India Model Portfolio – Billion Dollar Valuation

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India is on the verge of all-time high stock markets and a long bull run lasting for many years to come. The nation has stood strong amidst the global pandemic and emerged as a global manufacturing and technology hub. The coming decade is going to be India’s journey to be a global superpower. With the corporate taxes all-time low, a strong central government, and increasing income levels throughout the country, there is a lot of opportunity for wealth creation by investing in the Indian markets. With this in mind, we have done our extensive analysis and constructed a model portfolio. Presenting the BDV India Model portfolio – A well-researched and risk-managed portfolio consisting of high growth and value stocks in the upcoming industries.

The portfolio consists of a total of 29 stocks out of which 5 are entry-level positions to replace the underperforming stocks over time. The core portfolio hence is of 24 stocks across 6 upcoming high growth sectors in India with a well-diversified risk amidst value and growth stocks. You can get the entire list of the selected stocks and the weights in the portfolio in the excel model given below. All you need to do is to replicate the positions and hold the stocks for the long term. You can also create a customized Smallcase to replicate and invest systematically through lumpsum and SIP in these stocks.

Our Analysts have poured their hearts and souls in creating this portfolio and have spent more than 500+ hours in its construction. In order to respect their efforts, we are charging a nominal amount for the same.

Get the entire portfolio details along with the Investment tracker in the excel below.
Note: All major Indian bank’s debit and credit cards are accepted on Eloquens.

About the India Model Portfolio:

The portfolio is well researched and designed considering a long-term investment horizon (>10 years). It consists of a top-down selection of high-growth stocks along with some stable value stocks. This is done to balance the overall risk of the portfolio. Some of the stocks also pay good dividends and are a sweetener to the portfolio returns.The sectoral breakdown is as follows:

Sectoral Breakdown: India Model Portfolio
Sectoral Breakdown: India Model Portfolio

Banking and Finance Sector (15%)

Banking and Finance is still a highly underpenetrated sector in India. With the formalization of the economy, financial institutions are becoming more and more valuable. As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalized and well-regulated. The financial and economic conditions in the country are far superior to any other country in the world. Credit, market, and liquidity risk studies suggest that Indian banks are generally resilient and have withstood the global downturn well. Read more about this here.

Enhanced spending on infrastructure, speedy implementation of projects, and continuation of reforms are expected to provide further impetus to growth in the banking sector. All these factors suggest that India’s banking sector is poised for robust growth as rapidly growing businesses will turn to banks for their credit needs. The India Model portfolio contains equally weighted 3 stocks having 5% allocation each and estimated earnings growth of double digits over the coming decade.

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Cold Chain and Logistics Sector (15%)

Cold chain logistics is expected to grow at 20% CAGR over the next 5-10 years. This is also due to its transformation from conventional cold storage to modern storage space. The general logistics is also going to be benefitted from Increased e-commerce activity and Industrial manufacturing. India is soon expected to overtake China as the manufacturing hub and the logistics sector is going to be the key beneficiary. The India model portfolio hence contains 3 stocks with 7%, 5%, and 3% allocation respectively to cold chain, e-commerce, and large scale logistic respectively.

Specialty Chemicals Sectors (15%)

The chemicals sector has already seen a mega bull run over the last couple of years. The Indian chemicals industry stood at US$ 178 billion in 2019 and is expected to reach US$ 304 billion by 2025 registering a CAGR of 9.3%. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute US$ 300 billion to India’s GDP by 2025. This is a huge opportunity, especially for the large and midsize players.

The specialty chemicals constitute 22% of the total chemicals and petrochemicals market in India. The demand for specialty chemicals is expected to rise at a 12% CAGR in 2019-22. The petrochemicals demand is expected to record a 7.5% CAGR between 2019 and 2023, with polymer demand increasing at 8%. The Indian agrochemicals market is expected to register an 8% CAGR to reach US$ 3.7 billion by FY22 and US$ 4.7 billion by FY25. Thus the model portfolio contains 4 specialty chemical stocks having weights of 5%,4%,3%,3% respectively.

Energy and Renewables Sector (10%)

According to our research, the solar and wind energy companies are still a long way from becoming consistently profitable as the infrastructure is not completely developed. Hence we are bullish on Hydro-power, Natural gas, and LNG in our India model portfolio. The 10% allocation is distributed as 5%,3% and 3% respectively amongst 3 stocks.

Technology and Platforms (20%)

The India model portfolio contains 4 stocks in a high-growth industry and has double-digit growth potential. They have also seen a good inflow from foreign investors. The current retail participation in Equity Instruments stands at less than 5% and expected to rise exponentially in the coming years. Two of the stocks in this segment are specifically to get benefitted from the increasing retail participation in the Indian stock markets and have been allocated 5% each. Out of the remaining two stocks, one is a regulated exchange and the other is a company belonging to the L&T group.

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Manufacturing and Infrastructure (15%)

Automobile component industry’s revenue stood at US$ 49.3 billion in FY20, up from US$ 39.05 billion in FY16. Export of auto components grew at a CAGR of 7.6% to reach Rs. 102,623 crore (US$ 14.5 billion) during the same time. As per Automobile Component Manufacturers Association (ACMA), automobile components export from India is expected to reach US$ 80 billion by 2026. The Indian auto components industry is expected to reach US$ 200 billion in revenue by 2026. You can read more about it here.

In Union Budget 2021, the government has given a massive push to the infrastructure sector by allocating Rs. 233,083 crore (US$ 32.02 billion) to enhance the transport infrastructure. The government expanded the ‘National Infrastructure Pipeline (NIP)’ to 7,400 projects. ~217 projects worth Rs. 1.10 lakh crore (US$ 15.09 billion) were completed as of 2020. The 5 stocks in our portfolio related to this segment have been given 3% allocation each. An Interesting fact is that 2 of them are penny stocks with a great upside potential in the coming years.

Others – Entry Positions (5%)

These stocks are just the foot-in-the-door positions and are not part of the core portfolio. These stock positions can be trades in short term to realize additional profits or to test new ideas or themes. This 5% is hence allocated for sandbox testing. There are 5 such stocks in the segment with a 1% allocation each.

India Model Portfolio Valuation

The portfolio has a reasonable P/E as in 2021 considering the mega bull run in the market. The average earnings growth of the portfolio over the next 10 years is expected to be in the range of 12-18% CAGR.

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 Valuation Parameter (India Model Portfolio) Portfolio
Price/Earnings Ratio 27.74
Price/Cashflow Ratio 23.01
Price/Book Ratio 6.98

India Model Portfolio Performance over the Years

The performance of these stocks can be seen directly from the graphs given below. The India model portfolio has outperformed both the Nifty 50 and Nifty 500 Indexes by a long range and have given market-beating alpha over the years. This is excluding the additional dividend yield which the portfolio has given.

India Model Portfolio vs Nifty 500 Returns
India Model Portfolio vs Nifty 500 Returns

To replicate this portfolio you can create the positions manually in your account and accumulate on dips. You can also create a customized Smallcase to replicate and invest systematically through lumpsum and SIP in these stocks.

Get the entire portfolio details along with the Investment tracker in the excel below.
Note: All major Indian bank’s debit and credit cards are accepted on Eloquens

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(Note: All the research done by us is only for educational purposes and should not be seen as Investment recommendations. We are Research analysts and not SEBI registered Investment Advisors. Kindly do your own due diligence before Investing or consult your financial advisor)

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