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SUNDAY WEEKLY ISSUE #7
Good morning EveryFinions!
The media was almost entirely pre-occupied with figuring out US election results this week. We still don't know the final word on it. Meanwhile, Twitter labelled several of Trump's tweets as 'disputed' and potentially 'misleading'. Like these two below. But the president did not let any of this discourage him. He claimed that Twitter is out of control 😀 
The stock markets were also out of control this week. SENSEX surged a staggering 2,300 points just this week. Investors all over the country rejoiced the move. But some are cautioning about the massive overvaluation in markets and potentially an upcoming lost decade for equity investors. Who knows!
IN TODAY'S NEWSLETTER
QUIZ How much gold does the Reserve Bank of India (RBI) have in its reserves? MARKET UPDATE SENSEX 41,893 5.8% NIFTY 500 9,582 4.7% Brent Crude $39.52 4.1% Gold (per gram) Rs.5,247 3.2% NEWS IN BRIEF
IN LESS THAN 200 WORDS (1/2)
Reminder - Gold bonds open for subscription this week 
For those of you who read our piece on sovereign gold bonds last month, this is just a quick reminder that these bonds are opening for subscription again this week from the 9th to the 13th of November. For those of who didn't manage to read it, here it is again.
In 2015, the Indian government made holding gold even more lucrative for resident Indians. They came out with the sovereign gold bonds.
How do they work? The price of a sovereign gold bond (SGB), denominated in 1 gram of gold, varies with the price of gold. An investor who wishes to buy the SGB pays a price equal to 1 gram of gold today and holds his/her investment in paper format (holding certificate). Twice a year, the government pays 1.25% interest on these bonds (2.5% annually) on the nominal value of 1 gram of gold. At the end of 8 years, the bonds are redeemed at the prevailing price of gold. Investors can also exit from these bonds at the end of years 5, 6 and 7 if they so wish. Each investor can buy a maximum of 4Kg gold worth of SGBs. These instruments are safe and are backed by sovereign guarantee.
For investors looking to make an “investment” in gold, this is by far the best option. As is obvious, if you are looking to buy gold for ornamental purposes, these gold bonds will hardly do the job in your ring finger 😉 GAME : THE PRICE IS RIGHT! This 7-bedroom, 7-bathroom apartment in Breach Candy, Mumbai shares a slice of the sky with the two most expensive residences in the world – Antilla and JK house.
An iconic high rise this one, is home to the who’s who from different walks. It boasts a balcony with a sea view, penthouse, a sky deck and is split across 3 levels (12th, 13th and 14th). Currently listed on Knight-Frank for sale, Guess the price! (Scroll down for the right answer!) 
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8% per annum for 5 years - Bond offering Muthoot finance has come up a bond offering (non-convertible debentures) that is currently open for subscription to resident Indians. There are 3 different interest payment options (monthly, annually and at maturity) and 2 different tenors (38 months and 60 months) in offer for investors. The maximum coupon rate offered is on the 5 year annual pay bond at 8% for retail investors. The below image is an extract from the bond offerings document and captures interest rates being offered. The bond is rated AA(stable) by ICRA and AA/Positive by CRISIL. More importantly, the bond offering is ‘secured’ by collateral and negative covenants* on the bond protect investor interest to a very large extent. 
For those opting to take the monthly/annual interest payments, these are subject to tax at normal rates. For those opting to get a lumpsum payment at the end of the tenor without interim interest payments, the final amount is subject to long-term capital gains tax at 20% with indexation or 10% without indexation.
*What is a negative covenant on a bond? These are things the issuer cannot do unless they pay the amount due to bond holders. Here is an example – The company shall not pay any dividend to its shareholders unless it has paid the amount due on the NCDs.
Should you invest? The risks are balanced and the Muthoot finance’s business is doing well. Over 95% of their loans are backed by gold and consequently their asset quality is better than some of other NBFCs’. In the declining interest rate environment that we are in now, actual returns on high quality bonds like these will tend to be higher than fixed deposits. They'll do the job for most investors looking for a stable fixed income offering. But please check out the prospectus and speak to your financial advisor before investing. COVER STORY Heard about negative interest rates? 
Bank of England this week announced a bigger than expected monetary stimulus to support the British economy struggling from BREXIT and the second lockdown driven by another wave of COVID-19. Curiously, they also announced that the bank is working on negative interest rates. But what exactly are negative interest rates and how does it even work?
IN CASE YOU MISSED IT... 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 OTHER NEWS
ANSWER TO QUIZ 653 Tonnes That's the amount of gold the RBI had in its reserves of March 2020. The US FED owns about 8,100 tonnes and has the biggest reserve amongst central banks. But the Indian public at large holds over 25,000 tonnes of gold and is the largest owner of the precious metal. THOUGHT FOR THE DAY Also, Be You! 
READ/WATCH/LISTEN
ANSWER TO THE PRICE IS RIGHT! ₹70 Crores Talk about being swanky! Share with friends and family
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