First random thought this morning
The market behavior
yesterday made one thing quite clear that not many participants are expecting and
major legislative action from the government. No one appear concerned that the
government will face incrementally stiffer challenges in conducting the
legislative business in the Parliament.
I guess this is a good
news. Any marginal success on this count will be a major positive surprise for
the market.
Strategy for Samvat 2072
Unlike Vikram Samvat 2071 that began on an extremely buoyant note
with PM Modi appearing in full control of the things, Samvat 2072 may not be
welcomed with similar enthusiasm. The sentiments are somber and confidence
diminishing.
The below par corporate performance, worsening socio-political
environment clouding the outlook for any major economic reforms in near future,
specter of US rate hike and consequent turbulence in the global markets is
indicating development of a perfect storm that may hit Dalal Street sometime in
next 4-5months.
I am inclined to side with the view that US rate hike and consequently
adjustments in global currency, credit and commodity markets may eventually
benefit Indian businesses in the medium term.
I also subscribe to the view that the robust fiscal conditions
achieved through some brave decisions like not passing over the entire benefit
of lower crude prices and raising resource for infrastructure development
through higher indirect taxation (road cess, clean India cess etc.) and lower
subsidies, will help Indian economy in tough times.
I am also inclined to ascribe higher value to the measures like
UDAY and bankruptcy reforms rather than ruing delay in GST implementation.
I continue to maintain that we are in a portfolio building phase.
A large part of Samvat 2072 might see markets stuck in the eye of the storm and
progressing virtually nowhere.
My Strategy
·
Preferably complete planned strategic asset
allocation by March 2016.
·
Target 12-13% absolute return in the risk
portfolio over next five years.
·
Normalize overweight on global pharma and IT.
·
Normalize underweight on financials. Overweight
private sector lenders, NBFCs catering to LIG and MIG borrowers and add top PSU
lenders.
·
Continue underweight on global commodities.
·
Gradually increase exposure to domestic
Cyclicals, excluding minerals and metals. Prefer solution providers, technology
leaders and innovators rather than pure product or construction companies.
·
Maintain overweight on domestic consumers.
Overweight luxury discretionary consumption.
·
Increase allocation to longer duration debt.
·
Plan for lower tax benefits on financial
investments.
·
Avoid PSU in general. Selective policy neutral
companies could however be considered on case to case basis.
·
Avoid precious metals.
·
Assume a stronger USD and weaker EUR in
investment decisions.
WISH
THIS DIWALI BRINGS HAPPINESS, GOOD HEALTH AND PROSPERITY TO ALL
(NEXT POST ON MONDAY, 16TH NOVEMBER 2015)
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