Thursday, 2 August 2018

Why are investment so important?

Speaking to one of my closest friend i figured out that A common mistake investors make is confusing saving with investing and perceiving both as the same activity. This article will help you understand the nuances between these two related but independent activities.

When we do not spend a portion of our disposable income, we save it. The objective of saving should be to meet a short-term goal, one that can be funded primarily with our own money. It might be that holiday you are planning for, a tablet you want to buy or for a rainy day. Since the objective of saving is to meet a short-term goal or contingency that might arise, it is important that the saved amount be available to us when we need it, at short notice. Hence, one should park such funds in minimal risk instruments like liquid mutual funds or short period fixed deposits where the risk of capital loss is zero or next to zero.

On the other hand, we invest to meet long-term goals like funding child’s education or saving for retirement. Investing involves saving small amounts of money on a regular basis and using it to buy assets that will generate returns over a period of time. Since the goal of investing is to meet a large monetary outflow after an extended time frame, it is prudent to invest in securities that offer a higher rate of return. Long term bank fixed deposits, mutual fund investments in bonds and equities and stock market investments are all preferred routes for investments. As the monetary requirement is not in the near term, investors should approach the investment goal with a higher risk tolerance and not worry if the investment temporarily drops in value. Usually any amount that need not be accessed for at least the next five years can be considered for investment purpose.

Sonia is a 26-year-old finance professional working in a Mumbai-based MNC. Her monthly salary is Rs.38,000 and monthly expense including, EMI towards student loan, is Rs.31,000. She currently has savings of Rs.18,000. She is planning to take a backpacking trip to Rishikesh, expected to cost Rs.40,000, within the next 5 months. So she will need to save Rs.28,000 (40,000 – 18,000) for the same. Considering she is saving Rs.7,000 every month, she will be able to meet the goal comfortably by simply accumulating the amount in her savings bank account or buying units of liquid mutual fund.

Ganesh is a 35-year-old bank executive planning her finances to fund her retirement in 20 years. Her current annual income from salary is Rs.25,00,000, she will not receive any pension upon retirement. Her annual expenses including housing loan EMI is Rs.18,00,000 that will be paid off in 20 years time. She does not have any other major financial expenditure or investments. She plans to contribute a constant amount of Rs.7,00,000 towards retirement fund over the next 20 years. Mandrita feels a retirement corpus of Rs.6 crore will be sufficient assuming a life span of 85 years. She has the option to invest either in a bank recurring deposit, debt mutual fund, a Nifty exchange traded fund or equity mutual fund. Each of these options have different return expectations and risk profile.

Sunday, 3 June 2018

Effect on stock market if RBI increase the bank rates...

First, bank rate is the rate at which central bank (in case of India, it is RBI) of a country provides re-financing facilities or provides loans to the commercial banks.

When bank rate is lowered, it is called 'cheap money policy'. Money supply in the economy is increased. Commercial banks now can borrow from the RBI at cheaper rates and can pass on this change to their customers through by providing loans at cheaper rate. Now, say if you want to get a home loan, your cost of getting that loan gets decreased. Generally, RBI lowers the bank rate during a period of recession/slowdown or sluggish economic activity. Reduced costs of loans, encourage companies/manufacturing units etc to borrow more for increasing production and consumers to spend more. Thus, economic activity in the country picks up.

When RBI increases bank rate, it is called 'dear money policy'. Money becomes costlier. RBI, does so, generally, during a period of inflation. Commercial banks are compelled to pay higher interest to the RBI which in turn prompts them to raise the interest rates on loans they offer to customers. The customers then are dissuaded in taking credit from banks, leading to a shortage of money in the economy and less liquidity. So, while on the one hand, inflation is under controlled as there is less money to spend, growth suffers as companies avoid taking loans at high rates, leading to a shortfall in production and expansion.

Changes in the bank rate also affect the stock markets which generally react positively to reduction in the bank rate. Stock markets rise up in the anticipation or in the event of bank rate decrease while they are bearish on bank rate increase, generally.

RBI uses bank rate to balance economic growth and inflation.

Thursday, 31 May 2018

How Cryptocurrencies Influenced Affiliate Marketing

Cryptocurrencies, in a simpler way of explaining it, is a digital currency where it can help verify the transfer of your fund, and it is an inscription technique. Affiliate marketing is the method of earning money through promoting another person’s work. Now, you might be wondering how the former influences the latter. There are some ways on how affiliate marketing and cryptocurrency can influence one another since one does digital work in verifying the transfer of fund while the other deals with earning through promoting. To help you know, there are ways that it can influence each other.

Quality results are assured

One great influenced is that quality results will be assured. You see, for you to earn by the commission, you would need to advertise, and the best way to do that is through performance marketing which is known as online marketing. You see, through it, you would gain buyers and get a commission from the product you sold, and the money you receive will be encrypted to your account thanks to how cryptocurrencies work.

Well organized method

When it comes to this, everything is well organized, and you wouldn’t have to worry about anything. Cryptocurrencies aren’t your ordinary program because it can organize the number of transactions for you to be able to easily understand how things have gone with the money that you have earned.

Hassle free

If you want to focus on your affiliate marketing without having to worry about the verification if you have received the money, then the best way to do it is with cryptocurrencies because it will make things hassle-free for you. There wouldn’t be any more stress or pressure because with this program everything is done for you.

Easy to use

If you are worried about the how high class the cryptocurrencies because of its sophisticated encryption technique, then don’t be because if you want to know if you have received the money, then it can easily be done since this is to assure you that it will be easy for you to use.
Now you know how the cryptocurrencies can influence affiliate marketing and by knowing that you should begin to realize how amazing the work it does. It can help you in a lot of ways, and it can positively influence the affiliate marketing giving you the quality result, the method is well organized, everything is reflected, it is hassle-free, and it is easy for you to use. Truly, this is a work that can help a lot of people around the world.

Moodys Investors Service says that the increased use of public-private partnerships (PPPs) in Indias highway sector supports private sector investment in other sectors, benefiting from government initiatives and the improving credit profiles of infrastructure developers.

Private investment in highway projects had been declining in recent years, amid issues such as slow project approvals and cost overruns, but the Indian governments introduction of the hybrid annuity model (HAM) in 2016 -- as a variation of PPPs -- has triggered new investment inflows, says Abhishek Tyagi, a Moodys Vice President and Senior Analyst.

Other sectors, such as the port, shipping and rail sectors, have also started looking at improving the PPP framework in order to attract private investment to fund Indias substantial infrastructure needs, adds Tyagi.

Moodys report explains that the HAM model adopted in Indias highways sector, relative to more traditional PPPs, rebalances certain project risks between the public and private sectors. In addition, the government provides funding during the construction phase, thus addressing some of the key concerns of the earlier model.

For example, as a result of improved right of way risk allocation, the risk of delays in project completion is relatively lower for HAM projects because of the upfront availability of the majority (at least 80%) of right of way and other factors.

The new model has triggered a significant increase in projects awarded, with HAM projects accounting for around 46% of total awards in terms of highway length and 63% in terms of total value (INR765 billion) in the 12 months to March 2018.

In recent months, the government has implemented measures in an attempt to attract private investment for Indias vast infrastructure needs, including in the port and rail sectors.

The Ministry of Shipping has also proposed a new model concession agreement that that helps clarify the language in and standardize PPP projects.

Finally, Moodys notes that the improving credit profiles of infrastructure developers is increasing their capacity to participate in PPP projects. However, their access to funding remains a key concern, with banks constrained by sector-specific exposure limits and existing stressed assets in their infrastructure portfolios.

Outlook on current marker

1. Current Market Scenario :

The result season has almost come to an end. So far the results have been in line with estimates. The corporate earnings are improving and are broad based except public sector banks. Q4FY18 would be recalled for the confirmation that the consumer demand is back on track; the FMCG volume growth which indicates pickup in consumer demand be it rural or urban has been strikingly noticed in Q4FY18- HUL, ITC, Dabur posted excellent volume growth. HUL has reported a robust 11% volume growth and 240bps margin expansion as benefits of cost efficiency programs and improved product mix have boosted profitability. Medium term outlook looks encouraging given gradual pick up in rural demand on expectation of good monsoon, sustained benefits from GST and normalization of trade channels. Managements have been more optimistic about demand growth though worries about rising crude oil prices and interest rates still persist.

Monsoon is expected to be good. Both IMD and private weather forecaster Skymet has guided for ‘normal’ monsoon for third year in succession ruling out probability of deficiency in rainfall.  Good monsoon augurs well for the revival of rural consumption. GST tax collection has been improving and with implementation of E-way bill, the collection will further improve thus bridging the gap for the Government. The collection numbers for GST for the month of Apr.’18 were reported at Rs 1.03 lakh cr.

Market is keeping a close eye on the geo-political developments in Korean peninsula in aftermath of cancellation of meeting between the heads of US & N Korea.

2. Outlook on crude :

Crude oil prices have corrected after OPEC and Russia considered easing supply curbs to offset disruptions in Venezuela and an expected drop in Iranian exports. Together they are mulling to increase the production by about 1 mn bpd thus reducing the supply –demand mismatch. Further restrictions on oil production could be eased "softly" if OPEC and non-OPEC countries see the oil market balancing in June.

All eyes would now be on US crude oil production which has risen by more than a quarter in the last two years, to 10.73 million barrels per day (bpd) next only Russia who produces more, at around 11 million bpd. Output by producers like the United States, Canada or Brazil who are not bound by the OPEC/Russian led agreement to cut, will likely rise further as higher crude prices improves their profitability.  Oil is expected to consolidate in near term which would augur well for Indian economy. We expect it to stabilize around $72-75/bbl before taking any further direction based on the geo-political event and demand supply equation.

3. Key trends to watch out for :

Long term trends:-

Consumption: India is an emerging economy with rising per capita income currently around $1900 growing at 6-7%. As the per capita income crosses $2000, a drastic shift in consumption trends has been seen in the developed nations. This shift involves higher allocation to discretionary consumption the likes of consumer goods, clothing, media and entertainment. We like the FMCG and consumer goods theme, textiles etc in wake of this shift in consumption. If you find the penetration of airconditioning units is barely 4-5% in India. As the affordability rises, one can see the shift from fans to coolers to air conditioners. We expect the demand for cooler and air conditioning rising over coming years and the companies in this sector doing quite well.

Election year: We have few state elections and general election slated in coming year. Ahead of elections, there is high probability of increased governmental spends which will drive the sectors like FMCG, consumer goods, infrastructure etc. Good monsoon will also augur well for consumption sector esp the rural focused companies.

Automobiles: India produces barely 34/35 lakh PVs compared with China which produces more than 2 cr per annum; India’s CV production number is in the range of ~7/8 lakh per annum, China produces upwards of 40 lakhs. Indian auto industry is on growth phase, expecting to grow at low teens every year for next couple of years. Moreover, the vehicles are getting more electronic content, more comfort in it following the rise in the purchasing power and implementation of the regulations. We like the auto ancillaries who are positioned in providing the content for the vehicles.

Short term trends :-

Macros: The inflation is hardening which is further supported by crude oil price rise. The interest rates are already bottomed out and high probability of atleast one rate hike of 25 bps over next 6 months which would be negative for interest rate sensitive sectors like auto, housing finance, banking etc.

Global headwinds: The cancellation of US- N Korea meet scheduled for June 2018 has led to fears of intensification of tensions in Korean peninsula which will lead to risk aversion in global markets. The rising US yields, normalizing of US Fed balance sheet and hardening of rates in US is likely to have pressure in the markets in general.

4. Macroeconomic perspective :

The Inflation is expected to trend between 4.5-5% over next couple of months; though RBI has maintained status quo in last meet on Apr. 4/5 but the minutes of meeting indicated that the central bank has some concern about the inflation given the rising crude.

Depreciating INR following the likely deterioration of macros has been a cause of concern together with rising crude prices. The impact of rising crude oil bill is likely to stretch the fiscal deficit for the country.

The GST collections has been increasing, average collection per month has been (approx.) Rs 90,000 cr. for Aug.’17- March 2018; the collection for Apr.’18 has increased to Rs 1.03 lakh cr post implementation of e-way bill. E-way will help plug the loopholes if any and help improve collections. If GST revenues start picking up sufficiently to be in line with the government’s assumptions for FY19 then the bond market may actually cool off from current levels.

The corporate earnings have been in line with expectations and trending northwards. Going forward, the macro picture is expected to be impacted due to rise in oil prices. Domestic markets are likely to go through bouts of volatility time and again following the global cues, and domestic developments which include political developments but over long term, investors would be rewarded for their tenacity and patience for remaining invested.

5. Sector Outlook (Auto, Retail, Banking, Pharma, Energy, IT, Telecom, Real Estate, Metals, etc.) :

As India story is intact, be it rural or urban consumption, discretionary spends, infrastructure investments etc. look good.

Auto and Auto ancillaries are good investment options given the under penetration and rising demand in this space.

FMCG and consumer durable manufacturers would be beneficiaries of the rising spending power in rural areas along with improving electricity infrastructure in villages.

Given the massive public spending by the Government for improving infrastructure, EPC companies with execution capabilities and light balance sheet are also good opportunities for investment.

Housing and related theme like housing finance, home improvement etc are still looking good given the Govt.’s target of “Housing for all by 2022” and measures put in place for the same.

The financialization and formalization of the economy has created ample opportunities for NBFCs and Pvt. Banks with retail focus, although there would be some pressure on this segment as the rise in domestic yields would increase their cost of funds for short run.

As global economies are doing good, the export related segments like textiles and chemicals also has ample scope for growth. India holds advantage in these two sectors on account of India being largest cotton producer (thus secured on raw material front) for textiles and better production practices in chemicals industry where the West is looking for shifting production to East and India is considered as better option vis-à-vis China. In both Industries, India scores better due to lower labour cost, talented, educated workforce and stringent Intellectual Property laws.

We are not great fans of metals (neutral view) but we feel that metals sector would be beneficiaries of global inflationary trends in metal prices along with rising demand from US and China. Steel prices are expected to be elevated following rising infrastructure demand from US and aluminium prices are expected to be strong given the supply constraints from China and Russia.

IT has been benefited due to the depreciating currency despite the relatively muted growth prospects. We maintain neutral view on IT sector.

Top sectors to avoid: Pharma- the pharma sector is going through dull phase in its life cycle. In addition to USFDA issues which would probably get resolved in near term the pricing in US markets is worrying us. Hence we would recommend our investors to instead look for domestically focused sectors which have both growth potential and good pricing power.

6. Impact of global developments on Indian markets :

Global markets are joined at hip. Being part of global economy, Indian markets move in tandem to developed markets. The developments in US have major repercussions in global markets. The rise in 10 year yields has caught attention of all the markets. Currently trending around 3%, it has potential to reach 3.5% over next 6-9 months depending on the outcomes of the US economic data and actions of US Fed. If the yields breach 3.5%, there is high likelihood of shift towards US debt paper. It is every much evident from the FII sale figures over last couple of months.

The tensions in ME are likely to flare up the crude oil prices and the re-emergence of tensions in Korean peninsula has the potential to incite risk aversion in global markets. Any corrections in Indian markets following the global developments should be used as an opportunity by long term investor to accumulate good quality stocks with growth potential.  It has been proved time and again that the markets have provided excellent returns after sudden knee jerk reaction to any extraneous global event in past.

FICCI's Economic Outlook

FICCI's Economic Outlook Survey projects the quarterly GDP growth forecast for Q4 2017-18 at 7.1%; taking the full year growth estimate for 2017-18 to 6.6%. The survey was conducted during April-May2018 and included economists from Industry, banking and financial services sector.

The annual GDP growth for 2018-19 is projected at 7.4% by the participating economist; with a minimum and maximum range of 6.9% and 7.5% respectively.

Agriculture: The median growth forecast for agriculture and allied activities has been put at 3.2% for 2018-19. The Indian Meteorological Department (IMD) has predicted a normal monsoon which bodes well for agricultural production during the year.

Industry and Service Sector: Industry and services sector are expected to grow by 6.7% and 8.4% respectively in 2018-19.

IIP: The median growth forecast for IIP has been put at 6.5% for the year 2018-19, with a minimum and maximum range of 5.0% and 7.0% respectively.

Inflation: The outlook of the participating economists on inflation remained moderate. The median forecast for Wholesale Price Index (WPI) based inflation rate for 2018-19 has been put at 3.5%, with a minimum and maximum range of 2.9% and 3.9% respectively. The Consumer Price Index (CPI) has a median forecast of 4.6% for 2018-19, with a minimum and maximum range of 4.3% and 5.0% respectively.

Some concerns are visible on external front with median current account deficit forecast pegged at 2.1% of GDP for 2018-19. The surge in oil prices has emerged as a major risk factor and can weigh down heavy on Indias external position and overall growth prospects. The weakening Rupee is further adding strain on the imports. In fact, the economists felt that the Rupee might continue to remain under pressure during the remaining part of the year. Foreign capital inflows are expected to face risks from tighter global liquidity conditions, introduction of long term capital gain tax and from other global financial developments such as correction in global stock markets and rise in US treasury yields.

The economists also shared their views on rising protectionist policies by some of the leading economies and its impact on India. They unanimously felt that the brewing trade war can impact India indirectly, if not directly, as the country is deeply integrated with global economy. The trade related tensions will further exacerbate geopolitical strains and could lead to a slowdown in growth of world trade. The economists believed that protectionist measures could undermine the multilateral trading system governed by WTO rules.

It was opined that exports are likely to bear the brunt and export-oriented industries particularly MSMEs in sectors like iron and steel, machinery and metal products, chemicals and agricultural goods are likely to take a hit. There are possibilities of an unexpected interruption in the global supply chain.

Nonetheless, it was also felt that on the positive side the looming trade war has the potential to open up new avenues for India. India should focus on deeper engagement with its key trading partners to insulate itself from the impact of protectionist policies.

Furthermore, the Reserve Bank of India in its First Bi-monthly Monetary Policy announced setting up of an inter-departmental group to assess the feasibility of introducing a central bank digital currency. Given the fact that several central banks around the world are contemplating to introduce a fiat digital currency.

The economists agreed that introduction of a fiat digital currency will be a step in right direction. Citing various advantages, economists said that digital currency will provide an easy and efficient way for instant global electronic transactions, prevent counterfeiting and reduce printing and administrative costs substantially. It would also benefit by bringing about wider financial inclusion, enhancing market stability and providing for better record keeping and monitoring of transactions.

However, the economists also cautioned that even though the concept of digital currency is promising on several fronts, its introduction requires detailed discussion. They felt that a fiat digital currency could pose a threat to privacy and security concerns need to be safeguarded first. They called for careful consideration and discussions before implementing any such arrangement.

The government has set up a high-level task force to chart out a roadmap towards making India a USD 5 trillion economy over the next 7-8 years. In this context, the economists were asked to share their prognosis on ways government can adapt to support and promote rapid growth in the manufacturing sector.

Most economists agreed that a vibrant manufacturing sector is needed to achieve impressive growth in GDP. It was felt that the sector, at present, is grappling with issues related to competitiveness which is contributing to lower exports as well as overall growth. While the government has taken steps to improve the business environment and removed several bottlenecks, the economists participating in the survey felt that a lot more needs to be done to increase the share of manufacturing in GDP.

They opined that the government must stand up to the challenge of carrying out the difficult reforms, especially those related to the factor market (land and labor). Further, timely implementation of proposed reforms in the infrastructure and logistics space like the Bharatmala Project and power sector must be ensured to improve competitiveness of the Indian manufacturing sector.

A special focus must be provided to small and medium enterprises as they form the backbone of Indias manufacturing sector. The SMEs continue to be real job creators in Indias economy. Since they form such an important part of our countrys industrial structure, the economists suggested that processes for small and medium enterprises and start-ups must be further simplified. The participants also called for consistency in long term policy formulations to bring about stability which is conducive for investments.

Furthermore, the economists pointed out that there is an urgent need for continuous supply of aptly skilled workforce for manufacturing output to expand. This becomes even more important when the world is looking at Industry 4.0 which is expected to open newer opportunities for those with higher value-added skills.

Economists felt that state of art vocational training institutes must be established around key manufacturing clusters for developing skilled labour force.

In addition, economists believe that supply chain agility is crucial to improve the efficiency of the manufacturing ecosystem and this is where the governments spending on infrastructure to improve forward and backward linkages will play a significant role.

Lastly, it was suggested that manufacturing units must ensure world class quality in the products they produce. Economists recommended a zero-tolerance approach to be followed to guarantee process discipline. This will go a long way in promoting India as a global manufacturing hub.

Monday, 28 May 2018

Difference Between Stocks, Stakes, and Shares?

After reading this article you wouldn't get baffled by all this overlapping terminology.

Investing comes with its own set of terminology, and sometimes that lingo can overlap. While stocks, stakes, and shares can, in some situations, refer to the same thing, each term has its own distinct meaning.


When a company wants to raise capital, it can try borrowing money, or it can issue stocks. Stocks are securities that represent ownership in a corporation. When an investor buys a company's stock, that person is not lending the company money, but rather, is buying a percentage of ownership in that company. In exchange for purchasing stocks in a given company, stockholders have a claim on part of its earnings and assets. Some stocks pay quarterly or annual dividends, which are a portion of the issuing company's earnings. Investing in stocks can be profitable in two regards. Not only do you stand to possibly receive dividends, but if the company whose stock you own performs well and its stock price goes up, you could make money by selling that stock for a price that's higher than what you paid. Those who own stocks in a public company may be referred to as stockholders, stakeholders, and shareholders, and in reality, all three terms are correct.


If you own stock in a given company, your stake represents the percentage of its stock that you own. You can, however, have a stake in a company even if you don't own shares of its stock. Bondholders, for example, are considered stakeholders in a company because they stand to benefit if the company performs well. Additionally, if you invest in a smaller, non-public company, you might receive a stake in the business in exchange for your investment. Let's say a company is looking to raise 50,0000 in exchange for a 20% stake in its business. Investing 50,0000 in that company could entitle you to 20% of that business's profits going forward.


When a company issues stock, each unit of stock is considered a share. One share of stock is therefore equal to one unit of ownership in a given company. Although the term "shares" generally refers to units of stock in a public company, it can also refer to other types of investments. For example, you might own shares of a mutual fund. In a publicly traded company, shareholders are always stakeholders, but stakeholders do not necessarily own shares of stock. Some companies also offer plans or incentives in which employees get a share of their profits. It's common among start-up companies to offer profit-sharing plans to attract talent, though some established companies engage in this practice as well.
Which is know as ESOP-employee stock ownership plan

Thanks & Regards
Jitender Kumar  

M: +917827747427
Skype: jituhm.1991