This is a special Investment note that will walk you through what we have seen since 2020 and what we are now seeing for 2025-26. It will also explain the upcoming volatility and how we plan to help you protect your portfolio from economic shocks.
Is the market crashing? The yen carry trade—borrowing in cheap yen and investing in higher-yielding assets in other markets—is unwinding after the Bank of Japan last week hiked a short-term interest rate to 0.25% from 0-0.1%, the most in 16 years. This has strengthened the yen against the dollar, forcing investors leveraged by yen to unwind trades globally. As a result, global markets including nifty have been in a shock, with the nifty losing 3%. If you look at it from 1999 onwards, Nifty has done this 3% drop over 140 times, or at an average once every 10 weeks. Not that special, is it? But there is an underlying shift into this. Find out more below:
Equity holdings Outperform: As of today we have seen four years of phenomenal investment growth of upto 120% CAGR depending on when you began your equity portfolio with us. This period of growth in the Indian markets is not only completely divergent from the global markets which grew less than 50% in the same period, but also unprecedented in the history of India’s markets. Gold, commodities and Real Estate: are historically counter cyclical to Equity markets also performed in India to the tune of 80% in these four years, again an unprecedented and unexpected outcome. As you may have noticed, we have helped you prudently allocated your portfolio across gold, real estate and commodities with our ground-up research powering these trends.
What are my Risks? During this period we navigated several risks like the Pandemic disruption, Hyper Inflation, Geo political Russian War, Low volume markets, and low consumption risks. Within each of these risks, we ensured your portfolio remains stable, growth oriented, but away from these risks. The issue with risk is that you only realise it if it is not managed. Therefore 80% of our work remains in the shadows where it is not visible. However you may be able to spot it in the fact that we have avoided loss of your monies in the the last six market crises’, namely: IF&FS, DHFL, Covid crash, Adani, Yes Bank, Russian War.
How do we manage Volatility? As we have been communicating in our meetings since Feb 2024 - and continue to mention here - the 20% + returns era is over and we need to return to 10% + expectations on your broad portfolio. Our expectations have been a volatile second half of 2024 along with some pockets of volatility and minor markets shocks continuing over the next 18-24 months. This is important to note.
Should I be worried? Short answer: Not at all, we will try to take advantage of the upcoming volatility as we continue to look at it from an opportunity lens and intend to help you capture some if not all of these opportunities. Lets understand how:
The magic of compounding with Timely Rebalancing: In response to this upcoming volatility, we have helped you rebalance your portfolio in 2023 as well as 2024. Timely rebalancing, even though it may incur a 1% tax on the rebalanced amount, helps you stay on the right side of the risk-reward curve and avoid market shocks. A stick in time saves nine, as they say. The stitch costs a bit, but has saved over 10cr across our clients on a cumulative basis today alone, underscoring its value.
How are Economic Macros placed? While rising corporate and household incomes address India's generational shift in consumption, the broad contours of India's economic makeup are shifting. As our exposure to firms building India's infrastructure has risen in tandem with this. Macro strength continues to be reflected in India's aggregate earnings. For Q4-2024, across the spectrum of benchmarks, Nifty 50, Nifty 100, and Nifty Midcap grew earnings by 18%, 16%, and 6%, respectively. Further, the earnings growth of the broader sectors spanning banks, NBFCs, automobiles, healthcare, and real estate are in the range of comfortable double digits and run between 1.5x and 2.0x of nominal GDP.
How have we helped you make your portfolio resilient? Our current portfolio demonstrates a balanced approach to asset classes across Equity, Debt, Commodities and some real estate allied sectors. This has ensured we have not bet the farm on equities alone, and are not susceptible to equity shocks. Within the equity folio as well, we remain balanced across market capitalization, backing opportunities. Across our holdings in Credit, IT, Healthcare, Manufacturing, Capex, and Consumption, the portfolio is adaptive and balanced to the current economy and markets. This approach has positioned us well across cycles to set portfolios up for absolute returns.
Over the last two years, we have helped you away from risky small and mid caps into debt oriented safety + pockets of equity opportunity in diversified large caps, healthcare and banking, infra resulting in earnings of over 100% XIRR in your top funds, and no loss of capital. We hope to continue doing this well over the next two years. We appreciate your trust, do not take it for granted, and will continue to earn it.
コメント