Next big opportunity to invest in Stocks –

Stock markets go through cycles with up & down phases on regular periods, those who are able to identify them early and take advantage end up getting the best returns from the markets. Like the cycles we have in commodity prices. Crude or steel goes up in price when there is demand and comes down when supply increases.

As there are cycles for the whole market, there are similar ones for sectors too. Like for example metals sector went through a down phase when there was huge supply from China and when China stopped production, demand took the prices up and now the metals index is up 200 plus percent from the bottom it hit in early 2016.

Identifying and investing into sectors when they are at the bottom and about to turn up gives immense opportunity to grow wealth. Such opportunities come up often and 2 such conditions are available at present.

One among them is the Pharma sector, it went through a tough time since mid 2015 due to USFDA
clearance issues which forced many companies lose access to lucrative markets and thereby report losses. Now the condition has changed, most of the manufacturers have now adopted to the required standards, generics market has brought good opportunities and after a bottom or base formation any small growth will show up big and that will bring added value to the stocks.

This valuation gap will get filled with prices of stocks going up. Pharma stocks have already began their upward journey many stocks like GLAXO, ASTRA Zeneca etc are on the upward spiral. It is good time to pick up investments into a good Pharma specific mutual fund to ride this rally, which should last for more than 2 years and give some very big gains. 

Another opportunity waiting to happen is in the PSU Banking sector. All of us know of the challenges that our PSU Banks have gone through in the recent past due to their bad loans. Cleaning their balance sheets brought immense decrease in valuations and big loss in their stock valuations.

Now the cleaning activity is almost coming to an end, in another quarter or two most of the balance sheets should get cleared of all their NPA’s and even if the banks do not show robust performance on their numbers, just their regular profit reporting will give a big strength to their balance sheets which will attract valuations.

Again a very good opportunity to make more than 100% gains in the next 2 years by investing into this sector. The best way to capitalize on the rally that this sector will have is to identify mutual fund schemes that have more exposure to PSB’s and invest in them. One other alternative will be to invest into PSU Banking ETF’s.

These are pure sector calls which will go through high volatility and requires timing to enter and exit.
Getting in late into the rally or overstaying will give results that are opposite to what one expects from the investment. Have lesser allocation so that your investment does not go through volatility as well as help capture the gains of the next big opportunities available in the market.

Your investment advisors should be of help in choosing the right schemes along with timing entries
& exits.

Multi-Baggers in Pharma & PSBs

Turkish currency collapse and India staying strong brings confidence that India will continue its rally. When Large caps are giving new high’s, midcaps yet to catch up, which are trailing by 10% from their peak.

Midcap at the bottom of correction gives a bonus to current investors and the advantage that Mid caps have with average 3% additional returns against large caps, which when compounded bring more big gains.

SENSEX expected to reach 90K by 2027, where 1 lakh invested into SENSEX will be 2.25 lakhs & the same in Mid Cap will be 3 lakhs. For those who are investing now that is a bonus of 25K. Mid cap will give 225% growth for the next 9 years.

Pharma & Pub Sector Banking sector are likely multibaggers for the next 2 to 3 years. Investing in sector specific Mutual Funds with exposure to Pharma & PSB’s will help in taking advantage of the same.

Sector based investments can be volatile, take only small exposure to avoid any shocks int he interim.

SBI Result shock & future of Stock Markets for FY18-19

Markets climbing higher got shocked by close to 5000 crore loss declared by SBI, adding to volatility in the markets. Reasons to stay invested, how SIP’s are at advantage when volatility exists. Reliance Tax Saver, the best of high volatile schemes which suits the best for SIP investors.

Why markets will not go down further yet with high volatility and setting pace for the next big bullish ride, pre & post election 2019.

A Fund Manager’s View On Market Trends

Meeting with Mr. Jayesh Gandhi, Senior Fund Manager, ABSL.

Recently, I had the opportunity to meet Mr. Jayesh Gandhi and talk about our favourite topic, “THE MARKETS”. Mr. Gandhi manages the Mid & Small-Cap funds of Aditya Birla Sunlife Mutual Fund, schemes of which have been consistent performers in the recent past.

This meeting gave me an opportunity to understand the fund manager’s view of the markets when there is a divergence between mid-cap and large-cap stocks. He follows the growth stock investing approach using a template which finds stocks that are growing in both their sales and profits.

Straight out I asked him about the underperformance of the mid-cap stocks in the recent past against the broad markets. His reasoning was that growth stocks tend to underperform when value picks give larger moves. Growth investing creates higher alpha when the markets get into a broad-based up move. When there is a correction they tend to also correct as much as the indices. The advantage here is that when staying invested in such schemes, over a period, the growth tends to out beat the benchmarks to a larger extent.

Presently the SENSEX and NIFTY have been reaching new highs while the mid and small cap space has lost considerable value. Investors are questioning the underperformance in their portfolios since they see that the Sensex is climbing higher. This divergence is due to a few stocks in the large-cap space garnering higher demand during the recent scheme re-categorization. Fund managers were forced to liquidate quality mid-cap stocks and had to add large-cap stocks to reduce exposure and meet SEBI norms.

In the large-cap space, there are no high-quality stocks which are an equal match to the mid-caps that are fundamentally strong with higher sales and profit growth. Yet, fund managers were forced to add the large-caps, creating demand for a small group of good picks, pushing these stocks further up.  A few mutual fund schemes that already held these large-caps in their portfolio are now outperforming the universe that made big gains in the 2017 rally. But, this divergence is only to stay for a short period.

Mr. Jayesh’s view on profit growth is that in our country the mid and small cap space is likely to be rise by 20 to 30% in the next 3 years. The PE multiples, presently at 25-26 levels,  will reach 14 and below 10 for the small-cap companies, thereby giving very high wealth creation possibility in the coming 3 years.

We had a good rally in the 2014-17 period and are likely to have a similar one for the next 3 years. We are going into an election year. By December we will have more clarity on the outcome of the elections and if it is positive, we should see a 40% growth in 2019-20 alone. And to be a part of this massive wealth creation and reap the benefits in full a person has to be invested now. All portfolio realignment as per SEBI categories is now over, and it will follow now to the next phase of aligning stocks that are the new leaders.

Most of the mutual fund schemes are holding a good amount of cash in their portfolios and these funds will be deployed in the next 2 to 3 months, in preparation for the next rally post elections. Next, we pondered – what if election results are not favourable?

Mr. Gandhi’s thought was that going into the election itself markets will rally about 10-15%. So if there is a correction due to unfavourable results, those already invested will only come back to present levels and not lose much. those who are in now will not lose much if there is an unfavourable condition as the correction if there is one, All the corrections that mid-caps should see is almost over and now the whole market will get aligned. There will be volatility but due to the whole market facing the same condition. Bigger as well as smaller stocks will have the same levels of downside. Whereas on the upside, there is a high potential for the smaller stocks to give higher returns. One is because they are at lows now and the other reason is that they will see higher levels of profit growth.

Oil is expected to touch $85 and probably from there it will see a fall. Exports will increase and with  support from corporate earnings from FY19 everything looks favourable.

For the investors, it is going to be a few more months of ups and downs and then launching off to the next big growth phase. Even our portfolio is doing the same, we have been adding more new stocks, reducing cash exposure and will be ready for the next rally before elections.

Add Insurance To Your SIP For Double Benefit!

Insurance is a high priority investment option in the minds of the Indian investor for decades now. In reality, it is not to be considered as an investment product at all. This option was made to look appealing by insurance companies as they provided a guarantee in repaying the principal along with some appreciation and also an insurance cover. Hence, in the unforeseen eventuality that the insurer is not alive, his dependents get a significant sum of money.

Pitfalls of Insurance as an Investment

Investors failed to realise that in return for their long-term commitment to pay premiums, what they got back was a pittance. When taking out a policy they only see the high numbers quoted and it looks like a rich reward. At the time of maturity when they receive the maturity amount, only then do they realize that the amount is not a significant growth of their monies. For creating this corpus, they would have shelled out all their lifetime earnings by paying premiums.

The tax saving advantage of the premium paid made insurance look like a much better option compared to other investment avenues available. I even heard the mother of a 2-year-old child asking her husband to take insurance for her child to meet future educational needs. It is not her fault because that is how her parents have saved.

Many are so very sincere and committed to paying the hefty premiums without realizing that, all their commitment is doing is making the insurance company rich and not them.

Increasing Awareness and Options

Off late there is increased awareness about the poor returns that insurance gives. Even with the tax savings that the product delivers, it is not worth an investment and people have been moving to term policies.

People shied away from term policies because they will not get any amount in return if they are alive after the policy term ends. They felt bad that they the premium paid goes waste as most of them are pretty confident that they will live beyond the policy term. Little do they realize that, however healthy you are, there are still some chances that things can go wrong. Life is not fully in our control.

A New Entrant – SIP Insurance

Now, there is a new option available for those who thought that term policy premium payment is going waste. Mutual Funds have begun to give insurance cover for SIP’s. It is called SIP Insurance, where, while you are investing through your SIP’s in mutual funds, you get an insurance cover without any extra cost. Moreover, all the money you pay for the SIP earns the highest returns. Insurance comes free.

Reliance Mutual Fund gives the highest returns in this segment with 120 times the SIP amount as the insurance cover in the 3rd year of the SIP investment. Coverage begins from the second month of the SIP with 20 times the SIP amount for the first year, 50 times for the second year and 120 times for the 3rd year.

The only condition is that the SIP should not be disturbed or redeemed till the age of 55 for the investor. One can start a SIP of 10K, in the 3rd year get 12 lakh insurance cover and then stop the SIP in that scheme and take it in another scheme. At present each fund has a maximum limit of 50 lakhs, so if a person takes a SIP in 3 or more fund houses, over a period, they can have a Rs. 2 crore insurance cover.

Regular term policies have their own challenges as one’s age catches up. Many investors have been denied insurance coverage because they have some existing disease or the premium gets increased because of the pre-existing disease. In SIP Insurance, these conditions don’t exist. Any individual who is investing in a SIP and has opted for insurance gets covered, immaterial of his age or disease status.

A big sigh of relief to those who are in the above condition. This SIP Insure product option takes away the challenges of investing in insurance and getting lower returns. Get in touch to know more about this new avenue for your life savings.