Manage Your Risk Well

The erratic stages and varied impact of the pandemic is creating mixed signals on where the world economy is heading towards. While in some parts like India the economy is now beginning to chug along, there is Europe where the pandemic is again tightening its noose. On the other hand, China’s economy seems to be accelerating while the US’ pandemic situation is being overshadowed by the elections. However, in all this chaos, the market still continues to show strength and resilience.  With a major global event unfolding this fortnight – the US elections – it would be wise to stay light in the current market. This is not because we expect any major correction but for the fact that the stocks prices may become irrational in the short term. While the surveys are currently tilted in US’ presidential candidate Joe Biden’s favour, it is still anybody’s guess until the results are out. 

The result season has commenced, and the early signs indicate that the earnings are fairly impressive with some of the companies having been able to report outstanding results in spite of the restricted environment. However, the rising graph of unemployment and tough situations that people have gone through in the last few months will take a toll on consumer spends in the forthcoming festive season as compared to the previous years. 

With all this euphoria and uncertainty in the air, it is appropriate to remain cautious and manage one’s portfolio risk appropriately. And this is precisely what our cover story focuses on in this issue. Many investors overlook the simple fact that doing proper portfolio risk management actually allows them to take higher exposure while enhancing the overall risk-adjusted returns of the portfolio. Do find some interesting observations in our cover story and share them with us. 

Meanwhile, the government has been making some subtle announcements targeting specific sectors. One of the sectors that the government has decided to support is the textile sector. We have covered the prospects of the sector and investment opportunities in one of our special reports. We have also shared the top picks from this sector. In our additional special story, we have talked at length about the multibaggers of 2020. The story highlights sector-wise multibaggers and discusses the trends in 2020. We have also shared some interesting statistics on these stocks. Some of these observations are sure to be eye-openers. 

To conclude, our advice would be to avoid building a leveraged position for the short term. Keep light and hold some liquidity in cash to benefit from the market volatility which is expected to increase in the coming days. We are experiencing a rare market condition wherein the defensive along with cyclical stocks and consumer-facing businesses are showing signs of doing well concurrently. So stay optimistic, stay hopeful and manage your risk well! 

RAJESH V PADODE
Managing Director & Editor