Investing When Valuations are High

1. Investing When Valuations are High Speaker: Mr. Sorbh Gupta, Fund Manager: Equities November 12th, 2021

2. 2 Vertical Takeoff after the Vertical Takeoff after the Covid Covid Scare Scare Source: Bloomberg Finance L.P., As of October 29, 2021, Past Performance may or may not be sustained in future. *Aug 28, 2013 is the day when the Rupee hit an all-time low and Sensex hit 2013 intra-day low

3. 3 PER Elevated PER Elevated – – Will Markets Deliver on Elevated Expectations? Will Markets Deliver on Elevated Expectations? Source: Bloomberg Finance L.P., as of October 29, 2021. Past Performance may or may not be sustained in future.

4. Markets Supported by Consensus Earnings Upgrades After Many Years of Flat Growth Source: Bloomberg Finance L.P.; as of October 29, 2021 Past Performance may or may not be sustained in future 4

5. 5 Corporate Profits at an all time High, Expectations of Strong Demand Rebound Corporate Profits at an all time High, Expectations of Strong Demand Rebound Corporate profitability hit a record in Q4FY21 driven by strong revenue growth and strict control on costs Demand is expected to rebound post unlock driving sales, but higher input costs and normalizing other costs may see profit growth lag revenue growth Source: CMIE- Economic Outlook. Past Performance may or may not be sustained in future.

6. 6 Demonetization, GST, Demonetization, GST, Covid Covid: Large Companies Getting Larger : Large Companies Getting Larger Listed Company Growth YoY Industry Growth YoY 20% 16% 14% 14% 15% 9% 10% 6% 6% 5% 3% 3% 5% 0% -1% -5% -5% -7% -10% -8% -15% -12% -13% -15% -16% -20% -18% -17% -25% -25% -30% Paints Cement Steel Ceramic tiles AMC AUM CV Gen. Ins. Premium Passenger cars Bank Credit Two-wheelers Source : CMIE, RBI, IRDAI Note : YoY growth in FY21, Volume Growth for manufacturing sectors like paint,steel,auto etc. Credit growth for private sector banks is compared to systemic credit growth. Source: CMIE- Economic Outlook, Data as of March 2021

7. 7 Strong Flows: Fed Tapering Could Act As Pause Not a Full Stop Strong Flows: Fed Tapering Could Act As Pause Not a Full Stop Change in S&P BSE-30 TRI in that period (% ) ( % USD) +86.5% +20.5% +40.2% +51.6% +67.0% -60.8% +90.3% +24.2% -35.7% +24.1% -1.9% +29.2% -8.1% +0.9% +37.8% Net Foreign Activity (USD bn) Net Local Activity (USD bn) Total Activity (USD bn) Period CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 6.6 8.7 10.7 8.1 17.7 -12.0 17.5 29.4 -0.4 24.4 20.1 16.1 3.2 3.2 7.8 -4.4 0.1 -0.3 3.0 3.4 1.7 3.3 -1.2 -6.1 1.3 -3.9 -3.7 3.9 11.1 7.1 18.4 17.6 6.7 8.4 13.7 11.5 19.4 -8.7 16.3 23.3 0.9 20.5 16.4 20.0 14.3 10.3 26.2 13.2 -2.0% 14.4 7.6 22.0 +13.1% CY 2019 23.0 CY 2020 -7.5 15.5 +14.5% +22.4% YTD 2021 7.1 11.0 3.9 -0.4% October 2021 -1.8 -1.0 0.8 59.7 Cumulative 201.2 260.9 +1381.2% Source: Sebi.gov.in, NDSL, As of October 29, 2021. Past Performance may or may not be sustained in future.

8. 8 Domestic Institutional Flows Come Back After Second Wave ebbs & Improvement in Domestic Institutional Flows Come Back After Second Wave ebbs & Improvement in Employment Levels Employment Levels Source: CLSA and Bloomberg Finance L.P., as of October 29, 2021

9. 9 Scenarios To Ponder Scenarios To Ponder Corporate Earnings Liquidity Equity Valuations Equity Returns Most Likely Scenario, But Returns may moderate Rising Easy High Positive Rising Tight Moderate Slight Decline Stagnant/Falling Easy Moderate Slight Decline Falling Tight Falling Sharp Correction

10. 10 Markets are Heterogeneous… Well, Most Of The Time Markets are Heterogeneous… Well, Most Of The Time YTD 2021 25.4% 30.7% 32.4% 42.6% 16.1% 40.2% 36.6% 13.3% 23.1% 34.4% 65.8% 43.5% 24.8% 61.2% 54.9% 76.9% CY 2020 17.2% 17.9% 18.4% 22.2% 62.6% 60.3% 46.5% 13.2% 14.3% -0.6% 11.4% 12.5% -2.1% 9.2% -12.8% 18.4% CY 2019 15.7% 10.4% 9.0% 21.5% -2.8% 11.8% 11.1% -2.2% -9.9% 10.6% -0.6% -8.8% 21.1% 27.6% -1.1% -10.2% CY 2018 7.2% 0.8% -1.8% -8.3% -5.4% 27.3% 12.4% 12.1% -21.3% -12.6% -14.3% -0.5% 5.7% -30.7% -18.7% -16.3% CY 2017 29.6% 35.0% 37.6% 102.9% 1.1% 13.3% 18.8% 33.3% 33.3% 37.8% 22.0% 41.4% 40.0% 107.2% 22.7% 52.8% CY 2016 3.5% 5.4% 5.2% -5.8% -12.5% -6.1% -7.6% 4.8% 10.4% 30.4% 3.0% -2.3% 8.4% -5.3% 16.9% 43.2% CY 2015 -3.7% -0.2% 0.4% 24.8% 15.9% 6.4% 5.4% 3.6% 0.1% -1.2% -5.3% -7.8% -9.0% -12.8% -14.9% -28.8% CY 2014 32.0% 37.6% 39.1% 67.3% 48.8% 19.5% 18.2% 20.1% 53.8% 14.1% 25.5% 51.9% 67.1% 9.4% 44.8% 11.1% CY 2013 10.7% 6.2% 5.0% -23.9% 24.9% 62.3% 49.3% 12.5% 8.9% 5.9% -12.4% -4.0% -8.0% -31.2% -16.5% -7.5% CY 2012 28.0% 33.2% 33.4% 47.1% 39.8% 0.7% 3.0% 49.5% 42.8% 15.8% 12.8% 36.6% 59.1% 54.4% 18.6% 21.5% CY 2011 -23.6% -26.0% -26.4% -16.2% -12.1% -14.6% -15.5% 11.7% -18.6% -28.3% -39.1% -47.1% -30.7% -51.6% -31.6% -46.5% CY 2010 19.1% 17.8% 17.9% 69.6% 35.4% 34.1% 25.4% 35.5% 40.3% 2.7% -5.4% 10.0% 35.0% -25.7% 1.2% 2.1% CY 2009 83.3% 90.9% 92.7% 100.6% 71.2% 135.9% 69.9% 43.3% 208.3% 75.0% 76.1% 106.1% 86.8% 70.0% 82.5% 238.8% Securities Name BSE-30 INDEX BSE200 INDEX BSE500 INDEX BSETCD INDEX SPBSHLIP INDEX S&P BSE INDIA HEALTHCARE IDX SPBSITIP INDEX S&P BSE India IT IDX BSETECK INDEX S&P BSE India TECK Index SPBSCGIP INDEX S&P BSE India FMCG Index BSEAUTO INDEX S&P BSE India Auto IDX BSEOIL INDEX S&P BSE India Oil&Gas Index BSEPOWR INDEX S&P BSE INDIA POWER INDEX BSETCG INDEX S&P BSE India CapGoods IDX BANKEX INDEX S&P BSE INDIA BANKEX IDX BSEREAL INDEX S&P BSE India Realty Index BSETPSU INDEX S&P BSE INDIA PSU IDX BSEMETL INDEX S&P BSE INDIA METAL INDEX S&P BSE SENSEX 30 INDEX S&P BSE 200 IDX S&P BSE 500 IDX S&P BSE INDIA Cons.Dur IDX Source: Bloomberg Finance L.P.; based on daily total returns as of October 29, 2021. Past Performance may or may not be sustained in future.

11. Careful Stock Selection & Looking Beyond Noise is Extremely Important Careful Stock Selection & Looking Beyond Noise is Extremely Important S&P BSE-30 Index surpasses previous peaks in INR and USD terms Real estate remains an opaque business: DLF & Unitech “performed” well in 2007, not over long run “Boring” retailer Trent has soared compared to the more flamboyant – and leveraged – Pantaloon… ICICI has done well, but still lags the more prudent HDFC Bank since January 2007 Disclaimer : Stocks referred above are illustrative and not recommendation of Quantum Mutual Fund/AMC. The Fund may or may not have any present or future positions in these Stocks. The above information of stocks which is already available in publicallyaccess media for information and illustrative purpose only and not an endorsement / views / opinion of Quantum Mutual Fund /AMC. The above information should not be constructed as research report or recommendation to buy or sell of any stocks. Past Performance may or may not be sustained in future. Source: Bloomberg Finance L.P., data as of October 29, 2021 11

12. An Intelligent portfolio can be created from the broader Markets at reasonable Valuations An Intelligent portfolio can be created from the broader Markets at reasonable Valuations As % Of S&P BSE-30 Index** QLTEVF S&P BSE-30 Index Number of equity stocks 28 30 Median market capitalization (USD mn) 13,055 37% 34,922 Weighted dividend yield 1.7% 150% 1.2% Weighted PER: March 2023E 13.9x 74% 18.8x Weighted EPS Growth: March 2023E 8.6% 52% 16.7% PEG Ratio (excludes cash) 1.61x 143% 1.13x T12M PE 23.9x 60% 40.2x Weightage of stocks with PER > 20 69% 94% Weightage of stocks with PER > 30 48% 74.4% Source: Quantum AMC** S&P BSE-30 Index weight is based on free-float.. The figures mentioned in WTD PER, WTD EPS and PEG ratio are calculated on the basis of Bloomberg consensus estimates for companies owned by the Composite as well as the companies in the S&P BSE 30 as of the reporting date i.e. October 29, 2021. Past Performance may or may not be sustained in future 12

13. India’s Economy Will Grow > 6% p.a. India’s Economy Will Grow > 6% p.a. Real Grate across 10 governments has been 6.3% p.a. over the last 41 years DP growth 6.5% is a good long-term assumption; 8% is NOT a good long-term assumption! Source: RBI and www.parliamentofindia.nic.in as of June 2021. Note: The number in red rectangle is 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”; therefore under Modi, the GDP has been at 5.9% at best matching the 5.6% under the BJP-led coalition government of Vajpayee that resulted in a rout for the BJP at the time of the next election in 2004!* Please note that data used for World GDP for 2017 is a median Estimate since World Bank data is not yet available and India GDP data is governments second advance estimate released at the end of August 2021. 13

14. The Hungry Consumers The Hungry Consumers Home loans outstanding (Rs. bn) 2,603 2,794 3,009 3,499 3,971 4,567 5,386 6,285 7,468 8,601 9,746 11,601 13,498 14,591 Year 2-wheelers Cell Phone Connections (mn) Passenger Vehicles (Domestic sales Mn units) Refrigerators (Production Mn units) Cement (mn tn) (March end) (Domestic sales Mn units) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 174 187 207 216 230 248 256 270 283 280 298 337 334 294 1.55 1.55 1.95 2.50 2.63 2.67 2.50 2.60 2.79 3.05 3.29 3.38 2.73 2.51 8,064,903 8,439,786 10,511,009 13,302,335 15,384,261 15,753,563 16,890,778 18,433,027 18,938,727 19,929,958 23,007,691 24,460,688 20,936,201 18,397,111 225 392 584 812 919 868 905 970 1,034 1,170 1,183 1,162 1,158 1,181 6.14 6.72 8.00 8.72 9.91 11.12 10.65 11.95 11.86 13.05 13.50 15.64 15.0 11.2 YTD 2022* CAGR (2008 to 2021)** 8,762,657 1,187 1.19 4.1 171 14,785 3.8% 4.8% 4.1% 14.2% 6.5% 13.6% *2022 YTD data, Two-wheeler sales data as on September‘ 21, Passenger Vehicle sales Data as on September’ 21, Refrigerator data as on August’ 21, Cement sales data as on September’ 21, Housing loans data as on September’ 21, Latest cell phone connections data as on August’ 21 Source: 2 wheeler passenger vehicle and Cement – CMIE database; refrigerator production data – CMIE (IIP ) database, home loans outstanding – RBI Data on Sectoral deployment of bank credit (October 2021). ** Annualized Returns. Past Performance may or may not be sustained in future 14

15. Don’t Be Distracted By Global Macro: Don’t Be Distracted By Global Macro: Economic Activity Led To A 10x Growth In Earnings Economic Activity Led To A 10x Growth In Earnings Source: CLSA and Bloomberg Finance L.P., as of October 29, 2021 CY 21 and CY 22 are estimate numbers 15

16. The Market Tends To “Catch Up/Down” To Earnings The Market Tends To “Catch Up/Down” To Earnings Source: CLSA and Bloomberg Finance L.P., As of October 29, 2021 CY 21 and CY 22 are estimate numbers . Past Performance may or may not be sustained in future 16

17. 17 Risks to the Recovery Risks to the Recovery Low Vaccine coverage increases probability of a third wave. Festive season to start from Sep 2021 Job Losses amongst salaried employees and Rising Inflation may impact consumer discretionary spend Since the pandemic began, there has been a reduction in number of employed by 20 million Inflation in Raw materials and increase in Crude prices may force RBI to raise interest rates

18. Trying to Time Markets is a Folly Trying to Time Markets is a Folly Simple Asset Allocation Strategy to Deal with Market Cycles Simple Asset Allocation Strategy to Deal with Market Cycles 6 - 24 months Expenses • Liquid Fund/ Bank Deposit ₹ Balance Surplus 80% - 85% • 4-5 Diversified Mutual Funds Wealth Builder Stress case scenario Diversification • Gold/Gold ETF 15% - 20% 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 18 advice and arrive at an informed investment decision before making any investments

19. 19 Summary Yes, Index is expensive, but opportunities are available in the broader market Earning growth is the long-term driver for equities & after a long time we are seeing earing upgrades Liquidity environment is benign. However, there could be event-based pause. Equity Investment is a bet on long term India Story & it looks bright Equity investment is a bet on long term India story & it looks bright There are risks but an intelligent portfolio can manage it well Asset allocation is the holy grail to deal with market cycles

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