The equity markets remained lacklustre for major part of February 2010 as investors remained skeptical ahead of the Union Budget for FY2011. Towards the end of the month though the broader market posted decent gains, deriving comfort from the budget that aptly met investor expectations. Thus, for the month the Sensex and the Nifty gained 3.9% and 4.4% respectively.
Our portfolio of Top Picks delivered a return of 2.7% and fell a tad short of the benchmark indices in terms of returns. The performance of our recommended portfolio in February 2010 was adversely affected by the sharp underperformance of Dhampur Sugar Mills that bore the brunt of a significant correction in sugar prices in the international and domestic markets. However, our Top Picks portfolio ex-Dhampur Sugar Mills outperformed the benchmark indices delivering smart gains of 5.4%. Apollo Tyres and Godrej Consumer Products topped the returns table, registering an increase of 21% and 9.7% respectively for the month.
For March 2010 we make two changes to our basket of Top Picks: we recommend replacing Apollo Tyres and Dhampur Sugar Mills with Pratibha Industries and Allahabad Bank. Apollo Tyres has been a star performer for the past few months and we expect the stock to take a breather in the near term. We replace it with Pratibha Industries, given that we are bullish on the mid-cap infrastructure companies. With high volatility in global and domestic sugar prices we pull out Dhampur Sugar Mills from the list of the Top Picks to provide stability to the portfolio and replace the company with Allahabad Bank as we derive comfort from the bank?s improving operating parameters and healthy return ratios.
Given the heightened volatility in the market, we continue to favour partial cash allocation and recommend investors to hold 10% in cash to take advantage of corrections. The Top Picks basket has given a return of 105.4% since April 2009 as compared to 64.4% in the Sensex and 58.9% in the Nifty over the same period.
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