Inspired by the stories of riches in the ongoing market bull run, many small investors prefer to invest in stock SIPs in a bid to build positions in favourites scrips. Lump sum investments in stocks are usually the preferred route, but the lack of capital to buy a stock often motivates small investors to regularly invest in a handful of stocks. Note this analysis on the stocks mentioned below is not a recommendation to buy them.
Tracking winners
Our stock SIP analysis covers adjusted prices provided by Capitaline for 872 stocks from BSE Allcap index (100 large-caps, 150 mid-caps, 250 small-caps and 372 micro-caps). The stock SIP tenures are 1-, 3- and 5-year periods ended June 16, 2023. All returns are on absolute basis.
We assumed investors bought stocks every month (between 16-18); in this way, 1-year tenure means buying for 12 months, 3-year tenure is for 36 months and 5-year tenure is for 60 months.
Many of the stock SIP winners are from very small companies that have poor volumes and entry/exit could be much more difficult compared to more liquid names. On a 5-year SIP stock basis, the best performers include Aurionpro Sol., Lloyds Metals, Tanfac Inds., Titagarh Rail, Lloyds Steels, Jupiter Wagons, Usha Martin, Elecon Engg.Co, Choice Intl. and JBM Auto. These stock SIPs have generated about 300-450 per cent (absolute) gains.
The top-10 stock SIP performers on a 3-year basis again include the likes of Aurionpro Sol., Titagarh Rail, Lloyds Metals, Tanfac Inds., Jupiter Wagons, Usha Martin and JBM Auto. The new entrants in this list are Apar Inds., Power Mech Proj. and Safari Inds. Put together, the 3-year stock SIP returns of the top-10 range between 190-330 per cent (absolute).
The 1-year stock SIP top gainers list is relatively different from 3-year and 5-year charts. Stocks such Nucleus Soft., Jindal Saw, Manaksia, WPIL, Zen Technologies and Suzlon Energy enter the club; common names from the other two lists are Aurionpro Sol., Titagarh Rail, Tanfac Inds. and JBM Auto. The top-10 best-performing 1-year stock SIPs have gained about 80-180 per cent (absolute).
How have big stocks performed?
While small investors do show the tendency to bet on smallcaps, microcaps, and penny stocks, the larger and popular names such as Infosys, RIL, ITC, HUL, HDFC, and ICICI Bank counters are also of interest to investors who want to play safe. Let us see how stock SIPs of such shares have performed.
Five years ago, TCS, Reliance Industries (RIL), HDFC Bank, Hindustan Unilever (HUL), HDFC, ITC, Infosys, State Bank of India (SBI), Kotak Mahindra Bank and ICICI Bank were the biggest firms by market capitalisation. ITC tops the 5-year SIP performance chart with 76 per cent absolute gain, followed by ICICI Bank (64 per cent) and SBI (53 per cent). Infosys, Kotak Mahindra Bank, TCS and HDFC have notched up just 13-17 per cent.
In 1-year and 3-year periods, stock SIPs of many big firms have not worked much. HUL, ITC and ICICI Bank have performed better than the others.
Did Rolls Royces fare better than Marutis?
There are certain stocks in the Indian market that are high-priced in absolute figures. Take, for example, the likes of MRF, Page Industries, Honeywell Auto, Shree Cement, 3M India, Abbott India, etc. One share of such stocks currently trade at over ₹10,000-1,00,000 apiece. This puts them beyond the reach of many small investors. The only ways to get exposure to such stocks are either through MF/ETF way or by doing stock SIPs.
The performance of stock SIPs in such high-priced/valued scrips does not show any major trend in terms of delivering great alpha over a simple, low-cost investment solution such as Sensex ETF. It must be noted that stock SIPs in Lakshmi Machine Works, Abbott India, Nestle India and MRF did beat Sensex ETF gains (see table below).