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The fact that only 100 out of 1,300 listed companies (in 1995) have created meaningful wealth in last 25 years has once again highlighted the shallowness of the equity market and the risk borne by retail investors.
As per the Annual Wealth Creation Study of Motilal Oswal Group, Reliance Industries and Pidilite have been the consistent wealth creators in last five years, while Tasty Bite Eatables was the fastest wealth creator.
In last five years, Infosys, Reliance and Kotak Mahindra were the fastest, biggest and most consistent wealth creator, respectively, between 1995 and 2020. Kotak Mahindra was also the top all-round wealth creator. The consumer and retail is the largest wealth creating sector.
25 future bets for 25 years
On the future growth, the study finds financial services is a risky business and resorted to large-caps such as HDFC AMC, HDFC Bank, HDFC Life Insurance, Honeywell Auto, ICICI Lombard and ICICI Securities. Others included Ajanta Pharama, Alembic Pharma, Astral Poly, AU Small Finance, Bata India, Dr Lal Paths Lab, Page Industries and Whirlpool India.
Raamdeo Agrawal, Chairman, Motilal Oswal Group, said time is a friend of good companies and enemy of bad companies, with successful companies growing to unimaginable levels in sales, profits and market cap. While valuations matter less in the long run, stock returns are slaves of earnings power and growth, he added.
The report has preferred consumer-facing, secular business models for future investments and eliminated cyclical businesses like auto ancillaries, capital goods, chemicals, oil and gas and realty.
To ensure profitability of companies in the list, companies with average RoE of over 15 per cent for last five years and included market leaders in their business.
The future always holds a lot more promise. Over 50 per cent of current market cap is made up of listings post 1995.
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