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Gold Equity MFs dEbt MFs StockS

Fds

Gold To Rise More Beware Of Housing Discounts COviD Insurance Not Easy High nifty, low Interest Long-Term Investment Less Attractive What Is

Investors face the dilemma of Best choosing between stocks and the For Me safety of debt mutual funds

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AUGUST 2020 VOLUME 19 ISSUE 8

36 Being Risk-Free With Low Returns Small saving schemes still preferred as the returns are SANITY OF SAFETY OR guaranteed 38 Bullish On Bullion RUSH OF RISK Gold prices soar due to institutional buying push 40 An interview: Aman Ahuja Chase the right choices and manage a correct Sudden Surge In Demand For Credit Cards Among balance between risk and safety New Users The Right Policy For Mental Well-Being42 Better insurance cover needed for mental illness 44 Concern Over COVID Procedure Rates Hospitals charges not same as insurance covers What’s On Offer For COVID-19 Patients?46 Two new insurance for additional expenses 49 Widen Your Filter For Job Search Though dismal, the job market might recover soon Riding The Digital Wave With Virtual52 Tours pg 10 Digitisation needed for efficient home buying 54 Make The Most Of Your Money Regulars How financial planners help in uncertain times 4 Talk Back 8 News Roll 62 Stock Pick 64 My Plan Who Gets Affected By Stamp Columns Duty58 Cut? Saibal Dasgupta, Saurabh Khandelwal, Ajay Bagga, Rohit Gera The revised stamp duty law will have wide impact

Cover Design: PRAVEEN KUMAR .G

HEAD OFFICE AB-10, S.J. Enclave, New Delhi 110 029; Tel: (011) 71280400, Fax: (011) 26191420 OTHER OFFICES Bangalore: (080) 43715021 Kolkata: (033) 46004506, Fax: (033) 46004506; Chennai: (044) 42615225, 42615224; Fax: (044) 42615095; Mumbai: (022) 50990990, Printed and published by Vinayak Aggarwal on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: Saibal Dasgupta. Printed at Kalajyothi Process Pvt. Ltd. Sy.No.185, Sai Pruthvi Enclave, Kondapur – 500 084, R.R.Dist. Telangana and published from AB-10 Safdarjung Enclave, New Delhi 110029 For Subscription queries, please call: 011-71280462, 71280400 or email: [email protected] Published for the month of August 2020; Release on 1 August 2020. Total no. of pages 68 Outlook Money does not accept responsibility for any investment decision taken by readers on the basis of information provided herein. The objective is to keep readers better informed and help them decide for themselves.

www.outlookmoney.com August 2020 Outlook Money 3 Talk Back

SME Stocks Ready To Bounce Back? I had a great time reading EDITOR-IN-CHIEF about Micro, Small and Ruben Banerjee Medium Enterprises. The EDITOR whole experience was quite Saibal Dasgupta tantalizing and got to learn EQUITIES AND MARKETS EDITOR a lot. The MSME sector is Yagnesh Kansara SENIOR ASSISTANT EDITOR currently the talk of the Anagh Pal town after the `3 lakh crore SPECIAL CORRESPONDENTS stimulus package. However, Himali Patel many did not understand Vishav the ramification, this article PRINCIPAL CORRESPONDENT Nirmala Konjengbam helped me untangle many thoughts behind it. Rashi Chowdhury, Kolkata SENIOR CORRESPONDENT Dipen Pradhan NEWS DESK No Ready-Made Solutions COPY EDITOR Sudeshna Banerjee The article on the series TRAINEE SUB EDITOR of black swan events that Indrishka Bose the country is facing right WEB CORRESPONDENT Rajat Mishra now might bring in a lot of DIGITAL TEAM jitters in the market which Amit Mishra we are not aware of. It was Sneha Santra interesting to know that ART SENIOR DESIGNERS the need of the hour is a Praveen Kumar. G stimulus, not one of cash Vinay Dominic Leela and credit, but one of morale DESIGNER and sentiments. However, it was shocking to know that the Indian Rohit Rai companies have no structure to handle production halt. I hope Girish Chand (DTP Operator) they consider an upgrade for the long term. Coming to the mutual TECH TEAM fund investors, it is surely a troublesome phase for them as 60 per Raman Awasthi Suraj Wadhwa cent of the consumer electronic industry depends on China-made components. It was an informative column. Business Office Sudip Sarkar, Kolkata CHIEF EXECUTIVE OFFICER Indranil Roy VICE PRESIDENT Govt Is Monitoring And Tushar Kanti Ghosh Circulation & Subscriptions Tweaking The MSME Gagan Kohli, Kapil Dhal (North) Revival Package G Ramesh (South), Arun Kumar Jha (East) The interview with Anurag Production Thakur was commendable. GENERAL MANAGER Shashank Dixit I liked the questions asked MANAGER regarding the MSME sector Sudha Sharma as it helped the readers get ASSOCIATE MANAGER a bigger picture of it. I also Gaurav Shrivas appreciate that when asked how to discipline banks that showed DEPUTY MANAGER Ganesh Sah reluctance, he mentioned that they are monitoring every activity on a Accounts weekly basis. VICE PRESIDENT Taranpreet Singh, Delhi Diwan Singh Bisht COMPANY SECRETARY & LAW OFFICER Ankit Mangal Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, New Delhi 110029, or [email protected]. Please mention your full name and residential address.

4 Outlook Money August 2020 www.outlookmoney.com

Talk Back

NRIs May Drive India’s Realty Revival I found this article relatable as my relative, who is an NRI, has been inquiring about investing in real estate. However, he could not make any decision as the information was not reliable. The article was very helpful as it assured that the real estate and infrastructure sector is witnessing a shift. I also want to praise the way it has been weaved, and how the dots are joined, for example, how work from home practice is increasing the demand for homes in suburban areas due to attractive prices and other benefits. Dipankar Mishra, Mumbai

Photo: BHUPINDER SINGH Crisis Opens New Doors For SIP Investors Health Insurance Under A article focusing on how COVID-19 Cloud As COVID-19 Rages has helped fintech reap more I had many queries regarding benefit. whether to continue with my This article was very useful. People Amrita Viswanath, Bangalore SIP or not. I would like to thank are not only stressed about the Outlook Money for publishing virus but also the expense behind this interview with N S Venkatesh. the treatment. It is a time when Millennials And The Gold I was glad to know that SIP people are losing jobs, their wallet Melting Pot contributions have risen and have is becoming thin, and on top of Gold is termed as the safe haven, been breaching the threshold of ` that if someone gets the virus, it in times of crisis. The article 8,000 crore plus. Ankita Law, Kolkata becomes the worst nightmare. focusing on the behaviour of the After reading this, I got to know millennials and gold price was the reasons behind the cost quite intriguing. How To Deal With The and how comprehensive health Abhishek Sharma, Mumbai Bear Hug insurance cover might act as a silver lining in the pandemic. This I believe that financial planning awareness is very important. brings in a lot of power to the Rajdeep Kapoor, Mumbai family. When volatility is at its peak, it is the time to build an even Fintech Strike Gold As more strong financial goal. Such Digital Life Grows articles are like an eye opener for many out there who are stuck in The sudden evolution of digital a maze. I would absolutely agree platforms amid the pandemic has that, during these times, investors driven people and organisations need to focus on preventing action to digitisation. The lockdown is to minimise further corrosion adding more to it, as people choose of investments and corrective online payments. Digital payments action to get the investments back have turned into a necessity from on track. convenience. It was a very good Avinash Pandey, Bangalore

6 Outlook Money August 2020 www.outlookmoney.com

News Roll

Settlement Norms From Sebi For A Faster Process arkets regulator Sebi has streamlined settlement Mregulations to make procedures faster and more effective.In order to save time, Sebi said instead of issuing settlement notice under the regulations, a paragraph will be included in the show cause notice informing the notice about the option to file a settlement application. In addition, amendments have been made to the settlement regulations to include promoters along with the Principal Officer for the purpose of calculation of the base amount. Besides, base amount for alleged defaults relating to open offer violations, Sebi Plans For Actively where the making of the open offer has become infructuous, has been Traded Corp Bond Market rationalised and benchmark for certain base amount has been he Securities and Exchange Board of India (Sebi) on 16 July, suitably amended. 2020, announced that mutual funds will have to commence at After the acceptance of Tleast 10 per cent of their total secondary market trades by value in settlement terms, Sebi said corporate bonds on the exchange platforms. The aim is to develop an applicant will have to an actively traded corporate bond market. Sebi is trying to generate remit the settlement amount a platform that automatically does order matching, similar to stocks within 30 days from the date of receipt and government securities. “All transactions in corporate bonds and of the notice of demand, which may be commercial papers wherein mutual funds are on both sides of the extended by the panel of whole time trade shall be executed through the Request For Quote (RFQ) platform members for reasons to be recorded, by 60 of stock exchanges in one-to-one platform”, said the Sebi circular. days. For this, the applicant will have to file Mutual funds will trade corporate bonds by placing and seeking an application seeking extension of time quotes through the one-to-many mode, on the RFQ platform of stock within 30 days from the date of receipt of exchanges. The one-to-many mode is a rarely used trading system the demand notice. Earlier, the applicants and is similar to the auction process where multiple buyers can bid were required to pay the amount within 15 for one security. Currently, NSE and BSE operate the corporate days from the date of receipt of the notice bond platforms, but they are merely systems for reporting corporate of demand, which was extendable by 15 bond deals. Mutual fund industry officials said the fiasco at Franklin days. In another move, Sebi has caught Templeton could have triggered the urgency to come up with a more up with investors trying to evade taxes or lasting solution for mitigating the crisis in corporate bonds. As the launder black money by buying and selling fund house was struggling to sell its illiquid lowly-rated papers to meet thinly-traded options contracts. This the redemptions, Franklin decided to shut down six debt schemes and has become a widely used practice of tax withhold withdrawals indefinitely. evaders in recent years. The activity on the exchange platform will be initially driven by Sebi has identified 15,000 such mutual funds. However, Sebi is aiming to attract banks and insurers practitioners and offered them an through the presence of mutual funds and better trading. Sebi wants opportunity of a one-time settlement. to develop the corporate bond platform on the lines of the Negotiated This will help them avoid long drawn-out (NDS-OM), which is an electronic trading platform for issue and cases in the court. The settlement has trading of government securities and State Development Loans. been offered for trades that took place Indrishka Bose between April 2014 and April 2015. PTI

8 Outlook Money August 2020 www.outlookmoney.com Viewpoint Are Banking & PSU funds a safer bet in current scenario?

n the third episode of the Outlook Money’s special Jajoo said for the last almost two years, the single series that aims to help investors make most of their theme that has dominated the investors’ mind is the Imoney in today’s volatile market conditions, brought destruction that has been caused in the credit space to viewers by Mirae Asset Mutual Fund, Mahndra Kumar where a series of defaults from many corporates have Jajoo, CIO-Fixed Income at Mirae Asset investment taken away the returns of many investors. Jajoo said managers, talked about Banking and PSU funds, and these funds are not only safer, but also have a history of whether they are a relatively safer bet in the current giving good returns. scenario for investors. Jajoo, a veteran in the financial “Therefore in an environment where the credit services space with over 25 years of experience, has been has been the biggest destroyer of returns or wealth supervising all debt schemes of the Mirae Assets Debt in the fixed income space, the public sector units and Funds. the banking fronts have naturally emerged as the top According to him, Bank and PSU funds are “clearly contender for the investor. And because the banking and the hot favourites” in the current market environment PSU funds also have the range of duration possibilities, for those who are investing for long-term and who have they have also emerged as the best performing funds in the appetite for a bit of volatility for that long-term terms of returns also in a scenario where the interest return generation. rates have come down,” he added. He said that these funds are relatively safer because These funds, as per SEBI guidelines, are required to they invest primarily in banks and the public sector invest at least 80 percent into the banks and the PSU bonds and debentures. “These are the safest segments of bonds, and the remaining 20 percent is at the discretion the debt universe because most of the banks are either of the fund manager. Jajoo advised investors to carefully owned by the Government of India, and the private see what the fund manager is going to do with that 20 banks are supervised closely by the RBI,” he said. percent allocation. “While most have stuck to the highest rated AAA bonds, there are exceptions,” he said. He added that one should try to avoid credit risk as such a risk is permanent whereas market risk is temporary. “This means that if you encounter a credit situation, the likely recovery is very poor. But if you get trapped in an interest rate volatility, because these are so closely watched and monitored by the central banks and the government, these are cyclical in nature and you will Episode-3 get out healthy if you remain invested for a long enough Episode-3 Are BAnking & time. So the only thing you need to have on your side PSUAre BfUAndnkingS A SA & fer is time when you invest in an interest rate product,” he BPSUet infU cndUrrentS A SAfer explained. Bet in cUrrent Jajoo also advises investors to invest in PSU and SitUAtion? Banking funds based on their own investment horizon SitUAtion? and their risk appetite, while also diversifying. “Investors will have varying cash flows and varying Mr. Mahendra Jajoo, CIO - Fixed Income, requirements. So as is the conventional wisdom, they MiraeMr. Mahendra Asset Investments Jajoo, ManagersCIO - Fixed (India) Income, Pvt Ltd should look at investing in Banking and PSU funds only Mirae Asset Investments Managers (India) Pvt Ltd the money they have for two to five years investment

In conversation with horizon. Also for individual investors, the circumstances Vishav, Special Correspondent are specific. So they should go with their investment InOutlook conversation Money with Vishav, Special Correspondent advisors and take proper advice,” he explained. Outlook Money Jajoo added that apart from returns, another advantage these funds have over bank FDs is the tax advantage Visit: outlookindia.com/outlookmoney because if one invests for three years, they are entitled Visit: outlookindia.com/outlookmoney to long term capital gains which makes a very significant Mutual Fund investments are subject to market risks, read all scheme related documents carefully. difference between realized returns. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Cover Story

ou are utterly confused. Between April and June this year, many hurriedly scurried out Yof equities. And the stock indices bounced back with a vengeance in July. Now, there is brid frustration and desperation about the lost opportunities, as people wait for stock prices to Debt y correct so that they can re-enter. To seek safe havens, some of us got into cash, debt, and gold.

H Sadly, in these cases too, the events unexpectedly turned against us. The situation baffled us. Equity Armed with cash, the hapless investors decided to ‘time the market’, and act on their own – largely as day traders. They realised, like many did in the past, that it is almost impossible to do so. Even the experts are unable to predict the random walks of the stock market. While debt Commod seemed secure, there was uncertainty about future returns as interest rates fell, and inflation iti inched up. Gold seemed a no-brainer but was this a good time to buy at such high prices? es Most investors are shocked and stunned. To be safe or take risks, that is the question today. What should one do over the next 3-6 months? Is it better to take the plunge into equities, and ride out the topsy-turvy waves and volatility in the market? Is it more pertinent to accept lower returns, but protect our investments, and shift to debt? Is bullion the new calling for most of us? As some experts contend, if there’s one advice they wish to give, it is to be in gold. In this cover story, Outlook Money takes a 360-degree look at short-term strategies to shield your wealth from tumultuous upheavals, and simultaneously safeguard your returns. We present the pros and cons related to each asset category to enable you to make informed and insightful decisions. Beware that there is no one shoe-size that will fit every feet. At the end of the day, we are on our own, and we will need to carefully re-construct our Sanity Of plans on an individual basis. Safety By Himali Patel We consider ourselves to be rational human beings. But even the smartest of us tend to panic. Scheme Wise Composition Of Assets Or Worse, we later defend our dim-witted decisions 100 5.8% 5.8% 6.4% 6.8% 7.1% as logical and sensible. Given the information we had at that time, we theorise, what we did was 80 23.60% 23.30% 22.50% 21.80% 25.00% the best we could. There were few choices, and we had to act in real time. Any delays from our ruSh Of side could only worsen the situation. Moreover, 60 we couldn’t sit back, and watch our wealth being 42.30% 42.10% 42.30% 39.70% 39.40% eroded, minute-by-minute, day-by-day. 40 Nothing epitomised this panicked-rationality better than the mayhem in the mutual funds AMFI Source: riSk market. As the Indian stock indices tumbled 20 28.30% 28.80% 28.80% 31.70% 28.50% by almost 40 per cent by March 23 this year, the crazed investors ran away in herds. In June, 0 they pulled out a massive `13,500 crore from Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 the equity-oriented schemes, an increase of Debt Oriented Schemes Equity Oriented Schemes more than 75 per cent compared to the previous Liquid/ Money Market ETF’s & FoFs

10 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 11 Cover Story

` Arun KumAr 8,000 crore, or the lowest since November Head of Research, FundsIndia.com 2018. Even those, who wanted to continue with SIPs, were unable to do so. “This is worrying, but not completely unexpected given the strain on If you have a six-month horizon, incomes due to the COVID-19 situation,” explains this is not the market to be in G. Pradeepkumar, CEO, Union AMC. equity. Invest in shares only if you Expert Advice: Absolute returns over the past have 5-7 year timeframe one year (July-June) were negative for most of the equity-linked mutual funds, whether they were focussed on large-caps, mid-caps or small-caps. In the past two months, the indices have perked up. month. The overall monthly inflows in such funds However, this may be a temporary phenomenon in June were the lowest in the past four years. as it is possibly driven by the liquidity initiatives Massive outgoes were witnessed in the multi- taken by global central banks. The markets moved cap equity funds, followed by the large-cap ones. northwards, not just in India but across the globe. A similar trend gripped the hybrid funds, which Ideally, investors shouldn’t move in and out invest in a mix of equity and debt; arbitrage funds of equities based on short-term gyrations. “If proved to be an exception. The mid-cap category someone was not in equity, she shouldn’t get in survived the bedlam, but monthly inflows fell to now as she was never meant to be in stocks. If you `36.70 crore in June. Ironically, as the markets have a six-month horizon, and need returns in recovered, the assets-under-management of the this period, this is not the market to be in equity. equity funds grew by 8 per cent between May Invest in shares only if you have a 5-7 year time and June this year. frame. More important, don’t juggle your original In fact, they argue that the cancellation of SIPs In the low duration funds, there was an inflow Three reasons explain this apathy towards allocations, and become either underweight or is a bad strategy. Individuals should take steps to of `12,236 crore in June. In the same month, the equities. The first, feels Arun Kumar, Head of overweight on stocks,” warns Kumar. ensure that they manage to continue with them. accretion to short-term duration schemes zoomed Research, FundsIndia.com, is that people need Apart from the fact that SIPs can enhance your by over 300 per cent on a month-on-month basis clarity on future cash-flows, i.e. their incomes, The cash conundrum wealth, they are also a form of forced savings and the figure for those that invest in corporate before they can decide to re-enter the market. One of the reasons why most of us got out of over a longer period. Of late, there was a huge bonds went up by 180 per cent. Investors felt He adds that they were surprised by the sharp equities, or stopped SIPs, was to stay in cash. influx of youngsters in the SIPs and mutual fund comfortable as these funds have exposures in rally, and wish to wait for prices to come down to In June, investors This was either because of the uncertainty on the spaces. This needs to continue for the overall low-risk AAA-rated instruments, and zero-risk lower levels. “Investors are focussed on earnings pulled out income fronts, or because we were disgusted with investment climate, and also the future health of government securities, and allow them to redeem beyond FY21,” says Swarup Mohanty, CEO, `13,500 crore the returns through mutual funds, and wanted to the country’s economy. Expert Advice: “If both their money in shorter periods. Mirae Asset Investment Managers India. from equity trade on our own. Since most of us stayed at home the hypotheses are correct – people cancelled This is normal in times of crises and in a Connected with this is the contribution funds, an between April and June, we felt that we could SIPs either because of cash-flow issues or to trade scenario when interest rates fall, and pull down through the monthly systematic investment plans increase of 75 per utilise our time better and invest independently in shares on their personal accounts it is not good the average yields. “Yields are well supported (SIPs), which declined for the third successive cent compared and directly in stocks. Experts feel that this is a news. The first implies that individuals tend to and the curve has become fairly steep because of month. In June 2020, the figure stood at below to May dangerous precedent. lose their discipline in investments. Personalised large system liquidity which is chasing assets. The trading may sound attractive, but how much can surplus liquidity, lesser issuances in the market you earn through it?” questions Jimmy Patel, MD and expectation of reverse repo rate cut by RBI SIP Contribution `crore & CEO, Quantum Mutual Fund. in August is likely to support yields at the shorter 100,084 end of the curve,” says Amandeep Chopra - Group 100 92,693 Till-debt-do-us-part President & Head of Fixed Income at UTI AMC. Source: AMFI More than cash, debt is possibly the safest 80 67,190 way to keep your investments intact. Investors 60 43,921 did opt for it, as is evident from the trends in JImmy PATel MD & CEO, Quantum Mutual Fund 40 24,416 mutual funds in the April-June 2020 quarter. In May, `63,666 crore was added to the debt 20 funds. Although inflows declined by 95.5 As a thumb rule, gold comprises 0 per cent in June, compared to May, most 15-20 per cent of a person’s assets. schemes showed positive trends, apart from

Praveen Kumar .G Kumar Praveen Graphics: But it may not be a bad idea to 2016-17 2017-18 2018-19 2019-20 2020-21 the high-risk ones such as liquid, credit risk, enhance exposure levels and medium duration ones. The action in a few Note: 2020-21 (SIP for the month of April, May, June) sub-categories was hectic.

12 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 13 Cover Story

average Net aUm For June’20 The bullion lining Since 2019, ever since the Indian economy 28.29 25.81 25.64 26.14 27.26 26.07 was gripped by an ongoing slowdown, which 30 23.53 escalated into the COVID-19 nightmare, Gold ETFs have emerged as one of the better- 28.19 25.81 25.6 26.94 performing financial assets. In June 2020, this 24.71 24.28 ` 15 category received inflows of 494 crore, which were lower than the figures for April (`731 crore) Source: AMFI Source: ` COVID-19 IMPACT and May ( 815 crore). However, the overall AUM of Gold ETFs increased by 7 per cent in June, 0 compared to the previous month. Jun-19 Total Assets (`lakh Cr) Jun-20 Recently, gold prices in India crossed the `50,000 (per 10 gm) mark, and experts speculate that they will continue to rise as central banks According to a recent report by CARE Ratings, liberally open their credit pipelines. “Uncertainty the secondary market yields on government and In May, `63,666 is gold’s friend, and its northward journey is corporate securities declined sharply to two-year crore was added set to continue,” says Iyer. “Gold functions as lows in June 2020. While the average yield in the to debt funds. a strategic asset given its ability to act as an latter was down by 68 basis points between May Inflows declined effective diversifier, and alleviate losses during and June 2020, the figure for the benchmark 10- by 95.5 per cent tough conditions,” adds Himanshu Srivastava, year government securities was 21 basis points. in June, but most Associate Director (Manager Research), According to Lakshmi Iyer, Chief Investment schemes showed Morningstar India. Officer (Debt) & Head (Products), Kotak positive trends Expert Advice: “Given the favourable outlook Mahindra Asset Management, the benign for gold prices, one could see the AUM of Gold interest rate regime means investors wish to ETFs to grow in the near future,” predicts Kotak’s be in fixed income investments with longer Iyer. Quantum’s Patel avers that as a thumb maturities. “Gilt, banking, and public sector rule, gold has to comprise 15-20 per cent of an funds are best suited to meet such requirements. individual’s asset allocation. “But it may not be The bulk of flows are gravitating towards high- such a bad idea to enhance the exposure levels grade/sovereign-oriented portfolios, which have in this environment,” he adds. Mirae’s Mohanty little or no credit dilution. This trend is likely to says in another context, “Instead of a chaser of continue.” She adds. returns, one should become a gold chaser.” Expert Advice: “Since the yield curve However, on an overall basis, the choice continues to remain steep due to high risk between risk and safety is tricky. Investment aversion, short and medium duration funds pursuits in these trying times have to do as present an interesting investment opportunity,” much with an attempt to increase returns, as says S. Naren, ED & CIO, ICICI Prudential AMC with the specific risk-profile of each person. In For those, who have a longer-term horizon, the fact, according to experts, a bewildering event openings lie in dynamic duration schemes, in like COVID-19 can act as a natural profiler for which the fund managers have the flexibility to most investors. It is during an unexpected crisis change their strategies based on the evolving that people tend to comprehend their real risk- environment in the debt segment, he adds. appetite, and the pain that they can stomach. For example, mutual funds come with a disclaimer that the products are subject to Lakshmi iyer, market risks. But an investor understands the CIO (Debt) & Head (Products), implications of the rider, and how the risks Kotak Mahindra Asset Management undermine her wealth, only after a crisis unfolds. Therefore, this may be a unique chance to look The debt flows are gravitating towards oneself in the mirror, and ask a relevant question: high-grade/sovereign-oriented How risk averse I am? From there, it is simpler portfolios. This trend is likely to continue to chase the right choices, and manage a correct balance between risk and safety. [email protected]

14 Outlook Money August 2020 www.outlookmoney.com Viewpoint Remain Confident And Focus On Long-Term Goals Keep calm and continue with your investments says Raj Kishore Singh of IDBI Mutual Fund

modes to invest in gold. leave the portfolio churning In my opinion, gold funds to the fund managers. should be a part of an If you are facing a investor’s portfolio. It can financial or liquidity crisis due be ideally treated as a hedge to COVID-19 related factors to other asset classes, within like lockdowns, job losses, the range of 5-10% of the and pay cuts, please do not all-embracing portfolio. exit the schemes; you may choose to pause for the time What are the factors being and restart once you driving IDBI MF’s asset regain financial stability. Also, allocation framework? we must note that market At IDBI Mutual Fund, we indices have recovered to allocate assets or sectors quite an extent since March based on each scheme’s 23 and things are not as objectives. If it is a sectorial grave as they were during fund, maximum allocation the 2008 financial crisis. Raj Kishore Singh, MD and CEO, IDBI Asset Management will be to the specific sector. Therefore, remain confident In a normal equity fund, and approach your financial we allocate to different advisor. And do trust your Pandemic, lockdown Our schemes, such as IDBI sectors or companies as fund managers, they will and a sliding economy. Gold Fund and IDBI Gold per its weightage in the definitely help you to ride The situation is indeed ETF are performing well overall market and then go through this volatility. a double whammy for over the past one year. They overweight or underweight mutual fund investors. have delivered approximately keeping in view the future Any investment advice you How can they keep afloat? 36% and 38% return performance, valuation and have for our readers? Well, investors are certainly respectively as on June 30, general microeconomic Needless to say, uncertainties facing a crisis of confidence. 2020. However, the catch is, factors. In case of debt are galore due to COVID-19 Our advice to them is to the underlying asset in both schemes, the portfolio is very and the lockdown. One remain confident and focus these schemes happen to well diversified across sectors. should remain cautious on their long-term goals and be gold – the yellow metal However, some sectors are at in terms of financial follow their asset allocation to be precise. Now, as these times excluded if we gauge investments and expect plans. This is because we have schemes invest in physical some risks. These include real gradual recovery once the noticed an excellent recovery gold, it is unlikely that the estate, gems and jewellery, pandemic ends. The prudent in indices since the capital schemes can outperform the entertainment or aviation. thing to do now is to remain markets nosedived post underlying asset. However, calm and continue with their March 23. Also, debt schemes in India, decision to invest In current times, factors investments. have delivered decent returns in physical gold often have a like job losses and pay Remember that better during the past one year due sentiment quotient attached cuts have led many to returns are generated on to accommodative monetary to it. Also, when we go to either sell or pause their investments made during policies implemented buy or sell gold jewellery, we investments. What would troubled times. Hence, by Central Banks across often end up losing out on you advise them? always focus on your long- different geographies the asset value in the form We must remember that term goals and do not let the including Reserve Bank of of premiums, labour or fluctuations in the capital fluctuation affect you. Our India. making charges and resale markets are normal. Our recommendation is to remain discounts. On the contrary, only suggestions to investors standing patiently with a Your gold funds seem to gold schemes take care of having a cold feet and taking positive attitude and continue be performing well. Do purity and storage issues at hasty decisions is to remain investing keeping the long- gold-based funds generate very negligible fees. They are calm and eventually sail term view and unlock the better returns compared to devoid of making charges through this volatility. If you power of SIPs to ride over actual gold? and are considered safer are a long-term investor, then the tide. Cover Story

Mutual Fund Schemes Returns Across Various Categories 3 1 3 5 10 Category YTD Months Year Years Years Years Equity: Large Cap -10.51 16.35 -6.53 2.8 4.91 7.99 Equity: Large & MidCap -10.69 14.65 -6.46 -0.64 4.54 9.5 Equity: Multi Cap -10.21 15.08 -5.58 0.75 4.62 8.77 Equity: Mid Cap -7.58 15.32 -3.91 -1.8 4.01 11.11 Equity: Small Cap -8.91 16.42 -7.85 -6.13 2.96 8.6 Equity: Value Oriented -11.27 16.34 -10.25 -2.61 3.41 8.75 Equity: ELSS -10.58 14.92 -6.71 -0.05 4.25 8.94 Equity: Sectoral-Banking -31.7 12.33 -28.43 -6.69 0.35 4.02 Equity: Sectoral-Infrastructure -15.61 12.18 -17.15 -6.6 -0.13 3.45 Equity: Sectoral-Pharma 28.05 11.1 35.71 8.96 2.93 12.93 Equity: Sectoral-Technology 8.27 31.78 8.75 17.69 10.63 13.17 Equity: Thematic -7.51 15.02 -4.01 -0.26 3.69 9.09 Equity: Thematic-Dividend Yield -6.33 15.69 -2.98 -1.17 4.04 7.81 Equity: Thematic-MNC -2.86 10.98 4.14 2.97 4.42 13.16 Equity: Thematic-Energy 1.49 18.41 8.36 1.71 -- -- Equity: Thematic-PSU -17.62 2.64 -18.98 -8.87 -2.48 1.54 Equity: Thematic-Consumption -6.6 11.15 0.82 2.18 6.56 11 Equity: International 3.42 17.5 14.01 9.28 6.98 6.96 Debt: Long Duration 10.47 7.94 9.88 8.98 10.13 8.78 Debt: Medium to Long Duration 7.74 6.02 9.33 6.62 7.85 7.96 Debt: Medium Duration 3.87 4.32 5.83 5.86 7.09 7.66 Debt: Short Duration 6.34 4.5 9.1 6.29 7.2 7.95 Debt: Low Duration 3.4 2.86 6.03 4.98 6.05 7.14 Debt: Ultra Short Duration 3.54 2.01 6.67 6.14 6.75 8.01 Debt: Liquid 2.51 0.98 5.08 6.31 6.67 7.75 Debt: Money Market 3.74 2.08 7.02 7.16 7.34 8.1 Debt: Overnight 1.94 0.73 4.25 5.26 5.72 7.01 Debt: Dynamic Bond 7.12 4.86 8.96 6.64 8.08 8.49 Debt: Corporate Bond 7.2 5.29 10.87 7.61 8.07 8.28 Debt: Credit Risk -2.46 -0.54 -0.86 1.09 3.82 7.04 Debt: Banking and PSU 7.17 5.46 10.91 8.56 8.67 8.79 Debt: Floater 5.85 4.15 9.35 7.77 7.87 8.23 Debt: FMP 2.11 0.92 4.6 6.01 6.58 7.66 Debt: Gilt 8.96 5.66 9.8 8.04 9.3 8.86 Debt: Gilt with 10 year Constant Duration 9.45 6 10.78 9.83 10.79 9.83 Hybrid: Aggressive Hybrid -7.29 12.41 -3.79 1.08 4.74 8.54 Hybrid: Balanced Hybrid -6.42 9.71 -3.04 1.16 4.46 7.38 Hybrid: Conservative Hybrid -0.31 5.8 2.13 3.42 5.86 7.57 Hybrid: Equity Savings -2.41 7.5 -0.08 2.61 4.72 -- Hybrid: Arbitrage 2.42 0.96 4.73 5.55 5.92 7.17 Hybrid: Dynamic Asset Allocation -2.1 10.07 1.77 3.13 5.19 8.05 Hybrid: Multi Asset Allocation -3.59 7.76 0.11 2.49 4.8 6.9 Commodities: Gold 24.57 0.94 39.19 19.31 12.19 9.15

Source : Value Research ; As on 16-Jul-2020; Upt to 1 year Absoulute returns, Over 1 year Annuliased returns

16 Outlook Money August 2020 www.outlookmoney.com Viewpoint

Volatility Achchi Hai ew investors often regard volatility as something to Nbe afraid of. But legendary investor, Warren Buffet disagrees. Volatility is not a measure of risk, the wealthiest professional investor says, adding that past volatility does not determine the risk of investing. With some news or the other these days, there is always some volatility somewhere in the markets. Yesterday, it was US-China trade ties, today it is Covid-19 outbreak, and tomorrow Nitin Avasthi (left) & Achin Jain there will be something at some corner Co - founders, ESGL Clientalley Solutions Pvt Ltd in the world. Volatility is an inherent part of the market. Love it or hate it, volatility will stay. It is actually your how low your Cost Price is. If there stock market will benefit. One should reaction to volatility that will determine was any a time to buy, now is the not try to time the market, rather potential return. time because Cost Price is too low in stay long enough to profit from such The true investor welcomes particular pockets and sectors in the opportunities. There is plenty of volatility. A wildly fluctuating market stock market. With a professional set- evidence of wealth creation. In the last 1 often means that irrationally low up like mutual funds, identifying and year time period, markets have declined prices will periodically be attached spotting market opportunities is easier by about 8% but many equity MFs have to solid businesses/stocks. Therein than ever. delivered positive returns in the same lies the lucrative opportunity to make Both the RBI and the Indian time period. Systematic investment money for disciplined investors. Why? Government have a whatever- plans (SIPs), the most convenient way to Successful long-term investors view it-takes-approach to revive the invest for retail participants, in a 5 year volatility as a big positive because economy, which is at a turning point. period have delivered upto 12% CAGR companies/shares tend to get World over, economic recovery has and in the 10 year period have given mispriced in this type of a chaotic gathered pace. Global manufacturing above 18% CAGR. This is in far excess trading environment. So, a volatile PMIs jumped, financial conditions of the stock market gains. SIP practices market enables such investors to have eased yet again, and economic the time-tested philosophy of buying pounce opportunistically on stocks that surprises clocked a second successive low. With markets again priced low, now may be trading irrationally below their positive month. is the time to embrace volatility. true value. Indian markets are volatile. In India, signs of green shoots are The past few years’ volatility, coupled If you map Nifty’s 2 year returns, abundant in June. High frequency with Covid-19 induced market crash, you will see how the index has barely data for June shows slowing down has left many investors worried. But moved on a point to point basis, with of the sharp decline seen in previous markets have proved many times how frequent ups and downs in this period. months in the form of PMI (37.8 such opportunities are when money is But, investors have made money even versus 14.8 in May), Improving made. It happened in 2009, 2014, 2020 in these trying times. Google mobility trends, digital (from March onwards). Retail investors, Today’s volatility is decadal transactions, highway toll data, job in their desire to escape short-term opportunity as valuations are too low. surveys, GST collections and evidence volatility, should not kill the opportunity Stock markets are pricing in too many of reverse migration. This is expected to experience healthy long-term returns. potential negatives, which is giving an to pick up momentum in Q2FY21 as The stock market will always witness impression that returns will be low. the festive season approaches. money flowing from weak hands Simply put, Return = Cost Price - Sales When volatility appears, and it into strong hands. If you are strong, Price. Your ‘Return’ depends upon always will, those who are in the Volatility Achchi Hai! Interview

Dynamically Manage Your Asset S NareN Executive Director and Chief Investment Officer, ICICI Prudential Allocations For Smarter Returns Mutual Fund

It is essential to consider the risk appetite and liquidity needs of the investor. S Naren, Executive Director and Chief Investment Officer of ICICI Prudential Mutual Fund, says that the best approach in these uncertain times is to focus on dynamically managed asset allocation schemes or balanced advantage category of schemes. In conversation with Saibal Dasgupta

Given the heightened volatility, how are the most of such challenging times by tapping into you managing the risks associated with equity opportunities present across equity and debt asset funds? Why has the proportionate share of classes. At the same time, it is heartening to note that equity-oriented schemes slipped in recent the fundamental of India continues to remain strong times? as the rural economy is robust even amidst the present Both in India and globally, selected stocks have so far circumstances. delivered bulk of the returns. Cyclically, these stocks So, for an investor who is investing in equity for a appear to be in end cycle, while the rest of the market long-term financial goal, it is important to continue is not. So when it comes to portfolio construction, we with their Systematic Investment Plans (SIPs). Every have a value bias as several such stocks are available correction is an opportunity for a long-term investor to at inexpensive valuations, providing good dividend accumulate more units at a reduced cost, so that over a yield and reasonable earnings visibility. complete market cycle, the investor has the opportunity We believe the drop in equity assets is marginal to make outsized gains. and is largely on account of In terms of debt as an asset class, coronavirus-related developments. we believe debt mutual funds have an Further, absence of physical important role to play in a portfolio. infrastructure over the past three Foregoing this asset class, could prove investors through varied investment styles and two years, even though there were instances of months due to nationwide lockdown Investors to be an expensive mistake as debt is strategies. All of the funds are managed as per the several debt papers of certain schemes going bad, is another aspect, which has with a higher the asset class which brings stability to mandate listed out in the Scheme Information investors have realised that the trouble in debt hampered investments, especially risk appetite a portfolio. While choosing schemes, Document (SID). As an AMC, we are believers markets is not systemic in nature. It is business from those investors who preferred it would be advisable to consider the of asset allocation funds and offer a range of asset as usual for fund houses with quality debt paper using traditional means. can consider risk appetite and liquidity needs of allocation products, which are model based with holdings. Going forward, this is one trend we investing in the investor too. Fund houses which varied level of net equity exposure. Contra and would like to see continuing as it is important As you know, markets go credit space have a demonstrated track record of value segments are the categories we believe in. for investors to have debt mutual funds as a part through cycles of boom and bust. not facing any defaults or portfolio We also have the largest value fund in the mutual of their asset allocation practice as it is a stable Would you advise long-term and separation would be an ideal choice for fund industry. When it comes to debt, we follow asset class. We are of the view that currently both medium-term retail investors to investments. the principal of Safety, Liquidity and Return (SLR). duration and credit offers attractive investment take advantage of a major dip or This approach is aimed at optimising risk adjusted opportunities. Since the yield curve continues to correction? What are the upcoming trends in terms of returns by investing in high grade credits, efficiently remain steep due to high risk aversion, short and In March, we had communicated to investors that investing in the mutual fund industry? managing duration rate-risk without compromising medium duration funds present an interesting it was the right time to invest in equity. Due to the With the increased awareness around mutual funds on liquidity risk. investment opportunity. For those who are looking ample liquidity provided by the global central banks, and the importance of asset allocation for long- to invest with a longer term investment horizon over the past few months, equity markets globally term wealth creation. We believe asset allocation or Please share your views on why the can consider investing in dynamic duration witnessed one of its sharpest rallies. balanced advantage category of funds stands to attract proportionate share of debt-oriented schemes schemes. Owing to the pandemic, while there is uncertainty in larger investor interest. This category, we believe, has has risen in recent times despite the liquidity Investors with higher risk appetite can consider the near to medium term, we believe that over time the potential to reach the scale of the present equity crisis? investing in credit space. This space remains economies will recover. Assets Under Management (AUM) of the industry. Investors, based on their investment duration and attractive due to valuation comfort owing to the So, the optimal approach to navigate these risk appetite, can consider investing in a variety of high spread between accrual schemes and repo, uncertain times is through dynamically managed Please discuss your investment strategy for debt funds. At a time when the interest rates are on a which further provides a good margin of safety for asset allocation schemes or balanced advantage different kind of funds. decline, debt mutual funds have caught the investor investments made. category of schemes. These funds will help make We have funds, which cater to a wide range of attention with robust performance. Over the past [email protected]

18 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 19 Interview

Dynamically Manage Your Asset S NareN Executive Director and Chief Investment Officer, ICICI Prudential Allocations For Smarter Returns Mutual Fund

18 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 19 Cover Story

Institutional investors rates fall. High inflation can easily eat away the Institutional real yields from traditional products like fixed have money, expertise, and investors own deposits and their variants. To generate greater over 45 per cent information to influence stock of the assets. alpha (rate of return in excess of the yield prices. Watch them closely to Typically, 2/3rd of peer products), one has to move towards of IPOs’ issue mutual funds and direct equity. As institutional boost your profits amounts are investors are adept at earning positive returns reserved for in such situations, the small investors can them benefit from their actions and decisions. By Yagnesh Kansara The responsibility of institutional investors has another aspect that helps us. On the supply n 84 days during the height of the side, they (commercial Banks particularly) act COVID-19 scare, when the global stock as suppliers of credit to entities. They lend markets had tumbled and remained volatile, money they have pooled from account holders Ione company raised a stupendous `152,000 with the aim to generate returns in excess of crore. India’s largest private sector company, what they pay in the form of interest. “If they Reliance Industries, sold almost a third stake fail in their fiduciary responsibility, they are in a in its mobile-Internet venture, Jio Platforms, to soup. This resonates with the current situation 13 institutional investors. These included two of India’s public sector banks,” explains strategic partners (Google and Facebook), three Learn From Masters, Avoid ‘Falling Knives’ Ranganathan. sovereign wealth funds of Abu Dhabi, UAE and Retail investors don’t have the bandwidth Saudi Arabia, and eight financial investors. to spend time on deep research. However, At the same time, some retail investors they can take advantage of the work done tried to chase a category of stocks dubbed ways and investment patterns of the smart and debt markets. The BSE Sensex and Nifty by institutional investors, and stay focused as ‘Falling Knife’, which include shares that and intelligent institutional investors. Hence, still went up due to the sustained inflows from on the medium and long term outlook. As decline alarmingly in relatively short periods, it makes sense for the retail investors and the domestic investors. During the above- Venkatraghavan puts it, “Retail investors may especially during crises. The rationale to do so individual day traders to keep a close watch on mentioned period, the Sensex climbed by more inculcate this philosophy is that investors feel that they are hammered their larger counterparts, and closely monitor than 2,500 points. without daily stock-watching.” In other way below their intrinsic values and, hence, will the latter’s investments. This data is published Over the past several years, the ownership words, we can make our decisions based on bounce back to higher levels in the near future. regularly, and provides a fair picture about of Indian equities by the domestic institutions what institutions do, but we need not get What such unsuspecting investors don’t realise the mood of the institutional investors. In rose at a fast clip due to a consistent rise in boggled by short-term trends. is that these are exactly the shares that are addition, such information allows the range SIPs, and a deeper shift towards financial possibly offloaded by the institutions. of market participants, including us, to gauge savings by Indian investors. In fact, the Both examples exemplify the power of the the changing sentiments in the stock market. ownership of stocks by foreigners, which was Follow The Leader large influential investors to make or break Generally, the swings and sways of the indices 2.2 times that of the domestic ones five years stocks. In the first case, it showed how they and individual stocks are dictated by them. ago, has steadily come down to 1.4 times today. honed in on a company, which wasn’t even At a global level, says Venkatraghavan S, For the retail investors, this implies that they Retail investors can study the investment pattern listed, because they figured out its hidden MD & Head ECM), Equirus Capital, the need to watch both these sets carefully, and not of institutional investors to understand the value before the others did. In the second, they decisions of the large investors give a direction make overall assumptions. direction of flows sold in hordes, and left the ailing babies in the to the flow of money to specific geographies What is crucial is that institutions normally Retail investors should make an attempt to hands of the small investors. Clearly, there (like emerging markets), industries, and invest for the medium and long terms. inculcate the philosophy of investing with long are lessons that we can learn by studying the companies. At the local levels, they can nudge Although the foreigners have panicked and term horizon without daily stock-watching the broad trends in the national stock indices. dumped stocks in the past, they do take “Stock markets (in India and elsewhere) are a longer view. The domestic institutions Investor should gain absolute control over the VenkatraghaVan. S primarily driven by institutional money,” invest with a time horizon of 7-10 years, feeling of “Itching to pick falling knife stocks” MD & Head (ECM), Equirus Capital admits Devang Mehta, Head (Equity Advisory), help channelise the savings of the retail Avoid averaging junk stocks to recover cost price Centrum Wealth Management. investors, and thereby provide stability to Instead start investing in quality stocks to Large investors give a direction to The foreign investors have, historically, had stock movements, says S. Ranganathan, Head compound your wealth the flow of money to specific areas a greater influence in India. This has changed (Securities), LKP Securities. He adds, “They like industries, companies and over the past three decades. Consider what play a critical role in the financialisation of happened in the market in the first three week savings in the economy.” emerging markets. of July. Between July 1 and 19, the foreigners For the small investors, it becomes withdrew more than `9,000 crore from equities imperative to be on their toes when interest

20 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 21 Cover Story

What is generally not understood Sensex Chasing Gold To Reach 50,000 Level? is that institutional investors also add to the efficiency of the stock markets. he Gold price in the Indian markets touched the historical high One of the ways in which they do it is point of `51,500, price of 10 grams of gold in the third week of in the process of price discovery. This TJuly 2020. The equity market has joined its own kind of gold hunt. process looks at a number of tangible After suffering severe beatings in February and March, the stock and intangible factors, which include market has been steadily rising since the declaration of COVID-19 as supply and demand, investor risk a pandemic. The market rise at this time when the economy is in the attitudes, and the overall economic doldrums is turning many eyebrows. and geopolitical environment. Now the question that has arisen is whether the Sensex will breach This happens only because the the 50,000 mark from the July 23 level of 38,140 and climb far beyond institutional investors have conducted the previous peak level at 41,952 reached on January 15 this year. rigorous analysis of information that The upward movement rose 9.81 per cent adding 3,409 points includes macroeconomic factors and to the 30-stock Sensex after continuously rising geopolitical situation. The fact that day after day though six weeks from June 12. these large investors have large funds During that time, the 50-stock Nifty piled 971 and differential risk attitudes helps. points to reach the 11,215 mark, a growth of According to Mehta, however, price 9.48 per cent, by July 23. discovery should not be confused with This is a dramatic recovery if you consider valuation. “While price discovery is a that the market sunk to its worst level of 25,639 market driven mechanism, valuation Sensex points and 7,610 points of Nifty points on is a model driven one. Valuation is March 23—one day before Prime Minister the present value of the presumed Narendra Modi announced the country- cash flows, interest rates, competitive wide lockdown. Seen from this bottom analysis, technological changes both in level in March, the Sensex has done a pole place and envisioned, and many other jump of 49 per cent adding 25,639 points while factors”, he explains. The retail investor the Nifty leapt up 47.37 per cent. should always keep this in mind. Umesh Mehta, Head of Research, Samco Securities said, “There Evidently, there are many things is no doubt that what we are currently witnessing is substantial that the small investors can learn buying interest in the handful of stocks having greater weightage in from the institutions. However, the the benchmark indices are adding more points to the indices. We most important one is to always are yet to witness a broader market rally, which will take some more remember the age-old maxim – time. The Sensex will reach the 50K level sooner maybe before the action is overrated, patience is FY21 ends but not in a linear manner. Before that, my feeling is that underrated. If you are into stocks for it should encounter substantial correction and then it should start its the long haul, just like most of the journey towards 50K”. large investors, do not panic or get This means, when Sensex reaches 50K level, Nifty will be trading excited and sell good stocks to earn around 16,500 level during the same time, he added. small profits. Hold on to them for as This is the repeat of what we’ve seen during 2002-2008 bull long as you can. market run when we saw all asset classes –Equity, Bullion and Real But when it comes to penny and Estate—participating in the rally. The real estate is missing this time, junk stocks, do the opposite. Do not said Bhavesh D Damania, founder and Chief Care Taker, Wealthcare hold on to them in the hope that their Investments. prices will go up, and you will manage “The rally in equities is purely the function of liquidity injected in to get rid of them at breakeven levels. the market while the gold demand is rising because of its safe-heaven Instead, just junk them as soon as you characteristic as major institutional buying is being witnessed and can. And then, take a step back, take both asset class will continue to witness uptrend for quite a long a deep breath, and pause for a bit. period of time”, said a top executive with a foreign investment bank Invest whatever money you are left on the condition of anonymity. with in quality stocks. If you follow this practice you will compound your Yagnesh Kansara wealth, not your problems. [email protected]

22 Outlook Money August 2020 www.outlookmoney.com Focal Point Dominating The Distribution Landscape Experts remain optimistic about the mutual fund industry’s future

months, our Partners are doing splendid work from home with the entire business being 100% digitally managed.

Q4: Technology is shaping the financial landscape. How has NJ Group leveraged tech to democratize mutual fund investments? A: NJ Group has been very focused on building a strong technology platform ever since it started its journey. Perhaps we were the first to give an online mutual fund valuation report and client desk allowing investors to track their Mr. Jignesh Desai (L) and Mr. Neeraj Choksi, Jt. MDs, NJ Group entire wealth portfolio. We were also the pioneers in offering online mutual Q1. Indian capital markets have opportunity to create products for fund transactions on the exchange. Over exhibited myriad colours within a investors with distinct and attractive the years, we have only strengthened short span. How do mutual fund value propositions. Talking about our platform. NJ E-Wealth Account investors ignore such volatility and timelines, given the current evolving (EWA) is our flagship service wherein continue to remain focused? situation, all I can say that we are doing the account can be digitally opened and A: The past decade and a half have what needs to be done to launch soon. the investor can start investing within a been quite eventful considering few minutes. Also, today, an NJ Wealth the numerous ups and downs we Q3: NJ has become the largest Partner can onboard and easily service experienced. However, the markets MF distributor and has held the any investor located in any corner of recovered eventually each time, no position through thick and thin. India. matter how bad the situation. Investors What makes you different from today have this learning, have access others? Q 5: Correct us if we are wrong; NJ to information and are also a lot more A: Today, we have more than 73,700+ Group appears to get a majority of aware. This is reflected in the rising crore of mutual fund assets under its customers from western India. number of investors and SIP input management. We see this as a collective What are your plans for pan-India? value in the industry. Even in the success for our Partners and us. A: Well, that’s not entirely right. Today recent volatility, matured investors Everything boils down to the trust we are catering to investors spread continued with their SIPs and many that our esteemed NJ Wealth Partners across India and our 37,000+ partners even increased their equity allocation. have on us. We have been privileged are present in almost every major Indian Credit also goes to the IFA, distribution to be associated with such fantastic city. Our internal study showed us that community for handholding the clients. people and build strong relationships we had investors in 76% of all pin-codes which we cherish and nurture every of India, covering 85% talukas. Going Q2: NJ Group had applied for a day. We are proud to have lived up to forward, we desire to reach every nook mutual fund license. What is the every expectation, be it on technology, and corner of this vast nation. However, vision and when can we expect the sales, operations or product & service in terms of business concentration, it AMC to be launched? basket. Many of our very successful is not unusual to see the western region A: We feel that the industry offers Partners took the first step with us in dominating because it has traditionally enough choices when it comes to the industry and this gives us immense been more business and equity-oriented actively- managed funds. Globally satisfaction. Today, a new distributor compared to the rest of the nation. though, we have witnessed a clear shift starting the business with us feels the However, with growing awareness and from active to simple, disciplined, and same empowerment and has access digital disruption, we are seeing a greater rule-based style of management in the to every small or big thing necessary number of clients from other regions as past few decades. We feel this space to successfully run the business from well, which is a good holds great potential and there is an day one. Even in the last few testing sign going forward. Interview

liquidity to the market and lowers bid- investors. Extreme and irrational ask spreads. Institutional movement gets restricted with investors concept of benchmarking. Size Matters How are they beneficial to the provide retail investors? Rajat jain: Retail investors can Atul Mehra: Retail investors by liquidity to the access the debt and equity markets How Institutions Play Their Game participating through institutional markets and through these institutional investors investors can derive the benefits of aid in price like mutual funds. Retail investors Institutional Investors are the lifeline of capital markets across the globe. Atul Mehra, MD & Co-CEO, Investment collective bargaining power. With investing directly in equity and debt Banking , JM Financial, Sampath Reddy, Chief Investment Officer (CIO), Bajaj Allianz Life Insurance, their thorough research, institutional discovery instruments may also benefit from Neelesh Surana, CIO, Mirae Asset Investment Managers and Rajat jain, CIO, Principal Asset Management, explain investors can take long-term calls in the liquidity and price discovery the role of institutional investors in providing price discovery, stability and volatility to economies and an investment the market. They can derive superior provided by the active presence of mechanism for retail investors, during an interview with yagnesh Kansara. Edited excerpts: returns when compared to benchmark indices institutional investors in these markets. because of their long-term investments goals. What lessons should retail investors learn Sampath Reddy: Institutional investors work in from institutional players? What is the real role of institutional investors, and processes, they are better equipped to make a fiduciary capacity and can be entrusted with Atul Mehra: Retail investors have a lot to learn from given they are powerful because of their size? informed long-term decisions. public funds, of retail investors, to be managed in institutional investors. The first and foremost thing is Atul Mehra: With developments globally as well as in a professional and research-oriented manner, with how to cultivate patience to look at investments from India, capital markets have become highly institutionalised.. Rajat jain: Institutional investors bring depth in various risk controls in place. Some retail investors a long-term perspective. They also need to learn Some of these institutional investors have achieved a research to the markets, both fixed income and equity. may not have access or have the necessary time or about indulging in thorough and exhaustive research size and scale that is larger than the economies of some Their presence improves the quality of disclosures and proficiency in conducting their own research for - in-depth research not only about the company they countries hence they carry enormous weight and influence as they usually invest in a broad range of companies investing. Therefore, they can rely on investment are investing in but also about the sector in which the in the markets and their importance is only growing. this improvement is widespread. Further, their management vehicles like mutual funds, insurance, company operates may help them to take informed They bring to the table, apart from their vast experience intervention potentially leads to improving corporate pension funds for their investments to be managed decision. Retail investors can also benefit from the and expertise, patient long-term capital. They give huge governance as they engage with management of in a professional manner and better investment distinct feature of their institutional counterpart importance to innovation, scale, quality of management companies and push the minority shareholders’ point stewardship. Also, with economies of scale, these by keeping continuous and cautious track of their team, sound corporate governance and historical of view and actively vote on resolutions. In India, the investment vehicles can pass down lower cost of own investments. They should cultivate the habit of performance of companies. Bulk of the money that these debt markets are dominated by institutional investors investing through lower expense ratios. undertaking periodic review of their investments. investors manage is directly or indirectly coming from retail while equity markets also have an overwhelming Once they have invested their money/funds, retail investors either through their savings or pensions. presence of these investors. Their presence and Neelesh Surana: The market “inefficiency” is investors do not keep track of how their portfolio is subsequent large participation in the trading provides generally reduced if there are more institutional performing. They should also focus on innovative Sampath Reddy: Institutional investors, both foreign products and keep on identifying new sectors and and domestic, help to bring professional investment leaders across sectors, who can be supported in their management expertise/experience in the market growth journey. place. Also, with larger fund allocations and assets under management they help to deepen and broaden Sampath Reddy: Institutional investors have a the market, and thereby increase market penetration research-oriented process of investing, and typically and liquidity. They are well-regulated entities, and the investment tenure and approach is long term help in greater transparency, in terms of various in nature. Retail investors should try to develop investment disclosures, in professionalism and corporate a similar approach and have a longer investment governance. With share of institutional investors, both horizon to help achieve their investment goals, FII and DII, increasing in Indian companies over the rather than engaging in too much short-term years, we have been seeing growing institutional investor trading activity that may prove to be counter- activism, which was not much prevalent earlier in India, productive at times. and they are starting to play a proactive role in corporate governance of Indian companies. Neelesh Surana: Retail investors generally do not have time and resources to do in-depth Neelesh Surana: They are well-backed by research research. The best learning for retail investors is team, and have well-defined processes both to identify to participate by giving money to professional opportunities as well as for maintenance coverage. institutional investors. In India, formats like mutual Analysing businesses through sectoral analysts is the funds are very competitive and transparent. backbone of institutional investors. Given the system Atul MehRA RAjAt jAiN NeeleSh SuRANA SAMpAth Reddy [email protected]

24 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 25 Interview

Be Mindful Of The Yield Levels

Rajeev Radhakrishnan - Head Fixed Income, SBI Mutual Fund, in an interview with Himali Patel, explains given the credit market issues, the investor preference has been towards debt funds with a much conservative approach in credit allocations

Why are a lot of people are getting attracted to debt funds and why it has become more attractive recently? Debt funds have gained inflows based on the trend of softening interest rates and the associated capital gains that investors have made in debt-oriented funds. At the same time, we have seen a distinct trend of softer interest rates on other fixed income investment avenues like bank fixed deposits (FD’s). It must also be emphasised that given the credit market issues, the investor preference has been towards debt funds with a much conservative investment mandate in terms of credit allocations.

Any particular reasons why certain debt funds like a Long-Duration Bond, Corporate Bond Fund, Banking and PSU fund, Gilt Fund, and Gilt Fund with 10-year duration has really done well in terms of AUM and inflows Y-o-Y i.e. June 2019 vs. What should be the investors’ overall course June 2020 and as well as a month on month? of action while investing in mutual funds today? The interest in the above-mentioned categories have What has been the growth and return when it been on account of the capital gains realised in the comes to SIPs? recent periods, combined with the underlying portfolio Mutual funds provide various product alternatives allocations that are predominantly in high grade across debt and fixed income categories which can securities such as AAA bonds including PSU/PFI and satisfy the financial investment requirements of various corporates and sovereign securities. investors. Within the same investors should choose products in alignment with their individual risk appetite, Similarly, the index funds and Gold ETF’s seen investment tenures and liquidity requirements. This may an increase in its AUM and inflow growth? Is this include investment through SIP’s. a new trend amidst such an uncertain time? Interest in Gold ETF’s similarly may be reflecting the What is your outlook on debt funds going fact that gold prices have been on an upswing and forward in the next three months? have been the best performing asset class globally While the softer interest rate trend may continue for as well over the recent periods. Also, global market the near future, debt fund investors need to be mindful turbulences , uncertainty with respect to the event risks of the current yield levels across various segments, as well as declining real yields on risk free assets could while calibrating their return expectations. Excessive be reasons that have underpinned a positive sentiment system liquidity, RBI rate cuts as well as unconventional with regards gold prices. Inflows into Index funds are measures such as Targeted Longer-Term Refinancing dominated by institutional flows. Operations (TLTRO’s) have ensured that money market rates and Shorter-term AAA yields have softened meaningfully in the recent period. On a relative basis, Interest in Gold ETFs may reflect government securities and State Development Loans (SDL’s) provide more relative value. gold prices on an upswing [email protected]

26 Outlook Money August 2020 www.outlookmoney.com Viewpoint The Bulls Still Strolling To Dalal Street “As economy reopens markets are expected to show positive growth” says, Uma Venkatraman - Equity Fund Manager, IDBI Mutual Fund

Earning season for the also indicate that there is June. Petrol consumption related lockdowns, which first quarter of FY21 a meaningful month-on- has also seen a boost. has caused a meaningful is expected to be less month recovery. The weak Migrant workers are also dent in economic growth. encouraging. But markets performance of the first slowly returning to their With a revival of economic have taken an upturn quarter is being discounted employment zones which, indicators, there could be in early July despite an by the market, and there can further augment a reversal of these flows. elongated depressed mood. is now hope that future economic revival. We also Economic activity will What can be the reason? quarters will demonstrate monitor indicators of normalise in the coming The equity markets are positive growth. rural economy, where we weeks and this will be typically forward looking. are witnessing a strong reflected in a positive market Post lockdown there has What are the macro-high recovery as the impact of direction. We continue to like been a gradual reopening of frequency indicators the pandemic seems lower in the large-cap space, though economies. With production signaling about how the these areas compared to the valuations have run up a bit levels inching back towards markets will grow or urban centers. Additionally, in the past month. The large- normalcy, market expects recover? we are seeing spending by cap segment comprises the recovery from the second Usually several high- the Government including strongest companies and blue half of the year. Numerous frequency indicators are the large hike in MNREGA chips that can stick fast any macro and micro economic closely monitored to get a allocations and seeing a better volatility. These companies indicators are indicating a sense of how the economy than expected start to the have steadfast financials, with revival, while commentary is shaping up. We look at monsoons which have led to strong balance sheet and from several companies Industrial production data strong Kharif sowing. good growth prospects. We (IIP), inflation indicators remain convinced about the (WPI and CPI), 2-wheeler How do you see the equity long-term prospects of large- and passenger vehicles sales, markets performing in the cap companies. electricity generation as next two quarters? well as cement production, We are fairly constructive on Most mid-cap schemes among others. After a sharp the equity markets over the have failed to offer decline in all these indicators next two quarters. Clubbed decent returns even in during April and May, we are with the above factors is the five-year horizon. Is a starting to see some signs of recovery across urban centers longer minimum horizon month-on-month growth, as normalcy returns, which advisable? Your advice to mostly due to the are expected to keep capital seasoned investors as well pent-up demand. markets optimistic about as caveats for newcomers? For instance, revival. As earnings start to Equities are a fairly volatile unemployment data revive, we can expect healthy asset class. Investors with from the Centre returns. However if the at least a 10-year horizon for Monitoring pandemic situation worsens, have made reasonable Indian Economy companies could be forced to money. But yes, the five- continues to again shut operations which year performance has not show steady may cause weakness in the been very good. However improvement markets. it must be noted that in while indicators equity markets, five years is like railway freight Experts have been a short period of time. In showed a better recommending large-cap particular, the mid and small performance in funds for a while. But we cap segments, which bet on have seen outflows in June. upcoming and future winners, Are investors doubting require a longer period for large-cap funds in the their value to be discovered. Uma Venkatraman, current scenario? I would recommend a longer Equity Fund Manager, IDBI Mutual Fund The June outflows were holding period for the mid- triggered by the COVID-19 cap segment. Cover Story

Shankar Sharma that investor buys an asset whether equity, between the stock market and the basic return Co-Founder and Chief Global Strategist, First Global gold or fixed deposit and stays invested for ten available to anyone in India through FDs,” says years. In equities for example, the July 2020 Shankar Sharma, Co-Founder and Chief Global Is It Time For Long- returns is for a portfolio bought 10-years ago Strategist, First Global. The stock market has been a and redeemed in July this year. As numbers show, equity has not lived up to disappointing asset class in last Comparisons between equity and other assets the promise of providing superior returns as 5-6 years. FDs are better as they Term Equity Investors (as in the table) are based on 12-month average compared to any other asset class. “It happened don’t face volatility value of Nifty 50 index for the year ending July till 2014 – the numbers were good and it worked To Re-Think Strategy? every year. out to 14-15 per cent long term compounded returns. But from 2014 till now, the returns have Failing the investors? just fallen of the cliff,” he says. earnings growth for index companies now works The 10-year rolling returns for Nifty50 “The Indian stock market has been a very Siddharth Sedani, Vice President - Equity out to 1 per cent in the year ending March this disappointing asset class in the last five to six Advisory, Anand Rathi Shares and Stock year. “Covid-19 is not the culprit. It is only the declined from 19 per cent in the year years. The returns are not even matching fixed Brokers, says there are euphoric times when convenient villain,” says Sharma. This 5-year ending July 2013 to 8 per cent in the year deposit returns. If stocks and FDs both give you short term traders, day traders make money. earnings growth is now down to 1 per cent and similar returns, then “We have seen this in 2017 and also in the last the virus threatens to wipe-off most of the gains ending July 2020, which is less than even also FDs are better two months. There is nothing wrong in it. You in corporate earnings in the last ten-years. the returns on FDs because they don’t get on a horse which is moving and you get “The Indian stock market will be broadly face the volatility down when it stops,” he says. underperforming the world and be a laggard of the stock market. The “For the last two months people have been in comparison to emerging markets as well as By Rashmi Pratap return on FDs is a straight taking positions today and earning money other global markets,” says Sharma. line. There is no comparison tomorrow. One, is that in the short term, And it’s not over yet. “The pressure on n May this year, ace investor Warren markets are irrational and more sentiment and corporate earnings in the second half of 2020 Buffett’s conglomerate Berkshire liquidity-driven. In the long term, it looks at due to renewed lockdowns in many states Hathaway reported its biggest-ever earnings, fundamentals and how companies are continues to be a major risk factor for the Indian Iloss at 50 billion dollars in the March 2020 shaping up,” Sedani adds. markets,” says G Chokkalingam, Founder of quarter as the coronavirus pandemic took The returns for long term investors have Equinomics Research and Advisory. a toll on the Oracle of Omaha’s investment been inadequate primarily because of abysmal Moreover, the GDP projection for FY21 portfolio. The next day Berkshire Hathaway corporate earnings and profit growth. In fact, itself is in the red. Crisil expects FY21 GDP dumped all of its holdings in the airline there was de-growth on the two parameters to contract 5 per cent and has said the pre- sector, raising questions over even prior to COVID-19 as Indian companies virus level is unlikely in the next three fiscals. decades of Buffett’s wisdom were struggling with declining sales, slowing International Monetary Fund expects the Indian on holding stocks for profitability and high leverage resulting in economy to contract by 4.5 per cent in 2020, the long-term. higher operating costs. terming it a “historic low”. In a world that For the quarter ended March 2020, 1,002 listed stands changed companies reported a combined pre-tax loss of Short-term gains

s swiftly. And India is no exception. t These companies had reported a combined negative GDP growth forecast. In fact, it is short

r As things stand, the Indian stock market s profit before tax (PBT) of `1.06 lakh crore during term investors who are making money. is currently favouring short-term traders Q4 of FY19 and `1.05 lakh crore during Q3 of “Disconnect between the economic over the patient long-term investors, at FY19. Their combined revenues declined 9 per fundamentals and the stock market is least going by the performance of the cent year-on-year to `12.33 lakh crore during growing every day. At some point in time, the ` Before the broader market in the last decade. The ten- Q4 FY20 from 13.53 lakh crore a year ago. Coronavirus stock market adjusts to the equilibrium of year rolling returns for Nifty50 declined The contraction in topline was the worst in 18 crisis too, index fundamentals. But some investors are always from 19 per cent in the year ending July quarters and third consecutive revenue decline in companies on the forefront to capitalize on this short-term 2013 to a record low of 8 per cent in the as many quarters. combined earnings disequilibrium,” says Chokkalingam. year ending July 2020, which is less than The Nifty 50 index current underlying had grown at Sedani says many times, future discounting even the returns on bank and post office earnings per share (on a trailing 12-months a compounded takes place in the market. “And in the short term, fixed deposits (FDs) an investor would have basis) is around `380 per unit of the index, annual growth because of future discounting and liquidity push, earned over the same period. And gold is down 15 per cent from a high of `450 in January (CAGR) of just 5 none of the negative news impacts it. This is up 26 per cent in just the last 12 months. 2020. The current EPS is at a three-year low. per cent in the last the situation right now. For the last two months The analysis is based on the assumption After the recent decline in earnings, 5 year five-years people have been taking positions today and

28 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 29 Cover Story

S ` forever due to the COVID-19 pandemic, m around 2,700 crore with just eight days of the Yet, the stock market is neither reflecting the a l l investment strategies are also changing In Coronavirus lockdown, which began on March 25. steep decline in corporate earnings nor the v e s swiftly. And India is no exception. t These companies had reported a combined negative GDP growth forecast. In fact, it is short e

28 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 29 Cover Story

earning money tomorrow,” he says. G ChokkalinGam Chokkalingam points out that there is a Founder of Equinomics Research and Advisory structural change in the investor base in the stock market. A lot of millennials have started The pressure on corporate earnings entering the market in the last few years and the in the second half of 2020 due to lockdown has aggravated the trend as people are renewed lockdowns in many states looking for ways to make quick money,” he says. continues to be a major risk factor And they have not been disappointed either. The Indian stock market has been very volatile since February this year. This has thrown up trading opportunity for short term investors. “Years can pass with little or no change in stock Sensex shed 3,935 points with a 13 per cent prices followed by sharp up moves when years fall to 25,981 on March 23 with all its 30 stocks of returns are generated in matter of weeks and in the red. Just three days later, it bounced months Investors need to be patient and stay to 29,947 points. Continuing its uncertain invested for long periods to take advantage of movement, Sensex has been moving between favourable moves in the stock prices,” adds Sinha. 34,000 and 36,500 for most of July. Equity investors should also note that most In all, the annualized returns for an investor of the returns in equities in last five-years came who entered the market in March this year is from expansion in valuation rather than higher more than 100 per cent given that Sensex has corporate earnings. But analysts say that there is a recovered 42 per cent from the March 23 low. limit to how much expensive the market can get. So while returns for long-term investors are low, The benchmark Nifty 50 index is currently short term investors have raked in a moolah. trading at 28.2x its earnings per share in trailing 12-months way above its 20-year average The believers valuation ratio of 20x. In comparison, the index Some analysts, however, believe that equity as an was trading at an earnings multiple of 18.2x in asset class remains one offering better alternatives July 2014 and 23.5x in July 2015. for long-term investors, given the falling interest On many occasions in the past, including rates, benign liquidity and the lack of returns over the 2000 dotcom bust; the 2008 correction On many other popular assets such as real estate. occasions, and February meltdown this year, the market “Buy and sell price is an important including the 2000 has corrected sharply after hitting P/E determinant of returns on any assets and is not dotcom bust; the ratio of 28x. Obviously there is only a little unique to equity. Timing the market is crucial 2008 correction opportunity for investors to buy and hold for if investors want to generate superior returns and February the next 10-years in current market but lot of on their portfolio and that requires knowledge meltdown this profitable opportunity for short-term traders of valuations,” says Dhananjay Sinha, Head year, the market and investors. Yet, Sedani continues to be of Research and Equity Strategist, Systematix has corrected a firm believer in the long term game. “The Institutional Equity. sharply after theory is that long term investors only make According to him returns in equity come in hitting P/E ratio money. It has been historically proven that phases and investors need to appreciate this. of 28x big investors have made money on long term investments. And equity as an asset class is a completely hopeful asset class. For those who are not hopeful, equity is not the asset class for them,” he adds.

Rashmi Pratap is the Co-founder & Editor of 30Stades.com – a digital magazine on impactful stories from India’s nooks and corners. In her 18-year-career, starting as a trainee in UNI, Delhi, she has worked with the Economic Times, Outlook Business, The Hindu Business Line and Business Today. She can be reached at [email protected]

30 Outlook Money August 2020 www.outlookmoney.com Cover Story Viewpoint

earning money tomorrow,” he says. G ChokkalinGam Heads I Win, Tails You Lose Chokkalingam points out that there is a Founder of Equinomics Research and Advisory structural change in the investor base in the from 1.8x to 2.7x. At its current level, earnings made in the last six years. We stock market. A lot of millennials have started The pressure on corporate earnings the index valuation is now only 10% were very bullish and aggressive in our entering the market in the last few years and the in the second half of 2020 due to lower than its record high price-to- funds from March’20 till second week lockdown has aggravated the trend as people are earnings multiple of 30x on June 3, of June’20. We have clearly mentioned renewed lockdowns in many states 2019. in our June’20 factsheet commentary looking for ways to make quick money,” he says. continues to be a major risk factor And they have not been disappointed either. that we are turning cautious in our The Indian stock market has been very volatile Covid-19 crisis funds. We have gone more overweight since February this year. This has thrown up Indian economy’s road to recovery on defensive sectors and reduced high trading opportunity for short term investors. “Years can pass with little or no change in stock still has long way to go, since the beta sector exposures like banking and Sensex shed 3,935 points with a 13 per cent prices followed by sharp up moves when years lockdown also got extended the stress finance. fall to 25,981 on March 23 with all its 30 stocks of returns are generated in matter of weeks and on businesses is massive without in the red. Just three days later, it bounced months Investors need to be patient and stay any govt or RBI seen yet. The Nifty Volatility to rise to 29,947 points. Continuing its uncertain invested for long periods to take advantage of is up nearly by 48 per cent from The scenario that we are expecting is movement, Sensex has been moving between favourable moves in the stock prices,” adds Sinha. its March 2020 lows, even though markets can be highly volatile next 4-5 34,000 and 36,500 for most of July. Equity investors should also note that most George Heber Joseph the underlying index earnings per months as US Presidential election rd In all, the annualized returns for an investor of the returns in equities in last five-years came share continue to drift downwards is on 3 Nov 2020, can create big who entered the market in March this year is from expansion in valuation rather than higher due to the Covid-19 impact — the volatility and probably big fall as more than 100 per cent given that Sensex has corporate earnings. But analysts say that there is a How are we thinking about nationwide lockdown impacted well. Without pain there is no gain recovered 42 per cent from the March 23 low. limit to how much expensive the market can get. the markets at this juncture companies in the last seven days of possible in the market. The party is on, So while returns for long-term investors are low, The benchmark Nifty 50 index is currently The continued rally on the bourses the January-March 2020 quarter. We extended speculation which is seen in short term investors have raked in a moolah. trading at 28.2x its earnings per share in trailing despite dismal economic data after expect significant rise in the SME, cash turnover doubling in 3 months 12-months way above its 20-year average the Covid-19 pandemic is widening Retail and Corporate NPAs in the from 40k crores to 87k crores, retail The believers valuation ratio of 20x. In comparison, the index the gap between index valuation and coming quarters, which will be visible participation going up significantly into Some analysts, however, believe that equity as an was trading at an earnings multiple of 18.2x in underlying fundamentals. Common post the moratorium period. The direct equity (as most of the working asset class remains one offering better alternatives July 2014 and 23.5x in July 2015. sense has to prevail at this juncture, possibility of adding `6-8 lakh crores class population is sitting at home and for long-term investors, given the falling interest On many occasions in the past, including market rally has brought a belief additional NPAs to the existing NPAs venturing into direct equities - Demat rates, benign liquidity and the lack of returns over the 2000 dotcom bust; the 2008 correction to every market participant that will create more stress in the banking & trading account opening trend clearly On many all problems are over. We were sector. So, we are clearly worried suggests that) all suggests that whenever other popular assets such as real estate. occasions, and February meltdown this year, the market “Buy and sell price is an important has corrected sharply after hitting P/E expecting this rally to happen looking about investing into this sector at this market turns from here it can be brutal. including the 2000 at the quantum of liquidity pumped point of time, as we see all banking determinant of returns on any assets and is not dotcom bust; the ratio of 28x. Obviously there is only a little unique to equity. Timing the market is crucial 2008 correction opportunity for investors to buy and hold for in by USA and now we are turning companies in the bee line to raise Where to invest? if investors want to generate superior returns and February the next 10-years in current market but lot of cautious. money from the market by way of These are the times we want to be on their portfolio and that requires knowledge meltdown this profitable opportunity for short-term traders We see more downside to happen equity sales at 30-70% lower valuation defensive in our funds so that investor of valuations,” says Dhananjay Sinha, Head year, the market and investors. Yet, Sedani continues to be because of 3 major reasons to that of Feb’20, which showcases doesn’t need to worry about timing of Research and Equity Strategist, Systematix has corrected a firm believer in the long term game. “The 1) Valuations have moved up quite a the kind of stress the companies are the market, fund has to take care of Institutional Equity. sharply after theory is that long term investors only make bit, and not cheap any more envisaging. We are very apprehensive all those needs automatically and According to him returns in equity come in hitting P/E ratio money. It has been historically proven that 2) Possibility of volatility rising in to take the positive commentaries investor can keep investing in the funds. phases and investors need to appreciate this. of 28x big investors have made money on long term next 4 months given out by the managements when Best funds for lumpsum are Balance investments. And equity as an asset class is a 3) Earnings to collapse much they are selling equities on the other Advantage Funds and our fund in this completely hopeful asset class. For those who beyond our initial estimates as side. category has a conservative positioning are not hopeful, equity is not the asset class the lockdown got extended, at this point of time. We are very for them,” he adds. COVID cases rising, government Impact on Corporate bullish on small caps from next 3-5 package not being effective Earnings years perspective. If you are allocating Rashmi Pratap is the Co-founder & and RBI measures are short of The Nifty trailing 12-month earnings money at this juncture into Small Cap Editor of 30Stades.com – a digital magazine expectations. per share (EPS) works to be `402 per funds you can stagger the investments on impactful stories from India’s nooks and As of 30th July 2020, the unit of the index. The market rally for at least 6-9 months period. 23rd corners. In her 18-year-career, starting as benchmark NSE Nifty50 index is has been fuelled by ample liquidity in March 2020, we clearly communicated a trainee in UNI, Delhi, she has worked trading at a trailing price-to-earnings the market, thanks to unprecedented to put lumpsum into all our equity with the Economic Times, Outlook Business, The Hindu multiple of 27x, about 55 per cent monetary expansion by major funds, but now you need to stagger your Business Line and Business Today. She can be reached at higher than its valuation on March global central banks led by the US investments when you are looking to [email protected] 23, 2020, when it had closed at a Federal Reserve. At the broader invest into small caps. three-year low of 7,610 points. Price level, coronavirus has also wiped The author is the CEO and CIO, to Book valuation has moved up out most of the gains in corporate ITI Asset Management Ltd. 30 Outlook Money August 2020 www.outlookmoney.com TheCover Scanner Story

Knock Knock, Opportunity’s Here Overall economic growth is essential for sustained investor returns Saibal DaSgupta

hese are unbelievable times. Despite the ongoing Economy and public health crisis, which seems to become more the markets severe by the day, India attracted a mind boggling T$20 billion of FDI (foreign direct investment) in the past few months. To take advantage of the inexplicable scenario, the government hiked the FDI limit to 74 per cent in defence and invited American firms with open arms in sectors such as healthcare, infrastructure, energy, civil aviation, and insurance. Investors too seem to look ahead, beyond the next few quarters, which may explain the continuous upward march of the stock indices. Gold, as usual, has acquired a new glint as the risk-averse seek the sanity of safety. Google, Silver Lake Partners, Vista Equity Partners, The changes in the FDI arena may aid equities, as also General Atlantic, KKR, Mubadala, Abu Dhabi Investment other segments in the financial sector – mutual funds Authority, TPG Capital, L Catterton and Intel. It raised Rs and general insurance. It looks like an opportune time to 117,588.45 crore selling 25 per cent share in Jio. make a killing. But possibly, only in the short run. Those While this is impressive, it is a case of one company with a longer-term vision need to be careful. that offers web-telecom solutions, which managed to woo The commonsensical reason: Markets do not investors. This does not reflect on the capabilities of other necessarily reflect the current situation. They give a Indian companies. We have our share of corporate laggards glimpse into a future, which looks rosy but can be in areas such as product development, technology, and discoloured by unpredictable events. It is crucial to import substitution. To match the brilliance of Reliance always remember that one or two positive factors do Industries and Jio – the scrip zoomed from under `900 in not make a country’s story. The future of ‘India Story’ March to over `2,000 – India Inc needs to do a lot before it will depend on a slew of trends that are consistent, can work the same magic. continuous, and are backed by a conviction. At present, In the stock market, the foreigners were net sellers in the various trends do not warrant such conclusions. the past two years, and the first part of this year. There For example, there are strong hopes that India can are signs that they have re-discovered value in Indian attract higher FDI and foreign portfolio investments stocks. However, only sustained inflows will prove this (FPI) in the near future. However, this will be largely due premise. The world does not see us the same way we to global factors like a weak dollar that usually results in see ourselves. Gerry Rice of the International Monetary an outward rush of American investments. The rising Fund said India needs further reforms to attract political sentiments against China boost inflows into an investments. Moody’s downgraded India’s sovereign alternative factory to the world, India. Our close links rating to Baa3 from Baa2 with a negative outlook. with Silicon Valley yields dividends despite the US visa On a happier note, IHS Markit Purchasing Managers’ restrictions on software manpower. survey predicted a growth momentum for the Indian Look at the other side of the investment coin, and the economy in the second half of this year. It concluded that narrative changes dramatically. One of the key Indian the GDP growth will spurt to 6.7 per cent in 2021-22, or magnets that attracted foreign dollars is the Jio platform a figure that is higher than the one in the pre-COVID of the Mukesh Ambani Group. In 12 doses in 10 weeks, it period. Such a fortuitous change is still not enough drew funds from Facebook (largest minority shareholder), to realise Prime Minister Narendra Modi’s dream of Atmanirbhar Bharat. The government must urgently incentivise manufacturing and technology upgradation. Markets do not always reflect Mere liquidity support is not enough. the economic situation [email protected]

32 Outlook Money August 2020 www.outlookmoney.com Viewpoint Psychology of Investing - Sticking to Basics

an investment. Different investments Prepare for extreme market have varying levels of risk and return conditions: If there is anything that potential making it important for the last two decades have taught us, it you to evaluate both factors carefully is that economies move in cycles and before making an investment varyingly impact different asset classes. decision. Interestingly, it is not just As an investor, it is important for you the investment risk but also your own to be prepared for emergencies and risk tolerance that you must consider create an all-weather portfolio that can before making an investment survive the shape-shifting economic decision. Your risk tolerance basically landscape. In order to achieve this, you indicates your ability, need, and need to do the following: willingness to take risk. You must • Create an emergency fund ensure that the investments that you that covers at least six months D Sathishkannan make are well-aligned with your risk of expenses and can come to tolerance. your rescue in case of extreme MD, Sapthagiri Portfolio Management Pvt Ltd Create a customised asset developments. www.makeamoneyindia.com allocation strategy: A great way to • Allocate a small proportion of mitigate overall portfolio risk and your portfolio to gold investments. nvesting is as much of an art minimise the impact of behavioural Historically, gold has proved to a as it is a science. Thus, even biases is to create a diversified good hedge against inflation, Ithough all investment decisions investment portfolio that is tethered acted as an ideal portfolio should be made with a rational mind, to a sound asset allocation strategy. diversifier and generated they are often influenced by emotion This spreads the portfolio risk across competitive returns relative to and behavioural biases. When your various assets in such a way that other asset classes. emotions get in the way of rational adverse movements in any one asset • Adhere to your asset allocation thinking, you may end up acting too class do not have a large impact on strategy and monitor your portfolio quickly, not act quickly enough, or the overall returns of the portfolio. for deviations. sometimes not act at all. In order to This way, portfolio risk can be Open your mind to debt make optimal investment decisions managed well, precluding the need investments: Generally, when it comes that can put you on the right track for you to react to sharp market to investing, most people intuitively to achieving your financial goals, movements. Below, we share a step think about ‘equity investing’. it is important to strike a balance by step process for creating a robust However, if you wish to create an between your emotional side and asset allocation strategy. optimally diversified portfolio, then your logical side. Fortunately, this • Step 1: Determine your goals, the you must consider debt investments can be easily achieved by sticking to required rate of return and the time as well, along with several other asset the very basics of investing. period to achieve each goal. classes. Due to their fixed-income • Step 2: Determine your risk bearing nature, debt investments Getting back to basics tolerance. are often overlooked as vehicles of Understand the concept of risk • Step 3: Allocate your investments growth. However, it is important for and reward: Risk primarily stems in varying proportions across you to consider debt investments if from uncertainty in outcome. Since different asset classes in such a way you wish to create a robust portfolio investments are impacted by a host that your investments are able to that is capable of generating the of factors, it is inevitable that there meet your return objective and are required risk-adjusted returns. is some element of uncertainty aligned with your risk tolerance. Often, people make investing sound attached to their performance. • Step 4: Periodically review your far more complicated than it actually is. Thus, you must understand that all portfolio and rebalance if the You can make investing and financial investments carry some level of risk. portfolio investments are no longer planning an easy journey by simply Return, on the other hand, is the aligned with your asset allocation managing your emotions and following reward that accrues to the holder of strategy. the very basics of investing. Investor Initiative

An Investor’s Guide In Volatility

In the backdrop of unprecedented global crisis, Aditya Birla Sun Life Mutual Fund, in association with Outlook Money, held a webinar on “Financial Planning in Unprecedented Times” - the first edition of investor education and awareness series. The broadcast saw an insightful discussion between KS Rao, Head - Investor Education and Distribution Development – Aditya Birla Sun Life AMC Limited, and Amit Trivedi, Author, Speaker, Trainer, and Blogger with over 26 years in capital markets, during a conversation with Special Correspondent Vishav

he health crisis and the simply facing severe cashflow ensuing lockdown has problems. Amit Trivedi, Author, KEEP ALL YOUR Timpacted global economy, Speaker, Trainer and Blogger feels FINANCIAL and by extension, personal finance one should first look at the current DOCUMENTS IN segment too and that there is a liquidity situation and ensure ONE PLACE, ALONG need to reinvent one’s approach enough funds for immediate and to personal finance in these short-term expenses. Then one WITH A WILL unprecedented circumstances. should go for health insurance “COVID is, of course, a primary and life insurance for risk inherent to equity markets and concern of health. But the second management. It is only after that adds, “That decade was abnormal most prominent concern of that one should use the money that volatility was missing. What COVID is the wealth. I think it is for funding goals. He adds for happened in 2020 is the very time for everyone to many, are managing expenses nature of equity markets. Please take a conscious call and we need based of the drop in income. expect volatility.” to relook our entire finances in a Hence, one should calculate Offering advice on managing very different way,” says income-expense transition before finances in these uncertain KS Rao, Head - Investor taking any decision. times, Rao says the first thing Education and Distribution Those who invest in equity one should focus on is safety Development – Aditya Birla Sun markets do expect some risk. - so six months to 12 months Life AMC Limited. However, many saw their portfolio emergency fund, and health and Rao adds one must draw some correct by 30-40 per cent in life insurance with appropriate lessons from the experiences March. Even as markets have cover is crucial. “Second, if all of the last couple of months recovered volatility does exist. your investments are goal based, and prioritise their finances and Trivedi says a 30 per cent drop then you have nothing to worry goals. He feels one should take in equity markets happened after about. Use liquid assets for insurance more seriously beyond a long gap of almost 12 years. parking your contingency fund, just the tax-planning aspect and “Also, during the last one decade, debt for medium term goals and ensure they have enough cover, there were only three days when equity for long-term investment. for both health and life. He says daily Sensex movement was more Don’t sell in panic, and remember that this is also the time one than 4 per cent. But in March this SIP is always best investment should take a more detailed view year, out of 22 working days, the route. If you have a lot of surplus, of the clauses of their health 4 per cent change happened on create a satellite portfolio. So insurance. The IIM-Calcutta 10 occasions. This is the level of core portfolio for goals, and alumnus adds that one should volatility and if you are not used satellite portfolio for taking some also consider drawing a will and to seeing this kind of volatility, chances for better returns. And of get families more involved in it may get very scary for a lot of course, asset allocation is key. My financial planning, as most goals people,” he explains. last advice is to write a will and are family goals. Trivedi, who has authored four do proper estate planning. And Many are losing their jobs, books on personal finance and keep all your documents in place,” getting steep salary cuts or are investment, says the volatility is he concludes.

To watch the complete interview, visit: outlookindia.com/outlookmoney/ Viewpoint Why you must have an SIP in debt funds too

his year has been a is the ones who made the most rollercoaster ride for equity of this situation. How? They were Tinvestors. From the euphoric regularly investing in debt even beginning of the year when market when equity was reaching new reached it’s all time high, to a multi- peaks. Eventually, when equity year low in March, and then a steep went in to a free-fall, their debt rally again in the past few weeks investments were not hampered. inching towards the lost glory. This When equity reached at multi-year ride has brought many surprises for lows, they were in a position to different types of investors. liquidate their debt assets and shift One category of investors exited that money in to equity investments, the market when the market was in Harish Kotian thereby taking complete advantage deep red in March fearing further of the situation. Investment Navigator, Way2Alpha fall. Then there is one category that Also, look at it in another way. Wealth Services wanted to buy when the market was If you face an emergency when at a low level, but could not do so the market is at multi-year lows, due to lack of liquidity at their end. make investments in mutual funds, you will not want to withdraw your At the same time, there are also it is mostly synonymous with equity funds at a loss, or would be forced investors who were able to make the investments. This is also due to the to do so. If you have an allocation most of this bumpy ride. We will try low level of attention that asset to debt, the negative impact on to understand how the latter set was allocation gets in retail and DIY ‘Do your finances could be significantly able to do that. The answer lies in It Yourself ’ investors discussions. curbed, as you will be able to use asset allocation, and SIPs. But the fact is that you can do an that amount as a contingency fund. SIP not just in equity mutual funds, Being smart with your assets but also in debt mutual funds. As Where to invest? Asset allocation refers to investing the numbers highlighted above While equity investments are your money in different categories established, it makes absolute sense commonly discussed, it could be of investments, assuming that the to do that. slightly daunting to understand different categories will behave which fund or category of funds differently in any given situation. How can a debt fund SIP to choose for your debt fund SIP. For instance, year to date till mid- help you? It is important to answer this July, the Nifty 50 index, which is Let us assume you have been question basis factors like your among the most tracked benchmark continuing with an equity mutual risk appetite and financial goals. equity indices in India, gave negative fund SIP for several years, and the However, one option could be return of almost 12%. During the corpus has now reached a decent dynamic bond funds. These funds same period, the Nifty 15 year and level. Then a global event takes are like aggressive debt funds Above G-Sec Index gave a return place and markets fall sharply. If where the fund managers can of over 12%. Accordingly, it makes you are someone in category one change the underlying assets from sense to invest in both asset classes mentioned above, you would sell- time to time. Experienced fund from time to time, so that you are off in panic and turn the notional managers typically use this freedom not caught off-guard when one of losses in to real losses. If you are to effectively deal with credit and the two asset classes goes in to a in the second category of investors interest rate risks. tailspin. mentioned above, you would be Effectively, as an investor you thinking of ways to buy at low must not ignore debt investments. The SIP way levels, but due to lack of funds, In fact, just like you have an equity While Systematic Investment Plans won’t be able to do that. mutual fund SIP; it is important for are among the preferred ways to Now, the third category of people you to have a debt fund SIP as well. Savings

Performance of Various Instruments benefited. Therefore, a majority will 10.00 9.30 9.20

9.00 continue to stick to the old regime and 8.70 8.70 8.75 8.70 8.60 8.50 8.50 8.60 Being Risk Free With Low Returns 8.50 8.30 8.30 8.10 8.10 8.30 7.90 7.60 7.75 7.80 7.80 7.90 8.00 7.60 the tax benefit it offers,” he explains. 7.40 7.10 7.00 7.00 6.80 6.50 6.75

6.10 Rajeev Srivastava, Chief Business Small savings remain attractive despite high inflation and rate cuts affecting real returns 6.00 Officer, Reliance Securities, says that 4.00 compared with FDs and debt mutual Figures in (%) Figures By Vishav on PPF was cut sharply by 80 basis returns that are higher than inflation. 2.00 funds, small savings schemes offer points from 7.9 per cent to 7.1 per The higher the gap between interest 0.00 both superior returns and limited or generations, small saving cent. And with consistent decline in rate and inflation, the better your real 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 risk. They also offer EEE -- Exempt, schemes like Public Provident government bond yields, to which returns are. “If your savings are not Exempt, Exempt -- status during Public Provident Fund (PPF) Senior Citizen Saving Scheme (SCSS) Fund (PPF) have been among the interest rates of small savings earning you inflation-beating returns, National Savings Certificate (NSC) Bank Fixed Deposit (FD) their life-time. “Since these schemes Fthe most trusted investment schemes including PPF are linked, then you would need to save a lot offer EEE benefit, which translates instruments for the salaried class, one cannot rule out further cuts more for certain financial objectives. Source: Fintrust Advisors to ‘exempt’ when investing, ‘exempt’ along with fixed deposits, real estate in the future with PPF interest rate Inflation can specifically hurt savings while growing and ‘exempt’ while and gold. declining even below 7 per cent, in the areas of future education and Then there is debt mutual fund the maturity amount. However, redemption, the return profile is However, in recent times, the which hasn’t happened since 1974. retirement goals. As money gets less scheme that invests in fixed income according to the new income tax significantly more attractive than its returns on these investments have Another point to note here is valuable over time you may not be instruments, like corporate and regime announced during the Budget other peers available in the market, been falling. Be it PPF, or Senior the difference between the absolute able to afford your current lifestyle at government bonds, corporate in February, tax payers now have including RBI bonds and mutual Citizens Savings Scheme (SCSS) interest that one earns on their retirement,” she explains. debt securities, and money market an option to opt for the new system funds with exposure to only sovereign or National Savings Certificate investments and the real interest rate To understand how much sense instruments that offer capital with liberalised rates, albeit with no paper,” he claims. (NSC), the interest rates on all these that has been adjusted to remove the it makes to invest in small savings appreciation. Debt funds are also deductions. If one opts for the same, However, these schemes have schemes have fallen by around 1-2 effects of inflation. With inflation schemes, given the rising inflation referred to as “Fixed Income Funds”. the tax-rebate appeal of small saving limited scope as they have extended per cent over the last five years or rising to 6.09 per cent in June, the trend and falling interest rates, it is They offer relatively stable returns, schemes would no longer be there. tenures of lock-in. For instance, a PPF so. PPF used to give a return of 8.7 real returns on these schemes are important to understand the different relatively high liquidity, but are The government eventually wants scheme has a 15-year lock-in and per cent in 2014-15, which has now much lower than what they were a types of schemes and how they differ riskier than PPF and FDs. a complete transition to the new an NSC has a minimum five years come down to 7.1 per cent, whereas few years back. from other fixed income instruments According to Vikas Khaitan, tax regime. According to Khaitan, tenure. Also, tax benefits on small NSC’s rate of return has dropped to According to Dipika Jaikishan, like fixed deposits and debt mutual Co-Founder and Partner at Fintrust however, the new tax regime will not savings schemes are limited up to an 6.8 per cent during this period. SCSS Co-Founder and COO of Basis, funds. Advisors, among the benefits of small be a deterrent because most of the investment of Rs 1.5 lakh per annum. interest rate during this time has a financial services platform for Fixed Deposit (FD) accounts are savings schemes are safety, long- investors in such schemes are from “It would make sense to invest fallen dramatically from 9.3 per cent women, the only time one is growing considered to be hassle-free and one term compounding benefit and tax low and middle-income groups and in small savings schemes upto the to 7.4 per cent. the wealth is when savings are of the safest investment options in the savings. He adds these schemes are “for them, the priority is safety, not maximum limit of Rs 1.5 lakh allowed In April this year, the interest rate parked in investments that give you market. You deposit an amount for a ideal for building a retirement fund. tax-saving”. under Section 80C. The interest specified period, and that earns interest “Small savings schemes have “They mainly come for the rates offered here are tax-free and as per the rate prevailing on the date of always been a popular investment simplicity, safety and high rate of possibly are the best fixed-income deposit. option and will continue to be so. returns that small saving schemes instruments offering tax exemption,” PPF, on the other hand, is a Despite a massive 70-140 basis offer. According to SBI research Srivastava says. One cause of concern government-backed long-term tax- points rate reduction across schemes estimates, less than 10 per cent of for investors is that the interest rates free savings scheme where the money announced on March 31, and the the total taxpayers are expected to on them have been falling over the gets locked in for 15 years and can be introduction of the optional new migrate to the new tax regime as last several years. There has been a extended in blocks of five years after tax regime from April 2020, small- they are the only ones who will be time when PPF used to give up to even the completion of the lock-in period. saving schemes continue to remain 12 per cent return, that is between The interest earned from such savings attractive,” he says. 1986 to 2000. And then between is tax-exempt. While there is a lock-in He adds small saving schemes RAJEEV March, 2002 and June, 2017, this rate of 15 years, one can withdraw a part have retained their edge because SRIVASTAVA remained in the range of 8-9 per cent. of the savings after the sixth year. the returns are guaranteed, fairly Chief Business Now it gives 7.1 per cent return, which National Savings Certificate, another stable and they come with a Officer, Reliance may fall further in future. Securities government-backed saving scheme, sovereign backing. The tax savings According to Mrin Agarwal, provides guaranteed returns along add further to the appeal as most of financial educator and founder- with a tax saving option. The lock-in these schemes offer one or the other The interest rates director of Finsafe India, PPF still period for the scheme is five years. The kind of tax benefits. For example, offered are tax-free and remains a great investment as “it beats government reviews the interest rate of in case of PPF, one can avail tax inflation, compounds and gives a risk both PPF and NSC schemes once every deductions and exemptions on the possibly the best fixed- free and tax free return”. quarter. investment, interest accrued and income instruments [email protected]

36 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 37 Savings

Performance of Various Instruments benefited. Therefore, a majority will 10.00 9.30 9.20

36 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 37 Cover Story Experts Advise Buying Gold Gold may peak at `65K, silver may also rise sharply as well

By Yagnesh Kansara the Fixed Income players is happening into Gold as the rate of return from the debt papers have either ndia is suddenly seeing a Goldrush of a rare slowed down or has fallen into negative territory. kind. Gold is trading at a 9-year high and silver According to informed sources, the US Dollar at a 4-year high. (USD) has entered into a 6-7 year long weakening IAt MCX, the commodity exchange, MCX cycle. An atmosphere of economic uncertainty, Gold hit `51,010 per 10gm, up by `310, on July lower interest rates, falling bond yields, sustained 25 compared to the previous day. The same day, liquidity push from many central banks and futures contracts on MCX for silver rose by `31 to expanded fiscal balance sheets have all worked in `61,331 per Kg compared to the earlier day. tandem to push up prices. Nish Bhatt, Founder & CEO of investment Precious metals are in demand from so-called consulting firm, Millwood Kane International, cited big investors. Some experts believe that Silver four reasons saying, “A weak US Dollar, a recovery may better than Gold in next 6-8 quarters. After plan worth 750 billion Euros in the European Union, being a laggard for the last few years, silver has an expectation of US Fed keeping interest rates near seen massive buying interest. The surge in its record low level by 2022 end, and issues related to shareholding, falling mine supply and high physical the continued spread of the pandemic are the key and industrial demand has been supportive of reason for the rally in precious metals”. The situation the prices. Experts think that the metal has still has been augmented by the fall in the value of other enough steam left and can add further gains asset class and global uncertainties have also helped towards `64,000 a Kg in the near future and also Gold climb record high levels, he says. move towards a life-time high crossing `74000 per Another reason for surging buying interest in kgs in the next couple of quarters. Gold is rise in Institutional buying. Majority of Navneet Damani, VP – Commodities Research, the Big Institutional Motilal Oswal Financial Services, (MOFS) Says, investors have turned “Over the last few months we have been seen a bullish on Gold due to sustain run-up in gold giving over 25% returns for its safe-haven feature this year and taking the total gains for the last two during the current year to over 45 per cent. We expect the momentum health crisis the global to continue with and could deliver a handsome 30 economy is suffering per cent returns targeting `65000/10 gms. over the from. More and more next 18-24 months”. asset allocation from [email protected]

38 Outlook Money August 2020 www.outlookmoney.com Commodity Trading Made Easy Commodity Trading FAQs

What is commodity What are commodity at today’s price or `25/ the expectation that it will dadsf dsaf saf asdf market? futures? kg. After a month even if rise in value in the near A commodity market is a Here, the buyer and seller the price goes up to `30/ future. This buying strategy physical or virtual market enter into an agreement kg the farmer can still can turn a profit if the value for trading in commodities to buy or sell a specific buy soyabean at `25/ of the commodity goes up like crude oil, precious amount of a certain kg. Here are the farmer is during the holding period. metals, energy, agricultural commodity at a future hedging against the price A short position means that products and so on . date at a price which is of soyabean by buying a one anticipates the price of predetermined. A futures futures contract. If the the commodity to decline Who regulates the contract also contains price of wheat falls to `20/ in the near future. A short commodity market? other information like the kg the farmer can buy position is the opposite of a The Forward Market quality of the commodity wheat at that price and the long position. Commission is the and the mode of delivery contract lapses. regulatory authority for agreed upon. What to keep in mind commodity markets in What is speculation? before trading in India. What is hedging? Speculation is taking commodities? Hedging is a risk a position in the Retail investors should What are spot and management strategy in commodities market understand the risks future prices? the commodities market. based on an expectation and benefits of trading The spot price is the price The idea is to offset losses whether the price of a in commodities. One at which a commodity in investments by taking commodity will rise and should start by choosing sells on the spot. It is the an opposite position in a fall in the future. The idea a trustworthy commodity actual price one would related asset. Let us say of speculation is to make trader. It is important to pay for the commodity that the price of soyabeans profits. have a solid strategy and today. The future price is now is `25/kg. A farmer be disciplined in one’s of a commodity is the price anticipates that the price What are long and investments. One should which is quoted for the of soyabean may go up. short positions? also make a daily profit commodity for a financial So he buys a position A long position means target and stop trade once transaction at a future date. in the futures market buying a commodity with the target is reached. Interview

resilient, and we will start seeing overall Through Mastercard ID Check Express, we Sudden Surge In Demand For Credit growth in the next few weeks. Digital enable instant checkout for e-commerce What is also interesting is that purchases without OTP. This is a quicker there are certain categories which payments in way to pay and is valid for amounts up to Cards Among New Users have become a new normal. Between tier 2 and 3 Rupees 2000. Through Mastercard Send, February and March, tap-and-go we enable instant cash backs or refunds on Aman Ahuja, Vice President, Product Management, South Asia, Mastercard in an interview with Saibal transactions in Asia Pacific grew 2.5 towns have offers and returns, to any card. Dasgupta and Himali Patel explains how a large majority 77 per cent consumers in India believe the shift to times faster than non-contactless grown 2.5 contactless payments is here to stay transactions in the grocery and drug times faster as Penetration of credit cards is still store categories. We conducted a survey very low in India. How do you see it in April which showed that 79 per cent compared to growing in the coming years? Owing to the lockdown, digital transactions have there has been a decline in transactions viz last year. of people worldwide and 91 per cent metros Digital payments in tier 2 and 3 towns seen an uptick. How have things been for the sector However, what we are also noticing is that every week is in Asia Pacific were using tap-and-go have grown 2.5 times faster as compared in the period following the lockdown? better than the previous week and the digital transactions payments. Citing safety and cleanliness, to metros. Emerging cities (those with With the lockdown, there have been innumerable ways are bouncing back significantly. Indian economy is very 74 per cent of people globally and 75 populations of less than 1 million) in India in which consumer behaviour has evolved and adapted per cent in the Asia Pacific said they would keep using are expected to be the fastest-growing and will constitute to these unprecedented times. We have seen that while contactless payment methods even after the pandemic about one-third of total consumer spending by 2025. digital payment volumes declined in sectors like aviation, is over. Furthermore, the Indian market is expected to While the credit card market in India is small when tourism, hospitality, hotels, entertainment, e-commerce have over 50 million contactless cards by 2020. While compared to a debit card, the market trend is anticipated (non-essentials) and restaurants, there is also an uptick in contactless payments were already seeing a steady to change. In India, the credit card user base is 58 million areas like online grocery stores, online pharmacies, OTT growth in the last 18 months, Covid-19 has only fast- as on Apr’20 and the market is expected to grow at a players (telecom and media), EdTechs, online gaming, tracked its adoption. CAGR of more than 25 per cent during 2020-2025, on recharges and utility/bill payments. account of the rising the popularity of credit cards and Have you witnessed a rise of credit card defaults growing trend of purchasing products first and paying Has the industry seen any interesting consumer in the current times? later. The increasing usage of credit cards in the country trend during this period? Govt has provided a moratorium for credit card highlights the rising aspirations and spending power of Companies are converting their customer’s journey repayments thus providing a cushion to consumers. As Indians. It also suggests that the urban-rural divide in the from physical channels to end-to-end contactless we see that markets are starting to bounce back, we do country (in terms of digital habits) is bridging rapidly. operations and this is one trend that I see picking up. In not expect any significant increase in defaults. Having fact, a report by local circles mentions that 42 per cent said that, issuers have more insights about credit card Do you think mobile payments and bank-linked of Indians have increased digital payments during the defaults in current times, and they would be the right e-commerce system would impact the market and lockdown, bringing a lot of first-time users, who were not people to comment and substantiate with data. usage of credit cards in India? tech-savvy, closer to the digital payment’s ecosystem. The divide between physical and digital is completely According to recent research conducted by How is the industry preparing for the post-COVID fading away. Today you can tokenize your card credentials Mastercard as COVID-19 alters our daily lives, world, and what innovations payments industry can on the mobile wallet and make contactless transactions consumers in India and across the Asia Pacific are rapidly expect in the future? through your mobile phone at the point of sale or pay going digital with purchases of everything from groceries Certainly, COVID-19 has increased consumers concerns using a QR code from your mobile banking app or pay for to movies in a shift that looks set to become a permanent about cash usage and led to positive perceptions about your e-commerce purchases through your mobile. A credit habit after the pandemic passes. Shopping in India has contactless due to the safety and peace of mind it or debit card today can take any form factor of payment also shifted to online as 86 per cent of people feel that provides. Most consumers globally view contactless as depending on the consumer choice and convenience. hygiene concerns are here to stay. the cleaner way to pay (80 per cent in Asia Pacific) and Mobile-based payments are gaining popularity and we We are witnessing highest standards for safety and this is eventually being adopted in India as well. We are have all the right products and services to offer mobile- security of digital payments. We strongly believe witnessing a lot of innovations lately to prep up for the based payments with the highest levels of safety and that there is an imperative opportunity to protect post-Covid world. We are advocating and providing an security standards. Consumers look for exclusive offers, the digital ecosystem in these difficult times. end-to-end digital approach that will assist banks in rewards points, discounts/cash backs, or interest-free acquiring customers digitally. EMI’s and credit cards provide customers with money- Have you experienced any reduction in Consumers today look at Instant gratification, saving options and allow easy and instant credit in times the transaction and by what percentage? safety and security and best in class experiences of need. As I mentioned earlier, volumes have declined and our endeavour is to provide all those in every With over 1.3 billion population, the market is large in sectors like tourism, hotels, clothing, AMAN AHUJA step of consumer onboarding or payment journey. enough for all digital payment channels to make a restaurants but there has also been growth in Vice President, Product Mastercard is the only International Network enabled meaningful contribution to the “Digital India” vision of the Management, South Asia, many other categories. Overall, less commerce Mastercard for Aadhaar-linked eKYC in India, that can facilitate government. is happening post-Covid lockdowns and hence instant issuance of credit card and eKYC for all users. [email protected], [email protected]

40 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 41 Interview

40 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 41 Mental Health Insurance

IRDAI has given time till October GURDEEP mental illnesses. The are many The Right Policy For Mental Well-being 2020, so some companies have SINGH BATRA reasons quoted for not having made mental illness coverage as a Head-Retail any standalone products by the Read the fine print and choose a policy that covers OPD and hospitalisation charges part of their policy and some are Underwriting, Bajaj insurers. still in the process of doing it. Allianz General Dr Prakash says, “By giving Insurance Dr S. Prasad, MD, Star Health a standalone product we will By Rajat Mishra and Allied Insurance says, “It has discriminate people with mental to do with society as well, as out of We plan to cover both illnesses. Because the fundamental very illness has its seeds in 100 people suffering from mental OPD and in-patient objective is to treat mental illness our psychology. The sudden illness, 80-90 per cent people never treatments in all our like any other physical illnesses, alleged suicide of Bollywood go for treatment due to social we can have standalone products Eactor Sushant Singh Rajput stirred stigma and some other reason. health indemnity plans for different disease but not for up the debate of mental well- There is a treatment gap as only 10 this. So, we should not think for being once again. Actress Deepika per cent go for treatment. So, I will a standalone product in mental Padukone, who has battled clinical say awareness of mental health and at is whether the policy is covered illness.” He also adds that as we depression and runs a foundation its coverage is still at. very nascent for hospitalisation only or for OPD do not have statistics, data and for mental health says one must stage.” It is important to know too. So, if you are going to buy number to know what is the real reach out, “Talk. Communicate. the things you should look before policy you should go through the cost of coverage, what percentage Express. Seek help,” after Rajput’s buying any health policy covering fine print and understand what is of population may need that. This demise. mental illnesses. covered and what is not covered. creates an apprehension in the Insurance is readily available to “Mental illness treatment mind of insurers as well. treat mental health illness too, all Out-patient and In-patient is mostly taken care of on an How effectively insurers have clubbed along with general health If a person approaches a outpatient basis and existing health modified their underwritings insurance products. However, psychiatrist for consultation and insurance policies (Indemnity guideline that is what is to be only a few insurers like Star diagnosis, it is considered as an policies) most commonly cover seen. However, Dutta sees this as Health Insurance and Bajaj Allianz out-patient department (OPD) hospitalisation expenses Bajaj a demand and supply problem. General Insurance among others treatment. In majority of the cases Allianz General Insurance’s Health He says, “The growth of private are providing comprehensive cover by mental disorder in 2017. And that grossly impairs judgment, psychiatric treatments are done Care Supreme plan covered mental healthcare treating mental illness for out-patient or OPD and in- the report also accepted that India’s behaviour, capacity to recognise in OPD only. Even a report by a illness on outpatient basis since has been very slow in India. Even patient or hospitalisation charges. systematic understanding of their reality or ability to meet the panel on mental health constituted 2014 and now it is being covered on if you go to major hospitals they An illness that is mostly treated in prevalence, disease burden and risk ordinary demands of life, mental by National Human Rights inpatient basis in our other plans don’t treat mental illness in India. OPD, often gets ignored by most factor is not readily available. conditions associated with the Commission claim most mental like Health Infinity, Extra Care plus Once healthcare infrastructure for insurers. However, recently the According to the 2017 Act, abuse of alcohol and drugs, but illness don’t require hospitalisation. and Arogya Sanjeevani. We are mental illness improves, insurers insurance regulator IRDAI has mental illness means a substantial does not include mental retardation Similarly, most policies do not have working to cover the same in all our will follow. We need enough set new guidelines for insurers to disorder of thinking, mood, which is a condition of arrested or OPD benefit and hence won’t cover health indemnity plans which would people to buy it on standalone change their approach towards perception, orientation or memory incomplete development of mind of the treatment. Hence, many experts be implemented before October 1, basis.” Even as mental health illness mental health. a person, specially characterised by feel an ideal mental illness cover 2020,” says Gurdeep Singh Batra, is advised to be covered under In 2014 India launched its sub normality of intelligence. should include outpatient expenses. Head-Retail Underwriting, Bajaj standardisation of health products mental health policy and a revised Recently, a PIL was filed in The most important thing to look Allianz General Insurance. it is not pitched as a separate Mental Healthcare Act in 2017. Supreme Court on insurance These day some policies cover product. Since 2018, insurance regulator coverage for mental illness OPDs and Star Health do not IRDAI has made it mandatory treatment in India. The apex court distinguish between a person Exclusions for mental health to be part of all has asked IRDA to explain why SANJAY DUTTA seeking an OPD treatment from an Like any other insurance plan, health insurance products. Simply insurers were still not adhering Chief-Underwritings, endocrinologist or an orthopedist mental health insurance too has put, mental health benefits cannot to its guidelines to cover mental Claims and or a psychiatrist. If OPD is covered some exclusions. So, if you go by be more restrictive than physical health illnesses under their regular Reinsurance, ICICI and a patient visits a psychiatrist it the definition of mental illnesses Lombard health benefits. scheme. The insurance regulator is treated like any other disease and there are two clear exclusions - According to a report by Lancet, DEEPIKA PADUKONE has issued guidelines to standardise the claim is paid too. first the plan does not cover any mental disorders are among the Actress mental health illness coverage in The growth of private sort of mental retardation and leading causes of non-fatal disease India by Sep 30, 2020. healthcare treating No Standalone Product secondly outcomes due to abuse burden in India. The situation is Talk. Communicate. Sanjay Dutta, Chief- As far as the specific mental illness of drugs and alcohol are not so grave that around one in every Underwritings, Claims and mental illness has been products are concerned, there are covered. seven Indians were found affected Express. Seek Help Reinsurance, ICICI Lombard says, very slow in India no standalone products covering [email protected]

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hours in a row before changing the and directed that it be treated as a same and they diagnose a number representation. The country’s largest of patients with the same kit. Hence specialised health insurer, Star Health there is no logic for them to charge & Allied Insurance is also in favour of for same PPE kit from every patient. capping of hospital treatment charges so This problem doesn’t arise for as to curb the practice as adopted by the government hospitals. hospitals while sending inflated bills to Dr Patankar says that when it the insurers. comes to individual insured patients, Dr S Prakash, MD of Star Health the insurers are denying the same Insurance, says that the cost of COVID and hence hospitals are compelled treatment normally comes to be 2.5 to ask the patients to bear the cost times more than that of the non- on their own. On their part, insurers COVID patients. Hence, hospitals have a different tale to tell. are free to send us the genuine bills “What is happening that hospitals in case of COVID procedures. The are charging the cost of PPE per only thing is that they are also having hospital staff per bed. We are shortage of manpower and are faced Photo: PTI opposed to it and we want them to with higher cost due to PPE involved. price it by dividing the same with the So, they find themselves in a catch-22 hospitals based on the number of number of beds they have,” Sarma situation. There is a need for the players, Concern Over COVID Procedure Rates facilities they provide, investment says. Meanwhile, a PIL has been service providers, and policyholders to made by the promoters and the filed in Supreme Court by Avishek understand each other.” Read the fine print and choose a policy that covers both out-patient and hospitalisation charges number of beds they boast of having. Goenka against the council’s move Even though actuaries have advocated If no tab is put on such rates of capping of the COVID procedure for having a standardised rate for then the insurers will end up rates. While hearing the petition, COVID-19 procedures, they feel that By Kumud Das companies. The settlement under for PPE) and for non-NABH accredited incurring heavy losses under the apex court’s bench, headed by the same must be reviewed from time COVID-19 insurance claims shall be hospital) it would be `8,000 (including the health insurance portfolio. Justice Ashok Bhushan issued notice to time. “I think this is a welcome he General Insurance subject to the limits and terms of the cost of PPE `1,200). The corporate Consequently, there will be spike to the Centre to find out ways how to step given the COVID-19 is a new Council (GIC) has recently policy of respective insurer. hospitals are planning to approach in the premia when one goes for resolve the issue. illness with no established protocols come out with rate chart for The capping of procedure rates IRDAI, insurers and the council for renewal of one’s health insurance In another case, the Delhi high and standardised treatment. This COVID-19T treatment, taking into comes at a time when the country initiation of dialogue on the issue. policy next year. PPE continues court has declined to entertain standard rate will bring in certainly account rates published by various witnesses more than 10 lakh active Mumbai-based hospitals have to be another contentious issue. a PIL seeking review of the AAP among patients and also will be an state governments, after discussion cases. Moreover, the insurers have already approached the state Hospitals complain insurers are not government’s decision to cap the important input for pricing. In addition with experts. The council has made already made claim payout to the government. GIC has indicated the reimbursing the cost of PPE used price of COVID-19 treatment to that it would also bring clarity it clear that the reference rates are tune of `900 crore while settling rates are not constant and will review by the hospitals while treating the and transparency in the treatment variable and will be revisited every 55,000 COVID related claims. them every month. “We have arrived patients. On their part, the insurers of COVID-19,” says Gopal V Kumar, month. However, the corporate hospitals at the rates based on our experience feel that they are not against it. The Private hospitals are Actuary & Economist, Radgo & Insurance companies shall be are not comfortable with the capping of over 50,000 COVID claims which only thing that the hospitals must Company. The premia, as per Sanjay guided by the treatment protocols of the rates. They are worried the have been settled so far. If there is charge it reasonably. not comfortable with Datta, Chief, Underwriting and Claims, prescribed by ICMR. These rates council may go for capping of all the any peculiarity then it can be seen The hospitals use PPE kit for four the capping of rates ICICI Lombard, have already gone up by are broadly based on the schedule procedures. GIC has come out with separately,” says MN Sarma, Secretary 5 to 7 per cent as of now. of rates suggested for COVID-19 a schedule of rates for claims being of GIC. Hospitals are right about complaining treatment by Niti Ayog panel. filed with its member insurance Mumbai-based Zen Hospital, that uniform tariff will not work as These rates will be applicable to companies, capping the ICU with which has already implemented the charges for different hospitals may vary both cashless and reimbursement ventilator care at `18,000 per day in revised rates, says that there should based on various parameters. The only claims in states/ union territories/ the case of ‘very severe sickness’ in be differential for various hospitals. way out is categorisation of hospitals, cities where any government hospitals accredited with National “There has been profit-making and which is yet to be done. Moreover, there authority has not published standard Accreditation Board for Hospitals & even exploitation by hospitals. A lot is no regulator for the hospitals in India. charges for COVID-19 treatment. Healthcare Providers (NABH). of network hospitals are not doing According to G Srinivasan, Director Wherever, treatment charges have In the case ‘moderate sickness’, cashless so as to avoid capping of of National Insurance Academy, health been published by any authority, NABH-accredited hospitals charges, says Dr Roy Patankar, Director insurance may grow by 15 to 20 per cent those charges shall be applicable (including entry level) can charge at Zen Hospital. within next six months. to insurance claims with member `10,000 per day (including `1,200 GIC is in favour of categorising [email protected]

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domain. Hence, prices differ helping the customers by sharing the network and that cashless facility from insurer to insurer,” says cost of PPE. Max Buppa is helping will be made available. Gurdeep Singh Batra, Head-Retail by sharing the cost of PPE kits up Underwriting, and Bajaj Allianz to `5,000 per day for ICU and up to Cashless treatment General Insurance. `3,000 per day for non-ICU room. Taking cognisance of reports that Is the policy good enough to bear Aditya Birla Health Insurance is some hospitals are not granting the cost of COVID-19 treatment? covering ,considering a reasonable cashless facility for treatment “The coverage of up to 5 lakh is expense towards it and are sharing of COVID-19 despite such good enough from my perspective. cost up to `2,500 per day for wards arrangements with the insurers. Bills above `5 lakh are exceptions. and `5,000 per day for ICU. Bharti IRDAI has reiterated that the Since 95 per cent of the bills do not Axa is sharing cost up to `1,500 per policyholder is fully entitled to exceed `5 lakh figure, why should day for COVID-19 cases only and is cashless facility at all network of we unnecessarily tax policyholder?” not paying in non-COVID-19 related hospitals with which insurance questions Dr S Prakash, MD, Star claims.” company has entered into an Health and Allied Insurance while Some insurers are covering agreement. It is also brought to talking about the coverage of the the cost of home care. Max Bupa the notice of the authority that policy. is covering home care if the case some of these hospitals are also What’s On Offer For Dr Prakash feels it is very easy of COVID-19 is severe enough to demanding cash deposits from the to criticise but is very difficult to warrant hospitalisation (after 30 policyholders. COVID-19 Patients? frame a policy, particularly in the days of waiting period is over), if In order to provide a sigh of relief case of corona because there is a beds are not available in hospital to customers, IRDAI has asked Two new policies Corona Rakshak and lot of uncertainty. “Even after eight policyholders to file a complaint to Kavach can help cover hospitalisation months of this outbreak, we are still grievance redressal officer of the and domiciliary expenses learning and unsure of many things. These indemnity-based concerned insurance company if Few months back we used to say it is a hospital denies cashless facility spread by droplet now we are saying policies range between to any person. The details of it is airborne. We are seeing a lot of `50,000 and `5 lakh grievance redressal officer would uncertainty. I think the government be notified on the company’s By Rajat Mishra health policy and COVID-19 leads floater with sum insured ranging and the regulator have really done and they certify the same, and if the website. If a complaint is received to complications or attack of the between `50,000 and `5 lakh. It is what is required. The government policy has domiciliary hospitalisation from a policyholder on denial of he insurance regulator, heart. People suffering from salary available for three and half months, has framed uniform rules for each cover. On the flip side, Bharti Axa is cashless facility, IRDAI will ask Insurance Regulatory and cuts and layoffs can also avail of it. six and half months and nine and one of us from state owned insurers not covering home care. However, the insurance company to take Development Authority Thirdly, you may supplement your half months including the waiting to private insurers,” he explains. insurers like Religare Health an appropriate action against Tof India (IRDAI), has suggested existing policies with Corona Kavach period. The single mode of premium Insurance is covering home care as such hospital. It also directed all two new policies specific to the policy as this would protect you with payment varies from insurer to Clamour for normal health a part of domiciliary hospitalisation insurance companies to put in place COVID-19 pandemic and issued additional sums insured. insurer. cover? benefit if available in the policy. The continuous communication channel guidelines to insurers. Dr Shreeraj Deshpande, Chief The premium of Corona Kavach The treatment can go on for 10 days, specific terms and conditions and with all the network providers for One of them - Corona Rakshak Operating Officer, Future Generali policy for 30-year-old individual 20 days and in some critical cases sub-limit are applicable. prompt resolution of the grievances - is a single-premium cover that India Insurance debunks certain for six and half months for a sum for over a month. Customers need to However, in another move IRDAI of policyholders. will pay 100 per cent as lump-sum misconceptions that have emerged insured of `50,000 sum by Bajaj choose a policy to suit their needs. has announced that treatment at “These are some momentary to the policyholder on being tested about this policy. “This Kavach policy Allianz is `1,056, the premium of Some insurance companies are make-shift or temporary hospitals reaction of some hospitals which positive and need hospitalisation for covers home care treatment up to 14 Corona Kavach with same features pushing for `1 crore health insurance are eligible for claim settlement. is not fair. I want those hospitals 72 hours or more. This plan does not days for COVID-19 cases, whereas by United India is `1,140, for covers. There is a growing sense that In order to bring in more clarity, which are denying cashless have any deductible. Another plan - normal health insurance policies do Oriental Insurance `1,039, for IFFCO a `5 lakh cover will not be enough. the regulator said that if anyone treatment to announce it upfront. Corona Kavach - is a single-premium not cover it. The policy also comes Tokio `1,324. is diagnosed with COVID-19 and If this problem comes to us I am indemnity health policy that covers with an optional hospital daily cash “This is based on actuarial Paying for hospital consumables is admitted to a make-shift or going to write to the hospitals to hospitalisation as well as domiciliary cover in which the insurer will pay modeling for estimated prices There is little clarity even in normal temporary hospital, permitted by give me in writing that the hospital expenses. up to 0.5 per cent of the sum insured using current experience of health covers as to the extent of central and state government, then is not going to participate in any for every 24 hours of hospitalisation.” COVID and earlier experience of consumables and home care are the treatment cost shall be settled by insurance. I would suggest there be Who should buy and why? infectious claims. Also, a few future covered. Amit Chabbra, Health the insurer. It also added that if any a hospital regulator as well to bring Firstly, there are three segments Premium and other features presumptions on claims/ frequency Business Head, Policybazzar.com network provider has set up a make- the whole industry into a discipline of people who should buy it. One, These indemnity-based policy is development are considered using says, “Although as per T&C, PPE kits shift or temporary hospital it shall mode,” says Dr Prakash. those who don’t have any other available on individual and family information available from public are non payables, several insurers are be regarded as an extension of the [email protected]

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46 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 47 General Insurance Made Easy

Shield yourself from COVID-19 with the Right Health Policy during these unprecedented times

What are the pros a comprehensive cover for COVID-19 for affordability and cons of buying a treatment of acute and Mr. Ravi reasons. Coronavirus specific chronic major illnesses Vishwanath, health cover? including hospitalization President – Accident & For those without any A COVID-19 specific treatment for COVID-19, Health, HDFC ERGO health insurance, does policy will only cover but also provides coverage General Insurance it make sense to buy the policyholder for the for mental illnesses, provides Company Ltd. said, Coronavirus specific treatment of illnesses home healthcare, road “COVID-19 has brought cover or they should contracted on account of and air ambulance, organ new urgency to the need start with a regular the virus. Such policies also donor expenses, alternative to protect one’s health health cover? cover expenses incurred on treatments, Rebound/ and ensure access to Consumer may choose treatment of co-morbidity Restoration benefit, the best medical care. from among three types of along with the treatment for preventive health check up In such unprecedented policies to be covered for COVID-19 and come with a and wellness benefits with times, HDFC ERGO COVID-19: shorter waiting period of 15 lifetime renewals. is ready to provide 1. Comprehensive health days. This policy is offered customers with the policies: which have been only for short tenure of 3.5 Do people with regular much needed financial prevalent in the market like months, 6.5 months and health cover need to protection, giving them HDFC ERGO’s my:health 9.5 months. Considering buy a Coronavirus the confidence to ‘Look Suraksha or HDFC ERGO COVID-19 policies offer specific cover? What Ahead’ in life. We are Health’s Optima Restore disease specific coverage are the conditions fully committed in this 2. Arogya Sanjeevani: the for a limited period and under which they battle against COVID-19 base health insurance policy the pricing for this policy is need not buy a COVID and will provide our with uniform coverages lower than comprehensive cover? customers with all the across the industry health policy, making them Most comprehensive required support. This 3. COVID-19 specific affordable. health policies, as well as includes access to a wide policies: the standard However, COVID-19 Arogya Sanjeevani, already network of over 11,000 COVID-19 specific policy specific policies can be provide protection against cashless hospitals, swift offered by General and opted in case one is not the cost of COVID-19 & hassle-free claim Health insurers, to stay covered under any indemnity hospitalization treatment. settlements, several secured only from the cost health policy or to further Consumers should ideally services available digitally of COVID-19 treatment supplement their existing opt for a COVID-19 on HDFC ERGO’s Having said this, this coverage. A regular insurance specific policy to further mobile app; all of which policy should not be taken policy, like my:health supplement their health will be available to them as a substitute to the normal Suraksha or Optima Restore, insurance policy or to secure with our policy.” comprehensive health not only offers policyholders oneself specifically against cover. Employment

Widen Your Filter For Job Search The job market will start getting on track from next quarter

By Anagh Pal jobs only compounded the situation. Practice, Stanton Chase, an executive An overall 35 per cent reduction in search consultant, sounds optimistic. hile the pandemic has active openings over three-month “The pandemic had its impact on the brought a lot of bad period should be read in the context hiring and recruitment industry. As we news on the health front, of a general slowdown in business move into the unlock phases, certain newsW of job losses have also made activity across sectors.” sectors and functions are seeing an headlines. The lockdown brought the He adds that the total active job upswing in hiring while the others are economy to a grinding halt and that openings dropped from 200K in still struggling. While the pendulum affected jobs to a large extent. Things April to 167K in May and the closing is still tilted towards negativity at the have slightly improved with Unlock 1 figures for June was hovering at and 2, but it will be a while before the 132K. Early data indicators for July job market is again at pre-pandemic seem to point towards a climb to levels. similar numbers as of May 2020. If Says Kamal Karanth, Co-Founder the trend continues for rest of July KAMAL at specialist staffing firm Xpheno, and sustains for August, we will be KARANTH “Unlock 2.0 opened with a slightly possibly looking at the first V-shaped Co-Founder, moderated enthusiasm in the recovery graphs in the job market. Xpheno organised job market, as compared We will have to wait a little longer to what was witnessed in 1.0. While to see if June 2020 was the true dip Unlock 2.0 opened June and early July saw a cleanup point in the jobs opportunities graph with a moderated of some of the long-trailing job for now. openings resulting in lesser active Amit Agarwal, Managing Partner, enthusiasm in job counts, a slower top-up of new Regional Specialisation Leader CFO organised job market

www.outlookmoney.com August 2020 Outlook Money 49 Employment

moment, the scenario is likely to get cent said that the employees are nor better by next quarter,” says Agarwal. responding to them on the status of “In terms of new jobs, we have their job offers. However, recently AMIT VADERA seen a new segment around health TCS announced that they will hire Head Staffing - BFSI and safety that has opened up, which 40,000 freshers from campuses, & Govt, TeamLease is fuelling demand for verification, while Infosys said they will hire Services sanitisation and security personnel,” 20,000. says Tarun Sinha, Head of OLX “Companies are still looking to Looks like this would People (HBU). While few marquee hire fresh talent. While these are take anywhere between brands announced layoff plans over challenging times for job seekers, the last two weeks, few others have there is no blanket freeze in the 6-18 months from now been revoking fresher offers and industry. Firms continue to hire to improve the situation postponing fresher hiring plans. fresh talent, however, they are being While a market-wise hiring freeze cautious at every step. Hence, it is cannot be declared, what can be crucial for freshers to keep an eye situation will improve. The entire job said is that more enterprises are out for the sectors that are showing market scenario is dependent on how calibrating their hiring plans for recovery and scope in the near soon the situation around the pandemic the year. “The pandemic has created future as well as in the long term,” improves, the sooner we manage the huge uncertainties about the future says Sinha. As per their data, the situation, the easier it is for the market with most industries laying-off their top sectors that are hiring freshers to improve.” The longer the situation employees to sustain themselves in include IT/Software, e-commerce, takes to improve, the larger would be the longer run. Fashion, hospitality, banking, insurance, financial the impact. real estate, retail, auto, and travel- services, and recruitment/staffing. Agrees Amit Vadera, Head Staffing tourism have been massively hit The question on many people’s - BFSI & Govt, TeamLease Services, and are seeing layoffs, alrhough minds is if the worse is over and a human resource provider, “This is the situation is getting better if we how soon will we be back to pre- difficult to predict, however based on talk about the job scenario today lockdown levels. With cases rising my discussion with about 100 Industry as compared to the scenario two rapidly in the country, things may leaders in last three months - timeline months back,” says Agarwal. not improve till next year. Says will differ from company to company Larger enterprises are seen Agarwal, “These are unprecedented and it looks like this would take playing their cards closer to the times that we are facing. It is still anywhere between 6-18 months from chest when it comes to hiring very difficult to anticipate when the now.” outlook for rest of the year. Despite However, Sinha is confident that these conditions, new job openings the green shoots are back. ‘We are continue to be announced and seen Be Job Ready witnessing recovery across industries, actively accepting applicants. “With and the jobs market is getting back over 40K jobs being refreshed and Network as much as possible to normal,” he says. As per the reposted over the week, the fact Use this time to upskill and economic think tank Centre for remains that the hiring funnel is still spread their job search across Monitoring Indian Economy (CMIE), warm and hasn’t frozen to a halt,” he sectors the unemployment rate fell to its pre- says. While the job market has been lockdown level of 8.5 per cent in the Be open to take up a part-time affected as a whole, fresher hiring week ended June 21, led by big gains in job if a full-time job is not has also borne the brunt. While the rural areas. With the festive season available some of the top colleges have already coming up, the demand for consumer done their placements even before Prepare well for Interview. goods is further expected to boost the the lockdown, Tier 2 and 3 colleges Be comfortable with digital economy. We are positive that by the are struggling. According to fresher interactions end of this quarter, India will be hiring portal Firstnaukri.com, Stay open to a wider range of job back on track. As per OLX People’s almost 44 per cent graduates who possibilities. Widen the filter for Employer Sentiment Survey, more had a job offer said that their joining your skill set than 50 per cent of businesses expect dates have been deferred while 9 Look for remote working to completely recover by the month of per cent said that their employment opportunities October this year. has been rolled back. About 33 per [email protected]

50 Outlook Money August 2020 www.outlookmoney.com Column

Beware of heavy discount on houses Buy from builders with track record of timely project completion ROHIT GERA

lot has been said about real estate rates crashing taxed at 30 per cent in the hands of the developer and and so on. However, it is important to assess the customer. Stamp duty on the 20 per cent difference and understand the situation. at 6 per cent is added to the customer burden. This AWe hear builders are in trouble hence they will be means a consumer buying a home at 80 per cent of forced to lower prices. the circle rate effectively and pays 80 per cent plus an When a builder is in trouble, his cash flows get additional 7.2 per cent towards extra income tax and affected leading to the project slowing down or stamp duty. This is in addition to the normal stamp duty. getting stalled. The developer generally defaults on On paper a 20 per cent discount is infact 13.8 per cent. his repayment to the banks/financial institutions. The The developer is expected to lower the price but the impact is felt by the financial institutions, customers and government must take its pound of flesh at an artificially all stakeholders including the vendors and employees. inflated value. The other issue is selling below the However, when a builder sells an under-construction ready reckoner attracts the attention of the income tax home at a discount because he is in trouble, it just department where the assumption is that black money doesn’t make sense to buy in the project. There is no must have been a part of the transaction if the rates are guarantee it will get completed. below ready reckoner value. No one wants to attract It is often said that builders are not lowering their the department and bring about these problems on prices because they do not want to lower their profits. themselves. This is true only in certain cases. If a project is selling Over the past five years, property prices have and the developer is solvent or financially sound then been flat to negative across most markets in India. why should he lower the price? Prices only come down Developers have had to bear increased costs on account during distress. Therefore, if a home is ready with of inflation. In addition, the government came up with occupation certificate and the prices are down, the risk GST which lowered the overall input costs. Threatening is minimised. manufacturers with anti-profiteering provisions, the There has been a lot of judicial action against government forced them to pass on the benefits to developers for delay in delivery of homes and default consumers. Thereafter, the government decided to lower on debt. Now nobody wants to be called a wilful the GST for home buyers but decided not to permit the defaulter or remanded to judicial custody. Therefore, it pass through of the input GST costs incurred by the is important to understand that there is a bigger reason developers to the customers. This increased the cost why prices are not coming down. burden and eroded profits further. The government on its part collects stamp duty at One look at the balance sheets of the listed the circle rates (ready reckoner rates) and yet expects developers will tell the story. properties to be sold at below circle rates. This adds In looking at the distribution of every rupee of inflow to the cost burden on the flat purchaser. In addition to that a developer gets from sale of real estate, the largest this, if a developer is to sell his property at a discount share goes to the government - the Centre in the form of more than 10 per cent to the circle rate, both the of GST, Income tax, state in the form of stamp duty and developer and the customer have to pay income tax on local government in the form of development charges, the difference between the price at which the customer premiums and property taxes. bought the apartment and 90 per cent of the circle rate Buying a home is a huge financial responsibility taken price. Assume a developer sells at 20 per cent below the on by people. Getting the decision wrong can cost the circle rate. The tax earned by the government is 30 per buyers life savings, financial hardship and tremendous cent of 90 per cent of the circle rate. This 10 per cent is stress. In this market, it is important to be safe, buy from reputed developers who have a track record of project completion andy buy where the construction Selling at low rate attracts the activity is on in full swing on the project. attention of I-T department The author is Managing Director, Gera Developments

www.outlookmoney.com August 2020 Outlook Money 51 Property

By Vishav customer does not have to travel long the trend of fewer site visits will likely feels that COVID-19 has disrupted distances to view the property. Also continue,” he says. existing patterns across industries and mit Gupta, an IT at times, when a building is under He adds that during the pandemic, is ushering in a change that shall set professional, bought his construction, getting a clearer and his group hosted several virtual tours a new order for businesses even after first home in Greater Noida first hand view of the surrounding of under-construction real-estate the crisis is over. He says that while A(West) around seven years back. He is not possible. Now it can be done properties through tools such as live the home buying journey in India has made dozens of visits to different digitally,” he says. drone shoots with their property been a mix of both offline and online property locations and met a number India has the second largest consultants and the developers’ sales aspects, digital scrutiny has been of real estate agents before narrowing Internet user base in the world after teams answering live questions from steadily growing its share in the process. down on an under-construction China and it is on a rapid growth potential buyers. PropTiger.com has “Getting all critical processes online three-bedroom flat. Even after especially in the tier 2 and 3 cities built an online platform where users with the help of artificial intelligence deciding to purchase that apartment, and remote locations. Mobile data can complete the entire process from and machine learning would be another he remembers how he had to visit in India is the cheapest in the world. searching a property to buying it in a emerging trend. Virtual video tours the builder’s office several times These factors create a significant few steps. may gradually take eminence over site for different formalities right from opportunity and most stakeholders However, for end users, digital visits and the sample home. With an booking to taking possession. are making the most of it. solutions may not be enough as amalgamation of all these technologies, Gupta, who now lives in Sydney Housing.com, a leading online real they like to visit the site themselves. the real estate space is getting ready to with his wife, is considering investing Photo: TRIBHUVAN TIWARI estate portal, uses several technology However, even for them, the number emerge as a future ready sector able to in the Indian real estate market, focused products to reach out to of site visits prior to home buying handle challenges using technology,” he which he sees as a good investment potential homebuyers, homeowners has come down owing to digital explains. opportunity. However, living and tenants, including online initiatives. To boost their confidence, From the buyers’ perspective, thousands of miles away now in a Riding The Digital Wave booking platforms, real-time video some developers are offering full- digitisation will facilitate more completely different continent, he is connect, virtual realty and virtual refund of the entire booking amount efficiency in the home buying process no longer in a position to again make tours, rent payment and webinars. in case buyers change their minds with quicker discovery, access to better those multiple visits and go through With Virtual Tours While their website traffic initially after the site visit. information about the project and all the hassles. declined during the first phase of the Sudhir Pai, CEO, Magicbricks, locality, better price comparison, less There are many such investors, Homebuyers can now avoid site visits and take a complete lockdown, it has since increased to time in site visits and ability to make not just NRIs, who want to invest in digital tour of the property and the surrounding area record levels. It hosted over 30,000 transactions online. Developers, on the Indian real estate. And since their buyers over the last two months the other hand, will be able to focus on goal is financial returns, rather than using video calls, webinars and other more interested buyers, expand their end-use, many are open to make the developers are now adopting digital study the ongoing trends, tailoring our digital mediums. Over 90 per cent reach to buyers, convert transactions purchase without a physical visit as technologies to make this possible. approach and digital tools have become of real estate transactions on their quicker and reduce cost of customer long as the location is desirable and In light of the COVID crisis and an elemental part of the process,” platform have taken place entirely acquisition and site visits. the builder has a good reputation. ensuing lockdown, this transition Nagpal explains. through online channels during this Dr Niranjan Hiranandani, National While buying a property without has picked up pace. Many state With availability of advanced period. President, NAREDCO, says that in the visiting the construction site and governments are even making the technologies like artificial intelligence According to Mani Rangarajan, Do’s & Don’ts Of Buying real estate sector, barring the actual the office of the builder multiple registration process online, with (AI) and virtual reality, the developers Group COO of Housing.com, construction, most of the work has times was not possible when Gupta Maharashtra taking the lead. and real estate agents are using drone Makaan.com and PropTiger.com, Property For End Use quickly shifted to digital mode getting bought his first home, many reputed According to Yukti Nagpal, cameras and digital tours giving a searches for buying and renting Even if everything can be done synced with the post-RERA world, Director, Gulshan Homz, digitisation 360 degree view of their properties. homes have moved online over the online, it is advisable to make visits where transparency and accountability has helped in reviving the sector to According to DK Aggarwal, President, last few years with about 90 per cent to the site are the watchwords. a certain extent after it was brought PHD Chamber of Commerce and of all buyers and tenants using the Use online platforms mainly for “Post COVID crisis, digitisation and DK AGGARWAL to a standstill due to the lockdown. Industry, these virtual tours are giving internet to research potential buying gathering information on projects digitalisation will be the new normal, Take a decision after physical President, PHD In order to overcome the mobility a more realistic and picturesque view and rental options. transforming real estate to a cutting inspection of the project Chamber of challenges, Gulshan Homz started of the property and its surroundings. A “While we have seen buyers book edge. It has uplifted the industry’s Visit concerned offices for doing Commerce and digital marketing and virtual tours customer sitting at home, with family, properties with reputed developers presence beyond geographical Industry due diligence around the title, boundaries and connected the people of their properties for their target can view the intricate details of the without a physical site visit, we do approvals, certifications and buyers. property and get a bird’s eye view of the not believe that this will be the new construction status across the borders to invest or buy in Virtual site visits are “Virtual tours bring to you the surroundings from the virtual balcony normal. However, we have seen the Many developers offer full refund Indian real estate. The unprecedented more realistic and ease of visiting projects within the of their proposed property. number of site visits per transaction upon cancellation of online crisis demands unprecedented actions, comforts of your home, scrolling “The new virtual site visits have been decline by more than 30 per cent booking. But do check terms and and digitization is the new future,” he convenient for both the through your screens via latest more realistic and convenient for both and given that site visits will be conditions for refund concludes. customer and the agent technology integration. Now as we the customer and the agents as now the challenging given social distancing, [email protected]

52 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 53 Property

52 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 53 Financial Plan

`50 lakh or more to manage, you can opt for Portfolio Management COL SANJEEV Make The Services (PMS). Last year Sebi GOVILA (RETD.) doubled the minimum investment amount for PMS to `50 lakh from CEO, Hum Fauji Initiatives Most Of Your `25 lakh. Says Abhinav Angirish - Founder, Investonline.in, “PMS has an Without achieving Money upper hand when it comes to long-term goals, many customisation. Investors can opt to invest only in large caps, midcaps people make the If you have been toying mistake and exit with the idea of consulting a or a combination of both. Mutual funds do not offer customisation of financial planner now is the one’s portfolio. In PMS, the portfolio right time to do so manager is directly answerable to for its credibility aspect, its track an investor. No such accountability record, initial fee, performance fee By Anagh Pal exists in a mutual fund.” and registration with Sebi. Be wary In India there are two types if much data is not available in the t is easier to navigate the ship of PMS - discretionary and non- public domain or if the company when the sea is calm, but during discretionary. Discretionary PMS offers you a much lower fee as a storm, an expert captain is allows the portfolio manager to compared to its competitors. Ineeded to save the ship and the buy and sell the securities as per Do perform some research lives. Similarly in these trying times his discretion. In non-discretionary about the company’s services, take we need a financial planner to PMS, the portfolio manager has to feedback from people who are manage our finances. Photo: VINAY DOMINIC consult the investor before making either taking or have taken their Ananth Ladha, Founder, Invest investment decisions. services and also check about the Aaj For Kal draws from the How to select the right PMS? Says exclusivity that the company will Mahabharta to put across this point. emotions during difficult times.” then please stay away from such Ankur Sinha, Co-founder, “Abide provide to your investment. One “The role of the financial planner is In March when the market Change strategy or planners. Because even experts by CARE formula. Here C stands should also keep a quick eye for always goal planning and managing was tumbling and came down by cannot predict the returns.” for cross-check, A for assess, R for conflict of interest the company may emotions. I will just quote example about 35 per cent from its peak, replace funds to make It is important that you stay research and E for Eagle-eyed.” He pose. of Mahabharat, Krishna being an many investors sold their equity the most of the boom away from mis-selling in the name says that when you are looking for Sinha explains how the fee advisor of Arjun, guided him all investments, but they are now of financial advice. “Some, for a right PMS, it means you have structure works in a PMS. Entry throughout. Most importantly when regretting their decision as the their own interest recommends decided to trust them with your load and management fee range the war was about to begin, Arjun market has recovered almost 25 provide a proper financial advice. products which actually does not hard-earned money. So, before you from one to three per cent. Then was wanting to leave it seeing his per cent of losses. “So, instead of Once you decide, the next step is fit the client’s risk profile and goal, make this decision, do some basic there is a performance fee or profit- uncles and relatives in his front. using that period as an opportunity to choose the right financial planner. please stay away from such advisors, inquiry about the company and sharing fee. This fee is charged That was the most critical part of to accumulate units for long-term To begin with you should check cautions Ladha. cross-check all your findings. when the return on your investment Krishna when he managed Arjun’s goals, many put dent on their the qualifications of the financial Recently Sebi mandated that an Assess/evaluate the company exceeds the promised rate. Besides portfolio by exiting. A good financial planner and whether is he or she entity can either provide advisory these, some firms also charge clients planner might have stopped them is authorised by Sebi to offer such services or distribute financial for opening a Demat account, from taking such wrong steps,” services. “Do take references from products so that there is no conflict conducting audit and custodian fee. argues Col Sanjeev Govila (retd), existing clients to know exactly of interest and investor does not There may be some other charges ANANTH GEETHA JAIN CEO, Hum Fauji Initiatives, an what to expect and how the advice become a victim of mis-selling LADHA that you need to clear right at the investment advisor for facilitating has panned out in various cycles Fee-based financial planners time of signing of the investment Head, Client Services, Indian Armed forces. and the communication in tough are recommended over those who Founder, Invest Aaj agreement. Grow Wealth For Kal In uncertain situations such as times,” advises Shweta Jain, Founder, charge a commission for products “In the majority of the cases, now, one tends to take decisions Investorgraphy. they sell you because in that case these charges are often negotiable, It is important that you based on fear, which, more often Says Geetha Jain, Head, Client you may be sold products you do The role of the financial so an investor should always go for stay away from mis- than not are not wise and can Services, Grow Wealth, “If any not need. planner is always hard-bargain,” he adds. adversely affect one’s finances. financial planner is promising you While a financial planner is the Remember, it is your hard earned selling in the name of People often act on the advice from fixed high returns in equity markets way to go for small retail investors, goal planning and money. Make the most of it. financial advice those who may not be equipped to especially for short-term goals if you have a investment amount of managing emotions [email protected]

54 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 55 Financial Plan

54 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 55 Standpoint

As Warren Buffett once said, “Intelligent investing legendary investors were made fun of. A quote Insights For A Pandemic Economy is not complex, though that is far from saying it is from a decade old book illustrates this very well : e a s y.” “Buffett being penalised for underperforming Diversify portfolio and hold on to your investments for the roller coaster ride AJAY BAGGA 7. The costs of not following these simple versus managers riding the long side of the dot- guidelines are huge for investors. For example, com bubble is a perfect illustration of a common mutual fund flows show that a majority of investor mistake—failing to realize that often the his pandemic is a once-in-a-century crisis that with this, a simple will can be created, leaving investors pour money into the market at the managers with the highest returns achieve those has unleashed demand and supply disruptions everything, movable and immovable to a spouse or top at stretched valuations and then pull their results because they’re taking the most risk, not in the global economy after the Great parent or family member as desired. money out at the bottom when valuations are because they have the greatest skill.” DepressionT of 1929. 3. The lockdown has helped investors evaluate their attractively depressed. This has been shown to 9. We would like to urge investors to widely The contrast to 2008 Great Financial Crisis are priorities and led to a surge in essentialism, with lead to an average loss of 2 per cent per year in diversify their holdings into uncorrelated assets. fundamentally different. The GFC started as a people focussed on the high priority parts of their market gains. Increased trading activity from Herding behaviour of crowds chasing overvalues subprime crisis that went on to threaten the global life. Investors should use this clarity to re-evaluate overconfidence can lead to another 1.5 to 6.5 per momentum plays has led to most financial financial system and then impacted the economy and their investment objectives, time horizons, risk cent in relative losses as per studies of trading bubbles from the tulip mania in Holland in the households. This time around, the crisis started as a appetite and cash flow projections. Changes need trends of investors. Investing through market 1600s to the South Sea bubble to the dot-com medical pandemic, which led to scores of deaths and to be made in strategic asset allocations as a result. cycles for long term works for most investors. bubble and more recently the housing bubble in businesses forced to shut shop due to lockdown. The For example, we are advising all to increase their Studies have shown that if an investor was the US that ended with the Great Financial Crisis financial system has been safeguarded by upfront emergency liquid fund from six months of expenses invested through a 20 year period from Jan 2000 of 2008. concerted actions with rate cuts, huge liquidity to two years of expenses, given the surge in income to Dec 2019 in the US market, missing out on As the combined capitalisation of the top injections, monetary and fiscal stimulus and direct losses. the 10 best days out of those 7,300 days eroded four stocks on the US Nasdaq, Amazon, Apple, intervention by central banks. 4. Research has shown that strategic asset allocation returns by nearly 60 per cent. Missing out the Microsoft and Google commands a greater market Many business models will never come back and is the most important driver of portfolio returns top 20 days led to nearly a 98 per cent drop capitalisation than the entire Japanese market. A millions of jobs that were lost may have been lost over the long term. It explains more than 75 per in returns. Investors pulling out money from car company making 500,000 cars is valued higher permanently. The way people live, work, consume, cent of the variability of returns. The other three mutual funds in India in June 2020 may have than the top nine car majors making more than 12 spend, save and invest is changing forever and will components of security selection, tactical asset been one of the worst investment decisions of million cars per year, we are entering a bubble zone. require all service providers to recaliberate as well. allocation and market timing together account their lives. Over estimation of market timing Non participation is not an option. Sitting this In this backdrop, here is our prescription for the for the remaining less than 25 per cent. It’s abilities is a common point of failure for all types out will also have costs. financially savvy, “on the road to financial freedom” critical to use this opportunity of time, clarity and of investors. Diversification is the best antidote to this. investors: prioritisation to rejig the strategic asset allocation to 8. Discipline and humility go hand in hand in the Diversify and hold on for the coming roller coaster 1. The coronavirus pandemic will lose significance prepare for a vastly changed world. markets. There has been a surge in so called ride. Eventually we will make it to the other side, but sooner than anticipated, as better treatments, herd 5. On the tactical asset allocation front, a move to Robinhood traders worldwide with untrained, the churn in the cycle will be testing and trying. immunity and vaccine launches will consign it the highest quality is critical. The economic pain novice traders using no fee discount brokerages Good luck! to the ranks of one more “few hundred thousand will stay for at least two, maybe more years, even to enter the stock trading arena with an over deaths per annum” disease. Of the 60 million people as the medical emergency normalises fast. It is also estimation of their abilities. So much so that The author is a Private Investor who die annually, nearly half die from the top 10 important to be invested in good, healthy, growing diseases like cardiac ailments, cancer and diabetes. businesses, as they will be most likely to weather COVID-19 has been a severe challenge to humanity, storms. As Warren Buffett puts it, “It’s better to but we are already 75 per cent through the pain and have a partial interest in the Hope Diamond than the solution to it is on the horizon. Investors need to own all of a rhinestone.” Discard the lemons in to be courageous and mindful and relook at their your portfolio and focus on getting into top quality financial plans with hope and confidence. companies as a long term investor. 2. Making a comprehensive and clear record of all 6. The investment process itself need not be complex. financial holdings for our family should be the Simplicity has a huge premium on the path of top priority. A “family must know” file can be financial success. Borrowing a simple financial created, manually, with all details of all accounts, guidepost from Ben Carlson’s, “A Wealth of investments, insurances, loans, passwords. Along Common Sense”: Think and act for the long term Ignore the noise Buy low, sell high Make a comprehensive record of Keep your emotions in check Don’t put all of your eggs in one basket your family’s financial holdings Stay the course

56 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 57 Standpoint

56 Outlook Money August 2020 www.outlookmoney.com www.outlookmoney.com August 2020 Outlook Money 57 Stamp Duty Who Gets Affected By Stamp Duty Cut? A uniform stamp duty will help remove tax arbitrage and ensure market continuity

By Indrishka Bose with a short holding period. However, the impact will he recent amendment to not be apparent for debt the Indian Stamp Duty funds, and liquid funds where Act, 1899 will have a long- the investment horizon is lastingT and deep-rooted effect on significantly shorter. At 0.005 the investors at several stages. per cent, there will not be any The revised law, which became substantial impact for long effective on July 1, covers investment horizons, as the collection of stamp duty on all the stamp duty is applicable on the securities market instruments, net investment value. including mutual funds. A rate of Over the years, the average 0.005 per cent will be levied on returns from the liquid scheme every financial transaction. category have shrunk to 5.2 per This is a change from the cent due to a fall in the interest previous system of multiple stamp rate. Tighter regulatory levies like duty rates, across the states for stamp duty are contributing to the same instruments, leading to the cap on gains. jurisdictional disputes. The new Schemes like Unit Linked change will remove the arbitrage. Once the holding Plans (ULIP), National Pension “Since some states levied low period increases, the Plans (NPP), and Provident Fund rates on speculative trades and impact will be less (PF) will be impacted by the there was a tax arbitrage to be stamp duty. had by basing your office in those On 30 June 2020, Sebi declared states. This arbitrage will now that stamp duty will be applicable go due to a uniform rate across buyer. This notification clarified to the Alternative Investment the country”, said Deepak Jasani, that the stamp duty will be payable Funds (AIF). The circular Head retail research at HDFC to the state in which the buyer in a explained that Registrars to an Securities. transaction is located. issue and share transfer agents The government said the The circular will standardise (RTA), appointed by AIFs would stock exchanges will collect on the collection of stamp duty and collect the stamp duty on issue, trading stocks and commodities plug certain loopholes. It will transfer, and sale of units of AIFs. on exchanges. Banks will collect bring a significant change to the “AIFs, where RTA has not been on off-market transactions and off-markets transactions including appointed so far, shall appoint deposit the proceeds with the unlisted shares. Previously, no RTA, at the earliest, to enable the central government. such stamp duty was applicable in collection of applicable stamp Earlier, the brokers had to off-market transactions in Demat duty”, Sebi said. register with different states and mode. The amendments to the Stamp pay the stamp duty. The change This is the first time that mutual Act and the rates have been is a relief for the brokers, as the funds (except for ETFs) will attract in public since February 2019. exchanges will pay the states, on stamp duty. It will be applied to all Looking at the importance of their behalf. the mutual funds including, equity, stock markets for the economy, Previously, stamp duty was hybrid, index funds debt and even in a strict lockdown, payable by both the seller and exchange-traded funds. efforts were made for a smooth buyer. The new rule will do away The rule will have an impact implementation to ensure market with this double imposition and on the institutional investors and continuity. will be levied only once on the corporate treasuries which invest [email protected]

58 Outlook Money August 2020 www.outlookmoney.com Viewpoint Build Your Financial Immunity Protect the financial security of your family through a comprehensive insurance plan says Abhijit Gulanikar of SBI Life Insurance

insurance that protects the & CI Sum Assured (SA) individual and the family in the proportion of 80:20 from any unforeseen event. respectively. There would be an increase in CI sum Have you designed any assured on each subsequent products to address the policy anniversary, as current market needs? the propensity of being While our existing product diagnosed with a critical portfolio addresses all the illness is higher. In case key financial immunity of diagnoses of a CI, the aspects of the consumers, insured gets a lump sum to in specific, our Poorna take care of the treatment Suraksha plan as the cost and the future Mr. Abhijit Gulanikar, President-Business Strategy, SBI Life Insurance name suggest ‘complete premiums are waived off. protection’ addresses the insurance needs in How much of a role With the outbreak of life insurance, both new the uncertain times. The does Life insurance play COVID-19, how is the business and renewal product offers a dual in building financial changing consumer premium are seeing protection benefit i.e. a immunity and how can behavior affecting the encouraging trends. Term Cover and a Critical one ensure adequate Life insurance industry? Illness (CI) Cover under a insurance coverage There is a huge What do you mean by single package. Besides, this to address any life psychological impact of Financial Immunity it provides a unique feature uncertainty? COVID-19, consumers and what are the ways of ‘Auto-rebalancing’, which Life insurance is an essential are deeply concerned through which one can helps in balancing both the component in building a from physical health and build a robust one? cover with an increasing age robust financial immunity. economic perspective. Financial immunity means and address any uncertainty The amount of life cover Their attitudes, behaviors protecting financial related to life and health. needs to be calibrated for and purchasing habits are security of the family from change in income, liabilities evolving with the changing potential risks. The current You mentioned about and accumulated wealth. environment. We do environment has led to an Auto-Rebalancing feature Early in the working life believe that the need for increased appreciation of in the Poorna Suraksha when expenses eat up protecting your family for risk amongst the consumers. product, how is it most of the income earned uncertainty is now more In such a situation, the unique? setting aside, around acutely felt than in past. benefits and importance SBI Life’s Poorna Suraksha `7,000-1,50,000 per annum Addressing the need of of building a strong provides a dual protection goes a long way covering protection, life insurance financial immunity is well benefit i.e. both a term this main risk. Additional acts as an important understood. For instance, to cover and a critical illness planning for financial protection mechanism protect our physical assets cover in a single plan. immunity against protecting against uncertainties. from getting destroyed The unique feature of key assets like house, car While financial impact in a calamity, we buy a this product is the ‘Auto- etc also needs to be looked due to COVID is very general insurance cover; Rebalancing’ component upon. A basic Term life high, it might be limiting for ensuring comfortable that it rebalances cover cover with an in-built consumers to put some income post retirement, between Life Cover and critical illness cover can money aside for financial we buy an annuity policy. Critical Illness (CI) Cover. go a long way in ensuring protection. However, post Likewise, to build a At policy inception, the adequate corpus is available strict lockdown in March robust financial immunity Basic Sum Assured would to live the current lifestyle and April, customers it is important to have be split between Life in the absence of the bread are returning back to a comprehensive Term Cover Sum Assured (SA) winners’ income. Gems & Jewellery

Buying Diamonds In Post COVID Era The surge in gold price has made diamond a lucrative option SAURABH KHANDELWAL

he dynamic world of fashion and jewellery market has been badly hit by the pandemic. However, many Indian brands have still anticipatedT 2020 to be a doorway to a plethora of business opportunities. In unlock 2.0, the diamond market may look promising. The sky-rocketing price of gold has opened a gateway for consumers to invest in diamond, as sellers are offering lucrative discounts and gifts. As a consumer, it is important for you to look for authenticity of diamond through a GIA or IGI certification. Make sure to get the diamond tested via different methods available before you purchase. If you are planning to buy gold jewellery with embellished diamond, then make sure to check whether the gold jewellery is Hallmark or not and check the diamond certification too. The reason experts suggest investing in a blend of gold and four months at retailers’ end, the payment cycle has diamond is the pricing ratio. For instance, if you buy gone berserk during the lockdown phase and further a ring worth `25,000, the gold value will be only 20 to financial crunch has created an even bigger hurdle. 30 per cent and the rest will be diamond. Only marginal fresh sales are seen at this juncture. According to statistics, in early June, there had been While many factories have resumed work in June, a drop of 15 per cent diamond exports as compared shortage of labour has crippled the operations. Under to last financial year 2018-19 and many more figures unlock 2.0, most of the units are working partially. In are surely giving the Indian diamond industry the real fact, many factories have re-shut their operations due tremors from COVID. to staff testing positive for corona. This shift in tremor has a history that Asian market In post corona phase, consumers prefer light has been experiencing for a while. If reports are to be and ultra light weight jewellery over heavy ones. believed, the rough diamond prices from the miners Keeping the declining wedding market and low- were predominantly high while polished diamond profile weddings post-lockdown, it is expected that prices in the market were nominal, leading to a consumers will invest in light weight jewellery. One noticeable gap that the Indian diamond businessmen can see be a bigger shift in consumer behavior and were suffering from. This led to huge losses in the buying patterns Asian market. The existing trade war between China It is also easier to make lighter pieces with least and the US has further triggered the downfall of the intricacies. The market is expected to see normalcy diamond business in the India. only after September-October and impressive sales With exports down over 50 per cent and domestic may start by the end of fourth quarter of the financial businesses by 70 per cent traders are facing liquidity year 2020-21. The diamond industry is eagerly waiting issues. for the curve to flatten and in this a crucial time as According to a statistics, with bills overdue for over they are utilising the time to lay out a corona virus action plan that can be executed in the near future. As the market is trying to move towards stability it is necessary players stay sensible and together, The diamond industry is facing supporting each other. severe liquidity issues The author is Owner at Dhanvi Diamonds

60 Outlook Money August 2020 www.outlookmoney.com Standpoint Economy Will Continue To Suffer Post Pandemic COVID-19 likely to augment income inequality impacting consumption patterns

Ms. Anagha Deodhar impact of lockdown if not its pre-shock level at about two segment of consumers completely. Considering all 1.25 per cent indicating – underprivileged and he COVID-19 the factors, the destitute worsening disparity. the affluent. While the curve has started have been hit the hardest In India, incidents former focuses on basic Tflattening in resulting in growing income such as job losses across needs like food and shelter, many countries. As inequality. According to industries and mass exodus the latter spend more on governments worldwide a poll conducted by IGM of migrant labourers discretionary items such gradually lift lockdowns, Economics Experts’ Panel, suggest that income as durable goods and economy is slowly Chicago Booth School in disparity is likely to amplify entertainment. Hence, looking up. However, April 2020, 84 per cent post COVID-19. In fact, potentially accelerating in the coming months of the 44 economists the gap is expected to income inequality in the authorities might have to (including 2019 Nobel worsen than the previous future can impact India’s struggle to cope with the Laureate Abhijeet Banerjee) health hazards. This is consumption basket. economy. One of the believed that COVID-19 because, (i) COVID-19 Since economically most pressing challenges will disproportionately has affected a significantly backward households post COVID 19, would affect low-income workers larger proportion of are likely to be be the widening income despite government world population than its disproportionately inequality. The conventional support schemes. 91 per predecessors (ii) lockdown affected, we expect them response to the pandemic cent believed existing and social distancing in to tighten strings and (social distancing and gaps in access to quality many geographies have switch consumption from lockdowns) tend to education between high and been far more stringent discretionary items to food. affect the economically low-income groups will (iii) death toll has been This could result in share underprivileged segment be exacerbated. This will way higher and (iv) lack of of food in consumption more as they typically eventually impact future vaccine clubbed with fears basket to increase. We have jobs where employment opportunities of second wave. expect them to aggressively physical presence is among the latter only We estimate that in FY21, cut back on the rest. essential. These include augmenting income top 20 per cent India’s Although the more affluent construction workers, disparity. population accounted for ones are likely to be less drivers, housekeeping and Several studies have 47 per cent of consumption affected, they too can maintenance staff, factory corroborated the worries share while the bottom 20 reduce consumption amidst workers. Moreover, since voiced by economists. per cent accounted for only the weak economy. This a large percentage of According to a recent six per cent. Hence, the way, we expect aggregate low-skill jobs belong to study based on five major gap between consumption spend on durables, the unorganised sector, it epidemics in last 17 years shares of top two sections entertainment, personal makes them very vulnerable such as Severe Acute and bottom two sections care to decline soon. of going out of business, Respiratory Syndrome or was 41 percentage points. Going forward, we can especially during trying SARS, Ebola and Zika has If viewed in the Indian see COVID-19 induced times. For them, lockdown shown that global health context, then five years after rise in income imbalance to is equivalent to loss of hazards and their aftermath COVID-19 i.e. in FY25– manifest in two ways—the livelihood. Additionally, the led to significant rise in FY26, the gap between private consumption pie (as financially underprivileged wage disparity. It often income shares going to a whole) can shrink, and its populace tends to have decreased employment rate top two segments and consumption composition low savings and either for the less educated. Five bottom two segments could can shift towards food at extremely limited or no years after a pandemic, increase to 43.5 percentage the cost of corresponding access to credit. On the the net Gini (a measure points. decline in discretionary contrary, the educated of inequality adjusting Rising income inequality spend. white-collar workforce is for government welfare has implications for (The author is an Economist largely insulated from the support) remained above consumption pattern of the at ICICI Securities) Stock Pick

Regaining Position Voltas Seeing Strong Sales Amara Raja Batteries CMP: 597.55 CMP: 703.75 Its brand, market share, distribution and PE: 32.35 Despite a difficult year Amara Raja Batteries’ PE: 18.19 balance sheet makes Voltas a top pick *As on July 20, 2020 automotive brands saw a strong growth *As on July 20, 2020

By Himali Patel order wins in MEP segment,” says an he market disruptions this muted trend is likely to continue analyst at Prabhudas Lillader. Why Buy towards the year end due even in the H1FY21. “We lower Why Buy oltas is one such company, Further, in terms of the ongoing Gaining consistent market to COVID –19 induced our PAT estimate by 2 per cent for Strong financial performance on which has continued to COVID-19 crisis the company leadership in the Air Conditioner Tlockdown restrictions has not only FY20 due to lower demand in the back of excellent franchise model sustain its number one launched a new line of Ultraviolet segment brought uncertainty in automobile auto sector. We believe the auto and operational efficiency Vposition in room air conditioner Light (UVC) based surface Strong track of consistent growth sector but has also put the brakes sector is likely to show some pick Near-term revenues to be business despite the sector been disinfectant solutions in addition in Net Profit and Net Sales on the demand for the Original up in H2FY21 owing to lower base supported by pent-up demand adversely impacted by COVID-19. to the engineered UVC based air Equipment Manufacturer (OEM). and new launches. Considering the Voltas, part of the Tata Group, saw and duct disinfectant solutions. Watch Out For Despite this, one of India’s leading strong financials and larger visibility Watch Out For a surge in its sales by 8 per cent in On the flipside, the analyst also Risk of second wave of industrial and automotive battery in the telecom sector (25 per cent Adverse commodity prices, FY 2020 to `7,889 crore Year-on- cautions that the FY2021 would COVID-19 impacting the major Amara Raja Batteries (ARB) of revenue) we value ARB at 16x lower demand for OEM and Year (Y-o-Y). Despite facing severe be challenging year due to peak supply chain posted an impressive net profit of FY22 earning per share,” explains an replacement segment competition, it has cemented market summer sales lost in Q1 FY2021 250 `660.82 crore in FY2020 with a analyst at Geogit financial Services. 250 leadership position as its market and the need for clearance of 37 per cent growth Year-on-Year Its automotive business share improved by 50 basis point to surplus inventory. “As AC demand (Y-o-Y) due to the strong demand for division has overcome the demand 140.70 24.2 per cent Year-to-Date (YTD). shifts next year, Voltas remains the 200 replacement market and export. Its slowdown in auto OE segment 181.76 150 The company’s net sales and pick given its strengths like brand, export revenue in FY2020 was about driven by traction in volume net Profit After Tax (PAT) have market share, distribution, range and 10 per cent of the overall revenue. growth in domestic replacement clocked a Compound Annual balance sheet,” says another analyst Being a flagship company of market. However, the growth 100 Growth Rate (CAGR) of 6 per at Dolat Capital. Amara Raja Group of Companies, in home UPS segment has been 78.53 150 cent over FY 2016-2020. Presently, Many agree that this year is going the ARB business segment includes moderate as the seasonal demand Source : BSE India : BSE Source the revenue is spread across to be a wash out year with reduced automotive and industrial lead acid for inverter batteries was severely India : BSE Source 140.70 50 three segments - Unitary Cooling earnings estimate to built in lower as 100 taken value Base batteries, with market leadership impacted by lockdown restrictions as 100 taken value Base Products (UCP), which contributes revenue and profitability. “While in telecom segment. It remains the in March. However, despite the approximately 53 per cent of Voltas’ FY2021 performance is likely 100 preferred supplier to some of the difficult year end the company’s 0 revenue, Electro - Mechanical to get impacted by lockdown (cut 2 Jan 2017 20 Jul 2020 major telecom service providers, automotive brands, AMARONTM 2 Jan 2017 20 Jul 2020 Projects with 42 per cent and in revenue, earnings estimate by 24 BSE Sensex Voltas telecom equipment manufacturers, and POWERZONETM, continued BSE Sensex Amara Raja Batteries Engineering Products and Services per cent, 46 per cent, respectively), UPS sector (OEM & Replacement), strong growth momentum across with 4 per cent as on FY2020. we believe recovery in sales would Financials Indian Railways and power, oil & vehicle segments. Financials Despite the challenges faced start from H2FY21 led by good gas, among others. The company’s The Earnings Per Share (EPS) for Net sales (` crore) PAT (` crore) Net sales (` crore) PAT (` crore) during the lockdown since March, festive demand and onset of second industrial business contributes about FY 2019-20 was at `38.69. Over the the company reported a good summer,” concurs an analyst at FY20 7658.08 FY20 521.05 30 per cent towards overall revenue. last one year, the stock has gained FY20 6839.17 FY20 660.80 traction in securing orders worth Motilal Oswal Financial Services. On the financial performance, 8 per cent as on July 10. “Despite FY19 7124.07 FY19 507.91 FY19 6793.11 FY19 483.23 `1,116 crore during the fourth Over the last three years, the revenue for fourth quarter (Q4) saw a the fall in auto OEM volumes, the quarter of FY2020. Further their stock has gained 20.48 per cent FY18 6404.38 FY18 572.40 flat growth of 0.9 per cent Y-o-Y and company managed to grow on FY18 6059.15 FY18 471.32 carry forward order book of `4,789 returns as on 10th July, 2020. The Profit After Tax (PAT) rose 14.5 per the back of strong performance in crores indicates a healthy mix of earnings per share of the company OP (` crore) EPS (`) cent Y-o-Y. However despite the weak replacement and industrial segments OP (` crore) EPS (`) water, metro, airport, solar and stood at `15.63 in FY2020 which is FY20 917.26 FY20 15.63 demand, EBITDA came at above while expanding margins. We FY20 1153.59 FY20 38.69 general MEP projects. “Although the higher than `15.35 in FY2019. Many 15 per cent driven by cost control maintain an outperformed rating FY19 797.96 FY19 15.35 FY19 998.26 FY19 28.29 near term looks hazy, we continue brokerage firms like ICICI direct, initiatives and muted lead price. on the stock given the challenging to maintain our positive stance on Motilal Oswal financial services and FY18 836.77 FY18 17.30 As per the analysts the fourth outlook in the Auto OEM and FY18 949.60 FY18 27.59 Voltas given its leadership position Nirmal Bang among others, remain OP: Operating Profit; PAT: Profit After Tax; quarter witnessed two-wheeler & Telecom segments,” says an analyst at OP: Operating Profit; PAT: Profit After Tax; in high potential RAC segment, positive on the long-term prospect EPS: Earnings Per Share; Source: Ace Equity four-wheeler volume decline by 19 Chola Securities. EPS: Earnings Per Share; Source: Ace Equity balance sheet comfort and sustained of the company. per cent & 18 per cent Y-o-Y and [email protected]

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his life. At that point, it seemed Brig. Vinayak has a plethora of lessons to recall Mitigating Risks With Strong Foundation as if all he lacked was the right from his investment journey spanning across financial advice. almost two decades. Here are a few of those: The first step in correcting his A proper goal-based investment can help you avoid the short-term hiccups from market turbulence course of financial planning was Equity markets have been great wealth creators. However, investing in to erase the high-cost insurance equity markets needs clear guidance and strategized investment approach. policies, especially considering It cannot be learned through books, and one can acquire practical rigadier Ramnarayan that he had sufficient insurance experience only with time. A financial advisor, through the right guidance, Vinayak is a retired Army cover through the group insurance. officer, and he lives with Brig. Vinayak got around `5 lakh can help you have a smooth investment journey. Just like the maps app on Bhis spouse Jailaxmi Vinayak by terminating these insurance the smartphones guides the riders to their destination, a financial advisor and daughter Radhika Vinayak. policies, which formed the initial can guide the investors to their desired financial goals. He had exposure to a broad corpus for the fresh investments While equity is important for long term wealth creation, debt provides a spectrum of people and cultures, towards his financial goals. sense of stability to the portfolio with reasonable returns. Equity markets throughout his working life. While His financial goals were simple can be highly volatile in the short-term. Such volatility is indeed inherent to such relationships enriched him and confined to his daughter’s equities, and there is no sure-shot solution that can eliminate this volatility personally, the financial advice education, retirement corpus, from the investment portfolio. However, the investors can mitigate such he received from people was not including taking care of medical risks through optimal asset allocation strategy. Asset allocation helps the helpful. His investment portfolio needs. investors to balance the risk profile of the investment portfolio and align it initially consisted of several Since Brig. Vinayak was new to with the financial goals and investment horizon. high-premium insurance policies, investing in mutual funds, but it One can have different financial goals with varying investment horizons despite having a health insurance was important that his confidence cover under the Armed Forces continues to sustain and does not and emotional values. Such goals must be linked with the investment Group insurance. shake. While asset allocation is strategy to chalk out a clear roadmap to achieve such goals. It also acts as He met Javahar KP, a Bhopal crucial for a long term investment an implicit incentive for investors to continue investing in that goal. When based financial consultant who portfolio, a balanced mix of equity the financial goal is far away, having goal-linked investments helps the also happens to be an Army and debt for a new investor like investors to resist the market noise in a better manner. Veteran. With insurance policies Brig. Vinayak was essential for his A daily valuation update for the investment portfolio can be missed, dominating the investment investment experience to remain but at the same time, the investors must continue to review the portfolio, it was clear that pleasant. The initial investment portfolio regularly. Such a periodic review helps the investors identify the investment strategy required corpus was invested with a proper underperforming schemes and replace them with consistently performing a significant overhaul. The asset allocation of equity and debt. schemes. Further, it also enables them to keep track of the investment representative could understand Further, a few SIP investments journey and ensure that the financial goals are indeed achieved in the his behaviour towards money were also registered in equity desired time frame. management post several mutual funds to save towards his discussions and interactions with financial goals consistently. him. With discipline in his veins, it The significance of a regular was indeed easier to convince him portfolio review is well known. to bring financial discipline into Six years from when he started requirements and risk appetite. contingencies. investing in mutual funds, the Regular engagement with him While Brig. Vinayak could Global Financial Crisis, commonly for annual portfolio review also press the reset button on financial known as the sub-prime crisis, helped in building that strong planning with reasonable time in Investment corpus had hit the global economies, foundation for his confidence in hand; one must stay involved in creates a financial including India. In the last decade investing in the markets. the planning process and make of his working life, it was normal Currently, Brig. Vinayak has well-informed decisions moving cushion towards any for Brig. Vinayak to be nervous been able to accumulate a good towards financial prosperity. life contingencies and cautious with his investments. 8-digit investment corpus. While However, all his concerns were he does not have regular cash patiently addressed, and his focus flow requirements owing to Disclaimer turned back towards his long term his monthly pension from the goals. He was also assured that the government, the investment Financial Planning of Brigadier Ramnarayan Vinayak is based on the “personal opinion and experience” of KP Javahar and that it should not KP Javahar be considered professional financial investment advice. No one should make any investment decision without first consulting his or her own investment portfolio is regularly corpus helps him have a financial Founder & CEO, financial advisor and conducting his or her own research and due diligence. reviewed and aligned with the goal cushion towards any life Enhance Money

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Watch Emotions While Investing Let your vision and patience decide the course of your SIP journey UMANG THAKER

ystematic investing through SIP’s in mutual funds Vision to see: Stock market crashes are marked by a high has become a buzz word. However, keeping the level of noise about the present and the near-term future. discipline of regular investments during crisis This is where a clear vision of the long term future proves requiresS a certain level of tenacity. Investors often handy. encounter the ‘urge to sell’ at the first sign of trouble. Courage to buy: The courage to buy when the whole This is more behavioural than analytical. The irrationality world is fearfully selling actually arises from the above in decision making arises due to some inherent biases, vision to see itself which cognitive psychologists have termed as ‘loss Patience to hold: Only those investors will emerge aversion’. Researchers Kahneman and Tversky first successful from market crashes who have full conviction explained ‘loss aversion’ in their 1979 paper Prospect in their vision and high level of patience to see it become Theory: An Analysis Of Decision Under Risk. a reality. Simply put, humans have higher memory of losses Like every crisis the current crisis is also unique. What compared to gains and this is encapsulated as ‘losses began as a medical/humanitarian crisis soon became loom larger than gains’. A 10 per cent loss seems far more an economic one. One might wonder why did markets painful than a 10 per cent gain. correct so sharply in March’20 when the case count in Now add to this the natural instinct based response India was far lesser? And now with a far higher case count mechanism of ‘fight’ or ‘flight’. Since you cannot fight the why have markets recovered a large portion of the losses? stock markets, it is only natural that one resorts to flight. Is this the start of a new rally – why did I stop my SIP? So, is there a way out – or are we simply helpless The probable answers lie in understanding the way slaves of behavioural biases and inherent response humans deal with grief causing change. Psychologist mechanisms? Elisabeth Kubler Ross first described the ‘five stages The good news is that you can cultivate a certain model’ when she was studying terminally ill patients in degree of tenacity by appreciating returns are as much a 1969. By the turn of the century the five stages model function of markets as they are of your behavior. was used to understand individual responses to all kinds Howard Marks says investment markets make the of change. The five stages are denial, anger, bargaining, pendulum swing: depression and acceptance. between euphoria and depression Ross in fact called it defense mechanisms or coping between positive and negative developments mechanisms, that we need to move through to manage between overpriced and under-priced change. He who is trapped, in any stage, without reaching “The pendulum refers to mood swings in the markets, the fifth stage, remains in fear, disappointment and as in cycles. The midpoint of the pendulum is the “on- uncertainty of the future. average” point, although it spends little time at this As we limp our way back to normalcy, acceptance of point. That’s because it normally swings up or down, the disease causing virus and necessary changes in habits away from its extremes.” This oscillation is one of the will become a ‘new normal’. We are likely to see normalcy most dependable features of the investment world, and in our investment behavior too. And like after all previous investor psychology seems to spend much more time at crisis, economic activity does rebound and so do financial the extremes than it does at the “happy medium.” markets, we have reason to be optimistic. If you are Investors who continue their SIP journey accumulate investing through SIPs then the next few months will offer more units during corrections. The same units create a the volatility, which is likely to benefit you by giving you disproportionate advantage during good times. an opportunity for value averaging. Stock market crashes are best handled by three If you invest when markets are booming and chicken important behavior traits: out when markets turn bad you will always get poor results from your equity investments. So let your patience decide the course of your SIP journey, not market Humans have higher memory movements. of losses than gains The author is Head of Products, Motilal Oswal AMC

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RNI NO. DELENG/2002/08292 Regd/KA/BGGPO/2512/2018-2020 POSTED AT BANGALORE PSO BG - 560026 POSTAL REGD NO. DL-SW- 1/4149/2020-22 WPP NO. U(SW)-27/2020-22/ Posted Published on 29 July 2020 on 4th & 5th of every month. Licensed to post without Prepayment License No . at NDPSO/ MH/MR/South-201/2012-14, Posted at Patrika Channel Sorting Total pages: 68 WPP - 62 office, Mumbai-1 on 3 & 4 Released on July 29, 2020

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