Will the lockdown in India end on 17 May or will we as a country go deeper into “economic hara-kiri” ? (Anand Mahindra)
The first lockdown was perhaps right. In the fog of war, you have to act decisively till you figure out a course of action. However, post mid-April, we seem to acting more out of fear, than with “systems thinking”.
Read MoreIn trying to optimize short term performance and also long term performance simultaneously is a very hard game to play. We can choose to be smart in the short term or in the long term – but can’t choose both. It’s a rare genius that can trade short term and invest long simultaneously. Most people who claim they can do this lie about their returns.
Read MoreFranklin Templeton Mutual Fund, on Thursday announced it would wind up six credit funds with a large exposure to higher-yielding, lower-rated credit securities.
Why did they do so? The Corporate Bond markets in India are fairly illiquid. FT schemes have got impacted because they invested in papers with low credit rating (they actively took on credit risk).
Read MoreAs a follow up on the 2 scenarios we shared earlier on 18 March, the scenario likely to play out is perhaps something between Scenario 1 and Scenario 2 that we envisaged. No one knows, “for sure”, the road map to normalization. We are likely to see 2 steps forward and 1 step back approach based on “trial and error”.
Read MoreEvents of the last month provide significant lessons. We have been introspecting on what we could have done differently – and there will be a time to share that with you.
However, I want to share a few other observations with you today which are topical before the event passes and memories fade.
1. The only way to protect yourself from “tail risks” is through Asset Allocation.
Read MoreA salute to our doctors, nurses, police forces and sanitation workers who are at the forefront of this battle. A salute also to the Indian state – we are always criticized by the West, but we show our best when our backs our against the wall. And we have done a far better job than the developed world so far.
I am writing to share a few thoughts
1. Be careful how you interpret the news you are reading
Read MoreWe have witnessed a black swan event. We need to wait out the storm. We will not panic and sell unless we believe the fundamental 3-5 year prospects of a company have been significantly challenged. Selling now – just because there is short term uncertainty – will crystallize a temporary loss and make it permanent.
Read MoreIt has been a really tough month for all of us. Portfolios will be down about ~25-30% in a month. This is a speed of decline which I have never encountered as a Fund Manager.
Solidarity believes that following a disciplined process will result in good outcomes over the medium term, even if we get the occasional bad break that we are experiencing at present.
Read MoreMarkets have been on a continuous sell-off mode since then. A draw down of 20% from peak in a year is not an uncommon occurrence. However, we have all been surprised because we have not experienced it for a while. And, unlike other corrections, we have all been surprised at the speed of the decline as it has come in less than 3 weeks.
Read MoreWe had shared an earlier blog, ‘Why Mid-Sized Banks are strategically disadvantaged’ as they are forced to take on more risk in a business where success needs to be rooted in conservatism.
The collapse of Yes Bank will further widen the competitive gap between the leaders (SBI/HDFC/ICICI/Axis/Kotak) and the others.
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