SANDIP SABHARWAL

You Can Contact Us on

info@asksandipsabharwal.com
OR WhatsApp on 7303163931

MONTHLY UPDATE OCTOBER 2022

AN AMAZING MONTH

There is only one way to describe the resilience of the Indian Stock Markets. Its Extraordinary. While most other markets sold off in the earlier part of this year, actually till last month the Indian Markets held up very well. However as other markets saw a good rally in October we participated well on the upside. The Nifty gained 5.4% and Midcaps underperformed with a 2.3% gain. At the end of this month Nifty is up around 4% for the year which is huge given that most other markets are down 15-25%.

So the key is to evaluate what actually changed which led to the US Markets rallying the most in nearly 50 years in October for a single month. As we evaluate nothing much changed except for the fact that potentially markets became extremely oversold and in today’s day of Hedge Funds and Options trading moves on all sides are extremely exaggerated. On the macro front inflationary concerns have not subsided and as such most central banks are on course to raise rates further atleast over the next three to six months. The base case after that is likely to be a period of prolonged hold at higher levels till inflation falls back into the comfort zone.

India to that extent is better placed as our inflation issues are relatively lesser as compared to the Western Economies. We were used to double digit inflation till just about 15 years back and inflation was slowly tamed in India. As such a 7-8% inflation is not felt so much here as an 8% inflation is felt in developed economies.

The results season started this month and as I expected results form most technology companies have turned soft which is also reflected in their underperformance. However Indian Technology companies are doing much better than large US Technology companies which have sold off much more severely post pre and post results. Banking sector has held up the markets with huge outperformance in both the stock markets and results. The good part about financials in India today are that most are well capitalized with low NPA’s. Smaller banks and NBFC’s will face challenges as deposit rates move up but larger banks will do better. Consumer companies have seen stress in results with most talking of subdued growth driven by high inflation. Cement company results have also been muted driven by lower prices and higher costs though the long term prospects are better. Capital Goods companies continue to do well driven by higher order book and execution while commodity stock earnings have seen a severe downturn with could remain for some time. Automobile company results are encouraging and this could be an outperforming sector. Overall earnings growth of companies that have reported till now is just around 4% which is much lower than analyst expectations.

Indian markets as I have written earlier too have been in a zone of their own relative to whats happening around us. A leftist/socialist turn in China combined with their zero covid policies have created huge wealth destruction for domestic as well as foreign investors in that country. Diversification of sourcing out of China has got more pronounced as frequent shutdowns and lockdowns have shaken the confidence of foreign companies. Many countries will benefit due to this and India will be one of them.

Overall valuations of Indian Markets are now nearly 20% higher than historical valuations which indicated muted returns overall from the broader indices over the next one year. However sector and stock specific opportunities will remain as sectoral rotation create opportunities. For example the fancied sector of the last two years i.e. Chemicals could see severe margin compression over the next two years as capacities increase and demand slows down. Similarly many commodity consumers like Automobile and Durable companies as well as plastics etc consumers will see strong margin uptick over the next 1-2 years driven by lower input prices which could more than compensate for higher interest rates which is usually negative for these sectors. A static investment strategy is unlikely to work in these kind of conditions and we have to be ready to shuffle portfolios as opportunities come.

As another example the hotels sector which did not perform for nearly a decade or more are into a sweet spot now. Total star rated rooms in India are just around 150000 at this stage and due to Covid disruptions and previous low profits planned additions are just around 35000 for the next 5 years giving a CAGR growth of 4%. With domestic tourism growing strongly and international tourism expected to return this provides and excellent platform for operating leverage as many costs of hotels are fixed and every extra rupee of revenue has high profitability and there should be continued strong profit growth over 3-5 years. Hardly any investors own these stocks thus creating opportunities.

Market valuations have a direct linkage to the risk free rate i.e. rate on government bonds. These rates have gone up substantially this year as such any market upmove cannot get support from rerating on the upside. In this situation only earnings growth can drive the markets which also is moderating giving slowing economies. As such the next one year will be tough for investing.

The thinking process has to be contrarian to perform in the kind of markets we are entering where interest rates are higher, growth slower and as such valuations could come under pressure. Companies that are at very high valuations based on unrealistic expectations of growth might see sub normal returns for the next 2-3 years.

Overall we will continue to look for opportunities as we have done in the past and outperform the markets.

ASKSANDIPSABHARWAL.COM PRODUCT PERFORMANCES

The month of October was a mixed month for our plans. All long term plans continued to do well and the outperformance over the longer term sustained well. Power Alpha had a subdued month in terms of profit booking relative to the huge bookings over previous months. Trading Plans had a negative month as sustained market upmove surprised us.

POWER ALPHA STOCKS

Power Alpha stocks had two bookings this month. A small profit booking and a small loss. We also generated new recommendations which are still to be booked. The last three months had seen massive profit booking. The high ROI of this product has continued over the last many years and is has come back again. Overall profits were over Rs 400000 for the last two calendar years a very high ROI on a Rs 6-8 Lakhs peak capital and Rs 6 lakhs average capital deployed. The profits over the last 12-12 months are now running at above Rs 300000. Opportunities will be good for this product even in the future and we will see to capture them. This is an ideal product for those who want to keep the capital as it is and book regular profits so as to make reasonably higher returns over fixed deposits/Hybrid Products etc. As markets stabilize momentum plays work well.

TARGET MIDCAP PORTFOLIO

The TARGET MIDCAP PORTFOLIO had a good month following a phase of very strong performance. The portfolio was up 3.17% and outperformed the Midcap Index Given our huge outperformance during market declines we have continued to beat all competing products by a huge margin.

With this build up our outperformance over the indices, all midcap mutual fund scheme as well as all PMS Products has gone up further. The magnitude of our performance over other products is now huge. The portfolio now up 35% from 31st of December as against 3% for the Midcap Index as well as most Midcap Mutual Funds as well as PMS Products

The portfolio is up a huge 33% over a 12 month period as against a return of 3% for the Midcap Index and 1.9% for the Nifty. The performance of this plan has been much beyond my expectations. The portfolio is now up 209% since inception and we hope to continue to do well going forward. Our value with growth strategy is working well.

TARGET BLUECHIP PORTFOLIO

The Target Bluechip Portfolio had a good month with the portfolio going up 3.86% despite our having 20% cash. Sharp market upmoves always tough to beat in the short run. Nifty was up 5.4% during the month. From the beginning of 2022 the portfolio is up around 15 % as against 4% for the Nifty. The last one year returns are 17% Vs 2% for the Nifty.

The aim is to outperform by 5% every year to deliver strong long term returns and I believe we are on track to exceed that at this stage. This is an excellent product for those who are looking for steady returns with low volatility. We have beaten all PMS/Largecap funds by a huge margin. The since inception returns are 159% giving a CAGR of over 28%.

PLATINUM PLAN

The Platinum Plan is our oldest Long Term Portfolio plan had a decent month as some of our large and small caps did well. Others underperformed. The portfolio was up 2.96% during the month. With the performance over the year and for the last one year the PLATINUM PLAN has beaten all Flexicap and Multicap schemes all with somewhat positive returns. We deployed cash in some small caps during the month and reduced cash holding. The since inception returns are now 509% with a CAGR of returns of over 29%. The portfolio has a good mix of largecaps and smaller midcaps which have good potential over the long run. This is an ideal medium risk portfolio.

ONLY FOR TRADERS

Only for traders had an average month with loss of Rs 32500 on one lot trading. The performance of the product is running very well over the last many months. Some clients get frustrated if 1-2 months don’t make money, however trading is a patience game. We will get 3-5 very good months in a year 3-5 average months and 3-5 not very good months. The ROI of this product is running very high at this point of time with returns for the first 10 months absolute at 40%.

The last one year returns on a 2 Lot basis is now running at Rs 450000

POSITIONAL TRADING CALLS

Positional Trading Calls also had a below average month with one loss booking and one exit at cost. The good thing in trading is that a period of 2-3 months of good performance can make up for a few subdued months which this product has displayed over time. This has been one of our best products in the past. We hope to continue to do well going forward and this is an ideal trading product for those looking for lesser calls with bigger targets in a month.

WINNERS PLAN

Small and smaller sized midcaps started slow last year and built on gains. The same is likely this year. The first few months overall have seen decline in small caps but some of our stocks have done well and came back strongly over the last month. There will be opportunities going forward. We booked one recommendation with strong profits during June. Many of our recommendations have become multibaggers and we have booked profits in some of them last year. We recommended three new stocks over the last few months. The current year is one where timing entries will be important and that is what we will try to guide new investors to do. Small caps have a tendency to underperform for long periods of time and then give sudden gains. This is unlikely to change.

UNLOCK GAINS PORTFOLIO

Unlock gains got fully deployed in April and after that many of the holdings got hit by volatility. However the portfolio has come back very strongly now and is performing very strongly. ended August up nearly 14% since the start. In the last three months as results started to come out the portfolio did exceptionally well with many of out holdings moving up sharply. However this month was flat for the portfolio with mixed performance of various sholdings. We expect all stocks are well placed to outperform over the next two years. It’s a fixed term two year product which should do well during this time period.

For more details write to us at info@asksandipsabharwal.com . You can also call us up at 7303163931/022-66666931 or visit www.asksandipsabharwal.com