Mutual Funds

Through the eyes of the common investor

Lokeshwarri SK | Updated on December 28, 2014

Sushil ChuriwalaBusinessman

Deepak ModiReal estate developer

Fixed income delivered sound returns but bullion has weighed down portfolios

Stocks were on steroids in 2014, leaving equity investors with a large smile on their faces towards the end of the year.

Investors in fixed income have not had it so bad either with interest rates on bank deposits staying high for most part of the year and bonds rallying in the latter part of the year on the expectation of an interest rate cut by the Reserve Bank of India. Many savvy investors have benefited immensely from investing in tax-free bonds.

However, gold put up a rather lacklustre performance as dollar strengthened and the deflationary conditions in most countries reduced its attraction as an inflation-hedge.

Real estate was also insipid due to falling demand on high interest rates and excess supply.

Did investors make the right choices in 2014?

A BusinessLine poll of readers shows that 52 per cent of those surveyed invested in equity market; 35 per cent preferred the safe haven of fixed deposits and 10 per cent invested in gold.

And did those investing in equity make money? Another BusinessLine survey revealed that while 50 per cent of those investing in markets made money, 45 per cent did not make any money. Here is what individual investors have to say about 2014.

All is well

Sushil Churiwala, a businessman exporting pharmaceutical products, had a very satisfying 2014 as far as his investments go.

“I had started adding to my equity holdings right from end-2013 and so far, the journey has been good. In addition to equity, a sizeable amount was also invested in PSU tax-free bonds for a good steady return over the next 20 years. Funds from fixed deposits have been moved to tax-free bonds. No fresh allocations were made to bullion or real estate,” he explains.

Sushil has been actively investing over the last two decades. It is, however, the pharma business that provides him his “daily bread”.

“I started investing as part of our asset allocation and over a period of time, it has turned into a passion for me. Currently, I actively manage my personal, as well as family corpus.”

And what are the tools he uses for investing? “My investment strategy is based on a mix of fundamental and technical analysis and you could call me a positional long-term investor. A major part of my holdings mature over a period of several years, with a significantly small portion allocated to short-term active trading,” says Sushil.

He feels extremely satisfied with the investment climate in 2014. “With a new Government in place at the Centre, which seems committed to put India back on the growth trajectory, I expect the economy and, in turn, the stock markets, to experience stellar growth over the next few years.”

Any regrets about 2014? “I regret not having pared my investments in bullion. However, I believe this investment will fare better over the coming years.”

Does it matter?

Long-term investors have however been unfazed by the conditions in the equity and fixed income markets this year. Nageshwar Rao, Senior Deputy Mechanical Engineer (Retd), Indian Railways, has built a strong long-term equity portfolio consisting of about 20 stocks over the years.

“I am very selective. I do deep research and then purchase the stocks. Once I buy them, I do not see the need to churn them needlessly,” he explains.

“I purchased Grasim at ₹47 in 1982, Dr Reddy’s Labs in 1990, Larsen & Toubro at ₹100,” he rattles off a list of blue-chips. “I did do a little bit of buying last year, but nothing substantial.” And did his portfolio make money in 2014? “Of course!” he beams.

Rao, a great admirer of Lal Bahadur Shastri, thinks that Narendra Modi will make a difference to the Indian economy. “The most important aspect that needs to be tackled is corruption.” He thinks that once that is done, the ‘Make in India’ campaign can really take off.

No change on the ground

But the satisfaction with the new government is not all-pervasive. “It is true that there was a stock market boom due to the hype surrounding the Modi Government, but things were bad on the ground, for businesses. Nothing was moving at all. There was no take-off in capex spending of industries and no rotation of money in circulation,” says Deepak Modi, an investor in the stock market since 1991.

“Not all shares gained. Towards the end of December 2013, Reliance Industries was trading at ₹870. One year later, it is still available at the same price. There is, in fact, a loss of interest on the investment.”

Deepak Modi diversified from the family business of real estate development in the suburban areas of Mumbai in 1991.

He started trading by investing in initial public offerings to sell on listing day. Once the IPO pipeline dried up, he lost money in the secondary market.

“My funds are in bank fixed deposits. I take an overdraft when there is an interesting investment opportunity. I also invested in tax-free bonds of NTPC/NHAI in the first quarter of this year, which gave me 22-26 per cent returns in 10 months,” says Modi, outlining his investment experience in the past year. “This (tax-free bonds) was my best investment of 2014. As the RBI decreases rates, prices will rise further. I am still holding them. These bonds can be pledged with a bank to take overdraft too.”

Modi thinks that these bonds are better than PPF since interest on these bonds is tax-free and they are liquid as they are traded on stock exchanges. And what were his investment mistakes in 2014? “My worst investment was buying silver at ₹46,000-47,000 level...and some mid-cap stock, JP infra, thinking that infrastructure stocks will be boosted after Modi takes charge.”

Published on December 28, 2014

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