Timing the market

Dated: 2nd of October, 2017

 Equity markets in  India in the month of September showed increased levels of volatility  quite different from global markets. This can be largely attributed to  the renewed growth scare that might or might not have political  incentives behind it. No doubt the Indian economy registered a low 5.7%  GDP growth the last quarter but it can hardly be said that the reported  figure created a volatile environment. It was rather the heightened  political clamoring that the country has witnessed of late. Mr. Modi,  who seems to have largely avoided media facetime ever since he took  office is being bombarded with questions from both members of his own  party and that of the primary opposition as to whether his  demonetization drive and the recent implementation of the Goods and  Services Tax (GST) have broken the economic machinery of the country.


Many  argue, with some validity, that the country which was on the verge of  recovery after 2010- 2013 slowdown, really needed the PSU bank's NPA  mess to be sorted out to revive credit growth which has been abysmally  low. Instead, what the country got was probably a failed demonetization  effort (all cash returned back to the system) and a GST, which according  to my recent understanding, is a huge practical operational hindrance  to doing business. 

No one doubts the  government's intentions in both drives but recent media coverage on the  issue seems to show that there were some failings in implementation (as I  had noted in one of my earlier updates). Mr. Modi's media absence has  added to the rhetoric that the leader has turned more and more  authoritarian in nature.

On the portfolio  front, there was one change to the portfolio in that one of the oldest  holdings, which was held since inception (close to 4 years), City Union  Bank, has been exited on account of higher relative valuations compared  to its earnings growth. There were no new additions to the portfolio as  the exited funds were put back into existing names. 

Hedges  wise, I had taken off the Index hedges mid-month as even though  historically, earnings multiples are higher than average, I might have  failed to account for the low level of interest rates that exist today. I  am at a point of indecision and given such a state, I plan to err on  the long side. Agreeably, I had again fallen prey to the cute little  edges of my smartass mind which kind of drifts into thinking time and  again that it can predict the future.