Dear @akbarkhan
Your argument as I understand from the above is that the current constituents are better than historical constituents because historical non-performers go and only the performers stay. So we need to take the current constituents’ historical performance and infer growth in the future from that.
But the historical performance of current constituents has the benefit of hindsight. Suppose I create a portfolio today of stocks that has given a high earnings growth say in the past 5 years by choosing them obviously after I know their results, I cannot say that their their future earnings growth will be high. If you think about it, say the Nifty 5 years ago would also have thought the same as you are thinking now; ‘that I have removed laggards and only the performers stay’. But laggards continue to be there and Nifty continues to be revised; 2 – 4 changes every year. Even today’s Nifty will have laggards, no one knows which ones. For instance no one long back would have thought that RIL will be a laggard, and today I am sure you would laugh if I told you that Jet Airways was a part of Nifty. Similarly companies have been removed and brought back into the Nifty (Zee Enterprises, for instance) after a while!
So the best way to measure anchor earnings growth is to take Nifty portfolio as it was at that time in history and see how it did until the Nifty was changed; and again do the same.
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