E N J O Y the party

Finally market seems to be breaking from its one year range of 4700 to 5400. Most of the analysts on the street have been proved wrong for being skeptical on the market. FIIs are pouring money like anything and this year may prove to be the best year in history in terms of FII inflow. We feel that markets are likely to test the highs of 2008 soon. Markets at current levels are reasonably valued if considered on FY11 & FY12 basis. India has become an inevitable destination for parking money as we have 8.5% real GDP growth which is going to sustain for next 10 years. The fact of the matter is that it is very difficult to time the market & so our aim should be pick good stocks at a reasonable valuation and remain invested. It is pity to see our retail investors are not gaining in this Bull Run as they have been cautious & booking profit on every rise. India has a saving rate of 32%, still only 4% of it comes into equity. Most of the money goes in fixed deposit, Gold & real-estate. Indians are good savers but not good investors. Inflation is biting our money which is invested in fixed deposit.

The other issue which I want to touch is our success in Portfolio Management Service (PMS). We have outperformed benchmark index handsomely. The basic ingredients of our success are as follows:

1)      Never tried to time the market.
2)      Did not invest in companies or sector which we did not understand.
3)      Being Ethical & transparent.
4)      Well diversified across sectors.
5)      Took some contrarian calls which worked.
6)      Never tried to be number 1, but rather tried to be consistent.
7)      Don’t need high I.Q, need good temperament.

   

B O O M or bust

I feel market is on the brink of surprising us on the upside. You all may be surprised to hear that I am talking of an upside even after most of the analysts & economists on the street are skeptical both about global & local markets. The reason behind my optimism is that Central Banks across the world are very cautious & so any big catastrophe should not happen in near future. 2008 crisis happened when everyone was relaxed. Nobody had thought about the sudden collapse of the so called BIG financial institutions. Everyone on street is talking about expensive valuations of India vis a vis other emerging markets. I feel that India will always command higher valuations because of its high ROE, ROI & Low debt-equity ratio. Management quality is far more superior & transparent as compared to others. The other thing is that nobody is grand-father of the market & so cannot determine the exact valuation.

Macro picture looks much better than what it was six months back. Monsoon has been going very well along with a good spread across the country. This will boost rural economy as 60% of the population is dependent on agriculture & in turn will spur consumption. Still this story is been under-estimated by most of the analysts & is going to surprise everyone on the upside. This year we are going to have maximum “Mahurat” days for weeding in the last decade & this will have a big impact on Consumption story in India. History tells us that whenever anything is going against the trend, everyone would be skeptical initially. But then when people see that markets are not going down and earnings are reasonable or earnings are going up then at last everybody joins the party.