The Sensex, which is representative of the health of the economy, goes through regular reconstitution or rejig to re-evaluate its constituents.
The reconstitution would involve additions and removal of stocks from the index as well as adjustment in the weightage of stocks over a period of time.
History suggests that out of 31 stocks in the index, 18 have been part of the index since FY08. These include: Mahindra & Mahindra (M&M), Maruti Suzuki, Tata Motors, HDFC Bank, State Bank of India (SBI), Housing Development Finance Corporation (HDFC), Larsen & Toubro (L&T), ITC, ICICI Bank, Hindustan Unilever (HUL), Infosys, Tata Consultancy Services (TCS), Wipro, Bharti Airtel and NTPC.
But the next big question is will they remain in the index or perform consistently over the next 10 years as well. Some experts beg to differ on that statement and advise investors to rejig their portfolio if they are holding stocks that might end up as laggards.
“Some of the sectors which used to be market leaders like real estate are no longer part of the Sensex. Another sector at risk is telecom where we have seen a significant reduction in market capitalisation. So, offering a view on stocks which can survive and be part of the Sensex 10 years is very difficult, given the higher level of disruption likely in the economy. However, if I were to still make a guess, TCS, Reliance Industries, ITC, HUL, L&T, HDFC, HDFC Bank, M&M, Maruti Suzuki India and Tata Motors could still be part of the Sensex 10 years later as well,” Siddhartha Khemka, Head of Retail Research at Motilal Oswal Securities, said.
While constructing a portfolio, investors should only focus on bluechips displaying growth visibility. However, returns might not be the same but these stocks could act as an anchor for your portfolio.
The portfolio should constitute a healthy mix of well-diversified stocks and debt in order to safeguard investor wealth in case of any adverse turn in the markets.
Ashish Sharma of Guiness Securities placing capital on a few selected names is not an ideal strategy. “Blue-chip stocks are always safe bets. But to make a portfolio grow on a consistent basis one should chip in a few names from the midcap space to accelerate the growth factor.”
Sharma’s favourite picks include: Maruti Suzuki, HDFC Bank, L&T, TCS, HUL and RIL. “If an investor wants to grow his wealth on a steady and consistent basis, they should go with these stocks. By 2028, we expect our picks to still remain in the broader index. There are many emerging companies with young and dynamic entrepreneurs who will lead some to lesser known companies on the same growth trajectory as the current ones.”Disclaimer: Reliance Industries is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments