RNI No.

MAHENG/2009/28962 | Volume 14 Issue 02 | 16th - 28th Feb ’22

M umbai | Pages 40 | For Pr ivate Circulation

RAISING
THE
STAKES

Increased Capex On
Infrastructure Is Likely
To Boost Growth,
While Also Creating Jobs
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Volume 14 Issue: 02, 16th - 28th Feb ’22
Editor-in-Chief & Publisher: Rakesh Bhandari
Editor: Tushita Nigam
Senior Sub-Editor: Kiran V Uchil
Art Director: Sachin Kamble
Junior Designer: Orianne Fernandes
Operations: Namrata Sabbani
Research Team: Sunil Jain, Vikas Salunkhe,
Swati Hotkar, Nirav Chheda, Amit
Bhuptani, Ritu Poddar, Aniket Jadhav,
Swapnil Ufale
Printed and published by Mr Rakesh Bhandari on
behalf of Nirmal Bang Financial Services Pvt Ltd,
printed at Uchitha Graphic Printers Pvt Ltd
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Parel, Mumbai – 400013 and published at Nirmal
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CONTENTS
DB Corner - Page 5
Beyond Thinking
Finding A Middle Ground
The Union Budget balances growth aspirations with
higher capex. Yet, it manages to keep a lid on fiscal deficit
– Page 6
Aligned With Nature
The introduction of sovereign green bonds will give a
thrust to climate-friendly infrastructure projects in India
– Page 10
On The Mend
India’s economic recovery offers hope of better times in
the current fiscal year – Page 13
Raising The Stakes
Increased capex on infrastructure is likely to boost
growth, while also creating jobs – Page 16
Reading The Tea Leaves
Increase in production, mainly by small leaf growers and
lower export demand, is leading to a fall in tea prices and
impacting the organized sector – Page 19
Fuelling The Future
The government’s thrust on ethanol as biofuel will reduce
import dependency and provide additional income to
farmers, among other benefits – Page 22
Feeling The Squeeze
Both FMCG companies and consumers are grappling with
inflation-induced pains – Page 25
Beyond Basics
Passive Potential
The launch of ETFs and index funds by fund houses
indicates the massive scope of passive funds – Page 28
Beyond Numbers
Technical Outlook - Page 31
Mutual Fund Blackboard - Page 32
Beyond Buzz
Important Jargon – Page 37
3
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 INFRA THRUST
T he month of February began with the annual mega event - Union Budget 2022. While
Finance Minister Nirmala Sitharaman was chided for the lack of reforms for tax payers, the
government’s focus on the infrastructure sector was applauded by all.

The thrust to this sector will not only support economic development in the country but also add
jobs across industries. In our cover story in this issue, we have shed light on the various aspects of
allotments to the infrastructure sector, and how the FinMin plans to turn the announced outlay into
a reality.

With the budget in focus, we have also covered an article on how the Narendra Modi-led
government has tried to balance growth with higher capital expenditure while controlling fiscal
deficit. And sovereign green bonds that invest in climate-friendly infrastructure got a special
mention in the budget. These bonds are a step in the right direction and can be good investment
bets.

You will also find articles on the current economic scenario, aspects playing spoilsport for the tea
sector in India, and the impact of rising inflation on fast moving consumer goods (FMCG)
companies and consumers.

From this issue onwards, we will be covering interesting trends that are likely to be game changers
for the country. The first in this series is ethanol. Do not miss this interesting article that talks
about ethanol - the byproduct of sugar that is all set to become an important source of biofuel in
the coming years, all thanks to government subsidies, which will not only reduce import
dependency but also add to farmers’ incomes.

In the Beyond Basics section of this issue, we have spoken about passive investing. With mutual
fund houses launching exchange-traded funds and index funds, passive investing is getting an
impetus and is enroute to becoming a preferred investment avenue for investorS.

Beyond Market 16th - 28th Feb ’22 It’s simplified...

DB CORNER

The Indian stock

markets look good in
the coming fortnight.

G eopolitical tensions caused by the military attack on Ukraine by Russia sparked a bout of risk aversion
in the equity markets across the world, including in India.

The Federal Reserve (Fed) is likely to tighten monetary policy more aggressively than anticipated, beginning
March, owing to consistently higher inflation in the US.

Earnings results of India Inc saw some weakness due to high commodity prices.

The Indian stock markets look good in the coming fortnight. Nifty Futures has support at the 16,350 level. On
the upper side, it is likely to touch the 17,200 level.

The military conflict between Russia and Ukraine could impact world economies if it continues for a longer
period, and must, therefore, be watched closely by traders and investors alike to see how the situation might
unfold. They must also pay attention to inflation and commodity priceS.

Nifty: 16,658.40 Disclaimer

It is safe to assume that my clients and I may have an investment interest in the stocks/sectors
Sensex: 55,858.52 discussed. Investors are required to take an independent decision before investing. Investment in
(As on 25th Feb ’22) equity is subject to market risk. Our research should not be considered as an advertisement or
advice, professional or otherwise. The investor is requested to take into consideration all the risk
factors including their financial condition, suitability to risk return profile and the like and take
professional advice before investing.

5
Beyond Market 16th - 28th Feb ’22 It’s simplified...
BEYOND THINKING

FINDING
A MIDDLE GROUND

The Union Budget

balances growth
aspirations with
higher capex.
Yet, it manages to
keep a lid on
fiscal deficit

6
Beyond Market 16th - 28th Feb ’22 It’s simplified...
F
inance Minister Nirmala Sitharaman
created a splash by announcing big
bang capital expenditure in the
Union Budget for fiscal 2023 despite
the pandemic.
A 35% jump in capex to `7.50 lakh
crore in fiscal 2022 over `5.4 lakh
crore in the current, drew applause,
especially from India Inc, for not
losing the growth focus during
difficult times.
Governments generally cut capex
during crises to make way for higher
revenue spending as it happened
during the global meltdown in 2009.
Interestingly, the huge capex increase
for 2022-23 has been planned along
with the process of fiscal consolida-
tion. The government has sharply
compressed the fiscal deficit from a
pandemic-driven high of 9.2% of
gross domestic product (GDP) in
2020-21 to 6.9% in 2021-22, which
is to be further reduced to 6.4% in
2022-23.
This consolidation is necessary,
given persisting inflationary
pressures, elevated bond yields and
net FPI outflows.
So, how will the Centre finance its
big capex boost, given its emphasis
on deficit reduction?
Experts say the government is
banking on higher receipts, especial-
ly tax revenues and partly reducing
revenue expenditure to raise the
funds.
TAX REVENUES
The government has made a
conservative projection of a 9.6%
increase in tax revenue and the
Centre’s share during the next fiscal
with an implied buoyancy of 8.7%,
corresponding to the assumed
nominal GDP growth of 11.1%. The
modest tax revenue projection is
mainly on account of excise duty cut
on petroleum products.
However, GST has now stabilized
and Central GST is projected to
increase by 15.8% in 2022-23. Direct
taxes are also projected to grow by a
high of 13.6%, thanks to several
administrative measures.
Overall, the Centre’s share of tax
revenue, which accounts for about
85% of total non-debt receipts, will
grow an impressive 43% in 2022-23
compared to a pre-pandemic level of
`13.6 lakh crore in 2019-20.
Non-tax revenues and dividends and
surpluses of public enterprises are
expected to decline for a third year in
succession. This is mainly on
account of a lower provision for
dividends from the RBI.
Non-debt capital receipts are also
budgeted to fall by 29.7%, on
account of a 16.7% projected decline
in disinvestment receipts.
FISCAL DEFICIT
The Union Budget expects the fiscal
deficit for 2022-23 at `16.6 lakh
crore, or 6.4% of the GDP. The high
fiscal deficit for 2022-23 will come
on the back of extremely high fiscal
deficits for two consecutive years.
The fiscal deficit for 2020-21 was at
`18.2 lakh crore or 9.2% of the GDP.
The fiscal deficit for 2021-22, the
current financial year, is expected to
be at `15.9 lakh crore, or 6.9% of the
GDP.
RISING LIABILITIES
The total liabilities of the central
government as of March ’23 are
expected to be at `152.2 lakh crore.
Between March ’20 and March ’23,
the government would add `50 lakh
crore to its liabilities.
The Centre’s accumulated debt in the
three last years since the pandemic
began is equal to the amount in the
seven years before the pandemic.
The government needs to pay interest
on the bonds it issues to finance the
fiscal deficit.
In 2022-23, the central government is
expected to spend `9.41 lakh crore or
3.6% of the GDP on paying interest
on the bonds, which is around 48.6%
of the tax revenue that the central
government hopes to earn during the
year.
The figure is up from 42.6% in
2017-18. With almost half the tax
revenues gone in paying interest on
loans, the government has less
money for other things unless it
raises money through other avenues
such as disinvestment, PSE
dividends or higher borrowing.
If it continues to borrow more, a
higher portion of tax revenues every
year will go towards debt servicing,
which would push the government
into a debt cycle.
While a major part of the recent
increase in government liabilities is
due to the expenditure related to the
pandemic, such as giving away free
grains, some of it is due to good
accounting practices such as bringing
the off-budget spending under the
central government’s head and the
contraction of GDP in FY21 leading
to rise in liabilities as a percentage of
GDP.
7
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 It is highly unlikely that total
government liabilities will come
down to pre-pandemic levels anytime
soon. Also, Lok Sabha elections are
due in mid-2024, which means that
the next year’s Union Budget would
be expansionary.
The bond market is taking this into
account with the 10-year bond yield
rising close to 6.7% from 6.4% at the
beginning of the year. Analysts
expect yields to hit 7% in the near
term, and touch 7.5% in the next
fiscal.
A rising bond yield signifies that
bond market investors want a higher
rate of return on their current and
future investments. In the current
scenario, this is primarily because of
rising inflation as well as the chances
of government borrowing continuing
to remain on the higher side.
Total government liabilities peaked
in 2004-05 at 95.1% of the GDP, but
took 11 years to come down to the
recent low of 72.1% in 2014-15. In
2020-21, when total government
liabilities reached 91.3% while in
2021-22, the liabilities are expected
to be at 88.4%.
CAPITAL EXPENDITURE
Public sector enterprises raise their
own capital resources from the
market, which are classified as
internal and extra-budgetary
resources (IEBR).
The central government capital
expenditure and IEBR together make
up the total Union government and
public sector capital expenditure. The
Union government’s loans to the
state governments also count as
CGCE.
Central government capital expendi-
ture was `5.54 lakh crore in Union
Budget 2021-22 and rose to `7.50
8
Beyond Market 16th - 28th Feb ’22 It’s simplified...
lakh crore in Union Budget 2022-23.
However, the IEBR of PSEs was
`5.83 lakh crore in 2021-22 and has
decreased to `4.69 lakh crore in
2022-23.
The union government has hugely
hiked the loans to state governments
from `10,000 crore in budget
2021-22 to `1,00,000 crore in budget
2022-23.
The total central government and
public sector capital expenditure was
`11.37 lakh crore in budget 2021-22,
which is `12.20 lakh crore in budget
2022-23, a net increase of `83,000
crore.
If you exclude an increase of `90,000
crore in loans to the state govern-
ments, the union government capex
in 2022-23 is only `11.30 lakh crore
– a net reduction of `7,000 crore.
IEBR JUGGLERY
In the current fiscal, the National
Highways Authority of India has
raised `65,000 crore by borrowings
while it got funding support of
`57,350 crore to fund capex of
`1,22,350 crore.
While for 2022-23, the NHAI’s
capex is `1,34,015 crore, but the
government has decided to fully fund
the NHAI’s capex programme, and
the latter would not borrow anything
for capex.
The net increase in public sector
capital expenditure stands cancelled
to the extent of `65,000 crore.
In budget 2022-23, the BSNL capex
has been hiked up massively to
`44,720 crore, but it would be
entirely funded by the government.
The capex provision from the
government budget for NHAI and
BSNL totaled up to `1,09,720 crore.
This expenditure only substitutes the
IEBR resources of these two entities,
but boosts the government capex. It
will not lead to any increase in the
overall capex of the government and
the public sector.
The government announced issuing
sovereign green bonds in 2022-23,
with the proceeds being given to
public sector enterprises.
These are most likely to substitute
the borrowing of entities like NHPC,
IREDA, NTPC to that extent. It will
also boost the government cap, but
will not lead to an increase in the
overall capex.
THE EXPENDITURE
In budget 2021-22, the equity and
loans budgetary support provided to
the public enterprises was `2.46 lakh
crore - `2.23 lakh crore of equity and
`23 lakh crore in loans.
In the 2022-23 budget, this provision
has further gone up to `3.61 lakh
crore, out of which `3.34 lakh crore
is in equity and `27 lakh crore in
loans.
The capital outlay for defence
services provision, `1.35 lakh crore
in budget 2021-22, has gone up to
`1.52 lakh crore in budget 2022-23.
Of the capital expenditure provision
of `7.50 lakh crore in budget
2022-23 – excluding the capex
through public enterprises, state
government loans and `1.52 lakh
crore of defence capital expenditure
– only `1.39 lakh crore of capex is
incurred by all other ministries and
departments.
GOVERNMENT BORROWINGS
The government will borrow about
`11.6 lakh crore from the market in
2022-23 to meet its expenditure
requirement. This is nearly `2 lakh
crore higher than the current year’s
budget estimate (BE) of `9.7 lakh
crore.
Total market borrowings of the
government for 2022-23 are estimat-
ed at `11,58,719 crore.
The Revised Estimates (REs) for the
same for 2021-22 are `8,75,771
crore as against the BE of `9,67,708
crore. Gross borrowing for the next
financial year will be `14,95,000
crore as against `12,05,500 crore BE
for 2021-22.
SUBSIDIES
Making a bold move, the Centre has
rationalized subsidies, keeping it at
`3.17 lakh crore for 2022-23, 26.6%
lower than the RE for this financial
year. In its RE for 2021-22, the
government pegged total subsidies at
`4,33,108 crore, higher than the BE
of `3,69 lakh crore for the current
fiscal.
Food subsidies have been pegged at
`2.07 lakh crore, 27.8% lower than
the RE for this fiscal, while fertilizer
subsidy at `1.05 lakh crore, is 24.9%
lower than the RE.
Fuel subsidies at `5,813 crore are
10% of what is expected to be spent
in the RE.

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9
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 ALIGNED
BEYOND THINKING

WITH
NATURE The introduction of sovereign
green bonds will give a thrust to
climate-friendly infrastructure
projects in India

10
Beyond Market 16th - 28th Feb ’22 It’s simplified...
I
n Union Budget 2022, Finance
Minister Nirmala Sitharaman
announced sovereign green bonds to
fund climate-friendly infrastructure
projects. Sovereign green bonds
operate like any other debt instru-
ment, except that the proceeds from
the issue of these bonds will be used
exclusively to fund projects that are
climate-friendly. The issuer is
obliged to use proceeds from the
bonds to fund green infrastructure
projects and policy measures such as
battery-swapping policy for electric
vehicles.
With this announcement, India
became the first of the BRICS
(Brazil, Russia, India, China, and
South Africa) emerging economies to
enter the sovereign green bond
market. Brazil and Russia are
expected to follow India. ‘The
announcement builds on India’s 2070
net-zero carbon emissions target and
its intention of constructing 500
gigawatts of renewable energy
capacity by 2030, which it outlined
during November’s COP26 climate
conference,’ Sitharaman said, during
her Budget speech.
The issuance of sovereign green
bonds is part of the government’s
overall borrowing target of `14.95
trillion in financial year 2022-23.
Media reports suggest that around
5% of this could be targeted as
sovereign green bonds. It is believed
that green bonds will be rupee-de-
nominated papers that will have a
long tenure to suit the requirement of
green infrastructure projects.
Industry experts see the issue of
green bonds as a measure that signals
India’s commitment to green energy.
It will help in building a domestic
market for green energy by providing
much-needed liquidity.
It is a good alternative to convention-
al bank debt, which has sectoral
limitations. Green bonds will drive
down the cost of capital and reduce
asset-liability mismatches. It will
also offer an opportunity to interna-
tional investors to support India’s
green energy efforts.
There is still some ambiguity on
details about the bonds such as
timing, size, distribution method and
the plans for repeat issues. The
government has not yet appointed a
green structuring advisor, although it
is widely believed that State Bank of
India could play a key role.
The government could face some
challenges in the issuance of green
bonds. First of all, the government
will have to make sure that the
recipients of funds raised from green
bonds should be compliant with
green energy requirements.
Companies will have to certify that
their projects are climate-friendly.
Till now, the government has not
formalized such a certification and
this can cause some ambiguity. The
government will also have to ensure
that the companies continue to be
compliant with the green energy
requirement of green bonds, not just
at the time of the issue but even after
it. Monitoring companies can be a
challenge.
There is also the question of appetite
from domestic investors for such
bonds. Green bonds as a means of
finance are not a popular concept in
India, although the idea is gaining
traction. In the past one decade,
institutions such as Yes Bank, EXIM
Bank, IDBI, NTPC Limited, and
Axis Bank have raised funds through
green bonds for renewable energy,
water management, and low carbon
building projects.
In the recent past, JSW Hydro raised
$707 million through green bonds,
which were oversubscribed four
times. Data from Prime Database
reveals that since 2015 companies
such as Yes Bank and CLP Wind
Farms, sold `4,100 crore or $625
million of green bonds in India. In
the same period, Indian companies
raised $9.18 billion from green bonds
overseas.
Market experts believe that sovereign
green bonds will open up a domestic
market although the government may
have to sweeten the deal for inves-
tors. Indian investors do not have any
dedicated funds meant for green
energy, which means the government
will have to offer incentives to make
them popular.
The government could perhaps
consider issuing green bonds as
tax-free bonds with a yield of around
7% for 10 years. This will attract a
lot of interest from all investors,
especially retail investors.
The government could even mandate
large institutional investors to invest
a portion of their corpus in sovereign
green bonds. Institutions such as
IRDAI (Insurance Regulatory and
Development Authority) or EPFO
(Employees’ Provident Fund
Organisation) could be asked to
subscribe to green bond sales.
Incentives could be offered to
commercial banks to buy green
bonds.
In the overseas market, institutions
typically set aside funds for green
investments. The Indian government
could tap into this market by
launching green bonds overseas. It
11
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 could issue masala bonds that could
be of interest to the NRI community.
But the government will have to bear
forex risk, which may not be
acceptable. The disadvantage of
issuing bonds in the overseas market
is the scrutiny on domestic policies.
The government may not like the
scrutiny that such an issue would
attract.
In fact, it seems highly unlikely that
the government will issue bonds in
the overseas market. A report by S&P
offers some good news for the
domestic market. It says that
corporate and bank issuers in India
will subscribe to green bonds
actively. This augurs well for India’s
green energy plans because the
country might need as much as $10
trillion to be carbon-neutral by 2070.
The pricing of bonds is a contentious
issue as well. The government has
two options. It could price the bonds
higher than regular bonds to reward
investors for being part of the green
energy movement. If the rates are
higher, it would be attractive for all
investors - be it banks, mutual funds
or pension funds. Or it could price it
lower to make green bonds attractive
for corporates and project develop-
ers. It remains to be seen how the
pricing of green bonds evolves.
The World Bank, in association with
a Swedish bank, issued the world’s
first green bond in 2008. Since then,
the collective issuance of green
bonds has been more than $1 trillion.
Globally, green bonds have been
growing fast.
A report by Climate Bonds Market
Intelligence estimates the size of the
green bond market to touch $517.4
billion in 2021. This marks a 50%
jump from the market size in 2020.
In the last two years, the global bond
market has seen some stagnation in
growth because governments across
the world were battling the Covid-19
pandemic.
But there is now a renewed focus on
the challenges the world faces
because of climate change and this
could cause a surge in the global
green bond market.
As it stands now, the total green bond
market is just over one percent of the
global bond market, which leaves
ample room for growth.
The London-based Climate Bonds
Initiative estimates that sales from
green bonds could reach highs of
between $900 billion and $1 trillion
by the end of 2022 and up to $5
trillion by 2025.
India has been catching up slowly. In
2021, India issued green bonds worth
$16.5 billion. But it was still at a
distant 17th position among green
bond-issuing nations, with the US,
Germany, China, France and the UK
occupying the top five slots. India is
the second-largest bond market
among emerging markets after
China. But India’s green bond market
is less than a tenth of that of China’s,
which means that a lot more can be
done.
India can make the green bond
market more attractive for domestic
and international investors by
implementing some policy measures.
The government can consider a
decrease in the cost of raising green
bonds to make it attractive for project
developers. This could require more
involvement of regulators such as the
Reserve Bank of India and SEBI.
The government should also consider
standards for certification of climate
change projects. If the government
provides a direct financial incentive
for labeling projects as green, it
would encourage green bonds as a
mode of finance. Projects that could
possibly be considered for green
bond issuance by government would
help in improving investor sentiment
in the Indian green bond markeT.

BEYOND WORDS
James Heckman

James Heckman is a Nobel Prize winning American economist. He was presented the Nobel Prize in Economics
for his work on the microeconometrics of diversity and heterogeneity and for establishing a sound causal basis for
public policy evaluation.

Heckman is known for his contributions to selection bias and self-selection analysis, especially Heckman
correction, which is what earned him the Nobel Prize. Apart from this, Heckman is renowned in the area of labour
economics, mainly revolving around the efficacy of early childhood education programmes.

Heckman holds a BA in Mathematics from Colorado College and an MA and PhD (1971) in Economics from
Princeton University. He has been at the Department of Economics at the University of Chicago since 1973.

12
Beyond Market 16th - 28th Feb ’22 It’s simplified...
BEYOND THINKING
21
7+(0(1'
India’s economic recovery offers hope of
I
better times in the current fiscal year
ndia’s economic recovery is well on
track with its GDP growth for this
fiscal (FY22) projected at 9.2% and
at a decent 8% to 8.5% for the next
fiscal (FY23). Things appear to be
stabilizing as the after effects of the
two debilitating Covid-19 waves in
2020 and 2021 have ebbed consider-
ably. The third wave (Omicron
variant) has not been as devastating
as the two previous ones and this has
helped the country’s economy escape
largely unscathed.
While there is encouraging news
surrounding the economy, one factor
that could put a spoke in its recovery
is rising inflation. The government
has expressed its concern over this in
the Economic Survey tabled in the
Lok Sabha by the Union Finance
Minister Nirmala Sitharaman before
this year’s budget.
Hardening inflation has emerged as a
concern though presently there are no
indications that it will spiral out of
control. According to the Survey, the
country’s economy would be best
served if oil prices remained in the
$70/barrel to $75/barrel range.
With inflation reappearing in both
advanced and emerging economies,
India needs to be wary of imported
inflation, especially from elevated
global energy prices, the Survey said.
Tension in the Persian Gulf with Iran,
Saudi Arabia, the United Arab
Emirates, and Yemeni rebels at
loggerheads with each other, is a
cause of worry. In recent weeks,
increasing tensions in Europe
following American warnings about
a possible Russian invasion of
Ukraine is also worrying.
13
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 A war, even if limited in magnitude,
can result in oil prices flaring and
fuelling inflation, not only in India
but also worldwide. A rapid escala-
tion in inflation is the last thing India
and the world needs at this point of
time.
Globally, central banks have begun
tightening monetary policies
although India’s apex bank - the
Reserve Bank of India (RBI) - is still
pursuing an accommodative policy. It
retained its repo rate and reverse repo
rate at 4% and 3.35%, respectively.
India’s headline inflation rate based
on the Consumer Price Index (CPI)
rose to 6.01% in January ’22 from
5.66% in December ’21, which is the
highest in seven months. This is also
the 28th month consecutively that
CPI inflation has clocked in above
the medium-term target of 4%.
However, one need not be alarmed as
this northward movement was
expected owing largely to an
unfavourable base effect.
Food inflation jumped from 4.05% to
5.43% largely due to this unfavoura-
ble base effect though Consumer
Food Price Index declined by 1.3%
in January ’22 from December last
year. It must be noted that while the
sequential momentum in food prices
decreased in January this year, three
other groups - clothing and footwear,
housing and miscellaneous - all
clocked a rise in price momentum in
the same month.
Because of this, core inflation
remained in the 6% range, which
indicates the existence of underlying
price pressures. The RBI’s Monetary
Policy Committee (MPC) in its
statement early-February said that in
the near-term there was a possibility
of cost-push pressures on core
inflation continuing.
However, its surveys suggested
14
Beyond Market 16th - 28th Feb ’22 It’s simplified...
“some softening in the pace of
increase in selling prices by the
manufacturing and services firms
going forward, reflecting a subdued
pass-through.”
The apex bank seems optimistic that
inflation would not get out of hand
and has come out with its own set of
figures. The RBI sees CPI inflation at
around 4.9% in Q1 FY23, 5% in Q2
FY23, 4% in Q3 FY23 and 4.2% in
the last quarter of the same fiscal.
For the year, it sees inflation
averaging 4.5%, down 80 basis
points (bps) from the 5.3% this year.
The adverse implications of a rising
inflation aside, there are several
positive factors that the Economic
Survey and the RBI have highlighted
about the country’s economy, which
are heartening.
The alacrity with which the govern-
ment has tackled the third Covid-19
wave, the extensive vaccine cover-
age, which should act as protection
against another devastating outbreak,
easing of lockdown restrictions, a
healthy export growth, supply-side
reforms and the availability of fiscal
space to increase capital spending all
augur well for economic recovery.
The RBI also feels that the country’s
economic recovery is gaining
strength and traction and that
manufacturing and services are in an
expansion mode.
In its monthly bulletin for February
issued by the Department of
Economic and Policy Research, the
apex bank stated that there was
optimism on demand parameters
alongside an increase in consumer
and business confidence. “As
businesses return to a new normal,
the job landscape is expected to
improve,” it said.
A point that needs highlighting here
is that the country’s investment to
GDP ratio had hit 29.6% in 2021-22
(the highest level in seven years).
Pointing to the record corporate
profits in recent quarters and the high
mobilization of risk capital by firms,
the Survey said that while private
investment recovery was still at a
nascent stage, there were many
signals that indicated stronger
investment, going forward.
It needs to be noted here that the
corporate earnings results of 1,273
listed non-financial companies
representing 80% of market capitali-
zation of all listed non-financial
companies show double-digit
year-on-year (YoY) sales growth
during Q3 of FY22, which gives
ground for optimism. An additional
heartening feature is that India’s
merchandise exports registered a
healthy expansion of 23.7% YoY at
$34.1-billion in January this year.
The agriculture sector, so critical to
India’s economy, has witnessed an
increase in overall acreage (rabi
crops) to a new record of 700.8 lakh
hectares, which is 1.5% above the
previous year’s average and 8.2%
above normal (5-year average), as of
4th February this year.
A healthy performance by the
agriculture sector will strongly
support economic growth and also
help counter food inflation. A good
crop harvest will prevent shortages
while also bringing good earnings to
farmers, which, in turn, will help
boost consumption in rural areas.
Business segments such as tractors,
automobiles, two-wheelers, white
goods, textiles and gems and
jewellery have the potential to fare
well if there is more money in the
rural population’s hands.
Another indication of the economy
revving up is the January GST
collection at `1,40,986 crore, the
highest since the inception of the
GST regime in July ’17 and 15% up
over the year-ago figure. This was
made possible by the pick-up in the
economy coupled with anti-evasion
measures by the government. In
December ’21, the collection was
`1.29 lakh crore.
That this type of high collection is
not just a one-off is evidenced by the
fact that January is the fourth month
that the GST collection has crossed
the `1.30 lakh crore-mark and the
seventh month consecutively that it
has breached the `1 lakh crore-mark.
Encouraged by the buoyancy in GST
collections, Union Finance Minister
Nirmala Sitharaman said during the
budget presentation that “tax-payers
deserve applause who have diligently
contributed to fulfilling their
responsibilities in improved tax and
GST.”
12:40PM
The total number of GSTR-3B economy. The 9.2% GDP growth
returns filed up to 30th Jan ’22, is projected for this fiscal suggests a
1.05 crore, including 36 lakh recovery above the pre-pandemic
quarterly returns. level of 2019-20.
Till 3 pm on 31st Jan ’02, Central Encouragingly, the Reserve Bank has
GST (CGST) stood at `24,674 crore, also said that all major components
State GST (SGST) at `32,016 crore of GDP exceeded the FY20 levels
and Integrated GST (IGST) at barring private consumption but this
`72,030 crore, including `35,181 also looks likely to change for the
crore collected on import of goods. better, going forward, as normalcy
Cess stood at `9,674 crore, including increasingly returns.
`517 crore collected on import of
goods. Barring circumstances beyond one’s
control such as a war in Europe or
“Coupled with economic recovery, the Persian Gulf or a deadly fourth
anti-evasion activities especially pandemic wave, India’s economy
action against fake billers has been should stay smoothly on the recovery
contributing to the enhanced GST. path.
The improvement in revenue has also
been due to various rate rationaliza- A 9.2% growth for this fiscal
tion measures undertaken by the followed by an 8% to 8.5% growth
council to correct inverted duty for the next will be really happy
structure,” the Finance Ministry said. news for the country after two years
of Covid-19-induced distress on the
Things appear bright for India’s Indian economY.
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BEYOND THINKING

RAISING
THE STAKES

Increased Capex On
Infrastructure Is Likely
To Boost Growth,
While Also Creating Jobs
16
Beyond Market 16th - 28th Feb ’22 It’s simplified...
T
he government’s – centre and state -
focus on infrastructure sector has
been relentless. This is evident from
the fact that it has allowed the
construction of roads even during
pandemic-induced lockdowns.
In addition to this, it has also been
increasingly awarding projects year
after year as well as creating a
favourable business atmosphere by
reducing project burden in the form
of Hybrid Annuity Projects (40% of
the cost of a project is borne by the
central government), and announcing
several policy decisions in the
interest of the construction industry.
It is clear that the government wants
construction in the infrastructure
sector to continue unabated.
Union Budget 2022 is an extension
of the government’s position on the
infrastructure sector.
The government aims to change the
roadmap of India’s infrastructure
industry through increased capital
expenditure, as is evident from this
year’s budget.
THE BASICS
In Union Budget 2022, the govern-
ment announced plans to increase
investments in three major segments,
namely, water, roads, and railways.
On the whole, the total investment
proposal for infrastructure sector in
the budget has been increased to
nearly `12.2 lakh crore, which is
10% higher than what was the
revised estimate of Union Budget
FY22, and a little over 7% when
compared with the budget estimate
of FY22.
The increase in investment allocation
towards infrastructure is timely. At a
time when the total debt of National
Highway Authority of India (NHAI),
a government body that awards road
projects, has been worrying analysts
and sector experts, higher allocation
towards infrastructure would reduce
the burden on NHAI’s balance sheet
to a certain extent.
A) Water Supply
The government has made it
abundantly clear that it is keen on
tapping the water segment in a big
way. It has, therefore, launched the
Jal Jeevan Mission, which envisions
the provision of safe and adequate
drinking water through individual tap
connections to all households in rural
India by 2024.
In the current budget, the govern-
ment outlay for water supply has
been increased 32% on an
year-on-year (y-o-y) basis to `672
billion; within this, the outlay for
JJM is up 33% y-o-y.
The budget indicated that the current
coverage of the Har Ghar, Nal Se Jal
scheme is 87 million; of this, 55
million households have been
provided tap water over the last two
years itself.
An allocation of ~`600 billion has
been made with the intention of
covering 38 million households in
FY23.
b) Road Segment
Monetization or selling of stake in
road projects has been a key focus of
the central government. This helps in
obtaining capital required to maintain
and run road projects. In Union
Budget 2022, the government has
increased capital expenditure of road
sector.
As against FY22, the government has
increased capital expenditure towards
road sector by 8% to close to `1.9
lakh crore for FY23. It must be noted
that debt levels of the government’s
roads awarding agency National
Highway Authority of India (NHAI)
have been rising.
This has been a cause of concern for
analysts and sector experts. The
government plans to speed up
construction of roads and improve
connectivity between urban, rural
and border areas.
According to the current budget, PM
GatiShakti Master Plan for Express-
ways will be formulated in FY23 to
facilitate faster movement of people
and goods.
In this context, the government plans
to expand the network of National
Highways by 25,000 km in FY23.
c) Railways And Other Sectors
• The government has allocated close
to `2.5 lakh crore to railways. This is
nearly 14% more than the revised
spending in FY22.
• In FY23, as regards railways, the
government will focus on new lines,
gauge conversion and doubling with
capex.
• As regards metro rail, the govern-
ment is likely to provide support of
close to `23,800 crore in FY23 as
compared to approximately `23,300
crore in FY22, up 2%.
Apart from these sectors, the
affordable housing segment too
received proper attention of the
government.
17
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 In the affordable housing segment,
Pradhan Mantri Awas Yojana –
Urban (PMAY-U), a flagship Mission
of the Government of India, which is
being implemented by the Ministry
of Housing and Urban Affairs
(MoHUA), will receive an allocation
of close to `28,000 crore in FY23 in
comparison with `27,000 crore in
FY22. As regards rural housing,
Pradhan Mantri Awas Yojana –
Gramin (PMAY-G) will be allocated
`20,000 crore in FY23. This is 3%
more than the amount allocated in
FY22.
India’s Infrastructure sector has
clearly been a winner in terms of
business and allocation of funds by
the government.
Given the 35% increase in govern-
ment capex, it is important to
understand how it intends to focus on
the infrastructure sector through
budgetary allocation.
One of the major goals of sustained
increase in funding to infrastructure
sector is to create multi-modal
transport facilities. This will reduce
logistics costs.
Even for infrastructure companies,
reduced costs will translate into
earnings, improving the overall
competitiveness of Indian companies
as compared to their global peers.
In addition to this, it will provide a
level-playing field to global compa-
nies that plan to conduct business in
India and be a successful part of
India’s growth story.
Analysts and sector experts estimate
that a well-established multi-modal
transport infrastructure will contrib-
ute meaningful economic growth.
According to the website of Niti
Aayog, studies carried out by the
Reserve Bank of India and the
18
Beyond Market 16th - 28th Feb ’22 It’s simplified...
National Institute of Public Finance
and Policy on improving multi-mod-
al transport infrastructure have
estimated the multiplier effect to be
in the range of 2.5-3.5 times.
To put it simply, it means that for
every rupee spent by the government
in creating infrastructure, the Gross
Domestic Product (GDP) gains worth
`2.5 to `3.5.
To achieve this, the government in
the Union Budget laid high stress on
increased co-ordination between
various ministries for timely
execution of infrastructure projects.
The government’s Gati Shakti
initiative will play an important role
in achieving these two goals—mul-
ti-modal transport infrastructure and
fruitful co-ordination between
ministries.
In the Budget, the government has
proposed a Unified Logistics
Interface Platform for data exchange
among various operators through
Application Programming Interface
(API) to achieve regulatory and
operational accurate co-ordination.
In infrastructure sector, it is clear that
the government is more focused on
roads and railways. The government
has increased investments in these
segments by 50% in this Budget in
comparison with the year ago.
In terms of rail connectivity, 100 PM
Gati Shakti Cargo terminals are
proposed to be developed over the
next three years.
Also, the government’s budget
proposal of expanding national
highways by 25,000 km in FY23 is
nearly two times higher than the peak
construction achieved in the past five
years.
In terms of contribution, centre’s
share in the total budgetary alloca-
tion for infrastructure investments is
`10 crore to `11 lakh crore, 45% of
the total allocation in the current
Union Budget.
What this means is that state
governments and extra-budgetary
sources - banks, financial institutions
and other forms of private invest-
ments - will contribute to the
remaining investments. Overall, state
governments are likely to play a
major role in urban infrastructure,
irrigation, health and education.
Keeping this in mind, the centre
increased its outlay for Special
Assistance to States for Capital
Expenditure to `1 lakh crore in FY23
from `15,000 crore in FY22.
Though these proposals are in place
and their timely implementation will
be critical, most analysts and
economists opine that more policy
reforms by the government are
required.
These policy reforms must revolve
around creating a sustainable private
investment environment, say
analysts.
Some policy reforms that the
government can consider include
increasing investments from
domestic pension fund in infrastruc-
ture, expanding the scope and
definition of infrastructure investors
for taxes, expanding infrastructure
bond market, following a uniform
practice for selecting and contracting
with private partners, and creating
effective rules for contract renegotia-
tion and, setting up new dispute
resolution mechanisms to iron out
obstacles in the execution of projects.
These policy reforms are likely to
create an ecosystem where very few
crucial infrastructure projects will be
stuck or in need of fundS.
BEYOND THINKING

READING
THE TEA
LEAVES
Increase in production, mainly by
small leaf growers and lower
export demand, is leading to a fall
in tea prices and impacting the
organized sector

19
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 T
he Indian tea industry has thrown a
unique challenge to equity investors.
After staying out of investors’ radar
and underperforming the broader
markets for the last one decade, there
was some respite in 2020.
But growth momentum was lost in
2021, further doubting the sustaina-
bility of the sector in 2022 and
beyond.
In 2020, tea prices increased despite
the pandemic as production slumped
while demand remained steady.
Following this, tea producers listed
on the stock exchanges rallied.
But in 2021 and in the first few
months of 2022, stocks like Mcleod
Russel India Limited, Jayshree Tea
and Industries, and Goodricke Group
Limited have hugely corrected from
their 52-week highs.
With sustainability at stake, the
Indian Tea Association, a trade body
for large tea growers, has requested
the government, both the centre and
state, to undertake reforms to help
INDIA TEA SCENARIO
2016
Production 1267
Imports 21
Total Availability 1288
Exports 223
Consumption (Growth <2.32% pa) 1035
Total Absorption 1258
Yearly Surplus (+)/ Shortage (-) 30
Cum Surplus/ Shortage - 62
Auction Price (`/ Kg) 135.93 134.81
Source: Indian Tea Association
20
Beyond Market 16th - 28th Feb ’22 It’s simplified...
the sector to face the difficult Kenya and Sri Lanka, which mostly
situation. grow tea to export. As much as 80%
of the tea produced in India is
There are a few overhangs on the consumed domestically.
sector. The cost of production,
especially wage cost, is higher than Also, 80% of tea is produced in
price realization at various tea northeast India and is concentrated in
auctions in the country. Further, just two states of West Bengal and
production, especially by small tea Assam.
growers has resumed big time, which
is dragging the prices lower. In 2021 India produced around 1,330
million kilograms of tea up from
On the demand side, both domestic around 1260 million kilograms in
per capita consumption and export 2016.
demand, has stagnated in recent
years. All this needs to be fixed. Increase in tea production in 2021 is
attributed to the emergence of small
The sector witnessed its peak in tea growers. In 2020, production
financial performance in fiscal year dropped to 1,258 million kilograms,
2013-14. Can the sector turnaround helping tea prices surge.
at least in the medium- to long-term?
Let’s find out. Potential reforms have Tea prices hovered around `135 per
given hopes of revival of the tea kilogram in 2016. Auction prices
sector in India. rose to `187 per kilogram in 2020.
STATUS Due to the sudden shortfall in tea
supply owing to the coronavirus
The Indian tea industry is important pandemic and bad weather, tea prices
for the country as it employs over 3.5 rose in 2020. However, in 2021,
million people and earns foreign prices have continued to decline from
exchange by being a net exporter of 2020 levels at around `174 per
tea. kilogram.
India is the second largest tea A sub `200 per kilogram level for tea
producer after China. While China prices at the auctions is below the
mainly produces green variety of tea, cost of production of the organized
India produces black variety of tea. sector.
India accounts for 30% of global
black tea production. Other major ISSUES
producers of black variety of tea are
The industry is facing issues at
multiple levels. On the demand front,
2017 2018 2019 2020 2021 (Estd) domestic consumption growth of tea
1322 1339 1390 1258 1330 has stagnated at around 2.5% per
21 25 16 23 25 year, while exports have remained
1343 1364 1406 1281 1355 around 200 million kilograms in the
252 256 252 208 180 last five years. So, demand is not
1059 1077 1102 1128 1150 growing for the industry.
1311 1333 1354 1336 1330
32 31 52 -61 25 Stagnating tea prices and consistently
93 145 84 109 rising cost of production, especially
140.3 142.15 187.9 174.13 the wage cost is dragging profitabili-
ty of players.
Dumping of cheap tea by other
nations and inability of big domestic
players to diversify into high
margin-fetching variety of quality tea
has also weakened the financial
performance of the sector.
For instance, in the last 10 years,
while tea prices have grown at a
compounded annual growth rate of
just 4%, growth rates of vital inputs
have risen by 9% to 12%.
Labour costs constitute ~60% of the
total cost for tea producers. Workers’
wages in Assam and West Bengal
have risen by 50% in the last 5 years.
According to a report by industry
body ASSOCHAM, operating
profitability of bulk tea players
declined from a peak of around 16%
in FY13 to just 2% in FY20.
LIKELY REFORMS
The tea industry has been submitting
requests to the government, both
centre and the state, through various
trade bodies. Let us look at the likely
reforms in the sector.
Auction Price Reforms
All India tea prices in 2021 have
declined by more than 6% as
compared to 2020. Since tea prices
have stagnated over the years, while
the cost of production has continued
to rise, the industry is demanding an
artificial floor to prices at auctions.
Any reform on this front can support
the sector as today 50% of all teas in
the auctions sell below `200/ kg,
which is below the cost of production
of the organized sector. The industry
wants this floor price to be linked to
the actual cost of production.
Wage Reform
According to ratings agency ICRA,
Auction Tea Prices (`/Kg) (January - December)
Auction Centre 2021
Kolkata 210.76
Siliguri 177.71
Guwahati 182.43
North India 190.79
South India 116.97
All India 173.64
Source: Indian Tea Association
wages have trebled from `67 per day
in 2010 to around `205 per day at
present.
Since 60% of the cost for a tea
planter is wage cost, any reform
towards wage management can
reduce the burden on tea growers.
Productivity per worker also has to
rise in tea gardens.
Export Boost
India’s tea sector has traditionally
relied on a few geographies for its
exports. India needs to expand its
export base. India also needs to
export more of high quality tea and
other value-added products that can
fetch higher margins.
India also needs to iron out certain
issues faced during exports like high
ocean freight costs, non-availability
of containers and other payment-re-
lated issues by the importing nations.
Small Tea Growers
Around 50% of tea production in
North India is attributed to small
plantations in 2021, which was lower
at around 40% a few years back.
Unfettered production by such small
unorganized players has led to an
increase in tea supplies in the market
and a drop in prices.
Some regulation to increase efficien-
cy in acreage under tea and proper
crop management to avoid exhaus-
tion of the land should be welcome
by large players.
2020 + / - (`/Kg) + / - (%)
215.89 (-) 5.13 (-) 2.38%
191.02 (-) 13.31 (-) 6.97%
199.20 (-) 16.77 (-) 8.42%
201.85 (-) 11.06 (-) 5.48%
130.13 (-) 13.16 (-) 10.11%
184.68 (-) 11.04 (-) 5.98%
Demand Boost
There is a need to increase the level
of domestic consumption. The per
capita consumption in India at 786
grams per year is lower than many
other tea-consuming countries.
A sustained promotion campaign,
supported by government bodies, can
help increase the demand for tea.
IN A NUTSHELL
At current tea prices, a majority of
tea estates are making losses. As
small tea growers focus on increas-
ing tea production, it becomes vital
for large tea players to focus more on
production of better quality teas that
finds greater acceptance in the export
market and fetches higher margins.
This shift can be disruptive as
currently tea prices are not support-
ive.
Therefore, the government needs to
step in by first introducing some
reforms in prices, which can give big
players the necessary financial
strength to move towards production
of high quality tea.
Any reform on increasing exports
and measures to keep in check
imports will also be welcomed by the
industry.
Year 2022 will be a challenging year
for the Indian tea industry unless the
government steps in to reform the
sector for its medium and long-term
growtH.
21
Beyond Market 16th - 28th Feb ’22 It’s simplified...
BEYOND THINKING

FUELLING
THE
FUTURE
The government’s thrust on
ethanol as biofuel will
reduce import dependency and
provide additional income to
farmers, among other benefits

22
Beyond Market 16th - 28th Feb ’22 It’s simplified...
A
century ago, petroleum – what we
call oil - was just an obscure
commodity; today, it is almost as
vital to human existence as water.
These words by James Buchan sum
up the predicament that India is
facing in terms of meeting its energy
requirements. India imports 85% of
its oil requirements, chiefly from the
Middle East, but also from the
United States.
Every dollar increase in the price of
crude oil raises India’s import bill by
`10,700 crore on an annual basis.
India spent $101.4 billion on crude
oil imports in 2020.
Thankfully, there is a way out of this
predicament – through ethanol, a raw
material used in the production of
alcohol.
A WIN-WIN SITUATION
The Union government’s plans to
divert excess sugarcane molasses and
ethanol to blend with petroleum will
be a win-win situation for all the
concerned parties. Farmers will
benefit because excess capacity was
India's Ethanol Blending Rate
Year Consumption Blending Percentage
2015 10 2.1%
2016 19 3.2%
2017 17 2.4%
2018 23 4.0%
2019 30 4.2%
2020 30 4.3%
2021 42 6.1%
Note: Consumption In 1000 Billion Litres Per Day
Source: S&P Global Platts Analytics
pushing down prices of ENA and
ethanol. The government on the other
hand will gain because ethanol will
save its import bill by around
`30,000 crore, as per estimates.
Considering the long-term opportuni-
ties and current state of the industry,
India is on the cusp of a multi-year
boom with regards to ethanol
production and blending.
Let’s see what is fuelling this boom.
NATIONAL ETHANOL
BLENDING POLICY 2018
With the National Biofuel Policy
2018 formulated to boost India’s
energy security efforts, the country’s
ethanol distillation capacity is likely
to double by 2025. By 2025, India is
estimated to achieve an ethanol
blending target of 20%, which was
later brought forward to 2023 by the
government. This target has been
preponed by 5 years to 2025 from
2030 earlier.
As per the sector, this target appears
overly ambitious. If India manages to
achieve an ethanol blending capacity
of even 11%, it will be the third
largest producer of ethanol in the
world after US and Brazil.
OIL IMPORTS
Currently India imports 85% of its
oil requirements from the Middle
East and the US. So, every dollar
increase in the price of crude oil
pushes up India’s import price by
`10,700 crore annually. India spent a
whopping $101.4 billion on crude oil
imports in 2020. However this
money and valuable foreign
exchange can be saved with the help
of the ethanol blending programme.
For instance, currently, India’s
ethanol blending capacity is 684
crore litres. This is likely to go up to
1,000 crore litres over the next few
years. This is a quantum jump in
production and blending. Even at
20% blending, India would be able to
save a lot of foreign exchange.
This can be deduced from the fact
that production of fuel grade ethanol
and its supply to OMCs has
increased by a factor of 5 from 2014
to 2019. In 2019, a historically high
figure of 189 crore litres was
achieved with a petrol-blending
capacity of 5%.
In the current ethanol supply year of
2021, 300 crore litres of ethanol was
supplied to OMCs to achieve a
blending percentage of ethanol with
petrol of 8.5%. By 2022, a 10%
blending target would be achieved.
CLIMATE CHANGE WOES
The increased use of ethanol with
petrol blending will significantly
reduce pollution and help India meet
its climate change targets. Unlike
crude oil and gasoline, ethanol is
non-toxic and biodegradable, and it
quickly breaks down into harmless
substances if it spills. Ethanol and
ethanol gasoline mixtures burn
cleaner and have higher octane levels
than pure gasoline.
Additionally, the combustion of
ethanol made from biomass such as
corn and sugarcane is considered as
carbon neutral for the atmosphere as
when the biomass grows, it absorbs
carbon dioxide. Thus, ethanol along
with other renewable sources of
energy such as wind turbines, solar
farms and nuclear energy, will
definitely help India achieve its
COP26 requirements and reduce its
greenhouse gas footprint.
GOVERNMENT SOLVING A
TWIN PROBLEM
Given failed farm laws and the
23
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 upcoming elections in the sugar-pro-
ducing states of North India, the
Union government is keen on doing
something substantial for farmers.
In ethanol supply year 2014, supply
of ethanol to OMCs was only 38
crore litres with blending levels of
only 1.53%. In the same year, the
ethanol distillation capacity of
molasses- based distilleries was less
than 200 crore litres.
However, in the past six years due to
a massive push by the Narendra
Modi-led government in agriculture,
the capacity of molasses-based
distilleries has been doubled to `445
crore litres, and that of grain- based
distilleries to 258 crore litres.
Also, by achieving a 20% blending
with petrol target in five years,
around five crore sugarcane farmers
and their families and 5 lakh workers
working in sugar mills and ancillary
activities will benefit from the
government push.
Moreover, this comes in the
backdrop of excess sugar production
and inadequate demand, depressing
prices of sugar and increasing
farmers’ sugarcane dues.
This government diversion of excess
sugar for ethanol-blending with
petrol will help farmers in the
country get timely payment of
sugarcane dues as the realization
from ethanol sales is much faster
than the sale of sugar.
Ethanol Capacity Requirement
Year From Grain From Molasses
2019-20 2.58 4.26
2020-21 2.6 4.5
2021-22 3 5.19
2022-23 3.5 6.25
2023-24 4.5 7.25
2024-25 7 7.3
2025-26 7.4 7.6
Note: All Units In Billion Litres | Source: Niti Aayog
24
Beyond Market 16th - 28th Feb ’22 It’s simplified...
GOVERNMENT PUSH FOR
HIGHER PRODUCTION
The government has directed oil
CPSEs to set up second-generation
ethanol biorefineries in different
parts of the country: This will be
done using agricultural residues and
biomass. With the objective of
augmenting ethanol supplies, the
government has allowed the procure-
ment of ethanol produced from other
non-food feedstock besides molasses
such as cellulosic and lignocellulosic
materials including petrochemicals.
Oil and marketing companies are in
the process of setting up 12 Second
Generation (2G) biorefineries at an
investment of `14,000 crore. Further,
the government has launched
Pradhan Mantri Vi Jivan Yojana to
provide viability gap funding to
increase the capacity of 2G ethanol
in the country and also to attract
investments in this sector.
INCENTIVIZING CAPEX
The Cabinet Committee on Econom-
ic Affairs (CCEA) in December last
year approved a `8,460 crore
modified scheme for extending
interest subvention for those setting
up standalone ethanol distilleries.
The focus of this scheme is to
increase India’s ethanol production
capacity. The scheme has been
extended to those setting up distiller-
ies using grain, dual feed, sweet
sorghum, sugar beet, molasses, and
cereals as feedstock.
Besides, the government would also
bear interest subvention for five
years including one year moratorium
against the loan availed by project
proponents from banks at the rate of
6% per annum or 50% of the rate of
interest charged by banks, whichever
is lower for setting up new distiller-
ies or expanding existing distilleries
or converting molasses-based
distilleries into dual feedstock.
LONG-TERM OUTLOOK
The consumption of ethanol is likely
to grow multifold in India. By 2026,
India is expected to become the
world’s third-largest consumer of
ethanol after the US and Brazil. An
International Energy Agency report
said that India has tripled ethanol
demand to an estimated 3 billion
litres between 2017 and 2021. The
market demand for ethanol in India
stood at 3,250 million litres in FY21
and is estimated to reach 5,412
million litres in FY30, growing at a
CAGR of 8.25% till 2030.
Fuel additives and alcoholic beverag-
es are the main drivers of demand.
Ethanol is an alcoholic beverage
ingredient found in beer, wine, cider
and spirits. Changing lifestyles and
the adoption of western culture are
likely to spur this demand.
Owing to its germicidal properties,
ethanol also has several applications
in disinfectants. It has been strongly
recommended by the WHO as an
important ingredient in alcohol-based
hand sanitizers. The increasing
demand for disinfectants and rising
health consciousness among people
will further fuel this growth.
In fact, during the pandemic due to
lockdowns as demand for ethanol for
use in fuel for cars sharply went
down, the use of ethanol in hand
sanitizers saw a huge spike as a
record number of disinfectants were
purchased during this period.
Overall, the consumption of ethanol
and ethanol-blending is a long-term
theme in India, which will benefit
many companies operating in the
entire value chain such as engineer-
ing, equipment suppliers, sugar
producers and distilleries, etE.
BEYOND THINKING
)((/,1*7+(
648((=(
I
nvestors start looking for defensive
stocks when stock markets turn
volatile. For them healthcare,
information technology and Fast
Moving Consumer Goods (FMCG)
companies are places where they
seek refuge to contain the downside.
But this phase of volatility has shown
some signs of change.
Since the beginning of CY22 till 18th
Feb ’22, the Nifty 50 index has lost
0.44% whereas Nifty FMCG index
has lost 2.87%. Though the sector is
traditionally known for visibility of
revenue, this time investors are
thinking otherwise. Here are a few
things worth pondering over.
The biggest silent killer for investors
– inflation - is here. And contrary to
central bankers’ belief it is not at all
transitory. Inflation and rising
interest rates are generally not
considered strong headwinds for
most FMCG companies.
As FMCG companies use commodi-
ty inputs and convert them into
strong brands, which enjoy pricing
power, creeping inflation does not
hurt them. Price hikes tend to protect
margins for FMCG companies
without hurting their volume growth.
But in the recent past, the hikes in
commodity prices have not been
gradual. They are not only going up
– but the pace and quantum of the
rise is significant. Take the example
of palm oil, a key input in many
products manufactured by FMCG
companies.
Palm oil prices are up 22.75% in the
past one year. This situation needs to
be understood from two contexts. On
the one hand, commodity prices are
25
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 rising in an abundant liquidity
situation, which was caused by
money printing by central bankers
globally to avert the slowdown
caused by the pandemic. And on the
other hand, there are persisting
supply chain disruptions.
Contrary to popular notions, supply
chain disruptions are not temporary
but structural. This means that the
movement of goods may not become
smooth in the near term.
This may lead to further increase in
the already rising commodity prices.
As a result, commodity prices are
likely to stay at higher levels for
longer-than-expected.
In such a situation the only way out
for FMCG companies is to hike
prices. For example, market leader
Hindustan Unilever has taken two
price hikes in the past two months.
Other FMCG companies are also
resorting to price hikes. Despite the
across-the-board price hikes,
investors are worried about the
stocks as there is an expectation that
the price hikes will hurt their volume
growth.
In this context, it is important to note
that FMCG companies are measured
in their price hike strategies. Price
hikes are calibrated and in most cases
may not be compensating a company
entirely for the rise in input costs.
Volume growth in most categories is
in single digits.
When prices are hiked many times
small consumers either cut the
quantum of their consumption or
shift to less pricey brands or shift to
solutions provided by unorganized
players.
Hence, companies are watchful of
volume growth in the light of revised
margins – in some cases they may be
26
Beyond Market 16th - 28th Feb ’22 It’s simplified...
marginally lower.
Going forward, investors will have to
watch out for volume growth and
margins reported by FMCG compa-
nies. Negative surprises cannot be
ruled out at this juncture as the
Indian economy is yet not complete-
ly out of the woods, especially the
lowest economic strata of the society
is yet to come out of the revenue-de-
structive impact of the Covid-19
pandemic.
Urban poor were the hardest hit and
may find it difficult to increase their
consumption in the near term.
Though rural income is expected to
be better on account of improved
prices for many crops, the quantum
of the uptick needs to be watched out
for. The demand for small-sized
(sachets) packages offered by FMCG
companies will be especially kept
under the scanner by institutional
investors.
This becomes very important in the
context of the rich valuations these
companies enjoy. Barring a few
names such as ITC, most other
companies are priced to perfection.
Compared to Nifty 50, which quotes
at a P/E multiple of 22.21, Nifty
FMCG index quotes at 37.58.
Though historically FMCG names
have traded at premium to Nifty, the
earnings growth visibility was never
an area of concern as both the drivers
of earnings growth – volumes and
margins are under pressure.
As interest rates are expected to rise
across the globe, many growth
investors will rethink before putting
their money in richly valued stocks
that are reporting low earnings
growth. They may not be swayed by
the usual strong fundamentals of
FMCG companies - proven business-
es, competent managements, healthy
balance sheets and good corporate
governance.
Some investors have already turned
towards ‘value’ giving less weight to
‘growth’ stories among FMCG
companies. Take the example of ITC.
Till 2020, most institutional investors
were consciously avoiding the stock
given its high dependence on tobacco
business.
Savvy investors have been strictly
avoiding it especially when seen
from the context of ESG framework
of investing. However, in the past
one year, institutional investors’
interest has been resurfacing in the
stock, given the underlying value in
the company.
Though the investment argument is
seen changing, FMCG does not
become an avoidable sector as of
now. There are long-term drivers that
are going to ensure that these
businesses remain relevant.
FMCG is one of the biggest benefi-
ciaries of India’s growth story. As per
capita income increases, there will be
sustained increase in the number of
potential customers and FMCG
companies have exhibited proven
abilities to cater to the emerging
needs of the customers in the
‘bottom-of-the-pyramid’ segment.
There are two crucial factors, which
indicate that the coming quarters for
FMCG companies, especially for the
established ones, would not be
challenging. One is the confidence
shown by FMCG companies in their
post earnings conference calls with
analysts.
FMCG companies have indicated
that another round of product price
increases is imminent as they expect
the rise in the cost of commodities
and raw materials to create a
situation in which they would have to
increase prices for at least another
quarter.
“The inflation impact is not mitigat-
ing. We are seeing continuous
inflation despite a base of 4% to 5%
inflation in the last year. On top of
that, we are again seeing 4% to 5%
inflation. The company may have to
take more price increases, going
forward.” said Mohit Malhotra, CEO
of Dabur India, in a post-earnings
investor call.
Also Britannia MD Varun Berry said
due to unprecedented inflation across
commodities, the company will
increase prices by 10% in the fourth
quarter ending March.
Sanjiv Mehta, CMD of India’s
largest FMCG company, Hindustan
Unilever, gave a strong indication in
January this year that calibrated price
increases would be taken in the
quarters ahead.
These announcements indicate that
FMCG companies will be able to
deal with any increase in their input
costs.
Besides, analysts foresee well-estab-
lished FMCG companies, which
launched premium products experi-
encing likely gains from these
launches. These companies have
significant pricing power. While
low-income consumers aspire to shift
from products offered by unorgan-
ized players to entry-level brands
(trend of formalization), mid-income
customers aspire to migrate from
entry-level products to premium
brands (trend of premiumization).
These trends ensure that better
margin products keep improving
their share in the sales mix. And that
ultimately ensures stable or improv-
ing margins in the long term.
Given these facts, long-term
investors may identify some
structural growth stories in the
FMCG space and as the sector sees
consolidation, there will be a few big
winners in the FMCG sectoR.

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BEYOND BASICS

PASSIVE
POTENTIAL The launch of ETFs and
index funds by fund houses
indicates the massive scope
of passive funds

28
Beyond Market 16th - 28th Feb ’22 It’s simplified...
I
n the last few years, passive invest-
ments have made huge strides in the
Indian asset management industry.
Exchange traded funds (ETFs) and
index funds have grown since the
onset of the coronavirus pandemic.
With more and more new age
investors preferring to invest in
passive funds, fund houses have
linked up different categories of
funds for such investors.
As of January, the assets of passive
schemes stand at `4.80 lakh crore as
compared to just `1.92 lakh crore in
January ’20. All these schemes
include Index Funds, Gold ETFs,
other ETFs and Fund of Funds
investing overseas (FoFs).
A number of fund houses have filed
numerous draft documents for
passive funds.
From FoFs and International Funds
to digital and country-specific funds,
fund houses are introducing exciting
products for investors.
New-age funds like Navi Mutual
Fund have focused on launching
passive funds.
In August and September of 2021,
the fund house had filed around 14
schemes, all in the passive invest-
ment segment.
In August, Navi Mutual Fund had
filed seven offer documents with
markets regulator, the Securities and
Exchange Board of India (SEBI) in a
single day.
In September, the fund had filed offer
documents for four passive funds
that will invest in new driving
technologies, Chinese equities and
companies focused on domestic
manufacturing.
Even an established player such
HDFC Mutual Fund has started
focusing on passive funds. In
October ’21, the fund house had
applied for ETFs like Nifty Growth
Sectors 15, Nifty IT, Nifty Next 50,
Nifty Private Bank, Nifty100 Low
Volatility 30, Nifty100 Quality 30,
Nifty200 Momentum 30, HDFC NV
20, and HDFC Nifty 100.
Fund houses have realized that the
demand is not limited only to equity
ETFs or index funds, but also for
passive products in debt schemes.
Some of the new players are also
bringing in smart beta products for
investors.
RISE OF ETFs
There are multiple reasons as to why
investors are increasingly choosing
passive funds over active funds. The
key reasons for the growing demand
for passive funds are the disappoint-
ing performance of active large-cap
funds as well as the involvement of
governments and new-age investors
in the passive funds space.
An ETF is a basket of securities that
tracks a particular index and is traded
on an exchange in real time, like an
individual stock. Also, like any other
stock, an ETF can be bought and sold
throughout the trading day.
In the Indian market, the first ETF
was launched by Benchmark Mutual
Fund (now Nippon India MF) in
December ’01, and it tracks the Nifty
50 Index. So, the concept of ETFs is
not new in the market.
In the period between 2017 and 2020
(before the crash of March ’20)
Indian equity markets had seen a
concentrated rally. Only 8 to 10
stocks from the benchmark indices
were surging ahead, while other
stocks witnessed a correction. This
erratic behaviour in the market
resulted in bringing returns of several
funds below the benchmark in the
large-cap space.
Since then there has been a shift in
money towards passive funds,
particularly in large-cap funds. Also,
ETFs came to the fore in 2014 when
the government took the ETF route
(CPSE ETF) for disinvestment.
Again since 2015, the Employees’
Provident Fund Organisation (EPFO)
has been increasing its stake in ETFs.
All these factors have led to the
growth of Indian equity ETFs.
DEBT FUNDS TO HAVE ETFs
A large number of fund houses have
either launched target maturity funds
or plan to launch them in coming
times. In a scenario where interest
rates are likely to go up, such
debt-passive schemes have the
capability to reduce volatility if they
are held till maturity.
Such funds have specified maturity
dates aligned with the expiry date of
underlying bonds and invest in
government securities, State
Development Loans (SDLs) or
AAA-rated corporate bonds.
Like other passive funds, target
maturity index funds replicate the
composition of the underlying index
and have specific maturity dates.
For example, Aditya Birla Sun Life
SDL Plus AAA PSU Bond April
2027 60:40 Index Fund will mature
in April ’27 and will distribute
maturity proceeds to investors after
29
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 the date of maturity.
In debt passive funds, there is no
mark-to-market volatility if investors
hold till maturity and have predicta-
ble returns trajectory. Like Fixed
Maturity Plans (FMPs), these funds
too follow a roll-down strategy but in
this case, it follows an open-ended
structure.
Roll-down simply means that a fund
manager will construct a portfolio of
securities with a defined maturity
and allow the maturity to fall in line
with the fund’s tenure.
The prices of fixed-income securities
are governed by interest rates
prevailing in the markets. Interest
rates and price of fixed-income
securities are inversely proportional.
When interest rates decline, the
prices of fixed-income securities
increase. Similarly, when there is a
hike in interest rates, the prices of
fixed-income securities come down.
Some of the funds in the passive
category have given returns in the
range of 5% to 6% in the last one
year. Target maturity funds can either
be index funds or exchange-traded
funds.
GOING GLOBAL THROUGH
ETFs
Never has it been as easy to invest in
stocks of foreign stocks as it is now.
Many broking firms in India now
facilitate international investing.
However, it can be challenging to
pick right companies overseas and
fulfill many other operational
requirements if one chooses to invest
directly. Fortunately, for the Indian
investor, there are many equity funds
that invest overseas.
In the last few days, a flood of offers
30
have been filed with regulators for
funds such as Global Emerging
Markets Fund of Funds, Precious
Metals FoFs, Futuristic FoFs, Future
of Transportation FoFs and MSCI
Emerging Markets FoFs, among
others.
Recently, Navi Mutual Fund
announced the launch of Navi US
Total Stock Market Fund of Fund.
This fund will invest in Vanguard
Total Stock Market ETF, one of the
largest passively-managed US-based
ETFs. The Fund’s Expense Ratio will
currently be 0.06% per annum.
Vanguard Total Stock Market ETF
(VTI) tracks the CRSP US Total
Market Index, which comprises
4,000+ stocks, representing nearly
100% of the investable equity US
Market.
Though the fund invests in US
equities of all sizes - large, mid,
small and micro capitalization, it has
a considerable allocation in most
popular names such as Apple,
Microsoft, Alphabet, Amazon,
Facebook and Tesla.
Last year, Mirae Asset Investment
Managers India, one of the fastest
growing fund houses in the country
in the equities and debt segments,
announced the launch of India’s first
FANG+-based products, ‘Mirae
Asset NYSE FANG+ ETF.’
This is an open-ended scheme
replicating / tracking NYSE FANG+
Total Return Index and ‘Mirae Asset
NYSE FANG + ETF Fund of Fund’,
an open-ended fund of fund scheme
predominantly investing in Mirae
Asset NYSE FANG+ ETF.
The NYSE FANG+ Index will
provide Indian investors with the
opportunity to get exposure to global
innovation leaders, such as
Facebook, Amazon, Apple, Netflix,
Alphabet (Google), Tesla and
Twitter, among others.
As many as 7 out of the 10 compa-
nies from the NYSE FANG+ Index
have made it to the list of top 50
innovative companies for the year
2020 as per Boston Consultancy
Group. Of these, 4 companies are
serial innovators (been part of the
Top 50 list over 10 times).
IN A NUTSHELL
Since ETFs are passive products that
track the index, there is not much
difference in the portfolios of two
ETFs tracking the same category and
index. So, when it comes to choosing
the right ETF, investors should
consider a few important points
before making any investment
decision.
The expenses of ETFs or index funds
should be the first consideration. The
low-cost feature of ETFs has made
these funds more popular than their
actively-managed counterparts. So,
make sure that you are not paying
much for your ETFs.
The entire triumph of ETFs hinges
mainly on how efficiently they
manage to replicate the index. The
difference between the returns of an
index and an ETF is captured by the
tracking error of the fund. Hence,
investors should go for funds with a
low tracking error.
Finally, when it comes to investing in
an ETF, it is equally important to exit
it as and when required. So, as a
retail investor, it is important to
ensure that ETFs have enough
liquidity. Therefore, investors must
check whether or not an ETF trades
on the exchange daily with a fairly
high trading volume. So, one must
first look at all these factors and
invest accordinglY.
Beyond Market 16th - 28th Feb ’22 It’s simplified...
BEYOND NUMBERS
T
TECHNICAL OUTLOOK
he Nifty witnessed volatile trading
sessions in the month of February.
The rally in February was taken over
by Bears. The sentiment on D-Street
was cautious. A dip in a few percent-
age points would be a good opportu-
nity for traders and investors to enter
the market. The euphoria in the
market is likely to continue for the
coming trading sessions. However,
volatility is likely to witness an
uptick.
In the last couple of sessions, the
Nifty has been facing a strong
resistance at the 17,500-17,700
psychological mark. The Nifty is
trading below 50-, 100-, and
200-DMAs, suggesting a
cautious-to-bearish view for the near
term.
Going ahead, the Nifty has support at
the 16,200-16,000-mark. If the Nifty
fails to hold the support of 16,200 /
16,000-mark, then the downfall is
likely to extend towards
15,700-15,500.
We believe that after a stiff fall of
1,000 points from 17,500 to almost
16,400-mark, we may witness a
small pull back rally towards the
16,800-17,200-mark.
On the flip side, any move above the
17,200-mark on closing basis, may
witness buying, which might take the
Nifty towards 17,600 to 18,800
levels. Going ahead, a breather of a
few days from here on will, in turn,
make the market healthy.
The overall trend on the Nifty is that
of cautiousness. But a small pull
back rally may be seen, which may
be utilized for trading, albeit with a
strict stop loss.
The Bank Nifty’s chart suggests that
the Bank Nifty is trading below the
200-DMA, suggesting some signs of
cautiousness.
Looking at the trend in the Bank
Nifty, we see that it has support at
35,500. If Bank Nifty fails to respect
the support level, then selling
pressure is likely to intensify, which
might take the Bank Nifty towards
35,000-34,600. On the other hand,
36,500 will act as a resistance level
for the Bank Nifty. Any move above
the 36,500 level, may extend the
rally towards the 37,400-37,800
-mark.
We advise investors to stay light on
long positions as they will get an
opportunity to build long positions at
support levels.
On the Nifty Options front for March
series, the highest Open Interest (OI)
build up is witnessed near 16,500
and 16,000 Put strikes. On the Call
side, it is observed at 17,000 and
17,500 strikes.
India VIX, which measures the
immediate 30-day volatility in the
Nifty Chart
markets, has rocketed above 30
levels for the first time since June
’20. Going forward, VIX is likely to
remain high till UP election results
are out, and due to negative global
sentiments.
The Put Call Ratio-Open Interest
(PCR-OI) for Nifty Options has been
in the range of 0.70-1.30 in the
month of February. Going forward, it
is expected to remain in the range of
0.5-1.3 in March.
The markets are believed to remain
bearish with supports placed at
16,200 and 16,000; the markets will
continue to witness some steep
selling from important resistances
placed at 16,800 and 17,000 levels.
OPTIONS STRATEGY
Short Strangle
It can be initiated by ‘Selling 1 lot
10MAR 16900 CE (`200) and
Buying 1 lot 10MAR 15700 PE
(`190)’. The net premium gain
comes to around 390 points, which is
also your maximum profit. One
should, however, place a strict stop
loss at 460 points (a 70 point loss).
One should place Target at 280
points (a 110 point gain). With some
important events approaching within
the next fortnight, the index is likely
to remain highly volatile within the
range of 15,700 to 16,800 which
would result in decent gains for the
strategY.
31
Beyond Market 16th - 28th Feb ’22 It’s simplified...
BEYOND NUMBERS

MUTUAL FUND BLACKBOARD

Performance Of Mutual Fund Schemes From Different Categories
Multicap Funds/Flexicap Funds
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Aditya Birla Sun Life Flexi Cap Fund - Growth 1,098 18.2 17.5 12.5 12.2 16.4 15,677
Canara Robeco Flexi Cap Fund - Growth 221 21.3 20.9 17.1 12.4 14.8 6,778
Mahindra Manulife Multi Cap Badhat Yojana - Reg 20 31.3 25.2 -- -- -- 976
UTI Flexi Cap Fund - Growth 243 16.3 22.3 17.1 13 16 24,638
Axis Flexi Cap Fund - Reg - Growth 18 16.3 19.1 -- -- -- 10,603
S&P BSE 500 TRI 28,283 20 19.1 15 12.1 14.2 --
Large Cap Funds
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Axis Bluechip Fund - Growth 44 13.5 18.2 17.1 12.1 15.4 34,182
Mirae Asset Large Cap Fund - Reg - Growth 76 16.5 17.2 14.6 12.8 16.6 31,297
Kotak Bluechip Fund - Reg - Growth 363 16.8 18.6 13.6 10.8 13.8 3,766
Canara Robeco Bluechip Equity Fund - Growth 41 15.7 20.8 16.2 12.4 14.3 6,021
IDFC Large Cap Fund - Reg - Growth 49 17.3 17.1 13.2 9.8 11.9 994
Nifty 50 TRI 24,582 17.9 18 15.3 11.4 13.4 --
Mid Cap Funds
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Tata Mid Cap Growth Fund - Reg - Growth 231 21.3 21.9 14.9 12.4 18.7 1,516
Mahindra Manulife Mid Cap Unnati Yojana - Reg 16 27.6 22.9 -- -- -- 884
Edelweiss Mid Cap Fund - Growth 48 23.9 24.8 16.9 14 20.4 1,863
Axis Midcap Fund - Growth 65 22.2 23.9 19.9 14.4 20.2 16,754
Invesco India Mid Cap Fund - Growth 83 21.2 22.3 16 13.1 19.1 2,208
Kotak Emerging Equity Fund - Reg - Growth 69 24.7 25.1 15.9 15.1 20 17,756
Nifty Midcap 150 TRI 13,246 24.9 22.8 15.9 14.7 17.9 --
Large & Mid Cap Funds
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Mirae Asset Emerging Bluechip Fund - Growth 94 21.2 24.3 18.2 18 23.5 22,097
Canara Robeco Emerging Equities - Growth 157 22.1 21.5 16.5 15.1 21.5 12,548
HDFC Large and Mid Cap Fund - Growth 179 24.7 19.7 13.3 10 12.3 5,500
Kotak Equity Opportunities Fund - Reg - Growth 189 19.5 19.7 14 12.5 15.6 8,940
Tata Large & Mid Cap Fund - Reg - Growth 312 12.9 18.9 13.2 10.7 14.8 2,904
NIFTY Large Midcap 250 TRI 11,728 21.6 20.4 15.4 13.3 16 --
Small Cap Funds
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Axis Small Cap Fund - Reg - Growth 58 39.1 30.9 20.4 17 -- 8,411
Kotak Small Cap Fund - Reg - Growth 156 38.6 34.1 19 17.1 20.5 6,811
Nippon India Small Cap Fund - Reg - Growth 80 43.2 29.9 19.9 18.3 24.3 18,933
DSP Small Cap Fund - Reg - Growth 103 35.4 27.3 13.6 15.3 21.4 8,793
SBI Small Cap Fund - Growth 99 29.2 27.3 20.3 18.7 24.4 11,288
Nifty Smallcap 250 TRI 10,983 33.5 23.6 12.2 11.7 15.1 --

32
Beyond Market 16th - 28th Feb ’22 It’s simplified...
ELSS Schemes (Tax Saving u/s 80-C)
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Axis Long Term Equity Fund - Growth 68 10.9 18.5 15.6 11.9 18.3 32,136
Canara Robeco Equity Tax Saver Fund - Growth 113 19.5 23.4 18.1 13.1 15.8 3,209
Kotak Tax Saver Fund - Reg - Growth 69 21.3 19.6 14 11.9 14.7 2,473
Invesco India Tax Plan - Growth 79 17.5 18.7 14.9 12 16.4 1,900
Mirae Asset Tax Saver Fund - Reg - Growth 30 19.8 22.7 18.5 -- -- 10,972
S&P BSE 200 7,349 17.6 17.3 13.7 10.6 12.7 --
Hybrid Aggressive
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Canara Robeco Equity Hybrid Fund - Growth 242 15.4 17.3 13.8 11.6 14.5 7,407
DSP Equity & Bond Fund - Growth 227 13.1 17.5 12.2 11.4 13.2 7,538
SBI Equity Hybrid Fund - Growth 199 15.6 16.5 13.3 11.1 15.5 49,086
Mirae Asset Hybrid - Equity Fund - Reg - Growth 21 14.7 15.8 12.9 -- -- 6,542
NIFTY 50 Hybrid Composite Debt 65:35 Index 14,449 13.7 15.6 13.1 10.6 12 --
Multi-Asset Allocation Funds
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
HDFC Multi - Asset Fund - Growth 47 14.3 15.5 10.4 9.5 10.2 1,433
Nippon India Multi Asset Fund - Reg - Growth 13 14.7 -- -- -- -- 1,196
Tata Multi Asset Opportunities Fund - Reg - Growth 15 16.5 -- -- -- -- 1,257
NIFTY 50 Hybrid Composite Debt 65:35 Index 14,449 13.7 15.6 13.1 10.6 12 --

Dynamic Asset Allocation Funds

Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
ICICI Prudential Balanced Advantage Fund - Reg 49 11.2 13.2 10.7 9.9 13 38,544
Nippon India Balanced Advantage Fund - Reg 119 10.3 11.1 9.7 8.2 12 5,710
Tata Balanced Advantage Fund - Reg - Growth 14 11.1 12.9 -- -- -- 4,359
Edelweiss Balanced Advantage Fund - Growth 35 12.5 16.4 12.5 9.7 11.5 7,353
Kotak Balanced Advantage Fund - Reg - Growth 14 9.2 12.5 -- -- -- 13,010
NIFTY 50 Hybrid Composite Debt 65:35 Index 14,449 13.7 15.6 13.1 10.6 12 --
Contra/Value Fund
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Invesco India Contra Fund - Growth 74 17.6 18.8 15.6 13 17 8,560
IDFC Sterling Value Fund - Reg - Growth 86 37.2 22.4 15.7 12.6 17.1 4,495
SBI Contra Fund - Growth 195 29.2 24.4 15.2 11.6 14.1 3,774
UTI Value Opportunities Fund - Growth 98 18.6 19.6 14.1 9.9 12.9 6,710
S&P BSE 500 TRI 28,283 20 19.1 15 12.1 14.2 --
Focused Funds
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Axis Focused 25 Fund - Growth 43 11.1 18.9 16 13 -- 19,456
Nippon India Focused Equity Fund - Reg - Growth 76 17.5 20.8 13.9 12.3 18 5,952
ICICI Prudential Focused Equity Fund - Ret - Growth 48 21.5 19.6 13.1 10.4 13.1 2,772
SBI Focused Equity Fund - Growth 231 23.4 21.5 17.4 13.9 17.9 23,186
S&P BSE 500 TRI 28,283 20 19.1 15 12.1 14.2 --

Beyond Market 16th - 28th Feb ’22 It’s simplified... 33

 Sector/Thematic
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
Aditya Birla Sun Life PSU Equity Fund - Reg - Growth 14 25 -- -- -- -- 905
Canara Robeco Consumer Trends Fund - Reg - Growth 64 14.6 20.5 16.7 14 17.2 779
Edelweiss Recently Listed IPO Fund - Reg - Growth 18 22.3 28.9 -- -- -- 1,072
Mirae Asset Great Consumer Fund - Growth 53 19.8 17.4 16.3 13.1 17.1 1,627
ICICI Prudential Technology Fund - Growth 153 49.3 36.5 30.8 19.7 23.6 7,795
Nippon India Pharma Fund - Reg - Growth 277 13.8 23.2 15.3 11.6 17.7 4,910
BNP Paribas India Consumption Fund - Reg - Growth 19 15.7 21.2 -- -- -- 875
ICICI Prudential Banking and Financial Services Fund 82 9.8 12.2 10.6 11.6 16.6 4,420
S&P BSE 500 TRI 28,283 20 19.1 15 12.1 14.2 --
Gold
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Year 5 Years 7 Years 10 Years
HDFC Gold Fund - Growth 16 6.4 13.3 9.9 8.1 4.5 1,278
Kotak Gold Fund - Reg - Growth 20 5.9 13.6 10.2 8.1 4.4 1,174
Nippon India Gold Savings Fund - Reg - Growth 20 6.9 13.3 9.5 7.9 4.2 1,429
Prices of Gold 50,082 7.8 14.6 11.3 9.6 5.9 --
Arbitrage Fund
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
3 Months 6 Months 1 Year 2 Years 3 Years
IDFC Arbitrage Fund - Reg - Growth 26 3.8 3.4 3.8 3.6 4.4 5,510
Kotak Equity Arbitrage Fund - Reg - Growth 30 4.2 3.8 4.2 4.1 4.8 25,014
Tata Arbitrage Fund - Reg - Growth 12 3.7 3.3 3.9 4.2 4.9 11,192
Nippon India Arbitrage Fund - Reg - Growth 22 4.1 3.8 4.1 4 4.7 11,757
Index Fund
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
HDFC Index Fund-NIFTY 50 Plan 158 17.3 17.2 14.7 10.9 12.7 4,628
ICICI Prudential Nifty Next 50 Index Fund - Growth 35 16.5 15.1 10.4 10.8 14.3 1,868
Motilal Oswal Nifty Midcap 150 Index Fund - Reg 19 23.4 -- -- -- -- 464
Motilal Oswal Nifty Smallcap 250 Index Fund - Reg 19 31 -- -- -- -- 257
UTI Nifty Index Fund - Growth 114 17.5 17.5 14.9 11 12.8 6,012
Nifty 50 TRI 24,582 17.9 18 15.3 11.4 13.4 --
Liquid Fund
Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
2 Weeks 1 Month 3 Months 1 Year
Aditya Birla Sun Life Liquid Fund - Reg - Growth 339 4 3.5 3.5 3.3 3.91 30,652
ICICI Prudential Liquid Fund - Reg - Growth 312 3.7 3.5 3.4 3.3 3.66 38,987
Kotak Liquid Fund - Reg - Growth 4,263 3.7 3.5 3.4 3.3 3.74 29,967
Nippon India Liquid Fund - Reg - Growth 5,145 3.8 3.6 3.5 3.3 3.76 22,489
Mahindra Manulife Liquid Fund - Reg - Growth 1,369 3.6 3.5 3.5 3.4 3.71 1,729
CRISIL Liquid Fund Index -- 4.2 3.9 3.7 3.6 -- --

FoF Overseas
Historic Return (%)
SCHEME NAME NAV AUM (Cr)
1 Year 3 Years 5 Years 7 Years 10 Years
PGIM India Global Equity Opportunities Fund 31 -19.1 19.3 16.4 9.2 9.6 1,499

34
Beyond Market 16th - 28th Feb ’22 It’s simplified...
Money Market Funds
Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
Aditya Birla Sun Life Money Manager Fund - Reg 295 4 3.7 4 6 4.32 17,197
SBI Savings Fund - Growth 34 3.4 3.2 3.4 5.3 4.1 25,098
HDFC Money Market Fund - Growth 4,569 3.8 3.6 3.9 5.9 4.16 14,185
Nippon India Money Market Fund - Reg - Growth 3,306 4 3.7 3.9 5.7 4.05 8,883
Tata Money Market Fund - Reg - Growth 3,767 3.9 3.6 4 5.8 4.25 7,541
CRISIL Liquid Fund Index -- 3.7 3.6 3.6 4.8 -- --

Ultra Short Term Funds

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
HDFC Ultra Short Term Fund - Reg - Growth 12 3.5 3.3 3.7 5.7 4.28 13,808
ICICI Prudential Ultra Short Term Fund - Growth 22 3.8 3.6 4 6.1 4.39 11,835
UTI Ultra Short Term Fund - Growth 3,447 3.2 8.7 6.1 4.7 4.36 2,209
Aditya Birla Sun Life Savings Fund - Reg - Growth 438 4 3.7 4.2 6.2 4.68 15,541
NIFTY Ultra Short Duration Debt Index 4,413 4 3.9 4 5.6 -- --

Short Term Funds

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
HDFC Short Term Debt Fund - Growth 26 2.6 3.3 4.9 7.9 5.34 17,368
Nippon India Short Term Fund - Reg - Growth 43 3.9 3.5 5.5 7.6 5.59 9,330
ICICI Prudential Short Term Fund - Growth 48 1.5 3 4.4 7.7 5.46 21,799

Low Duration Funds

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
HDFC Low Duration Fund - Growth 47 2.8 3 3.8 6.4 4.82 19,577
ICICI Prudential Savings Fund - Reg - Growth 431 0.9 2.4 3.7 6.7 4.89 26,175
Nippon India Low Duration Fund - Reg - Growth 3,035 3.8 3.5 4.5 5.9 4.81 11,141
Mirae Asset Savings Fund - Regular Savings Plan 1,835 2.9 2.6 3.4 4.9 4.34 830
Kotak Low Duration Fund - Std - Growth 2,717 2.7 2.9 3.8 6.3 4.96 9,686

Banking & PSU Bond Funds

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
HDFC Banking and PSU Debt Fund - Reg - Growth 19 2.6 3.3 4.7 7.9 5.54 7,964
Tata Banking & PSU Debt Fund - Reg - Growth 12 2.9 3.5 5 -- 5.18 416
Kotak Banking and PSU Debt Fund - Reg - Growth 53 2.2 4 5.1 8.1 5.73 9,007
Nippon India Banking & PSU Debt Fund - Reg 17 3 3.6 5.3 8.2 5.26 5,218

Corporate Bond Funds

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
ICICI Prudential Corporate Bond Fund - Reg - Growth 24 1.3 3.4 4.6 7.8 5.4 18,613
IDFC Corporate Bond Fund - Reg - Growth 16 3.3 3 5.3 7.6 5.31 19,598
HDFC Corporate Bond Fund - Growth 26 2.4 3.5 5.3 8.4 5.53 27,400
Kotak Corporate Bond Fund - Std - Growth 3,022 2.9 3.4 5 7.4 5.18 12,021
Axis Corporate Debt Fund - Reg - Growth 14 3.3 3.3 4.6 6.9 5.30 4,835

35
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 Floater Fund
Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
Aditya Birla Sun Life Floating Rate Fund - Reg 276 3.1 2.9 4.6 6.7 4.9 17,580
Nippon India Floating Rate Fund - Reg - Growth 36 3.3 3 5.1 7.7 4.93 18,754
Dynamic Bond Fund
Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
ICICI Prudential All Seasons Bond Fund - Growth 29 0.6 3.2 4.8 8.6 6.48 6,512
IDFC D B F - Reg - Growth 28 2.2 3.2 4.7 8.8 6 2,798
Kotak Dynamic Bond Fund - Reg - Growth 30 0.5 3.8 5.3 8.3 6.09 3,097
CRISIL Corporate Bond Composite Index* -- -- -- -- -- -- --
Gilt Fund
Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
Nippon India Gilt Securities Fund - Reg - Growth 31 -1 2.3 4.1 8.3 5.53 1,318
Kotak Gilt Fund - Growth 78 -2.2 1.9 4 8.2 5.89 2,024
IDFC G Sec Fund - Invt Plan - Reg - Growth 29 2.5 3.5 5.1 9.8 6.02 1,448

Credit Risk Fund

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
ICICI Prudential Credit Risk Fund - Growth 25 5.2 5.6 7 8.5 6.76 8,436
HDFC Credit Risk Debt Fund - Reg - Growth 19 4.6 4.9 7.3 8.8 6.7 9,038
SBI Credit Risk Fund - Growth 36 3.9 4.2 5.8 6.9 6.47 3,267

Medium Duration Fund

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
ICICI Prudential Medium Term Bond Fund - Growth 36 2.4 3.9 6.1 8.3 6.79 7,093
HDFC Medium Term Debt Fund - Growth 46 3.3 4 6.2 7.9 6.52 4,218
SBI Magnum Medium Duration Fund - Growth 41 2.4 3.5 5.2 8.8 6.22 10,743

Medium to Long Duration Fund

Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
3 Months 6 Months 1 Year 3 Years
ICICI Prudential Bond Fund - Growth 32 -1.1 2.3 4.2 8 6.14 4,371
SBI Magnum Income Fund - Growth 57 0.7 2.4 4.6 8.8 6.56 1,675

Overnight Fund
Historic Return (%)
SCHEME NAME NAV YTM AUM (Cr)
2 Weeks 1 Month 3 Months 1 Year
Aditya Birla Sun Life Overnight Fund - Reg 1,141 3.2 3.3 3.3 3.2 3.2 12,865
IDFC Overnight Fund - Reg - Growth 1,126 3.2 3.3 3.3 3.1 3.17 2,404
Tata Overnight Fund - Reg - Growth 1,114 3.2 3.3 3.3 3.2 3.22 2,726
Nippon India Overnight Fund - Reg - Growth 113 3.2 3.4 3.3 3.2 3.18 9,492
CRISIL Liquid Fund Index -- 4.2 3.9 3.7 3.6 -- --

Disclaimer : Mutual Fund Investments are subject to market risks. Please read the offer document carefully before investing. Past
performance is no guarantee of future performance. Returns are of Growth option of Regular plans. Returns which are below 1 year
period are Annualized Returns. Source: - ICRA MFI, NAV as on 22nd February ’22

36
Beyond Market 16th - 28th Feb ’22 It’s simplified...
BEYOND BUZZ
LIC: India’s Long-Awaited IPO
Life Insurance Corporation of India (LIC), the country’s
largest life insurer, has filed its Draft Red Herring
Prospectus (DRHP) for an Initial Public Offering (IPO)
with markets regulator SEBI.
LIC’s IPO is significant from market perspective. With
LIC’s state-owned status, there will be a lot of demand
for LIC’s shares. It is highly likely that LIC will be
included in the Nifty 50 index post listing.
Q. What Is The Timeline For The IPO?
SEBI will take a few weeks to go through the DRHP
before LIC can tap the markets. Most likely the IPO can
hit the markets before the end of the fiscal year in March.
Q. What Are The Other Details For LIC’s IPO?
The government will divest a 5% stake through the LIC’s
IPO. The offer includes reservation for its eligible
employees and policyholders.
Media has speculated that the IPO would comprise of
offer-for-sale (meaning money raised will not go to the
company, but to the government) worth `65,000 crore
(around US $8.6 billion) in size.
To put things in perspective, India saw IPOs worth US
Beyond Market 16th - 28th Feb ’22 It’s simplified...
IMPORTANT
JARGON
$16 billion in 2021. So LIC’s IPO would be around 50%
of what corporate India raised in 2021 through IPOs.
Q. How Will It Impact Other Public Issues?
In 2021, retail investors accounted for 32% of all IPO
subscriptions, and domestic institutional investors
accounted for 21%. There is a fear that LIC’s IPO would
suck out liquidity from the market and thus affect the
future IPO pipeline.
Further, according to SEBI’s listing guidelines, the
government will have to trim its stake in LIC to meet the
minimum public shareholding norms of 25% within 5
years of its listing. So, there will be a constant supply of
LIC’s shares in the market over the medium term.
Q. How Will LIC’s IPO Impact The Markets?
LIC is the largest institutional investor in the Indian
markets. LIC’s total AUM is US $520 billion. Its equity
AUM is at US $130 billion. With its IPO, a lot of its
holdings will be disclosed, increasing transparency.
Also, post-listing, LIC would be answerable to investors.
In the past there were media reports that the government
used LIC as last resort if any of its public offers met
rough weather due to lower interest shown by other
investors.
In addition to this, LIC owns around 20% of all
government bonds. The IPO will make a lot of its
37
Beyond Market 16th - 28th Feb ’22 It’s simplified...
 investment unambiguous.
Q. What Is The Financial Profile Of LIC?
The state-owned insurance behemoth has a market share
of 64.1% of the insurance industry in terms of premiums
collected. The company has seen growth in its premiums
earned in FY21, increasing from `34,02,946.15 million in
FY19 to `40,58,508.02 million in FY21, at a CAGR of
9.2%.
The company’s EBITDA increased from `26,423.65
million in FY19 to `29,803.47 million in FY21. Its profit
increased from `26,273.78 million in FY19 to `29,741.39
million in FY21.
Q. Why Is LIC’s IPO Important For The
Government?
In all likelihood the government would be planning for
LIC’s IPO this fiscal. It seems that the government has
factored in proceeds from LIC’s IPO while setting the
disinvestment target for FY22 at `78,000.
Additionally, there would be future dilution of
government’s stake in LIC in the coming years. LIC’s
IPO would help bridge government fiscal deficit gap in
FY22 and beyond.
SEBI’S U-TURN ON SPLIT OF CMD POST
At its 15th February board meeting, markets regulator
Securities and Exchange Board of India (SEBI) took the
decision to make the mandate of having separate posts of
Chairman and Managing Director (or Chief Executive
Officer) voluntary as against compulsory requirement
earlier.
Q. What Has SEBI Announced?
According to one of SEBI laws, April ’22 was the
deadline for top 500 companies by market capitalization
to have separate posts for Chairman and that of the
Managing Director (or Chief Executive Officer). This
mandate was compulsory.
But compliance with the mandate was unsatisfactory.
Only 54% of these companies till December ’21 had
abided by the law. Given that only two months are left for
the April deadline, the markets regulator has now made
the mandate voluntary.
Q. Why Is The Move Seen As A U-Turn On Corporate
38
Beyond Market 16th - 28th Feb ’22 It’s simplified...
Governance Norms?
Separate offices of Chairman (as non-executive role) and
Managing Director or Chief Executive Officer (as
executive role) is seen as vital from corporate governance
stand point. In 2018, SEBI had come out with the
mandate of Chairman and Managing Director (or Chief
Executive Officer) to be separate person. Earlier, SEBI
had set April ’20 as the deadline.
Later, SEBI pushed back the deadline further to April ’22.
Companies had four years to meet the norms; however,
half of them failed to abide by it. Now, SEBI has reversed
its stance and has made the mandate voluntary.
Q. Why The Split In Posts In The First Place?
From a corporate governance stand point, a Chairman’s
post should be a non-executive one. Further, Chairman
and MD or CEO must not be related to each other.
Chairman is the head of the board of directors, while MD
or CEO is the head of operations and reports to the board
of directors.
Separate offices will enable efficient supervision of the
management and reduce excessive concentration of
authorities in a single individual. Separate roles can
secure interest of shareholders and also bring clarity and
accountability to the firm. Globally, this is the practice.
Q. What Were The Issues In Meeting The Mandate?
Corporate India is mostly seen as family-run. They would
like to have full control of the company’s board as well as
of the operations. There were requests by industries to
amend the norm.
According to data from Prime InfoBase, around 150
companies that have same individual as Chairman and
MD or CEO will benefit from SEBI’s change in mandate.
Q. So, What Should Investors Do Now?
Good corporate governance is a non-negotiable aspect for
investors before investing in a company. Every
reappointment of chairperson or Managing Director needs
shareholders’ nod.
Investors, small or institutional, should vote against such
appointment if CMD’s posts are clubbed. This way they
can ensure that the company meets the earlier SEBI norm
even if the regulator has taken a u-turn on corporate
governancE.
 When Forces Combine,
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