" I'm not a genius. I'm just a tremendous bundle of
experience."
— R. Buckminster Fuller
(American, 1895-1983)
Word for the day
Cheville (n)
A word or expression whose
only function is to fill a metrical gap in a verse or to balance a sentence.
Malice towards none
Finally @RahulGandhi will get an
opportunity to speak for 15min in Lok Sabha. We wait eagerly to see how he
makes @narendramodi bite the dust as he claimed once.
First random thought this morning
The nomenclature of key central socio-economic schemes started by
the incumbent NDA government is intriguing.
Some scheme have chaste Hindi names like Uday, Sashakt, Ujjawala, Pahal,
Kaushal Vikas, Mudra, Sukanya Smruddhi, Amrut, Indradhanush, etc;
Some are named in simple English like Make in India, Digital
India, Accessible India, Stand Up India, etc.,
Some have the words "Prime Minister prefixed to them like
Pradhan Mantri Awas Yojna, Pradhan Mantri Jeevan Jyoti Bima Yojna, Pradhan
manti Jan Dhan Yojna, etc.; and
Some other have names of RSS/BJP stalwarts' names prefixed like
Atal Pension Yojna and Deen Dayal Upadhaya, Gram Jyoti Yojna, etc.
What could be the algorithm behind determining the names of
schemes? If you apply Shakespearean maxim, then waht was need to change the
names of all existing schemes?
An Investor's Diary
As promised, I share my market
outlook for next 12months and investment strategy that I shall be following to
be in congruence with my market outlook.
Market outlook for next 12months
At beginning of the year, I had
presented, in detail, my market outlook for the year 2018 (see here). Six and half months later, my market outlook for
next 12months remains mostly the same.
I may reiterate in brief:
(a) The market may continue to remain volatile in next 12months.
Implied volatility has so far remain stuck in lower range. We may see episodes
of sharp spikes in India VIX in next 12months.
(b) The overall returns from Indian equities may be very low single
digit or negative in next 12months.
(c) Small and midcap may continue to underperform the benchmark. But
total divergence in the direction of benchmark and broader market indices may
end. Expect a sharper fall in benchmark indices in next 12months.
(d) Financials, consumer non-discretionary, and capex themes may suffer
more than others. Global commodities may suffer badly, before any recovering
sets in.
(e) Indian equities may suffer de-rating as political chaos clouds
growth outlook.
(f) INR may continue to be supported by higher yields and RBI
intervention. INRUSD may stabilize around 68.50, after witnessing some volatile
moves in the interim.
(g) Bond yields may touch a high of 8.30%, and average above 7.5% in
next 12months.
(h) Real estate prices may stabilize in most geographies and continue
to recover in select geographies.
My investment strategy for next 12months is summarized below:
Asset allocation
I continue to maintain a strategic
65% equity and 35% debt asset allocation. However, since I expect a fall in
both equity and bond prices, presently I am keeping 50% of equity allocation as
tactical cash in my portfolio, which shall be deployed as and when the
anticipated correction in the prices occurs.
My overall target return from
financial portfolio for next 12months is ~6%.
Debt strategy
I would like to largely confine my
debt investments to accrual products only; strictly avoiding search for capital
gains in my debt portfolio.
However, I may consider debt funds
with long duration if benchmark yields rise over 8.25% due to some global event.
I would avoid undue credit risk in
my debt portfolio to make few bps additional return. Though I would not like to
be paranoid about the credit risk and not waste my time looking for risk where
none exists.
Equity strategy
Presently, I am mostly focused on
large cap stocks, with strong balance sheets and superior return ratios. I am
getting increasingly circumspect about the extreme valuations and over
ownership in this space. I shall actively search for opportunities in second
tier companies and invest there.
(a) Target 5% price appreciation and 1% dividend yield from my equity
portfolio;
(b) Reduce the current overweight on global IT and look for
opportunities amongst real estate, infra developers and real estate ancillaries
like appliances and construction materials. Continue to own select pharma
companies. I shall also be actively watching financials (ex top 5) for an
opportunity.
(c) Underweight on consumer staples, agri input and agri commodities.
(d) Continue overweight high income discretionary consumption;
(e) I shall look at commodity
producers selectively towards mid 2019.
Equity trading strategy
(a) I shall continue to avoid trading in next 12months and focus on
building a portfolio for the following 3yrs perspective at least.
(b) I would actively look for shorting opportunities in financial and
richly valued consumption space.
What
will change my view?
1. Full
blown recession in US.
2. Hard
landing in China.
3. Sharp
earnings recovery in India led by higher investment demand
4. INR
breaking and sustaining over 70/USD.
5. A
full blown war in the Pacific.
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