P-notes

Investment through participatory notes declines to Rs 86,706 crore in May

P-notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly.

Investment in the Indian capital markets through participatory notes (P-notes) dropped to Rs 86,706 crore till May-end from the preceding month, while experts say foreign investors will reverse their selling stance and return to the country’s equities in the coming 1-2 quarters.

P-notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly.

They, however, need to go through a due diligence process. According to Securities and Exchange Board of India (Sebi) data, the value of P-note investments in Indian markets — equity, debt, and hybrid securities — stood at Rs 86,706 crore at May-end compared to Rs 90,580 crore at April-end.

In March, the investment was at Rs 87,979 crore. It was Rs 89,143 crore in February and Rs 87,989 crore in January. Of the total Rs 86,706 crore invested through the route till May 2022, Rs 77,402 crore was invested in equities, Rs 9,209 crore in debt, and Rs 101 crore in hybrid securities.

In comparison, Rs 81,571 crore was invested in equities and Rs 8,889 crore in debt during April. “In terms of ODI (offshore derivative instruments) in equity and debt, we have reached back to the levels of December 2020.

“However, if we look forward from here, most of the pain is factored in with the increase in 10-year bond yields, and equity markets showing significant drawdown,” said Divam Sharma, founder at Green Portfolio, a portfolio management service provider. There is still an uncertainty around inflation levels and the US Federal Bank’s actions. Besides, currency correction has happened to a large extent.

“Equity markets are offering some attractive valuations at these levels and the supply chain, and inflation issues should begin to subside over the coming months. Markets usually move ahead of the economic cycle and we believe that over the coming 1-2 quarters, we should see FPIs coming back to allocating capital towards Indian equities,” he added. In line with decline in P-notes investment, the assets under the custody of FPIs dropped by 5 per cent Rs 48.23 lakh crore at May-end from Rs 50.74 lakh crore at April-end.

Sharma attributed a large part of this reduction to the market correction in equity and debt portfolios. Meanwhile, foreign investors withdrew nearly Rs 40,000 crore from Indian equities and Rs 5,505 crore from the debt markets last month on fears of an aggressive rate hike by the US Fed that haunted such investors and dented sentiments.

This was the eighth consecutive month of net pullout by FPIs from equities.

Daily Voice | Chances of a bear market higher than that of an economic recession: Vivek Sharma of Estee Advisors

Commodity producers always do well in high inflation regimes. During recession, sectors catering to essential goods do well, said Vivek Sharma of Gulaq

Inflation has definitely not peaked out. We might remain in a high inflation regime for much longer, feels Vivek Sharma, Director (Strategy) and Head of Investments at Gulaq, a part of Estee Advisors.

Sharma said the point of concern is the possibility of a hard landing of US economy because of the rising interest rates. Higher rates in-turn lead to FIIs pulling out money invested in India at increasing pace. This will have higher impact on stock markets than on economy. So the chances of a bear market are higher than that of a recession, said in an interview to Moneycontrol.

Edited excerpts:

Do you foresee a recession going ahead given the elevated oil prices?

Elevated oil prices is definitely a cause of concern for Indian economy. Oil comprises about 20 percent of our import bill, so this directly impacts our current account deficit and puts pressure on rupee.

But the bigger concern is the possibility of a hard landing of US economy because of the rising interest rates. US Fed raised the Fed Funds rate by 75 bps in the June FOMC meet and another 75bps hike is being priced in for July. Currently, the short-term rates are in a range of 0.75 to 1 percent.

This will in-turn lead to FIIs pulling out money invested in India at increasing pace. This will have higher impact on stock markets than on economy. So the chances of a bear market are higher than that of a recession.

In India, do you expect a pause by RBI in the next policy meeting?

We have to realise that the central banks have only so much control over the factors that are creating inflation. Roughly 1/3rd of the inflation can be controlled by central banks by raising rates but then there are other factors like Russia-Ukraine war and the recent Covid-related factors, shutdowns in China – nobody knows how they will play out.

Do you think inflation has peaked out now?

Definitely not. We might be in a high inflation regime for much longer as this is being driven by deglobalization trend. But as I said, few big factors are there which can move the markets either way in short term.

We, in India, have seen this kind of inflation in last 10 years, so we are relatively well-placed. In US, the inflation has never been this high in last 4 decades.

Have you spotted any sector ideas that can be a part of a portfolio in the current market conditions?

Commodity producers always do well in high inflation regimes. During recession, sectors catering to essential goods do well. Other usual suspects like consumer staples, energy, healthcare, industrials and utilities are likely to do well on relative basis.

How can one make his/her portfolio recession-proof and inflation-proof?

There is no easy answer to this. Obviously, there are certain sectors which do well on a relative basis in inflationary times and recessions, and our models are increasingly giving these sectors more exposure in our portfolios. One needs to take risks to generate returns. By the time dust settles and there is clarity, the opportunity would no longer be there.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

A Dinosaur trying hard to stay relevant

We no longer speak of long-term windows while referring to our own careers or companies. What we talk about now are quarterly sprints. From planning for the long term, we have become very short-term.

I feel like a dinosaur. No, not because of size or ferocity, but as a metaphor for something that is prehistoric, almost extinct. I am writing this at a time when it is hard to make sense of the world and its incessant change. At a time when everything (in the world of work) is fighting for survival, I wonder who is the fittest. And, I am a millennial. Known to be a generation that can adapt to change. When I started my career, companies (as I knew them) were building for the long term. I remember meeting many global CEOs who spoke of 10-15-year careers (sometimes more) in the same company.

I now have a career spanning almost 15 years, and am noticing that we do not speak of long-term windows either referring to our own careers or companies. What we talk about now are quarterly sprints. From planning for the long term, we have become very short-term. Our aspirations, our goals and targets are all based on extremely short spans, and long-term thinking feels like a luxury (by long term I mean a year). Thinking long-term is perhaps contrarian in times when a venture capital (VC) culture has made work a never-ending treadmill. The problem, I think, is partly because many companies are not building for the long term.

Maximising returns – building for the short or long term? 

As I dig deeper and speak to experts, what I also come to realise is that the problem is twofold:

1) Leaders today are more reactive than visionary;

2) VCs have fostered a sense of unreal urgency and a ‘measurement culture’ to quantify any and everything – sometimes fiction and mostly fantasy.

There is an unnecessary need for speed that is glorified further by Twitter threads that comes in the way of utilising sensibilities, especially in situations that are unprecedented.

However, let me also add that there are also founders who have been playing the long game and that reflects in not only their leadership skills but the style in which they run their companies. Is it a mere coincidence then that the following similarities emerge?

– These companies are mostly bootstrapped (many are profitable)

– They are Business-to-Business (B2B)*/ Software as a Service (SaaS) companies that have been around for at least 10 years (and more)

– Their founders put culture and people first (and guess what, when you talk to employees in these organisations, they vouch for this – so culture is not merely lip service)

**A key point to highlight here is that Business-to-Consumer (B2C) companies are cash-intensive whereas B2B ones are not and that could be the reason why B2B businesses have more runway and are more sustainable.

Putting people first 

I am a strong believer that a long-term vision and a people-first culture go hand in hand in fostering capital gains. I can demonstrate through examples.

I wrote to Paras Chopra, chairperson and cofounder of Wingify, a 12-year-old bootstrapped SaaS company that has been profitable over the past three years, about his take on building for the long term.

Here is what he said: “Startups need to be narrowly focused towards product-market fit and that is generally short-term oriented. It’s almost impossible to predict success over the long term because there are so many variables involved.”

He pointed me to this blogpost where he wrote that “mature markets require mature products and getting there takes time. If you make an attempt to build a sophisticated product in the first go itself, chances are that you will miss many subtle but important details behind existing leading products’ dominance in the market.”

Which translates to a simple fact – build for the long term and sharpen your product and differentiators every day. Every product, startup and founder has their own journey, even if they are building for an extremely crowded market; these differentiators take time to build and are subject to volatile market conditions. Therefore, sustainability is key.

Building trust 

As I was writing this piece, I came across N.S. Ramnath’s article, ‘The Contrarian’ on Zoho and its founder, Sridhar Vembu, that not only reinstates my own belief but provides further ammunition to what I am talking about. Zoho, too, is a bootstrapped SaaS company built from India, whose key differentiators include building for the long run (which in turn means refusing VC money – in many cases), hiring people and letting them fail, again a trait of companies invested in the careers of people and increased focus on research and development (R&D) to build its own technology, tools and infrastructure and a leader who sets the tone for company culture.

Says Praval Singh, vice-president of marketing, Zoho: “Successful companies build a culture where people can work with you for the long haul.” Praval himself has worked 10 years at Zoho, and according to him, a few ‘seemingly simple’ things stand out:

1) Employees aligning with the company’s vision

2) The talent they have been able to nurture and create

3) Looking forward to work every day (which may not be perfect, but still has you gripped).

Further, he points out how a bottom-up approach to building trust is very important as a company scales. Even the last mile has to feel the same vibe as the founder does for culture to really percolate.

My view? Going against the tide and taking a step back when the world is headed in the same direction may not be a bad idea. Especially when you are a leader. Have a short-term mindset to ensure sustenance, but a really long-term one to create value. It cannot be either/or. Also, your values have to take people along with you, not sacrifice them at the first instance of instability or fear. Moving fast and breaking things may be a great Valley tenet, but it may not be very feasible when it comes to people.

What happens to jobs, then?

It is only natural that when companies themselves are temporary, so are ‘structured’ jobs. Think of your career as a marathon and multiple jobs as sprints. Going forward, we will run many marathons and even more sprints. The crux of the jobs issue is deep rooted. We are not trained to run too many sprints, let alone a single marathon. However, the system expects us to run.

Grades, skills, expertise 

Our approach to education is mostly rote learning and not a practical ‘makers’ approach’. For context, Sridhar Vembu wrote an article in the campus newspaper arguing that the Indian Institutes of Technology were taking in some of the smartest students in India and wasting their time. “We are not building anything. We sit in classrooms competing for useless grades,” he said.

Startups today are betting on A-listers, high-performers and those from meritorious institutions. Very few companies are bold enough to make a change, hire from lesser known institutes or not hire for grades altogether. Only grades are not the issue. It is also about skills and expertise.

In the current scenario, having a single degree for life is not enough. We should normalise going back to school/college in our 30s/ 40s/50s or beyond. Why does education stop, really? Organisations are not built for enhancing our skills and let us face that. We are responsible for ourselves. Learning and Development programmes are not designed for learning something new and relying on them is myopic. If you stop and give this further thought, like I do, you will also realise that many of these organisations do not create great leaders either. Everyone is put in the same mould (read job description) which is actually a killer of passion and originality, if you ask me.

Meeta Sengupta, FRSA, founder, Centre for Education Strategy, speaker, advisor and consultant, shares her perspective on the current times.

“Do you know the last line of the Mahabharata? It ends with, ‘and this is how the Yuga (era) ended’. Did the era actually end – did all of mankind disappear? No. A new era or way of doing things began. It is very similar now.” She continues: “Covid has only accelerated the pace, but as academicians we have been asking similar questions for at least seven to eight years. If we educate at the old speed, students will never be prepared for the new pace.” Meeta has workshops on what she has named Pivotal Skills that include the core 5 of Initiative, Improvisation, Insight, Influence and Impact. These are the five skills she proposes are essential to progress and career pivots. Can we be gutsy enough to abolish the current education system altogether and only teach/ learn for skills? I only wish.

We live in crazy times. There is no right or wrong – especially when you ask questions around building a lasting enterprise or making your career last. However, nothing stops us from taking a pause and thinking. What gets my goat is conforming and not questioning enough. We must. Our lives and livelihoods are at stake. Perhaps that differentiates us from dinosaurs. Don’t you think?

Rupert Murdoch-Jerry Hall divorce: This business of love!

To start all over again or admit to costly matrimonial mistakes at any age is a challenge, but to do so in one’s 90s plucks ageism right out of love and life.

As Rupert Murdoch embarks on a fourth divorce, the good news is he’s free to love again. A separation at 91 sounds more a passionate decision than cold plotting. In a world where most marriages muddle through to maintain status quo, here is hot rebellion.

The man who once tweeted that he was the luckiest and happiest man in the world on the day of his wedding to Jerry Hall did see some speculation over the fate of his marriage when she did not turn up at his last party. Now all speculation has been laid to rest – the media tycoon and the former model will not step into a seventh year of marital bliss.

There is a general air of ‘I care a damn’, about what people will say or catty comments on age gaps and alimony that permeate this announcement of divorce. At 65, Hall is two-and-a-half decades younger than Murdoch and the mother of singer Mick Jagger’s four children. Murdoch is her first husband.

A marriage at any age is a romantic occasion in any society, bringing on sighs and ‘so sweets’. A late divorce, though, is an eyebrow-raising event. Since both are matters of the heart, it is presumed, emotional clarity could be one of the reasons for major decisions in the evening of anyone’s life. One perhaps does not want to live a lie and opens up to authenticities as every day gets precious. To start all over again or admit to costly matrimonial mistakes at any age is a challenge, but to do so in one’s 90s plucks ageism right out of love and life. Is there any ideal age to love, to leave, to hope, to hurt?

With him a billionaire, this is a divorce that has the corporate circles losing sleep. Businesses tied up to his will want to chart how exactly the latest legal act will affect his wealth or at least allied decisions. As many experts on media and money put it, maybe none. An iron-clad pre-nuptial pact is expected to be in place, which will leave Murdoch’s bank balance pretty much the same as before. Divorce for him may be less about bank notes than love notes.

To love or to leave demands a fidelity to self, a refusal to be led by the head. In amour, a confession of loss brings the same amount of anxiety and loneliness to a pauper as to a prince. There is also the fear of ridicule and being in the news for all the wrong reasons. Already we are quoting Andrew Neil, a journalist who reportedly said that he was advised ‘don’t fall in love with Rupert. He turns against lovers and chops them off’.

Murdoch and Hall have indulged in enough PDA – they first kissed at a rugby match in 2015 – for the public to act all shocked and holier than thou or pass snide comments about money not buying happiness. But as any nonagenarian will tell you, better late than never.

Reference Link:- https://www.moneycontrol.com/news/business/rupert-murdoch-jerry-hall-divorce-this-business-of-love-8736831.html

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