Indian market clocked fresh record highs in no time and many investors felt left out as the indices raced ahead in a short duration. But, the rally may not be over and investors should use every dip to get into quality stocks.
So should one bet on stocks which are likely to benefit from the Budget 2020 or count on stocks which are consistent performers in the last 10 years?
There are 12 Nifty stocks that have given strong CAGR in the past 10-year period. These include Bajaj Finance, Eicher Motors, Bajaj Finserv, Asian Paints, HUL, TCS, and UPL, according to a Motilal Oswal report.
If someone is looking for stable returns then the given list of stocks is a good buy even at current levels even though the valuation might appear steep. Most stocks fall under the bracket of ‘quality’ and high earnings growth companies and thus command a higher premium, say experts.
“The stocks mentioned are all high earnings growth companies and also considered as wealth-generating stocks. In the last two years the valuations of many stocks from the list have further scaled up and gone to extremely high levels not seen in the last many years,” Rusmik Oza, Sr. VP (Head of Fundamental Research-PCG), Kotak Securities told Moneycontrol.
“If the economy does not recover in 2020 then they could still outperform in spite of steep valuations. Some of the stocks from the list which are not trading at peak or rich valuations could be safe bets for 2020,” he said.
If someone is looking to create wealth then diversification is essential. Diversification is a key to deal with geopolitical issues, slowdown woes, volatility in commodity prices, and Budget-related volatility.
One must include defensive stocks to the portfolio in order to encounter such a scenario (geopolitical), but with Budget around the corner small & midcaps stocks are likely to benefit the most which are linked to the economy.
“Consumption and Infra stocks are expected to dominate 2020, and IT stocks may show their X- factor and may generate handsome returns. T20 portfolio should be a mix of FMCG, IT and cement stocks,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.
“Investors should include at least 60 percent of the portfolio with large-cap stocks and should buy the remaining 40 percent in quality mid-small cap stocks at any correction. We are bullish on cement stocks as government spending on infra may be an added advantage to this under-performing sector,” he said.
No doubt that the 12 Nifty stocks that have compounded returns for their shareholders in the past 10 years are quality bets. These companies have been through down cycles and have still shown consistency in returns, suggest experts.
Investors should construct a portfolio along with these 12 players along with a few other midcap names that could make a safe investment strategy for investors in 2020.
“Stocks for the T20 portfolio should be chosen keeping in mind the longevity of the company, consistency in business, efficient strategies and capex plans by the management, the capital structure and if the operating leverage has kicked in for them,” Nirali Shah, Senior Research Analyst, Samco Securities told Moneycontrol.
“Having stronger names in your portfolio will enable higher risk-adjusted returns. It would be best to hold around 65-70% of your portfolio in safer stocks and the remaining 20-25% in high beta mid and small caps. Additionally, investors should also hold 5-10% in gold as it provides inflation-adjusted returns,” she said.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.