Divyanshu's Portfolio

[Divyanshu_Bagga]

Performance update:
An entire year’s gain wiped in just one month! Such is the nature of markets. My portfolio ended the year with a negative return of -2.70% as against -27.81% return from S&P BSE 500 index.

It may appear that my portfolio has fallen by the same amount as index during March, since the absolute difference between return has stayed the same, but that would be an incorrect way of measuring this difference. Remember - it takes 100% gain to recover from a loss of 50%. In the same manner, I can calculate how much excess return market has to generate to get par with my portfolio. On March 6 it was 27%, now it is 34.7%. I take this relative strength during correction as a good sign.

I haven’t made any changes to my portfolio since cutting Bandhan’s position in half on 6th March. Though I have changed my asset allocation. I wasn’t underestimating this virus, but I was pretty confident in long term value of business I hold. Hence I went into this crisis with 50% equity exposure.

@Divyanshu_Bagga

I stopped trading two weeks back, as the risks looked too high, and my trading system is designed for trending bull markets, not the high volatility markets like present. But not only have I kept all of my long term investments intact, I am also adding small quantities on every steep fall. Coronavirus outbreak is huge negative in the short run, but it does not impacts the long term earnings of the underlying businesses much. That said, I am only 50% in equities, with rest mostly in gold, so I have enough reserves to keep buying.

I bought aggressively on the nifty fall below 8000, and increased my equity exposure to 60%, but that was before the lockdown announcement. Until that point, I was assuming it would turn out like South Korea. That people wouldn’t take it seriously, leading to initial spike in infection numbers, but that will eventually cause people to panic and take precautions, like wearing masks, avoid going outside as much as possible and regular hand wash. This coupled with extensive testing and contact tracing/selective quarantine would drastically reduce the rate of new infections, just as it did in Korea. Turns out that was quite the optimistic view. After seeing millions leaving cities because of a sudden national lockdown and all supply chains being disrupted, I couldn’t help but brace for a much more significant and long lasting impact on economy. I can only blame my lack of imagination for not foreseeing this level of disruption, even though I was pretty certain that virus will eventually spread in India too. Thankfully, the markets bounced back and I was able to cut down my equity exposure to 40%. I was able to do so easily as I wasn’t in any loss overall. Had my portfolio been in 25-30% loss like the index, this wouldn’t have been an easy decision.