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Composition of heavyweight stocks on Indian bourses static over last decade, sectoral composition changes

The growth of the Indian economy over the last decade and mushrooming of large-sized companies over the period has not changed the character of the stock markets as the same old entities that became heavyweights on the bourses 10 years back continue to outperform others even today.

According to an India Strategy analysis done by Motilal Oswal Institutional Equities, barring the exit of L&T between December 2010 and December 2020, the top five weights in Nifty continue to be dominated by the same companies for the past 10 years.

So, RIL, INFOSYS, ICICI BANK, HDFC continue to have the highest weight in Nifty with the addition of HDFC Bank in between the period under study.

However, it’s not that Nifty composition has remained largely unchanged over the decade. According to the brokerage, 30 companies were common in the Nifty index between 2010 and 2020 but 40 per cent of components present in December 2010 are no longer part of the Nifty.

The 30 common stocks present in Nifty contribute 82.5 per cent of weight currently as against 83.7 per cent in December 2010 and have been broadly stable.

Prominent names that were part of Nifty in December 2020 but are no longer there include BHEL, Sterlite Industries, Jindal Steel, Ambuja, ACC, SAIL, DLF, Tata Power, IDFC, PNB, Cairn, Vedanta, Siemens, JP Associates, Rel Infra, RComm, Rel Power, Rel Capital, Suzlon, Ranbaxy. The combined weight of these 20 stocks in December 2010 was 16.3 percent.

The 20 new stocks which were not part of December 2010 but are part of December 2020 Nifty include Asian Paints, Britannia, Titan, Nestle, BAF, Bajaj Finserv, IndusInd, HDFC Life, SBI Life, Divis, Eicher Motors, Tech Mahindra, Ultratech, Shree Cement, Grasim, JSW Steel, Adani Ports, UPL, Coal India, IOCL

But the changes seem to be more visible in terms of sectoral composition at the bourses. Private Banks, which had a weight of 14.5 per cent in Nifty in December 2010, has covered a lot of ground raising the sectoral composition to 24.7 per cent in Nifty in December 2020.

In fact, private banks gained the highest weight in Nifty of about 1020bps over the last decade followed by the Consumer sector (470bps), NBFC (420bps), IT (200bps).

Banking, financial services, and insurance (BFSI) increased its weight from 26 percent to 39 percent, largely explaining the story of the decade as far as returns and outperformance are concerned. The weight of the IT and consumer sector also increased from 47 per cent to 67 per cent.

But metal and capital goods including utilities, oil and gas, and real estate sector remained nonperformers with their weight on Nifty slumping from 37 percent to 19 percent in the last 10 years.

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