Tamilnadu Investors’ Association – Investors Digest
by Vivek Karwa, CPFA, CFPCM , Financial Planner & Wealth Manager
120917: Investors have been in a state of confusion past many months. The Sensex today is at around 18500 and we were exactly at same levels even on 22/2/2012, thus if we just see the market movements, more than half of the year has passed by but nothing much has happened on the index front.
Though index is back at the same level we have seen enough volatility that too within a range and the index also saw a low of 15748. During this volatile period we have seen lot of events unfold and certain specific stocks… so called good quality stocks have depleted investor’s wealth. Those in index funds or ETF’s may have escaped the wrath of the market but continuing to remain invested in passively managed investment options may not be the right strategy going forward.
Other sectors which were badly hit during this period were Realty, Capital Goods and Banking. BSE Realty was at 2212 on 22/2/12 and is trading lower even today at 1633, Banking was at 12892 on the same day and is at 12188 and the Capital Goods sector is also a similar story.
These index levels are only a trailer of how markets have behaved past half a year. If we start looking at the individual stock performances the real picture is even worse. One of the major contributors to this is the policy paralysis of the government, which till now has not been able to push the key reforms particularly since it itself is caught in series of scams and economic mismanagement issues.
The world is totally globalised. Earlier the markets used to discuss the issues which are prevalent in United Stated and the European Union and thus we were seeing funds outflow which was happening due to risk averse mentality of the investors. We all know that the issues in US and EU will take many years to get resolved but the countries to a large extent are fighting unitedly to come out of the crisis. Since the world is globalised we saw money going out of our country as well.
Within our country, we are going through a situation where the economy is limping and upon all we have come across on bigger problems like the coal scam. The government finally realized that tough acts need to be taken up and suddenly announced a hike in diesel prices which turned away focus from coal overnight! If you remember when the petrol prices were increased by a record number few months back, there was lot of hue and cry, followed by a shortage at fuel stations and people had to live with the reality that what happens if they don’t get petrol itself. Better to pay higher price!
This time the government has taken bolder step of announcing FDI in multi brand retail, aviation both of which have been contagious issues and will remain so. The PM has been bold enough to say that he is ready to go down with the government if the allies pull out.
Our country and the market would have gone a long way had this determination been shown much earlier. We see that they get bold only at fag end of the government term getting over like how it happened during the Indo-US nuclear deal.
RBI may announce interest rate cuts to improve the sentiment further. This may bring cheer to Banking, Realty, Automobile, and other interest sensitive sectors. It is advisable to lighten the portfolios of the realty on rallies.
Banking looks good. Investors remaining stock specific at this point will tend to make more money than those investing in passive investment vehicles.
Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.
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