(Today’s column in Deccan Chronicle- A Happy “New” Year to everyone)
More things change, more they remain the same… 2015 6
A new calendar. Everything else the same. So why interrupt the chain of thoughts or the core philosophy? Let us focus on the NOW and what opportunities and threats are visible for the investor.
Never look at indices. Look at stocks. Buying closer to or below fair value and holding it for long periods always wins.
Keep focused on sectors that are driven by domestic consumption, for investment. FMCG, Pharma , auto & auto ancillaries, Private Sector Banks and a few Multi National Corporations. Pick stocks on the basis of their ROE (PAT as a percentage of NetWorth) over a few years. No debt ideally. Companies paying regular dividends and paying their share of taxes. This is a constant, irrespective of the dateline/s.
All other sectors are trading opportunities. Infrastructure, commodities, PSUs etc. Buy on hope and sell on event. Do not keep them for long. Have stop loss limits on these stocks. These sectors are characterised by poor average return on shareholder funds, cyclicality in earnings, high working capital needs and leveraged balance sheets. Not good for an investment or wealth portfolio.
Now, the market is hot for IPOs. For some more time, it pays to speculate on the IPOs. Buy and sell on listing. Valuations are very rich and just ride the momentum. You will know that the cycle is turning, when the listing premiums start to disappear.
Build your trading portfolio up before the budget. Most probably, it would make sense to liquidate soon after budget. I do not see any immediate relief in terms of earnings growth. Valuations are rich and potential returns are low. Buy some tax free bonds. Interest rates may continue to disappoint in 2016 by remaining stubborn.
No reason to change anything. Governments will neither help nor hurt too much. Yes, things like corprate tax, service tax, GST will keep exciting the ‘talking heads’, but are unlikely to shift earnings of companies too much. Infra does get a boost, but most companies ill, overladen with debt and bereft of talent pool. So, a good order book need not mean much, except a short term spike in prices. Want to watch Oil prices. Pray that they stay above $ 30 so that our NRI remittances continue. OPEC buying power has diminished and that means a definite slowdown in global growth. India is not an island.
December 31, 2015