Advice During Crucial Times

OUR ADVICE during Jan 2018 peak

Communication sent on 5.1.18


    From the Desk of Jaydeep Kashikar…


    When will we invest back in Equity Funds?

    The answer is simple: When Valuations are atleast reasonable, if not cheap.

    If you are seeking an answer w.r.t. time period, the answer is: 
    There can’t be a rational judgement of the irrational behaviour of the markets.

    We switched from Equity Funds to Liquid Funds not on the basis of staying out for a period of time 
    but because valuations were stretched which have become lofty now. Hence a request to all our esteemed 
    investors to show immense patience and ignore current rising markets which are getting more riskier by the day.

    One thing is sure... we will not succumb to the pressures & talks of massive domestic liquidity & the rising markets.

    Also, we won’t buy the talks of PE re-rating and that higher PEs is now a new normal.
    Because we don’t have a reason to believe it.
    During previous Euphoric times of 2007, when PEs touched 26x, our GDP stood tall at 9% with corporate 
    earnings growth at splendid 20-25% growth YoY. And currently we are at GDP 6.3% with earnings growth for this 
    FY expected at 11%. So where is the reason for PE re-rating?

    What can trigger the correction?
    The list can have several probable triggers viz
    - Higher Crude Oil prices
    - Lower GST collections
    - Fiscal slippage
    - Globally Interest rates are moving up.
    - Domestic Interest rates have moved up by 1% from 6.35% to 7.35% on a 10yr Gsec bond without any uptick in policy rates.
    - North Korea & US tensions
    ... and many more.
    But the biggest risk remains is 'Lofty Valuations' in India as well globally.

    "You can have cheap equity prices or good news, but you can't have both at the same time."
    So, you decide, when would you like to invest in Equities & accumulate maximum... when equity prices are cheap or 
    when you are surrounded by good news? Do take the right decision always!

    In other words:
    In good times, when the markets are doing well and the news flow is positive, the perceived risk is low whereas 
    the actual risk is much higher as the valuations are steep.

    This time around we have sold at the highest valuation levels compared to our all our previous 6 successful 
    Market Timings done in past 20 years (details available on our website).
    It’s just that this time the markets are sustaining the lofty valuations longer.
    There has to be some anxiety and some question marks during every 'Market Timing', else had it been so simple 
    everyone would made huge money in this market.

    Do you know...
    Year 2017 is the only year in the last 50 years of US markets where-in they haven’t seen a correction of even 3%. 
    Similarly, in India it’s the only year in last 20 years where-in it has not corrected more than 4% at any point of 
    time during the year.
    Strange Year.
    Have Patience.
    Risk is only becoming bigger.

    We are very confident that the switch we did is absolutely correct and we will successfully get our 5% gap 
    post all STCGTax paid, Exit Load & Nav loss.
    And as the markets climb higher to 35000 or 36000 the chances of sharper and deeper correction (crash) is 
    increasing rapidly as more the exuberance more the pain.

    The wonderful gains that you have enjoyed at BRAINPOINT over last 5/10/15/20 years in your Equity MF portfolios 
    is because we have always encouraged you to 'Buy Low aggressively & Sell High' !!!

OUR ADVICE during Dec 2016 panic @ Sensex 26000

Communication sent on 21.12.16

In BULL mkt, whole world concentrates only on positives (GREED) & ignores negatives.

In BEAR mkt, whole world concentrates only on negatives (FEAR) & ignores positives (Continuous & Rapid Economic Reforms, Falling Fiscal & Current a/c Deficits, Fastest growing Economy etc).

# Sensex expected to open 2-3% (dn 500 - 900 pts)

Dont let fear succumb you.
Profit from folly, dont participate in it.
As always... JUST ACCUMULATE LOW ... NOW near 26000 levels !!!
                

Communication sent on 22.12.16

When mkts are low... 

Most Common MISTAKE by Investors:
# Not investing addl funds, because of fear or boredom.

BLUNDER:
# Selling Equity Portfolio, fearing lower levels.

EXPERIENCED & WISE INVESTORS:
# Investing happily & greedily as and when funds available.
# Starting addl SIPs to invest every month at lows.
# Doesnt repeat mistakes of investing in Direct Shares. Prefers Equity Funds.
# Waiting patiently for mkts to go up, fully understanding that in this mkt neither good times are permanent nor bad times.

ACCUMULATE MAXIMUM AS SOON AS YOU HAVE INVESTIBLE FUNDS... now ~26000 levels !!!
                

Communication sent on 23.12.16

FAQ: Sensex below 26000 once again. How much can Sensex fall further?
Ans: Thats always a very difficult question to answer in short term. Valuation-wise it has become extremely cheap now. Fundamentally it should not go down further but markets are never rational in short term.
Its just the matter of time. Who knows markets might start bouncing back in mid next week... afterall market reverses when you expect it the least to happen!

MOST LIKELY THIS IS YOUR LAST CHANCE TO INVEST ~26400 !!!

Check your bank balance and invest on Monday for sure. DONT MISS!
                

OUR ADVICE during Feb 2016 Panic

Communication sent on 13.2.16


LOOK AHEAD... ONCE DUST SETTLES SOONER OR LATER, YOUR RETURNS POTENTIAL IS MASSIVE.

*** LOW CRUDE OIL PRICES
India saves around US$ 70 Billion in oil import bill.
This savings can wipe out India's entire external debt in ‹ 7 years.

*** CONTINUOUSLY IMPROVING FUNDAMENTALS:
- Improving GDP (from 4.5% to 7.5% in 3 yrs)
- Continued improvement in Fiscal deficit & Current Account deficit (down from 5% to 1%)
- Very low WPI Inflation
- Falling Interest Rates
- All-Time highest Forex Reserves of $350 bn
- Most stable currency (vs USD) vis-a-vis all other 160 countries
- Heavily fallen commodity prices (Crude Oil, metals etc) leading to margin expansion is a major positive for India
- A stable, proactive, long term focussed Govt, Coal & Telecom auctions, gas pooling, DBT, GST (next year), Bankruptcy act likely, diesel deregulation, resolving stalled projects, roads & railways increased spending ... so much happening in India
- Sharply falling unemployment rate due to initiatives like 'Make in India' & 'Skill India' is helping create massive job opportunities for our huge population
- Remarkably improving data of Core sector, Mfg PMI index & other macroeconomic indicators.
- Expected Sovereign Rating upgrade by S&P.
*** Only Current Negative: Temporary Global Slowdown.

And more... Monsoon this Year:
As per developments over Indian ocean, global forecasters expect 'La Nina' phenomenon resulting in a strong monsoon across Asia in the upcoming monsoon season as against 'El Nino', which was responsible for monsoon deficit during last 2 years.

A bountiful monsoon coupled with improving macro fundamentals will lead to a meaningful earnings recovery and a strong rally in equity markets seems very much on the cards.

Its upto us whether to focus on temporary external negatives (China moderation & Selling by Gulf states) which brings Sensex down few thousand points or to focus on structural domestic positives which will take Sensex up many thousand points going ahead.

At Sensex 22900... Sensex PE @ 16.9x, Market Cap : GDP ratio @ 63%... happens rarely. It's absolutely an oversold market.

JUST BUY BUY BUY ... at earliest whenever possible !!!
                

OUR ADVICE during Aug 2013 Panic

Communication sent on 28.8.13


FAQ: Can Rupee fall to 70 vs USD? Can Sensex fall to 15000?
Ans: All this is too pessimistic. In financial markets though anything can happen in very short term but such absurd low levels won’t be sustainable. All these assumptions are like as if India has already been downgraded to JUNK rating.

The current problems in Currency, Bond & Equity Markets is undoubtedly a result of weakening fundamentals... prolonged inaction & several late decisions by the government but is also a result of liquidity in Bond markets moving from emerging markets to US markets.

If Sensex has to go down to 15000 levels or so, the valuation parameters will have no meaning at all... our PEs, Mkt Cap : GDP ratios etc will go to levels of never seen before.

Sensex level of below 17500 should be considered as a killing Buy considering after 3-6 months markets will start looking up & would remain positive till elections in anticipation of a fresh new government probably led by a pro-development leader (of which chances are really good).

Also a gsec yield of 9%+ should be considered as a killing Buy to invest in Gilt Funds as gsec yield of over 9% has been seen only for 33 days in last 10 years.

(FYI.. not just India, but also S.Africa, Indonesia, Brazil etc too are facing same or more severe concerns on currency, Bonds & Equities in last 3 months due to liquidity shift in Bond markets).                    
                

Communication sent on 29.8.13


Do not get overwhelmed by the -ve news.

These are fantastic levels to invest in Equities (near 18000 levels... and a Killing BUY below 17500) & Gilt Funds (~9% yields).

If you are able to invest now and / or at lower levels & wait for 1 year you are bound to make significant returns as elections will be over, policy inaction will be out of the way, corporate profitability will be back to ~12-15% on back of lower base.

STRONGLY RECOMMENDED: Invest once or twice again, NOW & once in next 3-6 months in midcap funds as the valuations in the broader markets are significantly lower as if Sensex is at 12000.

DO NOT MISS THESE LOWS!!!                    
                

Communication sent on 30.8.13


FAQ: Is there panic in equity market?
Ans: Panic is in Bond market & in Currency market, not in Equity market.
The current scenario in EQUITY mkt (Sensex down 10% & broader markets down 20-25%) has been experienced several times in the past.

But Dollar outflow due to FII selling of 30,000cr in BOND mkt in 3 mths was probably seen for the first time.

Also the carnage that has happened to our CURRENCY due to selling in bonds (effect of US Fed QE tapering talks / US bond yields) & due to our CAD (due to government inaction) has actually created the panic there.

All said and done, it’s a Killing BUY below 17500 incase markets fall further.
Valuations in broader markets (non Sensex stocks) are actually much lower & already extremely attractive for long term equity.
                

9 European Downgrades

Communication sent on 16.1.12


From the desk of Jaydeep Kashikar…

9 European countries ratings downgraded...

The weakening financials of these countries is no new news to the markets & expected downgrades is very much priced in.

Downgrade effects sentiments, but does not further impact fundamentals adversely. It is always the result of weakened fundamentals & never the cause of further market fall.
The European markets in near future will move up or down as per change in fundamentals going ahead.
Recent observation:

In Mid 2011, USA was downgraded from AAA to AA+ . After its downgrade, DOW JONES actually recovered to end the CY 2011 with a gain of 5.5% (best performing market of 2011) as positive news kept flowing steadily.

Moral:
Don’t panic with media reports that markets will further fall due to recent downgrades. European markets will go up or down as per how they put their act together to improve the situation & not because they got downgraded which was very much due and expected by all.

Also remember, even in year 2009 at sensex level of 8500, no one in media recommended to BUY which was the lowest point since many years. Media scared investors even at the best possible level. Right?
So, think rationally, if you are holding on to your further Equity MF investments... Best time to BUY is during maximum panic!
Invest atleast once near these recent lows!     
                

Egypt & Japan Worries

These news discouraged investors to BUY LOW. At BrainPoint, we strongly recommended our investors to INVEST AT EARLIEST & KEEP ACCUMULATING LOW!

Communication sent on 02/02/2011 (Egypt Worries)


EGYPT... our view: 
Egypt... some statistics:
Unemployment: 25%
Food Inflation: 17% 
Govt deficit: 8% of GDP
Population below poverty line: 40% 
Total Population: 8 cr 
GDP: $ 216 bn (India: Population: 120 cr. GDP: $ 1220 bn)
# Egypt is a tiny economy to make any difference to world economy. 
# Egypt is NOT a major producer of oil. But it controls 120-mile Suez canal & 200-mile Suez-Mediterranean pipeline which together carry 2.5-4.5% of global demand. Any short-term disruption would probably have a MARGINAL impact on oil output. 
The possibility of the closure of the canal is the worst case scenario of which chances are remote. 
# IMPACT ON INDIA: As a trading partner, Egypt is NOT very significant with a share of 0.60% in imports & 0.79% in exports.                 
                

Communication sent on 15/03/2011 (Japan Worries)


# Explosion at No.4 reactor causing high radiations. 
# Public health at risk with radiations. 
# Risk of further radiation leak increasing. 
Japan’s Nikkie down 6% yesterday & down 12% today. 
Most Asian markets down 3-4%. 
Sensex down to 18000 again. 
Though the Japan worries are sad, such negative news offer the BEST opportunities to BUY LOW. Markets have overcome similar or bigger worries in the past... Twin Tower attack, Kargil War, 2008 US meltdown, Dubai crisis, Eastern Europe crisis etc.

# This may be a 1 day sell-off like: Dubai Worries & Eastern Europe crisis. 
# Today’s (15 Mar) Corporate Advance Tax figures are expected to be very good. 
# Crude Oil below §100 again. 
Hence domestically No Issues. 
Markets will bounce back... may be tomorrow! 
Don’t Miss Today’s Knee jerk reaction to Japan’s worries. 
Whenever such things happen, Markets always overreact immediately. And that’s the BEST time to BUY LOW!
                

Communication sent on 21/03/2011 (Japan Worries)


Though JAPAN had a disastrous tragic Tsunami & severe earthquake which will have a huge negative impact on their economy... 
whereas INDIA just because of Inflation (which is cyclical & common in any fast growing economy) and has several fundamental positives like: 
GDP @ 8%+ 
Corporate Results UP 20%+ 
Sensex EPS rising @ 21%pa 
Advance tax collection UP 24% 
52wk low PE @ 17.40x, etc 
... Japan & India both are down 15% from the recent peak. 
Japan’s Nikkei: 
21.2.11: 10858 
18.3.11: 9207 (-15%) 
India Sensex: 
5.11.10: 21005 
18.3.11: 17879 (-15%) 
Obviously Indian markets have over-reacted! 
IT’S THE PERFECT TIME TO GET AGGRESSIVE!     
                
In the stock market, a good nervous system is more important than a good head.

DUBAI Jitters & Eastern Europe Worries

These news triggered panic selling by investors across India. At BrainPoint, we strongly recommended: DON'T MISS THIS DIP, INVEST FOR SURE!

Communication sent on 27/11/2009 (DUBAI Jitters)


It is expected that few big institutions / companies in DUBAI may default to the extent of USD 60 bn. 
Not all will default as there will be some mergers & restructuring.
Will hit European banks the most, hence yesterday European markets fell 3%.
Also some Indian banks / companies have exposure to those Dubai Companies... these stocks will take a hit today. 
Dubai fallout won’t impact markets more than ~500-
800 pts.
This worry is nowhere near Lehman crisis.
Don’t Miss this pullback!                    
                

Communication sent on 05/02/2010 (Eastern Europe Worries)


Markets have a new worry: 
‘Eastern Europe sovereign defaults’ 
Before you panic or delay your Equity investment decisions, have a look at these facts which media has not published:
HUNGARY (population 1cr, GDP $155bn) 
PORTUGAL (population 1.06cr, GDP $243bn) 
GREECE (population 1.12cr, GDP $357bn) 
SPAIN (population 4.56cr, GDP $1.6 trn)
Three economies other than SPAIN are very tiny economies which if have sovereign defaults, will have zero impact on the global markets.
Markets will forget about these worries next week, like the DUBAI default. 

Such negative news offer the best opportunities to KEEP ACCUMULATING LOW! 
FIIs & MFs have turned smart buyers since last 4 trading days!

Sensex @ 15800. DONT MISS this fall!

P.S.: INDIA (population 114cr, GDP $1.22trn) 
                

Result: Our Investors seized both the opportunities to Buy Low! But here, we would like to give the credit to you (our investors) for the daring shown by you for investing on these sheer panic days!

Sept 2009 to April 2010

Few Lakh investors across India - SOLD Equity Funds.

Month - on - Month Net Selling figures of Mutual Funds in Equity Schemes
Sep. 2009 (-) 2335 crore
Oct. 2009 (-) 5195 crore
Nov. 2009 (-) 696 crore
Dec. 2009 (-) 1762 crore
Jan. 2010 (-) 1311 crore
Feb. 2010 (-) 697 crore
Mar. 2010 (-) 4082 crore
Apr. 2010 (-) 1410 crore
Total (-) 17488 crore

Mutual Funds had been net equity sellers at whopping ₹17,488 Crore during Sept 2009 to April 2010 due to unabated selling pressure by Retail & HNI investors.

We at BrainPoint - Strongly Recommended to Hold on & also invest more at every dip!

Result: At BrainPoint, we gained additional 10% (minimum) on the entire equity portfolio.

In the stock market, money moves from active to patient investors.

OUR ADVICE: Aug 2009

We strongly recommended MIDCAP FUNDS in June-August '09

Communication sent on 24/06/2009


SIEZE THE OPPORTUNITY! 
To reach previous highs... 
Sensex has to rise 45% from 14422 to 20873,
whereas BSE MIDCAP HAS TO RISE WHOPPING 94% from 5060 to 9817! 

STRONGLY RECOMMENDED .
... INVEST TODAY IN OUR RECOMMENDED MIDCAP FUNDS! 

ACT FAST! 
DONT MISS THIS SIZEABLE DISCOUNT IN MIDCAPS!!!   
                

Communication sent on 15/07/2009


We have been STRONGLY RECOMMENDING
Midcap funds since past 1 month! 

Last 2 days: 
Sensex UP 6% from 13400 to 14253 
Midcap UP 9% from 4585 to 4978 

Next 1year, Midcap funds will deliver 10-15% more
returns than other Equity Funds! 

INVEST TODAY: 
... in our Recommended Midcap Fund! 
... in ELSS (8OC) in Midcap oriented Fund.   
                

There was sizeable outperformance by midcaps over next 1 year. 

Midcap Funds

Scheme Name 31-07-2009 03-07-2010 Appr%
BSE Sensex 15670 17868 14%
BSE Midcap 5571 7408 33%
DSP BR Small and Midcap 11.12 17.29 56%
UTI Mid Cap 21.16 32.22 52%
SBI Emerging Business 26.08 39.28 41%
HSBC Small Cap 8.13 12.09 49%
Canara Emerging Equities 14.94 22.23 49%
ICICI Pru Emerging STAR 23.41 34.57 48%
Kotak Midcap 17.43 25.58 47%
JPMorgan India Smaller Cos 5.41 7.76 43%
Principal Emerging Bluechip 21.85 31.23 43%
Reliance Long Term Equity 11.15 15.78 42%
Franklin India Prima 196.15 273.9 40%
Sundaram Select Midcap 105.9 147.51 39%
SBI Global 39.82 54.83 38%
Franklin India Smaller Cos 10.43 14.32 37%
Sundaram S M I L E 24.93 34 36%
Birla SL Midcap 81.75 111.45 36%
HSBC Midcap Equity 17.29 23.04 33%
Reliance Growth 351.49 465.91 33%
Tata Mid Cap 13.72 18.09 32%
SBI Mid Cap 18.58 23.33 26%

Diversified Funds

Scheme Name 31-07-2009 03-07-2010 Appr%
BSE Sensex 15670 17868 14%
BSE Midcap 5571 7408 33%
Franklin High Growth Cos 9.68 12.51 29%
Tata Equity Oppo 63.08 81.4 29%
HDFC Top 200 156.61 199.28 27%
Kotak Oppo 36.48 45.61 25%
Birla SL Advangage 129.8 158.74 22%
ICICI Pru Growth 105.46 128.51 22%
Kotak 50 82.48 99.85 21%
DSP BR India T.I.G.E.R 39.66 47.8 21%
Sundaram Growth 75.45 90 19%
DSP BR Top 100 Equity 79.06 94.09 19%
Franklin India Oppo 25.92 30.62 18%
SBI Contra 48.3 57.05 18%
Sundaram Select Focus 74.51 87.22 17%
Reliance Quant Plus 10.64 12.41 17%
UTI Contra 11.89 13.78 16%
HSBC India Oppo 28.66 33.18 16%
IDFC Imperial Equity 16.19 18.65 15%
SBI Blue Chip 12.54 14.4 15%
HSBC Equity 86.41 99 15%
Reliance Equity 13.91 15.03 8%

Result: In 1 year, investors earned 20% extra returns in Midcap Funds than the diversified funds.