Indian equities outperform global markets in May: Report

The Indian equities outperformed several global peers, particularly in the mid- and small-cap segments, driven by solid macro fundamentals and improving investor sentiment, according to PL Asset Management's latest report.

Siddharth Vora, Head of Quant Investment Strategies at PL Asset Management, said India's solid economic fundamentals and improved global sentiment offer a positive environment for investors.

"India's resilient macroeconomic landscape, coupled with improving global sentiment, presents a constructive backdrop for equity investors," Vora added.

While the Nifty rose 1.7 per cent to close near the 24,800 mark, mid- and small-cap indices recorded sharper gains.

The Nifty Midcap 150 jumped 6.5 per cent and the Smallcap 250 surged by an impressive 9.5 per cent.

This strong performance was backed by cyclical sectors like defence, metals and public sector banks, as well as increased retail investor participation.

The report noted that India's macro indicators remained healthy, with steady tax collections, easing inflation, robust Purchasing Managers' Index (PMI) data, and rising foreign exchange reserves.

These factors helped build confidence among both domestic and foreign investors. The broader market also showed encouraging signs of recovery.

The Nifty 500 rose 3.5 per cent, while the Nifty 500 Equal Weight Index outperformed significantly with an 8.5 per cent jump.

This suggests that gains were more evenly spread across stocks, rather than being limited to a few large players.

Valuations have risen with this rally. The Nifty's price-to-earnings (PE) ratio climbed to 22.3 times, while the price-to-book (PB) ratio stood at 3.6 times.

Though mid- and small-cap valuations remain above their five-year averages, PL noted they are still within reasonable one-year bands -- indicating normalisation rather than overheating.

In terms of investment styles, quality, momentum, and high-beta stocks were the top performers in May.

The Nifty 500 Equal Weight Index gained 8.5 per cent, outperforming the market-cap weighted index.

High-beta and momentum strategies rose 8 per cent and 5 per cent respectively, supported by sectoral rotation and improving sentiment.

Quality stocks also saw strong interest, gaining 8.5 per cent on the back of good earnings and safe-haven appeal, the report stated.