Financial sector biggest wealth creator in India

The financial sector has been the biggest wealth creator for the investors in India during the past five years, despite banks and shadow banks going through a very rough patch.

The 23 financial companies have seen the wealth of investors surge by Rs 15.9 lakh crore between 2014 and 2019, with a compounded annual growth rate of 27% in their average share price, according to a study by brokerage firm Motilal Oswal.

At the end of FY 2014, the financial companies contributed 32.4% of the total shareholder wealth created by India Inc. The top wealth creators in the banks include HDFC Bank (Rs 4.08 lakh crore), Kotak Mahindra Bank (Rs 1.8 lakh crore) and Axis Bank (Rs 1.21 lakh crore).

As the shadow banks in India started reeling under severe fund crunch, investors started shifting towards the safer stocks like HDFC and Bajaj Finance, who have created wealth worth Rs 1.8 lakh crore and Rs 1.6 lakh crore respectively during the five-year period.

This surge in the wealth of the investors has happened despite the overall banking sector being burdened by the bad loans in excess of Rs 9 lakh crore – which has had a severe impact on their profitability. Also, the shadow banks have seen a severe liquidity crunch after the Rs 90,000 crore default by IL&FS revealed a high degree of asset-liability mismatch in the sector.

The consumer and retail sector companies, which have witnessed the growth in their toplines, despite a prolonged slowdown in the country, have created a wealth of Rs 8.8 lakh crore during the past five years.

On the other hand, driven by the surge in the share price of Reliance Industries, the oil and gas distribution sector has created wealth worth Rs 7.8 lakh crore for the investors. RIL, controlled by Asia’s richest man Mukesh Ambani, contributed 72.3% of wealth created by the oil and gas companies in India, as the company created wealth worth Rs 5.64 lakh crore during the past five years.

The company, which has been the biggest wealth creator in the past five years in India, recently became the first Indian company to surge past Rs 10 lakh crore valuation mark.

Among the IT sector, TCS and Infosys have made it to the top 10 wealth creators in the country. While TCS added Rs 3.7 lakh crore for its investors, the Bengaluru-based IT major Infosys has created wealth worth Rs 1.7 lakh crore for its investors during the period. The major driving force behind the wealth created by the companies has been the management, according to the report.