Examples of the Magic of Compounding in the Markets

There have been some great returns from some well run companies for last few decades and that has been attributed to the 'power of compounding'. Now, Compounding is the process of generating earnings on an asset's reinvested earnings. 

To work, it requires two things: the reinvestment of earnings and time. The more time you give your investments, the more you are able to accelerate the income potential of your original investment.

See for yourself, how the magic of compounding works over a period of 20–30 years.

• Rs 10,000 invested in Eicher Motors in 1992 is worth today - Rs 80 lacs
• Rs 10,000 invested in Asian Paints in 1986 is worth today at Rs 90 lacs
• Rs 10,000 invested in Dr Reddy’s Labs in 1986 is worth today at mindboggling Rs 10 crores.
• Rs 10,000 invested in Shree Cement in 1990 is worth today at Rs 2.90 crores.
• Rs 10,000 invested in Torrent Pharma in 2008 is worth today at Rs 2.19 lacs (approx) (that’s more than 21 times in 9 years)
• Rs 10,000 invested in Granules India in 2008 is worth today at Rs 2.97 lacs (almost 30 times in 9 years) (Stock was at Rs 28.20 back in 2008 and there was split in face value from 10 to 1 in 2015)
• Hold your breath for this one. Rs 10,000 invested in Ajanta Pharma in 2008 would be worth today at Rs 24.42 lacs. (More than 240 times in 9 years)

Barring these companies there are many companies which have grown tremendously in the last 20–30 years. We all have read about the investing returns from Infosys and Wipro over the last 3 decades.

There are companies like Bajaj Finance, BPCL, Lupin, Natco Pharma and HPCL which have delivered 50–60x over a period of last 20 years.

Happy Investing!

(Source; Compiled information available on various websites like Money Control, BSE India, Yahoo Finance and Google Finance)