7 Lakh crores lost! Should I be invested, now?

After August 24th carnage in the markets which took away 7 Lakh crores of investor wealth, due to global currency crisis, triggered by slowdown in the Chinese economy, investors in the equity markets are having thoughts to liquidate their holdings and be in cash.

This is a phenomenon experienced among all normal individuals, because sudden shakeouts create fear of further losses.

Chinese economy crashed due to many bad decisions the government took, to keep the robust growth continued. It also shook many other economies that were closely linked with it like Vietnam, Malaysia etc. Malaysia is staring at a near collapse situation with their currency losing value on a continuous basis.

Following China and Vietnam, there are a slew of countries planning to devalue their currency. Some prominent names that are showing strong indications are Kazakhstan, Turkey, South Africa, South Korea etc,. At present none can predict the future course, but, how are we placed in India is a major question that is of importance to us.

As for as India is concerned, it should be said that, “All is Well”. Our economy will be emerging as the strongest after this currency war is over. Thanks to RBI Governor, Raguram Rajan, he is committed to steer India into a totally different path due to his very stringent policy decisions. Along with him, the political climate in India is good compared to other countries.

The expectation we had on the business growth after Narendra Modi got elected as Prime Minister has somewhat lost track, as we did not have much of the expectations met. Corporate results did not show expected growth. Instead, consolidation continued with some companies which had already been in the growth path continuing to meet expectations. But, this consolidation is forming a strong base, from where the bounce will be very strong. It may take time, but for sure there is going to be a turnaround.

Though we had been getting news very often that the rain fall would be deficient, we have received fairly decent rainfall. Crude Oil hitting its 29 year low has been a boon to us, even though our currency is losing against the dollar; we are saving on forex reserves.

In stock market investing, there is bound to be volatility and every such time there is a drop in the market, the economy goes through a change by moving out of the prevailing sectors that have exhausted their growth and enter into the new sectors that are promising in growth. After which it resumes the up move. In the similar manner this time we are moving out of the automobile and ancillary along with agriculture sector that was leading in performance last year to Pharma, Textiles and NBFC companies that have come up to show strength this year.

It is a right time to buy into stocks that have very good fundamental growth in them. And always when the market corrects it gives a higher low and then moves on to take of the previous high. This pattern has been there in any market, across the globe, which can be seen from the chart of SENSEX. It is such corrections that help the investments in stock markets give the highest returns when compared to any other investment asset in the world.

Sensex

The only requirement is that, the portfolio should be tracked and changed according to the prevailing conditions. We at Bravisa Templetree have an automated process that helps us identify new sectors and move out of sectors that are getting slowed down in growth. Bravis Templetree’s investment portfolio has achieved 68.96% return in the last 3 years against the 36.09% return achieved by SENSEX in the same period. Annualized returns on our portfolio are 25.32%, while SENSEX is 13.25%.

big-vs-small-left

This time there is something more interesting in the markets. For the first time in the history of Indian stock markets, Mid Cap stocks have outperformed the Large Caps when markets correct. Traditionally, Large Cap stocks are the ones which lead the growth and the fall. Even the previous correction in 2013 was the same, but this time, Mid-Caps took the lead. While the SENSEX has corrected 13.96% since January 2015, the correction in the Mid-caps so far has been only 4.57%. The biggest reason behind this change is that, among the large cap companies, the metals sector and PSU banking was serious wealth destroyers. And many of the big boys don’t have strong growth in their sales and profits. Whereas, Mid-caps have shown good growth in their earnings and, are also having good managements running them.

In our portfolio we used to have large cap presence in 2013, but, from 2nd half of 2014, the concentration in our portfolio gradually shifted to quality Mid-cap stocks which were the other big reason for us to outperform the benchmarks with a wide margin.

Being invested will be a better choice, as the whole market is poised for phenomenal growth for the next 5 years, beyond that even our market will fall into the saturated category giving lower returns. So, until then take advantage of the life time opportunity, be invested and give your savings the highest possible growth.

Agriculture stocks in our portfolio.

000413We had invested in a stock called Excel Cropcare in the early 2014. Last year Agriculture stocks showed good strength in their Sales and profits. Among many stocks like Monsanto, Advanta, Kaveri Seeds etc., Excel Cropcare too participated in the growth story.

 

Following is the story that unfolded in this investment for us. We invested in January 2014 at Rs 475.00, held on to the position as the company was growing. The company in its December quarter results, showed signs of tiredness in its growth and along with that, the stock price began to look down.

ExcelCrop

 

Our research application gave us an exit signal in early February 2015. Following the signal we exited this investment at  Rs. 950 on 9th February 2015. We stayed in this stock for 396 days, thus qualifying for a long term capital gains tax savings on full profits made in this investment.

 

 

It was a nice experience being with this company & taking our share of profits from the investment.