Fund Manager Speaks- June 2013

Market Overview- June 2013

Global Capital Market Scenario

US economy is gaining strength, Europe is stabilizing, Chinese economy is showing signs of recovery and India is trying to touch bottom.  But the sustainability of these are yet to be tested after withdrawals of QE measures.  As per minutes of the Federal Reserve meeting the members have agreed for QE tapering but they were divided on timing. But we firmly believe that on QE tapering, US economy will start losing strength and the negative cycle will activate and spread among different economies.

Indian Capital Market Scenario

Our economy, which was dancing on FII money, is into all sorts of problems whose solutions are not written in the books of economics which our governors have learned. Now controlling measures for US$ and curbing of Current Account Deficit are backfiring and the rupee is further depreciating. Government does not know what to do and what not.

The situation is getting peculiar because economy is slowing down but the interest rates & food inflation are rising which is adding fuel to fire.  However, the best thing that has gone in our favour and advantage is above normal monsoon in most part of the country which will help control inflation naturally.

The stock market is directly linked to the economic conditions in general and value of rupee against $ in particular. But remember, it is not the end of India story. Ours is the one of the biggest market on which foreigner’s eyes upon. It’s an opportunity for good companies. They will grab the business of the weak players. There are few companies which are managed well and have strengthened their balance sheet during good times.

June quarter – 2013

Looking at the June quarter results, the overall performance is not good. Margins of the majority of the companies are in pressure. There are not more then 250 or 300 companies which are worth investing out of the listed 5000 companies. The business scenario is tough. People’s purchasing power is reducing as the cost of living is going up without corresponding rise in income.

Industry wise, Agro chemical, Pharmacy, Software, Textile & FMCG has comparatively done well. Capital Goods, Power, Infra, Oil & Gas, Banking and Financial did not do well. But there is exception in every sector.  We are following company specific approach irrespective of the industry performance.

As far as our portfolio companies are concerned, results are as per expectation and in some cases beyond our expectation. Fortunately baring 1 or 2 our company’s maintained revenue and profitability despite severe pressure to maintain both, detailed result update on the companies is attached herewith for your reference.


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