Guide for portfolio review
As I suggested yesterday ( see A perfect storm ), “the best strategy under the present circumstances would be to (a) hold nerves and not panic; (b) review the portfolio for any corrective action that may be needed once the storm passes and the sea becomes calmer.” To add further to that, I may suggest that the following points may be pertinent to note while reviewing the portfolios: 1. The higher cost of capital (interest rates) would result in lower fair valuation for equities in general. The growth companies that have debt on balance sheet or need to borrow for capex; and/or where the free cash flows are mostly back ended may see much sharper cut in their target multiples. In fact we have already seen 20% derating in Nifty PE Ratio over the past eight months. 2. The market consensus was working around 18% CAGR for Nifty earnings over FY23-FY24. The realized earnings growth may be much lower than this. My personal assessment is that we may end ...