Moneycontrol Pro Panorama | This time is indeed different

Most market leaders and index heavyweights have been underperformers.

Dear Reader,

Since the onset of the pandemic crisis in early 2020, global equity markets have encountered numerous challenges. Under ordinary circumstances, these issues could have led to a bear market or even a severe correction. The challenges ranged from an unprecedented worldwide shutdown, historical levels of inflation and interest rates, liquidity problems, disruptions in global supply chains due to logistical crises, conflicts in major oil-producing nations, the real estate crisis and economic slowdown in China, and a confrontational situation between China and the rest of the developed world.

Each of these factors had the potential to inflict serious economic damage, as was evident in most parts of the world. However, India has weathered these challenges relatively well.

But despite being one of the strongest economies globally, certain Indian companies have not been immune to the impact of these crises, as reflected in their share price behaviour over the past two years, or so it seems.

On an absolute basis, the benchmark index has given a 20 percent return in the past two years, but most market leaders and index heavyweights, the ones who have been spearheading market rallies earlier, have been underperformers.

Infosys has delivered a negative 11.69 percent return while HDFC Bank is down 2.61 percent, Kotak Bank is down 5.19 percent, Asian Paints is 4.32 percent lower, Bajaj Finserv gave a return of minus 12.54 percent while Bajaj Finance is down 3.57 percent during the same period and TCS is trading 1.38 percent lower than its price two years ago.

But for the recent rally in Reliance, the stock has largely been a non-performer. Reliance has given a 7.60 percent return, and Hindustan Unilever is up 6.88 percent in two years. Collectively these companies account for over 55 percent of the Sensex.

A strong performance of smaller companies has pulled up the market. This is apparent in the strong performance of index components and those outside the benchmark index. During the same period, the mid-cap index has rallied 52 percent, and the small-cap index is up 33 percent.

According to legendary investor Sir John Templeton, the four most dangerous words in the market is “this time it’s different”. But in the Indian context, it does not seem to hold true in the past two years. The benefit of the growing economy has percolated down to smaller companies, the result of which is visible in the market.

Martin Wolf: The dangers lurking in our messy and unpredictable world (republished from the FT)

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