Everyone expects inflation to go down with liquidity crunch but my concern is more about demand supply impact with ban of 500 and 1000 Rs and impact of Donald Trump’s reforms in USA.
The real economy is completely at a stall and everyone has cut down on expenses to save lower denomination notes that they have managed to withdraw from banks and ATMs.
Cash is being sucked out from the hands of people and is getting deposited into the bank accounts but there is very little that you can withdraw currently from your bank account.
Steps taken may be right but I am more concern about the process to bring back liquidity to normal levels. If banks allow withdrawal of 20k per week as the highest withdrawal limit, in 50 days or 7 weeks you can withdraw 140k which is quite low compared to the amount being deposited.
So according to me, this will be a tough time for Indian consumer goods and FMCG companies where end user deals everything in cash but this will be really good time for investors to accumulate these stocks in 2017.
Next, 6 months will be very challenging and every individual will face trouble while purchasing basic items like vegetables, clothes, groceries etc. So it can mean that Indian economy will have a big impact in the next few quarters but it can be an awesome opportunity for investor investing for 3 years+ time horizon.
In the midst of exchanging notes from banks, we have all forgotten about Donald Trump being the new president of US. When 500 and 1000 Rs. notes saga subsides, Donald Trump will be in action to bring back US economy out of recession. He will work on lowering tax rates and other reforms that can make the flow of money from emerging market back towards the USA.
It can mean markets will provide better opportunities in 2017.
Why I Avoid Banking Sector?
Bank’s in 90’s with few working hours can still manage to operate profitably. So a bank can never go out of business due to lack of operational excellence but it is always for bad debt.
Infusion of so much liquidity into banking sector is considered good for banks but according to me if banks had NPA’s earlier, they can have more NPA with the new money and so I don’t buy the liquidity as a reason for investing in banks.
The older NPA still exists for PSU banks and private sector banks will dominate over the PSU banks more and more going forward. So PSU banks are a complete no for me.
There will be enough liquidity in the system to push the interest rates down. I am not sure how it may impact the complete banking sector as a whole.
There is so much of ifs and buts for me to consider investing in banks at this moment.
Apart from that my investment checklist has a criteria to be investing in unique business and bank’s don’t offer any unique product that other banks can’t. On top of that banks’ always have high debt to equity ratio and I am not so well qualified to understand why a business that deals with money has debt in the first place.
Stocks I am Considering
Everyone expects inflation to go down due to liquidity crunch but what about demand supply chain. If there isn’t ample supply and if there is no way people can transact and deliver goods, the prices will skyrocket. Have already seen salt being sold at muvh higher price in my locality.
So here is the list of stocks that I plan to add in 2017 to my portfolio and keep them in my portfolio for next 3 to 5 years or so.
- Ashok Leyland – I want to start accumulating Ashok Leyland and it is one stock that I may invest even before 2017.
- Pidilite Industires – I have invested heavily in Pidilite Industries already but if I find suitable levels, will add more. My accumulation range will be 620 to 580 and below.
- Britannia Industries – I have Britannia Industries in my portfolio from the BREXIT day crash where I managed to enter in at around 2600 but now plan to add more around 3000 levels.
- Zydus Wellness – Small cap will be beaten more than mid caps and large caps and I hope it provides me an opportunity to add more Zydus wellness to my portfolio in 2017.
- Marico Ltd – This has always been one of my favorite stocks that I could not add to my portfolio due to very rich valuations but will keep a keen eye on Marico to see if I can add Marico to my portfolio. Have no levels as such because historically I have not seen this stock correct much.
- Jubilant Foodworks – Jubilant Foodworks has a declining profits and increasing sales which I love. So I will keep my position intact and add more at around 50PE (if it gets there).
- Asian Paints – I really love the management of Asian Paints but have always been an investor in Hitech Plast over Asian Paints because Asian Paints has many competitors with similar product lines and Hitech Plast is a unique player by the same awesome management.
What stocks are you considering to invest in 2017? Sharing your stock ideas can help others understand more about it and help you verify your understanding. The best stock discussions always happen in comments and so share your stock ideas below.