Five years as shareholder of Alkem Laboratories

Five years ago, I made the decision to invest in Alkem solely based on its inclusion in the Nifty Next 50 index. It was in September 2020 that Alkem was included in the Nifty Next 50 index. Without conducting any further research, I relied on the belief that companies included in Nifty Next 50 index are generally considered to be well-established and stable. And, there is a high chance of them moving to Nifty 50 index.

But what I didn’t consider was that Alkem can also be removed from the Nifty Next 50 index. This is what happened in August 2021. And it hasn’t returned back in the index since then.

After investing during the initial years, I haven’t made any new investments in Alkem since October 2023 (Figure 1).

The dividends—although minuscule—have been hovering above 1% since last two years (Figure 2).

Alkem has somewhat followed the returns of Nifty Pharma (Figure 3). There are bouts of significant outperformance for few months followed by equal amount of under performance in the coming months. As of today it marginally outperforms the Nifty Pharma.

Comparing it to a broader range of indices—Nifty Pharma, Nifty 500, Nifty 50, Nifty Next 50—reveals a new detail (Figure 4). The initial years had significant deviations between the returns of Alkem and the indices. In the last one year they are all merging into a small range of 12-16% XIRR.