The outbreak of COVID-19 has changed the lives of people across the globe and so has their portfolio allocation. Smart money is moving into stocks or sectors that are likely to benefit from COVID or could be recovery plays, suggest experts.
The time has come for investors to tweak their allocation towards BHARATH stocks and slowly lower their allocation from HRITHIK stocks.
HRITHIK is an acronym used for stocks like HDFC Bank, Reliance Industries, Infosys, TCS, HDFC, ITC, and Kotak Mahindra Bank.
Meanwhile, BHARATH, coined by BNP Paribas includes Bharti Airtel, HDFC Bank/Life, Asian Paints, Reliance Industries, Avenue Supermarts, Tata Consultancy Services, and Hindustan Unilever.
“It is ideal to stick with BHARATH kind of portfolio as it consists of companies with stable outlook and better consistency in earnings estimates. Given the rich valuations of the market it is safe to be with defensives,” Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities told Moneycontrol.
“Most of the names in BHARATH look safe from a one to two-year perspective even though some of them are rich in valuations. Based on sectoral outlook also the mix of telecom, paints, IT, FMCG, and banking looks quite attractive,” he said.
Most of the stocks in the BHARATH pack have given positive returns so far in the year 2020.
Meanwhile, four out of 7 stocks in HRITHIK portfolio gave negative returns, data from Ace Equity showed.
While BHARATH AND HRITHIK portfolio acronyms might be different, but the underlying stocks seem to have a common ideology – quality and large-cap.
This highlights the fact that investors choosing either of the portfolios would end up holding a motley group of stocks, across diversified sectors, trusted and revered most times, suggest experts.
“Creating a portfolio of these stocks will stand the test of time. The companies have good cash flows, higher profitability, dependable balance sheets, management capabilities to wither downtrends, etc, mark the reasons for choosing these stocks,” Gopal Kavalireddi, Head of research, FYERS told Moneycontrol.
“While a 40-50 percent of portfolio allocation to these stocks will prove to be a winner’s ace, a sizable allocation can be made to marquee midcaps holding similar qualities. With Indochina issues taking center stage, trade and commerce policies aligning to Made in India, Atmanirbhar Bharat Abhiyan and other domestic initiatives, PSUs as well as economy facing companies are expected to get a leg up,” he said.
Kavalireddi further added that a dynamic portfolio is the need of the hour. Growth Investing has overshadowed value investing for the better part of the last two decades. Investors are urged to pay attention to stocks and sectors that offer value and which possibly will emerge in a larger role that defines the new India.
What should investors do?
Both the HRITHIK portfolio and BHARATH portfolio have stocks that have good pedigree and robust track record. But, because of the outbreak of COVID, some companies might attract additional flows either they are COVID beneficiaries or recovery play.
Experts are of the view that both the portfolio can do well, but BHARAT stocks could fare slightly better as everyone is eyeing recovery in the economy.
“BHARATH stocks also include certain new-age sectors as well, whereas HRITHIK stocks over the years have proven to have a strong past track record. We believe both these portfolios can do well, considering all these companies are the market leader in the respective industry and have strong fundamentals,” Ajit Mishra, VP Research, Religare Broking told Moneycontrol.
“Most of them also have a strong promoter track record. Even if COVID could impact some of the companies, we believe these would be able to withstand the storm due to their strong balance sheet and decent long term growth prospects,” he said.
Gaurav Garg, Head of Research at CapitalVia Global Research Ltd is of the view that BHARATH, as technology-telecom-consumption might drive broader markets in coming years and expects growth and earnings to add momentum in these stocks.
“Lower expense with improved bottom line might trigger a growth story. However, valuations of stocks at higher-end, and in my opinion aggressive buying should be avoided especially in the consumption sector,” he said.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.