Though the maiden budget of Modi 2.0 laid out a long-term vision that the government aims to achieve, some provisions in it has been disappointing from a near term stock market perspective
Eighteen months since the sell-off in broader markets began and yet there has been no respite to small and mid-cap investors like us, wrote Porinju Veliyath, who runs portfolio management services Equity Intelligence in a letter to the investors.
Veliyath wrote a letter to investors explaining the poor performance of the portfolio.
Star equity investor manages AUM of over Rs 1,000 crore. He has been facing huge losses in the last few months. Veliyath’s portfolio has witnessed sharp losses in four of the last six months.
His portfolio has delivered a negative return of over 8 percent.
“All the recovery we made from February 2019 lows has been sold into and we are back to the February levels. The longevity of the ongoing bear market in mid and small caps - of this magnitude has been astounding to even the most seasoned equity investors,” Veliyath stated in the letter.
“I had felt elections could be the turning point for investors to come back to equities. Unfortunately, the positives of the continuity in government have been lost with the market-unfriendly provisions in Budget, at least for the near term,” he added.
He also said that while the monetary impact of these changes is minimal, the message it gives to the larger investment community is rather regressive.
“Intentions of the present government, without doubt, have been good and their efficiency in utilizing tax revenues has been excellent, but these factors aside, it seems that policymakers are not acknowledging the cardinal principles of a free-market economy,” the letter stated.
He also pointed out that past few years saw several challenges emerging in the economy.
Despite RBI repo rate cuts, the transmission of the reduction has not happened and the cost of capital to corporates have remained tight, thereby delaying any major industrial recovery.
“IL&FS scam, instead of getting resolved, have spread to other major NBFCs and banks. IBC process has been entangled in judicial processes and is frustratingly slow,” Veliyath said.
He concluded the letter by stating, “Hoping for better times and waiting patiently for the sentiments to change.”
