I prefer to communicate more during tough times in market. As I could not meet all of you in short span of time I choose to write and keep you updated in order to take proper decisions.

Markets have been highly volatile in recent times due to domestic and global issues. It is the natural behaviour of the markets. Todays’ fall was majorly attributed to the oil crash due to differences between Russia and Saudi. In the short term markets react either ways based on news flows. One is better avoiding such noises.

No one knows how deep and long will coronavirus issue last. Events always happen in the world which will not be predicted. Hence it is always prudent to invest in structural manner.I.e., Adhering to asset allocation, having debt investments in portfolio, investing in equity through SIP and STP for long term goals and intermittent falls can be used to add equity.

As mentioned in my earlier mail financial markets all over the world are in correction mode due to Covid-19 spreading to number of countries. Apart from it our markets also sentimentally affected due to moratorium imposed on Yes Bank (which is the fourth largest bank) it is the second bank facing moratorium after PMC bank.

Credit markets are the backbone for smooth functioning of any economy. Since the fallout of IL&FS, there is a fear in credit markets. With sudden credit squeeze and high leverage many companies fallen from grace. The prominent casualties are Anil Ambani Group, DHFL, Promoter of ZEE ,etc.(sold his stake in strong company ZEE Entertainment to pay his loans)

The main reasons to fall out of these companies are, they are highly leveraged, questionable corporate governance and poor competence of RBI and finance ministry officials particularly in handling Yes bank, which is a known problem since more than a year.

Key lesson we can take here is one should not leverage(take debt) beyond his means. It is better to avoid it.

“It is not the most intelligent of investors that prosper, nor the most optimistic that prosper. Prosperous are the ones that handle volatility the best.”

Keeping in view the changing landscape of credit markets I had been proactively doing necessary changes whenever warranted particularly in debt funds with your support and understanding. I thank you for listening to my thought process and permitting me to do so.

And in couple of them segregated portfolio’s of mark down papers allocated (To pay as and when the recovery happens). The reason for not initiating any changes in them is the probability of getting them resolved is higher. When the fund already marked down there is no point in getting exited, provided the rest of the portfolio is worth to stay. Over a period of time the loss gets recovered.

The mark down happened in couple of funds due to yes bank exposure, which is not alarming. Fortunately we exited long back in couple of other funds which got hit the most in the last one year. (Reliance and UTI)

“At the time of severe market disruption, cash is like oxygen. When you don’t need it, you don’t notice it. When you do need it, it is the only thing you need.” –Buffett

And coming to ongoing equity market correction, they corrected more than 10% from highs, which is a normal. Since couple of years I had been adding investments only in debt and asset allocation funds, apart from SIP’s(which average out cost over a long period) And some of you given proceeds for investment in last couple of months is parked in liquids, due to high valuations. Since last few days deploying it in staggered manner.

Do let me know in case of any further information or queries. Do not worry. Consider it as an opportunity.