There are many version … for this graph the global metric in dollar terms - to make it India relevant we have divide it by PPP factor ie around 4 so …
I am presenting number both global and Indian which is relevant for India after using PPP factor in Rs @ rate of Rs 70 per dollar
Middle Income : Global : < Rs 3.29 crores , Indian < Rs 82 lacs
Upper Income : Global > 3.3 crores < 72 crores , Indian > 82 lacs < 18 crores
The Ultra Rich : Global > Rs 72 crores , Indian > 18 crores
Blast from past . From a book written in 19th century … on being bull in bear market . Things have not changed in 200 years …
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via Investopedia .
Sector Rotation Strategy - fits into being bull in bear market -
What is this strategy all about ??
Sector rotation is an investment strategy involving the movement of money from one industry sector to another in an attempt to beat the market.
Theory is – financial markets attempt to predict the state of the economy – anywhere from three to six months into the future. That means the market cycle is usually well ahead of the economic cycle.
4 part of Economic Cycle - As discussed market will discount it 3/4 months earlier
This is not a good time for businesses or the unemployed. GDP has been retracting, quarter-over-quarter; interest rates are falling; consumer expectations have bottomed
Sectors that have historically profited most in this stage include:
Early Recovery
This is when things start to pick up. Consumer expectations are rising; industrial production is growing; interest rates have bottomed
Historically, successful sectors at this stage include:
Late Recovery
In this stage, interest rates can be rising rapidly, with a flattening yield curve; consumer expectations are beginning to decline; and industrial production is flat. Historically profitable sectors in this stage include:
Early Recession
This is where things start to go bad for the overall economy. Consumer expectations are at their worst; industrial production is falling; interest rates are at their highest
Historically, the following sectors have found favor during these rough times:
The last nail in the narrow bull market we had since January 2018 seems to have been hit with the unimaginative budget recently presented. It looks like the Govt treats the stock market like casino activities which are the past time of the well-heeled. How is the Govt going to fulfill its disinvestment target after stifling the capital market with cumbersome and exorbitant taxes? It looks like poor people’s insurance premiums will be used to meet the disinvestment target because there is long run way ahead of LIC before it hits the road block. The economy is slowing. The ground reality is very bad. A few stocks propping up the benchmarks can not hide the dire economic situation. In spite of benign international petroleum prices and other tailwinds, during the previous regime, the Govt fumbled badly in managing the economy with unimaginative measures like demonetisation and failure to smoothly implement GST etc. This budget seems to be unimaginative as well with insufficient steps to revive the economy and capital market. The market has given a thumbs down to the budget. Is this the way the Govt is fostering equity culture?
I understand the reason for Demonetisation although I do not agree its use
What I do not understand is the implementation of GST without consulting businesses.
Many small businesses that are a backbone of the economy couldnt survive due to cash flow issues related to GST
One of my friend had a factory to manufacture garments and he was doing extremely well before demonetisation and GST.
He couldn’t survive the effects of both and had to close his factory
According to him demonetisation & GST were comparable to the Britishers cutting the thumb of Indian weavers
The present government has every intention of running the country efficiently however they have never run the country for a stretch before.
Their learning exercise is costly, elections are won irrespective of economic performance, its almost a quasi democratic state we are in.
Presently there is feeling of letdown in market …People have become lazy , so there is less competition for many opportunities ( both on buy and sell side )
As Valupickr one should be more aware and play the game - The best thing for any investor is co existence of bull and bear market .
If enables you generate cash by selling over priced and buying underpriced unlike pure bear and bull market
Best wishes to all - Happy fishing …
Markets are tired because they lack trigger. Every fund manager and investor was super bullish 2 years back and has been hanging on to their pf waiting for corporate profits to show the light. Yes traders have had a field day when ever markets tanked buying and selling when the pulse starts rising after fall. Government has given their vision statement of 5 trillion by 2024 which will keep the markets hope high and will not let the markets go belly up. Investors will benefit once the numbers start showing in corporate profits. So opportunity aplenty for both breeds. Happy investing.
Unorganized sector was thriving at the cost of organized. Cheap labour no taxes, lower overheads. If we have to compete globally we need clear cut rules, fdi, labour laws, infrastructure, efficiency higher productivity better quality and lowest price. GST is formalisation of market rules. Rest will happen with government focus and drive.
Everyone likes easy things and change is irritating but some things have to be taken as medicine.Markets will allign.
Thats one way of looking at it
The bitter medicine to get better but its an idiom that has not been tried in economies
UK for instance had 50% of fake £1 coins, they didnt declare them invalid but came up with newer coins that were fool proof
We demonetised our currency and came up with a replacement currency that was again easy to copy
UK again is coming up with changes to VAT, companies house laws but they are doing it after discussion where each and every business has a chance to object and raise their concerns before they finalise new laws
Even when they do finalise, it is tested on a small section based on criteria such as revenue before releasing it to everyone
What did we do with GST - we just implemented it and locked cash flow of companies by making VAT recovery difficult
Formalise and change everything but do it in manageable steps. When we think we know better than everyone else and try to reinvent the wheel, we repeat the lessons that somebody has already gone through
This is not just bjp, remember the Delhi odd and even driving to reduce traffic congestion - this was tried long back by other countries we still decided we need to learn it ourselves
Ofcourse in a personal capacity you cannot do anything and I am not hoping you will but to defend the action without observing the world is sheer…
Market seems to be picking a sector and flogging the stocks upside.
Story of paper and chemicals seems to be over and now any upward movement in this segment will be slow and based on results.
water may be the new theme. Water related stocks are holding good. Ion exchange, vatech, jash…
It’s just an observation.
Money is nimble, Governments are not. For every rule their are going to be 10 ways to circumvent. Opinions differ Government has the courage and will to make doing business attractive. I will still bet on the long term vision. You have the right to to hold your views …be civilisatied even if u disagree…
I have a counter viewpoint on the latest budget. I think it has numerous positive aspects that we are missing out on and that could be because we have seen a 5% drawdown in NIFTY. The stock markets are a little myopic; while on one side it looks like the correction is due to increase in taxes, the drop in NIFTY could be due to the markets needing a reason to take profits off the table. NIFTY crossed 12K for the first time a few weeks back and we have had a one way 20% rally from the lows seen in late 2018. Profit booking was expected anytime.
During the 2016-2018 bull cycle, we had all stocks including the substandard one’s rally. The rubbish stocks were the ones that have shown a steep rally over a short span of time and they have corrected equally fast. The poor-quality ones seem attractive due to price action and a large number of retail investors have invested here unfortunately and that has resulted in a lot of pain. The good quality ones have either continued to make newer highs or shown corrections and partially recovered too.
During 2016-2018, we also had the clampdown on pollution in China, because of which some sectors in India like metals and chemicals benefited. With Chinese factories coming back onstream or simply due to profit booking, these stocks have shown a correction too, which was expected. Retailers have invested here as well, and the ensuing corrections have taken them by surprise.
Here are some notable positives from the budget:
One key reason for the current liquidity crunch is due to poor standards of lending practiced by NBFC’s towards the risky real estate sector; The government is encouraging PSU banks to purchase high rated NBFC retail loan assets by providing a credit guarantee and has also provided for capitalizing these banks. These steps seem adequate and anything more by the government would have been uncalled for (like helping NBFC’s tide over risky builder loans). RBI will now be the new regulator for HFC’s
While personal tax rates have gone up for the super-rich, corporate tax rates have come down from 30% to 25% for turnover less than 400 crore. (7% approx. increase in EPS for small/micro cap companies)
Continued investments in infrastructure: Railways and Road development will continue to see large investments and pertinent stocks will benefit (like Dilip Buildcon, Ashok Buildcon)
The government has put forth aggressive targets when it comes to basic necessities for the poor who are the vast majority of the country: like clean water and electricity for all households. We have seen power stocks and “water related stocks” (those companies possessing technology for clean water) rally.
While more aggressiveness when it comes to combating pollution like a roadmap towards moving to EV’s for instance, would have been welcome, however, going forward, I am expecting organizations like NITI Aayog and the newly formed “Jal Shakti Ministry” to come out with innovative proposals when it comes to combating air and water pollution.
While the following is not budget related, it is commendable, nevertheless: The government has transformed the economics of the sugar sector. Around 5%-10% of rural population is dependent on sugarcane grown by them. All sugar stocks took a beating late last year due to a sugar glut seen worldwide and even in our country. The government reforms took all by surprise, including the naysayers. There were numerous investors who concluded that the sugar rally was over. The reforms are well thought through and will go a long way to ensure that sugar companies are profitable, farmer dues are paid and our reliance on crude comes down (due to a mandatory 20% ethanol blending into petrol and higher payments being done towards ethanol produced from sugarcane directly called “B heavy molasses route”). Sugar stocks have shown a remarkable turnaround yet again.
I think that the pain being experienced by investors is mostly due to investments in substandard stocks and cyclical sectors like commodities, auto, etc. that have corrected steeply. The current NIFTY correction could be profit booking driven and there is an opportunity to rebalance portfolios by focusing on companies that could benefit from incremental investments being made by our government as detailed in the budget. The move towards reducing promoter holding from 75% to 65% in public companies could result in better corporate governance standards being practiced by them and is also an opportunity to rebalance portfolios.
The budget impact will end soon, and NIFTY movements will go back to being dictated by basics: EPS growth and sustainability of the same.
When promoter has less skin in the game, how will it result in better corporate governance standards? We have seen how independent directors, PE fund directors (in case of Manpasand) are fooled.
This move will only lead to delisting of good MNC stocks where ordinary investors could invest hoping not to get cheated.
This strong view is coming from Vijay Kedia - budget 2019: Budget treated equity investing in line with cigarette or alcohol use - The Economic Times
Did we see RJ come out with any interview after this budget. All of them are stunned in silence at this so called right-wing government which is actually a leftist govt. If you cannot respect capital, then capital has lot of other countries to go. Keep on increasing taxes, and handing out doles to get votes. Hasmuskh Adhia had said that capital gains don’t accrue from any effort. This in nutshell is thinking of this Govt which thinks that its a sin to make money from capital markets. Rest all of the budget is vision statement which sounds good but lack substance and implementation details.
Point well taken. Government role is to create environment of good business practices, fertile for innovation, good infrastructure and clear policies for business to flourish. Growth and stock valuation is a sub function of business. They are trying to navigate the path with a clear focused target and policies which evident from RERA, Startup eco system, EV focus, Solar focus and so on they clearly know what the country needs not what individual business , stock investor needs. The only thing they need to focus now is to get out of business and ensure good governance . If the government has given a target it is already creating a pass or fail Report card for itself… I do not think any other government has given such forwards looking statement. If they achieve it …eventually will grow the markets in multitude.
Here is an example of a MNC stock with 75% promoter ownership and with poor standards of corporate governance: Multibase India. 75% of Multibase is owned by a reputed MNC: Dow Dupont. All of a sudden, without any prior warning, the company discontinued sales of a key product, antiform, that constituted 37% of overall sales, demonstrating poor standards of corporate governance, and which has resulted in stock price dropping ~80% from the peak. If such companies being backed by reputed MNC’s delist, then we all can agree that this will be good for retail investors in the long run.
This example is only to state that poor quality stocks can take different forms and as long as regulations are not stringent, we will continue to see stocks with lax governance standards on a regular basis.
I have also gone through the article by Vijay Kedia. Nowhere does he mention that reduction of promoter holding from 75% to 65% will result in adverse impacts to the point where MNC’s delist. His criticism is primarily around how retail investors get taken for a ride while the “well heeled” make gains, and that the government should do something about it. With respect to the budget, his criticism is around increased taxes both for the superrich and buybacks.
As for promoter-holding coming down from 75% to 65%, resulting in improved corporate governance, the logic is the following: With the public owning more shares, this should hopefully result in increased dialogue between minority shareholders and the company promoter/board across the stock market in general, lead to increased shareholder activism and eventually put pressure on the regulators to get their act together and do something to prevent blatant manipulation of stocks and insider trading. The “promoter holding reduction” (~10/75 = 13%) is small and should not impact the morale of the promoters to the point where they stop focusing on creating value and instead start looking for loopholes in the system thereby leading to adverse governance standards.
Digressing from the topic a little, while Vijay Kedia’s point around retailers always losing money in the stock market is absolutely right, we should be able to delineate “cause-effect” relationships a little more.
Let’s take a data-driven approach and understand the kind of stocks retailers lose their hard-earned wealth in; these stocks can be divided in to the following groups:
Cyclical stocks driven purely by the nature of the underlying product/end of sectoral run: Auto and auto ancillaries, tires, rubber chemicals, shrimp feed, sugar, rice, pharma etc.
Cyclical stocks driven by unique situations leading to manufacturing disruptions globally: specialized chemicals, carbon stocks, steel, paper etc.
Stocks impacted by NBFC crisis and poor lending practices: DHFL, Yes Bank, PEL etc.
Overpriced Consumption oriented stocks: Page Industries
Pump and dump / stocks with poor standards of corporate governance: The list here is huge: PC Jewelers, LEEL, Manpasand, Kridhan, Intense Tech, Cosyn, Kellton Tech, 8k Miles, BEPL, Lycos, Aksh Optifibre, Sankhya and many more
Does it mean that all stocks in our market have destroyed wealth? I don’t think so. Here is a list of stocks that have continued to make new highs/Recovered after late 2018 lows:
IT stocks including midcaps (LTTS, Sonata, NIIT Tech, Mindtree etc.)
Select consumption-oriented stocks: Jubilant Foods, Bata, Relaxo, VIP, Bluestar, Voltas, Vguard
Banks including non-index ones (DCB, RBL)
Certain specialized chemical stocks like Vinati, Atul and Aarti Industries
Commodity stocks like Sugar, power and water stocks have shown some recovery
Based on the data, it is clear, that if the “effect” is that of retailers losing money, then the causes are either a) Retailers don’t do enough due diligence on fundamentals b) Do not attempt to get entry and exit points right and c) Do not bail out on the first signs of trouble d) Do not maintain diversified portfolios and e) Regulators are not doing enough to put in /implement regulations to avoid rampant manipulation and insider trading.
While it is fair that government should do more to make the stock market a level playing field, retailers should also put in more effort to safeguard their wealth and if that is not possible, invest in a basket of mutual funds.
Stock markets will always have loopholes and stocks will always rise and correct. It has been the same way for decades. It is better to spend time learning and figuring out how to make money instead of blaming extraneous factors for our dismal portfolio performance. That is one of the points being made in my earlier post. The Budget has had a reactionary effect on markets and going forward, macro and micro factors will prevail and dictate movement of NIFTY.
As rightly stated , in recent times bull and bear market has coexisted - giving long term investors multiple opportunities for building portfolio for next 3 - 5 years .
All news and regulatory actions present opportunities - It is important for all of us encash it as per own investment philosophy .
The problem with going from 75 to 65 percent is that there is limited money that can increase share prices
With 10 percent of most companies coming into the market in a bear market prices will further go down
Government will give 3 years for this change? If yes, then we do not know how bull or bear the market would be when final deadline is near…
A lot of money and wealth is tied up in gold
Tomorrow if there is something equivalent to Spanish/Mexican gold where making gold gets cheap then all that wealth will just vanish
Before humans found a way to make steel, the only steel available was from comets crashing into the earth (very very rare) and the price of steel was way more than gold
Gold investment or holding in itself doesn’t create anything but our fondness for gold means a lot of our gdp is tied up in gold
Even if you just take out Indian demand for gold, the prices of international gold will crash
The USA had once banned ownership of gold. There is more black money held in gold than in any currency or Swiss bank and banning gold or limiting the holding to 50 grams per person or 10pc of their declared wealth on the tax return whichever is higher will be more beneficial to the economy as this savings can then be used instead of supporting foreign mining companies to Indian infrastructure development
Gold is just a means to preserve purchasing power of saver while keeping it fairly liquid. The reason gold is such a good store of value is because annual supply of gold (from mining) is just 2% of the existing global stock. In comparison, it is easy for government to flood the market with new supply of rupee, as can be seen from its devaluation over the years. If not for that, savers would have preferred to hold cash over gold.
It is important to understand that the people who are holding gold, are doing so because they do not see any profitable investment, for example, bidding overvalued quality stocks even higher will only reduce their future return further. By forcing people to sell their gold, doesn’t make those wealth destroying investments profitable, but they just might be less loss making than holding cash. So in essence, such a policy will only destroy wealth, not create it.
Rather the government should try to understand why there aren’t enough profitable investments - it may be because of the red tape, need for reforms, privatization, etc. Once those issues are tackled and profitable opportunities arise, savers will automatically dump gold to chase them.
