Govt set for high FY22 tax collection; India among least prepared for automation in APAC, says survey

28th July 2021

At JainMatrix Investments, we want to think positive, and get back on Track, so here is what we’re reading:

  1. Govt set for high FY22 tax collection; Q1 is INR 5.6 lakh cr: Icra – ET – 28th July
  2. India among least prepared for automation in APAC, says survey – ET – 28th July
  3. Scientists find green option to plastic – TOI – 21st July
  4. Maruti crosses 50L cumulative sales in rural markets – TOI – 21st July
  5. Indian IT industry to post 11% revenue recovery in FY22 – ET – 07th July
  6. These states to witness good rains in July – Mint – 07th July
  7. Morgan Stanley says a bull run is only getting started, here’s why – MC – 27th June
  8. Health, credit, jobs: FM announces 8 measures – BS – 27th June
  9. Indian Railways approves 660 more trains – HT – 19th June
  10. India’s Covid Vaccination Rate Jumps 60% In June – MC – 19th June
  11. India offers huge potential for digital banks: Report – IndExp – 10th June
  12. 74% employees keen on remote work: Microsoft Index – Mint – 10th June
  13. Unlock status, rules and guidelines – Mint – 10th June
  14. Despite covid woes, profits of Indian firms hit a six-year high – Mint – 24th May
  15. India will be on faster growth path fuelled by infra – TOI – 24th May
  16. How the coming population bust will transform the world – ET – 24th May
  17. Overall coronavirus situation stabilizing in India: Govt – M’Control – 17th May
  18. Exports rise 80% to $7b during May 1-7 – Fin.Express – 17th May
  19. Crude oil and commodities rally as global recovery gains pace – FXstreet – 05th May
  20. Steel sector does well – Indian Express – 05th May
  21. RBI announces loan relief, Rs 50K cr liquidity to tide over Covid – BusinessStd – 05th May
  22. Tata gets nod to acquire BigBasket – (M’Control) – 03rd May
  23. Hot Sectors – a) Ports – $82b being invested in ports (M’Control)
  24. Budget 2021 lays foundation for $5 trillion economy – M’Control – 04th Feb
  25. India pivots to top ESG nation through Budget – ET – 04th Feb
  26. Towards $5 T: What is holding India back? – FinExpress – 07th Jan
  27. India should follow agri – led industrial growth model – BT – 07th Jan
  28. NBFC sector rebounded in six months of FY21, says RBI – LiveMint – 29th Dec
  29. Power sector limping back to normal – ET – 29th Dec
  30. Digital is the way forward in a post-Covid world – LiveMint – 16th Dec
  31. Disinvestment will now gain momentum – ET – 16th Dec
  32. India may grow at 11% in 2022, says N Chandra – M’Control – 13th Dec
  33. Six early trends in financial sector – M’control – 09th Dec
  34. View: How tech makes it possible to solve corruption – ET – 09th Dec
  35. Indian economy back on track in Q2 – FinExpress – 20th Nov
  36. India’s health spend low, needs to be made priority – BS – 20th Nov
  37. GST collections at 8-month high – IndianExpress – 05th Nov
  38. Economy to reach pre-Covid growth by fiscal-end – BS – 05th Nov
  39. COVID in India on recovery – BS – 05th Nov
  40. India reopens its doors, restores most visas – ToI – 22nd Oct 
  41. E-tailing to become USD 200-bn by 2025: Report – ETNow – 22nd Oct 
  42. FM’s consumption boost to turbocharge e-comm – BS – 13th Oct 
  43. Low finance rates leading to increased home sales – ET – 13th Oct 
  44. Gig economy to lead 80% of blue-collar jobs – BS – 13th Oct 
  45. How robust is India’s recovery? – IndianExpress – 5th Oct 
  46. Covid may have peaked in September – ToI – 5th Oct 
  47. Digital payments: Pandemic does what demon couldn’t – ET – 01st Oct
  48. Healthcare Reforms – National Med. Commission started – (ET) – 25th Sept 
  49. Export show signs of a revival – (LiveMint) – 25th Sept 
  50. Economic recovery sustains momentum through first week of Sept – (ET) – 10th Sept 
  51. Rice, sugar push up Q1 farm exports by 23% – (ET) – 10th Sept 
  52. IPL set to kick-start consumption cycle – (LiveMint) – 30th July 
  53. Unlock 4: Metros to start, no lockdowns outside containment zones – (LiveMint) 30July 
  54. Mfg. policies of govt to help firms shift base to India: ICEA – (BS) – 26th Aug 
  55. RBI at end of rate cut cycle, govt must play role for revival: Economists – (BS) – 26th Aug 
  56. Railway earnings, Power generation: weekly indicators about economy – (BS) 18th Aug 
  57. Import embargo plan for 101 defense items to boost indigenisation – (FE) 18th Aug 
  58. Must improve ease of business to be a mfg. hub: Industry captains– (ET) – 07th Aug 
  59. Here’s what Indians have been spending on during the pandemic – (ET) – 07th Aug 
  60. Redesign, rethink whole economy for success in post-Covid world – (ToI) – 05th Aug 
  61. Joblessness at pre-covid level as India unlocks more – (LiveMint) – 05th Aug
  62. Expect V-shaped recovery over next few months: Ridham Desai – (ET) – 30th July    
  63. A major change is shift in format: Panel on education – (ET) – 30th July 
  64. Hiring optimism grows as demand gathers pace – (LiveMint) – 20th July 
  65. IT may see surge in offshoring biz – (LiveMint) – 20th July
  66. The current wave of rail reforms is actually “historic” – (ET) – 17th July 
  67. Mapping India’s Post-Covid Capex Recovery – (BQ) – 17th July 
  68. View: Never a better time than now to build for India – (ET) – 13th July 
  69. India at the cusp of a huge explosion of demand: Panasonic CEO – (ET) – 13th July
  70. Record surge in sales of vacuum cleaners, dishwashers, DIY products – (ET) – 07th July 
  71. Labour shortage, factories go the extra mile to woo migrant workers – (ET) – 07th July 
  72. PMI, GST mop-up point to a pickup in economic activity – (LiveMint) – 02nd July 
  73. India Inc’s big bet on Bharat saving the day – (LiveMint) – 02nd July
  74. Green shoots in Bharat lead country’s economic revival – (LiveMint) – 30th June 
  75. Opinion | The onus is on us to conquer fear – (LiveMint) – 30th June 
  76. Not two years, 200 projects finished during lockdown: Railways – (ToI) – 29th June 
  77. Bankers in India are more productive working from home – (LiveMint) – 29th June 
  78. Global equity markets are likely to continue their up move – (BizStd) – 27th June
  79. Migration is reversing: Trains from UP, Bihar run full – (ToI) – 27th June 
  80. Indicators of economic recovery in India – (EcoTimes) – 24th June
  81. Get India fully back to business, says India Inc – (EcoTimes) – 24th June
  82. Post-crisis, increase integration with global economy – (EcoTimes) – 20th June
  83. Kharif planting rises 40% on strong monsoon start – (EcoTimes) – 20th June 
  84. Maruti Suzuki’s model can make India a global mobile mfg hub – (EcoTimes) – 18th June 
  85. Indian economy to recover very fast: HDFC Bank CEO – (EcoTimes) – 18th June 
  86. A COVID-19 workplace readiness tool for organisations – (IISC) – 17th June 
  87. It is time to be a little positive on financial space – (EcoTimes) – 17th June 
  88. Exports bounce back to last year’s levels in June – (EcoTimes) – 16th June 
  89. Unemployment rate declines sharply as India exits lockdown – (Livemint) – 16th June 
  90. Local trains, Mumbai’s lifeline, resumes services – (Livemint) – 15th June 
  91. Construction work restarts at over 100 projects in NCR – (EcoTimes) – 15th June 
  92. Govt urges use of bicycles, EVs to mitigate risks – (EcoTimes) – 13th June 
  93. Digital is the Key to Unlock this Disruption’ – (EcoTimes) – 13th June 
  94. ‘Put the money in Indian stocks, forget till 2025’ – (EcoTimes) – 12th June 
  95. Loans are getting cheaper, HDFC cuts lending rate – (EcoTimes) – 12th June
  96. View: Replacing China imports possible, even in EVs – (EcoTimes) – 11th June 
  97. ‘Time for Bold Investments, not conservative decisions’ – (Livemint) – 11th June 
  98. After steep falls, June exports show signs of improvement (EcoTimes) – 10th June 
  99. Partial lockdown lift gives work to 21 million; not salaried class (EcoTimes) – 10th June 
  100. Covid-19 is no plague or cancer; fear psychosis unnecessary (EcoTimes) – 09th June
  101. Import-intensive spending likely to feel the pinch – (EcoTimes) – 09th June 
  102. Getting growth back on track is non-negotiable: Uday Kotak (EcoTimes) – 08th June 
  103. Post Covid Opportunities – Global Work Force (Nasdaily) – 8th June
  104. Impetus To Realty Demand, But More Needs To Be Done (NDTV) – 06th June
  105. Collections improving, demand picking up in rural India (EcoTimes) – 06th June
  106. View: How to get Make-in-India to work this time (EcoTimes) – 05th June 
  107. Effects of Unlock 1.0 as new guidelines come into play – (IndianExpress) – 05th June 
  108. Cabinet approves amendment of Essential Commodities Act (Livemint) – 04th June 
  109. Goods movement pickup in May signals economic revival (Livemint) – 04th June 
  110. PM’s First Major Address On Economy After Unlock 1.0 (ndtv.com) – 03rd June 
  111. Five Indian states are leading in the recovery from lockdown – (EcoTimes) – 03rd June
  112. India’s 3-phase ‘Unlock’ Plan starts at last (ToI) – 1st June 
  113. Supply to improve post-unlock 1.0; demand pickup may be slower (Livemint) – 1st June 
  114. Over 1.65 lakh people traveled in 2,198 flights since Monday: Puri (Livemint) – 30th May 
  115. The global supply chain is being reconfigured, India can gain (EcoTimes) – 30th May
  116. Nearly 65,000 cured from COVID-19 in India, 42% recovery rate (Livemint) – 29th May 
  117. An India lockdown survey: The good, bad and the ugly (Eco Times) – 29th May 
  118. How is India doing against COVID19 in 3 graphs – 28th May
  119. Covid-19 proves the importance of telecom in India (Eco Times) – 28th May
  120. India runs on Rails: MORE TRAINS BASED ON DEMAND (Fin Expr.) – 27 May
  121. MY TAXI HAS VEHICLES WITH PPE KITS, CURTAINS (Eco Times) – 27th May
  122. COVID-19 Is Fast-Tracking Digital Transformation – 26th May 
  123. HOW DHARAVI IS TACKLING THE COVID INFECTION RATE – 26th May 
  124. AFTER 2 MONTHS, FLIGHTS ARE BACK – 25th May
  125. HOW INDIA INC. GOES BACK TO WORK, LEADERSPEAK (Eco Times) – 25th May
  126. A THIRD OF NSE MFG FIRMS BACK AT WORK (Eco Times) : 23rd May
  127. MAHINDRA FACTORY – COVID CARE READY – 23rd May
  128. We actually wrote about the need for a lockdown in Mar 2020 – CALL IN THE INDIAN ARMY TO HANDLE THIS EMERGENCY – 20th March

We have been tracking this infection since March when it came to India and we had to declare the lockdown. Today, 6 months on, we are at a different phase in the economy. We have to understand that this virus will not go away, it is we who have to adjust to it. Even as we maintain social distancing, and wear masks, and wash hands regularly, the important thing now is to dive back into business and achieve some semblance of normalcy.

Regards,

Punit Jain

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Punit Jain and JM has no ownership or known financial interests in any company mentioned in this note. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

Cryptocurrency – Or is it a CryptoCommodity?

Date: 16th June 2021

Summary

  • There is an excitement around Cryptocurrency (CCS) – a combination of high potential gains, high tech backbone, a novelty, and a rebelliousness, that has attracted investors and driven demand. While initial purchases were by professional traders, speculators, crooks and gamblers, the ecosystem and exchanges have been helping to simplify and popularize it.
  • The success of an asset class like CCS will be largely driven by regulations, and demand – supply. Regulations are now by and large benign. So far the demand has exceeded supply, but in June 2021 we are in a very positive investing cycle across stocks, commodities and CCS. A reversal will challenge CCS price trends.
  • If the two major issues around CCS of – 1) too many coins options and 2) high wastage of electricity for CCS mining and processing – are addressed, CCS has the potential to become a widely used and stable currency.
  • Until this happens, CCS has characteristics closer to global commodities, hence our term, CryptoCommodity.
  • Investing now into CCS is for professional traders, those with a high risk appetite, and who can see as much as a 50% fall in value, at least temporarily. Some experts suggest a maximum 5% of investible funds to be allocated to this asset class.
  • Past report on Cryptocurrency available A Note on Cryptocurrency

Introduction

  • The story of cryptocurrency (CCS) and blockchain technology began in the year 2008 when the globe was going through the financial crisis. We saw the fall of Lehman brothers, rising unemployment, and the bubble burst. Meanwhile, Satoshi Nakamoto founded bitcoin which was the first decentralised currency in the world valued at $0.0008, which is currently trading at $38,700. Also see Market caps of Coins in Fig 1a.
  • In the past 12 years of CCS market, many new coins were introduced that have almost disappeared. On the other hand, Dogecoin that was promoted by Elon Musk, helped it to rally very high just by his tweets.

Fig 1a- Market Capitalization in USD B / and Fig 1b – Volatility of Asset classes

  • CCS are digital currencies that utilize blockchain technology to provide improved security, anonymity, and decentralization. There is no central authority for CCS, and no third parties needed to facilitate transactions.
  • In Fig 1b, we compare Bitcoin with Gold and US equities in terms of volatility and drawdowns over 10 years. Bitcoin has the highest drawdowns, showing that it is more risky. 
  • Transactions are highly secure and independent. The most famous CCS, the blue chip cryptos, are Bitcoin and Ethereum. They have market capitalizations of ₹50.3 lakh crore and ₹22.6 lakh cr. resp.
  • Bitcoin, Ethereum and Dogecoin have rallied 2.7X, 9.4X and 133X resp. in a one year time frame. See Fig 2a.
  • CCS offers more confidential transactions with least transactions fees involved and provides more lucrative opportunities for easier international trade.
  • But CCS has some adverse effect on environment in terms of consumption of more power and electricity for mining which made Tesla to withdraw from Bitcoin as a payment option.
  • Even though CCS is decentralised, but they are still several powerful operators, who can manipulate the prices, and we can see huge dips and bounces in the market.

Fig 2a – BTC movement last 5 years and Fig 2b – In 1 year (Sources – Statista and Coinbase)

Recent News and Events

  • Recently RBI had issued notices to banks which gives relief to Indian crypto investors, allowing transactions in CCS but it needs to be regulated under KYC, Anti money laundering and combination of Financing of terrorism, Prevention of money laundering Act (2002).
  • The El Salvador Congress on June 9 approved a bill making the world’s largest CCS, Bitcoin, legal tender in the country. The Central American country is now the first ever to make Bitcoin legal tender.
  • Last month US CCS exchange Coinbase successfully listed on the Nasdaq stock exchange. This listing could stabilize CCS, change the perceptions of individuals and make the future bright for the industry. Coinbase also faces competition from Binance, the world’s largest crypto exchange, as well as decentralized exchanges like Uniswap, which handle more trading activity than Coinbase.
  • U.S Treasury calls for stricter CCS compliance with IRS as they pose tax evasion risk. Treatment of this in India is unclear. GoI has constituted a panel to develop crypto regulations for India.
  • China has taken a decision to ban financial institutions and payment companies from providing services for crypto transactions and has warned investors against speculation and volatility. This news led to bitcoin falling 50% from the years high to the lowest since February, See Fig 2a and 2b.
  • With the initial few CCS taking off, many new coins were being introduced in the form of ICOs (Initial Coin Offers). However this market became frothy and by Nov 2017, there were around 50 ICO offerings a month.
  • Indian blockchain start-up Polygon, is the first well structured, easy to use platform for Ethereum scaling which aims to provide faster and cheaper transactions on Ethereum. Mark Cuban a US based entrepreneur has invested an undisclosed amount in the Polygon Matic coin, which hit a new high market cap of $14 B.
  • Tesla allowed Bitcoin as payment option for purchasing vehicles, but later Elon Musk removed the option as there was significant increase in mining of the CCS after his announcement.
  • As technical outlook remains positive and strong, Bitcoin is expected to reach $4,00,000 level in 2021 as per Bloomberg. Many investors have added an exposure to CCS as a small part of their assets.

CRYPTO v/s GOLD

  • Gold is a traditional global store of value; Cryptos are new
  • Gold is physically heavy, difficult and costly to transport; CCS are instantly transferred
  • Country wise restrictions or taxes for import or export; CCS are digital and generally permitted
  • Gold is well established and regulated; CCS has low to medium clarity on rules and regulations
  • A rise in gold prices over the past 50 years; CCS/ Bitcoin has seen massive rally over last decade
  • Gold has been a protection against large risks like war and infection; also provides safety against inflation
  • CCS is itself volatile, so is not yet a safe store of wealth, but more is itself a high risk, potentially high gain asset
  • CCS can in future become a major threat to gold in global wealth and savings

CRYPTO v/s CURRENCIES like USD or INR

  • Cryptocurrency is weak as a currency due to high volatility.
  • Central banks stabilize their currencies and hedge against other asset classes to smoothen the spikes. Year on year movements reflect Trade balances and the strengths of their economies.
  • However CCS is increasing being accepted for purchasing on websites and as a medium of exchange. 
  • But it is right now being used as a speculative investment by itself.
  • CCS may evolve in time as a store of value and as an alternative to other stores of value.

CRYPTO v/s COMMODITIES like Crude Oil, Steel or Copper

  • The volatility of CCS can be compared to some global commodities.
  • Global commodities have supply restricted by mining and mfg. constraints and fluctuate in line with demand and supply.
  • Trading of global commodities happens rapidly on global exchanges but fulfilment and logistics to back the transactions of course require time.
  • Global commodities have an inherent utility and so trading of these is essentially the matching of producers with consumers, with a small fraction of speculative trading also happening.

Top Cryptocurrencies to invest in 2021

  • There are by now a large number of CCS, see Fig 3a below for a list.
Fig 3a – Cryptos
  • Of the options, we share a suggested ordered list of CCS for traders.
  1. Bitcoin
  2. Ethernum
  3. Cardano
  4. Ripple
  5. Polkadot
  6. Bitcoin Cash
  7. Tron
  8. VeChain

How to invest in cryptocurrency in India

  • There are lot of India available platforms like WazirX, CoinDCX Go and Coinswitch Kuber, etc. An investor can download the app, open an account by providing personal details, identity proof like Aadhar or PAN card. These apps are available in Play store and Appstore. Once the account is verified, the customer can link their bank account and add money to the wallet in the app using Mobikwik or bank transfer. See Fig 3b.
  • Once the balance reflects in the wallet, the customer can purchase coins available by just clicking to buy.
  • Purchased coin will be shown under My Investments. The platforms are user friendly and simple to navigate. See Fig 3c.
Fig 3b – Payment Transfer and Fig 3c – Buy the coin

Key Advantages & Disadvantages

Opinion and Outlook

  • There is an excitement around CCS – a combination of high potential gains, high tech backbone, a novelty, and a rebelliousness, that has attracted investors and driven demand. While initial purchases were by professional traders, speculators, crooks and gamblers, the ecosystem and exchanges have been helping to simplify and popularize it.
  • The success of an asset class like CCS will be largely driven by regulations, and demand – supply. Regulations are now by and large benign. So far the demand has exceeded supply, but in June 2021 we are in a very positive investing cycle across stocks, commodities and CCS. A reversal will challenge CCS prices.
  • If the two major issues around CCS of – 1) too many coins options and 2) high wastage of electricity for CCS mining and processing – are addressed, CCS has the potential to become a widely used and stable currency.
  • Until this happens, CCS has characteristics closer to global commodities, hence our term, CryptoCommodity.
  • Investing now into CCS is for professional traders, those with a high risk appetite, and who can see as much as 50% fall in value at least temporarily. Some experts suggest a maximum 5% of investible funds to be allocated to this asset class.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any Cryptocurrency or related app. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Punit Jain has no cryptocurrency assets as on date. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor or cryptocurrency specialist. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

The Indian Stock Markets’ 20 year Digital Transformation

Indian Stock Markets

It was about 20 years ago. I asked a relative about the stock markets. I got mixed stories.

On one hand 2-3 of their investments had done well and doubled in a few years.

On the other hand there were stories of (the Challenges)

  1. share values falling to almost zero, there were missing promoters or company locked in litigation
  2. difficult stock brokers. To know a good broker was rare. They were bullies, took your share and sold it and gave you money after a month; the transaction was opaque; you would be lucky if you only paid 4-5% commission on transactions.
  3. The stock market was famous for scams aplenty. The Harshad Mehta scam (1992), the Ketan Parekh Scam, the Satyam Scam, Saradha Scam and NSEL Scam, among other swirling stories of manipulation and operator driven shares naturally made outsiders wary. BSE had been in existence for a long time, and this was the nature of the market.
  4. A stock market transaction had a high degree of difficulty and uncertainty.

But it had piqued my interest. So a few years later when a new private bank offered me a website based stock broking account as an add on to the savings account, I went ahead and opened it.

Over the next few years, we saw a number of Equity Market Changes:

  1. The NSE came into existence with a digital trading offering
  2. Equity Shares began getting dematerialized. Once they were in Demat form, trading could be on the digital platform, quickly and cheaply
  3. SEBI as regulator began controlling and monitoring the sector’s progress
  4. A number of stock brokers came into existence, and with competition, broking commissions became reasonable.
  5. BSE and NSE had good digital backbones, so trading moved online
  6. The Mutual Fund industry took off, offering a simple entry level product for new investors
  7. Soon enough, the Equity Advisory, PMS and even AIF industries and products became available.

The digital transformation has dramatically changed Stock Market access, monitoring and information flow.

With these Equity Market industry changes, the nature of services available to the customer changed. The above Challenges were addressed:

  1. Share prices are still volatile. Some firms do fail/ go bankrupt. However, it does not happen in an information vacuum. We can track companies better today. Conversely, excellent companies do see good share price appreciation.
  2. Stock broking accounts can be opened easily. Transactions are easy, robust and transparent. Commissions are lower and competitive. Stock brokers are now much better, customer friendly and professional.
  3. Our Securities system has improved. The digital transformation has dramatically changed access, monitoring and information flow. Every scam perhaps made the system stronger eventually, as the loopholes found were blocked, (and hopefully that problem should not happen again). Of course there is no guarantee that there will not be another scam, but the stock market is a much safer place now.
  4. A stock market transaction is easily done now on websites, accessible from your PC, laptop, by phone call and even using mobile apps.

So a lot of people from my generation were afraid of the stock markets. The stories they heard from their friends and relatives were scary. Some people lost a lot of money and swore to never touch the sector again. However my message to them is:

Today the Indian Stock Markets are a very good Wealth option to all.

Its not too late. Take the plunge, and explore the stock markets for your wealth protection and appreciation.

To substantiate this, I present a simple 20 year graph of the SENSEX index

In this graph, one can see the performance of a Fixed Deposit (at 8% interest) versus the Sensex, in both absolute value and in the form of multiples.

Real Estate

The traditional Indian Wealth option has been Real Estate. People bought Land, apartments and commercial property, and waited for it to appreciate. Or developed it, and very often reaped excellent returns. For many years it appreciated very well.

Then came a couple of changes in the real estate sector:

  1. GST was brought in to track and tax real estate transactions
  2. RERA Act was brought in to make builders professional, accountable and transparent. It has been changing the way they work. Customers may finally have some protection or recourse now from builder slippages. However several builders could not change and adapt to the new rules, and may have scaled down or even closed.
  3. Several initiatives against black money have made real estate transactions more ‘white’ than they have ever been in the past.
  4. Today even after some correction, we can see that a buy v/s rent decision, for a city apartment, is still unbalanced. The EMI for an apartment purchase (with loan) is much higher than the rental cost for a similar property. In most mature markets abroad, the EMI and Rent are close or in some balance with each other.
  5. All this has resulted in a Time and Price correction in the real estate sector across categories. We can see that today this is still playing out. As a result:

Real Estate is no longer the default Wealth option it once was. Do try other options.

In 2020, 55% of adults in the United States invested in the stock market. Today in India, this is just 2%.

This is not going to change overnight for India, but as awareness builds, individuals must try and nibble at stock markets and educate themselves on its potential.

I have managed to do OK with my website based stock broking account. I became a full time investment professional in 2012. My firm JainMatrix Investments offers an equity advisory service to help invest in the stock markets. See our SERVICE DETAILS section.

Do revert to me if you have any questions on above article.

Regards,

Punit Jain

Founder, JainMatrix Investments

Glossary: I often use standard terms or shortforms so here is some explanation:

  • PMS – Portfolio management service
  • AIF – Alternative Investment Fund
  • EMI – Equated Monthly Installments, as in repayment for a loan
  • GST – Goods and Services Tax
  • RERA Act – link

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

Indian PetroTaxes, the Dharam Sankat – A Solution

Introduction

In this public interest article, JainMatrix Investments ideates on the Oil & Gas sector. In India, currently the retail prices of petrol & diesel are at all-time high. On 16th Feb’21, petrol cost ₹ 89.29/liter in Delhi, while diesel cost ₹ 79.70/L. In some parts of India, like Raj. and MP, petrol crossed the ₹100/L mark for the first time. This is of concern to the retail consumer. There is also a cascading effect of diesel prices impacting transportation, and truck rental and bus / taxi prices are rising.

Background

These products are not covered under GST, which has set tax slabs. The price build-up of petrol can be well understood from Fig 1. Govt. of India (GoI) has increased taxes on petrol & diesel over 5 years, to raise revenues, discourage excessive use & promote usage of environment friendly Electric Vehicles, see Fig 2.

Fig 1 – Price Build up of Petrol, Fig 2 – Excise and VAT (Source ToI)

Volume and Crude price volatility: Due to pandemic effect, the sales volume of diesel reduced by 10 M tons compared to the previous year. Crude prices also fell steeply as global demand fell, see Fig 3. To meet the budgeted FY21 Tax collection of ₹ 16.35 lakh cr., GoI had to raise excise duty on petrol by ₹13/L and on diesel by ₹16/L in two tranches. By Sept-Oct 2020, crude prices rose again, and Indian retail prices have risen to new highs.

Thus the problem is that collection of taxes (state VAT & center’s Excise Duty) is fixed by GoI assuming fixed base prices & sales volume of petrol & diesel. These 2 main factors contribute to petro price volatility: 1) Crude prices 2) Sales volumes.

The Finance Minister has referred to this situation as a ‘Dharam Sankat’. We have a Suggestion.

Fig 3 – Crude Prices (Source: TradingView)

Suggestion

  • This problem can be resolved by having monthly resets of Excise and VAT from petrol & diesel.
  • Thus the Union Excise Duties budget of ₹ 3.61 lakh crore (assumed from petrol & diesel) can be taken as ₹ 30,083 cr. /month. Similarly states’ VAT.
  • Every month, the VAT and Excise charges per liter can be modified to meet the monthly budget, based on last month’s collections, and petro sales volumes. Any monthly variance of collections from budget can be rolled over and made up in next month, so that the budget is achieved.
  • Naturally the states and center need to coordinate for the monthly tax reset task. Perhaps the infra is already in place, as PSU firms change prices rapidly when crude prices change.

Benefits

  • This system allows an auto correction of tax levels – excessive tax collection one month results in lower taxability next month so that over 2 months the budget is maintained. And vice versa.
  • As the Indian economy recovers, we feel that petro product consumption volumes will rise. The above system will trigger lower per liter prices in this scenario.  
  • It’s important that the GoI does not excessively tax petrol and diesel, and stay within budget, while also recognizing that petro products are an important way for GoI to control deficits post the covid year.

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. JM has no known financial interests in any of these firms. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JM at punit.jain@jainmatrix.com.

Indian IT Services Sector – Add the Digitals

JainMatrix Investments presents an Industry report on the Indian IT Services sector. It’s a sector that is growing at 8-10% annually and has significant share in global outsourcing. An ecosystem of good college education and a large pool of talent, feed a clutch of globally competitive Indian IT Service firms. The digital demand has only grown post-covid, so the industry is looking at many years of global growth in early double digits. See the Conclusion section for our recommended IT Services portfolio.

We make our 11th Jan 2021 IT Services sector report public for your investing pleasure and success.

jainmatrix investments, IT Services

Additional sector reports:  Happiest Minds IPO – Ride the Digital Wave – Sept 2020    

                                               LT Tech Services IPO – The Make in India Firm – Sept 2016

Introduction and Profile

  • Indian IT services industry started over 30 years ago, but is now very large with revenues US$ 191 billion (INR 14 lakh crores). About 81% of revenues are from exports. See Fig 1a.
  • It has 17,000 firms & is an emerging global hub for Digital Skills, with 75% of global digital resources.
  • IT Services have contributed 7.7% to the India GDP in 2019 which is expected to grow to 10% by 2025 (IBEF). In FY19, the industry employed 41 lakh people. It is also fueling innovation, as there are around 5,300 tech start-ups in India.
  • Exports rose at a CAGR of 8.05% during FY16-19. Export of IT services has been the major contributor, accounting for 54% of total IT export (including hardware) during FY19.
  • Globally, the sector is headed towards achieving USD 1 trillion (INR 75 lakh crores) of revenues by 2022.

Fig 1a – Market Size in India and Fig 1b – Share of Demand by Country

  • USA dominates global Country Share of demand, with EU, China and Japan coming next, see Fig 1b.
  • In Fig 1b, market share of Indian IT industry looks small but this is domestic demand in USD. India is a dominant supplier of IT services globally and has the fastest growing industry in the world with most key players having a HQ or development centers here.
  • BFSI is a key business vertical for IT & BPM industry, in terms of major revenue-share. Adoption of new technologies is needed for growth & competitive advantage in Banking & Insurance domain.
  • Other important sectors are Life Sciences & Healthcare, Retail & CPG, Communications & Media, Manufacturing, Telecom and Technology & Services.
  • Indian IT industry’s USP is cost competitiveness, good skills, resource availability and project management skills for providing IT services.  
  • Tier II and III cities are gaining traction among IT firms aiming to grow business in India, facilitated by skilled local resources, affordable real estate, favorable Govt. regulations, tax breaks and SEZ schemes. A hub and spoke model is developing with Tier I city as hubs and tier II, III and IV as spokes.
  • India is a top location for Global Capability Centers (GCCs), which concentrate on workers and infra to handle operations (back-office, corporate business-support, accounting & finance, transaction processing and contact centers) and IT support (app. development and maintenance, remote IT infra, and help desks), to enhance productivity. Some large companies use GCCs as a center of excellence for innovation and research.
  • About 70% of India-based GCCs belong to US companies, 20% European and 10% Asia-Pacific.
  • According to Nexdigm, India is home to over 1,750 GCCs, which is 50% of all such centers globally. GCCs here employ over 10L employees, generating a total economic value of around $28.3 billion.
  • IT Services in India are growing at a fast pace due to the globally competitive firms that provide world-class services. The Human talent pool available in India is highly skilled and trainable, a key strength of the IT Services sector. The IT infra here has also developed to global standards.

IT Sector Progress and News

  • NASSCOM (National Assn. of Software & Services Cos.) launched an online platform to up-skill 40 lakh tech professionals. It partnered with GE Healthcare for digital healthcare solutions for the market.
  • IT service firm DXC Technology, will set up its first global analytics unit in Bengaluru.
  • Govt. of India (GoI) announced a national program on AI (artificial intelligence) and a new National AI portal. GoI has identified IT as one of 12 champion service sectors for developing an action plan. It has set up a ₹5,000 crore ($ 745 m) fund for realizing the potential of these champion service sectors.
  • As of Feb’20, there were 421 approved SEZs (Special Economic Zone) across the country, and of these, 276 are from IT & ITeS. These provide tax incentives for exports. Software Technology Parks of India (STPI) has set up 57 centers for single window clearance and infra facilities, and for Excise Duty exemptions on buying local goods.
  • Technology for many businesses was considered a support function. This has changed as tech. has become business critical, enabling employee productivity, revenue growth from eCommerce, cost savings and faster customer support & communication.
  • TCS took the #1 spot with M-cap of $144 b among IT Services organizations, dethroning Accenture which is trailing by just $1b (Dec ‘20).

Impact of Covid

  • In Q1FY21, Indian IT sector has emerged as a winner post lockdown. With Work from Home (WFH) at 95%, all the big IT firms saw robust demand from clients, particularly cloud & automation. Infosys gained in revenue and profits; IT index gained 22% in July. Similarly in Q2FY21, IT sector gained due to increased tech spending by clients in digital transformation.
  • Due to automation, spending on IT infra has outpaced HR. Job creation has been limited with offers being rolled out more on contractual basis than full-time, in both emerging & developed markets.
  • Many firms found that WFH employees are equally productive & this saves real estate costs as well. It also relieves firms of covid related responsibility and litigation.
  • IT Deals – Indian IT stocks jumped by 50%, on an average, between Mar-Sept ’20. Top IT firms have been closing deals – Infosys closed 2 big deals, Vanguard and Consolidated Edison (digital transformation); TCS won deals from Phoenix Group (life insurance and pension) for client analytics tool, and Morrisons (retail); Wipro from Marelli (auto software engg.) and HCL Tech from Ericsson.
  • Broker comments: Girish Pai of Nirmal Bang said that global clients shifted spending from internal IT, selling, general and administrative (SG&A) and hardware, to outsourcing and digital, to speed up the digital transformation processes such as migration to cloud.
  • Motilal Oswal, a brokerage firm, said that demand & utilization has normalized to pre-Covid levels with discussions being revived for deferred deals and margins expected to be resilient as well.

Relative Price Performance

  • The graph in Fig 2 – Relative Share shows the stock returns given by listed Indian IT Services firms over Oct’18 – Jan’21.
  • We can see that performance was steady for these firms till early 2020 in a +25 to -10% ranges, then there was a sharp fall due to Covid. Recovery came by July’20 and in next 6 months there was a dramatic price rise for many of them.
  • On the right side we can see the resultant share performance by order for the 2+ years.
  • Among large caps, L&T Infotech is #1, marked L1, Infosys #2, HCL Tech #3 and next are Wipro #4, TCS #5 and Tech Mahindra #6. Among mid-caps, the rankings are Persistent is #1, marked M1, others are Mindtree #2, Mphasis #3, LTTS #4 and Sonata Software #M5.
  • Even so, the entire IT Services pack has performed very well as even the lowest performance was 42% gains over 2+ years, while the highest is an amazing 179% gain.

Fig. 2 – Relative Share Price

Large Cap Firms – Benchmarking and Sales Charts

Fig 3a – LC revenue and Fig 3b – MidCap

In Fig 3a we map the FY20 revenues for Large Cap Firms. Revenue from exports is the major source.

  • TCS has the highest sales by value, almost two-fold to the nearest competitor Infosys.
  • In terms of India revenues, Tech Mahindra has the highest domestic sales followed by TCS.

Fig 4a – LC Benchmarking

  • In Fig. 4a – Benchmarking, we compare large cap IT services firms on key financial parameters.
  • The leader is marked in green and the laggard in red. The sum total of these parameters is the Score.
  • We can see that TCS is a clear leader, including RoCE and Return of Equity, while Wipro lags on this comparison amongst 6 large cap firms. L&TI however appears as a growth and profit leader.

Mid-Cap Firms – Benchmarking and Sales Charts

  • In a similar manner, we compare mid cap IT services firms. In Mid-cap basket, Sonata is the leader on financial parameters, including RoCE and RoE, whereas Persistent lags among the 5 firms.

Fig. 4b – Mid-caps Benchmarking

  • Among mid-caps, Mphasis has the highest revenues or sales, followed by Mindtree.
  • Sonata Software has the highest domestic sales by value and proportions.
  • Fig 4b above captures the MidCap firms revenue by domestic and exports.

Future of the Indian IT Services Industry

  • The comparative advantages of the country are – young population, good college education and ample science and technical courses. These feed this sector with quality resources.
  • India is developing as a critical part of execution and delivery of global business and IT Services, across industries & locations. Firms like TCS are covering more countries & expanding the market.
  • The growth of Telecom networks like 2G-4G and now 5G are bringing the world closer.
  • Covid has actually accelerated the rise of digital, eCommerce, internet and the IT Services industry. As larger firms enforced WFH for their employees’ safety, the physical presence has become unnecessary for work, for large swathes of industry. 
  • TCS as the #1 firm globally in terms of market capitalization has been able to sustainably mix high margins, high growth and a global vision. The other firms in the industry are growing in its wake and developing their own niches and strengths.
  • The industry is looking at many years of global growth in early double digits, even as IT services take early baby steps of growth in its own backyard, India. With programs like Aadhar card, UPI payments, GST, digital tax filing and FASTag, technology is proving the best way to transact at scale with speed and transparency, and also reduce corruption.
  • The success of the Indian IT Services firms has spawned the second generation of services firms such as Syngene Intl. (pharma R&D) and Tata Elxsi & LTTS (Engineering R&D) which are niche services players by technology or industry.
  • The key new IT services trends are WFH, cloud services, AI, IoT, robotics, mobile apps and machine learning.

Conclusion:

  • IT Services firms are always going to be needed to stitch together solutions for large Enterprises, and to help them navigate, evaluate and deploy in complex IT landscapes with multiple technology options.
  • Indian IT services companies have time and again proven their mettle and have the skilled resources and project management skills to deliver successfully. It is a dynamic, globally focused sector.
  • The 11 firms had an excellent share price performance range of 42% to 179% gains over 2+ years.
  • The weak INR may help India to continue to be a good base for service delivery teams and exports.
  • Large Caps: A LC IT Services portfolio will be more stable and safer for investors. We conclude from Fig 2, Fig 3a, and Fig 4a that of the 6 LC firms, the best 3 are L&T Infotech, TCS and Infosys.
  • Mid-Caps: A MidCap IT Services portfolio will be more volatile, but possibly provide better returns. We can see from Fig 2, Fig 3b and Fig 4b that of the 5 LC firms, the best 2 are Mindtree and LTTS.  
  • We recommend investors to buy this 5 firm portfolio in an equi-weight mode.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Punit Jain has equity holdings in LTTS, Sonata Software, TCS and L&T Infotech, all <1%. Punit Jain has worked at TCS (1995-2002) and in Sonata Software (2003-2012). Other than this, JM has no known financial interests in any of these firms. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JM at punit.jain@jainmatrix.com.

JainMatrix Investments – Track Record

11th Feb 2021

Dear Investor,

JainMatrix Investments is a premium Investment Service for Indian equity. We build wealth through in-depth equity research and Model Portfolio appreciation over the long term. It is the best way to get great returns, lower costs and yet be in control of your own portfolio. We simplify investing for individuals. Investors trust our advisory services for stock picks, tracking and personalized support. JainMatrix is run by Punit Jain, a SEBI registered Research Analyst.

We created two Model Portfolios 8 years ago, with our best picks at that time. We have since been managing the 1) Large Cap (LC) and the 2) Mid and Small Cap (MSC) Model Portfolios. We remove under-performers and replace them with promising new picks, to give investors a solid core portfolio of equity assets to replicate in their personal holdings. Today we share with you the Track Record for these JainMatrix Model Portfolios.

PERFORMANCE TRACKER

Investors should be aware that performance depends on market conditions, and past performance is not necessarily a guide to future performance and value of investments can go down as well.

..

PERFORMANCE DESCRIPTION

The Indian Indices were doing well till Feb 2020, then they got impacted by the Covid uncertainty and subsequent lockdown, falling to a low in March. Thereafter, there has been a steady recovery, and the Sensex retouched its past high in Nov 2020, and has been above this level thereafter. 
The JainMatrix Investments Model Portfolios continue to do well against their stated objectives.
  • We have a portfolio universe of 70 tracked stocks, the finest firms found through our equity research over 8 years.
  • From this universe, we created 2 focused portfolios of 6-8 shares each – a Large Cap and a Mid & Small Cap portfolio.

Mid and Small Cap Model Portfolio – MSC

  • JainMatrix InvestmentsThe objective of MSC is to simply outperform over a 1 year plus period by investing in growth or turnaround firms with solid fundamentals and excellent managements.
  • The 6-8 MSC shares here represent growth or value leaders from 3-6 high potential sectors.

Large Cap Model Portfolio – LC

  • The objective of LC is to preserve capital and outperform the Nifty by 2-5% a year by investing for minimum 2 year periods in firms with solid fundamentals and excellent managements.
  • The 6-8 LC shares here represent leaders from 6-8 large and solid sectors.

Ours is a 100% equity approach, so investors should allocate to other asset classes with inputs from a good adviser/ financial planner. So if the investment climate turns sharply negative, we may exit equities and stay in cash.

Other Valuable Research – IPOs, Stock Ideas, Sector and Trend reports

  • In addition to the Model Portfolios, we also present new stock ideas from listed and IPO firms and reports that identify sectoral trends.
  • Our IPO reports have had a good success rate and help identify winners and avoid overpriced or under-rated IPO firms. Subscribers also receive valuable Listing Day – buying range advise on IPO picks, so that they can take large positions, as allotments in good offerings may be limited to 1-2 lots.
  • Our sectoral and economy notes help develop long term thinking after events like demonetization, budgets, etc.

Sign up for the JainMatrix Investment Service to take the right decisions, whatever the event, in your investing journey. ..

SUBSCRIBE NOW TO GET THE BEST INVESTMENT SERVICE at

PRICING AND PAYMENT OPTIONS

DISCLAIMERS

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

How is India doing against COVID19 in 3 graphs

Its been 3 months since Covid infection hit India. I believe India has done well so far. But lets check out the facts using just 3 graphs in Logarithmic Scale. (click to expand image)

  1. India’s COVID-19 Curve, compared to other countries. (Source visualcapitalist.com)
  2. Total Coronavirus Cases in India (Source: worldometers.info)
  3. Total Coronavirus Deaths in India (Source: worldometers.info)

jainmatrix investments, India on Covid

Thoughts? Comments? Please share below.

Regards, Punit Jain