BoI MF’s new Business Cycles Fund will adopt a theme-based approach rather than a market cycles based one. Some of the key themes Alok is excited about now include financialization, power, rising disposable income driven consumer discretionaries, renewables and recycling and manufacturing/PLI.
In order to align ongoing communication with this theme-based approach, the fund house will provide theme-based portfolio holdings statements so that investors and distributors can more readily understand the fund’s portfolio strategy and execution.
Expect the portfolio to be underweight IT services and pharma among the major sectors.
The fund will likely have around 50 stocks and will have roughly 50% of its holdings as core buy-and-hold positions and the balance 50% as tactical holdings to harness sector plays within each broad theme.
Alok suggests that we should be prepared for a time correction in the market. The recent yen carry trade flash crash and recovery does not mean its all done and dusted. Expect more rounds of phased unwinding with every rise, as leveraged positions get unwound.
From a domestic perspective, watch out for September quarterly results. We have already seen some signs of weakness in the earnings growth trajectory in the last quarter – any further signals on this front will make the market look more expensive and therefore less sustainable at elevated levels. Failure of private capex to take off materially is a cause for concern– that’s the other domestic data point to track closely.