Stay Safe at Home

Stay safe at home.

We have strengthened our online platforms with an aim to serve your needs uniterruptedly.

Access our websites: www.nipponindiamf.com www.nipponindiapms.com (Chat feature available)

www.nipponindiaetf.com www.nipponindiaaif.com

Click to download our mobile apps: Nippon India Mutual Fund | Simply Save App

For any further queries, contact us at [email protected]

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Risks In Debt MFs pg 38 Diabetes Insurance Plan pg 58

JUNE 2020, ` 50

OUTLOOKMONEY.COM THE NEW NORMAL POST COVID-19 Everything, from the way we eat, earn, save and spend, is going for a complete overhaul, something we have never imagined before

Term Insurance Personal Finance in Volatility Surviving A Salary Cut Or Job Loss 8 904150 800027 0 6

Contents

JUNE 2020 VOLUME 19 ISSUE 6

Invest Smartly Keeping A Long Term View

It is important to diversify the portfolios across asset classes, as it will assist in hedging the portfolio during a market downturn

pg 14

Regulars 8 Talk Back 11 Queries 13 News Roll 74 Dear Editor Cover Design: VINAY DOMINIC

HEAD OFFICE AB-10, S.J. Enclave, New Delhi 110 029; Tel: (011) 71280400, Fax: (011) 26191420 OTHER OFFICES Bangalore: (080) 43715021 Kolkata: (033) 46004506, Fax: (033) 46004506; Chennai: (044) 42615225, 42615224; Fax: (044) 42615095; Mumbai: (022) 50990990, Printed and published by Vinayak Aggarwal on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: Arindam Mukherjee. Printed at Kalajyothi Process Pvt. Ltd. Sy.No.185, Sai Pruthvi Enclave, Kondapur – 500 084, R.R.Dist. Telangana and published from AB-10 Safdarjung Enclave, New Delhi 110029 For Subscription queries, please call: 011-71280462, 71280400 or email: [email protected] Published for the month of June 2020; Release on 1 June 2020. Total no. of pages 76 Outlook Money does not accept responsibility for any investment decision taken by readers on the basis of information provided herein. The objective is to keep readers better informed and help them decide for themselves.

www.outlookmoney.com June 2020 Outlook Money 3 Contents

pg 68 Emergence Of Transformation Insurance sector is switching to the digital platform for a fast and cost-efficient result

38 Identify The Turmoil 54 Surviving The Storm It is important to acknowledge For a proper investment re-align the risk factor associated with amid the crisis, re-check your debt mutual funds, and act financial goals, and re-prioritise accordingly your needs

44 The Golden Glitter 58 A Lifestyle Disease Gold to play a critical role in the Analyse the diabetes-specific health pandemic as it is likely to surpass insurance policy, before a diabetic `50,000 mark in next 12 months pandemic sets in pg 74 48 Stockpick 62 Role Of Term Insurance Dear Editor A steady performance of NTPC Explore the pros and cons of term and Britannia Industries insurance before investing Gurpreet Sidana, Chief Operating Officer, Religare Broking shares his 50 Morning Star 72 My Plan investment journey in In focus: HDFC Gift Fund, ICICI Amidst all negativity, it is advisable equity trading Prudential Bluechip Fund, to invest in equity, to experience a Nippon India Large Cap Fund comfortable financial status

Columns Ajay Bagga, Raamdeo Agrawal

4 Outlook Money June 2020 www.outlookmoney.com Focused on the right selection.

ICICI Prudential FocusedFocused EquityEquity FundFund

To invest, consult your Financial Advisor

Download Visit IPRUTOUCH App www.iciciprumf.com

ICICI Prudential Focused Equity Fund (An open ended equity scheme investing in maximum 30 stocks across market capitalisation i.e. focus on multicap) is suitable for investor who are seeking*:

• Long term wealth creation • An open ended equity scheme investing in maximum 30 stocks across market-capitalisation

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Investors understand that their principal will be at moderately high risk

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Chapter One Economy In Labour Crisis

ver the last weekend, I spoke some time before normalcy returns to the to some companies in the civil Indian markets. construction sector. They said However, the big question now is thatO although the government has allowed whether the Rs.20 lakh crore economic them to start industrial activities, they package announced by the Prime Minister were facing a unique problem: labour. With will bear fruit. There is a general feeling that migrant labor returning to their home many of the policy measures announced states due to the COVID-19 pandemic, are long term and may not have a direct there were not enough people to man connect with the COVID-19 crisis. operations on the ground. Efforts by these For example why amend the Essential companies to get people from Bihar, Bengal, Commodities Act now or open up New investment rules, UP and Odhisa did not bear fruit and they disinvestment at this point when the private portfolio diversification feel labour may not return before July- sector is pulling back on all investments. and asset allocations August severely impairing their ability to Of course it will help the MSME sector, are the new norms post kick start economic activity. which will boost economic activity on the pandemic The situation in many other sectors ground. The MSMEs have been repeatedly is pretty much the same. Take the worst hit, first during demonetization and aviation sector for example. Although the now the pandemic. A large number of government opened up domestic air travel units have shut down. This package could on March 25, the first day was marked come as a welcome help. The `3 lakh crore by over 100 cancelled flights from Delhi worth of collateral free loans, `20,000 crore and Mumbai alone. This sector which has of subordinate debt and `50,000 crore of been on a complete standstill since the equity infusion, change in MSME definition nationwide lockdown was announced on and e-linkages to the markets would greatly March 25, will take some more time to help the sector. return to normalcy. The reduction in repo rate announced With international air travel slated to by the RBI is getting mixed signals. While begin in the next two months, economic it may be good for net borrowers, it may activity is expected to resume. But a lot turn out to be counter-productive for the of damage would have already been done. common man as his deposits will earn Globally, airlines are estimating that their less and will hit senior citizens who live on losses could be to the tune of $113 billion interest from savings and fixed deposits. It in the current year and that could be a will also not be very good for investors as conservative estimate. debt funds may not see higher returns. The good thing is that the stock On the other hand, it is not very clear markets are showing some resilience and who the extension in moratorium on EMIs there are signs of recovery. The Sensex has by another three months will help. The mostly stayed over the 30,000 level which first three-month moratorium had mixed is a good sign. reactions as most people were looking at But the worrying factor is that foreign the increased interest burden and many investors have pulled out about $ 26 opted out of it. This second round may see billion from developing economies in similar results. Asia. The figure for India is about $16 There is large scale expectation that there billion, according to a latest report by the would be more economic packages from Congressional Research Center. the government as we move ahead and start Though foreign portfolio investors learning to co-exist with the coronavirus. have started making their way back to The next few weeks would be important ARINDAM MUKHERJEE the Indian markets turning net buyers and will clear the air on how the economy [email protected] after selling heavily in March, it will take performs amid these difficult times.

6 Outlook Money June 2020 www.outlookmoney.com

Talk Back

Time To Upgrade Risk Appetite The article on EDITOR disciplined asset Arindam Mukherjee allocation and long term EQUITIES AND MARKETS EDITOR investment is absolutely Yagnesh Kansara SENIOR ASSISTANT EDITORS a must read according Aparajita Gupta, to me. Amid the crisis, Anagh Pal people are befuddled SPECIAL CORRESPONDENTS regarding finance, and Himali Patel, Vishav such guidance in the PRINCIPAL CORRESPONDENT financial world is highly Nirmala Konjengbam appreciated. SENIOR CORRESPONDENT Soumyabrata Banerjee, Kolkata Dipen Pradhan NEWS DESK COPY EDITOR Jobs Are At Risk But All Is Not Lost Sudeshna Banerjee SENIOR SUB EDITOR The COVID-19 outbreak Sampurna Majumder is giving sleepless nights TRAINEE SUB EDITOR to all the employees. As Indrishka Bose we all know, the experts WEB CORRESPONDENT are predicting a huge Rajat Mishra percentage of job loss and DIGITAL TEAM Amit Mishra, Sneha Santra salary cuts worldwide. I ART found this article highly Praveen Kumar. G, Vinay Dominic (Senior Designers) important as it is giving us Girish Chand (DTP Operator) a wider picture of its impact PHOTO EDITOR Bhupinder Singh on every sector. It also TECH TEAM guides the freshers and mid level employees separately on how they Raman Awasthi, Suraj Wadhwa can polish their skill set to survive the battle. Susheel Malhotra, Mumbai Business Office CHIEF EXECUTIVE OFFICER Indranil Roy PUBLISHER Tomorrow Is Going To Be Yet Another Day Sanchita Tyagi Rawat ASSISTANT VICE PRESIDENT This story has been Tushar Kanti Ghosh brilliantly woven, talking about the base Circulation & Subscriptions Anindya Banerjee, of startups in our Gagan Kohli, Vinod Kumar (North) country that has been G Ramesh (South), Arun Kumar Jha (East) Shekhar Suvarna jolted because of the sudden wave. Despite Production GENERAL MANAGER the digitised amount Shashank Dixit of funds raised for the CHIEF MANAGER startups it is a hard time Shekhar Kumar Pandey for them, especially the MANAGER Sudha Sharma ones at the early stage DEPUTY MANAGER because of the lack of capital infusion. I also liked how it threw Ganesh Sah light on different categories of startups, and how the digitized ASSOCIATE MANAGER ones might stand a chance. Gaurav Shrivas Aratrika Jain, Bangalore Accounts VICE PRESIDENT Diwan Singh Bisht COMPANY SECRETARY & LAW OFFICER Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, Ankit Mangal New Delhi 110029, or [email protected]. Please mention your full name and residential address.

8 Outlook Money June 2020 www.outlookmoney.com

Talk Back

new moratorium. It is an important story for people stuck in the box of dilemma. Sandeep Jha, Chennai Making Millennials Creditworthy It was a great experience reading about the growth of ZestMoney. I have always found the fintech space to be very fascinating. Trishita Guha, Kolkata My Plan The story on the importance of asset allocation strategy was a lesson for Trapped In The Whirlwind is frightening to learn about the me. Many people fail to fathom how Of Adversity abnormal changes that will settle important it is to continue investing in almost every sector. The need of We are stuck in a maze of in the volatile markets and also the hour is a correct strategy, when hardships, and as per the economy to switch the existing investment it comes to investment. However, it is concerned this crisis has simply products from the traditional ones is necessary to keep our hopes high added to it. The pandemic has just into mutual funds once they are and adopt the changes required to fastened the process of slipping matured. Especially in times like recover from the crisis. these a strong and cautious financial into an economic depression. Kushal Tripati, Delhi I was taken aback when I read plan is an absolute necessity. Asmita Jaiswal, Mumbai about the position of the organised Resolving The sector in the negative zone. We are Instalment Dilemma Putting Money To Best Use undoubtedly in a ship that has been In Crisis badly hit by large waves. I had a RBI’s decision to grant an optional great time reading the article. three month moratorium was like Navigating in the dark surely needs Bidisha Gupta, Mumbai the talk of the town. However, strong guidance especially when it people were still unsure whether comes to finance. I am thankful to Eternal Money Lessons to go for this option or simply Outlook Money for sharing such an From Life continuing paying the EMIs. important article with us. I found This story was surely a priceless This article vividly describes the the language very lucid and well lesson for me. The examples that matter and alongside mentions described, especially the guideposts. Aisha Dubey, Bangalore the author has taken to explain the lot that will benefit from the the basics and importance of reinvesting are quite compelling. I absolutely agree with the entire concept of learning from the crisis instead of panicking and worrying about the future investments. Anushka Bajpai, Pune

Battling The Black Swan It was quite an interesting article, learning about the unpredictable black swan and history of all the deadly pandemics that the economy had to battle through. It

10 Outlook Money June 2020 www.outlookmoney.com Queries

Always Keep Your Protection And Investments Separate

PRASHANT PN, BENGALURU [email protected] I am 40 years and have invested in Kotak Headstart Future Project. The policy commenced in 2008 with a premium term and a benefit term of 18 years. I have regularly paid `50,000 annually as premium. The fund has given me an 11 per cent return since inception. Should I continue to pay a premium until the term or do you suggest a better alternative? taking a pure term plan for a higher the investing quantum as much We always recommend keeping life cover. Invest the remaining as possible. Since the existing protection and investments amount in a diversified equity insurance cum investment plan is separately. You should consider mutual fund. You may augment more than 10 years, there will not be any surrender charges, though you can thoroughly cross-check the same with the insurance company. SUBHASH DUTTA, KOLKATA, [email protected] You may do so after considering the present fund value and if you would like to take the call once the value stabilizes. Sriram B.K.R, Investment Strategist at Geojit Financial Services

UJWAL SAPROO, DELHI [email protected] I wanted to know about the kind of financial investment one should make for a one-year-old child to I need regular monthly dividends. Which is the best fulfill the future financial fund to invest in? My second question is about requirements, which involves whether HDFC TOP200 mutual fund SIP investment higher education and a is advisable or not? secure future. Answering your first question, dividends in mutual funds are not Goals for a child are long term guaranteed, and the NAV of the fund is reduced to the extent of in nature. And if you want to the dividend declared. You could add exposure to ICICI Prudential secure the future then we would Multi Assets Fund, DSP Equity & Bond Fund. Answering your recommend adding exposure to second question, as per Sebi order (2017) now the fund name is any Multicap and “Large & Mid HDFC Top 100. But in recent years the fund has performed poorly Cap” Fund with following AMC’s in comparison to his category. We would hereby suggest not to add which also offer Free Insurance as exposure to this fund. Nippon India, Aditya Birla or ICICI Abhishek Raja Ram, FCA, M.Com (F&T), DISA (ICAI) Prudential. Abhishek Raja Ram, FCA, M.Com (F&T), DISA (ICAI)

www.outlookmoney.com June 2020 Outlook Money 11 Queries

ADAM, PUNE [email protected] What is the maximum permissible age of children for claiming tuition fee deduction under Section 80C of income tax rules? There is no age limit for children prescribed under Section 80C of the Income-tax Act, 1961 for claiming deduction in respect of the tuition fees paid. It should be noted that the deduction can be claimed in respect of tuition fees paid to university, college, school or other educational institution situated within India for full-time education for any two NIKHIL BHATIA, MUMBAI, [email protected] children of such individual. I am an employee with a monthly income of `2 Lakh Poorva Prakash, and my wife’s monthly income is `1 lakh. In pursuit of Senior Director, Deloitte India investment options for our savings with no taxability, we have exercised the option of investing 100 per cent PRATIBHA, MUMBAI of basic salary in a Voluntary Provident Fund. Due to the [email protected] VPF outgo, we now save only 30 per cent more than our What is the best tax saving monthly expenses. We also have surplus savings in FDs mutual funds to invest in? for any emergency. My set of queries are: I would suggest that the best tax (1) All the VPF investments and returns and maturity saving mutual funds are Aditya Birla withdrawals after 5 years will be completely tax-free? Tax Relief ‘96, Axis Long Term Equity The cap of `1.5 lakh will not be applicable here and full Fund, DSP Tax saver, Mirae Asset tax interest income will be tax-free? (2) Do we have the right saver, Tata India Tax savings. Also do investment approach here? not forget to evaluate your risk profile Answering your first question, yes it will be tax-free. If you are referring and investing horizon before taking to the Section 80C limit, VPF contributions are eligible for deduction the decision. under it which has a limit of `1.5 lakh per FY. Answering the second Sriram B.K.R, Investment Strategist at question, salaried individuals with a higher salary in Basic+DA, VPF is Geojit Financial Services a good option. With regards to the investment approach, it depends on the risk SNIGDHA, DELHI profile and the periodic cash flow needs of an individual. I would [email protected] suggest re-evaluating the current asset allocation of your investment I do not want to continue my portfolio. You may consider an allocation to equities, if your risk home loan insurance. Can profile permits and the investment horizon is long term. There are two you guide me through the pointers to it. One, going by the empirical data, equity has a higher process? probability of outperforming other asset classes in the longer term, Neither the law nor the regulatory even on a post-tax basis. Equity long-term capital gains are exempted bodies such as RBI or IRDAI up to `1,00,000 per FY and excess gains, if any, are taxed at 10 per have made the purchase of home cent. Two, diversification of long-term surplus into equities assumes loan protection plans with a loan significance in a declining interest rate trend. mandatory. Purchasing an insurance We always recommend keeping an allocation to Gold in the overall plan is the sole discretion of the buyer portfolio. We will recommend the Sovereign Gold Bond, Gold ETF, or and borrowers cannot be forced to Gold Savings fund route. As far as the emergency fund is concerned, purchase such plans. You should consider moving a portion of that from FD to a well-diversified debt contact your bank/branch that you do mutual funds with high credit quality. not need insurance. Sriram B.K.R, Investment Strategist at Geojit Financial Services Abhishek Raja Ram, FCA, M.Com (F&T), DISA (ICAI)

12 Outlook Money June 2020 www.outlookmoney.com News Roll

HDFC Life’s LFI Inches Up 8.7 Points Over 3 Years

s per the leading private life insurance company, HDFC Life inA its latest findings for the FY2020, highlighted an 8.7 point increase in the Life Freedom Index (LFI) in comparison to 2016. The LFI was established by HDFC Life in 2011 as a barometer that enables the measurement of “Financial Freedom” EMI Moratorium For of customers across four key segments - proud parents, wisdom Another Three Months investors, young aspirants and smart women. As per the insurance firm, he Reserve Bank of India’s Monetary Policy Committee (MPC) the research driven approach to seek was scheduled in the first week of June. However, a fortnight insights to understand the ever- beforeT the scheduled meeting, the apex bank decided to call an off- changing customer needs, innovate cycle meeting of the committee between May 20 and 22, during which through new offerings will enhance it decided to cut its repo rate by 40 basis points to 4 per cent, while the overall customer experience. also extending the EMI moratorium on all term loans by another three months till August 31. Holding an off-cycle meeting two weeks in advance itself underlines the significance of the move at a time when the recent release of macroeconomic data for the first time revealed the damage wrought by COVID-19. In RBI’s own words, “The macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated”. It added that the combined impact of demand compression and supply disruption will depress economic activity in the first half of the year. The report details the findings Under these circumstances, and with further extension of the in terms of behavioural changes in lock-down and continuing disruptions on account of COVID-19, customer segments across different the RBI decided to extend the three month moratorium on term indices, in various locations. Some loan installments by another three months. So borrowers can delay of the key insights from the report payment of their EMIs for the months of June, July and August. This includes that young aspirants extension would provide some relief to those facing difficulties in focus on short-term goals such as servicing their loans due to cash-flow and income disruptions. improving lifestyle (49 per cent), While during this moratorium period, there would be no penalties starting their own business (36 per or any impact credit score, however, this moratorium is not a cent). Whereas wisdom investors, waiver and interest would continue to accrue on the outstanding who have invested in at least two amount during this period. This interest can vary from 7 to 8 per financial products prioritise long- cent per annum for home loans, to as high as 40 per cent for credit term goals such as child’s future (74 card outstanding. And with interest being charged on interest, a per cent) and their own retirement moratorium of six months, especially in case of a credit card loan, (37 per cent) and health (44 per could substantially increase the debt. cent) planning. Given these conditions, those with sufficient means should For the smart women who have continue to make repayments as per their original repayment schedule invested in at least one financial while those who have severe cash-flow problems and are finding it product they prioritise physical and extremely difficult to repay their loans could avail the moratorium mental fitness (50 per cent) along facility during these six months. with their child’s needs. Vishav Himali Patel

13 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 13 Cover Story

The pandemic has highlighted that investment rules like asset allocation and diversification should be strictly followed

By Aparajita Gupta

he novel coronavirus (COVID-19) a lot of stocks directly and indirectly. “The pandemic has made the world go on first quarter of FY21 appears to be extremely a roller coaster ride, impacting every challenging. I don’t see the impact of lockdown aspectT of life. After attacking human health, abating until we have more relaxations and it has spread its tentacles on the global the virus situation is under control. For the economic health and India is no alien to it. full year, India may just eke out miniscule Even though Indian government has started growth, led by a possible recovery in H2. We lifting lockdown on industrial activities in a see growth to be under the two per cent mark, phased manner, it will take a long time for based on return to normalcy in the second normalcy to return. quarter and subject to a transition towards Investors have seen long accumulated reopening, by end of Q1FY21,” says Rahul Jain, profit getting wiped away within the blink of Head, Edelweiss Personal Wealth Advisory. an eye. However, as people begin rebuilding The pandemic-led lockdown has led to their lost asset, they scout for various equity markets taking a severe hit. Traditional options. This is the right time to invest in investors who typically invest in fixed income stocks of good companies, which are now instruments such as bank deposits, bonds trading at dirt cheap prices. Even investing in and debentures, have remained unscathed. Systematic Investment Plans (SIP) is a good The recent correction however, has once option. And gold is always a safe haven when again highlighted, that investment rules like equity market is volatile. asset allocation and diversification, should be However, every investment should be done followed at all times. for a longer period to yield better returns, even Even government has drastically slashed though the results of recovery could be visible interest rates for small savings scheme for the only from the second half of the current fiscal first quarter of 2020-21, which means popular 2020-21 (FY21). small savings schemes like Public Provident The government has rolled out an economic Fund (PPF), National Savings Certificate package worth `20 lakh crore to provide (NSC) and Kisan Vikas Patra (KVP) would necessary shots to various sectors. To revive yield lesser return now. economic activities through its Atmanirbhar The PPF interest rate was slashed by 80 Bharat Package the government has put much basis points and will now give 7.1 per cent stress on the MSME, even by revising the return, while NSC will give 6.8 per cent definition of the sector. The government’s self-reliant package has focused on liquidity, land, labour and laws. Rahul Jain Needless to say, it took lot of liquidity Head, Edelweiss Personal Wealth Advisory measures like `3 lakh crore collateral free automatic loans for businesses, including Growth to be under the 2 per MSMEs, `30,000 crore liquidity facility for cent mark, based on return to Invest smartly KeepIng non-banking finance companies/ housing normalcy in the second quarter finance companies/microfinance institutions and `45,000 crore Partial Credit Guarantee and reopening by end of Q1FY21 a long term vIew Scheme 2.0 for NBFC that would benefit

14 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 15 Cover Story

The pandemic has highlighted that investment rules like asset allocation and diversification should be strictly followed

By Aparajita Gupta

14 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 15 Cover Story

Things To Keep in Mind inflation has a significant impact and therefore Before investing in MFs equity as an asset class can beat inflation over a period of seven to 10 years. a. Fund house pedigree He adds that Indian economy will be facing massive headwinds in terms of job losses, b. history, qualification and experience of the fund decline in manufacturing activity followed manager by impact on GST collections, migrant c. past track record and performance of the fund labour issue, which may lead to shortage of d. Quality of the portfolio: number of stocks, labour in core industries like construction sectoral break-up, type of companies – large, and automobiles. India may take around six mid or small cap. in case of debt funds, also to nine months as the lockdown is relaxed check credit quality, credit ratings, average yield followed by gradual recovery in economic and maturity of the portfolio. activity in terms of manufacturing and rise in consumption. e. important ratios: standard deviation, sharp ratio, information ratio, turnover ratio that can Raj Khosla, Founder and MD, help with a comparative analysis MyMoneyMantra.com says the impact of the lockdown and the widespread job losses will source: Edelweiss continue to haunt the economy for several quarters if not years. Even before COVID-19, the economy was facing a structural and KVP will give now 6.9 per cent returns. slowdown. Now that demand and production Thus the average earnings of a person from have fallen off the cliff, the coming quarters various investments has already come down are likely to see a protracted slowdown. drastically. The recent pull-back of six debt funds by “There is no doubt that equity investors Franklin Templeton has investors shying with a long term view to gains,” he adds. RaJ Khosla followed by mutual fund investors with away from the debt market. “Real estate Jain says, investors should review their Founder and MD, MyMoneyMantra.com exposure to equity mutual funds would have has been a stressed sector for a while now investment portfolio in consultation with their faced massive losses. But one should keep making it unattractive as well. This leaves wealth advisor or a financial expert. Portfolios The impact of the lockdown and in mind that if the investor has a long-term equity as a viable investment for investors to must be restructured to align with optimal the widespread job losses will horizon of around five to 10 years, the Indian gain, considering its sharp fall and irresistible asset allocation based on age, risk profile, continue to haunt the economy economy will definitely bounce back and the prices,” feels Tarun Birani, CEO, TBNG investment horizon and expected returns. investor should instead utilise the opportunity Capital Advisors. Fundamentally sound stocks and mutual for several quarters to balance out the asset allocation which Then which are the investment tools one funds, although temporarily underperforming, includes equity, debt and gold,” says Vijay should look at to multiply money? should be held on to. Laggards and Kuppa, Co-Founder, Orowealth. ”Any asset, which is under-performing underperformers should be replaced with Experts say it is not fair to generalise. In terms of returns, exposure to equity long-term average, should be preferred as stocks that can be potential outperformers, There are a lot of funds which have stood the would have led to around 25 per cent decline it offers better returns compared to current in the future. Most importantly, lessons test of time and created wealth for investors. compared to mutual funds wherein the losses favoured assets that are already at high levels. should be learnt from past mistakes and the Investors, on their part, should do thorough would be around 15 per cent. Traditional Interestingly equity has underperformed fixed investment rules of asset allocation should be research, prior to investing. instruments like fixed deposits would always income from last three to five years, which stringently adhered to. However, Kuppa accepts Franklin prove safest, offering around 5.5 to 6 per cent gives me confidence that equity offers best It is known, that equity has the power to Templeton incident has definitely shaken returns. However, one must maintain that return potential among all assets, provided it create wealth in the long term. Hence building investor confidence, which can be seen in fits in suitability and risk reward assessment of a strong market portfolio of robust stocks, will terms of redemption pressure in debt funds the investor,” he says. help reap benefits, despite the current crisis. of different AMC’s including Franklin. An ViJay Kuppa “Unfortunately, it is rare that investors are Investments in well managed, diversified Co-Founder, Orowealth able to get the timing right to take advantage equity funds with proven track records, heading space asdfasdf of the windfall, which makes a lump sum through the SIP mode, will surely help. investment an attractive deal. Since times Kuppa suggests investors to continue A long-term investor should Mutual Funds balance the asset allocation are uncertain and none of us can confidently with their respective SIP as it provides nifty 50 which includes a portion of predict the bottom of this fall, the best strategy an opportunity to average out the cost of Largecap Midcap Smallcap right now is to stagger your investments in holdings. equity, debt and gold -21% -17% -15% -24% an incremental manner over a certain period. But with the Franklin Templeton incident Source: Edelweiss ; Returns: 1-yr as on May 5, 2020 Keep your risk appetite in check and invest people have lost trust on mutual funds.

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

16 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 17 Cover Story Column

TaRun BiRani be around seven to 10 years considering the CEO, TBNG Capital Advisors compounding effect of equity over a period of time and this will assist in creation of wealth,” have The Vision, Courage and patience Any asset, which is under- Kuppa adds. How to handle ongoing stock market crashes amid lockdown RaaMdEo agRawal performing long-term average, Hence the key to successful investment is should be preferred as patience. Any hasty step can lead to a loss. it offers better returns Investor confidence will be restored based on how quickly the economy recovers. The nless you can watch your stock holding of India’s GDP is expected to come in successively government is also taking proactive measures decline by 50 per cent without becoming shorter periods. This linear growth in GDP spells to tackle the situation. It will have to maintain panic-stricken, you should not be in the exponential opportunity for several businesses run by investor should always watch out for the a fine balance in terms of how quickly the stock“U market.” −Warren Buffett managements with integrity, competence and a growth underlying securities held by the respective lockdown can be lifted and the spread of the Warren Buffett’s above words have proved relevant mindset. schemes, which can range from corporate disease can be controlled. Easing lockdown at the market level at least twice so far this millennium. bonds, government papers and will give a fair may lift the economy for the time being but And we may well be in the midst of the third. Courage to buy idea on the safety aspect. Debt funds with holds a greater risk of further spread of the The first time was the dotcom bust followed by Warren Buffett has famously said, “Be fearful when good quality commercial papers would not virus, which is already on an abysmal rise. The 9/11 – from 1,700 levels in February 2000, the Nifty others are greedy and greedy when others are fearful”. face major issues in terms of redemptions. government needs to watch very carefully. crashed 51% to 850 levels around Oct-2001. The The courage to buy when the whole world is fearfully “Also, we would suggest diversifying the How much time will it take for investors to second time was the 2008-09 global financial crisis – selling actually arises from the above vision to see portfolios across asset classes – equity, regain their losses after COVID-19 spread is from nearly 6,300 in early 2008, the Nifty crashed 59 itself. Past experience also suggests that following a debt and gold, which will assist in hedging seen reducing in India? per cent to 2,600 levels by March 2009. We may well sharp correction, most sound companies bounce back the portfolio during the market downturn. “Changing business dynamics and alteration be in the middle of a third such decadal cleansing of with a vengeance across sectors. Exposure to gold and debt will always help to consumer preferences, could cause an the market – from a high of 12,300 in Jan 2020, Nifty in capital protection during a slowdown or upheaval in how different sectors command collapsed 38 per cent to 7,600 levels in just over two Patience to hold recession. Investments such as Sovereign valuations and contribute to earnings. This months, before recovering somewhat. As Thomas Phelps’s quote itself says, patience to hold Gold Bonds, indirect equity exposure via would be key for the markets to recoup The key question – how should investors handle is the rarest of the three attributes. During market mutual funds, bonds should be considered losses. In the past, markets have taken several such stock market crashes? crashes, it is very difficult to catch the bottom. as dynamic asset allocation and become very quarters and sometimes years, to recoup Investors may see a further fall in the stock prices after important during times of slowdown. An losses, post a crisis. So, expect a gradual return Back to basics they have bought, testing investors’ patience. Only individual should always take a long-term to normalcy,” says Jain. Stock market crashes are best handled by getting those investors will emerge successful from market view on investment, which usually should Apart from the `20 lakh crore stimulus, back to the basics of long-term investing. In his crashes who have full conviction in their vision and what other things can the government do to classic book, high level of patience to see it become a reality. make the economy roll? 100 to 1 in the Stock Market, Thomas Phelps has Khosla suggests, “Due to COVID-19, said, “To make money in stocks, you must have vision In conclusion revenue collection has come to a standstill to see, courage to buy and patience to hold. Patience The Corona virus pandemic has triggered a crash in while expenses are shooting up. So a tax cut is the rarest of the three.” stock markets worldwide. In India, it threatens to be is out of the question. Even so, some tinkering the third 50% fall since the turn of the millennium. with the Long-Term Capital Gains Tax (LTCG) Vision to see Each time, the trigger is different but the final outcome could boost investor sentiment. For instance, This is the first and most critical step of long-term is broadly the same – the fall is sharp but short-lived, raising the threshold for tax on LTCG from Rs investing. Stock market crashes are marked by a high and post the recovery, investors enjoy a great run of the 1 lakh to `5 lakh will be a welcome move.” level of noise about the present and the near-term “bottom-to-next-top” cycle. Now that the country is in the fourth phase future. This is where a clear vision of the long term Expect the Corona-led lock-down to disrupt Q1 of lockdown, it is no longer bothered about future proves handy. Such vision to see comes from of FY21 at most. However, post that, multi-year survival in lockdown, rather it is looking the long-period India story, what I call the Next low prices of crude should help lead the recovery forward to the reopening formula. People Trillion Dollar (NTD) opportunity. in GDP and corporate sector profits. The time is have now come to terms with the fact that the It took India almost 60 years to clock its first ripe to invest in “wonderful” companies i.e. great world has to co-exist with the virus for the trillion dollar of GDP in FY08. After that, given businesses (preferably consumer-facing) run by great time being and we cannot just lock ourselves the power of compounding, the second trillion managements. up and let our fortunes get washed away due dollar of GDP came in just seven ears. Every NTD Investors who stay put through this crisis and in to the fear of a fatal disease. Yes, it is a deadly fact have the gumption to take advantage through virus and we have to be cautious of but at the staggered allocation over the next three to four months same time we have to start living. We should stand to benefit. not hold back our investment decisions. Linear growth in GDP spells [email protected] huge opportunity for businesses -The author is Chairman, Motilal Oswal Financial Services

18 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 19 Cover Story Column

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

services,” adds Mehta. Once the pandemic subsides, a ‘new normal’, with irrevocably The new normal New World Order Post COVID-19 changed behaviors and expectations of Everything we do is going for a transformation that was never envisaged before customers, may emerge. This will present 1. accelerated use of digital technologies for all financial a unique opportunity for FinTechs to bring transactions end-to-end digitalisation to the creation and 2. FinTech to replace physical interactions as much distribution of financial products. “Once the as possible By Anagh Pal lockdown is lifted, Fintechs in neo-banking, lending and Investment segments, aided 3. increase of awareness on health insurance et us accept it. The COVID-19 pandemic by favorable regulatory initiatives such as 4. Video conferencing to replace physical KyC is one of the most significant events of this video KYC, account aggregators, MSME 5. Tele-underwriting to replace health tests for insurance century, with far reaching consequences. It marketplaces, e-invoicing, may extend isL being compared to the two world wars and to accelerated adoption of digital financial 6. Financial advisory to be virtual and video-based the great depression, but the last time the entire products among both retail and SME/MSME 7. Virtual tours to enable homebuyers to search world went through something like this was 100 customers,” says Vivek Belgavi, Partner and and view property years ago during the Spanish Flu pandemic. Leader FinTech , PwC India. Nobody is sure how the coronavirus pandemic Banking has been one of the earlier adopters 8. work from home to continue for a while. Employers to will end, whether it will go away, whether a of technology and in a post pandemic world, focus more on health and well being of their employees vaccine is discovered or whether we have to learn the way we bank is likely to change even 9. Essential travel to resume soon, international to live with this for the next few months or more. further. “Customers will need to fulfil a range travel later Says Sailesh Shah, Co-founder, Strta of banking transactions on a no-contact basis, 10. strict checks and social distancing at airports Consulting, “Like every part of the world, India completely digital without having to visit a and in flights is sitting on a fence that has COVID-19 on one branch. In this respect, banks will need to bring side and economic activity stagnating on the more and more services on to digital channels,” other. That fine balance is critical as WHO is now says Deepak Sharma, President & Chief Digital stating that we may not be able to eradicate the Officer, Kotak Mahindra Bank, which is the also why people take loans. In fact, as per a virus any time soon.” first to introduce a video KYC to open a full- recent study conducted by BCG, 86 per cent One thing is for sure. Our lives will change. service Kotak 811 account. IDFC Bank has of the respondents have shown concern over And a lot of that change will be in our financial also launched video KYC for opening of savings repayment of loans after the lockdown opens, lives. “The COVID-19 pandemic is likely to leave a account. Going ahead, there will be increased which is a very high number. permanent imprint on consumers, countries and usage of video conferencing as an alternative to “Due to the volatility of the employment economies. There will be a ‘new normal’ for every physical interactions. scenario and the fear of job losses, consumers aspect of our lives - be it business, personal or When it comes to investments, most of it is will postpone the purchase of not so essential social,” says Prateek Mehta, Co-founder, Scripbox. digital and the technology adoption is going to items. We feel that this trend will last for entire With social distancing norms in place, accelerate going ahead. According to Mehta, 2020. New consumer durables purchases technology will play a bigger role in our financial we are likely to see technology in all aspects are likely to see a drop, at the same time the lives. That is not to say that it was not already, but of investing whether it is discovery, decision personal loans will be largely to meet the it will become a more intrinsic part of our financial making, execution, operational support and necessary like meeting the survival needs, lives and businesses that do not adopt will perish. ongoing management. medical needs, education and so on,” says A McKinsey study reports that we have Not only will the way we invest change, Marko Carevic, Chief Marketing and Customer vaulted five years forward in consumer and there will also be a change on how people view Experience Officer of Home Credit India. business digital adoption in a matter of around investments “After the pandemic there will be Of course, technology will play a big role in eight weeks. “As people become cautious in a change in the way people think. They will loan disbursal as well. “Physical verification their dealings in the physical world, they will go back to saving more because they realise increasingly lean on digital solutions to meet that such emergency situations may come. In pRiyanK paRaKh their existing demands - related to financial the last 12 years or so we have moved from a Director-HR, GSK Consumer Healthcare planning and investments. Today, every part of high saving nation to a high spending nation. I the investment journey - from asset allocation expect that to change,” says Prakash Gagdani, Sanitising workspaces, decisions to transactions – is seamless on CEO, 5paisa.com. maintaining social distancing digital. We expect this trend to only accelerate This change in mindset of people with the norms are going to gain a from hereon. We would also see that a lot of lockdown plunging the economy in a crisis offline players will make the move to digital and expected salary cuts and job loss, will predominance and touchless delivery of investment advisory lead to a change in spending patterns and

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

life goals instead of focus on choice of products. pRaTEEK MEhTa When it comes to homebuying technology Co-founder, Scripbox will play a prominent role too. Virtual tours that augment the real estate experience will become The pandemic is likely to more popular as a result of social distancing leave a permanent imprint and help potential hommebuyers continue their on consumers, countries and searches for property in a digital manner. Going ahead one can expect homebuying not to be economies a series of discreet activities. “Rather we can expect one app where the entire ecosystem of the builder, financer, interior designer, furniture Says Neerja Bhatia, Vice President, Indian companies and e-commerce sites will collaborate Sub-continent, Etihad Airways, “The current in offering what is required to build a home,” says pandemic will surely change air travel, keeping Sundaram Mallik, Marketing Head, PTC Inc. in mind the safety of all passengers as well as the The lockdown has meant that many of us airline and airport staff members. These changes are now working from home and since the won’t just be inside the aircraft, but at every step virus is going to stay, work from home is likely right from the moment you enter an airport. to become the new norm. Our workplaces are These would include stricter measures at check- also going to change. “Sanitising workspaces, in counters, thermal screening at airports and maintaining social distancing norms, being advance booking and social distancing in flights of borrowers at their residence and office is insurance industry will focus on educating people able to operate remotely and being relevant by keeping the middle seat free when guests are now replaced by e-verification where location about the importance of health insurance through and productive are some of them that are travelling on separate bookings. Agrees Nishant mapping is done through geo-tagging, selfie various online and offline touch points. The going to gain a predominance in the upcoming Patti, CEO and co-founder, EaseMyTrip.com, and video interviews. Most of these processes company has already introduced digital services times,” says Priyank Parakh, Director-HR, “Strict social distancing norms would be followed are time and cost saving and we see no reason - for instance, policy holders can upload scanned GSK Consumer Healthcare. Additionally, you at all times via floor markings and queue managers not to continue with them even in the post claim documents using their app or by logging on can expect the employer to engage with the will ensure the it is being followed across – at COVID-19 era,” says Rajat Gandhi, founder and the claims centre to initiate claim reimbursement. employees regularly to boost their morale. entry gate, check-in counters, self-check-in kiosks, CEO, Faircent. Customers can hence renew policies, generate GSK Consumer Healthcare has implemented security checkpoints, and the boarding area. The need for insurance and how we buy claim status and buy health insurance policies from e-engagement activities like creativity contests, Seating arrangements at the food court, lounges, insurance will also see a significant change in the comfort of their homes. Tele-underwriting learning marathon and desktop yoga, which is a terminal building and departure terminals are a post coronavirus world. Says Vaidyanathan where underwriting decisions are made based on a platform for live yoga sessions for all employees. also expected to be reshuffled in a manner that Ramani, head, product and innovation, telephone interview to gather information related They have also launched an Employee promotes social distancing. Cashless transactions policybazaar.com, “Customers will not be to risk is also becoming a norm. Assistance Program (EAP) that helps access to a will be promoted across all restaurants and retail comfortable to walk into an insurance office “Even after the pandemic is over some of free, confidential telephone helpline and website stores. Passengers will be encouraged to wear or have some agent visit them. They will be the habits we are creating will remain. Digital for practical advice, information or support. masks and sanitise their hands at regular intervals.” comfortable to transact over calls, emails, apps adoption will become more in vogue and Finally, COVID-19 has changed how we will In-flight meals are also likely to be suspended and webpages.” replace many of the traditional sales channels travel not just for now, for months to come. till the situation normalises. Considering all Naturally, people are more concerned about like agents. Customers are also less dependent Forget planning for a summer holiday, we have these factors airfares are expected to increase to their health now and so the demand for health on human intervention and purchasing policies not even left our homes in a long time. Will compensate for lower revenues and increased insurance is likely to go up. According to Prasun online,” says Dr. S. Prakash, MD, Star Health and travelling ever be the same again? costs, unless the government announces some Sikdar, MD and CEO ManipalCigna Health Allied Insurance. relief for the sector. Overall Patti believes that the Insurance Company, post pandemic the health Financial advisory is also likely to change in a travel sector will take a considerable time to return post-COVID-19 world. Says Renu Maheshwari, to regular levels. For the first three months people “Businesses that were on cloud could handle the will only travel for essential reasons relating to pRaKash gagdani lockdown more productively. It also gave them work and education. Leisure travel is likely to pick CEO, 5paisa.com an opportunity to nudge the investor to come on up next with clear preference towards domestic line. Post COVID, most cloud based practices destinations. The international destinations will In the last 12 years we have will continue. They are efficient, cost effective and start attracting crowds only when a vaccine is moved from a high saving give better output.” Also, as Maheswari points developed or things are totally back to normal. nation to a high spending out, financial advisory will change from actions The way we earn, invest, spend, travel is going directed towards chasing market returns to for a transformation that was never envisaged even nation. I expect that to change fulfilling investor’s financial goals by choosing the six months ago. A brave new world awaits us. most appropriate returns with focus on client’s [email protected]

22 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 23 Cover Story

effects of COVID-19? Looking at the PM’s Atmanirbhar Bharat package, and the lack Bleak Expectations Of A Revival of enthusiasm post the announcement, the going seems to be difficult. Is Prime Minister Narendra Modi’s Atmanirbhar Bharat package a baggage for the stakeholders? The Atmanirbhar package is comprised of measures amounting to 4 per cent of GDP, which has been undertaken by the Reserve By Yagnesh Kansara & Arindam Mukherjee Prime Minister Narendra Modi on May 12 and Bank of India (RBI). The direct fiscal impact of need to do thread-bare analysis of its adequacy the reforms however comes to around `2 lakh s expected, India’s fourth quarter and relevancy. crore only (1 per cent of GDP). The measures Gross Domestic Product (GDP) has Commenting on Q4 GDP numbers, Upasna announced have been a mix of short and long slowed down to 3.1 per cent, lowest in Bhardwaj, Senior Economist, Kotak Mahindra term, with focus on building the capabilities lastA 11 years, data released on the last Friday of Bank, says, “The number partly reflects the for small players in the economy as well as month revealed. This number fully reflects the sudden halt in economic activity led by the paving the way for structural changes in certain slowdown, which the economy has been going COVID-19-related response. While the sectors. However, the package does not do through in the last two years and it also amply slowdown in economy was already underway, much to boost consumption in the short term highlights the importance of a demand-led the COVID-19-related disruption has further and that could act as a drag on growth. recovery for sustainable future growth. This exacerbated the issue. We expect the Q1FY21 to But has the massive economic package number is more important than a quarterly record a sharp contraction of over 14 per cent, come at the right time and will it have the hopeful of recovery in current fiscal and our GDP number. Because this number would be the with only a gradual recovery thereafter. For the desired impact? numbers could now have a downward bias from base against which the impact of the lockdown year, we continue to expect contraction in GDP Devang Mehta, Director, Equities, Centrum current stress estimate of–4.7 per cent in FY21,” and consequent demand destruction, loss (over 5 per cent). Accordingly, expansionary Wealth Management says, “The government he concludes. of productivity and employment would be fiscal and monetary response will have to will probably be looking to address, a number But will the package address the demand side mapped. What could be the fall from this level continue to aid the economy.” of challenges, faced by a host of sectors, at an problems which have assumed a global nature is the question that would be asked. If the expansionary fiscal and monetary appropriate time. Once the lockdown ends, with the COVID-9 crisis? In this backdrop, we need to dissect the response have to continue from policymakers, the exact extent of monetary and business Mehta strongly feels that the government’s much talked about “Atmanirbhar Bharat” through the year, do we have that economic pain would be known. While some sections package focuses mainly on supply-side reforms package worth `20 lakh crore announced by and financial might-to-fight-out the after of the population are yet to receive relief, we and relief measures. The underlying issue is of must understand that no one knows for sure demand destruction and joblessness and that still when the pandemic will end and economic stands to be addressed. The demand side needs operations will fully return. However the immediate support, as an estimated 70 per cent timing to address these issues has to be of India’s economic growth since liberalisationhas apt and it cannot be too little and too late. been powered by domestic consumption. There Structural reforms for land, labour, law and is a clear case of loss of business and hence a big liquidity are clearly the need of the hour. The setback for incomes, salaries and wages. government seems to be conserving resources Vijay Kuppa, Co-Founder OroWealth, at its disposal to be ready to invest more at a argues, “Majority of the support is in the form later appropriate time.” of long term instruments like loans and credit Soumya Kanti Ghosh, Group Chief guarantees and not much in the form of direct Economic Adviser, SBI, explains, “We cash benefits or reduction of tax rates. Now estimate that the revenue loss for the Centre whether the government should do more or after taking into account of gains from excise not, will only be known once these announced duty hike and DA freeze comes to around measures step off the ground. At the moment, `6.53 lakh crore. However, the government has announced additional borrowing of `4.20 upasna BhaRdwaJ lakh crore for FY21. As per our estimates, a Senior Economist, Kotak Mahindra Bank total of `4.36 lakh crore is still the uncovered loss for the Centre even after the additional We expect Q1FY21 to record a borrowing.” sharp contraction of over 14 Ghosh says, interestingly, this is nearly per cent, with only a gradual ` equivalent to Budgeted Capital Expenditure (CE) of the Centre, implying almost negligible recovery growth in CE in FY21. “We are thus less

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

dEVang MEhTa effect is to boost the economy immediately period is going to be of severe stress for the Director, Equities, Centrum Wealth Management but rather to ensure that India, in the medium banking sector. term, is in a position to benefit from shifts in Certain provisions of Atmanirbhar Bharat Various structural reforms for the global supply chain that will invariably package related to the banks and financial sector follow, (particularly with reduced dependence will make the situation for the sector from bad land, labour, law and liquidity on China). It is also a strong positive signal to worse. The listed banks will suffer the most, are clearly the need of the to the broader global community that we are claimed Emkay Global Financial Services in one hour in this situation taking both short-term measures as well as of its research note on listed banks. long-term ones to prepare for a post-COVID It says the Insolvency and Bankruptcy new normal.” Code (IBC) referral suspension for one year the prelim assessment is that they will fall Says Lav Chaturvedi, ED & CEO, Reliance will be a major set-back for banks as the code short in reviving the economy. What is Securities, “We still believe that India is placed assisted banks to recover `1.84 lakh crore needed is a massive short term power booster. better compared to other countries in various since its inception (44 per cent of loans due) Unfortunately, we don’t have the finances for parameters. For instance, our government debt and instilled fear in the minds of belligerent it, and the government knows this too.” to GDP stands at 69.6 per cent, which is far corporates, unlike earlier mechanisms. In Economists however, feel that in handling below countries like USA, Japan, France, UK, view of COVID-19-induced disruptions, the the situation, the government may have had its and Brazil. Our fiscal deficit at 3.8 per cent in government suspended of filing of fresh cases attractive. Hence, going forward with further own limitations. FY20 is significantly lower than 6.6 per cent for insolvency proceedings under the IBC for ease in lockdown restriction especially in red Says Abheek Barua, Chief Economist, HDFC which was seen during the global financial the next 12 months. zone areas should essentially offer more clarity Bank, “If by capability you mean fiscal resources, crisis and more importantly we have strong “We believe that this will be a setback about earnings momentum, which will augur then the government certainly has constraints. back up of our Central bank which maintains a for banks looking for resolution/liquidation well for the market”. Thus large cash transfers or large scale direct robust balance sheet. under the legal umbrella, with no risk of Kuppa feels that the markets may correct support to badly affected sectors might not be It is true that the slowdown began across witch-hunting later on and more so, when further going ahead as the full extent of possible. Even with a relatively small additional the world even before the COVID-19 crisis another wave of corporate NPAs could be damage due to lockdown will be seen in fiscal outlay, deficit is likely to climb to 6 per properly set in globally and hence many on its way. With little help from economic the corporate quarterly results in July and cent of GDP because of revenue losses.” governments had already started announcing package focused on long term reforms, banks October. “We may not see the sharp declines Besides, the government wants to be their fiscal stimulus packages. have to defend themselves from asset quality as seen in March where the indices had hit cautious and keep the fiscal powder dry Mehta clarifies, “The RBI had also been storm. The first order of asset quality impact a low. The government may take further should the infection itself come substantially proactive not only in cutting rates but of COVID-19 will be seen in retail/SME, relief measures which will lead to market worse and a lot more needs to be spent on also in infusing liquidity and announcing followed by another wave of corporate NPAs consolidation. Additionally, we will need to healthcare. It has tried to innovate and focus some important unconventional measures. with demand for moratorium extension/ watch out on the global market developments on keeping the supply side ticking by ensuring Government’s current package of `20 lakh forbearance/restructuring on the rise amid which will decide on the Foreign Institutional the flow of credit to the economy, Barua says. crore focuses largely on supply-side reforms extended lockdown”, Emkay’s report says. Investor (FII) flows. Due to historic liquidity The government, he says, has done this by and relief measures. It can now do more to It also recommended staying with select measures taken by different countries and acting as a super-guarantor for a large swathe increase disposable income in the hands banks with strong capital/provisioning buffers central banks, stock markets will remain of loans particularly to MSMEs and NBFCs. of the middle class and taxpayers to drive and healthy core profitability to absorb up despite negative real economies. And if This will help companies especially the smaller consumption. But before the government COVID-19-induced shocks. global indices remain up, Indian markets will ones to survive and operate. This could set off proceeds on the path to increase the disposable The markets have been extremely volatile stay up too,” he says. a virtuous cycle of production, employment, income in the hands of middle class, the interim but have shown some resilience of late, with Thus, the government’s ‘Atmanirbhar’ income and finally demand. “This was needed the Sensex staying above the 30,000 mark. But package, elaborated by Finance Minister over but can it entirely compensate for the absence who will take a call on where we will see them the last five days at the fag end of the first of demand side measures? Perhaps not and if in the next six months? fortnight of May, was a mix of many easy the economic situation improves and there is a Chaturvedi says, “Equity markets do not loan schemes, a slew of long-awaited policy better sense of possible revenue and additional like uncertainty and as long as uncertain reforms across sectors and a little bit of actual healthcare needs, the government will have to environment persists, markets may take money spent by the government (`2 lakh consider demand side measures, says Barua. bit longer to reward investors. However, crore or 102 bps of GDP hit in FY21). The ’10 Barua, however, feels this is a good given the ease of lockdown across the globe per cent of GDP stimulus’ as claimed and the opportunity to push with pending reforms and resuming economic activities offered a reform announcements, are worth grabbing and address many issues in the economy. He required boost of equities despite concerns international headlines. The overall package is says, “The history of India’s political economy related to second wave of coronavirus and a disappointment for expectations of a revival shows that crises are the best opportunities to escalation of USA-China stand-off. The of demand in the economy, and for sectors push through long pending reforms and so the good part of Indian markets as of now is our that are stressed due to the lockdown. timing is right. I do not believe that the desired valuations at 21.7 xs, which appears to be [email protected], [email protected]

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

the most, followed by the age group of 36-45 pos Terminals (Million) years at 83 per cent. XPay.Life, which simplifies 6 payment for utility bills among tier-two, three, four and five consumers, has seen a surge of 500 per cent in recurring utility bill payment 4 through its app, Kumar adds. “The transition to a fully digital India cannot happen overnight, but we can certainly say that 2 digital payment solutions are here to stay,” he says. According to Nityanand Sharma, CEO and Co-founder, Simpl Technologies, COVID-19 0 has forced people change the way they used to Jan 19 Mar 20 transact and pay for their day to day essentials. Many first-time users have started using digital payments industry in India with a sharp uptick Digital Payments And The New Normal payments during this lockdown as the entire in the adoption of e-banking, mobile banking, paradigm has shifted from offline to online. and most importantly UPI-based payment apps. COVID-19 has given further push to adoption of digital tools, avoiding handling of cash “We would see a surge in the overall While the current situation is very different, the adoption of digital modes of payment across pandemic will certainly serve as a growth catalyst industries. Users are ordering their essentials for digital payment platforms, feels Varun Sridhar, By Vishav that once the recovery starts, there is going to be a from hyperlocal merchants like Dunzo, Lead, Realme PaySa. new normal across the board and digital payments Bigbasket and this is generating a major “Fundamentally, many people have lived life here is no doubt that the global space is going to be no different. According to dependence on digital payments as users are for twi odd months without going to an ATM or pandemic and the ensuing lockdown ‘India Digital Payments Report - Q1 2020’, issued now making transactions through their cards, meeting someone in person. Today, person to has crippled economies and changed by Worldline India, social distancing is going to UPI apps, and net banking instead of relying person payments have hit a new normal with UPI Tthe way people lead their lives. While influence, to some extent, how the landscape of on cash transactions. Due to the current payments. When lockdown ends, even shopping the number of transactions have reduced digital payments will pan out particularly in the situation, businesses and merchants are trying with social distancing using QR codes will be the drastically during this time, the way these physical space, given it is a high contact area. digital payment platforms like eWallets, UPI- new normal. The new normal in urban India will transactions happen has also undergone a sea While the COVID-19 pandemic has impacted based apps and net banking. This is leading to be on an average one ATM withdrawal per person change. This leads to the question whether businesses across verticals and has upended daily a sharp jump in the number of digital payment per month, thinner wallets with Rs 2000 note kept digital transactions are going to become the life, the cash flow cannot be halted because of users,” he explains. as backup and around 20 mobile payments per new normal post-COVID. the virus outbreak or the subsequent lockdowns. Sharma adds that the depth and extent of month per person, 50 per cent of them using a QR Many experts believe that while digital This has resulted in increased adoption of digital the impact of COVID-19 crisis on the entire code,” he says. payments were already on a rise before the payment solutions at an unimaginable pace digital payments industry are difficult to gauge Sridhar adds that while studies are yet pandemic, the health crisis has given further throughout the country, says Rohit Kumar, CEO right now but in the long term, it is likely to to establish the fact that coronavirus can be push to people adopting digital tools to avoid and CMD, Xpay.life. accelerate the adoption of digital payments transmitted via paper currency, the general handling of cash. It has also resulted in fewer “Digital payment platforms are flourishing across the country. consensus among experts is that avoiding cash possibilities to deal in cash. However, there with the rise in adoption. The RBI, National “This pandemic has changed the world and consequently contact is a good idea right now. is still a large segment, which relies on cash Payment Corporation of India (NPCI), along with fundamentally, and it will take a couple of “Money changes hands very frequently. The fear amid all this and many believe that cash would government bodies, banks, financial institutions, months to get back to a normal life. Once the continue to remain the backbone of the Indian and regulatory authorities, are already teaming lockdown is over, there would still be a risk economy for a long time to come. up to quicken the process of digital payment for the second wave of coronavirus and this However, there is agreement on one thing: adoption in the country. Though different fear will drive people to opt online commerce economies are at different stages across the world, rather than offline. Most of the transactions in the COVID-19 has definitely cleared the road for India used to happen via cash but this trend aMiT nigaM digital payment methods in India,” he says. had changed post demonetisation as digital Executive Director and COO, Bankit The shift towards digital payments in India transactions in India registered 19.5 per cent is particularly striking when the evolution of in value in 2018-19 as per the RBI report. While a portion of the consumer behaviour can be seen among different Apart from being contactless which is crucial population has adopted digital segments, including older consumers who have in a time like this, digital payments are also payment services, there are traditionally preferred cash for transactions. safe and secure with a better user experience,” According to a recent study by Capgemini, 80 per he explains. many who still prefer cash only cent of consumers in India in the age group of Many believe that demonetisation marked 50 to 60 years will use digital payment methods the beginning of a new era for the digital

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

RohiT KuMaR to pay for everything. I’m sure we’ll continue CEO and CMD, Xpay.life using digital methods even after the lockdown,” Parthasarathy says. The RBI, NPCI, government However, despite the rise in digital bodies, financial institutions are transactions during the demonetisation, we saw quickening the process of digital cash transactions again gaining the lost ground during the following years. According to Amit payment adoption Nigam, Executive Director and COO, Bankit, cash always comes out as king. With migrants now being able to go back to their hometowns, of catching coronavirus from handling cash is the need for cash has seen a growth spurt, undoubtedly leading to more number of digital because once back home, they would need cash transactions in India and worldwide.” for daily purchases, he feels. Bala Parthasarathy, Co-founder and “India is a very diverse country in terms of CEO, MoneyTap, agrees and adds that as we demography and geography wherein everyone navigate through the post-pandemic world of prefers cash. While a certain portion of the lockdowns, digital transactions have once again population has adopted digital payment taken centre stage. services, there are many who still prefer and “I think this pandemic will bring an overall are comfortable with cash only. Still a larger shift in our behaviour. We have already population is not self-sufficient to use the become more conscious about hygiene and digital payment methods. Even today, in the physical distancing. Avoiding touching dirty hinterlands of the country, there are towns and surfaces and minimising physical contacts villages where banking facilities are limited. are the new normal. And when such a mass That is why cash out services in the rural and behaviour shift happens, old methods of semi urban areas have seen a spike in this day-to-day transactions can’t keep up. Once period and which will continue to remain, the economy reopens, there will be a further considering cash being the backbone of our push for contactless payments instead of cash monetary system,” Nigam explains. exchanging hands, due to possible concerns He adds that even though digital payments about the virus. Digital payments will continue are gaining momentum, cash business is also ad to grow as the economy rebounds,” he explains. growing because most of the people in the Apart from the virus scare, cash transactions country still rely on cash and love the touch and have also become negligible because nearly feel of money as a note. all financial transactions have come to a halt “Hence, we have not seen any decline in the during the lockdown. Most of us are inside cash transactions. However, in the first phase our homes, and digital payment is the only of the pandemic, people were apprehensive convenient option that we have. about using cash to avoid the spread of the “This is a positive sign for digital adoption, virus. But then the need to transact took over as we are also getting used to using our phones and cash came back to becoming the king. In this period, even vendors have been persistent about using cash as well, because the same has to be used across the value chain – transportation, wholesalers, vegetable farmers etc,” he explains adding that his company has seen 10x hike in cash-out business through Aadhaar Enabled Payment System (AePS) and MiniATMs since April 2020. But according to most, the ever-evolving technology will make the future entirely digital and while cash transactions might still be part of the economy, digital payments will dominate the future. [email protected]

30 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 31 Column Invest for Guaranteed Happiness

t’s not how much money you by creating an optimal asset allocation “ make, but how much money strategy that is well aligned with your Iyou keep, how hard it works risk-return objectives. It is imperative that for you, and how many generations you judiciously split your retirement fund you keep it for.” Simply put, it does between equity and fixed income assets or not matter how much money you you might risk outliving your retirement earn. What matters most is what fund. For example, if your entire you do with that money. The reason retirement corpus is only in fixed income why most people spend a reasonable products then it is highly probable that part of their lives working for their after a certain point in time, the returns money is to ensure that they are will not be able to beat inflation thereby, able to achieve their financial goals accentuating the risk of running out of and secure a comfortable living for money as you grow older. By creating a themselves in their retirement phase. diversified retirement fund that invests in a Many of you may have already mix of equity and debt instruments you are started putting some money aside DARSHIT SHAH giving it the firepower of equities and the to create a comfortable nest egg Founder, Leader Care Finance stability of fixed income. for your retirement. However, have Mutual fund houses, as a means of you ever given any thought to what helping investing with asset allocation has would happen if you outlive your retirement fund? launched asset allocations schemes, which also invests across Due to better medicare and also increased awareness equity and debt asset classes. The benefit these funds extend about maintaining a healthy lifestyle, life expectancy in is that the allocation to asset classes is managed dynamically. India has been increasing over the last many years and Such an arrangement helps the investor to make the most is currently 69.73 years. There is every indication that of the opportunities available in each of these asset classes this will increase further in the coming years. While without having to worry about booking profits at optimal longevity is definitely something to cheer about, living a time and the concurrent tax incidences such transactions part of your retirement years in penury is not. may be attracting. In effect, such schemes become a one stop solution for investors. Keep the meter running In the long run, asset allocation as a strategy is likely to You need to make investment decisions that over ensure that your retirement fund outlives you. Additionally, the long-term generate a happiness annuity in your starting with your retirement planning early on can give you retirement years ie., they can generate enough returns an edge as it gives you the opportunity to invest in equities to last you your lifetime. Fortunately, judicious financial for a longer period of time and benefit from compounding. planning can easily take care of this. Know your investments: Paint a picture for your retired life: At the end of the day, your goals are your responsibility. Investing without a tangible goal is meaningless. It This means that you need to take the first steps and start is akin to boarding a train and not knowing your your financial journey. It also means that you should be destination. Retirement can mean different things for aware of your portfolio investments and understand their different people. For some, it could be a time to turn off risk-return profile. Additionally, when it comes to creating the alarm clocks and hang up their boots. For others, it a retirement corpus you also need to ensure that the could be the end of one journey and the start of another investments are liquid and easily accessible. The good news new one. An exciting new phase of life where they can is that you don’t need to do all this alone. You can always fulfil all those aspirations that they have so far not had consult a financial planner who can help you plan your the time or energy to pursue. Knowing how you want to investments and create an optimal portfolio strategy. spend your retirement years will help you determine how Most people would consider the gift of longevity a much money you will need in the future. blessing. The best way you can appreciate this gift is by ensuring that you enjoy the extra years without having to Create an optimal asset allocation strategy: fret over money. Start your retirement planning early on and When making an investment portfolio to fulfil your follow an asset allocation strategy that reflects your unique goals, there is always a probability that you might not requirements. If you do this, then you are guaranteed a be able to achieve them. You can minimize this risk happiness annuity in your retirement years. Cover Story

do you expect digital payments to become the The contribution of fintech startups in digitalising the de facto norm in the country at least for the short to economy is important and hence NPCI wants to act as medium term? a catalyst for bridging the gap between the established As public health emergency due to COVID-19 financial entities and the startups. By encouraging open Digital Payments, The Need Of continues to unfold, one thing is clear: the economic discussion among startups and established entities, we and human impact of this virus is significant. In hope to lead to collaborations benefiting the nation. The Hour In This Pandemic the first place, coronavirus is significantly altering how consumers shop and how they make payments. is there any new innovation or practice, which the The government is actively pushing people to adopt digital payments at Consumers are now increasingly becoming ready to industry has adopted, to increase adoption of digital present. If earlier, it was for convenience, now with social distancing amid the embrace digital payments. payments? COVID-19 crisis, it has become mandatory, says Dilip Asbe, MD & CEO, Going forward, consumers and small businesses will We are working very closely with the ecosystem players NPCI in a freewheeling interview with Arindam Mukherjee. Edited excerpts: have a greater opportunity to pay and be paid virtually, who are really looking at innovative solutions, to help without the need to physically go to a store, visit the wherever we can. We are also working on some ideas bank or handle cash. As COVID-19 forces us all to that should help people in this environment. For what kind of growth has the digital payments Chalega’ campaign, to create awareness about paying adapt to potential changes in how we live, interact and example, people have become very used to paying by industry seen in the last two months, ever since the safe with digital payments. We hope we can encourage handle our daily tasks, we can be confident that digital UPI through QR. Currently, consumers are actually pandemic and lockdown have started? a lot of people, who have been used to handling cash, payment solutions will continue to improve, providing avoiding going to the store. Similarly, merchants too are The offline-to-online switch in payments has been to switch to digital payments and cultivate a habitual more immediate access to funds, especially for those avoiding too many consumers. There are also payment long in coming, however there has been an accelerated change. The campaign drives a broader message across who need it most. However, cash is still prevalent and service providers who are coming up with innovative shift in consumer behaviour in the recent lockdown the public in terms of using UPI as an easy, safe and we hope to see a good change in next 18 to 24 months. means, such as apps which tell you about merchants scenario due to COVID-19. NPCI has been urging and instant way for digital payments. We have also tried around you and by following a link, you can buy goods reaching out to consumers and all service providers of to use certain celebrities to push the cause. We have what is the long-term picture? using UPI. Another method is that of the merchant essential services to switch to digital payment methods created UPIChalega.com microsite, where all useful The payments industry, already one of the most sending across a UPI ID and through which a payment is to stay protected. We are seeing growth in essential information on how to use UPI safely can be found. We dynamic sectors in financial services, continues to being made. These solutions were not popular earlier. categories, online donations, and entertainment on ran a challenge on Tiktok and it attracted over eight evolve, propelled by technological and operational We are going to see solutions come up and merchants the OTT medium. There has been a dip in volumes as billion views. innovations. India is becoming an exciting platform for move more into the ‘Phygital World’, so they do not have discretionary spends, and some of the segments like All these numbers are important because we feel development and testing of new payment technologies. to go completely online. People would be able to call in travel, hospitality are near to zero. our message have made an impact and we have seen an Thanks to RBI and government policies, India is treated or use some messaging mechanism to place orders or We are also working with several ecosystem players increase in the number of users for UPI and RuPay and as an innovation hub for digital payments. Emerging communicate by exchange of photographs, saying what who are looking at innovative solutions to solve the other digital payments. technologies that are being slowly adopted across the they want to buy and ultimately the payment can happen current problems. globe are likely to be soon tested in India. digitally. Somebody goes and picks up the goods or these what kind of changes have we perceived in the Consumers expect to buy anytime, anywhere, they are delivered. The first big wave was post demonetisation digital payments space in the last two months? choose, making them no longer partial to just one payment Post lockdown, it is going to be a phase where we when we saw a large scale adoption of digital In the current situation, both the customers mechanism. They are going ahead with whichever channel will still have to be cautious and take extra precautions payments. The second big wave came during and merchants are preferring to transact with and payment method suits them. Payments are also being to stay safe until the world has really gotten rid of this the pandemic and lockdown. do we see a larger social distancing. The trend is interesting on the added into new disruptive technologies such as voice situation. This period is all about creating those solutions adoption of digital payments? P2M (person-to-merchant) side as we are seeing assistants, wearables and IoT devices. and innovating to solve these needs for the public, The current situation calls for digital payments. Earlier, transactions, which are focused on critical purchases. merchants and businesses. digital payments were about convenience but in this On the P2P (person-to-person) payments, we have seen environment, it is practically mandatory from the a decline due to social distancing. On the other hand, what kind of support has the government safety point of view. That is why the government and payments like those to the staff or workers in a small provided to push digital payments? Reserve Bank of India are pushing for it continuously. company and by families to their drivers and domestic In the current lockdown situation, along with RBI We will eventually come out of the lockdown but to get helps are happening on UPI. and the government, we are requesting citizens to back to normal will take some time. Just like people will In rural areas Aadhhar-enabled Payment System. switch to digital payment methods to stay protected. continue to wear masks and wash their hands, it will be (AePS) is a critical product as DBT transfers are being NPCI and other state governments are ensuring more equally important to use digital payments. made and people need to access these funds close to vendors of essential services are on digital platforms. In the current environment of social distancing, we their houses. People are able to get the funds from The government has taken to social media to encourage have initiated #IndiaPaySafe through our on-going ‘UPI Business Correspondent (BC) outlets. the use of online payments and discourage cash usage. It is seen that customers are preferring contactless The RBI and the government are constantly reiterating cards, contactless payments in UPI or scan and pay and multiple digital payment options available for customers RBI and the govt are reiterating link-based payments. We are trying to make changes in their day to day transactions such as NEFT, IMPS, UPI in our products as we see that need and way to pay is and BBPS that are available 24*7. multiple digital payment options changing rapidly. [email protected]

32 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 33 Cover Story

yet to see construction at full-swing. This to liquidity crunch. “Government has to come will likely take some time given that migrant forward with some solution to make sure that labour may not be available as supply chain buyer should not suffer. One of the ways to Gather The Rosebuds Right Now of raw material has been disrupted in some deal with them could be giving these projects areas,” says Rangarajan. to willing financially strong developers. If you are planning to buy a residential property, now is the best time to do so However, the problem of migrant labourers However, this has to be done on case-to-case is expected to reverse once the situation basis. Else government has to step forward improves over the long term. to help realtors complete them. The situation By Anagh Pal including Tier 2 and Tier 3 cities where homes Also, most of the projects, which were these projects are in has nothing to do are more affordable,” says Mani Rangarajan, under construction have been put on hold with COVID-19, except that the pandemic hile we have seen various Group COO, Housing.com, Makaan and because of the lockdown. After the lockdown has further worsened the situation of such economic and political crises, the PropTiger. is relaxed, it will be a period of about six projects,” says Aggarwal. COVID-19 is perhaps the biggest Having said that, residential realty is likely months before those projects are completed. However, Yash Miglani, MD, Migsun Group Wever global crisis since the Great Depression to experience a huge impact, according to Hence the government has suggested that is optimistic because he feels that more than in the late 1920s. This crisis or pandemic will Avneesh Sood, Director, Eros Group. He project completion deadline be extended for the buyers, the developers would be keen change the way most businesses operate in the points out that there is a belief among many at least six months for the RERA- registered on delivering projects within authorised foreseeable future. Needless to say, real estate that they will lose jobs and would not like ones. So, it will be some time before new timelines. The government has given us would be no exception. Naturally, there will to take a long-term loan where they are not projects are launched. timeline extensions. “Now defaulting on be an effect on residential real estate in next confident about the future. Many developers “However, there is a huge amount of unsold those would mean extra costs, lockdown has 12-18 months. across the country may not be able to sustain inventory in big cities. At the higher levels of anyway put certain stress on fund allocation, Now, consumers are embracing the idea the present debts and would go bankrupt if the `75 to `1 crore, there are not too many buyers so developers would not be treading the way that their own home is the safest place to government does not come out with a relief but for houses that cost between `25 lakh to of defaulting payments. Buyers can be assured reside in. Buyers are now resorting to digital sooner than later. `75 lakh, buyers are there,” says Deo Shankar for timely deliveries,” he adds. medium to book homes. “Even labour would not come back to Tripathi, MD and CEO, Aadhaar Housing Miglani believes that the recent government “While we have seen online demand for cities if they feel safer in their villages, which Finance. So, there will be a lot of ready homes measures to infuse liquidity into NBFCs can residential real estate declining in the initial might end up increasing the cost. With labour that can be bought when the pandemic is over. also benefit developers as some of them are phase, we are seeing demand come back in unavailability, the costs of construction would Tripathi says that since affordable housing dependent on NBFCs for financing. Given the new homes, resale and rental segments. go up and the supply constraints will result in is dependent on informal local builders, these that buyers prefer ready-to-move-in projects We also believe that as companies implement an increase in the cost of materials,” he adds. projects might not be affected that much as and the fact that developers are subject to remote working, demand for residential real “While some developers who have on-site labour requirement is somewhat limited for penal clauses under RERA, we are likely to estate may spur demand in new micromarkets labour have resumed construction, we are such projects. see developers focus on completing under- “The young generation will now be inclined construction projects. towards buying property without delay. People One thing that may act as an incentive who were living on rent and were investing in to buy a house are the reduced home loan other asset classes are realising the importance interest rates at present. This has certainly of owning a home post lockdown. The focus led to a rise in enquires though it is to be now is to own a property for various reasons seen if it leads to a rise in sales. “Individuals including it being the safest investment option with regular and secured incomes will be in the long run. This change in mindset will conjugating their financial decisions for definitely increase the demand of affordable being better prepared with situations like housing,” says Pradeep Aggarwal, Founder and these. The lower interest rate will be directly Chairman, Signature Global and & Chairman - passing on the benefits to end users. Such ASSOCHAM National Council on Real Estate, Housing and Urban Development. Another factor to consider is that of Mani RangaRaJan incomplete projects. Lot of projects were Group COO, Housing, Makaan and PropTiger still under construction when the lockdown was announced and there is the concern that We are seeing demand for the problem could get worse. The real estate residential spaces come back sector has been experiencing liquidity crisis in new homes, resale and for two-three years now. Incomplete projects fall in two categories – stuck and delayed. rental segments Both these projects are facing problems due

34 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 35 Cover Story

market. Even before the coronavirus crisis Reasons To Buy a home now we were in a situation where there was no speculative pressure as such because many investors burnt their fingers and were keeping low prices, corrected from a 5-year-peak away from residential realty,” says Pankaj lowest interest rate in a long time Pal, President- Business Development and ranging from 7.15%-7.8% Strategy, AIPL. Prices were very rational if availability of price protection plans you compare with the benchmark. So, when the COVID-19 crisis is over, there will at least good deals available in ready-to-move- be no price correction because the levels had in options already corrected from the five-year-old peak. stability of real estate as an asset class Sharing his views on the same, Dhiraj Jain, Director, Mahagun Group says, “Builders are seen extending incentives to buyers even during lockdown, in order to keep sales in motion. Depreciating prices is highly unlikely due to various factors including hike in values of raw materials and exodus of migrant labourers.” Also, developers will be working under the dual pressure of timelines and guidelines, leading to extra funds and time from their end, he adds. Rangarajan says that we have not seen significant price appreciation in most Tier 1 cities except Hyderabad where prices have increased by double digits over the last two years. At the same time, developers have incurred higher expenses as construction costs, regulatory compliance costs and wages have increased. In this scenario, while we may see some softening in prices, we are not likely favourable scenarios might fuel demand for to see prices declining significantly all across ad homebuying to a certain section of end users, the market. but this cannot be a definitive pattern across a However, he adds that a homebuyer demography or location,” articulates Miglani. can expect numerous incentives. Several Another question is whether residential developers including some top brands such property prices will fall once the pandemic as Godrej and Brigade have already launched is over? Here, one needs to understand that several schemes for homebuyers including the the way the real estate market was before possibility to book units on a token amount the coronavirus crisis holds a key to how it that will be partially or fully refundable will behave once things get normalised. “The on completion within a certain period of market was a very stable one and an end users’ time from the end of the lockdown. Some developers have launched a price protection scheme, where buyers will be compensated yash Miglani for any price reductions for a certain period of MD, Migsun Group time from the date of booking. “It is a good time to buy a home. The whole Government has given us ecosystem supports the buying decision,” says timeline extensions; therefore Pal. Therefore, if you had plans for buying a house and are sure about your financial buyers can be assured for stability, post the pandemic, go ahead and buy timely deliveries the house of your dreams. [email protected]

36 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 37 Column Asset Allocation as a strategy helps in weathering financial markets storms

etc). The goal of asset allocation is a specific category of fund termed as is to minimize volatility in one’s asset allocation funds which can prove to portfolio while maximizing return. be very helpful. Asset Allocation funds The process here involves dividing help to address the need to re-balance your investment among various asset allocation to various asset classes based categories that do not all respond to on their relative attractiveness. Many of the same market forces in the same such funds tend to model based when way at the same time. it comes to their equity investments. Stocks/equities do well under Such an approach ensures that there is vastly different conditions compared no room for emotional biases when it to fixed income/debt investments. comes to equity market investments. Equity market tends to generally They also help an investor to ‘buy low perform well in expansionary and sell high’ which is achieved by economies. On the other hand, increasing allocation to equities when bonds tend to generally perform the valuation is attractive and booking Koushik Ketharam well in contracting economies. Given profits in a staggered manner as the that the economic conditions are not market begins to turn expensive. Founder, Intelli360 Wealth static in nature; the attractiveness of By sticking to the discipline of asset Advisors, Chennai & Dubai an asset class will tend to vary from allocation, an investor can be rest time to time. assured that one’s investment portfolio he on-going spread of the As a result, if your investments is not adversely impacted by volatility COVID-19 pandemic has are concentrated in a particular asset in any one particular asset class. In Trattled the equity markets class which may not be performing effect, asset allocation helps improve the world over. The aftermath has very well at a particular point in overall portfolio performance and keeps resulted in sharp corrections and time, the entire portfolio is bound financial planning intact. It has been recovery within a very short span of to be impacted. Having a diversified proven over years that asset allocation time world over. At such instances of portfolio with holdings across asset as a strategy is helpful in weathering sharp market movements, it is natural classes ensures that the gains in a financial markets storms. One study for retail investors to panic. After all, particular asset class will help offset suggests that more than 91.5% of a for many retail investors who entered some of the losses in another asset portfolio’s return is attributable to the market towards the end of 2018, class, thereby helping to reduce the its asset allocation. Individual stock the current level is quite close to negative impact of the laggard on selection, market timing and several the time of their first investment. the overall portfolio. other factors jointly accounted for less Further, they may have been However, for a lay investor, than 8.5% of a diversified portfolio’s encouraged to buy into the fall, as managing asset allocation with return. a means to gain from the prevailing periodic rebalancing may seem low asset prices. While the advice is easier said than done, as regular Take Away true in principle, it might be difficult monitoring of the valuations of Since determining an appropriate asset for a retail investor to determine if different asset classes is not an easy allocation is the single most important the market fall has ceased. task given the dynamic nature of investment decision because of its high So what should such an investor markets. Given this predicament, impact nature, it is important to get do? Asset Allocation is the answer maintaining optimal asset allocation this right. Seek the help of a financial to this worry which may be afflicting through mutual funds may prove to planner who can help you reach optimal millions of investors. be an optimal approach for investors. asset allocation as per your financial Asset allocation is the process Mutual funds allow professional fund goals. Also, be sure to periodically of deciding how to divide your management of the money invested review your portfolio with the financial investment across several asset and adopt scientific valuation models planner to ensure that your chosen categories. The asset categories here to determine the relative valuations mix of investments continues to serve can be equity, debt and/or gold (or across the asset classes. your evolving investment needs as your maybe real estate, commodities, Within mutual fund space, there circumstances change over time. Debt MFs

depth also very poor. If there is a peers. In such a strategy the idea Know The Risks In Debt Mutual Funds downgrade in any corporate debt is to invest in high yielding bonds paper, the instrument immediately and stay invested till they mature. LAKSHMI IYER It is better to understand the nature and play safe while investing in these debt instruments becomes highly illiquid and will This is an appropriate approach CIO (Debt) & Head find no takers, this makes the life to be practiced in such funds Products, Kotak bit difficult,” explains George Heber or strategies as the underlying Mahindra AMC Joseph, CEO and CIO, ITI MF. securities tend to be less liquid Lower rated papers usually have in nature making it difficult to Focus on the asset very low liquidity as they cannot be liquidate them in the interim. quality and liquidity and sold immediately in the market at a Due to this nature of these fair valuation in India. During times funds, FT found it difficult to meet refrain from tracking of stress, the liquidity for such the redemption pressure in the NAVs on a daily basis lower rated papers becomes even recent times. “Credit-risk funds more tight as everyone becomes are debt funds that have at least 65 risk averse and wants to lend only per cent investments in less than the probability of default also to higher rated corporates. As per AA-rated paper. Credit risk is the stands higher as compared to a the Morningstar note dated April risk of default in an underlying sovereign/AAA/AA+ issuer. “Top 24, the FT funds were run with debt security that may arise from rated papers AAA & AA+ rated a clear focus towards a credit (or a borrower failing to make the (A1+ for short term instruments) accrual) strategy, with significantly required payments (principal or have good trading volumes higher exposure to AA and A rated interest),” says Deepak Khurana, and offers sufficient liquidity to instruments as compared to their Performance Director for Fund investors. Lack of liquidity in low Ratings and Distribution, Asia rated papers is mainly because Pacific Region at Refinitiv. major financial institutional buyers Within the debt MF universe, like banks, insurance companies Lower rated papers credit funds inherently carry high have certain investment restriction cannot be sold at a credit risk as typically they invest in with respect to dealing in below fair valuation lower credit quality papers where than investment grade papers.

Returns From Debt Mutual Funds Across Categories (%)

Debt Fund Category 3 Months 1 Year 3 Years 5 Years 10 Years

By Himali Patel debt MF schemes. Although the worst hit with a net outflow of Banking and PSU 1.85 11.09 8.06 8.23 8.53 debt-oriented categories witnessed `19,239 crore during the month. Corporate Bond 1.70 8.81 7.15 7.66 7.84 he turmoil in the debt funds a net inflow of `43,432 crore in Investors in credit risk funds ran space along with illiquidity April, the credit risk category, for exits after FT MF incident. Credit Risk (6.18) (5.31) 0.69 3.71 6.89 issue in the credit markets given its nature, was one of the The uncertainty triggered Dynamic Bond 2.02 9.79 6.54 7.47 8.29 Thas affected since the bankruptcy by these events in the debt of IL&FS in September 2018. markets has not only restricted Floater 1.36 8.12 7.27 7.56 7.95 The onset of COVID-19 and the the fund houses’ ability to sell FMP 0.94 4.84 6.21 6.75 7.72 subsequent lockdown impacting the securities but has made GEORGE HEBER the businesses has only added fuel JOSEPH investors question fund houses Gilt 3.74 14.85 8.33 8.87 8.63 to the fire in the credit market. whether to continue investing Liquid 1.26 5.62 6.47 6.83 7.80 Further, in April 2020, Franklin CEO and CIO, in debt funds or not. “When the ITI MF Templeton (FT) Mutual Fund economy is at the bottom levels Low Duration (0.55) 0.30 4.50 5.79 6.98 announced winding up of six of its and big crisis situations happen, Medium to Long Duration 2.16 10.01 6.41 7.30 7.65 credit-focused debt schemes. This During a downgrade in like what we are facing today, the was a rude shock to the entire debt corporate debt paper, it corporate bond markets become Money Market 1.66 7.27 7.07 7.35 8.03 mutual fund investors, who rushed very illiquid. The price discovery Short Duration 0.87 4.92 5.50 6.50 7.41 to withdraw their investments becomes highly illiquid and the trades happen mostly in from credit funds as well as other and finds no takers OTC market which makes the Source: Value Research; Note: Data as on 14th May 2020

38 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 39 Debt MFs

Returns From Debt Mutual Funds Across Categories (%)

Debt Fund Category 3 Months 1 Year 3 Years 5 Years 10 Years

38 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 39 Debt MFs

Relatively lesser interest by market DEEPAK the investors. That said, retail participants dry up the liquidity KHURANA investors must look at the groups Debunking The Myths Of Debt Mutual Funds especially in such uncertain times,” Performance Director, or business houses these funds says Deepak Jasani, Head Retail Fund Ratings & are investing in, as it helps Debt funds are risk free Research at HDFC Securities. Distribution- Asia Pacific them understand the group’s Investment Debt mutual funds are Region, Refinitiv As per the Motilal Oswal AMC solvency, credit and finance subject to market risk and there is report on Industry flow Insights, parameters. They should look at no guarantee on principal or returns. Fixed Income experience is not as Credit risk is risk of liquidity, volatility, predictability There have been many cases were a bad is made out to be, as there are default in debt security, and returns in that order while negative return arises from a default isolated instances of disastrous investing in debt funds, feel by the issuer or illiquidity issues. For performance but between 7 per when the borrower fails experts. instance, a fund manager can lose his cent to 10 per cent post tax returns to make payment “As most debt fund investors entire capital, in case of any default, over last 3, 5 and 10 years is not a are conservative - low duration/ by the institution in whose bonds the bad outcome. short term / Banking PSU money has been invested in. If one looks at the table of debt funds that suits their own risk categories with optimal exposure mutual fund across categories profile. But the main flaw in the to AAA rated paper would be the Debt funds will never give return has to be seriously considered while making returns (See Visual), credit risk system is that even today many ideal option. Investors investing negative returns debt fund investments, which is where people make fund has not given additional investors think that debt funds are in search of higher return It is important to note that Net Asset Value (NAV) the biggest mistake. Especially in debt funds, where returns, gilt funds have beaten completely risk free. Investment (with higher risk) can consider of debt funds tend to move up and down, depending there is no big upside possible when someone is corporate bond and credit risk in debt MFs are subject to market dynamic / credit risk funds. on the price movement of securities, being held by offering very high returns. It has to be weighed funds over the 10-year period. Also, risks and there is no guarantee on Doing a Systematic Investment the fund. Bond prices in turn, are affected by interest against the risk taken also,” says George Heber it would be unfair to put all the either the principal or returns as Plan (SIP) in gilt funds can be rate movements, as both bond prices and interest Joseph, CEO/CIO, ITI MF. blame on fund managers during well. Fund managers invest money considered as a part of long-term rates, are inversely related. “Any adverse movement such credit crisis, especially when in fixed income securities like investment goal. Shorter duration in interest rates can lead to a fall in bond prices and The higher the return the better the fund there are instances of mis-selling bonds and debentures issued by funds, especially overnight and consequently a fall in the debt fund NAV,” says Rahul Making investment based upon past performance and mis-buying of the products corporates, financial institutions liquid funds, are a safe bet for Jain, Head- Edelweiss Personal Wealth Advisory. should not be the only parameter to invest in a without understanding one’s own and governments. short-term parking and capital debt fund. Look for details. Higher returns should risk appetite of risk involved in This is essentially lending done protection needs,” explains Jasani. All debt funds are the same not arisen from lower credit risk debt Instrument such products. to these institutions by mutual That said, as much as risk In reality there are 17 categories of debt mutual in the portfolio that is accounted on accrual basis How many investors would funds and hence, there exists a profile is important it should be funds. All have different levels of risk attached to instead of actual receipts. “The economic situation is truly know that there are 17 possibility of default and credit risk aligned with one goal and time them. “Objectives of different debt funds may be dynamic and therefore the returns will be completely categories of debt mutual funds or default risk. Yet another risk frame. Even before redemption, different, some may focus on quality and some on dependent upon the quality of portfolio and not past as per classified by the regulator, that investors need to keep in mind investors should analyse the returns and therefore may take various degree of risk performance,” points out Modi. Securities and Exchange Board is interest rate risk. This risk is downside risk in case of mark that may not be appropriate for many Investors,” says of India (Sebi). This ranges from specific to debt funds and plays out down of the security or in case of Jimeet Modi, Founder and CEO, Samco Securities. Mark to market loss is permanent long duration funds to overnight when interest rates begin to move closure of the schemes. Hence investors need to understand the risks The impact on debt funds is limited to Mark-to- funds to floater funds and that up. “Since bond prices and interest “A short-time frame leaves associated with the various schemes in which they Market (MTM) impact when a security is downgraded, is why it is crucial for investors rates are inversely proportional to little room for taking risks. One have invested. Investors should stay true to their as the price of the security is adjusted downwards to choose the right kind of debt each other – when interest rates need not be in debt funds to asset allocation. Maintaining high credit quality to account for the rating change (in bonds, yield and go up bond prices fall and vice earn like saving banks account portfolio in current environment is of utmost price move inversely, where in case the yield goes up versa. This impact on bond prices returns. Their time frame should importance. price comes down and vice versa. Hence, during a is reflected in the Net Asset Value align with that of the funds downgrade the yield goes up as buyers demand more (NAV) of mutual funds. Besides, they choose. It would be wise Investors can buy a debt fund and forget rate to buy a downgraded security. In case of a default about it DEEPAK JASANI with these two pertinent risks in to stay away from credit for by a company, the value of that security may have to be debt funds, investors should also the next few quarters given the The reality is that like all investments, debt funds written down according to regulatory requirements. Head Retail Research, ensure returns from these funds economic situation and risk of need to be monitored and reviewed regularly for This may lead to permanent loss of principal/interest, HDFC Securities (adjusted for taxes) are higher defaults. Credit risks may well credit and interest rate risks. And in that context, till the funds are recovered (if any) from the defaulting than inflation, this is better known be prevalent in a low-duration debt funds require more active management company. “However it not a permanent loss if there Relatively less interest as inflation risk,” says Rahul Jain, or ultra-short fund. So, knowing when compared to other traditional fixed income is no credit default. MTM loss/gain happens even by market participants Head, Edelweiss Personal Wealth the quality of a portfolio is securities. Safety, quality, and liquidity are very if yields go up and down,” says Lakshmi Iyer, Chief Advisory. important,” says Vidya Bala, Co- important aspects of debt funds. Safeguarding the Investment Officer (Debt) & Head Products, Kotak dry up liquidity in Each of these risks need to be Founder, PrimeInvestor.in. downside is extremely necessary. “Risk adjusted Mahindra AMC. uncertain times defined clearly and explained to The other thing an investor

40 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 41 Debt MFs

needs to be aware of is the economic activities it was only allocation of the portfolio towards corporates who were taking out each of the corporate groups. One money for cash management. As VIDYA BALA should take care that no scheme the uncertainty is looming large has a large allocation towards with respect to economic activities Co-Founder, a particular corporate group. the panic redemption for high PrimeInvestor.in “Retail Investors should diligently net-worth individuals and retail look at the latest holding of the investors have increased. However, Credit risks could be debt mutual fund scheme and it is only when the lockdown is prevalent in the low- assess the quality of the issuers, lifted that normalcy can be seen concentration of the portfolio, in the debt market. Till then it is duration or ultra-short deproteinise coupon rates of any crucial to stay invested. “In any funds and should restrict themselves scenario, it is extremely important to few categories schemes with for investors to stay the course of high quality portfolios apart from the intended investment tenure. normal functioning of markets overnight and liquid funds,” says Panic only causes pain. If one has and growth of debt MFs, cites Jimeet Modi, Founder & CEO, done sufficient due diligence while AMFI. The Prime minister’s Samco Securities. making investments, why succumb announcement of economic During the absence of the to panic, especially when isolated stimulus package of `20 lakh cases don’t form the rule. Hence crore on May 12 will be a big focus on asset quality and liquidity positive for the financial sector. and refrain from tracking NAVs on However, these measures a daily basis,” expresses Lakshmi would be of a great help for the RAHUL JAIN Iyer, CIO -(Debt) & Head Products, economy, but the bond markets Head, Edelweiss Kotak Mahindra AMC. have become more anxious about Personal Wealth As per the AMFI the how the government will fund this Advisory redemptions have slowed down kind of spending. substantially in credit risk funds “The current pandemic and Investors should because of a special window of subsequent lockdowns have ` ensure returns from 50,000 crore provided by the adversely impacted economic RBI. Further measures taken by activity. This will impact these funds are higher the Sebi deepen bond markets government revenues, leading to than inflation over the years and have allowed higher fiscal deficit. This deficit will largely be tackled by higher borrowings that in turn will push up interest rates. This will negatively impact bond prices and therefore, also debt fund NAVs,” says Jain. As per experts, debt fund investors should not go by the belief - buy a fund and forget about it. For the investors it has become more imperative than ever to understand and keep in mind the risk factor associated with various debt mutual funds. As debt funds require more active management when compared to other traditional fixed income securities, your portfolio should be best evaluated in consultation with an expert. [email protected]

42 Outlook Money June 2020 www.outlookmoney.com Column Things To Look For When Investing In A Credit Risk Fund

kept the investors on edge. They the industry. Owing to the process rigour have been successful in achieving the fund house enjoys an unmatched this enviable feat due to the stringent track record in credit management and processes following when it comes has never been a part where the fund to on boarding a credit into their house was not able to recover dues. portfolio. This shows the importance of the credit Even though credit is one area assessment processes followed. which investors would like to keep away from owing to the cloud of Adequate portfolio negative news surrounding them, diversification this space provides an attractive An ideal fund is the one in which the investment opportunity in the investments made are spread across prevailing market environment. companies from diverse sectors. Pallav Bagaria The elevated yields and relatively While the asset side diversification higher risk reward benefit prevailing can be gauged through the monthly Director, Sapient Wealth Advisors currently makes credit an interesting portfolio declared through factsheet, and Brokers Pvt Ltd space to invest in. currently, there it is important to seek the details of is significant divergence which is the liability side. Some fund houses, in he Indian debt space, prevalent between G-Sec/AAA yields order to ensure diversity, has capped the especially the credit market, Vs. AA/A yields. The reason for such quantum of investment possible by a Thas been under pressure divergence could be attributed to the single investor. post Franklin Templeton’s abrupt credit concerns, lack of transmission decision to close six of its debt of rate cut and due to flight to safety. Chasing ‘yield’ schemes. This episode has led to Hence, one can consider investing in Watch out for fund houses which have a crisis of confidence among the credit schemes which invest in higher been chasing higher yields by investing debt mutual fund investors. Such spread assets and earn the higher in lower quality debt paper. This is what instances sharply bring into focus the carry over repo rate. often leads to accidents in portfolios importance of understanding a fund From an investor’s perspective seen in credit space from time-to-time. house’s debt management practice it is important to stay invested in a philosophy. When investing into a fund which has managed to weather Check for side pocketing of debt fund there are two ways through the various storms seen in this space portfolio which alpha is generated – by taking successfully, over the years. For the Check if there have been instances of duration calls and/or credit calls. ease of fund selection, following are side pocketing historically. This will For Franklin, it was all about taking some of the pointers to look for in a indicate how robust the portfolio was aggressive credit calls. credit risk fund. and how has the fund been managed When it comes to taking a credit during turbulent times, as compared to call, the credit investment team Credit assessment practices: what it is today. carries out the required due diligence This is the first and foremost point and makes an informed investment to watch out for. There are fund Performance track record decision. In India, today, among the houses where the credit on boarding While past returns is no indication top 10 mutual fund houses, ICICI decision is taken by an individual; towards future returns profile, the past Prudential Mutual Fund is the fund manager. In some other fund performance of a debt fund can provide only one which can claim that they houses, the decision is taken by an a fair idea on how consistent the fund successfully shielded investors from independent credit research team has been when it comes to generating bad investments since the IL&FS where the decision is vetted through returns. For example: Over the past one fiasco which occurred towards the the collective acumen of various year, within a debt category, there have end of calendar year 2018. The experts who are a part of that team. been instances of schemes generating fund house did not have a single For example: ICICI Prudential has negative returns while others have paper which has either defaulted or one of the largest and the most managed to generate positive returns downgraded which in the past has experienced credit research team in for its investors. Invest

all across has altered the world’s World Official Gold holdings As Of May 2020 perception towards everything. % of Yellow Metal To Reap Golden Harvest Fear of an unknown future has tonnes permeated so deep in the social reserves** Industry experts believe that gold prices will surpass `50,000 mark in the next 12 months fabric that everyone continues to united States 8,133.5 78.3% believe the worst is yet not over. 3,364.2 74.3% The sliding global economy has Germany By Aparajita Gupta and left people feeling anxious about iMF 2,814.0 1) Yagnesh Kansara the huge monetary “stimulus” that 2,451.8 69.5% would cause fiat money supply to italy he faster engulfing of increase without corresponding France 2,436.0 63.4% world population by novel growth in productivity. Needless to 2,299.2 21.1% Coronavirus (COVID-19) say, that owing to such activities, russian Federation Tcontagion has spiked the price of investors’ search for a safe haven china, p.r.: Mainland 1,948.3 3.2% the yellow metal globally. Apart have sharply enhanced gold’s status 1,040.0 6.3% from the deadly virus, Sino-US as an investment tool. Switzerland trade war has played a crucial role Gold being a highly liquid and Japan 765.2 2.9% behind gold price skyrocketing. probably the best-performing asset 641.8 6.8% Now the pandemic has wreaked class year-to-date, lends itself well india havoc on the stock markets around to liquidation during uncertain Source: World Gold Council the world, causing major indices to times; helps investors raise cash and crash to their multi-year lows. This counterbalance losses stemming recycling, refining, manufacturing crore—a drop of 27 per cent from has had a direct bearing on gold from other asset classes. This is a or selling and domestic prices are Q1 2019 (`37,070 crore). Jewellery prices, causing them to rise to an critical role that gold plays and the at a steep discount to international demand was at 11-year low. astronomical high. reason why it is a preferred tool for prices. Yet, even at this level, INR/ While the total investment In fact, some experts are of the diversification. rupee gold prices are at life-time demand for Q1 2020 was down by 17 opinion that gold prices are likely to Sharing his views on the high.” says per cent at 28.1 tonnes in comparison surpass `50,000 per 10 grams mark current price trends and expected Demand for gold in India for with Q1 2019 (33.6 tonnes), total gold in the next 12 months. performance of gold, Somasundaram January-March quarter (Q1) 2020 recycled in India in Q1 2020 was 18.5 The upheaval caused by the virus, PR, Managing Director, India, was at 101.9 tonnes, down by 36 tonnes, as compared to 16.1 tonnes leading to economic lockdowns World Gold Council says, “India as per cent as compared to overall in Q1 2019, a rise of 16 per cent a price-taker, is influenced by these Q1 demand for 2019 (159 tonnes) compared to Q1 2019. global factors and in addition, rupee due to the economic uncertainties However, why are investors depreciation fuelled INR/rupee price brought in by the novel Coronavirus turning towards the yellow metal increase. However, gold market is outbreak, said World Gold Council in times when the market is going practically frozen with no imports, in its latest report. through a turmoil? Total jewellery demand in India “The main reason behind during the quarter was down by 41 investors turning towards gold at per cent at 73.9 tonnes as compared times of market crisis is the fact that to Q1 2019 (125.4 tonnes). The value the yellow metal would not lose its of jewellery demand was `27,230 worth completely. It may decline or increase, depending on the demand; however, it would not lose all of its value. The current market scenario Archit GuptA has caused a spike in the gold prices of late as both individuals Founder and CEO, and institutional investors have ClearTax turned towards gold. The inflow of funds into listed gold ETF has been Investors are turning steady from all regions,” says Archit towards gold because Gupta, Founder and CEO, ClearTax. According to the World Gold the yellow metal will Council’s global gold-backed ETF continue retain its worth flows April 2020 report, globally,

44 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 45 Invest

44 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 45 Invest Gold gold ETFs added 170 tonnes – net portfolio invested in Gold ETF as inflows of $9.3bn (5.1 per cent) – in Being liquid, gold lends an insurance against the possible April, boosting holdings to a new demand volatilities expected in the global all-time high of 3,355 tonnes. Assets itself well to liquidation financial market,” he adds. under management also reached a during uncertain times Praveen Singh, AVP - new record high of $184 billion as Fundamental Research, Sharekhan by gold in US dollars moved higher by up because more central banks are BNP Paribas says that global interest 5.8 per cent. increasing their reserves? rates have fallen sharply as global Somasundaram says ETF inflows “No, that is not the case. Gold central bankers have cut around 750 in India increased by four tonnes price movements cannot be basis points of rates to combat the and Sovereign Gold Bond issued attributed to Central bank buying global economic slowdown. around Akshaya Tritiya saw a though this trend further reinforces “The major central bankers are significant response. gold’s diversification and safe haven forced to adapt accommodative “However, India is primarily a properties. Central banks have been monetary policies and support retail gold market, there is very net buyers for over a decade now the crumbling economies with little institutional buying though and more recently, in 2018 and 2019, everything that they can, which allocations from mutual funds as bought 650+ tonnes annually, which includes quantitative easing too. an alternative asset could rise. But is a multi-decade high since removal Talks of helicopter money are not retail jewellery market will be the of gold standard. The motivations really rare anymore. Although driving force of Indian gold market for buying gold differ between physical demand for gold remains for the foreseeable future, with bleeding red, market participants cent last year and this year again has average returns of approximately countries. Central banks have weak in key consuming nations digital engagement picking up some liquidated their positions from gold given ~10 per cent returns,” he adds. 9 per cent over the past 10 years, three main objectives when they like India and China, we are seeing momentum,” he adds. in order to sit on cash in this difficult Comparing the average price of comparable to stocks and more are thinking about reserve assets: strong physical demand in the US, Adding on to it, Navneet Damani, time. In the previous year (2019) gold last year, `35,220/10gms, to than bonds and commodities,” adds to keep their assets safe, to keep Canada and Australia,” he adds. Vice President, Commodities gold prices have rallied over 25 per the present rate of `47,200/10gms, Somasundaram. Gupta says gold is their assets liquid and to generate Since people are money-starved Research, Motilal Oswal Financial gold has appreciated over 34 per expected to float between `45,000 returns. Gold can help to meet all due to the tight economic health, Services, says, “There has been cent. Comparing the gold price and `47,500 levels in this fiscal year. three policy objectives,” clarifies would there be more recycling of old series of events lined one after of last year around this time, Echoing similar thoughts, Somasundaram. than fresh buying this year? the other, which pushed the gold `31,496/10gms, to the present Damani says, “Since we have seen Pankaj Bobade, Head - Somasundaram says it is difficult prices to its highs, apart from SOMASuNDArAM rate of `47,200/10gms, gold has such a good run up and liquidation Fundamental research, Axis to predict as several factors are other uncertainties, outbreak pr appreciated nearly 50 per cent. in other assets classed, there could Securities highlights as the Central involved with no clarity such as of COVID-19 since the start of Managing Director, India, “If we look at the average annual be bouts of correction in the near banks of developed nations have guidelines by authorities on in-store this year has petrified the market World Gold Council return of gold since 1981, it was term. But the medium-term picture been on easing spree to fight buying post the lock down period, and increased distress in major of 10 per cent; it has outpaced the still looks very promising and expect the economic contraction, fiat imports, logistics issues, return of economies globally.” Retail jewellery market Indian Consumer Price Index (CPI) gold on the Comex to above $2,000 currencies are expected to face karigars and such. “As panic increase demand for will be the driving force that averaged over the period at and domestic gold prices could pressure in the near future. In such a “The scale of economic gold does too, although witnessed in 7.35 per cent. In India, gold’s dual target upwards of `52,000 over the scenario, gold is likely to emerge as a disruption is not clear yet and when the recent past amidst the lockdown of Indian gold market position as an investment and for next 12 months.” safe-haven asset. it does, consumer sentiment could situation and all other asset classes for foreseeable future adornment has allowed it to deliver Shekhar Bhandari, Senior “One should have a part of the change and policy reactions too. Executive Vice President and Normal monsoon as predicted by Business Head, Global Transaction IMD could be positive. Recycling india Gold Demand corresponding period Jan-Mar 2019/2020 Banking & Precious Metals, Kotak NAvNeet and loans against jewellery could rise Mahindra Bank says, “We can DAMANi significantly following a combination Q1 ‘19 Q1 ‘20 % Growth expect gold prices to continue the of high gold prices amid stress on January – March 2019 January – March 2020 volume Vice-President, rally, to settle above `5,000 a gram Commodities Research, household finance,” he adds. Gold Demand by the end of this financial year, Motilal Oswal Financial As every investor is going tonnes `crore $bn tonnes `crore $bn tonnes `crore $bn primarily driven by the COVID-19 Services through the turbulent times and crisis and its significant impact on looking for a ray of hope, investing Jewellery 125.4 37,070 5.3 73.9 27,230 3.8 -41% -27% -29% the global economy.” A series of recent in the yellow metal can reap golden investment 33.6 9,940 1.4 28.1 10,350 1.4 -17% 4% 1% Gold is a hedge against events one after the harvest for many of them in the uncertainty and a good investment longer term. total 159.0 47,000 6.7 101.9 37,580 5.2 -36% -20% -22% vehicle, especially in the current other have pushed gold [email protected], Source: World Gold Council scenario. But is gold price shooting prices to its highs [email protected]

46 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 47 Invest Gold gold ETFs added 170 tonnes – net portfolio invested in Gold ETF as inflows of $9.3bn (5.1 per cent) – in Being liquid, gold lends an insurance against the possible April, boosting holdings to a new demand volatilities expected in the global all-time high of 3,355 tonnes. Assets itself well to liquidation financial market,” he adds. under management also reached a during uncertain times Praveen Singh, AVP - new record high of $184 billion as Fundamental Research, Sharekhan by gold in US dollars moved higher by up because more central banks are BNP Paribas says that global interest 5.8 per cent. increasing their reserves? rates have fallen sharply as global Somasundaram says ETF inflows “No, that is not the case. Gold central bankers have cut around 750 in India increased by four tonnes price movements cannot be basis points of rates to combat the and Sovereign Gold Bond issued attributed to Central bank buying global economic slowdown. around Akshaya Tritiya saw a though this trend further reinforces “The major central bankers are significant response. gold’s diversification and safe haven forced to adapt accommodative “However, India is primarily a properties. Central banks have been monetary policies and support retail gold market, there is very net buyers for over a decade now the crumbling economies with little institutional buying though and more recently, in 2018 and 2019, everything that they can, which allocations from mutual funds as bought 650+ tonnes annually, which includes quantitative easing too. an alternative asset could rise. But is a multi-decade high since removal Talks of helicopter money are not retail jewellery market will be the of gold standard. The motivations really rare anymore. Although driving force of Indian gold market for buying gold differ between physical demand for gold remains for the foreseeable future, with bleeding red, market participants cent last year and this year again has average returns of approximately countries. Central banks have weak in key consuming nations digital engagement picking up some liquidated their positions from gold given ~10 per cent returns,” he adds. 9 per cent over the past 10 years, three main objectives when they like India and China, we are seeing momentum,” he adds. in order to sit on cash in this difficult Comparing the average price of comparable to stocks and more are thinking about reserve assets: strong physical demand in the US, Adding on to it, Navneet Damani, time. In the previous year (2019) gold last year, `35,220/10gms, to than bonds and commodities,” adds to keep their assets safe, to keep Canada and Australia,” he adds. Vice President, Commodities gold prices have rallied over 25 per the present rate of `47,200/10gms, Somasundaram. Gupta says gold is their assets liquid and to generate Since people are money-starved Research, Motilal Oswal Financial gold has appreciated over 34 per expected to float between `45,000 returns. Gold can help to meet all due to the tight economic health, Services, says, “There has been cent. Comparing the gold price and `47,500 levels in this fiscal year. three policy objectives,” clarifies would there be more recycling of old series of events lined one after of last year around this time, Echoing similar thoughts, Somasundaram. than fresh buying this year? the other, which pushed the gold `31,496/10gms, to the present Damani says, “Since we have seen Pankaj Bobade, Head - Somasundaram says it is difficult prices to its highs, apart from SOMASuNDArAM rate of `47,200/10gms, gold has such a good run up and liquidation Fundamental research, Axis to predict as several factors are other uncertainties, outbreak pr appreciated nearly 50 per cent. in other assets classed, there could Securities highlights as the Central involved with no clarity such as of COVID-19 since the start of Managing Director, India, “If we look at the average annual be bouts of correction in the near banks of developed nations have guidelines by authorities on in-store this year has petrified the market World Gold Council return of gold since 1981, it was term. But the medium-term picture been on easing spree to fight buying post the lock down period, and increased distress in major of 10 per cent; it has outpaced the still looks very promising and expect the economic contraction, fiat imports, logistics issues, return of economies globally.” Retail jewellery market Indian Consumer Price Index (CPI) gold on the Comex to above $2,000 currencies are expected to face karigars and such. “As panic increase demand for will be the driving force that averaged over the period at and domestic gold prices could pressure in the near future. In such a “The scale of economic gold does too, although witnessed in 7.35 per cent. In India, gold’s dual target upwards of `52,000 over the scenario, gold is likely to emerge as a disruption is not clear yet and when the recent past amidst the lockdown of Indian gold market position as an investment and for next 12 months.” safe-haven asset. it does, consumer sentiment could situation and all other asset classes for foreseeable future adornment has allowed it to deliver Shekhar Bhandari, Senior “One should have a part of the change and policy reactions too. Executive Vice President and Normal monsoon as predicted by Business Head, Global Transaction IMD could be positive. Recycling india Gold Demand corresponding period Jan-Mar 2019/2020 Banking & Precious Metals, Kotak NAvNeet and loans against jewellery could rise Mahindra Bank says, “We can DAMANi significantly following a combination Q1 ‘19 Q1 ‘20 % Growth expect gold prices to continue the of high gold prices amid stress on January – March 2019 January – March 2020 volume Vice-President, rally, to settle above `5,000 a gram Commodities Research, household finance,” he adds. Gold Demand by the end of this financial year, Motilal Oswal Financial As every investor is going tonnes `crore $bn tonnes `crore $bn tonnes `crore $bn primarily driven by the COVID-19 Services through the turbulent times and crisis and its significant impact on looking for a ray of hope, investing Jewellery 125.4 37,070 5.3 73.9 27,230 3.8 -41% -27% -29% the global economy.” A series of recent in the yellow metal can reap golden investment 33.6 9,940 1.4 28.1 10,350 1.4 -17% 4% 1% Gold is a hedge against events one after the harvest for many of them in the uncertainty and a good investment longer term. total 159.0 47,000 6.7 101.9 37,580 5.2 -36% -20% -22% vehicle, especially in the current other have pushed gold [email protected], Source: World Gold Council scenario. But is gold price shooting prices to its highs [email protected]

46 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 47 Stock Pick Well-Insulated An Opportunity To NTPC Britannia Industries From Lockdown CMP: 90.9 CMP: 3165.7 PE: 6.81 Gain Market Share PE: 55.41 NTPC promises a stable performance, say experts *As on May 22, 2020 Britannia Industries to benefit post pandemic *As on May 22, 2020

By Himali Patel consolidated portfolio. NTPC has Why Buy hile analysts expect India “The company, in last five years, Why Buy a target to have 40 per cent of the Continued capacity expansion Inc to report a muted has seen its operating cash flow Company’s market share gain ndia’s largest power utility portfolio from the non-thermal bodes well with the investors fourth quarter (Q4) grown at 12 per cent CAGR and reflects strong in-market execution company, NTPC, which aims segment by 2032,” says an analyst at Significant improvement in coal earnings,W they also feel Q1 FY2021 Earnings Before Interest, Tax, capabilities to become a 130-Gigawatt ICICI Direct. availability will hike operating could be the best time to accumulate Depreciation and Amortisation Large distribution network with I(GW) company by 2032 led by its On the financial front, NTPC profit margins quality stocks of the companies based (EBITDA) margin has almost innovative products aided by strong robust regulated business model, posted a decent numbers for third on a scenario post the lockdown. doubled to 15.7 per cent. Have brands bodes well for the investors would have a negligible impact of quarter (Q3) for FY2020. The Watch Out For One such company leading in a negligible debt with debt/equity of COVID-19 believe analysts. The Earnings Before Interest, Tax, Extended lockdown could impact food-products category is Britannia 0.04x and has good cash position of Watch Out For nationwide lockdown has led India’s Depreciation and Amortisation upcoming commercialisation Industries. The company is into `850 crore as on FY2019,” says an Slowdown can impact the company’s power demand nosedive by 20- (EBITDA) margin was 31.9 per plans manufacturing and sale of biscuits, analyst at Geojit Financial Service distribution reach and margins 25 per cent Year-on-Year (Y-o-Y). cent and expanded by 380 basis bread, rusk, cakes and dairy products Post lifting of the lockdown, market However, this well-regulated points (bps) on the back of lower 200 both in India and abroad. Analysts experts believe, the company can 200 company remains well-insulated fuel costs (-14.1 per cent Y-o-Y) believe that even as packaged food witness opportunities to gain market from these external conditions. and improved realisations. Further industry, especially biscuit, is facing share led by the distribution expansion The company is into the operation net profit witnessed a 25.6 per 150 supply chain issue due to nationwide in Hindi belt, premiumisation of 150 of power generation plants and cent Y-o-Y to `2,995 crore for Q3 115.33 lockdown, Britannia is going to be products as well as share gains from 115.33 supplies power to state electricity FY2020. However, the company’s one of the major beneficiaries once regional/local players who may boards throughout India. It standalone revenue fell by 2.6 per 100 the situation stabilises. witness the dent in their business due 100 ` generates power from gas, coal, cent Y-o-Y to 23,496 crore. Further “Nearly 80 per cent of Britannia’s to COVID-19. “Its strong in-market Note : Quoting on 109.76 hydro, solar, nuclear and other the gross generation declined by turnover comes from biscuits, execution capabilities and focus on ex-split basis from November 2018 renewable energy sources. The 12.6 per cent to ~61.2 Billion Units 50 which is an essential category, is less driving premiumisation (though 50 Base value taken as 100 taken value Base

company’s growth depends on the (BUs) and energy sold was down by as 100 taken value Base impacted during the nationwide it has been pushed by another 1-2 BSE Sensex BSE Sensex capacity creation as well as on the 13.9 per cent Y-o-Y to 56.3 (BUs) NTPC 55.19 lockdown. We note that during quarters owing to coronavirus Britannia Industries plant availability. NTPC has an due to higher than expected tariff. lockdown period consumers have pandemic) are key growth drivers 0 0 installed capacity of 50 GW. On the positive note, the muted 2 Jan 2017 22 May 2020 resorted to up-stocking of essential from a long-term perspective,” says 2 Jan 2017 22 May 2020 The company recently acquired power demand, as well as production Source : BSE India items including packaged foods like an analyst at Axis Securities. The Source : BSE India 100 per cent and 75 per cent equity ramp-up at Coal India’s mines, led to biscuits,” says an analyst tracking recent stock underperformance stake in North Eastern Electric increase in coal stocks at power plants. Financials the company at Axis Securities. and improving margin outlook Financials Power Corporation (Neepco) and Brokerages continue to remain Today the company has an overall provide a good entry opportunity Net sales (` crore) PAT (` crore) Net sales (` crore) PAT (` crore) THDC from Government of India upbeat about the company’s distribution reach of above 5.5 mn for an investor’s view and many (GoI) for `4,000 crore and 7,500 prospects. “We have, however, FY19 94837.75 FY19 11961.38 outlets. Out of these it reaches brokerages, who remain upbeat FY19 11054.67 FY19 1156.43 crore respectively. Both these lowered our FY20/21 estimates and directly to 21.7 lakh retail outlets on the prospect of the company. FY18 87201.80 FY18 10056.45 FY18 9913.99 FY18 1004.14 value-accretive acquisitions will add Earnings Per Share (EPS) estimate and approximately 21,000 dealers as “Despite the continued struggle to more than 2,500 megawatt (MW) by 2.6 per cent/5.1 per cent to factor FY17 81342.90 FY17 10089.23 on Q3 FY2020. grow revenues in FY20, market share FY17 9054.09 FY17 884.33 of operating hydropower capacity in low generation and a fall in the On the financial front, the gains were unprecedented. It reflects to the firm’s predominant thermal incentive income amid falling power OP (` crore) EPS (`) company’s sales and Profit After the company’s strong execution OP (` crore) EPS (`) portfolio. “These acquisitions will demand. However, we continue to FY19 21703.92 FY19 12.77 Tax (PAT) clocked a Compounded capabilities in this challenging phase. FY19 1939.87 FY19 48.24 help NTPC diversify its thermal maintain our Buy rating on NTPC Annual Growth Rate (CAGR) of Although new product launches FY18 27615.91 FY18 10.66 FY18 1668.02 FY18 41.83 based portfolio as non-thermal factoring its risk-averse regulatory 6.42 per cent and 9 per cent over will be slow in the near term, we capacity and before this event it was business model, which ensures FY17 22827.04 FY17 10.83 FY2016-19. For the Q3 FY2020, the believe company will bounce back in FY17 1428.72 FY17 36.85 just 800 MW. Post this arrangement, fixed Return on Equity (RoE) on its OP: Operating Profit; PAT: Profit After Tax; company’s revenue rose 4 per cent at 2HFY21,” says an analyst at HDFC OP: Operating Profit; PAT: Profit After Tax; hydro capacity operation will be invested equity,” says an analyst at EPS: Earnings Per Share; Source: Ace Equity `2,936 crore, whereas net profit was Securities. EPS: Earnings Per Share; Source: Ace Equity 3,125 MW or 5 per cent of the total Emkay Global Financial Services. up by 24 per cent at `373 crore. [email protected]

48 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 49 Stock Pick Well-Insulated An Opportunity To NTPC Britannia Industries From Lockdown CMP: 90.9 CMP: 3165.7 PE: 6.81 Gain Market Share PE: 55.41 NTPC promises a stable performance, say experts *As on May 22, 2020 Britannia Industries to benefit post pandemic *As on May 22, 2020

48 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 49 Morningstar: Mutual Fund Guide

HDFC Gilt Fund ICICI Prudential Bluechip Fund

Investment Strategy Fixed-Income Statistics Manager Biography And Fund Strategy nil Bamboli is a competent and as against its peers and has always Fixed Inc Style Box (Long) High Mod nish Tawakley and Rajat Chandak along with price/book value and Equity experienced manager with an stuck to the investment mandate. jointly manage this fund. The return on equity, among others, to Portfolio Date: A Average Eff Duration - A Sectors 30/4/2020 overall experience of 24 years. He is However, with the recent change in Average Eff Maturity 6.1 investment team is remarkably large determine a company’s fair value. supported by a highly experienced, the fund mandate, it has the flexibility Average Coupon 7.6 and collaborative, comprising 10 Typically, the fund will invest only in adequately resourced, and stable to change the maturity profile based Average Price 104.7 research analysts and 12 portfolio the top 100 stocks by full market cap. % investment team that adds to the on the manager’s view on interest managers. The managers have a quality bias Basic Materials 7.4 fund’s appeal. rates. The manager focuses on high- The portfolio managers ply a when choosing stocks: They favour Fixed Income Style Box Consumer Cyclical 9.3 The fund’s investment process is conviction trades rather than taking benchmark-conscious strategy, and companies with robust business Financial Services 30.9 based on a comprehensive qualitative tactical bets. This is reflected by the High sector weightings are aligned to those models, strong entry barriers, and the Real Estate 0.0 and quantitative due diligence fund’s lower portfolio turnover ratio as Med of the IISL Nifty 100 Index, subject ability to scale up without eroding profit Consumer Defensive 10.2 process. Its assessment of inflation, compared with its peers. Furthermore, to a deviation of plus or minus 5%. margins. They follow a barbell strategy Low Healthcare 3.3 money supply, private-government he does take marginal tactical trading Hence, the top-down approach has and either end up paying more for high- Utilities 4.8 borrowings, fiscal and monetary bets whenever he identifies mispriced Ltd Mod Ext little relevance. They use the in-house growth stocks; and at the same time Communication Services 6.5 policy, and the global interest-rate opportunities; however, exposure to large-cap model portfolio as the initial focus more on attractive valuations. Portfolio Energy 10.9 scenario leads to the selection of a these is kept in check. reference point when choosing stocks. This is a true-to-label fund and Top Holdings Weighting Industrials 4.7 duration target. In addition to duration The investment approach centres (%) Although the managers also use the maintains about 80%-90% of assets management, yield-curve positioning on building the portfolio by having firm’s internal fair value approach and in large-cap stocks. The portfolio has Technology 12.0 7.17% Govt Stock 2028 15.33 and interest-rate direction calls form government securities issued by the the alpha alert, the model portfolio historically been well balanced across Total 100.0 the basis of portfolio construction. central government. Bamboli does not 7.26% Govt Stock 2029 13.52 remains the most important part of sectors. The portfolio managers follow Anil Bamboli follows an aggressive shy away from taking relatively small 6.79% Govt Stock 2029 6.57 the security-section process. Within a a benchmark-conscious approach Portfolio Weighting investment approach. Historically, the exposure in state development loans 6.79% Govt Stock 2027 4.72 sector, the managers perform business and align portfolio sector weightings Top Holdings fund has maintained higher duration if they are trading at attractive yields analysis to identify the best ideas. to those of its benchmark, IISL Nifty (%) 7.59% Govt Stock 2026 4.60 In addition, they use free cash flow/ 100 Index. While it could be viewed as HDFC Bank Ltd 9.26 16.6 6.97% Govt Stock 2026 4.15 enterprise value ratio (three-year constraining, it also reduces the risk of Infosys Ltd 7.25 Calendar Year Returns 13.8 8.60% Madhya Pradesh SDL 2023 3.28 average) as an appropriate parameter, underperformance in the fund. ICICI Bank Ltd 6.19 Calculation Benchmark: None 8.59% Andhra Pradesh SDL 2023 3.27 Reliance Industries Ltd 5.89 10.0 9.2 8.21% HR SDL Spl 2023 3.24 Calendar Year Returns 8.6 Bharti Airtel Ltd 5.76 8.0 8.61% UP SDL Spl 2022 2.46 6.0 5.9 Calculation Benchmark: S&P BSE 100 IndiaTR ` Axis Bank Ltd 3.66 6.0 5.4 5.5 5.2 Housing Development Finance 100 3.24 4.0 Corp Ltd Return 80 2.0 1.8 1.7 Fund Snapshot SBI Life Insurance Co Ltd 3.09 0.0 60 YTD 2019 2018 2017 2016 2015 ITC Ltd 3.00 Morningstar Category India Fund 40 32.7 33.3

Nippon India Dynamic Bond Gr India Fund Dynamic Bond Return 20 9.8 10.9 7.7 NTPC Ltd 2.96 Government Bond -23.1 -24.2 -0.8 2.6 5.0 -0.2 -2.0 Trailing Returns Fund Size (`) 16.5 billion 00 -20 Inception Date 25/7/2001 Fund Snapshot Data Point: Return Calculation Benchmark: None YTD 2019 2018 2017 2016 2015 Annual Report Net Expense Ratio 0.90 ICICI Pru Bluechip Gr S&P BSE 100 India TR ` YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall **** Morningstar Category India Fund Large-Cap HDFC Gilt Gr 4.90 11.66 7.27 7.94 8.23 Manager Name Multiple Trailing Returns Minimum Investment (`) 5,000 Fund Size (`) 218 billion India Fund Government Bond 4.93 12.92 6.99 7.59 7.50 Morningstar Analyst Rating Bronze Data Point: Return Calculation Benchmark: S&P BSE 100 India TR ` Inception Date 23/5/2008 Annual Report Net Expense Ratio 2.13 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 ICICI Pru Bluechip Gr -23.11 -19.13 -1.10 3.15 9.62 Minimum Investment (`) 1,00 Adviser India (“Morningstar”), which is registered with SEBI (Registration number INA000001357) and provides investment advice and research. Morningstar Analyst Rating Bronze Please visit www.outlookindia.com/outlookmoney/invest/picking-the-right-mutual-fund-2542 and read important statutory disclosures, as S&P BSE 100 India TR ` -24.21 -20.69 -0.54 2.94 7.65 mandated by SEBI, regarding the information, data, analyses and opinions given in this report. Data Source: Morningstar India

50 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 51 Morningstar: Mutual Fund Guide

HDFC Gilt Fund ICICI Prudential Bluechip Fund

50 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 51 Morningstar Mutual Fund Guide

NIppon India Large Cap Fund

Manager Biography And Fund Strategy

ailesh Raj Bhan joined Reliance The top-down approach isn’t Equity Portfolio Date: S(now Nippon India Mutual ignored as factors such as interest Sectors 30/4/2020 Fund) in 2003. He took on the role rates and currency movement are of a portfolio manager at the fund considered. Bhan works closely % company in 2004 and has since with analysts who maintain Basic Materials 4.1 gained considerable experience discount cash flow or relevant Consumer Cyclical 11.4 running diversified and sector funds. quantitative models. Sell-side Financial Services 26.7 Sailesh Raj Bhan plies a research is used, especially in the growth-at-a-reasonable-price large-cap space where adequate Real Estate 0.0 strategy. Typically, he prefers coverage is available. At its core, Consumer Defensive 9.4 companies with healthy or rising the process is uncomplicated. Healthcare 6.7 ROEs. He doesn’t mind paying However, Bhan’s research- Utilities 4.8 more for a stock if he believes it orientation gives the process Communication Services 3.1 has sustainable advantages and an edge over a typical growth- Energy 13.2 good growth prospects. But he is oriented approach. Taking cash Industrials 11.7 not indifferent to valuations. Bhan calls is not a part of the strategy. Technology 8.9 pays heed to qualitative issues Sailesh Raj Bhan is benchmark- Total 100.0 when evaluating a company. aware, but he takes reasonable He uses fundamental research sector deviations if his top-down Portfolio to scout for companies with view suggests so. Hence, he Top Holdings Weighting sustainable business models, scouts for businesses which are (%) strong management teams, and established, have a track record, or ICICI Bank Ltd 6.55 durable competitive advantages. have dominance in their area. ITC Ltd 6.00 State Bank of India 5.41 HDFC Bank Ltd 5.08 Calendar Year Returns Larsen & Toubro Ltd 4.82 Calculation Benchmark: S&P BSE 100 India TR ` Infosys Ltd 4.79

100 Axis Bank Ltd 3.84 80 Reliance Industries Ltd 3.79 60 Bharti Airtel Ltd 3.13 38.4 40 33.3 Hindustan Petroleum Corp Ltd 3.13 Return 20 10.9 -24.2 7.3 -0.2 2.6 2.2 5.0 1.1 0 -30.2 -2.0 -20 Fund Snapshot YTD 2019 2018 2017 2016 2015

Nippon India Large Cap Gr S&P BSE 100 India TR ` Morningstar Category India Fund Large-Cap Fund Size (`) 99 billion Trailing Returns Inception Date 8/8/2007 Data Point: Return Calculation Benchmark: S&P BSE 100 India TR ` Annual Report Net Expense Ratio 2.28 YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall ** Manager Name Multiple Nippon India Large Cap Gr -30.24 -29.36 -4.78 0.70 8.32 Minimum Investment (`) 100 Morningstar Analyst Rating Bronze S&P BSE 100 India TR ` -24.21 -20.69 -0.54 2.94 7.65 Data Source: Morningstar India

52 Outlook Money June 2020 www.outlookmoney.com Viewpoint Your Money In Pandemic Times Episode-1: should I continue with my SIP or pause them?

utlook Money has Mohanty said that while there rupee cost averaging. They start launched a new special is a lot of talk about people accumulating units at far cheaper Oseries titled “Your Money discontinuing their SIPs, the last prices than in normal times. And in Pandemic Times” in which we try month’s data showed that there was when you expand that over a to answer some crucial questions only a three per cent dip “which period of time, this accumulation like how Coronavirus pandemic means the noise is a little more of units at lower prices starts has disrupted the way we invest, than what is happening really”. He giving results over a long period where we should put our money said we need to wait a few months of time,” the Mirae Asset and what we should do with our SIP to come to a conclusion. CEO said. investments. “The concept of SIP started He added that if one has In the inaugural episode of the with a goal and when such to create wealth, they need to series, brought to viewers by Mirae abnormalities happen, the thought remain focused on the process Asset Mutual Fund, Outlook Money of discontinuing SIPs is bound “which says that we should Editor Arindam Mukherjee had an to come in the mind of investors. remain invested”. insightful conversation via video- But volatility is the best friend of According to Mohanty, every conference with Swarup Mohanty, an SIP investor and these are the crisis has a start date and an end CEO, Mirae Asset Investment best times of the journey for all date and the world picks up very Managers, on some significant investors. fast after a crisis is over. questions related to SIP investments It is in these times that the “While fear is a factor, but the during these disruptive times. SIP gets the biggest benefit of bottomline is that while there may be some kind of slowdown, it brings its own opportunities,” he explained. Asked what people should do with their SIPs in case of a job loss or other cash-flow problems, he said while it is reasonable to pause the SIP, it would delay the Episode-1 achievement of the goal. “However, in such a situation, Your Money in it is the prudent and rational thing to do. The non-rational Pandemic Times thing would be to redeem the SIP. That should be the last resort. Should I continue with my Stay invested as far as possible,” SIP or pause them? he said.

In conversation with Arindam Mukherjee, Mohanty added that while Editor, Outlook Money pausing the SIP during this period, one must be aware of the SWARUP MOHANTY risks involved like how it would CEO, Mirae Asset Investment Managers shift the period of achieving the India Pvt Ltd goal, and how that period would TO KNOW MORE also be affected if the rebound of the market is very quick. Visit: “These are the two risks when outlookindia.com/outlookmoney/ you pause the SIP. But one can top up their SIP when cashflow Mutual Fund investments are subject to market risks, read all scheme related documents carefully. resumes to get back on track of their goal,” he added. Invest

discretionary spending completely in existing loans with cheaper loans. these times and prioritize the non- “For example if a person has discretionary expenses. These are AnurAg a personal loan then one may How To Survive A Salary Cut Or Job Loss also the times when it is important JhAnwAr consider taking a gold loan since to take your family into confidence Co-Founder and it would be cheaper. Further, they Partner, Fintrust Do not take hasty decisions and review financial goals and plans regularly, say experts while doing budgeting to avoid any should create a plan to pay off non- kind of discontent later,” he explains. Advisors essential loans while maintaining One question usually asked in enough liquidity,” Agarwal adds. such times is should one continue With the lockdown One must focus on financial By Vishav of corporates already announcing lockdown and closure of activities, with their term plan and SIPs? there has been security by building an emergency pay cuts while many others actively there has been collateral damage to According to Jhanwar, term plan (or corpus, ensuring that they have ith the whole nation considering such a step. the widespread masses and as cash pure insurance) is a must and one collateral damage to adequate life and medical cover. under lockdown for For those who now have reduced flows dry up, there is need for people needs to continue the same. “Other the widespread masses “Focus on increasing savings by almost two-and-a-half income due to pay cuts, while the to be very prudent with money and investment policies should totally reducing expenses and do not forget Wmonths now, the wheels of the same level of liabilities, the big choice of spending,” he says. be aligned as per the cash flows. “They will need to relook at their to review financial goals and plans economy have been forced to a stand question is of survival. With their The principles of financial If cash flow permits, one should financial goals and may need to regularly. I find people are looking at still, so much so that a recession is financial planning turned upside planning usually encourage and help continue the SIPs.” rework on the same. For example, if short-term needs and not planning the most likely outcome. In such down due to this new reality, it is clients in creating an emergency At such times of crisis, it is very someone was looking to purchase for the long term. There should be a a scenario, many organisations time to revisit and re-plan their or contingency fund. Such a fund crucial to take financial decisions a house in the next couple of years, good balance of both,” she opines. have decided to take some drastic financial goals and explore new usually equals six months of family only after reviewing all options they will have to delay or drop the While times are tough, but steps to reduce their operational possible ways to achieve them. expenses. So, those who have their carefully, says Ankur Choudhary, goal for now. The immediate priority those who are facing the brunt of costs, including salary cuts for their According to Anurag Jhanwar, emergency fund in place are better Co-Founder, and Chief Investment is to ensure that essential expenses this must remember that this is a employees, and even lay-offs in Co-Founder and Partner, Fintrust off in these challenging times of Officer, Goalwise.com. are met and savings is built for the temporary situation and economies certain cases. The travel and leisure Advisors, COVID-19 has brought lockdown. “Go over all your expenses and next few months,” she explains. will bounce back and therefore, industry and the media industry back peoples’ focus on the Jhanwar says that in these times, eliminate or postpone everything For those who have taken loans the primary financial objective are the worst hit while no sector importance of personal financial it is critical for everyone to do that is not essential. This should and have the burden of paying should be to weather the storm has been left untouched by this planning, within which the key budgeting exercise marking the offset a good part of the salary cut. EMIs with a reduced income, she with minimal impact. Before the crisis. While some surveys predict focus today is on survival, with expenses into discretionary and non- Those who have been laid off, if you recommends trying to get their loan pandemic gripped the world, most two in five employees facing salary necessity taking precedence over discretionary (essentials) categories. had built an emergency fund, give repriced and possibly replacing the people had financial plans and cuts, others indicate at one-fourth other discretionary items. “With the “One should do away with yourself a pat on the back, and go ahead and use it,” he said. For those who didn’t build an emergency fund, Choudhary advises considering liquidating some of their investments starting with some risky investments like stocks and equity mutual funds, in addition to fixed deposits and debt funds in order to avoid skewing the portfolio asset allocation. “Avoid taking a personal or credit card loan at all costs. Seek help from your family and friends. We don’t know how long this situation will last and you don’t want to be caught in a debt trap because of this,” he Job advises. According to financial educator Mrin Agarwal, Founder Director of Finsafe India and Co-founder of Loss Womantra, those who have received pay cuts need to have a relook at their expenses and try to live frugally.

www.outlookmoney.com June 2020 Outlook Money 55 Invest

www.outlookmoney.com June 2020 Outlook Money 55 Invest goals for the immediate and distant fund accordingly too,” he explains. all investments at one go which can Management of debt needs should period. However, this relieves him future. A salary cut or loss of a job Jain also advises rebalancing be counterproductive in the long run. be looked at with utmost priority of the pressure of having to pay the may have hampered these plans to the risk element of the investment “If the individual is facing a salary as well. This situation has given EMIs during these difficult times,” certain extent. portfolio since before the lockdown, cut but still has some amount left every individual an opportunity to Jain explains. According to Harsh Jain, Co- every investor had a specific risk for investments, then he or she can look deeply on the spending as at Tips To Tide For those who invest in the stock founder and COO, Groww, with tolerance that would have changed consider investing in liquid funds this time only one can assess the over The market, there is a need to take a reduced or no source of income, post these two-and-a-half months for their minimal capital risk, the discretionary spending and check cautious and calculated approach the first thrust can be towards of lockdown. efficiency of returns, liquidity, and whether that spending is really in the present uncertain scenario, redeeming investments to make Especially for those who have minimal entry or exit loads,” Jain needed even after this pandemic is as markets, both globally and liquid cash available for emergencies lost a whole or part of their regular adds. “In a nutshell, experiencing over,” he advises. locally, are still digesting negative during such situations. However, income, he suggests setting up a a salary cut or job loss should not There is a financial planning news flows, according to Aamar he cautions against panic selling as systematic withdrawal plan to get deter people from their financial rule of thumb that says that one Deo Singh, Head Advisory, Angel Create a new budget it would only do more harm than regular income instead of redeeming goals. However, they need to align should have at least six months Broking. He recommends a hard according to the current good. He advises them to take a themselves with the changes that of monthly expenses parked in an and rational look at one’s existing step back and revisit their personal this crisis is ushering in.” emergency fund for unforeseen situation portfolio. finances and investments. Jashan Arora, Director, Master circumstances like the one we are “Culling out non-quality stocks, Cut down on all your “Create a new budget according AAmAr Deo Capital Services, agrees and adds witnessing now. In the sectors that which are faced with difficult to the current situation. Lesser Singh that with this disruption, it is a are directly and severely impacted discretionary expenses scenarios in the coming future, income, rising prices, and Head Advisory, time to revisit financial plans and from this pandemic, there are some should be number one priority. if you built an emergency uncertainty about the future can Angel Broking re-evaluate the risk profiles as this companies, which did not let the Secondly, ensuring that the portfolio render the earlier budget ineffective. situation might have changed one’s effects pass on to its employees yet. fund, this is time to use it is not overweight on any specific Hence, everyone must create a ability to take and absorb risk. According to Arora, those who sector, particularly the financials, Treat and protect your if you don’t have emergency budget based on this situation to capital as a scuba “Financial goals need to be are lucky to be among them should as this sector could face the manage their finances effectively. weighed and checked and priorities see it as a lesson to accumulate an fund, consider liquidating brunt of the ongoing COVID-19 Knowing the new set of ‘needs’ and diver would protect his need to be set out again and thus emergency fund to prepare for any some of your investments environment. Also, investors need ‘wants’ will help create an emergency oxygen supply investment realignment is required. unforeseen events like job cuts or to adopt a wait and watch approach, loss by saving their discretionary use a systematic withdrawal in case they are unable to fathom spending which they would have plan to get regular income the current market conditions, as otherwise spent on eating out, there is always another day, and shopping or travel. Avoid taking a personal or there is always another opportunity. “Also, one should seek to utilize credit card loan Lastly, not risking all of the money in this spare time to upskill oneself, any single stock is definitely advice as this would help you to make use emi moratorium only if worth paying attention to, as many a yourself an important asset to your necessary time, some investors bet it all on one company,” he adds. stock, and then leave it to the “lady One good news for those Check if you can get your luck” to decide their fate, which is whose income is affected because loan repriced never a good idea,” he explains. of this crisis is that the Reserve For those who may not have Bank of India (RBI) has allowed Seek help from your family had a salary cut but are working in banks to offer a moratorium on and friends sectors which are adversely affected fixed-tenure loans anticipating like tourism, hospitality and media, the impact of the pandemic on the he advises not to take rash decisions economy and possible job losses while investing, which one may or salary cuts. If one has lost their regret later. jobs or experienced a huge salary “Treat and protect your capital cut making EMI payments very hArSh JAin as a scuba diver protects his oxygen difficult, then they can opt for this Co-founder and COO, supply. And lastly, learning to live moratorium facility and push the Groww with uncertainty and volatility, is loan repayment schedule back by six something that everyone needs to months, Groww COO adds. Lesser income, rising get accustomed to, as the current “It is important to remember prices, and uncertainty ongoing crisis does not seem to be that he or she will have to pay going away anytime soon,” Singh these installments later and also about future can render concludes. pay the interest for the moratorium earlier budget ineffective [email protected]

56 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 57 Invest goals for the immediate and distant fund accordingly too,” he explains. all investments at one go which can Management of debt needs should period. However, this relieves him future. A salary cut or loss of a job Jain also advises rebalancing be counterproductive in the long run. be looked at with utmost priority of the pressure of having to pay the may have hampered these plans to the risk element of the investment “If the individual is facing a salary as well. This situation has given EMIs during these difficult times,” certain extent. portfolio since before the lockdown, cut but still has some amount left every individual an opportunity to Jain explains. According to Harsh Jain, Co- every investor had a specific risk for investments, then he or she can look deeply on the spending as at Tips To Tide For those who invest in the stock founder and COO, Groww, with tolerance that would have changed consider investing in liquid funds this time only one can assess the over The market, there is a need to take a reduced or no source of income, post these two-and-a-half months for their minimal capital risk, the discretionary spending and check cautious and calculated approach the first thrust can be towards of lockdown. efficiency of returns, liquidity, and whether that spending is really in the present uncertain scenario, redeeming investments to make Especially for those who have minimal entry or exit loads,” Jain needed even after this pandemic is as markets, both globally and liquid cash available for emergencies lost a whole or part of their regular adds. “In a nutshell, experiencing over,” he advises. locally, are still digesting negative during such situations. However, income, he suggests setting up a a salary cut or job loss should not There is a financial planning news flows, according to Aamar he cautions against panic selling as systematic withdrawal plan to get deter people from their financial rule of thumb that says that one Deo Singh, Head Advisory, Angel Create a new budget it would only do more harm than regular income instead of redeeming goals. However, they need to align should have at least six months Broking. He recommends a hard according to the current good. He advises them to take a themselves with the changes that of monthly expenses parked in an and rational look at one’s existing step back and revisit their personal this crisis is ushering in.” emergency fund for unforeseen situation portfolio. finances and investments. Jashan Arora, Director, Master circumstances like the one we are “Culling out non-quality stocks, Cut down on all your “Create a new budget according AAmAr Deo Capital Services, agrees and adds witnessing now. In the sectors that which are faced with difficult to the current situation. Lesser Singh that with this disruption, it is a are directly and severely impacted discretionary expenses scenarios in the coming future, income, rising prices, and Head Advisory, time to revisit financial plans and from this pandemic, there are some should be number one priority. if you built an emergency uncertainty about the future can Angel Broking re-evaluate the risk profiles as this companies, which did not let the Secondly, ensuring that the portfolio render the earlier budget ineffective. situation might have changed one’s effects pass on to its employees yet. fund, this is time to use it is not overweight on any specific Hence, everyone must create a ability to take and absorb risk. According to Arora, those who sector, particularly the financials, Treat and protect your if you don’t have emergency budget based on this situation to capital as a scuba “Financial goals need to be are lucky to be among them should as this sector could face the manage their finances effectively. weighed and checked and priorities see it as a lesson to accumulate an fund, consider liquidating brunt of the ongoing COVID-19 Knowing the new set of ‘needs’ and diver would protect his need to be set out again and thus emergency fund to prepare for any some of your investments environment. Also, investors need ‘wants’ will help create an emergency oxygen supply investment realignment is required. unforeseen events like job cuts or to adopt a wait and watch approach, loss by saving their discretionary use a systematic withdrawal in case they are unable to fathom spending which they would have plan to get regular income the current market conditions, as otherwise spent on eating out, there is always another day, and shopping or travel. Avoid taking a personal or there is always another opportunity. “Also, one should seek to utilize credit card loan Lastly, not risking all of the money in this spare time to upskill oneself, any single stock is definitely advice as this would help you to make use emi moratorium only if worth paying attention to, as many a yourself an important asset to your necessary time, some investors bet it all on one company,” he adds. stock, and then leave it to the “lady One good news for those Check if you can get your luck” to decide their fate, which is whose income is affected because loan repriced never a good idea,” he explains. of this crisis is that the Reserve For those who may not have Bank of India (RBI) has allowed Seek help from your family had a salary cut but are working in banks to offer a moratorium on and friends sectors which are adversely affected fixed-tenure loans anticipating like tourism, hospitality and media, the impact of the pandemic on the he advises not to take rash decisions economy and possible job losses while investing, which one may or salary cuts. If one has lost their regret later. jobs or experienced a huge salary “Treat and protect your capital cut making EMI payments very hArSh JAin as a scuba diver protects his oxygen difficult, then they can opt for this Co-founder and COO, supply. And lastly, learning to live moratorium facility and push the Groww with uncertainty and volatility, is loan repayment schedule back by six something that everyone needs to months, Groww COO adds. Lesser income, rising get accustomed to, as the current “It is important to remember prices, and uncertainty ongoing crisis does not seem to be that he or she will have to pay going away anytime soon,” Singh these installments later and also about future can render concludes. pay the interest for the moratorium earlier budget ineffective [email protected]

56 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 57 Insurance

On the other hand, Sanjay Datta, Sugar, Spice All Things Chief, Underwriting, Claims, Reinsurance and Actuary, ICICI Lombard General Insurance, says Not So Nice disease-specific insurance products can be opted by anyone. “However, it In an alarming scenario of diabetic growth, explore the is an individual decision and one must usefulness and caveats of diabetes insurance plan assess the needs and then take a call accordingly,” he adds. In most cases wherein customers are By Sampurna Majumder Several studies have found not offered a general health insurance that diabetes, especially type 2, is plan due to sub-optimal health y the end of 2019, a certain increasing among urban affluent conditions, a disease-specific plan can type of virus was identified Indians. The usual suspects which be of help. Also, as the world gradually in Wuhan, China. Thereafter, lead to this condition are decreased starts embracing the ‘new normal’, rising Bit spread rapidly in the country and physical activity, increased inflation and lifestyle costs, managing soon spread globally resulting in consumption of fat, sugar, and expenses for the medication of this a worldwide pandemic. Now, as a calories, and higher stress levels disease is not easy. disease COVID-19 can range from affecting insulin sensitivity and Nisha Jha, 45, a travel blogger being mild to severe and in many obesity. According to Cigna 360 from Mumbai has been living with cases resulting in deaths. This is Well-Being Survey India Report, diabetes for the past 10 years. She more common in individuals with a US-based global health service ends up spending nearly `70,000 a pre-existing health conditions like leader, the diabetic population in year to maintain her sugar levels. Since diabetes. the country is close to hitting the far as choices are concerned, experts insurance; however, if diabetes is she travels a lot, sustaining a healthy As of May 2020, the virus has alarming mark of nearly 7 crore by vary in their opinions. If you and hereditary in your family, then you lifestyle becomes quite a challenge. Jha, caused thousands of deaths all 2025 and more than 8 crore by 2030. Treatment expenses your family, (parents included) are may opt for a diabetes-specific plan,” who takes insulin shots daily, carries over and has forced countries to go Diabetes is known as a silent killer as are substantially covered by your employers’ group says Amit Chhabra, Head of Health her medicines, insulin cartridges, and into lockdowns for weeks, stalling it damages other organs of the body higher for diabetics health cover, usually in most cases, Insurance at Policybazaar. blood-sugar testing machines for the economic activities. thus resulting in several rounds of diabetes is included from day one. Sharing his views on the same, entire travel period, which sometimes While the entire world hospitalisation over a period of time. This is because, if diabetes is a pre- Anuj Gulati, MD and CEO, Religare goes into months. “Always conscious of is grappling with the novel However, what is the reason includes regular tests, medicines, insulin existing condition in you, chances Health Insurance, says, “Since most unforeseen happenings, I am constantly coronavirus, yet another disease, behind such an unprecedented shots (for some), and a customised of a regular plan being denied are insurance policies cover pre-existing in touch with my doctor via Whatsapp,” which is emerging as a pandemic growth among diabetics in India? diet. Among other regular tests include higher or even if issued, a premium ailments after a certain wait-period, says Jha. When asked if she would like by 2025 happens to be—diabetes. “A rapidly-changing lifestyle annual or bi-annual eye check-ups, loading of over 25 per cent will one can opt for comprehensive to consider a separate diabetic insurance Within less than a decade, three- can be attributed to an increase blood pressure check-ups, proper care be the clause. “While your first health insurance before onset of any plan, pat comes the reply, “Yes! If there’s quarters of the world’s 30 crore adult in diabetics in India. Less work- for foot ulcers and many more. For preference should be generic health such medical conditions.” a good insurance plan available, I would population will be diabetic, of which life balance, stress along with a example, Kolkata-based marketing a substantial percentage will be sedentary regime has resulted in professional Swaraj Mitra spends nearly Indians. several urban Indians suffering `60,000 annually for his diabetes care. Best Available Plans For Diabetes Insurance from diabetes,” says Jishnu Banerjee, 65-year-old Mitra has been living with Age Limit Sum Assured Annual Premium in senior endocrinologist, Columbia diabetes for almost 22-years and takes Plan Name Hospitalisation (in years) (` in lakh) ` (60-yr-old male) Asia Hospital, Kolkata. insulin shots daily. There are millions AMIT Star Health Diabetes Safe Plan A/ Often referred to as a lifestyle like Mitra who end up spending way 18-65 Upto `50 `21,240 Yes, included Senior Citizen Red Carpet CHHABRA disease, treatment expenses are more on medical expenses owing to a Yes Head of Health substantially higher. This is also lifestyle disease like diabetes. ICICI Pru Diabetes Care Activ 25-60 Upto `10 `15,385 Insurance, because, for a normal individual It is a fact that medical management (in typical cases) Policybazaar if it takes two to three days for a of the disease and related complications All including Apollo Munich Energy Plan 18-65 `2-10 `30,291 scratch or an injury to heal, for a are indeed critical. Also, dealing with the hypertension If diabetes runs in diabetic to heal the same might take financial impact of diabetes is equally National Insurance Varistha Only up to 20% 60-80 `1-2 `4,200 the family, then you a good 10 days, sometimes even important. Mediclaim covered more. A diabetic often ends up So, what is the best possible solution? Yes, including day may opt for a diabetes- spending `5,000 (sometimes more) A general health insurance plan or a Religare Health Care Freedom 18 – no upper age Up `5 lakh `23,732 care specific plan every month on an average, which diabetes-specific health plan? Well, as Source: Policybazaar

58 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 59 Insurance

love to explore. Getting medical to the needs of the policyholders, sub-limits as Gulati points out. For assistance at the right time is the however, disease-specific products instance, Religare’s diabetes-specific objective.” are usually priced higher than general policy imposes a 20 per cent co-pay, MACROECONOMIC FACTORS A policyholder can avail certain health insurance and hence customers which increases by 10 per cent per As on 20th May, 2020 benefits if he or she chooses to opt must bear in mind the premium as well.” claim once the policyholder crosses for a diabetes-specific insurance For example, a 40-year-old (male) 70. Similarly, Apollo Munich’s policy. Buying such a plan that opting for Star Health’s Diabetes Safe Energy plan postulates a two-year provides coverage from day one, India Diabetes Data Plan A (see table) will have to pay nearly waiting period for pre-existing may be suitable for someone who 89 per cent more than a regular policy. diseases apart from diabetes and is already living with the disease As of 2018, India has over 7.29 Keeping in mind the expenses involved, hypertension. like Jha or Mitra. “Since diabetes crore diabetic patients especially the trying times that we are In an ideal situation, an adult has many facets to its management By 2030 the number may shoot going through, most industry experts should consider buying a generic or including a changed lifestyle, a up to 100 crore suggest opting for riders. Riders can independent health insurance plan separate comprehensive plan might help policyholders protect the sum when young. And if you are past come to the rescue,” says Banerjee. Nearly 47% are unaware of their insured to cater to multiple claims or that age, make sure that you buy condition Highlighting some of the benefits of even higher sum insured requirements Inflation (April) 5.84% such a plan, Gulati of Religare says, Nearly 11% remain untreated of on account of multiple claims. Interest/Bank Rate 4.25% keeping in mind the importance the disease Finalising the right policy is of Effects Of Diabetics of periodic health assessments for Source: WHO; ncbi.nlm.nih.gov significance as few diabetes insurance On Body Repo Rate 4.00% diabetics to ascertain their state- plans include both – Type 1 and Reverse Repo 3.35% of-health, such plans also offer Type 2 diabetes. Ensure that you Increased risk of stroke relevant health check-up packages. examinations within their associate read the exclusions in the plan also Bank Lending Rate 9.40% “Furthermore, these plans come with or partner network,” he adds. understand that claim settlement Increased risk of heart diseases shorter wait-periods for covering While ever-changing lifestyles process. Do remember to check for Visual disturbances Savings Deposit Rate 2.75% - 3.50% pre-existing ailments. Some insurers and with more options at disposal, any extra benefits such as dialysis cover offer customers discounts on individuals are opting for disease- or companion benefits. “We advise Increased thirst Term Deposit Rate >1 Year 5.70% - 6.00% pharmacy purchases and diagnostic specific plans, however such plans, policyholders to go through detailed Lack of energy Current A/c Deficit (CAD) 0.2% (in this case diabetes-specific) also terms and conditions for a better High blood pressure NISHA JHA (45) come with certain caveats. Most understanding and then choose. Be Fiscial Deficit 2018-19 3.39% experts opine that diabetic-specific particularly careful about co-payment Excessive urination What does she do: Travel Blogger Estimated Fiscial Deficit 2019-20 3.30% plans are more expensive. Says clauses and applicable sub-limits on Dry, cracked skin City: Mumbai Datta, “While covers will be specific room rent along with other specific GDP Growth Rate -December'19 Qtr 4.7% ailments,” adds Gulati. Source: Medicalnewstoday Usually, regular health insurance GDP (Trillion): Nominal $2.94 plans have two to four years’ waiting a dedicated cover as soon as you periods for pre-existing medical are diagnosed. It would be rather Gross Savings Rate 30.10% conditions. In case you are covered by wise for young adults, non-diabetic Per-Capita Income (FY 2020E) INR 11,254 Monthly your employer’s group insurance, opt individuals to invest in a health for general health policy as it will have insurance plan early in life that INR/USD 75.66 a cover even during the waiting period. covers a wide range of ailments, Otherwise, a diabetes-specific cover is a especially those who have a family INR/Euro 82.68 good idea. Such policies stereotypically history of diabetes. INR/Pound 92.59 offer coverage from day one or come Before wrapping, it must be noted with short waiting periods. For example, that while availing a health insurance Nifty 9,066.55 Star Health’s product funds dialysis plan (disease-specific or no disease- costs of up to `1,000 per sitting for 24 specific) early in life is always a wiser Sensex 30,818.61 months. On the other hand, Apollo choice. On the other hand, as far Nifty PE 21.16 Munich offers a discount of up to 25 as diabetes is concerned, leading a per cent on renewal premiums in case healthy lifestyle including regular Sensex PE 19.25 the policyholder’s strictures abide by its exercise and a wholesome diet can pre-decided health chart. go a long way. Too much sugar and Gold Rate (MCX) 40,989 However, policyholders need to spice are certainly not nice! Source: RBI, Government Data, AceEquity cross-check with co-payments and [email protected]

60 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 61 Insurance

This type of insurance plan is paid the sum assured Gayathri says Paradise Often Evicts Plebeians availed by both service people and the key aspects to look for when business persons alike. “Service choosing a term plan are -- the Certain types of mortality rates are excluded by term insurance plans people or professionals take this as claims settlement ratio of the insurer this is the cheapest insurance and and review on the convenience of also most flexible; where people are the claims process, the premium that By Aparajita Gupta moving cities or countries during one is paying for the sum insured, their work, term plan becomes Before Buying a term Plan the critical illness riders provided, wning responsibilities of flexible and not a burden,” says the sum insured value, which family members is very Shweta Jain, CEO and Founder, insurance should be bought should adequately cover in case of crucial in life, which one Investography. only if someone’s life is any unfortunate incident and the Ohas to ensure during one’s very Term insurance assures a family be badly affected in your adequacy of the policy tenure. lifetime. That is the space where financial protection after sudden absence or there is some However, there are several kinds term insurance plays a decisive role. death. However, there can be financial dependency of deaths, which are not covered However, people are often ignorant circumstances where if something under term insurance. As Renu of the kinds of deaths term insurance unfortunate happens to you or you Maheshwari, chief executive officer Buy adequate amount does not cover under its purview. suffer from any critical illness, which of insurance rather and principal advisor, Finzscholarz Term insurance plans are bought results in huge financial loss. Under than underinsuring or Wealth Managers explains, suicidal to take care of family members such situations, your insurance rider overspending on insurance deaths are usually not covered during the policy owner’s death comes in. during the first year of policy. A lot or in the unfortunate incident of “One should always look for of policies do cover it from second permanent disability. riders while buying a term plan. Be extra careful if you year of the policy though. If the Not all kind of deaths are covered Riders are basically add-ons to your smoke. Look at the insured dies due to his involvement under term plans, there are certain basic term policy and work as a tool exclusions carefully; declare in criminal activities, the nominee facts truthfully exclusions, which could lead to to boost your insurance coverage will not get the money. Criminal’s claim rejection and one must read it without having to buy a separate death due to other causes will be carefully before buying the policy. policy altogether. However, one if you are involved in compensated to the nominee though. Popularity of term insurance does not need to buy all the riders adventure sports, know the “The beneficiary cannot file for continues to be relative. While it because as a policyholder, it is very exclusions carefully the claim if the insured is involved in has gained some popularity in the important for you to choose the any criminal activity and dies owing last five years or so, yet penetration right riders that make sense for Source: Finzscholarz to the same reason. The insurance is only about 24 per cent for the you,” says Santosh Agarwal, Chief company is not liable to settle the RIP urban markets. Business Officer, Life Insurance, claim if the insured is murdered Sharing her views on this very Policybazaar. all future premium will be waived because of his involvement in any trend, Gayathri Parthasarathy, In case of death due to an off till the end of the term rider. kind of criminal activity. ‘Death due National Head, Financial Services, accident, the sum assured of the This rider kicks in if the assured to the involvement in any type of KPMG in India, says that term accidental death rider is payable becomes permanently disabled due criminal activity as defined by law’ insurance in India has an extremely in addition to the normal term to an accident as all accidents does will not be covered under the term small market and constitutes ~5 per insurance death benefit. not always result in death. If the policy. However, in case policyholder cent of the new business premium in This rider when added to base life assured becomes permanently holds a criminal record and dies due the retail segment. The penetration insurance plan makes it the most disabled in an accident, then she is to any natural uncertainty or covered of term insurance is extremely low economical way of protecting cause, then the beneficiary will get owing to lesser awareness levels. against major life-threatening the sum assured,” confirms Agarwal. Term plan stems from the original diseases like cancer, heart attack, However, then what happens concept of life insurance where one organ- related diseases and stroke. Gayathri if the nominee has a criminal pays a premium to safeguard income Any life insurance policy that Parthasarathy record? In such cases, the insurance for dependents in case of death. is worth buying is also worth National Head, Financial company holds every right to keeping. However, there can be Services, KPMG in India withhold the payout indefinitely. The circumstances where one becomes claim will only be settled when the Not all kinds of deaths disabled due to any accident or Term insurance plan nominee will be given the clean chit get diagnosed with critical illness from the case and the charges. are covered under term leading to inability to pay future has an extremely small The suicidal exclusion is insurance plans premium. Under any such situation, market in India applicable for the initial one-year

62 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 63 Insurance

disclose his/her habit of smoking and died due to reasons related to that, the nominee will not get the sum assured of the plan,” she adds. “Most life insurance companies do not issue term life cover to the people who drink more often and therefore death under the influence of alcohol or any other narcotic substance is not covered. In case the policyholder has not disclosed the drinking habit and dies under the influence of the same, then the insurance company holds every right to reject the claim,” says Agarwal. Adventure enthusiasts and persons involved in hazardous activities are usually excluded from the term policy. Activities Checklist For Choosing a term Plan like chasing a hurricane, rafting, paragliding come under this clause. Claims settlement ratio of the insurer and review on the There can be separate special convenience of the claims process policies for such people. “All pre-existing health the premium that one is paying for the sum insured conditions should be declared. Critical illness riders provided Death due to pre-existing health conditions like HIV or AIDS is not the sum insured value, which should adequately cover in covered,” Maheshwari confirms. case of any unfortunate incident Also, death during childbirth is Policy tenure’s adequacy usually not covered in life insurance. Though pregnancy-related treatments can be covered under Source: KPMG health insurance. “Life insurance companies usually period from policy purchase date Insurance companies do not issue do not issue policy to someone and thereafter suicidal deaths are policies to alcoholics. It is a material who is five-months pregnant. covered in a term policy. In order to fact to be disclosed while buying However, if someone already has control the moral hazard risk, most the policy. Drug abuse is also an the term insurance, then death life insurers cover suicidal death exclusion in term policy. due to childbirth will be covered after the initial period of a year. “When the policy holder did not and the payout will be given to the Therefore, if the insured commits beneficiary,” says Agarwal. suicide within the first year of the Life insurance may not cover policy term, then the nominee will death due to natural disaster such as not get the death benefit, subject santosh earthquake and flood. to terms and conditions. In a group aGarwaL “Wars and catastrophic disasters insurance policy, the suicide is not Chief Business Officer, are usually an exclusion. These covered due to the reason that these Life Insurance, clauses need to be looked at carefully policies have the tenure of one year Policybazaar while buying the policy,” says and suicide is usually covered under Maheshwari. the life insurance policies after the If someone already While availing a term insurance completion of one year. has term insurance is important, it is very crucial to look Further Maheshwari explains that into the various pros and cons before death happening due to the effects plan, then death due to investing in it. of alcoholism are also excluded. childbirth will be covered [email protected]

64 Outlook Money June 2020 www.outlookmoney.com Episode-1 Your Money in Pandemic Times Should I continue with my SIP or pause them?

In conversation with Arindam Mukherjee, Editor, Outlook Money

SWARUP MOHANTY CEO, Mirae Asset Investment Managers India Pvt Ltd

TO KNOW MORE

Visit: outlookindia.com/outlookmoney/

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Standpoint

and even financial buyers, is creating a ponzi pyramid As I Look Back At My Investment destined for collapse. The only way to generate short- journey From 1990 To 2020 Living Through The Market Cycles term performance is to buy these stocks. The collapse came soon enough, wiping out trillions Every cycle, every crisis and every bubble has its set of lessons to learn from AjAy BAggA in investors’ wealth. The NASDAQ had risen 400 per a. The best return for me was in a technology MNC cent from 1995 to its peak in March 2000. Over the `1 roughly became `3,000, without adding the next two and a half years, it went down 78 per cent. dividends. This was fortuitous. 3,000 times returns is a t was May 2, 1990. I had taken the first flight of exotic locales, my wife (who also worked for the same I have given this historical timeline to give you an once in a lifetime return. With dividends, the total return my life, as I travelled from the City of Emperors, bank) and I were in the control room, waiting for the idea of the boom-bust-boom cycles. Every cycle, every would be around 4,000 times. Delhi, to the City of Dreams, Mumbai, to take change of the millennium date. My ATM card was used crisis and every bubble has its set of lessons. The need is b. The worst return was with nearly 50 stocks that lost Iup my first assignment as a management trainee at a to withdraw the first money of the 2000 millennium to buckle up for facing the pandemic and its aftermath. 99 per cent to 100 per cent value as promoter’s duped leading American bank’s Indian headquarters. Rana on the banks network in India. All went well, and the The biggest lesson for me is that we should focus on investors and decamped. Talwar and Jerry Rao had spearheaded the consumer Indian IT sector’s success story was embellished. our financial goals rather than trying to predict the c. Gold went up 14 times ,from `3,400 in 1990, to `47,000 banking revolution in Asia and India since 1985, and I The euphoria was rising with the dot com valuations. short-term economy or markets. No one can do that per 10 gms by 2020. was fortunate to be getting in at a very exciting time of Fraudsters were putting an “infosystem” or “dot com” consistently with any degree of accuracy. Based on heady growth, cutting edge innovations and immense in their company’s names and encashing on the those financial goals and our risk appetite and the time d. Silver over these 30 years gave a 7.5 times return, going learning in the bank’s history. gullible public’s herd mentality. Anything related to the horizon for each of those goals, we arrive at our ideal from `6,400 per kg to `48,000 per kg. The BSE Sensex (base 1979 =100) was still in three internet was one gigantic bubble. The value investors asset allocation. Gold, silver, stocks, bonds, mutual e. The best mutual funds in this time would be 27 year old figures. In July 1990, it touched 1,000 for the first like Warren Buffett were racking up losses in their old funds, real estate, bank deposits, all have a role in this. Kothari Pioneer Bluechip and Prima funds that went up time. In 20 months, as the world economy wobbled, economy investments. The entire financial advice industry would tell us 80 to 100 times . Funds launched later on also gave good India had a huge balance of payments crisis and the Value savant Julian Robertson of Tiger Management financial planning is complex. It is a great discipline returns in these ranges. big bang reforms under the PV Narashimha Rao and with a stellar track record, shut his six funds and but at its core, it is about following simple principles f. Land also gave great returns, with a land that my family Manmohan Singh combine. In those 20 months, the returned the money to investors in March 2000. consistently and resiliently. bought going up around 250 times. BSE Sensex went from 1000 to 4000. We were strictly He wrote in his farewell note: “Since inception, an What I can say is - a large portion of those serving regulated on what and how we could invest in, but all investment in Tiger has grown 85-fold net of fees; more clients from banks who sold high commission ULIPs g. Bank FDs averaged around 8.6 per cent in this period. around us we saw people making fortunes. than three time the average of the S&P 500 and five- and money back insurance bundles, to mutual funds Without taxes and assuming annual compounding, this would increase funds 12 times over 30 years. Then, as suddenly, the entire market came crashing and-a-half times that of the Morgan Stanley Capital who took inordinate risks and passed losses with no down, in what was to be called the Harshad Mehta International World Index.” guilt to unknowing clients, to NBFCs who collected h. Inflation meantime was at around 6.4 per cent, so` 100 scam. The paper fortunes made in the stock markets The key to Tiger’s success has been a steady public deposits and siphoned off the funds to related, of 1990 is worth only `15 in 2020. That severe loss of were lost. Many stocks lost all value and the market commitment to buying the best stocks and shorting crooked cronies, to companies who padded project purchasing power is the cost of doing nothing with your lost nearly 50 per cent of its capitalisation. the worst. In a rational environment, this strategy costs, took loans from banks and then systematically savings. The next cycle I saw was in 1994 when nearly every functions well. But in an irrational market, where siphoned out the cash flows or ineptly ran the i. The BSE Sensex at the same time gave a return of around large Indian corporate house had launched a financial/ earnings and price considerations take a back seat, companies into the ground, to regulators who were 13 per cent CAGR over these 30 years. Roughly 39 times leasing subsidiary. The CRB scandal derailed the entire such slogic does not work. supposed to prevent all these but were left behind with before dividends. With dividends, the total returns would euphoric bubble. Technology, Internet and telecom craze, fueled by a fast moving industry - all these have given enough be around 45 times. It was 1998 and I was working on a global project the performance desires of investors, money managers bitter lessons to ordinary investors’ caveat emptor. at Bengaluru, an electronic salary account offer for The antidote to this is diversification is spread your corporate employees. We launched the first debit card bets. In uncorrelated assets have 10 per cent of your worry if we have missed the bottom or if you invest and the first online banking for retail clients in India. portfolio in gold. Sovereign gold bonds are a great much ahead or too much after the bottom of this cycle. The IT sector in India was booming; globally the dot investment. Buy government bonds for fixed income The smartest managers like Howard Marks bought com boom was happening. exposure. Bank accounts are protected only up to Rs 5 from the week Lehman Brothers went bankrupt in All learned pundits were informing us that “This lakh per account/ name, per bank. Stick to the highest 2008. For months after that, there was turmoil till the time it’s different,” 100x Price Earnings valuations quality banks, don’t chase returns. markets bottomed and took off in 2009. were justifiable and the cash burn rate was more Mutual funds have left a lot to be desired. Stick Maybe sometime by August to October if not earlier. important than cash flow. We knew the year end of to Index Funds and Index ETFs issued by the When the price is much lower than the value you see, 2000 was going to be a big challenge due to the Y2K more venerable names in the fund industry. On that will be the time to re-enter. Right now, the risk transition. That Y2K work transformed the Indian IT stocks, buying low is still a recipe for disaster. Some reward is still not very favourable. sector forever. While clients were partying in the most turnarounds are happening as we have seen in telecom. Wait, stay diversified and be ready to jump in at the Those are good bets. My personal expectation is that market lows that satisfy you. Simple, yes. Easy, well no. in the next six months we will see a huge correction in Hardly a few hundred investors succeed in this despite Invest when you are happy stock prices. knowing the truth behind this advice. Invest in stocks when you are happy with the with valuations and growth valuations and growth trajectory of earnings. Don’t The author is a private investor

66 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 67 Standpoint

66 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 67 Insurance

interaction to non-physical touch CEO, Bajaj Allianz Life, “Demand points across the board. For the has slowed and growth is muted life insurance sector, which is PrashanT or negative; similar is the trend traditionally dependent on bank TriPaThy within the life insurance sector as branch walk-ins, agents, and MD & CEO, well. Let’s wait and watch how the customer meetings; enabling Max Life Insurance government’s stimulus pans out and contactless servicing was the biggest helps in reviving the economy and challenge. But with companies From sales to policy thereby businesses.” continuously innovating their issuance to claims In the 10 days of lockdown in everyday operations to deliver a March there was a dramatic drop seamless customer journey, the management – the entire in numbers from various insurers. way-forward is digital. Right from value chain is digitised Many insurers even registered a sales to new policy issuance to decline. Typically this industry was claims management – operations Says Ashwin B, Chief Operating slated to grow at 12 to 14 per cent across the entire value chain have Officer, Exide Life Insurance, “The but many insurance companies been digitised, which has signalled life insurance industry was on a declined in March to March. In April the biggest change in the way the growth trajectory till February’20, which was 30 days lockdown, there industry conducts its business.” which came undone due to the would be a significant impact. To ensure that new policies can lockdown in the crucial month of Some put the figure at even be issued to customers during this March, which accounts for over 20 higher. Says Rakesh Wadhwa, continuing time of lockdown with to 25 per cent of the annual business. Chief Marketing & Customer no physical contact, insurance However the Industry has been Officer, Future Generali India Life The New Normal During COVID-19 companies have also digitised their quick on its feet to adapt itself to the Insurance, “As per the recent IRDAI new normal of non-contact based report, life insurance business The way insurance sector works is changing, giving way to digital assessment, surveys and delivery sales processes to accommodate social distancing. selling, sourcing through electronic contracted 42 per cent for the Says Dhirendra Mahyavanshi, mode, enabling work from home for month of April over last year as a Co-founder Turtlemint, one of employees and intensified customer result of the mandatory lockdowns. the country’s largest insurance outreach through calls, emails and While this short-term adverse By Arindam Mukherjee assessment by customers in place of contactless system where we sell aggregators, “The industry has self-service options.” impact may persist, the medium- assessment by registered assessors. through an app and issue the changed a lot in terms of pre- But how has the pandemic long term effect will depend upon ike all other sectors that have Some insurance companies are even policy to the customer. Many COVID and post-COVID days, not affected growth of the insurance how long the crisis lasts. seen large scale changes in asking customers to send self-made other companies are also shifting only in the way that it functions or companies in the last three months The crisis has given rise to their operations because videos of their insured subjects like to a contactless service during reacts but in the mindset of people or so? Says Tarun Chugh, MD & increased demand for life and health ofL COVID-19 pandemic and the motor cars to renew policies. the pandemic so that the need for as well. The focus on digitisation crisis that it has brought about, Says Balachander Sekhar, CEO, human intervention is minimized or has been there for a while but now the insurance sector in India is RenewBuy, an insurance aggregator, totally eliminated”. the demand, as well as supply-side, seeing new ways of doing business. “Companies are moving towards a The current crisis has bolstered has come together to focus on it This is true of all the segments contactless service. Increasingly, the the adoption of digitisation and unanimously. So, digitisation is not of insurance, be it life, health, branch will become a prehistoric virtualisation in the industry. Both in one aspect only, but it focuses on automotive or general. dinosaur. We are using a totally - customers and the companies – the complete channel for end-to-end From pitching for policies have moved to engaging and selling resolution today.” to selling them and from claim via digital tools. From WhatsApp For some companies and settlement to surveys, India is to customer portals and Chat Bots, products, the underwriting norms seeing new and innovative ways of to having virtual meetings, the have changed in order to enable Tarun Chugh working of insurance companies. industry has moved quickly on this digital issuance of policies as well as As the vast Indian population MD & CEO, path to ensure that business runs claim servicing. Non-medical limits is working from home, insurance Bajaj Allianz Life even during these restricted times have also been enhanced. However, companies are discovering new and that their customer contact people with travel history or plans ways of bringing insurance, policies, Demand has slowed remains intact. in negative geographies can face a claims and surveys and settlement and growth is muted Says Prashant Tripathy, MD postponement of policy issuance as to people’s doorsteps by bringing & CEO Max Life Insurance, India tightens its borders especially in new and innovative ideas. Many or negative; same with “COVID-19 induced social with countries with a bigger history companies have relied on self life insurance sector distancing has restricted human of COVID-19 cases.

68 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 69 Insurance

additional grace period for renewal First year Premium Of Life insurers insurance policies as people grow premium due in March and April.” they are keen to get their renewals more concerned about health and In addition to that, the Life paid. With the lockdown, they are For The Period ended april 30, 2020 DhirenDra treatment in case they too became Insurance Council has also issued a Mahyavanshi leveraging the digital access points victims of the coronavirus and that statement assuring all life insurance to pay their renewals. Companies, Premium is a reason why people are diligently policyholders in India that the Force Co-founder, Turtlemint on their part, are going all out to sl renewing their policies on time. Majeure clause will not be applicable communicate with their customers, no. insurer For April, For April, Growth Market Says Chugh, “Two factors - how in case of death due to COVID-19. Digitisation is not in one and re-informing them about the 2019 2020 in % Share the pandemic is unfolding across Says Mahyavanshi, “The IRDAI aspect, but focuses on digital assets, the benefits of being nations and the volatility of global has extended the deadlines for policy invested. Further, the regulator has 1 aditya Birla sun Life 118.83 261.75 120.28 3.89 markets, have made customers renewals with an extension in the the complete channel for also extended the grace period for more cautious and aware, and look grace period for continuity benefits. end-to-end resolution payment of renewal premiums that 2 aegon Life 8.18 3.72 -54.53 0.06 for financial solutions with some This would help the insured to be were due in March and April. These 3 aviva Life 5.40 19.02 252.05 0.28 guarantees. Hence, the demand able to renew the policies even life insurance) of multiple insurers sustained efforts have helped us for term and guaranteed plans post-lockdown even if he doesn’t and hence offering a wider bouquet manage our renewals.” 4 Bajaj allianz Life 218.63 314.04 43.64 4.67 will see an uptick in the coming have access to online payment, and of products. Features like online 5 Bharti axa Life 49.46 29.59 -40.18 0.44 months. Furthermore, we are the insurer to be able to collect the quote generation, sharing the quote Some of the changes are that likely seeing customers also look for renewal premiums to be able to pay via SMS, email, WhatsApp, online to happen in the future are: 6 Canara hsBC OBC Life 183.74 27.05 -85.28 0.40 comprehensive health insurance the claims on time.” payment and instant issuance of a 1. Protection and health will become policies. We have seen this trend It is obvious that the pandemic policy is being done digitally without more prominent subject of 7 edelweiss Tokio Life 11.16 16.46 47.52 0.24 start in April.” will change the way the industry meeting the client. conversations. This could mean 8 exide Life 37.65 25.26 -32.91 0.38 While operational restrictions works and how insurance is bought But what about insurance policies introduction of new products and will have a short-term effect on and sold. So far, insurance companies that lapsed during the lockdown addition of services or benefits. 9 Future generali Life 34.30 10.67 -68.90 0.16 growth, this unprecedented situation have been functioning in a traditional and the customer had no way of 2. Acceleration of digital 10 hDFC standard Life 1422.29 668.89 -52.97 9.94 will create greater realisation way and have provided access largely reaching an insurance office to transformation – both at the amongst the community and to large cities and towns. With the renew or revive it and the online back-end and front-end processes 11 iCiCi Prudential Life 633.41 256.19 -59.55 3.81 shift the consumer focus towards advent of InsurTech companies and portals did not offer a way out? Of to gain higher efficiencies, speed safeguarding their financial future aggregators a few years ago, insurance course the moratorium provided and scale. 12 21.44 6.92 -67.74 0.10 iDBi Federal Life and loved ones. has been able to penetrate in Tier I, by IRDA did come as a relief for 3. Customers will get more 13 india First Life 149.04 32.68 -78.07 0.49 Says Chugh, “Not only our Tier II cities and beyond. such customers as the renewals and comfortable with ‘Phygital’ industry, it will impact the way The aggregators have been revival of policies got a new leash of (Digital and Physical) ways to 14 Kotak Mahindra Life 319.86 121.35 -62.06 1.80 business is done across industries. able to offer multiple insurance life through an extended date. engage with insurers as social 15 Max Life 201.55 171.84 -14.74 2.55 I believe the pandemic has products (car insurance, bike Says Chugh, “As customers distancing norms will prevail. nudged the industry to adopt new insurance, commercial vehicle understand the long-term nature of 4. Work from home among back 16 PnB Met Life 72.56 43.80 -39.64 0.65 practices more quickly than it insurance, health insurance and life insurance, we have observed that office functions shall become would otherwise have, and some a more prominent workforce 17 50.54 10.71 -78.81 0.16 Pramerica Life of these practices will stay on even solution as companies are seeing 18 reliance nippon Life 97.52 34.02 -65.12 0.51 after the pandemic.” a positive impact on collaboration Within the life insurance industry, and productivity. 19 sahara Life 0.00 0.00 0.00 0.00 the acceptance of digitisation and 5. Changes in risk underwriting 20 sBi Life 913.10 917.43 0.47 13.64 virtualisation, online selling, digital will find a balance between underwriting and video Medical convenience to customers and 21 shriram Life 26.29 13.73 -47.79 0.20 Examiner’s Report (MER), amongst covering new risk dimensions other digital and virtual initiatives arising from COVID-19. 22 16.78 6.61 -60.63 0.10 star union Dai-ichi Life will become the new normal. For Tata aia Life 122.19 154.36 26.32 2.29 instance many insurers have shifted The entire way in which the 23 to tele-medical or video MER in insurance sector works will change Private Total 4713.93 3146.09 -33.26 46.76 place of physical screenings. forever giving way to digital Says Tripathy, “The industry is assessment, surveys and delivery. LiC of india 5267.94 3581.65 -32.01 53.24 24 coming together in its own way This will be good both for the grand Total 9981.88 6727.74 -32.60 100.00 to navigate these extraordinary companies and customers as this will times. As payment of renewal make things fast, more efficient and source: irdai; note: 1.Cumulative premium upto the month is net of cancellations which may occur during the free look period. ; 2. Compiled on the basis of data submitted by the Insurance companies premium may become a concern, cost efficient. all life insurers are offering 30 days’ [email protected]

70 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 71 Insurance

70 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 71 My Plan

However, a lot was waiting Disciplined long-term SIP investing, good It Pays To Stay Invested In Equity to happen in the coming times. selection of funds coupled with an annual Markets continued to be volatile portfolio review, and a lot of patience have Focus on the financial goals instead of tracking short-term market movements on a daily basis during the next three to four helped him to be an actual long-term happy years. At the end of three years, equity investor. He shared his learnings the portfolio XIRR was 8.34 from the process, as outlined below: per cent, which further dipped to 7.50 per cent by next year. Link your mutual fund investments to your goals: Such underperformance of the It is always advised that the mutual fund investments must be linked with investment, as against the return financial goals. When one links the portfolio investments with specific expectations, carried the potential of financial goals, the motivation to continue investing in that goal comes shaking his confidence in investing naturally, helping the investors to save consistently towards the goal. in equity markets and there was The mutual fund schemes must be selected as per the specific goals, as a time when he was unsure of his different goals carry different emotional value and investment horizon. decision to continue the SIP. This While equity may not be advisable for short-term goals owing to its short- was the time when Sajni’s role as his financial advisor was tested to the term volatile nature, conservative schemes may not be suitable for long- core. However, she always cared to term goals as they may lower the overall portfolio returns. give a patient hearing to Dr Vijay’s Review portfolio regularly: concerns and advised him to ignore A prudent financial plan calls for not only consistent investing but also a the market noise and stay patient regular portfolio review. One may review the portfolio on an annual basis with his investments. Amidst the along with his/ her financial advisor, so that the underperforming schemes dilemma to continue and redeem, may be identified and replaced with better performing schemes. Such Dr Vijay continued his SIPs, and the a review also allows the investors to track the progress towards specific investments started to bear fruits financial goals so that such goals can be achieved as per the desired with time. time horizon. Any shortfall or deficit towards achieving such goals can be The performance of investments rose steadily, with 23 per cent plugged by taking corrective action well in time. XIRR over five years, which further It is important to ignore market noise and stay patient: r DG Vijay, 54 years, is a sentiments bearish. registered in August 2008 for long- increased to 27 per cent over six One should not monitor the portfolio movements daily or weekly. This senior oncoplastic breast As the first step to financial term wealth creation, disciplined years. As years passed, his practice is because short-term movements in markets can be highly volatile surgeon at HCG Cancer planning, discussions were held savings, and professionally managed was also increasing. With the with stocks reacting to different news, macroeconomic data. When the Centre, Ahmedabad. His wife Dr with Dr Vijay enlisting his financial investments. confidence rebuilding, he started D market sentiments turn negative, the surrounding market noise gathers Swati Devanhally works in the goals and the cushion for monthly Further, it was also planned increasing his monthly SIP amount high momentum. It is highly advisable that one continues to focus on Department of Ophthalmology at BJ savings. The financial plan was also that instead of focusing on the and also investing as and when the financial goals instead of short-term market movements. Most Medical College and is blessed with prepared considering the investment market movements, the investment he had an investible surplus. His importantly, one must continue to have trust in his/ her financial advisor. two sons, Shirdhar (27) and Shravan horizon as well as his risk appetite. It portfolio would be reviewed on an family’s monthly SIP investment (23). In spite of his busy schedule, Dr was a pleasant surprise to know that annual basis. Further, to top up his has increased multifold now from Vijay has continued to stay focused amidst all the negativity, Dr Vijay savings and financial goals, it was `50,000 in 2008 initially. While the on adopting a consistent investment was comfortable to invest in equity, advised that Dr Vijay must keep equity markets suffered substantial strategy for the fulfilment of his as his financial goals were primarily all the funds invested in equity market corrections in 2018 and goals of the higher education of his are staying at the forefront of this financial aspirations. He met Sajni long term, focused around his funds, which were not expected to also recently due to the COVID-19 sons and one son’s marriage. With pandemic crisis. While it is essential of Wealth First Portfolio Managers children and retirement planning. be required in the near term, say outbreak, his regular savings are the comfort of financial savings, to stay safe and keep yourself in good around 12 years back, just the time He understood the benefits of three years. Considering the recent still reflecting 8 per cent annualised he has also been taking his family health, all must stay committed to when the Global Financial Crisis professionally managed investments correction in the markets, his return returns. Considering the total on vacation annually, helping him their financial plans and keep their had struck the markets, and the fall and the power of compounding, an expectations from his investments in equity investment of `100 during spend quality time with his family, investment portfolio healthy too. of Lehman Brothers had made the initial monthly SIP of `50,000 was equity funds were 15 to 18 per cent. the period, his portfolio is currently amidst his busy schedule. This also valued at `195, besides the dividend makes him address Sajni as his pay-out of `30 over the same period. lifestyle advisor, instead of just being The consistent savings have his financial advisor. Disclaimer Sajni Aalok Patel Financial Planning of Dr. DG Vijay is based on the “personal opinion and experience” of Sajni Aalok Patel also helped him fulfil several of The country continues to fight Sr. Wealth Manager, and that it should not be considered professional financial investment advice. No one should make any investment decision without first his aspirations. Through the last the ongoing coronavirus outbreak, Wealth First Portfolio consulting his or her own financial advisor and conducting his or her own research and due diligence. decade and more, he has met the life and COVID warriors like Dr Vijay Managers Ltd.

72 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 73 My Plan

72 Outlook Money June 2020 www.outlookmoney.com www.outlookmoney.com June 2020 Outlook Money 73 Dear Editor, Hailing from a Delhi-based Punjabi family investments and business were always easy for me to understand. Like any other commerce student, I had two options either to appear for CA along with graduation course or wait till I completed B.Com to aspire for a banking career. I choose the first and in the next few years. While I was still 21 years, I became a partner in a CA firm doing tax practice and bank audits. After two decades of my stint in financial services, I am serving as Director and COO at Religare Broking, one of the leading diversified brokerage and distribution houses.

In my early youth, investments, banking, and politics were common everyday topics at home. I started my investment journey from my school days, thanks to my teacher who gave me my first lesson of investment in the stock market. My first investment experience was in SBI IPO with my father’s money, which gave me good returns and hands-on experience in trading

I belong to a humble middle-class family that has quite a few bankers. My father has been my role model. His approach has always been a conservative and pragmatic way to manage financial investments. I started my journey of financial independence as early as I passed out of school. Initially, I used to give tuitions and save money from internship to meet my pocket expenses. This made me understand the importance of money and managing it.

My interests to be part of the financial markets inspired me to join a broking company as a finance manager. The timing was perfect as financial markets were seeing a big transformation towards screen- based and paperless trading, the introduction of derivatives both in equities and commodities. In the early stage of my career with a brokerage house, I got a chance to understand the investment behavior of investors of all asset classes and also experiment with my learning of finance and investment management, which I envisaged during my CA practice. My business acumen, which I got from my family and exposure to the markets helped me grow professionally at a very rapid pace. I was heading the entire business of a leading brokerage while I was just about 27 years.

Like many others, the best period of my professional life was from 2007 to 2012 from earnings and returns perspective. During this period we all witnessed extreme bull-run, global financial crisis, and a sharp bounce back. I also had my share of ups and downs but this was still the best time for me professionally and by far the most impactful period for me in terms of my financial goals and diversification in real terms.

When it comes to managing money, my investments are driven by my belief in asset classes. A balanced approach, with a combination of conservative traditional savings and aggressive investments, has been the mantra. Though we all know capital markets will always offer superior returns, I follow a mix of real estate, which can now also be REITS, quality stocks, and fixed income government securities. I keep asset classes like equity, mutual fund, real estate, gold, and govt. securities in my investment portfolio.

I have categorised my investments to achieve the goals of wealth creation and emergency expenditures. Equity investments are best when it comes to wealth creation for which I have enough experience and exposure in the domain of stock markets to take up risks.

Gurpreet Sidana Chief Operating Officer, Religare Broking

82 Outlook Money March 2020 www.outlookmoney.com

An Investor Education Initiative by Introducing a smart way to learn about Mutual Fund investments.

MFBytes, a one stop knowledge hub for all your Mutual Fund needs.

Download now!

For KYC, change of address, investor complaints redressal, etc. visit - https://www.hdfcfund.com/information/key-know-how

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.