Markets at a crucial juncture

The Indian stock markets are at a crucial juncture. Why and what is the road ahead is the focus of this post. The markets have seen a big upside over the last few months and this upmove has not seen any significant correction. In a previous post, we had written of how stock prices can move up significantly without any serious expansion in earnings (Refer: 600% Gains in PC Jeweller). The same rule applies to the broader market index as well! (After all, indices are composed of individual stocks). Let’s look at what has been the primary driving force behind the rise in the Indian stock markets over the last four years. NIFTY50 We will use the Nifty index for our research. To being with, lets compare how things have changed for the index between 2013 and 2017. The above ... Read Full Article

Understanding portfolio beta

What is your portfolio’s beta? Even if you aren’t aware of your portfolio’s beta, you must be knowing if it is below 1 or above 1. Well, if you do not know your portfolio’s beta then you should immediately check it. What exactly is this highly statistical term – “Beta” ? Definition Beta is a measure of systematic risk. Systematic risk, also known as the market risk, is the risk inherent to the entire market and thus it is not diversifiable. What does it show? Well, Beta shows you the tendency of a stock’s returns to the general market swings. It goes like ~ How much does a stock move in response to a 10% movement in the market? If the market falls by 10% and a stock falls by 5% in that period, then it’s BETA is 0.5 (Roughly). The formula for beta is give... Read Full Article

Cash – Good for portfolio?

When in a bull market, the returns are coming in so fast that investors hate idle cash the most. They see cash as a loss of returns, an opportunity cost. So much for not wanting cash in portfolio, they even start leveraging! That is borrow and invest. The euphoria of a bull market usually means extreme and absurd valuations. These valuations are usually justified in the name of growth, PEG, economy boom, etc. There hardly is any scope left for long term investments! Even coal sells at the price of a diamond with the justification that it is a future diamond. When in a bear market, it is dull, the investors have run away after the crash, every share is hammered and beaten down. Even the diamonds sell at the price of coal, without any justification. Investors are out of cash since the cra... Read Full Article

Nifty PE above 25: What next?

There is no second thought on the fact that the markets are at a heated up valuation. A lot of clients who want to come aboard join us are concerned that this may not be the right time to enter the markets as the markets are “heated up”. In this post, we do a careful analysis of where the markets are currently and what do we make of it from a long term investors perspective. To start off, we look at some common valuation indicators like PE ratio, earnings growth rate, interest rates, dividend yield and VIX. Nifty Historical PE: Nifty’s PE has stretched to 28 twice in the past and close to 26 back in 2011. We are still lower than the past PE peaks which means that there is still room for further PE expansion, maybe Nifty even creates a all time high PE! We cannot predict the... Read Full Article

Crashproof Portfolio: 4 Ideas

A stock market crash is every investors nightmare. Seeing your portfolio erase all gains and slip into losses can be a real test of patience. So how do you protect your portfolio from a crash? The business world is full of uncertainties and noone can really predict the reason or source of the next market crash. Ups and downs are a part of investing in the stock market and you need patience and conviction to sail through the bad times. No matter how good the companies are in your portfolio, the share prices of these companies will not be immune to short term market volatility. There are steps you can take to protect your portfolio from market crashes and in this article we shall discuss some of them. However, before proceeding, we have a small checklist for you. i) Know your portfol... Read Full Article

Q1FY18: Portfolio Performance

In this post, we highlight the performance of the portfolio for the quarter ended 30th June, 2017. Going forward, we will be documenting our portfolio performance on a quarterly basis for the benefit of our readers and those who are interested in knowing the performance of our advisory service. Performance For this quarter, our base date is 1st March, 2017. So effectively Q1FY18 also includes March, 2017 which means that we are presenting before you a 4 month performance. Q1FY18 was a good start to the financial year with a 15.12% return on the portfolio. Our portfolio has out-performed the broader market (Nifty 50) by 8.69% in this quarter. The NAV chart is given below. Portfolio Our portfolio principles are: Hold not more than 15 companies in the por... Read Full Article

First Steps of Investing

This article contains extracts from Raghav Behani’s book First Steps of Investing which is available on Amazon for Rs 99. Click here to buy The fact that you are reading this article shows that you are interested in financially securing your future. Learning and reading are the gateways to new horizons. By the end of this article, some of your confusion will be gone away and you will surely have a direction to work in. Assume, you need to make a football team (Portfolio). Would you buy 11 strikers (Smallcap stocks) and no defenders (Debt funds, PF , etc)? In a rare case you could win that game but a well organised team (Inflation, market risk) will definitely beat you! For making a well balanced team, we will need: Goal Keeper (Insurance) – Defending our family Defenders (F... Read Full Article