Business

We’ve all heard of millionaires and billionaires, but one term that recently caught our attention was “Teslanaires”. No prizes for guessing that it’s related to Tesla, the mighty EV company. If you have even an iota of interest in cars or technology, then I’m sure you’ve heard of Tesla. Indeed, you’ve also heard of its enigmatic founder Mr. Elon Musk, who routinely creates ripples through tweets, press conferences and media appearances.

Elon Musk – The tech genius who dons many hats

It’s an adage that you have to think “out of the box” to succeed in business. Well then, what do you call someone who thinks “out of the cosmos”, quite literally! You call him Elon Musk. His companies encompass a broad spectrum of technology areas such as space tourism, telecommunications, electric cars, tunnelling, magnetic levitation, AI/machine learning, models for brain-machine interactions, etc. The list is vast and to put it in Lewis Carroll’s words, it gets “Curiouser and Curiouser”. Musk, no doubt, courts controversy at times owing to his fiery nature. But there is no denying that the guy is a genius and has created business cases out of concepts that only existed in science fiction until recently.

A look at the myriad of businesses under Musk’s control

Source: http://www.rapidshift.net/nope-cobalts-not-a-problem-the-ev-revolution-will-march-on

TESLA – A swift multibagger

While all of his companies are compelling business cases, the most famous one is undoubtedly Tesla. According to Wikipedia, “Tesla, Inc. (formerly Tesla Motors, Inc.) is an American electric vehicle and clean energy company based in Palo Alto, California. Tesla’s current products include electric cars, battery energy storage from home to grid-scale, solar panels and solar roof tiles, as well as other related products and services.” The stock of Tesla has been one of the biggest wealth creators in recent times. The stock has returned a staggering 794% over the past year. As of the last count, the stock price rose from $98 a year ago to $880 per share. The stock has created humungous wealth for investors who stuck to its growth story over the years.

Tesla stock returns over different time periods

Period	1M	3M	6M	1Yr	3Yr	5Yr	10Yr
Stock Return	35%	107%	168%	794%	136%	82%	66%

Source:- Investing.com. Please note 1M, 3M and 6M and 1Yr returns are absolute. 3Yr, 5Yr and 10Yr are CAGR

Simply hype or more: What caused the rise?

Tesla is currently the world’s most valuable car company. As the above graphic shows, its Market Capitalization is higher than that of some of the world’s largest car companies globally. Let us examine some reasons for the stratospheric rise in Tesla’s stock price in CY2020:

• Growing adoption of electric vehicles, solar energy and other cleaner technologies.
• Entry into fast growing compact SUV market (through Model Y) in early 2020. This model was cheaper than earlier SUV models of Tesla.
• Emission credit sales worth $1.2bn in 9MCY2020 (these are directly absorbed as profits) due to its clean energy businesses.
• Greater strides in self-driven car technology over the years, helping it command greater pricing for the technology.
• Slated target of battery cost reduction to the extent of 56% per kWh over the longer term. As per Forbes, batteries constitute 15% of the cost of a Tesla vehicle.
• The company also has plans to produce own batteries and mine lithium on its own, reducing costs further.
• Tesla was included in the S&P 500 index on 21^st December, 2020. This will expose the stock to a much wider ambit of portfolios and funds; increasing liquidity and investor participation.
• In August, 2020 the company went in for five-for-one stock split which boosted investor participation (retail and institutional) as the stock became cheaper to own (on an absolute basis).
• Given the meteoric rise in stock price, there is widespread speculation that there could be one more split in 2021, keeping sentiment buoyant.
• Tesla’s profitability has seen a huge improvement over past four quarters, bolstered by a combination of steady revenue growth and improving profitability.

 

Patience maketh a Teslanaire

The wealth creation journey of Tesla has been marked by periods of volatility, negative news flows, stock price drop, and many other events that routinely distract investors’ attention from a company’s core growth story. However, investors who firmly believed in the growth story and stuck to the stock have been rewarded handsomely. To illustrate, $1,000 invested in Tesla shares in 2010 (when the company got listed) would have become $1,59,000 now! Had you invested the same amount three years ago, you would have made $20,000! As a result of this stellar stock price run, Tesla has created several millionaires out of ordinary people. And these are the Teslanaires that were talking of.

Opportunities such as Tesla are found once in a decade. You need to spot them at a reasonable time, hold on to them and ignore distractions if any. We understand that it is difficult for an ordinary individual to spot such opportunities. And this is where Research and Ranking can step in and make the journey more uncomplicated for you. We might not facilitate investing in Tesla for you, as we are focused only on Indian stocks (at least currently). However, we are continuously looking at spotting the next Balkrishna Industries or the following Page Industries. So come aboard and join us in this wealth creation process!!

 

Consider this case: You have a new business idea. You share this with your friend. Moreover, he asks, “What is the probability that your new idea will work. Also, if it does, what is the return you will get?”

This question leaves you dumbstruck as you don’t have an answer to your friend’s question.

As a result, we spend too much time in reducing the risks and uncertainty associated with it.

However, there is a big difference between risk and uncertainty, which many people tend to ignore or fail to understand.

In this story, let’s understand the risk and uncertainty and how you can mitigate them (wherever possible) in investing.

Risk 

We take risks knowingly or unknowingly in everyday life. However, what is the risk? A potential of loss or any other negative outcome. Few salient features of risk are:

• You can predict the probability of a future outcome. For e.g. rolling a dice or picking a card. Before we roll a dice or pick a card, we know in advance the odds of each possible outcome.
• Since you can predict them, they can be quantified and managed.

Uncertainty

Uncertainty is the absence of what the outcome can be, forget even evaluating probabilities of an outcome to occur. Few salient features of uncertainty are:

• Unlike risks, where you can manage the probability of risks, it is difficult to predict the outcome here.
• Since they can’t be predicted, they can’t be measured, managed and controlled.

The stock markets are criss-cross of both risks and uncertainty.

Risk involves evaluating the probability of the success of your portfolio based on past performance, fundamentals, growth potential, cash flows, management, business model and many more. On the other hand, uncertainty revolves around global events such as trade wars, natural apocalypses and many others that are difficult to predict. Here, there is complete dark box as the outcome of an event is completely unknown. This means you can’t measure it as you don’t have any information or data on it.

A real instance of risk and uncertainty in investing:

There are two portfolios A and B each consisting of 10 investment ideas. Can you tell which one will perform better in the next 3 years?

You cannot make an accurate guess on the same, but you can analyse the performance of stocks over the last 5 years, their growth potential, management pedigree & other parameters. After doing this analysis, you can attribute the probability of the successful portfolio. For e.g. you may think portfolio A has 75% chance of better performance or portfolio B has only 25% probability of losing the match.

Now let’s again say that there are two portfolios A and B, each consisting of 10 investment ideas. Which one shall deliver better returns?

Let’s say that no investment ideas have been shortlisted for either portfolios. You are clueless as you don’t have any idea on the stocks, their fundamentals, growth or management. Hence, predicting the outcome even though the number of stocks and rule remain the same.

This is uncertainty in investing.

Why Risk (Calculated) & Uncertainty Is Good In Investing? 

Now you’ve understood the difference between risk and uncertainty, let’s look at the problems.

More often, while investing, we act like everything is a risk. The truth is when we act like everything is a risk, we significantly decrease the chance of success and increase the chance of failure. When we start thinking that each factor is unknown, it translates into inaction.

Barry Ritholtz, an American author and equities analyst, CIO of Ritholtz Wealth Management, once quoted: We’ can’t use not knowing as an excuse to not act – because we never know.

Avoiding uncertainty and even overexposing ourselves to uncertainty doesn’t work as both have adverse outcomes.

We all know the famous adage, “No risk, No gain”.

So if an investor wants to create wealth (sustainable one), they have to take calculated risks (where the probability of a negative outcome is low and positive outcome high) and face uncertainty rather than running away.

Uncertainty is a part and parcel of life, even while you walk, drive, start a new job and many more. You never know what may happen next. However, you don’t run from them. Similarly, you never know what uncertainty stock markets may face. So instead of running away, an investor should avoid high risk but embrace calculated risks and uncertainty in the stock market. And, if this still looks difficult, having an expert by your side will increase your chances of success manifold in the stock market.

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

The current level of the Nifty is around 11,350 while 5 years back, it was around 6,500 levels. Markets have been appreciating steadily, and irrespective of that, investors think that markets should be blamed.

Look at this: The stock market grew at a CAGR of 13.5% for the last two years. Irrespective of the upward trend in the stock market, an average investor only earns between 1-2% after considering the inflation. Research studies have shown that if you’re an average investor, you’re more likely to lose than gain by investing in the stock market.

What’s more surprising is that irrespective of this upward trajectory in the stock market, I tend to hear these statements a lot while having a conversation with the investors.

“Harsh, the stock market is all gamble. Tell me why I should invest.”

“It is all about luck.”

“Stock market is the best way to lose your money.”

Do you really think the market is the problem? Then why investors fail in the market? And when they fail, why they are fearful of entering the markets again?

We all have moments of darkness in our life, but should it stop us from progressing further in life?

Stock markets are no different. There will be moments of ups and downs but only those who remain patiently invested are highly rewarded. And failures are important to succeed since mistakes make us smarter.

Here are the top 3 reasons why failures are essential to succeed in the stock market…

Failures inspires us to do things in a better way.

Some people take failure personally and give up easily. This encourages stagnation in life.

Thomas Alva Edison is a well-known inventor famous for his optimism. While inventing the light bulb, he tried over a 1000 times and failed when his assistant told him that all their efforts were wasted and it was of no use trying further. Edison replied “I have not failed. I’ve just found 1,000 ways that won’t work”.

He then went on to do more and more experiments and finally succeeded in inventing the light bulb.

Instead of blaming luck or stock market for loss, one should take steps to do things in a better way. If your investments are not on the same track as your financial goals, it is best to seek professional expertise.

It shows you where to improve

Failure teaches us a very important lesson. It shows where you have to improve.

Different investors follow different styles of investing, which works best for them. If you have been following a particular style of investing, but not getting the desired results it is best to change your strategy.

Failure is an opportunity

Many investors fear market corrections or crashes. Instead of looking at market corrections as a time to exit, you should consider it as an opportunity of a lifetime to create wealth. Because market corrections are the best times to buy quality stocks at good discount prices.

The below table will give you a realistic picture of how the Nifty has behaved post every market correction.

So you can see from the above table, how the growth in Nifty after every correction has delivered a CAGR between 14-28% over the next 3 years.

Same is the story with quality stocks. Despite facing the darkest hours they have not only recovered quickly post correction but also outperformed with time.

So stop worrying about moments of darkness in your investment journey. Invest in star performers.

It is rightly said – “After every storm if you look hard enough, you will find a rainbow appear.”

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

A few weeks ago, the government announced a Mega Recapitalization Plan of INR 2.1 lac crore for the state-owned PSU Banks.

The plan is split into two parts -INR 1.35 lac crore to be generated via the issue of Recapitalization Bonds and the remaining INR 76,000 crore (which also includes INR 18,000 crore already allocated under the Indradhanush Recapitalization Scheme) via the budgetary support over the next two fiscals.

The capital starved PSU banks have been reeling under the burden of bad loans. This has drastically curbed their ability to reinitiate the flow of credit and push private investment cycle out of its dormancy.

So this announcement came as a big positive surprise for everyone in general and PSU banks in particular.

Many even claimed that the size of the program was equivalent to their estimates of capital requirements for banks for both non-performing asset provisioning and some growth. It is another matter that (in words of CEA Arvind Subramanian), “the amount of stressed assets always and everywhere is at least 10-20 percent more than what it is always and everywhere claimed to be.” So any claims about the adequacy of Recap-Program need to be taken with a pinch of salt.

Then there were many who called this to be an Indian equivalent of the U.S. Treasury’s Troubled Asset Relief Program or TARP, which was created as a response to the 2008 financial crisis.

Irrespective of the view people may have, one thing is clear that this front-loaded commitment brings a much-needed coherence to the resolution process. And for this, the policymakers need to be appreciated.

Before we deep dive let’s first understand the issue at hand in layman terms.

What is this Recapitalization (in simple terms)?

For every loan that a bank gives, it needs to have some percentage as capital. So for example, if this percentage is 10%, the bank then needs to have a capital of Rs. 1000 Cr if it wants to give out loans for Rs 10,000 Cr.

Some loans will obviously go bad. Suppose 4% of the loans, i.e. about Rs. 400 Cr (which is 4% of Rs. 10,000 Cr) go bad. So this loss will hit bank’s capital which will fall to Rs. 600 Cr (Rs. 1000 Cr – Rs. 400 Cr of bad loans) if the loss is realized. This means that bank now has Rs. 600 Cr capital on Rs. 9600 Cr loans – which is around 6.25% and much below the 10% regulator specified limit.

To rectify the situation and improve the ratio, banks need to raise more money, i.e. about Rs 360 Cr to bring capital back to 10% capital ratio (Rs. 960 Cr on Rs. 9600 Cr loans). Or, they need to call back loans worth Rs. 3600 Cr so that existing capital of Rs. 600 Cr is sufficient (as per 10% limit) for the reduced loan base of Rs. 6000 Cr. But calling back loans is of course not possible or practical.

So what happens is that banks stop lending.

And this is exactly what happened with the PSU banks. They stopped lending because they couldn’t lend more as their capital ratios will not allow it any more.

Recapitalization program is trying to solve this. The government gives money as capital to banks so that they can take in some losses and move on with fresh lending.
Let’s get to the actual situation now.

Why is Recapitalization needed now?

It is common knowledge that the quantum of bad loans in the Indian Banking sector is mammoth.

The stressed asset pile is close to INR 10 lac crores. Of this, NPAs account for Rs 7.7 lac crores and the rest are restructured loans. In addition, the banks also need more capital to transition towards the full implementation of Basel 3 norms.

The earlier plan to infuse Rs. 70,000 crore between 2016 and fiscal 2019 was looking increasingly inadequate to meet these capital requirements. To be fair, the government was keen that banks too pitch in and supplement this infusion by raising capital on their own. But due to their toxic books and few other factors (like lack of investor interest), banks found it tough to do anything.

Many felt that these banks should have been left to fend for themselves.

But that was not possible practically. The Indian economy still needs public sector banks as many economic objectives of the government need a strong and unrelenting support of the PSU banks.

Banks themselves switched on their damage control mode and began focusing on their NPAs than on new lending. And while banks started recognizing bulk of these assets as non-performing assets (NPAs), resolution of these assets is not easy and is taking time.

All this, in combination with inadequate credit demand, made for a vicious circle that became unbreachable for many banks.

So what effectively happened was that for several PSU banks, it seemed that they were set on a path of slow death. The government could not afford this -for a variety of reasons. And hence the bank recapitalization plan.

It is expected that this program will allow banks to focus on lending once again and help kick-start growth (which has slowed down since days of high seven percent). Government is also focusing on indirect benefits of such growth, which are more loans to small businesses and consequently, employment generation, etc.

Is it different this time?

Many are of the view that once again, it’s the same old story and things will not change. But let us try to see the bigger picture here.

This is the first time in many years that the government is using a comprehensive strategy to address the issue instead of taking a piecemeal approach.

In a series of development leading to this program announcement, there seems to be an honest intent to address this issue for once and for all.

It began in 2014 when RBI ended the unnecessary permission given to banks to restructure loans indiscriminately. Then in 2015, banks were forced to recognize a bunch of large stressed loans as NPAs, whether or not they were paying interest. Then came the Insolvency and Bankruptcy Code in 2016 that made it easier for creditors to dispossess defaulting promoters and sell the companies or assets to new promoters. Then earlier in 2017, RBI in toe with the government forced the banks to push top 50 defaulters to the NCLT.

And then happened this mega Recapitalization Program.

So it does seem that this time, the overall strategy is better thought out and may provide desired results to some extent. But it is still too early to judge and the problem being addressed is too large to be solved overnight.

But bank recapitalization is not a magic bullet. And things need to be done even beyond this. Ideally, recapitalization and restructuring should go together or atleast not without much lag between the two.

What More is Needed?

One point that is doing rounds is about the moral hazard. That is, what stops these banks from not committing the same mistakes and get into a mess again.

No doubt this is possible.

So even though this recap exercise is a step in the right direction and will help strengthen these banks to some extent, this recapitalization without consolidation and structural reforms is inadequate if not useless. And that is why there is a need to go much beyond this Recap Program.

First of all, not all PSU banks should have access to this program. The government must be selective about which banks get additional capital. Ideally, the banks that have worked harder to deal with their mess should be given priority.

If this means that some of the weaker banks will shrink and eventually become ripe for closure, then so be it. It is not wrong to focus on recapitalizing the strongest 10-15 public sector banks and force the rest to shrink or take their chances with a slow revival.

Unviable banks should be financed only to the extent of their current balances and not for their growth. Of course this will not be easy. But this is what may be necessary now. To implement this, the deposits may be shifted to stronger banks and as far as good assets are concerned, these should be sold off to the stronger banks. The inflow from this asset sale should be used to address bad loans. Eventually, this can result in winding up of weaker banks(hopefully if union issues have been tackled).

Mergers of small weak banks should not happen randomly with larger banks. This will not serve its purpose. There should be a calibrated plan to implement such a strategy. Many are of the view that small banks should go for asset swapping, where smaller banks can sell or swap assets of large companies to larger banks.

We feel that as far as mergers are concerned, they should be encouraged only when the NPA pain is practically addressed and mostly over.

But bigger problems still exist and aren’t addressed by any Recap-Program.

Inefficient and at times politically influenced lending practices, comparatively uncompetitive workforce and slow technology up gradation.

These are the fundamental problems of the PSU banks that have resulted in this mess and still aren’t being addressed correctly.

So even though Recap Program is a lease of life for these banks, the fact is that writing for them is on the wall if these problems are not addressed adequately.

Finally, it is true that at least theoretically, the government had the option of doing nothing about the sorry state of PSU banking space. And with all due respect, it did the right thing by trying to catch the bull by its horn. A large bank recapitalization will pay for itself many times over if things go as per expectations. It might not be easy, but that is still fine given the alternative scenarios that might have played out:

And as ex-RBI governor Raghuram Rajan said:

“I think it’s important to recognize that banks do need capital and you need to put it aside and if it means that there are other resources allocations that should be reduced, so be it. I mean, that’s the cost of staying within the budget. This is not painless.”

But having said that, we reiterate that recapitalization alone is not enough. The government should back this recapitalization program with some real reforms in public sector banks. That is the only way to fully address this problem in the long term.

Read more: About Research and Ranking.

Revealed: Here Are the 4 Reasons Why the Rich Are Getting Richer

One Sunday evening, 15-year-old Mohit was taking a stroll with his father. While crossing the city road, he noticed a beggar near the traffic signal, alas, he did not have many coins in his begging bowl. The distraught situation of the beggar got Mohit submerged into thoughtful and mournful thoughts. But his noble thoughts were soon interrupted by a blaring voice of the car honk. As his attention shifted towards the car, the fancy and exorbitant look of the car stupefied him. “Magnificent! This car would have cost him crores,” Mohit contemplated. And at the spur of that moment, a question “Why the rich are so rich” took its birth in his inquisitive mind. He raised his concern to his father.

“Dad, what makes these people so rich and what is the reason behind a huge disparity in the distribution of wealth in our country?” asked the innocent Mohit.

His father replied, “Son, the answer lies in the investing habits. Most of the Indians fail to realize that equity investments have consistently outperformed other asset classes & it can create significant wealth in the long term. Risk-averse investors have maintained a safe distance from this asset class. But they cannot be completely blamed for it. Lack of expertise and knowledge among the investment fund managers, adds to the existing apprehension in the air.”

Curious Mohit probed more. He enquired, “Dad, how many investors are participating in the Indian stock market?”

“Out of the meagre 7.5% population that has invested, at least 25% are now inactive and another 25% feel it’s not the right time to invest in equities. These people have already burnt their fingers trying to follow tips, rumours and in greed of making quick money through short-term trading. The remaining half, come under the list of top 10% of the India’s richest people. Almost all of them created their wealth by investing in stocks.”

“Even I want to create wealth when I grow old. But, how can I generate wealth through equity investments?”

“Listen to me carefully. You remember, last year you wanted to learn piano and we got highly experienced and credible piano teacher to give you the best piano lesson. Similarly, we have investment experts who are highly skilled to find out the companies to which can create significant wealth in the long term. Their job is to study the fundamentals of a company and on the basis of their stock research reports, they advise to invest for long term. The rich people allow their investment experts to manage their investments,” answered his father.

Also Read: Exploring Socially Responsible Investment

Here are 4 things that distinguishes the ‘RICH’ from the ‘REST’

1. They don’t fall for the gimmicks which shouts “Get rich overnight”

The rich are aware about the fact that wealth creation is a gradual process. They never look for quick fixes in a desire to get rich within a short span of time. Fast upward trend of wealth can take a nose dive any moment. They do not let their emotions play a part in buying or selling stocks and they are only interested in well researched companies that has a strong potential to generate robust return for them.

2. They believe in just three words! Diversify, Diversify, Diversify

The rich will never put all their eggs in one basket. They diversify their portfolio by investing in stocks, bonds, various-cap equities, specialty asset classes like real estate and natural resources to create the most diversified portfolio possible.

3. Don’t worry, Be happy

They treat ‘Panic’ situations as an ‘Opportunity’. Historically, studies have proven that the rich invest heavily when the markets are down. When the markets recovers, their investments provide mind boggling returns. However, many fail to realize is that any sector that is facing a lull will eventually recover and grow again.

4. Invest in Fundamentally Strong (and Socially responsible) companies

They majorly invest only after conducting the fundamental analysis of the stocks. They tend to invest in companies that are both sustainable and socially responsible. Today, the real value of a company is the amalgamation of its goodwill and historical performance. Remember the only trick that works is: “Hold what you have invested and for as long as the company is fundamentally strong.”

The father asked Mohit, “Do you wish to learn more and join the bandwagon of wealthy people? If yes, then you should see the brand new approach that Research and Ranking have to offer. They have a team of highly qualified researchers who advise on best wealth creation strategies. Based on the investors’ profile, they provide personalized stock portfolio for long term investments. The recommended stocks generate the returns of 4-5 times in the interval of 5 years. They also monitor these stocks and advise on portfolio rebalancing.”

“I am already on my way to schedule my visit with R&R,” said Mohit.

Mohit is coming to meet us. Why don’t you join us with Mohit and we can show you how to get rich…

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

These days, it’s quite common to find IT-Slowdown related stories in newspapers or anywhere else on the internet. And as if it has become a new normal now, the managements of large Indian IT companies regularly come up with gloomy commentaries about IT’s near future. But this gloominess surrounding the sector today was not there till very recently.

In the beginning, a vast majority of Indian IT companies were built around the idea of offering global businesses in an efficient, low-cost way to outsource their in-house IT work. And India became a leader in this space as it could easily beat the competition for such work because of its large pool of trained, low-cost engineers. For investors too, buying IT stocks was a no-brainer wealth creation strategy.

But once wildly successful, the Indian IT model has now begun to run into fundamental problems. Stocks of IT companies which till yesteryears were darlings of markets and part of almost all long term investment stocks portfolio, are now being shunned by one and all. So what exactly is the $150 billion+ Indian IT industry up against? There are quite a few. The major being that the very model that allowed them to grow their revenues for years by simply deploying cheap labour to perform simple IT tasks, is itself being disrupted. And then, there are many more.

Let’s discuss some of these major problems faced by the IT industry in detail here. Rise of Automation

It’s true that IT represents an important part of almost every industry. But its direct contribution to revenues and profits is often difficult to assess. So as the growth in developed nations slowed down in last few years, many companies started cutting down their discretionary spendings.

Unsurprisingly, IT budgets got the axe first thing among others. But slowing revenue growth due to slowdown in clients’ businesses is not the only reason.There have been cuts in IT spendings of many large global enterprises as they move towards automation. And this is a bigger threat than clients’ business slowdown.

In very simple terms, you can understand the idea of automation like this:

What earlier required 25-50 programmers and analysts, can now be done easily by a couple of smart programmers and intelligent automation-based systems. No doubt automation can accelerate and improve manual processes. And since the same amount of work can be done with less manpower, it’s cost-effective too. Obviously, more and more companies want to embrace automation. And as this trend catches up (and it’s happening pretty fast), the number of people required at the lower end of the IT-pyramid will continue to go down.

A report from global outsourcing research company HfS Research says that by 2021, India could lose 0.64 million low-skilled positions in IT services because of automation. Another report from NASSCOM says that by 2025, about 260 million jobs will be replaced or augmented by technology worldwide.

As a result of the rapid adoption of automation, Indian companies are now faced with the following two issues: Shrinking Revenue Pie As the automation component in projects is increasing, many large clients are not renewing their legacy contracts. They are instead looking to renegotiate old rates or reduce the scope of work itself. Shrinking Margins New players are entering the space and offering automation-rich services at lower rates.

So the competitive intensity has increased buyer’s negotiation powers. Alongwith that, a rise in employee costs is further reducing margins and threatening the very model which is based on low-costs. But the rise in costs hasn’t happened suddenly. Even as far back as in 2013, the Economist quoted that for IBM, “the total cost of its employees in India used to be about 80% less than in America; now the gap is 30-40% and narrowing fast.” Easy-to-draw conclusion here is that companies that depended heavily on cheap-workforce model will be in trouble as automation catches up.

Revenue cannibalization due to automation, though not a desired outcome, cannot be avoided now. To survive, Indian IT companies need to be more proactive and take the problem head on. Instead of avoiding automation, they should convince the clients about it and sharing the cost benefits with them. If not, they risk losing business to more nimble competitors. As for the loss of revenue (due to automation), it can now be balanced only by growing revenue from new businesses in digital and related areas.

Rise of Protectionism Protectionism is another problem that has recently caught Indian companies unaware. 60% of Indian IT industry’s revenues is from exports to the US. IT majors like TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra have 20 to 40% of their employees sitting onsite. It’s clear that in order to ensure low-cost operation, Indian tech companies prefer to send Indians abroad instead of accepting high cost of hiring employees locally in those countries. Now US government’s recent decision to review work-visa program (as they believe Indian IT companies are taking jobs away from Americans) is sending jitters back in India. Unfortunately, US is not the only country that is resorting to such protectionist measures to ensure more jobs for their citizens. UK, Australia and many others too are taking similar routes. So in general, more restrictive visa laws in the West are now making it tougher for Indian companies to get qualified engineers into their clients’ offices.

So costs are rising and consequently, margins are shrinking. Whether protectionism is right or not is a matter of debate.Those in favor feel that it is justified as Indian companies bring in cheap labour, which hurts local citizen’s employment. Those against it feel that it helps attract the required skills and more importantly, helps US firms remain competitive. Nevertheless, job creation and protection is a delicate topic having political shades. So as long as current political environment is supporting protectionism, Indian IT companies will continue to remain at the receiving end. Missing / Underdeveloped Business Verticals Even though issues like automation and visa-restrictions are grabbing newspaper headlines, there is another problem that Indian companies failed to address in time. Had there been a conscious effort to address it, the dependency on the low-cost model would not have been so much and neither would they have been so vulnerable.

The problem is that of the missing (or underdeveloped) Consulting Divisions of Indian companies. All non-Indian market leaders in the global IT space today (like Accenture, IBM, Cognizant, etc.) have strong consulting arms. As per Gartner Research, consulting makes up about 13% of the overall IT services market and more importantly, it is a segment growing faster than the overall market. Sadly, Indian IT companies do not have a strong presence in this space.They neither invested in organically building a strong consulting brand nor made necessary acquisitions to hit the ‘consulting ground’ running. Today, all high-level strategic consulting businesses go to large players like Accenture, PwC, Deloitte, Boston, etc. and not to Indian companies.

And as more and more companies are looking for higher-value services and more innovation (than what Indian companies have traditionally provided), the lack of solid consulting vertical is being sorely missed by each and everyone of the large Indian IT companies. Maybe, Indian IT companies should have taken lessons from Cognizant’s success in consulting. In the last few years, the company has successfully built a standalone consulting practice because it didn’t shy away from investing in it in a big way. As consulting expertise is increasingly becoming essential to win large, high-value contracts, it is now a non-negotiable for Indian IT companies. The current scenario has almost arm-twisted them to invest heavily and urgently,to scale up their consultancy practice. The Future? Indian companies have no doubt been caught on the wrong foot. Most were slow to adapt to the changing realities and were busy defending their legacy businesses.

They simply turned a blind eye to the threat of automation and naturally, are not prepared for it. Even the CEO of Infosys, Vishal Sikka acknowledges the scale of problem when he said: “We will not survive if we remain in the constricted space of doing as we are told, depending solely on cost-arbitrage, and working as reactive problem-solvers.” This “wait and watch” approach has had a detrimental impact on growth and competitive advantage of the Indian IT sector. Now going forward, they face an uphill task of a) protecting their revenues and b) maintaining their profitabilites.It won’t be easy. The sector as a whole needs to introspect and acknowledge that what got them till here will not take them ahead.Infact, the traditional model needs a CTRL+ALT+DELETE, i.e. a fresh restart.Transition to automation and climbing up the value chain (via consulting) is what is needed now.

And this would require investments in newer technologies, reskilling, increasing acquisition-led competencies and for lack of a softer word, downsizing if necessary. But all companies will not survive this transition. At the end, the companies that are deeply entrenched in client processes and are quick to adapt to the changing operating as well as cost structures, would emerge as the real winners. As long-term investors, we continue to observe the sector developments keenly and are continuously searching for best stocks to buy. It has been our past experience, that when a sector faces headwinds, picking out the companies that are quick to adapt to new realities is the key to finding potential future multibagger stocks.

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

India – our country is full of diversity, culture, colours and heritage. We all know this, as our schoolbooks gloriously capture this beauty. But India is much more.

India has been growing rapidly over the past few years, especially post-liberalization in 1991.

Before I talk about this growth, what immensely hurts me is that India’s image is still often projected as ‘land of snake charmers’.

To this, I remember a beautiful reply by our Prime Minister Narendra Modi in 2019.

“They are forgetting the fact that India has moved ahead of snake, it is moving ahead with ‘mouse’. They are not snake-charmers anymore, they now use the mouse of a computer.”

The above statement captures the rapid growth in the IT sector, digital revolution and innovation that India has witnessed over the last few years.

How India has evolved with regards to the innovation, GDP growth, GDP per capita, and industry growth with time?

1. Innovation Index

There are many indices developed to capture the innovation of different countries. To understand how India has performed in terms of innovation capabilities and results, we will take reference of the Global Innovation Index (GII) published by Cornell University, Insead. As per GII data, India’s performance on the world stage concerning innovation is consistently improving. Thanks to the initiatives introduced in recent times (Digital India, Startup India, Atal Innovation Mission), the country’s innovation ecosystem has had a positive impact.

Year	GII Rank	Total Countries
2014	76	143
2015	81	141
2016	66	128
2017	60	127
2018	57	126
2019	52	129
2020	48	131

Source: Global Innovation Index

R&D Expenditure (% of GDP)	2000	2005	2010	2015	2018
World	2.06	1.96	2.02	2.09	2.27
India	0.75	0.82	0.78	0.69	0.65
China	0.89	1.30	1.71	2.06	2.18
Mexico	0.30	0.39	0.49	0.43	0.31
Brazil	1.04	1.00	1.16	1.34	1.26*
Thailand	0.24	0.21	0.36**	0.61	1.004*
Russia	1.05	1.06	1.13	1.10	0.99
Argentina	0.43	0.42	0.56	0.62	0.54*
South Africa	0.71#	0.86	0.73	0.79	0.83*

* Data for 2017, ** Data for 2011, # Data for 2001   Source: World Bank

Irrespective of improvement in GII ranking, its expenditure on research and development presents immense scope for improvement. As seen in the above table, its R&D expenditure is impressive when compared to other developing economies like Mexico and Argentina. However, to mark its footprints on the globe, it needs to work holistically to upwards these trends, which is comparable to the level of BRICS economies.

2. India’s Share In Global GDP

India has come a long way – from a share of 1.70% in 1980 to more than 3% by 2020 in the world GDP.

Here is another exciting data – In 2000, with a contribution of 1.41% to the world’s GDP, India ranked 13th based on % share in world GDP. Now, it is ranked 5th. In recent years, it has continued upward trajectory to enter the list of world’s top 5 economies, even ahead of other countries such as the UK and France.

Rank for FY19	Country	GDP (in $ tn)	% of Global GDP
	World GDP	87.5	100
1	US	21.4	24.5
2	China	14.3	16.3
3	Japan	5.1	5.8
4	Germany	3.9	4.5
5	India	2.9	3.3
6	UK	2.8	3.2
7	France	2.7	3.1
8	Italy	2.0	2.3
9	Brazil	1.8	2.1
10	Canada	1.7	1.9
	Top 10 countries	58.6	67.0

#3. GDP Per Capita

In simple terms, GDP Per Capita of a country is nothing but a measure of a country’s economic output that accounts for its number of people. It is calculated as the GDP of a country divided by its population. Though China registered the fastest growth of 13% over the last 28 years, India has been growing at a rapid rate of 7% as compared to other emerging economies such as Russia, Brazil and Mexico.

	1991	1995	2000	2005	2010	2015	2019	Avg growth rate in last 28 years
India	303	373	443	714	1357	1605	2104	7%
Russia	3490	2665	1771	5323	10674	9313	11584	4%
Mexico	3661	3928	7157	8277	9271	9605	9863	4%
Brazil	3975	4748	3749	4790	11286	8814	8717	3%
Thailand	1716	2846	2007	2894	5076	5840	7808	6%
US	24342	28690	36334	44114	48467	56822	65118	4%
China	333	609	959	1753	4550	8066	10261	13%

#4. Ease Of Doing Business

This rank is based on various indicators such as – regulation and laws for starting a business, construction permits, registering property, getting credit, paying taxes, getting electricity, trading across borders amongst many others.

The country ranked 77th among 190 countries in 2018. Sustained economic reforms to address the business challenges, helped India earn applause from the world and jump to 63rd place in 2019.

Ease of doing business	2011	2012	2013	2014	2015	2016	2017	2018	2019
India\’s rank	132	131	134	134	131	130	100	77	63

#5. From Traditional to Modern

Talking about India, India has come a long way. While agriculture generated approx. 60% of the country’s employment opportunities in 2000, the people employed in this sector stands at 41.5% today.

% of total employment   2000 2010 2020 Agriculture 60% 51% 42% Services 24% 27% 32% Industry 16% 22% 26%	% of total employment		2000	2010	2020	Agriculture	60%	51%	42%	Services	24%	27%	32%	Industry	16%	22%	26%	Value added, % of GDP   2000 2010 2019 Agriculture and allied 22% 17% 16% Services 43% 45% 50% Manufacturing 16% 17% 14%	Value added, % of GDP		2000	2010	2019	Agriculture and allied	22%	17%	16%	Services	43%	45%	50%	Manufacturing	16%	17%	14%
% of total employment
	2000	2010	2020
Agriculture	60%	51%	42%
Services	24%	27%	32%
Industry	16%	22%	26%
Value added, % of GDP
	2000	2010	2019
Agriculture and allied	22%	17%	16%
Services	43%	45%	50%
Manufacturing	16%	17%	14%

Over the last few years, India’s dependence on the services and manufacturing industry has been growing at a steady pace. This transition from the traditional sector (agriculture) to the modern industry (services + manufacturing) will act as a significant catalyst for Make in India and other government initiatives. This in turn will propel growth and development for the country.

Projections Going Forward

India’s growth trajectory till now has been quite impressive. But why I am telling you all this?

Considering India’s GDP growth, I have been hearing a lot of negative news that India’s growth has been impeded and $5 trillion economy is a distant dream. I agree that $5 trillion milestone has been postponed a bit, however, considering the on-ground activities, we are well-placed for the next phase of growth.

The growth story of India remains robust and resilient due to faster than expected recovery, economic reforms, demographic dividend of the country, digital transformation, employment opportunities backed by Skill India, Make In India and government’s vision to adopt China Plus One Strategy.

The growth on the world stage has been impressive until now. Backed by robust fundamentals, India is expected to grow leaps and bounds over the coming years. And with many high-frequency data points such as manufacturing PMI, services PMI, GST collections, auto sales, etc. back to pre-covid levels, there\’s no reason why we cannot replicate the same growth (mentioned above) as we did in previous years.

Goldman Sachs revised FY21 India’s growth forecast upwards at -10.3%. The initial forecast was a contraction of 14.8%. However, in its global economic analysis report titled ‘V(accine)-Shaped Recovery’, Goldman Sachs also forecast India’s FY22 GDP growth at 7.3%, which is one of the highest among the world’s top 10 economies. Isn’t that an encouraging news?

Having talked about the economy and its growth saga, why should an Indian investor care about all this?

Indian stock markets will always follow the Indian economy

If the economy grows, quality businesses will surely have to grow and in turn the Indian stock markets will also grow. And to gain the most out of this, the mantra is simple – Invest in Companies That Drive This Growth.

To make things easy for you, our team of experts have created a list of 20-25 multibagger stocks after detailed research. Yes, these are the stocks which will grow by 4-5 times over the next 5-6 years as India grows. Click here to invest in them.

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

I recently got a Whatsapp forward from a friend of mine. Too busy with my routine work, I ignored the post as we usually receive many such forwards on a daily basis.

The very next day, I received a call from Deepak, the friend who sent me the post asking me if I had checked out his Whatsapp message.

When I replied negatively, he said: ” Just check it out once. It is important news which might impact the share price of Reliance Industries in the coming days”.

Not able to control my curiosity, I stopped all my work and checked out his post which spoke about how the launch of Elon Musk’s revolutionary satellite-based internet service Starlink in India would pose a significant threat for Reliance Jio as early as 2021.

It is said that ‘Half knowledge is a dangerous thing’. So to understand this post in detail, I decided to dig deeper and take a detailed look.

When Mukesh Ambani launched the Reliance Jio service in 2016, it was a gamechanger. With a disruptive tariff offering high-speed 4g internet services along with free voice calls Reliance Jio’s move put other telecom players like Bharti Airtel, Reliance Communications, Vodafone, and Idea on the backfoot.

While Bharti Airtel managed to hold its ground and emerge as Reliance Jio’s biggest competitor, Reliance Communications shut down its business under the burden of massive debt. Vodafone and Idea which got merged to form a bigger entity Vodafone Idea, now renamed as VI is still struggling to stay afloat due to its massive debt and outstanding dues for spectrum.

In a short span of fewer than 5 years after launch, Reliance Jio has become a top player in India’s telecommunications industry.

Can the arrival of a new disruptor, Starlink launched by Elon Musk, a man known to do the unthinkable topple Reliance Jio?

Keep reading to know…

What is Starlink internet service, and how does it work?

Imagine you are climbing on a mountain, far away from civilization, and want to transmit your pics live to your loved ones or do video call. Starlink internet service allows you to do that. Get connected to high-speed internet anywhere in the world without the requirement of wired infrastructure or cellphone towers.

A constellation of thousands of small satellites orbiting around 350 miles above the Earth beaming high-speed internet signal offers internet access from virtually anywhere on Earth. A recent performance test revealed that the service was capable of download speeds of between 102 to 103Mbps, & upload speeds of 40.5Mbps, with a latency of 18 to 19 milliseconds.

“Once these satellites reach their position, we will be able to roll out a fairly wide public beta in the northern USA and hopefully southern Canada,” Elon Musk said in a recent tweet.

Starlink internet service has been running a private beta since July in some parts of the USA.

“Other countries to follow as soon as we receive regulatory approval” stated Musk in another tweet.

Other players in the segment

Reliance Jio’s biggest competitor in India, Bharti Airtel owns a significant stake in OneWeb. OneWeb is currently owned by a consortium of the UK government and Bharti Global, which helped the satellite company stave off bankruptcy. Bharti Global is the overseas arm of Bharti Enterprises — the holding company of Airtel.

In December 2020, OneWeb launched 36 satellites with the objective of launching high-speed internet services across key global markets towards the end of 2021. The company also intends to launch the satellite-based high-speed internet service in India by mid-2022.

Why Elon Musk’s Starlink won’t be a significant threat to Reliance Jio?

India’s telecommunications market is very price sensitive. Before the arrival of Reliance Jio in 2016, data packs were priced around Rs.250 for 1 GB. Post the launch of Jio data prices came down to an average of Rs.12 to 14 per GB as other players in the industry were forced to cut the prices to match Reliance Jio’s tariff.

Reliance Jio’s competitors like Airtel were also offering 4G in a limited circle in 2016, but the low price was a significant reason why the majority of customers opted for Jio. Media reports indicate Starlink plans to provide its Internet services for around $80 per month and a worldwide rollout of the service is expected by the end of the year 2021.

Also currently no clarity about whether Starlink will offer voice calling services based on Voice over Internet Protocol (VoIP) (a technology that allows you to make voice calls using a broadband Internet connection).

Before Starlink, Motorola backed Iridium and Teledesic backed by Microsoft Chairman Bill Gates, Craig McCaw, founder of McCaw Cellular Communications, and Saudi Prince Alwaleed bin Talal had attempted to build and launch satellite constellation based internet service but failed due to enormous debt.

Starlink is a boon for connecting remote areas with poor or zero infrastructure. However, it works from a fixed location using an antenna, router, and a power source. Of course, it can be carried anywhere but cannot be as handy as a cellphone.

So the question of being a significant threat to Reliance Jio in the future does not arise as it is just like comparing an apple with an orange.

Going back to the Whatsapp forward, the inspiration behind this article, it is best to take such forwards with a pinch of salt.

To invest in a portfolio of 20-25 multibagger stocks click here.

This article was last updated on 26th Feb 2021.

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

Last week in an exchange filing, Vedanta Resources stated that the delisting offer for its Indian subsidiary, Vedanta Ltd. had failed as the company could not garner the required number of shares.

In this article, let’s take a detailed look at what it means for the shareholders.

In May 2020, the promoters of Vedanta had announced a delisting offer through a process of reverse book-building. Later in June, 93.3% of all shareholders and 84.3% of public shareholders approved the proposal to delist the shares of Vedanta in a special resolution by postal ballot. The floor price for share tendering was set at Rs 87.25.

The reverse book building process for public shareholders to tender their shares began on October 5 and concluded on October 9.

Why the promoters of Vedanta decided to delist the company?

The intended delisting of Vedanta Ltd was aimed at providing the group with enhanced operational and financial flexibility as well as support an accelerated debt reduction program in the medium term. Vedanta has nearly $7 billion in debt out of which around $1.9 billion is maturing in the next 12-15 months. Vedanta is the only operating entity for the company, which is dependent on the subsidiary’s dividends to fund interest obligations.

Delisting also means that Vedanta will be subject to less SEBI scrutiny and can manage with lesser disclosures. Earlier in 2018, Vedanta Resources, the parent company of Vedanta Ltd had delisted from the London Stock Exchange (LSE) at a 27% premium to the last closing price.

What is the delisting process through reverse book building?

Reverse book building refers to a process by which a company which intends to delist from the exchanges, decides on the price that needs to be paid to public shareholders to buy back shares. The company has to follow a detailed regulatory process for delisting with the first step being the appointment of a merchant banker to oversee the electronic bidding process.

The company then advertises the offer with a letter detailing the floor price for the buyback to all public shareholders. The reverse book building process through an online, fully automated, screen-based bidding system is then facilitated by the stock exchanges. Shareholders holding shares of the company can then approach their stock brokers to convey their bids to the company.

The tender price at which the shareholder is willing to sell his shares needs to be equal or above the floor price set by the company. The final buy back price will be determined only after the offer closes after aggregating all shareholder bids. Once the price is finalised, all offers below or equal to this final buy back price will be accepted.

The delisting offer is termed successful only if a minimum quantity of shares, as defined by the Delisting Regulations, are tendered by shareholders and accepted by the company.

What went wrong with the delisting of Vedanta?

Vedanta announced that it was not able to garner offers for the 134 crore shares required for the delisting process to go through. It was only able to gather around 125 crore shares instead.

A significant reason why the delisting of Vedanta failed is the considerable price difference between the price offered by the company and the price offered by shareholders and institutional investors.

According to media reports, while some investors had offered their stakes at around Rs 170, many investors, including institutional investor, LIC which holds 6.37% stake in Vedanta, had offered shares for Rs 320. As a result, Vedanta would have been required to pay almost double per share than what they had anticipated for a significant proportion of shares.

The road ahead for Vedanta’s shareholders

In a filing made by Vedanta, the company said that the promoters will not acquire any shares tendered by the public shareholders under the delisting offer and all the shares tendered will be returned to the respective public shareholders.

As of now, the verdict is out. Shareholders have rejected the delisting price offered by the company considering it as a raw deal. Only time will tell what the company’s next move would be. The next buyback, if ever it happens, will most likely to be done at a higher price.

After the failed attempt at delisting, the promoters of the company have raised their stake. In January 2021, the company launched a voluntary open offer to hike its stake by 10 percent. Currently, promoters hold a 55.11 percent stake in Vedanta, while 44.55 percent shares in the company are held by public shareholders.

When it comes to voluntary delisting of shares of a company, some shareholders may not be in favor if it, especially if they have purchased the stock at higher prices. However, sometimes things may be beyond their control if the majority of shareholders agree to the final buyback price. Hence it is very important to adequately diversify one’s portfolio by investing in 20-25 stocks for optimum wealth creation. Click here to get started now.

This article was last updated on 26th Feb 2021

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

K A L , A A J  A U R K A L

1971 Movie

Three generations of a family, decide to live together. However,their different mindsets create conflicts with each other and disrupt the harmony of the house.
However, in the end all of them realise that they have to respect each other to live a good life.

2020 Equity Portfolio

Similarly, while investing in the equity markets, we have to analyse data which may pertain to the past situation, present situation or situation likely to emerge in the future. All of these data have to be given equal respect without letting one set of data drive the investment decisions. This will ensure harmony in the mind (read portfolio).

KAL (YESTERDAY)- MAR-JUN 2020

QUARTERLY GDP GROWTH RATE

FY21 will see negative GDP growth (anywhere between 3%-6%) first time after 40 years. Other countries are also in the same boat. As per IMF, the global economy is expected to contract by 4.9% in 2020: advanced economies by 8%, emerging markets by 3%; the bounce back in 2021 is also likely to be sharp: 5.4%, 4.8% and 5.9% respectively.

1QFY21 CONTRACTION COMPARISON GLOBALLY

Q1FY21 contraction is highest because of the most stringent lockdown globally. However, the fatality rate was also amongst the lowest, at less than 2% vs. 5-12% in most countries.

Taking clue from China where GDP rose 12% in Q1FY21 vs. 10% contraction in the previous quarter, India’s GDP should also bounce back sharply in Q2FY21 and then improve in subsequent quarters thereafter.

Q1FY20 RESULT TREND

COVID CASES COUNTRY-WISE- JUNE 2020

HIGH LEVEL OF FUND RAISING BY CORPORATES DURING APR-AUG 2020

AAJ (TODAY)- JULY-SEPT 2020

What are we hearing/ reading – Key events during month of August 2020

The on-ground activity seems to be normalizing in July faster than expected. Our channel checks and on-ground readings suggest:

*If sales was 100 units pre Covid (Jan/Feb), then current sales is 75 units or 85 units as case may be.

July & August has thrown many positive surprises

•  Manufacturing PMI at 52.2 (vs 51.4 yoy) in Aug, the first expansion since lockdown.
•  E-way bills hit Rs. 13.8 lacs crores, which is 97% of its year ago period.
•  Rail freight at 95.2 MT, which is 97% of its year ago period in July.
•  Passenger vehicles and 2wheelers in August are at 95% & 90% of its year ago period.

AUTO MONTHLY DISPATCHED TREND

COVID CASES COUNTRY-WISE- SEPTEMBER 2020

K E Y  E V E N T S  D U R I N G  M O N T H  O F  A U G U S T  2 0 2 0

• Border tensions between India and China erupted once again; Government of India banned another 110 Chinese apps. 
• India entered the list of top 3 countries hit by coronavirus as confirmed cases rose to +35 lakh, but total cases and deaths as a percentage of the population remained much lower than other severely affected countries .
• GST collections in August was at Rs. 86,449 crores (down just 12% YOY), but lower than Rs. 87,422 crores in July and Rs. 90,917 crores in June. There is strong chance we should revert back to monthly run-rate of Rs. 100,000 crores per month starting October 2020.
• 10 year bond yields went below 6% in Jul’20, after a gap of 12 years.
• FIIs were net buyers of $5 bn during August. the highest in 2020.

KAL (TOMORROW)-  OCT-DEC 2020 & BEYOND

E-Commerce order volume growth has been 17% during Apr-Jun 2020 led by smaller cities and first time consumers; 66% share of Tier 2 and beyond, 53% share from Tier 3 and beyond.

Telecom firms get breather in AGR case, SC allows them 10 years to clear dues; Only 10% to be paid before 31st Mar 2021.

The second round of moratorium closed on 31st August 2020. However, retail borrowers may still get relief on repayment and tenure through a one-time restructuring scheme, which is in works. The proposed loan restructuring will enable banks to extend the term of retail loans by two years without increasing customers’ EMI amounts (equated monthly instalments). At present, loan accounts that are in default for not more than 30 days as on 1 March 2020 are eligible for restructuring.

RAPID IMPROVEMENT IN THE ON-GROUND ACTIVITY IN JULY/AUG LIKELY TO CONTINUE

K E Y  U P C O M I N G  E V E N T S

Events in the coming months that will provide swings to the markets are:

Vertical unlock state wise & opening of remaining pockets

Ramp-up in demand post ease of vertical/micro city/state lockdown in select areas. Opening of
food courts, entertainment zones, restaurants, bars, multiplex, gym, clubs etc.

US Presidential election (Nov\’20)

The U.S. Presidential Election will be top event to watch out for in coming months.

The state election in India (Bihar) in Nov\’20
The ruling party at Centre & State would have to avoid significant reforms which could derail the economy again and instead focus on measures which will enhance domestic consumption.

R e s e a r c h & R a n k i n g  V i e w
It may not be a bold statement to make that bottom of the market is behind us.

What will lend support is the $12 tn global stimulus packages, advancement in research on vaccine, cure and markets/people looking beyond pandemic (not fretting as much as in Mar/Apr). We expect Nifty consolidating in the range of 11,000-12,000 in the near term and then move past 12,000 post Oct\’20. We believe investors should consider investing half of their investible surplus now with the balance half in a staggered manner over the coming 2-4
months depending on advancement towards availability of a vaccine and
business return to complete normalcy.

For a detailed assessment, we had recorded a webinar a couple of days back. You can view the
same here.

Best Practices For Wealth Creation

Rather than wait for Nifty correction, we suggest:

• Staggered buying approach: Use every dip as an opportunity to buy.
• Stock specific approach: Identify a few solid businesses that you would like to own; start accumulating them.
• Long-term approach: Keep a horizon of 3-5 years while investing in these businesses.     
• Stay focused: Avoid getting distracted from information overload/distraction/rumors via forwards on WhatsApp/Twitter/news channel.
• Trust time in the market: Don’t try to time by selling portfolio now and reentering at lower levels later.

Always remember, our country of 1.37 billion people is vastly underpenetrated in most aspects vis-à-vis developed countries. History has shown us that crisis when combined with above point creates ample multi-year opportunities for growth and wealth creation, provided you\’ve invested your money in the right hands.

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