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Finance Friday: Who Made You The Maximum Money In The Stock Market This Year

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This year has been a see-saw ride as far as the Stock Markets are concerned. The Markets witnessed one of the worst falls but staged a comeback of sorts during the later part of the year. The fall was meteoric owing to the global economy slowdown which turned out to be disastrous for the Indian Stock Markets.

The Shareholders wealth tumbled like nine pins. But, at the same time the fall bought the valuations of stocks to decent levels exposing new investment opportunities. When the markets tanked to 8k levels, the investors were too sceptical to invest. But, the Indian Economy recovered at a good pace and things started turning around.

The markets saw some real good short term bull rallies which took the BSE Sensex close to 12k levels. With 12k levels sustaining for a short duration, it was clear that the markets are heading for a uptick. The rise to current levels of 17k has been a free ride so to speak.

But, of all this see-saw ride in the Stock Market, who made the maximum money for Investors. There is little room for surprises here though. It was indeed Reliance Industries.

Reliance Industries has emerged as the biggest wealth creator for the third time in a row. It has created Rs 1,514- billion worth of wealth contributing 15.6 per cent of total wealth created in FY 09. (Source: Motilal Wealth Creation Study)

This is not too surprising given the DNA of Reliance Industries.Reliance has played the Indian Stock Markets like no other organization has. The founder knew all tricks of the trade and is still remembered as the master of Stock market dynamics.Moreover, Oil and Gas will always be a sector which will drive wealth creation. Being in short supply, it is a pricey commodity and Reliance Industries is pretty much the market leader in the Indian Sub-Continent. ONGC comes close but the government subsidies take its toll on its profit margins.

Another interesting result from the study is UNITECH , which has been termed as the fastest wealth creator. It has been my personal favourite over the years. The stock being from the realty sector is bound for volatility but makes for a very profitable short to medium term buy. Unitech has always been the punters bet and a traders delight.

To get an idea of the the price volatility that Unitech has witnessed for the past two years, its best to look at the graphs from FY08 to FY09

unitech_08_09Keeping BSE as a benchmark , Unitech fell from highs of 546 levels to the maximum lows of 21.The figures bear the testimony of the volatility that Unitech witnessed in the year marred by U.S. financial crisis.

But, it did rise like a phoenix(from its shattering lows) of the year ending 2008. Here is the Unitech price movement from the year 2009 to Dec 2009,

unitech_09_10

The stock rose from its lows of 24 to highs of 118 levels and the stock mostly saw a consistent uptrend for the given period. That’s almost 5x gains for the year. No wonder, it was the fastest wealth creator for FY09. However, as is clear from the two graphs, a stock like UNITECH may not be the most prudent choice for a long term horizon. Given the cyclic nature of realty/infra sector, it only makes sense to keep a profit booking strategy in a stock like Unitech.

The long term portfolios will still take considerable time to show some green but the investors who made fresh purchases during the start of the year are definitely sitting on decent profits.

So, which stocks made you the maximum profits this year ?

  1. Sachin says

    Guys are we forgetting Mphasis here?

    1. Rohan says

      We had a stupendous rally this year, so most stocks have given huge returns for those who entered at the correct time viz. around Feb and March 2009.

      MPHASIS, RELIANCE, UNITECH, etc. are not an exclusive examples. Amound mid-caps, you will find many stocks that have given 10x returns, ex: EDSERV, from lows below 21 to 250 above.

      But the point is that all these are hind-sight calculations and bear no value now, for an investor, trader and speculator alike.

  2. Ankit says

    @rohan i am not sure why we are not getting on the same terms!! Wealth creation here is again linked to the stock markets, isnt it!! the wealth creation study was symbolic of the wealth creation in the stock markets.

    As for the title,it was a question for the readers and see if they also got significant wealth generations from RIL and UNITECH.
    However, i accept ur inhibitions on the post title and content and will ensure i take the effort to clarify things further.It is comments like these which will help me become a better blogger.

    1. Rohan says

      No, wealth creation in this study is NOT linked to the stock markets or the share price.

      Performance and profits are the sole important points considered, and whoever has better profits than the rest is the winner.

      We are not getting on the same terms because you are mixing up things.

      1. Ankit says

        In that case i accept that i have mixed up things a little.Appreciate u taking the time to explain the facts.

        1. Rohan says

          You are welcome.

  3. Kiran says

    Heard rumors that Unitech almost filed for bankruptcy…and hence the lows of 21…

    ah well…rumors shmumors…who cares..it’s one party out there!

    1. Ankit says

      Unitech has been marred with controversies.They had a debt of around 800 crores towards Indiabulls and that got blown out of proportion.Thats when the lows occured, but things settled down and Indiabulls itself gave a BUY rating on Unitech.

      Moreover, Unitech has always looked weak on the balance sheet.For that matter most of the infra companies are given the high debt ratio.But, Unitech is punter’s favourite which is explained by huge trade volumes that it witnesses

  4. Vishal Sanjay says

    No it was in the stock market, but i kind of feel, Bharti and HDFC have created much more wealth this year.

  5. Rohan says

    Ankit,
    At first you say “Stocks that made most money”, and then you went on to credit RIL, citing the Motilal oswal welath creation study.

    Are you SURE, the motilal oswal study, is based on SHARE PRICE, and not on some other thing?

    1. Ankit says

      Apologies if the words were confusing.However, if a stock makes money it reflects that the shareholder is making money, aint it!!
      The motilal study is indeed the wealth creation study.So, what it means is that the RIL share created wealth for investors.Be it via dividend,bonus or other means, it mean that the RIL stock made money for its investors

      1. Rohan says

        You are mixing up “stock markets / share price” and “company performance”

        When trading or investing in the stock market, one will always have to pay a premium over the face value. Dividends are declared over the face value. Ex: When if RIL declares 40% dividend(assuming FV=10) it comes to Rs 4 per share, but the premium does not increase by 20%. The premium gets adjusted for dividend/bonus/split/etc. corporate actions.

        A simple calculation:
        2009 low or RELIANCE was 532.5 and 2009 high was 1268 (both figures have been adjusted for bonus/dividends/etc.). Thus the amount of maximum profit is 138 %, assuming that one was able to get in and out at these levels.

        2009 low of UNITECH was 24.6 and 200 high was 116.7. Thus the amount of mazimum profit is 374 %, again assuming that one was able to enter and exit at these levels.

        A company like RELIANCE may have highest profits compared to their peers, but since the no. of shareholders is also huge, the amount of profit per share is obviously low. Also, the company may not give out its profits completely to the shareholders. The company can hold back a large part of it towards their “savings for a rainy day”. The company may have profits, but they will in the company’s bank account, and not yours.

        I hope you got the point.

        1. Ankit says

          Thanks for the detailed explaination Rohan.However, i am still not sure why you feel that i am mixing company performance here.

          When the study says 1,514- billion worth was generated that means it is for the shareholders, now this may not be equally divided.
          Your high-low explaination is apt but then when i mention Unitech being the fastest, it means on a market level.Individual earnings will obviously be dependent on entry/exit levels.
          “A company like RELIANCE may have highest profits compared to their peers, but since the no. of shareholders is also huge, the amount of profit per share is obviously low”
          It is true however, the onus was on the total wealth generated so profit per share is something i did not highlight.That again will depend on the entry-exit points.
          I do appreciate your insights on the topic.Always nice to discuss the markets with someone who has the inclination and the expertise

        2. Rohan says

          It is true however, the onus was on the total wealth generated so profit per share is something i did not highlight.That again will depend on the entry-exit points.

          If the onus was on ‘total wealth creation’, what purpose is served by bringing stock markets into the discussion? And then why this post title “Who Made You The Maximum Money In The Stock Market This Year”.

          Also, irrespective of entry/exit points by individual investors or traders, the maximum possible profits are capped at 138% for RELIANCE and 374% for UNITECH.

          I hope you get my point atleast now.

  6. Vishal Sanjay says

    Well its too far from when i’ll start investing in the market, I’ll keep this points in mind. Reliance is not something that would be a money maker for long, i guess from now on we’ll have to invest on healthcare and education stocks, they are the ones which rally the most.

    1. Ankit says

      I am not sure why you say Reliance wont make money in the long run.The company has probably the biggest treasure chest and a well diversified business.

      Health care and Education might seem prudent choices but then stock markets work on balance sheets too.I could probably do another post explaining why healthcare is a risky bet:-)

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