Only six Sensex stocks from 1990 remain in benchmark, says Naren
ICICI Prudential Mutual Fund Chief Investment Officer S Naren advised investors to distinguish between asset allocation and individual stock selection.
Speaking at the ET Wealth Expo in Mumbai, ICICI Prudential Mutual Fund Chief Investment Officer S Naren noted that only six companies from the 1990 Sensex are still part of the benchmark index.
Naren identified the surviving stocks as Tata Steel, Hindustan Unilever, Reliance Industries, Larsen & Toubro, Wipro and ITC, while mentioning that Mahindra & Mahindra also returned to the index after a period.
He explained that the other 24 constituents from the 1990 list are no longer in the benchmark. Naren said investors should not assume a beaten-down stock will necessarily regain its former value, as companies can lose competitive positions or cease to exist.
The Chief Investment Officer cautioned against treating individual stocks as entire asset classes. He stated that stocks do not always mean revert, which can lead to disaster for those hoping for a recovery.
Naren also identified the NASDAQ and the US dollar as examples of anti-asset allocation. He noted the US dollar's appreciation against currencies like the Japanese yen, which moved from 80 to 157.
He advised caution regarding Indian midcap and smallcap stocks due to strong returns since 2020. While some companies in these segments may perform well, he suggested the broader categories may not be attractive for asset allocation.