India’s Savings through OIL

India is presently saving about 70b$ due to the price correction that Crude Oil had, which is presently quoted at 45-50$. It will not again reach the $100 mark. Crude Oil will become history in a couple of decades, countries who minted money through crude reserves and are holding stock will have to force sell their stocks, else it will become junk very soon.

A couple of days back there was news that India is aiming to go all electric on its vehicles by 2030. Tata Motors to launch electric bus, M&M planning more electric vehicles along with its E2O. Today there is news that Jaguar Land Rover or (JLR) will be rolling out its Electric Vehicle by 2020 and all their new variants from them on will be an EV. Volvo follows too……

All these news support the ending of the Oil Supremacy, I remember a couple of years back how much the OPEC commanded the world markets, often coming out with production cuts and help the Oil price rise in the global markets. Middle east countries drooled themselves into high time luxuries, now the tide has began to turn against them.

For India, non-dependence on Crude imports will help save tonnes of dollars as well as subsidy expenses. As it is we are witnessing the Government aggressively cutting down on subsidies. All the savings that would come through these above mentioned advantages will be spent to build our economy, the dream of seeing India as a world super power is just around the corner.

SENSEX stocks of 2020.

classic350_right-side_blue_600x463_motorcycleIndia is the world’s best economy today. Following its robust journey that is going to come up in the next 5 years, there is going to be a dramatic shift in the whole economy and with it even the economic barometer of India, the SENSEX. The SENSEX will also undergo change by replacing some of its constituents. Those stocks that will take a space in the future index will be the stars of the markets in the next 5 years.

What if we can identify them and be invested in them?

The growth those companies will have is going to be tremendous and the potential for profits will be equivalent. The expected stocks that can move in to the SENSEX, the list is big with some new not yet listed companies too. Though for the new ones we may not have a direction, for those that are existing, and if identified and invested, can give great gains.

Some of the company’s whose are likely to move in are: NESCAFE

EICHER Motors (Royal Enfield Bullets)

Page Industries (Jockey and Speedo brand products)

TITAN (Watches and Jewelry)

NESTLE and the likes.

Companies that have premiumisation as their focus are likely to shine bright. So, look for premium products in the market and the companies that produce them and be invested in them, chances are you will end up having a goldmine.

jockey-logoAt present our portfolio contains the first 2 names and we have been holding them for quite a long period, in these years that we have owned these businesses, they have showed continuous growth in their sales as well as profits. If they continue the same for the next 5 years, we will still have them. While, there is no guarantee that it will be so.

In the last year, there were some companies that made it big on their growth and become the darlings of the market. Some of the best ones are

Ashok Leyland, Britannia., HPCL, Baja Finance, Ramco Cements, Maruti, TCS, Ultratech Cements, PVR & Kotak Mahindra.

And there are a next set of business that are showing signs of reaching for the best. They are Canfin Homes, TCI, Tata Motors, Orient Cement, Persistent, Heritage Food and BHEL.

These were the names that have come up in the ET500 listing.

Among the above names we are invested in about 7 businesses, while we have doubts on some like BHEL, TCI etc., while if they qualify our parameters in the future we will definitely look at adding them in our portfolio.

By being invested in the best performing companies, our portfolio is managing to grow the best. Last year we had an Alpha of 63% against the NSE 500 Index, This year in the first half, so far we are at 28% Alpha against the NSE 500.

We will continue to grow in the same manner adhering to the best practices and innovative thoughts.

30% of BSE 500 Companies available at 40% discount.

There was an article in Economic Times on the above topic. 40% discount is a big number, how should we see this one? Is this discount an advantage or worrisome?

goldbear_npMost of the companies that have lost big time in the recent weakness are from the Metals and Banking sector. Metal stocks have been the mostaTeoRR7T4 hit with some stocks losing more than 75% from their peak prices. Metals or commodities as they are wildly said have been very poor performers worldwide. The reason behind this is China! Does that mean the whole world has been dependent on China for their commodities business and if that is true, China had been buying raw materials from across the globe to feed its mammoth manufacturing facilities? Which also means that, the world has given itself fully to the dragon.

 

How things will change from here and make this crisis situation an advantage is not very clear for now. Whereas, such high level of dependency on China is not a good one. If it is continued, such turmoil’s will repeat. China’s forex reserves have taken a nosedive as the government has resorted to dollar selling to keep the Yuan safe from sliding down. This will create one more problem, if China has to purchase all the raw materials available in the world, it has to pay in dollars. Will it resort to some other game plan to meet that requirement? It is very early to comment on these ideas.

bank-collapseFor the banking sector the woes are much higher. Banks have not only lent to the core sector like metals which are in doldrums, it also has good exposure in the infrastructure segment, which is another big bottle neck.

When Modi government came to power, infrastructure was expected to be of highest attention and priority of the government, where, there seems to be an abrupt neglect. Our country needs infrastructure to grow faster, why we are not taking bolder steps here is not known. As the lending to these two sectors along with all the existing mistakes the consortium of public sector banks have created are building up huge NPA’s, Banking sector is not likely to see a turnaround in a shorter duration.

Housing sector has seen slow down, Automobile purchases are showing down tick and these are the segments were banks have big exposure too. When the industry is not taking loans, retails is becoming tight, Banks cannot perform better.

So, no wonder that both these sectors lead the wealth destroying mela in the markets. Investing in them just because their stocks are quoted at lows will only result into long term dormancy or investment suicide. Yesterday I had one of my clients ask me about investing in SBI, because he sees the stock is cheap. This thought is normal, because for us Indians, SBI is a behemoth at least that is what we think about. Our Grandfathers had accounts with SBI, which means it is trustworthy. Yesterday SBI hit its 52 week low. Any stock that reaches for a new low goes there for a reason; they rest in peace for some time and only then start their journey upwards.

When markets go down, which is a natural process, how much our portfolio has taken the impact is what everyone who has invested in stocks think about. Going by emotions and sentiments if someone has invested into stocks like Tata Steel, SBI, PNB, Jindal Steel, Tata Motors etc., they are doomed for failure. Always, investing in the sectors that are in the limelight for their performance is the good one, when it comes to investing.

In our Bravisa Temple Tree portfolio we don’t have a single stock in both, Metals as well as Banking sector. We were not biased in taking this decision, it happened as a natural process as our research application did not give out such names for investment. Following the very simple principle that we will invest in only those companies that have good sales as well as profit numbers has eliminated these stocks from our list. When in 2014, the markets made a big rally with most of the participation coming from the banking sector; there were thoughts in the back of the mind, “Have we missed something?”  It was good that we struck to our rules, now; it is getting proved that our decision was right. The damage that both Metals and Banking sectors have created in the market will take time to ease out, which in the process will also bring down valuations of those companies that are fundamentally good. Once the dust is settled, and the market begins on a renewed rally, the fundamentally strong stocks are the ones that will lead the market rally.

Feels good, that we are placed right.

Ashok Leyland leads in August Auto sales.

Auto sales were weak for most of the frontline companies in August this year. Hero lost near 14%, TVS had a 1% growth, Maruti managed due to Ciaz and S-Cross, which otherwise would have been negative. M&M goes weak, Tata Motors 0.50% down on overall sales.

LeylandLorry

Ashok Leyland & Eicher were super stars. Ashok Leyland managed a 39% growth, supported by pre-buying ahead of ABS (Anti breaking System) becoming a mandatory norm from October 1st 2015. The growth was slightly ahead of expectations. Eicher continued with its above 50% growth. Royal Enfield sales grew 59% and commercial vehicle sales grew 22%.The company has opened sales office in the North America, which is another positive for its growth as exports are on a steady increase.

classic350_right-side_blue_600x463_motorcycle

Ashok Leyland turned around in the last quarter and it is likely to continue its growth phase for some more time to come. Stock has already run up, but still has a lot of room to be captures. Ashok Leyland came into our portfolio at ₹74, in August 2015. Post strong growth numbers we are adding to the existing exposure after the current correction phase is over.

At its high of ₹99.65, our investment in this stock has reached 30+ percent profits in a month. The broad based correction in the market post Chinese currency crisis has brought the stock down, which is an opportunity to accumulate for those who missed it at 75 levels.