Harshal Patel (Image courtesy: IPL/BCCI)
India’s biggest cricket event, the Indian Premier League (IPL), has started on a fiery note. This is the second season which will be played under COVID-19 restrictions, under which no ground audience is allowed, taking away a lot of fun from the game.
If we draw parallels between the Indian stock market and the IPL, there are a lot of similarities. To remain in the game, each team has to survive 20 overs in IPL or 50 overs in a one-day match.
Similarly, if one has to generate wealth,investors have to remain invested for a longer period and that requires patience. If your stock selection is strong, just like team selection, more than one player or stock will give multibagger returns.
There are many similarities that can be drawn from cricket with the market in general, which can guide investors to withstand the tide of volatility/downturn in the economy.
“Right from the selection of cricketers through auction, our portfolio also goes through the first level of screening after analysing the underlying companies. Before auction, a team of expertsembark on a detailed evaluation of all potential players,” Dinesh Rohira, Founder, CEO,5nance.com, told Moneycontrol.
“Asset allocation and diversification arethe key to long-term wealth creation without getting forced out by emotions. Lastly, like a foreign player in a team that contributes to winning the game, the exposure in an international fund will provide a hedge against the domestic market while also contributing to time-bound growth in the portfolio,” he said.
The Indian market is down by about 4 percent from the highs, but the long-term story is still intact and investors can use the dip to buy into portfolio stocks for wealth creation.
Just like a team that needs a bowler, a batsman, and a wicket keeper, portfolio investors should diversify their portfolio to achieve their long-term goal. If you trust your selection, remain invested in a stock for as long as possible.
“Investors should pick a mix of stocks which provide the desired returns with bearable risks. Well-researched stocks, especially leaders of a particular sector, will cushion steep slides especially during market downturns,” Nirali Shah, Head, Equity Research, Samco Securities, told Moneycontrol.
“A right combination of a variety of stocks will enable the portfolio to deliver a higher Sharpe ratio. For instance, a Rahul Dravid stock will add consistency to the folio while a Virat Kohli stock will play the big shots and raise the bar each time,” she said.
To put things in perspective, we asked various experts to send in their dream team in the IPL-styled portfolio, which could help investors in achieving their long-term goals.
Dinesh Rohira, Founder, CEO, 5nance.com
Avenue Supermart (Opening Batsman): Given an experience in the retail business with a vast reach, coupled with favourable demography, it will go a long way to win the match.
Dr Lal PathLabs (Runner): The opportunity during the pandemicwill complement the portfolio with an upward run in the long term.
Asian Paints (One Down, Captain): With higher economies of scale and strong brand recognition, the stock will assist to reach the target.
Infosys (Wicket Keeper Bat): The dual tailwind in the form of digital transformation and dollar appreciation will offer consistent expansion in margins, with higher profitability.
AIA Engineering (Pinchhitter): The cyclical play will help the portfolio to increase returns which will be higher than the industry average.
HCL Technologies (All-Rounder): The expansion in business and penetration in key geographies with a decent orderbook will provide stability and growth in the portfolio.
Marico (All-Rounder): This will play defensively to protect or minimise the damage in market volatility.
Jyothy Labs (Medium Pace Bowler): It will complement the batsman to keep the risk low and also get a return (wicket) at certain intervals.
Persistent (Pace Bowler): With stronger median sales growth, coupled with a healthy dividend payout, it will be the key player to contribute growth in the overall portfolio.
MindTree (Leg Spinner): The occasional surge in price and strong business models in the mid-space have the edge to get returns on a long-term basis (frequent wicket to team).
Titan Company (Off Spinner): Given the growth in the luxury segment, post unlocking the pent-up demand, it has the ability to garner consistent growth over growing savings.
Expert: Anuj Jain, Co-founder & Research Head, Green Portfolio Management Services
Opening batsmen: Jubilant Ingrevia Ltd and JSW Energy Ltd.Opening batsmen carry the responsibility of instilling confidence in their team, irrelevant of the high score set by the opposite team in the previous innings.
Middle order: Defensive (They will hold the crease, with decent run rates, when openers falter.)
Our middle-order batsmen will be brisk and steady, and those who are bound to bring on sheer excitement amongst spectators.
INEOS Styrolution India Ltd, J. Kumar Infraprojects, ABB Power Products, and Systems India Ltd, CESC.
Tailenders: Tailenders are quick boundary experts. Now, this is where things start to blaze and the score builds on in no time. We place those who can finish the innings off in style with some quick boundaries, and frequent ‘out-of-the-stadium’ moments.
To sum it up, we place these players as our boundary experts. We like Shiva Cement Ltd, Precision Camshafts, Welspun Enterprises, Salzer Electronics, and Caplin Point Laboratories.
Atish Matlawala, Senior Analyst, SSJ Finance & Securities
We would like to have a mix of matured businesses that carry negligible risks as well as companies that are involved in new-age businesses. We will try to make a portfolio that can maximise returns in FY22.
At numbers 1 and 2, I will have Colgate and Tata Steel. I am looking for a solid start at the top of an innings. I want companies like Colgate, which can give consistent returns and Tata Steel, which, I think, has hit a purple patch and can be a star performer in FY22.
At no 3, I will have PI Industries, which has a solid track record and is a consistent performer.
At no 4, I will have TCS, which can provide stability in the middle order, just in case the top order fails.
At no 5, I will take Naukri Ltd, a rookie which can be a game-changer.
At no 6 and 7, I will take Bajaj Finance and Voltas, which can give a solid finish to an innings.
Now it’s time for the bowlers. They should be able to deliver decent performance every time. At no 8 & 9, I will have Asian Paints and HUL, which are expected to deliver every time the team needs them.
At no 10 & 11, I will have HDFC Life and ICICI Lombard General Insurance, two companies operating in the sunrise sector. These two are my long-term bets and can be equated to emerging players in an IPL.
Gaurav Garg, Head of Research, CapitalVia Global Research Limited
I would like to add insurance stocks as my opening batsmen as I expect this pack to outperform in FY22. Technology and FMCG might be the middle-order players to go with. However, I would like to add some pharmaceutical companies as my defensive bets. Following is my team for FY22:
1. HDFC Life
2. SBI Life
3. Tech Mahindra
5. Sonata Software
6. Tata Consumer products
9. Cadila Healthcare
11. Dr. Lal PathLabs
Nirali Shah, Head, Equity Research, Samco Securities
Investors should pick a mix of stocks that provide the desired returns with bearable risks. Well-researched stocks, especially leaders of a particular sector, will cushion steep slides, especially during market downturns.
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.