Thought for the day
“There is nothing so strong or safe in an emergency of life
as the simple truth.”
-
Charles Dickens (English, 1812-1870)
Word for the day
Schuss (n)
A straight downhill run at high speed.
(Source: Dictionary.com)
Teaser for the day
RIP Maruti800 - a metaphor for Indian middle class rising.
What to do? - III
After two days of dithering and side stepping, I would like
to tackle the real question, viz., “What to do?” To borrow a leaf from RBI
governor’s book, it may not earn me many “likes” on social media. But, I guess
even in these times you have to do few things which are beyond the realm of
“likes” and “dislikes”.
At the outset, I would like to make it clear that I expect Most
Indian equities should correct significantly (10% or more) from the current
level in next 12months. Though is possible that benchmark Nifty does not
correct to that extent due to its skewed construction but beyond Nifty correction
could be serious. The correction in my view would be led by the stressed
sectors like financials, realty and leveraged infrastructure builders.
What to do?
1.
Equal weight in equity, hold 25% tactical cash
at present. In debt only accrual products, no duration play. 10% precious
metals in portfolio. In commodities – prefer agri commodities vs. industrial
commodities. In real estate prefer land vs. apartments.
2.
For equities, 2014 to be portfolio construction
phase. Plan low to no return in next 12months.
3.
Overweight domestic compulsions (staples,
financials, higher productivity, low cost, low price discretionary, two
wheelers etc.).Avoid aspiration stories and high gestation infrastructure
projects, leverage.
4.
Overweight global compulsions (highly skilled
workers, low cost). Avoid consumers.
5.
Global deflationary trends appear real. Avoid
global commodities, including energy.
6.
PSU stocks are completely avoidable, except may
be for a small trade with a time horizon of less than 2months.
When to do?
Currently remain parked
in select Index heavyweights and niche midcaps.
As usual, at some point in time over next few months the
correction will be overdone and a good opportunity to buy will emerge. Mark the
stocks you like based on quality of assets, strengths of the management, market
leadership, execution skills and buy slowly at each dip over next 6months.
In case 2014 elections provide an undesirable outcome, the
market may correct substantially. That in my mind would be an opportunity to go
overweight in equities. However, if as expected Narendra Modi is able to form a
stable government and market become euphoric, I would suggest “sit back and
relax”.
How to do?
InvestTrekk model portfolio is mostly
designed to reflect this strategy. Use the template and design the one to your
liking.
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