VRITTAM

MONTHLY NEWSLETTER BY
FINATIX
THE FINANCE CLUB OF IIM RAIPUR
JANUARY 2021

Economic recovery momentum continued in December TABLE OF

quarter after a swift rebound in the second quarter, CONTENTS
even as the pace has slowed. Major economic activities
Economy P. 2
appear to be gradually returning to pre-covid levels,

service sector continues to lag. Expect FY21 GDP to

Markets P. 3

contract by a lesser magnitude of 7.5%. Inflation is likely

to remain above target and policy rates lower for a International • P. 4

longer period of time.

M&A/IPO • P. 5

Know more about it in the Newsletter

Personal Finance • P. 6
 ECONOMY
The need of an exit strategy from monetary
expansion
This has been an extraordinary year for the

world — a pandemic, an economic collapse,

human suffering. The technical conundrums of

monetary policy may seem trivial in

comparison to the profound upheavals over

the past 10 months. However, they are still

worth thinking about. The Indian response to

the economic shock has been led by monetary

expansion rather than fiscal spending. As the

economy normalizes over the next few

quarters, the Reserve Bank of India (RBI) will

have to work out a credible exit from its

monetary strategy.

RBI working paper defends 4% RATES REMAIN UNCHANGED:

inflation target for India STATUS QUO
B Y   B R A Y N R I C E

The paper, authored by Harendra Kumar Behera and

The Reserve Bank of India in December policy kept

Michael Debabrata Patra, finds that there is a steady its benchmark policy rate unchanged at 4 per cent

decline in trend inflation to 4.1-4.3 per cent since as inflation remained above its target even though

2014. Setting an inflation target below the trend may the economy continued to contract. However, the

central bank maintained an accommodative stance,

impart a deflationary bias to monetary policy because
implying more rate cuts in the future if need arises to
it will go into overkill relative to what the economy can
support the economy hit by the COVID-19 pandemic.
intrinsically bear in order to achieve the target, says

the paper titled 'Measuring trend inflation in India'.

The RBI working paper, which seeks to examine MONETARY POLICY COMMITTEE (MPC)
whether the choice of the target for inflation is VOTED UNANIMOUSLY TO KEEP THE
consistent with its trend, finds that the concept of
POLICY REPO RATE UNCHANGED AT 4 PER
CENT AND CONTINUED WITH ITS
trend inflation is vital for the design and conduct of
ACCOMMODATIVE STANCE TO SUPPORT
monetary policy to which actual inflation outcomes are
GROWTH. THE COMMITTEE, WHICH HAS
expected to converge after short run fluctuations from
CUT RATES BY 115 BASIS POINTS SINCE
a variety of sources die out. THE COVID-19 CRISIS HIT IN MARCH, HAS
KEPT RATES ON HOLD SINCE MAY.

Read More Read More

JANUARY 2021
MARKET VALUATIONS
2020 has been a year full of events outside the A number of market experts say
realm of imagination. No one could have while Indian equities are a dearer
anticipated that Sensex and Nifty would be bet, they are not in bubble
bludgeoned in late March, or that they will stage a
territory. “Based on headline
remarkable recovery almost immediately and soar
valuation parameters such as the
to all-time highs by the end of the year. 2020 will
price-earnings multiple and
probably go down in history as a year when global
implied equity risk premium,
central bankers injected close to USD 11 trillion as
Indian equities are no longer
stimuli to combat the COVID pandemic
cheap. But we are in no bubble.

The Nifty gained 14.9% in 2020 and the Sensex

has added 15.74%. Both indexes have hit record

highs and which is their best performance since

2017 after plunging to multi-year lows in March

as the Covid-19 pandemic hit Asia's third-largest

economy.

News on vaccine development and measures from

global central banks to cushion the economic

fallout from the crisis has helped the indexes log

annual gains.

The Nifty Pharma index, which has been the best

performer among the main sub-indexes, gaining

59% in 2020,

The Nifty IT index has rallied more than 55% in

2020 and which its best year since 2013.

GLOBAL EQUITY OUTLOOK MARKET SET TO BROADEN

B Y   B R A Y N R I C E

The economic response to COVID-19 will During 2020, investors flocked to safety

continue to be the biggest uncertainty amid the global uncertainty, with growth

stalking global equity markets in 2021. It is and defensiveness being a key part of the

likely to continue weighing on global equation (as with the technology names).

economic activity and to keep pressure on However, the announcements during

policymakers to produce programs that November that several effective Covid-19

support economic activity until an effective vaccines have been developed gave

vaccine is widely available. Until the investors an incentive to think about

spread of COVID-19 is reduced-probably “normalization” and economic recovery in

once one or more vaccines become widely 2021 and 2022.

available later in 2021-the outlook for the

world economy is likely to remain volatile.

The International Monetary Fund (IMF)

Investors have begun to look at the
expects the global economy to contract
potential for revenue and earnings growth
4.4% in 2020, which is an improvement in many “out-of-favor” areas that suffered
from its June forecasts following a strong during the pandemic. The most obvious of

rebound in activity in the United States these are those that were effectively shut-

and Europe in the third quarter. Next down, such as hotels, restaurants, leisure

year, the IMF forecasts the global enterprises and travel companies. It seems

economy will grow 5.2%, with the highly plausible that when the recovery,

uncertainty about COVID-19 outbreaks takes hold many of these businesses will

and the potential for renewed restrictions experience a sharp rebound.

creating more risks to the forecasts.

Read Read More

Read More
More

JANUARY 2021
 INTERNATIONAL
MPs approve EU-UK Brexit trade deal

MPs vote to approve legislation that will

pass the EU-UK post-Brexit deal into UK

law

The Commons approves the measures by

521 votes to 73 at its first stage in the

Commons

Parliament was recalled to put the

agreement into UK law, one day before

the UK stops following EU rules

EU bosses officially signed the agreement

in Brussels earlier - it has been flown to

London by the RAF for Boris Johnson to

sign

Read More

WHICH DEVELOPING
ECONOMIES WILL RISE AFTER
THE PANDEMIC?

After 2000, globalization and surging

commodity prices astronomically

boosted economic growth among

nations with emerging economies.

Over the next decade their share of

the global economy nearly doubled,

SAUDI ARABIA ANNOUNCES growing to 35 percent. By 2007, 107 of

$263.91 BN BUDGET FOR the 110 developing economies featured
2021
in the Penn World Table were catching

The Kingdom will spend 7% less than up to the United States in average

estimated spending for this year income, helping millions to escape

poverty.
Read More

Read More

JANUARY 2021
 M&A/IPO
IPO MARKET 2021

Multiple Indian startups like Zomato, Delhivery, Policybazaar, Freshworks, Flipkart, Nykaa are reportedly

eyeing the public markets in 2021, many others like BYJU’S, Pepperfry haven’t yet set a timeline but are

getting ready for a big, fat IPO debut. The Indian government too seems to be welcoming of tech IPOs.

India’s market regulator Securities and Exchange Board of India (SEBI) has set up an Innovators Growth

Platform (IGP) and has recently announced a consultation paper seeking comments for new rules that will

encourage startups to head for IPO.

TOTAL IPOS IN FY 2020 (APRIL TO OCTOBER), VS COMPARABLE PERIODS IN FY19, FY18, FY17.

UNACADEMY TATA SONS

India’s second most valued edtech company Tata Sons have agreed to buy an additional

Unacademy has struck another acquisition deal 32.67% stake in AirAsia India Ltd from its joint

before ending 2020. The SoftBank and Facebook- venture partner for $37.66 million, increasing its

backed company has acquired test prep startup stake in the budget airline to 83.67%. Tata Sons,

NeoStencil for an undisclosed amount, its fifth which owns a 51% stake in the Indian joint venture,

acquisition this year. The latest acquisition will has also the option to buy out AirAsia Bhd’s

help fortify Unacademy — the online learning remaining 16.33% stake after the closure of the

platform for cracking competitive exams—growth deal. Aviation experts believe this acquisition

in the test prep segment of edtech sector in India. could give Tata a stronger position in the sector,

Unacademy has gradually turned into the largest and help secure Air India, which has been put up

startup in the online education space following for sale by the Indian government.

the K-12 segment focused on Byju’s valued at $12

billion. The value of the test prep market in the

edtech segment in India is likely to be worth $515

million in 2021.

JANUARY 2021
PERSONAL FINANCE
4 PERSONAL FINANCE LESSONS FROM
2020 THAT YOU MUST NOT FORGET
IN 2021
The economic disruptions caused by the COVID-19 led to non-

repayment of debt obligations, adversely impacting the

finances of a large section of our population. These disruptions

re-affirmed the importance of following financial strategies.

1. Factor in your loan obligations in your emergency fund -As

financial exigencies come unannounced, park your

emergency fund in instruments that allow instant

withdrawals.

2. Continue your equity SIPs to make the most from market 4. Always ensure adequate

insurance cover - You should also

crashes- continuing the SIPs during such market turbulence
purchase adequate term insurance,
is crucial, as quality shares would be available at attractive
covering 10-15 times of your annual
valuations
income. An adequate term policy
3. Top-up your equity MFs with lump-sum investments during
will provide a replacement income
bearish markets - A financial emergency or the maturity of
to your dependents in the event of
a short-term financial goal occurring during an extended
your unfortunate death.
bearish market might compel you to seek loans at high

interest rates.
Read more

INSURANCE: AN INSURANCE
COVER FOR EACH LIFE STAGE

Beginning with term plans at a young age to

annuity plan on retirement and an assortment

of wellbeing covers all through life, there are

insurance plans made for each life situation

1. Young age -

Term plan- Go for an online term plan as soon as

you start earning. As a term plan is without any

investment component, the premiums are very

low

2. Middle age -

Deferred annuity plan: In deferred annuity, the

person gets pension after a defined time.

3. Old age -

Senior citizen health insurance plans: The higher

probability of diseases and absence of social

security in old age is a big concern among senior

citizens
Read More

JANUARY 2021