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Hbj capital ventures llp   monthly newsletter [october 2013]
Hbj capital ventures llp   monthly newsletter [october 2013]
Hbj capital ventures llp   monthly newsletter [october 2013]
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Hbj capital ventures llp monthly newsletter [october 2013]


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  • 1. OCT'13 HBJ CAPITAL VENTURES LLP Monthly Newsletter: HBJ Capital Ventures LLP To The Partners & Co-founders, HBJ Capital Ventures LLP, #912, 1F Main, Girinagar, BSK 3rd Stage, Bangalore – 85, Karnataka, India Dear Partners, The month of October has been good for Indian Markets with the SENSEX consolidating on its gains of the last month and steadily moving towards the all-time high. While the Markets have gained significantly, there has been absolutely no joy on the street. This new life time high is looking like just another level and the ecstasy which usually accompanies such new Highs is clearly missing this time around. This is not surprising, considering the fact that most Market participants have lost money over the last five years and their Portfolio's are nowhere near all time highs. In fact the Small Cap Index levels and Mid-Cap index are well below 30-40% from their highs. There has been massive wealth erosion for Retail investors in many stocks with the structural de-rating of the Indian markets from early 2008. In fact the Mid-Cap and Small-Cap indices are approximately down 20% from their highs of January 2013. Markets moving ahead by leaving the Retail investors behind is nothing new and history shows us that, retail Investors join the party only during its fag end. Markets moving higher without the joy is actually a good indicator of better times to come. We have been able to survive the rough weather of the past few years pretty well and our Portfolio has outperformed their respective indices significantly. Considering our portfolio construction, we believe that our Portfolios can continue to outperform its Indices even more during favorable market conditions. We have had the RBI policy a few weeks back and Governor - Rajan has clearly spelt out his direction for the Monetary policy. It clearly shows that Mr. Rajan has Inflation in his mind and he would like to increase the Interest rates to bring stability in prices. While his critics continue to point the fact that high Food Prices which has increased Inflation can't be controlled with money supply, the Governor is clear in his stand that - "If food prices can't be brought down by higher Interest rates, nor can growth be improved by decreasing Interest rates by a few basis points". Government policies are more important to achieve both these objectives and high #912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85 Page 1
  • 2. OCT'13 HBJ CAPITAL VENTURES Interest rates in fact pressurizes the government to act on its roles. He also believes LLP that, higher Interest rates can solve some of the other issues like lower Financial savings and higher CAD by incentivizing savers and decreasing consumption to an extent. Governor's other policy initiatives regarding the Financial sector reform is very encouraging and sets a good platform for future growth. We are positively surprised by the flexible reaction of the Indian economy to the rupee depreciation with a steeply reducing CAD and over 17% growth in exports. This clearly shows the dynamism of Indian economy and the strong pillars on which it stands. We also believe that the government has done several reforms over the last years which will improve the productivity in the economy going forward. There are also several steps in the offing like GST, UIDAI, Optic Fibre etc where considerable amount of work has been done and would be executed with a new political formation at the centre. We believe all these bodes well for the country and it definitely has the potential to surprise its critics positively by growing well above estimates. The big uncertainty which everyone believes will change the course of the markets is the looming general elections. There are several market participants who believe that there would be a BJP led government by Modi at the centre in a year and this can push the Market several notches higher. Analysts have also started predicting a strong showing by BJP in the upcoming assembly elections would help SENSEX cross its all-time highs decisively. We believe that we can't predict these outcomes and hence don't bet based on it. As written over the previous newsletters, we believe that Elections are extremely hyped and even in an adverse outcome scenario, Intelligent Investors can make money by buying low and selling high. We would be ready to buy high quality stocks in case of substantial correction in their prices post the result. But we really hope that the Indian growth story will get a shot in the arm with a progressive government at the centre. We continue to believe in the Indian story and the power of a democracy to achieve the level of governance which it deserves. But these have nothing to do with our Portfolios or Investment strategies. Our Portfolios continues to be positioned between the High Quality stocks which are extremely costly and the dirt cheap non-quality businesses. We believe that there is been a sweet niche in companies which are going through temporary issues and available at disproportionately cheap valuations and this is where Alpha is present. We have such good set of businesses and this will help us to outperform the Markets. The current Dividend Yield on our Portfolios also continues to be extremely attractive for Investors. #912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85 Page 2
  • 3. OCT'13 HBJ CAPITAL VENTURES We believe and hope that the next Samvat is good for the stock markets and LLP they are able to bring joy to Investors. Wish you and your family a Happy Diwali ! Regards, [Principal Fund Manager, HBJ Capital Venture LLP] Date: August 30th 2013, Place: Bangalore, India #912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85 Page 3