Skip to main content

Takeaways from 2010 for equity investors

2010 was a significant year for equity investors given the market movements.


   When you look back at the equity market's performance in December 2010, you are bound to smile at the performance of your portfolio. The average returns of most equity funds have been in the range of 20-30 percent, with some clocking even a return of 40 percent. In the case of individual stocks, the performance has been staggering with many stocks clocking over 50 percent returns. Many from the technology space have been impressive and despite the recent correction, a number of mid-cap stocks have turned multi-baggers.


   While every year in recent times has been dominated by foreign institutional investor (FII) flows, the year 2010 truly belonged to this aggressive bunch who took the inflows into a different level in the months of September and October. For the first time in many years, the domestic stock market was on the radars of a number of global funds and the noise in support of allocation for domestic stocks got louder during the year. Even as sceptics are crying hoarse that this money supply could end soon in the light of pricing, the time seems to have come for the world to have a bigger pie of India. This in itself should be comforting for the domestic investor but you need to get the timing right.


   A popular joke about investing in equity is that it is easier to spend time in the market than timing it. The repeated bounce-backs witnessed in the markets after sharp corrections have only reiterated this well known principle. However, the performances of a number of sectors did not hold water in 2010 as many didn't show signs of bounce-back even after sharp cuts.


   The classic examples were real estate and construction stocks that came under severe pressure due to negative news flow. The pain was more in the case of many small and mid-sized companies which shed as much as 30-40 percent in a matter of a few trading sessions. As a result, a number of investors are bound to feel left-out of the year's rally despite the market in general adding close to 35-50 percent to its previous level. The best way to tackle the issue is to put the past behind and take the right step forward. The task would be a lot easier if one makes it a point to learn some lesions from previous experience.


Why not list out the takeaways from the year gone by and avoid committing those errors in the New Year?


Here are some takeaways from 2010:

A stock that sheds liberally need not be good to invest in    

Often, an investor rushes to buy a stock which is on a downward trend, but one needs to know the reason behind the falling spree. As the recent scams have exposed, stocks which rose on manipulation and on poor fundamentals can never regain their past glory as their prices were never fair.

Past performance is no cushion for future show    

It probably holds good for sectors which hog the limelight at regular intervals. Ironically, every year has thrown up new winners at regular intervals and investors always seem to catch on at the wrong time. If it was auto in 2008-09, it was real estate in 2010 as both sectors came up with stellar performances prior to their poor shows.


   While betting on a sector, one needs to analyse the macro environment and price points first. If auto was an underperformer in 2009 it was because of the interest environment and so was the case with property in 2010. Hence, rather than using the contrarian approach, an investor would be betterplaced if he picks stocks which are not challenged by the macro environment.

Buying it right and getting out smart    

Equity markets in general can be better performers when compared with other assets. They can churn out winners when an investor gets his timing right both with buys and sells. In a volatile market, both need to be managed well as they ensure optimisation of returns.

 

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

EPFO can pay 8.5% interest in 2009-10

THE Employees’ Provident Fund Organisation can comfortably offer 8.5% interest rate to its 4.41 crore depositors during 2009-10 and still record a surplus contrary to Rs 139-crore losses suffered by it for giving the same benefit during the current fiscal. The issue of return to the depositors would be discussed at a meeting of the ‘finance and investment committee’ (FIC) on Thursday, agenda for which lists that maintaining an 8.5% interest could still give the fund a surplus of Rs 6.4 crore on the investment made by the fund. If EPFO maintains the interest rate of 8.5% on PF deposits, there will be a surplus of Rs 6.4 crore at an estimated income of Rs 12,994 crore in 2009-10. In case the interest is raised to 8.75%, the fund would suffer a loss of Rs 366.77 crore and the deficit would be still higher at Rs 739.94 crore if the rate of interest is fixed at 9%. FIC gives recommendations on financial matters to the apex EPFO body Central Board of Trustees (CBT), which takes the final ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now