Week Ending 26 February 2016

"Money is the most egalitarian force in society. It confers power on whoever holds it" ~ Roger Starr

Dear Patrons, the week gone by, was an eventful week. We had the expiry of the February contract in the derivatives market and the Railway Budget on the same day. This week was very volatile, with Nifty marking big swing downwards. Nifty started the week around 7200, made high of 7252 and then slid to 6961 losing all the gains made in previous week.

Next week starts with a BIG event for the markets, as we have The Budget on Monday. As we head into the Budget, we would like to advice caution and avoid leveraged positions till the event is over. 

Technically, Nifty is in the process of forming a bottom. Should 6950 hold on Nifty, we may see 7350 in a hurry, on breaching 6950, however we may see the previous low breached.

Today, that is on 26 February, the GoI published the Economic Survey. The readings from the Economic Survey paints a rosy picture about the Indian Economy, which, we have been saying for long through this blog. We have always maintained that small steps taken by the GoI will result in large impact on the Economy, and we have been validated by the Economic Survey.

Let us look at some data points.

1. Fiscal Deficit: In the last Budget the target for Fiscal Deficit was fixed at 3.9% of GDP and the Government has largely managed to keep it in check. 

2. Inflation: Inflation has by and large remained in check, mainly due to decrease in Crude prices and high interest rates. Looking at the inflation data, we feel RBI has room to cut rates further and boost the economic activity

3. IIP: IIP has been on a steady path of growth and with increased impetus on Make in India, we should see better industrial activity in future

4. GDP: India is the only shining star in the globe in the current recessionary scenario in the developed world. We expect to grow by 7.5% next year, which is a fabulous growth, in the bleak global outlook

5. Forex: There has been steady growth in Forex Reserve, though not satisfactory, it has increased. We should see more money coming in India over next year, which in turn should help the INR gain some lost ground

6. Agricultural Activity should see major thrust in this Budget, as we are reeling from 2 years of drought. 2016 however promises to be good as far as monsoon is concerned as the El-Nino effect is not present in this year. 

All in all we expect a good Budget, with significant allocation for Agri sector as well as Industry. Our motto remains the same. Accumulate good quality stocks.

Stay Invested!!

Week Ending 19 February 2016

Dear Patrons, welcome to yet another edition of the weekend blog. As we head into the Budget, lets have a look at what happened in the market in the last week and what is in store for the coming week. Today, we will look more at basics of investment than the markets. However lets spend some time on the markets first.

As stated in the last blog, Nifty failed to hold on to 7350, which resulted in a massive sell off in the markets. Thereby creating a panic situation. As they say, whenever there is a panic situation in the market, the bottom is near. Nifty slid to 6869 and recovered in the week to close above 7200. We like to believe that the worst is over for the markets and 6869 should be the bottom for this fall of almost 2300 points or 25% on the Nifty. If 6869 is considered the bottom then Nifty assumes targets of 7300 and 7500 in near future. 

Let us now talk about investment basics.

What is an investment?

The easiest answer to this question is "anything that gives a return over a period of time is known as investment"

What are avenues of investment?

There are many avenues available for investment, namely Bank Fixed Deposits, Bullion, Real Estate, Equity, Mutual Funds etc.

Which is best investment option?

This is a tricky question, the answer to this question depends on what are our goals and what is the investible amount available with us along with the time frame. We will look one by one.

1. Bank Fixed Deposits: These are perceived to be the safest investment option. It has a drawback though. The interest rate on an FD is less than 10% in India and assuming inflation rise of around the same nature i.e. 10%, the return on FDs does not cover the inflation let alone fulfilling goals.

2. Bullion: Bullion is also a safe bet, however there are issues regarding safety and purity of the Gold that we buy. Also it is a costly affair to invest in Gold, looking at current prices. 

3. Real Estate: Again a safe investment destination, but it requires bulk investible amount and is highly illiquid.

4. Mutual Funds: Mutual Funds have not been able to generate the kind of returns one expected over a period of time and liquidity is still a concern as far MFs are concerned.

5. Equity: First and foremost, its a bit risky if done without study. Equities, however, have given best returns when we look at the 80 year performance of all the asset classes. Also Equities are liquid and there is no threat of someone stealing it. Investment in Equities can start with a small amount also.

In all the asset classes Equities have given best returns with moderate risk and hence it is the most preferred investment destination in the world.

All in all we like to reiterate our stand

Stay Invested!!!!!

P.S.: We do not consider Insurance as an investment option.

Week Ending 5 February 2016

Dear Patrons, welcome to yet another edition of the weekly blog. We saw extreme volatility in the course of the week gone by, however we believe volatility will very much be a part of our markets in the foreseeable future. Increase in volatility in our markets is more due to global peers than local events.

Nifty started the week around 7600 and slid down to 7350 and regained most of the ground on the last two trading sessions closing at 7489. During the fall mid caps were the victims. Some of the mid cap stocks were brutalized in the last fall.

Nifty should find support around 7350 to act as base for some more up move. Barring a negative news on the global front, we should see a relatively stable market here on wards. This being the budget month the event risk remains in the market. We do not rule out a pre budget rally in our markets though. 

Last week both, the US Fed and the RBI held status quo in the interest rates. The Fed talk was pretty dovish and suggested no increase in interest rates in March. This resulted in the USD falling against other global currencies. The INR also gained some of the lost ground during the last two trading sessions. The RBI also held the rates constant. We have seen 125 beeps cut this fiscal and do not see any more cut in FY16. 

The results season is by and large over. There have been some extremely good results and some dampeners, however, we like to believe that the Indian economy is in very good shape and we should see improvement in the GDP in FY17. The GoI thrust on infrastructure spending augurs well for the industry as a whole along with Make In India campaign, which in all likelihood will result in India becoming a manufacturing hub, creating more jobs and expendable income, which in turn should push the growth rate higher. (Boeing is said to be in talks with GoI for their first manufacturing unit outside the US)

As seen above, should Nifty hold 7350, we are likely to see 7580-7700 levels in the near future. Many of the good quality stocks have been hammered out of shape in last one year. We strongly recommend to add good quality stocks to the portfolio in this period for long term.

Stay Invested. Happy Investing!

Week Ending 22 January 2016

Dear Patrons, first of all let me apologize for a long break in this blog due to some unavoidable circumstances. Coming back to our weekly analysis of the equity markets. The last week has seen a roller coaster ride in the markets, with the markets witnessing up and down movements throughout the week.

Nifty during the week saw high volatility and big moves both on the up as well as down side. During the week Nifty saw High of 7470 and low of 7241. The biggest reason for the fall can be attributed to the Chinese markets. Lack of stability in the Chinese Markets had a big impact on the world markets including emerging markets.

One more attribution for the fall can go to the currency reading. INR fail sharply against the USD, which prompted the FIIs to sell off Indian equity. The INR though behaved very well and held its ground as compared to other currencies. However, we would like to caution that the INR may post a new low in coming period.

Most of the world markets lost close to 3% in one single trading session, however, the tide turned positive after the ECB chief's announcement of further stimulus to the European Union economy. This positive news helped world markets gain some of the lost ground and almost all the markets closed with handsome gains.

We had clearly mentioned in our last blog that we see larger downside in the markets, when Nifty was trading around 7800. Current reading on Nifty is around 7400, which goes to show our conviction in technical analysis.

We still maintain our target of 6800 on the Nifty to arrive eventually. In such a scenario what do we do?

The mantra remains the same. "Accumulate" good quality stocks in every decline with a long term view. Our markets should look upwards in H2CY16. With a strategy to hold stocks for a long term one can start accumulating certain good quality stocks with every dip in the prices.

Happy Investing!!!!!