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Advantage India 🪷 | Strategy

Updated: Aug 17, 2023

What’s In A Name?


A straightforward concept, this portfolio is a bet on the beneficiaries of the Union Budget. Certain key sectors and industries directly benefit from the schemes employed by the government’s attempts at fuelling growth, and this portfolio aims to ride that wave!


Budget In Retrospect

Betting on the budget is a logical way to display a pro-growth stance on the markets, and certain sectors are usually distinct winners in this case. Take the Union Budget of 2022 for example!


The defence sector was allocated a massive 13% of the capex budget, towards the indigenisation of defence infrastructure, resulting in outsized returns of certain key defensive players.


Similarly, the Railway sector was a star attraction in the infrastructure sector, with an 11% allocation of the 2022 budget. Being pushed by PM Gati Shakti, several stocks from the railway segment gave stellar returns in 2022.


Here is how a stock from each of those sectors performed in 2022:

Segment

Sector

Returns

Nifty 50

Index

-3%

Bharat Dynamics

Defence

146%

Rail Vikas Nigam Limited

Railway

109%

On a side note, our Monopolies portfolio made a killing by betting on the defence sector in 2022, allocating 22% of our portfolio to it. The result? It was our top-performing portfolio, with names like HAL, BDL and Data Patterns giving returns in the triple digits!


Long story short - if fiscal policy is backing a sector, the chances of the sector and its key players doing well are significantly higher.


A New Chapter

This year’s budget is an interesting one as well, with a much larger capex outlay of Rs. 10 lakh crore, which is 33.4% higher than the previous year, and 3x that of what was denoted in 2019!


The 2023 budget is especially important as it is the last one before the much-awaited General Elections of 2024, making this possibly the final chance for the ruling party to make a tangible mark on the country and in the minds of the voters.


Here are some interesting numbers:

  • Capital outlay of Rs. 2.4 lakh crore for railways, up 49% from last year’s allocation

  • Allocation to PMAY increased by 66% to around Rs. 80,000 crore

  • 12% increase in capital outlay towards defence

  • Focus on green energy and mobility, with the PLI scheme allocating 15% of its funding towards battery storage

  • Boost domestic tourism by building 50+ airports and landing grounds in remote areas

  • The agricultural credit target was raised by 11% to Rs. 20 lakh crore

  • Electronics manufacturing has been given a push, with the budget increasing the outlay towards the IT Ministry to over Rs. 16,000 crore (40% rise YoY), most of which will go towards the semiconductor industry

Clearly, this is a heavy budget and sectors like infrastructure, railways, cement, steel, green energy, hotels, agricultural inputs, defence and manufacturing are set to grow and improve. Wouldn’t you want your money in those strategic locations?


Recipe For The Dough 💸

  • Identify key themes in the budget based on policy and capex support

  • Shortlist the sectors that can particularly benefit from the aforementioned policy action

  • Select the top stocks from those sectors based on their growth potential linked to the budget and the possibility of valuation re-rating

  • Accommodate for an ample amount of diversification among the sectors and stocks being chosen

  • Revise sectors and stocks periodically dependent on sector cycles, market sentiment, earnings and valuations; whilst still sticking to the broad theme

  • Monitor their progress, or lack thereof and make adjustments to the portfolio accordingly

Key Pointers

Benchmark

Nifty Large Mid Cap 250

Number of Stocks

10-15

Minimum Ticket Size

Rs. 35,000

Fees

2.5% AuA per annum

Churn

Quarterly

Portfolio Composition

Size

Composition

Large Cap

80%

Mid Cap

20%

Small Cap

0%


Sector Breakdown

Sector

Composition

Budget Theme

Banking

25%

Pro-growth budget + fintech support

Infrastructure/Steel

15%

Increase in capex

Automobile

10%

Agri credit + vehicle scrapping

Home Improvement

10%

Spend on housing, PMAY

Insurance

10%

Tax impact on high-value policies

Oil and Gas/ Telecom

10%

5G development

Agricultural Inputs

5%

Increase in credit to agriculture

Chemicals

5%

Focus on domestic manufacturing and exports

Consumer Electronics

5%

Boost to the electronics manufacturing

Hotels

5%

Promotion of domestic tourism

As of February 2023


Advantage India is exclusively available to invest in Kotak Cherry!





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