ESA (Edelweiss style analysis) June 2012

Portfolio for June 2012


Top 10 Long-Portfolio stocks
NSE Symbol
TCS
HCLTECH
TITAN
DIVISLAB
SUNPHARMA
HEROMOTOCO
ULTRACEMCO
HINDUNILVR
INFY
RELINFRA

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Bottom 10 Short-Portfolio stocks
NSE Symbol
UNITECH
HDIL
SAIL
TATAMOTORS
JPASSOCIAT
SESAGOA
MARUTI
JSWSTEEL
BHARTIARTL
BPCL



Introduction
Factor model
Over the past few years, Indian capital markets have taken giant strides to enter the league
of global profitable investment avenues. This growth has attracted investors with diverse
investment strategies in quest for better returns. Along with this bustling growth, investment
strategies too are undergoing a paradigm shift. The conventional long only strategies are
gradually being sidelined by quantitative models with emphasis on long-short portfolios. Such
a drift is justified on the back of volatile nature of equity markets globally.
The Edelweiss Style Analysis (ESA) gives you cutting-edge research and an in-depth analysis
on ‘what’s hot’ in the current scenario. The analysis revolves round various factors driving the
market in different scenarios and tries to capture factors driving the current momentum. We
believe that markets follow a typical investment style or pattern at different intervals, which
is mirrored by certain factors. The analysis provides investors with an understanding of the
factors that are currently working in prevailing market conditions to enhance portfolio
performance. The analysis outlines a host of long–short portfolios drawn on the basis of these
factors.
The efficacy of the Factor Model is gauged by the performance of portfolios from various
dimensions:
􀂄 Long Portfolio
􀂄 Short Portfolio
􀂄 Long–Short Portfolio
􀂄 Long–Short Nifty
􀂄 Nifty
Style analysis
Style analysis is basically a framework for measuring the efficacy of a select set of
fundamental and technical factors blended with certain quantitative disciplines. It tries to
encapsulate traditional investment styles of value and growth buying. Style analysis aims to
capture the factor momentum under prevailing market conditions to maximize the magnitude
and stability of expected incremental performance. However, due to changing market
dynamics, factors are bound to change from time to time. A specific factor riding the
momentum may change over a period of time.
Various factors
Style analysis makes use of a host of factors that aid momentum in a specific stock. P/E, EPS,
revenue, book value, EBITDA, enterprise value, P/BV, ROE, are few factors used for this
analysis. The above given factors often serve as an efficient evaluation tool. For simplicity
and better understanding, the factors are placed into different baskets as follows:
􀂄 Momentum Factors
􀂄 Growth Factors
􀂄 Value Factors
􀂄 Quality Factors