Did you know that India’s most prominent 100 companies mapped as S&P BSE 100 experienced its emerging moment when in a matter of nearly 36 months, four Adani group companies scaled up 1000 to 2000 times? They continued to fly under the radar as they did not have enough size [market capitalization] to get a significant weight in the S&P BSE 100. As a consequence, S&P BSE 100 could not benefit from that growth while the Exceptional & Rich Index which adopts a non-concentrated and diversified approach registered the best performance starting Jan 2021 with an annualized performance of the index at 34.78%, driven by the annualized excess return of 19.15%.
Figure 1 – % Rise in stock price of Adani Group Companies since January 2020
Now all this may look shocking from a developed North American market perspective, from the low annualized 1.5% European 50 perspective, and the economic point of view of high-interest rates, inflation, and low growth rates. But emerging markets are a different asset class, high risk – high return, and are a lot more heterogeneous in construction. The Indian large-cap 100 has registered double-digit growth since Jan 2000 and the few top outperforming fund managers have delivered an outstanding annualized return of 18% over the last decade, a top-notch performance.
An Index that can produce such double-digit annualized excess returns in a market like India can attract attention, diligence, and interest. But it’s not about how awesome a new Indexing method can be, it’s about the failings of the market capitalization-weighted concentrated method of the current benchmarks, which is blinded by Size. India is a different market when it comes to the war of Active vs. Passive. India is predominantly Active and Passive is going to grow at a steady pace with many more surprises like Adani’s. India is an extremely competitive turf for an 1871 method to continue holding ground.
Figure 2 – The Top 10 Holdings of Exceptional & Rich India 100 and BSE 100
The Exceptional & Rich India 100 [E&R India 100] Index blew past its market capitalized weighted counterpart, while maintaining the same number of components, passiveness and risk.
Figure 3 – The performance plots of E&R India 100 vs. the market capitalized benchmark
Figure 4 – Performance metrics of E&R India 100 vs. the market capitalized benchmark
Figure 5 – 2 Year rolling performance of E&R India 100 vs. the market capitalized benchmark
Figure 6 – Drawdown analysis of E&R India 100 vs. the market capitalized benchmark
AlphaBlock Team