R&R Gift Shares Initiative

We are happy to announce that soon we will be launching our unique Gift Share program for our new and renewing subscribers.

This can come as a surprise to you that after all why are we gifting shares along with our subscription?

Wouldn’t it have been easier if we had just offered some direct discounts on the subscription prices? Or maybe we would have offered some physical gifts along with the subscription?

As a believer of wealth creation via long term investments into equity markets, we did not like both the ideas as the direct discount will save you some money now and that’s about it and a physical gift can be cherished for sometime but will be forgotten after that. In both the cases, the monetary value of such kind of gifts tends to depreciate over time.

So our thought is – “Why not gift you something that will have more than just the emotional value; whose monetary value will also appreciate with time”?

Contact us to know more about the initiative: http://www.researchandranking.com/contact

September 2016 Newsletter

September marked a change in trend of previous 3 months as the broader markets declined marginally. The Benchmark Nifty50fell by 2% during the month. Nifty Next50 and Nifty 500 did slightly better with falls of 0.42% and 1.28% respectively.

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Increase in Geo-Political Risks

In last days of September, Indian defence forces carried our surgical strikes in response to terrorist aggression near LOC in Kashmir. As soon as this news came out, markets took a significant dip – fearing culmination of these strikes into a large-scale war between the two countries.

As of now, there is a growing concern about the extent of India’s response (read: war) to any future retaliation by the cross-border extremists. And if this issue escalates going forward, the risk of a correction in near term cannot be ruled out.

We also need to understand that unlike previous decades, the shareholding of foreign investors in Indian companies is much higher. So if foreign investors become worried about the increased geo-political risk, their swift exits can take the markets lower.

But we feel that correction (if it happens) will only be a short-term phenomenon. In long term, the impact of such corrections is very limited. The fundamentals of Indian economy continue to remain strong even though valuations are on the expensive side. The consumption led growth is showing signs of picking up due to better-than-average monsoon and implementation of the recommendations of the 7th Pay Commission.

So if there is fall in markets due to geo-political developments, it is going to be an opportunity for investors to pick some stocks for long-term investments (http://www.researchandranking.com/crisis-investing/).

IPO Bandwagon continues

The IPO bandwagon continues unabated. Barring few small negatives, the overall sentiments are upbeat and companies are taking advantage of this to raise funds.

Infact, the 6-month period ending in September, saw more than Rs 17,000 crore raised from equity markets (source: Mint via Prime Database). Few large companies (like ICICI Prudential, L&T Infotech, RBL Bank, etc.) that were till now waiting to raise funds came forward and did their IPOs.

Going forward too, we expect IPOs to come out in large numbers till there is investor appetite for new issues.

GST Implementation

The government is moving swiftly to ensure that GST is rolled out by 1st April 2017. So after passage of the bill by Parliament and ratifications by state governments, it obtained the Presidential assent and constituted the supreme GST council.

Now the council is working full-time to deliberate about the final tax rates to be introduced. But before that can be done, there is a bigger challenge to decide as to which goods to exempt, which to put in merit list and which in the demerit list (having higher tax rates).

Policy Rates

After his appointment recently, all eyes have been on new RBI governor and his views on inflation, current rates and possibility of rate cuts.

Though some market participants did not expect any change in rates in governor’s first monetary policy meeting in October, he has given cognizance to under-control inflation & expected boost to consumption and reduced the rates by 25 bps. This is bound to be a positive for all sectors.

Fresh Highs in Bond Inflows

September also witnessed large inflows in Indian bonds by foreign investors. Apart from US Fed’s decision to leave their rates unchanged, the expectations of a rate cut by RBI also caused large inflows in bond markets.

The month saw inflows of about Rs 9,789 crores (source: NSDL) – which is the highest this year.

Shakeup in Telecom Sector

The telecom sector seems ripe for a shakeup as Reliance Industries (RIL) officially launched its 4G-venture – Jio. The announcement itself created a lot of noise with aggressive features and pricing. As a result, shares of existing operators like Bharti, Idea, etc. fell substantially.

There is no doubt that existing operators will face a difficult time going forward as they will be forced to participate in a soon-to-ensue tariff war. But it must be noted that it won’t be easy for RIL too. An aggressive tariff policy will delay RIL’s breakeven for the venture.

Overall, the sector has entered into a period of uncertainty in medium term. But a clear picture will emerge only after few quarters of operation.

Also, with the biggest-ever spectrum auction slated to start off in first week of October, it will be interesting to see how aggressively the existing players bid to thwart off the threat from new entrant.

R&R Portfolio

Coming to our portfolio, we remain convinced about the long term India story in spite of the increase in valuations. Apart from the expected passage of GST bill, we believe that a lot of investments and economic/policy decisions taken in last 2 years have set the stage for the next up move.

Our portfolio remains adequately diversified across sectors and themes. The month of September saw no change in our holdings and sector allocation remains the same.

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We appreciate you for taking time to read this message. Do share your views/comments by email/comment section below.

Regards
Team Research and Ranking