Share of top 50 stocks to total market cap at all-time low: Report

Mumbai (The Uttam Hindu): Share of the top 50 stocks in the total market capitalisation has hit an all-time low, according to a report on Thursday. The December edition of the DSP Netra report said, "Large-cap stocks are now at their smallest share of total market capitalisation. The share of the top 50 or top 10 stocks relative to the total market has hit an all-time low, presenting a rare opportunity for investors."

"While large caps remain relatively attractive on a comparative basis, the current market environment underscores the need for caution amidst volatility. This backdrop makes a conservative approach to large-cap investing essential, offering a strategic advantage for long-term investors amidst uncertain and unpredictable conditions," the report stated.

As per the report, "India's long-term market outperformance is often attributed to factors like domestic flows or robust GDP growth, but the real driver is its superior returns on equity (ROE). About one-third of Indian companies have consistently achieved an ROE of over 20 per cent, second only to the US in this regard." The report further said, "One of the key factors contributing to the outperformance of Indian markets is the consistent growth in the book value of underlying companies. Indian companies have demonstrated remarkable stability and consistent growth over time."

The report highlights that over the long term, more than three-fourths of companies have shown positive growth in their book value. Notably, in the 20 years, 7 out of 39 companies with positive growth in book value have achieved growth in each of those 20 years, even amidst global challenges such as the GFC and the COVID-19 pandemic, showcasing the stability of these businesses. Sahil Kapoor, Head of Products & Market Strategist, DSP Mutual Fund said, "India's strong fundamentals and superior returns on equity highlight the potential for long-term growth. As we navigate these uncertain waters, a conservative approach to large-cap investing could provide a strategic advantage.”