Capitalmind Podcast: Recent Episodes
Capitalmind
Capitalmind looks at stocks, bonds, funds and the macro to bring you their view on the Indian financial markets. We discuss all things related to investing at our focussed podcast that keeps it simple. For more, go to capitalmind.in and to invest with us, visit capitalmindwealth.com
In this wide-ranging chat, Shray plays devil’s advocate while Deepak unpacks why conflict often jump-starts economies, how India’s defence binge could spill over into everything from lithium mining to 10-minute groceries, and why a 70-hour work-week isn’t the villain Twitter thinks it is.
Returns—not patriotism—ultimately determine whether CapEx endures, a reality visible in the economics of fracking, rare-earth extraction, and the three types of “crazy” investors who fund long-shot bets: governments, bondholders, and VCs. India’s manufacturing ambitions have long been stifled by outdated labour laws and missed opportunities, but we may now be staring at a rare, once-in-a-generation window of opportunity. While defence and industrial stocks might seem richly valued, there's still plenty of runway—especially if order books start to triple. That said, the journey is fraught with risks: a sluggish judicial system, bureaucratic inertia, and our national knack for fumbling promising leads. For investors, the challenge is knowing when to play defence and when to swing for the fences in a market that increasingly rewards conviction.
-- 00:00 - Intro 01:09 - Wars & the Economy 12:56 - Return on Investment - Driver of returns 25:28 - Does CapEx without justification work? 35:30 - Why don't we manufacture in India anyway? 47:33 - Labor laws - Why do they exist? 55:20 - Is the rally already priced in? 01:11:18 - What’s the downside risk? 01:15:49 - Where do you invest now? 01:19:03 - Trump, 70 Hours & Self-Reliance! -- More about us: https://cm.social/pms Connect with us : https://cm.social/pms-connect Deepak's Twitter: @deepakshenoy Shray’s Twitter: @shraychandra Capitalmind Twitter: @capitalmind_in
Mutual Funds are often seen as the McDonalds of the investment world. They are ubiquitous and convenient, and yet, they are seen to lack the prestige of a fine dining experience aka Private Equity et al.
In this episode, we take on the big question: Are mutual funds only for the salaried middle class, or is there a bigger story here? Deepak and Shray dive deep into the history and perception of mutual funds, from their once-exclusive status to becoming the go-to vehicle for SIPs and forced savings.
But why don’t you hear family offices or the ultra-wealthy proudly boasting about their mutual fund holdings? We explore this through the lens of economic class distinctions (India A, B, and C) and unpack how perceptions of exclusivity and quality affect investment choices.
Whether you're planning for retirement, your child’s education, or just wondering if your portfolio is too “plain vanilla,” this is a conversation that will make you rethink how you view mutual funds.
-- 0:00 – Intro 3:29 – Choosing Exclusivity Over Simplicity 7:34 – Volatility Laundering 20:32 – Liquidity in University Endowment Funds 31:49 – Alternative Investments 38:58 – Mutual Funds vs Other Investments 44:12 – Why not hire a personal fund manager? 48:04 – Advantages and Disadvantages of Mutual Funds 1:12:26 – Use cases for Mutual Funds 1:22:41 – Who are Mutual Funds not for?
--
More about us: https://cm.social/pms Connect with us : https://cm.social/pms-connect Deepak's Twitter: @deepakshenoy Shray’s Twitter: @shraychandra Capitalmind Twitter: @capitalmind_in
In this episode, Deepak and Shray unpack the ins and outs of international investing—why it matters, when it makes sense, and who it’s really for. From rupee depreciation to political and geographical risks, they explore the key reasons to diversify your portfolio beyond India’s borders.
They also discuss a crucial question: At what level of capital does it become meaningful to place your money outside? The conversation weaves in perspectives from investing greats—Peter Lynch, who believed in the power of consumer insight, and Devina Mehra, whose latest book "Money Myths and Mantras" emphasizes global allocation as a must-have strategy.
With fresh data on market returns (both in INR and local currency terms), the duo breaks down how different regions have performed—why Europe and China have struggled, and how the US tech boom, largely driven by the Nasdaq, has outshone the rest. But can the US continue to dominate, especially in light of Fed Chairman Powell’s recent remarks on tariffs?
They also touch upon an important side of global investing: taxation. From the complexities of capital gains to the lesser-known estate tax, and how investment vehicles like UCITS can help navigate these issues.
Tune in for a comprehensive, no-fluff guide to international investing—what works, what to watch out for, and how to do it right.
0:00 - 2:10 Introduction 2:11 - 8:27 Why should you invest abroad? 8:28 - 10:53 Economic growth ≠ Shareholder returns 10:54 - 19:35 How to select international investments? 19:36 - 27:31 Regular international investments 27:32 - 32:17 Commodity Diversification 32:18 - 40:50 Managed International Investment Solutions 40:51 - 43:37 Good time to global? 43:38 - 47:17 Domestic vs. International Brokers 47:18 - 50:34 Tax on Foreign Equity 50:35 - 54:17 Tax Collected at Source 54:18 - 56:38 U.S. Estate Taxes 56:39 - 59:50 UCITS
--
More about us: https://cm.social/pms
Connect with us : https://cm.social/pms-connect
Deepak's Twitter: @deepakshenoy
Shray’s Twitter: @shraychandra
Capitalmind Twitter: @capitalmind_in
At this point, you’ve probably read enough about tariffs to last a lifetime. But what if we told you the real story isn’t just about import duties or Donald Trump’s next announcement; it’s about a slow unraveling of the world order we’ve all taken for granted
In this episode, Deepak and Shray dig into how the US once helped shape a global economic contract — one where it bought the goods, paid in dollars, protected the rest of the world, and in return, the world kept buying US debt. It worked until it didn’t. Countries like China started playing a smarter game. They stitched shoes, then built the factories, then made their own brands, and finally started exporting those to the US. Somewhere along the way, the US realized it wasn’t in control anymore.
Tariffs are now the blunt tool being used to push back.
We break down what’s really happening, what’s likely to happen next, and how portfolios, both in India and abroad, need to adjust. If the world is becoming more inward-looking, where should your money go?
The world is changing. Listen in to make sure your portfolio is not caught off guard.
0:00 - 1:05 Introduction 1:06 - 3:17 What went wrong with the existing world order? 3:18 - 7:41 "The Unwritten Contract" 7:42 - 10:15 What a dollar can get you 10:16 - 15:22 Origins of Chinese Manufacturing 15:23 - 19:54 How the apprentice became the master 19:55 - 25:01 What's ailing Trump despite American glory? 25:02 - 26:00 The Multiplier Effect of Manufacturing 26:01 - 28:37 Why they resorted to Tariffs 28:38 - 30:41 Repercussions of Tariffs 30:41 - 33:33 De minimis Shipping 33:34 - 40:18 Shift toward an Isolated World (non-Tariff Barriers) 40:19 - 45:51 Global trade without the US 45:52 - 51:42 Investing themes during trade wars
--
More about us: https://cm.social/pms Connect with us : https://cm.social/pms-connect Deepak's Twitter: @deepakshenoy Shray’s Twitter: @shraychandra Capitalmind Twitter: @capitalmind_in
ETFs have taken over the world, or at least that’s what you’d believe if you spent any time reading financial media in the US. Passive investing! Low costs! No fund manager egos! And of course, that looming prediction: “ETFs will destroy price discovery!”
But in India? Crickets. While ETFs have become mainstream in the US, with trillions of dollars flowing into passive investing strategies, India's ETF story is still unfolding. Why haven’t ETFs exploded in India despite our obsession with stocks? And more importantly, should you be investing in ETFs or mutual funds?
In this episode, Deepak and Shray get into the weeds on all things Exchange Traded Funds — what they are, how they work, where they don’t work, and why, despite sounding like the next great revolution in investing, they haven’t quite clicked here yet.
00:00:00 - Introduction 00:02:01 - How big are ETFs? 00:07:30 - Why are ETFs so successful in the US 00:09:42 - How do ETFs work? 00:13:52 - Isn’t it better to move into ETFs then? 00:16:01 - Who are you buying the ETF from? 00:20:08 - Are there any advantages in ETFs over MFs in India? 00:25:10 - What role do Market Makers play in ETFs? 00:30:12 - When and why do ETF prices trade above their NAV? 00:39:14 - Role of liquidity in ETF prices 00:42:06 - Why don’t people do SIPs into ETFs and Stocks? 00:48:44 - How are ETFs useful for investors? 00:53:17 - What about Commodity ETFs? 00:55:47 - What about Liquid ETFs? 00:59:52 - How do regulations like stock-lending and free-float impact ETF returns? 01:04:53 - What are Deepak’s thoughts about Active ETFs? 01:07:06 - Will ETFs gain market share from Mutual Funds?
Deepak and Shray discuss the unexpected quirks and consequences of investing in mutual funds and pooled vehicles in general. The discussion covers how your returns and experiences can be impacted by other investors' actions, including issues with inflows, outflows, cutoff timings, and NAV calculations. Specific cases like DHFL, Yes Bank, and Zee promoter bonds are examined to highlight how complexities in pooled vehicles can affect investment decisions. Additionally, the episode provides insights on how to navigate these challenges and the importance of understanding the nature of pooled investments.
00:00 Introduction
00:43 Understanding Mutual Funds and Pooled Vehicles
02:43 Complexities of Pooled Vehicles
07:43 Impact of Inflows on Fund Composition
13:18 Challenges with Outflows and Debt Funds
20:00 Timing Issues and NAV Calculations
29:04 ETFs vs Mutual Funds: Arbitrage and Market Behavior
33:01 Case Studies: Yes Bank, DHFL, and Zee Promoter Bonds
37:50 Side Pocketing and Arbitrage
49:12 Investor Strategies and Market Timing Challenges
55:43 Conclusion and Final Thoughts
In today’s episode, we break down profit shares and performance fees, one of the most debated topics in the asset management industry. Are they a fair way to align incentives, or just another way for fund managers to charge more?
We get into the nitty-gritty of who can charge performance fees in India and how it works, the meaning of terms like management fee, hurdle rate, catch-up, and high watermark, and whether performance fees actually create skin in the game for fund managers. We also discuss why losses and performance fees don’t go well together, whether investors should care about profit shares or just post-fee returns, and whether paying a performance fee is ever worth it.
We also explore some of the murky areas of the industry, including hidden fees, commission structures, and the psychology behind why investors accept certain charges without question.
At Capitalmind PMS, we don’t charge a performance fee, and we explain why we chose this model. If you’ve ever wondered how fee structures impact your long-term returns, this episode is a must-listen.
00:00 Introduction and Disclaimer 00:42 Overview of Performance Fees 02:35 Understanding Management Fees 05:32 Performance Fees and Hurdle Rates 07:34 Catch Up and High Watermark Concepts 11:04 Complexities in Fee Structures 14:31 Skin in the Game and Incentives 29:34 Management Fee Only Model 31:17 Incentives and Performance in Fund Management 32:43 Principles of Charging Profit Share 33:14 Small Funds and Profit Share Justification 34:41 Mutual Funds and Profit Share Dilemma 35:49 Historical Examples and Active Management 37:37 Challenges in Asset Management 45:20 Regulatory Perspectives on Fees 51:09 Evaluating Investment Options 56:52 Final Thoughts on Profit Shares
Deepak and Shray analyze the implications of this budget on consumption, manufacturing, investments, and its impact on your wallet.
More about us: https://cm.social/pms
Connect with us : https://cm.social/pms-connect
Deepak's Twitter: @deepakshenoy
Shray’s Twitter: @shraychandra
Capitalmind Twitter: @capitalmind_in
In this episode, Deepak and Shray dive deep into the dynamics of the Dollar-Rupee equation. With the rupee at 85 to the dollar, what does this mean for us as investors and consumers? Are we losing 3-4% in dollar terms every year without realizing it? And if so, does investing in global assets provide a better hedge? Join us as we break down historical trends in the exchange rate, the RBI's role as the on the same and why inflation differentials drive the long-term trajectory of currencies (or why they may not in this case). Along the way, we explore everything from dosa economics to the peculiarities of India's remittance-driven current account. Packed with insights and a dash of irreverence, this episode is a must-listen for anyone trying to make sense of exchange rates and their impact on real wealth.
Timestamps
00:00 Introduction 00:31 Historical Context to the Rupee Dollar Equation 03:12 The Role of RBI in Currency Valuation 03:55 Dosa Economics 05:06 Inflation and Exchange Rates 09:29 Impact of RBI's Market Participation and Forex Reserves 17:49 Current Account and Financial Account Dynamics 23:14 Foreign Investments and Market Freedom 30:02 Tariffs, Exports, and Currency Manipulation 36:13 The Impact of Dollar Inflows on the Indian Economy 37:00 RBI's Role in Managing Rupee and Inflation 39:19 Government Bonds and Interest Payments 40:43 RBI's Forex Market Participation 43:04 Rupee Appreciation and FEMA 58:16 Investment Strategies and Global Opportunities 01:03:29 Speculation and the Non-Deliverable Forward Market 01:11:46 Concluding Thoughts and Future Outlook
Ever wondered if the Indian stock market still needs Foreign Institutional Investors (FIIs) now that domestic investors are stepping up? Shray and Deepak chew over this hot topic in our latest episode.
They examine questions like whether foreign investors are responsible for recent market declines, who the primary owners of Indian companies are, and why foreign ownership is decreasing. They discuss the impact of regulatory changes, such as increased KYC requirements and the end of tax benefits for investments through Mauritius, Singapore, and Cyprus. The episode also delves into the differences between Foreign Portfolio Investors (FPIs) and Foreign Direct Investors (FDIs), as well as the significance of retail and domestic investors in the market. The hosts conclude by discussing the future of foreign ownership and whether retail investors should continue their systematic investment plans (SIPs).
With retail investment soaring, the influence of foreign money seems to be waning—or is it? They also discuss the consequences of significant foreign withdrawals during global crises and compare the patterns of FII with Foreign Direct Investment (FDI), highlighting the intricate details of market shifts. They also take a look at global capital flows through the case studies of Hyundai’s, Holcim and British American Tobacco among others. Tune in to understand why studying both FII and FDI activity is crucial for grasping the bigger picture of market behavior.
More about us: https://cm.social/pms
Schedule a call with us: https://cm.social/pms-connect
Deepak’s Twitter: @deepakshenoy
Shray’s Twitter: @shraychandra
Capitalmind Twitter: @capitalmind_in
Deepak's first book: http://amzn.to/3CgkGea
In this episode of the Capitalmind podcast, Deepak and Shray dive into SEBI's recent report analyzing the profits and losses of F&O traders. The report reveals a staggering statistic, showing that over 90% of individual traders have lost money in F&O trading in the past few years. They explore the reasons behind these losses, the demographic impacts, and whether F&O trading is more akin to gambling than investment. They also discuss SEBI's new rules aimed at curbing losses and what these changes mean for both novice and seasoned traders. Tune in to understand the full implications of SEBI's analysis and what it means for the future of F&O trading in India.
00:00 Introduction 00:42 SEBI's Report on F&O Traders 01:41 Deep Dive into SEBI's Findings 02:32 Analyzing the Losses 06:00 Demographics of Losing Traders 07:57 Potential Misinterpretations of Data 18:06 The Appeal of F&O Trading 29:30 Speculation vs. Investment 30:39 The Role of Speculators in the Market 40:44 Comparing Trading to Performance Sports 43:11 The Discipline of Trading 43:42 Challenges of Undercapitalization 44:28 Intrinsic Value of Activities 45:10 Learning from Trading 49:08 Capital Requirements and Market Dynamics 52:18 Sophistication and Risk Management 57:20 Regulatory Impact and Market Participation 01:15:25 The Role of Speculation and Regulation 01:20:38 SEBI's New Rules and Their Impact 01:25:35 Conclusion and Final Thoughts
In this episode, recorded in early October 2024, we’re diving into a topic that’s on everyone’s mind: Is holding cash a smart move in these unpredictable markets?
We’re in what some are calling one of the most “unloved” bull markets—stocks keep rising, but investors (ourselves included) are uneasy, waiting for the other shoe to drop. To help us unpack whether cash can actually give your portfolio an edge during uncertain times, we brought in none other than Deepak Shenoy.
Together, we explore whether holding cash can protect you from potential downturns or even help you outperform the benchmarks. We also dig into the challenges fund managers face with cash calls, why getting back into the market can be harder than it seems, and how strategies like STPs (Systematic Transfer Plans) play out in real life.
Deepak shares some great insights, comparing today’s market to historical events like the 2020 Crash, Russia-Ukraine war, Brexit, and the 2008 financial crisis. Plus, we look at what Warren Buffett has done with cash during past downturns—and why even he hasn’t always gotten it right.
This episode is packed with practical takeaways including:
1) When holding cash makes sense—and when it doesn’t
2) Why fund managers sometimes get cash calls wrong
3) The emotional side of staying invested vs. going to cash
4) How IPOs and market liquidity can impact your cash strategy
If you’ve ever felt that itch to “do something” with your portfolio when markets are shaky, this conversation is for you. We break down the mental tug-of-war between holding cash and riding out the market, with Deepak sharing actionable advice that will help you stay prepared, no matter what happens next.
In this episode, Deepak and Shray dive into the intricacies of mutual funds, Portfolio Management Services (PMS), and Alternative Investment Funds (AIF). We analyze the tax benefits of mutual funds, highlight the liquidity advantages, and compare them with PMS and AIF in terms of fees, transparency, and investment flexibility. We also discusses why different products cater to different investors based on their income levels, asset sizes, and risk appetites. The conversation covers the psychological and practical reasons investors might choose one investment vehicle over another, the role of fund managers, and the impact of regulations on investment returns. 00:00 Introduction and Overview 00:13 Comparing Mutual Funds, PMS, and AIFs 00:55 Tax Efficiency of Mutual Funds 01:28 Challenges with Mutual Funds 01:41 The All Weather Equity Portfolio 02:23 Why Mutual Funds Aren't the Default Choice 02:46 Understanding Different Investment Products 04:13 Tax Implications for Different Investors 18:33 The Complexity of Mutual Fund Selection 24:06 Liquidity and Size Issues in Mutual Funds 27:18 PMS vs Mutual Funds: Key Differences 27:29 Large Investors' Preferences 28:46 Challenges for US Investors 31:09 Systematic Transfer Plans in PMS 33:22 The Importance of Fund Managers 35:31 Process vs Personality in Investing 46:42 Choosing Between PMS and AIF 52:21 Conclusion: Tailoring Investments to Individual Needs
In this episode of the Capitalmind Podcast, we take a deep dive into the world of unlisted and private securities. We’ll cover key topics such as:
- What exactly are unlisted and private securities?
- How do you value them, and what complexities should you watch for, like liquidation preferences and ratchets?
- Who can you sell these securities to, and what about corporate governance risks? Are these investments or just consumption in disguise?
- We also explore opportunities in the SME segment and how much of your net worth you should allocate to private investments.
- Whether you're considering investing in a friend's business or a pre-IPO startup like Swiggy, this episode will help you navigate the complex world of private markets.
Don’t miss out! Send your ideas for future episodes to podcast@capitalmind.in, and if you're ready to invest with us, visit capitalmind.in to learn more about our PMS service.
00:00 Welcome to the Capital Mind Podcast 00:37 Introduction to Unlisted and Private Securities 04:27 Private vs Public Limited Companies 07:32 Valuing Unlisted Companies 09:26 Complexities of Cap Tables 21:31 Exit Strategies for Unlisted Securities 41:19 The Impact of Swiggy and Zomato on Restaurants 42:57 Investment Opportunities in Unlisted Companies 44:01 Shenanigans in Private and Public Markets 44:49 Case Studies: Byju's and FarmEasy 49:22 The Role of Venture Capitalists 01:05:00 Strategic Investments and Their Impact 01:07:30 Challenges of Investing in Unlisted Companies 01:24:03 The Future of Private Investments 01:24:49 Conclusion and Final Thoughts
In this episode of the Capitalmind Podcast, Deepak and Shray dissect the surge in New Fund Offerings (NFOs) by mutual funds, dissecting why fund houses are launching new schemes and who truly benefits from them—whether it’s the AMC, the customer, or intermediaries like distributors. We also discuss the economics of fund distribution, the role of intermediaries, and how to identify the best options for your investments.
The episode also ventures into the often not talked about side of financial advisory, the unrealistic expectations of managing wealth independently, and the vital role of professional advisors. Additionally, they explore the cyclic nature of NFOs, investor hype in bull markets, and the risks of market oversaturation, concluding with advice on navigating financial products during booming market conditions.
Whether you’re a seasoned investor or just getting started, this episode is packed with insights that can help you make informed decisions.
Timestamps
00:00 Introduction to the Capitalmind Podcast and disclaimer
00:43 Overview of New Fund Offerings (NFOs)
02:29 Historical Context and SEBI Regulations
03:24 Fund Categories and Flexibility
05:00 The Role of Fund Managers and Themes
08:50 Marketing and Distribution Economics
12:04 Impact on Customers and Fund Houses
29:47 Advertising and Expense Management
33:33 The Role of SEBI in Fund Innovation
34:29 The Impact of Fund Variety on Investors
35:30 The Importance of Innovation in the Mutual Fund Industry
36:59 Challenges of Fund Categorization
42:43 The Role of Financial Advisors and RIAs
49:55 Mutual Fund Distributors vs. Bank RMs
55:27 When to Go Direct with Your Investments
01:05:50 The Cycle of NFOs in Bull Markets
01:09:01 Conclusion and Final Thoughts
Picture this: You’re at your favourite bakery, and you overhear that a celebrity is about to place a massive order for your favourite pastries. You rush to buy them all up before the celeb can, hoping to sell them back at a premium. That, in essence, is front running in the financial world.
We discuss how people pull off this trick and, more importantly, how they get caught.
(Spoiler alert: it’s not as glamorous as a Hollywood heist)
Axis Mutual Fund had their share of front running drama not too long ago. Traders making big bucks, splurging on luxury pads and flashy cars—sounds like a plot from "The Wolf of Wall Street”. We’ll break down the fallout and the lessons learned.
Currently, Quant Mutual Fund is going through allegations about front running.
How do you, as an investor, make sense of these allegations and decide on your next move?
Should you hold onto your Quant Mutual Fund investments or start thinking about an exit strategy?
We talk about all this and more in our latest episode of Capitalmind Podcast.
Recently, the mere hint of an inheritance tax proposal sparked a mini-political crisis? Thanks to a quick government rebuttal, it’s off the table—at least for now. But that’s not where the story ends.
As always, Deepak and Shray go head-to-head, weighing the merits and pitfalls of this hot-button issue.
We’re not just looking at the problem from 30,000 feet; we’re getting into the weeds, examining real-life scenarios and potential solutions that could impact you and your future.
Government Finances: Can an inheritance tax significantly boost government coffers? Or is it just another drop in the ocean of fiscal needs?
Societal Impact: Will taxing inheritances create a more industrious society, or will it just penalise those who’ve worked hard to create wealth for their children?
Implementation: What if we set the bar high, say at 100 crores or even 1000 crores? Would this make the tax more palatable and targeted?
Practical Hurdles: Imagine inheriting a house or a business. Sounds dreamy until you hit the wall of unrealised gains and logistical nightmares. We’re peeling back the layers on these challenges.
Future Planning: If you’re expecting a windfall 5 or 10 years down the road, how should you plan your finances today? Spoiler alert: It’s not as straightforward as you might think.
So, grab your headphones and tune in. Whether you’re a financial novice or a seasoned investor, this episode promises to challenge your thinking and maybe even make you laugh along the way.
Timestamps:
00:00 Introduction and Disclaimer
01:25 Should we have an inheritance tax?
07:36 What if inheritance tax is imposed solely on the wealthy?
15:42 Creating a Trust to offset tax
25:04 Are there significant practical difficulties associated with inheritance tax?
35:08 Doesn't implementing an inheritance or wealth tax help reduce asset prices or control inflation?
42:58 How should one prepare for potential inheritance taxes in the future?
In this comprehensive discussion, Fund Manager and Head of Research Anoop Vijaykumar and Shray Chandra distil the key lessons from over five years of managing the Capitalmind Adaptive Momentum portfolio.
Get a concise overview of the principles of momentum investing driving the portfolio’s success.
Learn from our real-world lessons on why momentum investing works for long-term wealth creation
00:36 Introduction
01:54 Momentum strategy in the last 5 years
03:30 Difference between the fundamental and quantitive styles
08:00 Random correlations when backtesting a quantitive strategy
10:30 Capitalmind Adaptive Momentum strategy
15:05 Why does momentum investing work?
18:54 Lessons learned from 5 years of managing momentum strategy
26:00 Will momentum stop working
29:30 How can we get more out of the momentum strategy?
Have you ever wondered why finance seems to have a forgiving nature?
From the sins of the past being easily forgotten to the belief in second chances, we'll explore the nuances of forgiveness in the financial realm.
We'll dissect the tactics some "for education purposes only" players use to enrich themselves at the expense of their students. It's a sobering reminder to always question the motives behind the message.
We uncover the darker side of startup culture, where founders blur the lines between innovation and exploitation. It’s a cautionary tale for aspiring entrepreneurs and investors alike.
Deepak & Shray, in their quintessential style, discuss nuances of investing and finance in this latest episode of Capitalmind Podcast.
Show Notes & References
00:00 Introduction and Disclaimer 01:35 Why is finance a uniquely forgiving industry? 19:37 Deepak’s views on AT 1 Instrument 28:23 How do customers react to their fund managers' pros and cons? 57:57 Critical look at how some financial educators profit heavily from courses that may not benefit students as promised. 01:05:40 A look into the darker side of startup culture where founders misappropriate funds and then start new enterprises. 01:12:00 Delving into the challenges faced by companies when customers misuse their power.
The idea that finance companies want to do everything from payments to lending to broking to investments is strange - why not just be good at one thing?
It’s a simple explanation, it turns out. Find out more about the business of money in a language you can easily understand, through the words of Deepak Shenoy and Shray Chandra.
Capitalmind manages Rs. 1700+ cr. as a SEBI-registered PMS, and has quantitative investing strategies that use extensively tested factor data to invest into stocks. Our flagship Adaptive Momentum strategy has outperformed the market indices over 5+ years.
References:
00:00 Introduction
00:17 Why does every company do everything in financial services?
12:41 Why aren’t banks more aggressive in growing and pricing things lower?
26:40 Discussion on the success of Bajaj Finance and arbitrage between Banks and NBFCs
36:46 Why aren't banks aggressive on lending ? What's the issue with lending?
56:49 Deepak explains the Indian Bankruptcy code
01:07:13 What can we do to fix this?
More about us: https://cm.social/pms
Schedule a call with us: https://cm.social/pms-connect
Deepak’s Twitter: @deepakshenoy
Shray’s Twitter: @shraychandra
Capitalmind Twitter: @capitalmind_in
Deepak's first book: http://amzn.to/3CgkGea
Ever wondered why circuits are in place?
It all started on Black Monday in 1987, where a 25% market correction prompted the introduction of market-wide circuit breakers in the US. These limits aimed to ensure market maker solvency and prevent panic-induced trading.
Fast forward to 2001, and India also introduced circuits to handle intraday market volatility. From the Nifty's inception to the imposition of index-level circuit filters, the Indian market landscape has witnessed a steady evolution in its approach to market regulation.
In this episode, we delve deeper into the concept of circuits, with real life stories and understand how they help the market.
We also discuss, should circuits continue to exist in their current form? or is it time to explore alternatives that foster greater transparency and resilience?
Show Notes & References
00:00 Introduction and Disclaimer
01:24 Background on limits or circuit breakers.
06:38 When did India implement the circuit breaker?
09:20 What are the current rules for circuits in India?
15:58 Why are circuits interesting in the first place?
19:07 What would happen if circuits weren’t there?
24:38 Some interesting stories on circuits in the stock market
36:34 What is a better way to manage circuits?
40:47 Will circuits continue to exit?
In today's episode, we delve deep into the recent actions taken by the Reserve Bank of India (RBI) towards the end of 2023 and the ensuing ripple effects they've set off.
The RBI, often the silent architect of our financial landscape, has made strategic manoeuvres that reshape the terrain for banks, non-banking financial companies (NBFCs), and borrowers.
Discover how these regulatory shifts could impact financial decisions and the broader economic landscape. From the nuances of risk weights to the implications for personal loan growth, this episode promises to demystify the complex world of financial regulations in a digestible and engaging format.
Here is a quick overview of what we talk about:
- We unpack the RBI's directives regarding risk weights and the restrictions placed on simultaneous lending and investing activities by financial institutions.
- Dive into how startups offering digital lending products, like CRED and Paytm, are affected and the challenges they face under the new regulations.
- Explore why your credit card limits might be scrutinised and how conflict of interest rules reshape lending dynamics.
- Understand why the RBI's focus on Alternative Investment Funds (AIFs) matters and how it impacts investors' portfolios.
- Debate whether these measures reflect a proportionate response from the RBI and what they suggest about the current state of our economy.
Timestamps 00:00 Introduction and Disclaimer 01:34 Deepak demystifies the two new regulations by RBI on Banks and NBFC 05:37 What’s the impact of these new regulations? Why should we care? 16:05 Why is RBI more concerned about personal loans? 24:54 Why aren’t you positive about the RBI action here? What’s wrong with the slowing loan growth? 32:20 If Startups are ready to take the risk, why is RBI stopping them? 45:14 Even after this bull run, why isn’t there lending against securities? 52:11 RBI has a new rule prohibiting Banks and NBFCs from evergreening loans through AIFs. 01:03:51 Is this a warning, a sign that the economy is over-heating?
Join us on Capitalmind Podcast, where we demystify the world of finance without the jargon. In today’s episode, talk about the asset management industry in India and what’s in store for the future.
Now get this - Mutual Funds own only 8% of Indian companies, while retail investors own 9%.
Let’s rewind. In 2005, despite impressive returns, MFs didn’t gain much attention due to high fees and the lack of tax advantages. Fast forward to 2018, capital gains and dividend tax changes sparked a surge in MF investments, increasing their ownership to 8%.
Explore the shift in India’s financial landscape – changing disposable incomes and tax adjustments have made MFs more attractive. The “MF Sahi Hai” mantra and the success of Systematic Investment Plans (SIPs) further contribute to their rise.
Regulatory improvements play a role, but we also discuss other investment vehicles – MFs, Portfolio Management Services (PMS), Alternative Investment Funds (AIFs), and more. Understand the evolving dynamics and where your money might fit best.
We dive into comparing investment vehicles and their equivalents in the US. Spoiler alert: India’s investment culture is rising, embracing the expertise needed to manage money with relatively low costs and instant liquidity.
Is passive investing becoming the norm? Not quite yet. We need more institutional capital for that shift.
We end the episode trying to connect the dots and see what the future of this industry may look like.
References
00:00 Introduction and Disclaimer 01:15 How is the money divided among different vehicles in the asset management industry? 06:36 Why do Mutual Funds have a lower ownership in Indian companies (8%) compared to retail investors who own 9%? 20:21 What are the downsides of investing in Gold and Real Estate? 27:40 Are we just one crash away from everyone turning away from equity? 34:38 Given that we have a savings culture, will investing grow faster in the future? 40:42 Which type of investment is good for whom? 44:53 Mutual Fund Vs Direct Stock Investing: How are things different in India and the US? 01:02:46 The future of the Asset Management industry in India.
Ever wondered about the whole money thing – how it's made, where it comes from? Well, in this podcast episode, we're breaking it all down, and without using any jargons.
We also promise that this podcast will not remind you about an economics class. Because, it's not a lecture on economic theories. Nope. It's more like your friend explaining things in a way that just clicks. You'll walk away with a bunch of useful insights to help understand the concept of money a little better.
Make sense of those tricky concepts you read about in newspapers or on business channels. You know, the stuff that usually leaves you feeling a bit puzzled.
Write to us at podcast@capitalmind.in if you have feedback or ideas. We read and reply to all emails.
References
00:00 Introduction 01:36 How is money created? How does it grow? 12:41 Money printed is not the same as money spent. 32:16 How do banks create money by lending? 40:59 How does money flow between banks and RBI? 43:53 How do banks make money? 48:40 More ways to create money 53:59 Wealth effect: People often assess their wealth without accounting for the impact of taxes. 59:41 The central bank isn't the one creating inflation. It's the people. 1:02:53 Economies create wealth by moving up the value chain
If you are even a little active on social media, especially Twitter, you would have witnessed the exponential increase in tweets related to options trading. Today, we are are going to talk about that - Indian's going gaga over options trading.
Deepak & Shray, take a detailed look at this fascinating phenomenon and tell you all that you need to know - except telling you about an options strategy that always makes money no matter where the market goes.
In this episode, we delve into the history of options, the factors driving their growth, and the potential risks and rewards.
From the earlier days of Badla to the scaling of options trading post-2006, we witness a significant shift in the landscape. What was once a predominantly institutional activity has evolved into a market dominated by retail and proprietary investors.
Several factors contribute to the surge in options trading, including simplified Securities Transaction Tax (STT) structures, technological advancements, flat-rate brokerages, and increased retail participation. The introduction of weekly options has especially transformed the game, turning it into a more accessible yet speculative arena.
But, all this is not without risks of ruin. Deepak raises valid concerns about the potential downsides of increased options trading. He shares real stories and lessons, through real-life examples, about the impact of options trading on individuals.
We realise that this is the time when the fine line between responsible investing and excessive risk-taking becomes apparent, emphasising the need for education and awareness.
While options trading has its drawbacks, Deepak acknowledges its positive aspects, such as providing liquidity and offering potential returns for those well-versed in risk management. He emphasises the importance of using options wisely and understanding the odds.
_________________
Timestamps
00:00 Introduction and Disclaimer
01:26 History and growth of Options trading in India
07:55 What has contributed to this massive growth in Options trading?
27:17 Is there a problem with increasing Options volume? Will the government come in and do what it did to all those gaming firms?
35:16 How do people lose money in options?
48:33 Isn’t SEBI systematically reducing leverage?
50:30 How to not get suckered while trading Options in India?
1:02:11 What are the good uses of Options?
1:14:15 Where do you think Options trading will go from here?
Welcome back to the Capitalmind Podcast – a place where we dissect the nuances of finance and investing, in a world that never stops changing. Your hosts, Deepak & Shray, are here to de-clutter yet another topic in their lucid and candid style.
In today's episode, we're zooming in on Portfolio Management Services (PMSes), a vehicle for your long-term wealth management. Here's a glimpse of what's on our financial canvas today:
- PMS Demystified: We're going to peel back the layers on Portfolio Management Services – both the legalese and the real-world implications – to answer the quintessential question: "Does it make sense for you to invest?"
- The Art of Timing: We'll delve into the art and science of choosing the right time horizon for your investments and why it's the secret sauce behind successful wealth building.
- The 50 Lakh Question: At point of your investment journey should you consider investing in a PMS?
- What's the PMS magic?: What can it do that traditional investment avenues can't? Specifically, does it offer any edge against Mutual Funds? (Spoiler alert: It does)
- The Ideal PMS Investor: We'll introduce you to different archetypes of investors who stand to gain the most from embracing PMS offerings from our experience of managing 1200+ crores.
Time Stamps:
00:00 Introduction and Disclaimer
01:30 What is a Portfolio Management Service and what’s it good for or what’s the point?
05:05 Who should invest in a PMS? And what should be the tenure of your investment?
08:53 Where to invest for short term needs?
13:27 The issues with investing in a mutual fund.
27:53 What does a PMS offer? What are the benefits of a PMS?
36:23 Once you cross a 50 Lakh mark, should you move from MFs to PMS?
42:36 What can a PMS do differently?
46:51 What about the returns of PMS and is it worth it vs Nifty?
52:15 Who shouldn’t invest in a PMS?
58:27 Who should invest in a PMS?
If what you hear today intrigues you, head over to Capitalmind Wealth to explore how our PMS services might align seamlessly with your financial aspirations. Our fee structure, ranging from 0.25% to 1%, keeps it straightforward, with no hidden performance fees.
Schedule a call
Alternatively, shoot us an email at connect@capitalmindwealth.com, and we'll be more than happy to provide you with additional insights about our PMS offerings.
You've tuned in to another episode of The Capitalmind Podcast, where we tackle a question that's been on your mind: "There's a lumpsum in hand, what's your next move?"
In a world where SIPs are all the rage, we're steering the ship towards understanding how to strategically deploy a substantial lumpsum amount.
Our hosts Deepak & Shray walk you through these aspects of managing, deploying and even spending that lumpsum gain. They discuss:
- Deciphering tax implications: The financial realm is fraught with complexities, especially when it comes to taxes. We delve into the intricacies, figuring out how you can harness the power of tax efficiency to maximise returns.
- Debt management strategies: From housing loans to high-interest obligations, every debt carries a unique weight. We share insights that empower you to navigate this terrain with finesse and help you to make informed choices
- Securing education and retirement: As the custodian of your financial future, you'll need strategies to earmark funds for your children's education and seamlessly transition into a well-funded retirement. Planning is key, and Deepak has you covered.
- The art of consumption and experience: Beyond investments, the episode delves into the delicate balance between material consumption and meaningful experiences. The discussion prompts you to curate a life that blends financial prudence with personal fulfilment.
Lastly, for those who've experienced an ESOP exit or find themselves grappling with a lump sum, our website capitalmindwealth.com offers tailored services designed to cater to portfolios exceeding 50 lakhs. For feedback and podcast ideas, write to us at podcast@capitalmind.in.
References 00:00 Introduction
01:30 ESOPs taxation and Whats the right way to allocate large lumpsum amount?
18:43 Which option is more preferable: Paying off housing loans sooner or investing in the market.
29:50 How to plan for your kids education?
34:57 Whats the simple rule of thumb for retirement planning?
40:21 If you have a large sum to invest should invest it via SIP or Lumpsum?
49:45 Don't fall for the products that assures you low risk and high returns.
59:36 Say no to angel investing
01:04:04 Consumption - all the things you wanted to do, make that list and do these
01:12:24 Types of windfalls: End year bonus vs exit from some ESOPs or synthetic ESOPs
01:20:43 Charity and Philanthropy
Liked the episode? Just tweet to us at @capitalmind_in and let us know. That's all we need to keep going!
Our latest podcast episode is here, and it's all about exploring the different ways investors make money in the market.
From thrilling arbitrage strategies to the art of short-term trading, we'll cover it all in a language that even your neighbour's fish could understand (well, almost!).
But that's not all—our experts will take you on a journey through long-term fundamental investing and quantitative approaches too.
Expect some fascinating stories, like the infamous LTCM blow-up, and how best investors (& trades) made their fortunes. We'll also unravel the logic behind the elusive VC's hunt for 50x returns and how even "value stocks" need a dash of momentum.
So, whether you're an investing enthusiast or just curious about the market's mysterious ways, you won't want to miss this one.
References 00:38 What do you think about the new all-time high? How do you view different types of investing strategies in the market and how to make money from these strategies?
24:27 The problem with peoples expectations:When I say stock markets do 12%, people expect this to be linear.
27:00 Concept of Expectancy
33:29 Problem in arbitrage is competition, so you need to lever yourself up
38:21 Option volatility trading - sell options expiring in 2 days and make the decay
46:32 When VC wins they need to win huge
49:50 Nifty monthly returns - how do quant strategies do?
56:52 We have just hit all time high. Based on the past data, how long can this good time potentially last? Which one is your favourite investing strategy?
Liked the episode?
Just tweet to us at @capitalmind_in and let us know. That's all we need to keep going!
Welcome back to another episode of our podcast, where we dive deep into the world of finance and investment. In today's episode, we will be exploring the fascinating realm of mutual fund costs and SEBI's recent proposals to bring them down.
As the saying goes, "The devil is in the details," and when it comes to investing, understanding the various expenses involved is crucial for making informed decisions.
In this captivating episode, we will dissect SEBI's show notes, which shed light on the inner workings of mutual fund costs and the need for change. We'll embark on a journey led by our expert hosts, Deepak & Shray, who will unravel the complexities of the system and explore the potential implications of SEBI's proposals.
Get ready to gain valuable insights and answers to burning questions.
- What is the Total Expense Ratio (TER) of a mutual fund, and what does it include and exclude?
- Why does SEBI propose changes in TER, and how will it affect mutual fund investors?
- How do large distributors exploit the system, and what measures can be taken to address this issue?
- Can tweaking TERs alone make the mutual fund industry 10x bigger, or are there other critical factors to consider?
- What innovative avenues could mutual funds explore to earn higher TER while providing value to investors?
Tell us on twitter @capitalmind_in on how did you like this episode. Your feedback means the world to us!
Show Notes & References 02:00 Thoughts on the recent discussion paper by SEBI on Mutual Fund TERs
10:30 SEBI is saying "You are making too much money", reduce fees
19:25 Largest India equity scheme is charging the maximum fees possible
31:30 Limited Purpose Trading membership for AMCs to trade directly on the exchange
43:00 Why should a big fund house have the ability to charge more on a new scheme?
48:00 Performance based AUM through sandbox
53:00 How do you make the mutual fund industry 10X bigger?
"If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck", goes the saying. Arbitrage mutual funds are actually taxed as equity funds but they actually behave as debt funds.
And this tax arbitrage of arbitrage funds is what the regulators may be looking to fix.
In light of this, we have our latest episode of the Capitalmind Podcast, where we dive into the intriguing world of arbitrage mutual funds, also known as arb funds.
In this shorter episode, our hosts, Deepak and Shray, explores the role these funds play in your investment portfolio and delves into the impact of recent changes in debt mutual fund taxation on arbitrage funds.
Here's a sneak peek of what you can expect from this episode
- The Role of Arbitrage Funds: Discover the peculiar position these funds hold, being described as equity funds but offering debt-like returns.
- Taxation Changes and Their Effects: Explore how the recent changes in the income tax code could potentially affect arbitrage funds.
- Deepak shares his insights on the first and second-order effects of these tax changes and highlights the potential short-term buying opportunities that may arise.
- Risk-Free and Low-Risk Investment Options: Understand the investment landscape going forward in the likely new tax environment. Discover what alternative options exist for risk-free or low-risk investments in light of these changes.
Here are five key questions that will be answered in this episode
- What role do arbitrage funds play in your investment portfolio?
- How will recent changes in debt mutual fund taxation impact arbitrage funds?
- What are the first and second-order effects of tax changes on arb funds?
- What risk-free or low-risk investment options are available in the likely new tax environment?
- How significant is the presence of arbitrage funds in the stock market, and what does it mean for overall market volumes?
Join us as we unravel the complexities of arbitrage mutual funds and gain a deeper understanding of their implications for your investment strategy.
Show Notes & References 01:00 What do arbitrage funds (arb funds) do and where they fit in your investment portfolio?
08:30 Why didn’t arb funds become the FD replacement?
12:30 How big are arbitrage funds and what does that mean as a percentage of total volumes/positions on the stock market?
18:45 Arbitrage Funds are a huge part of our market and it's a problem. Why?
21:30 First and Second order effects of taxing arb funds like debt
34:00 What are the advice or takeaways?
If you have any feedback, ideas for future topics, or questions, we'd love to hear from you. Send us an email at podcast[at]capitalmind[dot]in.
For those seeking professional wealth management services for portfolios exceeding 50 lakh, visit Capitalmind Wealth.
"Taxation is the price we pay for civilisation," as the saying goes. But what happens when the price tag keeps going up?
You may have thought you understood the friendly taxation system, until a new rule comes up that leaves you feeling like you've been sucker-punched. That's what recently happened when the government took away the tax efficiency of debt mutual funds and increased taxation. Suddenly, investors were left wondering how this would impact their investments and whether they needed to change their strategies.
In this episode of our podcast, Deepak and Shray delve into the conversation around the new taxation rules for debt funds. They ask the tough questions that many investors are likely asking themselves such as:
- whether taxation should be a factor when investing in equities,
- what to do with existing debt funds,
- whether foreign investing is still exciting after all the taxes.
But it's not all doom and gloom. They also explore other investment options such as MLDs, Gold, Real Estate, Startups, AIFs, and ETFs.
Taxes are indeed taxing. But who knows, maybe someday Pink Floyd will come up with a new hit single titled "We don't need no TAXES." Until then, tune in to our podcast to stay informed and keep your investing game strong.
Don't miss out on the show notes and references for this episode, where you'll find timestamps for each topic covered. So grab a drink, relax, and join us as we explore the fascinating and ever-changing world of investing and taxation.
Show Notes & References 8:50 Now all debt instruments are taxed similarly, isn't it now a fair system?
18:45 What should I do with my existing debt funds?
27:00 Should taxation be a factor while investing in equities?
33:00 In stocks, should you sell underperforming stocks and move to other stocks?
36:00 What about MLDs, Gold & Real Estate.
53:00 How investments in startups are taxed?
56:00 What about AIFs and ETFs?
1:05:30 Is foreign investing still exciting after all the taxes?
1:09:00 Final thoughts
“A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster”
- Bernard Baruch
Short selling is mostly misunderstood and often demonized. Quite understandable, it's difficult to put your head around a concept that involves selling something that you don’t already own. But, it’s not as sinister as it is made out to be. Markets have enough checks and balances to accommodate short sellers and maintain their balance.
Recently, we saw Adani group stocks come under attack by a US-based short seller which resulted in the marketcap of the group falling more than 50% within a month.
This sparked a discussion on the concept of short selling. We're not going to talk about the specifics of this short by Hindebug. Instead, in this episode, we will talk about the nuances of short selling, their impact on the market, and dive deeper into how the whole thing works.
Join, Deepak & Shray, as they talk about:
- How does short selling work?
- Is short selling always to bring down a stock?
- The operational aspects of short selling in India and the US?
- Examples of different short trades & how they played out
- Which market players, except short sellers, also short stocks?
Show Notes & References 1:10 What is short selling
5:15 Why people would do short selling?
11:30 Are HFTs also market makers? Or speculators?
13:30 Paul Tudor Jones and the 80s crash
19:30 How do Indians short a stock?
23:00 How do US traders generally short a stock?
33:00 NSEL fiasco
42:00 Do arbitrage mutual funds also short sells stocks?
45:00 How does a foreign fund short an Indian stock?
47:00 Should short selling be illegal?
49:00 Can a PMS (like us) go short and benefit from such trades?
54:30 The thing called "short squeeze" and stories from far & recent past
Things escalate and hit the fan very quickly in banking. It's fascinating to see how banks go belly-up for the same fundamental reasons but in an entirely unique way each time.
It's like being served the same romantic comedy story again and again with different actors, locations, and songs. But, these banking crisis stories are not as enjoyable and they hurt real people financially and emotionally.
In this episode, we discuss the crisis at Silicon Valley Bank.
How this seemingly robust, conservative, bank with $180 billion in deposits tumbled down in just a couple of days. All was good with the Silicon Valley Bank until, one day, it wasn't.
NO, there was no accounting scam. This isn't like Enron.
NO, there wasn't any irresponsible speculative betting. This isn't like Lehman.
This time it's a different story. But, with the same result.
Listen in as Deepak and Shray tell you everything you need to know about the Silicon Valley Bank crisis:
- What actually happened?
- What could SVB have done differently starting a year ago?
- Understand how rising interest rates affect the business of banking
- What is going to happen next?
- Lessons for the future
If you enjoy Capitalmind Podcast, tweet to us @capitalmind_in and let us know. It doesn't take more than 2 minutes and is the fuel that keeps us going.
Anyone who thinks financial accounting is boring hasn't seen the creativity in some of the financial statements. Not just in India but across the world.
In this podcast, Deepak and Shray discuss the shenanigans of financial accounting while referencing various case studies from the business world. This discussion is important because "new age" businesses in India have started reporting "adjusted" accounting statements along with standard reports.
While we do understand the need for "adjusted" metrics to gauge the health of a business. Especially when the nature of business is unconventional and may not be represented well by the existing reporting system. But more often than not, such adjustments are used for misguiding investors.
Listen in to figure out:
- Why do businesses need to report adjusted earnings?
- How cheques, affiliates, GMVs, and ESOPs are used for creative accounting?
- If such reporting is legal, why should investors care?
- How do you recognize whether adjustments are real or not?
Show notes and time stamps
1:50 - What’s the big issue with showing adjusted revenues?
10:20 - Shenanigans of adjusting revenues go back to the days of AOL (1990s)
13:45 - Argument of using the contribution margin
23:00 - How do “adjusted” numbers mislead stakeholders?
27:30 - Examples of creatively using metrics to manipulate numbers?
52:40 - VCs & Investors want “adjusted” metrics to understand business performance
1:00:00 - How to recognize if adjustments are real or not?
Stockbroking is a unique business enabling millions of people to trade billions of dollars of stocks with unknown counterparties. All trades, in this highly regulated ecosystem, are executed seamlessly, settled correctly, and recorded meticulously.
It’s fascinating to see how far India has come in making this ecosystem world-class and in some cases, the best in the world.
In this podcast, Deepak and Shray discuss the nuances of stock broking and how proposed regulations will impact the stock broking industry. They discuss, in detail, the role of stock brokers, regulators (SEBI), clearing corporations, exchanges, and investors.
As an investor, how brokers are regulated doesn’t impact you directly. Yet, it is important to figure out what happens to your money when you click that buy/sell button on your app.
Listen in as we talk about:
- How does stock broking work in its present form?
- What are the new regulations proposed?
- How will these regulations impact the stock brokers?
- How will it benefit the investors?
Timestamps:
02:10 - How trades are settled by your broker and exchange? Earlier and Now?
14:15 - Moving from t+2 to t+1 in settling share transactions
16:20 - Now clearing corporation holds the transactions before settlement. Is it safe?
21:15 - The practice of commingling (shares & money) and regulations around it
40:00 - Drying up float income and the new role of a broker?
44:00 - How much does “no float income” hurt the broker?
52:30 - Will these regulations, meant to protect investors, actually lead to an increase in brokerage charges?
55:10 - Can these regulations prove to be counterproductive?
1:03:00 - Closing remarks
Forecasting is a very difficult business, like selecting lottery tickets. No one could have predicted 2022 as a year in which there was geopolitical war, worldwide inflation, a massive hike in interest rates worldwide, and the US S&P 500 down about 20%, and yet, the Indian markets ended up 4%. If anyone got this spot on, they could still be terribly wrong for 2023.
That’s why we don’t predict, we react.
So, what’s going to happen in 2023?
We can almost hear this question, despite all the data that says prediction is a waste of time. But then, much about the markets is an entertainment business, which means it’s great to see people make crazy zany predictions, and maybe some of them will win. So we’ll participate mildly in what should purely be entertainment, even if at some point it appears to have deep investing insights.
Show Notes and References
1:55 Where should we invest in 2023 and some random predictions
3:00 Four ways this decade will be different from the last one
8:30 Return of Volatility in the markets
14:00 The peril of high interest rates
Podcast: Investing in a world with high interest rates
17:00 Return of inflation and higher yields
23:00 Putting Indian inflation in perspective
34:20 Geopolitical turmoil & the return of asset-heavy
39:40 ChatGPT, role of AI & Predicting how humans will react
47:00 Tactically where do I invest my money now?
51:00 Sectors that are positioned well for the current macroeconomic scenario
59:45 Will emerging markets outshine US markets?
How did you like the podcast? – Tweet to use at @capitalmind_in
In this conversation with Shray, Deepak shares why he feels now is the time for India's concept of a Retirement Account - he calls it the MERA account. This account should help improve investment opportunities for retail customers, create a longer-term investment horizon and push people to save for their retirements.
Listen in as we discuss:
- The concept of a retirement account
- Impact on the economy and people
- Imagining a retirement account scheme that works for India
- The operational aspect of such an account
- Who would oppose such a thing?
Show notes and references
2:00 - Seven consecutive years of positive market returns for India
4:00 Seize the opportunity of India story with retirement accounts
Read: My Empowered Retirement Account (MERA)
8:30 Where do LIC and EPFO invest retirement money
"We're giving asset managers our retirement money and asking them to do great things for the next 20 - 30 years... But, they're not doing great things... They are conservative.. not letting me realize my larger risk appetite."
14:30 ELSS equity funds hold money for a longer period of time. Can't they act as retirement funds?
17:00 The peril of investing for retirement with post-tax money
25:00 Deepak introduces his idea of MERA - My Empowered Retirement Account (MERA)
33:00 Why does this matter so much at the national policy level?
41:20 Who are the people who would feel this is not a good idea?
Of late, we have been discussing macro trends that affect the stock markets, the economy, and as an extension, the world. We have been zooming out to capture the big picture painted by investors, regulators, and the invisible hand of Mr. Market.
In this episode, Deepak & Shray break from the trend and do something different. Rather than zooming out, we zoom in. We discuss two companies that are going through fascinating developments and make for an interesting discussion.
LIC is a recently listed insurer that has a gigantic balance sheet and is a household name in our country of 1.4 billion. It operates in a market that is expanding wider as well as penetrating deeper. Yet, the company seems to be valued poorly by the markets. What’s happening here?
HDFC and HDFC Bank announced that they will merge at the start of this financial year. The merger is progressing rapidly, getting through from one regulatory approval to another, without much drama. But, this merger is causing drama at unrelated places that have nothing to do with the business or the merger (well, not directly at least). Will this merger make index funds do crazy rebalances?
Listen In.
Timestamps and highlights 2:00 - LIC has fallen 30% from its IPO. What’s going on?
4:25 - Cultural shift to maximize shareholder value
5:00 - Participating and Non-Participating Policy
“.. This quarter, LIC said, you know what we have 15000 crores of profit.. which we didn’t know we can take.. it turns out that they can and they did.. ”
11:15 - 100% of the profit from the Non-Participating Pool should have come to shareholders
19:30 - What happens to LIC, due to its high equity holdings, what happens if markets don’t do anything for the next 10 years?
25:30 - Why isn’t the market not enthusiastic about LIC if this is such a fantastic opportunity to buy?
30:15 - HDFC merger and the opportunity with Index Constitution
41:30 - The worrying thing about Index funds
As we slowly settle into the post-pandemic era, one of the hallmarks of this period has been higher inflation than we have seen in the recent past. In response to rising inflation, central banks across the world have responded with a fierce interest rate hiking excursion.
As a consequence, neither of the asset classes–stocks, or bonds, have performed well recently. It raises an essential question: how should we look at allocating our savings?
That’s precisely what Deepak and Shray are here to talk about, among intriguing followup questions one may have when it comes to Investing in a world with high interest rates, including which pockets to consider in financial and real assets. Listen in.
Timestamps and highlights 01:30 — To an average investor, is debt coming back as a relevant asset class?
“If you have multiple periods of high and low interest rates, you might actually get very good returns on certain corporate, or even government bonds.”
“[…] It’s coming to a point where debt might actually start to become an interesting investment, simply because interest rates across the world have gone up. This is not the time to look backward, but to look forward and say going forward, returns might actually be quite good from here.”
09:40 — Looking forward, how should one look at asset allocation? And, when is the right time to look at the debt markets?
“You might actually want to position yourself at the outer end of the spectrum in government bonds when the RBI switches its stance. But, until then, I think it’s a waste of time because you may see interest rates go up substantially. And we don’t even know how long they’ll go up.”
“Debt is a very boring instrument. What happens in equity markets in ten days, happens in six months in the bond market. It happens slowly over time, it’s excruciatingly painful, and people rejoice over 1% returns. […] But, I think the value in looking at a bond market as an equity-esque investment, only happens when interest rates start to come down.”
25:09 — Will high interest rates emanate an opportunity in gold?
“It is not inflation that drives gold prices, it’s the fear of inflation that drives it.”
26:49 — What about opportunities in equity markets?
“If in a low interest rate environment, the biggest beneficiaries happen to be zero debt service companies, then from an intuitive perspective, the beneficiaries in a high interest rate environment are companies with very high levels of debt, but whose competitors need the same levels of debt, but can’t acquire it because they don’t have the same standing in debt markets.”
40:03 — Are there repercussions on the startup ecosystem?
“The unfortunate problem of startups is that they come from the concept of needing capital to burn.”
50:05 — How long do interest rate regimes last?
“We have had a very long period of very low rates. Can that mean that we will have a longer period of high rates? The answer will come from how much damage there will be to the economy before the central banks blink.”
52:10 — How would we know when there's a pivot?
“Interest rate cycles don’t change overnight, they take a long time. Watching an interest rate cycle change is like watching paint dry. Six to eight months, something will happen, and suddenly the cycle would have changed.”
57:30 — What makes Deepak optimistic about investing in the current landscape?
“If you don’t deploy in an uncertain world, when do you deploy?”
RBI released a discussion paper that said: We’ve let you good people live all this time with “free” payment systems, so should we allow banks to start charging now? Specifically for UPI, which has reached volumes of 10 lakh crore rupees per month? And should we charge merchants?
Deepak's answer is a big NO. He firmly believes that the payments ecosystem (and the economy as a whole) will gain much more than any fees on UPI transactions will. As always, Deepak has a context to his argument and covers a wide range of nuances.
Listen to this podcast to understand his view on different aspects of the UPI payments system, its evolution, and the ways in which it can drive innovation. Also, this podcast covers many different aspects than Deepak's earlier post on the same topic.
Show Quotes & Time stamps
02:00 - Deepak and Shray trade fascinating stories about payment systems before UPI.
07:00 - The interoperability of UPI is a game changer
10:30 - How much do we pay for other payment systems?
“RBI spends 4,824 crores per year printing cash. None of that cost is borne by anybody except the government itself”
14:30 - The evolution of ATMs, Cheques, NEFT, RTGS, and the big role that RBI played in making these systems affordable for users.
21:30 - Has UPI always been free? Or has it also evolved over time to be free?
“The government went to parliament and passed a resolution to make UPI free… That’s the extent we went to keep this payment mechanism free”
“1,00,000 Crore is now available to banks to make money by parking it RBI and earning interest…. This is because people want to keep money with banks to make UPI payments”
31:00 - How much does it actually cost to run the UPI payments system?
“NPCI spends just ~680 crores per year maintaining the UPI infrastructure. Compare that against the float income that banks make on the additional 1 lac crore float”
34:00 - The argument that UPI is a toll road so you should charge for this "public infra"
“Credit cards transact about 100k crore a month, debit cards 60k crore per month, ATM withdrawals are at 300k crore per month…. So even now, after all these years, credit + debit card transactions are not more than cash”
41:00 - If you don’t let players charge for UPI, who will fund innovation?
“Internet protocols were free and they disrupted the world through innovation”
“Interestingly, in the payments ecosystem, all innovation has come from the regulator and not private players”
43:40 - Counter arguments from Deepak’s Twitter on why UPI shouldn’t be free.
44:00 - Google and PhonePe did all the handwork to make UPI popular. Now you’re telling me I can’t make money on it?
“You’re building a road and they tell you... you can never charge a toll. But you still keep building that road… that’s the payment apps for you”
50:00 - Let’s say that the biggest private players leave because you won’t let them make a profit. The top 2 guys control ~75% of all transactions. What happens to the ecosystem now?
1:02:00 - Why regulators have enforced limits on incentives and fees?
“Financial regulation is not like tech where if you’re too big, rules change for you. Here, if you are too big, and you disturb the system, the regulator first makes you small and then beats you”
1:05:30 - Government responses to the UPI monetization paper were very harsh. Why so?
“Hoarding cash is ok. Spending that cash on the economy creates a whole new economic system that’s outside the view of the government. That’s not ok”
“From Jan 2020 to now, the total ATM withdrawals are flat. UPI has gone from 120k crore to 1000k crore. The fact that UPI transactions are free has reduced cash transactions”
1:09:30 - The number of UPI transactions has drastically increased. But, is that all? The UPI tech reached its full maturity? What do we have to look forward to wrt UPI?
1:14:00 - UPI as a credit check for lenders and a game-changer for quick small loans
There’s a lot more interesting stuff ahead with UPI. We’re just getting started!
Recently, as of 7th September 2022, total Demat accounts in India touched the 10 crore mark. This is a staggering increase from 4 crore Demat accounts in Mach 2020. This alone is a testimony of increased participation and inclusion of individuals in Indian markets.
More and more Indians, especially youngsters, are taking to investing in equities enabled by their smartphones - digital broking, increased information access, and social media influence.
The whole securities (stock) market ecosystem has evolved immensely over the past decade and deserves a lot of credit for the recent growth in the participation of new investors. At the helm of the ecosystem sits our regulators who are responsible to enable, guide, protect and watch the market participants to ensure that we have a fair and thriving market.
In this episode, Deepak and Shray talk about the role SEBI can play in shaping the future of the markets. They talk about data warehousing, data accessibility, regulatory enhancements, bond markets, disclosures & reporting, and a lot more that would make our markets more accessible.
02:00 - As low as only 3% of household income is directed towards stock markets. Why are people so scared of investing in stocks?
04:00 - Game changers - Digital public goods in our financial system
09:00 - Data warehousing framework at RBI and its US counterpart
16:00 - Does an average investor even use the granular data that we’re expecting the regulators to build for?
24:00 - What company data should a centralized database ideally have?
32:00 - The way Indian companies play with stock tickers
34:30 - How will this organized information make things better for all participants?
39:30 - Better information access makes our markets more accessible to FIIs
43:00 - Crazy things that mutual funds & companies do with disclosures
48:00 - PMS & AIF returns should be cross-verified and shouldn’t be based on self disclosures
“The more developed you are, the more signages you see on the road”
55:00 - SEBI is a far better regulator than many western counterparts. What do you still wish they should improve
59:00 - Would information disclosures will be a hassle for smallcase companies?
1:03:30 - AMFI - the Self Regulatory Organization (SRO) recognized by SEBI
1:11:00 - What can SEBI do less to make space for things you wish it should do?
1:15:00 - How much impact can SEBI have on increasing household participation in the markets?
Markets are slaves of earnings and liquidity. Liquidity has taken prominence after the coronavirus outbreak. At first, central banks across the world increased liquidity by cutting rates and helping their populace to live through the pandemic. Then the after effects of increasing liquidity hit – increased inflation.
Now, the same banks are sucking out liquidity by increasing interest rates to counter inflation. The looming after effect of increasing rates is the “r” word that is too pious to speak loudly.
In this podcast, Deepak & Shray discuss the two central banks that impact us the most – RBI and FED (Federal Reserve System, USA). What makes this podcast interesting is that we are looking at everything from the lens of who does better – FED or RBI?
Refer to the show notes to see the wide range of things discussed and start listening.
.
Show notes & references:
02:00 - Why RBI will buy dollars to keep the rupee from appreciating?!
Refer: What the Fed's Big Balance Sheet Unwind Means for Markets
05:00 - What happens when RBI sells dollars?
07:00 - How does it control the liquidity of the markets?
14:00 - How have banks run out of liquidity?
17:30 - If banks need money, why don’t they increase their FD rates?
“Government is now a better bank than all banks. It’s also safer”
19:30 - RBI has taken out liquidity, you want to protect the status quo now. How does RBI do it? What are the consequences?
“RBI owns 3X more of US government bonds than it holds Indian government bonds. But things are changing.”
25:00 - But is the FED doing now?
26:30 - The interplay of treasury and Fed in the US government monetary environment
"RBI hates to buy government bonds because it knows the government is fiscally irresponsible. The US would buy their govt bonds knowing that their government is even more fiscally irresponsible."
28:30 - Mortgage backed securities and agency guaranteed debt.
“FED reduced their balance sheet by ~0.5% while RBI has already reduced the balance sheet by almost 10% in the same period”
35:00 - How increasing interest rates will impact different sectors & industries?
37:00 - If US interest rates go to 4% it will impact India and the world
38:15 - What makes India be in a bright spot as compared to the west?
43:30 - UPI is 10X the size of credit cards in terms of transactions. It’s massive.
47:00 - We have screwed up much earlier and recovered. West is starting to experience the fruit of its irresponsible policies.
“We might just be the single largest self dependent economy that’s worth investing in right now. With a local market which we have mostly given away to foreign players.”
53:00 - Domestic investments in equities by Indian investors have absorbed the highest ever FII selling spree.
56:00 - Our neighboring nations are falling apart mostly due to foreign dept - isn’t that a concern for us to open foreign investment?
“If you don’t have the freedom to fire people, you won’t hire them at all. That’s how human psychology works”
01:02:30 - Summarising Where India is right now in the economic scene
“If we don’t screw up, we will do really well. Because the world seems to have screwed up.”
Crytocurrencies were all the rage in past few years on account of rising asset prices and volatility. Now, they are going through a bear market that has witnessed some popular currencies going totally bust. This pehnomemnon of an "asset class" going from hot to untouchable is not new. We've seen this again and again in different forms and proportions.
The current bear market in cryptos certainly impacts the investors, start-ups, promoters, and VCs who are directly involved in the crypto business. But, this bear market has second-order effects that may impact you as well. Listen in, as Deepak and Shray discuss the nuances of how the crpto bear market inpacts you.
Show notes & references:
01:40 -How does the crypto bear market have an impact on stock markets & economy?
08:30 - The indirect knockdown effects of crypto bear markets
10:00 - Digging deeper which other segments of the economy will face a slowdown due to crypto?
15:30 - The trickling effect of hot money going away from crypto startups
16:30 - Misunderstanding of risk by crypto investors
20:30 - The debacle of fancy virtual assets - Luna & Terra
Refer: Terra's stablecoin UST collapses, LUNA falls 99%
24:50 - Learnings from Zee TV & Dish TV saga of taking loans from Mutual Funds via bonds
Refer - Capitalmind post on Zee FMP Saga
34:00 - New investors moving to crypto with leverage and family savings basis TV marketing
39:00 - Why VCs don’t let failed crypto companies die? - No, it's not for the right reasons.
48:00 - By Now Pay Later - bad small loans of small ticket size are a similar problem.
50:00 - Promotor fraud is now called Rug Pull.
Refer - What is a rug pull?
51:30 - The case for printing more money
54:30 - The commingling problem that stock exchanges have already solved. Crypto exchanges still fight that problem.
Refer: Deepak Shenoy tweets about these issues in Dec 2021
56:40 - Will Deepak one day invest in crypto someday in the future?
58:30 - One great thing that has come out of crypto markets
If you loved listening to Deepak talk about money and finance. You'll also find his book quite interesting - You can buy the book here – Money Wise.
In this episode, Deepak and Shray unravel different aspects related to investing in gold.
Gold has been around as a store of value for a couple of millennia, probably longer, because of how little there is and how difficult it is to get out of the earth.
Now get this - all the Gold mined would fit in a crate with sides of 21 meters. That’s roughly the length of three and a half standard containers.
Yet, in the last decade, this scarce and loved asset class has done just enough to match inflation. This means, adjusted for inflation, gold has returned nothing!
Now, after putting returns of gold into perspective, we get on to the theme of our podcast - Does it make sense to invest in Gold?
We look at gold from different lenses while we determine -
- If gold is a hedge against inflation?
- Can gold protect you in a crisis like war?
- Is gold investment to create long-term wealth?
- Is there an efficient way to invest in gold?
Show notes and references:
01:30 - Is gold the safe heaven when everything else falters?
05:00 - Today all assets classes act alike and correlated
Refer - How Gold has performed over years?
08:00 - Gold hasn’t outperformed inflation in 2011!
12:30 - Times when gold did outperform the Nifty
15:30 - The second-order effects of gold smuggling
17:30 - Buying gold for emotional and goal-based reasons
20:00 - Should you buy gold to hedge against a crisis like war?
23:55 - Is buying digital better than physical gold?
Refer - What is digital gold?
36:30 - Is gold as an ETF a good option?
Refer - What are Gold ETFs?
38:30 - Sovereign gold bonds as an avenue for investing in Gold?
Refer - What is the Sovereign Gold Bonds (SGB) scheme by Govt of India?
43:00 - What is the best way to buy gold?
If you loved listening to Deepak talk about money and finance. You'll also find his book quite interesting - You can buy the book here – Money Wise.
Two engineers get together to discuss two life essentials - food and money! Our food expert is Krish Ashok. Ashok is Global Head, Digital Workplace at TCS. He is a techie, a musician and an author. He talks about the science behind food, the history of food and offers a lot of food for thought for us to explore further. If you are interested, a good starting point is his famous book - Masala Lab.
Our money expert is Deepak Shenoy. Deepak talks about the importance of managing your finances, the myths about investing, the fallacies that investors should avoid, and his take on cryptocurrencies. It is quite a treat to listen when he shares food metaphors to explain financial concepts. So listen in!
Topics & References:
02:00 - Science of Indian food & cooking
Refer - The parable of turkey and how things are done
13:30 - Do modern food habits cause lifestyle diseases?
21:45 - Wait, it's the opposite? Butter is ok but the Naan is not?
25:30 - Basics of food everyone should follow
Refer: Michael Pollan: Three Simple Rules for Eating
37:00 - The play of sugar & salt
40:00 - People hate changing food habits
45:00 - Each of us processes the same flavor differently
49:00 - We don’t like something because its unfamiliar, not necessarily bad
52:00 - Misconceptions about Food
Refer: Why the Tomato Was Feared in Europe for More Than 200 Years
56:00 - The myths of Genetic Modification
Refer - The Story of Norman Borlaug, the American Scientist Who Helped Engineer India’s Green Revolution
01:01:00 - How do we make more people cook? (especially, the men)
Refer - Apple Cider Vinegar Rasam
01:07:00 - Does the online food delivery phenomenon change things for food and our food habits?
01:11:00 - Switching roles - Ashok Asks Deepak about Money
01:13:00 - Building a relationship with money
Refer: Book: The Lexus and the Olive Tree
01:17:30 - What money can do for you?
01:23:00 - How an adult should learn the basics of Finance?
Refer: Book: An Economist Gets Lunch
01:43:00 - How should salaried professionals think about Income Tax?
01:50:00 - Working as an employee Vs working as a businesses
01:54:00 - Understanding Inflation first before learning about investment returns
Refer: What you know about inflation might be wrong
02:01:00 - How do you make money work for you?
02:09:00 - How to allocate between Equity & Fixed Income?
02:11:00 - Ways for your money to make more money?
02:16:00 - Importance of diversification in Finance & Food
02:19:00 - How should one think about their own risk appetite?
Refer: Harry Markowitz and Modern Portfolio Theory
Refer: How Not to Be Wrong: The Power of Mathematical Thinking
02:28:00 - Is there a tool that helps track personal financial growth?
02:37:00 - Deepak’s thoughts on cryptocurrencies
Refer: Blockchains Are a Bad Idea (James Mickens)
Refer: Selling Shovels in the New Startup Gold Rush
You can buy Krish Ashok's book on the science of Food - Masala lab.
You can buy Deepak Shenoy's book on investing - Money Wise.
Check out our wealth management service - Capitalmind Wealth (PMS)
Today's episode is a crossover with The Seen and the Unseen podcast, hosted by Amit Varma. Amit and Deepak discuss how their careers - as creators - have evolved with the digital age. And their journey of discovering their own authentic voices. They take a first hand look at the creator economy and how it's shaping the media today.
2:32:00 onwards, they discuss key lessons in Deepak's new book, Money Wise, along with some behind-the-book stories.
What happens when a company goes bankrupt? Why do investors buy their stocks that are headed to zero? In this episode, we explore how the Insolvency and Bankruptcy Code (IBC) has changed the game. Deepak explains the many nuances of current regulations and how they've evolved. We dive into examples such as Bhushan Steel, Sintex and Ruchi Soya - which we hope will give you clarity. Listen in and decide. Would you stay the hell away from such stocks, or start hunting for bargains?
Understanding Bankruptcy
Businesses are tough and the best ones survive. There are ample failure points for a business that can drive it to bankruptcy. One or a combination of factors such as economical, social, regulatory, political, geographical, etc can drive a business suddenly to the ground or induce a slow death. Such companies eventually stare at bankruptcy. We discuss -
-
What is bankruptcy?
-
Does everyone lose money when companies go bankrupt?
-
Who gets what when the company is sold for parts?
Learnings from the Sintex saga
Sintex Industries, the Ahmedabad-based company, that boasts of tanks covering the skyline of most cities of India, was dragged to bankruptcy courts after it defaulted on a meager payment of ~15.4 crores towards principal and interest on its NCDs. This was the final nail in the coffin for the firm that had mismanaged its finances for too long. We discuss -
-
What Sintex does as a business
-
How the company was re-structured (through demerger)
-
How its issues snowballed to lead the company into IBC
Eventually, the IBC ( Insolvency and Bankruptcy Code) tribunal was able to keep the company running and also got a successful bidder to buy out the stressed company. That’s good news for almost all of its stakeholders. Except for its shareholders who will lose all of their equity in the company. So they get nothing. Zero.
So How does IBC work? Why do existing shareholders lose everything?
The short answer: Because existing shareholders contribute nothing to the upcoming growth of the company, they get nothing. The company that these existing shareholders bought into eventually went bankrupt. So the story for existing shareholders ends here with a big zero in their hands. Sounds unfair but that’s how it is. We discuss -
-
How does the IBC process work?
-
Every existing stakeholder (debtors, employees, vendors) gets some part of the new entity. The current shareholders should also get a piece no?
-
What actually happened to Sintex shares?
-
How did things use to happen before the IBC?
There are a lot of examples discussed in this section that explain different aspects of the bankruptcy process and also highlight how each bankruptcy case is different.
But, existing shares of Ruchi Soya went up "to the moon" while it was going through bankruptcy
All bankruptcies are different and unique. Ruchi Soya was trending on social media recently because the company came back strongly from bankruptcy and its investor (Patanjali) seems to have made a killing on its investment. There’s lots more to the whole revival story. Deepak explains -
-
How regulatory rules change impacted the Ruchi Soya bankruptcy process
-
The bidding by Adani and Patanjali
-
Interestingly, they kept 1% of the company listed. Why?
-
How does Patanjali make Ruchi Soya operating cash flow positive?
-
The positive impact of Covid
-
Why is a company that makes only 800 Crores has a market cap of 31000 crores?
Does investing in distressed companies work?
We all love investing at its theoretical best - buy extremely low and sell high. We also keep repeating Buffett's quotes like “Buy when there is blood on the street”. Distressed companies feel like a value buy all time but they are almost always value traps or falling knives or whatever. We briefly touch upon this before we wind up the podcast -
-
A quick reference to Buffett’s investing in the Salomon brothers
-
Brookfield & Hotel Leela deal - distress investing
Let us know if you enjoyed our podcasts on Twitter or write to us at premium [at] capitalmind [dot] in!
There is a lot to unpack about this new digital currency RBI is talking about. Deepak and Shray built up the discussion by pondering over successive questions. Deepak takes us through how cryptocurrencies currently work. This sets up the context to the current ways of handling digital currencies and we move on to discuss the RBI-backed digital currency - Central Bank Digital Currency (CBDC).
Key Points
- How CBDCs are not cryptocurrencies? And how are they different?
- Is CBDCs actually required or is it a response to the popularity of cryptocurrency? So basically, why now?
- Is the CBDC likely to be anonymous like cryptocurrencies?
- Can CBDCs be an alternative to the SWIFT system given how Russia has been isolated by the world right now?
- Impact of CBDC on Monetary and Fiscal policies?
As Indians, we discuss Inflation only during elections which makes it less of transient and more of seasonal!
But, as investors, we discuss inflation a little more. The latest reason for it is the hammering of growth stocks across markets which is blamed squarely on inflation.
In this podcast, we understand the practical concept of Inflation with examples, its impact on your investments, its impact on our daily lives, and how it impacts different people differently.
We promise, thinking of inflation in this podcast will be much more interesting than what you experienced in your economics class.
How do High Net Worth Investors invest SO much in IPOs? Nykaa's IPO saw Rs. 1,00,000 crores invested by the well heeled Indian investors. But not much of it is their own money - they borrow it.
In this episode, Deepak and Shray unravel the dynamics of an IPO application for HNIs. From the rules of allocation, the big business of IPO funding, how HNIs can borrow 100X their money, systemic risks, how grey market premium (GMP) works, the role of regulators and the road ahead.
Read more here
On today's show, Shray asks Deepak about how to make sense of the past two years in the markets, macroeconomics, and the seeming irrationality of it all. They also talk about how to look at the year ahead.
Highlights
- 2021 bad year with all the lives lost, but it happened to be good for markets with the number of IPOs at an all-time high
- NIFTY returned approximately 23% and has been positive for the 6th consecutive year
- India being top-heavy, from the income distribution standpoint caused the kid of market outcomes we saw
- Small firms got hit the most, and that may not be sustainable in the long run
- Markets don't care about death and destruction for sure. But what moves the market?
- We've normalized, letting go of our freedoms, and irrationality could be the new normal.
- Inflation could actually be a function of supply than demand
- If the market didn't go down in these pandemic years. How can we make any event-based predictions?
- The boom in startup funding. Has equity become cheaper than debt?
Read more at https://capitalmind.in
With technology comes great responsibility, says SEBI, as it attempts to regulate the algorithmic trading markets that have just started to evolve in India. The concept of “API” trading, through Application Programming Interfaces is the standard in the web and app-based world, but SEBI doesn’t want you to manage your own money programmatically. Or, worse, to give it to someone else who is “unregulated” to manage your money through an algorithm either.
In this episode we discuss SEBI’s recent consultation paper on algorithmic trading and how it impacts you. What roles do algorithms play in managing your money and will a program be investing on your behalf in the near future.
- SEBI published a consultation paper on algorithmic trading by retail investors on Thu Dec 9 2021
- The paper impacts any form of “automated” trading: through a broker provided API in general as well as Algo Trading
- An example of an Algorithm that already exists - Good Till Traded orders offered by your broker. They place an order automatically every single day through a program.
- Algorithms that would help retail investors- “Buy/Sell this stock if it falls 10%”, or manage the extreme risk on my portfolio (insurance, of sorts).
- The motivation for this paper is the emergence of 3rd Party platforms that make use of APIs through algorithms, where you share your API keys etc and they automatically trade on your account.
- The Algorithm behaves like a proxy fund manager or money manager. They can trade your account whenever they want.
- Concern: What if they make big losses and you have no idea of how much they can hurt you?
- Concern: Can’t these platforms get a lot of customers and then auto-manipulate a stock, in the name of algo trading?
- Concern: APIs + Algorithms could be used to overwhelm/stuff the exchange or be used to manipulate a security’s price. Rate limiting and cool off periods could help address this.
- Consultation paper currently bans all APIs and places onus on brokers to regulate them and suggests that brokers take responsibility to run the algorithms on their system
- The paper would enable the Broker to empanel someone (and do the checks/risk assessment/quality control) but would prevent an individual from setting up something themselves - but this seems unenforceable.
- Stopping APIs altogether is like using a sledgehammer to kill a mosquito. We could achieve many of the objectives by having the algorithm pop up an approve/reject screen that the user has to click on. If you have say more than 50 lakhs or something in your account then you could potentially have fully automatic execution. This would be a useful middle ground to protect the smaller retail customers.
- When I click a buy button on Zerodha Kite it triggers an API, when you click a buy button on Smallcase to buy on say zerodha it also triggers a bunch of API, when you place an order through a program that also triggers an API - how do you differentiate between the three? And you can’t build an app without APIs
- Even fund managers are found guilty of say front running or offloading - SEBI can come after them since they are regulated. If you’re trading other people’s money and earning from it - you have to be treated with the same level of compliance as a fund manager (PMS/AIF etc)
- There aren’t any fund manager rules that allow you to run strategies with the kind of leverage that these algorithms allow you to.
- According to Nithin’s twitter space only 0.5% of zerodha users use algos.If you’re running your own algorithm that really should be allowed
- Future of fund management (especially at scale) will require some levels of automation and APIs so we can’t take a regressive or overly harsh stand.
Read more at https://capitalmind.in!
How does P2P lending work in India? How safe is P2P lending? Deepak and Shray explore how the industry works, the risks involved and whether the returns are enough to justify the risks.
Summary
- Banks keep a considerable spread between the interest they offer on a deposit and the interest they charge a borrower. So, some people think, why is the spread so big? Why can't I deal with the borrower directly and receive more interest on my money?
- The problem is you don't know the person you are going to be lending money to. In comes the P2P lending company, which acts as a sort of intermediary between the lender and borrower.
- When you give your money to a bank (as a deposit), the bank will guarantee that you will get your money back. But in the case of P2P lending, there is no such guarantee that you will get your money back.
- Another problem with P2P lending is, no one outside knows the actual default rates, and they are often much higher than what these companies report, even though the whole operation is legal.
- In P2P lending, you don’t see one of the three Cs of lending – you don't have collateral; you have capacity and creditworthiness.
- One of the reasons why P2P companies have flourished is that banks, which should ideally lend money to people whose credit might be questionable, don't lend to them. But the answer is not to 'lend' them money. You can consider it as a form of charity, in which case, even if you don't get the money back, you don't mind losing it. And there are companies that work on this model.
- An alternative could be microfinance. But there are problems there too. Often, multiple microfinance companies want to lend to the same borrower, who uses the money for purposes other than what they were intended for, with the result that they are not able to repay.
- But microfinance companies can take this pressure because they are a company. A P2P lending firm is just an intermediary. They have no way to recover the money if a borrower refuses to pay, except send legal notices (because there is no collateral), which may not work.
- So, the gist is, if you want to give loans through a P2P lending firm, only lend so much that you won't mind even if you lose the money. Give it for charitable purposes. Give it to people who are in such bad shape, they can't afford anything else.
Read the full transcript.
Episode 41 - Deepak sits down with returning guest Ruchir Kanakia, the founder of the insurance distribution company OneAssure to discuss our favorite insurance product - term insurance.
Summary: * How term insurance works for you and the company that sells it to you * Debt or Dependents – the two reasons to buy term insurance * How Covid and the fact that a handful of reinsurers control everything has made your office insurance a bit less reliable – consider buying a personal one too * How much coverage is enough and how much the insurance company will give you * Why you should opt for the in person medical test * You’re tech or finance savvy but consider getting an agent or distributor if your dependents might not be * Common riders and why you should ignore them * How the claims process works and benefits of selecting a monthly or yearly premium payment
Click here for the full transcript.
Episode 40 and we’re speaking to the fintech firm that just raised 40 Million dollars last week - Smallcase! Deepak sits down with co-founders Vasanth and Anugrah to talk about creating a new way to invest in stocks, investment lessons from the pandemic and what’s up next from the Smallcase team.
What is a Portfolio Management Service? How does it really work? Do they actually benefit their clients? In this episode, Vashistha and Deepak explore PMS' through their experience of running one at Capitalmind. They explain how the operations work, the pros and cons of different fee structures, quantitative strategies and how PMS' are different from AIFs, Mutual Funds and Smallcases.
How do you plan for a smooth transfer of your wealth after you die? And how do you help someone whose loved one has passed on?
In this episode, Shray and Deepak explore what you must do in an unfortunate circumstance of a loved one's death, and for an easy transition in case of your own. We also invite Harshavardhan Ganesan, a practicing lawyer, to give us the legal perspective.
Listen in for real life anecdotes from covid, succession certificates, legal wills, and some counter-intuitive learnings.
Are the recent problems - GME, Greensill and Archegos - signs of a damaged financial system that is so terribly fragile that a slightly bigger disaster can easily crush it? Like what Covid has done to the world's health system, are there more hidden risks in our financial system that can trigger a repeat of 2008? In this episode, Deepak and Shray explore what's happened in the US over the past few months, and examples of hidden leverage within India - from Harshad Mehta to Karvy, Zee, DHFL and more.
On today’s show, Deepak invites Vivek Subramanyam of LiveAltLife to discuss the one thing without which wealth means very little - health. Vivek breaks down the foundations of health to help avoid or even reverse lifestyle diseases as Deepak draws paralells on human behavior from the world of investing.
On today’s show, Shray asks Deepak about government borrowing and debt, how the RBI can help bring down borrowing costs, the new rules that make your provident fund much less attractive and how we can now invest directly in Government bonds instead of Fixed Deposits.
In this episode, Shray and Deepak discuss the evaporating returns from safe investments such as FDs, what it means for lending, and how should you invest in this new (to India) low interest-rate world.
In this episode, Shray and Anoop discuss momentum investing and how we implement it as portfolios at Capitalmind.
In this episode, Deepak and Shray invite Ruchir, co-founder of OneAssure, to walk us through how to get started with health insurance.
In this episode, Shray and Sandeep discuss how adding a trend following layer to a long-only portfolio can help enhance returns and lower drawdowns, in the context of Capitalmind Chase - our own such strategy.
In this episode Deepak takes on the Reliance Jio story. Is the stock in a bubble, is there any danger of it becoming a monopoly and why is there only one Reliance in India.
Preview
"Dhirubhai Ambani himself is responsible for a lot of the shareholder culture in India. Till the early 80s minority Shareholders were considered like second class citizens - there were institutions and promoters - that was all that people cared about. In Dalal street, the “Operators” would consider retail shareholders the pits, they would con people all the time. People would lose money, no one would care. Reliance was one of the few companies that would care about the shareholders. People from his village, from Gujarat would come in and buy shares of Reliance - those people are now probably multi multi millionaires. He built that culture."
Deepak Shenoy of Capitalmind hosts Kunal Shah of CRED as they analyze the affluent - their spending patterns, usage of credit and habits that help them succeed. They talk about high trust groups, creating wealth and incentivizing good behavior.
Preview
Less than 1% will know what their income per hour is. Therefore, if you find somebody who is making Rs 5,000 per hour (and there are many ways to calculate this). But let’s say you spend 30 mins to get a Rs 1,000 discount on your flight ticket - was it worth your time?
On today’s show, Shray asks Deepak about the recent downgrade of India by Moody’s. Should we care? Are rating agencies more or less relevant after the 2008 debacle and what does the downgrade mean for India.
Preview
"There’s an internal class system they have developed. Whether it is between companies or across countries. The developed countries get a different framework to work with and what they call the non-developed is held to a different standard."
On today's show, Shray and Deepak discuss debt mutual funds. How do they really work? What do they invest in? And how do you evaluate these funds before investing in them?
Preview
"The whole money supply in India is about 150 lakh crores. Half of that is in Fixed Deposits with banks. Around 30-40 lakh crores is sitting with government bonds/funds issued by the government. The rest in retail deposits. Debt Mutual funds are nascent in comparison... we’ve calculated that you can pay 80% less tax if you hold a debt fund giving roughly the same interest as an FD if you hold it for 3+ years, even if you take out money from time to time. The tax advantage is huge for individuals who are in higher tax brackets."
On today's show, Shray and Deepak discuss FIIs (Foreign Institutional Investors). Who are they, how big are they, and what role do they play in our markets?
Read the transcript here.
On today’s show, we discuss the extreme volatility in financial markets and the Covid-19 pandemic affecting our daily lives. Is this a panic? How to we invest through this storm?
Read the transcript here.
On today’s show, Deepak Shenoy (CEO) and Aditya Jaiswal (Analyst) try to understand the ₹30 trillion behemoth, the Life Insurance Corporation of India (LIC).
Transcript: https://www.capitalmind.in/2020/02/podcast-how-big-is-lic-anyway/
On today's show, Deepak Shenoy (CEO) and Sahil Kini (Co-founder and CEO, Setu) talk about the problems ailing the Indian financial infrastructure and how APIs are shaping the way digital businesses are built.
Transcript: https://www.capitalmind.in/2020/02/indias-new-financial-infrastructure-will-enable-better-more-inclusive-bharat-ux/
On today's show, Deepak Shenoy (CEO) and Aditya Jaiswal discuss the impact of the union budget on our savings and investments- would you be better off moving on to the new tax regime? how does the budget impact your mutual funds (dividend options)? Are the Arb fund dividend reinvestment plans dead?
Transcripts: https://www.capitalmind.in/2020/02/podcast-22-how-budget-2020-impacts-the-way-you-save-and-invest/
Is passive investing making investors insensitive to price and valuations? Is this distorting the capital flows to the market? In U.S, the market share for passively managed funds has risen to about 51 percent, but what is the number for India? Where do we stand?
Transcripts: https://www.capitalmind.in/2020/01/the-amazing-rise-of-passive-and-what-you-need-to-do-about-it
Deepak Shenoy (CEO) and Aditya Jaiswal (Analyst) answer these and a lot more questions on today’s show.
On today’s show, Deepak Shenoy (CEO) and Aditya Jaiswal (Analyst) take you back to the 80s, when the Indian stock market was all wild wild west.
It's the April of 1982, a powerful bear cartel has raided the shares of Reliance, they short sell Reliance shares so heavily that it plummets from Rs131 to Rs121 in a short span of time. They have done it in the past and they have done it to many, but this time they have messed up with Dhirubhai Ambani- a businessman who was known for his astute business acumen.
Will the bears succeed? or will the tables be turned?
Transcript: https://www.capitalmind.in/2020/01/podcast-surviving-a-bear-attack-how-dhirubhai-did-it/
On today’s show, Deepak Shenoy (CEO) and Aditya Jaiswal (Analyst) discuss the New Pension Scheme in detail.
Transcript: https://www.capitalmind.in/2020/01/podcast-19-understanding-the-new-pension-scheme/
We discuss the NPS from the perspective of a 30 year old who opts for NPS and contributes INR50,000 every year. How much will he accumulate at retirement? What happens if he loses his job after 5 years? How will the forced annuity impact him at retirement? If he doesn’t wants to opt for NPS, how much should his investments earn to beat the NPS returns plus the associated tax benefits of NPS?
On today’s show, Deepak Shenoy (CEO) and Vashistha Iyer (COO) discuss effective ways to make life simpler by managing cash flows using credit cards and bank overdrafts.
Transcripts: https://www.capitalmind.in/2019/12/how-to-master-your-cash-flows-with-credit-cards-and-overdrafts/
Heads-up:
-
Is parking money in bank accounts a risky proposition?
-
If you earn 1 lakh a month and you get a 1 lakh credit card bill, what do you do? Do you not invest that month?
-
Do 'No-cost EMIs' really cost nothing?
-
If you consistently use more than 60-80% of your credit card's limit, does it affect your credit score?
-
Is it better to have multiple credit cards?
-
Is it safer to swipe your credit card more often than your debit card?
On today's show, Deepak Shenoy (CEO) and Aditya Jaiswal (Analyst) discuss the Bharat Bond ETF in detail.
Transcript: https://www.capitalmind.in/2019/12/bharat-bond-etf/
Q) Will it provide the much needed liquidity to the debt market? Who are going to be the market makers?
Q) Is it a zero credit risk option? and what about the interest rate risk?
Q) Is it a good deal for the fixed income investors?
Q) Which option will suit you better, the 3-year variant or the 5-year variant?
Grab your popcorn and stay tuned, you are going to enjoy this one!
Deepak Shenoy (@deepakshenoy) speaks with Nithin Kamath (@Nithin0dha), CEO of Zerodha about the Karvy mess- does it reflect a systemic failure? do brokers like Karvy have legacy issues? how differently does Zerodha operate? and most importantly, what should investors do to protect themselves from such scandals in the future.
Transcripts: https://www.capitalmind.in/2019/12/podcast-16-what-broke-karvy-and-how-is-zerodha-shaping-the-future-of-broking/
The year 2019 has been quite eventful for the Indian markets! Right from corporate governance issues popping up almost every month, the collapse of NBFCs such IL&FS and DHFL, then the shady practices in scheduled banks such as the PMC Bank and now comes the Karvy fiasco.
Read transcripts here: https://www.capitalmind.in/2019/11/podcast-the-strange-happenings-at-karvy-ep-15/
Deepak Shenoy (CEO) and Aditya Jaiswal (Analyst) discuss in detail how the Karvy fiasco unraveled followed by series of questions such as:
- What is a pool account and are brokers using it as means to fund themselves?
- Can brokers misuse the power of attorney signed by their clients?
- Is it safer to have demat accounts with banks?
- What should the existing clients of Karvy do?
- What happens to the banks/NBFCs who have lent money to Karvy?
We often hear that "Mutual Funds Sahi Hai". But none of the experts answer, "Konsa Mutual Fund Sahi Hai?"
Host Deepak Shenoy (CEO) and Aditya Jaiswal bring you another Podcast where they simplify mutual funds, allocation (debt-equity), SIP vs lump sum debate, the myth regarding Star ratings, ELSS funds, expense ratios, Sectoral funds and a lot more!
Transcripts: capitalmind.in/2019/11/how-to-buy-a-mutual-fund-ep-14/
Host Deepak Shenoy (CEO) and Aditya Jaiswal discuss a bunch of interesting things in this podcast including, whether it makes sense to buy a house in the Uber economy, the mother-in-law economics, the financial implications of having a portfolio of properties, and the outlook for the property prices in the near term.
Read full transcript: https://www.capitalmind.in/2019/10/podcast-should-you-buy-a-house-ep-13/
Host Deepak Shenoy (CEO) and Aditya Jaiswal discuss about Yes Bank – The “Kohinoor” of Rana Kapoor, pledging of shares by ZEE and deferred tax assets (DTAs) in the books of private and public sector banks.
- Deepak’s thoughts on Yes Bank (1:35)
- Cockroaches in Zee’s Books? (5:45)
- Deferred tax assets in the books of private and public sector banks (10:00)
Read full transcript: https://www.capitalmind.in/2019/10/yes-banks-fall-zees-fall-and-deferred-tax-assets-ep-12/
Excerpts: 1. Deepak's thoughts on Yes Bank:
Why should people continue to retain deposits with the Yes bank? The answer to this is two things First of all, the bank accounts itself don't show us the kind of panic that people seem to have in their heads the deposits seem relatively safe. And to that extent, you know, if you look at the numbers that they have their INR 58,000 crores in government bonds are the 2 lakh Crore in govt deposits, that's 25% straightaway or 30% early and then they have loans worth INR 2,30,000 crores, they have another you know 10,000 crores of cash with RBI they have another INR 5000 somewhere else. So, there is essentially about 75,000 crores of very, very liquid assets that they have. They have also told us that, you know we've still seeing certain amount of rationalization in their in their loans. Even if all the BB loans were to go to zero and their current NPAs are all supposed to go to zero, they would lose roughly 20-25,000 crores this would take you know eight quarters because RBI way gives them already quarters write them down, in those eight quarters they will generate INR12-13,000 crores of profits because they have other loans which are good, there is a potential another fund raise that will come up so, at max I think even if they were to take this extreme step of where all these loans go bad, the capital ratios will still be okay...
"I don't think it's a great time for anybody to buy Yes bank stock, it's a lottery! But the chances of winning substantial amounts are very low. So I'm not really interested in the stock. I am, however, of the opinion that the deposits are safe."
- Cockroaches in Zee's Books? (5:45)
If you look at the FII holding of ZEE, about 47% of ZEE is held by FIIs, out of which the big guys that is anybody who owns more than 1% of Zee add up to only only 19%. So, the remaining 30% of ZEE holding (held by FIIs), is held by a lot of FIIs who have less than 1% shares. Who are these FIIs? Why are there so many of them? And how come they all own these tiny little percentages of ZEE? We don't know the answer to that...
- Deferred tax assets in the books of private and public sector banks
If you take the 22% tax regime, you can't use the deferred tax assets. Whenever you take an asset and say that as it is worthless now, because I'm going to the 22% tax regime and that tax regime does not allow me to take the deferred tax asset, I am immediately going to lose that amount...
Host Deepak Shenoy (CEO) and Aditya Jaiswal discuss the corporate tax cut and it's impact on the economy and most importantly, on our portfolios.
Read full transcript: https://www.capitalmind.in/2019/10/podcast-will-corporate-tax-cuts-fix-indias-bruised-economy-ep-11/
We discussed seven questions:
- Corporate tax cuts are fine but why aren’t we talking about the consumption demand? (1:26)
- Why corporate tax cuts why not cut personal taxes? (9:15)
- How will the government bell the fiscal Cat? (13:00)
- Will India finally become the factory to the world? (16:58)
- Will the improving profitability lead to re-rating of the Indian market? (21:26)
- Why are the Megacaps rallying? (28:30)
- Are the good times back for the portfolios? (32:33)
Deepak Shenoy and Shray Chandra discuss in detail about the troubles at the Punjab and Maharashtra Cooperative (PMC) Bank, the role of RBI and what options do PMC bank's depositors have.
Read full transcript: https://www.capitalmind.in/2019/09/podcast-the-pmc-bank-debacle-episode-10/
We discussed five broad questions:
1) Should India borrow abroad, if yes, then why? (10 mins)
2) Domestic liquidity issues and crowding out effect (8 minutes)
3) Why are experts (Ex- RBI governors) against this move? (3 mins)
4) What are risks o going overboard with overseas borrowing? (4 mins)
5) Risks of borrowing abroad (15 mins)
Below is an excerpt of the podcast with time stamps of important sections!
Read full transcript: https://www.capitalmind.in/2019/09/podcast-should-the-indian-government-borrow-from-abroad-episode-9/
1.Should India borrow abroad, if yes, then why? (2:00)
The government borrows roughly INR5 lakh crores net per year. In the next year, the estimate of revenue that we want to collect just taxes, Indians will collect about 16 lakh gross, the government will pay 6.5 lakh crores in debt interest payment. About 40% percent of all of money that you're paying as a tax, is going not to build infrastructure, not to feed the hungry, not to pay farmers for food. It's going towards interest payments on the debt they borrowed in the past. Why would this be a problem? because we borrow debt at extremely high rates part. And here's the important thing, India's own companies that borrow abroad (ONGC for an example) has a bond issued in euros and euro denominated debt...
2. Domestic liquidity issues and crowding out effect (10:40)
You know, this is interesting, because what some of the economists have put across is or you know, what Indian Government is borrowing 3.3% and 2.2% is by states and some 4% is something else. And therefore, India's gross financial savings, which is about 10% of GDP out of which about 8% of GDP is borrowed by the government, my
answer to that is that's not true!
3. Why are experts (Ex- RBI governors) against this move? (18:00)
About 1% of GDP is about 2 lakh crores. I think it's too small. I think in any given year, you can say don't borrow more than 1% of GDP. That's fine. I don't think India will see appetite for more than 10 billion euros at this point, which is about 70-75,000 crores thousand crores. I don't think any more appetite exists right now because everybody wants to wait and watch. And I think this is a good start. If there is an appetite, of course, we can look at more, I think you know, go and give more and buy a bottle more, especially if they're going to give it to you at negative rates, just go and borrow as much as you can, up to say 10% of the total debt...
4. What are risks o going overboard with overseas borrowing? (21:00)
The problem is that, what if another government is in power, right?. What if the same government is in power? Your problem is this, you're creating debt, it could be a poison- poisoning the well phenomenon. And the idea is that poisoning the well is like, you know, when, when people used to attack another country, these two are another place which will which had a fort, the idea was to throw poisoned frogs, rags, with darts and arrows. Some of them could fall inside a well which would then get poisoned, then nobody would have any source of water and everybody would die. Poisoning the well is to say to the next person that comes here, he will not enjoy that place because the water will be poisoned, they won't be able to drink the water. If you poison a well, you too can't come back!
5. Risks of borrowing abroad (24:50)
I think the point is if we borrow $100 at 70 rupees, we get 7,000. We may get it at 0.45%, but three years later rupees or 100. And then we return the hundred dollars and we return 10,000 rupees.
"Under normal circumstances, merging PSUs would have been impossible, had the government tried it 5 years ago, there would been riot on the street, today there is not even a murmur. They were able to do that because the slowdown is obvious!" - Deepak Shenoy
Host Deepak Shenoy (CEO) and Aditya Jaiswal discuss about the economic slowdown witnessed in the Indian economy.
Read Full transcript: https://www.capitalmind.in/2019/09/podcast-how-slow-is-the-indian-economy-episode-8/
The Podcast was divided into three broad sections:
a) Macro indicators (20 mins)
b) Recent federal regulations (8 minutes)
c) Few sectors which are currently facing a slowdown (30 mins)
Below is an excerpt of the podcast with time stamps of important sections!
1) Macro-indicators
1:40- GDP growth:
We have had 5 consecutive quarters of decelerating GDP numbers, right from 8.2% in Q1 18 to 5% in Q1 19, this was the slowest growth in 25 quarters. How bad the situation is and is the worst behind us? Or should we expect a couple of more tepid quarters?
3:20- Inflation:
Inflation has been under control, it has been consistently falling for 6 straight months since Jan 2019, when inflation is under control, why is the GDP falling?, does this reflect weakening demand ultimately cooling off growth? Weakening of demand is concerning because we recently heard two big biscuit manufacturers going on record to say that people are not buying even 5-rupee packet biscuits.
8:07- Unemployment:
Unemployment in FY18 stood at 6.1%, a 45 year high, now with big manufacturing units announcing massive job cuts, auto alone has seen 2.3 lakh people losing jobs, where do you see unemployment situation going in the near term?
11:02- Private consumption:
Private consumption which constitutes about 58-59% of the GDP has been slowing down. Urban wage growth has stagnated, white collar wages have been slowing and rural consumption has also fallen on back of collapse on food prices and job cuts by manufacturing units, where do you see this going?
15:00- Investments:
We looked at the GDP growth, inflation, unemployment and consumption, let's talk about investments. The gross capital formation has fallen from 34% in 2011 to 29% in 2018. Do you believe that we are stuck in a low growth cycle (Falling wages- falling savings, falling investments and low GDP growth)?
2) Recent federal regulations
20:30- Impact of GST and Demonetization on the economy
About 30% of the Indian economy is completely informal and employs a chunk of the population. In 2014-15, late Arun Jaitley had made a statement, the informal sector doesn’t want to operate in shadows, neither they are corrupt, rather it was a failure on the part of the federal governments that even after six decades of independence, we couldn’t integrate them with the formal economy”
In the pursuit of this integration, the government went ahead with the vision of cashless economy, demonetization and GST. Do you believe that demonetization and GST have actually hit the informal sector really hard? Do you think, somewhere, it turned out to be a shock therapy for the unorganized sector?
3) Sectors
28:18- Real Estate
Residential real estate which was mostly fueled by black money is really not moving except the affordable housing part. Now that black money is hiding in may be gold! How will that come back into the economy? Where do you see the sector going?
33:09- Automobiles
Now, we all know that there is a crisis in the Indian auto industry, all big manufacturers are reporting double digit falls in volumes. TVS chairman made a big statement, that this slowdown is the worst in 3 decades and spread across sectors. Auto stocks recently witnessed buying interest in the anticipation of a GST cut, do you believe that a GST cut can change the fortunes of the sector?
41:28- Automobile replacement cycle
A lot of existing car owners have started using Ola/Uber/Quick ride and this has led to postponement new car purchase, where do you see the replacement cycle going forward?
45:23- FMCG
Parle-G and Britannia went on record to say that people are not buying even INR5 rupee packet biscuits. But FMCG stocks still command relatively high premium, why is that? Do you see optimism in investors, that among autos, infra, discretionary, real estate, financials, FMCG will be resilient.
50:50- Final thoughts!
You can also listen to our podcasts on our app: www.capitalmind.in/podcast
Host Deepak Shenoy (CEO) and Aditya Jaiswal discuss investor queries in a new show - The Investor Wants to Know.
Topics discussed include passive investing, current NBFC scenario, slowdown in the auto sector, cooking up of books by companies, fundamental analysis, global recession, surge in gold prices, aviation industry.
Read Full transcript: https://www.capitalmind.in/2019/09/podcast-the-investor-wants-to-know-episode-7/
Notes: How do you see the investment horizon for different categories of MFs?
If you are looking for a horizon for investing, then it's not investing, it's a trade! Asset allocation metrics (large, mid and small caps) can shift, but horizon should be long term. Stay invested as long as you don't need the money!
What are your views on passive investing? Is it advisable to invest in small cap index funds as most of good performing stocks will become midcaps and non-performing midcaps will become large caps which might pull the returns down?
In India, one should look at the large caps because that is where the index funds will benefit the most. If you invest in small cap index, your best stocks are going to move out. Rather, one may look at the stocks which are actually leaving the small cap index.
How bad is the NBFC scenario?
Many of the NBFC's may lose their current structure- few will be taken over, few will be cut up into pieces and sold. Global P/E players are also keen on buying assets on discounts. None of NBFCs will go bust, since they have valuable assets. It will take another year for clarity to emerge.
How to find out if a company is cooking up it's books?
It is very difficult for a retail investor to dig up gold plated numbers, there is no one way. Retail investors should diversify, do not put more than 5-10% in one stock. It's not worth losing sleep over your investments!
What are your views on auto sector?
We are going through a time when people are not buying cars, at the same time, India is not at a stage where people who aspire to buy cars or bikes, have bought enough of them. China sells 16x more vehicles than India. This is not an unending cycle or death of auto industry.
You can also listen to our podcasts on our app: www.capitalmind.in/podcast
Detailed Notes from Episode 6
Episode 6 - Momentum: The Anomaly that Persist
Fri Aug 23, 2019
Host Deepak Shenoy (CEO) interviewing Prashanth Krishna (Trading, Momentum Portfolio) on the Momentum Strategy and why it’s the anomaly that persists.
Capitalmind offers the Momentum Portfolio as part of Capitalmind Premium (subscription service) in Wealth and as part of our Wealth Management Service.
Read full transcript: https://www.capitalmind.in/2019/08/podcast-momentum-the-anomaly-that-persists/
What’s the Definition of Momentum
Stocks moving in one direction continue to do so. Speculation? No, Momentum is a factor identifying a stock that is going up and that continues to do so.
As part of Momentum, we are not asking why - we’re just identifying when this trend is happening and when it’s stopped. Same exercise on the way down as well.
We are betting on the trend of the market, not taking a contrarian view.
Why does Momentum work?
We have research going back decades (generally in the US and other developed markets) that clearly shows that momentum works.
We can show the persistence and impact of momentum but the reasons aren’t very convincing (Rory Sutherland anecdote on knowing something works but not having the exact reason why). One of the best reasons I’ve come across attributes this to behavioral factors. Investors underestimate at beginning and over-estimate at the end.
Another is asymmetric information - if you know or have figured out something about a stock you will start to acquire more and more shares. As information trickles in, people will jump on the bandwagon and others will replicate. The stock goes from under-information to over-participation driven by FOMO and greed.
Isaac Newton story about the South Sea Company, He got in, made 100%, got out, but jumped in once again on peer pressure and then eventually lost everything.
Momentum has an end too
How Long do you hold a stock for and what are the Portfolio Construction Strategy, Diversification criteria:
We don’t buy for life like Buffett. The average holding period is a couple of months. We know something about the stock but simply not enough to make long term hold decisions
Price is the key, price action is the trigger for our investment and exit choices.
We don’t want a low liquidity stock
We would rather not have a high volatility stock either that keeps hitting upper and/or lower circuits.
The best fit is a stock that goes up steadily without making waves
So avoid the parabolic rise? Yes, HEG is an example that after it hit all time highs it was subject to indefinite growth style justifications. You can’t start with momentum and then transition to fundamentals.
25-30 stocks is an optimal choice. Even a 50% fall in Vakrangee where couldn’t get out.only caused a drop of 1-2% of your overall capital which is still manageable.
How do you Rebalance?
Rebalancing is meaningful - selling and buying has costs, taxes and slippage.
Monthly is a sensible level. Let it ride for a month unless there is extreme news.
At the next month, re-visit is the stock still worth holding.
What do you do in times like these (months leading up to Aug 2019) when there’s not enough momentum
In Bear runs like the current environment, we stay in cash if we can’t find 30 stocks.
If we only find 20 stocks (instead of 30), we have 33% in cash.
Momentum is often viewed as a negative because of the dangers of manipulation (promoters and operators driving prices). Since you don’t have filters that can track manipulation - how do you deal with this?
Manipulation happens at every level, at accounting, price, balance sheet - even an analysis of fundamentals have risk from misleading or false financial statements.
Manipulation is easier in a low volume stock. If you filter on high volume, it’s tougher to get caught in a pump and dump.
Between filters and diversification, we avoid mistakes or avoid mistakes that we can’t recover from.
In Vakrangee - we rode the stock on the way up and then down as well! Once the lower circuit hits, you can’t exit no matter what your back test claims.
Do you get time to exit?
We’re scared of parabolic charts - they become waterfall when the stock comes down. The lower circuits often kick in (unless it’s an F&O stock) so it’s not easy to get out. Fortunately, momentum normally exhausts over time so it gives you down to exit. It’s the series of small waterfalls kills an investor in a stock.
Pitfalls or Things to Watch out for
How will you build your version of Momentum? If you’re not looking at volume filters - that’s a big risk.
What’s the universe? Momentum today would be say 50% in large and 50% mid cap. Outside of a wholesale fraud, you should have regular market risk.
When there’s a drawdown, will you have the conviction to exit the stock like your model tells you to or will you be loss averse?
Alpha comes from behavior rather than the genius of the strategy. Have faith in the strategy. The biggest failure point is us.
What are the returns like?
Return of this strategy is linked to the market. This isn’t a contrarian portfolio, In a bear market you don’t do great either.
Above Nifty returns are achievable based on the track record. During the bull market days you could easily hit the higher end of this range and the numbers looked abnormally great in the short term. However, drawdowns are similar to Nifty.
Your portfolio make-up changes from small to mid caps in the bull runs to larger companies in the bear market.
You’ll know this is working when Momentum falls in line with Nifty even on the downside but has beats it during the upside.
This has played out in foreign markets as well?
Yes, in US like markets we have some data going back nearly a century and this very much works. Low volatility strategies don’t always prosper but Momentum is an anomaly the persists.
Just buying small cap stocks looks great in bull markets but risk adjusted doesn’t really do better than large cap. Momentum gives alpha even after adjusting for risk.
Next Steps:
If you’re interested in learning and doing this yourself Capitalmind Premium articles on Momentum (we have a smallcase) https://www.capitalmind.in/momentum-portfolio/
And if you would like us to invest for you, we offer the Momentum to our Capitalmind Wealth customers (Wealth Management/PMS) as well.
Anupam Gupta (b50 on Twitter) speaks with Deepak Shenoy of Capitalmind, about what to focus on when investing. It's more about just regular investing, than other things like returns or timing the market, says Anupam. You'll make more money by saving more , instead of focussing on how much you should invest at what time in what stock.
Read full transcript: https://www.capitalmind.in/2019/05/podcast-anupam-gupta-on-regular-investing-and-where-to-focus/
Also - focus on liquidity, he says. Locking in investments in insurance or other such locked in plans isn't cool.
On that and more, about India and abroad, about Bombay and other cities - listen to this episode on Regular Investing.
Anupam is a podcast host at Paisa Vaisa, and also an investment research consultant and a Chartered Accountant.
Deepak Shenoy and Shray Chandra speak about how financial advice has evolved in India.
Read full transcript: https://www.capitalmind.in/2019/04/podcast-the-state-of-financial-advice-in-india-episode-4/
1) How did we get here? What’s been the evolution of financial advice in India and where are we now?
2) Who actually needs financial advice?
3) What is an advisor’s role, what should the customer expect and what should the advisor be doing?
4) What’s wrong with the current state of financial advice?
5) From the Customer’s POV: how do you identify bad advice?
6) What do you see changing with regard to financial advice?
7) What should our customers or listeners do with regard to financial advice or advisors?
Do let us know how you've enjoyed it! We are @capitalmind_in on twitter and podcast [at] capitalmind.in on email.
The startup crowd, from Flipkart to Swiggy to Paytm, are all owned by funds from China, Japan or the US. And now, other large companies too are seeing increasing foreign ownership - from an ICICI Bank to HDFC to even the now beleagured Jet Airways by Etihad. Liquor brands in India also - McDowell/United Spirits is now owned by Diageo, Kingfisher beer by Heineken, and so on. The large standout is still Reliance Industries, but by and large, foreign investors find India a lot more attractive than Indians do, it seems.
Read full transcript: https://www.capitalmind.in/2019/03/podcast-the-stubborn-cost-of-capital-in-india-episode-3/
Why is that?
Shray Chandra and Deepak Shenoy explore the space - high interest rates have raised the cost of capital in India, to a point where it's actually hurting business growth. After all, if you can get "safe" returns that are 5% more than inflation, why would you bother taking risks?
Deepak discusses a key aspect as well - easing up debt flows from outside India simply because the cost of capital outside India is much much lower. That, and so much more, at the Capitalmind Podcast.
Visit capitalmind.in and capitalmindwealth.com to read more about us.
Episode 2 - Are Index Funds Outperforming Actively Managed Funds?
Deepak Shenoy and Shray Chandra discuss the potential of "passive" investing.
Read full transcript: https://www.capitalmind.in/2019/02/podcast-episode-2-are-index-funds-outperforming-actively-managed-funds/ 1) Index Funds starting to hold their own? - Index like products more popular in markets like the US - Slowly coming of age in India - Actively managed large cap mutual funds - Want exposure to top 100 stocks, put 50% of funds in say nifty 50 and 50% of funds in nifty next 50 - Are actively managed large cap funds beating this combination? - Combination of Nifty50 and Nifty Next 50 has beaten large cap funds on 3,5 and 10 year period! - 2-3% p.a underperformance over the past few years 2) Are fees responsible for mutual fund underperformance - Index are in a loose sense momentum type products - 80-85% of MF money goes into large caps and large cap oriented funds - SEBI regulations on limiting the universe of stocks per mutual fund does make outperformance more difficult - Fees do play a part but they're not the whole picture - Index management through derivates and algorithms - Nifty Next 50 has fallen considerably more than the Nifty - SBI Nifty ETF gets significant monthly inflows from EPFO - Information arbitrage on these large cap names isn't what it used to be (this is a good thing) 3) What does this mean for customers? - There can be a point at which passive investing leads to problems but we're nowhere near that - Bank of Japan ETF purchases are an example where corporate governance issues don't necessarily bring down a stock - Index investing means Less decision fatigue for customers - Can spend less than an hour a year to see if index funds are winning out Parting thoughts: - They are 100+ index type funds too. So there's scope for innovation and marketing in indexes. - Indexing is here. It's worth considering. - If you have a demat account, the SBI Nifty 50 ETF is the big index product out there.
Here's introducing the Capitalmind Podcast: Of strange things in the financial markets, with Deepak Shenoy and Shray Chandra.
Read full transcripts: https://www.capitalmind.in/2019/02/introducing-the-capitalmind-podcast-on-debt-mutual-funds-taking-losses-and-what-you-can-do-about-it/
Today's episode, the very first, is about the concern in debt markets and the hit that debt mutual funds are taking. We'll talk about:
- What's going on in debt mutual funds and why the four letter word LOSS is staring investors in the face
- What parallels have we seen in the past for this, in India and globally
- What are investors supposed to do now, and how they can navigate through this situation
- Does it get worse before it gets better? The implications for the Zee promoters, IL&FS and DHFL debt.
Listen in for more, and do visit https://capitalmind.in for further information. If you'd like to invest with us, check out https://capitalmindwealth.com .
Disclaimer: Capitalmind and customers or employees of Capitalmind may have positions in securities mentioned in the podcast. No information in the podcast should be taken as investment advice, and is for informational purposes only.