Ampersand Capital LLP

Extreme valuation in India market has set alarm bell ringing among RBI, SEBI and leading Mutual Funds. Cautionary words are coming at us thick and fast. We are constantly being reminded about regular market crashes during 2008 and 2020, leading to annual return of only 7-8% in NIFTY in this 12 year period. In such environment, saying bullish things is tricky. However, it is important to not get carried away in one way or other. As investors we should keep looking for opportunities to generate absolute return, and generate alpha, by out performing market. What drives Alpha:- 1. Sector Rotation 2. Market Cap category rotation 3. Booking loss….accepting mistakes early enough During 2008-20 : NIFTY was up about 2.5x, NIFTY profit up about 2x. In same period HUL went up 10x driven by about 5x rise in profit. But BHEL stock became 1/3rd, and L&T was flat. BHEL incurred losses, and L& profit grew only about 40%. Capital goods , real estate etc dominated 2004-08, while FMCG/Pharma lagged. This reversed in 2008-20. Post Covid, we are seeing Cap Goods in leadership role, and FMCG lagging. Key laggards of past 3 years are Chemicals, Building materials, Banks/ NBFCs, FMCG, and IT. Alpha managers have to stay laser focused on earnings outlook, and sources positive and negative surprises. There’s always a bull market somewhere 😌 .

In April, Ampersand fund NAV rose 10.6%, our best performance in some time. Notably, and yet again, this was much better than benchmark BSE 500 (up 3.4%), and well ahead of most major indices. Strong showing in mid/small cap holdings dictated our performance. Standout winners were Kiroskar Pneumatic, Amara Raja E&M and Motilal Oswal Financial services, all of which we have been invested in for a while. Outlook of our market could brighten in further post monsoon and election.