April-August in 2015, is my money safe?

Stock markets have taken a nosedive post Chinese currency crisis, affecting valuations worldwide. In a sense, this correction has been getting the real value of those stocks, which had run up without any fundamental support. In this scenario, how our portfolio has performed or is my money safe? Is the question that will strike our mind?

Overall there is likely to be a drop in value of the investment, because one cannot be positive always by investing into Equity. Equity is a volatile asset and it is only due to that volatility, there is opportunity for the smart people to outperform all other asset class in returns.

If it is continuously going up like a Fixed deposit, there is no chance to have any better profits than the average and there is nothing much to do with this asset. And if there is something, that secure, it would have factored in for all the fears and have the minimum appreciation. It is because of this reason that the secure assets grow below the inflation which is normally said in the investment parlance as ‘Negative Returns’.

These kinds of corrections are not a surprise; a small magnitude correction does happen once in 2 years and some corrections of higher magnitude happen once in 5-6 years. This is mandatory and we have seen them quite often only that over time, we tend to forget the pain we went through. Once we move into a zone, where we experience pleasure, there are very less chance that we remember the pain we underwent, before reaching the joyful zone.

Sensex Gain ChartThis is what is happening with the markets now. Last year we had a euphoric run and now it is correction time. We have not moved below where we started on this current rally, but, when markets corrected, there is panic of losses and newspapers & media are blowing it up. When the bull market of 2014 started SENSEX was at 19500-21500 range, now the correction is happening at the 30000-25000 range. It is more than 3500 points higher than the space where it began. When this consolidation is complete and we resume the next journey upwards, we will have a support zone that is for sure, higher than the previous one at 19500.

For a regular investor, this was a good opportunity; having secured about 15% profits and moving up to add more. But, for people who time the markets and wait for a lot of confirmation before entering in, the losses could have been higher, because, by the time they decide and take the plunge, market would have had a fairly higher move and be ready for a correction. If someone had entered the market in March 2015, their losses as of now will be more than 15%.

fundAll these events that come often, like the Currency War that is happening now, will inflict a small damage, make the valuations realistic andPharma-Tabs vanish from the scene. Then, we tend to forget the pain the move on. To avoid major damage, any portfolio has to re-adjust the holdings by moving out of weaker stocks and add stocks that are showing new strength thereby getting prepared for the next move.

Every time there is a correction, the leadership among sectors and stocks change. In 2013 Technology sector was strong, in 2014 Agriculture and Automobile stocks had a very good rally, now in 2015, Pharma and NBFC stocks along with Textile stocks are showing strength.

Let’s take a look at how our portfolio at Bravisa Temple Tree has performed so far, in this financial year compared with the other funds that are available in India. As our portfolio consists of diverse sectors, it is apt to compare the performance with the diversified funds and the broader index that can be either the NSE 500 or the BSE 500 Index.

Apr-Aug15 Returns

In the last 5 months in this financial year, the top performing diversified fund, is the ICICI Prudential Exports & Other Services Fund with a near 8% returns, while the NSE 500 Index has given negative returns of close to -7% in the same period. Bravisa Temple Tree portfolio has managed to record 3.34% returns in the last 5 months.


Bravisa Temple Tree portfolio stands second in the top order in performance. Our portfolio does not consist of any Banking or Metal sector stocks which have been the biggest wealth destroyers in the recent past. We moved out of Banking in end 2013 as the performance of Banks sowed and they began to feel the impact of wrong lending. Moving into the Pharma sector along with the NBFC and Textile sectors just as they began to show strength in 2015, was the reason that we have performed well. ICICI fund has exposure in the Technology sector which has been showing a run up following the currency depreciation. We have low exposure in Technology stocks as we follow the discipline of investing only in those companies that show strength on their Sales and Profits. Technology sector profits are likely to show more growth in the coming quarter because of currency depreciation, which is not a right valuation. We might miss a few percentage gains by not adding them to our portfolio, but, on the hindsight a portfolio that only consists of growth stocks gives more confidence when there is a shakeout in the market, because, overnight there cannot be a situation where such g companies with good fundamental will falter and bring down the valuations.

We have been reducing exposure and moving to cash as many of the stocks in our portfolio that were showing tiredness are moving out of the portfolio. On a continued weakness in the market, lower exposure will ensure lesser losses and when the market moves up after the correction, we have funds to add new stocks and be on the next journey with a stronger presence.

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.


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%.


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.