Last I posted was two months back, how time flies! Anyways, last time I posted, I did mention about how hot money could flow out pretty quickly and be ready to redeploy. Well that theme played out partially with FIIs getting bored with markets post the Budget and RBI Policy. The government chipped in and spooked them some more with the GAAR regulations which threatens retrospective taxation and may bring P Noted within their ambit. Also the rupee is not helping. Its in free fall mode as we speak. So what happened was the beta play of Jan and Feb stopped. People got scared with the massive deficit numbers and sticky inflation. RBI’s outlook more or less indicating this rate cut is all you get for the next 2 quarters and falling growth led to a nose dive into defensives. End result? Broader markets remain range bound. FMCG continues to outperform. Nestle, ITC, HUL take a bow.
So where do we go from here? Q4 numbers are also more or less in line, done with. Market for the interim atleast is searching for triggers. And not many are too encouraging. S&P downgraded sovereign rating of India to BBB- Negative outlook. Now that will spook the firangs even more!
Remain invested. Good thing is from a valuation perspective 13x one year forward gives us comfort. So downside to that extent is protected. What we should bear in mind is probably a significant time correction still ahead of us for the next six months at least. There would be interim opportunities in the meantime. So all is not lost! Stay invested, stick with blue chips for stability. Introduce beta in the portfolio through quality private banks, who are doing surprisingly well and available at decent valuations. Add beta through auto, a proxy to consumption and valuations not as demanding as FMCG. Do take a bit at cap goods through known names like Larsen and Crompton. For the interim, to hedge the deficit, buy exporters like Cipla, TCS. Pick up some quality mid caps along the way, they have really outperformed the markets by a large margin. Risk reward in some cases better than large caps.
So where do we go from here? Q4 numbers are also more or less in line, done with. Market for the interim atleast is searching for triggers. And not many are too encouraging. S&P downgraded sovereign rating of India to BBB- Negative outlook. Now that will spook the firangs even more!
Remain invested. Good thing is from a valuation perspective 13x one year forward gives us comfort. So downside to that extent is protected. What we should bear in mind is probably a significant time correction still ahead of us for the next six months at least. There would be interim opportunities in the meantime. So all is not lost! Stay invested, stick with blue chips for stability. Introduce beta in the portfolio through quality private banks, who are doing surprisingly well and available at decent valuations. Add beta through auto, a proxy to consumption and valuations not as demanding as FMCG. Do take a bit at cap goods through known names like Larsen and Crompton. For the interim, to hedge the deficit, buy exporters like Cipla, TCS. Pick up some quality mid caps along the way, they have really outperformed the markets by a large margin. Risk reward in some cases better than large caps.
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