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Rupeeting Monthly Performance Update - May 2022

May 2022 was a bad month for the equity markets. It was also a month that was marked by volatility, with sharp movement seen on both sides. Such moves, with worse-hit mid and small caps are usually pretty lethal for portfolios.

In this context, while all our portfolios were negative in the month, a lot of them did outperform indices. The best performing was Monopolies, which was down just 3%, and has recovered more than that in just the last couple of days!

The markets in May 2022

Stocks: While large caps were down 3% during the month, mid and small caps were down 5% and 8% respectively.

Debt: 10 year prices fell as yields rose, reflecting the tightening of monetary policy. Corporate bonds and 1-days performed better.

Gold: Gold took a little bit of a breather after being the choice-of-safety since the few months.

International stocks: The Nasdaq fell a further 2% in May. This year so far, the Nasdaq is down nearly 20%, the mark that is indicative of a bear market. While the month started lower, encouraging data on retail spending, and the Fed’s actions being in-line with estimates provided some respite.

Rupeeting in May

During the month our All-Weather Portfolios, which are made of 5 different asset classes, performed a tad worse than their respective indices.

Some of our decisions in the last rebalance helped us gain this advantage:

  1. We added corporate bonds to the portfolio, which gave us a better yield

  2. We had moved from 10 year government bonds to 5 year, and those have been performing better

  3. We maintained exposure to Gold, which performed well

  4. We got rid of exposure to International Stocks, which had a disastrous month

However, what didn’t work in our favour this month was:

  1. Maintaining a high overall exposure to Equity

  2. Maintaining exposure to mid caps

Rupeeting’s Equity Portfolios were all in the negative this month. Some of them however did outperform indices. Monopolies was down just 3% this month. Naturally, portfolios with a high exposure to mid and small exposure suffered.

  1. Rocketship - Higher exposure to mid and small caps

  2. Monopolies - High exposure to defence sector (BDL and HAL), which saw a massive upswing in May

  3. Disruptors - Stability in internet companies

  4. Bread & Butter - Appropriate placement in consumption stocks

  5. Value Migration - Higher exposure to mid and small caps

Long term performance, of course, continues exceeding the benchmarks!

What next for the markets?

  • Inflationary pressures are expected to continue. Because of the Russia-Ukraine conflict, one after the other, either prices of commodities have shot up, or they have been in short supply.

  • Central banks have been getting aggressive at monetary policy tightening, and that is expected to continue till things are under control.

  • Consequently, economies are expected to start cooling off. This will impact demand, growth and profitability.

  • Valuations too, which are at a high are likely to see some de-rating to account for the reversal in trend.

  • Whilst some relief rallies are likely, any material improvement in the situation will either come from a control on inflation, or from the return to normalcy of whatever got impacted by the Russia-Ukraine conflict.

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