This is how your crorepati portfolio should look like post demonetisation
Although most analysts have advised investors to stick to their respective portfolios, there are also good reasons to tweak their weight for it to become more effective.
In the near term, demonetisation would lead to demand destruction in consumer sectors such as auto and consumer durables.
NEW DELHI: The domestic equity market witnessed a strong selloff last week as it hit a four-month low after Prime Minister Narendra Modi shocked the nation by demonetising high-value currency notes of Rs 500 and Rs 1,000 denominations with effect from November 8 in a major clampdown on black money.
It is a great step, which can have long-lasting impact on the economy as well as the equity market. In the short term, some sectors could very well go through some near-term pain. Although most analysts have advised investors to stick to their respective portfolios, there are also good reasons to tweak their weight for it to become more effective.
In the near term, it would lead to demand destruction in consumer sectors such as auto and consumer durables. Demand from rural areas will fall in the near term due to the limitations of the banking infrastructure. However, banks and select NBFCs are likely to benefit.
“There’s no real need to change or modify your long-term investments, provided you are holding fundamentally sound stocks. Currently, we are seeing a kneejerk reaction due to a possible liquidity crunch, but it will soon be over and therein lies the opportunity," Jayant Manglik, Religare Securities, told ETMarkets.com.
This is a good time to buy with a medium-term to long-term perspective. For investors waiting on the sidelines, this is the correction you have been waiting for. So go ahead and invest.
“And despite the sharp fall in the market, our preferred list of sectors has not changed, i.e. banking tops our list followed by auto and select NBFCs. We also like quality pharma and FMCG stocks, which make for a balanced portfolio,” Manglik said.
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December quarter earnings of some companies may show a slowdown due to the a drop in demand. “However, the medium-term structural benefits of demonetisation will lead to good return from equities over time,” Payal Pandya, Research Analyst, Wealth Research, Centrum Broking, told ETMarkets.com.
The government move was rapid and it is bound to derail the momentum for various sectors in the short term. But it would be prudent for investors to allocate money accordingly to gain maximum benefit out of demonetisation.
“With concerns like bank recapitalisation, managing fiscal deficit can be positively addressed. I expect this move to be very positive for both the market and the economy in the long term,” Jay Prakash Gupta, Founder & CEO at Moneylicious Capital & Advisory Services, told ETMarkets.com.
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“Investors should stick to quality stocks as those are available at attractive valuations. Real estate is likely to see more pain in the short term. Auto and luxury goods will be negatively affected. I would allocate 30 per cent to banking, 30 per cent to infrastructure, 20 per cent to consumer finance and keep the balance 20 per cent in liquid cash,” he said.
