Series 54 – Our Portfolio Construction today- Why we deviate from the benchmark?

We addressed a few inquiries from our partners regarding our allocation to larger caps and our thought process on the subject during our conversation last week. We want to talk about the portfolio construction and framework this week.

We have discussed in several of our earlier communications how our portfolio deviated from the Nifty 50. We’re going to give you some insight into how the cycle might play out and the fundamental changes that we observe today. This would enable us to comprehend why we are deviating from the index and the benefits it would provide.

The first chart (Chart 1), which demonstrates the rise in sanctions for private sector banks, illustrates credit expansion. Private capital expenditure is expected to surpass public capital expenditure, expecting a re-normalization in the public capital expenditure and we think loan book growth should continue. Since real estate inventory levels are at their lowest point in a decade (Chart 2), supply is increasing significantly across all regions. There is a supply and demand gap in the GDP-facing industries like steel and cement (Chart 3), which will also create a deficit in power sector. And finally  (Chart 4) With delevered balance sheets across all sectors and the majority of growth and reinvestment occurring through internal accruals without leveraging the balance sheets, we anticipate more aggressive private capex in 2024. We have positioned our portfolio’s towards these GDP-facing sectors—Capital Goods and Manufacturing, Auto and Auto Ancillaries, and Power—with these frameworks in mind.

Also, we keep writing to you about our SIP program that presents investors with a convenient avenue to regularly infuse capital into their portfolios. Feel free to check out the benefits for your clients. If you need more info, reach out to your dedicated relationship manager at [email protected].

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