Who Are The Real Movers & Shakers Of Nasdaq’s Stellar Run This Past Year

Recovering from the bottom of crisis in March 2020, on account of Covid-19 related lockdown and subsequent impact on global economy, all major global markets recovered well and posted impressive performance over one year period ending March 2021.

In line with overall US market, and broad based global benchmarks, NASDAQ 100 Index ended the financial year 2020-21 with positive total returns of 68.9% (as of close of 31 March 2021; all performance numbers in USD).

By Constituents –

Among the 115 securities (which include few index inclusion/exclusions during the past one year) 104 were up with (simple) average total returns of 69.2%; while 11 constituents noted negative average total returns of 10.8% (see exhibit-1(a) and (b) below).

When it comes to index movers not just constituents’ total returns are important, but also its weight in the index / portfolio is equally important. As seen in the exhibit 2 below, top 10 stocks’ (by size) total weight is around 52% and these top 10 stocks moved index up by 42% out of 68.9% overall index returns during 12 month ended as of Mar 31, 2021.

By Sectors –

Historically, NASDAQ 100 Index have had high weight to the Technology sector. Sector like Energy, Material, and Real Estate don’t have any constituent in the index. Utilities and Financials* sectors have negligible present with total weight of 0.75% and 0.02% respectively (all sectors with weight < 2% clubbed under ‘Others’).

As seen in the exhibit 3 below, out of 68.9% index total returns, the Technology sector alone contributed 34.3% (nearly half of overall index performance), followed by Communication Services 12.9% and Consumer Discretionary 16.4%.

What is meant by contribution to index returns? It helps understand the respective stock/sector’s participation in the overall index movement. It is not the same as individual stock/sectoral performance. The contributions of stocks/sectors are generally influenced by two factors, its weightage on the index and individual stock performance.

By FAANG Stocks –

These days, speaking of US market performance may not be complete without discussing FAANG stocks (FAANG stands for – Facebook, Apple, Amazon, Netflix and Google (Alphabet). As noted in exhibit 1 (a), FAANG don’t fall in the top performing stocks in terms of individual stocks performances. In fact their performance (average total returns of 70%) was very close to the index performance of 68.9% during March 2020 – 2021.

From the exhibit 4 below, it can be seen that total returns of each of FAANG stock (‘orange’ dots) lie very close to the index total returns line.

But when it comes to index movers, FAANG stocks due to high weight in the index (total weight of 35.4%), together contributed 26.1% to the index total returns (see exhibit 5).