Wednesday, December 26, 2012

Looking back at my crystal ball - How accurate were my 2012 predictions?

The time between Christmas and New Years is a good time to look back and plan forward. The weather here in Bangalore is beautiful – most of my friends have gone to Goa /Srilanka /Coorg /Chickmangalur etc and my students are all over the country (but available on FB)  -  and I am in a contemplative mood today.

So I went back to my blog dated 30th December 2011 to see what I had predicted then – and this is what I found :
  • I had said "Indian economy will slow down a bit –reforms are the way out and our government will need to push through a few reforms if we need to be anywhere near an 8% growth"  - Indian economy did slow down to 5-6% and Govt did falter (thanks to Pranab Mukherjee) and then Chidambaram has tried hard to talk the markets up in the last few months -so here I was right
  • I had said "Europe problems are expected to dampen the markets for the first few months –I am optimistic that it will not result in a Lehman like crash – the Europeans will find a way out (even though a few countries like Greece and Italy will be bruised badly)"  - That is exactly what has happened over the year
  • I had said "The US economy will limp through a 1-2% growth in 2o12 (just like in 2011) – but in the absence of other alternatives, the US markets will be deemed as the safest place to be and US Dollar will be strong and the US Bond rates will be low".  The US economy is closer to 2% than 1% - they have done better than my estimate – the US bond rates are still low – the Dollar is still very strong and the US /INR rate has gone beyond what I had originally thought.
  • I had said "Chinese economy too will slow down in 2012 – and the challenge there would be growing their domestic consumption as currently 65% of Chinese GDP is export based". - That is exactly what has happened over the year
So based on these macro predictions, I had recommended the following on Dec 2011 :
Debt  - I had said "for anyone who has a one or two year investment timeframe – invest now in Long term debt funds which have portfolio of 2011 debt –you can expect about 12% returns on these" – In the past 12 months Gilt funds has given 10% -11% returns – RBI did not reduce the interest rates as predicted and hence the actual ROI was lower than prediction by 1%. Here my prediction was close

Equity - I had said  "for those who are ready to invest for three years, you will get a 20% plus return per year by investing in specific stocks" – The sensex has gone up by 21.7% over the year due to FII activity and so I was spot on in this area – my own stock portfolio has given me a 43.6% return in the past one year. I am happy to share that I have beaten the sensex by 22% in 2012.

What stocks do I have – well I have currently  Agro tech foods, Bajaj Atuo, BHEL, Colgate, Crisil, Dabur, Gruh finance, Havells, HDFC Bank, L&T, Maruti Suzuki, Noida Toll, Page Industries, Piramal Enterprises, Sriram transport finance, Swaraj Engines, TCS and TTK Prestige.
Gold - I had said "I believe Gold will not give more than 15% returns in 2012 in Indian rupees – It will beat Inflation in India – so it not unsafe – but there are better investment options in 2012" – Gold has given 10.1% ROI in 2012 – after a few good years when we got 20% plus appreciation in gold, this year gold just beat the inflation of 9-10% by giving an ROI of 10.1%.

Real estate - I had said "Investment in urban (not rural) areas is recommended – if you can buy a house or flat or urban land anywhere in– you will make 15-20% asset return per annum". Well this is a generic statement and cities like Chennai, Jaipur, NCR, Pune and Lucknow have gone up by 20% and there are cities like Hyderabad, Bangalore, Kolkata, Mumbai, Surat, Bhopal where real estate has not appreciated much – and one city Kochi where real estate has gone down in 2012.

So overall I am happy with my predictions made in Dec 2011. I think I was correct on most counts.

What are my predictions for 2013  -just wait for a few days – I will share it shortly.