bm issue 155 - nirmal bang issue 155.pdf · o˜ ganpatrao kadam marg, lower parel (w), mumbai - 400...

3

DB Corner – Page 4

Eyeing The ElectionAll eyes are set on the upcoming national election as its outcome alone would determine whether or not the new government would be able to bring about political and economic stability – Page 6Stricter NormsThe National Housing bank has proposed stronger regulations for Housing Finance Companies in India – Page 9Taming The BullReliance has the might to take on major online retailers, but only time will tell if it will be able to give them a run for their money – Page 12Appetite For GrowthThe food ordering and delivery services market is on a de�nitive growth path. But the challenge before companies is to retain customers and succeed in a competitive world – Page 16Cementing GrowthThe tide seems to be �nally turning for cement demand in India – Page 19Above & BeyondThere is an immediate need for new airports in the country to lighten tra�c burden from major airports – Page 22Bleak FutureIndia’s jobless rate is on the rise as economic growth stalls – Page 25Music To The EarsDespite challenges, India’s music industry has a bright future – Page 28Peaceful Co-existenceOnline and o�ine retailers seem to have decided to bury the hatchet following the new e-commerce policy – 1

For A Life Of Financial DignityHaving a retirement plan in place will enable you to lead a comfortable life even in your sunset years – Page 34An Attractive OpportunityIn a high interest rate environment, FMPs are a better alternative over traditional investment options – Page 37

Mutual Fund Recommendations – Page 40Technical Outlook – Page 45

Out Of The OrdinaryDevoting some time to things that go against the grain could improve creativity – Page 46

Important Jargon – Page 49

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

REGISTERED OFFICE B-2, 301/302, Marathon Innova,O� Ganpatrao Kadam Marg,Lower Parel (W), Mumbai - 400 013Tel: 022 - 6273 8000/8001

Web: www.nirmalbang.com [email protected] No: 022 - 6273 8047

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

Volume 11 Issue: 03, 16th - 31st Mar ’19

BEYOND THINKING

BEYOND BASICS

BEYOND NUMBERS

BEYOND LEARNING

BEYOND BUZZ

CONTENTS

Beyond Market 16th - 31st Mar ’19 It’s simpli�ed...

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.

The European Central Bank (ECB) announced that it would not raise interest rates until the end of 2019 amidst concerns over growth in the region. It also said it would launch another round of targeted longer-term refinancing operations (TLTRO-III) as loans to banks. Weak European data too added to the woes of the eurozone.

The Federal Open Market Committee (FOMC) of the US Federal Reserve at its recent meeting left interest rates unchanged owing to slowdown in economic growth.

The Indian currency appreciated. The Indian stock markets moved up on the back of higher foreign institutional investors (FIIs) inflows into the country, aided by growing expectations of a stable government.

The Indian stock markets look good around the 11,480 level on Nifty Futures. It has support around the 11,420 level. Also, the markets are likely to be more positive if they cross the 11,615 level.

Investors and traders alike are urged to keep a close watch on the outcome of the first bi-monthly Monetary Policy Statement for 2019-20 along with economic parameters likes Purchasing Managers’ Index (PMI) data, auto sales figures, etc as these are likely to determine the course of the markets in the coming dayS.

The markets arelikely to be morepositive if they

cross the 11,615 level.

Sensex: 38,233.41Nifty: 11,483.25

(As on 26th Mar ’19)

Beyond Market 16th - 31st Mar ’19 It’s simpli�ed...5

DB CORNER


$298.5 billion, which is a marked improvement over last year’s (2018) export figure of US $274.21 billion in the same period.

There is a strong likelihood of India’s exports this financial year crossing the US $314 billion figure achieved in the last year of the Congress-led United Progressive Alliance (UPA) government.

What gives hope of a very heartening performance on the export front is the 8.8% growth already achieved this fiscal as compared to the last fiscal. In February this year, exports were up 2.44% at US $26.7 billion as compared to the same period last year.

Another important point that deserves highlighting is that imports were less by 5.4% and trade deficit is down to a 17-month low of US $9.6 billion. Trade deficit in January and February of last year stood at US $14.73 billion and US $12.3 billion, respectively.

An interesting sidelight on the topic is that the Engineering Export Promotion Council (EEPC) has come up with a road map for the country’s engineering exports to touch the US $200 billion-mark in the next six-year period (2025).

Engineering exports are projected at US $80 billion to US $82 billion this fiscal. Here, it must be pointed out that this segment forms an important constituent of the country’s overall exports, contributing close to a 25% share of the entire export basket.

With the growth rate anaemic, it is expected that India’s apex bank, the Reserve Bank of India (RBI) will aim to give a fillip to growth by cutting its rates.

Now, with inflation well under

definitely has come at the worst possible time for the BJP-led National Democratic Alliance (NDA) government at the Centre, which has to face the electorate in the next few weeks.

In Q3 FY19, the agriculture sector expanded by a low 2.7% as against a reasonably healthy 4.6% in the same quarter of the previous fiscal (FY18). The same trend was witnessed in the mining sector, which witnessed a slide in growth to 1.3% in Q3 FY19 as against 4.5% in the same quarter of the previous year.

There was a significant decline in the manufacturing sector as well; this important sector grew at only 6.7% in Q3 of this fiscal as compared to 8.6% of the October-December quarter of the previous fiscal.

The slowdown this fiscal to the estimated 7% growth rate can be mainly attributed to the lowering of the growth estimate of the agricultural sector from the earlier higher estimate of 3.8% to 2.7%. The manufacturing sector too is likely to witness a decline - it is estimated to expand at a marginally lower rate of 8.1% as against the earlier estimate of 8.3%.

An important point that needs to be strongly emphasised here is that if the country’s GDP growth is to touch the 7%-mark this fiscal, then much will depend upon the economic performance in the fourth quarter. Growth in Q4 this fiscal should be in the range of 6.5% if India has to attain a 7% growth rate.

A piece of good news here is that India’s exports so far this fiscal has been good. There is a strong possibility of India achieving a record export figure this fiscal. India’s exports in the April to February ’19 period stood at US

strong, powerful and robust country and political stability and economic stability must be married seamlessly for rapid progress on all fronts.

There is an almost unanimous agreement that India has the capability to achieve an 8% GDP growth but this has not happened in the last few years. Indeed, it has seemed a distant dream so far. This fiscal (FY19), it was felt that India would achieve an around 7.5% growth rate.

However, as things stand presently, this does not appear likely unless there is a miraculous turnaround in the last quarter of this fiscal (Q4 FY19). Instead, India’s economic growth this fiscal could fall to around 7% or even lower. If it were to fall below the 7%-mark, it will indeed be a big disappointment.

The government has estimated that this fiscal’s economic growth would be at 7%, lower than the earlier estimated growth rate of 7.2%.

In the October to December quarter of this fiscal (Q3 FY19), the country’s GDP growth declined to 6.6%. A point that needs to be highlighted here is that this is the third consecutive quarter of decline and besides, is also a six-quarter low. The growth rate was 8% and 7% in Q1 and Q2 of this fiscal, respectively.

The growth rates in the first two quarters were healthy; in fact the Q1 growth rate at 8% was very heartening and Q2 was reasonably good at 7%. It is against this backdrop of reasonably good performances in the first two quarters that this decline in growth in Q3 should be assessed.

It could adversely impact full year’s growth, i.e. pull down growth and

Beyond Market 16th - 31st Mar ’19 It’s simplified...8

control and there being no immediate danger of it moving northward, financial sector experts opine that the Reserve Bank will cut its rates in April with a view to boost growth.

However, it should be kept in mind that April does not fall in this fiscal (FY19) but in the next fiscal (FY20). So whatever impact a possible rate cut will have, it will not affect this fiscal as its effect will only be felt in the next fiscal.

Presently, the repo rate stands at 6.25% while the reverse repo rate stands at 6%. Repo rate is the rate at which the central bank of a country lends money to commercial banks within the country. Reverse repo rate is the rate at which the central bank of a country borrows money from commercial banks within the country.

While the economic growth rate could certainly have been better, there cannot be major complaints against the Narendra Modi-led government, at least on the economic front, especially given that there were two blockbuster initiatives launched by this government within a short span of just a few months. In

November ’16, the demonetisation initiative was launched while in June ’17 the Goods and Services Tax (GST) regime was launched.

There were initial hiccups associated with both but things have now smoothened out considerably. The shock after-effects of demonetisation have now disappeared while the GST regime is also beginning to successfully work out as indicated by the rising tax collections over the last few months.

While it is anybody’s guess as to who will win the forthcoming Lok Sabha election, present indications are that Narendra Modi and his party, the Bharatiya Janata Party (BJP) hold the edge at this stage.

During his tenure of the last five years (2014-19), Modi has ensured economic and political stability, which was sorely lacking previously in the period between 2004 and 2014 when the Congress-led UPA government was at the helm of affairs.

Besides, the recent air strike against terrorists in Pakistan has bolstered

his image hugely and this recent spike in his popularity could positively impact the BJP.

The BJP has also stitched up effective alliances all over the country and while the Opposition has made some moves towards putting up a unified front against the BJP, it has not succeeded to the extent needed to defeat the BJP. Indeed, in several places there are multi- cornered contests, which could swing things the BJP way owing to division of votes among the Opposition.

The national general election will be held over seven phases in April and May - on 11th, 18th, 23rd and 29th April and 6th, 12th and 19th May. The result will be declared on 23rd May.

It is hoped that that the voters exercise their choice wisely and elect a government that ensures political and economic stability besides continuity in policies, which is so very essential for attracting investors and creating a conducive environment for rapid development and progress, not only economically but across all other fronts as welL.

It’s Simplified

For free account opening, give us a missed call on 18003157577 | www.nirmalbang.com

powered by

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks. Investment in Securities/Com-modities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment .The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067) : INB260939138, INF260939138, INE260939139: Single Registration No.INZ000202536,PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99. NIRMAL BANG COMMODITIES PVT LTD – MCX (Member ID -16590 /NCDEX Member ID -0362 /ICEX Member ID -1165) : Single Registration No. INZ000043630; NCDEX Spot: 10084; Comtrack Participants: CPID -5040; CDSL Commodity Repository Ltd: 12013300 Nirmal Bang Securities Private Limited CIN:

U99999MH1997PTC110659; Nirmal Bang Commodities Private Limited CIN: U67120MH1995PTC093213Regd. Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010

Regd. Office Address Of NBCPL: Sonawala Building, 1st Floor, 25 Bank Street, Fort, Mumbai -400001. Tel: 62737500


availability of funds, which typically was the weakness of the HFC sector as they are not allowed to take demand deposits from the public like banks do.

Additionally, the sector enjoyed relaxed norms in terms of lower risks weights to real estate and lower capital adequacy norms. This led HFCs to aggressively chase higher margin products like construction finance and loan against property (LAP). Impetus to low-cost housing by the government further acted as a catalyst to the growth in the sector. In fact, seeing the opportunity many commercial banks started their own HFC arms.

However, the growth took place without any cutback in leverage. There was a concentration of large loans among few HFCs.

PROPOSED NORM

Being financial entities, HFCs are exposed to risks arising out of counterparty failures, funding risks and risks pertaining to liquidity and solvency. A need was felt by NHB to review the regulatory framework of HFCs. A few important aspects are as under:

1) NHB proposes to increase minimum capital adequacy ratio

prudent and avoid any systemic risk arising from the HFC sector, warranting stricter norms. Stricter norms will make the sector stronger and help HFCs to absorb risks better.

THE SECTOR

Before we look into the proposed norms, it is important to mention that the sector has evolved over the years, both in terms of size and operations. As on 31st Mar ’17, 83 HFCs were registered with NHB. During the year 2016-17, 11 more licenses were issued to HFCs. These 83 HFCs operate through a network of around 4,300 branches spread across the country.

Around 75% of total outstanding loans by HFCs are retail housing loans. The rest are advances to real estate players for development, among other avenues.

The `10 trillion (total outstanding loans) HFC industry grew at 25% in the last five years. Rising purchasing power, increasing nuclear families and rapid urbanization helped the sector to register strong growth.

One more reason for the sector to perform better is the easy liquidity in the system. Post-demonetization, money was abundantly available in the system. Liquidity ensured

31st March.

HFCs are specialized lending institutions for housing, registered with the National Housing Bank. HFCs have evolved as a major player of the mortgage market in India. They compete for customers with commercial banks, thriving on the gap left by them.

Not only have HFCs played a major role in providing credit to home buyers in the last few years, they have become a good source of credit supply to real estate developers in the last five years.

However, more recently, the HFC sector has hogged the limelight post the bond repayment crisis by Infrastructure Leasing and Financial Services (IL&FS) group companies in September last year. After that event, a trust deficit in the bond market made borrowings for HFCs expensive.

Things have moved towards normalcy now and HFCs with a good pedigree have managed to raise funds from the market at pre-crisis levels. But the HFC sector has become bigger in terms of size and operations over the years. The sector is also deeply interconnected with other entities in the financial sector. The NHB thinks that it is important to be

0%

5%

10%

15%

20%

25%Dec-17 Dec-18

0x

2x

4x

6x

8x

10x

12x

14xDec-17 Dec-18

India’s Top Five HFC’s Capital Adequacy Ratios India’s Top Five HFC’s Leverage Ratios

DHFL HDFC HDFC DHFL


BEYOND WORDSGiffen Goods

Giffen goods has been named after Robert Giffen (1837-1910). In economics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa - violating the basic law of

demand in microeconomics. But such goods may not exist in the real world. A Giffen good is so strongly an inferior good in the minds of consumers (being more in demand at lower incomes) that this contrary income

effect more than offsets the substitution effect, and the net effect of the good’s price rise is to increase demand for it.

(CAR) to 15% by fiscal year (FY) 2022 in a staggered manner, from 12% currently. Generally, in an event when a bank suffers large and unexpected losses, they rely on capital to absorb those losses before their creditors and depositors get affected. Thus, regulators mandate banks to hold a minimum amount of capital against the riskiness of their assets to make banks more resilient to losses.

Analysis: CAR will protect the HFC from any untoward event. This will make the sector more resilient. Even credit ratings agencies have said that the proposed guidelines are credit- positive for the sector, which will make fund-raising cheaper for the sector in the future.

Large HFCs already have higher CAR thereby complying with the proposed guidelines. But some of the smaller HFCs will get impacted. This will slow down their loan growth over the next few years.

But again the staggered approach to raise capital adequacy over the next three years will provide a reasonable time to most HFCs with a lower minimum CAR currently.

2) NHB has also proposed to reduce the borrowing limit for HFCs from 16 times of Net Owned Funds (NOF) currently to 12 times of NOF by FY22. This will happen in a staggered manner. NHB has also proposed to introduce a ceiling on public deposits mobilized by HFC at 3 times of NOF by March ’22. There is no such limit currently.

Analysis: NOF is an accounting term signifying the skin in the game of the owners in the HFC. With this proposal, the HFC can leverage their owned funds lesser than what they can do currently. Lower leverage will lower the risk for the sector.

Typically, HFC borrows from banks, issues non-convertible debentures and commercial papers, and takes public deposits. Limit on public deposit safeguards the public from any exigencies emerging from the HFC sector. Again a staggered approach to meet these regulatory guidelines will provide a reasonable time to most HFCs to meet the guidelines.

IN A NUTSHELL

The proposed guidelines, if adopted

as recommended, will change the HFC sector structurally. Higher capital adequacy will lower profitability for HFCs. Lower leverage will impact the growth of HFCs. A ceiling on public deposit will mean higher cost of borrowing as of all the sources public deposits are the cheapest source of funding for the HFC.

Some business of HFC will move to commercial banks and the HFC sector will get consolidated if new guidelines are implemented. But the system will become healthier. A tighter lending discipline is expected from HFCs in the future.

From the stock market perspective, the sector had a dream run in the last few years. Few of these companies have given tremendous returns in the last five years. While profitability will be impacted in the near term for the sector, positively the demand side for the sector is robust: the government is targeting housing for all by 2022 and the government also aims to enter the US $5 trillion club economy by 2025. Both will require a push to the real estate sector. Indirectly, the HFCs sector will benefit from iT.

Source: NHB

Changes Proposed

Particulars

Minimum Capital Adequacy RatioCap On Overall BorrowingCeiling On Public Deposit

Earlier

12%16x of NOF

No such ceiling

FY2013%

14x of NOF3x of NOF

FY2114%

13x of NOF3x of NOF

FY2215%

12x of NOF3x of NOF

Now proposed

11


sourcing power.

The second leg is Reliance Jio, which with its 4G service and low data prices, can help shops in villages and semi-rural towns to profitably transact with less affluent customers by using a hybrid offline-online model.

Third, proliferation of R Jio mobile phones and fibre broadband connections gives Ambani the heft to promote private-label fashion, currently housed under AJIO. The company plans to bring ‘immersive shopping experience’ using next-gen technology with augmented reality.

FINANCIAL MUSCLE

Like Walmart-owned Flipkart and Amazon, Reliance Retail has deep pockets to compete.

About 25% of its EBITDA, comes from its retail and telecom businesses and 75% from the energy business.

In the third quarter of this fiscal, Ambani’s retail business revenue rose by 89% to `35,500 crore, whereas EBITDA and EBIT surged a whopping 178% and 210% to `1,680 crore and `1,510 crore, respectively.

Meanwhile, revenue in grocery and fashion grew 61% and 51% year-on-year (y-o-y). Its retail and telecom business contributed nearly one-fourth of the `1.71 lakh crore consolidated revenue. In fiscal 2018, Reliance Retail had recorded revenues of `69,198 crore, a 105% growth compared to FY17. The company aims to increase the revenue contribution to 50%.

ALIBABA MODEL

Ambani is reportedly looking to emulate the online-to-offline (O2O) marketplace model pioneered by

THE RELIANCE RETAIL PLAN

The company plans to create a hybrid, online-to-offline new commerce platform, and combine its physical marketplace with Reliance Jio’s digital infrastructure and services.

It plans to utilize its over 5,100-plus Jio Point stores in more than 5,000 cities and towns as the last mile connection point for its e-commerce venture to reach consumers without internet access or who have never shopped online.

Ambani has announced several new ventures, including JioGigaFiber that would ultimately capture almost every sphere of a consumer’s life - from food, clothes and entertainment to health and security.

“We see our biggest growth in creating a hybrid, online-to-offline new commerce platform of 35 crore customer footfalls at Reliance Retail, 21.5 crore Jio customers five crore Jio giga-home customers, and three crore small merchants and shopkeepers,” Ambani said last year.

In the first phase, Reliance Retail plans to connect 12 lakh small retailers in Gujarat and later roll out across the country with big discounts splash in the coming Diwali shopping season.

THE STRATEGY

Reliance Retail has a three-legged plan to connect India’s 30 million small retailers with consumers. One, neighbourhood marts will be connected to Reliance Retail’s footprint of almost 10,000 stores, offering them common inventory- management, billing and tax platforms as well as low-cost payment terminals. That will give the expanded retail network a huge

Just as the Walmart-Flipkart and Amazon honchos were basking in their billion-dollar sales at the end of 2018, the Indian government quietly dropped a bomb.

On 26th December, the Department of Industrial Policy and Promotion put out a notification for changes in FDI rules in e-marketplaces in India.

The rules, which mandate that foreign players cannot sell their own inventory on their marketplaces and more than 25% from one vendor, severely disrupted the business models of online retailers such as Walmart-Flipkart and Amazon, which have acquired customers with huge discounts.

However, the rules, which are supposed to give domestic companies such as Shopclues and Snapdeal an edge, are set to benefit the biggest local player – Mukesh Ambani’s Reliance Retail – the most.

Fresh from the disruption in the telecom sector with Reliance Jio, Ambani plans to shake up the e-commerce space, and has set up a clash with Amazon’s Jeff Bezos, the world’s richest man and Walmart-Flipkart, who between them control 70% of the India’s e-commerce space.

So, how would the battle unfold?


Chinese e-commerce major Alibaba. It will involve aggregating merchants on RIL’s e-commerce platform where consumers would search for products and services online but make the purchase offline. Under this model, merchants will tap the online opportunity. It would also help RJio skirt the discounting issue raised by small traders and retailers.

It will entail zero cash burn as RIL’s consumer-oriented companies - RJio and Reliance Retail - sign on local merchants.

In China, Alibaba was also able to overtake a dominant eBay in the early days because it invested more both to sign up merchants and to acquire customers.

THE EDGE

Reliance’s burn rate for new e-commerce venture is expected to be lower. With nearly 300 million Jio customers, it won’t have to spend on acquiring customers. Also, since it has a strong EBITDA in the physical retail, it can certainly leverage its sourcing, distribution, supply chain, private label, etc.

Now that Jio has 25 crore users, Ambani will start commerce on the platform to make money and recoup the massive investment, to sell fashion and food, electronics and financial services, experts said.

A two-to-three-hour delivery window is an essential disruption for e-commerce industry. Although Amazon has managed it in some categories in certain areas, a well-designed hyperlocal delivery mechanism would make Reliance stand out.

Also, Reliance is a far more popular brand name in India than its American rivals, making it more

likely to attract first-time shoppers.

INDUSTRY VIEWS

As per industry experts, the retail business is now bigger than all of India’s organized players combined in both revenue and store count.

Some of them expect the start of full-fledged e-commerce as well as omni-channel retail, increased focus on broadband, extra push on payment solutions and launch of some disruptive products from Reliance.

Even assuming a moderate 25% market share, Reliance Retail’s revenue is set to rise leaps and bounds by 2028 and could take its value to over $100 billion.

Experts said Ambani would leapfrog into the global league of Jeff Bezos and Jack Ma as the market starts to discount the convergence and e-commerce gets tagged to its already present retail, telecom and media.

CHALLENGES

Reliance will not be immune to the challenges from incumbents, which are also entrenched players. Besides, the group is yet to prove its success outside of traditional business models of oil and telecom.

Along with being bargain hunters, Indian consumers are not loyal to one brand and most of the customers of online portals are overlapping, which means Reliance will have to chase the same set of customers.

Although fashion and electronic categories can be handled easily, Reliance may have to move slowly in the grocery category despite owning the Reliance Fresh chain. The sector is infamous for cash burn due to special logistics capabilities it needs.

FOREIGN RETAILERS

E-commerce companies could lose nearly 35% to 40% of e-retail sales, and revenues of around `35,000 crore to `40,000 crore due to the rule changes, according to Crisil.

Flipkart’s losses may rise following the recent policy changes. While the fresh regulations could spoil plans for greater synergy between Flipkart and Walmart, which operates in the cash-and-carry space, it also bars Amazon from selling products from subsidiaries like Cloudtail and Appario, where it has significant investments.

The move to ban exclusive deals for products also hurts Flipkart and Amazon in smartphones, which make about 50% of smartphone sales in India.

Following the curbs, Amazon’s Global Store, which was launched with much fanfare in 2016, has become virtually non-existent with a sharp fall in listed items.

From a peak of six million products before February, there were just about 6,000 products under this entity on Amazon India last month.

To circumvent the rules, Flipkart was likely to create a middle layer firm – in which it would have less than a 25% shareholding – between its wholesale arm and vendors on its marketplace.

This company, which would be classified as a non-group company, would be able to freely sell to vendors without the 25% sourcing restriction.

Amazon also brought Cloudtail back on the portal barely a week after revised FDI rules reportedly by restructuring the shareholding.

eyond P o w e r e d b y

Is Your Dealer Keeping Your Call On Hold?

BecomeYour Own Dealer

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

Simply Download The Beyond App

www.nirmalbang.comFor free account opening, give us a missed call on 18003157577 |

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity

Exchange before trading. We do not offer PMS Service for the Commodity segment .The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID-

09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067) : INB260939138, INF260939138, INE260939139: Single Registration No.INZ000202536,PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99. NIRMAL

BANG COMMODITIES PVT LTD – MCX (Member ID -16590 /NCDEX Member ID -0362 /ICEX Member ID -1165) : Single Registration No. INZ000043630; NCDEX Spot: 10084; Comtrack Participants: CPID -5040; CDSL Commodity Repository Ltd: 12013300 Nirmal Bang Securities Private Limited CIN:

U99999MH1997PTC110659; Nirmal Bang Commodities Private Limited CIN: U67120MH1995PTC093213Regd. Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010

Regd. Office Address Of NBCPL: Sonawala Building, 1st Floor, 25 Bank Street, Fort, Mumbai -400001. Tel: 62737500


However, the foreign players would still have to cut down on cashback payments and discounts.

STRENGTHS AND WEAKNESSES

While Walmart has a strong understanding of the supply chain, sourcing and consumers, Amazon is ahead in technology, and Reliance understands the country and the Indian consumer best.

It would be difficult to beat Amazon’s repeat customer count.

Neither will it be easy to grab a share of India’s $53 billion business- to-business e-commerce pie, where Flipkart is ahead of even Amazon, experts said.

Walmart has suffered a setback as during the course of its Flipkart acquisition and soon after, it lost the Flipkart co-founders, whose know-how and connections would have helped the US retailer better navigate the regulatory hurdle.

According to experts, most companies in India are great at running brick-and-mortar businesses, what they lack is the heft to run a digital platform.

In sum, the multi-channel play, including physical presence, makes Reliance Retail a formidable player ahead of Amazon and Flipkart. BETTER TIMES AHEAD

The e-commerce industry in India is

expected to cross $100 billion in sales and be between $125 billion and $150 billion by March ’20 from the current $38.5 billion now, as per Care Ratings.

As the online retail industry grows, its share in India’s overall retail market is also set to increase significantly.

The e-commerce industry will contribute 12% to 15% of India’s overall retail by March next year from just 5.7% at present, according to Care Ratings.

Sectoral experts believe that the troubled times for the online retail industry may soon pass and the long-term picture of e-commerce in India is brighT.

The food ordering and delivery services market is on a definitive growth path. But the challenge before companies is to retain customers and succeed in a competitive world

BEYOND THINKING

It has never been this easy for foodies to order food from the comfort of their homes. Online food delivery services such as Swiggy, Zomato, Freshmenu, Foodpanda and UberEats have made it easy for customers to browse countless menus from their laptops/ smart phones and order any food of their choice.

This works well for time-starved millennials who have shown a

APPETITEFOR GROWTH

growing appetite for having food delivered at their home.

According to Bengaluru-based research firm RedSeer Consulting, India’s online food-delivery market is estimated to be $7 billion in size (`50,375 crore). The market has grown because of rising disposable incomes and easy access to internet and smartphones.

The growth of India’s online food delivery market is a reflection of the global trend. In a report titled “Is the Kitchen Dead?” investment bank UBS forecasts that online food delivery sales could rise on an annual average of more than 20% to $365 billion worldwide by 2030, from $35 billion at present.

The study says that millennials are three times more likely to order food in than their parents. In fact, it goes a

Beyond Market 16th - 31st Mar ’1916


heavyweights such as Google, which launched its restaurant-delivery platform Areo in March ’18. The other market contenders in India are UberEats, Foodpanda, Domino’s, Pizza Hut, JustEat, Faasos, TastyKhana, and FoodMingo.

Bengaluru-headquartered, Swiggy, run by Bundl Technologies Pvt Ltd, is leading the market with over 45,000 restaurants on its platform. It recently emerged on top in trust and customer satisfaction in a food-tech survey by RedSeer. Swiggy ranked number one, with a score of 96, well above its closest rival Zomato, which had a score of 82, in the fourth quarter of 2018.

In 2018, Swiggy raised $1 billion, becoming the country’s fifth most valuable start-up, with a valuation of $3.3 billion in less than four years of its inception.

Till now, Swiggy has raised a total of $1.5 billion, in comparison with Zomato, which has raised $653.8 million in total. Much of this funding has come from Naspers, a South African internet firm, which owns a large share of Tencent, one of China’s online giants.

Investors in online food delivery platforms will have to wait to see profits though. Food delivery platforms have been wooing customers with heavy discounts and free delivery and the gap in the cost has been borne by companies.

Swiggy’s total losses during FY15-18 were around $113 million, Zomato’s losses during the period

or make acquisitions to grow their market share.

There are two types of service providers in the online food delivery market. One is the “aggregator” and the second type is the “delivery provider.”

Both allow customers to browse menus, post reviews and place orders from restaurants. The key difference is that while aggregators take order from customers and route it to restaurants for delivery, the delivery providers deliver the order themselves.

Swiggy and Zomato are the current market leaders with 80% market share between them. Revenues at both these companies have been growing at a phenomenal rate. In FY18, Swiggy’s revenue increased three-fold to `468 crore from 146 crore the previous year and Zomato’s revenue grew by 40% to `466 crore. The lucrative food delivery market has also attracted international

step further to say that there could be a scenario where by 2030 most meals are ordered online and delivered from either restaurants or central kitchens. This is because the total cost of production of a “professionally cooked and delivered meal could soon approach the cost of home-cooked food, or beat it when time is factored in.”

Only time will tell, if this is indeed the future. But there is no denying that the market is on an upward growth trajectory.

In India, online food delivery platforms have focused their expansion on the top five cities such as Delhi, Mumbai, Chennai, Bengaluru and Kolkata because over 80% of their orders come from these cities.

Needless to say, competition among food delivery platforms is very intense, forcing many start-ups such as Swiggy and Zomato to raise funds


was $146 million, BigBasket and Grofers’ losses for the period stood at $147 million and $74 million, respectively.

Food delivery companies such as Zomato and Swiggy are likely to see higher losses in FY19 compared to FY18 as they expand their business and try to grab a higher market share by offering heavy discounts to customers.

The food delivery market is headed for interesting times, with companies vying with each other for acquisitions to strengthen their market position and expand into other related categories.

In February this year, Swiggy acquired artificial intelligence start-up, Kint.io, which applies deep learning and computer vision for object recognition in videos. This can be applied to the discovery of restaurants using images and recommendations based on image search.

Swiggy has also invested `31.2 crore in Mumbai-based ready-to-cook food start-up Fingerlix and has acquired on-demand delivery start-up, Scootsy and milk delivery start-up, SuprDaily to launch micro-delivery of staples.

In June ’17, Zomato acquired hyper local logistics startup Runnr, which will help the company improve its economies of scale required to deliver an order.

Before this acquisition, 80% of Zomato’s orders were delivered though restaurants and third-party logistics players. Zomato also acquired an Indian start-up called TechEagle Innovations for drone-based food delivery.

The Indian online food delivery market is expected to hit $4 billion

by 2020, according to RedSeer Consulting. Growth is certain but can investors profit from their investments?

This would depend on whether customers will continue to order from food delivery platforms even in the absence of heavy discounts, which have contributed to losses for food delivery companies.

Considering intense competition in the food tech industry, it doesn’t look like there will be an end to discounts. The best bet of online food delivery platforms is expansion into other related categories and untapped cities.

Swiggy for instance, has launched an on-demand product delivery, with its Swiggy stores. This is a pilot project in Gurgaon, through which the company is delivering products from over 3,500 stores in 11 categories, which include groceries, fruits, vegetables, health supplements and flowers to customers. Swiggy will use its existing platform for this service.

Grofers, which narrowed its losses in FY18 to `258.30 crore from a loss of `268.32 crore in FY17, is hoping that private labels in the fast moving consumer goods (FMCG) segment will drive its second phase of growth.

Zomato has said that it will expand its online ordering and food delivery services in 30 more cities such as Puducherry, Jamshedpur, Ambala, Meerut, Haridwar, Bhavnagar, Ujjain, and Puri, among others.

The company will hire nearly 5,000 delivery partners in these cities. Mohit Gupta, CEO of Food Delivery at Zomato said, “We have been surprised by the demand in Tier-II and Tier-III cities and are, therefore, gung-ho on serving every last

customer, in the smallest of towns in India.”

There are rumours of consolidation in the industry as well. Media reports suggest that Swiggy is in talks with UberEats, the food delivery arm of ride-hailing platform, Uber.

If the deal goes through, it will be Swiggy’s largest acquisition till date. The deal would make Swiggy the undisputed leader of India’s thriving online food delivery space.

Experts believe that consolidation in the food tech industry is inevitable. “Consolidation will happen due to the thin operating margins and market acquisition costs, which will place enormous pressure on the companies to raise capital,” said Devangshu Dutta, Chief Executive of Third Eyesight, a specialist retail consulting firm.

The online food delivery market has had other troubles as well. The Food Safety and Standards Authority of India recently reprimanded food delivery platforms for hosting unverified outlets on their platforms.

The watchdog asked them to ensure “training and capacity building of restaurants for improving food safety and hygiene rather than focusing only on deep discounts and aggressive marketing.”

India’s online food delivery market has a lot of potential and has already attracted considerable investments. In less than five years, the industry has produced a unicorn in Swiggy.

The Indian market is on a definitive growth path and the challenge before food ordering and delivery companies now is to retain their customer base and sustain growth, while ensuring that profits are not sacrificed in the bargaiN.


cement in the past three years.

More importantly, if prices sustain till mid February, there is a high possibility that companies in the rest of India region may follow suit and raise prices.

If this transpires, it would mark the beginning of the demand upcycle for cement industry. It must be noted that all-India cement prices increased by `17 per 50 kg bag to `334 per 50 kg bag in February ’19 in comparison with January ’19. For more than three years now, cement manufacturers have been following the strategy of focussing on volumes instead of increasing prices. This was largely due to high capacity in the industry, which intensified competition among manufacturers.

According to the Index of Industrial Production (IIP) data of eight core industries, cement production grew by 11% in December last year. In recent months, analysts point out that there has been a slight improvement in cement demand from the real estate sector, which forms a large part of cement demand.

With the government’s sharp focus on low-cost housing through the Pradhan Mantri Awas Yojna programme and other key infrastructure projects awarded through roads and highway ministry (Bharatmala), cement demand is expected to be stable and may potentially rise given the seasonality of construction business in the coming quarters. It is estimated that India needs investments worth `50,00,000 crore in infrastructure by FY22 to have sustainable development in the country.

in the western region. Cement prices in the region have been trading in the range of `260 per 50 kg bag to `290 per 50 kg bag.

Analysts say cement realization in the western region is expected to grow at a CAGR of close to 4% in the next three years. NORTHERN REGION Demand in the northern region has improved by 5%. Cement prices increased to `300 per 50 kg bag to `320 per 50 kg cement bag. Analysts estimate cement realizations in the northern region are likely to grow at a CAGR of close to 4% over the next three years. CENTRAL REGION The demand for cement in the central region has improved by 6%. Cement prices have increased by close to 4% in the range of `290 per 50 kg bag to `330 per 50 kg bag. If analysts’ expectations are anything to go by, then cement realizations could improve at a CAGR of 3% in the next three years. EASTERN REGION Cement demand from eastern region is likely to be robust. It is expected to be in the range of 15% to 16%. Cement prices have risen in the range of 1% to 2% to `340 per 50 kg bag to `350 per 50 kg bag. Over the next three years cement realizations in the region are likely to improve over 3%. PAN-INDIA SITUATION The pan-India growth in cement prices should be seen as a favourable sign for cement manufacturers who have been recording stagnant or declining Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) on selling one tonne of

cement industry.

Now, there are clear signs of demand improving in the cement sector.

Let us understand how cement demand is looking across regions and how cement players from each region would benefit in terms of realization: THE SOUTHERN REGION Analysts point out that the southern region is likely to register around 16% volume growth despite high base and sharp price hikes. Cement demand in the region is expected to remain strong on the back of continued momentum in Andhra Pradesh and Telangana and revival of demand in Tamil Nadu on receding impact of sand mining.

According to dealers’ information, cement prices in Andhra Pradesh and Telangana have risen by `80 per 50 kg cement bag while in Karnataka and Tamil Nadu, cement prices have risen in the range of `50 per 50 kg bag to `60 per 50 kg bag.

Favourably, dealers alert that there would be an additional hike in cement prices in March also. They foresee a hike of `15 per 50 kg bag to `20 per 50 kg bag in March.

Given these factors, sector analysts believe that cement realizations in the southern region are expected to grow at a Compound Annual Growth Rate (CAGR) of 3.2% in the next three years. WESTERN REGION Cement demand in western India is likely to grow in the range of 8% to 9%. Maharashtra and Gujarat are likely to see the benefit of increase in cement prices.

Cement prices rose by more than 5%

Contact at: 022-6273 9600 | e-mail: [email protected]



Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment .The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759,

INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067) : INB260939138, INF260939138, INE260939139: Single Registration No.INZ000202536,PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99. NIRMAL BANG COMMODITIES PVT LTD – MCX (Member ID -16590 /NCDEX Member ID -0362 /ICEX Member ID -1165) : Single Registration No. INZ000043630; NCDEX

Spot: 10084; Comtrack Participants: CPID -5040; CDSL Commodity Repository Ltd: 12013300 Nirmal Bang Securities Private Limited CIN: U99999MH1997PTC110659; Nirmal Bang Commodities Private Limited CIN: U67120MH1995PTC093213

Regd. Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010Regd. Office Address Of NBCPL: Sonawala Building, 1st Floor, 25 Bank Street, Fort, Mumbai -400001. Tel: 62737500


The government’s increasing road building focus has transformed into increased budgetary allocations. Between FY09 and FY19, the budgetary outlay for road transport and highways rose at a CAGR of 20.9%.

The total investment in constructing national highways by both the government and private investors was about `1,50,000 crore. Of this, almost `1,00,000 crore came from budgetary allocation, re-investment of toll collections and borrowings by the National Highway Authority of India (NHAI). In FY19, the expenditure on national highways is likely to exceed `2,00,000 crore. Out of this, about `1,00,000 crore will come from extra-budgetary resource.

The total investment in state roads between FY18 and FY22 is expected to be around `4,48,000 crore. Industry expects private participation in state road projects to remain steady in the future as well. These investments are expected to sustain

high cement prices at least for the next two years. Besides, cement companies are also expected to benefit from crude oil prices from their high levels of $85 per barrel. This should boost their earnings in the March ’19 quarter.

According to various analysts’ sources, in February this year, imported petcoke’s prices fell 4% to US $91/tonne. Petcoke prices are 20% down from the levels they were trading at the end of the September ’18 quarter.

Also, domestic petcoke prices have been flat at `8,850 per tonne in February this year. Domestic petcoke prices are trading 6% lower than what they were trading at the end of the September ’18 quarter. Analysts say that companies which source a large part of their petcoke requirement - close to 60% from domestic sources, may benefit slightly more than those that are dependent on imported petcoke. The key reason being expectations of

further reduction in domestic petcoke prices as the premium between domestic petcoke and imported petcoke is quite high. It must be noted that since a large part of cement demand is due to government-funded projects, there is a perception among analysts that this is largely due to elections.

They believe that the pace of awarding road projects may come down post elections. Though this may hold true, a clear factor which works in favour of cement companies is that there is no capacity addition announcement by cement players at least in the next two years.

And since there is no new capacity coming into the industry, a slight rise in demand even from government- funded projects should boost earnings of cement players.

In fact, players are confident even if the government does not cut GST on cement, they will be able to pass on the cost to consumers as there is stable demand from infra projectS.


matched growth in the aviation sector. This is one of the key reasons why there is congestion at airports.

They point out that when the government is aiming for one billion trips in the next 15 years from around 200 million trips a year at present, the creation of new airport infrastructure is a must. Besides, there are issues related to runways, flights, and parking slots for aircraft too. The number of aircraft with scheduled airlines in India is 620 as on 31st Jul ’18, up from 448 in March ’16. India’s 17 scheduled airlines operated 9.22 lakh flights in 2017-18, up from 8.1 lakh from previous year.

International aircraft movement was 3.79 lakh in 2017-18 as against 3.45 lakh in 2016-17. Experts point out that the government is not just focused on adding terminals. There is a clear focus on adding runways because some airports, which have to be refurbished, may have terminals but not necessarily runways. The aviation ministry study takes this fact into account and observes that airport expansion can be planned accordingly. The media reported that at least 25 of the 50 busiest airports in India are already operating beyond their capacity, while almost all others will reach optimal capacity in 2018-19.

The Cabinet Committee on Economic Affairs (CCEA) has approved investments in expansion and upgradation of integrated terminals in Chennai, Guwahati and Lucknow by the Airport Authority of India (AAI) at `2,467 crore, `1,232 crore and `1,383 crore, respectively. Given these factors, there is an immediate need for new airports in the country which can lighten traffic burden from major airports.

Kolkata and Bengaluru are among the cities that will need a second airport by 2030. By 2035, more cities will need a second airport.

The study is still a work-in-progress and will also calculate by when each airport will reach its capacity. The government will write to respective state governments providing them information and asking them to spot land for a new airport at least five years before the airport reaches its capacity. It must be noted that India’s airports currently handle 183.90 million passengers a year, according to the 2017-18 data released by aviation regulator Directorate General of Civil Aviation.

The number has grown in recent years. It was 158.43 million in 2016-17 and 134.98 million in 2015-16. This year, it is expected to cross 200 million. Some of the bigger airports are already operating in excess of their capacity.

For instance, the Delhi airport handled 63.5 million passengers in 2017, and is expected to reach 70 million this year and will start operating beyond its capacity. It is also among the busiest airports worldwide, according to Airports Council International (ACI).

For the first time, the Delhi airport breached the 60 million-mark in 2017, making it to the list of the world’s top 20 busiest airports. The Indira Gandhi International Airport also became the seventh busiest in Asia, ahead of Seoul, Singapore and Bangkok. Senior airport officials believe that some airports are already operating beyond capacity but still have scope for expansion. They point out that the expansion in the sector has not

The government has unleashed an array of infrastructure reforms, which is reflected in the number of road projects awarded in the past three years. Interestingly, the government has not restricted infrastructure development only to roads, power and engineering. A lot has transpired in aviation sector too.

After the regional connectivity scheme, the government has plans to develop close to 100 airports. Given this tall ask, it is important to understand the context in which this development has transpired.

Here is a low-down on why India needs better airport infrastructure beyond Mumbai and Delhi. Also, it is equally imperative to know why certain infrastructure players have shown high interest in developing airports. THE CONTEXT One does not need to be an aviation expert to know that air passenger traffic between Mumbai and Delhi is the heaviest among all locations. According to media reports, a study of civil aviation ministry shows that at least 20 cities in India will need a second airport by 2030.

The study points out that Mumbai, Delhi, Goa, Visakhapatnam, Jaipur, Pune, Ahmedabad, Rajkot, Patna,


BEYOND WORDSCounter-Cyclical Policies

A government’s policy has a big role in stabilizing a country’s economy during business cycles. A counter-cyclical policy refers to strategy by the government to counter boom or recession through various policy

measures. Some of these initiatives include fiscal policies, monetary policies and social policies to maintain household incomes and spending even in a downturn. It works against the ongoing boom or recession trend; thus, trying to stabilize the economy. Understandably, counter-cyclical policy works in two different direction during

these two phases.

The Minister of State for Civil Aviation Jayant Sinha, while announcing the expansion plan, said `1 lakh crore would be invested to increase the capacity of the Indian airports. The government has launched a new initiative called NABH (NextGen Airports for Bharat) Nirman to enhance airport capacity by five times to one billion trips in the next 10 years to 15 years.

Increasing capacity requires both development of greenfield airports and the expansion of existing airports. The ministry plans to use AAI and private firms to execute these airport projects. The AAI, which runs all the non-private civilian airports in the country, is in the process of implementing plans to create additional capacity in airports in Agartala, Patna, Srinagar, Pune, Trichy, Vijayawada, Port Blair, Jaipur, Mangaluru, Dehradun, Jabalpur, Kolhapur, Goa, Rupsi, Leh, Calicut, Imphal, Varanasi and Bhubaneswar with a capital expenditure of `20,178 crore over the next four to five years.

The private firms that run the Delhi, Bengaluru and Hyderabad airports are also working on expansion plans that need an investment of `25,000 crore over the next five years.

THE DEVELOPMENT Besides developing new airports,

there have been talks about privatizing existing airports. In November last year, the cabinet had cleared the privatization of six airports under the public-private partnership model. The airports are currently run by the AAI.

In a departure from the model used in the first round of airport privatization more than a decade ago, the AAI sought bids for operations and maintenance of these airports for a concession period of 50 years.

The winning bid will be decided on the basis of the highest monthly per-passenger fee that the concessionaire will offer to the AAI. This is a departure from the revenue-sharing model that the AAI had adopted in the existing privatized airports such as Delhi, Mumbai and Bengaluru. One of the key reasons for privatisation of the aforementioned airports is that increasing passenger traffic is creating the need for airport expansion across the country. The government is planning to develop close to 100 airports - doubling the current number - over the next 15 years at an estimated investment of `4 lakh crore.

Analysts expect the private sector to play a key role in this process. The privatization of airports, the entry of new players in the sector and healthy bidding activity indicate that the sector’s potential for growth is

extremely high. Media reports point out that Adani Group and GMR Infrastructure have bid for all the half-a-dozen non-metro airports put up for privatization by the Union government.

The Airports Authority of India (AAI) has received 32 bids for the airports in Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru, said the people cited above.

Ratings agency Crisil had said that it expects the development of these six airports to attract potential investments worth $1.4 billion, with each roughly needing investments of $200 million.

Given this potential of investments in privatizing just six airports, it is amply clear that the government would not leave any stone unturned in developing new airports. A key reason for this is rapidly growing air passengers in India’s middle class, which have realized the slight difference between 2-tier and 3-tier AC train and air tickets.

Additionally, these middle-class travellers have realized that travelling abroad to a large extent is more profitable than in domestic locations given the difference in the travel packages. This is one of the key reasons as to why outbound travel from India has riseN.

India’s Jobless rate is on the

rise as economic growth stallsBLEAK

FUTURE

BEYOND THINKING

The growing unemployment rate raises serious concerns about the health of the Indian economy that has been growing at an impressive rate in recent years.

As of February ’19, the unemployment rate stood at 7.2%, the highest since September ’16.

The rate has been increasing steadily according to data compiled by the Center for Monitoring Indian Economy (CMIE). The rate of unemployment was 5.9% in February ’18 and 5% in February ’17.

Challenging Market Environment CMIE in its report notes that as many as 11 million people could have lost

their jobs in 2018. The losses followed the demonetisation of high-value notes.

The launch of a new goods and services tax also appears to have taken a hit on businesses slow about fresh hiring. Particularly, smaller businesses and SMEs, which initially felt the impact of GST implementation as it took a toll on their cash flows and growth. The other big issue is continued stress in core sectors such as metals, engineering, power, telecom, external trade, etc. Changing market economics as well as increasing debt levels have forced telecom firms to shun the job market as layoffs have become the order of the day.

Reliance Communication has seen its workforce shrink by 94% from record highs of 52,000 to about 3,400 as a wave of consolidation takes over the telecommunications sector. Employment in the telecommunications sector continued

its downward trajectory in the current year as about 4,000 people lost their jobs in January alone. A slowdown in the sector is already fueling expectations that over 60,000 employees could lose their jobs and will require fresh jobs.

The construction sector too is on a downturn, a development, which has rendered many people jobless. The construction sector which employs more than 40 million people, is witnessing a slowdown as employment growth in the sector shrank 18% in 2018 compared to 31% in 2017.

Consolidation has forced many operators as well as infrastructure providers to lay off some staff. Some of the segments that have been profoundly affected include customer support as well as those that handle financial functions.

A part of stress is also reflected in the banking sector’s non-performing assets (NPAs). Many corporates are

Beyond Market 16th - 31st Mar ’1925


go slow on new projects or operations that would have resulted in hiring of new personnel. A large number of them are facing balance sheet issues and for them the priority is to repair it first and then look for growth capex. Thirdly, the industry capacity utilization is still low at around 75%, which is not great enough to kick start the capex cycle and drive the job market.

A slowdown in the manufacturing sector is thus one of the reasons why the economy is not able to churn out as many jobs as it ought to, leading to a high unemployment rate.

Growth in the manufacturing sector shrank to 6.7% in the third quarter of FY18-19, down from 6.9% recorded in the second quarter and 12.4% in the first quarter of FY18-19.

The Index of Industrial Production figures indicate that manufacturing expansion contracted in the December quarter to 2.7% from 8.7% a year earlier.

THE RURAL STORY

Top on the list is agricultural sector that accounts for nearly half of the

Elections matter a lot, given that regime changes at times lead to policy changes that affect operations in any sector.

A coalition government or a weak leadership would mean greater uncertainty about the markets and industry policies, which in many ways impact investments both from domestic and foreign investors.

Money through FIIs and FDIs would get impacted based on the outcome of the general elections in April-May this year.

Second, some companies have had to

sitting on huge debt, thus limiting their ability to grow. Furthermore, companies are either getting merged or liquidated under insolvency laws, which is putting pressure on the job market.

The high unemployment rate also coincides with a slowing economy. GDP growth appears to have slowed down to 6.6% in the October- December quarter compared with 7.1% growth in the September quarter and 8.2% in the March quarter of 2018.

Both the government and various independent agencies tracking the Indian economy have already trimmed India’s economic growth forecast by 10-20 basis points.

SLOW RECOVERY IN CAPEX CYCLE

While the government has been spending on several sectors to spur demand and kick-start the capex cycle, private capex growth has been slow.

Manufacturing companies are also not ramping up production capacity on concerns about the aftermath of the upcoming general election.

12.4%

6.9%

6.7%

5%

6%

7%

8%

9%

10%

11%

12%

13%

Q1 2018 Q2 2018 Q3 2018

India's Manufacturing Sector Growth In FY19

405.5

402.4401.7

399.8

380

386

392

398

404

410

416

Q1 2018 Q2 2018 Q3 2018 Q4 2018

Employed Persons In India In 2018 (In Millions)

Source: CMIE

Source: CMIE

FUTURE


country’s total workforce. Data by the Central Statistics Office indicates that agriculture growth slowed to 2.3% in Q3 FY19 from 4.2% in the second quarter and 4.6% in Q1 of FY18-19.

A slowdown in the agricultural sector essentially means agricultural farms and businesses, as well as companies are no longer employing as many people as they used to, consequently leading to a higher unemployment rate. Besides, low growth also means low farm income and slow growth in consumption.

CONSUMPTION SLOWDOWN

The problems faced by services, manufacturing and agriculture sectors have impacted consumption cycle too. The spiralling effect of this rural and urban slowdown has impacted consumption. The manufacturing sector, which accounts for about a third of the country’s total workforce, has slowed. Consumer spending shrank to 8.4% in Q3 of FY18-19 from 9.9% in the second quarter of the same financial year.

The decline in consumer spending means companies are no longer able to generate the desired sales needed to sustain optimum manufacturing processes and go for more

investments and hire more people consequently.

GOVERNMENT POLICIES

The Indian government had every intention to spur the employment market through many of its flagship schemes such as Make In India, Start-up Funding, Indigenous defence procurement, industrial policies and others.

However, due to fiscal deficit and constrained government finances, it had limited ability to invest. On top of that implementation of GST, demonetisation and other harsh measures added to its woes.

To put this in perspective, the executive decision to ban specific notes as part of a demonetisation drive also continues to affect job markets, leading to increased unemployment.

While the initial intention was to flush out hidden wealth, demonetisation went on to hurt the agricultural sector that employs thousands of people.

The reduction of money supply in the market due to demonetisation has made it difficult for businesses as well as companies to gain access to much needed cash to ramp up operations.

Moreover, demonetisation, GST and tightening of norms against lakhs of small, non-operating companies or businesses that were created to get tax shelters have helped to break down the parallel black economy looming far and wide.

These developments initially jolted the job market in the country as people became cautious and several companies and operations were forced to shut shop. This happens at a time when job seekers are by and large increasing. Every year several million people join the job market looking for their first job.

WHERE ARE WE HEADED?

Industry experts are of the opinion that the job market in India may remain suppressed until after the elections.

Companies from various sectors are unlikely to spend vast sums of money on new projects until political temperatures cool down and there is certainty about who is going to run this country and what economic or industrial policies the ruling party has up its sleeve.

Thankfully, most of the worries over policy actions such as GST and others are over and the benefit of the same will now start reflecting on the overall demand.

Besides, funding environment and banking sector are gradually improving. Also, trade tensions are easing, commodity prices are settling and interest rates are either low or are expected to fall.

There is good reason to be optimistic. India’s job market should look good next year till the time additional demand is absorbed by existing investments and capacities in the system or the economY.

0

1

2

3

4

5

6

7

8

Jan-17 Jan-18 Jan-19

Unemployment Rate (%)

Source: CMIE


The three most popular genres among internet users in India are new Bollywood music, older Bollywood music and Indian classical music.

Licensed streaming services have enabled domestic music labels to flourish. Local artists from across the country are securing a sizeable fan base and Punjab leads the non-film music industry.

Saavn has its own Artists and Repertoire team in New York City and collaborates with independent artists on marketing campaigns through its Artist Originals program, while Hungama runs a similar initiative called Artist Aloud, states the FICCI-EY report.

So far Sounds, a VC-backed music events start-up headquartered in London, UK operates in 12 cities in India and has played a substantial role in putting independent Indian artists on the digital map. PHYSICAL FORMAT Physical format music sales fell 50% in 2018 in comparison with 2017. The contribution of physical sales to Indian music industry reduced 50% to just 4% of label revenues in 2018. This is much lower than the global share of around 30%.

In 2017, SaReGaMa had launched Carvaan, an audio player with pre-loaded songs and other features like USB and FM radio. It has seen a significant uptake of more than one million units since its launch. The revenues from these sales have not been included in the sizing of the music segment. PAID AUDIO STREAMING

The continuous growth of digital infrastructure has paved the way for a 50% growth in audio streaming to

crucial role in this growth are increased digital revenues, performance and synchronization rights.

Growth at the music label level was 20%, led by digital revenues, which now contribute 83% of their revenues. YouTube accounted for 40% of the digital revenues for labels.

Physical music sales fell by 50%. India reached 19th position in the International Federation of the Phonographic Industry (IFPI) world rankings of music markets. According to IFPI, streaming accounted for nearly 40% of global music revenues, making it the biggest source of income for the music industry by a significant margin.

As market leaders Spotify and Apple Music continue to grow, streaming will dominate music consumption going forward, especially now that smart speakers are making music streaming at home more convenient says the FICCI-EY research. It must be noted that Indian internet users surveyed by the IFPI spent 21.5 hours listening to music per week, that is, approximately three hours each day - which is more than the global average of 17.8 hours per week. Indian internet users in the 16-24 years age group listened to 23.9 hours per week on average. 81% users engaged with free audio streaming services. FILM MUSIC Film music contributed over 80% of total revenues in India. It must be noted that film music has the highest share in terms of revenue and accounts for over 80% of the music segment’s revenues.

Music plays an important role in India. There is rarely an occasion when Indians do not play music during celebrations. We even express grief through music.

Also, we have music that has evolved from various geographies. There is garbha in Gujarat, Bhangra in Punjab and Rabindra Sangeet in Bengal, and other forms of music in the rest of India.

Truly, to a large extent, music defines Indians. But one common form of music, which unites Indians is film music. It may be the simplistic form of music. Nonetheless, it continues to be popular.

Given the importance accorded to music in India, it is essential to understand how various segments in India’s music industry are doing in the context of technology, piracy and non-formulaic pattern of films.

A large part of data and trends in this story is based on the recent research conducted jointly by FICCI and EY. Here is a low-down on the emerging trends in India’s music industry: THE INDUSTRY India’s music industry grew 10% in 2018 in comparison with 2017 to reach `1,420 crore. According to the FICCI-EY research, India’s music industry is expected to grow 10.8% annually till 2021.

Factors that are likely to play a

10Beyond Market 16th - 31st Mar ’19 It’s simpli�ed...

30

150 million listeners in 2018 (excluding YouTube).

Smartphone penetration in India grew to 340 million, up 33% in comparison with 2017. It is expected to rise even further to 39% in the year 2019.

However, only 1 million to 1.5 million listeners paid for music, generating `80 crore in revenues.

The wide availability of music on services such as YouTube and the large consumption of pirated content are two key reasons for listeners not willing to pay for music. Smartphones and computers continue to be the most preferred choices for listening to music across all age groups in India. Almost 96% of users used their smartphones to listen to music.

This is the highest rate worldwide, followed by computers (92%). India generated 5 billion music streams in December ’18 and Indian audio streaming apps together reached around 5 billion streams per month towards the end of 2018, a growth of around 50% over 2017.

It must be noted that 50% of listenership was outside the top eight metros and 75% of music pertained to music released in the past one year. PIRACY This is a big hurdle in the prosperity of India’s music industry. The FICCI-EY research observes that 76% of internet users admitted to using pirated music in the last three months.

The Indian music industry faced a loss of `1,500 crore due to piracy through illegal sites.

Of the time Indians spent listening to music, 13% was used to hear illegal downloads in comparison with the global average of 7%. In China, where there have been major crackdowns on piracy, the figure is around 8%. ADVERTISING REVENUES Advertising fill ratios on music streaming applications remained low with just one minute of advertising per 60 minutes of consumption in some cases.

That is a loss of opportunity given that the year ended 2018 with around five billion music streams per month as per industry estimates.

Advertising on music streaming has not yet found traction mainly because compared to other digital platforms, the ability of some platforms to demonstrate returns on investment to advertisers is lacking at the moment.

There is an opportunity to combine radio ad sales with streaming music sales, which could result in growth in this segment. MOBILE APPLICATIONS There has been growth in online music streaming with various streaming platforms launched by content-driven and telecommunications companies.

Multi-language user interfaces - in up to 11 languages - have helped increase the uptake of new listeners outside the top 10 cities of India. As regards music applications by content-driven company, Amazon India’s Prime Music has integrated the voice features of its smart assistant Alexa, which can be used on the music app as well as Echo

devices.

This allows users to request favourite songs and create new playlists using voice commands.

According to the FICCI-EY research, up to 20% of new audio streaming listeners used voice search.

Also, one of the popular music applications, Gaana, has been widely accepted among listeners given its customised playlist for listeners. IN THE COMING YEARS Despite challenges related to piracy and low advertising revenues, India’s music industry has a bright future as different revenue-making avenues have come up.

Two most prominent avenues are music applications and subscription- based business model. But a lot needs to done for the industry to flourish.

The music industry in India needs to be quite creative in targeting consumers towards a paid subscription model.

If the current base of 1% of Indian music pay subscribers shifts upwards to 2% to 3%, digital revenues can propel the necessary growth to push the Indian music market towards `2,000 crore and beyond. Given the price-sensitive nature of Indian consumers, bundling will drive the growth of audio streaming in the next few years, and most consumers would accept the base no-frills package offered to them by telecommunication companies and other platforms.

Bundled streaming consumption could grow to over 75% of the total market by 2021 by Indian listenerS.


32

e-commerce can now look forward to a more level-playing field and tap into the rapidly growing Indian consumer market with renewed confidence and business prospects.

The new e-commerce policy will bring parity between online and offline retailers and address concerns of data colonization, as well.

Even as online players may lose many of their competitive advantages, such as high price discounts on their private labels, brick-and-mortar stores will focus on offering superior customer experience to enhance customer loyalty, says Anuj Puri, Chairman, Anarock Property Consultants. The new e-commerce policy will cause online retail entities to invest seriously in offline stores, says Puri adding that they will consider tie-ups with offline retailers or buy stakes in them. However, as competition stiffens, customer experience will be the key differentiator to the success and sustenance of any new retail venture. Responding to burgeoning consumerism in India and favourable environment, mall developers are rapidly infusing new retail developments across the top 7 cities, with nearly 10 mn sq ft new mall supply in 2019.

Factoring in the rollover of some supply from 2018, there will be a three-fold jump in 2019 against the preceding year, according to the Anarock report. Kumar Rajagopalan, Chief Executive Officer, Retailers Association of India (RAI) says, “A combination of essential and value-added services, along with sound marketing strategy, is now the key to customer attraction and, therefore, successful mall

report, India is poised to become the third largest consumer market with consumer spending likely to reach $6 trillion by the year 2030 from $2.6 trillion in 2017.

However, unlike developed markets and economies, India is still dominated by traditional retail stores, but organized market share is growing at a CAGR of 20% to 25% per year.

Along with traditional mom-and-pop stores, organized market and e-commerce platforms started taking over a large set of customers by adding ease and convenience to the shopping experience.

With huge discounts, offers and cashbacks offered by e-commerce marketplaces, brick-and-mortar stores faced stiff competition and as a result they had to revamp their business strategies to keep footfalls afloat.

Moreover, the new e-commerce policy introduced from February seeks to get online and offline retail players on the same level-playing field. Therefore, shopping today is not just about buying a product for a customer rather it is an experience and entity of indulgence and well-being.

Though online shopping platforms have added ease and convenience to shopping, offline shopping adds leisure and entertainment to a customer’s overall experience.

With the new e-commerce policy coming into effect from early this month, online retail giants are re-aligning their business strategies and focusing on expanding their offline presence.

Brick-and-mortar (offline) retailers who were earlier under threat from

Malls in the country suffered and saw a decline in footfalls over the past few years as heavy discounts lured customers to shop online. But things are likely to change soon for the brick-and-mortar players with the new e-commerce policy in place, which is likely to trigger demand for offline presence in the near future.

Customer experience and built environment are completely metamorphosing the retail business in the country. These trends have already started influencing and impacting both the online and the offline retail segments.

A lot has changed in the retail sector over the past few years with technology making a mark on all aspects of day-to-day life, the retail sector has also transformed for good.

Online shopping is a new way of life and is severely competing with businesses of brick-and-mortar stores. With the appropriate use of technology, online companies are tracking data and giving intuitive suggestions to enhance customer experience.

However, this hasn’t deterred buyers from flocking to the brick-and- mortar stores that give a holistic shopping experience to them. Thus, the Indian retail sector is today one of the most dynamic and robust industries. It contributes around 10% to the Indian GDP and employs about 8% of the workforce.

As per the World Economic Forum


performance. F&B and entertainment are critical ingredients for attracting footfalls into retail developments. Simultaneously, style, variety, and overall quality of malls also play crucial roles in ensuring customer satisfaction.” Historically dominated by unorganized mom-and-pop stores, the Indian retail sector’s dynamics are rapidly changing post liberalization and subsequent e-commerce boom across the country.

The rise in the number of internet subscribers and active social media users along with changing lifestyles and increasing disposable incomes has transformed rural and urban consumer bases.

This dynamic resulted in the increasing prominence of e-commerce across the country, leading to India’s emergence as a key global retail market. Today, the country has luxury malls, book malls, and gold souks. Though the majority of the malls have an identical look and feel offering similar attributes and tend to be replicas of each other, there are some very unique developments offering customized attributes and features.

This goes on to prove that innovation in design and concern for heightened customer experience are important features leading to the success of a retail structure.

The requirements of future tenants and the capability of offering services to the visitors are instrumental in defining the success of a mall.

Many malls across the country were developed without consideration of the catchment or tenant mix or the

profile of the visitors. This resulted in several unsuccessful developments.

While the basic features of the mall such as parking, access, and layout were similar across the country only a few could survive.

Aditya Krishna, Head Category Planning and Activation, Mondelez International says, “A majority of decisions are made by shoppers at the stores and, hence, it is critical for brands to have stunning stores. By bringing in global best practices, clear transparent matrixes and innovative yet impactful displays at large scale, this industry can match expectations of large brands that are looking to drive stunning visibility across sales.”

A senior official from Trent Hypermarket echoing similar view says, even today although we keep talking about customer experience, it has not become an all pervasive force. Customer experience has to be addressed more comprehensively.

Customer experience is the sum total of various journeys, connects and moments of truth that the customer interacts with the brands, companies and products and is important to drive growth.

However, the tide is changing as to create trust, confidence and expand brand presence, online players have started to seek offline presence. This strategy has started to pay off as their sales improved with online players coming up with brick-and-mortar stores and began chasing profitability by building trust among consumers.

Online players such as Clovia, Lenskart, Pepperfry, Zivame, and Urban Ladder are among the many who started to adopt this strategy to enhance customer experience and

trust. Clovia, a lingerie brand that started off as an online player six years ago, realized that only 5% of the customers bought lingerie products online, and the rest want to feel and try the product before buying.

Hence, the offline player understood the importance of customer experience. This helped them to boost the sales by 15% during 2017.

Currently, Clovia sells more than 5 lakh units a month with presence of more than 100 shop-in-shops and 25 standalone stores across the country. Furthermore, it is planning to add 150 new touch points and 15 exclusive stores by 2019, the Anarock report said.

FOREIGN DIRECT INVESTMENT (FDI)

Nearly $1.42 billion FDI has already been infused into the Indian markets between April ’00 and June ’18 - and global investments into Indian retail are all set to increase further.

The Indian retail sector is expected to reach $1,750 billion by 2026 due to changing demographics and increasing consumer expenditure, which is expected to rise to $3,600 billion by 2020. Although the new e-commerce policy may bring in a level-playing field between online giants and brick-and-mortar stores, there may be an impact on foreign investments, logistics and warehousing development and new job creation.

The reduction in foreign investments and profit cut for global marketplaces will hurt the Indian economy to some extent. Strong customer experience and high functionality of malls will reduce churn, increase footfalls and overall customer satisfactioN.

Having a retirement plan in place will enable you to lead a comfortable life even in your sunset years

FOR A LIFE OFFINANCIAL DIGNITY

BEYOND BASICS

What does it take to have a sense of security after you retire? It takes planning, retirement planning to be precise. In simple words, it means planning for the lifestyle you wish to have after your retirement, during the

golden years.

What does retirement planning aim to attain? Its primary objective is to not only ensure that you feel financially safe and sound in your old age, but also to enable you to do what you desire without having to make any lifestyle changes to attain it. It may sound far-fetched since you are planning for something that is decades away. Should you wait to reach a particular age to start planning for your retirement? While

there is no perfect answer to this as is with any planning, the earlier you start, the better.

It would be appropriate to start when there is some stability with respect to your income.

With the passage of time, there is flexibility to change to accommodate your shifting needs. The later you start, the more pressure you will feel in terms of the quantum to be set aside for savings.

Retirement planning is not a one-day

10Beyond Market 16th - 31st Mar ’19

34


consider. Work in the direction of diversification of risks so that you are protected from cyclicality.

NATIONAL PENSION SYSTEM

This is a government-approved low-cost pension scheme for people in the age group of 18 to 60 years. It is regulated by Pension Fund Regulatory and Development Authority (PFRDA).

Under Tier 1, one has to invest till the age of 60 years and then start getting annuity from the life insurance company on 40% of the corpus compulsorily while the balance 60% can be withdrawn which is tax-free.

Currently, the annuity portion is taxable in the year of receipt. Asset allocation can be decided by you based on your risk appetite but at no point in time can your equity exposure be more than 50%.

If you do not desire to specify your asset allocation preference, then based on your age bucket the allocation will be made.

This investment product provides a blend of both annuity and lump sum payment, which is preferred by many as psychologically regular inflow of funds gives more comfort. Tier-2 is voluntary and thus there is complete flexibility to withdraw whenever one desires.

PENSION PLANS

The pension plans in India are synonymous with annuity plans, where the idea is to provide pension (regular inflow) during retirement years. There are two phases i.e. accumulation and then distribution.

For the premium-paying term selected, you need to honour

later than it does currently. Therefore, if you single out this parameter, then your retirement kitty will certainly fall short of what is needed to maintain your lifestyle. As you would have already experienced, inflation eats into your savings and it is a constant.

The best way to incorporate inflation is by looking at the average inflation level over a decade and take it into consideration while arriving at the savings number you should have at the time of your retirement.

After all the planning you have done, a major medical emergency (that is if you have no health insurance in place) or any other calamity may throw you off guard, impacting the savings that were kept aside for other purposes.

So, do not underestimate contingency planning. Create a kitty that is easily accessible in case of any emergency or eventuality.

Retirement calculators that are available online can help you come up with the corpus needed to be able to live the life you desire after retirement or you can even take the help of a financial advisor. Sometimes having an advisor may be more fruitful because they tend to be objective and also bring with them years of experience.

WHAT AVENUES TO INVEST IN

You can opt for a blend of annuity and other investment products for your wealth to grow. Annuity will ensure frequent inflows of funds based on the frequency you select.

This, along with investment products that work towards wealth creation, will be an ideal blend for one to

exercise. The plan needs to be revisited annually or at least once in a couple of years.

The rationale is pretty straightforward - your lifestyle could change when you have more money at your disposal or if there is any major event in your life like marriage or having a child. Accordingly, appropriate financial adjustments can be made to your retirement plan for a comfortable life ahead.

The important question that needs to be asked here is how do you decide how much money is enough to fulfil all your aspirations when you retire. The first step is to list out your expenses by analyzing your lifestyle and then factor in inflation to arrive at that magical figure.

What do we mean by it? In simple words it’s nothing but what all do you need to lead a life that you deem satisfactory after your retirement. So, do you only consider your current lifestyle expenses for planning purposes? While it is important to consider your current way of life such as going out to eat, watching movies once a week may be, your other general household expenses, you may want to give it another thought given that you will have much more time at your disposal, which you don’t have currently.

You may aspire to go on an international holiday, a pilgrimage or watch movies quite frequently. As far as you can visualize, it is critical to consider them for retirement planning purposes.

The next step is to take into account inflation. The value of money diminishes every year because of inflation. The same amount of money will buy you lesser things one year


36

premium payment, which gets invested after deducting charges.

At the time of maturity, the scheme provides you with two choices – to either opt for any of the annuity policies that the company has to offer or alternatively withdraw the proceeds and purchase an annuity plan from another insurance company.

If there is no requirement to start annuity immediately, an individual can opt for a deferred pension product. In addition, pension plans have two compulsory features - guaranteed maturity benefit and death benefit.

In order to provide safety to the hard-earned money of the policyholder, all pension plans in India have to guarantee maturity benefit, which is either fund value or 101% of the premium paid or whichever is higher.

The guaranteed death benefit is 105% of the total premium paid if the policy is in force and if not, then the funds lying in the discontinued policy fund will be paid to the nominees.

There are several pension plans currently offered by both public and private players with both of them having schemes, which are fairly similar.

Analyze the costs across plans along with the benefits to determine the best fit for you. Some of the plans include LIC Jeevan Nidhi Plan, Bajaj Allianz Retire Rich Pension Plan and HDFC Life Click to Retire Plan, among others.

REAL ESTATE

Investing in a roof over your head when you have the wherewithal to

pay the EMIs is crucial to having a peaceful retirement.

Imagine yourself in the situation where you have to worry about paying rent and changing houses or even paying EMIs after you have retired when you have no regular income stream.

Having a house to live in after you have retired is crucial to retirement planning. If you own a house, in your old age you can even opt for reverse mortgage in case of shortfall of funds.

Simply put, reverse mortgage is a loan given against your property by the bank either in lumpsum or annuity depending on what you choose. It works well for those retirees who are asset-rich but cash poor. PUBLIC PROVIDENT FUND

This is an age-old investment vehicle, which has a tenure of 10 years extendable by 5 years. The interest on PPF is declared by the government every year. It is considered to be a very safe instrument as it is backed by sovereign guarantee.

There is a maximum cap of `1,50,000 annually and, hence, this can only be used as one of the many instruments for retirement planning.

EMPLOYEES PROVIDENT FUND

Under EPF, 12% of basic wages plus dearness allowance is contributed by the employer towards the scheme and an equal contribution is made by the employee.

An employee can choose to contribute a higher proportion but there is a cap on the same. Upon

retirement, the employee gets a lumpsum, interest included. This can result in a decent retirement kitty.

MUTUAL FUND SCHEMES

Mutual Fund houses have come out with retirement-focussed plans. Reliance Retirement Fund and HDFC Retirement Savings Fund are some examples. The idea is to create a corpus by the time you retire.

Withdrawals before the age of 58 are not encouraged and have an exit load of around 3% depending on the scheme. Any time after the age of 58, the corpus can be withdrawn. The fund managers use a blend of equity and debt to create wealth.

Also, if you are a disciplined investor, you need not restrict yourself only to retirement plans. You can use SIPs to create wealth by selecting a scheme of your choice based on your risk appetite.

HEALTH INSURANCE

One of the major expense heads once we get older is medical. If you have an insurance policy taking care of your health care needs, it will not create a dent in your retirement corpus should there be any development on the medical front.

Make sure you set aside the quantum needed to pay the annual premium when you retire as every year the policy needs to be renewed.

Retirement gives each one an opportunity to do things that you never had the time for before.

Consider all that you would like to do when you plan your retirement. Revisit it to make changes. This will help avoid miscalculations. Retiring rich is an achievable dream for those who believe in planning for iT.


38

indexation benefit is not available in case of bank FDs. For example, if one invests in FMPs in March having a tenure of three years and 10 days and gets matured in April ’22, it will be treated as long-term and taxed at 20% with indexation. But investors will get indexation benefit for four years (as it matured in financial year 2022-23).

The post-tax return from an FMP tends to be far better than returns on fixed deposits. This is one of the reasons why many fund houses launch FMPs between January and March every year. The indexation benefit for example is available for four years if one remains invested in an FMP for a little over three years. However, FMPs do come with a shorter time frame but in that case, the gains earned will be added to the total income of the investor and taxed as per income tax slabs and thus lose its tax-efficient feature. FMPs are very well compared with Bank FDs due to its fixed returns and maturity features. Advantage And Disadvantages Of These Schemes

One of the biggest advantages of FMPs is that they are less volatile compared to other debt funds and there is low risk of capital loss because securities are held till maturity.

As discussed here, FMPs offer better post-tax returns than FDs as well as other debt funds like liquid and ultra-short-term debt funds as they offer indexation benefits. Indexation helps to lower capital gains and thus lower taxes.

Even the expense ratio is lower as there is no cost of buying and selling the instruments.

prevailing in the markets. Interest rates and prices of fixed income securities are inversely proportional. When interest rates decline, prices of fixed income securities increase. Similarly, when there is a hike in interest rates, the prices of fixed income securities come down. However, in FMPs the security in which fund managers invest also matures at the time of scheme maturity, so there is less volatility. This product matures along with debt securities it has in its portfolio and thus is able to provide investors with fixed returns.

Typically, in India investors prefer safety over returns and that is the reason why even now many investors park their money in bank fixed deposits. However, the biggest problem with bank FDs is re-investment risks.

For example, if someone invests `10,000 for one year at say 7.5%, next year he is unlikely to get the same rate of returns. With inflation coming down and indication of rate cuts in the next few policies, it makes sense to invest in FMPs. Taxation And Double Indexation Benefits Compared To Other Debt-Oriented Products

This is the time when many fund houses promote FMPs as they provide indexation benefits. Returns from FMPs maturing after three years are treated as long-term capital gains and taxed at 20% with indexation. Indexation means adjustment of gains after taking inflation into consideration.

So, an investor who has invested in an FMP of over three years will be paying taxes only on returns over and above inflation-adjusted initial investment. This facility of

However, if interest rates are likely to come down from the current levels, investing in FMPs make a strong case in this period.

This article attempts to explain how FMPs can help investors, its advantages and disadvantages, whether investors must look at FMPs at this juncture and finally taxation. What Are Fixed Maturity Plans (FMPs)

Like other debt funds, FMPs are a type of debt funds that invest predominantly in debt instruments like government bonds and corporate bonds, among others. FMPs usually invest in certificates of deposits (CDs), commercial papers (CPs), money market instruments, highly-rated securities (like ‘AAA’-rated corporate bonds) over a defined investment tenure.

While other debt funds like liquid funds, short-term debt funds or credit opportunities funds are open-ended in nature, but FMPs are closed-ended debt funds. A closed-ended fund will be available for purchase and redemption only for a certain interval, announced by fund houses.

The closed-ended fund collects the money from investors through an NFO and later gets locked in for a fixed period according to the scheme. If a scheme is for three years, the money gets locked in for three years. Typically, returns in debt funds are the function of bond prices, which further depends on the market interest rate scenario. Open-ended debt funds get impacted by interest movements, which make it a volatile product in volatile interest scenario and vice versa.

The prices of fixed income securities are governed by interest rates

Download BEYOND App on


NEWS INA FLASH

Get real-time news at your finger tips with the BEYOND App. For sharp and

insightful news from across verticals like business, finance and stocks on the go,

download the BEYOND App and experience the difference anytime, anywhere.


Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We do not offer PMS Service for the Commodity segment .The securities quoted are exemplary and

are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139, INE230939139; MSEI Member ID-1067) : INB260939138, INF260939138, INE260939139: Single Registration No.INZ000202536,PMS Registration No: INP000002981; Research Analyst Registration No:

INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99. NIRMAL BANG COMMODITIES PVT LTD – MCX (Member ID -16590 /NCDEX Member ID -0362 /ICEX Member ID -1165) : Single Registration No. INZ000043630; NCDEX Spot: 10084; Comtrack Participants: CPID -5040; CDSL Commodity Repository Ltd: 12013300 Nirmal Bang Securities Private Limited CIN: U99999MH1997PTC110659; Nirmal Bang Commodities Private

Limited CIN: U67120MH1995PTC093213

Regd. Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010Regd. Office Address Of NBCPL: Sonawala Building, 1st Floor, 25 Bank Street, Fort, Mumbai -400001. Tel: 62737500


Most of the times, FMPs offer the safety and security of debt instruments and debt securities are safer and more stable compared to equities. For investors looking at stable returns and safety of principal, this is a good product to look at currently.

FMPs normally invest in highly rated instruments like government bonds, institutional debt and AAA-rated ones. In such cases, the risk of default is much lower, and that stability gets passed on to the investor.

Apart from that, another very important advantage of FMPs is that it virtually eliminates interest rate risks. When you are invested in an open-ended debt fund then any rise in interest rates will result in a fall in

the value of debt securities. Since FMPs are closed-ended they are locked into fixed returns and, hence, there is no interest rate risk in FMPs. However, there are two disadvantages of FMPs. One is liquidity risk and two, credit risk. Like every other financial instrument, even FMPs have credit risks. Though as of now we have not come across any news where credit risks have impacted FMPs, this instrument is prone to credit or default risks too.

Secondly, unlike bank deposits, FMPs cannot be redeemed in between the tenure of the FMP. Though these products are listed on stock exchanges where investors have an option may sell at the prevailing rates, but liquidity is very

weak and many times the trading is below existing prices.

In A Nutshell

In the past few years, there has been a change in the tax treatment of debt funds. Also, investors need to stay invested for at least three years to take the benefit of indexation on long-term capital gains tax. Hence, FMPs are best suited for those who have no liquidity requirement for at least three years.

Fixed Maturity Plans are a far better-placed, tax-efficient fixed return instrument. But investors should understand all the risks before investing in such a fund category. FMPs can become an efficient way of tax planning without taking any additional riskS.

SCHEME NAME 1 Year 10 Years5 Years 7 YearsAUM (Cr)

3 YearsNAV

Historic Return (%)

26.68296.6714.4150.47134.21

15912.88

8.395.585.8713.741.6516.14

-20.86

-23.1520.8315.96

16.9915.6215.9517.8218.4315.64

16.4416.83

-18.5820.1913.16

-16.01

-17.7316.3913.14

67624157231

105605124

-

Axis Focused 25 FundHDFC Capital Builder Value FundEdelweiss Multi-Cap FundMirae Asset India Equity FundTata Equity P/E FundNIFTY 50 - TRI

Diversified Funds

BEYOND NUMBERS


MUTUAL FUNDRECOMMENDATIONS

Here are a few mutual fund schemes we recommend you to consider from an investment perspective.

Large Cap Funds

SCHEME NAME

27.8841.71230.6134.66

15912.88

15.169.369.1213.6316.14

1 Year

-19.0215.6217.9015.96

10 Years

15.2515.1311.9816.2515.64

14.6014.4913.9516.9713.16

5 Years

15.3014.4413.2315.9913.14

7 Years

422120101133211694

-

AUM (Cr)3 Years

Historic Return (%)

NAV

Axis Bluechip FundICICI Pru Bluechip FundKotak Bluechip FundReliance Large Cap FundNIFTY 50 - TRI

Mid Cap Funds

SCHEME NAME1 Year 10 Years5 Years 7 Years

373335355635811

-

AUM (Cr)3 Years

Historic Return (%)

L&T Midcap FundKotak Emerging Equity SchemeDSP Midcap FundEdelweiss Mid Cap FundNifty Midcap 100 - TRI

NAV

132.0937.9353.6926.13

22772.80

-3.39-0.87-0.25-6.10-3.13

24.6621.8024.2824.4019.91

17.1315.1715.6813.2113.15

22.7722.7820.9120.7217.94

20.0518.9318.0119.6014.13

Small Cap Funds

SCHEME NAME1 Year 10 Years5 Years 7 Years

7245631255161604

-

AUM (Cr)3 Years

Historic Return (%)

Reliance Small Cap FundHDFC Small Cap FundL&T Emerging Businesses FundSBI Small Cap FundS&P BSE Small-Cap - TRI

NAV

39.6343.4824.4551.03

17350.37

-7.11-0.34-7.94-6.78-11.48

-22.04

--

18.14

17.7120.1820.6217.9112.83

25.2519.64

-27.9917.66

23.4318.22

-24.7713.37

Beyond Market 16th - 31stMar ’19 It’s simpli�ed...41

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

SCHEME NAME

17.3542.9431.1155.59

5726.17

12.678.983.880.3411.85

1 Year

--

20.0318.7117.55

10 Years

21.6413.8414.6115.5815.64

5 Years

-19.4217.6216.8013.86

-17.9518.4116.9914.59

7 Years

13811742675611741

-

AUM (Cr)3 Years

Historic Return (%)

Mirae Asset Tax Saver FundAxis Long Term Equity FundAditya Birla SL Tax Relief '96IDFC Tax Advt(ELSS) FundS&P BSE 200 - TRI

NAV

Dynamic Asset Allocation Funds

SCHEME NAME

28.5713.30

9319.84

18.716.54

18.12

3 month

11.840.0012.86

5 Years

4.473.049.90

3.834.5910.51

1 Year

12.309.0312.98

3 Years

1017542

-

AUM (Cr)6 month

Historic Return (%)

Invesco India Dynamic Equity FundSBI Dynamic Asset Allocation FundCRISIL Hybrid 35+65 - Aggressive Index

NAV

SCHEME NAME 3 month 5 Years1 Year 3 YearsAUM (Cr)

6 monthNAV

Equity Savings (Arbitrage MIP) Funds

36.5212.7214.11

1787.76

14.4610.4410.28

6.00

9.810.000.000.00

6.492.505.646.13

6.303.147.375.09

11.578.128.860.00

597920152239

-

HDFC Equity Savings FundReliance Equity Savings FundKotak Equity Savings FundNifty 50 Arbitrage Index

Historic Return (%)

SCHEME NAME 3 month 5 Years1 Year 3 YearsAUM (Cr)

6 monthNAV

71.3565.8620.72

2461.660.00

9.359.2510.919.509.68

8.699.098.679.038.29

10.8712.6111.7210.0111.14

7.837.897.768.187.67

7.988.828.078.017.62

15134871

117931139

-

Aditya Birla SL Corp Bond FundFranklin India Corp Debt Fund-AHDFC Corp Bond FundKotak Corporate Bond FundCrisil Short Term Bond Fund Index

Corporate Bond FundsHistoric Return (%)

Balanced Funds

SCHEME NAME 1 Year 10 Years5 Years 7 YearsAUM (Cr)

3 YearsNAV

53.5425.7514.60132.4854.27

9319.84

4.231.9912.256.852.6610.51

16.64--

17.7717.91

-

12.1610.3914.5614.0011.4112.98

10.1314.60

-15.4413.9412.17

12.7214.72

-15.3914.5412.86

21403944614952546712283

-

HDFC Hybrid Equity FundL&T Hybrid Equity FundMirae Asset Hybrid - Equity FundICICI Pru Equity & Debt FundReliance Equity Hybrid FundCRISIL Hybrid 35+65 - Aggressive Index

Historic Return (%)

SCHEME NAME3 month 5 Years1 Year 3 Years AUM (Cr)6 month

Historic Return (%)

NAV


Monthly Income Plans

42.3430.6743.56

4168.70

10.7812.8310.369.09

11.479.5110.0910.00

11.399.959.5112.90

8.664.517.188.11

10.508.198.288.89

15892662023

-

ICICI Pru Regular Savings FundKotak Debt Hybrid FundReliance Hybrid Bond FundCRISIL Hybrid 85+15 - Conservative Index

SCHEME NAME

18.8366.4223.0020.570.00

7.018.187.34

-4.376.39

3 month

8.619.9610.438.409.06

5 Years

11.7912.139.603.4513.73

7.618.586.953.727.29

1 Year

7.489.418.757.227.60

3 Years

14737892018825

-

AUM (Cr)6 month

Historic Return (%)

Axis Dynamic Bond FundFranklin India Dynamic Accrual FundICICI Pru All Seasons Bond FundUTI Dynamic Bond FundCrisil Composite Bond Fund Index

NAV

Dynamic Bond Funds

SCHEME NAME

14.9742.0514.900.00

9.969.60

-1.079.68

3 month

0.008.157.988.29

5 Years

11.6511.105.02

11.14

7.027.695.077.67

1 Year

7.717.807.357.62

3 Years

28721167403

-

AUM (Cr)6 month

Historic Return (%)

HDFC Banking and PSU Debt FundKotak Banking and PSU Debt FundUTI Banking & PSU Debt FundCrisil Short Term Bond Fund Index

NAV

Banking & PSU Debt Funds

SCHEME NAME

25.6144.6852.67

10.096.65

-5.33

3 month

8.798.407.94

5 Years

11.6010.532.39

6.445.912.53

1 Year

7.167.836.32

3 Years

28821274728

AUM (Cr)6 month

Historic Return (%)

ICICI Pru Bond FundSBI Magnum Income FundUTI Bond Fund

NAV

Medium to Long Duration Funds

SCHEME NAME

13.6314.5015.2029.750.00

4.578.457.588.759.68

3 month

0.000.000.008.708.29

5 Years

7.289.389.399.7011.14

5.936.626.056.937.67

1 Year

8.027.387.527.847.62

3 Years

73181622

163215459

-

AUM (Cr)6 month

Historic Return (%)

Aditya Birla SL Credit Risk FundAxis Credit Risk FundHDFC Credit Risk Debt Fund-SBI Credit Risk FundCrisil Short Term Bond Fund Index

NAV

Credit Risk Funds


SCHEME NAME

20.153287.69

20.5737.940.00

12.4111.6711.4013.4913.42

1 month

7.419.897.697.297.62

3 Years

9.288.769.0110.819.68

10.0612.4810.0211.6211.14

6 month

7.279.307.587.687.67

1 Year

43831251773165538

-

AUM (Cr)3 month

Historic Return (%)

Axis Short Term FundFranklin India ST Income-InstHDFC Short Term Debt FundIDFC Bond Fund - Short Term PlanCrisil Short Term Bond Fund Index

NAV

Short Term Funds

SCHEME NAME

18.1122.2213.460.00

8.667.626.589.68

3 month

9.389.080.008.29

5 Years

10.3711.138.1611.14

7.347.995.697.67

1 Year

8.549.217.667.62

3 Years

12483832332

-

AUM (Cr)6 month

Axis Strategic Bond FundFranklin India Income Opportunities FundUTI Medium Term FundCrisil Short Term Bond Fund Index

NAV

Medium Duration FundsHistoric Return (%)

SCHEME NAME

21.672280.212575.112568.60

0.00

10.419.559.708.2513.42

1 month

9.117.937.627.717.62

3 Years

9.758.619.017.499.68

10.548.879.268.2911.14

6 month

8.857.787.897.517.67

1 Year

6875457968385692

-

AUM (Cr)3 month

Historic Return (%)

Franklin India Low Duration FundKotak Low Duration FundReliance Low Duration FundUTI Treasury Advantage FundCrisil Short Term Bond Fund Index

NAV

Low Duration Funds

SCHEME NAME

2255.634132.962901.1925.400.00

7.997.468.468.877.25

1 month

8.207.426.758.647.23

3 Years

7.568.138.339.537.33

8.118.568.56

10.167.58

6 month

7.748.287.908.927.66

1 Year

24857345103

16712-

AUM (Cr)3 month

Historic Return (%)

BOI AXA Ultra Short Duration FundSBI Magnum Ultra Short Duration FundReliance Ultra Short Duration FundFranklin India Ultra Short Bond-InstCrisil Liquid Fund Index

NAV

Ultra Short Term Funds

SCHEME NAME

249.50258.012092.50

0.00

7.847.707.607.25

1 month

7.497.357.407.23

3 Years

8.138.078.147.33

8.458.258.387.58

6 month

8.277.978.137.66

1 Year

769059433128

-

AUM (Cr)3 month

Historic Return (%)

Aditya Birla SL Money Manager FundICICI Pru Money Market FundUTI Money Market FundCrisil Liquid Fund Index

NAV

Money Market Funds

For free account opening, give us a missed call on 18003157577 | www.nirmalbang.com

Regd. O�ce: B-2, 301/302, 3rd Floor, Marathon Innova, O� Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400013. Tel: 62738000/01; Fax: 62738010Regd. O�ce Address Of NBCPL: Sonawala Building, 1st Floor, 25 Bank Street, Fort, Mumbai -400001. Tel: 62737500

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risks. Investment in Securities/Commodities market are subject to market risks. Read all the related documents carefully before investing. Please read the Do’s and Don’ts prescribed by the Commodity Exchange before trading. We

do not offer PMS Service for the Commodity segment .The securities quoted are exemplary and are not recommendatory. NIRMAL BANG SECURITIES PVT LTD – BSE (Member ID- 498): INB011072759, INF011072759, Exchange Registered Member in CDS; NSE MEMEBR ID- 09391): INB230939139, INF230939139,

INE230939139; MSEI Member ID-1067) : INB260939138, INF260939138, INE260939139: Single Registration No.INZ000202536,PMS Registration No: INP000002981; Research Analyst Registration No: INH000001766; NSDL/ CDSL: IN-DP-CDSL 37-99. NIRMAL BANG COMMODITIES PVT LTD – MCX (Member ID -16590 /NCDEX

Member ID -0362 /ICEX Member ID -1165) : Single Registration No. INZ000043630; NCDEX Spot: 10084; Comtrack Participants: CPID -5040; CDSL Commodity Repository Ltd: 12013300 Nirmal Bang Securities Private Limited CIN: U99999MH1997PTC110659; Nirmal Bang Commodities Private Limited CIN:

U67120MH1995PTC093213


SCHEME NAME

22.5026.3413.5324.83

1787.76

5.225.485.195.876.00

3 months

6.656.900.006.690.00

5 Years

5.445.925.586.196.13

5.616.095.846.025.09

1 Year

5.956.216.076.120.00

3 Years

26812790

6851479

-

AUM (Cr)6 months

Historic Return (%)

Invesco India Arbitrage FundKotak Equity Arbitrage SchemeL&T Arbitrage Opp FundUTI Arbitrage FundNifty 50 Arbitrage Index

NAV

Arbitrage Funds

SCHEME NAME

298.442060.964364.023766.48

0.00

7.047.076.536.997.25

1 month

7.217.216.527.157.23

3 Years

7.137.156.617.097.33

7.407.416.897.317.58

6 month

7.497.526.867.447.66

1 Year

57548280101190935086

-

AUM (Cr)3 month

Historic Return (%)

Aditya Birla SL Liquid FundAxis Liquid FundFranklin India Liquid FundKotak Liquid FundCrisil Liquid Fund Index

NAV

Liquid Funds

Disclaimer Mutual Fund Investments are subject to market risks. Please read the offer document carefully before investing. Past 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. M=Months, Y=Year, D=Days Source: ACE MF, NAV as on 24th Mar ’19.

45

TECHNICAL OUTLOOK

BEYOND NUMBERS

Nifty towards 11,640/11,760 levels.

Overall, the view is cautious. Market participants are advised to not generate major long positions at current levels. Fresh positions can be taken only above the 10,570-mark on the closing basis. Market participants should be stock-specific and follow the trend till it reverses.

However, the bulls will be able to take control only if the Nifty closes and sustains for 1 to 2 trading sessions above the 11,570 level. As long as the Nifty remains below the mentioned level, an up-move with limited upside could be seen in the market. On the downside though, the next major support exists at the 11,200 level, and later on at 11,000/10,700 levels.

Market participants are advised to not generate major long positions at current levels. They should be stock-specific and follow the trend until it reverses.

The Bank Nifty support lies at the 29,000-mark. If it moves below the 29,000 level, then we may witness a rally towards 28,500-28,000 levels. Going ahead, the pullback rally is likely to continue only if it manages to give a breakout towards 27,500- 27,700 levels.

On the Nifty Options front for the April series, the highest Open Interest (OI) build up is witnessed near 11,200 and 11,000 Put strikes, whereas on the Call side, it is observed at the 11,600 and 11,800 strikes.

With four trading days to go before expiry (March), the indices have broken out above important consoli-dation range with a lot of buying

witnessed in Banking, Finance, Capital Goods and Power sectors. Stocks from these sectors are likely to perform well even in April. The rollovers in the last month were positive and we expect the rollovers to remain positive in the April series. India VIX, which measures the immediate 30-day volatility in the market, remained in the range of 14-17 for most part of March. Going forward, VIX will continue to remain elevated due to global risks and impending elections to be held in May in India.

The Put Call Ratio-Open Interest (PCR-OI) for Nifty Options has been in the range of 1.5-1.8 in the month of March. Going forward, it is expected to remain in the range of 1.3-1.8 in April.

The markets are believed to remain positive in the month of April with underlying buying demand near important supports of 11,200 and 11,000; profit booking can come near important resistances of 11,600 and 11,800. OPTIONS STRATEGY

LONG STRADDLE

It can be initiated by ‘Buying 1 lot 04APR 11300 CE (`160) and Buying 1 lot 04APR 11300 PE (`70)’. The net combined premium outflow comes to around 230 points, which is also the maximum loss. One can keep a stop loss at 70 points premi-um loss and maintain a target of 150 points premium gain. The maximum profit that one can get is unlimited. The markets are likely to move more than 250 points in either direction in the next 8 days, which can give good returns to the strategY.

ndia’s benchmark indices are less than 4% away from their record highs. But the pre-election rally in the broader market may be losing steam. Last week the ratio was consistently below 1, indicating that the sentiment in mid- and small-cap shares is weak in contrast to the bullish mood in blue chips, which form the Sensex and the Nifty.

The broader market was doing well till more than a week back. Now, the breadth has turned negative. Stocks are individually not holding up.

However, all eyes are set on the general elections in the country, which will be held in the month of May, and this event will keep the markets guessing in the short-term.

The interesting fact is that if we look at the PE ratio of the Nifty index, we see that whenever the Nifty touches the 28 PE, it crashes. This is the writing on the wall, and is based on historic trend. So, going ahead one should be cautious at current levels. Technically, the Nifty has good support at 11,200-11,100 levels whereas resistance is placed at 11,570-10,640 levels. Once the Nifty manages to achieve a breakout of 11,570 level on the closing basis, only then will we be able to witness fresh longs, which might take the

I



Non-commissioned work, however, is about something that one has not been told to do. Instead, it is something that people do for their own self, curiosity, internal satisfaction, etc.

In total, the researcher gathered 460 commissioned and non- commissioned works from different artists. These were evaluated by the artists from different backgrounds.

The results were quite startling. The research showed that the commissioned work was rated as significantly less creative than non-commissioned works.

To conclude, both kinds of works were rated similar in technical quality; nonetheless, it was the non- commissioned works, which got the highest marks.

This study effectively made a great argument for anyone who says that for motivation to do something really creative there is a need for tangible incentives.

This questions the reward-based system, that is, doing something in expectation of a reward. It precisely brings to point that today almost every work which is done is in many ways, considered to be commissioned work.

We have no idea how much more innovative and creative we can get if that motivation comes from within rather than a monetary or similar incentive.

The muted point here is that it is the non-commissioned work, which is far more creative, innovative and at times path-breaking.

When we ask people to do something in a certain manner or pay for what they do, they often think in a very

these two guys possessed. And Pink describes this as “Artistic Sensibility.”

According to Daniel Pink, this is one of the most important cognitive skills every person who wants to create something should adapt. Artistic Sensibility basically boils down to one thing, which is giving the society something it didn’t know was missing.

For instance, most companies focus on category enhancement or expanding product portfolio. But that according to Pink is an ok business. He rather takes inspiration from examples of Uber, Ola and few other businesses, which are category creators.

A strange car driver comes and picks you up for a ride at your desired time and location. This is a brilliant solution or something that the world was missing. This is not unique to business ideas.

A lot many professionals such as writers, painters, artists and movie makers, among others have an artistic sense. They give what the world is missing.

Now the question is if this is so important, then how do you know or wake up your inner sense?

COMMISSIONED VS NON- COMMISSIONED

Daniel Pink talks about the case of Harvard Business School’s research work where the researcher gathers around 23 artists and asks them to submit 10 of their commissioned artworks and 10 non-commissioned artworks.

Now, commissioned work means something that we are told to do and are paid or rewarded for doing it.

Motivation is a tricky subject, and has been a part of discussion among the rich and the powerful. The question that often gets asked is: how to continuously motivate ourselves to reach our goals and create value for ourselves?

While there are many self-help books and speeches out there, Daniel Pink, the business and management writer of the bestselling book “Drive”, has an interesting thought that solves the puzzle.

Through his works and interviews Daniel has demonstrated this as a recipe about “How To Win A Nobel Prize?”

WHAT CAN WE LEARN FROM WINNERS

Before you answer what can be learnt from winners, let us get some background. Daniel Pink talks about two brilliant physicists Andre Geim and Konstantin Novoselov, who won Nobel Prize in physics in the year 2010 for their ground-breaking experiments regarding the two- dimensional material graphene.

The duo says graphene, which is a form of carbon, is not only the thinnest ever but also the strongest – 70 times stronger than steel.

HOW DID THESE GUYS ACHIEVE THIS FEAT

There was something unique that the world was not able to see, which


48

narrow or constrained manner. If that is the case or by that means everything that happens or everything that people do in the world today is the commissioned work.

Organizations hire people to figure out what needs to be done, who, in turn, tell their subordinates or others to do the same.

Pink believes that while the majority of work is commissioned, there are people and organizations that are making efforts to engage people for non-commissioned work.

For instance, Pink talks about a software company, which gives their employees 24 hours every 3 months to work on whatever they would like to. They are free to do what they want and free to roam wherever they feel like.

The company has seen several breakthroughs and generated a lot of new creative ideas. It turned out to be a fabulous thing as it helped generate all kinds of innovative ideas and creations. It also led to the emergence of unique solutions.

Similarly, there is an American company, which devoted 10% of their man hours to non-commissioned work.

Another company devoted an hour a week - called it genius hour - to work on something that could improve their organization, change process, get rid of something, reduce time, improve efficiencies, etc.

The results for both of them were quite profound. Both of them came up with more profitable ideas and solutions that never came up during their commissioned time.

Now, since it is clear what artistic

sense means and where and how it applies through non-commissioned work, let us go back to the original case of two Nobel Prize-winning physicists.

The physicists used to work in a laboratory. But they also had a unique habit, which they referred to as “Friday Evening Experiments.”

In this format, they took 2 hours a week to work on something different or whatever they wanted to do. However, here they had to follow few rules.

They will work on...... something which is not related to their existing funding... anything which is not related to their due papers... whatever they want as long as it is not boring

These Friday evening experiments by the duo surprisingly led to an exceptional and brilliant breakthrough on graphene. Their Nobel Prize-winning work was not their commissioned or funded work, but it was something, which they did on their own without any promise of monetary rewards.

This essentially brings or answers the original question that one needs to carve out a little time for non- commissioned work in their normal life and organization so that they can ignite and bring out artistic sensibility. This turns out to be the basic premise of any breakthrough or innovation.

By devoting just about 10% or less of our time to doing something non- commissioned, we could simply ignite the genius within us and start witnessing exceptional results, which will be unique and different and possibly one that the world has never seen before.

While we continue to follow a routine or do mundane stuff every day, even if we make a habit of allocating few minutes of the day or week, it can provide a lot of space for improvement.

Even two hours of creativity every week means around 104 creative hours every year or equal to more than 4.3 days.

Finally, non-commissioned work is absolutely necessary. Historically, it is seen that most inventions are the result of that non-commissioned work.

Many disruptive and innovative ideas are being produced in remote places that are outside factories and R&D centres.

KEY TAKEAWAYS

1) One needs to re-determine his/her incentives for motivation. While monetary incentive may result in a temporary surge in short-term motivation, it may dampen spirits for long-term goals

2) Every individual has an artistic sensibility. One needs to be aware, ignite and practice that artistic sense, giving the world what it is missing to fuel creativity

3) It is high time we acknowledge the fact that monotonous and routine work can diminish a person’s creativity. To break out of the rut, one, therefore, needs to do something out of the ordinary or engage in non- commissioned work

4) Get some time for the non- commissioned work. Allocation of a little time every day or maybe every week could make a huge difference in an individual’s life. Make it a routine to get back to the non-commissioned worK.

Recently the Reserve Bank of India (RBI) announced that it will conduct a US $5 billion 3-year rupee-dollar swap auction on 26th Mar ’19. Simply put, the RBI will buy $5 billion from banks by giving Indian rupees now, and reverse the trade in 2022, by taking the Indian rupee back. Such a long-term foreign currency swap is a new liquidity infusion toolkit for the RBI to manage liquidity.

What Is Liquidity Management?

Through liquidity management, the RBI regulates money supply in the system and thereby controls interest rates. The RBI has got many tools for the same. One such tool is open market operations (OMO), where the RBI purchases government securities from banks and gives them Indian rupee or sells government securities and absorbs liquidity in the system. The former is expansionary in nature and lowers interest rates, while the latter tightens interest rates.

Why Is There A Need For A New Tool Of Liquidity Management?

The RBI has not shared any reasons. It has only said that it will undertake a swap in order to meet the long-term liquidity needs of the system and is adding one more tool to its toolkit. So, the swap window can be seen complementing the OMOs. While the swap tool is new for India, it is used by central banks of other emerging economies like Brazil, Russia and South Korea.

What Could Be The Rationale?

Markets have speculated that through such liquidity infusion, the RBI wants to address liquidity needs, which typically tightens towards March-end. Markets have also

IMPORTANT JARGON

speculated that the RBI wants to ensure transmission of its monetary policy through such a foreign currency swap window.

It is important to mention that interest rates in the markets have remained high despite recent repo rate (the rate at which banks borrow from the RBI) cuts by the RBI. OMO as a tool lack flexibility.

So, How Much Liquidity Will Be Infused Through The Swap Window?

It is estimated that the auction, if absorbed completely by banks, will inject around `350 billion of liquidity. This is against the total system liquidity deficit of around the same amount currently. There has been a liquidity crunch for the last one-and-a-half years.

So, even though the RBI cut the repo rate, banks were unable to transmit interest rates to borrowers. Now, with easing liquidity, banks may transmit any rate cuts by the RBI announced in its monetary policy.

What Are The Other Benefits Of Such A Move?

Enhanced liquidity will likely make Indian government bonds attractive to foreign investors. Foreign investors’ interest in government bonds have been muted, which increased the cost of borrowing for the government. The swap window will also make foreign borrowings for Indian corporates, like external commercial borrowings (ECBs), cheaper as it lowers any hedging cost for the duration of the swap window.

What Is There To Look Forward To?

Both the foreign exchange and the bond market have reacted positively to the measure announced by the RBI. It remains to be seen if such swap window will be used

RBI’S NEW TOOL: FX SWAP

BEYOND THINKING


frequently by the central banks in managing liquidity.

Will OMOs Become Less Frequent?

Typically, easing liquidity points towards lower interest rates in the system. Transmission of monetary policy actions can be expected in the months to come.

INDIA’S TRADE PREFERENCE WITHDRAWN BY THE US

Recently, the United States of America (US) terminated India’s designation as a beneficiary of its Generalized System of Preferences (GSP). GSP is the oldest US trade preference programme. The US also withdrew Turkey’s GSP status.

What Is GSP?

The GSP is the largest US trade preference programme introduced since 1976. It was designed to promote economic development in the US by allowing duty-free entry for thousands of products from around 120 designated beneficiary countries. India was one such beneficiary country. Products allowed under GSP were generally of specialized nature, specific to the exporting country in which the US lacked competitiveness. Around 3,700 products globally enjoyed GSP benefits.

How Did The GSP Help India?

More than 1,800 products including mechanical spare parts, ferro alloy, agri and food products, gems and jewellery, textile products, etc, were some of the popular export items under GSP to the US. In 2017, India’s total exports to the US stood at $45.2 billion. Exports to the US from India under GSP scheme was at $5.58 billion, which is around 12% of the total exports to the US.

Why Was The GSP Status Withdrawn?

The US undertakes periodic reviews on GSP. In April last year, the US had launched an eligibility review of India’s compliance with the GSP criterion. According to the US, India has implemented a wide array of trade barriers in recent years, which have impacted US exports to India negatively.

In short, the benefits extended by the US were not reciprocated by India. It is important to note that trade deficit of the US (India is exporting more than it is importing from the US) with India has shrunk to $21.3

billion in 2018 from $22.3 billion in 2017. In 2016, the figures stood at $24.4 billion. Clearly the deficit is coming down.

Was The Move Expected?

Yes. Trade has been an area of frustration in the US-India bilateral ties in recent years. Under the Donald Trump administration, the US wants reciprocity in terms of tariff and duties with all trading nations in order to boost local economy and create jobs. Business lobbies in the US are throwing their weight behind the US government to open up the Indian market for sectors like IT, medical devices, dairy and e-commerce, among others.

How Will The Withdrawal Of GSP Impact India?

According to media reports, the impact of the withdrawal of GSP will be limited only to the tune of $190 million. While in absolute terms the amount is lower, small industries were the major beneficiaries of GSP. Now, they will have to bear extra tariff if they want to export the same products to the US. This will mean lower profitability and lower expansion plans. Some will also face job losses. The government will have to provide some subsidy support to these exporting entities in the near term.

When Did Relations Start Spoiling?

In May last year, the US imposed tariff on steel and aluminium products under the garb of protecting America’s national security. In a reaction to this, India had announced its intention to impose retaliatory tariffs on 29 key imports from the US. However, India has refrained from imposing those retaliatory tariffs. The tariffs have been repeatedly postponed by the Indian government. The next deadline for the tariffs to kick in is 1st April. It’s unclear if India will stick to that date or postpone it again.

What Is The Future Of The India-US Trade Relation?

India has 60 days to convince the US to allow the GSP status. The US is India’s largest export market and most important economic partner. The US is an important ally for India. Even as the announcement of withdrawal of GSP was made, India was negotiating an extensive trade package with the US. The package was the reason why India deferred the imposition of tariff on US products. The package covers all aspects of bilateral trade with the US. India wants to strike a deal with the US before the general elections in the country in MaY.


50

bm issue 155 - nirmal bang issue 155.pdf · o˜ ganpatrao kadam marg, lower parel (w), mumbai - 400...

Documents