The second wave of the pandemic has stifled economic

PLOUGHINGON

The second wave of the pandemic has stifled economic recovery in India and continues to be a cause of concern

RNI No. MAHENG/2009/28962 | Volume 13 Issue 06 | 16th - 30th Jun ’21Mumbai | Pages 56 | For Pr ivate Circulat ion

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DB Corner – Page 5

Ploughing OnThe second wave of the pandemic has sti�ed economic recovery in India and continues to be a cause of concern – Page 6Unequal No MoreRBI’s draft norms on MFIs focus on deregulation and aims to provide a level-playing �eld to all players in the micro-lending space – Page 9Masters Of The CoinAmid a global boom, cryptocurrencies remain a grey area in India, but that haze is lifting – Page 12Tapping Into The FutureThe plastic pipe sector is set to grow manifold owing to Jal Jeevan Mission and consolidation of the industry – Page 16A Cautionary TrendA recent study shows that there has been a rise in young retail borrowers, which is a sign of worrying times – Page 19At A Sluggish PaceThe road construction industry is facing a lot of hurdles. But the outlook appears to be promising, nonetheless – Page 22Betting On DefensivesLarge foreign investors continue to invest in defensive stocks, especially consumer staples – Page 25Pivot And GrowSmall businesses are innovating to stay a�oat in the post-pandemic era – Page 28When Corporates CareCompanies are extending all possible support in cash and kind to their employees impacted by the coronavirus pandemic – Page 32

A Multi-Faceted ProductInvestors can consider ULIPs to create wealth as well as to save taxes and to get an insurance cover – Page 36Sustaining The DriveLife insurance companies are likely to witness sustainable growth in the years to come in spite of the ongoing covid-19 crisis – Page 40

Technical Outlook – Page 43Mutual Fund Blackboard – Page 44

A League ApartMasterclass With Super-Investors is a must-read for seasoned and aspiring investors – Page 49

Important Jargon – Page 53

Editor-in-Chief & Publisher: Rakesh BhandariEditor: Tushita NigamSenior Sub-Editor: Kiran V Uchil

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Research Team: Sunil Jain, Vikas Salunkhe, Swati Hotkar Shewale, Nirav Chheda, Amit Bhuptani, Ritu Poddar, Aniket Jadhav, Swapnil Ufale

Volume 13 Issue: 06, 16th - 30th Jun ’21

Beyond Thinking

Beyond Basics

Beyond Learning

Beyond Numbers

Beyond Buzz

CONTENTS

BATTLING THE WAVESOF UNCERTAINTY

The Indian economy has taken a huge hit from the coronavirus pandemic. The beginning of calendar year 2021 saw a tepid recovery in the economy. But this was cut short due to the second wave of covid-19, which took the nation by surprise and upended lives. From where the economy stands today, reviving to pre-covid-19 levels appears far-fetched. However, we will have to wait and watch how all this turns out with covid-19 cases dropping and a large number of people getting vaccinated. In our cover story of this issue, we have shared a round-up of the economic scenario and its future prospects.

You will also find a variety of other interesting articles in this issue. These include the consultation paper by the Reserve Bank of India (RBI) on ways to regulate the microfinance industry in India, cryptocurrencies and their future in the country as well as RBI’s keenness to launch its own digital rupee, the current state of industries like plastic pipes, road construction and personal loans and their respective future outlook.

The coronavirus pandemic has pushed companies – big and small, new and old - beyond their comfort zones by forcing them to tap newer segments. An article in this issue dwells on how businesses are pivoting and offering products and services to stay afloat. As part of their Corporate Social Responsibility (CSR), many companies are providing monetary assistance to survivors of deceased employees and working employees in other forms such as paid leaves, insurance, etc to overcome the effects of coronavirus.

The Beyond Basics section carries two articles. While one is on the famed insurance-cum-investment product Unit-Linked Insurance Plans (ULIPs), the other article is on the life insurance industry and the opportunities that lay in front of companies from this space.

Understand mutual fund schemes better by referring to Mutual Fund Blackboard in the Beyond Numbers section that provides you with a round-up of the top-performing schemes in various categories. Investors and traders can read the Technical Outlook in this section for insights and prevailing trends in the stock marketS.

Beyond Market 16th - 30th Jun ’21 It’s simpli�ed...

Disclaimer It is safe to assume that my clients and I may have an investment interest in the stocks/sectors discussed. Investors are required to take an independent decision before investing. Investment in equity is subject to market risk. Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing.

The US Federal Reserve has announced that it might start raising interest rates by late 2023, earlier than expected.

Federal Reserve Chairman Jerome Powell said he was cautious about high inflation and maintained that this was transitory.

The deadly surge of the coronavirus infection that ripped through India, claiming scores of lives, has abated and new cases have declined, helping state governments to announce a gradual withdrawal of lockdowns that were announced earlier to prevent the spread of the virus.

Monsoon rains have been good thus far, and is hoped to continue to be normal throughout the season.

In the coming fortnight, Nifty Futures has support at the 15,820 and 15,740 levels. The expected target on the upper side is around 16,450 and 17,000 levels. Among sectors, metal stocks look good and can be explored.

In the coming days, market participants are advised to look at corporate results of India Inc for Q1FY22. However, it is important to know that management commentary is the key to understanding demand revival scenario post the withdrawal of the nation-wide lockdowns. They must also closely track US corporate results along with the coronavirus situation globally as well as in IndiA.

Among sectors,metal stocks look goodand can be explored.

Nifty: 15,814.70Sensex: 52,735.59

(As on 28th June ’21)

5

DB CORNER

Beyond Market 16th - 30th Jun ’21 It’s simpli�ed...

BEYOND THINKING

PLOUGHINGON

The second wave of the pandemic has stifled economic recovery

in India and continues to be a cause of concern



mentioned that though the May ’21 collection was the eighth consecutive month of collection breaching the `1 lakh crore mark, it was still the lowest since September last year.

Generally speaking, it can be said that May was not such a good month for the economy as indicators such as manufacturing and services Purchas-ing Managers Index as well as toll collections plunged as compared to the previous two months of March and April.

Another interesting point is that despite the May collection reflecting a month-on-month fall, its GST number is still 65% higher than that of May ’20 when the country was in the midst of a severe lockdown.

The Finance Ministry said that the May GST figure included those collections from domestic transac-tions till 4th June since tax payers were given various relief measures in the form of waivers/reduction in interest on delayed filing of returns for 15 days for the return-filing month of May in the wake of the second wave of Covid-19.

Despite the not-so-rosy economy, it is still worth mentioning that the collection is healthy and above `1 lakh crore for the eighth consecutive month, which should be encouraging indeed for the government.

The gross GST revenue for May stood at `17,592 crore in central GST while the state GST figure stood at `22,653 crore. Integrated GST stood at `53,199 crore, which included `26,002 crore collected on import of goods.

The revenue from import of goods was 56% higher while the revenue from domestic transactions was 69% higher as compared to the same in the year-on-year (y-o-y) period, the

underdeveloped - were all adversely hit. This scenario was not limited to India alone.

Just when things indicated a somewhat better turn for the country’s economy in end-2019, the coronavirus struck and with this ‘shock,’ the country’s economy took a nose dive from which it is yet to recover. It is no consolation that many other countries in the world are also sailing in the same boat.

The first lockdown and subsequent months in the March to October ’20 period were severe but the second lockdown was not as much and was characterised by several local lockdowns instead, which may not hurt the country’s economy very severely.

The government, economists and industry, are confident that the after-effects of this (second) lockdown will not be as severe and with good governance and policy implementation by the government, the country, though it will undoubt-edly be scarred, will be able to tide over the crisis rapidly.

India, however, has to forget the earlier highly rosy GDP projections of around 8% for at least another five years. It may not be until the latter part of this decade that India’s economy will perk up to that level.

One clear indication that the country’s economy has taken a hit comes from the reduced Goods and Services (GST) collections last month (May). It stood at `1.02 lakh crore, which was a sharp 27.6% slide from the record `1.41 lakh crore collected in the previous month.

It must be highlighted here that the April collection was the highest-ever collection since the launch of the GST regime. It must also be

The Indian economy was touted as a model one for emerging economies till about three to four years ago with its GDP projected to expand at about 8% per annum, going forward. And for a time, everything seemed to be going according to script. Then things went wrong and some moves by the central government, though good-intentioned, hit economic growth adversely.

This is not to complain or criticise the Narendra Modi-led government at the Centre. The demonetisation initiative of November ’16 and the introduction of the Goods and Services Tax (GST) regime in July ’17 were, as mentioned before, well-intentioned and while there were some problems in their aftermath, they have all dissipated now. But these two government initiatives were ‘shocks’ that slowed down India’s economic growth.

Despite this, it was felt that once the aftershocks evaporated, the country’s economy would stabilise and return to normalcy with the growth rate slowly but steadily increasing.

Indeed, it looked like this would be the case when Prime Minister Narendra Modi won his second term in office in May ’19. Everything seemed to go well in the first six months of his second inning (till end-2019) when the coronavirus struck the world bringing in its wake a heavy death toll and untold misery to people everywhere. Countries - whether developed, emerging or


Finance Ministry said.

It should be mentioned here that the May figure could move northward as businesses having a turnover of less than `5 crore have until the first week of July to file their returns.

This brings us to the GDP projections for this fiscal (FY22). There have been a series of downgrades by reputed institutions such as the World Bank and domestic organisations such as Crisil.

India’s apex bank, the Reserve Bank of India (RBI) too has reduced the country’s GDP projection.

The World Bank has trimmed the country’s GDP figure for FY22 to 8.3% from 11.2%, while Crisil has reduced its projection from its earlier 11% to 9.5%. The Reserve Bank has pegged it at 9.5%. The World Bank has put India’s GDP growth for the next fiscal (FY23) at 7.5%.

What needs highlighting here is that India’s GDP projection for FY22 is no longer in double digits as it was till just a couple of months ago; now all institutions have pegged India’s GDP projection in single digits.

The main reason for this is the hit the country’s economy has taken due to the second covid-19 wave. Its after-effects will linger for some time and this will slow economic growth.

According to the World Bank, the covid-19 pandemic would affect both consumption and investment in the country. It also pointed to the low levels of consumer confidence and heightened uncertainty on job and income prospects because of the pandemic’s effect on the economy.

Private consumption and investment are two big economy growth-fuellers and both have suffered during this

second wave of the pandemic. While the lockdowns have not been as severe as last year, the localized lockdowns have still affected mobility in many places across the country. With mobility likely to remain affected till at least August, forward economic movement will be limited in the near future.

An alarming phenomenon during the second wave is that the pandemic has struck several regions in rural areas as well. This too could adversely impact economic growth. The Reserve Bank said that indicators of rural demand such as tractor and two-wheeler sales have registered a sequential fall in April this year. A high infection rate in rural areas poses a serious downside risk to economic growth.

The government has succeeded in controlling the second wave of covid-19, which peaked on 6th May with 4.14-lakh cases - now in end-June it has slid down sharply.

However, the medical fraternity, which has done a remarkable job in the last one-and-a-half years of the pandemic, has warned of a possible third wave, which would also be severe and could come in the next three to four months.

If this comes to pass, then the Indian economy will be irretrievably affected with the possibility of a negative growth for the second successive fiscal year. The slow pace of vaccinations thus far is another cause of worry. In FY21, the country’s economy shrank -7.3%.

One way to conquer the pandemic and lessen its malign effects is to get the vaccination process on overdrive. This will go a long way in reducing crippling lockdowns and help in rapid economic recovery. The government has realized this and has

stepped up the pace of vaccinations pan-India.

On 21st June, India recorded the highest-ever single day vaccination of 86.16 lakh shots. However, given India’s huge population of 130 crore, only 3.6% of the population has been fully vaccinated. This needs to be upped significantly if the pandemic has to be conquered quickly.

However, it is not all gloomy news. The south-west monsoon is expected to be normal with rainfall of 101% of the long period average (LPA) predicted. This augurs well for the agriculture sector, which contributes significantly to the country’s GDP.

A good monsoon translates into good foodgrains output, which is a welcome sign during this period of suffering as not only will it amelio-rate any problems of food shortage but it will also help keep prices of foodgrains and pulses under control, thereby avoiding food inflation. The global economy has started showing signs of recovery and this should help India’s exports, the RBI said, adding that the domestic monetary and financial conditions support economic activity.

This fiscal will be a difficult one but if the government is able to sustain its vaccination drive, which is gathering pace, then the cause of economic recovery will be greatly served. A lot, therefore, hinges on India’s vaccination drive and as at end-June the government seems to be getting its act together.

This is a good augury for the period ahead this fiscal but heed the warning - it will still be a difficult year. Proper policy formulation and implementation will alone ensure that India gets out of this pandem-ic-induced torpor quicklY.

BEYOND THINKING

The Reserve Bank of India (RBI) recently came out with a consultation paper with the aim to review the regulation of microfinance lending in the country. The proposed framework

UNEQUALNO MORE

RBI’s draft norms on MFIs focus on deregulation and aims to provide a level-playing

field to all players in the micro-lending space

aims to make regulation applicable to all players in the micro-lending space and tries to address issues of multiple-lending, over-indebtedness and pricing of loan in the segment. In India, microfinance lending - providing small loans and other financial services to poor and low-income households - is undertaken by a host of RBI-regulated entities. This includes, scheduled commercial banks (SCBs), cooperative banks, non-banking financial companies (NBFCs), and

microfinance institutions (MFIs) registered as NBFCs.

As on September last year, there were some 197 lenders in the space with loan amount outstanding of `2.27 trillion. These lenders were present in 628 districts across 37 states and union territories. But there is a high concentration of such lenders in states like Tamil Nadu, Bihar, West Bengal, Karnataka and Maharashtra.

Interestingly even as the sector



than two NBFC-MFIs can lend to a particular borrower. It also withdraws all pricing-related instructions applicable to NBFC-MFIs.

Here are a few other important changes:

Definition

The RBI has proposed a common definition of microfinance loans for all regulated entities. Collateral-free loans repayable in instalments for households with annual incomes of `1.25 lakh for rural households and `2 lakh for urban households will be considered as microfinance loans.

Indebtedness

The RBI has proposed that the overall debt repayment of the borrower should not exceed 50% of household income. This will keep indebtedness in check. The RBI wants the Board of the lending entity to decide the criterion to determine household income.

Interest Rates

Currently, the RBI limits the lending spread at lower of around 10% of cost of funds or 2.75 times the average base rate for five largest commercial banks. Now, RBI proposes the removal of the need to put a ceiling on lending rates. However, lenders would need to have board-approved policies and enhanced disclosures as far as pricing of loans are concerned. This is expected to create a level-playing field for all players.

Miscellaneous

In a bid to encourage transparency, the RBI has proposed the lending entity to display minimum, maximum and average interest rates

Due to this cap, lending rates of other microfinance lenders also hover at around the ceiling rate, despite having comparatively lower cost of funds. This keeps interest rates artificially higher even in low interest rate scenarios in the system.

Additionally, current regulations do not permit more than two NBFC-MFIs to lend to the same borrower. But small borrowers keep getting multiple loans from several other non-NBFC-MFI lenders, thus contributing to their over-indebtedness, posing the risk of defaults and coercive recovery practices.

Now, the RBI wants to correct this. It proposes a single uniform set of regulations to govern microfinance lending irrespective of the entity that provides the loan. However, the RBI proposes to continue with exemptions to MFIs that are registered as non-profit organizations.

The last revision in change in the regulatory framework for MFIs happened in 2011 in response to Andhra Pradesh (AP) microfinance crisis in 2010 where irrational exuberance of some MFIs led to higher indebtedness and unethical recovery practices. The State government had to intervene and also forced the RBI to come out with revised norms.

The RBI created a separate category of NBFC-MFI and put margin cap and interest rate ceiling on individual loans.

PROPOSED CHANGES

At the outset, the proposed regulatory framework for MFIs withdraws a few guidelines presently applicable to only NBFC-MFIs. It withdraws provision where not more

witnessed phenomenal growth over the past two decades in terms of increase in both the number of institutions providing microfinance as also the quantum of credit, the delinquency is quite controlled.

Delinquency in terms of default past 90 days from due date stood at 0.63% of all assets. This is way lower than the gross non-performing assets (NPAs) of commercial banks, which hover around high single digits.

While 70% of these microfinance loans were accounted for by SCBs, cooperative banks, NBFCs, small finance banks and non-profit MFIs, only 30% loans were forwarded by MFIs registered as NBFCs.

All this while, RBI’s regulation towards MFI’s hovered around NBFC-MFIs. NBFC-MFIs, with lower share as compared to other entities in the space, have a different and stricter regulatory framework. This had distorted the space somewhat.

On 5th February this year, the RBI had signalled the need for a framework that is uniformly applicable to all regulated lenders in the microfinance space.

Before we proceed with the proposed changes in the regulatory framework, it would be appropriate to understand the need for change in regulations in more detail.

NBFC-MFIs VERSUS OTHERS

MFI-NBFCs are in a disadvantageous position as compared to other microfinance lenders because of different set of regulations. For instance, there is a regulatory ceiling on interest rate, which is applicable only to NBFC-MFIs.

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charged on microfinance loans. It is proposed that there should be no pre-payment penalty and periodicity of repayment would be as per borrowers’ requirements.

FINALLY – REGULATORY ARBITRAGE REMOVED

Different regulations for entities within the same sector did not allow competition to play out in the microfinance industry. With no

level-playing field, customer protection got compromised. Now, the RBI has proposed to remove this regulatory arbitrage.

Level-playing field will drag lending interest rates downwards in the microfinance sector while empowering the borrowers as it brings transparency of loan pricing.

With the proposed changes, the RBI seems to be signalling that this

industry has evolved over the years and free market forces are best in achieving financial inclusion.

In the process, the RBI has brought upon positive changes for NBFC- MFIs and at the same time wants to ensure less disruption for non- NBFC-MFIs.

The RBI is soliciting responses from stakeholders before 31st July on the consultation papeR.

BEYOND THINKING

Recently rapper Raftaar became the first Indian artist to officially accept

MASTERSOF THE COIN

MASTERSOF THE COIN

Amid a global boom, cryptocurrencies remain a grey area in India, but that haze is lifting

cryptocurrency as performance fee, joining the galaxy of artists such as 50 Cent, Mariah Carey, G-Eazy, Sia and Fall Out Boy, who are accepting virtual currencies.

Raftaar is among the scores of Indians boarding a roller-coaster, which has taken investors on a dizzy 10,000% jump and also subjected them to a trillion-dollar crash in a matter of months.

In one of the biggest jumps in asset prices, the value of bitcoin has soared from $9,500 in May ‘20 to $40,000 in January and reached $65,000 in May ‘21, before staging a vertical descent.

Countries are joining the party too. El Salvador, a small Latin American nation without a currency of its own, became the first country to officially adopt bitcoin as a legal tender. “It



prospects.

There is no legislation or regulatory code yet to govern the crypto ecosystem, leading to confusion among customers, businesses and financial institutions providing banking services.

In 2018, the Reserve Bank of India barred financial institutions from supporting crypto transactions, which the Supreme Court overturned in 2020. The government has circulated a draft bill outlawing all cryptocurrency activities, which has been under discussion since 2019.

In the last few months, several leading banks and payment gateways have pulled the plug on cryptocurrency transactions, citing unclear regulations. Some banks cautioned customers and payment intermediaries citing the RBI’s 2018 circular, which was struck down by the top court.

Last month, the RBI asked banks not to cite its 2018 circular and clarified that banks can do their own KYC for crypto clients. With this, banks are now reassessing the situation, but several banks currently lack the technical expertise to make a supervisory assessment on these transactions.

THE RBI POSITION

The Reserve Bank is against private cryptocurrency and has made its reservations known to the government. It classifies such digital assets as private cryptocurrency unlike Japan, which treats Bitcoin as an asset class.

The RBI stance, experts say, puts the revolutionary blockchain technology in a spot, and may lead to India losing out on a trillion-dollar opportunity.

nation’s authorities.

ZebPay, a platform with about 4 million customers, expects to churn $2 billion worth of trades per month, which is still less than one-fifth of trades handled by top US-based exchange Coinbase Global Inc.

While there is no exact number of cryptocurrency firms operating in India, it is estimated that at least 50 are actively onboarding customers and collectively processing transactions worth over `15,000 crore annually.

INNOVATION

Investors are now looking for innovative blockchain and crypto projects. Tech billionaire Mark Cuban has invested an undisclosed amount in Polygon, a Mumbai-based cryptocurrency platform that aims to provide faster and cheaper transactions on the Ethereum blockchain. Polygon’s native token Matic has crossed a market cap of over $10 billion and is among the top 20 crypto coins globally.

WazirX has launched a marketplace for Non Fungible Tokens (NFTs), which will let users own unique digital works of art and let creators tap into an economy that has recently exploded.

The platform said to be the first in South Asia, will allow space 3D artists, digital artists, muralist photographers, canvas artists, street artists, and others to transact in art, music, videos, collectibles, and in-game articles.

UNDER A CLOUD

Despite the boom, cryptocurrencies are in a grey area in India, with the Reserve Bank hostile towards it and the government unsure about its

will bring financial inclusion, investment, tourism, innovation, and economic development for our country,” it’s President Nayib Bukele said. Following El Salvador, experts reckon, four to five countries will adopt cryptocurrencies as legal tender this year.

Amid the enthusiasm, worried governments and central banks, which fear a hit to financial stability, continue to treat cryptos as a hot potato. Last month China ordered a crackdown that saw trillion dollars of crypto value vanish overnight. Meantime, the market also keeps swinging to tweets of Tesla founder Elon Musk, a new pied piper on the crypto street, who has lifted the fortunes of meme crypto Dogecoin.

BOOMING IN INDIA

In India too, the interest in cryptocurrency has exploded over the last 15 months in line with the bull run in bitcoin and other virtual assets globally.

In the past few months, India’s biggest crypto exchange WazirX has seen exponential growth, just like other exchanges including CoinSwitch Kuber, Zebpay and CoinDCX, among others.

In April, WazirX claimed it hit $5.4 billion in transaction volumes, which is a tenfold rise from $500 million in December ’20. Its user base shot up by 50% to 3 million in April, and in May, it saw crypto trades worth over $380 million on its platform on a single day. CoinSwitch Kuber raised $25 million at a $500 million valuation in April ’21.

ZebPay, India’s oldest exchange for trading cryptocurrencies aims to double monthly transactions after an explosion in demand, despite concerns of looming curbs from


While the government is weighing its options on cryptocurrencies, the RBI has started plans on its own digital currency.

RBI Governor Shaktikanta Das has said a digital rupee remains a work in progress, but “as the underlying technology is still developing, we are exploring ways to create a clear, safer and legally certain settlement finality, which is most crucial for a secure and efficient payment system.”

The cryptocurrency industry in India has urged the government to regulate, instead of banning it, as any such restrictions can prove counterproductive in the long run.

GOVERNMENT PLANS

Union Finance Minister Nirmala Sitharaman has said that India is not shutting off all options when it comes to cryptocurrency or blockchain and fintech.

“My view on this is that of course the Supreme Court had commented on cryptocurrency and while the Reserve Bank may take a call on official cryptocurrency but from our side, we are very clear that we are not shutting off all options,” she has said.

A Cabinet note is being prepared on the issue, which will give full details on the formulation of cryptocurrency in India.

The government is mulling regulating cryptos as digital assets and not as currency, junking the recommendations of its expert panel to ban them. A fresh committee is likely to be formed to explore the use of blockchain for technological enhancement.

The recommendation to ban cryptos was made by a panel headed by former Finance Secretary Subhash Garg in 2019 and has become outdated given the advance, use and popularity of cryptos in the last couple of years.

The committee may also be asked to study ways to operationalize the RBI’s proposed digital rupee. These discussions are at an early stage and no formal resolution has been passed yet.

WHAT CRYPTOCURRENCY ENTHUSIASTS SAY

Experts say banning crypto assets would mean that India will be left behind in the global technology race and lose out on this opportunity for long-term wealth creation.

They fear that brain drain may happen from India in case the government puts a blanket ban on crypto and the country will lose out on high revenue generated by crypto in the form of taxation and other payments.

Along with wealth erosion, it will dampen the entrepreneurial spirit as most crypto firm founders are young with a vision.

In terms of portfolio diversification, like gold, experts say, bitcoin can evolve into a major asset class with properties of a good hedge.

Bitcoin has been one of the best performing asset classes over the past few years with a return of 10,869% since 2015 against 102% of S&P, 184% of Nasdaq and 59% of gold.

Though, a strong correlation between bitcoin prices and Google searches indicates that it is perhaps more of a fad.

GROWTH STUNTED

For two years, when the RBI ban was in place, the broader industry has not been exposed to what is going on with public blockchains - Ethereum, decentralized applications (DAaps), and decentralized finance (DeFi).

Experts say funding and talent have been hit. Due to a gap in these two areas, innovation has been stunted.

Meanwhile, the funds that have gone into the Indian blockchain start-ups are less than 0.2% of the amount the sector raised globally. The current ambiguity makes it difficult for entrepreneurs and investors to acquire much economic benefit.

None of the Big Four auditing firms in India currently offer auditing services for cryptocurrency.

Experts say India was a late adopter in all the previous phases of the digital revolution, including semiconductors, internet, smartphones, 4G and 5G. They predict the next phase will be led by technologies like blockchain and India should channelize resources towards them.

FOREIGN FIRMS

US-based Kraken, Hong Kong-based Bitfinex and rival KuCoin are actively scouting the Indian market. One of the companies had begun due diligence on an Indian firm while the other two were weighing options that include setting up a subsidiary or buying an Indian firm.

All three exchanges are ranked in the world’s top ten.

In 2019, Binance acquired WazirX, which has allowed users to buy and sell crypto with rupees on the Binance Fiat Gateway. US-based

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exchange, Coinbase, has announced plans for a back-office in India.

THE CAUTION

Experts say regulation is needed to ensure that cryptocurrencies are not misused, protect unsuspecting investors from excessive market volatility and possible scams, but it needs to be clear, transparent,

coherent and have a vision.

Former Infosys CEO Nandan Nilekani has said individuals and businesses tapping the $1.5 trillion market would allow the crypto industry to generate wealth and add value to India’s economy.

“Just like you have some of your assets in gold or real estate, you can

have some of your assets in crypto… I think there’s a role for crypto as a stored value but certainly not in a transactional sense,” Nilekani said. But investors like the rapper Raftaar need to speed down and exercise caution. The value of bitcoin, which crossed $65,000 billion just last month has more than halved to $26,000 noW.

BEYOND THINKING

TAPPING INTOTHE FUTURE

The plastic pipe sector is set to grow manifold owing to Jal Jeevan Mission and

consolidation of the industry



of `26,900 crore. This amount is similar to the share of states and other externally-aided projects for water connections.

Analysts estimate that the total investment can easily be above `1 lakh crore per year till FY24. This investment has enthused analysts and they foresee companies connected to the plastic pipe industry benefitting immensely from this.

According to various analysts’ estimates, incremental demand amounting to `8,600 crore for the plastic pipe industry will be generat-ed due to the government’s invest-ments in the Jal Jeevan Mission.

This demand is actually 25% of the existing industry size, which provides strong revenue opportuni-ties for companies based in the northern, eastern and north-east region due to the JJM programme.

As per government estimates, the number of households that do not have tap water connections are around 11.8 crore. According to analysts’ estimates, the biggest opportunity lies in the East and North-East regions (33%) and next will be North (30%). If one combines North, North-East and Central regions, then, it will be 74%.

Given these facts, analysts believe that this is an opportune time for plastic pipe players to open a plant in eastern India. Accordingly, Supreme Industries has announced the setting up of a second plant while Astral will open its first plant in the next one year in eastern India with greenfield capacity. These investments have come at a time when India’s plastic pipe industry is going through favourable times. Factors which play a crucial role in enhancing revenues are falling

the next five years.

According to the government’s web site dedicated to Jal Jeevan Mission, close to 3.85 crore of the remaining 83% households have been connect-ed with piped water connections. What this means is that officially 7.08 crore rural households have tap connection.

Experts say that if this pace is maintained, then the government could achieve its target of connecting all 19 crore households with a functional tap by 2024. Finance Minister Nirmala Sithara-man in Union Budget 2021-22 announced the launch of Jal Jeevan Mission (urban) with prominent goals. These were: 1. To provide tap water connections to 2.86 crore urban households in 4,378 urban local bodies 2. The ambitious mission will be implemented over the next five years with an outlay of `2,87,000 crore. This means an additional allocation of `57,400 crore per annum ADVANTAGES Recently, the central government released `6,000 crore to 15 states for the implementation of the JJM in FY22 for tap water connections in rural areas. This is the first tranche of the four to be released this financial year. Quite favourably, states in India will have to make a similar contribu-tion from their side.

According to government figures, the budgetary allocation for JJM has considerably improved to `50,000 crore in FY22 from `11,500 crore in FY21. In addition to this, under the 15th Finance Commission grants, the rural local body for water and sanitation will have funds to the tune

India’s plastic pipe industry is poised for growth on the strength of the implementation and increased allocation to Jal Jeevan Mission - a government programme that aims to provide safe and adequate drinking water through individual household tap connections by 2024 to all households in rural India.

Let us understand how the Jal Jeevan Mission is providing a strong source of revenue to India’s plastic pipe industry. JAL JEEVAN MISSION The BJP government restructured and subsumed National Rural Drinking Water Programme (NRDWP) into Jal Jeevan Mission (JJM) to provide functional house-hold tap connection to every rural household, that is, Har Ghar Nal Se Jal by 2024.

This mission largely covers the creation of in-village supply infrastructure for tap water connec-tion, reliable drinking water source development, retrofitting of complete and ongoing piped water supply schemes. On 25th Dec ’19, Prime Minister Narendra Modi launched the Jal Jeevan Mission programme. In December ’19, about 3.23 crore rural households had tap connections. This accounted for close to 17% of rural population. This means that the government had a daunting task of connecting the remaining 83.14 % in


BEYOND WORDSRandom Walk Theory

Random walk theory was first used by French broker Jules Regnault in a book published in 1863. Later, it was mentioned by French mathematician Louis Bachelier in his PhD dissertation called ‘The Theory of Speculation’ in 1900. However, the terminology was popularized by the book A Random Walk Down Wall Street by Burton Malkiel. This theory states that the changes in stock prices have the same distribution and are independent of each other, and that it follows a random walk. The past movement or trend of a stock price or market cannot be used to predict its future movement.

in place for the industry.

Capacity Addition According to official announce-ments, leading pipe manufacturers are enhancing their capacities. Reports show that Astral is setting up a greenfield pipe manufacturing unit in Odisha with a capacity of 20 KMTPA at an investment of `50 crore.

In addition to this, the company will also be expanding its valve portfolio at its Dholka facility in Gujarat. As per official announcements, the company’s fitting manufacturing capacity is expected to commence production soon at Hosur in Tamil Nadu. Apart from Astral, Prince Pipes’ Telangana plant has commenced production of fittings from January ’21 with an initial fittings capacity of 4,000 tonnes. The company plans to add pipe and fitting capacities depending upon the demand.

Also, Finolex Industries has planned a capital expenditure of `150 crore in FY22 to increase its pipe capacity by another 30,000 tonnes.

Lastly, Supreme Industries will be starting a new piping system plant at Odisha. Besides this, the company plans to start a new plant in southern India. In the present financial year, the company's capacity will increase up to 7 lakh MTPA.

The ‘Organized’ Journey At present, the unorganized segment accounts for 30% to 35% of 10 total plastic pipe demand. This demand largely comes from irrigation and plumbing sectors. But pipes used in these sectors are low in quality. It has been observed that organized players have a large market share in the plastic pipes industry.

With the introduction of Goods and Services Tax (GST) e-way & Bureau of Indian Standards (BIS) implemen-tation, the industry is moving towards formalization. The pace at which the industry is getting formalized is rapid. This works in favour of well-established large- and mid-sized players.

Furthermore, the pandemic has created liquidity challenges for small regional players. Due to this, large- and mid-sized players are likely to gain further market share in the coming months.

Analysts point out that large and branded companies are likely to focus strongly on marketing, increasing distribution network and launching innovative and branded products. This will help large- and mid-sized players gain further market share and increase their revenues. Product Positioning

Strong marketing and branding initiatives have been effective for the

industry. Today, pipes are known by their brands. They are no longer just a commodity. This is one of the key reasons why leading companies such as Astral, Supreme Industries and Ashirvad pipes enjoy premium valuation.

In the past five years ending FY19, India’s plastic pipes and fittings industry grew at a compound annual growth rate of 11%.

Analysts estimate that in the next five years, the industry’s growth will be higher. This is largely because of under-penetration of plastic pipes and increasing tendency to substitute metal pipes by plastic pipes. Branded players will continue to gain incremental market share in the coming quarters given the strength of their balance sheets and present market share.

According to estimates, India’s plastic pipe industry is estimated to be ` 29,000 crore to `35,000 crore. Nearly 60% to 65% of the market share is with organized players. This means that branded players continue to dominate the industry. In the coming quarters, the industry is expected to consolidate. This is largely because of the revenue-de-structive impact of the second wave of the pandemic. Due to this, analysts foresee earnings of well-established plastic pipes players growing in the range of 10% to 25% in the next two to three yearS.

BEYOND THINKING

Nearly 49% of first-time borrowers were less than 30 years old and 71% were based in non-metro locations, according to a report.

A CAUTIONARYTREND

A recent study shows that there has been a rise in young retail borrowers, which is a sign

of worrying times

JOINT STUDY

A joint report by Transunion CIBIL and Google titled “Credit Distributed” noted that in 2020, 49% of first-time borrowers were less than the age of 30 years; 71% of borrowers were situated in non-metro locations, while 24% were women.

The “Credit Distributed” report identifies the significance of small ticket (less than or equal to `25,000) loans, which were characterized

mainly by searches for “phone on loan,” “laptop on EMI,” and “mahila loan `30,000.”

The share of these loan disbursals amongst all personal loans has gone up to 60% in 2020 from 10% in 2017.

The report also states that ticket sizes on loan products such as personal loans, auto loans and consumer durable loans are geography-agnostic.



pandemic in March ’20.

It had touched a ten-year low of 9.1% credit growth in January 2021 on year-on-year comparison. This growth in the personal loan segment was led by growth in home loans and other personal loans.

Disbursal of home loans grew by 9.5% on y-o-y basis in April ’21. Other personal loans’ disbursal grew by a hard-to-ignore pace of 21% in April ’21 on year-on-year comparison.

Also, growth in credit card receivables improved to 17.1% on y-o-y basis in April ’21.

Vehicle loan growth reached a 32-month high of 11.7% in April ’21 as against the corresponding period a year ago. Analysts believe that the personal loan segment is likely to continue its high growth even after the economy bounces back from the second wave of the pandemic.

Services Sector In services sector, credit growth continued to fall. It fell by 1.2% year-on-year in April ’21. Within this segment, growth in credit to Non-Banking Financial Companies (NBFCs) fell by 3.4% y-o-y in April ’21.

However, credit to wholesale and retail segments remained largely unaffected. It grew by 21% y-o-y April ’21.

Industrial Credit Growth

Credit growth in the industrial segment was muted. It grew by 0.4% on a year-on-year (y-o-y) basis in April ’21. In March this year, it fell by 1.9% on a y-o-y basis because of

social media for information. Interestingly, 5% reached out to a Chartered Accountant for help regarding financial documentation.

Most respondents did not have any savings beyond traditional methods like a savings account, cash, fixed deposit, and gold. As many as 40% prefer gold as a mode of investment even though gold does not give any yield; only 12% had some form of equity investments such as in mutual funds or stocks.

It also found that 60% of individuals’ monthly income went towards their families, 20% towards rent, 8% to daily commute and 12% was put aside as savings – leaving very little to invest in retirement or long-term financial instruments.

The report also came across tech-savvy people despite being largely from traditional backgrounds. As many as 80% preferred using net banking for transactions and 66% were comfortable using UPI to send or receive money. Only 7% were seen still using cash or cheques.

CREDIT TRENDS

Credit trends in India’s banking industry give a fair idea about the health of the economy.

Credit growth is tracked mainly in areas of personal loan, services sector, industrial credit growth and agriculture credit.

Personal Loan

The personal loan segment showed pronounced improvement in credit growth. According to the data, the personal loan segment showed a growth of 12.6% year-on-year in April ’21. This is highest growth in the personal loan segment since the first wave of the coronavirus

NIRA SURVEY

Similarly, a survey was conducted by NIRA, a consumer finance company. The survey called ‘Understanding the Financial Challenges of Working India’ found that 28% of personal loans are taken for medical emergencies, whereas 25% are taken to meet family needs such as children’s education, home renovation and wedding expenses.

According to the NIRA survey report, most people earn modest salaries that just about cover their daily expenses and leave no additional resources for unplanned expenses.

Due to this, as high as 77% of individuals have availed of unsecured personal loans to make ends meet.

It further states that 41% of borrowers cited interest rate as the main criteria for choosing a lender, whereas 30% named loan tenures and 20% disbursal time as their main criteria.

In the report, Rohit Sen, CEO and Co-Founder, NIRA, said, “Young working Indians have to shoulder a lot of responsibility. They work hard to make ends meet but struggle to cope when faced with unanticipated or larger-than-usual costs. Since they’re unable to borrow from banks, they turn to local moneylenders who usually charge them more than 100% interest, further exacerbating their financial difficulties.” KEY FINDINGS

As many as 87% of the respondents handled their own finances, including filing tax returns and keeping track of EMIs, 55% relied on family and friends for financial information, and 25% turned to


weak capital expenditure cycle.

It has been observed that credit increased for Micro, Small & Medium Enterprises (MSMEs). It grew to an all-time high of 43.8% on y-o-y basis in April ’21 mainly due to Emergency Credit Line Guarantee Scheme (ECLGS).

Under ECLGS, the government announced a three-month extension of emergency credit facilities worth `3 lakh crore till 30th Sept ’21 from 30th Jun ’21, or till guarantees for an amount of `3 lakh crore is issued under the fourth revision of the scheme dubbed as fourth version of ECLGS to support Covid-hit MSMEs further.

The Ministry of Finance also announced a 100% guarantee cover to loans up to `2 crore to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants with the interest rate capped at 7.5%.

Credit to micro and small industries grew by 3.8% in April ’21 on y-o-y basis. According to the data presented by RBI, in industrial credit, credit for roads - close to 22% of infrastructure credit - recorded healthy growth at 26.2% in April ’21 on y-o-y basis.

Credit in sectors such as metals, engineering, chemicals, telecom and construction declined on y-o-y in April ’21.

Agriculture Credit Due to good monsoon seasons in the past two years, agricultural credit continued to grow in April ’21. It grew by 11.3% y-o-y in April ’21. IN A NUTSHELL

This clearly shows that India’s banking industry is going through an extremely delicate phase. While on the one hand, the second wave of the coronavirus pandemic has reduced

the ability of corporations and individuals to repay, on the other hand, the opening up of the economy has raised hopes of corporations and individuals ability to borrow and spend to a certain extent. Yet, there is an element of uncertainty as to when the lending situation in India’s banking industry will be robust.

Given these facts, it is pretty certain that this trend in credit growth in the personal loan segment is likely to sustain till uncertainty about the pandemic ebbs.

In the coming quarters, if vaccination intensifies and corporations increase capital expenditure, resulting in hiring, the growth in the personal loan segment may remain stable or stagnate.

But presently, there are not many concrete signs which indicate these trends. Hence, the momentum in the personal loan segment may sustain at least in this fiscaL.


Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment .The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067) : INB260939138, INF260939138, INE260939139: Single Registration No.INZ000202536,PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99. NIRMAL BANG COMMODITIES PVT LTD – MCX (Member ID -16590 /NCDEX Member ID -0362 /ICEX Member ID -1165) : Single Registration No. INZ000043630; NCDEX Spot: 10084; Comtrack Participants: CPID -5040; CDSL Commodity Repository Ltd: 12013300 Nirmal Bang Securities Private Limited CIN: U99999MH1997PTC110659; Nirmal Bang Commodities Private Limited CIN: U67120MH1995PTC093213

Regd. O�ce: B-2, 301/302, 3rd Floor, Marathon Innova, O� Ganpatrao Kadam Marg, Lower Parel (W),Mumbai - 400013. Tel: 62738000/01; Fax: 62738010

BEYOND THINKING

The second half of fiscal 2021 was outstanding for most construction

AT ASLUGGISH PACEThe road construction industry is facing a lot of hurdles. But the outlook appears to

be promising, nonetheless companies owing to higher execu-tion, which led to a spurt in earnings.

The first half of the previous financial year was affected by covid-19 and strict lockdown restrictions across the country. The sector, however, picked up signifi-cantly in the second part. A considerable drop in the number of coronavirus infections, relief in lockdown restrictions, and the return

of migrant labourers contributed to increased project execution. Hence, companies picked up construction activity rather swiftly.

Also, the government’s `20 lakh crore economic package, coupled with budget proposals and allocation towards roads, railways, urban infrastructure, along with a huge investment line-up under the National Infrastructure Pipeline



government’s finances are in the doldrums as their revenues shrink while they continue to spend on social infrastructure and share coronavirus-related burden.

The government deficit will only increase in the coming months. And its ability to prioritize projects as well as raise funds for critical projects could impact them further.

The road and highway construction sector depends majorly on govern-ment financing. The current fiscal crunch is likely to make it tougher for central and state governments to fulfill their obligations towards the National Infrastructure Pipeline.

As much as 70% of the total investment sum of `110 trillion was allocated towards roads, railways, and other urban projects. Of this, 50% of the funding was to come from the government itself.

But the coronavirus pandemic has disrupted the revenue flow to central and state governments. States are believed to contribute more towards capital assets.

However, the rising number of infections and lockdown-related restrictions has disproportionately affected the revenue of many a state in the country.

The government’s current focus on arranging for medical supplies is bound to affect road construction in the short run. In the long run, however, the outlook appears to be positive.

In this situation, the sector might face delays in funding and approval of key projects. If this issue compounds, like in 2009 and 2013-14, it could impact working capital, balance sheets and revenue visibility of existing players.

upwards and hurt their working capital.

The second wave of covid-19 has already impacted the economy and construction activity. In the quarter ended June’ 20, India’s economy contracted by 24% on a year-on-year (y-o-y) basis. While this year’s numbers are yet to be published, going by economists’ estimates, the figures are likely to be equally scary.

Construction activities have already dipped in the country as a result of the second wave of covid-19. In April ’21 construction activity on national highway declined by over 60% to 853 km as against 2,189 km in the month of March ’21.

DELAYS IN AWARD AND EXECUTION

The sudden surge in covid-19 cases since the beginning of 2021 delayed land acquisitions and caused procedural hurdles. The govern-ment’s order awarding activity was thus adversely affected.

Furthermore, the delay in execution of projects is forcing construction companies to not take up any new construction orders, slowing down the pace of infrastructure develop-ment in India even more.

In April ’21, the National Highway Authority of India (NHAI) construct-ed only about 853 km of roads at a speed of 28 km/day. There was a 61% decline in constructed highways as compared to March, which saw 2,189 km of road being constructed during this period.

GOVERNMENT FINANCES

The government is already in deficit and the second wave of covid-19 has only compounded its woes further. What’s worse is that the state

(NIP) and other allied sectors within the construction segment lifted overall sentiments, going forward.

This also had a huge and a positive impact on share prices and valuations of most companies from the infrastructure sector, which outper-formed benchmark indices. The BSE Infrastructure Index that had hit a low of 113 in March ’20 now stands at 247, a gain of almost 2.5 times in the last one year or so.

INTERIM PRESSURE

Despite long-term opportunities and government’s investment plans remaining intact, investors will have to again cope with lower earnings and other issues caused by the second wave of covid-19 in the meantime.

The sector was functioning smoothly until now when the country witnessed yet another surge in infections. The current rate of infections in the country is approxi-mately 2.5 times that of last year’s peak.

Strict measures to control the spread of coronavirus have been initiated both at national and state levels. State governments have come up with night curfews and lockdowns to curb the rapid surge in cases. These measures have negatively impacted economic activities, government finances, logistics and the execution of projects, due to the non-availabili-ty of labour.

SECOND WAVE OF COVID-19

During the first wave of coronavirus, there was a complete standstill for about 3 to 4 months. And most companies were not prepared for the same. The projects were closed and companies had to bear a lot of expenses, which pushed prices


BEYOND WORDSAdam Smith

Scottish Economist, Philosopher and Author, Adam Smith is regarded as the father of modern economics. He studied at Glasgow and Oxford. In 1751, he became a professor of logic at Glasgow University. In ‘The Theory of Moral Sentiments,’ Smith advocated the idea of an invisible hand – the tendency of free markets to regulate themselves by way of supply and demand, competition and self-interest. Not only has he laid the foundation of classical free market economic theory but also created the concept of Gross Domestic Product (GDP) and the theory of compensating wage differentials. He is also popular for ‘An Inquiry into the Nature and Causes of the Wealth of Nations.’ It was published in 1776. Smith’s economic theories have outlasted other economists of his time and era. Hence, many economists consider Adam Smith to be the alpha and omega of economics. The current 20 pound note features a portrait of Adam Smith. This note was issued on 13th March 2007.

ISSUES RELATED TO PROJECT IMPLEMENTATION

The imposition of night curfew and lockdowns in various states amid the pandemic has yet again forced migrant labourers working in metro cities to leave for their hometowns.

Unemployment in metro cities, higher cost of living and rapid spread of the virus has left no choice for workers but to relocate.

The unavailability of labour along with lockdown restrictions and delays in getting approvals from government offices is bound to hamper the completion of road and highway construction projects.

In April ’20, NHAI constructed only 210 km of roads due to the spread of covid-19. Although the impact has been limited, total construction activity has dipped 61% on a quarter-on-quarter (q-o-q) basis.

HIGHER COMMODITY PRICES

The other key issue pertains to rising raw material costs. Spiraling steel prices are affecting the ongoing projects and construction activities. The increase in labour, metal, steel, diesel and cement prices has further put heavy pressure on construction companies.

Apart from rising raw material prices, localized lockdowns and restrictions have hampered the supply of raw materials and construction equipment, hurting project execution.

Equipment rentals have gone up both on account of logistics and increas-ing cost of fuel. Thus, higher input price beyond what was expected is hurting construction companies.

THE ROAD AHEAD

Though the construction sector is currently witnessing a setback owing to the rising number of coronavirus cases, the long-term outlook remains good on the back of strong push and investments indicated by the government.

In the short-term, the earnings and balance sheets of many companies, particularly those of marginal players and companies that are highly leveraged are likely to be impacted.

Thus, it is extremely important to stick with robust players who have demonstrated timely project execu-tion in the past, have strong balance sheets and show remarkable revenue visibility in terms of order book in hand.

Unlike last year, the crisis at hand

seems to be relatively better. The sector has been negatively impacted in the short term. And as pandem-ic-related concerns ease, the number of issues plaguing the sector will fade away gradually.

According to ratings agency ICRA’s assessment, most construction companies are focused on non-urban infrastructure projects like roads and railways, and are primarily located in rural or remote areas.

Furthermore, the absence of complete lockdown across the nation also exempted construction activities.

Construction projects in metro cities are likely to be severely affected as these areas are currently facing a greater impact of localized restric-tions and migration of labour to their hometowns.

In fiscal 2021, despite the impact of covid-19, the sector witnessed 37 km/day of construction. Sector data suggests that India constructed 13,327 km of highways in fiscal 2021 as compared to 10,237 km in FY20.

This is a good indication. One can expect increased activities in the sector in the coming times given that there is enough scope for most companies to cover the distancE.

BEYOND THINKING

Valuation is a key parameter for investments. Naturally, an

BETTING ONDEFENSIVESBETTING ONDEFENSIVES

Large foreign investors continue to invest in defensive stocks, especially consumer staples

undervalued stock is bought swiftly and an overvalued stock is sold quickly. This works well when things are simple.

The idea behind what is undervalued or overvalued is not just about earnings’ visibility or market perception. But it could entail many other factors such as the very nature of the business of a company, the attractiveness of a sector and a

favourable trade-off between investing in two geographies, among others.

Recently, the valuation of defensive stocks especially consumer staples has been in focus. Even though strategic and large investors have bought companies that are likely to benefit from the re-opening of economy, their investments in defensives especially consumer



portfolio in highly volatile periods of markets. STRATEGY OF LARGE INVESTORS In recent months, the valuation of defensives, especially consumer companies, has generated a hot debate. There is a school of thought, which says that consumer companies are trading at pretty high valuations as compared to their historical valuations.

Yet, large foreign investors continue to hold consumer stocks even after they are trading at high valuations.

In April this year, large overseas investors who form nearly one-fifth of the total market capitalization of India, increased their exposure to defensive sectors. Foreign Portfolio Investors (FPIs) bought stocks worth $376 million (`2,800 crore) and $201 million (`1,517 crore) of consumer staples and IT stocks, respectively in April ’21, according to a data released by National Securities Depository Limited (NSDL).

Even till 13th June this year, large foreign investors have pumped in net `13,424 crore as cases related to covid-19 declined and the economy re-opened in India. Experts say that FPIs have been stable investors in consumer staples, IT and select financial and energy counters. Analysts point out that defensives have fared well even in the first and second wave of the coronavirus pandemic on broad financials. They say factors such as revenue visibility, brand power and EBITDA margin bands, and returns profile, have helped defensives, especially consumer staples, fare well and met expectations.

Companies from defensive sectors

which we consume daily. A case in the point is milk and other dairy products. 2. Dividend Yields Defensive stocks especially consumer staples have high dividend yields. This is why large foreign investors remain invested in these stocks despite high valuations. According to experts, stocks which offer dividend yields in the range of 4% to 7% are considered as defensives. ITC, HUL, NTPC, and Coal India are some of the key examples of defensive stocks with high dividend yields. 3. Stable Business Models Most defensive stocks have a long operating history. This means that they have seen long cycles of ups and downs in their respective sectors and segments, which provides them an edge over others when it comes to dealing with volatility in demand. And since their products are essential commodities, their business model is relatively more stable than other sectors in the economy. 4. Low Beta Low beta is one of the key reasons as to why defensives are perennially a part of the portfolios of large and strategic investors. Since they have stable and mature business model, these stocks deliver strong financials time and again. A case in the point is the return on equity of consumer staples, which are in the range of 25% to 90%, largely consistent with most market cycles.

This is one of the key reasons why defensive stocks such as Cipla, ACC, Bajaj Auto, Hindustan Unilever, and ITC have low beta. The beta of these stocks is lower than 1, implying that they protect the downside of any

stocks remain high.

What could be the possible reasons for this development? Let us understand what defines a stock as defensive and why large foreign investors may not desert consumer stocks among defensive sectors.

In understanding the very nature of a defensive stock we will be able to know why investments in these sectors do not see much erosion. CHARACTERISTICS It is a well-known fact that defensive stocks shield a portfolio against unforeseen volatilities in markets. Consumer staples, IT, pharmaceuticals, etc with a stable business model and demand for its products come under defensive sectors.

So, what makes a stock defensive? 1. Demand We all need products that we use daily. These are food items and soaps. Can a person do away with these products? Highly unlikely. Hence, companies that manufacture these products such as ITC, Marico, Britannia and Hindustan Unilever have a considerable amount of relevance in terms of investments. Also, these businesses have a long operational history. This is a proof.

Hence, even in times of high volatility, these stocks do not lose much value when compared with other counters in the markets. The demand for these companies is stable.

Experts say that the demand for defensive sectors’ products can be temporarily postponed but they cannot be avoided. This is because these products are part of essentials,


are better prepared than those from non-defensive sectors given the strength of their balance sheets, deep penetration and large distribution network. In the first phase of the lockdown, consumer staples learnt key operational lessons and tweaked their logistics and storage facilities to meet stable demand for their products. This is one of the reasons why most consumer staples companies have been able to maintain a strong production line. Analysts say that consumer staples companies have been able to supply more essential goods in markets in the second wave of the pandemic than in the first wave, boosting their financial performance when seen in the context of the past two years.

In the past two years ending March ’21 quarter, revenues of consumer staples companies such as Nestle,

Britannia, Marico and Colgate have grown in the range of 10% to 25%. This recovery has convinced FPIs to remain invested in defensives, especially consumer staples and IT. Besides, analysts continue to have a stable outlook on the performance of defensive sectors such as consumer staples, IT and pharmaceuticals. In addition to these factors, another important reason as to why large foreign investors continue to remain invested in defensives, especially consumer staples, is because of reasonably good trade-offs they have between US bond yields and investing in consumer staples.

According to experts, there is a definite connection between the US bond yield and high and stable dividend-paying consumer companies in India. They point out that if US bond does not offer

expected returns, large foreign investors maintain their investments in high dividend-paying consumer companies in India.

This can be understood with an example. FMCG major ITC has a healthy dividend yield of over 4%. In comparison with US’s 10-year bond yield, the net gain for large foreign investors is quite handsome when looked from the quantum of investments these investors make in India. This is why large foreign investors do not desert consumer staples and other defensive bets despite their steep valuations.

Experts point out that stable performance and dividend yield will continue to maintain a sustained interest in defensives especially consumer staples in the coming quarters as India’s economy re-opens and vaccination intensifieS.

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BEYOND THINKING

PIVOTAND

GROW

Small businesses are innovating to stay

afloat in the post-pandemic era



consumer.

The study surveyed more than 9,650 people in 19 countries, including over 500 people in India. The respondents support Accenture’s previous findings that many changes in behaviour will likely be long-term.

Covid-19 has led to compressed transformation, with companies simultaneously transforming multiple parts of the enterprise and re-skilling people in what previously would have been longer-term step-by-step programmes.

Many consumer-facing companies have re-platformed their businesses in the cloud, addressed cost pressures, and continued to build resilience and security, putting the infrastructure in place to enable innovation and position them for future success.

Manish Gupta, Managing Director and Lead for Products Practice at Accenture in India said, “To succeed in a post-pandemic economy, companies need to digitally reinvent themselves and strategically invest in technology, people and supply chains. Adoption of digital technolo-gies such as cloud, artificial intelli-gence, advanced analytics, combined with a well-defined purpose, can help companies to not only reach out to consumers in innovative ways but also adapt faster to the evolving market demands.”

Shifts in consumer habits are here to stay. Not only do people think some of their work habits and travel plans have likely permanently changed, many also think their shopping habits have evolved for the long haul.

The latest research supports Accentu-re’s previously released findings that the dramatic rise in e-commerce is likely to remain or accelerate further.

from home is going to become the norm in the coming days, we decided to provide furniture to these people.”

As “Work from Home” holds the new working future, Workshaala decided to come up with a venture that would make your work from home experience more comfortable. Forget the days when you used to sit with your laptop at any nook and cranny of the house, with our ‘Homescape’, you can sit in a workstation and enjoy your work with full efficiency, says the start-up.

Workshaala has introduced office-like workstation customizable option at your home - Homescape. You have to choose from three plans based on your choice. The catch here is that the company will design the space complimenting your home or any place you stay at,” Khandelwal has stated on the company’s website.

Despite the far-reaching effects of the pandemic, many businesses are facing the adversity with fortitude.

According to findings of a new global survey by Accenture, the covid-19 pandemic has changed the way people live, work and socialize, thus accelerating the demand for innovation as retailers and consumer goods and travel companies shift from reacting to the crisis to reinventing their products and services.

After lockdowns and coronavirus-re-lated restrictions were imposed across the country, 98% of respond-ents in India said they made at least one change to their lifestyle that they expect will be permanent.

Working from home, changing travel patterns, and a growing desire to shop locally are challenging indus-tries to fundamentally rethink how they cater to the pandemic-adapted

Indians have been struggling to stay afloat since the coronavirus pandem-ic began a year and a half ago. The lockdowns and restrictions imposed across the country to control the spread of the coronavirus have resulted in huge losses for businesses and enterprises. Also, job losses and salary cuts have resulted in curbs on discretionary spending.

While many businesses have been struggling to survive the onslaught of the pandemic, several others have pivoted by diversifying their portfolios and are continuing their upward trajectory.

The story of Workshaala and a few other entrepreneurs and small businesses is a testimony to how companies are emerging stronger out of the covid-19 crisis.

Bengaluru-based company Work-shaala is a co-working space and was founded by Manoj Khandelwal in 2013. As most people are working from home due to the ongoing pandemic, the company came up with an initiative called ‘Homescape’ to provide furniture to people working from home.

Workshaala is providing office infrastructure like tables, chairs, and desks at home to help improve productivity of individuals. Khandel-wal says, “The ideation of Homes-cape happened when we saw people facing issues while setting up offices at home. This was affecting their productivity enormously. Since work


For instance, the proportion of online purchases for products such as food, home décor, fashion, and luxury goods by previously infrequent e-commerce users - defined as those who used online channels for less than 25% of purchases prior to the outbreak - has increased 667% since the outbreak in India.

BUSINESS ADOPTION

When the first coronavirus case in India surfaced in January ’20, no one knew the extent of the virus’s impact on our lives. The World Health Organisation (WHO) termed covid-19 a ‘real threat’ in March ’20, when the cases were gradually increasing in India. And, at once sleeping products like masks and hand sanitizers started selling like hot cakes — flying off the shelves and off e-commerce portals.

Neeta Goel, Founder of Bioline India, narrates a similar story with ULV Bio Fogger, a product that was developed in 2005. The company has been supplying them to local hospitals for sterilization. However, it wasn’t in demand until coronavirus hit badly, Goel said in a statement.

Covid-19 skyrocketed the demand of this once slow-moving product so much so that the team is working 24x7 to meet the demand, pivoting its business operations.

Based in Indore, Bioline India was founded by Neeta Goel and her late husband Rajeev Goel in 2001 to manufacture and supply affordable medical equipment to masses.

While some are still striving hard to stay afloat in the business, others are pivoting operations to not just survive but also emerge as winners during the pandemic.

Another such story is that of Karan

Bose, Founder of Hula Global, a garment manufacturing company. Bose changed his business to manufacture N95 masks and surgical gowns, among other essential items, during the pandemic.

Hula Global is an apparel-manufac-turing company for wholesale buying. The company used to produce garments for both men and women, and used to supply to retailers across the world.

Karan says that to run the business operations and tide through the hard times, he diversified his business into manufacturing PPE kits, N95 masks and face shields, among others, to meet the rising demand for such products in the country. Hula Global is now clocking an annual turnover of `5 crore, he said.

There are several such stories where small businesses adopted or pivoted their businesses according to the demands meant for the pandemic and managed to stay afloat.

Pravin Dubey’s is one such story. The 60-year-old proprietor who runs a sports and toy shop says, “People are so hesitant to leave their homes and want to do everything online now even if stores like ours are open,” adding, “We had to respond to that.”

Dubey now spends much of his day speaking with customers on WhatsApp, sharing pictures of his stock and initiating online transac-tions through Paytm, PhonePe and GooglePay.

In India, the continuing struggle to contain the world’s second-largest coronavirus outbreak has crushed demand, upended supply chains and transformed consumer habits.

To survive the changed landscape

and uncertainty brought about by virus protocols, many small businesses are innovating or adapting their business models to cope with the same.

“We had to move online even though it is a significant cost for us,” explained Dubey. “Otherwise we would have lost out to sites like Amazon and Flipkart, who already offer deep discounts,” he reasons.

Catering to retail customers, as opposed to organizations, became even more important for Dubey after the government’s coronavirus restrictions shut schools and sports clubs – a move that eradicated 70% of the business’s revenue.

Without large reserves of capital to fall back on, small businesses like his – and across the world – have been the hardest hit by the pandemic-in-duced downturn.

More than a third of small and medium enterprises surveyed in June by the All India Manufacturers’ Organisation said their businesses were beyond rescuing.

Financial health and recovery are important to many Indian livelihoods. Micro and small enterprises employ around 110 million workers and contribute 30% of the country’s Gross Domestic Product (GDP).

Smaller enterprises will have to be more innovative than larger ones and exploit technology to their advantage if they want to survive, industry experts said, adding that the ones that survive this crisis are more likely to be those that have been more successful in the past.

A DIGITAL FUTURE

Surviving the pandemic involved


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rapidly shifting the focus of her company for small business co-own-er Kuntal Malia of StyleNook.Overnight the demand for their personalised office-wear recommen-dation service – aimed at Mumbai’s city workers – collapsed. The pressure of paying rent on office space and the fear of becoming irrelevant can be a powerful motiva-tor.

Soon she decided to add loungewear,

pajamas, and other clothes more suited to pandemic-era lifestyles to their existing supply of shirts and shift dresses.

StyleNook’s sales have now recovered to pre-pandemic levels. And with more Indian consumers getting used to shopping online for groceries during and after the government-imposed lockdowns, Malia says the company’s future is bright. She believes people are likely

to increasingly use the internet for fashion purchases.

Strategies like these could offer untold opportunities for India’s micro, small and medium-sized enterprises (MSMEs) and digital platforms could help them access larger markets and ride out rough times, industry experts said. The businesses that can survive the crisis are likely to emerge stronger in the future, they addeD.

BEYOND THINKING

The madness of the covid-19 pandemic has changed the world as we know it. This includes the way employers are treating their employees. Never before have

WHENCORPORATES CARE

Companies are extending all possible support in cash and kind to their employees impacted

by the coronavirus pandemic

employers shown their humane side towards their workers as they have now during this pandemic.

On the one hand companies have suffered huge losses because of the prolonged lockdowns imposed by state governments to control the pandemic. And on the other hand, companies have lost many of their vital workforce to coronavirus.

In these unusually tough times, Indian companies have shown that the lives of their employees matter

far more than profits.

One of the earliest covid-19-friendly measures introduced by companies is a generous leave policy. Tata Steel, Amazon India, and Google India showed care and generosity towards their employees by introducing a 14-day special sick leave policy for any employee diagnosed with covid-19.

Accenture introduced an additional leave benefit called the ‘Covid-19 Caregiver Leave’ of five days for



vaccination centres.

Reliance Industries Ltd, Amazon India, Cognizant, Tata Consultancy Services, Mahindra & Mahindra, Ashok Leyland, Vedanta Ltd, Prestige Group, Samsung India and Sundaram Clayton, among many others have launched vaccination drives for their employees and their families. In most cases, the shots are free.

In May, IT giant Cognizant initiated a nationwide covid-19 vaccination drive for its 6,50,000 associates, their families and support teams.

The vaccinations were administered at Cognizant’s own facilities in partnership with a network of hospitals including Apollo Hospitals, Columbia ASIA, Fortis and Manipal. Cognizant covered the cost of the vaccines.

Accenture has been organizing vaccination camps for its 2 lakh employees across India. The company is covering the cost of vaccinations for both employees and their families.

KPMG India has tied up with Ekincare to provide vaccination for its employees in more than 150 centres across the country.

Ashok Leyland has vaccinated 75% of its employees in the 45 plus age group in the company and 25% of all its employees across age groups. Mahindra & Mahindra, TVS Motor Company and Sundaram Clayton have vaccinated all of their employees above 45 years of age.

Paytm has vaccinated over 3,000 employees and their families free of cost. The company employs 7,000 people. It has also started a free-of-cost vaccination drive for 8,000 of its frontline field service

With in-person doctor consultations becoming more and more difficult, online health consultations have become the norm. Tata Consultancy Services has a covid-19 help desk and a 24x7 medical hotline to allow employees to reach doctors.

HDFC Bank offers its employees e-consultation with doctors through apps such as Apollo 24/7, MediBuddy and PharmEasy.

The psychological impact of covid-19 has been huge with employees reporting an increase in insomnia, depression, anxiety, panic attacks and phobia, which has led to a drop in productivity.

According to Forrester Research, which studies employee productivity, during the peak of the pandemic, many companies reported a 50% to 60% drop in productivity.

Indian companies have introduced many measures such as therapy, yoga, and mindfulness sessions to help their employees get through these tough times.

Tata Consultancy Services is conducting yoga and meditation sessions for its employees at its campuses.

Outsourcing giant, Mphasis has developed its own wellness app called Reach and has launched a help line with professional counselors for its 30,000 employees.

HDFC Bank provides its employees access to e-consultation with psychologists through healthcare apps.

With the pandemic subsiding a bit, the focus of India Inc is now on vaccinating as many employees as possible either through partnership with private hospitals or government

employees who need time off to care for their family members infected with the virus.

ITC Ltd and Phillips India went one step ahead by providing their employees with unlimited leave to allow them to recover from covid-19. The idea is to allow employees to recover from covid-19, without them having to worry about resuming work.

India’s companies have been quick in recognizing that the country’s health care system is just not equipped to handle a pandemic of this scale.

Testing facilities, hospitals and medical care centres have all been overburdened. Testing for covid-19 is not always an easy process.

Since time is of urgency here, to save lives IT behemoths such as Tata Consultancy Services, HCL Tech, Tech Mahindra and Infosys set up covid-19 test centres at their own offices.

Tech Mahindra, HCL Tech, Cognizant Technology Solutions and Infosys even set up quarantine centres with oxygen facilities at their campuses.

HDFC Bank converted its three training centres in Gurugram, Bhubaneswar and Pune into isolation facilities for its covid-19 infected employees, fully equipped with medical staff.

Amazon India and Capgemini partnered with hotels to convert them into quarantine centres for their employees, to combat the shortage of hospital beds.

Companies have also launched health care helplines to give their employees direct access to medical professionals.


executives.

Amazon India has said it will cover vaccination cost of its employees and its partners including Amazon drivers, trucking partners, and their dependents.

Flipkart, which has 10,000 corporate staff and 1,00,000 supply chain executives, has started vaccinating frontline employees through partner hospitals across Bengaluru, National Capital Region, Mumbai, Kolkata, Hyderabad, and Chennai.

Ola has completed vaccinating 50% of its employees, above the age of 45. Zomato has an ongoing free vaccination drive for 1,50,000 of its frontline staff and employees.

While vaccination drives to save lives are on, the more distressing aspect of this tragedy is the loss of lives. Companies have lost so many of their precious employees to covid-19, leaving the families of these employees, without an income.

In these uncertain times, employers have shown their humane side by introducing covid-19 support policies for families of employees claimed by the virus.

Glassware company Borosil was one of the first to announce that it will continue to pay two years worth of salary to the families of employees lost to coronavirus.

The company has also taken on the responsibility of paying for the education of children of its deceased employees right up to the university level.

Borosil’s announcement, which was appreciated by many on social media, was followed by similar announcements by other large companies, who have vowed to take

care of the families of their deceased employees.

India’s largest company Reliance Industries Ltd has said that it will provide salaries for five years to the families of its deceased employees.

The company, which employs over 2 lakh people has said that it would pay for the tuition fees, hostel accommodation and books of all the children of the deceased employees, up to graduation.

Tata Steel has promised to pay salaries to families of its deceased employees till the retirement age of 60 years. Families will receive the last compensation the employee was drawing before their demise.

The company will also continue to offer medical benefits, housing facilities and take care of the educational expenses of children of its deceased employees till their graduation.

Bajaj Auto has said that it will pay two years’ salary with a maximum limit of `2 lakh per month to the family of employees lost to covid-19.

The company has also promised to take care of the educational expenses of children of deceased employees by offering them an annual educational assistance package ranging from `1 lakh to `5 lakh.

Financial technology giant Paytm has said that it will continue to pay salaries to the families of its deceased employees throughout the current financial year.

Zomato announced that it would pay salaries to the families of the deceased employees for two years. Edtech major, Unacademy, has started a $1 million Covid internal fund for employee welfare.

Hotel group OYO has announced that it will provide eight months’ worth of salary to families of deceased employees and cover education cost of their children.

L’Oréal India has introduced a one-time Covid-19 insurance for its employees, distributors and sales representatives, who test positive for the virus. In the event of death of an employee from covid-19 or other causes, the company is offering 3 years’ worth of salary as insurance cover.

While companies laid off many employees during the first wave of the pandemic, in the second wave companies have shown that they care by standing by their employees.

Maruti Suzuki has retained all its employees even though there is an extended production shutdown. The company has been providing medicines to its employees and has initiated a vaccination drive for its employees and their dependents.

Hopefully, the pandemic will subside soon. But how employers treated their employees during these tough times will be remembered for years to come. The attitude of employers towards their employees will have a long-term impact on employee behaviour including their productivity and loyalty.

Financial stability, job security, health - both physical and mental - are the biggest concerns for employees right now and any employer who shows that they care will have earned the love and trust of their employees.

Indian companies be it large conglomerates or start-ups have led their companies with empathy and compassion, demonstrating that they are worthy of our respecT.


10:5510:55

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BEYOND BASICS

AMULTI-FACETED

PRODUCTInvestors can consider ULIPs to create wealth as well as to save taxes and to get an

insurance cover



funds that the nominee will receive on the death of the policyholder includes the sum of the amount assured and the fund value.

CHARACTERISTICS OF ULIPs

Long-term Investment

ULIP is a long-term investment product, which comes with a lock-in period of 5 years. The objective should be to hold the product through the life of the product rather than exit at the end of the lock-in period as it has to serve a life goal.

Not only will you lose out on the life cover by exiting early, your returns will also be affected as expenses tend to be front-loaded, especially premium allocation charges, mortality charges, etc.

Switching

ULIPs provide pre-determined multiple fund options based on the investor’s risk appetite for the portion of the premium that goes into wealth creation. The asset classes that ULIPs invest in include equity and debt.

Investors can select the appropriate option based on the risk appetite. The switch option in ULIPs is a convenient way for investors to protect their investment from extreme market volatility and maximize returns by balancing the investment portfolio between debt and equity.

For example, if the policy is closer to maturity and the policyholder is approaching a milestone such as his/her child’s education or marriage, it may be prudent to switch the investment more towards debt in order to protect his/her returns.

Switching does not have any tax

WHAT IS ULIP

ULIP is an insurance-cum- investment product offered by insurance companies and is bundled with tax benefits for the purpose of saving taxes.

The insurance element can be compared with a term insurance policy, while the investment element competes with mutual funds in general, and with equity-linked savings schemes in particular, due to the tax benefits.

Thus, it is a product that targets investment goals along with protection so as to ensure that investors’ life goals are achieved whether policyholders survive the tenure or not.

The benefit of life insurance is usually capped at 10x first year’s premium. The investment is market-linked, which provides investors with the opportunity to create wealth based on their risk appetite.

The annual investment made in ULIP is termed as ‘premium’ and it is bifurcated into three elements – life cover, expenses and investments, which enable wealth creation.

TYPES OF ULIPs

ULIPs can be classified on the basis of mortality benefits, investments and fund alternatives.

1. Type I ULIP Under this plan, on the death of the policyholder, the insurance company will either return the fund value or the sum guaranteed as death compensation to the nominee, whichever is higher.

2. Type II ULIP In this type of policy, the quantum of

In the world of investing, finding the right product that suits an individual’s investment goals is crucial for that person’s financial success.

Of the many financial products, investors often seek out ULIPs or unit-linked insurance products for the purpose of wealth creation, saving taxes and to meet insurance needs.

Nonetheless, ULIPs are controversial mainly due to their chequered past involving high costs; but they are now being regulated by the Insurance Regulatory and Development Authority of India (IRDAI).

Also, financial pundits do not advocate mixing investment needs with insurance, the basic premise on which ULIPs have been created.

The rationale behind this is that the cost structure is complex, which tends to impact overall returns on this product. Distributors and agents promote ULIPs over mutual funds because of the in-built life insurance element.

But at the outset, investors need to remember that the life cover does not come free of cost. There is a mortality charge that is deducted from the premium paid by the policyholder.

Let us delve deeper into ULIPs to assess and understand whether this product should find a place in an investor’s portfolio.


implication for the investor. Most insurers do not charge for switching below a particular threshold. After that, a nominal fee is levied. A case in point is HDFC Life, which permits up to four switches a year free of cost.

Tax Benefit On Maturity And Premium

On account of insurance element, gains on ULIPs are tax-free under section 10(10D) of the Income Tax Act. Even short-term gains made by the investor on the back of switches are not taxable.

However, one has to keep in mind that tax benefits are applicable only if the insurance cover is 10x the annual premium. Additionally, the annual premium paid is eligible for tax deduction under section 80C, provided the insurance cover is 10x the annual premium.

If the premium is more than 10x, then the tax deduction is permitted only for an amount up to 10x the sum assured.

If the policy were to be surrendered prematurely, that is, if the ULIP is surrendered before the completion of five years, the tax deduction availed on the product will be reversed.

This means that the entire tax deduction availed will be added to the income of the policyholder in the year the policy was discontinued. If the policy is surrendered after 5 years, the surrender value is tax-free.

Budget 2021 introduced an amendment to bring the maturity proceeds of ULIPs with an annual premium of more than `2.5 lakh, to be taxable at par with equity-linked mutual fund schemes. This will be applicable to new ULIP policies availed on or after 1st Feb ’21.

DISADVANTAGES

Inadequate Life Cover

The life cover provided by ULIPs, which tend to be in the range of 10x the first-year premium, is too less. Generally, it does not fully cover the life insurance needs of an individual. Thus, ULIPs can be used to top-up an existing life cover that is already in place.

Also, in order to ensure that the life cover does not cease to exist, the investor has to stay invested through the entire tenure of the policy, that is, even after the lock-in period ends. Early exit will mean that the insurance cover will cease to exist.

Lock-in Period

ULIPs have a lock-in period of 5 years. And no withdrawal is permitted during this period. Subsequently, partial withdrawal is permitted only if the policy is in force. But for every partial withdrawal made by a person less than 60 years old, the sum assured decreases for a period of 2 years and for those above the age of 60, the sum assured decreases permanently.

Expenses

There are around five charges in ULIPs– premium allocation charge, policy administration charge, mortality charge, fund management charge and surrender charge.

These expenses reduce the quantum of money that goes into wealth creation. Furthermore, GST is also levied on the premium amount, which further impacts returns on ULIPs. Moreover, some expenses are front-loaded and decline over the course of the policy. So, if an investor finds that the policy

is not at par with his/ her expectations and exits it after the lock-in period, then his/her returns will be impacted.

IN A NUTSHELL

What lures investors into buying ULIPs is the fact that unlike a term insurance policy where the policyholder’s premium is extinguished if he survives the term of the policy, in case of ULIPs, which also covers life, the policyholder gets something back. These prejudices result in investors opting for products that may not fit their investment plan.

Investors need to realize that in ULIP it is the investment portion that is returned at the market value and mortality charges that go towards covering life is an expense head just like it is for term policy, which only gives life protection.

Also, the typical life protection is 10x the premium paid in ULIPs. Hence, it may not completely provide the death cover that an individual needs.

Investment products have clearly defined objectives and alignment of an individual’s goals to those objectives will determine which investment product is the best fit for one’s portfolio.

ULIPs cannot fulfil the wholesome life insurance needs of an individual. But it can be used as a top-up product for life insurance.

Also, due to the long-term nature and construct of the product in terms of expenses, staying the course becomes essential, which instils financial discipline, and helps investors achieve long-term life goals such as building a corpus for retirement or for one’s child’s

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Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment .The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067) : INB260939138, INF260939138, INE260939139: Single Registration No.INZ000202536,PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99. NIRMAL BANG COMMODITIES PVT LTD – MCX (Member ID -16590 /NCDEX Member ID -0362 /ICEX Member ID -1165) : Single Registration No. INZ000043630; NCDEX Spot: 10084; Comtrack Participants: CPID -5040; CDSL Commodity Repository Ltd: 12013300 Nirmal Bang Securities Private




education.

To determine whether ULIPs are a fit in an investor’s portfolio, he/she needs to answer one key question: does he/she need to top-up his life cover?

Other aspects such as financial discipline due to the long-term nature

of the product or tax benefit can be satisfied through pure play investment products.

If the investor has a term plan that fully covers his/her insurance needs, then it is best to opt for a pure play investment product such as mutual funds with an SIP to bring in discipline as the expenses are lower,

thus pushing returns upwards.

But if a top-up to the life cover is what the investor desires, then ULIPs can be considered. Otherwise, why get stuck in a product with dual offerings and a lock-in if the combined offering does not really add value to the overall financial plaN?

BEYOND BASICS

SUSTAININGTHE DRIVE

Life insurance companies are likely to witness sustainable growth in the years to come in

spite of the ongoing covid-19 crisis



upward sloping yield curve, has been deepening of the Forward Rate Agreement (FRA) market up to tenors of 10 years. This ensures that an interest rate-guarantee product with pay-ins of up to 10 years can theoretically be hedged on an exact basis for all future principals.

Simply put, the capacity to sell this product without any major balance sheet risk implication has gone up materially across the board. The promise of a guaranteed healthy rate of return is an easy selling point. This demand is also not correlated to capital market sentiments, and, therefore, a possible anchor to growth expectations through cycles. Covid-19 is a mindset reset for a large part of the population regarding the idea of protection. Going forward, it will be harder to live in denial of life’s fundamental uncer-tainties. One can expect an accelerat-ed pick-up in protection demand once the dust settles. The credit-linked portion of the protec-tion business has slowed down in the current year in tandem with lenders’ disbursements. In the last few years private players have continued to gain market share due to the focus on new product addition, diversification of channel mix, increasing digital capabilities of proprietary channels and a push through non-core channels. Overall the market share in individual APE decreased to 40.3% in FY21 from 43.8% in FY18 and 60% in FY15. With better digital capabilities private players will continue to see higher growth in the years to come.

In the last fiscal, private players saw first year premiums at `94,100 crore compared to `80,919 crores in its previous financial year witnessing a growth of 16.3%. So, private players

business written by a life insurance company. It is computed as the sum of annualized first year premiums on regular premium policies, and 10% of single premiums, written by the insurance company during any period from new retail and group customers. VNB is used to measure profitability of the new business written in a period. It is the present value of all future profits to shareholders measured at the time of writing of the new business contract.

Future profits are computed on the basis of long-term assumptions, which are reviewed annually. VNB margin is computed as VNB for the period/APE for the period. It is similar to profit margin for any other business. The data from the Insurance Regulatory and Development Authority of India (IRDAI) shows that life insurers saw first year premiums at `2.58 lakh crore in FY20, which rose to `2.78 lakh crore in the last fiscal, a growth of 7.5%.

The Life Insurance Corporation of India (LIC) saw first year premiums at `1.84 lakh crore in last fiscal, a rise of 3.5%. There is structural and cyclical growth in the sector as there is ample capacity to sell long-term guarantees due to the deepened hedging market and significantly enhanced digital fulfilment capabilities across distribution and settlement channels.

In the last one year, owing to the fear of the financial crises investors have lapped up guaranteed products.

From the insurers’ point of view, one of the more recent developments in the Indian fixed income markets, partly incentivized by a sharply

Despite facing tremendous challenges due to the novel coronavirus, the life insurance sector reported single digit growth in the previous financial year. Insurance penetration has always remained a matter of concern for India as most of us have mixed insurance with investments. But now with crises seen in the last one year, investors have started making a distinction between insurance and investments. In the last one year we have seen investors investing in a pure term plan - which is a pure insurance product. However, there are other products offered by the life insurance companies that can also help investors.

With positive growth in the last fiscal, life insurers are expected to do better even in this fiscal. The Annualized Premium Equivalent (APE) in individuals is likely to gain further, going forward because of revival in unit-linked insurance plans (ULIPs), traction in non-par (policies where only sum assured is guaran-teed and no profits are earned), pension and annuity-based products and pick-up in credit life from trough levels in last fiscal. Expectations are rife that the value of new business (VNB) margins will remain strong due to a combination of high margin savings and term products, tempered by growth in ULIPs.

APE is the measure of a new

We help you get your money’s worth without letting volatility

in the markets reduce its value.

Worth It!


11:15

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eyond



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documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment .The securities

quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR

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have registered the highest growth compared to the industry and LIC. Even if in the current scenario life insurers are paying covid-19 claims, the mortality impact will not have much effect on their balance sheets.

Since March, India has seen a fresh surge in covid-19 infections. Given that there is usually a lag in reporting of claims, there might be a change in the pattern as we go ahead. But several private life insurers have already kept enough provisions for

future covid-19 claims. Given the current environment, life insurance companies are likely to have low impact of the ongoing crises and are all set for sustainable growth in the years to comE.

TECHNICAL OUTLOOK with a limited upside could be seen in the market.

On the downside though, the next major support exists at the 15,600 level, and later on at the 15,470/15,200 levels.

Having said that, the Nifty may not give a one-side up rally. This is because a small correction is likely. After this, it may bounce back from support levels.

On the technical charts, the Bank Nifty was an underperformer compared to the Nifty in the month of June. Technically, the Bank Nifty is facing a resistance of 35,600 on the higher side and a support of 34,900-34,600.

Currently, the Bank Nifty has support at 34,900. On the flip side, immediate resistance lies at 35,600. Above this level, it may extend its rally towards 36,000-36,250.

Investors should not create major long positions as long as it trades below the 34,600-mark. One can definitely trade in the small rally, but with a strict stop loss.

On the Nifty Options front for the July series, the highest Open Interest (OI) build up is witnessed near 16,000 and 16,500 Call strikes; on the Put side, it is observed at 15,500 and 15,000 strikes. The month of June witnessed average rollovers compared to the previous expiry. This shows that the bias for the month ahead is likely to be bullish.

Banking and Pharmaceutical sectors witnessed long rollovers. This evidently indicates that the stocks

from the above-mentioned sectors are likely to witness buying support in the near term.

India VIX, which measures the immediate 30-day volatility in the market, remained in the range of 18-13 for most part of June.

Going forward, VIX is likely to remain in range and slowly start to decrease. It will follow the global markets for further cues.

The Put Call Ratio-Open Interest (PCR-OI) for Nifty Options has been in the range of 0.9-1.50 in the month of June. Going forward, it is expected to remain in the range of 1.0-1.6 in July.

The markets are believed to remain bullish with supports placed at 15,500 and 15,000 although bouts of volatility are likely to come, causing the index to find resistance at 16,000 and 16,500 levels on the upside.

OPTIONS STRATEGY

Long Strangle

It can be initiated by ‘Buying 1 lot 08JUL 16000 CE (`85) and Buying 1 lot 08JUL 15600 PE (`95).’

The premium outflow comes to around 180 points, which is also your maximum loss. One should, however, place a stop loss at 130 points (50 point loss).

The maximum gain is unlimited and one should place the Target at 300 points (a 120 point gain).

The index is likely to move by more than 300 points in either direction, resulting in decent gains for the strategY.

he markets consolidated throughout the month after touching new lifetime highs. The Indian economy is on the road to recovery at a slow and steady pace, but certainly not at the same pace as the market. The equity market is factoring in a lot of future earnings growth and uncertainties due to covid-19.

The market was stronger-than- expected and ended the month of June on a positive note. The weekly chart indicates that the Nifty rallied in a higher top and higher bottom pattern throughout the June series and closed at an all-time high.

However, after a good performance in June, the Nifty might witness some profit-booking at higher levels.

Technically, as per the Fibonacci Retracement Theory, the weekly chart suggests that the Nifty may take support of 161.8%, that is, at the 15,470-mark.

On the flip side, resistance lies at 15,940. Any move suggests that there is a higher possibility that the upside in the market will stay capped between 16,100 and 16,240 levels.

However, the bulls will be able to take control only if the Nifty closes and sustains for 2 to 3 trading sessions above the 15,940 level.

As long as the Nifty remains below the mentioned level, an up-move

BEYOND NUMBERS

T


Small Cap Funds

SCHEME NAME NAVHistoric Return (%)

1 Year 10 Years5 Years 7 YearsAUM (Cr)

3 Years

Axis Small Cap Fund - Reg - GrowthKotak Small Cap Fund - Reg - GrowthNippon India Small Cap Fund - GrowthDSP Small Cap Fund - Reg - GrowthSBI Small Cap Fund - GrowthNifty Smallcap 100 TRI

50 139

70 93 91

12,007

80.4114.9103.5

89.185.4

108.1

23.822.818.816.620.510.5

20.220.3

2215.222.713.1

18.920.120.919.5

2510.1

-18.822.220.123.211.9

5,435 4,294

14,318 7,251 8,664

-

Multicap Funds/Flexicap Funds



3 Years

Aditya Birla Sun Life Flexi Cap Fund - GrowthCanara Robeco Flexi Cap Fund - GrowthMahindra Manulife Multi Cap Badhat Yojana UTI Flexi Cap Fund - GrowthAxis Flexi Cap Fund - Reg - GrowthS&P BSE 500 TRI

1,044 202

18 230

17 26,132

62.355.470.867.648.661.3

14.217.319.418.2

1615

16.317.9

-17.7

-16.3

14.413.6

-15.5

-13.4

15.514

-15.6

-13.3

14,144 4,244

532 18,405

8,230 -

Large Cap Funds



3 Years

Axis Bluechip Fund - GrowthMirae Asset Large Cap Fund - Reg - GrowthKotak Bluechip Fund - Reg - GrowthCanara Robeco Bluechip Equity Fund - GrowthIDFC Large Cap Fund - Reg - GrowthNifty 50 TRI

42 71

340 38 44

22,544

46.653.956.451.247.455.1

15.715

15.317.8

1215

17.116.614.317.313.815.7

13.815.213.413.810.512.4

14.715.8

1313.9

1112.5

27,142 25,721

2,642 2,886

770 -

BEYOND NUMBERS


MUTUAL FUND BLACKBOARDPerformance Of Mutual Fund Schemes From Different Categories

Mid Cap Funds



3 Years

Tata Mid Cap Growth Fund - Reg - GrowthMahindra Manulife Mid Cap Unnati Yojana - Reg Edelweiss Mid Cap Fund - GrowthAxis Midcap Fund - GrowthInvesco India Mid Cap Fund - GrowthKotak Emerging Equity Fund - Reg - GrowthNifty Midcap 100 TRI

213 16 44 60 76 64

34,906

6471.683.559.862.679.581.2

18.317.616.920.417.218.4

14

16.6-

18.119.817.418.116.1

16.6-

17.817.116.819.714.9

17.7-

19.219.318.219.414.4

1,216 705

1,359 11,834

1,574 12,463

-

Large & Mid Cap Funds



3 Years

Mirae Asset Emerging Bluechip Fund - GrowthCanara Robeco Emerging Equities - GrowthHDFC Growth Opportunities Fund - GrowthKotak Equity Opportunities Fund - Reg - GrowthTata Large & Mid Cap Fund - Reg - GrowthNIFTY Large Midcap 250 TRI

87 144 164 177 300

10,865

68.963.668.455.7

5766.3

21.715.914.816.316.915.6

21.718.713.816.514.717.4

22.219.110.615.5

1415.1

22.720.410.714.814.5

15

17,892 8,988 2,364 6,362 2,301

-

Focused Funds



3 Years

Axis Focused 25 Fund - GrowthNippon India Focused Equity Fund - GrowthICICI Prudential Focused Equity Fund - Ret - GrowthSBI Focused Equity Fund - GrowthS&P BSE 500 TRI

41 68 43

209 26,132

51.67052

51.461.3

14.114.313.816.3

15

18.115.213.517.316.3

1615.411.516.613.4

-16.712.317.413.3

16,540 5,239 1,523

15,879 -

Dynamic Asset Allocation Funds



3 Years

ICICI Prudential Balanced Advantage Fund - GrowthNippon India Balanced Advantage Fund - GrowthTata Balanced Advantage Fund - Reg - GrowthEdelweiss Balanced Advantage Fund - GrowthKotak Balanced Advantage Fund - Reg - GrowthNIFTY 50 Hybrid Composite Debt 65:35 Index

46 115

14 33 14

13,517

30.831.628.434.5

2736.4

11.410.4

-13.4

-13.9

11.512.3

-12.7

-13.7

11.110.6

-11.5

-11.7

12.711.7

-11.3

-11.6

32,188 3,515 2,651 3,881 8,754

-

Hybrid Aggressive



3 Years

Canara Robeco Equity Hybrid Fund - GrowthDSP Equity & Bond Fund - GrowthSBI Equity Hybrid Fund - GrowthMirae Asset Hybrid - Equity Fund - Reg - GrowthNIFTY 50 Hybrid Composite Debt 65:35 Index

226 219 185

20 13,517

40.643.739.342.436.4

15.115

13.614.413.9

14.914.413.414.613.7

13.714.213.7

-11.7

14.112.914.2

-11.6

5,327 6,769

39,977 5,150

-

ELSS Schemes (Tax Saving u/s 80-C)



3 Years

Axis Long Term Equity Fund - GrowthCanara Robeco Equity Tax Saver Fund - GrowthKotak Tax Saver Fund - Reg - GrowthInvesco India Tax Plan - GrowthMirae Asset Tax Saver Fund - Reg - GrowthS&P BSE 200 TRI

66 103

65 74 28

8,339

52.965

58.454.468.458.6

15.319.916.813.820.115.2

16.718.416.315.921.716.3

16.714.915.415.3

-13.4

18.214.913.715.5

-13.3

29,575 2,227 1,988 1,669 7,940

-

Contra/Value Fund



3 Years

Invesco India Contra Fund - GrowthIDFC Sterling Value Fund - Reg - GrowthSBI Contra Fund - GrowthUTI Value Opportunities Fund - GrowthS&P BSE 500 TRI

69 75

171 90

26,132

54.697.986.759.561.3

14.311.515.614.8

15

17.516.614.314.516.3

16.214.913.311.613.4

1615.312.212.913.3

7,033 3,601 2,248 5,917

-

Multi-Asset Allocation Funds



3 Years

HDFC Multi - Asset Fund - GrowthNippon India Multi Asset Fund - Reg - GrowthTata Multi Asset Opportunities Fund - Reg - GrowthNIFTY 50 Hybrid Composite Debt 65:35 Index

44 12 14

13,517

37-

39.536.4

12.3--

13.9

10.6--

13.7

9.7--

11.7

10.2--

11.6

832 1,049

719 -


Sector/Thematic



3 Years

Aditya Birla Sun Life PSU Equity Fund - Reg - GrowthCanara Robeco Consumer Trends Fund - Reg - GrowthEdelweiss Maiden Opportunities Fund - Series 1 Mirae Asset Great Consumer Fund - GrowthICICI Prudential Technology Fund - GrowthNippon India Pharma Fund - GrowthBNP Paribas India Consumption Fund - Reg - GrowthICICI Prudential Banking and Financial Services FundS&P BSE 500 TRI

13 59 17 49

128 298

18 80

26,132

51.555.372.151.9

134.555.743.967.861.3

-16.7

2014.232.4

27-

10.615

-18.2

-17.6

2518.3

-15.516.3

-17.1

-15.821.318.1

-14.613.4

-16

-16.821.617.9

-16

13.3

701 596 521

1,271 2,792 5,238

744 4,265

-

Gold



3 Year

HDFC Gold Fund - GrowthKotak Gold Fund - Reg - GrowthNippon India Gold Savings Fund - GrowthPrices of Gold

15 19 19

46,991

-4.2-4

-4.6-2.9

14.114.913.915.4

7.88.37.68.7

6.26.3

67.5

-6.2

67.8

1,229 968

1,429 -

Arbitrage Fund


3 Months 3 Years1 Year 2 YearsAUM (Cr)

6 Months

IDFC Arbitrage Fund - Reg - GrowthKotak Equity Arbitrage Fund - Reg - GrowthTata Arbitrage Fund - Reg - GrowthNippon India Arbitrage Fund - Growth

26 29 11 21

4.55

5.14.9

44.54.44.3

3.53.93.93.7

4.34.7

54.6

55.3

-5.3

7,126 20,291

6,302 11,792

Index Fund



3 Years

HDFC Index Fund-NIFTY 50 PlanICICI Prudential Nifty Next 50 Index Fund - GrowthMotilal Oswal Nifty Midcap 150 Index Fund - Reg Motilal Oswal Nifty Smallcap 250 Index Fund - RegUTI Nifty Index Fund - GrowthNifty 50 TRI

145 34 18 18

105 22,544

54.447.274.999.154.855.1

14.310.3

--

14.615

15.114.3

--

15.315.7

11.913.2

--

1212.4

11.813.2

--

11.912.5

3,210 1,230

231 157

4,022 -

FoF Overseas



3 Years

PGIM India Global Equity Opportunities Fund 36 34.9 30.6 21.4 12 12 1,069

Liquid Fund


2 WeeksYTM

3 Months 1 YearAUM (Cr)

1 Month

Aditya Birla Sun Life Liquid Fund - Reg - GrowthICICI Prudential Liquid Fund - Reg - GrowthKotak Liquid Fund - Reg - GrowthNippon India Liquid Fund - GrowthMahindra Manulife Liquid Fund - Reg - GrowthCRISIL Liquid Fund Index

332 305

4,171 5,034 1,339

-

3.23.23.23.23.33.5

3.33.23.23.23.33.6

3.23.23.23.13.33.6

3.23.23.23.23.33.7

3.523.483.463.483.54

-

30,047 36,601 30,283 20,049

1,617 -



Money Market Funds


3 MonthsYTM

1 Year 3 YearsAUM (Cr)

6 Months

Aditya Birla Sun Life Money Manager FundSBI Savings Fund - GrowthHDFC Money Market Fund - GrowthNippon India Money Market Fund - GrowthTata Money Market Fund - Reg - GrowthCRISIL Liquid Fund Index

288 33

4,458 3,223 3,674

-

4.13.5

43.84.33.6

3.93.43.83.8

43.6

4.33.84.24.14.43.7

6.96.36.86.74.25.7

3.953.83.9

3.723.94

-

14,089 25,994 15,383

9,596 3,722

-

Ultra Short Term Funds


3 MonthsYTM


6 Months

HDFC Ultra Short Term Fund - Reg - GrowthICICI Prudential Ultra Short Term Fund - GrowthUTI Ultra Short Term Fund - GrowthAditya Birla Sun Life Savings Fund - Reg - GrowthNIFTY Ultra Short Duration Debt Index

12 22

3,284 427

4,299

3.94.53.44.64.1

3.64.23.33.93.9

4.35.2

45

4.1

-7

4.77.26.5

3.994.713.944.28

-

16,736 9,949 2,278

18,100 -

Short Term Funds


3 MonthsYTM


6 Months

HDFC Short Term Debt Fund - GrowthNippon India Short Term Fund - GrowthICICI Prudential Short Term Fund - Growth

25 41 47

6.77.56.4

3.64.63.9

6.86.56.7

8.88.28.6

5.255.215.70

18,117 9,012

20,015

Low Duration Funds


3 MonthsYTM


6 Months

HDFC Low Duration Fund - GrowthICICI Prudential Savings Fund - Reg - GrowthNippon India Low Duration Fund - GrowthMirae Asset Savings Fund - Regular Savings Plan Kotak Low Duration Fund - Std - Growth

46 422

2,958 1,798 2,656

5.25.55.53.84.8

3.83.74.43.13.4

5.96

5.64.8

5

7.27.76.85.97.3

4.544.754.793.934.61

24,543 30,234

9,137 1,090

12,765

Banking & PSU Bond Funds


3 MonthsYTM


6 Months

HDFC Banking and PSU Debt Fund - Reg - GrowthTata Banking & PSU Debt Fund - Reg - GrowthKotak Banking and PSU Debt Fund - Reg - GrowthNippon India Banking & PSU Debt Fund - Reg

18 11 51 16

6.97.37.56.5

3.52.63.33.4

6.55.96.15.6

8.9-

9.19.1

5.624.725.58

5.1

9,582 476

9,714 6,364

Corporate Bond Funds


3 MonthsYTM


6 Months

ICICI Prudential Corporate Bond Fund - Reg - GrowthIDFC Corporate Bond Fund - Reg - GrowthHDFC Corporate Bond Fund - GrowthKotak Corporate Bond Fund - Std - GrowthAxis Corporate Debt Fund - Reg - Growth

23 15 25

2,940 13

66.77.26.56.3

43.33.43.23.6

6.36.16.55.9

7

8.78.59.38.37.9

4.975.04

5.45.114.94

19,871 20,978 26,184

9,646 4,566


Disclaimer : Mutual Fund Investments are subject to market risks. Please read the offer document carefully before investing. Past performance is no guarantee of future performance. Returns are of Growth option of Regular plans. Returns which are below 1 year

period are Annualized Returns. Source: - ICRA MFI, NAV as on 24th Jun ’21.

Dynamic Bond Fund


3 MonthsYTM


6 Months

ICICI Prudential All Seasons Bond Fund - GrowthIDFC D B F - Reg - GrowthKotak Dynamic Bond Fund - Reg - Growth

28 27 29

7.46.86.9

4.70.41.8

7.33.95.7

9.49.99.7

6.435.85.8

5,793 3,857 2,282

Gilt Fund


3 MonthsYTM


6 Months

Nippon India Gilt Securities Fund - GrowthKotak Gilt Fund - GrowthIDFC G Sec Fund - Invt Plan - Reg - Growth

30 77 28

5.95.6

7

0.50.70.6

3.14.24.1

109.7

11.3

5.695.785.81

1,815 875

1,572

Credit Risk Fund


3 MonthsYTM


6 Months

ICICI Prudential Credit Risk Fund - Growth HDFC Credit Risk Debt Fund - Reg - Growth SBI Credit Risk Fund - Growth

24 19 35

10.110.7

7.8

6.97.94.9

9.611.4

8

8.89

7.5

7.236.986.74

7,443 7,631 3,497

Medium to Long Duration Fund


3 MonthsYTM


6 Months

ICICI Prudential Bond Fund - GrowthSBI Magnum Income Fund - Growth

31 56

6.77.1

2.63.5

5.86.6

9.29.6

6.135.73

3,365 1,733

Medium Duration Fund


3 MonthsYTM


6 Months

ICICI Prudential Medium Term Bond Fund - GrowthHDFC Medium Term Debt Fund - GrowthSBI Magnum Medium Duration Fund - Growth

35 44 40

8.88.87.9

6.25

3.5

9.39

7.3

8.68.49.6

6.956.455.48

6,683 3,310 9,123

Overnight Fund


2 WeeksYTM

3 Months 1 YearAUM (Cr)

1 Month

Aditya Birla Sun Life Overnight Fund - GrowthIDFC Overnight Fund - Reg - GrowthTata Overnight Fund - Reg - GrowthNippon India Overnight Fund - Reg - GrowthCRISIL Liquid Fund Index

1,118 1,103 1,091

111 -

3.13.13.13.13.5

3.13.13.13.13.6

3.13.13.13.13.6

3333

3.7

3.33.223.283.22

-

10,120 1,112 1,819 5,552

-

Floater Fund


3 MonthsYTM


6 Months

Aditya Birla Sun Life Floating Rate Fund - Reg Nippon India Floating Rate Fund - Growth

269 35

6.16.8

3.63.7

5.56.5

7.78.6

4.774.91

14,325 15,676

BEYOND LEARNING

A LEAGUE APARTMasterclass With Super-Investors is a

must-read for seasoned and aspiring investors



Buying higher quality and growth at right valuation is a rare event. Ved suggests, “The best time to buy is when the macro is bad. That’s when you get the cheapest valuations.”

The essential parts of his investment strategy could be looked at in the following manner:

• To arrive at a valuation he looks at multi-indices like RoCE, P/E and the growth potential over the short- to medium-term

• Identify stocks where the market is likely to assign a steep value in the near future

• Look to enter the stock when the macro environment is bad as it will likely give the most attractive valuations

For sectoral investment, Ved focuses on allocating major investment to the market leader as compared to second-tier stocks. He advocates as much as 60% to 70% of the alloca-tion to the market leader and the balance to a basket of next-tier stocks.

RAAMDEO AGRAWAL

The Co-Founder of Motilal Oswal Financial Services, Raamdeo Agrawal, is one of the most respect-ed investors in India. Over the years he has built a reputation of being a prudent value investor who has identified many great ideas early on.

He invested in HERO Motocorp when the stock was a small-cap stock and traded at `30 apiece. Today, the stock has grown 73 times (excluding dividend) of its value and trades at `2,600 apiece.

Agrawal is an ardent follower of Warren Buffett and tries to inculcate Buffett’s approach of value investing

He has been early to identify some of the growth stories and ride on them. He talks about his investment in media stocks and how it has reward-ed him handsomely.

“We got very bullish on media stocks as they were great franchises but were still available cheap. We bought companies like TV Today, Sun TV, and Zee Entertainment. TV Today was the leader in Hindi news for the past 15 out of 15 years in India. When I bought it, the market cap was around `350 crore. It has gone up 8x in nine years since then – 25%+ compounder. India is majorly a Hindi-speaking country. You knew that there will be upticks in the advertising spend and it was just so cheap. They had proved their leadership for the past 15 years. The good thing with India is that everything can get bigger with time.”

Most of Damani’s stock investments shortlisted stemmed from his extensive reading and research habits. He is a firm believer in scanning annual reports and meeting company managements to under-stand their vision.

In usual course he tends to exit investments towards the end of the Bull Run. However, some of his great investments are long-term growth opportunities, and could be held on for a very long time, and not sold even during the Bull Run in the markets.

HIREN VED

Hiren Ved of Alchemy Capital is a noted equity investor with a history of spotting several multi-bagger stocks like Maruti Suzuki, Mother-son Sumi and many PSU banks. His investment strategy is simple. ‘Never lose focus on growth potential and quality of the stock and buy at the right valuation.’

Investing by and large is the process of creating a robust and resilient portfolio of stocks that may do well during events that are likely to occur in the future. Beyond skill and intellect, strong emotional control and a steely nerve are required to achieve success.

The Indian stock market is no different. Throughout the years, the Indian stock market has seen several successful investors with divergent approaches achieving massive success. Let us look at a few success stories.

RAMESH DAMANI

Ramesh Damani is one of the most fabled success stories from the Indian stock markets. He is consid-ered to be the one who has culled out deep-valued stocks and has invested in many growth stories, spotting them much ahead of the market.

His belief is simple – Invest long-term and have an exit strategy in place prior to investment.

Broadly speaking, his investment strategy can be encapsulated in the following manner• Analyze the enterprise value of the company• Ask yourself “would you in a strict business sense be willing to buy the business?”• To answer the question, analyze if the current valuation of the company is cheap in comparison to the size of the potential opportunity


with a long-term focus. His personal investment approach and also that of Motilal Oswal Mutual funds can be best described as QGLP, which is• Quality of business and manage-ment• Growth prospects of the company• Longevity of growth• Price or valuation of the company

Much like Warren Buffett’s value investing approach, Agrawal looks to invest in businesses that are econom-ically-critical, scalable, predictable, run by good and focussed leadership team and has a reasonable track record.

He typically aims to double his investments in around three years by looking for stocks with a 25% compounded annualized return.

Essentially two factors are important for every multibagger. First, strong earnings growth after you buy stock. And second, low price to earnings ratio that turns into high price to earnings ratio after you buy.

He further cautions against too much diversification. According to him, investing beyond 15 stocks is not worth it as it stifles returns.

Agrawal says:“Every investor is value investor so you have to choose the value and the price. Price will keep moving up and down. The loss in the price, not in value.”

ANIL GOEL

Anil Goel is the perfect example of guts and determination. Goel is a well-known small-cap investor. With his sheer perseverance and belief in his investing vision, he has earned a great amount of respect and fame as one of the greatest investors in India.

Also known as the “sugar baron”

because of his affinity to sugar stocks, Goel has many a times gone against conventional wisdom of equity research agencies and invested in sectors that were considered risky.

Goel relies on his understanding of the business. And as a former steel trader, he has had a first-hand experience of business challenges in asset and commodities businesses.

His approach is slightly more aggressive as compared to others as he looks for multibagger ideas which can turn five to ten times, possibly small-caps and mid-caps, which are currently out of favour in the market.

The investment approach that he follows can be encapsulated as KCPLTD, which is an acronym for• Knowledge of the business• Conviction in your belief• Patience to wait for the right stock and the right time to exit• Luck is an important factor• Timely Deployment of funds when an opportunity presents itself

Goel’s approach in itself is inherently aggressive and requires conviction and perseverance to reap returns. In September ’92, Goel decided to invest in the market with a corpus of `50 lakh. However, within 6 months his investment value had dropped to `33 lakh.

Goel says:“My family was not happy about it. They asked me to square off and exit. But I was adamant to succeed and recover my losses.”

“You don‘t need to read a lot to make money in markets. A successful investor is one who understands the business well.”

His single-minded focus is to understand how a business works and to identify the inflection point

for explosive growth and enter prior to this growth to take advantage of this multi-fold growth.

KENNETH ANDRADE

Prior to founding Old Bridge Capital Management, Kenneth Andrade was managing some of India’s most successful equity funds for the past 15 years.

He is one of the stalwarts of the stock markets who successfully invested and generated consistently high returns by investing primarily in small- and mid-cap companies. Kenneth largely focuses on protect-ing the downside as well as capital.

Andrade says: “I am a balance sheet-focused investor. You throw earnings growth at me and I don’t know the future. I understand cash flows and what impact they have on the balance sheet.”

According to him, the focus on capital efficiency is of paramount importance.

Capital efficiencies can be viewed as the ratio of Profit to the Capital employed. To an extent, the profits are a function of the macro and micro environment while the capital employed is of the management.

His mantra, which is based on capital efficiency, can be viewed in the following way• At the market peak, the employed capital is the highest and at this time, one needs to look for fixed asset addition to judge capital destruction• When the market passes through a trough and the same extends for an extended amount of time, it is better to play safe and invest in the market leaders you are likely to get them at attractive valuations

�ere is no shortcut to reach your �nancial goals. But there is always a proper path. We help simplify the path for you through in-depth research backed by decades of valuable experience in the industry.

7


While arriving at valuations, he estimates the time taken for the company to give back the invest-ment.

If the same is estimated at 6 years, then Andrade would be willing to pay up to six times the ratio of the Enterprise Value to EBITDA.

Two mantras, which he judiciously follows are investing in market leaders even if the sector is currently out of favour and avoiding leverage to invest.

A BOOK FOR CURIOUS MIND

Overall the book Masterclass With

Super-Investors offers investing knowledge shared by some of the best Indian investors.

Investing approaches of veteran investors, including Vijay Kedia and few others, who have not been mentioned in this article, are definitely worth a reaD.



Recently, the Association of Mutual Funds of India (AMFI) released the data for the month of May ‘21. According to the data, investors have put money into various equity mutual fund schemes for the third straight month in May as they made fresh purchases at lower levels.

Q. How Much Was The Inflow Into Equity Schemes Of Indian Mutual Funds? As per AMFI data, equity and equity-linked schemes witnessed an inflow of `100.82 billion in May, higher than `34.37 billion inflows witnessed in April on the back of strong equity market.

In May, the benchmark Sensex rose 6.46%. Till 9th June the BSE Sensex has been up 9.47% so far this calendar year, after rising 15.8% in 2020. Hybrid schemes having an exposure to equity, debt and gold in different proportions too saw positive flows.

Q. Why Is This Important?Mutual Fund equity schemes had witnessed continuous net outflows for eight months before turning positive in February this year. There were doubts about the sustainability of these flows into equity schemes. Now, despite the second wave of covid-19 and economic disruptions, investors are continuing to buy equity Mutual Fund schemes, which is a positive development.

Q. Why Has There Been Such Reversal In Trend? Negative flows before February can be primarily

IMPORTANTJARGON

attributed to profit-booking. Now, the trend reversal is on the back of demand from retail and high net-worth investors (HNIs) that usually take the Mutual Fund route to enter into the market. Positive inflows are aided by stable flows from Systematic Investment Plan (SIPs).

Q. How Have SIP Flows Been?SIP contribution in May stood at `8,819 crore, higher by around `225 crore as compared to the previous month. To point out, SIP contribution in whole of FY21 had come down to `88,057 crore as compared to `1,00,084 crore contribution in FY20.

Q. Why Do SIP Flows Continue To Be A Key Point To Monitor In The Coming Months?Most SIP flows are into equity schemes. They are the harbinger of the mood of retail equity investors. As on May end, total SIP accounts stood at 3.88 crore. Around 15.5 lakh new SIP accounts were opened in May, while around 6.6 lakh SIPs were discontinued. Sustained flow also ensures sustainability of Asset Management Companies (AMCs).

Q. What Is The Overall Asset Under Management (AUM) Of The Industry? As per AMFI data, the Mutual Fund industry’s AUM has witnessed a two-fold rise over the last five years. As on May-end, the AUM of the industry was at record `33.1 lakh crore, up around 35% as compared to May ‘20 but lower as compared to April ‘21.

Lower month-on-month (m-o-m) AUM is primarily due to investors pulling money from liquid debt funds. Debt schemes account for around 14 lakh crore of total AUM,

THIRD STRAIGHT MONTH OF EQUITY INFLOW INTO MFs

BEYOND BUZZ



while equity schemes account for around 10 lakh crore.

Q. What Does The Number Of Folios Tell Us About Sustainability Of Inflows Into Mutual Funds? Folio is nothing but a unique number, which identifies a person’s account with the Mutual Fund house. The same investor can open many folios. There are 685 lakh folios (68.2% of all folios) for equity schemes and 82.6 lakh folios (8.2% of all folios) for debt schemes.

The former, which is growing at 5% every year, derives majority of its assets from individual investors like retail and HNIs, while institutional investors have a higher stake in debt-oriented schemes.

According to one analysis, individual investors hold a higher share in overall industry assets at 52.6%, whereas institutional investors account for 47.4% of the total assets. Increasing retail participation means higher flows from Mutual Funds into Indian equity markets in the future and the capacity to absorb any negative shock from foreign investors pulling out money.

FRESH BOOST FOR THE ETHANOL SECTOR

The government recently advanced the ethanol-petrol blending target of 20% by two years to 2023 from the earlier 2025. Separately, it also released a document titled ‘Roadmap for Ethanol Blending in India 2020-25’ drawing out the vision for India’s ethanol sector. Sugar stocks have witnessed a linear rally in the recent past as investors bet on the ethanol sector.

Q. Why Are These Announcements Important For The Sugar Sector?India has more sugar than it consumes. Higher supply is dragging sugar prices down and lowering sugar companies’ margins. The diversion of some sugarcane towards ethanol production would lower the levels of sugar in the system, thereby balancing the demand and supply. But demand visibility for ethanol had always kept sugar mills worrying.

Q. What Is Ethanol? Ethanol contains a high level of alcohol and is produced from a by-product called molasses while manufacturing sugar. It is used for blending with petrol as it is less polluting. It also has application in liquor industry and has other industrial applications too.

Sugar mills need to have a distillery to manufacture ethanol. Ethanol is also made from foodgrains and other agricultural waste.

Q. Why Is India Boosting The Ethanol Sector?India imports almost 85% of its crude oil requirements. By blending petrol with ethanol, India can save valuable foreign exchange. There are other benefits like reduce its dependence on exports of sugar, cleaner environment, additional income to farmers, infrastructural investment in rural areas and employment generation.

Q. What Measures Has The Government Taken To Build A Robust Ethanol Economy In India? The government is ensuring lucrative prices for ethanol supplies to oil marketing companies. It is also offering soft loans to mills to increase ethanol production capacity. It has also lowered the goods and services tax (GST) on ethanol. Now, the government has also given a roadmap for ethanol demand in the future.

Q. What Is The Current Ethanol Production And What Will Be The Future Requirement? Pan-India blending ratio is below 8% right now. The current ethanol production capacity in India is 426 crore litres derived from molasses-based distilleries and 258 crore litres from grain-based distilleries. It is estimated that for 20% blending, India will need 1,016 crore litres by 2025. Molasses-based distilleries need to be expanded to 760 crore litres and grain-based distilleries to 740 crore litres by 2025. Remember, some ethanol will also have to be supplied to meet other industrial needs.

Q. What Are The Challenges? Apart from challenges in capacity-addition for both sugarcane-based and grain-based distilleries, there are challenges like lower ethanol storage capacity with oil marketing companies and adaptability of motor engines for higher blended petrol.

Q. What Is The Global Precedent In Ethanol Blending? The global production of ethanol touched 110 billion litres in 2019. USA and Brazil contribute 92 billion litres (84% of global share). It seems the national policy of Brazil mandates for a blending of 18% to 27.5% of ethanol in gasoline and the current blending ratio is around 27%.

Q. How Will It Help Sugar Mills And Their Share Prices On The Bourses? Ethanol production allows sacrifice of sugar production, thereby balancing demand and supply. Also, ethanol prices as fixed by the government are more remunerative as compared to sugar prices. Many sugar mills have already announced green and brown field expansion plans for ethanol productioN.

FLIGHT OFUNICORNSThe number of unicorns is likely to rise this year, but global and domestic slowdown may lower the tempo

RNI No. MAHENG/2009/28962 | Volume 12 Issue 01 | 16th - 31st Jan ’20Mumbai | Pages 56 | For Pr ivate Circulat ion

and reforms, the Finance Minister has

wholesome budget that has something or other for all constituents

RNI No. MAHENG/2009/28962 | Volume 12 Issue 02 | 16th - 29th Feb ’20Mumbai | Pages 52 | For Pr ivate Circulat ion

11:15

RNI Reg. No. MAHENG/2009/28962DISCLAIMERIn the preparation of the content of this magazine, Nirmal Bang Securities Private Limited has used information that is publicly available, including information developed in-house. Such information has not been independently verified and we make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgement of Nirmal Bang Securities Private Limited at the date of this publication/ communication and are subject to change at any point without notice. This is not a solicitation or any offer to buy or sell. This publication/ communication is for information purposes only and is not intended to provide professional, investment or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation or needs of individual recipients. For data reference to any third party in this material no such party will assume any liability for the same. Further, all opinion included in this magazine are as of date and are subject to change without any notice. All recipients of this magazine should seek appropriate professional advice and carefully read the offer document and before dealing and/ or transacting in any of the products referred to in this material make their own investigation. Nirmal Bang Securities Private Limited, its directors, officers, employees and other personnel shall not be liable for any loss (financial or otherwise), damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary and consequential, as also any loss of profit in any way arising from the use of this material in any manner whatsoever. The recipient alone shall be fully responsible/ are liable for any decision taken on the basis of this material. This magazine is prepared for private circulation only. Nirmal Bang Securities Private Limited, its affiliates and their employees may from time to time hold positions in securities referred to herein. Nirmal Bang Securities Private Limited or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.

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The second wave of the pandemic has stifled economic