I would like to take this opportunity as part of PenguWIN family to wish you a very happy 2016. Hope you have come out of the tragedy caused by unusual heavy rains that rocked Chennai earlier a month ago. Hope such an event does not occur anywhere in the world.
The markets were down from last calendar year to an extent of about 5.3% (Sensex) and 4.2% (Nifty). The fall in the markets have happened after 4 years when the markets gained year after year.
The Market valuations are quite attractive now for entering into Equity investments and this resulted in huge inflows from Retails investors, after 5 years, balancing the outflow of FIIs. FII investments in Equity is less than 25% of the Mutual funds in 2015.
I would like to quote Warren Buffett where he said
“Markets behave like a voting machine in short term and like weighing machine in long term”
meaning stock markets may react in a bizarre way in short term but adhere to the fundamentals of Equity investing in the long term.
Equity Investments are painful in the short term, but very rewarding in the long term. That is the reason why we say “you have to look from a 5 year perspective” for pure equity funds. Its not that the ROI can be obtained only after 5 years but the markets can swing either way in the short term. Investor time (duration) in the market is the key rather that timing the market (entering the market).
Markets are slaves of Earnings. The year started with a euphoria with the confidence that NAMO government will do miracles and rectify all bottlenecks for growth and analysts projected 20% earnings growth. This resulted in Sensex crossing 30,000 in March. But the reality was quite different:
- Corporate Earnings were less than expected
- Reform process by Government was slower than market expectation. Key reforms like GST and Land acquisitions could not be passed by the government
- Commodity Prices touched 10 year lows
- Chinese economy slow down
Fall in crude oil is a bonanza for India resulting in lower Fiscal and Current A/c deficit, improvement in GDP and lower Inflation (Consumer Price Inflation)
But lower Oil prices had an Impact on bourses as the Sovereign Wealth Funds (Saudi and Oil rich countries financials were affected due to lower prices) sold Large Cap stocks resulting in crashes on Sensex and Nifty.
Typically the valuations are high for Large Cap Stocks, lower for Mid Cap Stocks and least for Small Cap stocks. The sovereign wealth funds bet on Large cap stocks and since they pulled out, the large caps went down resulting in a abnormal situation where Mid and Small caps outperformed the Large Caps.
Investors holding Reliance Small Cap, Franklin Smaller Companies and Mirae Asset Emerging Blue Chip in their portfolio reaped rich rewards. Some of popular funds that have a tilt towards Large Cap Stocks like ICICI Prudential Dynamic, HDFC Top 200, HDFC Equity, DSP BR Top 100, Axis Equity under performed.
Whenever I speak to clients I quote this Analogy, so if you have heard it earlier please bear with me:
In Equity Investments doing SIPs is a safe bet(chances of losing money in long term is almost nil) than lump sum investments where you buy at specific market levels. In a one day Cricket match when the batsmen rotate the strike and take singles and two’s, the probability of getting out is relatively less. But if the target is high you cannot just restrict to singles and twos but clear the boundaries where the probability of getting out is higher.
Similarly, someone doing SIPs of say 10k per month for 10 years, would have invested only 12 lakhs and the Corpus growth will be proportional to the investment and cannot be huge. Hence investor who have started the journey late will have to do Lump Sum investment, whenever the have surplus.
Hope many of you have received the email from NSE Mutual Fund application on your FATCA and KYC data which we updated on your behalf to save your precious times. You will get an email and you just have to confirm it. Very few have taken this approach of doing it through the application and Advisors passed on the ownership to update the data in 4 application. I had sent an email on this.
All Mutual Funds are onboarded to NSE MFS application (last one was Franklin Templeton) which paves the way for paperless transactions. We are creating the profile of all investors which needs to be Physically signed and submitted to CAMS (you can send it to us and we will do the needful) along with a cheque copy and NACH mandate. The NSE MFS application has several limitations (yesterday it sent the same FATCA data for verification to all investors. I pursued the case with them and finally got another mail with correct data.)
Reference channel is the best option for ventures like us. Since we deal with investors money the trust factor plays an important role and any amount of advertising or road shows/presentations doesn’t work.
One of the key accomplishments of PenguWIN is 100% client retention. So far in this 1.5 years of operation, we were able to satisfy the the requirements of all our clients. It would of great help to us if you could refer us to your friends, wellwishers and relatives. In fact close to 50% of our clients were acquired through reference.
Hope 2016 brings in a lot of success to all of us.
PenguWIN Investment Services & Wealth Management Consulting
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