Portfolio Analysis March'20

As we navigate the murky waters of the coronavirus pandemic, the world seems to have entered uncertain times. And those deepening worries are reflected in fluctuating markets worldwide as the Black Swan event of 2020. Even as India so far has remained relatively less scarred from the COVID 19 virus compared to some other countries, the next few weeks can very quickly change that, with multiple cases erupting from corners of the country.

Major lockdowns in force globally has disrupted effective commerce, trade and business operations and have set in motion a ripple effect across industries coupled with stock market crashes ,volatile commodities and treasury yields

It would be very naive to believe that anyone would insulated from the repercussion of the stalling economy.

It is a very important time to manage the portfolio,while re balancing in one hand for reducing losses while picking up lucrative opportunities in the other hand. A three pronged approach I have taken

Evaluating my alternative portfolio and cutting any exposure to high risk sectors,individuals etc
Increasing exposure to asset classes which have become undervalued and can provide high risk reward in the future.
Looking for short term opportunities to make out most of the current volatility in the market

In light of these factors I will evaluate the latest performance of my portfolio:

P2P Portfolio

The current lockdown has negatively impacted the P2P portfolio as it makes collection tougher on one hand while some people are more susceptible to default if situation doesn’t improve.

Current Performance of the Portfolio is :

Well the portfolio drop in yield doesn’t look bad. The reason is some of the defaults will show up after 2-3 months as they are current as of date but might become delinquent which can drag down the yield. As some of the loans have availed moratorium if they start paying after the break yield will again start going up

As my current portfolio is predominantly across 3 platform I will look into their performance in depth.

I2IFunding: Luckily for me 90% of my exposure had been in either government related D category loans or education loans and nothing in business loans.These loans would be less stressed due to current economic condition.

Major challenges would be in group loans and e-rickshaw loans in which I have around 7-8% percent exposure. As these loans are in moratorium I expect if lockdown is over by may and people start working from June then collection should be able to get back most of that amount..

As of now reinvesting in 1) government employees 2) short term high salary employees.

RupeeCircle: In rupeecircle I invested only in salaried with Owned house.I see collection easier in these cases as companies have to access to parental house details and being salaried most people should be able to payoff loans unless mass unemployment starts in the country!

Finzy: In Finzy most of my loans are in salaried but few are also given to business owners. 15% of the people in my portfolio have requested for moratorium .

How the lockdown plays out in India would be critical to the p2p lending collection and borrower ability to pay back.

Invoice Discounting:

My invoices have been repaying on time and I am happy with the yield I m getting considering how most of the other assets are struggling with drawdowns.

My Amazon invoice recently matured on time. As of now people should only invest in big names with cash on balancesheet and avoid startups untill the lockdown is over and Corona virus threat comes down.

Even 11-12% yield in a big names is very attractive at the moment. Tradecred is providing liquidity which is a positive thing and people who wish to have some cash can use it when they require.

Equity/ REIT Investment:

As mentioned earlier I have been actively increasing equity investment both globally and in India since the carnage.

If we compare the US vs India comparison for the last months we can see how global investing was able to outperform India because of added dollar appreciation

S&P lost around 14% Year to Date. But if we see how much rupee depreciated over the same time : from 71 to 78 which is close to 9% which means effectively we lost only 5-6% this year!!!

compared to that indian market lost a whooping –25% this year!!

Some popular global and Indian ETF/MF I have bought recently

Existing MF and global products in portfolio

As of now Im not adding any small cap mutual funds to my portfolio as the question of survival can come up during a long lockdown and large cap have more cushion to withstand it. I bought ITC at 140 as dividend yield looked attractive at that level.

Trading Strategy:

If anything ,this market has been a traders market and gave lot of opportunity to make profit. Some of my trading calls proved right and I was able to make a decent profit.

Global Market Trading Strategy:

In my last post I had mentioned shorting VIX at 80 which I did and it has brought some good results.After touching 80, the VIX has dropped to almost 40+ level and the ETF generated a nice 20% returns in the 20 days period apart from the dollar gain! .It is available on stockal with ticker: SVXY

Indian Market Trading:

I could divide the strategy in 2 parts, Trading and the hedge.

Trading Strategy: I had sold dec put which I had to book losses after my stop loss got hit but when market crashed to 8000 ,weekly calls were trading at 80IV which is equivalent to 4-5% weekly return on ATM options,I started selling options which gave great returns

Ideally when markets have crashed selling options is a good strategy but best thing is to do spreads as most people cant monitor market all the time. eg bear spreads,calendar ,diagonal etc

Hedging strategy:

I bought a 8000 put and sold 2 7000 put for april almost at zero cost.

Reason. If market crashes upto 7000 I make a cool 75000 per lot. My downside protection is uptil 6500 beyond which I can either roll it for next months or create a similar structure!

Conclusion: This month has been really challenging but gave us good equity and REIT opportunity to buy along with trading .The next couple of months will be crucial .An important thing people should focus on is to keep liquidity in saving account(Kotak etc) for any bad situations like job loss etc!!

Footnotes:

Global Investing Platform Stockal Discount Link

For global Investing through Vested

Use this to register and get 5$ in your account (https://app.vested.co.in/referrals?code=RORA74993 )

For buying zero cost MF and lowest Derivative Trading

Zerodha Referral

For alternate investment you can use these links

Finzy Referral Code:

https://finzy.com/invest?partner=MAN635

or you can apply the code : MAN635

Faircent Referral

I2I Account Referral Link