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.

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,