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

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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.

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

Farm Loan Waiver There has been an increasing call for farm loan waiver from across the states and also from the Union govt. But, we believe this would be a temporary solution to a deeper malice. A statistic puts the total outstanding at about Rs.3LCr and any write-off move puts stress on the fiscal deficit. Add to that the state of banks, esp the PSBs which have substantial exposure to rural credit and the psyche it builds in the people's minds. RBI’s financial stability report warns that the banking system’s gross bad loan ratio will rise to 10.2% of the total loan book in Mar'18 from 9.6% in Mar'17. The need of hour is in employing modern farming techniques, scientific approach, improving overall infrastructure and eliminate counterfeit seeds/pesticides/fertilisers. The recently concluded G20 meetings didn't bring much change to the global business environment but has shown the world the new US admin ways of dealing with the rest. Though, a common communique was drafted the resolve for the same was missing from the largest economic powerhouse. And later it was vetoed for a resolution against North Korea by rivals Russia and China. The India-China boarder conflict is not new but this time there's been an aggressive stance by the Indian Army and also the administration. There's been a resolve to counter any activities around the boarder esp since the launch of 'new silk route'. The current Govt has expressed it's displeasure. Need to see how things evolve now-on. What's in it for you: Equity: The equity markets turn volatile in the near term with a uptick in the shorter term. The GST implementation would be complex so could create hiccups in the near term. Already we're seeing the wait period of the truckers on the highways shrink by about 25%. We recommend staggered investments in the large cap space while hedge based investment for lumpsum. Geo political events are a concern.  Debt: The domestic inflation softened more than anticipated and so the RBI's dovish tone despite maintaining the interest rates as status-quo. This makes the possibility of a rate cut in near future. This creates an opportunity for the medium term funds to provide stable accruals and also gain through the downward yields.  Commodities: The geo-political tensions and strengthened dollar bear impact on commodities. Except for steel most of the commodities including Gold/Silver are subdued and would further see pressure.    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 Commentary Jun '17

Death of Paris Agreement Trump - Promise on track President Trump is on track of fulfilling his campaign promises to his voters. After many protectionist measures, the environment treaty brokered last year is trashed by the new US administration. This despite the developing economies like India, China, etc. are on a rampage to create new capacities in the renewable space. Not all across the US embraced their President's stand and started to do their own legislations in their cities, communities, etc. UK Election Results Dis'May'- Have the Millennials sought their revenge? That seems to be the case as more youth turned out to vote in favour of Corbyn's Labour party. Also, May could've relied on the very pollsters who predicted Bremain possibility as her 20% lead evaporated to a cut of 13 seats and most importantly pitting her into a minority government. For UK, a harsher Brexit could be a reality now. The 'Gulf' around Qatar When everyone thought the POTUS completed his first major tour of nations - the GCC, on a sane note, a major crisis emerged out and all the fingers lead to Trump. Isn't it a coincidence that the Qatar sanctions were announced just as his air force one took off. Rumours have it that Trump gave a thumbs up to stifle and wipe out Qatar, the pain point for Saudis and the new crown prince's plans. It's an irony for Saudis mention terrorism! The current crisis has the potential to spill beyond the region. Are we heading into a Kuwait situation? Interest Rate Divergence As reflation takes a breather, the approach to interest rates seems to diverge across the Atlantic. While the EU and the rest of the world maintain status quo, the US is looking to increase the interest rates. This FOMC meet this month, could sound on those lines. Though, the growth in employment staggered, the wage growth is eluding. Domestically, RBI is at loggerheads with the Finance Ministry though the former is in a wait-and-watch mode with monsoon season approaching and GST implementation as triggers for a rate cut. What's in it for you: Equity: With no major headwinds and continued fund flows, the equity market has not lost its steam. The near term market is still in the bullish phase and investments could be very opportunistic and staggered with a horizon of 3 years.  Debt: The interest rate dilemma hangs on for any directional change in the fixed income space. Small exposures to hybrid debt is recommended with a 3 year horizon. Commodities: As US ditched the Paris agreement, Crude seems to head nowhere despite the production cuts by OPEC, while the US rate hike could further bounce the greenback the safe heaven seems to lose it's sheen further. 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 May'17

Monthly Market Commentary “it’s not the things you buy and sell that make you money; it’s the things you hold.” ~ Howard Marks It's been an eventful month. With domestic bourses touching new highs and entering uncharted territories, thanks to the unabated domestic as well as foreign fund flows, it's getting a bit jittery. India's share in the world m-cap rose to 2.7% above the LTA of 2.4% while contributing to a 34% m-cap change in the last 12 months.

French Elections Macron Wins This is decisive and truly En Marche! beating the far right Le Pen; especially for Europe which is reeling from the Brexit decision. South Korea Moon Wins This moderate leader's win is critical as it comes amid the North's increased shenanigans. He said that he wouldn't even shy away visiting North. What's in it for you? Equity The markets always swing between fear and greed. Monies are made in between. Every and any small good news is like opium now for the stock markets. Is it a scenario of sell in May and comeback in September? Don't know, can't say. But, we're wary of the current levels. India On a High We believe in risk to return strategy which makes us follow a disciplined approach that would capture most parts of the raging bull while protecting from the deep falls, thus outperforming in a full cycle. We continue to recommend staggered investments into equity with top-ups in falls.

Copyright © Wealocity, All rights reserved. Our mailing address is: dreams@wealocity.com

Our Mid-monthly Newsletter Edition 1/Vol 5/Apr '17

No, it’s not what you see but it’s how you respond to what you see makes up the market. This 4 yrs old cartoon of Kal depicts that either we’ve not known to live with him or he’s not bothered to accommodate with the world. North Korean leader has found an equally temperamental US President to dodge with and now the world is waiting with bated breath on how the present tussle unfolds. It’s very unfortunate that our rhetoric on geo-politics defining this year is turning true.

This April, May announces election in June. The surprise election call by British Prime Minister Theresa May seems an astute political move. The UK economy suggests to be in a sweet spot, with low unemployment, inflation still not affecting the consumers and none of the Brexit fears yet to materialize into any negative wobbles; what better would it be to consolidate her power while crushing the already disarrayed opposition. Her party, conservatives, have a 21-point poll lead and this snap election could extend the thin lead her predecessor won in ’15; a tactic working in her favor to retain power beyond ’20. Would the French buckle the trend? The protectionist and nationalistic fervor being played by the leaders from North Korea to the US to Australia to their masses is making the world more unstable . Macron and Le Pen are leading in the four-way race while the Fillon and Melenchon close behind moving into the second round of the French Presidential election. Unlike May’s fortunes the early Le Pen fortunes are drifting as the opponents are catching up and hopefully the French voters would clip the protectionist trend by not leaning to any of the extremes. This is of course, overcast with the latest terror attack in Paris.

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 of the market happenings  Monthly Market Commentary

Experiential Luxury A shift in focus from purchasing luxury goods to enjoying services. A common refrain of the past half-decade has been the decline of luxury ‘ownership’ and the rise of luxury ‘experience’. If this is to believed, then we're moving away from permanent, physical object ‘possession’ and ‘personal luxury goods’ into transient, intangible, service-dominated ‘experiential luxury.’ Experiential luxury is one-off and unrepeatable. This makes the moment of experience ever more important.

RBI Monetary Policy Two key aspects of RBI's commentary are: Hawkish inflationary outlook while extremely optimistic about growth in the coming FY; and serious intent to solve the NPA problem of the banks. While sticking to the medium term target of CPI to 4% within a band of +/-2% it flagged multiple risks to inflation. These include the probability of recurrence of El Niño and it's impact on food inflation, 7th pay commission receipts, one-off GST effect and even the farm loan waiver in several states. Rupee Conundrum The rupee rise in the last quarter caught almost all the analysts off-guard, revising the forecasts for the quarter and year. RBI's gauge of the currency's strength puts in the overvalued territory. And it's non-intervention though perplexing is a wise move as any aggressive buying of dollars would only add to the excess liquidity it's trying to suck out through reverse repo rate hike. We see the trend to continue in the medium term. The Syrian War The US has thrown a wrench in to the ongoing Syrian repair, unsure of which nuts and bolts it wants to tighten or loosen. So, this sudden US reaction to an alleged chemical attack by the Assad admin to be considered genuine or a POTUS ploy  to reverse the ever falling approval ratings is unclear. Musings also indicate the sustenance of new tax cuts and hiked spend proposals need more political mileage especially post the failure to replace 'Obamacare'. But this misadventure could add chaos to the Middle East.

What's in it for you: ‘Bull markets are known to be born on pessimism, grown on scepticism, mature on optimism and die on euphoria'  ~ Sir John Templeton.   Equity: The recent political victories have changed the sentiment and is attracting huge inflows both domestic and foreign. At Wealocity, we've used these higher levels to create cash reserves and believe this strategy would help us grab an impending opportunity. Probably time to bet on the infrastructure theme again!    Debt: With the change in RBI stand and the subsequent events, there could be possibilities of profitability in the long papers and hence are interested in the dynamic asset allocation based investment avenues. Crude: The Domestic price would be dependent on the USD parity, though the recent gains in the global prices is a combination of demand (US summer spends) - supply (shutdown in Libya) issues. The current geo-political tone would add more volatility to it. 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.