On the one hand, there are Banks, Metals, and Energy Sectors that have been outperforming Nifty while on the other hand FMCG has been underperforming since Jan ‘21 lows.

Post budget rally in the stock market from Jan lows has affirmed that investors are bullish on banks, metals, and energy stocks. But FMCG has been a major setback to the current rally as it could not perform well. Bank Nifty has performed 27% from Jan lows followed by metals and energy, which jumped 19% and 17% respectively, and are near 52 weak highs. The benchmark Nifty has rallied 13% post-budget. FMCG indices initially had a jump of 6% from Jan lows but later pulled back to the lows in the middle of Feb (refer to the comparative chart below).

The major ones to shine in Bank Nifty are SBI, Bank of Baroda, PNB, IndusInd, IDFC First, and ICICI Bank. The post-budget rally in these front runners has been more than 30%. SBI and Bank of Baroda are the special mentions as they lead the rally by nearly 50% gains. Except for Bandhan Bank, RBL Bank, and Kotak Bank, all the other stocks in the indices have been trading above Jan ’20 highs. It is evident that the investors have been buying public sector banks aggressively post-budget due to the news of privatizing two public sector banks.

It is not only the news but also the above expectation performance that the banks have shown in the third quarter. Bank of Baroda, IDFC First Bank, and PNB have turned into profit in Dec ‘20 from loss in Dec ’19, as they managed a percentage increase of 175%, 108%, and 203% respectively in their net profit. On the flip side, Axis Bank and Bandhan Bank had a percentage decline of 36% and 34% respectively in net profit. Overall in Dec ’20, the Bank Nifty had a 31% jump in the bottom-line compared to Dec ’19 quarter.

All the stocks in Bank Nifty have shown a downward trend in net Non-Performing Assets (NPAs) on a QoQ basis (see above chart). IndusInd Bank, HDFC Bank, and IDFC First had an NPA decline of more than 70%. Except for PNB, all the other banks had an NPA decline of more than 35%. Overall Bank Nifty had a 56% improvement on the NPA front. This factor along with privatization news has added more fuel to the buying interest in banking stocks.

In the metal index, Hindalco, Hindustan Copper, Jindal Steel, and NALCO have been trading above Jan ’21 highs. Overall there has been a post-budget rally of 18% in the metal sector. Hindustan Copper and Hindalco have outperformed the index with a massive push of 64% and 38% from Jan ’21 lows (see Daily comparative line chart below).

It’s worth mentioning that Hindustan Copper has turned into a profit of 10,820cr in Dec ’20 from a loss of 9560cr in Dec ’19, which is a 213% jump in the bottom-line. Also, other steel majors such as JSW Steel, Hindalco, and Tata Steel had 309%, 76%, and 100% increase respectively in their QoQ net profit.

The energy index has moved 17% from Jan’s lows and has been trading 5% above Jan’s highs. Adani Transmission has shown with-in the sector outperformance as it has bounced 75% from Jan lows and has been trading 57% above Jan ’21 highs. The second one worth mentioning is Power Grid. It rallied 29% from the lows and trading 13% above Jan highs.

In terms of growth, Tata power has given a spectacular jump of 8178% in its net profit compared to Dec ’19 quarter (see above chart). Also, Adani Transmission had a decline in net loss from 926cr to 404cr on a QoQ basis. The sector heavyweight Reliance Industries had a 10% decline in QoQ net profit. The stock gave a decent rally of 173% from Mar’20 and made a high in Sep ’20. Since then it has not moved in line with the overall energy sector as well as the benchmark Nifty.

Besides the high-flyers discussed above, there are lazybones (underperformers) like FMCG. The FMGC index has managed to recover only 5% from the Jan lows compared to 13% in Nifty. The sector has also been trading 4% below the Jan’21 highs. Although FMCG stocks like Britannia, Colpal, Emami, Hindustan Unilever, PGHH have shown growth in the QoQ bottom-line yet their price-wise performance is not at par, post results announcement.

Jan lows and 16% above Jan highs and thus outperforming the sector as well as Nifty. On the other hand, Hindustan Unilever and Dabur could not participate well in the post-budget rally, even when there has been more than 15% improvement in their sales. There is an opinion in the market that although there has been an improvement in the top-line yet the rising inflation as well as commodity prices had an adverse impact on the bottom-line.

In this backdrop, it can be said that there has been a cyclical sectoral shift in the investors’ interest from FMCG towards Banks, Energy, and Metals, and this trend is visible since Sep ’20. Perhaps investors had higher expectations from the latter, who have actually been able to deliver at par not just in terms of fundamentals but also in terms of price appreciation.