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August 19,2011
PMS Newsletter
It is time to infuse more funds if you have sufficient liquidity.


Dear Investors, 

My communication to investors in March 2009 titled Equity - Historic Opportunity is what is coming to my mind. Many of our stocks had risen manifold afterwards. I feel that equity market in India is experiencing similar situation today - irrational valuation! It is true that investors across the globe are going through panic, pain and disappointment! Global Financial System is too fragile and scary today! Europe and US have too much debt and are facing many problems. According to Mark Faber, world is full of rotten paper money and investors are moving to gold, land and other natural resources which are perceived to be real wealth. 

India has no reason to panic like this. I believe that the current global turmoil will not affect Indian economy significantly. In fact the decline in the prices of Crude Oil, metals and other commodities on the perceived global slowdown, is going to help us manage the economic challenges like high inflation, interest rates etc. Then why our stocks are going down like this? I dont know. I have seen markets behaving crazy at times, creating huge opportunity for potential investors. 

It is true that Indian economy is suffering from bad politics. If we had honest and dynamic leaders in government committed to create wealth for the country and to work for the welfare of the people, our GDP growth would have been well above 10% this year. I expect the worst is over regarding corruption, black money and criminals in govt. Going forward, India can only get better in governance, though we may have to go through the pain of transformation. Politics will become less attractive for criminals, which is the best long term solution!

 

Many of you are concerned with the erosion in the value of investments. My personal savings are invested in almost the same stocks and I consider the recent erosion of price (not value) as paper loss. In the above mentioned letter in March 2009, I had recommended to add funds to take advantage of highly irrational valuations in market. Many investors did it and benefitted considerably. I feel it is time again to infuse more funds if you have sufficient liquidity.

 Warm regards,

 Porinju Veliyath

Portfolio Manager

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