A lot of people have enquired about the dichotomy in the market,
i.e., the benchmark indices are ruling close to all time high levels, while not
many portfolios have returned positive returns during 2019.
I would say, the return of a portfolio of equity stock is
function of its construct and efficiency of management. The returns may vary
dramatically depending upon the stock selection and quality of the management.
So it would not be fair for me to comment on the performance of any particular
portfolio. Nonetheless, the following data points may be pertinent to note in
this context.
(a) At Tuesday closing
level, Nifty is higher by 9.2% YTD. But, the market capitalization of NSE is
higher by ~4% during this period.
Given that Nifty represents about 70% of the total market cap,
it is safe to assume that most of the companies outside Nifty have lost their
value during the year.
Moreover, 28 of the 50 constituents of Nifty have yielded
negative return during the year, the market breadth appears even narrower than
what Index performance may indicate.
(b) YTD, Nifty Small Cap
100 has lost ~14% value and Nifty Midcap 100 Index has lost ~8% value.
(c) Of the 1600 odd stocks
regularly traded on NSE, only 25% have returned positive yield YTD. 75% stocks
have lost their value during the course of 2019.
(d) To make the situation
even worse, over 28% of the stocks regularly traded on NSE have lost more than
50% of their value during the course of 2019. This set includes frontline
stocks like Reliance Capital (-95%), Reliance Infra (-93%), Jet Airways (-93%),
Yes Bank (-75%), Vodafone Idea (-72%), IndiaBulls Housing (-69%).
(e) Out of the 18 major
sectoral indices, 10 have returned negative yield YTD. Media (-32%), PSU Banks
(-22%) and Metal (-20%) are the worst performing indices. Auto sector yielded a
negative return of -16% YTD.
(f) Private banks (driven
mostly by HDFC Bank, ICICI Bank and Kotak Bank) outperformed with a 13% YTD
return. Energy (driven mostly by Reliance) also returned 13% YTD yield.
(g) In true sense, Realty was the best performing sector that
returned 20% YTD return. The reforms (RERA) and lower rates perhaps helped the
sector.
Considering this, in my view—
(i) Anyone who could
protect his/her capital and cover the opportunity cost of investing in equities
(6% in liquid fund or fixed deposit) has performed well during 2019.
(ii) Investors who could
also cover the inflation (4%) by earning ~10% must be considered above par.
(iii) Investors earning more
than 10% by design (and not purely by chance) must evaluate, whether they took
unnecessary risk for earning that kind of return. If not, they are rock stars.
(iv) Investors who have
lost more than 10% value in their portfolio may need professional help for
reviewing their investment strategy.
(v) All others are well
placed and need not worry too much.
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