Money in need, is money indeed!

Demonetisation made you sweat a pond;
The big corporate defaulted on its bond.

Limitations were imposed on your account;
Yet you ignore liquidity & focus on the amount?

Investing is pretty much like the perfect dinner – a well-diversified spread of dishes with nutrients in line with your health requirements. This is pretty much what you must seek in investments in the form of a diversified portfolio in line with your investment objectives & risk profile.

But imagine, you are hungry, and this appetizing meal is well-laid out in front of you and you take the first bite only to realize that the blessed chef simply forgot to add salt.

Quite often than not, you decide the asset class that fetches you the best returns but miss out on checking a simple attribute – liquidity.

Like salt, one realizes the value of liquidity only when it goes missing. What’s worse, by the time you realize it, you’ve typically reached the point of no return.

Recent times are a wake-up call for investors chasing returns in isolation, without considering other key attributes including liquidity risk & the importance of diversification.

We all know about PMC bank that was recently mandated to freeze depositor accounts or allow withdrawals subject to a significantly low threshold – irrespective of the amount held in the account. In similar news, DHFL could not repay investors who had parked their money in DHFL-issued fixed deposits. Such news triggered a slew of reports on people who lost health, and life in extreme cases, simply because most had their life savings parked entirely in the affected accounts and couldn’t come to terms with the fact that there is a possibility that they can never see their money again.

Developing situations made my cousin Anjali take a step back and re-think of the multiple financial decisions she had made and how could she possibly strategize well-enough to avoid, or at least mitigate, the risk of not being able to access her money while ensuring it appreciates optimally.

Here’s the list of actionable she shared with me saying that this would help her minimize risks and maximize returns on every penny deployed:

  1. Park money required to meet immediate liquidity in the savings account of a large bank
  2. Invest money needed for short term needs in very high-quality bonds/debentures – in many of them so that if one of them were to come under stress like DHFL, rest of the bonds continue to cover for the losses
  3. Deploy money needed to meet long-term objectives in multiple well-researched, high growth potential equity shares.
  4. Keep monitoring the holdings daily and keep managing the portfolio hoping that my knowledge suffices to take the right investment decisions.

Well, life was simple & she was confident till point 3, but point 4 made her open yet another pandora’s box wondering aloud if she really had the knowledge and time to actively manage the portfolio? How would she buy bonds & debentures reserved for institutional investors? Could she manage multiple trading accounts? Does she have the wherewithal to gain access to insights reserved typically for large institutional investors?

“I don’t think managing money is going to be as simple as the one, two and three. I know what’s required, but there’s no way I could do that myself. If only there was a way…” she rambled to herself as an idea struck her like lightning.
“Mutual Funds?”, she asked with a hopeful gaze.
“Precisely” was the only word I uttered as she picked the drift.

Mutual funds are typically pooled investment vehicles managed by highly qualified funds managers and regulated by SEBI – known for its typically low tolerance for compromised governance. Mutual Funds have a category-suite vast and expansive enough to suit almost all investor needs. While the fund manager’s role is to maximize wealth optimally, the role of a financial advisor is to help the investor with an efficient combination of well-managed mutual funds.

Informed decision making, predictable liquidity, and solid diversification are at the heart of mutual funds as a product.

Reply to this e-mail to know more about how you can utilize various mutual funds to achieve a variety of financial goals you have.

Indians are getting richer, Indian equities are next-in-line

Nifty and Sensex ended the week up by 2.65% and 2.84% respectively.

The recent credit Suisse publication – Global Wealth Report 2019 reflects total wealth grew at an annual rate exceeding 10%. Wealth increased significantly in every region of the world. Emerging market economies, especially China and India, did not simply benefit from this growth but featured as a key driver to the overall uptick

One key takeaway would be that while the wealth in most nations has been expanding, there seems to be a systemic fracture posing to be a hurdle in overall economic progress and hence the synchronised global slowdown today.

In other news, here is the week at glance:

  • The Federal Reserve cut its benchmark rate by 0.25%, a move that was widely expected & priced-in by futures markets.
    The statement may reflect a central bank that will be less willing to cut interest rates in the coming quarters after it removed the phrase that the Fed “will act as appropriate to sustain the economic expansion” and replaced it with less forceful language suggesting a wait-and-watch approach.
  • India to spend $100 bn on energy infra, says PM Modi inviting Saudi investment
    India is expected to invest a massive $100 billion in oil and gas infrastructure to meet energy needs of an economy that is being targeted to nearly double in five years, Prime Minister Narendra Modi said on October 29 as he sought investment from oil kingpin Saudi Arabia and other nations to boost supplies. Speaking at Saudi Arabia’s annual investment forum, also known as ‘Davos in the desert’, Modi promised stable, predictable and transparent policy regime to catalyse foreign investments.

Stock of The Week

Fund alerts:

Aditya Birla Sun Life Mutual Fund has decided to change the benchmark of the Aditya Birla Sun Life Equity Fund from S&P BSE 200 TRI to S&P BSE All Cap Index TRI.

Bottom line:

Earnings season, so far, have been slightly better than analyst expectations with major banks showing improvement in asset quality and fall in slippages, auto and technology companies’ improved earnings were partially backed by corporate tax reduction indicating a systemic recovery in second half FY20.
Though major indices may seem to lend a perception of Indian equities hitting the peak; however, the reality is far from it. We recognise immense valuation-based opportunities in Indian equities – especially in stocks beyond NIFTY15.
Investors deploying capital into large-cap-oriented & multi-cap funds through a Systematic Investment/Transfer Plan can be expected to benefit the most from the structural recovery underway.

Get more GOLD this Diwali!

Diwali-Gold

Important update: Recent regulatory changes applicable on Liquid and Overnight Fund

Dear Investor,

This is to update you that SEBI has introduced a graded Exit Load structure for Liquid scheme vide Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/101 dated September 20, 2019. Accordingly, SEBI has decided to implement a graded exit load in all liquid funds w.e.f. October 20, 2019.

The graded exit load shall be applicable on a prospective basis to the following transactions:

  1. All the subscription transactions (including switch-in) processed with NAV of October 21, 2019, and thereafter, irrespective of receipt of application.
  2. All the systematic transactions such as Systematic Investment Plan and Systematic Transfer Plan etc. where registrations /enrolments/installments of existing registrations have been done on or after NAV date of October 21, 2019.

Note: All other features, terms, and conditions pertaining to the schemes shall remain unchanged.
Please find below the grid on graded exit load to be levied on the liquid funds:

exit load

Another, important change for Liquid & Overnight schemes as per SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/101 dated September 20, 2019, is the change in cut-off timings for applicability of Net Asset Value (NAV) with respect to purchasing of units in Liquid Funds & Overnight Funds with effect from October 20, 2019.

Accordingly, the cut-off timings for the applicability of Net asset value (NAV) in respect of the purchase of units in Liquid Funds and Overnight Funds shall be changed from existing 2:00 p.m. to 1:30 p.m. with effect from October 20, 2019.

Bulls are buying, bears are buying – are you?

Appears that the bulls are back firmly this time – even the one residing abroad. FIIs retained their interest on the back of positive corporate earnings and perceived opportunity in the Indian market. We witnessed constant buying from FIIs this week, which remains the primary reason for sustenance in the uptick.

bull and bear

Key Happenings in the week that went by

Bumper opening for IRCTC:
IRCTC listed with a bumper gain of 100% and closed with an increase of 129%. This is so far the best gain of any PSU IPO and surpassed the 94% listing gain offered by Power Grid Corporation on its listing.

It implies the investors’ interest in the equity market and their bias towards quality and fundamental strength. From the government’s perspective, this precedent can be expected to aid further divestment measures.

What’s in for the investor here:
Strong divestment will help the government ease fiscal deficit which is expected to eventually translate to improved spending on infrastructure.

Strong corporate earnings

HUL Q2 profit increased 21% YoY to Rs 1,848 crore; announces Rs 11 dividend per share owned
Hindustan Unilever reported a net profit of INR.1,848 crore, a YoY rise of 21%.
If we will exclude the corporate tax benefit, the profit figure may come to ~INR.1,832 crore.

Country’s second-largest private sector bank HDFC bank has reported a YoY rise of 26.7% in net profit
Profit after tax for the quarter increased to INR.6,345 crore against INR.5,005 crore earned in the same period last year.

Reliance Industries posts record INR.11,262 crore profit in September quarter
Reliance Industries reported a net profit of INR.1,848 crore, a YoY rise of 18.35%. It became the country’s most valuable company after its market capitalization on market value touched INR.9 lakh crore. Notably, this is the only Indian company to achieve a market cap of such magnitude.

Possibilities of Brexit deal
Britain secured a Brexit deal with the European Union on Thursday, more than three years after the Brits voted to exit the bloc
The deal, however, needs final ratification of the British Parliament, which is a contingent event. Possibilities exist that if the deal may not get the parliamentary nod; in such a case the EU may extend the timeline.

Life ahead – at least in the near term
Indian equities are currently playing catch-up and the sentiment is likely to percolate to stressed sectors. Small and Midcaps are likely to witness buying interest. India’s two respected mammoths & index heavyweights – Reliance Industries and HDFC Bank’s quarterly results will set the ball rolling. Markets witnessed buying from FPIs and DIIs on improved sentiments and better prospects going ahead for the economy and we expect this uptick to sustain till the end of Christmas, at least.
Hence, investors may deploy fresh funds at current levels keeping in mind appropriate diversification and individual risk-taking abilities.

Star Fund

Key Mutual Fund News:
SEBI has accepted AMFI’s graded exit load recommendations for redemptions in liquid funds ; one day holdings would draw an exit-load of 0.007%, two days would lead to 0.0065%, three days would lead to 0.0060%, followed by 0.0055%, 0.0050%, 0.0045% till the sixth day; seventh day onwards there is no exit-load. This will be effective from the 20th of this month.

NFO in Focus: Invest in Kotak Pioneer Fund!

NFO

Here’s what you must know about the week that went by

“In the business world, the rearview mirror is
always clearer than the windshield.”

Warren Buffet

Witnessing a reversal in sentiments, Indian bellwether index Nifty bounced back to a much more favorable level of 11,305 from the previous week’s 11,175-end – up by 1.2%

Key highlights of the week included the following:
-The Union Cabinet raised the dearness allowance to 17% from the previous 12%
This move is expected to cost a total of Rs 16,000 crores to the exchequer and will benefit a total of 50 lakh Government employees and 65 lakh pensioners. This comes in as a surprise as previous increments were in the range of 2 to 3 percentage points.

Expected Impact:
This is the highest ever increase in DA in one go by the central government, we expect this to lend positivity towards the consumption sentiment as the festive season closes in.

– Public sector banks cut lending rates by up to 25 bps.
Banks including Bank of India, Bank of Maharashtra, Central Bank of India, Oriental Bank of Commerce, State Bank of India have reduced lending rates by up to 25 bps following a cut in the repo rate by the RBI last month.

Expected Impact:
With the upcoming festive season, the move is expected to extend the benefit of lower borrowing rates to customers; the auto segment is expected to benefit the most given an already slumped state of sales.
With continually reducing outflows of foreign capital, we can see a reinstatement of faith by the foreign investors and can see them turning strong net buyers soon.
Meanwhile, here are the star fund categories of the week:

return

Here’s how the week’s events reflected in Indian markets

NIfty

We believe corporate earnings will primarily guide market sentiments in the coming week. Hopefully, this earning season will revive domestic investor mood & act as a catalyst in bringing out the bulls in foreign investors.

NFO Alert: Invest in Kotak Pioneer Fund!

kotak NFO

Long story, short. Your portfolio & the week that went by!

Markets have corrected to a new low
“Oh no! It’s time to go!”

Markets have touched a new high
“It’s too expensive to buy!”

There may be a hundred reasons to not;
But it takes just one to escape the rot.

Sadly though, there is no reason adequate
for the fence-sitters choosing to simply wait.

The week and the month ended on an ecstatic high. NIFTY clocked a gain of over 7.5% only in the past six days while Sep’19 ended with month-over-month growth of 4.5% as the index reclaimed the 11,500-levels.

The finance ministry’s corporate tax rate-cut gift to India Inc. last weekend was well-received by capital market participants as domestic & foreign investors pumped in the capital in expectation of a spur in the earnings recovery rate. Modi’s visit to the Oval Office is expected to garner positivity for the Indian economy – especially around strengthened trade relations, improved tourism sentiment and influx of foreign capital into the home economy.

However, as the month wrapped, President Trump once again featured in global headlines as reports of progressing impeachment proceedings materialize coincided with his offensive strike against China which included announcing an intent to delist all China-based companies off the U.S. stock exchange.

Having said that, Indian capital markets have been quite resilient in the face of such escalating tensions between two super-economies as it basked in the comfort of an imminent consumption and earnings revival.

Here’s how the past week looked like:

Investors are advised to continue investing in a systematic fashion, sticking to asset allocation. If permitted by one’s risk & investment profile, preferences can be skewed towards a large & midcap allocation blend (large-cap orientation) and funds with meaningful exposure to banks, automobiles & IT as sectors.

Hot NFO Alert: Motilal Oswal Large & Midcap Fund (27 Sep’19-11 Oct’19)

Motilal Oswal has launched a New Fund Offer in the large & midcap category – Motilal Oswal Large & Midcap Fund. The category & NFO is expected to benefit from the evolving economic scenarios by way of capturing the uptrend and insulating against headwinds in an optimal fashion.

The fund is suitable for investors having a long-term investment horizon and seeking optimal appreciation across cycles.

You can invest (or access more scheme-related information) by launching the Fisdom app and choosing the “NFOs” option at the bottom of the home screen and clicking on “Motilal Oswal Large & Midcap Fund”.

Fund Overview:

The fund will be managed by Aditya Khemani & Abhiroop Mukherjee (star fund managers at Motilal Oswal). The targeted ratio between large & midcap is expected to be at 50:50; however, the AMC may have an underlying philosophy of maintaining at 35:35 with the rest being flexible for allocation between equities and debt. The fund has an exit load of 1% if redeemed within 15 days and none thereafter. Offer NAV at INR 10/unit.

Given our primary interaction & understanding with the AMC, the fundamentals and philosophy seem well-positioned considering currently evolving market dynamics.

Rationale:

The case for large-caps (NIFTY15) remains evergreen as it has known to withstand headwinds and leverage tailwinds effectively while continuing to grow efficiently. The case for large-caps is further strengthened by the current stimulus-orientation with the understanding that such measures will percolate from top to bottom of the market-cap pyramid across sectors.

As far as midcaps are concerned, Midcaps’ relative valuation (P/E) vs. NIFTY is at 2012-13 level lows – also the zone which marked the beginning of the midcap bull rally through 2014. The Nifty Midcap-100 market-cap is currently at a 5-year low with the rolling1-yr differential b/w NIFTY midcap-100 & NIFTY being at a historical extreme. Though there’s a strong case for a revival in the midcap space (albeit by tagging-along with the broader market), quality of stock-selection has become all the more critical within the space. We are confident that Motilal Oswal through its fund management team & framework along with institutional depth has the ability to deliver.

In case of any queries/concerns, feel free to reply to this e-mail and we would be glad to assist.