The world economy has shown signs of recovery over the last few months. China is leading the pack with strong export performance and consumption. We will have to wait and see the effect of withdrawal of stimulus world over. While China has hiked its reserve ratio requirement by 50 basis points and some sections are expecting similar moves in India too, given the improved economic numbers, we believe the fears are overplayed, if not unfounded.
There’s ample liquidity, both domestic and foreign. FII ownership is recovering from multi-year lows. Traditional MF schemes hold cash of over 10 per cent of their AUM in many cases. ULIP collections too are rising. Even if the RBI decides to moderately hike policy rates, lower credit off-take and adequate liquidity will ensure no immediate rise in bank lending rates. A scenario where inflation is moving northward and interest rates are not rising at a similar pace spells good news for the stock market.
What is your strategy for Season II?
During Smart Portfolios Season I, a cautious start by remaining in cash was followed by 100 per cent deployment of funds towards the end of the season. In Season II, the strategy may be exactly the reverse. For a long period, I expect to remain fully invested. The strategy towards the end will depend on how the above mentioned concerns play out. Bottom-up, buy on dips and hold is expected to be the mantra.
On stock selection, my approach has been to be fairly diversified across sectors and stock categories; part allocation for trading provides an additional boost in returns. For the core portfolio, promoter track record, business potential and valuations are important things I consider.
What’s your outlook on large caps?
Two large caps, Infy and Bajaj Auto, have declared stellar results and are on our fundamental buy list. We believe that some large caps will see earnings upgrades by the analyst community. However, even if one factors in higher growth for the Sensex and Nifty companies, these indices would trade at price to earnings of 16-18x FY11 EPS. In view of rich valuations in large caps, market liquidity aplenty and earnings momentum sustaining for many non-Nifty companies, we have taken aggressive bets in the mid-cap space. Part of the money is used for trading based on technicals and F&O indicators. We expect mid-caps to outperform.
Which sectors would you bet on and avoid?
Broadly speaking, consumption and infra-related stories are expected to bring in better returns. Besides the conventional ideas, one can look for companies in auto-ancillaries and textiles (yarn manufacturers). From hereon, 2010 will be the time for individual stock picking rather than broader sector plays.
| PRAVEEN PANJWANI Assistant Vice President, Edelweiss | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current Price (Rs) | Value (Rs lakh) |
| Pidilite | 9.05 | 184.70 | 208.15 | 1.03 |
| Hind Oil Exp | 6.29 | 271.00 | 311.95 | 0.72 |
| Bharat Forge | 6.06 | 269.77 | 294.55 | 0.69 |
| RECL | 6.01 | 238.30 | 267.85 | 0.69 |
| Allahabad Bank | 5.77 | 130.23 | 133.95 | 0.66 |
| Total investments | 97.20 | - | - | 11.09 |
| Cash | 2.80 | - | - | 0.32 |
| Net worth | - | - | - | 11.41 |
| Returns (%) | 14.13 | - | - | - |
| AMAR AMBANI Vice President (Research), India Infoline | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current Price (Rs) | Value (Rs lakh) |
| Aban Offshore | 4.69 | 1378.60 | 1507.35 | 0.60 |
| Reliance Ind Infra | 4.32 | 921.00 | 1010.10 | 0.56 |
| IFCI | 4.22 | 51.60 | 54.30 | 0.54 |
| Rallis India | 4.21 | 995.70 | 1082.40 | 0.54 |
| Essar Oil | 4.15 | 147.35 | 152.55 | 0.53 |
| Total investments | 95.96 | - | - | 12.34 |
| Cash | 4.04 | - | - | 0.52 |
| Net worth | - | - | - | 12.86 |
| Returns (%) | 28.62 | - | - | - |
| PHANI SEKHAR Fund Manager - PMS, Angel Broking | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current Price (Rs) | Value (Rs lakh) |
| eClerx | 11.65 | 344.25 | 467.10 | 1.31 |
| Federal Bank | ||||