Add ‘Summer Stocks to your Portfolio

The gaps and candlestick shadows have become the new norm for the markets as in each of the last four trading sessions Nifty has continued to witness either a gap-up or a gap-down opening. One more thing that was common in the last 4-5 trading sessions on the price chart was the formation of candlestick shadow. Investopedia defines shadow as a line found on a candle in a candlestick chart that indicates where the price of a stock has fluctuated relative to the opening and closing price. Since last Thursday’s close, virtually the index has not changed much; it’s almost flat amid lack of participation from any sectoral indices.

However, volatility has been the talk of the town. In each of the last four trading sessions we have witnessed daily range of about 200 points on the Nifty and that too without any decisive move, which has made life difficult for traders. One more thing which is making it bothersome for everyone is the soaring temperature. The oppressive summer heat is here: the feeling of being smothered and the nonstop flood of sweat is driving one and all senseless and if we go by the recent summer forecast by the India Meteorological Department (IMD), the prediction is that it will be a hotter than normal summer this year except in South and Central India.

While you might be worried about the spending you need to incur to escape the soaring temperature, you can also gain by investing in companies whose businesses get a boost during these months. The stocks of companies associated with airconditioners, cooling systems, cold-drinks, ice cream, etc. will be in a position of power since they will be the beneficiaries of the summer season, driven by demand for such products. So now the issue is that we know which theme to play but are faced with a problem of plenty since there are too many stocks in the same limited thematic space.

To sort out this issue, we have compiled a list of stocks based on pure logical sense backed by historical trend. Be it summer or winter, an ice-cream lover always finds a reason to have an ice-cream. But the sentimental shift towards icecream stocks during the summer season is quite evident from the fact that Vadilal Industries, which is an Indian ice-cream and flavoured milk manufacturer, had a positive ratio of 78 per cent in the month of March and the stock gave an average return of 11.60 per cent in this month, following it up with a solid performance in the month of April. The average return for April was 11.75 per cent with a positive ratio of 56 per cent.

One more stock which demands close attention during the summer season is Varun Beverages, one of the largest franchisees in the world (outside US) of carbonated soft drinks and non-carbonated beverages. The stock had a positive ratio of 50 per cent for the month of March and delivered a negative return of 6.77 per cent during this month; this is merely because of the fact that during March 2020 we saw a huge plunge in market and the stock also cracked nearly 35 per cent. If we keep aside this data and consider the performance of this stock in the month of April, May and June then certainly it would blow one’s mind.

The stock had a positive ratio of 100 per cent in the month of April with an average return of 11.90 per cent in April. Further, in the months of May and June the stock had a positive ratio of 75 per cent each with an average return of 5.87 in May and 3.85 per cent in June. In addition to the above mentioned stocks, there are some traditional summer favorites such as Blue Star, Voltas, Symphony and Bajaj Electricals which are usually seen buzzing due to demand surge in the summer season. Some other stocks, which our back-tested system suggest doing well during this period, include Navin Fluorine, Relaxo and Rupa. Navin Fluorine is engaged in the refrigerant business. The company products cater to various end-use industries such as window and split air-conditioners, chillers, package air-conditioners and commercial and industrial refrigeration. So, use the above mentioned to your advantage e and beat the heat by adding some the ‘summer’ stocks to your portfolio.