?The stock market boom in the last five years has created new highs and true valuation of the stocks has always remained a mystery for the investors,? said Raamdeo Agrawal, managing director of Motilal Oswal Financial Services, on the eve of 12th Annual wealth creation study by the company.
He added, “At current valuations, the margin of safety in the market is low. However, very high liquidity can lift the markets to rich levels of valuation for quite some time.” According to their study, Sensex will give a return of around 20% in the next 5 years from 2007-12 which is significantly lower than 29% recorded in the previous 5 years from 2002-07. According to the study the top 100 wealth creators(increase in market capitalisation) created Rs 7,06,500 crore of wealth between 2002 and 2007 and the top 10 companies contributed for about 50% of this value. To top the list was reliance industries limited (RIL) which created a wealth of Rs1,8,56 00 crore n in the last 5 years followed by ONGC and Bharti Airtel which created Rs 1,49,000 billion and Rs 1,36, 6 00 crore, respectively.
The study reflected that in the last five years stocks of MNC?s mainly led by FMCG and Pharma stocks listed on the Indian bourses have underperformed in terms of earnings as compared to their Indian peers. In the last five years companies which were wealth destroyers (companies giving declining returns), lost Rs14,200 crore of wealth which was only 2% of the Rs 7,06,500 crore (wealth created).
Even the State owned companies in aggregate underperformed their private counterparts in terms of earning, however this was mainly due to deregulation in most industries by the government in the last 5 years and selected PSUs like SBI, BHEL, SAIL and ONCG which are dominant in their sectors can not be ignored, mentioned the report.
According to the report, Wipro topped the list of the most consistent wealth creator giving a 15 years price CAGR of 47% followed by Cipla which gave a return of 36% in the same time frame. Among the fastest wealth creators, BF Utilities led the way with a whopping 5-year stock price CAGR of 267% followed by Unitech which saw a rise in their stock price by 246% in the last 5 years. According to Mr Agrawal the next big sectors which would dominate in terms of total wealth created in the next five years would be oil & gas, banking, engineering and real estate.
