Staying invested in pharmaceutical, FMCG and banking stocks since 2007 seems to have reaped good returns for the investors. Data on the BSE-500 stocks shows that about 10 per cent (55 stocks) have given more than 100 per cent returns, while 20 per cent (99 stocks) have given returns of over 50 per cent, between mid-October 2007 and end-June 2011.

According to a Business Line analysis of the BSE 500 stocks, during this period the Sensex itself has remained largely flat hovering around 18,600 levels. Of the top 500 stocks in the BSE, around 158 stocks or 32 per cent have given returns above ten per cent.

The stock with the highest returns has been Prraneta Industries, which has seen its stock price move from Rs 2.34 to Rs 72.85 , a whooping jump of more than 3,000 per cent. The second highest movement was seen in the case of TTK Prestige where the price moved from Rs 140.15 to Rs 2,942.05 a share, a 2,000 per cent increase.

Shree Global Tradefin was the third best performing stock giving returns of 1,339 per cent. However, it must be noted that Shree Global Tradefin was not part of the BSE-500 index in October 2007 and was included in January 2008.

The FMCG and pharma sectors dominate the list of these companies fortifying the Indian consumption story. Of the 99 stocks that gave more than 50 per cent, 56 belonged to the pharmaceuticals, FMCG, capital goods and banking sectors, with the FMCG companies dominating the list at 19. In an economy that is about 70-80 per cent driven by consumption demand, this is hardly surprising, say market analysts.

One reason for the strong performance of these sectors was the over-all growth in the country even during the economic downturn.

With a growth rate of about 7-8 per cent during the three-year, down from 9-10 per cent, the Indian market was still more attractive than the others global economies. The US economy's growth rate during the same period declined to 1.2 per cent from 3 per cent, while the European economies are still struggling to come out of the recession.

“All Indian companies which had high exposure to exports or imports and had a high correlation with the global economies have been affected greatly. But the India-centric companies have done well as is evident from the performance of the FMCG and Pharma companies' stocks,” said Mr Nirakar Pradhan, Chief Investment Officer, Future Generali India.

However, analysts are quick to point out that the growth in the economy has not been in an equitable manner as it has been concentrated only in a few sectors.

“This wealth-creation is more stock-specific as it is concentrated only in a few sectors. This just goes to show that it is the quality of stock-picking that will eventually lead to long-term returns,” said Mr Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities.

While the opportunities seem tremendous, what the analysts rue is the fact that the retail has missed out on the entire rally.

“Risk-aversion is at play. Most of the investors are short-term players and the patience to create wealth over a period of time is just not there. Value investors, those who invest for long-term, form a small percentage of the entire investor population,” said an analyst with a broking firm.

Globally, in the last six months, India has been one of the worst-performing markets, this coupled with rising interest rates has made the retail sector wary, say market experts.

For now, analysts say that the long-term India growth story will be led mainly by consumption. However, in the short-term, other sectors would gain prominence.

Pharma and FMCG would be the long-term defensive stocks, while the auto, cement, realty and infrastructure sector, among others would see more of a cyclical pattern, said experts.

“One sector which would play over and over again would be the banking sector. With a credit growth of around 18-19 per cent per annum, the banking sector has tremendous potential to unlock,” said Mr Chokkalingam G, ED & CIO, Centrum Wealth Management.

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