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India ranks second globally, behind only the United States, in the number of companies consistently achieving a return on equity (ROE) of over 20 per cent for more than a decade, according to a report by DSP Mutual Funds.
This performance underscores the strength of Indian businesses and the robust fundamentals driving the country's stock market outperformance. The report highlighted that India's superior stock market performance is deeply rooted in its strong ROE figures. It noted that while popular narratives often influence market sentiment, the real engine of growth lies in the sound financial health and efficiency of companies. It said "This strong performance in ROE is the true engine behind India's superior stock market results, suggesting that the underlying fundamentals are what truly matter, rather than the popular narratives surrounding market performance". It also noted that one of the critical drivers of this success, the report emphasized, is the consistent growth in the book value of Indian companies. Steady increases in book value reflect a company's ability to generate long-term shareholder value, maintain financial stability, and demonstrate effective management practices. The report further revealed that Indian companies have exhibited remarkable stability and growth over the years. Over the long term, more than three-fourths of Indian companies have achieved positive growth in their book value, indicating resilience even during challenging economic periods. It added "A steady increase in book value reflects a company's ability to create long-term shareholder value, as well as strong financial health and efficient management practices". Notably, the report mentioned that out of 39 companies with positive book value growth over the last 20 years, seven have achieved uninterrupted growth throughout the period. These companies sustained their performance even during global crises like the 2008 Global Financial Crisis (GFC) and the COVID-19 pandemic, showcasing their stability and adaptability. The findings from the report highlight the strength of India's corporate sector and its contribution to the country's stock market success. The report believe this consistent performance reflects a strong foundation for long-term economic growth, reinforcing India's position as a key player in the global financial landscape. (ANI)
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