At a time when the financial sector is facing rising bad loans and liquidity stress, it also remains the largest wealth creating sector between 2013 and 2018. Company-wise, HDFC Bank, Indiabulls Ventures and Titan Company are the biggest, fastest and most consistent wealth creator, respectively between 2013 and 2018. These are some of the findings from the Motilal Oswal 23rd Annual Wealth Creation Study.
State-owned companies have become marginalised in wealth creation between 2013 and 2018 with their share falling to 9% in 2018 from 51% in 2005. The number of public-sector in the top 100 wealth creators is only 11 and wealth created by these companies is only 9% of the total.
The top 10 wealth creators during the period 2013 to 2018 are HDFC Bank, Reliance Industries, TCS, Maruti Suzuki, Hindustan Unilever, HDFC, Kotak Mahindra Bank, IOC, Larsen & Toubro and Bajaj Finance. If an individual had invested `1 lakh equally in 2013 in top 10 fastest wealth creators, it would have grown to almost `1.7 million in 2018, delivering a CAGR of 75%. Over the same period, Rs 1 lakh invested in the Sensex would have grown to only Rs 1,75,000 or 12% return CAGR.
The top 10 created `19.95 lakh crore of wealth during the period. The top 100 created wealth of Rs 44.9 lakh crore. This, according to the report, is the highest-ever quantum of wealth created. “This reinforces the point that wealth creation happens in all kinds of market conditions. Investors are better off focusing on which stocks to invest in, rather than timing the markets,” the report underlines.
The total wealth destroyed during 2013 to 2018 is `4.9 lakh crore, which is 11% of the total wealth created by top 100 companies. Most of the wealth destroyers are led by public sector banks because of rising NPAs and cyclical downturn led by metals and mining sector.
Financial sector, the prefered one
Financial sector has emerged as the biggest wealth creating sector during 2013 to 2018. The surge has been led by private banks and non-banking financial companies (NBFCs). “The financial sector has the unusual distinction of being the biggest wealth creator, thanks to private banks and NBFCs,” it said.
The report underlines that India’s financial sector offers a huge opportunity. In banking, there is massive value migration on from state-owned to private banks. Further, insurance and asset management are emerging as high-growth segments. “Expect financials to rule the roost in wealth creation for the next few years at least,” underlines the report.