SENSEX stocks of 2020.

classic350_right-side_blue_600x463_motorcycleIndia is the world’s best economy today. Following its robust journey that is going to come up in the next 5 years, there is going to be a dramatic shift in the whole economy and with it even the economic barometer of India, the SENSEX. The SENSEX will also undergo change by replacing some of its constituents. Those stocks that will take a space in the future index will be the stars of the markets in the next 5 years.

What if we can identify them and be invested in them?

The growth those companies will have is going to be tremendous and the potential for profits will be equivalent. The expected stocks that can move in to the SENSEX, the list is big with some new not yet listed companies too. Though for the new ones we may not have a direction, for those that are existing, and if identified and invested, can give great gains.

Some of the company’s whose are likely to move in are: NESCAFE

EICHER Motors (Royal Enfield Bullets)

Page Industries (Jockey and Speedo brand products)

TITAN (Watches and Jewelry)

NESTLE and the likes.

Companies that have premiumisation as their focus are likely to shine bright. So, look for premium products in the market and the companies that produce them and be invested in them, chances are you will end up having a goldmine.

jockey-logoAt present our portfolio contains the first 2 names and we have been holding them for quite a long period, in these years that we have owned these businesses, they have showed continuous growth in their sales as well as profits. If they continue the same for the next 5 years, we will still have them. While, there is no guarantee that it will be so.

In the last year, there were some companies that made it big on their growth and become the darlings of the market. Some of the best ones are

Ashok Leyland, Britannia., HPCL, Baja Finance, Ramco Cements, Maruti, TCS, Ultratech Cements, PVR & Kotak Mahindra.

And there are a next set of business that are showing signs of reaching for the best. They are Canfin Homes, TCI, Tata Motors, Orient Cement, Persistent, Heritage Food and BHEL.

These were the names that have come up in the ET500 listing.

Among the above names we are invested in about 7 businesses, while we have doubts on some like BHEL, TCI etc., while if they qualify our parameters in the future we will definitely look at adding them in our portfolio.

By being invested in the best performing companies, our portfolio is managing to grow the best. Last year we had an Alpha of 63% against the NSE 500 Index, This year in the first half, so far we are at 28% Alpha against the NSE 500.

We will continue to grow in the same manner adhering to the best practices and innovative thoughts.

April-August in 2015, is my money safe?

Stock markets have taken a nosedive post Chinese currency crisis, affecting valuations worldwide. In a sense, this correction has been getting the real value of those stocks, which had run up without any fundamental support. In this scenario, how our portfolio has performed or is my money safe? Is the question that will strike our mind?

Overall there is likely to be a drop in value of the investment, because one cannot be positive always by investing into Equity. Equity is a volatile asset and it is only due to that volatility, there is opportunity for the smart people to outperform all other asset class in returns.

If it is continuously going up like a Fixed deposit, there is no chance to have any better profits than the average and there is nothing much to do with this asset. And if there is something, that secure, it would have factored in for all the fears and have the minimum appreciation. It is because of this reason that the secure assets grow below the inflation which is normally said in the investment parlance as ‘Negative Returns’.

These kinds of corrections are not a surprise; a small magnitude correction does happen once in 2 years and some corrections of higher magnitude happen once in 5-6 years. This is mandatory and we have seen them quite often only that over time, we tend to forget the pain we went through. Once we move into a zone, where we experience pleasure, there are very less chance that we remember the pain we underwent, before reaching the joyful zone.

Sensex Gain ChartThis is what is happening with the markets now. Last year we had a euphoric run and now it is correction time. We have not moved below where we started on this current rally, but, when markets corrected, there is panic of losses and newspapers & media are blowing it up. When the bull market of 2014 started SENSEX was at 19500-21500 range, now the correction is happening at the 30000-25000 range. It is more than 3500 points higher than the space where it began. When this consolidation is complete and we resume the next journey upwards, we will have a support zone that is for sure, higher than the previous one at 19500.

For a regular investor, this was a good opportunity; having secured about 15% profits and moving up to add more. But, for people who time the markets and wait for a lot of confirmation before entering in, the losses could have been higher, because, by the time they decide and take the plunge, market would have had a fairly higher move and be ready for a correction. If someone had entered the market in March 2015, their losses as of now will be more than 15%.

fundAll these events that come often, like the Currency War that is happening now, will inflict a small damage, make the valuations realistic andPharma-Tabs vanish from the scene. Then, we tend to forget the pain the move on. To avoid major damage, any portfolio has to re-adjust the holdings by moving out of weaker stocks and add stocks that are showing new strength thereby getting prepared for the next move.

Every time there is a correction, the leadership among sectors and stocks change. In 2013 Technology sector was strong, in 2014 Agriculture and Automobile stocks had a very good rally, now in 2015, Pharma and NBFC stocks along with Textile stocks are showing strength.

Let’s take a look at how our portfolio at Bravisa Temple Tree has performed so far, in this financial year compared with the other funds that are available in India. As our portfolio consists of diverse sectors, it is apt to compare the performance with the diversified funds and the broader index that can be either the NSE 500 or the BSE 500 Index.

Apr-Aug15 Returns

In the last 5 months in this financial year, the top performing diversified fund, is the ICICI Prudential Exports & Other Services Fund with a near 8% returns, while the NSE 500 Index has given negative returns of close to -7% in the same period. Bravisa Temple Tree portfolio has managed to record 3.34% returns in the last 5 months.

 

Bravisa Temple Tree portfolio stands second in the top order in performance. Our portfolio does not consist of any Banking or Metal sector stocks which have been the biggest wealth destroyers in the recent past. We moved out of Banking in end 2013 as the performance of Banks sowed and they began to feel the impact of wrong lending. Moving into the Pharma sector along with the NBFC and Textile sectors just as they began to show strength in 2015, was the reason that we have performed well. ICICI fund has exposure in the Technology sector which has been showing a run up following the currency depreciation. We have low exposure in Technology stocks as we follow the discipline of investing only in those companies that show strength on their Sales and Profits. Technology sector profits are likely to show more growth in the coming quarter because of currency depreciation, which is not a right valuation. We might miss a few percentage gains by not adding them to our portfolio, but, on the hindsight a portfolio that only consists of growth stocks gives more confidence when there is a shakeout in the market, because, overnight there cannot be a situation where such g companies with good fundamental will falter and bring down the valuations.

We have been reducing exposure and moving to cash as many of the stocks in our portfolio that were showing tiredness are moving out of the portfolio. On a continued weakness in the market, lower exposure will ensure lesser losses and when the market moves up after the correction, we have funds to add new stocks and be on the next journey with a stronger presence.