Aurum Capital’s View on the Market
These are interesting times in the Indian equity markets. If one were to leave a handful of stocks, the
broader market has been in deep correction mode for the last 17 months. The few stocks which have
done well in these times are mostly large-caps, and at high-end of their historic valuations. Value is
available in most small and midcaps.
The market has been going through a tough period and value sometimes becomes a deep value. Our
course of action is and should be, to stay put. Ride out this turbulence, have patience. If the story is
good, it will play out sooner or later. We must learn to bear out market cycles, short term hiccups in
performance. Very few companies can have a linear performance. Companies have to contend with
many challenges including economic slowdown, short term disruptions, demand de-growth, etc. As
long as the management is doing the right things and has a plan to come out of tough situations, we
as investors should have faith in them.
On the macro and micro front, we definitely have challenges for the short term.
• A slowdown in Indian Economy: There is a slowdown in the economy. The government has
curbed spending in the last few months to keep fiscal deficit in check. Model code of conduct
is also in force due to elections. We believe Q2’ 20 onwards we should see improvement. The
GST collections have moved higher, signalling better compliance. Also, if we get a stable
government, things can again look up.
• US-China trade war: This is playing out and remains a challenge. It will affect in the short term
if there are no rollbacks soon. On the flip side, if we have a long term view, this can be a real
positive for India, as it can become more competitive and some of the manufacturing can shift
to India, as it does compete in quite a few areas. We do have challenges from countries like
Vietnam, Cambodia, Indonesia, Philippines, Bangladesh, etc. But, we should be able to
increase our manufacturing in the next few years.
• Global economic slowdown: This is another real threat looming. It can affect India too. Luckily,
we are largely a domestic-driven economy. So, we can minimize the impact. But in the short
term, it can affect performance as well as sentiments. We still are expected to be the fastest
growing large economy despite all this. Question is, will we go to 6% or move to 8%.
• NBFC crisis: This has been simmering since Sep 2018. And we believe this will play out for some
more time. The cost of credit for most of NBFCs is rising and this will affect them. Also, lending
to the RE sector, LAP, ALM mismatch has been and will be affecting. Our view has been
negative for quite some time, and we continue to stay cautious. If at an opportune time, some
opportunity arises, we will definitely look into it.
• Auto and consumption slowdown: Auto has had many reasons for the slowdown. High base,
Increase in overall cost due to change in Insurance norms, tightened lending by NBFCs, apart
from a general slowdown are the primary reasons. Early results of consumption bellwethers
also show a slowdown in consumption. We believe growth can come back in the 2nd half. We
believe one should look into these sectors in this downturn.
• Political uncertainty: We believe that a stable government will be good for the country and
the markets. We will know soon on this front. If there is a weak coalition government, we
might have a prolonged correction.
Our benchmark index has given a negative 27% return since we started our subscription services. Our
cautious stand has helped us to minimize the loss and significantly outperform. We understand that
we all want our portfolios to be positive, but we have to learn to live with bear and corrective markets.
We cannot be fully isolated. The key is when markets turn positive, and they definitely will, will our
portfolio outperform? We have confidence in doing so. We have been very cautious and have built
our portfolio to 47% invested only. These uncertain times, help us in building a portfolio for the long
We can assure you, that our endeavour is to help our customers build good long-term portfolios. And
we will not deviate from that. If there is a mistake in stock selection, we will always be up to correct
it, by selling the stock. Even at loss. But a price correction in a stock does not mean a mistake. We
must focus on long-term business action, and not on short term price movements. These are 2
different things and must learn to live with the fact, that they are always not linear.
We will be happy to answer questions on our stock recommendations or any questions related to
market/sector via Investor Forum (preferable) or email.
We will end this message with a quote.
“It’s almost impossible to buy stocks at the bottom. Stocks mostly will be down after one makes an
investment. How successful one will be, is determined by how patient one can be and how their
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