PARALYZED ECONOMY? C VID-19 - Outlook Money - Conclave pg 54 - Outlook India
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Outlook Money - Conclave pg 54 Interview: Prashant Kumar, Yes Bank pg 44
APRIL 2020, `50
O U T L O O K M O N E Y. C O M
C VID-19
PARALYZED
ECONOMY?
Restructure your investments
amid gloomy economy with
reduced interest rates
8 904150 800027 04
Contents
April 2020 ■ Volume 19 ■ issue 4
pg
pg
10
10 pg
pg54
43
Cultivating Outlook Money
OLM Conclave
Conclave
valour
Reports and insights from the third
edition ofshare
Stalwarts the Outlook
insights Money
on India’s
Conclave
goal to achieve a $5-trillion economy
Investors can look out for
a definite recovery point 36 stock Pick
in the market scenario,
34 stockstrategies
Management Pick of Jubilant
Highlighting
FoodWorks theCrompton
and management strategies of
Greaves
considering India’s already JUBL and Electricals
Consumer CGCE
slow economic growth
38Morningstar
40 Morningstar
InInfocus:
focus:HDFC
HDFCshort
shortterm
termdebt,
debt,HDFC
HDFC
ds
smallcap
small capfund
fundand
andAxis
Axislong
longterm
termequity
equity
d ets ate e un ties
Gol ark Es t cn lF di 58Yes
46
M al ura ua
o YesBank
Bankcrisis
interview
Re Ins ut m
m Unfair
AT1 treatment
bonds meted
write-off out
leaves to the AT1
investors in a
M Co bondholders
shock, exposesingaps
the in
resolution scheme
our rating system
66My
52 MyPlan
Plan
COVID-19: How dedicated
Dedicated
discipline
SIPshelp
SIPs can
disciplineininyour
yourlife
canbring
lives
bringfinancial
financial
Volatile Markets
Investors need to diversify and Regulars : :6 6TalkTalkBack
Regulars Back
restructure portfolios to stay invested
and sail through these choppy waters Columns ::
Columns
AjayBagga,
Ajay Bagga, SSNaren,
Naren,Farzana
FarzanaSuri
Suri
Cover Design:
Cover Design:Vinay
VinayDOMinic
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Published
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forthe
themonth
monthofofMarch 2020; Release
April 2020; Releaseon
on11April
March 2020.
2020. Total
Total no.no.
of of pages
pages 7092
OutlookMoney
Outlook Moneydoes
doesnot
notaccept
acceptresponsibility
responsibilityforforany
anyinvestment
investmentdecision
decisiontaken
takenby
byreaders
readerson
onthe
thebasis
basisofofinformation
informationprovided
providedherein.
herein.
Theobjective
The objectiveisistotokeep
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readersbetter
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andhelp
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themdecide
decidefor
forthemselves.
themselves.
www.outlookmoney.com April2020
www.outlookmoney.com April 2020 Outlook
OutlookMoney
Money 33
Chapter One
Stay Calm And Avoid Panic Selling
I
n the last few weeks, things have not few months and bring in some cheer for the
really been favourable for Indian investors.
investors. The stock markets have tanked World over, the media is going through
miserably and globally there are clear signs a tough time. Conditions are such that it
of recession. There is a crisis of confidence in is increasingly becoming difficult for us to
the markets and there is uncertainty all over. continue with our normal schedules.
These are truly difficult and trying times. It is often said that desperate times
Systematic Investing The entire world is in the throes of one of require desperate measures and we are truly
Plans can keep you afloat its most formidable challenges ever faced by going through desperate times at present.
during trying times mankind. The COVID-19 virus attack has Obviously, at our end too, it will call for
taken the entire world unawares. The way drastic measures. We will do our best to
out is still unknown. While hi-tech medical ensure that our readers stay safe and ensure
research is ongoing, it is still uncertain when that we do not compromise your safety and
we will be able to see the light at the other security in such times.
end of the tunnel. The PM has put the entire nation in a
We have seen unprecedented three-week lockdown in which nothing
developments in the stock markets in the last but essential services will work. That puts
few weeks. The Sensex has dropped by 2000 us in a difficult position to carry on with
points plus in a day more than once. It stands normal working schedules as printing and
at around 29,000 now as against 38,000 last distribution of the magazine will not be
month. The story with the Nifty is similar. possible. Moreover, we would not want to
Investors have taken a heavy hit and no one send magazines to our readers at this point
is bold enough to venture into the unknown of time as the print copies go through many
at this point of time. Making matters worse hands before reaching our readers and may
are predictions by international bodies that inadvertently become carriers.
India’s GDP growth will plummet. Some, like As such, we have decided to temporarily
Moody’s has predicted that GDP growth will suspend the print edition of Outlook Money
be just 2.5 per cent for calendar year 2020, for the time being till things improve. I hope
down from 5.3 per cent forecast earlier. That our readers and subscribers will understand
is not helping investor confidence. our predicament. In many places across the
What is making things worse is the huge country, newspapers and periodicals have
drop in crude prices which is affecting the stopped production exactly for the same
global economy. With the US becoming reasons.
one of the worst affected countries by the But we will not leave you news-dry even in
COVID-19 attack, the impact is being felt such times. We will produce an e-magazine
worldwide and India is not an exception. on schedule and we will ensure that
The times are going to be tough for e-magazine, with all its elements reaches you
the months to come even after the virus so that you get your regular fill of our stories,
massacre recedes in India. The markets, investment advice and insights into the
though gaining in pockets, will take time to financial world. Of course, our website www.
come back to their earlier glory primarily outlookmoney.com will continue to update
because the Indian industry has been hit you on the latest in the financial world.
badly. Manufacturing and productivity has We hope to resume regular print
been severely affected. The state of company production as soon as things improve and
results in the next quarter is anybody’s guess. we are able to restart normal working
In such times it does not pay to do any schedules. Till such a time, we request you to
panic selling and will make sense to stay bear with us.
ARINDAM MUKHERJEE invested for the long term because the Praying that all of you stay home and
arindam@outlookindia.com markets may show some resilience after a stay safe.
4 Outlook Money April 2020 www.outlookmoney.com
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Talk Back
Dreams Have No Expiry Date
Being someone of that
ripe age, Latika’s story EDITOR
Arindam Mukherjee
about miseries and
EQUITIES AND MARKETS EDITOR
following the trail of Yagnesh Kansara
opportunities to creating SENIOR ASSISTANT EDITORS
her own ferry of destiny, Aparajita Gupta,
Anagh Pal
inspired me to a different
SPECIAL CORRESPONDENTS
height. In times when Himali Patel,
women are coming out of Vishav
their shell and efficiently PRINCIPAL CORRESPONDENT
Nirmala Konjengbam
contributing to the
economy, Latika did not step back thinking about her age, as dreams SENIOR CORRESPONDENT
Dipen Pradhan
are to be lived without considering the age. She had her moments
NEWS DESK
filled with obstacles, but her sheer desire to not overlook her talent COPY EDITOR
and pick up the resources that she finds midway, only to give a shape Sudeshna Banerjee
to her dreams. I would like to thank Outlook Money for giving the SENIOR SUB EDITOR
Sampurna Majumder
deserving exposure to women like Latika Chakravorty.
TRAINEE SUB EDITOR
Shipra Sinha, Kolkata Indrishka Bose
WEB CORRESPONDENT
Building Her Legacy Rajat Mishra
DIGITAL TEAM
It was such a delight to read this particular article on how Manju Amit Mishra, Sneha Santra
Yagnik, with her passion and high skill, decided to excel in a male- ART
dominated domain. Her achievements Praveen Kumar. G, Vinay Dominic (Senior Designers)
Girish Chand (DTP Operator)
and her sustenance in the real estate
PHOTO EDITOR
sector should be highly appreciated. Bhupinder Singh
I would request Outlook Money to TECH TEAM
come up with such intriguing articles, Raman Awasthi, Suraj Wadhwa
which is absolutely important for this Business Office
generation to witness. CHIEF EXECUTIVE OFFICER
Indranil Roy
Ishan Sharma, New Delhi
PUBLISHER
Sanchita Tyagi Rawat
Shore Amid The ASSISTANT VICE PRESIDENT
Tushar Kanti Ghosh
Ocean Of Fetters Circulation & Subscriptions
Anindya Banerjee,
Life of an entrepreneur Gagan Kohli, Vinod Kumar (North)
might seem all shiny G Ramesh (South), Arun Kumar Jha (East)
Shekhar Suvarna
and successful, but there
goes a lot of blood and Production
GENERAL MANAGER
sweat to garnish such Shashank Dixit
a lifestyle. This cover CHIEF MANAGER
story on interviewing an Shekhar Kumar Pandey
entrepreneur from dawn MANAGER
Sudha Sharma
to dinner was an excellent
DEPUTY MANAGER
one. I loved how the entire article is weaved under a timeframe and Ganesh Sah
how at the end when she sits for dinner, she looks at her workaholic ASSOCIATE MANAGER
life and smiles while raising a toast. Gaurav Shrivas
Tejas Malhotra, Mumbai
Accounts
VICE PRESIDENT
Diwan Singh Bisht
Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, COMPANY SECRETARY & LAW OFFICER
New Delhi 110029, or letters@outlookmoney.com. Please mention your full name and residential address. Ankit Mangal
6 Outlook Money April 2020 www.outlookmoney.com
Talk Back
Securing The Self
Against Maladies
I loved the insurance article, which
talks about the necessity to buy
health policies so that they do not
have to face any miseries when any
sickness might arrive. It was very
informative, especially the column
that focuses on the varieties of the
plan and alongside mentions the
insurer, eligible age and what they
cover.
Rohan Desai, Chennai
Young Fellas’ Financial
Affairs focused on the credit score, it Regents’ Share In
I have always been curious about became all the more interesting. Fintech Realm
the concept of Gen Z being in a Gen Z’s fantastic ability to use Women leaders in the world of
digitally advanced stage of this digital platforms to equip them on Fintech business is a story that
century, as compared to the and around credit. I enjoyed reading needs to come to a surface level
millennial. Added to this concept, this and got to learn a new concept. for the readers. Upasana Taku’s
when Kalpana Pandey’s article Shruti Gupta, Mumbai journey is really inspiring for
thousands out there, who are out
there achieving milestones. I being
FORM IV (See rule 8)
someone from this industry can
OUTLOOK MONEY relate to it to a far extent. The
1. Place of Publication New Delhi questions like, whether a woman
2. Periodicity of Publication Monthly
is traveling alone for a business
3. Printer’s Name Vinayak Aggarwal
Whether Citizen of India ? Yes
meeting, still exist. However, I
(If foreigner, state the country Not Applicable believe a strong vision and a belief
of origin) in one’s capability and talent is all
Address AB-10, Safdarjung Enclave, New Delhi - 110 029
that a woman requires.
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Whether Citizen of India ? Yes Aratrika Majumdar, Bangalore
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of origin )
Freedom To Enlighten
Address
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AB-10, Safdarjung Enclave, New Delhi - 110 029
Arindam Mukherjee
And Empower
Whether Citizen of India ? Yes I am purchasing outlook money
(If foreigner, state the country Not Applicable magazine for a long time, but
of origin )
Address AB-10, Safdarjung Enclave, New Delhi - 110 029
the March issue was profoundly
6. Name and addresses of OWNER beautiful. The personal finance
Individuals who own the
newspaper and the partners of
Outlook Publishing (India) Private Limited
Windsor, 7th Floor, CST Road, Kalina
section where it is mentioned that
shareholders holding more Santacruz (East), Mumbai 400 098 women are generally considered
than one per cent of the
total capital SHAREHOLDERS as the risk-averse, however, it does
1. Varahagiri Investments & Finance Pvt. Ltd.
RAHEJAS, Corner of Main Avenue & V.P. Road, Santacruz(West), Mumbai-400 054. not mean that you have to shun
2. Manali Investments & Finance Pvt. Ltd. the financial instruments, this
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3. Matsyagandha Investments & Finance Pvt. Ltd. statement is absolutely necessary.
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4. Bloomingdale Investments & Finance Pvt. Ltd. It is important for women to
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understand the need for the money
RAHEJAS, Corner of Main Avenue & V.P. Road, Santacruz(West), Mumbai-400 054. to grow and not just keeping them
I, Vinayak Aggarwal, hereby declare that the particulars given are true to the best of my knowledge and belief. in the savings bank account. The
Dated: 3 March, 2020 sd/- language was very lucid, and overall
Vinayak Aggarwal
PUBLISHER a great article.
Souvik Pandey, Bangalore
8 Outlook Money April 2020 www.outlookmoney.com
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Cover Story
Cash &
Courage
In CrIsIs Is
PrICeless
Long-term investors should buy into extreme bouts of volatility
By Yagnesh Kansara
T
he coronavirus outbreak is like a Coronavirus is a serious set-back to the
Lehman Brothers moment for the economy in the short-run and a death knell
corporate world but in a much larger to the financial sector in the long term if this
sense, particularly for the emerging and menace does not stop. Mainland China and
developing markets. The Lehman Brothers Hong Kong‘s experience is that corona can be
crisis was only limited to impacting the thwarted and controlled. However, it is to be
banking/ financial markets, associated with seen how this stops worldwide.
financial aspects of corporate with respect to India is relatively insulated given the
raising capital and capex. The crisis did not relatively weaker link to Asia’s supply chain.
have any impact on the general growth and Given that the incidence of coronavirus has
consumption cycle of India, China, South Asia been surprisingly low in India (probably
and West Asia. Furthermore, the crisis was aided by under-reporting but also helped by
limited only to the banking level and had not warm weather) and assuming that it does not
spread to the day-to-day functioning of most increase in the coming weeks.
companies. Rahul Singh, Chief Investment Officer
The stock markets, as measured by the (CIO) – Equities Tata MF, says, “We prefer to
benchmark indices, have fallen by around 25-30 analyse the impact of a global slowdown and
per cent this year, and for once this has been possible China linkages on the earnings of
in sync with global markets as a whole. This specific sectors instead of a broader impact
heightened volatility and the general risk-off on India’s economy as of now. China is a large
attitude in the global markets is due to the supplier of raw materials, components and
uncertainty and fear created by COVID-19 and intermediates for textiles, pharmaceuticals,
the unprecedented actions of the governments chemicals and consumer durables/electronics.
to contain it. Decline in Chinese export capacity will impact
10 Outlook Money April 2020 www.outlookmoney.comwww.outlookmoney.com April 2020 Outlook Money 11
Cover Story
demand sluggishness for over a year; also the
MAhESh SiNghi, automotive sector is on the cusp of adopting BS
Founder & MD, Singhi Advisors VI regulations effective April 1, 2020, leading to
higher cost of components and hence vehicles,
CRISIL notes.
Many aggressive corporates Also 3 Giga Watt (GW) of solar projects,
will start bargain hunting in worth Rs 16,000 crore, could be at risk of
acquiring strategic assets penalties for missing their project completion
deadline if the coronavirus impact prolongs
and delays supplies of solar panels, CRISIL note
adds, saying credit profiles of some of the firms
India’s output and exports from these sectors.” implementing these projects could therefore
On balance, n-CoV will prove to be a mixed witness some strain.
bag across sectors in the fourth quarter of In this period of time, people will start
this fiscal. But if it persists, Indian industry is working more inwards, which will lead to
heading for serious disruptions. Sectors such as being conservative followed by betterment of
auto components, pharma bulk drugs, and agro organisations and their cost structure, which
chemicals can survive the n-CoV headwinds to will further shrink the economy. Over the
some extent in the near term, given inventory next two to three months, China’s supply-
stocks of two months. However, as inventories based companies (like API’s, base chemicals,
run down, industry will face significant electronics) will be impacted and even Indian
pressure. Overall, that would eventually result exporters in the minerals/ mining-based
in more sectors being negatively impacted, industry (like iron ore, industrial salts) will
outweighing the positives, CRISIL says in its witness a volume drop and margin shrinkage.
Impact Note. This will have a cascading impact on every
Singh adds, “Our interaction with Indian single value chain.
corporates, however, indicates that the The manufacturing sectors, including
inventory levels are adequate and some of the hospitality, airlines, entertainment, are all
Chinese capacities are coming back gradually worried. All the chambers of commerce are
and they don’t expect the situation to get worse. busy issuing their advisories. The stock market
Earnings of commodity driven companies, is highly volatile and devastated. Banks and
however, would be impacted as global financial institutions are bleeding. There is
slowdown has impacted commodity prices bloodbath at the stock exchanges. Bigger
including crude oil.” worry is the performance of the banking
Credit profiles of firms in select sectors industry which is already struggling with NPA
could also get impacted if the supply disruption issues. A large number of industries of all sizes
continues beyond March - for instance and shapes are going to interpret corona as
automotive components, renewable (solar) Vis Major - meaning - Act of God and would
and diamonds. Both diamond and automotive approach lenders to restructure the facilities
component sectors are already witnessing and / or for reductions on interest and / or
loan waivers. The large corporates, SME,
SSME and micro industries all are likely to
how indian Markets Fared face actual challenges.
Unfortunately those who are not stressed
1 Week 1 Month YTD may pretend to be stressed, which is going to
add to the woes. There may be legal challenges
Nifty -17.3% -37.0% -37.5%
to the contract on the doctrine of ‘Act of
Sensex -17.2% -36.9% -37.0% God’ and this may create unprecedented and
unknown challenges.
BSE Midcap -18.3% -38.1% -35.1%
Rajesh Narain Gupta, Managing Partner,
BSE Small Cap -20.0% -39.8% -35.2% SNG & Partners, says, “In these unfortunate
times what we expect is that all should behave
BSE 500 -17.7% -37.3% -36.8%
like statesman. Bankers should not act as fair
12 Outlook Money April 2020 www.outlookmoney.comCover Story
weather friends and should come forward to and soaps with people stocking more than what
help all those borrowers who are in real stress they can consume. The resultant benefit of
owed to the corona-related problem and explore volume increase of stocking will be a temporary
how best the adjustments can be made with the phase. However, it will be followed by delayed
stressed account so that the economy revives.” buying because consumers will have enough
It is better to survive than to perish. goods stored unless things are perishable.
Regulators and the government have come Every buying decision or discretionary spend
forward with pragmatic solutions as is expected like travelling, property purchase, marriage
in a welfare state. Most importantly, the functions, entertainment or even buying
borrowers have to exhibit their integrity and of essentials is likely to be deferred. The
approach their friendly bankers with truth and far-reaching impact will be felt not only on
true statements. It is not the time when they consumption-led industries like garment,
adopt unfair tactics or try to hoodwink their travel, restaurants and entertainment but also
lenders, Gupta explains. deferment of routine corporate expansion plans
This time around India has already been in an economic ecosystem where all sectors are
grappling with problems in the financial inter-linked.
markets with big players like IL&FS, Yes Bank With financial markets going down and
and DHFL going down simultaneously. At such interest rates reduced, the ability and intention
a time, any disruption in the consumption cycle to borrow and take incremental risk will also
and supply chain would exert a definite impact be affected considerably. In a way, it denotes
on the economy. We are already observing an that the economy will shrink and prepare
overstocking of goods like foodstuff, sanitisers itself for structural changes, before it bounces
14 Outlook Money April 2020 www.outlookmoney.comIn Focus
This Too Shall Pass
Bright days are ahead, probably markets have already bottomed out or is in the process of
bottoming out in the midst of the maximum scare
S
tock Market always look Last 3 decades of investing has
ahead and the long-term taught me four important things
smart investors are the ones which has been proven right time
who will put money to work and again:
at this juncture. We want our Respect Valuation: When market
investors to play smart by making valuation is very attractive, you
lumpsum investments into equity have to bet saying that the current
funds with 3-5 years view and be economic/ market situation will
part of the smart money movers. normalise. All equity market indices
are trading at rock bottom valuations
The reasons for the fall have even when compared to global
been three folds: financial crisis periods.
Corona Virus Impact and the Believe Market Fundamentals: India
effect on the economies are has the best demography and is
uncertain the fastest growing economy in the
Corona Virus medicine/vaccine world. Fundamentals don’t change
is not known to anyone overnight.
Economic slowdown around Watch Market Sentiments: You need
the world expected to reduce to bet against the market sentiments.
Crude Oil demand. Crude Oil, George Heber Joseph Look for Triggers: Look for upside/
demand & supply issues are downside triggers depending on the
not known and the impact it market valuations.
has on various economies Markets bottom out in midst of the scare and
market peaks in midst of optimism. At the thick
“ITI Mutual Fund would like to convey this message of the problems generally markets bottom out.
to all of you. So, cutting all noise and focusing on long term
With the headlines screaming in your face about the investing makes a lot of sense.
gravity of the current situation, we strongly believe Investing into bust and selling into booms is very
that you need to look beyond the headlines. important to make big returns. This is the learning
Invest with discipline, keep in long term perspective, from all great investors like Warren Buffett, Seth
remember your investment horizon and remain calm Klarman, Charlie Munger, Benjamin Graham etc.
in times of distress are the key to long-term investing
success. HAPPY INVESTING AND BE SAFE.”
We are confident that all our funds are well poised
to generate good risk adjusted returns in the long run. Few mistakes that investors should avoid: -
Don’t panic at the wrong time and redeem your
ITI Mutual Fund view, in the next 3-5 years: investments.
Equities stack up as the best asset class to invest and Don’t mix Risk and Volatility
generate long term returns. Don’t bet on the same sectors which have done very
Small Cap segment will generate maximum returns well for a long period pre-crisis.
followed by Mid-Caps and Large Caps. Don’t make decisions based on hearsay, rumours
Small Cap segment returns will beat large cap and baseless assumptions.
returns by a wide margin on a 1 year, 3 year and
5-year basis. This is the time to be rational, invest maximum you
An outstanding opportunity of this decade: When can according to your risk appetite, ride through the
fundamentals are strong and the market valuations volatile period and make money, so we all can together
are at lowest point in two decades this becomes a laugh at volatility next time when it comes. In few
very good investment opportunity. years you would be very happy with your decisions.
We can prepare ourselves in this situation for a
better tomorrow. Nobody knows the bottom of the
corona virus impact or bottom of the markets. The author is the CEO and CIO of ITI Mutual FundCover Story
back again after a couple of quarters. In such a
situation, M&A activities will certainly take a
hit, even though you may witness many assets
being available for a grab. When the chips are
down and the atmosphere remains uncertain,
corporate world will have big resistance to take
risk, even though the market may remain liquid.
Mahesh Singhi, Founder & MD, Singhi
Advisors feels, “Many aggressive corporates
with strong balance sheets and well-oiled
management team will use such times for
bargain hunting in acquiring strategic assets. So
the deal street will largely be restricted to value
buying and bargain hunting for cheap assets
for next few quarters. New class of acquirers
such as buyout funds, family offices or special
situations funds with patient capital will
leverage these markets to consolidate certain
assets and build alternative platforms over the
next 12 -24 months.”
Certain sectors like chemicals, building
materials, business services, food processing,
which have a large number of sub scale players,
will witness consolidation with emergence of
new entrants, similar to what happened during
the early 2000 since many non-sellers will turn
sellers while natural buyers will remain on
the edge, opening doors for new hawks on the
streets, says Singh.
“Private equity funds may explore and
exploit by investing into listed and unlisted
stocks as valuations will be low till full recovery
happens and stressed industries will look for
capital,” says Gupta. Corporate world will evaluate whether to save
“The task is not easy. We have an option to their own units and core work or invest in any
sink together or sail together. Coronavirus shall acquisition,” says Gupta.
reset the world economic and manufacturing Coronavirus and its impact on global GDP
order. Countries will wonder whether to have will keep crude and commodity prices down,
their own manufacturing base or rely on foreign which can keep the non-food inflation and
imports. Countries may also consider whether current account deficit in check. The GDP
the foreign investments made in any form or impact at the global level would be mainly
consolidation should happen at home country. on the account of a drop in Chinese demand;
decline in Chinese exports due to supply chain
disruptions and decline in international travel
and tourism.
RAjESh NARAiN gupTA, This macro stability on the external front is
Managing Partner, SNG & Partners critical, especially when government has been
forced to adopt a mild fiscal boost through
relaxation in the fiscal targets for FY21. In
Bankers should not the medium term, the weak outlook on crude
act as fair weather friends prices and potential for improvement in
but help those in real stress Indian exports due to shift in supply chain
logistics away from China can provide an
16 Outlook Money April 2020 www.outlookmoney.comhow global Markets Fared
1 Week 1 Month YTD
Dow jones* -17.30% -34.40% -32.80%
FTSE100* -3.30% -30.20% -31.20%
Nikkei 225^ -0.7% -28.1% -28.6%
hang seng^ -5.9% -21.4% -23.0%
Selective bottom-up midcap stocks and rural
recovery plays remain in focus, ”Singh explains.
Since the outbreak of COVID-19 contagion
assumed dangerous proportions, stock markets
across the globe have been bleeding post
Valentine‘s day (February 14) and everyone
associated with it have been forced to undergo
quarantine in terms of their investment.
With the COVID-19 outbreak declared as a
pandemic by the World Health Organisation
(WHO), panic gripped the financial markets
across the globe including Indian markets,
where the benchmarks have shed in excess of
37 per cent in only 25 trading sessions. This
works out to be fall of 1.48 per cent on an
average a day in last five weeks.
All the leading Global benchmark indices
of from Nikkei, Hangsang, Dax, CAC, FTSE,
DJIA have been bleeding profusely. Back home,
Indian benchmarks, Nifty and S&P Sensex,
have also lost 37.15 per cent and 37.02 per
cent respectively as on March 23, 2020 in 25
useful counter balance. On the domestic front, sessions beginning February 13, 2020.
the GDP growth slowed down further in the The severity of the panic is witnessed that
December quarter as consumption slowed in less than a week’s time benchmark indices
down even as investment slump continued. in India have hit circuit breakers. The bourses
Government expenditure and relaxation in have clocked alarming level of trading volume
fiscal targets continues to provide support and dramatic rise in the turnover. The trading
to GDP growth. Meanwhile, there have been volume (number of shares traded) of Nifty
green shoots visible in terms of power demand during the period has risen from 62.35 crore
in February and low inventory levels like autos shares to 107.23 crore shares. This indicates a
provide scope for support to IIP and GDP rise of 72 per cent. During the same period, the
growth numbers. However, the biggest driver average daily Nifty turnover has risen 44.38 per
in the short term is likely to come from the cent, from Rs 20,760 crore to Rs 37,321 crore.
good rabi crop and higher agricultural income What is more worrying fact is that the broader
(aided by higher food inflation). index Nifty-500 and BSE-500 have lost more
“In this context of expected gradual value than benchmark indices. Both these
economic recovery and assuming no major measures have lost 37.33 per cent and 37.72 per
outbreak of the virus in India, we continue to cent respectively during the period.
build our portfolios around earnings stability Ankur Maheshwari, CEO, Equirus Wealth
and identifying stocks with potential to beat says, “COVID-19 has disrupted economic
earnings expectations thus providing the alpha. activity in multiple ways. With what started
www.outlookmoney.com April 2020 Outlook Money 17Cover Story
Rebalance Your Portfolio
The economic impact of coronavirus has disrupted the financial markets world over. We
have seen stock markets across the globe bleeding profusely in some of the previous sessions.
To, understand what impact it will have on various sectors in the Indian economy, Yagnesh
Kansara caught up with Dhiraj Relli, MD & CEO, HDFC Securities. Edited excerpts:
What is the impact of coronavirus on markets cent correction, then it can have a deeper impact. If
and how is it different from previous attacks the prolonged spread of virus continues and supply
of other viruses? chain continues to get affected for many more
Coronavirus contagion is such an event where you quarters, then it would lead to recession. It would led
don’t even know the magnitude of the problem and it to a slowdown in the global economy and that could
is difficult to quantify. Compared to earlier cases of last for 8-12 quarters (two to three years). If we are
different virus epidemics like Ebola, H!N!, Swine Flu able to control it in next two quarters, then in next
and others, in this case it has spread in the second (subsequent) two quarters, things will settle down and
largest economy of the world. China, which has the world will move on.
linkages, is contributing 20 per cent of the global GDP.
It’s contribution to the incremental world GDP is also Which are the sectors that will get impacted?
significant. So, if the world GDP is growing at 3.2 per Impact of coronavirus on certain sectors will be
cent, attribution to China growth is higher. Even if long lasting. For example, hospitality (includes
China grows at the rate of 5 per cent, with $13 trillion airlines, hotels, tour operators, taxi companies,
economy, their absolute growth is much higher than cruzeliners, casinos and others) and others will take
the growth of many other nations, because their base their own sweet time to recover. The impact will
is very large. Another important point is that, China lead to restriction on travel; be it by road or by air.
is an export-oriented economy, unlike India. China This will lead to drastic fall in demand for crude oil.
has supplies all over the world and that is where the Coronavirus is at the centre-stage of recent fall in
magnitude of the problem is more. crude prices.
has the worldwide spread of coronavirus how will automobile sector get affected?
worldwide affected global markets? We have seen changes in the human behaviour,
Since China has locked down many of its provinces change in preferences and that has its impact on
and the entire nation is under quarantine, the markets certain sectors like automobile. We have moved from
have reacted very sharply in last few sessions. Earlier, a possessive to share economy. People who use to buy
people could not understand magnitude of the second or third car are not doing so. So, even in High
problem. Till mid-February, people never anticipated, Networth Individual (HNI) segment, Mass-affluent
it would become such a big problem and that is why segment or if the husband-wife have one car, they
in last 19-20 sessions markets globally have corrected will not buy the second car. What I am saying is that
in the excess of 20 per cent. When markets correct 20 passenger cars will continue to attract demand but the
per cent or more then the question that arises is - is it number will come down. The demand for second car
a bull market correction or is it the beginning of the has got impacted. If your second car is driven only 20-
bear market? That is something no one knows at this 30 days in a year, then in that scenario, it is prudent to
stage. But it is one of the triggers that could lead to go for a rented car option, which is freely available and
recession at global level. It could lead to a significant an easy option.
slowdown in growth. But at this juncture, we don’t
have data points that could tell us that. We are in Were indian markets due for correction and they
dangerous zone, but at the same time, I would not found opportunity in the name of coronavirus?
raise red flags at this point of time. I have a disagreement that Indian markets were due
If the spread of the Virus gets prolonged to another for correction. It would be fair to say, markets were
two to three months and if we get another 10 odd per ahead of valuations. It is not true that markets were
18 Outlook Money April 2020 www.outlookmoney.comlooking for a reason to correct. I think the selling
that we are witnessing is part of global strategy of
foreign players. Most of their selling is in the form of
A slowdown in new
index selling. So, if Exchange Traded Funds (ETFs) infections could trigger
come to market to sell their index and they have to market recovery
align with their position and weights, then selling
will always happen in this kind of event. Whether
the PE is @ 18 or even at the multiple of 14, their in China largely as supply chain disruption,
strategy/ response would remain the same. The given that it is a manufacturing hub for many
higher valuations did not trigger selling, the cause firms across the globe, the economic impact
(Coronavirus) was severe. has now spread to more than 100+ countries.
Do you know how do global players invest? They Domestically too, almost all sectors have
have their own assigned weights to all jurisdiction got impaired in varying degrees owing to
including emerging markets. They have to maintain disruption in economic activity and Q4FY20
balance as per their weights. And they will act earnings will be severely impacted. Given that
ruthlessly and in regimented manner to maintain we are still in the midst of COVID-19 outbreak,
this balance. They sold equity following the outbreak it is difficult to assess the extent of impact
and moved all their money to US dollar-denominated completely. That said, FY21 earnings estimates
assets like US treasuries and gold. That’s why gold are expected to be downgraded anywhere
price shot up following equity meltdown. between 10-20 per cent vis-à-vis estimates at
the end of December quarter.”
What has been holding back indian markets? Investors would do well to note that the
It is the patience of Indian retail and HNI investor markets have historically faced such situations
that is holding back Indian market. It is the and more importantly recovered from it, albeit
Systematic Investment Plan (SIP) in the domestic over varying time periods. If it was a banking
market that is standing tall against FPI exit. crisis in 2008, now it is due to the coronavirus
Though FPIs are exiting, there is no panic seen spread and there is no ascertain damage to the
in Indian retail and HNI segment as far as SIP global economy and also to India, especially,
inflows are concerned. Even Domestic Institutional coming on the back of an already slow
Investors (DIIs) are buying at every dip. There is no economic growth of 4.7 per cent in Q3FY20.
intervention by DIIs unlike in past, to give support The difference in this market scenario is that
or any attempts to stabilise the market. Neither there is a definite recovery point for which
they are selling in panic. These are good signs for investors can look out for. A slowing growth
the Indian market. The annual SIP book has grown rate in new infections around the world or in
to the size of net FII buying in the Indian market, the developed nations could be a trigger for the
which is a good sign. market recovery.
Chinese infections have dropped off while
What is the right time for retail investors to the infection rate in other countries seems
take a dip, who had earlier missed the bus in to follow the same trajectory. We will reach
September 2019, following announcement of cut a point when that rate starts tapering off and
in corporate tax rates? that would be a good indication that the virus
This is the right opportunity for the investors to threat is being controlled. The sharpness of the
reconstruct-rebalance their portfolio. For, those who recovery would depend on how fast the threat
missed bus earlier, time has come to start building recedes and how fast the global economy gets
portfolio in a staggered manner. The current market back on track. Long-term investors would do
levels are giving opportunity following the cut in well to buy into the extreme bouts of volatility
corporate tax rates in September, 2019 the markets that we may witness and ensure to accumulate
moved up swiftly, as re-rating of certain sectors took quality stocks during this period.
place. This sudden market spurt deprived many of In this kind of situation, investors should
the investors to participate and they felt they missed keep in mind advice of Investment Guru
the bus. However, those who couldn’t participate last Warren Buffet who says, “Cash combined with
time, the time has now come. courage in a time of crisis is priceless.”
yagnesh@outlookindia.com yagnesh@outlookindia.com
www.outlookmoney.com April 2020 Outlook Money 19Cover Story
COVID-19 Volatility For An MF Investor
One needs to remain focused on long-term goals for correction is around the corner
By Himali Patel the tailspin has spooked investors, who have
started questioning their investment strategies.
O
n March 13, NSE Nifty saw a massive It is important to have a plan in place in case of
plunge hitting the 10 per cent lower a downturn. Further, investors should not let
circuit towards 85000 zones and short-term market movements impact their long-
marking a history for Indian bourses in twelve term investments especially in mutual funds.
years. Market participants are concerned over As an investor, one should not stop the
the kind of economic damage the pandemic ongoing Systematic Investment Plans (SIPs) or
would lead to and would most likely weigh on Systematic Transfer Plan (STP) strategies as
the market for a while. Given the suddenness volatility is the best friend of such investment
of plunge, it is difficult to predict the impact strategies in the long term. Discontinuing or
of COVID-19 or how soon normalcy would redeeming SIPs in a downturn is perhaps the
return. In the past with virus spreads like biggest mistake an equity investor can make. It
SARS, MERS, the economy and markets had defeats the very purpose of the SIP by denying
returned to normal within months. However, the investor an opportunity to accumulate
COVID-19’s global spread suggests the effect more when prices are low. “Volatility in markets
may take a while. is an ideal way to optimally use tools such as
“It is futile to predict market movements, but Systematic Investment Plans. SIPs are designed
in the near-term the global economic impact to increase unit purchase during weak market
will be really bad for various industries/ sectors. conditions and reduce unit purchase at elevated
Hospitality, travel, airlines, discretionary goods, levels. This reduces the cost of purchase (known
auto industry, you name it, will see a slowdown. as rupee cost averaging). Long term investors
As long as the fear is prevalent, markets will be must welcome such an opportunity to reduce
volatile,” says Neil Parikh, CEO, PPFAS Mutual the cost of acquisition of investments,” R.
Fund. Although markets might take a while Sivakumar, Head- Fixed Income, Axis AMC.
to recover from this significant price damage, The most important thing one can do, to
20 Outlook Money April 2020 www.outlookmoney.comCover Story
shield mutual funds from the downturn of the one cannot escape this inherent volatility. “One
current market, is to stick to the plan. As per of the reasons why the asset class has the higher
the experts, the current market has only made volatility but also delivers the higher return – for
investments more attractive, as the corrections instance, if one looks at a 5 to 10 year empirical
would provide great entry opportunities’. data in the Indian markets, equity as an asset
“Investors should consider staggering class delivers around 220-270 basis points (bps)
investments and continue to do systematic Compounded Annual Growth Rate (CAGR)
investment plans (SIPs) and systematic transfer better returns than the next closest asset class
plans (STPs). SIP is a great way to commit (among the five most used asset classes in the
future cash-flows into the market while STP country like gold, property, fixed deposit and
is the most dispassionate way to stagger an 10 Year T-Bill proxy for fixed income, data as
otherwise lump sum investment amount. I of December 2019),” points out Chockalingam
think these two tools should be used effectively Narayanan, Head – Equities, BNP Paribas Asset
to ride the volatility and invest in the market,” Management.
explains Sandipan Roy, Head of Products for To ride this volatility, experts believe that
India, Credit Suisse Wealth Management. investing in funds that give diversification,
To start with the first step to successful especially a geographical diversification can
investing is to outline the investment objective. add a cushion of safety in volatile times. “As
This helps investors shortlist the investment you diversify across countries, you avoid taking
instruments best suited for achieving their country-specific risk, which helps you reduce the
financial goal. Experts believe Investors should overall risk of the portfolio. It is hard to predict
take advantage of volatility in markets. “Investors which markets will perform/ underperform (or
must realise that in a goal-based investment with which country will be the most affected by the
a multi-year time horizon, market volatility is a virus). So having global diversification will help
friend. When investors make decisions based on ride through the uncertainty. Someone who is
market sentiments, then they are prone to higher extremely risk averse can park some funds in safe
amounts of losses. Hence a prudent approach havens like gold or FD’s,” says Parikh.
during such volatile times would be to stick Further asset allocation is also crucial.
to the overall asset allocation plan and avoid Many experts believe that investing in gold
investing in funds, which may not help investors can mitigate the risk against the uncertainty.
reach their financial goals,” says Nimesh “One should look at some allocation to gold as
Chandan – Head Investment Equities Canara this works best as a hedge against downside
Robeco Mutual Fund. on the long equity portfolio. Moreover, apart
An investor should note that capital from being a safe haven asset in times of
markets, particularly equity, that are prone to uncertainty, gold also has a historically strong
gyrations. It is due to the nature of the product correlation to the US Fed rate cuts and can work
the equity holders have access to the last stream to an investor’s advantage in case the rupee
of cashflows in any corporate. So, during the continues on a depreciation bias,” says Roy. In
downturn or upturn the market impacts the uncertain times like these it is good to build in
cashflows of any of the other stakeholders in some kind of protection against further market
the corporate value chain, the highest volatility downturn. Says Roopali Prabhu, Director-
is to the cashflows of equity holders. However, Head of investment products, Sanctum Wealth
Management, “Gold historically has acted as a
hedge against increased market volatility. Thus,
NEil pARikh, it makes sense to have a bit of investment in
CEO, PPFAS Mutual Fund gold. Recently, we further added to our gold
overweight position. Buying a protection like
a put can also be a good strategy but with rise
In the near-term the global in volatility the cost of puts has become very
economic impact will be expensive now.”
bad for various industries/ In times of economic uncertainty and
sectors heightened volatility, an investor should avoid
leveraged and poor-quality speculative bets.
22 Outlook Money April 2020 www.outlookmoney.comColumn
Importance of Asset Allocation
in Turbulent Times
or real estate. age, income, expenses and financial
The idea behind asset allocation goals. For instance, if financial goals
is that it helps you minimise your are long term in nature, one can
risks, thereby trying to maximise afford to take some risks in terms
returns. How is this achieved? The of their investment vehicles (equity)
simple answer is that different assets chosen to achieve these goals. The
react to different events in different underlying principle is that over the
ways. For instance, a major global long term, equity has the potential to
geo-political event has the potential perform well, even if the asset class
to impact economic growth. Such tends to be volatile in the near term.
a development usually results in fall However, if one’s risk profile is very
of equity prices. However, the same conservative, then the choices will be
event could lead to strengthening of taken accordingly.
bond prices or even gold prices, as On the other hand, if financial
large number of investors shift their goals are of short-term in nature,
Kshitija capital to safer asset classes. then one can choose fixed income
Director, Gaining Ground This means if a person’s options to achieve these set of goals.
Investment Services Pvt. Ltd
investment is spread across asset Given the nuanced approach required
classes, even if one part of your it is best to seek the expertise of a
H
investments is hit by volatility or financial advisor when it comes to
ave you been stressed over even loss of value in extreme case; charting one’s asset allocation.
the past few days over the the other parts of your investment
money you have invested may gain thereby balancing off the Asset Allocation helps
in equity markets? Or have you net impact on one’s portfolio. This withstand turbulent markets
been stuck in contemplation mode leads us to the next question…. When the equity market is in a tailspin,
when market was rallying and now and if most of one’s investment is
correcting? If yes, then its time to How to determine one’s in equity, then one would tend to get
remind yourself of two words that asset allocation? worried by the fall in portfolio value.
financial advisors often discuss — Asset allocation as a concept But, if the same investment was a
Asset Allocation. Does it ring a bell? is simple but when it comes to healthy mix of equity, debt, gold and
After all why do financial advisors implementation it turns out to be cash, then only one portion of the
and other experts keep reminding us a not-so-simple process because investment would have been affected.
about asset allocation all the time? the implementation has to be On the other hand, the gains in other
Let us try to decode this. nuanced. A variety of factors asset classes would most likely provide
(one’s risk tolerance, investment the much needed cushion to the
What is asset allocation? vehicles, rebalancing), all comes into overall erosion in portfolio value. This
In simple terms, it is the age-old consideration when deciding on was in case of a market correction.
wisdom of not putting all the eggs asset allocation. Which asset class On the other hand if the market
in the same basket. The idea being, to choose, when to invest in them, rallies, by adhering to asset allocation
if something goes wrong with that what should be the proportion of one will not be tempted to invest
one basket, then one may end up exposure, etc… are all very personal beyond the designated equity level
losing all the eggs or atleast most of decisions to be taken when deciding planned for the portfolio. After all,
it. When the same idea is applied to on one’s asset allocation. no one knows if the same market will
financial planning and investments, One of the major determinants move in the opposite direction the
this translates to not investing your in asset allocation is being aware very next day! So, as investors what
entire investable amount in a single of one’s risk profile. A risk profile one should be most conscious about
asset class. This could be applicable is an indicator of how much risk when investing is the asset allocation
to any asset class - debt, equity, gold one can bear with respect to one’s one follows.
www.outlookmoney.com April 2020 Outlook Money 23Cover Story
Top 5 mutual funds returns (AUM-wise)
Mutual Funds post Double Digit losses in last One Month
Return (%)
Scheme Name Category AuM (` Cr)
1 Month 1 Year 3 Year
hDFC liquid Fund Liquid 71025.75 0.42 6.14 6.66
SBi liquid Fund Liquid 49896.90 0.43 6.15 6.70
Debt
iCiCi prudential liquid Fund Liquid 45078.59 0.42 6.22 6.77
Aditya Birla Sun life liquid Fund Liquid 41465.99 0.41 6.31 6.83
uTi liquid Cash Fund - Regular plan Liquid 31148.23 0.41 6.23 6.81
SBi ETF Nifty 50 Large Cap 64463.65 -18.14 -11.16 4.99
kotak Standard Multicap Fund Regular plan Multi Cap 29459.53 -17.41 -8.33 4.51
Equity
iCiCi prudential Bluechip Fund Large Cap 23608.74 -18.06 -11.87 2.97
SBi ETF Sensex Large Cap 23234.83 -17.66 -8.71 6.81
hDFC Mid-Cap Opportunities Fund Mid Cap 22754.65 -15.26 -11.82 0.56
Source: Value Research,Return as on 13th March 2020,AUM as on 29th Feb 2020
Also, generally in sharp corrections, mid and hence one cannot go overboard with long
and small caps bear the maximum brunt. So duration allocation now.” The current meltdown
far, the sell-off has been indiscriminate, but is more broad-based and hence impacts
as economic and Earnings Per Share (EPS) most stocks. Pharma companies that are not
impacts get analysed better, divergences are vertically and backwardly integrated and do
bound to occur. Experts believe it is better to not have their own captive Active Pharma
be in quality across caps. Also concentrated Ingredient (API) unit could be at risk, claim
thematic bets in cyclical sectors can be avoided experts. “Companies with significant exposure
for the time being. to China like certain Indian auto companies,
“We are aware that this sell-off so far has and commodity/ metal players could see some
largely been driven by foreign institutional dent. Consumer electronics manufacturers
investor sell-offs, but with infection spreading that rely on China for basic components are at
in India now as well, economic impact needs risk. Any funds, which have large allocations to
to be carefully monitored and hence it is best these sectors can be avoided for the time being,”
to avoid excessive risks now. On the fixed explains Rajesh Cheruvu, CIO, Validus Wealth.
income side, we would advise to steer clear of Investors should reassess their portfolios
aggressive credit funds,” says Roy, adding, “long and ensure allocations are in line with their
duration funds after initial rally may see some target and stay the course. It is important to
turbulence if fiscal stimulus measures kick in keep in mind not to panic in such times to
avoid any rash decisions. Investors should
stick to their asset allocation and tactically
rebalance from time to time. Further, investors
R SiVAkuMAR, should instill a certain discipline to save face
Head-Fixed Income, Axis AMC by multiple volatilities on income levels and
job certainty. Having said that, the outbreak
of COVID-19 is an unprecedented event. Till
Volatility is ideal to optimally there is a decline in the number of cases or
use tools like Systematic some progress in finding a cure, the market
Investment Plans could remain volatile.
himali@outlookindia.com
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