Nifty 50 Underperformance: A Third of Stocks Show Flat to Negative 3-Year Returns

One in every five stocks in India’s benchmark Nifty 50 index has delivered flat to negative returns on a three-year compound annual growth rate (CAGR) basis for the period ending January 19, highlighting prolonged underperformance among several index heavyweights, even as many of these companies continue to rank among the country’s most highly valued firms. Stocks that have recorded weak performance during this period include HDFC Bank, Tata Consultancy Services, Infosys, Reliance Industries ltd, ITC Ltd, Kotak Mahindra Bank, Hindustan Unilever, Adani Enterprises, Tata Motors Passenger Vehicles, Asian Paints and HDFC Life Insurance. Interestingly, if investors had parked their money in fixed deposits offered by state-run banks during this period, they would have earned higher returns than those generated by many of these stocks. Tata Consultancy Services, the largest IT services company, has posted negative three-year CAGR returns of 2.1 percent. Infosys has delivered gains of around 3 percent over the same period, while Hindustan Unilever has recorded negative CAGR returns of nearly 3 percent. Reliance Industries, India’s largest company by market capitalisation, has generated a three-year CAGR of about 4.6 percent. HDFC Bank, India’s largest bank by mcap, has delivered returns of just 4 percent over the past three years, while Kotak Mahindra Bank has generated gains of about 6.5 percent during the same period. Adani Enterprises has declined sharply, posting negative returns of nearly 14 percent. ITC, India’s largest cigarette maker, has delivered largely flat CAGR returns, while Asian Paints has slipped close to 1.3 percent. Tata Motors Passenger Vehicles has seen returns fall by around 5 percent over the three-year period. Meanwhile, the Nifty 50 index has delivered returns of around 12 percent during this period. Veteran investor Shankar Sharma, founder of GQuant Investech, said most large-cap companies primarily serve domestic markets and operate traditional business models, with the double-digit nominal GDP growth being their primary growth driver. He said large companies are proxies for nominal GDP growth, as their revenues and profits are closely linked to it. Sharma said growth rates of large companies are not even matching nominal GDP growth, raising questions over whether the linkage between GDP growth and corporate profits has weakened or whether underlying nominal GDP growth is closer to corporate profit growth of around 5 to 6 percent. Shankar Sharma and independent research analyst Deepak Jasani spoke with Moneycontrol on January 19. Meanwhile, mutual funds (MFs) continued to invest in these stocks despite subdued performance. MFs’ total investment as of December 2025 in HDFC Bank stood at around Rs 3.37 lakh crore, the highest among all listed companies, while their exposure to Reliance Industries was about Rs 1.99 lakh crore. MF investments in Infosys and Tata Consultancy Services were valued at around Rs 1.35 lakh crore and Rs 64,216 crore, respectively. Holdings in Kotak Mahindra Bank and ITC stood at around Rs 92,550 crore and Rs 81,731 crore, while investments in Hindustan Unilever and Asian Paints were around Rs 34,201 crore and Rs 28,372 crore respectively. Together, these 10 stocks account for nearly 20 percent of total mutual fund equity assets. Independent research analyst Deepak Jasani said as businesses mature and their size becomes very large, return potential tends to diminish, as companies with large sales and balance sheets find it difficult to grow at the same pace as smaller firms. Jasani said investors should consider reducing exposure to mature companies and shift toward higher-growth businesses. He added that instead of focusing on individual stock selection, investors may prefer diversified baskets such as indices or mutual fund schemes, where fund managers can rotate capital from low-growth companies to higher-growth companies. He said investors seeking higher returns must allocate a higher proportion of capital to equities but must also be clear about investment horizon and portfolio composition. Some analysts said it is difficult to predict if these stocks would continue to underperform going ahead, though periods of prolonged underperformance are often followed by some degree of mean reversion. They added that any recovery could be used to reduce exposure, as companies with very large bases are unlikely to sustain strong performance over long periods. Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.