Interesting times in equity markets

Dear All,

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After a stellar run in 2017, broader equity markets have given a very good correction. A handful of index stocks are up, and hence index is at a new high. The founders of Aurum Capital have been giving their views about the markets for more than a decade, trying to help investors make better decisions.

We had anticipated a correction in small and midcaps as a lot of froth had built up. The fall has been severe and sharper than even our expectations. We had moved significant funds to cash and into safer stocks in Dec and Jan.

Reading of the markets is important and if we can get it reasonably right, we can outperform. The reasons for the fall in small and midcaps were:

  • Over-valuations due to frenzy and euphoria among investors, ignoring fundamentals
  • New regulations of reclassification of mutual funds, which resulted in the money entering into few large-caps and away from mid/small caps
  • Regulatory measures like ASM, GSM
  • The feeling of political uncertainty
  • Macros turning bad – high crude prices, current account deficit widening, rupee depreciating, higher US interest rates resulting in selling by FII’s
  • Geopolitical events like the possibility of trade and currency wars
  • Increase in commodity prices
  • Interest rate hike

Some of these are still valid and can be a challenge in the future. On the other side, we are seeing micros improving

  • GST rollout has more or less stabilized. Collections are improving. Recent rate cuts in GST slabs give a leg to growth
  • Compliance in taxation increasing meaning that revenues for the government will increase
  • Good monsoon prediction
  • Huge focus on infrastructure by the government
  • Consumer discretionary spends increasing
  • No major negative surprises in corporate earnings so far

Some good signs emerging are that crude has started moderating, growth is coming back. The economy is much more robust and major disruptions are over, and we believe steps taken by the government will put the Indian economy on a very good growth path.  We believe valuations in quite a few of the large caps are not sustainable and there could be time or price correction or both. We, at Aurum Capital, believe in value investing and are very particular about the price we want to pay, howsoever great a company maybe. We believe a lot of companies have corrected well and look good at current valuations. We might have short-term hiccups, but we definitely believe in the long-term story of India and remain positive.

Many have asked questions like “skin in the game” in the stocks we are planning to recommend. The founders of Aurum Capital believe this. They may be buying or holding the stocks recommended to the clients. This will be in line with the guidelines prescribed by the regulator. What we think is good for our subscribers, has to be good for us too. Our interests will be aligned.

We are working on a few stock ideas while expecting the market to get stabilized. Our first recommendation will be coming soon.

We have taken a lot of efforts and time to build a robust technological platform at www.aurumcapital.In. Our technology platform will ensure that the reports are available only to the genuine subscribers. The watermarked reports (with subscribers details on each page) will be available to the paid subscribers. We are deploying cutting-edge technologies to ensure avoidance of misuse of the platform by unscrupulous paid subscribers.

We will also have an investor forum for our paid subscribers. This will be an opportunity to interact with the subscribers. To find out how investor forum and how our service will work, please visit https://aurumcapital.in/faqs.

The response to our launch has been very encouraging. We thank all our paid subscribers and those who showed interest but yet to become a paid subscriber.

We look forward to your comments. Wishing you a very happy investing journey.

Regards,
Aurum Capital
SEBI registration No: INA000011024