On the 23rd of January, 2019, the students from the MBA – Financial Analysis batch 2018-20 visited the offices of Moody’s Analytics Knowledge Services (MAKS), based at Gurgaon. Moody’s Analytics Knowledge Services is the knowledge services unit of Moody’s Analytics.
The objective of the visit was to provide the students with an opportunity to understand the actual working of the organization on the Equity and Fixed Income side.
International College of Financial Planning is always practicing Corporate Social Responsibility. And as a part of this, it intends to disseminate knowledge amongst the youth wherever possible. In the past month, ICoFP has been proudly invited to various colleges from Delhi University. We were pleased to address students of Bhagini Nivedita Women’s College, Najafgarh; College of Vocational Studies, Sheikh Sarai; Janki Devi Memorial College; Kirorimal College; Aditi Mahavidyalaya; Zakir Hussain College and Gargi College on ‘Lucrative Careers in Finance’ at different point in time. Specific to Financial Analysis and Financial Planning, our prestigious panel members Mr. Anil Chopra, Group Director, Corporate Affairs @ Bajaj Capital Group and Mr. Rishi Taparia, Head, Corporates Affairs @ ICOFP enlightened everyone with their sea of knowledge and experience in financial world and made everyone mesmerized with their oratory. All the sessions were extremely knowledgeable and ended up gracefully with Question Answer round. ICoFP seeks forward to more such sessions.
The last budget of current Government before it comes to power again was presented by Finance Minister Mr. Piyush Goyal. It is Interim budget 2019.
In this budget, it was proposed to double the tax exemption limit for salaried class from existing Rs 2.5 lakh to Rs 5 lakh and also increased the standard deduction to Rs 50,000 from current Rs 40,000.
If an individual invests in the specified tax saving schemes of the government, the effective tax-free income limit will be Rs 6.5 lakh a year, while it may go further up with additional avenues like NPS, medical insurance and home loan interest payment.
The gratuity limit has been increased from Rs 10 lakh to Rs 20 lakh from the next fiscal.
For middle class, small depositors and Senior Citizens
TDS threshold on interest from bank, post office deposits will be raised from Rs. 10,000 to Rs 40,000.
The proposal will benefit senior citizens and small depositors who depend upon income from interest on deposits in banks and post offices.
The Budget also proposed to exempt tax on notional rent for unsold housing units for two years. It also proposed that benefit of rollover of capital gains tax will be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains of up to Rs. 2 crore. However, it can be exercised once in a lifetime.
Further, the TDS threshold for deduction of tax on rent is proposed to be increased from Rs. 1,80,000 to Rs. 2,40,000 for providing relief to small taxpayers.
Bonanza for Farmers
Budget announced major sops to provide relief to distressed farm sector. Under the scheme called ‘Pradhan Mantri Kisan Samman Nidhi’, FM announced that farmers holding up to 2 hectares of land will get Rs 6,000 per year cash support. This will cost the exchequer Rs 75,000 crore annually,
The Rs 6,000 will be transferred into bank accounts of each farmer in three equal instalments. It will benefit 12 crore farmers and will be implemented from this fiscal itself.
Rs 20,000 crore have been provided for current fiscal and allocation of Rs 75,000 crore has been announced for the next fiscal.
Unorganised sector
FM unveiled a mega pension yojna for the unorganised sector workers that will benefit 10 crore people. Workers of the unorganised sector will get assured monthly pension of Rs 3,000 after reaching the age of 60 years under Pradhan Mantri Shram Yogi Mandhan scheme. The scheme will provide assured monthly pension of Rs 3,000, with contribution of 100 rupees per month, for workers in unorganised sector after 60 years of age.
Defence Budget
FM Sh. Goyal announced an increase in defence budget to over Rs 3 lakh crore in 2019-20, adding that additional funds will also be provided if necessary. Rs 3,05,296 crore have been provided in the Budget Estimates for 2019-20, compared to Rs 2,82,733 crore provided in 2018-19 Budget Estimates.
Expectations from Next Budget:
We expect the next budget will focus on all areas like infrastructure development, employment generation, start-up businesses, improvement in medical facilities, focus on opening up of educational institutions, increase in Defence expenditures to protect borders and support to farmers in terms of awareness about use of technology to increase agriculture produce. All the upcoming budgets should take India to a higher growth rate in all areas.
We also expect that 30% tax rate should apply only to those earning above Rs. 20 lakhs annually. Currently, the 30% tax rate applies to people earning Rs. 10 lakhs and above.
Madhu Sinha
Campus Director, ICoFP Mumbai
Earning money doesn’t come easy. Today, I am going to share with you a very powerful idea which has changed many lives. The idea of creating wealth without putting many efforts. This sounds interesting, isn’t it? I have come across a lot of techniques that people followed and succeeded in creating wealth. We call it the 7R theory of wealth creation.
Prior to the Industrial Revolution, we had only two kinds of income called as Rate and Remuneration. Rate is offering goods or services at available price. Remuneration is offered to those who offered services. For example, a doctor or a lawyer get remediation for their services.But something interesting happened with the arrival of industry revolution. It’s called Replication. Efforts that were earlier put in by men now got transferred to machines. Earlier, if we had to make 100 copies of paper, we had to write it a 100 times. Then came the photocopier machines which had the potential to copy the sheet a 100 times or more in a minute.Today, we have other four kind of incomes i.e. Rent, Rights, Royalty and Returns.If you use these 7R’s wisely in your life you will be able to generate wealth by putting minimum efforts.You just have to create system & then system works for you.
Let’s start with Rent first. Rent is a wonderful way to generate income. If you have a spare property, flat, equipment or a spare asset, you can rent it and this will then initiate a cycle of income. If I have a spare property and put it on rent, it will start generating income for me even in my absence. Every month I will get a rental income without putting in much efforts. Property is one of the best ways to create wealth because of the great appreciation rate it has over the years. Next is Royalty. Many of you might have played Candy Crush. You will be surprised to know the earnings.It is about 500 to 1000 dollar per day.Every, time when you download the game, a certain portion of money goes to the stakeholders of candy crush.If anybody downloads an app,certain portion of the profit goes as royalty to the company. Apple has a revenue stream which is more than the GDP of 150 countries. Nowadays, people are also earning by putting up videos on YouTube, writing blogs, creating applications etc. People, are using intellectual property to create wealth. Moving on to Rights, it includes Franchise rights, Brand rights & Licensing. For example, McDonalds started with just 10 outlets in America and over the period of time they succeeded in spreading their franchise all over the world.Today, there are more than 36000 McDonald’s outlets in the world. Every day, when you buy burger or French Fries, certain percentage of money goes to the parent company.To all the budding entrepreneurs,”Interest is the eighth wonder of the world, return improves everything” as rightly said by Warren Buffet. Robert Kiyosaki quotes, “Poor people work, rich people network”. Through this network the power of earning money increases.
Khushbu Singh
MBA-FP (2018-20)
The importance of corporate governance becomes the talk of the street when a corporate fraud becomes a piece of breaking news. On 29th January 2019, Cobrapost, an investigative journalism company, held a press conference to debut its coverage of a huge banking and financial scam in India. This financial scam was uncovered by closely auditing and examining public records of government authorities as well as information available in the public domain. The scam is reported to involve a sum of more than Rs. 31,000 crore. The suspects of this huge financial fraud are claimed to be the primary promoters of Dewan Housing Finance Corporation Limited (DHFL) and their associated companies. This is an example of a systematic craft to steal public money in broad daylight.
The scam has been pulled off mainly by sanctioning and paying out funds in unsecured and dubious loans. These loans amount to thousands of crores of rupees and were provided to dubious shell companies which were related to DHFL’s own primary stakeholders through their proxies and associates. Added to that, no security or collateral and the proceeds were utilized for private asset creation, neither offshore nor in India. Such large loans were disbursed for new projects to the shell companies, which were newly incorporated, without scrutinizing the feasibility and viability of those projects. A lot of these shell companies are operating from the same email addresses and are run by the same group of initial directors. What raises more concern is the fact that DHFL has hidden the terms of loan and terms of repayment in the financial statements. They also ensured that most of the shell companies have hidden the name of the lender – DHFL. By lending to shell companies without due diligence, DHFL has ensured that the recovery of such dubious loans is impossible since the companies or their directors themselves do not own any assets. This way the private assets acquired by the promoters and their associates by using the funds from these dubious loans are completely ring-fenced from any recovery process. Thus, only public sector banks such as State Bank of India and Bank of Baroda are the primary losers. The loss amounts to a staggering sum of over Rs. 11,000 crore and Rs. 4,000 crore, respectively. Other entities that share the losses are foreign banks and shareholders from among the public or investors of DHFL.
After the press conference, DHFL shares plunged by 11% in the market. While the investors are waiting for further investigation by the authorities, the reputation of the company has already been dented. The credit rating agencies like Brickwork has downgraded various loan facilities by one or two notches. The scam represents a complete and absolute failure of corporate governance, and there is no way to even pretend that corporates are reliable and can commit to the best practices of the industry as required or expected by the law. The investigation brought to light the illegal insider trading, violation of takeover regulations of SEBI, creation of assets offshore for tax evasion, or laundering money illegally. With AAA rating to the company’s credit worthiness, DHFL’s inner working raises the question about the credibility and conduct of all credit rating agencies, which have failed miserably to identify its irregularities, as unearthed in this investigation. Even auditors have failed to address the irregularities in the annual audit reports.The participation of promotors in directing loan amounts to shell company without scrutiny or security shows a complete deviation from the corporate governance policies.
This isn’t the first time when the corporate governance has failed to promote corporate fairness, transparency and accountability. Scandals or scams such as 2G Scam, PNB Scam, Satyam Scam or Sahara Scam etc. all are the result of bad corporate governance. In Satyam Scam, Raju brothers proposed merging with a company known as MAYTAS which is nothing but Satyam spelled backwards. This involved major non-existing cash inflows of funds in the balance sheet, falsely making balance sheet heavy to remain competent. This scam made the need of corporate governance felt very badly along with the importance of good corporate governance and this was the reason that corporate governance became an integral part of the Companies Act, 2013. Not only in India, but companies around the world like Enron in US and Parmalat in Italy fell out because of the corrupt practices followed by the board of directors and the management of the said companies and their financial consulting firms.
The main goal of virtually every publicly-owned company business is to maximize profits for its owners or stakeholders while maintaining corporate social responsibility. Shareholder value gets lost when things are done illegally, when principles of corporate governance are not adhered to, when cohesive action is not taken. Difficulty arises for an analyst when even companies like DHFL, with AAA ratings and strong corporate governance norms, fails to comply with ethical business practices. With such scams coming in the light regularly, it raises a question on the ability of analysts, demanding a stricter monitoring of internal control system within an organization.The most common issues in corporate governance include conflict of interests, oversight issues, accountability issues, transparency, and ethics violations. An analyst should look out for red flags such as accounting anomalies, consistent growth during weak performance of the industry, frequent related party transactions and off balance sheet transactions, etc. to identify any possible irregularities in the financial statement of the organization. The scrutiny of Audit Committee is a vital process to understand the strength of corporate governance norms. An analyst can focus on the audit committee’s powers, functions, responsibilities, and relationships within the framework of corporate governance to gain an insight about the effectiveness of the norms.
With the DHFL scam easily escaping the sight of auditors, credit rating agencies, analysts, authorities and regulators, the investigative journalism acted as a watchdog in the public interest. By indulging in the public records and presented documents of DHFL, they were able to unravel the channel of money laundering of the promoters. Such deep dive analysis consumes months of investigation and scrutiny by dedicated journalists and financial market experts. Work of Cobrapost is commendable for bringing the swindle in the notice of the authorities. The true scale of the scam can be arrived at only after investigative agencies conduct a thorough forensic audit of the money trail.
Sanchita Bhatia
MBA-FA (2018-2020)
When it comes to choosing a Financial Planner Advisor, there are only a few you can trust. But you do need to start from somewhere. So, here are some bunch of tips you can use while choosing the best Financial Planner Advisor.
A financial advisor is a certified financial planner
Many times, it happens that the idea of choosing a financial advisor fills you with fear and dread. What if you need to plan your funds with the help of a professional? This is because you have been failing to plan your funds because of less time, following the old ways, peer pressure, less understanding of the financial markets and so on. Here’s to your success! A financial advisor is a certified financial planner who is licensed and regulated to take mandate decisions on multiple aspects of financial planning. He is the person who can buy or sell your stocks and guides you to invest in the best investment channels. They may charge for their services either on a commission basis or hourly rates. However, our advice is to trust financial planners who either take a flat annual fee or charge per hour for managing your portfolio instead of charging a commission on every stock they buy or sell.
Why do you need a financial planner?
Sometimes, we may find our hands stitch behind our backs with threads of logical weakness and inability to manage funds. As we get older and busier with our lives, we need someone who can guide us in the right direction in today’s changing economic scenario. Financial planners plan and manage your portfolio in a way that saves your time. Undoubtedly, it is a dependence that gives you pride and independence to focus on other activities. You can hand over 1% of your annual assets to financial advisors and in return, you will be getting more and more bunch of advice.
How to pay Financial Advisors?
We know that financial advisors can work on a commission or fee basis. However, it doesn’t mean that we are getting the right services. There is a lot left to learn which paying methods work best. There are three valuable lessons to consider the paying structure of the planner:
As the new year rolls in, we expect that you choose the professional financial advisor who can build amazing results for you when execution process enters in.
India is one of the best countries to start an idea. With the surplus advantage of a huge target market, so many needs and a technological strong growing economy, India is stepping towards becoming one of the world’s strongest tech markets with the best startups in India. Having thrived at home for nearly a decade, India’s startup scene went global in 2018. Several young tech companies in India are all set to take on the world this year, some of which are Ola, OYO, Byju’s, Paytm, Swiggy, Zomato.
Indian entrepreneurs have been on a roll this year. The Indian startup ecosystem is brimming with business ideas that continue to enamor investors as well as the global ecosystem. On one hand, we have prodigies exploring entrepreneurship and people leaving their jobs to turn an idea they’re passionate about into reality. Meanwhile, there are others marking second (or even third) coming, leaving no stone unturned to outdo their last best product or service in the sector. Now, as the year comes to a close, bringing the best and most innovative startups launched in 2018.
More than 1,200 startups came up in 2018, including eight unicorns, taking the total number to 7,200 startups. It is important to celebrate startups and their successes, given the cutthroat world they operate in. Reportedly, 90% of startups in India fail within the first five years of inception. So, the ones that make an impact must be put in the spotlight, celebrated, and presented as an inspiration for new startups in the making.
The key growth drivers were enterprise software, fintech, healthtech marketplace and edtech. Data analytics, artificial intelligence and IoT startups have been witnessing fastest adoption across industry verticals. Being right at the centre of the Indian startup ecosystem, startups are just in the right place to judge which ones disrupted the industry and made a mark. Apart from all this, startups can boost the economy as a strong. Fortunately, they can increase the country’s GDP, generating employment opportunity in the economy. So far, startups in India have increased this year in which our country is standing on the second position following the United States of America. Startups hence provide great opportunities those who want diversify their business in the global emerging market.
V. Mahalaxmi Nadar
MBA-FP (2018-2020)
It takes huge effort to organize educational programmes like CFP for working professional like us.
I would like to express my sincere thanks to the International College of Financial Planning ICOFP, New Delhi for introducing CFP certification program.
This course has certainly helped me improve the quality of financial advice and has helped me provide additional value to the clients. It aids in the holistic understanding of client financial requirement and assisting them in their journey of being financially independent.
According to me, the most critical part in a client financial management firstly is understanding the client Requirement, Risk, & his Goals and then giving unbiased advice for best results.
Numerous Products are available in the market but what product at what time would be suitable is what this curriculum helps in. Thereby gaining client confidence and helping them take right decisions.
As per Bhagwat Gita “One should seek to understand first than to be understood.”
As a finance professional, my goal is to build life-long relationships with clients based on TRUST & VALUE. A thorough study of this curriculum has instilled a lot of confidence in me which shows while I present my advice/ suggestions to the clients. Eventually this well thought advice has helped me gain confidence and earn trust of my customers in the long run.
Practicing the Code of Ethics on a regular basis plays a pivotal role in providing meaningful and correct information to the clients.
In a nutshell, I can say one must utilize the CFP curriculum content to the best possible manner. This would surely give you an edge over others, being more productive and create a positive impact on the clients.
General Election 2019 is the thing now every investor is waiting for. But why the elections are considered to be much more important for stock markets. Why every tom, dick and harry associated with the stock market is saying 2019 elections as a key trigger for the markets? Let us explore the facts behind this and see where the markets are expected to head ahead.General Election 2019 is the thing now every investor is waiting for. But why the elections are considered to be much more important for stock markets. Why every tom, dick and harry associated with the stock market is saying 2019 elections as a key trigger for the markets? Let us explore the facts behind this and see where the markets are expected to head ahead.
General election results decide the apex authorities for the country. The elected party will be responsible for the policy formulation and other economic decisions for the country. These decisions are directly related to the stock prices, as the favourable policies lead to industry growth and vice versa. Therefore elections are considered to be crucial for the stock markets. Generally, in the pre-election period the government’s past actions and election manifesto are considered to be the indicators for the future. Therefore, if investors find government optimistic on certain sectors then they start betting on the best possible stocks among that industry or sector, which further drives their prices.
On the basic level for everyone, the anticipated reforms and government plans drive the market sentiments. This is the only relation between the stock market and the general election. Upcoming election 2019 is a litmus test for BJP government. The biggest regulatory changes, tax reforms GST, Demonetisation have been carried by this government. Moreover, the export policies and other policies to boost small businesses are the key takeaways in the last 5 years.
Let us take the example of General Elections of 2009. Dr. Manmohan Singh led UPA Government won the elections favourably with a comfortable majority. But before the results came out, Sensex was around 12000. After the results declaration and subsequent trading on the next day Sensex hit 2 upper circuits and closed around 2100 points up taking its level to over 14200 and gaining almost 17.4%, Its single largest gain in a single day in its entire history. Nifty too gained over 17% over the Pro Government Sentiments. Investors were euphoric after the United Progressive Alliance emerged victorious in the 2009 general elections.
General Election 2019 are not only important for BJP but also for all the stock market investor. The history shows that stock markets have always favoured with the stable government and good economic reforms. The best example for this is the market movements in 1991. In the election year (1991) markets, market shot up almost by 200% due to the good economic reforms and strong budgets. A similar thing could be observed in 1999 which was the technological boom era where stock markets appreciated really well. It’s not only the election which drives the stock market rally but the decisions made by the government. This makes us crystal clear that elections have the material impact on the stock markets in the short run. But in the longer term, the decisions of the government and the economic growth matters more.
Election in 2019 can bring volatility in the markets; however, the strong economic growth can offset this. If the election result favours BJP, then it may turn a big positive. The investors would start betting on the sectors where progressive government policies would be pointing out. IT, pharma industries as well as textile and paper industries are some of the key beneficiaries of last year. And if the government changes then the market may see another crash soon.
Huzefa Lokhandwala
MBA-FP (2018-20)
Global Economy
In 2019, the dominant global theme will be quantitative
tightening, with major central banks draining systemic
liquidity after a decade. This comes at a time when global
growth is sluggish and interest rates are rising.
Consequently, we expect a shift to relatively dovish stance.
Soft commodity prices on the back of sluggish growth will
also support lower inflation. Commodity-importing
emerging markets (EMs) like India can heave a sigh of relief
as macro stability has returned, and the worst is behind.
Nevertheless, we do not rule out ‘panic attacks’ in EMs,
given tightening global liquidity.
Ongoing trade will remain in limelight this year as well.
Interesting thing will be to note how it turns out after the
upcoming meeting in January.
Global growth is already facing headwinds with growth in
the European Union slowing. Chinese growth is also under
pressure, and economies from East Asia to Germany are
feeling the impact of trade wars. Quantitative tightening
and rising US interest rates imply that global growth could
come under further stress. Moreover, Countries dependent
most on exports, specially the commodities might get
suffer. Further, slowdown in developed nation might lead their domestic firms output to dump in emerging countries and will impact emerging economies as well.
Indian Economy
General Election 2019 – The year 2019 would witness
General elections (April/May) along with a host of state
assembly elections. 4 states could have polling along with
General elections – Andhra Pradesh, Odisha, Sikkim, and
Arunachal Pradesh; followed by elections in the state of
Maharashtra, Haryana, J&K and Jharkhand later in the year.
Any change in political formations would be keenly watched
by the investors in the run up to the General elections;
however it is the fact that 5 of the 7 election years in the
past 3 decades have yielded positive returns.
GDP Growth – In 1QFY19 and 2QFY19, GDP grew by 8.2%
and 7.1%, respectively. The cyclical recovery in 1H2019 was
due to a low base of 1H2018. Despite fears of emerging
market contagion and the US-China trade war rhetoric,
India is expected to grow at 7.3% in FY2018-19. India’s
favourable demographics continue to support growth from
a long-term perspective with India remaining one of the
fastest growing economies in the world.
Indian Rupee – The INR was one of the better performing
emerging market currencies in 2017 but quantitative
tightening by the US Fed, FII outflows, emerging market
currency weakness and higher crude prices (and CAD) led to
a weak INR throughout 2018. The INR fell sharply to an alltime low of 74.39 v/s the USD but smartly recovered by
5% in the last two months, which coincided with the
sharp fall in crude oil prices. Historically, over the past 15
years the INR has witnessed long periods of overvaluation
and short periods of sharp corrections. INR levels in 2019
will primarily depend on three factors – CPI, crude prices,
global yields and it is believed that the INR will be rangebound within (+/-) 3-5% from the current level.
Crude Oil – By Oct’18, crude appreciated 36% and hit a near
4-year high of USD 86/bbl due to rising concerns regarding
sanction on Iranian oil exports by the US with many analysts
projecting a possible hit of USD 100/bbl mark. However, the
last couple of months saw a very sharp 40% correction in
crude prices due to fears of weak global demand. This fall in
price reduced pressure on CAD and provided potential for
INR appreciation. Due to increased supply and softening
demand, crude oil prices are expected to remain subdued in
2019.
CPI Inflation & RBI policy – CPI Inflation was 5.07% at the
start of 2018, while it declined sharply to 2.33% by Nov’18,
much below the medium-term target of 4% by the RBI,
mainly due to continued deflation in food prices and the
recent fall in crude oil prices. The RBI has projected inflation
at 2.7-3.2% in the 2HFY19 and 3.8-4.2% in 1HFY20. CPI
Inflation is expected to remain under control; however,
core Inflation is likely to remain elevated for the next few
months. Repo rate was at 6% in the beginning of 2018. The RBI hiked the repo rate twice by 25bps (in June and August) due to
expectations of higher inflationary pressures. The RBI changed its stance to “calibrated tightening” in its October monetary policy and has maintained the stance, keeping the repo rate unchanged.
Current Account Deficit (CAD) – In FY18, the CAD increased
to 1.9% of GDP from 0.7% in FY17. In 1HFY19, the CAD
increased to 2.7% of GDP from 1.8% in 1HFY18, on the back
of trade deficit widening. The external sector should
continue to be a headwind for the Indian economy in
CY2019. While softening crude oil prices will provide the
relief, there are some structural factors like lack of strong
export growth and uncertainty of capital flows, which will
pressurise the external sector.
Shivam Daga
MBA-FA (2018-20)