Series 106 – Q1 2025 Portfolio Strategy & Market Outlook

This week we are covering the key highlights of our quarterly call Q1- 2025. Our performance and our outlook on the market. You can access the complete video from our Fund Manager’s desk in the below link-https://ituscapital.com/investor_calls/itus-capital-1q-investor-call-2025/

We have done few changes in the portfolio construct in the last quarter that we would want to highlight and the reasons behind the same.

When discussing Macro, we need to consider the revenue components of the Government balance sheet. There are three key contributors- Income tax (30%+) , Corporate tax (~28%)  and GST/Service tax (~30%). Income tax has a market linked component including LTCG, STCG and STT that has been increasing from a 1-1.5% in 2019 to 5.2% of the total gross tax revenue, due the equity participation and market rally. Government budget will account for a tax revenue of 8-9% as their standard expectation, which implicitly assumes that Market Linked Tax revenue also will grow as expected. But a market like what we have seen in the last 6 months, we will see this LTCG and STCG take a hit. We see a reduction in the expected LTCG and STCG which means there is a shortfall of closer to 3% from the expected number in this component which we believe will impact the capex. The spend should be lower than expected and hence we have trimmed positions that were capex facing through Oct-Dec and we have used the cash to increase allocation to other sectors where we believe growth prospects are there.

We have also shown why the portfolio is looking at more concentrated portfolio in this market cycle where we do not see broad based rally anymore and earnings narrowing to selected set of companies.

Key sector under focus for the year are-

Large-Cap Banks and Financials – (30%)  holdings include HDFC Bank, ICICI Bank, and Bajaj Finance.

FMCG – Specific to companies where strong distribution network has been build with better volume and improved margin product penetration. Key holdings-  ITC and Marico

Pharma/Healthcare: Despite challenges related to US tariff noises we expect the sector to benefit.

Keep following us for more contents like these. As always, we keep re-emphasising our SIP mode of investment. You can connect with your relationship manager to know more about our SIP Program.

These weekly episodes are now available in our website for your quick read and you may access the same in the below link.

Weekly Enlightenment Archives – ITUS Capital