Stock Portfolio: Confused About Sector Allocation After Market Correction? Here’s what the experts suggest
Market analysts suggest that investors should choose stocks and sectors according to their appetite for risk but this correction should be used to rebalance their portfolio and allocate resources responsibly.
Local stock markets have experienced a sharp correction in the past few weeks, in the wake of geopolitical uncertainty, interest rate hikes, and growing concerns about inflation. Market people see this as the right time to enter the market after a healthy correction.
Here is what Dalal Street experts suggest to investors in terms of choosing sectors and how to play out the specific topics:
Nitasha Shankar, President – PRS Equity Research, YES Securities
We believe the value for investors lies in sectors such as clean energy games such as electric vehicles, components and green energy transitions; Sectors like banks that cleaned their books and took advantage of technology to enjoy the next phase of growth.
Sectors like Chemicals, Specialty Textiles which have seen a shift in demand due to China as well as one strategy for the developed world and finally the beneficiaries of India’s growth story led by Infrastructure and accessories including building materials, pipes etc.
Its ideal portfolio mix for a cross-functional strategy would be to look at private banks and financial institutions with 25 percent allocation, healthcare and pharmaceuticals at 17 percent and automobiles and accessories at 12 percent.
Other sectors have an allocation of less than 10 percent which includes infrastructure and manufacturing at 8 percent each; consumption, chemicals and information technology at 7 percent each; and textiles by 5 percent. One can maintain a cash balance to buy dips.
Divarsh Vakil, Vice President of Retail Research, Securities
Investors expected that current stock prices had reduced concerns such as rising food and fuel costs, tightening monetary settings, and China’s push to stamp out Covid. The short covering by the FPI in the indices is another bullish signal in the medium term.
Long-term investors should continue to invest and use this drop as an opportunity to accumulate stocks. We love banking stocks, IT and pharmaceuticals in the medium term. He has shown his optimism in sectors such as banking, information technology and pharmaceuticals.
Demand outlook for Indian IT service companies remains strong on the back of adoption of new technologies such as cloud platforms, AI-based services, cyber security and application modernization, which has helped the growth of IT services.
On the other hand, the outlook for the Indian banking sector is promising as the NPA has been cleaned up and there may be less slippage, higher decisions and recovery in the coming quarters.
Siddharth Sidani – Vice President, Equity Advisory, Anand Rathi Stocks and Brokers
The easiest way to customize a portfolio is to choose an indicator and follow its customization. If you decide to choose stocks, then it will make sense to choose your own allocation to your portfolio, and hopefully, it will be more convenient for you.
The market analyst said: Start by allocating 10 per cent to each sector and no more than 30 per cent of exposure in one sector, which eliminates the risks of sectoral concentration. It is positive in sectors such as information technology, agrochemicals, fertilizers, pharmaceuticals, chemicals, and banking.
He said India’s medium to long-term economic growth outlook remains strong on the back of the expected multi-year investment cycle, where any meaningful correction should be viewed as a buying opportunity to engage in high-quality stocks.
Siddharth Bamri, Head of Research, Brokerage
Analysts are quite bullish about the auto sector as a number of factors that worked against this space are now turning direction and we think stocks will too. The effect on stock prices made them very attractive in terms of valuation.
Whether demand is rapid due to the Covid virus, or input cost pressure due to the commodity lift cycle, or the issue of semiconductor supply, to name a few; All these factors are now being reversed which is sure to bode well for the sector as a whole.
The market tracker is also bullish on the profitability of the banking sector and has shown good traction as provisions decrease due to improvement in asset quality and visibility into future credit cuts.
The cement sector has shown significant growth due to the government push for infrastructure and the wave of renewed demand seen in residential spaces, so here too we would like to have more allocation than the indicator.
His exemplary portfolio included 25 percent in banking, 15 percent in automobiles and auto aid, and 10 percent in non-bank financial firms. 8 percent in information technology and cement, FMCG and 7 percent in telecommunications. One can get cash or liquid funds of up to 15 per cent.
(Disclaimer: Recommendations, suggestions, views and opinions provided by experts are their own. These do not represent the views of the Economic Times)