We recently released our strategy note that focuses on seven disruptive trends with sustainable ideas emerging from these but masked by the wild swings of global and local tides:

Agriculture incomes to rise: Doubling of farmer income

Auto: Emission norms, Change in stages of the cycle

Banking: New players, PSU consolidation, Digitization, Clean-up

Engineering (Railways, Defense) and Logistics: Major investments and indigenization

GST, Demographic macro, etc.

Power and equipment: Emission norms, Renewables

Telecom and Media: Data flood in telecom with disruption in Media

We also reviewed our Model Portfolio to incorporate the near-term view with overall macro backdrop (hardening crude, probable Fed hike, Brexit, stressed domestic B/S and upside risks to inflation). However, Micro seems to have troughed out. Q4 results show signs of earnings recovery. Earnings growth of BSE-500 companies (exFinancials and Resources) stood at ~9% YoY – a six quarter high! Sectors barring banks, infrastructure and retail have notched notable earnings growth. Moreover, there is some discernible improvement in select lead and urban consumption indicators (auto, fuels freight rates and cargo etc), and with hopes of a normal monsoon, the focus will remain on urban consumption. We believe recovery will continue to lag in rural consumption and private capex.

Our key portfolio stance – Rationale is provided alongside each stock wherever changes have been made in the portfolio

OW sectors: Auto, Cement, Engineering, Infra, Power, Telecom (partly due to ABNL classified under this sector)

UW sectors:Consumption (FMCG, Media, Retail), Resources

Nifty stocks:

   > 5% wtg: ICICI Bank, HDFC, HDFC Bank, Infosys, RIL

   OW by 2x Nifty wtg: UltraTech, BHEL, Tata Steel, GAIL, PGCIL, Tata Power, Eicher Motors

Non-Nifty stocks: Ashok Leyland, LIC Hsg, Thermax, ABB, Britannia, HPCL, Divi’s Lab, DLF, ABNL

Main changes from previous version (January 2016)

Auto: OW sector; added M&M and Hero MotoCorp, increased weight in Tata Motors, reduced Eicher Motors

BFSI: OW ICICI Bank, HDFC Bank and UW SBI. Removed Kotak Bank and Indusind Bank

Cement: OW sector and UltraTech

Engineering and Infrastructure: OW sector and BHEL (new addition). UW L&T and removed non-nifty JPA and BEL

Consumption (FMCG, Media, Retail): Massively UW sector

IT: OW Infosys and HCL Tech

Resources: OW Tata Steel (new addition)

Oil: Reduced exposure in RIL. Added GAIL and reduced non-Nifty HPCL

Pharma: OW Lupin (new addition), Cipla, Aurobindo

Power: OW sector and added NTPC

Telecom: OW sector – partly due to ABNL classified under this sector