Macroscope: RBI Monetary Policy Update Aug’20

RBI monetary poilcy

MPC Recap till date


MPC Reading – July 2020

What is the latest reading?


Growth & inflation outlook projection:

Growth: For the first half of the year, RBI expects GDP growth to be contraction zone and real GDP growth to be negative for the year 2020-21. This is on the back of negative consumer confidence in July, weak external demand, and contraction in global trade.

Inflation: Food inflation has been elevated since the pandemic outbreak. Headline inflation is expected to continue at elevate levels through Q2FY2020-21. Supply chain disruptions continue as re-clamping of lockdown in a fragmented manner continues to add pressure. Inflationary pressure also evident across segments.

Other Highlight:

Liquidity reported as essential for effective transmission of rate cuts. Incremental focus on liquidity support for financial markets, improved credit flow, digital payments and leveraging technology. Liquidity measures include INR 10KCr. Liquidity to NABARD & NHB, provisioning to allow stressed MSMEs to restructure debt, Gold loan LTV enhanced to 90% of value

Key takeaways:

As signs of revival defer and the pandemic is yet to taper significantly, the Central Bank may want to have enough rate headroom as dry powder and err on the side of caution. Improved statistics on containment efforts of the pandemic may nudge the Real GDP situation into the positive trajectory soon. RBI is being judicious with the use of monetary tools which seems like a good idea as world economies continue to stare into the fog.


Macroscope: Manufacturing PMI Update August 2020


What is Manufacturing Purchasing Manager’s Index (PMI)?

The Manufacturing PMI is a performance measurement of the manufacturing & services sector, derived from a 500 manufacturing companies’ survey. It aids in gauging business activity and confidence levels.

Its weighted components are as follows:

details PMI

It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.

How to read the PMI data?

– >50 figures indicate an expansion of the manufacturing sector compared to the previous month.
– <50 indicates a contraction.
– =50 indicates no change

What does PMI data mean for Financial Markets?

It serves as an indicator of corporate earnings, thereby, influencing equity & debt investors, alike. It is also a good parameter to compare attractiveness of an economy vis-a-vis another competing economy.

PMI Reading – July 2020

What is the latest reading?

The PMI figure in July 2020 stands at 46, compared with 47.2 in June

PMI data


Virus cases still rising and even the lockdown across multiple states, which indicates that the long road back to normality for the manufacturing sector.



Motilal Oswal Multi Asset NFO – An All-Weather Investment Product

motilal nfo

In current market scenario, where investors are facing real dilemma of choosing the investment asset class.
Investors are unwilling to invest 100% in traditional instruments as they currently offer meager returns, averse to invest all in equity as it carries high risk; also, not going all hog on gold as they think that the rally for gold is over & not investing in debt instruments as the risk of credit default has gone up amid current environment.

Is there any product which can allow investor to invest in all the above asset classes with the changing market dynamics, high downside protection and which aims for reasonable returns?

Interestingly, playing to this opportunity, Motilal Oswal mutual fund is launching a New Fund Offer based around the asset diversification- “Motilal Oswal Multi Asset”. Quick look at the features – open-ended, Multi asset.

Asset Allocation of Motilal Oswal Multi Asset Fund is as follows:


Every asset class has its “season”, and an investor whose portfolio is dynamically aligned to shift into said asset class, is poised to win most. All asset classes have their designated role ranging from generating alpha to acting as hedge, thus helping portfolio to maximize diversification benefits.

The Asset class correlation matrix is as follows:

Different levels of correlation among different asset classes provide the portfolio with an effective hedge

The Result of having the right mix of asset classes, in the right proportion, has led to Multi-Asset as a MF category to outperform its peers across various time periods. Table below highlights category average performance of MF categories.

Investor Takeaways:

The fund deserves an allocation in your portfolio for those who desire marginally better & consistent returns without
taking higher risk and looking to make an entry into the prevailing uncertain market.

The fund is suitable for those who are having an average indicative horizon up to five years & more.

In case you wish to understand more about the opportunity or simply discuss the prospects of the funds, feel free to
connect with us and we would be glad to have a chat.

Fund Details

NFO details

Opportunity to invest in Public Sector Bonds – Edelweiss Bharat Bond NFO

Public sector bond NFO

Of late, there has been quite a flurry of new funds being launched by mutual funds – many of which are for the fund house to offer a new product category or to play a theme. While we are constantly on the lookout for not just interesting, but for funds that hold real promise in terms of potential to create investor wealth.

PSUs are known to have laid founding stones to economic success. Their access to capital,  regulatory clearances and domain expertise have been instrumental in strengthening the businesses.

Times like now, when the private sectors are hitting a slump (almost), and the economy is turning towards the government for aid, PSUs stand strong.

PSUs covered in the CPSE basket are typically backed by state/central government and offer very high-rated debt instruments. These score well from a safety-against-default parameter

Here is the NFOs which have piqued our interest & the fund name is “Edelweiss Bharat Bond FoF”.

About Edelweiss Bharat Bond FOF

The NFO is open from 14th July 2020 to 17th July 2020. The Fund will be launched with two different maturities i.e. Bharat Bond FOF – 2025 and Bharat Bond FOF – April 2031

Edelweiss Bharat Bond FOF will invest in Bharat Bond ETF which will then invest the money in a bond issued by Public Sector companies.

• Portfolio will be majorly focused on PSU bonds issued by CPSE, CPFI or statutory body dominated in India

• Portfolio will have a conservative rating of AAA and will mature within 12 months period preceding the maturity date of the index.

• Fund does not have any lock in. Investor can entry and exit at any time.

• Investor will get the indexation benefit if he stays invested for a horizon of more than 3 years.

Food for thought:

Earlier issue (December 2019) of Bharat bond FoF April 2030 has generated a return of 10.41% (Data as on 13th July 2020) since inception while Bharat bond FoF April 2023 has generated 7.73% (Data as on 13th July 2020) returns since inception- more than most of the traditional instruments available.


Investors with a conservative to low-rated risk profile and an investment horizon equivalent to that of the issue may choose to invest in the fund. The fund is a good constituent to fit into the debt allocation basis asset allocation.

In case you wish to understand more about the opportunity or simply discuss the prospects of the funds, feel free to connect with us and we would be glad to have a chat.

Edelweiss Bharat Bond FOF fund details:

details of NFO

Be the MasterChef Of Your Finances

MasterChef Of Your Finances-01

As the twelfth season of MasterChef Australia comes close to it’s last few episodes, one watches people make mouth-watering dishes that are a perfect balance, technique and sometimes even innovation, it is hard to not imagine, what could be the classic perfect recipe for a happy life? Sadly there isn’t. However financial freedom which can at least make life comfortable just might have a recipe.

Recipe for Financial Freedom A La Keiv with Tax-saving Sauce


  • Life Cover
  • Health Cover
  • Investments

For the Tax-saving Sauce:

  • ELSS
  • NPS


1. Financial Freedom is an easy task if you have the best usage of the right ingredients mixed well in your financial portfolio, based on your financial goals and requirements. One of the biggest priorities in an individual’s life is to secure their family’s future and that is why life cover is so important. It is also essential to see that the coverage amount is enough and the premiums aren’t a liability.

2. The next biggest priority and asset is generally, health. Getting health insurance is also crucial because it protects one of your valuable assets. So, make sure when you have a health cover it has a large network of hospitals and meets the requirements of your Investments: family too.

3. The most beautiful thing about investing is that it helps you not only earn but also create more savings. Today, it is possible to get a mutual fund starting at just Rs. 100 a month. That is literally, throwaway money for things we don’t need. Your investment and what you make out of it is your savings, which is what will give the catapult to make all your dreams come true.

The Tax-saving Sauce

National Pension Scheme (NPS) and ELSS tax-saving funds are not just investments to earn high returns, but also save on your income tax money.

  1. NPS: is a Government initiative and monitored investment plan that anyone can use to both save taxes and earn returns that can at least fight inflation. 
  2. ELSS: on the other hand, comes with the shortest lock-in period among saving schemes and also can be attained for instant tax proof online.
  3. All the Other insurances: Both the health cover and life insurance come with tax benefits under the Income Tax Act. 

This is the classic recipe for hassle-free financial freedom while you can save on taxes. Find out what can you do with it. You can get all the ingredients and cookware for this recipe on our app. Click here to download our free app. Our app also comes with a tax calculator tool so that your sauce compliments your main dish.

How to Plan a Happy Retirement with NPS?

Happy Retirement with NPS-01

The reality of retirement planning isn’t as dramatic as it sounds. It is, in fact, easier if you start early because you never know what befalls in the future. So where do you get started? What could you possibly do effortlessly to save for your post-retirement days and not depend on other family members? National Pension Scheme might be the answer to all these queries. Let’s find out how.

Retirement Planning with National Pension Scheme (NPS): 101

The first thing that one needs to be aware of, about NPS is that it is governed by Indian laws and hence protected by them. This is one of the most secured investment schemes in India and can be very beneficial. 

1. All you need to be eligible for investing in the National Pension Scheme is proof of citizen of India with ID and Address proof and be over 18 years of age and less than 60 years of age.

2. There are 2 types of accounts for NPS and individual may subscribe for:

  • Tier 1: It is a mandatory account for all those who opt for NPS. The Government employees have to contribute 10% of their salary (salary = basic + DA), and the government will make equal contributions as well. For others opting this scheme, the initial contribution is Rs. 500/- at the time of account opening and minimum annual contribution is Rs. 5000.
  • Tier 2: Not a compulsory account like Tier 1. You can withdraw funds at any time, and hence, it provides high liquidity. There are no contributions from the government or the employers and include no tax exemptions either. There are three critical points to make a note of The minimum amount required to open this account is Rs. 5000/-

3. You get two options which are Active-choice and auto choice. With active-choice investment option, an investor gets to mix equity, corporate debt, and government securities as per his/ her choice. However, the allocation of equity can be a maximum of 50%. Auto- choice Allocation is done based on the investor’s age.

Equity Till the age of 35, the equity portion is 50%, post which it reduces 2% yearly till it becomes 10% by the age of 55.
Corporate Debt Till the age of 35, the corporate debt is 30 %, post which it reduces 1% every year until it becomes 10% by the age of 55.
Other Options 1. Aggressive life-cycle fund – begin with an equity allocation of 75%.

2. Conservative life-cycle fund – start with an equity allocation of 25%. Reduces as per the investor’s age advances.

4. Opening an NPS account is not that difficult now. It’s just a click away. You can easily invest in NPS online through the Fisdom App. We are a new-age app that makes it easy to invest in mutual funds, in a matter of minutes.

5. This is not all, NPS also has major tax benefits: Based on Union Budget 2019, NPS now qualifies to be an Exempt-Exempt-Exempt (EEE) category product. This means that NPS tax is exempted at all 3 stages. Here is how you benefit from it:

  1. Tax deductions up to 1.5 lakh per annum under Section 80CCD of the Income Tax Act.
  2. Additional tax deduction up to Rs. 50,000 under Section 80CCD(1B) in a financial year. (only Tier 1 accounts are eligible, not Tier 2)
  3. At term completion or 60 years, 60% of the amount received is free from tax, while the rest 40% has to be invested in the annuity.

So, you not only plan a financially happy retirement but also save on taxes while doing so. A lot of people need to understand that given the current scenario where the pension is almost non-existent one can use NPS to make their actual free time in life, comfortable.

How mutual fund investment can help you achieve your financial independence?

Financial independance

Any investment requires a certain amount of money, obviously. But what if you had just a ₹100 in your account and that’s all you can afford to invest per month at least for the time being. Do you still have a chance to be an investor and become financially more stable? Of course, it is possible with mutual funds and we’ll tell you how to make it possible.

How to invest in a SIP to ensure your financial stability?

SIP or Systematic Investment Plans are simply mutual funds that are invested on a monthly basis instead of a whole lump sum. While there are a plethora of schemes out there you have to make sure that you keep certain things in mind, so that you are able to achieve financial stability.

1. Set a Target:

Decide how much earnings due you have to make in the long run to be financially independent. The time it will take to build that wealth is based on your goal. You can use our Save For A Goal tool on Finity App for estimating your target amount and the time it would take you to achieve it.

2. Choose Scheme Wisely:  

There are multiple factors which should decide whether a scheme is appropriate for you or not. Your risk appetite is the most important because if you wish to become financially independent, you cannot afford to lose money and at the same time not indulge in the low-risk appetite where your investment is unable to fight inflation in the long run. 

3. Compounding:

Unlike other saving schemes the amount that you invest grows every month as you start earning more and you invest both your principal amount and earned amount in the next month, in the case of a SIP. Mutual funds have hence the major advantage of compounding interest hence the amount of money invested keeps growing not just through the monthly investment but also the earned amount.

4. Don’t Be Hasty:

It is quite exciting to watch your investment grow over time, which gives you further reason not to withdraw your investment and earnings in short periods of time. In that way, with continued investment and the power of compounding to aid it, you will keep earning more.

5. Check Your Fund Performance and Keep Adding to Your Mutual Fund Portfolio:

While you have existing funds and building wealth, you can start investing in larger amounts when it seems comfortable for you while you keep an eye on your older scheme at the same time. This way you can build wealth parallelly through two different plans.

6. Mutual funds are basically a multiplayer strategy game:

So your initial investment is the resources that you start with and you keep building wealth and getting ahead in the game by continued and strategic moves. While in a multiplayer game, it is your job to create and execute the strategy, in the case of mutual funds, it is the fund managers who strategize based on your risk appetite. You of course are overlooking the fund performance but leaving the major chunk of the game to the fund managers and making returns on the gameplay.

The truth is that mutual fund investments can help you become financially independent for real but you have to be patient and keep increasing your resources. Life may be tough but mutual fund investment is surely not one of those things. The best part is that with ₹100 as your minimum investment amount, it’s similar to the beans from ‘Jack and the Beanstalk’, only in this case you can keep earning without fighting a giant.

The Signal: The Week & More

the week & more




Key Events

  • PM dismisses lockdown rumours: 

PM Narendra Modi dismissed the rumours of lockdown reimposition, and infact urged states and union territories to get ready for Unlock 2.0.  

With economic indicators showing early signs of revival, cautious approach to open up the economy will further help boost business sentiments and help revive the economy.

  • 21 million jobs added in May: CMIE: 

The unemployment rate remained very high in May 2020, but labour market conditions have improved during the month. Announcements made by central government and several state governments indicate the lockdown could be lifted further in phases during June. 

With improving labour statistics on the horizon, we expect consumption recovery to be right around the block.

  • IAF on high alert, moves fighter jets to forward bases

India and China have held another round of military-level talks, following the fierce clash in the Galwan Valley in eastern Ladakh on Monday night. China has claimed sovereignty over the region, that India trashed as exaggerated and untenable.

Aggressive movements on both fronts could disrupt foreign investments in India. Foreign investments started picking up only last month since the onset of the pandemic. However, since Indian equities have already witnessed a flight of significant foreign capital, reactive downside seems capped.

  • RIL share price hits all-time high as firm becomes net-debt free 9 months ahead of deadline

RIL stock price has rallied 95 per cent in less than three months from its 52-week low of Rs 867.82, fuelled by 11 investment deals in nine weeks, which aided the Mukesh Ambani-led firm to raise Rs 115,693 crore by selling 24.70 per cent stake in Jio Platforms

The RIL fundraise has been a significant contributor to increased foreign  institutional/portfolio investments in India. Reliance Industries has the highest weightage in bellwether indices NIFTY50 and S&P BSE SENSEX – meaningful contribution to index uptick.

The Signal: The Fool’s Misbehaviour

The signal

“Investments are subject to market risk. Read all scheme related documents before investing”

Nothing represents investor ignorance better than the above statement. Let me fix it for you –

“Investments are subject to risks even beyond the market. Only reading scheme-related documents will not help you mitigate those risks.”

Writers love to talk about fancy-name-ratios and how it indicates risk. Journals and columns love to rave about risk indicators more than the risk. In fact, most do not even dare tread beyond diversification to mitigate risk. 

But, here’s the bomb – market risk is NOT the biggest risk. 

You know market risks exist. You invest with an understanding that this risk may materialise, and you can incur a loss. 

But what if there is a risk that you are completely unaware of? 

Or even worse – you are aware of the risk yet continue to be a helpless victim?


Behavioural risk is the most underrated risk!

Even the most intelligent investors succumb to behavioural risk – especially during volatile times like now. While behavioural risk is an expansive subject, here are the three most critical and common behavioural fallacies among investors.

#1: The Investor’s Ego

There’s a popular notion about the investor’s ego – the moment a person buys his first equity share, he/she contracts this behavioural virus known as the Investor’s Ego. Symptoms include being excessively confident about own’s own rationale, ignoring conflicting opinions and in extreme cases – a tendency to compare oneself with Warren Buffett (or the other way round).

Often, investors refuse to accept own decisions as wrong and continue with futile attempts to make good of the situation. The inability to see beyond one’s ego is a prime reason for fractured relationships & broken investments.

Most long-term equity investments started out as an intraday trade gone wrong!

#2: Paying Attention

Don’t get this wrong. Paying attention is important; paying attention selectively is lethal.

“South-Asian Paints’ market share in Mumbai goes up from 30% to 35%. The company’s WACC has increased to 18% in just three quarters. Analysts note, the stock price has been exhibiting a continuous increase in the beta and standard deviation over the three quarters.”

Now, just because the investor itches to act upon newfound knowledge, they log into their trading account. 

What do you think happens next? Is it a buy or sell? What would you do?

Hold onto that thought.

Most investors (academically & professionally unrelated to finance as a subject) read the above as – 

“Increase in market share… blah-blah … increase to 18% in just 3 quarters … blah-blah-blah … continuous increase … blah … three quarters”. 

Is this how you read it?

If yes, let us take a wild guess about your investment decision. 

Was it a “buy”?

Here’s how paying attention selectively can backfire. As humans we tend to retain only the things we understand and base our decisions on the information our memory retains. 

Here, it is simple to understand that the company’s market share has increased (which is a good thing) and then we read through some more mumbo-jumbo that talks about an increase – so we presume this is also a sign of progress.

Here’s where things go wrong, and this is how wrong investment decisions are made. 

For the curious, the other two increases were referring to an increase in cost and increase in risk (which is not a good thing!).

It is okay to pay attention selectively if that piece of information has no role in your investment decisions.

#3: The Itch

Drawing from the above illustration, the investor can still do well if he stops at paying attention selectively. The real problem begins when he acts on it. 

This itch to act upon newfound information is also popularly known as action bias.

“Charlie and I decided long ago that in an investment lifetime it’s just too hard to make hundreds of smart decisions. That judgement became even more compelling as Berkshire’s capital mushroomed and the universe of investments that could affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart – and not too smart at that – only a very few times. Indeed. We’ll now settle for one good idea a year.” 

– Warren Buffett

Investors need to find solace in the fact that not acting upon something is also a conscious action. While this may seem straightforward, most investors are vulnerable to this behavioural risk. If you are considering investing, switching or redeeming any of your capital market investments because of the current volatility – that’s a prime symptom of the itch

Do not be a fool. Do not misbehave.

Each time you feel like tweaking your portfolio, wash your hands for 20 seconds and utilise the time to think about this – 

A theory suggests that oxygen absorbed during respiration damages cells through oxidation which leads to aging and consequently death. In a way, the elixir of life is also the kiss of death. (Now you know why they recommend antioxidants in diets!)

Is it possible that your paranoia about financial security led you to making great investment decisions and the same paranoia will push you to overdo it and ruin the fort you built?

Category Update: Arbitrage

Arbitrage Finity

What’s happening in arbitrage funds?

Arbitrage funds spreads turned negative for the first time. A spread is the difference between the price of stock and the price of its futures contract. Arbitrage funds delivers returns from a positive arbitrage spread and gives negative whenever there is negative spread.

How future prices converge with the spot price

Spot price Finity


What was the primary reason for such negative spread?

If you look at May end series, market-wide rollovers stand at 91% (vs. average rollovers of 86% seen in last 3 series). Stock future rollover stand at 94% (vs. average rollovers of 90% seen in last 3 series).
Due to this pressure from arbitrage players over short roll overs, spread across stocks dipped into negative zone from over 20bps. Even the large inflows in last two months and lower interest rates have also contributed to the dip.

How do we look at it?

Amid such environment we all know that the arbitrage fund may generate lower returns over the next couple of weeks, however one should not forget that the market volatility during the May 2020 helps funds managers capturing better arbitrage opportunities by churning the portfolio in between. Hence, the actual returns are better than the spread captured on expiry days. One should ideally invest in arbitrage funds with at least 3-6 month’s investment horizon for stable investment experience.

Key Takeaways:

Existing Investor: Nothing will change for existing investor, they should stay invested for a horizon of 3-6 months.

For new investor who has time horizon of 3-6 months can definitely look at arbitrage funds cause they may generate better yields compared to liquid funds on a post-tax basis.

We believe that in couple of weeks the situation should normalize.

eye of an investor Finity