Greetings from Carnelian!
We are back with an update on our fund.
We changed our view on the markets during the month post the FM’s announcements on 20th September, 2019. We sent you a quick note on the same day.
To us, the government’s decisive move to do an aggressive tax cut, was a great signal. It was also followed by the announcement of strategic divestment of PSUs. It is clear that Government’s approach on the economy has undergone a material change and this will arrest the ongoing slowdown sooner than later.
Our overall strategy of cautious deployment came handy.
While our view on the markets is positive, we will continue to be watchful of risks in the environment. We are positive on the turn of events in the recent times, but we still feel that the most significant risk to watch out is contagion effect of real estate NPAs and possibility of retail NPAs. Susceptibility of large institutions in the banking and housing finance sectors has again caused panic in the system. This has once again opened a debate on how many more skeletons are still in the closet! Any improper handling of these issues can lead to a systemic crisis.
Till the time these issues are not behind us, markets will continue to be volatile. Retail NPA if not handled well can create a contagion effect of a very large magnitude. We will be watching out how these two risks are handled and determine the trajectory of our investments.
We are about to get into the festive season. Last year, we celebrated Diwali in the back drop of the IL&FS crisis. IL&FS crisis spread its wings across the financial sector leading to a complete freeze of the financial sector. Vikram Samvat 2075-76 was one of the worst years in recent times and barely anybody remained unscathed on account of this. We think Vikram Samvat 2076-77 will be a far better one than the last.
It is after all these times and environment which offers the best opportunity in the markets.
We wish you and your family a happy Diwali and Prosperous new Samvat. May this Diwali bring loads of health, happiness and prosperity
“The first rule of investment is ‘buy low and sell high’, but many people fear to buy low because of the fear of the stock dropping even lower. Then you may ask: ‘When is the time to buy low?’ The answer is: When there is maximum pessimism.” - Sir John Templeton