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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Eight in

Posted by Muthu on January 1, 2014

Wishing you and your family a happy and wonderful New Year.

We formally started our profession on January 1’st 2007 and are stepping into 8th year today.

So every New Year is our professional birthday:-)

Thanks to all our clients who are making this journey enjoyable and successful.

Requesting your continued support and promising our continued commitment.

Sensex as on December 31’st 2012- 19426

Sensex as on December 31’st 2013- 21170

Sensex has provided a return of 9% for the calendar year 2013. Sensex level is now marginally higher than the previous all time high (before the ones achieved in recent months) made in January 2008. Hardly any move over a period of last 6 years….

As systematic investors in equity through mutual funds, you have earned decent positive returns despite Sensex going nowhere in the last so many years. I’ve been reviewing your portfolios for the last few weeks and am satisfied with what I see. Given the market conditions, events of last few years and high volatility, results are looking satisfactory and you would do very well in the years to come. This is due to your discipline and patience.

In the year ending March’08 the earnings of Sensex was Rs.833. For this year (March’14), the expectation is that earnings would be around Rs.1400. Earnings has grown 70% over the period whereas market has been at a similar level. We’ve been going through a time correction for last 6 years. Earnings growth is expected to pick up in the next 18 months or so. We can look forward for both earnings growth and multiples expansion.

Price is the slave of earnings. This is a fundamental rule of stock market. Another fundamental is that reversion to the mean. I’ve written in the past why we may be heading into a bull market in the years to come. So I don’t want to repeat the same on a New Year day:-) All you need to do is to stay the course. Your discipline and patience would fetch you excellent rewards.

The rear view doesn’t look good whereas the windshield view is bright and sunny. What matters for us is future and not past. Bad past is invariably followed by good future. It’s all a function of cycle.

Early last month I mentioned that when 10 year G-Sec yields crosses 9%, going by the past data, ceteris paribus, it is a sign of interest rate cycle peaking out. We might have already peaked out (going by RBI not increasing the rate in December) or it may happen in this quarter. Interest rate softening would lead to both bond and equity market doing well. MIPs are good bet for next 3 year term. Though we suggest MIPs for a period of not less than 5 years, the present condition makes us feel that we can expect good returns over next 3 years.

So whether you are an equity investor or a conservative debt investor, this year and beyond is likely to be better. Though no one can predict how a particular year would be, by virtue of experience and learning, it is possible (at least some times) to understand the direction of the cycle we are in. Though I cannot gauge the speed or mile stones, to me the direction for next few years look very bright.

For those of you who believe in New Year resolutions, staying the course is the best resolution. “Stay the course” is some thing you can even paste on your mirror and see it every day.

I wish and pray that this New Year provides you with many joyful moments and increased prosperity.

All the best.

One Response to “Eight in”

  1. Kishor said



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