Though the index has gone down by 15% in 2015 but there are few sectors which did very well.
Picking up average of top performing 4-6 microcap and small cap in each sectors of the I get returns which look roughly like this. It’s true each sector will have winners and losers but I kind of follow this instead of traditional index because as a value picker you are supposed to spot atleast some of these.
Sugar = 70%(only due to a recent surge in October)
LCV&HCV = 70%
Glass = 90%
Packaging = 90%
Shipping = 100%
Dyes & Pigments = 130%
Telecom Infrastructure = 150%
Jewelley = 160%
IT Hardware = 170%
Textile/cotton spinning= 200%
Breweries = 200 %
Plastic = 200 %
Rice = 200%
Pharma = 400%
Few disappointing sectors of 2015 in-spite of doing well in 2014:
Courier and logistics
Castings & Forgings
Paints & Varnishes
Few sectors I feel are likely to do well in 2016:
Disc: I am primarily invested in Textile, agrochemical and HomeLoan companies
i feel home loan cos will do well in mid 2017 due to delayed trickle down of lower rate structure.
Sunrise v/s sunset sectors… Nice high level representation of history data available at http://www.bajaar.me/blog/hist.html… Snapshot pasted below for a quick reference… Thanks to @vml (Random Walker)… Brilliant work…
- Pharmaceuticals, Autos, Auto Ancillaries, Agrochemicals, Furnishing on rise
- Metals & Mining, Electric Utilities, Exploration & Prod, Tobacco and Telecom Services on decline
- IT and Cement stable
Trending sectors for 2016? Barring few exceptions, I think the above trend would continue.
Any idea how are these trend scores calculated ?
As far as stock pricing is concerned I found cement and Auto Ancillaries corrected in 2015 but here they have increased from 2014. How is it so? Does it mean overall market size of the sector has increased but is not yet reflected on stocks as the cement/reality/construction stocks were already overpriced and corrected themselves in 2015?
Secondly I had the impression reality sector should be strongly corelated with cements even that I am finding is not true here.
Sorry, don’t know. My educated guess - numbers are based on total MCAP of public listed Indian companies i.e. not just limited to NIFTY and/or Sensex stocks. Reason?
- Exhaustive 40+ sector categories; many more than NIFTY coverage.
- Pharma sector 7.88% weightage for 2015 translates to ~7L cr India Pharma MCAP (i.e. 7.88% of ~90L cr India total MCAP). Sum of Sun, Lupin, Cipla, DRL, Cadila, Auro, Glenmark, Divis, GSK, Torrent, Alembic, Ajanta, Shilpa, etc. MCAP comes to ~7L cr.
Data would have few grey entries, understandably e.g. Piramal - Should it be counted in Pharma, Finance or Real Estate?
@vml, this chart is really interesting and useful. Appreciate if you can share how these numbers are calculated - i) coverage width, ii) snapshot of a particular date of year or average, etc? Thanks in advance.
The calculation is a rough estimate. This is how I calculated it:
- Create a list of all currently listed BSE stocks. So there is survival bias - I dont look at companies which disappeared, but they may not have contributed much to BSE market cap.
- Fetch market cap stock price history from BSE. BSE provides quotes adjusted for splits/bonus.
- Average stock prices across the year to get an annual price for stock. (AnnualPrice/CurrentPrice)*MktCap should give historical market-cap measure.
- For each year, add all marketcap grouped by sector and represent as a percentage.
Beyond survival bias, there are some problems with the data
- Like @lustkills mentioned, the right category for any stock is unclear. I did some cleaning on my own but it is grossly inadequate.
- Convertible receipts like ADRs are not something I can handle. So I just ignore it
I spent some time looking at the numbers and I see two broad trends - Consumption cycles and Investment cycles. It is my personal opinion that this is the start of an investment cycles (with many false starts and delays). Each cycle then breaks down further into a few sub-cycles. Unfortunately there isn’t enough data to make a definitive statement.
So I have frozen that link for now, and it is still visible. But the contents of the chart will no longer be updated for the next few months.
@ishandutta2007 : It’s all percentage of the entire market cap. So stocks may have corrected across certain sectors but other sectors may have corrected more - it’s relative.
This may not show in the data, but my understanding is that Realty usually does well in the fag-end of the bull-market (early bear market) where investments move from financial to physical assets.
@vml Smaller sectors are too difficult to hover over. Basically I want to zoom over the smaller sectors, Can you give out the final data used in the plot in form of a table alongside.
Interesting topic. If one gets the sectoral themes right there’s lot of money to be made.
Question is how to find out the sector that will outperform.
One group of sectors I can think of is those that can benefit out of low crude and gas prices or those benefitting out of govt initiative of making gas easily available.
The sectors that fit the bill are OMCs (which have run up much earlier), certain companies in power segments (the name that comes to mind are torrent power etc who were earlier stuck due to non availability of gas to run their power plants), fertiliser sector again due to availability of gas and some easing of subsidy payments etc.
But even if one can find good companies in these sectors these will at best be opportunistic bets and one will have to be careful to get out of them once there are early signs of the music becoming too loud or stopping altogether.
If GST is passed then high quality consumer companies would have a good time but looking at valuations of most of them it seems overall returns may remain muted. There will off course be some winners there also.
Great work Vimal. Is it possible to construct a chart like this using EV instead of MCap. That would point to the sector’s debt as well (We might have to ignore financials). For example Reality and Infra sector would give a very different picture if debt is included too.
Apart from the sectors mentioned by Hitesh, I think the following ones might do well too:
Commercial vehicles - the government has disallowed vehicles more than 15 years of age to ply on the roads, and capex from transport companies has been long overdue. A lower interest rate regime should also help.
Chemicals - same reason as that of OMCs. Cheaper crude will result in lower RM costs. However, most chemical companies have low pricing power, so margin expansion will be muted. What might help is an uptick in mining activity, textile sector and other end users.
Tea companies - have not researched this in detail, but El Nino in Ethiopia should lead to higher prices. India might be affected though too
Here is how S&P breakup looks like
AVIATION low oil theme .occupancy will get better and coming q- q profits will lead this sector high.
SUGAR there is seen low production in sugar output next year due to mills are unable to pay farmers cane bill.so farmers will plant less crop this year .dams in Maharashtra dint have enough water reservoir so farmers are forced to cut crop acreage this year .low crop may drag pries of sugar up but mills may end crushing less crop next year .which may drag profitability. increase in ethanol blending good for sector .this year nothing to cheer…
DEFENSE no Brenner game as a sector but very difficult to figure out a stock .
EDUCATION we all are spending more and more on education .
Lets look at the major events that has happened in India and across the world in last 6-8 months.
Lets start with global first and its impact on India:
Crude has declined from US$90 to US$40-50 currently: This will positively impact Chemicals, Pharma, Consumer, Aviation and Transportation companies.
There has been much emphasis on Carbon reduction**:** IMHO govt might focus on renewable energy to a greater extent in the upcoming budget. Companies in renewable energies like suzlon or Inox Wind or companies that provides solar panels should benefit.
Imminent Interest rate hike by the FED: No major impact except for the sentiments. In my view market is already discounting most of it
Terrorist activites have shot up a lot in last 6-8 months: In my view this is a big risk.
Coming to India
1) Rate cuts: big positive for all the sectors. Banks need to pass on the rate cut benefits to customers. If that happens we may see Industrial revival in the country. Make IN India campaign may get a doser from the rate cuts. Keeping fingers crossed. Big sectors would be HFC, debt laden sectors.Watch out for Pennar PEBS.
2) GST (if & when happens): It will lift the GDP by 1.5-2% after 2years of implementation. I have a family business and I can definitely tell you TDS, TCS, CST etc is a big big pain. One uniform tax rate will improve the ease of doing business. Watch out for companies in the sectors like Transport (TCI, Gati), Logistics (Concor, Gateway Distriparks Snowman, Gati for its Gati Kausar subsidiary, DTDC - if and when gets listed), Road construction companies ( IRB infra - incase you are comfortable with corporate governance), Consumer companies as mentioned by Hitesh.
3) Railways: Mr. Prabhu (I would call him Chanakya for Railways) is a very smart man. He knows what he is doing and more importantly the action that he is taking will benefit the country in the long run. Look for companies like Titagarh Wagons or RK Forgings. Also look for Pennar Industries whose one segment caters to Railways. Segment might positively surprise.
4) Aadhaar: Govt has been focusing on making Aadhaar as the primary card for the needs. Companies that maintains the database for Aadhaar is a prime beneficiary. Watch for HCL Infosystems.
- Agri-chemical companies: Recently I read that govt is focusing on improving the land productivity, educating farmers etc. This should benefit Agro-chemical companies like PI Industries etc.
My hunch is one should invest in sectors that are more B2C than B2B. In B2C businesses like Nilkamal or Supreme Industries or WimPLast, they don’t have to pass on the entire benefit of lower crude prices. Also B2C businesses are more recession proof (except discretionaries). But not denying that some B2B businesses creates lot of wealth purely looking at BQ & MQ.
Discl: Invested in PI Industries, Pennar Industries, Pennar PEBS & TCI from lower levels.
My guess is that in next 2-3 years stocks related to primary sources/producers (mining, sugar, oil etc) or primary sources producers (steel, cement, textile, power etc) are likely to do well. My guess is based on simple assumptions:
(1) All consumers/ pharma / seed, branded players , consumption themes, auto , housing or housing finance, IT etc are priced to perfection for next 3-4 years. So even if they do well stock price appreciation is likely to be muted for them. Also there are investor fancy in these sectors and lot of talk about quality etc.
(2) There is hardly many materials or commodities which india can produce more than it consumes and if it has to grow at least for initial phase of growth it needs those commodities in abundance. Valuations of metals, steel, mining, sugar etc are already priced for close to bankrupty and most of these happen due to dollar getting stronger or slowdown in china etc themes which dont have much impact on fundamental demand in india of those commodities. Again strong dollar as a theme is not very sustainable for long term as amount of dollar printed by FED or EU etc at some point going to show it true effects in terms of increase in inflation and devaluation of us dollar which likely to support prices of primary producers and squeeze margin of branded players.
(3) Already most of agricultural commodities showing price recovery in last 6 months and no new investment is going into mining,steel,sugar, oil etc sector so no supply increase is possible for next many years. Also mostly consensus opinion is that commodity prices likely to remain in bear markets for many years which is already priced in by market and stock prices start recovering much before actual events happening. Any case without demand revival in commodities these level of consumption growth is not likely to sustainable any further.
I think as India is poised to become a 4 - 5 trillion economy in next 5 - 10 years, per capita income of the individual will also increase from $1000 to $ 3000-4000.
This would result in higher consumer discretionary spending and business like
- Cosumer durables
- Cosumer durable finance
- Housing finance ( both urban and rural )
- Agri related business
Moreover there would be various disruptive business would be seen in the future and we need the sight, courage and ability to identify and sit tight with the investment.
@ishandutta2007 : Open the page in the browser, right click and select View page source. You will be able to see the entire text as a CSV - search for the string “Sector-wise breakup”. Just copy/paste it out. After all the year-wise numbers you will see the column labels.
BTW, all graphs on the website are sent out as text to your browser and then drawn by your browser. So this method should work for any other chart as well. If View source does not work, then try Inspect element on right click.
@Anant : I used Mcap because it is easily available from BSE. Debt has to be extracted from financials. Harder to do automatically, but this is on my radar.
Percentage change in the “relative” percentage of the entire MCAP (for whatever it’s worth).
Source: view-source:http://www.bajaar.me/blog/hist.html (by @vml)
Sectors v1.xlsx (64.6 KB)
You can’t drive forward looking in the rear view mirror! However, all good drivers are taught to periodically glance back.
Zooming over @vml’s data gave me few more which weren’t easily visible to naked eye:
Furnishing and paint
heavy electrical equipment
transport related service
travel support service
Movies and Entertainment
non durable household product
Excellent findings. I have not checked all of the said sectors. but i have invested in breweries and pharma and tallied with my investments and your findings.