A new calendar. Everything else the same. So why interrupt the chain of thoughts or the core philosophy Let us focus on the now and what opportunities and threats are visible for the investor.
Never look at indices. Look at stocks. Buying closer to or below fair value and holding it for long periods always wins.
For investment, keep focused on sectors that are driven by domestic consumption. FMCG, pharma , auto and auto ancillaries, private sector banks and a few multinational corporations. Pick stocks on the basis of their return on equity (PAT as a percentage of net worth) over a few years. Ideally, don’t buy companies with huge debt. Pick companies which are paying regular dividends. This is a constant, irrespective of the datelines.
All other sectors are trading opportunities. Infrastructure, commodities, PSUs etc. Buy on hope and sell on event. Do not keep them for long. Have stop loss limits on these stocks. These sectors are characterised by poor average return on shareholder funds, cyclicality in earnings, high working capital needs and leveraged balance sheets. So these are not good for long investment or wealth portfolio.
Now, the market is hot for IPOs. For some more time, it pays to speculate on the IPOs. Buy and sell on listing. Valuations are very rich and just ride the momentum. You will know that the cycle is turning, when the listing premiums start to disappear.
Build your trading portfolio up before the Budget. Most probably, it would make sense to liquidate soon after Budget. I do not see any immediate relief in terms of earnings growth. Valuations are rich and potential returns are low. Buy some tax free bonds. Interest rates may continue to disappoint in 2016 by remaining stubborn.
No reason to change anything. Governments will neither help nor hurt too much. Yes, things like corporate tax, service tax, GST will keep exciting the ‘talking heads’, but are unlikely to shift earnings too much. Infra does get a boost, but most companies ill, overladen with debt and bereft of talent pool.
(The writer is an independent investment analyst)
