Nearly 25% of Nifty 50 Stocks Underperform: Investors Suffer as Blue Chips Lag Market Gains

Nearly 25% of Nifty 50 Stocks Underperform: Investors Suffer as Blue Chips Lag Market Gains​

A Moneycontrol analysis reveals a worrying trend within the Nifty 50, noting that approximately one in four stocks have delivered negative or flat returns over the past five years. While the broader index has seen a CAGR of 9 percent, nearly 25 percent of its constituents have trailed this performance significantly. This suggests pervasive underperformance among blue-chip companies despite generally positive market movements.

The analysis found that 13 Nifty 50 stocks failed to match the benchmark's returns over five years. For an investor who committed ₹1 lakh to these laggards five years ago, the outcome would be either a direct loss or returns barely matching those of a plain bank fixed deposit. These figures exclude any income derived from dividends, bonus issues, or buybacks.

IT Giants and Banks Dominate Laggard List​

The performance struggles are heavily concentrated within the Information Technology (IT) sector. Tata Consultancy Services has recorded the steepest decline among these laggards, posting a five-year CAGR of negative 10 percent. Wipro and Infosys have both seen their shares fall by 8.8 percent over the same period.

Other IT firms also showed muted results; HCL Technologies managed to barely stay afloat with a one percent CAGR. Tech Mahindra returned 4 percent, indicating consistent pressure on the traditionally strong sector.

The challenges are multifaceted for Indian IT majors. Concerns surrounding generative AI disrupting traditional services like manual coding and Level-1 support are forcing clients to cut technology budgets or demand lower prices. This has been exacerbated by weak discretionary spending in key US and European markets.

Two large private sector banks also feature on the underperforming list. HDFC Bank delivered a five-year CAGR of merely 1 percent, while Kotak Mahindra Bank returned 3 percent. Both lenders have faced regulatory scrutiny and margin pressure that limited their return potential.

Corporate Giants Face Slowdown Amid Rising Competition​

Among India's most valuable companies, Reliance Industries (RIL) has registered a five-year CAGR of 4.5 percent. Hindustan Unilever (HUL), the country's largest fast-moving consumer goods company, actually slipped into negative territory, recording a decline of 2.5 percent over the five years.

Asian Paints also faced headwinds in this segment, posting a 2.1 percent decline. Both RIL and HUL have been weighed down by an industry-wide slowdown in consumer demand coupled with rising competition and high initial valuations.

Other significant names on the list include HDFC Life Insurance, which recorded a negative 3.6 percent CAGR. Tata Motors' passenger vehicle business returned a marginal 0.2 percent, while pharmaceutical leader Dr Reddy's Laboratories posted a 3.8 percent five-year return.

Market Turbulence and Institutional Focus Shift​

This widespread corporate underperformance has been set against a backdrop of sustained Foreign Institutional Investor (FII) selling. Geopolitical tensions, including tariff disputes that adversely affected corporate earnings, have further complicated the market outlook for these companies.

The macroeconomic environment recently received an additional jolt as conflicts involving the US, Israel, and Iran pushed crude oil prices higher, increasing pressure on India's economic trajectory.

Despite these muted returns across many sectors, mutual funds have maintained increased exposure to these laggard stocks. As of May 2026, total mutual fund holdings in all listed companies stood at about ₹52.38 lakh crore, with these 13 struggling stocks accounting for roughly 18 percent or ₹9.16 lakh crore.

Mutual Funds Hold Key Stocks Amid Market Uncertainty​

Reliance Industries is the biggest beneficiary of this institutional conviction, holding nearly ₹1.79 lakh crore in mutual funds. Infosys and Kotak Mahindra Bank also saw significant increases in holdings at ₹1.04 lakh crore and roughly ₹92,468 crore, respectively. Holdings for Tata Consultancy Services stood at around ₹47,600 crore.

The market sentiment is now shifting as tensions in the Middle East ease temporarily. Investor focus is turning towards the upcoming earnings season and how the monsoon impacts the economy. Despite this shift, experts note that while scale naturally moderates growth potential for mature businesses, a large section of blue-chip stocks continues to lag behind the overall market performance.