Tag: india investing

The Changing World Order, and the India Opportunity

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07th April – Time to read article – text 10 min, video 43 minutes.

  • Today the Indian markets fell sharply, up to 5%, but lets look at this event in the global context.
  • I came across this wonderful video by Ray Dalio recently, (43 minutes) and this helps us put the current market scenario in context.

My lessons from this video:

  • The USA is in a down cycle and is showing the classic signs of this – more expenditure than revenue, high and rising debt, signs of domestic unrest and discomfort, and now this big one, new tariffs that are trying to curb imports and hopefully boost domestic production.
  • China has been rising for long in trade and defense, with strong manufacturing, and till now was a big exporter to USA and ran a massive trade surplus.
  • As USA fights China in the trade war, there may be bumps here, but this is a period of transition as China finds other markets and continues its rise.
  • In an era of extended cold wars (USA-Russia) and nuclear powered countries, my expectation is that modern transition of Big Cycles will happen in the form of Trade wars and slow stagflation of economies.
  • One example here is of Japan, which was a rising economic power till the 1980s, and could not sustain the rise, but has preserved its economy, and GDP has grown at about 1-2% p.a for 2-3 decades

So where is India and what is India’s play?

  • China is a manufacturing giant, making products in high volumes, from metal – steel and aluminium, to cars, EVs, toys, furniture, ships, trains, etc.
  • India’s play is in services –
    • Indian IT services industry is a miracle, with customers in over 150 countries. It gained momentum in the 1990s, and is today a massive industry commanding 50% of the global outsourced IT services market.
    • The second generation of Outsourced services has already rolled out – consisting of – Engineering services, contract medical & pharma services and Knowledge Process Outsourcing.
    • Global Competency Centers (GCCs) of many MNCs present in India also provide additional services like Marketing, Legal, HR, transaction processing, Finance and Accounts, etc.
  • The following Services sectors must learn from the Indian IT services giants and look at the global market potential:
    • Banking, Financial Services and Insurance – We have yet to see Indian BFSI firms grow aggressively abroad and establish a global brand. Given the domestic strengths and penetration, this is possible.
    • Hotel Chains – not just Taj hotels, but also Oberoi, ITC, Leela, etc. can also expand globally.
    • Education – Indians spend $60 billion (₹5.1 lakh cr.) per year on education abroad, mostly graduation and post grad degrees. This is 4X the entire GoI annual education budget. Quality education should be available more easily domestically, at a fraction of the cost in USA, UK or Australia. This will save outflows, and can even earn inflows.
    • Tourism – If packaged well, tourism to India can attract large numbers. The Himalayas in Kashmir, HP and Arunachal, the Goan and Kerala beaches, the Taj Mahal, historic forts and monuments, food and rich culture, etc. can draw in millions for the exotic Indian holiday.
    • Healthcare – the opportunity exists not just for domestic services, but medical tourism in India, and also hospital chains in the developed world, where there is a shortage. Yoga and Ayurveda are traditional Indian healthcare systems already admired globally.
    • Telecom – Bharti Airtel ventured successfully to Africa, the next stage is a global brand, and even other companies can roll out the India success model.
    • Aviation – Indigo & Air India have the opportunity to grow globally, building on the India base.
    • Retailing – the success by Reliance Retail, Zudio (Trent) and DMart can expand globally. Titan with Tanishq can also be in this category.
    • Food services – the Jubilant Foodworks franchise in India is a scalable QSR model, and Indian chains can expand abroad. Saravanaa Bhavan has expanded into several countries. Indian food is popular internationally, so there is a demand that can be tapped.
    • Infrastructure services – firms like L&T already have global footprints, and other firms with a good domestic projects roster can grow internationally.
    • Logistics – as India itself improves its infra, expands domestic capacities and cuts the costs of logistics, opportunities exist globally in Ports, Shipping and Railway services, where we can deliver projects to friendly nations through GoI.
    • Shipping – Indian shipmen dominate global merchant navies & shipping. India’s coastline stretches for 7,500 km. But how big is the Indian merchant shipping industry? There is massive potential here.

How can this play in Services be accelerated?

  • The need is for Industry focused colleges, universities and education, practical training with industry participation, and for skills development of the students at scale.
  • GoI should provide Plug and play industry infrastructure – Offices and Factory parks, ready with connections of water, electricity, road connectivity access and ready to occupy workspace.
  • Focus on growth in Tier 2 cities and towns by Govt. and current industry players.
  • Exports have to be encouraged more. The IT Services industry grew on the basis of all exports being Income Tax free in the 1990s. While GST is exempt today, broader encouragement like Global Sales Support desks, Trade Commissions, Think Tanks on exports markets, desks by Ministry of External Affairs, and various Ministries of GoI, and loans / funding will help.
  • While english speaking is an advantage for services, competence in Japanese, German, Spanish and French may also help in communication and business. A case – In a recent Vietnam holiday, we visited a mid sized Suits and Garments Tailoring showroom. A few minutes later, a batch of 20 odd Italian tourists walked in. I was stunned to see, a showroom sales staff made a fluent 20 minute presentation in Italian to them. Selling them 8 hour turnaround formal suits and traditional women’s dresses. No doubt the tourists bought lots of clothes that day.

Manufacturing and related thoughts

  • Manufacturing in India remains a massive opportunity, with the first objective to meet domestic needs. Here the sectors with potential are Defense, Shipping, Railways, airplanes, electronic products – mobiles, laptops, TVs, music equipment, Air conditioners and gadgets. Silicon chips are a key input which also can be made domestically.
  • PLI schemes have been started in 14 sectors to accelerate them.
  • Assembly in India is just the first step to get the supply chain and value add to increase in India.
  • We have to build on our success stories in automotive and pharmaceutical mfg. When will we be able to see an Indian made car succeed all over the world? Who will do this – Tata Motors? M&M?
  • The success of Indian 2W is admirable – Bajaj Auto, Eicher Motors and Hero Motors are doing well.

  • Why do Indian companies not list abroad? A quick check on ADRs and GDRs from India reveals a very short list of 10-11 companies. Any Indian company with significant global presence should list in USA or Europe.
    • Many years ago Cognizant listed in USA. It was riding global trends – HQ and listing in USA, IT workforce primarily in India, and customers in USA and spread across the world.
    • Chinese companies have long exploited this trend. A quick search reveals 286 Chinese companies listed in USA. Why have Indian companies missed this trick? The deepest stock market in the world is USA, listing here can give rich valuations, and help raise growth funds for Indian firms.
  • A large number of MNCs operate in India with subsidiaries, GCCs and factories or development centers. Like Hyundai India and Schneider Electric Infra., can they be nudged to list in India? This would cement their presence and commitment to India, and help to deepen Indian markets.
  • India has benefited from the free markets of the last few decades. With USA imposing tariffs for protection, India should continue trade with USA while growing free markets and trading with other countries and gain from global trade growth. To do this, it will have to lower tariff and non tariff barriers and sign Free Trade Agreements. At present 6-7 FTAs are under negotiation.
  • Japan can be an excellent target country, for Indian firms to partner with Japanese MNCs, and help them develop India as a manufacturing base for global sales, with success stories like Maruti Suzuki.

Conclusions

  • So Mr Leading Indian Bank CEO. USA isn’t just the place where you go on annual vacation to your brother’s house to admire the opulence and great roads. It’s the place you go with a crack team of CFO, CMO, retail head and CHRO, and plot your company’s 40% annual growth for the next decade.
  • In the wake of Trump Tariffs, we see a change in global order, with China emerging strong.
  • As some doors close, others can be opened. Indian firms have an opportunity to grab large chunks of the global services pie, while some can excel in select manufacturing opportunities.
  • We see a future of the parallel rise of China and India, CHINDIA, in the next BIG Cycle.
  • However there is little hope of cooperation, their rise will be independent and mutually exclusive, offering different products and services.

Disclaimers and Disclosures

  • Any mention of companies in this article are purely to explain and illustrate a point, and these are not investment suggestions.
  • This document has been prepared by JMI, 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 JMI. This report 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, JMI has not independently verified the accuracy or completeness of the same. Neither JMI 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. Investment in the securities market are subject to market risks. Read all the related documents carefully before investing. 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 a RIA Registered Investment Advisor. Registration granted by SEBI to JMI, and certification from NISM in no way guarantee the performance of the Research Analyst or provide any assurance of returns to investors.
  • JMI has been an equity investment adviser commercially since Nov 2012, and a SEBI certified and registered since 2016, under SEBI (Research Analysts) Regulations. Any questions should be directed to punit.jain@jainmatrix.com. Name of the RA as registered with SEBI – Punit Jain, SEBI Registration No. INH200002747. Logo/brand names

Should you Invest or Prepay your Home loan? – Jan 2025

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Introduction

Last month, my conversation with an investor went like this –

Rahul (not his real name): I have a home loan of ₹ 75 lakhs, of 20 years duration, and am paying an EMI every month. Right now I have cash available with me of ₹ 10 Lakhs. I have already been an investor in Equity markets for 10 years. Should I use this amount to repay my Home loan, or should I add it to my investments in the markets?

The rest of the conversation, I share below in a formal manner:

Approach – Review Rahul’s Profile:

Deciding whether to use cash savings to pay off the home loan or invest in equity depends on several factors, including Rahul’s financial goals, loan terms, risk profile and the potential returns on investment. Here’s how to think through this:

1. Consider his Home Loan Details

  • Interest Rate: Is Rahul’s home loan interest rate high (above 10-11%)? For Rahul it was 10%.
  • Loan Tenure Remaining: If he is in the early years of the home loan, paying off part of the principal can save more in interest, than in the latter half of the repayment period.
  • Tax Benefits: If he is availing tax deductions on interest (Section 24(b)) and principal repayment (Section 80C in India), consider how much benefit he is getting. The real post tax cost of Home loan may be lower, so from a 10% Home Loan rate, he may be actually paying about 6-7%.

2. Evaluate his Market Investment Details

  • Equity Returns: Historically, equity markets have offered average returns of 12-13% over the long term per the Sensex. However, the returns can vary depending upon Rahul’s actual market instruments – Equity Mutual Funds, Direct Equity Portfolio or ETFs. For Rahul it was 15% compounded on average over the last 7 years.
  • Rahul’s Risk Tolerance: Is he comfortable with short-term investment fluctuations? Equity investments certainly face market risks and volatility.
  • Time Horizon: Equity Investments generally perform better over a longer horizon (3+ years). If Rahul has a shorter time horizon for his equity investments, adding to these may not be a good idea.

3. Assess his Financial Situation

  • Emergency Fund: Rahul must ensure he has 6-12 months of expenses saved in a liquid emergency fund before considering his options.
  • Other Debts: High-interest debts (e.g., credit cards, personal loans) should be prioritized for repayment before addressing the home loan.
  • Working years: Are Rahul’s working years before retirement more than the Home Loan Tenure?
  • Retirement Goal: Is he on track for retirement savings? Equity investing might help achieve these if the Time Horizon is larger.

Calculate Two Data Points for Rahul

  • Tax adjusted cost of Home Loan: let’s assume that for Rahul from (1) that it is 7%.
  • Rahul’s expected Equity market returns: The past is apparent, while the future is unpredictable. However we can be conservative and project lesser returns in future than in the past. As noted in (2) Rahul got 15% returns compounded from his mix of Equity MFs and Direct equity. Let’s project future returns from these instruments at a lower 12%. Tax here is difficult to project but if fair tax planning is happening, capital gains can be within annual zero tax limits.

With the above data points it becomes obvious that for Rahul, Equity gives higher returns of 12% than the cost of Home Loan (7%).

Conclusion

  • The immediate conclusion would be that Rahul should use the 10 L funds in Equity investments and continue to repay the Home Loan as per the original plan. Here Rahul should be able to grow his incremental savings of ₹10 L by (12 – 7) = 5% annual average over the duration of the Home Loan.  

However several caveats and conditions can color or even change this conclusion:

  • The Home Loan repayment is an almost fixed commitment of monthly payments. There can, of course, be some interest rate resets, but otherwise, EMI and tenure are fixed. On the other hand, the Equity market returns can be volatile and unpredictable in the short term. So Rahul has to be comfortable with taking on these uncertainties and both commitments together.
  • If the Home Loan tenure is longer than expected working years of Rahul, it may be wiser to repay the Home Loan partly with the Rs 10 L, reduce the tenure, and plan for an EMI-free retirement
  • If the returns that Rahul projects to get from Equity markets are on average 9% or less, then the benefit is lower, and it may be better to repay the Home Loan than to invest in equity.
  • If Rahul’s job or business future cash flows are uncertain or constrained, early repayment of Home Loan again might be the prudent choice.

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Disclaimers

  • Investors new to our Research Analyst service can look at our OFFERINGS, and sign up using the PRICING AND PAYMENT OPTIONS link, to grow their Direct Equity investment portfolios.
  • This note has been prepared by JMI, 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 JMI. This report 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, JMI has not independently verified the accuracy or completeness of the same. Neither JMI 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.
  • Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. 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 a financial planner or RIA Registered Investment Advisor.
  • JMI has been an equity investment adviser commercially since Nov 2012, and a SEBI certified and registered Research Analyst since 2016, under SEBI (Research Analysts) Regulations. Registration granted by SEBI, and certification from NISM in no way guarantee the performance of the Research Analyst or provide any assurance of returns to investors.
  • Any questions should be directed to punit.jain@jainmatrix.com. Name of the RA as registered with SEBI – Punit Jain, SEBI Registration No. INH200002747. Logos / brand name –

NIFTY VIX and NIFTY 50: Market Sentiment Post Elections

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The Indian General elections are done with, and we have the observations of the last month –

NIFTY VIX – is a ‘Volatility Index’, first introduced by the NSE in 2008. It is an Index representing expected annual volatility in Nifty50 over the next 30 days. It being a leading indicator simply reflects investors’ sentiment about the market.

NIFTY 50 – The NIFTY 50 is a benchmark Indian stock market index representing the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange.

Follow JainMatrix Investments for more such updates.

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Become a Master of Finance

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I came across this superb interview today of Harvard Professor Mihir Desai (with Lewis Howes). I understand him well as he has Indian origins. And he is sharing awesome lessons from his long career as a Finance professor. Here you go.

Happy investing,

Punit Jain

A View on the Sensex

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Date: 28th Nov 2021

The Sensex Returns V/S GDP Growth chart

Chart Explanation

  1. Chart Notes: 2021SF is 2021 So Far. CY is calendar year. Also a positive ‘High-Low Return’ number indicates that intra-year high was after intra-year low and vice-versa. Data Sources: wikipedia, Bloomberg, Credit Suisse.
  2. The CY Sensex returns reflect key events – 1999 dot com up; 2000 crash, 2008 crash etc.
  3. The average CY Sensex return over 20 year period is 18%.
  4. The High Low Return is the intra CY volatility. The GDP real growth line largely runs similar to Sensex return while being mostly positive and smoothened out. Except 2020.

Key Observations

  1. The CY Sensex return over 2018-2021SF isn’t very high. It looks like just average returns. The volatility is high with higher highs and lower lows. GDP growth has fallen in 2020 and now looks in recovery mode.
  2. It does appear that the GDP fall is not reflected in the Sensex returns.

Conclusion

  • Sensex returns have been low to average, contrary to public opinion. Volatility has been high.
  • A good GDP recovery in CY21-23 can raise Sensex returns to above average levels.

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 independent expert/advisor. Punit Jain has applied for certification under SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

New into Equity Markets? Consider the Large Cap Stocks Basket from JainMatrix

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  • The Large Cap Stocks Basket was created 8 years 9 months ago
  • Its a concentrated 7 company basket of Blue Chip, well known and well respected large caps
  • This Basket has done very well over this period, doing better than the Sensex and Nifty indices
  • There have been only 6 changes in the portfolio in this period so we have a stable approach
  • We have just Reviewed this Stocks Basket on 04th Oct – get this New Report
  • If these are your first steps into Indian equity investing, we suggest you start with this safe portfolio
  • See Track Record for performance details
  • See Pricing and Payment for details, ask for the special October Large Cap only pricing.
  • Contact us to start, ask for the special October Large Cap only pricing.

DISCLAIMER

This service and related documents have been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. These documents are 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. 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 (SEBI Registration No. INH200002747) 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.

Retirement Planning: a Poll and some Radical Thoughts

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Dear Reader,

I came across this interesting article recently, and would like to share it with you.

The inglorious goal of doing nothing – LiveMint, April 21st 2015. 

In short the article describes a person who retired at 40 and is living in a remote location and doing nothing – just enjoying his peaceful retired life. The author proceeds to comment on this and sees it as a poor choice in life.

As an analyst, I would say that …. Its a choice the person in Goa has made, and the best he could do. I may or may not make the same choices, and I may or may not be able to achieve as much as this person at 40.

Which moves me to a question for my readers:

What is your ideal retirement dream?

In fact, I will ask you to take a Poll below and let me know what your dream is …..  Remember, you can answer this Poll only once.

Thank you in advance for your answer.

The Importance of Investing

The point of my exercise is to understand you, my reader. It is also related to this important thing in life called MONEY. Our entire work life is devoted to earning it.

There’s an almost equally important aspect of our life, often neglected, called INVESTING. Most people realize its importance, but are not able to act on it. Investing is a wide term, and there are a number of asset classes, see this chart.

Untitled

Within Direct Equity there are a few options, detailed below:

Equity Risk

My opinion on Retirement Planning:

  • Its not important to retire. Instead its important to be able to make work and lifestyle choices where you are free from financial pressures.
  • Free yourself from financial pressures by building your own financial assets.
  • Assets owned by you depend not just on income earned, but also on your making the right investments.
  • Equity as an asset class is highly recommended for long term wealth and asset building, and retirement planning.

Sign up with JainMatrix Investments as a subscriber. Build and protect your capital through equities, and let the money set you free to pursue a passion, a hobby or a peaceful life.

JAINMATRIX KNOWLEDGE BASE

See other useful reports:

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 independent expert/advisor. Either JM or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. JM is voluntarily compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com