March 2015
Outlook FY 2015-16
FY 2014 -15 was a rewarding year as we delivered close to 90% absolute return against the benchmark return of 33%. We were able to deliver staggering alpha of more than 55% in 2014-15. We have now completed 5 years in India Equity and 3 years each in India Dedicated and Wonder companies. Our focus has always been in identifying companies and themes which deliver superior risk adjusted returns which has helped us in multiplying wealth of our investors.
The highlight of 2014-15 was a strong political mandate and a sharp fall in crude and commodity prices. The market has already discounted a strong political mandate and early investors have been rewarded for the same. We are yet to see discounting of the fall in commodity prices in the equity market. Some of the companies which were immediate beneficiaries saw their share prices moving up sharply but overall the Indian economy is still being challenged with sluggish growth both internally and in the global economy.
We are starting FY 2015-16 on a very subdued note. Most of the Modi led euphoria has been discounted and the last three quarter numbers are not encouraging. Most of the investors and fund managers are sceptical about the market. We would like to give our outlook for 2015-16 under three broad parameters:
Technical - We have seen a big consolidation in the market from 2008 -2014. Indian investors are highly under-invested and supply of equity has been extremely weak. Technically the market is looking resilient and making new highs after every correction.
Fundamental - Corporate profitability and margins have hit historical lows. Fall in commodity prices and crude prices will aid margins. The government will also have more resources to kick start the economy and we will see base effect play out.
Sentiment – Markets always bottom in times of panic and typically tops in euphoria. Currently most of the people are worried about sluggish growth and lack of positive triggers in the economy. The market is skeptical and in this environment it has more upside than downside.
We would focus on capturing some of the above mentioned opportunities for all our investors.
Regards,
Vinod Jain