April 2013

We witnessed a sharp fall in commodities in the month of April. Gold corrected by more than 15% which was its highest ever fall in the last 30 years. In stocks we have witnessed an expansion of price earning multiple due to fall in commodity prices coupled with a fall in the 10 Year benchmark yield. In the middle of an eventful month we exited our holding in Titan Industries. Our belief is that Titan Industries was built on the “Gold Wave” in India that was created due to a strong rally in gold prices in the last decade. Most people have aggressively bough gold in this period - much more than what they need. It is a known fact that a major part of Titan’s profit is due to its subsidiary Tanishq. We believe it will be difficult for Titan to adjust its business model in the wake of a fall in demand for gold. As per our assessment the company is trading at top dollar valuation with significant risk to its business model. In place of Titan we have shifted our allocation to Colgate which should benefit with its focus on rural demand and product innovation.

We are consistent with our view on Budget – 2013. We think high quality stocks will continue to outperform broader markets and as always we will continue to focus on opportunities within the high quality space.