Porinju Veliyath writes to investors, blames budget provisions for poor market performance

The managing director and portfolio manager of Equity Intelligence India in his letter said policymakers of Modi government are not acknowledging the cardinal principles of a free market economy.

Veliyath said the intentions of the present government, without doubt, have been good and their efficiency in utilising tax revenues has been excellent.

“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," said the Kochi-based Veliyath in a letter to investors.

Talking on GST and demonetisation, he said these initiatives have backfired, "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."

He added, "IL&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 the mutual fund's industry. Overall, there has been a divergent and narrow market performance for a long time now."

Further, Veliyath said, "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."

Concluding his letter, he said, "Considering all the above and a host of other factors in a dynamic and evolving environment, we have been doing whatever in our opinions best possible. Hoping for better times and waiting patiently for the sentiments to change."

Veliyath is one of the most experienced fund managers in India and has an enviable track record of out-performing the stock markets.

In 2002, Veliyath started his own portfolio management firm, Equity Intelligence. Today, his company is creating wealth for his clients using his unique stock selection prowess and the wealth of knowledge on corporate India.