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World Gold demand rise by 1% at 1,083.8t in Q1 2020 same compaired to last year, according to the World Gold Council’s latest Gold Demand Trends report.
The global COVID-19 pandemic fuelled safe-haven investment demand for gold, with gold-backed ETFs attracting huge inflows But the retail sector has weakened sharply. demand for Jewellery has hit hard , demands have dropped 39% to a record low of 325.8t. Investing In Gold & Silver explained in easy langauge at www.MoneyEstate.in The gold price reached a new record high in Indian rupees and Turkish lira, among others. But Corona pandemic has slashed jewellery demand as global governments imposed lockdown measures. Demand fell to previously unseen lows, led by a 65% decline in China – the largest jewellery consumer and the first market to succumb to the outbreak. “Gold demand will continue to feel the effects of COVID-19 for the rest of 2020. In particular, the divergence between investment in gold-backed ETFs and consumers via jewellery will likely continue until there is greater economic and market certainty.” Investing In Gold & Silver explained in easy langauge at www.MoneyEstate.in The key findings included in the Gold Demand Trends Q1 2020 report are as follows: Overall demand grew in Q1 by 1% year-on-year to 1,083.8t Total investment demand increased by 80% year-on-year to 539.6t Total consumer demand decreased by 28% from 791t in Q1 2019 to 567.4t in Q1 Global jewellery demand fell by 39% to a record low of 325.8t Central banks net buying fell by 8% year-on-year to 145t Bar demand weakened to 150.4t, a year-on-year decline of 19% Demand in the technology sector fell 8% to a new low of 73.4t Total supply dropped by 4% year-on-year Read more at : https://www.gold.org/news-and-events/press-releases/q1-gold-demand-supported-covid-19-fuelled-safe-haven-investment Bloomberg Quint reports : Gold, Silver Race Higher on Fear of Second Virus Wave Gold jumped toward its peak in April, when prices hit the highest since 2012, after bleak U.S. government data underscored how hard coronavirus-related shutdowns have hit the world’s largest economy. Futures posted the highest close to a week since October 2012 after U.S. factory production plummeted in April by the most in records back to 1919, and a gauge of U.S. retail sales plunged through the record set just a month earlier. “Everybody must have realized it, but it’s just more evidence that the reality is this is a pretty bleak economic picture right now,” Phil Streible, chief market strategist for Blue Line Futures LLC, said by phone. “People are continuing to pile into gold because that weak economic picture is going to continue to drive interest rates lower.” Gold futures for June delivery settled 0.9% higher at $1,756.30 an ounce as of 1:31 p.m. on the Comex in New York, after climbing as much as 1.2%. Spot prices topped their 52-week high, heading for the highest close since November 2012. Investing In Gold & Silver explained in easy langauge at www.MoneyEstate.in Silver also got a stronger bid, rallying to the highest in over two months. The two precious metals have been lifted after U.S. Federal Reserve Chairman Jerome Powell warned earlier this week that the pandemic will take a heavy toll on the economy. Fears intensified on gloomy American unemployment data Thursday, and as President Donald Trump said he doesn’t want to talk to his Chinese counterpart Read more at: https://www.bloombergquint.com/markets/gold-silver-have-breakout-on-growth-and-second-wave-virus-fears Moneycontrol reports : Gold prices likely to touch Rs 50,000-55,000 by end of 2020 The precious metal known to be anti-inflationary retains its purchasing power parity during a global economic crisis. Gold has good liquidity right now and from the safety perspective seems to be the only option in front of people. Investing In Gold & Silver explained in easy langauge at www.MoneyEstate.in After giving a return of 23.74 percent in 2019, gold is likely to continue its upward trajectory, and prices are likely to touch $1,800/ounce, or around Rs 50,000-55,000 per 10 gram in rupee term by the end of 2020. The prices are likely to shoot up in the next two-three years with fear, speculation and uncertainty around the current economic situation. The precious metal has gained Rs 6,794, or 17.31 percent in 2020 so far. The precious metal has so far given a return of 15.19 percent in 2020. Read more at: https://www.moneycontrol.com/news/business/commodities/gold-prices-likely-to-touch-rs-50000-55000-by-end-of-2020-5141861.html
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Digital payment players have got a boost on the back of concerns over coronavirus and the recent advisory by the Reserve Bank of India to use non-cash payment options like NEFT, IMPS , UPI and Bharat Bill Pay. “A safe way to pay. A safer way to stay healthy. Use digital payment options and avoid social contact,” said National Payments Corporation of India in a tweet on Tuesday Popular payment apps like Paytm and Mobikwik too have been encouraging customers to use digital payment options during the current situation, where it is advised to avoid social contact and public places. “Manage all business payments from the comfort of your home,” Paytm said in a recent tweet.
Many retail chains and businesses have also been encouraging customers to shop online and pay through digital channels. An SBI Ecowrap report noted that evidences suggests that currency notes are a source of infection and dangerous to health, more so because many of the pathogens on them are multi-drug resistant strains. Combination of monetary, fiscal policy needed to address coronavirus impact: SBI report It said that immediate steps should be taken to check spreading of any virus through currency notes and said the possibilities of usage of polymer notes in India should also be examined. “For the time being, alternative mode of payments including digital payments coupled with incentives and benefits to encourage more and more people for adoption and acceptance of alternate mode of payments in the larger interest of health of the country needs to be encouraged further,” it said. “A crisis like Covid-19 needn’t necessarily mean loss of business. Banks and financial institutions can make the most of digital payments and customer onboarding solutions to keep up the pace. With remote working catching on, BFSI stakeholders would do well to adopt AI, and RPA led solutions, which can help them serve their customers effectively,” said Ankit Ratan, co-founder of Signzy a banglore based company. The RBI has said that public can use digital payment from the convenience of their homes and avoid using cash Read more at : https://www.thehindubusinessline.com/money-and-banking/digital-payments-get-boost-amidst-covid-19-concerns/article31089437.ece Get Hassle free Loans Digitally at www.MoneyEstate.in India Tv Reported : Digital payments in India are surging in the ongoing Covid-19-caused lockdowns which will accelerate mobile data/4G penetration and build an ecosystem of services. According to a research report by CLSA, acceleration in data penetration will especially be positive for Bharti Airtel, as 50 per cent of its subscribers are still to upgrade to 4G, and in services, the latest catalyst will be Reliance Jio’s partnership with WhatApp for JioMart ramp-up. CLSA said that digital payments in India are surging in the ongoing Covid-19-led lockdowns. Already these had jumped three-fold over the last two years to 3 billion transactions a month. UPI, an instant real-time payment system developed by National Payments Corporation of India (NCPI), which allows instant money transfer between two bank accounts on a mobile platform, is being promoted aggressively by the government. Get Hassle free Loans Digitally at www.MoneyEstate.in Launched in April 2016, UPI monthly transactions have risen to 1.3 billion with Rs 2.2 trillion transaction value implying 43 per cent of total digital payment volume and 32 per cent of the total value. UPI transactions now account for 41 per cent of total mobile banking transactions in value, up from 14 per cent in January 2018 and the government is now taking even more steps to aggressively promote digital payments via UPI in ongoing lockdowns. Further as mobile increasingly becomes the instrument of cashless/digital payment in the short and the long run it will build a growing ecosystem of useful services, CLSA said. Read more at : https://www.indiatvnews.com/technology/news-digital-payments-increase-in-india-during-coronavirus-lockdown-614260 Get Hassle free Loans Digitally at www.MoneyEstate.in Personal Loans are fast and the easiest way to get Loans, and the other alternatives for fast smaller size loans. CIBIL Explains The Reasons Behind India’s Soaring Personal Loan Growth –
A weak economy has weighed on growth in credit to most segments. But not on personal loans and amounts outstanding on credit cards. While overall consumer credit growth declined for the sixth straight quarter, “consumption loans” continued to grow, according to the latest credit trends report from credit bureau TransUnion CIBIL. For instance, credit card outstanding grew at 40.7 percent in the third quarter of calendar year 2019 compared with 31.7 percent a year ago. Personal loans grew at 28 percent compared with 33.5 percent in the same period last year. The volume of origination in the personal loan category soared 134 percent year-on-year. Overall, the share of consumption products to total balances originated increased to 31.2 percent in third quarter of 2019 from 25.1 percent in the year-ago period, CIBIL said. Get Hassle free Personal Loan at www.MoneyEstate.in What is driving this increase in consumption credit? Are lenders pushing such products in the absence of credit growth from other segments like auto and home loans? Or are consumers increasingly funding their consumption via credit in the absence of strong income growth? Harshala Chandorkar, chief operating officer of TransUnion CIBIL, said it was a combination of both these factors. We are seeing good growth in the unsecured loans. I think that it’s linked to a change in the consumer mindset. People are looking at smaller ticket loans. They are financing things like mobile phone purchases through credit and are not really looking at it as a loan but an easy way to access finance. Consumers looking to fund purchases, such as consumer durables and even holidays, through credit have a variety of options today. Apart from the option to take a regular personal loan, non-bank lenders are offering specialised products. EMI schemes are also offered across credit and debit cards to fund such purchases. There is a shift in the consumer mindset and there is availability of products, said Chandorkar. “Options are available to consumers to get access to finance for these products. It happens seamlessly, in a few minutes,” she said. The shift away from credit taken for one-time large expenses like weddings or medical needs, and towards financing of seemingly regular purchases, is visible in the reduced ticket size of such loans. Read more at: https://www.bloombergquint.com/business/cibil-explains-the-reasons-behind-indias-soaring-personal-loan-growth Get Hassle free Personal Loan at www.MoneyEstate.in Financial Express Reported :- Covid-19 personal loan scheme: Money available at reduced rates Covid-19 personal loans, as the name suggests, are not business loans but personal loans with some relaxed norms. The biggest relaxation is in the form of a lower rate of interest. Rate of interest is between 7% to 10%, which is lower than normal rate of interest for personal loans which start from 12% and can go up to 20%, depending on the individual’s credit score and income related factors. Banks which are offering such loans are Bank of Maharashtra, Punjab National Bank (PNB), Indian Overseas Bank (IOB), Bank of Baroda (BoB), Indian Bank, Union Bank of India, UCO Bank, State Bank of India (SBI) and Bank of India. Rest of the banks are only providing moratorium of up to three months on personal loan EMI payments that are due between March 1, 2020 to May 31, 2020 as per RBI directive. So the big question is whether it is available for everybody. The answer is no. These loans are for existing customers of lenders and most of the banks are offering loans to borrowers of home loans. The eligibility criteria is that the borrower needs to have salaried account or personal account with the bank. Get Hassle free Personal Loan at www.MoneyEstate.in Repayment track record The idea is that banks are ready to lend but not at the cost of default. They will lend only to those borrowers who have a decent repayment track record and a good credit score. Different banks have different criteria for how much can one borrow. For the self-employed, the limit is usually 50% to 60% of their last filed income. For salaried personnel, it is about 10 times the monthly salary. Banks have already given a lifeline to existing borrowers at the behest of RBI by offering a three-month EMI moratorium on all outstanding loans falling due between March 1, 2020 to May 31, 2020 including home, educational, personal and car loans. The catch is the interest will still accrue during the moratorium and will be added to the outstanding loan amount. We need to understand that it is not an interest waiver but only deferment. So in a way, the total interest cost of the loan will increase. Just because Covid-19 personal loans are available at reduced rates does not mean that one should opt for it. Loans still have to be repaid and we don’t know what will happen in the future. We don’t know how long this crisis will continue and we are borrowing right now to fill the gap for something when we don’t know whether we will be able to repay or not. Yes, if the requirement is there, then one should take these loans but only as a last resort. No point adding more debt in uncertain times. Read more at: https://www.financialexpress.com/money/your-money-planning-to-go-for-covid-19-personal-loan-take-it-only-as-a-last-resort/1964263/ Get Hassle free Personal Loan at www.MoneyEstate.in With each passing day, more and more people are testing positive for COVID-19 – popularly known as Coronavirus – globally. As per the data shared by the World Health Organisation (WHO), as many as 1 million people across various parts of the globe are infected with coronavirus infection with maximum being infected in the USA followed by Italy and Spain. In India, the total number of confirmed cases has crossed the 8,000 mark, of which over 270 people have lost their lives. Taking cue from the increasing panic amongst the people and rapid spread of the novel coronavirus, all health insurers in India have started covering treatment for coronavirus under the regular health insurance policy. However, as per the directions of the Insurance Regulatory and Development Authority of India (IRDAI), the insurers have even introduced Coronavirus-specific health insurance products that provide dedicated coverage against the deadly virus. Such plans are an excellent way to compensate for loss of income during the treatment of the illness as the policyholder is paid the entire sum insured as a lump sum in case of testing positive for coronavirus. However, one must only buy these plans as a rider along with the regular indemnity based health plans that provide comprehensive coverage against all illnesses and ailments up to the total sum insured. The offered fixed-benefit plans for coronavirus are available for a limited period—1 year—only and cannot be renewed or used for treatment of any other illness. Also, these policies are only applicable to Indian residents. While other eligibility criteria like age, sum insured, individual or group are specific to each policy. Want to Buy Insurance Hassle Free, Head on to www.moneyestate.in Read more at : https://www.financialexpress.com/money/insurance/covid-19-insurance-plans-know-what-insurers-are-offering/1925985/ Various Insurance Companies are offering Special Policy for COVID 19, some of them are :- COVID – 19 Protection Insurance – RuPay at www .rupay. co .in covid-insurance Max Life Insurance – Covid-19 Insurance Policy – Covid Term Insurance at Max Life www. maxlifeinsurance . com – Max Life Insurance is accepting death claims caused due to COVID-19 as per policy contract Want to Buy Insurance Hassle Free, Head on to www.moneyestate.in Future Generali – Covid-19 Support – Health Insurance covers Coronavirus. In these unprecedented times, they stand in solidarity with the world to fight the pandemic COVID-19. Iffco – Tokio – Insurance Plans – COVID-19 – under health insurance plans offered by IFFCO Tokio, renew health insurance policy from your home by our digital channels for transactions ICICI Lombard Covid 19 Protection Cover – Additional Coverage. The COVID-19 protection cover also comes with certain add-ons that can enhance the coverage provided to the insured. Policy X – Buy Coronavirus (COVID 19) Insurance Plan Coronavirus Health Insurance are offered at – Policybazaar . com Want to Buy Insurance Hassle Free, Head on to www.moneyestate.in Tata AIG – Health Insurance | Medical Insurance Plans with Covid-19- Buy health insurance online in India with Tata AIG Insurance that covers COVID-19 under inpatient treatment. Star Novel Coronavirus (nCoV) (COVID-19) -by Star Health – for treatment and medical expenses due Novel Corona virus (nCoV)(COVID-19) Go Digital Coronavirus Cover: Health Insurance with Coronavirus – Digit Health Insurance covers pandemic declared Coronavirus (COVID-19). Want to Buy Insurance Hassle Free, Head on to www.moneyestate.in Exide Life Insurance – Your safety is our utmost priority,Our branches will remain temporarily closed due to COVID-19 crisis. Aditya Birla Capital Coronavirus Health Cover- this is a health insurance policy and it will cover expenses during hospitalisation. HDFC ERGO has now newly launched Health Insurance on installments for credit card holders. and it supp ‘Stay Home, Stay Safe’ initiative to fight against COVID-19 crisis. Reliance General Insurance – COVID-19 Policy | Fino Payments Bank in association with Reliance General Insurance has launched, Reliance COVID-19 Insurance As a disciplined investor, what is expected from you is that while you stick to your long-term goals, you also build a contingency fund. In a quest to achieve all their financial goals, many times I have come across investors who won’t anticipate the need to have a contingency plan just until they need it. As a disciplined investor, what is expected from you is that while you stick to your long-term goals, you also build a contingency fund. In a quest to achieve all their financial goals, many times I have come across investors who won’t anticipate the need to have a contingency plan just until they need it. Investing In Mutual Funds explained in easy langauge at www.MoneyEstate.in Park your money, ideally your monthly expenses for around 6 months to a year in a Liquid fund. Job loss or no job loss, pay cut or no pay cut, everyone has to plan for emergencies. Remember, the first step towards prudent financial planning is to get yourself a term insurance if you are an earning member of your family. The second step is to save for contingencies. Then follows investing for your long-term goals. If you do this, trust me, come recession, come what may… you will have nothing to worry. Read more at: https://economictimes.indiatimes.com/https://economictimes.indiatimes.com/mf/analysis/covid-lockdown-recession-what-should-mutual-fund-investors-do/articleshow/75860189.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst So how will the Mutual Fund Companies Operate Now. – The Novel Coronavirus COVID-19 has served double blow to mutual fund (MF) investors, who are not Net-savvy. This is because, to protect the employees from the COVID-19 infection, the Association of Mutual Funds in India (AMFI) has announced that the offices of the Asset Management Companies (AMCs) and their Register and Transfer Agents (RTAs) will remain closed for some time. So, there will be no opportunity to submit physical forms for MF transactions, including – fresh/additional purchase, switch in, switch out, redemption etc. Although the offices will be shut, the employees would work from home and MF transactions through online modes would continue.So, to avail the opportunity to get higher number of units at low NAV by investing in down market, investors have no options, but to become tech savvy and go online. Investing In Mutual Funds explained in easy langauge at www.MoneyEstate.in However, to ensure that the existing investors, transacting through physical mode, don’t suffer due to closure of offices, AMFI, in a letter to market regulator Securities and Exchange Board of India (SEBI), said, “As an alternative to help such investors, AMCs/RTAs will accept transaction requests sent from the registered email IDs of the unitholders / registered domain IDs of institutional investors.” “Redemption payment will be made to the registered bank account of the clients,” said AMFI in the letter. Read more at: https://www.financialexpress.com/money/mutual-funds/want-to-buy-mutual-funds-in-times-of-corona-heres-what-you-need-to-do/1906498/ Lets first understand the important Lessons to learn from this difficult times (summary of Article at Economic Times) 1 – Do not wait till the eve of the event, to liquidate your holdings. The markets could be at their highs or might have collapsed on account of say, a war, a major terrorist attack or consecutive monsoon failures. Start withdraw systematically, several months ahead, and park your investment in a safe bank’s deposit. Investing In Mutual Funds explained in easy langauge at www.MoneyEstate.in 2 – It is human psychology to invest when the markets are going up and withdraw into a shell, when they fall. but we should pay heed to the market aphorism about “buying when there is blood in the streets”.it is impossible to identify a bottom, but these are the times to increase your SIP contribution. historically few pandemics apparently had second waves, months after the first, such a things could lead to new lows for the markets, which investors should be prepared for buying rather than fearing and selling. 3 – Investing in stock markets is not for the faint hearted. While it is perfectly understandable to feel elated at the eye-popping returns in your mutual fund portfolio statement during the euphoric phases of the markets, investors need to take the lows too, in their stride. The last few market crashes produced horror stories of investors “losing everything”, when the market mayhem played out over months during the dotcom crash of 2000 and the financial crisis of 2008. This time the crash has taken just a few weeks. Take heart that the indices recovered and hit new highs after every crash, till now. Investing In Mutual Funds explained in easy langauge at www.MoneyEstate.in
https://economictimes.indiatimes.com/mf/analysis/five-important-investment-lessons-from-the-coronavirus-crisis/articleshow/75243746.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst COVID-19 effects the Debt funds , no more safe to invest. As credit risk funds may see redemption pressure because there are no takers for lower-rated paper, investors can opt for liquid and overnight funds. Debt funds face risks of default, liquidity amid Covid-19 scare
Existing investors need to review the holdings of their funds and take a call based on their risk appetite As redemptions increase, remaining investors will be left with a higher exposure to risky debt As Covid-19 disrupts the Indian economy and the markets, several second-order effects of the global pandemic lie in wait on the horizon. One of the most prominent among these is the risk of defaults. Little data on this has come out into the public domain yet, but the number of government-mandated restrictions on businesses have steadily increased over the past month, affecting their profits and debt servicing ability. Looking to invest in Mutual Funds, come to www.MoneyEstate.in Debt funds, in general, are characterized by credit risk in varying degrees. It is the highest in funds that buy low-grade corporate bonds and the lowest in funds that buy only government securities. Though credit risk funds carry the highest degree of credit risk, other types of debt fund categories also have this risk. In return for taking on credit risk, debt funds get bonds with high yields. They also derive returns if their holdings get upgraded by credit rating agencies or the market prices them higher due to an improvement in their credit profiles. In order to do well, these funds need an improving credit risk environment or, at least, a stable credit environment. Both the scenarios look unlikely as, in the present scenario, timely repayment may be difficult for both consumers and small and medium enterprises. “The real economy is suffering enormously and there will be defaults across the board unless the government announces a bold fiscal package. This will impact credit risk funds,” said Prateek Pant, head of products and solutions, Sanctum Wealth Management. Falling stock prices have already caused rating downgrades. On 20 March, ICRA downgraded Future Group’s Future Corporate Resources Pvt. Ltd below investment grade, citing a rise in promoter-pledged shares due to a fall in stock prices. Even the HDFC Bank stock, considered India’s least risky private lender, dropped 35% from ₹1,217 as on 20 February to ₹779 as on 19 March, on concerns about its exposure to unsecured consumer lending. The Covid-19-driven distress is likely to amplify pain on an already stressed financial system. In a note released to its investors on 18 March, Suyash Chowdhary, head, fixed income, IDFC Mutual Fund, wrote that with another year of subdued growth almost a certainty, general pressures on somewhat weaker balance sheets are likely to continue. “It is a false perception in our view that yields on lower rated funds are attractive. The spreads between AAA and AA papers aren’t compensating investors for the significant financial market and macro risks,” he wrote. Looking to invest in Mutual Funds, come to www.MoneyEstate.in Apart from the threat of defaults, another challenge that credit-oriented debt funds in India face is that of redemptions. Bloomberg reported on 20 March that investors withdrew a record $35.6 billion from investment grade bond funds in the US. Funds that buy junk bonds, which are smaller in size, also saw an outflow of $2.9 billion in the five business days ending 18 March, said the report. As money flows out of debt funds, managers sell liquid and higher-rated bonds to meet redemptions, leaving the remaining investors with an even higher percentage exposure to risky debt. In the latest write-down on account of Yes Bank bonds, debt funds across the spectrum, including treasury advantage funds. short-term funds and medium-term funds, faced losses. Hybrid funds also faced deep cuts on the debt portion of their exposure. “There is a liquidity problem in the debt market and this aggravates the already low liquidity that high yield debt has. Credit risk funds, typically, maintain cash buffers to tide over this problem but, in the present scenario, if there is a run on these funds, the buffers may not be enough,” said Pant. However, Vishal Dhawan, founder, Plan Ahead Investment Advisors, a financial planning firm, pointed out that debt funds use various strategies to conserve liquidity, such as taking credit lines from banks to meet redemptions, having stiff exit loads and capping how much a single investor can invest in a debt scheme. On the positive side, there could be rescue measures from the Reserve Bank of India (RBI). The US Federal Reserve has cut its rate to near zero, launched a new asset purchase programme without a maximum limit and has stepped up bond buying, including municipal bonds. The European Central Bank has also announced a stimulus worth 750 billion euros and declared that there are no limits to its monetary policy. RBI has announced fresh rupee-dollar swaps and long-term repo operations (LTRO) worth ₹1 trillion to soothe the bond markets. LTROs involve providing money to banks for a term of one to three years in exchange for government bonds. “If economic distress spurs defaults, there needs to be sustained intervention by RBI. This is likely to be in the government bond market through open market operations and the market expects RBI to direct LTROs in the PSU bond market,” said Arvind Chari, head of fixed income and alternatives, Quantum Advisors Pvt. Ltd. “Direct purchases of corporate bonds by RBI is unlikely,” he added. So funds investing in low-rated debt may not benefit from this. However, A. Balasubramanian, CEO, Aditya Birla Sun Life Mutual Fund, rejected the notion that funds with higher yields-to-maturity necessarily have higher defaults. He asked investors to note the recoveries from some of the resolved securities under the legal resolution process. Read More at: https://www.livemint.com/money/personal-finance/debt-funds-face-risks-of-default-liquidity-amid-covid-19-scare-11585073815488.html All investors of debt mutual funds, which have been seen as low risk, are worried after Franklin Templeton Mutual Fund announced its decision to wind up six of its credit risk fixed income schemes with net assets under management of Rs 25,900 crore. The fund house had to take the extreme decision because of the redemption pressure and illiquidity caused by the Covid-19 pandemic. Investors in these six schemes will be hit as the money will be blocked and no liquidity will be available in their portfolios. They may get payments in a staggered manner if the fund house is able to recover money after liquidating the investments. Looking to invest in Mutual Funds, come to www.MoneyEstate.in Turmoil in debt market Analysts say other debt schemes may see redemption pressure as the coronavirus pandemic has led to risk aversion amongst investors and there are no takers for lower-rated and unrated paper. The turmoil in the Indian debt market started with the Infrastructure Leasing & Financial Services (IL&FS) default in 2018 which led to a liquidity squeeze, and then liquidity-starved Dewan Housing Finance Ltd (DHFL) and many other companies defaulted on principal and interest payments. Before investing, investors must analyse the credit risks and interest rate risks of debt funds. They must also check the fund house’s investment portfolio—whether the bonds are from well-known companies—and be careful where the fund manager is chasing returns by taking higher credit risk. Joydeep Sen, founder, Wiseinvestor.in, says what happened at Franklin Templeton was not only about the credit risk in the portfolio, but also about redemptions from the portfolio in apprehension of credit defaults. “One thing compounds the other. Had redemptions not happened to the extent it did, probably this extreme step would not have been required. It was possible to allow things to drift, without freezing the six funds. But then, investors who exited early would have got a ‘better’ exit and those who remained, would have been left with an inferior quality portfolio,” he says. Liquidity issues The corporate bond markets in India are fairly illiquid and even more so in the lower credit rating space. With rising redemption pressure, fund houses are not able to sell the bonds because of the poor liquidity conditions. Fund houses have also resorted to borrowing in order to meet the redemption pressure. According to a research note by Morningstar Investment Adviser India, Franklin Templeton took several measures to meet redemption pressure by way of getting borrowers to pre-pay debt, selling bonds to banks and using the credit line provided by banks. “However, with unprecedented high redemptions from these funds, it came to a situation where these were not viable options anymore,” it says. In March alone, cumulatively, these funds witnessed an estimated net outflow of Rs 9,148 crore. In the current context, investors should look at liquidity risks of the funds, which means how quickly the fund manager can sell the particular paper in case of any downgrade. Corporate bonds of high-rated companies are more liquid than the lower-rated paper. If the fund manager is selling the paper under pressure, then investors will suffer losses. In fact, savvy investors have been exiting from credit risk funds as the AUM fell to `55,381crore in March this year from Rs 65,124 crore in October last year. The number of folios dropped to 4,61,927 from 5,19,311 during the same period. Looking to invest in Mutual Funds, come to www.MoneyEstate.in Credit risk Corporate debt paper carry higher credit risks than government bonds. Credit risk takes into account whether the bond issuer is able to make timely interest payments and pay the principal amount on maturity of the bond. If the issuer is unable to do so, then the particular bond is likely to default. Investors should not invest in funds that have high exposure to companies having a large leverage. If you invest in debt funds, align investment horizon with that of a fund which will help to mitigate the interest rate risk. Sen says in case there is panic redemption across the industry, then the issue that happened at Franklin Templeton will spread to the entire industry and will ultimately harm the investors. “The panic exit will happen at higher bond yields i.e lower prices. The RBI Special Liquidity Facility (SLF) window of Rs 50,000 crore for mutual funds should help assuage sentiments,” he notes. Schemes like liquid funds and overnight funds are less risky than credit risk funds. Read more at : https://www.financialexpress.com/money/covid-19-effect-debt-funds-in-turmoil-check-credit-risks/1941401/ Ever since COVID 19 strike, markets loom under fear as uncertainty prevails. lt has sent markets around the world crashing to levels not witnessed since the Global Financial Crisis of 2008. Following the strong correlation with the trends and indices of the global market as BSE Sensex and Nifty 50 fell by 38 per cent. The total market cap lost a staggering 27.31% from the start of the year. The stock market has reflected the sentiments this pandemic unleashed upon investors, foreign and domestic alike. Companies have scaled back; layoffs have multiplied and employee compensations have been affected resulting in negligible growth in the last couple of months. Certain sector such as hospitality, tourism and entertainment have been impacted adversely and stocks of such companies have plummeted by more than 40%.
Want to Invest in Shares ? Head on to www.MoneyEstate.in While the world has witnessed many financial crises in the past, the last one being the global recession of 2008, the current coronavirus crisis is different from the past fallouts. In response to current turmoil, RBI and the Government of India has come up with a slew of reforms such as reductions of repo rate, regulatory relaxation by extending moratorium and several measures to boost liquidity in the system howsoever the pandemic has impacted the premise of the corporate sector. Payments deferrals, subdued loan growth, rising cases of bad loans and sluggish business conditions have impaired the growth and the health of the economic activity. Deceleration of GDP growth, demand-supply chain, cut in discretionary expenses and CAPEX has been the observed during the lockdown, which has led to falling in household incomes, marketing spends, reduced travel cost and hiring freeze. Companies with innovative products, increasing distribution reach, technology-driven processes and healthy balance sheet would revive the growth momentum post lockdown. Lower oil prices and high capital expenditure by the government in turn creating capital which will provide a platform to flourish when we overcome COVID 19 pandemic. Want to Invest in Shares ? Head on to www.MoneyEstate.in As for the outlook for the market, we only need to look back at its history. Drops in BSE sensitive index is temporary, and each dip provides investors with the opportunity to enter the market and earn a higher return especially for those with long term horizon. Moreover, the higher the fluctuations, the higher chances of getting better returns. While these crises are real and it impacts the world economy, but historically, such crisis has not lasted long, as the world is competent enough to come up with answers to combat these challenges. Despite the fact that it’s hard to predict the magnitude and impact of Coronavirus on the economy, but it is certain that the markets will bounce back soon the crisis gets over. With an average annual return (CAGR) of around 15 per cent, by growing from 100 points in 1979 to over 41,000 points in 2019, Sensex has proven time and again that corrections are temporary, but growth is permanent Read more at : http://www.businessworld.in/article/Impact-Of-COVID-19-On-The-Indian-Stock-Markets/11-05-2020-191755/ Investor sentiment in India is so low that despite relatively lower cases, Indian market has fared worst among global peers. Indian stock market has lost 26 per cent in dollar terms between February 1 and April 9, compared with a fall of 20 per cent and 14 per cent in the European and US markets. Emerging markets, reflected by the MSCI EM index, declined 15 per cent during the same period. China, where the coronavirus originated, has been least affected, with just 3 per cent fall in the stock market between February 1 and April 9. “We do recognise equity market is dynamic, often distorted and is perennially mispriced (and that’s the reason for the existence of market and stock analysts), but nonetheless is perhaps the best measure (to estimate the cost of COVID-19) currently. And, for now, while the US and other EMs have lost around 15% since February 1, India has eroded around 25%. That’s a lot of pain,” says Edelweiss Securities in a research note dated April 12. Want to Invest in Shares ? Head on to www.MoneyEstate.in Market’s value erosion – Highest in India so far Cost of the lockdown The lockdown in India has been the most stringent to contain the pandemic. While the three-week nationwide lockdown that started on March 24 is coming to an end on Tuesday, in all likelihood, it will be extended for another two weeks or more. “India’s economic cost are likely to be more in sync with the cost of shutting down the economy rather than its COVID-19 numbers. It’s also going to be a moving level given how it opens up and the impact of the shutdown,” the note says. The brokerage defines three components of economic cost — the government, corporates and consumers. “There will be different components of economic cost. Some of these could be absolute meaures: GDP value erosion over the year possibly the most dominant one, the fiscal expansion that offsetting would take over the year. But, its impact is well likely to extend over many years. Or it could be measured in terms of corporate sector profitability in terms of profitability lost, albeit the likely expansion in leverage / balance sheets or the leverage increase in the system could well be another measure,” Edelweiss Security says. “The cost to the consumer could well be another. The erosion in income over the year, on job losses, lower wages and man days lost,” it adds. Socialisation of COVID-19 costs Edelweiss sees additional burden in terms of socialisation of COVID-19 costs with the government and regulators asking the corporates to pitch in. “This could be in the form of forbearance / waivers (banks), public policy (PSUs), pricing regulations and caps (hospitals, airlines, telecom), inclusions (insurers), quantitative restrictions – supply prioritisation (pharmaceuticals, exporters), amongst others,” it says. For example, the RBI has told banks to offer moratorium on loans, the Supreme Court has asked private labs to provide free COVID-19 testing and hospitals have been taken over for coronavirus patients. Want to Invest in Shares ? Head on to www.MoneyEstate.in Given uncertainty around these sectors, the brokerage has downgraded banks to ‘underweight’ and keeping away from utilities and all government companies, while raising weightages on sectors that are not exposed such. For instance, it has upgraded consumer staples, pharma and IT to ‘overweight’. Read more at : https://www.businesstoday.in/markets/stocks/coronavirus-impact-india-worst-hit-stock-market-china-least-affected/story/400890.html How much economy will lose from coronavirus and what to expect from economic relief package 2.0 The economic impact of the pandemic on India is likely to be around Rs 7-8 trillion with sectors such as trade, textiles, aviation, transport, and MSMEs facing the brunt of the impact.
Reserve Bank of India (the “RBI”) has introduced a number of measures to stimulate lending and improving liquidity, all eyes are now on the Finance Ministry as Indian businesses look for a relief package to help them survive through these difficult times. Lockdown Impact of COVID-19 In its statement released on April 17, 2020, the RBI acknowledged that growth could slow to as much as 1.9%, if not more, in FY2020-21. At the same time, the International Monetary Fund (the “IMF”) has projected a global growth rate of (-)3% for 2020. While these projections see India as one of the better performing economies in Asia, the fall in global demand is likely to have a massive impact on Indian exports. Already, the RBI estimates that India has seen an export contraction of about 34% in March 2020. Looking for Loans during Covid Times ? Head on to www.MoneyEstate.in All in all, the economic impact of the pandemic on India is likely to be to the tune of INR7-8 trillion with sectors such as trade, textiles, aviation, transport, tourism, hotels, wholesale and retail trading and MSMEs facing the brunt of the impact. At the same time, the financial sector, especially NBFCs and MFIs, and the real estate sector are also likely to suffer during this period due to a lack of consumer demand. The fall in revenues and incomes will cause a substantial fall in revenue collection by the government, which in turn, will affect the fiscal deficit in the short to medium term. Measures introduced by the RBI and the Indian government RBI has introduced several long-term repo operation (“LTRO”) packages, including the LTRO of INR500 billion announced on April 17, 2020 which specifically targeted the financial sector (NBFCs and MFIs). LTROs are essentially long-term (one (1) to three (3) year term) loans given by the RBI to banks at low interest rates. The objective of this measure is to incentivize the banks to undertake onward lending at correspondingly low interest rates. NBFCs had been requesting the RBI for direct loans to ease liquidity, however, the RBI has chosen to proceed with indirect loans through banks. It remains to be seen whether the banks efficiently pass on the benefits to NBFCs and MFIs, who in turn, will have to strive to pass on the benefits to their borrowers. RBI also announced a cash infusion of INR500 billion for the All India Financial Institutions, namely, the NABARD (National Bank for Agriculture and Rural Development), the SIDBI (Small Industries Development Bank of India) and the NHB (National Housing Bank) which play an important role in meeting the long-term funding requirements of agriculture and the rural sector, small industries, housing finance companies, NBFCs and MFIs. The RBI recognized that these institutions were not able to raise sufficient funds from the market and therefore, injected much needed capital in a bid to support the rural economy. Looking for Loans during Covid Times ? Head on to www.MoneyEstate.in Separately, in its guidelines for the extended lockdown, the central government announced that agricultural and related activities will be permitted to remain fully operational in zones not demarcated as containment zones. As a significant portion of India’s population derives its income from agricultural and allied industries, this measure is likely to alleviate the financial impact on this sector and consequently, reduce the need for fiscal stimulus in a large chunk of the Indian economy. Expectations from the Finance Ministry The measures introduced by the RBI are unlikely to provide a sufficient stimulus as banks and other lenders are increasingly adopting risk-averse strategies. In fact, the RBI governor has stated that there is a liquidity surplus in the economy and that on April 15 alone, the RBI absorbed INR6.9 trillion from banks as surplus under the reverse repo operations. Therefore, it is clear that the RBI envisions sufficient liquidity in the market and that the benefits provided by the RBI are not being efficiently passed on by banks and other lenders to consumers. Given this prevalent reluctance, the RBI will likely need to introduce detailed procedural guidelines to incentivize banks to pump in the additional funds into the market. Looking for Loans during Covid Times ? Head on to www.MoneyEstate.in In the current global scenario, India will need to undertake a shift in its monetary policy towards fiscal stimulus to ensure that the economy is able to rebound from the fiscal loss suffered in the short term. If the IMF predicted V-curve recovery is to be achieved, the government must stimulate consumer spending and foreign investment in the medium term. So far, Indian businesses have diligently complied with the orders of the Indian government to stay at home and its advisories to avoid laying-off employees. Now, it is time for the Finance Ministry to step up and provide the fiscal relief needed by Indian businesses to ensure that they are able to sustain through the effects of the lockdown. Read more at : https://www.financialexpress.com/economy/how-much-economy-will-lose-from-coronavirus-and-what-to-expect-from-economic-relief-package-2-0-by-nirmala-sitharaman/1947511/ Lockdown to inflict $320 billion loss on Indian economy The COVID-19 pandemic is expected to hit Indian economy with about $320 billion in terms of daily gross domestic product (GDP) loss after 40 days of lockdown, said a report. The micro, small and medium enterprises (MSME) sector, often called the backbone of the Indian economy, has had to shut small-scale factories, and is working with minimal workforce.The COVID-19 pandemic has decimated the MSME revenue even more, said the “COVID-19 Startup Impact Report — Threats & Opportunities For The Indian Economy”. Looking for Loans during Covid Times ? Head on to www.MoneyEstate.in For some sectors, this pandemic has sounded the death knell, but the supply chain disruption has impacted manufacturing everywhere. Read more at : https://www.newindianexpress.com/business/2020/may/03/40-day-lockdown-to-inflict-usd-320-billion-loss-on-indian-economy-report-2138664.html |