The December edition of the DSP Netra report said, “Large-cap stocks are now the smallest share of the total market capitalization. The share of top 50 or top 10 stocks against the total market has reached an all-time low. , which presents a rare opportunity for investors.”
“While large caps remain relatively attractive, the current market environment emphasizes the need for caution amid volatility. This backdrop necessitates a conservative approach to large-cap investments, which are uncertain and unpredictable. presents a strategic advantage for long-term investors,” the report said.
According to the report, “India’s better long-term market performance is often attributed to factors such as domestic inflows or strong GDP growth, but the real driver is its improved return on equity (ROE). About one-third of Indian companies has consistently achieved ROE of over 20 percent, second only to the US.”
The report added, “One of the key factors behind the outperformance of the Indian markets is the continued increase in the book value of the underlying companies. Indian companies have shown exceptional stability and sustained growth over time.”
The report highlights that over the long term, more than three-quarters of companies have shown positive growth in their book value. Notably, over 20 years, 7 out of 39 companies with positive book value growth have achieved growth in each of those 20 years. Even in the midst of global challenges such as the GFC and the COVID-19 pandemic, that shows the resilience of these businesses.
Sahil Kapur, Head of Products and Market Strategist, DSP Mutual Fund said, “India’s strong fundamentals and high return on equity highlight long-term growth prospects. As we navigate these uncertain waters, A conservative approach to large investments can provide a strategic advantage.”