Some food for thought
"Alcohol may be man's worst enemy, but the bible says love
your enemy."
—Frank Sinatra (American Musician, 1915-1998)
Word for the day
Lunette (n)
Something that has the shape of a crescent or half-moon
First thought this morning
The recently concluded Madhya Pradesh (MP) assembly elections
were special in at least one sense - the analysts and political parties will
find it hard to decide who and what won these elections and who and what lost
it.
- BJP who got 5 seats lesser than Congress, has been polled more votes than Congress.
- All principal parties (INC, BJP, BSP, SP) played the same caste cards.
- Both Congress and BJP promised Cow protection, and played the same religion card.
- Both BJP and INC promised loan waivers and other soaps for farmers.
- On popularity charts, the losing Chief Minister was more popular than all the prospective ones' put together.
- The national leaders of both the parties did not enthuse the voters, this time. It was the local leadership which was more popular, unlike the last time when Modi won and Rahul lost.
Chart of the day
2019 - Investment strategy
Asset allocation
I raise my equity allocation to 70% from previous 60%. The
strategic asset allocation now stands at 70% Equity; 15% Gold and 15% Debt.
(a) Out of 70% equity
allocation, I shall hold 30% in tactical cash till April 2019 or 9200 Nifty
level whichever happens earlier.
(b) Gold allocation
will be mostly invested in gold bonds.
(c) For now, the
debt allocation is entirely in accrual products. However, if benchmark yields
rise to 8% or above, I shall move this to longer duration (10%) and credit
funds (5%).
My target return for overall financial asset portfolio for 2019
would be ~15%.
Equity investment strategy
I would mostly focus on mid cap stocks, with decent solvency
ratios and operating leverage.
(a) Target 18-22% price
appreciation from my equity portfolio;
(b) Overweight on
Construction, Capex, Real Estate, Media, Healthcare, PSU Banks, Commercial
Vehicles, Specialty Chemicals and select NBFCs. Would prefer large PSU banks,
pharma companies with domestic focus, construction companies with stretched
balance sheets, which are most likely to survive, and real estate ancillaries
like cement, tiles, sanitary, plywood, electric fittings etc.
(c) Underweight consumer
staples.
(d) Overweight high income
discretionary consumption like alcohol;
Equity trading strategy
(a) I shall be actively
trading in 2019.
(d) The trading strategy
would be mostly buy on declines. I would prefer large cap stocks.
Miscellaneous
I have assumed a relatively stronger INR (Average around
INR70/USD) and stable rates in investment decisions. Any change in these
assumptions may lead to change in strategy midway.
What will change my view?
1. Full blown recession in
US.
2. Total tech melt down in
US markets.
2. Hard landing in China, forced
by escalation in trade war.
3. Political breakdown in
India post general elections in April.
4. INR breaking and
sustaining over 74/USD.
5. A full blown war in the
Korean peninsula.
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