MAY 2023 | VOL.

24

THE

ORANGE
BOOK
Leverage your FINANCIAL QUOTIENT

Laugh your way to Financial Health

Neuroscience of laughter and what it
teaches us!
Laughter is one of the most enigmatic of human emotions and has baffled researchers for years.
Though momentary, it can have a lasting impact on our overall well-being and happiness.
Similarly, we can take certain steps in our finances that might get us closer to a sense of
contentment and peace, just like laughter.
This laughter day, let’s explore how!
Laughter induces complex reactions in our bodies:

Activation of brain's reward system

When we laugh, our brain’s reward system is activated, which in turn releases dopamine in the
body. This is responsible for giving us a sense of reward and happiness.

Activation of brain’s
reward system and
release of dopamine

Similarly, investing early helps us to harness the power of compounding resulting in long-term
wealth creation. This gives us a feeling of gratification & well-being, just like laughter!
EXPLORE INVESTMENT OPTIONS

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 Stimulation of amygdala
Laughter also stimulates the amygdala & decreases cortisol (stress hormone) levels. It also
stimulates the release of endorphins in the body that increase our endurance to pain.

Stimulation of amygdala &

decrease in cortisol levels

We can replicate this in our personal finances by creating an emergency fund, keeping our debts
under control, our credit card payments on track and by being cognizant of high-ticket impulse
purchases. All these measures help reduce stress and keep us worry free!

Activation of the pre-frontal cortex

This region of the brain is

responsible for social cognition along
with bonding and feelings of empathy
that strengthen our relationships.
Similarly, we can protect our family’s
future through Term Plan, adding
Activation of pre nominees, creating a will etc.
-frontal cortex and
improved social GET A TERM PLAN*** ADD NOMINEE
cognition

***Detailed Corporate Agent disclaimers are mentioned on last page of this edition

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 Stimulation of brain’s frontal lobe
Laughter stimulates the brain’s frontal lobe, which is associated with critical thinking and
decision-making abilities amongst others.

Activation of brain’s frontal lobe

and enhanced decision making

We can mirror this in our personal finances by taking stock of it from time to time and setting clear
financial goals, which can go a long way in helping us make better decisions.

Whole range of physiological and physical responses

Apart from these, laughter also
affects breathing, heart rate and blood
circulation, making us feel calm &
energised, improving our health
holistically.

Likewise, having sound personal

finances can have a trickledown effect
on all other aspects of our lives, as it Vacationing with family Spending time with
gives us the security to pursue things loved ones
that bring us happiness.

Be it spending time with the family,

vacationing with our loved ones,
pursuing hobbies, engaging in
philanthropy or focusing on our health;
all can be realistically attained with
sound financial planning. Engaging in Focussing on health
philanthropy
Just like laughter, comprehensive
financial planning can be a gateway to
our physical and mental well-being!
Pursuing hobbies

1800 1080 Connect with us! MAY 2023 | VOL. 24

With Mani, change the way you look at
your Money!

The story, all names, characters, and incidents portrayed are fictitious. No identification with actual persons (living or
deceased), places, buildings, and products is intended or should be inferred

1800 1080 Connect with us! MAY 2023 | VOL. 24

 What we can learn from Mani!
He understood the basic tenet of life - that change is inevitable. Bad times do not last and
neither do the good!
Like Mani, we need to embrace this truth and continue on our investing journey keeping a
long term perspective.
Markets go through cycles of ups and downs. But investors who remain disciplined and do
not overreact emotionally to market volatility, reap better long term gains.

The story, all names, characters, and incidents portrayed are fictitious. No identification with actual persons (living or
deceased), places, buildings, and products is intended or should be inferred

1800 1080 Connect with us! MAY 2023 | VOL. 24

How to use Bond and Earnings Yields
for your investment decisions?
Bond and Earnings Yields are two important metrics, which one can use to take important capital
allocation decisions towards equity or debt.

Bond Yield

A Bond’s Yield is the return an investor expects

each year over its term till maturity.

Interest Income
Bond Yield =
Market Price

Earnings Yield

The Earnings Yield of a stock shows the

percentage of company's earnings per share.

1 Earnings per share

Earnings Yield = X 100
P/E Market price per share

Nifty Index Expected 1-year Forward EPS

Nifty Earnings Yield =
Nifty Index Value

To explain this concept briefly let us consider the following example

Currently,
Bond Yields are trading at ≈ 7.30% (G-Sec 10 year)
Nifty is trading at ≈ 17750
EPS expectation of Nifty is ≈ 915
915
Thus Earnings Yield = X 100 = 5.15%
17750

Therefore, Bond Yield (7.3%) Equity Yield (5.15%)

1800 1080 Connect with us! MAY 2023 | VOL. 24

Hence, asset allocators prefer debt more as an asset class in the current environment, when
interest rates are rising and when fixed income yields are higher than the equity yields.

Fixed Income yields Equity Yields

Flow of
Funds

Fixed Income yields Equity Yields

However, it does not always work that way (at all times) since there is also a capital
appreciation angle to equities.

Bond yields represent the opportunity cost of investing in equities

Let’s take an example to understand this concept:

Yield on 10 yr bond ≈ 7.5% per annum

The equity markets will be attractive, only if it can earn well above 7.5%.
Also, equity being risky, there will have to be a Risk Premium. (Risk premium is the
compensation for taking higher risk)
Assuming that the Risk Premium on equities is 3-5%.
Then, 10.5 - 12.5% will act as the opportunity cost for investing in equity.

Thus, as Bond Yields go up, the opportunity cost of investing in equities increases, making
equities less attractive. This is one of the reasons that explains the negative correlation
between Bond Yields and Equity Market.

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 Is there a correlation between the two yields in the Indian perspective?
We have analysed both the yields and index movements for past several years:
Bond Yields Vs Earnings Yields
12

11

10

3
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
200 20 20 20 20 20 20 20 20 20 20 20 20 20 20
- - - - - - - - - - - - - -
1- 01 01 01 01 01 01 01 01 01 01 01 01 01 01
-0 - - - - - - - - - - - - - -
03 03 03 03 03 03 03 03 03 03 03 03 03 03 03
Nifty earnings Yield (1 Year Forward) Bond Yields

Investment opportunities in equities Years of consolidation or correction

Thus, we can reasonably conclude:

When NEY (Nifty Earnings Yield) Bonds Yield

Equity Market becomes attractive

When Bond Yields Nifty earnings Yield

Markets have either consolidated its previous gains or even corrected a bit

CONCLUSION

Presently the yield on:

Fixed deposit ≈ 7.00% 10 yr G-Sec bonds ≈ 7.30% Nifty Earnings Yield ≈ 5.15%

This indicates that investing in Fixed Deposits or Bonds is a better option on a risk-adjusted basis.
However, as stated earlier, this analysis is only one of the indicators to identify the attractiveness
of the asset class.

Please consult your Relationship Manager on 022 4440 0000,

to identify suitable investment options for you.

1800 1080 Connect with us! MAY 2023 | VOL. 24

GST-Revolutionising the Way India Does
Business
The Goods and Service Tax (GST) is a comprehensive Indirect Tax that was implemented in India
in July 2017. GST has replaced multiple Indirect Taxes at central and state level such as Excise
Duty, VAT, Service Tax & others making it a one unified tax system, due to which compliance
burden with different taxes is reduced for taxpayers.

The primary objective of GST is “One Nation, One Tax”, where GST ideology is to eliminate the
cascading effect of taxes. Previously due to multiple different types of taxes levied, taxpayers
were not able to take Input Tax Credit (ITC) claims against one tax to another. For example, excise
duty levied on manufacturing process could not be claimed against VAT levied on sales process.
However, under GST, tax is levied on the Net value added at different stages.

Structural reforms like Goods and Service Tax Network (GSTN) has driven the formalisation of
the MSMEs economy. The Active GST tax base has increased from ≈10 million in July 2017 to 14
million in May 2022. GST collection figures have increased from `7.19 lakh crores in FY 2017-18
to `14.76 lakh crores in FY 2021-22.

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 Empowering MSMEs with Simplified Taxation System

Easier access to credit for MSMEs

Increasing GST penetration and the Account Aggregator framework is set to
drive 100x growth in machine-readable data pertaining to MSMEs, which has
enabled sharper credit decision making. MSMEs can get easy access to credit
based on GST returns.

Simplified returns
GST has introduced a simplified return filing process, reducing the number of
returns that businesses have to file. For example, businesses need to file only one
monthly return instead of multiple returns for different taxes.

Online filing
GST filings are done entirely online, eliminating the need for businesses to file
paper-based returns. This has made the process faster, more efficient and less
prone to errors.

Reduced compliance burden

GST has reduced the compliance burden on businesses by introducing several
simplifications like the composition scheme, which allows small businesses to pay
GST quarterly at a lower rate and file quarterly returns.

GST Payments

Due date for monthly GST payment is typically 20th of the month and ICICI Bank is one of
the authorised banks to collect GST.
GST challan can be generated on www.gst.gov.in and can be paid through ICICI Bank by
selecting any of the below payment modes.

Internet Banking NEFT/ RTGS Over the counter

(Cash upto `10,000 per
challan/ Cheque/ DD)

With our simplified GST solution, auto-fetch the challan created by your CA and make
error-free payment.
KNOW MORE

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 Make Your Bonus Count
With the beginning of the financial year come the annual appraisals and the highly anticipated
annual bonuses. For many of us, instinct would be to buy that newly released high-end phone or
splurge on an international vacation. However, here is where our grandmother’s age-old wisdom
comes handy - Save before you spend. In this article, we will discuss the many ways in which you
can optimally invest your bonus and make it count.

Invest a certain amount in tax saving*

instruments that also help with
retirement planning, like PPF & NPS.
Some part of the bonus could be
INVEST IN PPF GET NPS
utilised for timely loan repayments
Invest a certain amount
to help reduce the burden of EMIs.
of sum in long-term
Repay the High Interest Rate
instruments, to fulfill
Loans first and Home Loans last, to
different life stage goals.
avail its tax benefits*.
START AN SIP**

Last but not the least, it is important

Set aside a sum in to celebrate your achievements.
Fixed Deposits (FDs) Set aside some amount to treat
as a safety net for yourself and your loved ones.
contingencies and to Make the most of your
leverage the Credit Card and Brand
increasing FD Offers to save while
returns. you spend.
OPEN AN FD
EXPLORE SUMMER
BONANZA OFFERS

*The tax related information provided herein is merely for general understanding and reference. The user needs to verify all
the facts, law and contents with the text of the prevailing statutes and seek appropriate professional advice before acting on
the basis of any information contained herein as the tax implications may vary depending upon the facts in each case/
interpretation by tax authorities. The tax laws are subject to change from time to time.
**ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk.
Read all scheme related documents carefully. T&C Apply.

1800 1080 Connect with us! MAY 2023 | VOL. 24

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