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

Marking a milestone Life isn't a matter of milestones, but of moments. ~ Rose Kennedy. For the first time in its history, the NIFTY has crossed 10,000 and closed above it. It’s a very big psychological mark and the journey so far has been pretty interesting ala a rollercoaster from 1,000 in 1995 to 10,000 in 2017. However, during the same period the market capitalization has seen a 48x at a CAGR of 20% while for the investors it has delivered a 11% CAGR on the index. The first 1K increase was at the slowest pace taking almost 9 years while the next slowest is the journey from 6,000 in '07 to 7,000 in '14 about 7 years. The quickest 1K jump is from 5,000 to 6,000 in 2007 which took just 52 trading days while the next quickest is the race from 7,000 to 8,000. Elaborating further into the statistics, the index has hit new all-time highs twice in 2006, 2007, 2014 and in 2017. Do we see a third high or is this the last for this year? Time is the real judge! The landmark tax overhaul came at the start of July and it’s still creating jitters among the market participants. As most earlier thought, the initial hiccup didn’t seem to surface and seemed to be a smooth transition. The benefit/impact would nevertheless be felt only in the long run, the short to medium term gains would soon rationalize in the long run. Despite some hitches, the new system is in place and certainly needs tinkering which would be carried out by the committee.  The disastrously low bond yields across the world and the insatiable appetite for purchase of assets by the central bankers excepting the US Fed has resulted in deluge of liquidity into equity markets. Excepting the geo-political tensions of Indo-China border dispute and US-N Korea tensions, there isn’t any possible untoward surprises in store. Watch out for these flashpoints for future course on the liquidity movement and the asset allocation matrix. Equity The recent restrictions from the SEBI on ‘shell’ companies have created a chaos in the domestic bourses creating a knee-jerk reaction pulling the mid & small cap indices down. With the earning season not providing any hope, the latest move only provided a good reason for the retracement in the march by the stock markets. We believe a further down side and the disappointing company results could pull back a bit more in the short term and provide an opportunity to enter the market. We recommend continuing staggered entries to equities while taking potshots at dips. Debt The falling CPI and the rate cut by RBI has further diminished the gleam out of bank deposits. The MPC also continued its neutral monetary policy stance monitoring the pain points for possible inflationary cycle. With corporates wobbling in their performance, it’s become difficult to hunt for good bargain in the bond markets. The medium term (5-10yr) govt. bond are at an attractive spread over repo. Investors looking for better returns could explore dynamic bond funds though it would increase the risk profile owing the duration play in these funds. 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.

Most of us read lot about the details of various financial instruments available and even the literature on how they tend to work. Though, not all is digested one makes an attempt to go through on how it’s invested and etal. And when it comes to ones needs, the list is almost always clear in mind. Especially of those that are of higher priorities like children’s education, retirement and other needs. However, if one has to probed a bit more, the finer details of how much is needed, etc. remain unclear. That of course, needs the help of a professional.

How many times has one understood a particular investment suits a certain need? It’s practically impossible to map an investment portfolio on to a set of different needs. Add to this confusion, is a list of continuing investments through systematic investments like SIP/STP, switches, redemptions and reinvestments; it’s only natural to feel lost in the woods. This raises the question if the earlier well-thought designed portfolio is correct.

This doesn’t need a rocket science and actually quiet rudimentary in approach that solves this problem. How many times has one jotted down on a paper of what’s required and defined an objective for the same? It’s a rare evet in most lives. This forms critical as the entire investment philosophy derives from this exercise and the nature & extent of the investments could be defined from the investment objective easily.

Even if one were to look at any investment available in the market, it first starts with an investment objective (all thanks to the standardisation by the SEBI) so that one could understand the true nature of the investment and also assess the extent of risk associated. This is important because each need has different timelines and requirements. For instance, a source of emergency fund should be highly liquid and accessible but almost it’s on vice versa for a retirement fund which has to yield better even as it remains less liquid; while that of a plan and style of investment for children overlaps caution and aggression.

So, when designing a portfolio, a defined set of investments are mapped to a particular need and there could be an overlap of investments for one need or a particular need could be serviced through different sets of investments. This is where if the investor is clear with his objective, it would be easy to evaluate, assess and take corrective action on their portfolios.

I’ve observed that most investors fall in either of the two categories: one who keeps checking the portfolio at shorter intervals and the other who rarely checks the portfolio. This is nothing to do with the trust upon the advisor but the reasons vary from not aware of what was done, doesn’t completely understand the nature of the investment and even a pretext of not good with numbers.

One has to understand that it’s truly difficult to navigate complex investments and their strategies if the investor is unclear of what to do. So, for a meaningful interaction with an advisor and for rich dividends across investments, the investor should be well aware of his requirements, priorities and preferences. This way one could question, help and evaluate the advisor better.

This article was originally published in "The Hans India" daily on  24th April '16