It’s always easier to do nothing (new).
Change is difficult to start.
Fear of making a decision > Benefit of making a decision.
The strong desire to keep things the same.
Listening to the same advice from the same people telling you the same things.
If you are buying an investment fund, there are two main strategies you’ll encounter – active management and passive management. Passive investing is essentially the replication of an index or benchmark. For example, buying the NIFTYBEES ETF that replicates the Nifty 50 index. The aim of active investing is to deliver returns that are superior to the stock market that the companies sit within. An actively managed fund can offer you the potential for much higher returns than what a particular market is already providing. The debate as to which of these strategies is better has been raging on for the better part of the last 20 years. Whenever stock-market indices recover from a crash, the debate re-emerges.
The problem with passive investment is that passive management is only theoretically possible.
any evaluation of passive investment funds to be complete should include withdrawal activity during draw-downs, something that can be viewed as active management by the part of the investor imposed on the passive fund.
Also, most funds that call themselves “active” are actually “passive.”
the representation of closet index funds and traditional index funds have risen to the point where they now represent approximately 40% of the active universe—making the exercise of differentiating them from true active managers more important than ever.
Traditional passive investing, using indices weighted according to market capitalisation, works best in the kind of long bull markets that ignore fundamentals, because at the end of the day, you effectively end up buying high and selling low.
Investors should be careful of simplistic arguments and biased data while allocating capital. While I remain a fan of ETFs to get broad-market exposure, it is by no means the be-all-end-all of investment choices.
Sources:
Passive Investing in Stock Indices Involves Substantial Risks
Re-thinking the Active vs. Passive Debate
Investing in stocks that have hit 52-week highs is a form of momentum investing. The rationale is that traders are slow to react, or overreact, to good news. A stock whose price is at or near its 52-week high is a stock for which good news has recently arrived. This may be the time when biases in how traders react to news, and hence profits to momentum investing, are at their peaks. The psychological underpinning is traders’ reluctance to revise their reference point is price-level dependent.
Unlike straight-up momentum investing that looks at the top decile of stocks in terms of 200-day performance, the 52-week high model only gets activated when there are stocks hitting 52-week highs. In that sense, momentum investing is a continuous model whereas the 52-week high model is sporadic.
How does this sporadic model compare during volatile markets? If you look at the Feb 2013 returns (above) that was picked right before volatility hit and the broad indices tanked, the model outperformed the CNX 100 by over 7 points. The out-performance is largely due to the immunity that these stocks enjoy in terms of positive news flow. It follows that this model is ideal for short- to medium-term investors who like to time their entry into the market. The image below is the performance of the portfolio picked on Feb 2012 to give you a longer-term perspective.
Check out our 52-Week High Theme and give us a call. Investing without emotions was never simpler.
It hasn’t been easy for the Indian IT outsourcing sector since the global meltdown in 2008. Even as the recession abated and markets began improving, unemployment and economic instability in US and Europe compelled governments to create more favorable conditions for domestic markets. But that’s just the tip of the problematic iceberg that’s denting IT outsourcing growth in India.
IT outsourcing has contributed significantly to the Indian economy. In the initial years, outsourcing came easy – Indian IT professionals were cheaper, work could be done faster with more people on less pay, and the Indian Rupee was not as strong. IT companies made huge profits while keeping 20-30 percent of their workforce on bench at a time. Today, the situation is quite different.
Challenges galore
The demand for IT services from US and Europe (accountable for three quarters of the work and revenue that came India’s way) has dwindled on account of their recovering economies. Furthermore, the popularity of cloud solutions has enabled more SMBs and large enterprises to manage well with a smaller workforce. Businesses no longer need bulk IT labor from India. If they have expectations, they are for experienced professionals who will add measurable value to their business.
Research firm Ovum reveals that the total contract value (TCV) of outsourcing deals in India fell by 30 percent during the last 2012 quarter. That’s a record low in 9 years.
Indian IT companies are seeing much slower growth; lesser attrition and higher productivity owing to enterprise mobility, automation and cloud implementations. Consequently, recruitment have frozen. IT freshers who were recruited on-campus in 2011 are waiting for appointment letters as their employers (like HCL Tech) try to cut costs and maintain profits. The golden dream of joining an IT company for a 6 or 7 figure annual package has just gotten tougher for college graduates.
Another challenge for Indian IT outsourcing companies is the emergence of countries like the Philippines as alternative IT/ITeS destinations.
Opportunities
NASSCOM has forecasted a reduced growth rate of 11-14 percent in IT outsourcing exports in 2013-14. However, the good news is that of the top IT outsourcing providers in India – Infosys, Wipro and Tata Consultancy Services (TCS) – only Wipro fell short of the guidance predicted for the quarter ending December 2012.
Indian outsourcers like Infosys are promoting “mini CEOs” to tap their intellectual property to the maximum rather than hiring new people. The demand for experienced personnel who can adapt to changing environments and stay productive is growing and companies are taking steps to retain such talent. As Tech Mahindra HR, Sujitha Karnad, points out – coding coolies are passé, the demand now is for solution architects. That’s where the new outsourcing opportunities lie.
IT companies are also diversifying their service offerings to stay profitable. Infosys has signed a 5 year agreement with RWE Supply and Trading (RWEST), a leading European energy trading house to provide technology services based on ‘gain-share’ – Infosys gets paid when RWEST makes a transaction on the platform.
NASSCOM predicts that the Indian IT industry will generate $225 billion by 2020 by leveraging on emerging technologies, mobile and cloud platforms, social collaboration, SMB outreach, and the integration of core business applications. It’s not an unbelievable target as India is well placed to address new opportunities and emerging markets. For all you know, this shakeup could be the re-making of Indian IT outsourcing as it matures in value as well as viability.
[stockquote]INFY[/stockquote] [stockquote]WIPRO[/stockquote] [stockquote]TCS[/stockquote] [stockquote]HCLTECH[/stockquote] [stockquote]TECHM[/stockquote]
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Jaiprakash Associates [stockquote]JPASSOCIAT[/stockquote] has been the darling of stock market speculators for a while. The company can be best described as an infrastructure conglomerate that is into everything from mining to power production. The last couple of years hasn’t been kind to infrastructure companies in general and JP is no exception. Since Jan this year, the stock is down -29.44% compared to Nifty’s -4.53%
As you can see from the chart, the stock has long-term support at Rs. 60 levels (off which it bounced off recently) and resistance at Rs. 80 levels. Just yesterday, the stock saw a bullish 4×9 Cross-Over. RSI levels at mid-40s and an imminent MACD signal-line cross-over are supportive to a bullish outlook as well.
There isn’t much to write home about from a fundamental point of view. Most recent 4Q EPS is around 3.11 and it barely made it past the finish line in the Oct-Dec 2012 quarter. Dividends are meager and the stock is currently trading at a PE of around 22. It has a beta of 2.12 which is one of the highest that we track. Clearly, JPASSOCIAT is not for the faint of heart.
All said, JPASSOCIAT is good for a short-term trade. Buy it at Rs. 60 levels and sell it once it hits Rs. 80. For the long-term, wait for clarity in policy direction before making a bet on infra stocks.
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