This reversal is attributed to valuation comfort in quality and growth companies, coupled with the expected interest rate cycle reversal. Quality and growth stocks in the NSE 500 index have delivered a median return of 13 per cent since June 1. On the other hand, non-quality and non-growth stocks have returned just 4 per cent, shows an analysis by PGIM India Mutual Fund (MF).
The asset manager defines 'growth' as companies that have seen average five-year annualised sales growth higher than their historical sales growth. Meanwhile, 'quality' companies are those that have higher than average five-year historical return on equity (ROE).
Between April 2023 and May 2024, stocks that do not qualify as quality or growth had delivered 86 per cent median return. This compares to 50 per cent median growth in companies that qualify both as quality and growth.
SBI MF, the largest fund house, has also been highlighting the reversal in trend.
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