August 2013

Currency Crisis

August – 2013 was a month of heightened volatility in all asset markets. INR depreciated by more than 10%, 10 Year yield spiked by more than 1% and we saw sharp movement in equity markets as well. For the first time we underperformed in one month performance in falling markets but inspite of that we have been true to our mandate and stuck to quality domestic stories.

With rupee depreciation, export companies were immediate beneficiaries. Market has discounted most of it in the prices of IT and pharma companies. Incrementally market will look at companies which can take advantage of exports. We also believe that a lot of companies will work towards import substitution and localize their raw material sourcing. We may not have participated in immediate rush for safety but we believe that most of our holdings will work their way out of this crisis and build world class businesses. Most of the companies we own have zero debt and strong balance sheets. They can unleash their favorable balance sheet in this crisis to build capacity to take advantage of the next cycle.

It’s our commitment to be with best of the businesses and not worry about short term movement in the stock market.