Optimists believe there is always a bull market somewhere. Right now, we have a bull market in pessimism. If one were to go by hearsay, nothing seems to be going right for the economy. The new RBI governor is being looked upon as a knight in shining armour but the jury is still out on if his band-aids can stop the haemorrhaging of confidence. The recent spike in the market would have you believe that all is well but foreign institutional investors (FIIs) continue to desert the Indian debt market and are on tenterhooks as far as their equity exposure is concerned.
This is a sea change from a year ago when, powered by QE3, FIIs couldn’t have enough of India and smugness among policy makers was not in short supply. Unlike FIIs, who have the option of investing in other equity markets, domestic institutional investors have to keep playing the rotational game locally. The other common refrain always has been, “When there is so much opportunity in India, why should we invest abroad?” To find out if there was any truth or just a case of a known devil being better than an unknown one, we dug deeper and looked up the compounded sales and profit growth of BSE 500 companies from FY08 to FY13 as well as compounded stock price performance from FY08 till date. We left out financial companies and had a cut-off of ₹1,000 crore in sales and market cap for the latest available period. You can find out more about the companies that made the shortlist, on page 108.
FY08 was a good starting point considering that markets would soon go into a tailspin, making FY09 a year to forget. Coordinated central bank intervention resulted in the Lehman Brothers bankruptcy becoming a bad memory. Then it was business as usual…until now, the reasons for which we will revisit later. Poring over the final sheet revealed that in the top 10, six companies were from the FMCG and consumer durables space. As we went lower, the consumption theme became even more prominent and was joined by the usual suspects — pharma and IT. Sure, if one looks at the benchmark over the past five years, returns have been sub-par, but domestic consumption stocks have enriched investors many times over. So, what accounts for their dominance?
Wind beneath wings
Nandan Chakraborty, managing director, institutional equity research, Axis Capital, says even before the Lehman cris