The market is wonderfully rotating, whether it was Vodafone Idea or the uptick in Tata Motors; suddenly, and Bank of Baroda are also making a comeback. Which are your favourite stocks in the rotation trade and unlock trade?
Unlock has now become a longish phenomenon. We have had quite a few months of being under lockdown and so that may not be the case but the rotation trade is certainly there. Unlock if at all would still be associated with sectors like hotels, multiplexes, travel.
Unfortunately, the market still keeps rewarding them and so unfortunately I do not particularly like all those sectors for the reasons of lower historical return ratios and far higher risks. Given the way the market has been going up, I will slowly start positioning my portfolio with a higher weightage on the low beta stocks.
Two, in this market I will try and look for the stocks which have not moved because rotation will bring market attention back to them.
And three, we are the result season. Though only a few results have come in, some of the companies have at least given a quarterly update on their broad numbers.
Read also: Good earnings season may take market up further
So keeping all these three things in mind, we like — part of FMCG, a low beta sector, and also the stock has corrected over the last two months by about 15%. Plus, it indeed gave a reasonably positive quarterly update. So that is one stock or the rotation trade.
What are the changes you have done in terms of realigning your portfolio in the last two or three months with domestic cyclicals, real estate or other stocks?
Real estate is doing very well but we have not bought anything. But we have bought Kotak Bank which was an underperformer. The whole BFSI space has remained an underperformer. We have bought India Energy Exchange as one of the shares in the recent past. We have bought Aptus Value Housing. We have exited Sona BLW which was an IPO listing.
PSU stocks are going up, How should one read it?
The PSU sector started getting rerated about 10-11 months ago based on various developments from the government side. There was the disinvestment secretary followed by announcement in the Budget, followed by actual actions. The trigger point is Air India being finally privatised. There is a clear indication to the market that now it is no longer just talk. It is now really in an action mood.
So, the reratings started 11 months ago and are continuing. The rerating is also being supported by the performance improvement in some of the sectors and companies. But stocks which are lined up for disinvestment will be the beneficiaries. Even others will have a rub off impact. The valuation for public sector stock is anyway has been significantly lower compared to their counterparts in the private sector. In fact, the public sector space is coming out of a long underperformance of about seven years till about December of 2020. That also resulted in institutional under ownership over the years. All these factors will come together and hopefully result in continued rerating for the public sector space.
