Dear Readers,
It’s been an eventful 2022. Inflation, Russia-Ukraine War, unscheduled and unprecedented levels of rate hikes — this year had everything that can fuel volatility in financial markets.
Amid all the action, as always, we singularly focussed on the best way to preserve and grow your hard-earned money, be it stocks, mutual funds , fixed income or other asset classes.. We steadfastly adhered to not being influenced by the hype and frenzies that dominate markets every now and then, which only cause pain eventually to those who end up believing ‘this time it’s different!’
Right calls
Looking back at 2022, we recount with satisfaction that our broad market calls turned out to be right. When markets were still close to their peak and looked fearless, we were amongst the first to warn on the risks to stocks from a looming Russia-Ukraine war, in our January 23 edition, a full month ahead of the war. Further, when markets corrected to sub-16,000 levels mid-year, we rightly recommended investors play sector rotation to benefit from market rebounds in our Big Story in the June 26 edition. Our forecast in the beginning of the year that inflation and rate hikes will rock global markets played out too. In March, we wrote on how to shield your investments from inflation, which, again, turned out to be well-timed, as inflation hardened in the months that followed.
On international stocks, we rightly refrained from giving buys on the famous US-listed big tech stocks in 2021 due to their excess valuations. However, as interest rate hikes routed global tech stocks this year, we recommended that investors enter a few specific names this year to capitalise on the opportunity. We also brought to you voices of global investing legends like Jeremy Grantham in our Big Story section.
When Nasdaq funds were a rage the whole of last year and early this year, we came out with a note, in our 2022 New Year edition, to wait for a minimum 25 per cent correction in Nasdaq 100, before starting your investment. An over 30 per cent correction in Nasdaq 100 happened during the course of the year as expected and we followed it up recommending investors to start SIPs.
When it comes to newer and fancied investment options, we stand vindicated on our consistent advice during the last two years to refrain from crypto investing. Sticking with newer investment options, we further wrote on the pros and cons of curated stock portfolios, NFTs as well as ESG investing — themes that have been in vogue in 2022.
We also cautioned investors on taking financial advice from social media in our Big Story in the June 12 edition. Towards the end of 2022, there were reports that market regulator SEBI is working on guidelines to govern social media influencers.
How we fared on stocks
Risk-vs-reward analysis remains the fulcrum of our stock recommendations. If there is upside case for stock, there is also a downside case and we remain acutely conscious of that while analysing out stock calls. We staunchly refuse to be swayed by one-way stories or be influenced by recency bias.
While broader markets were reaching frothy levels since mid-2021, we turned cautious and maintained the view for most part of 2022, for a few simple fundamental reasons. We knew interest rates will not remain low for ever and we also knew ultimately stocks will reflect fundamental value in the long run, even if they diverged sharply in the short or medium term.
When we analyse our recommendations given between July 2021 and June 2022 (this gives at least a minimum time period of six months to assess/evaluate our fundamental calls), we gave 24 ‘book profit’ calls, 17 ‘buy’ calls and 25 accumulate’ calls ( excluding IPOs). The rest were ‘hold’ calls.
We have had a good 83 per cent hit ratio in our book profit calls, with 20 of them going down in absolute value and also underperformed Nifty 50, validating our assessment. Amber Industries (down 47 per cent since our book profit reco), Route Mobile (down 45 per cent), Happiest Minds (down 43 per cent) and Clean Science (down 40 per cent) have turned out to be our best calls in this category. Our sell calls on Adani Green (up 79 per cent) and ABB India (up 56 per cent) did not play out as we expected.
The bearish view we took on the IT sector with book profit recos on most of the stocks in the sector starting from mid-2021 worked well for us in 2022.
When it comes to our long calls, our approach was to factor probabilities of a market correction, and hence we recommended more ‘accumulate’ calls than ‘buys’. The difference between our ‘buy’ and ‘accumulate‘ calls is that, when it comes to ‘buy’ investors can get in right away with a long-term perspective, while in the case of ‘accumulate’ investors can gradually start buying on 5-10 per cent or more declines/corrections over a period of time. Out of our 17 buy calls, 9 have yielded positive returns and 8 have outperformed Nifty 50. US-listed Abbvie (up 47 per cent) and Cochin Shipyard (34 per cent) are the best performer there, while Aurobindo Pharma (down 54 per cent) and US-listed Meta Platforms (down 50 per cent) did not play out as expected.
Our accumulate calls currently have a close to a 45 per cent hit ratio. Given that we had expected declines as opportunities to accumulate, these calls are still work-in-progress. On a 2-3 year investment horizon, we expect high hit ratios in this space as well.
One frequent feedback we have received from you is for follow-up calls. We assure you we are vigilant in tracking our stock recommendations, and whenever the time is appropriate in our view to revise (convert sells to buys) or re-iterate calls (when movement is contrary), we will come out with the same.
Like 2021, 2022 was a busy year for IPOs too. We feel really good about the fact that we refrained from recommending investment in new-age companies. The crash in the new-age stocks this year validates our call to refrain from subscribing to their IPOs. Post the IPO, our ‘sell’ calls for those who held Zomato and Paytm have worked well.
Fixed income
On the debt side, our outlook at the start of the year was that interest rates will be on a rise in 2022 and hence we had initially recommended to investors to focus on short-term fixed income investments. This was done with a view to capitalise on opportunities to re-invest at higher interest rates as they moved northwards. As this trend played out, we recommended several debt instruments instruments across different risk categories for investors, including senior citizens. Through multiple columns during the course of the year, we cherry-picked the best options amongst gilt and SDL target maturity funds. We rightly recommended to investors to lock into these funds when government bond yields touched peak levels of 7.4-7.5 per cent. As NBFCs and banks keep revising their deposit rates upwards, we constantly picked the best amongst those with primary focus on principal security. As rates moved up, we wrote a timely column for senior citizens on ‘Minting a tension-free pension’, which was well-received.
Technicals
Our technical analysis and derivatives column enjoy wide popularity amongst investors with a higher risk appetite. The view of our in-house technical analyst on the direction of the market was spot-on right through January to June. However, we missed the reversal in markets from July to August. Outside of these three months, the technical calls have played out well. Our ‘Investment focus’ column carrying technical calls on page 1 of the print edition on a regular basis has had some good hits on the technical recommendations — Aegis Logistics, ITC and our muhurat pick – Indian Bank being examples There have been a few misses as well. Here, we would like to re-iterate to readers the importance of strictly adhering to stop losses when it comes to trading based on technical analysis.
Besides providing focussed derivatives coverage and trading ideas, we also attempted to demystify this complex space via primers in our Big Story section this year. We also initiated the F&O query column in 2022..
New initiatives
One of our most successful new initiatives this year has been our weekly video series by our technical expert – BL Guru. By the end of the year, we will have completed 36 episodes of the same. The feedback has been very positive. This gives us encouragement to expand this format to other areas as well.
We also made our bl.portfolio podcast a weekly feature this year. Topics from the weekly print edition as well as other exclusive and happening topics were taken up for podcast to cater to the segment that prefers content delivered in this format.
While bl.portfolio is a weekly product in the print format, in recent months, we have also significantly increased our daily content for the online as well as print audience, providing timely analysis of significant developments as well as product launches. . Exclusive web content, especially mobile-friendly, infographic-based content, has been a focus area in 2022.. The best and most popular content of the web during the week now gets featured in bl.portfolio’s Sunday edition.
We launched a refreshed version of the very popular bl.portfolio Star Track MF Ratings in 2022 with key value additions.
Last but not the least, along with the redesign of businessline’s print and web editions, the bl.portfolio section of our website as well as the print edition on Sundays also came out with a new look in 2022.
Looking ahead
As the year draws to a close, we would like to thank you for your unflinching support and encouragement year after year
Into 2023, we will continue to remain your trusted friend when it comes to personal finance. We will work with renewed vigour with laser focus on providing you with the best insights, analysis and recommendations. To borrow a phrase from our RBI Governor, we assure you that we shall maintain an ‘Arjuna eye’ on your financial well-being.
We urge you to constantly send in your feedback — positive ones as well as criticisms, both equally important inputs in enabling us to get better at what we do.
Happy New Year and Happy Investing.
