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Diwali 2018 Mahurat Portfolio


Warm wishes for a joyous diwali & a prosperous year ahead.

Diwali 2017 Portfolio Return beats NIFTY by 41.28% [1] (YTH)


Broad Markets Outlook

The year gone by saw Indian capital markets face high price & earnings volatility round the year. On the onset of the Samvat 2074 (Oct, 2017) Indian capital markets were inching towards a valuation bubble, supposedly fuelled by aggressive earnings estimations. However, on YTD basis broad market indices (Nifty / Sensex) have remained flattish but the mid & small cap space has seen a price correction represented by respective indices indicating 9.33% & 15.47% drop respectively.


Higher crude oil prices, Falling INR & Increasing interest rates led to significant outflows of foreign funds. In the current calendar year FII’s have liquidated about INR ~400bn of Indian equities as against a net purchase of INR ~500bn in the previous calendar year. However, fund managers of Indian asset management institutions are experiencing shift in mindsets of individual Indian investors who now are overlooking this shorter term volatility & are increasing equity allocation even in the challenging times. This observation is supported by strong domestic inflows in equity mutual funds. Individual investors held INR 12.97 lakh crore in mutual funds as of September 2018, an increase of 25% over September 2017. Investments of individual investors in equity schemes increased by 33% over September 2017 (Source: AMFI). We see this phenomenon as a very positive structural change for the Indian capital markets as we move towards lower dependency of foreign funds.


In the immediate quarter gone by volatility index (VIX) has clocked a ~2year high mark at 21.36 on 22nd Oct 2018. High regulatory policy changes by market regulators, IL&FS debacle, currency fluctuations and political fears and speculations on account of the soon due state elections have caused this volatility expansion. However, earnings growth for Q2FY19 in the ongoing result reason has been strong for broad markets though its early to put a number on market vide growth as a large number of companies are yet to report their earnings. We believe that this volatility shall subside and Indian capital markets will be further rationalised by the end of this quarter owing to establishment of political direction post state elections, earnings rationalizing valuations & improving macros like ~16% crude oil price correction from year high of ~$87/barrel to current levels.


As per our diwali 2017 portfolio recommendations on an equal weight basis for all stocks in the portfolio, the portfolio returns were as follows:

Yield to highs: 56.25%[1] (YTH)

Yield to date: 23.11%[2](YTD)

Thus out- performing NIFTY by 41.28% on YTH basis & 20.03% on YTD basis.

Detailed list of these returns can be found overleaf.

Diwali 2017 portfolio report can be found here: http://bit.ly/PMdiwali2017




End of report.


[1] (YTH) Returns calculated from recommendation price to high price post recommendation.

[2](YTD) Returns calculated from recommendation price to closing price as on date of report


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