Monsoon and its thoughts on investing

As I look out of the window,  a beautiful gush of rain passes. Water is literally awakening to its moment of fun as nature welcomes the joy of abundance, change, freshness with bright blushes of green.  The air turns crispy with an aura of freshness, as if Delhi had no polluted past. With this sudden change, there is that sudden desire to have a freshly brewed cup of  for aromatic spicy tea.

As the rain continues, the rain and the green effect draw constant pause. My clear window looks like a work of art inviting me to think along with it.

Its wonderful that management gurus talk of Blue oceans and Blue sky strategies. The effect is akin to that witnessed by Street kids Who innocently play along just making the most of the moment.  All of the heat and dust and air masks and pollution have been forgotten and we breathe as if another upswing has come.

Is life in the financial markets a series of dust and pain? Followed by moments of changing seasons, each with its uniqueness.

The last few months have been quite off for markets. Partly due to some average to poor to even confusing inventory, raw material impacted results (dust) as corporate india still reaches out for capex pick up, export incentives, tax reliefs, ease of liquidity and benefits beyond rural necessities  etc. And partly due to exhuberance across many mid, small caps and even some pockets of large caps and including in metal infra and cement stocks, (heat). Some of the dust was almost sure but got masked in hope theory particularly in psu banks where the write offs got more severe. Thankfully the largest psu bank is itself showing more positive now than negative.

As the storm kept up, every now and then one could see cracks, damages or wreckages. this is where history of returns and temperament truly matter. If you have made even a 2x return in market (which is what any average investor would have surely made in the last 1-2 or even 3 years) and you get knocked down 20-25 percent,  it is only expected. I would think some of this was also due to excessive liquidity sucked up on the basis of “assured returns” not neccessarily the job of fund managers but marketeers who have incentive or other commissions.  Frankly their only senses of good and bad is how a fund has delivered in the last month or two and who could promptly advise you to keep switching if the trend changed,

the fall or correction as I would call it also has its other side You. Do you have the financial capability to bear the storm knowing it will pass and that you constructed a house well with your savings and will be able to plough funds for necessary repairs or even replacements. Or is your investment so stretched that given an impact, you wouldn’t know what to repair.

I will add to the factor of dust and heat, the sudden factor of governance, flagged off by auditors including in companies audited by them for multiple years, As a proposal to the Ministry of Law and Sebi I think an auditor should not be allowed to resign and hand over till the grounds are shared with the shareholders.

just as a sneeze catches on, seems india is sneezing to several fears of governance. Some founded, most just being used as an excuse to tame down excesses.

The retain investor sits in this muddle, confused. Some have given up on buying once again and as history repeats taking the market as a gambler’s den. Yet the market sits with its own partner in history to suggest how it has created unparalleled wealth for a person who found a good company, added his positions over time with the co’s growth and sometimes even played the role of an opportunist who even once in his life heard “buy when others are needy (sell when they are greedy).

I studied in this rain, the statistics of my blog posts. My posts early this year on why market returns could be moderate had the least likes. My take on buying consumption stories due to the positives of gst or pharma were most passé. I was told when large IT was underperforming how cna mid IT do well, The guy suffers from a bias of his position. Btw any opinion in this world is biased including well being from a parent or your perfect lover. Also max money is made when consensus is against not for.

So what have we now.

we have crossed a phase of corporate scares, inventory adjustments and reached a reason not to own companies as dollar to rs has surged and fiis will sell. Or trade wars will hit india. Wait a second, fiis still own the best selling banks and did not sell. Oil surge has in the past suggested that even when oil hit 120 we came back with a bang and the mkt delivered its best returns. Auditors fear signing reports- so finally the true color and weight of promoter credibility should set in. I think cos that get thrashed for improper disclosures should get that treatment and be barred from any capital market access for some years.

meanwhile we learn from life that only the tough survive. You discover one good co from another when things like this happen. Some benefits that percolate to rural and semi rural also benefit a vast no of companies.

 

one of the nuggets culprits if mkt exhuberance is benchmarking. You are not selling surf excel to see why your neighbors shirt is brighter than yours. He current mood of outperformance centric around a few very good cos otherwise has left them in a spot where they are still great companies but at very rich valuations. The market expectations factoring in their growth are now out of sync. These possibly include some finance cos several times (even 3-5 times historic value) every one now wants to own them which is not my problem as I am not a bookkeeper or a messiah nor can ever be. The problem to me is that in this fear people have stopped believing that the market has more than 10-12 cos.

all mid caps are now bad. in fact interestingly most sme cos have outperformed the fall.

all mid cpa managements suddenly do t know what to do. A pe of 15 is now too expensive for mid cap but that of 60-70 is ok for few outperformers.

 

i would like to believe personally this is a great time to buy several companies. I wish I was setting up a fund at this stage. It’s not necc that I will make money in a month or two but I sense a lot of money is to be made in many companies that will migrate from mid to relatively large cap.

I heard a great point in an interview made by Shankar sharma recently. He said india grows at 5 percent in consumption no matter what.

I see ample room for growth for companies in two wheelers, home improvement inc roofing, tyres, speciality chemicals, food, retail, car batteries, depositories and what not. The mkt penetration is too low to write off the growth.

 

my cup of tea just got over. The rain has stopped. My thoughts inspire me to think what next.

more thoughts soon. love nature, be happy, make the most of your life. That’s your best return. Stay away from people who are negative or just argumentative but skirt facts for they just can’t accept you for ego. Love those who are even remotely kind.

As I was recouping from a fever last 3-4 days, Amit Arora, who I think is a saint in a human soul sent me a book to read. Embrace such people as they are your true friends for life,

I also wish to thank KJB Mathews who is a guy always smiling and who every reason  to only sends me organic mangoes from his plantation but also guides me how to wait for them to turn ripe. He is due to get married very shortly and I wish him the best.

a word of thank you also to Ayesha Faredi at ET Now. Ayesha is always smiling no matter where the market is hoping her viewers are all doing well.

standard caveat: I am not sebi registered nor an advisor on finance. My views (and mistakes) are personal. Just that I find few who forgive me and send me kindness and love no matter what. To them I shall always be ever so grateful. My only assurance to you is I wish for you to do financially well and it’s more than anything to bump into some of you who lovingly thank me for Twitter or just about even the smallest thing.

Ps: pl ignore typos. And see you soon