Naren, Author at fisdom

Nifty at all-time high; Is it wise to invest now?

As I am getting closer to being a responsible adult, I realize the importance of investing and that equity mutual funds are the only way I’m going to be wealthy with optimal risk. I don’t gamble, especially with my money.

I was now ready to take the plunge for the sake of a wealthy future; but just as I was proceeding to download the popular investment app which promised to make my money work for me, the pink newspaper lying next to me caught my attention. “NIFTY at all time high; investors euphoric” read the headlines. Somehow, I started feeling that it is not wise to buy into a mutual fund at such high price points, what if the market crashes? Is this a bubble that is soon going to burst? A small part within me whispered – “What if this is just the beginning?”.

*Absolutely confused for one long minute*

Suddenly out of nowhere, like partial déjà vu, my memory started playing the same conversation but this time, between mom and dad. Yes, this was something I vividly remember my parents discussing years back – probably 10 years back. I was a 16-year old kid then. While I did not understand much, I remember my mom saying, “Let’s not be greedy, we are simple people and should invest in a fixed deposit or recurring deposit so that we save enough for our old age” and that’s exactly what they did. But let me tell you, after the taxes and inflation, they don’t seem much happy about their retirement wallet.

Now this has given me a brilliant idea. 10 years back, the market was at all-time highs like now and the fixed interest rates were low like it is now. My biggest fear was a fact; the markets had collapsed to new bottoms just after it hit the peak. Today, everything looks the same; there are chances that history might repeat itself. I got down to research. Armed with a calculator, paper, pen and MS-excel I tried to figure out, what would have happened if my dad had gone ahead with starting an SIP into an equity mutual fund.

I picked one of the top recommended funds shown by the investment app – the one that claimed to make my money work for me. It was tough to get the historical data, but the good guys at the app company fetched me the historical data I was looking for. I got them all on an excel worksheet and started calculating what would have happened if dad started an SIP right at the peak (just like now) and continued till today. Like my dad, even I believe in investing for long-term – for the rainy days. Also, I decided to benchmark it against his actual wealth growth – the term deposits. What I saw next was crazy.

My mind was blown away! The period post-2007 had witnessed a butterfly effect with the fall of Lehmann Brothers manifesting into the sub-prime crisis followed by China’s slowdown and consequent dips in the market and yet, the mutual fund managed to grow at a ~24% compounded annual growth rate, which is much higher than the sub-7% post-tax returns offered by banks on term deposits.
My dad effectively lost over half of what he could have had today!

Notably, the magic of compounding works best for a SIP arrangement and when these monthly investments are disciplined and continued for longer terms. In the shorter term, the amount may dip due to certain events, but towards the longer term it always goes up.

Getting back to my initial dilemma, I was now able to fit the pieces together. I finally understood how to “buy low and sell high”. Nobody can time the market, but an SIP averages your purchasing cost to a lower amount. For instance, today the rate per unit (NAV) of mutual fund is Rs.500 and increases to Rs.1,000 next month. Imagine you invest Rs.1,000 every month. By the end of two months you would be having 3 units (month 1: 500×2, month 2: 1,000×1) at Rs.2,000. This means, you paid ~Rs.670 per unit, when their current value is Rs.1,000 per unit.

The power of compounding and rupee-cost averaging seem to form a magical blend to somehow create exponential profits along the way. However, the magic only works in a disciplined and long-term environment.

I respect my parents a lot but I also know that the only think constant is change and only by improvising you can be better than what you were yesterday. I’m definitely not going to make the mistake my parents made. I know the key to building long-term wealth lies in long-term and disciplined investing.

The lessons I learnt:

  1. It is impossible to time the market, disciplined and systematic investments is the best way to average your rupee-cost.
  2. In the longer term, equity outperforms all other asset classes by a huge margin.
  3. Disciplined investing and the power of compounding works towards creating exponential returns.

I’m future-ready, are you?


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Received your bonus? Here’s what Ravish was advised to do.

While helping investors make their money work for them, we observed a common query around this time of the year and the following is an excerpt of one typical query Ravish (name changed) had. And here’s what we suggested:

Ravish: I am currently getting close to Rs.1,00,000 in hand every month, out of which Rs.80,000 goes towards my EMIs and living expenses while the residual amount is invested in equity mutual funds through the SIP route.
Now, I have received my annual bonus of around Rs.1.5 lakh and I’m stuck between indulging in the pleasures I believe I deserve (eg: a trip abroad with my wife) or to invest it all together into a mutual fund. I understand you guys always advocate the importance of saving, but I am looking forward to a plan which are in my best interests.

Expecting an unbiased opinion. Thanks.

The Response – Fisdom Expert:

Dear Ravish,

Thank you for reaching out to us and having faith in our unbiased advisory.

The good news is, you are not the only one facing this dilemma. Lately, we have been receiving many queries of the same nature. So, getting back to your situation-

Considering that you have already been investing in a disciplined manner, we believe that your bonus can be put to much better use than just investing the lumpsum.
We would recommend you to split your bonus into different buckets:

Bucket 1 (30%): Going on your much awaited vacation with your wife. Have the budget as Rs.45,000. The chances of you going abroad are slim with this budget, but you can probably have a comfortable trip across India. While this is not exactly what you wanted, this may help you rejuvenate yourself. It is only fair to reward yourself, take a break and get back stronger.

Bucket 2 (15%): Spend this Rs.22,500 on learning a new skill or getting the much needed certification for the big leap. This money should go towards new learning and development relevant to your personal and professional space.

Bucket 3 (10%): Utilise this Rs.15,000 to catch up with old friends and to expand your network. Attend professional as well as social events. Try and network well. In real life, most of your network will contribute to your net-worth later.

Bucket 4 (45%): This amount of ~Rs.67,500 should be invested. The best way to go about it is through a Systematic Transfer Plan. Since market timing is not advisable, it is recommended to invest the lumpsum amount into an ultrashort debt fund and then transfer a specific amount, say Rs.5,000 , every month into a top-recommended equity fund. This will ensure you average your rupee-cost at every price point and your lumpsum continues to generate safe and superior returns through the debt fund.

We believe that a healthy lifestyle is all about the right balance. Also, you must appreciate the fact that if you would not have had an active SIP, you would have to invest the whole bonus to make up for the opportunity and earnings lost.

Good luck to you. Stay disciplined for a financially secured and healthy lifestyle.


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“Dad taught me three timeless money lessons and it changed my life forever”

I am an investment planner. Towards the end of a successful meeting with an extremely wealthy client, he said to me – “This sounds like a great plan. Let’s start once I discuss this with my Dad”

For many of us, our parents have played a profound role in shaping our financial mannerisms. Right from childhood through adulthood, we always count on our parents for a second opinion on financial advice. No matter how financially savvy one is, he would always love to get a second opinion from his Dad; and why not? He’s already been through the game and has emerged successful.

With Father’s Day around the corner and remnants of the meeting lingering in my head, I started thinking about those timeless pieces of financial advice my Dad shared when I was young and naive.

I remembered the three incidents that shaped my financial habits and defined my current financial success.

Episode 1: Living within your means

I was ten years old and on the next day, the school had organized a mini-carnival where all the students were supposed to pay to play different games and could buy candies from different stalls.
I went to my Dad asking him for some candy money – probably around Rs.30. To my surprise he handed me a Rs.50 note and told, “This is your money. But, be careful. This is all you have for this month and you have a school picnic coming up as well.”

“What!?” I yelled as I asked, “How am I to enjoy the carnival and the picnic with only Rs.50?”.

He replied with a smile, “Your life is going to be full of picnics and carnivals, but sometimes, life does not give you enough to enjoy both. You should find a way to happiness with whatever you have.”

I was just ten years old and I had learnt a priceless secret to happiness – living within one’s means. I had started living frugal and most of my money would land up in my piggy bank.
Episode 2: You build your future, so plan accordingly

I was 13 and immensely fascinated by my 17-year-old cousin’s swanky Honda Activa.

One day, I asked Dad about when would I get one? The response, as always, amused me. “As soon as you get your driver’s license and buy one.”, he said. I wasn’t completely shocked but this buy-your-own-scooty seemed a little too much for me to absorb. After all, it costed quite a bomb for someone earning nothing but the Rs. 600 saved every month by walking to the school and back instead of taking the auto-rickshaw.

Dad knew I was saving up since quite some time now and suggested that he had an idea that would bring me closer to my dream scooty. I remember insisting that there is no way I’d be able to do that to which he asked, “What if I say that your money could grow by itself, without sweating it out?”. “Just like a plant?” I countered. “Just like that”, Dad said with his usual grin.

This was when he introduced me to the Disneyland of money – the bank. I got myself a savings account and was told that if I would regularly put my money into a fixed deposit, it would grow by itself. The bank guy assured me that they would take good care of my money and ensure that it grows well.

Fast forward 4 years, on my seventeenth birthday, I used the Rs.38,383.33 to buy the scooty I adored. Obviously, Dad added around Rs.10,000 but he said I had earned it. The feeling was priceless.

That day, I realized that all goals are achievable through proper planning.

Episode 3: Disciplined investing and power of compounding makes life easier

I was 21 and had just graduated from college and was offered a campus placement with a well-reputed company. My parents were very happy to see me cross an important milestone. Everything was going great till I realized that Rs.25,000 per month is not something that would make me a millionaire.
Dad, as always, sensed my predicament and spoke softly, “It is not about how much you earn, but how well does your earning grow.”

Times had changed. Fixed deposits were no longer magical. In fact, the returns would even lose out to inflation. This is when my Dad flipped out his phone and showed me an app – it was an investment app and he had invested into mutual funds. I had read about mutual funds but never knew that Dad invested through them. However, my thoughts were interrupted by the amount I saw on the screen. The screen showed an investment corpus of close to Rs.13.7 lakh and an SIP of Rs.10,000 active since 7 years!

“What!?” I asked in a surprised tone, “How is this even possible? I can invest double the amount! Can I also build such wealth?”. As always, Dad smiled. I had just learnt about the eighth wonder of the world – COMPOUNDING!

Today, I’m not a millionaire yet, but I can definitely see myself becoming one in a few years’ time.
Thank you, Dad.

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Let’s learn the secret sauce for success from top billionaires!

The super-rich and super-successful are so for a reason. “Habits maketh man” is an age-old proverb which only goes to reiterate the fact that you are a function of your habits. Successful people have a few common traits and habits which have played a major role in their success.

These four super-successful humans have discovered different keys to success. Here’s what we can learn from them while we continue working towards the success we aspire for.

Let’s learn from the best to be the best. Start planning your finance now.

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Axis MF’s views on the massive rally, GST effects and more…

Jinesh Gopani is Head – Equity for Axis Mutual Fund. He has an experience of over 17 years in capital markets of which 10 years are in equity fund management

Q1. The Indian markets are going through a massive bull phase. With major indices clocking a rally of over 14% in just 5 months, do you view this as a case for worry? 

Given such a sharp rally in the past few months, there is always a risk that investors get carried away and don’t stay mindful of normal market risks. At any stage in the market what works is a long term orientation and quality stock selection. Over the long term we remain positive on earnings growth picking up meaningfully which should help the market.

Q2. With markets at peak level, what asset allocation strategy would you recommend to retail investors?

First time investor can should look at regular investing and asset allocation. Investors with higher risk appetite can invest through multicap funds that offer a mix of large and midcap companies. All investors should avoid timing the market or investing with a shorter horizon.

Q3. What impact do you think would the GST rollout have on the domestic equity markets? With GST implementation as a trigger event, which sectors would you choose to be overweight on?

As largely expected, GST rollout may cause temporary supply chain interruptions as companies transition to the new regime. However, we believe that the market may not be impacted much. GST play is most positive for domestic consumption oriented companies and companies that can benefit from the unorganized to organized play.

Q4. Do you think that current valuation of Indian equity markets is stretched beyond rationale? What are your views on earnings revival?

Valuations have to be seen in the context of the economic cycle. We believe there is enough room for earnings growth revival once GDP growth picks up over the next couple of years. Further, GST implementation can have an impact on the formal sector of the economy which can lead to higher than estimated growth in earnings. The market is forward looking and is pricing some of these positives in the current valuations.

Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to ` 1 lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Ltd. is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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Top 3 reasons why Shariah funds are drawing more investor attention

Working on an investment strategy in line with your beliefs may hold you in good stead with your conscience and help you sleep better at night, but is it a profitable idea?

So far, it has been a unanimous “yes” from all investors, not just from the folks following Islam, but also from investors who are conscious about the industries they support.  Yes, Shariah-compliance is not just about Islam but has more to do with conscious  investing in shares of companies who do not operate in the not-so-ethical business segments like alcohol, gambling, tobacco, weaponry and similar. Additionally, there are restrictions to invest in companies operating on interest accrual models and pork products which skew the philosophy towards Islamic ideologies. But hey, fun fact – a large chunk of the total assets managed by Shariah funds are invested by members of the Jain community.

In brief, the idea is purely about investing with a conscience. But, getting back to the original question, is it profitable? And, what makes this a good investment strategy?

1. Shariah funds have outperformed the market for a long time now

While the Shariah funds are slowly gaining momentum, and have only two AMCs with limited AUM, the fund managers have done an exceptional job in beating not only the fund’s benchmark but also the broader Nifty despite being subject to restrictions, limitations and compliance challenges.

The following chart illustrates the wealth-growth for an investor who would have started an SIP into the Shariah mutual funds (asset-weighted allocation) versus how would his wealth grow if the same amounts were invested into Nifty, which has been clocking new highs lately.

Notably, Nifty’s value has increased at a CAGR ~14.4% from the beginning of 2012 to May, 2017. For the same period, Taurus Ethical fund’s NAV outperformed marginally at a CAGR ~14.8% and Tata Ethical fund’s NAV grew at a CAGR of ~17.7% while comfortably outperforming the index.

2. Diversified asset allocation helps to enhance risk-adjusted returns

The Shariah category follows a multicap investment strategy which allows the fund to explore opportunities without being subject to market-cap-related restrictions. This mix ensures that volatility is controlled through a higher exposure to large-cap stocks while the mid-cap and small-cap bets allow for a bump in the portfolio’s returns.

The sectoral allocation is well spread across different sectors, thus diversifiying sector-specific risks to a great extent. One key point here is that, despite the positive performance outlook for the financial sector, the category has almost no exposure to it as interest earnings are prohiboted under the Riba clause of the Shariah law. However, a good workaround would be to invest in a sectoral fund for financial services.

3. Shariah funds are tax-efficient

Like all other equity mutual funds, returns generated through Shariah funds are completely tax-free if redeemed after one year. If redeemed within a year, a flat tax rate of 15% would be applicable.

For those who are conscious about how they earn instead of how much they earn, Sahriah funds seem to be the right fit. This category aims at blending values and profitability into a happy mix.

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Alternative investing into Bitcoins? The journey from $100,000 to $27.5 million.

Bitcoins have become the buzzword today. Bitcoins is essentially viewed as a parallel system capable enough of overthrowing the archaic financial and banking system. So, this brings us to the most important question – “What is a bitcoin?”

A bitcoin is nothing but a digital currency just like the ones we have in our wallet. The only difference is this currency can be stored on your computer and instead of banks verifying the transactions and updating your passbook with relevant figures, this is done by millions of people all around the world. These digital-bankers are known as “miners” and the system is known as blockchain (click here to read more about blockchain).

The Bitcoin (BTC) is a cryptocurrency – a digital currency which is encrypted with a unique alphanumeric series which makes it practically impossible to duplicate. Bitcoin mining is a legit profession where thousands of people and companies validate transactions to earn bitcoins with a unique code. This requires huge technology infrastructure, rare algorithmic skills and supercomputers to execute.

Bitcoins can be purchased, sold and transacted through various bitcoin wallets and merchant gateways. Currently, there are around 16 million BTCs generated and only 21 million unique BTCs can ever be created. Now, that we’ve at least got a fair idea that BTCs are a currency and like all currencies its value will fluctuate, lets shift focus to its scope as an alternative investment.

Since supply is slow and capped and demand is growing, like any other currency’s demand-supply metric the value of BTCs also fluctuate. While this is extremely volatile, as an investment it can make you a millionaire or bring you down to rags. Enter 2017, the value of BTCs have surged sharply on the back of diluted trust on governing bodies and increasing belief in the sustenance of a parallel economy.

Here’s how the BTC prices moved in the last five years:

To help you interpret this crazy chart, you would be happy as well as sad to know that had you invested a hundred thousand USD, your Bitcoins would currently be worth a little over 27.5 million USD! That is a crazy 207% CAGR!

While this may look attractive, it is not advisable to miss the April of 2015 where the BTCs were a few hundreds away from crash and burn.

So, as an investor, these are the five golden rules to investing in bitcoins:

  1. Invest only what you can afford to lose
    Like all currency, even BTCs are subject to major volatility. In fact, even worse. At least all other legal tender currency is backed by the respective government and assures the value of the currency whereas here, it is not backed by any entity. There’s nobody you can plead to.
  2. Understand the system
    While it may seem simple or ultra-complex to many of you, it is advisable you do a thorough self-study and due diligence to understand the mechanisms. There are various forums and tutorials available on the internet to help you. As Warren Buffett says, “Never invest in a business you don’t understand”. Tip: always move your BTCs to your personal wallet, don’t leave it at the exchange and always use a trustworthy exchange.
  3. It is not a get-rich-quick scheme
    Though the past returns have been phenomenal, it can only be attributed to initial momentum. The journey gets rough from here on. You need to hold it and try to redeem it only in the longer term. Get back to rule number one if you feel like you can bank on this investment in case you need money.
  4. There’s fine line between risk and speculation
    This is not Russian Roulette, in fact, it may be worse if you try to gamble on BTCs. The risk here closely tends to infinite. After all, BTC is a technology and there may come a day when this turns obsolete. Fun Tip: Try googling Bitcoin v/s Ethereum.
  1. Hazy legality
    While the BTC fad is catching up, its legal validity lies in the gray. Many big governments have warned against the use of Bitcoins. In fact, in India many arrests and verdicts have been made against BTC hoarders. Again, this was not directly for holding bitcoins but for attempting to launder money through the system. However, you might want to be careful about the laws of the land.

Finally, there’s no straight recommendation on whether to invest in bitcoins or not. However, the above rules should help you deal with your crypto-portfolio better.

Anyway, the more you understand the sharper your investment skills get. Here’s a fun fact that will further fog your vision about BTCs.

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With investors jittery about pharma, it may be the best time to buy in

Globally, pharmaceuticals as an industry has been in critical views since some time now. With the Indian government exerting downward pricing pressure in its endeavor to make healthcare affordable along with similar pricing concerns in the USA post-Trump elections, pharma companies are scrambling to maintain profitability and grow at the same time. Notably, even as margins are under pressure, the top-line seems to have a different story to tell.

Demystifying the Indian pharmaceutical industry

India is a leading pharma production destination
The Indian pharmaceutical sector reflects close to 2.4% of the global pharma industry in value along with a 10% share in volumes. This clearly reflects the strong positioning of Indian pharma in the global space.

Strong on exports
For generics, India accounts for 20% of total global exports. Pharma exports from India have grown at 9.44% in FY16 ringing the register with ~16.9 billion USD. With exports growing at 8% in January 2017, Indian pharma is expected to register double-digit growth in 2017.

Rapid industry growth
The pharma industry is expected to grow at a CAGR of 12.9% through 2015-20 with a target monetary size of USD 55 billion. The highly-correlated healthcare sector, which is one of the fastest accelerating sectors in India, is expected to clock a 17% CAGR through 2008-20 to achieve the dream target of being a USD 250 billion industry.

Revenue Growth
Increased medical infrastructure and deeper medical insurance penetration is expected to set India right on track to be among the top 3 global markets in terms of incremental growth and 6th largest global market in absolute size.
The Indian pharmaceuticals market witnessed growth at a CAGR of 5.64 per cent, during 2011-16, with the market increasing from USD20.95 billion in 2011 to USD27.57 billion in 2016. As mentioned above, the industry is expected to hit the $55 billion mark by 2020.

Notable actions in the Indian pharma space
Research and Development:
Indian pharma companies spend anywhere between 8%-11% of total turnover on their R&D efforts. R&D expenses are expected to increase with product patents in place and the need for innovative drugs to support sales growth

Collaborations and Joint Ventures: Several MNCs are using M&A and JVs as a preferred route to enter the Indian market. The recent move by the government to allow 74% FDI into pharma has made the space even more conducive to M&A and private equity deals. The synergies are expected to further optimize the already low-cost pharma R&D and manufacturing in India.
6 leading pharmaceutical companies have formed an alliance ‘LAZOR’ to share their best practices to improve efficiency & reduce operating costs.

PPP in R&D: Indian Government invited multi-billion dollar investment with 50 per cent public funding through its public private partnership (PPP). As on January 2016, the total project cost of healthcare infrastructure project was USD151.91 million & there are 5 healthcare projects under PPP. The figures are expected to grow further this year.

While the Indian pharma industry is facing headwinds from stringent US FDA norms and downward pricing pressure from the Indian government, the increase in product innovations (fueled by product patent laws) and expanding healthcare market is expected to drive the earnings north over the next -year period.

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Canara Robeco’s Ravi Gopalakrishnan speaks it out

   Mr. Ravi Gopalakrishnan serves as the Head of Equities and Fund Manager at Canara Robeco Asset Management Company Ltd.

  1. The market seems to be in a frenzy clocking record highs. What do you think is the ideal approach for a new retail investor to participate?

While the Indian Equity markets have reached new highs, the current investment environment has easily sent even the most experienced investors into a frenzy over what sorts of investments to be looked at; let alone the new investors. Understandably, investors don’t want to lose out on the upside of the recent market upswing, but there are ways in which novice investors can try to make the most of their investments. It’s important to remain focused on one’s long-term financial goals in the midst of short-term stock market activity. While it’s tempting to react to current market conditions, first time investors may consider gradually increasing allocation to equities and can adopt a staggered approach of investing via SIP. SIP as a facility not only helps to avoid an exposure to market volatility at once, but also benefits from the power of Rupee Cost Averaging when the markets see a downturn. Having said this, Equity is a long term investment whose inherent potential is realized only by compounding i.e. buy-and-hold strategy. One should never try to time the markets, instead, one should keep investing systematically, as and when there is an investable surplus and an investment opportunity.

  1. What’s your outlook on the equity market for FY’18?

The bellwether indices are now consolidated in quality companies and the valuation of these companies are reasonably fair. Long term growth outlook is intact though near term scenario could be hazy due to specific unforeseen events. However, on the back of strengthening macro-economic situation and the political as well as regulatory stability in the country, the Indian equity markets are in a structurally constructive phase. The strong macroeconomic condition with the economy geared to shift from informal to formal could provide confidence to the investors and improve the market sentiments.  With the improving domestic environment, going forward the equity markets are likely to gather momentum on a longer term owing to inherent structural strengths of the economy with the bottoming of corporate profitability and prospects of domestic flows.

  1. What themes would you like to play in the current market scenario?

Global growth, at this stage, looks to be at an inflection point and India will remain no different, albeit is expected to continue to grow faster than most other economies. With a stable government at the center and the implementations of various structural reforms, sectors with structural growth drivers (especially domestic economy linked) having low cyclical and commodity related exposure are expected to do well in the near future. Companies in select high conviction sectors like private financials, consumer discretionary, auto, cement & building materials and industrials could be the few sectors which are seen gaining momentum and are expected to grow multifold going forward.

  1. According to you which are the key events an investor should watch out for and how do you think the domestic equities market will react to these events?

In the recent times, there has been a lot of uncertainty around the legislation in the US. The clarity over the impending key decision by the US could impact the global markets in near term and could be one of the major events to look forward to. The geo-political tension arising due to the US intervention in Syria as well as the North Korea and instability in the Eurozone could be global factors to look out for. Movement of commodity prices like of Crude Oil and the pace of rate hikes in the US resulting into a volatility in the domestic currency market could also result in bouts of intermittent equity market volatility. However, the strong macro-economic factors and positive domestic events could guide the direction of the Indian Equity Markets upwards in the times to come. Implementation of GST is seen to be a big positive for the country causing the formalisation of informal sectors of trade in the country. Expectations of an above average monsoon, contained inflation and a steady growth rate could drive the Indian equity markets in the coming future to new highs.


Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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We hope you don’t WannaCry

12th May, 2017 – It was a regular Friday with most of the world dragging themselves towards the weekend. Everything was normal till one-by-one, just like a chickenpox outbreak in a neighborhood, data stored on over 2 lakh computers were encrypted and locked users out of their own data. This happened not only the home PC levels but also across various banking and financial institutions all around the world. WannaCry Ransomware is the new villain in town with a demeanor vicious enough to send the world authorities into panic.

So, What is the WannaCry Ransomware all about?

Imagine one fine day someone like this happens –
All your doors, windows, refrigerator, oven, everything is locked with an alien-like complex lock which nobody in the world except the maker knows to unlock. Further, you find a sticky note asking you to put a ransom amount in a letterbox with nothing written on the envelope and promises to tell you the code to unlock the locks once the ransom is received. However, if you don’t pay in 3 days – the ransom doubles and after seven days everything locked will be destroyed.

This may seem like a fancy sci-fi plot, but this is exactly what the WannaCry ransomware has done to data saved on over 2 lakh computers across 150 countries.

The WannaCry ransomware enters your computer (just like a virus, only more complex and powerful) and encrypts (read: locks) all files and will decrypt (read: unlock) it only when it receives the ransom- US$300 in bitcoins. Why bitcoins? Because it preserves anonymity. Click here to read more about bitcoins. A 3-day delay in payment doubles the ransom and a week’s delay will trigger a permanent deletion of all your files.

How does it spread?

Ransomware is a programme that gets into your computer, either by clicking or downloading malicious files. It then holds your data as hostage.
However, some security analysts say the infections in the case of WannaCry seem to be deployed via a worm, spreading by itself within a network without being clicked on.
The programme encrypts your files and demands payment in order to regain access. Security experts warn there is no guarantee that access will be granted after payment.

Some forms of ransomware execute programmes that can lock your computer entirely, only showing a message to make payment to log in again.

Others create pop-ups that are difficult or impossible to close, rendering the machine difficult or impossible to use.

Global impact

Russia, Ukraine and Taiwan are reported as the top target destinations for the ransomware deployment. However, reports suggest fragmented cases across 150 countries have been recorded.

While India has been lucky enough to have only a few isolated WannaCry cases recorded, it has been a good wake-up call to the officials to take deeper interest and action to secure India’s digital databases and portals which include the banking system and Aadhar as lucrative targets.

What can you do to avoid being the victim?

  1. If you use windows XP, 8 or 10 or server 2003, it is highly recommended for you to download the security patch recently released by Microsoft.
  2. Install and use an updated antivirus like Microsoft Security Essentials.
  3. Disable pop-ups via pop-up blocker in your browser.
  4. Avoid clicking unfamiliar links and attachments.
  5. Most importantly, as you can never be too safe, regularly backup your crucial data.

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