2019 – what is coming is better

I know it is never a good idea to write about the future – there is a 50% chance that I will be wrong.

But as an investor, I live by prediciting the future. If my prediction is right, I make money. And if my prediction is wrong, I lose money. As an investor, I am used to predicting all the time and hence I am biting the bullet and sharing my thoughts on 2019 here.

But before you read any further – I want you to know that my 2018 predictions went wrong. In 2018, Sensex has given around 7.7% (as of 21^st Dec) – and I am about (-)1% .

However this year, 2019, I am optimisitic of doing well. Here are my reasons for being optimisitic

• Last year, the imponderable was crude oil prices. India being a large importer of crude oil, our Rupee devalued vis a vis the USD and that resulted in FII exits.
• Fortunately for us, the Indian retail investors kept faith. In 2018, the FII’s sold $4.5 Billion worth of shares where as Indian MF’s bought $17 Billion worth of shares (as per Bloomberg quint) – this kept the markets steady.
• In 2019, the major events impacting our stock markets that I can visualise are –  the Lok Sabha elections, crude oil prices and the US Fed stance on quantitative tightening (QT).
• Lok Sabha elections – I believe that no party in India can come on the way of the rising aspirations of the Indian populace. The politicians in power will need to deliver economic growth, if they want to stay in power. Each party may have a slightly different approach to growth – but broadly it will involve a focus on creating more jobs, improving the productivity, keeping the cost of capital low and improving the legal framework in which our businesses operate. So the Lok Sabha election could give some anxious moments – but these would be buying opportunities in a market that is, in the long term, upward bound.
• Crude oil price – this has the potential to create a market upheaval like what happened in 2018. However, with US emerging as a large player in the market due to shale oil, I believe that crude oil prices will always be under pressure if it goes above $75. At rates below $75, India is safe and hence even though we may have a few months when the crude oil prices goes up and up, it will not be a long term phenomenon.
• The UD FED is expected to have two rate increases next year – there is an expectation that the quantitative tightening will end in 2019 second half. This would be a positive for the Indian markets.
• I also believe that Indian consumption story is a long-term trend that will keep our big businesses growing – whatever be the political dispensation.
• Hence companies which are managed well, have good profitability ratios and have a durable moat are the ones that I would continue to invest in – if the price is right.

Here are the companies where I have between 3% and 5% exposure right now: Gruh Finance, MRF, Page Industries, Kotak Mahindra Bank, Bajaj Finance, HDFC Bank, Asian Paints, Pidilite, Godrej Consumer, Maruti Suzuki, Tata Elxsi, Marico, Motherson Sumi, Kajaria, Havells and Piramal Enterprises.

I do not see any known reason to reduce my exposure to stocks as of now and I am optimistic of getting a ROI of appx 15% from my portfolio in 2019.