Is Equity the Multi – Bagger amongst all Asset Classes??

One of the most predominant features of the ‘so –called ‘developed economies is its depth in their financial markets and the financial Industry, with about 30% of their savings being infused in the market instruments. However, Indians in general do not seem to have the faith, of their savings being captured in the gamut of market instruments. The recent affairs seem to have consolidated this fact. The year 2012, saw 55,000 cr being redeemed from the Equity Mutual Fund Space wherein FII’s pumped in $23 Billion in the Indian Markets.

Now those figures are mind – boggling .Its enticing as to why less than 5% of the household Savings in India is invested in Equity Mutual Funds. This write up pretty much tries to analyse that.

One of the primary reasons, of course is the lack of investor education and how there is no substantial penetration in the Tier2, Tier 3 cities. These figures, even made SEBI wake up from their slumber and take some rectifying actions. The Rajiv Gandhi Savings scheme launched in September was one of the primary steps taken to incentivize investing in Equity with tax breaks as an important feature. The next step was incorporating more safety measures for a retail investor with Regulations like Direct Plans and Actions on Mis-selling. Perhaps this would propel the retail towards the equity market.

Another concrete reason why an Indian abstains from putting the surplus in equity is his/her belief in physical assets like Real Estate and Gold. It’s undoubted that these asset classes have given phenomenal returns over varied time frames.

But the corollary to this is , the equity is not well analyzed .Every asset class has its pros and cons .And the Equity as an instrument is devoid of too many cons. Let me name a few pros to begin with which is not a pre-dominant feature in the other physical asset classes. They are Liquidity, Diversification and Systematic Investing or Leveraging risks. Generally Investments are made with a certain purpose /goal. When that goal needs to fulfilled, liquidity becomes an essence that cannot be missed on. Diversification into different categories or Schemes of equities makes the scope of loss even lesser. Systematic Investment Planning across time frames will average out the bears and bulls garnering sumptuous returns. So these pros give Equity an edge.

To further assess, a chart of performance asset classes is extracted. The premise being, Equity Mutual Funds is the universe of Diversified Equity Segment, the Real Asset considered is the Delhi –NCR region and data considered is till March, 2012.

The chart suggests that the last three years equity has done marginally better than the Real Estate Category with a 29 % CAGR returns compared to a 27%, where as in the 5 year period it was a dismal 8 % CAGR. An exceptional year of 2008 ushered in the down-slide. However, if we increase the band-width to a ten year horizon then 23 % CAGR in Equities with additional features of liquidity, Professional Fund Management and Diversification of Risk is a feather to the cap. Even gold hasn’t managed to cope with those figures despite being the best hedge against inflation and financial turmoil. Real Estate undoubtedly managed to win the game in terms of returns, but the hassle may not be worth it. Real Estate generally implies locking up a huge corpus, piled on with EMI’s and the exorbitant high interest rates in India, maintenance of the property and not to forget insuring it against the worst come scenarios. All these hassles are eliminated in Equity, though the risk of capital erosion will always be pertinent.

Taking all of the above into consideration, the next thought that comes to us is the future of these asset classes. If analyzed well, we understand that the upside of the equities is Unlimited whereas the upside of Real Estate and gold is limited. Wouldn’t we all agree to that?

The equities are at a nascent stage in India and the scope of growth is massive. Every developed country has immense depth in its financial markets and that step would be taken for us to reach that pedestal. According to us, the financial services are bound to see phenomenal growth. As the chart below deciphers, the upside from 1991 upwards .Most likely the trend will remain upwards. One of the prominent reasons being the growth of the Companies underlying will always see more growth than GDP of the country and that has been the trend of any growing economy.

The reason for limited Upside in Real Estate will be for varied reasons like Expensiveness of liquidity, lack of availability of Service Urban Land and thus Land Acquisition costs will sky rocket, Delays in Approvals and general pace of construction. All these factors could certainly prove to be detrimental for the sector. The 96-99 plummeting of prices in Real Estate prices is a live example.

Equities when compared to Gold are a clear cut winner in terms of performance over years. Gold is an exhaustible commodity with its set of cons. Its utility scope is limited, purely used for hedge and sentimental reasons and thus usually not recommended more than 5-10 % in an individual’s portfolio.

To further highlight Gold v/s Equity, this chart has been extracted. Over the span of thirty years, Rs 100 invested in 1980-81 in Equity has culminated to Rs 10,060 and Gold is Rs 1690. There is a very good possibility that the next thirty years could give similar returns.

Conclusion: - The final verdict after understanding the asset classes is that Asset Allocation is imperative and every individuals risk appetite should be measured. Real Estate and Gold are certainly not bad Investments. However it demands a lock in of huge amounts which may not be affordable after a certain point in time for majority of the population. As we see, the prices today are sky rocketing and is an investment option which is confined to the affluent class. In comparison, equity has a good scope. If investments in equity are done with absolute discipline, appropriate study and Expert-advise, then garnering decent returns and achieving goals will be an easy deal.

RBI V/S THE GOVERNMENT !

The GDP is seen at its 8 year low at about 5.5 % v/s a WPI inflation of about 7.6 which is not as bad as in comparison to the last 3 years. So the predominant question that surfaces is whether growth is the primary agenda or is it about curbing inflation? The RBI has been incessant on maintaining its stance on having lower headline inflation and thus having strong resistance in cutting down interest rates any further. The previous repo cut happened in April 2012 with the likelihood of it happening again on the 29-1-2013. The CRR rate was cut by a 25 basis point earlier this year. The normal notion lies that the CRR rate cut is followed by the cut in the repo rate.

However the question that still lies to be answered is how important is it to cut rates at this juncture.  Will growth re-surface if the interest rate cut has been implemented? The fact that is intriguing is why growth was prevalent in the last three years when inflation kept rising. The several factors that could have led to a decline in growth is the high levels of corruption, higher subsidy bills, poor distribution channels, slower reform processes and the languishing pace of infrastructure . This contributed to growth plummeting and inflation rising. So to my knowledge unless these problems are rectified there is no scope of steady or increasing growth.

The next question that features is what are the ramifications of an interest rate cut? This will propel an increased corporate and retail borrowing, which will in turn lead to increased growth. Currently the government is only trying to curb expenditure but without increasing sources of revenue. The recent measures of divestment, rationalizing diesel prices (which do contribute to inflation) were some of its means to curtail expenditure .Hence it becomes imperative for new sources of income to be generated.

Printing of money will only lead to inflation. So productivity and supply side constraints are the main parameters that would be the primary agenda to limit inflation. However, there are certain factors like import bills of crude, gold and increasing real estate prices which is putting a massive pressure on expenditures and inflation. It is a known fact that India as a country charges a very nominal sum on its oil products in turn leading to losses for the oil companies and the government treasury. If crude products are rationalized and market demand –supply oriented then, it will contain or reduce expenditure.

 The recent moves by the government seem to have ignited a certain positive sentiment in the market. It is evident that the government is compelled to act in perspective to the elections that are featuring in a year’s time. The FDI in retail and Aviation was essentially a strategic move to setting the economy in momentum and other the policy overhauls in mid September 2012 worked in the governments favor.

So again I come back to the question what is more essential growth or curbing inflation. What seems to be a graver problem? In my opinion, everything is linked. So if growth features in with the requisite productivity and streamlining of processes and reforms happens then inflation will wane off gradually to a decent level. Though the RBI is not wrong in resisting the rate cut, the prospects of growth versus that seems higher. Obviously the impediments and deterrents needs to be eliminated and investments on factors like infrastructure should be a priority to stay in tandem to the general growth.

Thus there has to be a balance in curbing expenditures and increasing revenues. Though the RBI would have its own reason, curtailing the fiscal deficit should be a priority as India has a problem of twin deficit which involves current and fiscal deficit which has to be the government’s primary concern. That generally leads to the Rating agencies downgrading our bonds and leading to a lesser inflows of FII money. We all know if that inflow was absent, then the depth of our market would have been a very shallow deal. And the 20 K Sensex currently would have stayed put at about 4-5 k (An approximate figure). Foreigners have purchased a net $18.7 billion of local shares this year, the most among the 10 Asian markets tracked by Bloomberg, excluding China. India's gross domestic product will increase 5.8% in the year through March 31, the Reserve Bank of India said on October 30, the slowest pace since 2003. This implies the consistent positive sentiments and growth prospects will have to sustain to attract investments from global arenas.

Thus if these reforms and measures sustain ,if the import bills and subsidy bills reduce and corporate earnings increase, then the rate cut is possibly a very good measure and reduced inflation will follow suit.

Source of Image :Economic Times.

Tryst with 'Wankhede'

Everything should be experienced once in a lifetime they say .And being An Indian, it is an atrocious crime if you dint like Cricket -1 and 2 – If you dint go see a match Live. I personally never was into this game, but curiosity always kills the mice & ME. So when my office colleagues (All Cricket fanatics) asked me if I would like to come, I complied. The ticket cost a good 1500 bucks (In my head at least 2 tops or 1 bag or 1 shoe equivalent or 3 visits to the Comedy Store).

Speaking about the match, it was the T-20 format against England. The T-20 made me wonder of its transitions across years from the good old Test Matches to the ODI’s and now this .Cricket seems to have adapted well to blend with the Gen Next. I must say if Cricket were to be personified, he would have been an amazing husband adapting to all needs.

The match started at 7 pm and trust me if you have never been for any of these matches, leave at least like by noon (doesn’t matter which area of Mumbai you reside) cause the organizers would have ensured to create some hell for you. We booked our tickets online and so we have to collect our tickets, obviously prior to standing in the queue. Mindlessly, you would expect that the entry to the venue and this ticket collection counter would be in the same area (by that I mean at least 100 – 200 meters distance).  But it isn’t as simple as the Cricket Game in itself. They manage to place it in Cross Maidan which is a good 2 kms away from Marine Line & Gate NO 5 that we were to enter from.  By the time I collected my ticket, I felt like I played a game of Mini- Scotland Yard.

Wankhede Stadium – The name is funny and so are its entrances. A friend said Chinaswamy stadium in Bangalarooo has 18 entrances, then what happened to this one, why just two? Another very pertinent question to the architect .Did you just not like Mumbai or the people here. The miles of line waiting to get in are worse than the lines at the passport offices. (Organizers please fix that soon), i.e.  if you think Cricket will continue to rule, with Sachin ‘No more ‘ in the picture as the ‘ Cricket GOD ‘ chose to retire.

Well, this is just the start. If you do get stuck outside and wish to communicate with anybody inside, forget about it. No chance that Vodafone or Airtel will help you. The Vodafone dog is not permitted inside. But if there is some hope, then it’s the Aircel users .Yes you heard me right. Always keep an Aircel sim handy incase you go there; it may just not let you down.

The sight as you enter is amazing .That view from the fourth level height does look good.  This one thing is worth it undoubtedly. But as time passes, all you need to see is some constant action like hits or wickets. Mind you it is very different from what you see on TV. The view on television is hundred times extrapolated. You catch on every emotion and everything about it seems euphoric. This game was more of the 1-2‘s and seemed less exciting than the test match unfortunately. To feel excited, we did all the screaming we could for Sidhu Paajis Yellow Turban, the Arrogant Dada (Saurav Ganguly) who chose not to wave at us and the flying paper rockets that landed well near the fielders. Also mandatory do’s are the (flag painted on your face , a India jersey with your name on it , annoying whistles and trumpets that blow into peoples ears ) . These factors get you into the groove and perhaps / maybe get you the camera footage.  Or carry a shirtless kid and wave it around. This too manages to give you some camera footage.

If you do read this, you may not see too much of the ‘real’ cricket. .Well honestly there is nothing worth mentioning. If Yuvraj Singh was the only bowler who could do some damage and the other bowlers included Piyush Chawla, Dinda and Ashwin, who were chilling around the boundary line leaving catches, you truly know my plight.

And mind you, hunger will happen and thirst will come on account of the cumbersome exercising you would have done to get in. But don’t you dare get tempted. The samossas will mess your stomach, the cold drinks is just ice water and all this for 50 bucks each. The dominos mini- mini pizza (i.e. size of my palm) is 150 bucks. What will save you this wrath are those waves that keep happening in the stadium. Its simple .All you got to do is get up with hands up and move like the wave .This will keep happening alternately across all segments in the stadium and you should scream.  That sight will fill you up.

Criticism apart, I must say the match got exciting in the last over and we lost at the very last ball which got hit for a six. I would go again, maybe for IPL .The energy levels is possibly more and the experience could be different. The feeling when you catch hold of the sight from the top is certainly ethereal. And all those looking out for a crash course in weight loss, this is more than ideal. Television is good, but stadium once in a blue moon with friends is fabulous.

'Dainty Lion' with the 'Ferocious BHAT's'

As I look back to those years, I recall all the annual family vacations we have had. And this year was no exception .Every year we put in a lot of thought into deciding our destination, however this year seemed more of an impromptu deal. Gir forests –The Home to Asiatic Lions in Gujarat, were not something I heard of too often, but when I did read about it, I was sure it would translate into an exciting trip. As nature and animal lovers, this seemed like the best option.

As I read a little more about places worthy of checking out, I came across this place called ‘The little Rann of Kutch’. It is supposed to be a smaller replicate version of the actual ‘Rann of Kutch’ in Bhuj, which is artificially created. As we had time constraints, we decided to spend a day here. We took the Duronto Express, which reached Ahmedabad at 6 a.m in the morning. This place as mentioned is located in a village known as ‘Dasada’, 110 kms from the station. On our way, we took a halt to munch on the fresh ‘Fafda’ prepared in the local shop there. Obviously we were looking forward to catching authentic Gujrati food.

The place that we stayed was called the ‘Rann Riders’. It’s a beautiful resort of sorts that transcends you to a very ethnic surrounding .It was indeed a well planned space, with beautiful cottages, loads of greenery, peacocks –ostriches-ducks trotting all over and the occasional camels .The cottage was well equipped inside with a mix of modern and traditional. We were lucky to have a swimming pool right outside our cottage. The food however here was a disappointment as we did not get the authentic Gujarati food that we expected. We got the typical continental stuff as loads of ‘white skin’ frequented this place.

                                                                                         (Outside the cottage: Rann Riders).

                                                               (Loads of these waddling around :pleasure)

                                                                                                

 ‘Nomadic’ and ‘Restless’ that my family is, we chose to explore and scout for things to see outside the resort. The nearest thing we could catch hold of was the ‘Sun Temple’, popularly known as the ‘Vav’ in Gujarati i.e. a ‘Well’. This was 45 kms from our resort. At first sight, I knew why it was called the ‘Vav’ or the ‘Wow’ as I call it. It was truly breath-taking and very unique. It was a 30 feet deep well, with hundreds of steps leading down to it. The walk down was full of captivating ‘sculptures’ perhaps made 100’s of years ago. It was a mini adventure walking down and clicking pictures all through was fun. This place was also surrounded with a couple of temples which were adorned with intricate stone work. It reminded me a little of the ‘Dilwara’ temples in Mount Abu. But these were equally magnificent. And all those who thread this path, should certainly make a visit here.

'THE VAV'

Early next morning, we drove down to the mini ‘Rann of Kutch’. To be very honest our expectations seemed to have been washed down a little. It was a barren land with white sand, filled with ‘Wild Asses’. Yes the name seems atrocious. But that’s exactly what they are called and happens to be rare breed of a ‘horse. They were indeed wild, as they kept fleeing away as we kept approaching them. The only other thing that we saw here was the pretty ‘flamingos’ alongside a lake in there. This place is also filled with salt pans. But that somehow did not add taste to our visit.

The 'Wild Asses'

Our day in Dasada seemed fruitful though, as the resort ‘Rann Riders’ truly seemed like another heaven. From here we drove down to Sasan Gir situated in the district of Junnagad, good 350 kms away. It was a long 5-6 hour drive which was indeed very tiring. We stationed ourselves at ‘The Club Mahindra’ Gir Resorts. This place was pleasant too, but certainly not as well planned as the ‘Rann Riders’.

The next morning we left for what we came for, the Jungle to spot lions. Early morning, apparently is the best time to spot lions as the weather is pleasant, and the probability to spot lions in the morning was always higher. As we entered there were multiple routes where many jeeps dispersed including ours. All of us got restless after driving into the jungle for a couple of kms as we did not spot any. However the guide informed us that the jungle was home to 46,000 deer and 410 lions which raised our hopes of seeing them. Along the way we spotted a lot of deer and peacocks which were in herds, as the guide narrated his zillion experiences with the lions.

As we ventured deeper into the jungle, the guide said he had spotted ‘fresh’ pugmarks. Sheer experience I say. A further drive down translated his words into reality. A lion had just managed to quench his thirst at the lake and walk past us. We clutched our hands and gave a small squeal of excitement. Obviously, as we had never seen it beyond the cage. Being the King of the jungle, it strolled at its own pace, as we trudged in the jeep behind it. But let me tell you this king was in the mood to entertain us. Atleast that’s what we assume. It kept turning behind in the pretext of fiddling with the plants, and posed as we clicked away. This went on for an extensive ‘half an hour’. Finally it chose to budge and walk into the sidelines and into the jungle. But the show wasn’t over .It came close to us with a drift of just 5-6 feet and gave us that ‘loving’ look.  Again that’s what we presume. Perhaps it had other intentions. But that gave us the opportunity to get closer pictures and videos. It then walked away with that grand finishing touch. By now we had a fictional ‘crown’ placed on our heads and that momentary ‘high’. Yes but this was a ‘male lion’ and generally found single unlike their female counterparts which are found in prides.

'The pretence stint'

                                                                'About turn'

After this ethereal experience, there was another one in the offing. That evening we decided to drive down to the Somnath temple. This was 52 kms of drive from GIR. We reached the place about 7p.m in the evening, in time for the Aarti. I must admit though that I got to this place with absolute reluctance as I considered it to be like any other commercial temple. I felt ‘angrier’ when I figured; cameras weren’t permitted in the premises. As the adage goes ‘When you expect the least, the surprise elements are enormous ‘. This temple showcased a movie that happened to be one of a kind. As we seated ourselves in the open space alongside the ‘Indian Ocean’, the movie played. It was special because it was pure lighting effect and sound of ‘magnificent’ voice over. The light effect was strategically placed on different areas of the temple, as the voice over explained the history of the temple. It was a beautiful 45 minute projection, wherein they highlighted the temples inception and how it was destroyed by Mogul emperors multiple times in different eras, purely out of envy and despite that it stands upright today in all its fortitude. As I feel close to the lord Nataraja and his Tandav, the story of this temple touched me even more. In my head I felt the need to perform here sometime in the future.

With that, it was end of another memorable day. The next day we chose to relax and stick indoors with activities like air hockey, carom (In which I surprisingly won), scrabble and some amount of cycling. The things that we perhaps long to do in our daily lives.

The following day happened to be the last day of our trip and I ached to stay back. I gave it a finishing touch by going for a ‘nature walk’ early in the morning. The guide showed us novel birds which we mostly managed to capture with our binoculars. How I wish we saw this in our very own Mumbai.

So this trip turned out to be more exciting than anticipated. If you do plan to make a visit to Gujarat, the places I mentioned are certainly worth it. I have yet to explore more of the state, perhaps in one of the many years to come.

Moolah Spent (For Information).

Rann Riders- Rs 9000 (Stay, 3 meals and the Desert Safari for 4 people for a day).

Desert Safari @ Gir – (Rs 3,000 for a jeep which takes about 3 hours) (Also kindly take your permits well in advance I.e about a month prior. Winter and summer better suited times to spot lions.)

Food @ Club Mahindra – (1k per day per person for breakfast, lunch and dinner).

Travel – Approximately Rs 8.5 /km in a AC Indigo.

Fine He(Art)..!!!

Twelve years ago, I witnessed for the first time, a Nataraj pose and instantly fell in love with it. At that very moment I decided to learn Bharatnayam and pursue it diligently. And today on this Vijaydashmi day, I feel nostalgic as that was the day I entered into the ambit of this stunning fine art.

Every year on this very day, it is customary for all disciples of this art to offer their new learning to the Lord .And as I look back, I feel happy to part of this festivity every year. It has been special to me, as I strongly believe it takes me to the very roots of our Indian culture. Pursuing this art makes me feel truly ‘Indian’.

What makes me appreciate the art even more is how traditionally it is conducted. By traditional I imply ‘wearing our sarees adorned with temple jewellary, the flowers and the ghoongroos. This being followed by ‘puja ‘to the Lord Nataraj’ and taking the blessings of our gurus seeking success with art in the times to come. This is something I say is ‘unique’ to our country and I feel proud to a part of this culture.

Speaking of culture, our country has no dearth of fine art dance forms. However Bharatnatyam allured me the most. It is a mix of nritta, nritya and natyam, a combination of scintillating footwork, mudras and expressions. It is a complete package of beauty and elegance, of course if adorned with grace. This art comprises of various items which is compiled into a Margam. Having said all of that, it is a life long learning experience with endless compositions by stalwarts.

The reason I chose to write this, was I wished to share with you the ethereal experience and facets that are attached to learning our very own art forms. These art forms as we know are purely based out of Ancient India and Hindu mythology. To me they are divine, and the best way to connect to the Almighty .Keeping the art alive is perhaps one of the best gifts we can give to the generations to come. It’s an art we should nurture before it withers away to become ‘History’.