How to plan your Equity Allocation for 2021
                     How to plan your Equity Allocation 
for 2021?
Where do we stand today?
Covid 19 – No Resurgence After First Wave, Vaccinations 
Underway
April 30 June 30 Sep 30 Dec 31
  2020  2020 2020 2020
Daily Tests 72,453 217,931 1,426,052 1,127,244
Daily new infections 1,901 18,522 80,472 21,822
Cumulative  Cases 33,610 566,840 6,225,763 10,266,674
Of which -Recovered 24,162 334,822 5,187,825 9,860,280
Deaths- Cumulative 1,075 16,893 97,497 148,738
Source: John Hopkins University
• There are no signs of a second wave
• Government has approved Oxford-AstraZeneca (manufactured by Serum Institute 
India) & Bharat Biotech’s (Local player) Vaccines for India 
• Vaccination started from Jan 16, 2021
• Government plans to vaccinate 300 mln people by August 2021
Down, Down Down…but Glimmers Of Hope With Newest Reading 
Showcasing Indian Economy’s Resilience
Source: Bloomberg, as of September 30, 2020. Note: The numbers in red circle are from a changed data series starting Jan 2015.  
While a “superior” series, there is no comparable number to equate the “New” with the “Old”. 
Most economists deduct 0% to 1.5% from the “New” to equate to the “Old”. Or you need to add 0% to 1.5% to equate the “old” to 
the “New”.
Economic Activity vs Pre-COVID levels
`Oct 2020 `Nov 2020 `Dec 2020 `Oct 2020 `Nov 2020 `Dec 2020
MoM % YoY% MoM % YoY% MoM % YoY% As a % of pre covid level (Feb 2020)
Production Indicators
Cement Production 11.2% 2.8% -6.1% -7.1% 8.7% -9.7% 87.7% 82.3% 89.5%
Steel Production 2.0% -2.7% 1.9% 2.4% 8.6% 1.4% 92.1% 93.8% 101.8%
Fertilizer Production 8.1% 6.3% -3.5% 1.6% 0.0% -1.7% 114.0% 110.0% 110.0%
Coal  Production 15.6% 11.6% 12.5% 1.9% 13.6% 2.2% 71.5% 80.4% 91.3%
Crude Oil  Production 3.3% -6.3% -3.2% -4.9% 2.6% -3.8% 107.0% 103.6% 106.3%
Natural Gas Production 5.4% -8.6% -3.6% -9.3% 4.1% -7.3% 104.0% 100.3% 104.3%
Electricity Generation -2.1% 10.5% -11.2% 2.2% 9.5% 4.2% 103.7% 92.9% 101.7%
Industrial Activity- Transport
Air Cargo 7.9% -14.1% -5.8% -13.1% 6.0% -8.9% 96.3% 90.7% 96.1%
Rail Freight traffic 5.8% 15.4% 1.7% 9.0% 7.4% 8.7% 101.7% 103.4% 111.1%
Port cargo 5.1% -1.2% 6.8% 5.4% 4.6% 3.8% 92.2% 98.5% 103.0%
Eway Bills Generated 11.6% 21.6% -10.1% 8.3% 11.2% 16.1% 112.4% 101.1% 112.4%
Source: CMIE, Bloomberg, QAMC 
Research
Economic activity in some sectors at 90% and in some sectors above pre-COVID 
levels
Economic Activity vs Pre-COVID levels
`Oct 2020 `Nov 2020 `Dec 2020 `Oct 2020 `Nov 2020 `Dec 2020
MoM % YoY% MoM % YoY% MoM % YoY% As a % of pre covid level (Feb 2020)
Deposit and Credit Indicators
Bank Credit 0.8% 5.9% -0.3% 5.2% 1.1% 6.0% 103.1% 102.8% 104.2%
Bank credit to Industry -1.3% -1.7% 0.5% -0.7% 0.3% -1.2% 98.1% 98.6% 98.8%
Retail credit 1.5% 9.3% 1.3% 10.0% 0.7% 9.5% 103.1% 104.4% 105.2%
Bank Deposits 1.1% 11.1% 0.4% 10.5% 108.2% 108.6%
Consumption Indicators
2 Wheeler Sales 11.2% 18.1% -18.3% 15.8% -24.5% 11.0% 150.9% 123.3% 93.1%
Passenger Car Sales 12.5% 8.3% -6.6% 1.2% -5.2% 1.8% 114.4% 106.9% 101.3%
Tractor Sales 6.6% 9.0% -27.7% 48.3% -19.9% 41.2% 190.8% 137.9% 110.5%
Petrol Consumption 8.2% 4.4% 0.6% 5.1% 1.3% 9.2% 105.5% 106.1% 107.5%
Diesel Consumption 27.4% 7.4% 0.7% -7.0% 2.0% -2.8% 97.7% 98.3% 100.3%
Domestic Air Passenger Traffic 32.5% -56.8% 21.4% -50.2% 15.3% -42.9% 42.9% 52.0% 60.0%
Consumer Spends: UPI 17.3% 101.8% 1.2% 106.6% 6.4% 105.5% 173.5% 175.7% 187.0%
Consumer Spends: Credit Card 26.5% -9.3% -3.9% 3.7% 104.4% 100.3%
Consumer Spends: IMPS 10.4% 29.1% 0.7% 36.3% 5.7% 38.6% 128.0% 128.8% 136.2%
Source: CMIE, Bloomberg, QAMC 
Research
Economic activity in some sectors at 90% and in some sectors above pre-COVID 
levels
Government Has Loosened the Fiscal Tap to Stimulate 
Demand  
  FY20 FY21 RE FY22 BE FY20 FY21 RE FY22 BE
   % of GDP  YoY change (%)
Centre's Total Revenue 8.6% 8.2% 8.9% 5.2% -8.6% 23.4%
Gross Tax Revenue 9.9% 9.8% 9.9% -3.4% -5.5% 16.7%
Net Tax Revenue 6.7% 6.9% 6.9% 3.0% -0.9% 14.9%
    Direct tax 5.2% 4.7% 5.0% -7.6% -13.7% 22.4%
    Indirect tax 4.7% 5.1% 4.9% 1.8% 3.6% 11.4%
           -GST 2.9% 2.6% 2.8% 3.0% -14.0% 22.3%
Non Tax Revenue 1.6% 1.1% 1.1% 38.8% -35.6% 15.4%
    Dividends and Profits 0.9% 0.5% 0.5% 64.1% -48.1% 7.2%
    Disinvestments 0.2% 0.2% 0.8% -46.9% -36.4% 446.9%
             
Revenue Expenditure 11.6% 15.5% 13.1% 17.1% 28.1% -2.7%
     -  Interest 3.0% 3.6% 3.6% 5.0% 13.2% 16.9%
     - Subsidies 1.3% 3.3% 1.7% 17.6% 147.3% -43.0%
     - Defense 1.1% 1.1% 1.0% 8.4% 0.2% 1.1%
Capital Expenditure 1.7% 2.3% 2.5% 9.1% 30.8% 26.2%
Total Expenditure 13.2% 17.7% 15.6% 16.0% 28.4% 1.0%
Fiscal Deficit 4.6% 9.5% 6.8% 43.8% 98.0% -18.5%
             
Net Borrowing 2.3% 5.4% 4.1% 12.0% 123.0% -13.2%
Source: Budget Documents, As of  February 2021
Estimates Have Corrected, Stage Set For Double-Digit 
Growth The Next Two Fiscal Years 
Data as of January 2021  Source: Bloomberg
Foreign Capital Pouring In, As Locals Turn 
Cautious
Change in S&P BSE-30 
Net Foreign Activity Net Local Activity Total Activity
Period TRI in that period (% )  
(USD bn) (USD bn) (USD bn)
( % USD)
CY 2003 6.6 0.1 6.7 +86.5%
CY 2004 8.7 -0.3 8.4 +20.5%
CY 2005 10.7 3.0 13.7 +40.2%
CY 2006 8.1 3.4 11.5 +51.6%
CY 2007 17.7 1.7 19.4 +67.0%
CY 2008 -12.0 3.3 -8.7 -60.8%
CY 2009 17.5 -1.2 16.3 +90.3%
CY 2010 29.4 -6.1 23.3 +24.2%
CY 2011 -0.4 1.3 0.9 -35.7%
CY 2012 24.4 -3.9 20.5 +24.1%
CY 2013 20.1 -3.7 16.4 -1.9%
CY 2014 16.1 3.9 20.0 +29.2%
CY 2015 3.2 11.1 14.3 -8.1%
CY 2016 3.2 7.1 10.3 +0.9%
CY 2017 7.8 18.4 26.2 +37.8%
CY 2018 -4.4 17.6 13.2 -2.0%
CY 2019 14.4 7.6 22.0 +13.1%
CY 2020 23.0 -7.5 15.5 +14.5%
January 2021 2.7 -1.8 0.9 -2.9%
Cumulative 196.8 54.0 250.8 1075.1%
Data as of January 2021  Source: Sebi.gov.in, NDSL, Past Performance may or may not sustained in 
future.
Spiking PER Overstates Valuation Given The Prior Quarter’s 
Gap Down
40.00 S&P BSE30 Index - PER
Maximum: 38.2
35.00 Minimum: 10.0
Current: 35.5
30.00
25.00
20.00
Average 20.4x
15.00
10.00 Lehman: September 15, 2008
SARS: March 2003
5.00
Source: Bloomberg. Data as on January 31st 2021. Past Performance may or may not 
sustained in future.
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20
30
5-
12
21
24
27
4-
8-
20
21
3-
9-
16
24
18
23
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14
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27
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11
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30
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28
10
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30
11
21
23
11
Factors Conducive for a Revival in Real 
Estate…..
Home Loan Rates at Two Decade Low
HDFC ‘rack rate’ for home loans in the Rs 3-7.5 Mln ticket 
size EMI Current (Rs)    39,330 
16.0%
14.0%
EMI (One year ago) –(Rs)     44,029 
12.0%
10.0%
Monthly Savings       4,699 
8.0%
6.0% % Saved due to lower interest 
        + 10.7%
4.0% rates
2.0%
Assumptions- For a home loan of Rs 5 million for 20 
0.0% years .
-99 -00 -01 -02 -03 -05 -06 -07 -08 -09 -09 -10 -10 -11 -12 -13 -14 -15 6 7 8 9n y t p l n g r g b l p c y t t n t p-1 y-1 n-1 g-1 v-1
9 -20
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-N -A Interest Rate -2019= 8.5%10 8 17 4 2 16 1 1 1 28 1 1 1 16 1 7 16 6 5 15 4 1 30 17  Interest rate-2020=7.0%
Source: QAMC Research, , As on Dec Decline in Interest rate=1.5%
2020
Reduction in duties + Lower EMI + Decreasing prices have improved affordability by 
~20% !
Demand Has Surprised Positively, Government Has Chosen 
to Spend its Way to a Recovery
• Economic activity has recovered to ~90-100% of pre COVID levels as 
demand has surprised positively
• 2 decade low interest rates, decrease in prices and cut in transaction 
charges in select states has improved Real estate affordability, 
leading to an uptick in transactions
• Budget - Government has chosen to spend on Infrastructure, 
Healthcare & Sanitation to try and stimulate demand further at the 
cost of fiscal discipline. 
• Fiscal deficit is expected to remain high over the next five years 
(4.8% for 2026)
Risk to the Recovery
• Emergence of a Second Wave of COVID Cases could derail 
economic recovery 
• Job Losses amongst salaried employees and Rising Inflation may 
impact consumer discretionary spend
• Real stress in the Banking sector has yet to be revealed as 
recognition of bad loans has been deferred after a Supreme 
court order
• Government finances remains under stress and may not have too much room to 
stimulate if economic environment worsens
Equity Outlook for 2021
Scenarios To Ponder
Corporate Equity 
Earnings Liquidity Valuations Equity Returns
Most 
Rising Easy High Positive Likely 
Scenario
Rising Tight Moderate Slight Decline
Stagnant/Fallin
g Easy Moderate Slight Decline
Sharp 
Falling Tight Falling Correction
Previous Peaks look like Small Hills Now
55000 S&P BSE Sensex Index
50000
45000
40000
35000 Lehma
30000 n Peak
25000
20000 Tech 
15000 Boom
10000
5000
0
Data as on 9th February 2021. Source: Bloomberg. Past performance may or may not sustained in future.
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Timing the Markets is a Myth 
2000 (11 Feb 2000) 2008 (8th Jan 2008)
Lump Lump 
  Sum SIP   Sum SIP
1 Year -27.8% -8.5% 1 Year -52.6% 0.0%
3 Year -17.9% 0.0% 3 Year -0.5% 23.5%
5 Year 2.0% 20.3% 5 Year -1.3% 8.8%
10 Year 10.7% 19.4% 10 Year 4.9% 10.8%
Source: Bloomberg
Past performance may or may not sustained in future.
Based on BSE Sensex
Returns are calculated on the basis of Compounded Annualized Growth Rate (CAGR)
18
Ignore Asset Allocation at your own Peril
There have been years when equity markets had a brilliant run, years when only bonds 
were dependable, and years when gold shined the brightest, and these periods did not 
typically overlap
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Sense Sense Gold Sense Gold Gold Sense Sense Sense Bonds Bonds Sense Gold Gold Gold
x 49% x 49% 26% x 83% 23% 32% x 28% x 11% x 32% 9% 13% x 30% 8% 16% 28%
Gold Gold Bonds Gold Sense Bonds Gold Bonds Bonds Sensex Gold Gold Sensex Sensex Bonds
20% 16% 9% 24% x 19% 7% 12% 4% 14% -4% 11% 5% 7% 14% 17%
Sense Sense
Bonds  Bonds Bonds Bonds Bonds Gold Gold Gold Sense Bonds Bonds Bonds Sensex 
x x
4% 7% 4% 5% 9% -5% -8% -7% x 3% 5% 6% 11% 12%
-52% -24%
Past performance may or may not sustained in future
The chart ranks the best to worst performing indexes per calendar year from top to bottom
Data as of December 2020
Past performance may or may not be sustained in future.
Imagine someone holding an all  Based on S&P BSE Sensex; Domestic Gold prices and
equity portfolio in 2008, or holding CRISIL Composite Bond Fund Index
Source: Bloomberg
none in the equity rally that 
followed? 
2021- Trying to Time Markets is a Folly
Follow a Simple Asset Allocation Strategy to Deal with 
Market Cycles
24 months •
Expenses Liquid Fund/ Bank Deposit
Balance ₹ •
Surplus 80%- 4-5 Diversified Mutual 
85% Funds 
Wealth 
Builder
Stress 
10%-15% • Gold/Gold ETF case 
scenario 
protection
Keep 6-24 months of expenses in Liquid Fund, Bank Fixed Deposit to be withdrawn in 
case of emergency
Please note that the above is the suggested fund allocation only and is not to be considered as investment advice / recommendation, please 
seek independent professional advice and arrive at an informed investment decision before making any investments
Disclaimer – Terms of Use
The data in this presentation are meant for general reading purpose only and are not meant to serve as a 
professional guide/investment advice for the readers. This presentation has been prepared on the basis of publicly 
available information, internally developed data and other sources believed to be reliable. Whilst no action has been 
suggested or offered based upon the information provided herein, due care has been taken to endeavor that the 
facts are accurate and reasonable as on date. Quantum AMC shall make modifications and alterations to the 
performance and related data from time to time as may be required as per SEBI Mutual Fund Regulations. Readers 
are advised to seek independent professional advice and arrive at an informed investment decision before making 
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12th February 2021
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