The financials sector (BFSI) has emerged for the first time as the largest wealth creating sector in financial year 2011, with Reliance Industries being the largest wealth creating company for the fifth time in a row since 2007, says a study by Motilal Oswal Financial Services.
Financials' share higher
The financials sector has created wealth to the tune of Rs 5,19,400 crore. Last year, the top wealth creating sector was the metals and mining sector. The oil and gas sector was the largest wealth creating sector for consecutive years between 2005 and 2009, says the report.
This CAGR of the financials sector is almost 28 per cent which is significantly higher than the average CAGR of 18 per cent, said the 16th wealth creation study by the brokerage.
The financials sector's share of wealth rose from 12 per cent in FY06 to 24 per cent in FY11.
With IRDA giving a go ahead for insurance companies to launch Initial Public Offerings (IPOs), the financials sector will benefit additionally. “The financials sector will further strengthen when insurance companies get listed and new banking licenses get issued,” said Mr Raamdeo Agrawal, Joint Managing Director at Motilal Oswal.
“Going ahead we see the FMCG/retail, auto and IT sectors doing well. The sectors which have exposure to consumers or consumer-related will be prominent wealth creators,” said Mr Agrawal.
Overall it's downtrend
Company-wise, Reliance Industries has been the biggest wealth creator for the fifth time in a row since 2007. The next in order are TCS, SBI and Infosys.
“The (overall) contribution of the largest wealth creators has been declining steadily from 76 per cent in 2003 to 42 per cent in 2011 indicating a more widespread wealth creation,” said the report.
“Sanwaria Agro, Adani Enterprises and Bhushan Steel are the top fastest wealth creators. But these are very risky investments, the stocks should be sold off at their peak, otherwise it is impossible to make a profit,” said Mr Agrawal.
During FY-2006-11, the total wealth destroyed was Rs 3,25,400 crore. This is about 15 per cent of the total wealth created (Rs 22,00,000 crore). The top four sectors which account for 56 per cent of the wealth destroyed are — capital goods, telecom, technology and construction/real estate, said the report.
The report explores blue chip investing and creation of wealth from dividends.
For the benefit of minority shareholders, Mr Agrawal came up with a suggestion of a “Minimum Dividend Obligation.”
Through this companies would have to commit a minimum dividend at the time of their IPO.