Financial Planning

This is a story of my senior, narrated to us in one of the training sessions, worth sharing, therefore thought of writing.

I joined my first gym, some 6 years back, a well-equipped and a renowned gym of my vicinity. After completing the first three days (free trial), seeing others with well-toned physic, I was inspired to go ahead on the annual subscription. My enthusiasm kept me disciplined for my new routine, for the next few weeks. My mornings were early, reaching the gym before time, warming-up and starting with the pre-planned sessions.

By the third week, this enthusiasm started fading… and soon my work, family, & above all, my laziness took over, resulting in just 5 days in the next 6 months. Life moved on, and so did I 😉.

After a good 2 years later, I saw a colleague of mine in-shape, and this got me thinking again. My curiosity arose & I asked him about his working-out pattern and gym details. He introduced me to a completely new concept of working out. He had purchased all common gym equipment’s and turned one room of his residence into a gym. He shared his gym experience, and with his in-house gym, he has a fit body!

My brain started working out on the calculations. Buying gym equipment Vs, a gym subscription. Buying the gym equipment’s and creating one at home looked pretty exciting and it worked as a new bait for my brain to take up the new challenge. What next? Skipping rope, dumbbells, weights, cycle, walking track, all were bought home in the following months and they became my new muse. There was no routine or a strict schedule to my working out, but it went well for a couple of months. But my laziness soon took over again, and even this plan didn’t work.

After two failed attempts, I gave up on the gym for almost 2 years. 

Last year, one of my friends dragged me to his gym. He sent me reminders to ensure that I wake up early. In the gym, we subscribed for a personal trainer, who helped us on a routine, based our body types and issues. And I have been a regular since.

What’s different now? well, laziness is a human attribute, and common to all of us. What we all need; is a push, or a nudge, daily (or regular basis), to keep us going. Which is also evident in our work & every aspect of life. For my gym, this started with my friend & taken over by my trainer later.

Investing is also very similar, you get into doing on your own first, seeing the ads or others… but you repent later, moreover discipline never sets in… that’s why, it’s advised to be guided by experts, not just once but on a regular basis.

Indian Equity market witnessed selling pressure, due to the death troll rise by the deadly Corona virus and fear of its spreading, which impacted the Global market, as well as the Domestic market.

On a weekly basis, Sensex closed at 41257 with a gain of 332 points or 0.8%, and Nifty at 12113 up 64 point or 0.5%. Sectors which are impacted due to Corona Virus China shutdown are; Auto Industry (which is already struggling), Tourism, Aviation and Electronics.

The retail inflation touched all time high, hitting 7.59%, impacting FD returns, as inflation adjusted return from Fixed Income (FD’s), now will become less attractive. Factory output declined to 0.3% in Dec-19, compared with a 1.8% rise in Nov-19.

According to S&P, India’s growth will recover soon, as slowdown is cyclical, with supportive monetary policy, measures by the government, will keep real GDP growth at 7.4% by FY20.

Stocks in focus: IRCTC jumped on news (profit nearly triples), Bharti Airtel rallied after improved performance & recent equity fund raise, and Avenue Supermart, due to share offloading via OFS to match exchange requirement.

What a week it’s been; the entire budget slide of minus 1k points, went positive within two days. Hence, Indian Indices Nifty & Sensex, again shined back to their 12k & 40k levels, bringing positivity in the market, leaving behind the Budget disappointment and China slow-down, on account of Corona virus.

I attended Kotak Funds meet this week & Key Takeaway; 

• Market crashed on budget day, mainly due to US market fall of 603 points & Chinese market fall of 9%, due to Corona virus fear.
• Assumptions taken in budget, are achievable, but very difficult, keeping in mind Govts past track record. For instance: from Telecom, Govt is expecting 1.3lac Cr in AGR collections, but if Vodafone defaults 50K Cr, what will happen then?
• Disinvestment targets are Tall, but achievable, considering BPCL, LIC & Concor disinvestment is done, on-time.
• Fiscal Deficit is within the cushion range & Govt will be maintaining it further, as there is enough room for higher fiscal deficit to support growth. For instance: cushion range for fiscal deficit is 4.5% & Govt is maintaining at 3.8% & 3.5% for FY-20 & FY-21 respectively.
• Most Indians consume Chinese goods; to curb the same, customs duty was increased in many products, to boost Make in India.
• Tax rates simplification, is to aim, increase in spending among millennials (to boost consumption).
• Current market favours, huge interest in Mid & Small Caps accumulation. Also, one should reduce positions in Large Caps. Large Cap Stocks are in a bubble range; HUL, Asian Paints, Nestle, Bajaj Finance, Titan, Britannia; all are trading above 10year PE.
• Switch funds from Dividend paying schemes to Growth.

Picture Credit: investorplace.com

Mid & Small-cap completely dominated the Large-cap in the previous month, where the Large-cap index gave a return of -1.25%, while the Mid & Small-cap gave a return of 3.30% and 7.72% respectively. This spurt was anticipated in advance, hence the allocation towards Mid & Small-cap was suggested, as compared to the previous month.

The large-cap index was dominated by selling pressure from the FII, due to global cues of US-Iran war and Coronavirus mainly, which overshadowed the pre-budget rally (on hopes).

For the month of February, one can expect the market to remain volatile, as GDP data, RBI policy, Quarterly results, and the greater impact of Coronavirus on Asian & global market, will give mixed cues to the Indian market.

In the Budget, the government has increased customs duty on imported items, to promote ‘Make in India’ initiative, parallelly they have also reduced corporate tax to 15%, for newly set-up manufacturing units. The impact of this initiative will be seen in the long-term. But for the short-term, the new tax regime will discourage certain class of tax-payers to invest in tax-savings instruments and will leave more money in their hands (to spend), which will boost the consumption (which is actually the need of the hour).

Due to significant fall seen on the day of Budget, one can look at increasing equity allocation. With improved earnings, due to lower corporate tax and correction seen in the market, has made the overall market, relatively less expensive.

Happy Investing!!!

Sensex crashes 1000 points today, as the market gives thumbs down to the union budget. Also, one of the longest budget speeches by the Finance Minister, heard in the last one decade.

Income tax changes were the most sought-after point but led to disappointment & created more confusion. To put it straight, now an individual has a choice to decide between two ways to pay tax; i.e. the Old-Slabs, which comes with many deductions, and the New-Slabs, introduced in this budget, which is without any deduction.

Simple calculation shows that, new slabs doesn’t give greater tax benefits, as one goes higher on income. For higher income, it’s better to have the old slab, as deductions (savings) help you save more.

By creating the new IT slabs, all the traded Insurance companies in the market crashed, as no longer they will have the IT benefit bundled with life policies.

Other key announcements:

• Deposit Insurance Coverage to increase from 1 lakh to 5 Lakh per depositor.
• Dividend Distribution Tax removed, and classical system of dividend taxation adopted.
• Simplified GST return shall be implemented from 1st April 2020. Refund process to be fully automated.
• The fiscal deficit is seen at 3.8% of GDP against projected 3.3%.
• Propose to divest LIC via IPO.
• To sell govt stake in IDBI Bank to private investors.

To boost infrastructure, 9,000 km of economic corridor will be set up. Chennai-Bengaluru expressway will also be started. Delhi-Mumbai expressway to be completed by 2023. Allocation of Rs 27,300 crore for development of industry and commerce. 100 more airports to be developed by 2025. 1,150 trains will run under the public private partnership (PPP) mode, also four stations will be redeveloped with the help of the private sector.

Photo credit: economictimes.com 

We all love to drive, and the passion starts when we are about to turn eighteen. We are eager to have our driving license in-hand, it’s like having wings-to-fly, like a free bird. I guess each one of us has experienced it 😉.

After spending years in Investment advisory, I feel there is a parallel between Investing and driving. So, grab your seat belts and read to understand.

Destination: The destination of everyone is different, or rather unique. And above all, we may choose different routes, for the same destination. It’s just like investments! What we look forward on our investments, is defined by our destination & the route we choose. And most of the time this decision is influenced by our near & dear ones, and that’s where the first mistake happens. Investment is not about copying someone but understanding one’s purpose.

Time: Can I drive my car to reach Ghatkopar from Andheri, in 30mins? The answer is yes, as well as no. It comes with a lot of parameter, your understanding, various options & the risk involved with each option. Similarly, any investment will have many parameters to be looked, risk assessed & options worked. Accordingly, one can arrive at the time.

Racing: Who doesn’t love overtaking and speeding on the roads? but this is equally risky. The risk and returns go hand in hand. Higher the risk, higher is the return. You decide the speed on your vehicle. Similarly, you should also understand your risk appetite. This is where the mistakes happen, and one ends up either in a hospital or below par returns.

Switching lanes: Switching lanes is important to smartly save yourself from being stuck behind huge vehicles or long traffic signals. But switching lanes too often may lead to accidents or the same kiosk which was being avoided. Similarly, switching between investment products depends on the goal’s cycles & other parameters. Switching too often, usually gives heartburns, and not advised.

Traffic: Traffics are all the factors that affect the equity market that is from national economies to international politics. Sometimes you reach your destination early, maybe on time and at times even late. But as the traffic moves on, so does the country’s development and thus the returns on your investments.
License to drive: being on the driver’s seat, who have multiple factors & assessment going on in your brain, from the time you start to the time you reach your destination. Similarly, for Investments, if you wish to be the driver, first ask this question: do you have the “Investment Driving License”?

Image  Credit:picfair.com

Start of the calendar year 2020, the trend is moving towards Mid & Small caps stocks.

Mid & Small-cap has had a consecutive two years of fall, and the gap between large-cap and Mid/ Small-cap continues to stretch. So far in January, NIFTY MIDCAP 100 and NIFTY SMALLCAP 100 recorded only 2 negative sessions, out of 13, which shows sign of a bullish trend.

In global markets, United States, Europe, China and Japan, these categories of stocks (Mid & Small) has already started showing sign of recovery, and in Indian history, based on historical trend, index/ stocks generally follows their global peers.

Sensex and Nifty are at an all-time high, due to inflows in the market from FII & DII, mainly driven by the large-cap or industry leaders, as investors prefer to invest in safe stocks, after many uncertain events that took place in the past (NBFC crisis, economy slowdown etc.).

Data Source: Moneycontrol

Image  Credit:Rediff.com

Monday opened to a bloodbath on the Dalal-Street, due to global tension between USA and Iran, leading to a single day plunge of almost 2% with Nifty and Sensex on Monday.

The week remained volatile, with a roller-coaster ride, leading to a sharp recovery after de-escalating issues further. On a weekly basis, Nifty gained 1.3% (160 points) and Sensex gained 1.38% (560 points), recording once again all-time high levels.

Gold prices hit the all-time high at Rs.42,420 due to uncertainty in the global market, as people choose to park funds in gold (as a safe investment). Over the period, the 1-year gold prices have surge 26.6 per cent.

On a similar note, Oil prices jumped four months high after the U.S drone strike, to mark USD 68.91, which recovered to USD 65.50 towards the weekend.
Stocks: Q3 earnings for Emami paper, reported 222% increase in net profit and locked upper circuit at 10% (Rs.89.5); Infosys was up 1.3% ahead of Q3 earnings, with audit committee finding no-evidence of financial impropriety; Yes bank fell 5% on resignation of Mr Agarwal as an independent director of bank.

Image credit: google images, society6.com

The three exclamations represent MoneyFrog’s inherent value, i.e. Wealth, Security & Protection, that’s why I decided to express it with three exclamations!!!

New Year also represents, not just the “Party-mood” to celebrate, but the “New Year Resolutions”, we proudly write down or post it on social media 😉.

Resolutions are nothing but Goals, which we decide to fulfil in a few months to 12 months. And, if I recall my resolutions (as far as I can think), I have been making them since I was in my twenties, and in terms of achievement & progress, it’s just been a fad for me, which usually lasts few weeks to few months, on a max.

But over the years, I have evolved, and thought of sharing my experience:

1. Review current year – before deciding on the resolutions for the new year, I spend time on my current resolutions (usually few days to a week), i.e. to review my current year resolutions, an exercise to simply write down month-wise progress & score it on a scale of 1 to 10.
2. Resolution logic – resolutions are not meant to be decided based on fan following or what others are doing, but what I can do & feel proud about. Also, I ensure that my resolutions are slightly uncomfortable, as anything easy isn’t challenging.
3. Resolution count – now since I am clear on current year achievement & miss-outs, next step is to decide & bring my resolution count to max 1 or 2, against each category for the new year. I usually follow 5 categories:
   • Personal – Health/ Fitness
   • Family – Relationship/ time-out
   • Work – Project/ Revenue
   • Learning – Read/ Courses/ something new
   • Money – Financial plan/ New avenues/ Debt etc.
4. Resolution journal – there is no meaning to create resolutions if I cannot monitor. As a matter of fact, my resolution success, over the years kick-started, only when I adopted the journal method. Journal is nothing but a note-pad, with written down resolutions & a daily/ monthly progress sheet. I’m from the old school of thought, hence a note-pad 😉 (whereas you can always have a new-age mobile app to help).

“What you get by achieving your goals is not as important, as what you become by achieving your goals”.

-Quote from Zig Zigler.

With 2019 about to close in next few days, Indian benchmark indices, Sensex and Nifty snapped three days of losses and managed to close high on Friday, due to positive cues from domestic & global markets. On a weekly basis, Sensex lost 0.19 percent and Nifty declined by 0.14 percent.

Profit booking was seen across the sector this week, due to fear of missing on fiscal deficit target with a struggling economy and shortfall in revenue collection. Government is unlikely to complete privatization of Air India, BPCL and Container Corporation of India by FY20, which was part of meeting fiscal deficit target plan.

According to ICRA report, the asset quality of the banking sector to improve further, with declining slippages and improvements in recoveries, which supported the banking stocks to rally, and near-term profitability may increase.

RBI announcement on simultaneous purchase and sale of government securities on 30^th December through special open market operations for Rs.10000 crore. This is a second time, when such operation will be performed, following a review of liquidity situation.

On an optimistic note, 2020 will bring more cheers, compared to the current sentiment in the markets. Wish you fabulous health, wealth & security in 2020!

Happy New Year 2020!