Stock markets in India are trading flat after the Rupee hit a record low against the US dollar. Gains are largely seen in power stocks and bank stocks.

The BSE Sensex is trading down by 35 points and the NSE Nifty is trading down by 20 points. Meanwhile, the BSE Mid Cap index is trading up by 0.7% while, the BSE Small Cap index is trading up by 0.4%.

Notably, the Indian stock market has had a hard time of it in 2018.

But a look at the Sensex would suggest just the opposite. The BSE Sensex is up by more than 11% in the current year.

Sensex Return Skewed by Top 12 Stocks

The real picture can’t be further from the truth. Only 12 stocks are responsible for Sensex touching their lifetime highs. TCS, Infosys, Reliance along with few other stocks have led to this outperformance.

The top 12 stocks have returned 25.5% on an average while the other 19 stocks in the Index have declined by 12% on an average.

Even among Sensex stocks, Tata Motors, Vedanta, and Bharti Airtel have performed poorly due to structural issues in their businesses. Corporate governance issues at mid and small cap companies have led to their corrections from sky-high valuations a year ago.

What happens when the top 12 fail to meet the market’s expectations?

There is a strong possibility they might take down the other 19 stocks and the index further with them. In such a situation, despite the recent correction, mid and small caps won’t be safe either.

And with so much happening in the markets these days, it is difficult for the aam investors to figure out the changing trends or to identify great management and pick potential multibaggers at the right time.

It is always helpful to have a handy guide, guiding you towards the right direction.

In the latest edition of our stock market podcast, I talked to CEO of Equitymaster, Rahul Goel about our latest book launch, in which he shares Equitymaster’s biggest secrets. Don’t miss it! Sign up for our free podcast today. Visit SoundCloud, iTunes or Stitcher.