Around this time last year, Mumbai was still impatiently waiting for the arrival of the monsoons. It would have been the season’s best reprieve for anxious investors who were till then reeling under the heat of a global market meltdown. In retrospect though, it may have been the ideal starting point for Indian investors.
20 stocks you must own
Exactly a year before now, in our first cover story on the markets, we had recommended that investors resume buying. We had recommended a portfolio of 20 stocks that would mirror an array of opportunities the Indian economy presented.
A year later, barring two companies, the portfolio has ended with positive returns. Three companies P&G, Page Industries and Pidilite have returned 100%. Five other stocks gained 70%.
On the whole, the Forbes India 20 portfolio was up 54%, compared to 45% of the mid-cap index (most of our recommendation was from this category). The broad market went up by 15% during the same time.
To be honest, there were enough easy pickings. Many companies were powering ahead before the global bust and yet, their valuations had fallen off the cliff. Almost all our stock picks had a strong domestic story that helped insulate them from the global instability.
But that was last year. Many Indian companies are now quickly reaching their pre-slump level in sales. Having scaled back expansion plans, they will soon churn out their full capacities, leaving little headroom for volume growth.
Investors have already guessed that Indian companies will continue to perform well, and lapped up stocks at prices that have already discounted the current financial year’s earnings.
Our considered opinion is that any investments in the stock market may not yield above-average returns in the next one year.
Mix Multibaggers in your Portfolio. Lower your Risk, increase Returns ! www.midcaps.in/AssuredHighReturns
20 stocks you must own
High net-worth individuals (HNIs) have already moved from equities to structured debt products to signal the flight to safety. The fog of global uncertainty hasn’t quite lifted. On the contrary, economist Paul Krugman has predicted the makings of the third Depression. To cut a long story short, it will, therefore, be more difficult to construct a portfolio that will return as much as the one we chose last year.
In a fast growing economy, there are bound to businesses that will deliver better than average returns. We tend to lean towards the views of experts who reckon that the valuations of Indian markets at a P/E ratio of 18 times 2010-11 earnings cannot be considered as expensive. The historic average tends to be 20, while a ratio of 24 could well enter the danger zone.
Last year, we had five themes in our recommendations. We included ones that captured very risky bets (Suzlon and Wockhardt, two stocks in that category failed to deliver). We also included smaller cap companies like Page Industries among those that run ahead of the broad market in good times. The aim was to maximise gains rather than stay conservative.
20 stocks you must own
There is a fundamental difference in the theme this year. Our immediate focus is to preserve capital, while aiming for decent returns (the long term returns from equities in India is 15%). So we’ve left out the relatively small companies, which typically fall harder in a downswing. Some of the other parameters have not changed. “This market is above fair value and investors should not overpay for growth,” says Rajeev Thakker, CEO of Parag Parikh Financial Advisory. We’ve retained our focus on picking stocks that have a large domestic play. We’ve also focussed on sectors that have shown dramatic consumption trends: Real estate, auto, banks and financial services. We’ve added the fast-growing infrastructure sector too.
Here’s a sense of why we selected some of the stocks and themes.
In the auto segment, we picked India’s largest car maker Maruti, tractor firm Escorts and battery maker Exide Industries. These stocks have run up in the recent past and seem fully valued. But the demand for small cars has continued to surge forcing Maruti to set up another plant. Trading at a P/E of 16, the stock still has a lot of steam.
Exide rides indirectly on the growing automobile sales – it makes nearly two-thirds of the batteries that go into cars and trucks. Exide’s core return on capital employed (ROCE) is at 85% and its management believes electric vehicles and hybrid vehicles could well be its next big opportunity.
The banking sector at the moment is valued on the higher side. But ICICI Bank is a good buy at 1.85 times the book value. Under CEO Chanda Kochhar, it has signaled a clear return to profitable growth. Yes Bank, on the other hand, plans to foray into the high-return micro-finance business. It is trying to improve its public deposits too. For the long term investor, this is one bank to catch at an early stage.
20 stocks you must own
Bajaj Finserv is a good insurance play. The stock has performed well over the past three months, up 28%, after benefitting from RBI’s circular on revised norms for transfer of shares to overseas entities.
There are some unusual names in the portfolio. BGR Energy is one. BGR Energy is engaged in power equipment and construction and it is expected that the power generation capacities are expected to peak in India. Based on a recent Goldman Sachs report, BGR is expected to add USD 4.7 billion in orders and report 43% sales growth CAGR and 33% RoE over the next two years. Over the next year, analysts expect BCG’s share price to move up by about 25%.
Then there is IVRCL, the integrated infrastructure player, which gave a guidance of Rs 7,000 crore for its top line in 2010-11. It has a huge order book of Rs. 32,000 crore. On 2010-11 numbers, the company trades at a P/E of 12.2 times.
Indian IT firms may have lost a bit of their margins, but of late, they’ve gained at the expense of global tech majors Accenture and Oracle. We sense value in HCL Tech, which is fast improving its standing among the top four and has registered the strongest revenue growth in three of the last four quarters. Aggressive bidding during the slowdown gave HCL entry into marquee client accounts. Discretionary spending is returning sooner than expected, and we expect HCL to be a key beneficiary from the revival in ERP consulting projects. Besides, its valuation is cheap compared to its peers.
Tuesday, July 6, 2010
Wednesday, June 23, 2010
Tuesday, June 22, 2010
The 100 Crore Lemons
The janta review of Kites and Raavan was swift and cruel. F-L-O-P. Flop. That’s real bad news for the common producer of both films – Reliance Big Pictures. Sources say the company has lost upwards of Rs 100 crore on these films. By its current scale of performance, Raavan looks to sink lower than the other mega-budget dud – Kites.
Both films had extensive pre-launch promotions. Alas – promotions ensure that a film has a good opening over the weekend. That’s it. After that, it is the content of the film itself which will make it swim or sink. Beating poor reviews and word-of-mouth ratings, Kites managed a good opening weekend, netting in Rs 30 crore.
Raavan has collected less than Rs 20 crore at the close of its opening weekend. This week onwards, Raavan has a clear run with no competing releases. Yet, analysts predict it will sink further. Nothing can salvage Raavan with its below average opening of 50% across the country.
Kites and Raavan were expected to follow Raajneeti’s rocking show at the box office. Instead, the films have become Bollywood ki Aag. That’s something, even by Bollywood standards of expecting the most unexpected.
Was it the actors? Raavan is Abhishek Bacchan’s third film with Mani Ratnam. After Yuva and Guru, expectations were sky-high from Abhishek Bachchan. (We tend to dismiss Delhi 6). What the janta saw was largely dismissed as hamming and posturing, amateurish and naive. Questions raised on faking the much-vaunted dive didn’t help.
Hrithik was appreciated in Kites for his good looks (which the camera made love to, framing him in tight close-ups and bare torso scenes). Jai faltered, Hrithik didn’t.
Scintillating Barbara Mori looked pretty in Kites. So does Aishwarya in Raavan. Luminous, floating around in the forest, long curly drenched hairpiece and carefully crafted no make up look. So we’ve heard of the chemistry between the stand-in Sita and the shrieking baddie. We think back to the mock fight when the same pair landed on a bed in Guru and phuuuuuus- zilch. Aishwarya, I suspect, still looks hottest with Hrithik. Hrithik and Barbara’s crackling chemistry and smouldering looks kept Kites ticking.
Both films are richly crafted and produced – sweeping shots, stunning locales, jungles, waterfalls, but where is the story? So Kites was painful and downright silly in the second half. With Raavan and its confusing plot (Beera is Raavan, Robin Hood or Veerappan), why does Vikram wear aviator glasses in the jungle (he’s a cop, they cost a lot, no?) and run slo-mo, etc, etc. The plot rests mostly in Mani Ratnam’s head.
To sum up, here’s what I am saying other filmmakers should avoid like the plague:
* Avoid bumbling actors who ham for the camera
* If your film is titled Raavan, don’t hope that Sita will see it through
* Get a lead pair who look hot together
* Let the story out of the director’s head and out there for the audience
* Acknowledge the use of stuntmen/women
* Don’t get Ma and Pa to defend your film
* Think of a strategy to counter word-of-mouth ratings and reviews
* Don’t let others in Bollywood poke fun at your expense and ask RGV and KJo to take their tweet battles offline
Read my colleague Rummana’s review of Raavan here. ‘Abhi-Ash are insufferable’, she says. And here’s the trailer.
Both films had extensive pre-launch promotions. Alas – promotions ensure that a film has a good opening over the weekend. That’s it. After that, it is the content of the film itself which will make it swim or sink. Beating poor reviews and word-of-mouth ratings, Kites managed a good opening weekend, netting in Rs 30 crore.
Raavan has collected less than Rs 20 crore at the close of its opening weekend. This week onwards, Raavan has a clear run with no competing releases. Yet, analysts predict it will sink further. Nothing can salvage Raavan with its below average opening of 50% across the country.
Kites and Raavan were expected to follow Raajneeti’s rocking show at the box office. Instead, the films have become Bollywood ki Aag. That’s something, even by Bollywood standards of expecting the most unexpected.
Was it the actors? Raavan is Abhishek Bacchan’s third film with Mani Ratnam. After Yuva and Guru, expectations were sky-high from Abhishek Bachchan. (We tend to dismiss Delhi 6). What the janta saw was largely dismissed as hamming and posturing, amateurish and naive. Questions raised on faking the much-vaunted dive didn’t help.
Hrithik was appreciated in Kites for his good looks (which the camera made love to, framing him in tight close-ups and bare torso scenes). Jai faltered, Hrithik didn’t.
Scintillating Barbara Mori looked pretty in Kites. So does Aishwarya in Raavan. Luminous, floating around in the forest, long curly drenched hairpiece and carefully crafted no make up look. So we’ve heard of the chemistry between the stand-in Sita and the shrieking baddie. We think back to the mock fight when the same pair landed on a bed in Guru and phuuuuuus- zilch. Aishwarya, I suspect, still looks hottest with Hrithik. Hrithik and Barbara’s crackling chemistry and smouldering looks kept Kites ticking.
Both films are richly crafted and produced – sweeping shots, stunning locales, jungles, waterfalls, but where is the story? So Kites was painful and downright silly in the second half. With Raavan and its confusing plot (Beera is Raavan, Robin Hood or Veerappan), why does Vikram wear aviator glasses in the jungle (he’s a cop, they cost a lot, no?) and run slo-mo, etc, etc. The plot rests mostly in Mani Ratnam’s head.
To sum up, here’s what I am saying other filmmakers should avoid like the plague:
* Avoid bumbling actors who ham for the camera
* If your film is titled Raavan, don’t hope that Sita will see it through
* Get a lead pair who look hot together
* Let the story out of the director’s head and out there for the audience
* Acknowledge the use of stuntmen/women
* Don’t get Ma and Pa to defend your film
* Think of a strategy to counter word-of-mouth ratings and reviews
* Don’t let others in Bollywood poke fun at your expense and ask RGV and KJo to take their tweet battles offline
Read my colleague Rummana’s review of Raavan here. ‘Abhi-Ash are insufferable’, she says. And here’s the trailer.
Saturday, June 19, 2010
IRDA wins ULIP battle: Govt to amend laws to revive sales--20 Jun 2010, 0051 hrs IST,ET Bureau
NEW DELHI: Insurance industry regulator Irda has emerged the victor in a high-profile tussle over the regulation of so-called unit-linked insurance plans or Ulips, with the government ruling that it and not the market watchdog Sebi would oversee the product.
The government is “clarifying by way of an explanation that life insurance business shall include any unit-linked insurance policy or scripts or any such instruments,’’ said a statement from the press information bureau. “This would set at rest all the issues regarding Ulips between the two financial regulators.’’
The government promulgated an ordinance late on Friday to amend four major laws that could revive the sale of Ulips and force the mutual fund industry to look for new avenues to get investors.
“This will completely end the uncertainty regarding unit linked insurance plans,’’ said Kamesh Goyal, chief executive, Bajaj Allianz Life Insurance. “Ulips have also turned extremely customer-friendly after recent measures taken by the regulator to bring down surrender charges.”
Irda and Sebi got into a legal battle over Ulips regulation after the markets regulator on April 9 banned 14 insurers from selling Ulips. Sebi withdrew the ban when bureaucrats brokered a truce, but only to revive it. Sebi moved the Supreme Court to club various public interest litigations against Ulips and resolve the issue of alleged mis-representation and the issue of jurisdiction.
The Supreme Court will have to take cognisance of the Ordinance when it hears the case on July 8. “The government’s clarification will enhance policy holder confidence as it settles the issue over regulation”, J Hari Narayan, chairman Irda told SundayET in an interview.
The ruling is a relief to existing policy holders who were unsure of continuing with the product and new investors were wary of buying them.
Ulips are hybrid products incorporating investment and insurance cover. They account for more than 85% of the portfolio for life insurers. Insurers can now sell new Ulips launched after April 9, 2010.
The government will amend the RBI Act, the Insurance Act, the Sebi Act and the Securities Contract Regulation Act to include Ulips, scripts or any such insttruments under the life insurance business. The Bill will be introduced in the monsoon session of Parliament, said a senior finance ministry official.
The government is “clarifying by way of an explanation that life insurance business shall include any unit-linked insurance policy or scripts or any such instruments,’’ said a statement from the press information bureau. “This would set at rest all the issues regarding Ulips between the two financial regulators.’’
The government promulgated an ordinance late on Friday to amend four major laws that could revive the sale of Ulips and force the mutual fund industry to look for new avenues to get investors.
“This will completely end the uncertainty regarding unit linked insurance plans,’’ said Kamesh Goyal, chief executive, Bajaj Allianz Life Insurance. “Ulips have also turned extremely customer-friendly after recent measures taken by the regulator to bring down surrender charges.”
Irda and Sebi got into a legal battle over Ulips regulation after the markets regulator on April 9 banned 14 insurers from selling Ulips. Sebi withdrew the ban when bureaucrats brokered a truce, but only to revive it. Sebi moved the Supreme Court to club various public interest litigations against Ulips and resolve the issue of alleged mis-representation and the issue of jurisdiction.
The Supreme Court will have to take cognisance of the Ordinance when it hears the case on July 8. “The government’s clarification will enhance policy holder confidence as it settles the issue over regulation”, J Hari Narayan, chairman Irda told SundayET in an interview.
The ruling is a relief to existing policy holders who were unsure of continuing with the product and new investors were wary of buying them.
Ulips are hybrid products incorporating investment and insurance cover. They account for more than 85% of the portfolio for life insurers. Insurers can now sell new Ulips launched after April 9, 2010.
The government will amend the RBI Act, the Insurance Act, the Sebi Act and the Securities Contract Regulation Act to include Ulips, scripts or any such insttruments under the life insurance business. The Bill will be introduced in the monsoon session of Parliament, said a senior finance ministry official.
Wednesday, June 16, 2010
Apple sells 600,000 iPhone 4s in a day, shares up
LOS ANGELES: Apple Inc has sold more than 600,000 units of its newest iPhone after just a day of preorders, surpassing some analysts' expectations and sending its shares up nearly 3 per cent on Wednesday.
The makers also of the iPad and iPod said it and carrier partner AT&T Inc had been forced to turn away "many" potential customers after the surprising volume of online orders triggered order and approval system malfunctions.
"We apologize to everyone who encountered difficulties, and hope that they will try again ... once the iPhone 4 is in stock," Apple said in a statement. AT&T, the exclusive US provider for iPhone, said orders of the iPhone 4 on Tuesday, the first day of online preorders, were 10 times higher than for the iPhone 3GS last year.
The makers also of the iPad and iPod said it and carrier partner AT&T Inc had been forced to turn away "many" potential customers after the surprising volume of online orders triggered order and approval system malfunctions.
"We apologize to everyone who encountered difficulties, and hope that they will try again ... once the iPhone 4 is in stock," Apple said in a statement. AT&T, the exclusive US provider for iPhone, said orders of the iPhone 4 on Tuesday, the first day of online preorders, were 10 times higher than for the iPhone 3GS last year.
Market heading 5300-www.moneycontrol.com
It was a quiet session for the markets. The indices moved within a tight range and closed the day absolutely flat. The Nifty ended the day at 5,233, up 11 points. The Sensex shut shop at 17,462, up 50 points. The Midcap index also ended marginally in the green. The gap between the advance and declines narrowed through the session to end at 1:1.
The mood on Dalal Street is getting optimistic. But does that mean a big rally is on its way or will global cues play spoilsport?
Naresh Kothari, President, Edelweiss Capital, sees some amount of optimism returning to the market over the last 3-5 days. "At lower levels, we are seeing continuous buying interest. At 4700-4800, we saw very good interest come in. I guess this continues to remain a period when people are sort of coming out of their shell and starting to look at opportunities and ideas."
He asks investors to be cautious around 5,300-5,400 levels. "The global phenomenon continues to be an overhang on the market. Also, the second half might not be as good as the first half. I think the market is a little bit more cautious on the upside. These two factors are actually ensuring that this will not be a runaway market. I would start buying more of Puts and build some amount of cash in the portfolio."
Ambareesh Baliga of Karvy Stock Broking expects the Nifty to continue in a 5,200-5,300 range. "Crossing this level will be quite difficult. Inspite of all the good news, whether it is advance tax figures, IIP (Index of Industrial Production) data, monsoons, GDP (gross domestic product) estimates, if you are not able to convincingly cross these levels, it clearly shows that there is no conviction in the market. Over the next two-three months, we will be in the broad range of 4,700-4,800 and to around 5,300."
However, Sudarshan Sukhani of Technical Trends feels the market can see a 70-80 or 100 point correction. He advises investors to buy on dips.
Phani Sekhar, Fund Manager, Angel Broking, too asks investors to buy on dips. But unlike Sukhani he sees another 4-5% upside. "Individual midcaps and stocks will be doing much better than indices and that is where a lot of money is there to be created."
How should you play stocks from the Reliance pack?
On Reliance:
Baliga sees huge upside potential in Reliance Industries. "We have been talking of Rs 1400 levels, which it is refusing to go towards in the last six-eight months. But by January- February next year, once all these things settle down, it should trade over Rs 1400. At these levels, we are quite bullish on Reliance Industries."
Sekhar is betting on Reliance Industries and Reliance Infrastructure from the Mukhesh Ambani stable.
On the ADAG pack:
Reliance Communications, Baliga said, has already moved up decently from lower levels. "I don't think it can move much more looking at the way the telecom sector is doing." On the other stocks in the pack, he feels they are more of a speculative move than a fundamental move. "It is more of traders' pick at this point of time than a fundamental buy."
From the ADAG group, Sekhar likes Reliance Infrastructure. "This is a very young engineering company. The numbers that you see now are not really reflective of the potential numbers that you will see in a couple of years’ time when majority of its current projects come onstream. Valuationswise, it looks pretty attractive. We will give a pass to the rest of the stocks and pick Reliance Infrastructure."
The mood on Dalal Street is getting optimistic. But does that mean a big rally is on its way or will global cues play spoilsport?
Naresh Kothari, President, Edelweiss Capital, sees some amount of optimism returning to the market over the last 3-5 days. "At lower levels, we are seeing continuous buying interest. At 4700-4800, we saw very good interest come in. I guess this continues to remain a period when people are sort of coming out of their shell and starting to look at opportunities and ideas."
He asks investors to be cautious around 5,300-5,400 levels. "The global phenomenon continues to be an overhang on the market. Also, the second half might not be as good as the first half. I think the market is a little bit more cautious on the upside. These two factors are actually ensuring that this will not be a runaway market. I would start buying more of Puts and build some amount of cash in the portfolio."
Ambareesh Baliga of Karvy Stock Broking expects the Nifty to continue in a 5,200-5,300 range. "Crossing this level will be quite difficult. Inspite of all the good news, whether it is advance tax figures, IIP (Index of Industrial Production) data, monsoons, GDP (gross domestic product) estimates, if you are not able to convincingly cross these levels, it clearly shows that there is no conviction in the market. Over the next two-three months, we will be in the broad range of 4,700-4,800 and to around 5,300."
However, Sudarshan Sukhani of Technical Trends feels the market can see a 70-80 or 100 point correction. He advises investors to buy on dips.
Phani Sekhar, Fund Manager, Angel Broking, too asks investors to buy on dips. But unlike Sukhani he sees another 4-5% upside. "Individual midcaps and stocks will be doing much better than indices and that is where a lot of money is there to be created."
How should you play stocks from the Reliance pack?
On Reliance:
Baliga sees huge upside potential in Reliance Industries. "We have been talking of Rs 1400 levels, which it is refusing to go towards in the last six-eight months. But by January- February next year, once all these things settle down, it should trade over Rs 1400. At these levels, we are quite bullish on Reliance Industries."
Sekhar is betting on Reliance Industries and Reliance Infrastructure from the Mukhesh Ambani stable.
On the ADAG pack:
Reliance Communications, Baliga said, has already moved up decently from lower levels. "I don't think it can move much more looking at the way the telecom sector is doing." On the other stocks in the pack, he feels they are more of a speculative move than a fundamental move. "It is more of traders' pick at this point of time than a fundamental buy."
From the ADAG group, Sekhar likes Reliance Infrastructure. "This is a very young engineering company. The numbers that you see now are not really reflective of the potential numbers that you will see in a couple of years’ time when majority of its current projects come onstream. Valuationswise, it looks pretty attractive. We will give a pass to the rest of the stocks and pick Reliance Infrastructure."
Wednesday, June 9, 2010
Loss in equities? Don't fall prey to investment myths-
Once bitten twice shy investors often fall victims to popular myths about investing rather than learning from their mistakes.
In the bargain, they lose out on other opportunities.
Here we took a look at some of the myths that are prevalent in the minds of those who have lost money
Investors feel that they do not need investment advisors and can make investment decisions on their own using their trusted sources. However, one must remember that markets today are far more complex.
It is virtually impossible for any one individual to track all asset classes. Hence choosing a good advisor, helps.
“An advisor is equipped to look at your changing needs and risk profile, and offer appropriate solutions given the market conditions and basket of products available.
"They are experts and will help you navigate the journey towards financial freedom with a high degree of certainty,” says Ashish Kehair, business head, private wealth management at ICICI Securities.
The NAV is the total value of all the securities in its portfolio, less any liabilities, divided by the number of units outstanding.
The NAV does not signal an entry or an exit point. Instead, one should look at the portfolio quality of the fund, see whether it is a large cap, mid-cap or small-cap oriented, the fund manager, the past performance and the style of investing.
“Individuals should look at the return on investment rather as a pure number to the NAV has no meaning”, says Anil Chopra, Group CEO, Bajaj Capital.
Bonds or debt mutual funds carry interest rate risk.
In a rising interest rate scenario, the value of your bond falls and you lose money and vice versa. Besides, there is a credit risk with bonds of private companies.
Hence investors must factor in that before making an investment in debt.
his works for a lot of people, but this is not sacrosanct.
For example, if you are 30 years old and have a loan and are the only working member in your family, and barely manage to meet your monthly expenses, it may be risky for you to put 70% of your assets in equities.
Alternatively, if you are an HNI and 60 years old, with your retirement nest built and well taken care of, then you can still afford to invest more than 40% in equities.
Hence, it is best that you discuss the same with a financial planner before taking a final decision.
A lot of investors are constantly trying to find the next multi-bagger. First, in an individual capacity it is not easy to spot one.
Even if you have a multi-bagger but it constitutes a small percentage of your portfolio then it does not make significant difference to your returns.
“In the process of identifying a multi-bagger, investors accumulate as many as 15 small-cap stocks, 14 of which would go down, so it is not really worth the effort,” says Radhika Gupta, director and founder of Forefront Capital.
Most investors think that they will buy at the bottom and sell at the top, in short they want to time the market. However, during their investment journey sooner or later they realise that timing the market is not possible and in the process they miss out on many opportunities.
“There is no best time to invest, but there is a best time horizon to invest. If you have the time horizon to live the shocks of the particular asset class, you will make money,” says AV Srikanth, executive director, Anand Rathi Wealth Managers.
Investors should build a portfolio over a period of time, depending on the risk that he can take.
Financial advisors advise diversification of portfolio to increase returns and reduce risk.
However, diversification does not mean buying stocks and funds at random.
“Overall we believe that investors should not have more than 20 instruments be it stocks, mutual funds or fixed deposits in their portfolio as diversification beyond that reduces returns without reducing risk”, says Sandeep Raichura, business head, wealth management at Pioneer Wealth Management.
In the bargain, they lose out on other opportunities.
Here we took a look at some of the myths that are prevalent in the minds of those who have lost money
Investors feel that they do not need investment advisors and can make investment decisions on their own using their trusted sources. However, one must remember that markets today are far more complex.
It is virtually impossible for any one individual to track all asset classes. Hence choosing a good advisor, helps.
“An advisor is equipped to look at your changing needs and risk profile, and offer appropriate solutions given the market conditions and basket of products available.
"They are experts and will help you navigate the journey towards financial freedom with a high degree of certainty,” says Ashish Kehair, business head, private wealth management at ICICI Securities.
The NAV is the total value of all the securities in its portfolio, less any liabilities, divided by the number of units outstanding.
The NAV does not signal an entry or an exit point. Instead, one should look at the portfolio quality of the fund, see whether it is a large cap, mid-cap or small-cap oriented, the fund manager, the past performance and the style of investing.
“Individuals should look at the return on investment rather as a pure number to the NAV has no meaning”, says Anil Chopra, Group CEO, Bajaj Capital.
Bonds or debt mutual funds carry interest rate risk.
In a rising interest rate scenario, the value of your bond falls and you lose money and vice versa. Besides, there is a credit risk with bonds of private companies.
Hence investors must factor in that before making an investment in debt.
his works for a lot of people, but this is not sacrosanct.
For example, if you are 30 years old and have a loan and are the only working member in your family, and barely manage to meet your monthly expenses, it may be risky for you to put 70% of your assets in equities.
Alternatively, if you are an HNI and 60 years old, with your retirement nest built and well taken care of, then you can still afford to invest more than 40% in equities.
Hence, it is best that you discuss the same with a financial planner before taking a final decision.
A lot of investors are constantly trying to find the next multi-bagger. First, in an individual capacity it is not easy to spot one.
Even if you have a multi-bagger but it constitutes a small percentage of your portfolio then it does not make significant difference to your returns.
“In the process of identifying a multi-bagger, investors accumulate as many as 15 small-cap stocks, 14 of which would go down, so it is not really worth the effort,” says Radhika Gupta, director and founder of Forefront Capital.
Most investors think that they will buy at the bottom and sell at the top, in short they want to time the market. However, during their investment journey sooner or later they realise that timing the market is not possible and in the process they miss out on many opportunities.
“There is no best time to invest, but there is a best time horizon to invest. If you have the time horizon to live the shocks of the particular asset class, you will make money,” says AV Srikanth, executive director, Anand Rathi Wealth Managers.
Investors should build a portfolio over a period of time, depending on the risk that he can take.
Financial advisors advise diversification of portfolio to increase returns and reduce risk.
However, diversification does not mean buying stocks and funds at random.
“Overall we believe that investors should not have more than 20 instruments be it stocks, mutual funds or fixed deposits in their portfolio as diversification beyond that reduces returns without reducing risk”, says Sandeep Raichura, business head, wealth management at Pioneer Wealth Management.
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