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Opportunity to invest in Public Sector Bonds – Edelweiss Bharat Bond NFO

bharat Bond NFO

Of late, there has been quite a flurry of new funds being launched by mutual funds – many of which are for the fund house to offer a new product category or to play a theme. While we are constantly on the lookout for not just interesting, but for funds that hold real promise in terms of potential to create investor wealth.

PSUs are known to have laid founding stones to economic success. Their access to capital,  regulatory clearances and domain expertise have been instrumental in strengthening the businesses.

Times like now, when the private sectors are hitting a slump (almost), and the economy is turning towards the government for aid, PSUs stand strong.

PSUs covered in the CPSE basket are typically backed by state/central government and offer very high-rated debt instruments. These score well from a safety-against-default parameter

Here is the NFOs which have piqued our interest & the fund name is “Edelweiss Bharat Bond FoF”.

About Edelweiss Bharat Bond FOF

The NFO is open from 14th July 2020 to 17th July 2020. The Fund will be launched with two different maturities i.e. Bharat Bond FOF – 2025 and Bharat Bond FOF – April 2031

Edelweiss Bharat Bond FOF will invest in Bharat Bond ETF which will then invest the money in a bond issued by Public Sector companies.

• Portfolio will be majorly focused on PSU bonds issued by CPSE, CPFI or statutory body dominated in India

• Portfolio will have a conservative rating of AAA and will mature within 12 months period preceding the maturity date of the index.

• Fund does not have any lock in. Investor can entry and exit at any time.

• Investor will get the indexation benefit if he stays invested for a horizon of more than 3 years.

Food for thought:

Earlier issue (December 2019) of Bharat bond FoF April 2030 has generated a return of 10.41% (Data as on 13th July 2020) since inception while Bharat bond FoF April 2023 has generated 7.73% (Data as on 13th July 2020) returns since inception- more than most of the traditional instruments available.

Bottomline:

Investors with a conservative to low-rated risk profile and an investment horizon equivalent to that of the issue may choose to invest in the fund. The fund is a good constituent to fit into the debt allocation basis asset allocation.

In case you wish to understand more about the opportunity or simply discuss the prospects of the funds, feel free to connect with us and we would be glad to have a chat.

Edelweiss Bharat Bond FOF fund details:

details of NFO

Finsight (15th June 2020 to 19th June 2020)

Finsight (15th June 2020 to 19th June 2020)

Indian Equity Markets ended on a negative note for the week. Nifty 50 was down 1.7% and Sensex by 1.5% respectively.

Weekly Capsule

– US Fed sees interest rates staying near zero through 2022

The Federal Reserve kept interest rates near zero indicated that rate might stay as it is till 2022. Also, during the Fed meet US Fed Chairman Jerome Powell said that the US economy will shrink by 5% in the year 2020 but will see a growth only in FY 21.

– Telecom operator dues

The Supreme court has asked private telcos to provide for security and repayment of roadmap in an attempt to allow telcos to replay AGR dues over a 20 year period. And if telcos are not able to furnish those guarantees the apex court is likely to consider a shorter time frame which may not be good news for these players.

– Indian Economy to Bounce Back with Growth of 9.5% in Next Fiscal: Fitch

After a contraction in the current financial year, India’s economy is forecast to bounce back with a sharp growth rate of 9.5% next year provided it avoids further deterioration in financial sector health. It has forecasted a 5% contraction in the GDP in the ongoing financial year.

Nifty at glance 

Nifty at glance

Outlook for next week:

Outlook for next week:

We feel that the markets will tend to be volatile over the next week also. Investors are suggested to invest only in staggered manner. The important number to watchout for next week in Indian market would be India Vix which is currently at 30-32 levels. In upcoming week markets are expected to remain volatile and this vix levels to elevate.

Finsight (18thMay to 22nd May 2020)

Finsight

Indian market closed negative during the week. Nifty and Sensex down this week by 1.24% and 1.72% respectively

Weekly Capsule

– Government rolls out INR. 20 trillion relief package
(Prime Minister Modi announced the much-awaited relief package on 12th May which amounts to ~10% of country’s GDP in order to fight the current break in economic activities amid the ongoing lockdown. The package has brought in huge relief to the most hit sectors of economy like MSME’s, migrant workers, farmers and agricultural industry.)

– India’s retail inflation in March drops to 4-month low of 5.84%
(The retail inflation registered lowest levels for current calendar year at 5.84%, mainly due the food basket price inflation dropping to 8.76% for the month of March compared to 10.81% for the month February. RBI is expected to focus on reviving the economy hit and may further cut policy rates to boost lending through financial institutions)

– World coming together to help India fight COVID-19
(The World bank on Friday cleared a $1 billion assistance for social protection in order to combat the ongoing war against coronavirus; the bank’s spokesperson also said there are ongoing discussions around funding initiatives to assist micro, small and medium enterprises. The United States government on Saturday announced supply of 200 ventilators to India.)

Nifty at a glance

nifty 1

Nifty 2

Outlook:

The announcements made so far by the government on the INR 20 lakh crore package have focused majorly on the supply side and investors fear that these measures may not result in a direct and immediate boost to demand, thus raising doubts over the country’s economic revival in the near term. For now, the market seems to be focused on global cues and continues to remain under pressure as the muted earnings season so far and the relief measures announced by the government have not been able to boost sentiments.

 

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Atmanirbhar Bharat Abhiyaan: Economy | Infrastructure|Technology|Demography|Demand

Atmanirbhar

MeasuresFeatures
Direct Financial Impact
INR 3 lakh crore earmarked for MSME lendingCollateral-free, automatic route, 4 year tenure, 12m moratorium on principal repayment
INR 20,000 crore debt subordination for stressed MSMEsMSMEs classified as NPAs or stressed, Promoters to receive debt - will deploy into MSME as equity
INR 50,000 crore equity infusion in MSMEs through FoFViable MSMEs can avail equity funding through Mother-daughter funding framework, support to push towards listing
INR 2,500 crore EPF support for business & workersEarlier liquidity facility for EPF contribution (3m) to be extended for another 3 months till salary month of August 2020
INR 6,750 crore EPF liquidity support for employee & employersEPF contribution for organisations & employees mandate reduced from 12% thresholds to 10% - not for government entities
INR 30,000 crore liquidity for NBFCs, HFCs, & MFIsGovernment to transact in primary & secondary market transactions of investment grade debt by these issuers; INR 30,000 crore liquidity for NBFCs, HFCs, & MFIs securities to be guaranteed by Gol
INR 45,000 crore NBFC Partial Credit Guarantee Scheme 2.0NBFCs, HFCs, MFIs - First 20% of loss to be borne by Government of India (guarantor); AA & below rated papers eligible
INR 90,000 crore liquidity injection to DISCOMSPFC/REC to inject liquidity to DISCOMS against receivables; loans against state guarantees for supporting DISCOM liabilities to GENCO's
INR 50,000 crore liquidity release through TDS/TCS rate deductionTDS/TCS reduced by 25% across the board; applicable for rest of 2020-21
Other/Indirect Financial Impact
Change in definition of MSMEs
Necessary amendments to increase definition net to offer more headroom to grow while drawing benefit as MSME
Global tenders for government orders curbedGovernment procurement including tender value worth INR 200 cr. to be disallowed for foreign bidder participation
Fast-track receivables from Government & CPSEs All MSME payments outstanding by government & CPSE to be cleared in 45 days
Extension of six months to contractors; partial release of bank guarantees Bank guarantees to be released to contractors in line with percent of work completed
RERA timeline extensionAll registered projects expiring on or after 25th March 2020 to be automatically extended by 6 months
Tax return due date extensionDue date of all income-tax return for FY 2019-20 will be extended from 31st July, 2020 & 31st October, 2020 to 30th November, 2020 and Tax audit from 30th September, 2020 to 31st October,2020.
Assessment date extensionDate of assessments getting barred on 30th September,2020 extended to 31st December,2020 and those getting barred on 31st March,2021 will be extended to 30th September,2021.
Vivad se Vishvas ExtensionPeriod of Vivad se Vishwas Scheme for making payment without additional amount will be extended to 31st December,2020.

 

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Here’s what your funds have been upto

funds been upto

Right from diving into a steep -38% trench since its all-time highs to recovering another 30% from the bottom created on 23rd Mar’20, the markets have been greatly rewarding to the patient and wise. As central banks get together to sustain global economies and analysts/investors draw clarity on evolving situations, markets seem to be reflecting the way forward – a brighter way forward. Here’s more on the key metrics promising a brighter economic future: www.fisdom.com/resources/the-yang-in-indian-economys-yin For most wishing to draw an insight from the mutual fund industry’s playbook, here’s what largecap funds bought/sold in the past month: largecap-funds trimmed While it may not be correct to construe the above information as an insight to support direct equity investing, it definitely allows an insight into understanding that fund managers have been taking aggressive calls and this, in light of recent developing situations. In any case, unless there’s a change in your financial goal or asset allocation, there should be no reason for you to take any action on your portfolio – rest assured, the fund manager is doing the job pretty well.

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Franklin Templeton Mutual Fund winds up six schemes

Franklin templeton

Dear Investor

Yesterday, Franklin Templeton Mutual Fund announced winding up of six of its yield-oriented, credit funds.

Considering the continuously thinning volumes in the high-yield fixed income securities segment and incremental redemption pressure given the current state of our pandemic-stricken markets, the fund house has decided to be proactive and wind up operations in the following six schemes:

  1. Franklin India Low Duration Fund (No. of Segregated Portfolios – 2)
  2. Franklin India Ultra Short Bond Fund (No. of Segregated Portfolios – 1)
  3. Franklin India Short Term Income Plan (No. of Segregated Portfolios – 3)
  4. Franklin India Credit Risk Fund (No. of Segregated Portfolios – 3)
  5. Franklin India Dynamic Accrual Fund (No. of Segregated Portfolios – 3)
  6. Franklin India Income Opportunities Fund (No. of Segregated Portfolios – 2)

24th April 2020 onwards, all forms of transactions in these schemes will be suspended and unitholders will receive the value of their units per the Net Asset Value of the scheme in line with liquidation proceedings.

Investors are requested to take note of the following and infer it in the spirit meant to be conveyed.

  • The decision of winding up these schemes must be looked at as an act of responsibility and understand that winding up of these schemes was perhaps the best way to preserve value for unitholders.
  • The sale proceeds after discharge of all liabilities and expenses will be paid to the Unit holder(s) in proportion to their respective interests in the assets of Schemes. The liquidation process will be undertaken in line with regulatory guidance.
  • This event does not change our stance on other funds managed by Franklin Templeton AMC.
  • We continue to maintain our view of fixed-income investors shifting towards Sovereign-grade securities and consider AAA-rated securities per risk appetite. Even with AAA-rated securities, steering clear of stressed segments like NBFCs and HFCs till further revision in view should augur well for investors in the time to come.
  • We have been continuously identifying and triggering a rebalancing campaign for investors exposed to credit risk beyond a threshold. Those accepting the rebalancing request would have effectively exited the affected schemes and continue to benefit from our active surveillance.
    For those who continued to invest in the affected schemes, there is no reason to panic as the fund house continues to focus on preserving maximum possible value for all unitholders and paying out the same.

(Link to Notice by Franklin Templeton Mutual Fund: https://www.franklintempletonindia.com/downloadsServlet?docid=k8lf815l)

 

 

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The Yang in Indian Economy’s Yin

Yang in Indian Economy’s Yin

Yin & Yang

Two complementary principles of Chinese philosophy; Yin is negative, dark, and
feminine, Yang positive, bright, and masculine. Their interaction is thought to maintain the
harmony of the universe and to influence everything within it

Indian equity markets have corrected significantly over the last one month (Nifty down ~38% from its 52- week high of 12,362 to the lows of 23rd Mar’20) in tandem with global equity markets due to headwinds from the Covid-19 outbreak across multiple countries. Well, we all might have heard negativity, concerns approximately from everyone around due to covid-19, lockdown extension resulting business impacts, subdued economy, etc.

The fall across the world is reminiscent of 2008. However, we note that such significant corrections have typically opened significant investment opportunities, especially in countries like India.

Let us understand why India is better placed during this volatile time:

Stable foreign exchange reserve:

The International Monetary Fund (IMF) defines foreign reserves as external assets that a country’s monetary authority can use to meet the balance of payments financing needs, affect currency exchange rates in currency exchange markets and other related purposes. India maintainsits foreign exchange reserve in US dollar.

Finally, US federal reserve offered RBI the currency swap facility to help them fund their dollar requirements. With the currency swap option, RBI can now enter repurchase agreements with the Fed and can restrict the rupee depreciation.

trading economics

It provides an ammunition to stabilize trade and forex outflows during volatile times such as the current crisis. The central bank’s dollar reserves fell to $437 billion as on 27 March from $447 billion a week earlier, due to the selling in the markets but remain robust, according to RBI data.

Takeaway:
India can do this as we are in the top 10 nations who are having the highest foreign exchange reserves

India’s Export & Import:

India importing nearly $40-$50 Billion worth oil every year; also, oil contribution in balance sheet is high followed by gold. Currently oil prices slashed down to nearly to $24.28% from its 60’s level in

January growth

As we know India imports more than exports. If we see Feb-March comparison, we have still saved $100 million. As due to lockdown extension we may see another drop-in export-import trade in the month of April.

Takeaways:

Though the import looks higher, major contributor to India’s import is oil as India’s 85% of the oil demand is met through import, which is trading at its low level right now. Typically, India benefits to a tune of ~$1.4 bn with every single dollar drop in oil prices. Brent oil prices have fallen by over 60% in 2020 till date.

A reduced bill implies more economic firepower for India to fight the current economic situation.

Market Capitalisation to GDP Ratio:

gurufocus

Takeaways:

M-cap to GDP ratios indicates us the valuation of markets I.e. whether undervalued or overvalued. Undervalued means that the market prices are cheaper and attractive to do investment and vice versa. Currently Market cap to GDP is hovering at 51.8% (18th Apr 2020) to its lower level since 2003 and looking undervalued after a very long time. There is an opportunity to invest now at cheaper valuation to ride the imminent economic recovery.

FIIs are sellers but domestic money is here to grow:

It looks like FII and DII inflows have inverse relationship. Foreign institutional investors are typically risk-averse – most of them by mandate. Foreign institutions include large pension funds, endowment funds, etc. which have a mandate to generate certain bps more than what their home markets can offer and hence diversify into emerging markets like India. An outflow of foreign capital is in no way indicative of a development in their outlook on Indian Capital Markets. Also, one would notice, the same has happened with global capital markets.

FII DII investment flow

As illustrated in the above graph, Domestic inflows have a strong negative correlation with foreign inflows (-0.9) indicating that domestic investors are capitalising on every decline created by foreign money outflow and that this outflow is not indicative of a change in fundamentals.

foodforthought

Key Takeaways for Investors:

• Equity investors must capitalise on the situation by buying more on dips. Those investing equities via SIP/STPs can accelerate by increasing periodic deployment by 10%-15%.
• Debt fund investors must try stick to funds with sovereign/AAA-rated underlyings.

 

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An Account of Central Banks’ Key Measures to Support the World Economy

world economy

The recent pandemic has thrown markets in a frenzy as fundamental expectations clash with extreme sentiments and desperate attempts to evaluate the economic impact on companies.

The past two months have been relatively easy for media houses covering the stock market as copywriters focus on creating sensational versions of doom-and-gloom. However, for a moment, let’s focus on a larger opportunity lurking behind gloom.

A closer look at recent performance of major global indices would reflect a marked improvement after what was  touted as perhaps the worst crash since 2008 – and worse in some exchanges.

To a meaningful degree, the uptick reflects normalisation & rationalisation of investor expectations along with an  acknowledgment of how collaborative efforts of global central banks will uphold the economies till we’ve won this battle against the pandemic.

In its meeting on 26 Mar’20, G20 committed to collectively inject over $5 trillion to contain job & income losses. The group also made a statement that went on to be the headlines of almost every pink newspaper the next day – they will “do whatever it takes” to tackle the pandemic.

Ever since the onslaught of the pandemic, governments & central banks around the world have been rather proactive, collaborative & coordinated in unleashing unprecedented stimulus – fiscal as well as monetary. While this is happening globally, here’s a brief account covering the G20 – a group of the top 20 economies.

Let’s take a closer look at how central banks are being the economic superheroes today when economies need them the most. We’ve tried to include snippets of how stock markets are responding to the stimuli wherever applicable.

For the less curious, here’s an overview of G20’s fiscal stimulus response, courtesy CSIS & Statista.

covid fiscal tracker

Here’s an economy-wise account of key fiscal & monetary policy measures undertaken by central banks & a
peek into how respective stock exchanges have received it

An Account of Central Banks’ Key Measures to Support the World Economy

1. United States of America

united states of america

Key Economic Measures:

• $2.2 trillion economic aid package released by the U.S. Fed
• The aid package includes $500 bn fund to assist most impacted industries & similar amount to be distributed to families as direct benefit
• Pledged $700 billion in asset purchases (quantitative easing program)
• Key policy rate cut to 0%-0.25%
• Promise of an unlimited quantitative easing program

2. China

china

Key Economic Measures

• Preparedness to spur public expenditure, especially into infrastructure backed by local government special bonds worth as much as 2.8 trillion Yuan
• Reserve requirement ratio cut for small banks by 100 bps; releasing 400 bn Yuan into the system
• Easier funding for SMEs through increased re-lending & rediscounting quotas up to 500 billion Yuan
• Increase in policy banks’ loan quota by 350 billion Yuan to spur credit to target business segments

3. Europe

europe

Key Economic Measures

• EU’s total fiscal response to the tune of 3.2 trillion Euros
• Cut interest rates on TLTROs by 25 bps resulting in banks having increased access to cheap loans
• Suspension of limits on EU government borrowing
• European Stability Mechanism bailout fund will make 240 billion Euros worth of cheap credit available to EU governments
• European Investment Banks add 200 billion Euros for lending

4. Japan

Japan

Key Economic Measures

• Total economic package of over $1 trillion (20% of GDP)
• Package includes cash payouts of ~$55 billion to households & Small & Medium Enterprises
• Ramping up government purchase of ETFs & corporate bonds
• Working on creating a new loan programme to extend one-year, zerointerest loans to financial institutions
• Funding for upgradation of medical facilities

5. Germany

germany

Key Economic Measures

• Agreed package worth up to 750 billion Euros
• 100 billion Euros earmarked for purchase of equity stakes in companies
• 400 billion Euros in loan guarantee to secure risk of corporate debt defaults
• 100 billion Euros in credit to public sector development bank for loans to focus sectors

6. United Kingdom

United kingdom UK

Key Economic Measures

•Policy rate cut to record low of 0.1%
•200 billion pounds worth of bond purchases; corporate bond purchase program to be worth 20 billion pounds
•Bank of England corporate financing facility to buy investment-grade corporate papers with maturity of 12 months
•Businesses allowed to temporarily hold onto VAT worth 30 billion pounds
•330 billion pounds in loan guarantees to businesses

7. France

france

Key Economic Measures

• 45 billion Euros aid package to support companies & workers
• Bank loans guaranteed up to 300 billion Euros
• 1 billion Euros set aside for small companies who lost >70% of revenue YoY in Mar’20.
• 8.5 billion Euros earmarked towards stabilising employment

8. India

India

Key Economic Measures

• Incremental liquidity infused in the system to the tune of INR 3.74 Lakh Crore through various monetary policy measures including the TLTRO and a combination of CRR, SLR, Repo, Reverse Repo, LCR cuts
• INR 1.7 Lakh Crore of fiscal stimulus including free food grains, cooking gas & direct benefit transfers to select cohorts of demography
• Three-month moratorium on loan repayment for retail as well as working capital loans

9. Italy

Italy

Key Economic Measures

• Over 425 billion Euros to be injected into the economy to support ailing businesses
• Suspension of select loan & mortgage payments for individuals and companies
• Assistance to firms to pay workers that have been laid-off

10. Brazil

Brazil

Key Economic Measures

• Interest rates cut by 50 bps & capital requirements for financial institutions eased
• Purchase of bank loan portfolios worth 1.2 trillion reais
• Central bank intervention in forex markets & repurchase of dollar bonds
• 201 billion reais budget to support people & preserve jobs

11. Russia

Russia

Key Economic Measures

• State payments of 12,130 rubles monthly to SMEs for every employee, provided they maintain 90% of workforce
• A package of 200 billion rubles towards regional budgets
• Government support of ~ 23 billion rubles for worst-hit airlines segment.

12. Canada

Canada

Key Economic Measures

• Overnight interest rate dropped to 0.25%
• Government to buy Canadian G-Secs worth C$5 billion every week across the curve
• C$150 billion insured mortgage purchase programme
• C$10 billion credit support programme for businesses
• C$72 billion for tax deferral & aid to low-income households
• 75% of wages of people working for SMEs covered

13. South Korea

South Korea

Key Economic Measures

• Total economic rescue package of 100 trillion won
• 29 trillion won in loans to SMEs
• 20 trillion won to buy corporate bonds & commercial papers
• Additional 36 trillion won to be made available to exporters in the form of cheap credit
• Additional 17.7 trillion won will be rolled out through measures to boost consumption7 support domestic demand

14.Australia

Australia

Key Economic Measures

• AUD 90 billion funding facility to banks at fixed rate of 0.25%; AUD 15 billion purchase of mortgage-backed securities
• AUD 715 million support to airlines
• AUD 66.1 billion in assistance for companies and additional welfare payments;
• AUD 17.6 billion in subsidies for apprentices, small businesses, pensioners, and others
• AUD 130 billion to subsidise wages of an ~ 6 mn people

15. Mexico

Mexico

Key Economic Measures:

• ~$16.6 billion available as reserves; to be spent as and when required
• Lending up to 25 billion Pesos to SMEs
• Front-loading social security & disability payments by 4 months
• public housing credit institute covering three months of workers’ debt (defer further six months for those let go)

16.Indonesia

Indonesia

Key Economic Measures

• ~$25 billion economic rescue package
• 3 percentage point reduction in corporate tax
• Reserve requirement ratio cut by 2% for banks and 50 bps for Islamic Banks
• Seven-day reverse repurchase rate cut by 25 bps

17. Saudi Arabia

Saudi Arabia

Key Economic Measures

• Rolled out a 120-billion riyal ($32 billion) economic package
• Package includes 50 billion riyals ($13.3 billion) to help small and medium-sized businesses stay afloat.
• 9 billion riyal ($2.4 billion) earmarked to compensate 60% of those salaries for the next three months.
• 70-billion Riyal support to healthcare
• Suspension of government tax, fees

18. Turkey

Turkey

Key Economic Measures

• 100 billion Lira economic stimulus package
• Tax subsidies & postponement
• Suspension of national insurance payments in select sectors for 6 months
• Benchmark interest rate reduced by 100 bps
• Minimum payment of credit cards reduced by 20%
• 3-month loan repayment moratorium for firms
• Turkey Wealth Fund given rights to buy stakes in firms

19. Argentina

Argentina

Key Economic Measures

• Lower reserve requirements on bank lending to households and SMEs
• Regulations that limit banks’ holdings of central bank paper to provide space for SME lending
• Temporary easing of bank provisioning needs and of bank loan classification rules (i.e. extra 60 days to be classified as non-performing)
• A stay on both bank account closures due to bounced checks and credit denial to companies with payroll tax arrears.

20.South Africa

South africa

Key Economic Measures

• 1.2 billion Rand earmarked to support farmers & food production segment
• The central bank (SARB) reduced the policy rate by 200 bps
• Increasing the number of repo auctions to two to provide intraday liquidity support to clearing banks at the policy rate
• Reducing the upper and lower limits of the standing facility to lend at repo-rate and borrow at repo-rate less 200 bps
• LCR reduced from 100% to 80% to afford liquidity

One must understand that the G20 (widely touted as the group of top twenty countries which have significant influence on global economic output) stimuli impact is not limited to only the country announcing it, but also benefits major trading partners indirectly.

So, an understanding of the economic measures undertaken by the G20 could be a decent indicator to how global economies are fortifying themselves in the wake of this crises and how stock exchanges are responding to these measures.

Key Takeaways:

Investors are requested to continue having faith in the fact that mankind will overcome this medical crisis while governments & central banks all around the world are working proactively, collaboratively & in a coordinated manner to protect your wealth. If you must take an action, it is to strategically buy into equities on declines with a long-term holding horizon; investments can be expected to benefit from the imminent recovery.

 

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RBI’s booster shots to help India’s economy fight the pandemic

RBI boost indian economy to fight the pandemic

“India is expected to post a sharp turnaround and resume its pre-COVID pre-slowdown trajectory by growing at 7.4 per cent in 2021-22.”

– Shaktikanta Das

Governor, RBI on 17th April 2020

Key Highlights: RBI’s booster shots to help India’s economy fight the pandemic

MeasuresObjective
NPA classification will now not include the 90- day moratorium on loansSecuring banks' books & entity classification as RBI rolls out aggressive measures
TLTRO 2.0 worth Rs 50,000 croreLiquidity boost to NBFCs, HFCs & MFIs
Special refinance facilities of Rs 50,000 cr to NHB, SIDBI and NABARDSystemic liquidity support to small enterprises
LCR requirement for SCB to be brought down from 100 percent to 80 percent with immediate effectCommercial banks deposit less with RBI, keep more with themselves for liquidity
Fixed reverse repo rate under LAF cut by 25 bps to 3.75 percent from 4 percent with immediate effectUnattractive for commercial banks to deposit with RBI, might as well lend
For large accounts under default, additional provisioning of 20 percent is required for not implementing resolution in 180 days. This has now been relaxed.Breathing space for banks, leaving more towards the banks' liquidity

 

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Strong Case for Global Diversification into U.S. bellwether index – S&P 500

NFO

Key Attributes:

Efficient Market | Very Low Correlation | Global Exposure | Dollar Hedge

Fund in Focus:

Motilal Oswal S&P 500 Index Fund
(NFO Period: 15th Apr’20 – 23rd Apr’20 | Min. Amount INR 500 | Exit Load: 1% if redeemed in 3 months)

Suitability:

Long-term investing (indicatively 5+ years of holding period); hedge against domestic currency depreciation and/or global inflation; Efficient economy diversification

Descriptive Highlights

Efficient Market

S&P 500 is the world’s largest index which is tracked and benchmarked globally. With a long track-record of over 63 years, it has developed a respectable vintage among global indices.

Very Low Correlation

Very low correlation between Indian Indices & S&P 500 offers an opportunity to benefit from true diversification – a combination on assets which don’t move in the same direction (low correlation) offers optimal risk-adjusted  returns

correlation

Global Exposure

Historically, a large component of sales of S&P 500 constituent companies were contributed by regions & economies beyond U.S. This mix of true-blue multinational corporations offer the benefit and/hedge of global diversity thus ensuring limited dependency on the state of a single economy or nation to drive business growth. The index is an efficient mode to achieve global diversity.

Global exposure

Dollar Hedge

Allocating a percentage of overall portfolio to S&P 500 also offers cushion to the overall portfolio in the form of a  Dollar hedge. By far the USD is considered a strong currency and exposure to S&P 500 adds incremental value during stressful times when INR depreciates against USD.

Dollar hedge

 

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