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Bank vs IT stocks: How these two Nifty heavyweights have fared in past 10 years

Banks and information technology make up 31% and 41%, respectively, of the Nifty 50 and NSE-500, respectively. According to domestic brokerage firm Motilal Oswal, over the past decade (from 2012 to 2022), both Nifty Bank and Nifty IT outperformed the Nifty-50, but their performance remained highly volatile and divergent.

Assuming what the business has said in its examination report is to be accepted, then this distinction in returns is supposed to go on further.

The brokerage also emphasizes the significance of the relative outperformance of the Indian stock market to the divergence between these two industries, IT and banking.

According to Motilal Oswal’s analysis of the annual performance of major sectoral indices over the past ten years, the Nifty-50 and other major indices experienced healthy double-digit growth from 2012 to 22.

According to the note, “Nifty-50 reported 12% CAGR, while other top performing indices, namely Nifty Bank and Nifty IT registered 13% and 17% CAGR respectively.”

Between FY12-22, the weighting of banks in the Clever 50 expanded by 820 premise focuses to 38 percent, while its weighting expanded by 260 premise focuses to 14 percent during a similar period.

In addition, between the calendar years 2012 and 22, the market cap contributions of the Nifty IT and Nifty Bank components of the Nifty-500 increased by 40 and 60 basis points, respectively, to 12.5 and 10.3 percent, respectively.

deviation consequently

Clever Bank and Clever IT files have shown wide variety in yearly returns, with both these records performing on the other hand in 2012-2022.

More importantly, the relative performance gap between the two industries was greater than 10% in 10 of 11 years and greater than 40% in six of 11 years, respectively.

In recent years of macro disruptions (demonetization, GST, US-China trade war, COVID 19, Russia-Ukraine war, cycles of central bank rate hikes, global banking crashes), the gap has grown significantly.

“As a matter of fact, over the most recent three years, CY20, CY21 and CY22, the general return hole between the bank and IT was 58%, 46% and 47 percent, separately, with IT performing better in CY20 and CY21. In 22 the Bank is doing better. So far, IT has outperformed the Bank by 6% (CY23YTD).

According to the brokerage, the obvious but significant role that sector selection plays in the creation of alpha was also highlighted by the fact that the average divergence between the two indices stood at 37% from 2012 to 2022.

disclaimer, The perspectives and proposals given above are those of individual investigators or broking organizations and not of Mint. Before making any investment decisions, we recommend that investors conduct due diligence with certified experts. Know your inner investor: Do you have steely nerves or suffer from insomnia when it comes to your investments? Let’s define your approach to investing.

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