April 2015

Mild Correction

We witnessed a mild correction in the month of April 2015. The index fall was in the range of 3 to 4% which was the extent to which our portfolios fell as well. Early corporate results were not encouraging and growth in revenue was near the 5% mark which is the lowest we have seen in the last few years. Corporate profits across sectors have seen de-growth with very few companies being able to demonstrate better results. In our holdings we had more hits than misses. Most of the negatives like poor corporate results, FII taxation, sharp spike in global bond yields and global volatility is getting discounted. We have also seen exits from FII’s in the last month and they have been continuous sellers in the market.

In our opinion most of the overweight position of India got corrected in the recent fall. At the same time most of the analysts have turned bearish on India’s future outlook. This has increased skepticism and we can now see a sharp U-turn on the bullish sentiments that these analysts carried just a few weeks ago. In the last few sessions we have seen buying emerging at lower levels from domestic institutions and they are absorbing supply from FII’s. In our opinion we are in a process of bottom formation of the market. In coming months we expect consolidation and stock specific action in the market. This should help our portfolios as most of our companies are expected to deliver better results than the broader market.

Regards,

Vinod Jain