Dalal Street Investment Journal – July 20, 2019

136 DALAL STREET INVESTMENT JOURNAL I JULY 22 - AUG 4, 2019 DSIJ. in^

Special Report

MF page - 08

T

he recent stock market activity highlighted the fact

that even the most protected citadel can fall apart.

Even the best of the NBFCs, which remained one

of the best wealth-creating companies in the last

few years, is now seeing a precipitous fall. This is

not unusual in the stock market. Business goes through various

cycles as it expands, slows down and declines. We have

witnessed this happening earlier in the Indian stock market

and elsewhere. For example, between 2008 and 2015,

pharmaceutical was the best sector that created wealth for its

investors, but it is lagging now in terms of performance.

Although, business cycle has its own logic, investors who

understand the business cycle can benefit out of it by taking

appropriate position in their portfolios for better returns. There

are various ways in which a sector-based strategy can be used

to construct a portfolio and there are number of investment

vehicles that can help accomplish this objective.

Earlier, one of the most preferred way to gain exposure to a

sector was to buy the stocks of many companies from that

sector. Nevertheless, now you can invest in sector-based

mutual funds to gain exposure to the entire segments of the

market. These investment vehicles enable you to gain the

desired sector allocations without having to invest large

amounts of capital. Besides, they also help you to more easily

execute a sector rotation strategy and tactically adjust your

equity portfolios in order to increase exposures to sectors you

feel have the best return potential.

Investing in sector funds can be a double-edged sword, while it helps you to increase your

portfolio returns, it may also inflict irreparable damage. DSIJ explains simple strategies that

you can adopt to get superior returns.

Strategies To

Invest In

Bank

Infra

IT

Pharma