Confidence Returns

Quick Edit:

Portfolio churn isn’t always an avoidable idea. While constant churning of portfolios is a strict no-no, selective churning has its advantages. In fact, it is a powerful tool to rejig your book when markets come out of a bad phase like the current one. Churning actually can help raise capital productivity. Money can be taken out of stocks that have delivered performance and placed on those that you expect will deliver going forward. Defensives can be replaced with growth stocks. Non-performers can be shunted out to make way for tomorrow’s winners. There is so much to do in every rally. Surely, running a static portfolio which you built a few years ago is your ticket to mediocre investing.

Invest speak:

The currency movement impacts stock market sentiment like never before. The fluctuations in currency make and unmake returns for global investors and FII’s. Global investment flows are determined as much by the currency’s stability and attractiveness. Investing is not simply about corporate performance and supporting economic data. The currency’s valuation is what helps investors make up their minds. Global investors brought in significant monies when the rupee last fell in December 2011. The thinking was that the currency would also chip in with some appreciation. That expectation has been way off the mark. The Rupee hit its weakest lows in June before looking up on the last trading day of June. There is no strong sign of the FII’s coming back as yet. The rupee’s weakness has shaken them up. But, the flip side is that in absolute dollar terms our markets are significantly cheaper than they were in March 2012. The rupee’s stability is critical for global investors to place their faith on Indian equities. The coming weeks will show how FII’s view the rupee and place bets on it. After all, betting on Indian equities is as much a bet on the rupee.

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