All gloom and doom in small and mid caps. Not even dead cat bounce in many. Large caps are also looking fragile. Waiting on the sidelines for all the negatives to play out.
It is always difficult to time market .
I have been buying and increasing my equity allocation right through Sept 2018 till date .
Also huge bond rally from Sept 2018 till date also helped …
Asset allocation balancing @ right time
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How do you correlate bond and equity returns
I agree with your views but I want to learn a bit more on how you have arrived at the conclusion. Did you read a book or something that made this link for you
thanks
No No … I am not correlating bond and equity returns .
Since 25% of investment was in bond and they appreciated by > 20% in last one year while equity returns were -5% in last year … My asset allocation got skewed and hence more cash had to be moved from bond to equity to get back to 75-25 allocation
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what bonds were you holding, if you dont mind me asking ?
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You can go through my thread …Portfolio Analysis - Shailesh
My bond / fixed income Pf is mix tax free bonds , perpetual bonds , gilt funds and quasi bonds .
It provides gun powder for equity investment
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It looks like some momentum has come back to small and mid caps.Is this the start of trend reversal?
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Technically speaking strictly, us indices has been relatively stronger than Indian ones for past 24months…
There are definite signs of accumulation that is going on in spx and dji…
Nifty n sensex has an unclear picture as of now owing to the volatility we faced originating from both fundamental liquidity crunch, lack of earnings to several news deterring sentiments…
Never the less, a large number of midcaps are showing good base formations and most likely coming out of it to form a trend…
Since the global markets move in tandem, I would have bullish expectations from the US indices and India to follow…
But we do need to be cautious since, the previous highs of various stocks might be retested on any rally, and there is always a chance of failure to clear the prev high and a potential double top formation which is a bearish structure of the market technically…
Personally speaking, as of now I would be more interested in stocks which maintained their bull run valuations throughout the corrections and keep beaten down ones in radar…
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i feel so too. most small cap stocks have shown strength lately, but i doubt this might be the diwali effect. rest lets see if this continues after oct too.
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Market reversal to profit from capital gains is immaterial in this thread . That is trading … In trading you move with trend ie you are always bull in bull market and bear in bear market - You don’t go against the tide .
Being Bull in bear market means that you are able to accumulate good companies at bargain prices and the dividend incomes from them in long run will take care of your expenses and lifestyle .
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Bulls have entered many sectors that were under cusp of bears
Like PSU , Telecom and Pharma
One needs to be careful and not carried away … Some of stocks are not fundamentally strong .
Avoid Debt / Equity > 1 and ROCE < 10% stocks
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Bull in Bear Market is entering final phase …
There may be pain - possiblily sharp pain - No one knows how long will it last - But survivors will be rewarded as Structurally India is more destined to gain from global supply chain imbalances
Time to look at PF and increase allocation to equity - to 80% of PF
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Is it time to look at OMC psus…DY is very attractive…downside is also limited i think. Moreover with crude prices significantly dropping to all time lows…apart from inventory losses i think result should be good. Your views pls.
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If you believe Fossil cars will be around 2040 - These business will continue …
++ some of these business have got license for CNG for homes … ++ will continue to supply cooking gas … ++ own pipelines for gas for which they get toll
SO some of them will have decent size business even in 2040 … The dividend yields if they cross 8% -10% you will have good margin of safety …
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Are those the OMCs like IOCl or the producers like ONGC? Also for long term, do you prefer a OMC or a producer? Considering producers are battered badly for fall in crude but they were anyways not making proportionate profits because of subsidy. With fall in crude, their exploration costs would come down. And ongc now has a significant omc subsidiary as well. Would be nice to know your thoughts on omc vs explorers/producers with specifically to ONGC
ONGC is disadvantaged as its cost of production is high vs global players … ( I think it is around $35-40 per barrel - and with tax it comes to near $52 per barrel ) - So ONGC needs Crude to be > 60 to make profits
OMC are just converter so basic commodity prices have no meaning + they have distribution network which is difficult to replicate + Govt has allowed price to be a bit higher so that they can cover BSVI capex cost
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In some bear market - Prices get depressed but valuation impact is minimal and hence we get bargains -
In some bear market - Prices and valuation both drop - this is becos there is generational impact on consumer behavior … Here you get value traps
In this bear market I see some industries may have generational impact on consumer behavior
So while it is great to be bull in bear market one needs to be mindful if there is significant consumer behavior change in businesses you buy in so one needs to be careful
Macros that can effect business dynamics & hence consumer / business behavior
- US loses reserve currency status
- Crude Oil prices are < $ 30 for long time
- Nationalisation / Localisation Drive
- Health care budgets
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Interesting observations in lockdown
1)Godrej properties sell 500 home using digital tools and Sobha claims 50 crores sales during Lockdown ?? IE DIGITISATION & ECOMMERCE will be key part of future strategy for even durables and high value purchase categories
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HPCL management says oil demand is lower by 60% - but refining output is > 50% - as Storage are used for excess product while at the same time LPG demand is very high depleting inventories … ie Supply Chain Management across companies will be key driver of success in next few months - Inventories , Woking capital Management and finally Logistics will get more attention/ money than Marketing & Advertising …
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Bajaj Finance says stress is visible across categories of clients becos of variable income and constant EMI issues while HDFC banks says its client are primarily steady income earners and constant EMI is not an issue … Now for finance company besides ALM mismatches one need to map Client ALM mismatches too ??
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Auto companies have not leveraged ecommerce as well as real estate ?? - Been stuck with inventories … It tells one business model where company can sell WIP goods is better than company that have to sell only finished goods … as Collateral risk is lower ??
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The swing to optimism from pessimism has been very swift .
It has given a great chance to build portfolio and get rid of dead woods …
Now it is time to be extra careful also asset allocation has increased towards equity due to sharp rise. Might have to cash out few stocks to balance asset allocation
It does not matter what led to up and down of Nifty or whether Nifty will go down again .
What matters a lot is what will we do at different of level Nifty and stocks prices . This will move us to action mode from spectator mode.
I had outlined my intention in my thread Portfolio Analysis - Shailesh right in 2018 …