September 2015
Capital Conservation
Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1.
- Warren Buffett
Amongst all the investment options equity is by far the most tax efficient and liquid investment. It has a long history of beating inflation and rewarding investors by generating returns in excess of any other asset class. But equity as an asset class has an inherent trait which turns off many - volatility. We have seen periods where stock markets delivered zero/ low returns for 3-4 years followed by a strong year of 100% return which in effect compensates for the previous years. Equity has bouts of corrections and weak periods like any other asset class but the effect is pronounced due to daily prices flashing on the screen. In a nutshell equity investments are most rewarding but come with a rocky ride.
Volatility being an inherent characteristic of equities cannot be completely elimininated but we have tried to smoothen the experience for our investors. Since January – 2015 we have been seeing a correction in Indian markets. The Sensex has corrected more than 10% on the back of selling of more than Rs.30,000crs by FII’s. In the same period we have managed to deliver 1-2% positive return for our investors.
We always advise our investors to look at relative returns while evaluating performance. Getting a positive return against 10% correction in market is in our opinion something to cheer about. Even if markets revert to mean we will be able to post strong returns in our strategies. Following table is highlighting correction in Sensex as well as few of the most favored stocks amongst institutional as well as individual clients.
|
January 30, 2015 |
September 30, 2015 |
Change |
Sensex |
29182 |
26154 |
-10.4% |
L&T |
1700 |
1466 |
-13.76% |
ICICI Bank |
361 |
270 |
-25.21% |
SBI |
310 |
237 |
-23.55% |
ONGC |
351 |
229 |
-34.76% |
Positive returns in a falling market can be attributed to avoiding mistakes in the market. We were able to do so by sticking to the strategy mandate. Our investors have greatly benefited from the same.
Regards,
Vinod Jain