Olm July 2020

Anurag thakur interview covid-19 Hits insurance
SubScriber copy not for reSale J u ly 2 0 2 0 , ` 5 0
outlookmone y.com
Unlocking
The Market
Power Of
SMEs
Govt. stimulus may
unleash hidden
energies of small and
medium enterprises
and fuel their
stock prices
China Conflict Effect ESG Funds Up NRIs Gain In Property 8 904150 800027 07
Focused on the
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Contents
JULY 2020 VOLUME 19 ISSUE 7
Interviews:
26 Anurag Thakur on the stimulus package
SMEREADYSTOCKS
TO
30 How India-China conflict can hit stock market
34 Is insurance sufficient in COVID times?
BOUNCE BACK?
Health insurance is proving to be insufficient to deal
with the challenges and high cost of COVID-19
treatment
Sops may give a push to small and 38 Environment funds set to rise
mid-cap stocks Investors are willing to invest in stocks with
environment and social values
42 Boost For Digital Payments

Fintech will reap benefits this year as people turn to
financial platforms
44 A Relief To MF Industry
RBI’s special liquidity window may help
mutual funds
48 Attractive property options for NRIs

It is an opportune time for real estate sector as
home prices drop
54 Reframe Your Goals

Plan asset allocation as per your risk profiles by
aligning goals with objectives
pg 12 56 Golden option for millennials

Gold will remain in the reckoning and provide
positive returns during the pandemic
Regulars
4 Talk Back 8 News Roll 10 Queries 52 Stock Pick 60 Morningstar 64 My Plan 66 Dear Editor
Cover Design: PRAVEEN KUMAR .G
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Published for the month of July 2020; Release on 1 July 2020. Total no. of pages 68
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The objective is to keep readers better informed and help them decide for themselves.
www.outlookmoney.com July 2020 Outlook Money 3

Talk Back
New World Order Post COVID-19

EDITOR-IN-CHIEF
Our lives are Ruben Banerjee
significantly EDITOR
changing in the era Saibal Dasgupta
of COVID-19, as we EQUITIES AND MARKETS EDITOR
tailor our lifestyle to fit Yagnesh Kansara
into the ‘new normal’. SENIOR ASSISTANT EDITORS

Aparajita Gupta,
This article about the Anagh Pal
new normal is well SPECIAL CORRESPONDENTS
presented in a detailed Himali Patel,
Vishav
and lucid manner,
PRINCIPAL CORRESPONDENT
talking about how Nirmala Konjengbam
financial transactions are soon going to be digitally dominated
SENIOR CORRESPONDENT
as customers are gradually becoming less dependent on human Dipen Pradhan
intervention, about increased awareness on health insurance and NEWS DESK
several other conspicuous changes. The crisis and lockdown have COPY EDITOR
Sudeshna Banerjee
deeply changed our mindsets, and as mentioned in the article, this
SENIOR SUB EDITOR
pandemic is likely to leave a permanent imprint on the customers, Sampurna Majumder
countries and economies. TRAINEE SUB EDITOR
Sonia Sharma, Mumbai Indrishka Bose
WEB CORRESPONDENT
Rajat Mishra
Bleak Expectations Of A Revival DIGITAL TEAM
I found the story highly Amit Mishra, Sneha Santra
informative, describing ART

Praveen Kumar. G, Vinay Dominic (Senior Designers)
the positive and negative Girish Chand (DTP Operator)
sides of the Atmanirbhar PHOTO EDITOR
Bharat package. Often it gets Bhupinder Singh
difficult for us to comprehend TECH TEAM

Raman Awasthi, Suraj Wadhwa
the entire concept and its
ramifications. Such articles Business Office
CHIEF EXECUTIVE OFFICER
help us to get a clear picture Indranil Roy
of it. I had a great time reading this article. PUBLISHER
Sanchita Tyagi Rawat
Mohina Singh, New Delhi
ASSISTANT VICE PRESIDENT
Tushar Kanti Ghosh
Invest For Guaranteed Happiness Circulation & Subscriptions

Anindya Banerjee,
The column on the Gagan Kohli, Vinod Kumar (North)
necessity of investing G Ramesh (South), Arun Kumar Jha (East)
Shekhar Suvarna
serves an important role for
people who find themselves Production
GENERAL MANAGER
confused while making Shashank Dixit
an investment decision. It CHIEF MANAGER
Shekhar Kumar Pandey
is a beautifully explained
MANAGER
column and teaches us Sudha Sharma
how to make our money DEPUTY MANAGER
work, once we enter the Ganesh Sah
retirement stage. ASSOCIATE MANAGER
Gaurav Shrivas
Soumyajit Pal, Kolkata
Accounts
VICE PRESIDENT
Diwan Singh Bisht
Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, COMPANY SECRETARY & LAW OFFICER
New Delhi 110029, or [email protected]. Please mention your full name and residential address. Ankit Mangal
4 Outlook Money July 2020 www.outlookmoney.com

Talk Back
Gather The Rosebuds

Right Now
I have been following Outlook
Money for years, and I would
like to say that this topic is really
commendable, and it helped me
settle my thoughts regarding
buying a new house. The financial
uncertainty has taken a front sit
due to the pandemic, hence many
are hesitating to buy a new house.
However, this story has given a
proper background picture coupled
with valid reasons.
Arshi Kashyap, Mumbai current scenario is the emblem of reach a certain point in future,
dark times, but we must learn to where it might be termed as another
Living Through The weather the storm with minimal pandemic. Since diabetes runs in our
Market Cycles impact. I feel this article is the need family, it is a grave concern for us. I
The standpoint was very intriguing. of the hour, as it explains that it is would like to thank Outlook Money
I have poor knowledge in this field, very important for us to weigh our for coming up with this topic. I got
but I would like to appreciate the financial goals, revisit our priorities to explore the pros and cons of a
way it has been woven, starting and create emergency funds. It is diabetes specific health insurance
with a historical timeline to give us quite apparent that the crisis will be plan and whether it is the best
an idea about the boom-bust-boom with us for some time, and we need possible solution or not.
cycles. to act accordingly. Nivedita Banerjee, Mumbai
Sunipa Dey, Kolkata Yashwi Pandey, Kolkata
Reap A Golden Harvest
Surviving A Salary Cut Sugar, Spice All Things I had a great time learning about the
Or Job Loss Not So Nice status of gold in the market. At this
Some are sailing in the ship I knew about the increasing cases point of time, it is surely the safe
of hardships while some are of diabetes, but I was taken aback haven for people, as it lends itself
witnessing their boats drown. The when I came to know that it will well to liquidation during uncertain
times and helps investors raise cash
and counterbalance losses stemming
from other asset classes. It has
become the best performing asset as
it continues to retain its worth even
in turbulent times like these.
Suraj Rastogi, Delhi
My Plan
I could very well relate to this story.
It is important to stay invested
amidst all negativity. It was a great
learning from Dr DG Vijay’s story
and it can be a lesson for several
others out there. We are often
unsure of our financial decisions
when there is an underperformance
of the investment. Such stories are
really helpful.
Rishi Jain, Bangalore

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WITH A ROOF OVER THEIR HEAD.
l One of the largest affordable housing ﬁnance companies in India focused on

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l 292 branches across 20 states and union territories of India covering more
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Web|site: www.aadharhousing.com
News Roll
Fitch Downgrades 9
Indians Welcome Change Indian Banks To Negative
In Customer Experience C redit rating agency Fitch has revised
the outlook on the long-term Issuer
Default Ratings (IDR) of nine Indian banks
from stable to negative in consonance with
rating changes to India’s sovereign outlook.
As quoted by Fitch, the reason for this
downgrade is the impact of the escalating
coronavirus pandemic on India’s economy.
However, earlier this month, another credit
rating agency downgraded the long-term
local and foreign currency deposit ratings
of HDFC Bank and SBI to Baa3 from
Baa2 and also the long term issuer rating
of EXIM India to Baa3 from Baa2, with a
negative outlook and had placed Bank of
Baroda, Bank of India, Canara Bank and
Union Bank of India under the review for
T he consumers are changing their approach and increasing

their interest and awareness regarding the value of the
information they provide to the businesses. 69 per cent of
downgrade.
On June 22, Fitch rating
downgraded outlook of
Indian consumers believe that the gradual change in the nine banks that include
trajectory of customer experience is seen due to the result of Export-Import Bank
their data being used, says one of the leading credit bureaus of India, State Bank of
Experian in its 2020 Global Identity & Fraud Report. As per the India, Bank of Baroda,
report, Indian businesses have ranked the highest at 100 per Bank of Baroda (New
cent in confidently identifying the customers, whereas 35 per Zealand), Bank of India,
cent customers felt unrecognised by the businesses. Further 54 Canara Bank, Punjab National
per cent of business organisations in India are using advanced Bank, ICICI Bank, and Axis Bank.
analytics for identity authentication and fraud prevention. Fitch said,“The negative outlook
With sophisticated authentication strategies and advanced on India’s sovereign rating reflects an
fraud detection tools, today they are accurately identifying and increasing strain on the state’s ability to
re-recognising their customers, reducing their exposure to risk provide extraordinary support, due to the
and eventually building a greater level of trust in organisations. sovereign’s limited fiscal space and the
“Companies need to deliver more than personalised products; significant deterioration in fiscal metrics
they need to deliver on customer expectations for security and due to challenges from the pandemic.”
convenience at every step of the digital journey,” said Sathya “The rating agency expects State Bank
Kalyanasundaram, Country Head & Managing Director, of India (SBI) to receive extraordinary
Experian India. government support, if required, due to
The credit bureau Experian had interviewed 6,500 its very high systemic importance. SBI is
consumers to study and analyse the research, with more than the largest Indian bank with nearly 25 per
650 businesses from across 13 countries including India, cent market share in the system assets and
Mainland China, Japan, Indonesia, Australia, the United States, deposits. It is 57.9 per cent state-owned
and the United Kingdom amongst others. “Globally, while 95 and has a much broader policy role than
per cent of businesses are optimistic in their ability to identify peers’’, Fitch added. For ICICI Bank and
customers digitally, many consumers across the globe are Axis Bank, the global rating agency expects
yet to be acknowledged and recognised while engaging with a moderate probability of extraordinary
businesses online. Over half of the organisations surveyed are state support, due to their systemic
prioritising the creation of targeted products and offers, while importance, market position, and private
collecting more personal information to do so,” said a report. ownership.
Himali Patel Rajat Mishra

Queries
Keep The Spotlight On Your Investment Goals

SUSNATA
[email protected] SANDEEP MITTAL, [email protected]
I have been investing
for the last nine years
and all my funds are in
direct plan and growth
option. My investment
horizon is 20 to 25 years,
targeting `2 to 2.5 crore.
My present MF portfolio
includes, Quantum Long-
Term Equity Value Fund:
`2,000, HDFC Mid-Cap
Opportunities: `5,000,
Franklin India Smaller I am 49 and fall under the 30 per cent tax bracket.
Companies Fund: `3,000, How much will I benefit by investing `50,000 per
Axis Focused 25: `3,000, year in NPS, by the time I am 60?
Franklin India Feeder As the global markets have dropped significantly and since you
Franklin US Opportunities are in a 30 per cent tax bracket, we advise you to invest in equity
Fund: `3,000, Canara related NPS and mutual fund schemes. Out of the proposed
Robeco Equity Tax Saver: `50,000 investment per year, `30,000 should be invested in
`8,000. equity oriented NPS schemes and `20,000 can be invested in
Since the market is equity multi cap mutual fund schemes for the next 11 years. This
down, shall I increase total amount should be bifurcated in SIPs of `4,000 per month
my SIP amount in a so that you can average out the cost of your investment with a
smallcap or multi-cap staggered approach.
fund? Secondly, CanRob Aakanksha Chopra, Wealth Manager, Ashika Wealth Advisors
Equity Tax Saver, has been
receiving a 3-star rating,
shall I change to Axis Long
Term Equity? SRIKANTH REDDY `17,000 per month. If however, you
I would suggest you hold all your [email protected] are planning only for `35 lakh then
funds. There is no need to make I am an NRI, planning to you will need to invest `7,000 per
any changes given your long-term invest in my kid’s education month. Depending on the investment
horizon. Simultaneously, add who is four months old. I route, you may or may not have to
more SIPs, especially focusing on would like you to advise me pay tax then, though, this cannot be
large-cap and Index. Also, add on the following - firstly, how predicted now, as it will depend on
HDFC Index Fund - NIFTY Plan much do I need to invest to the tax laws applicable at that time.
- Direct-Growth, and add other accumulate an amount of Hence, it is prudent to plan a 20 per
large cap funds like Mirae Asset `35 lakh by the time my son cent higher amount. You can also use
Large Cap Fund. You can also add turns 15? Secondly, do I need equity mutual funds as an option to
smaller amounts in funds like to pay a tax on `35 lakh? If save this money. Select index or large
Canara Robeco Emerging Equity yes, how much would it be? cap funds mainly (such as HDFC
and Mirae Asset Emerging I think `35 lakh after 15 years will Index Fund and Mirae Large Cap
Bluechip. Axis Long Term Equity not allow you to afford education Fund), since you will want lower risk
is a relatively better fund than expenses. If the present cost is on this corpus. Also, keep reducing
Canara Taxsaver, hence, you can anticipated at `35 lakh then in 15 equity exposure once you are near
go ahead and make the switch. years, the amount required will be your goal.
Sousthav Chakrabarty, around `85 lakh. In order to save Sousthav Chakrabarty,
CEO, and Director, Capital Quotient for this, you will need to invest CEO, and Director, Capital Quotient

Viewpoint
Are Debt Funds Safe In Today’s

Market Conditions?
I n the second episode of the

Outlook Money’s special series
that aims to help investors
make most of their money in
today’s market conditions, brought
they have given 8-8.5 per cent
returns,” Jajoo said.
He added that gilt funds, debt
funds which only invest in bonds
and fixed interest-bearing securities
is one of the key strategies for a
successful investment on a long-
term basis. And like any asset
allocation model, the investor
needs to look at two key factors
to viewers by Mirae Asset Mutual issued by the state and central - investment horizon and risk
Fund, Mahndra Kumar Jajoo, governments, have given returns appetite - before choosing a debt
CIO-Fixed Income at Mirae Asset close to 10 per cent in the last five fund.
investment managers, talked about years. Debt funds come in various
debt funds and how they continue to “So it is the choice of the right categories from liquid funds,
be very good options for investors. fund, that is more important and it’s which invest in very short term
Jajoo, a veteran in the financial grossly unfair to blame the entire securitues, to gilt funds that
services space with over 25 years of debt funds category because of one invest in high quality debt papers
experience is overall responsible for incident. Debt funds continue to like government bonds and AAA
supervising all debt schemes of the provide better returns than bank rated PSU bonds. And then you
Mirae Assets Debt Funds. fixed deposits which are traditional have credit-risk funds which invest
According to him, debt funds the first choice of retail investors. in low-rated companies in hope
continue to be very good options With long term capital gain tax of higher returns. Jajoo said that
notwithstanding one or two benefit, I think it is hight time to when one gives money to lower
isolated incidents like the Franklin look beyon one or two isolated rated companies, they are less
Templeton case. incidents and understand the high likely to return the capital in time
“There are challenges in each quality debt funds which provide along with the interest compared
market and one or two isolated very good investments to debt to highly-rated companies.
incidents should not become a investors,” Jajoo explained. “Therefore, one is much better
benchmark. Debt mutual funds have However, he warned that one protected by taking interest rate
historically performed very well and should not put all eggs in one volatility risk than to take the
if you look at their 25 year history, basket and hence diversification credit risk,” he concluded.
Cover Story
Stimulus Package
SME MF
STOCKS
READY TO
BOUNCE
BACK?
Graphics: Vinay Dominic
12 Outlook Money July 2020 www.outlookmoney.com Gold

F or the investor, the best way to judge the impact of the government’s `3 lakh crore
stimulus package for Micro, Small and Medium Enterprises (MSMEs) is to look at
the movement of the stock market and the effect on mutual funds.
These industries have a major role to play in not just generating huge employment
but also as a major exporter and a supportive ancillary sector for big industry. The
new push towards self-reliance and reduction of import dependence under the
Atmanirbhar Bharat Abhiyan has given them an entirely new role.
If the strategy works, there is no reason why the stock market particularly the small
and mid-cap shares, which represent the MSME sector, won’t cross the past levels.
But business models and management strategies are bound to see some remarkable
transformation in the COVID-hit universe, and this would have a wide-ranging impact
on both profitability and investor returns.
But there are many challenges that require greater attention than the government’s
liquidity led revival program. Industrial revival requires sharp up gradation in
technology, wide-ranging infrastructure development and a strong drive for skill
development among workers. These issues remain to be addressed. If handled well,
they will do good for the investors and the economy as a whole.
By Yagnesh Kansara
F
or more than 18 years, since he became the Gujarat There is a sober realisation that more needs to be done
Chief Minister for the first time, a key element of to help it become stronger, quality-conscious, and more
Narendra Modi’s ‘Model of Growth’ was to woo competitive. But there is also a feeling among experts
large Indian and foreign firms. He believed that if Ratan that if India continues her journey on this new path for
Tata, Mukesh Ambani, Bill Gates, and Jeff Bezos funnel a few years, it can transform the face of MSMEs as well
billions of dollars into mega projects, the economic as the economy. The combo-cocktail – encourage large
waves would help to lift the lives of millions of people. It and small firms – can inject adrenalin in the hitherto
worked in Gujarat. His experiments with ‘Make in India’ lackadaisical system. “We believe infrastructure
during his tenure as the Prime Minister were steps in the development and manufacturing-led growth is the
same direction. only sustainable model for India’s development in
COVID-19 changed the blueprint. There is a new medium to long term. Gradual import substitution,
strategic roadmap to pull the country out of the current growing domestic market and market share gains in
malaise. Apart from its focus on ‘Big Business’, it aims
to encourage local manufacturing, especially among AjAy ThAkur
the MSMEs (micro, small and medium enterprises). Head, SME & Start Up Platform, BSE
This explains why a sizeable portion of the `2,000,000
crore stimulus package targets the smaller firms. Under
the Atmanirbhar Bharat Abhigyan and self-reliance
Major problems faced by
philosophy, the objective of the short-term spur is companies, irrespective of
to inject liquidity in the system to benefit 4.5 million size, is the problem
MSMEs. There’s no denying the fact that thissegment of liquidity
constitutes the backbone of Indian manufacturing.

Cover Story
global exports could help boost GDP growth trajectory

and make development model more balanced,” says
Varun Lohchab, Head Institutional Research, HDFC
Securities.
However, it’s a long winded and arduous path, which
would test the patience of entrepreneurs and investors.
If executed well, multiple sectors could emerge winners
over next five years, like speciality chemicals, pharma,
Agri-processing, consumer durables, defence, autos and
capital goods, he adds.
For us, as retail investors, the focus on the long term
isn’t enough. For us, who have seen the worth of our
savings plummet, and then recover a bit, during the
COVID period, it is crucial to know if the stock market
and other asset categories will recuperate in the shorter
run. We want to understand if Modi’s new shift will boost
market sentiments. More importantly, we wish to figure
out whether MSMEs can become the new flavour of the
season. Should you look more seriously at these stocks in
the near future?
The existing policies will enhance the attractiveness
of the 300-odd SME stocks listed on the BSE platform
over the past 12 months. In the near future, more SMEs
will seek to raise equity funds. Some of them, like in the
recent case of Billwin Industries, may even offer their
shares at premiums. Although shares of smaller firms are
generally shunned by investors, this may be an opportune
time to look afresh, and spot profitable opportunities. Of
course, you will need to be careful. Here’s a sense of how
things will change over the next few months.
Indian financial system is awash with liquidity. Hence,
it was just extreme risk aversion approach particularly
of the Public Sector Banks (PSBs) that was freezing the
credit market. This has compelled MSMEs to look at
Non-Banking Finance Companies (NBFCs) for their
funding requirement. This resulted in increased cost
of funds as NBFCs were charging higher interest rates,
making MSMEs uncompetitive among Asian peers.
Satish Kumar, Head of Equity, Equirus Securities says,
“We believe the government has incentivised risk taking
by guaranteeing `3 lakh crore of incremental credit
and `20,000 crore as subordinate debt to MSMEs, and
the first 20 per cent losses on `45,000 crore lending to
Varun Lohchab NBFCs, HFCs and MFIs. We should see incremental

Head InstitutionalResearch, lending to MSMEs accelerate.”
HDFC Securities The move to provide bigger relief to industrial sector
in general and MSMEs in particular should not only
tackle the issue of risk aversion by the banking sector
Infrastructure development but should also cross another hurdle in the form of
and manufacturing-led growth rate transmission. This should happen sooner as we
is the only sustainable model move gradually out of lockdown, experts feel. These
developments will ultimately help the SME segment

of the exchanges. Once the speed of recovery improves,
more and more SMEs would be ready to tap the market
for further expansion and get listed. The listing provides
MSMEs the benefit of equity financing opportunities
to grow their business from expansion to acquisition. It
lowers debt burden, leading to lower financing cost and
healthier balance sheet. It also expands the investor base,
which in turn helps in getting secondary equity financing,
including private placement. This enhances a company’s
credibility and visibility. It further unlocks the value of
the company and helps in wealth creation and in creating
greater incentive for the employees who can participate in
the ownership and benefit from being its shareholders.
Ajay Thakur, Head, SME & Start Up Platform, BSE
explains, “The PM’s Atmanirbhar package of `20 lakh
crore, a significant part of which is dedicated to the
MSME sector will certainly benefit the small and
medium companies as it will take care of their working
capital requirements. In the time of lockdown, the
major problems faced by the companies, irrespective
of their size, is the problem of liquidity. It is a must for
their survival as in absence of it, they get trapped in a
vicious cycle.
They cannot pay salaries to their employees, clear
suppliers’ dues, loan servicing also becomes difficult and
interest burden piles up resulting in cost escalation for
the companies whether they operate in manufacturing or
service sector.”
In addition to increase in 20 per cent head room with
respect to enhanced working capital limit through this
package, the RBI’s interest rate cut will also help the
MSMEs to quickly bounce back, making them more
competitive, he says. BSE SME & Start Up platform has
already 322 SMEs and five startup listings in last one year
of operation, of which three SMEs and one startup were
listed during the lockdown period. 56 more SMEs and 10
startups’ listings are in pipeline. While Billwin Industries’
fixed price issue closed for subscription on Monday June
22, 2020, it offered 6.60 lakh shares at `37 per share with
a premium of `27 per share. These 322 companies, listed
on SME platform, have together raised fund to the tune
of `3,300 crore and their combined market capitalisation
(M-Cap) is worth `16,857 crore. Total five startups got
#
Solid return
* * * * * *
`166 `21.40 `71.60 `89.75 `1361.90 `309.50
Ramco Genus Power Kirloskar Greaves Garware Cochin
Industries Infrastructure Ferrous Cotton Technical Fibre Shipyard
*Current Market Price as on June 24, 2020 ; # These stocks recommended by LKP Securities are expected to provide
moderate return on investment (above 50 per cent) in short to medium term (One to three years).

Cover Story
List Of Stocks To Gain to pullback rally across global markets. Sparsh Chhabra,
Not covered#/ Economist, Centrum Group in his strategy note says,
Sector Coverage “With the outbreak of COVID-19, global equity markets
Unlisted
corrected significantly in March. Since the onset of April,
Alkyl Amines Aarti Industries
investors again started flocking around risky asset classes
Chemicals Galaxy Surfactant Deepak Nitrite (equity and like) and the risk on sentiment witnessed
Navin Fluorine a further uptick in May. This has been highly fuelled
Aurobindo IPCA by continuous mammoth liquidity injections, signs of
pharma COVID-19 cases peaking off in the European Union (EU)
Dr Reddys Alembic Pharma
region along with the signs of stabilisation seen in the
Voltas Dixon US. In addition to this, resumption of global economic
Consumer Havells Amber activity also drove the rally.”
Durables Crompton Bluestar However, the recovery in the India is expected to have
lagged effect compared to global market. India rightly
Symphony
went in for early lockdown to counter COVID-19,
Bajaj Auto thereby delaying the peak. However, it will also have a
autos
Maruti Suzuki much slower recovery. Given last two years of lacklustre
L&T Kajaria growth, the government has limited resources to
support demand in the economy. ”We believe the impact
Industrials Siemens BEL
of COVID-19 will be profound in India and the recovery
ABB BEML will be more ‘U’ or ‘W’ than of ‘V’-shape, expected in
Dabur some advanced economies,” Chhabra argues.
Marico Whatever be the shape of the recovery one thing is
FMCG certain that the rural economy will recover faster rate
GCPL
than the urban economy as prospects remain intact The
ITC forecast of a normal monsoon, its timely onset coupled
Avenue Supermarts Fab India with prospects of a bumper crop output along with MSP
retail hike and recently announced rural focussed government
ABFRL Reliance Retail*
programme - all augur well for the rural economy.
*Unlisted ; #These stocks do not instead of ‘does’ Securities where
it has initiated coverage. These developments are likely to cheer farmers and
policymakers as they hold potential to diminish the
impact of COVID-19. These trends emerge as a silver
listed on startup platform and have raised `22 crore and lining amid an imminent growth contraction in FY21.
their M-Cap is `80 crore, boasts Thakur. Based on this theme, LKP Securities has cherry
In addition to this relief package, another factor that picked stocks belonging to the MSME sector with an
will help the stock market to recoup its losses, seen in investment horizon of medium to long term (one to
the early parts of the lockdown, is tremendous amount three years) that coincides with bounce back time period
of liquidity floating globally. In the wake of G4, central the Indian economy will take to instill normalcy.
banks of the US, Japan, Britain and China came together Lohchab says, “Sectors within our coverage,
to salvage the situation by pumping in liquidity worth which could see tailwinds, include chemicals (Navin
~$6 trillion. This unparalleled liquidity injection has led Fluorine, Alkyl Amines), Pharma (Aurobindo), Autos
(Bajaj Auto, Maruti), Durables (Voltas, Havells), Cap
goods/defence (L&T), E-Commerce (RIL). Outside
SparSh Chhabra our coverage sectors, he sees a range of potential
Economist, Centrum Group beneficiaries across agrochemicals and fertilisers, solar
panels, agri processing, plastics, auto components and
steel products. “We recommend investors to closely
With the outbreak of watch developments in these sectors to see signs
COVID-19, global equity of improvement for multi-year investible themes.
markets corrected Consumption and financials might take a back seat as
significantly in March they would revive with a lag,” he concludes.
[email protected]

AmitAbh KAnt
CEo, niTi Aayog
on
Boycotting chinese goods

KicK-starting the economy and
reviving tourism
In conversation with
Join us on
@outlookindia @outlookmagazine
on
July 5th, Sunday, 11:00 a.m. Satish Padmanabhan
Executive Editor, Outlook
Interview
Many MSMEs Will Be Left

Out Of The Stimulus Package
Shreekant Somany, Chairman and Managing Director (CMD), Somany
Ceramics and also Chairman, CII National MSME Council spoke to
Yagnesh Kansara. about the impact of the PM’s Atmanirbhar package for
MSMEs and how it will help revive the sector.
Do you think the amount allocated for the being demanded from the loan seekers just to
MSMEs is adequate for the companies in the discourage them. Your views.?
backdrop of the hit? I have not heard of any such complaints, or such
Yes, the micro, small and medium enterprises apprehensions been expressed. For the most part,
(MSMEs) have received major relief in the form of a the scheme to automatically enhance the working
tailor-made stimulus package offered by the Narendra capital sanction by 20 per cent, with borrowers
Modi government. Also there are no significant requesting for enhancements not to be done, seems
MSME requests in recent weeks to enhance the extent to be working.
of working capital granted by the Banks that would
indicate that the current provisions are inadequate. Do you think the scheme will add to Non-
Performing Assets (NPAs) of banks as demand
How do you see the process of loan disbursal side revival may take a long time? When do you
by banks after government’s stimulus package? expect normalcy to return in the economy?
So far the information seems to indicate that banks Based on guidelines issued by SBI, and similar
have not been able to fully disburse the funds due to guidelines by other Public Sector Banks the loans
lack of demand. There are also reports that MSMEs are not being given to those with a ranking of SMA2
are not availing of the deferment of EMIs. While and below on Feb 29, 2020, or those having a default
some of this is related to the cost of deferment due exceeding 60 days pre-COVID crisis. This exclusion
to elongation of the payback period, it also indicates should screen out borrowers already in financial
that cost of funds rather than shortage of funds is trouble even without the hit from the crisis. The
of greater concern. In other words, the problem of balance borrowers being viable in “normal” times can
shortage of available funds is not the primary concern be expected to bounce back to health within a few
of MSMEs today. months of situation returning to Normal.
There are news that banks are eager to meet the As per an article in Bloomberg on June 11, 2020,
disbursement targets, but this may also lead to loosen the Finance Ministry sources have said that by
credit standards and they would be keeping a check on June 5, 2020, the state-run banks had sanctioned
their asset quality track record. In few cases, the banks `17,706 crore worth of collateral-free loans under the
are even identifying borrowers with a bad repayment. Emergency Credit Line Guarantee Scheme (ECLGS)
according to data from the Finance Ministry.
Many entrepreneurs have complained of According to finance ministry data, State Bank of
red tape while applying for loans from Public India, Punjab National Bank, Union Bank of India,
Sector Banks (PSBs) and other agencies. Bank of Baroda and Canara Bank have sanctioned the
Despite these loans being guaranteed by the highest amount of ECLGS loans till date.
central government a long list of documents is The article further quotes CS Setty, Managing
Director at State Bank of India, which has the largest
sanctions, said the bank has been able to identify
and contact 8.14 lakh eligible borrowers, all of whom
The cost of funds rather shortage were sent SMSes and offer letters starting from the
of funds is of greater concern beginning of this month. Over one lakh customers

have given their consent and loans COVID. Many existing business models
aggregating `12,905 crore have been
sanctioned. Disbursements, amounting
MSMEs who are will get wiped out and a few new business
models will evolve. Many businesses will
to `7,030 crore have gone to 60,674 part of FMCG recover in FY 21-22 and a few business
MSMEs. As per Shetty, disbursement supply chains models will become a habit like video
may be lower now as some borrowers
may want to utilise the limits as they
should also conferencing. Such business models may
require enough moratorium and hand-
need and SBI has given the borrower benefit from holding support and economic package
the option to withdraw the money in revival of demand for retention. A few of these sectors
tranches over time. include hospitality, entertainment,
As CII, we are hopeful and branded clothing and luxury items.
confident that this package will serve the desired
purpose. CII has contributed a lot through Which are the sectors in the MSME segment
recommendations submitted and the central that will benefit the most from the PM’s
government has been kind enough to cater to the package and why?
needs of majority in the sector. The key pain points of The small and medium sectors should benefit
the industry have been well addressed keeping in view more than the micro sectors, which may not have
the long term effects. pre-existing formal Banking relations. This should
This will not add to the bank NPA as due to the encourage such micro enterprises to also enter the
stricter norms of CIBIL ratings and banking norms, formal sector. Service sector, particularly related to
the entrepreneurs are cautious enough to misuse the e-commerce and delivery and logistics should benefit
credit facility availed and for that reason obviously, most from the revival of demand with cash flows
many are not availing increased credit facilities. It is supported by the PMs package. MSMEs who are part
true that demand side revival will take longer duration of FMCG supply chains should also benefit from early
to catch up, more specifically luxury segment. revival of demand. In terms of industry segments, the
Therefore this should not be significant. tourism, travel, hard goods, and auto industry supply
Ratan Tata has shared his opinion that to forget chains may not benefit due to lack of demand.
FY 20-21, the dynamics of business will change post [email protected]

Cover Story
More Means Less In MSME Mess

Without robust and healthy MSMEs the economic and
business skeleton of the nation can come crashing down
By Aparajita Gupta premium. If the straggling MSMEs are unable to recover

from their precarious state of a combination of near-
F
our major crises in less than four years! From paralysis and comatose by September 2020, be prepared
demonetisation, Goods and Services Tax (GST), for an economic mayhem. The pandemic will turn into a
economic slowdown, to COVID-19 catastrophe! pandemonium. Remember that the MSMEs account for
The first killed many MSMEs. The second forced some a third of gross value added, more than 100 million jobs,
to shut shop. The third led to fear and loathing. And and half the country’s exports.
the fourth, well, it decimated the sector. The future Without them, the economic and business skeleton
of more than 60 million Micro, Small, and Medium that India carefully constructed over the past few years
Enterprises (MSMEs) hangs by a thin thread. If the can come crashing down.
government-induced stimulus doesn’t work – the initial A recent sector-wide survey concluded that four-
signs indicate that it is unlikely – the India economy is fifths of the MSMEs had no faith in the official stimulus
likely to go into a tailspin. package that was announced more than a month ago.
The policy makers assure us that we need to wait, as They want more. They pray that the government realises
it takes a lot of effort to re-start a large economy like that what it thinks is more than enough to revive
India after a nationwide lockdown for two months. the economy, and MSMEs, is too less. The reason:
They repeat that things have begun to move, and the there are several challenges in the implementation
positive impact will be visible in the coming months. “It’s of these measures. The ground reality is different
too early to comment because many sectors resumed from the reports that the officials receive. The various
work only a few weeks ago,” says Anurag Thakur, Union stakeholders do not seem to be on the same page.
Minister of State for Finance (See Interview on Page 26) Despite the government guarantee, the banks are
He adds that the government took “extraordinary nervous to lend more money to the MSMEs. Hence,
steps” in an “extraordinary situation.” Sadly, time is at a the lenders give excuses to fob off firms, especially

Partner and National Leader, KPMG India. DK
Aggarwal, President, PHD Chamber of Commerce,
adds, “The various reforms will enable the MSMEs to
produce and compete strongly in the marketplace.” It
will allow them to get over the immediate crises, and
stabilise their operations until revenues flow in.
However, the problem is that the banks are not
interested to provide extra money to the MSMEs for
two reasons. The first is that India Inc is in a wobbly
situation. Most firms, whether large or small, and
especially in critical sectors such as aviation, tourism,
retail, logistics, and others, have either collapsed or
are on the verge of bankruptcy. The MSME is one of
the worst affected segments. The banks, therefore, are
more worried about how to protect their existing loan
exposures, and ensure that they don’t turn into NPAs.
Given this mindset among lenders, it is logical that
they will be cagey to extend fresh loans, even if they
are dictated by the government. They will find reasons,
reasonable or otherwise, to delay and reject new loan
applications. “The MSMEs face a number of difficulties.
Some conditions or others are imposed by the banks on
them. Sometimes, the latter are asked to furnish absurd
documents,” claims Pradeep Multani, Vice President,
PHD Chamber of Commerce, and Chairman, Multani
Pharmaceuticals.
For example, an MSME that has availed of past loans
from a bank can enhance its exposure by 20 per cent
under the emergency credit scheme, as long as the
credit has not turned into an NPA. No fresh documents
the micro and smaller ones. Lack of clarity on equity- have to be submitted as the bank already possesses
related policies results in a lack of confidence among the key papers under its KYC norms. Despite this,
entrepreneurs. Political and non-economic actors seem the bank insists on new financial records for the past
to have a larger say in how the schemes operate. There three months. This seems preposterous because the
is uncertainty about what to do first – push credit to firm has had no business in the past 90 days because of
the firms to kick-start supply, or put money in the COVID-19, and has nothing to show for this period.
consumers’ hands to rejuvenate demand. Add to this the fact that many entrepreneurs in
the MSME sector are not trained and professional
The liquidity factor managers. They comprise business families that
There is no doubt that the MSMEs need funds merely are nimble, flexible, and take advantage of new
to resume their businesses. They have run out of opportunities. They don’t understand the intricacies of
cash, saddled as they are with both raw materials government schemes, and are likely to get flustered by
and components that they couldn’t use, and finished
products that they couldn’t sell for more than two
months. This is where the government-backed KR SeKaR
emergency line of credit of `300,000 crore, which comes Partner, Deloitte India
without collateral and at lower interest rate, will help.
Until July 19 this year, slightly more than `20,000 crore
51% of MSMEs are in rural
was disbursed under the scheme.
“Many impacted businesses need funds to meet sector. Unless rural credit is
their built-up operational liabilities, working capital opened up, the impact
requirements, and salary payments. This will help will be minimal
MSMEs to resume their activities,” says Raman Sobti,

Cover Story
the jargon thrown at them by the bankers. A majority

function in the semi-urban and rural markets, and have
irregularly and intermittently dealt with the formal
credit and banking system in the past.
Hence, says Arvind Sharma, Partner, Shardul
Amarchand Mangaldas & Co, there is a need to
“strengthen training of, and awareness among, MSMEs,
as well as provide institutional support to ensure
accelerated growth” in the near future. Both civil
servants and bankers have to be sensitised to encourage
loans, rather than dissuade potential lenders. “In India,
51 per cent of MSMEs are in the rural sector. Unless
rural credit is opened up, the impact will be minimal,”
explains KR Sekar, Partner, Deloitte India.
The political factor

One of the solutions, according to Sekar, is to mandate,
rather than urge and nudge, banks to lend fresh money
to the MSMEs, and make the process simpler. The
second, feels Multani, is for the government to monitor
disbursals of the loans at the ground level. “Mere
issuances of loan sanction letters by the bankers are not
enough,” he adds. According to union minister Thakur, Photo: Bhupinder Singh
in the first few days of the emergency credit scheme,
while `25,000 crore of loans were sanctioned, `14,000 a scenario, nepotism and crony-capitalism can raise
crore were disbursed. their ugly heads, and derail the recovery process.
Even if the banks open the credit pipeline, and let Therefore, it is imperative to ensure that the
the money flow to the MSMEs, there is a skew or bias sanctions and disbursals are transparent According to
among the lenders. The first is that given the fears of sources, there were 10-20 per cent of MSMEs which,
future NPAs, there is the tendency to give loans to the in the pre-COVID period, had decided to exit their
larger MSMEs. This is because the bankers rightly or businesses due to various factors. Now, they may
wrongly feel that they are in a better position to survive, get a chance to do it profitably. Such firms can use
and repay the amounts in the future. The bitter fact is their influence and clout to get fresh loans, siphon off
that it is the smaller and micro enterprises that are in the money, and later declare bankruptcy. The policy
dire need of fresh funds. Without it, they will die, i.e. if makers and bankers need to be aware of this, and make
they already haven’t. sure that the loans go to those who are serious to turn
As banks become choosy, which they have, political around their operations. Or else, a sizeable proportion
and non-economic actors can influence their decisions. of the new loans will turn into NPAs.
State-owned banks are amenable to pressures, both at
the national and states’ levels. Who gets the loan, and The equity factor
who doesn’t, can be decided by factors that are not It is evident that the net worth of most MSMEs was
related to the state of business or future viability. In such eroded by COVID-19. Their balance sheets need to be
bolstered by infusion of fresh equity. One of the ways
that this can happen now is through the new ‘Fund
rAmAn Sobti of Funds’ (FFS) with a corpus of `50,000 crore. Sobti
Partner and National Leader, KPMG India points out that other nations announced similar plans.
In the UK, it is available to unlisted, but registered, firms
Businesses need funds that had raised £250,000 each in the past. In Poland,
the equity fund can be used by those that meet fixed
to meet operational employees and turnover criteria.
liabilities, working capital Although the details of the MSME FFS aren’t
and salary payments available, there is a precedent to go by. For instance,
the FFS for start-ups is modeled on the Mother-

Arvind ShArmA,
Partner, Shardul Amarchand Mangaldas & Co
Strengthen training
and awareness among,
MSMEs, and provide
institutional support
The demand factor

At the end of the day, the schemes related to loan and
equity infusion can spur supplies, and help the MSMEs
to immediately commence production. However, this
may prove to be irrelevant, if the consumers don’t have
the money to purchase the goods. For example, if there
are no buyers for cars, the MSMEs that supply to the
auto component vendors will not benefit.
As Sekar puts it, the government has to “revive
demand completely” or the supply-side measures
will only have “a limited impact”. One of the policies
to boost demand is to disallow global players to
participate in government tenders up to `200 crore
Daughters concept. The government gives the money each. This will give the MSMEs an opportunity to
to the ‘Mother’ fund, which distributes it among the grab new orders. Other decisions include moratorium
daughters, the 650-odd, privately-pooled Alternate on loan repayments, and delay in the filing of tax
Investment Funds (AIFs) that are registered with Sebi. returns. However, these are temporary and limited
The professional managers of the AIFs take the final moves, which are unlikely to excite the MSMEs. Critics
decision on which start-up to invest in. This ensures contend that the government hasn’t focused enough to
professional decision-making, and prevents the put more money in the hands of the consumers – and
government from becoming a direct shareholder in the this issue has to be adequately addressed.
start-ups. Apart from consumption constraints, more can be
In the case of the MSME FFS too, Sobti insists that done on the supply-side. Seth feels the need to introduce
“an innovative approach” is required for the proper use holistic reforms to enable MSMEs to scale up, and
of the funds. He adds that the government can seek “a become globally competitive. Existing policies have to be
hybrid model, which is operated under the government tweaked. A few states recently opted for stringent labor
framework, and managed by professional fund laws to benefit owners, and woo investments. Higher
managers”. These may seem to be a clear-cut strategy, investment limits for MSMEs – sacross micro, small and
but can create contradictions. While the government’s medium segments – are aimed to encourage promoters
goal is to “support good firms” in the medium term, to become bigger without the fear that they will lose the
the desire of the professional managers is to seek high sops that they enjoy as MSMEs.
returns within a short period. Such decisions can be counter-productive. Strict
However, if the MSME FFS is handled properly, labour laws can dissuade investors, especially foreigners
it can lead to several positive consequences for the who are bound by pro-worker laws in their own
sector. “The FFS can help MSMEs with good credit countries. What they want are flexible rules. Similarly,
rating and GST record to expand their capacities and higher investment limits in the MSME sector introduces
size. This will encourage them to get listed on the more competition, as larger firms that were not defined
stock exchanges in the future,” explains Sachin Seth, as MSMEs can now avail of the benefits.
Partner (Digital & Fintech Leader), EY India. A listing Instead of an enabler, i.e. help smaller firms to become
will enable the firms to raise more money, expand bigger, they can prove to be a deflator, and enable the
further, become more professional, adopt global best bigger firms to kill the smaller ones.
practices, and graduate into the mid-size segment. [email protected]

Cover Story
Govt’s Credit
Plan Needs To
Be Expanded
While units worth `250 crore
turnover are now MSMEs, yet
credit line is not available for units
exceeding `100 crore turnover
By Vishav
T
he government, while funding `3 lakh crore
under Emergency Credit Line Guarantee
Scheme (ECLGS), said it was a specific response
to the unprecedented lockdown, which severely
impacted manufacturing and other activities in the
MSME sector. Under the scheme, borrowers with up to at 20 per cent of the loan outstanding on February 29,
`25 crore of outstanding credit can avail an additional 2020. So there are instances when the entity did not have
credit of 20 per cent of the loan outstanding from banks, any outstanding loan as on February 29, but is in need
NBFCs, and other financial institutions. The government of funds now. Now it will not be eligible. Therefore the
would stand guarantee for this additional credit for loans government needs to bridge this gap,” Mittal explains.
taken till October 31. He adds the scheme had received a “very slow
As on June 20, banks from public and private sectors response” from the private bankers and NBFCs, who
had already sanctioned loans worth `79,000 crore, of inspite of the sovereign guarantee are very slow in the
which over `35,000 crore had already been disbursed. implementation of the scheme. The banks are still risk
Banks like SBI, HDFC Bank, Bank of Baroda, PNB and averse and fear the future risk of NPA in their balance
Canara Bank were among the top lenders. sheet, he says.
Finance Ministry official spokesperson claims the Rajesh Sharma, Managing Director, Capri Global
scheme has so far helped 19 lakh MSMEs and other Capital (which has a large portfolio of micro and small
businesses restart their operations. business borrowers), however, claims the fiscal boost
According to Sameer Mittal, Chairman of for MSME sector had come at an opportune time when
International Trade Council in India, and Managing MSMEs were facing severe liquidity pressure.
Partner at Sameer Mittal and Associates, one needs to “Most of our MSME borrowers are covered under
understand that the scheme is valid only for existing the ECLGS to help them tide over the economic
customers of a bank, NBFC or FI, but does not cover distress due to pandemic. We have pre-approved
new borrowers. Also, the government in June changed customers, who are eligible for the `3 lakh crore
the definition of MSME wherein the units with a guarantee scheme and are reaching out to these
turnover of `250 crore get covered, revised upwards customers in a strategic way,” he says.
from `100 crore as announced in May. And yet the Sharma adds that since the scheme does not cover
credit line is available for the borrowers having turnover the loans provided in individual capacity for business
up to `100 crore. purposes, which is typically preferred borrowing mode
“So though the entities with a turnover of `250 crore by the large segment of micro and small business
might get classified as MSME, yet the credit line would owners, this exclusion needs to be addressed on priority
not be available if the turnover exceeds 100 crore. as such borrowers are missing out on the benefits.
Further the loan amount that can be disbursed is capped [email protected]

The Scanner
No Ready-Made Solutions
Investors should prepare for fallout of conflict with China Saibal DaSgupta
W
ise men advise us to anticipate future
challenges and be prepared for them. Smart
companies and managements invariably have
Plan B and Plan C, along with enough cash reserves to
tackle crises. Individuals are generally advised to hold
the equivalent of six months’ income as cash to stave off
uncertainties. In addition, they need to own assets like a
self-owned house.
However, is it possible to do so for ‘Black Swan’
events? Can we ever save enough, or protect ourselves
enough for something that’s unimaginable, unexpected,
and unthinkable? COVID-19 was one such event when
professional managers found themselves at a loss of ideas,
which led to an axing of a large number of staff, and goods which can impact foreign fund flows and drag
losses and misery to investors. In most factories, there down the market in the medium and long term. No
were months when production and sales were halted as one can deny the importance of self-reliance, which is
the Coronavirus spread like wildfire across India. linked to the ‘boycott’ move besides being an emotional
The markets slide due to COVID-19 affected the response to the border trouble.
fortunes of over 50 million stock and mutual fund It’s true that the clashes did not cause immediate jitters
investors in India. Though there have been stray signs of in the stock market, which actually went into a recovery
improvement, the market situation remains a gloomy one. path after declines seen during the weeks of lockdown.
These are times when the nation needs a stimulus This may partly because the market has factored in
– not one of cash and credit, but one of morale and occasional skirmishes on the border and did not see it as
sentiments. An impetus to drive a nation to see a long-term breach in trade relationship with China.
opportunities, where there was dread. As Prime Minister Just because the market read the cross-border
Narendra Modi said, “There can’t be a better time for a situation in a certain manner does not mean it is
new beginning.” He added that consumption and demand the perfect one. Stock players take into account not
were fast attaining pre-COVID levels. one but many factors before opting for one of the
The crisis exposed the fact that a vast number of two animals-bear or bull—or choosing to stay some
Indian companies have not built sufficient strength distance away from both.
to handle production halt and market setback of a Stock and mutual fund investors need to think ahead
few months. There are many reasons for this, which and prepare for the possible fallout of intense trade
include a curious refusal to upgrade production friction with China as it would leave Indian companies
technology and plan for the long term. seriously in deep trouble. For example, nearly 60 per cent
An important question is whether companies, of the consumer electronic industry, a major attraction
individuals and governments are ready, not just for this for investors in stocks and mutual funds, depend on
crisis but the next one. It would be absurd to imagine China-made components and spare parts.
that we have reached a point when there will be no more There are no ready-made solutions that one can offer
crisis after tackling a serious slowdown and the ongoing to the retail investor in stocks and mutual funds. A safe
health crisis. An emerging danger is the likely impact of option is to rely on successful companies, whether big,
border clashes with China, and the call to boycott Chinese medium or small, with strong management capabilities
and a strong desire to continuously upgrade their
technologies. Those with linkages with the international
supply chain will also do well.
Are companies ready for not just
Covid but also the next crisis? [email protected]

Bailout Measures
Govt Is Monitoring And Tweaking The

MSME Revival Package
The government’s decision to inject stimulus in Micro, Small and Medium Enterprises (MSMEs) is not only meant
to help them recover from the pandemic crisis but also encourage them to contribute to the overall goal of creating
a $5 trillion economy by 2024. Union Minister of State for Finance Anurag Thakur, discusses his government’s
reform measures in conversation with Rajat Mishra
AnurAg ThAkur
Union Minister of State for Finance
All India Manufacturing Association’s disbursed. This clearly indicates the scheme has taken
(AIMO) recent survey showed 78 per cent of the off. We need to wait for the demand to improve. The
MSME do not see any hope of recovery despite disbursement will be much more in the coming days.
the government’s stimulus package. Instead,
they expect other forms of assistance. What is The MSME is one of the hardest hit sectors.
your view? Could we say this is not the only measure the
Whatever decision has been taken in the past was government is going to take?
done after due consultations with industry leaders. During this pandemic, nobody can say what
It is too early to comment anything because many tomorrow holds for you. You need to look at how
sectors have resumed work only a few weeks ago. the situation pans out. We are interacting with
We are closely monitoring the progress of Rs 3 various industry leaders and things have started
lakh crore emergency credit line announced under moving. It takes a lot to restart economic activity of
‘Atmanirbhar’ package, on a weekly basis. A portion a huge country like India, after months of complete
of the funds has already been sanctioned and shutdown.

If we look back at 2014, when we extraordinary situation, we are trying
took over from UPA, we may have had to take extraordinary steps.
taken some time to begin with, but the
next five years saw over 7.5 per cent How do you plan to discipline
growth. banks that showed reluctance
Even now our policy decisions in implementing the liquidity
include measures for future reforms. programme?
We will see the impact in the coming We are monitoring every activity on
months. a weekly basis. The finance minister
is regularly meeting with the public
Recently, Piyush Goyal had sector banks. They have been clearly
asked real estate developers told to come up with every detail on
to reduce prices and sell their how much loan they have sanctioned
inventories without waiting for the so far under this scheme.
market to improve. He also added
that there would be no bailout Could you tell us how the
package. What is the government’s Banks should government plans protect banks
official stand? disburse money from NPA, arising out of this
It is up to the industry. They should collateral-free loan plan?
look at it from project to project as early as There is a 100 per cent guarantee
basis and how much would the possible to help from the government and the banks
inventory cost, or even what have to
be amended, or the bank’s position.
businesses should not fret but give 20 per cent
of the additional working capital to
I cannot comment because the revive existing account holders. They should
department has not taken any call on disburse money as early as possible
the subject. Goyal is a senior leader to help businesses revive, including
and he may have expressed his views. MSMEs.
Credit rating agency Crisil has said bank credit Given the large scale damage done
growth will decline to a multi-decade low of 1 by COVID-19, do you see several other
per cent. Do you think that taking credit will be announcements from the government or a big
a big hurdle in implementing the government’s bang reform measure?
liquidity package? I have already said you do not know what the future
In situations like these you will see many hurdles, holds for you. If you look at the first step, we gave
but the issue is whether the government is active. industry a relaxation in compliance burden. The
And when you take any decision to help the industry second step we took was Pradhan Mantri Garib
and economy to grow it is not only to revive but Kalyan Yojna, where food grain and money problem
also to achieve our target of $5 trillion by 2024. The was sorted. Later, we decided on an economic
government is monitoring bank loan disbursement on package - Atmanirbhar Bharat - where not just
a day-to-day basis and companies are coming forward liquidity but reform measures have been taken
to seek the benefit of these initiatives. The entire care of.
corpus of `3 lakh crore emergency credit line is to be
disbursed until October 31. It is going to be utilised There is a likely shortfall in GST collection.
much before that. How does the government plan to compensate
states? Was there any discussion on the same
Do you think the government must change in GST council meeting?
its deadline of 2024 to achieve a $5 trillion We have taken it up in the last GST council meeting
economy, as the pandemic has created a havoc? among various stakeholders that all states and
Not really, because our intention should be focused union territories could come up with the idea on
on how to take advantage of the geopolitical situation what could be done. A special meeting will be held
or favourable conditions for India. So, India should with state governments just to discuss this issue for
work in that direction not only to look at the revival an amicable solution.
but look at the target of $5 trillion by 2024. As it is an [email protected]

Cover
ColumnStory
Need For Inclusive Credit Delivery

The MSME sector is in dire need for liquidity to restart work ShaChINDra Nath
T
he MSME sector has been witnessing support to survive this time of crisis and return to
liquidity stress due to prolonged economic the growth path. The recently announced Rs 3.75
slowdown. The COVID-19 pandemic lakh crore package for the MSME has made an
has made the scenario even more challenging as earnest attempt to address the capital crunch of the
the lenders have drastically reduced their credit sector. Announcements like Rs 3 lakh crore collateral
exposure to the sector. On the other hand, economic free automatic loans, Rs 20,000 crore subordinate
disruptions due to COVID-19 have disturbed the debt for stressed MSMEs, Rs 50,000 crore of equity
cash-flow cycle of the MSMEs. As a result, the SME infusion for MSMEs through a fund of funds, etc.
sector which contributes approximately 25 per cent are expected to offer the liquidity support to the
to the GDP from the service segment and more than government.
33 per cent to the manufacturing output is going However, to ensure effective transmission of those
through immense working capital stress. And a benefits to the SMEs, the government needs to make
section of the SMEs becoming unsustainable because SME credit delivery system more inclusive. One way
of liquidity stress is not a good sign for the economy, to do is to leverage digital underwriting capabilities
as the sector generates 1.3 million jobs every year. of NBFCs and SME lending institutions. The
So, given the role the SMEs have been playing to government needs to rethink their approach to SME
drive the economy forward, the segment needs to credit underwriting mechanism, risk assessment
be rejuvenated so that economy gets back on track framework so that small businesses become an
and becomes truly self-reliant. The success of the integral part of the economic revival post-COVID.
government’s call to ‘be vocal for local’ depends on In addition, the SME credit eco-system should
the collective resilience of the SMEs. also address the immediate challenges that the
However, the inherent strength of the SME SMEs are facing due to disrupted revenue cycle
segment can be measured from the fact that almost such as payment commitments to vendors, salary
90 per cent of the SME doesn’t have access to commitments to employees and other recurring
formal credit. Due to the lack of credit support, payment commitments. The SME lenders need
the SMEs are unable to leverage their scalability to roll out sustainability finance to the SMEs in
potential. Bridging the SME credit gap of $600 the form of term loans to help SMEs meet those
billion is a huge challenge. The fragmented nature expenses.
of SME sector makes it challenging for the large Simultaneously, the government should also
financial institutions to service the needs of the small focus on developing an enabling environment so
businesses as they follow a pre-defined underwriting that new-age SME lenders can build deep sectoral
process which doesn’t deep dive into the revenue specialisation and technology proficiency in order to
cycles, per-customer-value of those small businesses. develop underwriting platforms capable of reaching
As a result, the SME segment has always been out to all the SME segments.
suffering from credit under-penetration. Given the The SME growth story of India is quite inspiring
present SME lending scenario, access to credit is set and the impact of COVID-19 will not be able to
to become even more challenging, as conventional destabilise the sector in the long run. The sector
channels of credit are turning increasingly risk- requires liquidity flow to restart their activities. The
averse and NBFCs are fighting their own liquidity banking and financial institutions, regulator and
issues. the government must come together to support
SME sector now desperately wants government SMEs so that the story of the indomitable spirit of
entrepreneurship continues to fascinate
SME sector.
Lack of credit affects SMEs The author is Executive Chairman and

from leveraging their scalability Managing Director at U GRO Capital

Viewpoint
Becoming Atmanirbhar: Why You

Need To Build an Emergency Corpus
the not-so-good times. to collect the cash!
Like everything else with personal You should be able to easily withdraw
finance, an emergency fund is a the emergency money when you need
personal situation. What constitutes it and with minimum/zero delay. Apart
an emergency depends upon your from bank deposits, a great option is
individual situation. But typically, a liquid mutual funds, which are more
sudden drop in income is universally tax-efficient; deliver higher than savings
considered an emergency. Also, a bank account returns but with a
big health-related expense can be an comparable safety profile. Safety is of
emergency. paramount importance when it is about
All of us have bills to pay each where the emergency money is kept.
month, and we maintain the balance The safer the money is, the brighter the
by earning the money that we need chances that you can get it when you
to spend. When your income drops want it. Years may pass when you don’t
Mr. Rohit Kumar or vanishes, expenses still exist. On need the emergency money, till one fine
(Certified Financial Planner)
the other hand, if your expenses morning...
MD, Virat Financial Services
shoot up for a short period of time,
T
your earnings may not shoot up to War chest, peace of mind
he faulty light bulb going cover them. Having strength in one’s own finances
on and off every few These are the reasons why more gives confidence. It also allows family
seconds can be replaced. and more people are accepting the members to understand that their lives
If your debit card is misplaced, prudence in having an emergency will not be disturbed. Emergency money
you can block the card and get source of cash to meet expenses and is a war chest. It is about being ready for
a replacement within 48 hours. obligations. With emergency funds unforeseen exigencies that are not likely
However, a sharp decline in income at their disposal, there is no need to in your control.
or an unanticipated job loss is tough run pillar to post for loans during Begin by contributing a fixed sum
to handle. It’s an emergency, S.O.S, such a situation. to the emergency fund. For example if
crisis, disaster - pick a name. This is you want to build one with Rs 10 lakh,
why you need to have an emergency Liquid realities of today invest `5,000 or `10,000 (or more)
corpus. A large enough emergency The right amount for an emergency every month to accumulate the corpus
corpuses can help you deal with fund can vary from person to you will need. It may take a while to get
any financial calamity brought person. But as a thumb-rule, saving to the target. Like all good habits, it’s
on by events such as the ongoing 6-12 months of expenses including about being disciplined. To preserve the
Covid-19 economic slowdown. As EMIs is a good beginning. You emergency funds, keep the money out
the nation looks towards becoming can always build this corpus into of easy sight, or else you may just end
‘Atmanirbhar’, each individual, that a mountain that can financially up spending it.
includes you, should have adequate support you for years to come. Start To be doubly sure, define the use of
emergency funds at your disposal. the process today. ‘emergency funds’. Avoid succumbing
To be in a good position to cover to the temptation of dipping into
Uncertainty: the only unexpected expenses, an emergency that pot of money whenever you fall
certainty fund should be liquid. Believe us, short of money. The emergency fund
There are always a best case scenario, this is the most critical feature that is the shock absorber in a person’s
a base-case scenario, and a worst-case you should keep in mind when you financial life. Assess the adequacy of the
scenario. But advocates of Murphy’s are choosing where to park your emergency fund as part of your annual
Law will tell you that: “Anything that emergency funds. S.O.S money kept financial plan review. Whenever there is
can go wrong will go wrong”. The in non-financial assets is not liquid. an event that has an impact on income
nice part of this uncertainty is that When you need money at a quick and expenses, check if your emergency
you can prepare, well in advance, for notice, you can’t hope to sell things corpus is adequate.
Cover
Interview
Story
Border Clashes Can Hit

Funds Flow, Market Mood
Hemang Jani, Head - Retail Equity Strategist of Motilal Oswal Financial Services
tell Saibal Dasgupta and Himali Patel about the serious impact that India-China
conflict would have on market sentiments
If the border clashes continue for some more Could you mention companies that might be most
time, what impact could it have on Indian market impacted because they are dependent on Chinese
sentiments? imports or capital or otherwise?
The recent deadly face-off between the Indian and More than 70 per cent of the smartphones across
Chinese troops along the Line of Actual Control in price brands come from China. Xiomi even has a
eastern Ladakh and Sikkim led to the death of 20 manufacturing plant in India, which if asked to shut
Indian soldiers and 35 Chinese soldiers. It needs to could lead to huge unemployment. Telecom companies
be seen whether the tensions escalate further or gets import various equipment from China, which now
resolved with dialogues as it could have political, government is considering to stop. Consumer durables
economic, diplomatic and cultural consequences. In
case it aggravates, it would be a big challenge in front
of India as it heavily relies on China for imports. China
accounts for ~14 per cent of India’s total imports, while
India’s total exports to the country is a mere 3 per cent.
This trade deficit with China, also a major contributor
to India’s overall trade deficit, is one of the world’s
biggest trade deficits between two nations. Thus, this
geo-political tension could add further uncertainty to
companies that are already reeling under the pandemic.
Could you identify sectors that would be

affected more?
A large extent of companies imports parts or capital
from China; thus, they would have to find alternative
sources if tensions escalate. They had suffered when
China saw the initial phase of the outbreak that
shuttered plants. Now if another disruption is faced
it can further prolong the economic recovery. Hence,
a large number of sectors like consumer durable,
electronics, pharma/ chemicals, auto components,
engineering goods and some of the e-commerce
companies may have to rework their business strategies
if the tension escalates. Further there is huge amount
of Chinese investment in India, which is increasing
rapidly as China-based companies are stepping up their
investments in Indian companies, including the start-
ups. Thus, any disruption of trade ties between the
two countries will substantially hurt Indian businesses
given their limited manufacturing ability.

and electrical companies also rely heavily Thus the government is working on steps
on China to the extent 60 per cent of to reduce import dependence on China
the parts are fabricated there. Capital This tension and boost domestic manufacturing. The
goods—essentially heavy machinery could add Confederation of All India Traders (CAIT)
used in producing finished products, is further recently released a list of 500 categories of
the second highest import from China. products imported from China, which can
Pharma/chemicals is another space where uncertainty be swapped with goods made in India. The
dependency on China is very high at to companies commerce ministry has also identified 12
around 60 per cent. Then sectors like auto already sectors including metals, agro chemicals,
components and home appliances also electronics, industrial machinery, auto
source one-fourth of their requirements reeling under parts to make India a global player and
from China. On the other hand, defence the pandemic cut import bill. Further to cut import
is the only sector which may emerge as dependency on China for APIs, the
winner if the standoff prolongs. government in March approved a package to boost
At a time, when the world is trying to move out domestic production of bulk drugs and medical devices
of China, India needs to leverage its strength as a in the country along with their exports.
consumer market and must ensure ease of doing The government is also making efforts to attract
business and infrastructure so that it can become a global companies that are seeking to set up alternate
big manufacturer in other sectors apart from auto global supply chains outside China. It is putting
where it is already big. India needs to prioritise import restrictions on various products to push local
self-sufficiency, invest in R&D, strengthen the public manufacturing – the most recent being on tyres. It
sector, and move beyond imitation or improvisation also making its prior approval mandatory for foreign
to true innovation at scale. investments from countries that share land border
with India, to curb opportunistic takeovers of domestic
firms, a move which will restrict FDI from China.
What is the extent of portfolio investment by

Chinese companies in Indian equity? Did the market
expect a bigger portfolio investment from China?
Currently the equity markets are holding up as both the
countries have history of face-offs. It has been seen that
these events are more short term in nature and investors
have nothing to worry about. However, the challenge
now is to de-escalate the border tension, which if fails
will have severe repercussions on many sectors and
thus would drag the market down, because reliance on
China cannot be stopped overnight. It may also have an
adverse impact on foreign fund flows to Indian shares.
Usually, these are known as ‘Black Swan’ events and no
one can predict the bottom for the market at such times.
In such times, investors should keep calm and not
panic. Long-term investors with good quality stocks
should hold on to their portfolios and see through the
storm as good stocks get cheaper and attractive. In the
past crisis, we noted that a combination of extreme fear
and attractive valuations provided good foundation for
healthy long-term equity returns. The best strategy for
investors would be to accumulate good fundamental
and quality stocks. While it is very difficult to predict
the bottom of the market during such events, it always
rewards investors in the long run who take advantage
of the sharp fall.
[email protected], [email protected]

Cover
ColumnStory
MF Investments In Small
And Mid Caps Hold Promise DHIrenDrA KuMAr
T
is extremely important for investors to difficult to keep tabs on 70-odd ones because there is
understand the market for small and medium so much pre-digested knowledge available.
cap companies, particularly when it comes to That’s where mutual funds come in. Fund companies
investing in this segment through the instrument of are in the business of tracking a large number of
mutual funds. companies and running investment portfolios that
There are 3245 listed small-cap companies in are composed of a balanced set of chosen stocks. A
India, 160 mid-cap ones, and only 73 large-cap portfolio is not just a collection but a structure where
ones. Most of these stocks represent small and different stocks of different risk, sectoral and business
medium companies, which the government is eager profiles play a complementary role. This is something
to assist and help in their recovery from the ill- entirely out of the purview of an individual investor
effects of the pandemic. and yet something which is easily available as a service
Investors need to analyse carefully what is from a mutual fund. For getting your share of small cap
feasible in terms of research into these companies returns, there is no serious alternative.
and what should be left alone. Investing in smaller
companies are equivalent to what is called a Which Mutual Funds?
‘percentage shot’ in cricket. There are 24 small-cap mutual funds in India. Their
So investors need to have a strong desire and the track records, in length and quality, vary greatly. The
right attitude to manage the percentages. Succeed at oldest was launched more than two decades ago while
a higher percentage, and fail at a lower percentage. Be the youngest just four months back. There are three
prepared for the occasional bust and know precisely small-cap funds that we believe are the best choices for
how to recognise it, when to acknowledge it to investors. These are Franklin India Smaller Companies
oneself and let go. Just as importantly, be really, really Fund, HDFC Small Cap Fund and SBI Small Cap Fund.
prepared for the gigantic winners and own them all In our system, these are classified as ‘Aggressive
the way till they become mid-caps or even large-caps. Growth’ funds, which is exactly what I’ve described
If investments are made only in large, well- above as being the goal of small-cap investing. Of
understood, and over-analysed companies, then course, like all equity funds, one must invest in any of
investors could do well with them and yet never really these in a lump sum. A Systematic Investment Plan
have a winner. Make no mistake, this more stable (SIP) is the only way one should invest in asset types of
investing is important and must be there in every high variability.
portfolio but it will not deliver any outsize impact. I I’m sure you’ll agree that while smaller companies
mean it’s possible to invest for years in large-caps and are a great opportunity for boosting long-term returns,
have returns that are kind-of-okay. Smaller companies their variability means that they should not play an
provide that extra boost which many investors want. outsize role in your whole scheme things.
Let me elaborate. Individuals who invest in equities
Why Mutual Funds? must exploit the outsized returns that are available in
As an individual, can you mount any meaningful small-cap and mid-cap stocks. I’m not saying that they
research on 3000+ companies? Can any one of us should invest only in ALL small and mid-cap stocks--
even begin to understand the business of any but that would be too risky--but that these stocks should
a handful of companies, let alone acquire enough be a significant chunk of their equity investments. For
understanding and insight to be confident enough for most of us, the best way--perhaps the only way--to do
investing in a company? For large companies, it’s not this effectively is to invest through mutual funds.
Let’s understand both parts of this story. For
investors, the rewards from equity investing come from
dealing with the variability in business’ performance
Investing in small caps is like and stock prices. It means that to make money, there
‘percentage shot’ in cricket

Mutual Funds
are two important factors. There should be variability funds or creating market indices, grouping companies
and you should be able to deal with it. The first is by size is the most common way of classifying stocks.
supplied by the nature of equities and the second, in And with good reason too.
this case, by choosing the right kind of mutual fund. Smaller companies are inherently different from
larger ones. They are riskier because they are not as
Why Variability Is Key well-understood as bigger ones. There is relatively little
Instinctively, all of us know very well that it’s the research attention paid to them, so the truth about
variability of equities that make them great an their prospects is not widely known.
investment opportunity. Some stocks will do better However, this is actually only a small part of
than others, some will do worse. Some stocks will do the story. There is genuinely a very high degree of
better in the future than they are doing now and again, uncertainty about smaller companies’ future. Many of
some will do worse. That makes stocks risky, but this is them will never amount to anything. Many will fail and
precisely what also makes them potentially profitable. disappear. Even with the best of intentions, even with
The payoff comes from investing well, which is a way the best of research resources, even the best of analysts
of saying investing in stocks that will do better in the will make mistakes at a higher rate than they will with
future. Preferably, a lot better. larger companies.
Understand that risk and returns go together. That’s all part of the game and is never going
There’s no great payoff waiting for you for making great to change. However, it’s precisely because of this
choices for asset types that have no risk. uncertainty and this risk, smaller companies that
turn out to be winners give outsize returns. The two
Why Small aspects--high risk and outsize returns--are two sides
So let’s talk about size. From almost any perspective, of the same coin. What we have to do, as analysts and
size is one of the most fundamentally important investors, is two different things.
characteristics of a company. Whether it is for
formulating investment strategies, launching mutual The author is CEO of Value Research

Insurance
Health Insurance Under A Cloud As COVID–

With a spike in cases insurance
companies are acting pricey
while private hospitals are
changing patients for PPE kits
By Jeevan Prakash, Anagh Pal

and Nirmala Konjengbam
E
verybody has seen those social
media forwards. A picture of
private hospital charges for
COVID-19 patients: a list of services,
with astronomical figures that could
cause a cardiac arrest even in the
healthy. That one picture frames the
famine of health resources Indian
consumers face right now. It’s a
pincer grip—scarcity at one end, and
sheer unaffordability at the other,
unfolding just like a famine.
The early reprieve India got during
the COVID-19 pandemic now seems
a distant story. The very nightmare Photo: BHUPINDER SINGH
the lockdown sought to prevent
is now upon us. Existing hospital question: who’ll foot the bill? the latter should still be a choice—an
capacities are swamped. This is where the insurance older policy should suffice to cover
We have an active caseload of 2 drama begins. The biggest bone of a new disease. But several insurance
lakh-plus, leaping up by 16,000+ contention: insurance companies companies are dragging their feet and
every day. The turnover of the sick refusing to reimburse patients. looking for ways to cut corners. As
is so huge that governments, both Consumers are understandably angry it stands, the number of distraught
at the Centre and in states, have at private hospitals for seemingly patients—crying about not being
inevitably turned to private hospitals. profiteering from a calamity—at reimbursed—can itself become a small
But that has brought in the inevitable a time when India’s wallet is thin. graph among India’s COVID graphs.
Hospitals have their own reasons Thing is, a cumulative demand
and sob stories; yet, the government is putting strain even on insurance
has moved to cap charges in places companies, just like a run on the bank
JAYAN like Delhi. But why are insurance would. Smaller firms are reportedly
MATHEWS companies acting pricey? Because putting their policies on hold for new
Co-Founder and Chief a pandemic is an unprecedented clients, fearing huge losses. Most
Product Officer, Vital situation even for them. are refusing to reimburse the cost of
Insurance The Insurance Regulatory Personal Protective Equipment (PPE)
Authority of India (IRDA) says kits—which typically form a big part
existing health insurance policies of medical bills. Others, as consumer
Those with smaller suffice to cover COVID-19 expenses. rights activist Bejon Kumar Misra says,
sum insured have to Alongside, it’s encouraging insurers “are refusing cashless treatment and
pay large amount from to come out with new COVID- asking patients to pay from their own
their pocket specific policies. But for consumers, pocket and get reimbursed later.”

–19 Rages
exhaustive list of uncovered items
includes an expenditure head for
‘Care & Hygiene products’. That’s
what PPEs fall under, even if not ANUP SETH
specifically mentioned. CRO, Edelweiss
Mahipal Singh Bhanot, zonal Tokio Life
director, Fortis Hospital, says the
private sector too is seeking to find
solutions. “By and large, all third
Discretionary spending
party administrators (TPAs) are has taken a backseat
covering PPEs under the cashless to goal-based financial
facility,” he says. There are new planning
guidelines here: “one per day for
isolation room, 2-3 per day for a
single room, 4-5 per day for ICU.” existing policies cover COVID as any
But cashless itself has to become a other claim. “Till now, we have received
seamless reality for that to fructify. about 500 COVID claims: an average
As Ravi Vishwanath, president- claim size of `2 lakh, as high as `7.5
accident & health, HDFC ERGO lakh in some cases,” he adds. Krishnan
General Insurance, says, only a Ramachandran, CEO, Max Bupa Health
regulated COVID-specific package Insurance, too says old policies cover
can “help eliminate ambiguity and COVID—same claim process, travel
expedite claim settlements.” history no bar, home treatment covered
if the policy has built-in OPD benefits.
Calculating costs “We are also covering treatment
This looms as a big challenge: there’s costs at quarantine centres, including
no standard. “Average cost is a bit hotels,” he says. Biresh Giri, appointed
of a misnomer,” explains Bhaskar actuary, head of product development
Nerurkar, head-health claims, Bajaj & CRO, Acko General Insurance,
Allianz General Insurance. “Pan- says even testing is covered “if you
Insurers point to the huge, India, it’s `1.2 lakh. But it might be are hospitalised post-testing”. But he
unforeseen, extra burden on them. `70,000 in a smaller town, `4 lakh adds a nuance: “It’s essential to have
It’s not only PPEs that cost between in Mumbai. Also, some patients go an adequate sum assured. From our
`4,000-8,000 a day—which, as home in 7 days, some stay for 14. experience, customers with smaller sum
Deepesh Mehta, CEO, Grow Wealth, Some need isolation, some need insured bands have to pay a significant
says “falls under a non-medical ICU, some a ventilator.” But he says amount from their own savings.” Jayan
expense, and cannot be covered”. Take Mathews, Co-Founder and Chief
co-morbidities: it can go undeclared Product Officer at Vital, recommends
in a policy form, but a virus will a cover of `5 lakh for small towns, and
unerringly smell it out and strike,
Be Prepared `10 lakh or more
creating an unseen mountain of risk for metros.
for insurers during a pandemic. Ensure that you have a
The IRDA is scrambling to address comprehensive health insurance COVID Plans
this urgent set of challenges. Since cover Policies specific to COVID-19 will
existing policy contracts seem to be Pay your premium on time to come, as mentioned, in two types: a
cracking at the seams, the thrust is on ensure continuity of your policy benefit-based product, which pays an
a proposed COVID-specific insurance assured sum, or an indemnity-based
Top up your existing policy to
policy. Here, consumers will have increase your cover that reimburses you like any other
two options, beginning July 15: an policy. Mehta explains the basics of
indemnity policy and a benefit-based Avoid buying COVID only insurance. the first: an entry age-band from three
product. The first will cover PPE costs However, you can consider it as a months to 60 years, but with a fixed
top up your existing health
if hospitalised. But the problem of PPE premium for all; a sum insured ranging
insurance plan
costs stays unresolved: a less-than- from `25,000 to `2 lakh, the premium

Insurance
Costs That Matter

cybersecurity protocols to enable
the safe exchange of confidential
Treatment in private
hospitals: `1.65- 7.5 lakh information from outside office,”
adds Brahmajosyula. Now, many
Treatment with medication have updated their websites to ensure
only: `2-3 lakh with 10-12 day seamless, user-friendly features
stay for customers. Demand for health
ICU stay for critical cases insurance, naturally, is rising: the
where monitoring is required : crisis is indeed an opportunity for the
`5-7 lakh with 10-14 day stay industry. “Consumer awareness about
Very critical cases where having at least a basic cover has gone
ventilation support is required up significantly; most insurers are
– `12-15 lakh with 20-25 days receiving enquiries,” says Vishwanath.
stay During the lockdown, insurers
observed “an increase in renewals and
fresh policy sales”, he says, and retail
health premiums logged a growth of 14
per cent in this phase.
for the latter costing roughly `4,500 for a pandemic is not a bad thought:
per annum; 50 per cent of the sum consider spending a few hundred, Regulator’s role
insured for quarantine, full sum if especially a family floater plan The present moment, though, is still
diagnosed with COVID. that secures your loved ones too. one of intense anxiety. And the IRDA,
Ramachandran, however, says For those who can afford it, there while trying to evolve new norms, is
“it’s always advisable to opt for a never was a time when the need seen as being less than helpful on the
comprehensive policy” that covers for comprehensive cover was more core issue of settling claims, especially
hospitalisation and also the pre- and crystal-clear. At least now, health those related to unique factors like
post- phases. To that end, he believes cannot be seen as an afterthought. PPEs. Its pronouncements are seen
“a COVID benefit-based rider with a New initiates can learn from as taking a legalistic view of contracts
regular policy will be more beneficial experienced consumers who are signed before the pandemic, and
for customers”. throwing up interesting patterns thus not protective of policyholders.
It’s a fact, of course, that a `50,000 of behaviour. Subramanyam Factoring in customer feedback is vital
insured sum won’t help a patient Brahmajosyula, head-underwriting & at this stage of evolution, says Mishra—
who’s paying up to `2.5 lakh for reinsurance, SBI General Insurance, that would “give confidence to those
treatment. “A COVID policy only talks of “a reduction in the overall buying new policies and thus increase
takes care of today’s concern,” says number of claims reported during the insurance business, while bringing
Mathews. It may make sense, he too the lockdown”. Isn’t that a paradox down insurance costs”. Consultation
feels, to add on that benefit to an during a pandemic? No. “People are with policyholders was a regular
existing policy. merely choosing to postpone elective feature in the years after 1999 when
treatment.” So the price of health is a IRDA was set up—that’s been “totally
Who should buy? constant vigil. missing for the last 10 years,” he adds.
We make a case for standard plans “We are certainly seeing a At this point, even the media is finding
with COVID benefits, but who can permanent change in customer it hard to get IRDA to engage.
opt for COVID-specific policies? If behaviour: discretionary spending Outlook Money contacted, serially,
you are one of the unfortunate ones has taken a backseat to goal-based Mathangi Saritha, assistant general
who’ve recently lost a job or faced financial planning,” says Anup manager, communications, then DVS
salary cuts, a COVID plan with a Seth, CRO, Edelweiss Tokio Life. Ramesh, GM, health, and was finally
relatively lower premium is a good Insurers too are functioning amid asked to contact Subhash C Khuntia,
option. For those living in hotspots, an unprecedented crisis. As the chairman, IRDA…several calls were
there’s no time to waste. If not a high- pandemic set in, their biggest made to his office, in vain. A bit of
cost standard plan, at least secure challenge was to ensure the safety sunlight may not kill the virus but
some immediate cover with a COVID of their own employees: providing would be ideal in terms of collective
plan. Even if health insurance is not alternative work arrangements et response from India.
your thing, an affordable plan just al. “Another was to overcome set [email protected]

General Insurance Made Easy
Health Insurance FAQs

H
ealth insurance is a Mr Ravi Vishwanath,
must for everyone. President – Accident &
With health costs Health, HDFC ERGO
rising every year, a health General Insurance says
emergency can cause a major “A health insurance policy
financial blow in the absence offers individuals financial
of insurance. However, one security in case they fall prey
needs to be well informed to any ailments listed under
before taking a health the policy. They also cover
insurance policy that suits infectious diseases inclusive
one’s needs. Here are some of COVID-19 after an initial
health insurance FAQs that waiting period from inception
will address the key issues you need to ensure that you non-network hospitals. of the policy. Further, health
regarding health insurance. have adequate sum assured. insurance policies like HDFC
Check the waiting period Should I opt for a ERGO General Insurance’s
What is the right age to for pre-existing diseases. COVID-19 product, my:health Suraksha or HDFC
buy health insurance? Check for any sub limits even though I ERGO Health Insurance’s
One should buy a health and exclusions under the already have a health Optima Restore, will also offer
insurance policy as soon as policy. Check whether any insurance policy? policyholders a comprehensive
possible, when one is in good co-pay applicable in the A COVID-19 specific cover for medical expenses
health. This is because at a policy. One needs to also policy will only cover you from major illnesses.
lower age, a health insurance have information on the for the virus when it is Also, customer may opt
policy is available at a lower claims settlement ratio of prevalent and with certain for HDFC ERGO General
premium. Also, most health the company. pre conditions. In case Insurance’s my:health
insurance policies have you already have a health Suraksha policy, as individuals
a waiting period for pre- When can I make a insurance policy, this will may buy the policy on
existing diseases and specific claim? be sufficient to cover you installments without EMI.
diseases are not covered for In a cashless claim the from any infectious disease, my:health Suraksha also
usually a period of 2 years. insurer settles all bills with including COVID-19, after covers mental illnesses under
the hospital directly. In an initial waiting period medical expenses cover,
What do I need to check case of reimbursement, from inception of the home healthcare, road and
before selecting a the policyholder pays policy. Further, a regular air ambulance, organ donor
health insurance policy? for the hospitalisation insurance policy, also offers expenses, alternative treatments
There are several things you expenses and can later claim a comprehensive cover for under AYUSH (Ayurveda,
need to check before taking a reimbursement. This can be medical expenses for major Yoga and Naturopathy, Unani,
health insurance policy. First, availed at both network and illnesses. Siddha and Homoeopathy).
Mutual Fund
Environment Funds May See A Surge

The world post COVID-19 is likely to see a paradigm shift. We may soon see sustainability
and responsible investment gaining importance in the asset management industry
By Himali Patel inflows, these funds performed better combined assets of $1 billion. Globally,
than the global universe. there are almost 3,300 ESGs with assets
F
irst, your worst nightmare Towards the end of March 2020, of almost $840 billion.
came true. Like other global the assets of sustainable funds, Several reasons can explain the
indices, the BSE Sensex which focus on companies that rank fascination for the sustainable funds.
plunged. And then, there was some high on Environmental, Social, and COVID-19 has highlighted issues
good news. From its low of 25,381 on Governance (ESG) issues, were down related to health, safety, environment,
March 23, 2020, it recovered 60 per 12 per cent from their all-time high at and sustainability. “More companies are
cent of its losses over the next three the close of 2019. According to a May under scrutiny for decisions that affect
months. Now, there’s better news. 2020 report by Morningstar, this was their employees, vendors, customers,
Worldwide, as also in India, certain lower than the 18 per cent decline and other stakeholders. COVID-19 is
funds, dubbed ESG or “sustainable” for the global universe of all the a litmus test to verify a company’s true
ones, showed “resilience” during the funds. The sustainable funds “pulled sustainability, and its commitment to
sell-off triggered by the COVID-19 in $45.6 billion in the first quarter ESG best practices in these difficult
pandemic. In terms of both assets and of 2020” compared to “an outflow times,” explains Chirag Mehta,
of $384.7 billion for the overall fund Senior Fund Manager - Alternative
universe”. Investments, Quantum AMC. In the
In Asia, and specifically in India, future, both companies and investors
CHIRAG MEHTA the ESGs performed better than will be obsessed with non-financial
Senior Fund Manager in Europe and North America. parameters, apart from profits,
- Alternative “Bolstered by new fund launches”, revenues, and other financial figures
Investments, their assets in Asia (minus Japan) and ratios. “As we rethink our personal
Quantum AMC went up by 21 per cent. The report values and priorities, several companies
stated that “Indian (ESG) funds went out of their way to help the society.
experienced record inflows of $507 The theme of ESG or sustainability is
COVID-19 is a litmus test million in first-quarter 2020”. Clearly, becoming not just a luxury but indeed
to verify a company’s there is a huge investor interest in a necessity in the present-day scenario,”
sustainability and its sustainable funds. At present, there feels Jinesh Gopani, Head – Equity, Axis
commitment to ESG are seven such funds in India with AMC. Social responsibility will emerge

In the post-COVID world,
there will be a paradigm shift,
as sustainability and responsible JINESH GOPANI
investing gain importance. Asset Head – Equity,
managers will approach investments Axis AMC
differently, and investors will demand
this change. “Hence, the adoption
of ESG is likely to accelerate. It The theme of ESG or
will emerge as a new investment sustainability is becoming
philosophy, even in a nascent market not just a luxury but
like India,” says Shibani Kurian, Head indeed a necessity
of Equity Research, Kotak Mahindra
AMC. Like growth and momentum
stocks, sustainable shares will to show lower volatility due to possible
become part of our lexicon. controversies and occupational mishaps
Global experience shows that related to environment and governance
ESG investing generates long-term issues. Hence, the investors and asset
and competitive returns for both managers can be more confident about
asset managers and investors. This the price stability of such stocks.
is also true for the not-so-mature Unlike the other mutual funds, the
Indian market. For example, the sustainable ones incorporate ESG
as a priority for companies. two funds of SBI Magnum gave analysis in their research and decision-
At the governance level, investors annualised returns of 6.29 per cent making process. However, despite
will keenly watch how companies and 5.41 per cent over a five-year the single underlying philosophy, the
engage with specific stakeholders period. The returns were lower at various ESG funds can have different
like labour, and evolve meaningful 2.45 per cent and 1.55 per cent, approaches and tactics. According to SBI
policies to grapple with the new respectively, over a three-year Magnum’s Mehta, “some funds invest in
challenges. Ruchit Mehta, Fund timeframe. Given the current state companies that are broad ESG leaders,
Manager-SBI Magnum Equity of the stock markets, the returns and others focus on those with specific
ESG Fund, SBI Mutual Funds were negative in absolute terms in positive value-add such as clean energy,
says that shareholders will focus the past three to six months. Gopani healthcare, education, gender equality,
on the risk-mitigation options indicates that the more significant and waste management”.
that managements adopt. “The aspect of the sustainable funds is that “We weigh stocks based on our
strengthening of supply chains will their investment strategies “bring proprietary ESG scores, and check
be one of them. Import-dependent down the risk of disruptions in the tolerance on sector guardrails to
companies may change their companies’ business models and arrive at the final weights assigned to
practices, and evolve alternative performances due to ESG factors”. each stock in the portfolio,” explains
supply chains,” he adds. The stocks, which they buy are likely Quantum’s Mehta. He adds that an
ESG Fund Returns (%)

Scheme Name 3 Months 6 Months 3 Years 5 Years AUM (` Cr)
Axis ESG Equity Fund - Direct Plan 1.22 - - - 1,690.17
Axis ESG Equity Fund - Regular Plan 0.71 - - - 1,690.17
Quantum India ESG Equity Fund - Direct Plan -1.66 -8.87 - - 14.15
Quantum India ESG Equity Fund - Regular Plan -1.88 -9.18 - - 14.15
SBI Magnum Equity ESG Fund -7.50 -15.87 1.55 5.41 2,323.67
SBI Magnum Equity ESG Fund - Direct Plan -7.30 -15.52 2.45 6.29 2,323.67
Source: Value Research; Note: Return as on 9th June 2020, AUM as on 30th April 2020

Mutual Fund
Average ESG Risk Score as per Sebi’s rules, only the top 1,000
listed companies need to furnish
Healthcare 38.68 Business Responsibility Reports,
Utilities 37.11 which highlight their initiatives on
Basic Materials 36.45
ESG issues. There is also a lack of
Energy 35.42
Industrials 30.61
regulatory desire to push companies
Sectors
Financial Services 27.96 to reveal additional information.

Consumer Defensive 27.71 Thus, ESG research becomes difficult,
Real Estate 26.06 which limits the choices for the fund
Communication Services 24.62 managers, as also the investors.
Consumer Cyclical 22.25
Technology
By default, the funds fall back on
15.88
safe strategies. For example, they
0 5 10 15 20 25 30 35 40 45
assiduously shun stocks of companies
Average ESG Risk Score
that derive significant revenues from
Source: Morningstar & Sustainalytics
businesses such as tobacco, liquor, and
controversial weapons. In addition,
ESG score, which is a tally of 150 severe risk comprises Lupin, Cadila there is the tendency to keep portfolios
to 200 parameters of a company’s Healthcare, Sun Pharma, Piramal well-diversified, and not to unduly
ESG footprint, can be considered Enterprises, GlaxoSmithKline, and penalize specific sectors, even those
a measure of its long-term Dr Reddy’s Lab. like energy and utilities that rank high
sustainability. The higher the score, But an ESG score of a company on ESG risk scores. The standard
the better it is as an investment or sector is not a static figure or practice is to keep the sector-wise
option. “A high score translates into concept. There are no guarantees exposures in sync with the overall
steady and sustainable performance,” that certain stocks or sectors will market or the benchmark index.
reveals Gopani. always remain high on such rankings. COVID-19 will lead to several
The most favoured stocks in Therefore, the fund managers changes. Investors will become
the portfolios of ESG funds are need to nuance and fine-tune their sensitive, and gauge companies’ efforts
TCS, HDFC, Marico and Shree analyses, and include future trends to tackle the ESG issues. As they
Cements. “The choice of Marico is in their calculations. The steps that pump money into sustainable funds,
because 93 per cent of its packaging a company plans to take and the the asset managers will be forced to
material is recyclable and, despite changing state of an industry are become picky, and discard certain
a high promoters’ holding of 60 crucial factors. Even the past is stocks. The managements will pursue
per cent, the business is managed important. Companies with a past sustainable practices. Like CSR, ESG
by a professional CEO. In the case record of high controversies scores will emerge as a win-win for the
of Shree Cements, almost a fourth should be avoided. stakeholders, who will realise that such
of its raw material comes from It’s not an easy task to be an ESG strategies lead to higher operational,
alternative sources, and its plants fund manager. The problem becomes financial and stock value, and benefit
have zero liquid discharges and are more complex in India because of the communities and societies. In several
equipped with air-cooled condensers paucity of information. For example, ways, the performances of the ESG
to conserve water,” says Quantum’s funds vis-a-vis the global universe in
Mehta. The most promising sectors the first quarter of this year prove these
include technology (which has the trends. As the Morningstar report
lowest ESG risk score), followed by RUCHIT MEHTA contends, the “continued inflows”
consumer cyclical, communication, Fund Manager- into the sustainable funds “speak of
and real estate. The riskiest ones SBI Magnum Equity the stickiness of ESG investment.” It is
are healthcare and utilities. “Most ESG Fund, SBI evident that investors are increasingly
healthcare companies have severe Mutual Funds driven by values, even non-financial
or high ESG-related risk. The issues ones. Hence, they are willing to invest
include business ethics, product in stocks that rank high on ESG for a
quality, and safety and access to
Import-dependent longer term and, most importantly,
healthcare,” says Harish Toshniwal, companies may change they are “willing to ride out periods of
Product Manager, Morningstar practices and evolve bad performance.”
Indexes. His list of companies with alternative supply chains [email protected]

Interview
Serving Stakeholders A
Top Priority Now
Stakeholders are extremely important and maintaining a balanced approach to
boost their confidence will help firms bounce back from the crisis.
Arvind Gupta, Partner and Head – Management Consulting, KPMG in India
explains how firms need to establish the new normal and communicate this
approach to their stakeholders, during an interview with Himali Patel.
The pandemic has caused a serious business take care of their stakeholders in their decision-making,
slowdown. How are the corporates trying to they are likely be more resilient over the time.
reassure stakeholders (investors, creditors,
employees) during decision-making? What do stakeholders go through when their
The aftermath of COVID-19 outbreak is going to views are not considered?
reverberate through the economy for a long time, All stakeholders expect their needs to be taken into
pushing us to transform and innovate the way we account as companies strategize to meet new challenges.
operate. We are seeing firms establishing incident By not meeting these basic expectations, companies would
management teams, redoing business continuity plans see fear, confusion and anxiety across the value chain.
and charting stakeholder communication strategically to These may include investors who doubt the financial
deal with all unseen and unexpected challenges. viability of their investment, or employees who may be
Organisations are attempting to respond on multiple facing job and financial insecurity, or the creditors who
fronts simultaneously. They are looking at safeguarding may doubt the company’s worthiness. This will have
their workforce by promoting employee benefits like a ripple effect negativity affecting both the brand and
remote working, increased health cover and developing reputation. At present, the hospitality and the airline
employee risk mitigation strategies. While doing so, they companies are trying to ensure safety of customers by
are also looking at opportunities to preserve cash for maintaining high hygiene standards and make both
operational continuity, re-thinking how they can manage customers and employees feel comfortable about being
their regular activities and identify opportunities for associated with them.
realigning expenses in this dynamic environment.
Companies are re-analysing their strengths so that Which principles would contribute to a more
they can make a positive impact on shareholders. We are sustainable and prosperous future for the
re-doing our offerings to better match the market needs, stakeholders?
making our stakeholders hopeful and confident. Firms need to establish the new normal and accordingly
Firms are sharing execution plans with stakeholders change the way they operate and communicate with
for inputs, fostering collective decision and sense of stakeholders to give them confidence.
belonging. 1. Companies with a robust business continuity plan and
well-laid policies to deal with emergencies are better
Why do you think stakeholders matter now more placed to cope with downturns.
than ever? 2. Openness in sharing the financial situation of the
Many large organisations have stepped up efforts to organisation would foster security amongst employees,
provide more social benefits, they are extending sick creditors, partners and investors.
leaves to employees, longer credit period to its vendors 3. Businesses to need find means to help employees deal
and forgoing downsizing. with increased levels of anxiety and monotonous work-
With such uncertainty, businesses know that if they life through innovative ways of engagement, active
listening, and providing opportunity to upskill and reskill.
4. They also need to recognise and weed out short-term
crisis that may victimise employees or investors, by
Firms are re-analysing their using innovative methods for stability.
strengths for a positive impact [email protected]

Fintech Watch
Fintechs Strike Gold As Digital Life Grows

There is a sudden surge of demand for using these app-based financial platforms post pandemic
By Aparajita Gupta businesses. “We have seen no fall in the lockdown we were growing 20
our user base during the lockdown. per cent month-on-month. Since
W
ith the coronavirus- In fact, the transactions on our the last three months we have been
induced lockdown platforms have grown by 2X. Before growing by 30 per cent month-on-
getting prolonged, month. We crossed 6 million users in
the fintech platforms are reaping April,” says Harsh Jain, Co-founder
a harvest with netizens thronging and Chief Operating Officer, Groww.
various sites for financial solutions. As an investment platform,
Many fintech platforms have even Groww currently offers direct
seen its traffic getting doubled during NithiN KAmAth mutual funds and recently launched
the lockdown period without any Founder & CEO, stock investing. The average age of
marketing spent. Zerodha investors on Groww is 28 years.
Apart from digital payments Evidently, the online traction for
companies who witnessed a boom these platforms have gone up thanks
Witnessed a surge in
during the demonetisation and are to the young population.
now seeing good traction on their account opening to the Bala Parthasarathy, CEO & Co-
platforms, other fintech platforms are extent of over 300 per founder, MoneyTap says, “We are
also witnessing sharp surge in their cent post lockdown witnessing an impressive surge in

negligible at the moment. However,
we are witnessing an uptick in other
categories like education and medical
Archit GuptA loans. Our customers are also taking
Founder and CEO, small-ticket loans to meet their
ClearTax essential everyday expenses,” he says.
Even tax solutions provider
ClearTax is witnessing higher traction
Lockdown has given during this time of lockdown.
us an opportunity But will it be able to sustain this
to double up on new traction once lockdown is over?
products and features “Yes. We adapt our product
pipeline based on continuous
airlines, tourism, hospitality, hotels, customer feedback. We were the first
entertainment, e-commerce (non- few to offer GST 2.0 and E-Invoicing
essentials) and restaurants, among solutions and the lockdown gave us
other sectors. an opportunity to double on new
However, there are also a few products and features on our existing
areas that are seeing an uptick in tax compliance suite which we will be
digital payments by way of increased rolling out in the next few months,”
adoption during the lockdown. These says Archit Gupta, Founder, and
include online grocery stores, online CEO, ClearTax.
pharmacies, OTT players (telecom Again, bulk of the tax payers are in
and media), EdTechs, online gaming, the 25-40 year age group.
recharges and utility/bill payments, Even, Nithin Kamath, Founder &
the study states. CEO, Zerodha says the lockdown had
Digital payment volumes are a positive effect on the business. “We
also receiving a boost through the have witnessed a surge in account
our organic lending activity and the Government, which has pledged opening to the extent of over 300 per
number of daily enquiries. Just like monetary assistance to the poor via cent post lockdown in the last three
demonetisation provided a massive direct transfers to bank accounts. months. This is mainly due to the fact
impetus to digital payments, as we The finance minister and the that during the lockdown people are
navigate through the post-COVID CEO of the National Payments working from home and getting some
world of lockdowns, digital lending Corporation of India have also urged time to invest in the markets.”
has come to the centerstage.” people to increase the use of digital Zerodha offers investments in
MoneyTap provides customers payments in order to make payments stocks, mutual funds, and bonds,
with a revolving credit line, from contactless. trading in equity, equity derivatives,
which they can borrow money once “Digital payments, once a currency derivatives, and commodity
or twice, or as many times as they convenience, have become a necessity derivatives on its platform.
like. Basically, one gets a one-time in these times. With a majority of “Our client user base was around
approval for multiple disbursements. the sectors that contribute to digital 2 million before the lockdown
It has 90 per cent repeat customers payments still in a state of flux, it is phase and now crossed more than
on the app. It provides credit of up to still too early to ascertain the long- 2.5 million clients. Overall we have
`5 lakh at interest rates starting term impact of COVID-19 on digital registered an increase of more
13 per cent per annum. payments,” the study added. than 27 per cent in our new client
“We have seen our organic website Even Parthasarathy’s views are additions,” adds Kamath.
traffic almost double than what it absolutely in sync with the study. Though COVID-19 had a negative
was before the lockdown. And all this “Our existing customers are impact on most of the sectors, a
with zero marketing spend,” he adds. borrowing from their line of credit, few sectors could leverage it well.
According to a recent but this borrowing is at a reduced Undoubtedly, fintech will reap more
study conducted by level as expenses have gone down benefit this year as long as the fear of
PricewaterhouseCoopers digital in the lockdown. Spends on luxury the disease does not subside fully.
payment volume declines are seen in items and travel have become [email protected]

Mutual Fund
MFs Confident After RBI’s Fund Offer

Have measures taken by Indian regulators really helped boost the inflow of debt fund in MF industry?
By Himali Patel
T
he Government has come
out strongly with a huge fund
meant to support the Mutual
Fund (MF) industry after the recent
collapse of a few funds including
the major Franklin Templeton (FT)
Mutual Fund.
But only `2,430 crore out of the
`50,000 crore allotted for the purpose
was utilized till June 11, which is more
than two months out of the 90-day
period allowed by the government.
The low offtake could mean that most
major players in the industry feel
confident about their future.
An increased volatility in capital
markets has led to liquidity strains
in the Mutual Fund (MF) industry,
forcing companies like Franklin
Templeton (FT) Mutual Fund to by the central bank that saw a very Agriculture and Rural Development
wind up six of its credit-focused debt limited utilisation yet proved to be (NABARD), Small Industrial
schemes on April 23, 2020. This was a confidence boosting measure,” Development Bank of India (SIDBI) and
further intensified by the redemption recalls Raveendra Balivada- Head National Housing Bank (NHB)
pressure followed by a contagious of Investment Advisers, HDFC “By giving a boost to the available
effect on the overall industry. Securities. funding, we believe RBI has given
In a move to ease liquidity pressure RBI has constantly provided relief comfort to mutual fund managers
on MFs, the Reserve Bank of India to many other participants in the regarding their ability to meet funding
(RBI) has opened a Special Liquidity capital market, which has indirectly requirements in case of redemptions.
Facility (SLF) for mutual funds worth benefited the MF industry with Further measures like Targeted Long-
`50,000 crore on April 27, 2020. efforts like provision of moratorium, Term Repo Operations (TLTROs) have
The scheme was made available liquidity infusion in apex financial provided the much-needed market
from April 27 till May 11, 2020 or bodies like National Bank for liquidity,” says Mayank Prakash, Fund
up to utilisation of the allocated Manager - Fixed Income, BNP Paribas
amount, whichever was early. This Mutual Fund.
measure by the apex bank has raveendra According to Association of
provided necessary confidence to the Balivada Mutual Funds in India (AMFI), Assets
investment community, when the MF Under Management (AUM) of Indian
Head of Investment
industry was affected by continuous Advisers, HDFC
MF industry has risen 2.6 per cent
redemptions. Securities sequentially at `24.5 lakh crore in May
“The very provision of the facility 2020, owing to growth in liquid and
has provided enough confidence to arbitrage funds. However, compared
stem redemptions. As on June 11, The facility has to May 2019, the AUM slipped by 5.4
2020, only `2,430 crore has been provided enough per cent in May 2020, translating to an
availed. In 2008 and 2013, similar confidence to stem asset base reduction of `1.4 lakh crore.
liquidity supports were provided redemption In May 2020, the largest proportion

of funds of debt AUMs invested in As per experts it is interesting to note
corporate debt papers were worth that over the same period of time
`3.87 lakh crore. This segment Mayank there has been a 40 per cent growth in
includes floating rate bonds and Prakash AUM of liquid funds from `3,34,725
non-convertible debentures. The debt crore as on March 31, 2020 to
Fund Manager - Fixed
AUMs deployed their funds and PSU Income, BNP Paribas `4,69,086 crore as on May 31, 2020.
debt funds increased to `2.04 lakh Mutual Fund Explains Balivada, “Although,
crore from `1.96 lakh crore, while the majority of the AUM growth in the
percentage share decreased to 13.2 liquid fund at 21 per cent MoM
per cent in May 2020.
Targeted long-term from March 31 to April 30, 2020
The lack of access to fresh funding repo operations can be attributed to the inflow from
has also led to yield spread widening have provided the corporates and financial Institutions,
in corporate bonds, thereby indirectly market liquidity the AUM growth at 16 per cent MoM
impacting debt funds. Within the from April 30 to May 31, 2020 clearly
debt MF universe, credit funds a proven track record. Thus, the flow indicates that investors have become
inherently carry a high risk as they has been seen in banking and PSU risk averse, redeeming from credit risk
typically invest in lower credit quality debt funds/ low duration/ shor-term funds and deploying in safer products
papers, where the probability of funds with the underlying exposures,” like liquid fund.”
default stands higher as compared to explains Prakash. They typically redeem at the end
a sovereign/AAA/AA+ issue. Credit The AMFI data indicates that of the financial year to show cash in
risk funds are debt funds that have credit risk fund has declined 45 per their books and deploy it again in the
at least 65 per cent investments in cent in AUM over the last three beginning of the new financial year.
less than AA-rated paper. “Investors months. As on March 31, 2020 the The regulators - RBI, Sebi and
seem to be moving into debt funds AUM was `55,381 crore and declined AMFI - have been constantly
with caution and money is flowing massively by 36 per cent Month-on- working with all stakeholders to
incrementally into categories where Month (MoM) to `35,222 crore as build confidence and clarity amid
underlying credit is largely focused on April, 30, 2020. It saw a further the chaos and panic. They have been
on banks/ PSU / PFI and AAA erosion by 13 per cent MoM to behind the ideation of many revival
corporates with a good parentage and `30,469 crore as on May 31, 2020. measures for the MF industry. It has
helped boost confidence and stopped
panic redemptions. “Regulatory
Policy initiatives By rBi initiatives have been good confidence-
Time amount building measures and have indeed
Policy initiatives
Period (` Trillion) helped the MF industry ensure
normal functioning of the markets.
March &
reduction in policy rate (75bps + 40bps) - Credit risk concerns have ebbed,
May 2020
following regulatory support, even as
TlTrOs April, 2020 1.5 redemptions have come down,” says N
Crr cut by 100bps S Venkatesh, Chief Executive, AMFI.
March, 2020 1.37 The pandemic has significantly
relaxation over lCr & Crr impaired many sectors, which could
MsF - O/n borrowing raised by 100bps March, 2020 1.37 witness credit pressure this year
slF-MF April, 2020 0.5 because of the slowdown in public
spending and stretched working
relief package May, 2020
capital cycles. Further, banks remain
For nBFCs/hFCs/MFis 0.75 cautious in lending corporates
For MsMes 3.7 and SMEs and this will impact the
liquidity of low-ranked corporates.
For disCOMs 0.9
Next one year is going to be very
special refinance facility to Fis 0.5 crucial for the rating actions and also
increase limits to 30% from 25% under leF May,2020 - from RBI’s stance on provisioning
since a sharp slowdown can trigger a
source : RBI ; Note : TLTROs (Targeted Long-Term Repo Operations), CRR (Cash Reserve Ratio),
Liqudity Coverate Ratio (LCR), Marginal Standing Facility (MSF), Special Liquidity Facility (SLF) for fresh set of defaults.
Mutual Funds (MF) [email protected]

Interview
Crisis Opens New Doors

For SIP Investors
The correction in markets is helping retail investors accumulate more number of units
of mutual funds and build a big corpus for themselves through the SIP route,
N S Venkatesh, Chief Executive of the Association of Mutual Funds in India
(AMFI), told Himali Patel in an interview. Credit risk concerns in the fund industry
has largely ebbed because of regulatory support and upcoming redemptions, he said.
What is your assessment of the economy and and keeping their long-term goals as the objective to
market after the government’s stimulus measures? decide on their investments.
Indian equity markets have seen harsh corrections due If Investors stay firm, they stand to gain from the
to the pandemic. ongoing market developments and build a sizeable
However, our government has risen to the occasion. corpus that can help them achieve their financial
Atmanirbhar plan as a dynamic mantra, and the life goals. Let us not overlook the fact that each of
`20 lakh crore package will help the economy resurrect these crisis events leading to market correction, is
in the coming quarters. helping investors accumulate more number of units
As far as Mutual Fund (MF) industry is concerned, at lower net asset value, through the SIP route. These
it is heartening to note that retail investors continue investments will make a big difference to the investor
to demonstrate mature investment behaviour. They corpus when the market rebounds in view of the
continue to repose confidence in equity mutual funds, inherent strength of the economy.
as reflected by robust monthly Systematic Investment
Plan (SIP) contribution. Even the debt side has seen What should investors opt for between equity
a steady rise in the net flows as investors are shifting and debt MFs? Will you reassure investors to
towards high-quality AAA-rated debt in view of the continue investing in equity funds even though the
trend of reducing interest rates. bulk of them have hit the bottom in terms of NAV?
Credit risk concerns have ebbed, following Debt schemes serve as the best investment vehicle if your
regulatory support, and with redemptions coming investment horizon is between six months and three
down, we could see investors allocating higher years. Risk averse investors can opt for debt schemes,
quantum of savings to schemes having high-quality which have high-quality AAA paper, like corporate bond
debt paper. fund, or banking and Public Sector Undertakings (PSU
fund), savings fund. In fact, MF Industry is offering SIPs
What is your view on SIP flows? Will they into high-quality debt funds too.
continue to breach `8,000 crore threshold in the Investors should opt for equity funds if their
given scenario? investment horizon is for a very long term. The best
Allow me to respond a bit differently. Equity markets approach would be to invest periodically through goal-
have been at their peak of uncertainty and volatility and oriented SIPs into chosen equity schemes.
reigned supreme in the last 18 to 24 months. Against
this backdrop, it is important to observe the behaviour AMFI BCG report last year had set a target
of retail investors. SIP contributions have risen and of achieving `100 lakh crore AUM and 10 crore
now have been breaching the threshold of `8,000 investors. Has that goal post changed in the
crore plus. Even in the last three months of COVID- given scenario?
impacted economy, SIP contributions continue to The goal post has certainly not changed. At worse, the
be robust. Investors have realised the importance of MF Industry may now take a bit more time to arrive
staying invested, not getting distracted by these events at the goal post. However, increasing awareness of
mutual funds coupled with ease of onboarding newer
Investors, thanks to increasing adoption of technology,
will hopefully help the industry achieve that target,
Retail investors continue to earlier than envisaged.
repose confidence in equity MFs [email protected]

Viewpoint
Why it makes sense to

invest through SIP?
T he world is currently
navigating a challenging
environment, unprecedented
in its scope and impact. The near-
term trajectory of the market looks
when prices fall. As a result, you are
able to lower the average cost of your
investment, thereby reducing volatility
and improving the probability of
generating higher long-term returns.
uncertain.
However, it is important to note No need to try and time the
that over the long-term, the economy markets – Most equity market
will recover and the stock markets participants tries to time the markets
will generate returns. There have in an attempt to ‘buy low and sell
been instances in the past like the high’. However, anyone who has
Balance of Payments crisis in 1991 or ever tried to do this will tell you that
the Global Financial Crisis of 2008 Vinay Agrawal it is a redundant exercise. It is near
when markets corrected in the range CEO, Angel Broking Ltd impossible to accurately predict the
of 20% to 60%. In case of each of market tops and bottoms out. Thus,
these instances, markets eventually it makes sense that instead of trying
recovered to not only recoup all the the equity markets through an SIP to time your entry and exit from the
losses witnessed during the crisis you can smoothen volatility, reap markets, you focus on consistently
but also to generate significant gains. the long-term benefits of equity participating in the markets to
Having said that, the interim periods investing and harness the power leverage intermittent opportunities.
are usually checkered with extreme of compounding. Compounding Through fixed, periodic investments
volatility, making it difficult to make is a mathematical process that an SIP will ensure that you are able to
optimal investment decisions. ensures that the principal invested participate at market tops, at market
In such an environment, how and the returns generated on that bottoms and at all times in-between.
can you best take advantage of principal are reinvested to generate Reduce the impact of behavioural
future growth prospects to generate further returns. Over the long-term, biases – greed and fear influence
compelling long-term returns? compounding can exponentially most investment choices - the greed
The simple answer to that is, increase your earnings from an to make more money and the fear of
“Invest through a Systematic investment. losing money. It is these emotions
Investment Plan (SIP) and continue that can often influence your
with your existing SIP investments”. Benefit from rupee-cost investment decisions and hinder your
averaging – due to the inherent ability to make wise choices. An SIP
SIPs as vehicles of long- volatility of equity markets, stock by its very nature inculcates discipline
term growth – SIPs are simply prices are bound to fluctuate sharply in the investment process and helps
investment vehicles that inculcate in the short-term and change over you overcome behavioural biases
discipline in the investment process the long-term. By investing all your that might come in the way of your
and make it easy for investors to money at a particular price-point you investment decisions.
participate in the volatile equity are exposing yourself to heightened The benefits of SIP are fairly well
markets. Through an SIP, you can volatility. However, if you were to known. However, when faced with
invest a fixed amount of money participate in the market at all price highly volatile market conditions
periodically in the equity markets. levels, then you would be able to and an uncertain future, it is easy to
SIPs give you a great deal of mitigate portfolio volatility and forget these advantages and succumb
flexibility in terms of how much enhance long-term returns. Since to the fear in the environment. Do
you want to invest (the investment an SIP entails investing a fixed remember that SIPs are vehicles
amount can be as low as INR amount of money at fixed intervals, of long-term growth that can help
100) and when you want to invest it ensures that you purchase fewer you navigate the volatile investment
(fortnightly, monthly, quarterly, units of an investment when prices landscape to generate robust long-
etc.). By consistently participating in rise and more units of an investment term returns.
Real Estate
NRIs May Drive

India’s Realty Revival
Subdued property rates, falling rupee and abysmally low
interest rates are making realty a lucrative choice for NRIs
By Vishav Shveta Jain, Managing Director with unchanged ready reckoner

- Residential Services, Savills rates in many markets including
I
ndia’s already ailing real estate India, agrees and adds that NRIs Maharashtra for FY21.
sector faced a snowball effect had traditionally been buying There have been a considerable
post pandemic when the global properties in India. The sector number of inquiries from NRIs
economy was struck by a crisis like sees highest remittances from the when it comes to investing in real
never before. Private Equity (PE) diaspora. Sadly, there has been a estate, especially from the Gulf
investments in the real estate sector decline in NRI investment post countries followed by the United
crashed by 93 per cent to around 2014 when the residential market States and other European nations.
`1,800 crore during the first five went through a slump. Moreover, funding is also easily
months of 2020, down from about “In the wake of the current available to NRIs from banks
`25,000 crore in the corresponding crisis, we expect to see a heightened and housing finance companies.
period last year, mainly due to the NRI activity driven by first-time
nation-wide lockdown imposed homebuyers in the age group of 27
since mid March. to 37. These purchases will be seen
However, there is a consensus as a hedge and safeguard against
that some new pockets of crises. However, the rider to these
opportunities may actually help the purchases will be of right value
crisis-ridden sector bounce back and and proven track record of the
emerge stronger. developers,” Jain says.
According to Manju Yagnik, Vice Yagnik adds that time couldn’t
Chairperson, Nahar Group and have been more beneficial for
Vice President, NAREDCO, NRI them to invest with a fall in Indian
investment is one such potential rupee, subdued property prices,
area, with increased uncertainty of over a decade low interest rates,
jobs, visa related issues as expats. reduced stamp duty in most states
Promising Pockets
in Bangalore micro markets like
kanakapura Road, ORR, Devanahalli, Sarjapur Road
in nCR Sector 150 noida, noida City Center, Dwarka
Expressway (gurgaon)
in Pune Hinjewadi, Wagholi, Baner, Wakad
Source: 360Realtors

Additionally, with stamp duty now advantage to NRIs with a 10 per cent
being sold online it becomes an dip in the value of rupee over the last
Manju
added advantage. 12 months coupled with attractive
Yagnik
“Owning a home in their payment plans such as 10:90, 20:80,
own country is a matter of great Vice Chairperson, leasing assistance, assured rentals and
Nahar Group and Vice
emotional and psychological so on. According to Ankit Kansal,
President, NAREDCO
fulfilment for NRIs. They mostly MD and Co-Founder, 360Realtors, to
prefer to invest in independent realise this potential and overcome
villas, luxury, semi-luxury housing in Owning home in India is the crisis, Indian real estate needs
an integrated township, which offers a matter of emotional to alter its existing business model
world class amenities, excellent and psychological and aggressively work towards
infrastructure support, good digital transformation and build a
construction quality and sustainable
fulfilment for NRIs comprehensive infrastructure that can
environmental values. They seek facilitate seamless customer life cycle
safety, security, clean and green crisis emerging out of coronavirus management over the web world.
environment and a community set- outbreak may not affect NRIs as “The way forward will be to step
up, which they have been used to much as it affects domestic buyers. up the digital game with focus on
while living abroad,” Yagnik explains. “Since NRIs stay far away, lack a more immersive and experience-
According to a whitepaper of physical visits or inspection does based technology platforms that
released by 360Realtors, at the onset not make much of a difference. An can foster stronger customer
of FY21, a total of $13.1 billion was effective digital view of the project engagement and personalisation
expected to enter the Indian housing can be equally helpful. Developers
market from NRI quarters. While are also investing heavily in digital/
this number may see a revision online medium to help buyers learn
due to COVID-19, it cannot be more about properties and make
denied that these are also one of the informed decisions,” says the report
most opportune times with home by 360Realtors.
prices seeing a huge dip. Also, the The situation offers a significant

Real Estate
reverse migration may have had a

detrimental impact on the real estate
in metro cities but tier-II and tier-III Shveta
aNkIt cities are expected to see a surge in JaIN
kaNSal demand. Developers may need to Managing Director -
MD and Co-Founder, change their approach. Similarly, Residential Services,
360Realtors acceptance of work from home Savills India
culture, if extended beyond the
times of crisis, may lead to demand
Realty sector needs to for homes in suburban areas due to
Expect a heightened
alter its business model attractive prices and other benefits. NRI activity by first-
and work towards Savills India’s Jain feels the time buyers in the age
digital transformation increasing trend of work from home group of 27-37 years
could potentially induce residential
along with offering transparency to buyers to opt for bigger and less avoid congested places and look
facilitate real estate sales. expensive homes away from the for larger spaces and open areas
For instance, in a post COVID city centre. She adds that this trend, and migration will take place from
world, virtual events will proliferate. however, may not essentially be central business districts.
However, just taking the event fuelled by work from home alone, When it comes to tier-II and-III
online would not serve the purpose. but would primarily be led by people cities, they have always promised
Those events need to be designed looking for larger homes with being end-user markets. Cities like
and implemented to offer real value superior amenities. Lucknow, Chandigarh, Ludhiana,
to the customers,” he explains. Kansal too agrees and adds Faridabad and Allahabad, among
It’s not just the NRIs that hold that post-COVID, demand for others, have always found takers and
hope for the sector. Some events peripheral areas will increase now the demand has been revitalised
which occurred as corollary because in a work-from-home with reverse migration, investment
to the COVID crisis have also situation, people would need larger from Gulf countries, historic low
opened up opportunities in the space at an affordable price. If level of loan rates and accelerated
form of challenges. For instance, that were to happen, they would need for self-owned homes, says
Mohit Goel, CEO, Omaxe.
“The recent rise in demand and
NRI Investments in $Billion renewal of interest of investors,
13.1 Est developers and homebuyers owing
12.5
to the pandemic is a welcome shift.
12 The pandemic has taught us that
creating several economic centres
11 is what the Indian economy needs
9.7
10 9.4 right now. The real estate and
8.5 infrastructure sector is driving this
shift and the coming times will see a
8
7.2 lot of commercial activities and jobs
in these cities,” he explains.
6 The need of the hour is to
6
change the conventional ways of
working and innovate to cater to
4 the new demands of the potential
homebuyers. The good news is that
2
most studies concur that a large
majority of buyers are still planning
to go ahead with their investment,
0 even if they have deferred it for the
FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 time being.
Source : 360 Realtors Research [email protected]

Viewpoint
Avoid these costly mistakes in life!

base a lot of weight on our next about current scenario and value your
set of actions. We tend to jump investments based on that.
to conclusion without properly
evaluating the options available. Confirmation Bias – Considered
3 as one of the most deadly biases.
First mistake, falling prey to As Rolf Dobeli expresses in his
1 Recency Bias – is to sell an book – The Art of Thinking Clearly –
investment at a loss and park Confirmation bias is the mother of all
the proceeds in a safer option. This misconceptions. Here, an investor tends
is done solely out of fear of making to look for only those information/
more loss. I have seen this several data that confirm his/her theories. In
times, over the years. This bias is other words, we end up discounting
so strong that sometimes advisors or filter out information that doesn’t
too tilt naturally towards taking confirm with our views.
such decisions as clients are easily If we have a negative view on
Vatsal Shah convinced. markets, we will always refer to the
Head - Wealth Management,
How to address this: Evaluate negative news or wait for markets
Sushil Financial Services Ltd
each situation in isolation. Have to correct further. Likewise on the
B
enough data points to make sure upside, we become a blind believer of
iases can cost you a lot! you are considering all the scenarios unlimited upside and always feel this
Almost everyone takes wrong and then do a probabilistic study. time it’s different.
decisions because of certain Put down the various outcomes and How to address it: The best
biases that are set in their mind. then co-relate with your most recent approach is to write down your views
Much has been spoken/discussed experience. or theories about investing, business,
about Behavioral biases and how Recently we have seen markets team building etc. and then find
it impacts our decision making. performing mainly on account of evidence in actual cases which are
However, just a fraction of people the run-up seen in growth stocks. against your views.
possess the rightful knowledge to Value as a theme has been a laggard.
understand these biases. Expecting this trend to continue If you find yourself more upset
forever may not work as money 4 with losses than the gains you
Why do people have biases? would definitely move to value make, you are exhibiting Loss
It is because we are humans. That’s pockets over a period. Aversion. This bias will lead to selling
how brains are developed to think. your winners quickly while holding on
There are certain patterns for Second one is the Anchoring to your losers. Recently, this bias was
which a human brain is naturally 2 effect – We experience this visible in the credit markets when one
hard wired to think. ‘Once burnt all the time, particularly when of the Asset Management Company
twice shy’ is the simplest phrase dealing with stock markets. It is said closed down their credit related funds.
that can explain why we all suffer that once we buy a stock at a certain Immediately, investors seeking safe
from a powerful bias known as the price, the investor by no means can returns exited en masse. This episode is
Recency Bias. sell the stock below that price. This a clear case of loss aversion combined
Just after the attack on World is because our mind is anchored to a with recency bias which ultimately leads
Trade Centre, there was a sudden particular price and deciding to sell to irrational behaviour.
drop in people taking flights. Similar at a lower price becomes difficult. How to address it: Don’t get bogged
trend played out in hotel industry Owing to this the investor tends to down by losses of individual portfolios.
post the tragic attacks by terrorists keep waiting for the stock to regain Instead, look at overall positions of
in Mumbai. Ironically, the best time its price and consequently may end your entire basket of wealth and then
to take a flight or visit a hotel was up with huge losses. analyze the returns.
after such attacks given that security How to address it: Think forward Keeping away from these four
is stronger. These examples indicate and don’t be hooked to previous biases will surely help you avoid costly
that a recent negative impact can values/ numbers. Think objectively mistakes. Happy investing!
Stock Pick
Strong Execution
And A Healthy Order
KEC International
CMP: 244.1
PE: 11.50
KEC offers a healthy order book amid lockdown *As on 22nd June, 2020
By Himali Patel control. Strong promoter parentage

and focus on the balance sheet Why Buy
T
he efficient working capital should help KEC emerge stronger Consistent profitability growth
management and execution post pandemic versus peers,” despite challenges.
ramp-up are two components explains an analyst at Motilal Oswal Healthy order inflows and efficient
that have aided KEC International Financial Services. working capital management.
(KEC) despite the economic slowdown. The company’s order book stood
This RPG Group flagship company at `24,000 as on March 2020, with 1 Watch Out For
has showcased a strong execution per cent growth Y-o-Y. On the order Rising competition and project
capability and a healthy new order inflow front, its total order intake execution delay may dent margins.
inflow despite the challenges in for FY20 stood at `11,331 crore,
Fourth Quarter (Q4) of Financial down by 19.5 per cent. “Overall
Year (FY) 2020. The company is a performance has been satisfactory 300
global Engineering, Procurement across segments for FY20 barring
and Construction (EPC) major and order inflows, which were impacted
is executing multiple projects across by economic slowdown. Efficient
250
over 30 countries. It delivers projects working capital management
Base value taken as 100
Source : BSE India

in key sectors like Power Transmission and execution ramp-up, despite
& Distribution (T&D), Railways, Civil, challenges, should comfortably 174.92
200
Solar, Smart Infra and Cables. KEC has ensure 5.1 per cent revenue
eight manufacturing facilities across Compounded Annual Growth Rate
India, Dubai, Brazil and Mexico. (CAGR) in FY20-22 estimate,” says
150
For FY2020, revenues stood at an analyst at ICICI Direct.
`11,965 crore with a growth of 9 per As on June 22, 2020, the
cent Year-on-Year (Y-o-Y) on the company’s share price stood at 131.27
back of the growth in Railways and `244.1 and has delivered a negative 100
2 Jan 2017 22 Jun 2020
acquired SAE Tower. For Q4 FY2020, return of 23 per cent. However,
BSE Sensex KEC International
the sales grew in SAE Tower (+39 per KEC’s debt level remained in line
cent Y-o-Y) and Railways (+36 per with the FY20 guidance of `2,200 Financials
cent Y-o-Y) division while domestic crore. “According to management,
T&D execution dropped by 17 per the working capital position Net sales (` crore) PAT (` crore)
cent Y-o-Y on back of COVID-19 remains manageable with no stress, FY20 11965.37 FY20 565.52
disruptions. On the operating front, despite collecting loss of about
the Earnings Before Interest, Tax, `300 to 400 crore, which could FY19 11022.00 FY19 495.77
Depreciation and Amortisation have further reduced debt,” says FY18 10106.02 FY18 460.42
(EBITDA) rose 7 per cent in FY 2020. an analyst at Chola Securities. As
The Profit After Tax (PAT) saw a per experts the ordering would OP (` crore) EPS (`)
growth of 14 per cent Y-o-Y at pick up pace from the second FY20 1245.45 FY20 22.00
`566 crore in FY2020. “We forecast quarter of FY21 as the company
revenue/ EBITDA/adj. PAT CAGR derives majority of orders from FY19 1269.84 FY19 19.28
of 6 per cent / 4 per cent/ 2 per cent Indian Railways, Metro Corp, and 17.91
FY18 1117.86 FY18
over FY20-22E, taking into account multilateral banks. This bodes well
OP: Operating Profit; PAT: Profit After Tax;
the order book position and the for the investors looking at the EPS: Earnings Per Share; Source: Ace Equity
need to keep working capital under long-term horizon.

Going Strong On
Tractor Business
Escorts
CMP: 974.1
PE: 24.26
Brokerages remain positive on long-term prospects *As on 22nd June, 2020
A
better product mix, benign primarily caters to rural markets,
commodity prices and with over 75 per cent sales coming Why Buy
other cost efficiencies from tractor. The pandemic spread Innovative product profile with
have led Escorts to report a robust in rural areas so far has been robust distribution network.
Quarter Four (Q4) Financial arrested and the process of gradual Strong leadership position in the
Year (FY) 2020 performance. lifting of lockdown is on. Given the tractor industry.
Being one of the leading players signs of revival in tractor demand,
in tractor industry, Escorts has we expect Escorts to be the prime Watch Out For
strong presence in the north and beneficiary with its leadership, Increased raw material prices,
western market, with an overall strong distribution network and Delay in funds by Kubota.
domestic market share of 11.6 per innovative product profile,” says an
cent for the year ended March analyst at Chola Securities. 303.46
2020. The company is mainly This year Escorts is expected 300
into manufacturing of equipment to benefit from equity investment
for agriculture, infrastructure by Japan’s leading tractor major
and Railways for domestic and Kubota. Further, it will also acquire
250
international market with 1000 plus 40 per cent stake in Kubota’s
Base value taken as 100
Source : BSE India

active dealer network. Escorts has put Indian subsidiary, Kubota Agri
up an impressive show for the first Machinery India for `900 crore,
200
quarter June, by posting a Profit After in an all cash deal. The deal will
Tax (PAT) growth of 10 per cent widen its product segments across
Year-on-Year (Y-o-Y) in Q4 FY20. geographies. The equity investment
150
Export volumes rose 21.9 per by Kubota will strengthen the
cent on back of new product balance sheet and will provide
introduction and penetration in new growth avenues for Escorts. As 131.27
markets. The consolidated revenue on June 22, the closing stock price 100
2 Jan 2017 22 Jun 2020
stood at `1,385 crore, a decline of 15 of the Escorts was at `974.1. The
BSE Sensex Escorts
per cent Y-o-Y due to the impact of company over last one year has
lockdown in Q4 FY20. Over the last given a return of 77 per cent. Financials
five years the company’s revenue has “We value the stock at a 15 per
grown at a Compounded Annual cent premium to the last five- Net sales (` crore) PAT (` crore)
Growth Rate (CAGR) of 11 per cent year average trading multiple. FY20 5810.09 FY20 472.80
over FY2015-20. Its revenues share We believe the equity infusion by
FY19 6264.84 FY19 477.90
by segment in Q4 FY2020 for Agri Kubota will strengthen the balance
Machinery (EAM) segment was 77 sheet and will provide multiple FY18 5065.22 FY18 346.59
per cent, Construction Equipment growth avenues for Escorts – both
(ECE) segment (15 per cent) and in India and internationally,” points OP (` crore) EPS (`)
Railway Equipment Division (RED) out an analyst at HDFC Securities. FY20 760.00 FY20 38.53
was 8 per cent. Many brokerages including HDFC
Experts say Q4 reflects only Securities, Chola Securities and FY19 816.86 FY19 39.07
partial impact of the current ICICI Direct remains positive on
FY18 618.55 FY18 28.31
pandemic and for the coming the long-term prospects of the
quarters, one does not foresee any company. OP: Operating Profit; PAT: Profit After Tax;
EPS: Earnings Per Share; Source: Ace Equity
significant damage. “The company [email protected]

Investments
How To Deal With The Bear Hug

Defer some financial goals or take loans and diversify existing portfolio but avoid exiting in the red
By Vishav Gupta is not alone. Many what can such investors do?
investors face this crisis as equity According to Archit Gupta,
S
umit Gupta (name changed), markets have washed off most Founder and CEO, Cleartax, while
a first-time investor, put in of the gains they made over the it won’t be wise to exit the market
around `3 lakh in an equity last few years. While Gupta has at this point, redeeming some of
fund in 2018, hoping to have enough postponed his plans to buy the car, their investments might be the only
returns to buy a nice car when he it’s an option not every investor option for such investors.
turns 30. Hoping for 14-15 per cent has. There are many whose dates “We understand that children’s
annualised returns, Gupta hoped of realisation of goals are fast education and future planning
to have around `4.5 lakh by 2021. approaching with no possibility to are of utmost importance. As the
However, in April, still 10 months push them to a later date: parents achieving of the goal cannot be
away from his 30th birthday, he got who were saving for their offspring’s deferred, it becomes essential to
the shock of his life when he found wedding or their higher education. redeem at least some part of the
the value of his corpus reduced Or those who were saving for investment,” he says.
to just over `2.10 lakh. While his retirement. These events and goals He advises such investors to
portfolio has recovered a bit, he is cannot be postponed. But with their pull out around 60 per cent of
still far from his goal. corpus significantly eroded in value, the corpus and utilise it for their
requirement, while the remaining
portion continues to stay invested.
“If 60 per cent of the portion is
not sufficient, then look for other
means instead of pulling out the
It is the best option entire investment, because that
for investors to take would mean exiting in the red
which should be the last option,”
advantage of the rupee Gupta argues.
cost averaging According to Nitin Shahi,
Executive Director, Findoc, the
pandemic took everyone by
surprise and in the short term, not
too many options were available for
those who invested in equity. He
advises a more proactive approach
to tide over the crisis by reassessing
the investment portfolio, and if
possible, investing more via SIPs
to take advantage of the fall in the
equity market.
“In case of emergency
requirements, especially for
education, one can go for an
education loan. For other goals, one
can opt for loans against insurance
and also gold loans as they are
easily available and are one of the
cheapest resources to avail credit
in the short term. Unavoidable
expenses may be done through

PPF withdrawals or loan against product to cover exigencies.
PPF. One can also opt for overdraft During such times, investors need ANURAG
against fixed deposits,” he suggests to focus on taking two types of JHANWAR
while cautioning against redeeming actions - preventive action to
Co-Founder and
the mutual fund investments. minimise further corrosion of Partner, Fintrust
Cleartax’s Gupta adds that while investments and corrective action Advisors
it is understandable that investors to get the investments back on
are alarmed since their investments track, advises Harsh Jain, Co-
are now in the red, they need founder and COO, Groww.
Rebalance investments
to note that the current market “One of the best preventive from risky to risk-free
scenario is not going to prevail, measures is diversification. assets when goal is
and therefore, they should not lose Investors must look at their approaching
all hopes. And that is why, those current portfolio and rebalance
who can defer their financial goals it to diversify to reduce risk and Equally critical is to have a safe
should do so and stay invested enhance returns. And to bring their landing for one’s investment which
during this time. investments back on track, look can be done by rebalancing from
“Exiting now won’t help them at fresh investments based on the risky assets to risk-free assets when
achieve their goals. The best option analysis of the stocks and mutual the goal is approaching, either in
for investors is to take advantage of funds and the direction in which parts or in one go.
the rupee cost averaging and invest the economy is headed. Also keep “One can rebalance the portfolio
more now as the stock prices and liquidity in mind and dedicate a by shifting money from equity
the cost of fund units have fallen, sizable portion to liquid funds to debt in four years, 25 per cent
enabling them to pick more units or short term debt terms,” Jain each year, preceding the said
for less money. Once markets start explains. financial goal,” Jhanwar explains.
rising, which is expected given the Anurag Jhanwar, Co-Founder By following this, one would have
past performance, they are going to and Partner, Fintrust Advisors, already taken required steps if
erase their losses and move towards feels that one lesson to take away is their goals were near, and shifted
achieving their goals,” Gupta that for short-term financial goals a major part of their portfolio to
explains. with a time horizon of five years safer instruments before a crisis
In fact, as per data available with or less, one should prefer investing like COVID would have eaten away
Cleartax, the goal-based investors in fixed return instruments which their returns.
who continued their systematic are comparatively safer and less “Alternatively, one can also
investment plans (SIPs) during the volatile. “For long-term goals like rebalance all the equity investments
crisis now have their investments children’s education, marriage and into debt in one go, two years
in the green territory because retirement, it is advisable to invest before the goal. It will depend
they made use of the rupee cost into a mix of both equity and debt, on the need and comfort of the
averaging to their advantage when with a higher allocation to equity to investor and also on the economic
the markets were subdued. generate higher returns over a long environment prevailing at that
While those whose investments term,” he said. time,” he adds.
are already hit by the sudden crash If financial planning is not
in equity values have few options executed properly, it might lead to
left, there are several lessons to be imbalances in the achievement of
learnt from this crisis for a smooth respective goals, which will lead
investment journey. to undercutting or cross funding
First and foremost, never put all ARCHIT GUPTA of goal buckets; putting all such
eggs in one basket as diversification Founder and CEO, goals at risk. This could easily be
is the key to balanced planning. Cleartax avoided through proper planning
According to Shahi, one must and execution. Hence, it is critical
have at least 15 to 20 per cent to plan asset allocation as per risk
Those who increased
share of their investment portfolio profiles by aligning goals with
in cash and cash equivalents. the ticket size of objectives, and use professional
Moreover, insurance should also their SIP have earned help if needed..
be considered as an investment substantial returns [email protected]

Commodities
Millennials And The Gold Melting Pot

Sharp market corrections are making gold funds a lucrative choice for the young investors
By Dipen Pradhan
G
old is a symbol of wealth
and holds a deep emotional
connect with India’s culture,
and has served as a financial support
through the years. But as the modern
investment instruments become
more visible and easily accessible, and
high-end consumer goods become
more lucrative, the young Indian
population is reportedly becoming
less prudent to invest in the golden
metal. Further, the market facing
global economic recession induced
by the novel Coronavirus pandemic
is unlikely to attract more young
consumers at the time when the price
of the golden metal is skyrocketing.
If history is a guide, gold has
provided positive returns during
periods of economic shocks, falling
equity markets, high inflation, falling
currency rates, and geopolitical
uncertainties; however, entry at this
point for an individual consumer will
be at a higher price point. Gold prices
in India rose to `48,420 per 10 grams
on June 24, this year.
The Reserve Bank of India
estimates the GDP growth of the
country is likely to remain in the
negative territory in 2021, and much
will depend on how the curve begins
to flatten and moderate. But why is
gold performing at an all-time best
during this uncertain period, and is going to remain very much in the expansionary monetary policy and fiscal
what does it mean for the investors reckoning. There is no visibility in policy, because when the central banks
in gold? terms of economic return, and there across the globe go on an expansionary
“Given the background of the is no rebound of economic activity mode to finance deficit with economic
global economy, gold as an asset class – or, you see a very U-shaped or growth remaining low, eventually they
L-shaped recovery, which will take have to print money, which again leads
time. I think this could go to support to monetary debasement – and gold as
gold,” Hitesh Jain, Lead Analyst, an alternative currency always comes
Interestingly gold Institutional Equities, YES Securities, back in the reckoning,” he adds.
tends to do well in says. “The other things which also The COVID-19-induced lockdown
falling equity markets remain supportive for gold are has paralysed the country’s economy,

and the stock markets around the mutual funds. She has also bought
world have tumbled frequently. Is this some gold because “it has always kept
the good time to invest in Equity? its value in the long term,” she says, HITESH JAIN
“I’m not saying that you should not adding that she usually puts more Lead Analyst –
put your money into equity as it still money to her investment in gold after Institutional Equities,
makes sense to park your money an appraisal. YES Securities
in companies with a strong balance Medhi is fortunate to have
sheet, low leverage, and which are her job secure at the time when
less vulnerable to this epidemic,” unemployment, layoffs have taken a
A U or L-shaped
Jain says. toll across business sectors of India economic recovery will
When asked to compare the facing severe impact by the lockdown. take time, which could
performance of gold with equities As an emergency measure, gold is a support gold
and real estate, Archit Gupta, CEO of handy asset to immediately convert it
Cleartax, says, “Equity investments into cash.
deliver returns in a growing economy. She says , “Always check the yellowish charm of the metal to easily
Similarly, real estate investments yield hallmark and certificate when buying lure consumers into making them believe
returns in a growing economy aided gold. Also make it a point to check that it is pure. Indian government,
by consumer demand. However, any buy back facility the jeweler is through BIS, ensures protection of
the prospects for both equity and providing.” While India is the second customers’ gold through hallmarking by
real estate become dim in a slowing largest consumer of gold, the market mandating sale of only 14, 18 and 22-
economy or in uncertain times.” is flooded with retailers using the carat jewels.
On the contrary, gold tends to Regardless of the situation, investing
do well in the falling equity markets. in a certain quantum of gold is always a
Moreover, it reduces the risk of prudent approach. Let’s understand that
adverse price movements in an the economy and the financial markets
asset, making it a safe haven for go through the cycle. So an investor is
investments. “Gold is an excellent always exposed to a risk. However, gold
hedging instrument in investment as an asset always protects an investor
portfolios against losses from equity against such risk. “Gold is an ideal
investments,” says Sahil Arora, diversifier and an excellent hedging
Director and Head of Investments, instrument in investment portfolios
Paisabazaar. Average Price Of against other asset classes,” says Arora.
The question looming at large is Gold In India A 28-year-old professional, Harday
– beside cultural ties, emotions and Gupta has been buying 10 grams of
PRICE (24 karat per
pleasures associated with the golden YEAR 24-carat gold every three months, along
10 grams)
wearable – will India’s millennial with his peer group. He has been buying
also start to favour gold as a savings 2009 `14,500.00 gold because, “An individual buying gold
instrument option in the new 2010 `18,500.00 will never face loss,” he says. In fact,
normal? Let’s look at its prospects. Harday plans to add some quantum of
A 34-year-old professional, Deepa 2011 `26,400.00 gold this month even though the price
Medhi bought gold after taking 2012 `31,050.00 of gold is high. “What my prediction
personal finance advice from her says is, if the price of gold is between
friends and parents. “But out of 10, 2013 `29,600.00 `46,000 and `47,000 right now, it will
only three friends of my generation 2014 `28,006.50 be above during the festive season. The
might be investing in gold, especially price will definitely go at the higher
girls,” she says, adding that most 2015 `26,343.50 side,” says Harday. It is not necessarily
of her friends do a mixed bag of 2016 `28,623.50 true that the price of gold tends to shoot
short term-and long term-based up during the festive season as it has a
investments. 2017 `29,667.50 diverse set of demand drivers such as, “its
Medhi, who moved to Bengaluru 2018 `31,438.00 role as a reserve asset for various central
in 2011 from a tiny hamlet in Assam, banks, consumer demand in the form of
has been investing in a 15-year SIP 2019 `35,220.00 jewellery and as an instrument for ‘store
and another in a five-year term Source: Bankbazaar of value’ against inflation risk. All these

Commodities
Different Ways To Buy And Invest In Gold

PLACE OF
GOLD TYPES FEATURES ARCHIT GUPTA
PURCHASE
CEO,
Retailers, 6-25 per cent making
Jewelers ClearTax
E-Commerce charges
Jewelers, Ashok Chakra and
Coin Banks, NBFC, Mahatma Gandhi New investors in gold
E-Commerce engraved on the sides should consider the
Available in period of investment in
denominations of 5
PHYSICAL and 10 grams short or long term
GOLD
Buy back options
available factors provide stability to the demand
for gold in a diverse range of economic
Available in
Gold Bar or environments,” says Arora. Meanwhile,
Retailers denomination up to
Gold Bullion Bank of America Merrill Lynch predics
1 kg
the price of gold is likely to reach $3,000
Stored in a locker at
home or the bank by the end of 2021.
Financial advisors advise that even
Monthly recurring
Reputed in good times, a prudent approach is
deposit mode of
Jewelers to park at least five per cent of wealth
GOLD payment available
in gold, while maintaining a diversified
SAVINGS Buy gold when the
SCHEMES term ends portfolio. Given the companies earning
outlook is currently uncertain in the
Discounts on Premiums
market, it makes sense to increase the
available
allocation in gold. “If you’re putting
Gold Buying and selling about five to seven per cent of your
Stock
Exchange happens in NSE and
Exchanges holdings in gold, that allocation can
Traded Funds BSE
actually be increased to maybe 10 to 12
Trading account and
to 15 per cent,” says Jain.
a demat account
Here are a few tips for youngsters
required
looking to invest in gold. “Those
Can be bought in lump
without adequate exposure to gold may
PAPER GOLD sum or through SIP
consider starting investing in it in-case
Sovereign Issued by the of any steep correction in gold prices
Banks
Gold Bonds government
in the future. Investors can always use
Has a tenure of eight their asset allocation strategy to redeem
years part of their investments in other
Buy minimum of 1 unit asset classes and use it for lump-sum
up to 4,000 units of investing in gold funds to average its
gold bond in a FY investment cost,” says Arora.
Gold However, investors looking to
Accumulated Paytm Only for Paytm users relocate their portfolios should consider
Plans
the risk and return of the alternate
Buy minimum amount investments such as gold or bonds.
of gold starting from “One should also consider the period of
DIGITAL 0.001 gram
GOLD investment, whether they wish to invest
Stock Holding Buy gold for a minimum in the short-term or the long-term. In
Corporation of uncertain times, the safety of money
value of `1,000
India
should be of the utmost importance,”
Minimum of 1 gram says Gupta.
gold can be taken [email protected]

Commodity Made Easy
WHAT IS HEDGING?
I Hedging
f done properly, treatment is reimbursed. farmer who is in the
one can make Hedging is used not only business of selling maize.
profits by trading in by individual traders in is nothing The current price of maize
commodities. However, the commodity market, but a risk is `25/kg. He anticipates
commodity trading is but also by institutional that the price of maize
fraught with risks. These investors and large management may fall to `20/kg after a
risks come because price corporations. strategy. month. So he sells futures
of commodities may Hedging is based on contracts at today’s price
fluctuate. the principal of offsetting. farmer anticipates that (`25) a future date a month
Hedging is nothing When hedging is done, the price of wheat may later. If after a month
but a risk management one takes equal but go up. So the farmer the price of maize falls
strategy. The idea of opposite positions in two buys a position in the to `20 a kg, he can still
hedging is to eliminate different markets. The future market at today’s sell the maize at `25/kg
the uncertainty that idea is to hedge a certain price, that is `15/kg for according to his contract.
comes with price investment with the help a date a month later. In this example, the farmer
fluctuations. Hedging is of some other investment. After a month, the price is selling futures in the
thus a way of protecting Hedging is a strategy in of wheat goes up to market to protect himself
oneself against a negative which you protect loss in `20/kg. But the farmer from a fall in prices and
event. Hedging does investment A by a profit can still buy wheat at hedging his losses.
not stop the negative in investment B. `15. Here, the farmer is As we have seen, risk
event from occurring Similarly, hedging basically hedging against is an essential part of
but reduces the impact is done in commodity the price of wheat by commodities trading.
of such an event. So trading to protect buying a futures contract. Having a basic knowledge
hedging is similar to someone from fluctuating However, if after a month of hedging and apply
insurance. If one takes prices. Let us take an wheat is selling at `14 a hedging strategies in
health insurance, one example. Let us say that a kg, the farmer can buy correct manner will help
cannot protect oneself farmer is into the business what for `14/kg and the you understand the market
from a health emergency, of processing wheat. The contract lapses. better, protect yourself
but insurance can ensure current price of wheat Let us take another from losses and be a better
that the cost of one’s `15/kg. However, the example. There is another investor.
Morningstar: Mutual Fund Guide
SBI Dynamic Bond Fund

Investment Strategy Fixed-Income Statistics
D inesh Ahuja has been the lead

portfolio manager of this fund
since February 2011 and has a total
security selection. The managers use
various qualitative and quantitative
parameters and put a lot of emphasis
Fixed Inc Style Box (Long)
Average Eff Duration
High Mod
-
Average Eff Maturity 10.6
experience of more than 22 years, on the company’s management, Average Coupon 7.5
with about 13 years’ experience in business, and financial health. They Average Price 106.9
fixed-income fund management. The also use the analysis of sell-side
stability of the investment team and research and credit-rating agencies to Fixed Income Style Box
its long tenure at the helm is a positive. form a view on the creditworthiness
High
The fund is driven by a flexible of companies, but to a limited extent.
mandate to move across the segment The credit committee then reviews Med
with an active-duration strategy. It the rated securities, and the approved Low
employs a bottom-up investment securities are assigned credit and tenor
Ltd Mod Ext
approach with a top-down overlay to limits. The risk-management team
generate superior risk-adjusted returns. also periodically reviews the portfolio. Portfolio
A top-down approach guides portfolio The portfolio is constructed purely Top Holdings Weighting
positioning around the predetermined based on the underlying instrument’s (%)
risk parameters by assessing gross liquidity. Lower credit bets are
GOVT STOCK 43.52
domestic product/inflation, monetary/ avoided. Manager Dinesh Ahuja
fiscal policy, interest rate, liquidity, sometimes invests in extreme long 7.26% Govt Stock 2029 16.06
yield curve, credit spread, and so on, debt instruments capped at 7.17% Govt Stock 2028 14.86
while the intensive bottom-up credit 10-15 per cent The fund’s low expense 7.16% Govt Stock 2050 7.71
research uses an in-house model for ratio is a positive. Power Finance Corporation 6.75
Indian Railway Finance Corporation 3.06
15.3
Calendar Year Returns 8.24% Govt Stock 2033 2.32
Calculation Benchmark: None 11.7 5.79% Govt Stock 2030 1.33
10.0 12.7 State Bank Of India 1.12
8.0 7.1 GOVT STOCK 0.34
6.0 5.8 5.5
6.0 5.1 4.8
3.9
Return
4.0 3.4 3.0

2.0 Fund Snapshot
0.0
YTD 2019 2018 2017 2016 2015
Morningstar Category India Fund
SBI Dynamic Bond Reg Gr India Fund Dynamic Bond
Dynamic Bond
Trailing Returns Fund Size (`) 15.1 billion
Data Point: Return Calculation Benchmark: None Inception Date 9/2/2004
Annual Report Net Expense Ratio 1.65
YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall *****
SBI Dynamic Bond Reg Gr 7.10 12.81 8.06 9.47 9.30 Manager Name Dinesh Ahuja
Minimum Investment (`) 5,000
India Fund Dynamic Bond 3.43 6.58 4.70 6.38 7.03
Morningstar Analyst Rating Neutral
Disclaimer
@2017. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. This report is issued by Morningstar Investment
Adviser India (“Morningstar”), which is registered with SEBI (Registration number INA000001357) and provides investment advice and research.
Please visit www.outlookindia.com/outlookmoney/invest/picking-the-right-mutual-fund-2542 and read important statutory disclosures, as
mandated by SEBI, regarding the information, data, analyses and opinions given in this report.

SBI Magnum Midcap Fund
Manager Biography And Fund Strategy
S BI Magnum Mid Cap has been in

existence since 2005 and has been
managed by Sohini Andani since 2010.
portfolio forms the basis for stock
selection and consists of the team’s
best ideas. Valuations are looked at on
Equity
Sectors
Portfolio Date:
30/5/2020
Andani’s extensive experience as an an absolute basis relative to the stock’s
analyst and a research head stands 10-year history. The fund has largely %
out in her bottom-up approach to maintained an orientation towards
Basic Materials 22.9
stock selection. growth stocks and is focused on long
Consumer Cyclical 18.3
The AMC differentiates its funds term (three to five years) visibility. The
Financial Services 9.6
based on absolute and relative return team’s approach towards investing
Real Estate 5.1
frameworks. This is an absolute return in companies with a high ESG scoring
Consumer Defensive 0.0
mid-cap strategy that aims to invest is a positive measure to maintaining
Healthcare 15.2
in Sohini Andani’s high-conviction a clean portfolio. The team takes a
Utilities 6.2
ideas. While being conscious of sector view as a fund house, with stock
Communication Services 0.0
valuations, the team evaluates a selection left to managers who could
Energy 0.0
company’s management and focuses remain uninvested in sectors where
Industrials 14.3
on stocks that are able to meet its they don’t find the right opportunities.
threshold in terms of CAGR and a Andani aims to invest in companies Technology 8.3
consistent ROCE over a three to five with a relatively high risk/reward ratio. Total 100.0
year horizon. The team lays emphasis The core mandate and strategy of
on the management and takes the fund remain undiluted despite the Portfolio
into consideration the promoter’s growth in its size. The portfolio is well- Top Holdings Weighting
integrity, past track record, holding diversified and currently constitutes (%)
in the company, and so on, and look around 50 stocks; the top 10 holdings PI Industries 8.83
at investing in businesses with high account for around 50 per cent Sheela Foam 7.53
entry barriers. The in-house model of the portfolio. Coromandel International 5.30
Dixon Technologies 5.03
Calendar Year Returns Godrej Properties 4.96
Calculation Benchmark: S&P BSE Midcap TR ` Gujarat State Petronet 4.86
100 Alembic Pharmaceuticals 3.74
80 Ramco Cements 3.58
60 49.9 Page Industries 3.57
Return
40 33.5
14.9 Sanofi India 3.54
20
-8.7 -13.9 0.1 -2.1 -18.0 -12.5 5.0 9.3 8.7
00
-20 Fund Snapshot
YTD 2019 2018 2017 2016 2015
SBI Magnum Midcap Reg Gr S&P BSE Midcap TR` Morningstar Category India Fund
Mid-Cap
Trailing Returns
Fund Size (`) 29 billion
Data Point: Return Calculation Benchmark: S&P BSE Midcap TR ` Inception Date 29/3/2005
Annual Report Net Expense Ratio 2.33
YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall ***
Manager Name Sohini Andani
SBI Magnum Midcap Reg Gr -8.72 -8.40 -5.83 2.16 11.42
Minimum Investment (`) 5000
S&P BSE Midcap TR ` -13.91 -10.16 -3.72 5.31 7.68
Data Source: Morningstar India

Morningstar Mutual Fund Guide
Axis Bluechip Fund
Manager Biography And Fund Strategy

Equity
S hreyas Devalkar has been
managing the Axis Bluechip
Fund since November 2016 and
companies despite their (possibly)
higher growth trajectory. The
manager chooses stocks based
Sectors
Portfolio Date:
30/4/2020
plies a structured and well- on the PEG ratio as opposed to %

thought-out process of investing the P/E ratio of a company. The Basic Materials 7.2
with a focus on quality and focus is on being able to identify Consumer Cyclical 4.0
growth. companies with sustainable
Financial Services 33.4
Shreyas Devalkar’s portfolio is earnings growth potential, credible
a high-conviction one where he management, and acceptable Real Estate 0.0
invests in stocks from blue-chip liquidity. Stock-picking is based Consumer Defensive 18.9
companies across sectors that he on a fundamental bottom-up Healthcare 9.4
views positively. He looks at sectors approach with added emphasis Utilities 0.0
from a top-down perspective and on top-down risk parameters, Communication Services 6.9
evaluates individual stocks from liquidity profile, and internal Energy 6.0
a bottom-up perspective. Rather volatility targets. From a financial Industrials 0.0
than investing in sector leaders, standpoint, they look for firms Technology 14.3
the manager evaluates companies with lower capital gearing and Total 100.0
based on their fundamentals, strong balance sheets.
growth trajectory, corporate The fund has a benchmark Portfolio
governance, financials, and so agnostic portfolio that typically Top Holdings Weighting
on. They place a lot of focus on shares a very low overlap of about (%)
corporate governance and this 25-30 per cent with the IISL Nifty HDFC Bank 7.21
leads them away from some 50 TR Index. Avenue Supermarts 6.50
Infosys 6.15
Kotak Mahindra Bank 6.05
Calendar Year Returns Bharti Airtel 5.50
Calculation Benchmark: S&P BSE 100 India TR ` Tata Consultancy Services 5.22
100 Reliance Industries 4.82
80 ICICI Bank 4.57
60 Nestle India 4.38
Return
40 38.0 33.3
18.6
Bajaj Finance 4.36
20 10.9 6.5 2.6
0
-11.3 -15.0 -3.6 5.0 -1.2 -2.0
-20
YTD 2019 2018 2017 2016 2015
Fund Snapshot
Axis Bluechip Fund Gr S&P BSE 100 India TR ` Morningstar Category India Fund
Large-Cap
Fund Size (`) 130 billion
Trailing Returns
Inception Date 5/1/2010
Data Point: Return Calculation Benchmark: S&P BSE 100 India TR ` Annual Report Net Expense Ratio 2.30
YTD 1 Year 3 Years 5 Years 10 Years Morningstar Rating Overall *****
Manager Name Shreyash Devalkar
Axis Bluechip Fund Gr -11.33 -4.25 7.90 8.38 10.31 Minimum Investment (`) 5000
S&P BSE 100 India TR ` -14.96 -11.08 2.48 5.81 8.21
Data Source: Morningstar India

My Plan
Have A Robust Plan To Prosper

We must stay cautious and prudent in our investment strategies in the face of volatility
A
shu Sabharwal, 52, runs a when she met Jitin Jain, who was
boutique market research then a part of Axis Bank. He is now
company-Qualisys. She lives an independent financial advisor and
Stick to the agreed
with her two children, Mudit and continues to guide Sabharwal in her plan and stay focused
Omanshi. While Mudit is pursuing financial affairs. on long-term goals
law from Delhi University, Omanshi The preliminary conversations
is in her first year of graduation in with Sabharwal helped Jain work some persuasion, she was convinced
Mass Communication & Journalism. out individual goals and suggest about investing in equity, through
Sabharwal took charge of her a comprehensive solution, which SIP route.
family’s financial plan after her could add tax efficiency over the Jain recalls that campaigns like-
husband’s demise in January 2018. current structure. Prioritising “Mutual Fund Sahi Hai”, (Mutual
Without much exposure to money safety over returns, Sabharwal was Fund is the right choice), among
matters, she wanted to stay risk- apprehensive about investing in others, have played a crucial role in
averse and invested all her savings in equity and diversifying across debt spreading awareness among masses.
fixed deposits. funds. Jain helped her understand They started with a monthly
However, her financial plans took the concept of Systematic SIP of `1 lakh for long-term goals.
the right turn a few months later Investment Plans (SIPs), and with Further, any surplus amount
Disclaimer
Financial Planning of Ashu Sabharwal is based on the “personal opinion and experience” of Jitin Jain and that it
should not be considered professional financial investment advice. No one should make any investment decision without first consulting his
or her own financial advisor and conducting his or her own research and due diligence.

available for investment in lumpsum stated category of debt funds for through the investing behavior of their
was allocated to banking and PSU better and tax-efficient returns. clients, including Sabharwal. During
debt funds and short-term debt A portion of the surplus was also initial days of good performance
funds, considering they have a invested in asset allocation funds in equity markets, Sabharwal was
relatively better risk profile. It was to manage the needs of portfolio excited to see her portfolio, especially
also agreed upon that fixed deposits diversification. the asset allocation funds perform
on their respective maturity dates Jain shares how they have a first- better than the traditional investment
would be switched to the above- hand experience of market volatility products. She had also asked for
converting some of the debt fund
investments to asset allocation funds
owing to their outperformance.
Things To Look Out For More recently, when the markets
took a beating, she got concerned
With continuing volatility across equity markets, there
about the safety of her investments
is a lot to learn: and wanted to discontinue her
incremental investments through
1) Have your goals defined: SIPs. Such investing behavior has not
Investors should have their goals clearly defined, both for the long and been exclusive to Sabharwal, but most
short term. This helps them prepare a roadmap for such goals and also retail investors. However, this is where
measure the investment performance objectively. It also allows them the role of a financial advisor comes
choose the schemes best suited as per their investment horizon and risk into play.
appetite. For example, equity as an asset class might not be suitable for On each count, Jain insisted on
short-term goals but would be better suited for the long term owing to its sticking to the agreed plan and
wealth creation potential. staying focused on long-term goals.
Besides recommending her to shift
her investments to schemes that
2) A robust financial plan is indispensable:
have recently performed well, he
It is often said, “a goal without a plan is just a wish.” Investors must
continued with the pre-decided
have a clear strategy to achieve their financial goals in a time-bound
asset allocation strategy and avoided
manner. While effective implementation holds the key, a robust plan is
skewing it towards any single asset
crucial for financial prosperity, as it helps them control their emotions
class. He would stick to funds with
over investment plans. Amid volatility a sound financial plan can help a proven track record across various
investors be in a better position to withstand the hiccups from domestic market cycles. He also advised on
and global markets. continuing SIP, while explaining the
logic and advantage of buying low,
3) Stick to the plan: when markets have shown turbulence.
Retail investors are experiencing tough times fighting the market Even within debt funds, the focus
volatility and emotional biases. However, they should continue to invest remained clearly on risk-adjusted
in markets, as it allows them to continue saving for their goals. However, returns, instead of returns. Such a
if recent economic disruptions, caused by the lockdown, have temporarily prudent investing strategy helped her
impacted your cash flows, you may consider pausing your SIPs instead debt portfolio reflect over 8 per cent
of discontinuing them. This will help you continue with your investment CAGR.
plans as and when the cash flow normalises. Even as the country fights an
unprecedented situation, the need of
the hour is to be cautious and prudent
4) Trust your financial advisor: in our investing strategies.
Investors need to stay patient as the markets can be volatile in the short
term. Instead, they must continue to focus on their financial goals and
understand that short-term volatility is not likely to impact their long-
term goals significantly. This is where financial advisors play a crucial role
for investors in reinforcing their lost conviction in the markets. One must Jitin Jain
look at one’s financial advisor as the guardian for financial plans. Independant Financial
Advisor

Dear Editor,
My first experience in handling money independently started way back in 1986. My engineering days were
spent in a hostel and from my gathered experience I can proudly say that the hostel can be a great teacher.
The initial months taught me how to estimate my expenses and seek a reasonable monthly allowance from my
parents. At the age of 22, I moved to Mumbai for my MBA. By the time I got my first job, I was quite proficient
in the estimation of expenses, budgeting, spending, contingency planning, and learnt concepts like time value
of money, compounding effect, and return on investment.
I started my career at Godrej & Boyce and had to share an apartment with my friends. By the end of the
second year, I was amazed at the amount of money I had managed to save. I realised that my expenses as a
student to a bachelor wage earner had not changed much.
During those days when my career had just begun, I learnt a very supreme lesson –‘Spend on what you need
and not what you can afford.’ This lesson has stayed with me throughout my life. Even today, as a family, we
spend on the essentials and have never been extravagant in our lifestyle. This practice takes care of one part
of fiscal management expenses.
I joined financial services in 1994 and started with auto loans; hence became familiar with reducing
balance rate of interest versus simple interest, and calculating IRR (Internal Rate of Return). Until then, out
of sheer inertia and lack of understanding, I used to roll over my credit card payments. Later, I realised the
folly of borrowing at 24 per cent per annum and switched to a credit card. Now, I can enjoy the benefits of the
interest-free period and loyalty points but always pay in full on the due date.
Around this time, the Non-Banking Financial Companies (NBFCs) were pervading the market and people
were getting swayed by the lucrative returns they offered. The NBFC collapse taught us to never misconstrue
the risk in investments. The fact that you can lose the entire principal amount while chasing marginally
higher returns is a reality.
Over the years, I moved to the bank and started advising clients on managing portfolios. I have started
practicing what I preached, assessing my risk-taking capabilities and about the discipline of the Asset
Allocation Model. I ensure that my portfolio is allocated thoughtfully into equity, fixed income, recurring
deposits, SIP, gold, and property. I have also invested in NPS ( National Pension Scheme) as it is tax effective
with the lowest cost. Apart from these practices, I have consciously eluded short term insurance plans as they
do not yield good returns.
When it comes to equity, I was always a keen IPO investor as I believed it can give good returns. After losing
my money several times, I have become quite wary of them. It has taught me to be a passive investor, which
means investing in few companies with good track records, consistent performance, good governance, and
finally leaving the investment alone. Over the years, I have received commendable returns from these stocks.
In 2014 I was given the mandate to start Kotak General Insurance. Prior to that, I
only had a motor insurance policy. In order to actively secure my assets, I hold term
insurance equivalent to five times of annual pay, health indemnity plan for my
family with a large cover, critical illness and personal accident plan, household
insurance plan to protect my properties and valuables, and I am also in the process
of taking a cyber-insurance plan.
In a nutshell, the principle is to spend on only what is needed. You should not
borrow beyond which you can not comfortably repay, save for the future, say no to
greed and ignorance, ensure and allocate the assets wisely, and invest with a
long term perspective. Time in the market is always more beneficial than
trying to time the market.
Mahesh Balasubramanian
MD & CEO, Kotak General Insurance

RNI NO. DELENG/2002/08292
A smart investment
that’s easy for one and all.
*(Systematic Investment Plan) SIP facility is generally available in Daily, Monthly & Quarterly frequency
“Visit here https://licmf.info/KYCredressal to learn more about KYC requirements, SEBI Registered Mutual Funds and Grievance redressal.”
Connect with us: /LICMutual /LICMutual /company/LICMutual 1800-258-5678 www.licmf.com
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

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Anurag thakur interview covid-19 Hits insurance

SubScriber copy not for reSale J u ly 2 0 2 0 , ` 5 0

• Long term wealth creation

42 Boost For Digital Payments

48 Attractive property options for NRIs

54 Reframe Your Goals

pg 12 56 Golden option for millennials

www.outlookmoney.com July 2020 Outlook Money 3

New World Order Post COVID-19

into the ‘new normal’. SENIOR ASSISTANT EDITORS

informative, describing ART

difficult for us to comprehend TECH TEAM

Invest For Guaranteed Happiness Circulation & Subscriptions

4 Outlook Money July 2020 www.outlookmoney.com

Gather The Rosebuds

6 Outlook Money July 2020 www.outlookmoney.com

l One of the largest affordable housing ﬁnance companies in India focused on

Give a missed call

T he consumers are changing their approach and increasing

8 Outlook Money July 2020 www.outlookmoney.com

Keep The Spotlight On Your Investment Goals

10 Outlook Money July 2020 www.outlookmoney.com

Are Debt Funds Safe In Today’s

I n the second episode of the

12 Outlook Money July 2020 www.outlookmoney.com Gold

www.outlookmoney.com July 2020 Outlook Money 13

global exports could help boost GDP growth trajectory

Varun Lohchab NBFCs, HFCs and MFIs. We should see incremental

14 Outlook Money July 2020 www.outlookmoney.com

www.outlookmoney.com July 2020 Outlook Money 15

16 Outlook Money July 2020 www.outlookmoney.com

Boycotting chinese goods

Many MSMEs Will Be Left

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More Means Less In MSME Mess

By Aparajita Gupta premium. If the straggling MSMEs are unable to recover

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the jargon thrown at them by the bankers. A majority

The political factor

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The demand factor

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Govt Is Monitoring And Tweaking The

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Need For Inclusive Credit Delivery

Lack of credit affects SMEs The author is Executive Chairman and

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Becoming Atmanirbhar: Why You

Border Clashes Can Hit

Could you identify sectors that would be

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What is the extent of portfolio investment by

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