While market commentators continue to talk about the Nifty 50 being stuck in a 2 year range, Gautam sees a healthy bull market –provided you ignore IT and FMCG.
These are the 2 sectors that are a drag on the market, and since their weight in large caps is much higher than mid and small caps, the large cap index is underperforming its smaller peers quite significantly.
Sharp sector calls continue to drive HSBC Aggressive Hybrid Fund’s outperformance across 1 yr and 3 yr time horizons. Underweight IT vs peers (4% vs 8%), underweight FMCG and higher than peers allocations into non-lenders within financials have been key performance drivers.
Another key sector pick that’s driving performance is industrials – especially the power ecosystem. He has cut back allocations to consumer discretionary and is on wait and watch mode as the follow through demand after initial surge is not quite shaping up to expectations yet.
The 16 month old HSBC Financial Services Fund has posted a strong top quartile 1 yr performance on the back of this same call of going overweight non lenders vs peers and benchmark. Gautam currently has a 38% weight in non lenders (asset and wealth managers, insurers, exchanges, fintechs), 60% weight in lenders (vs 80% benchmark weight) and 2% in cash.
Among smaller sectors, he is bullish on textiles – especially now that we have trade agreements in place with UK and EU which takeaway the duty disadvantage we suffered vs competing countries. A similar trade deal with US will be another big fillip.