Wealth Management Archives - fisdom

The Signal: The Week Highlights

The-Signal-Week-and-more-1

 

  • Old Gold May Maintain New Shine
    Gold is set to score the best gains in a decade this year as the pandemic and a gloomy outlook for the world economy sparked a rush towards the yellow metal, considered a safe haven in turbulent times. Volatility in other asset classes and a risk-off sentiment also attracted investors to gold

    Delay in approval of vaccine, fear of lockdown and fear of covid strain may create a global turbulence and positive support for gold. As the economic and social uncertainties triggered by the coronavirus pandemic turned the spotlight on gold as a safe haven. 

 

  • World’s Biggest Vaccine Manufacturer In India To Get Serum Vaccine Nod
    India to do large-scale production and supply of coronavirus vaccines as it enters 2021. India contributes 60 per cent of the vaccine production to the world. India is going to play a vital role in equitable distribution of vaccines around the world

    The mass production will be only after it is proven efficacious and immunogenic for mass use. India’s production capacity is over 200 million doses and may increase if needed. Infrastructure for logistics and storage is will develop as the vaccines are required to stored be at specified temperature.

 

  • India Identifies As The New China
    Major outcome of COVID-19 is the likely shift in global supply chains away from China to other economies. India could benefit from this move and they expect a fair share of manufacturing to shift from China to India in the near future.

    Under the Aatmanirbhar Bharat package, the government has introduced several measures to address the immediate pain points of the economy as well as steps to improve India’s manufacturing competitiveness and now all eyes are on the upcoming Budget. This Budget is expected to be different due to an unprecedented social and economic challenge, and exuding confidence that the government will take bold steps to respond them

 

  • India To Spend On Covid Pain For Bigger Gain
    This year’s budget will be increased from its current 30 trillion rupees ($407 billion) when new spending plans are announced. Government’s budget gap will probably widen to 8% of GDP this year.

    The developments will give a boost to spending to help weather the hit from the coronavirus pandemic. Economy entered an unprecedented recession last quarter; so, the government spending is key to staving off a prolonged crisis in the nation. Potentially, India can build upon aspects such as push in rural economy and huge consumption base to put economy back on a healthy growth.

 

  • Increasing Count Of Banks Is Increasing (A)Mount Of Monies
    Brining efficiency to country’s finances will require new entrants and newer tech to mould old systems. While planning expenditure is a good 1st step, prioritizing it is the next needed step as spending levels were akin to H1FY20 levels, owing to curbs applied to many departments.

    Covid 19 is causing shockwaves across the world, with India’s GDP correction reflecting similar economic infections. Like before, reforms are being merited as economical vaccine, with individuals and institutions awaiting govt.’s Relief package 3.0 announcement.

The Signal: Learn From 2020 To Earn In 2021

Th Signal 2021

2021 is here, and markets have welcomed it with bang by closing on all-time highs! 

After a curfew-induced new year, India looks to new unlockings to hold the “Fastest Growing Economy’ title. As market’s dichotomy vis-à-vis underlying fundamentals wears a wider spread, all investors wear 1 question – “What’s In Store For 2021?”

While no one can give an 100% accurate answer, we can help you reap, not repeal, market potential that lies in front of us.

In setting the tone of the note, let’s have refresh market’s behavior to the doings in the year:

The markets have danced to its tunes as its wavelength jumped between pitches (High = Good, Low = Bad). From being shell-shocked in Mar’20 to excited elevations as of date, the markets tested investors across behavioral and buying patterns.

A vintage lesson found new voice as we observed how buying behaviors were a result of emotional biases rather than a self-actionable. 

Enjoying a direct co-relation, impromptu investing was a common theme seen across markets in CY2020. In attempt to categorize client behavior, we present the graph below to help you understand how emotions play out under different market scenarios:

The volatility seen in Markets (VIX all-time high, wealth phoenix) brought forth a host of emotions, which are all encapsulated in the above graph. While many hold conflicting thoughts about where stand today, all market participants agree to erring on the emotion tagged to particular phases of the market cycle.

Legendary investor Charlie Munger has said the one persistent challenge investing will face for perpetuity is natural feeling-laced perception-based money actionable. Calling for “Delayed Gratification”, he spearheaded the development of sans-emotion investing. 

In fact, the seriousness about being “emo-&-ego”- deaf when investing is heralded by institutions and individuals alike. 

India’s National Stock Exchange (NSE) had conducted a survey named, “The Emotions Erosion Principle” wherein they touted reduced realized investing returns for participants, courtesy of spillover emotions.

The graph below highlights the concept of “Investing Gap” which is in essence a penalty levied for bubbling behavioral patterns:

Today, most investors are guilty of ‘unclean’ investing by wrapping their portfolios with hinges of pulses. The 1st and biggest lesson we can learn from 2020 is to master the skillset of avoiding faux-pas’ arising from frantic feelings.

Investing is a long-term activity, and hence should be practiced in a similar manner. The only time a portfolio requires manual intervention is in 1 of the following situations:

  • Change In Investment Objectives
  • Change In Risk-Return Profile
  • Re-set Asset Allocation

Amongst the aforementioned points, Asset Allocation is a charter investing principle with disciples in the greatest investors of all-time.

2020, from an investor’s perspective, has not been shy of volatility, drawing parallels to that of a roller coaster ride. These temporary (read as: contingent) and temperament-testing swings on the downside across global and domestic markets, has witnessed wealth preservation become the flavor of investments, over wealth creation

The case study for asset allocation is evidently clear from the journey of the 3 broad asset classes in calendar year 2020. The same is shown below:

Equity

 

 

  • With VIX levels touching all-time highs in 2020 and no respite in sight, investor wealth saw massive erosion in the first 6 months of 2020
  • However, external weaknesses with internal strengths have pumped euphoria onto markets elevating levels to trading at ~14,000 levels today!

 

Debt

 

  • The IL&FS crisis in late 2017, spelt doom for our shadow-banking industry, a key proponent for helping India achieve the $5 tn economy mark by 2025. 
  • The DHFL fraud, further augured feelings of discomfort in the debt industry with MFs not willing to roll debt or issue fresh CDs without adjusted risk premiums.  
  • This lead to a chain of by companies, casing one global fund house to close 6 of their prime debt funds, in recent times.

This clearly shows why risk-averse investors should not compromise on credit quality to realize growth, but stick to AAA/AA rated papers, or look into the likes of “risk-free” Govt. papers

Gold 

Gold lived up to its merit of being a safe-haven asset touching all-time levels. Converting ‘Cry’-sis into Currency, metal saw highest ever inflows on record. However, It too has its rusty elements. The same are shown below:

Gold’s attractiveness as an investment case tends to be weaker during healthy economic periods, in comparison to other asset classes

As can be seen above, all asset-classes are riddled with risks. Investors overweight on either asset class can misalign their risk-return metrics. The calendar-year returns for the same shown below:

2020 markets saw mini bouts for particular asset classes contingent on developments and un-developments. The call for asset allocation stood ground when extremes in allocations became widely visible. 

Tailored, actively managed, rightly allocated portfolios made the best of markets in up and down trends by systematically managing portfolio exposures. 

Below graph highlights how moderated and modulated custom portfolios fared vs 100% asset exposed funds:

Shuffling between conservatism and optimism, revived interest in Gold as an investment avenue, pushing it to deliver 2x returns vs equity stocks!

As observed:

  • Gold Out-performed Equity by ~43% when covid malaise the markets with its viral virus
  • Gold Out-performed Debt by ~13% in the recent run-up of markets, courtesy favorable SWOT analysis

Kick this year off by being more prudent and emotion-savy so you let your portfolio reflect your true objectives. 

And next time there is a fire sale, remember Warren Buffett’s words, “Be fearful when others are greedy and greedy when others are fearful”

Investor Takeaway

Psychologically the human mind is designed to be risk averse. The pinch of losing almost always trumps the ecstasy of winning.

Asset Allocation is an umbrella risk investment, for it acts as limiter in practice and as Balm to anguish!

You can’t control market volatility, but you can limit its effects on your portfolio. Think of Multi-asset as antibody for inflated risks. The note has brought forward the inherent risks every asset class carries… Individually. Clubbed together paints a different picture, one which is risk-efficient from the get-go.

Be it books or speeches, sound asset allocation merits a special mention when talking of investing!

Wishing you a Happy New Year, lets get our money working for us this year. 

Do write to us if you wish to share your thoughts.

The Signal: The Year (2020) That Went By

The Signal

A Boutique Of Learnings & Earnings

Today’s blog makes for a special moment, for it is the last piece we write in CY2020 under the trademark “Signal” Brand.

We thought of structuring today’s note as an ode to the cherished communications we have enjoyed with you over this year. We do this by spotlighting the most favorited editorials in facts and figures by you, while maintaining symmetry to cover the landscape of events during the entirety of 2020.

2020 kicked off like 2021 is about to – Rallying on new-found optimism with markets hovering near All-time highs. What followed after has been an once-in-a-century event as the world dissolved into a socio-economic lockdown, courtesy of the biggest health crisis of the century.

Nearly 100 years later from the plague of this stature, Covid-19 has eaten up all of 2020. Hosting its virality, its vitality can see subsumption in the year to come as world’s vaccine centers rush in doling out doses in the fastest record on date.

The markets have danced to its tunes as voice modalities jumped between pitches (High = Good, Low = Bad). From being shell-shocked in Mar’20 to excited elevations as of date, the table below shows market movement in CY2020:

newsletter1

In riding through the Covid Crisis, markets have come out super strong breaking All-time highs on an almost daily basis in Dec’20. 

In fact, markets closed 16/18 times in the Green, making new All-Time Highs on 12 out of those occasions!

As we revel in hindsight, let us see how investors using the fisdom app navigated through the year’s troubles and made most of opportune markets.

Markets In Boon

The global breakout of the covid vaccine called for immediate shift in market mood to conservatism, as DIIs forecasted a selling spree in the midst of all-time high volatilities.

We at fisdom were pro-active in quashing investors’ emotional adrenaline by stringing out notes on actionables and in-actionables at the time. A few of them are mentioned below:

  • Mutual Fund – Your Wealth Caretaker

This piece showed how “mutual funds got to revel in their livery as a simple and intelligent investment product”. Coming at time when markets were peaked with fear and investors resorting to the yellow metal, many asked what to do. 

Through this note we highlighted the financial nuances that MFs wore which allowed them to arrest downside volatiles and maximize returns on the upside. 

In respecting key principles of investing, MFs continue to be the go-to evergreen investment product with variety wide to prescribe to your risk-objective profile

Click here to read more

  • Who Said Opportunity Does Not Strike Twice

Markets have always bet best on those who meditate. It’s in the erroneous nature of human behaviour to react more than act, with unsilenced and unprofound degree of intensities.

Rudyard Kipling, in his poem “IF” taught us about how to treat losses and wins in the same manner. 

Building on fresh lenses, this article voiced reason over treason as investors resorted to discovering new health-&-wealth of the markets. 

Being overwhelmed with bad news in Crying Covid, Bad Banks, FII Fever, and Valuation Voes, we continued recommending investors to staying invested and follow “Time In Market” over “Timing The Market”.

Those who did had Christmas come early. Those who didn’t showed active response in getting interested and invested. 

Click here to read more

Markets In Bane

The lift-off post covid has helped India become the global engine of growth coming times. From relief package to harmony between Govt and central bank, the world’s biggest vaccine manufacturer is set to become to the world’s biggest manufacturer. 

FIIs have poured in record monies in CY20 with DIIs jumping in late on the trend. 

Market’s complete 180 turn has seen euphoria to extent where markets are portrayed as overly-optimistic. However, is that the case?

We at fisdom focused on the new market moods and doled out to pictographic notes to investors to help them make sense of market happenings at the time and draw the next best plan of action. A few pieces are below:

  • Markets Are Shining Bright! – Or Are They?

In comfort or confusion, the Market’s Shine in 2020 recorded complaints from investors and traders. 50% recovery or room is the half-glass perspective tailored to deliver half the results. The noted went ahead of questioning the strategy by challenging the perception at the time. 

Striking balance between fact and fiction, the note caressed the apparent dichotomy between markets and its fundamentals.

Click here to read more 

  • The Best Way To Buy Into Great Stocks Today And More

This note tried to address the golden question which lies at the heart of sound investing. Highlighting myths and more myths, the note is a blueprint in tailoring your investment-making approach irrespective of market moods.

It also answered a key question in investors “Selling Mutual Funds To Invest In Stocks For Superior Returns”

Click here to read more 

  • What Price Is The Right Price

“What Is The Right Price?” is an all-time favorite question for all-time high markets. You ask, “What Is The Right Answer?” We say, “Is That The Right Question?”

Let us share a lesson with you which comes with market vintage, “There Is No Best Price”

Investing is about staying wallet-vested (investment tenure) and emotion-divested (guess-timating market prices). You can only know of the right price when you have exhausted all the wrong options. To know this, you have to stay invested.

Click here to read more

  • Breaking The Market’s Code. You Asked – We Answered

You Asked – We Answered. fisdom’s FAQs answer the markets hottest questions in the 4 Ws – What, Why, Where & Which!

To be aware of the 4 Ws is to be abreast with key market happenings. 

Break The Market’s Code by burying uncertainties and welcoming probabilities. In knowledge lies power. In markets lie money….if you have the knowledge

Click here to read more 

Personal Finance – Education Series

Of all the interactions we had with you, this segment was an investor favorite. This segment was focused towards educating investors about most talked-about principles which find ardent fans in legendary investors like Buffett and Bogle.

Presented in interactive and colorful fashion, the blogs showcased the strength of investment basics across times and tides. Facts and figures encouraged a momentum of positive investor actions. A few of them are mentioned below:

  • SIP – The Common Investment Denominator Between New & Old Market Participants

Investors are paraded with SIP notifications by all investing bodies at all given times. In researching their claims, we found a host of merits across a seemingly simple investment strategy. In fact, the idea accoladed a string of notes on SIPs. A few are:

  1. Your Weekend’s Finance 101 Lesson – “Smartness Of Salary SIP”
  2. SIP – Investing In The Gandhian Way
  3. Systematic Investing – The PPE For Your Portfolio
  • Statue & Stealth – The 2 Perceptive Pillars Of Passive Investing

For as long as there has been investing, there has been an active debate about “Active vs Passive” philosophy. Each style has found its suitors, often citing, and sitting on opposite ends of the same reasoning spectrums. But what if there is no difference?

Being the same side of the same coin, Passive is more definitive and derivative of Active, than distinctive. 

“Doing Nothing is still doing something” – is an apt way to describe the thesis within this note

Click here to read more

  • Intelligence In Investing Approach

A key sub-category that was born out of reader interest were categorical takes on diversification, international investing, and entry-&-exit strategies amongst others. A few of our takes on the same are presented below:

  1. The Global Voice Of Domestic MFs
  2. Multi-Asset MF – The “One Size Fits All” Fund
  3. Entry & Re-Entry – The Movement Within Market Movements
  4. NFO Investing – All You Need To Know
  5. This Is How The Rich Invest

 

Investor Takeaway

As can be seen, the year’s noise and news overwhelmed markets with flurry of flavors. Pronounced actions deserved as much attention as staying put, as opportunities disguised themselves as cheap thrills and the other way round.

The year called for financial jurisprudence like none seen in years past, and we at fisdom actively stood up to the plate in hand-holding our investors through the Good, Bad and Ugly.

We have had a joyous time with each one of you, and look to have more of you in the times to come. As we say goodbye to 2020, let us take this year’s learnings and shape into next year’s earnings.

See you in 2021, sounder and wiser than the 3 Magi!

Wish You Happy Holidays

The Signal: The Week Highlights

The-Signal-Week-and-more-1

newsletter

 

1. India To Scale “Ease Of Doing Business” Index

India’s rank under Modi leaped from 142 in 2015 to 63 in 2019. Govt. has zeroed in on 6 laggard segments – enforcing contracts, registering property & starting business — which prevented India from breaking into top 50 nations in the World Bank’s ease of doing business index

India looks to establish itself as foreign darling for the coming decade by aggressively resolving and resorting to cleaning up of it’s works and perks. Climbing up the Ease Index will propel India’s aim to replace China as the global growth engine by arousing more FII interest than it does today. By channelizing check-points, India can expedite growth verticals in the post-covid world. 

 

2. Budget To Be Bigger & Bolder 

FY21 has been a once-in-a-century fiscal year as it shone light on poor developments across  health, rural, consumer affairs, and infrastructure sectors. The covid shock has merited the country to call for a big and bold budget in the following year to support India’s $5 Tn GDP target by 2025

The road to recovery will not be easy as there will be challenges on the way. India witnessed shoots of recovery in tax collection from companies, GST revenue and direct tax collection. PMI for both manufacturing and services are in the expansion zone, but the fear of re-infection of the virus and lockdown stays. For now, the most essential factor is the restoration of confidence which is expected from Budget 2021.

 

3. World’s Biggest Vaccine Manufacturer In India To Get Serum Vaccine Nod

The Drug Controller General of India (DCGI) may clear the shot for use if clinical data furnished by Serum Institute is found satisfactory. Covishield is Serum Institute’s version of the vaccine being developed by Oxford University and British drug-maker AstraZeneca Plc.

The Economy is on its way to brighter days as the early vaccine development and expectation of India’s Nod may spread the optimism in the market and earlier it was reflected with strong capital inflows

 

4. FII Flow Is India’s Winter Fashion

There is a growing interest among overseas investors about the country amid the government’s continuing reform measures to further improve the business climate. Defence production will be the areas for fresh overseas investments while easing compliance burden will be a priority area.

FDI recorded significant jump irrespective of global slowdown. Easing compliance and relaxed norms have attracted investors. The key sectors attracted investors are hardware, telecom, trading, construction, auto, chemical and pharmaceuticals. The trend is expected to continue with more development on ease of doing business.

 

5. Digital India Seeks Growth From Brick-&-Mortar 

The vitality of the infra vertical in the country is key in vaccinating the virality of the virus. The sentiment is reflected via benchmark policy in ‘Atma Nirbhar Bharat’, and supported via boosted via latest IIP figures. It registered 3.6% last-month, growing at its fastest pace in last 7 months. 

Reading elemental growth of IIP shows how the infra sector is readying for a bounce-back. From a 100 Cr+ spend package to revived demand for steel and consumer durables shows willingness of country in printing its growth via manufacturing more manufacturing and service outputs.

UTI Small Cap Fund

UTI NFO

Making Big From The Small

The big titans of today started as the smalls of yesterday. Hence, Small businesses are often referred to as the backbone of a country.

In the most primitive life-stage, the sector reflects the best of where the economy is heading. 

Govt. support to MSMEs via policies & packages, benchmark program “Make-In-India”, and accelerator set-ups, signal conviction of the contribution of small-caps to the $5 Tn economic agenda. 

More so, the continuous push towards the formalization of the economy will augur greater inclusion of the broader universe of smaller companies. This will further propel growth in a holistic manner in the undiscovered and under-looked talent pool of companies

The less travelled path of small-cap universe is proved to be rewarding many times before, and this time round, the story reads in the same manner. 

Here is why!

Large/Mid Sector Stall Vs Small Sector Stall-ion

Sector coverage in small cap space is more evenly spread out as compared to Nifty sister indices. 

Enjoying higher diversification, the wider base adds to maximizing potential on the upside, while arresting risk on the downside. 

With higher count of sectors to tap into, no particular sector can determine the trajectory of the health & wealth of the index. As an example, the recent inflated vales in Large cap is courtesy of the heavy rallies seen in UPI, API and AI sectors.

The graph below highlights the sectoral imprint across market-caps:

UTI Small Cap

The weightage comparison to derive over/underweights of sectoral presence is derived via comparison between Small-cap and Large-cap indices

The Stock-Star In Small-Caps

“Like is with sectors, is with stocks” is an apt adage to define the working symbiotics between the broad and narrow market dynamics. 

The mismatch in count representation and dilution in upside potential is very visible in the stock story too.

In fact, over the last 5 years, small-caps have greatly out-performed the bigger indices, courtesy of the bigger pool of stocks.

The table below highlights the count of out-performing small-cap companies vs sister market-caps in the Nifty 500 over the last 5 years

NFO Small Cap Fund 1

As can be seen, Small-caps have out-performed the large & mid-cap stocks by significant margins of 92% and 50% respectively on a cumulative basis.

Vlogging Values In Valuations

The developments and attention of Indian markets are to bring more sophistication to reporting standards thus finetuning small-cap stocks on qualitative basis. 

On the quantitative front too, small-cap stocks present a rosy picture.

Value finder and feeder in PE multiple is associated with gauging market segment’s trend in coming times. Current PE multiples trading over long-term averages call for segment to be tagged, “Over-valued” and vice-versa.

Being in-line with market principle of mean reversion, it is figuratively and factually smarter to enter markets at suppressed PE levels, as you can then capitalize on the market’s expected upward trend.

Today we find ourselves in that position.

As of September 2020, the small-cap division has seen sharp fall at ~70% from June 2017 peaks. The fall has been a result of consecutive event spills and investor behavior to forage for “safer” asset classes in time of tries. 

However pick-up of economic indicators, and foreign monies finding fervor instead of fever, can see the segment lift-off its current comforted levels.

On a valuation front, the index has seen sharp contraction of 46% from peaks in 2017.

After the big tumble, the segment is gearing up to rumble. The particular market-cap can see newfound limelight due to changed Multi-cap MF rules and polarization in the bigger segments.

The chart below highlights the PE valuation gap between the Nifty50 vs Nifty Small cap:

Small cap fund 2

Like in peak-trough-peak wave, the Small-cap segment seems to follow similar print. Coming off its yesteryear peaks, the segment is now ready to scale the upside as its value graph hitchhikes following suit.

Looking into the hard numbers solidifies the views made above. 

In studying rolling returns, it is observed that the current gap between the small-caps and large-caps is currently at favorable level.

UTI small cap fund

On time testing returns over a 3-year rolling return period, the observations made are similar to those made from graph seen above

Already excited to go hunting for your favorite small-cap fund? UTI MF introduces their small-cap fund so your portfolio can boast the best of tomorrow’s leaders

UTI Small cap Fund

UTI Small cap fund will look to invest in companies with scalable business models with seasoned management and regularly undertake quality and quantity check on portfolio stocks.

Fund Breakdown is as follows

UTI Small cap fund

Investment approach:

  • Business Scalability

High and consistent growth companies with sustainable business models, long growth runway and run by seasoned managements.

  • Turnaround Strategy

Invests in sound businesses going through weak operating business phase.

  • Transformational Change:

Invests in businesses undergoing a transformational change and hence becoming potential re-rating candidates.

Who Can Invest In UTI Small Cap?

  • Investors who are seeking higher returns as compared to other diversified equity funds with willingness to be subject to underlying higher portfolio volatility and risks.
  • Investors with investment horizon of 7 years or more

Key Details About The Fund

UTI Small cap NFO

 

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