What your portfolio should consist of in 2010

The year draws to a close ending with it one of the most phenomenal stock market rallies ever seen. In March this year, the Bombay Stock Exchange's benchmark Sensex levelled out at close to 8,000 levels and today it hovers above the 17,000 mark. Market sentiment eagerly eyes the Sensex breaching its all-time high of 21,000 level going into the next year.

"2010 will be far more interesting year for investors because they will have more confidence in the equity markets," says Amit Dalal of Amit Nalin Securities. For the next year, Dalal marks out the budget in February and how the government shows it intends to handle its burgeoning fiscal deficit as a key risk for markets. Among other things, he said high inflation and a repeat dry spell a la 2009 could play spoilsport. "But overall, I see more positives than negatives and the call is the Nifty rises 10% in the year from 5,200 currently to 5,700 levels," he said. The Nifty's all-time high is close to 6,400 that it reached in January 2008, post which a sell-off of unprecedented magnitude saw it retrace to 2,500 levels in a year.

Jagdish Malkani says the theme of the markets, of late, has been midcap and smallcap stocks as largecaps that have a had a big rally post March have been cooling off. "It's the classical bull market," he says, "There was talk of the Delhi-Mubai rail corridor and rail stocks went on a year. There is sector rotation going on — rail, cement, steel."

Malkani, however, warns investors who buy a lot of midcaps to be nimble-footed as in any sell-off, the worst hit would be the smaller stocks.

Themes for 2010

"For 2010, I would go for deep value, some of these holding company types, which are trading at a fraction of what they are intrinsically worth," Malkani says, "Or I would actually look into midcap arena for possibly the couple of media stocks that are appealing, in the IT space and even in pharmaceuticals."

Dalal of Amit Nalin says he would lift some money off the table from stocks like those with rural consumption theme that have done well this year.

"We have seen almost like a bubble in the economy in demand for products coming from the rural side. A lot of it is because of the government spend rather than an improved productivity coming from the rural economy on its own. So I would be very wary of owning stocks in that particular sphere," he said. "Technology has had a stupendous run and we have started discounting things, which the markets still do not understand in terms of what the changes in prospects are. A lot of it is speculation in terms of what the change can be and there the PE ratios have expanded a lot. So I would reduce weightages in that sector too."

Source : Moneycontrol.com