$8.8 Billion USD(or INR 64k Crores), that is the kind of money brought in by the FII’s (Foreign institutional investors) in November-2020, catapulting the stock markets to a new high, and making the month with the “highest monthly net-inflow” (ever till date). The Mid and Small-cap sector were the outperformers to Large-cap, as the Large-cap sector seems to be at saturation with the top giants (like Reliance, TCS, Infosys & HDFC twins).
If one looks at the market valuations from the
earnings perspective, it will appear to be expensive, since the profitability
of the company has been affected the most, due to the unprecedented times.
Though we all know that this is a temporary phase and recovery may be better
than expected, but other ratios like Market-cap to GDP, it is above average,
where GDP is expected to be in the negative territory for the current financial
We believe, and based on the historical trends, the market is nearing to test its saturation level, and the rally would only be sustained if FII’s keeps pumping funds. Recently MSCI has increased the weightage of emerging markets like India in their index and hence all the passive fund’s flow is getting diverted towards the Indian market.
The GDP for Q2, for the current fiscal year, improved better than expected and contracted by -7.5% (market expectation was in the range of -9 to -11%). Nomura & CARE has revised expectations for the current fiscal year based on the new trend line, with a forecast of -8.2% & -7.7%.
Considering all these factors, one should
relook at their portfolios and rework on future allocation.
When we search for an Investment Advisor or a Firm, we have too many names that pops-out, and each one of them highlighting … either an Ivy league degree (they have), or Assets they manage, or How big the firm is?
Also, we have the smart marketing Ads & Campaigns, which are too enticing, either making us believe that Investments is a kid play, or the kind of returns one can generate … super easy 😉.
Plus, the world we live in today has too much information overload, how to filter it down, who to believe, and finally who to choose?
Two simple questions to shortlist an advisor or a firm.
Sounds unbelievable, but it is that simple.
Who talks the most in the first meeting (or the call)?… in the first or the initial set of meetings, or the Tele-call, usually it is you who will be talking the most, and your advisor will ask basic questions (to drill down your requirements), and there will be no products offered at this stage. If it is the other way round, then you are in the wrong hands.
It is like a doctor’s appointment, where post listening to you, asking basic questions & checking your reports, finally the doctor writes a prescription.
How do they make money?… although this is the most awkward question to ask, but when it comes to your hard-earned money, you better ask and most importantly, how it is answered. If they are not comfortable answering this, or try confusing ways, then you are in the wrong hands.
Disclosure, conflict of interest, earning modes, risk factors etc … cannot be part of the agreement only (the fine print), but needs to be spoken first and to be highlighted at the start.
Trust builds up… only If your Advisor is transparent with you, and that too, speaks simple language, right from the beginning.
Keeping aside the Corona & Lockdown fear, our economy & the stock markets are upbeat on the future and the surge continues. Some of the indicators from today’s Economic Times, to Cheer us up 😉.
Business recovery at a New High: The Nomura India Business resumption index (NIBRI) touched 87.1 for the last week, against 84.4 the previous week.
Car industry on a High Gear: Maruti being the market leader, has revised its annual production target recently, based on demand & long order book in hand. Earlier it was expecting a 20% decline, with analysts predicting 13-14%, which they have revised it to 5-8% now. Other manufacturers like Hyundai, M&M & Tata, all are all sitting on a strong order book & demand, thereby helping the passenger vehicle industry to an early revival.
IPO Market warms up: Come December, and we have half a dozen companies eyeing for raising funds through IPO. So far in 2020, 12 companies have raised funds through IPO, with the majority of them yielding handsome returns.
Companies likely to raise (IPO) in Dec: Kalyan Jewellers – 1750crs, Suryoday Small Fin Bank – 1000crs, ESAF Small Finance Bank – 1000crs, Nazara Technologies – 950crs, Burger King – 900crs, RailTel – 700crs, & Antony Waste Management – 350crs.
Today effective yield on debt post tax is 4% to 6%. If I can earn 12% to 15% on equity, I am a king, says Rakesh Jhunjhunwala.
September 2020, the market remained volatile during the month, mainly due to FII selling amid global cues. Even though the market has factored in a gradual recovery of the economy, it is expected to remain range bound and volatile, till the time the economy catches up with market growth. Global & local events like the US election count down, Covid19 vaccine announcement, Bihar elections, will keep the speculation, buzz & the volatility alive.
The current market is at a fair-market-level, at an overview it may look 8-10% away from the Pre-Covid19 levels, but if one excludes the rally of Reliance Industries, the rest of the market is still down by 13-15%. Even If we assume FY21 to be in negative territory in terms of economic growth and FY22 to bounce back (only to reinstate pre-Covid levels), the market still has a potential to deliver a double digit CAGR growth, from the current levels. Any correction (if seen) in coming few months, one should capitalise with a lumpsum investments, for a better averaging.
Gold has corrected by ~10% and it seems to have a strong resistance at 48,000 level. Currently it looks to be at an attractive level to start investing and make it part of the portfolio.
The FOMO effect is catching up with the Indian retail, which is evident from the number of new DMAT accounts opened since the lockdown started, and the uptake in the daily trades, where leading discount brokers claim that they process 5m to 7m orders a day.
Where will this lead to? Looking at the international markets, we have quite a similar trend, where due to lockdown, online penetration and given options, retail does not want to miss out on this opportunity. Equity markets since June are on an upward swing, showing a V-shaped recovery, hence giving boost to the participants equity and a cascading effect on the new word-of-mouth traders 😉.
The only difference here on the FOMO effect, is the quantum of money invested, where retail participation will go from tens of thousands to few lacs, as it comes from the monthly savings and not cash-in-hand or liquid funds (unlike a HNI client). Even though returns may be way higher on the lockdown investments or even the trading, but the long-term effect will eventually rule on the final returns, i.e. 10 years from now, time will decide and average-out the returns (which is hard to digest).
Ultimately, for a retail participant, it’s not the euphoric moment or even the entry point of investments, which will dictate the high returns, but the time horizon of the investments, i.e. how long one can remain invested, and also, how often one invests (Power of SIP).
A famous quote from Warren Buffet, who turned 90 recently: “Someone’s sitting in the shade today, because someone planted a tree a long time ago.”
Market witnessed a phenomenal surge till the last day (Aug-20), almost at a kissing distance to the next level, i.e. 12k for Nifty & 40K for Sensex. Even though India’s daily count on COVID19 numbers is still a cause of worry, some of the indicators show a ray of hope, on the curve flattening and numbers to drop, most likely by mid or end-Sept.
The first quarter GDP data was on the expected line, i.e. our economy contracted by 23.9%, with only one sector, i.e. agriculture witnessing a growth of 3.4%. The biggest contributors on contraction were the manufacturers, services, hotel & tourism sector, as they were the worst affected due to the lockdown.
With the economy opening up (since June-20), current quarter (Q2) data is expected to be good, as GST collection as an indicator, looks promising (till now it stands at 1.8lac crores, with one month to go, against 1.85lac crores for entire Q1). Monsoon this year has been above normal, and will most likely will lead to a higher food grain yield & production, resulting in higher income for the farmers, i.e.a very good indicator on growth.
Next quarter, i.e. Oct-Nov-Dec-20 should be a bumper quarter (compared to Q1 & Q2), as all indicators should witness growth & euphoria. Biggest indicator to pull it up, will be the announcement of COVID19 Vaccine, leading to economy opening fully and consumption to return to base normal (i.e. fear to move away), leading to a “Happy Diwali”, as one of our key festive consumption seasons.
If we keep the fear & the political narrative away, and just look at the small cues or success stories, which are emerging now, (it’s a human nature, with bigger stores on focus, we miss out or ignore the smaller ones), the gloom or the dark clouds are slowly fading away.
Can I build this platform, myself? … that’s the question I asked in mid-2012, when I stepped out from the Promoter’s Boardroom, after one of the presentations. But to have the guts to leave a corporate job, without worrying about salary & cash-flow, it took me one full year to debate, prepare, and all possible groundwork, to say “yes” to myself.
Finally, with clarity on what we wanted (myself & MK), we started working on the IT specs & the Business plan, from mid-2013. But we went fully live with Team, Operations, IT and above all, our full-time involvement, from Aug-14 onwards, thereby completing 6 full years today.
Today on this occasion, let me write about my 6 great learnings, I have had on this momentous journey:
TEAM – Building a team with a corporate & building with a young company like ours, is a huge challenge. First and foremost, you may be a start-up with an entrepreneurial mind-set, but your team-mate, who is joining the company, does not fancy the same. Second, work culture plays an important role, which must have a clear role-profile on performance & reward. But at a start-up, due to multi-tasking & evolving roles, performance measures on the key areas are usually mixed, discounted, and in no time, same results into frustration. Therefore, building job clarity with the team, right from day one is a must, and same to be promoted with a culture of performance & reward.
CASHFLOW – I have always believed in positive cashflow, but somewhere this got mixed in our initial years, with our development efforts and the belief that we will cover up later with big numbers. Believe me, this never happens, also this is related with Team building above, hence our learning the hard way. It took us a while to understand, clean up & put things in order. Not just it impacts a company, but it also impacts your own personal cash-flow.
CUSTOMER – Everyone says getting customers is the toughest task, yes, I do agree, but managing a customer is still a bigger & an important task, than the entry funnel strategy. One of the key reasons for us to start & build MoneyFrog. One area, where we are ahead of the pack, and we are doing it beautifully, is managing customers. Soon we will go live on our ERP version 2.0, where customer management will be redefined, and we will create a new norm on our service levels. Our success here stems from the fact that we have a good number of new customers monthly, coming thru our referral program. Therefore, we believe, a happy customer leads to a happy company, and we are a happy company today!
ROAD Map – One should have absolute clarity on this, as to, where do you want to reach? and what is your objective? One needs a clear Goal (objective), what needs to be achieved & which can be measured with a timeline, else we are just fooling ourselves. We were clear right from the beginning, that we are not here to sell mutual funds, or to build a five click execution platform**, but to build a platform to offer solutions, which are life-long & above all, not to offer it free. Though in between, we also ventured into unchartered territories, for various reasons, but soon we realised our mistake & stepped back. (** we do sell mutual funds & built a five click execution platform, but that’s not what we want to promote)
FAMILY – When you are building a start-up with limited resources, your time & energy gets drained out, by the time you get back home. One cannot expect them to understand your plight & timeline, as you decided to leave your job & take this plunge. Therefore, one must set priorities right, as I have done my share of mismanagement in my initial years, and thankful to my wife & kids, for sailing me through.
ENJOY Your Success – However small, one should always enjoy, as this builds a culture of success stories, which eventually leads to more success. This is also true the other way round, i.e. the more you cry, more you will witness negative stories. We have been doing it in all formats off lately. Success is not just positive cashflow, big numbers, fund raising, or many likes one gets, but as simple as a call from your client, saying “thank you” and you telling the same to your entire team & family, with a “feel good factor”.
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
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.
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.
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.