Time to take stock

PERSONAL FINANCE

With the markets at an unprecedented height, it may be a good time to restructure your bag of stocks.

It took just four trading sessions for the Sensex to move up from 18,000 to 19,000 points, a clear indication that the markets' movers are in a great mood. And even 20,000 points do not look too far away. This means that good times are here for the stock market investor.

It is also a time when you could opt for portfolio restructuring, that is, if you still haven't done so. Says Mukesh Dedhia, director, Ghalla and Bhansali, "This could be a good time to do a bit of tinkering around with your portfolio."

According to him, this could be the right time to reduce the risk by looking at stocks that are undervalued. "I am looking at cheaper options like HUL, MTNL and ITC stocks," adds Dedhia.

Says Rajesh Jain, CEO, Pranav Securities, "While it is good to do some restructuring, especially if you are holding large blue chips which have risen from Rs 1,000 to Rs 5,000, there is no need to book profits on them."

He feels that even if these blue chips come down to, say, Rs 3,500, there is no need to rush and sell them. And raising cash gets a big no from him.

A way of looking at this restructuring process is through the asset allocation angle. That is, if you have a 70:30 equity/debt ratio, then because of the surge in the market, it is very likely that your asset allocation has heavily tilted towards equities.

So it will be better if you can book profits on some of these gains in equities and divert them back towards debt to maintain the portfolio balance. "One could also look at sectors like sugar and auto, which are expected to do well in the festive season," explains Dedhia.

Jain, on the other hand, advises to create a 10 per cent bias (of the entire portfolio) towards media and oil stocks.

This is because he expects them to do well in the days to come. Crude oil, for one, is shooting past $86 per barrel and in spite of the rising rupee, there is likely to be pressure on the oil-marketing companies.

There is a strong likelihood that the high crude prices will be passed on to the customer. And when that happens, it will shore up the balance sheets of these companies.

"One can also look at tier II companies in different sectors," says Jain. He believes that the third, fourth or fifth companies in terms of size in many sectors could be good picks at this time because the rise has been mainly due to a few big stocks.

In other words, there are a lot of different strategies you could use while restructuring your portfolio. Use what suits you best.