Update on G-sec


Dear Investor

After long 1 year, Clients are now having double digit absolute returns between 11% to as high as 19% and annualised returns ranging from 7% to 12% in their G-sec investments.

View is very clear now and everyone is chasing G-sec now.

The complete cycle, I expected to unfold, got delayed by a year and all factors I expected are converging now. Commodity prices are coming down, GDP world across has been falling past 1 year except US and to some extent UK. Not inflation but deflation is a problem in most part of the world now. Gold and Crude prices remained in downtrend for past 1 year.

In anticipation of fall in above factors, I had advised to invest in G-sec.

What should G-sec investor do?

I believe, He should remain firmly invested in G-sec for entire 2015. Entire world is gearing in expansionary mode. Japan even after repeated attempts to stimulate growth through monetary easing, doing it again aggressively. Europe is now at the place, where US was towards end of 2008, When US FED started buying assets directly from companies, deleveraging broader economy and leveraging its balance sheet.

China resisted initially but as it feared that downturn in economy is real and could slip further, it started monetary easing last month with rate cut. China also lifted one house policy to bail out housing industry.

US is expected to start raising Interest rate from 3rd Quarter of 2015 but if Dollar continue to strengthen as it is likely, Fed will postpone it to 2016. With fall in Commodity prices, it is even harder for Fed to achieve 2% inflation target at current policy. Some are expecting resumption of easing by end of 2015 to achieve inflation if it remains muted for most part of the year.

Above economies, put together, constitutes 70% of world economy.

Indian economy has, too, started feeling the pinch of slowdown. Festive season remained muted for Auto and FMCG companies. Manufacturing is still not picking up. Elevated prices of real estate still refuse to moderate. But, underlying current has weakened. It reflected in credit take off from banks. Credit growth of banks came down to 9% from 15-16%. Even much claimed FII investment in Equities is at half the level of last year.

In all, what I want to emphasis on is, World has still not recovered from shadow of 2008 crisis. Demand is still considerably down. Overcapacity is visible in all most all sectors of economy. World can still fall back into recession.

Therefore, it is prudent to be (diversified) invested in 4 types of assets. 1. Which goes up when inflation is more than expected 2. Which goes up when inflation is less than expected 3. Which goes up when growth is more than expected and 4. Which goes up when growth is less than expected.

I will write on it in detail sometimes next month.

On Rate cut cycle

I expect, rate cycle will be much faster than it is expected. With the pace, commodity prices are coming down, with the pace world growth is dwindling, with the pace every nation is entering into expansionary mode, keeping cost of money low is inevitable to sustain economy.

I expect most of the rate cuts should take place in 2015. By the end of 2015, Investor should have double digit annualised returns reaching as high as 20% annualised and 30-35% absolute returns.



Dhaval Shah

Blog: https://investmentacademy.wordpress.com/ Cell: 98255 28815

Office – Khushi Investments, GF-1, Shivalay Complex, Near Bank of India, Manjalpur Gam Road, Manjalpur, Vadodara.

Disclaimer: This is a free daily investment newsletter published by Investment Academy. This publication does not provide individual, customized investment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. Author might have open positions in the stocks and Indices recommended above.


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