There are very few times when a
value investor is able to make a macro call. But I am daring to do it at this stage. The call is on
financial sector![](http://www.assoc-amazon.com/e/ir?t=indvalinv-20&l=btl&camp=213689&creative=392969&o=1&a=1589063163)
in
India. If you look at Index composition of
Nifty and
Sensex, there is hardly any diversification left. Financial sector represents 23.74% of Sensex (
ICICI Bank,
HDFC, HDFC Bank and
SBI) and 25.37% of Nifty (
AXIS BANK, HDFC BANK, HDFC, ICICI BANK, IDFC, KOTAK BANK, PNB,
RELIANCE CAPITAL, SBI). As all of you must be knowing, a value investor generally does not invest in financial firms since they are difficult to evaluate. This leaves just 76.24% of Sensex for investment for a value investor like me.
It has already been observed many a times in the past that when a particular sector garners most of the weightage of a financial index, it underperfoms the index. The evidence can be seen in IT sector after 2000 and
FMCG![](http://www.assoc-amazon.com/e/ir?t=indvalinv-20&l=btl&camp=213689&creative=392969&o=1&a=B00007HYSF)
and
Pharma![](http://www.assoc-amazon.com/e/ir?t=indvalinv-20&l=btl&camp=213689&creative=392969&o=1&a=0976309637)
in India after 2003. So I am taking a call on Indian Financial sector today, that the sector would be an underperformer in the next five years.
Abnormally good or abnormally bad conditions do not last forever. - Benjamin Graham
1 comment:
Hi
So index investing wont fetch much returns because of higher composite of finance in index.
i planned to buy 5 nifty bees every month for my kids education(he is just 5 months old).
Post a Comment