Tag: market volatility

Vetri Subramaniam’s key for investors to rest easy amid market fluctuations

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Vetri Subramaniam, CIO of UTI AMC, says investors should not be scared of the current volatility in Indian equity market as it is very much par for the course.

He advised investors to be guided by the history of volatility in markets, noting that drawdowns of 10% once a year, 10-15% once every three years, and larger than that once every 5-10 years are very common.

“A combination of having asset allocation and rebalancing the portfolio at some frequency is the key to being able to sleep well at night despite volatility,” Subramaniam said.

Also Read | Kotak’s Nilesh Shah says this is the key reason behind the market fall

He advises that while investors must have an asset allocation framework, they should not decide the allocation based on the performance of a particular asset class over just one year.

“It is the set of asset classes which over a 10-20-year period will help you achieve your financial goals,” he said.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fabindia scraps Rs 4,000-crore IPO due to uncertain market conditions

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Lifestyle retail brand Fabindia on Monday, February 27, said it has withdrawn its Rs 4,000-crore initial public offering (IPO) due to the current market conditions.

This comes after the popular jeweller Joyalukkas India Ltd withdrew a Rs 2,300-crore IPO. The date for the IPO was expected to be announced early in 2023.

“Fabindia withdrew its DRHP for a public listing, the validity of which was to end in April 2023. The decision to withdraw was taken as the current market conditions were not seen to be conducive for the listing of our size,” an official spokesperson said.

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In January this year, the company filed the Draft Red Herring Prospectus (DRHP) with market watchdog Securities and Exchange Board of India (SEBI) for the offer that would have included a fresh issue of shares worth up to Rs 500 crore. This was in addition to an offer for sale (OFS) of up to 2,50,50,543 shares.

Also, the company said the withdrawal of the DRHP will allow Fabindia to explore other options for liquidity. The company may reconsider filing an IPO in the future, depending on its need for growth capital and prevailing market conditions.

“We strongly believe that the Indian consumer story is going to be the engine that drives the world economy. We have seen record sales this year, with a 40 percent YoY growth in our business. This is our highest growth ever,” the retailer said.

“Several leading global ESG-focused funds have expressed keenness to invest in us. They appreciate our strong ESG track record of more than six decades and believe in our business model, which is based on ESG values,” the company said.

Also Read: Reddit aims for IPO in second half of 2023

In order to “reward and express gratitude to certain artisans and farmers engaged with the company or its subsidiaries”, Fabindia’s two promoters — Bimla Nanda Bissell and Madhukar Khera — intend to transfer 400,000 shares and 375,080 shares, respectively, to them, subsequent to the filing of the DRHP.

“Our promoters, namely, Bimla Nanda Bissell and Madhukar Khera have opened their respective demat accounts and have transferred 400,000 equity shares and 375,080 equity shares, respectively, that are proposed to be transferred by way of gift to the artisans and farmers,” the DRHP said.

Proceeds from the fresh issue of shares will be utilised for voluntary redemption of the company’s NCDs (non-convertible debentures), pre-payment or scheduled re-payment of a portion of certain outstanding borrowings and general corporate purposes.

In the DRHP, the company underscored its ESG (environmental, social and governance) initiatives, saying it believes in “enabling and uplifting the people we work with, taking care of the environment, and being ethical in our conduct with have a long and lasting positive impact.”

Also Read: Airtel chief Sunil Mittal seeking stake in Indian fintech Paytm

“We have aimed to create social impact and foster economic well-being for our artisans, communities, employees and investors, using environmentally responsible and ethical means,” it added.

ICICI Securities Ltd, Credit Suisse Securities (India) Pvt Ltd, JP Morgan India Pvt Ltd, Nomura Financial Advisory and Securities (India) Pvt Ltd, SBI Capital Markets Ltd and Equirus Capital Pvt Ltd are the lead managers of the issue.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bottomline: When in doubt, root for value

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Stock markets globally have been prone to big, wild swings of late, leading to significant uncertainty about the future trend. There are also several moving parts, making any forecasts of the future difficult. The Ukraine war and the western allies’ response, the lockdowns in China, tensions in West Asia, surging inflation and the US Federal Reserves’ next move are all factors that can influence the direction of markets.

Given where we stand, while trading is tricky with high volatility making this a high-risk, high-return market, investing can be made more rationally, provided you focus on long-term value and are patient enough to hang in there to reap the likely rewards.

LOOKING FOR VALUE

There are several tools that analysts and investors use to seek out value. Some look at earnings per share, others at enterprise value expressed in proportion to operating profits, some consider book value, and for life insurers, you have the embedded value. To each his own.

For non-financials, my preferred metric is the cash flow yield. Think of it like this: When you put money in a fixed deposit, what return or yield do you get? Let’s say today you manage 6 percent. Now, that 6 percent is a fixed rate over the term of the deposit—your preferred investment period. Think similarly of a share in a company.

The cash flow generated is expressed in relation to the market price of the stock to compute its yield. And this yield at the current market price should keep rising if the company’s profit is going to see secular long-term growth. So in effect, you are investing in an asset that will deliver higher yields going forward on your purchase price. Hence, you might be willing to accept a slightly lower yield than 6 percent in year one for a share than a fixed deposit, provided of course that the yield you generate over your term of investment also covers the higher capital risk associated with equities.

With the above understanding, we sifted through the top 100 companies listed on the stock exchange of Mumbai (represented in the BSE-100 index) to see how they fared on an operating and free cash flow yield basis. We looked for a minimum 5 percent and 4 percent yield, respectively, for the above parameters. And this is what we found.

The oil refining companies come out on top, but given that these numbers are for the last concluded fiscal (FY21), it needs to be noted that they had a very good last fiscal and this year hasn’t been that good, even in the concluded nine months. There is also the cyclical factor in steel companies, but in their case, the current fiscal has been better than the previous one. Even at FY21 levels, Tata Steel, though, doesn’t look terribly expensive.

Then there are the cement players, who are facing input cost pressures now and may not be able to deliver strong profitability. Then there’s IT, where frontliners HCL Technologies and TechMahindra still don’t look too expensive given the growth tailwinds. The point, in a nutshell, is that using historical data is an indication only and should not be used as the basis for investing in a company, but it definitely can be a good starting point.

Similarly, very high valuations, on a historical basis, need to be studied closely. For instance, the commercial vehicle cycle could be about to turn, aviation might just be getting out of a difficult period and consumer durables players, especially those with high summer sales, might finally be looking at a good sales year this time. But here again, the valuations are a pointer to evaluate whether a lot of the expectations are already in the stock price.

THE INVESTMENT STRATEGY

Once you identify the companies offering value and having good growth potential, the next thing you need to work on is your portfolio allocation based on risk-reward. This done, the next step is to create a basket of these stocks in the fixed proportion and invest in them periodically over the next 6-7 months like in a systematic investment plan (SIP).

If you stick to a disciplined approach, you should be able to generate healthy returns from this market. So, if you are wondering what to do in these volatile times, I’d say start looking for value. There’s much work to be done, and the market is allowing you time to do it.

Happy investing!

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

View: Diversifying a portfolio key to investing in a volatile market

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Indian stock market is off to a rocky start this year, owing to mixed global cues amid concerns about the Omicron variant of COVID, faster-than-expected rate hikes, and now the Russia-Ukraine crisis. Not so long ago, India was one of the best performing emerging markets with the Nifty50 giving a return of a little over 30 percent between January 1 and December 15. The Nifty 500 rose 36.8 percent during the period.

After the second wave of the pandemic, the global economic outlook remained healthy. The market indices rose over 20 percent in the first 10 months of 2021 as the number of young investors multiplied. The thriving tribe of retail investors in the stock market helped equities outperform traditional investments such as gold and real estate.

ALSO READ: What should be your options trading exit strategy?

India’s two-year bull run may have yielded exceptional returns but also brought forward potential risks not seen in 18 months. In fact, right before the government was to announce the Union Budget for FY23, weak global cues wiped out Rs 10.36 lakh crore investor wealth from the Indian stock market in four days. Not too long ago, India saw some of the worst IPO market debacles after CarTrade, Paytm, Windlass Biotech and other stocks wiped out 52 percent of investors’ wealth.

Where should you invest in a highly volatile market?

A disciplined and diversified approach can help Indian investors convert risk into opportunity.

Balancing risk portfolio with lease financing investment options

Digital advancements have democratised many new-age investment opportunities such as lease financing. An asset-backed investment such as lease financing or inventory financing presents a unique opportunity for investors to co-invest money in leasing assets — such as electric vehicles, furniture, EV batteries and Cloud kitchen equipment – and get fixed monthly returns.

Lease financing can help investors to strike the right risk-reward ratio in an investment portfolio. It will further enable companies looking to leverage lease financing and access new forms of capital. These companies can then grow without raising equity or debt but using leasing as growth capital.

ALSO READ: Russia-Ukraine War – India abstains on UNSC resolution

The biggest risk for the investor, if any, is that the company leasing the asset from the investor defaults on its payment. Even then, investors can always recover the asset to monetise it or resale it. This kind of investment thus significantly reduces the probability of capital loss.

The market correction we’re seeing right now is not surprising, and somewhat overdue. The current scenario offers an excellent opportunity to look beyond traditional investments and diversify the investment portfolio. Investors can explore market- and non-market linked investment opportunities to balance their portfolios and reduce the impact of financial risk.

ALSO READ: Ukraine crisis throws central banks’ rate-hike plans off track

–Nikhil Aggarwal is Founder and CEO of Grip. The views expressed in this article are his own.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Russia-Ukraine crisis: Fear index India VIX hits 20-month high amid heightened geopolitical tensions

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

As heightened geopolitical tensions sent global markets tumbling on Thursday, Dalal Street’s own gauge of volatility hit the highest level recorded in more than 20 months. The NSE’s India VIX index – also known in market parlance as the fear gauge – surged 32 percent to finish the day at 30.3, having almost touched 34 during the session.

That made it the India VIX’s biggest jump since June 17, 2020 – both intraday and at the close.

Indian equity benchmarks Sensex and Nifty50 suffered their worst single-day loss since May 2020 amid a global sell-off after Russian President Vladimir Putin announced a military operation in Ukraine.

Catch latest stock market updates with CNBCTV18.com’s blog

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow