Is Market view Important ??

 When you are a long term investor. Is the market view really important. I think to some extent its important. Let us see few examples on the past and how i have reacted to market.

When Midcap and smallcaps fall in 2018, it was unexpected, but i had some cash to fill the porfolio with mid and small caps. That is when i realized to have a better crash fund of the overall portfolio and was ready to look stupid in the short term with FD returns. I was focussing to build a good amount of crash fund and waiting for any decent crashes.

Around late 2018, one of my Friend in cisco asked i have 60 lakhs plus in cash and what should i do. I told him how much i have in cash and said i am waiting for a crash. He asked me when market will crash and i said i dont know, but i am ready to wait, it could be 1, 2 or 3 years but its ok.  In 3 months time he bought a house in Chennai, later when the market crashed he did not had funds much to deploy, but my patience paid off.

The above is about having a crash fund when you see market is long run and expecting a crash. How to react to a market where you dont expect a crash but only corrections. Even here  market view is important.

For people of my age, who have been in the work force for 24 years, the savings will be decent and need to decide how much to deploy. For people with less experience the money to deploy in market will be propotionate.  So for people of my age if i have a view in market for next 5 years, i will not follow asset allocation.  

Let us say if i have a asset allocation of 75 percent in equity and 25 percent in Debt market. If that 25 percent of debt funds can take care of my expenses for next 15 years, will the asset allocation make sense ?? Not really i will not follow such a asset allocation rather i will ensure my debt funds can take care of expenses up to 7 to 8 years and move the rest to equity since i have a bullish view on the market for next 5 years. 

When you have a market view, you dont have to have a fixed asset allocation and ensure you can take  more risk based on the view of the market. Even if the view goes wrong, you have a earning and you have enough in debt funds to manage.  As i mentioned when you are less experienced less savings and market view may not matter. But at some point of time the view and funds deployed based on the view will matter.

Markets and returns - Future Updated View

 The earlier post in Sep 2019 is here

https://personalfinfitness.blogspot.com/2019/09/markets-and-returns-future.html

When this article was posted Sensex and nifty corrected around 11.5% from peak and nifty index was around 11k and sensex was around 36k.  That time the five years view was we are anywhere in midpoint and market would double from there that is sensex would be anywhere around 75k and nifty around 22k.

I also mentioned in the previous article that 2002 to 2008 is the golden period because nifty saw a 700% return in 5 years. Are we going to see the same again, i still doubt. But my view on nifty has changed based on some recent analysis.

From Sep 2019 we are already 2 years and its good to have update on my view based on current market conditions. In the next 5 years i am still bullish on the market and have arrive a figure of nifty hitting 36k.

After 5 years psychologicall people will forget the previous peak of 12450 and will say 2020 market was in 7500 and now its 36k which is close to 500 percent returns.

How to we arrive at a number like 36k.  We might still live in a low corporate tax regime. You can do some work by listing all nifty companies, extrapolate their earnings, profits, growth and arrive at a EPS for next 4 to 5 years and arrive at average EPS of nifty year on year and also have a reasonable forward PE and can calculate where approximately nifty can be. You can include few companies from nifty next 50 which may have a possibility to come to nifty 50 as well.  

Anyways this is just approximation and you can decide how bullish you can be. Even in a ultra bull market, corrections of 5, 10,15 or even 20 percent is going to stay. Lets us hope the low corporate tax is going to stay as well.

Bull Market Cycle - Real Estate, Gold and Equity

 When we say bull market cycle, prices of all the asset classes goes up. Classic example for a bull market cycle is 2003 to 2008. In this bull market cycle, Real Estate, Gold and the stock markets went roaring. Equity indices like Nifty went from 900 to 6200 plus which is almost 7 times. Gold moved around 2.5 times and Real estate moved around 4 to 5 times.

Is it possibe to find a bull market cycle ?? To some extent its possible. If you look at the start of the bull market cycle in 2003 the interest rates were lower and it was lower for atleast 2-3 years. E.g home loans were cheaper to the extent of 7% to 7.75% for 3 years plus. Demand started picking up and the growth was seen across all sectors. 

So what about 2008 to 2020 ?? We may not be able to call this as bull market cycle for stock markets, because let us say nifty moved from 6200 to 12450 before the crash. So in 13 years the indices just doubled, which is a lower returns regime when you compared to a Fixed deposit. But gold moved almost 4 times during this period and it was bull market cycle for gold.

Now how to handle a bull market cycle ?? If you go to any financial advisor, he will say Real Estate is a bad investment, equity is a wealth creator for the long term and in the past market has gone up 7 times in shorter period of time. He will also say have gold has some percentage of your portfolio as a hedge. 

Let us look at some real life examples since i was part of this bull market cycle in 2003 to 2008. In 2002 a person like me would have got just 5 years experience and say i had a capital of 6Lakh. I chose to put 2L in Stock indices, 2L in buying a property and 2L buying gold.

Stock indices: The 2L put in stock indices would have become 14 Lakh at the end of the bull market cycle in 2008 and my profit would have been 12L.

Real Estate: With 2L capital, i went ahead and bought a property worth 20 Lakh and at the end of the bull market cycle, a Sq ft of plot which costed Rs 1000 went up to Rs 4500 so for calculation let us say it went up 4 times. So the cose of the property would have become 80L. To identify the real profit you need to calculate the cost of the leveraging i.e the interest paid on the borrowed capital.

Lets not get into capital gains because you need to calculate the purchase price based on indexation and in the actual profit since there were tax benefits on the borrowed capital your cost of leveraging would be lower than actual as well... etc.

Gold : The 2L put in Gold would have become 5Lakh in 2008.

In the above example you could clearly see the real winner is Real Estate and the advantage in Real estate compared to other instruments is, In both Gold and Equity your capital appreciates where as in Real Estate your asset appreciates which is along with the borrowed capital.

People can argue even in Equity, you can leverage 20Lakh worth indices or stocks with a 2 Lakh capital. But the problem is in Real Estate the cost of leveraging is spread over 20 to 25 years and the risk is known. In equity after you purchase if market goes down 10% your capital of 2L is vanished and you are out of the market in no time.

So when you invest in a Market cycle understand the benefits and invest accordingly. In the above example even if Real Estate just doubled the cost of property would have have become 40 Lakhs which is a better return compared to a 7 times returns in equity.  

So how to benefit in Real estate ?? understanding Real Estate market cycle, Cities/areas of growth, leveraging and the cost of leverage. BTW why did Real Estate run up in 2003 to 2008 bull market cycle. Its the FDI in Real estate Bill that pulled more foreign investors to Real Estate.

This is why during the bull market cycle of 2003, when some one had 4 Lakhs they purchase two property worth 20Lakh with a capital of 2Lakhs in each and saw the property prices worth 1.6CR in a shorter period of time. But you need to understand the risk and should not fall in the trap.

Investing - Its a Serious business

 Earn, Save, Invest that is what we do with respect to handling money. Most of the people dont track the CAGR on their investments. The investment could be Real Estate, Debt instruments, Gold, equity, commercial properties. 

Real Estate : We often hear people say my father bought a land in 1980 for 1Lakh and today its 2 crores. Immediately people will conclude long term RE is good investment. You need to tell them though it looks big appreciation but the CAGR is 14.2%

Gold : Some people say gold is a good investment. When you look at 40 years data. Gold has appreciated 38 times, but again the CAGR is 9.5%

Sensex:  The index moved from 128 to 40k in this 40 years.  If you have invested in index it would have appreciated 310 times with CAGR is 15.4%

In the above most of the investments are not done as business and it was more like passive investing, bought and kept for years and that was your CAGR. 

I know people who consider investing as business and  will tell you with a recent example. A friend of mine who considers investing only with a business mindset. I can tell you what he did with his equity investments in the recent past

1. When nifty crossed 12K in January 2020, he hedged all the investments against nifty by buying the ATM put option - long term options for Dec 2020. Kept the stocks so that the dividend are intact.

2.  The hedging cost was managed by Selling the Call option of the same value in long term options for Dec 2020.

3.  When the market started falling he realized that he need to raise more capital and mortgaged his Real Estate and Gold investments and raised 3 crores with a 3 year mind set.

4.  When the market came to 8k he sold all the put options and bought back the funded call options.

5.  With the money made in options he sold 6000 put option again against long term options Dec 2020.

6. Invested all the three crore capital raised in different stocks, mutual funds and few long positions on nifty. 

7. When market crossed 11500 he took back the borrowed capital from the market and plan to close the morgaged loan. 

The morgaged loan was targetted for three years but got enough returns for the capital invested so he decided to close the loan and the profits he made is still in market. 

Investing with a business mind set allows you to take risk when there are opportunities and when there are opportunities you need to know how you should raise capital. Identifying businesses to double the capital every three years is possible only if you are investing with a business mindset.

Certainly investing should be considered a serious business irrespective of where you invest your money.

Did your MF investments beat Index returns

From an investment perspective i always believe Direct stock investment is the best considering the returns you might get, but that is not a easy job or you will learn it quick time, you need to spend lot of time learning it and also never do a Direct stock investment if your portfolio is not beating Index returns or even a MF returns. So people's first choice if they dont understand equity investment is to put it in Mutual funds, but you should also know if your investments are providing better returns than index or in worst cast than debt instruments.

Since i started my first investment in Dec 1999, its almost 20 years and i know the track history of the nifty/sensex and many of the companies how it has performed in this 20 years.

First time Nifty touched 6000 in Jan 2008 and first time we hit 12000 in May 2019. So Nifty has doubled only in almost 12 years which gives a return of 6% as opposed to a minimum expectation of 12% from equity. Even if you look at a debt product like PPF it would have earned you a 8% interest with interest being tax free.

Now Does that mean that the MF investment has been wrong ?? Not at all - equity as an asset class is really the only sensible way to beat inflation in a country like India and MF is a good vehicle for this.

Also, though Nifty returns are only 6% annually, most of us invested in well managed active funds and those returns are well above the 12% to 20% range in the long run.

As they say, past performance is not a guarantee for future performances, if you look at the last 3 year or even 5 year performance of some of the funds the investors should be worrying abt it because it might hit your financial goals, there are only handful of funds which has beat the index returns in the last 3 years.or even 5 years. Take some well known funds HDFC top 100, HDFC equity, AB frontline equity, icici pru discovery all are struggling to beat the index returns for the last 5 years. So its better to review your MF porfolio and understand why these funds are not performing and change the portfolio accordingly.

Bottom line - MF investments are good for your financial life but you need to do these by being more aware of it as compared to before. The old method of deciding on a SIP amount and letting it be in the auto mode will not work any more.

Blue Zone

How is Blue Zone related to Finance. Simple Health is Wealth. Did you know that there is a Blue Zone ? Its not related to Finance or War or Cold or ice. This is a marking used to designate places where people live the longest. Not countries but islands or villages with in the country where majority of the population is old or ripe old.

There are 5 designated places in this blue zone - Sardinia in Italy, Nicoya in Costa Rica, Okinawa in Japan, Loma Linda in California and Ikaria in Greece.

The term 'Blue Zone' first appeared as an international concept in the Nov 2005 national geographic magazine cover story "The secrets of long life". It is found that residents of these places produce a high rate of centenarians, suffer a fraction of the diseases that commonly kill people in other parts of the developed world, and enjoy more healthy years of life.

Sardinia in Italy is the place where people live the longest on earth, where an amazing proportion of men reach the age of 100 years. In Ikaria, one out of three people make it to their 90s and has the highest precentage of 90-year olds on the planet. The best part - they have about 20% lower rates of cancer and 50% lower rates of heart diseases.

All these five places share common characteristics of people - family always comes first, they have very little smoking, most are semi-vegetarians, they are constantly engaged in some moderate physical activity, have enriching social life which is integrated into their communities and legumes are the most commonly consumed food.

Is there a lesson for all of us to lead a better life while living in the Red zone? Also are we financially prepared if we live till 90 or 100.

Markets and returns - Future

With 11.5% correction from the peak, where is market headed. Buying at 40k, vs at 36k does it matter if sensex headed towards 100000. In terms of absolute returns it matters but yes timing is always a luck and not a skill.

For stock market returns 2002 to 2008 is golden period and will do a post with data, even though there was a 60 to 65 % correction in 2008. Why I say golden period is because the % returns you saw in index you will not see it in next 25 to 30 years, unless there is a deep fall followed by a steep rise.

Leave the past, where is this market headed... Experts whom I follow says, we are in midpoint and will double in next 5 years.
Over optimistic right.. I think the pain will be there when Q2 results come and we might be bottom fishing that time and from Q3 it would be handed over to Bulls.

Again, indian market is also reacts to global factors and there will be uncertainties... But certainly it will give inflation beatable returns in the next 3 to 4 years.

Ready to bottom fish and fill your portfolio...

Single Earning Vs Double Earning - Does it matter ??

To acheive a retirement corpus of Ten crores, a family with single earning member vs the family with both working members, Does it really matter ?? Only the power of compounding matters.

If some one asks me how much money is needed for retirement in India, though i say it depends on your life style, expenses and other commitments, but if i am still forced to provide a number.

I will say go for a networth of Ten crores (Dont include the assets that you might inherit). 

Once i say Ten crores people will defend saying for two people working it might be easier and if its a single earning then i have to work life long etc. This is just a mindset and they really underestimate the power of compounding which i have to explain to make them understand. May be we have been taught poorly the power of compouding.

Let us assume both husband and wife are working and they are able to save 11750 each.

Investment per month - 11750

Annual returns - 12%

Investment step up annually  10%

Investment Tenure - 25 years

After 25 years both husband and wife will accumulate 5 crores each so that the networth becomes ten crores.

Let us assume only one works and he or she is able to save 11750 each

Investment per month - 11750

Annual returns - 12%

Investment step up annually 10%

Investment Tenure - 30 years

After 30 years the accumulated corpus would be Ten crores.

So when one member works to achieve ten crores corpus it takes 30 years and when both works it takes 25 years(both working for 25 years) to acheive the same corpus for the same investment amount and step up %.

Both working for 25 years and one person working for 30 years, has pros and cons and i leave it to individual. But the point here is the power of compouding that works beautifully and acheiving 10 crore corpus whether single working or both working does not matter much as far as you are a disciplined investor allowing your money to grow....

In a later post let us see how the 10crore networth can be deployed...

Teachers Day - Lessons from WB

Today is Teachers day, a very important day to remember the ones who have, in many ways, moulded your thought process and taught you a way in life to earn an honest living. In many ways they are the role models and these are not just the acadamic teachers but those who teach life lessons.

For those in the stock market, there is no great inspiring teacher than Warren Buffet. Certainly his quotes will motivate us during this current trouble and confusing times if you have not predicted this.

Buffet's brilliance is in the simplicity of his advice

1. Keep things simple and dont swing for the fences.
2. When promised quick profits, respond with a quick "no".
3. Focus on the future productivity of the asset you are considering. If you dont feel comfortable making a rough estimate of the assets future earnings, just forget and move on.
4. With regards to speculation he says - I am unable to speculate sucessfully, and i am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an exception of profit if he continues to play the game.
5. A real winner of an advice - the fact that a given asset has appreciated in the recent past is never a reason to buy it.
6. For those who value stocks on a day to day basis - when he invested in properties he thought on the long term value, not daily valuations. He puts it so beautifully, "Games are won by players who focus on the playing field - not by those whose eyes are glued on the scoreboard."
7. Rational people dont risk what they have and need for what they dont have and dont need.
8. He says that one should invest based on one's "circle of competence" and make study of business they want to invest in a priority. And for those who do not have this competence, he says, " the goal should not be to pick up winners but rather be to own a cross section of businesses that in aggregate are to do well." This he explains is the "what" of investing.

Slowdown in Growth not a cyclical issue but more structural.

On Friday, we got the news on GDP and also the big bang announcement on merger of PSU banks and you could have seen today how market reacted. Market went down -2% and it clearly shows its worried on growth and not happy on the bank merger announcements.

GDP numbers are more worrisome because its very much lower than all the analysts expectations. GDP was at 5% vs 5.8% previous quarter and GVA was at 4.9% vs 5.7%. The worst hit was the manufacturing which was at 0.6% vs 3.1%.

Well, there have been many things announced over the last 10 days but there is nothing which has been directed straight at pulling up the sagging growth. There has been no BIG bang money spending measures, nothing fiscal.  The announcement on merger and capitalization will strengthen the banks but it will take time; we might see the impact of this only in FY21, depending on the timeline.

The slowdown at 5% means that the economy needs more than all that which the govt has given; a major fiscal push is required. I am not sure if the govt is thinking this as a cyclical issue. If it thinks it as cyclical issue they are sure to screw up the economy further, unless they realize soon its a structural issue and these structural issues needs to be addressed soon. Sentiments are low and that too, to a large extent is keeping the demand on bay. The govt needs to thus announce measures which will push up investor confidence and more than non-fiscal, a good fiscal push is required.

Taking care of the FII and super-rich alone will not help; the govt needs to get down to real reforms. Collapse of the private sector consumption is a very big worry and that is what the govt needs to concentrate on. Manufacturing growth at a meager 0.6% should really get the govt going.

The grim picture we see today is more on account of our own doing and cannot be blamed on the global factors alone. Hope the govt takes this very seriously and gets cracking on pushing reforms which impacts real people and not the mere 1% of the population.

Fundamentals Vs Market Sentiments

Last week you could have noticed market fell over 580 points in a day because it was expecting a stimulus and rightly so, it has been denied. On Friday, there were rumours about Govt rolling back the super-rich tax and not surprisingly there was a bounce back.  After the FM announced the SOPS including the tax invocation after market hours the market might bounce back today.

When you look at market behaviour from outside it makes you wonder whether fundamentals rule the market or only sentiments. Yesterday all the talk about growth faltering, unemployment, gloom and doom was all that we could see and read and today, suddenly, everything just vanished in a whisk as news of the FIIs tax getting exemption started making the rounds.

Thus the way the market functions today is - give me something, give me all the attention, spoil me, pander to my needs or else i will crash!!

In Aug FII sold to the extent of 10,656 crores and DII were net buyers of 14,599 crores. In July FII were net sellers to the extent of 16,870 crores and DII were net buyers of 20,394 crores.

When DII are net buyers, they are buying more than what the FII are selling, yet the markets fall. Does not this mean the DII, despite the growing money power have no sway over the market? They help mitigate the selling impact of the FII to some extent but despite buying more than the FII, they enjoy no or little clout.  DII certainly do not have the kind of influence which the FIIs have; Do you think that consistent DIIs selling will force the govt to rollback any tax imposed on mutual funds? Or for that matter, with DIIs being net buyers, will they get benefits or can the govt take a stand and say what the FIIs think does not matter ?

Well, as we know the answer is a big NO to all the questions. FIIs continue to hold the market and the govt enthralled and what they need and want matters more than anything else.

Will DIIs ever be able to replace this clout of the FIIs? Thats a day we all should eagerly wait and it will take a long while. Though DII's are pumping huge money into the domestic equities, still they cannot absorb the foreign inflows. When more and more household savings go into equities instead of physical assets the influence of DII will go up.

Its a generational change we are talking about but it will happen. Till then we have no option and FII will drive the markets.

Nifty Returns - Part 2

In the earlier post, we saw when Nifty Index moved from 6000 to 12000 the annualized returns was 6% and a debt instrument like PPF would have given a 8% annualized return which is exempted from Tax.

So, If Nifty gives a 6% returns can we expect the well managed funds to give a return of 12-15%.
I took Aditya Birla SL Frontline equity, HDFC Top 100, Franklin india Blue chip. These three funds were hot selling funds and many MF investors have in their portfolio. So what is the annualized returns of these when you invested on 1st Jan 2008.

AB SL Front line Equity - 8.57%
HDFC Top 100 - 9.04%
Franklin India Bluechip - 7.06%

So for a 12 year long period holding it in well managed funds like the above gives you just one percent extra return than your debt instrument like PPF. Remember today we have LTCG at 10% as well.

Bottom line once again: Bottom line : MF investments are good for your financial life but you need to do these by being more aware of it as compared to before. The old method of deciding the sip amount and letting it to be in auto mode may not work anymore.

Nifty returns

In Jan 2008, Nifty first touched 6000 and with current value of nifty let us assume nifty regains 12000 by Jan 2020. Nifty index doubled in 12 years with annualised return of around 6 percent. For a 12 year long period index returns gets doubled in 12 years.. Does it help beat inflation...

PPF is EEE category and would have fetched annualised returns of roughly 8 percent in debt instrument..

If you would have invested for a 15 year goal in 2008.. don't you think you will be well short of your goal. If nifty is giving you 6 percent annualised return for 12years.. how many of well managed funds going to give 12 to 15 percent returns for the same period..

Bottom line : MF investments are good for your financial life but you need to do these by being more aware of it as compared to before. The old method of deciding the sip amount and letting it to be in auto mode may not work anymore.

When PAT rises can ROE keep falling...

Return on Equity is the ratio of net income to equity or net assets (i.e assets - liabilities)

ROE = Net income /(Total Assets - Total liabilities)

If the denominator (Assets) rises at a higher rate than the numerator (PAT), ROE will fall, despite rise in profits.

If a company having rising profits and debts starts to reduce its high debt burden by paying off the debt at a fast pace, the liabilities of the company will start reducing and this will be mostly by the excess cash profits generated by the rising PAT levels. This indicates that the assets may still remain high and the denominator inturn will increase. This situation will lead to falling ROE even when profit increases.

E.g for a company

Let us assume PAT (a) increases from 20,00,000 to 30,00,000 from FY18 to FY19.
Total Assets (b) increases from 5,00,00,000 to 6,00,00,000 for the same period
Total liabilities (c) reduced from 3,00,00,000 to 2,75,00,000
Shareholders capital (d) = b - c ; increased from 2,00,00,000 to 3,25,00,000
ROE (a/d) decreased from 10% to 9.2%.

In the above example ROE has fallen despite the PAT rising because of the lower liabilities and higher assets in the balance sheet. Thus while analysing the company's ROE an investor should keep a watch on the assets and liabilties of the company to understand the accurate reason for change.

When PAT rises can EPS fall ?

PAT means Profit after tax or net profit or profit available for equity shareholders. A company having increasing profits/PAT can have lesser EPS than the last results due to increase in the number of shares issued by the company. Increase in number of shares are due to issue of bonus shares or share split or stock options being exercised or issue of new/fresh equity shares.

EPS (Earnings per share) is an important metric tracked by investors, shareholders and analysts. It is calculated by diving PAT by the number of shares. Since outstanding number of equity shares is in the denominator, any change in the same would inversely affect the EPS despite rise in numerator.

e.g A company having PAT of Rs 100 crores has 10 crore outstanding/issued equity shares in year 1. The EPS in this case is Rs 10. In Year 2, PAT increases to 120 crores. Also, in year 2 company issues a bonus share in the ratio of 1:1 which makes the outstanding shares to 20 crore. The EPS in this case is 120/20= Rs 6 for year 2. Thus we can see the increase in number of shares affects the EPS despite increase in PAT levels of the company.

Mutual Funds - Regular Plan Vs Direct Plan

If you are investing in Mutual funds look at in which plan you are investing whether its Regular or Direct. People who started 10-15 years ago would be in Regular plan. Even if you investing through the recommendations of IFA look at in which plan you are investing. Direct plan came into existence 6.5 years ago.

One aspect to look at direct plan is the expense ratio it will be atleast 1% less than Regular plan. When your corpus size grows 1% every year saving on expense ratio will be a big money.
Take Mirae asset Emerging blue chip for e.g expense ratio of Direct plan is 0.79% and for Regular plan is 1.99%. So prefer to chose Direct plan than regular plan.

But when will the expense ratio will be a fixed money and not %, no one knows its in regulators hands. From investors perspective it should be a fixed amount and not percentage.

Ground Reality - IIP Slumps

For Kashmir to Grow, the rest of India needs to grow first. IIP for June in at 2% vs 3.1% in May and it put forth what we knew all along - the economy is slowing down and slowing down fast. With the auto sector almost gutted, realty also down in the dumps, these numbers of industrial production, at least as of now seem merely symbolic. The sharp degrowth in capital goods and consumer durables shows the reality we experience. Manufacturing too at 1.2% shows sure signs of slowdown.

Internals of IIP:

Manufacturing 1.2% vs 2.5%
Capital goods  -6.5% vs 0.8%
Primary goods 0.8% vs 2.5%
Intermediate goods 12.4% vs 0.6%
Consumer durables  -5.5% vs -0.1%
Consumer non-durables 7.8% vs 7.7%
Electricity 8.2% vs 7.4%
Mining 1.6% vs 3.2%

RBI on Wednesday did what it could do the best and now the onus now lay on the Govt, a rate cut can only do so much beyond that, structural issues needs to be sorted out and smoothened by the Govt. Also there is a lot of uncertainity, especially on the global front and till that settles, growth will continue to struggle. At this junture, to say that RBI cutting rates will boost the sagging consumption story would be too far-fetched.

The markets are currently in the positive zone after days of consistent battering and this is on the hope that the FM will soon announce the clarification on the surcharge issued inadvertently on the FII/FPIs in the budget, and after that FII have turned aggresive sellers.

FM has assured that all the action will be taken "very soon" to boost the sagging economy. So once again the market and the indian industry will wait and watch. Hope the sense of nationalism now gives way to boost the sagging economy.

One more Successful IPO - Affle India

Affle India has its presence in the new age Tech and high growth industry had a fantastic listing today at 20-25% premium. Issue price was Rs 745 and got listed at 929 and rose to 958 levels and closed at Rs 875.

Affle India is based on Gurgoan and Singapore provides B2C digital advertising services in the mobile space, undertaking customer acquisition, engagement and transactions through mobile advertising. Being a data driven company, business model is asset light and scalable. Company have a 28% EBITDA margin.  It serves clients across e-commerce and traditional consumer industries. In the past 13 years of existence has accumulated 2 billion customer profiles and 300 billion data points. Company looks good in a high growth industry.

Let us track the next one Spandana Sphoorty.

Companies that benefit when oil slump

In Capital markets, whether dollar goes up or oil goes up or the reverse happens you will always find beneficiaries. Basically any event will have some beneficiaries. 

Companies which will benefit directly from falling crude oil prices are mainly upstream oil companies like ONGC, Oil India and less OMC's. These are the obvious gainers. Other big gainers would be paint companies like Asian Paints, Kansai, Berger and Shalimar as 25% of the raw material cose if from crude derivative and when price reduces, margin improves. Analysts say, 10% fall in crude oil prices will boost margins by 200bps. 

Another gainer will be tyre companies which uses crude derivatives in its raw material - infact it has double advantages of falling rubber prices too. Companies making plastics will also be beneficiary as cost of its crude oil polymer to make plastics comes down. Packaging costs will come down as it also uses petroleum derivative. FMCG and airline companies will also do well as falling crude will help better their balance sheets - a 10% fall in crude will lead to 300bps rise in EBITDA margins.

Gold driven by Sentiments

When Equities are undergoing correction, oil is slumping every day, realty is down the only price that is going up is Gold. 24 carrot gold touched 3700 yesterday and today its at 3728 rupees. This is normal when everything else is down, it indicates an increase in uncertainity and that means gold becomes safe haven.  As per analysts 10gm of gold could hit 40k by Dec 2019. 

There is an indelible relationship between price of Gold and Oil. When oil falls, gold will rise and when oil rises, gold will fall. This is not just co-incidence; there is a logical reasoning to this correlation between these two. Gold is used as a hedge against inflation which is spurred by oil - wen oil prices rise, gold prices also rise. But the anamoly here is that when oil prices fall along with equity, there is a need for investors to run to something rock solid, which will give the cushion from the fall. So when oil slumps, the need to use of yellow metal as a hedge comes down but becomes a tool of safe haven - demand for gold is more out of a sense of security though demand as hedging tool falls.

There is another school of thought - if oil prices rises, gold prices also rises as rising oil indicates inflation, which inturn leads to increase in price of all commodities.  Yet this is again not really waterproof correlation as in 2014, even when oil was over $100/barrel, gold was down. Thus one cannot say that oil prices and gold always move either in tandem or inversely. 

Gold is one commodity which is driven purely by sentiments - the moment there is uncertainty, global turmoil, fear of economies hurting or slowing, gold immediately shoots up. Gold is always an anchor against stromy weather, the go-to metal when the risk is high.

Experts say, have 5-10% of the porfolio in gold.  The problem with gold when we buy as ornaments if we have to rebalance our portfolio based on the networth, say if gold becomes 15% of the networth will we ever go and sell it.. So when investing in gold look for ETF,bond funds or severeign bond schemes so that rebalancing your portfolio becomes easy.