5 years, no returns: Are these 9 Nifty bluechip stocks finally ready for a turnaround?

For five years, investors who owned some of India’s most trusted bluechip stocks have had little to show for their patience. TCS has fallen nearly 42%, Infosys almost 39%, while Hindustan Unilever (HUL) and Asian Paints have declined about 32% and 30%, respectively.

The list also includes HDFC Life, HDFC Bank, Reliance Industries, Bajaj Finserv and HCL Tech. Together, the nine stocks span some of India’s largest technology companies, most valuable consumer franchises, leading financial institutions and one of the country’s most diversified conglomerates.The average decline is about 22%, according to ACE Equity data.

“Some of the most popular, the best-quality businesses have shown mean reversion,” Dalal Street’s ace fund manager Prashant Jain of 3P Investment Managers said when asked on the underperformance of bluechips at the ET Alpha Wealth Summit 2.0 recently. “When something mean reverts, investors are disappointed and they are again extrapolating the past and therefore that pendulum does not stop at fair value, it goes below fair value.”


“These are some of the finest businesses, the mega caps some of them,” Jain said. “I think they are extremely attractive. Some of these I am owning for the first time in the last 25 years in my fund. I have never owned them because they were so expensive.”

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After years of underperformance of some bluechip stocks, expectations have fallen, valuations have compressed and even modest earnings improvement could trigger a re-rating. But the risks are not uniform. Some of these stocks are facing a cyclical slowdown. Others are confronting structural disruption. A few have delivered operational growth but failed to convert it into stock market returns.

The underperformance of these bluechips also reflects a major change in market leadership. For much of the last cycle, largecap stocks were the preferred route to participate in India’s growth story. Investors paid a premium for size, balance sheet strength, brand power and predictability.

The market’s preference later shifted towards smaller companies, manufacturing, defence, capital goods and other high growth themes. As liquidity moved towards those segments, traditional index heavyweights were left behind.

The result is a sharp divergence between business quality and stock market performance. A company can remain strategically important, profitable and financially strong, yet produce poor returns if earnings growth slows or the valuation premium disappears. That is exactly what has happened across the nine stocks.

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IT remains the biggest turnaround opportunity and risk

TCS and Infosys are the two biggest laggards in the basket. HCL Tech has performed better, but its five-year return is still marginally negative.

The sector remains caught between two opposing forces. On one side, large technology companies are likely to be among the survivors as enterprises spend more on artificial intelligence, cloud transformation, cybersecurity and digital infrastructure.

On the other hand, AI could reduce the amount of labour required for traditional technology services. That could put pressure on realisations, margins and headcount-led growth.

Amnish Aggarwal of PL Capital remains cautious on the sector. “IT Services remain in uncertainty on slow growth and likely impact of AI on profitability,” Aggarwal said. “Although large players will be survivors, intermittent periods will be volatile with pressure on realisations leading to uncertainty on growth and margins.”

He added that mid-cap IT companies may have a better growth outlook and could adjust faster to the new environment, although valuations remain demanding in many cases. PL Capital has retained a 150-basis-point underweight on the sector.

That makes the large-cap IT opportunity highly conditional. TCS and Infosys do not necessarily need to return to their old growth rates for their stocks to recover. They need to show that AI is creating new revenue pools faster than it erodes traditional services revenue.

A stabilisation in growth, better deal conversion and resilient margins could be enough to change sentiment. But if AI primarily becomes a tool for customers to demand lower prices, the sector’s old valuation framework may not return quickly.

HUL and Asian Paints need volume recovery

Hindustan Unilever and Asian Paints represent another kind of disappointment. Both companies have powerful brands, extensive distribution networks and established leadership positions. Yet their stock prices have weakened because investors no longer believe that past growth rates can be easily repeated.

For HUL, the market is waiting for a stronger consumption recovery. Rural demand, premiumisation, distribution and input costs will determine whether the company can regain volume momentum without sacrificing margins.

Asian Paints faces a more direct competitive challenge. Its long-standing market leadership is being tested by new entrants, pricing pressure and the need to defend distribution strength. Even if demand improves, the company must prove that growth can return without permanently lowering profitability.

This creates a classic turnaround dilemma. If the company protects margins, it may lose market share. If it cuts prices or increases spending to defend growth, earnings may remain under pressure.

For both HUL and Asian Paints, the recovery trade will require more than a change in sentiment. Investors will need evidence of sustained volume growth, stronger demand and a durable earnings trajectory.

HDFC Bank: Strong franchise, weak stock performance

HDFC Bank has delivered a negative five-year price return despite remaining one of India’s most important private sector banking franchises.

The bank’s underperformance reflects the market’s wait for a post-merger reset. The balance sheet has grown, but investors have been concerned about margins, deposit costs and the time required for the merged institution to achieve its full earnings potential.

PL Capital remains overweight on banks, arguing that credit growth has been strong, credit costs remain under control and private banks could benefit when the interest-rate tightening cycle begins because a higher proportion of their loans are linked to external benchmarks.

However, the brokerage is reducing its weight in HDFC Bank while increasing its preference for ICICI Bank.

Reliance needs a new trigger

Reliance Industries has also delivered a negative return over five years, despite the expansion of Jio, retail and new energy ambitions.

The stock’s challenge is that the company has become increasingly difficult to value through a single framework. Its energy business is cyclical, retail is still building scale and profitability, Jio is approaching IPO, and new energy is a long duration investment requiring capital and execution.

PL Capital has retained an equal-weight stance on Reliance. Its view is that the company lacks a meaningful near-term trigger, while the Jio Platforms listing could attract a holding company discount. Retail growth and profitability also remain concerns.

Jefferies takes a more constructive view. It has increased Reliance’s weight in its model portfolio, arguing that the stock is trading at attractive valuations and that higher gross refining margins could create upgrade potential.

Financial stocks

HDFC Life and Bajaj Finserv have delivered smaller declines than the IT and consumer names, but both remain below their levels of five years ago. Their recent performance suggests that the problem may lie more in expectations and valuation than in a collapse in business quality.

HDFC Life’s challenge is to maintain growth in annual premium equivalent and value of new business while preserving margins. Its bank distribution channel remains a critical factor. If growth accelerates and the company maintains profitability, the stock could gradually rebuild investor confidence.

Bajaj Finserv is a broader financial services platform, with lending remaining the main earnings engine. Its future performance will depend on the ability of the lending businesses to grow while keeping credit costs under control, and on whether its newer businesses can contribute meaningfully without diluting returns.

How cheap are largecap stocks now?

ICICI Securities believes the Nifty 50’s PEG ratio is moving towards an attractive level of about one, with forward price-to-earnings at around 17 times and consensus earnings growth expectations of roughly 16% for FY27.

The brokerage says this is among the lowest PEG levels seen over the past decade, while the earnings-growth outlook appears credible after a strong first quarter.

Jefferies also believes risk-reward is becoming more favourable for large-caps as the valuation gap with mid-caps narrows and the earnings-growth gap reduces over FY26-FY28.

(Data inputs: Ritesh Presswala)

(Disclaimer: This article has been written by Nikhil Agarwal, who is not a SEBI-registered Research Analyst or an Investment Adviser. Nikhil Agarwal and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here)