Wealocity's musings on market happenings Edition 1/Vol 12/Nov '17 Our Mid-monthly Newsletter November 19, 2017 This time it's different !!! As the macros turn better and liquidity seems unabated, the markets notching up newer levels every day, one could come up with enough reasons to proclaim the sustenance of this trend. With markets touching dizzying heights and an increased investor frenzy to invest in to equities, I could be termed a ‘perma-bear’ on touching upon a topic of selling the stocks but would like to elucidate some principals on how to reduce the equity exposure and what parameters to be considered for taking these decisions. It’s true that every stock market crash could be a life changing event and the natural response would be a fear of changed future. In that sense, all the considerations or boundaries earlier drawn would be wiped out with a new reality. So, studying the past to predict the future is futile as one could learn that markets are unpredictable (a right lesson) or assuming that a past cycle would repeat and thus plan the investments (a wrong lesson). The below is a tabulated comparison of Nifty parameters at a seminar I attended recently, where the Co-CIO of one of the largest fund houses has presented.   Nifty is not in bubble territory             Description 2007 2017 Description P/E * 22.5 22.5 P/E ratio are at similar levels Earnings Growth** >20% ~1% Earnings 've been muted for last 3 yrs; Good earnings growth in next few years could decrease p/E P/B* 5.7x 2.9x P/B ratio is much lower than in 2007 P/S* 3.6x 2.5x P/S ratio is 30% lower than in 2007 RoE 29% 13.60% RoE are depressed currently & could bounce Dividend Yield 1.01% 1.58% Market offering higher dividend yield Mktcap/GDP 130% 82% Current level is lower and at 10Y avg. level Yield Gap Ratio 57% 62% Current level is lower and at 10Y avg. level IIP growth *** 15%+ 3.10% 2007 was peak of economy while '17 is seeing cyclical recovery=>growth numbers to rebound 8- core Ind growth*** 6.40% 4.10% Markets could see short term correction which could be limited and mayn't be deep one * Trailing ** 3yr avg ***3mth avg “This time it’s different” - A phrase most often used to describe the market conditions especially when elaborating a bull market. We pull out various parameters juxtaposing on each of these details on how this time the market conditions are different. However, this phrase best suits when explaining the market falls. I believe, it’s actually true that the causes for the next fall would be completely different from the last one. All I’m trying to convey here is that one shouldn’t look through the old prism to understand the new spectrum. So, the most basic question one should ask themselves is why? Why would one want to sell, what’s the basis for a sell? If the sell is because a pre-defined target or time is achieved then it could be good but in bull markets targets are achieved in short times. One finds if the time is being warped as timelines are shrunk. This becomes a predicament for investors while trying to gauze the extent of the further run to time the exit. One should realize that the stock markets have the tendency to take the stairs while going up and elevators while coming down. When a particular stock is raising continuously, most investors only see that the last few months or quarters of that particular stock. If one would’ve checked its history the performance would reflect the above statement. It could’ve taken years trying to break-out the current levels and could be in the last leg of its rise. Below is the Bitcoin prices and number of days it took to reach the next $1K milestone.   Bitcoin Price days $0 to $1K 873 $1K to $2K 907 $2K to $3K 56 $3K to $4K 6 $4K to $5K 45 $5K to $6K 13 $6K to $7K 4 $7K to $8K 15 Mind you, at the start of the calendar year (2017), the price was at $997.69 and the historical high is $8,040 on 17th Nov ’17 though it closed a tad below. The better way to deal with this in a boom period is to continuously assess and reassess the pre-conditions one had written earlier. For every purchase of MF/share/asset we need to have a target price/value with a pre-defined period of holding. As the target is achieved either in price or time, re-assess the situation/position. At each of these target levels, a strategy is to be drawn on whether to hold or to divest/profit-book. And if there’s a possibility of continuity in the asset growth then it’s ideal to hold and add further to the existing holdings. Of course, the process is retained with the definition of the next target price and the time period. The steps are repeated at each goal post. This way, one could continue to bet on the right ones and move away from the wrong ones. The magic of wealth creation is achieved as the vintage increases and wisdom improves. My experience taught me that most investors rue at the missed opportunity though all wouldn’t dare to act when it was presented. This is because one forgets their risk appetite while asset prices grow and that could turn disaster as they try to enter at a wrong time.  In a booming market, many profess with a lot of conviction to hold an asset forever as they’ve made money but ideally it should be corrected to holding period of an asset is until the facts change. Caution always prevails and do remember – its bulls and bears who make money while the pigs get slaughtered. Godspeed, Editor, ABOUT WEALOCITY Asseses situations both pro-actively and reactively to manoeuvre portfolios offering customised solutions at risk management   Arth-Samvaad Our Mid-Monthly Newsletter Follow on Twitter Friend on Facebook Website opyright © Wealocity, All rights reserved. Our mailing address is: buzz@wealocity.com Disclaimer: All the views and above references are for information purposes only. We recommend consulting your financial advisor for making any investment decisions based on your risk appetite, timelines and goals.

Wealocity's musings on market happenings Edition 1/Vol 11/ Oct '17

Our Mid-Monthly Newsletter October 19, 2017 Looking into the Future through the past It’s been three decades since the Black Monday on 19th Oct 1987 when the stock markets across the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin. The Dow Jones Industrial Average on this day had a 509-point fall, a plunge of almost 23% in a single day, was followed by about 15% fall in the previous fortnight. Ironically, what we consider trading conveniently today i.e. through computers, that crash was primarily triggered by program trading, used mostly by institutions to protect themselves from significant market weakness. Though, it was compounded by other factors of excessive valuations, illiquid markets and market psychology. The so-called program trading meant computers were set up to quickly trade stocks when certain conditions were met and on that day, it led to automatic selling as the market fell. But, the still predominant floor traders were overwhelmed by the sell orders by the systems making the market itself significantly impaired. Outside of stocks, bond yields are extraordinarily low, rising oil prices and increasing geo-political tensions (US - Iran). Does that sound familiar to that of today’s settings? There’s a great joke about an automated car plant in Japan, where the machines work in the dark (no need for light, they don’t have eyes) and there are only two living things authorized to be on the factory floor - a man and a dog. What’s the man there for? His job is to feed the dog. What’s the dog for? The dog keeps the man from touching any of the machines. In Kurt Vonnegut’s novel - Player Piano, published 65 years back, describes the future in which only Engineers and Managers have gainful employment and meaningful lives. If you’re not one of them, then you’re in the army of some nameless people fixing roads and bridges. The world no longer has a use for you and you are reminded of this all day, every day by the society and the single omnipotent industrial corporation that oversees it all. Tables have turned now and unlike automation which mostly affected manual labor, AI and Machine Learning are undoubtedly eating into the share of all human work force across all jobs. So, has the job creation stopped? This trend does seem evolutionary but this time it’s only at a hyper pace. Even my investors inquire now if I’m up with the game? What kind of heuristics and algorithms do you employ to maneuver these markets? The below graph shows a 70% increase in the ROBO index in last two years. What’s now left for us except to “just own the damn Robots” as said by Joshua Brown. Godspeed, ABOUT WEALOCITY Asseses situations both pro-actively and reactively to manoeuvre portfolios offering customised solutions at risk management   Arth-Samvaad Our Mid-Monthly Newsletter Follow on Twitter Friend on Facebook Website Copyright © Wealocity, All rights reserved. Our mailing address is: dreams@wealocity.com Disclaimer: All the views expressed are strictly personal and we recommend consulting your financial advisor for making any investment decisions based on your risk appetite, timelines and goals.

Wealocity's perspective on the market happenings Monthly Market Commentary Oct '17

Monthly Market Commentary Market Euphoria As markets across the world notch new highs, a very important word is left to the wind - Caution. To just illustrate this, days around China's entry to WTO, any Co with 'China' in its name would rally and in Nov'99 "China Enterprises Ltd", a little known stock zoomed from $2 to $10.62 in about a fortnight (it now trades about 26 cents) This is 2017, and a Colorado based bio-tech Co has decided to change it's name from 'Bioptix' to 'Riot Blockchain', the stock surged over 50% The Catalonian Conundrum The Catalan Parliament has renewed to pursue talks with the Spanish govt. rather than declare independence immediately. At the beginning of this month, Catalonia, a wealthy region in the northeast of Spain, held an independent referendum. Spain's constitutional courts deemed this as illegal and has used Police force to prevent it from happening. Despite various hurdles the referendum went ahead and the results are in a huge favour of independence. Though, this mayn't represent the whole of the region's will due to the questionable quality of the voting, the region has begun to witness flight of prominent corporations and capital to Madrid. The Independence would effectively push it from the EU membership and would only increase their problems. Saud and their Russian leaning This was a fantasy till a few months back. With Russia always siding Iran, the arch rival of Saudi Arabia, the recent visit by King Salman is not just pathbreaking but should be viewed through the lens of the young crown prince, who's planning for radical changes to modernise his country. The inconsistent US foreign policy vacuum, falling Oil price and need for renewed influence in the region has pushed for this diplomatic move by Saudi. And Putin at the helm is a charmer with fingers across the region and beyond. The Saudi's at one point of time were torch bearers of the US policy in the Middle East are now courting with their alley's rival. This shift is most credited to the US policies than Saudi's internal issues and Paranoia.  What's in it for you: Asset allocation is the key going forward. As the theme of this commentary goes, we are cautious over the future market movements from hereon.   Equity: This year so far has seen quiet a run-up both in domestic & world-wide equity assets and it's anybody's guess from here on how the markets pan out. The markets are relatively no longer cheap and certainly are in a boom market. Staggered investments into equity are recommended with quality as a parameter.  Large cap and Equity arbitrage funds will be the flavour to savour. Pharma and value funds offer good investment choice for the longer term in a staggered manner over 3-5 yrs.    Debt: Continuing our view at the top about exercising caution, now debt exposure is to be considered NOT on the basis of the return generation but diversification, asset allocation and hedge point of view.  Dynamic Bond funds are the best bet in this regard and their benefits would take over 15 months to witness from these exposures. Real Estate: The only green shoots is in the affordable housing all thanks to the govt.'s initiative. Also, due to Demonetisation and RERA, the RE prices have rationalised a bit and are at an attractive curve in some areas. A bit of exposure which yield incomes could be considered. Investments in commercial property with a lease out facility is one avenue to consider. The other is buying an open plot with a lease out for commercial crops is another option.    Alternatives: The Bitcoin witnessed a flash crash today losing $600 and later recovering. It's cause though unknown, is believed to be a reaction to the Russian Central banker's new proposals for restrictions on exchanges celling the cryptocurrency. We continue to believe, the continued inflation in the prices of these alternatives would attract further govt. attention and regulatory scrutiny beating the very cause of their creation.  We would witness such volatility in these assets in the coming days. If mined and purchased for consumption could turn out to be profitable but any trade should be confined to the speculative limits of the individual.  Copyright © Wealocity, All rights reserved. Our mailing address is: dreams@wealocity.com Disclaimer: All the views expressed are strictly personal and we recommend consulting your financial advisor for making any investment decisions based on your risk appetite, timelines and goals.

Wealocity's musings on what's happening Edition 1/Vol 10/Sept '17

Our Mid-Monthly Newsletter September 21, 2017

Scary World, Calm Markets Eurasia Group President Ian Bremmer says the world is facing “the most dangerous geopolitical environment” he’s ever encountered. But tell that to investors as stock markets rise across the world - even South Korea’s benchmark KOSPI index is up 19 percent this year. Despite a series of missile launches and detonating the most powerful bomb ever by the Hermit Kingdom, the southern neighbour and the world markets didn’t wither much. The silver lining though is that trade to major destinations through the first 20 days of the month is on a tear, including a 40% jump in the value of shipments to the European Union, and a 36% increase in those to the U.S as pointed out by Bloomberg's James Mayger. One of the big themes of the year has been synchronized global growth: the notion that, basically for the first time since the crisis, all the big economic regions are showing solid expansion. I know it’s boring to bring to notice the most obvious yet ignored. But are the current investors primed psychologically for a major decline in the stock market or are they likely to keep bidding up stocks for some more time to come? Those’re the critical questions. The only way to skip out of this mass psychology is through sticking to one’s investment philosophy particularly when the peer pressure is at its peak. A campaign ad released this week shows the chancellor as a young East German girl along with the slogan “For a Germany where anyone can realize their dreams.” The picture is a reminder of how Merkel remains her party’s central asset even after 12 years in power.  In the wake of protectionism across the world and especially in the Euro region, Merkel’s re-election would infuse a fresh lease of life. Godspeed,

ABOUT WEALOCITY Asseses situations both pro-actively and reactively to manoeuvre portfolios offering customised solutions at risk management   ArthSamvaad Our Mid-monthly newsletter

Follow on Twitter Friend on Facebook Website Copyright © Wealocity, All rights reserved. Our mailing address is: dreams@wealocity.com Disclaimer: All the views expressed are strictly personal and we recommend consulting your financial advisor for making any investment decisions based on your risk appetite, timelines and goals.

Wealocity's perspective on market happenings Monthly Market Commentary Sept '17

The Infy saga Indian corporates are not outstanding at corporate governance but certainly Infosys had a better perception among the investor community and is badly hit with the Sikka vs Founder tiff. To bring a perspective, MF industry held investments of Rs.21,285Cr in this stock as on 31st July '17 as per NAVIndia. Out of the 782 equity schemes, Infy was part of 421 schemes with the stock among the top 5 holdings in 222 schemes and is the top holding in 19 schemes. There was pressure to bring Nilkeni on board to set things right ASAP. Marking the Markets In the graph of NIFTY (Jan'96 - Jul'17) the green line represent the returns on a yearly basis where the biggest annual return is in the year '08-'09 when the Sensex delivered a stupendous return of almost 80% while in the very previous year the returns plunged to negative 53%. The least volatile year i.e. 2015, the volatility (orange line) was about 19% but the annual return was a negative 5%. This doesn't help us to conclude that every lower volatile year yields to lower returns. What we infer from this graph is that one shouldn't rely on past performance while investing and a systematic investment helps to counter the volatility. The North Korea Conundrum It's futile for the US to exert pressure on China unknowing the history of the alliance. It dates back to the Korean war where the Chinese forces fought against the South (even Mao's son lost his life) and to cut ties would be more than over optimism from the US admin. And the Chinese worry that any more stringent actions could lead to collapse of the regime, not a desirable outcome. Xi would be more worried if this could escalate in arms build-up in the region (Japan & SKorea) at odds with its policy The Russian Probe The relationship between the arch rivals has taken a further downward spiral with the accusations flying high about the Russian meddling of the US elections and the emails exposing incumbent family's involvement has co-mplicated things. Adding to the woes are the frequent attrition of WH staff. These digress the current issues that need attention - debt ceiling leading to a possible govt shutdown, tax overhaul, response to hurricane Harvey, Irma, etc. derailing the nascent economic upturn. The investor of today does not profit from yesterday's growth ~ Warren Buffet. Equity  The MF inflows continue to surpass the older records which touched Rs.20,000 Cr in Aug alone. The structural changes of demonetisation and GST have contributed to a bit of contraction in the GDP than anticipated. There's been a significant dip in the manufacturing and stagnant services probably due to de-stocking, though a recovery is anticipated while a slight tax base expansion is already witnessed. We continue to remain overweight on Equity though a staggered approach is recommended with a large cap bias. IT & Pharma continue to wander in woods while Infra seems to be attractive as a theme. Debt  With RBI's intervention in currency markets along with tight monetary policy has resulted in greater FPI inflows. The industry and household credit remained low providing a headroom for further rate cut.   Dynamic bond funds still suit investors with a longer time horizon due to their very nature of dynamism and flexibility.  Alternates  There's been a growing interest in the investor community on the crypto/digital currencies. We continue to remain cautious despite the announcements by various countries.   Investments in these could turn speculative and should be looked as such at this juncture. Greater penetration would surely entice Govts to take notice and could well restrict their growth.  Copyright © Wealocity, All rights reserved. Our mailing address is: dreams@wealocity.com Disclaimer: All the views expressed are strictly personal and we recommend consulting your financial advisor for making any investment decisions based on your risk appetite, timelines and goals.