November 2014

Big theme at Play

In our September – 2014 diary we highlighted the impact of falling crude oil price on markets. We also mentioned that it was a good time to invest as FII flows were slightly negative. From that month we have clearly outperformed the benchmark index by more than 10%. In our portfolios we primarily owned domestic stories with strong franchise. Most of our businesses will benefit from the changing dynamics of the economy which in turn will lead to expansion in margins. We have seen strong sector rotation and markets are now favoring FMCG, Engineering, Banking, Auto & Auto Ancillary. We have clearly benefitted from this rotation and been one of the best performers in the industry.

In our opinion most of the analysts are not able to estimate the positive impact of fall in crude prices on corporate earnings as well as GDP. This just makes it difficult for all of us to decide PE multiples for the market and companies. We are, simply put, in uncharted territory. In this market strong hands will not sell and people sitting on the sidelines will keep on looking out for opportunities to buy. This will ensure that the downside is limited. In our estimate some of the companies will show nonlinear growth in this environment and will be clear winners. We will continue to focus on finding winners in this environment and consolidate our returns.

If you want to read our past views on the market you can read our blog below

http://investmentstrategyindia.blogspot.in/