{"id":13976,"date":"2020-01-03T16:17:26","date_gmt":"2020-01-03T10:47:26","guid":{"rendered":"https:\/\/www.moneyworks4me.com\/investmentshastra\/?p=13976"},"modified":"2020-01-03T17:14:13","modified_gmt":"2020-01-03T11:44:13","slug":"december-2019-moneyworks4me-outlook","status":"publish","type":"post","link":"https:\/\/www.moneyworks4me.com\/investmentshastra\/december-2019-moneyworks4me-outlook\/","title":{"rendered":"December 2019: MoneyWorks4me Outlook"},"content":{"rendered":"<div style=\"background: #FAFAFA; border: 1px solid #CCC; padding: 15px; margin-bottom: 10px;\">\n<p><strong>This article covers the following:<\/strong><\/p>\n<ul>\n<li><a href=\"#review\">Review<\/a><\/li>\n<li><a href=\"#outlook\">Outlook<\/a><\/li>\n<li><a href=\"#risks\">Risks<\/a><\/li>\n<li><a href=\"#gdp\">GDP Slowdown<\/a><\/li>\n<li><a href=\"#opportunity\">Opportunity for long term investors<\/a><\/li>\n<\/ul>\n<\/div>\n<h2 id=\"review\"><strong>Review<\/strong><\/h2>\n<p>Nifty Total Return Index (Nifty including dividends) earned ~13.5% Year to date Nov\u201919 and ~15.5% CAGR in the last 3 years from demonetization lows.<\/p>\n<p>Nifty continues to remain steady thanks to a handful of stocks making all-time highs while the rest of the market is at 52-week lows or even 3-year lows.<\/p>\n<p>This has led to underperformance for most advisors and MFs. <strong>Just 37 out of Top 100 stocks actually made a double digit return for the year. <\/strong><\/p>\n<p>This narrow rally meant that an average investor\u2019s portfolio hasn\u2019t earned good returns from equity this year.<\/p>\n<p>As we go deeper, small and mid-caps have done worse than large caps. Just 100 stocks out of 400 mid\/small cap stocks in BSE 500 have earned double digit returns.<\/p>\n<p><strong>Around 150 stocks out of 400 have fallen more than 20%<\/strong>. This implies that small and mid-cap investing has not done well.<\/p>\n<p>Our hypothesis at the start of the year turned out right where in we chose not to participate in small and mid-cap aggressively due to valuation concerns.<\/p>\n<p><em><strong>Following is the list of the best performers of 2019 in the respective categories:<\/strong><\/em><\/p>\n<p><a class=\"gridlove-popup-img\" href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was.png\"><img decoding=\"async\" loading=\"lazy\" class=\"size-full wp-image-13972 aligncenter\" src=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was.png\" alt=\"From Analyst\u2019s Desk Year 2019 the year that was\" width=\"1808\" height=\"724\" srcset=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was.png 1808w, https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was-300x120.png 300w, https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was-768x308.png 768w, https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was-1024x410.png 1024w, https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was-370x148.png 370w, https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was-270x108.png 270w, https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2020\/01\/From-Analyst\u2019s-Desk-Year-2019-the-year-that-was-740x296.png 740w\" sizes=\"(max-width: 1808px) 100vw, 1808px\" title=\"\"><\/a><\/p>\n<p>The above stocks have managed to report superior sales and\/or earnings growth in the year when the rest of the market was subdued.<\/p>\n<p>Overall the sentiment remained negative due to no uptick from festive demand. The economy remains sluggish due to credit squeeze, lack of employment growth and no increase in demand.<\/p>\n<h2 id=\"outlook\"><strong>Outlook<\/strong><\/h2>\n<p>As on date, the average upside of our coverage universe is likely to be less than 10% CAGR over the next 3 years.<\/p>\n<p>Just a handful of companies are delivering moderate earning growth due to slow economic growth.<\/p>\n<p>These companies are enjoying high valuation as more and more investors are chasing them.<\/p>\n<p><strong>This trend will reverse as other sectors start showing signs of improvement.<\/strong><\/p>\n<p>Some pockets of the market like consumer staples, consumer discretionary and\u00a0now insurance and AMCs are trading at stretched valuation.<\/p>\n<p><strong>We find that Nifty 50 also trades at 12-15% above <\/strong><a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/category\/analyst-corner\/sensex\/\"><strong>its fair value<\/strong><\/a><strong> as stocks with large weightage in the index are trading at elevated valuation.<\/strong><\/p>\n<p>We expect below-average returns from these baskets over the next 3 years even if earnings growth is good. Starting valuation plays an important role in long term returns.<\/p>\n<p>Even if the indices valuation doesn\u2019t look cheap, we don\u2019t mind buying stocks with low valuation and good future prospects.<\/p>\n<p>We are looking at companies that have good earning triggers over the next 2 years as we are not certain whether broad-based recovery will happen immediately.<\/p>\n<p><em><strong>We are investing in companies\u00a0<\/strong><\/em>i) coming out of sector consolidation, or ii) introducing new products, or iii) commissioning new capacities or iv) executing the order in hand.<\/p>\n<p>An investor can consider investing in value and high dividend yield stocks like Infra &amp; Infra-related companies like\u00a0<em>capital goods<\/em>,\u00a0<em>high-quality\u00a0<\/em><a href=\"https:\/\/en.wikipedia.org\/wiki\/Public_sector_undertakings_in_India\" target=\"_blank\" rel=\"noopener\"><em>PSUs<\/em><\/a>,\u00a0<em>corporate banks, pharmaceuticals,\u00a0<\/em>and <em>select\u00a0<\/em><a href=\"https:\/\/en.wikipedia.org\/wiki\/Non-bank_financial_institution\" target=\"_blank\" rel=\"noopener\"><em>NBFCs<\/em><\/a>.<\/p>\n<p><strong>We will be participating in some of these opportunities <em>via thematic Mutual Funds<\/em>. <\/strong><\/p>\n<p>We are still evaluating \u2018<a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/mutual-funds-investing\/what-are-the-different-types-of-debt-and-balanced-mutual-funds\/\"><em>Credit Risk funds\u2019<\/em>\u00a0<\/a>as they might have become cheap, due to herd\u2019s negativity, even after considering the risks they carry.<\/p>\n<p>If we find any merit, we will share our recommendations and analysis with our subscribers.<\/p>\n<p>We believe that small and mid-cap are not cheap yet to make risk-adjusted returns over an entire cycle.<\/p>\n<p>Growth in small-cap stocks is poorer than large-cap stocks as they can\u2019t wither the storm.<\/p>\n<p>Even if they rise from here, long term returns won\u2019t be commensurate for the risk one takes investing in small and mid-cap companies today.<\/p>\n<p>A\u00a0<a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/mutual-funds-investing\/is-sip-in-mutual-funds-the-right-way-to-invest-for-me\/\">SIP<\/a>\u00a0product may work in such a small &amp; mid cap but we recommend caution on lump-sum purchases\u00a0<em>till we don\u2019t see broad-based earnings recovery in mid and small-cap companies<\/em>.<\/p>\n<h2 id=\"risks\"><strong>Risks<\/strong><\/h2>\n<h3 id=\"gdp\"><strong>GDP Slowdown<\/strong><\/h3>\n<p>GDP growth averaged around 4.75% in the first half of FY20. This was the lowest in almost 8 years.<\/p>\n<p>One will also notice that the slowdown is entrenched from large size purchases to small ticket items.<\/p>\n<p>Private investment grew at only 1 percent. Nominal GDP growth fell to a new low of 6.1 percent.<\/p>\n<p>As we know that equity returns have strong co-relation to the nominal GDP growth rate, the equity market has been underperforming.<\/p>\n<p>Usually, slowdown stays for 2-4 quarters after which the low base effect kicks in thereby leading to above-average growth and sentiment improvement. So it is a wait and watches mode to see how it pans out.<\/p>\n<p>We do not see merit in avoiding equity just because near GDP growth is lower. No one can time the pick up in the economy.<\/p>\n<p>Markets may turn the corner before actual GDP growth picks up.<\/p>\n<h2 id=\"opportunity\"><strong>Opportunity for long term investors<\/strong><\/h2>\n<p>Markets may remain subdued until the time earnings growth kick in. But this doesn\u2019t mean stocks won\u2019t rise.<\/p>\n<p><a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/analyst-corner\/november-2019-moneyworks4me-outlook\/\">In the previous month<\/a>, we highlighted that stocks that are underpriced can rebound even of expectation that the worst scenario is behind us.<\/p>\n<p>We already see some bounce back in the last of December\u201919. It is yet to be seen whether this recovery from the low sustains.<\/p>\n<p>We expect the\u00a0<em>average<\/em> to <em>below-average <\/em>return in Nifty over next 2 years so be light on Index Funds for the next few years.<\/p>\n<p>But expect superior returns from stock picking as average stock today is trading cheaper than Nifty.<\/p>\n<p>We are seeing a lot of NBFCs and banks recovering as the government\u2019s push to resolve the liquidity crisis has brought some hope.<\/p>\n<p>Near term uncertainty in structural growth, story spells an opportunity for long term investors. Stocks are beaten down from short term fears.<\/p>\n<p>We do not find any merit in second-guessing what\u2019s going to happen in the next 6months-1year. We leave this field open for speculators, fear mongers, and punters.<\/p>\n<p>We are managing only long term money and <a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/stock-investment\/how-power-of-perseverance-works-in-investing\/\">predicting near term events is futile<\/a>.<\/p>\n<p>We continue to recommend Gold Fund\/Gold (up to 5-10% of the portfolio) as a hedge from potential geopolitical risks and allocation to safe liquid funds\/Fixed Deposits (10-20%) within in equity portfolio for capturing new opportunities.<\/p>\n<p>Together these investments will hold the portfolio relatively intact even if the market reports minor declines.<\/p>\n<p>Beyond this, tinkering asset allocation will only reduce long term returns thereby missing one\u2019s target corpus.<\/p>\n<p>Equity returns often give surprises, we wish to stay invested to enjoy such surprises.<\/p>\n<div style=\"background: #FAFAFA; border: 1px solid #CCA; padding: 15px; margin-bottom: 10px;\">\n<p><strong>MoneyWorks4me Outlook:<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/analyst-corner\/november-2019-moneyworks4me-outlook\/\">November 2019<\/a><\/li>\n<li><a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/analyst-corner\/october-2019-moneyworks4me-outlook\/\">October 2019<\/a><\/li>\n<li><a href=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/analyst-corner\/september-2019-moneyworks4me-outlook\/\">September 2019<\/a><\/li>\n<\/ul>\n<\/div>\n<p>If you liked what you read and would like to put it in to practice <a href=\"https:\/\/www.moneyworks4me.com\/registration\/\">Register at MoneyWorks4me.com<\/a>. You will get amazing FREE features that will enable you to invest in Stocks and Mutual Funds the right way.<\/p>\n<hr \/>\n<p><a href=\"https:\/\/www.moneyworks4me.com\/\"><img decoding=\"async\" style=\"float: left; height: 100px; padding-right: 16px; margin-left: 40px;\" src=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2018\/05\/mw4me-logo.png\" alt=\"\" title=\"\"> <\/a> <a class=\"hide-mobile\" href=\"https:\/\/t.me\/mw4me\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"float: left; height: 100px; padding-right: 16px;\" src=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2018\/05\/investments-shastra-blog.png\" alt=\"\" title=\"\"> <\/a><\/p>\n<div class=\"hide-mobile\" style=\"height: 100px; padding-top: 15px;\"><strong style=\"font-size: 15px; color: #32aadf;\">Join our Telegram Channel:<\/strong><br \/>\n<a style=\"text-decoration: underline; font-size: 14px;\" href=\"https:\/\/t.me\/fundamentalstockinvesting\">Stock Investing<\/a><br \/>\n<a style=\"text-decoration: underline; font-size: 14px;\" href=\"https:\/\/t.me\/mutualfundinvesting\">Mutual Fund Investing<\/a><\/div>\n<div class=\"hide-desktop\" style=\"float: left; width: 100%; text-align: center; padding-bottom: 15px;\"><a href=\"https:\/\/t.me\/mw4me\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"height: 100px;\" src=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2018\/05\/investments-shastra-blog.png\" alt=\"\" title=\"\"><\/a><br \/>\n<strong style=\"font-size: 15px; color: #32aadf;\">Join our Telegram Channel:<\/strong><br \/>\n<a style=\"text-decoration: underline; font-size: 14px;\" href=\"https:\/\/t.me\/fundamentalstockinvesting\">Stock Investing<\/a><br \/>\n<a style=\"text-decoration: underline; font-size: 14px;\" href=\"https:\/\/t.me\/mutualfundinvesting\">Mutual Fund Investing<\/a><\/div>\n<div style=\"text-align: center;\">\n<p><span style=\"color: #0070c0;\"><b>Need help on Investing? And more<\/b><b>\u2026.<\/b><b>Puchho<\/b> <b>Befikar<\/b><\/span><\/p>\n<div class=\"puchhoBefikarIcon\"><img decoding=\"async\" loading=\"lazy\" class=\"\" src=\"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-content\/uploads\/2018\/05\/puchho-befikar-logo.png\" width=\"59\" height=\"46\" alt=\"\" title=\"\"><\/div>\n<p><b><i>Kyunki<\/i><\/b> <b><i>yeh<\/i><\/b> <b><i>paise<\/i><\/b> <b><i>ka<\/i><\/b> <b><i>mamala<\/i><\/b> <b><i>hai<br \/>\n<\/i><\/b><a href=\"https:\/\/www.moneyworks4me.com\/\" target=\"_blank\" rel=\"noopener\">Start Chat<\/a> | <a href=\"https:\/\/www.moneyworks4me.com\/\" target=\"_blank\" rel=\"noopener\">Request a Callback<\/a> | Call 020 6725 8333 | <a href=\"https:\/\/api.whatsapp.com\/send?phone=918055769463&amp;text=Need%20any%20help?\" target=\"_blank\" rel=\"noopener\">WhatsApp 8055769463<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>This article covers the following: Review Outlook Risks GDP Slowdown Opportunity for long term investors Review Nifty Total Return Index (Nifty including dividends) earned ~13.5% Year to date Nov\u201919 and ~15.5% CAGR in the last 3 years from demonetization lows. Nifty continues to remain steady thanks to a handful of stocks making all-time highs while [&hellip;]<\/p>\n","protected":false},"author":725,"featured_media":13982,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[1166,1182],"tags":[1241,1239,1242,1240],"modified_by":"MoneyWorks4me","_links":{"self":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/13976"}],"collection":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/users\/725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/comments?post=13976"}],"version-history":[{"count":0,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/13976\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media\/13982"}],"wp:attachment":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media?parent=13976"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/categories?post=13976"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/tags?post=13976"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}