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A star equity investor in India with over ₹1,000 crore worth of assets under management has been forced to write yet another letter to his investors explaining the poor performance of his portfolio. Porinju Veliyath of Equtiy Intelligence's latest letter rued the seemingly endless sell-off in mid and small-cap stocks in India for over 18 months. Making matters worse for Veliyath, who has over a million followers on Twitter, are the provisions of the latest budget presented by the newly appointed Finance Minister Nirmala Sitharaman. The following the full text of his latest letter addressed to his investors on July 18. Dear Investors, Eighteen months since the sell-off in broader markets began and yet there has been no respite to small and mid-cap investors like us. All the recovery we made from February 2019 lows has been sold into and we are back to the February levels. Longevity of the ongoing bear market in mid and small caps - of this magnitude has been astounding to even the most seasoned equity investors. I had felt elections could be the turning point for investors to come back to equities. Unfortunately, the positives of the continuity in government has been lost with the market unfriendly provisions in Budget, at least for the near term. Though the maiden budget of Modi 2.0 laid out a long-term vision that the government aims to achieve, some provisions in it has been disappointing from a near term stock market perspective. While the monetary impact of these changes is minimal, the message it gives to the larger investment community is rather regressive. Intentions of the present government without doubt have been good and their efficiency in utilizing tax revenues has been excellent, but these factors aside, it seems that policy makers are not acknowledging the cardinal principles of a free market economy. Past few years saw several challenges emerging in the economy. Though we were cognisant of many of them, we underestimated the extent of the first and second order consequences of some. Government's noble and welcome efforts to strengthen tax base, improve traceability, reduce black money and corruption seem to have chocked the economy for the near term, more than anyone anticipated. Despite RBI repo rate cuts, transmission of the reduction has not happened and the cost of capital to corporates have remained tight, thereby delaying any major industrial recovery. IL&amp;FS scam, instead of getting resolved, have spread to other major NBFCs and banks. IBC process has been entangled in judicial processes and is frustratingly slow. Broader markets are yet to recover from the forceful selling in small and midcap companies triggered by SEBI directives on reclassification to mutual funds industry. Overall, there has been a divergent and narrow market performance for a long time now. Though Nifty has held up, broader markets have shaved off 50% or more in this period. Close to 90% of listed stocks are down anywhere from 30% to 90% whereas top 10% large companies have not fallen much. All the matters above that has affected the universe of the companies in which we have been investing in and for which our clients have entrusted us the funds, sadly, are beyond our control. Most of the stocks in our portfolio are fundamentally strong and some of them are industry leaders with the potential to create wealth. But when will the market acknowledge the underlying value of these companies and reflect them in the stock prices? Having experienced the vagaries of markets for the past three decades, I see a significant recovery going forward, that looks inevitable to me, but I cannot give a time frame for this - I have gone wrong many times earlier in this regard. Many of you would be wondering why we are holding on few underperformers in the portfolio. After a significant draw-down, to sell any under-performing company and shift to alternate opportunities, we need to take a call on many aspects, including: <ul><li>Has the original investment thesis been permanently jeopardized or delayed indefinitely, that makes shifting a better decision than waiting? </li><li>What would be the implicit costs of liquidating these investments in a sentimentally depressed market devoid of buyer participation? </li><li>Is there an alternate opportunity with potential upside that can compensate the draw-down in these stocks available? </li><li>What is the further downside in these stocks and what is the probability that when market sentiment turns around these stocks would perform better than the available alternatives? </li></ul> Considering all the above and a host of other factors in a dynamic and evolving environment, we have been doing whatever in our opinion is best possible. Hoping for better times and waiting patiently for the sentiments to change. SEE ALSO: <a href="https://www.businessinsider.in/warren-buffets-advice-for-investment-manager-porinju-veliyath-who-lost-millions-by-not-cutting-losses/articleshow/67522607.cms" data-type="tilCustomLink" target="_blank">A star money manager in India made a rookie mistake that cost millions</a>

Full text of Porinju Veliyath's latest letter to his investors

<ul><li>Porinju Veliyath of Equity Intelligence wrote a letter to his investors on Thursday explaining the poor performance of the portfolio.</li><li>There has been no respite from the sell-off in mid and small-cap stocks in India for over 18 months, he said.</li><li>Some of the budget provisions did not acknowledge the cardinal principals of a free-market economy, according to Veliyath.</li><li>Veliyath had earlier written a similar letter to his investors in January 2019 when the portfolio had lost nearly half its value in the preceding nine months.</li></ul>A star equity investor in India with over ₹1,000 crore worth of assets under management has been forced to write yet another letter to his investors explaining the poor performance of his portfolio. Porinju Veliyath of Equity Intelligence's latest letter rued the seemingly endless sell-off in mid and small-cap stocks in India for over 18 months. Making matters worse for Veliyath, who has over a million followers on Twitter, are the provisions of the latest budget presented by the newly appointed Finance Minister <keyword id="129243" type="PERSON" weightage="20" keywordseo="Nirmala-Sitharaman">Nirmala Sitharaman</keyword>. 
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 "Some of the budget provisions did not acknowledge the cardinal principals of a free-market economy," Veliyath said in his letter on Thursday (July 18) adding that the the positives of the continuity in government has been lost with the market unfriendly provisions in Budget, at least for the near term. 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Though the blue-chip stocks have held up largely, nearly 90% of all listed stocks in India have lost anywhere between a third to as much as 90% of their value in recent months, Veliyath wrote in despair. Some of the stocks that Veliyath is known to have invested in have lost as much as 85% in the last six months, since his last letter to the investors. <table style="width: 188pt;"> </colgroup></colgroup> <tbody><tr> <td class="xl65" style="height:15.0pt;width:78pt">Stock</td> <td class="xl66" style="border-left-width: initial; border-left-style: none; width: 110pt;">Last 6 months</td> </tr> <tr> <td class="xl67" style="height: 15pt; border-top-width: initial; border-top-style: none;">LEEL</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-85.42%</td> </tr> <tr> <td class="xl67" style="height: 15pt; border-top-width: initial; border-top-style: none;">Duroply</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-38.85%</td> </tr> <tr> <td class="xl67" style="height: 15pt; border-top-width: initial; border-top-style: none;">Ansal Buildwell</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-50.71%</td> </tr> <tr> <td class="xl67" style="height: 15pt; border-top-width: initial; border-top-style: none;">Eastern Treads</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-35.32%</td> </tr> <tr> <td class="xl67" style="height: 15pt; border-top-width: initial; border-top-style: none;">Raunaq EPC Intl</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-61.66%</td> </tr> <tr> <td class="xl67" style="height: 15pt; border-top-width: initial; border-top-style: none;">Kerala Ayurveda</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-19.23%</td> </tr> <tr> <td class="xl67" style="height: 15pt; border-top-width: initial; border-top-style: none;">Palash Sec</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-6.98%</td> </tr> <tr> <td class="xl69" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Shalimar Paints</td> <td class="xl70" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3.47%</td> </tr></tbody></table> <a href="https://www.businessinsider.in/markets/full-text-of-porinju-veliyaths-latest-letter-to-his-investors/articleshow/70278145.cms" data-type="tilCustomLink" target="_blank">Read: Full text of Porinju Veliyath's latest letter to his investors</a> Veliyath, in his last letter in January, said that the portfolio had lost 44% of the investors' money in the preceding nine months mostly because of one stock, LEEL Electricals Ltd (formerly Lloyd Electric &amp; Engineering). In a private letter on January 11, accessed by news agency IANS, Veliyath's firm Equity Intelligence apologised for the 'flawed investment' that eroded millions in value, adding that there may be no benefit in selling it now. Seven months later he continues to hold some of his loss-making bets. "Many of you would be wondering why we are holding on few underperformers in the portfolio. After a significant draw-down, to sell any under-performing company and shift to alternate opportunities, we need to take a call on many aspects," Veliyath wrote on July 18. SEE ALSO: <a href="https://www.businessinsider.in/warren-buffets-advice-for-investment-manager-porinju-veliyath-who-lost-millions-by-not-cutting-losses/articleshow/67522607.cms" data-type="tilCustomLink" target="_blank">A star money manager in India made a rookie mistake that cost millions</a>

A star money manager in India with over a million followers is blaming the budget for perpetuating the bear market in Indian stocks

<ul><li><keyword id="2623347" type="PERSON" weightage="20" keywordseo="Biocon-chief-Kiran-Mazumdar-Shaw">Biocon chief Kiran Mazumdar Shaw</keyword> and former Infosys Director <keyword id="6491998" type="PERSON" weightage="20" keywordseo="mohandas-pai">Mohandas Pai</keyword> told a newspaper that they were told hold back their criticism of the Modi government by an official.</li><li><keyword id="33278" type="PERSON" weightage="20" keywordseo="Rahul-Bajaj">Rahul Bajaj</keyword>, chairman of Indian conglomerate Bajaj Group, said that the auto industry’s going through a rough patch because of lack of demand and no private investment. </li><li>Over the months, more and more stock market investors have taken to Twitter to talk about the government’s unfriendly market policies. </li><li>Adi Godrej, chairman of the Godrej group, had said that the Budget presented by Finance Minister Nirmala Sitharaman is not “growth-oriented”.</li></ul>Indian companies have been betting big on PM <keyword id="6354477" type="PERSON" weightage="20" keywordseo="Narendra-Modi">Narendra Modi</keyword>. And why not? In 2017-18, a lion’s share of <a href="https://www.business-standard.com/article/economy-policy/data-shows-bjp-bagged-92-of-corporate-donations-to-political-parties-119011701405_1.html">corporate</a> political donations went to his party, BJP. Now, they are livid. The latest to join the bandwagon of angry corporates is Kiran Mazumdar shaw who made a shocking revelation on Sunday. A government official reportedly told her not to speak of harassment by tax officials in relation to <a href="https://www.businessinsider.in/rip-vg-siddharthas-death-and-why-former-prime-minister-hd-deve-gowda-cried/articleshow/70464431.cms" data-type="tilCustomLink" target="_blank">the unfortunate death of VG Siddhartha</a>, the founder of <keyword id="46195" type="COMPANY" weightage="20" keywordseo="Cafe-Coffee-Day">Cafe Coffee Day</keyword> outlets. "“He just said that ‘please don’t make such statements. Even Mohandas Pai should not. I am telling you as a friend’,” the Biocon chief told The Telegraph. Even Mohandas Pai, the former Infosys director who is currently a private investor who backs startups, chimed in. "Lots of people get such threats," he told the newspaper. Both of them have been avid supporters of Narendra Modi in the past and bitter critics of the Congress-led United Progressive Alliance government that ruled from 2004 to 2014. “I used to speak out always. It doesn’t matter if UPA is in power or the NDA,” Shaw said urging the corporate world to speak up. Earlier, Rahul Bajaj, the chairman of Indian conglomerate Bajaj Group. During his company’s Annual General Meeting, he spoke of the government’s role in the weak sales of the auto industry. Fall from Heavens “There is no demand and no private investment, so where will growth come from? It doesn’t fall from the heavens. The auto industry is going through a very difficult period. Cars, commercial vehicles and two-wheelers are going through a rough patch,” Bajaj added. The Budget has not cheered them either. The government imposed a tax on super rich, and <a href="https://www.business-standard.com/article/markets/sebi-s-separate-fpi-registration-plan-draws-flak-from-investors-119061901134_1.html">Business Standard</a> had reported that market regulator SEBI mandated separate registrations for Foreign Portfolio Investors. The resentment against these rules is rising. The slow pace of economic growth, and their credibility isn’t helping either. Until now, corporate giants stayed out of the debate over credibility of government's growth data between <a href="https://www.businessinsider.in/131-cas-respond-to-letter-from-economists-disputing-govt-gdp-data/articleshow/68463411.cms">108 economists</a> and 131 chartered accountants. But, now they are not holding back. “The government may or may not be saying this but there are clear cut markings from the International Monetary Fund (IMF) and World Bank, which shows a decrease in growth in the last three-to-four years. Like any government they would like to show a happy face, but reality is reality” Rahul Bajai <a href="https://www.moneycontrol.com/news/technology/auto/angry-rahul-bajaj-criticises-centre-for-falling-demand-private-investment-4259711.html">said.</a> Meanwhile, his son Rajiv Bajaj had said government’s policies on<a href="https://www.moneycontrol.com/news/technology/auto/governments-policy-on-electric-vehicles-has-left-everybody-confused-rajiv-bajaj-4252151.html"> electric vehicles</a> had left everyone confused. Complaints in chorus The Bajajs, Kiran Mazumdar Shaw, and Mohandas Pai are not alone. Adi Godrej, chairman of the Godrej group, too <a href="https://www.firstpost.com/business/industry-leaders-reaction-on-budget-2019-adi-godrej-says-budget-is-not-growth-oriented-stock-market-comes-down-considerably-6940161.html">said</a> that the Budget presented by Finance Minister Nirmala Sitharaman is not “growth-oriented”. <a href="https://www.ndtv.com/india-news/adi-godrej-rising-intolerance-hate-crimes-can-seriously-damage-growth-2068996">Godrej also touched upon a sensitive subject </a>saying that rising intolerance in the country is also affecting growth. Investor and author Basant Maheshwari recently took to Twitter to say, “Lowering GST and other charges on Electric Vehicles won’t create demand. There is just no infrastructure. People won’t change preferences like that plus EVs aren’t cheap. However, it will surely lead to a fresh bout of short selling in the frontline auto names? That’s all.” This is an unexpected move for top corporates who had stayed away from government bashing even during demonetisation in 2016. Clearly, the tables have now turned. Porinju Veliyath, founder and CEO of Equity Intelligence, after the Budget said, “India dreams a $5 trillion, graft-free, double-digit, free-market-driven, rule-based and liberal economy by 2025! This is very much doable, but I am afraid parts of the Budget - the direction it points, can take us back to 4% GDP growth rate!” Center of the Left Veliyath had even written a letter to his investors, explaining the poor performance of his portfolio. "Some of the budget provisions did not acknowledge the cardinal principles of a free-market economy," Veliyath said in his letter on Thursday (July 18) adding that the positives of the continuity in government <a href="https://www.businessinsider.in/india-market-news-porinju-veliyath-blames-the-budget-for-bear-market-in-smaller-stocks/articleshow/70277012.cms">has been lost with the market unfriendly provisions in the Budget. </a> When big money backed Modi with hopes of market reform, they made a bad bet on a party whose ideology is rooted in ‘Swadeshi’, which can be loosely translated to home-grown conservatism. As the commentator and author <a href="http://www.newindianexpress.com/opinions/columns/shankkar-aiyar/2019/jul/21/the-bjps-socialistic-conservatism-2006971.html">Shakar Aiyar argued recently</a>, “In popular perception, the BJP was seen as the home of right of centre economics. And the centre continues shifting to the left.” SEE ALSO: <a href="https://www.businessinsider.in/rip-vg-siddharthas-death-and-why-former-prime-minister-hd-deve-gowda-cried/articleshow/70464431.cms" data-type="tilCustomLink" target="_blank">A former Prime Minister cried on national TV for VG Siddhartha-- the untold tales of politics and privilege may die with India’s coffee baron</a> <a href="https://www.businessinsider.in/cafe-coffee-day-founder-vg-siddhartha-letter-to-board-of-directors/articleshow/70443951.cms" data-type="tilCustomLink" target="_blank">Full text of the letter written by Cafe Coffee Day founder VG Siddhartha before he went missing</a>

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Full text of Porinju Veliyath's latest letter to his investors

BI India Bureau

A star money manager in India with over a million followers is blaming the budget for perpetuating the bear market in Indian stocks

Sriram Iyer

Narendra Modi has a new problem – big corporates and moneybags are angry

BI India Bureau

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