The rise in share valuations of one sector is not uncommon. We have seen sectoral trends dominate our markets for the past few years. Effectively, the performance of the market is often just the performance of one or two sectors. At extremes, it becomes even more finely nuanced into just the performance of a handful of stocks.
When performance gets too concentrated, capturing it is the essence of investing. Either you have that performance in your portfolio, or you don’t. When it is just the performance of a few stocks, you are more likely to miss the bus. But, if a few sectors perform, your chances of participation improve. The rally of the recent months has seen both trends play out. On one hand, a few frontline stocks delivered big. On the other hand, a few defensive sectors have rallied smartly. You can make the most of it by capturing market trends in your portfolio.
The only way to capture the gains from a narrowing market rally is to keep booking out gradually and raising your liquidity and improving your defensive stance. The coming weeks will see smart money do that. Meanwhile, the markets are only seeing steady growth in participation. This augurs well for both the aggressive and defensive investors. After all, when both sides of a market are active, it helps tremendously to ensure the markets are very liquid. The consequence of investment actions taken during liquid phases should always be kept in mind while making choices.
