Read this before deciding your 2018 investment strategy

What a week for the markets! Drama from the Gujarat elections injected volatility, but overall stocks rose dramatically through the week. 82% of stocks listed on the NSE rose during the week. To put it another way, for every stock that declined, nearly five rose during the week. The markets are up nearly 30% in the last year and some stocks have outperformed indices by several orders of magnitude. No wonder that the investment industry is India’s true sunshine sector currently. As if on cue, more than a handful of experts can’t stop but wonder aloud about the sheer brilliance of

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Markets this quarter

Only three sub-indices (IT, Healthcare and Consumer Durables) ended up on Sep 30th compared to where they were on July 1st. Metals lost over 25% while Capital Goods and PSUs lost over 14%. Easily one of the worst quarters for Indian markets since the excitement of a new government at the center in early 2014. Call it turmoil in China and the devaluation of the yuan or the Fed and the spectre of rate hikes or key legislation stalling in the Rajya Sabha, this quarter saw one of the steepest one-day fall in six years in the Indian stock market.

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4 charts that sum up Indian equity markets in FY2015

India Share Market in FY2015 In FY2015, India share market were propped up by a combination of a decisive political majority, lowering inflation from falling crude prices and persistently low interest rates in the developed world Apart from commodity sectors like Oil & Gas and Metals, all other sectors and sub-indices have provided positive returns this past year However, Earnings growth, the key driver of share prices, has remained elusive as shown by the 20% increase in Nifty PE explaining most of the 24% rise in the index. We’ve seen in a previous post, current PE has some impact on returns A broad-based

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The investment strategy that beats the average investor – II

In Part I of this two-part post, I made the case for low cost passive indexing as an effective means of long-term wealth building. So much so that even Buffett has recommended it to his heirs in his 2013 letter to shareholders: “My advice to the trustee couldn’t be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee

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Predicting market returns? Not so fast!

“Be careful – you are using the same data to predict as the model itself. You used past data to determine how stocks have behaved 1 year in the future based on the P/E that the index had (average ranges). Then you plot the “prediction” of that past data as a backcasted chart. Obviously it will show the same curve, because you used the very same data to determine the ranges in the first place :)” – Deepak Shenoy Excellent comment on my last post: Predicting stock market returns, by one of the most prolific analytical finance practitioners in India. (If you

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3 charts that sum up Indian equities in 2014

1. An “exuberant” 2014 Both key benchmark indices up by 30% December so far has seen the only significant correction in 2014 2. A “can’t go wrong” 2014 Every sub-index provided positive returns, some more than others with returns ranging between 10% and 70% Metals, Oil & Gas, IT, FMCG and Power under-performed the broader index Small caps, Consumer Durables, Mid caps, Auto & Capital Goods offered 50%+ returns 3. An “Expectations ahead of Earnings” 2014 Indian markets currently trade just above 21x earnings (For every ₹1 in earnings, you pay ₹21) Unless earnings show significant growth in the next quarter or two, historical data over 15 years suggests you’re more

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How to prepare for a market correction

Nov 2014: Both the Indian benchmark indices are up by almost 40% from November last year. These are troubling times for the calm investor. I know, the two sentences don’t make sense. Shouldn’t an equity investor be thrilled that the Indian market, after hobbling along like a hamstrung geriatric for the better part of four years, is now scorching the pavement showing better performance in 2014 than every other stock market in the world? And apparently, we’re just getting started. Here’s a smattering of expert opinions on what’s in store: “Bull markets typically last for periods of five-seven years. That has been

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Is the US about to sneeze?

At a glance A newsletter suggests that US markets currently are ripe for a huge correction – This is a result of the Fed’s Quantitative Easing programs that have pumped huge amounts of liquidity in the system – We look at historical relationship between market levels in the US with India and 3 other countries – Long-term (17 year) view suggests strong correlation between emerging markets but not as much with US and UK – However data from since the 2008 credit crisis paints a different picture – Three possible views and corresponding actions exist   “Oh…you know…everything is screwed

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