The document discusses the strong performance of the Indian stock market after the COVID-19 pandemic. It notes that economic activity and corporate profits are recovering. Some sectors have surpassed pre-pandemic levels while others are recovering gradually. Risks like a potential third wave, rising inflation, and global factors could impact the recovery. The fund manager believes the market rally can continue if COVID containment accelerates and as economic growth remains strong. However, valuations appear elevated and returns may moderate going forward. The portfolio aims to provide value through a focus on quality companies with strong earnings growth at reasonable prices.
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Investing in a bull run
1. Investing in a Bull Run
Where To From Here?
Speaker:
Mr. Nilesh Shetty, Fund Manager – Equities
August 20th 2021
2. 2
Vertical Takeoff after the Covid Scare
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Aug-13
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Dec-16
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Apr-21
S&P BSE Smallcap Index
S&P BSE Midcap Index
S&P BSE Sensex Index
Rebased in INR
Source: Bloomberg Finance L.P., As of July 31, 2021, Past Performance may or may not be sustained in future.
*Aug 28, 2013 is the day when the Rupee hit an all-time low and Sensex hit 2013 intra-day low
3. 3
2020- Flight to Safety; 2021- Play on Recovery
YTD CY CY CY CY CY CY CY CY CY CY CY CY
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
BSE-30 INDEX S&P BSE SENSEX 30 INDEX 11.0% 17.2% 15.7% 7.2% 29.6% 3.5% -3.7% 32.0% 10.7% 28.0% -23.6% 19.1% 83.3%
BSE200 INDEX S&P BSE 200 IDX 17.4% 17.9% 10.4% 0.8% 35.0% 5.4% -0.2% 37.6% 6.2% 33.2% -26.0% 17.8% 90.9%
BSE500 INDEX S&P BSE 500 IDX 19.8% 18.4% 9.0% -1.8% 37.6% 5.2% 0.4% 39.1% 5.0% 33.4% -26.4% 17.9% 92.7%
BSETCD INDEX S&P BSE INDIA Cons.DurIDX 20.0% 22.2% 21.5% -8.3% 102.9% -5.8% 24.8% 67.3% -23.9% 47.1% -16.2% 69.6% 100.6%
SPBSHLIP INDEX S&P BSE INDIA HEALTHCARE IDX 21.1% 62.6% -2.8% -5.4% 1.1% -12.5% 15.9% 48.8% 24.9% 39.8% -12.1% 35.4% 71.2%
SPBSITIP INDEX S&P BSE India IT IDX 28.5% 60.3% 11.8% 27.3% 13.3% -6.1% 6.4% 19.5% 62.3% 0.7% -14.6% 34.1% 135.9%
BSETECK INDEX S&P BSE India TECK Index 22.5% 46.5% 11.1% 12.4% 18.8% -7.6% 5.4% 18.2% 49.3% 3.0% -15.5% 25.4% 69.9%
SPBSCGIP INDEX S&P BSE India FMCG Index 8.9% 13.2% -2.2% 12.1% 33.3% 4.8% 3.6% 20.1% 12.5% 49.5% 11.7% 35.5% 43.3%
BSEAUTO INDEX S&P BSE India Auto IDX 9.0% 14.3% -9.9% -21.3% 33.3% 10.4% 0.1% 53.8% 8.9% 42.8% -18.6% 40.3% 208.3%
BSEOIL INDEX S&P BSE India Oil&Gas Index 13.3% -0.6% 10.6% -12.6% 37.8% 30.4% -1.2% 14.1% 5.9% 15.8% -28.3% 2.7% 75.0%
BSEPOWR INDEX S&P BSE INDIA POWER INDEX 28.9% 11.4% -0.6% -14.3% 22.0% 3.0% -5.3% 25.5% -12.4% 12.8% -39.1% -5.4% 76.1%
BSETCG INDEX S&P BSE India CapGoods IDX 27.3% 12.5% -8.8% -0.5% 41.4% -2.3% -7.8% 51.9% -4.0% 36.6% -47.1% 10.0% 106.1%
BANKEX INDEX S&P BSE INDIA BANKEX IDX 9.5% -2.1% 21.1% 5.7% 40.0% 8.4% -9.0% 67.1% -8.0% 59.1% -30.7% 35.0% 86.8%
BSEREAL INDEX S&P BSE India Realty Index 28.5% 9.2% 27.6% -30.7% 107.2% -5.3% -12.8% 9.4% -31.2% 54.4% -51.6% -25.7% 70.0%
BSETPSU INDEX S&P BSE INDIA PSU IDX 37.4% -12.8% -1.1% -18.7% 22.7% 16.9% -14.9% 44.8% -16.5% 18.6% -31.6% 1.2% 82.5%
BSEMETL INDEX S&P BSE INDIA METAL INDEX 83.9% 18.4% -10.2% -16.3% 52.8% 43.2% -28.8% 11.1% -7.5% 21.5% -46.5% 2.1% 238.8%
Securities Name
Source: Bloomberg Finance L.P.; based on daily total returns as of July 31, 2021. Past Performance may or may not be sustained in future.
4. 4
Corporate Profits at an all time High, Expectations of Strong Demand
Rebound
Corporate profitability hit a record in Q4FY21 driven by strong revenue growth and strict control on costs
Demand is expected to rebound post unlock driving sales, but higher input costs and normalizing other costs may see profit growth lag
revenue growth
Source: CMIE- Economic Outlook. Past Performance may or may not be sustained in future.
5. 5
Consensus Earnings Upgrades After Many Years of Flat Growth
Source: Bloomberg Finance L.P; as of July 31, 2021. Past Performance may or may not be sustained in future.
6. 6
Demonetization, GST, Covid: Large Companies Getting Larger
14%
3% 3%
-1%
-7%
-8%
-16%
9%
14%
6%
-5%
-15%
-12%
-18%
-25%
-13%
-17%
6%
16%
5%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Paints
Steel
Cement
Ceramic
tiles
Passenger
cars
Two-wheelers
CV
Bank
Credit
AMC
AUM
Gen.
Ins.
Premium
Listed Company Growth YoY Industry Growth YoY
Source : CMIE, RBI, IRDAI
Note : YoY growth in FY21, Volume Growth for manufacturing sectors like
paint,steel,auto etc. Credit growth for private sector banks is compared to systemic
credit growth.
Source: CMIE- Economic Outlook, Data as of March 2021
7. 7
Economic Activity Gradually recovering
Economic activity in some sectors are at similar or higher than pre Covid-19 level.
Production Trends
June 2021 as %
of Feb 2020
Credit and Consumption Trends
June 2021 as %
of Feb 2020
Cement Production 89.2% Bank Credit 107.1%
Steel Production 99.2% Bank credit to Industry 102.7%
Fertilizer Production 108.4% 2 Wheeler Sales 87.3%
Coal Production 65.5% Passenger Car Sales 93.2%
Crude Oil Production 103.5% Tractor Sales 185.5%
Natural Gas Production 120.2% Air Cargo 88.5%
Petroleum Refinery
Products
87.9% Rail Freight traffic 105.9%
Electricity Generation 108.6% Port cargo 96.1%
Source: Advisor Office of Economic, RBI Bulletin, SIAM, CMIE, Tractor Manufacturer Association, AAI, Indian Railways, Indian Port Association
Data as on June 2021.
8. 8
Risks to the Recovery
Low Vaccine coverage increases probability of a third wave. Festive season to start from Sep 2021
Job Losses amongst salaried employees and Rising Inflation may impact consumer discretionary
spend
Since the pandemic began, there has been a reduction in number of employed by 20 million
Inflation in Raw materials and increase in Crude prices may force RBI to raise interest rates
9. 9
Covid Containment To Accelerate Inflows
Period
Net Foreign Activity
(USD bn)
Net Local Activity
(USD bn)
Total Activity
(USD bn)
Change in S&P BSE-30 TRI
in that period (% )
( % USD)
CY 2003 6.6 0.1 6.7 +86.5%
CY 2004 8.7 -0.3 8.4 +20.5%
CY 2005 10.7 3.0 13.7 +40.2%
CY 2006 8.1 3.4 11.5 +51.6%
CY 2007 17.7 1.7 19.4 +67.0%
CY 2008 -12.0 3.3 -8.7 -60.8%
CY 2009 17.5 -1.2 16.3 +90.3%
CY 2010 29.4 -6.1 23.3 +24.2%
CY 2011 -0.4 1.3 0.9 -35.7%
CY 2012 24.4 -3.9 20.5 +24.1%
CY 2013 20.1 -3.7 16.4 -1.9%
CY 2014 16.1 3.9 20.0 +29.2%
CY 2015 3.2 11.1 14.3 -8.1%
CY 2016 3.2 7.1 10.3 +0.9%
CY 2017 7.8 18.4 26.2 +37.8%
CY 2018 -4.4 17.6 13.2 -2.0%
CY 2019 14.4 7.6 22.0 +13.1%
CY 2020 23.0 -7.5 15.5 +14.5%
YTD 2021 6.8 0.6 7.4 +9.0%
July 2021 -1.5 2.6 1.1 +0.2%
Cumulative 200.9 56.4 257.3 +1218.9%
Source: Sebi.gov.in, NDSL, As of July 31, 2021. Past Performance may or may not be sustained in future.
10. 10
Domestic Institutional Flows Come Back After Second Wave ebbs
Source: CLSA and Bloomberg Finance L.P., as of July 31, 2021
12. 12
Spiking PER Overstates Valuation Given The Prior Quarter’s Gap Down
Source: Bloomberg Finance L.P., as of July 31, 2021. Past Performance may or may not be sustained in future.
13. 13
PER Elevated – Will Mid Caps Deliver on Market Expectations?
Source: Bloomberg Finance L.P., as of July 31, 2021. Past Performance may or may not be sustained in future.
14. 14
Scenarios To Ponder
Corporate
Earnings
Liquidity Equity Valuations Equity Returns
Rising Easy High Positive
Rising Tight Moderate Slight Decline
Stagnant/Falling Easy Moderate Slight Decline
Falling Tight Falling Sharp Correction
Most Likely
Scenario, But
Returns may
moderate
15. 15
Don’t Be Distracted By Global Macro:
Economic Activity Led To A 10x Growth In Earnings
Source: CLSA and Bloomberg Finance L.P., as of July 31, 2021
CY 21 and CY 22 are estimate numbers. Past Performance may or may not be sustained in future.
16. 16
Portfolio Reflects Value
QLTEVF
As % Of
S&P BSE-30 Index
S&P BSE-30
Index**
Number of equity stocks 28 30
Median market capitalization (USD mn) 11,693 39% 30,317
Weighted dividend yield 1.4% 132% 1.1%
Weighted PER: March 2023E 13.7x 71% 19.3x
Weighted EPS Growth: March 2023E 22.6% 98% 23.0%
PEG Ratio (excludes cash) 0.61x 72% 0.84x
T12M PE 22.6x 62% 36.6x
Weightage of stocks with PER > 20 72% 91%
Weightage of stocks with PER > 30 47% 66%
Source: Quantum AMC As of July 31, 2021| QLTEVF - cash weight excluded | ** S&P BSE-30 Index weight is based on free-float. % S&P BSE 30 Index column depicts
the QLTEVF as a percentage of S&P BSE 30 Index fundamentals. The figures mentioned in WTD PER, WTD EPS and PEG ratio are calculated on the basis of Bloomberg
consensus estimates for companies owned by the Composite as well as the companies in the S&P BSE 30 as of the reporting date i.e. July 31, 2021. Past Performance
may or may not be sustained in future.
17. Keep 6-24 months of expenses in Liquid Fund, Bank Fixed Deposit to be withdrawn in case of
emergency
Trying to Time Markets is a Folly
Follow a Simple Asset Allocation Strategy to Deal with Market Cycles
₹
Please note that the above is the suggested fund allocation only and is not to be considered as investment advice / recommendation, please seek independent
professional advice and arrive at an informed investment decision before making any investments
• Liquid Fund/ Bank Deposit
6-24 months
Expenses
• 4-5 Diversified Mutual Funds
Balance Surplus
80%-85%
• Gold/Gold ETF
15%-20%
Wealth
Builder
Stress case
scenario
Diversification
17
18. 2021- A Simple Asset Allocation Strategy to Deal with Market Cycles
19. Solutions to meet Sustainable Development Goals: SGD-17
SMILE was born out of our
desire to support credible
NGOs and create a steady
stream of money flow for
them
Since 2018, Quantum MF
investors have supported
7 NGOs from diverse
sectors via the SMILE
facility
WHAT IS SMILE? THE SMILE STORY OUTCOME SO FAR
SMILE enables Quantum MF
investors to contribute 10%
of their investment in eligible
schemes to charities vetted
by HelpYourNGO
+ = “SMILE”
20. SMILE Process Flow
Q Long Term Equity Value Fund
Q Equity Fund of Funds
Q Dynamic Bond Fund
Q Multi Asset Fund of Funds
Q Gold Savings Fund
Q Liquid Fund
Donated to NGOs
selected by investors
and vetted by
HelpYourNGO
HelpYourNGO sends
donation receipts and 80G
Liaises with NGO grantees
Monitors & reviews
INVEST IN SMILE FACILITY DONATE TO NGO’S DONATION RECEIPTS
Investors receive periodic program reports from HYNGO on the NGOs supported by them
Investors receive periodic program reports from HelpYourNGO on the NGOs supported by them
* Q Stands for Quantum for scheme names
25. Disclaimer – Terms of Use
The data in this presentation are meant for general reading purpose only and are not meant to serve as a professional
guide/investment advice for the readers. This presentation has been prepared on the basis of publicly available information, internally
developed data and other sources believed to be reliable. Whilst no action has been suggested or offered based upon the
information provided herein, due care has been taken to endeavor that the facts are accurate and reasonable as on date. Quantum
AMC shall make modifications and alterations to the performance and related data from time to time as may be required as per SEBI
Mutual Fund Regulations. Readers are advised to seek independent professional advice and arrive at an informed investment
decision before making any investment. None of the Sponsors, the Investment Manager, the Trustee, their respective Directors,
Employees, Affiliates or Representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or
exemplary damages, including lost profits arising in any way from the data/information/opinions contained in this presentation. The
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Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors
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under the Companies Act, 1956.
20th August 2021
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