Thought for the day
“Nothing cannot exist forever.”
—Stephen Hawkins (English, 1942 - )
Word for the day
Maslin (n)
A mixture of different grains, flours, or meals, especially rye mixed with wheat.
(Source: Dictionary.com)
Teaser for the day
Secular India …Umm…duh!
Stays put or take
the beta bait? - III
In view of the feedback received in past couple of days, I find
it pertinent to clarify at the outset that the current discussion is purely
from a trading strategy view point. I do not mind repeating for the Nth
time that there is little material evidence to suggest that a secular bull
market may materialize in next 2-3 quarters.
It is just that there is a natural instinct (the more
appropriate word would be ‘itch’) to get attracted by the prospect of some
quick and easy money. Despite having learned the hard way over past three
decades that there is nothing called “easy and quick money” in equities,
allurement is irresistible.
This discussion should be taken as an exercise to practice some
restraint before jumping out to take the bait.
I suggest (a) indulge not more than 5% of risk portfolio towards
this allurement; (b) fishing in the shallow waters and not plunging in the deep
waters; and (c) seek reasonable convergence of trading and core investment
strategies.
With this I suggest taking the following bait:
(a)
Aggressive divestment should be on the top of
new government’s agenda to raise resources for re-capitalizing struggling PSBs.
But one should buy only reasonably valued growth stories that are doing well
and are least affected by policy decisions.
(b)
From manifestos of various parties it is clear
that “railway infrastructure” and “water infrastructure” may be flagship policy
initiatives of the new government, against roads and power for past three
governments. Equipment suppliers and E&C companies specializing in railways
and water infrastructure may have better visibility than traditional roads and
power sector companies.
(c)
The market exuberance will continue to hinge on
FII flows and stable global macro environment. Global businesses (IT, pharma,
auto ancillaries) and exporters may continue to do well. After some volatility,
INR should make a base at Rs60/USD and start a gradual move down.
(d)
I do not expect benchmark interest rates to come
down in any material measure. There may however be selective concessions.
Besides withdrawal of some restriction imposed to contain CAD may also reflect
in market. Companies from sectors like farm equipment, agri input, jewellery,
etc. may see larger traders’ interest.
(e)
In my view rise in private consumption is at the
core of the Indian economic growth. Notwithstanding the recent slow down and
stock market underperformance the sector shall continue to remain in focus of
serious investors. A relative outperformance by cyclicals in early part of the
rally would make the relative sector valuations attractive again. Fiscal and
monetary initiative to contain inflation may also reverse the falling trend in
private household consumption.
(f)
Better execution and continuation of corrective
measures may strengthened the interest in power and fuel utilities.
I will refrain from
naming specific stocks to allow readers to make their own choice.
Readers can send their views, comments, criticism to the
author at vijaygaba.investrekk@gmail.com
Follow @VIJAYGABA
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