Archive | April, 2019

The Challenge of making 8% + Returns in an increasingly volatile and unpredictable market

25 Apr

Aditya Birla Sun Life Focused Equity Fund a 3 Star Rated fund, a leading fund in its category  has given a 4.76% return in the last 1 year (2018 – 19). In the same period Nifty reported a 14.93% gain and Sensex reported a 17.3% gain. Aditya Birla fund did relatively well because in the same period Equity Mid Cap reported (-) 3 % and Equity Small Cap  (-) 11.5%. (https://www.livemint.com/market/stock-market-news/sensex-ends-fy19-with-the-biggest-gain-in-4-fiscal-years-1553879533118.html)

This is not a 12 Month trend but a 24 Month phenomena. If you started investing in March 2017 and your Investment Advisor assured you of an Alpha (A gain over the Index Returns) – well you are in trouble. In this period the Sensex moved from 29,000 – 39,000 a whopping 30% + but the best of MF’s you have invested in may have given you returns of less than 10%.

In effect in the last 24 Months you would have made better returns if you had stayed invested with your neighbourhood Bank FD Or with a good Liquid Fund – some of which have given annualised returns of 8%+

You wonder how this is possible when the Country is supposedly growing at 7% GDP. A 15% annual Index Gain and a 7% GDP growth indicates an economy that is burning hot. But the reality seems to be different. IT Companies are reporting 3 – 4% growth and holding on to their stock prices with buybacks, Airline are melting, Real Estate is sluggish for the last 7 years, and Telecom companies have merged and reported losses and Job losses. Banking Industry is reeling in NPA’s the Pharma industry has lost its sparkle and the booming Automobile industry has started showing low to negative growth. The liquidity crisis is severe and the rate of loans on the street is very different from what the RBI rates are. And Swiggy, Ola & Uber seem to be the only people hiring. Yes inflation is low – but one wonders if this inflation or deflation driven by low consumer spending.

If every large industry that constitutes the economy is limping, there is a job challenge and liquidity is stretched –  one wonders how the economy and the stock market is booming. 

Which answers the 1st Point on why the Index is gaining but the MF’s you invested in are lagging. A handful of stocks have done extremely well. Reliance, HDFC Bank, TCS, Havell, Bandhan Bank …. you can pick the stocks with your fingers. But sadly most investors picked the wrong stocks and are seeing their portfolios steeply negative. Ask your friends who invested in Stocks and PMS schemes and they will tell you how they have burnt their fingers in the last 24 months. So if the fundamentals are not strong you have to question what is driving the index higher and higher over the last few months – is it really the Modi factor or is it Black Money coming in thru the P Note route to fund the 10B USD Grand Indian elections?

So where do you go from here.

Your investment manager will tell you about India being a great 10 year story and how the stock market has given 15% + returns over the last 25 years. Big bull Rakesh Jhunjhunwala will talk about India being in the midst of the greatest bull run ever. All this is true and works well if you don’t want your money back for the next 10 – 15 years. But if you have invested in the stock market hoping to pay for your daughters education in the US a few years away or for buying a house 2 years down the line and are expecting to skim away 15 – 20% of the profits from your MF every year – then beware you may be in for a rude shock.

Let’s look at the Nifty P/E

A P/E below 14 indicates – Extremely Oversold and above 22 Extremely Overbought.This link will give you an indication of how the Nifty P/E has fared over the years. (https://nifty-pe-ratio.com). We are today at a historically high P/E of 29 – and that is cause for concern

Remember 2008 when the Lehman Brother Crisis hit the globe. 2008 was an incredible year for the Indian markets, after scaling the 21,000 peak in January 2008, the markets were at 8,000 in Oct 2008. The Sensex P/E in Jan 2008 was also 28. See the correlation – all that goes up has to come down. It’s been a great 10 + years since 2008 as liquidity has flown thru global markets like a river in flood.

Losing faith in the system

Track the best of analyst reports over the last two years and you will see the extremely poor quality of research in India. Let’s take the example of South India Bank – 2 years back the stock was at Rs 18. leading Analysts talked about the Bank being on a fast track growth and the target price was given as Rs 45 over 12 – 18 months. Some even spoke of a 100+ price. In the midst of the euphoria the stock did go up steeply and touched 34 and then it collapsed to Rs 12.5 and is now settling down at 16 – 17 Rupees. You will see this trend again and again for numerous stocks and it leaves you with a feeling – are these stocks being manipulated and is the common investor being taken for a ride.

There is no skin in the teeth.

ILFS was rated AAA by Care, ICRA, Crisil in March 2018. A few months later the company went bankrupt. A Bluechip like ICICI bank is under scanner for nepotism. ZEE, DHFL and many more are reporting inability to pay back loans. Banks gave away Billions in loans that were defaulted. And Kotak is defaulting on its FMP – just to recollect the word FMP means Fixed Maturity Plan. When a Bank like Kotak delays your FMP you better get worried. All this makes you question the role of the Board of Directors, Auditors, Management and the Regulator.

Your Financial investment partner also has no skin in the teeth. Irrespective of you making or losing money they continue to make their commissions on your holdings. You can’t blame them – they run a company that is measured on quarterly growth and if they start getting pessimistic then that’s the end of their company. Given the state of confusion they  may pitch for complex products like A Structured Product where the returns are linked to the Index over 2 – 3 year. Some may even make handsome returns on it. But if you delve deep into the product you will realise that a small part of them are invested in Futures & Options while a large chunk is lent to Small & Medium Business at very high rates. That Debt can be very risky. Also remember the basic rule – Never invest in a product which you don’t understand. 

Well now that I have got you worried let’s come back to the basic question – How do I make 8% steady returns over the next 2 years? We are now in a situation where we should be worried about Return of your Capital Vs Returns on your Capital. 

There are no easy answers – but these pointers may help you make your right decision

  • Nifty P/E at a historic high of 29 is a Red Flag – it’s time to Go slow on market investments.
  • Unless you are a whiz kid – stay away from investing in individual stocks. The Daily TIPS and Research Reports cause more harm than help.
  • Debt Funds thanks to rate reductions have given good yields over the last 1 year. Given the severe liquidity crisis one can expect a few more rate cuts that will ensure Debt Funds yields of  7 – 9%.
  • A Good Bank FD gives you 7% and is not Tax friendly – but it does give you a lot of peace of mind
  • If the market crashes and you have liquidity – invest 25% of your portfolio in Index Funds – like they say you can never beat the Index.

 

 

 

 

 

 

 

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Thank You Jet Airways

17 Apr

In a few hrs from now Jet Airways will fly its last flight (April 17th – 10.30 PM). The era of a great airline which set high standards for the Indian aviation industry will finally come to an end. Hopefully a temporary one.

I have fond memories of Jet Airways. it has been my favourite airline for almost 25 years. My corporate career from 1992 and the growth of Jet mirrored each other. In the last 25 years I would have taken over 2500 flights in India and Abroad. During these flights I was treated well, got decent food, was upgraded many a time and almost always got my priority aisle seat near the emergency exit or the first row.

I recollect in the mid 90’s when even a cost conscious company like Wipro made an exception allowing employees to fly Jet even if it was not the cheapest fare – because the service was excellent and the Chairman and Corporate head of HR enjoyed travelling Jet.

Jet Privilege – The award winning frequent flyer program was excellent. The best in the country – and we have enjoyed many a free holiday thanks to the thousands of miles we accumulated. In the initial years it was easy to upgrade and almost all my Bangalore – Delhi flights I used my Vouchers or Upgrade points to fly in luxury. If you were a Jet Platinum customer your baggage would be on the belt as you walked out with almost no wait time. When I started flying to London every quarter – I skipped the direct BA flight from Bangalore and went all the way to Mumbai or Delhi to take the Jet Flight to London. It was worth it. The Business Class on Jet international was better than most International flights and I was often rewarded with an upgrade to 1st Class and many a time rubbed shoulders with Politicians and Fortune 100 CEO’s. For many years my Brown & Cream night suit was thanks to Jet Airways.

From Day 1 Jet differentiated itself with the food it served. It was piping hot and fresh. The Food in Business Class was outstanding – selection, taste and aesthetics were 10/10. I remember a presentation made by an International Strategy Consultant on Branding in 1998  – when he explained the concept of Brand Differentiators. He explained that all planes were Boeing or Airbus make but then some airlines were Air India, some were Singapore Airlines and finally some were Jet Airways. The differentiation was in service. In the early days Jet made India proud with its service.

The golden era was till 2005 and then the IPO happened. I have observed that most companies start tumbling down after their IPO as the greed for quarterly profits accelerates. After that the airline slowly started going down hill.

This accelerated with the disastrous acquisition of Sahara. The loyalists like us still stuck along with fond memories of the past. By 2012 – 2013 things started getting bad. The seats were jammed and there was hardly and leg space, food quality dropped the Rotis were half cooked and the Air Hostesses looked overworked and tired. The AC would start only after you boarded the flight. Getting an upgrade even with vouchers was a challenge.

As Brand Indigo grew and the fare wars escalated Jet started struggling even more. Rather than hold fort as a full service airline and charge a premium Jet fell into the trap of retaining market share at any cost. It was a losing battle and slowly Jet lost its No 1 position to Indigo.

With Etihad stake there was some hope and service levels did go up before Jet started its final descent a year back. Loyalist that I am – inspite of all the challenges I booked my Bangalore Amsterdam flight for my May holiday on Jet – KLM Codeshare in January. A few weeks back I realised that the last nails were being banged in the coffin and managed to cancel with a steep penalty and booked myself on Emirates. But I have no regrets – I see the cancellation penalty as a small fraction of the Upgrades and excellent service I have been provided over the years. A small cost to pay for the great times I have had over the years.

Thank You Jet Airways and all the staff for a wonderful 25 years. As you make your last flight people of my generation will sigh and empathise with you. I sincerely hope you revive and get back to your golden days again.

 

 

 

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Experience Punjabiyat – The essence of Punjab in 4 Days

11 Apr

When you think of Punjab you immediately conjure an image of big brave fun loving people. Colourful dresses, Bhangra, Paneer, Butter Chicken, Patiala Peg and the Brave Sikh soldier are instantaneous connections. The food bowl of India nestled between the fertile valleys of the 5 rivers has been the first line of defence against the country’s invaders.Punjab is unique and ever since my 1st visit to Amritsar 4 years back I have been wanting to take the family to experience the essence of Panjibayat.

We had 4 days to experience the charm of Punjab. We spent two days in Amritsar and 2 days at a rustic and sylvan farm stay called Punjabiyat – about 90 km north of Amritsar. If you want to experience the charm of this wonderful state – I urge you to follow this program.

Indigo has a direct flight from Bangalore that reaches Amritsar at 1.30 PM and you are in your room comfortably by 3 PM. Amritsar, historically known as Ramdaspur derives its name from the Amrit Sarovar which was built by Guru Ram Das. It’s a small city that is now expanding rapidly. Located on the border of Pakistan, Lahore is considered its twin city. Amritsar is famous for 4 Things all of which and more you can cover comfortably in 2 days

  • The Golden Temple
  • Attari Wagah Border
  • Jalianwala Bagh (Memorial centenary in 2019 – April 13th)
  • The best Kulcha’s in the country

The Golden Temple is India’s most well managed and clean temple. It caters to large crowds especially on the weekends and festival days. Its serene, calm and beautiful inspite of the crowds. Plan a visit in the morning and in the night when it is lit up and don’t forgot to offer your services and eat a meal at the Langar. It’s a miracle how they serve so many people.

The area around the temple has been done up like a walking heritage corridor – The cobbled pathways are broad, clean, well maintained with shops selling food, trinkets, and clothes on both sides. There are many hotels also walking distance from the temple. The locals recommend a place called Saragarhi Niwas (www.sgpcsarai.com) – Room rent Rs 1100/- a day. email sgpcsarai@gmail.com, Phone – 0183 – 2550060 which is located less than 100 m from the Golden Temple in the heritage corridor.

Jalianwala Bagh is  located right next to the Golden temple. Sadly the current state of maintenance does not do justice to the history it narrates.

The Attari Wagah border is 30 Km from Amritsar, a 45-minute drive. Every evening there is a flag retreat ceremony that is jointly coordinated by the BSF and Pakistan Rangers at around 530 PM (Time varies by season). This half an hour show attended by nearly 10,000 people can be an adrenaline boost to your nationalistic spirit. It’s a must watch for every patriot and its FREE. To get front row tickets you need a VIP pass from someone in the BSF / Army which we were lucky to get. Even without  a pass you can get a decent viewing spot from the gallery that is built like a stadium.

And you can wrap up your Amritsar stay by shopping for Ladies Suits, Masala, Papad, Vadiyan, Sweets, Bangles…. Almost all the shops can stitch your dresses in 24 hrs and have them delivered at your hotel. In the two days you spend here you will also have time to visit the ancient Durgani temple (Under renovation) and the Mehramgarh Fort. Most people also spend an evening at Sada Pind – which is like a the Choki Dani of Jaipur creating a rural feel.

Do all that but keep time to visit the food joints of Amritsar. The Kulchas & Parathas here are the best in the Country. A few places you must visit are Bhai Kulwant Singh Kulchian Dhaba for breakfast and  and Kesar Da Dhaba for Lunch or Dinner. Kulcha Land is another highly rated joint. The street Jalebi and Gulab Jamun is also very tasty. Paneer here is soft and succulent. And don’t miss the Lassi. Food is fresh, delicious and economical. But its rich and servings are large. All these shops are in the bye lanes of old Amritsar and are accessible by walk or e Rickshaws only. We were told that the Amritsari Fish and Butter Chicken is equally popular but being vegetarians, we did not taste them. (Note Bharwan da Dhaba although recommended by some was disappointing. Brothers Dhaba is another place you can visit for Breakfast. Breakfast joints open only by 8 AM)

From Amritsar we headed to Punjabiyat – a Rustic Rural Resort which is in Gurdaspur Dist north of Amritsar. A great place to experience the essence of real Punjab. It’s a short 90 min drive from Amritsar (excellent Roads) and is located in the midst of a vast expanse of agricultural fields. We visited on April 10 and the fields were laden with the Golden produce of wheat – ready for harvest after Baisakhi in a week’s time. The weather was pleasant even in April. This is fertile land close to the Beas river and they grow Wheat, Rice, Sarson and Sugarcane. If you come in Dec you can see the Sarson in full bloom- and that will indeed be a pretty sight. It does get cold in Dec but that adds to the charm of the holiday.

Panjabiyat is Rustic Luxury. Its small, exclusive and efficient. There are 4 well-appointed cottages. Each Cottage has a large room, a very large airy bathroom, a nice sunny balcony facing the fields and a terrace that is accessible. The ceiling height is about 15 feet and the rooms are bright and happy. The furniture is all you need and more – solid wood. Room is large and can easily accommodate 3 adults – or 2 Adults + 2 Children. The walls, the furniture, the look and feel are rustic, warm and welcoming.

 

The hospitality & service is excellent and food is custom made. We loved the food – it was fresh, hot and delicious with lots of variety. It is a small property with a common hall and a portico where they serve meals and you can get together with your friends for a drink, play carom or listen to music. They also have a small Library tower where they can set up a romantic breakfast. This is a great place for you to come with 2 – 3 family friends. Ideally book the whole place for 2 days and enjoy the solitude, the food, the ambience and the warmth of the place.

Do take time to step out and visit the neighbourhood and some historic Gurudwara’s all of which are accessible by walk along the fields or by a tractor ride. A walk thru the fields can bring memories of William Wordsworths “A Solitary Reaper’.

Kids may be fascinated with the milking of cows – but what really excited us was seeing how jaggery was made out of Sugar Cane. A family of 4 in very humble surrounding were working hard to crush the juice and process it across boiling vats to make fresh tasty Jaggery. Freshly made Jaggery tastes like Mysore Pak – it is warm and delicious. We also visited a rice mill and saw mountains of sparkling rice being separated from the chafe by automated machinery.

To enjoy Panjabiyat you must love nature and solitude. It’s perfect for a 2-day break. Don’t expect too many thrills and action. There is no TV and the 3G signal is weak. Which is good because you get family time. Go for long walks. Take a ride in a tractor.

 

Punjabiyat is a great place to Detox. Be with nature. Smell the earth. Listen to the birds. Use the time to read and meditate. Or just sit quietly by the Beas river and ponder and reflect on life and thank the good Lord for all his blessings and Grace. Come alone, come as a couple or just use this time to connect with family and friends. Punjabiyat is definitely an offbeat property worth visiting.

For more details Visit https://www.itmenaanlodges.com/punjabiyat/

Taxi : For the entire trip you can contact Mr Pandey. He is an ex BSF Commando and if you book your trip with him he can even help you with passes for the Attari Wagah border program. He can be reached at +91 9463521098. Even though we had passes from my Army friend he helped us in getting better seats using his BSF clout.

 

 

 

 

 

 

 

 

 

 

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