Archives April 2021

Invest for monthly income should be phrased as effective ways of generating monthly income from a certain amount of capital with minimum risk.

This is so because if a person is looking for a monthly income, most probably he is looking at it for an indefinite time and don’t want any erosion in his capital.

Investment by virtue of its nature will come with risk for the invested capital and the ones looking for monthly return don’t want to risk their invested corpus.

They would prefer low returns but the safety of principal is of paramount importance to them.

Investment for monthly income is usually associated with pension. However, with changing time, an individual can look to invest in a plan for monthly income at any time and can choose to pursue other interests in life once he has saved enough.

In corporate jobs, almost majority of them don’t have any clause for pension after retirement from a company. They usually leave it on an individual to plan for it.

In government jobs too, in most of the cases, employees are getting their PF and gratuity at the time of retirement and there is no provision of pension any more. NPS ( New pension Scheme) announced by the government of India in Dec’03, took over the traditional pension system which was followed for many years.

In this article, we would be suggesting few easy to understand ways for generating monthly income. Some of the prominent ones are:

1. National pension Scheme (NPS) – This scheme was announced by the government of India in Dec’03. Under this scheme, an individual can choose to invest systematically for a number of years and then on retirement, 60% of the maturity amount can be withdrawn and remaining 40% has to be invested with a life insurance company for an annuity plan. Annuity means that the interest on capital is paid on a monthly, quarterly, half yearly or on a yearly basis. The return that will be given by an insurer depends on the product and macro conditions at the time of investment. From 29’th Aug’21, the pension fund has revised the guidelines on entry and exit following an increase in the maximum age for joining the NPS from 65 years to 70 years of age. The entry age for NPS has been revised to 18-70 years from 18-65 years. In a set of new rules, PFRDA has also permitted to allocate up to 50% of the funds in equity, besides easing the exit norms.

• Pradhan Mantri Vaya Vandana Yojna – This scheme was announced by central government for senior citizens, above 60 years of age. This came into existence in 2017 and will be available till Mar’23. Under this scheme, an individual can invest a maximum of 15 lacs and minimum amount of approximately 1.5 lacs depending upon the mode of return (monthly, quarterly, half yearly or yearly). Currently, when the interest rates are low and hovering around 5% for most of the investment products, this scheme is still assuring a return of approximately 7.4%. The tenure in this scheme is 10 years. It is one of the great products available for individuals looking for a high monthly return and safety of the invested capital.

• Saving Schemes of Bank– Many banks offer products where in you can either choose to invest for a certain period or invest a lump sum for a monthly income. Depending upon the requirement, returns can be immediate or after a certain duration. The frequency of returns can also be chosen out of monthly, quarterly, half yearly or annual options. The interest rates for this product is around 5.2% currently and can vary on a bank to bank basis.

• Guaranteed plans by insurers – There are many life insurance companies like LIC, Bajaj Allianz, etc. which are giving guaranteed plans with fix details of the invested amount, tenure, mode of payment and life cycle of returns. Without going in nitty grit-ties of financial parlance and compound return cycle, these are one of the best options to invest for a fix monthly income for life. Even on death, the lumpsum amount is paid to the nominee. These are usually open for individuals above the age of 35 and they can start getting the benefit after 10 years. For example, if an individual who is 40 years of age invest approximately 5 lacs/ annum in this scheme for 10 years, then after 10 years, that person will start receiving an annual amount of approximately 4 lacs till he is alive. He also has the option of roping his wife in this plan. This means, after him, his wife will continue to receive the above stated amount. She will receive it till she is alive and after her, the nominee will receive a lump sum amount which will be approximately 51 lacs. Here is the sample illustration in a tabular format,

An example of this plan is Guaranteed Pension Goal by Bajaj Allianz life.

Hence, on the basis of one’s requirement and objective, a scheme can be opted for a monthly income through investment.

Invest in share market is a fancy and dream for virtually every investor and each one of us have taken the plunge at least once in our lives to do it.

If not, I am sure the event is not far away.

It’s exhilarating to see the sharp and volatile movements of price in both up and down direction. The returns which can be given by a stock in a day, week, month, year, multiyear forces us to compare it with parallel avenues of investment and its very common to feel pity on other alternatives which falls flat as compared to the extrapolation we end up doing in hindsight.

Well, this pity is just in theory and fades away with time.

There can’t be a better day to write this blog as Nifty 50 has completed its 25 years. It was constituted in India in 1996.

It has given a return of 13 times since inception, which means a compounded return of 11% over the years.

Now, it doesn’t sound so fancy as we think share market means at least 100% compounded return for as long as we invest.

This is the biggest myth and wrong expectation from share market which has made it earn a reputation of a gamblers paradise and hub of speculative activity.

Share market, like any other market place, is a common ground for buyers and sellers to meet and enter into a transaction. As long as the fundamentals of trade are followed like valuations, time horizon, limited risk, etc., there will be no challenge in an investment call.

This is exactly what is done and followed in other alternative investment classes like:

1. Bonds
2. Real Estate
3. Fixed Deposits
4. Currency
5. Precious metals like Gold and Silver
6. Energy, etc.

If we follow the basics of investing in share market too, there will be no challenge.

If you want to directly start investing in stocks, then you should be clear with few basic principles and ethos of it like:

1. Return on Equity
2. Return on Capital
3. Cash Flows
4. Volume
5. Valuation
6. Return on investment
7. Business cycle.
8. PESTEL analysis
9. Business Macros and Micros
10. Growth prospects
11. Earnings,etc.

The threat arises when we start speculating in the arena and start looking at share prices like numbers. If we bet on a number only, then the result of it will also be like an outcome of a lottery or a casino. If we get it right, exponential profit and if we get it wrong, loss of capital.

Investment in share market, as the term investment suggests should be done as per the fundamentals and principles of investing.

However, if someone wants to trade and speculate, then it should be done with that strategy, skills and mental approach.

We should not try to marry both the approaches, as that’s where the problem starts and leads to serious repercussions.

Hence, the choice has to be made by you and an apt action can be taken then.

If you want to go ahead and start investing in share market, one of the best options is to put it in Nifty 50 Index funds. Most of the professionals also find it tough to beat returns of an index in a long run. This way, you will get an exposure in share markets and you don’t have to go through the hassle and huge effort in doing research and analysis on your own.

If you want to go for trading, make sure that you pick up a course that makes you understand the basic concepts of short term approach like:

1. Technical Analysis on charts
2. Study of simple and exponential Moving Averages
3. Bollinger band
4. Macd
5. RSI, etc.

With proper skill set and understanding of what an individual is doing, he will be better prepared to manage and handle risk.

Thus, conclusion is that share market offers every opportunity to an individual to experiment with his money.

What matters is that we should be clear with our motive and approach.

With that, investment in share market and trading in it will offer its own respective rewards with its own due risk.

Investment, like exercise, is something, which should be started early so that an individual is better prepared and equipped to face the challenges of life, that do comes later. We will be suggesting various options that can be taken by individuals who are starting their investment journey and best options for investment for beginners.

We can start at any time to train and exercise on the basis of our objective, which can be:

• Immediate – An individual has to visit a shrine in a week where in he has to walk and trek a lot. Hence, wants to prepare for it.
• Short term – Someone has signed up for a half marathon in a couple of month’s time and wants to prepare for it.
• Long term – An individual wants to be healthy for life to live it with happiness.

However , if we start it early in life, the training regimen can always be altered to suit and meet any of the above three stated goals.

Similarly, if a person has a financial need to meet a :

• Immediate requirement – Like a medical emergency which comes up suddenly.
• Short term requirement – For a vacation, buying a car, etc.
• Long term requirement – Retirement, Kids education, Wedding, etc.

He/She should be in a habit of investment and start early. Only then, the above stated goals and requirements can be met.

Here, we will be discussing the options for investors who will be starting their investment journey and has not been through the roller coaster of financial investment.

Thus, let’s keep it simple for the first couple of years.

Let’s assume that there is INR 100 to invest, then looking at the current macro prospects, it can be distributed as:

• 30% in Ultra Short term debt Funds –  These are very liquid funds and are the best option to garner and get an annual 5.5-7% compounded return. These can be treated equivalent to cash and also offers a very high margin of safety to the invested capital. Few of the Ultra short term funds in India which can be considered are:
  • Kotak Savings Fund.
  • SBI Magnum ultra-short duration fund.
  • ICICI Prudential ultra-short duration fund.

• 20% in Gold – Gold as an asset class is a holy grail for any portfolio and has to be there. It will help an investor to beat inflation and is a wonderful escape from negative real yields which the world is seeing right now and are here to stay for the next few years too. Exposure can be taken through Sovereign bonds which are issued by the government of India or by ETF’s like:
  • Nippon India ETF GoldBees.
  • SBI ETF Gold.

• 50% in Nifty 50 Index Funds – If we look at the returns for few nifty 50 Index funds, it is roughly around 15% compounded for the last 5 years. It is roughly the same for any other best performing equity fund too barring few exceptions and anomalies. Hence, this half share of the original invested amount of 100 can be invested in this instrument. Few of the Nifty 50 index funds are:
  • IDFC Nifty Fund
  • HDFC Index Fund Nifty 50 Plan
  • SBI Nifty Index Fund

If an investor consistently follows the above investment strategy for a significant time, he will be able to meet all his designated financial goals without much change in asset allocation. He doesn’t have to time the market and doesn’t have to go through the stress of market cycles.

Above three segments of:

. Debt,

. Gold and

. Equity

will take care of returns over a period of time.

This is for investors who don’t have time to track and analyze the factors of different asset classes and then try to create alpha in returns.

Even the professionals, who do try to time the various financial instruments and go for diversification in the form of:

• Country
• Asset Classes
• Cycles
• New instruments like Cryptocurrency, NFT( Non Fungible Token), etc.

struggle to give more than 15-20% compounded return over a period of time.

Hence, the asset allocation provided above is a good investment solution for wealth and will meet various financial objectives of an investor.

Penny stocks in India are mostly the ones which trades in single digits on stock exchanges. A broader definition can be that if a price of a stock is below INR 10, then it’s a penny stock.

These stocks have got their names from the price at which they trade. As they trade at like INR 2, 3, etc. per share, hence the name.

Few of the key characteristics of such stocks are:

• Low volume – Many investors are not interested in these stocks and hence there are very low volumes in trade in these on exchanges.
• Low interest – These companies because of their wealth erosion history and virtually no earnings growth, don’t garner any significant attention from investors or traders.
• Very low market cap – These are very small companies with low valuations and low net worth. (Market cap is the total value of a company and is calculated by multiplying total number of shares and price per share of a company. Number of shares of a company should not be confused with free float. Free float is the number of shares of a company which is there in the secondary market to trade and are always a subset of total shares).
• Very volatile – These shares have a low float in the market and these are characterized by low price. Hence it’s easy to manipulate their share price. This makes them very volatile on both sides, rise and decline.
• Poor performance track record – They have become penny for a reason and the main reason is poor performance in earnings growth over a period of time.
• Low liquidity – Liquidity refers to the characteristic of a stock as to how quickly you can buy or sell a huge quantity without adversely affecting the stock price. In the case of penny stocks, a significant volume on any side can affect the share price adversely.
• Wide spread – Spread refers to the gap in a sell and buy price. For example, an investor wants to a buy a stock at 6 and another one wants to sell it at 9. This gap of 3 Re is the spread for this particular stock and it is usually very high for penny stocks.Thus, the transactions dont reflect the market price and usually happens at a discount or premium.

• Reasons for them to be penny – There are reasons for these stocks to be penny in terms of poor management, no earnings growth, consistent under performance, etc. Hence, an investor should not be lured into them without a proper research
• Bull market play – In a bull market in a country, there is a major economic recovery and growth. Amidst such an economic boom, every sector and company does well as the organic growth creates huge demand for virtually everything. Hence, earnings of poorly managed companies can also post a decent growth. However, these earnings fade away when the economic environment recedes and declines. Thus, the high seen in such stocks may never come back. This results in huge wealth erosion and can even make an investor permanently exit the stock markets.

Hence, we should be extremely wary before taking an investment and a trading bet on penny stocks. Most of the bullish calls in them will come out saying that the investment amount can grow in multiples and that the stock has bottomed out.

But as per me, investment is protection of capital first and then returns. And there is no point in making an investment in an instrument where in there is a serious threat to the invested capital.

Also, when these stocks start falling, there are no buyers and hence any investment done in them gets stuck and there is virtually no exit. And by the time, an exit opportunity comes, these stocks have lost so much of value that there isn’t anything left for the person holding them.

Hence, again as a point of reiteration, penny stocks are a big no-no from our side.

It’s an interesting read for everyone about these two financial instruments, which has the potential to create a huge amount of wealth, over a medium to long term. ETF, Exchange traded funds and Index Funds are almost same with few differences as highlighted below.

Index funds are mutual funds associated with a particular index like,

• Sensex
• Nifty
• Nifty IT
• Nifty Bank
• Dow jones
• Nasdaq
• International Market, etc.

These funds buy securities in same proportion as they are in the above respective indexes, to create a mirror image of them.

This is done, so as to give a chance to an investor to take exposure in a particular theme for generating better returns, thus creating alpha.

If an investor thinks, that in coming time, NiftyBank will do better than Nifty, then they can go ahead  and invest in that particular index rather than investing in entire sectors through Nifty.

Also, risk for the invested amount gets diversified as the amount goes into multiple securities of that index. This means that if one security falters in its earnings and returns, it is made up by others.

There are also several criteria’s for stocks and securities to be a part of index like:

• Certain size of a company.
• Certain minimum number of volume in trades.
• Past performance.
• Growth potential in revenue and earnings.

Only, when all the above check boxes are ticked, a company becomes a part of an index. Thus, an investor doesn’t have to do that homework at his end for carving out quality companies to invest.

This also ensure that laggards in index are taken out from time to time and are replaced with new winners.

Hence, an index over a medium to long term will always give decent returns to an investor by minimizing risk.

Few of the index funds in India are:

• HDFC Index fund, Nifty 50
• Motilal Oswal S&P 500 Index fund
• Axis Nifty 100 Index fund, etc.

If above index funds are listed on exchanges and can be traded like securities, then these are called ETF, exchange traded funds.

Few of the advantages and differentiating factors of ETF’s are:

• They are traded like securities and hence can be bought and sold like a share.
• You get the price at which you buy or sell. Where as, in the case of Index funds, NAV’s are declared at the end of the day. Hence, depending upon time of your purchase, value of investment varies. This is a differentiating factor when there are days in stock market of big movements like 4-10%.
• In ETF’s, one unit can also be bought and investments can start with a very low amount too. However, in index funds, there might be a certain criteria for a minimum amount to be invested.
• In an index fund, there can be a condition of lock in. This is not the case with ETF’s.
• In ETF, cost is slightly higher as there is STT, securities transaction tax and other government taxes involved. This is not the case with Index funds.

Few of the ETF’s are:

• Kotak Gold ETF
• Motilal Oswal Nasdaq 100 ETF
• SBI ETF Sensex
• Nippon ETF Hang Seng

Hence, it is clear from above that index funds and ETF’s are a great financial instruments, which offers an opportunity to an investor to diversify his risk and ensure decent returns.

I would again like to highlight the biggest advantage of such funds is that laggard companies are replaced from time to time and better performing ones are inducted in it. This ensures much better returns and fund value grows over time, as compared to other styles of investing in secondary markets.

Blockchain is the latest technology which has come in Vogue and is there since 2009. It is the base and founding block of Cryptocurrency and the famous one – Bitcoin.

It is a shared e-ledger, which keeps a track of transactions that takes place on it and cannot be altered.

This facilitates the exchange between two entities swiftly, as the records become eternal and cannot be tampered with.

If there is a blockchain network, it can be accessed only by its members and all the details are shared and available, thus making it transparent.

It got its due in Jan’09, when Bitcoin was launched using it and the world saw its application and benefits.

Bitcoin, also called a cryptocurrency, has gained a lot of popularity since then and has moved from almost no value to a high of $60,500 in April’21, per bitcoin.

Please find the movement in price of Bitcoin in all these years below:

There are currently close to 4500 cryptocurrencies in the world and their king is Bitcoin because of:

• Value – Market capitalization of Bitcoin has touched $1 trillion in 2021.

• Popularity – It is a topic of discussion for every investment entity, with its vertical rise in last 2 years. It has gone up by 15-20 times since 2019. No other asset class has given such returns, not even close to it

• No control and tracking – If someone has cash or anything of value, it is always a subject of scrutiny in terms of its income source. There is also a fear of theft and a number of controls. Also, if you want to move it from one country to another, there is a tedious process for the same. Bitcoin is a single answer to all these problems. All you need is a login ID and a key. Then, no one can track your holdings. It can also be transferred to any person in the world using an electronic device and doesn’t attract any fees, attention, etc.

Above are few of the benefits and reasons as to why Bitcoin has become so popular in such a short span of time.

If someone wants to trade in them, there are various options in India through which a trade can be taken.

Although, RBI in 2020 has come out several restrictions on trading in Bitcoin, still it doesn’t barred people from taking a position in it.

If you want to take a trade in it, please do it with following caution points:

• Bitcoin doesn’t have any fundamentals attached to it. Its trading at $60k because someone is buying it at that price. It has seen a correction of close to 70% in 2018 and it can see it again. If we try to understand the reasons of decline, it would be difficult. Similarly, it will be difficult to ascertain the reasons of its rise.

• We are still a long time away when Bitcoin can, if it ever happens, be used for buying goods and services, just like we can do it with a normal currency. Although, Tesla has started accepting it as a form of payment, we are still far far away from a reality, where in, it can be used internationally as an alternate currency.

Above is a synopsis of history of Bitcoin and its benefits and challenges.

Our stance on investment in it is very very cautious. If someone wants to trade in it, please do it at your own due risk as its difficult for us to attribute any fundamentals to it and a price target.

Indian indices took a nosedive last march in 2020 amidst Covid concerns and nifty touched a low of 7500. Since then, it’s a vertical rally, what we call a V- shaped recovery and Nifty touched a high of ~ 15500 in 2021 overtaking its previous high of ~12400. Almost everyone thought that Covid 19 is over and we are out of the pandemic. Its just at this feeling and moment, the imminent second wave of Covid 19 has begin and is happening.

The sectors which were laggard from last 3-4 years:

-Metals

-Pharma

-PSU, etc.

turn out to be one of the best performers in last one year.

What changed after Mar’20 was the action by central banks to be dovish and coming out with monetary and fiscal support for their respective economies.

This leads to a reflationary scenario and leads to higher GDP and inflation.

In a inflationary scenario, the prices of products, commodities, services, etc go up and mostly its because of higher demand. This also means that margins of companies take a hit as raw materials prices go up and they cant increase the prices of finished products in same proportion, as it risks their volume and revenue.

Still, an overall economy does a lot better when there is inflation as compared to when there is deflation.

The classic case in hindsight for same is the period from 2002-08, when the whole inflation and reflation trade played out so well and it was a boom time for corporates, individuals, professionals, economies.

As we say that history doesn’t repeats itself but it do rhymes, this period from 2020 is believed to be the same case of higher inflation, higher monetary and fiscal support by major central banks across the world, to increase output, demand, sentiment, etc.

Hence, it’s expected that Indian and major developing markets will do well during this phase.

However, in India, from April’21, we have started seeing the second wave of Covid where in fresh daily cases have again spiked to more than 1 lac. The same situation of higher daily cases is also seen in US, Germany, Brazil, etc. This leads to restrictions and lockdowns, thus bringing down the pace of earnings recovery which was anticipated by street in 2021.  

Although a parallel argument of vaccines, available covid treatment, awareness of what needs to be done can be given, but it doesn’t takes away the fact that pace of recovery will be slow and not V shaped, as was in the consensus.

If we take a look at major markets across the world in April’21,

• Dow Jones –  Touched an all time high of 33,800
• Nasdaq – Is at an all time high of 13,845.
• S&P- Made an all time high of 4128.
• Dax- At an all time high of 15235.
• FTSE –  Is closer to 7000.

Its only Indian indices which are under performing and the reason is Covid’s second wave.

As per me, in this quarter, with some help from weakening rupee, sectors which will render support are:

• Metals – The cycle has just begin after a lull of many years and will last for atleast 2-3 more years.
• Information technology – Digitilisation is the the new disaster recovery plan and buzz strategy for every entity. This will ensure good deal wins, consistently high revenue and better margin for these companies.
• PSU
• Pharma
• Capital Goods
• Cement
• Real Estate
• Auto’s –  As the demand for personal mobility would be on rise amidst covid concerns.

The sector which are high beta and could take time to deliver are :

• Banking
• Consumer discretionary like Malls, Cinemas, Cruise, etc.
• Restaurants
• Small retailers
• Small and medium enterprises

as they are affected by lockdowns and sentiment.

But here also looking at the stance of RBI and favorable credit cycle, it’s a matter of time, before they join the list of performers.

Our stance is cautiously positive on Indices with major action happening on individual stocks like Adani group, MF companies, Life insurance plays, JSW steel, Sail, Hindustan copper, Hindalco and the likes.

Be cautious and look at the range of 14250-15000 on Nifty.

The decisive movement on any side will be seen in direction of the point where this range is breached.

RBI came out with its policy on 7’th April and kept the key interest rate unchanged.The highlight of the monetary meeting and policy is dovish stance by Indian central bank too, following its international peers.

The Repo rate stands at 4% and reverse repo at 3.35%.

[ Repo rate is the rate at which RBI lends to commercial banks and Reverse repo rate is the rate at which banks lend to RBI].

The key takeaways were:

. The dovish stance by central bank saying that they are in line with the target for higher growth with inflation target of 4%, plus minus 2% for coming few years.

. They are committed to ensure that there is ample liquidity in system so that corporates and any entity who is worthy of credit gets it. This will ensure that key macros like credit growth, core sector growth, lower unemployment, etc. remains intact.

. GDP estimates for FY’22 is kept at 10.5%. This is very conservative from my view and I think India is on its path to achieve a credit growth of 13-15% in this financial year. Even IMF this week up the global growth forecast to 6% and estimated India’s growth at 12.5%.

. The central bank announced that they will be buying government securities worth 1 lakh crore from secondary market in Apri-June’21 quarter.

This along with other factors like higher trade deficit of close to $15 billion in March’21 and Covid 19 concerns took USDINR to 74.5 from 73.5 in a day. It’s the biggest fall which was seen in Rupee in last 20 months.

. Above announcements also soothed the bond market and 10-year G-Secs cooled down from a high of 6.17% to 6.08%.

If we try to decode above announcements for our bond/debt portfolio, following will be the key takeaways:

. Interest rates on 10-year G-secs will be around 6% and RBI participation will mean that interest rate rise will be checked.

. Thus, a long-term( 3-10 years) bond portfolio will give a return of around 6-7% for one year, if excess risks are not taken.

. Hence, for fresh investments, looking at the credit cycle, investments can be made in ultra-short term or liquid funds which will fetch around 5.5-6.8 % return for one year.

. Floating rate bonds can also be considered, which looking at current juncture and the range of interest rates, can give an average of 8% returns.

In continuation to our last post on 30’th Mar’21, when we expressed our bullish stance on gold, it has rallied close to 3%. There was a huge consumption demand for Gold in March 2021, breaking all previous records. In Feb’21, India imported close to 56.5 tons of Gold. This is highest for India for any month since April’19. The big surprise came in March’21 when India’s gold imports surged by 471% on an annualized basis and was 160 tons.

Goldm Jun Fut in India is closer to 45700 on MCX and international prices are at $1738. If they stay above $1725, then the next level to be tested is $1765, which is a 3-4% upside from current levels.

In our opinion, we are extremely bullish on gold because of the following reasons:

1. Higher Government Debt across the world – Please find approximate current debt of few major countries in the world,

This high level of debt leads to fiscal uncertainty and inflation outbreak. This is positive for gold prices. Also, as the size of Fed balance sheet keeps increasing because of debt monetization, it leads to an extended time and era of negative real interest rates, which is again a bullish case for gold prices

2. Higher Stimulus – Since April’2020, governments across the world have come out with huge stimulus packages to support their economies against the ramifications of Covid 19 pandemic. The case in example is of US. It has given close to $8 trillion dollars in total relief packages since Mar’20. This has again increased debt and creates inflation, which leads to gold buying as a safe haven. Also whenever there is a major relief package announced by US Fed, it leads to a lower dollar value which is a spur for higher gold prices.

3. High Demand – With prices of Gold having corrected by 20% since Aug’20, the demand has spurt in two major consuming countries, India and China. Data and reports suggested that Switzerland, which is world’s biggest gold refining centre, exported huge quantities of gold to Thailand in 2021, which is a regional trading hub in Asia.

In Feb’21, India imported close to 56.5 tons of Gold. This is highest for India for any month since April’19. The big surprise came in March’21 when India’s gold imports surged by 471% on an annualized basis and was 160 tons.

This support by high demand leads to a base formation in gold prices and it gears up to move higher when other supporting criteria’s moves in its favor.

4. Negative Real Yields –  As highlighted above in points 1 and 2, negative real yields with high inflation and lower interest rates are here to stay and this will drive Gold to new highs. We expect this to continue for an elongated time for at least 3-5 years.

5. Geo Political Risk –  World has not been a safer place in last so many centuries and current times are no different.

The world saw World war 1, World war 2, Cold war, Vietnam war, Afghanistan war, Asian crisis, Gulf war in the last century. This century started with dot com bubble burst, 9/11 attacks, Global financial crisis, Covid 19 pandemic, etc. All these scenarios lead to investors and liquidity rush to Gold and the coming times will be no different, with many geo political risk coming to life.

Hence , with so many factors turning positive for gold in last couple of years, we would like to conclude that it presents a decent opportunity to invest for medium to long term at the current juncture.

It was just on Thursday, 1’st April’21, when everything was looking bullish and happy on indices and here comes the Covid jitters for Indian stock markets. Nifty was down by almost 400 points at one point. It finally closed at 14637, down by 229 points.

Last week, out of three days of trading, Nifty closed above 14850 on two occasions, which is a key resistance level and after the announcement of:

1. US Infrastructure package of $2 trillion last week.
2. Much better than expected employment data on Thursday where in the US economy added close to 9 lakh jobs against the expectation of 6 lakhs.

The expectations were of a higher opening.

I understand that these are US announcements and the usual thought is that how come we will be affected by it.

Well, looking at last 3 decades, barring companies which perform exceptionally well and their growth reflects in their share price, we are influenced by global factors in short term.

Please find the sector wise break up of Nifty:

It is evident from above that sectors like Pharma, IT, Metals which are much more closely related to US and global economy, drives and control a significant portion of nifty earnings and valuations.

Also, the role of FIIs and foreign money plays a major part in driving our stock markets and we can’t be insulated from mother market, which is US.

Over the weekend, India became a no 1 country in terms of daily Covid cases with 1 lakh count and thus it was followed by very strict lockdown guidelines in Maharashtra and Rajasthan. This spoofed the markets and the fear drove them lower.

With earnings that will start coming in from next week and optimistic US economy scenario, we are cautiously positioned on the markets.

As we have highlighted before, please watch out for earnings and from technical stand, keep an eye on sectors and stocks which are correcting less than the market, as they are the ones which will drive the next leg up.

Our bias is also towards PSU basket with latest announcements by Indian government in budget’21 and certain stocks can be looked at like PSU banks, Gail, BPCL, etc.

At an index level, keep an eye on the range of 14250-15000 for Nifty.