New Delhi [India], December 12 : The combination of rising financialisation, expanding equity ownership and stronger corporate profitability is creating a multi-trillion-dollar opportunity for investors, Motilal Oswal Financial Services in its Annual Wealth Creation Study (2020-2025) said.
Long-term wealth will be created by high-quality businesses that can compound for decades, and the key is to select the compounders carefully and avoid the temptation to time the market, the report noted.
The study examines India's evolving wealth creation landscape and presents this year's theme: India - The Multi-Trillion Dollar Opportunity - Compounding Economy, Compounding Stocks, an exploration of how India's economic compounding is set to create exponential opportunities for investors, businesses, and capital allocators.
The study found that wealth creation during 2020-2025 is the highest in the 30-year history of the study, with the top 100 companies adding Rs 148 trillion, driven by the sharp rebound from the COVID-19 lows.
Bharti Airtel, BSE, and Hindustan Aeronautics emerge as the biggest, fastest and most consistent wealth creators, respectively. HAL is also the best all-round wealth creator of the study period, the brokerage said in its report released Thursday.
According to Motilal Oswal, financials remain the largest wealth-creating sector, followed by industrials, capital markets, technology, and utilities.
Notably, PSUs extended their comeback, especially in defence, energy, and utilities.
"The world is getting wealthier and so is India, with global financial assets compounding steadily and India's market cap compounding at 17 per cent over the last 20 years. India is now the 4th largest equity market globally," the brokerage said.
There is no absolute upper limit to financial wealth, despite periodic disruptions; global and Indian equity markets continue to expand structural wealth over long cycles, it added.
India's GDP quadrupled from USD 1 trillion to USD 4 trillion over the last 17 years; the study projects another quadrupling over the next 17 years, creating a Multi-Trillion Dollar (MTD) opportunity across sectors.
"The Wealth Effect is accelerating with rising household equity ownership. Even a modest 5 per cent wealth effect on incremental market cap can materially lift GDP growth, reinforcing a virtuous cycle of wealth creation and consumption," the brokerage noted.
Going forward, large caps are likely to outperform in the medium term, the financial services company said.
Raamdeo Agrawal, Chairman, Motilal Oswal Financial Services said, "India is entering its most powerful compounding era. As the economy moves from USD 4 trillion toward USD 16 trillion, the combination of rising financialization, expanding equity ownership and stronger corporate profitability is creating a Multi-Trillion-Dollar opportunity for investors. Long-term wealth will be created by high-quality businesses that can compound for decades. The key is to select your compounders carefully and avoid the temptation to time the market."
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