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    G OS iT fay OVI OGK \ l, \ ) fancy as cz — MARKET. © LU Bd a _., Flush, Retail Frenzy Firm Up Market Rally, But Ride The Bull Cautiously ees cet © Pearse Deri ie ee eee Diag ‘The NFO Euphoria Daring The Third Wave Bs PirMiee LOM IMC ‘Names and Numbers nixi A . > ’ SECURE - YOUR BUSINESS WITH YOUR OWN Pea RC CL aus acu lacaate Cla ae Cole a emer) with IPv4 address Tiere te sous odes Co cetl sceh kenees Niel and upstream providers. - visit wwwsiinnin | Q., callus on o11-48202008, o11-48202030 OX) email: helpdeskeiri .in for more details about our offerings. Contents OCTOBER 2021 ™ VOLUME 20 m ISSUE 10 Barrier Covid has taught Konkona Sen ‘Sharma an important financial lesson: she has become a more careful saver now > Th Columns by: Dr. VK Viyakumar,Nilanjan Dey, Larissa Fernand, Siddanth Shetty and Edul Patel SPECIAL STORY 28 Dealing With Debt RBI's loan restructuring scheme had costs and conditions attached. Here is how you can deal with your loans instead 40 Is the NFO Euphoria Good For Investors? New fund offers are being launched a dime a dozen. But does it make sense fr investors to subscribe to them? 46 Daring The Third Wave [Aided by a rapid vaccination drive and economic recover; Inia is unlikely to be wounded badly even if Covid breaks out again 50 Is The Grass Greener for Unicorns? “The challenges and criticisms start-ups face as they line up to launch initial public offerings. 54 For Sunshine In Sundown Days Retired life can be 25 years or more and you can make ita journey of comfort by investing in mutual funds 60 Tech Shows The Way To Revival Technology came tothe aid of small businesses trying to stand back on their feet after being badly bruised by the pandemic 68 Learning The Tricks Of The Trade ‘Anew breed of traders wants to become financially literate before venturing into the stock market Disclaimer ‘View Ponts exoressedby various contibutorsin the magazine ae ‘thei own and not necessariy reflect the opinions bei and view Pols of Outlook Money eta These are advertorial pages. ‘Cover Design: KEP SWAN, Photograph: GETTY MAGES HEADOFFICE A551 5. New Deh 0 028 (0) T2BD4ON. Fax (0) 26120 OTHER OFFICE Mura: (022) 50880880 Pandey Va aaa on Dea of Culek Pub (nee) PL Ear NYS Pare at Keto Poet Li. 5 NaI Kondasu RR Os 50 OB, Tengen naples fen A Sauer Ene New Deh 10023 er stzipion ais plese cl 7280462. 7280400 snot youelpineBouteekmoneyam Plies act espns ‘ikon ds nth ofOctbe 202 Reason 1 202 Tal. ge 75 Toran vesnent eon taken breeders on theta of fomain waded "reece tok eadar alt nome ar hapten deer eee. worwauslockmoneycom |October202| Outlook Money | 1 Talk Back Start-Up to a Trillion-Dollar Dream ‘There have been several articles on how India asa country is embracing the start-up ecosystem but very few talk about how its growth was aided by a huge untapped market, With e . sinartphones penetrating ~ 2 A thecountyhasemerged == as having the second- largest internet user base after China. And definitely, it was amplified by the pandemic when many chose to become entrepreneuss. Its commendable hhow the article sheds light on these factors. would like to know its road ahead and the opportunities they are providing to the freshers. Herculean Power of Narration Thad a great time reading this very tunique story on narration. liked how itbegan with Hopkins, cave paintings, and gradually navigated to venture ‘capitalists and investments. The author has shown us a new perspective on investment and how unconsciously stories or narratives influence our investment strategy or decision. ‘Akshara Tripathi, Mumbai Education in New Age “The education sector is going through some major changes and simoltaneously the students and the ‘mentors are upgrading their skills to stay afloat. [know people who have ‘Trina Das, Kolkata graduated with fying colours but are finding it dificult to be placed Itis because the industries are also preferring freshers whose concepts are translucent. Itis great that the story also speaks about the new facilities and New Education Policy hich focuses on transforming higher education institutions into large multi- disciplinary universities, colleges, and HET clusters/knowledge hubs. Surely there is an urgent need for bridging the digital divide. ‘Manik Lokkhande, Pune Mind Your Money, More Than Ever “Thank you for showing us the equation of how the government’ efforts to tackle the Covid crisis have led toa liquidity lush in the system, while the containment measures imposed by the authorities have triggered supply-side constraints. The two factors have added to the spurt in inflation. Many are also tunaware of how to use the power of compounding, hence 1am sure the article will be helpful and will enlighten several investors on how to change their strategy. ‘Megha Sharma, Dei MONEY en Srna favRanSnah ‘eqeoR ASSISTANT EDITOR KomarChatteree umes AND MARKETS EDTTOR "agresearsae ‘SPECIAL CORRESPONDENT vehae MuLTIMEDA PRODUCER Tatra Get ‘sea Boi COmEFARTORECTOR DespaSharns SEMORDESINERS Paeentima wayne esiner ones ‘CHEF PHOTOCO-ORDIATOR ‘ese TecHTEAM repnanvasth Business Offce CHREFEXECUTIVEOFFCER rex Roy Tahartanichoh Citevlation & Subscriptions Geaanknt Production ‘Stash Ost Accounts vicePreSDENT Duan Srgh Bot peor conTROL Vanshelacve (CowPaNY SECRETARY LAW OFFICER “oul areal Letts rstbactresed to: Theo Oulok Money ABO, SaeayngEncave Now Deh 70029orletterst@outookmene}com. Peacementionyourfullnameand residents adores. 112 | Outlook Money | October202 | wari outlockmoney com Asset Allocation is the KEY... in the journey of wealth creation makes it easy © Contact your Mutual Fund Distributor or Registered Investment Adviser today, or give a missed call on 73974 12345 HDFC Asset Allocator Fund of Funds (An open ended Fund of Funds scheme investing in equity oriented, debt oriented and gold ETFs schemes) is suitable for investors who are secking* + Capital appreciation over long term + Investment predominantly in equity oriented, debt oriented and Gold ETF schemes PECs ‘Investors should consult their financial advisers, if in doubt about whether the product is suitable for them. Note: Investors in the Scheme shall bear the recurring expenses of the ‘Scheme in addition to the expenses of other schemes in which this Fund of Funds scheme makes investment (subject to regulatory limits). Ce) Date of Release: September 22, 2021 BHAROSA APNO KA MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Queries Gold ETFs Are Good For Long-term Investment Catt Iwant to build a tong- term portfolio for my daughter. Please suggest a.good combination of gold exchange-traded funds (ETF), mutual fund systematic Investment plans (SIPs) and stocks. Considering that you want to ‘make along.term investment that fs for more than 10 years, gold ETF isa very good alternative asset class to buying physical gold which has disadvantages such as storage risk and extra making charges ft isin form of jewellery. ETFs are cost-effective, liquid, tradable, and long-term hedges against inflation. MURUGASEN, Coimbatore Ihave %6 lakh and want 220 lakh in five years. Which is, better: an index fund ora diversified mutual fund? | find index fund expense ratio is only 0.2 per cent (HDFC Index fund) but HDFC Top 100 is charging 1.2 percent, Ifyou want %6 lakh to become £20 lakh in five years, you need to invest nan avenue that is giving you 27.23 They can also be bought in small denominations to accumulate over the Jong term. Like any equity, there isa risk factor of NAV fluctuations in it but itis taxeffective It attracts long-term capital guin tax “here are afew asset management ‘companies whose gold ETFs have given good returns. These are Goldman Sachs Gold BEes, Reliance R shares gokd CTT, SBI gokl ETT: Ifthe Jnvestment is more than 10 years then cone can think of investing in equity diversified or balanced funds, which withthe same risk give higher returns over time ‘Mutual funds: There are many good ‘mutual funds lke balanced MFS. which have given returns more than gold per cent compounded returns per ‘annum, If you are investing in a mi ‘cap or a small-cap share or mutual fund, and if your luck plays a role, ‘then you may get this kind of return, Ifyou are looking at getting index returns, you can invest in an index fund which is a passive fund. If you are looking at getting returns more than the index, then you can look for a consistently performing active diversified mutual fund scheme that is 14 Outlook Money| October 2021 wwwoutlookreney.com ETFs, with less risk. Inthe long term, the risk mitigates throughout more than 12-13 per cent. You can start SIPs with different proportions in large-cap, aggressive small, and mid-cap funds. Few large-caps are Mirae ‘Assets Biuechip Fund, Canara Robeco Bluechip Fund and Axis Biuechip Fund. Some mid-caps are Axis Mid-Cap, Franklin India Prima Fund and $B1 Magnum Midcap Fund. The returns are around 20 percent and above in mid-cap funds. Inthe case of direct equity, the risk factor increases. Ifyou can ‘monitor actively, then you can buy a few blue-chips and promising, mid-cap companies. Any asset class should be in proportion to balance your overall return. All the above recommendations are based on the assumption of, long,term investment and that you are well-versed with the risk versus return factor of investingin equity or equity MFs. It is advisable to take help from a certified financial planner with proper tisk analysis based on your goals and personal risk tolerance. Hina Shah, erie FnancalPranner&e Franc Coach LUHEM giving better returns than the index. In the large-cap category, very few schemes are outperforming the benchmark index. However if you look at flexi-cap, mid-cap, ot other categories ‘of mutual funds, you can find some good schemes. Even an outperformance of 2-3 per cent returns over a long period can make a lot of difference to the wealth you have created. UMA SCHANDER,Cetifed Financial Planner, Co-Founder, Handholding Fnancals Gee ree oyalel SATS ler i Mi ce THIS FESTIVE SEASON, FULFILL YOUR DREAMS! e700) ipa. eee eee iT CICYT TE CREEK) Cover Story MAKING SENSE OF Low interest rates, corporate deleveraging and retail frenzy push Sensex above 60,000 in September. Let's understand the rationale behind the bull run and why retail investors need to be cautious amid the euphoria. Rajiv Ranjan Singh dichotomy between the economy and the market has been one of the biggest smas of the past 18 months. The period Ibe remembered as the best fr the stock it also one which saw the highest gross domestic product (GDP) contraction in the history of India “The fea instilled by the Covid pandemic pushed the stock matket in a panic zone in March 2020, but that also sowed the seeds of the next bull run In the next 18 ‘months, the BSE Sensex zoomed over 34,000 points from its March 2020 low of 25,639. Similarly, the Nifty moved up around 1,300 points from its March 2020 low of 7,511 Remarkably inthis calendar yeas, the Nifty 30 index climbed to its all-time high in 46 out of 180 trading sessions. The Nifty index is a composition of 50 stocks, hile the Sensex contains 30 stocks. “The stock market is being supported by adequate liquidity from foreign investors. Thanks tothe massive balance sheet expansion by the US central bank, the Federal Reserve, and the European Central Bank (ECB), the world is awash with liquidity. Every month, the Fed is buying bonds ‘worth $120 billion. Is balance sheet is $8.45-trilion- large, a 102 per cent increase on a year-on-year basis. Never in history has any central bank expanded its balance sheet by $4 trillion in a single year. ECB’ balance sheet was worth €82 trillion at the end of September, according to Refintiv In search of return, money is pouring into high-growth markets like India, which attracted $31 billion in the last one year ending July ‘Speaking with Outlook Money, Vijay Bhambwani, head of research, behavioural technical analysis, Equitymaster, says the market is running purely on liquidity. “Ifa defaulting countey like Peru after raising the coupon rate to 3 per cent can get $10-11 billion in ‘a short span, then why wont the world's fifth-largest economy with over 6.25 per cent coupon rate get the inflow many times over Peru” he reasons. In a single month, the Nifty has returned over 7 per cent more than what the bond markets offer on an annual basis. In the last one year, the Nifty has returned over 65 per cent. UPWARD JOURNEY While Senser’s journey form 1,000 to 10,000 points was a slow and steady one. it covered the last mile, rom 50,000 to 60,000 points, in just ‘about eight mnths. Jul 25,1990 16 | Outlck Money| October 2021 | www otlockmaney cam os Feb6,2006 Oct 29, THE MARKET LEAP ‘That, coupled with low interest rates on safer investment options, is pushing retail investors into the there-is-no-alternative-to-equities zone. Naturally, the stock market has caught thetr fancy, In the June quarter, an average of 2.45 million demat accounts were opened. per month, according to Securities and Exchange Board ‘of India chief Ajay Tyagi. On average, about 10 lakh new demat accounts were opened per month in FY21. “Apart from liquidity and large inflow from both domestic and foreign institutional investors, are there other reasons that are leading to higher market valuations? ‘Why Is Nifty Getting A Premium? Nitty was trading at 21 times FY23 earnings around September-end. The average one-year forward earnings ‘multiples forthe past five, 10 and 15 years was 20, 18 and 175, respectively. As indicated by the data, Nifty is wading ata higher premium now as compared to its historical performance. Nifty is also trading at a 68 per cent premium to emerging markets’ average earnings multiples, according to a Nomura report, dated August 30, 2021. So why is Nifty commanding such a high premium? The first reason is strong corporate earnings that are not volatile in nature, Another is moderate inflation of 4-5 percent in a world where even 2 per cent inflation is too much to ask for. For instance, in the US, the 10-year sovereign bond is yielding just 1.34 per cent, while $16.5, trillion of bonds globally have a negative yield. However, rising inflation could upset the Nifty premium. Rising inflation forces monetary authorities to increase interest rates. The adverse impact of inflation, ‘on stock prices compresses earnings multiples as rising interest rates lead to equity derating. Right now; India’s inflation is both structurally low and cyclically tame, and is unlikely to be a cause of any major equity selloff, according toa report by Canada-based BCA Research, titled ‘Can Inflation upset the Indian Applecart2; which was released on September 9, 2021. ev NI Mar 4, 2015 May 23, 2019 oa Semen Jan21,2021 Sep 24,2021 wiv autlookmoneycom | October 202 | Outlook Money | X7 Cover Story ‘STRONG EPS “There has been steady year-on-year growth in earnings per share (EPS) between FY10 and FY, though t came down sighty in FYI9 and FY20. 2s7_= 408 356 379 37 323 346 2 2 —— 483 460 6 460 451 Nifty EPS Between (2) Sauce:toonbeg Marto “The repeated resilience of indices inthe face of negative news, such as Covid-rlated stress, global supply chain disruption, rising commodity prices and the Evergrande crisis, begs an explanation for such an impressive performance and leads to some key questions. Are the current market valuations justified? Why isthe Nifty trading ata premium? ‘What's The Rationale Behind ‘The Bull Run? Experts are unanimous that though the strong inflow of capital along with cheaper credit is feeding excessive optimism into the market, itis stil far away from a bubble Market participants believe that re-rating of many sectors, especially banking and metals, and corporate deleveraging on the back of strong earnings growth is fuelling the upward movement of the index, For starters itis important to understand the two factors that decide the direction ofthe equity market— price of money or the interest rate and the expectation of corporate earnings growth. For the stock market to move up, interest rates must fall, and corporate profit must rise. Between February 2019 and September 2021, the Reserve Bank of India's (RBI) repo rate came down from 6.5 per cent to 4 per cent, the lowest level since 2000. Slowly and steadily, banks passed on the reduced rates to corporates and households. Lower interest cost also meaningfully reduced the debt burden for heavily leveraged Indian corporates and improved their profits Corporate India’s deleveraging exercise: With an improved income statement, ‘corporate India followed a massive deleveraging exercise and cut down its not debt (gross debt minus cash) by approximately one-third (30 per ‘cent) and gross debt by almost one fifth (17 per cent) in FY21. THE WAY FORWARD EPSis expected to go up inthe future, pointing torobust corporate camings. 554 746 873 999 Mar20 and, for a change, instead of amassing debt, corporate India was repaying loans. A leaner balance sheet has become the mantra for a host of companies now. In FY21, Reliance Industries reduced its gross debt by 267,656 crore, while Tata Steel lowered it by around 31,000 crore, the largest deleveraging exercise by corporate India. At the group level, Reliance’s gross debt came to 2243 lakh crore in FY21 from 83.1 lakh crore in FY20, Tata Group’ (excluding Tata Motors) gross debt reduced by 245,853 crore to around 21.34 lakh crore in March 2021 from Rs 1.8 lakh crore in March 2020. Data from Capitaine shows that, overall, 750 companies have reduced gross debt by €3 lakh crore to 147 lakh crore in FY21 from 217.71 lakh crore in FY20. The net debt is down by 4 lakh crore to 29.5 lakh crore in| March 2021 from %19.51 lakh crore in March 2020. “The top five gross debt reducing sectors in FY21 were refineries (875,823 crore), steel 44,635 crore), textiles (214,384 crore), fertilizers 10,780 crore) and power generation (%10,230 crore), as per Capitaline. Sandeep Shenoy, a market veteran and the executive director of Mumbai-based investment boutique firm Pioneer Invest Corporation, says the saving on the back of low interest rates and the rapid pace of deleveraging by conporate India are fueling the market rally “India has never seen such massive deleveraging as we are seeing now says Shenoy. Massive deleveraging may lead to revival ofthe capital expenditure cycle, he adds. Tata Steel along with a few other steel and cement ‘companies recently announced new capex plans. New capex plans are undertaken ‘only when firms are confident of strengthening demand. Besides, ‘capex usually comes on the heels of rising profits. Revival of the banking sector: Massive corporate deleveraging “The biggest overhang on the om 202220232024 ushered a watershed moment for ‘corporate balance sheet was debt Nifty EPS Estimate (%) Indian banks that were grappling with Sees Boxraes 118 | Ovitok Money| October 2021 | wwnuttockmoney com bad loans and non-performing assets (NPAS). The banking and financial sector contributes 37.58 per cent to index ‘weightage, the largest among all sectors. Harshad Borawake, head of research, Mirae Asset Investment Managers, says the outlook for the Nifty ‘earnings has improved primarily due to the improvement in the financial sector earnings and financial companies, are gradually getting re-rated by the street. “Bad days for banks are over as provisioning cycle has normalised he says. Maybe banks’ loan book growth vill remain subdued, but profits will come from reduced provisioning, he adds. For the record, in FY20, the Nifty’s profit stood at €3.48 lakh crore, and banks’ share in it was 71.02 lakh crore. By FY24, the street is expecting profit to more than double and touch 22.35 lakh crore. According to Bloomberg's street consensus estimate, the financials are expected to have a 23-24 per cent compounded annual growth rate (CAGR) between FY20 and FY24, with a share of about 31 per cent in FY24 in Nifty companies’ earnings. "As per the street estimate, in just three years, financial companies’ profits may get doubled and this is providing strength to the Nifty” says Borawake. This optimism is well captured in the share price of State Bank of India, India’s largest public sector bank, which gave a handsome return ‘of 150 per cent in the last one year. In 2018, banks were making a provision of 2-22 per cent of total assets, which has now come down to 08 per cent. Reduced provisioning is strengthening the bottomline and earnings per share of financials that are part of the Nifty. “Almost 60 per cent of future profits may come from normalisation ‘of provisioning” adds Borawake. Metals, especially steel, is a major sector that got re-rated this year on the back of high commodity prices and supply chain disruption across the globe. In the last one year, Tata Steel was the best, performing stock, providing over 270 per cent return. As per the NSE website the Nifty Metal index ‘with 136 per cent price return was the best performing sectoral index in the last one yea. “Metals have just 3.75 per cent weight in the Nifty but, through deleveraging, it played a significant role in boosting banks earnings’ and the index’s upmove. Concentration of earnings in a few large ‘companies: Shankar Sharma, a market veteran, says the current bull run is the most logical one he has ever seen. The Nifty is a composition of 50 large companies and if these companies register high earnings growth, then despite a sluggish economy, the market will grow, he says. “Concentration of earnings in big companies isthe trend that is fuelling the index” adds Sharma. After Covid broke out, this trend became more pronounced. In the June 2020 quarter, only a few large-caps like Reliance, Infosys and TCS made a Re-rating of many sectors, including banking and metals, and corporate deleveraging on the back of strong earnings growthis feulling the stock market movement wiv cutlookmoneycom | October 202 | uitook Money | 19 Cover Story ‘massive move. “In times of distress, ‘market participants pour money into strongand sound large-caps only.” says Gaurav Misra, head of equities, Mirae Asset Investment Managers (India) Private Limited. The fact that Indian corporates are deriving more revenue from overseas market is also balancing out the sluggishness in the Indian economy, he adds. Sharma has a point, as with 18 per cent weightage, IT is the second- largest component of the Nifty and in FY21, major IT companies lke HCL. ‘Tech, Infosys, Wipro and TCS derived, 61 per cent, 59 per cent, 57 per cent and 48 per cent revenue, respectively, from the overseas market. “The Rise Of Retail Investors “The Indian markets are seeing record inflows both from ‘domestic investors and foreign institutions. According to Bloomberg, in the last 12 months, ending July 2021, India received $31.26 billion (€2.34 lakh crore), which was the largest foreign fund flow in the emerging markets. Indian retail participation through mutual funds is also making new records, Retail customers are pouring approximately 210,000 crore every month into equities through systematic investment plans (SIPs). “The soaring index has emboldened retail customers, who are now directly dabbling into equities. Tor many of them buy-and-hold isa dud philosophy. “You neither get any till nor do you make substantial money if you follow the buy- and-hold strategy ina higher moving market” says Vibhuti Mohanty, a Nagpur-based trader: Retail participants ike Mohanty have forgotten the basic law of science that states thatthe “higher it goes, the harder it fills “The massive bull run in the last 18 months has created a trading frenzy and that is evident from the trading volume in the futures and options (F&O) segment. Inthe last three months, five different days have seen F&O ‘volume crossing 2100 lakh crore, The market capitalisation ofall BSE-listed companies on September 24 was %261 lakh ‘crore, which is unprecedented. This implies that ina single GradRight GRADRIGHT: A GLOBAL FINTECH PLATFORM FROM INDIA FOR THE WORLD In an exclusive interview with Outlook Money, Aman Singh & Sasidhar Sista, Co-founders, GradRight demystify financing for higher education abroad 1 Tell us about the education loan India? when India started education loans the loan book has Increased 60 times to INR 60,000 crores, Jn 2020 at a CAGR of 2296, While some public sector banks have struggled ‘with high NPAs because of government mandates, the private sector has thrived. A leading private lender started in 2008, has grown at 66% CAGR to build a loan book of more than INR 60,00 crores. With the expected increase of Gross Enrollment Ratio from 25% to 50% over the next decade, coupled with the increasing cost of hhigher education our outstanding loans may rise to INR 3 lac crores. ‘There are significant opportunities in this sector if you notice the number of new NBFCs entering the space and the increased VC participation in the last five years Start with a real education budget that should account for the total money students can spend from savings, plus education loans. ifthe budget estimate is too high, a student will end up with a university that she cannotfund, toolow 4 and it may lead to the student missing ‘out on choosing a better university for her career. ‘Then estimate the total cost of the program including tuition fees, living costs in the city the college is located along with expenses such as the cost fof books, clectronics intial room act up, local tips, health insurance, airline expenses, visa application, health check-ups, university applications, and counselor fees. In the US. the living cost in New York is nearly 1.5 times the living cost in Philadelphia. Parents occasionally underestimate the cost by < GradRight =| £2600... 12.6 crore Savedin intrest expanse 26 |OxtlookManey October 2021 wuwoutlookmoneycom World's first education loan bidding platiorm INR 10-15 lacs. Remember to analyze college cholces based on true return on the program from a financial lens and avoid being driven by biases, peer pressure, and hearsay. Be careful in evaluating placement statistics that may not be a true indicator of thelr earning opportunities. Students can schedule a free call with 2 GradRight financial advisor to get the right estimate. Bl How can a student got the best education loan? Without GradRight, loan application and approval can take 7 days to 2-3 months, depending on the lender, processing of collateral, and the time required for the follow-up. Start the loan process in advance, preferably immediately after getting test scores. Various types of loans are available with differing interest rates and payback times based on academic profiles and parents’ financial profiles GradRight’s FundRight is the Worlds first student loan bidding platform where 12 public and private, domestic and international banks and NBFCs F370 crs PE correo ARR 80% vee from Tier 20nd cies compete transparently to offer the best education loan based on their ‘own credit policies, student profile, and college choices. Students complete their entire loan process online and get the best loan for their profile. What are the insights that one canuse to get the best deals? “Taking care of some nuanced factors ‘can contribute immensely to getting ‘an awesome loan. Students. with test scores (GRE, GMAT, SAT, TOEFL, IELTS) are three times more undable. Each bank recognizes a set of global Universities for their placements Sometimes, even with an average Score, students can get a great admit and thereby, a good loan. Banks prefer the US, and Canada the most. UK, Singapore, Australia, Germany, and Ireland are also considered positively. The maximum unsecured loan ‘amounts one can get will vary based on ‘country you choose to study in. Parents’ ‘credit oF financial discipline will have ‘an impact on what you can get as an ‘education loan, as most of the lenders will ask for them to be co-applicants Having too many active EMIS wil also deter banks. Our SelectRight platform ‘aan help students choose the most bank-fundable universities for their Unique profiles ElWhatis your mission at GradRight? ‘Our vision is to build the leading ‘education fintech company dedicated to making education accessible and affordable. Our mission Is to enable students to maximize their Return on Education(Roéd) by ensuring that they are able to study at the Right College at the Right Cost. El How are you adding value to the banks? “We ate very glad that GradRight has picked up really fast. In 2020, GradRight was one of the first partners we signed Lup with for one of our new initiatives. Fost-forward to today, GrodRight is ‘among our top partners. Im very happy with how our relationship has developed with our combined vision of helping Rocca out students & being an instrument of ‘change n their lives" -Mayank Sharma, Country Head, Prodigy Finance GradRight is already the preferred sales and service partner for all its lending partners Since the launch of FundRight, only 10 months ago, we have received INR 2500 crores in loan requests and helped secure close to INR 400 crores in loan approvals. Banks attribute GradRight in helping them find exceptionally fundable students in one place and cut up to 75% ofthe cost of sales and pro-disbursement services. With a first. principle approach, GradRight created an education loan journey for banks and students that drove up the approval rates for banks and created unseen access to high Potential students across hundreds of Indian cities and towns at once. 1 How are you adding value to the students? “Anyone considering graduate student loans should seriously check out GradRight. Seeing a bevy of options from different banks laid out so comprehensively and conveniently was a huge source ofreiefandled me tooptions would not have found otherwise! -Raghav Adlakha, Alum, Harvard Kennedy School With Gradkight’s Fundkight, students have saved INR 30 crores in interest expense to date. We are making higher education financing more accessible. 80% of our students come from 2000 VIEWPOINT plus, Tier 2 and 3 cities of India with limited access to education loan options. We have increased the chances of securing a loan by 500% by bringing all the top education loan providers on cone platform. With GradRight students are choosers and not beggars for financing their higher education. Al this 1s possible because of the commitment of our Student Success team led by our colleagues Shivani Mani, Hasil Gora, Prachi Singh, Aayush Nagpal, and Lovish Rawal. “There's information asymmetry in the student loan morket in India. The loan Journey hence becomes overwhelming. At Gradfight, the Student Success team Is driving rational program choices, financial avvareness, and well-negotiated loan decisions/terms for our students. We want to make them feelcomfortable with the loan choices they make alongside GradiRight” Shivani Mani, Student Success What are your Future plans? To power students’ financial transactions, we will soon launch, Worlds first student-centric score, GradRight Credit Rating API. This will unlock the next level of efficiency and value for all stakeholders in the ecosystem. We will scale up FundRight inIndia and expand our services in Asia and the Middle bast. Selectkight will bbe a game-changer in the sector and will enable students to make better decisions on selecting high return programs, ‘wacutlookmoneycom | October 2021 | Outlook Money 27 Dealing With Debt RBIs loan restructuring scheme that lasted till September 30 had costs and conditions attached. If you weren't able to avail of it, here is what you can do instead ‘Manik Kumar Malakar he first wave of the Covid-19 pandemic was [ devastating for many households, and the second ‘wave in 2021 has only worsened the situation. Millions of people lost their jobs, while many households ‘saw their incomes dwindle drastically. In June 2021, Mahesh ‘Vyas, chief executive officer of Centre for Monitoring Indian Economy, said that over 10 million people became Jobless after the second wave of Covid-19, while almost 97 per cent households saw their incomes reduce, Ina recent ‘write-up, Vyas said that unemployment rose in August 2021 to over per cent from around 7 per cent in July 2021 In this scenario, a record number of people have had to resort to personal and credit eard loans. According to data from the Reserve Bank of India, personal loans grew by 11.2 per cent in July 2021, up from 9 per cent last year: The high Panalties in personal loans and credit card loans have a way. ‘of ensnaring people into a debt loop as even a single unpaid instalment can drag them deeperin the cesspool. ‘While loan restructuring was en option tll last month to ‘manage your debt, it was not the best option. We tell you ‘why and what you can do instead to deal with debt. 2B |Ovtlock Money | October2021| wwoutlockmoneycom Not ‘The Best Option The Reserve Bank of India (RBI) stepped in earlier this year to provide some relief to debt-burdened individuals hit by the pandemic blues. On May 5, 2021, RBI announced its Resolution Framework 2.0 for debt restructuring. The restructuring was applicable to Covid. stressed individuals, small businesses and micro, small and medium enterprises (MSMEs) with a debt exposure of up to 825 crore tll September 30, 2021. “There were a number of options under the restructuring plan. The first was the extension of the Joan tenure, wherein RBI had allowed extension up to 24 months, though the bank was to decide the final term. ‘The second option was step-up EMI, wherein you could inerease the EMI when your cash flows improve. For instance, if your salary has been cut due to Covid stress but you expect it to be rolled back in six months, this ‘option could work for you. “Another option was to avail principal moratorium or holiday, wherein you pay only the interest component. This option would have helped avoid exira interest ‘payment, which would have accrued in the case of an EMI moratorium or holiday. “Borrowers could reach out to thei existing lenders to renegotiate loans” says Gauray Jalan, chef executive officer and founder, mPokket, a digital lending app that lends primarily to young people and college students However, navigating your debt burden through the central bank’s restructuring plan was not the easiest way cout for borrowers. There were a flurry of conditions and costs bucied in the fine print that you would have been expected to navigate ‘To start with, while borrowers were within their rights to ask fora restructuring of loans, it was the prerogative ofthe lenders to grant that leeway for debt relief “The RBI announcement ‘merely permitted the bank to consider restructuring for borrowers impacted by the second Covid-19 wave! said Kaushik Khanna, chief credit office, Clix Capital digital lending non-banking finance company (NBFC). In case they did agree forthe loan restructuring, there was a cost attached. “Restructuring was not free of cast and one hhad to shell out extra money in the form of auiditional interest depending on the restructuring package opted for” added Khanna. Borrowers whose accounts are restructured are required to be categorised as Restructured due to Covid-19: "Loans reported as restructured can hurt the ‘credit scores of borrowers and borrowers must also keep in ‘mind that this will impact thei loan eligibility as well as debt raising capacity in the future? says Khanna, Credit rating agencies may view borrowers whe have ‘opted for restructuring as riskier than others and may keep a dlose watch. The moratorium option, which was one of the ‘options under the restructuring scheme, would have been better from the credit score perspective but not completely risk-free. “While moratorium does not impact eredit score at this point of time (considering the pandemic), it does create a perception of an individual with banks/lenders that may affect re-borrowing. Banks will definitely take into consideration the moratorium that you have taken’ says ‘Anil Pinapala, CEO and founder of Vivid India Finance, ‘an RBI-certfied non-banking finance company (NBFC) ‘enabling easier and more direct access to credit forthe underserved communities in India. What Can You Do Instead? If you have missed the bus on the loan restructuring scheme, there's still hope. In fact, it should only have been ‘your last resort. “The frst option should be cutting down on your lifestyle ‘expenses and continuing to repay the loan. For example, ‘you could ditch the cab ride for some months, and optfora cheaper mode of public transport to tide out the reduction inincome. ‘It’s not your salary or income that makes you _wivw cutlookmeneycom | October 2021 | Outlook Maney | 29 Loans | ‘wealthy, but its your spending habits? said Sujit Bangar, founder of FinBingo.com, Afintech offering 260-degree financial planning, Tn case you are unable to pay the fall EML it's best to approach the lender, deseribe your current financial situation and seek a reduction in the equated ‘monthly instalment by extending the loan tenure. How long the tenure can be extended, typically, differs from lender to lender. However, a borrower must remember that extending the time period. of a Joan also leads to a higher interest component. “Loan tenure can be extended without restructuring. Capping (on the extension) depends from case to case” said Jalan. Ifyou think that your cash flow may improve after some time, say six months so, you could just go back to the original EMI or tenure. *A moratorium increases your interest burden. If you have a steady source of income, do nat opt for a ‘moratorium’ says Pinapala. “Another option is to get your loan transferred to another lender, With interest rates going down, a lot of borrowers are doing this to save on the interest payment. “The borrower can always seek out an alternate lender. However, the borrower ‘must consider the lender's terms and conditions, besides 30 Outlook Money| October 202| wwwoutlookraneycom the new interest rate being offered, before finalising an alternate lender? said Jalan. Transferring a loan makes more sense for those ona fixed-rate loan as a floating. rate loan is likely to be cheaper at present. “As interest rates are presently ata historic low level, it may make sense fora fixed rate borrower to switch over to a floating rate loan, either with the same lender or with some other lender! said Bangar. However, if you are in dire circumstances and don't know ‘where to turn to, you could consider liquidating some of your assets lke gold and bank deposits to tide over the situation. “If the debt situation becomes bad, one should consider options such as borrowing against life insurance policy or even from. the Public Provident Fund (PPF) account,” says Jalan. But make ‘sure you resort to such means only in extreme situations where there is no other option available since these are long-term investments that should ideally remain untouched. “People can also put gold holdings to good use in such times. Borrowers should ensure they have exhausted all possible options before resorting to having loans restructured” says Jalan. In any case, loan restructuring should really have been the last resort for those in financial trouble. ‘The writer isa financial journalist en Indian parents welcome their child into their family they alayskeepin mind the costsofthe childs education and marriage. Securing a child’ future is ‘one of the critical goals for most parents. Hence; Indian culture has traditionally valued education ‘THE ROLE OF EDUCATION FINANCING SOLUTION ‘The expense of education has drastically risen in recent years. The avrareness of educational degrees has increased to a ‘great deal, which in turn amplified its demand and student's aspirationto achieve them. To give deserving studentsachance, institutes are reinforcing strict measures to select candidates, ‘and this high demand is contributing towards increased pricing, In such a scenario, parents consider liquidating their savings to help full their children’s dream. But in reality, an VIEWPOINT STUDENT LOAN - AN IDEAL WAY TO MAKE HIGHER EDUCATION ASPIRATIONS COME TRUE A loan is a form of debt incurred, so it’s important to conduct a thorough research before taking it. Mr. Amit Gainda, CEO, Avanse norms and unique selling propositions. Being a student: centric organization, Avanse has devised student‘friendly evaluation methodologies. Rather than depending only ‘on the co-borrowers financial background, it evaluates 2 student thoroughly. It assesses the student's past academic performance, entrancetest scores, universitynsttute ranking ‘and course. The organization has set benchmarks in terms of fulfilling academic aspirations across 10,000+ courses and 2,000+ institutes in ~50 countries. Its services cater to the ‘entice gamut ofthe education ecosystem from Kindergarten to Post-Graduation, thereby, cultivating the education ecosystem of the country. Its partnership with Edtech companies has ‘enabled Avanse to fund deserving students from K-12 level to professionals opting for up- skill courses, tccaton loan the best option because of MANAGING DEBTIS CRITICAL ‘the multiple benefits it offers. Debt selection The pandemic has made us realize the should bean importance of saving. Though the regulatory. THINGS TO CONSIDER WHILECHOOSING —informeddecision. _ bodies introduced policies to provide acushion ASTUDENT LOAN Student loan, tothe economicimpact, many people acedthe Beforeavallinganeducationloan,ttisimporant’ = egignedto fund brunt ofthis unprecedented situation. Hence, erecta Sate hone designed tofund rns esr tomou ean 2 toatieat be able to pay ot debts whi oe Research is crucat A student planning _-—‘te customized to take an education loan should research» FeqUrements of Earning while learning: Many students ‘about it online and talk to friends and family students. Thus, studying abroad prefer to take up part-time members wh have ake sir loos Being i jabs wl they eam so that they ean use the TIRES SINC heme tress theldealcholce for ee ne ee Services has subject mater experts who ean cs broad or pay of certain portion of thet help students understand all about student loans and processes. should be the right student loan that covers the holistic loan interest. Repayment strategy is crucial: Education Analyzehow much money is needed: efore i Ioan esvaly the fet nancial boroning fr opting for aloan, a student needs to estimate costof education; a student. Hence, it is important to plan the the total expenditure that wl be incurted repoymert as tcan affect a borowers coat Thorough research wil aid students ¢0 score Planing theloan tenveison portant Undersond ths CenderssuchasAvemsecen—- Mr, Amit Gainda —parrortvssvategy studensshould acussll asst students to comprehend such deals CEO Avanse recarnponentscraloansuchaslean aroun Professionals are readily available to guide ‘them through theacademic journey planning Student loans should cover the holistic cost of education: ‘One of the criteria that students should consider before ‘opting for an education loan is that, it should cover the anaillary expenses, Avanse’s solutions cover the holistic cost ‘of education which includes living expenses, accommodation ost, travel expenses, and more. Selecting the right education financing partner is crucial. ‘There are various NBFCs, banks and fintech providers in the market. While choosing a lender, its imperative to consider its domain expertise in managing education loans, regulatory tenure, repayment options and EM with the lender to design the best repayment strategy that suits the student’s journey ahead, Fintech and new-age education financiers are disrupting the sector and introducing ways to better assess student’ ‘capabilities, Avanse uses an employability potential scorecard to examine students and underwrite products, which helps ‘the organization create customized solutions ithas adopteda PHYGITAL operating model which comprises best practices of traditional endersand new-age intech playersacrossthe value chain, All these robust processes have been implemented to remain steadfast nits mission of making education financing seamless and affordable for every deserving Indian student, Investment: Debt The Death of Debt in Money Market Debt now makes a compelling alliteration, ignoble, irational and inconsequential, for most investors. Credit management has become all the more crucial with market dynamics evolving every moment ost tragedles havea common tat someone Me Giesatthe end A tagedy of sort obeng played out in the debt market even as you read this. The concept of generating afin yield (rom deb it quite neatly moribund thee days The tate of afais there Stands in star contrast tothe bust performance being delivered by equity at this very moment, To most investors, debt now makesa compeling alteration: ignoble, imational and inconsequential “he atest stance ofthe Reserve Bank of Ind 8 expressed in its recent policy, isto manta stats avo on interest ates, The central banks accommodative view, generally in keeping with the market expectations, brings ho specific cout insofar as debt investors re concerned For them, the overall ied income envionment appeats oomy at returns are likely to remain under considerable Dresruein the dys to come The mod astte among them wil ether stay putin shorter papers inorder to make the most fom the debt market. Going lang isnot realy an option format quarters, unless fons cl is perfect in syne with thee fskappetite. The ater wil determine the kindof asset alloction strategy they wl ultimately adopt, Asthings stand, however, uch allocation will be subjected othe two old reprobate — interes rate Tskand eed risk. As for the former changes in tates are not immediately imminent, asthe banking authorities are likely to hold back on modifcations for the time being. The latter, nevertheless quite different story at this juncture Credit isk today s what may be clleda very palpable pri Til explain bey, Well a ag 82 | OutlookMoney October 2021 | wwrwoutlookmaneycom ‘number of systemic inefficienctes have been noticed in the recent past. Several sectors have done poorly in the recent past. Certain companies have delayed payments ~ that is, they have not serviced their debt in an efficient manner. This has resulted in rating downgrades or worse, considering the fact that straight defaults have also occurred. Quite a few heavyweights have made it to the ddefaulters' ist. IL&FS will sucely ring a bell. Lamentably, this has not been the finest hour for corporate India Credit Management, Compromised Speaking of credit defaults and downgrades, | must insist that opting for AA-rated papers and the lke is not for all and sundry. Taking a competitive credit call has its angers, and staying invested in bonds (or bond funds, especialy the risk-taking kind) may not be the wisest thing to do under the present circumstances. So, for those who still believe in chasing yields, here is a shoe list of critical pointers « Do not take eredit risk as itis not likely to bring about a major difference in the overall returns. «# Ifyou ae sll ikely to remain loyal to this segment, consider a recalibration of your allocation strategy. «# You may wish to tactically switch small portions of your resources into another asset class. Yes, the discerning reader will quickly think of equity at this juncture. Agreed, but will discuss the frst point in some detail. As you will no doubt agree, taking risk of the nature mentioned here is significant if you really wish to accelerate returns. Yet, inthe current scheme of things, returns will not really increase by leaps and bounds. This, ‘of course, will lead you tothe essential question is credit risk actually worth it? ‘The short and sharp answer is a thumping no! Credit risk will probably help you beat the nearest fixed deposit But that sal ~ the buck stops right there. This, meanwhile, brings us to the subject of fixed deposits, FDs in short. You see, FDs offered by banks are very nearly meaningless in today’s world. They deliver so litle, andthe irrelevance of these deposits (particularly the humdrum, low-cost instruments that bankers love to wax and wane about) was never as stark a it is now. AWEALTH VIEWPOINT REVOLUTION HAS BEGUN ..and it’s not about the stock markets Toll us about your oumey with Landbox eo r For far too long, banks and financial services players. have offered the retall investor tons of complicated investment options, but have kept the simplest one and the golden goose - just for themselves; retail credit. This is the driving force behind the inception, of Lendbox. To take it up a notch, we're launching our new investment platform soon - Per Annum, by Lendbox. Ells Per Annum different from Lendbox? Is it better than other investment options? Per Annum isan offshoot of the “For far too long, Ekmmeet Singh CEO, Lendbox much left to disrupt in these industries. People want ‘their investment portfolios to keep up with the ongoing fintech boom. Who are your competitors? Not just in P2P, but in the Fintech community as well. The new age Indian Wealthtech space is doing wonders, The brilliant folks at Grip invest, Strata and KredX are paving the way for Fintech start-ups. More than competition, they are all fellow disruptors and there is enough space in investors’ wallet shares for all of us to grow simultaneously. Rather than eat out of each others slices, there is ‘scope to increase the size of the pie. What would be your answer original Lendbox piatorm.These --ANKSandfinaneial —¢— someone who thinks P2P are the’Créme de la Créme’of debt Setvices piaysrs) investments are too risky? investments, bundled together. have offered the Finance is termed personal'for a reason. Through ths platform, our retailinvestortons —_investmentis a very personal decision investors willbe able to invest in ‘of complicated and I would never recommend anyone to Uemest creditworthy population Investment options, invest in something they don't understand of india the top 29. Our first buthave kept the ~P2P. crypto or other new options out offering isin partnership with Uni Cards, one of the hottest BNPL players in the Indian Fintech space Fight now. By combining our strengths, we have managed to put heightened simplest one - and the golden goose - just for themselves; retail credit” there. My advice is to start smal - allocate '5%6 of your portfolio to P2P and increase your exposure only ifit works for you. ELHow do you choose whom to lend to? Tell us more about the kind of Tcaeinecaacrica — — ~ERMMeet'Singh Paneth would fake aleenchrowgh exception, EO, Lendbox We source borrowers organically and ‘Better’ isa relative term and changes person-to-person. Itis definitely one of the most exciting opportunities for retail investors today. E1Why are people moving towards such new age investments? Ihave observed that in interactions with our investors over the last 6 years, one fact remains Unchanged. Other than stable earnings, they crave diversity. Smart investors understand that the key ‘to wealth is putting their eggs in many baskets. ‘We built Per Annum at the very intersection of stability and diversity. To add to this, the scope for innovation in traditional investments lke stocks and ‘Mutual funds is limited, With the advent of direct MF and discount brokerage platforms, there isn't through B282C partnerships. They range from an NTC (New to credit) professional ata blue chip company, who won't get a Credit card from his bank since he doesn't have sufficient credit history, to an MSME merchant who ‘wants to withdraw his receivables two days in advance from his payment service provider. We have diverse offerings which will cost the borrower 10% p.a. to 249% pa, depending on the risk category they fall into. [What does the future hold for Lendbox? I strongly feel lending isthe easiest investment option. ‘The most lucrative lending products such as BNPL, digital loans and credit cards, receivable financing, working capital loans - are all still dominated by large institutions and hold tremendous earning potential. We want to be able to bring this opportunity to anyone who has Rs 50,000 to invest. Investment: Debt Reality - All Stark And Sombre Let me, jst forthe time being, wear a different hat. Assume am an eager-beaver investor, a first-timer willing to test ‘the debt market. What are the elements thet I get to observe right away? How does the scene unfold before my eyes? ‘Well, see despondence all around me. Runaway inflation is suffocating us these days — and the CPI (Consumer Price Index) captures its brutal nature quite well.A hard look at retail prices will revel the actual story. Fuel and food, in particular, are on the high side. The scenario is being attributed to all sorts of reasons, the most common being breakdown in supply chains in a Covid-searred economy. Given the nearineessant price rise, the average individual in this country has to make tough choices every day His ‘medical bills are climbing, so are the prices of staples and ‘vegetables. Many of his compatriots have lot their jobs ‘or have otherwise suffered because of shrinking income. ‘Additionally, his age-old belief that fixed-income instruments ‘will bring him some relief has almost disappeared, How does this pan out? The answer, once again, lies in the sheer reality ofitall A 6 per cent inflation rate, a burden to ‘which income tax is added atthe end ofthe day, is hardly ‘covered by the interest rate being offered by most fixed- income securities. For an individual who belongs to the highest tax bracket, it makes no sense a all, Check out the latest interest rates of commercial banks. ‘State Bank of India, the nation’s largest and the banking sector's bellwether, for instance, is offering a rate that is hardly consequential for its customers. I will not go into the actual rate structure here, but let me say this again atthe ‘ost of repetition: the days of relying on bank deposits for income (annual or otherwise) are well and truly gone. However, there is indeed a modicum of relief at the other ‘end of the spectrum. The government has recently increased the deposit insurance level to lakh, which is quite an improvement from where it stood earlier Investors who are ‘34 | Outlook Maney | October 2021| wwutlookmaneycom still not keen on other asset classes will take comfort from, this development. Other Assets ‘Well, speaking of other asset classes, the difference between returns provided by equity and debt is simply ‘humongous - the gap has lately increased due toa wild rally in the stock market. The last few weeks (I writ this in the second week of September) have been particularly ‘buoyant on the stocks front. The fact that the leading. indices have markedly accelerated — yes, the BSE Sensex has clocked the psychological 60,000 points ~ has reflected the popular euphoria stemming from advancing equities For the archetypical investor, I agree, this is not an apple- to-apple comparison. The two asset classes are poles apart. ‘There isno point in, say, comparing a company's stock with that ofthe debt it has issued. However, a common thread of perception does run through — and binds — the two. ‘An efficently-managed corporate may do well on the stock ‘market because of a hundred reasons; chancesare that some ‘ofits equity investors may take cognisance of ts debt offer ‘oo. There may well be suficient demand, at least from a small section, forthe later. And such a company will probably rank high in terms of perception from stodgy income-seekers. Just for the record, I am not even thinking of other asset classes, real estate and commodities included. You see, each of these is uniquely risky, and investors need to ponder hard before they allocate too much in them. For the sake of balance and diversification, however, moderate ‘exposure can be recommended. ‘At the end of the day, the standard norm for the investment universe is advisedly biblical. In four simple ‘words, it conveys a wealth of meaning — to each his own. ‘And may all of us prosper. Amen. & ‘The author is Director, Wishlist Capital Crypto Myths v/s Reality “Disruption in marketplace is often created by New Technologies, which brings misunderstanding - and Cryptocurrency is no exception” By Shiladitya Sinha ‘Asa phenomenon, Bitcoinis _bedtime stories or food for thought, relatively new and disruptive butit could be highly detrimental omewhere between the Forone, illuminates an abyss, to let them misguide us at critical Known and theunknown, ringing several unknown avenues times in human history. Indeed, si a near ‘9s into plain view. So naturally,much —_cryptocurrencies like bitcoin may we often believe. Let alone holy waters and magical stones; some people vehemently argue that the Earth is flat. That too, when satellite images of our blue planet are so commonplace as to provide "scientific evidence" for whataboutery. Personally, it's pretty amusing, But anyway, itis therefore also natural to find people imagining, believing, and propagating far-fetched myths ‘about the nascent cryptoverse. Unfortunately, the list is longer than this space can accommodate, if not infinite. And so, | will presently focus ‘on one that's probably the most misinformed and consequential noise and scepticism accompany its _be proved beneficial for some rise to the mainstream, besides the criminals, but their potential as, inertia ofthe status quo. Butin the tools for investment and social second decade of the twenty-first impact has also been undeniable. century, looking forward towardsa__We must, therefore, be wary of digital future, it’s high time for us to mistaking exceptions as the norm. embrace the power the asset class that bitcoin has unfurled, The author isa writer on Tech & ‘Myths may serve us well as Culture. Ditcoin is criminals’ money, created for the underworld, Okay. Let's see. First thing first, there isa shred of truth to this claim, like most myths. But the problem lies with its conclusion, which is too hasty and unthoughtful. There have been instances where hackers and other criminals have sought ransom payments in bitcoin. We ‘an even concede that participants of darknet marketplaces often use bitcoin (and other cryptocurrencies) for its decentralised and privacy- preserving nature. Yet, can we rightly infer from these premises that abetting crime isthe asset’s only function? More importantly, has there ever been amonetaty asset that ciminals haver’t used in one way or another? Certainly NOT. And that Fs raises another pertinent question. L 2s Isthe vilification of bitcoin and similar assets utterly misguided? Most probably, yes. Views expested are the author’ own. Itshould not be canst professional nancial investment advice Noone should make any investment econ without fst ‘consitng thelr acsor and conducting research and due dilgence Investment: Equity The aM hates Sonica because they trust what they Tete UC e as aa ry Cah Manik Kumar Malakar pulled Bhima away and placed an iron statue in front of ‘on what they hear and what they see. The lack of a ICINVESTOR overlook the fine print. More than 95 per cent of ll stocks do not even end up beating the returns yielded by fixed deposits the simplest of investment options ~ over a long haul and almost 99 per cent ofthe wealth is created by the top 1 per cent of the stocks. Much like the young Abhimanyu, who had ventured into the Chakravyul with only the knowledge of entering the trap and no idea of how to step out of it, the DIY investors, park their money trusting only what they hear in the ‘market. This self-deception is a fundamental mistake the DIY investors make. “The biggest error that these investors commit is not doing an adequate amount of research on their own and just relying, ‘on brokerage reports or media hypes? says Kishor P Ostwal, chairman and managing director of CNI Research. “They should ideally spend more time on analysing the company, its ‘operations, cash flows, and its management” Itsas simple as opening the annual report of a company and checking cash flows as this information is mandatory for company to submit. Cash positive isa good sign. There are ‘more tell-tale signs for a DIY investor, A stock with a high P-E (price-to-earnings) or a stock that has seen a run-up ot increase in prices are also red flags for investors. “Avoid companies where the promoters have pledged a large amount oftheir shares? Ostwal suggests. “Iam also not very comfortable where the company’s debt to equity is more than 2 or where the price-to-book is above 25 times” Price to book means market value to book value “The DIY brigade fails to assess the target stock because of faulty heuristic view or their inability to process information correctly that had cost the life of Drona because of ‘Yudhishthira’ tricky lie of Kunjarova. “You must not enter the market unarmed because lack of knowledge about market «dynamics puts your money at risk says Ostwal. ‘The unarmed and defenceless investors cannot justify or calculate their moves and fail to restrain the temptation of toeing others into a dash for buying a particular stock. “Herd is quite common in the markets and retail investors are more prone to fll into this syncrome! says Ajit Mishra, vice-president research at Religare Broking. “In most cases, such moves backfire on the investor” For instance, retail investors went on a mad rush when Reliance Power launched its maiden public issue with. impressive growth prospects. But deteriorating fundamentals ww autlookmoneycom | October 2021 | OuttookMoney| 37 Investment: Equity ‘of the company shattered the growth story very soon and the stock began slumping into an abyss. ‘When it comes to intelligent investing, experts give only 1 per cent weightage to buying a stock and 99 per cent to the patience of holding it for the right time to sell off. The new breed of investors do exactly the opposite. Where a mere 2 per cent of the market accounts for 99 per cent of the wealth in one’s portfolio, it becomes all the more important to avoid wealth destroyers. Identifying and draining out the bad blood in the system is of supreme importance. Shakunis devious conspiracies had ‘contributed to the fall ofthe Kauravas in the Mahabharata, Duryodhana never realised the vengeance of his maternal uncle against Hastinapar for the annexation of Gandhara. “One of the things investors can scrutinise isto check the divergence in retail shareholding of a stock. The idea isto filter out the stocks which have too many speculators,’ says Nirali Shah, head of equity research at Samco Securities A few case studies can make it easier for a first-time investor to choose the right destination for his hard- ‘earned money. Hindustan Unilever has 7.4 lakh retai shareholders, while Colgate-Palmolive and Dabur are owned by over 2 lakh retail shareholders. While such quality-resilient businesses have up to 10 lakh sharoholders, some businesses which are weighed down by massive debt and have difficulty in repaying their creditors have more shareholders. For instance, Reliance Power has over 30 lakh shareholders, Suzlon has around 11 lakh and ‘Vodafone Idea has over 15 lakh, “This proves that wealth destructors constitute a much, {3B | OutlookMoney October 202)| www outlookmaneycom larger slice ofthe public shareholding pie, mosty filled by speculators who run away at the first signs of trouble, driving the stock to crash” says Shah. “So, look at stocks with quality investors, rather than punters?” More than the numbers, it is the quality of the stock that matters when it comes to investing. The Pandavas went to the front with 7 akshauhini (1,530,900) warriors, while the Kaurava army had 11 akshauhinis (2,405,700). But the result went in favour of the Pandavas. “Retail investors looking for high volumes (of shares traded on the bourses) is one of the commonest mistakes?” says Ostwal. “This is all the more inexplicable behaviour When they are buying just 100 to 500 shares: “The Café Coffee Day stock ht the upper volumes with some 2 crore shares being traded. Investors thought that some high net-worth individuals (HINIs) were buying the shares, and so, they too jumped the bandwagon only to experience the downhill rive. ‘Alok Industries throws up another case study for DIY investors. From bankruptcy to 1,500 per cent returns in barely three months, Alok Industries hogged the limelight during the early pandemic period. The company had. bbeen taken over by Reliance Industries and JM Financial Reconstruction Company and was relisted in mid-February '2020:This dream team did wonders for the stock asit hit upper-circuits every day. — But the stock was. Morethanthe fundamentally weak and the numbers, it is ‘momentum was only based on the quality of hype. Investors had rushed for thestockthat _the'set sich quick’ scheme and doubled the retail base after matters when vel ing. By nly 2020, all this itcomesto fizzled out and the price tanked investing nearly 70 percent, trapping the retail investors ina blackhole. “A simple and effective way to avoid the ‘hot tips’ would be to do your own research before investing. Going by the popularity ofa brand isn’t the right method; advises Shah. Mishra suggests a safer play. “If retail investors are investing forthe first time, then they should invest in blue- chip stocks’ he says. Much of the success for a retail investor depends on the financial discipline maintained in the investments. “The more robust the discipline, the more protected is the investment even through a phase of extreme volatility in the markets, believe experts. “Those who invest systematically in the right shares,

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