right horizons pms - india asset market review 2013 & outlook 2014
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Indian Asset markets – Time to pick the low hanging fruit.
Outlook 2014
Right Horizons PMS
For private circulation only
Agenda / Table of contents
A review of the asset markets in 20131
Are we already in the bull market and we don’t know about it?2
Do we have a safety net for the economy3
Why we could be closer to the take off point?
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Do we have a safety net for the economy3
The next bull market, how does the foundation look like4
We are on the inflextion point, please catch it5
Right Horizons PMS – better than most6
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Asset market in its volatile best – no asset spared…� Equities have continued to perplex the
common man and seasoned investor alike,
leaving no arbitrage between the two.
Large caps have been highly volatile and
positive currently; mid-caps have still a lot
of value left.
� Inverted yield curve means that short term
A review of the asset markets in India - 20131
0.00%
10.00%
20.00%
Asset return in 2013#
in India
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� Inverted yield curve means that short term
was better in 2013 than long duration.
� Gold performed its worst medium term
performance by Indian standards; globally
there was a rout in the asset – falling over
20% in USD terms.
� Real estate in metros continue to grow
~10% yoy, but volumes dry up indicating
medium term slump coming soon.
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-10.00%
Equities -Nifty
Equities -CNX Mid
Cap
Bond -Short Term
Bond -Long Term (GILT)
Gold -ETF
Real Estate - Tier I# YTD Nov 20th 2013
Are we already in the bull market and we don’t know about it?2
Volatility precedes bull markets. 2001-03 was a time which succeeded a period of agony, lackluster returns and high volatility
Early period of the bull market appear like mirage. In 2004-05, at every high point appeared like pullback is eminent. Market trudges higher every quarter with an occasional
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Chart Source: Yahoo Finance
trudges higher every quarter with an occasional pull back.
Not until we reach higher peaks that media and general public proclaim “BULL Market”. But most of the gains are skimmed, frenzy starts to kick in – time to be selective.
Disbelief!!
Where is our safety net; why are we a unique market?3
Growth driver #1: Demography remains favorable
Growth driver #2: Savings rising = higher investments
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Growth driver #3: Integration with global trade rising
Growth driver #4: Structural reforms inevitable
Where is our safety net; why are we a unique market?3
1/4th population of middle income earners – a potent force expected to
reach 1/3rd population by 2025
Highest amount of working class population and addition to workforce by
2030 in the world
Lowest age dependency ratio amongst the developing and developed
economies in the world
Safety Net #1
Safety Net #2
Safety Net #3
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Households practically immune to world currency crises. Est. total
collective GOLD holdings (physical) ~ 22,000 tones = USD 1 Tr at current
prices
Staples such as Rice, Wheat, Fruits & Veggies and Cereals are NOT
imported and produced locally = food insecurity and inflation is temporary
Energy resources such as Oil and Gas are currency independent, policy
dependent = Iran accepts local currency /GOLD in event of a crises
Weak currency = higher exports = higher manufacturing. CAD is a
temporary phenomenon.
Safety Net #4
Safety Net #5
Safety Net #6
Safety Net #7
� Nifty target of around 7200 by December 2014, implying a 18% annual upside
- Factors taking Nifty higher to these levels include
- De-levered balance sheet of corporate India over the next twelve months
- Policy clarity driven by results of Lok-Sabha elections and next central government fomation
- Inflation fatigue due to high base on CPI and WPI indices and consequent softening of RBI stance on tight monetary policy
- Availability of value picks in the large cap space (Index constituents) and higher value proposition in the bigger mid-cap space
Next Bull market & Outlook for 2014 and beyond4
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� 2013-2018 (medium term) outlook. ISRO the market!!!
- Corrective actions imminent after 5 years of flux, inactivity, low productivity and policy
paralysis
- Discretionary demand revival imminent due severe cut-back, higher savings and pent-up
demand outburst
- Strong investments uptick in spectrum of growth sectors – low ticket infrastructure (roads,
water projects, urban infra); capital goods and prosumer goods’ demand
- Strong Index movement based on favorable valuations and growth momentum pick up
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Inflexion point: closer than we might think!5
The foundation of a equity bull market lies in the following ingredients
� Low inflation and sustainably comfortable interest rate outlook. � Policy clarity at local and national level� Easy access to capital, with growing/stable equity markets� Stable domestic currency outlook.
At this moment, it appears that none of the ingredients are present for making a bull market
recipe over the next several months/quarters. Before we jump – it is extremely important to put
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recipe over the next several months/quarters. Before we jump – it is extremely important to put
the asset market cycle in perspective, explained in the next slide.
However, we believe that the next six months would take care of bullet # 2 and that could pave way to bullet # 4.
Bullet # 1 & #3 could be the outcome of many things including cleansing of the system by severe stress that the system has seen during 2011, 2012 and 2013, consequently leading to decade low GDP.
We believe, as a result, the turning point for Fixed income and equities market is expected in the next few quarters.
Inflexion point: closer than we might think!5
Higher Interest rates
Higher Savings
Low Money Supply
Higher Corporate profits
Rising Inflation
Loss of purchasing power
Asset Market
BUY Real Estate
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Lower investments
Fall in consumption
Lower Investments
Fall in Inflation
Fall in Interest rates
Investments pick up
Higher Money Supply
Increase in Consumption
Market Cycle
BUY Fixed Income
BUY Equities
Right Horizons PMS portfolios – wealth creation vehicles6
Portfolio Strategy
Nifty Plus FlexicapCapital Protection
Super Value
Fixed Income
ObjectiveLong term Wealth
creation
Long term weath
creation
Lower Capital
Volatility
Provide for high
capital
appreciation
Provide for
Inflation beating
returns
Predominantly invests in
Equities
• Nifty Index stocks
• BSE 200 stocks
Equities
•BSE 500 stocks
Fixed Income securities
• Listed securities
(80%)
• Equity Indices
Equities
• Mid-cap
Equities
Fixed Income Securities
• 100%
listed/Unlisted
Fixed income
securities
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• Equity Indices securities
Recommended Holding Horizon
> 18 months > 30 months 24 months >36 months 12 months
Portfolio StrategyBUY & Hold; Weight
Management
BUY & Hold;
Thesis Driven
BUY & Hold;
Trading Driven
Active
Strategy;
Bottom Up
BUY & Hold;
Risk Level Medium Medium Low High Low to Medium
Minimum Strategy Size1 INR 1million INR 1million INR 1million INR 1million INR 1million
1 Each PMS account shall be a minimum of INR25,00,000 set up value
Right Horizons PMS portfolios – performance6
Portfolio Performance (%)
1 month 3 months 6 months 1 year Since Inception
Nifty Plus 2.22% 9.25% 5.49% 6.45% 9.15%
Flexicap 1.02% 6.99% 0.7% 5.86% 3.56%
Super Value
(Mid & Small cap)3.07% 9.87% -0.45% - -8.76%
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(Mid & Small cap)
Nifty Index -0.93% 5.47% 1.01% 6.53% 8.75%
CNX MidCAP Index 2.00% 7.98% -5.17% - -12.63%
Capital Protection 0.76% 1.67% 1.08% 6.76% 6.76%
GSEC Index 0.43% 2.80% 0.73% 5.52% 5.52%
All time frames based on Nov 22 2013 data; Inception dates vary with respect to the different benchmarks adopted by the portfolios
DisclaimerThe information contained herein has been obtained from reports secured from third parties, publicly available sources and
Right Horizons, its affiliates, subsidiaries and/or Group companies take no responsibilities – express or implied for
inaccuracies contained herein.
This document is meant for the use of the intended recipient only. Though dissemination to all intended recipients is
simultaneous, not all intended recipients may receive this document at the same time. This document is neither an offer nor
solicitation for an offer to buy and/or sell any securities mentioned herein and/or official confirmation of any transaction.
This document is provided for assistance only and is not intended to be, and must not be taken as, the sole basis for an
investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document
should make such investigation as he deems necessary to arrive at an independent evaluation, including the merits and risks
involved, for investment in the securities referred to in this document and should consult his own advisors to determine the
merits and risks of such investment.
The investment discussed or views expressed may not be suitable for all investors. This document has been prepared on the
basis of information obtained from publicly available, accessible resources. Right Horizons has not independently verified all
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basis of information obtained from publicly available, accessible resources. Right Horizons has not independently verified all
the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to
accuracy, completeness or fairness of the information and opinion contained in this document.
The information given in this document is as of the date of this document and there can be no assurance that future results
or events will be consistent with this information. Though Right Horizons endeavors to update the information contained
herein on reasonable basis, Right Horizons, its associate companies, their directors, employees, agents or representatives
(“Right Horizons and its affiliates”) are under no obligation to update or keep the information current. Also, there may be
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Right Horizons and its affiliates expressly disclaim any and all liabilities that may arise from information, error or omission in
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Questions?
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Reach us:contactus@righthorizons.com+91 80 4120 9582+91 22 4100 2018
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