While some only saved money, others earned during COVID... here's how?

On 5th April, mere 40 days before the last active trading session on 15th May 2020, I had suggested some stocks to be followed and traded if deemed fit. Here is a result of what would happen if one had adhered to that strategy. I will make the conclusions short and crisp and shall share my views on the current economic situation below. If you are not interested in the results of the stock selection, feel free to skip this section and read further.

Stocks and Results:

Since I had no intentions of making a portfolio with defined percentages of the amount in each sector, I will assume I invested the same amount in each company. Here is the link to the previous post so that you can see the reasoning for stock selection.

1. NMDC - The day I suggested for buying the stock, it traded at Rs. 77. With targets of Rs. 89, we almost made our desired money. Since then it rose up to Rs.87, with partial bookings of 50%, I remained invested. Its current price is Rs. 74.

5th April: 77 (base)

High: +12.9% from the base

Now: -3.9% from the base

2. TCS - The buy was generated when it traded at Rs. 1703 in April. Since then, it rose to Rs.2026, to currently trading at Rs.1893.

5th April: 1703 (base)

High: +18.95% from the base

Now: +11.15% from the base

3. HDFC Bank - The share started its journey from Rs.848 to all the way up into 4 digits (Rs.1020). Succumbing to the market pressure, especially the financial state of the country taking a toll, the stock has managed to still reap profits.

5th April: 848 (base)

High: +20.28% from the base

Now: +4.7% from the base

4. PVR - The only share I regret holding onto. Expecting the lockdown to get over soon was a very big mistake. And an even bigger mistake was to keep holding on to it. These stocks have taught me a lesson I shall write below.

5th April: 940 (base)

High: +32.97% from the base

Now: -9.57% from the base

5. HUL - Another very important stock where I booked 50% in the middle and kept holding. I will keep holding it and if tomorrow the price breaks a trend, I will increase my stakes in the portfolio.

5th April: 2222 (base)

High: +17.23% from the base

Now: -8.55% from the base

There were 5 more shares that I had mentioned namely - BPCL, HPCL, ONGC, Reliance and Spencers. Culminating all in a single excel sheet, they could be seen something like this...

Results of amount of money that could have been made without much effort.

Results Explained ...

It clearly indicates that only within 40 days of investing money in sound stocks can do wonders. If the numbers look small then let me break it for you.

You invested your idle money in it. Because of inflation, your buying power reduces every year. Within just 40 days of investment and without any intervention or attention to the portfolio,i.e., without giving any time, effort or application of skill, you could have beaten the inflation for the year of 2019. This means no loss of buying power of a year within just 40 days. This means there is a high chance of growth.

Despite the economic conditions being so delicate, you could have remained profitable. The highest one could have achieved from the portfolio is +21.8% return in 40 days, a return which investors would love to have, yet fail to achieve, even in a year. Exactly selling at the top and fishing at the bottom is not possible hence, I will reserve this to 11%, which is 50% of the highest that could have been made. If one is willing to spend some energy and time in it, this result was easily possible with the partial booking of profits and tracking the shares. This 11% in 40 days is way higher than the best Fixed Deposit returns any well-rated bank in India would provide in a year. This is how amazing the results are.

The economic situation unfolding...

I clearly stated my portfolio does not have pharma and auto sector stocks because I do not want to indulge in them at this point. Both these sectors have done amazingly well. The pharma, while expected to do well, has outperformed every sector. Despite the auto sector doing well, I have my reservations with them in terms of their fundamentals. As the lockdown increases, the auto sector is the one that shall see a lot of loss in sales. Maruti, Mahindra&Mahindra, TVS Motors, etc have a bleak future in terms of growth for the next few quarters.

"We have to learn to live with the virus" said by many eminent people in the country including the Health Minister of India and the Chief Minister of Delhi, makes one thing clear - the economic status of the country has had a severe backlash and will take time to recover. Since trains and flights are further blocked till June beginning, companies involved in entertainment, hospitality and tourism will take the most of the heat. Hence, companies like PVR, Inox, Thomas Cook and others are not the best stocks in the portfolio keeping the psychology of the country in mind.

IT sector is believed to have the least effective in terms of efficiency and work deliverables, correctly so allowing them to beat street estimates this quarter. The top 3 companies in the sector - TCS, Infosys and Wipro - are sitting on a cash pile of $16 billion. COVID has made the valuations of the competitive companies much lesser, making their acquisitions easier and cheaper. Work from home and increase in employees is the norm of this sector, thus, allowing a great upside to be seen in the longer run.

My favourite sector - manufacturing - had been suffering much prior to the outbreak of the virus. The hopes of revival are now almost deceased for the time being. It is the second-highest contributor to our GDP at around one-third of the total. The growth of GDP can stoop to as low as 0% this year. Some experts believe that we should be ready for negative GDP growth. The tension surrounding this statement has increased owing to the gigantic tranche of money levied into the Indian Economy. Rs. 20 lakh crore or 10% of our GDP has been streamlined by the BJP govt. as a relief package. Though this package is much bigger than expected, the despondency spread across the country shall see no great effect in the market.

The governments will be able to take a sigh of relief only when they can get the industries and workshops up and running. The different governments in our quasi-federal country are trying to get as many companies, that are contemplating on shifting from China, to India. UP alone is in talks with 250 companies, to woo them into India, by making flexible agreements in terms of land, labour and regulations. This shall be a blessing in the long term, but the short term still looks gloomy. The centre is also talking to many MNCs and has promised states and the companies full support. Apple in talks to shift one-fifth of its production from China to India is one of the many deals being discussed. Bosch and biosciences' companies have shown keenness too

The demand for fast-moving consumer goods has decreased amidst the COVID, but this decrease in consumption is neither too significant to be worrisome nor sustainable. The government has given mostly indirect benefits to people in its 'mother of all' relief package. They firstly aim to help the downtrodden and deficient, later to the economically sound. The centre is witnessing a severe cash crunch. They paid for 85% of the fares of the labourers travelling by train and also allocate money to the states for proper governance. The states have been facing serious economic crisis too, which ultimately led to the opening of liquor shops.

Liquor, tobacco and luxury items are a major chunk of any government's earning. Tolls also generate a lot of money but owing to the lockdown on travelling among cities and states, this stream has also dried up. The major source of money right now is through oil. Despite the price crude going to the least in decades, the prices for petrol and diesel has not reduced. In fact, has increased in states. This was a method using which our former Prime Minister of India, Shri VajpayeeJi, earned extra money from the country to fund the projects to build roads and better infrastructure.

Talking of which, the infrastructure sector has received a significant portion of the relief package. This is typical Modi-government in the last 6 years. This sector has always been happy under this government showing multi-folds of growth. Larsen-Toubro has major potential to reward investors heavily.

Will be writing more on the economic status of the country in posts to follow. Till then please stay safe at home and build your skillset. A few things I learnt from trading in these 40 days, keep targets for each stock, I prefer 10-12 per cent, after which partial dilution helps. If the trend continues, reinvest or hold. This increases the returns most number of times but requires some tracking and effort. As the old maxim goes - there is no free lunch.

Just like this time, keep writing to me personally or in the comments below, your views or any doubts, even the topics you want me to write on. This shall help you as well as me to learn and know better.