Economy

High inflation levels in India captured the headlines across the country on 14 February. As per the Ministry of Statistics and Programme Implementation India’s benchmark inflation rate rose to 6.01% YoY in January 2022.

Inflation for January crossed the upper tolerance level the RBI maintains. This seven-month high inflation rate was due to high food and beverage prices, contributing 43% to inflation YoY and 198% MoM.

Before you panic about rising inflation, you must understand a little more about CPI and WPI.

The Consumer Price Index (CPI) from April to December 2021 was 2.9% compared to 9.1% for the same period in 2020. The decline was led by easing food inflation. However, untimely rains, seasonality, lockdowns, night curfews, and supply chain disruptions contributed to the rise in December.   

On the other hand, wholesale inflation based on the Wholesale Price Index (WPI) remained low in the previous financial year but rose sharply to 12.5% between April and December 2021-22. Increased economic activity, a sharp rise in crude oil, imported inputs, and high freight costs raised wholesale prices.

The image above shows the increasing gap between wholesale and consumer inflation. Factors like variations due to base effect, the difference in scope and coverage of the indices, the items covered, and the difference in commodity weights affect the WPI and CPI differently.

WPI is highly-susceptible to imported inputs-led inflation. But as the base effect in WPI wanes, the gap between CPI and WPI will also narrow down.

What is driving retail inflation and why?

Retail inflation may remain high and rise further by the end of the quarter. Volatility in commodity and crude prices are the chief causes of this rise. A surge in Brent Crude prices due to rising geopolitical tensions between Russia and Ukraine, depreciation bias in the rupee, and imported inflation are key risks to inflation in India.

Rise in food prices is a vital inflation driver. Food inflation rose 5.4% in January from 4% in December. The unfavorable base effect led to a rise in inflation, though the food index fell for the second month in a row. Inflation in food jumped 110bp in January to 5.6% because of a 100bp drop in the base period. Price rise for commodities, such as cereals, milk, and vegetables, hovered around 5%, while inflation for pulses and eggs, meat, and fish fell to 3% and 5% respectively.

Expected hikes in the MSP for agricultural products and the depressed base for the last year could mean higher food inflation. Rising consumer goods prices and telecom tariffs are primary reasons for rising inflation. Increasing input costs seem to have pushed up inflation for footwear, clothing, household goods, and services.

Also Read: CNC Full Form in Share Market

The Inflation Scene

Inflation has become a Key global concern raising inflationary expectations and central bank action after the pandemic-led slowdown since 2019. Over 40 countries have raised policy rates by 150bps, while the US may raise 100bps on the policy rate by July 22. But RBI expects inflation to ease considerably in FY23 indicating less pronounced action.

The RBI Governor Shaktikanta Das said inflation in January rose largely due to adverse base effects. But the RBI expects India’s inflation rate to go down to 4.5% below its upper tolerance level at the beginning of the new financial year.

However, economists caution that high inflation is now turning structural, with price rise in non-food segments like clothing, fuel and light, household goods, health, transport, and communications above 6%.

Non-food commodity MRP prices hiked may not be decreased even if the inflation rate falls. With manufacturers looking to pass on their high input costs to consumers, a rise in prices could be on the cards.

What can you expect?

Several automobiles, telecom, and FMCG firms announced price hikes due to high input costs. It means non-food commodity prices will increase. Food CPI rose considerably in the last three months as the favorable base effect wore off.

You can expect the retail prices to go up as manufacturers face double-digit WPI inflation.

But look at India’s inflation rate comparison from 1986 to 2026 

Look at the graph above. Do you think the inflation rate will rise or decrease as the RBI expects it to in the next fiscal? We will have to wait and see how the drivers of inflation behave going forward.

What do you think of this article? 

Write to us at createwealth@researchandranking.com 

In the meantime, subscribe to the 5 in 5 Wealth Creation Strategy and start creating wealth.

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

We have been reading about long-term investing for some time now. So, we thought of sharing a fantastic story that became a part of case studies for financial investors. 

Before we share the story, here is a Warren Buffet quote that sums up our sentiments exactly.

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

 Our story began in the unknown town of Quincy, Florida in the middle of the great depression in 1920. The story tells us how a relatively small town became one of the richest in America. Quincy is the Secret town of Coco-Cola millionaires even today.

During the great depression banker, Mark ‘Pat’ Munroe found the townsfolk willing to spend their last cent on a chilled glass of Cola even when they struggled to survive every day. Pat realized, that despite the consumer demand, brand image, revenues, and favourable market position Coco-Cola enjoyed, it was still trading lower than cash in the bank, and the shares were cheap. So, he invested in Coco-Cola but didn’t stop there.

He advised his customers and neighbours to invest in the company and then hold onto the shares no matter what happened. As a trusted banker, people followed his recommendations and bought equity shares in Coco-Cola. He even offered loans to depositors who were willing to invest.  

Munroe’s strategy paid off. His idea of convincing the townsfolk to invest and keep investing when the market was down; saved the town when the rest of the U.S. was struggling to make ends meet.

The Coco-Cola dividends helped new shareholders survive the downturn even when their crops failed and every economic crisis after that. As a result, Quincy became the richest town per capita in America with at least 67 residents called the Coco-Cola millionaires.

These millionaires amassed fortunes from these early shares and passed them on-to future generations. A visit to this town and you will find several signs of Coco-Cola’s legacy over the years. The bank where this story began has Coco-Cola on display. As of 2009, the bank had a massive 65% of its trust assets under management still invested in Cola.

Can you guess how much a 1919 share would be worth? 

One share of Coco-Cola bought at $40 in the 1919 IPO is worth more than $10 million, including dividend reinvestment. The investment would yield $270,000 in pre-tax cash dividends, sent to investors every quarter. These earnings were six times the average American earnings. Amazing what long-term investing can do for you. Remember -the magic of compounding is at play here.

What was different about Quincy? 

In Quincy, the residents ignored the stock market volatility completely. They focused only on the profits Coco-Cola generated and the percentage of that profit distributed as dividends.

The people continued to buy the stock as long as the profits and dividends increased each year and there was no change in the competitive position of Coco-Cola. But they did not sell the shares -a staggering 102 years since the public offering in 1919. This growth is what the phrase ‘it only takes one good idea in life to get rich means.

How does this story help YOU?

We have very few stories like Pat Munroe’s town of Quincy and its millionaires in India. A shining example is Wipro Ltd, which has generated returns better than Coca-Cola but finding the original shareholders except for the promoters today is not easy. Stories of how Rs. 10,000 invested in Wipro pre-independence has grown multi-fold, while the dividend income is multiple times the original investment, which is lost in the drama of buy and sell calls put out every day. Wealth creation is possible only if YOU consider long-term equity investments.

Does this story resonate with you? Would you prefer to be a long-term investor?  If yes, subscribe to our 5 in 5 Wealth Creation Strategy today 

Disclaimer*

The information and the stocks mentioned in the article are just for information purposes only. A reader/investor/trader should not consider it a buy/sell/hold recommendation from Research & Ranking.

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

The first chapter in the series -LICs Road to the IPO, is here.

In the previous chapter, we gave you a flavour of LIC’s massive size as well as its stature as one of India’s most recognizable brands.

LIC does not follow the same rules as other insurance players in the country. The government owns 100% of the PSU established after merging 243 companies under a parliamentary act. The government will divest around 25% of its stake in LIC to generate as much as $12bn.

The amount will help to bridge the deficit gap in FY22.

Disinvestment has not been easy, and the government hopes to list the largest insurer LIC by the end of this financial year 2021-22. With just a month left before its launch, the preparation for the public offer is in full swing.

The IPO of this insurance behemoth is daunting; harried bankers are racing against the clock to complete the mammoth task of assigning a valuation to India’s largest insurer. The government officials are burning the midnight oil to put an initial offering that will rival other public offers in Asia. LIC alerted policyholders via front-page newspaper ad campaigns and SMS titled – Be prepared.  

Well, this IPO may not be as simple as putting together the DHRP and announcing the dates like other companies. The governing structure, the books, FDI, and policy structure must change before the listing.

Let us look at the changes made to ensure LIC lists successfully. 

Changes to the LIC Act: After cabinet approval for the disinvestment, the LIC Act, 1956 was amended to increase the capital base before the listing. The paid-up capital of LIC was 100 crores before the amendment. The government also approved raising LICs authorized share capital to Rs. 25000 crore. The government did not receive a dividend in the last financial year as LIC used its free reserves to increase its paid-up capital to Rs. 6,325 crore.

LIC will not be renamed Company after listing: Initially, the government expected to rename LIC –Company instead of Corporation. But the change may not be possible considering LIC would like to retain its sovereign guarantee provision. As per Section 37 of the LIC Act, it is the only insurer to offer such a guarantee to its policyholders, i.e., the government guarantees every policy LIC sells. Moreover, the Companies Act 2013 does not allow for the sovereign guarantee if LIC becomes a Company.

Reorganizing the Investment book: Insurance companies have two books of accounts; the policyholder investment book and the shareholder investment book. LIC had a shareholder investment of Rs. 685 crore, while policyholder investment was Rs. 30.1 lakh crore as of Q1FY21. The consultants will reorganize the investment books to clearly define the debt and equity investments in the book, especially the ULIP portfolio that has both equity and debt investments.

LIC and the consultants SBI Capital and Deloitte are working to simplify the books to make it easier for public investors to understand the financial aspects of the insurer.

Changes in Public disclosures: Insurance companies must maintain a high degree of financial and investment book disclosures compared to other businesses. Considering the sheer size of LIC, the corporation must ensure it discloses the exact nature of its investment in listed companies, including corporate debt, downgraded investments, and the action taken against them.

LIC will now have to disclose its equity stake in all listed companies. Another IRDA mandate it has to fulfill is to outline its role in the voting process at such companies and the rationale behind the decisions.

Changes in LIC itself: The Department of Financial Services under the Finance Ministry amended LIC Employee’s Pension rules and a few other rules under the LIC Act, 1956.

The insurer always had a Chairman since its launch. It will now have a CEO and MD instead of the chairman. Yet, the government will still appoint the Chief Executive and Managing Director under section 4 of the LIC Act. The Department of Economic Affairs amended the Securities Contracts (Regulation) Rules.

Changes to the FDI policy: India currently allows FDI up to 74% in the insurance sector. But, this policy does not apply to LIC since the LIC Act governs it. The government is awaiting the Cabinet’s approval to changes in the FDI policy. The new policy will allow 20% FDI during LICs public offer. The government is the only one that can hold over a 5% stake in LIC now. 

Also Read: CNC Full Form in Share Market

The new rule will let foreign funds invest in the mega IPO and buy more shares after listing. The regulators have made other changes like tightening rules that govern share sales by anchor investors.

LICs share-based employee benefit schemes or ESOPs will be aligned with the Companies Act to avoid contradiction with other laws.

These changes will help smoothen LICs road to the IPO. The government and LIC executives are leaving no stone unturned to ensure the initial public offer is a success. A successful listing will set the stage for listing other PSUs to fulfill disinvestment targets the government has set down in the budget.

What do you think of the article? Email us on createwealth@researchandranking.com and let us know.

Read more: Reliance, TCS, Infosys Are Some Of LICs Blue Chip Investments – Know Its Investment Value Today

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

In the introductory chapter, we promised you a deep dive into the Budget FY23. But before we get into details, a look at India’s economic survey is a must.  

What is the Economic Survey and why does it matter? 

The Chief Economic Advisor of India puts forth the Economic Survey every year before the Budget presentation. The survey evaluates the trends in economic factors such as employment, agricultural and industrial production, infrastructure, money supply, prices, imports, exports, foreign exchange reserves, and other relevant economic factors that affect the Budget.

Yes, the survey looks at these whole host of factors. 

The economic survey helps in the effective mobilization of resources and their allocation in the Union Budget.

Now that we know what the economic survey is. Let us look at the highlights.

Finance Minister Nirmala Sitharaman tabled the Economic Survey 2021-22 in Lok Sabha. The report projected the economy would grow by 8-8.5% in FY23. She declared India is well-placed to meet the future challenges based on the widespread vaccine coverage, supply-side reforms, easing of regulations, robust export growth, and the opportunities to ramp up capital spending.

Highlights of the Economic Survey

• The survey expects the economy to grow by 9.2% during FY22. It signifies a recovery to the pre-COVID19 levels from the 7.3% contraction in 2020-21 due to the pandemic and subsequent nationwide lockdowns to control the spread of coronavirus.

• The projected GDP growth for FY23 is 8-8.5%. These estimates are based on forecasted oil prices of USD 70-75 per barrel in the next financial year against the current price of USD 90.

• India will follow an agile policy instead of the traditional waterfall policy that introduced front-loaded stimulus packages most economies adopted in 2020.

• Higher CAPEX that will support growth in the next fiscal will be possible due to robust growth in FY22 Exports.

• Private sector investment will grow as the financial system is strong enough to support the economic revival.

• Government finances will witness consolidation in FY22 after the deficit and debt increased in the previous year.

• India moved from the ‘Fragile Five’ nations tag to become an economy with the fourth-largest forex reserves, giving the agile policy room for strategic maneuvering. 

 

• High WPI inflation partly due to the base effect may even out. However, the imported inflation caused due to rising global energy prices may be a cause for worry.

Summarizing the Survey highlights

The highlights above offer a positive outlook for FY23. However, the survey did not consider the uneven nature of economic recovery, continued distress in the labor market, the sharp rise in inequality, and the lingering financial issue among the MSMEs (Micro, small and medium enterprises), especially those operating in the informal economy.

This survey correctly flagged the issues with IMF’s assessment of 9% growth and World Bank, which expects India to grow at 8.7%. The survey believes the external environment will not be as kind, and financial conditions will tighten considerably.

In its recent World Economic Outlook, the IMF has downgraded its global GDP growth rate from 5.9 percent in 2021 to 4.4 percent in 2022 as they expect global trade volumes growth to plummet in 2022. The threat of another wave of infections and its repercussions on economic activity is looming. However, the survey strongly defended the policy response to these concerns.

What can you expect?

You can expect continued government support for the economy. Based on the trends, the government has enough money to sustain support and ramp up capital expenditure when required. The sharp rise in the central government revenues will allow it to increase spending. But the government will have to consider the limits placed by the rising government debt of 89.3% in FY22BE (budgeted estimates), up from 74.6% in FY20.

We have shared the most pertinent details of what the economic survey found. This report was the basis for the blueprint for the Amrit Kaal the Finance Minister spoke of in the Budget presentation on the 1st February.

We hope you find this article interesting and look forward to reading more about the Budget and its implications.

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

India’s Finance Minister Nirmala Sitharaman finally presented The Budget on 1^st February 2022.

The multiple speculations, expectations, expert opinions on what the Budget should address are over.

But wait, it is now time for a complete breakdown of the things left unsaid.

The rise of ‘Amrit Kaal’

Creating a Budget that make everyone happy is difficult, so the FY2023 Budget did not try to pacify any specific section. It was a straight-up plan to aid growth and maintain the recovery momentum the country has been on since the second wave in 2020. The finance minister declared that India will grow at 9.27% during FY2023.

The Budget focused on four pillars of development -comprehensive development, augmented productivity, energy transition, and climate action. It presents the economic blueprint for India from its 75^th-year to 100 years of Independence dubbed the Amrit Kaal.

The Budget forecasts effective capital expenditure of the Central government at Rs 10.68 lakh crore in 2022-23, amounting to 4.1 per cent of the GDP. The gross GST collections for January 2022 were the highest at 1,40,986 crores since its inception in 2017.

Addressing the elephant in the room – digital assets

In a major boost for digital currency and the economy, the finance minister said the RBI will issue ‘digital rupee’ using blockchain 2022-23. What’s more, the budget took cognizance of cryptocurrencies and virtual digital assets. The income from the transfer of virtual assets will be taxed at 30 percent.

We are just skimming the cream off the top.

But we’ve decided to begin February with a deep dive into the budget and what it could mean for the country.

Interestingly, did you know the finance minister’s attire on budget day also makes a difference?

Well, the late finance minister Arun Jaitley sported Nehru jackets while the current Nirmala Sitharaman is known for her love for local like her red-and-cream silk Pochampally with ikat print pallu.

This year she walked in carrying a tablet to present the Budget. Those watching the live session felt it was the government’s emphasis on digital is what prompted this change.

Well, we hope you find it interesting like we do.

In the meantime, subscribe to the 5 in 5 Wealth Creation Strategy and create wealth.

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

January is almost over and for those who follow the budget closely, it means 1st Feb is that much closer. 

Well, before we get to the best part of this article today here are few details you may want to know. 

Budget presenter: FM Nirmala Sitharaman 

When: 1st February 2022 at 11 am.

Where: Lok Sabha TV (Live). The other channels will also telecast the Budget. 

Now that the pertinent details are out of the way, let us get on to the most interesting part. We are sure you are as fascinated as us by the countless articles that have been gracing the headlines all January in the run-up to the Budget. 

What makes it interesting are the expectations from everyone right from experts, investors, businesses to manufacturers, retailers, shop owners, and the general public. 

All have a wish list that doesn’t seem to end. We thought putting these wishes all together in a neat list would give you a better idea of what people expect from FY2023 Budget. 

Here we go… 

Expectations of the industry: People expect the finance minister to announce plans that may help kindle India’s capex cycle while laying the roadmap for economic consolidation. They expect the government to announce a higher outlay on capital expenditure, new healthcare schemes to cement India’s place in the global supply chain. 

A tax-neutral GST, whether the rate implies tax rate hikes for various sectors is still unknown. Moreover, there are chances of excise duty reduction on petroleum products. Investment experts believe the markets expect more support for sectors like housing, auto, auto ancillaries along with improved PLI-measures in multiple sectors. 

The MSME sectors expect more financial support from the government along with reforms for import substitutes that encourage self-reliance and domestic manufacturing. If these policies include green energy, they will help to create a sustainable economy reducing domestic reliance on energy imports. 

Tax expectations: Tax experts expects the PPF limit to increase from Rs 1.5 lakh under 80C as it was intact in the last budget. They expects Ttax relaxations can to boost the real estate sector and lower GST rate on raw materials. 

The working population expects a rise in the standard deduction while the tax-free income slab increases from two lakh now to five lakhs. Given the changes in working patterns most expect a WFH allowance to be announced. Experts want an increase of Fifty thousand rupees Rs. Fifty thousand in the tax benefit on home loans for interest and principal repayment from the 2-lakh and 1.5-lakh, respectively. Investors expect the government to take steps to reduce tax litigation and encourage compliance through better oversight of transactions. 

Market and Investing expectations: The digital payment industry played a vital role in bringing in transparency and formalization in the economy. Many investors expect this trend to continue and want the government to consider incentivizing Venture Capitalists (VCs) and Private Equity (PEs) players and investors to fund R & D, and technology upgradeation in India. 

Experts believe the government must offer incentives to fintech companies that lend to the under-credited segment as it could help uplift the society and economy too. 

Bond investors feel India’s inclusion in the global bond indices is crucial from a long-term capital availability point of view. 

Investors expects measures that will make India globally competitive allowing labor-intensive sectors a level playing field, promote exports of value-added products, etc. Monetization of public assets, disinvestment of PSUs stake is the need of the hour. However, an increase in the spending for social and health welfare initiatives and capex in railways and infrastructure are crucial for economic revival. 

We’ve tried to offer a general view of what people expect. However, whether these expectations will be met, or the finance minister has more reforms in the kitty will remain a mystery till the 1st of February. 

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

A fortnight ago, people felt things would be dreary in 2022. The world is recovering despite the rising inflation, supply chain issues, Omicron-led flight cancellation, an extension of work from home, curfews, and curtailed travelling,

The World economy has grown and will reach $100tn in 2022, says the Centre for Economic and Business Research (CEBR) in its 2022 report. The analysts foresee global economic growth at 4.2% better than expected before.

This growth will push the World’s GDP to over $100tn, higher than its level before the pandemic and two years before its previous deadline of 2024.

Not just the world, but India may overtake France again and become the sixth-largest economy in the world. Moreover, the CEBR report predicts a reversal of the historic mean with China and India moving up the league table by 2031. The GDP of the US is $22tn, which is larger than the combined GDP of 150 countries today.

Japan, China, the US, and Germany account for 50% of the world GDP. Although, the economic conditions are changing with the economic gravity shifting towards Asia. China, Japan, India, and Korea accounted for $26tn in 2021.

Experts forecast China will overtake the US to top the table in 2030, while India will overtake Germany to become the 3rd largest economy by 2031.

Will India really become the third-largest economy?

Well, like all economic forecasts these ratings are contingent of several other factors too.  

Let’s look at the factors that drive GDP in India

India is the second-largest country population-wise globally. In 2020, India’s per capita GNI was $6,284, making it a lower-middle-income country. Even though India is a large exporter of cars, chemicals and clothing, the services sector with flourishing industries in IT and software account for most of the economic activity.

India had been losing its growth momentum just before the COVID-19 crisis. However, the pandemic knocked India off course, and its GDP sank to a ten-year low of 4.2%. As a result, after surpassing the UK in 2019, the UK overtook India again in 2021.

Causes of slowdown

The instability in the banking system, adjustment to reforms, and a slowing of global trade were some factors that led to a slowdown in India’s growth. And then, the COVID-19 struck, causing both economic and human losses. India had ~140,000 deaths by mid-December, i.e., ten deaths per 10,000 cases.

The nationwide lockdown, curbs on economic activities, drying up global and domestic demand led to a slide when India’s Q2 2020 GDP fell 23.9% below its 2019 level.

However, as lockdowns lifted, the economic activities and growth rose gradually. The agricultural sector was a key driver in India’s recovery buoyed by a bumper harvest.

The CEBR Forecasts: 

The CEBR report said India’s GDP would fall 3% in 2020 and rise 8% in 2021. Per the Union Ministry of Statistics and Program Implementation, India’s GDP grew 8.4% in Q2 2021-22 compared to a 7.4% contraction in the same quarter in 2020.

Analysts foresee the UK staying ahead till 2024 before India takes over again, while the UN expects India’s population to overtake China’s in 2027.

CEBR estimates India’s economy will expand 7.0% in 2022.

Growth will naturally slow as India becomes more economically developed, with an annual GDP that may sink to 5.8% in 2035.

This growth trajectory will see India become the world’s third-largest economy by 2030, overtaking the UK in 2025, Germany in 2027 and Japan in 2030.

India’s road to reach the third spot on the WELT

The development of the COVID-19 pandemic domestically and internationally will influence India’s pace of fiscal recovery. India manufactures most of the world’s vaccines, and its 42-year-old vaccination programme that targets 55 million people each year will help it roll out the vaccines successfully and efficiently in 2022.

The medium to long-term benefits of reforms like the 2016 demonetization will deliver economic benefits. The government’s stimulus spending in response to the COVID-19 crisis was substantially more controlled than most other large economies, though the debt to GDP ratio rose to 89% in 2020.

Most of India’s workforce is engaged in the agricultural sector, so the changes must be gradual. These reforms must balance long-term efficiency gains with the need to support incomes in the short term.

An increase in infrastructure spending will help India unlock substantial productivity gains. So, any benefits the country accrues will depend on the government’s approach to infrastructure spending.

These are forecasts dependent on several global and domestic factors. We will have to wait and see whether India surpasses the UK and Germany to become the third-largest economy.

While we consider the economy, let’s do our part and invest wisely for the long term. Subscribe to our 5 in5 Wealth Creation Strategy and begin your journey today.

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

India is on its way to becoming the fastest growing economy globally.

Is this just speculation or rumor? No, it is a fact.

India’s economy has grown since October, with expansion in services, manufacturing, and exports.  The demand during the festive season added to the economic momentum.

As a result, the momentum remained steady at a 5 on the Bloomberg News “Animal Spirits” gauge of indicators.

The indicators looked at are:

• Markit India Composite PMI
• Output Price Index
• Order Books Index
• Citi Financial Index
• GOI data on exports, industry, and infrastructure sectors
• RBI data on demand for loans.

The Bloomberg study considers a three-month weighted averages to even-out the instability in one-month readings in services, new orders, and growing exports.

Wondering what Animal Spirits have to do with economic recovery and finance?

Renowned British economist John Maynard coined the term Animal spirits to define how people decide on financial matters. It includes the buying and selling of securities; during economic stress or uncertainty.

These animal spirits denote human emotions of confidence, hope, fear, and negativity. Such emotions affect financial decisions that can fuel or hamper growth.

When public spirits are low, the confidence is low, driving down a promising market despite strong economic fundamentals. Similarly, when the spirits are high, buoyancy in the economy is high. This confidence helps the market prices soar. 

Now that you have a brief idea of what animal spirits mean. Let\’s see what is helping India stay on its growth trajectory.

The steady growth in several industry sectors, great demand in the services and a rebound in exports will help India stay on the path toward being the world’s fastest-growing economy this year. A Bloomberg survey due on 30^th November is likely to show the GDP in Q2FY22 grew 8.2% from the same period year ago, after a high 20.1% growth the previous quarter.

The sectors that added to the high confidence of Animal Spirits.

Business Activity: An IHS Markit survey of purchasing managers of factories and services witnessed robust inflow of new orders helped the business activities grow. They kept the composite index growing for the third month in a row.

The shortage of raw materials and high commodity prices led to an acceleration in input cost inflation. It nullified the advancement new orders gave. Business activity, order books, and output prices score 7, on the Bloomberg ASI based on three-month weighted indicator averages against the 30-month historical data.

Exports and Imports: The exports grew 43% YOY in October. It was nearly double the growth in September due to rising demand for petroleum products, Indian coffee, and engineering goods. However, a surge in the inbound shipment of pulses, coal, crude oil, and newsprint led to a jump of 63% in imports too. Despite the increasing trade deficit, the Indian exports continued to hold onto the growth momentum scoring a 7 on the Bloomberg ASI.

Consumer Activity: Retail auto sales, an indicator of consumer activity, fell 27% to yoy as global chip shortage played havoc with production schedules. Moreover, two-wheeler sales, an animal spirits indicator in smaller towns, declined.

Yet, per RBI data, the bank credit grew 6.8% in October from 6.7% in the previous month. The liquidity in the market is still surplus leaving room for more loans and advances. The credit demand has improved, so consumer activity scored 7 on the Bloomberg ASI.

Industrial Activity: The Government data showed that industrial production rose 3.1% in September. It was a slow pace of growth compared to the first five months of FY22 due to the declining low base effect the pandemic caused.

Likewise, the output at infrastructure industries that makes up 40% of the industrial production index rose 4.4% in September, while the demand for cement, coal and natural gas continue to drive activity. Despite the slower pace of expansion, industrial activity is growing.

You can see the positive effects of stable growth in various activities. Though the pace is slow, it does not mean our economic activities have declined. We may not be jetting off, but India is still moving up on its way to becoming the strongest-growing economy in the world.

Do not fear the recent 5–10% correction in the market as it is transitory. The country’s growth story is still intact. As the economy grows, the financial markets will follow suit.

One must consider the current situation as a buying opportunity. Wondering how to begin, connect with us; we shall get you started on a wealth creation journey.

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

Just when the markets were skyrocketing, economy was gaining momentum, and money trickling in, reports of Omxicron –the newest strain of the coronavirus appeared.

Does this feel like the beginning of the third-wave of COVID-19?

This time around, the government is alert and has taken pre-emptive steps like barring international travel to 14 countries including the UK, South Africa, some parts of Europe, etc.

Pfizer, BioNTech, Moderna, Johnson & Johnson, and AstraZeneca have begun studying the virus to protect against the strain. Proactive steps now will help us fight the virus better.

In the meantime, rapid growth in several sectors since the easing of lockdown has left the markets buoyant and businesses optimistic about recovery in the final quarter of this calendar year.

Data shows this quarter will be the highest since the second quarter of CY2014. The construction sector is optimistic about its selling price, inventory, and hiring.

Adding a boost to this positive outlook is the Dun & Bradstreet Composite Business Optimism Index (BOI). The BOI for the final quarter stands at 94.6%, 27.4% higher than Q3CY2021. Per the survey, five out of six indices –the volume of sales, net profits, selling prices, new orders, inventories, and employees have grown compared to Q3 levels.

The Dun & Bradstreet’s Global Chief Economist says, “GDP growth during October-December quarter of 2021 will be strong as the BOI surged to an eight-year high.”

Per the survey, 79% of the respondents expect the sales volume to increase in Q4 2021 compared to the 67% in Q3 2021. 62% of the respondents expect net profits to grow in Q4 2021, compared to 48% of respondents in the previous quarter.

The director of National Institute of Public Finance and Policy, Pinaki Chakraborty, believes the current macro-economic situation in India is better than a year earlier. He anticipates growth despite elevated inflation owing to significant economic and financial expansion in the last 18 months and the looming COVID-19 third wave.

The IMF forecasts a growth rate of 9.5% in 2021 and 8.5% in 2022.

What is fuelling this positive outlook?

There can be several reasons why businesses believe the Q4 will be better for business, but the top few reasons are-

• Boost in consumption in all sectors,
• Easing of lockdown limitations
• Bottled-up and festive demand
• Payment of dearness allowance arrears
• Improving consumer confidence in the economic growth

What could hamper recovery?
Several reasons like inflationary pressure, supply chain issues, high deficits of the Centre and the States, and the resource allocations may hamper recovery despite the optimistic outlook businesses have.

However, better management of inflationary pressures and supply will help businesses maintain their positive outlook. The Director, NIPFP Pinaki Chakraborty says, “If we manage deficits in a way that it doesn’t become an issue later, then recovery will be durable and sustainable.”

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

In the past two days, we looked at Retail Direct Scheme. What are government bonds, and how a retail investor will benefit from this initiative? In this article, we explain another customer-centric initiative announced last week – Integrated Ombudsman Scheme.

Before we understand this initiative, know what an Ombudsman means.

An ombudsman is a government elected official who investigates complaints private citizens lodge against businesses, financial institutions, universities, government departments, etc. They attempt to resolve the conflicts or concerns raised, either through mediation or recommendations.

Know the Integrated Ombudsman Scheme

After the government’s “One Nation, One Ration Card,” the Reserve Bank of India (RBI) announced the Integrated Ombudsman Scheme on the concept of “One Nation, One Ombudsman”.

This initiative will help strengthen the complaint redress mechanism for banks, NBFCs, and payments system operators. The scheme will roll out in June.

The idea here is to integrate the existing three Ombudsman schemes: (i) The Banking Ombudsman Scheme, 2006: (ii) the Ombudsman Scheme for Non-Banking Financial Companies, 2018; and (iii) the Ombudsman Scheme for Digital Transactions, 2019 into a single Integrated Ombudsman Scheme, 2021.

Think of it like a consumer court, where you file complaints against any fraud and seek redressal. 

The need to integrate three different Ombudsman schemes

Currently, there are three Ombudsman schemes. These three schemes have evolved over different periods with varied grounds of complaints. Each scheme had different compensation structures, so complainants received unequal treatment.

Combining these schemes, streamlining grievance redress, letting the customers file their complaints about deficiency in service under the integrated scheme, with a single centralized reference point was the need of the hour.

Moreover, under RB-IOS, the central bank withdrew the exclusive jurisdiction of each ombudsman’s office under the one nation, one ombudsman initiative. A deputy ombudsman will address certain categories of complaints, giving the ombudsman’s office a greater adjudicating power.

Benefits under the Integrated Ombudsman Scheme

RBI has set up a complaint management system with a centralized receipt and processing center (CRPC) at Chandigarh. It will enable a one-point interface for customers to file complaints, submit documents, track status, and get pertinent information.

There will be a single point of reference with the integration of three schemes into one. Moreover, the RB-IOS allows for better coverage.

Initially, the number of entities covered will go up from 1,091 under the current Ombudsman bodies to 1,975. But, the scheme will cover 11,352 entities in phases. Entities here refer to banks, NBFCs, etc.

The scheme will cover the customers of all scheduled commercial banks, regional rural banks, scheduled urban co-operative banks, other UCB’s with deposits of Rs. 50cr and above, all the NBFCs accepting deposits and those with assets worth Rs. 100 crore and above, and non-bank system participants and complaints about deficiency of service.

An easier way to file complaints

Currently, customers must file their complaints under the correct scheme and with the correct ombudsman’s office, based on the territorial jurisdiction referring to the branch of the entity being complained against.

If a customer files a complaint in the wrong jurisdiction, the complaint gets rejected. The current mechanism has specific options for complaint dispensation. The customer has to ensure that the complaint falls under the specified and limited grounds under the respective schemes. The complaint gets rejected if a complainant fails to choose the correct dispensation.

With the new RB-IOS, customers can file any complaint involving poor service using a single email address or one office -CRPC, RBI, Chandigarh. The team will process each complaint and check if it maintains a few parameters such as first resort complaints, sub judice matters, or repeat complaints before allocation to ombudsman offices based on the residential address.

The CMS portal will have all the communication from/to the customer and the regulated entity, including auto intimations for registration and closure of complaints.

Final Words

A single point Ombudsman will help bring all the information related to the customer, his/her complaint, requests for guidance, and help to allow for greater focus on adjudication. Speeding up the redress process will help the complainant and the regulated entity spend less time finding a solution.

The integrated Ombudsman is a positive step towards better governance; however, there are several issues like the complexity of the cases, the volume of complaints in the offices, delayed submission of documents from the entities, and others. Whether the rejection of complaints reduces or adds to customer woes is to be seen.

Let us wait and see what happens once it goes live.

In the meanwhile, subscribe to 5 in 5 strategy and start your wealth creation journey.

Read more:

Retail Direct Scheme – Democratizing The Ownership Of Sovereign Securities

Bonds –All You Need To Know About Government Bonds And Securities Today!

Read more: About Research and Ranking.

India is opening its $1.1Trillion Bond Market to Retail Buyers – a headline that graced the Bloomberg website a week after Diwali. This initiative garnered plenty of interest as the PM announced the latest reform – RBI’s Retail Direct Scheme (RDS).

The government decided to open up its gold bond, treasury bills, and government securities market to retail buyers through this scheme. This move aims to widen the investor base to finance government borrowing.

The scheme opened on 12th November with 20000+ accounts added till 9 pm on 14th November. The number of accounts indicates people are willing to invest in government bonds.

The bond market has been where large institutions and corporate investors invested their funds, with little retail investment, unlike the equity markets. But this initiative should change this narration. Investors looking for safer investments will find the RDS attractive.

Here’s a look at how the RDS works

Special Platform: The Centre launched a platform; available on retaildirect.org. It offers access to government securities, gold bonds, and treasury bills. As an investor, you must open a Retail Direct Gilt Account to start investing. You can hold the account singly or jointly with another eligible investor.

Eligibility: To invest via RDS, you must have a valid PAN or any other KYC document; and a rupee savings account. In the case of NRIs, the investor must be eligible to invest in G-Secs under FEMA Act 1999.

RDS account: Through the account, you get access to the G-Secs primary market and the order matching system for secondary market transactions in government bonds. You can trade in Government of India treasury bills, govt-dated securities, Sovereign gold bonds, and State development loans.

Fees and Charges: RBI does not charge fees to open and maintain the Retail Direct Gilt account and submit bids in the primary auctions. However, the investor bears the charges for the payment gateway.

Buying in the Primary market: Submit a bid under the non-competitive bidding segment to buy G-Secs in the primary market. On submitting the bid the platform displays the final amount. Set aside funds like you would for secondary market purchase. After the bid is accepted and securities allotted, they are credited to the account on settlement.

Investment: You can start investing with a minimum of Rs. 10000 and a maximum of Rs. 2cr in G-Secs.

Trading in the Secondary Market: If you want to trade in the secondary market for existing G-Secs, you must

• Use the link provided in the account to access the NDS-OM and select the security you want to buy or sell.
• Transfer funds to the designated NDS-OM Clearing Corporation account via net banking or UPI-linked account before trading hours or during the day.
• The platform allocates a funding limit to place a buy order based on the actual amount transferred.
• Any excess funds are refunded after the trading session ends.
• The funds in your UPI-linked bank account are blocked when you buy and debited upon settlement.

If you want to sell your securities, then

• The securities sold will be blocked while placing the order till the trade is settled.
• The sales proceeds are credited to your account on settlement day.

Before you get to set your RDG account and trade, let us make a note of all things Bond.

Understand bonds: Bonds are investments where you lend money to the government or a company for a specific time for regular interest payments. On maturity, the issuer returns the money to the investor. Bonds are also called fixed-income investments.

Coupon rates:  The coupon rate is the fixed rate of interest paid to bondholders. If you invest 1, 00,000 (One-Lakh) and the coupon rate offered is 4% p.a. Then, the bond issuer will pay you 4000 per year until maturity.

Face value: The bond’s face value is the amount it will be worth on maturity. The interest payments depend on the face value.

Yield: The rate of returns on your bond, is yield. Though the coupon rate is fixed, the yield varies. It depends on the bond price in the secondary market and other factors. It is expressed as the current yield, the yield on maturity, and the yield to call.

Price: Bonds traded on the secondary market after issue have two prices. One is the Bid price, and the other is the Ask. The ask, is the lowest price the seller offers, while the bid is the highest price an investor is willing to pay for the securities.

Rating: Credit rating agencies like the CRISIL, ICRA, and CARE rate the creditworthiness of the bond and the bond issuer. Ratings like AAA, AA+, AA-, and BBB indicate the quality of the securities. They depend on the issuer’s financial strength and ability to pay the principal and interest on time. Such ratings allow an investor to pick the correct securities to invest in.

Duration risk: The bond’s price changes based on interest rate fluctuations. They are inversely proportionate. Per experts, the bond price will decrease 1% for every 1% increase in the interest rates. The longer the bond term, the higher its price is prone to interest-based fluctuations.

Types of Bonds: An investor can invest in corporate bonds, Government bonds, State bonds, Municipal bonds, gold bonds, and treasury bills.

Is investing in Government Bonds a good idea?

Yes, investing in G-Secs is a good idea; if you want a steady income with the least risk. These securities offer assured returns and stability as the GOI issues them. Moreover, these bonds may offer a better rate of interest than Bank FD.

We hope you now understand how the RDS account will work. The RBI is looking for tax sops for retail investors buying bonds through RDS. However, whether that happens or not is something we must keep an eye out for.

In the meanwhile, subscribe to 5 in 5 Wealth Creation Strategies and start creating wealth.

Read more:
Retail Direct Scheme – Democratizing The Ownership Of Sovereign Securities
Integrated Ombudsman Scheme: Find What It Means And How It Works Today

The Prime Minister addressing the nation live on TV has become synonymous with new announcements or developments. Last week, he was live on TV announcing two new customer centric initiatives.

However, this time he wasn’t on TV at 8 PM but spoke to the nation during the day.

So, what did he announce that caught everyone’s attention, especially the retail investor community?

1. RBI Retail Direct Scheme
2. Integrated Ombudsman Scheme.

In this article we talk about the RBI Retail Direct Scheme in detail.

For the uninitiated, Retail Direct Scheme opens up a $1.1tn government bond market to retail investors. This means that you can now invest in government bonds directly through RBI.   Shaktikanta Das, RBI governor, first spoke about this initiative in a February policy review calling it a major structural reform.

According to RBI website, “Retail Direct Scheme is a one-stop solution to facilitate investment in Government Securities by individual investors. Under this scheme individual retail investors can open a Gilt Securities Account – “Retail Direct Gilt (RDG)” account with RBI. Using this account, retail investors can buy and sell government securities through the online portal – https://rbiretaildirect.org.in

Does this announcement mean you could not invest in G-Secs earlier?

No.

Earlier, a retail investor could only buy G-Secs through non-competitive bidding in primary auctions through stock exchanges. The only way to invest in G-Secs was via debt mutual fund schemes that invested in such securities.

Big institutional investors like Banks, Mutual Fund houses, insurance companies etc. with lot sizes of Rs. 5crores and higher dominated the Government securities market. So, retail participation was rare.

If you are wondering why the government introduced this structural reform now, you are not alone. The Retail Direct Scheme will help the government big time.

It was rather a perfect time to introduce such an initiative. RBI had cut lending rates to battle the covid-19. This gave people access to cheap money. However, the rising inflation is adding pressure on the central bank to lift rates higher. Tighter monetary policy is expected to weaken the demand for bonds, making it hard for the government to fulfill its near-term borrowing..

The Retail Direct Scheme will help the center amass idle money from small investors to meet its financial requirement to fund public expenditure projects. We expect this to result in better price discovery and yield curve for government bonds.

You can invest in four Government Securities

Retail Direct Scheme allows retail investors to buy and sell in the following securities.

• Government of India Treasury Bills (T-Bills)
• Government of India dated securities (dated G-Secs)
• State Development Loans (SDLs)
• Sovereign Gold Bonds (SGB)

You get access to the Secondary Market

A major plus point of this scheme is that a retail investor now gets access to the secondary G-Secs market. Retail investors can directly access the secondary market portal Negotiated Dealing System-Order Matching Segment (NDS-OM).

Once a retail investor opts to trade his/her G-Secs on the secondary market, CCIL (Clearing Corporation of India Ltd.) will send an ID. These investors can then access the order matching and request for quote (RQE) segment on the platform.

You can invest without worry

One more reason for the retail investors’ happy faces is the safety net the G-Secs come with. Since the government issues these securities G-Secs are extremely safe instruments..

Further, the scheme is based on inclusivity. The PM Narendra Modi, in his speech said, “The Retail Direct Scheme will give strength to the inclusion of everyone in the economy as it will bring in the middle class, employees, small businessmen and senior citizens with their small savings directly and securely in government securities.” 

The retail investors have welcomed this initiative. Per one article in The Economics Times, over 20,000 accounts were opened till 9 pm on Sunday after the Prime Minister announced the scheme.

That’s it from us today. We will cover more about this topic in the next article.

Meanwhile, now that you know how safe and secure Retail Direct Scheme is, will you invest in G-Secs?  

Read more:
Bonds –All You Need To Know About Government Bonds And Securities Today!

Integrated Ombudsman Scheme: Find What It Means And How It Works Today

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

120 World leaders gathered at Glasgow for the Global Climate Summit. It was one of the most-awaited gatherings. Many considered it the last chance to get world leaders to agree to an emission target to ease climate change after the 2015 Paris Agreement.

Many climate activists believe the COP26 has been a failure with no agreement in sight. There has been no climate action, though several Global North leaders made impressive pledges and goals to lower greenhouse emissions.

The COP26 has failed to meet expectations so far. The richest and most industrialized nations are keen to escape accountability, blame emissions and funds for not fulfilling their promises while looking for ways to shift the burden of their inaction on other developing nations.

In this scenario, India quickly emerged as the beacon of climate change with its willingness to commit to an end date for global greenhouse emissions.

Two weeks ago, the Indian Prime Minister pledged to become carbon net-zero by 2070 at the Global Climate Summit COP26. An announcement that led to frowns and criticism from other world leaders but put a smile on Indian faces.

It is perhaps, for the first time, one of the largest carbon emitters has committed to do away with fossil fuels. This move signifies an end in sight for fossil fuel use, though it is two decades later than other countries.

Renowned economist Lord Nicholas Stern appreciated PM Narendra Modi’s proposed plans, calling them ambitious and path-breaking. He believes India made the most important commitment and will play a major role in fighting climate change.

Let us understand the commitments India made at COP26.

Introducing the concept of Panchamrit at the summit, the PM committed to the following on behalf of India.

• To be carbon net-zero by 2070.
• To bring the non-fossil energy capacity to 500 GW by 2030.
• To bring down the carbon intensity to 45% by 2030.
• To fulfil 50% of its energy requirement through renewable energy by 2030.
• To reduce 1bn tonnes of carbon emissions from the total estimated emissions by 2030.

India’s carbon-neutral commitment has received the most attention. But it is the other pledges that are daring in their scope. Like reducing 1bn tonne of the projected emissions by 2030. This goal means absolute emissions must reduce 2-3% in the next nine years.

India’s Plan to meet the targets

India Inc. welcomed the PM’s pledge to be carbon net-zero by 2070. They believe we are on track to achieve these aspirations.

Here’s how Indian businesses plan to contribute to the net-zero mission.

Challenges India faces

Fulfilling the pledges may not be a walk in the park. India faces several issues like low-level of human development, shortage of resources. It means improving a lifestyle of billions without access to abundant energy will be troublesome.

Meeting the targets will be particularly difficult as India must balance its ever-increasing development needs with a depleting global carbon budget while finding a way to honor its climate obligations.

India has a growing population of 1.38 billion, and it is the fourth biggest emitter after China, the US, and the European Union. However, India’s per capita CO2 emissions, at 1.9 tonnes per person in 2019, are the lowest compared to 5.5 tonnes in the UK, 16 tonnes in the US.

It is a clear case of developed nations not reducing their carbon emissions quickly though they are responsible for the rapidly depleting global carbon budget.  

Unless developed nations lower their carbon emissions, developing countries will find moving to expensive renewable sources with increasing demand for cheaper energy hard. Shifting to green and clean energy requires finance, but Global leaders have not kept their promise of $100Bn in climate financing every year. 

Wealthy countries achieving their carbon net-zero targets is not guaranteed despite their large financial resources and advanced technology. This means emerging markets have a difficult task ahead.

Large emerging markets such as India, China, will need to augment their productivity from low levels of economic development to adopting advancing technologies because of a fall in prices of onshore wind and solar energy.

COP26 ended on 12^th November, however the discussions will be on for the next six months. But will the transition to clean energy happen? Will emerging countries like India get the support and finance they seek to meet their targets?

Well, it’s a wait and watch game.

Need sound advice on where to invest, how much to invest, for how long to invest in the stock market? Subscribe to 5 in 5 Wealth Creation Strategy and get a portfolio of 20-25 fundamentally strong stocks tailored for your goals and risk taking ability.

Read more: 
Renewable Energy – The World’s Favorite Energy Source Today!
Ambani’s Reliance On Its Way To Becoming A Major Renewable Player In The Next Decade
Adani’s Race To Triple Its Green Energy Capacity Within The Decade

*Disclaimer: Information mentioned in this email is for educational purposes. Please do not consider it a recommendation to buy/sell/hold from Research & Ranking.

Read more: About Research and Ranking.

The outcry on coal shortage, fuel price rise, and other scarcities across the world last month brought Renewable Energy into the limelight again.

Clean energy derived from natural resources that replenish constantly is Renewable energy. Though considered new-tech, humans have been using nature’s power for transportation, heating, lighting, and more for ages. Examples, wind-powered sailboats, windmills to grind grains, solar energy to cook food, etc. Only in the last 500 years have human beings turned to cheaper, dirtier energy sources like fossil fuels, coal, and fracked gas.

A few decades ago, capturing and retaining solar and wind energy was expensive and cumbersome. Over the years, innovations and cheaper options to capture energy have made renewables a significant power source globally. In the last few years, renewable energy has become popular, with more countries pledging higher investments in renewal sources. China, the United States, and Germany are the largest consumers of renewable energy.

Today, India is among the Top 3 attractive destinations for renewable energy. The biannual Renewable Energy Country Attractiveness Index (RECAI) ranks the top 40 countries on their renewable energy investments and deployment opportunities. The classifications reflect EY’s assessments of global market trends and market desirability.

The infographic below will give you an idea of the change in rankings since 10th May 2019.

India’s flourishing renewable energy market conditions, inclusive policy decisions, investment and technology improvements focusing on self-reliant supply chains have pushed the clean energy transition to new heights.

India can generate 1000 GW of solar power on 0.5 percent of the land. India’s renewable power generation capacity has increased with a CAGR of 17.33% from FY16-2020. The Center plans to install 227 GW of renewable energy capacity by 2022, more than its Paris Agreement target of 175 GW.

Top Billionaire Barons race to a Renewable finish line

Prominent business houses like Ambani’s, Tata’s, and Adani are betting big on renewable sources.

Last year, India’s richest man Mukesh Ambani, announced to make Reliance a carbon net-zero company by 2035. He also pledged to invest $10Bn in clean energy and hydrogen fuel in the next three years in June this year, presenting the 5000-acre Dhirubhai Ambani Green Energy Giga Complex in Jamnagar.

Not to be outdone; Gautam Adani, India’s second richest man, announced a $20Bn investment in the next decade. He promised to produce the world’s cheapest green electron, foray into green hydrogen production, use renewable energy to power its data centers, and turn carbon net-zero by 2025.

This week’s we talk of focused interest in the Renewable Energy Sector, the several green company acquisitions, FDI inflows, and more. While we write the next chapter, look at the recent developments in the sector:

• Smart Power India (SPI), Rockefeller Foundation’s subsidiary, and Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) joined hands with India’s Ministry of New and Renewable Energy to encourage decentralized renewable energy (DRE) for the country through Azadi Ka Amrut Mahotsav.
• Tata Power inks a three-year commercial contract with the World’s first renewable energy AI (Artificial Intelligence) firm Bluewave-ai. The company is also in talks with a large pension and sovereign asset managers to raise around $500 million ahead of its renewable energy arm’s IPO.
• State-owned power behemoth NTPC draws Rs. 15,000crore disinvestment plan. NTPC intends to list NTPC Renewable Energy, North Eastern Electric Power Corporation, and NTPC Vidyut Vyapar Nigam.
• India’s renewable energy generation capacity, excluding large-scale hydro projects, has crossed 100 GW. The country stands fourth in the globe in terms of installed renewable energy capacity.

Read more:Ambani’s Reliance On Its Way To Becoming A Major Renewable Player In The Next Decade

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

Wondering whether it is the right time to invest in the stock market?

In our honest opinion, yes, it is! In fact, it is the best time to invest in the Indian stock market if you want to become a successful investor. Today we will tell you the difference between a wise and an ordinary investor and how you can become a successful investor.

September was on all account a positive month for the stock market with Sensex crossing a psychological level of 60,000. Then October came and the Blue-chip Index Nifty crossed the 18,000 mark. However, last week the stock market corrected with Nifty Midcap 100 and Nifty Small Cap down 3.53% and 4.60% respectively. Moreover, several fundamentally sound stocks like IRCRC, IRX, Deepak Nitrate, etc. tumbled 10%-35%.

Why did IRCTC fall?

Here comes the fascinating bit.

In the last one year, investors’ darling IRCTC gave exuberant returns, growing from 1,000 level to 6,000. Many wanted to buy the stock when it was at 5,000 – 6,000 levels.

However, it fell dramatically last week since the National Stock Exchange (NSE) banned the stock on the Futures & Options (F&O). The reason for the ban was that the stock crossed the 95% threshold of the market wide position limit (MWPL).

What is that, you ask?

The MWPL is set by the stock exchanges, which is the maximum number of contracts that can be open at any time (Open Interest), therefore, the F&O contracts of a stock enters a ban period if the open interest crosses 95% of the MWPL.

Does this fall in price imply weakening of the company’s fundamentals?

No. The company’s fundamentals are intact. Many ordinary investors offloaded IRCTC from their portfolio just because others were selling.

Why did IEX fall?

Similar is the case with Indian Energy Exchange (IEX). Before plunging ~24% last week, IEX had gained over 35% in October alone. The stock rose on the backs of the Energy Crisis buzz, strong second quarter earnings, and a bonus issue announcement.

Today the National Stock Exchange added IEX to the F&O banned list with six other stocks.

Does this fall in price imply weakening of the company’s fundamentals?

No. The company’s fundamentals are intact. Many ordinary investors offloaded IEX from their portfolio just because others were selling.

No. The company’s fundamentals are intact. Many ordinary investors offloaded IEX from their portfolio just because others were selling.

Let us now come back to the difference between a successful and an ordinary investor and why it is the best time to invest in the stock market.

A successful investors would look at this correction in IRCTC, IEX, Deepak Nitrate, etc. as an opportunity to buy as these stocks are available at cheap prices. An ordinary investor, on the other hand, would pursue it as bad time to invest. He/she would wait till stocks return to pre-correction levels.

A wise investor looks at a dip in price as an opportunity and an ordinary investor looks at a rise in price as an opportunity.

So you need to decide, which one you want to be.

Now, why it is the best time to invest. The country has undergone tremendous positive changes over the last few months. These developments and key policy reforms mean India is poised for growth.

Here are a few major developments-

Big Trillion Plan- Last month, the Government unveiled a four-year National Monetization Pipeline (NMP Vol 1 & 2) worth an estimated Rs. 6 lakh-crore. This plan aims to unlock value in the Infrastructure Line Ministries’ assets. The Creation through Monetization philosophy is directed at tapping private sector investment for new infrastructure.

Retails investors contribute to the rally– 15.2 Million Retail investors have added to the investor base since April 1. This implies retail investors are no more riding pillion but are major contributors to the recent rally.

The sixth largest stock market- India became the world’s sixth largest stock market, overtaking France for the first time in market capitalization.

FIIs Continue the Buying Spree- The fear of taper tantrum has reduced. Irrespective of negative comments from the bankers around the world, the Foreign Institutional Investors (FII) continue their buying spree. The NSDL data says FIIs buying stood at Rs. 2.28 trillion in September.

PLI Scheme- The government approved Production-linked incentive (PLI) scheme for the textile sector worth Rs. 10,683crore. Automobile and auto components industry to receive an outlay of Rs. 25,983crore under the PLI scheme.

NBFCs loosen their Purses- After a brief pause during the COVID-19 pandemic, the NBFCs and Banks have begun filling creditors’ pockets as the demand for loans picks up. Edelweiss and IIFL are now lending Rs.4,000 crores a month. The country’s largest mortgage lender HDFC Ltd. is witnessing a remarkable rise in home loan demand similar to pre-COVID levels. 

Bad Bank to tame the Worsts: After its announcement in the FY22 Budget, the Union Cabinet approved 30,600core government guarantee for the National Asset Reconstruction Company (NARCL), facilitating the formation of Bad Bank.

India MSCI Index Premium Soars– The valuation premium of the MSCI India Index reached 55% and 12% by mid-June compared to the MSCI Emerging Markets and MSCI World indices. Moreover, this is much higher than the five year average premium of 45% and 8%.

With all these and other developments happening in the periphery, one should look at the bigger picture instead of fearing short-term corrections in the stock market and waiting for the right time to invest.

Today, the Sensex is above 60,000. Sure, it’s a big number. But can you imagine how high the stock market will be, if all things fall in place as planned.

Nick Murray’s quote says it for us

“Timing the market is a fool’s game, whereas time in the markets is your greatest natural advantage.”

Need sound advice on where to invest, how much to invest, for how long to invest in the stock market? Subscribe to 5 in 5 Wealth Creation Strategy and get a portfolio of 20-25 fundamentally strong stocks tailored for your goals and risk taking ability.

Read more: Why Did Tata Chemicals Fall?

*Disclaimer: Information mentioned in this email is for educational purposes only. Please do not consider it a recommendation to buy/sell/hold from Research & Ranking.

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