Zee Business Mutual Fund Helpline 03 Dec 2019 Mr Prakash Ranjan Sinha ...

Generation Need Shift – Survival to Growth to Enjoyment

Generation Need Shift – Survival to Growth to Enjoyment

I was just thinking about life , demographic changes and its impact on present day society and lifestyle . Have human being changed ? Is todays younger generation a different human being than my fathers generation .

Do we remember Maslow’s hierarchy of Needs ( see below )

·         Physiological Needs. The physiological needs includes the basic needs that man needs for the survival of his body which food, clothing, air, shelter

·         Safety and security Needs

·         Love/Belongingness Needs , family , friends

·         Self-Esteem , prestige , feeling of accomplishment Need

·         Self-Actualization ,creative activities , realising full potential need.

This Maslow’s hierarchy need when made was a step by step progression in the life of a human being . But when I evaluate this I find its not in a single human life but has spaced itself in 3 different generations – father , son and grandson in Indian context.

Our father generation – Most of them took job as it served the basic mean for survival ( Roti , Kapda and Makan ). The permanent nature of job also added security and safety . Belongingness and love was an integral part of society . They hardly looked beyond this . Whatever success they got they were happy so very few really strove for higher accomplishment and for most sense of contentment existed . Individual value system, behaviour was main factors for esteem and respect from others which was a high priority . they derived self actualisation more by laughing freely , celebrating festivals , meeting in family functions i.e stress free life  

Our generation – We saw a shift  from safe and secured government job and started moving toward private job . Basic need and safety and security was a requirement but not necessarily a priority . The belongingness and love which was to come from family friend slowly started shaping into business and professional interest and gains . Family time got replaced with long working office hours . Esteem slowly started getting replaced by greed of money so everything acceptable for some . Last 2 decades now money is main relative and friend for many . Accomplishment means more flats , properties and assets . Self actualisation for many is now holidaying abroad , watching movies , dining , partying etc or spending time on TV , internet , social media.

Next Generation ( Todays Youth ) – Do they really need to worry about psychological need ? . Parents have already purchased few flats for them , have built assets to enjoy life . Formal study has been replaced by hobby centric study . For many study abroad is the motto . safety and security is nothing to worry as “ Paisa hai to koi chinta nahi “ . Their life and its essence starts from 3^rd level. Social media plays a big role in its execution . How many really care for esteem ? They live in pragmatic world where not much of emotions are seen in any relationship . They adopt to new realities of life and move on n . They don’t hold the baggage of past for long and venture new things which excites them  . They find self actualisation in creative things ( Tik Tok , stand up comedy , netflex ) .

Well these are the shift generation wise from survival to growth to enjoyment . But what shift one might see in generation to come i.e after todays generation ?

If they start from self actualisation level as all the earlier needs have been generated by their earlier generation then what will be their definition of self actualisation ?

If it’s a reality that older generations are being ignored or some unfortunate ones thrown out of homes or left to feed themselves or the younger lots happy settling abroad leaving their parents here only what next left now to happen in family?

Today one has to pay even for the very very basic needs ( food , water and now fresh air to breath ) . News is fresh oxygen parlours setting up their shops and with level of pollution increasing what one can expect further ? So are we going to see new form of needs in Maslow’s hierarchy ?

Watch the younger lots on road – engrossed in their mobile while walking on road that not even noticing a beggar or old man or a sick person on road . Their only encounter with such emotions if any on reel scenes ( movies ) and not in real scenes .

Why this analysis ?

If each one of us love our children and seeing the changing lifestyle if we feel that our same beloved children might be facing an unimaginative distress when they become old then who is responsible for all this ? Its our generation only . We initiated all the changes , we accepted all the changes , we introduced to them all the changes and so only we have to undo some of the wrong changes .

Make them to understand how to earn basic need ( don’t build too much wealth for them ) , let them fight for their own safety and security . teach them cultural, social , human values and not only IT led values . Let intelligence be real and not make world dependent on artificial intelligence only. let them understand the real love , happiness . relationship emanating from humanity . Teach them to explore their inner self through meditation  .  Lead them to path of real and natural Godly self actualisation and not worldly self-actualisation .

If we fail to undo our own mistakes then our children when they pass their prime and face distress in latter part of their life they will only blame us .

Its sometime to ponder and act…………………………….

Zee Business Mutual Fund Helpline 18 Nov 2019 Mr Prakash Ranjan Sinha ...

In future return from Equity Mutual Fund in long term may not be as high as of Past

In future return from Equity Mutual Fund in long term may not be as high as of Past

Generally investors , distributors and analyst compare fund return for the period say 5,7, 10,15,20, 25…. Years on year to year basis and draw the trend  . Our expectation of return is based on that and we believe will get the same . As we move ahead my understanding is it will reduce going forward . For example lets say if I got 18% CAGR for last 15 year holding I will end up less than 18% in next 15 year .

My assessment is based on some facts and logics

·         The nos of stocks available has been increasing in the stock market. We have 3 market caps – large , mid and small . Though the number of universe in large cap remains the same i.e 100 the valuation of companies are higher than what they were 15 years back . In other words overall market cap of top 100 companies has increased . Now as the valuation go higher and higher the percentage return can not be the same . e.g if stock X was priced say 400 , growth of 25%  means prices becoming 500 . But if the price becomes say 1200 expecting price to become 1600 ( i.e 25% might not be so easy ) . In India most equity investors refrain to go for long term for the stock whose valuation has gone up. The general psychology of investor is they do see upside in a good company but not willing to stay invested for long term as they have entered at a very high price . So upside in large cap companies are there but will not maintain same growth percentage .  Also many of these today large cap were mid cap some years back or even small cap many years back . The rate of growth will not remain same as the base of growth ( price or earnings) grows . Today periodically some stocks are moving in or out from large cap basket . Now those entering in have already risen up on valuation and those going out have saw reduction in valuation . Those moved in again higher valuation becomes a limiting factor to some extent as explained earlier but those moved out creates not so positive image and investor again are a bit cautious for long term perspective . May be watch and gain by trading on short term . In Mid cap earlier the universe was 500 now reduced to 150 . This reduction of universe itself can create lesser trading opportunity based on short term price volatility . In Small cap the universe is very large but large universe has no relevance in fund management but how many stocks they are researching is important . Now again since research findings are almost on similar variables , similar methodology findings will not be having much of differentiating factors . Higher return will again be a function of tactical calls by fund manager . Also with reduction in total expense ratio some expense flexibility has been restricted by SEBI .

·         There was a time when many AMCs were striving to reach break even level  . Once reached and generating good profit top AMCs have moved toward now increasing their AUM at a lower cost . They are putting more emphasis on platforms and direct option . Now since decision making is left more or less to investors who will be averse to volatility , the Fund Managers will be more inclined to protect short term downside risk than taking advantage of short term profiteering opportunity . It simply means allocation will have more long term strategic intent and less of tactical biases than earlier times. No AMC  wants volatility is return should create volatile AUM as that not only leaves large number of dissatisfied investors but also puts contact redemption pressure . So fund will prefer to go for constant good return than chase for higher return .

·         We are in information age . With quick and smooth flow of information even trading activities also brings some sanity i.e we may not see higher volatility in stocks than past and that will also bring lesser volatility in equity fund performance .

·         Now Indian stock market have integrated with other economies . Many stocks are traded at different stock exchanges in other part of globe. Information are analysed on real time basis with the use of better technical tools and technology . This will nullify any price differences existing in different markets . Some markets will factor in information in much better manner and those inputs will be of big use in Indian market and so arbitrage opportunity or return on price mismatch reduced further.

·         Also as the return from Bank FD , G- Sec ( debt ) reducing the risk premium ( return of equity MF less risk free security ) will also either remain same or might reduce also . This means return from equity might reduce in comparison vis a vis past data .

Investors also needs to moderate their return expectation in percentage terms for long term holding . Indian equities will still deliver premium over debt on return side as our economy and industries are still in growth path and it has a long way still to go .

EXCHANGE TRADED FUND (ETF) vs OPEN ENDED EQUITY MUTUAL FUND

EXCHANGE TRADED FUND (ETF) vs OPEN ENDED EQUITY MUTUAL FUND

Today lots of investment experts and Fund Managers advocating of more Exchange Traded Funds (ETFs ) in Mutual Fund Industry . USA and other developed economies MF industry have a big dominance of various ETFs and many feel India should also be having more and more ETFs . It has got both pros and cons if looked from the perspective of a real ground realities and scenarios .

ETFs are MF product ( portfolio based on any defined basket of securities ) which is listed and traded at the stock exchange like a share . It can be bought and sold on a real time price like share and unlike other MF products which have only one NAV for the day . So it captures features of both MF ( Portfolio ) and share ( tradability on real time price) .

Lets evaluate what risk it poses for investors .

As an investor rather than trading on a particular stock I can trade on basket of similar industry stocks (banking ,IT , Pharma etc ) or similar risk category ( market cap ) or indices ( nifty etc ) . Portfolio is more or less known to me but is portfolio risk i.e short term volatility due to buying and selling of stocks at the stock exchange on real time basis is known to me ? Just like stock the quality does not matter for a day trader but the entry and exit price and timing it at right time matters . Do a normal MF investor has knowledge, information , skills to time entry/exit at right price ?

The downside risk in Equity MF is mitigated by being a long term investor ( > 5 years ) whereas this is more of a short term investment product . If it is to be invested as long term and I wish to bet on market and not on fund management ( active ) then why not go for Index Fund rather than ETF .

Many experts talking of lower cost vis a vis normal MF product . But cost is an irrelevant aspects considering the downside risk from return in short term . Moreover have we factored the taxation side . In Equity MF if any profit booked in the fund it is not taxed . Taxation comes into force only when investor gains by selling the units whereas in ETFs if the investor will be gaining due to impact of same share his taxation will be like normal share . In Equity MF , fund is an intermediary executing trade on behalf of investor so not taxed whereas in ETF there is no intermediary but direct execution by investor so any gain is taxed .

Some talk of easy and quick liquidity vis a vis MF products . But again liquidity at what cost ? Buying and selling behaviour of a day trader can create short term volatility in pricing of the stock and if that stock is in ETF product it will have similar impact . Will it not create more confusion on entry/exit pricing and action as he can not track on real time basis the movements if he is a normal Equity MF investors . Indian stock market and stock prices are mispriced most of times in short term as compared with developed countries and so if a laymen enters in big way in ETF he is infact helping a day trader to gain at his cost . Who knows many promoters can through cartel of stock broker gain through trade inducing a normal investor to fall into their trap .

Its true that today in information age we have access to information on real time basis but again how many of investors have skills to analyse them correctly and most importantly what about the authenticity of the information itself .

I feel ETF is no doubt a very good product and may be future of MF Industry in India but looking at the market mispricing stocks in short term , behaviours of different participants in stock market its not a product which can be positioned as alternative to equity MF but yes can be positioned as an alternative to direct stock trading.

The MF industry should put more emphasis on educating the investors on risk side . The ignorance and lack of knowledge of most investors have to be removed first . Skill sets have to be developed if we want investors to act and behave like a professional fund manager or equity day trader . Pushing a product aggressively to a normal MF investor before that will do more harm than gain for the MF industry .

Zee Business Mutual Fund Helpline 09 Oct 2019 Mr Prakash Ranjan Sinhain...

Was Finance Minister right in reducing Corporate tax rate ?

Was Finance Minister right in reducing Corporate tax rate ?

Recently FM has reduced corporate tax rate and made it at par with many global economies . The step has been taken to counter economic slowdown . Many feel its incorrect and rather than this individual tax rate should have been reduced or tax on product reduced or interest rate reduced to augment consumption . Well these people can have their own logic but I support what FM has done .

Lets analyse both Corporate vs Individual cases .

I feel the one who takes risk , whose earnings are more transparent , who pays taxes should be rewarded first which is corporates here . The one whose survival is in growth and non growth is a concern should be rewarded first than the one whose major concern is survival and not growth and most importantly his( individual ) survival is dependent on growth of first ( corporate ).

A promoter takes risk on his capital, spends time and energy to build and develop a business and a employees enjoys the fruit of this growth . Yes employees do contribute for business growth but are paid salary , perks etc. They go on official tour , stay in good hotel , move by flight etc . Are they worried about the expenses which they are incurring ? No . Its being born by their employer company . So a employees lives and enjoys a good life at company’s cost and has no risk of company business failure . The only time he is worried when his salary gets reduced or retrenched from job . Who has got the first hit from the risk of business failure – corporate or its employee ? So who needs to be protected first ? If a company fails employees loses his job , if the company grows employees also grow in terms of salary etc . Also whose fortune is dependent on whom ?

Now coming to individual ( consumer ) . We all are individual so will always look for our benefit first . We want ourselves to be protected and rewarded because we feel all are paying tax .  But that’s not the reality . How many of individuals disclose their earnings correctly particularly those who are doing business, self employed , professional or even in private sector ? How many pay taxes correctly ? If a businessmen showing less earning , paying less tax why he should be rewarded for his purchase of big car by lower interest rate or lower tax . Has he contributed to the revenue of the country for which he should be given the benefit ?

It’s a reality that is I have to pay 10000 as EMI I will think twice for going for loan but if the same EMI becomes 4000 due to reduced interest rate then most Indians will try to take advantage of it . This will lead to more consumption , revival of growth and increase in inflation . That will force RBI to increase the interest rate and the EMI will get increased . So are we not going to end up a situation where people might have borrowed more than their paying capacity ( main reason for present slowdown ) , cases of default might creeps in and again entering into economic slowdown phase . Is it a long term solution ?

Reduced corporate tax makes India attractive investment market for foreign companies , competition will lead to better quality products  , competition will also lower the cost and lowering the cost means consumer will get at a lower price.

Yes I do agree that honest tax payer should be rewarded but that when I look at dishonest tax payers . Government already doing a lot to increase the tax base and there has been increase in tax revenue last few years. I am sure that individuals tax rate will also get reduced in coming years as felt by many but it’s a step by step process .

AM I PRODUCTIVE ?

AM I PRODUCTIVE ?

What has tempted me to think on above topic ? If I see anywhere I find people just glued to their mobile phone . After that to TV or internet or Netflex movie . The pattern of our life has changed and becoming from bad to worse . I don’t know what life means to different person . So I tried to ask myself what my life means to me ?

Answer was “happiness every second of my life “ . Going by this logic for most may be mobile , social media ,entertainment if gives happiness then they have right interpretation of life . So again thinking I got the answer “ happiness every second of my life but through what is productive for life “ .

I have been hearing the word productive since beginning of my career . In my early part of my career when anyone used to say about productivity or productive employee it was more related with how that person was helping in growth of organisation , business , adding more revenue . So productivity was more with success , money and career growth . Yes this gives happiness to many but is it a perfect scenario ?

With passage of time , experience and interaction with hard realities of life my interpretation of productivity has now got changed . My understanding of productivity is now in holistic sense , more to do with life .

 We live 60 or 70 or 80 years of life . If I take a person who lived say 75 years of his life it means he has lived 236.53 crore seconds of his life . But how many of his second has been productive ?

When I am saying Productive I mean am I using every second of my life correctly ? We all know time is the most precious thing in our life , it has a limit and we live a fixed life . But in that life also we do not live a single life but multiple life ( childhood, youth , mid , old ) . Time once lost is not recovered . I can not again become 40 year old or 17 year old .

Productivity for a kid is enjoying freely , productivity for a student means studying well but at the same time enjoying his youth times as well . For the ones who are in job productivity does not only mean earning more revenue for the company and salary in return but spending quality time with family and others who matter in his life .

In life there are many aspects – work , relationship, health, entertainment , relaxing , enjoyment etc etc . We spend our 24 hours every day involved in any one of these . The allocation of time to different aspects varies for different age group but there is limit of everything . Overindulgence in any activity is never good . Doing exercise , meditation , doing puja are all good things but these aspects also have a limit . one should not end up spending time more than required or for some things even less than required . Balancing of time w.r.t every aspect of your life which adds productivity is very important .

What is important from Productivity point of view if whatever we do should make us happy but at the same time not at the cost of harming anyone .  So now I will redefine Productivity as  “ happiness every second of my life but through activities which is productive for life and that does not harm anyone “,

Generally we have seen people working 12-14 hours a day regularly , called workaholic , praised by all but is he really productive  ? yes he might not be harming anyone else but harming himself . Is he spending some time to meditate , relax his mind , spending quality time with family . We have only 24 hours and you require a minimum 6-7 hours of sleep also . yes this person might be productive for his employer but not for himself in true sense . Yes he might be finding happiness but at what cost . if ignoring child when young will he get same response from his later years adult child when he has retired ?.  There can be many different types of examples . 

How to know the deviations , overindulgence or underindulgence and not balancing between each important aspects of life .

List down each aspect fully understanding its relevance for life as a whole . Of 24 hours earmark minimum time you should be giving to each aspect . Try to maintain that . We are all human being and bound to err so every day before sleeping spend at least 5-10 minutes with yourself -sit quietly , ask yourself, introspect what you did the whole day and your inner self will give you answer what you should not be doing , what you missed and improvement will come slowly but surely .

The basic purpose of this article is to awaken everyone before its too late and we repent after 20-30 years . Looking at todays generation over indulgence only in tech related things I don’t know what the life will be then.

Zee Business Mutual Fund Helpline 10 Sept 2019 Mr Prakash Ranjan Sinha ...

Economic slowdown. cause and remedy

Economic slowdown. cause and  remedy

( PL READ - YOU DONT NEED TO BE AN ECONOMIST TO UNDERSTAND THIS ISSUE )

Everyone is blaming government for slowdown . This article is make people understand what economic slowdown means , how it happens and how can be corrected . 

The creation and correction lies totally in the hand of consumer . So any citizen if he blames government should read this article .

Consumer or citizens create demand by buying any product . Industries and companies are supplier who cater to the demand I.e manufacture and sell to the consumer . 

Now since everyone wants a better life , have aspiration for better lifestyle products demand grows and so grows the purchase . To meet the growing demand supply also grows through more products manufacturing . Up till now no issues .

Now enters the lending institutions ( Banks and NBFCs) . Seeing the growing demand they start providing loans to individuals and  capital for investment for more manufacturing . 

It's a general principal of life " paav Uti hi pasaro Jitni lambi Chadar Ho " . Simply meaning live within your means or spend from your earnings or borrow only that much which you can pay comfortably on time . 

But since everyone is chasing growth , availability of money is easy so overspending starts . All of us took pride in 8% GDP growth but anyone ever even questioned that was it a sustainable growth ? 

What happened that very soon individuals expenses which has overgrown the income realised this and the only way they could have countered the situation is go slow in purchase I.e buying getting deferred or lowered till the income -expenses mismatch normalised . This is what led to economic slowdown . In India there are other structural changes also happening ( consumer choices and preferences changing like shared mobility through Ola ,Uber preferred in place of car purchase ) .There are many structural and demographic changes also happening leading to emergence of new style of living , emergence of new type of industries and may be some traditional industries either die or reshape themselves . 

Now the supplier I.e companies have already taken loans from bank and they have to pay interest . they have got other costs ( salary cost of increased manpower strength ) but there income from reducing sales gone down and so profit also getting reduced . Now these companies think one of the decision is to lay off some employees to counter the situation . 

I request my readers to see the audited balance sheet and profit and loss statement of any company which is laying off employees and crying of losses . I find in last 5 years all have earned huge profit every year , good reserves and surplus , paid good dividend also to their shareholders , good book value . So where is the loss which any of these companies are talking about . Yes profit might have got reduced vis a vis last year but is that a loss ?

Now the moment companies lay off employees or do salary cut more people are now added who have lesser money to purchase and again adding to more slowdown . 

Government has to step in and through certain policy measures along with RBI they try to reduce interest rate so that loans are cheaper , some tax advantage also given so that more money for spending at the end of individuals .

Economic slowdown is nothing but an after effect of chasing unrealistic aggressive growth by all in economy but it is led by individuals and only individuals can again end this slowdown by their normal purchasing activities . 

My only fear is that this economic slowdown might not get compounded because of greed of promoters of companies . They might aggravate the situation by laying off employees rather than taking the brunt for a year as they all have huge accumulated profit in their balance sheet . If these companies operate at a low profit for a year believe me this economic slowdown is just a matter of some months or max a year but if they add fuel to the fire ( laying off employees ) then will prolong. Government role is just to make policies which can ease the situation but action of individual consumers and companies will what eventually make this good or worse. 

Economic Slowdown catalysed by few Individuals

Economic Slowdown catalysed by few  Individuals

To understand economic slowdown and massive talk about auto slowdown I tried to look into balance sheet and income statement of Maruti ( which has 50% market share in car segment ) .

Some facts

Profit & Loss account of Maruti Suzuki India

------------------- in Rs. Cr. -------------------

Mar '19

Mar '18

Mar '17

Mar '16

Mar '15

Sales Turnover	86,020.30	81,994.40	77,266.20	65,054.60	55,133.60
Reported Net Profit	7,500.60	7,721.80	7,350.20	5,364.30	3,711.20
Earning Per Share (Rs)	248.30	255.62	243.32	177.58	122.85
Equity Dividend (%)	1,600.00	1,600.00	1,500.00	700.00	500.00
Book Value (Rs)	1,527.46	1,382.33	1,206.01	989.28	784.70

Balance Sheet of Maruti Suzuki India

------------------- in Rs. Cr. -------------------

Mar '19

Mar '18

Mar '17

Mar '16

Mar '15

Reserves	45,990.50	41,606.30	36,280.10	29,733.20	23,553.20
Networth	46,141.50	41,757.30	36,431.10	29,884.20	23,704.20
Current Liabilities	15,976.80	16,915.50	13,865.00	11,564.70	8,013.60
Book Value (Rs)	1,527.46	1,382.33	1,206.01	989.28	784.70

I do not have last 3-4 months data but assuming that sales are down as per various report should this company can be called a loss making company which has fired thousands of employees .

Sitting on a net profit of 7500 cr which rose from 3711 cr in just 4 years . Reserves doubled in same 4 years . Its very simple the promoter wants book value not to go down and so be the very very high dividend payout rate ( 1600% on face value of a share ) so has reduced the current liability through salary cut/losses by firing employees .

Economic showdown is a result of lesser spending due to lesser earning . Those thousands employee will add more to slowdown and not solve the economic slowdown problems . If the Management had been prudent they would have withered the present situation at least for a year as has enough reserves ( 3 times of their current liability ) , can think of skipping/reducing extremely high dividend ( reward to shareholder but most going to promoter ) .

This is the analysis of just one company . If 100 such companies behave the same manner then the economic slowdown which could have been avoided will definitely balloon to unmanageable level as personal income will get reduced drastically ( layoffs ) which will have an impact on spending and consumption ,

Just think and analyse how economic slowdown are catalysed even by a profit making big company . Its not a God creation but a result of greed of few individuals .

Nurture India Consultants : Confusion of an Equity investor – what to do now ...

Nurture India Consultants : Confusion of an Equity investor – what to do now ...: Confusion of an Equity investor – what to do now   ? Last 2 years return from equity fund has been low to negative , present looks ba...

Confusion of an Equity investor – what to do now ?

Confusion of an Equity investor – what to do now  ?

Last 2 years return from equity fund has been low to negative , present looks bad and future many saying worse yet to come. Now many equity investors might be thinking

1.       Did we do mistake by investing in equity mutual fund ?

2.       Should we get out and stop our notional loss ?

3.       How long we need to wait ?

Today economy is slowing down , corporate earnings reducing , job cuts happenings in various industries , bad debt rising in banking sector .

If someone ask me how long this slowdown will continue or when we will see reversal in these negative trends it will be just a guesstimate based on what I am reading or hearing . There also what I am reading , hearing is contradictory. Some say nothing wrong but its structural issue, some saying its cyclical problem  , some saying worse yet to come ….. . some defensive , some optimist , some pessimist . whom to believe and whom to not ?

I have always believed that there is no other teacher in this world than your own experience and observation ?. Believe yourself and what you can cross check yourself. So here I have tried to answer based on what I have seen and I will like others to also cross check based on their own observation on what has actually happened and is supported by facts .

The biggest risk comes from economy and all good or bad we have seen or talked has been  emanating from state of economy and economic factors .

Economy has always been growing in long term ( > 7 years time horizon ) and have been unpredictable/uncertain /good/bad in short term ( < 3 to 5 years ) . In every long term please remember there are many short terms . So even if I take my 20 years of experience which is good that has mix of some small term bad experience also .

Market is a reflection of how the economy stands at that point of time . Again this also has to be viewed in long term and short term .

Market ( Stock market ) has always been growing in long term ( > 7 years time horizon ) and have been unpredictable/uncertain /good/bad in short term ( < 3 to 5 years ). In every long term please remember there are many short terms . So even if I take my 20 years of experience which is good that has mix of some small term bad experience also .

Market movement is also linked to behaviour of different participants in it . There also I have observed tow things – (1) Market always over react in both situation more bullish when economy expanding and more bearish when economy is slowing down (2) whether its speculators or arbitrageurs or investors ( different type of participants ) no one wants loss , all wants profit .

Lets look now life and analyse what it was 10 , 20, 30 ….years back and what we can expect 10,20,30….. years ahead . Lets answer one question were more products/services earlier ? Answer is No . Do we expect more products/services in future ? Answer is YES . But why it is so ?

Life for all is governed by GROWTH aspiration . Growth and Aspiration of what ? --- Better life , better lifestyle  --- and that is catered through some or the other product /service provided by some or the other company – so investment if done is some good product manufacturing company which is in demand by people it will earn good return as sales will lead to profit and profit will translate to better valuation of that company share and that will translate to NAV growth .

Yes the risk is of short term as explained above but since our life is of 60,70,80 … years and we do require any product/service every second of life and its demand growing due to growth aspiration in long term good positive return will come .

Life is uncertain in short term but life always want to be good . So in this uncertain world one certainty is we all want a good life .

Now let me answer earlier question which might be hounding the minds of many investors

1.       Did we do mistake by investing in equity mutual fund ? – Definitely NOT . It’s a right decision

2.       Should we get out and stop our loss ?  -- It will be a big mistake if you do now . If you invested without understanding short tern uncertainty then you were misguided

3.       How long we need to wait ? – any recessionary trend ( worst form of economic slowdown  ) does not last long for more than 3 -4 years so may be notional pain for couple of years . You have another 20.30.40…. years to live so why to worry of this short term .

One thing which you should always be taking care is no risk of your short to mid term liquidity requirement and that investment at any point of time should be in safe asset i.e debt and that is liquid, in better quality company and is less or not effected adversely by rising interest rate .

Zee Business Mutual Fund Helpline 19 Aug 2019 Mr Prakash Ranjan Sinha

Economy Slowdown reasons

Economy Slowdown reasons

Many experts are blaming demonetisation and GST as a cause of economic slowdown . Some are even going to the extent of blaming lower cash transaction , increasing tax net etc as a cause of slow business .I am not able to understand their logic . If that’s the case then in most developed economy businesses are operating on non cash , digital transaction basis since last many decades then how they have developed their economies all these years ?

It’s a very silly excuse in India . Where has cash gone ? RBI has pumped back the withdrawn ( 500, 1000 rupee notes ) currencies back into the economy in form of new currency . So cash within economy is at same level . Salaried employees are getting salaries as like earlier times .

Apart from global issues where we have lesser control lets analyse only domestic factors for this slowdown .

Reason is most corporates in order to chase high growth were targeting higher earnings as that would have led to higher valuation and net-worth of promoters . Many went for leveraged money to fuel their growth desire adding more cost on their balance sheet . Stock market also reached a good height in anticipation of better earnings through more sales and revenue . Post demonetisation its not the cash crunch but the unwillingness to disclose cash in a transparent way ( GST ) has left many perplexed . The way many corporates went fudging their financial statements earlier are now not able to do so very easily . Projected earnings which were shown inflated earlier now are muted or getting corrected in the financial statements . Government has also become more vigilant on borrowings of corporates and also the effective utilisation of the borrowed money .

My personal belief is there is no recessionary trend but a slowdown injected into the system more because as an effect of normalisation of the situation emanating from the cleaning process in the economic system. Today many promoters are hesitant to put more money in their business as they are also waiting for normalisation process to complete and reversal of fabricated gloomy situation .

Promoters and businesses in India have to understand that they need to accept the positive changes and move ahead . We might see many businesses dying but at the same time emergence of many new entrepreneurs also who are willing to take risk and operate in a clean manner .

Flaws in Indian Financial System

Flaws in Indian Financial System

The economy is slowing down , consumer activities are declining , corporates earning going down and that is bringing the risk of defaults . I read one research report some days back which stated that almost 40% of the corporates who have borrowed from banks their interest coverage ratio is 1:1 ( EBIT = Interest payment ) . Don’t know if this figure is correct or a bit exaggerated but it can not be totally wrong .

Already we are seeing some corporates under stress and promoters finding problem in paying back loans. The reason is very clear we are having a flawed financial system .

Long back ( early 2000) when I was in UTI Kolkata I remember there was one major corporate which used to invest in UTI schemes . One day I got a call from the CFO of that company and he in anguish expressed that most of his investment was not performing well . When I checked the investment I found big amounts invested in equity funds and this was the time after IT bubble market had tanked . In fact they had major investment in UTI IT fund also. I went and said very humbly to him , Sir when you have mobilised resources from small investors through your debt schemes ( FDs ) who are looking for safe , assured return how you invested that money in equity schemes .

The same mistake is happening . Banks are lending FD money to whom ? to those who are chasing growth . They are buying properties ( flats , residential premises ) or consumer items ( cars , luxurious items ) . Bank is lending to corporates who are looking for aggressive growth ( expansion, for increasing the size of market and their own market share as well ) . Nothing wrong in it . If India has to grow , there has to be clear growth strategies and  approach . But every growth has some limit . I think somewhere this is being overlooked .

Right from promoter/ entrepreneur to top management to consumer everyone have been running a blind race looking at others and not on own capabilities and limitation .We are living in integrated and relative world so any growth in isolation is unsustainable in long run.

Consider this – Lets say today all car companies make 10 lakh car and it is sold , next year they will increase the sales target and make 1.2 lakh and if that is also sold next year even more and process continues . If most car are bought on loan then most people living on leverage money ( debt ) . Add to this home loan , shopping and dining through credit card . So proportion of debt is increasing in our life . We all leverage our expense on assumption of increasing salary /income . But from where that is coming again ? from the increasing corporate earning or employers earning growth . there will be stage when interest payout will affect normal living and from there only problem starts . Suddenly there will be less consumer activities , less spending and now car manufacturers and other corporates stranded with inventory . Defaults happens , bail out exercise happens .

Banks are recapitalised by lakhs of crores to make their balance sheet look healthy . This money which could have been spent  on construction of dam and other infrastructure related projects gets diverted . So we will continue seeing people suffering from floods in Bihar , UP etc . Agriculture gets affected and so does consumer spending .

I am not an economist but I always remember and value what our elders said – “ Utni hi paav pasariye jitni lambi chadar ho “ ( Extend your legs only which fits the size of the blanket ) .  So growth is not bad but growth rate has to be sensible and sustainable . Leveraging ( use of debt ) is not bad but how much you should leverage that is important ?

But excessive greed ( greed of growth ) is killing the economy . Promoter want growth , Management want growth as that will help them get more salaries and bonus and down the line they keep putting pressure of sales target without realising the limits .

They day our banks and corporates learn to go for sustained , achievable , realistic growth on year to year basis the problems of default and slowdown will not be so visible as what seen today .

So the message is know your limit and take risk of borrowing , leveraging accordingly . Its better to go for economic development rather than economic growth . Businesses are failing today because combined cost of all outputs are not matching with the combined all consumer incomes . Both are interdependent and inter-related and so growth from both side has to happen simultaneously to maintain the proper balance .

Government should look at these aspects and come with right regulation :

·         Corporates should keep a minimum percentage of reserve and surplus at any point of time . Presently it’s a management decision and nothing binding.

·         Corporates should not be allowed to borrow beyond a minimum level of debt considering business volume and conservative growth prospect . This has to be evaluated on year to year basis . Again its all in theory ( Debt – Equity ratio ) not followed religiously. If business slowdown they should deleverage ( reduce debt ) using reserves and surplus .

·         Corporate lending from Banks should be maximum for 5 years even though fund requirement is for 10,15 ,20 years . This will put pressure on the Management for effective utilisation of borrowed money . Review every year and after 3 years of initial borrowing next lending again for 3-5 years .

·         Banks should have a sustainable profit target based on deposit base and not uncontrollable lending targets . Risk averse people will keep investing in bank FD but how much of it is productive and how much is default ? Loan base and loan growth should not be the basis of bank efficiency but sustained profit on that lending should be the key efficiency parameter.

·         Treat every adult / workable age citizen as an asset and judge his economic productive value . No freebies , no subsidy . Let all work for their minimum normal living.

Zee Business Mutual Fund Helpline 26 July 2019 Prakash Ranjan Sinha M...

Zee Business Mutual Fund Helpline 24 June 2019, Prakash Ranjan Sinha

Zee Business Mutual Fund Helpline 04 June 2019 Mr Prakash Ranjan Sinha

Zee Business Mutual Fund Helpline 20 May 2019 Mr Prakash Ranjan Sinha

Congress NYAY Yojna

Congress NYAY Yojna (PLEASE READ THIS TO UNDERSTAND CAUSE OF EMERGENCE AND RISKS )

I was trying to find how come suddenly Rahul Gandhi talking of NYAY ( Minimum Income Scheme ) for poors . Off course given his thinking prowess it could not be his brainchild . its of Sam Pitroda ( USA based an IT expert ) his mentor thought process .

In few part of globe Universal basic income is being tested as pilot project . We need to understand what led to that and its viability in Indian context .

Automation and Robots are slowly replacing human work force in every aspects leading to risk of employment for humans. Scientific advancement is bringing more efficiency , better productivity and also lowering the cost . So revenue in economy is not affected but increasing . Yes with more lay off it will bring economic inequality and social discontentment in society . To ensure that this does not turn into a massive discontentment many economies who are taking advantage of this technical advancement are ensuring that the minimum cost of living of their population should be taken care by government and so thus this concept of Universal Basic Income Guarantee Scheme is being implemented . Ultimately the corporates or business entities who are saving human labour cost , getting more revenue may be willing to get taxed more to help the government for this.

Sam Pitroda shared this to Rahul Gandhi and he has been guided to add in his election manifesto as NYAY scheme . But is the situation same in India as those Economies from where the idea has been copied .

Is India’s automation level reached that stage as of Japan or other developed countries ? The very idea of Universal Basic Income Guarantee Scheme was to cover up for the loss of personal income due to automation but In India such level of automation yet to come so where is the need to cater for loss of job and income today ?

Those countries have much lesser population to cater vis a vis Indian poor population to whom NYAY being offered. Most important those countries which are experimenting they have clarity on source and resource that will fund Universal Basic Income Guarantee Scheme but here does Rahul Gandhi has even correct estimate of beneficiaries and fund requirement and most importantly source and resource that will fund his NYAY scheme . In those economies there is clarity of personal income lost due to automation whereas in India no such data available .

Mr Rahul Gandhi should not copy anything on the advise of an USA based expert without doing a feasibility test . Those countries are running pilot project , yet to implement on nation wide basis but here in order to win election it has been declared that it will be implemented for whole India .

In India we have still much to achieve to reach the level of economic growth of developed countries . There is lot of industrial growth opportunities where the idle workforce can be employed . this is where Modiji vision is . Rahul Gandhi is just copying without assessing ground reality , need of it and most importantly risks involved in it.