IAIP Annual Forecast Event – Key Takeaways

The 8^th Indian Association of Investment Professionals (IAIP) Annual Forecast Event held at the historic International Convention Hall of Bombay Stock Exchange (BSE) on 1^st April 2016 saw large attendance from various market leaders, industry professionals, students and investors. Experts shared their views and outlook on the financial, economic, fiscal and monetary topics and indicated what they thought about the prospects of the Indian economy in the next financial year.

With assistance from my friend Pranav Pendyala, I have jotted down a few significant points discussed in the session.

General Overview

• BSE Sensex clocked first yearly loss in the last four years
• Negative interest rate environment in major parts of the globe has rarely happened earlier. Banks might start charging the public for keeping their money with banks.
• Rate cut not being implemented by banks though it has been initiated by RBI. This is due to the liquidity crunch for banks. This crunch leads to higher WACC.
• Urban consumption of goods and services is increasing along with volatility.
• According to BASEL III regulations, more capital is being demanded on banks’ balance sheets. Private banks have an advantage over public banks as private banks already have more capital than their public counterparts.

2016-17 Projections: Survey Results

1. Best Asset Class for Risk-adjusted Returns

a.       Equities: 58%

b.      Government Bonds: 9%

2. Real GDP Growth

a.   Between 6.5% and 7.0%: 29%

b.      Between 7.0% and 7.5%: 40%

3. CPI Inflation

a.       Between 4.5% to 5.0%: 21%

b.      Between 5.0% to 5.5%: 19%

c.       Between 5.5% to 6.0%: 20%

4. 10-year GOI securities Yield

a.       Between 6.5% and 7.0%: 34%

b.      Between 7.0% and 7.5%: 39%

5. Crude Oil (Brent) prices– per barrel

a.       Between USD 35 and USD 40: 21%

b.      Between USD 40 and USD 45: 22%

c.       Between USD 45 and USD 50: 22%

6. Gold Prices

a.       Between USD 1100 and USD 1200: 29%

b.      Between USD 1200 and USD 1300: 28%

7. Average INR – USD Exchange Rate

a.       Between 66 and 68: 28%

b.      Between 68 and 70: 22%

8. Target for BSE Sensex

a.       Between 26000 and 28000: 24%

b.      Between 28000 and 30000: 35%

9. Sensex EPS (Corporate Profits)

a.       Between 0% and 10%: 44%

b.      Between 10% and 15%: 41%

10. Most critical driver for Indian Equities

a.       Government policies and reforms: 39%

b.      Corporate Results: 22%

11. Most critical concern for Indian economic growth

a.       Global Low Growth Environment: 45%

b.      Government Policies: 26%

12. Compensation expectation in Finance industry

a.       Increase between 0% and 10%: 39%

b.      Increase between 10% and 20%: 41%

Assessment of FY 2015-16

• GDP Growth of 7.5%
• Volatile global environment
• Global factors have impacted the market more than domestic factors

How FY17 will be different from FY16

• Nominal GDP growth will be almost equal to Real GDP growth
• Big hit on banks due to NPAs
• Rural economy should be better this year comparatively
• Back-to-back monsoon failures for the past two years not expected to continue

References

• IAIP Annual Forecast Survey Results FY 2017:    https://www.cfainstitute.org/about/vision/Documents/iaip_8th_annual_forecast_survey_fy2017.pdf

Biases Explained - Through 'Twelve Angry Men'

The movie Twelve Angry Men begins with a jury of 12 men who are locked in a deliberation room to decide the fate of an 18 year old boy from the slums who is accused of murdering his father. All the evidence, on the face of it, points to the fact that the boy is indeed the murderer, and a guilty verdict would send the boy to the gallows.

Now, even before the discussion between these 12 men begins, most of them are convinced that the boy is guilty and they would be done with this thing soon. Most of them, except one! And the tale begins..One juror who wants to atleast discuss the case threadbare, who wants to examine the facts one more time, who wants to be absolutely sure before they all ask the judge to pronounce him guilty.

An intriguing story, devoid of any rosy scenery and glamour; the movie also gives an amazing lesson about how biases influence our thinking and how biases clog our logic and our minds. I was fortunate enough to learn this concept in such an interesting way in my college and here, I try to put them down in words. Let us look at a few types of biases that we come across in the movie and try to understand them.

Juror #3 is very biased towards the accused teenager, and that is because his own son had once hit him on the jaw and had run away from home at the age of 15. He says, "I've got a kid...when he was fifteen, he hit me in the face...I haven't seen him in three years. Rotten kid! I hate tough kids! You work your heart out (but it's no use)". This text explains that this juror is biased towards all teenagers who rebel and who act tough. So, he just generalizes his personal experience and lets this logic influence his thinking about the slum kid.  He uses the actions of his son towards him as an anchor around which his arguments revolve. This type of bias can be called 'Anchoring Bias'.

Look at what Juror #4 has to say to support his argument. He says, "We're missing the point here. This boy - let's say he's a product of a filthy neighborhood and a broken home. We can't help that. We're not here to go into the reasons why slums are breeding grounds for criminals. They are. I know it. So do you. The children who come out of slum backgrounds are potential menaces to society." He assumes that dirty locales and domestic fights are a norm in slum areas, and children living there have crime and villainy drilled into their minds. He, in fact, is very convinced that they are a social nuisance. This bias can be a 'Stereotype Bias'.

Juror #10 stereotypes all those people who live in the slums negatively. He says, "They don’t need any real big reason to kill someone, either. You know, they get drunk, and bang, someone’s lying in the gutter… most of them, it’s like they have no feelings". He assumes that all those kids who are born in such conditions and who have been exposed to violence from a small age, turn out to be notorious, and can murder anyone they want. This belief convinces him completely that this kid had indeed killed his father. He has this image of slum kids and uses this information to interpret it in a way that confirms his beliefs about teenage kids. This bias can be called 'Confirmation Bias'.

It's quite fascinating how innovative and entertaining learning can be. An amazing movie, which holds up beautifully even if seen today - a must watch for all.

Tidbit: Did you know Twelve Angry Men was remade in Hindi as Ek Ruka Hua Faisla in 1986 and starred accomplished actors like Pankaj Kapur and Annu Kapoor?

What Freedom Means To Me!!

Freedom is important, it is essential. It is an inevitable part of our lives; in fact, we have started to take it for granted. Today, we might not even be able to answer what freedom actually means to us. Let’s try to find a response to this.

What freedom means to me? Freedom, to me, is making my own choices. I should be able to go where I want to, I should be able to live where I want to, and I should be able to do what I want to. I would love to be free to be able to decide my own career path and not just go with the herd. I would be thrilled to be able to study something that I like instead of something that I should. But try digging beneath the surface more, and you will find that the problem lies with our notion of freedom.

Liberty is not just for material things. It is deeper, more profound. Freedom to me means breaking the shackles of our minds, our suspicions and our doubts about others. Our society is too rooted into beliefs and conceptions that make it judge anyone and everyone. “A man who cries is not really a man”, “A woman who wears short clothes is characterless”, “He is gay. Therefore, he is not normal”. These are just some of the prejudices that are absolutely common in our society. Freedom comes from within, and we won’t be able to experience it until we let our minds flow free. Freedom is when you don’t make yourself and others a slave of your own narrow thinking, of your own biases and of your own judgement.

#MyFreedom – Let me fly, let me travel. Let me make mistakes, let me learn.

Indian B Schools: The Ranking Dilemma

We all know how difficult it is to get into an Indian B-school, what with having to first appear for multiple entrance exams, followed by a rigorous GD-PI round. Some institutes have a few other tests or activities as well before one gets an admit to any of the few coveted B-schools in India.

But there is always a dilemma about what institute to choose. Which institute is better than the other, what are the placement records, faculty, how is the quality of students and campus life etc. are few of the questions that bog down the students' minds before they join a certain institute.

We can easily find the rankings of the Indian B-schools on internet, published by various sites. But the problem here is that most of these sites have a disparate computation logic or a novel formula considering the various factors. Some give preferences to location, others to placement, and some to legacy. No one is completely wrong and no one is completely right ! But what we can do is go through all the rankings and then devise our own rankings for the schools that may help us in make a better conclusion. And this is what I have done here.

I have collated quite a few rankings published on various websites and then created my own list based on it. Hope this helps !!

B Schools	Careers 360	Business Today	Trak	Wikipedia	Career Anna	Eduniversal	MBA Universe	Test Funda	Money Control	MBA Club	Career Launcher	Outlook India	Final Rank
IIM - A	1	1	1	1	1	2	1	1	1	1	1	1	1
IIM - B	2			2		1	3	3	2	4	2		2
IIM - C		2	2	3	2	3	2	2	3	3	3	2	3
ISB Hyderabad								4		2	4		4
XLRI Jamshedpur	7	3	3	5	3	10	4	5	5	6	6	3	5
FMS Delhi	4	4	4	6	4	8	12	12	10	7	9	4	6
IIM - L	8			4	5	9	6	6	4	5	5		7
IIM - K	9	7	5	9	7	13	7	10	6	8	8	5	8
SPJIMR Mumbai	12	5	7	7	6	15	5	8	9	10	10	6	9
IIM - I	13	8	6	13	8	11	8	7		9	7	7	10
MDI Gurgaon	11	6	8	8	9	7	10	13		11	11	17	11
IIFT Delhi	17	10	9	12	12	18	15	14	11	13	13	8	12
NMIMS Mumbai	32	0	11	15	15	23	9	11	12	18	27	12	13
SOM IIT - B Mumbai	5	19	20		13	5	24	19		16	18		14
IMI Delhi		9	10		16	14	11		7	41	25	11	15
NITIE Mumbai	14	12	12	16	10	46	14	16		15	12	10	16
JBIMS Mumbai	30	16	14	10	11	28	13	9	21	14	14		17
DMS IIT Delhi	3	15	15		19	6	29	25	14	22	19	16	18
TISS Mumbai				11		20		20		20	15		19
IIM Shillong	18			20	21		23	15		12		13	20
IMT Ghaziabad	20		13	18	24	16	16	29	8	19	21		21
IIT Kharagpur	15	17	18		20		28						22
XIM - B		13	16		17	19	35	22	13	23	26	14	23
SIBM Pune	29	14	17		14	44	20	21		17	23	9	24
TAPMI	21	18	19	19	32	26	17	28	16	39	24	18	25
IIM Ranchi	25	36		20	22		25	17	22	28			26
SCMHRD Pune	40				18	30	27	23		24	22	15	27
IIM Trichy				20	25		18	39		30			28
IIT Madras	6							37		37			29
IIM Rohtak	24			20	23			49		31			30
IIM Raipur	26			20	26			47		29			31
IIM Kashipur				20	27			41		33			32
Sydenham Mumbai	42						32	30			33	26	33
IIM Udaipur				20			30	52		32			34

It is worth noting that some sites have not considered some schools for rankings, while some B schools did not want to share their details with the websites for rankings. Also, the final rankings are not program-wise; they are at an institute level. Also, some of these sites have not updated their rankings, which is why there can be some discrepancies.

I would be adding a few more schools to this list and try to make it an exhaustive index. Let me know some other rankings that I should consider and some other schools that you would like to see in the list. Lastly, do look at all the factors and make an informed decision.

Knock those extra inches off your tummy !!

Generally, teenagers and youngsters do not think much about what they should eat and what they should avoid, what is good for their health and what is not, what can create health problems and what is perfectly harmless. Even I used to not think about it till...till I started working.

Sitting at one place for almost nine hours and staring at your desktop, occasionally getting up for extremely short breaks, endless cups of tea and coffee and weird eating habits and schedule was all going well..until one day, I realized that I have become fat; that I have gained quite a few unwanted extra kilos; that my stomach would, in a few days, start looking as if I have a pot belly. I decided then that I needed to shed these kilos, otherwise I would end up having a lot of health problems. (Actually, the real reason was that I was scared no girl might be ready to marry me !!)

Whatever the reason be, I did not know how to start doing it. I had always been someone who ate to his heart's content, someone who did not feel full till he had eaten almost a minimum of 10 chapatis. Then what was the solution? I started exercising, started building my muscles. But my stomach would not go in. I realized that somehow I had to control my diet. Somewhere I was going wrong. And then, I started looking up online to find out good dietary habits, good lifestyle tips etc. and started following a few of them.

Here, I will try to list down a few good eating habits so that it might be helpful for all those who, like me, are going through this crisis of putting on weight all of a sudden.

• Less oily foods (Say bye to your favourite Vada Pavs, Samosas and Bread Pakodas)
• Heavy breakfast, a lighter lunch and an early dinner (You might have probably heard it millions of times: :Eat breakfast like a king, lunch like a prince and dinner like a pauper". Start implementing it.)
• Good quantity of milk during the day
• Oats, Yogurt and some healthy supplement with milk like Boost, Bournvita or Corn Flakes is a very good start to your day.
• No fruits immediately after meals
• Less intake of sweets and chocolates, especially late in the day
• Try avoiding cold drinks. Instead opt for natural juices.
• Eat more fruits instead of drinking its juices.
• Countless cups of tea and coffee with multiple spoons of sugar is definitely not good for health.
• Green Tea (Though not very tasty, it helps a lot.)
• One should walk a little after a meal. Walking is a very necessary exercise in day-to-day life.
• No reasons needed to quit smoking.
• Avoid rice for dinner.
• Vegetable soup is good for your health.
• Alcohol is not meant to be taken frequently; over consumption can create quite a lot of problems.
• Spicy food should be reduced during hot weathers. It helps you balance the internal heat.
• There is nothing like bananas for breakfast. Eat it before you start exercising.
• A few almonds and walnut
• Brown bread is better than the white bread.
• Rather than counting calories in your food, try to bring in variety, color and freshness in your meals with a little control over your food intake.
• Drink a lot of water.
• Do not ban any food item; after all all foods are meant to be eaten. But it is very essential to know the time when that food should be eaten and the limit in which it should be consumed. If you have eaten more than what you intended to, balance it out by exercising.
• Occasional eating out is absolutely fine until it does not become frequent.
• Eat smaller meals throughout the day instead of large meals only twice or thrice a day.
• Avoid eating at night when you are physically more inactive. Your digestive system needs a good break.
• Limit sugar intake as much as possible; rather have naturally sweet food to satiate your sweet tooth.
• Eating too much salt is not good as well. Can lead to high blood pressure.

This is by no means an exhaustive list, but just a small start to correcting our eating habits. We would have heard most of the above-mentioned food tips from our parents and elders, but we often ignore it. And the repercussions of it are noticed later. Today, we see a lot of people, in their 30's and 40's, getting life-threatening diseases, something that was not heard of about two decades back. But with our fast-paced lives becoming faster by the day, we need to start taking care of our bodies early.

I am not a dietitian; I do not guarantee that these tips would help you reduce those extra inches off your tummy. But following the above things would surely do your body no harm. In the long run, some of them might just help you. Enhance the quality of food intake, do not try to reduce the quantity of intake of all food items. Remember, a diet does not mean eating less food, it means healthy food.

P.S. I am a vegetarian, have absolutely no idea what non-vegetarian items are good for health.