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

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...

Health for Wealth - How to buy Health Insurance ?

Tax Saving Mutual Funds Online Current open Infra Bond Application form   HEALTH insurance is a relatively new phenomenon in India. Hence, it is not on the top of the mind for most people to make a conscious commitment towards health insurance. However, it is imperative for each one of us to plan for better health for our families and ourselves. There's no better way than to start with making health your top priority this year. So, your health insurance resolution charter would look something like: ■ Invest in health for wealth: Timely investment in health insurance can help build a security net and hedge sudden dilution of another financial asset class in the event of a health emergency, making it imperative to opt for a comprehensive health insurance plan. ■ Buy a comprehensive health cover that fu lfills your health needs for life: Buy a personal health insurance cover even if you have an employee cover because 'employer provided' health insuranc...
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