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Why Even the Best PMS Failed to Deliver Returns in Last 1.5 Years?

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Indian markets have been under huge pressure, due to a slowdown in the economy and weak corporate earnings growth. So it is quite natural that the portfolio of most investors has taken a hit and the same is the case with portfolios of best Portfolio Management Service (PMS).

Let’s take a look at some of the other factors which affected the Indian stock markets over the last 1.5 years:

Default of IL&FS

In September 2018, IL&FS Financial Services, a subsidiary company of IL&FS, defaulted in payment of interest on bank loans, deposits and in the redemption of commercial paper. As a result, rating agency ICRA downgraded the ratings of its IL&FS’s short and long-term borrowing. The defaults also put at risk thousands of small investors as well institutional investors like banks and mutual funds who had significant exposure to IL&FS. It also sparked panic among equity investors even as several non-banking financial companies faced turmoil amid a default scare.

Fears of a debt market crisis due to an IL&FS default prompted DSP Mutual fund to sell commercial papers of Dewan Housing Finance (DHFL). This resulted in a contagion effect in domestic stock markets with Indian benchmark indices correcting heavily.

Higher tax surcharge on foreign portfolio investors (FPIs) announced in the Budget

In the union budget for 2019-20, the finance minister announced higher tax surcharge on foreign portfolio investors. This triggered off a massive sell-off by foreign portfolio investors in domestic markets which continued for the next few months. Foreign Portfolio Investors (FPI’s) & Foreign Institutional Investors (FII’s) have been one of the biggest drivers of Indian stock market over the last 2 decades.

Ongoing round of trade wars between USA and China

There seems to be no respite in the trade wars between USA and China. The imposition of fresh tariffs by USA on China and vice-versa every time have resulted in a sell-off in American stock markets, prompting a rush for safe-haven assets such as US bonds and gold. With American stock markets taking a hit, the cascading effects can be seen in world-wide markets including Indian markets too.

The road ahead looks better for best portfolio management service

Over the last 1.5 years the number of negatives which influence stock markets have far outweighed the positive factors in the market which resulted in a negative returns for portfolios of even the best Portfolio Management Service. Small-cap and mid-cap stocks which form a large portion of portfolios of investors of best Portfolio Management Service have taken the biggest hit in the last 1.5 years.

However, the government has taken some concrete steps to boost the market, such as the rollback of the higher tax surcharge on foreign portfolio investors, reduction in corporate taxes and re-capitalization of public sector banks. With government doing everything possible in its power to uplift the economy and boost stock markets, the road ahead looks positive for investors.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

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