Nifty Internet index outperforms peers with 19% returns since Feb launch. Is the dotcom boom here to stay?

Time of India

6 days ago

The Nifty India Internet Index has shown impressive growth since its inception in February, outperforming the Nifty 50 and many sectoral indices. This growth is fueled by increasing investor confidence in digital-first business models and the shift towards online platforms. While some internet stocks have struggled, consumer-facing digital disruptors have largely driven the index's positive performance.
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Launched on February 28 this year, the Nifty India Internet Index , designed to track the performance of India's burgeoning new-age stocks , has already delivered impressive returns. It has outpaced the broader Nifty 50, clocking a 19% gain since inception, compared to 12% by the latter. However, it still trails many of its more established sectoral peers.The Nifty India Internet Index became operational on March 3, and the 19.4% return is calculated based on the closing level of 1,109 on that day. During this period, the 21-stock index has outperformed several key sectoral indices, including Nifty Bank, Nifty Financial Services, Nifty Private Bank, Nifty Auto, Nifty Commodities, Nifty India Tourism, Nifty India Consumption, Nifty Metal, Nifty Healthcare, Nifty Pharma, Nifty FMCG, and Nifty IT, which delivered returns ranging from 2% to 17%.However, it lagged behind six sectors: Nifty India Defence (69%), Nifty Realty (26%), Nifty Media (24%), Nifty PSU Bank (24%), Nifty Oil & Gas (20%), and Nifty Energy (20%)."The index has delivered strong returns since its launch, outperforming broader markets and most sectoral peers. This outperformance highlights growing investor confidence in digital-first business models and the structural shift toward online platforms in both consumption and financial services. Given the sector's growth potential and supportive macro trends, it presents a credible thematic investment opportunity," Anil Rego, Founder & Fund Manager of Right Horizons PMS.The Nifty India Internet Index is a diverse basket of 21 stocks primarily from the consumer services (63.10%), financial services (35.37%), and media, entertainment & publication (1.53%) sectors. Leading the pack in terms of weightage is Eternal (erstwhile Zomato), holding the largest share at 20.27%. It's followed closely by PB Fintech (Policybazaar) at 16.48% and Info Edge (India) at 15.66%.Other significant constituents with weights between 8.57% and 2.01% include One 97 Communications (Paytm), FSN E-Commerce Ventures (Nykaa), Indian Railway Catering and Tourism Corporation (IRCTC), Angel One, Swiggy, Motilal Oswal Financial Services (MOFSL), and Indiamart Intermesh.The total weight of these 10 stocks stands at 83.69%.The other 11 stocks viz. RattanIndia Enterprises, IIFL Capital Services, Le Travenues Technology, Nazara Technologies, Thomas Cook (India), Infibeam Avenues, TBO Tek, CarTrade Tech, Just Dial, Brainbees Solutions, and Easy Trip Planners together carry a weight of 16.31%.Out of the 21 stocks in the index, a dozen counters have outperformed the index while 14 have surpassed the returns given by Nifty50.RattanIndia Enterprises and IIFL Capital Services were the top gainers, both surging nearly 60%. This impressive run came despite RattanIndia reporting widened losses and IIFL Capital Services seeing declining earnings, suggesting that market sentiment or future growth prospects played a significant role.Broking majors Motilal Oswal and Angel One also saw substantial increases, each up over 40%, even as they navigated challenges with significant profit and revenue declines.However, the true earnings winners among the top performers were the consumer-facing digital disruptors.Le Travenues Technology (ixigo), the ticketing platform operator, surged 40%, backed by a robust 92.5% jump in net profit and over 72% revenue growth in Q4 FY25. Meanwhile, Policybazaar stock soared 29% on the back of a remarkable 181% earnings jump and 39% sales growth.Beauty & personal care player Nykaa posted a 95% profit after tax (PAT) jump, contributing to its nearly 25% stock gain.Info Edge, which operates 'Naukri', rallied 8% during the period, driven by a whopping 570% year-on-year rise in PAT in Q4 FY25, alongside 14% bottom-line growth.Gaming and content platform Nazara Technologies rose 40% with a 95% jump in revenue, while IRCTC, a more traditional online player, posted modest 17% gains, with PAT and revenue growth of 26% and 10%, respectively, in the January–March quarter.Despite the overall positive trend, some digital players experienced a downturn. For instance, travel platform EaseMyTrip shares slipped nearly 6%, struggling with both falling sales and profits. Others like Swiggy and Brainbees Solutions (FirstCry) also saw their stocks underperform despite reporting strong revenue growth, as they were weighed down by deepening losses.Rego warns against any focused strategy on internet stocks, arguing that it carries concentration risk. He suggests investors evaluate their exposure based on individual risk tolerance and investment objectives.Rego said that the recent performance trends in consumer and financial sectors provide important cues for their near-term outlook."Within consumer discretionary, categories like hotels, value retail, and jewellery are expected to maintain growth momentum, supported by domestic demand, store expansion, and favourable pricing dynamics. Meanwhile, premium retail, QSRs, footwear, and textiles may see a gradual recovery as inflation stabilizes and discretionary spending improves," the analyst said.Meanwhile, financial services are likely to continue their earnings growth trend, driven by strong credit demand, he opined."Given this Q4 backdrop and the index composition, the Nifty India Internet Index could serve as a thematic proxy for both consumer demand trends and the ongoing digital transformation in financial services," he added.The RBI's continued accommodative stance and the government's tax relief measures in the February 2025 Budget are expected to improve liquidity and increase disposable income.This rise in income is expected to stimulate consumer spending, particularly in digitally enabled services, Rego said. The Nifty India Internet Index, which comprises companies that operate primarily through online platforms such as e-commerce, digital payments, and internet-based services, stands to gain from this shift, the Right Horizons PMS founder added.: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)