In fact, quite the contrary has happened. The attraction of MNC stocks, the traditional movers and shakers of the stockmarkets with their high share premia, robust performance and professional management, has eroded steadily. Their combined market capitalisation (if you exclude itc and Hindustan Lever) account for Rs 47,291.6 crore or 7.8 per cent of the total market capitalisation—down from 10.9 per cent in 1999. And this, despite the shoring up of some stock prices with buyback offers. In most of these companies, promoter holding tends to be high (51 per cent or more). Assuming an average public holding of 40 per cent, MNCs would need only about Rs 19,000 crore to delist from Indian bourses.
So why did the magic wear off? There are five major reasons for the fall from grace. First and foremost, technology. "In the last 2-3 years, Indian IT and telecom stocks have not only provided earnings growth but also created wealth," says Motilal Oswal of Mumbai-based brokers Motilal Oswal Securities. Since MNCs, except for ITC and Hindustan Lever, weren't able to match the performance, the spotlight shifted away. For instance, compared to the cumulative average growth rate (CAGR) in net profit and sales growth of Infosys at 85.0 per cent and 79.6 per cent respectively during 1997-2002, GlaxoSmithkline, the top pharmaceutical MNC in India, achieved just 1.7 per cent and 12 per cent respectively. "The premium enjoyed by MNC stocks over and above Indian stocks is now gone," says Vetri Subramanian, head, Equity Fund, Kotak Mahindra Mutual Fund.