Yesterday in the late evening first quarter of 2016 GDP numbers were released and they were pretty impressive. India’s GDP grew by 7.6% in 2016 financial year and many analyst and economist are predicting it to be in range of 7.7% – 8% for the 2017 financial year. So officially, India is the fastest growing economy in the world today again beating China for the third consecutive time.

You are in the right market if you are investing in India. But what’s going on… is there nothing to invest in the market at right price today? Our portfolio is turning into cash and now we are sitting on almost 30% in cash. If you look at the history or ask any professional investors who invests in the market, study shows us that there is no correlation between GDP and market returns. Let me give you example of 2016 financial year only, where we are reporting strong GDP number of 7.6% for the whole year and our stock market returns for the year are -3.24% (NIFTY 50)!

Coming to our after crash portfolio, we started this portfolio exactly at the bottom of the market in the month of February and picked up the stocks that we thought are of good quality and trading at cheap price. I was not happy with few picks as there was not enough margin of safety available in the few and hence we replaced one stock with another where we were happy with its margin of safety.

There are lot of emotions run and you can feel when you invest in the stock market. There is always a question in your mind whether your picks or investments are in the right business at right price. I have found it easy to control these emotions if you start looking for the facts instead of assumptions.

Same time it is also important to know your risk profile and how much are you comfortable for impairment of your capital. End of the day it is your hard earned money and to recoup your capital from your existing portfolio, you need extraordinary returns and also extra time. We are not comfortable with impairment and our strategy helps us to automatically liquidate our positions and turn our portfolio into cash, no matter others in the market think it is stupid idea looking at the strong macro numbers.

If you are investing for five – ten year’s horizon and your investments are in good quality stocks and you bought them at the right price, your short term returns might be mediocre but in the long run you will beat the market. Having said that, our very first portfolio (click here) is also good investment though its performance is the weakest.

What we are doing from this month is monitoring all the portfolios with the change and see which one outperforms.

Portfolio one (click here): 12th Feb 2016 – 31st May 2016

  stocks Purchase Price Current Price Returns IV – 2018 Selling
Castrol 533 375 374.95 -0.01% 393  
JK Bank 2985 67 57.30 -14.48% 109  
Axis Bank 511 391.10 515.20 31.73% 391 550
Coal India 660 302.85 291.40 -3.78% 297*(2017)  
TCS 90 2226.60 2569.40 15.40% 2221  
Cash     20,749      
Total   999,997.10 1,078,475.05 7.85% 15.13%  

 

So far during this whole period Coal India and Castrol had given dividends and the ‘cash’ column above tells us how much dividends was collected.

Portfolio two (click here): 12th Feb 2016 – 31st May 2016

  Stocks Purchase Price Current Price Returns IV – 2018 Selling
Axis Bank 511 391.10 515.20 31.73% 391 550
JK Bank 2985 67 57.30 -14.48% 109  
Coal India 660 302.85 291.40 -3.78% 297*(2017)  
TCS 90 2226.60 2569.40 15.40% 2221  
Indiabulls Housing 333 693.55 718.45 3.59% 904  
Cash     278.55      
Total   1,031074.25 1,097,400.10 9.74% 22.24%  

 

On 2nd May we sold Castrol India shares for Rs 210,481.70 and added remaining cash in hand in that amount (Rs 20,749) and bought Indiabulls Housing Finance 333 shares for Rs 693.55 each. On the original portfolio of Rs 999,997.10 investments, for this portfolio our returns are 9.74%.

Portfolio three: 12th Feb 2016 – 31st May 2016

After the release of financial results of JK Bank, we came to the conclusion that it is worth to sell JK Bank from the portfolio as it is trading at premium price and we might get opportunity to buy back when it trades at cheaper price and we see stability in their NPA’s.

We sold JK Bank at Rs 58 per share and now after this change our portfolio looks like this:

  Stocks Purchase Price Current Price Returns IV – 2018 Selling Price
Axis Bank 511 391.10 515.20 31.73% 391 550
Coal India 660 302.85 291.40 -3.78% 297* (IV-2017)  
TCS 90 2226.60 2569.40 15.40% 2221  
Indiabulls Housing 333 693.55 718.45 3.59% 904  
Cash     173,408.55      
Total   831,079.25 1,099,489.60 9.95% 7.02%  

 

Overall NSE 500 had given returns of 16.64% and we are underperforming. But it is too early to say that we will underperform. Don’t forget we still have almost 15% of our portfolio in cash if you are following portfolio three. Portfolio two doesn’t have any cash but overall there is a big margin of safety available.

There is no right or wrong portfolio. If your investment horizon is 10 years then all the three portfolios will outperform the index.

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Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.