Tag: JainMatrix Investments

Real Estate v/s Equity for personal wealth creation

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10th Apr 2023

Lets evaluate several publicly available asset classes and try to answer this question. In addition, we will have a face off among two of the largest asset classes – Real Estate and Equity. This will help investors to build clarity and help choose among these assets.

Wealth Options and Components

In this Wealth chart Fig 1, we can see various Wealth Options and Components publicly available to investors.

  • The old classic asset is Real Estate (RE), in the form of apartments, land, commercial property, etc.
  • Equity markets are a rising star asset class as the digitization processes have made it transparent and accessible. Equity subcategories are also listed. AIF funds and PMS services are also available now.
  • Debt, Jewellery (and Gold and precious metals) and Alternative assets are also available.
  • Insurance is a wealth protection asset, helping cover some risks.
  • Loans are a part of your wealth, however they can be taken for Appreciating or Depreciating Assets (AA/DA). Loans are better used to buy an AA like house or education, than for DAs like furniture, cars and holidays.

Fig 1 Wealth Options

Choosing among the Asset Classes

Here is a chart of Average Returns versus Risk for each of these assets, Fig 2.

  • Returns for each asset class vary by subclass and by time periods. Here we try to take the multi-year average for each class over 5-6 years period of time.
  • Equity ETFs and MFs returns are simplified as the Nifty index.
  • Direct equity assumes blended returns across market caps.

Fig 2 Wealth and Risk

 Hence the broad principle is – You need to take a higher risk to get a higher return.

  • There are perhaps higher risk asset classes such as F&O and Private equity. Several Wealth Options are not seen here. Its seen that results and returns vary widely among Classes and so results cannot be generalized.
  • All asset classes are probabilistic in terms of returns and risks. This means that while the average returns for RE (for example) may be 8-10% per year, there can be a particular year where this may be 15-20% on the high side and (-10%) on the low side.

The choice among these assets depends upon risk appetite, comfort level and nature of the investor.

  • However the chart points to Equity as a higher returns asset, if we are able to manage the higher risk.
  • Having seen all this, the suggestion to the new investor is to try some of these asset options in small quantities to get a better understanding. Here RE is difficult as it is a big ticket item, but the others can be bought for small sums.
  • A Bank savings account and a Stock broking account would be required to try out these (non RE) assets.

Real Estate versus Equity

In this section we delve deeper into the two most common asset classes – Real Estate and Equity.

Assumptions

Let’s simplify Real Estate to an apartment purchase in the person’s place of work. For own use, and as an upgrade from paying rent. Other Real Estate options such as a second house for investing or a plot for investment or commercial property are not being considered here.

Also Equity will also be simplified as Nifty index investments. Specific products such as MFs, PMS, and Direct Equity investment services such as that offered by JainMatrix Investments will not be considered here.

Comparison

In the following table we compare the Real Estate and Equity asset classes across key parameters. (Table 3)

CriteriaReal Estate – ApartmentEquity – Nifty
Ticket sizeRanges from ₹ 25 lakhs to crores depending on city and location. However if you buy with a loan, you need to pay 20% as down payment.Generally speaking the Nifty ETF products start with ₹ 5000, and go to any number. Direct equity has no minimum.
Source for buying and sellingNew apartments can be bought directly from builders. Second sale or older are from known people or with the help of real estate brokers. Aggregator websites also help with real estate information and brokers.Buying Platform – You will need a Stock Broking account for direct equity purchase. Products like MFs and ETFs can also be bought from Bank account – investment channels. And also directly from Fund website or MF distributors.
Rating for Identifying and buyingThis can be HARD and complex. Here the buyer has to identify the location, size of property, new v/s old, builder, etc. The process involves visiting potential properties, finalizing criteria, rating them, and closing the purchase, followed by registering the property. If you decide to invest in the Nifty, it’s EASY and a simple choice of Nifty ETFs. Otherwise the rating is MEDIUM. There are 5000+ listed firms in India, but homing in to a purchase decision of 5-10-20 shares needs reading, and decisions. JainMatrix Investments provides this advisory service. Similarly choosing among MFs or PMSs.
Time and costs for TransactionsThis can take anything from 2 months to a year. The cost over and above property cost may be Stamp Duty and Registration Tax for new properties, but may also include brokerage depending upon the agent or services used.With digitalization, time to buy is very less, 1-2 days, once the buying platform is in place. Brokerage costs vary from 0.75% of purchase for full service brokers to very low for discount brokers. Other taxes are less than 0.1% except Capital Gains tax.
Selling; and Time and costSelling is also HARD. From a decision to sell, to actual transaction it can take from 2-6 months. Brokers, websites or personal network can help. The cost can be 1-2% of property value. There are payment risks so one has to be disciplined in the process.Selling is EASY. The transaction happens at market rates, and funds are transferred in 1-2 days. Brokerage and other costs are similar as buying.
Total cycle timeSo one can see that the total cycle time for Real Estate is long. It includes Buying time, holding period and selling time.Varies by approach. The Nifty ETF or other equity assets can be held till the cash is required or a better investment has been found. At JainMatrix, we suggest Long Term Investments in quality companies, which allow the money to compound. However periodic pruning of a Direct Equity portfolio can be done every 6 months, to let the winners ride and exit underperformers.
UtilityAn apartment in use by the owner is useful, saves rent and provides pride of ownership.Equity investments appreciate and earn dividend. We must save for a rainy day!!
Capital GainsLong Term Capital Gains kick in at a holding of over 2 years. Typically from buy to sell may be 8-12 years on average.Long Term Capital Gains holding period is over 1 year.
Returns from Investing  A house to stay is a good choice in terms of stability and rootedness rather than just monetary returns. It saves on rent. Having said that, an apartment asset can give 8-10% returns on average. Fig 2.The Nifty has given 12-14% CAGR returns over the past decade. Returns are estimated higher for Direct Equity. See Fig 2.

Real Estate versus Equity Opinion by JainMatrix

In fact both Real Estate and Equities are asset classes that can complement each other. Investments should be started early in the working life, salaried or business. These can be in Equity, as the minimum is a small ticket size. In a few years as this asset grows, and the need arises, it can help to initiate a real estate purchase.

Finally Pros and Cons of Equity

Pros

  • High average returns. Rising asset class.
  • Indian equity markets have achieved a global size, volumes and transparency.
  • Flexible – minimum ticket size is small, but it can scale for larger investments.
  • Fast yet robust – digital enablement now allows a stock broking account to be as easy and convenient to handle as a savings bank account. Buying, selling and dividend transactions also happen digitally. Websites and mobile applications have also improved access and ease of navigation.
  • Tax friendly – the tax rules are encouraging for equity with just 1 year for Long Term Capital Gains, LTCG not being taxed until it crosses a certain sum, and ability to set off losses one year with gains in another year.
  • Several equity products like Direct Equity access, MFs, PMS, small case and advisory services allow flexible access to all kinds of investors. See Fig 4.

Cons

  • Equity investors are exposed to market risks, and also industry and company specific risks like fraud, global events, war, weather, currency, etc.
  • Fear and Greed are driving forces in equity markets, and equities can alternate between expensive (excessively high valuations) and cheap (too low valuations).
  • Patience is a virtue, and expecting quick returns can be detrimental for investors.
  • Short term Trading versus Long Term Investing is also a difficult choice for those new to equity markets.

Conclusion

Equity penetration in India is low due to lack of access to stock brokers, pre existing fears of stock markets, inertia and invisible nature of equity assets. However a look at developed markets shows that penetration is as high as 50% compared to India’s 5-6%. Further, financialization of Indians’ assets has begun, with We expect steady growth of equity penetration and

Glossary

  • AIF – Alternative Investment Funds are SEBI regulated and pools of funds from specific investors as per a previously defined investment policy. Next version of Mutual Funds
  • PMS – Portfolio Management Service.
  • MF – Mutual Fund
  • ETF – Exchange Traded Fund – a type of MF which is passively managed, and usually shadows a well-known Index or commodity. It typically has lower management fees compared to actively managed MFs.

My Standard Disclaimer

Investment in securities market are subject to market risks. Read all the related documents carefully before investing. 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. 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.

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

Corporate Transformation: From Cost to Time

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Growing up in a middle class home, I have pretty much got used to worrying about cost. Going on a holiday? What’s the best deal you can find? Buying a coffee table? What’s the best price you can find for that size and quality?

In recent years, there has been a new challenge. On getting overworked, and with budgets not a big issue, the issue was, how can I plan that holiday within that limited time? How can I buy that furniture fast and right? Can I do all this today, and still get a good night’s sleep?

Optimize for Time: That’s when the thought struck me. Rather than optimizing for Cost, I need to optimize for Time. Productivity is more important. Speed and accuracy may cost more, but are a better option.

This needs a radical rethink of the way we make decisions. One way to do this is the digital tools available. E-commerce for buying? Check. Travel websites for holidays? Check. Doing everything yourself? No, no. Outsourcing of design and execution? Check. The other way is outside expertise.

In corporate environments too, a more precious commodity than budgets, is the time of the workforce. How can we do this work within this time constraint? Planning and project management tools? Check. Portals, collaboration tools and email for employee collaboration? Check.

An example that comes to mind is the Bangalore Metro – BMRCL. Eleven years after it was set up, the firm has recently bid out for Project Management software that can capture the complexity of its work, help tie the loose ends and do work on time.

Corporate Objectives: Business or Group Leaders with large teams in place have instinctively moved to Time optimization for their teams. The team is fixed (in the medium term) and everyone is on a salary so the objective is for the team is to work better together, and do more. The workload should also be well spread across the team rather than a few getting overworked even as others are relatively free.

What’s changed is the tools, and outsourcing and digital options we have to do this in practice.

Software versus Jobs: Another mental constraint some of us struggle with – is the use of software going to result in the loss of jobs? Is there a trade off between use of software versus number of jobs and employees? This may be true of some legacy bloated PSU firms where employee collaboration is by physical files and paperwork. Collaboration software surely helps teams work better and faster with fewer people. But many of the non collaboration digital tools that we now have access to are just outsourcing the work to another organization that can do it more efficiently. This organization does the work, and grows, while your firm becomes more focused. In effect, total employment may not be affected, but productivity improves.

Example – Second Generation PSUs: The second generation PSUs in India have been set up without legacy workforces and are super focused on their core competencies. Petronet LNG, IRCTC and CONCOR come to mind. They have their own employees handling senior management functions and the core work. Non core work like security, facilities management, recruitment, routine procurement, travel, logistics, canteens, etc. can and are being outsourced to competent agencies. Keeping the core staff low.

The ‘L1’ dilemma: Indian PSU procurement and tendering is famous for awarding projects to the ‘L1’ bidder. Looking back at the performance of projects bid out, perhaps the L2 or L3 bidder would have been a better choice if the primary criteria was not just price, but also Speed, reliability and Quality of work. So many projects flounder on execution after the bidder realizes he is in losses or is unable to handle project challenges. The Total Cost of a Project includes Project bid value, real costs of project, time of project and maintenance for the life of project. So here also for better success rates and performance, the tendering process needs to be ‘L1’ for Total Cost of Project, incorporating a probability of timely completion and penalties and counter guarantees. This is harder to judge, but its time our decision making advances, and gets better results.

Cheers and success to you. Comment on this article if you find it interesting.

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. This is not an equity research or investment report. Any mention of companies in this report is to illustrate a point and we make no comment here on valuations or investment attractiveness. 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. 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.

LIC IPO – Buy the Family Silver

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JainMatrix Investments presents an Investment Report on RACL Geartech Ltd.

  • 03rd May 2022
  • Sector – Life Insurance
  • IPO Opens 4-9th May
  • Price range ₹902-949 /share; discount for policyholders is ₹60, and for employees is ₹45
  • Large Cap: ₹ 6,00,000 crore Mkt cap

Summary

  • Positives: 1) High life insurance market share 2) massive Assets Under Management and equity market ownership 3) LIC is a solid brand  4) low operating cost 5) good all India sales presence 6) the IPO can be transformative to make LIC more flexible, competitive and profitable.
  • Risks: 1) govt. initiatives and directives that are unprofitable 2) capital and profit ratio restructuring makes financials unpredictable 3) competition from private players and falling market share 4) High NPA ratio 5) attrition in sales agents team 6) Periodic FPOs can subdue the share price.
  • Opinion: Conservative Investors can SUBSCRIBE to this IPO with a 2 year perspective.

Other related IPO reports

Here is a note on LIC IPO.

IPO highlights

  • LIC IPO will have a price band of ₹ 902-949 and will open from May 2 for anchor investors and May 4-9 ‘22 for others.
  • The firm will raise ₹ 21,000 cr. by selling 3.5% stake sale through Offer for Sale (OFS) by promoter. LIC market cap at this pricing is ₹ 6 lakh cr.
  • Promoters of LIC are the President of India, acting through the Ministry of Finance, Government of India. Currently GoI holds 100% stake and post-IPO this will come down to 96.5%.
  • The IPO quotas are: Policy Holders 10%, employees 0.7%, QIB 44.6%, Non Institutional 13.4% and retail 31.25%. The total number of shares in IPO are 22.14 crore shares. This discount for policyholders is ₹60, and for employees is ₹45.
  • Objects of the issue: GoI unloads stake to list LIC. Since it is an OFS, it will not receive any funds in IPO
  • The grey market premium (GMP) of LIC is ₹85 as of today. 
  • One lot is 15 shares and Face Value is ₹10. Retail investors can bid for 1 to 14 lots i.e. 210 shares.
  • The anchor investor portion of Life Insurance Corporation of India’s (LIC) initial public offering (IPO) was oversubscribed on Monday, raising around ₹5,620 crore from anchor investors.

Introduction to LIC

  • LIC is the largest public life insurance companies in India, and took its current form in 1956.
  • It has a 64.1% market share in Gross Written Premium (GWP) in FY21 (CRISIL). It is the #5 largest life insurer globally by GWP, see Fig 1b. LIC has a distribution network of 5,004 offices spread across 36 states and UTs, with 28 cr. policies served as on FY22. It has a workforce of 1,05,207 employees.
  • The proposed IPO will make it the biggest Indian IPO ever.
  • In India, LIC has the largest agent network of 13.5 lakh individuals in 2021, which is 55% of the total agent network in the country and was 7.2 times the number of agents of the second largest life insurer.
  • LIC is the largest asset manager in India (Dec’21) with AUM (includes policyholders’ investment, shareholders’ investment and assets held to cover linked liabilities) of ₹ 41 lakh crores, which was (i) 3.2 times the AUM of all private life insurers in India, (ii) 15.6 times the AUM of the #2 player in Indian life insurance industry in terms of AUM, (iii) 1.1 times the entire Indian MF industry AUM and (iv) 17% of India’s GDP for FY22. (CRISIL). LIC’s investments in listed equity represented 4% of the total market capitalisation of NSE as at that date. (CRISIL). See Fig 1a. Close to 25% of this is equity oriented, and they own more government bonds than the RBI. Thus it is a mega player that can dominate and profit from the growing Indian capital markets. Thus it is India’s Family Silver, which is made available in the IPO.
  • LIC is thus both a Life Insurance and an Asset Management firm.

The rest of the report is available as a download, see PDF –

Do read our insightful research, we attach the complete Investment report in PDF format here.

LIC IPO – Buy the Family Silver
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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 stake ownership or financial interests in LIC or any group company. Punit Jain has been a retail – insurance and annuity customer of LIC for 20+ years. Punit Jain intends to apply for this IPO. 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 a RIA – Registered 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.

25 Lessons – Great Investing Wisdom

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First published by me on May 11, 2018

Here is a brilliant tweet from @jposhaughnessy. I have added to it some of my commentary. In the note, he touches upon the classic challenges – uncertainty, fear, under-performance, the big new industries, standing out, biases and luck. It is great investing wisdom. 

Jim O Shaughnessy / My Thoughts

I’ve added a few of my thoughts, and an Indian angle.

jainmatrix investments
jainmatrix investments
jainmatrix investments
jainmatrix investments
jainmatrix investments
jainmatrix investments

Here are the links that Jim had referred to in case you are interested

Hope you liked this. Do comment below.

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. 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.

When to make a stock SELL decision

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First published July 8, 2014

With the Indian markets pushing to new highs over the last 6 months, its time to ask a loaded, important, yet difficult question.

When should you SELL your stock?

I assume here that you are a long term investor. You are growing your equity portfolio from a minimum 3 year perspective and want to see it meet your big life goals.

Of late you would have looked at your nest egg with a glad eye. In the last 6 months, chances are you have been surprised at the excellent performance of these stocks. It is in these very happy times that you should note the importance of a Sell decision. After all it is very difficult to Time the Market. In stocks it is important to think contrarian. It makes more sense to decide for yourself on your sell decision, execute on it and be satisfied with it.

On a personal note, my favorite holding period for a stock is forever. This is a wisdom gained from the greats of investing. However there are some practical and real situations that we can face. The Indian market is more volatile than the ones the greats live in. These are the situations where you need to think of the Sell decision, and take a call. Here they are:

1. You need the Cash urgently 

The best of well laid out plans can get interrupted. It could be a medical condition. Or education admissions time. Or it could be a desired asset that has become available. Go ahead, and sell. You have earned the luxury of encashing your Demat balance.

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2. Maintain your asset allocation 

Asset classes are varied such as Direct Equity, equity mutual funds, debt/ bond mutual funds, Gold ETFs, real estate, fixed deposits, insurance and cash. You may in consultation with your ‘Investment Adviser’ have agreed to maintain your asset classes in a certain proportion. So when the time comes to re-allocate, its possible that selling of Equity is the call by the agreed formula. This is good, and can help you align your portfolio risk with your personal risk appetite and objectives.

3. Switch to a stronger share 

For a long term investment portfolio, your objective should be to enter into investments with a chosen set of stocks. Read up and track them. And always be on the lookout for a better investment idea. If one comes by and you are convinced, make a switch from a weaker stock to a stronger one. It could be from the same industry. Or even an industry change. You now have a stronger stock portfolio.

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4. Tax considerations 

In India any listed stock investment when sold at a profit after holding for one year constitutes a Long Term Capital Gain, which is not taxed. The one year period should be noted & considered before deciding to Sell.

Sophisticated investors may also consider the converse situation. A Short Term Capital (STC) Loss can be declared in case a loss is booked in an equity investment for a period less than one year. This can then be set off against a STC Gain, in the same year or (by carry forward) in the next few tax years. Speak to your Chartered Accountant before using this strategy.

5. Exceptional gains from a stock 

If you are invested for the long term in a number of stocks, you may be witness to a lot of stock specific activity that can be quite interesting. If your stock has recorded massive recent gains, which are difficult to justify on the basis of fundamentals, it may be time to book partial or even full gains in the stock. Things happen. Shares can appreciate suddenly and unexpectedly. This is a good problem to have. Greed may stop you from doing this. This is where good advice from your Equity Service can be useful.

(JainMatrix Investments is an Equity Service that tracks 3 portfolios for its subscribers, the Large Cap Portfolio 2014, the Mid Cap Portfolio 2014 and the Post Elections Investment Seven)

6. Business has deteriorated (but does not reflect yet in the price) 

You got some good equity research, assessed an opportunity and the risk, and decided that XYZ stock was a great investment. Six months later, something unexpected happened. Maybe one of your investment assumptions went wrong, or an industry specific regulation change, or such. And the future doesn’t look so good for XYZ now. Review the situation with inputs from your Equity Service. Bite the bullet. If justified, take the Sell call. Don’t get married to your stocks. You have to be solid yet nimble in your long term investment decisions. Get out quickly to minimize your losses.

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7. The share price has fallen sharply 

Markets, and shares, by nature are volatile. If the share you hold has seen a sharp fall in price recently, this needs to be analysed. If the fall is due to temporary reasons, like some bad publicity over a minor issue, a temporary technical correction or such reason, then it can be ignored. It may even be a good point to accumulate more shares. But if the reason for the fall is found to be due to a ‘fundamental’ deterioration, then again it may be time to exit.

8. The market changes direction for the worse 

Sometimes the market reaches an inflection point and changes direction. If it is positive like the recent elections schedule announcement then its good for your portfolio. But if it is negative then it may be time to exit, at least partially. This is a tough call to predict. Here again, you can review the situation with inputs from your Equity Service.

Having said all this, it is in the nature of stocks to see long periods of both under and over performance. The market is very very inefficient, and this gives good value and growth investors in India lots of opportunities.

The Converse, a few reasons why you should NOT Sell your stocks in these times:

  1. You can get 10 baggers only if you leave your high potential appreciating stocks alone and let them fly.
  2. If the Modi government delivers on their potential, promise and visibly bold approach, the party for Indian investors has just begun.
  3. For a long term investor, a short term correction of say 10% is not something to worry about. Markets move in a ripple or zig-zag fashion in the short term, but pan to the multi year view, and the Indian indices haven’t looked so bullish since 2004-05.
  4. Valuations for the Indian indicies are just above the average. If the investment cycle is kick starting again, aided by a Modi government, earnings will accelerate and valuations may stay just above average even if the Indices forge ahead sharply.
  5. Indian Retail, hurt by the dull period of 2008-12 and big damaging overpriced IPOs, is just about starting to join this market rally, if MF numbers are anything to go by. Picture abhi baki hai mere dost.

Overall Opinion

  • Stay positive.
  • Book partial gains in some stocks.
  • Temper future expectations from Indian Indices after the recent run up.
  • Watch for cues from the budget.

But as usual there are no easy answers.

Happy Investing,

Punit Jain, JainMatrix Investments

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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 Financial 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. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

Equity Portfolio Thoughts – Control, Wealth and your Reflection

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Date 28/01/2022, first published 23rd March 2015  

Summary

  • An Indian investor is free to invest in any of 5000+ stocks listed on the exchanges.
  • He may have a range of needs in his equity portfolio, which we have captured in a hierarchy.
  • He may like to progress on this range and exercise his choices in a calibrated fashion

Introduction

I was speaking to an investor a few weeks ago. A busy executive, he had a medium size equity portfolio by value. But I was astonished to see that he had almost a hundred shares in his Demat account. And he looked at me and asked, “So what should I do with my portfolio?” I was of course on a tight time schedule, and ran through my 4-5 step standard template for portfolio discussions.

A little later, on reflecting on the above question, I realized that the answer to the above question can be very nuanced. And really there can be multiple approaches and answers to this question.

Let’s step back to the very basics of the question, what does a person need from his equity portfolio?

An Equity Portfolio – A Hierarchy of Needs

To answer this question, we need to draw parallels from the Maslow’s hierarchy of needs, and it is summarized below. Expressed simply, every human can have a number of needs, but at different times in his life, and in different situations, the needs change. Generally speaking, the needs follow a hierarchy.

Portfolio hierarchy, JainMatrix Investments

An Equity Portfolio – A Hierarchy of Needs. Source: JainMatrix Investments. Click to enlarge.

In a similar way as Maslow’s needs hierarchy, a person’s equity portfolio reflects different needs in investing and his ability to focus efforts and achieve his personal needs and objectives. Here are the levels that I am able to present:

  1. Gain Control: I have seen many equity portfolios that are nothing more than a legacy of 15 years of sporadic investment enthusiasm. With funds available and a pep talk by anyone, individual investors may make a series of purchases. This may be followed by 6 months of watching the results unravel, followed by 4.5 years of inaction. All of which may be repeated again. As a result the shares may be an uncoordinated mass of choices from the past. Selling is more difficult than buying.
    • It may seem that ‘Do nothing’ is an option here. After all these stocks can sit in your portfolio for another 5 years, and your carrying cost is as less as Rs 1000/year. Wrong. If you are not in the right stocks for a ‘long only’ portfolio, chances are that over time your portfolio will decay in value rather than strengthen.
    • The task of the Investor (along with his portfolio adviser) would be to try and gain control of this portfolio. The basic issues here are –
      • 1. What’s the objective and primary need of this portfolio?
      • 2. How many shares are we comfortable with?
      • 3. Whats the risk appetite and profile of the investor?
      • 4. How do we achieve these 1, 2 & 3, and in what time frame?
    • Also essential to Gain Control, is the need to identify and exit the low potential stocks.
    • In my opinion even stable long term (example – avg. holding of 10 years) investment portfolios should be reviewed once a year to align with macro/ sector events and to evaluate opportunities.
  2. Absolute Returns and Profits: Typically equity trading has a very clear objective, of maximizing returns from any trade. Similarly we obviously invest money with the plan of gaining profits and building wealth. The question here is, over what time span? One hour? One week? One year? A decade? New investors are typically looking for a simple quick absolute return.
    • For an investor, the portfolio strategy here is to simply find the shares that have a high confidence rating of highest upside potential. To find such shares is an ongoing exercise. Many successful finds for example may achieve their potential and may not be investment worthy any longer. Others may continue appreciating for decades. However this exercise is also fraught with risks. Many highly rated shares may fail. Or a sector may be affected by an unexpected event.
    • Its critical here to not just understand a target investment firm for its financials, management and business assets, but also the sector and macro context of this firm.
  3. Safety and Stability: Very soon a trader/ investor may realize that just desire for profits and available funds is not enough. One has to approach investing with a safety plan, and temper high profit expectations with realistic back up plans and a safety net. Am I taking too high a risk, with the possibility of a big loss? What’s my worst case scenario? What risk am I comfortable with? And for how much of my portfolio? With some experience, an investor is able to balance the profit expectation with an understanding of risk, and build his checks and balances.
    • For some thoughts on Risk v/s asset classes see LINK.
    • Every asset class has an associated risk. And a good fundamental researcher can assess and understand this risk well. So for a long term equity investor to have a 100% returns per annum expectation is asking for too much. He may actually get it but only once or twice in a decade. And this may soon be followed by a hurtful loss, equally unexpected.
    • A good equity Portfolio should be able to limit equity holdings within individual firms and within a sector, and also align the market cap focus with risk profile such as Safety – large caps, Higher risk – mid caps and Aggressive – small caps.
    • Embed from Getty Images
  4. Belonging: Community, Region, Profession, etc: At another level of the investment hierarchy, a wealthy investor may start thinking of his investments not just as a means to grow wealth, but as an expression of his place in society. This means the person is focusing a part of his funds towards the things that are important to him, an extension of his personality.
    • This could perhaps mean that for a Bangalore based person like me, I could invest in firms like Titan, Brittania Industries, BF Utilities, Mindtree, etc. which are local firms. I may get a feeling of pride to see these firms doing well, and even though a small shareholder, would be sharing a part of a big success.
    • Similarly as a former software executive, I may like to invest in a few software small caps that I not just understand well but also hope that my ownership in a small way can contribute to its success. It’s more about encouragement and support than just returns.
    • In terms of an exclusion list, a lot of people may be uncomfortable about investing in sectors such as cigarettes and liquor/alcohol. Its really upto the investor to be comfortable with his investments, right?
  5. Self Actualization: A wealthy investor may actually decide to focus his funds towards doing real good, or addressing problems of society. In the past the only way one could do this was in making donations to NGOs, and Education or Religious Trusts. In today’s economy there are several listed corporates that address the needs of the weaker sections of society, or of the environment, and still have an objective of making profits for shareholders. I see no essential compromise in achieving both these objectives. There is, possibly, “A Fortune at the bottom of the Pyramid”.
    • I believe firms in sectors like education, environment, renewable energy and some NBFC’s in housing finance and micro-finance may be addressing and solving large problems of society.
    • Readers are invited to revert to me with their ideas or suggestions of such firms that they have come across.

In Conclusion

Different investors may have vastly different needs in their equity portfolio, and we have mapped these in the form of a simple hierarchy. Many of us could be frozen in inaction at Stage 1 of this hierarchy. Others may have progressed along the stages and gained control and solid wealth from it. Some may actually have a portfolio that expresses their hopes and dreams for their society. Its essential for an Investor to reflect objectively about his own portfolio and think about improvements.

So where are you in this hierarchy? Drop me an email to see if I can help you with aligning your Equity Portfolio to your own needs. See Portfolio Review for a short description of our services.

JainMatrix Knowledge Base:

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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. Many firms are mentioned in this report, and 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. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

Investor Charter and Complaint Data in respect of Research Analyst (RA) JainMatrix Investments

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Updated Feb 2026

Investors can read this Investor Charter for SEBI guidelines, to set expectations and complaints redressal.

SEBI Annexure A – Investor Charter for Research Analyst (RA)

A. Vision and Mission Statements for investors.

  • Vision – Invest with knowledge & safety.
  • Mission – Every investor should be able to invest in right investment products based on their needs, manage and monitor them to meet their goals, access reports and enjoy financial wellness.

B. Details of business transacted by the Research Analyst with respect to the  investors.

  • To publish research reports based on the research activities of the RA.
    • To provide an independent unbiased view on securities.
    • To offer unbiased recommendations, disclosing the financial interests in recommended securities.
    • To provide research recommendations, based on analysis of publicly available information and known observations.
    • To conduct audit annually.
    • To ensure that all advertisements are in adherence to the provisions of the Advertisement Code for Research Analysts.
    • To maintain records of interactions, with all clients including prospective clients (prior to onboarding), where any conversation related to the research services has taken place.

C. Details of services provided to investors (No Indicative Timelines)

  • Onboarding of Clients.
    • Sharing of Terms and Conditions of research services
    • Completing KYC of fee paying clients
  • Disclosure to Clients
    • To disclose, information that is material for the client to make an informed decision, including details of its business activity, disciplinary history, the terms and conditions of research services, details of associates, risks and conflicts of interest, if any
    • To disclose the extent of use of Artificial Intelligence tools in providing research services
    • To disclose, while distributing a third party research report, any material conflict of interest of such third party research provider or provide web address that directs a recipient to the relevant disclosures
    • To disclose any conflict of interest of the activities of providing research services with other activities of the research analyst.
  • To distribute research reports and recommendations to the clients without discrimination.
  • To maintain confidentiality w.r.t publication of the research report until made available in the public domain.
  • To respect data privacy rights of clients and take measures to protect unauthorized use of their confidential information
  • To disclose the timelines for the services provided by the research analyst to clients and ensure adherence to the said timelines
  • To provide clear guidance and adequate caution notice to clients when providing recommendations for dealing in complex and high-risk financial products/services
  • To treat all clients with honesty and integrity
  • To ensure confidentiality of information shared by clients unless such information is required to be provided in furtherance of discharging legal obligations or a client has provided specific consent to share such information.

D. Details of grievance redressal mechanism and how to access it

  1. Investor can lodge complaint/grievance against Research Analyst in the following ways:
    • Mode of filing the complaint with research analyst
      In case of any grievance / complaint, an investor may approach the concerned Research Analyst who shall strive to redress the grievance immediately, but not later than 21 days of the receipt of the grievance.
    • Mode of filing the complaint on SCORES or with Research Analyst Administration and Supervisory Body (RAASB)
      • SCORES 2.0 is a web based centralized grievance redressal system of SEBI for facilitating effective grievance redressal in time-bound manner (https://scores.sebi.gov.in)
      • Two level review for complaint/grievance against Research Analyst:
        • First review done by designated body (RAASB)
        • Second review done by SEBI
      • Email to designated email ID of RAASB
  2. If the Investor is not satisfied with the resolution provided by the Market Participants, then the Investor has the option to file the complaint/ grievance on SMARTODR platform for its resolution through online conciliation or arbitration.
  3. With regard to physical complaints, investors may send their complaints to:
    • Office of Investor Assistance and Education, Securities and Exchange Board of India, SEBI Bhavan, Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051

E. Rights of investors

  • Right to Privacy and Confidentiality
  • Right to Transparent Practices
  • Right to fair and Equitable Treatment
  • Right to Adequate Information
  • Right to Initial and Continuing Disclosure -Right to receive information about all the statutory and regulatory disclosures
  • Right to Fair & True Advertisement
  • Right to Awareness about Service Parameters and Turnaround Times
  • Right to be informed of the timelines for each service
  • Right to be Heard and Satisfactory Grievance Redressal
  • Right to have timely redressal
  • Right to Exit from Financial product or service in accordance with the terms and conditions agreed with the research analyst
  • Right to receive clear guidance and caution notice when dealing in Complex and High-Risk Financial Products and Services
  • Additional Rights to vulnerable consumers – Right to get access to services in a suitable manner even if differently abled
  • Right to provide feedback on the financial products and services used
  • Right against coercive, unfair, and one-sided clauses in financial agreements

F. Expectations from the investors (Responsibilities of investors).

  • Do’s
    1. Always deal with a SEBI registered Research Analyst.
    2. Ensure that the Research Analyst has a valid registration certificate.
    3. Check for SEBI registration number. Please refer to the list of all SEBI registered Research Analysts which is available on SEBI website in the following link: (https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=14)
    4. Always pay attention towards disclosures made in the research reports before investing.
    5. Pay your Research Analyst through banking channels only and maintain duly signed receipts mentioning the details of your payments. You may make payment of fees through Centralized Fee Collection Mechanism (CeFCoM) of RAASB if research analyst has opted for the mechanism. (Applicable for fee paying clients only)
    6. Before buying/ selling securities or applying in public offer, check for the research recommendation provided by your Research Analyst.
    7. Ask all relevant questions and clear your doubts with your Research Analyst before acting on recommendation.
    8. Seek clarifications and guidance on research recommendations from your Research Analyst, especially if it involves complex and high risk financial products and services.
    9. Always be aware that you have the right to stop availing the service of a Research Analyst as per the terms of service agreed between you and your Research Analyst.
    10. Always be aware that you have the right to provide feedback to your Research Analyst in respect of the services received.
    11. Always be aware that you will not be bound by any clause, prescribed by the Research Analyst, which is contravening any regulatory provisions.
    12. Inform SEBI about Research Analyst offering assured or guaranteed returns.
  • Dont’s
  1. Do not provide funds for investment to the Research Analyst.
  2. Don’t fall prey to luring advertisements or market rumours.
  3. Do not get attracted to limited period discount or other incentive, gifts, etc. offered by Research Analyst.
  4. Do not share login credentials and password of your trading and demat accounts with the Research Analyst

SEBI Annexure B – Complaint Data for JainMatrix Investments

Data for the month ending – Jan 2026

Sr. No.Received fromPending at the end of last monthReceivedResolved*Total Pending#Pending complaints > 3 monthsAverage Resolution time^ (in days)
1Directly from Investors00000n.a.
2SEBI (SCORES)00000n.a.
3Other Sources (if any)00000n.a.
 Grand Total00000 

No. of complaints received during month against the RA due to impersonation by some other entity: 0
Note: In case of any complaints received against the RA due to impersonation of the RA by some other entity, the RA may adjust the number of such complaints from total number of received/resolved complaints while preparing the above table. Further, RA must close such impersonation related complaints after following the due process as specified by SEBI/ RAASB.

* Inclusive of complaints of previous months resolved in the current month.

#Inclusive of complaints pending as on the last day of the month.

^ Average Resolution time is the sum total of time taken to resolve each complaint, in days, in the current month divided by total number of complaints resolved in the current month.

Trend of monthly disposal of complaints

Sr. No.MonthCarried forward from previous monthReceivedResolved*Pending#
1Nov 20250000
2Dec 20250000
3Jan 20260000
 Grand Total    

* Inclusive of complaints of previous months resolved in the current month.

# Inclusive of complaints pending as on the last day of the month.

Trend of annual disposal of complaints

SNYearCarried fwd from previous yearReceivedResolved*Pending#
12022-230000
22023-240000
32024-250000
 Grand Total0000

*Inclusive of complaints of previous years resolved in the current year. #Inclusive of complaints pending as on the last day of the year.

Disclosure wrt compliance with Annual Compliance Audit

Disclosure in compliance with Annual Compliance Audit requirement under Regulation 25(3) of SEBI (Research Analysts) Regulations, 2014 for last and current financial year are as under:

Sr. No.Financial YearCompliance Audit StatusRemarks, If any
1FY 2022-23ConductedNone
2FY 2023-24ConductedNone
3FY 2024-25ConductedNone

Regards,

Punit Jain