SOFIA TIMES - JANUARY'23 EDITION

CoverStory

THE₹3.68TRILLIONWEDDINGINDUSTRY

India has a wedding season full of glitz and life that it lacked over the previous two years as a result of Covid limitations. India will witness up to 32 lakh weddings take place in a period of fewer than four months as we leave the pandemic in the past and return to the previous normal. A staggering 3.2 million weddings are scheduled between November 15 and February 2023, and markets are bustling as people swarm to stores to finish their buying. There has been an increase in demand for consumer devices, clothing, necessities, and gold in the run-up to the wedding season.

Manufacturers and merchants of apparel and consumer electronics are optimistic that the wedding season will significantly increase their sales in December and the January-March quarter because people tend to spend more money on events like this. According to managing director Venu Nair, postponed weddings and other events will fuel Shoppers Stop's demand after wardrobe and office refurbishment. Cooking oil, pulse, rice, and sugar dealers are heavily restocking in response to the increasing demand before the wedding season.

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"Cooking oil is in high demand across the nation. As weddings are being planned at hotels, large volumes of cooking oils are being purchased. Marriages are being celebrated widely, "said the MD of Gemini Edibles & Fats India, Mr. Pradeep Chowdhry

The need for daily necessities and electronics is also anticipated to increase. On the other side, the retail and apparel industries posted some of the highest-ever sales last quarter and around Diwali.

Additionally, businesses will invest money in the wedding season, which lasts through February, in the hopes of generating sales. Along with new product lines, this also includes spending on ongoing holiday finance programmes, marketing initiatives, and advertising campaigns.

Titan anticipates a robust second half for weddings and is putting together the necessary plans. Ajoy Chawla, CEO of the jewellery division, told analysts that the company had "enough collections, marketing, and on-the-ground activities that we are continuing to do because we see a very good potential for this."

So, buckle up because your Instagram feed will be flooded with pictures of wacky "save the date" cards, mehendi, and celebrants dancing in banquet halls during the coming few months. It serves as a reminder that the Indian wedding season is currently in full gear and is expected to be exceptionally busy.

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ABOUT THE PROJECT

With an initial investment of Rs 5,069 crore, the Adani Group won the competition to reconstruct the Dharavi slum cluster, one of the biggest and densest urban settlements in the world. The Maharashtra government had made four attempts to launch the project. The Slum Rehabilitation Authority (SRA) of Maharashtra was established in 1995 to eradicate slums from the state, but it hasn't been very successful; according to official figures, 2,067 rehabilitation projects involving 223,000 or so families were completed between 1995 and August 2021.

To put things in context, Dharavi alone was thought to include around 58,000 family and business units a decade and a half ago; the number would have undoubtedly increased since then. In both 2008 and 2016, the state made attempts to secure a developer for Dharavi, but no one showed any interest. Two parties responded to the 2019 tender announcement, but it was cancelled. A new tender was announced on October 1. Only three of the eight interested companies submitted a proposal. For the refurbishment, a construction budget of $23,000 crore is projected.

DHARAVI REDEVELOPMENT PROJECT

IMPORTANCE

The state government has designated 240 hectares of the 300 hectare Dharavi slum cluster for the project. In addition to the current estimate of 56,000 families, it is home to tens of thousands of small businesses, from leather work to pottery. However, considering the population density and the scarcity of essential necessities, living circumstances are relatively bad. The project would benefit real estate in addition to the benefits of rehabilitation. Due to its close proximity to the financial district of BKC, Dharavi has enormous unrealized economic potential.

SPECIFICS

A $23,000 crore construction budget is anticipated for the renovation. The formation of a special purpose vehicle (SPV) with Adani as the principal partner is planned. It will own 80% of the SPV's equity, or $400 crore. 20% would be held by the state government. A total of 10 million square feet of construction—7-8 million square feet for rehabilitation space and 2-3 lakh square feet for the commercial/sale component is scheduled to be built by the end of 17 years. The government would grant exemptions from the GST and other taxes totalling thousands of crores of rupees.

AIR INDIA - VISTARA MERGER

Merger of Air India and Vistara: Singapore Airlines (SIA) and Tata Sons announced their agreement to merge Air India and Vistara on Tuesday. As part of the deal, SIA will invest $250 million in Air India and receive a 25.1% share in the combined company. This 25.1% interest will be in an expanded Air India group, which would include Air India, Vistara, AirAsia India, and Air India Express. Subject to regulatory permissions, the merger of all airlines is anticipated to be completed by March 2024. Air India Express and AirAsia India will soon be combined into one company that will offer low-cost airline options.

With its internal cash resources, which were S$17.5 billion as of the 30th of September 2022, SIA plans to completely fund this initiative. Additionally, SIA and Tata have agreed to take part in future financial infusions that may be necessary to finance the expansion and operations of the larger Air India in FY2022/23 and FY2023/24. SIA's portion of any extra capital injection, based on its 25.1% post-completion holding, could be up to Rs 5,020 crore ($615 million), payable only after the merger's conclusion, according to a statement released by SIA.

The SIA provided a thorough explanation of the benefits that both airlines can provide to one another as well as how the merger will enable the group to create India's largest international airline. The boost Vistara would receive on the international front is possibly the most alluring aspect of the merger. Air India has been transporting numerous overseas passengers for years, although Vistara only began flying internationally last year. Only wide-body aircraft can be used to chart such routes, and Air India possesses a large number of them.

E-RUPEE: CURRENCY DIGITALISED

e-RUPI is essentially a digital voucher that a beneficiary receives by SMS or a QR code on his phone. It is a pre-paid coupon that can be used at any location that takes it. For instance, the government can use a partner bank to create an e-RUPI voucher for the appropriate amount if it wants to pay for a specific employee's treatment in a particular hospital. On his feature phone or smartphone, the employee will receive an SMS message or a QR code. He or she may visit the designated hospital, utilise the services, and pay using the e-RUPI voucher that was sent to his phone.

To encourage cashless purchases, the National Payments Corporation of India (NPCI), which manages India's digital payments ecosystem, has introduced eRUPI, a voucher-based payment system. It was created in association with the National Health Authority, Ministry of Health & Family Welfare, and Department of Financial Services. The first 1,600 hospitals where e-RUPI can be redeemed are partners with NPCI. According to experts, e-user RUPI's base will likely expand in the coming years as MSMEs use it for Business To Business (B2B) transactions and even the private sector uses it to provide employee perks.

11 banks have joined with NPCI to conduct e-RUPI transactions. They are Punjab National Bank, State Bank of India, Union Bank of India, Axis Bank, Bank of Baroda, Canara Bank, HDFC Bank, ICICI Bank, Indian Bank, IndusInd Bank, Kotak Mahindra Bank, and Union Bank of India. Bharat Pe, BHIM Baroda Merchant Pay, Pine Labs, PNB Merchant Pay, and YoNo SBI Merchant Pay are the acquiring apps. Soon, it's anticipated that more banks and acquiring Apps would join the e-RUPI project.

As per RBI, digital tokens would exhibit the same qualities as actual money in terms of confidence, safety, and settlement guarantee.

TheDarkHorseofAnyGoodInvestment

Now that the dust has settled from a once-in-a-lifetime pandemic and we are slowly struggling to turn to a new leaf amidst global economic trouble, the highest inflation figures, and a literal war. It can be very overwhelming to manage your finances amidst all the volatile chaos. But What if I told you, there is one thing you will need for any good investment, well apart from the money of course!

Well, it's not a good stock or scheme or something, it's actually patience!

Very Little emphasis is given to behavioural finance in today’s world and more importance is given to the fact of how one can time the market There are these numerous tips and targets about certain stocks that if you can catch you will capture the gold mine. These are amplified by the volatility of the market in the previous 2 years(post-pandemic) and it has given a feeling of missing out to most to many investors. The DEMAT account openings (accounts required for buying shares digitally) immediately shot up and everyone poured their money to only turn to today in the most slump state of the market

While the experts will tell you about phenomena and theories of the finance world and how the math works out. I won't really touch that and stray as far away from the numbers and ratios of the complex finance world for the betterment of this blog and for the limit of my knowledge.

If you were looking for a “put XYZ in ABC stock for 1/3rd to 3 times return” thing then you are probably not clear with what an investment is. When you operate on a few days to months term in hope of quickly making money that’s trading and not investing. When you put money consistently as a form of savings or a saved amount for a long-term goal that’s investing.

It's probably very tempting to follow some social media content and get fruitful returns in no time but the real returns of buying fruits of the future can only come from investing!

The key to investing is not the timing of the market but indeed the time spent in the market. This is due to a simple compounding factor that most markets follow, and it lets your profits or savings grow perpetually till the time you can hold it Once you see a little green or red, you will act on impulse by either exiting or putting more. However, this is where behavior finance comes in: -

“You put a fixed amount in fixed instalments for fixed number of years and hold tight”

Well, that’s it! isn’t it? Well, what if the other XYZ thing is giving more returns should I switch? should I combine the best of 50 of these things? and this is where the most important advice on behavior finance comes in from the book Psychology of the money: -

“You can be wrong half the time and still make a fortune.”

Penned by: Karan Madhyani

Economic Cycles and Its Impact on Investing

What is an economic cycle?

Economic cycle refers to the fluctuation of the economy between expansion (growth) and contraction (recession). A stage in an economic cycle is determined by factors like gross domestic product, economic growth, unemployment.

An economic cycle is influenced by factors like geo-political events, investor sentiments, economic policy and political stability.

Stages of economic cycle:

Expansion (rapid growth, interest rates are low, production rises)

Peak (growth reaches maximum rate)

Contraction (growth falls, unemployment rises, demand stagnates)

Trough (economy, demand and supply forces reach a low point)

Managing economic cycles

A country using fiscal measures and monetary measures to manage the economy under different economic stages. Government increase expenditure to create demand, employment and support growth in an economy The RBI hikes the repo rate to control inflation and reduce credit availability in the market. A fiscal policy and monetary policy of a country is determined by what economic stage the country is in.

In an expansionary stage, interest rates are low, capital is widely available, production increases and investment opportunities are available in the market. It is a good time to enter the market and reap benefits.

Investment Approach

Source: https://thenewsavvy.com/wp-content/uploads/2016/11/A.png

An economy is cyclical in nature and goes through mainly four stages One needs to adjust portfolio allocation to ensure capital preservation and returns on investment. In a diversified portfolio, allocation of stocks and bonds determine the risk profile. Stocks tend to do well during expansionary and growth cycle and bonds do well during recession. The reason is that, stocks carry more risk and investors tend to look for safe options like bonds.

No matter the quality of investments, one will have to make changes in different economic cycles. Capital appreciation and high returns is replaced by need to preserve capital, safe options as the cycle changes. Each market cycle is different, sectors tend to perform differently in each cycle. Post pandemic, we can see good performance by the financial and real estate sectors. Whereas in 2008-09 they were the most affected sectors and not doing good

Commodity stocks and economic cycles

Commodity stocks are an indirect way to invest in the commodities. The share prices of the commodity stocks are influenced by the price movement of the commodities. Usually, commodity prices and share prices move in the same direction in case of commodity stocks

Prices of commodities are influenced by factors like demand and supply forces, government policy and availability of raw materials. For example, government announced a 15% export duty as of May’22 on steel intermediaries, major steel products. Heavy export duty served a big blow to the domestic steel companies. The benchmark steel prices fell by Rs 5500 and Rs 6300 a ton EBITDA and profitability of the steel companies had a negative impact.

This was reflected in the stock prices of the steel companies The share prices of Tata Steel. Steel Authority of India, JSW Steel hit a 52-week lows. The Nifty Steel Index crashed 16% in May alone, sharpest decline since Mar’20.

Timing Strategies

Investors would want to shift to bonds in such situation On the other hand, when the inflation is on the rise and the economy is booming, the MPC may announce an increase in repo rate. It will push the bond prices down and reduce the capital available in the market. Many investors switch from bonds to stocks. Investors often try to take advantage of such situations and profit from such events.

Penned by: Rishav Agarwal

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Multi Asset Strategies- See the Big Picture

A multi asset strategy combines various asset class like equity, debt, gold, real estate to take benefit of the big picture possibility of growth, risk distribution, income generation and a diversified portfolio. Under this strategy, the fund managers use the big picture analysis to take portfolio-oriented decisions.

Benefits

Global markets are interconnected, geo-political events, climate change, supply chain problems are likely to have an impact on a particular asset class more than the other. Last 3 years Indian stock market have outperformed the global markets. But with inflation, high valuations and geo-political risks, it may face certain headwinds. At the same time, interest rates rising will benefit the risk-averse investors. Gold has always been a hedge against uncertainties, it is likely to add value in your portfolio There is also real estate which has always found its place in the portfolio of Indian investors Bond has always suited investors looking for income in form of coupons and at a time when interest rates are rising This multi-asset strategy will work well for this year

Common benefits are:

Multi Asset Strategy in 2022:

Popular types of Multi asset funds

1.

Target Date funds:

These are multi asset funds that change their time horizon to mirror the requirements of the investors. Globally such schemes manage $2.3 trillion in assets These funds use age-based formula to maintain asset allocation of retirement savings The idea is to rebalance the portfolio periodically The fund should be more focused on capital preservation than growth when it nears the target date The NPS in India takes a similar approach

These funds consist of different schemes. The underlying funds offer diversified exposure to a mix of asset classes such as domestic equities, foreign equities, domestic bonds, foreign bonds, gold and money market instruments. These funds are appropriate for investors who don’t want to periodically balance the portfolio.

2. Risk Tolerance Funds:

These multi asset funds are designed to suit the risk tolerance of the investors. These funds range from aggressive to passive to conservative. An aggressive style funds would allocate more to equity as they are more growth oriented. HDFC Hybrid Equity Fund is a type of aggressive fund. HDFC Gilt Mutual Fund is a type of conservative funds.

Risk Tolerance matters as it indicates the risk that the investor is willing to endure given the volatility of the investment. Age, investment goals, income contribute to the risk tolerance.

Risks associated with these funds

One of the major risks with these funds is that investors may not be able align their objective with the fund objective. If a multi asset fund is aggressive in nature but a conservative fund may suit an investor more. It is important to carefully analyze your goals and objectives, find a strategy that suits you and then pick a fund that aligns with your requirements and long-term goals.

Who should pursue a multi asset strategy?

This is a powerful strategy to achieve long term investment goals. A general strategy may not work well for all as different investors have different levels of risk tolerance, income and goals. Going by the rule to make money work for you. An investment decision should be taken after considering all the facts and figures

Penned by: Karan Sutaria

Tryst with CBDCs

A digital form of fiat currency issued and backed by the Central Bank is known as a Central Bank Digital Currency (CBDC) It is intended to be a digital representation of the central bank's fiat currency, and it can be used for transactions in a similar way to physical cash CBDCs may be designed to be used by the general public, financial institutions, or both. They may be issued and traded on a decentralized blockchain platform or on a centralized platform, depending on the design of the particular CBDC.

While central bank digital currencies (CBDCs) may come with their own set of problems and challenges, it's important to remember that these problems are not insurmountable. In fact, many of the issues associated with CBDCs can be seen as opportunities for innovation and progress.

One potential problem with CBDCs is the loss of control that central banks may experience when issuing a digital currency.

This loss of control may seem intimidating initially, but it also presents an opportunity for central banks to rethink their role in the financial system and find new ways to exert influence and stability By collaborating with private sector entities and leveraging new technologies, central banks can ensure that they remain central to the monetary system even as the use of CBDCs increases.

The ways out:

·Implement regulations to ensure that CBDCs are only used for legitimate purposes.

·Be transparent about the issuance and distribution of CBDCs to ensure that the public has a clear understanding of how the currency is being used and to build trust in the system.

Allowing other private sector digital currencies to compete with CBDCs can help ensure that the market remains competitive, and that the public has a choice in the types of digital currencies they use

Privacy concerns are another issue that has been raised with regard to CBDCs. While CBDCs could be used to track and monitor financial transactions, this doesn't have to be a negative thing. By adopting strong privacy protections and working with regulators to ensure that personal data is used responsibly, central banks can help build trust and confidence in the use of CBDCs.

The ways out:

·Design CBDCs with vital encryption techniques to protect the privacy of transactions and prevent unauthorized access to personal financial information

·CBDCs can be designed to allow users to transact anonymously so that their personal financial information is not connected to their transactions. Access to the transaction data associated with CBDCs can be limited to authorized parties.

Security risks are always a concern with any digital system, and CBDCs are no exception. However, by investing in robust security measures and partnering with leading cybersecurity firms, central banks can help mitigate these risks and ensure that CBDCs are as safe and secure as possible.

The dependence on technology is another potential problem with CBDCs. While it's true that the use of advanced technologies like blockchain is necessary for CBDCs to function, this dependence on technology can also be seen as a strength By embracing technology and continuously innovating, central banks can help drive progress and bring about a more efficient and effective financial system

Finally, there is the concern that CBDCs could exclude certain groups of people, such as those without access to smartphones or the internet. While this is a valid concern, it's important to remember that the introduction of any new technology brings with it the potential for exclusion. However, by working with governments and other stakeholders to ensure that CBDCs are accessible to all, central banks can help to promote financial inclusion and ensure hearty participation from all people.

·CBDCs need to be designed to be interoperable with other digital payment systems so that they can be easily used by a wide range of merchants and consumers.

·Ensure that CBDCs are available through a wide range of distribution channels, such as banks, online platforms, and mobile apps Ensure that CBDCs are designed in an inclusive way, taking into account the needs of different groups, such as older people, people with disabilities, and people who are not digitally literate.

Ultimately, while there are certainly challenges associated with the use of CBDCs, these challenges should encourage us to move forward. By embracing the opportunities presented by CBDCs and working together to overcome the difficulties, we can create a more efficient, inclusive, and secure financial system for all.

by: Nishant Hemrajani

Penned

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