Wednesday, May 22, 2019

Be Positive and Vigilant ....

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

Happy investing        


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