You never know how tables turn. So it is always good to be ......two-wheelers, tractors, automobiles...

JINESH GOPANI,Head – Equity,Axis Mutual Fund

You never know how tables turn. So it is always good to be careful. Losing 5% returns is okay rather than losing capital.

RNI No. MAHENG/2009/28962 | Volume 9 Issue 09 | 16th - 30th Sept ’17Mumbai | Pages 56 | For Pr ivate Circulat ion

www.nirmalbang.com

FinancialDecisionsOn The GoStay ahead in a rapidly changing world by making smart and informed

using the Beyond app. This app

you to trade from just about any

View real-time streaming quotes and charts

Access market news and updates Obtain trade reports and account information Access NB Research Reports View delayed market data for non-subscribed tickers

Key Features

eyond P o w e r e d b y

Download Beyond app on

Nirmal Bang Securities Pvt. Ltd.

MCX SEBI No INZ000043630,

DB Corner – Page 5

Still Going StrongAlthough inflation is up, it is no cause for alarm yet – Page 6Better Or Bitter?The jury is still out on whether demonetisation was a success or failure. Though going by the opinion of experts and economists, it does lean towards the negative – Page 9The Rising Clout Of Mutual FundsThe shift to financial savings by Indian households has led to huge investments in mutual funds in the domestic market – Page 12United For A CauseThe government is pushing consolidation of public sector banks in India to make the industry future-ready – Page 15Red RageIt’s a long way ahead for India to reduce Chinese imports and set up exports – Page 18An Electrifying StartThe government is leaving no stone unturned to move towards an electric vehicle-led future and is supporting its plans through right mix of policies and tax structure – Page 21Future ForwardThe government hopes to monetize completed stretches of public-funded national highways through the Toll Operate Transfer or TOT model of road construction – Page 24Power DressingSmart casuals or semi-formals is the buzzword in the office wear segment, thus offering unparalleled opportunity to manufacturers in organized retail – Page 27On The Brink of RevivalIndustry trends indicate that efforts to resuscitate the domestic steel pipe industry will bear fruits soon – 0

Technical Outlook – Page 33Buckfast Recommendations – Page 34

Jinesh Gopani, Head-Equity, Axis Mutual Fund, discusses about the mutual fund market in India and opportunities it offers in an interview with Vijai Mantri, Buckfast – Page 38

Tata Global Beverages: Back In The RaceGiven the restructuring activities taken by the beverages company as well as improving business prospects, TGBL is likely to do well in the near future – Page 44

On The Threshold Of HopeThe mutual fund industry in India is growing on the back of regular inflows from SIPs and rising awareness among investors – Page 48

The Money MultiplierInvestors can grow their money astoundingly if they follow compounding interest – Page 51

Important Jargon – Page 53

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

Art Director: Sachin KambleJunior Designer: Orianne Fernandes

Operations: Namrata Sabbani

Printed and published by Mr Rakesh Bhandari on behalf of Nirmal Bang Financial Services Pvt Ltd, printed at Uchitha Graphic Printers Pvt Ltd65, Ideal Ind. Estate, Senapati Bapat Marg, Lower Parel, Mumbai – 400013 and published at Nirmal Bang Financial Services Pvt Ltd, 19, Sonawala Building, 25 Bank Street, Fort, Mumbai-400001. Editor: Tushita Nigam

CORPORATE OFFICE B-2, 301/302, Marathon Innova,Off Ganpatrao Kadam Marg,Lower Parel (W), Mumbai - 400 013Tel: 022 - 3926 8000/8001

Web: www.nirmalbang.com [email protected] No: 022 - 3926 8047

Research Team: Sunil Jain, Runjhun Jain,Vikas Salunkhe, Swati Hotkar, Nirav Chheda

It’s simplified...Beyond Market 16th - 30th Sept ’17 3

Volume 9 Issue: 09, 16th - 30th Sept ’17

Words From The Wise

4

Tushita NigamEditor

It’s simplified...Beyond Market 16th - 30th Sept ’17

Gaining knowledge from books may be foolproof. But practical and experienced insights are a different ball game altogether. Through the section Beyond Talk of our magazine, we aim to share the financial acumen and expertise of market mavens and corporate czars to help our readers make right investment decisions. The tête-à-tête series has been conducted by Vijai Mantri, Co-Promoter and Chief Mentor, Buckfast Financial Advisory Services Pvt Ltd.

For the current issue, Vijai Mantri has interviewed Jinesh Gopani, Head-Equity at Axis Mutual Fund. Gopani talks about the mutual fund industry in India and enumerates ways by which one can make better investing decisions. Read this insightful interview and get inspired.

Apart from this interview, readers can dig deeper into other articles like the ones on how the Indian economy is holding strong currently despite wavering inflation numbers, the positive and negative impact of the demonetisation drive initiated in November last year, the huge inflows of domestic funds into the Indian mutual fund industry, the ways by which the government is speeding up the process of consolidation of public sector banks and how India continues to be heavily dependent on China for bilateral trade despite growing clamour for ban on Chinese goods over the Dokhlam issue.

Also covered in this issue are articles on the government’s involvement in promoting electric vehicles in the country, the future of the toll-operate-transfer (TOT) model now prevalent in road construction, revival in the steel pipe industry and opportunities in the organized retail segment of the apparel industry with growth prospects of casual wear among buyers today.

While the Beyond Basics section carries an interesting article on the growing mutual fund industry, the Beyond Learning section features one on the power of compounding, a tool that each one of us should use to see our investments multiplY.


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

n the previous fortnight, the Indian rupee showed a sharp weakness mainly due to FII outflows and economic concerns, leading to a correction in the stock markets.

Post decline in volumes of various companies on account of implementation of GST in Q1 FY18, several of them saw an up-tick, although not to the full extent. This will reflect in improved Q2 earnings results of India Inc.

Globally, geopolitical issues persist mainly in the backdrop of growing nuclear ambitions of Kim Jong Un of North Korea. The Indian stock markets are likely to remain range-bound in the coming fortnight. The Nifty Index has support at the 9,670 level. The expected upper side target is around the 9,980 level.

In the coming fortnight, market participants are advised to look forward to the initial corporate results of India Inc, which may show some improvement over Q1 FY18.

Traders and investors should also watch out for the steps the Indian government initiates to support the economy, and how the international markets pan out, especially the US.

I

The Indian stockmarkets are likely

to remain range-boundin the coming fortnight.

Nifty: 9,768.95Sensex: 31,282.48

(As on 28th Sept ’17)

Although inflation is up,

it is no cause for alarm yet

STILL GOINGSTRONG



In India, agriculture is heavily dependent on monsoon and, therefore, the scanty rainfall received till now could affect agricultural production, leading to shortage of certain food products which, in turn, could drive up their prices, thereby fuelling inflation.

Rainfall-deficit has been witnessed in the high agricultural production states of Punjab, Madhya Pradesh, Uttar Pradesh and Haryana. The rainfall in September will have to be computed; if there is a healthy rainfall in September, it could to a reasonable extent help in foodgrains production. Otherwise a shortage of food products over the next few months has the potential to ignite inflation, going forward. Besides, a large part of the country’s population is engaged in agriculture and the sector contributes around 18% to India’s GDP.

A good performance by the agricultural sector has the potential to significantly boost consumption, especially in rural areas. A good crop harvest will bring in a healthy amount of money for farmers and as has been witnessed in the past, could turn out to be a boon for segments such as electronics (TV sets, refrigerators), two-wheelers, tractors, automobiles and gems and jewellery. This will have a positive impact on the country’s economy. A healthy performance from the agricultural sector is, therefore, always welcome.

Fuel prices too have shown an uptrend despite no significant increase in international prices. There is a demand to bring petroleum under the Goods and Services Tax (GST) regime as this will help usher in uniformity in tax rates nationally. Taxes imposed by both states and the Centre are often mentioned as one reason for the recent spike in fuel prices, pushing up inflation.

ill inflation rear its ugly head again? This is a question being asked increasingly

now as inflation rose to a five-month high in August this year. The Consumer Price Index (CPI) or retail inflation rose to 3.36% in August from an increase of 2.36% in July, a rise of one full percentage point.

This increase is a point to be noted and the country’s apex bank, the Reserve Bank of India (RBI) will certainly keep this in mind come 4th October this year, when it will come out with its fourth bi-monthly monetary statement for 2017-18.

Inflation has been under control for quite some time now and the focus of policymakers has shifted to economic growth, which has remained subdued, both in FY17 and so far in FY18 too.

The demonetisation initiative undertaken late last year, though positive for the country in the long-run and welcomed by large sections of the society, has had a dampening effect on rapid economic growth, especially in the short-term.

However, with inflation successfully reined-in over the last several months, the RBI had undertaken a series of rate cuts, something which India Inc had been clamouring for long as an antidote to slow economic growth.

The rate cuts were expected to boost growth but this has not happened. Now, however, with inflation once again rising, it is to be seen if the RBI will go in for a rate cut in October.

The apex bank had trimmed its repo rate by 0.25% in August and accordingly it now stands at 6%, while the reverse repo rate stands at 5.75%, respectively. The repo rate is the rate at which the central bank of a country lends money to commercial

W banks in the event of any shortfall of funds. The reverse repo rate is the rate at which the central bank of a country borrows money from commercial banks within the country.

There is no need to panic; however, at least not immediately. Retail inflation at 3.36% in August is still below the RBI’s target of 4%. A point that needs highlighting here is that this year’s retail inflation is still below 5.05% for the corresponding month last year.

The government is seized of the matter and is fast gearing-up to tackle supply-side bottlenecks, which, for long, have been one important reason for pushing up prices, especially of food and perishable items.

The country’s wholesale price index (WPI) inflation was pushed up by rising food and fuel prices at 3.24% in August as compared to 1.88% in July. In the corresponding month of last year (August ’16) it was at 1.09%.

The causes for rise in inflation, which could influence the RBI to pause its rate cuts relate primarily to a spurt in food and fuel prices. The monsoon has been good in some areas but in some places it has been deficient while in some others, floods have damaged crops and affected transport of food items from centres of production to centres of consumption.

Supply-side issues, which have for long been a major problem, need to be resolved on a war-footing; a permanent solution to this problem will go a long way in curbing the periodic food price increases, which continue to haunt India regularly.

Another driver of inflation could be rainfall deficiency - the Indian Meteorological Department (IMD) recently said that monsoon rains were normal in only 44% of the 660 districts it maps for rainfall.


Internationally too, there has been no significant uptick in crude prices though the recent hurricane (Irma) has reportedly affected refining in the United States and so prices have risen a little. But this is expected to be temporary and the government has said that prices are likely to stabilise by around Diwali next month.

Bringing petroleum products under GST could go a long way in helping stabilize fuel prices in the country. Even a slight reduction in fuel prices could help bring down inflation. This, in turn, could encourage the Reserve Bank to go in for another rate cut with a view to boosting India’s economic growth, which has remained subdued despite a series of rate cuts by the country’s apex bank.

Here it must be said that the country’s GDP had dropped to a three-year low in the June quarter at 5.7%. India’s Index of Industrial Production (IIP) rose by only 1.2% in July this year as against a reasonable 4.5% registered in the same period last year (2016).

Manufacturing continued to remain weak, its output up by just 0.1%. This segment has dragged down India’s GDP growth, which stands at just 5.7% in the June quarter of this fiscal (FY18). Mining and electricity grew 4.8% and 6.5%, respectively.

A sharp southward movement was registered in capital goods production. It fell 1% as compared to an 8.8% growth in July last year. The consumer durables segment’s output also slipped 1.3% as against a 0.2% rise in the same month last year.

The RBI has a difficult task at hand in the months ahead as it will have to maintain a balance between reining in inflation while trying to boost growth. Inflation has crept up and with the possibility of a deficit monsoon looming on the horizon the apex bank

will have to factor in a possible rise in food prices, going forward. A further rate cut may, therefore, not be in the offing in October; the RBI may instead opt for a pause in rate cuts.

This will impact economic growth, which is already subdued. If inflation rises in the next two months above the Reserve Bank’s comfort level of 4%, then the apex bank will have no option but to either maintain a status quo on rates or raise them marginally.

Here it must be pointed out that the October-November period constitutes the peak festival season in India and any price rise will not only greatly inconvenience the people but can also prove fatal to the political ambitions of the government.

It will also affect consumption as a lot of goods are purchased during this period. This, in turn, will have an adverse impact on the country’s economy. The Reserve Bank, therefore, has a ticklish period ahead of it as 2017 draws to a close.

For the Narendra Modi-led central government as well, the next six- month period is politically crucial. With assembly elections scheduled in the three important states of Gujarat (Modi’s home state on the west coast of the country), Himachal Pradesh in the north and Karnataka in the south, it is only to be expected that the government would do its utmost to rein in inflation, especially food inflation. The ruling Bharatiya Janata Party (BJP) has had it very good so far and would like its winning trend to continue right till the 2019 Lok Sabha election and if possible, even beyond.

Barring the odd reversal, the BJP has been on a roll since its huge victory in the 2014 national election, winning a series of state assembly elections and decimating its main opposition, the Congress party since then.

This year too has been very hospitable for the BJP; it won in the Uttar Pradesh state assembly election and also struck an alliance with the Nitish Kumar-led Janata Dal (United) in Bihar.

BJP has also managed to get its candidates elected as President and Vice-President of the country easily. On the economic side, Modi managed to successfully usher in the long- delayed GST regime.

With things rolling smoothly for the party, it is only natural that the BJP would not like rising prices, especially of food products, to derail its political march. Given this background, one can expect the government to immediately take steps to streamline the supply side so that inflation is controlled rapidly.

While the state assembly elections will in no way be a referendum on Modi’s performance so far, an important point to be noted is that the three states going in for elections are from different parts of the country (west, north and south) and hence, in a way the BJP’s popularity in the country will be tested.

Elections in Gujarat and Himachal Pradesh are most likely to be held in December this year while in Karnataka, early next year.

Inflation has crept up and there is a possibility of it increasing in the months ahead, especially if there is weak rainfall. But it is not expected to assume alarming proportions and, hence, one can expect a low interest regime in the medium-term.

It is economic growth that needs a leg-up; if India can achieve a GDP growth of around 6% or marginally above it this fiscal (FY18), then it can be considered as a good achievement in the prevailing circumstanceS.

Better Or Bitter?

The jury is still out on whether demonetisation was a success or failure. Though going by the opinion of

experts and economists, it does lean towards the negative

demonetisation saga, which initially created nothing short of chaos among the public.

Long queues could be seen in front of banks and ATMs. Prolonged cash shortage threatened economic output. The BSE Sensex and Nifty 50 stock indices fell over 6% the day after the announcement. Demonetisation in India has become a case study for economists worldwide. The effects of it on the Indian economy can still be

he time was 8 pm IST and the date was 8th Nov’ 16, when India’s Prime Minister, Narendra Modi,

declared in an unscheduled live telecast address that usage of all `500 and ̀ 1,000 banknotes of the Mahatma Gandhi Series would be invalid past midnight, and announced the issuance of new `500 and `2,000 banknotes of Mahatma Gandhi New Series in exchange for old banknotes. This was the beginning of the Indian

T felt ten months after the demonetisation exercise was carried out by the government.

According to the government of India, the main intent of demonetisation was to address the issue of black money or “kaala dhan” as Prime Minister Modi put it succinctly. As time went by, many new objectives were added such as curtailing shadow economy and cracking down on the use of illicit and



in the last three years.

In November ’16, in his demonetisation speech, former Prime Minister Dr Manmohan Singh termed demonetisation “a monumental disaster” and issued a warning about a 2% hit on GDP growth. His warnings were shrugged off by the NDA government and experts in favour of demonetisation as a “purely political speech lacking substance.”

Finance Minister Arun Jaitley said, “Certainly a matter of concern that the first quarter GDP has come down to 5.7% and it is obvious, therefore, that it throws up challenge for the economy.” P Chidambaram has predicted a further fall in growth rate in the coming GDP numbers, which will be released in November ’17.

Manufacturing segment is the primary sector, which is dragging down GDP numbers. The segment grew by a mere 1.2% in the June quarter compared with 10.7% in the year-ago quarter and 5.3% in the preceding quarter.

The unorganized manufacturing sector has borne the brunt of demonetisation. Many small manufacturing units had to down shutters as owners defaulted on cash payments and sales plunged.

According to the Centre for Monitoring Indian Economy (CMIE) as many as 1.5 million jobs were lost in the first four months of 2017, ostensibly due to demonetisation and a continuing fall in new investments. This was the worst quarter for Indian manufacturing in five years.

Overall industrial output also collapsed to 1.6% growth from 7.4% a year ago and 3.1% in the previous quarter. Apart from manufacturing, agriculture sector also witnessed a sharp drop of 2.3% compared with

counterfeit cash to fund illegal activity and terrorism. Later, it was changed into a vision of making India cashless or turning the country into a digital economy.

In the beginning, it was believed that untaxed, undeclared or criminal money was being hoarded as large bills and with demonetisation such notes would become useless as criminals would hesitate and refuse to declare their enterprise in the fear of being caught.

However, that objective has somewhat proven to be a failure as in the recent annual report, the Reserve Bank of India (RBI) has said that 99%, or around `15.28 trillion ($238.7 billion), of the demonetised 500-rupee and 1,000-rupee notes were deposited or exchanged for new currency notes.

The RBI also told a parliamentary panel that it has “no information” on how much black money has been extinguished or about unaccounted cash legitimized through exchange of old currency.

Taking a potshot at RBI, Sanjay Singh, senior AAP leader said, “In November last year, the RBI had said that `14.18 lakh crore was in circulation in notes of `500 and `1,000 denominations. And now it says `15.44 lakh crore was in circulation. On the basis of the new figure, almost 99% of the currency is back with the banks. But going by the previous amount, it is clear that more than 100% is back.”

Former Finance Minister P Chidambaram termed the demonetisation exercise “an abject failure.” He recently tweeted, “`16,000 crore out of demonetised notes of `15,44,000 crore did not come back to RBI. That is 1%. Shame on RBI which recommended

demonetisation.” (sic)

Justifying his tweets, he said, “It’s a matter of fact that the attorney general had told the Supreme Court that the government expects `4 lakh crore to `5 lakh crore will not come back to banks. Therefore, the government will get huge dividends.”

According to the RBI report, this did not happen. On the contrary, the RBI’s surplus payable to the Centre out of its earnings for 2016-17 has been halved to `30,650 crore, from a year ago.

The RBI was left with very little cash to spare because of incurring extra cost of printing new notes and making an additional provision of `13,140 crore for a contingency fund. Also, the RBI had to pay more interests to banks as a result of larger deposits by banks owing to demonetisation.

According to Shilan Shah, India economist at Capital Economics, “Critics have presented this as overwhelming evidence that demonetisation failed in its stated aim of clamping down on illicit wealth, known colloquially as ‘black money.’” He further added, “After all, the rationale was that demonetisation would penalize those storing illicit cash as they would be unable to declare it.”

As far as Gross Domestic Product (GDP) growth is concerned, it has shot down to 5.7% in the last quarter. It is noteworthy that by the end of 2015, India had surpassed China as the fastest growing economy in the world. In the first quarter of 2016, GDP even clocked a growth rate of 9.2%. But after that GDP has been in a continuous downward spiral, so much so that growth has slowed down to 6.1% in the January-March period and 5.7% in the last quarter, which incidentally is the lowest growth rate

The most intelligent strategy in Chess is to be ready with the next move. Similarly,

currency trading involves moves that are a combination of knowledge and skill, backed

by years of experience.

Currency Derivatives Trading with us keeps you a few steps ahead, always.

Registered O�ce: Nirmal Bang Securities Private Limited. 38-B, Khatau Building, 2nd Floor, Alkesh Dinesh Mody Marg, Fort, Mumbai - 400001. Tel: 3926 8600 / 01; Fax: 3926 8610Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme related document carefully before investing. Please read the Do’s and Don’ts prescribed by Commodity Exchange before trading. Through Nirmal Bang Securities Pvt. Ltd. *Through Nirmal Bang Commodities Pvt. Ltd. #Distributors investment in securities is subject to market risk. investment in securities is subject to market risk

EQUITIES | DERIVATIVES | COMMODITIES* | CURRENC Y | MUTUAL FUNDS# | IPOs# | INSURANCE# | DP

Contact: 022-39269600 | e -mail: [email protected] | www.nirmalbang.com


5.2% in the year-ago quarter. Similarly, the mining sector contracted by 0.7% from 6.4%.

Despite all these facts and figures, there are many optimists, who believe that demonetisation is not as bad as it is made out to be. “I equate India with a house under renovation: several long-held norms are being challenged; new and more efficient rules are being written,” says Neelkanth Mishra, managing director and India Equity Strategist at global firm Credit Suisse.

According to Finance Minister Arun Jaitley, “The fallout of demonetisation is on predicted lines. The fact that money got deposited in banks doesn’t make it legitimate money.” He also added that the country was ready for demonetisation, and demonetisation coupled with GST, will give a

“significant boost” to direct tax revenues as many people have come under the tax net.

However, Raghuram Rajan, the former RBI governor has said that demonetisation at this point is not an economic success as the costs associated with the exercise have been substantial while GDP has taken a hit.

In fact, according to him, the RBI was likely burdened with additional interest payments amounting to tens of thousands of crores because of the sum of black money back in the banking system after demonetisation.

“One of the costs that people have not paid enough attention to is that this was money sitting. If you believe it was black money, it was sitting in people’s safes or in their basement,” Rajan said. “It wasn’t earning any

interest. Once it gets into the formal system, if you haven’t identified it as bad money, these are people gaining interest on it.”

According to him this interest burden could be as high as `24,000 crore annually, if we estimate that there was around `4 lakh crore of black money in circulation at the time of the note ban in November ’16.

The former RBI chief further added, “I think all said and done, it would be fair to say the intent was good. But certainly at this point, one still cannot in any way say it has been an economic success. But again, as I said, only time will tell.”

The jury is still out on whether demonetisation was a success or failure though going by the opinion of experts and economists, it does lean towards a failurE!

THE RISING CLOUTOF MUTUAL FUNDS

The shift to financial savings by Indian households has led to huge investments in

mutual funds in the domestic market

Investors (FIIs). On the back of buoyant retail inflows into equity and equity-related schemes, DMFs have remained net buyers of Indian equities for the 13th straight month in August ’17, leading to a one-way rise in markets since January ’17.

This article focuses on DMFs and the reasons why these have garnered so much attention in recent years.

THE TILT

Indeed a fundamental shift is underway in domestic equity flows in India. But, what has triggered the

omestic Institutional Investors (DIIs) have become a force to reckon with. In recent years,

they have provided a cushion to the Indian markets during periods of volatile foreign flows.

DIIs is a broad term used for Domestic Mutual Funds (DMFs), insurance firms, banks and financial institutions and other Indian institutional investors like provident funds and pension funds.

Within DIIs, DMFs are becoming as mighty as Foreign Institutional

D sudden and massive liking for equity instruments by the otherwise equity- shy Indian households? There are multiple reasons for the shift to financial assets from physical assets by Indian households in recent years. They are economic growth potential, confidence over reforms by the current government, better returns in equities in recent years and young risk-inclined population.

However, two big triggers for the shift have been demonetisation in November ’16 and sustained positive real interest rates (returns after



total amount of `43,921 crore was collected through SIPs. In April-August’17, SIP `23,750 crore was collected through the SIP route.

IMPORTANCE

SIPs have deepened the much desired equity culture in India. Indians’ shift to financial assets like equity and bonds from physical assets like gold and property is needed for the revival of investments in India. Through financial market intermediation, savings are routed for country’s investment needs or else economies will have to depend on external flows. The latter can distort the current account deficit.

In a worrying trend, post the 2008 global credit crisis, due to higher twin deficits of fiscal and current account along with higher inflation, savings has started to slip. Households, which contribute around 60% of total savings (rest is contributed by government and financial and non-financial corporation), have shifted out of financial assets towards physical assets.

OWNERSHIP IMPACT

With rising financial savings and fall in cash holdings, Indians can now be a part of the India growth story, which so far was being enjoyed by foreign investors alone. A deluge of flows to equity and equity-related schemes of mutual funds has increased participation of Indians in Indian equities. The ownership pattern as on financial quarter ending June ’17 shows that FIIs now own 21.2% of top 500 National Stock Exchange (NSE) listed companies. DMF holdings have increased to 5.6% from 4.5% in December ’15.

FUTURE FLOWS

So far this year, FIIs have pumped in net US $6.7 billion and DIIs have put net US $7.4 billion into Indian equities. Within DIIs, DMFs have bought Indian equities worth US $11 billion while banks and insurance companies in India have booked profits worth US $3.6 billion. So, will the trend of higher financial savings and investments in the equity markets continue?

Institutionalization of savings in India is slowly becoming a reality. But India still has a long way to go. DMF’s AUM is 12% of the GDP as compared to the global average of over 50%. Within the overall AUM, equity AUM to GDP ratio in India is just 4% as compared to the Asian countries’ average of 15%.

adjusting for inflation) in the economy. Financial savings within the overall savings of Indian households have increased from 31% in 2012 to 41% in FY16.

35%

40%

45%

50%

55%

60%

65%

70%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

3M Real Rates On CPI

Share Of Financial Savings In Total HH Savings Lag By 3 Years (`)

Positive Real Rates For A Long Period Is The Key To Drive Financial Savings In India

LARGE RETAIL PARTICIPATION

Testimony to the financialization of Indian household savings is the rising Asset Under Management (AUM) of DMFs. From `10 lakh crore in May ’14 the AUM has crossed `20 lakh crore in August ’17, an all time high. The number of investor accounts (folios) in mutual funds has grown to a record high of 5.8 crore in July ’17 from 4 crore in the year 2014. This is a clear indication of broadening retail participation towards financial assets. Small tier cities have seen a huge jump in the opening of mutual fund accounts. Savings in physical assets like property and gold has, however, slipped.

Within financial savings, the share of equities has increased and cash held by households has decreased since demonetisation. Mutual fund’s equity assets under management (AUM) have increased from `3.5 trillion in March ’15 to `7 trillion in July ’17.

DMFs have been receiving monthly flows of more than `7,000 crore in equity and equity-related schemes on an average in the past three years. Around `4,000 crore of these monthly flows are in the form of Systematic Investment Plans (SIPs). SIPs have indeed driven the markets upwards.

SIPs

With flexibility of investing as low as `500, DMFs have added about 8.55 lakh SIP accounts each month on an average in each month during FY17-18, with an average

have about 1.59 crore SIP accounts. During FY16-17, a

Source: RBI, CEIC


The DMF equity AUM within the overall AUM is just around 40%, signifying that investors are risk-averse and are investing in debt funds as compared to equity funds. This will change going forward. DMFs are all set to be the largest contributors to equity savings.

IN A NUTSHELL

One of the biggest macro transitions has been the shift to financial savings by Indian households in the last three years. This has led to huge equity investments in the

domestic market.

Confidence in the Indian economy, digitization drive of the government, financial inclusion, falling interest rates on fixed deposits and favourable demographic dividends will ensure that the financial landscape is tilted towards equity investments. It’s important for the government and the Reserve Bank of India (RBI) to ensure lower inflation to maintain positive real rates in the near to medium term. Else, household savings will once again move to unyielding investment assets like gold and real estatE.

Source: AMFI, Bloomberg Source: AMFI, Bloomberg

Net Inflows In MF Equity Schemes

(1,000)(500)

0500

1,0001,5002,0002,5003,0003,5004,000

May

13

Aug

13

Nov

13

Feb

14

May

14

Aug

14

Nov

14

Feb

15

May

15

Aug

15

Nov

15

Feb

16

May

16

Aug

16

Nov

16

Feb

17

May

17

Aug

17

Net Inflows In MF Equity Schemes(US$ in million)

Net Inflows In Mutual Fund SIPs

31 32 33 33 35 37 34

39 40 41 41 43 43

46 47 49

0

10

20

30

40

50

60

Apr

16

May

16

Jun

16

Jul 1

6

Aug

16

Sep

16

Oct

16

Nov

16

Dec

16

Jan

17

Feb

17

Mar

17

Apr

17

May

17

Jun

17

Jul 1

7

(` in billion)

The government is pushing consolidation of public sector banks in India to make the

industry future-ready

he universe of state-owned banks is all set to shrink in India. The government on 23rd August proposed a

framework for merging public sector banks (PSBs). As many as 21 state-owned banks will eventually get reduced to 10 to 15 post the consolidation process.

T

UNITED FORA CAUSE

To be sure, consolidation is not a new theme for the Indian banking industry. Consolidation within PSBs was first mooted by a government committee as early as 1991. But now consolidation among PSBs has become imperative. Consolidation of public sector banks is second in the list of priorities for the government

after bad debt resolution. Even the Reserve Bank of India (RBI) is on the same page.

The new framework was expected in this fiscal as promised by the government. To that effect, the government has mooted an alternative mechanism to oversee such mergers.



CAPITAL NEEDS

A push for consolidation in PSBs arises due to many reasons. Here are a few:

Bad Debt

Although PSBs account for roughly 70% of the banking industry, they contribute more than 80% of stressed accounts in the system. Overall, banks in India are weighed down by `10 trillion of stressed assets.

Worryingly, many PSBs have gross non-performing assets (NPAs) in excess of their net worth. Since stressed assets need more regulatory provisioning, and public sector banks by themselves are unable to provide the necessary capital, the onus, therefore, lies on the government to provide capital. The government is wary of bloating its fiscal deficit and is shying away from adequately re-capitalizing banks.

For instance, the government has planned to infuse just `8,586 crore in 10 lenders this year. In FY18, the government plans to infuse overall `10,000 crore. This is way short of the requirement.

The initiative of merging banks will lower the government’s share of re-capitalization.

Credit Off-take

If stressed assets have limited banks’ ability to lend, lack of demand for corporate credit has led the banking system’s loan growth to fall substantially from over 20% in March ’11 to around 5% currently.

Even for lending, some regulatory capital has to be set aside. Banks cannot lend more with inadequate capital. Economic growth can be hampered without proper credit availability in the system.

Other Current Affairs

Banks also need more capital to comply with Basel III norms (international norms for safety of the banking system), which requires them to maintain a capital adequacy ratio (most reliable kind of capital that one can rely on in case a bank is in trouble) of 10.87% by March ’18 and 11.50% by March ’19.

In addition to this, a new international accounting standard for banks will kick in from 1st Apr ’18. Both the above mentioned norms will need more capital.

The initiative should speed-up consolidation within the PSBs, which roughly account for 70% of the Indian banking industry.

THE PROCESS

The framework doesn’t set any timeline for mergers. But the process is fair. Although the government is the majority shareholder in PSBs and wishes to maintain a 52% shareholding, the proposed framework is actually not anti-minority shareholders.

To start with, the government will not propose candidates for merger. Instead, the government wants individual board of banks to come up with proposals. So the proposal must start from the bank. Any proposal would be solely based on commercial considerations. Few banks have already sent proposals to the government.

Secondly, the proposal would be placed in front of an inter-ministerial group (IMG). IMG will have members from different ministries. After scrutinizing the proposal, the IMG will give an in-principle nod and send the proposal back for the banks to work on it.

Thereon, the banks will take steps in accordance with law and capital markets regulator’s requirements. The final scheme will be notified by the central government in consultation with the RBI.

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

March2008

March2009

March2010

March2011

March2012

March2013

March2014

March2015

March2016

March2017

Gross NPA Ratio (%) For Indian Banks All Banks PSBs Pvt Banks

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

March2008

March2009

March2010

March2011

March2012

March2013

March2014

March2015

March2016

March2017

Provision Coverage Ratio (%) For Indian Banks

All Banks PSBs Pvt Banks

Source: RBI Documents



Agio

Agio is a charge made for changing money of one currency into another, or for changing banknotes into cash. Agio is also the difference between two values, such as between the interest charged on loans made by a bank and the interest paid by the bank on deposits, or the difference between the values of two currencies. In international markets, agio can also sometimes refer to the fee paid for undertaking a transaction. Because these bonds are often traded on international markets, the agio premium is also used to describe the premium to exchange currencies. Agio is typically an uncommon term for spread.

Operations

Yet another reason for consolidation in public sector banks arises from legacy issues. PSBs so far have had a big role to play as far as financial inclusion and nation-building is concerned. But now with most Indian households having a bank account, it’s important for the public sector banks to move to a higher level. PSBs are fragmented with varying sizes. Most PSBs follow roughly similar business models and compete with each other in the same geography. It has been argued that India has too many PSBs. Consolidation among PSBs can result in harvesting rich benefits of economies of scale as well as scope.

Analysts feel that India can have a few banks at the top level of global standards, followed by few big banks catering to local needs. The third tier can have smaller banks to meet niche requirements. It’s important to put government’s capital to best use. CHALLENGES

Any merger will fail if it lacks synergy. Undue haste in the name of consolidation can become a bigger problem for the sector. It’s vital that synergies in aspects of businesses, culture, treasury, information technology (IT) systems and geographical operations match. Although economic consideration will drive mergers, it is also important to

cater to employee needs as there are fears of job losses in the consolidation process.

Another set of challenges arise if there is a merger between two weak banks or one weak and one strong bank. Problems of capital shortages and non-performing assets (NPAs) may get bloated or transmitted to a stronger bank. In both the cases the combined entity can weaken further, which is undesirable.

For instance, the recent State Bank of India’s (SBI’s) merger with five associate banks and Bharatiya Mahila Bank (BMB) has catapulted the combined entity to the top 50 banks in the world; but gross NPAs jumped from `1.08 trillion to `1.79 trillion post merger.

IN A NUTSHELL

A merger between companies is not only about balance sheets but also about process, integration of technology and people. While commercial considerations will lead merger talks among PSBs, long-term view needs to be given due importance.

Unlike mergers in the private sector, mergers in PSBs can be relatively easier as the majority shareholder is common for both, which is the government. PSBs have a similar work culture and technological systems making the mergers relatively easier.

However, unsuccessful mergers would mean wastage of management’s time and efforts, which can have a strong stock market reaction. Merger among PSBs with strong economic rationale, due-diligence and synergy can unlock value for shareholders. Consolidation in PSBs will create strong and competitive banks.

Competitive banking sector is needed to meet the credit needs of a growing economy like India, absorb shocks and have the capacity to raise resources without depending unduly on the state exchequer. Also, regulating fewer banks is much easier even for the RBI.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

March2008

March2009

March2010

March2011

March2012

March2013

March2014

March2015

March2016

March2017

Growth in Advances (% YoY) For Indian Banks All Banks PSBs Pvt Banks


REDRAGEIt’s A long way ahead for India to reduce Chinese imports and step up exports

s the border standoff between India and China erupted this year, a war was waged against Chinese goods on the Indian social media. Frantic messages imbued with patriotic spirit

exhorting fellow Indians to boycott Chinese goods were exchanged on WhatsApp and other platforms. But they had a catch: Almost all were sent via China-made smartphones, which the senders will not want to trade at any cost.

The tension between the two countries has now eased, but the conflict has put the spotlight on the disadvantage India has in bilateral trade with China.

Gone are the days when Chinese imports meant lanterns and low-end plastic products. In 10 years, Chinese imports have not only grown multi-fold, they now mostly comprise of value-added products like hi-end electronic goods, mobile phones, plastics, electrical goods, machinery and parts. In contrast, India’s exports to China are mainly raw materials like ores, cotton and mineral fuels. So what is the scene and

A



aggressive solar energy targets mean business worth over $40 billion for component manufacturers over the next five years.

DEALS

About 60% of Chinese FDI in India is in automobiles, 14% in metallurgical industries, 3% in power and 4% each in electrical equipment and industrial machinery. The auto sector has attracted the biggest Chinese foreign direct investment, with SAIC recently buying General Motors’ factory in Halol in Gujarat. And Fosun Pharma took a majority stake in Gland Pharma for $1.3 billion.

In 2017, when inbound deals dipped, the Chinese shifted gears and accounted for 31% of the inbound deal value as against 27% from the US. China’s Tencent Holdings has so far invested $700 million in Flipkart.

Chinese digital giants have been investing heavily in India’s digital ecosystem - Alibaba in Paytm, and CTrip in MakeMyTrip. Chinese real estate firms like China Fortune Land Development Company and Dalian Wanda are entering India with multibillion-dollar plans for industrial townships and similar projects. These deals have helped in reducing the surplus China enjoys.

HIT TO INDUSTRY

The rise in imports can adversely impact production of domestic industries and hurt government’s ‘Make in India’ push, experts warn. Factory output contracted in June for the first time in four years, which stands to only burnish the appeal of inexpensive Chinese imports.

“The IIP data reveals that industries such as electrical equipment; motor vehicles, trailers and semi-trailers; fabricated metal products and

where does it leave India?

THE TRADE

At $51.09 billion in 2016, India’s trade deficit with China is about half the country’s total trade deficit of $106 billion.

China is India’s largest trading partner, with bilateral trade at $71.5 billion in fiscal 2016: India imported $61.3 billion worth Chinese products while it exported $10.2 billion.

Top imports from China include electronics and electrical items ($21.9 billion), machinery and parts ($11.1 billion), organic chemicals ($5.6 billion), plastics ($1.8 billion), ships and boats ($1.5 billion). India’s top exports to China are ores, slag and ash ($1.6 billion), cotton ($1.3 billion), organic chemicals ($887 million), mineral fuels ($789 million), copper and articles ($708 million).

India’s imports from China have risen a whopping 251% from $17.48 billion in 2006-07 as against 22.5% rise in India’s exports to China.

Coinciding with the rise of smartphones, the trade deficit with China first doubled in 2006 and has been rising since.

India’s exports to China, on the other hand, have swayed wildly from a peak of $18 billion in 2011-12 to a low of $9 billion in 2015-16.

In 2007-08, India’s merchandise exports to China rose a record 30.6% and grew consistently above 20% for the next three fiscals. However, they fell drastically by 25.1% in 2012-13 due to base effect and fell 24.5% in 2015-16.

In the context of GDP, China has less exposure to India. Its exports amount to 2.7% of India’s GDP and about

0.5% of Chinese GDP. India’s exports to China are about 0.08% of Chinese GDP and 0.45% of the Indian GDP.

TELECOM

While domestic smartphone companies have not taken off, Chinese companies including Xiaomi, Oppo and Vivo, control 51% of the $8 billion Indian smartphone market. Also, India imports telecom gear worth over `70,000 crore annually, much of it from Chinese firms like Huawei and ZTE. Even as the government has put an anti-dumping duty in 2012 and fixed a quota for local companies in government orders, it was contested by the US companies. Experts said China protects own firms and had pushed US firms like Apple to set up data servers locally. India too needs to take similar steps.

Last year, India had imposed an anti-dumping duty on the import of telecom gear from Chinese firms Huawei, ZTE Corp and Alcatel Lucent to protect the domestic industry from cheap shipments.

POWER

Equipment manufactured in China account for 35% of power plant imports in India.

At $1.9 billion and 87% market share, China was the biggest exporter of solar equipment in India in 10 months to April ’17. Malaysia was a distant second with 8% share, at a value of $170.42 million. India’s solar imports increased 39% during the period while its exports fell 56%.

Chinese solar panels are 10% to 20% cheaper than domestically manufactured modules and developers do not want to pay more, according to an expert. India’s


chemicals industries are showing negative growth in the past few months,” SBI Ecowrap report has said. This calls for some policies which support and encourage domestic industries and reduce dependence on such frivolous Chinese imports, it said.

THE CURRENCY ANGLE

The Chinese imports are also aided by an appreciation of rupee against the renminbi since February and if the trend continues, imports from China may cross $ 61.30 billion. The Indian unit has appreciated by 3.7% against the Chinese renminbi since February, resulting in a surge in cheaper imports from China. India has saved at least $3.9 billion in May ’17 because of the stronger Indian rupee.

ANTI-DUMPING MEASURES

Anti-dumping duty by India is in force on 93 products imported from China including chemicals and machinery items, steel and other metals; fibres and yarn; rubber or plastic; electric and electronics; and consumer goods.

Between 1995 and June ’16 India initiated anti-dumping investigations in 818 cases, out of which 24% (193 cases) were against China. Anti-dumping measures had been levied in 149 cases (77%) out of these 193 investigative cases. Interestingly, India had also initiated similar anti-dumping investigations against other Southeast Asian economies in 193 cases during the same period.

Out of these 193 cases, anti-dumping measures had been levied in 143 cases (74% of total cases). The other major targets of anti-dumping investigations by India are the EU (62 cases) and South Korea (62 cases); out of these, anti-dumping duty has been levied in 46 EU cases and 45

South Korean cases. The data clearly shows that India is pursuing anti-dumping investigations across the board rather than just targeting any particular country.

IN CASE OF A TRADE WAR

If India stops buying Chinese goods, China would be hurt more because it has a trade surplus, according to an expert. However, in the context of GDP, China has less exposure as its exports to India amount to about 2.7% of India’s GDP and about 0.5% of Chinese GDP. India’s exports to China amount to about 0.08% of Chinese GDP and about 0.45% of Indian GDP.

In case of a trade war, India would have to source the goods it imports from China. While India is competitive in the things it exports to China, the latter offers good value in its exports to India. Both the countries will have to find other markets, which would not be easy as both nations are large markets. Also, sourcing from other nations would not come cheap and mean a few billion dollars hit.

India is also deficient in rare earth metals, which goes into solar power equipment, wind turbines, cell phones, laptops, and most other electronic gear. And China has 90% global monopoly in rare earths.

WHAT’S INDIA STANCE?

India has signed an agreement with China in September ’14 for achieving bilateral trade balance by 2019.

The five-year programme for economic and trade cooperation is a joint medium-term road map for promoting trade and investments. The agreement seeks easing of restrictions by the Chinese government against export items such as meat, fruit and vegetables, and basmati rice. Of

these, only restrictions have been eased on basmati rice with 14 firms being allowed to export to China.

The Union Commerce Ministry recently said efforts were being made to increase overall exports to the country by diversifying the trade basket with emphasis on manufactured goods, services, resolution of market access issues and other non-trade barriers.

The Ministry has identified hardware, electronics, pharmaceuticals, textiles and automobile components.

In September ’17, the government imposed 18.9% countervailing duty on Chinese hot and cold rolled stainless steel products. These products were being imported from China at a subsidized rate, which was hurting the domestic industry, it said.

India has imposed anti-dumping duty on import of certain type of radial tyres used in buses and trucks to protect domestic manufacturers from below-cost shipments from China for five years.

THE BENEFITS

Not only Indian consumers, but Indian companies too have benefited from cheap Chinese imports of electronic goods. China’s importance as a major supplier of imported capital goods to India has also risen substantially since 2000.

Ironically, while Doklam stand-off was raging during the latest April-June quarter, Chinese imports to India rose by 33%, indicating trade remains unscathed by the border standoff between the two countries.

While the government wants to push exports of value-added goods, given China’s low-cost muscle, it’s a long way aheaD.

The government is leaving no stone

unturned to move towards an electric vehicle-led future

and is supporting its plans through right mix of policies and

tax structure

The Minister for Road Transport Nitin Gadkari warned the automobile

new era of electric cars is expected to begin soon with Union Minister Piyush Goyal expressing

the ambitious goal of bringing in self-sufficient electric vehicles in India by year 2030.

If all goes well as planned, then not a single vehicle running on the roads will use fossil fuel. Instead, vehicles in India would have moved to a cleaner option of electric cars.

A industry to switch to either alternative eco-friendly fuel or convert to electric variants of existing models by 2030.

However, as far as reality can be seen, the electric car era is achievable but with an extended deadline and government initiatives. Statistics look good if we consider figures of Electric Vehicles (EVs) that are sold in India and the opportunity that exists in this segment.



pattern is expected to stay and even hit new highs as is evident from global sales of electric cars touching 2 million in year 2016 alone.

INDIA’S EVOLUTION

While it is too early, the government and auto companies are working to make it a reality. The FAME India scheme [Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India] that was implemented from 1st Apr ’15 aims to encourage hybrid or EVs with respect to market expansion and production supply chain. FAME is broken down into four sub phases for easier initiation and implementation of which first focus area is under progress.

WHY ELECTRIC VEHICLES?

In the context of the Paris Climate Bill, every participating country has to look at reducing carbon dioxide emissions, which can be the biggest achievement if the auto industry switches to clean energy like ethanol or electric energy.

0

5000

10000

15000

20000

25000

30000

Year 2014-15(Includes four-wheelers as well as other vehicles like two-wheelers, etc)Source: Industry Data

Source: Industry Data

Year 2015-16 Year 2016-17

Number Of EVs Sold

Electric Cars Conventional Cars

No tailpipe emissions Pollution due to petrolor diesel usage

Cost benefit over regular petrol or diesel cars since electricity is supplied by local electricity suppliers

Costlier than alternativeenergy since it has to beimported from OPEC

Easy recharging including household recharging

Refuelling takes moretime and money

Use Of EVs By Different Countries In 2016

Norway

Nerherlands

Sweden

China, France & UK

Others

Currently, China is touted as the biggest contender in electric cars with a 40% market share in global electric vehicle market. China is capturing the market in production of electric two-wheelers, which cost $500 or `40,000 approximately.

At present, the Indian market is sporting the basic Internal Combustion Engine (ICE) vehicles that cost around `40,000 to `50,000. This is comparable to the eco-friendly and highly efficient electric vehicles. So it can be easily deduced that this will bring a huge momentum in the automobile industry in India.

However, the same is not the case for electric cars that cost around $35,000 (representative price of Tesla model 3), which is very high as compared to conventional cars running on fossil fuel.

China is thinking of banning gas-guzzling cars to achieve its goal of getting rid of pollution, believed to be the third highest in the whole world. China is moving forward with its step-by-step program. First, it hit coal production. Second, it plans to ban gas-run cars.

The growth potential and demand pattern of EVs is high in China. In fact, sales of commercial and passenger electric vehicles as well as hybrid vehicles were to the extent of 53% higher in year 2016 as compared to year 2015.

THE INDIAN PERSPECTIVE

FAME scheme was started in 2015 to carry out systematic and smoother adoption of hybrid electric vehicles to achieve the ambitious target of making India fossil fuel-free at the earliest. This program has been divided into 4 focus areas i.e. technology development, demand

Electric Cars Versus Conventional Cars

GLOBAL AND INDIAN EV MARKET SCENARIO

Global demand is rising consistently with year 2016 witnessing a spurt in demand for electric cars. Norway lead the pack with one electric car out of three cars sold. This


creation, pilot projects and charging infrastructure. Of these 4 focus areas, the first phase of the scheme is being implemented for a period of 2 years i.e. FY15-16 and FY16-17 commencing from 1st Apr ’15. The second phase involves demand creation, which is being done by bringing in strict mandates for vehicles using fossil fuel.

The third phase of pilot projects will ensure that hybrid and electric cars adhere to mandates and market requirements. Finally, the fourth and the most important phase of charging infrastructure will work towards creating an energy source for election vehicles.

While all this seems easy on paper, it is going to be an uphill task to ensure the implementation of FAME scheme.

The program highlights below steps to reach the target of all electric fleet by 2030- Lottery on registration of conventional vehicles using fossil fuel - Huge volume production and supply of EVs into market - Infrastructure development to bring down the cost of swappable batteries and to install recharging stations - Offering direct and indirect subsidies on batteries and other electrical components to bring the EVs in India at par with conventional vehicles- Tax holidays, tax exemptions and reduction in rates of interest on lending and lowering electricity rates to contribute to reducing the cost of producing the electric fleet of cars

WINNERS AND LOSERS

If we look at the FAME program, one thing is clear that the government will push its agenda quite rigorously. Hence, it is high time for the automobile industry to change and adapt to survive or die a natural death.

The adjacent image graphically explains the various parts of electric cars vis-à-vis conventional petrol or diesel cars.

We can see that the parts appearing under the electric vehicles segment will be the ones having neutral or positive impact and those under conventional vehicles will be affected negatively.

CONVENTIONAL CAR PARTS USELESS IN EVs

ICE-related parts like clutch, carburetors, etc, are used in conventional vehicles and can be used in alternative fuel-consuming vehicles like ethanol. The government has also been proposing the manufacture and installation of second generation of ethanol.

In year 2016 the prototype of the vehicle that runs on ethanol was unveiled by Nissan called E-Biofuel-cell car. It is a hybrid car, which works on electricity as well.

However, such advanced technology stage would only be feasible with step-by-step eradication of petrol and diesel engine. This would mean that the auto industry still has time to wake up to the emerging needs to do away with conventional fleet of vehicles.

The journey for some of the companies like Clutch Auto (manufacturers of clutch), Banco products (radiators) and Shriram Pistons (piston) will be challenging in the wake of faster adoption of electric and hybrid cars

NOT SO AFFECTED

Some parts and accessories that are currently used in conventional cars can also be used in electric or hybrid cars like shock absorbers, steering systems, etc.

Manufacturers of such automobile parts and accessories will have no effect in the transition period or not even after the introduction of electric cars in the country. Companies like Gabriel India (shock absorbers), Bharat Seats (seatings), Nippon Electricals (internal wiring), etc. will have a neutral impact.

However, some of the manufacturers will witness a boost in demand pattern due to the adoption of eco-friendly fleet of vehicles.

Items like batteries, which are prerequisites for electric vehicles will help manufacturers emerge with a strong growth potential. So, battery companies like Amara Raja or wiring harness producers like Motherson Sumi could enjoy better dayS.

ConventionalVehicles

ElectricVehiclesSteering system,

Headlights and SeatsShock absorbers, Brake

lingings and leaf springs

ICE (Internal CombustionEngine) parts like EngineValve, Clutch and GearsCarburators

RadiatorsBatteries and wiringrequirementsSheet metal parts

The government hopes to monetize completed stretches

of public-funded national highways through the Toll

Operate Transfer or TOT model of road construction

FutureForward

TOT



investors on account of other infrastructural developments around these stretches.

Analysts point out that there are broadly two benefits of bidding out highway projects on toll, operate and transfer (TOT) basis. To an extent that there are potential leakages in government toll collection system, entrusting operations to a private sector player will plug gaps and make it evidently transparent.

Besides, it will help the government to securitize future cash inflows and utilize it to create new assets. They say that the government has designed the TOT model to create an opportunity for the private sector to invest in low risk assets and at the same time provide for efficient operations and maintenance of highways by the private sector, check pilferage of toll revenue and channelize capital inflows for creating new road infrastructure.

As per toll collection data available with the National Highways Authority of India (NHAI), over 40% of toll projects are currently generating more than 10% of the project completion cost annually.

Of the 104 projects in all, 44 projects are generating 42% of the project completion cost annually through toll, 34 projects are earning 33% of the project completion cost annually and 24 projects are generating 23% of the project completion cost.

The TOT model has already been put to test elsewhere around the world. A consortium of Macquarie-Cintra has invested a sum of $1.83 billion in the Chicago Skyway for a concession period of 99 years.

Other projects where the model has been implemented successfully include the Puerto Rico Highway

ollowing the stupendous response to the Hybrid Annuity Model wherein the government sponsors 40%

of the project cost, there is growing interest in the Toll Operate Transfer (TOT) Model.

So, what exactly is the TOT model? Here is a detailed explanation of this.

A TOT project is an already constructed road project funded by public money. For an upfront payment, the government will transfer projects (chiefly national highways) on a TOT basis for a specific time period, which can extend up to 30 years to private players or investors for tolling and maintenance. Private players or investors mainly include road developers, private equities and institutional investors such as pension and wealth funds.

The National Highway Authority of India (NHAI) is expected to invite bids for 11 TOT road projects, which are expected to cover 700 km and generate an upfront value of `6,500 crore. In total, NHAI plans to transfer 75 projects on a TOT basis and expects to raise `75,000 crore.

There are two distinct advantages of acquiring projects through the TOT route. First, the model is asset-light. Since the highway is already constructed, it saves the cost involved in constructing the project for the player. Besides, the private player is also freed from the hassle of obtaining land, which is one of the key reasons as to why awarding activity has been weak in the first half of FY18.

NHAI is expected to award 1,100 km length of project by the end of September this year. This is almost half of the total 2,250 km length of projects awarded in the first half of

F financial year 2017.

Hassles in land acquisition is the key reason for the significant decline in awarding of projects by NHAI. Given this, TOT is expected to revive interest among road companies who intend to acquire new projects and expand their roads portfolio.

Various research houses estimate that projects under the TOT model may generate an annual toll revenue growth of 7% to 8% and return on equity of 14% to 16%, considered reasonably good by analysts given that it is an asset-light model.

So, how did it all start? The government needs funds to construct new highways. And it needs a viable and sustainable route to raise money. One of the ways is by monetising completed stretches of public-funded national highways.

The Ministry of Road, Transport and Highways (MoRTH) has prepared a roadmap to issue bids for the already constructed roads to private investors in the country. The Ministry has identified 104 toll roads from where it is currently earning toll revenue. A senior official from the Ministry recently told a leading newspaper that the government is assessing the interest of the private sector in toll road assets.

The objective is to award these toll roads to private sector entities for operations and maintenance for a fixed period in lieu of an upfront fee (under the toll-operate-transfer or TOT model). The official said that a meeting between ministry officials and stakeholders was held.

The ministry has shortlisted close to half a dozen highway projects, illustrating the potential of such investments. These stretches can be good investment prospects for


PR-22, where a consortium of Goldman Sachs-Abertis has invested $1.43 billion for a period of 40 years, the Penang Bridge in Malaysia where United Engineers Malaysia Berhad has invested $204 million (the concession period has been extended to 45 years from 25 years) and the Indiana Toll Road where a consortium of Macquarie-Cintra has invested $3.8 billion for a period of 75 years.

There are discussions also on whether to undertake project by project bid or award a portfolio of projects in a bid, the minimum size of the portfolio in that case, and if the portfolio should have contiguous toll roads or geographically spread toll roads.

In addition, there needs to be a discussion on the proposed termination payment clause. Once the key details of how the TOT model would function are out, there will be a clear trend about its acceptability in the Indian context. While the buyer of the stake in the already constructed projects will be responsible for complete operations and maintenance of the awarded section, the ministry is yet to freeze the list of activities that would form a part of the concessionaire’s obligation

- toll collection (toll plaza operations, use of technology, safety compliance), regular maintenance (prompt repair of potholes, cracks, drains, joints) and major maintenance (re-laying of the road, strengthening and rehabilitation, refurbishing of the tolling system as and when required).

The government is in the process of determining eligibility and ways to reduce the barrier for new entrants and investors. It is examining whether experience in maintaining and operating toll roads or track record of minimum service levels or use of advanced tolling technologies or experience in major maintenance, experience in road construction should form a part of credentials, say media reports.

There are discussions also about the parameters which can be used to check the financial health of the entity, which would buy the stake in the already built road projects. These are debt coverage ratio, debt raising capabilities or debt to equity ratio.

Roads have been the key focus of the NDA government. The NDA government has an ambitious target to award highway projects worth `3.5 lakh crore. As many as 1,231 projects

measuring 37,000 km have been firmed up for award by the ministry over the next two years.

It has given its nod to the Bharat Mala project aimed at developing 6,000 km of new roads in border areas at an estimated cost of `76,000 crore. Another 2,500 km of roads to connect religious and tourism centres in mountainous terrain is expected to come up at an estimated cost of `51,000 crore.

Also, world-class highways will be developed to connect 123 of the 676 district headquarters in the country at an estimated cost of `96,000 crore. The government has allocated `42,913 crore for the highways sector in the Budget for the current fiscal, up from `28,881 crore in 2014-15, to ensure greater participation in road building in the absence of private investment. But with mega projects in the pipeline, the government has also been exploring different terms of engagement to lure the private sector to invest in road projects.

Given such high focus, it would not be naive to assume that the TOT model would work in the coming quarters and revive interest among investors and players alikE.

Micro analysis. Mega gains.Trading at Nirmal Bang is based on extensive research and in-depth analysis, where we focus on the smallest of details and turn them into an advantage for you.

Over the years, the analytical approach coupled with decades of experience has helped us maximize returns for our investors and thereby inspire con�dence in them.

EQUITIES* | DERIVATIVES* | COMMODITIES | CURRENCY* | MUTUAL FUNDS^ | IPOs^ | INSURANCE^ | DP* www.nirmalbang.com

REGD. OFFICE: Sonawala Building, 25 Bank Street, Fort, Mumbai - 400 001. Tel: 022 - 39267500 / 7501; Fax: 022 - 39267510 CORPORATE OFFICE: B-2, 301/302, Marathon Innova, O� Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400 013. Tel: 022 - 39268000 / 8001; Fax: 022 - 39268010

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme related document carefully before investing. Please read the Do’s and Don’ts prescribed by Commodity Exchange before trading. The PMS Service is not o�ering for commodity segment. *Through Nirmal Bang Securities Pvt. Ltd. ^Distributors #Prepared by Research Analyst of Nirmal Bang Commodities Pvt. Ltd.

Contact at: 022-3926 9600 | e-mail: [email protected]

Power DressingSmart casuals or semi-formals is the buzzword in the

office wear segment, thus offering unparalleled opportunity to manufacturers in organized retail

changes in preferences from non-branded to branded, fast growing economy and large young consuming population in the country has made India a highly lucrative market.

India has the world’s largest youth population, which is becoming fashion conscious owing to mass media and social media penetration. This has opened unprecedented retail market opportunities. The promising growth rate of 9.7% makes the Indian fashion industry prominent in the retail sector.

Favourable trade policies and increased penetration of organized retail among other factors contribute towards making the Indian fashion

he Indian apparel industry is witnessing some major shift towards smart and casual wear compared to

formal wear. Organized retail remains an unparalleled opportunity as the market size is seen rising to $983 billion by year 2020 from $553 billion in 2016.

The advantageous situation is based on the facts that India has 17% of world population and 3% of global consumption with per capita income quadrupling in the last 15 years to $1,600 and consumption being driven beyond the metro belt, according to a PWC retail report.

Entry of international brands,

T industry attractive to investors.

The Indian fashion retail industry is transforming rapidly and is seeing a shift from unorganized to organized retail. The transformation is due to increase in income, increased penetration of branded wear in the country and awareness of fashion trends among consumers.

But nowadays couture is not limited to metros only. Tier-II cities and semi-urban cities have emerged as huge potential markets for these organized players in the Indian retail industry. Penetration of organized retail chains across India has contributed to the growth of the apparel market in these markets.



Deepak Chhabra, Managing Director and Chief Executive Officer, Crocs India, said, the demand for casual footwear was on a rise. “Earlier the ratio of formal to casual was 60:40 but this has now reversed to 40:60,” Chhabra said.

MEN’S WEAR

With a market size of `1,24,423 crore ($19 billion), men’s wear is the largest segment in apparel market and is expected to grow at a CAGR of 9% for next 10 years to reach `2,95,795 crore ($45.5 billion) by 2026.

The various product categories of men’s wear segment include shirts, trousers, suits, winter wear, t-shirts, denim, daily wear, active wear, ethnic wear, innerwear, etc. Shirts are the single largest category in men’s wear, followed by trousers and denim.

In recent years, denim, active wear and t-shirts have shown promising growth and are expected to grow at high CAGRs of 14%, 14% and 12%, respectively, owing to changing preference of the consumers.

While denim and t-shirts have matured as categories and have shown consistent growth over a considerable period of time, active wear has recently evolved and has high growth potential. This is due to the boom in fitness and healthcare.

In addition, the consumers in India have evolved and now understand that clothing for fitness is different from everyday clothing. These factors contribute to high growth projections of 14% over the next decade. The growth in this category is not just restricted to metros and Tier-I cities and has shown growth in Tier-II and Tier-III cities as well.

Further the acceptance of smart casuals in corporate India has boosted

Market expansion in non-metros seems like a lucrative opportunity for domestic and international brands. Once considered value conscious, consumers of Tier-II cities are now open to spending more on fashion to look good. Apparel retail in non-metros is growing exponentially due to which more brands are entering hinterlands.

Within the retail categories, apparel retail has demonstrated comparatively higher receptivity towards corporatized retail. High penetration of corporatized retail in apparel has also paved the way for more formal and systematic processes and procedures in operations, procurement as well as distribution of such products.

Apparel retail is expected to continue witnessing deeper penetration of corporatized retail beyond major urban clusters in the country and significantly increase the demand for branded products.

Corporate dressing these days is not restricted to strict formal wear in pastel colours and minimal designs but has gone through a transition. In women’s wear the concept of smart casuals has carefully replaced traditional formal wear such as sarees, western formals and salwar-kameez.

Increasing inclusion of smart casuals or semi-formals has resulted in acceptance of chinos and other relaxed trousers along with half sleeved shirts or t-shirts.

Not surprising, makers of formal wear such as Arrow, Van Heusen, Raymond and Park Avenue are now moving into the casual wear segment where they see an opportunity. According to industry experts, the increase in demand for casual wear has compelled retailers to focus on the segment.

Arrow has recently launched Arrow Youth, a sports range. CKY, the premium brand of Calvin Klein mainly into formals, has got into fusion wear, comprising both casual and formal wear.

At present, formal wear accounts for 63% of the menswear market of around $20 billion. This segment is expected to grow at 10% annually slower than the 20% annual growth envisaged for casual wear. The growth in casual wear is expected to be driven by higher Internet penetration in Tier-II and III cities.

Gaurav Mahajan, President, apparel business, Raymond pointed out that two seasons ago, Raymond Apparel, a casual wear brand, was launched. “The Color Plus brand exists. But within Raymond too we introduced the segment,” Mahajan said.

He added that corporates were easing dress codes to allow employees to wear formal casuals like cotton chinos, semi-formal among others and he expects the ratio of formal to casual wear to change from 60:40 to 50:50 in the next couple of years. This was partly in deference to employees’ preferences to wear lighter clothes in hot weather.

A senior executive at Shoppers Stop, declining to be identified, said the retailer’s casual wear category was growing at around 10% to 15% annually and that the growth of formal wear had moderated. Sector experts said given the climate in India, sales from casual wear is expected to increase.

Aditya Birla Group’s Madura Garments too is focusing on casual wear and has products across most of its brands including Louis Philippe and Van Heusen; it is also expanding the range at retail store Linen Club across the country.


growth of western wear among working professionals. Formal wear is not restricted only to shirts and trousers but also has a wide range of other options such as smart jackets and brightly coloured or patterned shirts, among others.

Men’s denim wear is expected to grow at a rate of 14% per year. The young population of the country is the key demand driver of this segment.

Due to rise in media penetration in the country and global fashion awareness among youth, a shift in consumer’s choice of denim wear has been witnessed in the country. Penetration of international brands in denim has provided consumers with ample product options.

WOMEN’S WEAR

The women’s wear market in India contributes 38% of the total apparel industry. It is estimated to be worth `1,11,467 crore ($17.5 billion in 2016) and is expected to grow at a CAGR of 9.9% to reach `2,86,456 crore ($44 billion in 2026).

Globalization, coupled with fast fashion, has resulted in awareness of fashion trends and styling.

Further, the increase in number of working women has fuelled the women’s wear market. The demand is expected to grow for western wear, fusion wear and occasion-specific ethnic wear. Women’s wear in India comprises of ethnic wear, western wear, Indo-western and innerwear, among others. Ethnic wear is the single biggest category in women’s wear segment with a share of 66%.

Denim is another high growth category among women’s wear and is expected to grow by a promising rate of 17.5% for the next ten years to become a market of `10,209 crore from `2,035 crore currently.

Initially, denim brands used to focus primarily on men, but with the change in demand and preferences of women, they started catering to women consumers as well. Stretch denims have seen a huge demand among women in the country.

Women’s t-shirts and tops categories are also growing fast owing to generic inclination for western wear categories. The women’s tops and shirts market is of `2,236 crore and is expected to grow at a CAGR of 14% to reach `8,291 crore by 2026. The women’s t-shirts market of `933 crore

is growing in tandem with the growth of other casual wear categories and is expected to grow at a CAGR of 17% to reach `4,484 crore by 2026.

INCREASED INCLINATION TOWARDS SMART GARMENTS

With technological penetration in everyone’s lives, garments too are witnessing some major upgradation. After smart phones, smart televisions, smart watches, etc, ‘smart shirts’ have emerged as a new trend in the apparel industry. Companies are trying to woo customers by providing smart shirts to the growing tech-freak population of the country.

Right now, the wearable technology market mainly consists of wearable devices such as fitness bands and smart watches, among others. But, recently there has been a shift towards smart garments among premium and luxury customers.

However, the rural apparel market in the country is still primarily catered to by a large number of unbranded and unorganized local players. Need-based clothing and price sensitivity among people of rural India does not make it a lucrative market for branded playerS.

Now, Commodity Trading Is No More A Puzzle.Commodity trading can be confusing especially if one is inexperienced and lacks the necessary skills to trade successfully. At Nirmal Bang, our team of seasoned analysts with years of experience and in-depth knowledge can help you spot the underlying clues and create the investment strategies that best suit your commodity trading

requirements.

EQUITIES* | DERIVATIVES* | COMMODITIES | CURRENCY* | MUTUAL FUNDS^ | IPOs^ | INSURANCE^ | DP* www.nirmalbang.com

REGD. OFFICE: Sonawala Building, 25 Bank Street, Fort, Mumbai - 400 001. Tel: 022 - 39267500 / 7501; Fax: 022 - 39267510 CORPORATE OFFICE: B-2, 301/302, Marathon Innova, O� Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400 013. Tel: 022 - 39268000 / 8001; Fax: 022 - 39268010BSE SEBI REGN No. INB011072759, INF011072759 & INE011072759, NSE SEBI REGN No. INB230939139, INF230939139 & INE230939139 DP SEBI REGN. No NSDL: IN-DP-NSDL-136-2000, CDS(I)l: IN-DP-CDSL-37-99, AMFI REGN. No. arn-49454 NCDEX REGN. NO. 00362, FMC Code-0075, MCX REGN. No. 16590, FMC Code-MCX/TCM/CORP/0490, MCX SX-INE260939139, PMS-INP000002981

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme related document carefully before investing. Please read the Do’s and Don’ts prescribed by Commodity Exchange before trading. The PMS Service is not o�ering for commodity segment. *Through Nirmal Bang Securities Pvt. Ltd. ^Distributors #Prepared by Research Analyst of Nirmal Bang Commodities Pvt. Ltd.

Contact: 022-39269600 | e -mail: [email protected] | www.nirmalbang.com

Industry trends indicate that efforts to resuscitate the domestic steel pipe industry will bear fruits soon



post government’s announcement to opt for local manufacturers. It recently cancelled a 700 km pipeline project inked with a Chinese player. The project was later awarded to the domestic players. Furthermore, the government recently awarded orders to Indian companies like Jindal Saw and MAN Industries.

Currently, GAIL has a gas pipeline network of 11,000 km, which it intends to take to 15,000 km by the end of 2019-20.

Not long ago the government announced a huge pipeline project to connect and develop India’s northeastern states. The project, known as Urja Ganga, will comprise of 2,540 km and will connect 25 industrial clusters in five states.

Urja Ganga will cost the government close to `13,000 crore and will benefit as many as 2,600 villages by providing them with natural gas. It will be commissioned by state-run GAIL and executed by Indian steel pipe manufacturing companies.

Furthermore, GAIL has unveiled big plans to invest about `30,000 crore over the next few years in projects like city gas and coal gasification, among others, offering a huge opportunity to a large number of domestic pipe manufacturers. Apart from GAIL, ONGC, IOC and few others also intend to spend more on gas projects, leading to more demand for the domestic steel pipe industry on the whole.

PROTECTION OF LOCAL INDUSTRY

Apart from boosting local manufacturing, the government is also helping Indian companies by imposing restrictions on imports in

he domestic steel sector is witnessing a revival and a possible rerating, backed by earnings growth and

increase in steel prices, an uptick in demand and restrictions on cheaper imports from China. This is likely to bring cheer to manufacturers of steel pipes in India.

PAST CHALLENGES

The domestic steel pipe industry had been facing a number of challenges in terms of servicing debt as a result of low demand in local and international markets. Several of them have turned into stressed assets for banks as prolonged slowdown in the industry has impaired their balance sheets. In fact, a large manufacturing capacity is sitting idle and companies are incurring losses.

Over the last three years, the three large players - Jindal Saw, Maharashtra Seamless and Welspun Corp - have reported a decline in sales in the range of 2% to 16%, hurting their profits. However, things have started changing for the better.

GLORIOUS FUTURE OF OIL AND GAS

The government mandate to implement Bharat Standard (BS)-VI emission norms by 1st Apr ’20 is pushing the oil and gas industry in India to adapt to the change. While complying with the new emission norms will necessitate huge capital investment, it will also offer a huge opportunity for the steel pipe industry in the country.

T Owing to rising demand and upgradation of refinery equipment, public and private sector oil and gas companies are expected to expand capacity. Already leading companies like ONGC, RIL and GSPC have discovered gas reserves in the KG Basin under the government introduced NELP (New Exploration Licensing Policy).

With the help of reforms like Hydrocarbon Exploration Licensing Policy and uniform licensing formalities, the government is now aiming to reduce imports by 10% by year 2022. These policies are paving the way for self-sufficiency in the coming years, saving foreign exchange reserves as well as encouraging domestic manufacturing.

The hydrocarbon sector is the key demand driver for steel pipes globally. Domestic pipe manufactures have suffered in the recent past and are currently operating at a capacity utilization of less than 40%.

Apart from oil, there is huge opportunity in the gas sector. Following a slew of reforms, the Indian gas sector is expected to open up with higher volumes and improved output. Rating agency ICRA estimates India’s gas production to rise from current 80 mmscmd to 110 mmscmd in 2021 and 125 mmscmd by year 2027.

LOCAL PROCUREMENTS

GAIL, the largest customer of domestic steel pipe manufacturers, is increasingly picking domestic players

25,000 crores each yearExpected to be 35,000 croreseach year

Years Expenditure OnExploration (Together By

ONGC And Oil India)

Annual Demand For SteelPipes (From Oil And

Gas Industry)

4-5 lakh tonnesExpected to be upwardsof 6-7 lakh tonnes each year

Demand From OtherSectors Like Power Sector,

Nuclear Sector, Etc.

Upwards of 1.5-2 lakh tonnes 2012-20162017-2019

Revised Guidelines

Source: Steel Pipes In Oil And Gas Industry


the form of anti-dumping duty. Only recently, the government slapped an anti-dumping duty of $100/tonne on imports from China.

Incidentally, Chinese players were exporting nearly 7 lakh tonne of seamless pipes to India, thus hurting domestic manufacturers. This has been corrected by the government.

Now, Chinese imports have plummeted and domestic demand has picked up, with some like Maharashtra Seamless reporting 26% volumes growth in quarter ended March ’17.

Higher demand will improve capacity utilization as well as operating margins of companies. Today, many domestic players are incurring heavy losses mainly due to higher interest costs. With demand picking up and margins improving, the ability of companies to service debt and interest will improve.

WATER AND OTHER SEGMENTS

Although the hydrocarbon sector

accounts for a large part of the demand for steel pipes in India, its scope in water-related segments cannot be underestimated.

In addition to growing emphasis on providing potable water to every household across the length and breadth of the country, investments in agricultural infrastructure through government schemes like Rashtriya Krishi Vikas Yojana will give fillip to the steel pipe sector.

Also, the revival of the real estate sector in the country will boost the steel pipe industry in India.

BEAMING INVESTORS

Demand is the only thing that could revive the steel pipe sector. If there is demand, companies will be able to use their capacity and recover fixed costs like interest to become profitable yet again.

Thankfully, demand for steel pipes has started improving. Companies have begun seeing growth in their order books. Even though the gap between the current revenue and the

revenue needed to break even at the operating level is low, the improvement in order flow over the following year will help steel pipe manufacturing companies in the country profit.

The steel pipe manufacturing business has a huge operating leverage. If these pipe companies are able to use their existing capacities well, then incremental growth in revenues will translate into profitability for the companies, and thus improve earnings that are depressed currently.

The pick-up in earnings cycle, which is three to four quarters away, would result in shareholders being rewarded for their investments, as most of these companies are currently lying in a state of sheer neglect.

For instance, the four large players in the steel pipe manufacturing segment are today trading at less than 1.2 times their price to book value.

As earnings pick up, the ownership of these stocks will go up, allowing them to operate at higher valuationS.

Contact: 022 39269600E-mail: [email protected]

TTECHNICAL OUTLOOK

he Indian benchmark index rallied spectacularly towards the end of August and the start of September

’17 as the Nifty index quoted an all-time high of 10,178.95.

As soon as the Nifty hit the all-time high, profit-booking was witnessed at higher levels by 490 points within a span of 8 trading sessions, bringing it to the 9,687.55 level.

A price correction is being seen in almost all sectors and indices, lending good support at lower levels i.e 9,640-9,600.

Technically, the Nifty had given a breakout of the upward sloping channel, indicating a cautious view. The lower trend line of downward sloping channel was at the 9,940 level. A breakout of channel support dragged the Nifty by 250 points in three trading sessions.

Currently, the Nifty is taking the previous swing’s low i.e. 9,685 level. As long as it stays above the mentioned level on a closing basis, there is a chance of some short cover-ing, which might take the Nifty towards 9,970/10,040 levels. On the flip side, if it breaks the 9,685 level, then we may see the fall extending towards 9,570-9,500 levels.

The month of October will be crucial given quarterly earnings results of India Inc and RBI Monetary Policy that are likely to be announced. These events may have a bearing on the Indian markets. It is also important to note that the Nifty is at the make-or-break level.

Technically, the overall view is cautious as the Nifty is under selling pressure. Fresh buying can be done

on dips towards 9,650-9,570 levels. Market participants should be stock-specific, and follow the trend with a trail stop loss level till it reverses from trading perspectives.

The Bank Nifty faces immediate resistance around 23,870 on the upside and on a decisive close, it can rise to 24,200/24,400 levels. There is an immediate support at 23,450/23,200 levels.

On the Nifty Options front for the October series, the highest open interest build up is witnessed near 9,700 and 9,500 Put strikes, whereas on the Call side, it is observed at the 10,000 and 10,200 strikes. The market is likely to remain range-bound in October with bouts of selling pressure near resistances.

A day before the September expiry, average rollovers in Nifty (45%) and a lower-than-average rollover in Bank Nifty (41%) were seen with a positive cost of carry, indicating mixed bias.

Technology (71.85% - long rollover), Oil & Gas (63.27% - long rollover) and Capital Goods (51.95% - short rollover) sectors saw much higher rollovers compared to the same day of the previous expiry (one day before the expiry).

Select stocks from Technology, Fertilizers, Oil & Gas and Pharma sectors are expected to outperform in this expiry. However, select stocks from Capital Goods and Banking

sectors are likely to underperform in this expiry.

India VIX, which measures the imme-diate 30-day volatility in the stock markets, remained in the range of 11-15 in the month of September. Going forward, VIX is likely to remain at elevated levels.

The Put Call Ratio-Open Interest (PCR-OI) for Nifty Options has been in the range of 1.05-1.60 in the month of September. Going forward, it is expected to remain in range, implying a sideways undertone in the market.

Going forward, the Nifty may remain range-bound in October with bouts of selling pressure near resistances. The 10,000 and 10,200 levels are likely to remain strong resistances, while 9,700 and 9,500 levels are likely to see good demand.

OPTIONS STRATEGY

LONG STRADDLE

It can be initiated by ‘Buying 1 lot 26OCT 9800 CE (`120) and Buying 1 lot 26OCT 9800 PE (`135)’. The net combined premium outflow comes to around 255 points.

Keep a Stop Loss of 50 points or `3,750 loss. The strategy will gener-ate profit above 10,055 or below 9,745. The maximum profit for the strategy is unlimited. One can book profits on a gain of 100 points or `7,500 profiT.

Nifty Daily Chart


Buckfast Recommendations

About Buckfast Research

Disclaimer Mutual Fund Investments are subject to market risks. Please read the offer document carefully before investing.

Source: ACE MF, NAV as on 22nd Sept ’17.SIP returns as on 30th Jun ’17. M=Months, Y=Year, D=DaysPast performance is no guarantee of future performance.

Returns are of Growth option of Regular plans Returns which are below 1 year period are Annualized Returns

Finance is a maze of umpteen possibilities and choices. And it is easy for individuals to lose their way in this tangle. In such a scenario, an expert comes handy. For, he alone can wade through the enigmatic world of finance and simplify choices for investors.

Buckfast Research, the research arm of Buckfast Financial Advisory Services Pvt Ltd, recommends mutual fund schemes that can be considered by investors.

Buckfast Research, the research arm of Buckfast Financial Advisory Services Pvt Ltd is guided by Mr Vijai Mantri and a team of professionals with more than 50 years of cumulative experience with leading Indian and Global Mutual Fund companies.

A number of parameters have been taken into consideration while making the recommendations. Some of the guidelines are track record of the scheme and consistency, risks associated with the scheme, fund house pedigree and credentials of the fund manager.

However, there is no specific time frame for the investment as such. It depends entirely on an investor’s objectives, investment timeline, risk tolerance and type of scheme he/she wishes to invest in. By and large, equity schemes are suggested with a long-term investment horizon.

SCHEME NAME

42.8031.7625.97

135.72

18.2018.2726.6521.67

1 Year

7.77--

8.81

10 Years

14.7917.0024.9915.65

16.0221.37

-21.26

5 Years

9.3513.84

-13.15

7 Years

1570134928678494

AUM (Cr)3 Years

Historic Return (%)

IDFC Classic Equity FundKotak Select Focus FundMOSt Focused Multicap 35 FundPrincipal Growth Fund

NAV

Diversified Funds

Lumpsum

SCHEME NAME

42.8031.7625.97

135.72

25.1322.9627.5929.88

1 Year

12.47--

15.44

10 Years

17.0317.4922.1118.39

17.0321.51

-21.31

5 Years

14.7219.14

-18.85

7 Years

1570134928687494

AUM (Cr)3 Years

Historic SIP Return (%)

IDFC Classic Equity FundKotak Select Focus FundMOSt Focused Multicap 35 FundPrincipal Growth Fund

NAV

SIP


Large Cap Funds

Mid and Small Cap Funds

SCHEME NAME

30.5237.2144.8420.79

431.73

17.1730.8520.5518.4215.62

1 Year

11.139.61

--

12.11

10 Years

13.0612.8815.6814.6310.09

17.6014.4320.70

-15.30

5 Years

11.798.7614.78

-9.76

7 Years

4589391

4510771

14917

AUM (Cr)3 Years

Historic Return (%)

Reliance Top 200 FundIDFC Focused Equity FundMirae Asset India Opportunities FundMOSt Focused 25 FundHDFC Top 200 Fund

NAV

Lumpsum

SCHEME NAME

30.5237.2144.8420.79

25.5638.9824.9224.49

1 Year

-11.47

--

10 Years

14.2716.2616.9115.07

18.2615.2920.87

-

5 Years

16.5012.6418.84

-

7 Years

4589391

4510771

AUM (Cr)3 Years


Reliance Top 200 FundIDFC Focused Equity FundMirae Asset India Opportunities FundMOSt Focused 25 Fund

NAV

SIP

SCHEME NAME

52.4439.1624.9515.85

33.1929.6537.9035.94

1 Year

----

----

10 Years

17.9721.4125.42

-

21.3231.17

--

5 Years

15.0021.52

--

7 Years

164243721581196

AUM (Cr)3 Years

Historic Return (%)

IDFC Sterling Equity FundReliance Small Cap FundL&T Emerging Businesses FundTata India Consumer Fund

NAV

Lumpsum

SCHEME NAME

52.4424.9539.1615.85

37.2847.5435.1742.28

20.0230.0024.47

-

1 Year 10 Years

22.17-

33.57-

19.47---

5 Years 7 Years

164215814372196

AUM (Cr)3 Years


IDFC Sterling Equity FundL&T Emerging Businesses FundReliance Small Cap FundTata India Consumer Fund

NAV

SIP

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

SCHEME NAME

500.7353.2761.0217.0315.40

18.3325.4620.3628.9526.85

1 Year

11.22-

13.45--

10 Years

10.4416.5913.28

--

17.1121.3121.78

--

5 Years

10.4614.2214.90

--

7 Years

6565675

9042622547

AUM (Cr)3 Years

Historic Return (%)

HDFC TaxSaverIDFC Tax Advt(ELSS) FundReliance Tax Saver (ELSS) FundMOSt Focused Long Term FundMirae Asset Tax Saver Fund

NAV

Lumpsum

SCHEME NAME

53.2717.0315.40

31.0934.9834.33

1 Year

---

10 Years

17.08--

20.56--

5 Years

18.52--

7 Years

675622547

AUM (Cr)3 Years


IDFC Tax Advt(ELSS) FundMOSt Focused Long Term FundMirae Asset Tax Saver Fund

NAV

SIP


Balanced Funds

Equity Savings (Arbitrage MIP) Funds

SCHEME NAME

38.6243.1638.6429.32

NAV

16.5310.0613.4610.64

3 month

11.668.52

10.738.18

14.0510.3211.7710.69

3 Years

14.3411.1712.1210.91

5 Years

225938451440353

AUM (Cr)1 Year

Historic Return (%)

Aditya Birla SL MIP II-Wealth 25HDFC MIP-LTPICICI Pru MIP 25Kotak MIP

SCHEME NAME

482.7552.90

120.9225.38

NAV

14.1323.9313.4722.14

6 month

14.3217.2012.9816.70

11.2413.6313.1614.93

3 Years

16.5016.9618.3619.06

5 Years

303048481

180976426

AUM (Cr)1 Year

Historic Return (%)

HDFC Prudence FundReliance Reg Savings Fund-Balanced PlanICICI Pru Balanced FundL&T India Prudence Fund

SCHEME NAME

33.9412.4812.2512.98

NAV

10.606.74

15.7213.73

6 month

12.427.24

11.769.47

10.45---

3 Years

10.68---

5 Years

238725491116888

AUM (Cr)1 Year

Historic Return (%)

HDFC Equity Savings FundICICI Pru Equity Income FundReliance Equity Savings FundAditya Birla SL Equity Savings Fund

Monthly Income Plans

SCHEME NAME

21.3920.7821.4119.92

2.541.290.862.42

3 month

11.829.569.0510.27

5 Years

11.197.398.558.68

9.718.869.359.97

1 Year

12.0010.7910.9410.85

3 Years

3134478435771663

AUM (Cr)6 month

Historic Return (%)

ICICI Pru Long Term PlanIDFC Dynamic Bond FundSBI Dynamic BondUTI Dynamic Bond Fund

NAV

Income & Dynamic Bond Funds

SCHEME NAME

13.0712.5412.8459.3513.69

70286.728.328.466.50

3 month

---

9.37-

5 Years

9.0710.339.939.579.00

9.829.769.839.938.64

1 Year

---

10.7410.24

3 Years

8983517128527527401

AUM (Cr)6 month

Historic Return (%)

Baroda Pioneer Credit Opp Fund-AAditya Birla SL Corp Bond FundBOI AXA Corporate Credit Spectrum FundFranklin India Dynamic Accrual FundReliance Corporate Bond Fund

NAV

Accrual Funds


SCHEME NAME

2317.7212.2123.83

2050.98

4.855.024.894.57

1 month

8.17-

8.488.99

3 Years

6.496.636.636.54

7.066.977.327.25

6 month

7.287.257.627.82

1 Year

18351484668056074

AUM (Cr)3 month

Historic Return (%)

Reliance Money Manager FundDSPBR Ultra Short Term FundIDFC Ultra Short Term FundKotak Low Duration Fund

NAV

Ultra Short Term Funds

SCHEME NAME

268.78231.47

2748.504079.54

6.476.446.506.49

3 month

8.368.308.368.32

5 Years

6.576.546.596.58

6.736.746.796.76

1 Year

7.787.767.817.76

3 Years

29322115831231827698

AUM (Cr)6 month

Historic Return (%)

Aditya Birla SL Cash PlusICICI Pru Money Market FundKotak Floater-STReliance Liquid-Treasury Plan

NAV

Liquid Funds

SCHEME NAME

12.5422.3318.7224.10

NAV

5.815.625.506.08

3 month

6.105.915.456.08

7.096.796.516.88

3 Years

-7.867.277.76

5 Years

313710138

6408813

AUM (Cr)1 Year

Historic Return (%)

Edelweiss Arbitrage FundICICI Pru Equity-Arbitrage FundIDFC Arbitrage Plus FundKotak Equity Arbitrage Scheme

Arbitrage Funds

RETURNS

77.02%8.20%

15.61%16.73%8.61%9.85%

15.17%13.97%10.56%

Investmentin Nifty

18.35%6.23%

11.91%8.83%7.71%9.12%

14.60%13.52%10.19%

BuckfastFundamentalMarket Model

(One time)

-58.68%-1.97%-3.70%-7.90%-0.90%-0.72%-0.57%-0.45%-0.37%

ValueAddition

Last 1 monthLast 3 monthsLast 6 monthsLast 1 yearLast 2 yearsLast 3 yearsLast 4 yearsLast 5 yearsSince Aug 2011

Returns as on 31st Aug ’17

Buckfast Fundamental Market Model (BFMM) is a asset allocation model, which analyses historical market behaviour taking into consideration various aspects such as fundamental ratios, long-term trends. It aims to reduce volatility in the short to medium-term without compromising the opportunity for long-term wealth creation. Currently as per BFMM, we suggest 0% allocation to equity and 100% to debt.

SCHEME NAME

64.6831.9319.5535.40

3.351.902.071.56

1 month

9.368.928.809.44

3 Years

6.726.065.935.90

8.267.797.418.31

6 month

8.007.347.538.10

1 Year

20830166049320

12216

AUM (Cr)3 month

Historic Return (%)

Aditya Birla SL Short Term FundReliance STFSBI Short Term Debt FundICICI Pru Short Term Plan

NAV

Short Term Funds


JINESH GOPANI,Head – Equity,Axis Mutual Fund

You never know how tables turn. So it is always good to be careful. Losing 5% returns is okay rather than losing capital.

Jinesh Gopani, Head – Equity at Axis Mutual Fund, is a Master of Management Studies (MMS) in finance from Mumbai University. He has a total experience of over 16 years in the capital markets. Of these, 10 years have been spent in the area of equity fund management. His previous experience includes Birla Sun Life Mutual Fund and Voyager Capital.


any of the companies, taking concentrated bets, carrying out through in-house research and trying to find out companies that are leaders in the large cap space and leaders or probable leaders in mid and small caps too.

There are the four-five principles that we normally stick to. These are: strong corporate governance/strong promoter pedigree, secular growth rate of the sector, which is anywhere around 1.5x to 2x of GDP; a company with a reasonably strong business model, which demonstrates its pricing power in the product category and the business it is in, and ultimately good ROEs and cash flows. About 80% to 90% of our portfolio is based on this philosophy and have been continuing with it since 2009.

Vijai Mantri: So To Sum It Up, It Is A Classical Long-Term Investing Philosophy. Comment.

Jinesh Gopani: If you take the fact sheet now or that of say 2012 or 2013, you will find that 70% to 80% of stocks are similar.

In an interview with Vijai Mantri of Buckfast Financial Advisory Services Pvt Ltd, Jinesh Gopani, Head Equity at Axis Mutual Fund discusses the mutual fund market in India and opportunities offered by mutual funds in particular. These are the edited excerpts from the conversations they had.

Vijai Mantri: What Is Your Investing Style?

Jinesh Gopani: When we started Axis Mutual Fund in 2009, it may have appeared that we were just another mutual fund company coming in the market. However, through a collective and conscious decision, we decided that we must differentiate our product category as compared to others available in the market.

We went in for real, long-term wealth creation rather than playing the indexing game. It all boils down to wealth creation for our investor.

For example, Axis long-term equity fund that was launched in 2009 with an AUM of `1 crore, today is more than `14,000 crore. It is because we have been consistent with our philosophy of investing since day one We have always looked for a three to five year view in

IJAI MANTRI,CO-PROMOTER &

CHIEF MENTOR,BUCKFAST FINANCIAL

ADVISORY SERVICES PVT LTD

v


Vijai Mantri: I Think Most Investment Managers Follow This Investment Philosophy To A Large Extent. The Question Is That If You Like The Company, Everything Is Fine. But At What Value, And At What Price?

Jinesh Gopani: Frankly, nothing comes cheap. More particularly quality. A calculated judgement is necessary to see how a company pans out over the next five years. Let’s say even if a company is slightly over valued in a one year or a two-year period, are you ready to sit on the company for three to four years, which can really generate returns the way you want?

It is both an art and a science. One cannot pin point whether you will buy at only a PE of 10 or 30. It is the business model which decides the fate of a company’s valuation.

Hence, if the company is incrementally delivering higher ROE or higher cash flows, the business model is going on the next trajectory, then obviously it would get higher valuation and you can justify it because growth rates are very high.

As long as the business is strong, economic moats justify the ROE and cash flows and what they can deliver in three to five years. We are okay buying it a bit expensive. It is important to know what you are buying, what risk you are taking and are able to justify it.

In 2001, when I started my career, a leading bank used to trade at four times the price to book value and is still trading at its price to book value. At that point, I had seen many reports, which suggested that the stock is very expensive.

But it has had consistent delivery, consistent 20% ROE. The corporate governance and management’s ability to scale greater heights and new trajectories is what is helping the company to stay at that level.

Vijai Mantri: When You Look Back At Your Journey In Axis, What Have Been Your Success Stories?

Jinesh Gopani: At the outset, I want to talk about the mistakes or lessons that we learned. Two very distinct


mistakes come to my mind as we speak. The first was EPC companies, which saw a lot of IPOs coming in during 2009-10.

We thought one or two of these would be strong, secular plays. But history taught us the hard way that markets can be ruthless. We did not end up losing a lot of money, but we did not make big money either. So we learnt that EPC as a sector is always a one or a two year story. It is an order inflow story, not a secular one. Therefore, it does not fit into our investment universe.

The second mistake was that we were highly bullish on pharma companies and did not anticipate the problems that arose from the US FDA. We did not expect the problem to be so big for large-cap pharma companies. This is where we made a mistake as exposure levels were high. Though we trimmed it down, it was a good learning experience. We learnt that we should be cautious about sectors with high regulatory hurdles.

Success stories are many. One of the successful sector stories that we played came in from the NBFC sector. We have invested in a particular company from this sector since the last five years going by the way they have executed their model over the last 10 years.

The company is now envied by many good private sector banks and it is still going strong with its 30% to 35% growth rate. The most important part is that the management understands the risks of the business very well and pull back at any sign of worry.

We bought it when the market cap was around `6,000 crore to `7,000

crore, and now it is `73,000 crore. Again, the simple thing is impeccable team and execution track record. We did not have to look back at any point and say we made a mistake of investing in it.

Further, innovations in technology, artificial intelligence (AI), analytics are where they are able to perform better than other NBFCs, which has been a big success. Another company is from the two-wheeler sector. Again, it is a simple story - leadership position, good execution, and a strong brand name, which helps the company to continue growing at 30% to 35%. We also picked a small cap cooler company, which we identified at `700 crore market cap. It was a BIFR company, and was trying to come out and become big in the sector. We got great reviews of its management. Now, the market cap of that company is `10,000 crore. We are still one of the big investors in that company.

These are a few of the stories that have made good money for us. Vijai Mantri: Nifty Has Touched New Levels. A Lot Of People Are Terming It Over-Valued From The Absolute Level And PE Multiples. What Is Your Take On This?

Jinesh Gopani: Liquidity is driving the markets, both in the global arena and domestic, but especially domestic, which has been strong after demonetization. Domestic flows are strong with around `5,000 crore of SIP book for mutual funds, which is not heard of quite often.

Therefore, when you have so much money per month to invest only in 300 good stories, it will be like the

chicken and egg story wherein we debate what comes first – valuation or the timing of your investment. So frankly, it is a liquidity-driven market.

You can justify any valuation as the money is very strong. If you take index constituents, let’s say take BSE 200 or whatever the shareholding is, 50% is held by promoters and 20% - 25% is owned by institutions. Hence, the free float for new money to come in is very less.

In such a situation, the new money chases (the market). As long as the company is delivering, one is okay paying. But if the company does not deliver, then there could be a bloodbath (on the bourses). So, can there be a 5% to 7% correction? Yes, very easily.

In May, we saw the mid-cap index correcting a bit. So, volatility is high. It is a liquidity-driven market and few IPOs are listing at exuberant valuations. This is not a good sign. It is not that we are negative. But this is the reality.

The hope is that earnings should catch up after GST’s implications. So many companies are trading at higher valuations. The hope is that there is a big unorganized to organized trade from a domestic market point of view and brands that are strong and with a more formal structure can grow disproportionately in FY19, which will justify this higher valuation. In case this does not happen, then there is a risk you are running in the market.

The biggest risk we (India as an economy) are running now is that investment is lagging and job growth is not taking place. These are signs of worry.



The government is trying its level best by offering affordable housing and more infra projects. But there is no job growth. Although there is no decline, there is no growth either. This is not a good sign for an economy that wants to grow at 7% to 8% GDP. I hope in the next one-and-a-half years, this gets corrected because the next term of the government that comes into power should be big years of growth. Only then can we justify this valuation. So, one should remain cautiously optimistic and generally bear in mind that it is a liquidity-driven market.

Vijai Mantri: This Liquidity Is Domestic Liquidity And Does Not Look Like It Is Going To Go Out In A Hurry. What Do You Have To Say?

Jinesh Gopani: For the first time

we are seeing counter balancing flows. Normally, when FIIs exit, markets correct big time. This is the first time that money from mutual funds, insurance or EPFOs are holding on to the markets. It is a problem of plenty. But it is a good problem to have. However, fund managers have to be careful about where they invest.

Vijai Mantri: Which Sectors Are You Bullish On Currently?

Jinesh Gopani: If you consider our normal sector weightages, then we are bullish on private banks, specifically NBFCs, automobile, auto ancillaries and consumption driver sectors. We are underweight on IT and pharma.

Vijai Mantri: The Trend Emerging In The Market Is That Pharma Is Undervalued And Has Corrected. And So Has IT. Please comment.

Jinesh Gopani: We are increasing weightages but not going overboard because we really feel that there is a problem in the IT sector as growth rates are down and will take some more time as the whole transient phase of technology changes and we will have to live with it before companies start growing at 10% at least. At the moment, they are growing at 7% to 8%, and that too is questionable.

Owing to a more macro-economic slowdown in the US, not from the GDP perspective, but more from recurring businesses, pricing pressure is very high. And new technologies are being developed by Google, Amazon. Big companies are working on artificial intelligence and block chains instead of us developing and participating in them. This will be a transient phase and by that time a few companies will come back.

Pharma is very stock specific right now. And this is our view as every company has a different set of problems to live with. So we have to be very careful as there are a lot of event risks. A similar problem in the US pertains to generic pricing, which is coming down very fast. The world is becoming socialist with significant regulatory pressures and protectionism, which will not allow few of these sectors to grow without any issues.

Vijai Mantri: Which Other Sectors Are You Not Positive About Currently?

Jinesh Gopani: As mentioned earlier, we are underweight on IT and pharma. I personally do not understand commodities. So rather than playing a dart game, I avoid buying those volatile stocks. So, commodities, oil and gas to some extent, and telecom are a few sectors that I’ve refrained from buying into due to regulatory pressures. We don’t know what is happening and what will come next in these sectors.

On the commodities side, it is more the world that decides commodities’ price rather than any particular company. We have also stayed away from the big infra theme as it has very few good companies to invest in.


Vijai Mantri: A Lot Of People Feel PSU Banks May Be A Great Opportunity To Invest In. Do You Feel The Same?

Jinesh Gopani: I’ve refrained from buying PSU banks in long-term equity funds from day one. I have nothing against them. But generally speaking, if you see how the asset quality has been, I feel it is a long way for them to come out of this mess. Though people know the problem, the resolution of the same will take some time. Another aspect pertains to mergers and acquisitions coming in.

So, it is better to play private banks rather than PSU banks just because they are available at historically lower valuations. If I have no options, I would buy PSU banks. But if I had an option, I

would pick private sector banks that are growing at 20% to 30% and have good promoters and understand asset quality better than others.

Vijai Mantri: If Someone Wants To Invest In The Equity Markets, How Should One Participate? Should It Be Through SIPs Or Lumpsum Investments Given That We Have Figured Out His Risk Appetite And The Volatility He Is Comfortable Taking? What Would You Advice?

Jinesh Gopani: If he is a first-time investor, 30% to 40% should be through lumpsum followed by staggered investments for the next 12 months. If he is already an investor, then SIP is a better route because you want to navigate this phase considering that we are coming close to the election year, i.e. 2019. You never know how tables turn. So it is always good to be careful. Losing 5% returns is okay rather than losing capital. World is volatile and we need to be alert and watchful.

Vijai Mantri: What Is Your Assessment Over The Next

Five-Year Period? What Kind Of Investment Returns Can Be Generated From Equities?

Jinesh Gopani: Expecting over and above nominal GDP growth should be good enough in this inflation world especially where the cost of capital is continuously coming down.

Vijai Mantri: Do You Have Any View For Gold, Real Estate, Fixed Income Market?

Jinesh Gopani: Frankly, I have no view on them. But generally speaking, if you take the views of realty experts, you will see that real estate as an investment option is not that great as of now. But it might improve in the next three to four years down the line. Genuine demand for affordable housing will prop up real estate markets. The government is doing the right things to cool down the hype in the real estate market. For gold, frankly I have no view. But it will always remain a small asset-buying option because that is how Indians have traditionally wanted it. So, where would you invest? That is why we are seeing a lot of flows into equities.

Vijai Mantri: How Did You Start Your Career?

Jinesh Gopani: After completing my Masters in Management Studies (MMS), I joined Emkay Stock Broking, which was a good place to learn. I was there for almost five years. After that I joined Voyager India Capital, which is an FII outfit. I was there for nearly three years. Later, I joined Birla Mutual Fund for a brief period. In 2009, I joined Axis Mutual Fund and started managing Axis Long Term Equity Fund from April 2011.

Given the restructuring activities

taken by the beverages company

as well as improving business

prospects, TGBL is likely to do well

in the near future

ata Global Beverages Ltd (TGBL) is the world’s second largest branded tea company with growing interest in coffee and water. It has a global footprint and is present in 40 countries.

It posted muted topline growth in Q1 FY18 with a 2% drop. But adjusting for adverse forex movement, there was an underlying growth of 1%. Despite muted topline, TGBL posted healthy profits owing to efficient cost management and softer raw material prices.

T

Back InThe Race

Geographical Brand Portfolio

Source: Company Data, Nirmal Bang Research

TEATetleyJemcaVitax

Tata TeaTeapigsLaager

WATERTata

Gluco+Tata Water

PlusHimalayan

COFFEETata Co�ee

Grand

South Asia46%

Europe,Middle Eastand Africa

(EMEA) 28%

Canada,Australia and

America (CAA) 25%

Non-Branded12%

Branded88%

Tata Global Beverages Ltd

Others1%

TEATata TeaTetley

COFFEEGrandCo�ee

TEATetley

TeapigsTata teaGood Earth

COFFEEMAP

(Australia)Eight

o’Clock



INVESTMENT RATIONALE

Standalone/India

The standalone business contributes 45% of consolidated revenues. TGBL is a well-known brand in India and is present in tea, coffee (through Tata Coffee) and water (through Nourishco – 50:50 JV with Pepsico). Tata Tea is rated as the second most trusted hot beverage brand in India and accorded ‘Super Brand’ status. The company had exited the plantation business in 2005.

Since the last 2 to 3 years tea prices in India have been subdued, which is beneficial for a marketing company like Tata Global. Hence, the standalone business is growing both in value and volume.

Though a majority of Indians consume black tea, and has been growing in single digits, the trend of non-black segments like green tea and herbal tea is increasing rapidly and growing in double digits.

In an attempt to keep pace with the changing environment where a large number of consumers are going in for healthier options in the tea segment, the company has launched a number of alternatives and is enjoying robust growth in non-black tea category, although on a smaller scale.

Tata Coffee

Over the last 2 to 3 years, coffee bean prices have been on an upswing due to poor monsoon in India and volatile weather conditions in Africa – two major coffee-producing countries.

Q1 FY18 standalone results were low as operations in certain coffee plantations were lacklustre owing to fewer crops and seasonality in sales.

The company is also setting up a state-of-the-art greenfield freeze-dried coffee plant in Vietnam at a capex of `350 crore to further its growth agenda in the premium instant coffee segment and strengthen its global footprint.

Eight O’Clock: Eight O’Clock, America’s Original Gourmet Coffee, has a legacy of 150 years. It is the fifth largest coffee brand in the US in terms of volume. Tata Global bought it in 2006. Due to intense competition in the US market, the company has not been able to grow as planned. However, it reported improved performance, aided by enhancements in sales of ground coffee, subsequently pushing operating profits.

Eight O’Clock only uses Arabica beans, which have been volatile in recent past. The company showed improved profitability in FY17 due to lower input costs, i.e. prices of green coffee beans.

However, prices of green beans started moving up early in Q1FY18, cooling off again in the last week of the quarter. This impacted Q1 FY18 profitability due to high inventory pile up. Going forward, the benefit of the fall in prices will start reflecting in the performance of the company, leading to improvement in profitability.

7089465

` in crore

FY16 FY17

843189

60

1,551283125

779146139

Standalone

827245

70

EightO’Clock

1,606391210

ConsolidatedStandalone EightO’Clock Consolidated

SalesEBITDAPAT

Tata Coffee Financial Break-up


Overall, the outlook on coffee is positive and can be attributed to growth in instant coffee, which is driving consumption in India.


Restructuring

The company recently decided to rationalize its businesses to cut losses and to become more profitable. Hence, the company divested its stake in loss-making instant tea business in China (89.75% stake) joint venture and is under the process of selling 58% stake of its business in Russia (100% stake) due to underperformances of these divisions as compared to plans.

The company’s Russian and Chinese subsidiaries reported a loss of `32.2 crore and `20.44 crore, respectively in FY17. This would result in increase in consolidated net profit by ~`37 crore. Some restructuring initiatives are underway in the Eastern Europe business as well.

Particulars StarbucksJubiliant

Foods Ltd Westlife CCD

FY1791

2682.9

1,1802,546

2.22.9

2589313.63.8

1,6821,423

0.853.9

Number Of StoresRevenues (` in crore)Revenue/Store (` in crore)EV/Sales

Peer Comparison


As the company is restructuring its international businesses, the performance of the segment is improving. This should improve further post divestment of state in Chinese and Russian subsidiaries.

JOINT VENTURES

India

Starbucks: Starbucks is a 50:50 JV with Starbucks Global and was started in 2012 in India. The JV currently has 95 stores. It’s been positioned as a premium offering in line with global brand reputation. The company performed well last year and is continuing its momentum. It’s been growing in double digits and has already begun generating cash. The JV is likely to be P/L positive soon. Due to lack of information, we are comparing it with other store operators on the basis of sales per store. Tata Starbucks Private Ltd India reported an increase in its revenues attributable to improved in-store performance, cost and productivity initiatives.

expansion. Himalayan, the premium water brand, grew in double digits owing to growth in traditional trade, e-commerce and key accounts. The JV reported higher volumes driven sales and lower operating losses in FY17 and showed a double digit growth in Q1FY18. The JV is close to break-even. Overall, both the joint ventures are expected to be profitable in the near future.

United Kingdom

The UK market is majorly a black tea market. However, the segment is saturated and, hence, got stagnated. In spite of

Being a premium player, the company should get a higher multiple as compared to its listed peers.

Nourishco: Tata Global has a 50:50 JV with PepsiCo for branded water and has brands like Himalayan, Tata Water Plus and Tata Gluco Plus. Tata Gluco Plus grew significantly, aided by distribution

Tata Global Beverages Break-up


3040472358289

` in crore Stand-alone

FY15 FY16 FY17

1693341114120

TataCoffee

3261-39-94

-162

7993775378248

Interna-tional

Consol-idated

2987359290226

Stand-alone

1551283

8983

TataCoffee

209912

-83-346

6637654296-37

Interna-tional

Consol-idated

3064363276276

Stand-alone

1606391153151

TataCoffee

2110382028

6780791450455

Interna-tional

Consol-idated

SalesEBITDAPAT Excl EOPAT Post EO


this, Tata Global has been able to grow and outperform the market. Moreover, other segments like green tea are growing in double digits and Tata Global has been able to ride the growth wave there too.

Others

Tata Global has made significant investments in other countries also like Middle East, USA, etc, which are not yet providing full benefit to the company.

VALUATION AND RECOMMENDATION

The stock has underperformed the broader markets for long. However, the management is bringing back focus into portfolio of the business. Hence, given the restructuring activities taken up by the company and improving business prospects, the stock is likely to catch up the valuation gap with other consumer players.

Being a branded player (87% of revenues comes from brands), the company should get premium valuations. However, its ROE is much lower than its peers (7.5% versus 28.4% of Dabur and 43% of Britannia in FY17) due to its legacy business.

TGBL acquired Tetley brand in 2000 for $450 million when its own size was merely $114 million. Hence in the process, it created a huge goodwill in the books, which is dragging returns ratios down.

At the current market price (CMP) of `198, Tata Global Beverages Ltd is trading at 23.2x FY19E as compared to 33.7x Dabur and 41.5x BritanniA.

The mutual fund industry in India is growing on the back of regular inflows from SIPs and rising awareness among investors

ON THE THRESHOLDOF HOPE



stocks benefit from both price appreciation and dividends being paid out by stocks. Comparing the fund performance to the TRI is an impartial and transparent mechanism for capturing the true returns generated through active management.

While this will reduce the perceived alpha being generated, it will give investors a better comparison and a clear picture of how their investments are performing.

In the current market, where recent outperformance of equity fund schemes is adding to record inflows from retail investors, this is likely to alter in performance measurement, which is more relevant from investors’ perspective.

CORPORATE GOVERNANCE FOR FUND HOUSES

In the past one year two large conglomerates had a showdown in public, impacting not only the stock prices of the two companies but also mutual fund houses that were holding those stocks. Even SEBI has said that greater governance norms are needed for investors to maintain their trust in the growing mutual fund industry.

The urge for broader corporate governance is also because the Indian asset management industry has now reached the 20 lakh crore mark and is all set to continue its growth with rapid speed. But with unclear corporate governance, the growth might see some negative impact on Indian fund houses.

However, in the last few years, corporate governance of fund houses has improved significantly.

Recently, when a top official of a large IT company resigned, the stock of that company saw a major correction and there was some crisis

n the past few years, market regulator Securities and Exchange Board of India (SEBI) has announced a series

of new regulations. These norms include ban on entry load, changes in instant redemptions in liquid funds, permitting investors to buy mutual funds via digital wallets, thus making mutual funds more investor-friendly.

These steps have not only improved penetration of mutual funds across the country, but also ensured that there is transparency and accountability of asset managers in India.

Changing regulations is an ongoing process. The market regulator is planning to roll out a slew of reforms measures over the next few months. Some of them are changes in corporate governance, merger of schemes, bringing in the total index returns (TRI) for benchmark. These are hoped to bring in clarity to investors while investing in MFs.

Changes in Investment Advisers (IA) Regulations, 2013 are also on the anvil. SEBI has proposed a host of changes in regulations to bring in transparency in the working of investment advisors and prevent conflict of interest in advising and selling investment products. This might also stop mis-selling of investment products to investors.

Since May ’14, when the present NDA government came into power, mutual funds have seen sharp inflow of funds, especially in equity funds. The spurt in demand for mutual funds, especially from investors in Tier-I and Tier-II areas, is due to rise in equity markets as well as efforts of industry and regulators alike.

This article attempts to throw light on the new regulations that are likely to come in and the impact they will have on the mutual fund industry as well as

I on the retail investors.

WILL TOTAL RETURNS INDEX (TRI) GIVE A TRUE PICTURE OF RETURNS?

Even now a majority of the Asset Management Companies (AMCs) in India are benchmarking their performances with various indices as per the SEBI regulations.

Benchmarking schemes against the index helps investors to compare the performance vis-à-vis its respective index. It also indicates how much alpha the scheme has generated along with the performance of the mutual fund manager.

But now more and more players are adopting the Total Return Index (TRI) that will be benchmarking all their actively managed equity schemes.

Currently, only Quantum AMC does TRI benchmarking, while DSP BlackRock Investment Managers and Edelweiss AMC have announced that they will be benchmarking all their actively-managed equity schemes with TRI.

TRI is basically an index, which captures both the movement in the stock price of the underlying companies as well as the dividend paid by the companies to the investors. This ensures that it reflects true returns accruing to investors over a particular period while a simple price index will only reflect the price changes of the index and the capital gains arising out of it.

Comparing with a price index will give a sense of generating higher alpha, which may not give a true picture to investors. This will ensure that TRI returns are a little higher than pure index returns.

Equity mutual funds that invest in


owing to his exit. But all fund houses put up a united front. They even sent a letter to the board suggesting a person to head that company.

Earlier in 2015 too when there was a big shuffle in a major Indian corporate house, the mutual fund industry in the country demonstrated similar strength. Participation of fund houses in voting against or for a resolution in any company also showed remarkable improvement.

Fund houses have even put a corporate governance guideline on their websites for investors to have a clearer picture.

Traditionally, in India, private sector financial investors have always believed in passive corporate governance behaviour. This meant that if they were uncomfortable with something in a company, they simply sold the shares of those companies, rather than voicing their concerns.

One reason is that individually, mutual funds and even insurance companies never have a substantial stake to oppose those who are controlling a company.

But this started changing after 2010 when SEBI asked them to formulate guidelines on exercising their voting rights as shareholders. Later, it was made compulsory for AMCs to reveal their voting record publicly.

MERGER OF SCHEMES AND INVESTOR AWARENESS FOR DEEPER PENETRATION

In the past few years, especially after 2014, mutual funds have continued to witness sharp inflows and a rise in the number of Systematic Investment Plans (SIPs). Between April ’16 and August ’17, equity funds have seen net inflows of over `1.33 lakh crore. Similarly, the contribution of SIPs has

been more than `67,000 crore.

Such sharp flows have been possible due to the positive performance of equity markets, strong returns from equity funds and efforts put in by the mutual fund industry and regulators in tapping the rural populace of India.

SEBI seems to be impressed with investor awareness campaigns undertaken by mutual fund houses and the Association of Mutual Funds in India (AMFI).

Further, to improve awareness about mutual funds as a distinct asset class, SEBI had earlier mandated mutual funds to set aside a small portion of their net assets i.e., 2 bps, for investor education. Of this, half the amount is now being pooled with AMFI for better utilization of funds at the industry level.

Using these funds, AMFI had launched a new media campaign with the aim to increase the number of mutual fund investors multi-fold. AMFI and Asset Management Companies have jointly spent `300 crore to create investor awareness and financial literacy.

The past few months have seen huge participation from semi-urban and rural areas, largely due to investment awareness programmes and positive returns in equity markets.

The campaign is being launched with the message “Mutual Funds Sahi Hai” through different media such as TV, digital, radio, print, cinema and outdoor hoardings using simple but very clear messaging advertisements in different languages. This move will attract more and more investors into the mutual funds.

In the past, SEBI has been frequently asking fund houses to reduce the number of schemes so that it gives a

clear picture to investors. Currently, there are over 2,000 schemes in the domestic mutual fund industry. Of these, around 300 are in the equity space and the remaining are in debt and other categories.

However, fund houses are waiting for a clear picture from the regulator because if they give direction for the merger of schemes, then big fund houses are likely to hit them badly.

For example, if one scheme having a corpus of `500 crore merges with another with the same amount of corpus, then a graded expense ratio calculation sets in, which will impact the income of such fund houses. According to regulations, higher the corpus, lesser is the expense ratio of the scheme.

Many participants also believe that it will be difficult for fund managers to manage such a large corpus. However, from the investors’ perspective, this move will ensure that they invest only in clearly-defined schemes and not the fads of the bull market.

IN A NUTSHELL

The Indian mutual fund industry manifests huge opportunity for growth and further penetration. This will be possible with technological support and increased awareness about the product. The key lies in strengthening distribution networks and enhancing levels of investor education to increase presence in rural areas.

Fund houses along with regulators have covered a significant distance. But more needs to be done, going forward. Lastly, it may perhaps be useful if the mutual fund industry continues with strong corporate governance and best practices to move to the next level of growtH.

THE MONEY MULTIPLIERInvestors can grow their money astoundingly if they

follow compounding interestow many of us invest in fixed deposits or for that matter invest in any other financial instrument and opt for the interest payout option or dividend payout option without

giving compounding a serious thought, although the periodic inflow of money is not required?

It is essentially for the feel good factor of having returns come into the bank account. We don’t realize that we are sacrificing gains that compounding can bring for us.

WHAT IS COMPOUNDING?

Simply put, compounding or compound interest is defined as interest calculated on the initial principal and also on the accumulated interest of previous periods.

It is making your money work for you by earning interest (returns) on interest accumulated or dividend earned. The cumulative effect of compounding cannot be ignored as

H the exhibit below will illustrate.

Take for example the case of Ms Rupa. She has invested `50,000 in a bank fixed deposit for a period of 5 years at 8% p.a. compounded annually. Had she opted for the interest payout option, she would have received `4,000 every year as an interest payout.

But on account of the compounding effect, the accumulated interest was earning her interest (interest on interest) ballooning her payout by `373 at the end of the fifth year. In the second year, she was earning an interest on `54,000 which was `320 and in the third year on `58,320.

Year Invested Sum Accumulated Interest Interest On Interest50,00054,00058,32062,98668,024

-4,0004,3204,6665,039

--

320346373

12345

Exhibit 1



has a higher corpus at the end of 58 years - more by `1,82,926. He saved for just 10 years while Shyam saved for 24 years. This is how important time is when it comes to investing.

The 10 extra years that Rohit gets for his investment to compound has worked its magic and the benefit of the snowballing effect far outweighs all those years of extra contribution by Shyam. The effect is so drastic that Shyam can’t catch up, even if he saves for additional 14 years. What happens if Shyam were to increase his annual investment by 25% from `10,000 to `12,500 and Rohit still continues with `10,000? Even then, Shyam is unable to catch up with Rohit and he ends up with a payout of `8,34,559 which is lower by `16,014.

WHAT WILL MAKE YOU WEALTHIER?

In the above illustration, it seems unbelievable how large Ram’s corpus has become in comparison to the quantum he has invested. On an investment of `3,30,000 over a tenure of 33 years, his corpus at the age of 58 is whopping `14,59,506!

It’s much higher than both Shyam’s and Rohit’s investments. Twin parameters are at play for him and they are working wonders - steady annual investment, coupled with starting time as he started early. Note, it’s not the quantum but discipline.

IN A NUTSHELL

While compound interest works wonders for you when you want to make your money grow, the same principle can bleed you when it comes to loans or delay in payment of credit card bills. Imagine how much you will bleed should you delay your payment on credit cards!

Not only do they follow the principle of compounding, the rate of interest is also very high. An understanding of how compounding works, will not only make you more disciplined while investing but will also keep you on your toes when it comes to timely loan repayments. The key points to make compounding work for you:

time you allow compound interest to work its magic.

savings, the wealthier you will be. Compounding can help your wealth grow exponentially.It doesn’t take too much. Make sure you have a healthy corpus to take care of your retirement needS.

TIME TAKEN TO DOUBLE YOUR MONEY

Without the impact of compound interest, at 10% p.a., simple calculation will tell you that it will take you 10 years to double your money. But bring compounding into play and that changes to 7.2 years, 2.8 years lesser. It surely makes sense to go in for compounding if you do not require regular inflow of the interest income.

CHOOSE BETWEEN ANNUAL, QUARTERLY, MONTHLY OR DAILY COMPOUNDING

The greater the periodicity of compounding, the higher the returns because of the snowballing effect. The table below illustrates, the payout at the end of five years if `10,000 was invested for a period at different rates of interest. Daily compounding provides us with the highest corpus at the end of five years followed by monthly compounding, quarterly compounding and lastly annual compounding.

Interest Rate Annual Quarterly Monthly Daily4%6%

12%

12,16713,38217,623

12,20213,46918,061

12,21013,48918,167

12,21413,49818,219

Exhibit 2

Individual CommitmentOf `10,000Per Year

InvestmentPeriod(Years)

InvestedAmount

CorpusAt 58Years

Type ofInvestor

RohitShyam

Ram

25 Years - 35 Years

35 Years - 58 Years

25 Years - 58 Years

10

24

33

1,00,000

2,40,000

3,30,000

8,50,573

6,67,648

14,59,506

Early Investor

Later Bloomer

Disciplined Investor

Exhibit 3

IS THERE AN APPROPRIATE TIME TO START?

The golden rule to investing is to start early. The quantum is not the key differentiator as much as time is. By starting early, you will end up being wealthier than somebody who has started investing higher amounts much later. Let’s take an example to understand it. We have assumed interest to be 8% throughout the tenure and the invested amount per year to be `10,000 across different tenures.

1. Rohit is an early investor. He starts early but invests `10,000 every year for only 10 years which makes his investment sum `1,00,0002. Shyam is a late bloomer. He starts ten years later than Ram. Shyam is investing `10,000 every year for 24 years, taking his investment sum to `2,40,000.3. Ram on the other hand is a very disciplined investor. At the young age of 25, he diligently starts investing `10,000 every year till he reaches 58 and is due for retirement. He has made a total investment of `3,30,000

Shyam has invested 2.4 times as much as Rohit. Yet, Rohit

Recently, the government said in a notification that all peer-to-peer lending (P2P) platforms, a form of crowd funding, will fall under the ambit of non-banking financial companies (NBFCs) and they will be regulated by the Reserve Bank of India (RBI). The RBI will soon come out with a detailed regulation for the same.

What Is Crowd Funding?

Crowd funding mainly refers to a method of funding a project or venture through small amounts of money raised from a large number of people, typically through a web-portal acting as an intermediary. Crowd funding can be for charitable or for for-profit reasons. Since crowd funding falls within the domain of financial markets, SEBI is the regulator.

What Is P2P Lending?

P2P lending is a form of crowd-funding used to raise loans. P2P can be defined as the use of an online platform that matches lenders with borrowers in order to provide unsecured loans. P2P platforms are limited to providing loans. They fall within the domain of banks; hence the RBI is the regulator.

How Does P2P Lending Work?

There are three players in P2P lending: lender, borrower and the platform provider. If you want to invest money in it, you go to a P2P marketplace and register as a lender.

An agency will maintain the platform and set its terms and conditions. The borrower, which can either be an individual or a legal person requiring a loan, can borrow from the platform at an interest. Lenders and borrowers

IMPORTANT JARGONFOR THE FORTNIGHT

pay a fee to the agency that manages the platform.

So, Why Are We Talking About P2P Lending In India?

P2P lending has become popular globally. Although nascent in India, it is taking root in India. Associated risks to the financial system from P2P lending are too important to be ignored. P2P lending has the potential to “disrupt the financial sector and throw surprises.”

What Is The Status Globally And In India?

According to one data, the cumulative lending through P2P platforms globally, at the end of Q4 of 2015, has reached 4.4 billion Great Britain pounds, 2.2 million GBP in 2012. Till April ’16, there were around 30 start-up P2P lending companies in India.

P2P is partially or fully regulated in countries like Australia, Argentina, Canada (Ontario), New Zealand, the United Kingdom, France, Germany, Italy and USA, while it is banned in Israel and Japan. China has the largest P2P market in the world.

What P2P Lending Means For The Banking Space?

The P2P platforms offer an alternative lending channel. It needs to be acknowledged. It can offer a better deal both for the borrower and the lender.

P2P platforms have the potential to soften the lending rates as a result of lower operational costs and enhanced competition with traditional lending channels. If properly regulated, the P2P lending platforms can be an important player in the lending market.

What Is The Next Step?

Government notification has allowed the RBI to be the

RBI TO REGULATE P2P LENDING



PM LAUNCHES SAUBHAGYA

regulator. The RBI had floated a consultation paper in April ’16. Now, the central bank will soon release the final guidelines for these platforms.

The regulatory framework would cater to the permitted activity, regulations on capital, governance, recovery practices and customer interface, apart from regulatory reporting for P2P platforms.

But Weren’t There Similar Schemes In The Past?

Yes. But the targets remain unachieved. Even if electricity reached villages, individual households didn’t get supply because either the distribution companies feared delinquencies or the households were not able to afford connection charges.

The Saubhagya scheme will offer last mile connectivity and will support existing schemes. All un-electrified households from rural and urban areas will have easy access to electricity.

So What Will Be The Rise In Demand For Power?

According to one government estimate, additional power of about 28,000 MW and additional energy of about 80,000 million units per annum will be required. With the enhancement of income and habit of using electricity, the demand for electricity is bound to vary. This figure will also vary if assumptions change.

What Would Be The Economic Benefit?

Electricity connectivity will have a multiplier effect of increased economic activities and job creation. Access to electricity would mean rise in demand for electrical appliances like TV, mobile, etc.

Access to electricity would also mean new cottage industries. Switch to electricity from kerosene would reduce annual subsidy on kerosene and would also help reduce the import of petroleum products. This will help government finance in the medium term.

What Would Be The Social Benefit?

The switch to electricity would substitute the use of kerosene for lighting purposes resulting in reduction in indoor pollution thereby saving people from health hazards. The scheme will help India meet its global climate change commitments as electricity will substitute kerosene for lighting purposeS.

Prime Minister Narendra Modi recently launched Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or Saubhagya scheme to provide electricity connections to over 4 crore households in rural and urban areas by December ’18.

What Is The Scheme All About?

The objective of the ‘Saubhagya’ scheme is to ensure last mile connectivity (with appliances, electric metres, wires, etc), both in rural and urban places, and make electricity accessible to 4 crore households by 31st Dec ’18. With the success of the scheme all Indian households (around 25 crore) will have access to electricity.

Is It Some Kind Of A Subsidy?

No. Poor households would be provided with electricity connections free of cost, but they will have to pay for the consumption. Non-poor households can, however, pay for their usage in installments.

What Is The Overall Cost Of The Scheme?

The cost of Saubhagya scheme is `16,320 crore, of which the Union government will pay `12,320 crore, the rest will be shared by the state government. Out of `12,320 crore, `10,587.50 crore will be spent in rural areas while `1,732 crore will go to urban India.

The Union government will also offer incentives to state government if they achieve the target by December ’18.

GhostingGhosting is an illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. Ghosting is used by corrupt companies to affect stock prices so they can profit from the price movement. This practice is illegal because market makers are required by law to act in competition with each other. It is known as “ghosting” because, like a spectral image or a ghost, this collusion among market makers is difficult to detect. In developed markets, the consequences of ghosting can be severe.

www.nirmalbang.com

DISCLAIMERIn the preparation of the content of this magazine, Nirmal Bang Securities Private Limited has used information that is publicly available, including information developed in-house. Such information has not been independently verified and we make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgement of Nirmal Bang Securities Private Limited at the date of this publication/ communication and are subject to change at any point without notice. This is not a solicitation or any offer to buy or sell. This publication/ communication is for information purposes only and is not intended to provide professional, investment or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation or needs of individual recipients. For data reference to any third party in this material no such party will assume any liability for the same. Further, all opinion included in this magazine are as of date and are subject to change without any notice. All recipients of this magazine should seek appropriate professional advice and carefully read the offer document and before dealing and/ or transacting in any of the products referred to in this material make their own investigation. Nirmal Bang Securities Private Limited, its directors, officers, employees and other personnel shall not be liable for any loss (financial or otherwise), damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary and consequential, as also any loss of profit in any way arising from the use of this material in any manner whatsoever. The recipient alone shall be fully responsible/ are liable for any decision taken on the basis of this material. This magazine is prepared for private circulation only. Nirmal Bang Securities Private Limited, its affiliates and their employees may from time to time hold positions in securities referred to herein. Nirmal Bang Securities Private Limited or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.

RNI Reg. No. MAHENG/2009/28962

Nirmal Bang Securities Pvt. Ltd.

�ere is no shortcut to reach your �nancial goals. But there is always a proper path. We help simplify the path for you through in-depth research backed by

decades of valuable experience in the industry.

Disclaimer: Insurance is a subject matter of solicitation. Mutual fund investments, investments in commodities and securities are subject to market risks. Please read the scheme-related document carefully before investing. Please read the Dos and Don’ts prescribed by Commodity Exchange for trading. The PMS service is not o�ered for commodities segment. * Through Nirmal Bang Commodities Pvt. Ltd. # Distributors

You never know how tables turn. So it is always good to be ......two-wheelers, tractors, automobiles...

Documents

Transcript of You never know how tables turn. So it is always good to be ......two-wheelers, tractors, automobiles...