‘Needle hunting’ starts pricking stock investors

It is no longer the one-way 2021 market of fair valuations, easy liquidity and euphoric sentiment.

Index fund pioneer John Bogle’s famous line about buying the haystack, instead of hunting for the needle, feels like a cliché in bull markets.

But in the last 12 months or so, stock investors searching for the needle felt the prick as the odds flipped in Dalal Street. Sure the benchmark Nifty 500 TRI rose a respectable 12.57 per cent. Yet, only 26 per cent of stocks beat it, with just 39 per cent churning out a positive gain, and the average stock return slipping into negative territory for the first time in at least half a decade.

A study of all NSE-listed stocks in a fixed universe of 1,494 names (those with five-year trading history) across 5-yearly blocks shows how investing in stocks has become unforgiving in recent times (see table). Contrast this to the 2021 period when the new-found post-Covid enthusiasm in equity market made stock picking look like a hobby between lunch and a broking app login. Seven in ten stocks beat the index in that period. And a larger share, over eight in ten stocks, clocked positive returns. Those were times an investor could be directionally right without being particularly precise.

Fast forward to the twelve months ended February 13, 2026 and the under-performance has gone mainstream. Excitement got expensive as investors went down the market capitalisation ladder. Large-caps (top 100 stocks) still gave a fight, with 60 per cent scrips, including the likes of RIL, Bharti Airtel and SBI, beating the Nifty 500 TRI. The hit rate of mid-caps (the next 150) has fallen to 50 per cent now from 68 per cent in the February 2023-24 period, but still was respectable with stocks like Marico, HPCL, BHEL & Aditya Birla Capital outperforming. But small-caps (251^st stock and beyond) turned into a veritable graveyard, with only 20.5 per cent, such as Pfizer, Timken and IIFL Finance, beating the benchmark.

Multi-baggers have thinned out sharply now, with far fewer stocks delivering standout gains. Most stocks now cluster in modest-return or loss buckets, showing a market dominated by laggards (see table).

The gap between how the index behaves and how the typical stock behaves is what makes this an unusually tough market.

It is no longer the one-way 2021 market of fair valuations, easy liquidity and euphoric sentiment. Today brings richer valuations, tighter global liquidity, FPI outflows, a weaker rupee and fresh AI anxiety for sectors like tech services.

Shrinking breadth

In February 2021 to February 2022, 69 per cent of stocks beat the Nifty 500 TRI. That is the kind of year that builds faith in stock tips, momentum screens, and the notion that investing is easy.

Many investors remember it as a time when simply investing felt like a skill. Then, the hit rate started dwindling. Nifty 500 TRI benchmark beats dropped to 43 per cent, then rose to 63 per cent, then slipped to 38 per cent, and finally plunged to just 26 per cent in the latest twelve-month period.

Next, look at the profit and loss split. In the year to February 2022, 82 per cent of stocks were positive. In the year to February 2023, that rate surged to 90 per cent.

Then, it started slipping. In the year to February 2026, only 39 per cent were in the black. This is how investors get emotionally whiplashed. The index is up, so the market looks fine. But a stock portfolio often feels like it belongs in Russia, among the worst performing markets globally.

The sector split tells you why stock picking now feels challenging. In the year to Feb 2026, several large sectors (by stock count) saw single-digit or low teens hit rates for beating the index. IT-software had only 11 per cent of stocks outperforming Nifty 500 TRI, as none of the top-10 like TCS, Infosys and HCL Tech beat the index.

Chemicals were near 12 per cent, with the likes of Linde India, Navin Fluoro and Atul holding the fort. Textiles were less than 10 per cent. Meanwhile, pockets like banks (70.6 per cent), finance (37.5 per cent) and auto ancillaries (54.4 per cent) had much higher benchmark beating rates. Steel was over 45 per cent, courtesy JSW, Tata, Jindal and SAIL.

Know your edge

Each year throws up a few big stock winners and some deep losers. But when market breadth shrinks, those winners do not rescue most portfolios. They merely decorate social media.

Former PIMCO CEO Mohamed El Erian, in an interview to this paper, had offered retail traders a blunt test, borrowing from ‘bond king’ Bill Gross. If you cannot explain your edge over the crowd, you are not buying a stock. You are then buying a lottery ticket, Erian had said.

That is when Bogle’s haystack logic stops sounding boring. Preferring the index over an individual stock, where you have not done your checks, is not laziness. It is arithmetic.

Published on February 14, 2026