Market are at an All Time High, what should investors do?

Last 1 year has been fantastic for investors.

Our Intrinsic Value smallcase is up by 60% in a year but if we talk about the newbie investors also, they are also up by 20-22% in a year which is a good performance. But there is a section of investors who have not made any returns. These are investors who have bought IT companies, Specialty chemical companies, Metal companies in the last year. These are the only investors who are down even today.

Recency Bias is the worst thing that can happen to you in your wealth building journey.

What is Recency Bias?

Thinking that stocks which have done well in the last 2-3 years will continue to do well.

What are the reasons for this bias?

Positive commentary across the media houses, 10 year long targets, double digits growth guidance and most influencers talking about it stocks. These are the common traps that intelligent investors should stay away from.

Outlook for the Stock Market in 2023

How do we sum up the 2023 rally and how do we see markets in rest of 2023?

It was satisfactory, Intrinsic value core smallcase is beating the index by 49% in last 16 months. 85% of our portfolio is smallcap and the smallcap Index underperformed the market in 2022 still we were up by 22-25% and that’s how we know that we will continue to do well in 2023 also.

Do we think the sectors that worked well so far and will continue to perform in future as well?

Yes, real-estate, pharma, financials and construction, all our contrarian ideas have performed well. We remember no one wanted to allocate in the construction/infra sector in the first half of 2023 because 2024 is the election year. But we did because we focused on numbers and not stories. Some of those bets have exploded.

Will Interest rates peak out in 2023? If yes, what is the kind of impact we could see on equity markets?

Interest rate cycles are generally longer historically,  it should take time before they reduce it. We think it would settle on current levels for some time though. Financial stocks should do well due to that.

What are our views on New Gen tech IPOs and IT sector?

New gen tech companies were overvalued to start with. Glamorous IPOs with 10-20 year growth guidance were sold to investors that too in the middle of overhyped market of 2021.

Coming to current condition, we think better backed and companies with good market share will come out of it stronger than before but we think a final blow up is yet to come in this space. Once we see media reports on mass firing/ chapter-11 in startup space, we will start investing in Tech/New gen tech because that will be the start of new cycle.

In the case of stable IT companies, I will look for their comparative valuation for better entry in good growth companies. In the case of IT, I think the bottom is near.

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Nikhil Gangil•SEBI Registration No: INH000009047

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