Over the last 3 years, mutual funds have seen a sharp inflow of funds. Interestingly, most of the inflows have come into equity funds and they have come from retail investors via SIPs. One of the sub-categories of equity funds is the equity linked savings schemes (ELSS). An ELSS is an equity fund which has a lock-in of 3 years and also proffers a tax benefit under Section 80C of the Income Tax Act. Here is why you must seriously consider ELSS for planning your taxes… Continue reading →

In the last week of May 2017, the ruling NDA government under Narendra Modi will complete 3 years in power. Over the last 3 years, the Nifty has given a Compounded Annual Growth Rate (CAGR) return of 9.8%. That is about what an investor would have earned in a debt fund over the same period. That means the equity markets have not really indulged in fireworks during the last 3 years. If you were to play the Devil’s advocate, you can argue that jobs creation has really slowed in the last 3 years and most of the benefits that we see today are an outcome of weak global crude oil prices. One can also argue that NPAs in the banking system have burgeoned sharply in the last 3 years and the PSU banks are a lot more brittle today than what they were 3 years ago. Continue reading →

What they could actually mean for the Indian economy…

Like in most years, the rainfall estimates have diverged. While the government owned IMD has forecast an above normal monsoon this year, the privately owned SKYMET has forecast a below-average monsoon this year. The difference arises from the interpretation of the likely impact of the El Nino effect. While the IMD believes the effect is waning, the SKYMET still believes that the El Nino effect could take its toll on the size and spread of the monsoons. However, last year the IMD had got its estimates right, while the SKYMET had got their estimates entirely wrong…

Understanding average rainfall… 

Before getting into the subtle nuances of the two forecasts, it is essential to understand what average rainfall implies in the field of weather forecasting. Average rainfall is defined as the range of 96-104% of the Long Period Average (LPA). Anything below 96% is classified as below average rainfall while anything above 104 is classified as above normal monsoons. From the point of view of Indian agriculture, the quantum of rains, the timely arrival and the regional spread matters. If rains get delayed, then it impacts the sowing season and the eventual quantum of rainfall does not matter. Back in 2014 and 2015 we had conditions wherein the monsoons resulted in droughts in some areas and floods in other areas. Hence, a stable distribution and timely arrival are as important as the quantum of rainfall.

Why the estimates matter?

Monsoon estimates are at the core as far as food inflation and overall inflation are concerned. Over the last few months, food inflation has been on a consistent downtrend. The reason is the good monsoon in 2016 and the consequent 9% growth in the production of food grains. Any slowdown in this growth will again put pressure on food prices and also impact CPI inflation. The RBI has been quite wary of the risk of food inflation and that will virtually rule out any possibility of a repo rate cut by the RBI.

Rural and semi-urban demand…

The big takeaway from monsoon estimates is rural and semi-urban demand. Agriculture still accounts for over 50% of the employment and a chunk of the rural and semi-urban demand. A slowdown in agricultural production will mean lower incomes in rural and semi-urban areas. This will lead to a compression in demand for a variety of products where the incremental demand is largely driven by rural areas and therefore is dependent on agriculture. A range of products including tractors, entry-level cars, two-wheelers, agricultural equipment, hybrid seeds, fertilizers and agrochemicals are impacted by the food-grain output and therefore monsoons become critical. One hopes the actual monsoon tends more towards the IMD forecast! ©

What other FMCG companies can learn from their growth…

Baba Ramdev’s Patanjali has clocked fabulous sales of Rs.10,000 crore for the full year 2016-17. This makes Patanjali the third largest FMCG Company in India after Hindustan Unilever and ITC. From sales of Rs.450 crore in 2011, the company has grown to Rs.10,000 crore in 2017; nearly 20-fold. Going by that trend, the company’s projection to touch Rs.20,000 crore sales by next year does not seem entirely impractical. So, what are the lessons that other FMCG companies can learn from Patanjali… Continue reading →

As the Nifty and the Sensex scale new highs, the key question is whether it time to book profits and move out. There may be no clear answers as these decisions are largely driven by individual trading strategies and individual goals. However, there are 9 things that traders and investors need to remember before taking a decision to book profits just because the Nifty and the Sensex are at a new high… Continue reading →