“Your success as an investor will be determined by how you respond to punctuated moments of terrors, not the years spent on cruise control” –by Morgan Housel in his book ‘The Psychology of Money’.

We are at an uncertain juncture of the market. Investors are grappling with interpreting the impact of Covid second wave on the economy and its subsequent impact on the market. Against that backdrop, it is crucial to analyse the world experience of Covid second wave, particularly in the western markets like the US and Europe. The USA witnessed a daily increase in the number of cases from 86000 to 310000 during Oct-Dec20; however, Dow Jones Index continued its upward trajectory. Similarly, Germany witnessed an increase in the daily number of cases from 13000 to 49000 from Oct 2020 to Jan 2021, but DAX Equity Index continued to register strong gains.

The important reasons for such a strong equity market performance are 1. Global central bankers and governments continued to support the economy; 2. Manufacturing PMI Indices continued their strong recovery – surpassing pre Covid levels while services Index was adversely impacted and 3. The hope of faster vaccination roll out.

Back at home, the situation is not much different. Unlike in Mar2020, during Covid second wave, the lockdowns restrictions are much more balanced – the movement of goods is not restricted, lockdowns are managed by each state depending upon its severity, unlike national lockdown and, most importantly, the strong start of vaccination drive.

A powerful economic start is already underway. While Covid second wave might have delayed economic recovery, one should not underestimate the sharp recovery witnessed post first Covid wave during the Oct-Mar period. Most corporates were pleasantly surprised by the V-shaped recovery, and many of them faced a stock-out situation. Economic indicators, like cement production, industrial petroleum production, railway freight traffic, non-oil imports registered flat to positive growth over March 2019 – implying normalcy in the economy (since Mar 2020 had seven days of national lockdown, we have compared Mar 2021 numbers against Mar 2019 numbers). For April 2021, the numbers so far suggests limited impact on economy – GST collections have crossed Rs 145000 crs for month of April 2021 – highest in the history. India PMI – manufacturing indices also at its pre-Covid levels.

Investment strategy and Market outlook:
Undoubtedly, Covid second wave will lead to some downgrade in street earnings estimate for FY22; but we believe that one should not focus too much on the near term and instead focus on underlying transformation of the Indian economy. After muted corporate earnings growth for FY08-20; we expect corporate earnings growth to bounce back strongly over FY21-23. As the equity market is mirror of earnings growth, strong earnings growth and improvement in ROE will lead to strong equity returns. We may see bouts of volatility due to Fed’s policy stance and state-wide Covid daily cases headlines, but we advocate to stay invested and looking through any turbulence as our ‘powerful economic start’.

Key Risks: National lockdown, severe Covid third wave, slower vaccination drive.

AAA PMS Performance

*(23 Nov 2009 – 30 April 2021) ^ (7 Dec 2014 – 30 April 2021).Performance is after all expenses and fees from April 2018. Prior to 2018 the Performance is after all expenses and Fixed management fees. Index performance is calculated as per Total Return Indices as per SEBI Guidelines
Note: Returns of Individual clients may differ depending on the time of entry in the strategy. Past Performance may or may not be sustained in the future and should not be used as a basis for comparison with other investments. Performance-related information provided herein is not verified by SEBI.
DISCLAIMER: This document is not for public distribution and has been furnished to you solely for your information and may not be reproduced or redistributed to any other person. The manner of circulation and distribution of this document may be restricted by law or regulation in certain countries, including the United States. Persons into whose possession this document may come are required to inform themselves of, and to observe, such restrictions. This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. No person associated with AlfAccurate Advisors Pvt Ltd is obligated to call or initiate contact with you for the purposes of elaborating or following up on the information contained in this document. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon. Neither AlfAccurate Advisors Pvt Ltd., nor any person connected with it, accepts any liability arising from the use of this document. The recipient of this material should rely on their own investigations and take their own professional advice. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavour to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. We and our affiliates, officers, directors, and employees worldwide, including persons involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (is) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company (is) discussed herein or may perform or seek to perform investment banking services for such company(is)or act as advisor or lender / borrower to such company(is) or have other potential conflict of interest with respect to any recommendation and related information and opinions. The same persons may have acted upon the information contained here. No part of this material may be duplicated in any form and/or redistributed without AlfAccurate Advisors Pvt Ltd.’s prior written consent. No part of this document may be distributed in Canada or used by private customers in the United Kingdom. In so far as this report includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.
Download PDF

Subscribe to AAA Insights newsletter

Signup for our newsletter to get the latest news
and updates delivered directly in your inbox.
All Fields required*

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

I authorize AlfAccurate Advisors Pvt. Ltd. and its representatives to call / email / SMS me through its Customer Care numbers with reference to my Account / Application. This consent will override any DNC / NDNC registration

Direct Onboarding Route

Invest with us

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

I authorize AlfAccurate Advisors Pvt. Ltd. and its representatives to call / email / SMS me through its Customer Care numbers with reference to my Account / Application. This consent will override any DNC / NDNC registration