Invest in certain key sectors to cash in on the rally

Select stocks from banking, auto & pharma should form a part of one's portfolio & retail investors should stay away from penny scrips

Last week saw the Sensex touch its 52 week high due to various reform measures announced by the Government. Many brokerages have upped their Sensex estimates thanks to this sudden change in sentiments.

Leading broking firms such as Morgan Stanley, Citigroup, Deutsche Bank and Nomura have come out with positive reports on the Indian market performance.

Ambit Capital estimates that by December the Sensex could touch 23, 000 levels, from their predictions made earlier in the year of 19, 000. “With the RBI now talking a more pro-growth language and with the recent spate of liquidity enhancing measures, we are arguably close to the  bottom of the earnings cycle. Both top line improvements and interest burden reductions should emanate from easier liquidity thus aiding earnings growth for corporates”, says the report.

That is an upside of 23% from current levels. To take advantage of this, Motilal Oswal, Chairman and Managing Director of Motilal Oswal Financial Services says one should stay invested or invest in five to seven sectors that have good growth prospects and management.

He says that the sectors include banking, pharma and auto. “One’s portfolio should contain about 10-15 stocks from these sectors”, adds Oswal.

Another strategy would be to look at those high beta scrips which are yet to join the rally. G Chokkalingam, chief investment officer and executive director, Centrum Wealth Management says that investors should book profits in those high beta stocks that are not backed by fundamentals. “Those high beta stocks that are running up with out being backed by fundamentals will run out of steam soon. So instead one should book profits in these scrips and invest in select scrips in banking, capital goods and even sugar scrips which have not joined the rally yet and are backed by fundamental”, he adds.