How to build Protection in your Portfolio?
Nifty @17500, What Next?
Markets at Peak, Is It?
Protect your growth, but How?
Markets are never expensive, never cheap, it’s just a perception.
When I am writing this note, Nifty is at ~ 17500, by the time, this will get published, Nifty may be at 18000 or 16000 and by the time you read it, Nifty again can be 17500 or 19500.
The key point remains, volatility, ups & downs, Non — Linearity is the basic behavior of the markets, equities and stocks.
Every time, when someone is selling at 8400 level Nifty (in March 2020) when someone is selling at 17000 Nifty (Aug 2021), someone is also buying on the other side whether it’s March 2020 or Aug 2021.
Some believe that this market is driven by Liquidity, Some fear that the market will drop due to tapering of Quantitative easing, some worry that Inflation is rising ( Inflation in Germany is 13 years high at 3.4%), that will propel the interest rates to rise.
Another worry is FIIs will sell and exit, DII will have redemptions, what next from 17500 levels of Nifty?
Questions, Doubts, Fears?
Last 17 months have been transformatory for India and for the world. Both tanked but the rebound is steep and sharp in India with GDP Q1 FY 22 posting a healthy 20.1% due to low base effect.
But three things have been rather irreversible.
First amongst many being, FIIs, FPIs (Foreign Portfolio Investors) which till now were believed to have the handle of the equities have lost their grip. They have been selling for the past few months, but no correction in sight for the Indian stock markets as yet.
Second, DIIs are also left with limited prowess at present on Indian equities. Last year we saw the mighty Indian mutual funds also selling due to the redemption pressure from investors (apart from SIPs — Systematic Investment Plans which continued to contribute ~ a billion USD in equity mutual funds month on month basis). Despite that, one didn’t witness any significant downturn in the market.
Retail participation with ~ 75% to 80% of daily delivery volumes (the delivery volumes — quantum in INR- have grown over 100% in the last decade) this time has been driving the stock markets assisted by technology, education and ease of execution.
Third, the TINA (there is no alternative) factor continues to remain robust, with debt, gold and real estate (being illiquid) losing sheen in delivering returns.
DE-risked equities, Consistent Equities, Safe equities is the place where investors wish to reach by being patient.
To top all this up, Interest rates in India are the lowest since Independence. Benefit of which is directly on PAT (Profit after Tax) with no intervention from anyone.
Even after a few years, not now (as rise in Interest rates will impact growth) if interest rates rise happens, it will be marginal as borrowing not only for India but for globally biggest and developed economies around the world has swelled. If interest rates rise, the FIRST VICTIM will be governments’ worldwide.
Also Inflation, jump in inflation is transient, on account of supply side challenges and disruption in International trade. The rise in energy cost has pushed the CPI (Consumer Price Index) worldwide, whilst WPI (Wholesale Price Index) remains benign.
With the DIGITAL economy and digital platform for grocery to fashion pretty much everything, dis — intermediation is on the rise which will bring the middle man cost down and thus benefiting the customer or the corporate in both cases, benefit will to stock markets in terms of jump in demand for goods and services or jump in Profits or both.
Also crackdown on Chinese Internet companies, have left little option for investors but to maneuver around Indian businesses. Internet means Volumes, large scale and low marginal cost and thus, global internet money will chase and is chasing India.
One caution amongst all the positive and optimistic approach.
SHIFT, Shift immediately to Quality, Shift to Integrity, Shift to Consistency.
In other words, the days of easy money, blind picks are over.
Quality will reign, companies which will deliver healthy EPS and more importantly C — EPS (Cash — Earnings per Share) will be winners and Nifty will remain buoyant from here.
Don’t expect more than single digit volatility (NOT Correction) in INDICES, but one can witness time wise correction if growth trajectory slows down, which at the moment seems unlikely.
Remember more money is lost in timing the market than in market corrections.
Think which game you are in 5% or 500%. Be clear in your objectives, rest is all noise.
