Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

141121 – In the previous article we were waiting for the state election results of Maharashtra and Haryana as they were seen as referendum on the present govt. The Prime Minister has only got stronger with the results and we as a country do need decisive leadership to take on to the world at this juncture.

The Prime Minister after assuming office had asked every minister to prepare a power point presentation on what they would do in the next six months. The ministers were evaluated during the cabinet expansion recently and those who fell short in performance, were replaced with other people. This is a typical corporate style evaluation, where the CEO just terminates the underperformers! If this method is benefiting the country then let the same continue.

A leader’s job is to lead and show the way, the present government is coming up with various innovative ideas which have started making people think! The market is taking all these very positively and all the investors are just hoping that the momentum of the same continues. The Make In India campaign will surely encourage many to start manufacturing in the country and the government soon may ease the policies so that this campaign becomes a reality.

There are many more such programs which have already been announced by the government which over the period of time will surely benefit the country. It should be every Indians dream that we see a strong Bharat, a Bharat which can show the way to the world, how long should we continue to be slaves?

Even in stock market we are still slaves! More than majority shareholding in both Sensex and Nifty are held by foreign funds! We use their products day in and day out and think we are buying products of Hindustani company! Just because a company has Hindustan as a name doesn’t mean they are Hindustani..!

The government and SEBI should come out with ideas which can lead to real financial inclusion! With just four odd percent of population investing in equities and rest all investing in depreciating assets (depreciating net off inflation) will never make our population rich. Whenever the market goes up we see retail investors going out and the foreign investors buying our businesses! This has to change and this cannot happen without the government and the regulators taking up the matter serious.

With inflation, crude and most likely the interest rates coming down soon, we may see markets continue doing well. The earnings expectations have started rising and every fund manager of foreign research houses and brokerages are bullish on India with the present government moving slow but steadily on the right track.

Even at this point of time one should avoid buying debt ridden companies and the real estate companies, though they benefit when the interest rates start coming down. Even the gold financing companies should be avoided. One would most probably make real positive returns if they are betting on the market with a three to five year investment horizon.

This Article will be Printed in the Investors Digest Magazine of TamilNadu Investors Association (SEBI Recognized)

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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Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

141016 – Fifth month is running since the new government had taken over the reins at New Delhi. The expectations are running high. The government seems to be moving in the right direction, considering its early days in the office. People of the country watch for the intentions of the government first, then comes the expectations of on ground performance.

The initial months have been spent well on connecting with people. Communication was something which was lacking earlier and now through various programs the spirits among the people seem to be rising. Even as I write this, the most needed labour reforms are being launched by the government, and the best part of the event has been that the required number of related forms, are being reduced from 16 to 1. Businesses want just this, easy laws will help all.

If the government is serious about its Make In India campaign then the ground realities need to be changed. Everyone understands that these are not things which can be done overnight and hence market will wait for may be few more months. The fact that files are being cleared at faster rate is welcome move towards the need. Some green organizations have raised concerned, but let’s be real on one thing, development cannot take place otherwise. We can be prudent at max.

The exit polls of Maharashtra and Haryana election can be considered as the referendum on people’s view on the present govt. If the results come as per the exit polls the central government will only become stronger and hence would be taken very positively by the market. Many started expecting the government to deliver in first 100 days itself. It was like expecting a baby in 3 months instead of normal 9 months! Reality has finally set in.

Indian market’s had run too fast too soon and off late we are seeing the volatility for good. The Mid caps and the Small cap stocks have corrected recently. This is supposed to be very good for the long term health of the market. A large part of the volatility is coming from the American and the European markets. The growth there seem to be still in slow pace. China also is slowing down.

In all these mess our country is benefiting the most, if not yet benefitted will benefit for sure in future. Crude oil for instance has come down to $80 per barrel in case of WTI and the Brent is trading around $83. All these prices were firmly trading just few months back. The crude oil has fallen more than 20 dollars since the union budget in July’14.

Crude alone will act as major economic booster for us. A dollar fall in crude oil saves the government Rs.6000 Crs in oil bill payment. Twenty dollars is like Rs.1.2 L Crs savings! If crude remains even for 6 months in this region we will have great positive impact on our fiscal deficit. The Finance Minister may really be able to achieve the set target in the budget.

Hence global volatility will be negative for our markets in short term and will be super positive in the long term. Hence we have to and we must invest. We believe that Indian markets should deliver the highest post inflation returns among all asset classes. Be choosy since the future will be of stock pickers market.

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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Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

140813 – After almost a one sided move since long, the market has finally come to terms with reality. The FII flows have slowed down, slowing the market as always, considering our dependence on foreign flows for keeping the sentiments positive. The index is consolidating, as many put it: index management is happening in the market, but once we look outside the index, particularly on the mid cap and the small cap segment, the story is different.

Many mid cap and small cap stocks had run much beyond their fundamentals warranted and has seen considerable amount of selling. In the process better mid cap and small cap stocks also corrected and many have started looking cheap now. We have been mentioning a reasonable target on Sensex, but the real returns will be delivered outside the index as and when the economy starts showing signs of recovery.

There was lot of dust and negative sentiment around past 12-18 months which seems to be settling down now. The expectations from the new government are really high and we all know that, no person can do wonders within three months of assuming office, considering the size and diversity of our country. The initial moves of the government seem to be in the right direction. The budget showed that this government will not lure people by doles and is serious about curbing the fiscal deficit.

IIP, Inflation and other economic indicators may remain unfavourable for some more time. But as the measures of the new government starts reaping benefits, we may see them moving for good and bringing back the focus on serious economic development. The increase in FDI limit in certain sectors will go down well in long term and will attract money from foreign players.

We import crude oil for our energy requirements. It is the biggest portion of our import bill. We also import mobile phones, laptops and tablets. With the kind of penetration taking place, forget ordinary phones, we may start seeing every individual shifting to smart phones! Estimates suggest that this bill may start competing with crude oil bill if things continue in same pace. Hence the government has announced measure which will encourage manufacturing of electronic communication devises in the country itself.

The next big thing which we import is in the defence sector. With such hostile neighbours, we need to keep our war chests always ready and hence it was always warranted that we increase the FDI limits in this sector, and the government did the right thing.

Such measures are generally not fancied by the public. They find nothing amusing in such decisions since they do not excite like how free food or farm loan waivers may! But these measures should prove to be good in the long term. We should hope that the government should continue with reforms and don’t fall prey to same mistakes which the previous government did.

Expect markets to do well over a period of time. If the administration works the way it is working today, we may see lot of money flowing in to the economy, including the stock markets.

Best Wishes

Vivek Karwa

Financial Planner & Stock Market Adviser

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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Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

140618 – Not even a month has passed since the oath taking ceremony of the, all new government. Even before taking oath the country’s new establishment has sent the right message to all the neighbouring countries, commonly called as SAARC nations. They had no other option but to come to Delhi since they were hinted clearly that the new government means Business!

After taking oath, the corridors of power in Delhi showed a sign of confusion and disbelief for few days on what is happening. Most people there were used to time schedules of 10am+ to start the day (I think even certain courts start their day post 11am), these people got a shock when they saw that the new PM reaches office by 8.30am and is on job by 9am!

You have no other option to fall in line with your boss. When the head of an organization or even a country for that matter is serious, about work the lower lines will automatically fall in place. Even one minister in an interview went to the extent of saying that the PM calls on his office landline to ensure that the ministers are on job! All these send waves of confidence to the citizens of the country.

The government has already started working on war footing. We just hope that this momentum continues and they walk the talk by clearing all the bottle necks in the system. Every Bottle has its Neck on the Top, and that’s the reason the boss who is at the top has to be strong and decisive.

The PM has asked the ministers and the bureaucracy to start performing and the cabinet has taken stock of various economic agendas in the country. There are talks that most projects stuck in the ego vaults of different ministries in the previous government need to be cleared soon. We may hear news on this in coming weeks and that will again augur well for the markets.

We in our previous article had mentioned that… If things improve and GDP shows signs of going up we may see Sensex testing 28630 – 30006 within next 18 months! And further mentioned that… we should surely look at Banking, PSUs, Capital Goods, Infrastructure at this point of time.

All the above mentioned sectors did phenomenally well over the past one month. But we feel that the run has been pretty steep and too fast too soon. It was mentioned that the above targets may be achieved in next 18 months but the market seems to be determined to hit them earlier. Hence we need to be cautious at this point of time.

By cautious, we don’t mean sell everything and sit on cash. But it is time to liquidate the companies where the run has been more than their fundamentals and invest in companies which will remain stable. We are in bull market and the corrections in bull market are always steep and by the time we think of entering fresh they recover. Hence by selling junk and keeping cash ready will help you make most out of the frenzy movements which may occur, and they will occur for sure!

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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Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

140213: The year 2014 has started with substantial amount of volatility. The market which was going strong till the end of 2013 saw a good correction as we began 2014. We saw the rally coming in post the results of the four assembly state elections, the mood turned positive since the results were in line with the projections and the market expects a similar show during the 2014 lok sabha elections. The market is betting for a change and if the change comes in with strong numbers, the market will be inclined to perform better.

The resent sell off has come on account of US federal reserve reducing its bond purchases program and hence leading to lesser infusion of funds into the US economy, popularly known as the FED Tapering Program. There are both positive and negative aspects to it.

The negative reasons which the market participants are giving is that, since the infusion of money will reduce the spending abilities, the economy may not recover at the same pace as the spenders will become cautious. This will lead to consolidation to negative growth and hence market are reflecting the same.

We feel there are more positives to the move. The biggest positive being that FED is now finally confident that US economy is recovering. The FII’s have been selling continuously in emerging markets like India since they would prefer investing in safer “recovering” economies like the US than to take risks at other paces.

The reason is also due to the reasons of our own internal issues. The government is just not able to take decisions on any important matters, leave alone the important matters, there are no decisions on any small matters either. Everybody is involved in some kind of shadow boxing and there is no one to control such feuds.

To make the matters worse for the corporate India and the foreign direct investors, the continuous harassment by the income tax department due to unclear rules is creating all the havoc. It is unethical on the art of the government to change rules as per the tax amounts they want to collect. Who will come and invest in the country when you know that they may modify the rules to snatch away more money from you in order to bridge the fiscal deficit gap they have created, due to their own mis-managements.

Anyways, these things may become a history soon. If we get government as per the common perception of people and as per the projections made by government, the markets may be headed for a major rally. Stocks from the Banking, Infrastructure and capital goods have suffered the most in the current regime.

A strong change at the centre may give a booster injection to the stock prices across the board. Our immediate target of 22000-22500 on Sensex still remains a doable figure. May be by May-June’2014.

Best Wishes

Vivek Karwa

Financial Planner & Stock Market Adviser

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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Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

131220: This time RBI has surprised everyone by not raising the interest rates in spite of the inflation numbers rising beyond the comfort point. Infact the RBI has given out statements which have confused most of the investors. RBI governor Raghuram Rajan speeches have ended up making some believe that rates will go up in next policy review and some are still assuming that he has said that the uptrend may not resume.

Though the inflation numbers have gone up and though the governor spoke tough words on inflation, yet the rates were not hiked. Mr.Rajan knows that hiking any rates now would just further choke the cash strapped corporate world. Most of the inflation is now driven by other factors than the actual consumption. The demand-supply mismatch of food products has caused lot of hardship and further we are also dealing with the problem of imported inflation as the Indian currency is not moving below the 62 mark against the dollar. The RBI also knows that very little would now happen on the policy front until the next government is formed in 2014.

Hence increasing the rates would have not helped much, but harmed more. The love which the market had shown for the governor is all over now. Don’t expect him to steeply reduce rates. A max 25 bps can be expected during the next policy review. Situation would improve when the short term rates and the long term rates fall back to the normal yield curve.

So what should investors be doing going into the new year 2014?

This is indeed good time for those people wanting to invest for safety as priority to get locked into the debt market right now through the Fixed Deposits, Company Deposits, Bonds or Debt Funds. So if you are a retired person or a person who cannot digest any risk then the current offerings are giving you inflation adjusted marginally higher real return. There are good companies which are offering upto 11% yield on the deposits.

Those who can take just a few percentage points risk can choose Bonds and Debt Funds. If in case, the inflation starts coming down in next 12 to 24 months and the RBI also softens the higher rates regime, the bonds and debt funds may also give you capital gains over and above the interest amount. Hence it would be wise to lock yourself in medium term papers of 2 to 3 years horizon to reap the full benefit.

What if you are a person who is ready to take risk and is willing to wait for medium to long term?

You should surely in this case be invested in the equities market. The market has seen the worse and may stabilize here even if similar policy paralyzed set up takes over. In case the elections show up results as per poll projections then expect market to handsomely reward you for your faith of staying invested in equities. Just resolve three things this new year! Will not buy anything without doing proper homework, Will take advise if I don’t know how to analyze, will invest through mutual funds if I have no time to do both the above.

Thanks

Financial Planner & Stock Market Adviser

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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Few Words on Market…

by Vivek Karwa, CPFA., CFPCM

131119: International rating agencies, one after the other have started predicting the political scenario which is expected in our country, what market expects, and what kind of scenario would be good for the Indian stock market. The government might show displeasure with what has been projected as people’s expectation but the reality is that this is the ground reality today.

We can easily judge markets, that they are in bubble territory when, even the taxi drivers start talking about the Sensex, similarly when even the best IPO’s are given a miss by investors, it’s a signal that markets are over sold. Similarly, when the same taxi drivers and the lower working class start talking I’ll of a regime then it’s time that the rulers understand the pain of the public and get into action else they may be thrown out of power.

The saddest part in our country is that this angry public can easily be pacified if they are given some last minute sops and freebies. The public memory is sharp and hence until the results are actually declared, the market cannot take for granted, that the country would get the right policy decision which it ought to get!

The anger among the general public is not illegitimate. Nothing’s going right in the country.

1. India has the 5th largest coal reserves in the world, but we are importing!

2. Projects worth billions are stuck for sake of approvals due to tussle between ministries.

3. Mining ban continues for want of frame work by the government.

4. MNCs are vary of investing in India due to unclear rules laid down.

5. Developmental politics is still missing and vote bank politics is ruining the country. Many of our leaders don’t understand that the country men today are smart enough to gaze through the reality.

Market is the reflection of what is happening in the country. The effect is already seen in the job industry. As per the latest reports the job losses in the broking industry alone is pegged at 40000. No one feels the sense of security today and instead of attracting new investors the policies and extra tough regulations have driven away investors from the markets.

The latest case being the NSEL defrauding investors. Government should atleast come out with ways by which the investors in e-series products can get back their money! These are people who did not enter the futures segment and wanted to invest in the cash segment though the demat mode. Even these investors are badly stuck now. There are many investors who have called us and asked if holding equities in demat is safe! Hope we not regress due to the faulty system.

Last time we had mentioned that, we may target 20500 – 21000 on Sensex in medium term and 22000 – 22500 on higher side. The market tried to cross the 21000 mark but then saw a correction. This can be termed healthy as the market did what we expect out of it. It has started moving up again and this time hopefully we test the second range.

There would be immense pressure there. New investors should look investing systematically now. We recommend to avoid investing in the real estate for now. As elections come near the volatility has to increase and if projections show a clear government formation then we should have continuous upward bias.

Thanks

Financial Planner & Stock Market Analyst

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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