Investment Shastra

December 2018: MoneyWorks4me Outlook



Nifty Total Return Index (Nifty including dividends) earned 5.6% for 2018 and 12.3% CAGR in last 3 years. Although Nifty ended with gains, there were less than 15% stocks listed on NSE that made any positive return. Sectors that performed well in 2018 were FMCG, Banking and IT. We are glad that we had exposure to some of these stocks which helped us to contain downside on overall portfolio. This year has been tough for investors as well as advisor as they couldn’t dodge steep losses in some of the stocks in the portfolio.


As on date, average upside of our coverage universe is likely to be ~8% CAGR over next 3 years. Given quality companies are trading at steep price multiples & our coverage mostly has quality companies, expensive valuation is getting reflected in poor upside potential too.

We continue to remain cautious except for select opportunities where we find downside risk is low. There are times in the market when protecting downside becomes more important that earning higher returns. As soon as we see increase in upside potential in coverage universe, we will get more aggressive and try to remain fully invested in opportunities with higher upside.

Based on today’s valuation, we are very good upside in Pharma, select utilities, corporate banks and Autos. As on date, our recommended stocks are likely to earn 13-15% CAGR versus current Nifty upside of around 8-9% CAGR over three years. Our average company earns ROC of 15-18%+ versus average Nifty company with ROC of 12-14%. Since there are not many quality companies providing higher upside potential we suggest parking uninvested amount in liquid funds and wait for our BUY signals.


Year 2019 has few risks. The biggest risk is from US and developed countries are reducing liquidity by increasing interest rates and rolling back quantitative easing. This would increase cost of capital worldwide. This may lead to volatility in stock/bond/currency markets as our currency and stock markets are slightly elevated. However, US companies are earning peak margins and market valuation is also high on such peak profitability, FII may eventually prefer investing in emerging markets over medium term. This may also mean that FIIs may stay invested and we may not experience any major correction. Hence, we prefer investing as and when we find good opportunities rather than outguessing which event would pan out.

Second risk, though minor from long term perspective, is Loksabha elections. The headlines are likely to be very scary as both the parties will keep making allegations to win trust of vote banks. This may have transitory impact on stock markets but nothing substantial to avoid investing altogether.

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A team of business leaders, equity research analysts & investment counsellors. Started in 2008; experienced in equity research, financial planning and portfolio management. Passionate about providing institutional quality research and advice to Retail Investors in a simple easy-to-understand-and-act manner.

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