RIL, TCS, ICICI Bank top wealth creators between 2018 and '23, finds study

Reliance Industries has emerged as the biggest wealth creator over the five-year period between 2018 and 2023, as per the latest edition of the widely followed Wealth Creation Study done by market veteran Raamdeo Agrawal of Motilal Oswal Financial Services.

The private sector major is followed by TCS, ICICI Bank, Infosys, and Bharti Airtel with the five firms collectively creating wealth totalling Rs 27 lakh crore.

“For the fifth time in succession, Reliance Industries has emerged the largest Wealth Creator over 2018-23. This takes Reliance’s overall No.1 tally to 10 in the last 17 five-year study periods,” stated the report.

Interestingly, HDFC Bank is conspicuous by its absence as the stock did not feature in the study for the first time in many years though the broking firm is confident that it will soon return to the list of top wealth creators.

“HDFC Bank does not feature in the top 10 list of Wealth Creators for the first time in several years. In fact, it does not feature in this study at all, as the stock underperformed the Sensex over the last 5 years. However, given HDFC Bank’s inherent strengths, it would be no surprise if it regains its pride of place in the next year’s study,” stated the report.

Meanwhile, a relatively low-profile company, Lloyds Metals, has emerged as the fastest wealth creator with 2018-23 price CAGR of 79 per cent. Interestingly, an amount of Rs 10 lakh invested in 2018 in the top 10 fastest wealth creators would have been worth Rs 1 crore in 2023 -- a CAGR return of 59 per cent, much higher than the 12 per cent for the BSE Sensex.

At a time when there is a lot of market talk around mid- and small-cap stocks, the report has highlighted the fact that six of the top 10 fastest wealth creators had a market capitalisation of less than Rs 5000 crore in 2018.

“Thus, the data confirms the obvious – for high Wealth Creation, pick small- to mid -companies with robust earnings growth prospects. As all our 28 studies show, such stocks are available in all market conditions,” stated the report.

“One key characteristic of mid- and small cap stocks is high volatility of returns. Such stocks may outperform over 5 years, but in the interim, they may cause investors quite a few anxious moments. This is where consistency comes in. Investors’ nirvana is in identifying stocks which not only outperform point-to-point but in the interim as well,” it added.

In terms of sectors, technology emerged as the biggest wealth creating segment for the second successive year, followed by consumer & retail and financials.

Meanwhile, the top 100 wealth creators of India Inc during 2018-23 created wealth of Rs 70.5 lakh crore, which was lower than the previous five-year period 2017-22 when it was 92.2 lakh crore.

Further, the pace of wealth creation at 21 per cent CAGR was also lower than the previous five-year period – 28 per cent -- but well higher than the BSE Sensex return of 12 per cent.

Incidentally, both the quantum and pace of wealth created by the top 100 firms in the latest study period is lower than the previous two successive study periods – 2017-22 and 2016-21.

The report has also highlighted the fact that investors should approach equity investment more from a stock perspective rather than the overall market.

“For the past 9 successive study periods, market benchmark indices have delivered muted returns ranging from 5% to 15%. Still, the top Wealth Creators have maintained their track record of 10-15% outperformance over the benchmark. This reinforces our pet take on market strategy, ‘Forget markets, think stocks’”, stated the report.

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