Why big investors are dumping small stocks for blue-chips: Sensex gains 965 points

A rotation by domestic institutional investors out of expensive mid- and small-cap stocks and into large caps helped drive India’s benchmark indices higher on Friday. The Sensex climbed 965 points and the Nifty reached 24,330, with blue-chip Reliance Industries and a set of bank and IT stocks leading the gains.

“There is a shift in market momentum, with strong traction moving towards large-cap stocks, led by the IT and banking sectors. This is supported by optimism around business updates and Q1 earnings expectations,” said Vinod Nair of Geojit Investments. He added that the trend appeared to be driven largely by investors seeking a better risk-reward profile in more attractively valued large caps.

The broader market, however, stayed predominantly negative through the session as weak global cues continued to weigh on sentiment, traders said. A strengthening rupee offered some relief, gaining 14 paise to settle at 96.3 against the US dollar.

Tech Mahindra led the gainers, rising 3.9% after its net profit for the June quarter climbed 28.4% to Rs 1,465 crore, with the company expressing confidence in the demand environment. Kotak Mahindra Bank, Tata Consultancy Services, Reliance Industries, Hindustan Unilever, Mahindra & Mahindra, Axis Bank, ICICI Bank and Bajaj Finance also closed higher.

Sun Pharma, Trent, Bharti Airtel and UltraTech Cement were among the laggards, and the commodities, industrials, telecommunication and metal segments underperformed for the day. Brent crude gained 1.79% to $85.5 a barrel over the same session.

“Indian equity markets ended the week on a strong note, extending their recovery as broad-based buying in heavyweight banking, financial, and IT stocks helped benchmark indices outperform weak global cues,” said Ponmudi R, CEO of Enrich Money, an online trading and wealth-tech firm.

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