The current quarter was an extremely volatile one for the markets with significant swings as markets adjusted to various developments all around the world. As I write now it is very clear that there will be an aggressive recovery worldwide over the next 12 months. However with recovery will also come the side affects of rising inflation as most commodities have rallied hugely over the last 6-9 months. However the story in India might be a bit different due to the second covid wave
The earnings growth estimates for next year if I take into account all broking houses projects varies between 32-40%. While one might argue that this should be possible because last year the first quarter was a washout, it does not take into account a possible increase in interest rates at some stage and the huge pressure that rising commodity prices as well as a return of normal costs can put on the profitability of companies. With an expected GDP bounce back of 12% an earning growth of 30-35% should be possible under normal circumstances. However when input costs move up by 50-100% and the economy is just recovering this could become a challenge and that is what I will be monitoring. However a recovering economy will give huge investment opportunities at the right time. Many recovery plays have corrected post the start of the second wave in India. These will provide very good opportunities. Capex cycle recovery and infrastructure and green investments are a reality and companies in these segments will also give good opportunities. Many fancied sector stocks are currently expensive and as such can only be bought on corrections. Overall market valuations are not expensive if we believe that 35% earnings growth is for real. However if we trend towards 25% then markets look quite expensive.
We need to move forward with caution as well as optimism to capture opportunities as they come. Overall I do not expect huge returns from benchmark indices this year.
Our products across the board performed satisfactorily
TRADING PRODUCTS
After an exceptional March quarter this was an average month for the Trading Products. We gave very less calls in Positional Trading and did not close any call as the markets were too volatile. ONLY FOR TRADERS had a loss of Rs 19450 on one lot trading and Rs 38900 for two lots. Overall in ONLY FOR TRADERS two lot profits were upwards of Rs 300000 and in the last six months we have had 4 months with profits of Rs 140000-150000 on a two lot trading basis. POSITIONAL TRADING also had a good last quarter with strong profits of Rs 200000 on a two lot trading basis. We will get 3-5 very good months in a year 3-5 average months and 3-5 not very good months. Long Term Track record of both trading plans continues to be strong. The trading plans have been doing well across market ups and downs and we have avoided blind long trading.
POWER ALPHA STOCKS
Power Alpha stocks had good months of January and February with profit booking of nearly Rs 90000 plus. However the last two months have been average as we could not give more calls due to extreme volatility and a negative near term outlook. Overall markets have not gone anywhere over the last two months. In the current month we booked one loss of Rs 21000. We also restricted the number of calls we gave as focus shifted to capital conservation. However overall profits were around Rs 430000 for 2020. Overall opportunities will be good for this product even in the future and we will see to capture them. At peak capital the ROI was 56% and at Average Capital 72% in 2020
TARGET BLUECHIP PORTFOLIO
The Target Bluechip Portfolio had a stable month with the portfolio falling by around 1%. We continue to maintain a good cash buffer which will hold us in good stead over the next two months if things move as I expect them to. Since inception returns are nearly 83% from the time the portfolio started off more than two years back a substantial outperformance. This is an ideal portfolio for low-risk investors. We have used the momentum of the markets to book profits and generate some cash which will be redeployed appropriately. The outperformance over the last two years has been more than 100%.
TARGET MIDCAP PORTFOLIO
Target Midcap was flat during the month as many post recovery plays corrected. Overall, the portfolio gave 44% returns for 2020 which is exceptional. Since inception returns from end of 2019 are now 62% much above the indices. This portfolio has huge potential with some stocks having the potential to be multibaggers over the next few years. This portfolio is all about a journey which will do good over 2-3 years. Average valuations of our portfolio is half the midcap index and that of most momentum midcap mutual funds and PMSes. This is an ideal portfolio for long term investors who are willing to take the risk of short term underperformance. We have cash to deploy on corrections.
PLATINUM PLAN
The Platinum Plan is our oldest Long Term Portfolio plan and did exceptionally well during the month with returns of around 3.3% . The YTD returns are now 16.11% and since inception returns are 355% with a CAGR of returns of over 23%. 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. We used sharp upmoves in many stocks to book profits to redeploy later. This portfolio is a mix of Large Caps and Small Caps. This is an ideal medium risk portfolio.
WINNERS PLAN
Small and smaller sized midcaps started to outperform and this helped many of the holdings rally. We booked profits in many of the recommendations. Some of the recommendation did exceptionally well during the month of April too with one recommendation of 2020 rising nearly 500% from recommended price. We generated many ideas over the last few months, some of which rallied, and some are still to perform in 2021. Many of the recommended stocks do have deep value however many PMS fund managers and other investors burnt by small cap investing might not come back fast. We need to adapt accordingly. However, given high operating leverage small caps will do well in 2021/22
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