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Sunday, March 15, 2020

Coronavirus Panic - Requires Courage to Buy this Fear!

Dear Reader,

As you know, equity markets have experienced turbulent times recently as investors keep watch of a deadly viral outbreak of COVID-19 initially in China and now in many other countries across globe causing economic and market damage. None of us (who have invested in Indian equities) can forget the extreme fear we have experienced on Friday morning, 13th March, when trading was halted for 45 minutes as benchmark indices were down by 10% hitting lower circuits on exchanges.

In fact, we were expecting some correction in broader markets i.e mid and small caps post rally in stock prices since beginning of this year, however it was not expected that stock prices will collapse like falling knife with global stock market crash. The crash was so brutal that Nifty was on lower circuit on Friday. The bloodbath on Dalal Street intensified on Thursday followed by Friday with benchmark indices entering into the bear market and logging their worst ever decline of more than 30% within a month in absolute terms before gaining some of the lost ground. Sensex and Nifty joined the global market rout following the US travel ban on European countries and World Health Organisation (WHO) declaration of coronavirus as a pandemic, pushing the threat beyond the global health emergency it had announced in January. This further created panic due to fear of world economy heading towards recession due to complete shutdown happening in impacted countries.

The recent carnage in stock prices is mainly due to aggressive selloff by FIIs, who have sold Indian equities worth more than Rs. 30,000 crore in this month. Such steep corrections in major indices and sharp fall in stock prices are shakeouts to create panic among investors. Mostly, retail investors give up during these painful times and take wrong decisions by selling stocks in panic due to fear of further erosion of capital. If not, they are the first to sell their stocks once stocks recover back to their buying price in future again making a mistake to sell early rather than holding stocks to get the maximum gains which comes considering better earnings with upturn in economic growth in future. Remember, best prices to invest in equities comes only during worst times like we have witnessed recently. Moreover, we must understand that the recent selloff by FIIs in Nifty seems to be justified considering major heavy weights of Nifty 50 were trading at lofty valuations. The fear of coronavirus has just acted as a catalyst for FIIs to book profits. 

One more thing which we need to understand is performance of Indian equity market compared to US Market (Nasdaq & Dow Jones) which was in bull run and rallied more than 30% last year. Nifty / Sensex rallied around 10% during last year just because of dozen of heavy weights companies of Nifty / Sensex. But actually, Indian economy is going through a slowdown and registered lowest GDP of 4.5% (in Sept 2019) over last 6 years. Hence, it will be prudent to say that we are in bear market since Jan 2018 while looking at small and mid size companies performance and stock prices. Looking at past data indicates that during bear phase, small and mid caps witness fall to the tune of 65% to 75% from their peak levels over period of 1 to 2 years and later start recovering their lost ground with revival in business with upturn in economy and many turn out to multibaggers from their lows again. We are mostly done with the carnage in broader markets over last 2 years and its time to buy this Panic. We advise you to plan your purchases in staggered manner so that you keep some cash in hand and use it in case the stock prices slips further in coming weeks.

If you are a long term investor, recent carnage should not bother you much. Panics like these must be used to buy stocks. But it need lot of courage to buy during such panic times, market do test our nerves and if our emotions take over our discipline habit of investing,  we may sell in panic instead of buying stocks. Its human psychology, buying during good times is much easier than buying during bad periods.

Small caps being most volatile tend to offer best investing opportunities during turbulent times. Retail investors usually make mistake by buying stocks at higher levels due to greed factor and later exit due to panic and fear of further erosion of capital. This phase has happened earlier also and good quality small and mid caps have always bounced back, not only recovering all losses but also delivering much higher returns from previous highs. Steep fall in stock prices of small & mid caps with good business fundamentals must be considered as buying opportunity considering attractive valuations, most of small & mid caps have already beaten down a lot over last 2 years and are now available at historically low valuations. BSE Small Cap Index which made a all time high of 20,184 in Jan 2018 closed at 11,761 on Friday, down by 41.7% from its peak. Similarly, BSE Mid Cap Index is down by 31% from its peak of Jan 2018.

We started 2020 with better participation in small & mid caps compared to large caps mainly on account of expected revival in Indian economy going forward but witnessed crash in stock prices this month due to extreme fear across globe. However, its important to note that major selloff is seen with heavy volumes in large caps due to FIIs selling in these companies whereas fall in stock prices in small and mid caps are with lower volumes which indicates that retailers might be selling their holdings too due to fear of further loosing their capital. Coronavirus will surely impact world economy due to disruption in supply chain along with dampening demand, which is happening due to lockdown in various countries to save human life. But things will get back to normal over few weeks or months which means disruption will be temporary and not permanent for most of the companies.

Recovery in stocks may be slower considering the fact that Indian economy is still not out of the woods, most of the small and mid size companies have reported subdued performance in Dec 19 quarter. As per data released by the Central Statistics Office on Friday, GDP grew by 4.7 percent in the third quarter of 2019-20, the Indian economy continued to remain sluggish in the three months ended Dec 2019. The pace of growth fell sharply in the third quarter and is estimated to slowdown further in the fourth quarter mainly on account of supply chain disruption caused due to coronavirus spread in China initially and many other countries over last few weeks.

However, gauged by the market’s performance during the onset of other infectious diseases, including SARS, Ebola and avian fluInvestors may have little to fear that the pathogen will sicken global stock market. The MSCI All countries world index has gained an average 0.4% in the month after an epidemic, 3.1% in next six-month period and 8.5% a year later. However, the severity of the virus, ultimately, will dictate the market’s reaction and just because indexes had managed to shrug off the contagion from outbreaks in the past doesn’t mean that will be the case this time

Brent Crude slips below 40 USD per barrel – A Big Positive for India

Falling crude prices and global supply chain base shifting from China can emerge as boon for Indian economy in medium to long term.

Brent Crude price has witnessed its worst start since 1991 as it has fallen by more than 40% since the start of 2020. The recent drop in oil prices is due to a collapse in demand following slash in crude prices by Saudi Arabia after Opec's supply pact collapsed. It is the world’s biggest importer of oil and the virus has infected thousands of citizens causing a huge loss of economic activity. The collapse of economic activity in China has disrupted global supply chains and in turn could further put pressure on oil demand.

Low oil prices would help India, the world's third-biggest importer of oil, to narrow its fiscal deficit at a time the government estimates to overshoot the target. Cheaper crude would also reduce fuel and freight costs for a host of companies helping contain inflation. The additional oil bounty can be utilized to create adequate space for an increase in government expenditure. Some pass-through of reduction in oil prices to domestic prices will also benefit industry in the form of lower input costs and may result in moderating inflation.

We have been saying this time and again - don’t try to time the market. We firmly believe that to get the best returns in the long term, investors should invest in a staggered and disciplined manner irrespective of market conditions. However, smart investors do wait for such times to increase their allocation toward equities to buy stocks at depressed prices  due to panic and fear in market. Investing through ups and downs of the market lets your investment grow and averages the purchasing cost. Equity investment is a serious business meant for long term investors. Trying to get in when the market goes up and getting out when there is a correction does not help you to create wealth.

Let us share some valuable insights to make you understand why we believe buying the right set of small and mid caps now can be a massive wealth creating once in a decade opportunity. To make our readers understand bull as well as bear phase of markets, we have covered long term monthly charts of some of our own small and mid cap stocks recommendations (released under Hidden Gems and Value Picks) over last 9 years which at one point of time were down by 50% to 70% from their peak but turned out to be mega multibagger stocks in longer run delivering upto 64X returns.

Below are the Monthly Chart (since Jan'10) of 8 Multibagger Small Cap Stocks released under Hidden Gems service. 

1. Camlin Fine Sciences (Hidden Gem released on 27th Mar'11) - Read Old Report

Multibagger Small Cap Stock 1

Above is the monthly chart of Camlin Fine Sciences which we recommended as Hidden Gem on 27 Mar’11 at 6.05*. The stock made life time high of 155 in Jan 2018 and later crashed to lows of 36.70. At current price of around 60, it is still a 10-Bagger for investors who bought it during lows of 2011 or 2013 but those who invested later during 2015 – 2017 period are bearing losses as of now. Current situation is more or less similar like that of 2013. Investors who bought Camlin Fine Science stock at highs of 2011 were holding it bearing losses till 2013. However, initial pain of 2 years rewarded the investors of 2011 later in year 2014-2015.

2. Kovai Medical (Hidden Gem released on 27th Oct'11) - Read Old Report

Multibagger Small Cap Stock 2
Now look at monthly chart of KMCH since Jan 2010, Kovai Medical stock price made a high of Rs. 176 in Feb 2010 and low of Rs. 89.50 in 2012 when overall market sentiments were negatives. It witnessed correction of nearly 50% over next 2 years. Later in 2014, stock rallied more than 400% in matter of 12 months. Kovai Medical price fell by 56% from high of 1480 in Jan 2018, a 8-Bagger stock even after severe fall in stock price for those who invested in the company in 2012.

3. Roto Pumps (Hidden Gem released on 05th Aug'12) - Read Old Report

Multibagger Small Cap Stock 3
Let us look at monthly chart of Roto Pumps since Jan 2010, stock which turned 10-Bagger in matter of 16 months. Roto Pumps which witnessed correction of 60% in stock price in 2011 from high of 2010, rallied by more than 900% later in 2014. At current levels, Roto Pumps is a 13-Bagger stock for investors who bought it at lows of 2011.

4. Acrysil (Hidden Gem released on 25th Nov'12) - Read Old Report

Multibagger Small Cap Stock 4
Above is the monthly chart of Acrysil  from Jan 2010. Acrysil stock price fell by 48% over 2 years from its peak of 2010. With improvement in fundamentals and start of bull cycle, stock delivered 588% returns within one year. It is still a 9-Bagger stock for investors who bought it in 2012 or 2013 and a 4-Bagger for those who invested at high in Jan 2010 and later experienced negative returns for nearly 4 years.

5. TCPL Packaging (Hidden Gem released on 31st Jan'13) - Read Old Report

Multibagger Small Cap Stock 5
Above is the monthly chart of TCPL Packaging since Jan 2010. In 2014 with start of bull cycle in broader market, stock delivered 1100% returns in 2 years, turning 12-Bagger stock from initial high of Nov 2010 and 22-Bagger from lows of 2011. TCPL Packaging is down by 60% from its all time high but it is still a 5-Bagger stock for investors who bought it at highs of 2010 and still holding it.

6. Rane Brake Lining (Hidden Gem released on 31st May'14) - Read Old Report

Multibagger Small Cap Stock 6
Rane Brake Lining is our Hidden Gem stock recommended on 31 May 2014. During recent melt down in broader markets, stock witnessed price correction of 67% over last 2 years. Even when stock is down from all time high of 1450 hitting recent lows of 505, it is a 4-Bagger stock from highs of Nov 2010. Those who invested at high of Nov’10 were sitting on losses in the same stock for more than 3 years.

7. Visaka Industries (Hidden Gem released on 05th Jul'15) - Read Old Report

Multibagger Small Cap Stock 7

Above is the monthly chart of Visaka Industries since Jan 2010. Between Feb’16 to Jan’18, stock turned 9-Bagger delivering 853% returns in 2 years. Since then stock price has corrected by 68% making recent lows of 265 but is still a 5-Bagger stock for investors who invested in the same company 7 to 8 years back during 2011 – 2012 and a 2-Bagger for those who invested in 2015 - 2016.

8. Stylam Industries (Hidden Gem released on 08th May'16) - Read Old Report

Multibagger Small Cap Stock 8
Stylam Industries has delivered maximum returns of 6304% in last 9 years. A mind boggling mega 64-Bagger stock which moved from lows of 13.35 (Nov 2011) to high of 855 (July 2017). We recommended Stylam Industries as Hidden Gem on 08 May 2016 and advised to book full profits around 800 levels considering expensive valuations of the company. Its interesting to note that the stock which turned out to be a mega multi-bagger delivering maximum returns of 64 times over last 9 years was down by more than 70% by Nov 2011 from its peak of July 2010.

Below are the Monthly Chart (since Jan'10) of 5 Multibagger Mid Cap Stocks released under Value Picks service.

1. Aurobindo Pharma (Value Pick released on 27th Jan'13) - Read Old Report

Multibagger Mid Cap Stock 1

Aurobindo Pharma, a well known company from pharma sector, was recommended as our Value Pick stock on 27 Jan 2013. Stock which made low of 41.52* witnessing fall of 70% from its peak of Jan 2011 later delivered 1200% returns in matter of 2.5 years. Aurobindo Pharma is still a 15-Bagger stock for investors who invested in the company during lows of 2011.

2. Mindtree (Value Pick released on 23rd Mar'14) - Read Old Report

Multibagger Mid Cap Stock 2

Let us look at monthly chart of our another Value Pick stock – Mindtree recommended on 23 Mar 2014. Mindtree also witnessed severe correction of 61% from its peak of Jan 2010 and tested patience of investors for nearly 4 years. Those who stay invested and sit patiently on the stock were rewarded over next 2 years as stock rallied from 195* to 795* delivering more than 300% returns.

3. Heritage Foods (Value Pick released on 03rd Jan'16)

Multibagger Mid Cap Stock 3

Above is the monthly chart of Heritage Food of last 9 years. During bear phase of 2011 – 2012, stock price fell by 52% from its peak price of 2010. However,  the same company delivered 525% during bull phase in matter of 30 months. Stock made all time high of 884 in Oct 2017 turning mega 28-Bagger stock from lows of Jun 2012.

4. Can Fin Homes (Value Pick released on 29th Feb'16) - Read Old Report

Multibagger Mid Cap Stock 4
Can Fin Homes witnessed severe correction of 67% from its peak during last year. However, the same stock created significant wealth for investors who invested in the company during beginning of this decade. Even after severe correction in stock price over last 2 years, stock is a 12-Bagger for investors who invested in the company at high of 2010 and a 20-Bagger who invested at lows of 2012.

5. Sonata Software (Value Pick released on 10th Jul'16) - Read Old Report

Multibagger Mid Cap Stock 5
Above is the monthly chart of Sonata Software since Jan 2010. The stock price fell by 76% in 2 years from high of 69 made in April 2010. Investors who bought at highs of Apr 2010 were in losses for almost 5 years but those who held it tightly were rewarded handsomely over next 4 years. Sonata Software made all time high of 428.40 in Sept 2018 turning 7-Bagger for those who entered at highs of 2010.

Looking at long term charts of most of the companies with good businesses, you will realise that investors who entered in market by investing in small and mid caps during last 2 to 3 years have pain in their portfolio however those who invested in bad phase of market in 2011 - 2013 like that of today are still holding plenty of multibaggers in their portfolio. That is why its important to invest in equities keeping a real long term view. In fact, during turbulent times, we must increase investments / equity allocation in small / mid size companies which have good business fundamentals with better earning visibility and robust cash flows from their operations to get rewarded in big way in long run.

We also take this as an opportunity to inform our readers that our Combo - 1 (Annual subscription of Hidden Gems, Value Picks, 15% @ 90 Days & Wealth-Builder) is the best selling subscription service at Saral Gyan, we have registered maximum subscription of Combo 1 since beginning of this year followed by Wealth-Builder and Combo 3 subscription. We keep on updating our members on our past recommendations suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

Below are the details of our services:

1. Hidden Gems (Unexplored Multibagger Small Cap Stocks): Based on fundamental analysis, our equity analysts release one Hidden Gem research report every month with buy recommendation and share it with all Hidden Gems members. Stock finalized as Hidden Gem belongs to small / micro caps space with market cap of less than 500 Crores, expected returns from Hidden Gems is above 100% in period of 12 - 24 months. Once target is achieved, we inform our members whether they should continue to hold the stock or need to do partial / full profit booking. If fundamentals are intact and valuations are reasonable, we suggest to continue to hold the stock for long term for multibagger returns. Annual subscription charge of Hidden Gems is INR 10,000 9,000 under which you will receive total 12 Hidden Gems research reports (one on monthly basis). Click here to read more about Hidden Gems.

2. Value Picks (Mid Caps with Plenty of Upside Potential): Our equity analysts team consider Warren Buffet approach to short list stocks from mid cap segment as Value Picks. Market cap of Value Pick will range from 1000 crores to 10,000 crores. Holding period of Value Picks is 12 - 24 months and one can expect returns of 40-50%. Annual subscription charge of Value Picks is INR 6,000 5,400 under which you will receive total 12 Value Picks research reports (one on monthly basis). Click here to read more about Value Picks.

3. 15% @ 90 Days (Buy to Sell Stocks for Short Term Gain): Based on technical analysis, our team recommends one stock every month to our members. It’s a short term call under which you can expect returns of 15% within period of 90 Days. Annual subscription charge of 15% @ 90 Days is INR 4,000 under which you will receive 12 stock recommendations. We suggest lower allocation in 15% @ 90 Days stocks and higher allocation in Hidden Gems and Value Picks which are our portfolio stocks based on fundamental analysis.​ 15% @ 90 Days stocks recommendations are based on buy to sell and gain strategy, hence we suggest our members to book complete profits once target is achieved and exit in case target is not achieved or stock has broken its 2nd support level as per report. Click here to read more about 15% @ 90 Days.

4. Wealth-Builder (An Offline Portfolio Management Service): Wealth-Builder is our model portfolio of Rs. 10 lakhs and currently we are holding 16 stocks in our portfolio. We suggest higher allocation in our Wealth-Builder stocks which includes best of our Hidden Gems and Value Picks released during last couple of years. Our team suggest all our Wealth-Builder members to invest in the stocks which are part of our Wealth-Builder portfolio. Every month our team updates our Wealth-Builder members which stocks they need to buy / sell / hold with % allocation of these stocks in their portfolio, the suggested changes need to be replicated in the same proportion. Annual subscription charge of Wealth-Builder is INR 20,000 18,000 under which you will receive total 12-18 portfolio updates. We also review existing equity portfolio of our members and advise them which stocks to hold and which to exit based of fundamental analysis. Moreover, we do look at sector wise / stock wise allocation in the portfolio and advise in case of any corrective measure needs to be taken by increasing or decreasing the stock specific allocation. Our Wealth-Builder service is suitable for those investors who have an existing portfolio of at least 2 to 3 lakhs or planning to invest similar amount or more in equity market. Click here to read more about Wealth-Builder.

Avail attractive discounts by subscribing to our combo packs. Below are the details of our annual subscription charges, simply click on SUBSCRIBE! link to subscribe to our services online using debit / credit card or net banking facility.

Hidden Gems
Rs. 10,000
Value Picks
Rs. 6,000
15% @ 90 Days
Rs. 4,000
Rs. 20,000
Combo 1: HG + VP + WB + 15%
Rs. 32,000
Combo 2: HG + VP + 15%
Rs. 16,000
Combo 3: HG + VP
Rs. 14,000
Combo 4: HG + 15%
Rs. 12,000
Combo 5: VP + 15%
Rs. 9,000

In case if you are not comfortable in subscribing online, you can make the payment through cheque / cash deposit / NEFT transfer in any of our bank and writing back to us sharing transaction details. Click here for bank details.

Do contact us in case of any queries, we will be delighted to assist you.

Wish you happy & safe Investing. 

Team - Saral Gyan