Market update - (Rare Opportunities to be Optimized)

This report has some macro analysis done for year 2016:

·         Market has corrected substantially

·         Good money could be put into equity in this month & March 2016.

·         This opportunity could be compared with year 1998, 2002, and 2008 though not on same magnitude.

·         In year 2011-12 FII were bullish on India when

Growth was down

Lot of Projects were getting stranded

Current account deficits were high

Inflation & Fiscal deficits were high

FII were bullish for two reasons oil was high Pension Fund were given mandate to invest in emerging markets. In those economic scenarios, emerging markets was way to go.

·         Year 2016 – Oil is falling & One set of FII ‘s are selling to mend their loss & other set of FII’s investors who invested in emerging market is selling as they have made good money & quitting with the trend.

·         Simple lesson to be learnt

When non fundamental selling is happening, it’s time to invest. In present scenario:

Inflation is low

Current account deficit is stable

Fiscal deficit is low with 3.3% trailing of last year

Govt. during this fall of Oil prices from 110 $ per barrel to 29$ barrel has amassed 500000 crore.

·         We are positive mainly due to two reasons:

1.       We belief with lifting of sanctions on Iran – Oil price will become stable & will rise from here & should settle around $50 per barrel.

2.       Banking space has come out with realistic NPL & there is enough reason to believe.

·         Entire Macro Economic factor are phenomenal.

·         Mid Cap index & Large Cap index are 52 weeks low. Mid Cap though still little overweight.

·         The growth we see would be increase in Capacity Utilization (replicating America growth of 2012 to 2014)

Currently around 70% of Capacity utilization is seen across sectors which are expected to go up to 100% in next two years without Capital influx.

This will further add to bottom line of the companies. Importantly market moves ahead & earnings come back ended.

·         Banking segment is also expected to bottom out in a year’s time.

·         Deflationary Deleveraging Cycle is on its bottom end. First mild leveraging cycle will start by 2017 to be bettered of in 2018.

·         5 Lack crore earned by govt. should be used to increase the growth during 2017 & 2019.

·         Raghuram Rajan has done phenomenal job by improving REAL INTEREST RATE.

·         We expect a rate cut again pre march.

·         Hefty Taxes has been collected in current fiscal due to exercise duty on Diesel & Petrol due to fall in International Oil prices.

·         We soft tax regime for 2016-17

·         Finally we could comfortably say year 2016 is year of Investment into Financial Market be it Equity be it debt & not of physical Asset with minimum time horizon of 2 years.

Happy Investing.

January 2016 headlines

·       FPIs withdraw Rs. 3,500 cr. from equities in a fortnight

·       Rupee at fresh 28-month low vs dollar, down 30 paise at 67.59

·       Commodity prices /Retail inflation inches up to 5.61%

·       Markets in free fall after China devalues yuan

·       Sensex plummets 318 points to 19-month low on global worries

·       Gold, silver turn weak on global cues, sluggish demand

·       China slowdown fear spooks global, Indian equity markets

·       Govt cuts import tariff on gold, silver

·       Rupee falls to lowest since 2013 crisis, but traders unfazed

All these news when come up in public domain with lot of hue & cry … means corrections are behind us (if not there won’t be any more than another 10% spread over in next couple of month).

Right time to balance your investment by participating in the right asset for overall growth of the Portfolio.

Regards

Financial Assets @ January 2016

Equity Market Update - After good performance in 2014, Indian equity markets ended on a negative note in 2015. Globally also, barring DAX, CAC and Shanghai, all equity markets gave negative returns. The table below gives the details of the monthly and CY 2015 performance of key indices. FII’s were a net buyer of $3.2bn of Indian equities in 2015. The Rupee depreciated 4.9% versus the Dollar in 2015. Domestic Mutual funds continue to see healthy inflows. Equity mutual funds net inflows in November 2015 were Rs 6,073 crs. Total inflows so far in FY16 have been nearly Rs. 64,000 crs. and inflows in CY15 till November were Rs 82,000 crs. Commodities fell sharply in 2015. The table alongside gives the performance of key commodities in December and 2015.

In a widely expected move the US Federal Reserve raised the federal funds rate by 25 bps, from 0-25 bps range to 25-50 bps range during December. This was the first hike by the US Fed in over nine years. The uncertainty around expected US Fed rate hike is now behind us. There is a clear evidence of falling commodity prices working to India’s advantage. Further, low inflation, improving CAD and fiscal outlook and rising order backlogs in some key infrastructure related industries point to a steadily improving growth prospects of the economy, especially of the capex cycle. The policy direction is right and economy is making good progress on most fronts. Economy and equity markets appear to be in transition from consumption to capex. Improving margin outlook of corporates, likely lower interest rates, soft commodity prices and reasonable valuations lead to a positive outlook for equity markets over the medium to long term. In our opinion therefore, there is merit in increasing allocation to equities (for those with a medium to long term view) in a phased manner and to stay invested. Further, given the sharp outperformance of midcaps, Largecap / Multicap Funds should be preferred for fresh investment in our opinion. Debt-Market-Update - During the month of December 2015, the yield on 10-year benchmark Government bond (7.72% GoI 2025) ended at 7.76% as against 7.79% in end November 2015, down by 3 bps. The yield on 10-year AAA Corporate Bond ended the month at 8.37% as against 8.27% at the end of November 2015. Thus, corporate bond spreads during the month increased to 46 bps as against 33bps in the previous month. Liquidity conditions continued to remain negative during the month of December. As against ~Rs88,406 crs of average liquidity net injected by RBI during the month of November through various sources (Liquidity Adjustment Facility, export refinance, marginal standing facility and term repos/reverse repos), ~Rs.1,21,795 crs of liquidity was net injected by RBI during the month of December. The overnight rate ended at 7.03%, as against 6.84% at end November 2015. The INR appreciated to 66.15 against the US dollar as compared to 66.67 at the end of previous month. The net FII investment in equities & debt was an outflow of ~US$ 1.6 billion in December 2015. The net FII investment in equities & debt has been US$ 131.8 billion in calendar year 2015. The annual rate of inflation, based on monthly WPI, stood at -1.99% (provisional) for the month of November, 2015 (over November, 2014) as compared to -3.81% (provisional) for the previous month and -0.17% during the corresponding month of the previous year. CPI came in at ~5.4% YoY in November 2015, up from 5.0% in October 2015. Core CPI for October 2015 came in at ~4.3% as against 4.1% in October 2015. The US Federal Reserve raised the federal funds rate by 25 bps, from 0-25 bps range to 25-50 bps range in December. The Federal Open Market Committee (FOMC) also adopted a new conditionality for rate hikes in the future. The FOMC said that "in light of the current shortfall of inflation from 2%, the Committee will carefully monitor actual and expected progress toward its inflation goal." Thus inflation considerations will now take precedence over labor market conditions. Outlook With US rate hike behind us, anticipation of slow rise in US interest rates and high current spreads between India and the US 10 year yields, we feel Indian yields should head lower. It is interesting to note that the 10 year yields in India are back to where they were before the 50 bps repo rate cut by RBI in September 2015. The moderate pace of economic recovery, low commodity prices, relatively stable exchange rate vs other emerging market currencies and proactive measures by the government with regard to food supply management should help in containing inflation over the medium term. The recent hikes in excise duty on petrol and diesel will provide significant cushion to government to manage fiscal deficit against the additional burden of seventh pay commission and One Rank One Pension (OROP) in our opinion. Low inflation and benign inflation outlook, falling fiscal deficit and low Current Account Deficit (CAD) are all supportive of lower yields. As highlighted repeatedly over the past several months or so, we continue to recommend adding duration to fixed income portfolios. Source for various data points: Bloomberg, Reuters, www.sebi.gov.in, www.rbi.org.in and Central Statistics Office (CSO) & HDFC Mutual Fund

Happy New Year 2016

Season Greetings…

We would like to you wish a very happy new year 2016 by sharing very meaningful story…

7 ways financial goals are like dieting

by Richard Barrington (Published on December 29th, 2015)

Dieting is not a popular topic around the holiday season; but perhaps with caloric temptations everywhere you turn, this is the best time to be thinking about it. Similarly, the holidays are a time of year when people tend to let themselves go financially, so a reminder about financial discipline might also be timely. After all, working toward financial goals is like dieting.

I have all too much experience with dieting - my weight has tended to yo-yo quite a bit over the years - and I also spend much of my time thinking about strategies for meeting financial goals. In thinking about the two topics together, I came up with seven ways that working toward financial goals is like dieting:

1. Goals should be incremental rather than all-or-nothing. Its not so bad stepping on the scale when you first start a diet, because you can be comforted by the lofty goal of how much weight you intend to lose. The hard part comes about a week later when, after days of sacrificing and exercising, you find that you have only made one pound is worth of progress toward your 30-pound weight-loss goal. Its a little discouraging -much like your first year of saving for retirement, when you find that after a year of sacrificing part of your paycheck, your 401(k) balance is only $3,000 toward your goal of saving a million dollars.
   This is where incremental goals become important. If you know that losing a pound in that first week of dieting, or saving $3,000 in that first year of 401(k) contributions, is what you need to be on track to eventually make your long-term target, then you can take satisfaction from having met your goal for that first time period. From there, you set your sights on the next short-term goal.
2. Be realistic about being better tomorrow. We tend to have this touching faith in how virtuous we will be sometime in the indeterminate future - people expect they will eat less when summer comes or save more when they are in their 40s. But to make dieting or saving work, you cannot lean too heavily on that future you. Chances are, that you will be no more up for the task than the current you, so make sure you do your share of sacrificing now.
3. Build in room to be bad occasionally, within limits. Few of us - certainly not me - are built for living a spartan existence full time. Build the occasional indulgence into your diet or your savings plan. If you can limit such things by planning for them, you can give yourself a much-needed break now and then without completely blowing the good work you have been doing.
4. Do not let one setback become an excuse for giving up. And then there are the indulgences that are not planned. If that happens, the main thing is to bounce back strong. There is a tendency once you overeat or overspend to feel that now you have blown it and your original plan has become futile. Do not give up just because of an occasional screw-up. Make a new plan to get back on track.
5. Hold yourself accountable. This is very important, because you can always find an excuse for bad behavior if you want one. Do not accept excuses. If you overeat or overspend, it is because you failed to live up to your responsibility to yourself, and you need to do better next time.
6. Announcing your intentions can create additional accountability. Sometimes, telling people that you intend to lose 30 pounds puts the pressure on yourself to follow through - and it might even make others more sensitive about not putting temptation in your way. It is a little tougher to be so open about your financial goals, but simply mentioning to a few close friends that you are trying to save more money can have a positive effect on your behavior and theirs.
7. Think of it as a lifestyle change, not a temporary project. I struggle with this nutritionally, but I am getting better. Permanently changing your habits can actually be easier than gearing up for occasional periods of good behavior because, with dieting and saving, it is easier to stay on track than it is to get back in shape once you have let things go.

Nutrition is a very complex subject, and so is finance. However, while there are many nuances to be mastered, to a large extent a successful diet and a successful financial plan both come down to common sense and willpower. Best of luck to all of us for mustering both common sense and willpower as we head into 2016!