Despite drifting within a range during the better part of the last month, both the benchmark indices slipped in the past one week to close at more than a three-month low. Given the market conditions, the Top Picks basket also declined by 2.6% since our last update on March 30, 2012. However, it continues to outperform the benchmark indices and the CNX Mid-cap Index for the third consecutive month. In April this year, the Nifty and the Sensex declined by 3.9% and 3.3% respectively whereas the CNX Mid-cap Index fell by 7.4%.
We are making some significant changes in the Top Picks basket this month. We are reducing the basket's exposure to certain sectors like tyres and cement due to media reports related to potential penalties by Competition Commission of India. Thus, Apollo Tyres and Madras Cement move out. Moreover, the weaker than expected Q4FY2012 results of Bharat Electronics, Marico and Bank of Baroda make us remove all three from the basket. At the same time, we are including ITC and Mcleod Russel in the Top Picks basket as part of the readjustment to increase the basket's exposure to the FMCG sector. The other two additions are Raymond and NIIT Technologies. Raymond is a domestic consumption story at attractive valuations even without considering the optional value of its land bank. NIIT Technologies is our preferred mid-cap pick in the information technology sector. It has a strong order book and would be among the beneficiaries of the weakening rupee.
We are taking in only four stocks as compared with the five stocks that we are pulling out as part of our strategy to create some cash to exploit volatility-driven opportunities.
Since the beginning of 2009, the Top Picks basket has handsomely outperformed the benchmark indices, Nifty and Sensex, which is quite evident from its performance graph. What's more, the outperformance is consistent with its record of doing better in 26 months out of the total 40 months under review. This implies a strike rate of 65% during the period.
