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Underperforming Stocks in the Nifty 50

Let’s take a closer look at the Nifty 50 stocks from the past year. Out of 50 stocks, 15 have underperformed compared to the Nifty index. The numbers might surprise you. For instance, Asian Paints underperformed by 36.13%, Hindustan Unilever by 32.94%, and Kotak Mahindra Bank by 32%. Other notable names like ITC, HDFC Bank, and Bajaj Finance also lagged behind. These stocks were expected to do well but fell short of expectations.

Lost Opportunities

When you see top names underperforming, it reflects lost opportunities. Even if these stocks bounce back in the next year, a significant amount of time and potential gains have been lost. These companies, despite favorable market conditions and substantial fund inflows, have not performed well. There seems to be a churn happening in the market, with new leaders emerging. While some of these underperforming stocks might recover, others could stagnate or continue to decline.

Stocks That Outperformed

On the flip side, there are stocks in the Nifty 50 that have outperformed significantly. For example, Coal India outperformed by 87%, Bajaj Auto by 84%, and Mahindra & Mahindra by 70-80%. Even the least among the top performers, Cipla, did 32% better than the Nifty. This demonstrates that within the same index, there are always stocks that excel and those that fall behind.

Focusing on Winners

Given the disparity in performance, it makes sense to focus on the top-performing stocks. Rather than holding onto underperforming stocks, investors should aim to have the top 10 or top 20 names in their portfolios. This approach allows you to beat the Nifty by staying with the winners and not waiting endlessly for the underperformers to bounce back.

One effective strategy is to regularly review and rebalance your portfolio. For example, the Mi India Top 10 strategy focuses on Nifty stocks and picks the ten stocks with the highest momentum. This approach helps in generating additional alpha over the Nifty. By continually adjusting the portfolio, you ensure that you are always holding the strongest stocks.

The Importance of Rebalancing

Investors need to let go of the attachment to specific stocks and focus on what’s working in the market. Confidence in a stock does not guarantee its performance. Regularly reviewing and rebalancing your portfolio can help in identifying and holding onto strong stocks. The goal is to make money, not to stay loyal to a particular stock.

Check out the detailed video on the WeekendInvesting App