Stock Market-Time for Shopping?

In India, long before anyone knew the word corona virus, Quarterly GDP was falling. Markets started the month of February 2020 on a negative note after the Union Budget 2020-21 announcements failed to meet investor expectations. Markets continued the downtrend for the second consecutive month in March 2020.GDP was going down but markets were making new peaks. I wrote a blog almost a year back (3rd june 2019 to be precise) predicting correction in stock market. You can read it by clicking here. Whenever stock markets start trading in high valuation zone, market start finding reasons for correction. Coronavirus is one such scape goat.

Corona virus threat coupled with falling oil price created panic in world market.   Finally, markets are corrected 20-25% and reached in bear phase. WHO declared COVID-19 as Pandemic.

No one knows for how long this bear phase will continue. However, market is offering huge discount and it is the right time to start shopping in stock market for quality stocks. Presently, (12.03.2020) Nifty 50 is trading at PE ratio 21.83. It is good time to enter the stock market and buy quality stocks with 3 to 5 years investment perspective. Defensive investers must start their SIP’s in mutual funds.

Does Corona Virus will have all negative impact on Economy?

Countries across the world, including India and the US, are imposing travel restrictions, fuelling fears of a global recession. There are expectations that the loss in trade, tourism, and fresh investment can drag GDP growth.

Read more at:
https://economictimes.indiatimes.com/markets/stocks/news/why-is-coronavirus-seen-as-such-a-big-threat-to-economy/articleshow/74610538.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Aviation, tourism and those manufacturing companies heavily dependent on Chinese spare parts will face worst impact due to COVID-19 Pandemic.  

However, there will be some companies who will make huge profits. Companies making surgical instruments, masks, sanitizers, pathology labs, Hospitals, Pharma companies, local spare parts manufacturing companies and news channels will see top line growth.  

More people die because of Flu and extream climate conditions then the no. of death occured due to noval corona virus also known as COVID-19. However, for COVID-19 there is no drug or treatment available till date which is the prime reason for panic across the globe. If it will take more than a month from now in finding cure, it will have a huge impact on world economy. In a global village, no country can survive in isolation.

Why Mutual Funds Investers suffer losses on Budget day?

This year Budget-2020 is presented on Saturday.  Normally Saturday and Sunday are off days for Indian stock market. However, due to Budget presentation, share market was open and there was a steep fall in BSE Sensex of around 1000 points.

Unfortunately, all mutual funds decided to remain closed on Saturday as usual because as per their offer documents Saturday and Sunday are “Non business days” and NAV is not calculated on these days.

Mutual fund investors face huge loss due to this. All Mutual funds investors were unable to invest or redeem their money on Saturday. Suppose some person wanted to invest money on Saturday in mutual fund then he has to invest it only on monday when again market will be open. On Monday market was recovered and thus he missed the opportunity to buy low.

Logically, when share market is open, Mutual funds should be open too. This is not the first time when budget was presented on an off day. In 2005 also Budget was presented on Saturday. Mutual funds must think about it and in the interest of investors, all mutual funds houses and online discount brokers like Zerodha and Groww must remain open on such holidays. Even if they have to make some changes in offer documents, they must do it.

Millions of Indian Mutual Funds investors are feeling cheated and lose money on third of February 2020. When stock market is open, every investor must have access to invest not just those who directly invest in stocks. I request all Mutual Fund investors to raise their concerns to fund houses to avoid it in future.

Economic slowdown and Indian Budget 2020:

BJP led Indian Government should stop implementing RSS agenda and start listening to economic experts. Presently PM Modi is busy in pleasing few super rich industrialist and businessman. These Businessmen gives highest donation to BJP during election. However, Businessmen are not economic experts; they are expert of running a company profitably. They have their own hidden agenda to generate more profit for their company by requesting government to make favourable policies. They are focussed on their business not on Indian overall economic growth.

Government should trust more on Bureaucrat and let experts do their jobs. If PM or FM need advice they should listen to Nobel Laureate. Even if opposition parties especially our Ex-PM Manmohan Singh, who changed the course of Indian economy in 1991 and again in his tenure as a PM, wants to give advice, Government must be open to listen to his advice. Unfortunately, presently, this is not the case.

A good Government must have a long term vision. Government should focus on new ways to generate revenue rather than selling profit making PSU’s.Reducing corporate tax was a short term solution for long term problem of economic slowdown. Disinvestment of profit making PSU’s is another short term solution. To make a balanced budget, Govt. should focus on Agriculture and farmers.

A realistic Budget is far better than a popular but unrealistic budget. This is because every surprise brings panic in market. Though I am not a economic expert but as much as I learned about economy as an investor I find more and more economic experts suggesting Government to increase spending on infrastructure project which will generate employment and demand in market rather controlling fiscal deficit. Also, reduction in personal taxes are important, which will give purchasing power to people.

An extra ordinary problem needs extraordinary solutions. India is facing huge economic slowdown. GDP is at its lowest level in last 6 years. Everyone has very high expectations from Government, because this Budget will decide our direction in this new decade.  


Definition:

Fiscal Deficit: The difference between total Income (revenue) and total expenditure of the government is termed as fiscal deficit. It is represented in terms of percentage of national GDP.

GDP= Gross Domestic product: It is a measure of the value of economic activity within a country. It comprise of market values of all final goods and services produced in an economy during a period of time.

Be a Defensive Investor

 

Broadly speaking, there are two kinds of Investors –Aggressive and Defensive. Aggressive investors are those who are willing to take more risk for more profit, thereby putting their investment at higher risk. Whereas defensive investors are those who are more interested in avoiding any losses on their initial investment. They want to play safe. They are happy with minimum returns.

Investment and gambling are two different things. In investment, you take a calculated risk and do the proper research before investing. In gambling, you leave everything on your luck and wild guess.

So, even if you are an aggressive investor, do proper research before trying to make more profit. Do not just invest blindly on someone advice. Instead of making higher profit you may end up losing all your money. Do not invest on someone’s recommendations or past performance of any share or mutual fund. Past performance does not guaranty future returns.

We all know one universal principle of investing: More risk, more profit. Conversely, it also means that chances of making profit decreases as profit increases. If chances of making profit decrease too much, it becomes gambling rather than investing. In gambling most of people lose money. Similarly, investing with high risk can make you lose your whole money.

Seldom people told stories of peoples making lot of money in very short span of time from stock market. However, there are many more cases where people lost all of their hard earned money. Thus, do not let other’s success stories blind your eyes.

What is the purpose of investing? To make money, right? If instead of making money, you start losing money, there is no benefit of investing. Better, keep your money safe in bank account or in liquid funds. So, by default everyone must be a defensive investor.

If you have some extra money which you do not need for several years, you can invest it in stock market as an aggressive invertor. For high risk and high return, invest in small cap funds or small cap stocks.  

For retail investors and first time investors, defensive investing is the best. Diversify your portfolio and invest in different sectors and different schemes. Be happy with 10 to 15% annual profit on your investment in stock market and mutual funds because no other scheme will give you better returns. It has been observed that in long term (five to seven years), stock market gives good return.  As per your risk appetite, mix your investment in debt and equity.

Below are some other articles on investment:

1)

2)

Disclaimer: Mutual Fund/ stock market investments are subject to market risk. Please read the offer document carefully before investing’

200 Friends!

After waiting almost one year, finally today I reached to my second milestone of 200 followers. Cheers!!!

Thanks to all who appreciated, criticized and motivated me and my blogs. Somewhere I read that 70% bloggers quit in their first year. I am lucky to find some wonderful people who liked my blogs and gave me reason to keep writing. Though I know, neither me nor my writing are perfect, still you guys supported me. It is the time to thanks you all who read my blogs and most importantly I would like to thanks those who commented on my blogs.

A big THANKS to everyone!

Blind Marriages

There are many broken marriages because of the physical or mental incompatibility. People marry without knowing each other. They take the oath of living together forever as soul mate and in very first night they come to know this relation will not last any longer because of incompatibility! Still you try to patch up things but within a year or so you feel like enough is enough. You can’t spoil your whole life for your oath. You deserve a better life and with a heavy heart you broke up and move on.

In Indian sub-continent, this is a tremendous problem. We can call such unions as blind marriage where boy and girl didn’t see and talk to each other until they get married. Families of bride and groom make all the arrangements and they feel quite proud about it and believe it is morally correct. We can minimize such incidents of illogical practice resulting in divorce, if we let boy and girl to meet and understand each other completely before marriage. Let them spent some time together before they marry each other.

We do see some successful blind marriages, but in most of the cases such marriages succeed only because of wife does all the sacrifices to save her marriage. Her parents always tell her that if she disobeys her husband she is wrong, and there is no space in their home for her if she came back after fighting with her husband. Can there be anything more ridicules’ than this? Society preaches such behaviour as morality!

Time had come when we should raise our voice against such stupidity so-called morals. In small cities and villages you can still find such practice. I do not understand logic of it in a society which allows co-education . But when it comes to marriage it becomes somewhat objectionable if bride and groom want to see or talk to each other before marriage, the whole family will have problem. As blind dates are dengerous, so are blind marriages which can ruin your entire life.

Water crisis in Indian villages and its solution.

Population growth is putting enormous pressure on natural resources. Underground water, which was available in abundance few decades ago is depleting very fast. Rich peoples always find a short-term solution to avoid such problems without thinking about long-term effect. First, they come up with above ground pumps to store municipal water in overhead tanks and to use it 24 hours uninterrupted. Due to which poor peoples were unable to get water. Later, when there was not enough water in municipal water line, they start using submersible pumps. However, no one think about its long-term effect on water table and its permanent solution.

Water level is going down very rapidly. In many villages, hand pumps are not working anymore. You have to bore as deep as 200m depth to find sweet water, such boring cost more than one lakh Indian Rupees. Poor’s and even lower middle class peoples cannot afford such huge amount of money.

In Neem village in Mathura and Dori nagar in Aligarh, potable water crisis is increasing day by day. Poor farmers and villagers are suffering daily. Daily women have to walk for 2 km for sweet water. Submersible pumps with less than 200m boring are no longer working. If such scenario will continue for long time, even plants will start dying causing double havoc for human being.

What is the solution of this problem?

Rainwater harvesting, reducing wastage of clean drinking water and using treated water can be the solution of this grave problem. Without Government and NGO involvement, this will not be possible. However, Government is giving slogans. No concrete action until date.

What is Rainwater Harvesting?

Rainwater Harvesting refers to the practice of collecting rainwater from a roof or other surfaces and to use this water for different purposes. Water collected is typically used as a non-potable source for uses such as toilet flushing, urinals, and irrigation.  If the water is treated it can also be used as potable water for drinking, dishwashing or bathing. 

Does Congress Party needs a new Face?

Early trends of 2019 election vote counting are showing clear majority for BJP. Exit polls were right this time. Congress paid the price of its Ego and family politics. They could have made alliances with several regional parties like in UP, they could have joined the Mahagathbandhan. But their overconfidence and ego came in between. They bring Priyanka Gandhi at last moment as if she is a magician and can turn things upside down.

Post-election it is easier to criticise but Congress need to understand root cause of their successive shameful failures. Root cause is that Congress do not have suitable Prime ministerial candidate. Just few months ago Congress won elections in three states because RaGa was not fighting for CM from there. Even today, when Ra Ga has improved himself and can face media independently his “Pappu” image is not leaving him. No one has courage to take Rahul Gandhi name when someone ask question-who will be next PM if not Modi?  

Mr. Modi is a Hero for powerless peoples. He is a match maker for business tycoons. He has amazing art of adaptation. He keeps his mission above himself. There is no limit that he cannot cross and there is no trick that he cannot use to achieve his mission.

We can continue to blame EVM hacking for election results; however, it is quite clear that India has changed considerably in last one decade. Pseudo secularism is haunting Congress. They let RSS to grow exponentially.  Now when RSS has poisoned millions of minds towards Hindu Rashtra and have accumulated lot of resources, it is very difficult for any other party to win in elections.

Congress desperately needs a better face. Someone like Shashi Tharoor will be a great choice. Rahul Gandhi must accept his defeat and must give chance to another leader to come up as a PM candidate in 2024 elections if that election ever happened!

On other hand, Mr. Modi is looking more humbled and talking more sensibly about 130 Crore Indians after getting unimaginable victory yet another time. I hope Modi-2 will be far better than Modi-1 and India will prosper and progress in coming years as expected by  more than a billion Indians.

Mutual Funds-How to maximise your earnings?

There are two ways of investing in Mutual funds:

  1. Lump sum Investment
  2. SIP (Systematic Investment Plan)

Above two methods are used by most of new investors. If you do not have big amount of money in your hand, you must opt for SIP where you can start monthly investment as low as Rs.500. whereas if you already have money at your disposal, you can invest as lump sum. In lump sum investment you will start getting profit/loss on whole amount from day one. Whereas in SIP, as your initial investment will be very small, thus, you will gain very small or insignificant return till you accumulate big amount after several months.

Talking about advantage of SIP, SIP average out the risk of share market as you keep investing regularly.

Both SIP and lump sum has their own advantages. Is there any method by which you can take advantage of both the world?

Answer is yes, and this is the reason why I am writing this blog. This method  is called STP-Systematic transfer plan. Suppose you have a lump-sum amount and you want to reduce risk by investing through SIP. In this case STP is best solution.

First you choose two funds from same company. Invest your full amount in first fund which has zero exit loads. Using fixed monthly withdrawal through  STP option you can invest in second fund as SIP. In this way, you will be able to earn return on both the mutual funds.

Suppose I am having two mutual fund schemes from Aditya Birla mutual fund namely:

  1. Aditya Birla Sun Life Low Duration – Direct – Growth
  2. Aditya Birla Tax relief 96

First fund has zero exit load, so I will park my lumpsum in first fund and I will opt from STP which I will use as SIP for second fund. In this way I will earn return on both the funds.

Disclaimer:

1) Names of mutual funds mentioned are only for example and are not any recommendation to buy or sell.

2) Mutual Fund investments are subject to market risk. Please read the offer document carefully before investing