It’s Darkest Before the Dawn

190816 – The previous article Don’t Press the Panic Button got me many responses from investors across (if you haven’t read that article, please do so before reading this one). Existing investors with spare money in hand, fully invested investors, and first-time investors. I’m going to try addressing most of the concerns which came across to me

The market today is in panic mode; no investor is ready to peddle into the market currently. Stocks are getting punished ruthlessly even though they are quoting below their actual worth. The valuations are far cheaper than even 2008 crash. I remember in Jan’2008 Sensex was quoting at around 21200, and the same crashed to 7500 by Oct’2008 which was the steepest cut which most of us present then, ever saw in our careers.

With all the earnest I can say that we have already seen a 2008 kind of correction in the market today. The difference then and today is that 2008 was fast and furious, and the current correction which started in Jan’2018 is continuing even today. It has been a slow and steady grind.

People relating the correction to bringing back of LTCG, Increase in Income Tax levels for the super-rich, Taxing the FPI’s, etc. are not fully correct. 100% I agree that these did the initial job of spoiling the sentiments, but the whole correction cannot be on this. Who in the world will stop earning just because he has to pay tax?

The real reason for the steep cut in the last few weeks and the pertinent slowdown we are witnessing in certain sectors, particularly automobile can be directly related to the NPA and Debt cleansing which government has seriously undertaken. I had explained this in the previous article.

This cleansing process is going to be good; as a result, we will have better balance sheets, better auditors too. Had the world economy been strong this process would have passed by without hurting us and our economy, but sadly, the whole world is under stress right now, and hence we are feeling so much pain.

The recent proof for my thought process is the stake sale by Reliance Industries to a Saudi Arabian company. Even the imagination of Reliance failing brings pains in the minds! RIL too has huge debts in the books, and there was a report which was also circulating on the WhatsApp warning the same. The stock too had fallen almost to 1200 levels.

The market is punishing any company which has debt, Mukesh Ambani knew this before the market could react in an ugly manner, the deal got struck, and he has promised to go debt-free in next 18-24 months! We should applaud him for his business acumen.

You cannot get a bank loan easily today, and that is hurting the automobile industry in particular. And when this sector slows down many others slow with it. For example, Maruti uses 70 litres of paint every minute, so if Maruti cuts production… you got the point already!

The slowdown in the Automobile is due to various other factors too like BS VI, EV and non-availability of finance. Other sectors too are facing the brunt. As per my info CTS alone has cut around 6000 jobs in last few weeks.

The saying goes It’s Darkest Before the Dawn! Don’t forget that the Indian Micros may be going through a rough patch right now but our Macros continue to be strong. The government has already taken note of the situation and expect some measures to boost confidence among investors.

What I sense now is that we are in the bottom part of a U. Check out the results; they are down not that companies across the board have started incurring losses. One thing which has made an investors life hell is the WhatsApp forwards.

Remember we are in the darkest phase of the downtrend right now and are bound to see the dawn.

Will write more later. Feel free to reach us on the below contact details in case of any non specific stock or investment queries.

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Be Greedy!

Vivek Karwa

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Don’t Press the Panic Button

190728 – As mentioned in the previous writeups, the Sensex and the Nifty have been moving up and holding the levels based on 6-7 stocks popularly called as Hrithik stocks. It is next to impossible to find anyone, be it individuals or fund managers who would have bought only these stocks.

The market has been performing badly since Jan’2018 and till date, there are no signs of recovery. There was some expectation which was built up before the budget’2019. The budget has been a total damp squib from the market’s point of view. Not that the overall budget was bad, it was prepared keeping the only long term in mind and hence nothing materialised for the short term for the market.

Two things which market did not like were, firstly, Higher Taxation of HNI’s and FPI’s and secondly, with this brute majority, the market was expecting the government to go capitalistic but they seem to be adopting the socialist approach to which even I am opposed to.

With clear thumbs down from the market, I feel there would be course correction in the next budget, this being not a whole year budget.

There are other reasons also due to which the Indian market is going down. Budget is a smaller excuse. One reason being the slowdown which India is facing right now. The most common thing being talked about is slowing sales of the automobile sector. The sector was going thru a rapid growth and with so many factors changing and expectations of the changes are slowing it down. I am not ready to link it directly with the slowdown.

The biggest reason due to which the businesses are talking about slowdown is Cash Crunch in the system. Majority of the companies today don’t have access to cash by way of loans, overdrafts, etc, Only a few companies with no debt on the books are in a happy situation today. Let me explain the earlier situation and what changed now in detail below:

Earlier, assume company X goes to a bank and takes a loan of Rs.1000/- Crs, also assume the management has no intention of paying the amount immediately. Cannot be termed as a fraud, but had the intention to use the money for a long time, maybe called as overzealous.

When the due date arrives to repay this 1000 Crs, the company goes to another bank and asks for a loan. Gets the loan and repays the first bank. The first bank actually ends up rating the company in high regards since they paid on time. Factually the amount still remains with the company.

When the date arrives to pay the second back, the company goes to the first bank again and the bank this time is happy to lend them double the amount since it was repaid on time earlier. Such loans kept on building up during the period 2004-2014 under the economist PM, these loans today are popularly called as NPA’s.

Then the government brought the IBC Law. Where in the government has made it clear to all those having debt that, it’s there problem and can’t depend on the banks and taxpayers money anymore? It’s their problem, they took the loans and now pay them back or they may lose the control over the company and in certain cases if found that the money was being diverted may end up in jail.

The result: Most companies are repaying or reducing debt.

Few examples: Emami recently sold a stake to reduce debt, Apollo Hospitals sold their Health Insurance business to HDFC to reduce debt, Anil Ambani is selling everything he owns under the sun to repay debt, there are many such examples.

Even the Chartered Accountants are feeling the heat.

Above all the IL&FS and DHFL issues have aggravated the problems.

Hence the slowdown! But go to any hotel, any resort, any airport, any mall and you may end up asking what slowdown! Even a few car models are overbooked right now.

This too shall pass, don’t let the bad times pass by simply, use the opportunity. We are seeing a severe cleaning process right now. In the end, we will have cleaner companies and balance sheet. You get the point right? Call up your advisor and ask which segment and which sectors to invest in right now. Invest more now, you won’t regret few years down the line.

When you visit www.vridhi.co.in on a laptop or desktop, you can subscribe for email alerts on future articles. If you are browsing on the phone, while scrolling up and down you will find the ‘follow’ button. Do stay connected with us. Click Here for all over social media details.

Happy Investing

Vivek Karwa

Modi 2.0

190526 – Before we start, we would like to congratulate Mr. #NarendraModi for getting the second term as the PM and that too with thumping majority. We also wish the people of India for having decided the next government with clarity.

Any government with dependence on regional parties would have been unstable. India is in a time where a majority government can take decisions much faster and there would be no vested interests to pull the government down.

It is first time probably in the history of India that a government has been voted back to power with larger vote share and seat share. It’s a world record, this is the first government which has been voted back to power after implementing GST. All other governments in the world which brought in GST were thrown out.

With 303 seats under its kitty, the new government will kick start on day one of taking the oath. In 2014 Modi was new to Delhi and it took him almost 6 months just to understand the 11 am a culture of Delhi. Also, the bureaucracy was more loyal to the earlier establishment.

The above problems are not present this time and the work would start from day one. The same will be taken very positively by the markets. Though we saw some movements, we did not see upper or lower circuits since the outcome was somewhat factored in already.

The year 2018 has been very bad for the markets particularly for the Mid and Small Cap segments. Due to various factors, the stock prices had corrected 50-70% and most Large Caps too corrected up to 30% resulting in losses across the board in both equity portfolios and mutual fund portfolios.

A lot of newcomers entered the markets in 2017 and 2018 and now are assuming that they made a mistake. They also feel that while the Sensex and Nifty are at all-time highs, why are their investments not moving up?

Fact is this: Firstly, literally only five heavyweight companies in Sensex and Nifty have moved up, other stocks have either moved down or remained flat. Hence, the index may be at high and the portfolios down, but that doesn’t mean you should call it quits. After the election results, there are all possibilities that Index may remain flat and the stocks move. Secondly, Please don’t judge the investments on 3-5 years basis. Equities can give you five-year returns in a single year and make you lose patience in the first four years. You need to invest for absolute long term.

The best thing is to do your Financial Planning and start investing. This can keep you disciplined during the ups and downs. Keep in mind, no one in this world has become rich by investing in Fixed Deposits alone. Even Real Estate will remain subdued for the next five years.

We believe that the markets will be buoyant now. Single-party majority government will take actions faster.

I expect these things in the first half of the term:

1. A 100 days plan will be announced.

2. The full budget may be presented with Bigger Tax breaks for people.

3. Draft of Direct Tax Code will be ready by July.

4. IBC will be strengthened.

5. More spending on Social Reforms.

6. Spending on Infrastructure may increase.

7. Govt and RBI will now push liquidity into the system.

8. Big projects like River Linking may be announced.

Also, since the clarity has now emerged, the corporates will start their investments in India. Many of the companies were just waiting for the results. For example, around 200 companies from China alone were waiting for results to shift base to India.

We at VRIDHI will start the process of making the changes required to suit the portfolios for the New India. We also have been under pressure in the last one year due to bad markets and are now hopeful and delighted that better days for India are in sight. Will now be working for best results. India’s time has come.

Global problems will continue to cloud the markets, but the local opportunities overweigh them. India’s relationship with global leaders is extremely favourable currently which will also help our country.

We will continue updating over the next few weeks as the structure of the new government gets clear. Stay connected with us and work for better tomorrow.

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Happy Investing

Vivek Karwa

Roller Coaster Ride Continues

190217 – Firstly, We pray for all 44 souls of our Indian Army martyred in the Pulwama terror strike. May all the souls attain Shanti. Om Shanti.

Such a cowardice act on part of Pakistan backed terrorists. They feel they will get back Kashmir by doing all these. Fact is it’s getting tougher for them by the day.

Sensex went to highs of 37172 on 7-2-2018, the movement on the upside was as expected since I was sounding bullish on the Index in the previous two to three posts continuously. Post the highs, the market has corrected a bit more than expected and has closed at 35809 as on 15-2-2018, that’s almost 4% fall within a few days.

Sensex even at these levels looks quite decent. Sensex is actually giving a wrong picture to everyone. Fact is though Sensex is at its highs, most portfolios are in red. I should say 100% of the portfolios in the last one year has turned negative, including the Mutual Fund portfolios. Including ours, which we recommend. That’s the truth. The only difference between our portfolios and that of a naive investor will be seen during the recovery of Mid and Small cap companies.

Our portfolios will recover much faster than others. Even our MarketFastFood subscribers will see a faster recovery. In fact, we have added just one company in MFF past one month.

The broader market has been on a slide. Sensex and Nifty are up based on just a few stocks. They are today commonly called the HRITHIK stocks! No, not that Hrithik Roshan the actor owns them, just that a new word has been coined in the market. HRITHIK means:

HDFC, Reliance, Infosys, TCS, HUL, IndusInd Bank, Kotak Bank.

An investor can now ask why shouldn’t I buy only the Hrithik stocks and beat the market? Logically it’s a yes, you can, but will you take risk of investing only in 7 companies of which 3 are from one sector alone? If these stocks falter then life can become miserable. Hence, an advisor like me would never risk putting money in such stocks and few of them are steeply valued today!

The broader market is actually quite cheap now. Your portfolio may be in minus, still, this is the time to add more. Those who fear now will later regret missing the chance. This is not the first cycle in the market. It has happened many times in the past. Not that India is doing bad, not that Indian companies are going to close down tomorrow, not that we have bad government.

Yes, in the short term there will be heightened volatility due to elections coming up. Until then keep adding slowly. Don’t fear, this phase shall too pass.

We may get even better chances in the next few weeks/months. Pakistan has this time crossed its limits. The Indian government cannot simply let this pass. Action has already started. I don’t think there will be a full-fledged war, but things like surgical strikes, or strikes in the PoK area cannot be ruled out. Any panic situation should be used. Pakistan is bankrupt. They cannot face India. India has had huge diplomatic success in the last few years which has cornered Pakistan on all fronts.

India has already taken few steps over the weekend. These will make India emerge stronger. No country would dare to openly support Pakistan over India.

In case you need our support feel free to WhatsApp us on our office number. My desk number is 93810-24365. We at VRIDHI are always happy to hear from you. Feel free to get in touch with us.

When you visit www.vridhi.co.in on a laptop or desktop, you can subscribe for email alerts on future articles. If you are browsing on phone then scroll to the bottom for the ‘follow’ button. Do stay connected with us. Click Here for all modes.

Happy Investing

Vivek Karwa

Roller Coaster Ride Ahead

190127 – Volatility has set in as expected. Again, like before, the same is invisible in the indexes, but when you dig deep into the market you find that enough damage has been done in the past 10 days. There was some recovery which tried coming in, and some of that has again been taken off. Justified! The market climbing by the stairs would be better, an investor should not expect an escalator type of recovery, that’s always dangerous.

We at VRIDHI have been trying to stay connected with you all on various platforms, would like to mention a few of them before proceeding, would request you to join them all.

1. You can follow this website by subscribing for email alerts. Scroll down to the bottom if you are reading it on phone. If you open the website on a system then you would find the subscribe option on the left-hand side.

2. Subscribe to the YouTube page: https://www.youtube.com/c/VivekKarwaIndia/

3. Facebook: https://www.facebook.com/teamVRIDHI

4. Twitter: https://twitter.com/vivekkarwa (being personal twitter, you will find non-finance posts too)

Now coming back to the markets:

I, still feel we would do better in 2019 than 2018. Leave the minor blips, I guess, in the previous post I had mentioned that my gut feeling says we may hit a new high before the Lok Sabha elections. Some people sent me counters, people don’t understand! I am in competition with none, and nor do I predict this short term. It’s just a gut feeling which may turn out to be real or may fail. If it fails, so be it.

Some people have been sending me WhatsApp messages and Facebook messages that America may crash and take India along with it. The scenario is totally different. Dow Jones on 3/12/2018 hit a high of 25980, it saw a steep correction and hit a low of 21712 on 26/12/2018, that’s 16% correction in a short span of time. The latest high on Dow is 24750 achieved on 18/1/2019 which again is a massive recovery in short span of time.

We did not move with Dow! India is adjusting to her own scenario.

What’s the lesson? We have to move very selectively for the next few months. The fact of the matter is that the valuations are cheaper now, and yet I am not able to freeze on the investment ideas easily. Meaning, a normal investors life would be much more difficult. We at VRIDHI will keep doing the hard work on behalf of you. Just stay connected with us. In the previous post, I had recommended three ideas, and all of them are stable even today. Read them by Clicking Here.

Also in the previous post to the previous, I had mentioned that we had recommended MGL to MarketFastFood clients and you know what? The stock is still stable. Don’t take this as a Buy recommendation since we may exit without any info. The exit ideas for the other three stocks will be posted on any of the above-mentioned platforms, hence stay connected.

India is adjusting to her own scenario. The market is factoring in all the possible outcomes of the elections. Don’t go with the doomsday sayers. Ignore them. Most of them have stopped getting their easy money and are predicting hell. Take my word, India is the best investment case in the world today. With China slowing down and US-China stress, India will fear in short term but gain in medium to long term.

So, be selective, take advice from your advisor, use strategies wherever possible and keep adding fresh money in these volatile times.

If you are a member in any WhatsApp group and would like me to contribute, feel free to add 93810-24365. No one to one messages, please.

At your service

Vivek Karwa

Better 2019

190101 – Wishing you all a Very Happy Calendar New Year 2019 and may all the days till next year are exciting, profitable and memorable. I, in my video recently had promised to mention few investment ideas in the article and will do so today. To stay connected with us on all social media platforms Click Here.

I know most of you must be busy on this day and hence will not make this post very long. I promise you will be able to read the whole write-up in under 11 minutes. Not all are sitting in office today like me. 😦

In the video, I had mentioned a line that ‘My gut feeling says we may hit a new high before Lok Sabha elections’ Not necessary the gut feeling is high but most probably 2019 will be better than 2018.

Look at the Index performances in 2018:

Index 29-12-17 31-12-18 Change %tage

Sensex

34057 36038 +2011 5.90%

BSE MidCap

7781 6696 -1085 (13.94%)

BSE SmallCap

19231 14707 -4524 (23.52%)

The Sensex delivered marginal 6% returns. Still, not all investors made it, why? Because the movement was based on just 5 companies. The silver lining is that world markets did much worse. India was among top performers with this bad return. The movement was very shallow. MidCap Index delivered pretty bad and SmallCap Index was a disaster! When Index itself is down this much, no wonder most investors are seeing their portfolios in deep red.

This builds the base for a better the year 2019, in spite of elections around the corner. You can read the previous two posts to read the views on elections.

Volatility will still be seen and hence I would publicly mention ideas which may not see huge volatility. MarketFastFood clients get updates instantly but the public at large who are acting upon reading this post should go safer. Any further update would be posted in the comments box by me in future.

Things are improving constantly, as per RBI’s Stress Test of the banks, the PSU banks are getting stronger. Buy SBI at CMP of around 295 and hold it till I update again.

The loans which were written off from the balance sheet are now finding their way in again with NPA resolution mechanism. Some people got misguided when politicians said loans are being waived off of the rich, there is a big difference between waived off and written off.

The GST has almost settled fully. With the liquidity situation improving in the system and elections around the corner, the rural economy may do well. Elections see a lot of spends and hence the economy benefits. GST will be a game changer and stocks like ITC in the FMCG sector can possibly do well. You can Buy it at this CMP of around 281 and just hold on for some time. Compared to other peer group companies the stock looks cheap as well.

The third stock I would like to choose at this juncture is Cipla at CMP of around 521. You can aim for a price of 600+ and then ask me again what to do.

In the recent Fb Live video, I had said that don’t get misguided by what news you see on social media. It’s a platform right now used by vested interests to spread fake news about the economy. What has been said in MFF articles till now have gone the right majority of the times.

We at VRIDHI will continue to help investors who are ready to listen to the facts with an open mind. Only this can make you money and not believing in the fake news.

Take it from us, the overall quality of the economy has improved and markets will also follow suit and hence look at India with a positive mindset.

When you visit www.vridhi.co.in on a laptop or desktop, you can subscribe for email alerts on future articles. If you are browsing on phone then scroll to the bottom for the ‘follow’ button. Do stay connected with us. Click Here for all modes.

Happy 2019

Vivek Karwa

Not Much to Fear

181223 – Those who had read the previous MarketFastFood article dated 9-12-18 would have found things post that very interesting. If you did not read Click Here, read it first and then continue reading this article.

First, I had said, don’t fear the state election results too much, they are going to be insignificant in the current scenario. I had posted two charts showing how markets have behaved in the past.

What happened finally? Though all the three states were lost by the ruling party, the markets gave thumbs up to the results. The Sensex and Nifty closed in the green on the same day. Why? It’s all due to the vote share pattern! If you look at the vote share, as an investor you will be least bothered on the results outcome.

Second, Though I had mentioned market looks good, the volatility will remain. Check the data, on the article day 9-12-18, Sensex was 35673, it hit high of 36554 on 19-12-18 and as I write today’s MFF, we are at 35742, hardly any movement!

Third, It was mentioned that RBI will not increase the rates and it went as expected. No rate hike and no impact of Urjit Patel’s resignation.

Fourth, I had mentioned that we had recommended MGL to MFF clients and the stock still remains in our portfolio’s. It hit a high of 907 recently.

Hence, my stance on the market continues to be neutral right now, Buy on dips, but be very selective on what you are buying. Volatility will persist till Lok Sabha Elections and hence no blind buying until then. Seek an Investment Adviser’s help.

Till the general elections are over, my views can drastically change as the events unfold, hence stay tuned to www.VRIDHI.co.in and follow this page. Read the last paragraph of this article.

One can ask why am I neutral and not negative on the market in spite of America’s partial shut down.

As of now, I am least bothered about what is happening in America. Not that they don’t affect us, just that I don’t fear America movements like before currently.

Good things are happening in India.

Inflation is so much under control that RBI won’t think of rate hike even in the next meeting. Remember the inflation in 2012-13? It hit above 12% and we are today under 3% little more down and we can reach deflationary situations! That would be negative but will not happen.

Banks are collecting the earlier written off NPA’s back. Government is funding the Public Sector Banks heavily. Look at the stock movements of strong PSU banks. They are so stable. (Not a buy recommendation)

The GST rates have been cut yesterday. Now hardly around 22 goods are remaining under the 28% category. The market will celebrate this for sure. I have in a number of TV interviews and articles said that in 2-3 yrs post-GST the overall tax paid by the common public will come down. A recent report already states that a common man is saving Rs.320 already, mainly due to FMCG products.

We as a country are heading into interesting times. Don’t go by what news you read. With elections hardly 4 months far, you need to read every news with two teaspoons of salt. Better to stay connected to VRIDHI.

I promise to mention few Investment Ideas before the New Year article. Keep following us. Read the below para.

When you visit www.vridhi.co.in on a laptop or desktop, you can subscribe for email alerts on future articles. If you are browsing on phone then scroll to the bottom for the ‘follow’ button. Do stay connected with us. Click Here for all modes.

Happy Investing

Vivek Karwa