Investing in the top performing sectors for the next stage of the economic cycle
Strategy
Sector rotation is an investment strategy where one moves money invested in stocks from one industry to another as we anticipate the next stage of the economic cycle.
The economy moves in reasonably predictable cycles and there is a specific set of sectors that dominate a given market cycle. While cyclical stocks do well when the economy is growing, the defensive stocks outperform in riskier markets.
With the sector rotation strategy we aim to take advantage of the cyclical nature of sector outperformance and allocate to most suitable sector for the given phase of the business cycle.
Benefits
Approach
- Defining Universe– Top fifty market cap stocks listed on NSE
- Liquidity Filters– We only look at top two liquid stocks in any sector
- Default Probability & Compliance Filters– To ensure only stable & going concern companies are included in the portfolio
- Model Criteria– We select sectors based on valuation, dividend yield & trend based filters. We do a equal weight allocation to stocks in the selected sectors
- Sector & Stock Exposure- Maximum permissible weight of a sector and stock is 33% & 16.7%, respective
- Review Frequency- Portfolio is reviewed monthly to check for additions and deletions as per the screening criteria
- Turnover- less than 50% per year
Business Cycles & Sectors
The economy moves in reasonably predictable cycles and there is a specific set of sectors that dominate a given market cycle. While cyclical stocks do well when the economy is growing, the defensive stocks outperform in riskier markets.
We select sectors based on valuation, dividend yield & trend based filters. We do an equal weight allocation to stocks in the selected sectors.
Performance
Cumulative Historical Performance
Annual Risk-Adjusted Returns
Current Sector Allocation
Disclaimer: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of a SEBI recognized supervisory body (if any) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice and nor to be construed as an offer to buy/sell or the solicitation of an offer to buy/sell any security or financial products. Users must make their own investment decisions based on their specific investment objective and financial position and using such independent advisors as they believe necessary.
Wryght Research & Capital Pvt (Brand name: Wright Research) is a SEBI Registered Portfolio Manager Reg No: INP000007979 (Validity: Apr 03, 2023 – Perpetual) and a SEBI Registered Research Analyst No: INH000017295 (Validity: Jul 03, 2024 – Perpetual), with its registered office at 103, Shagun Vatika Prag Narayan Road, Lucknow, UP, 226001 India and CIN: U67100UP2019PTC123244. Past performance may or may not be sustained in future. Performance provided there in is not verified by SEBI. Investment in securities is subject to market and other risks, and there is no assurance or guarantee that the objectives of any of the strategies of the Portfolio Management Services will be achieved. Registration granted by SEBI, enlistment as RA with Exchange and certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Please read the Disclosure document carefully before investing. Securities quoted are for illustration only and are not recommendatory. Charts shown are for illustration only. For more information and disclosures, visit our disclosures page here.
