NEW DELHI: If you thought betting on index heavyweights would guarantee you market-beating returns, rethink.
Since 2004, none of the largest-weighted Nifty stocks in a given calendar year have outperformed the NSE barometer over the subsequent five years, suggests a study by Motilal Oswal Securities.
Reliance Industries, ONGC, Infosys, ITC and HDFC Bank have, among themselves, enjoyed highest weightage in the Nifty50 since 2002.
Data suggests ONGC, which was top index stock between 2004 and 2006, delivered 17 per cent return CAGR, which was 4 per cent lower than that of Nifty50. During the same period, the stock saw its Nifty50 weightage fall from 13 per cent to 9.4 per cent.
Even from 2005, the Nifty biggie underperformed Nifty50 by 6 per cent, though it matched Nifty returns in the five years from 2006.
In 2007, Reliance Industries emerged new index leader. But the stock offered a negative 10 per cent return CAGR over next five years, underperforming the Nifty50 by of 9 per cent CAGR.
Till 2010, the stock commanded highest weightage in the Nifty50 pack but its rolling performance remained subdued, falling behind Nifty50 by 6- 10 per cent every year.
Infosys became Niftys numero uno in 2011 and delivered 8 per cent CAGR return over next five years, but even that was short of Nifty return by 4 per cent on a relative basis.
Its the same story for ITC, which enjoyed 7.8 per cent to 8.4 per cent of index weightage between 2012 and 2014.
HDFC Bank, which has been ruling the roost currently, has been outperforming the 50-pack since 2016. Who knows what lies ahead?
Data suggests since 2002, RIL has been the only stock to maintain its position among the top 10 in Club Nifty.
The stocks weightage in the index has declined 24 per cent from 12.3 per cent in December 2002 to 9.4 per cent in August 2018.
Only 38 per cent, or 19, Nifty constituents have consistently remained on the index since December 2002. Combined weightage of these 19 stocks has declined to 61.4 per cent from 73.1 per cent 16 years back.
Data suggests even the titans find it hard to stay afloat in the long run and being an index heavyweight is no guarantee of outperformance at all.
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