Sharekhan’s Model Portfolio & Top Picks

Sharekhan Top Picks

Markets never fail to surprise

Many a times, the equity markets tend to move against the prevailing consensus wisdom and consequently catch most market participants by surprise. Just when the expectations had hit a nadir and equities were threatening to tumble down to new yearly lows towards the end of 2011, the Indian equity market had surged with an unexpected sharp rally at the beginning of the new year. This time around also, the equity markets climbed the wall of worries to register smart gains in the month of June.

Despite the disappointment from the Reserve Bank of India (RBI)’s inaction in the policy review meet and the downgrade of India’s rating outlook by another leading global rating agency in June, the Sensex and the Nifty have registered handsome gains of 8.8% and 8.5% respectively since our last update on June 5, 2012. The Top Picks basket has performed in line with the benchmark indices and appreciated by 8.7% in the same period. However, the blended return stands at 8% after accounting for the cash created (by adding one stock less to the basket) in May this year.

In this month, we are increasing the basket’s exposure to engineering, construction and infrastructure sectors by adding Larsen & Toubro (L&T), IRB Infrastructure Developers (IRB) and Kalpataru Power Transmission Ltd (KPTL) in the Top Picks basket. IRB replaces IL&FS Transportation Networks to take advantage of the widened gap in the valuations of the two stocks. L&T, the bellwether engineering, procurement and construction player, comes in place of Sun Pharmaceuticals, which has appreciated by close to 28% in the last five months and sharply outperformed the benchmark indices since it was introduced in the Top Picks basket in February 2012. Lastly, we deploy the cash to bring in KPTL, which has a strong order backlog and a healthy balance sheet