Saturday, May 1, 2021

Divergent. Covid & Markets

 It is with great sadness, having lost a few relatives and friends' to this covid onslaught that I say that this Government has displayed zero foresight, planning and  empathy for the citizens of the country. Death from disease is common but dying from lack of oxygen or dearth of treatment is absolutely callous.

We are close to loosing almost a decade to lost growth, infrastructure development and industrial development. Our cities look almost the same as they did a decade back with decrepit bridges, a few new metro trains and slightly better roads.

Yet the stock markets are near all time highs and show no sign of remorse or fear. A dangerous situation and contradictory in nature. How long can we keep building in the growth potential and cling to the fact that nothing much is happening in the economy.
The move on various sector indexes has been sharp and volatile. Metals have moved globally and stocks like Tata Steel and SAIL have gone above long term trends in some cases most after 2007-2008 period. Every decade in India seems to the time when infrastructure would become world class and we would be rid of ramshackle amenities more in keeping with our aspirations. Pipe dream.

The swarming liquidity in the global system has been primarily responsible for the stock price climb be it the Dow Jones or Nasdaq or our very own NSE and BSE. I would pause and remember the wise worlds of Warren Buffet because sooner or later that is what is going to happen although in the short term the move especially in the small cap stocks will be going up.
Domestic economy is moving towards stagflation i.e. high inflation(7%) and low growth. With joblessness and not much business for the small and medium sector which forms the backbone of our broader economy, we are faced with the devil's alternative - loose fiscal policy for growth or tighter controls to control inflation?

The divergence is expected to continue on the back of a normal monsoon, fall in covid infection numbers or better managed vaccination.

My message over the past year has been simple. Buy value. Buy stocks of companies where you feel:-
  • The product is invaluable to daily living and even if prices rise it has to be in use
  • It is available in both online and offline form i.e. can be delivered even if there is a lockdown in place
  • Life saving products - pharmaceuticals, medical equipment 

This pandemic has changed consumer preferences more in One year than in the last 50 and some far reaching impacts will I presume be beyond predictions. Stick to what is immediately visible.

Our portfolio has given 63% in the last financial year and that has been due to calculated risks in Autos, textiles, financials and select metal stocks. I expect the rally in Metals to continue further with some beaten down counters coming up with better results.

We look at investing in unfashionable stocks that can become fashionable. Bottoms up Approach👍

Stay safe and stay well.

Friday, March 19, 2021

One Flew Over The Cuckoo's Nest

 Let me be clear that the headline has nothing to do with the movie that got Jack Nicholson his Oscar! It is all to do with the markets as they are.

And they are - all over the place. Naturally I get asked what to do? I do not predict(rather cannot) as I am not Nostradamus. Yet it seems clear that the Indian markets are trying very hard to recognise that 'some' green shoots in the economy are visible.

The situation is really bad but it's in such times that stocks react to future positives - bit too much if you start discounting FY23 results!!So being realistic is a very necessary attribute. A lot of stocks have moved up. let me illustrate

Stock A was priced at Rs 300 last year. It then fell to 200 and subsequently went back up to 300. How much as it gained or lost? A lot of investors seem to think that the stock is overpriced just because you are seeing the leg 200-300↗ and not the ⬇ 300 - 200 hence doing smart research is imperative.

New stories are being spun about the rising from the ashes of corporate mis governance, outright fraud and such others of companies that are not investment worthy. But what can one do when those suffering FOMO are lapping up the stories. Seen it happen in every bull market and does not look like 2021 will be any exception except feeling sympathetic towards those who get trapped in such useless companies at prices that they may never reach again. Yes Bank anyone?

These are the Cuckoos nest!!

As mentioned earlier too this is the time to de stress, gym, yoga or whatever your choice runs to. If you are invested in a good thematic firm then hold tight or have the courage to look for good businesses and deploy only 20% of your capital.

Another Cuckoo's Nest is the string of IPOs which have been oversubscribed at astronomical rates as if there will not be another opportunity to purchase the very same same stocks.

👉Check.....are funds being raised for new projects, expansions etc

Or it is to give original investors an exit? Which means it is an OFS(Offer for Sale)

➜Are you subscribing because a marquee investor is mentioned as holding a stake?

Was the company registered 10 years back as XYZ Oils Ltd and have come out with an IPO as XYZ Oils Fintech Ltd. ?(Yes its common practise to add the name of the "Hot" sector before listing application!!)

All old, boring scams that resurface every time the bulls roam Dalal Street. Read the Red Herring Prospectus(RHP) a boring document full of useless verbiage but important if you want to know what one is getting into.

Indian Market View: If the Nifty can hold 14500 then look for an immediate bounce back to near all time highs for the market. For long term investors the level of 13,800 is very important. For traders it is good all the time as long as you do not get stuck with one worldview!!

Be flexible and yes Research is very Important. Happy Investing & Happy Holi !!!!🔆

Wednesday, February 17, 2021

It Is Like Looking Down from Everest For Investors!

For equity investors across the US and India is like staring down from the peak of Mount Everest. A steep up move from mid 2020 has left many gasping - some because they never believed and either sold off too soon and others who waited for the markets to correct before buying. 

Don't be this?

It's natural to face disappointments in the market sometimes but this rise and rise has been extraordinary and unprecedented. The big learning from this is NEVER SAY NEVER AGAIN!

The fear of missing out(FOMO) is driving investors but like always this will end badly. When and how I do not know but like a Bollywood movie the climax is clear.

The best strategy in these times is to

STEP 1 invest in identified stories that you strongly believe in.

STEP 2 invest only 10% of your allotted capital at any one particular time

STEP 3 stay invested and stay patient

STEP 4 when (the question now is when and not If) markets correct do not panic

STEP 5 invest another tranche. R E P E A T

To give a milestones is difficult but for Indian investors investing 10% of capital at every 200 point fall in the nifty will lead to a fantastic average buy rate(ABR) akin to what a plethora of advertisements ask to to do when you start a Mutual Fund SiP.

Finally after more than Six years in power the government is moving to shore up the economy by spending on infrastructure. For a consumer driven economy like ours it is imperative that we kickstart growth by ploughing in capital. The big question as always remains whether there will be action or just words that are buried in administrative files.

We have in our Portfolio generated 63% CAGR over the Covid period no thanks in small measure to not doing much, remaining invested and not panicking. It's worked for us and no reason it will not for you!

This is also a good time to restructure your portfolio and estimate what will be the focus theme for the coming period and what has not worked. Most investors are loath to exit from loss making investments but this is a good time to re position and introspect.

The message as always is to keep investing a part of your surplus in Equities as no other avenue can match up to equities as a wealth creator.