Hoping for A Merciless Market for Higher Gains at Lower Risk !

As a Concerning Week comes to a close,the Sensex again has chopped off a few hundred points and gone sub 25500

I’m Hoping for A Merciless Market !  ….that’s when you can get into serious wealth creation opportunities at lower risk for higher gain !

Have held from December 2014 that 2015 will be volatile and vulnerable and had repeatedly voiced cautions on SCRIP STANDPOINT Module on my company website

which would serve you well to visit and revisit  to understand why we thought so

 

 

This is the latest note emailed by me to clients and associates  earlier this week

Hi,

We have been quiet for a few months now for a good reason. Those who are on our fundamental wavelength know what we stand for. We had cut down drastically on our ‘Buy’ recommendations  in all Modules in FY 16 till date.Too frequent communications then would have served little purpose other than the danger of generating ‘Noise’ from the exchanges !

A Communication is Now Due as to why on Indian Equities we had preferred to take the risk on Erring on the Side of Caution

Sensex closed down 2.23% or 587 points down today to close sub 25700 triggered by declaration of  Shortfall in Rain & lower that expected GDP for the last quarter 

While we are not into Equity Fundamental Advisory for Bragging Rights we must raise this issue to revalidate our cautious view held in 2015

We have held a view of Sensex Range of 25000 to 27000 for most part of this year 2015,especially after it touched 30000 on March 4,2015 after closing 2014 at 27500 levels.

We had opined in December 2014 itself and in January 2015 that the Sensex will record an all time high of 30000 early in 2015 as the three legs of the Equity Table ~Momentum,Sentiment and Liquidity ~ were all in favour although the fourth leg Valuation was beginning to raise an alert on the Corporate Earnings Front 

Early in 2015 we were unable to assess with the required degree of conviction on four domestic factors and three overseas factors that would play out in 2015.Of course everyone had a strong view or opinion on these !…these were :

Domestic Front

  • Significant Rate Cuts demanded by the Corporate Sector to revive Manufacturing Sector  ~ Yet awaited 
  • Corporate Earnings in FY 16 after a bad Q 4 FY 15 ~ Q1 & Q 2 FY 16 seem to carry forward from Q 4 FY 15 ~ Sensex FY 16 EPS projections lowering inevitable 
  • Normal Monsoon ~ After a promising June,it’s been downhill in July and August 2015 and Monsoon Shortfall is now a given
  • Pace of Economic Reforms especially on the GST ,Land and Make in India Initiatives ~ Not much Headway given the Political Opposition that has disrupted and washed out whole Parliament Sessions

Overseas Front

  • Was the record surge of Chinese Stocks backed by fundamentals 
  • Will Greece be bailed out or allowed to default and exit the Eurozone
  • When will the US Fed raise rate 

What we did assess with conviction was that FPI Inflows will ebb or even reverse in 2015 from the record inflows in 2014…another reason that should mute markets…as this was played out it was ignored by a frenzied midcap space market that justified it being balanced out by increased retail participation and absorption by increased Mutual Funds Investments 

On ET Now Prime time on March 31,2015 I had aired my fundamental views for the new FY 16 that was dawning to a wider audience than just clients.I had stated that the markets were running ahead of fundamentals

Yet the Smallcaps & Midcaps had raced away in a frenzied climb last six months too and had lead to a few clients not being happy with me,some voting with their feet, for not having been aggressive enough to participate in the midcap takeoff and for being relatively more conservative with dependence on Core Scrips weightage as per Risk Profiling and Asset Allocation as a discipline and drastically reducing the frequency of Fundamental Recommendations in all Modules and refusing to trade in and out of markets furiously especially in scrips that were touted on the street or in stock chats or in networks or on the air by experts on popular stock channels and stock portals….most were justifying the run up and urging and seducing for more participation to those especially  who thought were missing the boat…The Young were inheriting Earth !   

There were Fundamental Reasons to hold the view that we did and  that is being only realised and acknowledged now…these were reiterated with reasons in a much appreciated NSE Training Workshop on August 8,2015….it is safer to err on the side of caution…there will always be another opportunity or another boat to catch in case if we did miss one  

The Chinese Shock of last Monday acted as the trigger to unnerve global markets and currencies and set into motion a rapid decline and increased uncertainty and nervousness…the bearings don’t read good

Midcaps that had madly raced away have derailed quite pointedly and ecstasy has literally overnight turned to first bewilderment and now consternation for those who thought they had boarded a Rocket but which has turned out to be at best a Roller Coaster and at worst a Momentum & Sentiment Trap !…Valuation takes a backseat in such situations or is conveniently justified by multiple re-ratings or unrealistic growth assumptions …all leading to risky plays on the conclusion that value,existing or potential is not in the price yet. 

We do not yet believe the Markets are in a Merciless Zone where we shall get great multi-bagger value for the next few years…a great situation of ‘lower the risk,higher the gain’….we may not get there but we hope we do !  🙂

We love Big Falls ! ~ We love Chaos ! ~ We love Panic ! ~ therein lie Opportunities

So what should be the Equity Portfolio Approach & Strategy now ?

  • Sell now to buy cheaper equity later or to get on/back on track with asset allocation ?
  • Start Averaging Buying Now ?
  • Commit all Funds available for Equity right away to Buy ?
  • Wait & Watch ?

What?  

We are not suggesting Timing the Markets…no one can or has done so with sustained degree of success over the years

We are preparing a note to support the view we held and now hold and the Equity Investment Approach & Strategy to adopt for good to great returns in the coming years

2014 was wonderful ~ 2015 as expected is turning out to be choppy ~ How does one prepare in Equity for the second half of FY 16 and beyond

Of course we remain as always fully fundamental in our reasons for our Selections

Think Risk Profile ~ Think Asset Allocation ~ Think Fundamental ~ Think Investment ~ Think Long Term ~ Think Value ~ Think Contrarion when indicated

…and then Act to really create Wealth and protect it while doing so and  not just trade in and out all the time

Watch out for our Note with Stats to support our Fundamental View

Cheers & Best Regards,

Gaurav A Parikh, Managing Director

Jeena Scriptech Alpha Advisors Pvt Ltd

 

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3 thoughts on “Hoping for A Merciless Market for Higher Gains at Lower Risk !

  1. Good job sir,

    maintaining sanity in insane times is the foremost duty of the advisors……..the market was merciless to bulls above 9100 and it will be merciless to bears below 7200

    Regards
    Anurag

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