Wish you and your family a happy new year. Hope you had a great time welcoming it.
Exactly a year back, we predicted 2018 to be a ‘roller coaster ride’ and the year has turned out to be nothing short of it. Nifty seems to have just managed to stay afloat above the 2017 year-end levels, but the ride has definitely not been a smooth one as the markets had to navigate through difficult terrain in 2018, quite contrasting to the one way ride in 2017.
Banking Frauds, NBFC’s Liquidity crisis, State election results, concerns over the impending general election in 2019, Oil prices, Fed rate hikes, and US-China trade war played vital roles in the movement of the markets.
We believe that a tipping point has been reached in the global markets in 2018 and India too in August of 2018. And why not? The easy liquidity provided by Fed, ECB, and others have been losing their effect for some time and has reached stall-speed. The December volatility is the first sign that something has changed in US markets setting the tone for 2019. Some sort of a bear phase may have started in the US in 2018 and may become clear down the line, in its direction and scope.
2019 may be a tale of two halves. A turbulent first half and a recovery thereafter probably coinciding with post elections environment. By then the focus could shift back to corporate earnings recovery which seems on the mend and can accelerate depending on next Governments economic policies, stability in crude prices, the monetary policy of the central bank and the state of the global economy.
We believe that the unpredictability of 2018 will continue into 2019, as the first half of the year looks crowded with events such as Union budget, pre-election announcements that are likely to be populist, General elections, Brexit, key meetings on US-China trade deal and they will surely lend enough noise to the market and we simply have to ‘bear’ it out. 2019 is the year to build portfolios.
We are strongly considering to raise the cash allocations by another 15% or more as the market reaches 11000 to 11100 levels.
We are also turning bullish on medium duration funds and we strongly believe the time for Gold has come. Long duration funds could be the surprise pack of 2019 if investors retrench from equities and invest in G- Sec bonds like in 2008. If yields were to perk up to higher levels, we intend to increase the debt exposure to longer end of the yield curve.
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