Top Picks Basket of 16 Stocks (8 Large-Cap, 5 Mid-Cap & 3 Small-Cap) has delivered return of 329%

We believe that with the recent run-up in the market, most of the narrative has already been priced in. We see near-term consolidation in the market with the breadth of the market likely to narrow further in the near term. Hence, the focus remains on style and sector rotation. Moreover, with a strong catch-up by Midcaps and Smallcaps in the last couple of months, we still believe their margin of safety, in terms of valuation at current levels, has reduced as compared to Largecaps. Keeping this in view, the broader market may see time correction in certain pockets in the near term and flows will likely shift to Largecaps. In any case, the long-term  story of the broader market continues to remain attractive and, in this context, two themes – ‘Growth at a Reasonable Price’ and ‘Quality’ look attractive at the current juncture. With the expected recovery in China, some cyclical sectors are likely to see come back in the domestic market. However, Largecap private banks, Telecom, Consumption, IT, and Pharma provide more margin of safety in the near term.

Hence, we recommend investors to remain invested in the market and maintain good liquidity (10%) to use any dips in a phased manner and build a position in high-quality companies (where the earnings visibility is quite high) with an investment horizon of 12-18 months.

Keeping these latest developments in view, we have made one change to our Top Picks recommendation. We have removed Nestle India and added Chalet Hotel to the basket. Our modifications reflect the changing market style and shift towards the ‘Growth at a Reasonable Price ‘theme.

Based on the above themes, we recommend the following stocks: HDFC Bank, ICICI Bank, Dalmia Bharat, State Bank of India, HCL Tech, Lupin, Aurobindo Pharma, Federal Bank, Varun Beverages, TVS Motors, Bharti Airtel, Chalet Hotel, J Kumar Infra, Prestige Estates, Sansera  Engineering, and Cholamandalam Invest and Finance