We are now ready to welcome a new government. Whether it
will be the continuity of the previous one or formed by new faces is the
question in everyone’s mind. The last five years were mixed for investors. The
first half was excellent with all round enthusiasm, participation from FII’s,
Institutional and retail investors..etc. but the last one and a half year was
no so good for market especially for retail investors due to signs of weakening
economy, liquidity crisis, global issues..etc.
Unexpected currency note ban, implementation of GST without proper preparedness,
introduction of long term capital gain tax , election related uncertainties,
serious liquidity crisis in our economy , rise in crude oil price, trade differences
between US and China ..etc are some of the concerns which affected our market
in the second half this government. Though we are still not fully recovered
from such macro headwinds, we can’t forget the strength of an economy with more
than 130 Cr population if properly managed , supported and utilized by the upcoming
governments. From the point of view of investors in equity market, we have
passed many such acid tests during the past many years and many of our corporates weather the storm of such macro factors and emerge as winners.
The success of any investor
depends on his/her ability to foresee the upcoming opportunities and make timely
changes in their portfolio to gain out of such opportunities. Unfortunately one
section of retail investors still believe, buy some stocks and wait for a long
time is enough to make money out of it . We have discussed this subject many
times in the past and advised to take investment decisions based on the changes
happening in the company. It is a fact that holding a stock without proper periodic review
will not give any gain and it may even
results in enormous wealth erosion especially in case of debt laden high risk companies
which we invested with an anticipation of debt restructuring, asset sale..etc (
Though I am not recommended directly ,Ess Dee aluminum is one such stock we
have discussed earlier in this genre ) .Having said , debt restructuring was the investment
rationale of few of these companies but it didn’t go through as expected mainly
due to the sudden withdrawal of various types of debt restricting schemes by RBI ( Read details HERE) .Then encouraged
debt resolution process through insolvency and bankruptcy code taking too much
time due to various reasons and this delay adversely affecting such troubled
companies ability to survive. In case of small companies, resolution through
IBC facing lot of challenges due to red tapism, lack of clarity in procedures,
legal matters ..etc resulting even in winding
up of such companies itself . Situation of negative net worth for consecutive
three years is really a bad sign and we should check the annual reports and
foot notes of results of such vulnerable companies and act accordingly without
any delay in order to save at least
part of our investment.
In
my opinion, whatever be the macro factors, the stock market is here to stay and
investors in growing companies will ultimately gain in the long term .So
short term opportunities should be
utilized with a long term view and hold stocks which qualify your periodic
checks and balances. Always prepare the portfolio according to your risk taking
capacity and not based on the portfolio of your friend or neighbor.( Personally
I advise a balanced portfolio of stocks
with Compounders, growth companies ,deep
value ones, high risk opportunities ..etc and the ratio of each category should
depends on ones’ risk taking capacity)
. If you feel something wrong is going on or against our calculation or
feel we took a wrong decision ,exit at
the earliest even in a loss without any hesitation. Better to avoid leveraged
positions especially at the time of important macro events like election
outcomes..etc
