Sector Rotation with Augment Capital

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