With stock market indices at or near their all-time highs, it is instructive to take a look at how shares have done as an investment since the peak of January 2008 — when the markets were riding a wave of optimism just before the great financial crisis that swept everything before it in the succeeding months. The Sensex has moved up by about 40 per cent over these nine years, less than what a fixed deposit in a bank would have yielded! In the same period, gold has gone up from Rs 11,000 for 10 g to more than Rs 28,000, easily outperforming index stocks as a group. In the absence of reliable indicators for real estate prices, it is hard to do a similar comparison between shares and property values. What we do know is that real estate values have mostly lost ground in the last five years, and especially so after the demonetisation of November. However, property did well before that period. You could argue that the initial weeks of 2008 were an unusually buoyant period for stocks, and using that as a reference point does not give a fair picture. Perhaps. However, one has to compare peak to peak, not trough to peak.
Among stocks with the largest market capitalisation, the one category that stands out for under-performance is the public sector. It is understandable that ONGC, as a cyclical stock affected by oil prices, should lose value in this period, but others too have not done well. National Thermal Power Corporation has lost value in this period, as has Coal India since its listing in 2010. PowerGrid and Gas Authority have barely kept pace with the broad market. Almost alone among the most valuable public sector stocks, Indian Oil has done well by nearly doubling in value.
It goes without saying that the best performers are in the private sector. Companies like Asian Paints, IndusInd Bank, Maruti Suzuki and Sun Pharmaceutical have set a scorching pace, multiplying value nearly 10-fold in the first two cases and six-fold in the latter two. Despite their recent troubles, most of the tech stocks have done well, with Tata Consultancy and HCL Technologies multiplying value five-fold, while Infosys has done more modestly and Wipro set a slower pace. Among banks and financial firms, the two largest (State Bank of India and ICICI Bank) have been under-performers in comparison with other leading players, in particular HDFC Bank; Axis, Kotak and HDFC have seen share prices increase in value by a healthy 150 per cent, broadly speaking. The dogs among the large private sector firms have been the two that are now slugging it out in the telecom market — Reliance and Bharti Airtel. Both have seen their stock price fall compared to the peak of 2008. Larsen & Toubro is the other giant which has been a disappointment, its share price going up by less than 15 per cent. Meanwhile, the two consumer goods majors, ITC and Hindustan Unilever, have done similarly well as sustained performers, roughly quadrupling value.
The real story of recent years has been mid-cap stocks; in that sense, looking at just the top end of the market would be misleading. There are greater variations in performance in this segment, and some spectacular performances —like that of Eicher Motors, which has seen its share price multiply an astonishing 60-fold in this period, and TTK Prestige, which has seen a 30-fold jump. There will also be many more dogs, of course. Taking the market as a whole, all stocks have seen their combined value go up by about 70 per cent in these nine years, while the gross domestic product has trebled. Finally, it is worth noting three things about the names and numbers: Conglomerates are mostly missing, the winners tend to be in winning sectors, and the individual winners do not surprise. Good business stories are usually not secrets, and deliver value.