Money never sleeps, 2018 to 2019 investment trends

Let us take a minute to reflect on the Indian equity capital markets in 2018 and then let's put a predictable investment perspective for 2019.

So what really happened in 2018: capital markets delivered a return of 3.1% on the index. Institutional & individual portfolios were hit with markdown on investments as deep as 20-30 percent & in some cases more.

We moved from an expensive index level of 28 pe to 24 pe & between.

Apparent reasons for correction (in reality we felt valuations on many mid caps were anyways very expensive & frothy at the start of the year)

1. Imposition of LTCG
2. Additional Surveillance Measures
3. Mutual Fund Reclassifications
4. Derivative Margins increase
5. Increase in Loan against securities rate of interest by nbfc's
6. Trade wars Impact
7. Currency devaluation at a rapid pace
8. Crude Oil prices rising, only cooling off towards the end of the year
9. IL & FS Default
10. Liquidity squeeze on the nbfc sector

Our strategy worked out well in retrospective. We were not buy & hold investors in the year and followed an active trading/investing strategy to generate a far higher return than the index.

Mostly large cap with only some presence in quality mid caps which were less hit by the carnage or had corrected significantly for us to have a margin of safety.

So what's in store for 2019.

1. We feel the index will continue to trade between 10000-10250 to 11500-11750 with spikes towards 12000-12500.
2. However, we envisage selective recovery in some mid cap counters where the fundamentals are sound. Bouts of volatility will be there, hence need to follow a combination of active & passive strategy to beat the debt rate. It makes sense to keep cash for a buy & trade strategy. But not advocating a strategy to go into liquid debt unless an unexpected event hits us from the US or China.
3. We continue to avoid stocks where corporate governance is an issue, debt levels are high or earnings visibility is poor.
4. Many large cap businesses and many mid cap businesses are available at reasonable valuations and need to be accumulated through the year with a buy on dips strategy and sell on over exuberant rallies.
5. We do not over emphasize on newsflow around elections as that has a temporary impact on the markets which lasts maybe a month whether it is fear or greed either side.

In summary, continue your long term asset allocation between equity & debt, with a slight higher bias towards equity. Avoid businesses where corporate governance or debt is an issue, just because a stock is trading at a low beaten down level does not make it an investment candidate. In the long run, please remember that 2-3 years of consolidation are normal in markets, so have patience and continue to value invest as always.

Happy Investing!

Happy 2019!

footnote:

Nitin Shakdher is a professional long-term value investor as the Founder & CEO at Green Capital with the core focus on equity research, asset management advice, knowledge investing, capital markets and venture funding.

The Green Capital group is an exclusive multi-family office investments firm that manages wealth, preserves capital, creates portfolio strategies and provides asset management advice.

For more information:

Nitin Shakdher

Founder & CEO

Green Capital

www.thegreencapital.net

[email protected]

Disclaimer: Equity investments are subject to market risks. Please consult a financial advisor before making any equity investments. Investors should not solely rely on the information contained in this Report and must make investment decisions based on their own investment objectives, judgment, risk profile and financial position. The recipients of this Report may take professional advice before acting on this information.