The benchmark index declined 0.7 per cent in June, after rising by 17 per cent in the first five months of this year. Since May 2014, it was up 37.8 per cent, as shown in Chart 1.
While concerns are being voiced over valuations, the market currently trades at 23.04 times earnings, as shown in Chart 2, strong earnings growth could ease such fears. Earnings are expected to grow at 22 per cent in FY18 and 23 per cent in FY19.
Small- and mid-cap stocks have consistently outperformed large-cap stocks over the past three years and the divergence has grown progressively, as shown in Chart 3.
While public sector banks continue to be bogged down by worries over bad loans, the private bank index has doubled over the past three years, as shown in Chart 4.
In June alone, the PSU bank index was down 6.27 per cent after the Reserve Bank of India (RBI) ordered the banks to make 50 per cent provisioning for accounts that were referred for bankruptcy proceedings.
Sectors such as IT and pharma continue to underperform the broader market over this period, as shown in Chart 5.
Since January 20, when Donald Trump was sworn in as US president, the IT index has barely budged, while the pharma index is down 8.4 per cent. And while demonetisation had dealt a severe blow to the real estate sector and the realty index fell 11.6 per cent on November 9, it has since then recovered quite sharply. As shown in Chart 6, the index is up 50.4 per cent since November 9.
The commodity index has also rebounded, as shown in Chart 7. It is up 61.1 per cent since its lows in the early half of 2016, largely mirroring the trend in oil prices.