Nomura says earnings expectations have been a key factor in the performance of Indian stocks this year, unlike last year when the rally was driven by a contraction in global risk premiums and improved sentiment from government reforms.
Data for NSE index stocks reveal that more than half of the difference between individual stock price movements in 2013 can be attributed to consensus earnings changes over the same period, the note says, compared with less than a tenth last year.
Nomura adds NSE stocks that have underperformed this year even though their earnings have not been downgraded are: Reliance Industries Ltd, Coal India Ltd, GAIL (India) Ltd, NTPC Ltd, Cairn India Ltd, Reliance Infrastructure Ltd, and Power Grid Corp of India Ltd.
Others in the same category include ICICI Bank Ltd, Axis Bank Ltd, and Maruti Suzuki India Ltd.
However, stocks with "excessive outperformance" are Tata Consultancy Services Ltd, HCL Technologies Ltd , Oil Natural Gas Corp Ltd, Bharat Petroleum Corp Ltd, Ambuja Cements Ltd, Lupin Ltd , and Dr. Reddy's Laboratories Ltd.
Meanwhile, the top stocks with "excessive underperformance" are Hindalco Industries, Bharat Heavy Electricals Ltd , Coal India Ltd, Punjab National Bank , Bank of Baroda, Larsen & Toubro Ltd , and Bajaj Auto Ltd