India’s biggest cricket event, the Indian Premier League (IPL), is already on, but is being played away from India and no stadium audience is allowed leaving out a lot of fun from the game.
If we draw parallels between cricket and equity investing, there is a lot that investors can learn.
Investors should ideally look at integrating the discipline into investing which will pave the way for IPL – Investments in Portfolio over the Long term (“IPL”), suggest experts.
Nirali Shah, Senior Research Analyst, Samco Securities highlighted various analogies that can be drawn while comparing the two which are – diversification, everyone needs a coach, stay invested for the long haul, no one player is important, and concentrate on the game, not the scorecard.
“In the market, there is a saying “Never put all your eggs in one basket”. Similarly in cricket also it is important to diversify the team with batsman, bowler, and all-rounders to create a diversified portfolio. During the match time, the players need to stay in the game and focused,” Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.
“For a batsman, it is important to understand the pitch conditions and wait for the right balls instead of throwing the bat. In the same way, market requires patience for good returns especially for long-term investments,” he said.
Garg is of the view while building a team, players should be selected based on the past performance, pitch conditions, and combinations of the team. While constructing the portfolio one has to analyze the stocks based on their past performance, economic conditions, Valuations, Fundamental factors, and time frame of investment.
We have collated views and recommendations from various experts on how to construct a portfolio in line with the IPL theme:
Expert: Nirali Shah, Senior Research Analyst, Samco Securities
The opening batsman will be strong front-runners who can set the base of returns and get the ball rolling. And Reliance Industries and Coforge Limited are good candidates for strong momentum plays.
Middle-order players assist the team by adding to the scoreboard in order to build a winning total. Similarly, investors need to have stable businesses with predictable future cash-flows to support the portfolio. Companies like Divi’s Labs, Dr. Reddy’s, Asian Paints, Pidilite, and HUL seem perfect for this category.
Being leaders, they have performed consistently over a long period of time and are well suited to be in the middle order. Divi’s Laboratories and Dr. Reddy’s Labs have established themselves as a leading API & global generics player respectively and have strong potential for growth.
For a cricket team to become complete and successful, a decent combination of aggressive and defensives is a must. Companies like ITC and HDFC Ltd. have been consistently maintaining their profit growth and overall market share.
TCS, too, must be added to the defensive party as it has a strong financial profile which is characterized by healthy revenue growth, recurring cash accruals and strong liquidity in the form of free cash reserves. Lastly, Kotak Mahindra Bank is an out-performer among the top private sector banks in India operating with a balanced mix of retail and corporate clientele along with muted and controlled bad loan formation.
Expert: Gaurav Garg, Head of Research at CapitalVia Global Research
The IPL fervor has driven the market most of the time barring few times e.g. 2019 when the General election was going on and speculations of the result was driving the market dominantly, otherwise, it has been observed that IPL season generally boosts the Equity market as this event has a lot of economic impact ranging from endorsements, consumption to telecast rights.
Expert: Atish Matlawala, Sr Analyst, SSJ Finance & Securities.
1. My opening batsman would be Reliance Industries as looking at the current form and consistency of the stock to deliver it will provide me a reliable opening batsman.
2. Maruti will come in at No 2 as I think it holds a lot of promise to deliver good returns in uncertain times.
3. Muthoot Finance will come in at No 3 which can provide good returns, but also has a risk to fail.
4. TCS will be my No 4 and HUL at No 5 as I want stability in the middle order which can resurrect the team in-case top order falters.
6. PI Industries will be my all-rounder at No 6 which has a potential to provide good returns as well as have a consistent track record.
7. Dixon Technology will be my rookie at No 7.
8. HDFC Life will be at No 8 providing me economical bowling option in middle overs.
9. ICICI Lombard General Insurance will be at No 9 which can provide a decent opening spell.
10. I will take Asian paints at No 10. It will be my go to bowler every time I need a wicket.
11. United Breweries will be my No 11. It is currently out of form but I expect a comeback and get wickets in crucial matches.
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