Where should you invest in June 2019? TCS to Sun Pharma - These 7 stocks are money magnets
Now that, PM Modi is back in office investors have entered to June 2019, where focus has shifted towards RBI monetary policy, thus one has to make most of stock markets.
May 2019 month was very fruitful for investors, as both Sensex and Nifty touched all-time highs. Gains arising from these two benchmarks were nearly 2.28% and 2.12% respectively alone last month. Further, even foreign investors became net buyers, as equities worth Rs 79.2 billion were bought in May. Meanwhile, the domestic investors showered their investment in equities to the tune of some Rs 53.16 billion. Investors' joy on Dalal Street was led by Lok Sabha Elections counting where a historic win was made by NDA government. Also, cabinet positioning along with Prime Minister Narendra Modi’s oath ceremony played a positive factor. Now that PM Modi is back in office investors have entered to June 2019, where focus has shifted towards RBI monetary policy, thus one has to make most of stock markets.
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Naveen Kulkarni and D. Vijiya Rao, analysts at Reliance Securities in their research note said, “R Model Portfolio outperformed the benchmark index NIFTY 50 by 66bps in May’19 led by superior stock selection and lower allocation to underperforming sectors like Automobiles, which is seeing significant volume pressure. Notably, both selection and allocation effect were positive for the month. R Model Portfolio has consistently outperformed the benchmark index in the last 6 months (4 months out of last 6) notwithstanding the higher market volatility.”
Key takeaways of the last month’s performance are as follows, as per the duo.
IT Surprises with Significant Outperformance:
May’19 was quite eventful with the incumbent NDA coming back to power with a thumping majority. Though the outcome of General Elections was on expected lines, the outperformance of IT sector was surprising considering it is an export dominated sector. Overweight allocation in the sector with focus on small allocation to Sonata Software delivered a decent alpha.
The duo said, “we keep our allocation in the sector unchanged.”
Materials & Consumer Discretionary Allocation – Outperformance:
Cement sector reported a strong operating and earnings performance in Q4FY19. Conspicuously, the sector is seeing sustainability of price hikes leading to improvement in sectoral earnings visibility. Both large-cap and mid-cap cement stocks have seen re-rating over the last 3 months. The duo said, “We maintain our overweight stance on the sector owing to better pricing environment and likely volume growth in the forthcoming quarters. Our underweight stance in the automobile sector (part of consumer discretionary) delivered consistent outperformance over the last six months.”
Hence, they said, “We expect the volume challenges to persist in the forthcoming quarters, while cost challenges led by introduction of BS-VI emission norm will put further pressure on demand. We maintain our underweight stance on the sector.”
Banking & Pharmaceuticals Allocation – Underperformance:
The Reliance Securities analysts Banking sector allocation underperformed in May’19 led by sharp price correction in Yes Bank and not having any PSU bank in our portfolio.
These analysts said, “While we are positive on SBI, we will look at adding SBI at lower levels, as it has seen a sharp run-up in the past month. Pharmaceutical sector continues to remain a mixed bag with highly volatile monthly performance. We maintain our weightage on the Pharmaceuticals sector primarily owing to diversification benefits.”
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“The market is likely to see reduced volatility and we expect broader market participation, going forward. Our multi-cap portfolio is well-suited to deliver outperformance in the current market conditions. At this juncture, we are not making any major change with regard to allocation or selection. Our NIFTY target for Dec’19 is 13,000. We believe our model portfolio is set to outperform the benchmark target,” said the duo.
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