»5 Minute Wrap Up by Equitymaster

On This Day - 7 SEPTEMBER 2018
I Don't Worry About the Turmoil in the Global Markets and Neither Should You

Kunal Thanvi, Research analyst

Yes, there's turmoil in global markets.

Specifically, emerging markets are facing the heat.

  • Trade wars
  • Currency wars
  • Rising interest rates
  • Rising crude oil prices

After a stellar 2017, emerging markets are in a tricky situation. These factors are threatening many countries - Argentina, Brazil, Indonesia, South Africa, Turkey, Venezuela...

The strengthening US dollar, among other factors, has resulted in depreciation of currencies in emerging markets including India.

In fact, the rupee is at its life time low near 72.

This has made our markets volatile.

Currency Deprecation - Leading to Global Turmoil?

There are some extreme views out there. Some believe this situation can lead to a repeat of the 2008 crisis. I'm not part of this group.

In the case of Indian companies, crude oil is a major raw material for many of them. This is mostly imported. So, the rising price of crude and the falling rupee is likely to impact the margins of many Indian companies.

-------- Advertisement --------
Most investors aren't aware of this…

But 3 simple steps can give you a list of potential multi-bagger stocks to buy…

It's easy.

  • Log on to a website I'll just tell you about…
  • Type in the name of the stock you want information on.
  • Download a copy of this little-known legal document that reveals Top Stocks which are Marked to Boom.

This document is only released four times a year…and the last one came out in June

Click here to get all the answers.

So, how do we deal with this situation?

I believe, over the last few years, policies like GST, RERA, the bankruptcy code, NPA resolutions etc will bring about a structural change in the Indian economy.

The industrial pick up has just started to happen as seen in the latest GDP growth numbers.

India is well placed in the emerging market world.

But honestly, I am not much concerned about the global macro challenges.


I look at them as an opportunity.

Yes. I'm happy to see any correction because of global macro challenges. This will help me recommend quality stocks to my Smart Money Secrets subscribers.

As I recommend stocks for the long-term, I don't worry too much about the short-term.

In fact, I've already started meeting the managements of companies which I really like. These companies were trading at premium valuations in the market. Some of them have corrected recently. But I will recommend them only if there is a good margin of safety.

Sarvajeet and I are traveling again this month. We are meeting managements of three companies in three different sectors.

There is one thing in common about these managements - they don't meet analysts.

So, we are traveling to some remote places in south India to attend their annual general meetings.

-------- Advertisement --------
How to Spot Potential Small Cap Winners Early

Senior Research Analyst Richa Agarwal has discovered a way to identify potential small cap winners early.

This strategy has previously generated triple- and even four-digit gains in a few years.

And with many solid small companies available for cheap right now, this could be a perfect time to put this strategy to use.

So don't delay...

Click here to know all about this strategy now!

Here are the three candidates for this month's Smart Money Secrets recommendation...

#1: A Healthcare Company - This company has been in our radar for more than a year now. Even though it has corrected more than 50% from its peak, we were not able to recommend it. The management didn't agree to meet us. If all goes well, this can be first healthcare stock recommendation to subscribers.

#2: A Travel Company - This company is India's largest in the space it operates. It has developed a niche for itself and a competitive advantage by foraying into specific categories. The upside in the stock could be 100%. However, we need to meet the management before we recommend it to subscribers.

#3: A Branded Apparel Company - This company owns an emerging apparel brand. It has recently started changing the way it does business. The change will help it improve its business. We have met the management in the past and are excited to meet them again.

In Smart Money Secrets, my mission is to cut through the market noise and find good companies for subscribers in which our super investors have bought a stake.

The global market turmoil will not change that.

Chart of the Day

Talking about currency wars and the falling rupee, we did a small exercise to understand the impact of the weak rupee on the markets.

India is a net importer. This means if the rupee is weak, the cost of imports increases and value of the export decreases - resulting in a widening current account deficit.

High Imports + Weak Rupee = Widening Current Account Deficit.

A high current account deficit also impacts the government's spending power.

Also, companies which import raw material witness pressure on their margins and profitably.

So, this looks quite negative on the face of it. So, it's not surprising that markets get volatile when the currency depreciates.

Should You Be Worried About the Rising Dollar?

Look at Indian rupee against the dollar from 1990. It has deprecated at a compounded annual rate of 5%.

Yes, the dollar has been on a winning streak from the beginning.

And despite that... the BSE Sensex has returned 14% compounded annually since 1990.

Thus, the falling rupee can bring volatility to the market in the short-term. But in the long-term, our market should be fine.

This is exactly what I keep in mind when picking stocks for Smart Money Secrets subscribers. I cut out the noise of short-term disruptions and look at the long-term picture beyond.


Kunal Thanvi
Kunal Thanvi (Research Analyst)
Editor, Smart Money Secrets

PS: Kunal Thanvi, editor of Smart Money Secrets, is the Sherlock Holmes of investing. He is on a mission to reveal the top picks of India's best investors to you. For clean, high quality stock recommendations that won't put your wealth at risk, subscribe to Kunal's Smart Money Secrets.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.

Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement

Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.

This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.

This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.

This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.

As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407