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Liquef-action : Alpha Edge – April 2016

I wish you all a better financial year of FY 17. I sincerely hope that the subdued expectations all around has room for positive surprises due to the many small things which are falling in place.

Our key calls for the markets in FY 17 are:

1. A range bound equity market at best.
2. Long short /Absolute return seeking strategies will continue to outperform relative return strategies
3. Muted returns from duration play on Fixed Income
4. Higher Gold prices in rupee terms
5. Stagnant residential real estate prices
6. An increase in commercial rental yields
7. Stronger dollar and weaker EM currencies
8. Stagnant to lower commodity prices

We hope that we are way off the mark on all the above counts and that can only mean that

1. Global demand has revived even despite its current low probability
2. Domestic earnings revival is led by rural demand and the 7th pay commission effect and outweigh the possible slack on the exports side of the economy
3. Inflation collapses and / or Government meets with its fiscal deficits leading to higher bond prices.
4. Personal savings revive enough to bring forth household leverage, that’s required to revive the demand for real estate.

Our Model Equity portfolio, Growth Opportunities Portfolio has managed to safeguard the principal since inception while outperforming the benchmark by ~9.33% since 1st January 2015. In December 2015 quarter stocks in the Growth Opportunities Portfolio on an average delivered ~20% earnings growth vis-à-vis -12% of BSE500 index. Going forward, under stable market conditions we expect the portfolio to continue its outperformance given the higher earnings growth differential.

Request you to pass it on whosever can benefit from it.


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