A rewind of Portfolio in 2018

In a year of unprecedented volatility, we bolstered our offerings across avenues

The year 2018 has been among the most volatile for both equity and debt in recent times. The four-year-old rally that began before the Modi government took charge at the Centre, came to an end this year. The meltdown in mid- and small-cap stocks has been extremely severe, as the market corrected the valuation excesses built over the past few years. While large-cap stocks managed to hold themselves above water until September, these stocks, too, lost ground after that, as rising crude prices and rupee depreciation caused a sharp pull-back.

Ten-year G-Sec yield also went on a roller-coaster ride, from 7.3 per cent in January, 7.1 per cent in April and 8.2 per cent in September, to decline to 7.2 per cent again by December. As the RBI kept everyone guessing about its decisions, the market decided to chart its own path; it, too, keeping everyone guessing. In short, it’s been a year of unprecedented volatility in which all fund managers struggled to deliver.

In this scenario, we decided to bolster our offerings across investment avenues, to help investors diversify their holdings and thus manage risk.

What’s new

A factor that stands out in 2018 is the marked shift in investor behaviour. With a flood of domestic money flowing into mutual funds through the SIP route, it became apparent that indirect investment in equity will be the preferred route in the years ahead. Also, the large group of young professionals joining the mutual fund fraternity prefer to take informed decisions based on unbiased advice — something that is hard to come by.

It is to fill this gap that we launched the BL Portfolio Star Track ratings in October by leveraging BusinessLine Research Bureau’s expertise in fund selection and recommendation. The Star Track ratings are based on in-depth analysis of funds’ historical performance, measured both in terms of return and risk. This methodology is far superior to those existing in the market as the period considered is much longer and the filters are much more stringent. The returns and risks of the schemes are measured using rolling returns and Sortino ratio, respectively.

Another intense exercise by the Portfolio team was bringing you an exhaustive table every week from May to August to help you understand the changes to MF schemes brought about by SEBI’s new norms for scheme re-categorisation. This unique exercise has not been replicated by any other media organisation till date.

The growing awareness on the need for insurance made us devote a section in Portfolio for insurance-based stories, including explainers, answers to readers’ queries and giving our recommendations on new insurance products as well as various ULIPs (unit-linked insurance plans).

The commodity section in Portfolio also increased its focus on highlighting the issues faced by the stakeholders in agriculture, including farmers, users and traders. We did many special features from ground zero, including pieces on how cartels are preventing traders from getting their dues in Erode turmeric mandis, how the Centre’s import restrictions are hurting pepper farmers, and how Karnataka’s digital drive through the Samrakshane portal has made crop insurance more transparent. Some of these stories resulted in regulatory actions to rectify the issues.

In the last quarter of 2018, we have also begun recommending one fixed-income product every week, including corporate and bank fixed deposits, NCDs (non-convertible debentures), and tax-free bonds.

Besides these, our weekly columns on real estate (Home Truths) and gold (Bullion Cues) ensure that we cover the entire spectrum of assets. The interactive columns where we answer readers queries — Your Taxes, Your Fund Portfolio, Insurance Uncovered and Your Stock Portfolio — have also attracted good reader interest.

Stock and fund calls

As explained earlier, it was the worst of times for equity and debt investors in 2018. While our ‘sell’ recommendations in stocks had a hit rate of over 80 per cent, the hit rate in ‘buy’ recommendations was well below the half-way mark. We considered the stock calls given between January 2018 and June 2018 for evaluating the performance. The miss can be attributed to our analysts recommending only businesses with good growth potential, whose valuation had become too pricey in the market rally.

With the correction impacting stocks trading at higher valuations, our recommendations have also been impacted.

The slew of IPOs in 2018 posed a fresh set of problems. While the businesses were decent, the asking price was too high in many cases, making the task of giving recommendations quite difficult. Our hit rate in IPOs was 40 per cent. We can, however, draw some comfort from the fact that only 16 per cent of the diversified equity funds managed to outperform the Nifty 500 in the same period.

With most fund managers unable to do better than the benchmark over the past year, our mutual fund recommendations have not fared too well. But since fund calls are given with a perspective of over two years, investors need not fret too much.

Way forward

Portfolio will attempt to bolster its personal finance offering further in 2019. With investors paying more attention to portfolio allocation, we will try to increase our focus on fixed-income products that are of interest to retail investors.

On the anvil is a column on financial planning, which can provide guidelines for individuals trying to manage their finances. Fintech products is another area where we will attempt to do more stories.

As the focus turns towards digital products, we will also attempt to improve Portfolio’s offering on the internet and through BusinessLine’s mobile app.

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