No changes in income tax slabs, while some relief in cases of disputed tax
Forget the flickering numbers on the Sensex. This isn't about chasing market peaks; it's about igniting the engine of your own financial future. India's story isn't just about surpassing Hong Kong as the fourth-largest stock market; it's about unleashing a torrent of opportunities for you and me. Let's move our attention to the actual dance floor, where India will waltz with a $5 to $10 trillion GDP in the coming years while the analysts analyse the China-Hong Kong tango. This is a runway that is prepared for take-off, not a forecast. Let me offer robust data points to elevate your confidence. These figures don't just represent statistics; they embody us. Let's not just cheer from the sidelines?own your India story. Rise of the Phoenix - India Soars Towards Global Dominance Fuelled by sizzling GDP growth of more than 7 percent in FY23 and projected to rise in FY24, India's economic firecracker is ready to ignite the world stage. Already the fifth largest economy (surpassed the UK in FY22), India's sights are set on the coveted number three spot by 2027, according to market estimations. Rising Middle-Class Prowess In India, the upper 4 percent of the working-age populace boasts a per capita income surpassing ~$10,000 annually, as against the national average of ~$2,100. Propelled by increasing incomes and booming ecommerce, per capita income is projected to soar to an impressive $5,000 by 2030, showcasing significant financial strides in both segments. Consumer Confidence Soars Forget the budget blues; India's top earners are splurging like never before! Various reports from the Centre for Monitoring Indian Economy (CMIE) and Reserve Bank India's (RBI) reports on credit and spending reveal that travel takes centre stage, with a 25 percent surge in bookings compared to last year, fuelled by a 42 percent rise in wellness retreats and luxury getaways. Dining goes gourmet, with a 38 percent increase in premium meal orders, where curated experiences trump everyday meals. Bolder bling is trending, too, with a 20 percent jump in statement jewellery pieces and a healthy 15 percent rise in gold investments. And it's not just indulgences?healthcare sees a 22 percent increase, driven by a focus on preventive care. With double-digit income growth fuelling this spending spree, expect these trends to soar even higher. Urbanisation Blitz At around $1.5 trillion, the infrastructure spending spree and smart city investments lay the foundation for a booming economy. The Present Surge in Equities, With the Best Yet to Unfold The surge in retail investor engagement is evident in the Indian equity realm. Demat accounts have skyrocketed from 4.1 crore in FY20 to more than 13 crore in FY24 as yet. Moreover, the consistent uptick in household savings flowing into stocks since FY17 indicates a sustained uptrend in equity market participation, especially during periods of robust market performance. Consumer ownership of equities involves direct retail shareholding and mutual funds, with the monthly SIP amount reaching a staggering ?17,000 crores, reflecting a substantial increase in recent years. Also Read-?India is climbing up global stock market ranks. Will this sustain? Export The Ministry of Commerce and Industry envisions a substantial surge in India's merchandise and services exports, anticipating a climb to over $2 trillion by 2030 from the existing $765 billion. Make in India Fuelled by the Make in India initiative, India is poised to elevate its manufacturing value chain. Projections indicate that by 2025, the country's manufacturing sector is set to soar to $1 trillion. Start-up Stampede From IT prowess to pharma powerhouses, India's innovators are reshaping industries, with hi-tech sectors poised to triple by 2030. Skilled Symphony Investments in education ensure a skilled workforce ready to power this transformation. Green Giant Awakens A $700 billion clean energy drive positions India as a leader in the sustainability race. Concluding Note What are we waiting for? Let's seize the stage. India scripts a financial saga beyond market numbers, waltzing to a $5 to $10 trillion GDP. It's not a forecast; it's a take-off. Embrace your India tale confidently and stride into a future of boundless possibilities. Also Read-?China stocks at lower valuations but India growth more convincing: Stefan Hofer In essence, the current narrative underscores the challenge of grasping the true significance behind emerging market dynamics, such as India's ascent to the fifth-largest economy and record highs in stock markets. The message is clear: Embrace stock market investment without fear, seize the opportunities our nation provides, and leverage them to advance in your career or business while intelligently managing your increased income. Simply put, concentrate on boosting your income, then wisely invest in the stock market through direct or mutual funds, emphasising both active and passive income. These shared insights aim to equip you to comprehend the intricacies, stay nimble, and position yourself as an active participant in this unfolding narrative, not merely a spectator.
?In the short run, the market is a voting machine, but in the long run, it is a weighing machine." - Benjamin Graham These words carry even greater significance in the present as we observe global stock markets' turbulent and erratic behaviour. In the last six sessions, amidst mounting geopolitical risks and the toughening of US government bond yields, along with widespread selling and increased market volatility linked to the expiry of October derivative contracts, the Sensex has observed a substantial decline of approximately 3,300 points. The ongoing market correction, driven by a convergence of global factors such as geopolitical tensions, toughening bond yields, and growing economic concerns, has left many investors anxious. While long-term goals are vital, the evolving financial landscape requires a proactive and informed approach. Why long-term investing and Benjamin's wisdom need an overhaul Benjamin Graham, a legendary figure and the guru of Warren Buffett, stands as an enduring beacon of wisdom in the world of investing. My intent isn't to challenge his timeless principles but to shed light on the misinterpretation that has enveloped the notion of 'long-term investing' over the years. Long-term financial objectives should unquestionably remain at the forefront, yet the conventional 'invest and forget' approach no longer fits our dynamic landscape. Viewing the challenges of our ever-evolving world as a call to active engagement in your investment journey is paramount. This entails the delicate art of balancing action and inaction, driven by a meticulous portfolio assessment. Let me share financial strategies beyond the usual 'invest and forget' approach, allowing you to make better-informed decisions. For the direct stock market investor: Should you buy during market dips? Seasoned investors might consider buying during market dips, displaying agility with their stock portfolios. However, there's a fine line between seizing an opportunity and catching a falling knife or, in other words, buying when there's blood on the street. How do you discern whether the blood is not your own (especially for those already fully invested) or whether the knife has yet to fall further? It's essential to differentiate between a market bottom and an ongoing descent. Experienced investors are less prone to grave errors, having learned from past mistakes. As an investor, businessman, and advisor, I can confidently state that becoming a proficient stock market investor typically involves making mistakes, for instance, selling off winning stocks prematurely, booking losses hastily instead of exercising patience, lacking dry powder (cash) to capitalise on promising buying opportunities for better returns, or straying from a well-planned asset allocation. So, unless you are certain, do not assume that the market has reached its nadir. Those who lived through the market crises of 2000 or 2008 understand the significance of this caution. Therefore, it's crucial to acknowledge that you might not know what you don't know. If you are a part-time investor managing both a full-time job and a business, it's advisable to approach your shopping spree cautiously in the current circumstances. Don't buy stocks at any price Avoid the error of acquiring assets indiscriminately. In the financial realm, you often hear experts and influencers advocating the purchase of stalwarts like HDFC, Bajaj Finance, Dmart, TCS, and ITC. While these are undoubtedly commendable companies, you need not pledge unwavering loyalty or become an ardent fan with regard to profit generation. It's crucial to detach yourself from emotion and concentrate on evaluating valuations and prospects. While these companies have indeed been prolific generators of wealth and might continue to do so, it's essential to assess the extent of their future potential. Given the ongoing disruption across various industries, it's uncertain whether these conglomerates can sustain the same growth patterns they have exhibited over the last two decades. In the ever-evolving business landscape, new entrants can remarkably challenge established giants, as evidenced by two enterprising individuals who, in a mere decade, transformed a relatively unknown stock brokerage into a powerhouse that outperformed the likes of HDFC Securities, ICICI Securities, and Kotak Securities. Thus, one must question whether these industry behemoths will maintain their dominance. While they are unlikely to falter owing to their robust balance sheets and substantial cash reserves, the question that arises is whether they can continue to deliver consistent returns of 20 percent or more in the future and can you find better companies generating more returns, if you are a true stock market investor, you will do that. For those who do not wish to delve into this depth of analysis, I often advocate a straightforward approach?investing in mutual funds and channelling your primary focus towards your occupation or business. This is due to the higher likelihood of generating substantial returns, be it 1x, 2x, or even 10x, through your individual capabilities. After all, the most valuable financial asset you possess is yourself, and concentrating on your personal growth and financial well-being can be a wiser and more rewarding choice. Also Read-?Why are FIIs fleeing Indian stocks? Blame it on bonds Another significant aspect to consider is exploring companies within the same or other sectors, provided they exhibit deep value and sound valuations. This is where proficient investor distinguishes themselves?by not merely replicating the crowd's investment choices. If your portfolio comprises solely the aforementioned blue-chip stocks, an index fund might as well replace it. These prominent stocks have demonstrated limited returns over the past two years. While they might still deliver respectable returns in the future, it's essential to continually scrutinise their performance and explore alternative, better investment opportunities if available. What guides your investment choices?diligent research or mere hearsay, external influence, or news? I find many people wanting to or actually investing in stocks like Suzlon, Yes Bank, or Idea, perhaps swayed by the belief that they would yield substantial gains. Well, they may very well because you never know who is playing with the stocks, sentiments or fundamentals, mad bull runs, operators, and these factors can also drive these penny stocks trading at around Rs. 10, 16, or 32. My core questions are: Are these the stocks you genuinely want to buy based solely on the turnaround story? What percentage of your portfolio is this, and have you thoroughly analysed these companies? What percentage of your portfolio are they a part of, and have you done a thorough analysis of these companies, and are they better than other options on the market? Can you hire others to do push-ups for you? Many people today base their stock investments on news, WhatsApp University, influencers and whatnot. While that may have worked for some in the past due to the insane bull run after the COVID-19 fall, it will not last. An influencer was recently fined Rs17 crores for falsely claiming to generate profits on trading. In fact, he lost a couple of crores trading, and all the money he made was by selling courses which guaranteed returns of 200 percent and whatnot. Why would someone sell Rs500 courses if such gains were possible? With those types of returns, they'd outperform Mukesh Ambani in less than a decade. Discount anyone who claims to have made 50 percent or 100 percent returns in the last 2.5 years. I once heard a choreographer share a story about Hrithik Roshan. The choreographer tried to teach him a dance move, for simplicity's sake, worth Rs2, but Hrithik showed him moves worth Rs20 in return. Similarly, when someone claims extraordinary returns, a hundred others will make similar claims. So, don't be swayed by impressive numbers from the last 2.5 years; they could be the Hrithik Roshan of the moment. Wait for more time to know who the real Hrithik is. Also Read-?The mutual funds industry in India can be far larger: Monika Halan For the mutual fund investor: - Keep up with your SIPs (Systematic Investment Plans) and let dollar-cost averaging help you steadily build a robust portfolio while mitigating market volatility. - If you have extra cash to invest, do it gradually, taking advantage of market dips, but always follow a well-thought-out plan. Stick to your risk tolerance and asset allocation, or consider mutual funds, where the management is in the hands of experienced fund managers, advisors, or distributors. - Remember, "Mutual funds sahi hai!" You've probably witnessed the volatility of direct stock investments and how mutual funds can shield you from the shocks individual stocks can deliver. While stocks can offer significant returns, they can also erode your wealth if not managed correctly. - Consider converting your liquid funds into equity funds to rebalance and optimise your investment during a market correction. The writer?is a Chartered Accountant and?founder of?NRP Capitals.
Unlike active investors or traders, mutual fund investors rely on the expertise and convenience of mutual fund advisors to navigate the market. However, as the Sensex reaches new all-time highs, mutual fund investors find themselves contemplating changes to their investments. With the Sensex surpassing 65,000 today, the market's steady rise has created a mix of excitement and reflection among mutual fund investors. The Sensex: Just numbers, not a destination ? Recognising that market highs are merely numbers, not destinations, is crucial. The Sensex has proven its resilience through wars, recessions, and industry fluctuations, always bouncing back stronger. From its humble beginnings at 148 points in 1980 to the recent highs of 65,000, the growth has been impressive. By leveraging the power of compounding, achieving Rs1 lakh in the next 3-4 years and Rs5 lakh in the long term is within reach with a compounding return of 12-15 percent. So, it's advisable to continue with mutual fund SIPs, hold equities, and increase investments because "mutual funds sahi hai." ? What are some mutual fund investors considering? ? The market's steady increase has sparked ideas of selling and re-entering when a correction occurs, also due to concerns about the El Ni?o threat to the monsoon, inflation and recession worries, global economic conditions, and other factors. Also Read:?Will El Nino further heat up Indian macro and markets? The pitfalls of timing the market ? Attempting to time the market is futile, as even Warren Buffett states, "Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future." Predicting market movements with certainty is beyond human capability. Attempting to outsmart the market is like trying to possess divine powers that only the Almighty has. Therefore, pausing and reflecting before making decisions based on short-term market fluctuations is essential.? ? Ask the right questions ? Before selling and booking profits, consider the following questions: 1) Why did you invest in the first place? 2) Are you a speculator or a long-term wealth creator? 3) What will you do with the proceeds from selling your mutual funds? ? If you are achieving your goal earlier than anticipated, such as if you planned on saving Rs1 crore for your children's education by 2024 but have already done so because of the growth in the Sensex, then book profits as the purpose is fulfilled. But why should individuals be concerned about seeing all-time highs and struggling with selling their investments if retirement and education for their children are still 5-10-15 years away? Also Read-?Missing IPOs in a stock rally: When will markets get their mojo back? Embrace the bull and unleash the potential of compounding ? Don't let fear dictate your decisions when the market rises to new heights. If you, like me, believe in our country's incredible growth and potential, then recognise our country's enormous potential. Stay invested instead of falling into short-term thinking until your goals are completed, or financial necessities emerge. Concentrate on what matters most to you, whether your job or your business and let the market use the power of compounding to do its magic. Remember that those who stay the course and allow the dramatic story to unfold frequently reap the biggest rewards in both investing and life. The writer?is a Chartered Accountant and?founder of?NRP Capitals.
Indian stock market witnessed a historic milestone as Madras Rubber Factory (MRF) emerged as the country's first six-digit stock, with a share price exceeding Rs1 lakh. This substantial figure has left many retail investors questioning its affordability. Let us now compare it to a global stock, Berkshire Hathaway, the renowned business led by Warren Buffett, where Class A shares are trading at over $500,000 per share, amounting to approximately Rs4 crore. Now the question arises: Is MRF truly an expensive stock? Compared to Berkshire Hathaway, it doesn't seem so bad. So, let us delve deeper into the depths and uncover the hidden secrets behind this intriguing MRF story. Why is it so expensive? Companies frequently announce stock splits to make their equities more appealing and accessible to individual investors, enhancing liquidity while maintaining dividend payments. MRF, on the other hand, has never split its shares. MRF granted bonus shares in the ratios of 1:2 and 3:10 in 1970 and 1975, respectively, but no bonus shares have been issued since then. When the number of outstanding shares remains constant and the organisation grows over time, the company's market value increases, and the stock price rises. Expensive ? Quality: Debunking the myth A costly stock does not always imply a high-quality stock. Understanding the difference between a high stock price and a high valuation cost is critical. Despite its high price, MRF is not the most expensive company in India because investors value stocks based on metrics such as price to earnings (PE) or price to book value (PB), market capitalisation and so on. MRF has never used a stock split to lower its prices. As MRF has demonstrated throughout the years, a high-priced stock can be justified by solid earnings and good future growth prospects. As a result, it is critical to consider aspects other than the stock's price when determining its underlying value and potential. Peer comparison: MRF's pricey reality When comparing the price-to-earnings (PE) ratio, MRF appears expensive compared to its peers. Currently standing at a staggering 55 times, MRF's PE ratio surpasses its competitors. For instance, Apollo Tyres sits at 23.4 times, Ceat at 44 times, JK Tyre at 18 times, Balkrishna Industries at 42 times, and Goodyear India at 22.6 times. However, higher PE ratios indicate limited room for returns. MRF has significantly underperformed its peer group and the overall market over the past 3-5 years. MRF yielded a mere 56.9 percent returns during this period, while the benchmark index soared by 87 percent. Similarly, MRF generated a paltry 33 percent return over five years, while Sensex achieved a commendable 77 percent. Meanwhile, MRF's rivals, such as Apollo Tyres, secured an impressive 284.4 percent return over three years, Ceat earned 122.3 percent, and JK Tyres rewarded their shareholders with a return of 219.68 percent. The numbers paint a compelling picture of MRF's performance compared to its peers, highlighting the need for a closer examination of investment potential. MRF: Expensive but not in the Top 100 MRF is India's undisputed king of high-priced stocks, followed by Honeywell Automation, Page Industries, Shree Cement, 3M India, Abbott India, Nestle, Bosch, Procter & Gamble Hygiene, and Lakshmi Machine Works rounding out the top 10. But despite its Rs42,000-crore market cap, it is still not among India's top 100 listed firms in terms of market capitalisation. Reliance Industries leads the pack with a market cap of Rs17 lakh crore, followed by TCS at Rs11.9 lakh crore and HDFC Bank at approximately Rs8.9 lakh crore. MRF's distinctive characteristics Despite MRF's high PE ratio and modest growth pace, individual investors can take heart. Because of its high-value price denomination, investing in MRF may provide a significant advantage in terms of decreased vulnerability to manipulation and the sector's overall growth. However, as previously stated, look at its competitors?who are doing better than MRF. Always remember that stock market gains depend on future performance rather than past performance. The stock market is a forward-looking animal, so be cautious. Also Read: >?Which stocks did Radhakishan Damani, India's richest investor, bet on in Q1 > I'm always fully invested in good and bad times: Raamdeo Agrawal