Seeking stability in volatile markets

All Weather Investing

The volatile & negative returns of benchmark indices like Nifty 50, Nifty 200, Nifty Midcap, Nifty Smallcap, etc. have again put in-focus the need for stable strategies that generate returns without taking too much risk.

The All Weather Investing smallcase is exactly that – a recession-proof long-term investment strategy. The smallcase invests in three different asset classes (equity, debt, and gold) via ETFs. By investing part of the corpus in debt & gold instruments, the smallcase reduces fluctuation in the short term – while the equity component ensures steady wealth generation over the long term.

In fact, the weightage of different components (equity, gold, fixed income) is derived via an algorithm that seeks to maximize the Sharpe Ratio of the smallcase. Sharpe ratio denotes the returns earned for every unit of risk. The higher the ratio, the better the performance of the smallcase. 

For example, the smallcase has outperformed with returns of 3.89% in the past 1-year compared to Nifty’s -3.23%. That too at less than half the volatility/risk of Nifty 50. Moreover, the strategy has also been backtested across different stock market conditions since 2007. 

Tax boost for EVs, GST slashed to 5%

On 28th July 2019, high-powered GST Council reduced the GST rate on all Electric Vehicles (EVs) from 12% to 5%. Additionally, the Council also slashed the tax on chargers & charging stations for EVs from 18% to 5%. Customs duty on certain parts of EVs has also been exempted to further incentivise this industry.

While previously discussed & proposed, these have now been finalised and have gone into effect from 1st August 2019. These developments are part of the Government’s broader push to develop the EV ecosystem. The recent Budget had already provided additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase EVs.

There are also plans to order taxi-aggregators like Ola & Uber to convert 40% of their fleet to electric by April 2026, which is being worked on by NITI-Aayog, which is chaired by PM Modi.

The Electric Mobility smallcase comprises of companies across various sectors (like Automobile, Power, Battery & Mining, etc.) that are investing in the EV ecosystem and are expected to benefit due to the growth in electric mobility. The smallcase has a large-cap focus and a historical CAGR of 23.75%.

Markets update

Benchmark indices had their worst week for the month, ending in red for the 4th straight week. Nifty was down -2.47% at 10,997.35 while the Sensex closed down -1.75% at 37,118.22. 

The US Fed’s rate cut and accompanying hawkish stance, along with depreciating rupee and unimpressive corporate earnings were key drivers of the bearish sentiment.

Stopping the market slide on Friday were media reports that the PMO & Finance Ministry are in talks to resolve the issue of surcharge on FPIs, after which the indices staged a strong comeback from intraday lows.

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Introducing ‘The smallcases Show’

Sponsored: How do you build a portfolio that can stay ahead of the markets? What strategies do the world’s most renowned investors use? Introducing ‘The Smallcases Show,’ a web series in which @b50 speaks to financial experts. #thesmallcasesshow #smallcase #investing @smallcasehq pic.twitter.com/pfbWaEuNE4

— BQ Prime (@bqprime) August 1, 2019