Banks, RIL, L&T, Infy power latest market rally

The last nine trading sessions have seen the benchmark Sensex clock its fastest 1,000-point gain and the laggards of 2011, and most of 2012, were the ones who fuelled the latest rally.

Reliance Industries, Infosys, Larsen and Toubro (L&T) and State Bank of India (SBI) have been the biggest contributors to the gains while ITC, Hindustan Unilever Limited (HUL), Cipla, and TCS, weighed on the performance of the benchmark indices.

Banking and financial stocks namely ICICI , SBI and HDFC have so far accounted for 37% of the gains made by the 30-share Sensex and a third of the returns posted by the 50-share Nifty, Bloomberg data showed.

Infosys and L&T made a smart comeback during the latest run, accounting for a fifth of the gains.

Morgan Stanley recently argued that the relative valuations of domestic cyclicals —sectors such as construction and infra, realty and materials — against defensives indicate likelihood of 59% relative outperformance for domestic cyclicals over the coming one year.

The brokerage has changed its weightage on consumer staples to underweight and raised energy and materials to overweight as well as elevated industrials to neutral. Since the start of the recent rally that began on September 6, the Sensex and Nifty have gained 1,183 and 374 points, giving a year to date return of 19.7% and 21.1%, in that order.

The Foreign Institutional Investors (FIIs) have, in the period, bought close to $1.5 billion worth of stocks, about 10% of their total purchases in 2012 so far. The RIL counter, which had been underperfoming so far, emerged as the second-biggest contributor to the benchmark indices, contributing more than 14% to the Sensex and 12% to the Nifty. On the back of an 11 % gain in the last nine trading sessions, the stock has not only reclaimed its status of the most valued company, but has also managed to beat the year to date benchmark returns. The stock has for the year gained as much as 23.5% compared to a 34% decline last year which burdened about 14% of the Nifty's total decline of 1,510 points.

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