SUNDAY WEEKLY ISSUE #6

Good morning EveryFinions!

There were such polarising discussions this week in Twitter about the tussle between Jasmin Bhasin & Rahul Vaidya on Big Boss 14. It was just too much drama for one night. Twitterati were pouring in abuses about her. Poll ratings for Jasmin went down significantly on the social media platform.

Something else that went down this week was the pack of technology stocks in NASDAQ and this is despite them posting good results. AAPL (-6%), FB (-7.5%), Netflix (-3.5%) were all down. Twitter’s stock went down by a massive (-20%). Paparazi in India are suggesting that nobody should mess with Jasmin, not even Twitter.

IN TODAY'S NEWSLETTER

• Market update & news in brief
• Ant financial vs. top 15 Indian banks
• COVID-19 vaccine - Where are we?
• Cover story - Looking to buy a house? Read this first.
• In case you missed it - The art of investing in equity mutual funds
• Thought for the day

QUIZ

Given a risk-free interest rate of 5%, how much would you pay today to get a guaranteed return payment of Rs.100, 2 years from now?

MARKET UPDATE

NEWS IN BRIEF

1. Reliance Jio posted results this week. Revenue went up 33% and profits up by a phenomenal 185%. The telecom sector’s much tracked figure of ARPU (average revenue per user) was at Rs.145 for Jio. Airtel also recorded an increase in revenue by 22% and managed to earn a higher ARPU of Rs.162. Airtel said average data usage per user came in at 16GB per month. It however made a loss of Rs.763 crores last quarter against Jio’s profit of Rs.2,844 crores.
2. Hero MotoCorp this week announced that it will sell and service Harley-Davidson’s motorbikes in India. This announcement comes only a month after HD announced that they are pulling out of India due to a lack of clear demand outlook. Hero comes to the rescue?
3. Tata motors continues its loss-making spell on the back of continuing performance issues at JLR. The company reported a near 20% reduction in revenue and net losses of -Rs.314 crores. The business has posted losses in the last 8 out of 10 quarters. JLR expects to be profitable in the second half of this financial year. That's what they said last year, and the year before and the year before and...
4. This week, Kerala became the first state in India to fix a floor price for 16 different vegetables. While MSPs (minimum selling price) themselves are not new and are usually provided for pulses, food grains and sugar canes, this is the first time a state has come forward to declare MSPs on perishables. Given the prices for onion and potato in the country, consumers are also demanding MSP for vegetables, Maximum Selling Price.
5. Rumours were afloat this week about a possible merger between Kotak Mahindra bank and IndusInd bank in what could become the country’s largest ever banking merger deal. If the merger does happen, it would be creating India’s second largest bank behind HDFC.

IN LESS THAN 200 WORDS (1/2)

ANT Financial vs. Top 15 Banks in India

China’s Fintech giant, Advanced new technologies Co. ltd., commonly referred to as ANT financial received the necessary approvals this week to dual list its IPO shares in Shanghai and Hong Kong. The business at the offer price was valued at $320Bn. An article by Bloomberg noted that at that value, it is bigger than the GDP of countries like Egypt & Finland. To give you a perspective of how that value stacks up against our banks in India, here is a chart.

It is bigger than our top 15 banks put together!

Individual investors submitted bids worth $4.2 Trillion for Ant’s shares collectively at Hong Kong and Shanghai. That much money would buy the entire amount of goods and services produced in India over a full year and still be left with a pocket change of $1.4 Trillion. The institutional investors quota was oversubscribed by 284X times and retail investors oversubscribed by 870X in Shanghai. Individuals have taken on significant leverage in order to increase their bid size and secure some allocation. All eyes will be on listing day gains.

This is the first time in history a financial institution has managed to raise such staggering sums of money outside the US. Ant generated $2.7Billion in profits in CY19 and $3.3Billion in profits in H1 CY21 business. The company owns 23% of Zomato and 30% of PayTM.

IN LESS THAN 200 WORDS (2/2)

COVID-19 Vaccine - Where are we?

Never in the history of this world have so many people wanted to be pricked by a needle as bad as they do now. We took a detailed look at the vaccine development process, where we are, and who the lead contenders are. You can read about it here. If you only want a summary, here it is.

There are typically 5 phases in the development and monitoring of a vaccine. We have about 213 different COVID-19 vaccines under development, 37 of which are in clinical trials and just 10 are in phase 3 right now. Half of those are being developed in China and Russia. Safe to say that these will be met with ample skepticism. But there are 4 being developed by western pharmaceutical companies that are near the finish line.

At home, Bharath biotech, Indian council of medical research ICMR, and the National Institute of virology have tagged together to develop a vaccine that received approval to kick off Phase 3 clinical trials. Over 28,500 people will be involved in this study which is due to start soon.

Given that the stakes are really high, market pundits are watching quite keenly on the developments. Indian investors looking to get exposure to the equity of some of these companies can consider direct investments or indirectly through a mutual fund that holds positions in these. But the risks are very high and it is not for the faint-hearted.

COVER STORY

Looking to buy a house? Read this first.

Real estate investors in India have had it tough over the last decade. Average inflation over the last 7 years stood at about 5% per annum and residential property prices across most major cities did not even appreciate by the same %. This was at a time when average housing loan interest rates were at 9% per annum. This chart from Knight-Frank shows this rather sad trend.

This trend worsened as we got into 2020 as prices fell dramatically across most major cities. This chart below shows that.

Given, we are where we are, how should one think about real estate investments today? Should you invest in a residential property?

To answer that question, we need to look at demand and supply factors that drive real estate prices. We will look at 3 demand-side and 3 supply-side factors to make a judgement call on where we are now and how these metrics could evolve over the next few years to affect property prices. We will also give you our top picks of areas where we expect property prices to appreciate the most in the next few years.

IN CASE YOU MISSED IT...

The art of investing in equity mutual funds

This is Part 2 of the three part series on mutual funds in India. If you have not read Part 1, you can read it here.

Equity mutual funds in India are probably the most popular kind amongst retail investors because they are easily understood. But when there are 465 different schemes to choose from, where do you even start!

We assigned each of these 465 equity mutual funds into 10 broad categories and extracted their historic performance data. History is not usually the best indicator of future performance, but the fund’s track record is the only real tangible piece of data available to us to make a judgement. So, we begin there.
 
Have you heard the story about Snow White and the evil queen? The evil queen owned a magic mirror. Every morning, the queen looked at the mirror and asked, “Mirror mirror in my hand, who is the fairest in the land?” The mirror never lied and faithfully kept telling the queen the truth that she is the prettiest. On the day Snow White turned 7 years old, she became more beautiful than the evil queen. It is not difficult to guess what happened next!

Given that the mirror (data) never lies, we will pose the questions to it.

Mirror Mirror, tell us as we yearn,

"Which categories, amongst the 10, have delivered high return?"

P.S : I won't lie to you, this one is going to be a difficult read. But if you get through it, you will become a star mutual fund investor. I promise!

ANSWER TO QUIZ

₹90.70

That is what you should be ready to pay today to get a guaranteed return payment of ₹100 in 2 years. This is called time value of money and the method of arriving at this value is called discounted cashflow. Think about it the other way around - If you open a FD today with ₹90.70 paying 5% per annum, it would return Rs.100 in 2 years. 

THOUGHT FOR THE DAY

Rule #3 : Never forget rule #2

READ/WATCH/LISTEN

• In the first US presidential debate, Trump kept interrupting Biden. The US commission on presidential debate decided to mute his mic at certain times during the second debate to prevent this. This post discusses the psychological underpinnings of interrupting someone’s speech to project an image of being more capable, confident, dominant and persuasive. Project Syndicate
• Heard about social media influencers? Here’s an article about ‘virtual’ social media influencers who are starting to make-in roads. Bloomberg

From the writer in me, to the reader in you ♥

Follow us on instagram here

© EveryFin.in, 2020, All rights reserved. You are receiving this e-mail because you subscribed to the weekly Sunday newsletter at everyfin.in. To unsubscribe, click here

Disclaimer : All content published on this newsletter or on any other post on everyfin.in are meant to be for information & education purposes only. It is not intended to be investment advice or a solicitation to buy or sell securities. Please do your own due diligence or consult with your financial advisor before making any investment decision. While the information published on everyfin.in and the newsletters are obtained from reliable sources, neither the author, the publisher nor any of their affiliates guarantee the accuracy or completeness of any such information.