What the charts don’t foretell

The skewed weightage of some select stocks is distorting the valuation gap between large and mid caps

The reaction of a widely-read pink paper, when it screamed “Band, Baaja, Bernanke!” to capture the 600-point rally in the Sensex, following the US Federal Reserve’s decision to continue with the stimulus package, seemed to suggest the worst was over for Indian equities. But after hitting a three-year closing high of 20,647 on September 19, the euphoria didn’t last for long as the benchmark fell 700 points (4%) to 19,920 on September 24. The slide was largely on account of a surprise hike in the repo rate by the new Reserve Bank of India governor, Raghuram Rajan, who continued the hardline approach taken by his predecessor towards combating stubborn inflation.

Also, with GDP growth in FY13 dropping sharply to 5%, the lowest since FY03, and Q1FY14 growth, too, falling to 4.4%, marking three con


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