Market performance in August; Consumer staples, IT are the laggards

Market performance in August; Consumer staples, IT are the laggards

Indian markets continued to rise despite the macro-uncertainty around both growth and inflation. The realised volatility remained low, while average pair-wise correlation between the stocks dropped. Both broad and concentrated All-Season portfolios continue to outperform the benchmark since inception on a risk-adjusted basis, despite their underperformance in August. September 2022 portfolio consists of Nestle India, Cipla, Hindustan Unilever (HUL), Tata Consultancy Services (TCS) and Larsen & Toubro (L&T).

Low-volatility consumer staples and IT services underperform in August

Momentum the sole outperformer; low-volatility and fundamental underperform Momentum had a good month in August. However, other single factors underperformed the index by varying degrees. The concentrated anti-factor portfolio, which takes exposure to stocks with the highest volatility, lowest momentum, worst sentiment change and poor fundamental scores, generated a return of ~3.6% in the month of August, slightly underperforming the index.

Also read: 24% jump in insolvency cases in wholesale, retail trade during Q1 FY23 from year-ago period: CareEdge

Index realised volatility remains low

BSE-200 index realised monthly volatility in August was slightly up compared to July but remained low compared to the long-term average. The realised pair-wise correlation between the returns of the BSE-200 index constituents decreased marginally but remains elevated.

Green shoots in ‘EPS’ estimate upgrades?

There were net downgrades to FY1E earnings estimates again in August 2022, marking the ninth consecutive month when FY1E estimates have been cut. However, the FY2E earnings estimates saw a net upgrade. The consensus ‘rating’ for the average stock in the Nifty index remains extremely high at ~4.3, despite isolated downgrades.

September 2022 portfolio

September 2022 Concentrated All-Season portfolio consists of Nestle India, Cipla, Hindustan Unilever, Tata Consultancy Services and Larsen & Toubro. The anti-factor portfolio, which contains the stocks with the worst factor scores, has Bajaj Finserv, Bharat Petroleum, IndusInd Bank, Hindalco Industries and Tata Motors. AlphaBet recommendations can differ from KIE analyst recommendations.