The Hindu Business Line : Sensex at 20K, but most stocks miss the bus

BL Research Bureau Congratulating yourself for entering the markets when the Sensex was hovering at 10,000? As the Sensex soars to an intoxicating high of 20,000, here is a sobering thought. There is a 7 in 10 chance that you picked a laggard! While the Sensex may have doubled in value, it is very likely that your portfolio has not matched this stellar performance.

An analysis of 1015 actively traded stocks (listed on the NSE) between June 19, 2006 and October 29, 2007 shows that 50 per cent of the stocks have not managed even half the returns of the Sensex. About a fourth of the stocks have actually declined during this period. While the BSE Midcap and BSE Smallcap indices have broadly kept pace with the Sensex, the rally appears to have been narrow in mid-cap and small-cap universe as well. Ninety per cent of the underperformers were stocks with a market capitalisation of less than Rs 5,000 crore. Not surprisingly, several underperformers belong to the sugar, textiles and plantation sectors. Some stocks from these sectors have tanked more than 50 per cent in the 10K-20K journey.

Among the large-caps, pharmaceutical majors such as Cipla, Ranbaxy and Dr. Reddy’s and FMCG companies such as Hindustan Unilever and ITC also feature in the laggards list.

There has, however, been a sharp polarisation in performance within the listed space. Had you picked the likes of Jai Corporation, India Infoline, B.A.G. Films and IFCI, your investment would have multiplied 20 times.

Overall, the portfolio of these 1015 stocks would have delivered a median return of about 40 per cent. In other words, adjusting for the extremes, the average portfolio would have managed this return, though the Sensex has doubled in value.

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