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Unlocking The Market Power Of SMEs

Govt. stimulus may unleash hidden energies of small and medium enterprises and fuel their stock prices

China Conflict Effect ESG Funds Up NRIs Gain In Property 8 904150 800027 0 7 Focused on the right selection.

ICICI Prudential Focused Equity Fund

To invest, consult your Financial Advisor

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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. Focused on the right selection. Contents JULY 2020 VOLUME 19 ISSUE 7

Interviews: 26 Anurag Thakur on the stimulus package 30 How India-China conflict can hit stock market SME STOCKS READY TO 34 Is insurance sufficient in COVID times? Health insurance is proving to be insufficient to deal with the challenges and high cost of COVID-19 BOUNCE BACK? treatment

Sops may give a push to small and 38 Environment funds set to rise mid-cap stocks Investors are willing to invest in stocks with environment and social values

42 Boost For Digital Payments Fintech will reap benefits this year as people turn to financial platforms

44 A Relief To MF Industry RBI’s special liquidity window may help mutual funds

48 Attractive property options for NRIs It is an opportune time for real estate sector as home prices drop ICICI Prudential 54 Reframe Your Goals Plan asset allocation as per your risk profiles by Focused Equity Fund aligning goals with objectives

Golden option for millennials pg 12 56 To invest, consult your Financial Advisor Gold will remain in the reckoning and provide positive returns during the pandemic Download Visit IPRUTOUCH App www.iciciprumf.com Regulars 4 Talk Back 8 News Roll 10 Queries 52 Stock Pick 60 Morningstar 64 My Plan 66 Dear Editor

ICICI Prudential Focused Equity Fund (An open ended equity scheme investing in maximum 30 stocks Cover Design: PRAVEEN KUMAR .G across market capitalisation i.e. focus on multicap) is suitable for investor who are seeking*: 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, • Long term wealth creation Printed and published by Vinayak Aggarwal on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: Saibal Dasgupta. • An open ended equity scheme investing in maximum 30 stocks across market-capitalisation 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 July 2020; Release on 1 July 2020. Total no. of pages 68 *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 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.

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New World Order Post COVID-19 EDITOR-IN-CHIEF Our lives are Ruben Banerjee significantly EDITOR changing in the era Saibal Dasgupta of COVID-19, as we EQUITIES AND MARKETS EDITOR Yagnesh Kansara tailor our lifestyle to fit SENIOR ASSISTANT EDITORS into the ‘new normal’. Aparajita Gupta, This article about the Anagh Pal new normal is well SPECIAL CORRESPONDENTS presented in a detailed Himali Patel, Vishav and lucid manner, PRINCIPAL CORRESPONDENT talking about how Nirmala Konjengbam financial transactions are soon going to be digitally dominated SENIOR CORRESPONDENT as customers are gradually becoming less dependent on human Dipen Pradhan intervention, about increased awareness on health insurance and NEWS DESK COPY EDITOR several other conspicuous changes. The crisis and lockdown have Sudeshna Banerjee deeply changed our mindsets, and as mentioned in the article, this SENIOR SUB EDITOR pandemic is likely to leave a permanent imprint on the customers, Sampurna Majumder countries and economies. TRAINEE SUB EDITOR Sonia Sharma, Mumbai Indrishka Bose WEB CORRESPONDENT Rajat Mishra Bleak Expectations Of A Revival DIGITAL TEAM Amit Mishra, Sneha Santra I found the story highly ART informative, describing Praveen Kumar. G, Vinay Dominic (Senior Designers) the positive and negative Girish Chand (DTP Operator) sides of the Atmanirbhar PHOTO EDITOR Bhupinder Singh Bharat package. Often it gets TECH TEAM difficult for us to comprehend Raman Awasthi, Suraj Wadhwa the entire concept and its Business Office ramifications. Such articles CHIEF EXECUTIVE OFFICER help us to get a clear picture Indranil Roy of it. I had a great time reading this article. PUBLISHER Mohina Singh, New Delhi Sanchita Tyagi Rawat ASSISTANT VICE PRESIDENT Tushar Kanti Ghosh Invest For Guaranteed Happiness Circulation & Subscriptions Anindya Banerjee, The column on the Gagan Kohli, Vinod Kumar (North) G Ramesh (South), Arun Kumar Jha (East) necessity of investing Shekhar Suvarna serves an important role for Production people who find themselves GENERAL MANAGER confused while making Shashank Dixit an investment decision. It CHIEF MANAGER Shekhar Kumar Pandey is a beautifully explained MANAGER column and teaches us Sudha Sharma how to make our money DEPUTY MANAGER work, once we enter the Ganesh Sah retirement stage. ASSOCIATE MANAGER Soumyajit Pal, Kolkata Gaurav Shrivas Accounts VICE PRESIDENT Diwan Singh Bisht Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, COMPANY SECRETARY & LAW OFFICER New Delhi 110029, or [email protected]. Please mention your full name and residential address. Ankit Mangal

4 Outlook Money July 2020 www.outlookmoney.com

Talk Back

Gather The Rosebuds Right Now I have been following Outlook Money for years, and I would like to say that this topic is really commendable, and it helped me settle my thoughts regarding buying a new house. The financial uncertainty has taken a front sit due to the pandemic, hence many are hesitating to buy a new house. However, this story has given a proper background picture coupled with valid reasons. Arshi Kashyap, Mumbai current scenario is the emblem of reach a certain point in future, dark times, but we must learn to where it might be termed as another Living Through The weather the storm with minimal pandemic. Since diabetes runs in our Market Cycles impact. I feel this article is the need family, it is a grave concern for us. I The standpoint was very intriguing. of the hour, as it explains that it is would like to thank Outlook Money I have poor knowledge in this field, very important for us to weigh our for coming up with this topic. I got but I would like to appreciate the financial goals, revisit our priorities to explore the pros and cons of a way it has been woven, starting and create emergency funds. It is diabetes specific health insurance with a historical timeline to give us quite apparent that the crisis will be plan and whether it is the best an idea about the boom-bust-boom with us for some time, and we need possible solution or not. Nivedita Banerjee, Mumbai cycles. to act accordingly. Sunipa Dey, Kolkata Yashwi Pandey, Kolkata Reap A Golden Harvest Surviving A Salary Cut Sugar, Spice All Things Not So Nice I had a great time learning about the Or Job Loss status of gold in the market. At this Some are sailing in the ship I knew about the increasing cases point of time, it is surely the safe of hardships while some are of diabetes, but I was taken aback haven for people, as it lends itself witnessing their boats drown. The when I came to know that it will well to liquidation during uncertain times and helps investors raise cash and counterbalance losses stemming from other asset classes. It has become the best performing asset as it continues to retain its worth even in turbulent times like these. Suraj Rastogi, Delhi My Plan I could very well relate to this story. It is important to stay invested amidst all negativity. It was a great learning from Dr DG Vijay’s story and it can be a lesson for several others out there. We are often unsure of our financial decisions when there is an underperformance of the investment. Such stories are really helpful. Rishi Jain, Bangalore

6 Outlook Money July 2020 www.outlookmoney.com BENEFITTED 1,61,000 FAMILIES WITH A ROOF OVER THEIR HEAD.

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Fitch Downgrades 9 Indians Welcome Change Indian Banks To Negative

In Customer Experience redit rating agency Fitch has revised the outlook on the long-term Issuer DefaultC Ratings (IDR) of nine Indian banks from stable to negative in consonance with rating changes to India’s sovereign outlook. As quoted by Fitch, the reason for this downgrade is the impact of the escalating coronavirus pandemic on India’s economy. However, earlier this month, another credit rating agency downgraded the long-term local and foreign currency deposit ratings of HDFC Bank and SBI to Baa3 from Baa2 and also the long term issuer rating of EXIM India to Baa3 from Baa2, with a negative outlook and had placed Bank of Baroda, Bank of India, Canara Bank and Union Bank of India under the review for he consumers are changing their approach and increasing downgrade. their interest and awareness regarding the value of the On June 22, Fitch rating Tinformation they provide to the businesses. 69 per cent of downgraded outlook of Indian consumers believe that the gradual change in the nine banks that include trajectory of customer experience is seen due to the result of Export-Import Bank their data being used, says one of the leading credit bureaus of India, State Bank of Experian in its 2020 Global Identity & Fraud Report. As per the India, Bank of Baroda, report, Indian businesses have ranked the highest at 100 per Bank of Baroda (New cent in confidently identifying the customers, whereas 35 per Zealand), Bank of India, cent customers felt unrecognised by the businesses. Further 54 Canara Bank, Punjab National per cent of business organisations in India are using advanced Bank, ICICI Bank, and Axis Bank. analytics for identity authentication and fraud prevention. Fitch said,“The negative outlook With sophisticated authentication strategies and advanced on India’s sovereign rating reflects an fraud detection tools, today they are accurately identifying and increasing strain on the state’s ability to re-recognising their customers, reducing their exposure to risk provide extraordinary support, due to the and eventually building a greater level of trust in organisations. sovereign’s limited fiscal space and the “Companies need to deliver more than personalised products; significant deterioration in fiscal metrics they need to deliver on customer expectations for security and due to challenges from the pandemic.” convenience at every step of the digital journey,” said Sathya “The rating agency expects State Bank Kalyanasundaram, Country Head & Managing Director, of India (SBI) to receive extraordinary Experian India. government support, if required, due to The credit bureau Experian had interviewed 6,500 its very high systemic importance. SBI is consumers to study and analyse the research, with more than the largest Indian bank with nearly 25 per 650 businesses from across 13 countries including India, cent market share in the system assets and Mainland China, Japan, Indonesia, Australia, the United States, deposits. It is 57.9 per cent state-owned and the United Kingdom amongst others. “Globally, while 95 and has a much broader policy role than per cent of businesses are optimistic in their ability to identify peers’’, Fitch added. For ICICI Bank and customers digitally, many consumers across the globe are Axis Bank, the global rating agency expects yet to be acknowledged and recognised while engaging with a moderate probability of extraordinary businesses online. Over half of the organisations surveyed are state support, due to their systemic prioritising the creation of targeted products and offers, while importance, market position, and private collecting more personal information to do so,” said a report. ownership. Himali Patel Rajat Mishra

8 Outlook Money July 2020 www.outlookmoney.com

Queries

Keep The Spotlight On Your Investment Goals

SUSNATA [email protected] SANDEEP MITTAL, [email protected] I have been investing for the last nine years and all my funds are in direct plan and growth option. My investment horizon is 20 to 25 years, targeting `2 to 2.5 crore. My present MF portfolio includes, Quantum Long- Term Equity Value Fund: `2,000, HDFC Mid-Cap Opportunities: `5,000, Franklin India Smaller I am 49 and fall under the 30 per cent tax bracket. Companies Fund: `3,000, How much will I benefit by investing `50,000 per Axis Focused 25: `3,000, year in NPS, by the time I am 60? Franklin India Feeder As the global markets have dropped significantly and since you Franklin US Opportunities are in a 30 per cent tax bracket, we advise you to invest in equity Fund: `3,000, Canara related NPS and mutual fund schemes. Out of the proposed Robeco Equity Tax Saver: `50,000 investment per year, `30,000 should be invested in `8,000. equity oriented NPS schemes and `20,000 can be invested in Since the market is equity multi cap mutual fund schemes for the next 11 years. This down, shall I increase total amount should be bifurcated in SIPs of `4,000 per month my SIP amount in a so that you can average out the cost of your investment with a smallcap or multi-cap staggered approach. fund? Secondly, CanRob Aakanksha Chopra, Wealth Manager, Ashika Wealth Advisors Equity Tax Saver, has been receiving a 3-star rating, shall I change to Axis Long Term Equity? SRIKANTH REDDY `17,000 per month. If however, you I would suggest you hold all your [email protected] are planning only for `35 lakh then funds. There is no need to make I am an NRI, planning to you will need to invest `7,000 per any changes given your long-term invest in my kid’s education month. Depending on the investment horizon. Simultaneously, add who is four months old. I route, you may or may not have to more SIPs, especially focusing on would like you to advise me pay tax then, though, this cannot be large-cap and Index. Also, add on the following - firstly, how predicted now, as it will depend on HDFC Index Fund - NIFTY Plan much do I need to invest to the tax laws applicable at that time. - Direct-Growth, and add other accumulate an amount of Hence, it is prudent to plan a 20 per large cap funds like Mirae Asset `35 lakh by the time my son cent higher amount. You can also use Large Cap Fund. You can also add turns 15? Secondly, do I need equity mutual funds as an option to smaller amounts in funds like to pay a tax on `35 lakh? If save this money. Select index or large Canara Robeco Emerging Equity yes, how much would it be? cap funds mainly (such as HDFC and Mirae Asset Emerging I think `35 lakh after 15 years will Index Fund and Mirae Large Cap Bluechip. Axis Long Term Equity not allow you to afford education Fund), since you will want lower risk is a relatively better fund than expenses. If the present cost is on this corpus. Also, keep reducing Canara Taxsaver, hence, you can anticipated at `35 lakh then in 15 equity exposure once you are near go ahead and make the switch. years, the amount required will be your goal. Sousthav Chakrabarty, around `85 lakh. In order to save Sousthav Chakrabarty, CEO, and Director, Capital Quotient for this, you will need to invest CEO, and Director, Capital Quotient

10 Outlook Money July 2020 www.outlookmoney.com Viewpoint Are Debt Funds Safe In Today’s Market Conditions?

n the second episode of the they have given 8-8.5 per cent is one of the key strategies for a Outlook Money’s special series returns,” Jajoo said. successful investment on a long- Ithat aims to help investors He added that gilt funds, debt term basis. And like any asset make most of their money in funds which only invest in bonds allocation model, the investor today’s market conditions, brought and fixed interest-bearing securities needs to look at two key factors to viewers by Mirae Asset Mutual issued by the state and central - investment horizon and risk Fund, Mahndra Kumar Jajoo, governments, have given returns appetite - before choosing a debt CIO-Fixed Income at Mirae Asset close to 10 per cent in the last five fund. investment managers, talked about years. Debt funds come in various debt funds and how they continue to “So it is the choice of the right categories from liquid funds, be very good options for investors. fund, that is more important and it’s which invest in very short term Jajoo, a veteran in the financial grossly unfair to blame the entire securitues, to gilt funds that services space with over 25 years of debt funds category because of one invest in high quality debt papers experience is overall responsible for incident. Debt funds continue to like government bonds and AAA supervising all debt schemes of the provide better returns than bank rated PSU bonds. And then you Mirae Assets Debt Funds. fixed deposits which are traditional have credit-risk funds which invest According to him, debt funds the first choice of retail investors. in low-rated companies in hope continue to be very good options With long term capital gain tax of higher returns. Jajoo said that notwithstanding one or two benefit, I think it is hight time to when one gives money to lower isolated incidents like the Franklin look beyon one or two isolated rated companies, they are less Templeton case. incidents and understand the high likely to return the capital in time “There are challenges in each quality debt funds which provide along with the interest compared market and one or two isolated very good investments to debt to highly-rated companies. incidents should not become a investors,” Jajoo explained. “Therefore, one is much better benchmark. Debt mutual funds have However, he warned that one protected by taking interest rate historically performed very well and should not put all eggs in one volatility risk than to take the if you look at their 25 year history, basket and hence diversification credit risk,” he concluded. Cover Story

or the investor, the best way to judge the impact of the government’s `3 lakh crore Fstimulus package for Micro, Small and Medium Enterprises (MSMEs) is to look at the movement of the stock market and the effect on mutual funds. These industries have a major role to play in not just generating huge employment but also as a major exporter and a supportive ancillary sector for big industry. The Stimulus Package new push towards self-reliance and reduction of import dependence under the Atmanirbhar Bharat Abhiyan has given them an entirely new role. If the strategy works, there is no reason why the stock market particularly the small and mid-cap shares, which represent the MSME sector, won’t cross the past levels. MF But business models and management strategies are bound to see some remarkable transformation in the COVID-hit universe, and this would have a wide-ranging impact on both profitability and investor returns. SME But there are many challenges that require greater attention than the government’s liquidity led revival program. Industrial revival requires sharp up gradation in technology, wide-ranging infrastructure development and a strong drive for skill development among workers. These issues remain to be addressed. If handled well, they will do good for the investors and the economy as a whole.

STOCKS By Yagnesh Kansara

or more than 18 years, since he became the Gujarat There is a sober realisation that more needs to be done Chief Minister for the first time, a key element of to help it become stronger, quality-conscious, and more Narendra Modi’s ‘Model of Growth’ was to woo competitive. But there is also a feeling among experts largeF Indian and foreign firms. He believed that if Ratan that if India continues her journey on this new path for Tata, Mukesh Ambani, Bill Gates, and Jeff Bezos funnel a few years, it can transform the face of MSMEs as well billions of dollars into mega projects, the economic as the economy. The combo-cocktail – encourage large READY TO waves would help to lift the lives of millions of people. It and small firms – can inject adrenalin in the hitherto worked in Gujarat. His experiments with ‘Make in India’ lackadaisical system. “We believe infrastructure during his tenure as the Prime Minister were steps in the development and manufacturing-led growth is the same direction. only sustainable model for India’s development in COVID-19 changed the blueprint. There is a new medium to long term. Gradual import substitution, strategic roadmap to pull the country out of the current growing domestic market and market share gains in malaise. Apart from its focus on ‘Big Business’, it aims to encourage local manufacturing, especially among AjAy ThAkur BOUNCE the MSMEs (micro, small and medium enterprises). Head, SME & Start Up Platform, BSE This explains why a sizeable portion of the `2,000,000 crore stimulus package targets the smaller firms. Under Major problems faced by the Atmanirbhar Bharat Abhigyan and self-reliance companies, irrespective of philosophy, the objective of the short-term spur is to inject liquidity in the system to benefit 4.5 million size, is the problem MSMEs. There’s no denying the fact that thissegment of liquidity BACK? constitutes the backbone of Indian manufacturing.

Graphics: Vinay Dominic

Gold 12 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 13 Cover Story

STOCKS By Yagnesh Kansara

Graphics: Vinay Dominic

Gold 12 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 13 Cover Story

global exports could help boost GDP growth trajectory of the exchanges. Once the speed of recovery improves, and make development model more balanced,” says more and more SMEs would be ready to tap the market Varun Lohchab, Head Institutional Research, HDFC for further expansion and get listed. The listing provides Securities. MSMEs the benefit of equity financing opportunities However, it’s a long winded and arduous path, which to grow their business from expansion to acquisition. It would test the patience of entrepreneurs and investors. lowers debt burden, leading to lower financing cost and If executed well, multiple sectors could emerge winners healthier balance sheet. It also expands the investor base, over next five years, like speciality chemicals, pharma, which in turn helps in getting secondary equity financing, Agri-processing, consumer durables, defence, autos and including private placement. This enhances a company’s capital goods, he adds. credibility and visibility. It further unlocks the value of For us, as retail investors, the focus on the long term the company and helps in wealth creation and in creating isn’t enough. For us, who have seen the worth of our greater incentive for the employees who can participate in savings plummet, and then recover a bit, during the the ownership and benefit from being its shareholders. COVID period, it is crucial to know if the stock market Ajay Thakur, Head, SME & Start Up Platform, BSE and other asset categories will recuperate in the shorter explains, “The PM’s Atmanirbhar package of `20 lakh run. We want to understand if Modi’s new shift will boost crore, a significant part of which is dedicated to the market sentiments. More importantly, we wish to figure MSME sector will certainly benefit the small and out whether MSMEs can become the new flavour of the medium companies as it will take care of their working season. Should you look more seriously at these stocks in capital requirements. In the time of lockdown, the the near future? major problems faced by the companies, irrespective The existing policies will enhance the attractiveness of their size, is the problem of liquidity. It is a must for of the 300-odd SME stocks listed on the BSE platform their survival as in absence of it, they get trapped in a over the past 12 months. In the near future, more SMEs vicious cycle. will seek to raise equity funds. Some of them, like in the They cannot pay salaries to their employees, clear recent case of Billwin Industries, may even offer their suppliers’ dues, loan servicing also becomes difficult and shares at premiums. Although shares of smaller firms are interest burden piles up resulting in cost escalation for generally shunned by investors, this may be an opportune the companies whether they operate in manufacturing or time to look afresh, and spot profitable opportunities. Of service sector.” course, you will need to be careful. Here’s a sense of how In addition to increase in 20 per cent head room with things will change over the next few months. respect to enhanced working capital limit through this Indian financial system is awash with liquidity. Hence, package, the RBI’s interest rate cut will also help the it was just extreme risk aversion approach particularly MSMEs to quickly bounce back, making them more of the Public Sector Banks (PSBs) that was freezing the competitive, he says. BSE SME & Start Up platform has credit market. This has compelled MSMEs to look at already 322 SMEs and five startup listings in last one year Non-Banking Finance Companies (NBFCs) for their of operation, of which three SMEs and one startup were funding requirement. This resulted in increased cost listed during the lockdown period. 56 more SMEs and 10 of funds as NBFCs were charging higher interest rates, startups’ listings are in pipeline. While Billwin Industries’ making MSMEs uncompetitive among Asian peers. fixed price issue closed for subscription on Monday June Satish Kumar, Head of Equity, Equirus Securities says, 22, 2020, it offered 6.60 lakh shares at `37 per share with “We believe the government has incentivised risk taking a premium of `27 per share. These 322 companies, listed by guaranteeing `3 lakh crore of incremental credit on SME platform, have together raised fund to the tune and `20,000 crore as subordinate debt to MSMEs, and of `3,300 crore and their combined market capitalisation the first 20 per cent losses on `45,000 crore lending to (M-Cap) is worth `16,857 crore. Total five startups got

Varun Lohchab NBFCs, HFCs and MFIs. We should see incremental # Head InstitutionalResearch, lending to MSMEs accelerate.” Solid return HDFC Securities The move to provide bigger relief to industrial sector in general and MSMEs in particular should not only `166* `21.40* `71.60* `89.75* `1361.90* `309.50* Infrastructure development tackle the issue of risk aversion by the banking sector but should also cross another hurdle in the form of Ramco Genus Power Kirloskar Greaves Garware Cochin and manufacturing-led growth rate transmission. This should happen sooner as we Industries Infrastructure Ferrous Cotton Technical Fibre Shipyard is the only sustainable model move gradually out of lockdown, experts feel. These *Current Market Price as on June 24, 2020 ; # These stocks recommended by LKP Securities are expected to provide developments will ultimately help the SME segment moderate return on investment (above 50 per cent) in short to medium term (One to three years).

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

List Of Stocks To Gain to pullback rally across global markets. Sparsh Chhabra, Not covered#/ Sector Coverage Economist, Centrum Group in his strategy note says, Unlisted “With the outbreak of COVID-19, global equity markets Alkyl Amines Aarti Industries corrected significantly in March. Since the onset of April, investors again started flocking around risky asset classes Chemicals Galaxy Surfactant Deepak Nitrite (equity and like) and the risk on sentiment witnessed Navin Fluorine a further uptick in May. This has been highly fuelled Aurobindo IPCA by continuous mammoth liquidity injections, signs of pharma Dr Reddys Alembic Pharma COVID-19 cases peaking off in the European Union (EU) region along with the signs of stabilisation seen in the Voltas Dixon US. In addition to this, resumption of global economic Consumer Havells Amber activity also drove the rally.” Durables Crompton Bluestar However, the recovery in the India is expected to have Symphony lagged effect compared to global market. India rightly went in for early lockdown to counter COVID-19, Bajaj Auto autos thereby delaying the peak. However, it will also have a Maruti Suzuki much slower recovery. Given last two years of lacklustre L&T Kajaria growth, the government has limited resources to Industrials Siemens BEL support demand in the economy. ”We believe the impact of COVID-19 will be profound in India and the recovery ABB BEML will be more ‘U’ or ‘W’ than of ‘V’-shape, expected in Dabur some advanced economies,” Chhabra argues. Marico Whatever be the shape of the recovery one thing is FMCG GCPL certain that the rural economy will recover faster rate than the urban economy as prospects remain intact The ITC forecast of a normal monsoon, its timely onset coupled Avenue Supermarts Fab India with prospects of a bumper crop output along with MSP retail ABFRL Reliance Retail* hike and recently announced rural focussed government *Unlisted ; #These stocks do not instead of ‘does’ Securities where programme - all augur well for the rural economy. it has initiated coverage. These developments are likely to cheer farmers and policymakers as they hold potential to diminish the impact of COVID-19. These trends emerge as a silver listed on startup platform and have raised `22 crore and lining amid an imminent growth contraction in FY21. their M-Cap is `80 crore, boasts Thakur. Based on this theme, LKP Securities has cherry In addition to this relief package, another factor that picked stocks belonging to the MSME sector with an will help the stock market to recoup its losses, seen in investment horizon of medium to long term (one to the early parts of the lockdown, is tremendous amount three years) that coincides with bounce back time period of liquidity floating globally. In the wake of G4, central the Indian economy will take to instill normalcy. banks of the US, Japan, Britain and China came together Lohchab says, “Sectors within our coverage, to salvage the situation by pumping in liquidity worth which could see tailwinds, include chemicals (Navin ~$6 trillion. This unparalleled liquidity injection has led Fluorine, Alkyl Amines), Pharma (Aurobindo), Autos (Bajaj Auto, Maruti), Durables (Voltas, Havells), Cap goods/defence (L&T), E-Commerce (RIL). Outside SparSh Chhabra our coverage sectors, he sees a range of potential Economist, Centrum Group beneficiaries across agrochemicals and fertilisers, solar panels, agri processing, plastics, auto components and With the outbreak of steel products. “We recommend investors to closely COVID-19, global equity watch developments in these sectors to see signs of improvement for multi-year investible themes. markets corrected Consumption and financials might take a back seat as significantly in March they would revive with a lag,” he concludes. [email protected]

16 Outlook Money July 2020 www.outlookmoney.com AmitAbh KAnt CEo, niTi Aayog on Boycotting chinese goods KicK-starting the economy and reviving tourism

In conversation with

Join us on @outlookindia @outlookmagazine on July 5th, Sunday, 11:00 a.m. Satish Padmanabhan Executive Editor, Outlook Interview

Many MSMEs Will Be Left Out Of The Stimulus Package

Shreekant Somany, Chairman and Managing Director (CMD), Somany Ceramics and also Chairman, CII National MSME Council spoke to Yagnesh Kansara. about the impact of the PM’s Atmanirbhar package for MSMEs and how it will help revive the sector.

Do you think the amount allocated for the being demanded from the loan seekers just to MSMEs is adequate for the companies in the discourage them. Your views.? backdrop of the hit? I have not heard of any such complaints, or such Yes, the micro, small and medium enterprises apprehensions been expressed. For the most part, (MSMEs) have received major relief in the form of a the scheme to automatically enhance the working tailor-made stimulus package offered by the Narendra capital sanction by 20 per cent, with borrowers Modi government. Also there are no significant requesting for enhancements not to be done, seems MSME requests in recent weeks to enhance the extent to be working. of working capital granted by the Banks that would indicate that the current provisions are inadequate. Do you think the scheme will add to Non- Performing Assets (NPAs) of banks as demand How do you see the process of loan disbursal side revival may take a long time? When do you have given their consent and loans COVID. Many existing business models by banks after government’s stimulus package? expect normalcy to return in the economy? aggregating `12,905 crore have been MSMEs who are will get wiped out and a few new business So far the information seems to indicate that banks Based on guidelines issued by SBI, and similar sanctioned. Disbursements, amounting models will evolve. Many businesses will have not been able to fully disburse the funds due to guidelines by other Public Sector Banks the loans to `7,030 crore have gone to 60,674 part of FMCG recover in FY 21-22 and a few business lack of demand. There are also reports that MSMEs are not being given to those with a ranking of SMA2 MSMEs. As per Shetty, disbursement supply chains models will become a habit like video are not availing of the deferment of EMIs. While and below on Feb 29, 2020, or those having a default may be lower now as some borrowers should also conferencing. Such business models may some of this is related to the cost of deferment due exceeding 60 days pre-COVID crisis. This exclusion may want to utilise the limits as they require enough moratorium and hand- to elongation of the payback period, it also indicates should screen out borrowers already in financial need and SBI has given the borrower benefit from holding support and economic package that cost of funds rather than shortage of funds is trouble even without the hit from the crisis. The the option to withdraw the money in revival of demand for retention. A few of these sectors of greater concern. In other words, the problem of balance borrowers being viable in “normal” times can tranches over time. include hospitality, entertainment, shortage of available funds is not the primary concern be expected to bounce back to health within a few As CII, we are hopeful and branded clothing and luxury items. of MSMEs today. months of situation returning to Normal. confident that this package will serve the desired There are news that banks are eager to meet the As per an article in Bloomberg on June 11, 2020, purpose. CII has contributed a lot through Which are the sectors in the MSME segment disbursement targets, but this may also lead to loosen the Finance Ministry sources have said that by recommendations submitted and the central that will benefit the most from the PM’s credit standards and they would be keeping a check on June 5, 2020, the state-run banks had sanctioned government has been kind enough to cater to the package and why? their asset quality track record. In few cases, the banks `17,706 crore worth of collateral-free loans under the needs of majority in the sector. The key pain points of The small and medium sectors should benefit are even identifying borrowers with a bad repayment. Emergency Credit Line Guarantee Scheme (ECLGS) the industry have been well addressed keeping in view more than the micro sectors, which may not have according to data from the Finance Ministry. the long term effects. pre-existing formal Banking relations. This should Many entrepreneurs have complained of According to finance ministry data, State Bank of This will not add to the bank NPA as due to the encourage such micro enterprises to also enter the red tape while applying for loans from Public India, Punjab National Bank, Union Bank of India, stricter norms of CIBIL ratings and banking norms, formal sector. Service sector, particularly related to Sector Banks (PSBs) and other agencies. Bank of Baroda and Canara Bank have sanctioned the the entrepreneurs are cautious enough to misuse the e-commerce and delivery and logistics should benefit Despite these loans being guaranteed by the highest amount of ECLGS loans till date. credit facility availed and for that reason obviously, most from the revival of demand with cash flows central government a long list of documents is The article further quotes CS Setty, Managing many are not availing increased credit facilities. It is supported by the PMs package. MSMEs who are part Director at State Bank of India, which has the largest true that demand side revival will take longer duration of FMCG supply chains should also benefit from early sanctions, said the bank has been able to identify to catch up, more specifically luxury segment. revival of demand. In terms of industry segments, the The cost of funds rather shortage and contact 8.14 lakh eligible borrowers, all of whom Therefore this should not be significant. tourism, travel, hard goods, and auto industry supply were sent SMSes and offer letters starting from the Ratan Tata has shared his opinion that to forget chains may not benefit due to lack of demand. of funds is of greater concern beginning of this month. Over one lakh customers FY 20-21, the dynamics of business will change post [email protected]

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Many MSMEs Will Be Left Out Of The Stimulus Package

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Partner and National Leader, KPMG India. DK Aggarwal, President, PHD Chamber of Commerce, adds, “The various reforms will enable the MSMEs to produce and compete strongly in the marketplace.” It will allow them to get over the immediate crises, and stabilise their operations until revenues flow in. However, the problem is that the banks are not interested to provide extra money to the MSMEs for two reasons. The first is that India Inc is in a wobbly situation. Most firms, whether large or small, and especially in critical sectors such as aviation, tourism, retail, logistics, and others, have either collapsed or are on the verge of bankruptcy. The MSME is one of the worst affected segments. The banks, therefore, are more worried about how to protect their existing loan exposures, and ensure that they don’t turn into NPAs. Given this mindset among lenders, it is logical that they will be cagey to extend fresh loans, even if they are dictated by the government. They will find reasons, reasonable or otherwise, to delay and reject new loan applications. “The MSMEs face a number of difficulties. Some conditions or others are imposed by the banks on them. Sometimes, the latter are asked to furnish absurd More Means Less In MSME Mess documents,” claims Pradeep Multani, Vice President, PHD Chamber of Commerce, and Chairman, Multani Without robust and healthy MSMEs the economic and Pharmaceuticals. business skeleton of the nation can come crashing down For example, an MSME that has availed of past loans from a bank can enhance its exposure by 20 per cent under the emergency credit scheme, as long as the credit has not turned into an NPA. No fresh documents By Aparajita Gupta premium. If the straggling MSMEs are unable to recover the micro and smaller ones. Lack of clarity on equity- have to be submitted as the bank already possesses from their precarious state of a combination of near- related policies results in a lack of confidence among the key papers under its KYC norms. Despite this, our major crises in less than four years! From paralysis and comatose by September 2020, be prepared entrepreneurs. Political and non-economic actors seem the bank insists on new financial records for the past demonetisation, Goods and Services Tax (GST), for an economic mayhem. The pandemic will turn into a to have a larger say in how the schemes operate. There three months. This seems preposterous because the economic slowdown, to COVID-19 catastrophe! pandemonium. Remember that the MSMEs account for is uncertainty about what to do first – push credit to firm has had no business in the past 90 days because of TheF first killed many MSMEs. The second forced some a third of gross value added, more than 100 million jobs, the firms to kick-start supply, or put money in the COVID-19, and has nothing to show for this period. to shut shop. The third led to fear and loathing. And and half the country’s exports. consumers’ hands to rejuvenate demand. Add to this the fact that many entrepreneurs in the fourth, well, it decimated the sector. The future Without them, the economic and business skeleton the MSME sector are not trained and professional of more than 60 million Micro, Small, and Medium that India carefully constructed over the past few years The liquidity factor managers. They comprise business families that Enterprises (MSMEs) hangs by a thin thread. If the can come crashing down. There is no doubt that the MSMEs need funds merely are nimble, flexible, and take advantage of new government-induced stimulus doesn’t work – the initial A recent sector-wide survey concluded that four- to resume their businesses. They have run out of opportunities. They don’t understand the intricacies of signs indicate that it is unlikely – the India economy is fifths of the MSMEs had no faith in the official stimulus cash, saddled as they are with both raw materials government schemes, and are likely to get flustered by likely to go into a tailspin. package that was announced more than a month ago. and components that they couldn’t use, and finished The policy makers assure us that we need to wait, as They want more. They pray that the government realises products that they couldn’t sell for more than two it takes a lot of effort to re-start a large economy like that what it thinks is more than enough to revive months. This is where the government-backed KR SeKaR India after a nationwide lockdown for two months. the economy, and MSMEs, is too less. The reason: emergency line of credit of `300,000 crore, which comes Partner, Deloitte India They repeat that things have begun to move, and the there are several challenges in the implementation without collateral and at lower interest rate, will help. positive impact will be visible in the coming months. “It’s of these measures. The ground reality is different Until July 19 this year, slightly more than `20,000 crore 51% of MSMEs are in rural too early to comment because many sectors resumed from the reports that the officials receive. The various was disbursed under the scheme. sector. Unless rural credit is work only a few weeks ago,” says Anurag Thakur, Union stakeholders do not seem to be on the same page. “Many impacted businesses need funds to meet opened up, the impact Minister of State for Finance (See Interview on Page 26) Despite the government guarantee, the banks are their built-up operational liabilities, working capital He adds that the government took “extraordinary nervous to lend more money to the MSMEs. Hence, requirements, and salary payments. This will help will be minimal steps” in an “extraordinary situation.” Sadly, time is at a the lenders give excuses to fob off firms, especially MSMEs to resume their activities,” says Raman Sobti,

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the jargon thrown at them by the bankers. A majority Arvind ShArmA, function in the semi-urban and rural markets, and have Partner, Shardul Amarchand Mangaldas & Co irregularly and intermittently dealt with the formal credit and banking system in the past. Strengthen training Hence, says Arvind Sharma, Partner, Shardul and awareness among, Amarchand Mangaldas & Co, there is a need to MSMEs, and provide “strengthen training of, and awareness among, MSMEs, as well as provide institutional support to ensure institutional support accelerated growth” in the near future. Both civil servants and bankers have to be sensitised to encourage loans, rather than dissuade potential lenders. “In India, 51 per cent of MSMEs are in the rural sector. Unless The demand factor rural credit is opened up, the impact will be minimal,” At the end of the day, the schemes related to loan and explains KR Sekar, Partner, Deloitte India. equity infusion can spur supplies, and help the MSMEs to immediately commence production. However, this The political factor may prove to be irrelevant, if the consumers don’t have One of the solutions, according to Sekar, is to mandate, the money to purchase the goods. For example, if there rather than urge and nudge, banks to lend fresh money are no buyers for cars, the MSMEs that supply to the to the MSMEs, and make the process simpler. The auto component vendors will not benefit. second, feels Multani, is for the government to monitor As Sekar puts it, the government has to “revive disbursals of the loans at the ground level. “Mere demand completely” or the supply-side measures issuances of loan sanction letters by the bankers are not will only have “a limited impact”. One of the policies enough,” he adds. According to union minister Thakur, Photo: Bhupinder Singh to boost demand is to disallow global players to in the first few days of the emergency credit scheme, participate in government tenders up to `200 crore while `25,000 crore of loans were sanctioned, `14,000 a scenario, nepotism and crony-capitalism can raise Daughters concept. The government gives the money each. This will give the MSMEs an opportunity to crore were disbursed. their ugly heads, and derail the recovery process. to the ‘Mother’ fund, which distributes it among the grab new orders. Other decisions include moratorium Even if the banks open the credit pipeline, and let Therefore, it is imperative to ensure that the daughters, the 650-odd, privately-pooled Alternate on loan repayments, and delay in the filing of tax the money flow to the MSMEs, there is a skew or bias sanctions and disbursals are transparent According to Investment Funds (AIFs) that are registered with Sebi. returns. However, these are temporary and limited among the lenders. The first is that given the fears of sources, there were 10-20 per cent of MSMEs which, The professional managers of the AIFs take the final moves, which are unlikely to excite the MSMEs. Critics future NPAs, there is the tendency to give loans to the in the pre-COVID period, had decided to exit their decision on which start-up to invest in. This ensures contend that the government hasn’t focused enough to larger MSMEs. This is because the bankers rightly or businesses due to various factors. Now, they may professional decision-making, and prevents the put more money in the hands of the consumers – and wrongly feel that they are in a better position to survive, get a chance to do it profitably. Such firms can use government from becoming a direct shareholder in the this issue has to be adequately addressed. and repay the amounts in the future. The bitter fact is their influence and clout to get fresh loans, siphon off start-ups. Apart from consumption constraints, more can be that it is the smaller and micro enterprises that are in the money, and later declare bankruptcy. The policy In the case of the MSME FFS too, Sobti insists that done on the supply-side. Seth feels the need to introduce dire need of fresh funds. Without it, they will die, i.e. if makers and bankers need to be aware of this, and make “an innovative approach” is required for the proper use holistic reforms to enable MSMEs to scale up, and they already haven’t. sure that the loans go to those who are serious to turn of the funds. He adds that the government can seek “a become globally competitive. Existing policies have to be As banks become choosy, which they have, political around their operations. Or else, a sizeable proportion hybrid model, which is operated under the government tweaked. A few states recently opted for stringent labor and non-economic actors can influence their decisions. of the new loans will turn into NPAs. framework, and managed by professional fund laws to benefit owners, and woo investments. Higher State-owned banks are amenable to pressures, both at managers”. These may seem to be a clear-cut strategy, investment limits for MSMEs – sacross micro, small and the national and states’ levels. Who gets the loan, and The equity factor but can create contradictions. While the government’s medium segments – are aimed to encourage promoters who doesn’t, can be decided by factors that are not It is evident that the net worth of most MSMEs was goal is to “support good firms” in the medium term, to become bigger without the fear that they will lose the related to the state of business or future viability. In such eroded by COVID-19. Their balance sheets need to be the desire of the professional managers is to seek high sops that they enjoy as MSMEs. bolstered by infusion of fresh equity. One of the ways returns within a short period. Such decisions can be counter-productive. Strict that this can happen now is through the new ‘Fund However, if the MSME FFS is handled properly, labour laws can dissuade investors, especially foreigners rAmAn Sobti of Funds’ (FFS) with a corpus of `50,000 crore. Sobti it can lead to several positive consequences for the who are bound by pro-worker laws in their own Partner and National Leader, KPMG India points out that other nations announced similar plans. sector. “The FFS can help MSMEs with good credit countries. What they want are flexible rules. Similarly, In the UK, it is available to unlisted, but registered, firms rating and GST record to expand their capacities and higher investment limits in the MSME sector introduces Businesses need funds that had raised £250,000 each in the past. In Poland, size. This will encourage them to get listed on the more competition, as larger firms that were not defined to meet operational the equity fund can be used by those that meet fixed stock exchanges in the future,” explains Sachin Seth, as MSMEs can now avail of the benefits. liabilities, working capital employees and turnover criteria. Partner (Digital & Fintech Leader), EY India. A listing Instead of an enabler, i.e. help smaller firms to become Although the details of the MSME FFS aren’t will enable the firms to raise more money, expand bigger, they can prove to be a deflator, and enable the and salary payments available, there is a precedent to go by. For instance, further, become more professional, adopt global best bigger firms to kill the smaller ones. the FFS for start-ups is modeled on the Mother- practices, and graduate into the mid-size segment. [email protected]

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Govt’s Credit No Ready-Made Solutions Plan Needs To Investors should prepare for fallout of conflict with China Saibal DaSgupta

Be Expanded ise men advise us to anticipate future challenges and be prepared for them. Smart While units worth `250 crore companies and managements invariably have PlanW B and Plan C, along with enough cash reserves to turnover are now MSMEs, yet tackle crises. Individuals are generally advised to hold the equivalent of six months’ income as cash to stave off credit line is not available for units uncertainties. In addition, they need to own assets like a exceeding `100 crore turnover self-owned house. However, is it possible to do so for ‘Black Swan’ events? Can we ever save enough, or protect ourselves By Vishav enough for something that’s unimaginable, unexpected, and unthinkable? COVID-19 was one such event when he government, while funding `3 lakh crore professional managers found themselves at a loss of ideas, under Emergency Credit Line Guarantee which led to an axing of a large number of staff, and goods which can impact foreign fund flows and drag Scheme (ECLGS), said it was a specific response losses and misery to investors. In most factories, there down the market in the medium and long term. No Tto the unprecedented lockdown, which severely were months when production and sales were halted as one can deny the importance of self-reliance, which is impacted manufacturing and other activities in the the Coronavirus spread like wildfire across India. linked to the ‘boycott’ move besides being an emotional MSME sector. Under the scheme, borrowers with up to at 20 per cent of the loan outstanding on February 29, The markets slide due to COVID-19 affected the response to the border trouble. `25 crore of outstanding credit can avail an additional 2020. So there are instances when the entity did not have fortunes of over 50 million stock and mutual fund It’s true that the clashes did not cause immediate jitters credit of 20 per cent of the loan outstanding from banks, any outstanding loan as on February 29, but is in need investors in India. Though there have been stray signs of in the stock market, which actually went into a recovery NBFCs, and other financial institutions. The government of funds now. Now it will not be eligible. Therefore the improvement, the market situation remains a gloomy one. path after declines seen during the weeks of lockdown. would stand guarantee for this additional credit for loans government needs to bridge this gap,” Mittal explains. These are times when the nation needs a stimulus This may partly because the market has factored in taken till October 31. He adds the scheme had received a “very slow – not one of cash and credit, but one of morale and occasional skirmishes on the border and did not see it as As on June 20, banks from public and private sectors response” from the private bankers and NBFCs, who sentiments. An impetus to drive a nation to see a long-term breach in trade relationship with China. had already sanctioned loans worth `79,000 crore, of inspite of the sovereign guarantee are very slow in the opportunities, where there was dread. As Prime Minister Just because the market read the cross-border which over `35,000 crore had already been disbursed. implementation of the scheme. The banks are still risk Narendra Modi said, “There can’t be a better time for a situation in a certain manner does not mean it is Banks like SBI, HDFC Bank, Bank of Baroda, PNB and averse and fear the future risk of NPA in their balance new beginning.” He added that consumption and demand the perfect one. Stock players take into account not Canara Bank were among the top lenders. sheet, he says. were fast attaining pre-COVID levels. one but many factors before opting for one of the Finance Ministry official spokesperson claims the Rajesh Sharma, Managing Director, Capri Global The crisis exposed the fact that a vast number of two animals-bear or bull—or choosing to stay some scheme has so far helped 19 lakh MSMEs and other Capital (which has a large portfolio of micro and small Indian companies have not built sufficient strength distance away from both. businesses restart their operations. business borrowers), however, claims the fiscal boost to handle production halt and market setback of a Stock and mutual fund investors need to think ahead According to Sameer Mittal, Chairman of for MSME sector had come at an opportune time when few months. There are many reasons for this, which and prepare for the possible fallout of intense trade International Trade Council in India, and Managing MSMEs were facing severe liquidity pressure. include a curious refusal to upgrade production friction with China as it would leave Indian companies Partner at Sameer Mittal and Associates, one needs to “Most of our MSME borrowers are covered under technology and plan for the long term. seriously in deep trouble. For example, nearly 60 per cent understand that the scheme is valid only for existing the ECLGS to help them tide over the economic An important question is whether companies, of the consumer electronic industry, a major attraction customers of a bank, NBFC or FI, but does not cover distress due to pandemic. We have pre-approved individuals and governments are ready, not just for this for investors in stocks and mutual funds, depend on new borrowers. Also, the government in June changed customers, who are eligible for the `3 lakh crore crisis but the next one. It would be absurd to imagine China-made components and spare parts. the definition of MSME wherein the units with a guarantee scheme and are reaching out to these that we have reached a point when there will be no more There are no ready-made solutions that one can offer turnover of `250 crore get covered, revised upwards customers in a strategic way,” he says. crisis after tackling a serious slowdown and the ongoing to the retail investor in stocks and mutual funds. A safe from `100 crore as announced in May. And yet the Sharma adds that since the scheme does not cover health crisis. An emerging danger is the likely impact of option is to rely on successful companies, whether big, credit line is available for the borrowers having turnover the loans provided in individual capacity for business border clashes with China, and the call to boycott Chinese medium or small, with strong management capabilities up to `100 crore. purposes, which is typically preferred borrowing mode and a strong desire to continuously upgrade their “So though the entities with a turnover of `250 crore by the large segment of micro and small business technologies. Those with linkages with the international might get classified as MSME, yet the credit line would owners, this exclusion needs to be addressed on priority Are companies ready for not just supply chain will also do well. not be available if the turnover exceeds 100 crore. as such borrowers are missing out on the benefits. Further the loan amount that can be disbursed is capped [email protected] Covid but also the next crisis? [email protected]

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Govt’s Credit No Ready-Made Solutions Plan Needs To Investors should prepare for fallout of conflict with China Saibal DaSgupta

24 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 25 Bailout Measures

If we look back at 2014, when we extraordinary situation, we are trying Govt Is Monitoring And Tweaking The took over from UPA, we may have had to take extraordinary steps. taken some time to begin with, but the next five years saw over 7.5 per cent How do you plan to discipline MSME Revival Package growth. banks that showed reluctance Even now our policy decisions in implementing the liquidity The government’s decision to inject stimulus in Micro, Small and Medium Enterprises (MSMEs) is not only meant include measures for future reforms. programme? to help them recover from the pandemic crisis but also encourage them to contribute to the overall goal of creating We will see the impact in the coming We are monitoring every activity on a $5 trillion economy by 2024. Union Minister of State for Finance Anurag Thakur, discusses his government’s months. a weekly basis. The finance minister reform measures in conversation with Rajat Mishra is regularly meeting with the public Recently, Piyush Goyal had sector banks. They have been clearly asked real estate developers told to come up with every detail on to reduce prices and sell their how much loan they have sanctioned inventories without waiting for the so far under this scheme. market to improve. He also added that there would be no bailout Could you tell us how the package. What is the government’s Banks should government plans protect banks official stand? disburse money from NPA, arising out of this It is up to the industry. They should as early as collateral-free loan plan? look at it from project to project There is a 100 per cent guarantee basis and how much would the possible to help from the government and the banks inventory cost, or even what have to businesses should not fret but give 20 per cent be amended, or the bank’s position. of the additional working capital to I cannot comment because the revive existing account holders. They should department has not taken any call on disburse money as early as possible the subject. Goyal is a senior leader to help businesses revive, including and he may have expressed his views. MSMEs.

Credit rating agency Crisil has said bank credit Given the large scale damage done growth will decline to a multi-decade low of 1 by COVID-19, do you see several other per cent. Do you think that taking credit will be announcements from the government or a big a big hurdle in implementing the government’s bang reform measure? liquidity package? I have already said you do not know what the future In situations like these you will see many hurdles, holds for you. If you look at the first step, we gave AnurAg ThAkur but the issue is whether the government is active. industry a relaxation in compliance burden. The Union Minister of State for Finance And when you take any decision to help the industry second step we took was Pradhan Mantri Garib and economy to grow it is not only to revive but Kalyan Yojna, where food grain and money problem also to achieve our target of $5 trillion by 2024. The was sorted. Later, we decided on an economic government is monitoring bank loan disbursement on package - Atmanirbhar Bharat - where not just All India Manufacturing Association’s disbursed. This clearly indicates the scheme has taken a day-to-day basis and companies are coming forward liquidity but reform measures have been taken (AIMO) recent survey showed 78 per cent of the off. We need to wait for the demand to improve. The to seek the benefit of these initiatives. The entire care of. MSME do not see any hope of recovery despite disbursement will be much more in the coming days. corpus of `3 lakh crore emergency credit line is to be the government’s stimulus package. Instead, disbursed until October 31. It is going to be utilised There is a likely shortfall in GST collection. they expect other forms of assistance. What is The MSME is one of the hardest hit sectors. much before that. How does the government plan to compensate your view? Could we say this is not the only measure the states? Was there any discussion on the same Whatever decision has been taken in the past was government is going to take? Do you think the government must change in GST council meeting? done after due consultations with industry leaders. During this pandemic, nobody can say what its deadline of 2024 to achieve a $5 trillion We have taken it up in the last GST council meeting It is too early to comment anything because many tomorrow holds for you. You need to look at how economy, as the pandemic has created a havoc? among various stakeholders that all states and sectors have resumed work only a few weeks ago. the situation pans out. We are interacting with Not really, because our intention should be focused union territories could come up with the idea on We are closely monitoring the progress of Rs 3 various industry leaders and things have started on how to take advantage of the geopolitical situation what could be done. A special meeting will be held lakh crore emergency credit line announced under moving. It takes a lot to restart economic activity of or favourable conditions for India. So, India should with state governments just to discuss this issue for ‘Atmanirbhar’ package, on a weekly basis. A portion a huge country like India, after months of complete work in that direction not only to look at the revival an amicable solution. of the funds has already been sanctioned and shutdown. but look at the target of $5 trillion by 2024. As it is an [email protected]

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Need For Inclusive Credit Delivery The MSME sector is in dire need for liquidity to restart work ShaChINDra Nath

he MSME sector has been witnessing support to survive this time of crisis and return to liquidity stress due to prolonged economic the growth path. The recently announced Rs 3.75 slowdown. The COVID-19 pandemic lakh crore package for the MSME has made an hasT made the scenario even more challenging as earnest attempt to address the capital crunch of the the lenders have drastically reduced their credit sector. Announcements like Rs 3 lakh crore collateral exposure to the sector. On the other hand, economic free automatic loans, Rs 20,000 crore subordinate disruptions due to COVID-19 have disturbed the debt for stressed MSMEs, Rs 50,000 crore of equity cash-flow cycle of the MSMEs. As a result, the SME infusion for MSMEs through a fund of funds, etc. sector which contributes approximately 25 per cent are expected to offer the liquidity support to the to the GDP from the service segment and more than government. 33 per cent to the manufacturing output is going However, to ensure effective transmission of those through immense working capital stress. And a benefits to the SMEs, the government needs to make section of the SMEs becoming unsustainable because SME credit delivery system more inclusive. One way of liquidity stress is not a good sign for the economy, to do is to leverage digital underwriting capabilities as the sector generates 1.3 million jobs every year. of NBFCs and SME lending institutions. The So, given the role the SMEs have been playing to government needs to rethink their approach to SME drive the economy forward, the segment needs to credit underwriting mechanism, risk assessment be rejuvenated so that economy gets back on track framework so that small businesses become an and becomes truly self-reliant. The success of the integral part of the economic revival post-COVID. government’s call to ‘be vocal for local’ depends on In addition, the SME credit eco-system should the collective resilience of the SMEs. also address the immediate challenges that the However, the inherent strength of the SME SMEs are facing due to disrupted revenue cycle segment can be measured from the fact that almost such as payment commitments to vendors, salary 90 per cent of the SME doesn’t have access to commitments to employees and other recurring formal credit. Due to the lack of credit support, payment commitments. The SME lenders need the SMEs are unable to leverage their scalability to roll out sustainability finance to the SMEs in potential. Bridging the SME credit gap of $600 the form of term loans to help SMEs meet those billion is a huge challenge. The fragmented nature expenses. of SME sector makes it challenging for the large Simultaneously, the government should also financial institutions to service the needs of the small focus on developing an enabling environment so businesses as they follow a pre-defined underwriting that new-age SME lenders can build deep sectoral process which doesn’t deep dive into the revenue specialisation and technology proficiency in order to cycles, per-customer-value of those small businesses. develop underwriting platforms capable of reaching As a result, the SME segment has always been out to all the SME segments. suffering from credit under-penetration. Given the The SME growth story of India is quite inspiring present SME lending scenario, access to credit is set and the impact of COVID-19 will not be able to to become even more challenging, as conventional destabilise the sector in the long run. The sector channels of credit are turning increasingly risk- requires liquidity flow to restart their activities. The averse and NBFCs are fighting their own liquidity banking and financial institutions, regulator and issues. the government must come together to support SME sector now desperately wants government SMEs so that the story of the indomitable spirit of entrepreneurship continues to fascinate SME sector. Lack of credit affects SMEs The author is Executive Chairman and from leveraging their scalability Managing Director at U GRO Capital

28 Outlook Money July 2020 www.outlookmoney.com Viewpoint Becoming Atmanirbhar: Why You Need To Build an Emergency Corpus

the not-so-good times. to collect the cash! Like everything else with personal You should be able to easily withdraw finance, an emergency fund is a the emergency money when you need personal situation. What constitutes it and with minimum/zero delay. Apart an emergency depends upon your from bank deposits, a great option is individual situation. But typically, a liquid mutual funds, which are more sudden drop in income is universally tax-efficient; deliver higher than savings considered an emergency. Also, a bank account returns but with a big health-related expense can be an comparable safety profile. Safety is of emergency. paramount importance when it is about All of us have bills to pay each where the emergency money is kept. month, and we maintain the balance The safer the money is, the brighter the by earning the money that we need chances that you can get it when you Mr. Rohit Kumar to spend. When your income drops want it. Years may pass when you don’t or vanishes, expenses still exist. On need the emergency money, till one fine (Certified Financial Planner) the other hand, if your expenses morning... MD, Virat Financial Services shoot up for a short period of time, your earnings may not shoot up to War chest, peace of mind he faulty light bulb going cover them. Having strength in one’s own finances on and off every few These are the reasons why more gives confidence. It also allows family Tseconds can be replaced. and more people are accepting the members to understand that their lives If your debit card is misplaced, prudence in having an emergency will not be disturbed. Emergency money you can block the card and get source of cash to meet expenses and is a war chest. It is about being ready for a replacement within 48 hours. obligations. With emergency funds unforeseen exigencies that are not likely However, a sharp decline in income at their disposal, there is no need to in your control. or an unanticipated job loss is tough run pillar to post for loans during Begin by contributing a fixed sum to handle. It’s an emergency, S.O.S, such a situation. to the emergency fund. For example if crisis, disaster - pick a name. This is you want to build one with Rs 10 lakh, why you need to have an emergency Liquid realities of today invest `5,000 or `10,000 (or more) corpus. A large enough emergency The right amount for an emergency every month to accumulate the corpus corpuses can help you deal with fund can vary from person to you will need. It may take a while to get any financial calamity brought person. But as a thumb-rule, saving to the target. Like all good habits, it’s on by events such as the ongoing 6-12 months of expenses including about being disciplined. To preserve the Covid-19 economic slowdown. As EMIs is a good beginning. You emergency funds, keep the money out the nation looks towards becoming can always build this corpus into of easy sight, or else you may just end ‘Atmanirbhar’, each individual, that a mountain that can financially up spending it. includes you, should have adequate support you for years to come. Start To be doubly sure, define the use of emergency funds at your disposal. the process today. ‘emergency funds’. Avoid succumbing To be in a good position to cover to the temptation of dipping into Uncertainty: the only unexpected expenses, an emergency that pot of money whenever you fall certainty fund should be liquid. Believe us, short of money. The emergency fund There are always a best case scenario, this is the most critical feature that is the shock absorber in a person’s a base-case scenario, and a worst-case you should keep in mind when you financial life. Assess the adequacy of the scenario. But advocates of Murphy’s are choosing where to park your emergency fund as part of your annual Law will tell you that: “Anything that emergency funds. S.O.S money kept financial plan review. Whenever there is can go wrong will go wrong”. The in non-financial assets is not liquid. an event that has an impact on income nice part of this uncertainty is that When you need money at a quick and expenses, check if your emergency you can prepare, well in advance, for notice, you can’t hope to sell things corpus is adequate. CoverInterview Story

and electrical companies also rely heavily Thus the government is working on steps on China to the extent 60 per cent of This tension to reduce import dependence on China the parts are fabricated there. Capital and boost domestic manufacturing. The goods—essentially heavy machinery could add Confederation of All India Traders (CAIT) Border Clashes Can Hit used in producing finished products, is further recently released a list of 500 categories of the second highest import from China. uncertainty products imported from China, which can Pharma/chemicals is another space where be swapped with goods made in India. The Funds Flow, Market Mood dependency on China is very high at to companies commerce ministry has also identified 12 around 60 per cent. Then sectors like auto already sectors including metals, agro chemicals, Hemang Jani, Head - Retail Equity Strategist of Motilal Oswal Financial Services components and home appliances also reeling under electronics, industrial machinery, auto tell Saibal Dasgupta and Himali Patel about the serious impact that India-China source one-fourth of their requirements parts to make India a global player and conflict would have on market sentiments from China. On the other hand, defence the pandemic cut import bill. Further to cut import is the only sector which may emerge as dependency on China for APIs, the winner if the standoff prolongs. government in March approved a package to boost If the border clashes continue for some more Could you mention companies that might be most At a time, when the world is trying to move out domestic production of bulk drugs and medical devices time, what impact could it have on Indian market impacted because they are dependent on Chinese of China, India needs to leverage its strength as a in the country along with their exports. sentiments? imports or capital or otherwise? consumer market and must ensure ease of doing The government is also making efforts to attract The recent deadly face-off between the Indian and More than 70 per cent of the smartphones across business and infrastructure so that it can become a global companies that are seeking to set up alternate Chinese troops along the Line of Actual Control in price brands come from China. Xiomi even has a big manufacturer in other sectors apart from auto global supply chains outside China. It is putting eastern Ladakh and Sikkim led to the death of 20 manufacturing plant in India, which if asked to shut where it is already big. India needs to prioritise import restrictions on various products to push local Indian soldiers and 35 Chinese soldiers. It needs to could lead to huge unemployment. Telecom companies self-sufficiency, invest in R&D, strengthen the public manufacturing – the most recent being on tyres. It be seen whether the tensions escalate further or gets import various equipment from China, which now sector, and move beyond imitation or improvisation also making its prior approval mandatory for foreign resolved with dialogues as it could have political, government is considering to stop. Consumer durables to true innovation at scale. investments from countries that share land border economic, diplomatic and cultural consequences. In with India, to curb opportunistic takeovers of domestic case it aggravates, it would be a big challenge in front firms, a move which will restrict FDI from China. of India as it heavily relies on China for imports. China accounts for ~14 per cent of India’s total imports, while What is the extent of portfolio investment by India’s total exports to the country is a mere 3 per cent. Chinese companies in Indian equity? Did the market This trade deficit with China, also a major contributor expect a bigger portfolio investment from China? to India’s overall trade deficit, is one of the world’s Currently the equity markets are holding up as both the biggest trade deficits between two nations. Thus, this countries have history of face-offs. It has been seen that geo-political tension could add further uncertainty to these events are more short term in nature and investors companies that are already reeling under the pandemic. have nothing to worry about. However, the challenge now is to de-escalate the border tension, which if fails Could you identify sectors that would be will have severe repercussions on many sectors and affected more? thus would drag the market down, because reliance on A large extent of companies imports parts or capital China cannot be stopped overnight. It may also have an from China; thus, they would have to find alternative adverse impact on foreign fund flows to Indian shares. sources if tensions escalate. They had suffered when Usually, these are known as ‘Black Swan’ events and no China saw the initial phase of the outbreak that one can predict the bottom for the market at such times. shuttered plants. Now if another disruption is faced In such times, investors should keep calm and not it can further prolong the economic recovery. Hence, panic. Long-term investors with good quality stocks a large number of sectors like consumer durable, should hold on to their portfolios and see through the electronics, pharma/ chemicals, auto components, storm as good stocks get cheaper and attractive. In the engineering goods and some of the e-commerce past crisis, we noted that a combination of extreme fear companies may have to rework their business strategies and attractive valuations provided good foundation for if the tension escalates. Further there is huge amount healthy long-term equity returns. The best strategy for of Chinese investment in India, which is increasing investors would be to accumulate good fundamental rapidly as China-based companies are stepping up their and quality stocks. While it is very difficult to predict investments in Indian companies, including the start- the bottom of the market during such events, it always ups. Thus, any disruption of trade ties between the rewards investors in the long run who take advantage two countries will substantially hurt Indian businesses of the sharp fall. given their limited manufacturing ability. [email protected], [email protected]

30 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 31 CoverInterview Story

30 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 31 CoverColumn Story

MF Investments In Small And Mid Caps Hold Promise DHIrenDrA KuMAr Mutual Funds

is extremely important for investors to difficult to keep tabs on 70-odd ones because there is understand the market for small and medium so much pre-digested knowledge available. cap companies, particularly when it comes to That’s where mutual funds come in. Fund companies Tinvesting in this segment through the instrument of are in the business of tracking a large number of mutual funds. companies and running investment portfolios that There are 3245 listed small-cap companies in are composed of a balanced set of chosen stocks. A India, 160 mid-cap ones, and only 73 large-cap portfolio is not just a collection but a structure where ones. Most of these stocks represent small and different stocks of different risk, sectoral and business medium companies, which the government is eager profiles play a complementary role. This is something to assist and help in their recovery from the ill- entirely out of the purview of an individual investor effects of the pandemic. and yet something which is easily available as a service Investors need to analyse carefully what is from a mutual fund. For getting your share of small cap feasible in terms of research into these companies returns, there is no serious alternative. and what should be left alone. Investing in smaller companies are equivalent to what is called a Which Mutual Funds? ‘percentage shot’ in cricket. There are 24 small-cap mutual funds in India. Their So investors need to have a strong desire and the track records, in length and quality, vary greatly. The right attitude to manage the percentages. Succeed at oldest was launched more than two decades ago while a higher percentage, and fail at a lower percentage. Be the youngest just four months back. There are three prepared for the occasional bust and know precisely small-cap funds that we believe are the best choices for how to recognise it, when to acknowledge it to investors. These are Franklin India Smaller Companies oneself and let go. Just as importantly, be really, really Fund, HDFC Small Cap Fund and SBI Small Cap Fund. are two important factors. There should be variability funds or creating market indices, grouping companies prepared for the gigantic winners and own them all In our system, these are classified as ‘Aggressive and you should be able to deal with it. The first is by size is the most common way of classifying stocks. the way till they become mid-caps or even large-caps. Growth’ funds, which is exactly what I’ve described supplied by the nature of equities and the second, in And with good reason too. If investments are made only in large, well- above as being the goal of small-cap investing. Of this case, by choosing the right kind of mutual fund. Smaller companies are inherently different from understood, and over-analysed companies, then course, like all equity funds, one must invest in any of larger ones. They are riskier because they are not as investors could do well with them and yet never really these in a lump sum. A Systematic Investment Plan Why Variability Is Key well-understood as bigger ones. There is relatively little have a winner. Make no mistake, this more stable (SIP) is the only way one should invest in asset types of Instinctively, all of us know very well that it’s the research attention paid to them, so the truth about investing is important and must be there in every high variability. variability of equities that make them great an their prospects is not widely known. portfolio but it will not deliver any outsize impact. I I’m sure you’ll agree that while smaller companies investment opportunity. Some stocks will do better However, this is actually only a small part of mean it’s possible to invest for years in large-caps and are a great opportunity for boosting long-term returns, than others, some will do worse. Some stocks will do the story. There is genuinely a very high degree of have returns that are kind-of-okay. Smaller companies their variability means that they should not play an better in the future than they are doing now and again, uncertainty about smaller companies’ future. Many of provide that extra boost which many investors want. outsize role in your whole scheme things. some will do worse. That makes stocks risky, but this is them will never amount to anything. Many will fail and Let me elaborate. Individuals who invest in equities precisely what also makes them potentially profitable. disappear. Even with the best of intentions, even with Why Mutual Funds? must exploit the outsized returns that are available in The payoff comes from investing well, which is a way the best of research resources, even the best of analysts As an individual, can you mount any meaningful small-cap and mid-cap stocks. I’m not saying that they of saying investing in stocks that will do better in the will make mistakes at a higher rate than they will with research on 3000+ companies? Can any one of us should invest only in ALL small and mid-cap stocks-- future. Preferably, a lot better. larger companies. even begin to understand the business of any but that would be too risky--but that these stocks should Understand that risk and returns go together. That’s all part of the game and is never going a handful of companies, let alone acquire enough be a significant chunk of their equity investments. For There’s no great payoff waiting for you for making great to change. However, it’s precisely because of this understanding and insight to be confident enough for most of us, the best way--perhaps the only way--to do choices for asset types that have no risk. uncertainty and this risk, smaller companies that investing in a company? For large companies, it’s not this effectively is to invest through mutual funds. turn out to be winners give outsize returns. The two Let’s understand both parts of this story. For Why Small aspects--high risk and outsize returns--are two sides investors, the rewards from equity investing come from So let’s talk about size. From almost any perspective, of the same coin. What we have to do, as analysts and dealing with the variability in business’ performance size is one of the most fundamentally important investors, is two different things. Investing in small caps is like and stock prices. It means that to make money, there characteristics of a company. Whether it is for ‘percentage shot’ in cricket formulating investment strategies, launching mutual The author is CEO of Value Research

32 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 33 CoverColumn Story

MF Investments In Small And Mid Caps Hold Promise DHIrenDrA KuMAr Mutual Funds

32 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 33 Insurance

exhaustive list of uncovered items Health Insurance Under A Cloud As COVID–19 Rages includes an expenditure head for ‘Care & Hygiene products’. That’s ANUP SETH what PPEs fall under, even if not specifically mentioned. CRO, Edelweiss Tokio Life With a spike in cases insurance Mahipal Singh Bhanot, zonal companies are acting pricey director, Fortis Hospital, says the while private hospitals are private sector too is seeking to find Discretionary spending changing patients for PPE kits solutions. “By and large, all third has taken a backseat party administrators (TPAs) are covering PPEs under the cashless to goal-based financial By Jeevan Prakash, Anagh Pal facility,” he says. There are new planning and Nirmala Konjengbam guidelines here: “one per day for isolation room, 2-3 per day for a verybody has seen those social single room, 4-5 per day for ICU.” existing policies cover COVID as any media forwards. A picture of But cashless itself has to become a other claim. “Till now, we have received private hospital charges for seamless reality for that to fructify. about 500 COVID claims: an average COVID-19E patients: a list of services, As Ravi Vishwanath, president- claim size of `2 lakh, as high as `7.5 with astronomical figures that could accident & health, HDFC ERGO lakh in some cases,” he adds. Krishnan cause a cardiac arrest even in the General Insurance, says, only a Ramachandran, CEO, Max Bupa Health healthy. That one picture frames the regulated COVID-specific package Insurance, too says old policies cover famine of health resources Indian can “help eliminate ambiguity and COVID—same claim process, travel consumers face right now. It’s a expedite claim settlements.” history no bar, home treatment covered pincer grip—scarcity at one end, and if the policy has built-in OPD benefits. sheer unaffordability at the other, Calculating costs “We are also covering treatment unfolding just like a famine. This looms as a big challenge: there’s costs at quarantine centres, including The early reprieve India got during no standard. “Average cost is a bit hotels,” he says. Biresh Giri, appointed the COVID-19 pandemic now seems of a misnomer,” explains Bhaskar actuary, head of product development a distant story. The very nightmare Photo: BHUPINDER SINGH Nerurkar, head-health claims, Bajaj & CRO, Acko General Insurance, the lockdown sought to prevent Allianz General Insurance. “Pan- says even testing is covered “if you is now upon us. Existing hospital question: who’ll foot the bill? the latter should still be a choice—an Insurers point to the huge, India, it’s `1.2 lakh. But it might be are hospitalised post-testing”. But he capacities are swamped. This is where the insurance older policy should suffice to cover unforeseen, extra burden on them. `70,000 in a smaller town, `4 lakh adds a nuance: “It’s essential to have We have an active caseload of 2 drama begins. The biggest bone of a new disease. But several insurance It’s not only PPEs that cost between in Mumbai. Also, some patients go an adequate sum assured. From our lakh-plus, leaping up by 16,000+ contention: insurance companies companies are dragging their feet and `4,000-8,000 a day—which, as home in 7 days, some stay for 14. experience, customers with smaller sum every day. The turnover of the sick refusing to reimburse patients. looking for ways to cut corners. As Deepesh Mehta, CEO, Grow Wealth, Some need isolation, some need insured bands have to pay a significant is so huge that governments, both Consumers are understandably angry it stands, the number of distraught says “falls under a non-medical ICU, some a ventilator.” But he says amount from their own savings.” Jayan at the Centre and in states, have at private hospitals for seemingly patients—crying about not being expense, and cannot be covered”. Take Mathews, Co-Founder and Chief inevitably turned to private hospitals. profiteering from a calamity—at reimbursed—can itself become a small co-morbidities: it can go undeclared Product Officer at Vital, recommends But that has brought in the inevitable a time when India’s wallet is thin. graph among India’s COVID graphs. in a policy form, but a virus will Be Prepared a cover of `5 lakh for small towns, and Hospitals have their own reasons Thing is, a cumulative demand unerringly smell it out and strike, `10 lakh or more and sob stories; yet, the government is putting strain even on insurance creating an unseen mountain of risk for metros. Ensure that you have a has moved to cap charges in places companies, just like a run on the bank for insurers during a pandemic. comprehensive health insurance JAYAN like Delhi. But why are insurance would. Smaller firms are reportedly The IRDA is scrambling to address COVID Plans cover MATHEWS companies acting pricey? Because putting their policies on hold for new this urgent set of challenges. Since Policies specific to COVID-19 will Co-Founder and Chief a pandemic is an unprecedented clients, fearing huge losses. Most existing policy contracts seem to be Pay your premium on time to come, as mentioned, in two types: a Product Officer, Vital situation even for them. are refusing to reimburse the cost of cracking at the seams, the thrust is on ensure continuity of your policy benefit-based product, which pays an Insurance The Insurance Regulatory Personal Protective Equipment (PPE) a proposed COVID-specific insurance Top up your existing policy to assured sum, or an indemnity-based Authority of India (IRDA) says kits—which typically form a big part policy. Here, consumers will have increase your cover that reimburses you like any other existing health insurance policies of medical bills. Others, as consumer two options, beginning July 15: an policy. Mehta explains the basics of Those with smaller Avoid buying COVID only insurance. suffice to cover COVID-19 expenses. rights activist Bejon Kumar Misra says, indemnity policy and a benefit-based the first: an entry age-band from three sum insured have to However, you can consider it as a pay large amount from Alongside, it’s encouraging insurers “are refusing cashless treatment and product. The first will cover PPE costs top up your existing health months to 60 years, but with a fixed to come out with new COVID- asking patients to pay from their own if hospitalised. But the problem of PPE insurance plan premium for all; a sum insured ranging their pocket specific policies. But for consumers, pocket and get reimbursed later.” costs stays unresolved: a less-than- from `25,000 to `2 lakh, the premium

34 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 35 Insurance

Costs That Matter cybersecurity protocols to enable Treatment in private the safe exchange of confidential hospitals: `1.65- 7.5 lakh information from outside office,” adds Brahmajosyula. Now, many Treatment with medication have updated their websites to ensure only: `2-3 lakh with 10-12 day stay seamless, user-friendly features for customers. Demand for health ICU stay for critical cases insurance, naturally, is rising: the where monitoring is required : crisis is indeed an opportunity for the `5-7 lakh with 10-14 day stay industry. “Consumer awareness about Very critical cases where having at least a basic cover has gone ventilation support is required up significantly; most insurers are – `12-15 lakh with 20-25 days receiving enquiries,” says Vishwanath. stay During the lockdown, insurers observed “an increase in renewals and fresh policy sales”, he says, and retail health premiums logged a growth of 14 per cent in this phase. for the latter costing roughly `4,500 for a pandemic is not a bad thought: per annum; 50 per cent of the sum consider spending a few hundred, Regulator’s role insured for quarantine, full sum if especially a family floater plan The present moment, though, is still diagnosed with COVID. that secures your loved ones too. one of intense anxiety. And the IRDA, Ramachandran, however, says For those who can afford it, there while trying to evolve new norms, is “it’s always advisable to opt for a never was a time when the need seen as being less than helpful on the comprehensive policy” that covers for comprehensive cover was more core issue of settling claims, especially hospitalisation and also the pre- and crystal-clear. At least now, health those related to unique factors like post- phases. To that end, he believes cannot be seen as an afterthought. PPEs. Its pronouncements are seen “a COVID benefit-based rider with a New initiates can learn from as taking a legalistic view of contracts regular policy will be more beneficial experienced consumers who are signed before the pandemic, and for customers”. throwing up interesting patterns thus not protective of policyholders. It’s a fact, of course, that a `50,000 of behaviour. Subramanyam Factoring in customer feedback is vital insured sum won’t help a patient Brahmajosyula, head-underwriting & at this stage of evolution, says Mishra— who’s paying up to `2.5 lakh for reinsurance, SBI General Insurance, that would “give confidence to those treatment. “A COVID policy only talks of “a reduction in the overall buying new policies and thus increase takes care of today’s concern,” says number of claims reported during the insurance business, while bringing Mathews. It may make sense, he too the lockdown”. Isn’t that a paradox down insurance costs”. Consultation feels, to add on that benefit to an during a pandemic? No. “People are with policyholders was a regular existing policy. merely choosing to postpone elective feature in the years after 1999 when treatment.” So the price of health is a IRDA was set up—that’s been “totally Who should buy? constant vigil. missing for the last 10 years,” he adds. We make a case for standard plans “We are certainly seeing a At this point, even the media is finding with COVID benefits, but who can permanent change in customer it hard to get IRDA to engage. opt for COVID-specific policies? If behaviour: discretionary spending Outlook Money contacted, serially, you are one of the unfortunate ones has taken a backseat to goal-based Mathangi Saritha, assistant general who’ve recently lost a job or faced financial planning,” says Anup manager, communications, then DVS salary cuts, a COVID plan with a Seth, CRO, Edelweiss Tokio Life. Ramesh, GM, health, and was finally relatively lower premium is a good Insurers too are functioning amid asked to contact Subhash C Khuntia, option. For those living in hotspots, an unprecedented crisis. As the chairman, IRDA…several calls were there’s no time to waste. If not a high- pandemic set in, their biggest made to his office, in vain. A bit of cost standard plan, at least secure challenge was to ensure the safety sunlight may not kill the virus but some immediate cover with a COVID of their own employees: providing would be ideal in terms of collective plan. Even if health insurance is not alternative work arrangements et response from India. your thing, an affordable plan just al. “Another was to overcome set [email protected]

36 Outlook Money July 2020 www.outlookmoney.com General Insurance Made Easy Health Insurance FAQs

ealth insurance is a Mr Ravi Vishwanath, must for everyone. President – Accident & HWith health costs Health, HDFC ERGO rising every year, a health General Insurance says emergency can cause a major “A health insurance policy financial blow in the absence offers individuals financial of insurance. However, one security in case they fall prey needs to be well informed to any ailments listed under before taking a health the policy. They also cover insurance policy that suits infectious diseases inclusive one’s needs. Here are some of COVID-19 after an initial health insurance FAQs that waiting period from inception will address the key issues you need to ensure that you non-network hospitals. of the policy. Further, health regarding health insurance. have adequate sum assured. insurance policies like HDFC Check the waiting period Should I opt for a ERGO General Insurance’s What is the right age to for pre-existing diseases. COVID-19 product, my:health Suraksha or HDFC buy health insurance? Check for any sub limits even though I ERGO Health Insurance’s One should buy a health and exclusions under the already have a health Optima Restore, will also offer insurance policy as soon as policy. Check whether any insurance policy? policyholders a comprehensive possible, when one is in good co-pay applicable in the A COVID-19 specific cover for medical expenses health. This is because at a policy. One needs to also policy will only cover you from major illnesses. lower age, a health insurance have information on the for the virus when it is Also, customer may opt policy is available at a lower claims settlement ratio of prevalent and with certain for HDFC ERGO General premium. Also, most health the company. pre conditions. In case Insurance’s my:health insurance policies have you already have a health Suraksha policy, as individuals a waiting period for pre- When can I make a insurance policy, this will may buy the policy on existing diseases and specific claim? be sufficient to cover you installments without EMI. diseases are not covered for In a cashless claim the from any infectious disease, my:health Suraksha also usually a period of 2 years. insurer settles all bills with including COVID-19, after covers mental illnesses under the hospital directly. In an initial waiting period medical expenses cover, What do I need to check case of reimbursement, from inception of the home healthcare, road and before selecting a the policyholder pays policy. Further, a regular air ambulance, organ donor health insurance policy? for the hospitalisation insurance policy, also offers expenses, alternative treatments There are several things you expenses and can later claim a comprehensive cover for under AYUSH (Ayurveda, need to check before taking a reimbursement. This can be medical expenses for major Yoga and Naturopathy, Unani, health insurance policy. First, availed at both network and illnesses. Siddha and Homoeopathy). Mutual Fund

In the post-COVID world, there will be a paradigm shift, as sustainability and responsible JINESH GOPANI investing gain importance. Asset Head – Equity, managers will approach investments Axis AMC differently, and investors will demand this change. “Hence, the adoption of ESG is likely to accelerate. It The theme of ESG or will emerge as a new investment sustainability is becoming philosophy, even in a nascent market not just a luxury but like India,” says Shibani Kurian, Head indeed a necessity of Equity Research, Kotak Mahindra AMC. Like growth and momentum stocks, sustainable shares will to show lower volatility due to possible become part of our lexicon. controversies and occupational mishaps Global experience shows that related to environment and governance ESG investing generates long-term issues. Hence, the investors and asset Environment Funds May See A Surge and competitive returns for both managers can be more confident about asset managers and investors. This the price stability of such stocks. is also true for the not-so-mature Unlike the other mutual funds, the The world post COVID-19 is likely to see a paradigm shift. We may soon see sustainability Indian market. For example, the sustainable ones incorporate ESG and responsible investment gaining importance in the asset management industry as a priority for companies. two funds of SBI Magnum gave analysis in their research and decision- At the governance level, investors annualised returns of 6.29 per cent making process. However, despite will keenly watch how companies and 5.41 per cent over a five-year the single underlying philosophy, the By Himali Patel inflows, these funds performed better combined assets of $1 billion. Globally, engage with specific stakeholders period. The returns were lower at various ESG funds can have different than the global universe. there are almost 3,300 ESGs with assets like labour, and evolve meaningful 2.45 per cent and 1.55 per cent, approaches and tactics. According to SBI irst, your worst nightmare Towards the end of March 2020, of almost $840 billion. policies to grapple with the new respectively, over a three-year Magnum’s Mehta, “some funds invest in came true. Like other global the assets of sustainable funds, Several reasons can explain the challenges. Ruchit Mehta, Fund timeframe. Given the current state companies that are broad ESG leaders, indices, the BSE Sensex which focus on companies that rank fascination for the sustainable funds. Manager-SBI Magnum Equity of the stock markets, the returns and others focus on those with specific Fplunged. And then, there was some high on Environmental, Social, and COVID-19 has highlighted issues ESG Fund, SBI Mutual Funds were negative in absolute terms in positive value-add such as clean energy, good news. From its low of 25,381 on Governance (ESG) issues, were down related to health, safety, environment, says that shareholders will focus the past three to six months. Gopani healthcare, education, gender equality, March 23, 2020, it recovered 60 per 12 per cent from their all-time high at and sustainability. “More companies are on the risk-mitigation options indicates that the more significant and waste management”. cent of its losses over the next three the close of 2019. According to a May under scrutiny for decisions that affect that managements adopt. “The aspect of the sustainable funds is that “We weigh stocks based on our months. Now, there’s better news. 2020 report by Morningstar, this was their employees, vendors, customers, strengthening of supply chains will their investment strategies “bring proprietary ESG scores, and check Worldwide, as also in India, certain lower than the 18 per cent decline and other stakeholders. COVID-19 is be one of them. Import-dependent down the risk of disruptions in the tolerance on sector guardrails to funds, dubbed ESG or “sustainable” for the global universe of all the a litmus test to verify a company’s true companies may change their companies’ business models and arrive at the final weights assigned to ones, showed “resilience” during the funds. The sustainable funds “pulled sustainability, and its commitment to practices, and evolve alternative performances due to ESG factors”. each stock in the portfolio,” explains sell-off triggered by the COVID-19 in $45.6 billion in the first quarter ESG best practices in these difficult supply chains,” he adds. The stocks, which they buy are likely Quantum’s Mehta. He adds that an pandemic. In terms of both assets and of 2020” compared to “an outflow times,” explains Chirag Mehta, of $384.7 billion for the overall fund Senior Fund Manager - Alternative universe”. Investments, Quantum AMC. In the ESG Fund Returns (%) In Asia, and specifically in India, future, both companies and investors CHIRAG MEHTA the ESGs performed better than will be obsessed with non-financial Scheme Name 3 Months 6 Months 3 Years 5 Years AUM (` Cr) in Europe and North America. parameters, apart from profits, Senior Fund Manager Axis ESG Equity Fund - Direct Plan 1.22 - - - 1,690.17 - Alternative “Bolstered by new fund launches”, revenues, and other financial figures Investments, their assets in Asia (minus Japan) and ratios. “As we rethink our personal Axis ESG Equity Fund - Regular Plan 0.71 - - - 1,690.17 Quantum AMC went up by 21 per cent. The report values and priorities, several companies Quantum India ESG Equity Fund - Direct Plan -1.66 -8.87 - - 14.15 stated that “Indian (ESG) funds went out of their way to help the society. COVID-19 is a litmus test experienced record inflows of $507 The theme of ESG or sustainability is Quantum India ESG Equity Fund - Regular Plan -1.88 -9.18 - - 14.15 million in first-quarter 2020”. Clearly, becoming not just a luxury but indeed to verify a company’s SBI Magnum Equity ESG Fund -7.50 -15.87 1.55 5.41 2,323.67 there is a huge investor interest in a necessity in the present-day scenario,” sustainability and its sustainable funds. At present, there feels Jinesh Gopani, Head – Equity, Axis SBI Magnum Equity ESG Fund - Direct Plan -7.30 -15.52 2.45 6.29 2,323.67 commitment to ESG are seven such funds in India with AMC. Social responsibility will emerge Source: Value Research; Note: Return as on 9th June 2020, AUM as on 30th April 2020

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Average ESG Risk Score as per Sebi’s rules, only the top 1,000 listed companies need to furnish Healthcare 38.68 Serving Stakeholders A Business Responsibility Reports, Utilities 37.11 which highlight their initiatives on Basic Materials 36.45 ESG issues. There is also a lack of Energy 35.42 Top Priority Now Industrials 30.61 regulatory desire to push companies Financial Services 27.96 to reveal additional information. Stakeholders are extremely important and maintaining a balanced approach to Sectors Consumer Defensive 27.71 Thus, ESG research becomes difficult, boost their confidence will help firms bounce back from the crisis. Real Estate 26.06 which limits the choices for the fund Arvind Gupta, Partner and Head – Management Consulting, KPMG in India Communication Services 24.62 managers, as also the investors. explains how firms need to establish the new normal and communicate this Consumer Cyclical 22.25 Technology 15.88 By default, the funds fall back on approach to their stakeholders, during an interview with Himali Patel. safe strategies. For example, they 0 5 10 15 20 25 30 35 40 45 assiduously shun stocks of companies Average ESG Risk Score The pandemic has caused a serious business Source: Morningstar & Sustainalytics that derive significant revenues from take care of their stakeholders in their decision-making, businesses such as tobacco, liquor, and slowdown. How are the corporates trying to they are likely be more resilient over the time. controversial weapons. In addition, reassure stakeholders (investors, creditors, ESG score, which is a tally of 150 severe risk comprises Lupin, Cadila there is the tendency to keep portfolios employees) during decision-making? What do stakeholders go through when their to 200 parameters of a company’s Healthcare, Sun Pharma, Piramal well-diversified, and not to unduly The aftermath of COVID-19 outbreak is going to views are not considered? ESG footprint, can be considered Enterprises, GlaxoSmithKline, and penalize specific sectors, even those reverberate through the economy for a long time, All stakeholders expect their needs to be taken into a measure of its long-term Dr Reddy’s Lab. like energy and utilities that rank high pushing us to transform and innovate the way we account as companies strategize to meet new challenges. sustainability. The higher the score, But an ESG score of a company on ESG risk scores. The standard operate. We are seeing firms establishing incident By not meeting these basic expectations, companies would the better it is as an investment or sector is not a static figure or practice is to keep the sector-wise management teams, redoing business continuity plans see fear, confusion and anxiety across the value chain. option. “A high score translates into concept. There are no guarantees exposures in sync with the overall and charting stakeholder communication strategically to These may include investors who doubt the financial steady and sustainable performance,” that certain stocks or sectors will market or the benchmark index. deal with all unseen and unexpected challenges. viability of their investment, or employees who may be reveals Gopani. always remain high on such rankings. COVID-19 will lead to several Organisations are attempting to respond on multiple facing job and financial insecurity, or the creditors who The most favoured stocks in Therefore, the fund managers changes. Investors will become fronts simultaneously. They are looking at safeguarding may doubt the company’s worthiness. This will have the portfolios of ESG funds are need to nuance and fine-tune their sensitive, and gauge companies’ efforts their workforce by promoting employee benefits like a ripple effect negativity affecting both the brand and TCS, HDFC, Marico and Shree analyses, and include future trends to tackle the ESG issues. As they remote working, increased health cover and developing reputation. At present, the hospitality and the airline Cements. “The choice of Marico is in their calculations. The steps that pump money into sustainable funds, employee risk mitigation strategies. While doing so, they companies are trying to ensure safety of customers by because 93 per cent of its packaging a company plans to take and the the asset managers will be forced to are also looking at opportunities to preserve cash for maintaining high hygiene standards and make both material is recyclable and, despite changing state of an industry are become picky, and discard certain operational continuity, re-thinking how they can manage customers and employees feel comfortable about being a high promoters’ holding of 60 crucial factors. Even the past is stocks. The managements will pursue their regular activities and identify opportunities for associated with them. per cent, the business is managed important. Companies with a past sustainable practices. Like CSR, ESG realigning expenses in this dynamic environment. by a professional CEO. In the case record of high controversies scores will emerge as a win-win for the Companies are re-analysing their strengths so that Which principles would contribute to a more of Shree Cements, almost a fourth should be avoided. stakeholders, who will realise that such they can make a positive impact on shareholders. We are sustainable and prosperous future for the of its raw material comes from It’s not an easy task to be an ESG strategies lead to higher operational, re-doing our offerings to better match the market needs, stakeholders? alternative sources, and its plants fund manager. The problem becomes financial and stock value, and benefit making our stakeholders hopeful and confident. Firms need to establish the new normal and accordingly have zero liquid discharges and are more complex in India because of the communities and societies. In several Firms are sharing execution plans with stakeholders change the way they operate and communicate with equipped with air-cooled condensers paucity of information. For example, ways, the performances of the ESG for inputs, fostering collective decision and sense of stakeholders to give them confidence. to conserve water,” says Quantum’s funds vis-a-vis the global universe in belonging. 1. Companies with a robust business continuity plan and Mehta. The most promising sectors the first quarter of this year prove these well-laid policies to deal with emergencies are better include technology (which has the trends. As the Morningstar report Why do you think stakeholders matter now more placed to cope with downturns. lowest ESG risk score), followed by RUCHIT MEHTA contends, the “continued inflows” than ever? 2. Openness in sharing the financial situation of the consumer cyclical, communication, Fund Manager- into the sustainable funds “speak of Many large organisations have stepped up efforts to organisation would foster security amongst employees, and real estate. The riskiest ones SBI Magnum Equity the stickiness of ESG investment.” It is provide more social benefits, they are extending sick creditors, partners and investors. are healthcare and utilities. “Most ESG Fund, SBI evident that investors are increasingly leaves to employees, longer credit period to its vendors 3. Businesses to need find means to help employees deal Mutual Funds healthcare companies have severe driven by values, even non-financial and forgoing downsizing. with increased levels of anxiety and monotonous work- or high ESG-related risk. The issues ones. Hence, they are willing to invest With such uncertainty, businesses know that if they life through innovative ways of engagement, active include business ethics, product Import-dependent in stocks that rank high on ESG for a listening, and providing opportunity to upskill and reskill. quality, and safety and access to companies may change longer term and, most importantly, 4. They also need to recognise and weed out short-term healthcare,” says Harish Toshniwal, they are “willing to ride out periods of Firms are re-analysing their crisis that may victimise employees or investors, by Product Manager, Morningstar practices and evolve bad performance.” using innovative methods for stability. Indexes. His list of companies with alternative supply chains [email protected] strengths for a positive impact [email protected]

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40 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 41 Fintech Watch

negligible at the moment. However, we are witnessing an uptick in other categories like education and medical Archit GuptA loans. Our customers are also taking Founder and CEO, small-ticket loans to meet their ClearTax essential everyday expenses,” he says. Even tax solutions provider Lockdown has given ClearTax is witnessing higher traction us an opportunity during this time of lockdown. But will it be able to sustain this to double up on new traction once lockdown is over? products and features “Yes. We adapt our product pipeline based on continuous airlines, tourism, hospitality, hotels, customer feedback. We were the first entertainment, e-commerce (non- few to offer GST 2.0 and E-Invoicing essentials) and restaurants, among solutions and the lockdown gave us other sectors. an opportunity to double on new However, there are also a few products and features on our existing areas that are seeing an uptick in tax compliance suite which we will be digital payments by way of increased rolling out in the next few months,” adoption during the lockdown. These says Archit Gupta, Founder, and include online grocery stores, online CEO, ClearTax. pharmacies, OTT players (telecom Again, bulk of the tax payers are in and media), EdTechs, online gaming, the 25-40 year age group. recharges and utility/bill payments, Even, Nithin Kamath, Founder & the study states. CEO, Zerodha says the lockdown had Digital payment volumes are a positive effect on the business. “We also receiving a boost through the have witnessed a surge in account our organic lending activity and the Government, which has pledged opening to the extent of over 300 per number of daily enquiries. Just like monetary assistance to the poor via cent post lockdown in the last three Fintechs Strike Gold As Digital Life Grows demonetisation provided a massive direct transfers to bank accounts. months. This is mainly due to the fact impetus to digital payments, as we The finance minister and the that during the lockdown people are There is a sudden surge of demand for using these app-based financial platforms post pandemic navigate through the post-COVID CEO of the National Payments working from home and getting some world of lockdowns, digital lending Corporation of India have also urged time to invest in the markets.” has come to the centerstage.” people to increase the use of digital Zerodha offers investments in By Aparajita Gupta businesses. “We have seen no fall in the lockdown we were growing 20 MoneyTap provides customers payments in order to make payments stocks, mutual funds, and bonds, our user base during the lockdown. per cent month-on-month. Since with a revolving credit line, from contactless. trading in equity, equity derivatives, ith the coronavirus- In fact, the transactions on our the last three months we have been which they can borrow money once “Digital payments, once a currency derivatives, and commodity induced lockdown platforms have grown by 2X. Before growing by 30 per cent month-on- or twice, or as many times as they convenience, have become a necessity derivatives on its platform. getting prolonged, month. We crossed 6 million users in like. Basically, one gets a one-time in these times. With a majority of “Our client user base was around theW fintech platforms are reaping April,” says Harsh Jain, Co-founder approval for multiple disbursements. the sectors that contribute to digital 2 million before the lockdown a harvest with netizens thronging and Chief Operating Officer, Groww. It has 90 per cent repeat customers payments still in a state of flux, it is phase and now crossed more than various sites for financial solutions. As an investment platform, on the app. It provides credit of up to still too early to ascertain the long- 2.5 million clients. Overall we have Many fintech platforms have even Groww currently offers direct `5 lakh at interest rates starting term impact of COVID-19 on digital registered an increase of more NithiN KAmAth seen its traffic getting doubled during mutual funds and recently launched 13 per cent per annum. payments,” the study added. than 27 per cent in our new client the lockdown period without any Founder & CEO, stock investing. The average age of “We have seen our organic website Even Parthasarathy’s views are additions,” adds Kamath. marketing spent. Zerodha investors on Groww is 28 years. traffic almost double than what it absolutely in sync with the study. Though COVID-19 had a negative Apart from digital payments Evidently, the online traction for was before the lockdown. And all this “Our existing customers are impact on most of the sectors, a companies who witnessed a boom Witnessed a surge in these platforms have gone up thanks with zero marketing spend,” he adds. borrowing from their line of credit, few sectors could leverage it well. during the demonetisation and are account opening to the to the young population. According to a recent but this borrowing is at a reduced Undoubtedly, fintech will reap more now seeing good traction on their Bala Parthasarathy, CEO & Co- study conducted by level as expenses have gone down benefit this year as long as the fear of platforms, other fintech platforms are extent of over 300 per founder, MoneyTap says, “We are PricewaterhouseCoopers digital in the lockdown. Spends on luxury the disease does not subside fully. also witnessing sharp surge in their cent post lockdown witnessing an impressive surge in payment volume declines are seen in items and travel have become [email protected]

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42 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 43 Mutual Fund

of funds of debt AUMs invested in As per experts it is interesting to note corporate debt papers were worth that over the same period of time MFs Confident After RBI’s Fund Offer `3.87 lakh crore. This segment Mayank there has been a 40 per cent growth in includes floating rate bonds and Prakash AUM of liquid funds from `3,34,725 Have measures taken by Indian regulators really helped boost the inflow of debt fund in MF industry? non-convertible debentures. The debt Fund Manager - Fixed crore as on March 31, 2020 to AUMs deployed their funds and PSU Income, BNP Paribas `4,69,086 crore as on May 31, 2020. debt funds increased to `2.04 lakh Mutual Fund Explains Balivada, “Although, By Himali Patel crore from `1.96 lakh crore, while the majority of the AUM growth in the percentage share decreased to 13.2 Targeted long-term liquid fund at 21 per cent MoM he Government has come per cent in May 2020. repo operations from March 31 to April 30, 2020 out strongly with a huge fund The lack of access to fresh funding can be attributed to the inflow from meant to support the Mutual has also led to yield spread widening have provided the corporates and financial Institutions, TFund (MF) industry after the recent in corporate bonds, thereby indirectly market liquidity the AUM growth at 16 per cent MoM collapse of a few funds including impacting debt funds. Within the from April 30 to May 31, 2020 clearly the major Franklin Templeton (FT) debt MF universe, credit funds a proven track record. Thus, the flow indicates that investors have become Mutual Fund. inherently carry a high risk as they has been seen in banking and PSU risk averse, redeeming from credit risk But only `2,430 crore out of the typically invest in lower credit quality debt funds/ low duration/ shor-term funds and deploying in safer products `50,000 crore allotted for the purpose papers, where the probability of funds with the underlying exposures,” like liquid fund.” was utilized till June 11, which is more default stands higher as compared to explains Prakash. They typically redeem at the end than two months out of the 90-day a sovereign/AAA/AA+ issue. Credit The AMFI data indicates that of the financial year to show cash in period allowed by the government. risk funds are debt funds that have credit risk fund has declined 45 per their books and deploy it again in the The low offtake could mean that most at least 65 per cent investments in cent in AUM over the last three beginning of the new financial year. major players in the industry feel less than AA-rated paper. “Investors months. As on March 31, 2020 the The regulators - RBI, Sebi and confident about their future. seem to be moving into debt funds AUM was `55,381 crore and declined AMFI - have been constantly An increased volatility in capital with caution and money is flowing massively by 36 per cent Month-on- working with all stakeholders to markets has led to liquidity strains incrementally into categories where Month (MoM) to `35,222 crore as build confidence and clarity amid in the Mutual Fund (MF) industry, underlying credit is largely focused on April, 30, 2020. It saw a further the chaos and panic. They have been forcing companies like Franklin on banks/ PSU / PFI and AAA erosion by 13 per cent MoM to behind the ideation of many revival Templeton (FT) Mutual Fund to by the central bank that saw a very Agriculture and Rural Development corporates with a good parentage and `30,469 crore as on May 31, 2020. measures for the MF industry. It has wind up six of its credit-focused debt limited utilisation yet proved to be (NABARD), Small Industrial helped boost confidence and stopped schemes on April 23, 2020. This was a confidence boosting measure,” Development Bank of India (SIDBI) and Policy initiatives By rBi panic redemptions. “Regulatory further intensified by the redemption recalls Raveendra Balivada- Head National Housing Bank (NHB) initiatives have been good confidence- Time amount pressure followed by a contagious of Investment Advisers, HDFC “By giving a boost to the available Policy initiatives building measures and have indeed effect on the overall industry. Securities. funding, we believe RBI has given Period (` Trillion) helped the MF industry ensure In a move to ease liquidity pressure RBI has constantly provided relief comfort to mutual fund managers March & normal functioning of the markets. reduction in policy rate (75bps + 40bps) - on MFs, the Reserve Bank of India to many other participants in the regarding their ability to meet funding May 2020 Credit risk concerns have ebbed, (RBI) has opened a Special Liquidity capital market, which has indirectly requirements in case of redemptions. following regulatory support, even as Facility (SLF) for mutual funds worth benefited the MF industry with Further measures like Targeted Long- TlTrOs April, 2020 1.5 redemptions have come down,” says N `50,000 crore on April 27, 2020. efforts like provision of moratorium, Term Repo Operations (TLTROs) have Crr cut by 100bps S Venkatesh, Chief Executive, AMFI. March, 2020 1.37 The scheme was made available liquidity infusion in apex financial provided the much-needed market relaxation over lCr & Crr The pandemic has significantly from April 27 till May 11, 2020 or bodies like National Bank for liquidity,” says Mayank Prakash, Fund impaired many sectors, which could up to utilisation of the allocated Manager - Fixed Income, BNP Paribas MsF - O/n borrowing raised by 100bps March, 2020 1.37 witness credit pressure this year amount, whichever was early. This Mutual Fund. slF-MF April, 2020 0.5 because of the slowdown in public measure by the apex bank has raveendra According to Association of relief package May, 2020 spending and stretched working provided necessary confidence to the Balivada Mutual Funds in India (AMFI), Assets capital cycles. Further, banks remain For nBFCs/hFCs/MFis 0.75 investment community, when the MF Head of Investment Under Management (AUM) of Indian cautious in lending corporates industry was affected by continuous Advisers, HDFC MF industry has risen 2.6 per cent For MsMes 3.7 and SMEs and this will impact the Securities ` redemptions. sequentially at 24.5 lakh crore in May For disCOMs 0.9 liquidity of low-ranked corporates. “The very provision of the facility 2020, owing to growth in liquid and Next one year is going to be very special refinance facility to Fis 0.5 has provided enough confidence to The facility has arbitrage funds. However, compared crucial for the rating actions and also stem redemptions. As on June 11, to May 2019, the AUM slipped by 5.4 increase limits to 30% from 25% under leF May,2020 - from RBI’s stance on provisioning ` provided enough 2020, only 2,430 crore has been per cent in May 2020, translating to an source : RBI ; Note : TLTROs (Targeted Long-Term Repo Operations), CRR (Cash Reserve Ratio), since a sharp slowdown can trigger a availed. In 2008 and 2013, similar confidence to stem asset base reduction of `1.4 lakh crore. Liqudity Coverate Ratio (LCR), Marginal Standing Facility (MSF), Special Liquidity Facility (SLF) for fresh set of defaults. liquidity supports were provided redemption In May 2020, the largest proportion Mutual Funds (MF) [email protected]

44 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 45 Mutual Fund

44 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 45 Interview Crisis Opens New Doors For SIP Investors

The correction in markets is helping retail investors accumulate more number of units of mutual funds and build a big corpus for themselves through the SIP route, N S Venkatesh, Chief Executive of the Association of Mutual Funds in India (AMFI), told Himali Patel in an interview. Credit risk concerns in the fund industry has largely ebbed because of regulatory support and upcoming redemptions, he said.

What is your assessment of the economy and and keeping their long-term goals as the objective to market after the government’s stimulus measures? decide on their investments. Indian equity markets have seen harsh corrections due If Investors stay firm, they stand to gain from the to the pandemic. ongoing market developments and build a sizeable However, our government has risen to the occasion. corpus that can help them achieve their financial Atmanirbhar plan as a dynamic mantra, and the life goals. Let us not overlook the fact that each of `20 lakh crore package will help the economy resurrect these crisis events leading to market correction, is in the coming quarters. helping investors accumulate more number of units As far as Mutual Fund (MF) industry is concerned, at lower net asset value, through the SIP route. These it is heartening to note that retail investors continue investments will make a big difference to the investor to demonstrate mature investment behaviour. They corpus when the market rebounds in view of the continue to repose confidence in equity mutual funds, inherent strength of the economy. as reflected by robust monthly Systematic Investment Plan (SIP) contribution. Even the debt side has seen What should investors opt for between equity a steady rise in the net flows as investors are shifting and debt MFs? Will you reassure investors to towards high-quality AAA-rated debt in view of the continue investing in equity funds even though the trend of reducing interest rates. bulk of them have hit the bottom in terms of NAV? Credit risk concerns have ebbed, following Debt schemes serve as the best investment vehicle if your regulatory support, and with redemptions coming investment horizon is between six months and three down, we could see investors allocating higher years. Risk averse investors can opt for debt schemes, quantum of savings to schemes having high-quality which have high-quality AAA paper, like corporate bond debt paper. fund, or banking and Public Sector Undertakings (PSU fund), savings fund. In fact, MF Industry is offering SIPs What is your view on SIP flows? Will they into high-quality debt funds too. continue to breach `8,000 crore threshold in the Investors should opt for equity funds if their given scenario? investment horizon is for a very long term. The best Allow me to respond a bit differently. Equity markets approach would be to invest periodically through goal- have been at their peak of uncertainty and volatility and oriented SIPs into chosen equity schemes. reigned supreme in the last 18 to 24 months. Against this backdrop, it is important to observe the behaviour AMFI BCG report last year had set a target of retail investors. SIP contributions have risen and of achieving `100 lakh crore AUM and 10 crore now have been breaching the threshold of `8,000 investors. Has that goal post changed in the crore plus. Even in the last three months of COVID- given scenario? impacted economy, SIP contributions continue to The goal post has certainly not changed. At worse, the be robust. Investors have realised the importance of MF Industry may now take a bit more time to arrive staying invested, not getting distracted by these events at the goal post. However, increasing awareness of mutual funds coupled with ease of onboarding newer Investors, thanks to increasing adoption of technology, Retail investors continue to will hopefully help the industry achieve that target, earlier than envisaged. repose confidence in equity MFs [email protected]

46 Outlook Money July 2020 www.outlookmoney.com Viewpoint Why it makes sense to invest through SIP?

he world is currently when prices fall. As a result, you are navigating a challenging able to lower the average cost of your Tenvironment, unprecedented investment, thereby reducing volatility in its scope and impact. The near- and improving the probability of term trajectory of the market looks generating higher long-term returns. uncertain. However, it is important to note No need to try and time the that over the long-term, the economy markets – Most equity market will recover and the stock markets participants tries to time the markets will generate returns. There have in an attempt to ‘buy low and sell been instances in the past like the high’. However, anyone who has Balance of Payments crisis in 1991 or ever tried to do this will tell you that the Global Financial Crisis of 2008 Vinay Agrawal it is a redundant exercise. It is near when markets corrected in the range CEO, Angel Broking Ltd impossible to accurately predict the of 20% to 60%. In case of each of market tops and bottoms out. Thus, these instances, markets eventually it makes sense that instead of trying recovered to not only recoup all the the equity markets through an SIP to time your entry and exit from the losses witnessed during the crisis you can smoothen volatility, reap markets, you focus on consistently but also to generate significant gains. the long-term benefits of equity participating in the markets to Having said that, the interim periods investing and harness the power leverage intermittent opportunities. are usually checkered with extreme of compounding. Compounding Through fixed, periodic investments volatility, making it difficult to make is a mathematical process that an SIP will ensure that you are able to optimal investment decisions. ensures that the principal invested participate at market tops, at market In such an environment, how and the returns generated on that bottoms and at all times in-between. can you best take advantage of principal are reinvested to generate Reduce the impact of behavioural future growth prospects to generate further returns. Over the long-term, biases – greed and fear influence compelling long-term returns? compounding can exponentially most investment choices - the greed The simple answer to that is, increase your earnings from an to make more money and the fear of “Invest through a Systematic investment. losing money. It is these emotions Investment Plan (SIP) and continue that can often influence your with your existing SIP investments”. Benefit from rupee-cost investment decisions and hinder your averaging – due to the inherent ability to make wise choices. An SIP SIPs as vehicles of long- volatility of equity markets, stock by its very nature inculcates discipline term growth – SIPs are simply prices are bound to fluctuate sharply in the investment process and helps investment vehicles that inculcate in the short-term and change over you overcome behavioural biases discipline in the investment process the long-term. By investing all your that might come in the way of your and make it easy for investors to money at a particular price-point you investment decisions. participate in the volatile equity are exposing yourself to heightened The benefits of SIP are fairly well markets. Through an SIP, you can volatility. However, if you were to known. However, when faced with invest a fixed amount of money participate in the market at all price highly volatile market conditions periodically in the equity markets. levels, then you would be able to and an uncertain future, it is easy to SIPs give you a great deal of mitigate portfolio volatility and forget these advantages and succumb flexibility in terms of how much enhance long-term returns. Since to the fear in the environment. Do you want to invest (the investment an SIP entails investing a fixed remember that SIPs are vehicles amount can be as low as INR amount of money at fixed intervals, of long-term growth that can help 100) and when you want to invest it ensures that you purchase fewer you navigate the volatile investment (fortnightly, monthly, quarterly, units of an investment when prices landscape to generate robust long- etc.). By consistently participating in rise and more units of an investment term returns. Real Estate

Additionally, with stamp duty now advantage to NRIs with a 10 per cent being sold online it becomes an Manju dip in the value of rupee over the last added advantage. Yagnik 12 months coupled with attractive “Owning a home in their payment plans such as 10:90, 20:80, Vice Chairperson, own country is a matter of great Nahar Group and Vice leasing assistance, assured rentals and emotional and psychological President, NAREDCO so on. According to Ankit Kansal, fulfilment for NRIs. They mostly MD and Co-Founder, 360Realtors, to NRIs May Drive prefer to invest in independent realise this potential and overcome villas, luxury, semi-luxury housing in Owning home in India is the crisis, Indian real estate needs an integrated township, which offers a matter of emotional to alter its existing business model India’s Realty Revival world class amenities, excellent and psychological and aggressively work towards infrastructure support, good fulfilment for NRIs digital transformation and build a Subdued property rates, falling rupee and abysmally low construction quality and sustainable comprehensive infrastructure that can interest rates are making realty a lucrative choice for NRIs environmental values. They seek facilitate seamless customer life cycle safety, security, clean and green crisis emerging out of coronavirus management over the web world. environment and a community set- outbreak may not affect NRIs as “The way forward will be to step By Vishav Shveta Jain, Managing Director with unchanged ready reckoner up, which they have been used to much as it affects domestic buyers. up the digital game with focus on - Residential Services, Savills rates in many markets including while living abroad,” Yagnik explains. “Since NRIs stay far away, lack a more immersive and experience- ndia’s already ailing real estate India, agrees and adds that NRIs Maharashtra for FY21. According to a whitepaper of physical visits or inspection does based technology platforms that sector faced a snowball effect had traditionally been buying There have been a considerable released by 360Realtors, at the onset not make much of a difference. An can foster stronger customer post pandemic when the global properties in India. The sector number of inquiries from NRIs of FY21, a total of $13.1 billion was effective digital view of the project engagement and personalisation Ieconomy was struck by a crisis like sees highest remittances from the when it comes to investing in real expected to enter the Indian housing can be equally helpful. Developers never before. Private Equity (PE) diaspora. Sadly, there has been a estate, especially from the Gulf market from NRI quarters. While are also investing heavily in digital/ investments in the real estate sector decline in NRI investment post countries followed by the United this number may see a revision online medium to help buyers learn crashed by 93 per cent to around 2014 when the residential market States and other European nations. due to COVID-19, it cannot be more about properties and make `1,800 crore during the first five went through a slump. Moreover, funding is also easily denied that these are also one of the informed decisions,” says the report months of 2020, down from about “In the wake of the current available to NRIs from banks most opportune times with home by 360Realtors. `25,000 crore in the corresponding crisis, we expect to see a heightened and housing finance companies. prices seeing a huge dip. Also, the The situation offers a significant period last year, mainly due to the NRI activity driven by first-time nation-wide lockdown imposed homebuyers in the age group of 27 since mid March. to 37. These purchases will be seen However, there is a consensus as a hedge and safeguard against that some new pockets of crises. However, the rider to these opportunities may actually help the purchases will be of right value crisis-ridden sector bounce back and and proven track record of the emerge stronger. developers,” Jain says. According to Manju Yagnik, Vice Yagnik adds that time couldn’t Chairperson, Nahar Group and have been more beneficial for Vice President, NAREDCO, NRI them to invest with a fall in Indian investment is one such potential rupee, subdued property prices, area, with increased uncertainty of over a decade low interest rates, jobs, visa related issues as expats. reduced stamp duty in most states

Promising Pockets

in Bangalore micro markets like kanakapura Road, ORR, Devanahalli, Sarjapur Road in nCR Sector 150 noida, noida City Center, Dwarka Expressway (gurgaon) in Pune Hinjewadi, Wagholi, Baner, Wakad Source: 360Realtors

48 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 49 Real Estate

Promising Pockets

48 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 49 Real Estate

reverse migration may have had a detrimental impact on the real estate in metro cities but tier-II and tier-III Shveta aNkIt cities are expected to see a surge in JaIN kaNSal demand. Developers may need to Managing Director - MD and Co-Founder, change their approach. Similarly, Residential Services, 360Realtors acceptance of work from home Savills India culture, if extended beyond the Realty sector needs to times of crisis, may lead to demand Expect a heightened alter its business model for homes in suburban areas due to NRI activity by first- attractive prices and other benefits. and work towards Savills India’s Jain feels the time buyers in the age digital transformation increasing trend of work from home group of 27-37 years could potentially induce residential along with offering transparency to buyers to opt for bigger and less avoid congested places and look facilitate real estate sales. expensive homes away from the for larger spaces and open areas For instance, in a post COVID city centre. She adds that this trend, and migration will take place from world, virtual events will proliferate. however, may not essentially be central business districts. However, just taking the event fuelled by work from home alone, When it comes to tier-II and-III online would not serve the purpose. but would primarily be led by people cities, they have always promised Those events need to be designed looking for larger homes with being end-user markets. Cities like and implemented to offer real value superior amenities. Lucknow, Chandigarh, Ludhiana, to the customers,” he explains. Kansal too agrees and adds Faridabad and Allahabad, among It’s not just the NRIs that hold that post-COVID, demand for others, have always found takers and hope for the sector. Some events peripheral areas will increase now the demand has been revitalised which occurred as corollary because in a work-from-home with reverse migration, investment to the COVID crisis have also situation, people would need larger from Gulf countries, historic low opened up opportunities in the space at an affordable price. If level of loan rates and accelerated form of challenges. For instance, that were to happen, they would need for self-owned homes, says Mohit Goel, CEO, Omaxe. “The recent rise in demand and NRI Investments in $Billion renewal of interest of investors, 13.1 Est 12.5 developers and homebuyers owing to the pandemic is a welcome shift. 12 The pandemic has taught us that 11 creating several economic centres 9.7 is what the Indian economy needs 10 9.4 right now. The real estate and 8.5 infrastructure sector is driving this 8 shift and the coming times will see a 7.2 lot of commercial activities and jobs 6 in these cities,” he explains. 6 The need of the hour is to change the conventional ways of working and innovate to cater to 4 the new demands of the potential homebuyers. The good news is that 2 most studies concur that a large majority of buyers are still planning to go ahead with their investment, 0 even if they have deferred it for the FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 time being. Source : 360 Realtors Research [email protected]

50 Outlook Money July 2020 www.outlookmoney.com Viewpoint

Avoid these costly mistakes in life!

base a lot of weight on our next about current scenario and value your set of actions. We tend to jump investments based on that. to conclusion without properly evaluating the options available. Confirmation Bias – Considered 3 as one of the most deadly biases. First mistake, falling prey to As Rolf Dobeli expresses in his 1 Recency Bias – is to sell an book – The Art of Thinking Clearly – investment at a loss and park Confirmation bias is the mother of all the proceeds in a safer option. This misconceptions. Here, an investor tends is done solely out of fear of making to look for only those information/ more loss. I have seen this several data that confirm his/her theories. In times, over the years. This bias is other words, we end up discounting so strong that sometimes advisors or filter out information that doesn’t too tilt naturally towards taking confirm with our views. Vatsal Shah such decisions as clients are easily If we have a negative view on convinced. markets, we will always refer to the Head - Wealth Management, How to address this: Evaluate negative news or wait for markets Sushil Financial Services Ltd each situation in isolation. Have to correct further. Likewise on the enough data points to make sure upside, we become a blind believer of iases can cost you a lot! you are considering all the scenarios unlimited upside and always feel this Almost everyone takes wrong and then do a probabilistic study. time it’s different. Bdecisions because of certain Put down the various outcomes and How to address it: The best biases that are set in their mind. then co-relate with your most recent approach is to write down your views Much has been spoken/discussed experience. or theories about investing, business, about Behavioral biases and how Recently we have seen markets team building etc. and then find it impacts our decision making. performing mainly on account of evidence in actual cases which are However, just a fraction of people the run-up seen in growth stocks. against your views. possess the rightful knowledge to Value as a theme has been a laggard. understand these biases. Expecting this trend to continue If you find yourself more upset forever may not work as money 4 with losses than the gains you Why do people have biases? would definitely move to value make, you are exhibiting Loss It is because we are humans. That’s pockets over a period. Aversion. This bias will lead to selling how brains are developed to think. your winners quickly while holding on There are certain patterns for Second one is the Anchoring to your losers. Recently, this bias was which a human brain is naturally 2 effect – We experience this visible in the credit markets when one hard wired to think. ‘Once burnt all the time, particularly when of the Asset Management Company twice shy’ is the simplest phrase dealing with stock markets. It is said closed down their credit related funds. that can explain why we all suffer that once we buy a stock at a certain Immediately, investors seeking safe from a powerful bias known as the price, the investor by no means can returns exited en masse. This episode is Recency Bias. sell the stock below that price. This a clear case of loss aversion combined Just after the attack on World is because our mind is anchored to a with recency bias which ultimately leads Trade Centre, there was a sudden particular price and deciding to sell to irrational behaviour. drop in people taking flights. Similar at a lower price becomes difficult. How to address it: Don’t get bogged trend played out in hotel industry Owing to this the investor tends to down by losses of individual portfolios. post the tragic attacks by terrorists keep waiting for the stock to regain Instead, look at overall positions of in Mumbai. Ironically, the best time its price and consequently may end your entire basket of wealth and then to take a flight or visit a hotel was up with huge losses. analyze the returns. after such attacks given that security How to address it: Think forward Keeping away from these four is stronger. These examples indicate and don’t be hooked to previous biases will surely help you avoid costly that a recent negative impact can values/ numbers. Think objectively mistakes. Happy investing! Stock Pick Strong Execution Going Strong On KEC International Escorts CMP: 244.1 CMP: 974.1 And A Healthy Order PE: 11.50 Tractor Business PE: 24.26 KEC offers a healthy order book amid lockdown *As on 22nd June, 2020 Brokerages remain positive on long-term prospects *As on 22nd June, 2020

By Himali Patel control. Strong promoter parentage better product mix, benign primarily caters to rural markets, and focus on the balance sheet Why Buy commodity prices and with over 75 per cent sales coming Why Buy he efficient working capital should help KEC emerge stronger Consistent profitability growth other cost efficiencies from tractor. The pandemic spread Innovative product profile with management and execution post pandemic versus peers,” despite challenges. Ahave led Escorts to report a robust in rural areas so far has been robust distribution network. ramp-up are two components explains an analyst at Motilal Oswal Healthy order inflows and efficient Quarter Four (Q4) Financial arrested and the process of gradual Strong leadership position in the Tthat have aided KEC International Financial Services. working capital management. Year (FY) 2020 performance. lifting of lockdown is on. Given the tractor industry. (KEC) despite the economic slowdown. The company’s order book stood Being one of the leading players signs of revival in tractor demand, This RPG Group flagship company at `24,000 as on March 2020, with 1 Watch Out For in tractor industry, Escorts has we expect Escorts to be the prime Watch Out For has showcased a strong execution per cent growth Y-o-Y. On the order Rising competition and project strong presence in the north and beneficiary with its leadership, Increased raw material prices, capability and a healthy new order inflow front, its total order intake execution delay may dent margins. western market, with an overall strong distribution network and Delay in funds by Kubota. ` inflow despite the challenges in for FY20 stood at 11,331 crore, domestic market share of 11.6 per innovative product profile,” says an 303.46 Fourth Quarter (Q4) of Financial down by 19.5 per cent. “Overall cent for the year ended March analyst at Chola Securities. Year (FY) 2020. The company is a performance has been satisfactory 300 2020. The company is mainly This year Escorts is expected 300 global Engineering, Procurement across segments for FY20 barring into manufacturing of equipment to benefit from equity investment and Construction (EPC) major and order inflows, which were impacted for agriculture, infrastructure by Japan’s leading tractor major is executing multiple projects across by economic slowdown. Efficient 250 and Railways for domestic and Kubota. Further, it will also acquire 250 over 30 countries. It delivers projects working capital management international market with 1000 plus 40 per cent stake in Kubota’s in key sectors like Power Transmission and execution ramp-up, despite active dealer network. Escorts has put Indian subsidiary, Kubota Agri ` & Distribution (T&D), Railways, Civil, challenges, should comfortably 200 174.92 up an impressive show for the first Machinery India for 900 crore, 200 Solar, Smart Infra and Cables. KEC has ensure 5.1 per cent revenue quarter June, by posting a Profit After in an all cash deal. The deal will eight manufacturing facilities across Compounded Annual Growth Rate Tax (PAT) growth of 10 per cent widen its product segments across Source : BSE India : BSE Source India : BSE Source India, Dubai, Brazil and Mexico. (CAGR) in FY20-22 estimate,” says 150 Year-on-Year (Y-o-Y) in Q4 FY20. geographies. The equity investment 150

For FY2020, revenues stood at an analyst at ICICI Direct. as 100 taken value Base Export volumes rose 21.9 per by Kubota will strengthen the as 100 taken value Base `11,965 crore with a growth of 9 per As on June 22, 2020, the cent on back of new product balance sheet and will provide 131.27 131.27 cent Year-on-Year (Y-o-Y) on the company’s share price stood at introduction and penetration in new growth avenues for Escorts. As 100 100 back of the growth in Railways and `244.1 and has delivered a negative 2 Jan 2017 22 Jun 2020 markets. The consolidated revenue on June 22, the closing stock price 2 Jan 2017 22 Jun 2020 ` ` acquired SAE Tower. For Q4 FY2020, return of 23 per cent. However, BSE Sensex KEC International stood at 1,385 crore, a decline of 15 of the Escorts was at 974.1. The BSE Sensex Escorts the sales grew in SAE Tower (+39 per KEC’s debt level remained in line per cent Y-o-Y due to the impact of company over last one year has cent Y-o-Y) and Railways (+36 per with the FY20 guidance of `2,200 Financials lockdown in Q4 FY20. Over the last given a return of 77 per cent. Financials cent Y-o-Y) division while domestic crore. “According to management, five years the company’s revenue has “We value the stock at a 15 per Net sales (` crore) PAT (` crore) Net sales (` crore) PAT (` crore) T&D execution dropped by 17 per the working capital position grown at a Compounded Annual cent premium to the last five- cent Y-o-Y on back of COVID-19 remains manageable with no stress, FY20 11965.37 FY20 565.52 Growth Rate (CAGR) of 11 per cent year average trading multiple. FY20 5810.09 FY20 472.80 disruptions. On the operating front, despite collecting loss of about over FY2015-20. Its revenues share We believe the equity infusion by FY19 11022.00 FY19 495.77 FY19 6264.84 FY19 477.90 the Earnings Before Interest, Tax, `300 to 400 crore, which could by segment in Q4 FY2020 for Agri Kubota will strengthen the balance Depreciation and Amortisation have further reduced debt,” says FY18 10106.02 FY18 460.42 Machinery (EAM) segment was 77 sheet and will provide multiple FY18 5065.22 FY18 346.59 (EBITDA) rose 7 per cent in FY 2020. an analyst at Chola Securities. As per cent, Construction Equipment growth avenues for Escorts – both The Profit After Tax (PAT) saw a per experts the ordering would OP (` crore) EPS (`) (ECE) segment (15 per cent) and in India and internationally,” points OP (` crore) EPS (`) growth of 14 per cent Y-o-Y at pick up pace from the second FY20 1245.45 FY20 22.00 Railway Equipment Division (RED) out an analyst at HDFC Securities. FY20 760.00 FY20 38.53 `566 crore in FY2020. “We forecast quarter of FY21 as the company was 8 per cent. Many brokerages including HDFC FY19 1269.84 FY19 19.28 FY19 816.86 FY19 39.07 revenue/ EBITDA/adj. PAT CAGR derives majority of orders from Experts say Q4 reflects only Securities, Chola Securities and of 6 per cent / 4 per cent/ 2 per cent Indian Railways, Metro Corp, and FY18 1117.86 FY18 17.91 partial impact of the current ICICI Direct remains positive on FY18 618.55 FY18 28.31 over FY20-22E, taking into account multilateral banks. This bodes well OP: Operating Profit; PAT: Profit After Tax; pandemic and for the coming the long-term prospects of the OP: Operating Profit; PAT: Profit After Tax; the order book position and the for the investors looking at the EPS: Earnings Per Share; Source: Ace Equity quarters, one does not foresee any company. EPS: Earnings Per Share; Source: Ace Equity need to keep working capital under long-term horizon. significant damage. “The company [email protected]

52 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 53 Stock Pick Strong Execution Going Strong On KEC International Escorts CMP: 244.1 CMP: 974.1 And A Healthy Order PE: 11.50 Tractor Business PE: 24.26 KEC offers a healthy order book amid lockdown *As on 22nd June, 2020 Brokerages remain positive on long-term prospects *As on 22nd June, 2020

52 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 53 Investments

How To Deal With The Bear Hug PPF withdrawals or loan against product to cover exigencies. PPF. One can also opt for overdraft During such times, investors need ANURAG JHANWAR Defer some financial goals or take loans and diversify existing portfolio but avoid exiting in the red against fixed deposits,” he suggests to focus on taking two types of while cautioning against redeeming actions - preventive action to Co-Founder and the mutual fund investments. minimise further corrosion of Partner, Fintrust By Vishav Gupta is not alone. Many what can such investors do? Cleartax’s Gupta adds that while investments and corrective action Advisors investors face this crisis as equity According to Archit Gupta, it is understandable that investors to get the investments back on umit Gupta (name changed), markets have washed off most Founder and CEO, Cleartax, while are alarmed since their investments track, advises Harsh Jain, Co- Rebalance investments a first-time investor, put in of the gains they made over the it won’t be wise to exit the market are now in the red, they need founder and COO, Groww. ` from risky to risk-free around 3 lakh in an equity last few years. While Gupta has at this point, redeeming some of to note that the current market “One of the best preventive assets when goal is fundS in 2018, hoping to have enough postponed his plans to buy the car, their investments might be the only scenario is not going to prevail, measures is diversification. returns to buy a nice car when he it’s an option not every investor option for such investors. and therefore, they should not lose Investors must look at their approaching turns 30. Hoping for 14-15 per cent has. There are many whose dates “We understand that children’s all hopes. And that is why, those current portfolio and rebalance annualised returns, Gupta hoped of realisation of goals are fast education and future planning who can defer their financial goals it to diversify to reduce risk and Equally critical is to have a safe to have around `4.5 lakh by 2021. approaching with no possibility to are of utmost importance. As the should do so and stay invested enhance returns. And to bring their landing for one’s investment which However, in April, still 10 months push them to a later date: parents achieving of the goal cannot be during this time. investments back on track, look can be done by rebalancing from away from his 30th birthday, he got who were saving for their offspring’s deferred, it becomes essential to “Exiting now won’t help them at fresh investments based on the risky assets to risk-free assets when the shock of his life when he found wedding or their higher education. redeem at least some part of the achieve their goals. The best option analysis of the stocks and mutual the goal is approaching, either in the value of his corpus reduced Or those who were saving for investment,” he says. for investors is to take advantage of funds and the direction in which parts or in one go. to just over `2.10 lakh. While his retirement. These events and goals He advises such investors to the rupee cost averaging and invest the economy is headed. Also keep “One can rebalance the portfolio portfolio has recovered a bit, he is cannot be postponed. But with their pull out around 60 per cent of more now as the stock prices and liquidity in mind and dedicate a by shifting money from equity still far from his goal. corpus significantly eroded in value, the corpus and utilise it for their the cost of fund units have fallen, sizable portion to liquid funds to debt in four years, 25 per cent requirement, while the remaining enabling them to pick more units or short term debt terms,” Jain each year, preceding the said portion continues to stay invested. for less money. Once markets start explains. financial goal,” Jhanwar explains. “If 60 per cent of the portion is rising, which is expected given the Anurag Jhanwar, Co-Founder By following this, one would have not sufficient, then look for other past performance, they are going to and Partner, Fintrust Advisors, already taken required steps if means instead of pulling out the erase their losses and move towards feels that one lesson to take away is their goals were near, and shifted It is the best option entire investment, because that achieving their goals,” Gupta that for short-term financial goals a major part of their portfolio to for investors to take would mean exiting in the red explains. with a time horizon of five years safer instruments before a crisis advantage of the rupee which should be the last option,” In fact, as per data available with or less, one should prefer investing like COVID would have eaten away cost averaging Gupta argues. Cleartax, the goal-based investors in fixed return instruments which their returns. According to Nitin Shahi, who continued their systematic are comparatively safer and less “Alternatively, one can also Executive Director, Findoc, the investment plans (SIPs) during the volatile. “For long-term goals like rebalance all the equity investments pandemic took everyone by crisis now have their investments children’s education, marriage and into debt in one go, two years surprise and in the short term, not in the green territory because retirement, it is advisable to invest before the goal. It will depend too many options were available for they made use of the rupee cost into a mix of both equity and debt, on the need and comfort of the those who invested in equity. He averaging to their advantage when with a higher allocation to equity to investor and also on the economic advises a more proactive approach the markets were subdued. generate higher returns over a long environment prevailing at that to tide over the crisis by reassessing While those whose investments term,” he said. time,” he adds. the investment portfolio, and if are already hit by the sudden crash If financial planning is not possible, investing more via SIPs in equity values have few options executed properly, it might lead to to take advantage of the fall in the left, there are several lessons to be imbalances in the achievement of equity market. learnt from this crisis for a smooth respective goals, which will lead “In case of emergency investment journey. to undercutting or cross funding requirements, especially for First and foremost, never put all ARCHIT GUPTA of goal buckets; putting all such education, one can go for an eggs in one basket as diversification Founder and CEO, goals at risk. This could easily be education loan. For other goals, one is the key to balanced planning. Cleartax avoided through proper planning can opt for loans against insurance According to Shahi, one must and execution. Hence, it is critical and also gold loans as they are have at least 15 to 20 per cent Those who increased to plan asset allocation as per risk easily available and are one of the share of their investment portfolio the ticket size of profiles by aligning goals with cheapest resources to avail credit in cash and cash equivalents. objectives, and use professional in the short term. Unavoidable Moreover, insurance should also their SIP have earned help if needed.. expenses may be done through be considered as an investment substantial returns [email protected]

54 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 55 Investments

54 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 55 Commodities

and the stock markets around the mutual funds. She has also bought Millennials And The Gold Melting Pot world have tumbled frequently. Is this some gold because “it has always kept the good time to invest in Equity? its value in the long term,” she says, HITESH JAIN Sharp market corrections are making gold funds a lucrative choice for the young investors “I’m not saying that you should not adding that she usually puts more Lead Analyst – put your money into equity as it still money to her investment in gold after Institutional Equities, makes sense to park your money an appraisal. YES Securities By Dipen Pradhan in companies with a strong balance Medhi is fortunate to have sheet, low leverage, and which are her job secure at the time when A U or L-shaped old is a symbol of wealth less vulnerable to this epidemic,” unemployment, layoffs have taken a economic recovery will and holds a deep emotional Jain says. toll across business sectors of India connect with India’s culture, When asked to compare the facing severe impact by the lockdown. take time, which could andG has served as a financial support performance of gold with equities As an emergency measure, gold is a support gold through the years. But as the modern and real estate, Archit Gupta, CEO of handy asset to immediately convert it investment instruments become Cleartax, says, “Equity investments into cash. more visible and easily accessible, and deliver returns in a growing economy. She says , “Always check the yellowish charm of the metal to easily high-end consumer goods become Similarly, real estate investments yield hallmark and certificate when buying lure consumers into making them believe more lucrative, the young Indian returns in a growing economy aided gold. Also make it a point to check that it is pure. Indian government, population is reportedly becoming by consumer demand. However, any buy back facility the jeweler is through BIS, ensures protection of less prudent to invest in the golden the prospects for both equity and providing.” While India is the second customers’ gold through hallmarking by metal. Further, the market facing real estate become dim in a slowing largest consumer of gold, the market mandating sale of only 14, 18 and 22- global economic recession induced economy or in uncertain times.” is flooded with retailers using the carat jewels. by the novel Coronavirus pandemic On the contrary, gold tends to Regardless of the situation, investing is unlikely to attract more young do well in the falling equity markets. in a certain quantum of gold is always a consumers at the time when the price Moreover, it reduces the risk of prudent approach. Let’s understand that of the golden metal is skyrocketing. adverse price movements in an the economy and the financial markets If history is a guide, gold has asset, making it a safe haven for go through the cycle. So an investor is provided positive returns during investments. “Gold is an excellent always exposed to a risk. However, gold periods of economic shocks, falling hedging instrument in investment as an asset always protects an investor equity markets, high inflation, falling portfolios against losses from equity against such risk. “Gold is an ideal currency rates, and geopolitical investments,” says Sahil Arora, diversifier and an excellent hedging uncertainties; however, entry at this Director and Head of Investments, instrument in investment portfolios point for an individual consumer will Paisabazaar. Average Price Of against other asset classes,” says Arora. be at a higher price point. Gold prices The question looming at large is Gold In India A 28-year-old professional, Harday ` in India rose to 48,420 per 10 grams – beside cultural ties, emotions and PRICE (24 karat per Gupta has been buying 10 grams of on June 24, this year. pleasures associated with the golden YEAR 10 grams) 24-carat gold every three months, along The Reserve Bank of India wearable – will India’s millennial with his peer group. He has been buying `14,500.00 estimates the GDP growth of the also start to favour gold as a savings 2009 gold because, “An individual buying gold country is likely to remain in the instrument option in the new 2010 `18,500.00 will never face loss,” he says. In fact, negative territory in 2021, and much normal? Let’s look at its prospects. Harday plans to add some quantum of `26,400.00 will depend on how the curve begins A 34-year-old professional, Deepa 2011 gold this month even though the price to flatten and moderate. But why is Medhi bought gold after taking 2012 `31,050.00 of gold is high. “What my prediction gold performing at an all-time best personal finance advice from her says is, if the price of gold is between `29,600.00 during this uncertain period, and is going to remain very much in the expansionary monetary policy and fiscal friends and parents. “But out of 10, 2013 `46,000 and `47,000 right now, it will what does it mean for the investors reckoning. There is no visibility in policy, because when the central banks only three friends of my generation 2014 `28,006.50 be above during the festive season. The in gold? terms of economic return, and there across the globe go on an expansionary might be investing in gold, especially price will definitely go at the higher `26,343.50 “Given the background of the is no rebound of economic activity mode to finance deficit with economic girls,” she says, adding that most 2015 side,” says Harday. It is not necessarily global economy, gold as an asset class – or, you see a very U-shaped or growth remaining low, eventually they of her friends do a mixed bag of 2016 `28,623.50 true that the price of gold tends to shoot L-shaped recovery, which will take have to print money, which again leads short term-and long term-based up during the festive season as it has a `29,667.50 time. I think this could go to support to monetary debasement – and gold as investments. 2017 diverse set of demand drivers such as, “its Interestingly gold gold,” Hitesh Jain, Lead Analyst, an alternative currency always comes Medhi, who moved to Bengaluru 2018 `31,438.00 role as a reserve asset for various central Institutional Equities, YES Securities, back in the reckoning,” he adds. in 2011 from a tiny hamlet in Assam, banks, consumer demand in the form of `35,220.00 tends to do well in says. “The other things which also The COVID-19-induced lockdown has been investing in a 15-year SIP 2019 jewellery and as an instrument for ‘store falling equity markets remain supportive for gold are has paralysed the country’s economy, and another in a five-year term Source: Bankbazaar of value’ against inflation risk. All these

56 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 57 Commodities

Different Ways To Buy And Invest In Gold PLACE OF GOLD TYPES PURCHASE FEATURES ARCHIT GUPTA Retailers, 6-25 per cent making CEO, Jewelers ClearTax E-Commerce charges Jewelers, Ashok Chakra and Coin Banks, NBFC, Mahatma Gandhi New investors in gold E-Commerce engraved on the sides should consider the Available in period of investment in denominations of 5 PHYSICAL and 10 grams short or long term GOLD Buy back options available factors provide stability to the demand Available in for gold in a diverse range of economic Gold Bar or Retailers denomination up to environments,” says Arora. Meanwhile, Gold Bullion 1 kg Bank of America Merrill Lynch predics Stored in a locker at the price of gold is likely to reach $3,000 home or the bank by the end of 2021. Monthly recurring Financial advisors advise that even Reputed deposit mode of in good times, a prudent approach is Jewelers GOLD payment available to park at least five per cent of wealth SAVINGS Buy gold when the in gold, while maintaining a diversified SCHEMES term ends portfolio. Given the companies earning Discounts on Premiums outlook is currently uncertain in the available market, it makes sense to increase the Gold Buying and selling allocation in gold. “If you’re putting Stock Exchange happens in NSE and about five to seven per cent of your Exchanges Traded Funds BSE holdings in gold, that allocation can Trading account and actually be increased to maybe 10 to 12 a demat account to 15 per cent,” says Jain. required Here are a few tips for youngsters Can be bought in lump looking to invest in gold. “Those PAPER GOLD sum or through SIP without adequate exposure to gold may Sovereign Issued by the consider starting investing in it in-case Banks Gold Bonds government of any steep correction in gold prices in the future. Investors can always use Has a tenure of eight years their asset allocation strategy to redeem part of their investments in other Buy minimum of 1 unit up to 4,000 units of asset classes and use it for lump-sum gold bond in a FY investing in gold funds to average its investment cost,” says Arora. Gold Accumulated Paytm Only for Paytm users However, investors looking to Plans relocate their portfolios should consider the risk and return of the alternate Buy minimum amount of gold starting from investments such as gold or bonds. DIGITAL 0.001 gram “One should also consider the period of GOLD investment, whether they wish to invest Stock Holding Buy gold for a minimum Corporation of in the short-term or the long-term. In India value of `1,000 uncertain times, the safety of money Minimum of 1 gram should be of the utmost importance,” gold can be taken says Gupta. [email protected]

58 Outlook Money July 2020 www.outlookmoney.com Commodity Made Easy WHAT IS HEDGING? dadsf dsaf saf asdf f done properly, treatment is reimbursed. Hedging farmer who is in the one can make Hedging is used not only business of selling maize. profits by trading in by individual traders in is nothing The current price of maize Icommodities. However, the commodity market, but a risk is `25/kg. He anticipates commodity trading is but also by institutional that the price of maize fraught with risks. These investors and large management may fall to `20/kg after a risks come because price corporations. strategy. month. So he sells futures of commodities may Hedging is based on contracts at today’s price fluctuate. the principal of offsetting. farmer anticipates that (`25) a future date a month Hedging is nothing When hedging is done, the price of wheat may later. If after a month but a risk management one takes equal but go up. So the farmer the price of maize falls strategy. The idea of opposite positions in two buys a position in the to `20 a kg, he can still hedging is to eliminate different markets. The future market at today’s sell the maize at `25/kg the uncertainty that idea is to hedge a certain price, that is `15/kg for according to his contract. comes with price investment with the help a date a month later. In this example, the farmer fluctuations. Hedging is of some other investment. After a month, the price is selling futures in the thus a way of protecting Hedging is a strategy in of wheat goes up to market to protect himself oneself against a negative which you protect loss in `20/kg. But the farmer from a fall in prices and event. Hedging does investment A by a profit can still buy wheat at hedging his losses. not stop the negative in investment B. `15. Here, the farmer is As we have seen, risk event from occurring Similarly, hedging basically hedging against is an essential part of but reduces the impact is done in commodity the price of wheat by commodities trading. of such an event. So trading to protect buying a futures contract. Having a basic knowledge hedging is similar to someone from fluctuating However, if after a month of hedging and apply insurance. If one takes prices. Let us take an wheat is selling at `14 a hedging strategies in health insurance, one example. Let us say that a kg, the farmer can buy correct manner will help cannot protect oneself farmer is into the business what for `14/kg and the you understand the market from a health emergency, of processing wheat. The contract lapses. better, protect yourself but insurance can ensure current price of wheat Let us take another from losses and be a better that the cost of one’s `15/kg. However, the example. There is another investor. Morningstar: Mutual Fund Guide

SBI Dynamic Bond Fund SBI Magnum Midcap Fund

Investment Strategy Fixed-Income Statistics Manager Biography And Fund Strategy

inesh Ahuja has been the lead security selection. The managers use Fixed Inc Style Box (Long) High Mod BI Magnum Mid Cap has been in portfolio forms the basis for stock Equity portfolio manager of this fund various qualitative and quantitative existence since 2005 and has been selection and consists of the team’s Portfolio Date: D Average Eff Duration - S Sectors 30/5/2020 since February 2011 and has a total parameters and put a lot of emphasis Average Eff Maturity 10.6 managed by Sohini Andani since 2010. best ideas. Valuations are looked at on experience of more than 22 years, on the company’s management, Average Coupon 7.5 Andani’s extensive experience as an an absolute basis relative to the stock’s with about 13 years’ experience in business, and financial health. They Average Price 106.9 analyst and a research head stands 10-year history. The fund has largely % fixed-income fund management. The also use the analysis of sell-side out in her bottom-up approach to maintained an orientation towards Basic Materials 22.9 stability of the investment team and research and credit-rating agencies to stock selection. growth stocks and is focused on long Fixed Income Style Box Consumer Cyclical 18.3 its long tenure at the helm is a positive. form a view on the creditworthiness The AMC differentiates its funds term (three to five years) visibility. The Financial Services 9.6 The fund is driven by a flexible of companies, but to a limited extent. High based on absolute and relative return team’s approach towards investing Real Estate 5.1 mandate to move across the segment The credit committee then reviews Med frameworks. This is an absolute return in companies with a high ESG scoring Consumer Defensive 0.0 with an active-duration strategy. It the rated securities, and the approved mid-cap strategy that aims to invest is a positive measure to maintaining Low Healthcare 15.2 employs a bottom-up investment securities are assigned credit and tenor in Sohini Andani’s high-conviction a clean portfolio. The team takes a Utilities 6.2 approach with a top-down overlay to limits. The risk-management team Ltd Mod Ext ideas. While being conscious of sector view as a fund house, with stock Communication Services 0.0 generate superior risk-adjusted returns. also periodically reviews the portfolio. valuations, the team evaluates a selection left to managers who could Portfolio Energy 0.0 A top-down approach guides portfolio The portfolio is constructed purely company’s management and focuses remain uninvested in sectors where Top Holdings Weighting Industrials 14.3 positioning around the predetermined based on the underlying instrument’s (%) on stocks that are able to meet its they don’t find the right opportunities. risk parameters by assessing gross liquidity. Lower credit bets are threshold in terms of CAGR and a Andani aims to invest in companies Technology 8.3 GOVT STOCK 43.52 domestic product/inflation, monetary/ avoided. Manager Dinesh Ahuja consistent ROCE over a three to five with a relatively high risk/reward ratio. Total 100.0 fiscal policy, interest rate, liquidity, sometimes invests in extreme long 7.26% Govt Stock 2029 16.06 year horizon. The team lays emphasis The core mandate and strategy of yield curve, credit spread, and so on, debt instruments capped at 7.17% Govt Stock 2028 14.86 on the management and takes the fund remain undiluted despite the Portfolio Weighting while the intensive bottom-up credit 10-15 per cent The fund’s low expense 7.16% Govt Stock 2050 7.71 into consideration the promoter’s growth in its size. The portfolio is well- Top Holdings research uses an in-house model for ratio is a positive. integrity, past track record, holding diversified and currently constitutes (%) Power Finance Corporation 6.75 in the company, and so on, and look around 50 stocks; the top 10 holdings PI Industries 8.83 Indian Railway Finance Corporation 3.06 at investing in businesses with high account for around 50 per cent Sheela Foam 7.53 15.3 Calendar Year Returns 8.24% Govt Stock 2033 2.32 entry barriers. The in-house model of the portfolio. Coromandel International 5.30 Calculation Benchmark: None 11.7 5.79% Govt Stock 2030 1.33 Dixon Technologies 5.03 12.7 10.0 State Bank Of India 1.12 Calendar Year Returns Godrej Properties 4.96 8.0 7.1 GOVT STOCK 0.34 6.0 5.8 Calculation Benchmark: S&P BSE Midcap TR ` Gujarat State Petronet 4.86 6.0 5.1 5.5 4.8 3.9 Alembic Pharmaceuticals 3.74 4.0 3.4 3.0 100 Return 2.0 Fund Snapshot 80 Ramco Cements 3.58 0.0 60 49.9 YTD 2019 2018 2017 2016 2015 Page Industries 3.57 Morningstar Category India Fund 40 33.5

SBI Dynamic Bond Reg Gr India Fund Dynamic Bond Return 14.9 Sanofi India 3.54 20 9.3 8.7 Dynamic Bond -8.7 -13.9 0.1 -2.1 -18.0-12.5 5.0 Trailing Returns Fund Size (`) 15.1 billion 00 -20 Inception Date 9/2/2004 Fund Snapshot Data Point: Return Calculation Benchmark: None YTD 2019 2018 2017 2016 2015 Annual Report Net Expense Ratio 1.65 SBI Magnum Midcap Reg Gr S&P BSE Midcap TR` YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall ***** Morningstar Category India Fund Mid-Cap SBI Dynamic Bond Reg Gr 7.10 12.81 8.06 9.47 9.30 Manager Name Dinesh Ahuja Trailing Returns Minimum Investment (`) 5,000 Fund Size (`) 29 billion India Fund Dynamic Bond 3.43 6.58 4.70 6.38 7.03 Morningstar Analyst Rating Neutral Data Point: Return Calculation Benchmark: S&P BSE Midcap TR ` Inception Date 29/3/2005 Annual Report Net Expense Ratio 2.33 YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall *** Disclaimer Manager Name Sohini Andani @2017. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. This report is issued by Morningstar Investment SBI Magnum Midcap Reg Gr -8.72 -8.40 -5.83 2.16 11.42 Minimum Investment (`) 5000 Adviser India (“Morningstar”), which is registered with SEBI (Registration number INA000001357) and provides investment advice and research. Morningstar Analyst Rating Neutral Please visit www.outlookindia.com/outlookmoney/invest/picking-the-right-mutual-fund-2542 and read important statutory disclosures, as S&P BSE Midcap TR ` -13.91 -10.16 -3.72 5.31 7.68 mandated by SEBI, regarding the information, data, analyses and opinions given in this report. Data Source: Morningstar India

60 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 61 Morningstar: Mutual Fund Guide

SBI Dynamic Bond Fund SBI Magnum Midcap Fund

Investment Strategy Fixed-Income Statistics Manager Biography And Fund Strategy inesh Ahuja has been the lead security selection. The managers use Fixed Inc Style Box (Long) High Mod BI Magnum Mid Cap has been in portfolio forms the basis for stock Equity portfolio manager of this fund various qualitative and quantitative existence since 2005 and has been selection and consists of the team’s Portfolio Date: D Average Eff Duration - S Sectors 30/5/2020 since February 2011 and has a total parameters and put a lot of emphasis Average Eff Maturity 10.6 managed by Sohini Andani since 2010. best ideas. Valuations are looked at on experience of more than 22 years, on the company’s management, Average Coupon 7.5 Andani’s extensive experience as an an absolute basis relative to the stock’s with about 13 years’ experience in business, and financial health. They Average Price 106.9 analyst and a research head stands 10-year history. The fund has largely % fixed-income fund management. The also use the analysis of sell-side out in her bottom-up approach to maintained an orientation towards Basic Materials 22.9 stability of the investment team and research and credit-rating agencies to stock selection. growth stocks and is focused on long Fixed Income Style Box Consumer Cyclical 18.3 its long tenure at the helm is a positive. form a view on the creditworthiness The AMC differentiates its funds term (three to five years) visibility. The Financial Services 9.6 The fund is driven by a flexible of companies, but to a limited extent. High based on absolute and relative return team’s approach towards investing Real Estate 5.1 mandate to move across the segment The credit committee then reviews Med frameworks. This is an absolute return in companies with a high ESG scoring Consumer Defensive 0.0 with an active-duration strategy. It the rated securities, and the approved mid-cap strategy that aims to invest is a positive measure to maintaining Low Healthcare 15.2 employs a bottom-up investment securities are assigned credit and tenor in Sohini Andani’s high-conviction a clean portfolio. The team takes a Utilities 6.2 approach with a top-down overlay to limits. The risk-management team Ltd Mod Ext ideas. While being conscious of sector view as a fund house, with stock Communication Services 0.0 generate superior risk-adjusted returns. also periodically reviews the portfolio. valuations, the team evaluates a selection left to managers who could Portfolio Energy 0.0 A top-down approach guides portfolio The portfolio is constructed purely company’s management and focuses remain uninvested in sectors where Top Holdings Weighting Industrials 14.3 positioning around the predetermined based on the underlying instrument’s (%) on stocks that are able to meet its they don’t find the right opportunities. risk parameters by assessing gross liquidity. Lower credit bets are threshold in terms of CAGR and a Andani aims to invest in companies Technology 8.3 GOVT STOCK 43.52 domestic product/inflation, monetary/ avoided. Manager Dinesh Ahuja consistent ROCE over a three to five with a relatively high risk/reward ratio. Total 100.0 fiscal policy, interest rate, liquidity, sometimes invests in extreme long 7.26% Govt Stock 2029 16.06 year horizon. The team lays emphasis The core mandate and strategy of yield curve, credit spread, and so on, debt instruments capped at 7.17% Govt Stock 2028 14.86 on the management and takes the fund remain undiluted despite the Portfolio Weighting while the intensive bottom-up credit 10-15 per cent The fund’s low expense 7.16% Govt Stock 2050 7.71 into consideration the promoter’s growth in its size. The portfolio is well- Top Holdings research uses an in-house model for ratio is a positive. integrity, past track record, holding diversified and currently constitutes (%) Power Finance Corporation 6.75 in the company, and so on, and look around 50 stocks; the top 10 holdings PI Industries 8.83 Indian Railway Finance Corporation 3.06 at investing in businesses with high account for around 50 per cent Sheela Foam 7.53 15.3 Calendar Year Returns 8.24% Govt Stock 2033 2.32 entry barriers. The in-house model of the portfolio. Coromandel International 5.30 Calculation Benchmark: None 11.7 5.79% Govt Stock 2030 1.33 Dixon Technologies 5.03 12.7 10.0 State Bank Of India 1.12 Calendar Year Returns Godrej Properties 4.96 8.0 7.1 GOVT STOCK 0.34 6.0 5.8 Calculation Benchmark: S&P BSE Midcap TR ` Gujarat State Petronet 4.86 6.0 5.1 5.5 4.8 3.9 Alembic Pharmaceuticals 3.74 4.0 3.4 3.0 100 Return 2.0 Fund Snapshot 80 Ramco Cements 3.58 0.0 60 49.9 YTD 2019 2018 2017 2016 2015 Page Industries 3.57 Morningstar Category India Fund 40 33.5

60 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 61 Morningstar Mutual Fund Guide

Axis Bluechip Fund

Manager Biography And Fund Strategy

hreyas Devalkar has been companies despite their (possibly) Equity Portfolio Date: Smanaging the Axis Bluechip higher growth trajectory. The Sectors 30/4/2020 Fund since November 2016 and manager chooses stocks based plies a structured and well- on the PEG ratio as opposed to % thought-out process of investing the P/E ratio of a company. The Basic Materials 7.2 with a focus on quality and focus is on being able to identify Consumer Cyclical 4.0 growth. companies with sustainable Financial Services 33.4 Shreyas Devalkar’s portfolio is earnings growth potential, credible a high-conviction one where he management, and acceptable Real Estate 0.0 invests in stocks from blue-chip liquidity. Stock-picking is based Consumer Defensive 18.9 companies across sectors that he on a fundamental bottom-up Healthcare 9.4 views positively. He looks at sectors approach with added emphasis Utilities 0.0 from a top-down perspective and on top-down risk parameters, Communication Services 6.9 evaluates individual stocks from liquidity profile, and internal Energy 6.0 a bottom-up perspective. Rather volatility targets. From a financial Industrials 0.0 than investing in sector leaders, standpoint, they look for firms Technology 14.3 the manager evaluates companies with lower capital gearing and Total 100.0 based on their fundamentals, strong balance sheets. growth trajectory, corporate The fund has a benchmark Portfolio governance, financials, and so agnostic portfolio that typically Top Holdings Weighting on. They place a lot of focus on shares a very low overlap of about (%) corporate governance and this 25-30 per cent with the IISL Nifty HDFC Bank 7.21 leads them away from some 50 TR Index. Avenue Supermarts 6.50 Infosys 6.15 Kotak Mahindra Bank 6.05 Calendar Year Returns Bharti Airtel 5.50 Calculation Benchmark: S&P BSE 100 India TR ` Tata Consultancy Services 5.22

100 Reliance Industries 4.82 80 ICICI Bank 4.57 60 Nestle India 4.38 38.0 40 33.3 Bajaj Finance 4.36

Return 18.6 20 10.9 -15.0 6.5 2.6 5.0 -1.2 0 -11.3 -3.6 -2.0 -20 Fund Snapshot YTD 2019 2018 2017 2016 2015

Axis Bluechip Fund Gr S&P BSE 100 India TR ` Morningstar Category India Fund Large-Cap Fund Size (`) 130 billion Trailing Returns Inception Date 5/1/2010 Data Point: Return Calculation Benchmark: S&P BSE 100 India TR ` Annual Report Net Expense Ratio 2.30 YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall ***** Manager Name Shreyash Devalkar Axis Bluechip Fund Gr -11.33 -4.25 7.90 8.38 10.31 Minimum Investment (`) 5000 Morningstar Analyst Rating Neutral S&P BSE 100 India TR ` -14.96 -11.08 2.48 5.81 8.21 Data Source: Morningstar India

62 Outlook Money July 2020 www.outlookmoney.com

My Plan

available for investment in lumpsum stated category of debt funds for through the investing behavior of their Have A Robust Plan To Prosper was allocated to banking and PSU better and tax-efficient returns. clients, including Sabharwal. During debt funds and short-term debt A portion of the surplus was also initial days of good performance We must stay cautious and prudent in our investment strategies in the face of volatility funds, considering they have a invested in asset allocation funds in equity markets, Sabharwal was relatively better risk profile. It was to manage the needs of portfolio excited to see her portfolio, especially also agreed upon that fixed deposits diversification. the asset allocation funds perform on their respective maturity dates Jain shares how they have a first- better than the traditional investment would be switched to the above- hand experience of market volatility products. She had also asked for converting some of the debt fund investments to asset allocation funds owing to their outperformance. Things To Look Out For More recently, when the markets With continuing volatility across equity markets, there took a beating, she got concerned is a lot to learn: about the safety of her investments and wanted to discontinue her incremental investments through 1) Have your goals defined: SIPs. Such investing behavior has not Investors should have their goals clearly defined, both for the long and been exclusive to Sabharwal, but most short term. This helps them prepare a roadmap for such goals and also retail investors. However, this is where measure the investment performance objectively. It also allows them the role of a financial advisor comes choose the schemes best suited as per their investment horizon and risk into play. appetite. For example, equity as an asset class might not be suitable for On each count, Jain insisted on short-term goals but would be better suited for the long term owing to its sticking to the agreed plan and wealth creation potential. staying focused on long-term goals. Besides recommending her to shift 2) A robust financial plan is indispensable: her investments to schemes that It is often said, “a goal without a plan is just a wish.” Investors must have recently performed well, he have a clear strategy to achieve their financial goals in a time-bound continued with the pre-decided manner. While effective implementation holds the key, a robust plan is asset allocation strategy and avoided crucial for financial prosperity, as it helps them control their emotions skewing it towards any single asset shu Sabharwal, 52, runs a when she met Jitin Jain, who was over investment plans. Amid volatility a sound financial plan can help class. He would stick to funds with boutique market research then a part of Axis Bank. He is now a proven track record across various Stick to the agreed investors be in a better position to withstand the hiccups from domestic company-Qualisys. She lives an independent financial advisor and market cycles. He also advised on plan and stay focused and global markets. withA her two children, Mudit and continues to guide Sabharwal in her continuing SIP, while explaining the Omanshi. While Mudit is pursuing financial affairs. on long-term goals logic and advantage of buying low, law from Delhi University, Omanshi The preliminary conversations 3) Stick to the plan: when markets have shown turbulence. is in her first year of graduation in with Sabharwal helped Jain work some persuasion, she was convinced Retail investors are experiencing tough times fighting the market Even within debt funds, the focus Mass Communication & Journalism. out individual goals and suggest about investing in equity, through volatility and emotional biases. However, they should continue to invest remained clearly on risk-adjusted Sabharwal took charge of her a comprehensive solution, which SIP route. in markets, as it allows them to continue saving for their goals. However, returns, instead of returns. Such a family’s financial plan after her could add tax efficiency over the Jain recalls that campaigns like- if recent economic disruptions, caused by the lockdown, have temporarily prudent investing strategy helped her husband’s demise in January 2018. current structure. Prioritising “Mutual Fund Sahi Hai”, (Mutual impacted your cash flows, you may consider pausing your SIPs instead debt portfolio reflect over 8 per cent Without much exposure to money safety over returns, Sabharwal was Fund is the right choice), among of discontinuing them. This will help you continue with your investment CAGR. matters, she wanted to stay risk- apprehensive about investing in others, have played a crucial role in plans as and when the cash flow normalises. Even as the country fights an averse and invested all her savings in equity and diversifying across debt spreading awareness among masses. unprecedented situation, the need of fixed deposits. funds. Jain helped her understand They started with a monthly the hour is to be cautious and prudent ` 4) Trust your financial advisor: However, her financial plans took the concept of Systematic SIP of 1 lakh for long-term goals. Investors need to stay patient as the markets can be volatile in the short in our investing strategies. the right turn a few months later Investment Plans (SIPs), and with Further, any surplus amount term. Instead, they must continue to focus on their financial goals and understand that short-term volatility is not likely to impact their long- term goals significantly. This is where financial advisors play a crucial role Disclaimer for investors in reinforcing their lost conviction in the markets. One must Financial Planning of Ashu Sabharwal is based on the “personal opinion and experience” of Jitin Jain and that it look at one’s financial advisor as the guardian for financial plans. Jitin Jain should not be considered professional financial investment advice. No one should make any investment decision without first consulting his Independant Financial or her own financial advisor and conducting his or her own research and due diligence. Advisor

64 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 65 My Plan

64 Outlook Money July 2020 www.outlookmoney.com www.outlookmoney.com July 2020 Outlook Money 65 Dear Editor, My first experience in handling money independently started way back in 1986. My engineering days were spent in a hostel and from my gathered experience I can proudly say that the hostel can be a great teacher. The initial months taught me how to estimate my expenses and seek a reasonable monthly allowance from my parents. At the age of 22, I moved to Mumbai for my MBA. By the time I got my first job, I was quite proficient in the estimation of expenses, budgeting, spending, contingency planning, and learnt concepts like time value of money, compounding effect, and return on investment. I started my career at Godrej & Boyce and had to share an apartment with my friends. By the end of the second year, I was amazed at the amount of money I had managed to save. I realised that my expenses as a student to a bachelor wage earner had not changed much. During those days when my career had just begun, I learnt a very supreme lesson –‘Spend on what you need and not what you can afford.’ This lesson has stayed with me throughout my life. Even today, as a family, we spend on the essentials and have never been extravagant in our lifestyle. This practice takes care of one part of fiscal management expenses. I joined financial services in 1994 and started with auto loans; hence became familiar with reducing balance rate of interest versus simple interest, and calculating IRR (Internal Rate of Return). Until then, out of sheer inertia and lack of understanding, I used to roll over my credit card payments. Later, I realised the folly of borrowing at 24 per cent per annum and switched to a credit card. Now, I can enjoy the benefits of the interest-free period and loyalty points but always pay in full on the due date. Around this time, the Non-Banking Financial Companies (NBFCs) were pervading the market and people were getting swayed by the lucrative returns they offered. The NBFC collapse taught us to never misconstrue the risk in investments. The fact that you can lose the entire principal amount while chasing marginally higher returns is a reality. Over the years, I moved to the bank and started advising clients on managing portfolios. I have started practicing what I preached, assessing my risk-taking capabilities and about the discipline of the Asset Allocation Model. I ensure that my portfolio is allocated thoughtfully into equity, fixed income, recurring deposits, SIP, gold, and property. I have also invested in NPS ( National Pension Scheme) as it is tax effective with the lowest cost. Apart from these practices, I have consciously eluded short term insurance plans as they do not yield good returns. When it comes to equity, I was always a keen IPO investor as I believed it can give good returns. After losing my money several times, I have become quite wary of them. It has taught me to be a passive investor, which means investing in few companies with good track records, consistent performance, good governance, and finally leaving the investment alone. Over the years, I have received commendable returns from these stocks. In 2014 I was given the mandate to start Kotak General Insurance. Prior to that, I only had a motor insurance policy. In order to actively secure my assets, I hold term insurance equivalent to five times of annual pay, health indemnity plan for my family with a large cover, critical illness and personal accident plan, household insurance plan to protect my properties and valuables, and I am also in the process of taking a cyber-insurance plan. In a nutshell, the principle is to spend on only what is needed. You should not borrow beyond which you can not comfortably repay, save for the future, say no to greed and ignorance, ensure and allocate the assets wisely, and invest with a long term perspective. Time in the market is always more beneficial than trying to time the market.

Mahesh Balasubramanian MD & CEO, Kotak General Insurance

66 Outlook Money July 2020 www.outlookmoney.com

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