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July 2019 - Update
The Month Gone By - Nifty EAP outperforms
In June, we completed our first quarter of the EAP initiative. Our Nifty EAP has generated 223bps of Alpha since inception and 110bps in June, compared with the Nifty50. Our OW stance on Private Banks, Insurance, IT and Metals & Mining sectors generated the majority of Alpha in June. However, our SMID EAP underperformed by 206bps (-290bps since inception) compared with the BSE400 Small & Mid-Cap index. Within our sector EAPs, NBFC delivered the highest Alpha of 222bps, followed by Telecom (+134bps), Media & Entertainment (+188bps) and Banks (+108bps). Major underperformance was seen in Speciality Chemicals (-242bps) and Consumer Durables (-237bps).
Key Changes: Status quo in High-Conviction list and Nifty EAP
Our High-Conviction list remains unchanged, and after focusing on portfolio concentration over the last two months, we are staying put with our stock selection in Nifty EAP. The only change in Nifty EAP is the reduction in Overweight position in UPL to 7bps from 23bps earlier, apart from a few minor changes due to Nifty weight adjustments. In Nifty EAP, we have a total of 35 stocks, with us being Overweight on Banks, NBFCs, Consumer Goods, IT, Engineering & Capital Goods, Metals and Pharma sectors.
* Large-Caps (OW) - Axis Bank, Bajaj Finance, Cipla, HCL Tech, ICICI Bank, Larsen and Toubro, Mahindra & Mahindra, Marico, SBI Life, Tata Steel, and United Breweries
* Large-Caps (UW) - Ashok Leyland, Bharti Airtel, Eicher Motors, ITC, United Spirits, and Yes Bank
* Small & Mid-Cap (Buys) - APL Apollo, Cholamandalam Finance, City Union Bank, Exide Industries, Granules India, Mphasis, Radico Khaitan, Sterlite Technologies, Sunteck Realty, and Varun Beverages
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