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.

Arth-Samvaad - Fortnightly Newsletter

While investing in the markets somehow we tend to ignore the regulatory risk, making our own interpretations of the government commentary. So, when the central govt. has taken a call on the demonetization of the higher denominations, the systematic risk is being felt hard. Even after almost couple of weeks, we’re still grappling with the estimates of its impact on the economy.

The activity across sectors like Real Estate, Asset Finance, Consumer Durables, Auto Finance, Micro Finance, Housing Finance have taken a huge hit. Also are the operations of the SME segment that use high levels of cash transactions. In all of the above sectors, the transactions have reported a slump of at least 50% ranging up to 80% of the usual activity. Of course, these are temporary and short term excepting for Real estate where the outcome is still unclear with the PM warning further action through the Benami Law, which was earlier passed.

The positive outcome from this drive is an improved CASA of banks, elimination of counterfeits, increased tax base, advanced or recovered tax dues, boosted formal transactions and also migration to highly efficient digital payment modes. The move had multi-dimensional results which the govt. has struggled to achieve in the past few decades.

The near-term discomfort (availability of new currency) gives out to lower interest rates - a good for all discretionary & consumer spending while it brings agony to the retired savers where the options are closing-in quick. Though, the short-term volatility persists as the new US administration shapes up and Fed rate hike seems inevitable, the medium term to long term i.e. 6mth to 2 year timeframe is good for domestic equities. A robust portfolio is thus the need of the hour.

Equity: Hybrid and large caps
Debt: Dynamic bond funds and Corporate FD

Godspeed,