Bulls vs. Third COVID Wave: Who Will Prevail?

27 July, 2021

            Sinhasi Investment Solutions

We as investors, invest in Equity to get better returns than Fixed Deposits, especially now with FD interest rates being so low. We may invest in shares, equity mutual funds and PMS Schemes. The goal of investing in PMS schemes is to get better returns than equity mutual funds. And this is what Girik Capital has achieved consistently over a 10 year period. We at Sinhasi have been working with Girik Capital now for almost 10 years and all our clients have reaped the benefits of their alpha returns. The Girik Capital Multicap PMS is now the top performing PMS fund in India over a 5- and 10-year period.

We spoke to Charandeep Singh and Varun, both founders of Girik Capital to see what their tips are on the market touching 52K, with the Covid 3rd wave around the corner.

The Indian earnings growth story is strong and very much in hand. Companies have grown in a structured manner over the last decade. Markets have gone up and down over the past century and they have also come back stronger.

Should we book profit or take a cash call now that the market has hit a high?

Always remember that you have to be careful that you are looking at the long term when investing in equity markets as they are extremely volatile in nature. Invest only your disposable income in the market.

Always remember that you have to be careful that you are looking at the long term when investing in equity markets as they are extremely volatile in nature. Invest only your disposable income in the market. “Investing in concentrated portfolios like the Girik PMS is very different from investing in equity mutual funds. And it is very important to understand this difference, to see if you need to book profits or not at current market levels. Though PMS schemes and Equity mutual funds fish from the same pond, their approach and strategies for making sustainable alpha returns is totally different and this is very important to understand."

Managing Director,
Sinhasi Consultants Pvt. Ltd.

From a portfolio management scheme perspective, Charandeep (who leads the risk side of the business) and Varun (who leads the innovations side) at the Girik PMS had 4 key tips to give about the sensex at 52k.


Tip No 1
Don’t bother about the macro environment

This is difficult to do and has never been forecastable. But the corporate earnings and performance is a direct indicator of how a stock will perform. You can’t ignore the fact that there is Covid in the air, certain sectors and industries are doing very well because of this situation . In the first wave, we thought corporate earnings were decimated, but they came back stronger. Corporate India cut costs, reduced debt and also grow when the growth opportunity presents itself. Even if the stock prices drop by 20%, there is a very strong chance they will bounce back.


Tip No 2
Easier to forecast company earnings

There are companies where the earnings have gone up more than 4x and the market cap has gone up many more times than that. Wealth has been created in the last decade. The macro factors 10 years ago had suggested that we were staring down a doomed economy with a failed UPA govt, European crisis, increase in interest rates, etc. So, while the macros were inclined towards getting out of the market, we see that HDFC bank, for example, has grown 9x in the last decade. Overall, in spite of the scams over the years, we see that the number of profitable companies in the investable universe has gone up. The key is to identify these gems for investment..

Whenever I ask Charandeep about the macro environment, I usually get the answer that this is not a concern. Bad news can be all around but picking winners amidst the noise is the focus. The focus is on earnings and earnings growth potential – to pick potential winners and multi-baggers with great discipline and process and weed out losers as required.



Tip No 3
Stay the course. Even during Recessions. Don’t Panic, Don’t try to time the market

Anybody who wants to make money in the markets has to be focused and keep a calm head, especially during volatility. Even Warren Buffet has gone through the last 75 years seeing about 14 recessions and come out ahead. Long term compounding wins every time.

Girik normally has delivered particularly good returns to people who have stayed beyond 3 to 5 years, while they do lag the industry for the first 2-3 years. Most corporate earnings start kicking in after the initial 2-3 years because strategies take time to be executed. So, stay the course and give time to the portfolio!


Tip No 4
Deploying Money via SIP even for PMS schemes is a good investment strategy in this time

Markets give you opportunities, but the businesses are what you are investing in.

What is the IRR on existing portfolio companies? Maybe we bought early and current IRR on the investment is low? is it then better to look for another opportunity rather than putting money back in the same stock? Take your time. Don’t rush to invest. Typically fund managers should take about 6 months to fully deploy the funds in the market to take advantage of the market fluctuations. Which is why SIPs even for PMS schemes work the best.

Sectoral leadership changes during market falls and it will be beneficial to see what environmental changes are being seen during the uptake. For example, during the Covid 19 crash, the rise of focus on pharma, work from home leading to digitalization which in turn drove the IT Sector , infotech and OTT platforms These are all growth opportunities.

As a company Girik is not looking to book profits nor are they taking a cash call beyond the standard 10-12% that they keep in growth times like this. They are always looking for opportunities to invest in companies to realise exponential growth in earnings over several years. That’s what has worked for them over the past decade.

However, the system is rigged to take a cash call, if necessary, like last year in May 2020. And the cash call could be as high as 60% of investment. But as of now they are invested at 90%+ of the portfolio right now.

Girik works with a portfolio of 18- 25 companies, which are thoroughly researched by their team, screeners and processes.

There are checks and balances on amount of stock in specific industries or even within large, mid and small caps. And of course, liquidity considerations for the client are kept in mind to invest in any stock. Their screeners have a risk management process they follow for every stock. The process of choosing stock is derived from the euphoria in the market for various stocks, post which they go through the screening process.



After having this conversation with Charandeep and Varun, we would stay invested in equities as we have already said earlier,Click Here. The macro environment is not predictable while corporate earnings based on earlier results are. The homework is necessary. Don’t try to time the market with a single round of investment. Release funds slowly and periodically so that you can gain the maximum over time due to the market fluctuations. We can never time the market – this is the plain truth. You WILL win and reap the benefits of alpha returns by picking the right fund manager, with the best process.

We urge you to have conversations with certified financial planners who can help with your risk profiling and therefore asset allocation portfolio. They are in the best objective position to help you understand and mitigate the risks of letting fear get the better of you and being disciplined. It is all about spending time in the market and not timing the market!

Reach out to us

If you would like to gain a better perspective on how we see the market panning over the next 2 to 10 years.