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Monthly Digest – September 2021

By Avatar photoKedar B | Edited By Kedar B | Updated on September 22, 2023

Large caps took centerstage with a furious rally through August; the broader market outperformance that investors had started to take for granted took a much needed breather. When a Bajaj Finance delivers ~40% in a six month period, investors wonder why they should search for the next Bajaj Finance and not just invest in Bajaj Finance instead. Not suggesting you do that but you get the drift. 

When investors think they have the game figured out, the nature of the game tends to change

Either way, those with a well defined investment philosophy shouldn’t bother too much. You can’t change your team combination based on one innings, unless the problems are deep rooted and do not seem to go away. When the market mood is buoyant, most investment styles catch up soon unless one is pursuing a deep value/contrarian style. We do have a few value bets in the portfolio but they do not overpower the rest of the portfolio. GARP is where our game is at, that does not change based on short term market movements. 

Over the next few months the market will respond to a different set of narratives than it has responded to over the past year or so. We should keenly watch how the market prices the consumer discretionary theme. It is one of the few themes where prices are still well below their pre COVID highs. The upcoming IPO list does have an interesting set of businesses coming up within this theme. 

In bull markets capital tends to rotate between sectors and themes before the market sees confirmation from economic data points and earnings. We may well be in this very phase right now. The risk is that if things aren’t as good as expected, the market can get disappointed and shake off those chasing momentum. For longer term investors the risk of a 10% fall in the index from the peak is present at any time, not just in a bull market. That should not make us do things too differently, though we may want to exercise higher levels of caution. 

To summarize my view on what investors should do in the current market 

Don’t be guilty of deploying too much money at elevated valuation 

At the same time don’t be guilty of being judgmental and sell out too soon Don’t take an extreme stance unless you need to This is my regret free approach of riding out a good market.

Be clear about what not to buy and what not to chase, continue to buy what is reasonably priced.

Participate to the extent your risk management framework allows you to, outcomes usually take care of themselves over the medium term.

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