Wednesday, February 10, 2016


Happy to notice a flicker on the needle as I sight a slight rebound in the earnings profile of companies that have declared results so far. However this delayed evidence seem to be of little consequence to a market that may have waited enough and is now looking at global cues. Only time will tell whether the known unknowns of Chinese Yuan devaluation & dollar strengthening, the path of Fed rate hikes, rebound in global growth etc., will stabilise enough to let us refocus on the green shoots in India. 

Domestically I  am optimistic of growth becoming better, but not enough to let fiscal slippages be in control. And this may cause further debt issuance by RBI keeping floor on yields not withstanding any rate cuts that may or may not happen. The near lack of sympathetic movement despite 125 bps rate cut by RBI in 2015 is a case in point. 

In this light, I fear that a fiscal slippage if evident post budget, coupled with signs of stress on the currency front due to any risk-off events in the near term, may put to rest our recent alignment with duration. An outside chance is developing where yields may indeed cross 8.00% and force all of us to relook at accrual strategies, abandoning duration despite the multi-year wait of advisors hoping it would pay off. I pray that global markets remain calm in 2016 and allow the scope for local bond yields to drift lower as is the current possibility. 

In the same breath were there to be global turmoil or market weakening from current levels, local markets may go down in sympathy to even lower levels of 6500 +/- 200 points if it doesn’t stop at 7000 levels which is a very good medium term support. I am looking to trim mid-cap exposure based on a likelihood of the above turmoil. 

I strongly recommend to add good amount of money to your Indian equity diversified mutual funds now looking at 2 to 3 years time horizon. focused on large cap will pay off good.

Please feel free to call us for more detailed discussion.

Ritesh.Sheth CWM®

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