Marching Ahead

05th February 2022

Dear Fellow Investors,

Hope everyone is keeping healthy, wealthy and wise.

India is the fastest-growing economy among the Emerging Markets as per the World Economic Outlook Survey 2022 and this year’s budget was a testimonial to it with Government’s support and push.

In the current environment as the Covid cases fade away and the nation restarts itself, the budget seeks to fulfil the needs of the nation at large and not please any one class of people. It shows the affirmative stance of the government for the Infrastructure sector and PSU Sector.

The increased anticipated CAPEX amounting to 7.5 Lakh crores vs 5.54 Lakh crores is a welcome move. The government is committed to reviving the economy and building a new India. Its benefits will be seen across industries directly or indirectly related to CAPEX.

Push for higher exports and incentivising the MSME sector is another highlight. “Vocal to Local” stance was shown when 68% of the defence capital procurement budget has been allocated towards local procurement. This will certainly boost the domestic defence industries.

Overall the budget has been in line with expectations for the stock markets with no major tinkering in taxes. Though one question looms over the bulls. INTEREST RATES.

USA remains the biggest economy in the world with its currency USD dominating the world for a long time. US Fed is anticipated to hike the interest rate to counter the rising inflation. We think it might lead to short term corrections. However, with ample liquidity in the system globally, for long term investors, the interest rates might not be so detrimental until it is raised to much higher levels.

Also, periodic interest rate hikes keep the bubble from making and shouldn’t be seen as a sell point in the current growth cycle.

It is a cardinal sin in investing to reduce market exposure through ill-conceived selling — and thus failing to participate fully in the market positive long-term trend.

That’s even more true of selling without reason things that have fallen, turning negative fluctuations into permanent losses and missing out on the miracle of long-term compounding.

When one finds an investment with the potential to compound over a long period, the hardest thing is to be patient and maintain the position as long as doing so is based on the prospective return and risk.

An investor can be easily moved to sell by news, emotions, the fact that they’ve made a lot of money, or the excitement of a new, seemingly more promising idea.

Nevertheless, we are convinced that there are two main reasons people sell investments: because they’re up or they’re down. (It sounds Nutty, but let’s talk about the Nutty behaviour of humans first).

“Profit-taking” is the intelligent-sounding term in our business. To understand, one needs insight into human behaviour and psychology. An investor spends a lot of time and effort trying to avoid unpleasant feelings like regret and embarrassment. It’s only human to want to realize profits to avoid these outcomes.

If profit booking is one end of the sphere, limiting losses is another. Many more people become convinced to sell assets the more they decline.

Negativity causes investors to become depressed or fearful and sell in panic. Typically, stockholders are sceptical to let losses compound. And further, a decline can overshadow the overall portfolio returns.

Learning from Warren Buffett, however, the long term investor participates in business and does not trade pieces of papers, holding till the company has enormous potential, making it “unnecessary” to focus on short-term fluctuations.

There are certainly good reasons for selling, but they have nothing to do with anything mentioned above earlier. Rather, these should be based on the outlook for the investment (not the psyche of the investor).

1. If the investment thesis seems less valid than it did previously.

2. Another investment comes along that appears to have more promise to offer superior “risk-adjusted” prospective returns.

“Great compounders are hard to find. Also, it’s much more straightforward to predict the long-term outcome for a company than the short-term price movements.”

Happy Investing!!

Leaving everyone with a thought -

“Mantra of sensible investing — If I avoid the losers, the winners will take care of themselves.”

With Respect,

Chandranshu & Priyaanshu

+91–9953726305 & +91–8800967088

cachandranshu@outlook.com priyaanshu@live.com