Category Archives: Note from the desk of the founder

Investing in 2016

New Year Wishes!

At the end of a long, tiring, uneventful year for equities, it is again the time to be predicting the next. Here is a caveat. Nobody has a crystal ball. Nor, is anyone truly clairvoyant. Then, why predict? It is not even the job of an investor. The advisor’s job is far more complicated than investing. An advisor needs to keep investors in the hunt for investment success. To achieve that, he needs to help an investor set his expectations right. A prediction is merely a tool to fix the expectations right. Investors who set the right expectations would do all the right things. So, here we go.

 

So what did we say in 2015? We hadn’t promised much. Here is what we said. (Investing in 2015). Actually, we had exhorted investors to set their expectations low. We went against the market consensus. Just to remind you, the consensus view for 2015 was overly bullish. Our view put realism into our investors. This helped them invest aggressively as markets fell in 2015.

 

2016 holds much more promise than 2015. We have reasons to think the year 2016 will end much stronger than where it begins. We expect the flows, of news and funds, to improve as the year 2016 progresses. The economy will deliver a decisive movement and break-free from the current state of flux. A recovery would be far more visible. Investor conviction will rise in 2016. Investment alternatives to equity will progressively weaken. Interest rates will marginally drop further. Real estate won’t find enough demand to match supply. And, gold will struggle against rising US interest rates. Equity will be viewed as a relatively, superior asset class.

 

2016 will see a paradigm shift in expectation- performance equation. Market expectations will drop drastically while corporate earnings will recover consistently. This will make INDIA an attractive destination in 2016. FII’s could well reverse their stance towards Indian equities in 2016. They can turn buyers of Indian equity as the year progresses.

 

The long and short –

Believe in equity.

Buy more equity.

Don’t wait too long to buy.

Raise equity exposure.

The markets won’t wait for you. 

Be ahead of the markets.

Stay ahead of the herd.

Staying in the hunt longer than everybody else would be the success mantra in an economic recovery. The game is all about patience. Patience makes wealth too.

Happy investing!

Stock Markets and the Marathon

“What do the markets have to do with a marathon?” – I am sure the question is already in your mind. Let us get to the answer by understanding the question better.

 Over to the marathon first – The marathon got its name from the famous run of Pheidippides, who carried the winning message in the great war of Marathon to Athens. He ran non-stop, delivered the message ‘We won’ and dropped dead or so goes the tale. The marathon has been a constant in every Olympics right from 1896. Today, the marathon has grown way beyond being an Olympic event. Every great city of the world has its own marathon and the event celebrates the spirit of the city, the culture of its people and is a grand celebration. These events have made marathon running into a passion for people across age, gender and class. Participation has also become a reality test of the endurance levels of body and mind.

This ultimate test of endurance has seen several amazing participants. An old man of 100 years Fauza Singh and a little 3 year old Budhia Singh exemplify the spirit of this race and the pursuit of excellence though endurance. Most participants do not run a marathon to win. They run in order to finish. And those who finish are all treated as winners in spirit. Running a Marathon is no joke. Training is intense and runners learn to progressively manage the distance.

The preparation for a marathon is a progression. Often, people who aspire to run a marathon are those who haven’t even run in years. Yet they venture with the spirit of doing the impossible and enjoy the progression. Small steps lead them onto bigger things. The approach is to build oneself mentally and physically. First, they take on 5 km and learn to run the course. They run with a weekly plan and gradually expand the distance they cover at one go. They prepare themselves mentally and physically as they grow their distance. Once a marathon runner confidently does his distance without the fear of stopping short, he then shifts his attention to the time. After ensuring you will finish, it is time to see how soon you can.

Investing in the stock markets is a race that is only too similar to the marathon – a distinctly long distance race. There is no escape from this race and every one of us needs to run it. We need to focus upon how we run this race.

What most of us do is measure ourselves time and again over the short distance.

We keep trying to do the shorter distance faster. In other words, we measure how we are performing over shorter time lines. This leads to excessive performance anxiety in the short term and often makes one to quit the race after doing a short distance. We simply run out of gas by doing too much in too short a timeframe.

Excessive focus upon short term performance is not how a long distance race ought to be run. When we focus upon shorter distances, we tend to overlook the big picture of how we should stay the course and complete the long distance race. The whole game is about staying the course and within reasonable earshot of the leading pack. Few investors run the investment race like a marathon. Why?

The reasons are not too difficult. Most investors venture into the stock markets with little or no previous experience, preparation or idea. Investors want to take the journey to wealth and the stock markets seem to be the best road to take. An investor must understand that the road to wealth should also be run like a marathon.

Preparation should be meticulous and precise. To run the stock market marathon, one must build himself mentally and financially. Firstly, you must believe in the stock markets and in your own ability to weather its tough course. If you only believe in the power of hope and prayer, it is only wishful thinking that the markets will do well for you. Then you aren’t sure about your own conviction and will probably chicken out of the markets exactly when you must not. Building conviction is like adding mental muscles and toning up your mind. You understand the risks and the opportunity on hand clearly. Then you mentally figure out the worst case scenarios. You understand how bad things can get and work out how you will respond. A marathon runner needs a well-toned up body. An investor needs a well-toned up mind. Financial preparation is equally important and should be built gradually by undertaking incremental investment steps. Building an investment corpus through regular, disciplined savings helps you assemble the capital that you need for stock market investing. As you build this corpus, you also learn what not to do by keenly observing the market behavior and investor responses. The money that you are building into a corpus continues to earn stable, fixed returns in bank deposits or fixed investment plans. During this phase when money is being built into a corpus your conviction must be strengthened and built up. By the time you continue to achieve the twin objectives of mental and financial readiness, you will be ready to run the marathon on the road to wealth. The actual race will go off well only when the preparation is precise and perseverant. The limited few who follow these two aspects and are well prepared end up winning. Striking gold or finishing well is only a matter of time. The road to wealth is very much a marathon.

By

Shyam Sekhar,

Chief ideator and founder

 

You are the reason for our recognition

It has been four years since ithought was ideated. To many who know my circumstances, this was a move that wasn’t easily understood. The times were such – 2009 was a year when the infra thematic funds and energy funds had drilled and destroyed investor confidence. The industry had manufactured toxic thematic funds in infrastructure and energy that were born to fail. And, these had been hard sold to raise thousands of crores of public money. Entry load had been banned leaving revenues of distributors in shambles. Advisory was not even a workable idea at that time.

“Why do this? Where was the necessity? What is the need?”

I had been a research driven value investor for two decades. I had a track record and investment approach as an investor in direct equity. I was known by my investment style and the choices I made. The idea of entering a space where I was to actually deploy money on the investment style of another guy – a fund manager, was hardly appealing to many to whom I sounded out. Yet, I was intent on building an investment practice in funds and financial products.

To me, the inspiration was simple.

Every investor needed something that will make his investing succeed. To me it was amply clear that this something was an investment process. I was convinced I could build this process. I liked the implicit challenge. The challenge was to build an investment process that was agnostic about brand power, fund manager’s image, incentive schemes and popular thinking.

The process simply had to be the sole driver of the business. It had to deliver research, investment discipline and strategy to every investor without bothering him too much. So, we built the process for two years and then invited investors to experience it. These two years of building investment processes for our customers have given us great insights, learnings and forward looking strategies.

The surprising part was that we didn’t sell even a single product. We simply bought the best products for our customers. We made it our mission to keep identifying potential winners.

An ironic surprise landed on my phone a few weeks back. We had been chosen for two awards in the IFA category.

1. Champion sales – equity & hybrids for South Metros.

2. Distributor of the year – South metros.

Both awards only show one thing – that a lot of investors trusted our investment judgment and process integrity. Thanks to the investor’s faith in us, we were able to invest a lot more equity than other IFAs. That the numbers translated into an award for sales and distribution is the irony, because we did neither of the two.

We dedicate this recognition to our investors. We promise you that we shall not sell you anything. We will only buy what we are fully convinced about.

When we win Sales awards for buying, we shall humbly place them as our dedication to you.

You are the reason for our recognition.

Warm regards,

Shyam Sekhar,

Chief ideator.

People never learn & I hope I am wrong

My best friends have all been calling me and asking the same question. “Should I buy property now ?”. 

A palpable anxiety will dominate every conversation. Interestingly most callers will start arguing the case for realty after hearing my opening lines which were not what they wanted to hear. 

Initially, i  wondered if it were just an NRI phenomenon. Being so far away from India, the NRI could easily be a  victim of the well-oiled real estate selling machine. Not to forget, their social do’s with fellow Indians must be full of  bragging stories about those wonder investments made by almost everyone. Everyone would have a story. A stroke of genius that worked from them and keeps them ahead of their NRI peers. On the long drive home from those parties, your wife will unfailingly  point out that  you may be missing out on something. 

The NRI must be loving this dream tale of Indian realty while hating everything else about India. After all, nobody believed when they left India that their Indian country cousins they left behind will be worth millions of dollars because they owned some real estate. For years, the Global dream was way ahead and Indians were hardly wealthy when compared with their peers who left the shores of India. But, bubbles change everything and my friends in London or NY feel that an Adyar home is out of their reach. This feeling of India being out of their reach has actually given many NRI’s a left out feeling.

I drive through Gandhi nagar, Adyar seeing the cubby holes that count for half a million dollar homes (notionally, of course ) and my disbelief only grows on me. So who is wrong out here? Will buying now be a smart thing? What are the odds that these markets fall by half? Instead, let us get some odds on prices going up further. Almost everybody agrees that prices cant go up. Even the greediest fellow concurs on this. But, nobody believes that the prices can go down. Sounds familiar, right ?

Didn’t we hear the same thing when there was a bubble in equities in 2008? Or, during the bubble in gold in 2011-12? 

In a bubble, even optimists typically believe that prices cant go up. But, they equally believe the prices cant go down too.  So bubbles destroy late believers and leave them financially maimed for a long time if not a lifetime.

That took my thoughts to 2004 when I saw the maimed lot sell real estate. That was a time when I last bought realty aggressively. Then, the mood was glum. Nobody wanted to buy homes as they thought the prices will never rise. Builders made 250 rupees to a square foot as profits and big projects like condominiums gave profits of a few crores. 

Now, builders work on profits in thousands per square foot. Actually , the profits a builder makes in a City development is much more than the selling price of comparable homes in 2004. So , what has changed so much in 9 years? Perception & investor confidence have run ahead. The result – investor greed funds builder greed. 

The sad truth is that when confidence runs way ahead, there is a price to pay for it. I hope I am wrong at least for the sake of my good friends who are buying homes now after never thinking about the idea for a decade. Doing the unthinkable at the market top is something I always dread. That friends are at it is a double worry. 

Cracking the investment puzzle

2008 made most of us risk averse. So, we thought the best way to steer clear from high risk was to stay off Equity. The investment options were limited to debt , gold and realty. Most investors went for a mix of the three. The strategy worked very well till gold came apart. Now, debt is set to give lesser returns. That leaves property as the last man standing.’ Will property fall ?’ If it falls, our investments of the past five years may well turn futile. But, the question should actually be ‘what if ?’.

Here is the ithought view. Investing should be done with the ‘what if ‘ question always taking precedence over the ‘ will there be a crash ? ‘ question. A crash will always happen if we overdo things. That is the plain truth. As investors , we must learn how to keep the damage minimal.  We must learn how a crisis works and how we must work in a crisis. Predicting a crisis is less important than preparing for one.
The important thing in investing is to be able to respond to a crisis. Why is it so important ? The reason is simple. When there is a crisis and we are in a position to respond, we turn the crisis into an opportunity. How do we achieve that ? We achieve that by actually assuming that things can go wrong. And, preparing for it.
Investors hate hearing that things can go wrong. Imagine the advisor telling us things can go wrong when you are about to invest ! So most advisors say only the right things. As an investor , one must learn to hear bad news. The ability to take the bad news first will turn us into better investors. The good news will anyway find us. We must learn to find the bad news.
When we devised an investment process for ithought , we were in a dilemma. How do we tell people the bad news and yet make them
invest ?Painting a rosy picture wasn’t an option. But, starting with a dirty picture wasn’t easy either ? That didn’t stop us from trying. So, we boldly did some straight talking.
We gave the bad news first and then explained how the good news will start flowing. Here too, investors are often in a hurry. ‘Why is my portfolio down now ?’. This question almost always makes its appearance when things are at their worst. ‘ I could have as well invested in a deposit.’ is another oft-heard reaction.
Here, the investor in us needs to be prepared. By asking questions in panic , we are only showing how unprepared we are. If we are prepared for the worst, we would respond by turning that into an opportunity. The ‘what if things turn worse ? ‘ approach always helps us take our investing to the next level. When the world panics, we will be ready to act. In panic, others will certainly freeze when they are unprepared. Just then, we will act decisively having prepared well for that moment.
An advisor’s  job is to prepare investors for that moment. Willing investors will be better prepared. The reluctant warriors will lag behind. But, preparation is clearly a journey.  So, how should you journey now ?
Prepare for debt investments turning unattractive. Prepare for a property meltdown. And, slowly start believing in the economic recovery.
Performance of asset classes is always by rotation.  Yesterday’s performers like gold are today’s laggards. Today’s performers could be tomorrow’s laggards. The laggard of today will deliver returns tomorrow.
Stop predicting. Prepare . Tomorrow’s prosperity lies ahead near us.

The making of a bull run

When nobody wants to buy something, it naturally loses its value. The value of something that is not in demand naturally tends to be lower than what it is really worth. This is the state of equities now. Look around you and you will find that the last time people chose equities as their preferred investment was in 2008. The past four years of painful wait has left investors tired and dejected. So much so, that people are selling equity on every rise and exiting the stock markets. Clearly, investment fatigue is at its peak. From experience, I can confidently say that a bull run is usually born when the fatigue peaks.

Can a bull run actually be predicted?

Bull runs always defy logic. But, they unfailingly follow a pattern. A number of economic events need to fall in place and liquidity flows into stock markets must rise quickly. Bull runs take off when people logically expect markets not to rise. Yet, if you are a contrarian thinker, you can sense when the markets refuse to follow logic and start breaking away. High levels of pessimism among retail investors are another good indicator to predict a bull run. Most bull runs start off when retail investors vigorously sell stocks and larger players absorb their selling.

How do I say a bull run is about to be born?

Between 2009-2011, we saw everyone flock to buy three asset classes. Real estate, gold and debt dominated the investment choices. Today, realty prices are at their all time high, gold is at its all time peak and interest rates are clearly peaked out. None of these three are attractive investment choices. Yet, investors are flocking to buy them. On the contrary, capital allocation to equity investments are at their lowest in five years. In fact, money is continuously moving out of equity mutual funds. Investor aversion to equity is at its peak. This naturally leads to a sharp dip in valuations. Pessimism always tends to be overdone. We are in that mind state right now about equities.

When fundamentals look at their weakest, how can a bull run be born?

Every Bull Run is born only when the fundamentals look very weak. Earnings of the Sensex remain static for two or three years. At the end of that phase the earnings start to grow again. The Sensex earnings were virtually static between 2008-2010. For three years the Sensex EPS went nowhere and hovered between 833 and 834. History has an important lesson here. When earnings don’t grow for long periods, it tends to compensate quickly in the subsequent years. The Sensex EPS hovered between 266 in 1997 (the year of the dream budget ) and 272 in 2003. Between 2003 and 2008, the Sensex earnings trebled to 833. The Sensex rose from its 2003 high of 5920 to its 2008 high of 21206.

This Bull Run was no accident. It happened because interest rates kept falling to hit a 10 year low. Liquidity hit a 10 year high. When interest rates are lowest and liquidity is highest, the earnings of companies grow at their fastest. The only spoiler is inflation. Always inflation will lead to the bursting of every bull market bubble.

What causes a bull run to gain momentum?

Falling interest rates.
Rising liquidity.
Rapidly expanding earnings ( E.P.S).

As inflation falls over the next two years, we will see interest rates drop and liquidity rise. Corporate earnings will grow faster as interest costs drop. The earnings growth tends to gain momentum within two years of the interest rate cycle turning. Over the next two years we will see the return to growth. The stock markets will only respond after returns convincingly establish that growth is back. A swift rise in the markets will then leave the investors stunned. This is how every Bull Run shocks and awes the investor. The next Bull Run will be no different.

How does the Sensex gain valuation?
Pardon me for saying a plain truth. The Sensex gains from two things. One, the outperforming companies take the leadership of the Sensex and become its growth engines. Usually, it is four or five companies to begin with. Overtime, the numbers grow. The second and most important contributor to Sensex gains is the restructuring of the Sensex. Stock exchanges tend to replace non performing companies with performers. This improves the composition and delivers a positive drag to the Sensex. You will notice that key indices are in the middle of a churn of companies. This bodes well for the indices.

Will the markets gain rapidly?

Unlikely, given the weak economic numbers, Nifty will remain in a range between 5200 and 5600. The changes in the nifty’s composition will take effect only slowly. As the economy gradually picks up growth momentum, more companies in the nifty will start reporting better numbers. This will help the markets break out of the range given above. But, that is going to take time. Liquidity from FII’s can however change all assumptions and investors must closely monitor FII fund flows.

What should investors be doing now?

Investor’s must use this range bound market to buy quality. When markets are in a side wards movement, it is the best time to build a portfolio for the next Bull Run. Buying price bargains should happen when equity is out of favor. Stock specific approach should be followed and investor’s would be better off avoiding trading. Blue chips must be bought now and held for many years. Investors must understand that there will be underperformance for a while and confidence will return only over a longer period.

Trading vs. investing – which is a better idea?

Trading is a strict no-no. If you try trading now, you will end up selling your winners and hanging onto the losers. Moreover, if you have bought a company with high visibility of performance, by trading you would have settled for a very small profit. If you had chosen to remain an investor, such stocks will turn out to be your multi baggers.

 

Mr.Market – The Man Friday who works for free

Sounds cocky, right? Let me try and make my case.

An investor’s life isn’t easy. Winning to one actually means losing to a whole lot of others. The truth is that every smart investor gains from the stupidity of others. In my view, smartness can be demonstrated only if you can find the requisite stupidity. That counter point is what makes smartness stand its ground. That is the story of every investing success. So, for once, let us give stupidity it’s fair due.

What is so special about Mr.Market?

His very construct. Imagine how life would be if everything was efficient about the stock market. Imagine if there was no irrationality. Investing will be a nightmare with no upside. Irrationality is what breeds every investing success. Only that the investor feeds on it like a parasite. The irrationality is what Mr.Market generously doles out to the smart investor.

The smart investor’s alter ego is Mr.Market. He fills the need for someone who will do your bidding without questioning you. Even if it meant acting irrationally just so you can benefit from it. One needs such a foot soldier on whom you could rely upon to deliver every time. One who will wilfully bear the cross so that smart investors enjoy the gains.

The best part is you don’t need to even ask him. I have seen Mr.Market work for me like no one else. He has done 22 years unblemished service with no remuneration. His loyalty to my cause has been total. My cause was to create wealth and I always needed an irrational fellow who will sell my what I like at prices I like; buy my stocks are high valuations giving me easy exits on quantities which I struggled to build for months together.

What if there was no Mr.Market ?

I am nobody without Mr.Market. He is the central character in my investing story. Over two decades , my respect for Mr.Market has risen as I gradually understood the role-play. My empathy towards the troubles of Mr.Market have grown with me. I really hope that one day there will be no Mr.Market. That the pain of losses will never fall on anyone. But, my head tells me that will never be. Mr.Market is actually forever.

Why ithought?

This question is popped at me by almost everyone who knows my story. It puzzles those who know me that I should actually start a venture that advises other investors (small and big) in a beaten space like mutual funds. Isn’t it too restricted and repetitive? Would it not be better if I simply stayed put to the proven path in secondary market investing?  How will investors understand what we do and appreciate the value of our work? Is there a differentiator? Even if there is one, will we be viewed differently from the herd?

When you are hearing many questions on something, I believe that it indicates that people need greater clarity on the subject.  This note is an effort at explaining.

I am basically a secondary market investor. My secondary market investing is based on research and strategy. I rely principally on reading, researching and thinking about the future of businesses. The numbers matter as much as the ideas. My investment style avoids interaction with companies and I rely on my understanding and number crunching skills for decision making.

I have a core investment philosophy which pervades my work. The philosophy guides my thoughts and helps me make my investment choices. While making the right choices is critical for investing success, how we deploy our monies into these ideas is equally critical. The investment strategy does that job. The investment strategy follows the investment philosophy closely and involves managing the right balance between chosen investment bets. My investment strategy is adaptive and dynamic. It factors in events, news, economic data and sentiment while making routine decisions of buying and selling. The strategy gives the much needed calibration to my investing.

This investment approach has helped tide over two gulf wars, the scams of Harshad Mehta & Ketan Parikh , the dotcom bust, the derivatives crisis of 2007 and the current crisis of global central banks. The long term value of investments did not get impaired and returns stayed consistently better than other asset classes.

Over this period, I observed that retail investors who took the mutual fund route had mostly been battered and lost faith in this concept. The powerful idea of mutual funds had not worked for a wider section of investors. I have been a passive observer of this trend and not preferred professional advice despite being qualified to do so for a long time.  The crash of 2007 inflicted severe pain and developed abhorrence to mutual funds among the investing public. This made me go deeper into how funds were managed. The months of studying what the funds were doing and why they were not returning monies to investors were an eye opener. The curiosity grew into a challenge as I started trying to develop metrics which could measure the future potential of funds. This process saw a team being assembled and a framework falling in place. The ithought way was born out of this search for answers. I drew on all my experience as a researcher and investor. Gradually, we came to the point where we started viewing the fund like a stock and making portfolios of funds. Even at this point, we were not sure how we could turn our research work into a business model.

Investors were not willing to pay an advisor fees and the funds schemes were being distributed with upfront commissions being paid to agents out of the entry loads taken from the investor’s corpus. SEBI brought about a sweeping change to this system by abolishing entry loads. This event turned the research project into a start up and ithought was born.

I believe that ithought will change the way investors use the mutual fund route. The ithought way will help every investor to make his investing research-based and strategy-driven. Investors can even turnaround their existing investments by adopting the ithought way.

Ithought is a game changer. It has kicked off in a falling market. The next Bull Run will prove its efficacy and team ithought will constantly strive to make the ithought way work for every investor.

 

Lastly and most importantly, ithought has a strong reason to be. YOU.

Shyam Sekhar,Ideator

and Chief Mentor,

ithought.

 

 

 

 

The ownership factor in investing

Dear Investor,

Greetings from ithought!

Successful investing is all about having a sense of ownership. Think of your past experiences in equity investing. Ask yourself why the bets you took in mutual funds did not play out as expected. Could you have done things differently to bring about the right outcome? What would have made the difference?

We thought about this hard. Being an investor helped. We knew how things go wrong. We knew what it took to do things right. Some basics need to be always right if your investing ought to work. Firstly, you need the right knowledge to deliver. Secondly, you need to know the art of deciding. Decisions count and ought to be timely. Thirdly, you need to have a method to manage. A method to manage yourself, the knowledge on hand and to keep the decisions going.

Now banks, with their executives flying all around money like prying vultures, simply don’t mean to do any of this. In fact, they simply aren’t equipped to do any of what we just mentioned. Bluntly put, any seasoned investor knows this truth. Only that, this is well concealed from the bank’s customers. Nothing will change in the way the banks work with your money. In fact, nothing will change the investment outcomes except chance.

ithought was ideated to be the alternative. A venture where knowledge, decisions and method stand out.  Where capital is deployed, managed, and grown with a sense of ownership. It is exactly how a sensible and hard nosed investor would handle his money; an approach to investing with a strong sense of ownership.

With the markets in a state of hopeless apathy and the previous bull market a full four years behind, the stage is set for the next bull run to take birth. We believe that it is a matter of time before equity recoups interest. The best thing you can do now is to rework your approach to equities. Try an approach to investing whose strong sense of ownership would make a difference to your outcome.

What better time to begin than when the chips are down? There is little to lose and so much to gain.

Investing is not simply about placing money. It is about placing faith on the right people.

Happy investing!

Warm Regards,
Shyam Sekhar,
Chief ideator, ithought.

Expectations for 2012

As I sit down to write this note, the Sensex is down 24% for 2011. Equities have been the worst performing asset class and the reasons are clear and adequately reflected in a situation where market sentiment has been weak and investor interest quite indifferent.

The question often being asked is what went wrong in 2011? The economy was managed poorly, fiscal prudence was non-existent and reforms went into neutral gear. If that was not bad enough, corporate corruption was rampant. By any stretch, it was an awful year  for equity investors. In the midst of all, what can one expect from 2012?

To my mind, we are in a spot on both the economic  and political fronts. Our currency is dangerously above the Rs 52 levels against the dollar. The government cannot afford to indulge in populist welfare schemes when its purse is strapped. There is very little option but to bring in more reforms on the back of some serious pressure to disinvest. What has been most worrying is the political paralysis which needs to be addressed at the earliest. The hope is that economic sense will prevail after the crucial UP elections in 2012 and some economic legislations could then see the light of day.

One of the most talked about measures has been the GST. It is apparent that this will go through sooner than later. If the implementation of VAT had a positive effect on the GDP, it is clear that GST too will have a similar impact. Once it is implemented, the simplified tax structure will move businesses away from the parallel economy which, for long, has resulted in tax evasion.

In terms of the monetary policy, 2011 was the squeeze year when there was a shortage of liquidity and soaring interest rates. One anticipates that there will be less pressure on the system in 2012, which will infuse liquidity back in the system. This process may take time and the benefits will slowly be felt.

For now, the stock market could witness another rough ride accompanied by irrationality as well. Investors may miss the positives and their decision will be backed more by fear and less by logic. The way I see it, what has gone past in 2011 will ready us for a better 2012.

Happy investing during 2012!