Terms and Conditions of ICICI Bank Apply Outlook Money - Conclave Pg 54 Interview: Prashant Kumar, Yes Bank Pg 44

Terms and conditions of ICICI Bank apply Outlook Money - Conclave pg 54 Interview: Prashant Kumar, Yes Bank pg 44

APRIL 2020, ` 50

OUTLOOKMONEY.COM

C VID-19 PARALYZED ECONOMY? Restructure your investments amid gloomy economy with reduced interest rates

8 904150 800027 0 4

Contents

April 2020 ■ Volume 19 ■ issue 4

pg 10 pg 10 pgpg 54 43 Cultivating OutlookOLM Conclave Money ConclaveReports and insights from the third Stalwartsedition of share the Outlook insights Moneyon India’s valour goalConclave to achieve a $5-trillion economy

Investors can look out for stock Pick a definite recovery point 36 Management34 stock strategies Pick of Jubilant in the market scenario, FoodWorksHighlighting and the Crompton management Greaves strategies of considering India’s already ConsumerJUBL and ElectricalsCGCE slow economic growth 4038 Morningstar Morningstar InIn focus: focus: HDFC HDFC short short term term debt, debt, HDFC HDFC smallsmall cap cap fund fund and and Axis Axis long long term term equity equity Gold Markets 4658 Yes Yes Bank Bank c irisisnterview Real EstateInsuracne AT1Unfair bonds treatment write-off meted leaves out investors to the AT1 in a Mutual FundsCommodities shock,bondholders exposes in gaps the inresolution our rating scheme system 5266 My My Plan Plan COVID-19: DedicatedHow dedicated SIPs can SIPs help can bring bring financial financial Volatile Markets disciplinediscipline in in your your life lives Investors need to diversify and 6 Talk Back Regulars : 6 Talk Back restructure portfolios to stay invested Regulars : and sail through these choppy waters AjayColumnsAjayColumns Bagga, Bagga, SS Naren,Naren, :: Farzana Farzana SuriSuri

CoverCover Design: Vinay Vinay D DominicOMinic

HeadHead Office Office AB-10, AB-10, S.J. S.J. Enclave, Enclave, New New Delhi Delhi 110 110 029; 029; Tel: Tel: (011) (011) 71280400, 71280400, Fax: Fax: (011) (011) 26191420 26191420 Ot OtHHerer Offices Offices Bangalore: Bangalore: (080) (080) 43715021 43715021 Kolkata:Kolkata: (033) (033) 46004506, 46004506, Fax: Fax: (033) (033) 46004506; 46004506; Chennai: Chennai: (044) (044) 42615225, 42615225, 42615224; 42615224; Fax: Fax: (044) (044) 42615095; 42615095; Mumbai: Mumbai: (022) (022) 50990990, 50990990, PrintedPrinted and and published published by by Vinayak Vinayak Aggarwal Aggarwal on on behalf behalf of of Outlook Outlook Publishing Publishing (India) (India) Pvt. Pvt. Ltd. Ltd. Editor: Editor: Arindam Arindam Mukherjee. Mukherjee. PrintedPrinted at at Kalajyothi Kalajyothi Process Process Pvt. Pvt. Ltd. Ltd. Sy.No.185, Sy.No.185, Sai Sai Pruthvi Pruthvi Enclave, Enclave, Kondapur Kondapur – – 500 500 084, 084, R.R.Dist. R.R.Dist. Telangana Telangana and and published published from from AB-10 AB-10 Safdarjung Safdarjung Enclave, Enclave, New New Delhi Delhi 110029 110029 ForFor Subscription Subscription queries, queries, please please call: call: 011-71280462, 011-71280462, 71280400 71280400 or or email: email: [email protected] [email protected] PublishedPublished for for the the month month of of March April 2020; 2020; Release Release on on 1 1April March 2020. 2020. Total Total no. no. of ofpages pages 70 92 OutlookOutlook Money Money does does not not accept accept responsibility responsibility for for any any investment investment decision decision taken taken by by readers readers on on the the basis basis of of information information provided provided herein. herein. TheThe objective objective is is to to keep keep readers readers better better informed informed and and help help them them decide decide for for themselves. themselves.

www.outlookmoney.comwww.outlookmoney.com April April 2020 2020 Outlook Outlook Money Money 3 3 Chapter One

Stay Calm And Avoid Panic Selling

n the last few weeks, things have not few months and bring in some cheer for the really been favourable for Indian investors. investors. The stock markets have tanked World over, the media is going through miserablyI and globally there are clear signs a tough time. Conditions are such that it of recession. There is a crisis of confidence in is increasingly becoming difficult for us to the markets and there is uncertainty all over. continue with our normal schedules. These are truly difficult and trying times. It is often said that desperate times Systematic Investing The entire world is in the throes of one of require desperate measures and we are truly Plans can keep you afloat its most formidable challenges ever faced by going through desperate times at present. during trying times mankind. The COVID-19 virus attack has Obviously, at our end too, it will call for taken the entire world unawares. The way drastic measures. We will do our best to out is still unknown. While hi-tech medical ensure that our readers stay safe and ensure research is ongoing, it is still uncertain when that we do not compromise your safety and we will be able to see the light at the other security in such times. end of the tunnel. The PM has put the entire nation in a We have seen unprecedented three-week lockdown in which nothing developments in the stock markets in the last but essential services will work. That puts few weeks. The Sensex has dropped by 2000 us in a difficult position to carry on with points plus in a day more than once. It stands normal working schedules as printing and at around 29,000 now as against 38,000 last distribution of the magazine will not be month. The story with the Nifty is similar. possible. Moreover, we would not want to Investors have taken a heavy hit and no one send magazines to our readers at this point is bold enough to venture into the unknown of time as the print copies go through many at this point of time. Making matters worse hands before reaching our readers and may are predictions by international bodies that inadvertently become carriers. India’s GDP growth will plummet. Some, like As such, we have decided to temporarily Moody’s has predicted that GDP growth will suspend the print edition of Outlook Money be just 2.5 per cent for calendar year 2020, for the time being till things improve. I hope down from 5.3 per cent forecast earlier. That our readers and subscribers will understand is not helping investor confidence. our predicament. In many places across the What is making things worse is the huge country, newspapers and periodicals have drop in crude prices which is affecting the stopped production exactly for the same global economy. With the US becoming reasons. one of the worst affected countries by the But we will not leave you news-dry even in COVID-19 attack, the impact is being felt such times. We will produce an e-magazine worldwide and India is not an exception. on schedule and we will ensure that The times are going to be tough for e-magazine, with all its elements reaches you the months to come even after the virus so that you get your regular fill of our stories, massacre recedes in India. The markets, investment advice and insights into the though gaining in pockets, will take time to financial world. Of course, our website www. come back to their earlier glory primarily outlookmoney.com will continue to update because the Indian industry has been hit you on the latest in the financial world. badly. Manufacturing and productivity has We hope to resume regular print been severely affected. The state of company production as soon as things improve and results in the next quarter is anybody’s guess. we are able to restart normal working In such times it does not pay to do any schedules. Till such a time, we request you to panic selling and will make sense to stay bear with us. ARINDAM MUKHERJEE invested for the long term because the Praying that all of you stay home and [email protected] markets may show some resilience after a stay safe.

4 Outlook Money April 2020 www.outlookmoney.com Always You First. Open a Savings Account and get up to 7% interest p.a. Because for us, it’s Always You First.

Introducing IDFC FIRST Bank, a bank that always puts you first. It’s why we offer 7% interest p.a. with an assured 6% interest p.a. on our Savings Account. Open an account and get returns better than the prevailing banking industry deposit rates, with access to your money at all times. So bank with us, and see what it’s like to always be first.

Up to `1 Lakh - 6.00% p.a. > `1 Lakh - 7.00% p.a.

Rates are applicable for domestic, NRE and NRO Savings Accounts. Frequency of interest payout will continue to be on quarterly basis.

Open an IDFC FIRST Bank account NOW idfcfirstbank.com 1800 419 3332 Talk Back

Dreams Have No Expiry Date Being someone of that ripe age, Latika’s story EDITOR Arindam Mukherjee about miseries and EQUITIES AND MARKETS EDITOR following the trail of Yagnesh Kansara opportunities to creating SENIOR ASSISTANT EDITORS Aparajita Gupta, her own ferry of destiny, Anagh Pal inspired me to a different SPECIAL CORRESPONDENTS height. In times when Himali Patel, women are coming out of Vishav their shell and efficiently PRINCIPAL CORRESPONDENT Nirmala Konjengbam contributing to the SENIOR CORRESPONDENT economy, Latika did not step back thinking about her age, as dreams Dipen Pradhan are to be lived without considering the age. She had her moments NEWS DESK filled with obstacles, but her sheer desire to not overlook her talent COPY EDITOR and pick up the resources that she finds midway, only to give a shape Sudeshna Banerjee to her dreams. I would like to thank Outlook Money for giving the SENIOR SUB EDITOR Sampurna Majumder deserving exposure to women like Latika Chakravorty. Shipra Sinha, Kolkata TRAINEE SUB EDITOR Indrishka Bose WEB CORRESPONDENT Building Her Legacy Rajat Mishra DIGITAL TEAM It was such a delight to read this particular article on how Manju Amit Mishra, Sneha Santra Yagnik, with her passion and high skill, decided to excel in a male- ART Praveen Kumar. G, Vinay Dominic (Senior Designers) dominated domain. Her achievements Girish Chand (DTP Operator) and her sustenance in the real estate PHOTO EDITOR sector should be highly appreciated. Bhupinder Singh I would request Outlook Money to TECH TEAM Raman Awasthi, Suraj Wadhwa come up with such intriguing articles, which is absolutely important for this Business Office CHIEF EXECUTIVE OFFICER generation to witness. Indranil Roy Ishan Sharma, New Delhi PUBLISHER Sanchita Tyagi Rawat ASSISTANT VICE PRESIDENT Shore Amid The Tushar Kanti Ghosh

Ocean Of Fetters Circulation & Subscriptions Anindya Banerjee, Life of an entrepreneur Gagan Kohli, Vinod Kumar (North) might seem all shiny G Ramesh (South), Arun Kumar Jha (East) Shekhar Suvarna and successful, but there goes a lot of blood and Production GENERAL MANAGER sweat to garnish such Shashank Dixit a lifestyle. This cover CHIEF MANAGER story on interviewing an Shekhar Kumar Pandey entrepreneur from dawn MANAGER Sudha Sharma to dinner was an excellent DEPUTY MANAGER one. I loved how the entire article is weaved under a timeframe and Ganesh Sah how at the end when she sits for dinner, she looks at her workaholic ASSOCIATE MANAGER life and smiles while raising a toast. Gaurav Shrivas Tejas Malhotra, Mumbai Accounts VICE PRESIDENT Diwan Singh Bisht Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, COMPANY SECRETARY & LAW OFFICER New Delhi 110029, or [email protected]. Please mention your full name and residential address. Ankit Mangal

6 Outlook Money April 2020 www.outlookmoney.com

Talk Back

Securing The Self Against Maladies I loved the insurance article, which talks about the necessity to buy health policies so that they do not have to face any miseries when any sickness might arrive. It was very informative, especially the column that focuses on the varieties of the plan and alongside mentions the insurer, eligible age and what they cover. Rohan Desai, Chennai Young Fellas’ Financial Affairs focused on the credit score, it Regents’ Share In I have always been curious about became all the more interesting. Fintech Realm the concept of Gen Z being in a Gen Z’s fantastic ability to use Women leaders in the world of digitally advanced stage of this digital platforms to equip them on Fintech business is a story that century, as compared to the and around credit. I enjoyed reading needs to come to a surface level millennial. Added to this concept, this and got to learn a new concept. for the readers. Upasana Taku’s when Kalpana Pandey’s article Shruti Gupta, Mumbai journey is really inspiring for thousands out there, who are out there achieving milestones. I being FORM IV (See rule 8) someone from this industry can OUTLOOK MONEY relate to it to a far extent. The 1. Place of Publication New Delhi questions like, whether a woman 2. Periodicity of Publication Monthly is traveling alone for a business 3. Printer’s Name Vinayak Aggarwal Whether Citizen of India ? Yes meeting, still exist. However, I (If foreigner, state the country Not Applicable believe a strong vision and a belief of origin) in one’s capability and talent is all Address AB-10, Safdarjung Enclave, New Delhi - 110 029 4. Publisher’s Name Vinayak Aggarwal that a woman requires. Whether Citizen of India ? Yes Aratrika Majumdar, Bangalore (If foreigner, state the country Not Applicable of origin ) Freedom To Enlighten Address AB-10, Safdarjung Enclave, New Delhi - 110 029 5. Editor’s Name Arindam Mukherjee And Empower Whether Citizen of India ? Yes I am purchasing outlook money (If foreigner, state the country Not Applicable of origin ) magazine for a long time, but Address AB-10, Safdarjung Enclave, New Delhi - 110 029 the March issue was profoundly 6. Name and addresses of OWNER beautiful. The personal finance Individuals who own the Outlook Publishing (India) Private Limited newspaper and the partners of Windsor, 7th Floor, CST Road, Kalina section where it is mentioned that shareholders holding more Santacruz (East), Mumbai 400 098 than one per cent of the women are generally considered total capital SHAREHOLDERS as the risk-averse, however, it does 1. Varahagiri Investments & Finance Pvt. Ltd. RAHEJAS, Corner of Main Avenue & V.P. Road, Santacruz(West), Mumbai-400 054. not mean that you have to shun 2. Manali Investments & Finance Pvt. Ltd. RAHEJAS, Corner of Main Avenue & V.P. Road, Santacruz(West), Mumbai-400 054. the financial instruments, this 3. Matsyagandha Investments & Finance Pvt. Ltd. statement is absolutely necessary. RAHEJAS, Corner of Main Avenue & V.P. Road, Santacruz(West), Mumbai-400 054. 4. Bloomingdale Investments & Finance Pvt. Ltd. It is important for women to RAHEJAS, Corner of Main Avenue & V.P. Road, Santacruz(West), Mumbai-400 054. 5. Coronet Investments Pvt. Ltd. understand the need for the money RAHEJAS, Corner of Main Avenue & V.P. Road, Santacruz(West), Mumbai-400 054. to grow and not just keeping them I, Vinayak Aggarwal, hereby declare that the particulars given are true to the best of my knowledge and belief. in the savings bank account. The Dated: 3 March, 2020 sd/- Vinayak Aggarwal language was very lucid, and overall PUBLISHER a great article. Souvik Pandey, Bangalore

8 Outlook Money April 2020 www.outlookmoney.com Follow us at : www.franklintempletonindia.com

1. One-time KYC (Know Your Customer) : One-time KYC registration is mandatory to invest in mutual funds. You can complete the same by submitting the following at any of our branches or collection centres: a) Duly lled and signed Central-KYC application form. b) Proof of Identity: Any document noti ed by the central government. c) Proof of Address: Same as identity proof (except PAN). d) Recent Passport Size Photograph. Copies of all documents submitted must be self-attested by the applicant and accompanied by originals for veri cation. You may also avail our Online KYC Registration facility while opening an online account with us, for more details please visit our website www.franklintempletonindia.com. In case you are KYC veri ed and want to update any information, please submit a completed KYC details change form with the required self-attested documents as proof to our nearest branch or collection centre 2. Details of SEBI registered Mutual Funds: Investors must deal/ invest only with SEBI registered Mutual Funds. Details available on the SEBI website www.sebi.gov.in. 3. Complaint Redressal: Investors can reach us on our toll-free helpline 1800 425 4255 OR write to us at grievancere- [email protected]. For escalation, write to us at [email protected]; [email protected] or lodge your grievance with SEBI through their SCORES (SEBI Complaint Redress System) Portal at https://scores.gov.in Cover Story Cash & Courage In CrIsIs Is PrICeless Long-term investors should buy into extreme bouts of volatility

By Yagnesh Kansara

he coronavirus outbreak is like a Coronavirus is a serious set-back to the Lehman Brothers moment for the economy in the short-run and a death knell corporate world but in a much larger to the financial sector in the long term if this Tsense, particularly for the emerging and menace does not stop. Mainland China and developing markets. The Lehman Brothers Hong Kong‘s experience is that corona can be crisis was only limited to impacting the thwarted and controlled. However, it is to be banking/ financial markets, associated with seen how this stops worldwide. financial aspects of corporate with respect to India is relatively insulated given the raising capital and capex. The crisis did not relatively weaker link to Asia’s supply chain. have any impact on the general growth and Given that the incidence of coronavirus has consumption cycle of India, China, South Asia been surprisingly low in India (probably and West Asia. Furthermore, the crisis was aided by under-reporting but also helped by limited only to the banking level and had not warm weather) and assuming that it does not spread to the day-to-day functioning of most increase in the coming weeks. companies. Rahul Singh, Chief Investment Officer The stock markets, as measured by the (CIO) – Equities Tata MF, says, “We prefer to benchmark indices, have fallen by around 25-30 analyse the impact of a global slowdown and per cent this year, and for once this has been possible China linkages on the earnings of in sync with global markets as a whole. This specific sectors instead of a broader impact heightened volatility and the general risk-off on India’s economy as of now. China is a large attitude in the global markets is due to the supplier of raw materials, components and uncertainty and fear created by COVID-19 and intermediates for textiles, pharmaceuticals, the unprecedented actions of the governments chemicals and consumer durables/electronics. to contain it. Decline in Chinese export capacity will impact

10 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 11 Cover Story Cash & Courage In CrIsIs Is PrICeless Long-term investors should buy into extreme bouts of volatility

By Yagnesh Kansara he coronavirus outbreak is like a Coronavirus is a serious set-back to the Lehman Brothers moment for the economy in the short-run and a death knell corporate world but in a much larger to the financial sector in the long term if this Tsense, particularly for the emerging and menace does not stop. Mainland China and developing markets. The Lehman Brothers Hong Kong‘s experience is that corona can be crisis was only limited to impacting the thwarted and controlled. However, it is to be banking/ financial markets, associated with seen how this stops worldwide. financial aspects of corporate with respect to India is relatively insulated given the raising capital and capex. The crisis did not relatively weaker link to Asia’s supply chain. have any impact on the general growth and Given that the incidence of coronavirus has consumption cycle of India, China, South Asia been surprisingly low in India (probably and West Asia. Furthermore, the crisis was aided by under-reporting but also helped by limited only to the banking level and had not warm weather) and assuming that it does not spread to the day-to-day functioning of most increase in the coming weeks. companies. Rahul Singh, Chief Investment Officer The stock markets, as measured by the (CIO) – Equities Tata MF, says, “We prefer to benchmark indices, have fallen by around 25-30 analyse the impact of a global slowdown and per cent this year, and for once this has been possible China linkages on the earnings of in sync with global markets as a whole. This specific sectors instead of a broader impact heightened volatility and the general risk-off on India’s economy as of now. China is a large attitude in the global markets is due to the supplier of raw materials, components and uncertainty and fear created by COVID-19 and intermediates for textiles, pharmaceuticals, the unprecedented actions of the governments chemicals and consumer durables/electronics. to contain it. Decline in Chinese export capacity will impact

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

demand sluggishness for over a year; also the MAhESh SiNghi, automotive sector is on the cusp of adopting BS Founder & MD, Singhi Advisors VI regulations effective April 1, 2020, leading to higher cost of components and hence vehicles, Many aggressive corporates CRISIL notes. will start bargain hunting in Also 3 Giga Watt (GW) of solar projects, worth Rs 16,000 crore, could be at risk of acquiring strategic assets penalties for missing their project completion deadline if the coronavirus impact prolongs and delays supplies of solar panels, CRISIL note adds, saying credit profiles of some of the firms India’s output and exports from these sectors.” implementing these projects could therefore On balance, n-CoV will prove to be a mixed witness some strain. bag across sectors in the fourth quarter of In this period of time, people will start this fiscal. But if it persists, Indian industry is working more inwards, which will lead to heading for serious disruptions. Sectors such as being conservative followed by betterment of auto components, pharma bulk drugs, and agro organisations and their cost structure, which chemicals can survive the n-CoV headwinds to will further shrink the economy. Over the some extent in the near term, given inventory next two to three months, China’s supply- stocks of two months. However, as inventories based companies (like API’s, base chemicals, run down, industry will face significant electronics) will be impacted and even Indian pressure. Overall, that would eventually result exporters in the minerals/ mining-based in more sectors being negatively impacted, industry (like iron ore, industrial salts) will outweighing the positives, CRISIL says in its witness a volume drop and margin shrinkage. Impact Note. This will have a cascading impact on every Singh adds, “Our interaction with Indian single value chain. corporates, however, indicates that the The manufacturing sectors, including inventory levels are adequate and some of the hospitality, airlines, entertainment, are all Chinese capacities are coming back gradually worried. All the chambers of commerce are and they don’t expect the situation to get worse. busy issuing their advisories. The stock market AD Earnings of commodity driven companies, is highly volatile and devastated. Banks and however, would be impacted as global financial institutions are bleeding. There is slowdown has impacted commodity prices bloodbath at the stock exchanges. Bigger including crude oil.” worry is the performance of the banking Credit profiles of firms in select sectors industry which is already struggling with NPA could also get impacted if the supply disruption issues. A large number of industries of all sizes continues beyond March - for instance and shapes are going to interpret corona as automotive components, renewable (solar) Vis Major - meaning - Act of God and would and diamonds. Both diamond and automotive approach lenders to restructure the facilities component sectors are already witnessing and / or for reductions on interest and / or loan waivers. The large corporates, SME, how indian Markets Fared SSME and micro industries all are likely to face actual challenges. Unfortunately those who are not stressed 1 Week 1 Month YTD may pretend to be stressed, which is going to Nifty -17.3% -37.0% -37.5% add to the woes. There may be legal challenges to the contract on the doctrine of ‘Act of Sensex -17.2% -36.9% -37.0% God’ and this may create unprecedented and BSE Midcap -18.3% -38.1% -35.1% unknown challenges. Rajesh Narain Gupta, Managing Partner, BSE Small Cap -20.0% -39.8% -35.2% SNG & Partners, says, “In these unfortunate BSE 500 -17.7% -37.3% -36.8% times what we expect is that all should behave like statesman. Bankers should not act as fair

12 Outlook Money April 2020 www.outlookmoney.com

Cover Story

AD weather friends and should come forward to and soaps with people stocking more than what help all those borrowers who are in real stress they can consume. The resultant benefit of owed to the corona-related problem and explore volume increase of stocking will be a temporary how best the adjustments can be made with the phase. However, it will be followed by delayed stressed account so that the economy revives.” buying because consumers will have enough It is better to survive than to perish. goods stored unless things are perishable. Regulators and the government have come Every buying decision or discretionary spend forward with pragmatic solutions as is expected like travelling, property purchase, marriage in a welfare state. Most importantly, the functions, entertainment or even buying borrowers have to exhibit their integrity and of essentials is likely to be deferred. The approach their friendly bankers with truth and far-reaching impact will be felt not only on true statements. It is not the time when they consumption-led industries like garment, adopt unfair tactics or try to hoodwink their travel, restaurants and entertainment but also lenders, Gupta explains. deferment of routine corporate expansion plans This time around India has already been in an economic ecosystem where all sectors are grappling with problems in the financial inter-linked. markets with big players like IL&FS, Yes Bank With financial markets going down and and DHFL going down simultaneously. At such interest rates reduced, the ability and intention a time, any disruption in the consumption cycle to borrow and take incremental risk will also and supply chain would exert a definite impact be affected considerably. In a way, it denotes on the economy. We are already observing an that the economy will shrink and prepare overstocking of goods like foodstuff, sanitisers itself for structural changes, before it bounces

14 Outlook Money April 2020 www.outlookmoney.com In Focus This Too Shall Pass Bright days are ahead, probably markets have already bottomed out or is in the process of bottoming out in the midst of the maximum scare

tock Market always look Last 3 decades of investing has ahead and the long-term taught me four important things smart investors are the ones which has been proven right time Swho will put money to work and again: at this juncture. We want our Respect Valuation: When market investors to play smart by making valuation is very attractive, you lumpsum investments into equity have to bet saying that the current funds with 3-5 years view and be economic/ market situation will part of the smart money movers. normalise. All equity market indices are trading at rock bottom valuations The reasons for the fall have even when compared to global been three folds: financial crisis periods. Corona Virus Impact and the Believe Market Fundamentals: India effect on the economies are has the best demography and is uncertain the fastest growing economy in the Corona Virus medicine/vaccine world. Fundamentals don’t change is not known to anyone overnight. Economic slowdown around Watch Market Sentiments: You need the world expected to reduce to bet against the market sentiments. Crude Oil demand. Crude Oil, George Heber Joseph Look for Triggers: Look for upside/ demand & supply issues are downside triggers depending on the not known and the impact it market valuations. has on various economies Markets bottom out in midst of the scare and market peaks in midst of optimism. At the thick “ITI Mutual Fund would like to convey this message of the problems generally markets bottom out. to all of you. So, cutting all noise and focusing on long term With the headlines screaming in your face about the investing makes a lot of sense. gravity of the current situation, we strongly believe Investing into bust and selling into booms is very that you need to look beyond the headlines. important to make big returns. This is the learning Invest with discipline, keep in long term perspective, from all great investors like Warren Buffett, Seth remember your investment horizon and remain calm Klarman, Charlie Munger, Benjamin Graham etc. in times of distress are the key to long-term investing success. HAPPY INVESTING AND BE SAFE.” We are confident that all our funds are well poised to generate good risk adjusted returns in the long run. Few mistakes that investors should avoid: - Don’t panic at the wrong time and redeem your ITI Mutual Fund view, in the next 3-5 years: investments. Equities stack up as the best asset class to invest and Don’t mix Risk and Volatility generate long term returns. Don’t bet on the same sectors which have done very Small Cap segment will generate maximum returns well for a long period pre-crisis. followed by Mid-Caps and Large Caps. Don’t make decisions based on hearsay, rumours Small Cap segment returns will beat large cap and baseless assumptions. returns by a wide margin on a 1 year, 3 year and 5-year basis. This is the time to be rational, invest maximum you An outstanding opportunity of this decade: When can according to your risk appetite, ride through the fundamentals are strong and the market valuations volatile period and make money, so we all can together are at lowest point in two decades this becomes a laugh at volatility next time when it comes. In few very good investment opportunity. years you would be very happy with your decisions. We can prepare ourselves in this situation for a better tomorrow. Nobody knows the bottom of the corona virus impact or bottom of the markets. The author is the CEO and CIO of ITI Mutual Fund Cover Story

back again after a couple of quarters. In such a how global Markets Fared situation, M&A activities will certainly take a hit, even though you may witness many assets 1 Week 1 Month YTD being available for a grab. When the chips are -17.30% -34.40% -32.80% down and the atmosphere remains uncertain, Dow jones* corporate world will have big resistance to take FTSE100* -3.30% -30.20% -31.20% risk, even though the market may remain liquid. Mahesh Singhi, Founder & MD, Singhi Nikkei 225^ -0.7% -28.1% -28.6% Advisors feels, “Many aggressive corporates hang seng^ -5.9% -21.4% -23.0% with strong balance sheets and well-oiled management team will use such times for bargain hunting in acquiring strategic assets. So Selective bottom-up midcap stocks and rural the deal street will largely be restricted to value recovery plays remain in focus, ”Singh explains. buying and bargain hunting for cheap assets Since the outbreak of COVID-19 contagion for next few quarters. New class of acquirers assumed dangerous proportions, stock markets such as buyout funds, family offices or special across the globe have been bleeding post situations funds with patient capital will Valentine‘s day (February 14) and everyone leverage these markets to consolidate certain associated with it have been forced to undergo assets and build alternative platforms over the quarantine in terms of their investment. next 12 -24 months.” With the COVID-19 outbreak declared as a Certain sectors like chemicals, building pandemic by the World Health Organisation materials, business services, food processing, (WHO), panic gripped the financial markets which have a large number of sub scale players, across the globe including Indian markets, will witness consolidation with emergence of where the benchmarks have shed in excess of new entrants, similar to what happened during 37 per cent in only 25 trading sessions. This the early 2000 since many non-sellers will turn works out to be fall of 1.48 per cent on an sellers while natural buyers will remain on average a day in last five weeks. the edge, opening doors for new hawks on the All the leading Global benchmark indices streets, says Singh. of from Nikkei, Hangsang, Dax, CAC, FTSE, “Private equity funds may explore and DJIA have been bleeding profusely. Back home, exploit by investing into listed and unlisted Indian benchmarks, Nifty and S&P Sensex, stocks as valuations will be low till full recovery have also lost 37.15 per cent and 37.02 per happens and stressed industries will look for cent respectively as on March 23, 2020 in 25 capital,” says Gupta. Corporate world will evaluate whether to save useful counter balance. On the domestic front, sessions beginning February 13, 2020. “The task is not easy. We have an option to their own units and core work or invest in any the GDP growth slowed down further in the The severity of the panic is witnessed that sink together or sail together. Coronavirus shall acquisition,” says Gupta. December quarter as consumption slowed in less than a week’s time benchmark indices reset the world economic and manufacturing Coronavirus and its impact on global GDP down even as investment slump continued. in India have hit circuit breakers. The bourses order. Countries will wonder whether to have will keep crude and commodity prices down, Government expenditure and relaxation in have clocked alarming level of trading volume their own manufacturing base or rely on foreign which can keep the non-food inflation and fiscal targets continues to provide support and dramatic rise in the turnover. The trading imports. Countries may also consider whether current account deficit in check. The GDP to GDP growth. Meanwhile, there have been volume (number of shares traded) of Nifty the foreign investments made in any form or impact at the global level would be mainly green shoots visible in terms of power demand during the period has risen from 62.35 crore consolidation should happen at home country. on the account of a drop in Chinese demand; in February and low inventory levels like autos shares to 107.23 crore shares. This indicates a decline in Chinese exports due to supply chain provide scope for support to IIP and GDP rise of 72 per cent. During the same period, the disruptions and decline in international travel growth numbers. However, the biggest driver average daily Nifty turnover has risen 44.38 per and tourism. in the short term is likely to come from the cent, from Rs 20,760 crore to Rs 37,321 crore. RAjESh NARAiN gupTA, This macro stability on the external front is good rabi crop and higher agricultural income What is more worrying fact is that the broader Managing Partner, SNG & Partners critical, especially when government has been (aided by higher food inflation). index Nifty-500 and BSE-500 have lost more forced to adopt a mild fiscal boost through “In this context of expected gradual value than benchmark indices. Both these Bankers should not relaxation in the fiscal targets for FY21. In economic recovery and assuming no major measures have lost 37.33 per cent and 37.72 per act as fair weather friends the medium term, the weak outlook on crude outbreak of the virus in India, we continue to cent respectively during the period. prices and potential for improvement in build our portfolios around earnings stability Ankur Maheshwari, CEO, Equirus Wealth but help those in real stress Indian exports due to shift in supply chain and identifying stocks with potential to beat says, “COVID-19 has disrupted economic logistics away from China can provide an earnings expectations thus providing the alpha. activity in multiple ways. With what started

16 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 17 Cover Story

looking for a reason to correct. I think the selling that we are witnessing is part of global strategy of A slowdown in new foreign players. Most of their selling is in the form of infections could trigger Rebalance Your Portfolio index selling. So, if Exchange Traded Funds (ETFs) come to market to sell their index and they have to market recovery The economic impact of coronavirus has disrupted the financial markets world over. We align with their position and weights, then selling have seen stock markets across the globe bleeding profusely in some of the previous sessions. will always happen in this kind of event. Whether To, understand what impact it will have on various sectors in the Indian economy, Yagnesh the PE is @ 18 or even at the multiple of 14, their in China largely as supply chain disruption, Kansara caught up with Dhiraj Relli, MD & CEO, HDFC Securities. Edited excerpts: strategy/ response would remain the same. The given that it is a manufacturing hub for many higher valuations did not trigger selling, the cause firms across the globe, the economic impact (Coronavirus) was severe. has now spread to more than 100+ countries. What is the impact of coronavirus on markets cent correction, then it can have a deeper impact. If Do you know how do global players invest? They Domestically too, almost all sectors have and how is it different from previous attacks the prolonged spread of virus continues and supply have their own assigned weights to all jurisdiction got impaired in varying degrees owing to of other viruses? chain continues to get affected for many more including emerging markets. They have to maintain disruption in economic activity and Q4FY20 Coronavirus contagion is such an event where you quarters, then it would lead to recession. It would led balance as per their weights. And they will act earnings will be severely impacted. Given that don’t even know the magnitude of the problem and it to a slowdown in the global economy and that could ruthlessly and in regimented manner to maintain we are still in the midst of COVID-19 outbreak, is difficult to quantify. Compared to earlier cases of last for 8-12 quarters (two to three years). If we are this balance. They sold equity following the outbreak it is difficult to assess the extent of impact different virus epidemics like Ebola, H!N!, Swine Flu able to control it in next two quarters, then in next and moved all their money to US dollar-denominated completely. That said, FY21 earnings estimates and others, in this case it has spread in the second (subsequent) two quarters, things will settle down and assets like US treasuries and gold. That’s why gold are expected to be downgraded anywhere largest economy of the world. China, which has the world will move on. price shot up following equity meltdown. between 10-20 per cent vis-à-vis estimates at linkages, is contributing 20 per cent of the global GDP. the end of December quarter.” It’s contribution to the incremental world GDP is also Which are the sectors that will get impacted? What has been holding back indian markets? Investors would do well to note that the significant. So, if the world GDP is growing at 3.2 per Impact of coronavirus on certain sectors will be It is the patience of Indian retail and HNI investor markets have historically faced such situations cent, attribution to China growth is higher. Even if long lasting. For example, hospitality (includes that is holding back Indian market. It is the and more importantly recovered from it, albeit China grows at the rate of 5 per cent, with $13 trillion airlines, hotels, tour operators, taxi companies, Systematic Investment Plan (SIP) in the domestic over varying time periods. If it was a banking economy, their absolute growth is much higher than cruzeliners, casinos and others) and others will take market that is standing tall against FPI exit. crisis in 2008, now it is due to the coronavirus the growth of many other nations, because their base their own sweet time to recover. The impact will Though FPIs are exiting, there is no panic seen spread and there is no ascertain damage to the is very large. Another important point is that, China lead to restriction on travel; be it by road or by air. in Indian retail and HNI segment as far as SIP global economy and also to India, especially, is an export-oriented economy, unlike India. China This will lead to drastic fall in demand for crude oil. inflows are concerned. Even Domestic Institutional coming on the back of an already slow has supplies all over the world and that is where the Coronavirus is at the centre-stage of recent fall in Investors (DIIs) are buying at every dip. There is no economic growth of 4.7 per cent in Q3FY20. magnitude of the problem is more. crude prices. intervention by DIIs unlike in past, to give support The difference in this market scenario is that or any attempts to stabilise the market. Neither there is a definite recovery point for which has the worldwide spread of coronavirus how will automobile sector get affected? they are selling in panic. These are good signs for investors can look out for. A slowing growth worldwide affected global markets? We have seen changes in the human behaviour, the Indian market. The annual SIP book has grown rate in new infections around the world or in Since China has locked down many of its provinces change in preferences and that has its impact on to the size of net FII buying in the Indian market, the developed nations could be a trigger for the and the entire nation is under quarantine, the markets certain sectors like automobile. We have moved from which is a good sign. market recovery. have reacted very sharply in last few sessions. Earlier, a possessive to share economy. People who use to buy Chinese infections have dropped off while people could not understand magnitude of the second or third car are not doing so. So, even in High What is the right time for retail investors to the infection rate in other countries seems problem. Till mid-February, people never anticipated, Networth Individual (HNI) segment, Mass-affluent take a dip, who had earlier missed the bus in to follow the same trajectory. We will reach it would become such a big problem and that is why segment or if the husband-wife have one car, they September 2019, following announcement of cut a point when that rate starts tapering off and in last 19-20 sessions markets globally have corrected will not buy the second car. What I am saying is that in corporate tax rates? that would be a good indication that the virus in the excess of 20 per cent. When markets correct 20 passenger cars will continue to attract demand but the This is the right opportunity for the investors to threat is being controlled. The sharpness of the per cent or more then the question that arises is - is it number will come down. The demand for second car reconstruct-rebalance their portfolio. For, those who recovery would depend on how fast the threat a bull market correction or is it the beginning of the has got impacted. If your second car is driven only 20- missed bus earlier, time has come to start building recedes and how fast the global economy gets bear market? That is something no one knows at this 30 days in a year, then in that scenario, it is prudent to portfolio in a staggered manner. The current market back on track. Long-term investors would do stage. But it is one of the triggers that could lead to go for a rented car option, which is freely available and levels are giving opportunity following the cut in well to buy into the extreme bouts of volatility recession at global level. It could lead to a significant an easy option. corporate tax rates in September, 2019 the markets that we may witness and ensure to accumulate slowdown in growth. But at this juncture, we don’t moved up swiftly, as re-rating of certain sectors took quality stocks during this period. have data points that could tell us that. We are in Were indian markets due for correction and they place. This sudden market spurt deprived many of In this kind of situation, investors should dangerous zone, but at the same time, I would not found opportunity in the name of coronavirus? the investors to participate and they felt they missed keep in mind advice of Investment Guru raise red flags at this point of time. I have a disagreement that Indian markets were due the bus. However, those who couldn’t participate last Warren Buffet who says, “Cash combined with If the spread of the Virus gets prolonged to another for correction. It would be fair to say, markets were time, the time has now come. courage in a time of crisis is priceless.” two to three months and if we get another 10 odd per ahead of valuations. It is not true that markets were [email protected] [email protected]

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

COVID-19 Volatility For An MF Investor One needs to remain focused on long-term goals for correction is around the corner AD By Himali Patel the tailspin has spooked investors, who have started questioning their investment strategies. n March 13, NSE Nifty saw a massive It is important to have a plan in place in case of plunge hitting the 10 per cent lower a downturn. Further, investors should not let circuit towards 85000 zones and short-term market movements impact their long- markingO a history for Indian bourses in twelve term investments especially in mutual funds. years. Market participants are concerned over As an investor, one should not stop the the kind of economic damage the pandemic ongoing Systematic Investment Plans (SIPs) or would lead to and would most likely weigh on Systematic Transfer Plan (STP) strategies as the market for a while. Given the suddenness volatility is the best friend of such investment of plunge, it is difficult to predict the impact strategies in the long term. Discontinuing or of COVID-19 or how soon normalcy would redeeming SIPs in a downturn is perhaps the return. In the past with virus spreads like biggest mistake an equity investor can make. It SARS, MERS, the economy and markets had defeats the very purpose of the SIP by denying returned to normal within months. However, the investor an opportunity to accumulate COVID-19’s global spread suggests the effect more when prices are low. “Volatility in markets may take a while. is an ideal way to optimally use tools such as “It is futile to predict market movements, but Systematic Investment Plans. SIPs are designed in the near-term the global economic impact to increase unit purchase during weak market will be really bad for various industries/ sectors. conditions and reduce unit purchase at elevated Hospitality, travel, airlines, discretionary goods, levels. This reduces the cost of purchase (known auto industry, you name it, will see a slowdown. as rupee cost averaging). Long term investors As long as the fear is prevalent, markets will be must welcome such an opportunity to reduce volatile,” says Neil Parikh, CEO, PPFAS Mutual the cost of acquisition of investments,” R. Fund. Although markets might take a while Sivakumar, Head- Fixed Income, Axis AMC. to recover from this significant price damage, The most important thing one can do, to

20 Outlook Money April 2020 www.outlookmoney.com

Cover Story

shield mutual funds from the downturn of the one cannot escape this inherent volatility. “One current market, is to stick to the plan. As per of the reasons why the asset class has the higher the experts, the current market has only made volatility but also delivers the higher return – for investments more attractive, as the corrections instance, if one looks at a 5 to 10 year empirical would provide great entry opportunities’. data in the Indian markets, equity as an asset “Investors should consider staggering class delivers around 220-270 basis points (bps) investments and continue to do systematic Compounded Annual Growth Rate (CAGR) investment plans (SIPs) and systematic transfer better returns than the next closest asset class plans (STPs). SIP is a great way to commit (among the five most used asset classes in the future cash-flows into the market while STP country like gold, property, fixed deposit and is the most dispassionate way to stagger an 10 Year T-Bill proxy for fixed income, data as otherwise lump sum investment amount. I of December 2019),” points out Chockalingam think these two tools should be used effectively Narayanan, Head – Equities, BNP Paribas Asset to ride the volatility and invest in the market,” Management. explains Sandipan Roy, Head of Products for To ride this volatility, experts believe that India, Credit Suisse Wealth Management. investing in funds that give diversification, To start with the first step to successful especially a geographical diversification can investing is to outline the investment objective. add a cushion of safety in volatile times. “As This helps investors shortlist the investment you diversify across countries, you avoid taking instruments best suited for achieving their country-specific risk, which helps you reduce the financial goal. Experts believe Investors should overall risk of the portfolio. It is hard to predict take advantage of volatility in markets. “Investors which markets will perform/ underperform (or must realise that in a goal-based investment with which country will be the most affected by the a multi-year time horizon, market volatility is a virus). So having global diversification will help friend. When investors make decisions based on ride through the uncertainty. Someone who is market sentiments, then they are prone to higher extremely risk averse can park some funds in safe AD amounts of losses. Hence a prudent approach havens like gold or FD’s,” says Parikh. during such volatile times would be to stick Further asset allocation is also crucial. to the overall asset allocation plan and avoid Many experts believe that investing in gold investing in funds, which may not help investors can mitigate the risk against the uncertainty. reach their financial goals,” says Nimesh “One should look at some allocation to gold as Chandan – Head Investment Equities Canara this works best as a hedge against downside Robeco Mutual Fund. on the long equity portfolio. Moreover, apart An investor should note that capital from being a safe haven asset in times of markets, particularly equity, that are prone to uncertainty, gold also has a historically strong gyrations. It is due to the nature of the product correlation to the US Fed rate cuts and can work the equity holders have access to the last stream to an investor’s advantage in case the rupee of cashflows in any corporate. So, during the continues on a depreciation bias,” says Roy. In downturn or upturn the market impacts the uncertain times like these it is good to build in cashflows of any of the other stakeholders in some kind of protection against further market the corporate value chain, the highest volatility downturn. Says Roopali Prabhu, Director- is to the cashflows of equity holders. However, Head of investment products, Sanctum Wealth Management, “Gold historically has acted as a hedge against increased market volatility. Thus, NEil pARikh, it makes sense to have a bit of investment in CEO, PPFAS Mutual Fund gold. Recently, we further added to our gold overweight position. Buying a protection like In the near-term the global a put can also be a good strategy but with rise economic impact will be in volatility the cost of puts has become very expensive now.” bad for various industries/ In times of economic uncertainty and sectors heightened volatility, an investor should avoid leveraged and poor-quality speculative bets.

22 Outlook Money April 2020 www.outlookmoney.com Column Importance of Asset Allocation in Turbulent Times

or real estate. age, income, expenses and financial The idea behind asset allocation goals. For instance, if financial goals is that it helps you minimise your are long term in nature, one can risks, thereby trying to maximise afford to take some risks in terms returns. How is this achieved? The of their investment vehicles (equity) simple answer is that different assets chosen to achieve these goals. The react to different events in different underlying principle is that over the ways. For instance, a major global long term, equity has the potential to geo-political event has the potential perform well, even if the asset class to impact economic growth. Such tends to be volatile in the near term. a development usually results in fall However, if one’s risk profile is very of equity prices. However, the same conservative, then the choices will be event could lead to strengthening of taken accordingly. bond prices or even gold prices, as On the other hand, if financial large number of investors shift their goals are of short-term in nature, Kshitija capital to safer asset classes. then one can choose fixed income Director, Gaining Ground This means if a person’s options to achieve these set of goals. Investment Services Pvt. Ltd investment is spread across asset Given the nuanced approach required classes, even if one part of your it is best to seek the expertise of a investments is hit by volatility or financial advisor when it comes to ave you been stressed over even loss of value in extreme case; charting one’s asset allocation. the past few days over the the other parts of your investment Hmoney you have invested may gain thereby balancing off the Asset Allocation helps in equity markets? Or have you net impact on one’s portfolio. This withstand turbulent markets been stuck in contemplation mode leads us to the next question…. When the equity market is in a tailspin, when market was rallying and now and if most of one’s investment is correcting? If yes, then its time to How to determine one’s in equity, then one would tend to get remind yourself of two words that asset allocation? worried by the fall in portfolio value. financial advisors often discuss — Asset allocation as a concept But, if the same investment was a Asset Allocation. Does it ring a bell? is simple but when it comes to healthy mix of equity, debt, gold and After all why do financial advisors implementation it turns out to be cash, then only one portion of the and other experts keep reminding us a not-so-simple process because investment would have been affected. about asset allocation all the time? the implementation has to be On the other hand, the gains in other Let us try to decode this. nuanced. A variety of factors asset classes would most likely provide (one’s risk tolerance, investment the much needed cushion to the What is asset allocation? vehicles, rebalancing), all comes into overall erosion in portfolio value. This In simple terms, it is the age-old consideration when deciding on was in case of a market correction. wisdom of not putting all the eggs asset allocation. Which asset class On the other hand if the market in the same basket. The idea being, to choose, when to invest in them, rallies, by adhering to asset allocation if something goes wrong with that what should be the proportion of one will not be tempted to invest one basket, then one may end up exposure, etc… are all very personal beyond the designated equity level losing all the eggs or atleast most of decisions to be taken when deciding planned for the portfolio. After all, it. When the same idea is applied to on one’s asset allocation. no one knows if the same market will financial planning and investments, One of the major determinants move in the opposite direction the this translates to not investing your in asset allocation is being aware very next day! So, as investors what entire investable amount in a single of one’s risk profile. A risk profile one should be most conscious about asset class. This could be applicable is an indicator of how much risk when investing is the asset allocation to any asset class - debt, equity, gold one can bear with respect to one’s one follows.

www.outlookmoney.com April 2020 Outlook Money 23 Cover Story

Top 5 mutual funds returns (AUM-wise) Mutual Funds post Double Digit losses in last One Month Return (%) Scheme Name Category AuM (` Cr) 1 Month 1 Year 3 Year hDFC liquid Fund Liquid 71025.75 0.42 6.14 6.66 Invest With A Clear Strategy SBi liquid Fund Liquid 49896.90 0.43 6.15 6.70 Amid the global pandemic, predicting the future of markets continues to remain dicey. In

Debt iCiCi prudential liquid Fund Liquid 45078.59 0.42 6.22 6.77 the light of the present situation, Radhika Gupta, CEO of Edelweiss AMC suggests Aditya Birla Sun life liquid Fund Liquid 41465.99 0.41 6.31 6.83 what mutual fund investors should do to stay afloat in muddy waters, in conversation with Himali Patel. Edited excerpts from an interview. uTi liquid Cash Fund - Regular plan Liquid 31148.23 0.41 6.23 6.81

SBi ETF Nifty 50 Large Cap 64463.65 -18.14 -11.16 4.99 kotak Standard Multicap Fund Regular plan Multi Cap 29459.53 -17.41 -8.33 4.51 With COViD-19 leading to a gradual economic Can you list different types of mutual funds slowdown, how should investors safeguard their that can add a cushion of safety right now? Large Cap 23608.74 -18.06 -11.87 2.97 Equity iCiCi prudential Bluechip Fund mutual fund investments? Among all the myriad mutual funds available, asset SBi ETF Sensex Large Cap 23234.83 -17.66 -8.71 6.81 Coronavirus has been declared pandemic resulting allocation funds popularly known as BAF, that in worldwide fear and global markets crashing. follow asset allocation based on a particular model, hDFC Mid-Cap Opportunities Fund Mid Cap 22754.65 -15.26 -11.82 0.56 Black Swan events are also becoming more frequent help in keeping emotions away in the investment Source: Value Research,Return as on 13th March 2020,AUM as on 29th Feb 2020 lately. Therefore, the best thing we can do is prepare process. These funds are more suitable for those our portfolios accordingly. By using common sense who want to invest in equities, with caution. These and good investment principles, one can safeguard funds manage equity levels between 30 per cent Also, generally in sharp corrections, mid and hence one cannot go overboard with long portfolios from market volatility as much as possible. to 80 per cent that helps to handle the downside and small caps bear the maximum brunt. So duration allocation now.” The current meltdown Here are five tips that I learnt, during my first better. For the more conservative ones, Equity far, the sell-off has been indiscriminate, but is more broad-based and hence impacts Black Swan event in 2008. Savings Fund is a good choice. These funds manage as economic and Earnings Per Share (EPS) most stocks. Pharma companies that are not Cash is your friend. Keep some cash in your equity levels between 20 per cent to 40 per cent impacts get analysed better, divergences are vertically and backwardly integrated and do portfolio that can be used, or invested to take and provide equity participation with very low bound to occur. Experts believe it is better to not have their own captive Active Pharma advantage of a crisis. Low risk equities like Balanced downside risk. Having such funds in your portfolio be in quality across caps. Also concentrated Ingredient (API) unit could be at risk, claim Advantage Funds (BAF) are also good. Diversify helps in containing downside risks amid such thematic bets in cyclical sectors can be avoided experts. “Companies with significant exposure currency risk. The Indian rupee and emerging market volatile market phases. for the time being. to China like certain Indian auto companies, currencies are vulnerable in Black Swan events. “We are aware that this sell-off so far has and commodity/ metal players could see some Illiquidity is costly! This implies liquid assets What are the funds investors should avoid largely been driven by foreign institutional dent. Consumer electronics manufacturers become less liquid, and illiquid assets become capitalising right now? investor sell-offs, but with infection spreading that rely on China for basic components are at extremely illiquid in a crisis. Always keep a watch on One should always invest in funds that suit one’s in India now as well, economic impact needs risk. Any funds, which have large allocations to your liquid assets and the liquidity of the underlying risk profile and avoid investing lump sum amounts to be carefully monitored and hence it is best these sectors can be avoided for the time being,” funds. Leverage should be limited; especially where and try timing the bottom. It is advisable to take to avoid excessive risks now. On the fixed explains Rajesh Cheruvu, CIO, Validus Wealth. the underlying is risky. Appropriate advice is the the systematic to invest in pure equity funds. Funds income side, we would advise to steer clear of Investors should reassess their portfolios most important thing, which can help you during one should avoid are the ones, which do not suit aggressive credit funds,” says Roy, adding, “long and ensure allocations are in line with their such times. It is often said that dealing with one’s your risk profile. For instance, if you are risk averse duration funds after initial rally may see some target and stay the course. It is important to own emotions is difficult, but with someone’s help, by nature or heading towards retirement, where turbulence if fiscal stimulus measures kick in keep in mind not to panic in such times to investors can make wise decisions, especially during an equity exposure, let us say, high-risk strategies avoid any rash decisions. Investors should Black Swan events. like small-caps, can prove costly. Hence, for such stick to their asset allocation and tactically investors small funds can be avoided and a balanced rebalance from time to time. Further, investors how long do you think it will take for global approach like investing in a BAF is efficient. R SiVAkuMAR, should instill a certain discipline to save face markets to bounce back? Head-Fixed Income, Axis AMC by multiple volatilities on income levels and The pandemic has brought instability to the global An investor’s course of action in times of job certainty. Having said that, the outbreak markets including the Indian stock markets, which COViD-19. Your advice. Volatility is ideal to optimally of COVID-19 is an unprecedented event. Till is hitting new lows, not witnessed since the 2008 Well, the worst action you can take is to redeem and use tools like Systematic there is a decline in the number of cases or financial crisis. Though it is extremely difficult to leave the markets; the best thing you can do is to some progress in finding a cure, the market predict when the markets will attain normalcy, have the courage to invest strategically. It helps to Investment Plans could remain volatile. however, as far as India is concerned, I believe some ride the storm, not react. [email protected] of this panic is already priced in the market today. [email protected]

24 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 25 Cover Story

some places, the stock markets have fallen over Revised 2020 gDp growth Forecasts (%) 30 per cent. The uncertainty about how it would Coronavirus Wreaks Havoc In Global Markets play out and whether the Western World would high base low base be able to manage it well is at the root of this 0.0 (0.5) Experts fear there may be one more leg of fall if the virus becomes an epidemic in the US massive sell-off,” he says. u.S. According to market experts, we may not Eurozone (0.5) (1.0) have yet seen the end of it as there may be one more leg of fall left there in the global markets China 3.2 2.7 By Vishav if coronavirus becomes an epidemic in the Rest of the world 1.9 1.4 US. They feel that once we see the peak of the t all started in China at the rise of the year outbreak in the US is when we would probably global (ppp weights) 1.5 1.0 2020. A virus brought a whole nation to start seeing some sort of stability happening in Source: S&P Global Economics. standstill, and then began its spread towards the global market. theI rest of the world. Stock markets crashed. Fake The impact of the virus on the markets is in news and rumours spread. People panicked and anticipation of how the economies would be down had been Europe with Italy now the big hot started hoarding essential goods, and then locking affected by prolonged city- and countrywide spot outside of China, and with the virus now themselves in their homes. It may all sound like the lockdowns and quarantines, which are affecting spreading like wildfire to the rest of Europe. plot of a blockbuster science-fiction Hollywood film, daily lives as well as businesses. After China, S&P Global said that tourism and investment but this is what the world has been going through much of Europe – now the epicenter of the had been the hardest-hit areas so far due to which with the outbreak of the COVID-19 coronavirus - a outbreak – is locked down. Self-imposed the eurozone economy was to contract 0.5-1 per new virus whose cure and antidote are not known. lockdowns are now happening in other countries cent this year. For the US, it said, the impact of Towards the later half of March, the virus had as well which are seeing a rise in the number COVID-19 had escalated rapidly. infected close to 2,50,000 people across the world of detected coronavirus cases. This would have “The sectoral hits should be similar, with the killing around 10,000. The second-biggest casualty, a detrimental effect on the economy which key addition of the oil and gas sector, given the after human life, in this epidemic is perhaps people’s markets are anticipating. plunge in global prices. Owing to the strong start wealth, irrespective of which country they belong According to Jyoti Roy, DVP Equity Strategist, to the year and the lag in many key metrics, it looks to as stock markets crashed dropping as much as Angel Broking, the impact of the virus on China like the U.S. will post marginally negative growth 30 per cent by the third week of March, erasing one could be gauged from the numbers which we did in the first quarter, with the big hit coming in third of people’s wealth in the equity markets. not see even during the global financial crisis of the second quarter before recovery begins in the According to S&P Global, the total return in 2008-2009. second half of the year,” according to a report by euros from the S&P Europe Broad Market Index, “If you look at the retail sales data, they went S&P Global. which tracks the share prices of more than 1,500 down by 20.5 per cent for the month of January Roy says that the spread of the epidemic to listed European companies, has fallen 33.3 per cent and February. And industrial output was down Europe was something the markets had already since Jan. 1. The S&P BMI for the real estate sector by 13.5 per cent. That’s huge. While March factored in and now further movement in the has fallen 38.4 per cent. numbers are going to be better sequentially global markets will predominantly depend on how From the levels of close to 30,000, Dow Jones, a stock month-on-month, but year-on-year, that’s it spreads in the US. market index that measures the stock performance of again going to be a big negative trend. There’s a “That will now drive market movements 30 large companies listed on stock exchanges in the significant amount of lockdown which is still in from here on to the next two weeks. If we see a United States, dropped to the levels of 19,000. Japan’s effect in China and there’s still some amount of massive outbreak in the US like we saw in Europe, Nikkei 225 index nosedived to levels of 16,000 from the social distancing being maintained. And we don’t then global markets can head down further highs of 24,000. UK’s FTSE 100 dropped 30 per cent know whether there could be further outbreaks from current levels. Once we see the peak of the while Italy’s and France’s benchmark indices fell even over there. So that is one thing for which markets outbreak in the US, that is when probably we sharply by almost 40 per cent. In India, both NIFTY and are keeping a lookout for,” he explains. are going to start seeing some sort of stability Sensex fell over 30 per cent. With many European countries already in happening in the global markets. This can happen According to former Finance Secretary Subhash stage three of COVID-19 spread where there is maybe if the US learns from what Europe did Chandra Garg, the largest turmoil post spread of community transmission, and the US fighting to wrong over the next 10 to 15 days. But if they don’t COVID-19 in Europe and North America is in the remain in stage two, the world may be looking learn the lesson from what Korea did right and stock markets. at fears of recession. S&P Global, in mid-March, what Italy and Spain did not do right, then it may “Most of these stock markets were at their life- forecast a global recession this year, with annual drag on for another month. But definitely the peak time peaks in January and February - even when GDP rising 1-1.5 per cent. It cut China’s growth of the spread in the US may probably mark some the virus was spreading its tentacles in China. For forecast to 2.9 per cent from 4.8 per cent. sort of intermediate bottom in the global markets, last few days, the stock markets all over the World Roy added that now the big worry factor if not the major bottom,” he says. (except in China) are in real mess and free fall. At which was playing out and dragging the markets [email protected]

26 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 27 Cover Story

witnessing erosion in their portfolio value, will ChENThil iYER, be required to reduce their expected returns Founder and Chief Strategist, in the near-medium- term, which could affect Horus Financial Consultants the growth of their portfolio. “Long-term goals are so for a reason. There Recovery will be slow and there is enough time for those goals to arrive in your life. So, the pandemic should not worry could be a bit of a fall afterwards you much with regard to these goals,” says too, but one has to be in it to win it Chenthil R Iyer, Founder and Chief Strategist, Horus Financial Consultants. With the mutual funds all dipped in red, the first instinct for investors would be to pull out Chief Information Officer at Validus Wealth money. However, that is not a wise thing to do. says, “SIPs are generally for long term goals “For those who are invested in such a and hence we would recommend to continue portfolio for their long-term objectives, in the funds as long as funds are suited to remaining invested and continuing with risk profile, time horizon and consistent Systematic Investment Plans (SIPs) is the performers in the respective category. An most logical choice. While the markets are investor should evaluate the funds periodically likely to remain volatile at least for the next or take help of investment advisor to decide few months, stopping SIPs or withdrawing whether to continue or exit the fund. However, unnecessarily might prove detrimental to if we are exiting any fund, amount should be long-term objectives. Ask yourself again, redeployed in line with investment horizon what have you invested for? Your goals and and risk profile.” objectives should reflect your decision- Continuing with SIPs are also important making,” says Prateek Mehta, Chief Business for another reason. “SIPs are going to be the Officer, Scripbox. beneficiary of this downfall simply because Currently, almost all equity-oriented investors will be accumulating higher number Time To Turn Wounds Into Wisdom funds are experiencing a performance of units at lower net asset value. Whenever, hit as all sectoral indices are trending the markets are going to get back to the higher Ensuring long-term goals can help you remain unaffected during pandemic coronavirus downwards. “Hence, the last three months levels, the units bought during these times will are not a suitable time frame to evaluate help the overall SIP to give you good returns,” the performance of a fund. Before moving says Amit Suri, Director and CEO, AUM from funds, one needs to look at consistent Wealth Management. medium-term under-performance, tax On the other hand, those who have a higher By Anagh Pal the coronavirus is all set to impact the real implications and exit load costs,” says Mehta. risk appetite and choose to invest directly in economies negatively in terms of reduced Agreeing with the idea, Rajesh Cheruvu, stocks, this is a good time. “Maybe it’s a good e are well aware of the idiom, what demand and growth, translate into lower happens in Vegas, stays in Vegas. expected earnings growth for companies and However, analysing the situation therefore lower expected returns from equities weW are in present times, this phrase has been in the near-to-medium term,” says Unmesh completely subverted. What started off as Kulkarni, MD, Julius Baer India, a wealth an infection in the city of Wuhan, China has advisory firm. now spread its tentacles all over the world. This implies that your long-term financial By last week of March, more than 6.25 lakh planning – be it securing a retired life or individuals were affected and over 29,000 had financing your child’s higher education, is succumbed to the deadly coronavirus. likely to be affected, with most of us seeing a Needless to say, global economy has been significant erosion on our portfolios. badly affected and India is no exception. Kulkarni feels this may become relevant Markets have remained volatile and with to investors particularly if the damage to the BSE Sensex witnessing some of the biggest economy is pronounced and it takes longer falls in recent times. “With several countries for the demand and growth environment to (including India) suspending human and revive. Accordingly, investors with meaningful economic activities and ordering lockdowns, weightage to equities in their portfolio and

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

is important to cut one’s expenses as much pRATEEk MEhTA, as possible and increase savings rate. The Health Insurance Cover For COVID-19 Chief Business Officer, Scripbox time for recovery is unpredictable and there could definitely be a long, dark path ahead. Even as coronavirus is covered by health insurance, companies are offering new products “Ensure that there is adequate liquidity Remaining invested and available and be prepared to liquidate a continuing with SIPs is the real estate investment in case of any major By Anagh Pal most logical choice goal falling due in the near vicinity as loans may get more expensive as governments ith over 30,000 dead and 6.6 lakh may need to borrow heavily to tide over the infected with the COVID-19, current situation and provide for welfare nobody is safe from the virus time to invest more money into long-term programmes for the affected population anymore.W India has been pretty successful in assets like equities, which are available at a due to a complete lockdown,” advises Iyer. containing the virus and the next fortnight or so good price now. The recovery will be slow and Therefore, in case you have any near-term will be crucial. there could be a bit of a steep fall after you goals, which require large cash flows, “As we know that India no longer remains buy, but one has to be in it to win it! A good contemplate postponing the same by a immune to coronavirus and with the rising strategy could be partial entry at various levels couple of years or exit proportionately from number of confirmed and suspected cases, to average out the price points,” says Iyer. all asset classes to fund the same without the regulator has taken stringent steps to One also needs to understand that the worrying about exiting at a loss. ensure that claims related to coronavirus are impact will vary depending on how far the Should one make a change to one’s expeditiously handled,” says Prasun Sikdar, MD goals are. “For those with long-term goals at portfolio in such a situation to keep their & CEO, Manipal Cigna Health Insurance. least a decade or more away, if this crisis is long-term goals on track? The first question that comes to our mind is - anything like previous market and economic “Long-term goals are generally buy-and- If I am infected by the virus and need treatment, crisis, the impact is likely to be made up by hold and one should not monitor the long- will my existing health insurance cover me? cover you if you have visited any of the countries significant growth in post-crisis periods,” term corpus very often. Investors who held “A health insurance policy covers all with high levels of infection after a government confirms Mehta. So, if you are in your mid- on through the 2008 crisis, have made up the infections and the novel coronavirus is one advisory against doing so. thirties or even in your mid-forties, you do losses and even extracted gains in the long such infection. Coverage will be available for all Batra suggests that under any such not need to make significant changes to your run. Hence, micro-monitoring a long-term indemnity products that offer hospitalisation circumstances, health insurance coverage portfolio as you have time on your side. investing portfolio should be avoided,” covers,” says Mayank Bathwal, CEO, Aditya Birla with an adequate cover is the key. The health However, if you are approaching a major says Cheruvu. Health Insurance. insurance policy should also have wider cover. goal like retirement and have not made a Investors should be very clear about their Says Gurdeep Singh Batra, Head- Retail He advises that one should read the policy terms switch to a stable asset class yet, this is likely asset allocation depending upon long-term Underwriting, Bajaj Allianz General Insurance, carefully before buying so that one does not end to come as a rude shock. In such a scenario it as well as short-term objectives. Since asset “Your existing policy will protect you against up buying a cheap policy with a restricted cover. allocation assumes a risk tolerance with coronavirus. Every insurance policy has a 30-day You should also opt for additional cover for respect to the investor, it should not be waiting period for any disease. For all those fresh expenses like OPD and so on. altered too often. policies that have exhausted the 30-day waiting Insurance companies are on the way to In such a situation, it would make sense period, every claim will be payable for coronavirus launch coronavirus specific policies. Star to rebalance one’s portfolio to keep the under the policy. The regulator has already issued a Health and Allied Insurance has launched ‘Star how Not To let The Virus Affect asset allocation intact. When equities circular saying that all coronavirus cases have to be Novel Coronavirus Insurance Policy’, a benefit Your long-Term goals are performing very well, their allocation attended to on priority.” policy to cover all those who test positive for on your portfolio goes up. “Similarly, in Agrees Sanjay Datta, Chief, Underwriting, the current pandemic COVID-19 and require Continue with your SIPs, do not stop them periods such as the current coronavirus Claims and Reinsurance, ICICI Lombard GIC, hospitalisation. The Star Novel Coronavirus If you decide to exit from a fund, redeploy the amount into environment, wherein equity markets have “All group/corporate and retail health policies another suitable fund crashed 25 per cent to 30 per cent and have will cover coronavirus related hospitalisation guRDEEp SiNgh BATRA, Rebalance your portfolio over a period of time to keep your eroded equity value as well as brought down expenses. Testing and other diagnostic related asset allocation intact the percentage of equity allocation, it makes medical expenses will be covered under the Head- Retail Underwriting, Bajaj Allianz For those investing in stocks this could be a good time to buy prudent sense for a long-term investor to buy health policy if out-patient cover is opted. General Insurance If your goal is near, cut down on expenses and liquidate equity and restore the asset allocation,” says In case an instance leads to hospitalisation, some of your investments. Kulkarni. Of course, this adjustment need expense for such tests will be covered under The regulator has said all If possible, postpone your goals by a couple of years not be done in a single day, but can be spread pre-post medical expenses.” coronavirus cases have to Stay invested in gold asset class based on your asset over a few days or even a few weeks, in order However, one needs to be hospitalised for at be attended to on priority allocation to ride the volatility. least 24 hours to be covered under any health [email protected] insurance policy. Also some policies may not

30 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 31 Cover Story

Follow guidelines, Ensure Safety Will your health and travel insurance policies cover for coronavirus? SANjAY DATTA

t has been declared a global health emergency WHO, many travel plans exclude losses incurred directly and pandemic by the World Health Organization or indirectly arising due to corona. and has already claimed thousands of lives since Having said that, if you are infected with the virus beingI first reported. The coronavirus outbreak has sent during transit, then you can receive coverage. In governments, people and markets into a tizzy. case you are travelling abroad, make sure to follow With the virus spreading thick and fast across the government guidelines to ensure safety. globe, insurers are being flooded with queries from With the increasing prevalence of the virus across concerned policyholders as to whether their respective the globe, some insurers have decided against issuing health and travel policies would cover them in case they policies in countries affected by the virus. are diagnosed with this virus. If you too have a similar As there’s no specific treatment for coronavirus, it is query, read on to find the answer. better to adopt precautionary measures to ensure safety. Coronavirus is a family of viruses capable of causing a You must wash your hands with soap or sanitizer often, range of illnesses in humans including the common cold, and avoid crowded places as much as possible. with more severe forms being Severe Acute Respiratory It is also essential to cover your face with tissue or Syndrome (SARS) and Middle East Respiratory handkerchief while sneezing and maintain at least a Syndrome (MERS). If you are diagnosed with the virus distance of a metre from someone who is sneezing and and need to undergo hospitalisation for treatment, your coughing. It is advisable to avoid touching eyes, nose and health insurance policy in all probability would provide mouth, as there it increases chances of the virus being coverage for the same. This will be basis the policy terms transmitted, and wear a mask while commuting. and conditions of the health policy of the insured At the same time, it is better to restrict visits to A disease like corona does not fall in the category relatives and friends who have recently travelled in of pre-existing ailments, and therefore will be covered regions under the effects of COVID-19. under the base plan. If you seek the treatment for this Given the gravity of the situation, it’s in your best virus , your existing health plan will reimburse expenses interest to refrain from travelling to China and countries incurred on treatment of the disease as per the policy’s being affected by the outbreak. Watch out for symptoms terms and conditions. like fever, coughing, and shortness of breath and seek The claims process is the same as in the case of any medical help at the earliest. other ailment. You can either opt for reimbursement or Also, keep an eye on the updates issued by local opt for a cashless method in a networked hospital by authorities and the government. Follow the advisory your insurer. issued to mitigate the risk of getting infected. This is a tricky aspect as whether your travel policy would provide coverage for corona depends on the The author is the Chief - Claims, Underwriting and Reinsurance, insurer. As it has been declared an epidemic by the ICICI Lombard General Insurance

policy will provide a lump sum payment to any As far as travel insurance is concerned, if one insured between age 18 years to 65 years, who travels against a government advisory, as is the is declared positive by a government-accredited case with most countries now, it is at your risk test and is hospitalised for the coronavirus. and it is excluded from the policy. If you had Importantly, the policy does not have any bought a travel insurance policy before such international travel history related exclusions advisory had been issued, some policies will ICICI Lombard has also launched a pay you the cancellation charges too. But if you COVID-19 Protection Cover. The policy will pay still decide to travel due to some emergency, 100 per cent of sum insured on positive testing the policy will not pay anything related to the for COVI-19. However, it has a 14-day waiting epidemic. period with no overseas travel history. [email protected]

32 Outlook Money April 2020 www.outlookmoney.com General Insurance Made Easy

losses that are caused to a third party by the insured’s vehicle. The policy will also All You Need To Know cover the insured from legal liability which may arise from the damages suffered by the About Motor Insurance third party. Motor insurance offers protection agaist third party damages and 2. Comprehensive theft or damage to own vehicle. While third party liability cover is insurance: As the name suggests, comprehensive mandatory, comprehensive insurance is optional insurance provides coverage to the insured for damage of Motor insurance Add-on Covers their own vehicle, provides basics: Some important add-on covers to consider coverage towards the personal Motor insurance is a policy accident – injury or death of that protects the owner Zero depreciation cover: Full parts amount is covered owner / occupants if opts for from any financial losses in the claim settlement and third party liability. that may arise in case the No claim bonus protection: If the insured has opted vehicle is damaged or stolen. for this add on cover, then in case of a claim (specific 3. Standalone Own It also covers for the liability cause of loss), the insured will not lose the NCB damage insurance: The towards third part injury or policy provides coverage to death caused by the vehicle accumulated under the motor policy the insured for damage of accidently. It can apply to Emergency assistance: In case of a vehicle breakdown, their own vehicle only. This cars, both passenger and this provides round-the-clock assistance cover could be opted if the commercial vehicles, trucks, Engine protection: Covers damages to the engine due customer already has a third buses and also two/three party cover. wheelers as well. to water-logging and other reasons Cost of consumables: Pays for the cost of consumables Under the Motor Vehicle The concept of Motor which need replacement during the repairs of the Act 1988, third party liability insurance vehicle damaged in an accident insurance is mandatory When you purchase motor Return to Invoice: This cover pays full invoice value for all vehicles. However, insurance, you get into a + taxes in case of total loss / theft of vehicle comprehensive insurance/ contract with the insurance Standalone own damage company. To avail the policy policy is optional. To further you need to pay a sum on an rewards you with a no-claim Insured Declared Value understand the importance of annual basis called premium. bonus (NCB). This can range (IDV) a Comprehensive cover, let’s In case you do not make a from 20-50 percent of the IDV is the maximum sum look at what is covered under claim for any damages during own damage cover premium assured which the insurer will the policy: the policy term, the insurer you pay. provide in case there is theft or total loss of the vehicle. Physical injury/ “We need to understand that mandatory insurance only cover IDV is calculated taking into Death: In case the insured the Third Party liabilities; it does not provide benefits of account the manufacturers himself suffers any physical Comprehensive Motor like protection in case of self-damage and listed (Example - Showroom) or bodily injury in an accident, natural or man-made disasters. It is imperative that the customers price and factoring in the policy will provide for opt for Add-on insurance covers like Engine Protection, Emergency depreciation. a fixed benefit amount. Assistance and Zero Depreciation covers which protect them from Coverage of the owner-driver significant financial loss. Most of the customers also tend to lose out Types of Motor of the vehicle is mandated on the continuous protection in case they do not renew their policies. Insurance by law. Therefore, a motor insurance is of utmost importance, not only to In India, there are three types relieve you from your financial burdens but also to relieve you from the of motor insurance: Damage to the vehicle: mental stress you could suffer in case of an accident.” It covers the cost of damage 1. Third party liability to the insured vehicle due to Mr. Parthanil Ghosh, insurance: This covers any an accident, theft or certain President – Motor Business, HDFC ERGO bodily injuries, damages or natural calamities. Standpoint

COVID-19: Where Do We Go? FARZANA SURI This is a year of growth in the dimensions that need change

ife is a constant cycle of learning and What is needed most, is to emphasise things that transformation. We are in the first quarter of are missing most to get through this period. Have 2020 and the implications of the Universal patience, inner work, organization, altering beliefs and numberL 4 (2+0+2+0 =4) are being felt. Number 4 resilience. Play by the rules. This is not the time to give signifies reconstruction and re-evaluation of our vision. in to greed. Comply with the laws and regulations. It encourages hard work, discipline, structure, realistic Even minor violations can negatively impact your goals and the need for security in the wake of ensuing financial growth with hefty fines. Stay on top of your obstacles. Add to it the wobble of the Leap Year, makes game. Be visible and act responsibly. Remember the need for balance, all the more crucial. It is a pivotal financial security demands better moral sense and year where materialism is being forced take a backseat. ethics. It is your family that remains your core strength. This is a year of growth in the dimensions that need For the financial community, it is the time to heed change. Changes are sudden to bring order in your life, the clarion call for balance. Re-calibrate and adjust especially in the areas of finance and health. It induces your view of the world. Use the energy of the year confinement, restrictions and hurdles. to build, cautiously with level-headed conservatism. On a positive note, it reminds you of the strength It demands thorough research before you decide to in going slow, exercising thrift and budgeting your invest. You may have to keep your spending down excesses. It may get you involved in government-related to a minimum and avoid all but guaranteed (safe) or collective projects, reworking both your business as investments, for now. Sectors in IT, medicine, well as personal strategies. engineering, may see impetus. The recent ‘awakening’ with the pandemic, is likely The confusion and chaos, is perhaps necessary for to place things in perspective that you need to live your the growth of humanity and our personal evolution, life in a different way. Perhaps be true to yourself and too. The challenge you face, may create new paths. your needs. Open yourself up to new possibilities of Those who rise to stride towards it, will move ahead leading a more fulfilling life. It guides you to transform, with greater ease. Release and surrender that which transition and flourish. doesn’t support your progress. It’s time to work on a new business idea and do things, differently. While, co- operation and teamwork are the new way, it is also the time to partner with ourselves. Avoid unnecessary confrontations. Keep a lid on your anger however, do not bottle up your emotions. Make room for flexibility. Clinging to fixed beliefs and ideas could be counterproductive. A good idea to lean in to people who encourage and inspire you. Seek professional help, if needed. The next two quarters are challenging. The cloud of uncertainty, is likely to clear up towards June with August demanding more of you. In the period between September and December, you may see some semblance of ‘normalcy’. Keep the hope alive, hold firm to the seed of peace and shut off everything that causes you undue stress. Be home. Stay safe. Pray for peace. This, too shall pass.

The author is a Victory Coach

34 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 57 Commodity Made Easy StepS to trade in the commodity market

ommodities refer for executing your trades. so on. Once your application unnecessary risks. For this, is to assets or goods The broker will also give is approved, the account is it important to understand like food, energy or you recommendations to opened. how the commodity markets Cmetal that has an importance make the correct trading work. You also need to get an in everyday life. The decisions. Before choosing Start off making idea of your risk appetite and commodities market works a brokerage it is important the minimum the capital you can spare. To like any other market. In the to check all the various fees investment: begin with, you need to focus commodity market one can involved. Brokerages provide When you are starting off, on a certain commodity or a buy and sell commodities a brokerage calculator which it is recommended that group of commodities. Then at a present or future date. helps you get an idea of fees you make the minimum you need to decide whether For investors who want to and compare it with fees investment. Once you open you want to be a long term diversify beyond equities charged by competitors. an account, you would need or a short term trader. When and real estate, commodities to make an initial deposit to you are placing an order, are a good option. However, Open a trading start trading in commodities. you should also place a stop investing in the commodities account: The initial deposit varies loss order to limit the risk market comes with a set Since 2017, you can use between 5-10 per cent of of trade. It is also important of risks. A beginner needs the same trading account the contract value. Also, you to keep record of all trades to understand the market to trade for stocks and need to pay a maintenance that you make. Over time, thoroughly before investing. commodities. For this, you margin. This is a minimum you will learn what strategies Here are the steps to start need to fill up an application amount of money which you work best under which investing in the commodities form with the broker and need to pay your broker so circumstances. To sum it up, market. provide information like age, that any losses you make can a trading strategy is a like a income, financial status and be deducted from it. roadmap that tells you how to Choose the go about commodity trading. stockbroker: in the Devise a trading Without a proper trading The first step is to choose commodity strategy: plan, you will lose direction a good stockbroker. The market one can Before you start investing, and end up going wayward. stockbroker must be buy and sell you need to frame an Remember, like anything registered with Sebi. This commodities investing strategy. Without else, you will become better is an important step as the at a present or a proper strategy, you at the game with more stockbroker is responsible future date. will be taking on a lot of practice. Stock Pick

Market Share In Key Crompton Greaves Playing Along With Consumer Electricals Jubilant FoodWorks x CMP: 214.15 x CMP: 1490 Segments Climb x PE: 25.05 Domino’s Effect x PE: 57.64 Working on commercialising the innovation pipeline *As on March 20, 2020 Bringing more brands under one umbrella helps *As on March 20, 2020

By Himali Patel Growth Rate (CAGR) in revenue/ Why Buy espite facing intense Same Store Growth (SSG) was Why Buy PAT over FY19-22, fuelled by a ~15 n Lean balance sheet with strong competition from 5.9 per cent Year-on-Year (Y-o-Y). n Strong revenue growth with retail perfect blend of per cent rise in ECD and a small, return ratio and healthy prospects local players and The company attributes the strong expansion and launch of new premiumisation, innovation 86bp expansion in EBITDA margin n Increasing market share across all foodD aggregators, Jubilant performance to its delivery service, products and cost reduction has (on investments in advertising business segments FoodWorks(JUBI), one of India’s which contributes to 87 per cent of n JUBI is improving SSGs and growing ledA Crompton Greaves Consumer and promotional and channel largest food service companies has online sales. It recently launched faster than peers Electricals (CGCE) post revenue expansion), says an analyst at Anand Watch out for gained market share over the last Masala Pizza alongwith a new growth largely in-line with most Rathi Share and Stock Brokers. n Competitive market and weak three quarters driven by its brand campaign - Dil, Dosti, Domino’s Watch out for brokerage firms for the third The company is working summers might impact margins Domino’s. With concerns over range, which aided sales growth, n Impact on margins on account of quarter (Q3) results in FY2020. aggressively on the cost front, as COvID-19, experts see a short-term during the quarter. “Healthy demand increase in raw material cost and The company reported a revenue well as on commercialising the hiccup and suggest investors to environment, favorable base of 4 to competition from local players growth of 4 per cent Year-on-Year innovation pipeline, by introducing focus on the long-term earnings and 6 per cent SSSG in next 4 quarters (Y-o-Y) at Rs 1,071.2 crore. CGCE a series of innovative products such 200 market share position of JUBI. An and incrementally benign outlook on 250 143.58 Note: Share quoting is into manufacturing of a wide as silent pro fans with a superior analyst at Motilal Oswal Financial operating cost augur well for >25 per ex-bonus from 173.44 range of consumer products that performance. The distribution has Services points out that Jubilant cent earnings growth over the next June 21, 2018 include fans, lamps, household expanded in fans and B2C lighting. 150 FoodWorks dominates the Quick two years,” says an analyst at Motilal 200 appliances like water heaters, The management is stepping up Service Restaurant (QSR) pizza Oswal Financial Services. 112.49 grinders and irons. The Electrical investments in long-term brand segment with over 70 per cent On the operating performance, Consumer Durables (ECD) segment building. “Crompton is focusing 100 market share. It is the largest player. the company’s Earnings Before 150 saw a growth of 11 per cent based on significantly scaling up in three For the third quarter (Q3) of Interest, Tax, Depreciation and on a strong performance in fans, appliances category of geysers, FY2020, the company opened 47 Amortisation (EBITDA) for third 112.49 domestic pumps and appliances. air cooler and mixer grinders 50 stores, marking the highest store quarter rose 23.9 per cent of revenue 100 Base value taken as 100 taken value Base Its volume growth in fans stood (collectively Rs 10,000 crore market) as 100 taken value Base opening count in 20 quarters. It at Rs 253.6 crore. The Profit After BSE Sensex BSE Sensex at 8 per cent Y-o-Y. The market where it had insignificant presence Crompton Greaves holds exclusive rights to operate Tax (PAT) saw a growth of 9.8 per Jubilant FoodWorks Consumer Electricals share in fans is around 27 per cent, till last year but wants to be the 0 the brand Domino’s Pizza in India, cent of the revenue. On a flipside, 0 which improved by 80 basis points second largest player. Post portfolio 2 Jan 2017 20 Mar 2020 with a network of 1,325 restaurants the company’s business faced a 2 Jan 2017 20 Mar 2020 Y-o-Y. CGCE is number two in revamp, Crompton has garnered 11 Source : BSE India spread across 282 cities as on significant dairy inflationary, which Source : BSE India premium category of fans with about per cent market share in geyser (vs December 31, 2019. JUBI has also impacted gross margin. However, 20 per cent in fan sales. However, 8 per cent Y-o-Y) as it posted 66 per Financials acquired rights for developing and the focus on operating efficiencies, Financials the revenue of lighting segment cent volume and 64 per cent value operating 32 Dunkin’ Donuts outlets targeted promotions, reduction Net sales (` crore) PAT (` crore) IE (` crore) PAT (` crore) declined by 11 per cent despite its growth in 3QFY20,” points out an across 10 cities in India. “It has wastage has helped it to mitigate strong double-digit volume growth analyst at Nirmal Bang Institutional FY19 4478.91 FY19 401.38 revised store addition guidance for the raw material inflation during FY19 3563.145 FY19 317.98 in Q3FY2020. The segment is Equities Research. The new FY20 from 120 stores to 140-150 Q3 FY2020. Despite competition FY18 4079.66 FY18 323.79 FY18 3018.4 FY18 196.227 undergoing challenging times led by management strategy is working stores. We have revised estimates for from aggregators and local players, pricing pressure and macro factors. out well as the company prides best FY17 3900.89 FY17 283.17 FY20-22. We value the stock at 40x JUBI is focused on improving its FY17 2583.389 FY17 57.775 On the operating front, Earnings operating margins and free-cash- FY22E Earnings Per Share (EPS),” strategy towards new launches Before Interest, Tax, Depreciation flow generation, which bodes well OP (` crore) EPS (`) says an analyst at IDBI Capital. and affordability. It has partnered OP (` crore) EPS (`) and Amortisation (EBITDA) rose 8.6 for the investors. Brokerages like FY19 632.33 FY19 6.402 On the company’s financial front, with food aggregators Swiggy and FY19 647.124 FY19 24.232 per cent Y-o-Y to Rs 140 crore, and Motilal Oswal Financial Services, the operating revenues for Zomato. This strategy provides FY18 561.79 FY18 5.166 FY18 463.166 FY18 14.869 the EBITDA margin was up by 12.8 Emkay Global Financial Services, Q3 FY2020 stood at Rs 1,059.6 Domino’s a presence in 500 cities. per cent Y-o-Y. “We raise our FY21 Anand Rathi Share and Stock FY17 504.13 FY17 4.518 crore, with a 14.1 per cent growth Its aspiration to bring more brands FY17 255.874 FY17 4.38 estimates (e) /FY22e PAT ~3 per Brokers and Reliance Securities OP: Operating Profit; PAT: Profit After Tax; over Q3 FY2019. Like for Like (LFL) under one umbrella with non-linear OP: Operating Profit; PAT: Profit After Tax; cent each and expect 11 per cent/18 are giving favourable forecasts for EPS: Earnings Per Share; Source: Ace Equity sales growth for Domino’s Pizza growth favours growth prospects. EPS: Earnings Per Share; Source: Ace Equity per cent Compounded Annual CGCE in the long run. rose 7.2 per cent for the quarter. [email protected]

3436 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 35 Playing Along With Jubilant FoodWorks x CMP: 1490 Domino’s Effect x PE: 57.64 Bringing more brands under one umbrella helps *As on March 20, 2020

espite facing intense Same Store Growth (SSG) was Why Buy competition from 5.9 per cent Year-on-Year (Y-o-Y). n Strong revenue growth with retail local players and The company attributes the strong expansion and launch of new foodD aggregators, Jubilant performance to its delivery service, products FoodWorks(JUBI), one of India’s which contributes to 87 per cent of n JUBI is improving SSGs and growing largest food service companies has online sales. It recently launched faster than peers gained market share over the last Masala Pizza alongwith a new three quarters driven by its brand campaign - Dil, Dosti, Domino’s Watch out for Domino’s. With concerns over range, which aided sales growth, n Impact on margins on account of COvID-19, experts see a short-term during the quarter. “Healthy demand increase in raw material cost and hiccup and suggest investors to environment, favorable base of 4 to competition from local players focus on the long-term earnings and 6 per cent SSSG in next 4 quarters market share position of JUBI. An and incrementally benign outlook on 250 Note: Share quoting analyst at Motilal Oswal Financial operating cost augur well for >25 per ex-bonus from 173.44 Services points out that Jubilant cent earnings growth over the next June 21, 2018 FoodWorks dominates the Quick two years,” says an analyst at Motilal 200 Service Restaurant (QSR) pizza Oswal Financial Services. segment with over 70 per cent On the operating performance, market share. It is the largest player. the company’s Earnings Before 150 For the third quarter (Q3) of Interest, Tax, Depreciation and FY2020, the company opened 47 Amortisation (EBITDA) for third 112.49 stores, marking the highest store quarter rose 23.9 per cent of revenue 100 opening count in 20 quarters. It at Rs 253.6 crore. The Profit After as 100 taken value Base BSE Sensex holds exclusive rights to operate Tax (PAT) saw a growth of 9.8 per Jubilant FoodWorks the brand Domino’s Pizza in India, cent of the revenue. On a flipside, 0 with a network of 1,325 restaurants the company’s business faced a 2 Jan 2017 20 Mar 2020 spread across 282 cities as on significant dairy inflationary, which Source : BSE India December 31, 2019. JUBI has also impacted gross margin. However, acquired rights for developing and the focus on operating efficiencies, Financials operating 32 Dunkin’ Donuts outlets targeted promotions, reduction IE (` crore) PAT (` crore) across 10 cities in India. “It has wastage has helped it to mitigate revised store addition guidance for the raw material inflation during FY19 3563.145 FY19 317.98 FY20 from 120 stores to 140-150 Q3 FY2020. Despite competition FY18 3018.4 FY18 196.227 stores. We have revised estimates for from aggregators and local players, FY20-22. We value the stock at 40x JUBI is focused on improving its FY17 2583.389 FY17 57.775 FY22E Earnings Per Share (EPS),” strategy towards new launches says an analyst at IDBI Capital. and affordability. It has partnered OP (` crore) EPS (`) On the company’s financial front, with food aggregators Swiggy and FY19 647.124 FY19 24.232 the operating revenues for Zomato. This strategy provides FY18 463.166 FY18 14.869 Q3 FY2020 stood at Rs 1,059.6 Domino’s a presence in 500 cities. crore, with a 14.1 per cent growth Its aspiration to bring more brands FY17 255.874 FY17 4.38 over Q3 FY2019. Like for Like (LFL) under one umbrella with non-linear sales growth for Domino’s Pizza growth favours growth prospects. OP: Operating Profit; PAT: Profit After Tax; EPS: Earnings Per Share; Source: Ace Equity rose 7.2 per cent for the quarter. [email protected]

www.outlookmoney.com April 2020 Outlook Money 3537 Column The World of Alternate Currencies

nickel, issued only by the kings in their own kingdom. As the banking system developed, paper currency gained. The transactions were not based just on physical delivery of currency, but also on balances held in banks. Money multiplier effect helped the growth of trade. In early days, the issue of currency was backed by equivalent amount of gold being held by the government. World War II saw many economies shattered and their deficits ballooned. The rise in has no counterparty risk. Commodity money falls in international trade also necessitated a standard this category. Gold has been trusted by mankind for Bitcoin is the most well-known, method for comparing different currencies. This led thousands of years as a medium of exchange. but there are many others such to the Bretton Woods agreement in 1944. The US In today’s digital world, the concept of a digital as Ethereum, Ripple. Dollar was pegged to gold. Other currencies were currency has emerged in the form of cryptocurrency. also aligned to this rate and a mutually acceptable It is based on a technology called Blockchain. This is a While it may now be legal, system was adopted. database system, which is like a transparent open ledger. investors must know the high Rising fiscal deficit in the US economy in the It has many other applications and is considered a safer degree of risk. 1960s led to higher money printing, resulting into database technology. The first known cryptocurrency breaking of the gold relation in 1971. The control – Bitcoin- was launched in January 2009. A reclusive on issue of currency became more and more lax in Japanese Mr Satoshi Nakamoto is believed to be the new hybrid model. It could become more acceptable the last 50 years. The central banks in the respective initiator of Bitcoin. The central feature is that the its by users, but could turn out to be a new weapon in the countries now have the authority of money printing. supply is limited to a maximum number of 21 million currency wars. It could also mean more surveillance of Economist John Maynard Keynes propounded the Bitcoins. The different transactions in the database are the users. theory of stimulating economic growth by increasing required to be reconciled and participants who work Two ingredients for a currency are limited supply money supply and many countries embraced it. for this are rewarded in Bitcoins. This activity is called and wide acceptance, which historically, gold has After the sub-prime crisis in 2008, there was a “mining”. Stacks of computers with graphic processing fulfilled. Initially limited supply for Bitcoin was also synchronised action by central banks in all developed units are today used in cryptocurrency mining. The believed, but today we have over 6,000 alternatives thus Mr. Bharat Phatak countries to print more money and avert the risk of degree of difficulty and cost of mining has been going undermining the limited supply. Director, Wealth Managers (I) Pvt. Ltd. recession. Similar emergency action is also taken in up, as we approach the ceiling. Valuation of any asset is based on the stream of the present COVID-19 crisis. The Austrian school The supporters of crypto currency also challenge future cashflows. In absence of cash flow, it cannot be of economics opposes the Keynesian approach the sovereign authority for issuing and regulating. applied to currencies, including crypto. They will be and believes that such money printing threatens the They also have no geographical limits and hence nearly “priced” based on their perceived value. If perception he Supreme Court recently removed the ban global economy. impossible to regulate. There is also a darker side to changes, prices have no support. In the late 90’s, Dot on dealing in cryptocurrencies imposed by What we consider an “asset” is someone else’s this aspect. The digital currencies are possibly used Com companies without a revenue model were priced Tthe Reserve Bank of India. Bitcoin is the liability. This is true for bank deposits, government for terrorist funding, the underworld and demands for on “eyeballs”. Many lost 100% capital. We also cannot most well-known, but there are many others such securities, corporate bonds, municipal bonds, ransom by hackers are made in crypto currency. The overlook that some of the most valuable companies as Ethereum, Ripple. While it may now be legal, company shares – in short, all financial assets. It government authorities also find this an encroachment today are Dot Coms. Hence it will not be right to investors must know the high degree of risk. applies to paper currency as well. It is the liability on their sovereign right and would look at fighting the ridicule the digital currencies. Without knowing their Currencies have played an important part in the of the government which has issued it. The case spread of digital currencies. Recently, there were news survival and valuation model, coupled with extreme development of human society. Barter trade was of physical assets is different. If I own gold or reports that the Chinese government was considering price volatility we should avoid crypto currencies as an replaced by metal coins in gold, silver, copper and property it is not anyone’s liability and hence it issuing its own crypto currency. This could become a “investment”. Column The World of Alternate Currencies

HDFC Short Term Debt HDFC Small Cap Fund

Investment Strategy Fixed-Income Statistics Manager Biography And Fund Strategy nil Bamboli is an experienced and Meetings with management are followed Fixed Inc Style Box (Long) High Ltd etalvad ranks amongst the best select stocks that aren’t too expensive Equity skilled manager and has led this fund by rigorous quantitative analysis in portfolio managers in the India relative to their growth prospects. Portfolio Date: A Average Eff Duration - S Sectors 29/2/2020 since June 2010. Bamboli is supported by which the focus is to get a measure of Average Eff Maturity 3.1 small/mid-cap Morningstar Category. Broadly speaking, the investment an investment team that is composed of the company’s creditworthiness. The Average Coupon 8.1 He has been managing this fund since style can be characterized as growth head of credit Shobhit Mehrotra, manager team studies the company’s cash flow Average Price - 2014 and has been associated with at reasonable price. Setalvad has % Anupam Joshi, three credit analysts, and and relevant ratios-leverage, coverage, HDFC since 2007. We view his long consistently adhered to his professed Basic Materials 13.0 two dealers, who also contribute to the and solvency. The team also draws on tenure at the fund house as a positive. style of investing in quality businesses Fixed Income Style Box Consumer Cyclical 23.0 research. Mehrotra and Bamboli together the expertise of their counterparts in the The analyst team is composed of with established track records. This Financial Services 9.6 have an average experience of more than equity team. The fund company uses a High seven members who have an average incorporates an element of predictability Real Estate 0.0 18 years in portfolio management, which proprietary model in which qualitative Med experience of more than 14 years. to the investment process, one that will Consumer Defensive 1.6 makes them a highly experienced duo. and quantitative inputs are used to arrive Chirag Setalvad emphasizes likely hold the fund in good stead over Low Healthcare 8.5 Manager Anil Bamboli seeks to at a credit score for each issuer. This understanding businesses before longer periods. The investment process Utilities 3.1 add value through security selection in turn helps managers determine the Ltd Mod Ext investing. He adopts a hands-on follows a bottom-up approach. Communication Services 6.0 rather than taking duration bets. exposure they can take to each issuer, approach to research, in order to identify Chirag Setalvad is benchmark- Portfolio Energy 1.3 The investment approach relies on thereby acting as a risk-management companies with robust business models, agnostic when constructing the Top Holdings Weighting Industrials 19.5 fundamental research. It entails tool. Here the investment team lays more (%) strong competitive advantages, and portfolio. This has resulted in a portfolio combining qualitative aspects with emphasis on risk control. clean balance sheets. Setalvad looks that often differs significantly from Technology 14.4 Treps - Tri-Party Repo 5.93 quantitative analysis. The investment Broadly, the portfolio is composed for tangible business models with a the IISL Nifty Free Float Small Cap Total 100.0 team prepares the coverage list of more than 80% of assets in AAA/ Net Current Assets 3.23 track record. Emerging companies 100 Index and the category norm. The with a strong focus on the company equivalent-rated securities. The credit State Bank Of India 2.35 with untested business models don’t portfolio follows a diversified approach, Portfolio Weighting management and track record, financial bets are taken tactically and are capped Tata Sons Limited 2.17 find favor with him. He typically looks currently consisting of around 70-80 Top Holdings strength of the promoter group, and at 20% of the portfolio. The focus is to for companies that can generate stocks with individual holdings typically (%) State Bank Of India 2.10 corporate governance standards. not compromise on the fund’s risk profile. reasonable free cash flows and have accounting for around 4%. The top 10 Sonata Software Ltd 3.25 Housing Development Finance Corporation 2.09 Limited high ROEs. Setalvad combines absolute holdings account for around 25%-30% NIIT Technologies Ltd 3.25 and relative valuation parameters to of the portfolio. Calendar Year Returns LIC Housing Finance Limited 2.05 INOX Leisure Ltd 3.09 Calculation Benchmark: None Power Finance Corporation Ltd. 2.01 Balkrishna Industries Ltd 2.87 10.0 9.7 9.3 NATIONAL BANK FOR AGRICULTURE AND Calendar Year Returns Bajaj Electricals Ltd 2.70 8.3 8.7 1.73 8.0 7.0 6.9 RURAL DEVELOPMENT 6.5 Calculation Benchmark: S&P BSE SmallcapTR ` Atul Ltd 2.69 6.0 4.8 4.9 Tata Capital Financial Services Limited 1.64 DCB Bank Ltd 2.46 4.0 3.7 100

Return 2.0 80 Indian Hotels Co Ltd 2.43 -0.3 -0.6 Fund Snapshot 60.8 60.8 0.0 60 2019 2018 2017 2016 2015 The Federal Bank Ltd 2.27 YTD Morningstar Category India Fund 40

HDFC S/T Debt Gr India Fund Short Duration Return Procter & Gamble Health Ltd 2.24 Short Duration 20 7.7 -29.9 -28.7 -9.5 -5.9 -8.1 -22.9 5.4 2.7 6.4 Trailing Returns Fund Size (`) 122.2 billion 00 -20 Inception Date 25/6/2010 Fund Snapshot Data Point: Return Calculation Benchmark: None YTD 2019 2018 2017 2016 2015 Annual Report Net Expense Ratio 0.40 HDFC Small Cap Gr S&P BSE Smallcap TR ` YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall ***** Morningstar Category India Fund Small-Cap HDFC S/T Debt Gr -0.28 7.32 7.18 7.76 — Manager Name Multiple Trailing Returns Minimum Investment (`) 5,000 Fund Size (`) 92 billion India Fund Short Duration -0.61 1.42 4.00 5.21 6.40 Morningstar Analyst Rating Silver Data Point: Return Calculation Benchmark: S&P BSE Smallcap TR ` Inception Date 3/4/2008 Annual Report Net Expense Ratio 2.19 YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall *** Disclaimer Manager Name Multiple @2017. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. This report is issued by Morningstar Investment HDFC Small Cap Gr -29.91 -38.30 -5.97 0.79 6.99 Minimum Investment (`) 5,000 Adviser India (“Morningstar”), which is registered with SEBI (Registration number INA000001357) and provides investment advice and research. Morningstar Analyst Rating Silver Please visit www.outlookindia.com/outlookmoney/invest/picking-the-right-mutual-fund-2542 and read important statutory disclosures, as S&P BSE Smallcap TR ` -28.70 -33.70 -10.61 -1.68 2.60 mandated by SEBI, regarding the information, data, analyses and opinions given in this report. Data Source: Morningstar India

3840 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 39 Morningstar: Mutual Fund Guide

HDFC Short Term Debt HDFC Small Cap Fund

Return 2.0 80 Indian Hotels Co Ltd 2.43 -0.3 -0.6 Fund Snapshot 60.8 60.8 0.0 60 2019 2018 2017 2016 2015 The Federal Bank Ltd 2.27 YTD Morningstar Category India Fund 40

38 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 3941 Morningstar Mutual Fund Guide

Axis Long Term Equity

Manager Biography And Fund Strategy

inesh Gopani joined the AMC as an is based on fundamental bottom-up Equity Portfolio Date: Jassistant fund manager in 2009 research with emphasis on top-down Sectors 29/2/2020 and has been managing this fund risk parameters, liquidity, and internal since May 2011. Overall, the team has volatility targets. From a financial % remained stable since 2016 and has standpoint, the team looks for Basic Materials 7.4 clearly outlined responsibilities. companies with low capital gearing Consumer Cyclical 13.2 Gopani looks for companies that and strong balance sheets. The fund Financial Services 39.7 have the capability to grow over a house seeks to spend more time three- to five-year period and places identifying fresh ideas and researching Real Estate 0.0 a lot of emphasis on finding quality companies that are not as widely Consumer Defensive 14.4 names at reasonable valuations. researched by the broader market. Healthcare 2.4 However, he can tend to invest in This results in a benchmark- Utilities 3.8 stocks that are slightly expensive in agnostic portfolio that typically Communication Services 7.3 relative terms as long as they meet shares a very low overlap of about Energy 0.0 his quality and growth criteria. The 25%-30% with the S&P BSE 200 Industrials 3.8 portfolio holds about 50%-70% Index. The AMC monitors the fund Technology 8.1 large-cap stocks, while small and size on a consistent basis and places Total 100.0 mid-caps constitute the remaining constraining limits on it, but this portion. The focus is on being able to number can vary constantly based Portfolio identify companies with sustainable on the growth and liquidity in the Top Holdings Weighting earnings growth potential, credible markets. This, in addition to the (%) management, and good corporate multicap nature of the fund, should Bajaj Finance Ltd 8.75 governance practices. Stock-picking help mitigate the risks of asset bloat. Avenue Supermarts Ltd 8.46 Kotak Mahindra Bank Ltd 8.45 HDFC Bank Ltd 6.35 Calendar Year Returns Tata Consultancy Services Ltd 6.17 Calculation Benchmark: S&P BSE 200 India TR ` Pidilite Industries Ltd 5.72

100 Info Edge (India) Ltd 5.08 80 Housing Development Finance Corp Ltd 4.90 60 Maruti Suzuki India Ltd 4.71 37.4 35.0 40 Nestle India Ltd 4.53 Return 14.8 20 10.4 6.7 -23.0 -31.0 2.7 0.8 -0.7 5.4 0 -0.2 -20 Fund Snapshot YTD 2019 2018 2017 2016 2015

Axis Long Term Equity Gr S&P BSE 200 India TR ` Morningstar Category India Fund ELSS (Tax Savings) Fund Size (`) 217 billion Trailing Returns Inception Date 29/12/2009 Data Point: Return Calculation Benchmark: S&P BSE 200 India TR ` Annual Report Net Expense Ratio 2.13 YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall ***** Manager Name Jinesh Gopani Axis Long Term Equity Gr -23.04 -12.52 3.59 3.71 13.46 Minimum Investment (`) 5,000 Morningstar Analyst Rating Bronze S&P BSE 200 India TR ` -31.03 -27.29 -2.97 0.71 6.21 Data Source: Morningstar India

4042 Outlook Money April 2020 www.outlookmoney.com

Interview

Secondly, NBFC crisis had an impact on credit growth As you have been working in the banking in other sectors. If the private sector faces the liquidity industry for such a long time, what are the intrinsic crunch then supporting credit growth for them would problems with the Indian financial system? What be a challenge. Hence, credit growth has to be taken are the structural reforms required to stop banks Focus On Retail & SME from getting trapped in this kind of crisis? care not only by public sector but by other large private institutions too, which are sound on their liquidity side. If you see the banking system, there was a slowdown. We need to address and arrest this trend. Private sector Some of the loans have become Non-Performing banks should have enough liquidity to continue with their Asset (NPA). Especially, after the assets quality review, business of normal lending. Otherwise, lending in the we observed that the NPA of the banking sector has PRASHANT KUMAR economy would be badly affected. gone up. The most critical issue is that banks need to MD & CEO, YES BANK understand more about risk in their lending. Basically, Experts are of the opinion that in Yes Bank was the risk management framework has to be sent across. sitting on this crisis for a very long time. So, why Here, I will not make any distinction between a public was the bank allowed to carry on and why did RBI sector and a private sector bank. We have seen that not intervene earlier? whenever such lending have been made, the mistakes That is always a debatable question on what is the right have been committed too. time to act. But what we need to see, which is more important, is that the decision was taken very fast. Now with you at the helm of Yes Bank, what is Within 24 hours of the moratorium, the RBI came out the road ahead? with a draft resolution plan. And within one week after Firstly, we need to improve our liquidity profile and the comments from the stakeholders move from bulk deposit to retail deposit. came in, the central government gave its The second most important thing is approval and reconstituted the board. recovery. If you see the bank’s NPA in Q3 The moratorium was lifted within Private sector results, as on March 14, it is very high. 13 days. We have not seen this in the banks should And thirdly, we hope to shift our focus past, anywhere in the world, where the from corporate lending to retail lending. resolution of a bank is being done so have enough Because whenever you do a corporate fast - within just 13 days - and the whole liquidity for lending, there is always a concentration banking service was made available to normal lending of risk. For entities of our size, I think the customers. most important thing would be to focus more on the retail and SME sectors. Rajat Mishra caught up with Prashant Kumar, the newly appointed MD and CEO of Yes Bank Do you think making SBI infuse who shared his roadmap and plans on the banks revival. Edited Excerpts: capital into Yes Bank will adversely I had conversation with almost 20 affect its balance sheet and in-turn further retail investors who invested in AT-1 bonds which encourage undue risk-taking by other are written off by Yes Bank as per the exchange Do you think the failure of financial institutions commercial bank lost any money and in the future private banks? filing on March 14. They say they have lost their like PMC Bank and Yes Bank have largely eroded too this is not going to happen. According to me this No, I don’t think so. Firstly, we need to understand money. What’s your comment on that? people’s trust in the Indian banking system? assurance was something very important and we have not that this is not a merger. It is a strategic investment Firstly, this matter is sub-judice and I would not For a very long time, the customer was having a trust seen such assurances coming from the RBI in the past. from the State Bank of India, which has made such like to make a detailed comment on this. But whatever on Indian banking system, hoping the money was So, I think, this signifies that nobody needs to lose faith in investments in other entities too. For example, there has been done is in accordance with the terms and absolutely safe. So, when PMC crisis happened, which the system. are so many subsidiaries of SBI, like SBI life, General conditions of the bond and as per the regulatory was a cooperative bank, there were some concerns. Insurance, Mutual Fund. Thus SBI has made many guidelines. Subsequently, the Yes Bank crisis happened, which is a After Yes Bank crisis unfolded do you see this strategic investments and their returns have been quite scheduled commercial bank. having a spill-over effect on other sectors and the high in the past. In this case who do you hold responsible - However, I think everybody has acted really fast economy at large? Secondly, it is the responsibility of the banking banking administration who sold these bonds during Yes Bank crisis. A revival plan has come out. What we are seeing is not happening only in the banking system to come together and support each other to the retail investors or the retail investors who Not only SBI - the largest public sector bank - but seven sector. Unfortunately, because of the coronavirus there during such events. It is not the only large lender. There bought these bonds without knowing the details? other private sector banks too are part of this unique are other events, happening in the economy. There is a are many other private sector lenders too who have I am getting feedback from some of the retail revival plan. The government and Reserve Bank of India tendency of customers running to safety. Hence, money have also joined in. If everybody sits on the sidelines customers who are visiting us. We are inquiring how have also acted very fast. And within 13 days the scheme is flowing more into the public sector banks, despite a and don’t contribute, there will be a contagion effect. these bonds were sold - whether investors have been was formulated and implemented. The moratorium low rate of interest. What we have seen is that people are So sometimes, we need to come together and try to told clearly about the risk associated with these bonds. was lifted within 13 days. The RBI governor assured more worried and money is continuously flowing from the resolve the problem, so that it is good for the We are looking into this. that in the past not a single depositor of the scheduled private sector to the public sector. That is still a concern. larger interest. [email protected]

44 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 45 Interview

44 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 45 Yes Bank Crisis

the relationship manager. We were promised about the safety of these PANKAJ bonds but now we understand why PATHAK we were forced to buy these bonds.” Fund Manager, Fixed Another bond holder on condition Income, Quantum of anonymity says, “My parents Mutual Fund invested in these bonds after being persuaded by the relationship Moratorium on Yes manager and we bought 14 bonds Bank has once again worth Rs 1.4 crore. But now we are left with not even a single penny.” He raised the vulnerability sent an email to RBI and Ministry of in credit market Finance with little avail. These are just a few cases. In fact, of Rs 93,669 crore of AT1 bonds will there are a plethora of stories of be outstanding as on date (Rs 84,574 depositors being duped by the bank, excluding Yes Bank) of which Rs which lured customers to invest in 39,315 crore will be of private banks risky bonds without letting them (Rs 30.620 crore excluding Yes Bank). know other caveats involved. After Most of these bonds were issued during this news broke out, it sent shock FY2017 and FY2018 with the first call waves among retail and institutional option after fifth year of issuance and investors. More than 100 retail hence a large number bonds are due for investors have penned letters to call in FY2022 and FY2023. RBI governor and FM Nirmala Dhiraj Relli, MD & CEO, HDFC Sitharaman, highlighting the case. Securities says, “As per the latest The letter that Outlook Money restructuring guidelines announced, has seen says, “We are tax-paying Yes Bank AT1 bonds have been written salaried class people, whose life off completely. However, there is Laxmi Sirisha, 42, and Naveen savings are at stake. We request your no clarity as to whether the holders AT1 Bonds Write-Off Exposes Gaps Devnani, 43, a couple from Delhi urgent intervention in safeguarding of these bonds will be allotted any bought 7 AT1 bonds worth Rs 70 the interest of retail investors. Yes equity in exchange of write-off after a ‘Misselling’ by bank executives leaves investors’ trust at stake, triggering risk aversion lakh. Laxmi, an HR professional Bank officials sold us the bond legal challenge. Mutual funds will be recalls, ‘We were lured by the stating that they are safer than fixed cautious in subscribing to instruments relationship manager to invest in deposits and have misguided us. Yes (including Tier1 bonds) of weak banks, By Rajat Mishra panic-stricken depositors were left date perpetual. They are generally AT1 bonds saying it will fetch you Bank sold these bonds to retailers going forward due to the experience with no option other than flocking to considered to be superior to equity. more interest rate. Ever since we through incorrect representation of that they have had in Yes Bank.” he recent wounds created ATMs and branches of Yes Bank. And the bank with the RBI’s approval heard about these bonds being the features credit rating, risk factors Prateek Pant, Head of Products by Punjab & Maharashtra Finance Minister Nirmala can very easily say it will not pay back if written off, we were left in shock. and nature of these bonds.” & Solutions, Sanctum Wealth Cooperative (PMC) Bank’s Sitharaman and RBI Governor Shakti there is a situation where the bank lost That was our hard-earned money we As per ICRA estimates, a total Management says; “The draft Tfailure have not healed yet. With RBI Kanta Das kept assuring depositors so much money. In fact, if tier 1 capital have saved over the last 10 years. resolution plan for Yes Bank completely blowing the lid off another crisis in about the safety of their money ratio falls below a certain limit or when Naveen fears, “My father‘s writes off Additional Tier-1 bonds Yes Bank, it left depositors in the parked in Yes Bank, which according a bank needs massive capital infusion, retirement corpus is also locked in issued by the bank. Hence, mutual fund lurch, badly shaking people’s trust on to its balance sheet calls itself India’s this can be considered. This is exactly these bonds. If he gets to know he houses that have invested in Yes Bank Indian banking system. fourth largest private sector lender. what led Yes Bank take such a call. On will have a heart attack.” PRATEEK PANT AT1 bonds stand to lose the entire On March 5, 2020, the RBI Despite several safety assurances March 14, dashing hope of investors, Madhu Patni, 64, another Yes Head of Products & amount invested. Many mutual funds superseded the board of directors and taking depositors into Yes Bank issued a release to exchange Bank customer also invested a Solutions, Sanctum have already segregated their portion of of Yes Bank and put it under confidence, one section who bore that its AT1 bonds worth Rs 8,500 whooping Rs 70 lakh in AT1 bonds. Wealth Management portfolio, which is invested in Yes Bank moratorium, which was lifted on the maximum brunt was those crore will be fully and permanently It was also her husband’s and her AT1 bonds.” Talking about the impact March 18. Within a few minutes of who invested in Additional Tier 1 written off to zero. savings that were invested with Mutual funds houses of this he says, “The write-off by mutual the announcement, digital payment (AT1) bonds. These are quasi-equity All retail and institutional AT1 an intention to live comfortably, that invested in Yes funds would impact the NAV to the networks collapsed and even internet instruments. They are like equity, investors were taken aback and in one post retirement. Her son Chirag extent of investment in Yes Bank and mobile banking services of the but are structured as high interest- stroke were barred from having access complains, “We purchased these Bank AT1 Bonds stand AT1 bonds.” bank went dysfunctional. Baffled and bearing bonds without any maturity to their own hard-earned savings. bonds in 2019 after being pestered by to lose Fund houses including Nippon

6046 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 61 Yes Bank Crisis

60 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 4761 Yes Bank Crisis

India Asset Management, Baroda Lessons To Be Learnt Asset Management India, UTI Asset Management, Franklin Templeton RBI has set a wrong precedent for the perpetual bonds Asset Management and PGIM India like AT1 as an instrument Asset Management have already side pocketed their exposure to Yes Bank. f one wants to learn, there are multiple lessons that can be learnt from Yes Rating Agency Fitch says Non- Bank episode. The first and the foremost is that demutualisation has to be Banking Financial Institutions madeI mandatory for the entire Banking, Financial Services and Insurance (NBFIs) in India could face a renewed (BFSI) sector. Demutualisation is a process where any company/institution pressure on funding and liquidity operating in BFSI sector, should have separate ownership and management. following the RBI’s takeover of What we have seen during Yes Bank crisis was a lack of this. Rana Kapoor Yes Bank. “The consequences will was the promoter as well as the CEO, before Ranveet Gill was appointed in compound the credit squeeze across his place. Capital market regulator Securities and Exchange Board of India the country’s financial system, adding (Sebi) had introduced demutualisation process for Stock Exchanges (SEs) to current economic uncertainty,” it way back in 2003-04, where by the management of SEs was taken away from says adding the recent announcement stock brokers and was given to professionals. Here too, the regulator learnt may bring contagion effect for NBFIs’ the hard lesson from the mishap that occurred in 2000-01 at Bombay Stock funding condition. The AT1 bonds Exchange (BSE), which was later known as ‘Rathi Tapes’. write-off will trigger a fresh round Wherever management and ownership is vested in single hand, there of investor risk aversion that will will be conflict of interest and it will create undue pressure on the board tighten the market access and raises and on executives running the company. In such a scenario, there could be overall funding costs for borrower malafide intentions; one can really leverage it, which is what has happened in with wholesale NBFIs likely to remain case of Yes Bank. What happened in case of Karvy and DHFL recently, was more vulnerable in this situation. also the result of ownership and management lying with the same entity. In Pankaj Pathak, Fund Manager, BFSI space, it is important that professionals run the business and owners Fixed Income, Quantum Mutual Fund maintain safe distance from running the business. says, “Given that liquidity conditions It is a fact that as banking sector regulator, RBI is aware that ownership are likely to remain in surplus mode, and management should be separate in functioning of banks and it has taken returns from overnight and liquid several steps n this direction but what is required is speed. It was expected funds and money market fund, that RBI would act swiftly in case of Yes Bank as issues related to mis- which do not take too much credit governance were known. Many respectable brokerage houses have flagged risk, should also remain muted in off that Yes Bank’s accounts are not correct. So to that extent RBI should have line with the repo rate. There will be acted much early. But, nevertheless, the resolution proposed by the central recommendations to allocate to credit bank is excellent and that is the reason why the bank is up and running so risk strategies given the fall in yields of swiftly. However, the treatment meted out to the AT1 bondholders in the government bonds and AAA (Triple resolution scheme is not right. In this issue, RBI has exploited technical A) companies. However, as we have clause. In such a situation, one should first write off the equity and then been highlighting for some time, we the AT1 bonds. But by not sticking to that order in the writing off process, do not yet see the end of credit crisis we have killed the instrument. No, one would subscribe to it now. RBI has in the bond markets, despite RBI’s treated AT1 bonds a secondary to equities in Yes Bank case, which is not actions, and crisis in the NBFCs, right. Also, it has set a wrong precedent for the perpetual bonds like AT1 as telecom and now banking sector are an instrument. Who will subscribe to the instrument, which carries 200-300 extension of the same crisis.” basis points (bps) higher risk compared to other bond market papers. Pathak further adds, “The recent The Yes Bank fall has set another bad precedent is that if someone developments of financial stress mismanages and entity in the banking sector and at the end of the game, if in the Vodafone-Idea and the you say, now I cannot run the show, RBI or the government will immediately imposition of moratorium on intervene and bail out the troubled entity. That should not be encouraged. Yes Bank by RBI have once again Today it is Yes Bank, tomorrow there can be five more, smaller banks that raised the vulnerability in the may turn to RBI for help. This should not be allowed and regulator should credit market.” take pro-active approach in dealing with such situations. [email protected] Yagnesh Kansara (With inputs from Himali Patel)

6248 Outlook Money April 2020 www.outlookmoney.com Standpoint

Cruising Through Corona Concern S NAREN Be conscious of dynamic asset allocation schemes during troubled times

oth the global and domestic markets are currently Equity Valuation Index reeling under the coronavirus siege. In India, on 170 a year-to-date basis, Nifty has corrected 22.44 150 Book Partial Profits perB cent and BSE Sensex was down by 21.76 per cent 130 on March 13, 2020. One does not know how long the Incremental Money to Debt 110 Neutral impact of coronavirus is likely to play out and what 90 will be the exact impact of it on the health of the global Invest in Equity 70 economy. As a result, global markets too are likely to be Aggressively Invest in Equity on the edge with investors flocking to safer asset classes. 50 Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Historically, it has been observed that any global 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 event, due to which a market meltdown has occurred, Source: ICICI Prudential Factsheet; Equity Valuation Index is calculated have proved to be a lucrative investment opportunity by assigning equal weights to Price-to-Earnings (PE), Price-to-Book (PB), (see chart). At such times it is important to have a G-Sec*PE and Market Cap to GDP ratio. G-Sec - Goverment Securities. GDP - staggered approach to investing and more importantly Gross Domestic Product; Data as of March 13, 2020 be invested in products that can make the most of the ongoing market volatility. research conducted by Gary Brinston, Brian D Singer Furthermore, an analysis by ICICI Direct shows that and Gilbert L Beebower on determinants of portfolio in six out of nine occasions when the markets corrected performance found asset allocation is the key to by more than 10 per cent, all the losses were recouped portfolio performance, which accounted for 91.5 per within the subsequent two months. cent. This was followed by security selection, market Our equity valuation index highlights that equity is timing and a few other factors, which contributed only available at an attractive valuation with a good margin. 8.5 per cent. Investors should be conscious of asset The Valuation, Cycle, Trigger and Sentiments (VCTS) allocation. framework, which we at ICICI Prudential Mutual One of the best approaches to getting this done right is Fund follow, indicates that valuations are attractive through dynamic asset allocation schemes which are on and we are in the low to mid phase of business cycle offer from various fund houses. Here, based on the market with sentiments around equity as an asset class being valuation, the allocation to equity and debt will keep negative. Keeping these in view, we recommend adding varying. When the equity valuation is expensive, such a equity to the investment portfolio at this juncture. A portfolio will increase its allocation to debt and vice versa. This helps an investor to buy low GDP Mkt Cap BSE S&P Sensex Level Return in and sell high. Date of Mkt Cap (` Lakh (` Lakh to GDP Observation After 3 Next 3 Yrs Debt is an asset class which Observation Crore) Crore) Ratio (CAGR) Date Yrs is often ignored. In the current Dec-2007 72 48 149% 20287 20389 0% market, we believe credit funds Dec-2008 31 56 56% 9647 15455 17% present an interesting opportunity Oct-2010 72 72 100% 20032 21034 2% for investment given their Aug-2013 57 104 55% 18620 28343 15% attractive valuation. Opt for fund houses which Feb-2016 87 133 65% 23002 35905 16% follows rigorous process-oriented Jan-2018 152 163 94% 35965 ? ? investment and stay away from Aug-2019 136 195 70% 37018 ? ? troubled debt papers. 12-Mar-2020 126 206 61% 32778 ? ? The author is ED and Chief Investment Data Source: Bloomberg, BSE India, Internal Calculation. Past performance may not be sustained in future. Officer, ICICI Prudential AMC

68 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 49 Standpoint

Managing Portfolio During Volatility AjAy BAggA Long term gains will help the patient, determined and resolute investor

he spread of the coronavirus pandemic globally of us can take for the next few weeks until this virus is has had a severe impact on global stock markets. contained. After cash flows, look at your cash pool. The With over 242,000 infections and 10,000 deaths, cash component in your portfolio can contain cash in Tthe epidemic has drawn comparisons with painful hand, banks accounts and deposits that can be broken periods such as World War II, the 2008 global financial and liquid mutual funds with overnight redemption crisis and the 1918 Spanish flu outbreak. facilities. Increase this cash pool so that one years of Most markets have slipped down 20 to 30 per cent expenses are covered. One never knows with a huge plus, with individual stocks lower by anything up to 50 downturn like this. With that in place you can be clear per cent. As an example, on March 19, the entire US headed and unsentimental in dealing with your portfolio. airlines industry had seen its combined market worth The second action item is to look at your insurance fall to $51 billion. This for an industry that had used $39 coverage. Is your health insurance up-to-date, is it billion over the last 5 years for share buybacks. adequate with top up and a family floater in place. If you As always happens in large scale events with increased are dependent on a health insurance offered by your uncertainty, not only risky assets but even so called employer, what is the risk of job loss? It may be better safe haven assets like gold have seen a fall in prices. to spend the premium and acquire a personal health Only cash and that too US dollar cash, seems to be insurance in these uncertain times. The same goes for the king for now, as all assets, from stocks to bonds to your life insurance cover, don’t depend on the group government securities to currencies to metals and other insurance covers offered by your workplace. There will commodities fell sharply. be huge job losses if the economic pain stays for a few As all of us are grappling with an uncertain medical months. At that time, being out of a job and losing your event of the coronavirus, markets have started insurance coverage both will be a very big risk. Buy discounting widespread economic destruction due to personal health and life insurance. Make sure your car this and have fallen hard and fast. The market gave no and home insurance is also updated. warning on Feb 19, 2020 before it started its fall, to The third thing to do, is get your entire portfolio down become the fastest ever bear market in the US. Very few on paper and analyse it. How much of your money is in investors had a chance to pull out their funds in time and cash, fixed income, stocks, mutual funds, private equity even now most retail investors have stayed invested. The funds, PMS schemes, AIFs, unlisted stocks , gold, silver, 2008 experience has shown that, the stocks that fall the art and other valuables . We saw in 2008, that so called most, on average don’t recover the fastest. Rather it is liquid asset classes turned illiquid with funds refusing the stocks that fell the least that will form the nucleus of redemptions and other market events disrupting the next bull run. normalcy. Ensure you have one year of expenses in cash So the first lesson is, don’t be afraid that you missed kept aside. That gives a lot of strength of mind in such the last helicopter getting you out of a disaster zone. trying times. Relook at your portfolio and your emergency fund. If the broad stock allocation is troubling you, this Ensure you have a cash flow other than from the stock may be the worst time to reduce your stock allocations. market. It may be from a job, a business, fixed income But if your cash buffer is low, sell now and build your investments, a side hustle. Relook at your cash flows cash cushion first. Remember, in the world’s largest and if these look under threat, reduce expenses now. market, the US, the median number of days between Postpone that big purchase. Holidays anyways none the US S&P 500 index hitting its peak and then hitting its eventual low was 187 days. And the median time from entering a bear market to the market hitting its Give a relook at your portfolio eventual low was 71 days. The median loss in each bear market was 32.9 per cent. and your emergency fund Of course this time the market could be very different,

6450 Outlook Money April 2020 www.outlookmoney.com these historical figures are just indications for us to plan. We can’t say how much more the markets will fall, for Diversification is critical. Keep how long the correction will be or how widespread the economic suffering will be. the safety net. Buy some gold The kind of selling we have seen is pointing to panic and capitulation with algo based selling exacerbating the This is also a good time to weed out the losers falls. Reputed market masters are talking of this being from your equity portfolio. These times favour quality similar to 1920s or 1929 or 1937. Second order impacts companies that generate good cash flows and deliver of the virus with high levels of leverage and the OPEC strong margins/ returns on capital. Stay conservative and Russia oil war are scaring markets into a huge risk off. in quality. Stick to your asset allocation plan. If you are regularly Assume it’s a long downturn, assume defaults will investing X amount every month in the markets, happen, deals will dry up. Assess how you will stay continue that. Maybe you will not get any returns for a solvent and liquid. A big lesson of 2008 was the lack of year, but when the markets rebound, they will give two liquidity that hit all out of the blue. years returns in a matter of weeks. Don’t miss that. Stick to what works for you in sum. No one has the However, don’t try to go bottom fishing. We don’t one correct solution. Stay invested. Short term pain know the depth of the bottom and those shiny objects is certain. Long term gains will accrue to the patient, that seem so attractive, could be falling knives. Avoiding determined and resolute investor. those starts with the humility to know that no one can The world has gone through many wars, disasters, call the bottom. Don’t try that. epidemics and market cycles. This will be a very tough Diversification is critical. Keep the safety net. Buy time, but with patience and discipline we will achieve some gold. small coins that can be liquidated easily. our financial goals. That is what history teaches us. Let’s Spread your accounts to two three banks. Reassess win this. your risk appetite, which tends to shrink in market downturns. The author is a private investor

www.outlookmoney.com April 2020 Outlook Money 6551 My Plan

With Rupal and Yatharth trying to sustain pursue higher education after five The Secret Key To Staying On Track the momentum to fulfill their financial years. Their long-term goals included aspirations as desired, here are a few financial investing in a house for themselves, An early investment will gift you a hassle-free journey in the longer horizon lessons one can learn from their financial as well as planning prudently for their retirement corpus. journey: The couple also deserved some upal Dhonkariya and her to note that millennials are importance of savings, proper special appreciation, for they were husband Yatharth Singh undertaking their financial planning financial planning at an early stage Link mutual fund investments to financial goals making a distinction between the Chauhan are a young at an early stage of their lives and and how it could help them sail This was also the starting point for Rupal and Yatharth. While they had necessities and luxuries of life and Rcouple. While Rupal is working as career. through their future short-term as been investing earlier, their savings lacked discipline, with the primary planning for vacations, out of the a manager, audit and assurance in Rupal and Yatharth both had got well as long-term goals. Just like agenda behind such investments being tax savings. However, once they annual bonuses. As such, their one of the big four consulting firms, in touch with financial advisors the list of questions, they had a list linked their plans and investments to their goals, the entire investing monthly take-home salary of `1 lakh Yatharth is the managing editor around two years ago for chalking of financial aspirations that was strategy found its purpose. Further, with the emotional connections each could be channelised towards for content management with a out a roadmap for attaining their also long enough. However, with the couple had towards their financial goals, they found an internal savings and investments after premier automobile portal. They financial goals, and in the process, no other financial commitment and motivation to continue investing in their journeys and achieve the goals. making regular expenses. With such both are in their late 20s. It has the financial freedom. They had plenty of time at disposal for crucial cashflows, the financial goals planned indeed been a pleasing experience lots of doubts regarding the goals like retirement planning, all Select schemes as per the financial goals by the couple looked practical and that they required was a prudent Different mutual fund schemes tend to carry different risk-reward achievable. In the course of the financial roadmap. The time in trade-offs for the investors. Equity schemes may be volatile over the discussion, the importance of asset hand also allowed them to undo short term but tend to create wealth over the long term. Similarly, debt allocation was also explained to any of their earlier mistakes and schemes may generate reasonable returns but tend to be relatively Rupal and Yatharth and how they simultaneously take the remedial stable. The investors can align their investments as per their risk can achieve their short-term and action in their financial plans. appetite and financial goals by maintaining a suitable mix of mutual long-term goals with a proper mix After a long discussion with the fund schemes. For example, for long-term goals, one can stay invested of equity and debt instruments. As a couple, various financial goals were in equity schemes, for such schemes have historically created wealth for first step towards bringing financial quantified along with a revisit to the investors over the long term. Similarly, for emergency fund corpus, discipline into their lives, dedicated the current investment strategy. SIPs were advised to be registered for which must stay liquid at all times, one can choose to invest in liquid I figured out that while they had different goals. funds and overnight funds. been staying financially aware and Further, given the career making some investments since aspirations to pursue higher Instead of watching your portfolio monthly, make an annual the last two to three years, they education in five years, a need was were not being guided well with a portfolio review with your advisor felt for them not only to start saving clear strategy. Further, there was A financially aware investor tends to make one common mistake of towards the goal but also to create also a need to guide them from the watching the portfolio movements quite frequently. Even when staying a corpus to tide through the days traditional investment products financially aware and updated is good, staying influenced with short- of lower family income during the towards tax-efficient instruments, term movements can push one to make emotional decisions. However, study period. They were also advised so that the returns could be further just like it is advisable to ignore short-term movements in the portfolio, to have adequate life and health optimised. Rupal and Yatharth were it is equally important to review the portfolio on a periodic basis, insurance covers to mitigate the risk planning for a new car in the next preferably once every year with your financial advisor. Such a review can of any future uncertainties. three years and further, aiming to help the investors gauge the portfolio performance, enabling them to Starting early in the investment achieve their financial goals in a time-bound manner. journey helped Rupal and Yatharth plan for their financial goals in a It is vital to trust your financial advisor better manner. You must also take Dedicated SIPs were Markets can test the patience of the investors with short term volatile your first step right away as it is advised as a first step movements. Often the investors can get impatient with their mutual never too late to start your journey. fund investments and think of redeeming such investments. This Happy Investing! in financial discipline is when the financial advisors can help the investors reinforce their confidence in the markets by guiding them about the market outlook and aligning their investment portfolio suitably. As such, it is profoundly Disclaimer crucial to trust your financial advisor to stay invested in the markets and Financial Planning of Rupal Dhonkariya and husband Yatharth Singh Chauhan is based on the “personal opinion and experience” of have a pleasant investing journey. Vidit Bhura Vidit Bhura and that it should not be considered professional financial investment advice. No one should make any investment decision Partner, without first consulting his or her own financial advisor and conducting his or her own research and due diligence. JNV Advisors LLP

6652 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 67 My Plan

66 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 6753 Outlook Money Conclave

Moving Towards A SPECIAL ADDRESS $5 Trillion Economy Not A Comforting Message Government is creating a false binary between socialism and new liberal economic order

In the opening address, Chandok shared how India was By Rajat Mishra therefore, you have 101 extremely Tewari mounted a scathing attack Presents on its path to become a $5 trillion economy and the only wealthy and prosperous Indians on the BJP led government saying, question was not about if that would happen, but when it or 135 crore people in India, whose collective wealth is in the “Before the budget, the economic would happen. He talked about the fundamental pillars, the economy just cannot be range of about Rs. 20 lakh crore. And survey was presented, and the which would support India’s growth in years to come. allowed to fail,” said Manish if you were to sort of juxtaposing economic survey for the year 2020- The keynote address was delivered by SBI’s Ghosh Tewari,F Member of Parliament and that with the entire revenue of the 21 unfortunately, tried to create a who emphasised on the importance of policy making former Information and Broadcasting government of India for the last fiscal false binary between socialism and a frameworks and said that COVID-19 outbreak has put a Minister, while speaking at the third it was about 27 lakh crore. There new liberal economic order.” lot of uncertainties in the global economy, while India’s edition of Outlook Money Conclave are about eight billionaires in the He took the gathering through aspiration to reach the $5-trillion GDP target by 2024 was and 18th edition of Outlook Money world whose collective wealth is as the current state of the economy faced with serious questions. Awards, held in Mumbai on February much as what is held by 400 crore and said, “If you will look at the In his power-talk session, Ranade discussed the 27, 2020. people on planet earth. They are a Indian economy today, it would be

Industrial challenges on the road to $5 trillion considering India’s Tewari was addressing a gathering bunch of companies, about 25 of a bit of an understatement to say Destination Partner Life Insurance Partner Banking Partner Housing Finance Partner General Insurance Partner growth in last four years had dropped from 8 per cent to 5 of stalwarts from the financial them, whose individual GDP is more that the economy is not doing well. per cent. world as he pushed the subject of than the GDP of 85 per cent of the Because, if you look at any of the

Mutual Fund Partner Financial Education Partner Knowledge Partner Outreach Partner Bespoke Partner Outreach Partner But the highlights of the event from an investor’s inequality to center stage and said, countries on planet earth. So, there is indices, GDP growth at 5 per cent perspective were the five eminent panels, which evoked “If you will step back and look at inequality.” is the lowest in 11 years. Private curiosity and answered many relevant questions. In the India in a perspective, we are 17.7 consumption at 5.8 per cent is the Mutual Funds panel, moderated by Kailash Kulkarni, MD per cent of the world’s population. lowest in seven years. Investment By Vishav & CEO, L&T Mutual Fund, the panelists discussed how We occupy 2.4 per cent of the An understatement growth at 1 per cent is the lowest in the MF industry has changed in the past one year after world’s area. But interestingly, 73 17 years. Manufacturing growth at he third edition of the Outlook Money various tightening of norms by Sebi. This was followed by per cent of India’s wealth is held by to say economy is not 2 per cent is the lowest in 15 years. Conclave, held on February 27 in Mumbai, the Insurance panel in which Tapan Singhel engaged in only 1 per cent of its people. And doing well Agricultural credit at 2.8 per cent is turned out to be a huge success with industry a riveting conversation with Asish Mehrotra, CEO, Max the lowest in four years. leadersT across segments coming together on a single Bupa Health Insurance, and Sumit Rai, MD and CEO, Bank credit growth between platform to inform and educate investors and discuss Edelweiss Tokyo Life Insurance. They discussed how April 2019 to January 2020 was 7.6 the future of money. In a fast-evolving world, it’s digitisation has transformed the insurance industry and per cent as compared to 14.6 per crucial to keep up with the change and the annual what the regulator should do to reduce digital scams and cent for the corresponding period event organised by Outlook Money has regularly and frauds in the insurance industry. during the previous year. Inflation actively played a role in helping investors do that. This In the Personal Finance panel, moderated by financial at 7.35 per cent during December time around, with the theme “India Moving Towards educator and coach Mrin Agarwal, a threadbare 2019 was the highest in five years. a $5 Trillion Economy”, 25 speakers participated in the discussion was held on the importance of blending robo- Unemployment at 6.1 per cent is event spread across five expert panels, three power-talk advisory vis-a-vis physical advice by financial advisors. the highest in 45 years. Exports sessions and a keynote address. The panelists also discussed challenges people face while are down 1.8 per cent as compared From SBI Chief Economist Soumya Kanti Ghosh embracing technology and how to overcome them. The to December 2018. If you take to Aditya Birla Group Chief Economist Ajit Ranade, Capital Markets panel was headlined by the idea that if December 2019 as the benchmark from ICICI Securities MD and CEO Vijay Chandok to the economy was like a train destined to reach $5 trillion for which figures are available, Bajaj Allianz General Insurance’s MD and CEO Tapan station, then the market should ideally be its engine. The imports are down by 8.83 per Singhel, eminent personalities and industry captains panel led by Ajay Bagga, Chairman OPC Asset solutions, cent. In the corresponding period, graced the occasion sharing their invaluable thoughts discussed how the valuation game through equity markets electricity consumption is down by and insights on subject matters varying from the Indian help in achieving the goal of $5 trillion economy, besides 5 per cent. So, unfortunately, every economy to specific sectors like insurance, banking and other factors. parameter that you look at does not finance. Former Union Minister Manish Tewari was also The final panel was on Fintech, during which experts Manish Tewari, Member of send out a very comforting message. present who tore apart the government on its handling from the financial world had an engaging discussion Parliament and former Information The fiscal deficit is 14.8 per cent of the economy. He said for the sake of 135 crore people on how the use of blockchain by fintech companies is and Broadcasting Minister over the budget estimate and this in India, the economy just cannot be allowed to fail. redefining the sector. was the figure for January 2020.”

54 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 55 Outlook Money Conclave

Moving Towards A SPECIAL ADDRESS $5 Trillion Economy Not A Comforting Message Government is creating a false binary between socialism and new liberal economic order

54 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 55 Outlook Money Conclave

PANEL DISCUSSION: PERSONAL FINANCE phone or on video phone, Skype or management only $65 million is meet in person.” under robo advisory. So, forget But are there any predictive about the remote areas only, it is Majority of the people As Robo Blends With Conventional Advisory analytical tools available that can be the Indian space, which is up for would want to talk to used to advise customers? disruption if you talk about wealth us either on phone or on A combination of robo technology and physical advice is what modern investors are looking at Rajesh Cheruvu, CIO, Validus management being done by a robo Wealth said, robo advisory has advisor or digitisation of wealth video phone actually put most of the analytics in advisory in India. As per Statista, the the hands of investors. But how to Indian industry of wealth advisory Gaurav Mashruwala make use of these analytics and how on the robo side would grow at Financial Expert and Author to actually do away with emotional the pace of about 30 to 40 per cent biases and take an appropriate CAGR,” he said. there are probably four or five very decision is an important thing to “So, in the span of three years, important aspects and investment is ponder upon. you would see this number doubling one. But what kind of debt they are “We are at the end trying to up. So, that is the kind of disruption having, what kind of insurance they empower investors with the that you can see in the US or in the are having, these are other significant technology. We are actually global markets. We are expecting a points. What are we trying to do for processing more and more towards growth of about 20 per cent in these the customers? We are trying to start empowering our advisors, investment numbers,” Bansal further added. his journey with investments. And advisors and financial advisors to He explained that to avail robo then, you know, we will obviously have data or acquire data. And you advisory, it requires a high amount look to expand our product portfolio, bring in required focus. There is of financial literacy. The investor offer other products as well to the information overhang today; there also has to be financially sound. It customers,” he added. are too many data points. What is difficult for just a layman as it So can both the models of physical to focus and what not to focus? requires a person to fill up a large and robo advisory co-exist? That’s where I think our technology amount of forms and a large amount Mashruwala said, “I firmly believe platform actually provides the of details about the investors’ that whether it’s financial planning or From left to right: Rajesh Cheruvu, CIO, Validus Wealth; Abhishek Bansal, Chairman, Abans Wealth and Investment Managers; Mrin Agarwal, Financial educator & Coach; Gaurav Mashruwala, Financial expert and author; Vivek Agarwal, COO, Scripbox required emphasis and a required preferences. wealth management whatever name focus to the advisors,” he said. But Asked about robo advisor’s you call it, it is not about money. how do you think technology can efficiency in dealing with mutual It is completely about the human By Aparajita Gupta rapid advancement in disruptive So what are the challenges that be used to actually acquire clients in funds or loan advisory, Vivek emotions that arise in the mind of an technology. people face while they embrace metro and non-metro cities, asked Agarwal, COO, Scripbox said: individual when it comes to money.” isruptive technologies “When we started this technology? Gaurav Mashruwala, Agarwal. “Technology will be used in phases. “We believe the philosophy are increasingly taking millennium, we probably started financial expert and author said many Abhishek Bansal, Chairman, If you look at the financial products, of wealth management or true charge of various aspects with a handful of online platforms, of the clients are still not used to Abans Wealth and Investment the investment of customers and wealth management is that the first Dof life and the financial world is but now you have a whole technology and want a human-touch. Managers, said the global wealth financial products itself is quite low. generation should make sure that the not an exception. When it comes magnitude of platforms available. “Yes, they want to see human faces. management industry is about $75 I mean, the mutual fund sector or second generation is wise enough to to financial advising do people still As a financial educator, I meet a lot They want to meet them face-to-face. to $80 trillion. And the Indian wealth let’s say direct equity penetration handle that wealth. And I suppose if favour one-on-one advisory or are of retail investors who tell me that Third, from a common independent management industry is about half a in the country is quite low. What that wisdom is being transferred or they ready for robo advisory to take their biggest concern is the access financial advisor perspective, what trillion dollars. “US is the frontrunner we are trying to do is take these that sanity is being transferred, then charge of things? In the personal to financial advice. They could be happens is that the cost of upgrading in the robo advisory. India’s out of products to the customers who are I suppose the second generation will finance panel various luminaries partly to blame because they don’t on a regular basis could be prohibitive,” half a trillion dollars of total wealth yet not using them. So in fact, 70 per take the right calls whether to advise, from the industry did a threadbare want to pay for advice. But I think he said. cent of the customers who come to whether to adopt robo advisory or discussion on - “How important there’s a bigger systemic issue But would all problems end with our platform, our customers who personal advisory or which wealth is it for financial advisors to offer as well, where it does not make robo advisor and technology at the are new there, we can figure that management firm or what wealth a blend of physical advice and economic sense, sometimes for the forefront and human manning it from The new hybrid model out, because we get to know that management firm,” Bansal added. robo advisory?” - during the third advisor to provide physical advice. back end? Mashruwala said people their KYC is not done.” The discussion definitely Conclave of Outlook Money held in In all this, you now have the new still want human presence at front-end has a combination of “So we are actually acquiring highlighted that there is space Mumbai. hybrid model, which is a channel when it comes to interaction. “People technology and customers who are very, very new for everybody and there is a huge Mrin Agarwal, financial where you can do a combination of also still want to meet us, talk to us, see physical advice to this and you know, they are just market that is untapped. It is up to educator and coach, who was the technology and physical advice. And us and touch and feel and hence both starting to build their personal the investors to decide what kind of moderator of the panel said, over I think a lot of advisors have been should survive but majority of people Mrin Agarwal finance journey. If you come to think advisory they want and the kind of the last decade there has been a embracing technology,” she said. would still want to talk to us either on Financial Educator and Coach of it in the personal finance space, cost they want to incur.

56 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 57 Outlook Money Conclave

SPECIAL ADDRESS KEYNOTE ADDRESS For An Effective Regulatory Mechanism Infuse Investment, Spending Into Economy

Emphasising the importance of policy making framework and regulation Demand, investment and digitisation are laying the foundation for $5 trillion economy

By Dipen Pradhan policy in specific spheres of monetary By Vishav all these problems. We overtook four In real terms, it would be around 8 policy that could be better served by countries – Brazil, Canada, Russia and per cent. Today we are at 5 per cent. tating that COVID-19 constrained discussion,” he said. ndia is firmly on its path to Italy. Today we have reached number So clearly, the question is why did we outbreak has put a lot of According to Ghosh, in India, the become a $5 trillion economy 5 and are a $2.7-2.8 trillion economy, move back to 5 per cent and what uncertainties in the global RBI has been following a very rule- and the question is not whether having overtaken France and Britain needs to be done to move closer to economy,S chief economist of the based policy of prompt corrective itI would happen, but when would in the process over the last four years,” 8-8.5 per cent to get to $5 trillion State Bank of India, Soumya Kanti action. “In fact, India still follows a it happen, said Vijay Chandok, Chandok explained. sooner than later,” Chandok wondered. Ghosh, said that India’s aspiration rule based policy in specific monetary Managing Director, ICICI Securities. He said in rupee terms, this He said when we were at seven per to reach the $5-trillion Gross Soumya Kanti Ghosh, Chief Economist, SBI policies. That’s a matter of debate and He said his confidence in India’s economic expansion was even more cent, two main pillars supporting that Domestic Product (GDP) target by research, which may be served better economy was due to three factors impressive as from Rs 14 lakh crore, rate of growth were the government 2025 is faced with serious questions. by constrained discussion,” he said. which were laying the foundation India had now become Rs 200 lakh spending and consumption which were “The recent slowdown has put two types: constrained discretion Ghosh asserted that the income tax of a high-growth phase -- demand, crore economy, growing 20-23 disrupted by three-four big shocks a serious question on such an and unconstrained discretion. proposals announced in the budget investment and massive productivity times in last 25 years, despite all the including the movement from non- aspiration. The outbreak of the “Constrained discretion could be 2020 is the example of a very good use gains through digitisation. problems. GST to GST world, the demonetization virus from China has also put a good and unconstrained discretion of constrained discretion turning into Delivering the opening address “So when we talk about $5 trillion world, the RERA world and the IBC lot of uncertainties in the global could be bad for policy making,” unconstrained discretion. However, at the third edition of the Outlook world. economic scenario. We are actually he said, while giving highlights of he is doubtful of the government’s Money Conclave held in Mumbai, “Each one of them had great dealing with uncertainties, and how policy making frameworks expectation to see around 80 per cent Chandok said India had grown from a medium-term benefits because you are economic policymaking is grappling in developed countries moved shift to the new tax regime. $300-350 billion economy in early 90s moving from a random and inefficient with appreciations about the future,” from a system of rule-based policy “In fact, the proposals in the budget to a $2.8 trillion economy despite all way of doing business to a more formal Ghosh said at the Outlook Money to a constrained discretionary are noble, encouraging people to the problems and crises. way, which brings sustainability, Conclave 2020. policymaking after the global crisis make decisions in their broad self “25 years back, in early 90s, the comfort and greater scale in the course Ghosh suggested to reconsider in 2008. interest, and not about penalising them GDP of India was $300-350 billion of time. But they were highly disruptive “basic principles” to design an According to Ghosh, in India, financially. However, the main research and per capita income was around in the short term. And the net impact effective and flexible regulatory there was a lot of unconstrained could be just the reverse, because the $300. As time passed, despite some of each of these is that it shocks the Vijay Chandok, MD, ICICI Securities mechanism capable of dealing with discretion exercised in the government is projecting around 80 obstacles, our GDP touched $1000 economy in terms of demand. Then structural changes. He emphasised policymaking till the opening of the per cent of the people could shift to the billion, or one trillion, by middle during the election time, there was on the importance of policy making economy in 1991, and afterwards new tax regime, but given the current 2000s. We joined the trillion dollar economy, the question to be asked a pull-back from the government on frameworks while making policies. moved towards rule-based regime. incentive structure, this number could club which was a big deal. It took us is not whether it would happen, but capital expenditure. These support According to him, policymaking He said that fiscal policy making be much lower, it could be even lower 12-13 years to get to that,” he said. whether it would happen by 2024, pillars of economy have disappeared, frameworks across the globe are in India continues to be dictated than 10 per cent. He added that while we kept or 2025 or 2026. One is the massive which has brought our growth rate to 5 either rule-based or discretion- by unconstrained discretion. “We Ghosh emphasised that incentives cribbing about one or the other consumption that is coming through per cent,” he explained. based. “Rule-based framework used to do rampant monetisation of on peoples’ investments is a crucial problems in the economy, including the population of the country which The ICICI Securities MD said that follows a pre-specified plan, and fiscal deficit, basically print money factor in order to impact household the big problem of the global financial is young. Second is that our country’s three things were needed to put this policymakers pursue the same whenever we had a deficit. With savings in India. Citing studies, he crisis, by 2010, India was ranked unique ability to consume a lot of momentum back on track. course of action in all circumstances the opening up of the economy in said, “Household savings in India number 11 in terms of GDP. money for creating infrastructure “The government has come as written in the textbook. However 1991, India actually moved over are a function of macro economic “Time passed – we had something which is able to pay for itself. And up with a lot of well-intentioned in a discretion-based framework, more towards rule-based regime. as well as qualitative factors. While called policy paralysis in 2012-13 third is this wave of digitisation announcements recently. And the policymakers have wide latitude India still follows a rule-based macroeconomic factors are per when we said nothing was working, and technology changes that are third thing needed is to take feedback to design the best policy response capita real income, dependency ratio, the markets were down, liquidity leading to massive improvements in on those measures and tweak them for the given circumstances. inflation, real interest rate, and access was bad, economy was floundering, productivity,” he elaborated. accordingly to ensure the intended Such flexibility in policymaking Fiscal policy making to banking; qualitative factors are inflation was very high, interest rates “In a mathematical sense, we are outcome is achieved. Getting into that allows policymakers to respond to incentivisation. The incentive to invest were high. In the meantime, India today at around $2.8 trillion and to virtuous cycle will be more powerful unforeseen scenarios,” he said. is dictated by uncon- is a crucial factor to impact household from the number 11 position moved get to $5 trillion by 2024, we need to than coming up with another 25 Discretion-based policy is of strained discretion savings in India.” to number seven by 2015-16 despite grow at 12 per cent in nominal terms. initiatives,” he concluded.

58 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 59 Outlook Money Conclave

SPECIAL ADDRESS KEYNOTE ADDRESS For An Effective Regulatory Mechanism Infuse Investment, Spending Into Economy

Emphasising the importance of policy making framework and regulation Demand, investment and digitisation are laying the foundation for $5 trillion economy

58 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 59 Outlook Money Conclave

PANEL DISCUSSION: FINTECH would remain challenges for some blockchain can play a role in trust time where inter-personal advisors building “because it’s immutable Using Blockchain In Financial Sector may still have an edge, especially and apparently unhackable and We can run a lot when it comes to Ultra High Net completely transparent”. better analysis, which As technology plays the role in trust building and brings in complete transparency Worth Investors (UHNIs). “From that perspective, financial “When it comes to UHNI services can really leverage creates those wow segment, the relationship becomes blockchain,” she said. moments important because the information Gaurav Rastogi, CEO, Kuvera, flow is quite distorted and people said that financial services were Gaurav Rastogi are not looking for generic not about the product but about CEO, Kuvera solutions. They are probably looking transparency and trust. for something specific to their “That is what the business is simple language, the technology can requirements. They are very savvy based on. When we say that a be deployed in any industry where investors and they already know human advisor has built trust there is a transaction happening. where to invest and what to do. So over 10 years, it’s basically about “When it comes to the financial relationship value and trust is there. repeatability and delivering on the industry, with its risks and value that you promised. That does complexity, blockchain is highly not change just because we are a relevant for us. Banks and other digital platform,” he said. financial institutions are trying to Rastogi added that some of utilise blockchain for betterment Through blockchain, the things that change for digital of several processes. First they are we could digitally platforms is because they have a trying to simplify the KYC process convey a trustworthy much larger data set and are built in which is one of the major roadblocks process a way that they store that data and why the financial industry is parse that data better. not entirely digital. Second is “We can run a lot better analysis document verification which is Vijay Kuppa Co-founder, Oro Wealth on top of it, which creates those still offline and takes a lot of time. wow moments. For us, machine This is where banks are trying to learning is a big component. We can involve technology companies and We may be 10 years away from look at data our users share with consulting companies to solve it,” he building that trust on only-digital us and based on that, create what said. platforms,” he said. kind of investors they are. Are they He added that then there are Vijay Kuppa, Co-founder, Oro someone who will chase returns or compliance and record-keeping From left to right: Shantanu Awasthi, Head (Family Office), Karvy Private Wealth; Gaurav Rastogi, CEO, Kuvera; Vijay Kuppa, Co-founder, Oro Wealth; Financial Expert Deepika Asthana; and Sachin Vashishtha, Chief Digital Officer, PaisaBazar Wealth, said that it’s a little harder just someone who will just do an where companies spend a huge for a digital company to prove SIP,” he said. amount of money on quarterly, its trustworthiness compared to Rastogi said that a lot can be monthly and yearly audits -- keeping someone who is in front of the done using blockchain in financial the records and making sure that the By Vishav redefining the sector. investor. services in terms of how people data which they have stored in any Clients in the 21st century are “Digitally, it’s a lot more difficult. behave, how they invest and what form is safe and secure. intech has not only changed savvy, generations are changing So the onus for us, in terms of kind of nudges will get the investor “We use blockchain to the way we bank but also and the use of digital platforms is product selection and the way we better outcomes. disintegrate that and keep it in a the way we think. With definitely increasing, said Shantanu want to deliver our message, is a Sachin Vashishtha, Chief Digital decentralised way so that instead of technologiesF like blockchain Clients are savvy, Awasthi, Head (Family Office), lot more trying to convey to the Officer, PaisaBazar, said since a monthly, quarterly, yearly auditing, causing large scale disruption in the generations are Karvy Private Wealth. He said that user that he or she can trust me. blockchain is a distributed ledger we can do it on a real time basis. It financial sector, fintech companies changing and use of from a transaction and information Hopefully through blockchain, we which records transactions in a very makes the process simpler, faster that adapt smartly to this change flow perspective, technology is will find some way through which and very cost-effective,” Vashishtha will come out on top. During the digital platforms is proving to be a big enabler. And we could digitally convey to the user explained. third Outlook Money Conclave increasing even in the background, like in the that it is going to be a trustworthy The panel concluded that held in Mumbai, experts from selection process, technology is process being here,” he said. For UHNI, personal blockchain can open many new the financial world had a riveting Shantanu Awasthi being used massively. Financial Expert Deepika doors for the financial sector but discussion on how the use of Head (Family Office), Karvy Private Awasthi added that personal Asthana, who moderated the relationship becomes there are many challenges that still Wealth blockchain by fintech companies is relationship and trust building panel, said that undoubtedly important remain to be overcome.

60 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 61 Outlook Money Conclave

PANEL DISCUSSION: MARKETS the presence of some stalwarts On being asked one of the most and industry leaders from the pertinent question that market Using Valuation Game For A capital market sector. Besides Announcement of capitalization or GDP, which first Bagri the panellists included 25% of corporate attracted a varied view points $5 Trillion Economy Devang Mehta, Head-Equity from the panellists, Mehta said Advisory Centrum Broking, borrowings as bonds it is basically solving a riddle like If the economy is a train, then capital market is the engine, feel experts Kedar Deshpande, Head-Retail will give a big fillip what came first chicken or egg. Distribution, ICICI Securities “But still I think market cap will and Ajay Bagga, Chairman, Kedar Deshpande lead to GDP growth,” he added. By Yagnesh Kansara have efficient fundraising platform OPC Asset Solutions, who also Head Retail Products, Services & However, Deshpande had a Distribution, ICICI Securities in the form of capital market then moderated the panel discussion. different viewpoint. He said, ne of the main pillars The goal of $5 trillion dream is quite far away,” The panel discussed one of the “Three variables that drives it of production is $5 trillion economy said Uttam Bagri, Chairman, BSE most important themes of our government has announced one is efficiency of the capital, “ capital. India has been Brokers’ Forum while speaking times -“How the valuation game which is not necessarily in the construct as the economy a capitalO scarce country. Within is achievable at the third edition of Outlook through equity market help in the stock market but in the grows tomorrow there will be last 10 years we have seen a good Money Conclave and 18th edition achieving the goal of $5 trillion listed debt market. One of more sectors which less asset capital flow but in last two years Devang Mehta of Outlook Money Awards on economy, besides other factors?” the big reforms that has been is heavy will be more service anyone who is in business knows Head Equity Advisory February 27, in Mumbai. “The $5 trillion economy is announced in the last budget oriented and the capital efficiency what happened. So, if you don’t Centrum Broking The panel on capital market saw just a number, if the economy is that 25 per cent of the can go up and we have seen that is just like a train, than ideally incremental borrowings by the capital market should be its large corporate have to be in engine. Second, the engine has the form of corporate bonds, to be powerful and swift, as to that will give the big fllip to not causing many accidents,as the debt markets. This will If LIC gets it happened in 2018 (IL&FS), help in creating liquidity in listed, India’s Market so the train will reach its the bond market. So this will Cap (M-Cap) destination (goal). As we know, increase the participation in the will go up Indians have tendency to reach overall capital market because to wedding reception bit late, these market instruments will Uttam Bagri so here if we reach our goal effectively bring down the Chairman, BSE Brokers’ Forum two to three years late, it is an cost of borrowing for the good opportunity wasted. However, companies, which is a positive all said and done, I feel that the step.” the economies which are more goal of $5 trillion economy is While talking about the service oriented companies, the achievable,“ said Devang Mehta. retail investors’ behaviour,which market cap comes first.” Kedar Deshpande, while has gone through a change, “It is spurious correlation. throwing some light on some Mehta said, “The behaviour of Suppose if tomorrow LIC gets bold steps taken by the current retail investors has changed be listed, India’s market cap will dispensation, said,“One of the substantially over last one go up. In this scenario, does it significant reforms that the decade or so. Earlier, investors change anything from economic were interested only in one point of view? So, once it will be or few stocks to invest that done market cap to GDP ratio would give them humungous will change dramatically. I think returns, which would help them ratio does not make sense.” Push market achieve their life goals. But said Bagri. capitalisation for now they seek to know from While moderator Ajay Bagga GDP to go up their investment advisor, which also said he would be pushing mutual funds they should invest market capitalisation so that automatically in. The Biggest change is visible GDP would go up automatically. in the behaviour of HNIs, who And the logic propounded by From left to right: Uttam Bagri, chairman, BSE Brokers’ Forum; Ajay Bagga, Chairman, OPC Asset Solutions; Kedar Deshpande, Head, Retail Ajay Bagga have curtailed their expectations him is that we are a capital Distribution and Devang Mehta, Head, Equity Advisory Centrum Broking Chairman, OPC Asset Solutions of returns.” constrained economy.

62 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 63 Outlook Money Conclave

PANEL DISCUSSION: INSURANCE the customer in the very center advisory product when it is of what you do and you plot broken to the micro needs Digitisation Can Improve these five stages of the customer First conversation must of the customer, it will help lifecycle, then you are solving be of a quality where the leapfrog the penetration and Insurance Penetration the real problem. We are now customer has immense adoption of insurance. breaking the insurance product Mehrotra said, “When we Using AI cuts the claim process time from two hours to 10 minutes into simple consumables, what trust in the agent work with Fintech companies we call as sachets. On the claim and banks, one can create side, we have used Artificial Ashish Mehrotra smaller, simpler products which CEO, Max Bupa Health Insurance company treats you as a fraudster Intelligence (AI). It is helping us help customers to experience till you are proven honest by the to get to 99.6 per cent accuracy insurance and then they come questioning mechanism. The on almost 40 per cent of our It needs to create a platform that back to us. Sometimes we have insurer asks several questions claims which is dramatically simplifies the contract by using a bunch of products we offer to the insured. This may lead superior that we could have done the current digital tools like AI with a bank like a simple Rs many to think that insurance ourselves. We have a 2 per cent and ensures that the right advice 1,000 product linked to account companies do not want to pay higher error rate than what AI is given to the right customer”, opening or insurance products claims,” said Tapan Singhel, MD and Machine Learning is helping said Mehrotra. worth Rs 50 or Rs 100 meant and CEO, Bajaj Allianz General us to achieve,” said Mehrotra. Digitisation can help improve for a communicable disease Insurance. In the end, simplifying and the quality of the conversation or event. Out of people who However, digitisation has a solving the real customer issues between the distributor and the buy that product, 20 to 30 per solution for the stated problem. will eventually bring efficiency customer. cent are coming back to buy “Nowadays, mobile phones have into the insurance business, “Here is where digitisation a full-fledged product. This cameras with a good network, resulting in a cost-cutting will truly make a difference. ensures that once a customer hence the physical presence of scenario. The AI use on claims However, since insurance is not experiences the value of an a surveyor is not needed. One cuts the claim process time from a bought product but a sold insurance, the adoption rate will is not required to struggle for an hour or two hours to about product, some limitations will grow up considerably.” days to collect information 10 minutes. Information can be be there. The true power of The combined growth in and data. Instead, you can get analysed correctly and approved digitisation is for distributors health insurance is 15 per cent the customer to click pictures, on time irrespective of the claim. to know customers better, serve on a YTD basis. Also, this upload, verify the claim and then “Using technology and them diligently and build a long- adoption is coming more in Tier Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance; Sumit Rai MD & CEO, From left to right: II and Tier III cities. Edelweiss Tokio Life; Ashish Mehrotra. CEO & Managing Director at Max Bupa Health Insurance transfer the money,” he said. digitisation makes it far easier lasting career for themselves and “The problem statement has to and unchallenging to identify the business,” said Sumit Rai, According to Singhel, we be solved and digitisation is one fraud incidents. Hence the very MD, and CEO, Edelweiss Tokio should relook at data protection of the tools to solve it. If you are first conversation must be of Life Insurance. norms as our data is already By Anagh Pal doing that well, you are going in a quality where the customer The insurance penetration compromised and we are not the right direction,” he added. has immense trust in the agent. in India is about 3 to 4 per cent aware of it. Even if a customer igitisation is a tool Nowadays, one is not According to Ashish The trust gets transferred to the which is very low as compared has given a consent, the insurer to find a solution to required to struggle Mehrotra, CEO, Max Bupa company, where the customer’s to some other countries. should not use the data for any what needs to be done. for days to collect Health Insurance, the customer needs will be fulfilled seamlessly. Digitisation can play a role in other purpose. Data protection DThe insurance industry faces journey for any financial service increasing this penetration. The is about ethics and it should a peculiar issue. Even as the information and data product can be broken into dissemination of information has also progress to the digital industry is paying claims through five parts. It is the same with become more accessible and that world. But there should be its nose, the common man on Tapan Singhel insurance. The way we attract empowers the end consumer and KYC norms for the insurance the street feels that insurance MD & CEO, Bajaj Allianz General the customers, connect to them, the intermediaries on phones, industry as well. Insurance The insurance is not companies do not pay any claims fulfill their needs and deepen the tablets or laptops. One needs to understand and only collect money. relationship. a bought product but Digitisation is helping that insuretech is not about Digitisation can help solve a contract. So, when someone Over the last five years, the a sold product, hence insurance companies to creating a product but creating this problem. Insurance is about launches a claim, the onus is on advent of mobile phones and limitations will be there understand the needs, which a full ecosystem. This will help collecting money from many the industry to scrutinize it well internet connection in India has resulted in products like solve a customer’s problem, and paying it to a few who have so that they do not end up paying has significantly leapfrogged Sumit Rai toffee insurance, bite-sized help drive the penetration and faced some untoward incident to any fraudster. “Hence, as soon us to a different stage than the MD & CEO, Edelweiss Tokio Life insurance. While insurance customer appreciation of the for which they were covered by as you file a claim, the insurance rest of the world. “If you keep Insurance will predominantly remain an core product.

64 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 65 Outlook Money Conclave

PANEL DISCUSSION: MUTUAL FUND the development of the markets. So, just five years ago and that’s the both have to be balanced out. And huge shout-out to the regulator for Gaining An Institutional Face if one takes a look at the regulations We need to ensure formalising. The MF industry has that have come in the last one year fruits of growth are seen a huge transformation - from Changes in the mutual fund industry over last one year as Sebi tightens norms then most of it is related to investor merely selling products to a more protection. distributed to a larger advisory role, which is indeed a “It was done by giving the benefit part of the population stepping stone. By Himali Patel years substantially. According to permanent. “Most of the time I believe to investors, let’s say by the Total Further, in the last three years him, the Securities and Exchange that regulation is the outcome of Expense Ratio (TER) reduction and Navneet Munot 60-70 per cent transactions are utlook Money’s Conclave Board of India (Sebi) has been what we have been doing and is not the investor protection by means Chief Information Officer, SBI Mutual Fund happening in the digital form. The 2020 saw many of the tightening the norms not only from the outcome of what Sebi thinks and of various tightening measures, number of new customers that are interesting and engaging one last year but has been doing it therefore the regulation comes,” said which has happened during credit advisors and the professionals who being added by some of the digital Odiscussions throughout the day. over the last few years. Balasubramanian. That said, panelist crisis. We also made disclosure take financial planning as a tool to players within two-three years of One of which was - How has the Joining the discussion with him expert NS Venkatesh, CEO, Amfi norms by mutual fund houses much explain investors. existence is far higher than the large Mutual Fund industry changed was A Balasubramanian, MD & India was asked by the moderator more transparent. It is in favour Shreenivas Kunte, Director, distributors, which were adding in the past one year after various CEO, Aditya Birla Sun Life AMC, about What are the steps and changes of investors to give a feeling that CFA Institute, who plays a large over 10 to 15 years of existence,” said tightening of norms by Sebi?” who was asked how the industry has undertaken by the regulator to make every investor is committed to an role in providing one of the top- Mohanty. Moderating the session was grown over last one year and how system far more transparent and easier industry which is well regulated and notch highest level of professional He believes that India is about Kailash Kulkarni, MD & CEO, L&T the MF industry is going ahead? To to enter? the regulator is at top of the things. education, was asked about the the people and finally it is about Mutual Fund. Before throwing the which he explained MF industry is As per Venkatesh, the regulators So, this gives the confidence to the challenging role of the institute in how many people invest that’s what questions to the other MF experts, now gaining the institutional face. have two roles to play - one is to investors to come and invest in the years to come. matters. If one looks at the last 10 he made a point by emphasising Earlier, it used to be small ensure the safety of the market, a place mutual funds,” explained Venkatesh. “The CFA institute dates back to years, given the distribution pace, that mutual fund industry today industry in both size and where the investors are coming in, Panelist Navneet Munot, CIO of at least 60 years. So, I mean we have the money that came to AMCs has is nearly Rs 28 lakh crore and the prominence in the eyes of the which has to be completely safe and SBI Mutual Fund being asked on done lot of work globally. What Sebi become double. equity component has also grown investor. However, despite all the secure for them. And the second one how he saw equity side substantially is doing stands perfectly well with That said, Munot also addressed primarily in the last five to seven regulations the growth will remain is that the regulator has to look after growing over the next three to five our position. We work very closely the audience with an insight on years, explains that the last few with Sebi and other regulators coronavirus outbreak and how years have seen a lot of boom and around the world, which means we various important factors would bust of the industry and yet it has are going in the right direction,” said influence the markets in coming growth from strength to strength. Kunte, adding, “We are also doing a times. Given all the measures taken “As India moves towards much lot of educational programming. We by various countries, the virus should greater financial inclusion and the are trying to influence people with get contained and over the period of $5 trillion economy, our objective a right technique and try to think a month or two the situation should is to become the catalyst for about the conceptual frameworks start normalising believed Munot. ensuring that fruits of the growth and innovative ideas.” “I think we are going to have a are distributed to a much larger Panelist, Swarup Mohanty, faster recovery in the second half. part of the population,” said Munot. CEO, Mirae Asset India, shares his Because of whatever the policy He also emphasised that the direct approach in addressing investors makers will do. But from the longer- and indirect participation through on how the current norms help term perspective India, what we have the mutual fund industry as well balance out the growth of Asset seen over the last few years, can be as indirect participation of the Under Management (AUM) and the the structural long-term beneficiary pension funds will reap the benefits clients. of the coronavirus,” explained Munot. of economies of scale. Also, with all “AMC is getting money from The session ended on a note of that pool of money one can take at least the double the kind of by Kunte urging distributors and advantage of the skillset one builds landscape that we used to get advisors not only to build asset in the MF industry. allocation of the client but also to Currently, one of the improve and create a good trust important role regulator plays The regulator plays the with the client to build the industry is to professionalise the entire role of professionalising on a positive factor. “What is most distribution system. This is to important is emotional stability - first From left to right: Shreenivas Kunte, Director, CFA Institute; A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC; Navneet Munot, CIO, clearly differentiate between the the entire distribution for yourself and then for your clients,” SBI Mutual Fund; N. S. Venkatesh, CEO, Amfi; Swarup Mohanty, CEO, Mirae Asset India; Kailash Kulkarni, MD & CEO, L&T Mutual Fund plain vanilla distributors or basic system he concluded.

66 Outlook Money April 2020 www.outlookmoney.com www.outlookmoney.com April 2020 Outlook Money 67 Outlook Money Conclave

KEYNOTE ADDRESS Converting Demographic Advantage Into Innovation The per capita burden on an average taxpayer will be relatively low despite higher deficits

By Anagh Pal trillion in the next three to four years, which is a very tall ambition. he economic context is not Now I will talk about what gives very happy because of the us the confidence to talk about such slowdown. In the last four a possibility in the medium to long Tfinancial years, 2016-17, 2017-18, term. The main driving force for that is 2018-19 and 2019-20, as per the demography. The population of India government’s data, the growth of the is growing at a rate of 1.7 per cent economy has gone down from 8 to 7 per year. However, India’s workforce to 6 to 5 per cent. or people in the age group of 18 to The GDP growth depends on 60, which is a subset of the total your investment, as what you invest population is growing at 2.5 per cent. today becomes the GDP growth This demographic phenomenon is very tomorrow. An important indicator of robust and impervious. People who are how much the economy is investing Ajit Ranade, President and Chief Economist, going to be working, earning, saving, Aditya Birla Group is the investment to GDP ratio. That investing, consuming and paying taxes ratio in 2008-09 to 2010-11 was about surface is whether this is a structural are being driven by demography. Just 36 per cent of GDP. That number or a cyclical slowdown. A cyclical as the tax net is widening, the financial has been 28 per cent of the GDP in slowdown means that the business savings of the country are deepening. the last four years. With 28 per cent cycle is slow. It goes up as cycles go The kind of transfor-mation we are investment to GDP ratio, you cannot up and down based on the movement having in financial inclusion get high growth unless the investment of the business cycle. However, a is tremendous. becomes super productive or super- structural slowdown means that the If we have a higher deficit today, it efficient. But, in order to get a higher structure of the economy is flawed, means that the government is spending growth, you need higher investments. so it will not grow at higher rates. The more than it is taking in through The third important fact is exports. economy will continue to grow at 5 tax revenues. In such a situation the In this case, the reference would be per cent unless we make some big government borrows money, but it to manufacturing or merchandise decisions. I feel there are elements needs to be paid back. Hence, today’s exports and not export of software of both in the current slowdown. deficit is nothing but tomorrow’s taxes. or tourism revenue. Exports are However, let us not just blame the Since the demography is such that the important because they are highly global economy for our slowdown. population of young people is stable aligned with manufacturing activity There are many reasons for the and rising over the next two decades, in the country. Since there is a high same. Some of the reasons will be and the median age is going to remain degree of correlation it is not possible very difficult to overcome. The data at 27 to 28, the per capita burden on an that industrial and manufacturing shows that the economy has not been average taxpayer in India is going to be growth goes up and there is no robust and yet we are saying we will relatively low despite higher deficits. growth in exports. In the last six double the economy from today to $5 So while the demographic advantage years, exports have grown at an is in favour of India, the question is average growth rate of zero per cent what are the policy obstacles and which used to grow at 20 per cent. Economy will grow at 5 what needs to be done to convert From the scenario we can conclude this demographic advantage into that this is a slowdown. However, per cent unless we make innovation, increased productivity, and now the question that comes to big mistakes higher GDP growth.

68 Outlook Money April 2020 www.outlookmoney.com A smart investment that’s easy for one and all.

*(Systematic Investment Plan) SIP facility is generally available in Daily, Monthly & Quarterly frequency “Visit here https://licmf.info/KYCredressal to learn more about KYC requirements, SEBI Registered Mutual Funds and Grievance redressal.”

Connect with us: /LICMutual /LICMutual /company/LICMutual 1800-258-5678 www.licmf.com

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Available on BSE StAR MF, NSE-MFSS , NSE NMF II and MFU platforms.

169-20