SANDIP SABHARWAL

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MONTHLY UPDATE NOVEMBER 2022

THE RUN CONTINUES

Indian Stock Markets continued to defy gravity and moved to all time highs during the month of November. As the markets did not correct when global markets corrected during the first few months of the year as globally things stabilized Indian Markets have continued to move higher. Volatility also came down sharply as markets moved higher and conviction grew on inflation and interest rates peaking out. Nifty was up 4.1% this month while the Midcaps underperformed with a 2% growth.

We are now into December which is typically a muted month without much up’s and downs. So what should be the outlook for 2023 when valuations are already high and higher interest rates are impacting growth. In my view 2023 overall for index returns will be a tough one with a -10% to +10% zone being the most probable scenario. There are many moving pieces for us to bet on one side. For example which way will inflation go globally, how severe will the slowdown in China and rest of the world be, the long term impact of liquidity withdrawal by the US Fed and ECB on global asset valuations etc.

The positives for India lie in a good capital expenditure cycle which has come after a decade, a strong financial system with NPA’s at near historic lows and an improving credit cycle, greater focus of the government on growth as the Central Government enters into the last year of the 5 year cycle, higher rural incomes driven by a potentially good winter crop and higher corp prices which should be good for rural incomes as well as falling inflation due to the correction in commodity prices and improved food supplies.

The headwinds will come from global factors like higher interest rates, less liquidity, slowing growth which could impact sectors like technology and commodity companies as well as continued geopolitical tensions creating volatility.

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.

Overall valuations of Indian Markets are now nearly 25% 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. Companies catering to the Defense and Railways could see sustained growth for the next 2-3 years. Consumer companies have suffered due to slower growth and compressing margins. That could reverse going forward.

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. However India is still growing at 6% on a higher GDP base. This will always give opportunities to invest in companies that do well in specific sectors.

Many people ask me questions on New Generation listed companies, Fintech’s etc. We need to be careful of companies whose entire business model was built around taking valuations higher by delivering high growth without any focus on profits in the hope of getting sold or raising money at higher and higher valuations. As such opportunities in these companies will be small and far between. My advise is not to look at historic prices to take investment decisions for the future. There will be some winners for sure.

Many global markets after the severe selloff have recovered 10-20% from the bottoms and are now not as far away from all time highs as we would want in the current growth cycle. There is no need to feel left out. Markets always give opportunities and they will do so in the future also.

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 November was a good for us except for the trading plans where we did not do well. All long term plans continued to do well and the outperformance over the longer term sustained well. Power Alpha had an exceptional month taking the return cycle back to historic high returns. previous months. Trading Plans had a negative month as sustained market upmove surprised us.

POWER ALPHA STOCKS

Power Alpha stocks had an exceptional month with very strong profit bookings. We booked profits of Rs 44000 for the month and generated several calls. The last six months profit booking now has reached Rs 293000. In the first quarter I had maintained that we need to be patient and profits will come and we are seeing that now. We also generated new recommendations which are still to be booked. The last few months has 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 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. Plan success rate continues to be over 90%

TARGET MIDCAP PORTFOLIO

The TARGET MIDCAP PORTFOLIO had an excellent month good month following a phase of very strong performance. The portfolio was up 5.62% 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 42% from 31st of December as against 5% for the Midcap Index as well as most Midcap Mutual Funds as well as PMS Products

The portfolio is up a huge 39% over a 12 month period as against a return of 8 % 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 226% since inception and we hope to continue to do well going forward. Our value with growth strategy is working well.

However these kind of returns are clearly unsustainable.

TARGET BLUECHIP PORTFOLIO

The Target Bluechip Portfolio had a decent month with the portfolio going up 2.42% despite our having 20% cash. Sharp market upmoves always tough to beat in the short run. Nifty was up 4.1% during the month. From the beginning of 2022 the portfolio is up around 18 % as against 8% for the Nifty. The last one year returns are 20% Vs 10% 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 165% 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. The portfolio was up 2.4% 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 strong positive returns. The since inception returns are now 521% 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. The small cap to Large Cap ratio will be broadly 60:40.

ONLY FOR TRADERS

Only for traders had a bad month, one of our worst as almost no call worked. This has wiped out the good work of many months. The challenge is now to come back strongly. This year was going well till September but last two months performance has spoilt the entire record for this year. One lot loss was nearly Rs 141000 our worst on record. A big part of the loss was due to one short where results came out strong and there was a big gap up. Its tough for new clients for sure. We will need to work harder to come back going forward.

POSITIONAL TRADING CALLS

Positional Trading Calls also had a subdued month with one loss booking. 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. The unprecedented one sided upmove in the markets kept us wary in this and that has led to missed opportunities.

WINNERS PLAN

Many of the small caps have come back strongly and overall returns of the Winners Plan have picked up. Many of the holdings have got strong potential and lie in the value zone. We have avoided high fancy sectors which has helped the plan this year. We are looking forward for a better year 2023 for the winners plan where many companies are in deep value zone.

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 17% 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. The current month saw the portfolio move up by 3%. 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