Tuesday, July 16, 2013

Mid-year review of my 2013 predictions and where to invest now:


This note is based on my 12 month predictions made in Dec 2012 – and to share with you my sense of where to invest now.
 
So here are the key predictions from my Dec 2012 blog

·  “The US economy and the US dollar will emerge stronger over the year” – the US economy has emerged stronger that what I had predicted. I had under estimated the recovery of the US economy 6 months back. The US economy is not out of the woods yet – but it is surely doing better than expected.

·  “The European central bank will continue with its policy of monetary easing” – here my predictions have been closer and I do believe that the EU economy will continue to splutter through the year.

· “China and India will do better in 2013 than in 2012” – this has surely not happened.

· “Inflation will fall and RBI will reduce interest rates in H1 -2013” – this has not happened  as envisaged as the inflation has persisted due to the weakening Rupee.

· “USD/INR ratio will go from current Rs 55 range to Rs 57 range” – here I had under estimated the devaluation and we are worse off right now.

· “Gold will beat inflation but will not be a great investment option” – here again I was wrong as the gold prices have fallen globally in USD terms – and has lost about 13% in INR terms over the past six months.

· “Industries that I expect to outperform are FMCG, consumer durables and financial services” – here I was partly correct -  FMCG has given close to 15% in the past 6 months  and consumer durables have hung on and the financial services is down appx 10% in the past 6 months

· “Real estate would do better in 2013 than in 2012” – this seems to be true based on Residex data released till March 2013.

So as is visible, my predictions were off mark – the key reason for this was that 
  • I underestimated the US recovery (this lead to a sharp fall in Global gold prices ); and
  • I overestimated Indian GDP growth (leading to a sharper devaluation of INR)  

So where am I investing currently?

I have parked my funds in liquid funds temporarily – till I find some good investing options.  At this stage, with RBI’s actions not clear, it is best to park funds in liquid MF’s.

I had sold most of my Gold ETF's last year - and I have moved out of gold completely in Q1. I am not recommending gold yet. As long as the US economy does well – gold will not give a good ROI.

I have signed up for a residential property in Bangalore which I believe will double in value over the next 5 years

 In the past 12 months, my investments in Gruh finance and Repco have done well - and my investments in Jubilant foods and Nesco have not done well – but I am OK with these as I believe that over a period of 3 years all these would do well.

 I am looking at opportunities in the equity markets - FMCG companies (Asian paints, Marico etc) is where my eyes are right now.  I believe that with a time period of 3-5 years – there will be good opportunities here.