Post pandemic building of multi-cap tourism portfolio

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Several socio-economic factors have shown an optimism towards tourism and industry-related stocks often referred to as the ‘back to normal’ trade. There have been no reports of the second wave of coronavirus cases in the country and the growth projections have been revised upwards for the next year. ICICI in a direct note said that, since the economy is been recovering from covid a sharp recovery in tourism is expected in FY22E. The firm has picked five stocks to build a multi-cap portfolio that could benefit from tourism activity shortly. ICICI direct said it expects a higher preference for health and hygiene which in turn would help in the boosting of market share by branded players. The stock selection is based on an amalgamation of technical screeners and fundamental analysis these stocks are expected to provide great returns having a favorable risk-reward proposition.

Among the stock picked by ICICI in their tourism portfolio is United Breweries. It is currently trading at Rs 1,264 and the stock price has surged 40% since November 2020. The company recently announced that its volumes had gone up by 31% on-quarter leading to 85% normalization. After the third quarter, ICICI had a target price of Rs 1490. United Breweries has a 24% weightage in the proposed portfolio.

Some of the major Indian hotels have been assigned a weightage of 20.9% in the portfolio. Tata’s stock currently trades at 126 per share and had reported a 118% revenue growth during the third quarter. VIP industries are the third-largest stock with 19.3% weightage. Their shares have shot up by 37% since November, trading at Rs374 per share. Oberoi Group’s EIH that reported a 159% on quarter growth in the third quarter has been assigned 19% by ICICI direct. It is priced at Rs 97.75 per share. The last stock is that of Lemon Tree Hotels having a 16.8% weightage which is also on the path of recovery.

The proposed multi-cap portfolio is labeled as a medium-term high-risk portfolio with the initiation price ranging from Rs 15,500-15,800. Out of this 55.1% of the portfolio makes up small-cap equities whereas 20.9% are midcaps and the remaining 24% large-cap stocks.  

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