What next for large caps which are not moving since 5 years?

Via chat gpt

There is a very important historical lesson here, but I would not interpret “5–8 years of no return” as automatically meaning the stock is about to give a good return.

Current screens show several large caps with poor 5-year price returns: HDFC Bank about -2%, TCS about -10%, Infosys about -8%, Dabur about -10%, while other large caps have also struggled. 

What happened historically after similar stagnation?

The interesting pattern is that good businesses frequently produce their best forward returns after long periods of valuation compression, provided earnings remain intact.

A few examples:

1. ITC — perhaps the clearest example

ITC had a prolonged period of frustration around 2017–20. Its annual stock returns were:

2017: +11%

2018: +9%

2019: -14%

2020: -8%

Then:

2021: +7%

2022: +58%

2023: +43%

So ₹1 lakh at the beginning of 2021 became roughly ₹2.8 lakh by the end of 2023, before considering dividends. 

That's a very good example of time correction → valuation reset → rerating.

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2. Infosys

Infosys had another interesting cycle.

After a weak period around 2011–12:

2011: -33%

2012: -19%

It subsequently produced:

2013: +34%

2014: +16%

2015: +8%

Then another strong cycle came in 2019–21:

2019: +11%

2020: +69%

2021: +50%

So a long-term compounder can have several years of disappointment and then produce very strong 2–3 year bursts. 

The important point for today's Infosys is that its current situation is not identical to the earlier cycle. Its 2025–26 decline is much more severe, so we have to distinguish valuation opportunity from a structural IT-growth problem.

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3. Asian Paints

Asian Paints illustrates the other side.

It had phenomenal returns in 2017–20:

2017: +29%

2018: +21%

2019: +31%

2020: +55%

Then:

2021: +23%

2022: -9%

2023: +13%

2024: -32%

2025: +21%

2026: -10% so far. 

So the present stagnation isn't necessarily an obvious “buy the dip” opportunity. The business is facing a genuine competitive change from Birla Opus/JSW and the industry's economics are being tested. 

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4. HUL

HUL demonstrates why we shouldn't blindly extrapolate.

After exceptional returns in 2017–20:

2017: +68%

2018: +37%

2019: +8%

2020: +26%

the stock essentially stalled:

2021: +0%

2022: +10%

2023: +6%

2024: -11%

2025: +1%

2026: -15% so far. 

This is a classic valuation digestion story. The company can remain excellent while the stock gives mediocre returns for years.

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5. Dabur

Dabur is even more interesting.

Before its current weak phase, it had:

2017: +35%

2018: +13%

2019: +7%

2020: +14%

2021: +8%

Then:

2022: -12%

2023: +1%

2024: -11%

2025: -5%

2026: roughly -29% so far. 

This is now a much more interesting valuation question, but not necessarily a timing signal.

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The key historical lesson

I would divide these “no-return” stocks into three different types:

A. Excellent business + valuation correction

This is the category we want.

Examples historically:

ITC → potentially HUL → potentially HDFC Bank/TCS

The business continues to compound earnings/cash flows while the valuation falls or remains stagnant.

Eventually:

EPS growth + P/E stabilisation = strong stock return

This is the ideal setup.

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B. Excellent business + structural slowdown

Example:

Infosys / TCS

The businesses remain excellent, but the growth rate may permanently settle lower than the market previously expected.

A stock that looked like a 20% compounder may become a 10–12% compounder.

That's still a good business—but not necessarily a great investment at every valuation.

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C. Former compounder + genuine competitive disruption

Example:

Asian Paints

The previous moat may still exist, but its incremental economics are being challenged.

This is dangerous because a 5-year correction can become a 10-year correction.

That's the difference between:

> “The market is temporarily wrong”

and

> “The market has correctly identified a change in the economics.”

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What does history suggest about the next 3–5 years?

I would not say:

> “After 5 years of no return, expect 50–100%.”

The more defensible historical proposition is:

> When a high-quality company undergoes a long price correction while earnings continue to grow, subsequent 3–5 year returns can become substantially better than the preceding period.

The return comes from two engines:

Future return ≈ EPS growth + change in valuation multiple + dividends

For example:

If EPS grows 12% CAGR for five years and P/E remains unchanged:

₹100 → ~₹176

That's already ~12% CAGR.

If P/E subsequently expands from 15× to 20×:

₹176 × 20/15 = ₹235

That's ~18.6% CAGR.

But if P/E contracts from 15× to 12×:

₹176 × 12/15 = ₹141

Only ~7% CAGR.

So the valuation at the end of the stagnation period matters enormously.

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Among your 14 stocks, I would NOT treat them equally

Based on the framework we've been using for your portfolio, my preliminary classification would be:

Most interesting for a contrarian long-term investor

1. HDFC Bank

2. TCS

3. Infosys

4. ITC

5. Reliance

These have the strongest combination of scale + balance sheet + franchise + cash generation + ability to recover.

But HDFC Bank needs an additional governance/leadership check now. The current weakness isn't purely valuation: leadership uncertainty and governance concerns have materially affected sentiment. 

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Interesting but requiring more evidence

6. Kotak Bank

7. Dabur

8. HUL

9. Bajaj Finserv

10. Axis Bank

Here I would want to see whether earnings growth can reaccelerate rather than simply assuming mean reversion.

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More cautious

11. Asian Paints

12. Tech Mahindra

13. LTTS

14. LTIM

The IT engineering/services names may ultimately become attractive, but I wouldn't buy them merely because they have fallen. The growth trajectory and AI-driven changes in IT services economics need to be incorporated.

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One particularly interesting observation

Your list actually gives us a very useful large-cap contrarian basket:

Banking

HDFC Bank

Kotak

Axis

Consumer

HUL

ITC

Dabur

IT

TCS

Infosys

Tech Mahindra

LTTS

LTIM

Diversified

Reliance

Bajaj Finserv

Paints

Asian Paints

That's almost a laboratory for testing the hypothesis:

> “Does buying great companies after prolonged underperformance work?”

And I think this is worth doing systematically rather than relying on anecdotes.

I would suggest the next step

For each of these 14 stocks, calculate:

1. Length of previous stagnation

2. Maximum drawdown

3. P/E at beginning of stagnation

4. P/E now

5. EPS CAGR during stagnation

6. FCF CAGR

7. ROE/ROCE trend

8. Debt trend

9. Market-share trend

10. Return 3 years after previous comparable stagnation

11. Return 5 years after previous comparable stagnation

12. Whether the business fundamentals improved before or after the stock started rising.

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Step 2:

Agreed. I would exclude all finance/banking/insurance except HDFC Bank.

That leaves us with the following 13-stock “long stagnation” universe:

1. HDFC Bank — allowed exception

2. Reliance Industries

3. Hindustan Unilever

4. ITC

5. Dabur

6. TCS

7. Infosys

8. Tech Mahindra

9. LTTS

10. LTIMindtree

11. Asian Paints

Actually, from your original 14, removing Axis, Kotak and Bajaj Finserv leaves 11 stocks, not 13.

And this is an interesting universe because the current weakness is unusually broad: IT, FMCG, paints, telecom/diversified, and HDFC Bank are all represented. Recent data confirms that TCS, Infosys, HUL, Asian Paints and HDFC Bank have all been among the major five-year laggards. 

I would analyse them differently now

Rather than simply asking “what happened after a pause?”, I'd test:

A. Historical stagnation

How long was the previous no/low-return period?

Maximum drawdown during it

Return after 1, 3 and 5 years

B. Fundamental behaviour during the pause

Revenue CAGR

EPS CAGR

FCF CAGR

ROCE/ROE

Debt

Market share

C. Valuation

P/E at beginning of stagnation

Lowest P/E during stagnation

Current P/E

Current valuation vs 5/10-year median

D. Structural change This is the most important filter.

For example, today's IT weakness is not simply a valuation correction. Large-cap IT is dealing with slower traditional technology spending and uncertainty over how AI changes the economics of outsourcing. Infosys is currently guiding to only 1.5–3.5% FY27 constant-currency revenue growth. 

Similarly, Asian Paints cannot be treated like an ordinary cyclical correction because competitive intensity has changed.

Conversely, ITC's valuation has compressed substantially while its underlying franchise remains powerful, although the tobacco-tax changes are an important new variable. 

My preliminary hypothesis

If we run the historical exercise properly, I suspect the eventual ranking will look something like:

Tier 1 — strongest candidates for a recovery after stagnation

ITC

HDFC Bank

TCS

Reliance

Tier 2 — potentially attractive, but need stronger evidence

Infosys

HUL

Dabur

Asian Paints

Tier 3 — turnaround/speculative rather than simple mean reversion

Tech Mahindra

LTIMindtree

LTTS

But I don't want to prejudge the result. The really useful exercise is to calculate what happened historically after comparable pauses for each company, then compare that with today's fundamentals and valuation.

That could identify whether, for example, ITC at today's valuation is a much better “pause opportunity” than Asian Paints, or whether TCS/Infosys are cheap enough to compensate for the structural AI risk.

I can do that next and produce a ranked 11-stock list with historical 3-year/5-year post-pause returns → current valuation → fundamental health → expected 5–10 year return → Core / Accumulation / Satellite.