He was referring to what then seemed an impossible trinity — very low unemployment, low inflation and low interest rates.
At the time, Indian markets too rode the global liquidity flood.
Cheap money flowed into a select set of ‘consistent compounder’ stocks as well, pushing valuations higher and entrenching the belief that they could do no wrong.
In the post-Covid, app-driven retail boom, repetition turned that belief into near-consensus wisdom. The last six years, however, have delivered a harsh rebuttal: even great businesses can become poor stocks when bought at excessive valuations.
a different story
From December 2019 to March 2026, the Nifty 50 compounded at 10.6 per cent, rising from about 12,100 to 22,800 levels. Yet several of best-known quality stocks failed to keep pace, and in some cases significantly underperformed. Asian Paints returned 3.5 per cent, Hindustan Unilever (HUL) 1.5 per cent and TCS 1.6 per cent CAGR, while Dabur India fell 1.4 per cent. HDFC Bank and Kotak Mahindra Bank delivered just 2-3 per cent against the Nifty Bank’s 8.1 per cent. These are household names, core portfolio holdings and still command lakhs of crores in market capitalisation.
Their reputation was not invented out of thin air. In the 2009-2019 decade, these stocks delivered exceptional returns. Britannia compounded at 33.5 per cent, Pidilite at 30.4 per cent and Asian Paints at 25.8 per cent annually. Even HDFC Bank and Kotak Mahindra Bank delivered 22-24 per cent CAGR, while HUL returned 21.9 per cent. By comparison, the Nifty 50 compounded at just 8.9 per cent and the Nifty Bank at 13.6 per cent. These were not just steady businesses —they were outstanding stocks, earning the “consistent compounder” tag.
good fundamentals
The enthusiasm was backed by business performance too. Between 2009 and 2019, profits compounded at 18.1 per cent for Asian Paints, 23.2 per cent for Britannia, 25.8 per cent for HDFC Bank and 26.9 per cent for Kotak Mahindra Bank. Pidilite, too, delivered a 23.7 per cent profit CAGR.
Margins expanded meaningfully. Britannia’s profit margin climbed from 4.2 per cent in FY09 to 10.5 per cent in FY19. Pidilite’s rose from 5.6 per cent to 13.1 per cent. Asian Paints improved from 7.7 per cent to 11.5 per cent.
By the end of 2019, though, many of these stocks were priced for near-flawless execution. When the Nifty 50 traded at about 23.3 times earnings, HUL was above 72 times, Pidilite at 76 times and Asian Paints near 79 times. Some, such as Berger Paints, had crossed 100 times. These were not just valuations, they were acts of faith.
Then came the reset. Global interest rates rose from near-zero levels, liquidity tightened, and FIIs found 3-4 per cent risk-free bond yields more appealing than expensive stocks with thinner earnings yields. At the same time, competition intensified and earlier growth assumptions weakened. Paint companies found their moats were not impregnable. FMCG firms learnt that volume growth was not guaranteed. Banks discovered that stronger PSU rivals and slower credit growth could upend old assumptions. The result was a double blow — moderating earnings growth and valuation compression.
Between FY19 and FY25, these companies continued to grow, but at a markedly slower pace than in the previous decade. Asian Paints’ profit growth CAGR fell from 18.1 per cent in FY09-FY19 to 8.7 per cent in FY19-FY25, and its stock return CAGR dropped from 25.8 per cent to 3.5 per cent. Dabur’s profit growth slowed from 14 per cent to 3.1 per cent, while its stock return slipped from 19.2 per cent CAGR to a negative 1.4 per cent. TCS saw profit growth ease from 19.5 per cent to 7.3 per cent, and return CAGR from 19.1 per cent to 1.6 per cent. This was not simply the market turning unfair. Growth slowed, and valuations could no longer do the heavy lifting. Even after the derating, excesses have not fully vanished. HUL still trades at 48.6 times earnings, Asian Paints at 57.7 and Pidilite at 64.4, while the Nifty 50 stands at 21.1.
Harder lesson
The lesson is not that these are weak companies. Most remain strong businesses with dominant brands, solid balance sheets and respectable, if slower, earnings growth.
The harder lesson is that even strong businesses can deliver weak stock returns for extended periods. HUL had a lost decade between 2000 and 2010; Reliance Industries had one between 2007 and 2016.
For a turnaround, valuations must cool meaningfully or growth must re-accelerate. When investors pay up simply because a stock once compounded brilliantly, they are not buying the future — they are paying for nostalgia.
Published on March 28, 2026