CAGRfunds – Blog

CAGR Insights is a weekly newsletter full of insights from around the world of web.

Index	13-Apr-23	06-Apr-23	Change
Nifty 50	17,828	17,599	1.30%
Nifty 500	14,954	14,759	1.32%
Nifty Midcap 50	8,677	8,551	1.47%
Nifty Smallcap 100	9,337	9,198	1.51%

Chart Ki Baat

Gyaan Ki Baat

CAGR vs XIRR

CAGR represents the average annual return between two specific dates. It considers the start date and the end date only. Therefore, if you have a lot of transactions between the start date and the end date, the CAGR may not give you a correct representation of returns.  

XIRR on the other hand considers date-wise inflow and outflow and therefore gives a more accurate picture of returns.  

This is relevant for all kinds of investments. For people investing in residential real estate, if you have annual costs that you incur on the property and rental income that you continue to get, an XIRR may give you a much better idea of the returns you make on the investment.  

Here’s the list of curated readings for you this week:

Personal Finance

• The case for  Index funds over active large-cap funds – In 2022, 88% of actively managed large-cap equity funds underperformed the S&P BSE 100, as per the S&P SPIVA India scorecard. Read here.

• SEBI to incorporate all expenses and taxes within TER – Currently, fund houses charge GST of 18% on the fund management component, which is over and above the maximum TER limit. In addition, fund houses pay brokerage to the security companies on MF transactions, which is over and above TER Read here.

Investing

• Buying right but selling wrong – A recent study has documented a striking pattern in the investment world: while investors display clear skill in buying, their selling decisions underperform substantially. Read here

• Optical illusions in Equity Investing – Psychological biases tend to affect an investor’s decision making in subtle ways which are usually detrimental to long term investment returns Read here

• Focus on signals provided by companies but filter out the dishonest ones – A dishonest signal is one that does not reliably communicate the trait it is supposed to. Lend credence to only those signals that are costly to produce. Read here

• Avoiding Landmines: Focus On Free Cash Flows – With rising interest rates and tightening liquidity, the environment is becoming tougher for many dodgy businesses. These are companies that use all sorts of accounting shenanigans to report accounting profits even though the business truly does not make any money. Read here

• Interesting Annual Phenomenon – PSU banks dump gilts after shift from HTM books– “There is the natural build-up of stock in the available-for-sale book after shifting,” a treasury official at a state-owned bank said. “This paper is all in-the-money, and would have to be offloaded eventually; it is an annual ritual. It is just that the rate pause has allowed us to do it quite aggressively.” Read here.

Economy

• Indian banks well placed to manage the risks in volatile global environment- Structurally, Indian banks deploy their assets mainly in advances, resulting in a higher Credit to Deposit (C/D) ratio in the range of 65% to 90%, while investments constitute around 25% of their total assets. As of March 31, 2022, Indian banks had a C/D ratio of around 72%. In contrast, their US counterparts have nearly one-third of their assets in investments and a credit-to-deposit ratio that is in the range of 45% to 70%.  Read here

• Rising milk prices becoming a headache – The average retail price of milk in India has increased by 12% from a year ago. India accounts for almost a quarter of the world’s milk supplies.   Read here

• Apple Triples India iPhone Output to $7 Billion in China Shift – Apple Inc. assembled more than $7 billion of iPhones in India last fiscal year, tripling production in the world’s fastest-growing smartphone arena after accelerating a move beyond China Read here

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Check out CAGRwealth smallcase portfolios here.

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That’s it from our side. Have a great weekend ahead!

If you have any feedback that you would like to share, simply reply to this email.

The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information outlined in this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated in this newsletter.

CAGR Insights is a weekly newsletter full of insights from around the world of web.

Index	6-Apr-23	31-Mar-23	Change
Nifty 50	17,599	17,360	1.38%
Nifty 500	14,759	14,558	1.38%
Nifty Midcap 50	8,551	8,467	0.99%
Nifty Smallcap 100	9,198	8,995	2.26%

Chart Ki Baat

Bazaar Ki Baat

In this month’s edition of Bazaar ki Baat we discuss about Market Performance, the Sectoral change in NIFTY 50 over the years and its implications on valuation parameters and the much-discussed tax rule change on debt funds.

Over the years, the sectoral representation in Nifty-50 has undergone a sea change, largely in line with the changes in the underlying economy. This has significant implications for the comparison of valuation parameters with their historical averages.

Nifty and Sensex have been flat in March and for FY23 overall. We believe that the recent corrections have made India market valuations attractive.

Further, the changes in debt tax rules may have taken some sheen out of the debt funds but we believe still a place for them in the investors’ portfolio.

Do watch and let us know your opinion.

Gyaan Ki Baat

Pradhan Mantri Jan Arogya Yojana (PM-JAY) is the biggest heathcare scheme sponsored by the government. This scheme is designed keeping in mind universal health coverage. This is a family floater scheme. This scheme is specifically designed for people belonging to lower income category.

• Eligibility – The Ayushman Bharat Yojana Eligibility is designed with pre-conditions so that only the underprivileged people of the society benefit from the initiative. The scheme does not cover government employees, owners of 2,3 or 4 wheelers , holder of Kisan cards, monthly earning of more than Rs. 10,000, individuals living in decently built houses etc.

• Coverage – This is a family floater scheme with a sum assured of INR 5 lakhs per family. The scheme provides coverage for medical examination, treatment and consultation fee. It covers up to 3 days of pre-hospitalization and 15 days post-hospitalization expenses such as diagnostics and medicines All pre–existing conditions are covered from day one

This can be a useful government policy for low-income individuals around us. Do spread the word.

Here’s the list of curated readings for you this week:

Personal Finance

• IRDAI introduces direct plans in insurance – Direct plan in insurance will have reduced premium amount as it will deduct agents’ commission from the gross premium amount. Read here.

• How can short term capital loss from Debt MF be used for reducing tax outgo – You can set off your short term capital loss from equity mutual funds with your short term capital gains from debt mutual funds. Read here.

• GPT-4 Is a Reasoning Engine – GPT models are constrained by the knowledge databases it uses, its a reasoning engine but it is cannot invent new things. Read here.

Investing

• Maxims of Analytical Thinking – Talk at CFA Society based on the wonderful book on Richard Zeckhauser by Prof Sanjay Bakshi. Watch here

• India’s Premium Over EMs Washed Off – India was trading at a 90% premium to its emerging market peers six months ago. A 10% correction in Indian stocks, a sharp rally in EM peers, and a catch up in earnings have reduced this premium. Read here

• Invesco has slashed Swiggy’s valuation from $10.7 billion to $8 billion – Invesco devalued its stake in Swiggy in October last year, just 10 months after it invested in the company at a $10.7 billion valuation, filings accessed by TechCrunch showed. Read here.

Economy

• India pauses rate hikes in surprise decision, but door open for more – While the central bank has taken the decision to pause rate hikes in light of global macroeconomic and financial conditions, “our job is not yet finished and the war against inflation has to continue”, Das said. Read here

• India’s surging services exports may shield economy from external risks – The recent growth in services exports has been largely powered by global capability centres, which have started to offer global clients a range of high-end and critical solutions such as accounting and legal support. Read here

• Reverting to Old Pension Scheme: A move at the expense of the poor – Reversing to the OPS, would therefore, result in a reallocation of resources away from the state’s development expenditure which benefits the poor, and towards a much smaller group of people who have benefitted from a secured and privileged job throughout their working life. Read here.

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Check out CAGRwealth smallcase portfolios here.

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That’s it from our side. Have a great weekend ahead!

If you have any feedback that you would like to share, simply reply to this email.

The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information outlined in this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated in this newsletter.

CAGR Insights is a weekly newsletter full of insights from around the world of web.

Index	31-Mar-23	24-Mar-23	Change
Nifty 50	17,360	16,945	2.45%
Nifty 500	14,558	14,279	1.95%
Nifty Midcap 50	8,467	8,284	2.21%
Nifty Smallcap 100	8,995	8,924	0.80%

Chart Ki Baat

Gyaan Ki Baat

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a pure term life insurance scheme launched by Government of India directed towards the poor and low-income sector of the society.

• Eligibility – The entry age for this scheme is 18-50 years and the interested policyholder must have an active savings bank account.
• Premium – Rs 436 per annum. The premium paid is applicable for tax exemption under section 80 C. The premium may be lower if you are joining the scheme mid-year.
• Coverage – In case of Death, beneficiary receives is Rs. 2 Lakh. No maturity benefit or surrender benefit with this policy. The coverage amount to the beneficiary is tax free. The cover shall be for one year starting from June 1 to May 31 of next year and the insurance holder can renew the scheme up to 55 years of age.

This can be a useful government policy for low-income individuals around us. Do spread the word.

Here’s the list of curated readings for you this week:

Personal Finance

• Product-wise insurance commission cap removed by IRDAI- The new rules, which aim to provide flexibility to the insurers to manage their expenses and are set to come into effect from April 1, will allow insurance companies to offer commission up to the expenses of management (EoM) limit. Read here.

• Concentration is Not Your Friend – The financial graveyard of history is filled with concentrated investors. In particular, going from a 1-stock portfolio to a 5-stock portfolio cuts the standard deviation in half, and going from a 5-stock portfolio to a 50-stock portfolio reduces the standard deviation by another 40%. Read here.

Investing

• Stocks Ki Baat – Shivalik Bimetal Controls Limited – We talk about a dominant player in niche industries of Shunt Resistors and Thermostatic Bi-metals. The application of its products in smart meters and EV are expected to be a promising growth area for this company. The stock has more than doubled its revenue and profit has also become 4x since FY18. Read thread here

• The IPO rush: Lessons from the past – The probability or chances of gaining more than the index, only by investing in IPOs, is very less. One can choose to play the listing day game – applying and selling on listing day at a premium. Read here

• What they don’t tell you about high P/E stocks – The probability or chances of gaining more than the index, only by investing in IPOs, is very less. One can choose to play the listing day game – applying and selling on listing day at a premium. Read here

•  How to Identify Promoters extracting money via high salaries –P/E multiples are deceptively damaging for anyone seeking long term gains from equity investments. Marcellus says, Focus on high quality compounders, rather than agonise about high P/E. Read here

• Indian promoters are best contrarians – are they buying Now? – The data show that owners/promoters usually have a huge skin in the game and it is the interest of investors to track promoter share transaction activity, especially where there is a pattern of buying. Read here.

Economy

• NBFCs are increasingly taking credit from banks- The banks’ outstanding credit to NBFCs has risen nearly 1.5x since February 2020. The banks’ credit exposure to NBFCs had crossed crucial thresholds in CY2022. The growth has remained robust due to high growth in the NBFC asset book and as additional borrowings moved to banks due to differentials between market yields and interest rates offered by banks and lower borrowings in the overseas market. Read here

• Why isn’t the whole world rich? – The question of why some countries join the developed world while others remain in poverty has vexed economists for decades. What makes it so hard to answer?. Read here.

CAGR Speak

• An MF category is being killed. – This means that debt MF will have taxation at par with Bank FDs. This is a big blow to the growth of the Debt MF among retail investors. Read here.

• How many of you have lost money in Real Estate? A lot of people I know who have invested in residential real estate in the last 7-8 years, have not seen much appreciation. Read here.

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Check out CAGRwealth smallcase portfolios here.

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That’s it from our side. Have a great weekend ahead!

If you have any feedback that you would like to share, simply reply to this email.

The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information outlined in this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated in this newsletter.

CAGR Insights is a weekly newsletter full of insights from around the world of web.

Index	24-Mar-23	17-Mar-23	Change
Nifty 50	16,945	17,100	-0.91%
Nifty 500	14,279	14,421	-0.98%
Nifty Midcap 50	8,284	8,488	-2.40%
Nifty Smallcap 100	8,924	9,095	-1.88%

Chart Ki Baat

Gyaan Ki Baat

Mutual Fund levy exit load on most of the funds, if the redemptions are placed before the stipulated time. It is a kind of penalty for premature redemptions.

As Mutual funds are market-linked, regulators want investors to make investments for a longer period and discourage early redemption. Exit load is applicable on the redemption value calculated based on NAV as of the date of redemption.

Note: The exit load is paid to AMC, which is again reinvested in the investment portfolio as per SEBI guidelines. Hence existing investors get the benefit of outgoing investors.

Here’s the list of curated readings for you this week:

Personal Finance

• The rare and unexpected occur more often than you think. – In some respects, it feels like we’re living through a period of elevated volatility in geopolitics, markets and the economy. But as someone who enjoys reading about financial market history I can attest that this is the norm. History is chock-full of panics, crises, crashes, ups, downs and the unexpected. Read here.

• NPS Tier 2 vs mutual funds – Comparing the two on performance, cost, taxes and other important parameters.  Read here.

Investing

• India Valuations: There are pockets of opportunity – The NIFTY 50 Index is on 18th month of consolidation. Ever since high of October 2021, earnings have risen, and valuations have normalized. Read here

•  Decoding Plastic Pipe Industry in India – In this video, PPFAS fund manager talks about various product categories as well as the major players & their strategies. He also talks about what can be the competitive advantages for any player in the industry. Watch here

•  Hindustan zinc cash being depleted for Parent company – Hindustan Zinc has paid Rs 20,710 crore as dividend to Vedanta in this financial year, significantly higher than its nine-month profit of Rs 7,928 crore. Read here.

Economy

• Switzerland’s secretive Credit Suisse rescue rocks global finance- In the end, the Swiss agreed, choosing to wipe out 16 billion of francs of bonds, compensating shareholders with 3 billion francs and turning a key principle of bank funding on its head – namely, that shareholders rather than bondholders take the first hit from a bank failure. Read here

• Steel Industry may have a over capacity problem if projects are completed – In steel, there are 347 projects that aim to set up 239 million tonnes of additional capacity. This is more than 1.5 times the current outstanding capacity. Upon completion these alone could raise the steel capacity by almost 50 per cent. Read here.

• How did Taiwan’s Govt increase its tax collection by 75% in a single year? –  No crackdown. No tax rate hikes. No one time levy. So, you’re wondering how? They launched the “Uniform Invoice Lottery” scheme to gamify tax collection. Read twitter thread here

CAGR Speak

• The importance of Brand Building for companies – The profit growth for Pipe companies who have invested in building brands over the years is higher than the other players, even at similar pace of revenue growth. Read here.

• Is your Bank RM asking you to buy a Insurance policy for tax benefit ? Think Again – Read here.

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Check out CAGRwealth smallcase portfolios here.

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That’s it from our side. Have a great weekend ahead!

If you have any feedback that you’d like to share, simply reply to this email.

The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information outlined in this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated in this newsletter.