Rexit Underestimated? Who loses?

Ashok KumarLKW Investment AdvisersLet us make no mistake about this - we lost someone with extra-ordinary skills when RBI Governor, Raghuram Rajan announced his decision not to seek a second term at the helm of the RBI. This problem got further magnified within a week, when against the grain of popular opinion and exit polls, ‘Brexit’ became a reality. ‘Forced’ buying perhaps by the DFIs may have shored the indices for now and may also well have allowed an easy exit route for some disillusioned FIIs, but for how long can we pull wool over our own eyes.In a nation used to mediocrity and chest-thumping even at imaginary gains, it really begs the question - is Rajan any worse-off without the tag of the RBI Governor ?Or are Indian tax-payers who got used to relative stability of the INR, positive traction from foreign investors and also cheered the de-frocking of crony capitalists and their servile banking benefactors, the losers? The answer, to my mind, if not that of the GoI, is obvious. Compulsion to Underplay Brexit ?It was quite interesting to watch the same ‘experts’ who swore that Rajan’s exit would be forgotten post the Brita’IN’ vote, great monsoons, passage of GST and all things wonderful, were forced to run for cover and re-emerge to say Brexit was no Lehman. Oh, maybe it is no Lehman, but surely it isn’t a non-event either. So, what was the compulsion to put on a brave face and say ‘its business as usual’ instead of honestly admitting that Brexit has opened up a Pandora’s box, the contents and consequences of which are barely foreseeable at this moment?Ah, could some of them have been stock-brokers with Proprietory Trades as their mainstay and some of them, Fund Managers, who may well have been caught with their pants down literally, having failed to hedge their portfolios against the possibility of Brexit ?And then there are those that simply follow an Ostrich psychology, bury their heads in the sand and keep their fingers crossed that ‘this too shall pass’.God bless those investors that generously park both their money and financial future with some of the above-mentioned worthies.Non-Performing Fund Managers? Change is the only Constant is a well accepted truism. Alas, two of our champion cricketers of the previous two decades reflected an old Indian institutional inability to call a spade a spade and hesitation in weeding out ‘non-performers’ resting on their past laurels. Surprisingly, this culture seems to be seeping into the ‘Fund Management’ business too where stars of the past have turned into a pale shadow of their old champion selves and the funds they manage have turned into flabby non-performers for longer than many investors can take. I, for one, would prefer backing a younger fund manager with a reasonable track-record as she/he will only get better with time and will not carry the ‘star’ tag that I believe, tends to become more a hindrance than a facilitator while taking calibrated decisions and risks in the market-place. Asset Allocation and All that Glitters Having spent the better part of second half of FY 2014-15 convincing investors to start investing in Gold as a hedge against rapidly rising Equity, the biggest payoff came off on Brexit day. Further, Brexit preceded by Rexit in India, proved the market adage and my strong belief that ‘It is not the Stock or Fund, it is not even Timing but one’s Asset Allocation that determines Returns. And so, those that shed some equity gains before Brexit can now bide time and refuel at opportune moments. One must however resist the temptation of getting carried away with the near term optics of buying opportunities as they may turn out to be illusory.After all, you don’t want to ‘Catch a Falling Knife’, do you?