Author: shyam

Macro Update: Mayhem 2015

US TREASURIES VS. GILT SPREAD

The spread between 10yr US Treasuries and Indian Gilts remained within a tight range this month.

ust-ind-10yr-spread.2011-01-18

Long-term US bond yields leapt higher in May…

ust-yield-curve.2011-01-18

… and the spread was kept in check by Indian gilts moving in tandem.

INSTITUTIONAL INVESTMENTS

FPIs took an asston of money out of Indian markets because of regressive and retrograde tax demands. Huge outflows both in equity and bond markets.

fii-investments.2014-01-01.2015-05-30

Domestic institutional investors tried to keep up but were helpless under the onslaught.

dii-investments.2014-01-01.2015-05-30

Lets zoom into what happened on a daily basis to get sense for how badly we shot ourselves on our foot:

fii-investments-monthly.2015-05-01.2015-05-30

dii-investments-monthly.2015-05-01.2015-05-30

DIIs pushed the buy button near the end of the month – after the FIIs had finished scaring the bejeebers out of the market.

Oil

Oil futures in Nymex seem to have trailed off for now.

wti-brent.2011-01-18

Gold

Gold seems to be headed lower. As rate hikes get factored in, expect precious metals to drop more in USD terms.

gold.usd

And it seems to have trailed off in INR terms after an early spurt in May.

Copper

Copper is supposed to be a bellwether for global manufacturing and that seems to be back at Dec’14 levels.

copper.usd

USDINR

The rupee continued to depreciate against the US dollar in May.

USDINR

The Dollar Index (DXY) did a nice about turn.

Outlook

Here are some of the headlines this month from FT:

And while all this was being said and read, the Nifty went up 3% and our Momentum strategy was up 6% in May. (Monthly Recap) I am sure there is a lesson in market timing in there somewhere.

In terms of positioning your portfolio, the dollar is probably going to head higher since US rates are going to go up and Indian rates are going to go down. Oil usually goes in the opposite direction of the dollar. Gold in USD terms is probably going to head lower as rates normalize.

Monthly Recap: Don’t Follow Your Passion

world.2015-04-30.2015-05-29

Equities

Major
DAX(DEU) -0.35%
CAC(FRA) -0.76%
UKX(GBR) +0.34%
NKY(JPN) +5.69%
SPX(USA) +1.05%
MINTs
JCI(IDN) +2.55%
INMEX(MEX) +0.49%
NGSEINDX(NGA) -1.15%
XU030(TUR) -1.35%
BRICS
IBOV(BRA) -6.17%
SHCOMP(CHN) +3.83%
NIFTY(IND) +3.08%
INDEXCF(RUS) -4.69%
TOP40(ZAF) -3.96%

Commodities

Energy
Natural Gas -2.94%
Brent Crude Oil -1.50%
Heating Oil -1.61%
WTI Crude Oil +1.09%
Ethanol -4.82%
RBOB Gasoline +0.90%
Metals
Gold 100oz +0.67%
Palladium -0.28%
Platinum -2.68%
Copper -4.50%
Silver 5000oz +3.73%

Currencies

USDEUR:+2.00% USDJPY:+3.80%

MINTs
USDIDR(IDN) +1.94%
USDMXN(MEX) +0.12%
USDNGN(NGA) -0.13%
USDTRY(TUR) -0.46%
BRICS
USDBRL(BRA) +5.45%
USDCNY(CHN) -0.09%
USDINR(IND) +0.63%
USDRUB(RUS) +1.47%
USDZAR(ZAF) +2.06%
Agricultural
Cattle -4.39%
Cocoa +5.87%
Coffee (Arabica) -7.84%
Coffee (Robusta) -6.74%
Sugar #11 -8.74%
Wheat +1.92%
Feeder Cattle +2.52%
Lean Hogs +9.14%
Lumber +7.22%
Orange Juice +1.92%
White Sugar -7.19%
Corn -2.83%
Cotton -5.45%
Soybean Meal -4.16%
Soybeans -4.69%

Credit Indices

Index Change
Markit CDX EM +0.52%
Markit CDX NA HY -0.09%
Markit CDX NA IG +0.14%
Markit iTraxx Asia ex-Japan IG +0.03%
Markit iTraxx Australia +2.12%
Markit iTraxx Europe +0.71%
Markit iTraxx Europe Crossover +2.06%
Markit iTraxx Japan +2.85%
Markit iTraxx SovX Western Europe -1.04%
Markit LCDX (Loan CDS) -0.05%
Markit MCDX (Municipal CDS) +4.83%
The US Dollar rallied, Nifty put in a decent show and gold flat lined.

Nifty Heatmap

CNX NIFTY.2015-04-30.2015-05-29

Index Returns

index performance.2015-04-30.2015-05-29

Sector Performance

sector performance.2015-04-30.2015-05-29

Advance Decline

advance.decline.line2.2015-04-30.2015-05-29

Market Cap Decile Performance

Decile Mkt. Cap. Adv/Decl
1 (micro) -2.14% 64/65
2 -0.23% 64/64
3 -0.66% 60/68
4 +3.15% 68/60
5 -0.13% 61/67
6 -0.16% 66/62
7 -0.04% 61/67
8 +1.24% 67/61
9 +0.23% 58/70
10 (mega) +2.38% 70/59
Large and mid-caps turned in a good show…

Top Winners and Losers

INFRATEL +19.32%
UNIONBANK +20.58%
EICHERMOT +24.39%
SRTRANSFIN -15.08%
TECHM -10.77%
EXIDEIND -10.41%
Bullet the blue sky…

ETF Performance

CPSEETF +6.50%
NIFTYBEES +2.88%
JUNIORBEES +2.85%
PSUBNKBEES +2.11%
BANKBEES +1.66%
INFRABEES +1.42%
GOLDBEES -0.98%
Interesting to see Nifty out-performing private banks…

Yield Curve

yield Curve.2015-04-30.2015-05-29

Bond Indices

Sub Index Change in YTM Total Return(%)
GSEC TB +0.24 +0.56%
GSEC SUB 1-3 +0.53 +0.31%
GSEC SUB 3-8 -0.05 -0.27%
GSEC SUB 8 +0.09 -0.05%
Indian gilts were not immune to the global dislocations in the bond market…

Investment Theme Performance

Equity Mutual Funds

Bond Mutual Funds

Thought to sum up the month

Weekly Recap: Only Idiots Pay Taxes in India

world.2015-05-22.2015-05-29

Equities

Major
DAX(DEU) -3.40%
CAC(FRA) -2.62%
UKX(GBR) -0.67%
NKY(JPN) +1.47%
SPX(USA) -1.06%
MINTs
JCI(IDN) -1.86%
INMEX(MEX) -0.67%
NGSEINDX(NGA) +0.11%
XU030(TUR) -3.68%
BRICS
IBOV(BRA) -2.58%
SHCOMP(CHN) -0.98%
NIFTY(IND) -0.30%
INDEXCF(RUS) -3.39%
TOP40(ZAF) -3.34%

Commodities

Energy
Brent Crude Oil +0.20%
Ethanol -1.97%
Heating Oil -0.39%
Natural Gas -8.87%
RBOB Gasoline +0.56%
WTI Crude Oil +0.75%
Metals
Gold 100oz -1.28%
Copper -2.47%
Palladium -0.91%
Platinum -3.00%
Silver 5000oz -2.34%

Currencies

USDEUR:+0.14% USDJPY:+2.12%

MINTs
USDIDR(IDN) +0.50%
USDMXN(MEX) +0.59%
USDNGN(NGA) -0.21%
USDTRY(TUR) +2.47%
BRICS
USDBRL(BRA) +3.05%
USDCNY(CHN) +0.00%
USDINR(IND) +0.48%
USDRUB(RUS) +4.62%
USDZAR(ZAF) +2.16%
Agricultural
Coffee (Arabica) -0.51%
Orange Juice -3.43%
Cocoa -0.09%
Coffee (Robusta) -0.85%
Cotton +1.58%
Lean Hogs +0.12%
Sugar #11 -2.60%
Wheat -7.09%
Corn -2.43%
Feeder Cattle +1.33%
Cattle +0.16%
Lumber -0.04%
Soybean Meal +0.72%
Soybeans +1.00%
White Sugar -0.43%

Credit Indices

Index Change
Markit CDX EM -0.36%
Markit CDX NA HY +0.04%
Markit CDX NA IG -0.54%
Markit iTraxx Asia ex-Japan IG +1.53%
Markit iTraxx Australia +0.90%
Markit iTraxx Europe +2.70%
Markit iTraxx Europe Crossover +4.86%
Markit iTraxx Japan +0.36%
Markit iTraxx SovX Western Europe +0.13%
Markit LCDX (Loan CDS) +0.00%
Markit MCDX (Municipal CDS) -0.59%
This was not a good week for equity markets. The dollar rallied after taking a spring break and credit spreads widened.

Nifty Heatmap

CNX NIFTY.2015-05-22.2015-05-29

Index Returns

index performance.2015-05-22.2015-05-29

Sector Performance

sector performance.2015-05-22.2015-05-29

Advance Decline

advance.decline.line2.2015-05-22.2015-05-29

Market Cap Decile Performance

Decile Mkt. Cap. Adv/Decl
1 (micro) -2.36% 67/62
2 -1.83% 58/71
3 -3.67% 58/70
4 -0.95% 63/66
5 -2.40% 59/69
6 -0.38% 63/66
7 -2.68% 58/71
8 -0.33% 66/62
9 -1.20% 61/68
10 (mega) -1.04% 68/61
Not really sure what will replace the Modi rally. Are we back to reality?

Top Winners and Losers

BPCL +8.67%
HINDPETRO +10.08%
INFRATEL +10.32%
TECHM -16.89%
ADANIENT -11.13%
RELINFRA -8.34%
Looks like the market really hated Tech Mahindra’s results…

ETF Performance

BANKBEES +1.87%
CPSEETF +1.82%
INFRABEES +1.54%
PSUBNKBEES +0.47%
NIFTYBEES -0.14%
JUNIORBEES -0.82%
GOLDBEES -0.96%
Public sector banks remain a bane on Indian society. PSUBNKBEES lets you measure how much of a bane they are…

Yield Curve

yieldCurve.2015-05-22.2015-05-29

Bond Indices

Sub Index Change in YTM Total Return(%)
GSEC TB +0.26 +0.08%
GSEC SUB 1-3 +0.26 -0.16%
GSEC SUB 3-8 +0.01 -0.30%
GSEC SUB 8 -0.01 +0.22%
Everybody and their grandmother is expecting a rate cut on June 2nd…

Investment Theme Performance

Equity Mutual Funds

Bond Mutual Funds

Thought for the weekend

This is what Ajay Banga, CEO of Master Card had to say in a recent conference about India:

And only idiots like me pay taxes there…not paying taxes is a bloodsport in India, right. And that’s going to be, that’s one of the biggest reasons why acceptance in India is poor, acceptance is probably less than a million merchants, there is probably 10 million merchants and 1 million take cards and even they say the take cards, you show up with your card and the first thing will be told is, do you pay cash instead and it’s just the whole way it works, right. That’s going to take time to change.

Source (audio): talkpoint.com

The Worst Mutual Funds – Quantitative

Introduction

Our previous post looked at the 10 best mutual funds based on sharpe ratio, bear-beta, information ratio, draw-down depth and draw-down length between Jan-2010 and May-2015. Here are the 10 worst funds based on the same metrics.

As you can imagine, infrastructure funds performed poorly in this time-frame. We ignore them for now.

Sharpe Ratio

Bear-Beta

Information Ratio

Draw-down Depth

Draw-down Length

Past Performance

Conclusion

Mutual funds are marketed as wealth builders. However, the truth is that most of them struggle. As you can see from the analysis here, there are quite a few of them with low-single-digit returns over 5-year time-frames. At last count, there were more than 5300 different schemes that you could choose from.

Are you getting the right advise? Get in touch with us if you are looking to invest! Call us or Whatsapp us at +918026650232

The Best Mutual Funds – Quantitative

Introduction

Mutual fund investors are faced with a zillion choices in the marketplace. At last count, there were more than 5300 different schemes that an investor could choose from. When confronted with such a large number of choices, investors either spiral into an “analysis paralysis” mode and end up doing nothing or blindly invest in whatever their broker recommends – both these paths lead to situations that are injurious to the investor’s long-term financial health.

In this post, we try to simplify the choices in front of the investor by ranking the top 10 funds based these risk metrics: sharpe ratio, bear-beta, information ratio, draw-down depth and draw-down length between Jan-2010 and May-2015.

Sharpe Ratio

Bear-Beta

Information Ratio

The information ratio is a ratio of the portfolio’s returns above the returns of a benchmark (CNX MIDCAP, in this case) to the volatility of those returns.

This is probably a better metric than the Sharpe ratio to rank funds.

Nice to see that both the Value Discovery fund and an MNC fund make this list.

Draw-down Depth

Draw-down depth measures the max-loss from peak valuation.

For example, the Blended Plan at the top of the list only lost 0.35% from its peak valuation between 2010 and 2015.

Portfolios with a lot of short-term bonds test well for this metric. But note the pathetic IRRs – no pain = no gain!

Draw-down Length

The draw-down length is a measure of how many days it took the fund to get back the previous peak valuation after a draw-down.

Shorter bounce-backs typically indicate high-quality portfolios.

Nice to see both the MNC funds make this list.

Past Performance

Conclusion

We looked at broad spectrum of funds – including those with bond allocations – to ferret out a good set of funds that investors can consider. Depending on what is more important to the investor, the appropriate set of metrics can be weighted to fit individual risk appetites.

Mutual fund investors whom we advise will immediately recognize some of these funds as they are already part of their portfolios. Get in touch with us if you are looking to invest! Call us or Whatsapp us at +918026650232