a grand plan

AGRANDPLAN

India’s `6 trillion National Monetisation Pipeline is an innovative way of ensuring adequate funding of new infrastructure projects and proper implementation will

determine its success

RNI No. MAHENG/2009/28962 | Volume 13 Issue 09 | 16th - 30th Sept ’21Mumbai | Pages 56 | For Pr ivate Circulat ion

SIPs – ForInvestors With

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Beyond Market 16th - 30th Sept ’21 It’s simpli�ed...3

DB Corner – Page 5

A Brewing StormWith climate change threatening huge economic destruction, India Inc is gearing up with sustainable solutions, strengthening ESG and quantifying the risks – Page 6Battered But Not BeatenIndia’s economy is showing good signs of recovery backed by increased vaccinations and the subsequent easing of lockdown measures across the nation – Page 10Aiding GrowthGovernment-led capex is likely to revive economic growth of the country – Page 13A Grand PlanIndia’s Rs 6 trillion National Monetisation Pipeline is an innovative way of ensuring adequate funding of new infrastructure projects and proper implementation will determine its success – Page 16Tight SuppliesGovernment and industry preparedness in meeting India’s fertilizer needs in the coming Rabi season will determine the health of the sector – Page 20From Ruin To RevivalMalls across the country are reimagining their revival following the easing of coronavirus-induced restrictions – Page 23Back In The SkiesIndia’s aviation sector is seeing better air passenger tra�c thanks in large part to government relaxations – Page 26Reclaiming Its Rightful PlaceFashion is here to stay as fashion houses have proved themselves to be surprisingly resilient despite predictions of doom for the industry – 0 SOS CallThe telecom sector is in urgent need of a relief package if it wishes to come out of the current crisis – Page 33 Bottom OutVeteran investor Howard Marks lists factors that investors must follow when trying to reinvent themselves after hitting rock bottom during a downturn in the market – Page 36

A Delicate IssueHaving a health insurance policy ensures cost-sharing support for policyholders and is a must for everyone – Page 40

Technical Outlook – Page 43Mutual Fund Blackboard – Page 44

A Fenced-O� FortressPicking a company with an economic moat will ensure greater investor success – Page 49

Important Jargon – Page 53

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

Art Director: Sachin KambleJunior Designer: Orianne Fernandes

Operations: Namrata Sabbani

Printed and published by Mr Rakesh Bhandari on behalf of Nirmal Bang Financial Services Pvt Ltd, printed at Uchitha Graphic Printers Pvt Ltd65, Ideal Ind. Estate, Senapati Bapat Marg, Lower Parel, Mumbai – 400013 and published at Nirmal Bang Financial Services Pvt Ltd, 601/6th Floor, Khandelwal House, Poddar Road, Malad (E) Mumbai - 400097. Editor: Tushita Nigam

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

Volume 13 Issue: 09, 16th - 30th Sept ’21

Beyond Thinking

Beyond Basics

Beyond Learning

Beyond Numbers

Beyond Buzz

CONTENTS

Last month, the Indian government announced a countrywide monetisation plan. The National Monetisation Pipeline (NMP) aims to unlock the value of investments in public sector assets by tapping private sector capital and efficiencies. The capital can thereafter be leveraged for augmentation of or greenfield infrastructure creation.

Asset monetisation, also termed as asset or capital recycling, is a widely used business practice across the globe. The NMP estimates aggregate monetisation potential of `6 trillion through core assets of the central government over FY22-FY25.The announcement on NMP, which was long in the making, reiterates the government’s commitment to infrastructure development. To know more about the plan and its execution, do read the cover story of this issue.

Other engrossing articles in this issue include the effects of climate change on Indian businesses as well as the government and the growing impetus on green finance, how the Indian economy continues to battle coronavirus blues, the government’s capital expenditure plan, a round-up of the fertilizer sector with emphasis on how the dynamic demand–supply and raw material scenario is playing out at the moment, and how shopping malls across the country are trying to revive their fortunes following the easing of lockdown restrictions.

Also covered in this issue are articles on the positive impact of improvement in air passenger traffic on the airline industry due to government relaxations, how fashion houses are proving their mettle despite the pandemic-led situation, how the telecom sector is desperately hoping for government support in the form of a relief package, and tips from famed investor Howard Marks on what an investor should do on hitting rock bottom due to market cycles.

In the Beyond Basics section, we have touched upon the importance of having a suitable health insurance plan, which is highly imperative for every individual with absolutely no exceptions whatsoever.

Do read about an interesting concept called economic moat in the Beyond Learning section. The article explains why investing after analyzing a company’s economic moat can prove to be a safer optioN.

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

MONETISINGRESOURCES

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

The Federal Reserve has signalled that it intends to begin QE tapering before the end of 2021. The Fed has indicated that it may start withdrawing some of the support it has been providing in the form of bond purchases as the economy is witnessing a revival.

Post the Fed’s policymaking committee statement, there are expectations of raising the benchmark rate sometime next year as opposed to 2023.

China is grappling with a real estate crisis with one of its biggest real estate developers, Evergrande Group, facing a likely collapse due to its inability to clear off billions of dollars of debt. However, the Chinese government has promised to protect consumers that are exposed to the housing market. Nonetheless, this could impact the local economy, and allied sectors connected to the real estate sector in the event of the default by the housing conglomerate.

In the coming fortnight, the Nifty Futures is likely to cross the 17,840 level. If it closes above this level, it will touch the 18,800 on the upper side.

Market participants can look forward to Q2 earnings results of India Inc for FY22 that are likely to start pouring in anytime soon. They should also track movements in the Chinese real estate sector, and the ongoing coronavirus pandemic in India and around the worlD.

In the coming fortnight,the Nifty Futures is likelyto cross the 17,840 level.

Nifty: 17,748.60Sensex: 59,667.60

(As on 28th Sept ’21)

5

DB CORNER


BEYOND THINKING

ABREWING

STORMA

BREWINGSTORM

With climate change threatening huge economic destruction, India Inc is gearing up with sustainable solutions, strengthening ESG

and quantifying the risksBeyond Market 16th - 30th Sept ’21 It’s simpli�ed...

6

7Beyond Market 16th - 30th Sept ’21 It’s simpli�ed...

Indian businesses to wake up to the threat of climate change and commit to urgent climate action.

Five years on from the Paris Agreement, and months away from COP26, India Inc is ramping up environmental action to help the country build back a green and resilient economy.

A record 70% of Indian CXOs, bigger than the global average of 62%, believe they are likely to see occasional, or regular, disruptions of this scale, going forward, according to the Deloitte report. Indian CXOs exceed global peers in honouring societal and environmental commit-ments.

About 88% of responding companies to a CDP survey report incentivising top management for climate-related issues; 66 companies, a whopping 99% of the respondents, have board-level oversight of climate-re-lated issues.

By 2020, 52 Indian companies have prepared themselves for possible policy and regulatory changes in the future by voluntarily committing to the Science-Based Targets initiative, registering a significant growth of 37% from 2019.

This has put India in a leadership position among emerging economies: second in Asia Pacific and sixth globally for being home to the most SBTi-committed companies.

In 2020, 24 industry leaders released a voluntary declaration under the aegis of the Ministry of Environment Forest and Climate Change to set GHG reduction and energy efficiency improvement goals. About 20 Indian CEOs also committed to prioritizing business actions for green covid-19 recovery under the CEOs for the Future initiative committing to eight

Economics Institute.

The top industries to suffer would be services, manufacturing, retail and tourism, construction, and transport - that account for over 80% of India’s GDP. By 2070, these five industries alone would experience an annual loss in the value added to GDP of more than $1.5 trillion per year, Deloitte estimates.

In a separate survey by non-govern-mental CDP, about 42 companies reported that a staggering `7.14 lakh crore was at risk from climate change.

This brings India, which is aiming to become a $5 trillion economy, to a crossroad.

INDIAN INDUSTRY AND EMISSIONS

According to the latest greenhouse gas (GHG) emission data submitted by the government to the United Nations Framework Convention on Climate Change, in 2016, emissions from Indian industry constituted 22% of the country’s total GHG emissions.

This includes emissions from energy use by manufacturing industries and construction, and the emissions from industrial processes and product use. With a growth of 12% and 13%, respectively between 2014 and 2016, this was the fastest-growing emissions category.

REALITY DAWNING

While the government is striving to meet global emission commitments through stringent standards, promo-tion of EVs and high fuel taxes, India Inc too is looking at threats seriously. The growing environmental, social and governance (ESG) disclosure requirements are also prompting

The world is in a danger zone. Extreme weather events - floods in Germany, heatwaves in Canada, cyclones and floods in India, and fires in Australia and the US - are sweeping across the globe.

The world is warming and if no action is taken on climate change, average global temperatures could rise by 3°C or more by the end of this century, making it harder for people to live and work, as sea levels rise, crop yields fall, infrastructure is damaged, and other challenges emerge.

If governments, businesses, and communities act rapidly in the next decade to address climate change, average global temperature rises can be limited to around 1.5°C by 2050.

Even if the rise is limited to 1.5°C, the threat is dire for India. According to a United Nations report, greater heatwaves and droughts, increased rainfall events and higher cyclonic activity are projected to occur across India during the next several decades.

Along with human suffering, India is also staring at a huge economic loss. It has lost about $80 billion in the last 20 years to climate-related disasters.

The country may lose a staggering $35 trillion in economic potential over the next 50 years due to unmitigated climate change, according to a report from Deloitte


priorities for business activities to stimulate green recovery.

COMPANIES’ CONTRIBUTION

Individual companies are contribut-ing their mite.

Mahindra Group became the first global signatory of EP100, a grouping of companies committed to improving energy productivity; Dalmia Bharat became the first cement company to join RE100; and Tata Steel became the first Indian company to install a solar photovol-taic plant in an iron ore mine.

Reliance Industries plans to set up 100 gigawatts of solar energy by 2030 apart from giga factories to produce energy storage, electrolysers and fuel cells. JSW Energy intends to have an energy portfolio dominated by green and renewable sources of at least 85% by 2030.

NTPC Ltd is firming up IPO for its green energy-focused subsidiaries, NTPC Renewable Energy Ltd and NTPC Vidyut Vyapar Nigam and plans to reach 60GW of renewable energy capacity by 2032 from around 4GW today.

Tata Power is also charting a strong green energy trajectory. By protecting mangroves, Godrej & Boyce has sequestered 6,00,000 tCO2e so far in its standing stock and continues to sequester 59,000 tCO2e per year in Vikhroli, Mumbai.

WHAT MORE CAN BE DONE?

With resource extraction per unit area in India being one of the highest (1,579 tonne per acre) as compared to the global average of 454 tonnes per acre, experts say businesses need to adopt circular economy models that reduce resource use, emissions, and waste.

The hard-to-abate sectors would require breakthrough technologies. Internal carbon pricing can help the industry channel investments towards cleaner and efficient technologies and prepare for carbon-constrained regulations.

Currently, 25 companies in India have adopted an internal carbon price. The industries should continu-ously engage with stakeholders to adopt cleaner production practices and minimize waste.

Companies can join initiatives such as EP100 that helps lower their emissions and improve their competitiveness. With nearly one-third of the Indian GDP generat-ed by nature-dependent sectors like agriculture, forestry and fisheries, investing in nature-based solutions can yield major socio-economic benefits for nature-based livelihoods.

TASK FORCE FOR CLIMATE-RELATED FINAN-CIAL DISCLOSURES

Globally, the private sector has put its weight behind the Task Force for Climate-Related Financial Disclo-sures (TCFD), a key platform and framework for businesses to assess, manage and disclose the financial impacts of climate change.

In India, 43 companies have signed up for TCFD, with 72% of Indian signatories coming on board in 2020 and 2021. Several factors such as greater board-level awareness, growing investor pressure, and climate impacts are driving this new momentum.

While the Indian government has not officially endorsed TCFD, it has provided a regulatory push. The Securities and Exchange Board of India (SEBI) has released its latest Business Responsibility and

Sustainability Reporting (BRSR) format, and the RBI has joined the Central Banks and Supervisors Network for Greening the Financial System.

The BRSR guidelines, applicable to the top-1,000 companies by market capitalization, require companies to disclose their energy- and water-us-age, and report plans around GHG emission reduction.

The guidelines ask companies to quantify material risks and opportu-nities for their businesses. In addition to this, RBI’s NGFS membership should be the first step for applying global best practices on the manage-ment of climate risk for the financial sector.

ESG REPORTING

While there is greater momentum around ESG reporting, companies’ initiatives tend to focus on driving stewardship rather than addressing material risks to operations and value chains. Moreover, sustainability reports are largely disparate and do not allow for any comparability or industry benchmarking.

Also, very few companies are quantifying their climate risks in financial terms. Growing companies wanting to tackle climate change face two key challenges - limited access to complex datasets and tools to assess their risks, and the lack of a government framework or mandate to undertake these efforts.

Currently, the NSE100 ESG Index, a subset of the Nifty 100, has only 88 companies, and a common set of ESG guidelines from the regulator would add depth to the movement.

It would also help investors who are now left to develop their own mechanism for identifying


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ESG-compliant companies.

FINANCIAL RISKS

About `6.19 lakh crore of debt at India’s leading financial institutions was at risk from extreme weather events such as droughts, floods and cyclones, according to a CDP report based on the information provided by some of the biggest lenders, includ-ing SBI and HDFC Bank.

While SBI is looking into agriculture and allied agri-activities, HDFC Bank has done a scenario analysis in five states on agriculture, flooding and its portfolio in sectors such as steel, cement, power, oil and gas.

SBI has valued its total climate risk at `3.83 lakh crore. The bank said it

may “indirectly face reputational risks, should it be involved in lending to environmentally-sensitive projects, which may have significant public opposition.”

India’s largest lender SBI has tied up with the European Investment Bank to jointly pump Euro 100 million in equity financing into Indian small businesses focused on climate change and sustainability. It already invests in a vehicle called Neev Funds for its impact investing objectives, and the two entities have created ‘‘Neev Fund II’’ for taking the partnership ahead.

THE $11 TRILLION OPPORTUNITY

India could gain $11 trillion in

economic value by limiting rising global temperatures and exporting climate solutions that it has already developed to countries across the globe.

For India, a rise of 3°C or more in average global temperatures by the end of the century will “make it harder for people to live and work, as sea levels rise, crop yields fall, infrastructure is damaged, and other challenges emerge,” Deloitte warns.

The good news is that India is well-positioned to help the world transition to a green economy, and could achieve “significant economic growth” by supplying the products, services, and financing the world to limit temperature increases, the global firm sayS.

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BEYOND THINKING



coming months.

This is in sharp contrast to last year when the pandemic had severely devastated the country’s retail sector. It had brought not just India’s but the world’s economy to a standstill.

Domestic demand needs to strongly pick up and remain consistent over the long term for India to achieve a meaningful economic recovery.

The first green shoots are now visible - the services sector bounced back in August after being in contraction in the May-July period. The Purchasing Managers’ Index (PMI) in services moved northward to 56.7 in August, the highest since the pandemic struck India in March ’20.

A bright spark amidst the pandemic-induced gloom is the noticeable increase in bookings that tour operators and hotels are reportedly registering, especially in western and northern India. A healthy recovery in the retail and services sectors will be hugely beneficial to the country’s economy.

Here, it must be highlighted that the services sector contributes around 68% to India’s GDP and employs around 32% of its workforce. A good showing from the retail and services sector is, therefore, crucial for reviving the pandemic-ravaged economy.

India’s Index of Industrial Production (IIP) expanded in double-digits (11.5%) in July this year as against a 10.5% contraction a year ago.

Manufacturing, mining and electricity registered reasonably healthy growths at 10.5%, 19.5% and 11.1%, respectively, while in July 2020, all three had contracted.

Though the overall IIP in July this

begun opening up following the easing of lockdown measures pan-India. India’s services sector, which is a big contributor to its GDP will especially benefit from this vaccination drive as will SMEs and other labour-intensive industries.

For India’s economy to perk up, it is essential to complete the double dosage for the eligible population as quickly as possible and this is now being done smoothly, which augurs well for the country’s economy.

Presently, it is estimated that half of the country’s eligible population has been vaccinated at least once.

The recent pick up in vaccinations should also be seen in the backdrop of the ongoing festival season, which is expected to witness healthy retail sales. This, in turn, will also help boost the economy.

With Onam, Rakshabandhan and Ganesh Chathurthi over, reports indicate a pick up in retail sales. The festival season will last till March with the big festivals - Dussehra, Deepavali, Christmas and Holi along with New Year - likely to clock healthy sales, boosting consumption and giving the economy a fillip.

In several states, most lockdown measures have been relaxed. In Mumbai which depends on its suburban railway service for local commuting, all who have received two doses have now been allowed to commute, which has come as a godsend for the metropolis. Small enterprises, retail and services sectors will benefit tremendously from this move.

According to indications, the retail sector has witnessed some positive activity in the last two months and retailers have begun stocking up in anticipation of good sales in the

India’s economy may not be as suffocated as some other countries’ or even as bad as feared domestically, going forward. This is because India has been successful in countering the second wave of covid-19.

Also, central and state governments have been taking adequate precautions to mitigate the after effects of the third wave should it strike the country anytime in the future.

Presently, the second wave which struck the country around April-May this year has been effectively countered, and thankfully there are no signs yet of the feared third wave (predicted around October).

The vaccination drive has picked up pace and India is doing creditably on this front compared to many countries, including developed nations.

Around 80 crore vaccinations have been done since the drive commenced in January this year.

A fact that needs highlighting here is that a world record 2.50 crore jabs were administered on 17th September which, incidentally, is also Indian Prime Minister Narendra Modi’s birthday. This beat the previous world record of 2.47 crore jabs held by China.

This vaccination drive is critical for India’s economy as businesses have


year was still about 0.3% lower than 2019 levels, the difference is only marginal. This is encouraging as it points to a potential recovery in the industrial sector.

In this period, capital goods expanded 29.5%, consumer durables 20.2% and intermediate goods output 14.1%.

However, consumer non-durables production moved southward by 1.8% in July. Interestingly, in July last year, it was the only category, which registered a rise (1.8%).

Encouragingly, the Goods and Services Tax (GST) collection once again breached the psychological mark of `1 lakh crore at `1.12 lakh crore in August.

It had slipped below the `1 lakh crore mark in June after remaining above it for nine consecutive months. In July, GST collection stood at `1.16 lakh crore.

“With the easing of covid restrictions, GST collections for July ’21 and August ’21 have again crossed `1 lakh crore, which clearly indicates that the economy is recovering at a fast pace,” the Finance Ministry said.

Three states - Maharashtra, Karnataka and Tamil Nadu - clocked over 30% growth in collections this August as compared to the year-ago period at `15,175 crore, `7,429 crore and `7,060 crore, respectively.

Gujarat and Delhi registered a healthy growth of 25% each this August at `7,556 crore and `3,605 crore as against `6,030 crore and `2,880 crore, respectively, in August last year.

Central GST stood at `20,522 crore, State GST at `26,605 crore,

Integrated GST at `56,247 crore (including `26,884 crore collected on import of goods) while Cess stood at `8,646 crore.

Many crucial manufacturing states in the country have witnessed an uptick of 25% to 35% in collections compared to the same period last year and this is as clear an indication as any that economic recovery has begun and that its momentum could begin to pick up pace in the coming months.

With anti-evasion measures and economic growth combining to enhance GST collections, the Finance Ministry said that it expects robust GST revenues, going forward as well.

Given that the country’s economy is now on the recovery path, its GDP growth could be in double digits this fiscal (FY22).

The Reserve Bank of India (RBI) has projected a sub-10% growth at 9.5% for FY22, while leading economic think tank National Council of Applied Economic Research (NCAER) pegs the country’s GDP growth at 10% and Morgan Stanley at a slightly higher 10.5% for the same period.

The country’s economic growth rose sharply to 20.1% in the April to June period (Q1 FY22). But this was primarily due to the low base of the year-ago period.

Last year, in the same period, India’s economy had contracted by 24.4%. The Reserve Bank projects a GDP growth of 21.4% in Q1, 7.3% in Q2, 6.3% in Q3 and 6.1% in Q4.

NCAER’s Director-General Poonam Gupta said that India’s economy will improve on the back of fewer covid-linked supply disruptions

coupled with growth in the global economy, which has begun to show positive signs.

Growth could be in the ballpark range of 10%, Gupta said, adding that “the reasons for this perceived optimism are: fewer supply disruptions; increased pent up demand in the traditional and contact-intensive services; and a buoyant global economy.”

Morgan Stanley also expects economic activity in the country to start normalizing from the quarter ending September.

Normalization will be supported by the pent up demand, a favourable policy mix, robust global growth and the ramping up of the vaccination drive.

Pointing out that any laxity in the vaccination drive will increase risks to economic growth, Morgan Stanley said that key risks such as the pace of vaccination and trend in covid-19 cases, a potential re-acceleration threat from new variants and restrictions on (economic) activities, will remain.

Thus, while pro-active government policies have their own place in promoting economic growth, a strong focus should be laid on vaccinating the entire eligible population.

This will render it easy for the government to further ease lockdown measures, thereby accelerating economic activities which, in turn, will spur economic growth.

The need of the hour, therefore, is to marry fiscal measures and vaccinations along with a long-term programme to sustain an economic growth of 7% to 8% over the next few yearS.

BEYOND THINKING

India’s capex cycle has been in a limbo for far too long. As recently as

AIDING GROWTHGovernment-led capex is likely to revive economic

growth of the country two years back, India’s Index of Industrial Production (IIP) was the lowest among emerging market economies of Asia.

A slew of factors were to blame for the lull in the capex cycle, including poor corporate earnings for the December quarter of 2019 and generally low earnings over a period of time. Worries over the government’s shift in focus towards

consumption, political uncertainty with elections around the corner, slow export growth and tighter funding conditions were further to blame. Moreover, many firms were busy repairing their badly dented balance sheets and were in no mood to undertake fresh capex.

A NEW BEGINNING

However, in 2021 the scenario is



of close to `100 trillion under the development of national infrastructure pipeline were big boosters. According to the plan, roads, railways and urban infrastructure have got close to `50 lakh crore of investment pipeline over the next five years.

Moreover, most of these investments are front-loaded considering the importance of investment to revive the economy and the job market in the post pandemic era. The government has already upped its investments. The central government’s capex as a percentage of GDP jumped from a mere 1.7% in FY20 to 2.2% in fiscal 2021. During April to July ’21, the government has undertaken a capex of close to `1,300 billion, which is higher than `1,100 billion capex announced in the corresponding period last year. Among them, railways and roads have got the highest amount of focus and allocation, leading to higher capex and demand in industries. In fiscal 2021 close to 14,000 km of highways were constructed as against 10,000 km in fiscal 2020.

PRIVATE CAPEX TAKING SHAPE

The government is on the front seat driving India’s capex cycle more so in the light of stress and other issues in other parts of the economy. Private capex was already low in the past few years, led by initial hurdles caused by demonetisation, implementation of GST, trade wars, banking crisis, and finally the coronavirus-induced restrictions and contraction in demand.

Most companies were or are grappling with balance sheet issues. High debt in their books and increasing NPAs in the banking

Also, what has been a shot in the arm for the sector as a whole are stamp duty cuts, unmet demand during covid-19-related restrictions in the second half of FY21, and a moderation in interest rates of housing loans.

Additionally, the pandemic-induced work-from-home and study-from -home scenarios have spurred housing demand. During October’20 – March ’21 residential housing property registrations and sales across major cities exceeded their pre-pandemic average levels.

According to the RBI’s Financial Stability Report, unsold inventory levels have dropped steadily in the last four quarters to 7 lakh as on 31st March, a two-year low, from around 8.5 lakh in the first quarter of FY21.

Launches of new units have progressively gone up in the past four quarters to 6 lakhs. The report said All India Housing Price Index HPI increased year-on-year (y-o-y) by 2.7% in the fourth quarter vis-à-vis 3.9% growth a year ago.

Despite the pandemic, home buying has continued, albeit at a slower pace. In fact, after the lockdown in the second half of 2020-21, there was a surge in home buying, which was further sweetened by low home loan interest rates and deal sweeteners from real estate developers.

GOVERNMENT PUSH FOR GROWTH

The second important driver has been government spending on infrastructure and other programmes. After the covid-19-led stress in the economy, the government has increased its spending on key sectors to revive growth.

Announcements such as investment

slightly different. Green shoots are appearing in the economy and a revival in the capex cycle seems to be around the corner.

India’s Gross Fixed Capital Formation (GFCF), which is a barometer of investment in the economy creating fresh capex, has been steadily increasing from 2020. Though it fell by 10.8% in 2020 as compared to a rise of 5.4% in the previous fiscal, it reached a 27-quarter high in FY21, growing by 10.6% in the fourth quarter.

In fact, in Q1 FY22, the GFCF rose 55.3% as opposed to a record 46.6% decline in Q1 FY22. This was largely due to a low base effect in the economy. The GFCF rise was in line with the recovery in the broader economy, and nominal GDP growing at 8.7% in FY21.

Even in CY20, investment demand as measured by Gross Fixed Capital Formation, improved from -47% in the first quarter to -7.4% in Q2. There are about four important drivers of capex cycle, namely, the government-led capex, consumption-led, industrial-capex and exports-led.

HOUSING: A BIG DRIVER

Of these, housing and construction form the biggest or the largest part of the overall capex in the economy. Thankfully, housing and construction sectors have picked up significantly. Real estate registrations have jumped and inventories in many of the markets have exhausted leading to new launches and pick up in construction.

Inflation in the past year has been around 6%. While housing prices have been stagnant in the same period, it implies that the real cost of owning a house has come down.

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system remained a key worry, which got accentuated further after covid-19. While funding and balance sheet issues were crucial, the other hurdle was surplus capacity in the system.

Till about the first quarter of fiscal 2021, India’s capacity utilization had dipped to less than 60% as against 70% to 75% in the pre-covid-19 period. The contraction in demand and surplus capacity along with balance sheet issues meant that private capex might take longer than expected.

But thankfully, it is once again shaping up and there are good signs

of pick up in certain pockets of the markets like electrical, renewables, chemicals, pharma, steel, cement, food processing, consumer durables and a few other sectors, which have seen a growth in capex. Companies from steel sector such as Tata Steel and JSW Steel and many others have undertaken a huge domestic capex. The other important data point is increase in the order book of engineering companies. India’s large listed engineering companies’ order inflows were in the range of `2.8 lakh crore around the first quarter of fiscal 2020, which dropped to around `2 lakh crore in the first quarter of 2021. Later on, the run rate has

improved to around `2.5 lakh crore by the end of Q1 of fiscal 2022.

Although private capex has been improving, it is the government capex that will be the major driver of the capex cycle in the economy. Private capex is improving; but considering that current capacity utilizations continue to be low at around 70% and companies are still de-leveraging their balance sheets, the decisive or marked growth in private capex would still be far or expected to be towards the end of fiscal 2022. Meanwhile, the government-led capex should continue to support growth in capex cyclE.

BEYOND THINKING

AGRANDPLAN

India’s `6 trillion National Monetisation Pipeline is an innovative way of ensuring adequate funding of new infrastructure projects and proper implementation will

determine its successBeyond Market 16th - 30th Sept ’21 It’s simpli�ed...

16


public sector undertakings. The government has drawn out twenty plus asset classes. But most of these projects will concentrate on roads, railways and power sectors. The balance will come from sectors such as telecom, mining, aviation, ports, warehouse and natural gas, among others. The pipeline has been developed by the government’s think tank - Niti Aayog.

Ownership

Private sector will have the right but not the ownership of the assets and there will be compulsory handing of these projects back to the govern-ment at the end of the contractual obligation. Also, the private sector will have no major risk involved as these projects would be brownfield projects.

Modes Of Monetisation

There will be transparent and competitive bidding for the asset under MNP. Models for monetisation of assets could be PPP or structured financing vehicles like Infrastructure Investment Trusts and Real Estate Investment Trusts.

NMP & National Investment Pipeline (NIP)

NMP will work in tandem with NIP. In 2020, the Indian government announced a mega spending plan of `111 trillion over fiscal year 2020-2025 under its National Infrastructure Pipeline (NIP). The MNP is only around 6% of the total NIP of `111 trillion, and contributes around 14% of the centre’s share of `43 trillion under NIP.

Fiscal Deficit

The government has been focusing on infrastructure spending to boost the economy. It is estimated that

ment and economic growth.

SALIENT FEATURES

The covid-19 pandemic has worsened the government’s fiscal situation. It has been exploring alternative mechanisms to fund its infrastructure spending.

The genesis of NMP was laid in the Union Budget in February. A lot of emphasis was put in the Budget on asset monetisation as a means to raise innovative and alternative financing for the infrastructure sector.

Simply put, there are two ways by which the government benefits from the NMP programme: upfront payment (government earns) and through committed capital expendi-ture by private entity (government saves).

Assets worth `6 trillion (2.6% of GDP) could be monetized in phases over fiscal year 2022 to 2025. Out of the total, fiscal year 2021-22 could monetise around `0.88 trillion under NMP.

The amount will be raised to `1.62 trillion in FY23, `1.76 trillion in FY24 and `1.67 trillion in FY25. This is an indicative value and the actual outcome may differ.

The central government will also provide incentives to the state governments for monetising their state assets under the new NMP scheme.

Here are the salient features of the National Monetisation Pipeline.

Assets & Sector

Assets for monetisation would include brownfield projects held by the central government or by central

On 23rd August, the government announced a National Monetisation Pipeline worth `6 trillion. The plan entails leasing or monetizing government’s brownfield projects in the next four fiscals till 2024-25, and use proceeds for funding other infrastructure projects.

Asset monetisation creates a virtuous cycle for the economy – underuti-lized or languishing assets are monetised for upfront fees, generat-ing greater value for the government; the freed up capital is then used to fund other projects, which, in turn, helps boost the economy.

Asset monetisation, also known as capital recycling, is widely used in developed economies. This tool of monetisation of government assets is not privatization. But it includes contractual partnership with the private sector.

Private sector and investors tend to benefit from NMP as the assets are typically given to private parties for a pre-specified period, which brings in efficiencies in operation and management of assets. The assets eventually revert to the government.

India is now trying this innovative tool with the objective to meet its vision of becoming a $5 trillion economy.

India primarily wants to achieve this target through infrastructure development as this critical sector has a multiplier effect on employ-


India would need to spend $4.5 trillion on infrastructure development by 2030, to become a $5 trillion economy by 2025 and onwards. However, current yearly spending is less than $100 billion.

NMP has the advantage of ensuring more budgetary funding for growth without inflating fiscal deficit and without resorting to higher taxes by the government.

Historically, infrastructure spending has been pruned when government’s revenues have disappointed. During a downfall in the economy, even private players turn risk-averse and shy away from investments in infrastructure building.

As a result, infrastructure in the economy becomes the casualty. With NMP there is now certainty of spending towards infrastructure.

Additional revenue raised from asset monetization will mainly be used for infrastructure spending rather than fiscal consolidation.

The government has a medium-term fiscal consolidation roadmap of 6.8% of the GDP in fiscal year 2021-2022 to less than 4.5% by FY25-26. Since the government does not see NMP as a tool to bridge its fiscal deficit, there will not be any material difference in the glide path of fiscal consolidation.

IN A NUTSHELL

The central idea behind NMP is to raise money by monetising existing brownfield infrastructure assets and channelling these additional revenues into building greenfield infrastruc-ture. For this, NMP taps private sector investments. So, ultimately NMP’s success will depend on the implementation of the programme

and participation from private sector.

For active private participation in NMP, the government will have to ensure that the assets are attractive and have revenue-generation capacity. The government will also have to undertake simultaneous reforms in dispute resolution and taxation to woo investors.

Not only seasoned infrastructure investors are likely to benefit from the NMP programme, domestic engineering and construction companies too will gain from infra spending by the government.

A spate of InvITs and REITs listings can also be expected with the success of NMP. Individual investors too can indirectly participate in the govern-ment’s new monetisation program through such structured finance vehicleS.

Source: Niti Aayog

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BEYOND THINKING

TIGHTSUPPLIES

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In India, urea prices are fixed and are regulated by the government while the industry is free to set the retail prices of non-urea fertilizers. In other words, government sets the final selling price for urea and a shortfall between the cost of production and the selling price is reimbursed to urea manufacturers as subsidy.

For non-urea fertilizers a fixed amount of subsidy is announced every year and the subsidy is provided directly to the farmers.

There are two options if the cost of production of non-urea players increases: 1) Either the government has to increase the subsidy, or 2) The industry has to take a price hike and pass the burden on to the farmer. For urea, the government needs to increase urea prices to make production viable.

Before the Kharif season, the government had a similar predica-ment. Then, the government decided to more-than-double the subsidy on Di-ammonium phosphate (DAP) to `1,200 per bag of 50 kilogram (kg) from `500 per bag earlier. This was part of the revision of rates under the nutrient-based subsidy (NBS) scheme for the sector.

Under its nutrient-based subsidy, the government allocated additional funds to the tune of `14,775 crore to take care of price hikes taken on non-urea fertilizers.

So will the government allow retail prices to go up?

LIKELY SCENARIOS

The government may intervene again and increase subsidies as raw material prices continue to soar. Companies have started increasing retail prices. Another spell of subsidy allocation could be announced in the

the manufacture of DAP domestical-ly are imported. The industry is also dependent on other imported inputs like ammonia, sulphur, phosphoric acid, rock phosphate and potash. The urea industry is dependent on imported gas to the extent of 80% to meet its feedstock requirements.

According to the Fertilizer Associa-tion of India, India imported 9.83 MMT of urea and 4.88 MMT of Di-ammonium phosphate in fiscal year 2020-21. Muriate of Potash (MOP) is almost entirely imported. MOP import stood at 4.23 million MT in fiscal year 2020-21.

CURRENT SITUATION

In the last six months, prices of raw materials and finished fertilizers have soared. For instance, between January ’21 and July ’21 the landed price of urea, DAP and MOP has jumped 60%, 46% and 22%, respectively to $506 per metric tonne, $597 per metric tonne and $280 per metric tonne, respectively.

In the same period, phosphoric acid, ammonia, rock phosphate and sulphur have jumped by 36%, 120%, 25% and 78% to $1160 per metric tonne, $641 per metric tonne, $150 per metric tonne and $228 per metric tonne, respectively.

Rising international prices of fertilizers and raw materials have increased the cost of production of fertilizers. This has forced companies to resort to price hikes, much to the discomfort of farmers.

OPTIONS NOW

What are the options for the industry when their cost of production rises, say due to a surge in raw material prices, like in current times?

Currently, India is facing a shortage of crop nutrients. The domestic fertilizer sector has taken a beating due to the surge in key raw material prices and its availability. Even imports of ready fertilizers have been lower due to soaring international prices and constraints related to global shipping lines.

The situation has posed an important question over the availability of key fertilizers like urea, Di-ammonium phosphate (DAP) and muriate-of -potash to the farming community in the ensuing winter sowing (Rabi) season that starts in October.

Chemical fertilizers play an impor-tant role in enhancing agricultural productivity and making a country self-reliant in agricultural produce. India is the second largest consumer of fertilizers behind China. In urea, India is the second largest manufac-turer; but the production always falls short of demand, forcing India to import fertilizers.

Fiscal year 2020-21 saw total fertilizer sales at 67.6 million metric tonnes (MMT), a growth of 9.6% over the previous year. Around 35% of fertilizers are imported every year.

IMPORT DEPENDENCE

India is not self sufficient in fertiliz-ers. Around 20% of urea consumed in India is imported. While MOP is entirely imported, 50% of DAP requirements are imported in India. Further, 90% raw materials used for


near future by the government before the Rabi season. This is the most likely scenario as the government would not like to upset the political-ly-important farming constituency.

Here are some other options that may help the government and the industry to manage the situation in the near to medium term and prevent any increase in retail prices for farmers.

Urea Reforms

Reforms in the urea sector are long-pending. The government can increase the final selling price for urea and lower its subsidy outgo. Bringing urea under the nutrient- based subsidy (NBS) policy and disbursement of fertilizer subsidy directly to farmers’ bank accounts can also have reformative outcomes. The government can also prioritize domestic gas for urea sector. The government can also reduce taxes on natural gas to help the industry.

Raw Material Reforms

India lacks natural resources for

non-urea production. Exempting major raw materials from customs duty can help reduce the cost of fertilizers for the near term. The government may also tap its geopolitical power to establish some mechanism to source raw materials from natural resources rich nations bilaterally.

Part of the strategy could also include investing in foreign raw material assets in collaboration with the industry. This could also encourage industry to backward integrate, which can provide the much-needed cushion from any sudden spurt in prices in internation-al markets. India also needs to devise a strategy for creating a buffer stock for P&K fertilizers.

IN A NUTSHELL

The government also has to have a long-term picture in view and ensure that farming remains sustainable. From an ideal ratio of 4:2:1 for NPK in the soil, the ratio has widened to 7.1:2.8:1 in 2019-20. This implies that higher use of urea has upset

soil’s health; other nutrients are equally important for sustainability of Indian agriculture. The govern-ment needs to keep this in mind. Finally, there are limitations in government finances. For FY22, the government has made a budget provision of around `80,000 crore towards the fertilizer sector. The government has estimated an additional cost of `14,755 crore towards DAP during the kharif season. Any future subsidy hikes should not come at the expense of pending subsidy bills of the industry.

According to one analysis, subsidy receivables from the government accounted for 75% of the company’s revenue for urea players; and for non-urea players, it accounted for close to 25% of the revenue.

So far, the government has been striving to clear all pending bills of the industry. While ensuring the availability of fertilizers to farmers at low costs, the government also has to ensure that the cost of fertilizer production stays viable in IndiA.

Fertilizers

Fertilizers contain a few basic nutrients for agriculture. These include nitrogen (N), phosphorus (P) and potassium (K) and sulphur (S), among others. Fertilizer may either have a single nutrient, say only nitrogen as in urea or a combination of nutrients in various proportions, say DAP which contains 46% P and 18% N. Other widely used fertilizers are single super phosphate (SSP) containing 16% P and 11% sulphur (S) and Muriate of potash (MOP), which has 60% of K. SSP is a cheaper domestic alternative to DAP. The fertilizer sector is highly regulated in India. While MRP for urea is fixed by the government, any difference in the cost of produc-tion and the MRP is paid by the government as subsidy to urea producers and importers. For P&K fertilizers, the arrangement is slightly different. The industry is free to price P&K fertilizers as it wishes.

But the government pays the company an amount fixed annually and that depends on per kg of nutrient (N, P, K, and S) used in that particular fertilizer. For instance, the MRP of urea is currently fixed at `5,378 per tonne or `242 for a 45-kg bag. For nutrients N, P, K and S, the new rates are fixed at `18.789/kg, `45.323/kg, `10.116/kg and `2.374/kg, respectively. Now depending on the constituent mix in the fertilizer, the subsidy will vary. Under the NBS regime, the government makes available around 24 grades of P&K fertilizers to farmers at subsidized prices through fertilizer manufacturers/importers. Urea accounts for more than 55% of overall fertilizer used by farmers, primarily because it is cheaper. Around 55% of total fertilizer sale in the year is done in Kharif season and the rest in the Rabi season. For urea shortfall, the government is already trying to revive 5 closed units, the output of which will be on stream in the near future.

BEYOND THINKING

With the advent of the festive season, retailers across the country are desperately hoping for demand to improve. Malls in most parts of the country witnessed improved demand

except Maharashtra and Kerala owing to the ongoing coronavirus-related curbs.

Most malls in Maharashtra are reporting footfalls in the range of 15% to 20% as compared to pre-covid-19 times.

And they do not expect the festive season to turn the fortunes around for them if restrictions on the entry to malls are not eased by the government, industry experts and mall owners said.

The government has mandated shopping malls to fully vaccinate their staff, retailers, and salespersons before opening them to the public.

All customers entering the mall should also be fully vaccinated. However, the pace of vaccination stands at around 32% in Maharashtra because of which malls are not able to allow everyone inside.

Industry experts said retailers and mall owners are trying to lure customers by offering their discounts



97% (of the pre-covid times), respectively.

The retailers in South India reported 81% recovery but West lagged with only 76% recovery when compared to the pre-pandemic levels.

RAI estimates there are about 50 malls in Maharashtra, employing more than two lakh people, generating `40,000 crore in business and contributing `4,000 crore in GST per month.

The RAI report further said that consumers are spending less than an hour inside malls, buying only what is necessary. This is the new normal across the country. Earlier people used to roam around in malls just for fun, but the scenario has completely changed, and now it is only business in malls.

Contactless car parking, UV bag scanners, sanitization stations, and temperature checks are the new normal. Every industry has been forced to adapt in order to survive the pandemic, and the retail sector, including mall promoters.

Kumar Rajagopalan, CEO of the Retailers Association of India, said, “It is similar to the time when malls were new; customers had to be attracted with different promotions.”

Amitabh Taneja, Chairman, Shopping Centres Association of India, said, local and state governments can help retailers bounce back by relaxing state duties and taxes, waiving off licensing fees and offering fixed electricity charges.

“We have asked financial institutions and the government to consider a moratorium period, a one-time loan restructuring with lower rates of interest for organized retail, and offer short-term financing options, and

recover from the huge losses.

LACKLUSTRE FESTIVAL DEMAND

Shopping malls have not yet witnessed strong footfalls in malls and have low expectations from the approaching festive season.

“Unless the restrictions are eased, we do not expect to see a significant uptake in demand,” Rajneesh Mahajan, Chief Executive Officer, Inorbit Malls, said.

Viviana Mall in Thane is also experiencing less than 20% of footfalls as compared to the pre-covid times, according to a company official.

The festive season starts with Ganesh Chaturthi and lasts up to Christmas in the country. Shopping malls typically witness about 35% to 40% of their sales during the festive season.

Malls are optimistic that people would start flocking in as more people get vaccinated towards the end of September after completing the mandatory 84-day gap between two doses.

RETAIL ASSOCIATIONS

With the reopening of malls, retailers and shopping malls in other parts of the country, apart from Maharashtra, have reported a strong recovery.

A recent report by the Retailers Association of India said that sales recovered to as much as 88% of the pre-pandemic levels in the country, aided by festive shopping.

The report said that retail businesses in North and South India are almost back to the pre-pandemic levels in August ’21 with sales at 98% and

and freebies. Yet, getting back to normal demand seems farfetched at the moment.

Shopping malls across India have remained shut or have operated partially for most of the last 17 to 18 months.

Now, even though they are permitted to reopen in some states, shoppers are not frequenting the malls as they are sceptical about visiting closed areas to ensure covid-19 safety, industry experts opined.

The prolonged closure coupled with restrictive openings has hurt the mall business.

According to Mukesh Kumar, Chairman, Shopping Centres Association of India (SCAI) and Chief Executive Officer, Infiniti Malls, had earlier said that retailers in the region have incurred losses to the tune of `4,000 crore every month and in the past 17 to 18 months, they have lost `35,000 to `40,000 crore of revenue.

Kumar insisted that customers in the age group of 18 to 45 frequently visit malls. But most people who have been administered two doses of vaccine are above 45 years of age, resulting in lesser number of visitors to malls.

Just before the second wave of covid-19, at least 80% of the footfalls in malls had returned. But later due to lockdowns, malls had to shut down across the country.

The malls have gradually opened post the second wave, but social distancing norms continue to dent footfalls.

The shopping malls in India have got into a severe financial crisis and it will be difficult for several of them to


GST rebates, among other things,” said Taneja.

According to industry experts, footfalls across malls hover around the 30% mark, while daily/weekly operational costs have gone up by over 20%. Investment in tech and equipment, including apps and UV scanners, is as high as `50 lakh per property.

Mall owners said that this investment is crucial as their first goal is confidence-building. “Once people are comfortable with the idea of being in a mall, we will expand our offerings,” said Rajendra Kalkar, President (West), Phoenix Mills. This will include open-air shopping options, which seems to be the way forward.

The upcoming festive season will be crucial for malls to make up for their losses.

Deloitte India recently unveiled the 2021 edition of the report ‘KNOW your consumer – What you see is what you get’ at Retail Leadership Summit (RLS) organized by Retail Association of India (RAI), highlighting key sectoral trends that will drive a new wave of growth strategy in the retail consumer industry.

Adoption of digital technologies has significantly accelerated, compensating for store closures and the consequent reduction in customer engagement (due to lack of touch points) in the current times.

Rajat Wahi, Partner, Deloitte India, said, “The pandemic continues to transform consumer-buying behaviour, making consumers more digitally inclined and demanding at one end, whilst becoming more health and socially conscious on the other.”

REGIONAL DEMAND

DELHI

In Delhi, malls had opened since early June, giving them more time to prepare for the upcoming festive season. Most malls have taken an omni-channel approach to mitigate the impact of low footfalls in malls.

According to a DLF Luxury Malls official, it is imperative to maintain exclusivity to retain the fundamental role of luxury and balance it with the new phygital (physical + digital) experience, by taking the in-store experience online and the online experience in-store. The most popular has been their on-call personal shopper, where customers browse via video call and then select their products.

Many retailers said that customers ordered on WhatsApp from digital catalogues that featured the latest from home, beauty, lifestyle and fashion brands, and got them home-delivered. Several retailers are introducing festive catalogues. They have also added concierge service and personal shoppers to their list of offerings.

MUMBAI

Santosh Pandey, Vice President, Growel’s 101 Mall said that at Growel’s 101 Mall, facilities like live shopping services and ‘Mall on Wheels,’ where a selection of brands are brought to housing societies have been introduced.

The mall is also organizing pop-ups for customers who are apprehensive about stepping inside stores. About 70% of business is coming from online channels, with deliveries happening through mall stores. This reinstates the fact that omni-channel as a trend is here to stay.

There is a sharp contrast between malls in South Mumbai, which are mostly deserted as their footfalls came mainly from office goers and tourists, and from those in the suburbs where millennials are daring to step out, industry experts said.

HYDERABAD

Being an IT hub, Hyderabad has made an easy transition to the online retail space, and customers too have adopted well, mall owners said.

The GVK One Mall in Banjara Hills, for instance, is leveraging WhatsApp for a contactless shopping experience. Apart from temperature checks and sanitization of frequently- touched surfaces, the mall has a covid-19 response team to jump into action if someone exhibits symptoms. The mall is supporting retailers, brands, and also flea market owners so that they can sail through these tough times.

BENGALURU

According to a Phoenix MarketCity official, Bengaluru, there has been a decent growth in footfalls in the mall since July ’21, and the mall has been witnessing footfalls of around 8,000 on weekdays, and double that figure on weekends.

Consumption has grown over 55% of what it was last year, with some categories like electronics and home furnishings recording higher sales. Their current offerings include home deliveries, and agents for tele-shopping.

Demand is expected to improve from end-September with many customers expected to receive two doses of vaccine, and return to normal life, while continuing to wear masks, sanitizing and following social distancing, industry experts saiD.

BEYOND THINKING

BACKIN THESKIESIndia’s aviation sector is

seeing better air passenger traffic thanks in large part to government relaxations



Ministry said that lower and upper limits on airfares will remain for 15 days at any given time. Airlines will be free to charge without any limits from the 16th day onwards, it said.

Since 12th Aug ’21, this roll-over period was of 30 days and airlines have been charging without limits from the 31st day onwards. “If the current date is 20th September, then the fare band shall be applicable till 4th October. Any booking done on 20th September for travel on or after 5th October shall not be controlled by fare bands. On the following day, that is, if the current date is 21st September, then the fare band shall be in force till 21st October and for travel on or after 6th October, the fare bands shall not be applicable,” the ministry said in its latest order.

Domestic air travel became costlier on 12th August this year after the Civil Aviation Ministry raised the lower and upper caps on fares by 9.83% to 12.82%. The 12th August order also mentioned that the limits on airfares will remain in place for 30 days at any given time.

Today, the ministry modified the 12th Aug ’21 order, replacing the word “30 days” with “15 days.”

These developments show that the Ministry and airlines are functioning on the basis of changing realities on the ground. This is the only approach which has worked in western and developed nations. In the context of these facts, a key question that investors may have in their minds is: how does one negotiate with these facts? STRATEGY In the past one year, share prices of leading companies from discretionary sectors such as

from 1st Jun ’21, taking into account higher ATF prices and weak traffic.

The government extended the ban on international commercial flights till the end of September ’21.

Recently, the government made an important announcement, which was being eagerly awaited by industry players. The Ministry of Civil Aviation has allowed Indian airlines to operate domestic flights at a maximum of 85% of their pre-covid capacity. In its latest order, the civil aviation ministry has modified its 12th August order.

It said that the “72.5% capacity may be read as 85% capacity.” The fresh order also read that further opening up of domestic airspace will be effective immediately, and will remain applicable till further orders.

The government had resumed scheduled domestic flights on 25th May last year after a two-month break. The Ministry had allowed carriers to operate not more than 33% of their pre-covid domestic services. This cap was gradually increased to 80% by December ’20, which remained in effect till 1st Jun ’21. On 28th May, the government decided to reduce the industry’s operational capacity from 80% to 50% from 1st June onwards “in view of the sudden surge in the number of active covid-19 cases across the country, decrease in passenger traffic and passenger load (occupancy rate) factor.”

The 50% cap was in effect till 5th July, beyond which it was relaxed to 65%. On 12th August, the ministry decided to allow 72.5% of pre-covid flights to run across the country, which had been applicable till now. In a separate order, the Aviation

India’s aviation industry is going through a peculiar phase. On the one hand, the business situation in the industry appears to be improving. While on the other, there is a looming fear of the pandemic firming its grip on the industry’s business prospects. This situation is akin to two steps forward, and one back.

Let us understand in detail how you as investors can benefit from the changing business situation in India’s aviation industry: PASSENGER TRAFFIC

After a huge fall in air passenger traffic in May, caused by revenue-destructive impact of the second wave of the coronavirus pandemic, numbers recovered in a big way. According to the Directorate General of Civil Aviation (DGCA), the average daily passenger traffic grew 31% on a month-on-month (m-o-m) basis to 2,11,000 passengers in August this year.

In September so far, average daily passenger traffic grew moderately by 8% on a m-o-m basis to 2,28,000. Post resumption of airline services, India’s aviation industry clocked peak passenger traffic of 2,80,000 in February ’21.

Presently, India’s domestic industry is operating close to 67% capacity.

The DGCA hiked the floor on domestic airfares by 13% to 15%


Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks, read the offer document carefully before investing. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment. The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067): INB260939138, INF260939138, INE260939139: Single Registration No. INZ000202536, PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99; Exchange Member ID: MCX - 56460, NCDEX - 1268,

ICEX – 2073. Mutual Fund Registration No: ARN- 49454. Regd. Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam

Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010


aviation, hospitality and cinema exhibition saw a sharp improvement.

Share prices of Indian Hotels, InterGlobe Aviation and PVR have run up so sharply that they have beaten the benchmark index, the Nifty 50, by a considerable margin. This outperformance has flummoxed investors as these companies have been making losses, and earnings’ visibility in these sectors has been quite low due to the ongoing pandemic.

Given these facts, two important questions arise in retail investors’ minds. These are: What has triggered this sustained interest in these counters? And secondly, how long will the interest in these counters remain? Analysts say the run-up in these counters is much more than just broad market rally. They cite the fact that the second wave of the pandemic has been more lethal for companies in unorganized part of respective sectors than the organized part.

Companies hailing from the unorganized segment of the industry have been more vulnerable than those belonging to the organized segment. This is owing to the absence of brand recall, relatively low market share, weak balance sheet and size of these companies.

Hence, analysts are clear about the fact that in the coming quarters, companies from the unorganized sectors will face issues related to liquidity. This will increase the burden of debt on their balance sheets. These companies are also likely to lose more market share to their peers in the organized segment. The business situation for players from the unorganized segment is expected to turn more unfavourable as demand in most key sectors has been stable or rising slowly. On the other hand, companies from the organized segment have been doing two things well. One is strict cost control. And the second is their ability to raise funds to address liquidity issues.

InterGlobe Aviation and PVR raised `3,000 crore and `800 crore, respectively through Qualified Institutional Placement (QIP) in recent months. In these market conditions, the ability to raise money by these large players from the organized segment has impressed institutional investors in the markets. In this context, analysts advise investors intending to invest in airlines industry to stay with the sector leader. They believe that till airlines operate with optimum capacity or capacity similar to the pre-pandemic period, interest in their counters will remain.

Besides, they point out to the fact that sector leaders in discretionary sectors are likely to post extremely high profits in the coming quarters given the low base last year. They foresee sector leaders recording bumper profits given their low base, which is when there will be the end of the rally in these counters. This is when investors can consider an exit these counterS.

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Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks, read the offer document carefully before investing. Investment in Securi-ties/Commodities market are subject to market risks. Read all the related documents careful-ly before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment. The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067): INB260939138, INF260939138, INE260939139: Single Registration No. INZ000202536, PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99; Exchange Member ID: MCX - 56460,

NCDEX - 1268, ICEX – 2073. Mutual Fund Registration No: ARN- 49454. Regd. Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower

Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010

BEYOND THINKING

RECLAIMING ITSRIGHTFUL PLACE

Fashion is here to stay as fashion houses have proved themselves to be surprisingly resilient despite

predictions of doom for the industryBeyond Market 16th - 30th Sept ’21 It’s simpli�ed...

30


business sentiment for luxury brands such as Gucci, Louis Vuitton and Cartier in the coming quarters.

Also, many companies have been doing away with Fashion Shows given the fact that they are achieving more concrete results through online branding and sales.

Now, let us understand the change in business situation from consumers’ point of view. According to various research reports, an important and prevalent trend in fashion is the growing inclination towards “comfort” clothing. This refers to clothing which is comfortable.

In market parlance, this kind of clothing is called casual-aesthetic clothing. It is slowly becoming consumers’ lifestyle. Also, increasingly, after the pandemic, consumers are preferring “atheleisure” clothing.

Fashion experts call ‘athleisure’ as hybrid clothing. It is a kind of clothing, which is worn during athletic activities at workplaces, schools, or casual or social occasions. The outfits that come under ‘atheleisure clothing’ are yoga pants, tights, sneakers, leggings and shorts.

This kind of clothing is gradually becoming people’s everyday wardrobe. A fundamental reason for this trend is the increasing number of modern consumers becoming more health conscious. Athleisure clothing provides much comfort and at the same time takes care of the exercise routine of consumers.

In a media report, fashion brand Guess, which relaunched its retail presence at the DLF Mall of India in Delhi-NCR said that the store is inspired by the rapidly evolving style preferences and buying habits of the

levels in the fourth quarter of 2023. In either scenario, the global management consultancy firm expects tough trading conditions to persist next year, in some geographies at least, and for high levels of bankruptcies, store closures and job cuts to continue.

At the same time, the pandemic will accelerate trends that were in motion prior to the crisis, as shopping shifts to digital and consumers continue to champion fairness and social justice, it observed in the report.

In the context of these facts, it is important to understand how key variables are changing after the pandemic. This can be understood from two distinct points of view.

One is how companies are responding to the pandemic and the other is the changes in fashion, which are transpired largely by the pandemic.

Let us understand the situation from the point of view of corporations. A key variable which has been keenly monitored is production. Experts believe that the global fashion industry produces much more than what is consumed.

Given this, post the pandemic, most global brands - known as well as little-known - are producing less and less.

Analysts point out that manufacturers want customers to buy garments and other fashion products at full-price. They have asked retailers to postpone ‘end-of-the-season sale’ to late September rather than June.

Besides, a key trend which is already developing in the global fashion world is big luxury brands gaining more market share after recovery in demand. This is likely to boost

The coronavirus pandemic has torn a massive bite out of the fabric of fashion industry, forcing businesses to prune costs and focus on cost-effective ways of selling their products.

McKinsey in its report titled ‘The State of Fashion 2021’ said, “Fashion companies will post approximately a 90% decline in economic profit in 2020, after a 4% rise in 2019.

Given the ongoing uncertainty, McKinsey Global Fashion Index predicts two scenarios – “Earlier Recovery” and “Later Recovery.”

The first, more optimistic “Earlier Recovery” scenario envisages that global fashion sales will decline by between 0% and 5% in 2021 as compared to 2019.

“This would be predicated on successful virus containment in multiple geographies and a relatively rapid transition to economic recovery. In this scenario, the industry would return to 2019 levels of activity by the third quarter of 2022,” it said.

The report also talks about a ‘Later Recovery’ scenario. It says in this scenario they would see sales growth decline by 10% to 15% over the coming year compared with 2019.

In this case, the virus would continue to wreak havoc despite widespread containment measures and fashion sales would only revert to 2019


new-age consumer, which has led to the launch of the ‘athleisure collection,’ which had zero penetration in the pre-covid era.

Guess said that now ‘Athleisure’ clothing represents 7% of its apparel sales. These figures are significant as quarantine consumers are clearly choosing comfort-driven apparels with a considerable shift towards fitness. Apart from ‘Athleisure Clothing,’ there is an increasing demand for second-hand fashion products. According to industry experts, consumers are focusing on “unused” clothes in their wardrobe instead of buying new clothes.

It has been observed that some consumers are willing to sell their “unused” clothes to make up for the fall in their earnings. From a buyer’s point of view, it is a good deal to buy “unused” and branded apparel, which comes at an affordable price.

There is a growing trend of consumers donating their “unused” clothes to the needy during the pandemic.

Experts say that the pandemic will result in a big shift in buying patterns. They say that the tendency to buy clothes frequently, largely because of sale and other incentives, will no longer be a reality.

Experts also insist that consumers are buying denim. Fashion designers note that there has been an increase in preference for comfortable and relaxing denim wear. Besides, there is a stable demand for tracksuits, pajamas, hoodies, sportswear, and other leisure apparel.

Designers maintain that consumers have been increasingly buying more baggy jeans than skin-tight ones.

Also, consumers are buying loose-fitting and ideal for stay-at-home outfits. In addition to this, dressmakers are making specialized masks in sync with turbans, hijabs and hearing aids. Masks are also being created for people who maintain full beards.

The demand for beauty products is increasing. According to the Mckinsey report, the global beauty market is set to return to — and even surpass — 2019 levels in 2021. The report highlights three key insights about the global beauty market. They are: • Recovery will be led by China, where sales have already rebounded. China had already surpassed 2019 beauty sales by the first half of 2020, with an 8% to 10% average annual growth forecast between 2019 and 2021.

International fashion giants such as Estée Lauder Companies, L’Oréal Group and LVMH are driving sales of beauty products in China.

In the US, by comparison, the report forecasts a return to pre-crisis beauty sales by as early as the first half of 2021, with an average annual growth rate of 3% to 4% between 2019 and 2021 - if the pandemic is managed effectively in the interim.

The shift to e-commerce for this sector is a global phenomenon: McKinsey predicts that the share of the beauty products market in e-commerce sales will effectively double from just over 10% in 2019 to almost 20% by 2021. • Fragrance and colour cosmetics faced a steep decline in 2020 but beauty demand remains strong overall as consumers turn to the “self-care” categories of skincare, haircare and personal care — all of

which face less disruption from new covid-19 routines and lend themselves well to digital discovery and purchase.

The report points out that the growth in beauty products is likely to come from “self-care” category as consumers favour creams, masques, jade rollers and bath bombs.

According to Mckinsey, the demand for ‘self-care’ category of beauty products is largely a reflection of the growing tendency among consumers to prefer wellness products. • Brands and retailers are responding to the “new normal” in their product and channel strategies, with successful players focussing on building direct, trust-based connections with the beauty consumer in an increasingly virtual world. Experts opine that Asia, especially China, is likely to drive sales of luxury products.

A key reason for this is China’s ability to contain the spread of coronavirus. They point out that a large portion of sales of luxury products in the European markets has been contributed largely by Asian buyers.

In a globalized world, online shopping of luxury products has become much easier than a decade ago.

Asians, who have a higher tendency to save and conserve cash, have contributed to sales of luxury products in the European markets.

There are fashion experts who believe that in the future for a longer period of time, the eastern part of the world (Asia) will drive sales of luxury fashion productS.

BEYOND THINKING

SOS CALLThe telecom sector is in urgent need of a relief

package if it wishes to come out of the current crisis 33



should limit its role to regulating the use of spectrum by slicing it into different bands and allotting them to telecom operators, to ensure that the use of the same spectrum in the same service area by more than one company does not lead to chaos.

The second issue is the government charging telecom operators for the use of auctioned spectrum. Reduc-tion in spectrum usage charges has been a long-standing demand of telecom companies.

The third huge liability imposed on telecom companies is the misinter-preted sharing of telcos’ revenues from adjusted gross revenues (AGR). Under the current revenue-sharing regime, 32% of revenue of telecom companies goes towards taxes and levies.

Vodafone and Bharti Airtel both owe the government millions in AGR dues. Vodafone has an AGR liability of `58,254 crore. Out of this, the company has paid `7,854.37 crore, and `50,399.63 crore is outstanding.

The company is liable to pay `1,500 crore to the Department of Telecom-munication (DoT) as AGR every quarter over the next 10 financial years between 2021 and 2031. Bharti Airtel’s total AGR dues amount to `43,000 crore. In stark contrast to its competitors, Reliance Jio has a liability of only `191 crore.

Vodafone and Bharti Airtel have taken the AGR issue to court asking for a reduction in dues. But the courts have not ruled in their favor and all that they have got so far is an extension to clear their dues.

In 2019, the Supreme Court ruled in favour of DoT, directing telecom companies to repay their pending AGR dues by 31st Mar ’21 in annual installments.

and Vodafone Idea.

Reliance Jio, which is owned by India’s richest man, Mukesh Ambani, has amassed almost half of the market share (35%) owing to its competitive pricing. The entry of Jio in 2016 forced other telcos to lower their tariffs in an attempt to retain their consumers, who were migrating to the Jio platform. This led to an ugly tariff war, which destroyed Jio’s competitors.

Not only did the telecom players lose their market share to Jio, but they also ended up with huge losses because of tariff cuts. The new market dynamics led players such as Vodafone and Idea to merge with each other three years ago. The merger, which was valued at $23 billion, turned Vodafone Idea into the largest telecom company in the country, with the largest share of active customers (35% after the merger).

But Jio’s attractive tariffs ruined its competitors. Vodafone lost its subscribers to Jio and has never made a quarterly profit since its merger. Losses and massive amounts of debt on their books have driven telecom companies to the brink of bankruptcy.

The demand for reforms has increased because most industry people feel that the sector might not survive the current crisis. India’s telecom industry has many legacy issues, which have been a pain point for telecom companies, even before the entry of Reliance Jio.

The biggest issue is the fact that the government still owns radio spectrum, which is essential for mobile communication and auctions this to private players at a very high price. Industry experts have long held the belief that the government

On 2nd August, Kumar Mangalam Birla resigned as the Chairman and Managing Director of Vodafone-Idea, abandoning the company, which is on the brink of bankruptcy. The once-leading telecom operator owes a massive amount of money to the government by March ’22.

The company’s cash balance is negligible with no financial institu-tion showing its willingness to bail out the ailing company. Vodafone-Idea’s subscribers have moved on to its rivals, hitting the final nail in its coffin. Most subscrib-ers have shifted to Reliance Jio, thus helping establish its position as the market leader.

The telecom sector has come full circle in the last three decades. In the early 1990’s, the then Prime Minister PV Narasimha Rao opened up the telecom sector to private sector companies, thereby ending the monopoly of the Department of Telecom (DoT).

Three decades later, the sector is in the midst of a crisis, raising demands for another round of reforms.

Today, the telecom sector runs the risk of turning into a duopoly with two players - Reliance Jio and Bharti Airtel - dominating the market. Until a few years ago, the telecom industry had many players, who were forced out of business after the 2G spectrum allocation scam. This left the industry with only three private players - Reliance Jio, Bharti Airtel


Recently, the telecom industry, through its association, the Cellular Operators Association of India (COAI), came together to ask for a revival package, from the govern-ment. COAI has asked the govern-ment to extend the tenure of leased spectrum to operators up to 40 years against the current 20-year period.

It has asked for the moratorium on spectrum payments to be extended to 7-10 years from the current 2 years. This would apply to the current-ly-leased spectrum and its payments, and the spectrum to be allotted in future auctions.

COAI has also demanded that the overall licence fee be reduced to 2% of AGR of operators from the current 8%.

In addition to this, COAI has asked for a change in the definition for calculating AGR so that only telecom revenues from customers are considered and non-telecom revenues are kept out of it.

The telecom industry has demanded that interest rates on all outstanding deferred payment liabilities for acquiring spectrum through auction be reduced to 4% or less. The current interest rate is between 9% and 10%.

COAI’s demands come at a time when the government of India is close to announcing a relief package for the telecom sector. This package could include a reduction in revenue share licence fee to 6% of operators’ AGR from 8% now.

This reduction will provide a relief of around `3,000 crore annually to the operators. The government is also considering extending the moratori-um for spectrum payments by a year or two. It is also believed that the DoT will recommend changes in the foreign direct investment (FDI)

norms.

While India allows 100% FDI in the telecom sector, only 49% is through the automatic route, with government approval required for the rest. The level of automatic inflows could be increased to 74% of the FDI.

The telecom sector is in need of a relief package almost on an urgent basis. Vodafone’s bankruptcy could cause an unprecedented crisis for the sector, the government and lenders. Considering the money Vodafone owes to lenders and the government, a rescue package is inevitable.

Vodafone Idea’s gross debt stood at `180,310 crore as on 31st Mar ’21. The amount included deferred spectrum payment obligations of `96,270 crore and debt from banks and financial institutions of `23,080 crore aside from the AGR liability.

Eight leading banks have lent to Vodafone Idea. India’s largest bank, the State Bank of India, has the largest exposure at `11,000 crore. Other lenders include IDFC First (`3,240 crore), Yes Bank (`4,000 crore), IndusInd Bank (`3,500 crore), Punjab National Bank (`3,000 crore), ICICI Bank (`1,700 crore), Axis Bank (`1,300 crore) and HDFC Bank (`1,000 crore).

A government relief package could provide $1 billion in annual relief to Vodafone. According to a note by BNP Paribas, a combination of reduced interest on deferred spectrum liability and an interest waiver on its AGR dues could offer an annual relief of nearly $1 billion to Vodafone Idea.

A 2% rate cut on Vodafone’s deferred spectrum liability would lower its annual interest burden by `2,100 crore. And if the government foregoes the interest component on

AGR dues, it can result in an additional `4,000 crore to `5,000 crore annual relief, the BNP Paribas note said.

Vodafone’s survival is important because in its absence, the telecom sector would turn into a duopoly, which will eventually hurt consum-ers. The operator’s collapse, which looks imminent in the absence of a relief package, would hurt the government, banks, tower companies and its employees.

Lenders will have to write off losses worth `30,000 crore, if the company collapses. The government will bear most of the losses, since SBI has the highest debt exposure to Vodafone.

Vodafone has repeatedly failed to raise capital after receiving approval from its board to raise `25,000 crore. The company claims that investors have bypassed the company because of a lack of clarity on AGR liability, moratorium on spectrum payments and floor pricing regime above the cost of service.

This leaves the company with only one solution - a government bailout. Deutsche Bank recently said the government should take control of Vodafone by converting the compa-ny’s debt into equity. All indications point to the fact that the government is considering a long-term relief package for the entire telecom sector and not just Vodafone.

It is not clear yet if the government will consider recapitalizing Vodafone by converting its debt into equity or merging it with BSNL. Reports say a relief package is on the horizon but the government has kept quiet on bailing out Vodafone. It is anybody’s guess if they will consider doing so. Also, the industry can look forward to reforms that will mitigate legacy issues that are haunting the sectoR.

BEYOND THINKING

If you had bought stocks at the bottom of the market in March last

Veteran investor Howard Marks lists factors that investors must follow when trying to

reinvent themselves after hitting rock bottom during a downturn in the market

year, then you would have probably made tonnes of money. While in hindsight everything looks easy, the real challenge of having knowledge, courage and confidence to act in such times is rare.

One rare breed that probably understands the pulse of stock markets much better than the rest and is quite famous for his regarded market cycle theories is Howard

Marks, who has done so quite often.

In fact when the markets made a low in March last year, Howard Marks, in his memo distilled a few criteria or important pre-conditions that his firm (Oaktree) follows to determine or make the best judgment of the market.

“I feel strongly that it’s possible to improve investment results by



remains the most reliable way to invest for the long term.” THE EASE OF EXECUTING RISKY FINANCINGS

It’s all money. Change in share prices is nothing but the function of demand and supply in the market. And flow of money or liquidity in the market can often lead to surprising results.

In most of the previous bubbles and the bottoms of the market, the flow of money has been a key driver. Like risky financing is responsible for extreme exuberance in the markets, they are equally a good indicator when the markets hit bottom.

“In good times, we hear most people say, “Risk? What risk? I don’t see much that could go wrong: look how well things have been going. And anyway, risk is my friend - the more risk I take, the more money I’m likely to make.” Then, in bad times, they switch to something simpler: “I don’t care if I ever make another penny in the market; I just don’t want to lose any more. Get me out!” said Howard Marks.

In another memo, Marks stated, “Just as the inadequacy of their risk aversion allowed them to push prices up and buy at the top - egged on by the vision of easy money in a world in which they couldn’t discern any risk - now they push prices down and sell at the bottom. Their unpleasant recent experience convinces them - contrary to what they had thought when everything was going well - that investing is a risky field in which they shouldn’t engage. And, as a consequence, their risk aversion goes all the way from inadequate to excessive.”

Howard Marks suggests maintaining a balance in his April ’20 memo. He says “One way to think about the

the one end and yet the market keeps on firing from the other end. Sharp and consistent declines are normal during every cycle at the bottom of the market.

THE LEVEL OF VALUATIONS

The second important thing is to keep a close eye on overall valua-tions. During the global financial crisis and economic slowdown of 2008-09, the Sensex fell from about 21,000 to around 8,900 level.

At its peak, it was trading at almost 25 times its earnings but when it fell or made a low in March ’09, the price to earnings ratio had corrected to almost 8-9 times and was offering a dividend yield of close to 3%, which was the highest in history.

“Stocks are cheapest when everything looks grim. The depress-ing outlook keeps them there, and only a few astute and daring bargain hunters are willing to take new positions,” says Howard Marks.

Valuations may keep on falling. They may not assure but they are the key in determining the levels of the markets. More so it is not the direction of the valuation which is unpredictable, what really matters is whether they are cheap enough or not.

Howard Marks’s memo of 3rd Mar ’20 has an apt insight into price-val-ue relationship. He says, “Intelligent investing has to be based – as always – on the relationship between price and value. In other words, not “will the collapse go further?”

But rather “has the collapse to date caused securities to be priced right; or are they overpriced given the fundamentals; or have they become cheap?” I have no doubt that assessing price relative to value

adjusting your positioning to fit the market; and Oaktree was able to do so by turning highly cautious in 2005-06 and highly aggressive in 1990-91, 2001-02 and immediately after the Lehman bankruptcy filing in 2008. This was done on the basis of reasoned judgments,” said Howard Marks.

He further lists out his key points as mentioned below:• How Markets Have Been Acting• The Level Of Valuations• The Ease Of Executing Risky Financings• The Status Of Investor Psychology And Behaviour• The Presence Of Greed Versus Fear• Where The Markets Stand In Their Usual Cycle

So the next time you are not sure, keep the points or checklist handy.

HOW MARKETS HAVE BEEN ACTING

Markets act differently during different cycles. And when they are about to hit the bottom, it is often seen that they appear to be in a confused state. Share prices and markets as a whole hesitate to form a view. It is in an uncertain zone; the participants are not sure how prices will act tomorrow morning, the skepticism is at its peak and people are afraid to take a position home.

Rationality and fundamentals often take a back seat. Stocks are valued by the amount of buying and selling rather than the intrinsic value of the company. Markets and share prices take clues from the events which are remotely related.

Like exuberance at the peak of the market, gloom and doom produce irrationality and the markets act irrationally beyond people’s imagina-tion. People are staring at losses on


balance between offense and defense is to consider the “twin risks” investors face every day: the risk of losing money and the risk of missing opportunity.

At least in theory, you can eliminate either one but not both. Moreover, eliminating one exposes you entirely to the other. Thus we tend to compromise or balance the two risks, and every individual investor or institution should develop a view as to what their normal balance between the two should be.

Cautious positioning in recent years has served its purpose. Investors who favoured defense over offense have experienced smaller losses this year, have the satisfaction that comes from relative outperformance, and are able to spend more of their time looking for bargains than dealing with legacy problems.”

THE STATUS OF INVESTOR PSYCHOLOGY AND BEHAV-IOUR

Like fundamentals and liquidity, behaviour and investors’ psychology play an important role. Many great changes in the markets from exuberance to panic selling or many past great market crashes are produced by investor psychology.

For instance, just after the end of the WWI in 1918, a new wave lashed the US, and Europe popularly known as “Roaring Twenties.” Economic prosperity boomed with growing industrialization, flow of capital and opening up of the society. Investors bought any stock at any price.

The greed in the market spread and irrationality took over the wider market. This huge craze led to an era of mass consumerism.

In the decade from 1919 to 1929, the

US Dow Jones jumped more than four-fold from a level of 80 to 381. However, when the cycle turned, production declined, unemployment rose, panic set in.

The fear of losing money and other accompanied emotions led to a massive market crash. The year 1929 marked the onset of “The Great Depression and the Great Market Carsh of 1929.” The US Dow Index crashed further to a rock bottom level of 41.22 by the end of July 1932.

“Typically the bottom is reached only when optimism is nowhere to be found,” asserts Howard Marks.

The year 2019 was a great year for the global markets. Sensex was trading at an all-time high of around 42,000 levels in January ’20. No one thought a global disease brewing somewhere in China could cause a huge crash.

By the end of March ’20, the Sensex had collapsed to around the 25,000 level, marking a correction of almost 40% from the peak. More than anything that could be seen or evaluated in a short span of time the investors’ psychology superseded every other factor.

Marks aptly elaborated this fact in his memo dated 3rd Mar ’20. In it he says that investor behaviour and perception vary greatly. He says, “In the real world, things generally fluctuate between ‘pretty good’ and ‘not so hot.’ But in the world of investing, perception often swings from ‘flawless’ to ‘hopeless.’

“What I can say is that a month ago, most people thought the macro outlook was uniformly favourable, and they had trouble thinking of a possible negative catalyst with a serious likelihood of materializing. And now the unimaginable catalyst

(covid-19) is here and terrifying. (There are a few important lessons here. First, the catalyst for a recession or correction isn’t always foreseeable. Second, it can seemingly appear out of thin air, as this virus (referring to the covid-19 virus) seems to have done. And third, the negative effect of an unforeseeable catalyst is likely greater when it collides with a market that reflects so much optimism that it is “priced for perfection”).”

THE PRESENCE OF GREED VERSUS FEAR

“The stock market is the story of cycles and of the human behaviour that is responsible for overreactions in both directions,” says American billionaire investor Seth Klarman.

Fear and greed are the influencing sentiments. Negative market sentiments following a weak economy drive people to become bearish. In the year 2000, market hype and optimism led to the severe over valuation of several IT compa-nies. Eventually in October ’02 markets dramatically came crashing down.

The NASDAQ crashed by as much as 76.81%. Some companies went bankrupt entirely. Fundamentals and Liquidity when accompanied by sentiments or emotions such as fear and greed can take markets and for that matter any market to levels no one could have imagined.

Through his memo dated 6th Apr ’20 Marks elaborates, “In my opinion, the difference between most people’s positive and negative views is likely to stem largely from their innate biases, and thus the data points they choose to overweigh. Future scenarios comprise a large number of variables: today even more than usual. It’s relatively easy to build a


Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks, read the o�er document carefully before investing. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not o�er PMS Service for the Commodity segment. The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067): INB260939138, INF260939138, INE260939139: Single Registration No. INZ000202536, PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99; Exchange Member ID: MCX - 56460,

NCDEX - 1268, ICEX – 2073. Mutual Fund Registration No: ARN- 49454. Regd. O�ce: B-2, 301/302, 3rd Floor, Marathon Innova, O� Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010


spreadsheet listing the many things that will contribute to the future and rate them as likely to turn out well or poorly. But merely toting up the plusses and minuses won’t tell you whether the future will be favourable or unfavourable.

“The essential element is figuring out which ones will be most influential. That’s often where optimistic or pessimistic biases come in. The optimist takes cheer from the favourable outlook for the positive data points, and the pessimist is depressed by the unpleasant possibil-ities for the negative ones . . . even if they’re both working from the same underlying spreadsheet in terms of elements and ratings.”

When markets fall or they are about to hit the bottom, you would often see lots of fear. Investors are seen willing to jump out of window and

swearing to never come back again. The extent of pessimism reaches its peak and even the most courageous people lose faith. People completely write off equities as they see a gloom.

WHERE THE MARKETS STAND IN THEIR USUAL CYCLE

According to Howard Marks, the primary method of positioning ourselves involves a good under-standing of the current condition of the cycle. It provides an advantage, which puts us ahead of others.

If we carefully study these market cycles, we could be in a position to understand how various factors influence them. If we, as investors, know the cycles and the behavior of the cycles, then we can maintain a balance between aggressiveness and defensiveness.

Knowing where we are in the usual market cycle is thus important to act. The points elaborated above will help in gauging where we are in the cycle. But moreover, once we know where the markets are in a given cycle, our ability to act will improve drastically.

Interestingly, a typical cycle will have a normal bell curve type impression. At the bottom of the market they look drifting down and chugging along.

Like the peak and moderation, in the down cycle markets will provide all the important cues including low valuations, gloomy outlook, dismal share prices, extreme risk averseness and highest fear, among others. If these signs are visible, while they cannot stop markets from falling further, you are at least sure that markets stand in their down cyclE.

BEYOND BASICS

The demand for health insurance has gone up sharply since the

ADELICATE ISSUE

Having a health insurance policy ensures cost-sharing support for policyholders and is

a must for everyone

coronavirus-led pandemic started. Despite the rise in the number of investors rushing to buy policies amidst growing cases of covid-19, the penetration of non-life insurance continues to be abysmal in India. The insurance industry in conjunction with its regulator has taken several steps to improve the penetration of health insurance in the country. The Insurance Regulatory

and Development Authority of India (IRDAI) has announced various initiatives like standard policy in health insurance and specific policies for covid-19. Arogya Sanjeevani, a standard health insurance plan to be sold by all the insurance companies, was announced recently. Later, to tackle the current pandemic, regulators asked insurers to come out with covid-19 specific



TOP-UP AND A SUPER TOP-UP PLAN

Unlike mediclaim, a critical illness plan, pays the entire sum insured on the occurrence of the specified illness, regardless of your hospital expenses.

All insurers cover 10 to 12 major critical illnesses or even more. Some of these include cancer, coronary artery bypass surgery, heart attack, stroke, kidney failure, aorta surgery, heart valve replacement, major organ transplant and paralysis. So along with the base plan, an individual should also look at buying a critical illness rider along with the health insurance policy. In today’s time when hospitalization costs are very high for people who can’t afford higher health insurance premiums, individuals could opt for a top-up or a super top-up plan for their health insurance policies.

In simple words, a regular health insurance policy reimburses hospital bills up to the sum insured while top-up plans cover the cost of the bill, which is higher than the sum insured. Policyholders can buy a top-up policy either from the existing insurance provider or a different company. Top-up plans work on a cost-sharing basis where medical expenses up to the deductible limit have to be borne by the policyholder. The insurance company takes charge of medical costs only if the expenses cross the deductible limit. The top-up plan will pay for expenses incurred above that limit. For example, if your current policy has a sum insured of `10 lakh and you get a top-up plan of another `10 lakh, you can use the top-up plan if

transportation and illnesses that they may be at risk of suffering from due to their family’s medical history. If investors are buying a health insurance policy for their families, they need to check whether the policy meets the needs of each member of their respective families. So there are individual health insurance plans, also popularly known as mediclaim and family floater plans. Individual plans are to be purchased in individual name.

And, therefore, the premium is based on age and the sum insured. They are indemnity policies, that is, they reimburse the actual expenses incurred up to the amount of the cover that the policyholder buys. Even a family floater plan is largely similar to an individual health insurance plan. The benefits remain largely the same.

But the sum insured can be availed of by any or all members of the family and not a single person. The premium in these plans is lower than individual health insurance plans. Secondly, coverage is very important in a family. In urban cities like Mumbai, there is no use of buying a policy of just `2 lakh. People living in urban areas should have a minimum health cover of `10 lakh.

If someone wants to buy more cover but is unable to pay the premiums, he/she should look at buying top-ups and super top-up plans. So, for a big family living in an urban city, it is best to buy a family floater plan with a health insurance cover of at least `15 lakh to `20 lakh. BUYING A CRITICAL ILLNESS COVER ALONG WITH A

plans known as Corona Rakshak and Corona Kavach. These announcements will certainly improve the penetration of health insurance in India, going forward. However, as individuals, we need to have enough health insurance coverage so that there are few out-of-pocket expenses.

Currently, around 80% Indians incur out-of-pocket expenses when it comes to health insurance. This means that they don’t have enough insurance cover. In this article we try to explain how a person should buy health insurance, the steps that should be followed after buying the policy and how much cover one should have while buying health insurance plans. STEPS TO BUY HEALTH INSURANCE PLANS

Several investors face the dilemma of how to buy a health insurance policy, what should be the ideal cover and should they buy family plans or individual plans. While buying health insurance, one should ensure he/she has a health cover in the name of all family members, unlike life insurance, which is to be bought in the name of the bread earner of the family. Besides buying the right health cover, it is equally important to keep adequate coverage so that hospital bills are paid by insurers, and that the bills are not paid by you from your own pockets. Investors should choose a health plan that secures them against a wide range of medical problems, and provides benefits including pre- and post-hospitalization expenses, daycare expenses as well as



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

Exchange Member ID: MCX - 56460, NCDEX - 1268, ICEX – 2073. Mutual Fund Registration No: ARN- 49454. Regd. Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010


the existing sum insured gets exhausted. So, if the claim amount is `14 lakh, `10 lakh will be paid from the base policy and the remaining `4 lakh will be paid from the top-up plan. But if your medical expenses are `25 lakh, then the remaining `5 lakh will have to be paid from your own pocket. There are benefits of having top-up plans. But the main advantage of a top-up plan is that it can be bought at a minimal cost of a basic insurance plan and can also be purchased with family health insurance plans and health insurance plans for seniors. But super top-up plans offer an extensive cover. A regular top-up plan starts only when policyholders’ single hospitalization costs cross the deductible limit.

It simply means that in case of multiple hospitalizations within a year and if the cost of each hospitalization is below the deductible limit, the top-up plan will not kick in even when the total cost

during the year crosses the deductible amount.

But super top-up plans cover total expenses in a given year. These include multiple hospitalizations, which are not covered in top-up plans. IMPORTANCE OF RENEWING HEALTH INSURANCE POLICIES

The timely renewal of health insurance plans is very important. Missing renewal premiums can lead to getting uninsured.

If the renewal date is missed or if the policyholder fails to pay the premium amount during the stipulated timeline or before the policy expires, then he/she can still make the payment during the grace period (this period differs from insurer to insurer) offered by the insurer.

However, if the payment is missed even during this period, then the

policy would lapse. There are two ways of dealing with a lapsed policy - buy a new health plan or revive the lapsed policy. However, both these solutions have a couple of setbacks. Buying a new health insurance plan would be similar to buying a policy for the very first time. Any bonuses earned during the past policy period wouldn’t be continued and the waiting period would be applicable from the start with this new plan. The previous waiting period would not be carried forward to this new plan, and, hence, this situation can be stressful to people. When it comes to the revival of the lapsed policy, individuals can simply pay the outstanding premium amount with the additional interest that comes along with it.

Renewing a health insurance policy is very important because once its lapses, policyholders have to buy a new policy with some other features and even higher premiums, in a number of caseS.


TECHNICAL OUTLOOK immediate support at the 17,500- mark. Any move below this level on a closing basis may cause selling pressure, which might drag the Nifty towards 17,200 to 17,000 levels.

Looking at the technical set up, the Nifty might witness some profit- booking at higher levels. A breather of a few days from here on will, in turn, make the market healthy. Hence, any breather towards the 17,500 level should be used as a buying opportunity.

The overall trend on the Nifty will remain positive as long as it trades above the 17,500 level. Any move above this level on close for at least 1-2 trading sessions, will take the Nifty to the 17,200 - 17,000 levels.

The Bank Nifty’s technical set up is strong. The monthly chart suggests that the Bank Nifty has given the breakout of Flag Pattern, indicating a potential up move towards the 38,800-39,200 mark.

The Bank Nifty has just started showing a stellar performance compared to the Nifty. If it manages to hold on to 38,000 on close on two trading sessions, then a one-sided rally in the Bank Nifty towards 38,800-39,200 is likely to be seen.

On the other hand, 37,000 will act as a strong support for the Bank Nifty. Till it holds this level, a pullback rally at every support may be seen.

Overall, the market trend is strong and bullish. A sectoral rotation is visible, which will help the index perform at every trading session. One should hold on to long positions with a trailing stop loss.

On the Nifty Options front for the

October series, the highest Open Interest (OI) build up is seen near 18,000 and 18,500 Call strikes. On the Put side, it is observed at 17,500 and 17,000 strikes.

Banking and auto sectors saw long OI positions, indicating that stocks from these two sectors may see buying support in the near term. Pharma and metals sectors saw marginal short OI positions, which could keep stocks from these sectors under selling pressure.

India VIX remained in the range of 10-18 for most part of September. Going forward, VIX may remain in a similar range and follow global markets for further cues.

The Put Call Ratio-Open Interest (PCR-OI) for Nifty Options has been in the range of 1-1.65 in September. Going forward, it may be in the range of 0.9-1.5 in October.

The markets are believed to remain bullish with supports at 17,500 and 17,000 levels. Bouts of volatility may come from key global scenarios with the index finding resistance at 18,000 and 18,500 levels on upside.

OPTIONS STRATEGY

Long StrangleIt can be initiated by ‘Buying 1 lot 14SEP 18000 CE (`163) and Buying 1 lot 14SEP 17600 PE (`134).’ The premium outflow is around 297 points, which is the maximum loss. One should place a stop loss at 210 points (87 point loss). The maximum gain is unlimited and one should place a Target at 450 points (153 point gain). Since VIX has increased sharply, heavy volatility is expected in either direction, which will result in decent gains for the strategY.

rom hitting the 1,000-mark on 25th Jul ’90 to reaching the 60,000-mark for the first time recently, it has been a historic journey for the benchmark index, Sensex.

Interestingly, the Sensex breached levels 50,000 and 60,000 in 2021 amidst the devastation caused by the coronavirus pandemic, thus demon-strating its remarkable resilience.

The Nifty rallied a great deal in August by touching the 17,947.65- mark. The market was stronger-than- expected and ended September on a positive note. The weekly chart indicates that the Nifty rallied in a higher-top and higher-bottom pattern throughout September and gave returns of almost 4.24% to the Bulls.

The sentiment on D-Street is bullish. A dip of a few percentage points would be a good chance for traders and investors to enter the market.

Broad-based buying from large-caps to mid- and small-caps is visible. The euphoria in the market is likely to continue till 2022. However, volatility may see an uptick.

In the last few sessions, the Nifty has been facing strong resistance at the 18,000 psychological mark. Once it crosses this level, then the extension of this positive trend towards 18,400 to 18,600 levels is likely.

On the flip side, the Nifty has an

BEYOND NUMBERS

F

43


Small Cap Funds

SCHEME NAME NAVHistoric Return (%)

1 Year 10 Years5 Years 7 YearsAUM (Cr)

3 Years

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

59 159

81 105

99 13,554

82.5104.7

98.381.373.793.7

31.231.525.624.424.318.9

21.520.221.915.121.912.6

2020.420.919.2

2313.3

--21.324.821.925.613.9

7,095 5,642

16,633 8,000 9,714

--

Multicap Funds/Flexicap Funds



3 Years

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

1,182 230

20 270

20 29,543

69.462.582.778.265.268.1

19.222.225.4

2522.519.4

15.318.2

--19.5

--16.8

15.815--

16.7--

14.6

18.216.2

--18.4

--15.9

15,677 5,730

721 22,592

9,783 --

Large Cap Funds



3 Years

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

48 80

384 43 51

25,571

58.958.7

6258.852.663.7

21.418.419.721.716.818.7

18.516.815.317.414.716.8

15.215.814.214.911.713.6

17.318.515.4

1613.815.4

32,213 29,425

3,233 4,272

898 --

BEYOND NUMBERS

44

MUTUAL FUND BLACKBOARDPerformance Of Mutual Fund Schemes From Different Categories

Mid Cap Funds



3 Years

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

241 17 49 70 86 71

39,708

68.574.579.969.664.576.684.5

23.322

23.325.721.624.220.1

16.6--

17.921.117.717.515.3

16.7--

18.418.216.9

1916.2

19.7--

21.421.719.921.216.9

1,410 785

1,643 14,804

1,879 15,709

--

Large & Mid Cap Funds



3 Years

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

98 164 183 196 332

12,288

73.268.275.9

6061

72.3

25.821.818.920.3

2120.4

21.118.314.715.914.817.5

21.919.111.615.714.316.3

24.922.713.317.116.517.7

20,615 10,985

2,904 7,827 2,636

--


Focused Funds



3 Years

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

48 77 50

242 29,543

7075.965.272.468.1

21.320.116.922.919.4

19.414.814.2

1816.8

17.815.212.417.114.6

--18.415.218.815.9

19,736 5,626 2,088

19,429 --

Dynamic Asset Allocation Funds



3 Years

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

49 122

15 36 15

14,778

29.832.629.537.624.541.3

1312.3

--16.413.516.7

10.811.3

--13.4

--14.2

10.910.6

--11.6

--12.4

13.613.6

--12.5

--13.4

34,687 4,331 3,342 5,304

10,688 --

Hybrid Aggressive



3 Years

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

249 240 205

22 14,778

4651.949.847.441.3

18.619.117.816.816.7

14.713.714.114.714.2

14.114.313.8

--12.4

15.614.516.5

--13.4

6,493 7,516

45,748 5,950

--

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



3 Years

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

77 117

71 84 31

9,428

71.165.160.660.6

6966.3

22.123.919.718.723.619.2

18.418.915.516.5

2116.8

17.115.715.415.3

--14.6

20.617.1

1617.7

--16

33,871 2,680 2,249 1,843 9,401

--

Contra/Value Fund



3 Years

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

77 84

195 102

29,543

60.194.790.166.868.1

18.218.222.519.119.4

17.316.615.115.116.8

16.114.914.112.214.6

18.21715

14.715.9

8,199 3,990 2,823 6,545

--

Multi-Asset Allocation Funds



3 Years

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

47 13 15

14,778

34.735

41.341.3

15.1----

16.7

11.1----

14.2

10.4----

12.4

10.7----

13.4

1,088 1,182

987 --

45


Sector/Thematic



3 Years

Aditya Birla Sun Life PSU Equity Fund - Reg - GrowthCanara Robeco Consumer Trends Fund - Reg - GrowthEdelweiss Recently Listed IPO Fund - Reg - GrowthMirae Asset Great Consumer Fund - GrowthICICI Prudential Technology Fund - GrowthNippon India Pharma Fund - Reg - GrowthBNP Paribas India Consumption Fund - Reg - GrowthICICI Prudential Banking and Financial Services Fund S&P BSE 500 TRI

13 67 20 56

165 311

20 86

29,543

68.161.8

8660.1

104.839.959.378.268.1

--23.130.618.839.224.325.815.219.4

--18--

17.833.816.2

--13.416.8

--17.8

--16.423.314.8

--15.614.6

--18.4

--18.827.119.2

--18.615.9

788 704 709

1,488 5,037 5,667

839 5,097

--

Gold



3 Year

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

15 19 19

46,058

-8.9-8.3-8.5-7.1

13.314.213.214.5

6.77.36.6

8

6.66.86.4

8

--4.43.95.8

1,229 1,019 1,391

--

Arbitrage Fund


3 Months 3 Years1 Year 2 YearsAUM (Cr)

6 Months

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

26 30 12 21

3.43.53.73.6

44.34.44.2

3.63.9

43.7

3.94.44.74.3

4.85--5

6,704 25,746 11,990 12,972

Index Fund



3 Years

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

164 38 20 20

119 25,571

62.962.277.288.963.263.7

1815----

18.318.7

16.213.3

----

16.416.8

1314.2

----

13.213.6

14.615.8

----

14.715.4

3,705 1,535

329 208

4,854 --

FoF Overseas



3 Years

PGIM India Global Equity Opportunities Fund 39 35.8 29.2 23.8 13.5 14 1,516

Liquid Fund


2 WeeksYTM

3 Months 1 YearAUM (Cr)

1 Month

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

335 308

4,206 5,075 1,351

--

2.92.92.92.9

33.3

33

2.92.93.13.4

3.23.23.23.23.33.5

3.23.23.23.23.33.6

3.353.293.273.263.33

--

32,671 41,512 33,195 24,716

1,760 --

46


Money Market Funds


3 MonthsYTM

1 Year 3 YearsAUM (Cr)

6 Months

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

290 33

4,502 3,255 3,711

--

43.53.93.9

43.5

43.4

43.84.23.6

4.13.53.9

44.13.6

6.76

6.66.54.55.4

3.673.643.623.523.68

--

16,634 25,620 15,730

9,665 7,139

--

Ultra Short Term Funds


3 MonthsYTM


6 Months

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

12 22

3,351 432

4,344

3.84

8.24.34.1

3.84.35.84.44.1

3.94.5

54.4

4

6.46.84.8

76.3

3.74.293.814.06

--

17,843 10,652

2,180 18,973

--

Short Term Funds


3 MonthsYTM


6 Months

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

25 42 47

6.36.25.7

6.46.8

6

5.96.35.9

98.58.7

4.954.985.25

19,011 10,189 20,850

Low Duration Funds


3 MonthsYTM


6 Months

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

46 428

2,991 1,814 2,687

4.35.54.53.74.6

4.75.54.93.74.7

55.5

53.74.4

7.27.76.75.87.2

4.394.484.343.914.58

25,628 34,969

9,778 1,079

12,464

Banking & PSU Bond Funds


3 MonthsYTM


6 Months

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

18 12 52 17

5.66.36.66.6

6.26.66.86.3

5.85.85.95.7

9.1--

9.39.3

5.315.005.634.93

9,736 396

9,819 6,785

Corporate Bond Funds


3 MonthsYTM


6 Months

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

23 16 26

2,986 14

6.26.87.16.35.6

6.16.66.96.35.7

66.26.45.65.7

8.88.79.68.47.9

4.974.855.09

54.84

20,383 21,013 27,568 10,336

5,425


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

period are Annualized Returns. Source: - ICRA MFI, NAV as on 27th Sept ’21

Dynamic Bond Fund


3 MonthsYTM


6 Months

ICICI Prudential All Seasons Bond Fund - GrowthIDFC D B F - Reg - GrowthKotak Dynamic Bond Fund - Reg - GrowthCRISIL Corporate Bond Composite Index*

29 28 30 --

6.95.77.9

--

6.96.17.1

--

6.84.46.1

--

9.610.1

9.9--

6.15.686.02

--

6,036 3,833 2,984

--

Gilt Fund


3 MonthsYTM


6 Months

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

31 78 28

7.79.56.2

6.57.46.5

4.46.24.8

10.310.211.5

5.855.34

5.7

1,355 1,530 1,937

Credit Risk Fund


3 MonthsYTM


6 Months

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

25 19 36

5.98.47.4

89.67.5

7.810.1

7.3

99.57.7

7.056.676.19

7,926 8,311 3,440

Medium to Long Duration Fund


3 MonthsYTM


6 Months

ICICI Prudential Bond Fund - GrowthSBI Magnum Income Fund - Growth

32 57

77

6.46.9

5.46.4

9.510.1

6.125.73

2,792 1,700

Medium Duration Fund


3 MonthsYTM


6 Months

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

35 45 41

7.37.66.4

7.88.16.9

7.87.76.6

8.98.89.9

6.66.135.67

7,006 3,853 9,555

Overnight Fund


2 WeeksYTM

3 Months 1 YearAUM (Cr)

1 Month

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

1,123 1,108 1,097

112 --

3.13

3.13.13.3

3333

3.4

3333

3.5

3333

3.6

3.153.113.153.09

--

9,323 2,066 1,195 7,804

--

Floater Fund


3 MonthsYTM


6 Months

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

273 36

5.25.9

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BEYOND LEARNING

A FENCED-OFFFORTRESS

Picking a company with an economic moat will ensure greater investor success



enjoys a wider moat, it can protect its turf and grow on a sustainable basis for decades to come.

The wider the economic moat, the more difficult it would be for a competitor or a new entrant to overcome the incumbent’s advantage. Over time, the effectiveness of the moat could change, that is, it could become smaller or wider.

One of the factors influencing this is the fact that we live in a globalized world where innovation is fast-paced, making it even more important to find businesses with a wide economic moat.

ADAPT OR PERISH

A case in point is Nokia. Although it was once a market leader in the mobile phone market, Nokia failed because it was unable to adapt to changing consumer needs. And instead of adopting the Android Operating System, it stubbornly stuck to Symbian OS.

MTNL is another example of a company that has failed to reinvent itself. Thus, it has gone from being a debt-free company to being under heavy debt. In the current environment, digitization has been disruptive. Also, the accelerated pick up of e-commerce due to the covid-19 pandemic has been posing a serious threat to various retail businesses.

INVESTOR FORESIGHT

Why do long-term investors need to identify companies with an economic moat? What makes an economic moat important is the fact that it gives a company a pricing power, that is, even if the company increases the price of its products and services, it enjoys customer stickiness, and,

the affirmative, then Berkshire Hathaway would invest in the business under consideration.

WHAT IS AN ECONOMIC MOAT?

A moat refers to a castle that is surrounded by a deep trench that is filled with water. This protects the castle from attackers. And the bigger the moat, the lower is the chance of attackers getting across the moat.

Just as one would prefer to have a castle with a wider moat, a wide economic moat in terms of investible opportunities ensures the success of long-term investors.

The emphasis is on a wider moat because the wider the economic moat, the more sustainable the business would be. That is, the company will enjoy a unique advantage, which will enable it to grow profitability for years to come and create wealth.

IN IT FOR THE LONG HAUL

An economic moat differs from purely competitive advantage, which is the ability of a company to earn premium margins from its competitors because an economic moat emphasizes on sustainable competitive advantages - one that will last for decades and not one that is an opportunistic window that a business stumbles upon during the course of its operations.

Some examples of economic moats include patented technologies or processes, brand recognition and network/distribution strength, among others.

Moats can be narrow or wide. If it is narrow, it means that the advantage the company has would last only for a few years. But if the company

Veteran investor Warren Buffett has popularized the term economic moat. He has been using this concept to successfully create wealth for Berkshire Hathaway.

Buffett mainly studies companies and looks out for those that have a sustainable and strong economic moat around their businesses, also known as a wide economic moat.

In response to a shareholder’s query at Berkshire Hathaway’s annual shareholders meeting in 1995, Buffett stated: “What we are trying to do is find a business with a wide and long-lasting moat around it, surround - protecting a terrific economic castle with an honest lord in charge of the castle.”

After identifying the moat, the next step is to answer the question, “What is keeping - why is that castle still standing? And what’s going to keep it standing or cause it not to be standing 5, 10, 20 years from now. What are the key factors? And how permanent are they? How much do they depend on the genius of the lord in the castle?”

The final step is to assess management quality. Buffett said, “And then if we feel good about the moat, then we try to figure out whether, you know, the lord is going to try to take it all for himself, whether he’s likely to do something stupid with the proceeds, et cetera.”

If the answer to these three steps is in


hence, there will be no fall in demand.

Companies such as Mercedes Benz or Rolex enjoy a wide moat because of status symbol. Customers are willing to buy them no matter what. This means that they are not price-sensitive because they hold the brand in high regard as it provides them with an elite status they covet.

IDENTIFYING PROMISING OPPORTUNITIES

How should investors identify companies with an economic moat? Companies with a wide economic moat necessarily have high profit margins, which are sustainable.

Analyzing a company’s business model and its performance over certain number of years using return ratios such as return on equity and return on capital employed, among others will shed light on profitability and dominance in terms of sales revenue or market capitalization along with management quality. All these can be used to shortlist companies with an economic moat.

Infosys for example has dominated the information technology space for years, creating wealth for investors.

TYPES OF ECONOMIC MOATS

Network Effect

Network effect includes those companies that grow in strength with the increased use of their products or services by consumers. This makes the company’s position untenable as it is a significant entry barrier for a competitor trying to establish its presence.

Social media websites such as Facebook, Twitter and YouTube are valuable companies because of their

user base, making it an uphill task for competitors to replicate their success.

In the marketplace, Amazon’s shipping and delivery infrastructure is difficult to replicate because of the requirement of significant capital investment in the logistics system.

In India, Amul has created a distribution and logistics network that gives it an advantage.

Another example is Visa, which dominates the electronic payment industry. The number of institutional partners and merchants that Visa has tie-ups with makes it a company with an economic moat.

Intangible Asset Moat

Non-physical attributes of a company that give it an advantage is called as an intangible asset moat. Some companies have such a dominating presence in the area of operation that the brand becomes synonymous with the product. Brand strength will ensure that the brand is on top of the mind when one thinks of the product.

For example, Dettol comes to a buyer’s mind the moment he/she thinks of antiseptic products, or Fevicol when one thinks of adhesives.

Intangible assets could also include patents, trademarks and intellectual property rights that give companies an edge over their competitors. For example, pharma companies; they get their moats from patents on drugs.

However, the period of the moat is up to the life of the patent the company owns. Trade secrets, on the other hand, can be protected indefinitely. Britannia is a good case in point. The biscuit manufacturer’s recipes for its best-selling products

are protected forever.

High Switching Cost

The cost that a customer incurs by switching from one company to another is known as switching cost. Companies with an economic moat make it difficult for consumers to switch. Thus, when switching costs are high, companies hold customers for life.

Microsoft’s dominance over customers through its Office Suite is an apt example. Even if a competitor launches a better product, customers will be hesitant to move on to it because switching to a new service provider would mean dealing with the unknown.

Scale Or Size Advantage

When a company’s operations are large and growing, that in itself is an economic moat as the company will benefit from economies of scale, which will lower the cost of operations. Furthermore, companies with very few competitors or are monopolies, provides them with an economic moat.

Indian Railway Catering and Tourism Corp (IRCTC), for example, is the only authorized entity by Indian Railways that is permitted to offer online railway tickets and manage catering services on trains and on railway stations.

Stock exchanges like NSE or the energy exchange such as the Indian Energy Exchange (IEX) all operate either as monopolies or duopolies, providing them with an economic moat.

IN A NUTSHELL

Finding companies with economic moats is a smarter way to invest in


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the markets for long-term investors. The wider the economic moat, the better it would be for them. This is because the dominance of the company would ensure that it is in a position to withstand tough times without a huge impact on its business. This means that it will have

the ability to bounce back. If a moat is weak, overtime, the competition will weaken the position of the company, leading to erosion of revenues and profitability. Finding companies with a wide economic moat is the first step as it will help build a strong investment portfolio.

But since these companies are generally sought after, investors should be cognizant of the valuations at which they trade. So, after identifying them, keeping them on the radar for valuations and buying on dips will provide stability and ensure success in investinG.

Recently, the government increased the Fair And Remunerative Price (FRP) for sugarcane for the next sugar marketing season, which is the highest so far. The sugar season (SS) follows the October to September period. Q What Is FRP?

FRP is the minimum price that sugar mills have to pay to sugarcane farmers for the cane supply. For sugar season October ’21 to September ’22, the FRP has been hiked by `5 to `290 per quintal. After no increase in FRP in SS 2019-20, the FRP was increased in SS 2020-21, by `10 per quintal to `285 per quintal.

FRP is linked to a basic recovery rate (amount of sugar recovered from cane) of sugar. FRP is higher if farmers use better sugarcane variety. This way the government incentivizes efficiency in sugarcane farming.

Q Why Do Some States Have Different Minimum Selling Prices For Cane?

Agriculture being a State subject, individual States come out with their own minimum price for sugarcane. Some States pay the FRP as announced by the central government, while some states like Uttar Pradesh (UP), announce their own State Advised Price (SAP), which is

IMPORTANTJARGON

higher than the FRP. UP has not increased its SAP for sugarcane for the last three years. The UP SAP stands at `315 per quintal.

Q What Is The Formula For Fixing The FRP?

Few things like cost of production of sugarcane, return to the growers from alternative crops, availability of sugar to consumers at a fair price, recovery of sugar from sugarcane and the realization made by mills from the sale of by-products like molasses and bagasse are few of the things that are kept in mind while fixing the FRP.

Q What Is The MSP For Sugar?

Like FRP for cane growers, the government also announces a Minimum Selling Price (MSP) for sugar that is sold by the mills. No sugar can be sold by mills below the MSP. Currently, the MSP is `33 per kilogram of sugar at factory gates. While the government has increased the FRP, it has ruled out any immediate increase in sugar MSP.

Q With No Change In MSP, What Does The FRP Announcement Mean To The Sugar Mills?

With increase in FRP, the outgo for mills will increase. Mills will be negatively impacted. But the hike is marginal and can be absorbed by the mills. Sugar mills have a long-pending demand to increase the MSP to upwards of `33 per kilogram. They are hopeful that the government will meet their demand.

GOVERNMENT INCREASES SUGARCANE FRP FOR THE NEXT SUGAR SEASON

BEYOND BUZZ


Q Why Fix MSP In The First Place? MSP is the government’s way of averting a crisis in the sugar sector. With MSP they want to ensure that mills don’t make losses and delay payments to the cane growers.

Mills have to pay farmers for cane supply within 14 days. This is irrespective of whether sugar mills generate profit or not. According to one analysis more than 80% of the mills’ cost is cane cost. During times of low sugar realization in the market, cane arrears due to farmers can jump to uncomfortable levels. Q But Why Do Sugar Prices Fall? Sugar, being a commodity, follows the law of demand-supply in the market. Higher supply in the system can make prices fall. This creates a liquidity mismatch in the industry in the form of sugarcane arrears.

According to the government, currently cane arrears are nil. But in the past the amount had increased to more than `35,000 crore putting the industry in crisis. Government sometimes has to bailout the sector.

Q Why Does The Government Protect The Sugar Industry?

The sugar sector is an important agro-based sector that impacts the livelihood of about 5 crore sugarcane farmers and their dependents and around 5 lakh workers directly employed in sugar mills, apart from those employed in various ancillary activities including farm labour and transportation.

Q How Have The Government’s Proactive Measures Kept The Sugar Sector Stable In Recent Years?

MSP ensures a fixed amount for mills. Besides MSP, the government has been incentivizing mills for exporting sugar. The government also has been rewarding mills for diverting or sacrificing sugar production for ethanol production. The idea is to lower the stock in the system so that prices stay higher.

Q What Is The Export Scenario?

Currently, the international prices of raw sugar are at a four-year high at around 20 cents per pound amid reports of lower sugar production in Brazil in the ongoing and the next production year due to bad weather conditions. Indian mills have taken advantage of this scenario and

have exported a lot of sugar. The government also provides export assistance of around `6 per kilogram. The government has been trimming the assistance as international prices are lucrative now. Q What Is The Outlook On Sugar Export Subsidy? The government has allowed exports of 6 million tonnes of sugar in the ongoing sugar season. By end-SS 2021, India is expected to export over 7 million tonnes of sugar.

No subsidy would be provided by the government for the additional 1 million tonnes. Sugar exports are likely to be profitable without government subsidy in SS 2022.

According to industry reports, Indian mills can export 6 million tonnes of sugar even without subsidy in SS 2022.

Mills want world prices to sustain at around 20 cents per pound of raw sugar to make exports profitable without needing any support from the government. The government will eventually do away with export assistance in a few years. Q What Is The Domestic Scenario? Wholesale prices of sugar have jumped to `38 per kilogram to `39 per kilogram in the past two months on account of the ongoing festival season. This could be seasonal. But with MSP, sugar prices cannot go below `33 per kilogram.

For SS 2022, India’s sugar production is expected to remain the same as that of the ongoing year at 31 million tonnes. India consumes around 26 million tonnes of sugar every year.

Sugar mills are expected to divert 3.4 million tonnes of sugar for ethanol production in the next season, as compared to 2.1 million tonnes diverted in the ongoing season. Q What Things Must Investors Watch Out For? There are four things that investors need to keep an eye on: 1) Check if international prices fall by any chance, or 2) Higher SAP announcement by UP before the assembly elections in the State next year 3) See if the government obliges to any MSP hike for sugar as it can be a positive for mills, and 4) Demand for ethanol demand by oil marketing companieS.


11:15

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