JainMatrix MidCap Portfolio outperforms by 50%

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Date: 12th June 2014

JainMatrix Investments launched its Mid Cap portfolio in Feb 2013. This is the fourth update report on this portfolio, along with a brief investment note.

(Since our portfolio can only be shared with Subscribers, here is the rest of this report). 

JainMatrix Investments presents the June 2014 update of its Mid Cap Model Portfolio.

  • Post elections, the investment climate looks self-assured, with smart positive moves and an air of confidence. Investors are approving the initial noises from the new government, and awaiting with anticipation the budget due second week of July.
  • Early in 2014, the Indian indices were at all-time highs, but could be split logically into two groups.
    • One set of sectors that appreciated manifold from 2008 levels. This includes IT, FMCG, auto & auto ancillaries, banks, NBFCs and pharmaceuticals.
    • The other set of sectors were at a mere fraction or below the 2008 levels, like realty, capital goods, infra, engineering, power, telecom, metals and Oil & Gas.
  • In the past few months, we are seeing a rebalancing of investment funds from the overvalued first group to the undervalued second. This is because the outlook for the economy is now quite positive. All sectors should do well, but from a valuation point of view, there was an imbalance, and so this was inevitable. Plus the new govt’s first task has to be to resurrect the damaged sectors of the second group, which are also crucial enabling sectors for GDP growth.
  • In a similar fashion, while the large Caps were positive in this period, the undervalued Mid and Small-Caps saw a big appreciation, also called a mean reversion.
  • The INR/USD strengthened to 58.6 because of high FII/NRI funds inflow before coming to today’s 59.3
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  • Theme: The investment theme for now is – exports, infrastructure and rural/semi urban consumption. The investor should continue his wealth building process with Mid and Small-Caps.
  • Performance: In a very positive environment, the portfolio performed extremely well. On average the 7 Buy recommendation shares were up by absolute 95% and annualized 132%. But including the one Hold, the portfolio gained by absolute 82% and annualized 115% (over a period of 16 months).
  • The CNX & BSE MidCap were up by 31% & 32% absolute in the period.
  • The JainMatrix Investments Mid/Small cap portfolio outperformed these benchmarks by 50%.
  • There are now 7 shares in this portfolio that are BUY recommendations and two Hold.
  • Investors need to continue to invest in these shares in a SIP mode.

The rest of this report is shared with only current subscribers. 

Some previous updates for this Portfolio

Not a subscriber? Sign up for a JainMatrix Investments subscription to help navigate your investment journey. Visit  Subscribe

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Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent Financial Expert/Advisor. Either JM or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

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A Vision for the Indian Economy

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You may say I’m a dreamer, but I’m not the only one – John Lennon

This New Year my message to readers was … Lets dream BIG in 2014.

Six months later, I certainly feel we have made some progress and a lot of terrific things are happening around us. The political and government scenario. The stock market. The optimism in the air. All are very positive.

The last few weeks, I have seen a lot of articles in newspapers and magazines which gave a wish list to government for some sector – such as banking, infrastructure, environmental clearances, education & HRD, etc.

Lets step back and dream a bigger dream.

Look at this graph prepared by financial services firm, J P Morgan.

200-years-of-economic-history_thumb

(This graphic is from this page LINK).

In the year 1700, India was #1 in the world in GDP, ahead of China and far ahead of UK and France and other leading countries of that time. USA was barely there.

In the 300 years since, India lost its freedom, and the Industrial Revolution happened, that bypassed India.  Our country steadily weakened on this GDP list till 1980, after which it appears to be at least growing its share. Even our freedom apparently did not result in relative wealth improvement till 1980.

However in the last 34 years, I think India has absorbed all the modern world Revolutions and is a vibrant country.

Its time to think of the next 30 years as our time to return to this primary #1 position globally.

This is a grand vision. But this grand vision is nothing if not broken down into a series of smaller targets. The first target I can think of is China.

India has a lot in common with China. We are neighbors. We are population wise and country size wise close to each other. Before 1700 we can see that China & India dominated world wealth and civilizations.

In the period from 1980 to now, China has provided economic freedom to its people, encouraging business, entrepreneurship, and attracting industry worldwide to invest in factories. It has invested in its own infrastructure, and build its economy. It’s done a wonderful job. Literacy is up. Population growth is falling. Lifestyles are improving.

It is on its way to the #2 position.

India needs to get to the #1 position again. To start with by matching China on the industrial and infrastructure side. In the next 10 years.

We need to learn from China. And we need to be as good as them in 10 years. But how?

Lets look at these figures of GDP growth for India & China

CNI gdp growth

China has averaged 8-10% while India has averaged 4-5% in the last 28 years.

So the next target has to be a 7% plus GDP growth rate for the next 10 years. And we have to Think BIG.

This does not appear difficult since we have done over 7% in 6 of the last 28 years.

Somehow I feel the big government constraint – across Indian PSUs, education, tourism, Oil & Gas, etc. sectors, may not be an issue from here. Partly because of the new government. Partly because the times are changing.

I pray some of our business and government leaders are thinking on these lines. They need to dream on these lines for their businesses, or for their Ministry. Many of our industries and firms need to be globally competitive.

And for each of us? We need to dream this in our daily work.

  • For the salesman, make two additional calls today.
  • For the factory worker, produce two more manufactured parts from your lathe or machine tool today.
  • For the CEO, hire more, fire less and give your staff a dream for their company.
  • For the retired CA, get active again, and teach young students finance.
  • For me, I need to create an additional investment report this month.

We have just 10 years.

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The Post Elections Investment Note

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(Read on to receive this entire report Free) 

Post Elections Investment Note

  • The General Elections of 2014 are done and dusted. A resounding majority victory for BJP brings Narendra Modi (NM) into power as PM, to be sworn in the next few days.
  • From a stock market point of view, this is a best case scenario playing out. The majority aspect should ensure stability of the party in power, as opposed to coalition politics. The BJP coming into power should mean that business, industry and enterprise get a boost.
  • If anything, we can look at some of the progress in Gujarat over the last decade, the period NM was Chief Minister, and hope that he can deliver some of these on a larger India canvas.
  • So far we have only seen a perception change in the eye of the investor. The PM and ministers have to be sworn in, some months will go in settling in and defining the priorities. It will take months to see ground realities changing in terms of ministry actions, laws, legislation, and real improvements in economy, government efficiency, business climate improvements and tangible gains.
  • But certainly one recent change has been the flow of FII/ NRI funds into India, strengthening the INR which is at Rs 58.5/USD, from 61 about a month ago, a 4.1% strengthening.
  • However even a perception change can have a large impact on some sectors. Typically the markets try to see the 1 year ahead and try to price this in based on events. In addition, we can expect a few policy and taxation related changes, which can rapidly improve prospects of that sector.
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  • Today as the new government moves into power, we believe that the improvement in infrastructure is going to be a high priority in the new administration. And inevitably, the government will depend on these infra firms to take the load for execution.
  • The sectors we are positive on are infrastructure, capital goods, engineering and jewellery
  • The specific stocks that we are recommending will only be shared with current Subscribers.

But here’s our offer. Sign up as a paid subscriber in the next one week to receive this entire report for free, that will help you take part in this amazing equity market rally.

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One Month of Silence

  • JainMatrix Investments stated goal is to be ‘Your guide to investing in Indian equity’ and ‘make equity investments easier’.
  • To this end we have been publishing a short form of most Research Reports on our website. However we need to reward our paid Subscribers, and so we have now introduced the concept of ‘One Month of Silence’.
  • From hereon, any report created by us will be published on our website, for public viewing, only one month after release to our Subscribers.
  • Our quick research shows that the last 11 reports that we created and published, the One Month gains from the recommended share is 13.2%. See details in table below.
  • We encourage you to sign up with JainMatrix Investments for an annual subscription.
SNo Stock Date of Report Market Price (Rs) Price One Month Later (Rs) Increase (%)
1 ABC Mar-14 825 953 15.52
2 DEF May-14 146 158 8.22
3 GHI May-14 125 193 54.40
4 JKL Apr-14 415 444 6.99
5 MNO Apr-14 17.47 20 14.48
6 PQR Dec-13 90 98 8.89
7 STU Feb-14 151 177 17.22
8 VWX Dec-13 1215 1546 27.24
9 YZA Nov-13 306 309 0.98
10 BCD Jan-14 1569 1554 -0.96
11 EFG Jan-14 340 314 -7.65
        Average 13.2

* – in less than 1 month.

  • In short, its worth your while to sign up with JainMatrix Investments.

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Happy Investing.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either JM or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

JainMatrix Investments Large-Cap Portfolio Investment Note

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Date: 15th May 2014

Investment Note

JainMatrix Investments presents the May 2014 update of its Large Cap Model Portfolio.

  • The year 2014 has seen the Indian indices move into new high territory. The stock investment climate remains positive with events such as strengthening Indian rupee, fall in inflation, a high decibel general election and some stability at RBI and the banking sector.
  • FIIs were early on the trends with high investment inflows. This was also aided by the other BRICS and emerging economies not looking as good as India.
  • The next major trigger is the General election results. Elections closed on May 12th and the exit polls indicated a win for the BJP. The markets rapidly priced it in with a 6% appreciation in 3 days. We now expect Retail to enter the market in larger numbers, and the IPOs season to start again.
  • Risks at this stage are a weak domestic monsoon, inflation rise and a fractured election mandate.
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  •  We remain positive on the markets, and feel that it’s time for investors to Review their Investment portfolio, prune the lower quality/ underperformers and rebalance their holdings. JainMatrix Investments has launched its Portfolio Review Service to this end.
  • Theme: The Large Cap Model Portfolio investment theme remains – Sector leaders and undervalued but fundamentally sound challengers, from sectors we are positive on. The investor should continue his stable long term wealth building process with these Large-Caps.
  • Performance: In a volatile environment, the portfolio performed well. We also expect the performance to improve in the next few quarters.
  • The Large Cap Portfolio has 7 Buys and a Hold.
  • Investors need to continue to invest in these shares in a SIP mode. 

The rest of this report is shared with only our subscribers. 

Some previous Updates for this Portfolio

See other useful reports

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Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either JM or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

JainMatrix Investments Mid-Cap Portfolio Investment Note

Date: 20th Mar 2014

JainMatrix Investments launched its Mid Cap portfolio in Feb 2013. This is the March 2014 update of this Model portfolio along with a review of the performance and a recap of the individual stocks.

Here’s the brief investment note:

  • The year 2014 opened on a positive note. The major Indices are at all-time highs, and we are seeing heavy investments by FIIs and a pre-election rally, since the election schedule was announced on 5th March.
  • The election results are unpredictable, and more so the effect of these on the economy. But our feel is that the economy is past its worst, and is on a recovery path.
  • The INR/USD appears to be gaining strength, another sign of improvement. Inflation appears to be down, perhaps from improving supply rather than falling demand. With good rainfall this year, we are seeing better agricultural production. The beaten down sectors such as capital goods, infrastructure, oil & gas and mid-caps, are seeing a revival.
  • The uncertainties on the horizon include an inconclusive election result, USA monetary tightening and the Ukraine – Russia tensions.
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  • Theme: The investment theme for now is – exports, private sector banks, NBFCs and selective infrastructure. The investor should continue his wealth building process with Mid-Caps.
  • Performance: In a volatile environment, the portfolio performed very well. On average the 6 Buy recommendation shares were up by 40.8%. But including the one Hold and one Sell (recommendations in Dec 2013) the portfolio gained by an absolute 16.5%.
  • This compares well with the Benchmark Indices CNX Midcap (-6.5%) and BSE Midcap (-7.4%) which fell in this period.
  • There is one addition to this portfolio, in this report, so now there are 7 shares in this portfolio that are BUY recommendations and one Hold.
  • Investors need to continue to invest in these shares in a SIP mode.

The rest of this report is shared with only current subscribers. 

Some previous Updates for this Portfolio

Not a subscriber? Sign up for a JainMatrix Investments subscription to help navigate your investment journey. Visit  Subscribe

Do you find this site useful?

  • Visit the SUBSCRIBE page to find how you can get more. Click LINK
  • Register Now to get our Free reports and much more, on the top right of this page, or by filling this Signup Form CLICK.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either JM or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

Are we in a new Bull Run?

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Recent media articles have spoken about Indian Indices hitting new all time highs, and the start of a new Bull Run. My thoughts Pro and Con on this subject. On any matter its better to hear both sides of the story:

Pros:

  • The bull run from ’04-07 has been followed by a flat period from ’08-13 (of Indices). A significant period of consolidation. But the economy has not been flat in this period, and grown by 5-8% per annum. This indicates a likely rise hereon.
  • We may be economically at a trough right now, the bottom in terms of economy and growth. The inflation cycle is turning already. CAD is under good control. RBI and the banking sector are in good hands.
  • A lot of projects have been cleared by the govt recently and investment is going to spike up.
  • Indices valuations are at the average for India over the last 15 years, giving a fair chance of a rise, see Nov’13 NOTE
  • Impending Elections, the BJP and AAP have raised expectations of people. Based on results, sentiments should improve.
  • We have seen that FII buying has accelerated in recent times, and foreign ownership of Indian firms is at an all time high. The converse is that Retail has not been present in this market. If he starts investing (ie domestic investment mood improves) then markets will rise.
  • We are at new Index highs, this may be a turning point for Retail to come back to the market.
  • The PGCIL FPO has shown the kind of money waiting on the sidelines, for an opportunity to enter the stock markets. See FPO analysis.

Before you hit the buy button, do take a look at the converse arguments.

Cons:

  • FII money can be hot money. It only takes an US economic event for them to pull the plug on Indian investments. Events such as stopping of the QE program, rise in US inflation, or a rise in US interest rates. We are not even talking of a Black Swan, unpredictable, disaster event here.
  • The Indian retail has invested more in Mid and Small caps, and these have not really recovered so far. In other words he is still staring at notional losses, and is he likely to come back to such a market?
  • Corruption, poor governance, Indian manufacturing going downhill, electricity and power woes, infra woes …. do you think all this is going to change this year? Not very likely. Then how can industry / businesses and stock markets in India advance from these levels?
  • The 2004-07 bull run in India was a global growth period where India was also a part. For USA it was a home price, low-interest and easy loans based boom that ended in disaster. We are nowhere near a big global uptick right now.
  • The harsh reality is that Indian GDP growth has fallen to 5% and things are quite bad right now.

My conclusion:

Based on all this, I remain positive for investors and investments. If one tempers expectations away from overnight riches, to a simple – double of FD returns, from this and the next few years, you should not be disappointed. A Bull Run is just a small possibility, and should not be the reason for your investments.

JainMatrix Knowledge Base:

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Hope in the Roads Sector

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Introduction:

One of the signs of mis-governance in India has been the Roads sector, and the way the Policies have been created and executed.

Issues: 

The problems of the sector are obvious. Short of funds, the govt developed the PPP (Public Private Partnership) model to not just involve the private sector, but fund the entire project construction, pay govt the premium, and then recover this from citizen road users in the form of Tolls. In the initial euphoria of a new sector (2005-07) and some stock market excitement, there were a plethora of private sector bidders and premiums for winning bids were high.

Road

Road (Photo credit: Moyan_Brenn)

Soon the excitement wore off. Who is going to fund large road projects for 20 years, and at what rates? Are the road investments viable? Soon the project execution started flagging. In the last 2 years, there were no bidders for many of the new NHAI projects. Saddled with high debt and project delays, companies are trying to sell assets. On most parameters, the government did not achieve the road development targets.

It was unfair for consumers too. Where earlier there was an option to take the old highway (untolled) or the new tolled one, we are increasingly seeing that travellers have no choice but to pay high tolls.

Roads are an essential building block of a country. It is a pre-requirement for economic growth. Tolling should be reasonable and the tolled road an option. And the government should own these assets.

News Today:

A policy change reported today provides some hope to this sector. See article from Mint, 14 Highway Projects get nod for EPC bids

Faced with failure, the bureaucrats are reverting back to the EPC model. In this, the road continues to be owned by the government, and the construction of the road is bid out to firms who execute the projects as per approved plans. This is a business friendly model. The firm can focus on project execution and quality; and they will exit from projects in the 1-2 year span it takes to construct. No large long term debts and revenue risks. In future, tolls may not be so common or compulsory as today.

Its time for common sense to return to this sector. For too long the difficult high risk PPP model has thrown a vibrant sector into disarray. And after several years of struggle, the Indian Roads sector can hope for a revival. 

Investors:

If the above policies are rolled out successfully, Infra conglomerates like L&T, Reliance Infra, GMR and Lanco may see incremental improvements. Bigger gainers will be roads focused firms like IL&FS Transportation, IRB Infrastructure, Ashoka Buildcon and Sadbhav Engineering.

Investors need to analyze each firm in depth in consultation with their investment adviser before buying securities.

JainMatrix Knowledge Base:

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Disclaimer:

These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

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