Financial Planning

Market Outlook – AUGUST 2020 – Is the recovery REAL?

July extended the market recovery with an 8% growth, leading to a 28% growth over the last four months (Sensex Growth, i.e. Apr to July 2020). If one would have invested in one of the Index funds, post the fall (March/ April 2020), it would have yielded a fabulous return. It reminds me of Warren Buffet’s famous quote: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

But how many of us act GREEDY when others are FEARFUL?

While the economic recovery is still to show early signs, but the market has decoded and discounted the revival, based on consumption, lockdown easing, monsoon, corporate earnings & other indicators. One of the good indicators for July is the revival in vehicle production, where Maruti’s July numbers, were at par with last year’s production, and they have plans to further ramp it up, month on month.

Aug can be a month of lots of Good News, expected towards Covid19 vaccine trials, medication use-case studies, flattening of the curve with states (Mumbai & Delhi as an example), where one can expect the market to look northwards. But expect volatility to continue, due to lack of control on these data points and surge in Covid19 numbers on unexpected areas.

An international index like Nasdaq 100 and Gold, in the last four months, has given fabulous return. Nasdaq 100 includes companies like Amazon, Microsoft, Apple, Tesla, which are at the forefront of the tech revolution and have become market leaders in their respective domain. Gold needs no introduction, a safe haven during the crisis, acts as a hedging tool, having a low correlation with Indian and US market, hence makes it an attractive investment & must-have part of portfolio.

Photo Credit: The Economic Times

The V-Shaped Recovery – How True?

The market is on a surge since mid-June, and it seems that it may continue doing the same, unless we have some major negative event happening. Question is, what is left to happen?

COVID numbers are still on a major surge, and we are now ranked 3rd in the world, on infection count. But slowly & steadily we have realised that we have to live or co-exist with COVID, as it cannot be just wiped out. But eventually, in some time to come, either a medication or a vaccine or herd immunity will take effect.

As per today’s Economic Times, we are witnessing “Better Times” now, compared to the last three months (Apr/May/June), and hope to see same getting stronger in the coming months. Some of the good indicators:

  • GST collection is rising, narrowing the gap on previous years monthly collection.
  • Petroleum product consumption is on the rise.
  • The unemployment rate has fallen to 11% from a peak of 24% in April.
  • Power demand is rising.
  • Post-lockdown, automobile & 2-wheeler sales have picked up.

As per KV Kamath, ex ICICI bank head, “The landing will not be as hard as anticipated. Rebound is faster than what most of us thought would be. The economy may see a shallow U-shaped recovery,” as told to Network18 today.

But economic recovery may take a temporary backseat if state governments or local bodies are forced to impose further restrictions to curb COVID numbers.

Stay Safe & Stay Connected!

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Market Outlook – July 2020

In the last month, the market has delivered a stupendous return of around 7.5%, this is despite the geopolitical tension seen in the India – China border. The main reason behind this sharp increase was the availability of global liquidity with institutional investors, what we have seen is a coupling effect and this rise in equity was witnessed globally across the markets.

Certain companies, especially the one who are largely affected by this lockdown, are expected to defer or merge their quarterly result to soften the impact seen in top-line of Q1 strict lockdown with Q2 quarter with a partial lockdown. Some investors are concerned about market valuations due to current gains seen in the market since on earnings parameters it appears to be expensive, it is fallacious to conclude by just seeing one parameter. Investors must adhere that earnings are just a perspective like other ratios viz Price to book value and Market cap to GDP. Many other ratios still suggest the market being at an attractive valuation due to sharp correction so investors who have missed previous opportunities have not really missed the bus yet. Also, the volatility index though relatively high but has fallen drastically which indicates that the market is closer to trade at the fair market value range.

Global economy is headed for its sharpest contraction but by comparing previous historic events and market reaction, the current phase has seen lesser correction and the recovery seen is quicker since learnings from previous such events has made global leaders more competitive to react proactively and with the amount of liquidity injected into the financial system will prevent the stalling of the economy to a larger extent and the recovery expected is to be relatively quicker.

The government is also expected to announce another fiscal stimulus which will mainly address the demand issue and boost consumption and investment sentiments.

Stay Safe!

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Market Outlook – June 2020

May-20 was relatively flattish for the market. The percentage difference was sub 1%, for the major benchmark index, like BSE 100, BSE Midcap and BSE Small cap. The good part is that the FII’s are back in the market. After selling close to $9.5 Billion in March-20 and April-20, they were net buyers and pumped in $1.67 Billion in the month of May-20.

The major highlight for the month was the RBI announcement, where they indicated that Indian economy will degrow, GDP will remain in negative territory for FY-21 and major part of the recovery will be seen in second half of FY-21. We believe that, the worst phase of economy is behind us and a gradual opening of lockdown will recover the wounds of complete lockdown done in the past, while the Covid19 cases may continue to see a spike, despite that, lockdown has to be eased else the economy may kill more people than Covid19 itself.

In the past 69 years, India has witnessed recession only thrice, i.e. 1958, 1966 and 1980. All three of them,were due to agricultural shock. But this time, the situation is completely other way around this year, above average monsoon at 105% is being predicted, agriculture is expected to support and offset the impact of other sectors of the economy. The worst affected industries could be Travel, Tourism, Hospitality, Aviation and Real Estate. Due to cautious travels and work from home being a new normal, these sectors can be a bigger contributor to overall fall. The sectors that can do well in these phases are Telecom, Internet services, OTT services, E-commerce.

The consumption sentiments are expected to be poor, as due to high liquidity requirement, job losses, salary cuts, all will result into only need based consumption. The shape of recovery, which was expected to be V-Shaped, now looks like a U-shape or L-shape, considering time required to bring back consumption. The Fiscal stimulus package announced, worth INR20 Lakh Crores, is expected to have a relatively lesser impact on our fiscal deficit.

From the valuation standpoint, market data suggest allocation favouring equity.

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COVID CRISIS – How do we see ahead?

COVID crisis, one of its kind, has shaken each one of us (whatever the age group), big time. A highly infectious deadly disease, without any cure till date, only negative stories world-over and never-ending home lockdown. Our elders have also not witnessed such events in their lifetime, as they are the ones who usually guide us through in such crisis … who we fall back on 😉.

CRISIS, however big or small, does not come invited, it just lands-up, the question is; how will you handle it? Or am I prepared for it?

Here the question is, NOT how to handle COVID? which we are doing smartly, as we have adapted, which includes measures like, social distancing, wearing masks, frequently washing hands & many more do’s & don’ts.

Here the question is, HOW do I handle; Financial, Physical & Emotional challenge? which comes with this crisis (or any crisis for that matter).

FINANCIAL Challenge: an emergency fund of cash to hedge against economic collapses, or a business/ salary loss (unemployment). Usually, 6 months to a 1 year of income/ funds are recommended.

PHYSICAL Challenge: nutrition (the food we eat), functional movement (our daily activity), and sleep to strengthen the immune system. Which also means, staying away from alcohol, junk & other bad habits.

EMOTIONAL Challenge: meditation practice, therapy, and other practices to avoid mental breakdowns. Which also means, keep talking to friends & relatives and avoid reading unverified negative news.

If you ask me, Crisis makes us LEARN (& DO) things, which in our lifetime we may not even think of achieving. All the three challenges above, we have it in our mind always, but how many of us really end up with a checklist to say, I have all marked YES?


P.S. – Feel free to write back on your challenges.



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Market Outlook – May 2020

“You’ll never get the Good News and Good Price at the same Time”, a very famous saying.

More often than not, good news is always predicted well in advance, and the market factorises it in the valuation, unless it is a sudden surprise for everyone, like the recent Corporate tax cut. The same situation is with the market now.

We have not resumed normalcy yet, and it looks like we need more time for it to happen. But the market is responding positively, since overall the covid growth rate is in control, started to show signs of getting flat, and eventually to fall. From India’s perspective, the cases are mostly detected in concentrated areas, which is relatively easier to contain, than a dispersed spike occurring sporadically.

As the month of April-20 ends, we have witnessed a partial recovery from overall correction. The Sensex had corrected 39%, from it’s all-time high of 42,273, it shed off 16,635 points to settle down at 25,638. It has now gained back almost 50%, i.e. 8,523 and is now trading at 33,750.

In the last press release of RBI, the governor hinted by stating that since the inflation is in control, they will do whatever it takes to boost the economy, indirectly hinting for a further rate cut. US based weather company, has stated that this year’s monsoon, we will see 105% of average rainfall, which will further ease the inflation as it will support the crop cultivation and overall supply, during the year.

Though the partial recovery has already been taken, the complete recovery will be merit based, depending upon the quarterly earnings of the firm & overall economic recovery. From the valuation standpoint, the market although recovered, still looks attractive at this level, hence one should continue equity allocation further.

Stay Safe! and continue Investing your Savings!

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Market Outlook – April 2020

“There are decades where nothing happens and there are weeks where decades happen.” ― Vladimir Ilyich Lenin

The above quote sums-up, what we have seen in the month of March-20. Some of the key events: 

  • World’s largest democracy went under a total lockdown for 21 days.
  • Crude oil saw the sharpest fall since 1991, last time it occurred on account of Gulf-war.
  • Equity market crashed globally, Indian market’s benchmark Indices i.e. Sensex and Nifty, saw a steep fall of almost 40%, erasing its last 5 years gain and witnessed a recovery, to settle down at 32% down (as on 30th March 2020).
  • RBI announced a rate cut of 75bps, with Repo-rate at 4.4%, which is lowest since the last 20 years.
  • USD/ INR surpassed the 75 barriers.

All this is due to something which is not even tangible and we all seem to be talking over and reading about it. Indian population is assumed to be more vulnerable to this pandemic; as the density of population is too high & the medical infra is too low for its population, which amplifies the fear & spread. The government has taken a very defensive approach and took proactive measures to control the numbers. The first case reported in India was on 29th Jan-20, and it’s been 2 months; from a relative standpoint, we seem to be much in control with our numbers, which is around 1250 (as on 30/Mar/20). China has recovered from Covid-19 and has resumed its production and other economic activity after 2 months of lockdown. The US has yet not announced a full lockdown, and if it does, the economy and stock market may see a further slide.

However, this scenario is much relatable to a ‘V-shaped’ recovery, which describes the ‘classic’ economic shock, a displacement of output, but growth eventually rebounds, because it is an effect of some temporary external forces, that are beyond our control and the inherent economy structure otherwise was strong and in a recovery phase.

Moreover, the recent press release of Mr. Mukesh Aghi, president of US-India Strategic and Partnership forum has officially said that as many as 200 US companies are in talks with them and are interested in setting up an alternative to China by investing in India. If and when this happens, it will be a blessing in disguise for India.

From a valuation standpoint, the market looks very cheap at these levels, hence equity allocation with large-cap stocks, looks highly attractive.

Photo Credit & V-shaped insight: Harvard Business Review

Another Manic Monday – Biggest Single Day Fall In Last 10 Years

Global sell-off, due to Corona Virus fear & Crude oil fall, resulted in global melt-off since last week & spilled over to Monday today, leading to one of the biggest single day falls in the  last 10 years. The S&P BSE Sensex index plummeted as much as 2,366.26 points to hit 35,210.36 on the downside, during the session.

Coronavirus fear continues; analysts who have been tracking coronavirus over the past few weeks, believe that the pandemic is still a huge negative in the near-term, and further market correction cannot be ruled out for the time being.

Crude oil fell by the most; since the Gulf-war of 1991, as Saudi Arabia started a price war with Russia, by slashing its selling prices, due to falling demand on account of the coronavirus outbreak.

SBI cards IPO; become the first company from the credit card space to come up with an IPO. The IPO created a buzz in the market by over-subscribing 25 times in the current volatility.

Yes Bank; was up 32% on the SBI supported bail-out. With panic under control, moratorium is also likely to go away in a week’s time.

Current week & March (as a whole), will remain volatile & may show huge swings further, purely on account of how coronavirus will spike or gets contained. Till now, it’s the western world (other than China), where the spike & numbers are noted, where they have one of the best healthcare systems to address & contain such diseases.

The real challenge now is on India, which is virtually unaffected till-date, and will test waters soon, if we have a spike in next few weeks, else we will sail through .  😉.

Wish you a Happy & a Colourful Holi!!!

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Market Outlook – March 2020, Corona Fear

Market witnessed a sharp correction in Feb, 6.76% in Large Cap, 6.95% & 4.22% in Mid and Small Cap respectively. This was mainly due to heavy selling by Foreign investors, amid the spread of Coronavirus and its cascading effect on Global and Indian economy. FII sold USD 1.6 billion, while the Domestic investors remained net buyers, at USD 1.3 billion. This was a very generic selling, and in the coming months, we can see some merit-based recovery, when the virus fear eases-off.

Though India remained immune from this disease, the industries dependent on China and other counterparties affected by Coronavirus, is facing supply chain disruption, but the resulting slow-down looks temporary. If we look back into history, China is known for such diseases, like SARS in early 2000 & swine flu in 2009. Globally, strict measures are taken by all the countries to control the spread, even China, which is the epicentre, has started to show the early trends of decline in the new cases being detected, since last one week.

India’s biggest competition, when it comes to manufacturing, is with China, as both these countries have labour supply advantage. With the recent Corporate tax rate cut (brought down to 15%), India stands to gain towards future capital investments.

India has been grabbing major attractions, with many MNCs planning to set up Manufacturing plants in India before 2023, to avail the new Tax rate benefit. With China slow-down, Industries are looking at building other alternatives, where India comes out as a clear winner.

India will have a huge upper hand on China in the coming years. The virus effect may create a short-term disruption to overall economy, due to interdependency globally, but it is expected to perform even better in coming years.

For the month of March, we’re expecting the market to remain volatile, till the time the virus spread slows-down and eventually starts falling. Analysts will foresee and give their expectations regarding the quarterly results in the late March, which is due to be released in April. Overall JFM quarter is expected to be subdued, while the GDP for Q3 is 4.7%, Q1 and Q2 GDP was revised to be 5.6% and 5% respectively. It is expected to fall further, as we are expecting overall global slowdown in February and March.

Since the corrections are expected to be temporary, we can be opportunistic to invest more in equity, and hence one can look at increasing equity allocation, in phases.

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Deep Dive – Corona Fear Grips The Market

Corona fear gripped Dalal-Street this week (in-line with the world markets), with Nifty diving 879 points or 7.3% down, biggest weekly fall seen in the last ten years (US Dow down almost 10%). Rs. 10 lakh crores of investor wealth wiped out in just six trading sessions due to coronavirus impact globally. Sell-off happened after fresh cases of coronavirus outside Chine i.e. Italy, Iran & South Korea. Moreover, the US officials warned American people, to be prepared for it.

Sharp foreign fund outflow in last few sessions created negative sentiments in the market, FII (Foreign institutional investor) were the net-seller this week, to the tune of Rs.9939 crores, whereas DII (Domestic institutional investor) were the net-buyer, to the tune of Rs.8364 crores, as on Thursday. Brent crude again tumbled to USD50.

India’s GDP growth improved to 4.7% in the December quarter, from 4.5% in previous quarters, retaining GDP growth at 5% for 2019-20. Improvement from coronavirus will help the economy to grow further.

Overall, one can see this as a correction to the big optimism created in the markets since last quarter (domestic & international). We expect the market to remain volatile for the next few weeks to few months. We hope to see corona virus containment, mainly in China & strict control with the rest of the world, over the next few weeks. In-turn will bring confidence to the world & the markets.

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