SANDIP SABHARWAL

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MONTHLY UPDATE JULY 2022

There is only one way to describe the resilience of the Indian Stock Markets. Its Extraordinary. After the strong rally of last month we saw a follow up with the Nifty again climbing by another 3.5% and Midcaps outperforming with a rally of 6.2%. This was despite little respite on the macro concerns plaguing the markets this year. After this move the Indian Markets are up by around 3% for for 2022 while most global markets are down 12-15% if not more.

On the macro front the key development of this month was the reiteration of most central bankers that inflation is the priority at this stage and the fight against inflation will go on for longer. This essentially implies that rates will remain higher for longer. This is very important from an equity valuation as well as growth outlook perspective. Equity valuations are directly linked to risk free rates as well as economic growth prospects. RBI also increased rates this month at the upper end of the expected range. Stock Markets in general have been sanguine about these development at a time of stick inflation. The other big factor that is going to play out is the reversal of the huge money printing cycle with US Fed Balance Sheet reduction likely to pick up pace from September onwards. We have not seen monetary tightening with significant liquidity withdrawal in the past and need to see how markets will take it.

Overall the Indian Economy is much better placed in terms of both inflationary dynamics, growth prospects as well as the external front than pervious cycles and this should help us sustain premium valuations. However a 90% premium over other Emerging Markets is tough to sustain and that could become a challenge especially after the moves of the last two months.

Given that India did not have any significant fiscal stimulus the inflationary spiral has been lower than in other countries as unemployment still remains high and wage pressures ex of the IT industry are low. However global commodity inflation always seeps in and as a result we have seen sharp hikes in most product prices as well as food items. Wheat and Rice the two staple foods are up nearly 20% over the last year and milk prices are up over 10%. This has had an impact on consumption with most consumer items seeing pressures. Another positive for India has been the escape from the havoc of the global weather pattern changes (atleast for this year) and also the fact that we are able to procure crude oil at lower prices from Russia while Europe has borne the worst of both these factors. Higher farm prices means that farmers have got good cash flows this time as they have been able to sell cash crops in the market instead of to the government and at much higher than minimum prices.

The results season ended with there being an overall downgrade of earnings by around 4% at the end of the quarter led by Technology and commodities while financials, capital goods etc outperformed

The results season has been very well taken by the markets despite an overall weak season for most large companies. Technology stocks which have mostly reported saw significant margin pressures and underperformance of earnings expectations. Margins of many consumer companies were under pressure, banks in general outperformed expectations in terms of asset quality and growth which led to the banks outperforming the markets this month. Reopening trade companies like restaurants, multiplexes etc reported good numbers while cement companies saw margin pressures. Commodity companies saw severe profit pressures while automobile companies had a mixed bag with outlook improving. Infrastructure and Capital good companies reported good results and order bookings

One good part is that ex of crude oil all other commodities seem to be clearly topping out and some have also seen deep corrections driven both by slowing economy concerns as well as central bank actions.

The sectors to avoid for the next 6-12 months seem to be commodity and technology where lower global demand combined with extreme pressures on the Chinese Economy will keep commodities subdued and an imminent recession in the USA and Europe will impact technology demand and as such the growth of Indian Technology companies. Loss making new generation companies could also see things tightening as raising money at higher and higher valuations might be tougher.

Capital Goods, infrastructure and domestic cyclical industries should do better in this time period and still are underowned by investors and offer opportunities.

The best thing for equity markets will be that central banks gain credibility in their inflation fight and inflation peaks out and starts moving down. That will provide better opportunities to invest.

Indian Markets also trade at nearly 125% of GDP largely due to rapid gains in loss making company valuations or those with very low earnings. Valuations are 20% above long term valuations.

From current levels of 17700 it is tough to build a case for an overall market upmove. However stability and lower volatility will give lot of opportunities in the right sectors.

ASKSANDIPSABHARWAL.COM PRODUCT PERFORMANCES

The month of August was a very good one for us across the board except for one of the trading plans which took a back seat of sorts. However the wealth generation journey for clients across the board continued strongly.

POWER ALPHA STOCKS

Power Alpha stocks had one of our best months. With strong profit booking. This followed the profit booking trend of last month and the current month rally helped us exit and generate profits. Now this product is well set for the future. Overall profits were over Rs 103000 in Power Alpha after a long time. Our best alpha generating product over several years had a tough year till May. Our aim is to provide good ROI to investors with us and all subscribers to this product got their subscriptions adjusted beginning of the year so that they recover their fees and make money. The high ROI of this product has continued over the last many years and is now coming back. 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. 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 3.54% and despite that we underperformed the midcap index which was up around 6.2%. 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 26% from 31st of December as against 3.4% for the Midcap Index as well as most Midcap Mutual Funds as well as PMS Products

The portfolio is up a huge 44% over a 12 month period as against a return of 10.8% for the Midcap Index and 3.66% for the Nifty. The performance of this plan has been much beyond my expectations. The portfolio is now up 189% 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 very good month with the portfolio was up 3.8% despite our cash position which typically pulls performance down in a one sided upward moving market. From the beginning of 2022 the portfolio is up around 13%as against a rise of 2.3% 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 for that. This is an excellent product for those who are looking for steady returns with low volatility. One year returns of the portfolio are 19% much above Nifty returns of 3.66% for the last 12 months. We have beaten all PMS/Largecap funds by a huge margin. The since inception returnsare over 150% giving a CAGR of over 29%.

PLATINUM PLAN

The Platinum Plan is our oldest Long Term Portfolio plan had a very good month as some of our small caps did well along with the rise in largecaps. The portfolio was up 5.03% 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 which are all with negative to somewhat positive returns. We have maintained some cash to capture opportunities going forward. The since inception returns are now 462% with a CAGR of returns of over 30%. The portfolio has a good mix of largecaps and smaller midcaps which have good potential over the long run. The portfolio performance should pick up going forward. This is an ideal medium risk portfolio.

ONLY FOR TRADERS

Only for traders had an decent month after a below average start. The performance of the product is running very well over the last many months. 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 half absolute at 40%. The low risk strategy is playing well and such high returns in a sideways market are tough and very satisfactory.

POSITIONAL TRADING CALLS

Positional Trading Calls had a muted month with just one recommendation closing with a loss. The plan has been doing very well for the last many months and short periods of underperformance are expected and will happen. 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 ROI of this plan is running above 40% absolute for this year already.

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 ended August up nearly 9% since the start. In the last one month as results started to come out the portfolio did exceptionally well with many of out holdings moving up sharply. We expect all stocks are well placed to outperform over the next two years. Will write more on this product later while clients in this plan will get the updates. 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