Stock Investments Beat Index Returns In The Last Decade
Investors were better off investing in stocks compared to Nifty in last 9 years.
India’s equity benchmarks have given the highest returns compared to peers from large economies since the Lehman Brothers’ collapse triggered a global meltdown nine years ago. And investors would have been better off betting on individual stocks rather than the Nifty 50 Index during the period.
At least, that’s what a BloombergQuint analysis shows. The Nifty 50 rose 3.4 times since Dec. 31, 2008. Had an investor parked Rs 50,000 in Nifty and Rs 1,000 each in the 50 index constituents then, the combined investment in the stocks would have fetched 24 percent higher returns than the benchmark gauge.
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Yet, it’s not as smooth as it appears. Only 24 stocks outperformed the index. The remaining 26 lagged, with 10 giving negative returns.
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The Nifty itself has seen several changes since 2009:
- Sterlite Industries was merged into Sesa Goa and that was later joined by Cairn India. The three merged later to become Vedanta.
- Ranbaxy was merged into Sun Pharma.
- Reliance Petro was merged into Reliance Industries.
- Scam-hit Satyam Computers was taken over by Tech Mahindra.
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The Outperformers
Automobile and information technology companies were the leading wealth creators in the last decade.
Maruti Suzuki India Ltd. has been a marked outperformer with one of the highest valuation premiums in the automobile sector and returns of 15.5 times since 2009. An investment of Rs 1,000 in that stock would have multiplied to Rs 15,530 - a profit of Rs 14,530.
Investments in stocks like HCL Tech, Tata Motors, TCS and M&M have multiplied more than 10 times since 2009. Rs 1,000 invested in HCL Tech would have become Rs 13980, Tata Motors would have yielded Rs 12,670, and an investment in TCS would have increased to Rs 10,800 and M&M would have yielded Rs 10,150.
Stocks such as HDFC Bank, BPCL, Zee Entertainment, Grasim, HDFC, Sun Pharma and HUL would have made investors richer by five times the original investment.
The Laggards
Select stocks in the telecom, real estate, power and infrastructure space left investors worse off. Power and infrastructure such as Suzlon Ltd., Reliance Power Ltd., BHEL, NTPC and Reliance Infrastructure Ltd. were especially hit by stagnant private investments.
Rs 1,000 invested in Anil Ambani-Led Reliance Communications Ltd. would have been worth only Rs 60 now as the stock price corrected 94 percent since January 2009. Dwindling market share and debt concerns led to a massive loss of shareholder confidence in the stock.
Unitech Ltd., once India’s second largest real estate company by market capitalisation, was hit by the 2G scam revelations which dented its share price by 86 percent. A Rs 1,000 investment in Unitech in January 2009 would be worth only Rs 140 today. An equivalent investment in Suzlon, Reliance Power and BHEL would have left investors with Rs 210, Rs 310 and Rs 500, respectively.
