Hey Subash, Reel - 4 Our take on Indo-US trade deal impasse!

Hey Subash, Reel - 3 Musk and Jio!

Hey, Subash! - Reel 2 To invest in global markets or not?

On this Navaratri Day, we start our foray into Reels. This series will be titled "Hey, Subash!". Our answers will be short, crisp and to the point. Hey, Subash! - Reel 1 To borrow or not?

Market Volatility: Look Beyond the Noise Rising Fed rates, higher crude prices and a depreciating rupee are all acting in tandem and exerting pressure on Indian equity markets. The benchmark Sensex has corrected nearly 14% from its September 2024 peak and around 7% over the last one month. But we have seen this movements many times before. Global factors have triggered sharp corrections in Indian markets repeatedly. And, in hindsight, many such episodes have turned out to be excellent long-term buying opportunities. More importantly, the Indian economy continues to do reasonably well, growing at 7.8%, with several independent, real-time, high-frequency indicators showing strong momentum in the last quarter: - Bank credit growth: 20% - Auto registrations: 21% - Advance tax collections: 15% - Power demand: 8.8% - Non-oil merchandise exports: 12.44% - E-way bills: 12.4% - Finished steel consumption: 8.3% - Petrol consumption: 5.81% - Diesel consumption: 2.82% These are independent, real-time indicators of economic activity and, collectively, paint a picture that is quite different from the pessimism dominating parts of social media. Therefore, rather than getting carried away by short-term noise, use the current subdued market conditions to add to your Indian equity exposure, provided your financial situation and investment horizon permit it. You could consider investing in good-quality Indian companies available at reasonable valuations or in equity mutual funds with strong long-term track records. Markets may remain volatile in the short term due to global factors. But long-term wealth is created by investing during periods of uncertainty, staying invested through volatility, and allowing time and compounding to do their work.

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There are 11 equity mutual funds in India whose NAV is above ₹1,000. All of them were launched in the 1990s or early 2000s. They have had three decades to compound wealth. Here is the list - AI generated by prompts. Many of these funds are not “hot” funds today. Some are hardly talked about anymore. Yet, over three decades, they have generated roughly 100× to 450× wealth through sustained compounding at high CAGRs. And the journey was anything but smooth. These funds went through periods of underperformance and negative returns multiple times. Yet, they created substantial wealth for investors who stayed invested. That is the real lesson in wealth creation. Patience to stay the course for decades matters far more than constantly analysing every period of underperformance and jumping from one “hot” theme to another. Chasing what is working today can make you miss what compounds tomorrow. In compounding, ‘n’ — the number of years — is often more important than anything else. This study is purely to illustrate the power of long-term compounding and is not a recommendation to buy any of these schemes.

The city of Madras has a vibrant corporate culture. It is an economic powerhouse in modern India. Close to 300 companies from Madras are listed as well. You have a variety of companies in Madras listed on the bourses ranging from banks and hospitals to defence, dairy, auto, and retail companies. An index, such as the MADEX 50 or even the MADEX 25, can be constructed. This index could outperform any other index in wealth creation and shareholder value delivery. Watch this space carefully over the next few months—a product to capitalise on these wealth creators is on the way!

Excerpts from the newsletter prepared by our team. You would be aware that Indian markets have remained largely range-bound and static over the past 26 months. During this period, a small section of FIIs—perhaps around 5%—reduced their Indian equity exposure and redeployed capital into AI-driven themes in markets such as Korea, Taiwan and the US. That trade worked exceptionally well for a while. However, we believe the theme has now become increasingly crowded and stretched. Some of these investors appear to be recognising this and are beginning to exit. Korean markets have seen a sharp correction (30% from the peak), while several AI-linked stocks in the US have corrected 20–30% over the past two months. Gold has also corrected significantly say 22% from its peak, while silver has fallen even more sharply - about 32%. What is particularly encouraging is that Indian markets have held their ground even as these global positions have capitulated. Contrary to what many India bears had predicted, Indian equities have not capitulated. More importantly, the domestic economic indicators are beginning to turn increasingly supportive: - Consumption is picking up. Auto sales are growing at over 20%, while FMCG volumes are growing at high single digits—an encouraging sign of improving underlying demand. - GST and income-tax rate cuts announced last year appear to be gradually feeding through to consumption. - The monsoon has improved after its initial sluggishness, which should provide further support to rural demand. - GST collections remain robust, growing around 10% this month despite the rate cuts, compared with the same period last year. - Advance tax collections, particularly from corporates, have increased by around 22%, indicating continued strength in corporate earnings and profitability. - The RBI's FCNR deposit scheme, aimed at supporting the rupee, has also received a strong response, with substantial foreign currency inflows (USD 36 Billion) into India. Taken together, these developments create an increasingly favourable backdrop for Indian equities: consumption is recovering, the monsoon is proving better than feared, the rupee could stabilise, and the AI trade that attracted capital away from India appears to be losing momentum. We believe the conditions are therefore falling into place for FIIs to gradually return to India. A stabilising rupee, improving domestic consumption and a relative moderation in global AI valuations could provide the catalysts for Indian equities to break out of their prolonged 26-month hibernation. History suggests that when markets remain subdued for an extended period, the subsequent years can often deliver attractive returns as valuations and fundamentals realign. We therefore recommend that you consider aggressively topping up your Indian mutual fund and equity portfolios over the coming days and weeks, with a multi-year investment horizon.

Here is how markets had reacted to various types of monsoons over the last 4 decades. There were a few bad monsoons but markets moved up. There were also fantastic monsoons but markets went down. There are many moving variables that determine market movements in the shorter run apart from monsoon. If you are a long term investor, do not worry about monsoon. Please keep on investing in a systematic and disciplined manner. You will be rewarded. Don't break your heads too much listening to social media voices predicting gloom and doom because of the deficient monsoon this FY. Stay calm and stick to basics - be systematic, disciplined and patient.

Observe the single stock concentration risk in many emerging economies. India is a fairly diversified and broad-based market compared to these economies. It is only a matter of time before FIIs, who sold a part of their Indian holdings to build positions in these economies, return to India after booking profits there. Concentration risk works both ways, as evident from the divergence in Denmark and Taiwan returns. Please be patient and hold your Indian holdings. Dawn is not far off.

Many high earners neglect their personal finances and run into trouble once they lose their job. If you are a high earner, pay close attention to your personal finances. Build a robust yet simple portfolio which will give you peace of mind and save for a rainy day.

Here is the comparison between S&P 500 and Nifty returns over the last 26 years. Dollar adjusted returns are also shown.

Sensex Earnings Analysis

Sensex had delivered reasonably good returns in the past after consolidating for 18 months.  Don't lose hope. Dawn is not far off. Please stay invested!

Plan your child's future better.

Note the divergence between Indian market and US market.

Cash levels in Balanced Advantage Funds.