Handy at record highs, but wallets are still bleeding. SAMCO Securities lists four reasons why

As the Nifty 50 rose to a new all-time high of 26,310.45 this week, many retail investors are wondering why their portfolios continue to languish in the red. Despite the index’s robust performance, only a fraction of stocks actually post profits.According to a market note from SAMCO Securities, the broader stock rally is largely illusory for most portfolios, with the pain masked by some heavyweight index moves.

Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, explains that while benchmark indices like the Nifty paint a picture of widespread prosperity, the granular data tells a very different story.

Of the 750 largest stocks by market cap, only 252 have posted gains, while 464 are in negative territory. The median return is -10.54% and the mean return is -5.24%. Notably, 268 stocks fell more than 20%, while only 117 stocks rose more than 20%.

Sheth outlines the reasons behind this difference:

1. Concentration of profits among index heavyweights: According to Sheth, the ascent of the Nifty is made possible by a limited number of heavyweights who have managed to perform well. These stocks have a disproportionate influence on the index, creating a distorted picture of the health of the market.
2. Underperformance of the broader market: The Nifty Microcap 250 is down almost 10% from its previous peak, and the Nifty Smallcap 250 is down around 9%. These segments, where most private investors are generally active, have lagged significantly behind the large caps.
3. Retail participation declined: Many retail portfolios are focused on small- and mid-cap stocks, which have borne the brunt of the recent corrections. As a result, the actual experience for retail investors remains bleak even as the overall index reaches new highs.
4. Lack of breadth in the market recovery: Sheth points out that of the 716 stocks that have been listed for more than a year, a staggering majority are still in the red. This lack of participation in the broader market underlines the limited nature of the rally.

“Until participation increases,” Sheth concludes, “the average portfolio will not reflect the strength seen in the overall index.” Also read: Why are shares of Thyrocare Technologies down 67% today, but why shouldn’t investors worry?

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)