"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.