Business

These days, it’s quite common to find IT-Slowdown related stories in newspapers or anywhere else on the internet. And as if it has become a new normal now, the managements of large Indian IT companies regularly come up with gloomy commentaries about IT’s near future. But this gloominess surrounding the sector today was not there till very recently.

In the beginning, a vast majority of Indian IT companies were built around the idea of offering global businesses in an efficient, low-cost way to outsource their in-house IT work. And India became a leader in this space as it could easily beat the competition for such work because of its large pool of trained, low-cost engineers. For investors too, buying IT stocks was a no-brainer wealth creation strategy.

But once wildly successful, the Indian IT model has now begun to run into fundamental problems. Stocks of IT companies which till yesteryears were darlings of markets and part of almost all long term investment stocks portfolio, are now being shunned by one and all. So what exactly is the $150 billion+ Indian IT industry up against? There are quite a few. The major being that the very model that allowed them to grow their revenues for years by simply deploying cheap labour to perform simple IT tasks, is itself being disrupted. And then, there are many more.

Let’s discuss some of these major problems faced by the IT industry in detail here. Rise of Automation

It’s true that IT represents an important part of almost every industry. But its direct contribution to revenues and profits is often difficult to assess. So as the growth in developed nations slowed down in last few years, many companies started cutting down their discretionary spendings.

Unsurprisingly, IT budgets got the axe first thing among others. But slowing revenue growth due to slowdown in clients’ businesses is not the only reason.There have been cuts in IT spendings of many large global enterprises as they move towards automation. And this is a bigger threat than clients’ business slowdown.

In very simple terms, you can understand the idea of automation like this:

What earlier required 25-50 programmers and analysts, can now be done easily by a couple of smart programmers and intelligent automation-based systems. No doubt automation can accelerate and improve manual processes. And since the same amount of work can be done with less manpower, it’s cost-effective too. Obviously, more and more companies want to embrace automation. And as this trend catches up (and it’s happening pretty fast), the number of people required at the lower end of the IT-pyramid will continue to go down.

A report from global outsourcing research company HfS Research says that by 2021, India could lose 0.64 million low-skilled positions in IT services because of automation. Another report from NASSCOM says that by 2025, about 260 million jobs will be replaced or augmented by technology worldwide.

As a result of the rapid adoption of automation, Indian companies are now faced with the following two issues: Shrinking Revenue Pie As the automation component in projects is increasing, many large clients are not renewing their legacy contracts. They are instead looking to renegotiate old rates or reduce the scope of work itself. Shrinking Margins New players are entering the space and offering automation-rich services at lower rates.

So the competitive intensity has increased buyer’s negotiation powers. Alongwith that, a rise in employee costs is further reducing margins and threatening the very model which is based on low-costs. But the rise in costs hasn’t happened suddenly. Even as far back as in 2013, the Economist quoted that for IBM, “the total cost of its employees in India used to be about 80% less than in America; now the gap is 30-40% and narrowing fast.\” Easy-to-draw conclusion here is that companies that depended heavily on cheap-workforce model will be in trouble as automation catches up.

Revenue cannibalization due to automation, though not a desired outcome, cannot be avoided now. To survive, Indian IT companies need to be more proactive and take the problem head on. Instead of avoiding automation, they should convince the clients about it and sharing the cost benefits with them. If not, they risk losing business to more nimble competitors. As for the loss of revenue (due to automation), it can now be balanced only by growing revenue from new businesses in digital and related areas.

Rise of Protectionism Protectionism is another problem that has recently caught Indian companies unaware. 60% of Indian IT industry’s revenues is from exports to the US. IT majors like TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra have 20 to 40% of their employees sitting onsite. It’s clear that in order to ensure low-cost operation, Indian tech companies prefer to send Indians abroad instead of accepting high cost of hiring employees locally in those countries. Now US government’s recent decision to review work-visa program (as they believe Indian IT companies are taking jobs away from Americans) is sending jitters back in India. Unfortunately, US is not the only country that is resorting to such protectionist measures to ensure more jobs for their citizens. UK, Australia and many others too are taking similar routes. So in general, more restrictive visa laws in the West are now making it tougher for Indian companies to get qualified engineers into their clients’ offices.

So costs are rising and consequently, margins are shrinking. Whether protectionism is right or not is a matter of debate.Those in favor feel that it is justified as Indian companies bring in cheap labour, which hurts local citizen’s employment. Those against it feel that it helps attract the required skills and more importantly, helps US firms remain competitive. Nevertheless, job creation and protection is a delicate topic having political shades. So as long as current political environment is supporting protectionism, Indian IT companies will continue to remain at the receiving end. Missing / Underdeveloped Business Verticals Even though issues like automation and visa-restrictions are grabbing newspaper headlines, there is another problem that Indian companies failed to address in time. Had there been a conscious effort to address it, the dependency on the low-cost model would not have been so much and neither would they have been so vulnerable.

The problem is that of the missing (or underdeveloped) Consulting Divisions of Indian companies. All non-Indian market leaders in the global IT space today (like Accenture, IBM, Cognizant, etc.) have strong consulting arms. As per Gartner Research, consulting makes up about 13% of the overall IT services market and more importantly, it is a segment growing faster than the overall market. Sadly, Indian IT companies do not have a strong presence in this space.They neither invested in organically building a strong consulting brand nor made necessary acquisitions to hit the ‘consulting ground’ running. Today, all high-level strategic consulting businesses go to large players like Accenture, PwC, Deloitte, Boston, etc. and not to Indian companies.

And as more and more companies are looking for higher-value services and more innovation (than what Indian companies have traditionally provided), the lack of solid consulting vertical is being sorely missed by each and everyone of the large Indian IT companies. Maybe, Indian IT companies should have taken lessons from Cognizant’s success in consulting. In the last few years, the company has successfully built a standalone consulting practice because it didn’t shy away from investing in it in a big way. As consulting expertise is increasingly becoming essential to win large, high-value contracts, it is now a non-negotiable for Indian IT companies. The current scenario has almost arm-twisted them to invest heavily and urgently,to scale up their consultancy practice. The Future? Indian companies have no doubt been caught on the wrong foot. Most were slow to adapt to the changing realities and were busy defending their legacy businesses.

They simply turned a blind eye to the threat of automation and naturally, are not prepared for it. Even the CEO of Infosys, Vishal Sikka acknowledges the scale of problem when he said: \”We will not survive if we remain in the constricted space of doing as we are told, depending solely on cost-arbitrage, and working as reactive problem-solvers.\” This “wait and watch” approach has had a detrimental impact on growth and competitive advantage of the Indian IT sector. Now going forward, they face an uphill task of a) protecting their revenues and b) maintaining their profitabilites.It won’t be easy. The sector as a whole needs to introspect and acknowledge that what got them till here will not take them ahead.Infact, the traditional model needs a CTRL+ALT+DELETE, i.e. a fresh restart.Transition to automation and climbing up the value chain (via consulting) is what is needed now.

And this would require investments in newer technologies, reskilling, increasing acquisition-led competencies and for lack of a softer word, downsizing if necessary. But all companies will not survive this transition. At the end, the companies that are deeply entrenched in client processes and are quick to adapt to the changing operating as well as cost structures, would emerge as the real winners. As long-term investors, we continue to observe the sector developments keenly and are continuously searching for best stocks to buy. It has been our past experience, that when a sector faces headwinds, picking out the companies that are quick to adapt to new realities is the key to finding potential future multibagger stocks.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

India – our country is full of diversity, culture, colours and heritage. We all know this, as our schoolbooks gloriously capture this beauty. But India is much more.

India has been growing rapidly over the past few years, especially post-liberalization in 1991.

Before I talk about this growth, what immensely hurts me is that India’s image is still often projected as ‘land of snake charmers’.

To this, I remember a beautiful reply by our Prime Minister Narendra Modi in 2019.

“They are forgetting the fact that India has moved ahead of snake, it is moving ahead with ‘mouse’. They are not snake-charmers anymore, they now use the mouse of a computer.”

The above statement captures the rapid growth in the IT sector, digital revolution and innovation that India has witnessed over the last few years.

How India has evolved with regards to the innovation, GDP growth, GDP per capita, and industry growth with time?

1. Innovation Index

There are many indices developed to capture the innovation of different countries. To understand how India has performed in terms of innovation capabilities and results, we will take reference of the Global Innovation Index (GII) published by Cornell University, Insead. As per GII data, India’s performance on the world stage concerning innovation is consistently improving. Thanks to the initiatives introduced in recent times (Digital India, Startup India, Atal Innovation Mission), the country’s innovation ecosystem has had a positive impact.

Year	GII Rank	Total Countries
2014	76	143
2015	81	141
2016	66	128
2017	60	127
2018	57	126
2019	52	129
2020	48	131

Source: Global Innovation Index

R&D Expenditure (% of GDP)	2000	2005	2010	2015	2018
World	2.06	1.96	2.02	2.09	2.27
India	0.75	0.82	0.78	0.69	0.65
China	0.89	1.30	1.71	2.06	2.18
Mexico	0.30	0.39	0.49	0.43	0.31
Brazil	1.04	1.00	1.16	1.34	1.26*
Thailand	0.24	0.21	0.36**	0.61	1.004*
Russia	1.05	1.06	1.13	1.10	0.99
Argentina	0.43	0.42	0.56	0.62	0.54*
South Africa	0.71#	0.86	0.73	0.79	0.83*

* Data for 2017, ** Data for 2011, # Data for 2001   Source: World Bank

Irrespective of improvement in GII ranking, its expenditure on research and development presents immense scope for improvement. As seen in the above table, its R&D expenditure is impressive when compared to other developing economies like Mexico and Argentina. However, to mark its footprints on the globe, it needs to work holistically to upwards these trends, which is comparable to the level of BRICS economies.

2. India’s Share In Global GDP

India has come a long way – from a share of 1.70% in 1980 to more than 3% by 2020 in the world GDP.

Here is another exciting data – In 2000, with a contribution of 1.41% to the world’s GDP, India ranked 13th based on % share in world GDP. Now, it is ranked 5th. In recent years, it has continued upward trajectory to enter the list of world’s top 5 economies, even ahead of other countries such as the UK and France.

Rank for FY19	Country	GDP (in $ tn)	% of Global GDP
	World GDP	87.5	100
1	US	21.4	24.5
2	China	14.3	16.3
3	Japan	5.1	5.8
4	Germany	3.9	4.5
5	India	2.9	3.3
6	UK	2.8	3.2
7	France	2.7	3.1
8	Italy	2.0	2.3
9	Brazil	1.8	2.1
10	Canada	1.7	1.9
	Top 10 countries	58.6	67.0

#3. GDP Per Capita

In simple terms, GDP Per Capita of a country is nothing but a measure of a country’s economic output that accounts for its number of people. It is calculated as the GDP of a country divided by its population. Though China registered the fastest growth of 13% over the last 28 years, India has been growing at a rapid rate of 7% as compared to other emerging economies such as Russia, Brazil and Mexico.

	1991	1995	2000	2005	2010	2015	2019	Avg growth rate in last 28 years
India	303	373	443	714	1357	1605	2104	7%
Russia	3490	2665	1771	5323	10674	9313	11584	4%
Mexico	3661	3928	7157	8277	9271	9605	9863	4%
Brazil	3975	4748	3749	4790	11286	8814	8717	3%
Thailand	1716	2846	2007	2894	5076	5840	7808	6%
US	24342	28690	36334	44114	48467	56822	65118	4%
China	333	609	959	1753	4550	8066	10261	13%

#4. Ease Of Doing Business

This rank is based on various indicators such as – regulation and laws for starting a business, construction permits, registering property, getting credit, paying taxes, getting electricity, trading across borders amongst many others.

The country ranked 77th among 190 countries in 2018. Sustained economic reforms to address the business challenges, helped India earn applause from the world and jump to 63rd place in 2019.

Ease of doing business	2011	2012	2013	2014	2015	2016	2017	2018	2019
India\’s rank	132	131	134	134	131	130	100	77	63

#5. From Traditional to Modern

Talking about India, India has come a long way. While agriculture generated approx. 60% of the country’s employment opportunities in 2000, the people employed in this sector stands at 41.5% today.

% of total employment   2000 2010 2020 Agriculture 60% 51% 42% Services 24% 27% 32% Industry 16% 22% 26%	% of total employment		2000	2010	2020	Agriculture	60%	51%	42%	Services	24%	27%	32%	Industry	16%	22%	26%	Value added, % of GDP   2000 2010 2019 Agriculture and allied 22% 17% 16% Services 43% 45% 50% Manufacturing 16% 17% 14%	Value added, % of GDP		2000	2010	2019	Agriculture and allied	22%	17%	16%	Services	43%	45%	50%	Manufacturing	16%	17%	14%
% of total employment
	2000	2010	2020
Agriculture	60%	51%	42%
Services	24%	27%	32%
Industry	16%	22%	26%
Value added, % of GDP
	2000	2010	2019
Agriculture and allied	22%	17%	16%
Services	43%	45%	50%
Manufacturing	16%	17%	14%

Over the last few years, India’s dependence on the services and manufacturing industry has been growing at a steady pace. This transition from the traditional sector (agriculture) to the modern industry (services + manufacturing) will act as a significant catalyst for Make in India and other government initiatives. This in turn will propel growth and development for the country.

Projections Going Forward

India’s growth trajectory till now has been quite impressive. But why I am telling you all this?

Considering India’s GDP growth, I have been hearing a lot of negative news that India’s growth has been impeded and $5 trillion economy is a distant dream. I agree that $5 trillion milestone has been postponed a bit, however, considering the on-ground activities, we are well-placed for the next phase of growth.

The growth story of India remains robust and resilient due to faster than expected recovery, economic reforms, demographic dividend of the country, digital transformation, employment opportunities backed by Skill India, Make In India and government’s vision to adopt China Plus One Strategy.

The growth on the world stage has been impressive until now. Backed by robust fundamentals, India is expected to grow leaps and bounds over the coming years. And with many high-frequency data points such as manufacturing PMI, services PMI, GST collections, auto sales, etc. back to pre-covid levels, there\’s no reason why we cannot replicate the same growth (mentioned above) as we did in previous years.

Goldman Sachs revised FY21 India’s growth forecast upwards at -10.3%. The initial forecast was a contraction of 14.8%. However, in its global economic analysis report titled ‘V(accine)-Shaped Recovery’, Goldman Sachs also forecast India’s FY22 GDP growth at 7.3%, which is one of the highest among the world’s top 10 economies. Isn’t that an encouraging news?

Having talked about the economy and its growth saga, why should an Indian investor care about all this?

Indian stock markets will always follow the Indian economy

If the economy grows, quality businesses will surely have to grow and in turn the Indian stock markets will also grow. And to gain the most out of this, the mantra is simple – Invest in Companies That Drive This Growth.

To make things easy for you, our team of experts have created a list of 20-25 multibagger stocks after detailed research. Yes, these are the stocks which will grow by 4-5 times over the next 5-6 years as India grows. Click here to invest in them.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

I recently got a Whatsapp forward from a friend of mine. Too busy with my routine work, I ignored the post as we usually receive many such forwards on a daily basis.

The very next day, I received a call from Deepak, the friend who sent me the post asking me if I had checked out his Whatsapp message.

When I replied negatively, he said: ” Just check it out once. It is important news which might impact the share price of Reliance Industries in the coming days”.

Not able to control my curiosity, I stopped all my work and checked out his post which spoke about how the launch of Elon Musk’s revolutionary satellite-based internet service Starlink in India would pose a significant threat for Reliance Jio as early as 2021.

It is said that ‘Half knowledge is a dangerous thing’. So to understand this post in detail, I decided to dig deeper and take a detailed look.

When Mukesh Ambani launched the Reliance Jio service in 2016, it was a gamechanger. With a disruptive tariff offering high-speed 4g internet services along with free voice calls Reliance Jio’s move put other telecom players like Bharti Airtel, Reliance Communications, Vodafone, and Idea on the backfoot.

While Bharti Airtel managed to hold its ground and emerge as Reliance Jio’s biggest competitor, Reliance Communications shut down its business under the burden of massive debt. Vodafone and Idea which got merged to form a bigger entity Vodafone Idea, now renamed as VI is still struggling to stay afloat due to its massive debt and outstanding dues for spectrum.

In a short span of fewer than 5 years after launch, Reliance Jio has become a top player in India’s telecommunications industry.

Can the arrival of a new disruptor, Starlink launched by Elon Musk, a man known to do the unthinkable topple Reliance Jio?

Keep reading to know…

What is Starlink internet service, and how does it work?

Imagine you are climbing on a mountain, far away from civilization, and want to transmit your pics live to your loved ones or do video call. Starlink internet service allows you to do that. Get connected to high-speed internet anywhere in the world without the requirement of wired infrastructure or cellphone towers.

A constellation of thousands of small satellites orbiting around 350 miles above the Earth beaming high-speed internet signal offers internet access from virtually anywhere on Earth. A recent performance test revealed that the service was capable of download speeds of between 102 to 103Mbps, & upload speeds of 40.5Mbps, with a latency of 18 to 19 milliseconds.

“Once these satellites reach their position, we will be able to roll out a fairly wide public beta in the northern USA and hopefully southern Canada,” Elon Musk said in a recent tweet.

Starlink internet service has been running a private beta since July in some parts of the USA.

“Other countries to follow as soon as we receive regulatory approval” stated Musk in another tweet.

Other players in the segment

Reliance Jio’s biggest competitor in India, Bharti Airtel owns a significant stake in OneWeb. OneWeb is currently owned by a consortium of the UK government and Bharti Global, which helped the satellite company stave off bankruptcy. Bharti Global is the overseas arm of Bharti Enterprises — the holding company of Airtel.

In December 2020, OneWeb launched 36 satellites with the objective of launching high-speed internet services across key global markets towards the end of 2021. The company also intends to launch the satellite-based high-speed internet service in India by mid-2022.

Why Elon Musk’s Starlink won’t be a significant threat to Reliance Jio?

India’s telecommunications market is very price sensitive. Before the arrival of Reliance Jio in 2016, data packs were priced around Rs.250 for 1 GB. Post the launch of Jio data prices came down to an average of Rs.12 to 14 per GB as other players in the industry were forced to cut the prices to match Reliance Jio’s tariff.

Reliance Jio’s competitors like Airtel were also offering 4G in a limited circle in 2016, but the low price was a significant reason why the majority of customers opted for Jio. Media reports indicate Starlink plans to provide its Internet services for around $80 per month and a worldwide rollout of the service is expected by the end of the year 2021.

Also currently no clarity about whether Starlink will offer voice calling services based on Voice over Internet Protocol (VoIP) (a technology that allows you to make voice calls using a broadband Internet connection).

Before Starlink, Motorola backed Iridium and Teledesic backed by Microsoft Chairman Bill Gates, Craig McCaw, founder of McCaw Cellular Communications, and Saudi Prince Alwaleed bin Talal had attempted to build and launch satellite constellation based internet service but failed due to enormous debt.

Starlink is a boon for connecting remote areas with poor or zero infrastructure. However, it works from a fixed location using an antenna, router, and a power source. Of course, it can be carried anywhere but cannot be as handy as a cellphone.

So the question of being a significant threat to Reliance Jio in the future does not arise as it is just like comparing an apple with an orange.

Going back to the Whatsapp forward, the inspiration behind this article, it is best to take such forwards with a pinch of salt.

To invest in a portfolio of 20-25 multibagger stocks click here.

This article was last updated on 26th Feb 2021.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Last week in an exchange filing, Vedanta Resources stated that the delisting offer for its Indian subsidiary, Vedanta Ltd. had failed as the company could not garner the required number of shares.

In this article, let’s take a detailed look at what it means for the shareholders.

In May 2020, the promoters of Vedanta had announced a delisting offer through a process of reverse book-building. Later in June, 93.3% of all shareholders and 84.3% of public shareholders approved the proposal to delist the shares of Vedanta in a special resolution by postal ballot. The floor price for share tendering was set at Rs 87.25.

The reverse book building process for public shareholders to tender their shares began on October 5 and concluded on October 9.

Why the promoters of Vedanta decided to delist the company?

The intended delisting of Vedanta Ltd was aimed at providing the group with enhanced operational and financial flexibility as well as support an accelerated debt reduction program in the medium term. Vedanta has nearly $7 billion in debt out of which around $1.9 billion is maturing in the next 12-15 months. Vedanta is the only operating entity for the company, which is dependent on the subsidiary’s dividends to fund interest obligations.

Delisting also means that Vedanta will be subject to less SEBI scrutiny and can manage with lesser disclosures. Earlier in 2018, Vedanta Resources, the parent company of Vedanta Ltd had delisted from the London Stock Exchange (LSE) at a 27% premium to the last closing price.

What is the delisting process through reverse book building?

Reverse book building refers to a process by which a company which intends to delist from the exchanges, decides on the price that needs to be paid to public shareholders to buy back shares. The company has to follow a detailed regulatory process for delisting with the first step being the appointment of a merchant banker to oversee the electronic bidding process.

The company then advertises the offer with a letter detailing the floor price for the buyback to all public shareholders. The reverse book building process through an online, fully automated, screen-based bidding system is then facilitated by the stock exchanges. Shareholders holding shares of the company can then approach their stock brokers to convey their bids to the company.

The tender price at which the shareholder is willing to sell his shares needs to be equal or above the floor price set by the company. The final buy back price will be determined only after the offer closes after aggregating all shareholder bids. Once the price is finalised, all offers below or equal to this final buy back price will be accepted.

The delisting offer is termed successful only if a minimum quantity of shares, as defined by the Delisting Regulations, are tendered by shareholders and accepted by the company.

What went wrong with the delisting of Vedanta?

Vedanta announced that it was not able to garner offers for the 134 crore shares required for the delisting process to go through. It was only able to gather around 125 crore shares instead.

A significant reason why the delisting of Vedanta failed is the considerable price difference between the price offered by the company and the price offered by shareholders and institutional investors.

According to media reports, while some investors had offered their stakes at around Rs 170, many investors, including institutional investor, LIC which holds 6.37% stake in Vedanta, had offered shares for Rs 320. As a result, Vedanta would have been required to pay almost double per share than what they had anticipated for a significant proportion of shares.

The road ahead for Vedanta’s shareholders

In a filing made by Vedanta, the company said that the promoters will not acquire any shares tendered by the public shareholders under the delisting offer and all the shares tendered will be returned to the respective public shareholders.

As of now, the verdict is out. Shareholders have rejected the delisting price offered by the company considering it as a raw deal. Only time will tell what the company’s next move would be. The next buyback, if ever it happens, will most likely to be done at a higher price.

After the failed attempt at delisting, the promoters of the company have raised their stake. In January 2021, the company launched a voluntary open offer to hike its stake by 10 percent. Currently, promoters hold a 55.11 percent stake in Vedanta, while 44.55 percent shares in the company are held by public shareholders.

When it comes to voluntary delisting of shares of a company, some shareholders may not be in favor if it, especially if they have purchased the stock at higher prices. However, sometimes things may be beyond their control if the majority of shareholders agree to the final buyback price. Hence it is very important to adequately diversify one’s portfolio by investing in 20-25 stocks for optimum wealth creation. Click here to get started now.

This article was last updated on 26th Feb 2021

Read more:  How Long-term investing helps create life-changing wealth – TOI.

K A L , A A J  A U R K A L

1971 Movie

Three generations of a family, decide to live together. However,their different mindsets create conflicts with each other and disrupt the harmony of the house.
However, in the end all of them realise that they have to respect each other to live a good life.

2020 Equity Portfolio

Similarly, while investing in the equity markets, we have to analyse data which may pertain to the past situation, present situation or situation likely to emerge in the future. All of these data have to be given equal respect without letting one set of data drive the investment decisions. This will ensure harmony in the mind (read portfolio).

KAL (YESTERDAY)- MAR-JUN 2020

QUARTERLY GDP GROWTH RATE

FY21 will see negative GDP growth (anywhere between 3%-6%) first time after 40 years. Other countries are also in the same boat. As per IMF, the global economy is expected to contract by 4.9% in 2020: advanced economies by 8%, emerging markets by 3%; the bounce back in 2021 is also likely to be sharp: 5.4%, 4.8% and 5.9% respectively.

1QFY21 CONTRACTION COMPARISON GLOBALLY

Q1FY21 contraction is highest because of the most stringent lockdown globally. However, the fatality rate was also amongst the lowest, at less than 2% vs. 5-12% in most countries.

Taking clue from China where GDP rose 12% in Q1FY21 vs. 10% contraction in the previous quarter, India’s GDP should also bounce back sharply in Q2FY21 and then improve in subsequent quarters thereafter.

Q1FY20 RESULT TREND

COVID CASES COUNTRY-WISE- JUNE 2020

HIGH LEVEL OF FUND RAISING BY CORPORATES DURING APR-AUG 2020

AAJ (TODAY)- JULY-SEPT 2020

What are we hearing/ reading – Key events during month of August 2020

The on-ground activity seems to be normalizing in July faster than expected. Our channel checks and on-ground readings suggest:

*If sales was 100 units pre Covid (Jan/Feb), then current sales is 75 units or 85 units as case may be.

July & August has thrown many positive surprises

•  Manufacturing PMI at 52.2 (vs 51.4 yoy) in Aug, the first expansion since lockdown.
•  E-way bills hit Rs. 13.8 lacs crores, which is 97% of its year ago period.
•  Rail freight at 95.2 MT, which is 97% of its year ago period in July.
•  Passenger vehicles and 2wheelers in August are at 95% & 90% of its year ago period.

AUTO MONTHLY DISPATCHED TREND

COVID CASES COUNTRY-WISE- SEPTEMBER 2020

K E Y  E V E N T S  D U R I N G  M O N T H  O F  A U G U S T  2 0 2 0

• Border tensions between India and China erupted once again; Government of India banned another 110 Chinese apps. 
• India entered the list of top 3 countries hit by coronavirus as confirmed cases rose to +35 lakh, but total cases and deaths as a percentage of the population remained much lower than other severely affected countries .
• GST collections in August was at Rs. 86,449 crores (down just 12% YOY), but lower than Rs. 87,422 crores in July and Rs. 90,917 crores in June. There is strong chance we should revert back to monthly run-rate of Rs. 100,000 crores per month starting October 2020.
• 10 year bond yields went below 6% in Jul’20, after a gap of 12 years.
• FIIs were net buyers of $5 bn during August. the highest in 2020.

KAL (TOMORROW)-  OCT-DEC 2020 & BEYOND

E-Commerce order volume growth has been 17% during Apr-Jun 2020 led by smaller cities and first time consumers; 66% share of Tier 2 and beyond, 53% share from Tier 3 and beyond.

Telecom firms get breather in AGR case, SC allows them 10 years to clear dues; Only 10% to be paid before 31st Mar 2021.

The second round of moratorium closed on 31st August 2020. However, retail borrowers may still get relief on repayment and tenure through a one-time restructuring scheme, which is in works. The proposed loan restructuring will enable banks to extend the term of retail loans by two years without increasing customers’ EMI amounts (equated monthly instalments). At present, loan accounts that are in default for not more than 30 days as on 1 March 2020 are eligible for restructuring.

RAPID IMPROVEMENT IN THE ON-GROUND ACTIVITY IN JULY/AUG LIKELY TO CONTINUE

K E Y  U P C O M I N G  E V E N T S

Events in the coming months that will provide swings to the markets are:

Vertical unlock state wise & opening of remaining pockets

Ramp-up in demand post ease of vertical/micro city/state lockdown in select areas. Opening of
food courts, entertainment zones, restaurants, bars, multiplex, gym, clubs etc.

US Presidential election (Nov\’20)

The U.S. Presidential Election will be top event to watch out for in coming months.

The state election in India (Bihar) in Nov\’20
The ruling party at Centre & State would have to avoid significant reforms which could derail the economy again and instead focus on measures which will enhance domestic consumption.

R e s e a r c h & R a n k i n g  V i e w
It may not be a bold statement to make that bottom of the market is behind us.

What will lend support is the $12 tn global stimulus packages, advancement in research on vaccine, cure and markets/people looking beyond pandemic (not fretting as much as in Mar/Apr). We expect Nifty consolidating in the range of 11,000-12,000 in the near term and then move past 12,000 post Oct\’20. We believe investors should consider investing half of their investible surplus now with the balance half in a staggered manner over the coming 2-4
months depending on advancement towards availability of a vaccine and
business return to complete normalcy.

For a detailed assessment, we had recorded a webinar a couple of days back. You can view the
same here.

Best Practices For Wealth Creation

Rather than wait for Nifty correction, we suggest:

• Staggered buying approach: Use every dip as an opportunity to buy.
• Stock specific approach: Identify a few solid businesses that you would like to own; start accumulating them.
• Long-term approach: Keep a horizon of 3-5 years while investing in these businesses.     
• Stay focused: Avoid getting distracted from information overload/distraction/rumors via forwards on WhatsApp/Twitter/news channel.
• Trust time in the market: Don’t try to time by selling portfolio now and reentering at lower levels later.

Always remember, our country of 1.37 billion people is vastly underpenetrated in most aspects vis-à-vis developed countries. History has shown us that crisis when combined with above point creates ample multi-year opportunities for growth and wealth creation, provided you\’ve invested your money in the right hands.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

#BoycottChina has been trending on social media from the last few days. But is it as easy as it seems? To get into that, we have to take a sneak-peek into a few details…

Knowingly or unknowingly, most of us have used Chinese products in our day to day life. In fact, many of the electronic products we purchase in India, from Indian companies are also manufactured in China.

To give you an example, I recently purchased an OTG online from a leading brand in India which makes everything from motorcycles to household electrical appliances. However, I was very disappointed to see ‘Made in PRC’ printed on the box of OTG after I took the delivery.

So, considering this dependence on Chinese products, is it possible to boycott China? And how did it all start?

The story traces back to the period of lockdown in China to prevent the spread of Coronavirus, which halted the global supply chains for several industries in India as well as globally, which depend on China for both raw materials and finished goods.

Also, a few weeks back, PM Narendra Modi in his speech to the nation, stressed the need to make India self-reliant in the wake of acute shortages faced in specific equipment in India due to lockdown in China. In one of previous articles we wrote about how India can become more self-reliant by decreasing its dependence on China. You can check out the article here.

But was this enough justification for boycotting China?

The final nail in the coffin was the rising border tensions among India and China, that made it even more critical for India to be self-reliant than ever before.

But with a massive imbalance in trade between India and China presently, some are sceptical whether this is indeed possible. Afterall China is India’s biggest trading partner with India importing everything from toys, stationery, electronics, gems, chemicals, pharmaceutical raw materials and heavy machinery from China.

So, does this mean this is just a distant reality, assuming if it ever happens? Wait…

Boycotting China – A reality or a dream?

If you see, few sectors have been already doing that. Before I tell you about that, let me tell you a real-life incident.

In 2005, an Indian company partnered with a Chinese company to launch 100 cc motorcycles in India. A retail shopkeeper whose shop is just outside my building was one of the first people in our country to buy it.

I still remember the day he bought it and parked outside his shop, a small crowd had gathered in awe with many asking questions about the motorcycle and its brand etc. The most significant point which caught everyone’s attention was the dirt-cheap price of Rs. 30,000. On contrast, market leader Hero Honda Splendor motorcycle was retailing for Rs.44,000.

Fast-forward a year later, one day when I went to the shop, I noticed the shopkeeper’s bike which was covered with tons of dust and bird-droppings as it had not moved for several days. Out of curiosity when I asked him the reason why he is not driving the bike, he replied he was unable to source some replacement parts which had worn out in the bike.

Till date, the bike is still parked there rusted to the core and giving a grim reminder of cheap quality which, the Chinese were initially famous for. In 2005 when cheap Chinese motorcycles entered the Indian market, many predicted the end of Indian motorcycle companies like Hero MotoCorp, Bajaj Motorcycles and TVS Motors.

However, these Indian companies did not take the competition lightly. They were already prepared for such a situation for many years. And for this, they had invested significantly in developing world-class R&D teams, pumped in significant investments for the same and hired the best automobile engineers and designers they could afford.

The result of that was seen in terms of their consistent market share over the years despite the entry of Japanese motorcycle companies like Honda, Suzuki, Yamaha and Kawasaki, who decades back were the technology partners of Indian motorcycle companies.

But the success stories of Indian motorcycle companies like Hero, Bajaj and TVS do not stop there. Today India is the largest motorcycle manufacturer in world the beating even China. KTM which sells most bikes in Europe, is partly owned by Bajaj. Indian motorcycle companies have been on a global acquisition spree to reach global markets with TVS Motors acquiring the iconic British brand Norton, Mahindra Group acquiring Czech brand Jawa and British brand BSA.

Recently Bajaj Motorcycles have also tied up with Triumph Motorcycles to produce medium-capacity 200-700 cc motorcycles in India. All these efforts by manufacturers of Indian motorcycle companies have shown impressive results.

India exports motorcycles to its neighbouring countries like Srilanka and Bangladesh as well as countries in Africa, South America, Gulf and South East Asia.

So, don’t be surprised the next time when you spot a TVS motorcycle zooming past you while on a trip to Pattaya or if a motorcycle taxi you hire in Lagos turns out to be a Bajaj motorcycle.

Apart from beating the Chinese in the two-wheeler segment, India also has managed to establish a robust two-wheeler ancillary manufacturing and supply chain.

India’s two-wheeler exports increased by substantially in FY2019-20. The total two-wheeler exports, including motorcycles, scooters and mopeds, reached 35,20,376 units in FY2019-20, as against the 32,80,841 units exported FY2018-19.

The question now boils down to – Can we achieve the same success in other sectors as well?

It all boils down to the will of the manufacturers and of course, government support in the form of cheap and 24×7 electricity, improved labour laws and better infrastructure. With this necessary boost, can India become self-reliant? Definitely.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Ever since the start of the lockdown towards the end of March, we’ve been hearing numerous stories on more people facing financial crunch.

Some of them have lost their jobs, some of them have had to face pay cuts, some are facing delayed salaries. Read more about how to deal with pay cuts or job loss.

Things have taken a turn for worse for some, with few even resorting to extreme measures like suicide. Today, I want to share with you how a 74-year-old, retired man is living through the crisis with ease.

And yes, he has invested a substantial part of his savings in direct equities and mutual funds – and he is barely worried about them.

Why? How? What’s the secret formula he has followed?

Do you have these questions in mind? I am sure you do!

His words of wisdom

In his words: “I’ve been investing in the stock markets since 1985. I’ve seen many crises that the stock markets have faced. Initially, I used to panic, but then I knew that the fundamentals of the companies I had invested in were strong. After a couple of falls, I didn’t even bother. If I can give an example, during the fall of 2008, every single person I met told me to sell off everything and hold on to cash, I didn’t’.”

And he continued: “I’ll just advice you 3 things if you want to enjoy financial freedom:

1. Avoid debt as much as you can. Taking even a small loan can put you into a habit of living on loans.
2. Saving & Investing is not a one-time activity – it is a lifelong process.
3. Never indulge into panic buying or selling – even if you are at a risk of losing out on some profits or incur some losses.”

Well, I am talking about my very own father and when I see him enjoying his retired life (tension free), I am sure what he says makes sense.

And especially when I see people around buying those latest phones, gadgets, travel and do a hell of a lot of things on EMIs, and indulge into either short-term trading or panic buying/selling of their investments and come times like these, financial lives go into a complete mess. And I am sure if the financial part of the life is in a mess – it does affect the overall atmosphere at home as well. Right?

It is for reasons like these, that one needs to understand, plan & invest, not just for himself/herself, but by and large for the peace and prosperity of his loved ones as well.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

A few days back Billionaire Gautam Adani led Adani Power to announce its intention of Delisting of shares from Indian stock exchanges with its promoter firm Adani Properties, proposing to buy out the company’s publicly listed shares.

The promoter group collectively holds 74.97% of the paid-up equity share capital in the company, whereas public shareholders own 25.03% currently. The company has appointed a merchant banker named Vivro Financial Services Pvt Ltd to assess the proposal to delist its equity shares from NSE and BSE.

Headquartered at Ahmedabad in Gujarat, Adani Power Limited is the power business subsidiary of Indian conglomerate Adani Group. The company is India’s largest private thermal power producer, with a capacity of 12,410 megawatts across six states in India.

This move by the Adani group to delist Adani Power shares comes close on the heels of delisting plans of Vedanta Ltd. announced by its Founder & Chairman, Anil Agarwal.

Why Adani Group Stocks Are Falling? – Research & Ranking

Why Adani Group is planning on delisting of Adani Power shares?

As per an official statement issued by Adani Power, the proposed delisting of Adani Power shares is expected to enhance the company’s operational, financial and strategic flexibility.

“The objective of the delisting proposal is to enable the promoter group to obtain full ownership of the company and provide enhanced operational flexibility,” stated a disclosure issued by Adani Power.

This has left many unresolved queries in the minds of investors, with many not sure of how the delisting of shares will affect their investment.

Through this article, let’s take a look at the process of delisting of shares and its impact on the shareholders from a layman’s perspective.

Adani’s race to triple Adani green energy capacity within the decade

What is meant by the delisting of shares?

Delisting of shares refers to the removal of a company’s shares from a stock exchange platform, as a result of which the shares can no longer be traded on the exchange. Delisting of shares can be of two types i.e. voluntary delisting or involuntary delisting.

What is involuntary delisting of shares?

In the case of involuntary delisting of shares, the delisted company, its full-time directors, promoters and group firms are barred from accessing the securities market for ten years from the date of compulsory delisting. Involuntary delisting of shares can happen due to several reasons, such as if the company becomes bankrupt or fails to meet the compliance standards set by the exchange.

In the case of involuntary delisting of shares, the promoters of the delisted companies are required to purchase the shares from public shareholders based on a fair value determined by the independent valuer. In this scenario, investors don’t have any other option.

Kingfisher Airlines, Brandhouse Retails, Elder Pharmaceuticals and Varun Industries are some well-known examples of the companies whose shares were involuntarily delisted in the last few years.

What is the voluntary delisting of shares?

Voluntary delisting of shares happens when the company decides that it would like to purchase all of its shares or merge with another company. In case of voluntarily delisting, the company typically offers shareholders a premium over the current share price in the market.

UTV Software is an example of a company whose stocks got voluntarily delisted after Disney acquired the company.

As per the guidelines prescribed by SEBI, in case of a voluntary delisting of shares, the company has to follow the below process:

• Company will call for a board meeting after giving written notice to all board members. The proposal for delisting shares is floated, and a resolution to the effect is passed.
• Obtain a prior approval of shareholders by a special resolution passed at its general meeting.
• Make a public announcement through newspapers with detailed explanation and justification for the proposed delisting.
• Submit an application to the relevant exchange in the form specified by the exchange, along with a copy of the special resolution for delisting of shares.
• Promoters will offer an exit opportunity to the shareholders at a floor price, which shall be calculated on the basis of the average of 26 weeks traded price quoted on the stock exchange.

There are several more steps involved until the final delisting is completed. From a shareholder’s perspective, a company which is delisting its shares voluntarily will keep its shareholders informed at different stages.

In case of delisting of Adani Power shares, given the low valuations due to market correction in March 2020, it can be considered as an attempt by the promoters to increase their stake at attractive prices. In the last 12 months, share prices of Adani Power fell from a high of Rs. 73.75 to the current level of Rs. 37.80, making delisting an affordable option for promoters. Retail shareholders who entered the stock at high prices, however, would be the biggest losers.

Events like voluntary delisting may be beyond the control of shareholders even if some shareholders of the company may not be in favour of it.

Hence it makes sense to invest in a well-diversified portfolio of 15-18 stocks for optimum wealth creation and diversification of risk. Click here to get started.

Create Wealth: Make your money work while you are asleep

Airlines stocks in India, have hit a rough patch amid rising Covid-19 pandemic associated lockdowns and travel restrictions across the country. All commercial passenger flights which were suspended in the country from March 25, to curb the spread of the novel coronavirus were resumed only on May 25 after a 2-month halt.

Budget airline SpiceJet’s share prices are currently hovering around the Rs. 55 levels, while market leader Indigo’s share prices are trading at around Rs.1080 levels.

The above chart depicts SpiceJet share prices over the past 1-year period

Compared to this, just a year back, the share prices of SpiceJet and Indigo were trading at around Rs.145 and Rs.1664 levels respectively.

The above chart depicts Indigo share prices over the past 1-year period

At current levels, SpiceJet and Indigo share prices are trading at significant discounts compared to their share prices a year ago. This has brought a significant question across the minds of many investors – are they value buys or falling knives?

To help you resolve this dilemma and make an informed decision, here\’s a detailed analysis.

Despite favourable oil prices, SpiceJet and Indigo Share prices may take some time to recover

Before the crash in global oil prices, this year, aviation turbine fuel prices in India have been among the highest in the world. With oil prices crashing on account of low global demand and price war among oil-producing nations, aviation turbine fuel prices have also come down substantially, providing some relief to airline companies in India. Aviation turbine fuel (ATF) accounts for as much as 40% of the costs incurred by airlines in their daily operations.

Should you include SpiceJet and Indigo shares in your portfolio?

To find out the answer to this question, let\’s go back a little in history. Fifteen years back, Jet Airways was the number one, airline company in India. Today the company exists only on paper, unable to find a suitable buyer despite several attempts.

The bankrupt airline, which was grounded in April 2019, owes over Rs 8,000 crore to various banks. In June 2019, The National Company Law Tribunal (NCLT) had admitted the insolvency petition filed by the lenders\’ consortium led by State Bank of India against Jet Airways.

Total liabilities of Jet Airways exceed over Rs. 26,000 crore, including Rs. 10,000 crore of vendor dues, Rs. 8,500 crore along with interest owed to the lenders, over Rs. 3,000 crore in salary dues, and over Rs. 13,500 crore in accumulated losses over the past few years.

Kingfisher Airlines, another high-flying airline which started operations in 2005 came to a grounding halt in 2012 after mounting debt. The crash of the company also brought the downfall of the company’s founder and flamboyant liquor baron, Vijay Mallya. Once known as the ‘King of good times’ he is currently battling legal cases against him filed by lenders over non-payment of dues and financial mismanagement.

The state-owned airline, Air India too has a mountain of piling debt. The only reason it has still managed to stay afloat till date is timely financial help from the government.

As per to publicly available data, the national carrier posted a provisional net loss of ₹8,556.35 crores in 2018-19 and the airline’s accumulated losses have ballooned to about 69,575.64 crores in the last ten years.

An attempt by the government to privatize the debt-laden national carrier in 2019 had failed as there were no buyers.

Global outlook for the aviation sector looks grim

According to a recent forecast made by the International Air Transport Association (IATA), airlines across the world are set to lose as much as $84 billion in the current year due to the Coronavirus pandemic. The association also said that with most of the world\’s airliners currently parked revenue is expected to decrease to $419 billion from $838 billion last year.

Don\’t just look at SpiceJet and Indigo Share prices. Look at their business models and sector in which they operate.

The airline business is a risky business with high capital expenditure and low yields.

Here are a few reasons why airline business is very risky in India:

Cut-throat competition

Intense competition among airlines in India to capture market share has resulted in cut-throat competition and slicing of fares which results in less operating margins.

Deprecation of Rupee

With Indian Rupee falling to around Rs. 75 levels against the dollar, aircraft lease rentals have become costlier. It has also increased the cost of aircraft maintenance, ground handling and parking charges abroad.

High taxes on Aviation turbine fuel (ATF) 

ATF prices in our country are among the highest in the world. The reason behind this can be attributed to the 11% excise duty charged by central government and up to 30% state-level taxes levied by the state governments.

Flying routes under route dispersal guidelines (RDG)

According to government rules under route dispersal guidelines (RDG), airlines are required to operate a certain percentage of flights on smaller routes. Government’s intention behind this rule is to establish connectivity with remote and less accessible areas such as Jammu & Kashmir, Andaman & Nicobar Islands, North-Eastern India, Lakshadweep and airports in Himachal Pradesh and Uttarakhand. Airline companies in India, however, have been claiming that flying on such routes are unviable and affect their overall profitability.

Bottom line

During the last few years, the aviation industry in India has emerged as one of the fastest-growing sectors in the country. India currently ranks fifth in the world in terms of domestic civil aviation and is expected to become the third-largest air passenger market by the year 2024.

Covid-19 may have put a temporary speed-breaker to India’s aviation industry which has enormous growth potential. With growing purchasing power among the middle class, air travel would definitely become the preferred mode of transport in the next few years.

However, unless the issues affecting the profitability of airline carriers like bringing ATF under GST regime, freedom to opt-out of non-profitable routes, high taxes and airport charges are taken care of, airline carriers in India will continue to bleed financially.

So rather than considering a dip in SpiceJet and Indigo share prices as a reason to invest, look at the overall picture of the aviation sector in India to make an informed decision.

There are many investment opportunities available in the market currently. Click here if you wish to build a solid and well-diversified portfolio of 15-16 stocks that don’t just have the potential to survive this pandemic, but also having a high potential to grow manifold in the coming time.

The telecom sector in India is on fire these days. From tech giants like Amazon, Google and Facebook to large private equity firms like Silver Lake, Mubadala, Vista Equity Partners, General Atlantic and KKR, the one sector in which every company across the world wants to invest in currently is the telecom sector in India.

The latest to join the bandwagon is Bharti Airtel with media reports emerging on Friday that American multinational conglomerate, Amazon is planning to buy a stake in it. The alleged investment reports, if true, would translate to Amazon acquiring around 5 percent stake based on the current market value of Bharti Airtel.

The immediate impact of the news was seen in the stock with Bharti Airtel Share prices gaining as much as 2.93% to Rs. 590 on the BSE on Friday morning.

However, Bharti Airtel share prices lost some of its early gains after the company issued a clarification to the exchanges saying that \”no such proposal is currently under consideration\”.

Why Amazon may be interested in buying a stake in Bharti Airtel Shares?

The telecom sector in India has seen a flurry of activities in the last two months with Mukesh Ambani’s Reliance Jio bagging multiple investments to within a short span of six weeks. Next came the news of tech giant Google’s planned investment in Vodafone Idea which the latter denied in a statement issued to BSE. Read more.

Despite intense competition from Reliance Jio, Bharti Airtel has managed to hold the fort and even staged a turnaround by raising required capital. This came even as multiple telecom companies perished over the last 4-5 years in India.

In an attempt to reduce its debt, promoters of the company had recently sold 152 million Bharti Airtel shares for about Rs. 8,500 crores in a block deal when the stock was at an all-time high. Airtel shares have risen sharply this month after it reported a massive jump in average revenue per user (ARPU) and revenues for the March quarter. This has also resulted in enormous market share gains as compared to Reliance Jio, whose average revenue per user grew only marginally.

Bharti Airtel is a strong player in the telecommunications sector in India, and its product offerings include cellular services, fixed line services, broadband, and enterprise services. Bharti Airtel also offers Digital TV Services, video-on-demand and m-Commerce services.

With digitization and work/shop from the home culture on the rise in India in a world post-Covid-19, by purchasing a stake in Bharti Airtel, the deal would help Amazon access Airtel\’s 300 million-strong subscriber base.

Should you invest in Bharti Airtel shares?

Bharti Airtel share prices have outperformed the market and have witnessed over 26% increase in the last one year.

From Rs. 353.80 on 6^th June 2019, Bharti Airtel share prices have surged to a high of Rs. 584 on 5^th June. However, this in no way implies that Bharti Airtel share prices may continue its uptrend in the near future.

The telecom sector in India is one sector where many heavyweights who once ruled the roost have bitten the dust. In 2005, Reliance Communications was the market leader. Today it is nowhere in the scene. Similarly, Reliance Jio was not there in the market before 2016, but in just four years, it has become the market leader.  Vodafone Idea which also once ranked among the top players in the telecom industry in India, is now reeling under massive debt.

Irrespective of whether Amazon invests in Bharti Airtel or not, as an investor it is your duty to exercise due caution before investing your hard-earned money. Telecom sector is highly capital intensive and operates on thin margins. On top of this, any change in technology can change the fortunes of the operators like what happened in the case of Reliance Communications which continued with the outdated CDMA technology while other players raced ahead with 3G and 4G GSM technologies.

Click here if you wish to know about best investment opportunities currently available in the market.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Let me talk to you about the Prime Minister Narendra Modi’s vision of ‘Self Reliant India’, the snags in the journey and the inherent advantages.

In his fifth address to the nation on 12th May 2020, Prime Minister Narendra Modi charted a plan to recover from the crisis, a Rs 20 lakh crore stimulus package and his vision to make India ‘Atma Nirbhar Bharat’. Read more about government’s dream of Self-Reliant India here.

In his exact words, “Friends, we have been hearing since the last century that the 21st century belongs to India. We have seen how the world was before Corona and the global systems in detail. Even after the infliction of the Corona crisis, we are constantly watching the situation as it unfolds across the globe. When we look at these two periods from India\’s perspective, it seems that the 21st century is the century for India. This is not our dream, rather a responsibility for all of us. But what should be its trajectory? The state of the world today teaches us that a (Atma Nirbhar Bharat) \”Self-reliant India\” is the only path. It is said in our scriptures – Eshah Panthah That is – self-sufficient India.”

Let me preface this story by stating that I truly believe that making India self-reliant is the only way. Now there are various ways to do it. If you listened to the entire speech of our Prime Minister, he signaled the plan to attract firms set up their manufacturing capacities in India that exit China.

But the question that arises is – Will India again miss this bus to becoming a major player? Will the 21st century truly belong to India just by turning the current pandemic crisis into an opportunity?

Well, let the time give the verdict. All we can do is fasten the seatbelt and analyze the probability of India becoming a humongous player.

Let’s rewind to the past

If you look into the past, India missed opportunities, where China won big. First in the 1990s and then in the 2000s. In 1990, China joined the World Trade Organization (WTO) and became a part of the multilateral trading system. We missed the bus here. The second was the growth of the internet which paved the way for manufacturing setup in the most competitive place. We lost here too somewhere.

And that led a strong foundation for China to become the biggest beneficiary with these two developments in place.

Please don’t take it from me. Let the numbers speak here.

In 1990, China’s and India’s GDP were more or less the same. Not much difference, right? In just 10 years, between 1990 and 2000, after China joined the WTO, China’s GDP grew 235%, while India’s GDP grew by only 46%. Also, post dot-com bubble, China grew by 403% between 2000 and 2010, whereas India grew by just 258%. The reasons can be attributed to weak labour laws, poor infrastructural growth, low productivity, which made it look like a hostile country for doing business.

But this is past. What about now, with many countries mulling the shift in the global supply chains? Considering the ongoing pandemic, many countries like U.S. and Japan are considering moving out of China or setting up ‘China plus one’ strategy. For starters, looking at ways to tap alternative supply chains to reduce dependence on one country is called ‘China plus one’ strategy.

But will India grab the opportunity and eat a major chunk of ‘China plus one’ strategy?

Well, to become a global manufacturing hub to attract firms that wish to move out of China, we need to put ourselves into the shoe of these companies that are willing to minimize their exposure to China and understand on how they take such decisions.

For that, two factors play of paramount importance.

1. Risk vs reward: The number 1 criteria would be to consider the costs and benefits while shifting their manufacturing capacities. Firstly, do they want to shift, and if yes, where? The key parameter one would look at is the rate of return on their investments. The climb in ease of doing business ranking (63rd rank among 190 countries) and low labour wages as compared to China will work in favor of India. But that won’t be enough. To become an attractive FDI destination, India needs to lay out a plan to offer the best ambience for doing business i.e. low risk and low cost of doing business.
2. The next is stability. With political stability and stable companies/institutions, India has an inherent advantage here to curate a strategy that is low risk, low cost while doing business here.

In fact, Secretary of State Mike Pompeo quoted, “The US is in talks with its \”friends\”, including India, for restructuring the global supply chains.”

Even behemoth companies are already eyeing India

Recently, I came across the news with a title ‘Apple may take a bigger bite of India’s manufacturing pie.’, which talked about a possibility of Apple shifting nearly a fifth of its production capacity from China to India.

But till then, to capture a significant chunk of the supply chain that will move out of China, India needs to build a more secured environment, work on stability and transparency of labour laws and taxation policies, while doing away with the uncertainty and ambiguity in laws.

The Modi government has started working in this direction by adopting a plug-and-play model in industrial estates to enable investors to scout for plant locations. For this, the government to promote industry and internal trade is working on GIS-based model, which will cover dozens of locations for investors to compare.

With this, it is also working on sorting technological issues and deploying electronic tracking and monitoring system for central and state-level clearances, investment clearance cell, additional funds for creating new economic zones, leveraging the inherent advantage of the states to attract investments in the country.

Now this is just one part of the story of how government shall attract companies.

What makes India attractive as an FDI investment destination is thanks to our:

• Urbanization
• Demographic dividend
• Digitization
• Sheer scale

No matter how you dissect the market segment of India, you end with the size of another country. Today, there are approximately 300 million smartphone users in India, which is the population of the U.S. Maharashtra’s population is 114 million which is slightly less than Japan’s population of 126 million. Any company that can tap the majority of any market segment will witness humongous growth in the future!

With the sheer scale, consider this: 450 mn millennials, high internet penetration with propensity to spend. The eventual outcome would be buy, buy and buy. Considering the strong and rigid consumption growth story of India, any foreign company would want to grab a pie of this spending.

To cut the long story short – well, to put it in black and white, it is difficult to say whether India will board the bus this time or not.

But considering the advantages that would work in our favour, we have our fingers crossed. If this happens, India can become more self-reliant by decreasing its dependence on China. India’s total imports from China was around $70 billion in 2018-19, with China’s share in the country’s total imports being about 14%, second after Middle-East. Also, if it is able to woo foreign companies, then nothing can deter India to emerge as a more powerful economy.

Until then, stay calm, stay patient, stay home and invest sagaciously. Not just India, this is your time as well to turn crisis into an opportunity. And you know it how.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

Today, if you read news, most of the news you are likely to come across may be quite disturbing.

If daily news about rising Covid-19 cases look repetitive, you will surely be moved by the news and photos of migrant workers making hazardous journeys from cities to their villages by foot or on overcrowded trucks. And yes, not to forget the recent locust attacks.

Covid-19 cases across the globe have touched a dangerous 5.9-million mark with over 3,66,913 deaths. Among the worst-hit countries are the United States, Spain, Russia, UK, Germany, Brazil, Italy, France, and the count is increasing every day. 

The United States happens to be the worst-hit country with positive cases toll at 1,793,530, including 104,542 deaths, followed by Brazil with 4,68,338 cases including 27,944 deaths.

India is not too far behind in the list with over 1,73,763 cases which makes it the 9^th worst affected country in the world.

With manufacturing coming to a standstill due to lockdown across many places in India, and many people losing their jobs from diverse industries such as travel, hospitality and other sectors, the economic situation looks grim. Even the number of cases of infections and deaths is rising by the day.

To add fuel to the fire, there have been other reasons to worry like the recent devastation caused by cyclone Amphan, locust menace, border tensions between India-China.  Besides these, there are also rising USA-China trade war tensions, as the USA and its allies have accused China of not doing enough to stop the Covid-19 when it originated as well as proposed changes by China in Hongkong\’s autonomy.

Stock markets in India too have also seen a huge decline with share prices falling with some random intermittent recoveries in between. India’s benchmark indices the Sensex and Nifty are trading way too below at 32,073 and 9,470 levels as compared to their lifetime highs of 42,063 and 12,385 respectively.

So overall, it does appear that as the economy is shrinking and livelihoods are being lost, stock prices are falling and there is no end in sight. If you ask, when things would be back to normal? Or when would the lockdown end? No one will be in a position to provide a definitive answer.

At this point, the answers to all these questions look quite difficult, and there seems to be a lot of uncertainty around.

However, even in such dark times, there is a light of optimism which most people are overlooking.

An exodus of companies from China could benefit India

The supply chains of many global companies suffered due to lack of materials from China in the wake of the Covid-19. Besides several countries have accused China of deliberately hiding facts about the origin of the virus. All these have created an environment where many global companies are looking at developing supply chain teams completely independent of China. India could be the biggest gainer as it has the potential for filling part of the supply chain vacuum that is created by companies looking to shift from China.

Savings of around $40 billion in crude oil spending

Falling oil prices have turned out to be a great boon for India with savings on oil imports is estimated to be around $40 billion in the current financial year. As per a report by Livemint, every fall in oil prices by $10 per barrel helps reduce the current account deficit by $9.2 billion, which amounts to nearly 0.43% of the GDP.

A self-reliant India

Covid-19 crisis has shown why nations can no longer be dependent on others in especially in the times of crisis. Recognising this as a catalyst for creating a self-reliant India, the government has set an ambitious target of achieving self-reliance in over 12 sectors such as food processing; organic farming; iron; aluminium and copper; agrochemicals; electronics; industrial machinery; furniture; leather and shoes; auto parts; textiles; and coveralls, masks, sanitisers and ventilators. Read more about government’s dream of a self-reliant India here.

Low market cap-to-GDP ratio

India\’s market cap-to-GDP, a ratio used to determine how over, or under-valued a market is currently at 55% per cent, which is much below its long-term estimate of 75% to 85%. The low market cap-to-GDP ratio shows that the overall market is currently undervalued, which means many exciting investment opportunities are available for long term investors.

Bottom line

Covid-19 pandemic has ravaged economies across the world, with India being no exception. However, even in these difficult times, there are some silver linings in the clouds as we have seen above.  Besides these, there have been other benefits too, like less air and water pollution, a drastic drop in road accidents and better family relations.

It is said that \”After every storm, if you look hard enough, you will find a rainbow appear\”. In India\’s case, the rainbow is already there, it is just that many of us are not looking hard enough to spot it.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

In our previous article we took a look at the PM Modi’s speech where he stated that the government would take all possible measures in an effort to convert the current crisis into an opportunity. You can read it here.

Taking it ahead from where Prime Minister Narendra Modi concluded his address to the nation on Tuesday, Finance Minister Nirmala Sitharaman announced the first leg of the post-pandemic financial package to help boost the economy.

Instead of giving you detailed information, let me share my analysis that will be of more relevance to you.

The first of the three announcement tranches focused heavily (6 announcements) on MSMEs and primarily because of the employment concentration there.

Government means business

The measures showcase that the government means business and is ready to give the required confidence to help propel both – employment and demand.

And that is exactly what was showcased by the Finance Minister yesterday when she said that the Rs. 3 lakh crore loans can be availed by the MSMEs would be collateral free minus of any fees & will be guaranteed by the government.

The same was shown when she said that the government will facilitate Rs. 20,000 crore liquidity as subordinate debt for stressed MSMEs which are in need of equity support or Rs. 50,000 equity infusion in MSMEs through equity funds of funds.

Boost for NBFCs

Moving on, for the NBFCs there will be an additional pumping of Rs. 75,000 crores for NBFCs, HFCs and MFs. Of this, the GOI will provide partial credit guarantee worth Rs. 45,000 crores. This will further enhance liquidity in the markets and help boost businesses & demand.

The next big announcement was with regards to EPF. Again – the sole reason is to boost overall liquidity in the system and hence give a boost to demand.

Reduction of TDS rates

The last of the big steps was the reduction of TDS rates by 25%, and this will be applicable to all non-salaried specified payments made until 31st March 2021 – just another step towards leaving more disposable income in the hands of the people.

And there were other announcements with regards to Rs. 90,000 crores in DISCOMS to as a one-time emergency liquidity infusion and the relaxation of RERA rules by citing Covid-19 as an “Act Of God” and hence allowing extension of registration and completion dates of real estate projects.

The government is showing signs that it wants to fast track the recovery process.

Saying this, I am looking forward to the announcements made in the last few days as I am looking forward to more steps taken by the government towards boosting businesses in India and also inducing demand growth.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

I am sure we all heard PM Modi\’s speech at 8 PM on 12^th May. And I am also sure you would have received nothing less than a thousand social media messages around it.

Let me share with you my perspective and to make it simple, to the point and highlight pointers relevant to you.

First and foremost, let me bring to you the question why we were all glued to our television sets – The Lockdown. There was a marathon 6-hour meeting with the CMs of every state where a lot of CMs urged the PM to enable states to decide on the lockdown within their states instead of a blanket lockdown all across the country. Based on that, the PM asked the CMs for a blueprint on how they would want to manage the lockdown in their respective states going forward.

4th phase of the lockdown to witness easing of rules

Giving a hint yesterday, the PM categorically said that the 4th phase of the lockdown wouldn\’t be the same as it has been for the past almost 2 months. It would be with a lot more easing of rules. We will need to wear masks, we will need to maintain social distancing, but we need to now open up. The rules will be disclosed before 18th May 2020.

The second point mentioned in the PM Modi speech I want to highlight is probably the key highlight of the announcements made yesterday. He announced a package of Rs. 20 Lakh Crores to help India deal with the current pandemic. That is close to 10% of India\’s current GDP.

He did mention that there would be reforms for small businesses, MSMEs, corporate sector, taxpayers like you and me, farmers, labourers of both, the organized and the unorganized sectors, etc.

The package will ensure continued reforms in land, labour, liquidity and laws.

The FM will be unfolding various measures over the coming few days.

Making India self-reliant

The third announcement by PM Modi stressed a lot on making India self-reliant (Atma Nirbhar). And he stressed on it quite a few times in his speech. And to make India self-reliant, the government would be paying more attention to the 5 key pillars.

The 5 Key Pillars he mentioned:

1. Economy
2. Infrastructure
3. Technology Driven Systems
4. Demography
5. Demand

And while I talk about this, there was another important message – Promote local products – and this clearly means he wants to focus more on manufacturing than before.

What this means to me is that the government is looking at 2 key aspects – generating internal demand & developing the infrastructure and economy to transform India as a Global Manufacturing Hub.

It obviously shows that there is a bigger plan in place to get a sizeable chunk of business that could potentially leave China. And to make it even more obvious that there is a plan in place, he also mentioned about India playing a bigger role in the Global Supply Chain.

Interestingly, it was just earlier in the day yesterday, Apple Inc. is heard to shift 20% of its manufacturing out of China and move to India and would invest $ 40 billion over the coming 5 years.

The last and the most important takeaway for me was his repeated stress that the 21st Century will belong to India.

Be it the Make In India or the Aatma Nirbhar Bharat, there seem to be enough indications that are given by PM Modi that he means business and the government would take all possible measures in an effort to convert the current crisis into an opportunity.

Before I end for the day, there are some pessimists around and they would always be around who want to pick holes in whatever good is happening. Would you want to fall prey to their pessimism, or would you want to be a part of the now even bigger India growth story by investing in the best investment opportunities?

Read more:  How Long-term investing helps create life-changing wealth – TOI.

When I stepped out for some essential shopping yesterday at the local grocery store, I bumped into my neighbour an avid online shopper in the queue ahead of me.

I was surprised because I know that usually, he buys everything from grocery to medicines and electronics online.

Before I could say anything, he pre-emptively told me that all the delivery slots are full for most online grocery providers for the next few days and hence he had come down there to buy some stuff.

Yes, this is so true. Most online retailers who delivery grocery and household items have their delivery slots full due to the tremendous demand amidst the current lockdown.

Welcome to the new world of changing consumer behaviour.

As amid Covid-19 lockdown goes on, consumers have started living with changes. At the same time, for some customer-centric businesses like restaurants, airlines and gyms, it may never be business-as-usual at least for some time.

A recent survey by McKinsey & Company reveals that 67 per cent consumers are likely to reduce spending, as over 52 per cent feel insecure about their jobs, and 85 per cent were deeply concerned for their family’s safety. As a result, they were more inclined to spend on hand sanitizers, masks, and immunity boosters rather than on fashion, travel or eating.

To understand the changes in consumer behaviour amid Covid-19 on consumption, travel, entertainment, etc., we conducted an exhaustive survey on 765 participants. I will also be sharing the outcome of the survey with you ahead.

In one of earlier article we had a detailed look at how life and equity investing will change post Covid-19. You can check out the article here.

Let’s first take a detailed look at how consumer behaviour has changed drastically in the last few weeks:

More spending on grocery and household supplies

The sudden nationwide lockdown announced on March 23^rd caught most people unaware. Despite PM Modi’s assurance on television that all essential items will be available as usual during the lockdown period, people panicked and started panic buying of grocery and food products.

While panic buying is no longer there, consumers are spending more on basics such as groceries and household supplies. It is also seen that consumers are also not shying away from other brands in the absence of their regular brands. To give you an example, during the lockdown, stocks of Maggi, the market leader in instant noodle category with over 60% market share got sold out quickly. In the absence of it, Yipee another instant noodle brand, has become a huge hit with stocks of if flying off the shelves quickly.

Based on our survey, 86.5% of respondents replied that they have stocked up on food grains, pulses and wheat flour by over 1.5 to 3 times their normal requirements., while 43% stocked up tea, coffee and sugar more as compared to their normal requirements.

Increase in demand for hygiene and healthcare products

Sales of hand sanitizers, disinfectants and floor cleaners have witnessed a drastic rise during the lockdown period. So has the demand for health care supplements like Chyawanprash, multi-vitamin tablets and immunity-boosting products. Even in a world post-Covid-19, the need for such products are likely to continue as the importance of good health takes precedence among consumers.

63% of respondents in our survey stated that they have now started using handwash and hand sanitizers more and more on a regular basis than ever before. Again, in this category, in the absence of their regular brands, consumers are trying out new brands. For example, in the disinfectant category when established brands like Dettol and Savlon ran out of stocks, consumers are trying out new unknown brands which are readily available.

Less preference for dining out and out of house entertainment

The restaurant and movie theatre businesses have a taken a massive hit due to the current lockdown.  Even in a world post-Covid-19, consumers are likely to shun eating out or visiting a movie theatre as it would be challenging to practice social distancing in such places.  In the case of a Wuhan restaurant, the virus travelled through the air conditioner duct at the restaurant and infected three families sitting in the vicinity of each other who never engaged with the other. The emergence of such cases will inevitably change the dining patterns of people in the post-pandemic world.

In our survey, 51% respondents said that they will wait at least for a month to visit multiplexes after the current situation normalizes.

Business leisure travel and vacations may decline

With the nationwide lockdown in place, the travel and hospitality industry has taken a huge hit. However, even when the situation normalizes, people are likely to choose local holiday destinations which they can drive to rather than flying.

71.2% of respondents in our survey said that they would prefer to wait for at least a month to resume their travel outside the city once flights and trains resume services.

More preference for online shopping

Online shopping, which was earlier considered as a secondary channel for shopping, has taken the lead over physical shopping amidst Covid-19 pandemic. Buying necessities and food items have become the first preference for most people with fashion and other unnecessary shopping taking a backseat.

As the recent Mckinsey study in China suggests, consumers are more likely to prefer online shopping over physical shopping in crowded supermarkets or shopping malls for groceries and personal care even post Covid-19 world.

To summarize, Covid-19 has changed consumer behaviour. It has completely changed the way we shop, our travel and entertainment choices.  Even when the malls and supermarkets open few weeks or months down the line, it will take some time for shoppers to shift back from convenience and safety of online shopping to the traditional way.

To encash on this unprecedented demand, even big offline supermarket chains such as Metro Cash and Carry, Big Bazaar and Spencer’s Retail, have spruced up their efforts to serve customers online.

Post 9/11, there was a considerable paranoia about flying, resulting in passenger traffic decline of over 30%. However, things went back to normal after a few years and air travel peaked by 2004.

As our country progresses along the contagion curve, there may be a shift in both how people shop and what they shop back to the way it was earlier. Only time will tell. As of now, digital shopping looks like a clear winner.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

Currently, the economies across the world are facing a challenging time. The reflection of the same can be seen across the widespread correction in stock markets in India.

However, corrections or bear markets are nothing new to the stock markets in India. The reasons may vary though, with the most common reason being overstretched valuations.

The year 2008 was considered as one of the worst years for stock market investors worldwide.

That record broke this year! 

Stock markets have witnessed their worst mayhems with never before seen market corrections and indices hitting lower circuits repeatedly in March 2020 due to escalating fears of the global pandemic caused by the Coronavirus.

Amidst these series of market corrections, in between, there have been some moments of recovery too triggered by news of government announcing economic stimulus, rate cuts and vaccination trials.

Only time will tell whether the number of Coronavirus cases will escalate further or tone down.

At this point, most share market investors are facing a common dilemma. 

Is it time to do bottom fishing? Or Is it time to wait on the sidelines and watch patiently as there could be new lows?

To answer the above questions, let\’s take a look at the two possibilities and their possible outcomes.

Situation 1: The pandemic is under control.

Outcome: Undoubtedly, the economy and markets will recover in some time.

Situation 2: The pandemic worsens.

Outcome: Some countries may experience recession and markets will correct further. Even in the worst-case scenario of the two situations mentioned above, one should not forget that the world has been through difficult times before as well. Take for example, the burst of IT bubble in early 2000 and SARS epidemic of 2002-2004.

And who can forget the global financial crisis of 2008 fuelled by the American subprime crisis?

Coincidently two of the biggest crashes in the stock markets in India too happened around the same time.

Check out the below charts.

Chart 1

From a high of 5,933 points on 11th Feb 2000, Sensex corrected to a low of 2,667 on 26th Sep 2001 and remained subdued over the next two years. However, as seen in the above chart, stock markets in India not only recovered by Jan 2004 but also touched new highs. 

Chart 2

From a high of 20,869 points on 08th Jan 2008, Sensex corrected to a low of 8,160 on 09th March 2009. But despite the global liquidity crunch, the stock markets not only recovered by Nov 2010 but also touched new highs.           

In both the above cases, the recovery period was around 1 to 2 years.

Now coming back to the current situation, till the time the dust settles over the Coronavirus, stock markets are going to experience extreme volatility.

Here’s what you can do as a share market investor:

Remain invested to tide over stock volatility

The current value of your investment may have gone down significantly. But remember it is only a notional loss. Don’t make the mistake of turning it into real losses by selling it off.

Invest in the stock market in tranches to overcome stock volatility

If you have some amount handy for investment, don’t invest it at one go. Invest it in systematic tranches so that you can make the best use of this current market volatility. Also, invest with a long term horizon of 3 years and above.

Invest only in excellent quality stocks to overcome stock volatility

Stock markets have corrected a lot in the last month. We can also see the prices (and not value) of many fundamentally sound businesses going down. But that does not mean the fundamentals of quality stocks have changed in any manner? Any company that is well-managed and has an established business model with consistent growth in revenues will continue to do so when the economic climate is favourable again. Read more about how you can identify fundamentally sound stocks.

Become an informed investor to overcome stock volatility

Last but not least, use this time wisely to invest in knowledge. Remember, stock prices are driven by the fundamentals of the company behind the stock in the long run. So, try to understand and learn the parameters which make a stock fundamentally sound and why fundamentally sound stocks can survive any volatility and emerge triumphantly with time.

At the height of the global financial crisis of 2008, when stock markets across the globe were crashing badly, and panic-struck investors were selling stocks like there was no tomorrow, there was one stock market investor who was buying stocks. It was none other than Warren Buffett.

Buffett revealed his rationale behind investing at that point of time when all others were selling. In an article on the New York Times dated 16^th Oct 2008, he quoted, “The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter, and headlines will continue to be scary. So…I’ve been buying American stocks.”

The current situation looks familiar isn’t it? Scary headlines…crashing markets.

As mentioned before, these are testing times, but we’ll pass through them. And we’ve started witnessing a recovery in stock markets in India, presenting a moment of ample opportunities for investors to create wealth. Know more about them here.

Before taking any decision, keep two facts in mind:

1. This pandemic will pass.
2. The markets will rebound as it has from SARS, Ebola, Swine Flu, or any other crisis.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

We all are pressed for time, especially when it relates to balancing family and professional life alike.

Take my example being a person employed in a great organization that respects its clients and its employees alike. The only issue (If there is one) is the travelling in Mumbai, specifically between my office and home. To share, I stay at Kandivli, and my office is around 33 kms away from my house.

Travelling to the office is nothing less than an adventure

It involves me to jump on an auto-rickshaw, then to a local train and then to an auto-rickshaw again to reach the office.

Oh, the ordeal here is generally 1.5 hours on an average.

The stop where I board my train for a long journey back home often is jostling with passengers carrying their office bags like a soldier would have done in any action movie. It amazes me the swiftness with which they get onboard, hunt for a seat and by the time I join the chaos, they had already started reading the important chat that they continued before the local train came!

Now can I be as swift as them, probably not because I am not getting any younger these days!
I guess I have gotten used to the routine because I know that\’s the way life is-until recently I noticed someone do something that made my life a little more, can we say \”comforting\”!

This is where a woman in her mid-50s taught me the lesson that I needed otherwise as well (for my investing). Become a contrarian while investing in the Indian stock market!

So, she would board the local train going two stops the opposite direction! When the train from the end station arrived 22-24 minutes later, she would be seated comfortably without a sweat on her face and be very happy! The cost was built in already as it was a season ticket, so it was budgeting the time reaching home happier, I guess!

This is what I have learnt with the current equities\’ scenario & markets as well.

A valuable lesson which I learnt from this while investing in the Indian stock market

I know that the levels of 8,000-8,400 (Nifty) are where I am, waiting to board a TRAIN that will take me to the destination – my home of 14000 levels (this will change as we go along). But the point is that when the train comes for boarding (the Indian stock markets turning happier), that is when the market TURNS GREEN, the people who jump in will not give me a chance to board and I may have to be pushed around, thrown out battered waiting for the next one, and the next one.

That\’s what the revival trend will mean any day now. I may not have the chance to board the TRAIN on its journey towards 13,500-14,000 levels!!

So, what do I do?? Since I have bought a season ticket, which is the RIGHT to invest for myself and my loved ones, I will board the train but in the opposite direction that is at levels of 8,000-8,400. Actually, many smart people are boarding at these levels along with me as well!  To invest in quality stocks trading at bargain prices click here.

I will come back and ZIP through the same local station but in a FAST-LOCAL train this time with a seat that I prefer! That\’s where I will have time to pick a seat of my choice (=stocks) and a train of my liking (=markets).

See, I told you- LIFE TEACHES ONE A LOT!!

Happy riding, happy investing!!

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Share markets in India and share prices never move in a straight line.

Ever noticed this?

Yes, it is indeed a fact and this happens because of market volatility. Check out the below graph of Nifty 50 for a 5 year period ranging from June 2016 to June 2021.

In the above graph, it is quite evident that over the long term, markets are eventually going up, but in between, there are some hiccups, i.e., corrections.

So, what does this mean?

It simply means every correction in the share prices offers an opportunity for an investor to buy more at discounted prices.

It simply means every correction in the share market in India is an opportunity for an investor to buy more discounted prices.

Consider it as a sale at your favorite store. Now, what would do we usually do when we come across a 30% or 40% or even 50% or more sale on our favorite brands?

The obvious answer is to buy more. Isn’t it?

The same principle applies in the share market in India too. However, what happens, in reality, is just the opposite.

Most share market investors panic at first sight of correction and end up selling their stocks for losses.

\”In the middle of difficulty lies opportunity\” – Albert Einstein.

As mentioned earlier, investors who look at market correction as an opportunity to buy stocks trading below their intrinsic value can create significant wealth.

Through this article, let\’s take a detailed look at:

A) How stock market volatility gives rise to imperfections in share prices resulting in mispriced opportunities?

B) How Research & Ranking can help you in identifying and investing in shares trading below their intrinsic value?

C) How to gain from fluctuating share prices by investing in current mispriced opportunities in the market?

 

Wish to Know More About Current Mispriced Opportunities in the Market?

 

A) How stock market volatility gives rise to imperfections in share prices resulting in mispriced opportunities?

Share prices depend on multiple factors, but the most primary consideration is the number of buyers and sellers.  When there is a high demand for a stock, i.e. a high number of buyers the price of the stock is bound to increase on the other hand when there is a low demand for a stock, i.e. a high number of sellers, the share price is bound to decrease.

In the long term stock prices of companies listed in the share market in India are decided on the basis of the earnings of the company.

When a company does well in terms of sales and revenue, the value of the company is ultimately reflected in its share prices.

However, in the short term share prices are influenced by multiple factors such as political, global instability, rise in oil prices, terrorist attacks, the threat of armed conflicts, etc. to name a few.

To help better understand this, let\’s take a look at a few examples from the past below:

Example 1

On 14th September 2019, Saudi Arabia\’s two major oil plants were attacked by armed drones reducing almost 50 percent of the country\’s global crude supply. This led to escalations of tensions in the Gulf region with America blaming Iran for the attack.

Spooked by the threat of potential escalation leading to armed conflict in the Gulf region, the share markets in India corrected sharply with Nifty falling by almost 300 points over the week. However, in less than a week, the Indian share markets not only recovered but touched new highs with the Nifty touching 11,600 levels.

Now here we have used the example of Nifty 50 as it represents the weighted average of 50 Indian company stocks in 13 sectors and is one of the leading stock index benchmarks used in India.

Example 2

Post the announcement of the FPI surcharge in Budget 2019, Foreign Portfolio Investors (FPI’s) & Foreign Institutional Investors (FII’s) who have been one of the biggest drivers of the share market in India started selling stocks.

This resulted in a free fall in the Indian markets with the benchmark Nifty 50 correcting from 11,788 in June 2019 to 11,023 in Aug 2019. However, post the rollback of the FPI surcharge by the government the benchmark index Nifty 50 bounced back quickly and touched 11,877 in October 2019.

The above two examples are the latest ones. However, if one looks back in history, there are many such examples of market correction triggered by domestic and global events which have resulted in a significant correction in share prices.

An important point for an investor to note here is that irrespective of the correction in stock market indices and share prices there are no fundamental changes in good quality stocks.

For example, if the stock price of a company that is fundamentally sound in terms of consistently growing revenues, is well managed, has low or zero debt, and has a scalable business model, corrects as a part of the overall market correction due to temporary domestic or global events but has a potential to bounce back in the foreseeable future, thereby delivering good returns in the medium term.

Example 3

On March 23rd, 2020 Indian benchmark indices the Sensex and Nifty touched their yearly lows a correction of almost 35-40% from their yearly highs achieved in January 2020 due to rising fears of Coronavirus cases and a slowdown in the economy due to lockdown. But markets brushed off these fears and have touched new highs.

Now that you have a clear picture of how corrections in the stock market in India can give rise to stock price imperfections let\’s take a look at the second and most important part, i.e. identifying those mispriced opportunities.

B) How Research & Ranking can help you in identifying and investing in shares trading below their intrinsic value?

Using a winning combination of technology and in-depth research, our team of experts will identify those fundamentally sound stocks which are trading below their intrinsic value and have the potential to multiply investor wealth by 25-50% over the next 6-18 months.

 

Past Success Stories Of High Growth Stocks Recommended

Company Name	Buying Price	Exit Price	Duration	Gain in %
Hero MotoCorp	₹ 1806	₹ 2361	40 Days	31%
Kansai Nerolac Paints	₹ 360	₹ 463	41 Days	29%
Emami	₹ 310	₹ 360	8 Months	16%
Varun Beverages	₹ 688	₹ 974	5 Months	42%
Page Industries	₹ 19101	₹ 27247	4 Months	43%
SBI Card	₹ 700	₹ 611	96 Days	-13%
Endurance Technologies	₹ 1009	₹ 1418	75 Days	41%

So essentially you will receive investment recommendations of 10-12 fundamentally sound businesses; i.e. one stock recommendation each month. However, at times when you may also receive two investment opportunities in a month.

Along with the stock recommendation, Research & Ranking will also provide you with a detailed research report which highlights the rationale behind the analysis and the upside potential of the stock.

It will also include information such as:

• The price range in which recommended stock has to be purchased and exited.
• A short update every six months until the recommendation to exit to track earnings growth/major events in the stock/industry.
• A quarterly fact sheet to capture open and closed positions, profit booked/accrued of the portfolio stocks.
• Alerts via SMS, email & updates on your personalized dashboard and mobile app.

Sounds Exciting? Get Started Now

C) How to gain from fluctuating share prices by investing in current mispriced opportunities in the market?

 Step# 1

Sign up for Mispriced Opportunities Strategy by visiting our website.

https://www.researchandranking.com/mispriced-opportunities

In this page, you can view the subscription details of the Mispriced Opportunities Strategy.

You can choose from any of the two subscription plans offered by us for the Mispriced Opportunities Strategy, i.e. one-year subscription for Rs. 28,000 and a five-year subscription for Rs. 1,25,000.

Save Rs.15000 by opting for a 5-year subscription instead of a yearly subscription model.

You can make payments through NEFT/RTGS/IMPS/UPI.

Step# 2

Check registered email for our welcome email.

Once you have made the payment, you will receive a Welcome Email from our customer service from the address createwealth@researchandranking.com containing details such as the link for Research & Ranking dashboard, your username and password to log in. 

Step# 3

Visit https://dashboard.researchandranking.com

Enter the registered email address and password to login & update your Profile.

Once you verify your email address and mobile number and complete the mandatory fields, click on I agree to Terms & Conditions and click Submit.

According to SEBI guidelines, it is compulsory to attach your PAN card copy.

So keep it nearby.

You will then be redirected to the Mispriced Opportunities which will appear as below.

Click on Stocks to Buy to view the list of stocks recommended in Mispriced Opportunities Strategy.

In this section, you can see the list of stocks to buy with essential details such as:

• recommendation date
• percentage allocation,
• buying range
• exit range
• current price

Important things to note:

We will recommend only those stocks under Mispriced Opportunities that have passed our stringent fundamental test based on various quantitative and qualitative tests and should fall under one or more of the ten pre-defined categories of events.

Since the returns will be calculated on a portfolio level, you should be investing in all the recommended stocks as per the recommended portfolio allocation.

Research & Ranking will be providing you with an exit on a stock recommended to you even after your subscription period ends.

Any stock recommendation is valid only for the month in which it is recommended or as long as the stock price is within the buying range.

By clicking on Portfolio Details on the Dashboard, you can view your Portfolio and Stock/ Market details.

Investing in the mispriced opportunities in the Indian stock market using the R&R Dashboard is quite simple and can be done in just a few clicks.

At any time if you require any assistance, you contact our support team by clicking on Support.

Alternatively, you can also reach our support team by calling 022 6101 3838 or email us at support@researchandranking.com.

To summarize, Mispriced Opportunities Strategy offers investors an excellent opportunity to capitalize on the fluctuations in share prices by investing in good quality stocks trading below their intrinsic value. Such stocks have very strong fundamentals which can help them outperform with time.

Click here to get started now!

Wish you and your loved ones a very Merry Christmas!

2019 has been a year that taught me a lot. From interacting with investors in person or over phone calls on why long term investing in the share market in India is probably the only way to create wealth and answering repeated queries on whether gloom or doom is going ahead, 2019 was an overall pleasant experience.

There have been a lot of learnings throughout the year. And I have used those learnings to draft my Financial resolutions for 2020 and beyond.

Here’s how I went about thinking about what needs to be done:

I listed down the goals I have for myself over the coming years such as immediate goals, medium-term goals and longer-term goals. My immediate goals include buying myself a professional camera, while my medium-term goals include purchasing a new car in the year 2021. My longer-term goals include buying a bigger home and planning for my retirement to live a similar lifestyle I live now or even better without having to depend on anyone else, etc.).

Then I listed the resources that I would have on hand to achieve those dreams.

Talking of the gaps, I may be able to buy the camera, rather easily. But I may have to think twice before purchasing a new car in 2021. So, it would be better if I start planning now. Thinking of a bigger home and planning for my retirement, my heart told me something – \”Harsh, start finding another full-time job that you can do alongside your current employment.\”

My heart surely knows that isn\’t possible. But what it means is I need to plan a lot of lot better going forward. Here are my Financial Resolutions I will take this New Year:

Adequate Savings:

I will plan my savings in a way that I can surely follow and invest a certain amount by the end of the year. This is extremely important if I want to ensure my family & I get to live a comfortable life in the future and never have to adjust for anything.
Planned Expenses: I will completely avoid impulsive buying – as I say this, I know it is going to be the toughest one to do, but I need to start doing it now – after all, it will have some impact on my finances in the future.

Systematic Investing:

I will ensure I invest my savings wisely. I will not just trust anyone into putting all my savings in 1-2-3 baskets. I will spread them across systematically. I will read, do my bit of research and only once I am satisfied, will I commit to investing my money there. I also need to understand I have different goals/dreams – I need to save and invest accordingly for each of them. E.g., I cannot be allowing myself to buy a new car at the expense of my retirement plans.

Avoid Speculation:

Be it going for speculative investing in share market or being speculative about some rumours or investing based on gut, I will altogether avoid all of it. I will ensure I do not fall into this trap and invest my money systematically. Know more about the perils of investing based on  tips.

Investments don’t need 24×7 surveillance:

I shall invest wisely and also keep a track on my investments, but I shall not monitor them minute-by-minute. Just because there is technology available to do so, doesn\’t mean I misuse it that way. Just because the markets go up and down, I will not indulge in impulsive buying or selling. Read about the importance of patience in stock market investing here.

Invest in health & life Insurance:

Medical bills are rising by the day. I am extremely healthy today, but I do not want to speculate about it for tomorrow. I neither want my health to be a burden, especially a financial burden for anyone. Plus, just in case if something terrible has to happen to me, I need to have enough money for my family not to at least worry about money.

Use my credit cards wisely:

Credit cards offer the convenience of not carrying cash in your wallet when you want to buy things or travel. However, the credit aspect of buy now and pay later sometimes motivates most of us to spend on some things, which we would have otherwise probably not have bought on cash.

Although I use my credit cards very wisely, sometimes I end up missing the payments on time resulting in unnecessary pile up of interest. So, this is one area which I am certainly going to focus on.

Avoid unnecessary shopping:

There is a popular joke doing rounds these days on WhatsApp and Facebook. Here’s the joke “Do you know what is the best way to save money on online shopping portals? Simply uninstall their apps and you will end up saving a lot of money”.

The ease of shopping from the comfort of our homes or office in few swipes has most of us buy a lot of things we probably even don’t need or hardly use. I personally bought many things which I hardly use and this has made me realize the pitfalls of impulsive shopping. Not only do these unnecessary goods eat up your money, but also clutter your house. So, I have decided to strictly buy only those things I need especially when it comes to online shopping.

Easier said than done is what I\’ve heard. But if I can\’t help myself, who else will?

Read more: About Research and Ranking.