Top 15 stocks which stood the test of time for the last 21 years; should they be your retirement bets?

“There are 15 companies which have been there in Nifty since inception and have given a healthy return to the investors. Out of these 15 companies, HDFC Ltd has given the highest return followed by ICICI Bank, HDFC Bank, and L&T,” Sanjeev Jain, AVP - Equity Research at Ashika Stock Broking Ltd told Moneycontrol.

“The Nifty rose around 22 percent so far in the year 2017. For long term perspective, I am confident in the Indian equity market. For a long term perspective say 15-20 years, one can invest in the companies like SBI, ICICI Bank, ITC, L&T, Reliance Industries, Tata Motors, Tata Steel, HUL, as they are fundamentally strong and sound management,” he said.

At the time of inception, Nifty represented 13 sectors while there are 12 sectors as of June 30, 2017. Over the years weight allocation in these sectors has undergone a significant change, said the NSEIndia report.

IT sector was not represented at the time of inception, but now it represents around 11.6 percent of weight in the index as on June 30, 2017.

The Nifty has given annualized returns of 11.2 percent while having annualized volatility of 24.5 percent. The volatility in recent periods has reduced from over 24 percent since inception to close to 8-11 percent in more recent times.

The Nifty as on July 24, 2017, was trading at P/E of 25.45x and P/B of 3.55x which is lower than the previous highs of 28.5x on Feb 11, 2000, and 6.6x on Jan 08, 2008 respectively.

The index has increased investors wealth by almost 10 times during the last 21 years and the stocks which remained part of the index at the time of adversities deserves mention because that reflects sheer management quality as well as product portfolio.

“The mere fact that the 15 companies withheld through the bear phase witnessed during the financial crisis of 2008 and downturn in the economy, illustrates the efficiency of the management to turnaround the circumstance and investors belief in their potential to build wealth,” Dinesh Rohira, Founder & CEO, 5nance.com told Monecyontrol.

Few of these stock reached its peak during the recent rally and marked its life-time-high after consolidating at a lower level for several years to result in a positive trajectory.

“It certainly makes sense to hold stocks in the portfolio which build a defensive strategy for investor during any downtrend in the market. Given the steady past track record coupled with its ability to limit downside risk, these stocks trade with lower volatility and thus restraining from higher price swing,” said Rohira.

It is advisable to build a retirement portfolio based on value investing to realize from the business growth and expansion, which builds a wealth, advises Rohira.

From 1995 to 2017, weights of financial services sector has increased from 19.7 percent to 35 percent and for metals and consumer goods have declined from 11.6 percent to 4 percent and 18.8 percent to 11.2 percent respectively.

Other sectors like chemicals & textiles which represented 5.4 percent and 5.5 percent respectively at the time of inception, no longer form part of NIFTY 50.

The companies which remained part of the Nifty since inception are not sector leaders and more linked with the economy. Analysts are of the view that these companies will keep on generating inflation-adjusted returns year-after-year.

“Yes, the companies mentioned are certainly for long haul considering their size scale and business model,” Jimeet Modi, CEO, SAMCO Securities told Moneycontrol.

“They are large players in catering to the basic needs of the masses, and basic needs do not change and therefore they are worth investing even at the current juncture as they will keep on generating an inflation adjusted cash flows year after year,” he said.

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