Reliance Securities on Tuesday said its Model Portfolio has outperformed the benchmark index Nifty 50 by 66 bps in May 2019 led by superior stock selection and lower allocation to underperforming sectors like Automobiles, which is seeing significant volume pressure.
Nifty target for December 2019 is 13,000 and its model portfolio is set to outperform the benchmark target. The market is likely to see reduced volatility and broader market participation is expected, going forward, the report said.
The Reliance Securities model portfolio of companies include — TCS, Sonata Software, HDFC Bank, ITC, NTPC, Kotak Mahindra Bank, Sun Pharma, Axis Bank, Yes Bank, ICIC Bank, Bajaj Auto, KEC, Infosys, Ultratech Cement, L&T, Torrent Pharma among the list.
“Our multi-cap portfolio is well-suited to deliver outperformance in the current market conditions,” it said.
“Both selection and allocation effect were positive for the month. R Model Portfolio has consistently outperformed the benchmark index in the last 6 months (4 months out of last 6) notwithstanding the higher market volatility.
Key takeaways of the last month’s performance are, according to the report, “IT surprises with significant Outperformance as May ’19 was quite eventful with the incumbent NDA coming back to power with a thumping majority. Though the outcome of General Elections was on expected lines, the outperformance of IT sector was surprising considering it is an export-dominated sector. Our overweight allocation in the sector with focus on small allocation to Sonata Software delivered a decent alpha”.
R-Sec said on materials and Consumer Discretionary Allocation where the weightage is Outperformance. The report says: Cement sector reported a strong operating and earnings performance in Q4FY19. Conspicuously, the sector is seeing sustainability of price hikes leading to improvement in sectoral earnings visibility. Both large-cap and mid-cap cement stocks have seen re-rating over the last three months. The sector owing to better pricing environment and is likely to see volume growth in the forthcoming quarters.
The broking house puts underweight stance in the automobile sector (part of consumer discretionary).
“We expect the volume challenges to persist in the forthcoming quarters, while cost challenges led by introduction of BS-VI emission norm will put further pressure on demand. We maintain our underweight stance on the sector.”
On Banking and Pharmaceuticals Allocation, the report says “Our Banking sector allocation underperformed in May’19 led by sharp price correction in Yes Bank and not having any PSU bank in our portfolio. While we are positive on SBI, we will look at adding SBI at lower levels, as it has seen a sharp run-up in the past month. Pharmaceutical sector continues to remain a mixed bag with highly volatile monthly performance. We maintain our weightage on the Pharmaceuticals sector primarily owing to diversification benefits”.