Opinion: Fear Is The Best Time To Build Portfolios
As fear plays havoc with sentiment in the Indian context, we have seen the Nifty retrace from 8968 to 7920 in just two months. This is more exaggerated by the double whammy of Donald Trump's unexpected victory and the government's move on demonetisation.
However, fear is always the best time to build portfolios as the concentrated selling is in shock rather than ground realities:
1) The Trump victory has seen the US dollar rise in tandem with bond yields which are now already pricing in a 25 basis points rate hike by the Federal Reserve.
2) Short-term the strength in the US dollar on expectations of higher government spending on infrastructure has seen bond yields rise sharply, which will see money globally buy US debt and equities with banks being outperformers as yields rise.
3) Indian markets are also seeing undue weakness extend as the perception of extreme slowdown is anecdotal with no visible reality from the past. Brokerage houses pushing the sell side are doing their business with perception being much worse than actual.
4) Any slowdown will be temporary with an equally fast rebound as once the dust settles, spending is expected to pick up with a new vengeance.
5) The government will definitely use the windfall gains to reignite the economy and expect a dream budget which could see GDP targets well exceed all estimates for 2018 and beyond.
SUGGESTED PORTFOLIO PICKS
Mid cap outperformers:
- Trident Rs 48-50
- NBCC Rs 210-220
- Engineers Rs 260-270
- Petronet Rs 360-365
- Power Grid Rs 175-185
- Asian Paints Rs 875-900
- Bajaj Auto Rs 2,500-2,530
- Maruti Rs 4,750-4,800
- Tata Global Rs 115-118
- United Spirits Rs 1,750-1,800
- BPCL Rs 600-625
- Ambuja Cement Rs 188-195
- L&T Rs 1,325-1,375
- Hindalco Rs 155-160
- JSW Steel Rs 1,575-1,625
- SBI Rs 250-260
- Bank of Baroda Rs 155-160
- ICICI Bank Rs 250-260
- HDFC Rs 1,200-1,225
- Bajaj Finance Rs 775-825