8th India Investment Conference – Growth Conundrum, Opportunities and Threats in 2018


It was a great gathering of luminaries at the 8th India Investment Conference  at Mumbai organized jointly by CFA Society India and CFA Institute in Mumbai on January 12, 2018. The event was very well crafted around its title – “Growth Conundrum, Opportunities and Threats in 2018”. It started with the presentation by Rupal Bhansali, CIO of Ariel Investments, on Non-Consensus Investing. This was followed by Richard Koo, Chief Economist at Nomura Research Institute, who explained the other half of macroeconomics not dealt by conventional economists & academics, a phenomenon he refers to as balance sheet recession. James McGregor, Chairman of APCO (Beijing) Consulting Company, discussed the Geopolitical Landscape in Asia as China Expands and America Retreats. The event brought in Carla Harris of Morgan Stanley who explained what it takes to succeed in the organization. Lastly Anil Gaba, Professor of Decision Sciences at INSEAD presented on Illusion of Control and its impact on Judgement while dealing with Risks and Uncertainty.

Like in the past each of the speaker sessions was moderated by the industry experts and practitioners like Sunil Singhania CFA, Global Head Equity at Reliance Capital, Navneet Munot CFA, CIO, at SBIMF, Jayesh Gandhi CFA, President CFA Society India and Senior Portfolio Manager at Aditya Birla Sun Life Asset Management, Madhu Veeraraghavan, Director, TA Pai Management Institute, and Anil Ghelani CFA, Director CFA Society India and Senior Vice President DSP Blackrock.

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IIC18 was co-chaired by Sonia Gandhi CFA, Director CFA Society India and Anil Ghelani CFA, Director CFA Society India. Opening Keynote address of IIC18 was presented by Amit Khurana CFA, Director CFA Society India and Nick Pollard, MD, Asia Pacific, CFA Institute. Paul Smith CFA, CEO, CFA Institute gave global insights on the investment industry and roles of CFA charter holders in shaping the industy. The conference was wrapped up with closing remarks by Vidhu Shekhar CFA, Country Head, CFA Institute India.

Apart from the participants, the corporate supporters of the events were Flame University as Academic Supporter; TAPMI as Platinum Sponsor; CMT, DART, MSCI, Morningstar, SBI Mutual Funds, S&P BSE Indices and Wiley as Silver Sponsors; Bajaj Allianz as Delegate Bag Sponsor, Thomson Reuters as Lunch Sponsor; Aditya Birla Sun Life Mutual Fund and Reliance Mutual Fund as Delegate Sponsors respectively.

Follow Twitter with following hashtags #IndiaInvConf, #IIC18 and blogs on iaip.wordpress.com under the tab “India Investment Conference”.

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Person of the year

By: Navneet Munot CFA, CIO, SBI MF and Director IAIP

Like every year, there were several contenders.

North Korea’s ‘little rocket man’ can take it easy as Trump, America’s Twitter-in-chief is likely to be occupied with his real agenda on Tehran, Trade and Tax for some time. The pace of hiring and firing makes the White House look like an AirBNB guest house. The costliest guest for Trump could be Special Counsel Mueller investigating Russian involvement in elections. Steve Bannon may be out, the Bannonism lives on. The Americans witnessed a total solar eclipse but the Charlottesville videos were a lot darker. May Jerusalem send the true spirit of holy messages from all religions to United States of Amnesia. That would truly make America great again.

Catalonians played the freedom song on the Spanish Guitar, but strings of dissent are visible across Europe. Interestingly, from Austria to Ireland, young leaders are emerging everywhere in ageing Europe. I think the ‘liberal’ dose of M3 (Merkel, Macron and Mario (Draghi)) will keep the grand idea of Europe afloat. Notwithstanding lesser powers, Angela Merkel will remain the “Wonder Woman” in continental “Justice League”. Theresa May’s Divided Kingdom invoked article 50 and is negotiating Brexit. Unlikely that Brussels makes it an easy 50:50 deal.

Jacob Zuma and the Mugabe couple’s long honeymoon with power is reaching an end. A classic case of how politician corrupted by cronies can convert a great African safari into a Jungle-Raj.

My heart goes out to the Yemenis, Rohingyas, Syrians and Venezuelans dying of hunger. In a world with bountiful food and obesity issues, the average Venezuelan reportedly lost 19 pounds in weight. Those killing innocents in London, Barcelona or Manhattan are condemnable, but what about weapon manufacturers who find ways for uninterrupted supplies to killers?

Crude oil gave a rude shock to those writing obituaries on fossil fuel. Demand grew while Saudi Prince’s determination to arrest OPEC supply as well as other oligarchs fueled the rally. Support of Putin’s Kremlin, Shale producers and geopolitical risks could add more steam.

I thought of the great global equity rally. Risk assets rode high on a concoction of synchronized growth sans inflation, continuing central back largesse and creative stories like a new technological renaissance. No price is considered high enough for FAANG stocks in US or TATS, their Asian equivalents. ETF managers are the new Lords of the Ring. I will now bet on surviving active managers. Dear Warren Buffet, another bet?

Why not Bitcoin? Yes, blockchain technology has massive potential but what stops virtual miners from creating unlimited types of limited edition chit-coin, kit-coin or s*it-coin. What’s in a name? A coin by any other name would sell as sweet. Don’t ask Da Vinci to solve this code, he is busy in heaven painting another $450 million piece.

Jerome Powell may continue to yell dovishly like Yellen, but is well advised to cap the well of liquidity. Other central banks should pay heed. Ballooning asset prices and technological shifts are creating riches for a privileged few while stagnating real income growth for the majority. Divide can make Ed Sheeran a popular star but economic divide will turn popular tide against policy makers.

I thought of Xi Jinping, the most powerful leader in China’s recent history. Whether it’s crackdown on pollution, corruption and shadow banking, naval expansion in the South China Sea, One Belt-One Road project or progress in scientific research, the world underestimates China’s ambitions. China is more than willing and working hard to occupy the space vacated by US as the prominent super power. Only time will tell whether it rises on top or crumbles under its debt burden.

Cristiano Ronaldo and Usain Bolt deserve accolades but Roger Federer mesmerized us. What a comeback! With his perfection, agility and calmness, he looked like a meditator on the court.

I am looking forward to the Tokyo Olympics as a gracefully aging Japan welcomes us with young robots. Mrs. Watanabe can cheer with Abenomics bringing a cherry blossom of rising growth and stock prices.

‘The crying game’ played in private for so long by Hollywood’s ‘Heavenly Creatures’ is now in public. Harvey Weinstein was apparently not a ‘Shakespeare in Love’ but a ‘Frankenstein in Lust’. The collective power of beauty tamed high-profile beasts from Senators to Silicon Valley this year. Driving license to Saudi women is just a symbol, women are increasingly in the drivers’ seat across fields.

Shashi Kapoor crossed the ‘Deewar‘ of life. Roger Moore, the man with the golden gun ended his Bond with this world. Disney’s twist in the tale of Murdoch & Sons made an interesting climax.

Modi’s India cheered Ranking fall (ease of doing business) and Rating rise (Moody’s). The midnight launch of GST is India’s another ‘tryst with destiny’. Hopefully, next year if Gabbar Singh asks “Kitne Tax dete  hai”, Kaalia’s answer would be ‘Sarkar, everyone.’ Rahul (RG) had a Hardik desire to win Gujarat. His prayers did ring bells, but couldn’t stop Modi’s chariot reaching the assembly. Yogi is the Nath (lord) of UP, a state with 200 million inhabitants, as large as Brazil. The Supreme Court Single-mindedly supported women, set aside Double standards and banned Triple talaaq. 

I salute the Indian scientists who discovered a new supercluster, Saraswati, some 4000 million light years away. May the force be with these Jedi knights, the real Guardians of our galaxy. Fake Godmen like Gurmeet saw their stars waning.

Indian Investors are SIPping mutual funds while sapping their connection with real estate and gold. Hope the funds and expectations remain “balanced”. Insurers claimed a hefty equity gain from primary markets. Retail lenders had a wholesome time. Bankers were empowered to deal with bad loans and showered with recap bonds to make good loans next year.

If ‘data’ is the new oil, India can create the biggest OPEC – Open Platform for Entrepreneurs and Civil society. Aadhar will be the Aadhar (foundation) of India’s high-rise in a digitalized world. A billion plus connected citizens can transform India from a ‘data poor’ to the most ‘data rich’ society. Of course, we must protect against cyber-risks like ‘wannacry’, if we wanna try to drill the deepest well. If this data is public property, then it should primarily be used for collective prosperity. We will only be constrained by our imagination.

Harvey Hurricane, Mexican earthquake and floods across the world reminded us the inconvenient truth of climate-change. Wildfires raged across California, while the Supreme Court doused fireworks to ease Delhi’s pollution chamber. Despite getting trumped by US, Bonn COP23 summit promised to power past coal and contain emissions ‘further, faster and together’. We need much more sparks of innovation.

The world may be more prosperous but humanity is facing immense challenges like climate change, inequality and technological disruptions. Amidst deteriorating political discourse and unimaginative policymaking, a breed of entrepreneurs are striving to tunnel alternative solutions. Elon Musk is one such visionary. This immigrant entrepreneur’s batteries are always super-charged with innovative ideas like Hyperloop, electric trucks, Open AI and Neuralink. He shows strands of Nicola Tesla and Thomas Edison. His views on potential of artificial intelligence vs. our natural irrationality are worthy of deeper debate. Tesla’s Model-S may not be the eventual leader in the EV race, the stock may perhaps crash, SpaceX may succumb to financial strains but hopefully Elon’s legacy as an intrepid innovator and dreamer will inspire future generations of entrepreneurs. The sheer ingenuity to change the world (and beyond) makes Elon Musk my ‘Person of the year’. A Standing Innovation!

  • NM
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Small and medium enterprises (SME) IPO Pitch

Contributed by: Manish Chandak

CFA Society India, Pune hosted a session on “Small and medium enterprises (SME) IPO Pitch” by Mr. Sachin Shirol on 9th September 2017. Mr Sachin is Director at SkyBridge Financial Services. He is a qualified Chartered Accountant and CFA charter holder. Prior to launching SkyBridge in May 2017, he worked with Deutsche Bank in the Global Markets division for about 10 years. His session on SME IPO Pitch was an attempt to raise awareness about how SMEs can and are raising capital through SME Platform of BSE and NSE. Also, he made a strong case for retail investors to invest money in SMEs which are available at the attractive valuation and reap benefits in the long run.

Mr. Sachin started the session by explaining the significant role played by Small and medium enterprises (SMEs) in Indian economy. He said that SMEs are finding it difficult to raise institutional credit. However, SME IPO is an opportunity for both the Small and medium enterprises as well as domestic investors.

He spelled out the eligibility norms of SME IPO as below.


He enumerated various benefits of the listing on SME Platform. Few of them are as below:

Net Worth: Substantial growth in the net worth of promoters with increase in the price of listed securities

Liquidity: Exit route for VC/PE/angel investors and unlocking of shareholder wealth
Tax Benefits on Transfer of Shares: NIL tax on LTCG (vs. 20% tax on unlisted securities) and 15% tax on STCG (vs. 30% tax on unlisted securities)

Monetization of Shares: Listed securities can be pledged as collateral to raise funds from financial institutions

Access to Capital: Unconventional ways of raising funds via Preferential Issue, Rights Issue, QIB Placements, etc.

Credit Rating: Equity infusion lowers Debt/Equity ratio, thereby improving credit ratings and lowering financing costs

Employee Stock Options (ESOP): Way to attract, retain and promote human capital

Brand: Listed companies enjoy brand recall and separate identity amongst peer group

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He talked about the key players involved in the SME IPO Process. Also, he explained in detail the process for listing including various timelines and compliance formalities involved. In 2017 YTD, SME IPOs were oversubscribed 17.5x on NSE and 3.8x on BSE. He expressed his anguish over the fact that there is not enough media coverage about SME IPO and less information being available in the public domain. However, he was confident that things will change for better on SME IPO front. He used his presentation to explain how promoters can unlock the potential through SME IPO listing and create significant wealth for themselves and retail investors.

Since most of the participants were not aware of the SME IPO and its benefits, they listened to the presentation with rapt attention. It was followed by Q&A session where Sachin answered questions ranging from eligibility norms for SME IPO, differences between SME Platform and Main Board (NSE/BSE) and benefits of SME IPO to the Indian economy and retail investors


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Understanding Block Chain and Demystifying Crypto Currencies

Contributed by : Rajni Dhameja, CFA

CFA Society India organised a session on “Understanding Block Chain and Demystifying Crypto Currencies” on Nov 25, 2017. The session was divided into two parts viz: Blockchain which was presented by Hrishikesh Dewan, Director, Zero Labs Private Limited and Crypto currencies, which was presented by Ramani Ramachandran, Co-Founder and CEO, ZPX and Gautam Seshadri, CFA, Co- Founder and Chief Business officer, ZPX.

Key takeaways from the presentation:

– Block chain is a bunch of records ordered in time and stored at central network. It is a distributed system wherein all people in the network (called as nodes) will have access to the same records.

– Once validated, it is difficult to alter the records stored in any of the blocks of the chain, which is what differentiates the Block chain.

– Any new record once entered is validated by one of the nodes which are miners and then that record in the block becomes part of the chain and is difficult to alter.

– There are various applications of Block chain technology : Store KYC, property records, land records, health records etc..

– Bitcoin is one of the largest application of Block chain technology. Bitcoin is a type of crypto currency which aims at disintermediation of the fiat currency. Today, in case of fiat currency, the currency notes are validated by the central Bank which helps in avoiding the double spending of same money. Bitcoin being the virtual currency, it is challenging to track the double spending of the same coin. To tackle this problem, Satoshi invented that Block chain can be used wherein all the transactions done in Bitcoin are validated by the miners and published to the entire network.

– Considering this, Block chain can disintermediate almost anything and everything. That sounds simple enough, but there are still lot of questions which are unanswered like privacy of data, searching the data if it is encrypted to name a few. A lot of research is going on to answer these questions.

– Global banks, some regulators etc. are experimenting with the Block chain. Some countries are researching on virtual version of their own fiat currencies.

– Considering the current situation, crypto currencies have become a new asset class altogether. Bitcoin futures are listed on stock Exchange and the way market capitalisation of crypto currencies have gone up has taken everyone by surprise. Believers in this asset class are viewing it as just the beginning.

– Initial coin offerings (ICOs) have begin to replace the traditional financing models. There are other crypto currencies as well in the market like Ethereum, Ripple, Litecoin etc.. ICOs have raised $1.5 + bn surpassing the early stage VCs. Investing in this asset class comes with its own idiosyncratic risk as one needs to understand lot of things about crypto currencies which are too technical to begin with. There are extreme views on whether or not virtual currencies would become a reality to replace the fiat currency or it would become a sustainable asset class. That is something yet to be seen over coming decade.

– RD

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Blockchain: A Bitter Pill for Banks

Contributed by: Sivananda Subudhi, CFA, AVP, Structured Finance Group, Axis Bank Ltd


During Indian Banks’ Association Banking Technology Conference held in 2017, Dr. Viral V Acharya, Deputy Governor Reserve Bank of India (RBI) highlighted that ever since Asset Quality Review of Banks during 2015 was initiated, the asset quality of most of the Banks in India has deteriorated because of recognition of stressed assets. While there is a lot of debate related to the reasons for the creation of such stressed assets, assigning any specific reason for the deterioration in asset quality is quite contentious. However, there seems to be a general consensus in the lending community that stringent/ apt monitoring of “end use of funds” could have ameliorated pileup of such high level of stressed assets across sectors. In last several years, there has been a significant increase in the pace of technological innovation across industries leading to structural changes which have affected the business models of incumbent players. Ever since Satoshi Nakamoto (identity still not known) came up with a concept paper on Peer-to-Peer Electronic Cash System in October 2008 followed by the introduction of Bitcoin crypto-currency in January 2009, there has been tremendous interest from industry participants over identifying use cases of the underlying technology, i.e. “Blockchain”.

What makes the Blockchain protocol unique is that it is an entirely peer-to-peer system that is not based on any centralised entity. The entire record of transactions in the Blockchain is accessible to all parties which is in direct contrast to the current Banking system. It is important to note the distinction between Bitcoin and Blockchain. Bitcoin is an electronic cryptocurrency that can be used to purchase goods or services. Bitcoins are awarded to specialized network participant nodes, called “miners,” for validating transactions. This serves to incentivize and strengthen the network. The blockchain is the underlying technology that enables the Bitcoin network to operate in an open, autonomous, decentralized model, where trust is enforced through cryptography and not its participants. In essence, there would be no Bitcoin without Blockchain, but there can certainly be Blockchain without Bitcoin. The distinction is important because Blockchain technology can be applied to other uses beyond the processing of electronic currencies.

Given the unique features of Blockchain technology, tracking and recording flow of money across various transactions is possible by way of collaboration amongst all the stakeholders i.e. Consortium of Banks, Suppliers, contractors etc. Once a transaction is recorded in the ledger and is validated by multiple parties/ nodes, the transaction can safely be assumed to be legitimate and shall be available for scrutiny to all the participants of the Blockchain (Private Blockchain). Due to its immutability feature, the entire ledger can be shared with requisite overseeing agencies including Auditors either in a con-current manner or at any later stage. It will increase the transparency levels significantly while reducing all associated incidental costs being incurred for justifying any specific transaction.

Broader Applications of Blockchain in Financial Services Sector:

The attractiveness of Blockchain technology and underlying potential of redefining trade settlement, reduction in settlement time, cross-border payments or enabling new business opportunities i.e. Smart Contracts for insurance claim settlements etc. have led to significant investments in the development of technology by Venture Capital funds and by existing Financial Institutions. Many top US and European Banks are exploring Blockchain application by either partnering with start-ups or creating innovation labs to their proof of concept. A consortium of more than 70 Banks/ FIs have partnered in a distributed database technology company named R3 contributing towards R&D of Blockchain database usage in the financial system. Similarly, a team of researchers at Institute for Development and Research in Banking Technology (IDRBT) in India have been brainstorming on the technology and possible use cases in the Indian scenario.

In my view, Banks have to increase the pace of adoption and enable the Blockchain technology to become mature and robust. The key is not to replace Banks with simply a technology platform (in turn moving the Trust factor into oblivion), rather to collaborate with the technology providers to feed off each others’ idea and experiments which in turn can overcome a lot of challenges being faced by the Banking sector.


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Cricket and Investment Selection Process – Emotions and Committee Structure Commonality

By Sitaraman Iyer, CFA

Another similarity I find between investment and cricketing is the way decision-making committees are structured.

A research analyst would be the equivalent of a scout in the cricketing world; a fund manager would be akin to a selector; and a chief investment officer would be like the chairman of selectors. In the investment field, a team is headed by the chief investment officer with research analysts presenting their findings to fund managers. In the cricketing world, the selection committee is administered by the chairman of selectors with scouts presenting their reports to selectors.

Scouts/analysts keep tracking players/companies throughout the year in the hope that they would be able to identify talent/companies well before they are ripe to succeed.

One may wonder:

  • Why is this process so important
  • Why can’t fund managers/selectors do the scouting themselves

The answer to the first question is simple: identifying the right talent/company is the only way to be ahead of competition.

To the second query, my answer is that fund managers/selectors simply don’t have the time. There are way too many players/companies to keep a track of, which is why analysts/scouts doing the preliminary screening makes sense.

The analyst/scout’s job is mundane and non-glamorous, and involves a lot of observing, number-crunching, and talking to relevant stakeholders. Ability to communicate well and present findings in a succinct manner to superiors work well in an analyst/scout’s favour.

On the other hand, a selector/fund manager must have the skill to process all the data that is provided and arrive at an objective decision. He must select the team/portfolio by keeping in mind both medium- and long-term goals. Excess focus on near-term benefits may result in one not building the teams / portfolio for the long term. For instance building a test team only that is only good for home conditions/ building a portfolio with too many momentum stocks that can get severely impacted during turn of a cycle.

Fund managers/selectors have to be nimble enough to question old assumptions and validate their beliefs every now and then. While building team/portfolio for the long term is always recommended, sticking to poor performers during adverse times can invite criticism. A good selector/fund manager must have the patience and ability to ignore such censure for the good of the long term. An example of this is backing a talented novice/company even before the player/company has started to deliver results. Think of Virat Kohli just before the third test in the 2012 series in Australia, or Bharti Airtel just after listing in 2002.

Having said this, one also has to have the ability to take unemotional ruthless decisions when things don’t go as planned. Quite often, sticking to winners who have delivered in the past can be disastrous for the team/portfolio. A company, like a player, can have a ‘best before’ date: think of the Fab Four of Indian cricket during their twilight years; or of Nokia. It requires guts to drop a player/company that has delivered in the past but is now performing poorly.

The chief of selectors/ investment officer’s job is to drive the overall strategy of the team/portfolio, keeping emotions at bay. He/she often bears the brunt of a decision gone wrong, but also takes credit for success. Though a fund manager/selector’s job looks glamorous, it is unlikely one gets that job without having spent enough time doing scout/analyst’s job.


PS: Pictures of Mohamed A El-Erian, Ex-CIO PIMCO and MSK Prasad, Chairman of Selectors, BCCI

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Key Lessons from Financial History for Today’s Investors, talk by Mr. Russell Napier

Contributed by: Rajni Dhameja, CFA


CFA Society India along with SBI Mutual Fund hosted Mr. Russell Napier, Co-Founder at ERIC on October 29, 2017 for an insightful session in Mumbai. Mr. Russell Napier spoke about the Key Lessons from Financial History for Today’s Investors. Keeping those lessons in mind while making investment decisions will help in making more informed decisions.

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The Key takeaways from the session are as follows:

– Try to forecast the supply side. It is mistaken to invest the majority of time in forecasting demand and too little time in forecasting supply. History suggests that great returns have been earned when supply side has been forecasted correctly.

– There is no direct relationship between the growth of an economy and returns on equity. There are times in the history wherein equity markets have given substantial returns for economies which have not grown substantially

– When evaluating the companies, look for the incentive structure for management. A very good business model can fail if the incentive structure for management is not in alignment with the growth of the company in the long run.

– Whenever possible deal with principal directly and not with the agent.

– Whenever you come across any development in the market which you consider as unsustainable, can actually last longer than what your rational assessment suggests.

– Governments are not referee of the game; they are players of the game. They can change the stance as per the situation. Hence, the assumption that government will always act/ intervene to protect the markets will not hold true.

– Monetary policy: The easiness or otherwise of the monetary policy is not judged by the levels of interest rate. It is judged by the quantity of growth in money supply. An extremely low interest rates but minimal growth in actual money supply would construe a tight monetary policy.

– Monetary systems fail approximately every 30 years. This is the time frame in which certain drastic changes occur which causes the failure of existing systems.

– Tourism of any country acts as an indicator to guide the over/under-valuation of the country. The country which has tourists coming in will have a currency which is in appreciation due to high demand.


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