Mutual Fund Stops – 07-08-2020

Stop loss values for Mutual Funds tracked and recommended by us.

Pharma funds have reached 15% lock in profits. Trend is likely to continue for few more weeks. Value funds are leading with good returns now due to the big drop that facilitated them to pick best bargains. When value funds perform, they give very big returns.

Use stop losses for all your positions, it helps protect your profits as well as your capital.

Mid Caps crack…..

Mid Caps under performed against the broader indices by closing more into negative territory than the broad indices today (Sept 13th, 2017). SENSEX stayed positive and flat, NIFTY moved into negative territory. As the markets are climbing higher and higher, there is visible tiredness, while the fund flow is not letting them to correct.

Our portfolio had a bigger correction with 0.77% losses as we had more number of stocks closing negative than the positive ones. A correction is always healthy as it helps us to move out of the weaker holdings and add new stocks that are getting strength to get prepared for the next rally. Hopefully, this time the market should correct to some extent.

Feels good to think about the situation we are in today, from the periods where we used to fear a correction, now we are welcoming it. A clear sign of maturity, not only with Bravisa, the whole market or the managers who are managing substantial are looking for it.

In a couple of week’s from now, September results will begin to flow, which is expected to give some kind of guidance to the markets. As we hold a portfolio of high quality stocks, we should not fear a correction, we expect a churn in our portfolio too in the coming week’s.

Metals were the leaders in our portfolio today, JSL is about to reach 100% gains since our purchase. Gains were also seen in the home construction and Sugar space. KEI is among the major losers, giving up gains it had post its result announcement, where as the stock is strong and will get going soon.

Midcap strength continues

Markets favored midcaps on 7th September, where the SENSEX was totally flat, Midcap Index made 0.30% and small cap made 0.51%. Our portfolio managed a gain of 0.60%. This strength was possible due to big gains from metals sector, Tata Metaliks lead with a 10% gain followed by Jindal stainless with 7%. We had 3 stocks with above 5% gains.

Bajaj Finance, which has occupied mainstream news today, is close to 2000, it came into our portfolio at 470 levels.  Post its bonus issue, ranking dropped and we had restrictions on adding this stock to the newer accounts. We have  made 300% gains in this stock so far. The company has offered 4.50% stake to institutions at 1650 price level and had  4.50 times over subscription.

We had losses in SREI Infra which lost more than 7% followed by Himadri losing close to 5%. SREI lost today due to  Bharath Road not having good outcome in its IPO.

2 years of normal monsoon a boon to the markets

1

Met department has predicted normal monsoon this year. It follows the previous year which was also normal. This means big good news for the markets. We are going to see big gains coming…. Reason, farmers will have surplus income in their hands and will add to consumption. Rarely does such occurrences happen, where always there are drought conditions following one good or normal year of monsoon. Where our farmers clear off all their loans when there is normal monsoon and a fairly good crop. Now, if there is a second year of good income, where they will not have loans to pay, and can think of some luxuries for their families.

Once they have surplus funds, they will think of buying a new TV, automobile, renovate his home and more such goodies…. As their lifestyle improves, so will the economy. Businesses will have good sales, sectors like home construction, which already has a booster in the form of the Government’s “Home for all Scheme”, consumer goods and auto companies.

We look forward to have a great year for the markets. As this writing happens, the market is in consolidation, with no mood to get into correction. Mid caps, which were the stars as always have corrected to some extent. Sector rotation is happening, Sugar is showing signs of weakness, while banking is showing strength.

Good times ahead…….

Above 3% gain in June 2016.

stock-june-2016

For the month of June 2016, our markets took a breather from its rally. We had pressures from 2 events which were surprising, Raghuram Rajan exit and BREXIT. While both were shocking, none had any broad based impact on the markets. In BREXIT became an advantage to our markets. Post BREXIT, emerging markets became favorite’s among fund managers & India had an advantage.

In this period of uncertainty our portfolio had an edge. We had a gain of above 3% on our portfolio against the 2.40% gain achieved by the broad based indices.

Good news is that we have achieved this out performance against the benchmarks with only 60% exposure to Equity. Not fully exposed to the market is also an indicator that the markets are in the wait and watch mode yet. Following June and September results, we should see full loading to happen.

SENSEX could manage to be flat for the month, giving a clear indication that front line stocks are yet to show reasonable growth. It is the Midcaps and a selected few among them that are in good strength. Infrastructure sector had begun to show strength; we have about 5% exposure to the Infrastructure, Cement, Construction and Reality sectors. Most of the stocks in this sector have registered good gains.

ARSS Infrastructure has reached 100% gain within 30 days of our investment giving strength to the exposure we have in this sector.

Sugar & Paper along with NBFC’s are the leaders in the current market. Media stocks have shown growth, with the big releases like SULTAN, KABALI etc., to hit the screens this year, the rally here is likely to continue. We have PVR in our portfolio.

Automobile and Pharma exposure in our portfolio is getting considerably reduced. We have used the system rules to move of stocks and the action also eventually coincided with the future developments. There are news that Auto sector is likely to under perform and stocks are getting downgraded. Following the system diligently helps us be in the right sector at the right period and this has largely helped us outperform all the benchmarks.

Look forward to more fireworks in price moves in the coming months.

Stars of the Modi Sarkar

It’s been 2 years since Modi Sarkar is in power and the expectations that Modi was to deliver propelled the financial markets to big rally. What began with a lot of euphoria began to weed out as results of companies failed to keep pace. In the 2 year period there were some businesses which did tremendously well on the sales and profits as well as on their stock prices, while there were many laggards which took away investor wealth along with their confidence.

Mid caps were the stars of the rally and there were 17 stocks which zoomed more than 100%. Among them the top 4 were from diverse sectors which had more than 200%. All the 4 were part of our portfolio and we still hold to 3 of them Bajaj Finance, Ashok Leyland and 3M India.

Top4 Gainers.May16

Stocks that gained more than 100% were-

HPCL, Marico, India Bulls Housing, Piramal Enterprises, Torrent Pharma, Berger Paints, Emami etc., and among the 100% gainers too, we had 4 of the stocks in our portfolio.

It was not a rosy period for all the stocks in our market, we did have 20 stocks that fell in value in the last 2 years. Losses were between 5-90%, between them the top 4 losers were the following.

Top Losers may16

None of the above were in our portfolio, having the best performers and not having any of the weak ones in the portfolio is what helped us have phenomenal growth against the broader benchmarks.

In the last 2 years the returns from SENSEX, MIDCAP and Bravisa Temple Tree shows the superior returns we were able to achieve.

BTT with Index May16

“Midcaps have delivered significant returns over the last three-five years compared to large cap funds but you have to be wary that they are more volatile. So you clearly need to have a long-term horizon in terms of investing in some of these funds. So, I will say even 5-7 years might be a short time because you can have cycles in the market where mid-caps might under perform and since they have run up so much, you have to be a little cautious when entering this segment.” – Kaustubh Belapurkar, Director – Manager Research, Morning star India.

Pre-election rally began with the banking stocks in 2014, while surprisingly, apart from Yes Bank, all of the bank stocks 20-73%. In our portfolio, we were totally out of banking exposure since 2013, just before the challenges we faced in the Subba Rao period. After Raghuram Rajan stepped in, our economy went into a dramatic change, while there is still a long way to go before the banking stocks get strength, because there have been so much muck to be cleaned in them, without Raghuram Rajan, it wouldn’t have been possible for sure.

Factors like ease of doing business, Make in India, Roads and Railway infrastructure along with GST will instill very good growth for our economy, selecting the right stocks and being invested in them till they complete their growth phase will give any investor tremendous profit potential on their investments.

Alembic is strong, Lupin is weak, and we got it right.

alembic_600The 2nd quarter results for both ALEMBIC PHARMA and LUPIN show a very different picture. ALEMBIC PHARMA had a 83% sales growth and 273% profit growth. While LUPIN had only about 2% growth on sales and a negative growth of above 35% on its profits.

Both these companies were in our investment portfolio a couple of months back. Lupin moved out following the slowdown of its results in March 2015. It was the time the stock made a steep rally to 2100 levels and took a beating after some news in the media that they are facing challenges in the US markets. We made a small profit of 20+% on our investment which was on hold for a couple of months since September 2014.

lupin_pharma600On the other hand ALEMBIC PHARMA has been a steady performer and we continue to hold this investment which was picked up in the early 2014 at around 200 a share. This investment has so far given us about 200% profits, not very big when compared to stocks that have made more than 500% in a year like CEAT  & EVEREADY. While it has been a good investment for the portfolio.

Post our exit in LUPIN, the price of its stock kept moving higher giving us a sticky situation as to, whether we missed a rally in a good stock, because media reports were favouring LUPIN on its performance. We struck to our discipline of not holding an investment if the company is not growing. Now, we don’t have any regrets, in fact we are happy, our system ensures that we are invested in the best businesses across making the BEST POSSIBLE PROFITS to our investors.

Pharma Sector is the strongest in the current markets and among them the Midcaps are the leaders today. Our exposure to Pharma sector is considerably growing too.

Dollar comes back to India.

Dollar comes back.22.10.15In August 2015, when markets crashed post China Crisis, FII money fled out of our markets. Though it did not cause much damage to the retail investors, because the losses were mostly in the large cap stocks while our retail investment was mostly in the Midcap space.

FII money went out of our country for a reason. The expectation that FED will reduce interest rates in the US made the FII’s pull out from the Emerging Markets to park the investments in their countries in order to reduce risk.

When FED postponed the decision to reduce rates, by which time most of the money had moved out. The only possibility was for the money to come back and India was the most favourable destination. On 15th September in our article “Mid Cap stocks are stronger than their large cap peers.” We had written that, all that is going to happen is positive for India. FII money will soon come back, it became a reality.

In the first 20 days in the month of October, India has received 4675 Crores from FII’s. As this money is reaching here our SENSEX has made a near 4% gain in the same period.

Somehow, FII’s made some wrong decisions, while they are pretty fast to take responsibility and change. Now, their investments are in the Midcap space. The advantage here is that, this segment is already low on liquidity and pretty strong. With the additional flow of capital, wanting to buy more in this space will increase demand far higher than supply and that will result it very high valuation for the stocks.

One of the Mid Cap stocks, Britannia has in fact given more than 10% profits in the last one month alone. Some stocks like KEI, DEEP Industries, ITD Cementation etc., are having good runs in the market.

In our portfolio that already has investments in these stocks; we have added exposure and have been gains. We look forward to have a small correction in the markets, post which, our market is going to have a big rally in prices.

Mid Cap stocks are stronger than their large cap peers.

FIISelling TableThe interest rate hike fear has come again this year after it had created a tantrum in 2013. A comparison of FII selling in our markets against what was in 2013 has been marginally higher. In 2013 they had sold to the tune of 22639 Crores, now it is 22693 Crores, just surpassed the previous numbers.

The situation now is entirely different from what it was in 2013. This time when FII’s were selling, we have had the Domestic Institutions (DII) buying, from 13K Crores in 2013; they have increased it to above 21K Crores in 2015. Domestic buying was possible because there was money available with the Mutual funds, which means there has been good retail participation in the markets. Indian public’s contribution to mutual funds.

Even though there were good amount of purchases made by the domestic institutions, the SENSEX has taken a bigger hit this time. The dynamics here was totally different. FII investments were mostly into the large cap stocks, while the domestic purchases were from the mid cap space.

Now, who is smart among the both?

I have been tracking MF purchases for the last 5 years, and all this while the domestic participation will always be on the wrong side. While, this time it is different here too. FII’s have been caught on the wrong foot. Their investments have largely been on the frontline stocks. There is a reason that the large cap stocks are not performing.  It is both they have a bigger base and growth from there is a challenge or there is de-growth visible in their balance sheet.

For example: Banking stocks do not have any kind of growth visible in them, this was more clearly known last year itself. Banking has hit the highest impact in the current downturn. FII’s splurged heavily by being invested in these stocks.

So, when they sold out, there was no saviour for large caps, hence the fall is 8.77% on the SENSEX this time when compared to 5.77% loss in 2013.

Have the MF’s become smarter on their own or the retail participation made them do it, we do not know. The inflows into mid cap mutual funds were higher compared to large caps and hence, the DII buying was concentrated on the Mid-Caps. It springs about good news; the retail investors of India have gone smart. This is news to celebrate.

I used to always think about, why foreigners are taking away all our wealth through stock market profits, while our people being the creators of this wealth are not enjoying it? Now, there is relief. People of India are enjoying the benefits of their growth.

The Rupee has also been strong when compared to 2013 Taper Tantrum, now it is down only 2.29% as compared to the 9.70% drop in 2013. Thanks to Raguram Rajan’s wonderful policy decisions.

All these data numbers throw out some predictable moves in the coming months.

  1. 1.       Currency is strong, so, the bounce back is going to be strong for India.
  2. 2.       Mid-caps show more strength, they are going to outperform in the next rally.
  3. 3.       Large Cap investments will take time to pay returns.
  4. 4.       FII’s cannot do much damage from here. They can only multiply the bullish effect.

If tapering of interest rate is happening in the US, FII’s will take time to come to India. There is no fear of big sell out, as they have already moved out considerable funds from our country.

In case the situation is opposite and the FED postpones tapering, the FII’s will rush back to our markets and this time they will buy more into Mid-caps as they have already burnt their hands on the large caps.

FII buying into Mid-caps will take the stock valuations to levels one cannot imagine off. The reason behind this is that Mid-caps don’t have the float that large caps have; which would simply mean that there will be very high demand for quality Mid-cap stocks while the supply is going to be minuscule. Unless the DII’s get into a selling spree, there cannot be much liquidity available for the FII’s to absorb. And it is unlikely because it is the public who have to decide on moving the funds out of the Mid-cap funds to provoke selling pressure.

What a beautiful situation we have come into?

Investors, sit tight with your mid-cap exposures, you will see astronomical valuations coming in a few months from now.

Out Bravisa Templetree portfolio is loaded with the best of quality Mid-cap stocks, which is likely to take us to the moon….. I suppose.

Let’s laugh all the way to the bank, enjoy our money growing in a super-fast manner. A speed that we have not experienced so far in our life.