Volatility has severely impacted the capital markets in recent times. Varied measures have been adopted in this direction in the past. Capital market regulator, Securities and Exchange Board of India (SEBI) is all set to take measures in this direction very soon. SEBI is planning to put an imposition on the investments made in liquid mutual funds. Short lock-in period for investments in liquid mutual funds with an assets of over INR. 8 Lakh Cr. will be imposed by the market regulator in coming times.
The need for such step arose as a result of the continuous liquidity encountered by the finance companies in recent times. Series of defaults by Infrastructure Leasing & Financial Services (IL&FS) and some of its group companies led to liquidity crisis.
The step to initiate a lock-in period in liquid funds will impact their popularity and this will end up with investors showing less interest towards them. Liquid funds are mostly used by large companies to park their surplus cash. In order to satisfy the capital adequacy norms, banks sell the securities they hold immediately before the end of the quarter. These type of instruments are purchased back within a span of 1 week. Such kind of methods of selling and then repurchasing the securities leads to unnecessary volatility. There have been instances in the past where debt MFs have seen redemption of INR. 60000-70000 Cr. even as net flows were at record high.
The main reason for the institutional investors to keep their attention towards liquid funds is the restriction-free entry and exit from the funds. The investors might not get good returns but they park their funds on account of liquidity they get from liquid funds.
Liquid funds only invest in debt securities with a maturity of 90 days or less, and most corporate debt securities are not publicly traded. Even in the ones that are, trading activity tends to be muted and quoted prices are often not at fair value. These funds calculate their net asset value (NAV) based on prices provided by rating agencies for securities that have maturities of less than 60 days, and mark-to-market their investments in others. SEBI may also make separate mandate for liquid funds to mark-to-market their investments in securities with maturities of 30 days or more. It may also give guidelines to separate debt instruments of defaulting companies from those of good ones in the portfolio.
As per the senior officials of the mid-sized fund, if the 30 day rule is brought in and implemented, a considerable increment in the proportion of securities that are marked to market will be noticed giving a clear idea about the portfolio to investors. However, some of the funds might face fall in the NAVs on account of change in the valuation mechanism.
SEBI is all set to implement the short lock in period on liquid funds and move away from a simple accrual method to a more market–linked valuation method.
The concept of auspicious time is not only considered for performing rituals but also for investments. The concept is nothing new, but a very old concept that has been followed till date. In stock markets, we have an auspicious time to invest in equity market for healthy returns over a period of time called as Muhurat Trading.
Indian equity markets have encountered a massive correction this year till date. A double digit correction from record high hit in August has taken out many investors out of this market. For some, it resulted in sleepless nights as portfolios were completely thrashed into the red zone from the green zone in just a span of a few months. Benchmark indices were pushed below the crucial support levels in the last two months. Every time, a new low was made; we have this concept that now the bottom is done and an upside is soon to begin. But at the current juncture, it looks like we have hit a bottom at 10000 on the Nifty, and the only way for market to go is UP.
Markets remained highly volatile for both equity and debt market across the world in 2018 till date. The high volatility was primarily on account of a looming trade war between the U.S. and China coupled with a change in interest rate policy across major central banks in developed countries. Indian equity market fell about 10% from its peak while many stocks eroded wealth by more than 50% in some cases. The current conditions in markets are ideal for investors to reshuffle their portfolio and what could be a better time to change the allocation than Diwali. Volatility will prevail in the markets for an extended period; investors looking forward to build a portfolio should approach with caution and use the bottom-up strategy for the allocation.
At an aggregate level, mostly large caps offer a better risk-return profile; however, at some occasions individual stock among small and mid-caps look better. The long term strategy to stay in the game of investment is to always look for companies with strong business model. Quality matters in the long term that can stand against all volatility. With elections due in 2019, highly volatile sessions will occur. Sensex is targeted to touch the mark of 45000 by the end of the year 2019.
Our recommendation is to construct your portfolio with an allocation to varied asset classes based on investment objective and risk appetite in consideration. You should always stick to your asset allocation plan and if you have more funds to invest, do so in the same pattern; so if equity has fallen, you should invest more in equity to maintain asset allocation ratios.
For example, If you have ₹ 100000 in hand and you are in the age bracket of 30-40 years, a reshuffle can be looked at after the recent fall in markets. For long-term investors, the following should be practiced:
Reserve Bank of India (RBI) announced a complete overhaul for a resolution of the stressed assets aka Non Performing Assets (NPAs). The RBI has withdrawn existing norms, such as, Corporate Debt Restructuring (CDR) Scheme, Joint Lenders' Forum (JLF), and Strategic Debt Restructuring Scheme (SDR).
The new resolution includes the following key points:
The RBI's new move is definitely a good take. With the withdrawal of old norms and framing new ones in a speedy and effective way for the NPA structure might pose a pressure on banks, but on a broader perspective, the move should be welcomed.
With the election results in Gujarat positively out of the way for the government and Budget 2018, which will be the last full budget of the Modi-government ahead of general elections 2019, major structural reforms will take place for the overall economic growth of the country. Power, Agriculture, and rural initiatives will be a core focus, alongside infrastructure and rural investment in the Union Budget 2018-19. Due to increased investments in agricultural infrastructure, such as, irrigation facilities, warehousing, and cold storage, the agriculture sector is expected to perform better in the next few years. Focus will be more on consumption oriented stocks.
Some of the scrips where a good momentum is expected from the Union Budget 2018-19 are as follows:
The company is engaged in transportation of containers (rail and road), and handling of containers. The company is also engaged in the operation of logistics facilities, including dry ports, container freight stations, and private freight terminals.
Its divisions are EXIM and Domestic. Both EXIM and Domestic divisions of the company are engaged in handling, transportation, and warehousing activities. Its International services include train services, road services, air cargo movements, reefer services, and block booking on round trip basis.
Granules India Limited is a pharmaceutical company with presence across the pharmaceutical manufacturing value chain, including active pharmaceutical ingredients (APIs), pharmaceutical formulation intermediaries (PFIs), and finished dosages (FDs). The company's business operations include three areas: core business, emerging business, and contract research and manufacturing services (CRAMS).
Central Depository Services (India) Limited operates as a securities depository in India. The company offers service for a range of clients, such as, depositary participants and other capital market intermediaries, corporates, capital market intermediaries, insurance companies, and others. The company offers dematerialization for a range of securities, including equity shares, preference shares, mutual fund units, debt instruments, and government securities.
Parag Milk Foods Limited is engaged in manufacturing and processing of milk and milk products. The company offers a range of products, which include cheese, ghee, whey proteins, paneer, curd, yoghurt, milk products, liquid milk, milk-based beverages, and milk powders. The company's brands include:
The company has an aggregate milk processing capacity of approximately two million liters per day. The company has a product basket comprising over 150 stock keeping units (SKUs). Its manufacturing facilities are located in Manchar, Pune and Palamaner, Chittoor.
Apex Frozen Foods Limited is an India-based integrated producer and exporter of shelf stable aquaculture products. The company produces two kinds of shrimps:
The company supplies ready-to-cook products to the food companies, retail chains, restaurants, and club stores. The company distributes the products to the United States, the United Kingdom, and European countries.
Tech Mahindra Limited is engaged in the business of computer programming, consultancy, and related services. The company's segments include Information Technology (IT) Services and Business Processing Outsourcing (BPO). The company operates in various sectors, including telecom business and enterprise solutions business. The telecom business provides consulting-led integrated portfolio services to customers, which are telecom equipment manufacturers, telecom service providers and IT infrastructure services, and BPO, as well as enterprise services (banking, financial services and insurance (BFSI), retail and logistics, and manufacturing, among others) of IT and IT-enabled services delivered through a network of various locations around the world. The enterprise solutions business provides IT services, including IT enabled services, application development and maintenance, consulting and enterprise business solutions, extended engineering solutions, and infrastructure management services.
Sundram Fasteners Limited is a holding company. The company is engaged in manufacturing high tensile fasteners, and motor vehicle parts and accessories. Its product range includes cold extruded parts, powder metal parts, radiator caps, gear shifters, hot forged parts, precision forged differential gears, water pumps, oil pumps, fuel pumps, belt tensioners, rocker arm assemblies, cam followers, bearing housings, hubs and shafts, tappets and other engine components, and valve train parts.
The company's high tensile fasteners product range includes standard fasteners and special fasteners. The company's powder metal parts product range includes bushes, structural parts, and iron powder. The company's radiator caps product range includes metal and nylon cap assemblies for original equipment manufacturers. The company's hot forged products include connecting rods, lug gears for motorcycles, constant-velocity joint parts, fan hubs, bevel gears, and fuel injection pump parts.