right horizons pms - india 2016 review & outlook 2017
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Indian Asset markets – 2016 review and Outlook 2017December 2016
Right Horizons PMS
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Agenda / Table of contents
2016 review of the Indian asset markets1
Turbulance has continued!2
2016 – top trends that could linger3
2017 – looking at the crystal ball4
Look around– there is opportunity in financial markets5
2017 – there is only one way: UP!
Right Horizons PMS – Keeping the head down!6
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2016 was going along fine, but bonds just Trumped! Equities just threw in the towel
- Calendar 2016 turned out to be unusually volatile, with two
sharp correction and one long rally.
- External environment continued to influence the markets
and funds flow too has been quite uneven.
- One positive surprise: Domestic funds flow into equites
remains stronger despite sharp corrections. This has lent
support and prevented a sustained sell-off.
Bonds / Debt securities continued to perform,
two years in a row. 2016 has had the final flare
up. LT debt has just returned upwards of 20%
and no asset class come even close.
Gold did a relief rally in 2016 after a bad 2015,
however most the gains were erased during
the end of 2016.
Real estate has already topped out couple of
years ago. 2016 could be the beginning of the
end.
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2016 review of the Indian asset markets1
For private circulation only
-11.00%
-6.00%
-1.00%
4.00%
9.00%
14.00%
19.00%
Equities -Nifty
Equities -CNX Mid
Cap
Bond -ShortTerm
Bond -LongTerm
(GILT)
Gold -ETF
RealEstate -
Tier I
Asset return in 2016#
in India
# YTD ending December 15th 2015
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The new normal is TURBULANCE!2
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History tells us: Pause / negative
years are usually followed by
strong return years.
Over the last 24 months, every
asset class has provided more
volatility and less returns; across
the globe. India is no exception.
In 2016, though; India has been
the most volatile markets thanks
to external and internal induced
shocks.
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
19
95
19
96/9
7
19
98
19
99
20
00
20
01
20
02
20
03
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
24 year Data: Strong years have followed down
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2016 trends that might linger on in 20173
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Trend # 1Crude price movements in past 12 months have caused windfalls
for consumer and bankruptcy for producers. Producers have tried
and now impose hefty cuts in production from 2017; depending
upon what the outcome; 2017 could impact success stories of 2016
in India – Autos, goods transportation, tourism and consumers.Trend # 2
Trend # 3
FED funds rate story is over 3 years old. Finally the up cycle has
started. Depending upon where the FED funds rate ends in 2017,
we could have impact on liquidity, currencies and risk asset prices.
India appears to be in slightly better position compared with EU and
rest of Asia.
Demonetization: the impact of which is being debated by every
economist worth his name for analytical outcomes as different as
chalk & cheese. Our assessment tells us that whatever the outcome
the impact of which would certainly apply to most of 2017 and
positive/negative outcomes would have an impact on equities and
other asset classes.
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Trend # 4 The last monetary policy was a pass! The anticipation of
another total 50bps points cut in the next 6 months the
market expectation. Given lower inflation expectation and
fallout from the demonetization exercise, it is likely that
there could be a cut before April 2017
Trend # 5
Trend # 6
India’s Foreign Policy has seen a material shift and decisiveness
over the past 24 months. Bi-lateral relations between key partners –
US, Japan, Russia, China and EU would shape materially in 2017
and impact such as FII/FDI inflows, defence co-operation and
trade/commerce is likely to set the stage the next 3 years.
India’s Fiscal policy including the key legislations that were not
brought in the past 24 months would be key action event in 2017.
the GST rollout, tax rationalization on personal (direct) taxes and
widening / deepening of the tax base would be key issues that
might impact the asset class returns
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2017 crystal ball gazing...4
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Global Outlook 2017
Equites: Select EU and Developed market stocks appear attractive
Real Estate: markets appear resilient across the globe
Commodities: in for a bumpy rebalancing
Fixed income: Selective opportunities in EM debt
India outlook 2017
We anticipate around 15%-17% equity mainline index performance predominantly
towards the SH 2017
We believe that GOLD would continue to tread with long period average returns of
around 8%-10%
Fixed Income yield falling is not good news for short terms investors. Returns could
range in the of 6.5% - 7.5% for 1 year; lower than those reported in 2016
Real Estate could be some price correction after a period of stagnancy in 2016.
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Recent consensus estimates
suggest Rs.1,430 Sensex EPS for
FY17. EPS targets appear to be
robust for FY18 & FY19
Next 12 months SENSEX targets
factor in moderate growth
around16% or 30,000 by 2017
end.
Equities are better positioned in 20174
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Inflexion point: closer than we might think!5
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Higher Interest rates
Higher Savings
Low Money Supply
Lower investments
Fall in consumption
Lower Investments
Fall in Inflation
Fall in Interest rates
Investments pick up
Higher Money Supply
Increase in Consumption
Higher Corporate profits
Rising Inflation
Loss of purchasing power
Asset
Market
Cycle
BUY Fixed
Income
BUY
Equities
BUY
Real Estate
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Right Horizons PMS portfolios – wealth creation vehicles6
For private circulation only
Portfolio Strategy
Nifty Plus Flexicap AllianceSuper Value
RH India Underserved
ObjectiveLong term Wealth
creation
Long term weath
creation
Lower Capital
Volatility
Provide for
high capital
appreciation
Provide for high
capital appreciation
Predominantly
invests in
Equities
• Nifty Index stocks
• BSE 200 stocks
Equities
•BSE 500 stocks
Equities, MF’s
Fixed Income
securities
• Direct stocks,
taxable and tax-
freee bonds, MF
and ETF’s
Equities
• Mid-cap
Equities
Equities
• Mid-cap Equities
Recommended
Holding Horizon> 18 months > 30 months 24 months >36 months >36 months
Portfolio StrategyBUY & Hold; Weight
Management
BUY & Hold;
Thesis Driven
BUY & Hold;
Trading Driven
Active
Strategy;
Bottom Up
Active Strategy;
Bottom Up
Risk Level Medium Medium Low High High
Minimum Strategy
Size1 INR 1million INR 1million INR 1million INR 1million INR 1million
1 Each PMS account shall be a minimum of INR25,00,000 set up value
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Right Horizons PMS portfolios – performance6
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2014 2015 2016
RH NiftyPlus Portfolio 31.60% -1.20% 8.10%
CNX Nifty Index 29.89% -4.06% 1.98%
RH Flexicap Portfolio 43.3% 0.65% 3.30%
CNX 500 Index 35.81% -0.72% 2.84%
RH Super Value (Mid & Small Cap) Portfolio 58.6% 14.2% -5.80%
RH Underserved - - 9.42%
CNX Midcap Index 53.10% 6.46% 6.28%
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Disclaimer
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