December 2014
HAPPY New Year 2015!!
Rewind 2014
2014 by all means has been a good year for all of our investors. We have been able to
deliver more than 42% alpha in all the strategies which was the highest we’ve seen in the
last five years. We are extremely happy for our investors as we have outperformed the
Index for the fifth consecutive calendar year. Our endeavor like always will be to
continuously work hard to sustain performance in coming years and deliver superior risk
adjusted returns. Looking back, 2014 for us and our clients has truly been the “Year of
alpha”.
Fast Forward 2015
Most of us are predicting that 2015 should be a reasonable year. I would like to welcome
the new year and take this opportunity to crystal gaze 2015.
Fundamentals – Biggest story of 2014 was a sharp fall in oil prices from 120$ to less than
60$ in a span of 3 months. India being a net importer of oil was the biggest beneficiary of
this fall in crude prices. In our opinion 2015 will be a year where fundamental benefits of
crude prices will be discounted. This will help a lot of companies to deliver above
expectation results in the coming four quarters. Also we will see corporate margins
improving. Finally we will also see GDP growth getting into higher trajectory. Markets will
watch all this with a lot of excitement and will be ready to pay a premium to corporates
who are delivering on performance.
Technical – 2014 was the third calendar year with positive returns. S&P 500 delivered 31%
in 2012, 4% in 2013 & 37% in 2014. The beauty of a bull market is that people at large
realize they’re in one only at a later stage. As we speak we are entering the 4th year of bull
market. Technically markets have consolidated beautifully at every higher level. It might
come as a surprise that after a game changing election result the index has just moved up
by 14% in the last 7 months. So it was a surprisingly grinding move by the index. IPO’s
were extremely weak in 2014 with collections at just 1500 crores which was lowest in the
last 14 years. The positive side to this is that interest in secondary markets will continue. I
personally believe that the market is on a firm footing and 2015 will be a rewarding year.
Sentiment – We are seeing mixed sentiment on the street. There is still a lot of skepticism
which is keeping people underinvested. The fund manager fraternity believes that
markets will give average returns in 2015 after a spectacular run in 2014. Lots of people
believe that businesses on ground are struggling. People are still not buying the bull
market phenomenon and are hesitating in allocating money to equities. This is keeping
market healthy and creating buying at every 2-3% corrections. We are still far away from
euphoria where there is consensus on the street. In my mind euphoria will start emerging
if we see fourth consecutive year of positive return.
If you want to read our past views on the market you can read our blog below
http://investmentstrategyindia.blogspot.in/