History of Market Bubble and Sector Rotation

Year 2000 – 40% IT Sector weightage in NIFTY leads to IT Bubble:-

When IT sector had 40% weightage in NIFTY and at that time Silverline Technology, Pentafour Software, Global Tele, DSQ Software, Rolta, Satyam Computers, HFCL and many more were leading the market. All these counters were hitting all time high in almost every consecutive month and lost more than 80% of its market value just within time span of 1-1.5 years. And today in 2019, all these counters are no more traded and become zero. Apart from this, today’s blue chip companies like Infosys and Wipro were also lost more than 80% of its market cap and took so many years to recover.

Year 2008 – 40% Real Estate, Infrastructure, Construction & Power Sector weightage in NIFTY leads to Bubble:-

History of 2000 knocked once again in Quarter one of 2008 when NIFTY was trading at all time high but this time sector was different. This phase of bull market was started in second half of 2003 and ended in January 2008. During these five years of rally; Reality, Infra & Construction were leading the market and later on in 2006 Power Sector also joined this rally. Consequently, in second half of 2007 sectoral index of this space had weightage of 40%. And in January 2008, when correction triggered by Sub Prime Crisis in US market, once again this space lost more than 70%-80% of its market just within in time frame of one year. The companies Like Unitech, Rel Infa, Suzlon, RPower, Lanco Infatech, IL&FS, GVK, GMR etc lost 90%-100% of its wealth during last 10 years. Same way in reality sector Ganesh Housing, Peninsula Land, Ansal Prop etc lost 95% in one year and Unitech lost 100%. Apart from these another Blue chip company like DLF also lost 80-90% of its market cap after hitting all time high of Rs 1225, it hit low of Rs 72 in Feb 2016 and currently trading around Rs 175.

Year 2019 -Once again, Financial Services Index weightage is 40% in NIFTY Index – Does it moving toward another sectoral bubble ????.

Even though Financial services sector is a back-bone of the Economy but the current situation is alarming. In last 3.5 years since Qtr-1 2016, this sectoral index has gained more than 180% and gained more than 60% in last 12-14 months time frame, its total weightage in NIFTY has reached at alarming level. Only HDFC Twins, Kotak bank, ICICI bank, Axis bank and Bajaj Fin Twins were leading this rally while Yes Bank, IBULHSGFIN, Indusind bank, PNB and almost all major NBFCs except Bajaj Group & HFCs are losing its momentum and hitting 52 weeks low.

Will this type of high weightage (40%) in NIFTY Index lead to another sectoral fall and rotation in coming years? Only time will give its answer. But it is very clear that there are so many companies losing its business and momentum and hampering investors’ wealth.


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