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Published for the month of August 2020; Release on 1 August 2020. Total no. of pages 68
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The objective is to keep readers better informed and help them decide for themselves.
and sentiments. However, it was shocking to know that the Indian DESIGNER
Rohit Rai
companies have no structure to handle production halt. I hope
Girish Chand (DTP Operator)
they consider an upgrade for the long term. Coming to the mutual
TECH TEAM
fund investors, it is surely a troublesome phase for them as 60 per Raman Awasthi
cent of the consumer electronic industry depends on China-made Suraj Wadhwa
b ri d
Debt
Hy
Equity
Commodit
ies
Sanity Of
Safety
Or
ruSh Of
riSk
10 Outlook Money August 2020 www.outlookmoney.com
Y ou are utterly confused. Between April and June this year, many hurriedly scurried out
of equities. And the stock indices bounced back with a vengeance in July. Now, there is
frustration and desperation about the lost opportunities, as people wait for stock prices to
correct so that they can re-enter. To seek safe havens, some of us got into cash, debt, and gold.
Sadly, in these cases too, the events unexpectedly turned against us. The situation baffled us.
Armed with cash, the hapless investors decided to ‘time the market’, and act on their own –
largely as day traders. They realised, like many did in the past, that it is almost impossible to do
so. Even the experts are unable to predict the random walks of the stock market. While debt
seemed secure, there was uncertainty about future returns as interest rates fell, and inflation
inched up. Gold seemed a no-brainer but was this a good time to buy at such high prices?
Most investors are shocked and stunned. To be safe or take risks, that is the question today.
What should one do over the next 3-6 months? Is it better to take the plunge into equities,
and ride out the topsy-turvy waves and volatility in the market? Is it more pertinent to accept
lower returns, but protect our investments, and shift to debt? Is bullion the new calling for
most of us? As some experts contend, if there’s one advice they wish to give, it is to be in gold.
In this cover story, Outlook Money takes a 360-degree look at short-term strategies
to shield your wealth from tumultuous upheavals, and simultaneously safeguard your
returns. We present the pros and cons related to each asset category to enable you to make
informed and insightful decisions. Beware that there is no one shoe-size that will fit every
feet. At the end of the day, we are on our own, and we will need to carefully re-construct our
plans on an individual basis.
By Himali Patel
SIP Contribution `crore
100,084
100 92,693
67,190
Source: AMFI
80
43,921
Graphics: Praveen Kumar .G
60
40 24,416
20
0
25.81 25.6 24.71 24.28 category received inflows of `494 crore, which
15
were lower than the figures for April (`731 crore)
and May (`815 crore). However, the overall AUM
COVID-19 IMPACT
of Gold ETFs increased by 7 per cent in June,
0 compared to the previous month.
Jun-19 Total Assets (`lakh Cr) Jun-20 Recently, gold prices in India crossed the
`50,000 (per 10 gm) mark, and experts speculate
that they will continue to rise as central banks
According to a recent report by CARE Ratings, liberally open their credit pipelines. “Uncertainty
the secondary market yields on government and is gold’s friend, and its northward journey is
corporate securities declined sharply to two-year
In May, `63,666 set to continue,” says Iyer. “Gold functions as
crore was added
lows in June 2020. While the average yield in the to debt funds. a strategic asset given its ability to act as an
latter was down by 68 basis points between May Inflows declined effective diversifier, and alleviate losses during
and June 2020, the figure for the benchmark 10- by 95.5 per cent tough conditions,” adds Himanshu Srivastava,
year government securities was 21 basis points. in June, but most Associate Director (Manager Research),
According to Lakshmi Iyer, Chief Investment schemes showed Morningstar India.
Officer (Debt) & Head (Products), Kotak positive trends Expert Advice: “Given the favourable outlook
Mahindra Asset Management, the benign for gold prices, one could see the AUM of Gold
interest rate regime means investors wish to ETFs to grow in the near future,” predicts Kotak’s
be in fixed income investments with longer Iyer. Quantum’s Patel avers that as a thumb
maturities. “Gilt, banking, and public sector rule, gold has to comprise 15-20 per cent of an
funds are best suited to meet such requirements. individual’s asset allocation. “But it may not be
The bulk of flows are gravitating towards high- such a bad idea to enhance the exposure levels
grade/sovereign-oriented portfolios, which have in this environment,” he adds. Mirae’s Mohanty
little or no credit dilution. This trend is likely to says in another context, “Instead of a chaser of
continue.” She adds. returns, one should become a gold chaser.”
Expert Advice: “Since the yield curve However, on an overall basis, the choice
continues to remain steep due to high risk between risk and safety is tricky. Investment
aversion, short and medium duration funds pursuits in these trying times have to do as
present an interesting investment opportunity,” much with an attempt to increase returns, as
says S. Naren, ED & CIO, ICICI Prudential AMC with the specific risk-profile of each person. In
For those, who have a longer-term horizon, the fact, according to experts, a bewildering event
openings lie in dynamic duration schemes, in like COVID-19 can act as a natural profiler for
which the fund managers have the flexibility to most investors. It is during an unexpected crisis
change their strategies based on the evolving that people tend to comprehend their real risk-
environment in the debt segment, he adds. appetite, and the pain that they can stomach.
For example, mutual funds come with a
disclaimer that the products are subject to
Lakshmi iyer, market risks. But an investor understands the
CIO (Debt) & Head (Products), implications of the rider, and how the risks
Kotak Mahindra Asset Management undermine her wealth, only after a crisis unfolds.
Therefore, this may be a unique chance to look
The debt flows are gravitating towards oneself in the mirror, and ask a relevant question:
How risk averse I am? From there, it is simpler
high-grade/sovereign-oriented to chase the right choices, and manage a correct
portfolios. This trend is likely to continue balance between risk and safety.
himali@outlookindia.com
Given the heightened volatility, how are the most of such challenging times by tapping into
you managing the risks associated with equity opportunities present across equity and debt asset
funds? Why has the proportionate share of classes. At the same time, it is heartening to note that
equity-oriented schemes slipped in recent the fundamental of India continues to remain strong
times? as the rural economy is robust even amidst the present
Both in India and globally, selected stocks have so far circumstances.
delivered bulk of the returns. Cyclically, these stocks So, for an investor who is investing in equity for a
appear to be in end cycle, while the rest of the market long-term financial goal, it is important to continue
is not. So when it comes to portfolio construction, we with their Systematic Investment Plans (SIPs). Every
have a value bias as several such stocks are available correction is an opportunity for a long-term investor to
at inexpensive valuations, providing good dividend accumulate more units at a reduced cost, so that over a
yield and reasonable earnings visibility. complete market cycle, the investor has the opportunity
We believe the drop in equity assets is marginal to make outsized gains.
and is largely on account of In terms of debt as an asset class,
coronavirus-related developments. we believe debt mutual funds have an
Further, absence of physical important role to play in a portfolio.
infrastructure over the past three Foregoing this asset class, could prove
months due to nationwide lockdown Investors to be an expensive mistake as debt is
is another aspect, which has with a higher the asset class which brings stability to
hampered investments, especially a portfolio. While choosing schemes,
from those investors who preferred
risk appetite it would be advisable to consider the
using traditional means. can consider risk appetite and liquidity needs of
investing in the investor too. Fund houses which
As you know, markets go have a demonstrated track record of
through cycles of boom and bust.
credit space not facing any defaults or portfolio
Would you advise long-term and separation would be an ideal choice for
medium-term retail investors to investments.
take advantage of a major dip or
correction? What are the upcoming trends in terms of
In March, we had communicated to investors that investing in the mutual fund industry?
it was the right time to invest in equity. Due to the With the increased awareness around mutual funds
ample liquidity provided by the global central banks, and the importance of asset allocation for long-
over the past few months, equity markets globally term wealth creation. We believe asset allocation or
witnessed one of its sharpest rallies. balanced advantage category of funds stands to attract
Owing to the pandemic, while there is uncertainty in larger investor interest. This category, we believe, has
the near to medium term, we believe that over time the potential to reach the scale of the present equity
economies will recover. Assets Under Management (AUM) of the industry.
So, the optimal approach to navigate these
uncertain times is through dynamically managed Please discuss your investment strategy for
asset allocation schemes or balanced advantage different kind of funds.
category of schemes. These funds will help make We have funds, which cater to a wide range of
investors through varied investment styles and two years, even though there were instances of
strategies. All of the funds are managed as per the several debt papers of certain schemes going bad,
mandate listed out in the Scheme Information investors have realised that the trouble in debt
Document (SID). As an AMC, we are believers markets is not systemic in nature. It is business
of asset allocation funds and offer a range of asset as usual for fund houses with quality debt paper
allocation products, which are model based with holdings. Going forward, this is one trend we
varied level of net equity exposure. Contra and would like to see continuing as it is important
value segments are the categories we believe in. for investors to have debt mutual funds as a part
We also have the largest value fund in the mutual of their asset allocation practice as it is a stable
fund industry. When it comes to debt, we follow asset class. We are of the view that currently both
the principal of Safety, Liquidity and Return (SLR). duration and credit offers attractive investment
This approach is aimed at optimising risk adjusted opportunities. Since the yield curve continues to
returns by investing in high grade credits, efficiently remain steep due to high risk aversion, short and
managing duration rate-risk without compromising medium duration funds present an interesting
on liquidity risk. investment opportunity. For those who are looking
to invest with a longer term investment horizon
Please share your views on why the can consider investing in dynamic duration
proportionate share of debt-oriented schemes schemes.
has risen in recent times despite the liquidity Investors with higher risk appetite can consider
crisis? investing in credit space. This space remains
Investors, based on their investment duration and attractive due to valuation comfort owing to the
risk appetite, can consider investing in a variety of high spread between accrual schemes and repo,
debt funds. At a time when the interest rates are on a which further provides a good margin of safety for
decline, debt mutual funds have caught the investor investments made.
attention with robust performance. Over the past saibal@outlookindia.com
Institutional investors
have money, expertise, and
information to influence stock
prices. Watch them closely to
boost your profits
By Yagnesh Kansara
I
n 84 days during the height of the
COVID-19 scare, when the global stock
markets had tumbled and remained volatile,
one company raised a stupendous `152,000
crore. India’s largest private sector company,
Reliance Industries, sold almost a third stake
Size Matters
How Institutions Play Their Game
Institutional Investors are the lifeline of capital markets across the globe. Atul Mehra, MD & Co-CEO, Investment
Banking , JM Financial, Sampath Reddy, Chief Investment Officer (CIO), Bajaj Allianz Life Insurance,
Neelesh Surana, CIO, Mirae Asset Investment Managers and Rajat jain, CIO, Principal Asset Management, explain
the role of institutional investors in providing price discovery, stability and volatility to economies and an investment
mechanism for retail investors, during an interview with yagnesh Kansara. Edited excerpts:
What is the real role of institutional investors, and processes, they are better equipped to make
given they are powerful because of their size? informed long-term decisions.
Atul Mehra: With developments globally as well as in
India, capital markets have become highly institutionalised.. Rajat jain: Institutional investors bring depth in
Some of these institutional investors have achieved a research to the markets, both fixed income and equity.
size and scale that is larger than the economies of some Their presence improves the quality of disclosures and
countries hence they carry enormous weight and influence as they usually invest in a broad range of companies
in the markets and their importance is only growing. this improvement is widespread. Further, their
They bring to the table, apart from their vast experience intervention potentially leads to improving corporate
and expertise, patient long-term capital. They give huge governance as they engage with management of
importance to innovation, scale, quality of management companies and push the minority shareholders’ point
team, sound corporate governance and historical of view and actively vote on resolutions. In India, the
performance of companies. Bulk of the money that these debt markets are dominated by institutional investors
investors manage is directly or indirectly coming from retail while equity markets also have an overwhelming
investors either through their savings or pensions. presence of these investors. Their presence and
subsequent large participation in the trading provides
Sampath Reddy: Institutional investors, both foreign
and domestic, help to bring professional investment
management expertise/experience in the market
place. Also, with larger fund allocations and assets
under management they help to deepen and broaden
the market, and thereby increase market penetration
and liquidity. They are well-regulated entities, and
help in greater transparency, in terms of various
investment disclosures, in professionalism and corporate
governance. With share of institutional investors, both
FII and DII, increasing in Indian companies over the
years, we have been seeing growing institutional investor
activism, which was not much prevalent earlier in India,
and they are starting to play a proactive role in corporate
governance of Indian companies.
To Re-Think Strategy?
value of Nifty 50 index for the year ending July
every year.
I
n May this year, ace investor Warren
Buffett’s conglomerate Berkshire
Hathaway reported its biggest-ever
loss at 50 billion dollars in the March 2020
quarter as the coronavirus pandemic took
a toll on the Oracle of Omaha’s investment
portfolio. The next day Berkshire Hathaway
dumped all of its holdings in the airline
sector, raising questions over
decades of Buffett’s wisdom
on holding stocks for
the long-term.
In a world that
stands changed
forever due to the COVID-19 pandemic,
Sma
T
hese are unbelievable times. Despite the ongoing
Economy and
public health crisis, which seems to become more
the markets
severe by the day, India attracted a mind boggling
$20 billion of FDI (foreign direct investment) in the
past few months. To take advantage of the inexplicable
scenario, the government hiked the FDI limit to 74 per
cent in defence and invited American firms with open
arms in sectors such as healthcare, infrastructure, energy,
civil aviation, and insurance.
Investors too seem to look ahead, beyond the next
few quarters, which may explain the continuous upward
march of the stock indices. Gold, as usual, has acquired
a new glint as the risk-averse seek the sanity of safety. Google, Silver Lake Partners, Vista Equity Partners,
The changes in the FDI arena may aid equities, as also General Atlantic, KKR, Mubadala, Abu Dhabi Investment
other segments in the financial sector – mutual funds Authority, TPG Capital, L Catterton and Intel. It raised Rs
and general insurance. It looks like an opportune time to 117,588.45 crore selling 25 per cent share in Jio.
make a killing. But possibly, only in the short run. Those While this is impressive, it is a case of one company
with a longer-term vision need to be careful. that offers web-telecom solutions, which managed to woo
The commonsensical reason: Markets do not investors. This does not reflect on the capabilities of other
necessarily reflect the current situation. They give a Indian companies. We have our share of corporate laggards
glimpse into a future, which looks rosy but can be in areas such as product development, technology, and
discoloured by unpredictable events. It is crucial to import substitution. To match the brilliance of Reliance
always remember that one or two positive factors do Industries and Jio – the scrip zoomed from under `900 in
not make a country’s story. The future of ‘India Story’ March to over `2,000 – India Inc needs to do a lot before it
will depend on a slew of trends that are consistent, can work the same magic.
continuous, and are backed by a conviction. At present, In the stock market, the foreigners were net sellers in
the various trends do not warrant such conclusions. the past two years, and the first part of this year. There
For example, there are strong hopes that India can are signs that they have re-discovered value in Indian
attract higher FDI and foreign portfolio investments stocks. However, only sustained inflows will prove this
(FPI) in the near future. However, this will be largely due premise. The world does not see us the same way we
to global factors like a weak dollar that usually results in see ourselves. Gerry Rice of the International Monetary
an outward rush of American investments. The rising Fund said India needs further reforms to attract
political sentiments against China boost inflows into an investments. Moody’s downgraded India’s sovereign
alternative factory to the world, India. Our close links rating to Baa3 from Baa2 with a negative outlook.
with Silicon Valley yields dividends despite the US visa On a happier note, IHS Markit Purchasing Managers’
restrictions on software manpower. survey predicted a growth momentum for the Indian
Look at the other side of the investment coin, and the economy in the second half of this year. It concluded that
narrative changes dramatically. One of the key Indian the GDP growth will spurt to 6.7 per cent in 2021-22, or
magnets that attracted foreign dollars is the Jio platform a figure that is higher than the one in the pre-COVID
of the Mukesh Ambani Group. In 12 doses in 10 weeks, it period. Such a fortuitous change is still not enough
drew funds from Facebook (largest minority shareholder), to realise Prime Minister Narendra Modi’s dream of
Atmanirbhar Bharat. The government must urgently
incentivise manufacturing and technology upgradation.
Mere liquidity support is not enough.
Markets do not always reflect
the economic situation saibal@outlookindia.com
Psychology of Investing -
Sticking to Basics
an investment. Different investments Prepare for extreme market
have varying levels of risk and return conditions: If there is anything that
potential making it important for the last two decades have taught us, it
you to evaluate both factors carefully is that economies move in cycles and
before making an investment varyingly impact different asset classes.
decision. Interestingly, it is not just As an investor, it is important for you
the investment risk but also your own to be prepared for emergencies and
risk tolerance that you must consider create an all-weather portfolio that can
before making an investment survive the shape-shifting economic
decision. Your risk tolerance basically landscape. In order to achieve this, you
indicates your ability, need, and need to do the following:
willingness to take risk. You must • Create an emergency fund
ensure that the investments that you that covers at least six months
make are well-aligned with your risk of expenses and can come to
D Sathishkannan
tolerance. your rescue in case of extreme
MD, Sapthagiri Portfolio
Management Pvt Ltd Create a customised asset developments.
www.makeamoneyindia.com allocation strategy: A great way to • Allocate a small proportion of
I
mitigate overall portfolio risk and your portfolio to gold investments.
nvesting is as much of an art minimise the impact of behavioural Historically, gold has proved to a
as it is a science. Thus, even biases is to create a diversified good hedge against inflation,
though all investment decisions investment portfolio that is tethered acted as an ideal portfolio
should be made with a rational mind, to a sound asset allocation strategy. diversifier and generated
they are often influenced by emotion This spreads the portfolio risk across competitive returns relative to
and behavioural biases. When your various assets in such a way that other asset classes.
emotions get in the way of rational adverse movements in any one asset • Adhere to your asset allocation
thinking, you may end up acting too class do not have a large impact on strategy and monitor your portfolio
quickly, not act quickly enough, or the overall returns of the portfolio. for deviations.
sometimes not act at all. In order to This way, portfolio risk can be Open your mind to debt
make optimal investment decisions managed well, precluding the need investments: Generally, when it comes
that can put you on the right track for you to react to sharp market to investing, most people intuitively
to achieving your financial goals, movements. Below, we share a step think about ‘equity investing’.
it is important to strike a balance by step process for creating a robust However, if you wish to create an
between your emotional side and asset allocation strategy. optimally diversified portfolio, then
your logical side. Fortunately, this • Step 1: Determine your goals, the you must consider debt investments
can be easily achieved by sticking to required rate of return and the time as well, along with several other asset
the very basics of investing. period to achieve each goal. classes. Due to their fixed-income
• Step 2: Determine your risk bearing nature, debt investments
Getting back to basics tolerance. are often overlooked as vehicles of
Understand the concept of risk • Step 3: Allocate your investments growth. However, it is important for
and reward: Risk primarily stems in varying proportions across you to consider debt investments if
from uncertainty in outcome. Since different asset classes in such a way you wish to create a robust portfolio
investments are impacted by a host that your investments are able to that is capable of generating the
of factors, it is inevitable that there meet your return objective and are required risk-adjusted returns.
is some element of uncertainty aligned with your risk tolerance. Often, people make investing sound
attached to their performance. • Step 4: Periodically review your far more complicated than it actually is.
Thus, you must understand that all portfolio and rebalance if the You can make investing and financial
investments carry some level of risk. portfolio investments are no longer planning an easy journey by simply
Return, on the other hand, is the aligned with your asset allocation managing your emotions and following
reward that accrues to the holder of strategy. the very basics of investing.
Investor Initiative
T
he health crisis and the simply facing severe cashflow
ensuing lockdown has problems. Amit Trivedi, Author, KEEP ALL YOUR
impacted global economy, Speaker, Trainer and Blogger feels FINANCIAL
and by extension, personal finance one should first look at the current DOCUMENTS IN
segment too and that there is a liquidity situation and ensure ONE PLACE, ALONG
need to reinvent one’s approach enough funds for immediate and
to personal finance in these short-term expenses. Then one
WITH A WILL
unprecedented circumstances. should go for health insurance
“COVID is, of course, a primary and life insurance for risk inherent to equity markets and
concern of health. But the second management. It is only after that adds, “That decade was abnormal
most prominent concern of that one should use the money that volatility was missing. What
COVID is the wealth. I think it is for funding goals. He adds for happened in 2020 is the very
time for everyone to many, are managing expenses nature of equity markets. Please
take a conscious call and we need based of the drop in income. expect volatility.”
to relook our entire finances in a Hence, one should calculate Offering advice on managing
very different way,” says income-expense transition before finances in these uncertain
KS Rao, Head - Investor taking any decision. times, Rao says the first thing
Education and Distribution Those who invest in equity one should focus on is safety
Development – Aditya Birla Sun markets do expect some risk. - so six months to 12 months
Life AMC Limited. However, many saw their portfolio emergency fund, and health and
Rao adds one must draw some correct by 30-40 per cent in life insurance with appropriate
lessons from the experiences March. Even as markets have cover is crucial. “Second, if all
of the last couple of months recovered volatility does exist. your investments are goal based,
and prioritise their finances and Trivedi says a 30 per cent drop then you have nothing to worry
goals. He feels one should take in equity markets happened after about. Use liquid assets for
insurance more seriously beyond a long gap of almost 12 years. parking your contingency fund,
just the tax-planning aspect and “Also, during the last one decade, debt for medium term goals and
ensure they have enough cover, there were only three days when equity for long-term investment.
for both health and life. He says daily Sensex movement was more Don’t sell in panic, and remember
that this is also the time one than 4 per cent. But in March this SIP is always best investment
should take a more detailed view year, out of 22 working days, the route. If you have a lot of surplus,
of the clauses of their health 4 per cent change happened on create a satellite portfolio. So
insurance. The IIM-Calcutta 10 occasions. This is the level of core portfolio for goals, and
alumnus adds that one should volatility and if you are not used satellite portfolio for taking some
also consider drawing a will and to seeing this kind of volatility, chances for better returns. And of
get families more involved in it may get very scary for a lot of course, asset allocation is key. My
financial planning, as most goals people,” he explains. last advice is to write a will and
are family goals. Trivedi, who has authored four do proper estate planning. And
Many are losing their jobs, books on personal finance and keep all your documents in place,”
getting steep salary cuts or are investment, says the volatility is he concludes.
By Vishav on PPF was cut sharply by 80 basis returns that are higher than inflation.
points from 7.9 per cent to 7.1 per The higher the gap between interest
F
or generations, small saving cent. And with consistent decline in rate and inflation, the better your real
schemes like Public Provident government bond yields, to which returns are. “If your savings are not
Fund (PPF) have been among the interest rates of small savings earning you inflation-beating returns,
the most trusted investment schemes including PPF are linked, then you would need to save a lot
instruments for the salaried class, one cannot rule out further cuts more for certain financial objectives.
along with fixed deposits, real estate in the future with PPF interest rate Inflation can specifically hurt savings
and gold. declining even below 7 per cent, in the areas of future education and
However, in recent times, the which hasn’t happened since 1974. retirement goals. As money gets less
returns on these investments have Another point to note here is valuable over time you may not be
been falling. Be it PPF, or Senior the difference between the absolute able to afford your current lifestyle at
Citizens Savings Scheme (SCSS) interest that one earns on their retirement,” she explains.
or National Savings Certificate investments and the real interest rate To understand how much sense
(NSC), the interest rates on all these that has been adjusted to remove the it makes to invest in small savings
schemes have fallen by around 1-2 effects of inflation. With inflation schemes, given the rising inflation
per cent over the last five years or rising to 6.09 per cent in June, the trend and falling interest rates, it is
so. PPF used to give a return of 8.7 real returns on these schemes are important to understand the different
per cent in 2014-15, which has now much lower than what they were a types of schemes and how they differ
come down to 7.1 per cent, whereas few years back. from other fixed income instruments
NSC’s rate of return has dropped to According to Dipika Jaikishan, like fixed deposits and debt mutual
6.8 per cent during this period. SCSS Co-Founder and COO of Basis, funds.
interest rate during this time has a financial services platform for Fixed Deposit (FD) accounts are
fallen dramatically from 9.3 per cent women, the only time one is growing considered to be hassle-free and one
to 7.4 per cent. the wealth is when savings are of the safest investment options in the
In April this year, the interest rate parked in investments that give you market. You deposit an amount for a
specified period, and that earns interest
as per the rate prevailing on the date of
deposit.
PPF, on the other hand, is a
government-backed long-term tax-
free savings scheme where the money
gets locked in for 15 years and can be
extended in blocks of five years after
the completion of the lock-in period.
The interest earned from such savings
is tax-exempt. While there is a lock-in
of 15 years, one can withdraw a part
of the savings after the sixth year.
National Savings Certificate, another
government-backed saving scheme,
provides guaranteed returns along
with a tax saving option. The lock-in
period for the scheme is five years. The
government reviews the interest rate of
both PPF and NSC schemes once every
quarter.
9.30
9.20
9.00
10.00
8.70
8.70
8.60
8.75
8.70
8.60
8.50
8.50
8.50
8.30
8.30
8.30
8.10
8.10
7.60
7.90
the tax benefit it offers,” he explains.
7.80
7.80
7.90
7.75
7.60
7.40
7.00
7.00
6.80
8.00
6.50
7.10
6.75
Rajeev Srivastava, Chief Business
Figures in (%)
6.10
6.00
Officer, Reliance Securities, says that
4.00 compared with FDs and debt mutual
2.00 funds, small savings schemes offer
both superior returns and limited
0.00
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 risk. They also offer EEE -- Exempt,
Exempt, Exempt -- status during
Public Provident Fund (PPF) Senior Citizen Saving Scheme (SCSS)
their life-time. “Since these schemes
National Savings Certificate (NSC) Bank Fixed Deposit (FD)
offer EEE benefit, which translates
Source: Fintrust Advisors to ‘exempt’ when investing, ‘exempt’
while growing and ‘exempt’ while
Then there is debt mutual fund the maturity amount. However, redemption, the return profile is
scheme that invests in fixed income according to the new income tax significantly more attractive than its
instruments, like corporate and regime announced during the Budget other peers available in the market,
government bonds, corporate in February, tax payers now have including RBI bonds and mutual
debt securities, and money market an option to opt for the new system funds with exposure to only sovereign
instruments that offer capital with liberalised rates, albeit with no paper,” he claims.
appreciation. Debt funds are also deductions. If one opts for the same, However, these schemes have
referred to as “Fixed Income Funds”. the tax-rebate appeal of small saving limited scope as they have extended
They offer relatively stable returns, schemes would no longer be there. tenures of lock-in. For instance, a PPF
relatively high liquidity, but are The government eventually wants scheme has a 15-year lock-in and
riskier than PPF and FDs. a complete transition to the new an NSC has a minimum five years
According to Vikas Khaitan, tax regime. According to Khaitan, tenure. Also, tax benefits on small
Co-Founder and Partner at Fintrust however, the new tax regime will not savings schemes are limited up to an
Advisors, among the benefits of small be a deterrent because most of the investment of Rs 1.5 lakh per annum.
savings schemes are safety, long- investors in such schemes are from “It would make sense to invest
term compounding benefit and tax low and middle-income groups and in small savings schemes upto the
savings. He adds these schemes are “for them, the priority is safety, not maximum limit of Rs 1.5 lakh allowed
ideal for building a retirement fund. tax-saving”. under Section 80C. The interest
“Small savings schemes have “They mainly come for the rates offered here are tax-free and
always been a popular investment simplicity, safety and high rate of possibly are the best fixed-income
option and will continue to be so. returns that small saving schemes instruments offering tax exemption,”
Despite a massive 70-140 basis offer. According to SBI research Srivastava says. One cause of concern
points rate reduction across schemes estimates, less than 10 per cent of for investors is that the interest rates
announced on March 31, and the the total taxpayers are expected to on them have been falling over the
introduction of the optional new migrate to the new tax regime as last several years. There has been a
tax regime from April 2020, small- they are the only ones who will be time when PPF used to give up to even
saving schemes continue to remain 12 per cent return, that is between
attractive,” he says. 1986 to 2000. And then between
He adds small saving schemes RAJEEV March, 2002 and June, 2017, this rate
have retained their edge because SRIVASTAVA remained in the range of 8-9 per cent.
the returns are guaranteed, fairly Chief Business Now it gives 7.1 per cent return, which
stable and they come with a Officer, Reliance may fall further in future.
sovereign backing. The tax savings Securities According to Mrin Agarwal,
add further to the appeal as most of financial educator and founder-
these schemes offer one or the other director of Finsafe India, PPF still
kind of tax benefits. For example,
The interest rates remains a great investment as “it beats
in case of PPF, one can avail tax offered are tax-free and inflation, compounds and gives a risk
deductions and exemptions on the possibly the best fixed- free and tax free return”.
investment, interest accrued and income instruments vishav@outlookindia.com
I
ndia is suddenly seeing a Goldrush of a rare slowed down or has fallen into negative territory.
kind. Gold is trading at a 9-year high and silver According to informed sources, the US Dollar
at a 4-year high. (USD) has entered into a 6-7 year long weakening
At MCX, the commodity exchange, MCX cycle. An atmosphere of economic uncertainty,
Gold hit `51,010 per 10gm, up by `310, on July lower interest rates, falling bond yields, sustained
25 compared to the previous day. The same day, liquidity push from many central banks and
futures contracts on MCX for silver rose by `31 to expanded fiscal balance sheets have all worked in
`61,331 per Kg compared to the earlier day. tandem to push up prices.
Nish Bhatt, Founder & CEO of investment Precious metals are in demand from so-called
consulting firm, Millwood Kane International, cited big investors. Some experts believe that Silver
four reasons saying, “A weak US Dollar, a recovery may better than Gold in next 6-8 quarters. After
plan worth 750 billion Euros in the European Union, being a laggard for the last few years, silver has
an expectation of US Fed keeping interest rates near seen massive buying interest. The surge in its
record low level by 2022 end, and issues related to shareholding, falling mine supply and high physical
the continued spread of the pandemic are the key and industrial demand has been supportive of
reason for the rally in precious metals”. The situation the prices. Experts think that the metal has still
has been augmented by the fall in the value of other enough steam left and can add further gains
asset class and global uncertainties have also helped towards `64,000 a Kg in the near future and also
Gold climb record high levels, he says. move towards a life-time high crossing `74000 per
Another reason for surging buying interest in kgs in the next couple of quarters.
Gold is rise in Institutional buying. Majority of Navneet Damani, VP – Commodities Research,
the Big Institutional Motilal Oswal Financial Services, (MOFS) Says,
investors have turned “Over the last few months we have been seen a
bullish on Gold due to sustain run-up in gold giving over 25% returns for
its safe-haven feature this year and taking the total gains for the last two
during the current year to over 45 per cent. We expect the momentum
health crisis the global to continue with and could deliver a handsome 30
economy is suffering per cent returns targeting `65000/10 gms. over the
from. More and more next 18-24 months”.
asset allocation from yagnesh@outlookindia.com
Owing to the lockdown, digital transactions have there has been a decline in transactions viz last year.
seen an uptick. How have things been for the sector However, what we are also noticing is that every week is
in the period following the lockdown? better than the previous week and the digital transactions
With the lockdown, there have been innumerable ways are bouncing back significantly. Indian economy is very
in which consumer behaviour has evolved and adapted
to these unprecedented times. We have seen that while
digital payment volumes declined in sectors like aviation,
tourism, hospitality, hotels, entertainment, e-commerce
(non-essentials) and restaurants, there is also an uptick in
areas like online grocery stores, online pharmacies, OTT
players (telecom and media), EdTechs, online gaming,
recharges and utility/bill payments.
By Rajat Mishra
E
very illness has its seeds in
our psychology. The sudden
alleged suicide of Bollywood
actor Sushant Singh Rajput stirred
up the debate of mental well-
being once again. Actress Deepika
Padukone, who has battled clinical
depression and runs a foundation
for mental health says one must
reach out, “Talk. Communicate.
Express. Seek help,” after Rajput’s
demise.
Insurance is readily available to
treat mental health illness too, all
clubbed along with general health
insurance products. However,
only a few insurers like Star
Health Insurance and Bajaj Allianz
General Insurance among others
are providing comprehensive cover by mental disorder in 2017. And that grossly impairs judgment,
for out-patient or OPD and in- the report also accepted that India’s behaviour, capacity to recognise
patient or hospitalisation charges. systematic understanding of their reality or ability to meet the
An illness that is mostly treated in prevalence, disease burden and risk ordinary demands of life, mental
OPD, often gets ignored by most factor is not readily available. conditions associated with the
insurers. However, recently the According to the 2017 Act, abuse of alcohol and drugs, but
insurance regulator IRDAI has mental illness means a substantial does not include mental retardation
set new guidelines for insurers to disorder of thinking, mood, which is a condition of arrested or
change their approach towards perception, orientation or memory incomplete development of mind of
mental health. a person, specially characterised by
In 2014 India launched its sub normality of intelligence.
mental health policy and a revised Recently, a PIL was filed in
Mental Healthcare Act in 2017. Supreme Court on insurance
Since 2018, insurance regulator coverage for mental illness
IRDAI has made it mandatory treatment in India. The apex court
for mental health to be part of all has asked IRDA to explain why
health insurance products. Simply insurers were still not adhering
put, mental health benefits cannot to its guidelines to cover mental
be more restrictive than physical health illnesses under their regular
health benefits. scheme. The insurance regulator
According to a report by Lancet, DEEPIKA PADUKONE has issued guidelines to standardise
mental disorders are among the Actress mental health illness coverage in
leading causes of non-fatal disease India by Sep 30, 2020.
burden in India. The situation is Sanjay Dutta, Chief-
so grave that around one in every Talk. Communicate. Underwritings, Claims and
seven Indians were found affected Express. Seek Help Reinsurance, ICICI Lombard says,
By Kumud Das companies. The settlement under for PPE) and for non-NABH accredited
COVID-19 insurance claims shall be hospital) it would be `8,000 (including
T
he General Insurance subject to the limits and terms of the cost of PPE `1,200). The corporate
Council (GIC) has recently policy of respective insurer. hospitals are planning to approach
come out with rate chart for The capping of procedure rates IRDAI, insurers and the council for
COVID-19 treatment, taking into comes at a time when the country initiation of dialogue on the issue.
account rates published by various witnesses more than 10 lakh active Mumbai-based hospitals have
state governments, after discussion cases. Moreover, the insurers have already approached the state
with experts. The council has made already made claim payout to the government. GIC has indicated the
it clear that the reference rates are tune of `900 crore while settling rates are not constant and will review
variable and will be revisited every 55,000 COVID related claims. them every month. “We have arrived
month. However, the corporate hospitals at the rates based on our experience
Insurance companies shall be are not comfortable with the capping of over 50,000 COVID claims which
guided by the treatment protocols of the rates. They are worried the have been settled so far. If there is
prescribed by ICMR. These rates council may go for capping of all the any peculiarity then it can be seen
are broadly based on the schedule procedures. GIC has come out with separately,” says MN Sarma, Secretary
of rates suggested for COVID-19 a schedule of rates for claims being of GIC.
treatment by Niti Ayog panel. filed with its member insurance Mumbai-based Zen Hospital,
These rates will be applicable to companies, capping the ICU with which has already implemented the
both cashless and reimbursement ventilator care at `18,000 per day in revised rates, says that there should
claims in states/ union territories/ the case of ‘very severe sickness’ in be differential for various hospitals.
cities where any government hospitals accredited with National “There has been profit-making and
authority has not published standard Accreditation Board for Hospitals & even exploitation by hospitals. A lot
charges for COVID-19 treatment. Healthcare Providers (NABH). of network hospitals are not doing
Wherever, treatment charges have In the case ‘moderate sickness’, cashless so as to avoid capping of
been published by any authority, NABH-accredited hospitals charges, says Dr Roy Patankar, Director
those charges shall be applicable (including entry level) can charge at Zen Hospital.
to insurance claims with member `10,000 per day (including `1,200 GIC is in favour of categorising
By Rajat Mishra health policy and COVID-19 leads floater with sum insured ranging
to complications or attack of the between `50,000 and `5 lakh. It is
T
he insurance regulator, heart. People suffering from salary available for three and half months,
Insurance Regulatory and cuts and layoffs can also avail of it. six and half months and nine and
Development Authority Thirdly, you may supplement your half months including the waiting
of India (IRDAI), has suggested existing policies with Corona Kavach period. The single mode of premium
two new policies specific to the policy as this would protect you with payment varies from insurer to
COVID-19 pandemic and issued additional sums insured. insurer.
guidelines to insurers. Dr Shreeraj Deshpande, Chief The premium of Corona Kavach
One of them - Corona Rakshak Operating Officer, Future Generali policy for 30-year-old individual
- is a single-premium cover that India Insurance debunks certain for six and half months for a sum
will pay 100 per cent as lump-sum misconceptions that have emerged insured of `50,000 sum by Bajaj
to the policyholder on being tested about this policy. “This Kavach policy Allianz is `1,056, the premium of
positive and need hospitalisation for covers home care treatment up to 14 Corona Kavach with same features
72 hours or more. This plan does not days for COVID-19 cases, whereas by United India is `1,140, for
have any deductible. Another plan - normal health insurance policies do Oriental Insurance `1,039, for IFFCO
Corona Kavach - is a single-premium not cover it. The policy also comes Tokio `1,324.
indemnity health policy that covers with an optional hospital daily cash “This is based on actuarial
hospitalisation as well as domiciliary cover in which the insurer will pay modeling for estimated prices
expenses. up to 0.5 per cent of the sum insured using current experience of
for every 24 hours of hospitalisation.” COVID and earlier experience of
Who should buy and why? infectious claims. Also, a few future
Firstly, there are three segments Premium and other features presumptions on claims/ frequency
of people who should buy it. One, These indemnity-based policy is development are considered using
those who don’t have any other available on individual and family information available from public
By Anagh Pal jobs only compounded the situation. Practice, Stanton Chase, an executive
An overall 35 per cent reduction in search consultant, sounds optimistic.
W
hile the pandemic has active openings over three-month “The pandemic had its impact on the
brought a lot of bad period should be read in the context hiring and recruitment industry. As we
news on the health front, of a general slowdown in business move into the unlock phases, certain
news of job losses have also made activity across sectors.” sectors and functions are seeing an
headlines. The lockdown brought the He adds that the total active job upswing in hiring while the others are
economy to a grinding halt and that openings dropped from 200K in still struggling. While the pendulum
affected jobs to a large extent. Things April to 167K in May and the closing is still tilted towards negativity at the
have slightly improved with Unlock 1 figures for June was hovering at
and 2, but it will be a while before the 132K. Early data indicators for July
job market is again at pre-pandemic seem to point towards a climb to
levels. similar numbers as of May 2020. If
Says Kamal Karanth, Co-Founder the trend continues for rest of July KAMAL
at specialist staffing firm Xpheno, and sustains for August, we will be KARANTH
“Unlock 2.0 opened with a slightly possibly looking at the first V-shaped Co-Founder,
moderated enthusiasm in the recovery graphs in the job market. Xpheno
organised job market, as compared We will have to wait a little longer
to what was witnessed in 1.0. While to see if June 2020 was the true dip
June and early July saw a cleanup point in the jobs opportunities graph
Unlock 2.0 opened
of some of the long-trailing job for now. with a moderated
openings resulting in lesser active Amit Agarwal, Managing Partner, enthusiasm in
job counts, a slower top-up of new Regional Specialisation Leader CFO organised job market
moment, the scenario is likely to get cent said that the employees are nor
better by next quarter,” says Agarwal. responding to them on the status of
“In terms of new jobs, we have their job offers. However, recently AMIT VADERA
seen a new segment around health TCS announced that they will hire Head Staffing - BFSI
and safety that has opened up, which 40,000 freshers from campuses, & Govt, TeamLease
is fuelling demand for verification, while Infosys said they will hire Services
sanitisation and security personnel,” 20,000.
says Tarun Sinha, Head of OLX “Companies are still looking to
People (HBU). While few marquee hire fresh talent. While these are
Looks like this would
brands announced layoff plans over challenging times for job seekers, take anywhere between
the last two weeks, few others have there is no blanket freeze in the 6-18 months from now
been revoking fresher offers and industry. Firms continue to hire to improve the situation
postponing fresher hiring plans. fresh talent, however, they are being
While a market-wise hiring freeze cautious at every step. Hence, it is
cannot be declared, what can be crucial for freshers to keep an eye situation will improve. The entire job
said is that more enterprises are out for the sectors that are showing market scenario is dependent on how
calibrating their hiring plans for recovery and scope in the near soon the situation around the pandemic
the year. “The pandemic has created future as well as in the long term,” improves, the sooner we manage the
huge uncertainties about the future says Sinha. As per their data, the situation, the easier it is for the market
with most industries laying-off their top sectors that are hiring freshers to improve.” The longer the situation
employees to sustain themselves in include IT/Software, e-commerce, takes to improve, the larger would be
the longer run. Fashion, hospitality, banking, insurance, financial the impact.
real estate, retail, auto, and travel- services, and recruitment/staffing. Agrees Amit Vadera, Head Staffing
tourism have been massively hit The question on many people’s - BFSI & Govt, TeamLease Services,
and are seeing layoffs, alrhough minds is if the worse is over and a human resource provider, “This is
the situation is getting better if we how soon will we be back to pre- difficult to predict, however based on
talk about the job scenario today lockdown levels. With cases rising my discussion with about 100 Industry
as compared to the scenario two rapidly in the country, things may leaders in last three months - timeline
months back,” says Agarwal. not improve till next year. Says will differ from company to company
Larger enterprises are seen Agarwal, “These are unprecedented and it looks like this would take
playing their cards closer to the times that we are facing. It is still anywhere between 6-18 months from
chest when it comes to hiring very difficult to anticipate when the now.”
outlook for rest of the year. Despite However, Sinha is confident that
these conditions, new job openings the green shoots are back. ‘We are
continue to be announced and seen witnessing recovery across industries,
actively accepting applicants. “With
Be Job Ready and the jobs market is getting back
over 40K jobs being refreshed and Network as much as possible to normal,” he says. As per the
reposted over the week, the fact economic think tank Centre for
Use this time to upskill and
remains that the hiring funnel is still Monitoring Indian Economy (CMIE),
spread their job search across
warm and hasn’t frozen to a halt,” he the unemployment rate fell to its pre-
sectors
says. While the job market has been lockdown level of 8.5 per cent in the
affected as a whole, fresher hiring Be open to take up a part-time week ended June 21, led by big gains in
has also borne the brunt. While job if a full-time job is not the rural areas. With the festive season
some of the top colleges have already available coming up, the demand for consumer
done their placements even before Prepare well for Interview. goods is further expected to boost the
the lockdown, Tier 2 and 3 colleges Be comfortable with digital economy. We are positive that by the
are struggling. According to fresher interactions end of this quarter, India will be
hiring portal Firstnaukri.com, Stay open to a wider range of job back on track. As per OLX People’s
almost 44 per cent graduates who possibilities. Widen the filter for Employer Sentiment Survey, more
had a job offer said that their joining your skill set than 50 per cent of businesses expect
dates have been deferred while 9 to completely recover by the month of
Look for remote working
per cent said that their employment October this year.
opportunities
has been rolled back. About 33 per anagh@outlookindia.com
A
lot has been said about real estate rates crashing taxed at 30 per cent in the hands of the developer and
and so on. However, it is important to assess the customer. Stamp duty on the 20 per cent difference
and understand the situation. at 6 per cent is added to the customer burden. This
We hear builders are in trouble hence they will be means a consumer buying a home at 80 per cent of
forced to lower prices. the circle rate effectively and pays 80 per cent plus an
When a builder is in trouble, his cash flows get additional 7.2 per cent towards extra income tax and
affected leading to the project slowing down or stamp duty. This is in addition to the normal stamp duty.
getting stalled. The developer generally defaults on On paper a 20 per cent discount is infact 13.8 per cent.
his repayment to the banks/financial institutions. The The developer is expected to lower the price but the
impact is felt by the financial institutions, customers and government must take its pound of flesh at an artificially
all stakeholders including the vendors and employees. inflated value. The other issue is selling below the
However, when a builder sells an under-construction ready reckoner attracts the attention of the income tax
home at a discount because he is in trouble, it just department where the assumption is that black money
doesn’t make sense to buy in the project. There is no must have been a part of the transaction if the rates are
guarantee it will get completed. below ready reckoner value. No one wants to attract
It is often said that builders are not lowering their the department and bring about these problems on
prices because they do not want to lower their profits. themselves.
This is true only in certain cases. If a project is selling Over the past five years, property prices have
and the developer is solvent or financially sound then been flat to negative across most markets in India.
why should he lower the price? Prices only come down Developers have had to bear increased costs on account
during distress. Therefore, if a home is ready with of inflation. In addition, the government came up with
occupation certificate and the prices are down, the risk GST which lowered the overall input costs. Threatening
is minimised. manufacturers with anti-profiteering provisions, the
There has been a lot of judicial action against government forced them to pass on the benefits to
developers for delay in delivery of homes and default consumers. Thereafter, the government decided to lower
on debt. Now nobody wants to be called a wilful the GST for home buyers but decided not to permit the
defaulter or remanded to judicial custody. Therefore, it pass through of the input GST costs incurred by the
is important to understand that there is a bigger reason developers to the customers. This increased the cost
why prices are not coming down. burden and eroded profits further.
The government on its part collects stamp duty at One look at the balance sheets of the listed
the circle rates (ready reckoner rates) and yet expects developers will tell the story.
properties to be sold at below circle rates. This adds In looking at the distribution of every rupee of inflow
to the cost burden on the flat purchaser. In addition to that a developer gets from sale of real estate, the largest
this, if a developer is to sell his property at a discount share goes to the government - the Centre in the form
of more than 10 per cent to the circle rate, both the of GST, Income tax, state in the form of stamp duty and
developer and the customer have to pay income tax on local government in the form of development charges,
the difference between the price at which the customer premiums and property taxes.
bought the apartment and 90 per cent of the circle rate Buying a home is a huge financial responsibility taken
price. Assume a developer sells at 20 per cent below the on by people. Getting the decision wrong can cost the
circle rate. The tax earned by the government is 30 per buyers life savings, financial hardship and tremendous
cent of 90 per cent of the circle rate. This 10 per cent is stress. In this market, it is important to be safe, buy
from reputed developers who have a track record of
project completion andy buy where the construction
activity is on in full swing on the project.
Selling at low rate attracts the
attention of I-T department The author is Managing Director, Gera Developments
By Vishav
A
mit Gupta, an IT
professional, bought his
first home in Greater Noida
(West) around seven years back. He
made dozens of visits to different
property locations and met a number
of real estate agents before narrowing
down on an under-construction
three-bedroom flat. Even after
deciding to purchase that apartment,
he remembers how he had to visit
the builder’s office several times
for different formalities right from
booking to taking possession.
Gupta, who now lives in Sydney
with his wife, is considering investing
Photo: TRIBHUVAN TIWARI
in the Indian real estate market,
Make The
Most Of Your
Money
If you have been toying
with the idea of consulting a
financial planner now is the
right time to do so
By Anagh Pal
I
t is easier to navigate the ship
when the sea is calm, but during
a storm, an expert captain is
needed to save the ship and the
lives. Similarly in these trying times
we need a financial planner to
manage our finances.
Ananth Ladha, Founder, Invest
Aaj For Kal draws from the
Mahabharta to put across this point. emotions during difficult times.”
“The role of the financial planner is In March when the market
always goal planning and managing was tumbling and came down by
Change strategy or
emotions. I will just quote example about 35 per cent from its peak, replace funds to make
of Mahabharat, Krishna being an many investors sold their equity the most of the boom
advisor of Arjun, guided him all investments, but they are now
throughout. Most importantly when regretting their decision as the
the war was about to begin, Arjun market has recovered almost 25 provide a proper financial advice.
was wanting to leave it seeing his per cent of losses. “So, instead of Once you decide, the next step is
uncles and relatives in his front. using that period as an opportunity to choose the right financial planner.
That was the most critical part of to accumulate units for long-term To begin with you should check
Krishna when he managed Arjun’s goals, many put dent on their the qualifications of the financial
portfolio by exiting. A good financial planner and whether is he or she
planner might have stopped them is authorised by Sebi to offer such
from taking such wrong steps,” services. “Do take references from
argues Col Sanjeev Govila (retd), existing clients to know exactly
CEO, Hum Fauji Initiatives, an what to expect and how the advice
GEETHA JAIN investment advisor for facilitating has panned out in various cycles
Head, Client Services, Indian Armed forces. and the communication in tough
Grow Wealth In uncertain situations such as times,” advises Shweta Jain, Founder,
now, one tends to take decisions Investorgraphy.
based on fear, which, more often Says Geetha Jain, Head, Client
It is important that you than not are not wise and can Services, Grow Wealth, “If any
stay away from mis- adversely affect one’s finances. financial planner is promising you
selling in the name of People often act on the advice from fixed high returns in equity markets
financial advice those who may not be equipped to especially for short-term goals
T
his pandemic is a once-in-a-century crisis that with this, a simple will can be created, leaving
has unleashed demand and supply disruptions everything, movable and immovable to a spouse or
in the global economy after the Great parent or family member as desired.
Depression of 1929. 3. The lockdown has helped investors evaluate their
The contrast to 2008 Great Financial Crisis are priorities and led to a surge in essentialism, with
fundamentally different. The GFC started as a people focussed on the high priority parts of their
subprime crisis that went on to threaten the global life. Investors should use this clarity to re-evaluate
financial system and then impacted the economy and their investment objectives, time horizons, risk
households. This time around, the crisis started as a appetite and cash flow projections. Changes need
medical pandemic, which led to scores of deaths and to be made in strategic asset allocations as a result.
businesses forced to shut shop due to lockdown. The For example, we are advising all to increase their
financial system has been safeguarded by upfront emergency liquid fund from six months of expenses
concerted actions with rate cuts, huge liquidity to two years of expenses, given the surge in income
injections, monetary and fiscal stimulus and direct losses.
intervention by central banks. 4. Research has shown that strategic asset allocation
Many business models will never come back and is the most important driver of portfolio returns
millions of jobs that were lost may have been lost over the long term. It explains more than 75 per
permanently. The way people live, work, consume, cent of the variability of returns. The other three
spend, save and invest is changing forever and will components of security selection, tactical asset
require all service providers to recaliberate as well. allocation and market timing together account
In this backdrop, here is our prescription for the for the remaining less than 25 per cent. It’s
financially savvy, “on the road to financial freedom” critical to use this opportunity of time, clarity and
investors: prioritisation to rejig the strategic asset allocation to
1. The coronavirus pandemic will lose significance prepare for a vastly changed world.
sooner than anticipated, as better treatments, herd 5. On the tactical asset allocation front, a move to
immunity and vaccine launches will consign it the highest quality is critical. The economic pain
to the ranks of one more “few hundred thousand will stay for at least two, maybe more years, even
deaths per annum” disease. Of the 60 million people as the medical emergency normalises fast. It is also
who die annually, nearly half die from the top 10 important to be invested in good, healthy, growing
diseases like cardiac ailments, cancer and diabetes. businesses, as they will be most likely to weather
COVID-19 has been a severe challenge to humanity, storms. As Warren Buffett puts it, “It’s better to
but we are already 75 per cent through the pain and have a partial interest in the Hope Diamond than
the solution to it is on the horizon. Investors need to own all of a rhinestone.” Discard the lemons in
to be courageous and mindful and relook at their your portfolio and focus on getting into top quality
financial plans with hope and confidence. companies as a long term investor.
2. Making a comprehensive and clear record of all 6. The investment process itself need not be complex.
financial holdings for our family should be the Simplicity has a huge premium on the path of
top priority. A “family must know” file can be financial success. Borrowing a simple financial
created, manually, with all details of all accounts, guidepost from Ben Carlson’s, “A Wealth of
investments, insurances, loans, passwords. Along Common Sense”:
Think and act for the long term
Ignore the noise
Buy low, sell high
Keep your emotions in check
Make a comprehensive record of Don’t put all of your eggs in one basket
your family’s financial holdings Stay the course
T
he recent amendment to not be apparent for debt
the Indian Stamp Duty funds, and liquid funds where
Act, 1899 will have a long- the investment horizon is
lasting and deep-rooted effect on significantly shorter. At 0.005
the investors at several stages. per cent, there will not be any
The revised law, which became substantial impact for long
effective on July 1, covers investment horizons, as the
collection of stamp duty on all the stamp duty is applicable on the
securities market instruments, net investment value.
including mutual funds. A rate of Over the years, the average
0.005 per cent will be levied on returns from the liquid scheme
every financial transaction. category have shrunk to 5.2 per
This is a change from the cent due to a fall in the interest
previous system of multiple stamp rate. Tighter regulatory levies like
duty rates, across the states for stamp duty are contributing to
the same instruments, leading to the cap on gains.
jurisdictional disputes. The new Schemes like Unit Linked
change will remove the arbitrage. Once the holding Plans (ULIP), National Pension
“Since some states levied low period increases, the Plans (NPP), and Provident Fund
rates on speculative trades and (PF) will be impacted by the
there was a tax arbitrage to be
impact will be less stamp duty.
had by basing your office in those On 30 June 2020, Sebi declared
states. This arbitrage will now that stamp duty will be applicable
go due to a uniform rate across buyer. This notification clarified to the Alternative Investment
the country”, said Deepak Jasani, that the stamp duty will be payable Funds (AIF). The circular
Head retail research at HDFC to the state in which the buyer in a explained that Registrars to an
Securities. transaction is located. issue and share transfer agents
The government said the The circular will standardise (RTA), appointed by AIFs would
stock exchanges will collect on the collection of stamp duty and collect the stamp duty on issue,
trading stocks and commodities plug certain loopholes. It will transfer, and sale of units of AIFs.
on exchanges. Banks will collect bring a significant change to the “AIFs, where RTA has not been
on off-market transactions and off-markets transactions including appointed so far, shall appoint
deposit the proceeds with the unlisted shares. Previously, no RTA, at the earliest, to enable the
central government. such stamp duty was applicable in collection of applicable stamp
Earlier, the brokers had to off-market transactions in Demat duty”, Sebi said.
register with different states and mode. The amendments to the Stamp
pay the stamp duty. The change This is the first time that mutual Act and the rates have been
is a relief for the brokers, as the funds (except for ETFs) will attract in public since February 2019.
exchanges will pay the states, on stamp duty. It will be applied to all Looking at the importance of
their behalf. the mutual funds including, equity, stock markets for the economy,
Previously, stamp duty was hybrid, index funds debt and even in a strict lockdown,
payable by both the seller and exchange-traded funds. efforts were made for a smooth
buyer. The new rule will do away The rule will have an impact implementation to ensure market
with this double imposition and on the institutional investors and continuity.
will be levied only once on the corporate treasuries which invest indrishka@outlookindia.com
T
he dynamic world of fashion and jewellery
market has been badly hit by the pandemic.
However, many Indian brands have still
anticipated 2020 to be a doorway to a plethora of
business opportunities.
In unlock 2.0, the diamond market may look
promising. The sky-rocketing price of gold has
opened a gateway for consumers to invest in
diamond, as sellers are offering lucrative discounts
and gifts. As a consumer, it is important for you
to look for authenticity of diamond through a GIA
or IGI certification. Make sure to get the diamond
tested via different methods available before you
purchase. If you are planning to buy gold jewellery
with embellished diamond, then make sure to check
whether the gold jewellery is Hallmark or not and
check the diamond certification too. The reason
experts suggest investing in a blend of gold and four months at retailers’ end, the payment cycle has
diamond is the pricing ratio. For instance, if you buy gone berserk during the lockdown phase and further
a ring worth `25,000, the gold value will be only 20 to financial crunch has created an even bigger hurdle.
30 per cent and the rest will be diamond. Only marginal fresh sales are seen at this juncture.
According to statistics, in early June, there had been While many factories have resumed work in June,
a drop of 15 per cent diamond exports as compared shortage of labour has crippled the operations. Under
to last financial year 2018-19 and many more figures unlock 2.0, most of the units are working partially. In
are surely giving the Indian diamond industry the real fact, many factories have re-shut their operations due
tremors from COVID. to staff testing positive for corona.
This shift in tremor has a history that Asian market In post corona phase, consumers prefer light
has been experiencing for a while. If reports are to be and ultra light weight jewellery over heavy ones.
believed, the rough diamond prices from the miners Keeping the declining wedding market and low-
were predominantly high while polished diamond profile weddings post-lockdown, it is expected that
prices in the market were nominal, leading to a consumers will invest in light weight jewellery. One
noticeable gap that the Indian diamond businessmen can see be a bigger shift in consumer behavior and
were suffering from. This led to huge losses in the buying patterns
Asian market. The existing trade war between China It is also easier to make lighter pieces with least
and the US has further triggered the downfall of the intricacies. The market is expected to see normalcy
diamond business in the India. only after September-October and impressive sales
With exports down over 50 per cent and domestic may start by the end of fourth quarter of the financial
businesses by 70 per cent traders are facing liquidity year 2020-21. The diamond industry is eagerly waiting
issues. for the curve to flatten and in this a crucial time as
According to a statistics, with bills overdue for over they are utilising the time to lay out a corona virus
action plan that can be executed in the near future.
As the market is trying to move towards stability
it is necessary players stay sensible and together,
supporting each other.
The diamond industry is facing
severe liquidity issues The author is Owner at Dhanvi Diamonds
Ms. Anagha Deodhar impact of lockdown if not its pre-shock level at about two segment of consumers
T
completely. Considering all 1.25 per cent indicating – underprivileged and
he COVID-19 the factors, the destitute worsening disparity. the affluent. While the
curve has started have been hit the hardest In India, incidents former focuses on basic
flattening in resulting in growing income such as job losses across needs like food and shelter,
many countries. As inequality. According to industries and mass exodus the latter spend more on
governments worldwide a poll conducted by IGM of migrant labourers discretionary items such
gradually lift lockdowns, Economics Experts’ Panel, suggest that income as durable goods and
economy is slowly Chicago Booth School in disparity is likely to amplify entertainment. Hence,
looking up. However, April 2020, 84 per cent post COVID-19. In fact, potentially accelerating
in the coming months of the 44 economists the gap is expected to income inequality in the
authorities might have to (including 2019 Nobel worsen than the previous future can impact India’s
struggle to cope with the Laureate Abhijeet Banerjee) health hazards. This is consumption basket.
economy. One of the believed that COVID-19 because, (i) COVID-19 Since economically
most pressing challenges will disproportionately has affected a significantly backward households
post COVID 19, would affect low-income workers larger proportion of are likely to be
be the widening income despite government world population than its disproportionately
inequality. The conventional support schemes. 91 per predecessors (ii) lockdown affected, we expect them
response to the pandemic cent believed existing and social distancing in to tighten strings and
(social distancing and gaps in access to quality many geographies have switch consumption from
lockdowns) tend to education between high and been far more stringent discretionary items to food.
affect the economically low-income groups will (iii) death toll has been This could result in share
underprivileged segment be exacerbated. This will way higher and (iv) lack of of food in consumption
more as they typically eventually impact future vaccine clubbed with fears basket to increase. We
have jobs where employment opportunities of second wave. expect them to aggressively
physical presence is among the latter only We estimate that in FY21, cut back on the rest.
essential. These include augmenting income top 20 per cent India’s Although the more affluent
construction workers, disparity. population accounted for ones are likely to be less
drivers, housekeeping and Several studies have 47 per cent of consumption affected, they too can
maintenance staff, factory corroborated the worries share while the bottom 20 reduce consumption amidst
workers. Moreover, since voiced by economists. per cent accounted for only the weak economy. This
a large percentage of According to a recent six per cent. Hence, the way, we expect aggregate
low-skill jobs belong to study based on five major gap between consumption spend on durables,
the unorganised sector, it epidemics in last 17 years shares of top two sections entertainment, personal
makes them very vulnerable such as Severe Acute and bottom two sections care to decline soon.
of going out of business, Respiratory Syndrome or was 41 percentage points. Going forward, we can
especially during trying SARS, Ebola and Zika has If viewed in the Indian see COVID-19 induced
times. For them, lockdown shown that global health context, then five years after rise in income imbalance to
is equivalent to loss of hazards and their aftermath COVID-19 i.e. in FY25– manifest in two ways—the
livelihood. Additionally, the led to significant rise in FY26, the gap between private consumption pie (as
financially underprivileged wage disparity. It often income shares going to a whole) can shrink, and its
populace tends to have decreased employment rate top two segments and consumption composition
low savings and either for the less educated. Five bottom two segments could can shift towards food at
extremely limited or no years after a pandemic, increase to 43.5 percentage the cost of corresponding
access to credit. On the the net Gini (a measure points. decline in discretionary
contrary, the educated of inequality adjusting Rising income inequality spend.
white-collar workforce is for government welfare has implications for (The author is an Economist
largely insulated from the support) remained above consumption pattern of the at ICICI Securities)
Stock Pick
V
oltas is one such company, Further, in terms of the ongoing Gaining consistent market
which has continued to COVID-19 crisis the company leadership in the Air Conditioner
sustain its number one launched a new line of Ultraviolet segment
position in room air conditioner Light (UVC) based surface Strong track of consistent growth
business despite the sector been disinfectant solutions in addition in Net Profit and Net Sales
adversely impacted by COVID-19. to the engineered UVC based air
Voltas, part of the Tata Group, saw and duct disinfectant solutions. Watch Out For
a surge in its sales by 8 per cent in On the flipside, the analyst also Risk of second wave of
FY 2020 to `7,889 crore Year-on- cautions that the FY2021 would COVID-19 impacting the
Year (Y-o-Y). Despite facing severe be challenging year due to peak supply chain
competition, it has cemented market summer sales lost in Q1 FY2021 250
leadership position as its market and the need for clearance of
share improved by 50 basis point to surplus inventory. “As AC demand
24.2 per cent Year-to-Date (YTD). shifts next year, Voltas remains the 200
The company’s net sales and pick given its strengths like brand, 181.76
Base value taken as 100
T
he market disruptions this muted trend is likely to continue
towards the year end due even in the H1FY21. “We lower Why Buy
to COVID –19 induced our PAT estimate by 2 per cent for Strong financial performance on
lockdown restrictions has not only FY20 due to lower demand in the back of excellent franchise model
brought uncertainty in automobile auto sector. We believe the auto and operational efficiency
sector but has also put the brakes sector is likely to show some pick Near-term revenues to be
on the demand for the Original up in H2FY21 owing to lower base supported by pent-up demand
Equipment Manufacturer (OEM). and new launches. Considering the
Despite this, one of India’s leading strong financials and larger visibility Watch Out For
industrial and automotive battery in the telecom sector (25 per cent Adverse commodity prices,
major Amara Raja Batteries (ARB) of revenue) we value ARB at 16x lower demand for OEM and
posted an impressive net profit of FY22 earning per share,” explains an replacement segment
`660.82 crore in FY2020 with a analyst at Geogit financial Services. 250
37 per cent growth Year-on-Year Its automotive business
(Y-o-Y) due to the strong demand for division has overcome the demand
140.70
replacement market and export. Its slowdown in auto OE segment 150
export revenue in FY2020 was about driven by traction in volume
Base value taken as 100
B
rigadier Ramnarayan
Vinayak is a retired Army
officer, and he lives with
his spouse Jailaxmi Vinayak
and daughter Radhika Vinayak.
He had exposure to a broad
spectrum of people and cultures,
throughout his working life. While
such relationships enriched him
personally, the financial advice
he received from people was not
helpful. His investment portfolio
initially consisted of several
high-premium insurance policies,
despite having a health insurance
cover under the Armed Forces
Group insurance.
He met Javahar KP, a Bhopal
based financial consultant who
also happens to be an Army
Veteran. With insurance policies
dominating the investment
portfolio, it was clear that
investment strategy required
a significant overhaul. The
representative could understand
his behaviour towards money
management post several
discussions and interactions with
him. With discipline in his veins, it
was indeed easier to convince him
to bring financial discipline into
Investment corpus
creates a financial
cushion towards any
life contingencies
Disclaimer
Financial Planning of Brigadier Ramnarayan Vinayak is based on the “personal opinion and experience” of KP Javahar and that it should not
be considered professional financial investment advice. No one should make any investment decision without first consulting his or her own
financial advisor and conducting his or her own research and due diligence.
S
ystematic investing through SIP’s in mutual funds Vision to see: Stock market crashes are marked by a high
has become a buzz word. However, keeping the level of noise about the present and the near-term future.
discipline of regular investments during crisis This is where a clear vision of the long term future proves
requires a certain level of tenacity. Investors often handy.
encounter the ‘urge to sell’ at the first sign of trouble. Courage to buy: The courage to buy when the whole
This is more behavioural than analytical. The irrationality world is fearfully selling actually arises from the above
in decision making arises due to some inherent biases, vision to see itself
which cognitive psychologists have termed as ‘loss Patience to hold: Only those investors will emerge
aversion’. Researchers Kahneman and Tversky first successful from market crashes who have full conviction
explained ‘loss aversion’ in their 1979 paper Prospect in their vision and high level of patience to see it become
Theory: An Analysis Of Decision Under Risk. a reality.
Simply put, humans have higher memory of losses Like every crisis the current crisis is also unique. What
compared to gains and this is encapsulated as ‘losses began as a medical/humanitarian crisis soon became
loom larger than gains’. A 10 per cent loss seems far more an economic one. One might wonder why did markets
painful than a 10 per cent gain. correct so sharply in March’20 when the case count in
Now add to this the natural instinct based response India was far lesser? And now with a far higher case count
mechanism of ‘fight’ or ‘flight’. Since you cannot fight the why have markets recovered a large portion of the losses?
stock markets, it is only natural that one resorts to flight. Is this the start of a new rally – why did I stop my SIP?
So, is there a way out – or are we simply helpless The probable answers lie in understanding the way
slaves of behavioural biases and inherent response humans deal with grief causing change. Psychologist
mechanisms? Elisabeth Kubler Ross first described the ‘five stages
The good news is that you can cultivate a certain model’ when she was studying terminally ill patients in
degree of tenacity by appreciating returns are as much a 1969. By the turn of the century the five stages model
function of markets as they are of your behavior. was used to understand individual responses to all kinds
Howard Marks says investment markets make the of change. The five stages are denial, anger, bargaining,
pendulum swing: depression and acceptance.
between euphoria and depression Ross in fact called it defense mechanisms or coping
between positive and negative developments mechanisms, that we need to move through to manage
between overpriced and under-priced change. He who is trapped, in any stage, without reaching
“The pendulum refers to mood swings in the markets, the fifth stage, remains in fear, disappointment and
as in cycles. The midpoint of the pendulum is the “on- uncertainty of the future.
average” point, although it spends little time at this As we limp our way back to normalcy, acceptance of
point. That’s because it normally swings up or down, the disease causing virus and necessary changes in habits
away from its extremes.” This oscillation is one of the will become a ‘new normal’. We are likely to see normalcy
most dependable features of the investment world, and in our investment behavior too. And like after all previous
investor psychology seems to spend much more time at crisis, economic activity does rebound and so do financial
the extremes than it does at the “happy medium.” markets, we have reason to be optimistic. If you are
Investors who continue their SIP journey accumulate investing through SIPs then the next few months will offer
more units during corrections. The same units create a the volatility, which is likely to benefit you by giving you
disproportionate advantage during good times. an opportunity for value averaging.
Stock market crashes are best handled by three If you invest when markets are booming and chicken
important behavior traits: out when markets turn bad you will always get poor
results from your equity investments. So let your patience
decide the course of your SIP journey, not market
movements.
Humans have higher memory
of losses than gains The author is Head of Products, Motilal Oswal AMC
“Visit here https://licmf.info/KYCredressal to learn more about KYC requirements, SEBI Registered Mutual Funds and Grievance redressal.”
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