What an Investor
should be doing in Present Market Situation
We are seeing a situation where
rupee just becoming weaker and weaker vis a vis dollar, stock market which was
moving northward some day back now going south ward , GDP growth has been also
showing downward trend last some quarters , interest rate movement depending on
lots of economic factors dominant one being inflation etc . If anyone asks me
what do I foresee from here in terms of investment and return I am at sea to
reply to this . It is not because of real economic and financial factors but
things that are influencing these factors are not clear and more of confusion .
If some expert giving a sure shot reply it is either coming from his optimism
or pessimism or but is it from fair analysis of facts ? .
Being an investment advisor I
feel my responsibility is more toward guiding investors on investment front with
sincere intent. Firstly I believe before
advising any client the advisor should ask or judge himself – does he know
everything to guide his clients about investment properly . Do we know what
will be next move of Govt or corporate decision makers ? Do we know what will be the thinking of FIIs
today in terms of their investment in India or else where ? Do we really know
what policies of Govt will see its light or get implemented and by when ? . To
most answer is not clear .
Well the realty is most of us
just read or gather information from secondary sources i.e TV, Newspaper ,
websites , research report and form an opinion . Is the information moving in cyclical
way amongst these sources and so one influencing the other or there is really
primary sources of information. Very difficult to comment on this . My take on
this is today most of these secondary information are short lived and following
day to day news and views . The news and views to a large extent are not
fundamental to the assets where investment goes but more with perception of
different stakeholders in the financial world on various non economic , non
financial factors more than economic ,
financial factors and that is what leading to more confusion than clarity about
road ahead .
Globally also when most economies
are facing some or the other problems in their own backyard the various
permutation and combination of decision making also is more non clear than
clear . So that’s why my first query to any expert is how much they know or how
much they are sure about how different financial and investment assets will
perform so as to give correct investment advice to the clients .
I feel when so much of
uncertainty , non clarity then the best thing is to play safe first . When I am
saying safe I mean protect from downside return in short to mid time span . Lets look all assets today . Gold seems
riskiest in short term so should be avoided . The only way I feel Gold should
be apart of someone portfolio is one from future family need aspect i.e for
marriage in family . Else can be just 5% of overall investment portfolio more
to act as hedge against uncertainties , inflation. But at this point of time
fresh investment decision in Gold can be withheld for some time at least .
Real Estate is still appreciating
but again in what form , land or constructed one . Land is limited so will
always grow in value but location is very important and risk from getting
grabbed by antisocial elements do carry headache . Flat or house is good option
but one has to look at volume of money required and again go for location where
there is cent percent more scope of growth in value.
Coming to debt and equity there
is no doubt that debt was and is safer bet in short term . Equity seems very
risky in short term. One can dabble in stock market and can still make money if
luck is on his side but definitely not seems the case as far as equity mutual
fund is concerned in short term . One has seen by experience that when short
term return is very shaky and risky , confidence does not come for long term return
even when fundamentals of the corporate are good . Looking at the scenario
today can we say that fundamentals of corporate are looking good today . An
optimist will say yes and in fact that is what should be but in reality is it
really so ? What decides about fundamentals – management , consumer ,
competition , economy , performance etc . Is the confidence level of all very
high ? . Ideally Equity is the best bet in long term and I firmly belief that
it is even looking at present dampening situation today . But if I have to
advise anyone on equity mf I will tell to be cautious in selecting here also .
Most important is conviction about this asset and firm determination to stay
invested in this asset for long . Interest in equity comes from the assessment
of future earning from the business and if there is element of unpredictability
in earning of corporate in short term there creates interest or lack of
interest in equity . One major problem the equity mutual fund is facing is that
since huge money came in short span of time when the market shot from 15000
level to 21000 level ( sensex ) , every rise in market level is now taken more
to recover the losses existing in the portfolio last 4-5 years and so with more
units exiting at higher level and net sales being negative , when market goes
down due to FIIs action / inaction or due to some other issues the NAV goes
down and starts looking unattractive and not the case of bouncing back . It is
a situation where an investor the moment he starts observing upward movement in
market levels and just under some serious introspection there comes the fall
and the confidence which was just starting to build up breaks even more
fiercely than the fragile built up .
So the moot point for investment
in risky asset ( equity mf ) is conviction of investor about the asset
performance , conviction that corporate are seriously involved in growing their
business and government is serious about
creating positive investment climate . If devoid of any such conviction inflow
in equity asset will be short lived and opportunistic only .
If conviction exists the investor
should focus on those stocks or companies who have done well in all market
condition and have long term investment horizon ( at least 3 to 5 years ) .
Funds dominated by large cap in FMCG, Pharma looks attractive and so do new
sectors like educations . But most important is the fund manager track record
and his ability to withstand well in downward market trend . One last advice to investor , don’t believe
blindly on secondary source of information , do some study and fair analysis
yourself also and then take investment judgment , after all its your hard
earned money .
