{"id":4792,"date":"2014-03-12T14:21:03","date_gmt":"2014-03-12T08:51:03","guid":{"rendered":"https:\/\/blog.fundsindia.com\/blog\/?p=4792"},"modified":"2020-02-10T11:10:37","modified_gmt":"2020-02-10T05:40:37","slug":"fundsindia-equity-strategies-a-portfolio-for-election-euphoria-and-beyond","status":"publish","type":"post","link":"https:\/\/fundsindia.com\/blog\/mf-research\/mutual-funds\/fundsindia-equity-strategies-a-portfolio-for-election-euphoria-and-beyond\/4792","title":{"rendered":"FundsIndia Equity Strategies: A Portfolio for Election Euphoria and Beyond"},"content":{"rendered":"

A little over a week into March and you see the Sensex climb swiftly by over 800 points, or up by close to 4%. While you might think that the announcement of election dates simply triggered this rally, there appears more to the rally than meets the eye.<\/p>\n

But we are not going into a political analysis here. We simply wish to find an answer to the question – Which sectors\/stocks would stand to benefit the most pre and post elections? To know this, we did a quick exercise on what has been the choice of investors and institutions in the recent rally and how different is this move.<\/p>\n

Discerning Investment<\/b><\/p>\n

The current rally suggests that investors appear more discerning in their choice; and that encouraged us to take cues from the market. While they did go for under-valued stocks, the top gainers suggest that stocks that are over leveraged or have other management concerns have not mostly been in the toppers\u2019 list. However, quite a few joined the party later.<\/p>\n

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Similarly, unlike earlier rallies, when companies flocked the markets to raise money through IPOs or placements, they have stayed away this time. They clearly seem to read that investors are in no mood to pick IPOs of companies that are desperate for funds.\u00a0In fact, these companies appear to rather wait for a better equity environment to offload some of their assets to deleverage their balance sheet, is in contrast to what corporates usually do in market euphoria.<\/p>\n

The recent rally clearly appears to suggest that investors are picky in their choice of stocks and sectors.\u00a0 A look at these sectors and you will see that – these sectors are under-owned, stocks in these spaces are undervalued, but not poor in \u2018quality\u2019, and there are policy initiatives that are already underway in some of these segments. Also, such initiatives cannot significantly differ, irrespective of which party rules.<\/p>\n

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Of course, there are also sectors that could directly benefit from a boost in investors\u2019 sentiment, notwithstanding policy moves. We think some of the stocks in such sectors could continue to witness momentum, the election outcome notwithstanding (but we are not factoring a third front for this purpose), simply because the job at hand for any government would be to revive the investment cycle.<\/p>\n

Such stocks are currently being picked from sectors such as banking and finance, energy, engineering and industrials, telecom and pockets of infrastructure,<\/b> to name a few.<\/p>\n

We dug deeper into these sectors to know what are the kinds of regulatory\/policy initiatives that have been happening and what sectors could benefit simply from even a sentiment boost. Here’s what we found out:<\/p>\n