Finity Weekly Update (Issue #24): The Great Indian Borrowing Programme & More

“The gross borrowing is higher because of the repayment programme. My recollection on net borrowings is that we are not even touching the highest that was touched in the last five years.” -S C Garg (Economic Affairs Secretary, Government of India)

Below is the government’s borrowing plan for the next fiscal year. If this starts seeming too technical for you, advisable to skip straight to the “What does this mean for you as an investor?” section.

The Government of India announced its borrowing calendar yesterday. Last month in its budget, the government had estimated that it would need to borrow ~INR 7 Lakh Crore in the next fiscal. However, seems like the government is prepping to borrow the same quantum only within the first six months of the upcoming fiscal year.

Here’s what the borrowing plan looks like in a nutshell:

 

Borrowing Split Mode Maturity Tranches
 

 

 

INR 7.02 LCr.

 

INR 4.42 LCr.

 

GoI – dated securities

 

Varying maturity
of from 1 to 4 years to 25 years and above.

 

first six weeks – 6 tranches of
INR 17,000 Cr. each;
over 6 months – 26 tranches of
INR 17,000 Cr. each

INR 2.6 LCr. T-bill auction 91d, 182d, 364d INR 1.2 LCr. Through
91 day T-Bills

(Source: financialexpress; GoI announcement | LCr. = Lakh Crore)

What does this mean for you as an investor?
We can expect a marginal impact as yields increase, albeit marginally. The opportunity still continues to be around debt funds with an average effective maturity below ~3 years – lower, the better. It would be best to ensure a high credit quality till there’s not further clarity around the liquidity situation in India.

Meanwhile, call it a relief rally or perhaps the build-up to a bigger story, Indian equities seem to be reflecting really strong growth in the time to come. Here’s how nifty move in the week that went by:

Explore More

If you have any concern, please write to us at ask@finity.in or call at 080 48039999we would be happy to answer your query.

Thanks,
Nirav (Head of Research)
Finity

How To Add i-SIP Biller In Axis Bank

Step 1: Go to Axis bank netbanking page and login with your credentials

Step 2: Click on the Pay Bills under “Payments”

Step 3: Click on Add Biller

Step 4: Select Mutual Fund, then BSE Limited

Step 5: Enter/Paste the URN and select the options as shown below

Congratulations! Your i-SIP biller request has been registered. You will hear from your bank within 2-3 business days.

How To Add i-SIP Biller In HDFC Bank

Step 1: Go to HDFC net banking page and login with your credentials

Step 2: Click on the Bill Pay & Recharge and then Continue

Step 3: Click on “Click here to add” under “Register New Biller”

Step 4: Select Mutual Fund, then BSE Limited

Step 5: Enter/Paste the URN and select the options as shown below

Congratulations! Your i-SIP biller request has been registered. You will hear from your bank within 2-3 business days.

How To Add i-SIP Biller In ICICI

Step 1: Go to ICICI netbanking page and login with your credentials

Step 2: Click on the Bill payments under “Payments & Transfer”

Step 3: Click on Register in “Electricity, Telecom and Other Utility Bills”

Step 4: Select Mutual Fund, then BSE ISIP and click on Register

Step 5: Enter/Paste the URN and select the options as shown below

Congratulations! Your i-SIP biller request has been registered. You will hear from your bank within 2-3 business days.

How To Add i-SIP Biller In SBI

Step 1: Go to SBI netbanking page and login with your credentials

Step 2: Click on the Bill payments Tab

Step 3: Click on Manage Biller

Step 4: Click On “Add” under “Manage Biller”

Step 5: Select Biller as BSE Limited

Step 6: Enter/Paste the URN and select the options as shown below

Congratulations! Your i-SIP biller request has been registered. You will hear from your bank within 2-3 business days.

Life Insurance

Have you started saving for uncertainties?

Vijesh is 48 years old, an engineer working in an MNC and he is the only working member in his family. One day while returning from work in his car, he met with an accident. Unfortunately, he died. He was survived by his wife, Meena and two children. Meena has lost his life partner and she has to take care of her children. Now she is struggling to get a good job which would serve 3 lives.

Imagine something like this happening to you. What happens to your loved ones when you are no longer there? Death is an inevitable part of life. Invest in a life insurance plan and put these concerns to rest. Your insurance investment will take care of your family in any situation and will help in replacing lost household income, paying for the education of your kids or even providing financial support to your spouse if something happens to you.  

What is Life Insurance?

Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person.

Types of Life Insurance

1.Endowment Policy

  1. Unit Linked Insurance Policy
  2. Term Insurance
  3. Money Back Policy
  4. Whole Life Policy
  5. Pension Plan

Let’s know more about its 3 major types:

  1. Term Insurance Plan- Term insurance is a type of life insurance policy that provides coverage for a certain period of time or a specified “term” of years. If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid. Term insurance is initially much less expensive when compared to other life insurances.
  2. Unit Linked Insurance Policy- A Unit Linked Insurance Plan or ULIP is a product offered by insurance companies that, unlike a pure insurance policy, give investors both insurance and investment under a single integrated plan. You can withdraw only after lock-in-period of 5 years. Advisors say not to mix insurance with investment. Mixing the two will give you less than moderate returns from both.
  3. Endowment Policy- An endowment policy is a life insurance policy which apart from covering the life of the insured, helps the policy-holder save regularly over a specific period of time so that he/she is able to get a lump sum amount on the policy maturity in case he/she survives the policy term. This maturity amount can be used to meet various financial needs such as funding one’s retirement, children’s education or marriage or buying a house. The premium payable is usually much higher than that of whole life insurance or term insurance. It does not have the renewability (a few companies do provide renewable endowment policies subject to a maximum issue age) or convertibility option available in term insurance.

Claim Settlement Process

On the happening of the event, the beneficiary is required to send claim intimation form to the insurance company as soon as possible. Claim intimation should contain details such as Date, Place, and Cause of Death. On successful submission of claim intimation form, an insurance company can ask for additional information about

  1. Certificate of Death
  2. Copy of Insurance Policy
  3. Legal Evidence of title in case insured has not appointed a beneficiary
  4. Deeds of assignment

On successful submission of all the document, the insurance company shall verify the claim and settle the same.   

Equity Mutual Funds

Equities! A Smart Way to Invest

People normally don’t find it safe to invest in Equity. They consider it a gamble. Why? Because your shares are traded in the stock market which is subjected to market fluctuations. Then why does Monika Halan, consulting Editor for Mint, state “I Love equity funds”  in her book “Let’s Talk Money”.

Let’s look at this picture:

Invest in Equities

 

Surprising! The most trusted instruments such as Fixed Deposit multiplies wealth only by 20 times whereas investments in Equity multiplies it by 260 times.

Equities are stocks, meaning shares of a company. When you invest in equities it means you own the shares of a company and are partial owners of the company

But the hitch is how do you know which company’s stock performs well? How are your shares trending in the market? When to sell or buy?

This arises the need to understand the difference between investors and traders. The work of a trader is to track the market minute to minute and closely monitor the fluctuations in the stock. But as an investor, you must ascertain your investment horizon and financial need, invest in Equities and to stay invested until investment purpose is achieved. Remember, “time in the market” is important not timing the market.

The best option to invest in Equities is through Mutual Funds. Even Monika Halan says that she doesn’t buy shares directly but rather invests in Equity through Mutual Funds. Because when you do so, the decision of picking the right stock is vested with Professional Fund Managers who track the movement of shares closely and rebalance the investment portfolio regularly. They have a tab on the performance of companies, markets, political events, interest rates, and past data that help them to forecast the future of a stock. With Mutual Funds, there is a scheme for every person depending on your risk and investment goal. Say if you are a conservative investor but are willing to take a little bit of risk then, with Mutual funds you can always have your investments primarily in Bonds (Debt) with a little exposure to Stock (Equity).

As an investor one should remember that Equity Investing is no gamble. In a growing economy like India, good investments should outperform in the long run, irrespective of the macroeconomic factors. The Table below will give a clear idea:

Time Period 1 year 3 years 5 years
Amount Invested (INR) 12000 36000 60000
L&T India Value Fund-Direct Plan Growth Option 10,948.02 37,485.68 76,658.66
ICICI Prudential Bluechip Fund-Direct Plan Growth 11,596.35 40,193.66 75,470.58
SBI Bluechip Fund Direct Growth 11,322.36 37,843.27 72,645.74

These are the Top Rated Funds on Finity. The Table clearly shows that when Rs 1000 a month invested through SIP in these funds, say L&T India Value Fund-Direct Plan Growth Option for a period of 1 year gives a fund value of Rs. 10,948 which is lesser than the invested amount of Rs. 12000. But when the same process is carried out for a process of 5 years, the fund value is Rs. 76,658.66, which is 27% more than the invested amount Rs. 60000. The same pattern is seen in the other two funds as well.

India is expected to add the fourth-highest number of High Net Worth Individuals in the next five years, only behind the star economies of U.S., China, and Japan yet ahead of the European powerhouse – Germany.

Here’s what the High Net Worth Indians are doing right with their money-

HNI Indians: Source of Wealth

To make life simpler, here’s the inference you should care about – The wealthy have become wealthy through smart investing and by having a very good understanding of equities as an asset class.

Investing & Equity – bring these together and you will discover the secret sauce to wealth creation.

To sum it up, Equities may be volatile in the short run, but over the longer period, volatility will decrease and the returns will increase, thus reducing the risk.

So, Remember!

The thumb rule in Equity is to stay patient and remain invested for a long period to reap its benefits.

Finity Weekly Update (Issue #23): What Moved My Market?

Indian markets opened on a positive note this week for the sixth consecutive session on the back of energy & financial service sector positive performance but settled lower on Friday as investors booked profits.

Both Sensex and nifty went up by 0.37% and 0.26% respectively during this week.

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Investment Planning in case of job loss

Are you worrying about your Job Loss? Here is what you can do!

The thought of losing a job is very scary, isn’t it? With the evolving technologies around and automation happening in every industry, it is but natural to be worried. Any of us can lose our job at any time and the worst part is we can’t do anything about it.

What you usually do to get out of this fear is you start talking to your peers, your friends, spending more time with your loved ones or you may watch a motivational movie etc which can motivate you. Each of them will motivate you but you would end up getting the perfect answer for what if I lose my job?
So here are some best ways to prepare for and tackle the job-loss situation:

Create your emergency fund:

Build your emergency fund out of your income. Transfer around 30% of your saving income into Liquid funds or ultra-short-term funds where risk is minimal, and your money will start growing on a daily basis. An ideal emergency fund should be equal to six months’ future expenses or if you are having any EMI’s going on, it should at least equal future six months EMI.
Another option would be to reduce the EMI amount & increase the tenure of the loan temporarily till the time things get normal. This is not at all beneficial for you in the long term so better have an emergency fund in place.

Fun Fact: There are certain mutual funds like Reliance Liquid Fund which provide instant redemption facility whereby you can get your money in just 5-10 min in your bank account 24*7. These funds can give you returns ranging from 6.5% – 8%.

Understand the employee benefits:

You should be aware of all the details of your salary, your unused leaves and their compensation, insurance etc. It will help you in estimating the future income.

Utilize your open-ended/Withdrawable Investments:

You should always have an investment which can be easily liquidated. In such critical times, your real estate, Public Provident Fund (PPF), National Savings Certificate (NSC) etc investments will not help as you can’t liquidate them but your investment in mutual funds safeguard you in such cases.

Use loan protection plans if you have any:

To safeguard investors from any uncertain events, banks do provide loan protection before taking any loan. This plan covers other critical events like illness or job loss. If you have this policy, redeem the plan’s benefit at times of job loss.

Make sure about your personal Mediclaim Policy:

You should always make sure that you are having your own Mediclaim policy other than the one which gets provided by the employer. Medical emergencies can arise at any time and will impact you majorly in your crucial times.

Look ahead for the opportunities:

While it is obvious to get frustrated by job loss but at the same time, you should also think about the skill set, the knowledge set required to qualify for the best opportunities in the market. Because, the above measures will help you in tackling the temporary emergencies, knowledge and skill set will give you permanent solutions.

Losing a job is a stressful activity, however proper planning & a balanced approach can help you in coming out of such cases.

Finity Weekly Update (Issue #22): Here’s how RBI is trying to kill two (or more) birds with a single stone!

“There is always the potential for a central bank to engage in discretionary monetary policy and to break the one-to-one link between changes in foreign reserves and changes in the money supply.”- Steve Hanke (American Economist)

Late evening, this Wednesday, RBI announced that it would conduct a USD/INR swap auction for $5 billion. We view this as an exceptionally well-thought implementation by RBI to infuse liquidity and manage INR rates with a single move.

How does the swap work?

Eligible banks will bid a premium (an additional amount they are willing to pay RBI) to avail the opportunity to exchange their US Dollar reserve for a Rupee equivalent from RBI. This swap allows the bank to utilise the INR for banking activities and are expected to return this INR amount to RBI along with the committed premium at the end of three years to get their USD reserves back.

How does this help India?

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