Vakrangee Q1 FY@3 Result Update

Fixed Income Portion of the Portfolio Should Stabilize the Overall Returns.

Fixed Income Portion of the Portfolio Should Stabilize the Overall Returns.


Mutual funds have gained business over the last few years as a safe form of investment alternative. Mindfulness of the performance and benefits from different equity and hybrid mutual fund schemes witnessed an upsurge over time. As a regulator, SEBI took several measures to simplify the categorization of investments and the AMFI helped to disseminate the idea of mutual funds through an easy to understand advertising campaign. Mutual funds as a legal mechanism can provide debt holders with a tax arbitration, provided that assets kept for three years through mutual funds are eligible as LTCG. Nevertheless, awareness of equity schemes are much more as compared to debt investments due to various uncertainties in the financial market investors obliged to put more attention in fixed income investments.


Taboo of Fixed Deposits:

Equity investment is much more risky than debt instruments and fixed earning investments but it has been observed that people tend to invest in Fixed earning asset class. Most investors are used to investing in fixed bank deposits, in which they are aware of their interest rate or total return on investment.


Volatility in Market:

It is easy to understand. In debt mutual fund investments, investors tend to rely on the yield from the portfolio depending on the past returns, which may not be the correct index for future returns. Although, debt funds invest in securities or bonds that provide mostly fixed coupons or interest payments but securities prices fluctuate to alter the return on investment during the investor’s holding period. The bond price can fluctuate because interest rates or the credit profile of the issuer change in the economy. Bond markets can also often become illiquid, contributing to lower prices for bonds in general. Investors need to be aware that the bond fund will fetch them returns which are close to their Portfolio Rate and which are adjusted to their expenses if things do not change much during their investment horizons. However, the situation completely changes and investors may get higher or lower return than their expectations.


Liquidity concern:

In the past, the world of fixed-income investors has been astounded by a variety of credit events, resulting in large write-downs in the fund values. Though we observed many uncertainties in a financial market over the years, the size of defaults was comparatively low and does not impact much in the investing pattern of the investors and even there was no such significant effect on mutual fund schemes. However, in recent times due to the massive problem of liquidity, investors tends to invest in fixed earning instruments. Investors have expressed a great deal about their disappointment that while the return on portfolio has captured the credit risk of the investment, the return on the portfolio is not at all worthy.

Therefore, when a scheme faced major redemptions, the scheme avoided accepting new subscriptions or redemptions which would lead the customer’s investment being illiquid. Based on this experience, investors are likely to reject credit risk or high yield funds which are unfortunate because any developed market requires a market where liquidity is stable and investors can evaluate and then take part in high yield trades. This dimension needs to be closely examined by the regulator, as failure to fix problems at ground level will lead to a fragmented market with less issuers locking up all liquidity.

Investments with fixed revenue will produce strong returns at least on a periodic basis. If the economy slows and inflation is not at its height, a central banker will try to lower interest rates, increase the money in the system, and encourage banks to loan to the real economy by lowering alternative deployment rates.
In these situation, value bonds have been observed at peak and investors get the capital gains added to their portfolio return. So if equity funds do not perform well, fixed-income funds are a perfect sanctuary for any portfolio. On the contrary, if rates increase instead of decreasing due to a decreased rating or an unregulated fiscal expansion, portfolios with a fixed income may produce returns lower than portfolio produce. Nevertheless, capital is not in danger of being frozen out forever because there is no chance of illiquidity.



A good investment consultant, with some common sense and some history should be able to recognize the various risks linked with debt fund schemes and properly evaluate the client’s risk profile and identify schemes of better-managed funds and avoid obvious mistakes. Although, a fixed-income portfolio contains many moving parts. A competent adviser is usually able to separate all the advantages and disadvantages. The portfolio’s fixed income portion should add stability to the overall returns and not to results in anxiety and concern.



The History of the Modern Portfolio

Equity Right

India's borrowing target now raised to Rs 12 lakh crores

India’s borrowing target now raised to Rs 12 lakh crores

From the estimated amount in the budget of 7.8 lakh crores, the government has increased the gross market borrowing target to Rs 12 lakh crores for the financial year 2020-21. It attributes nearly 54% increase to deal with the problem of illiquidity during the economic crisis due to corona virus pandemic.


The circular:

The government issued a circular on 8th May 2020, which said that the gross borrowing target has been raised from the budgeted Rs 7.8 lakh crores to Rs 12 lakh crores. In a statement given on Friday, the Finance ministry said that an increase in the borrowing targets has been done after consultations with the RBI and has been inevitable during this covid-19 pandemic crisis.


Increase in budgeted borrowings:

A few days ago, a package worth Rs 1.7 lakh crores was announced. It is expected that there will be additional packages and programs introduced in the days ahead to have fiscal support. This is because of the expected reduction in the tax revenue from the lock down. It is expected that the revenue shortfall would be same as the additional borrowings of Rs. 4.2 lakh crores in this financial year. The recent surge in the fuel prices will generate an additional Rs 1.4 lakh crores but still cannot reduce the revenue shortfall.

A senior government official communicated with the media that there will definitely be a revenue shortfall in this financial year. It is because many of the industries are shut down amid lock down in the month of April. For now, they are focusing on the expenditure side. If the situation improves in the second half of the year, then the government will scale down the estimated borrowings. He added that the RBI has not taken any call for monetizing the deficit. A stimulus package will be announced very soon and the government is working on it.


Borrowing Plan:

The government plans to borrow an amount of Rs 7 lakh crores in the first half of this financial year than the earlier of plan of Rs. 4.88 lakh crores. So it means that the government can borrow at the most Rs 6 lakh crores by the end of September. The government can borrow an average of Rs 30,000 crores per week according to the current plan as compared to the earlier plan of borrowing Rs 19,000 – 21,000 crores. This will leave a balance of Rs 5 lakh crores which can be borrowed in the second half then the earlier plan of Rs 2.92 lakh crores.


Benefits of additional borrowings:

The additional market borrowings would lead to an increase in the bond yields and would also ensure adequate liquidity in this system. According to the report given by finance ministry, the surplus liquidity in the banking system is Rs 6.07 lakh crores currently.



Debt, hybrid mutual funds see large outflows in April


Equity Right

Effects of Covid-19 on cryptocurrency market

Effects of Covid-19 on cryptocurrency market

Cryptocurrency is a digital currency secured by cryptography which is not issued by banks or governments. In other words, a virtual currency which doesn’t have any physical embodiment is called cryptocurrency. Bitcoins(BTC), Litecoin(LTC), Ripple(XRP) Ethereum(ETH), Bitcoin cash, Ethereum classic, Zcash(ZEC) are some of the types of cryptocurrencies. In the present scenario, the COVID-19 pandemic has affected nearly all areas of businesses, people, economy, trade and the financial system worldwide.


Impact of COVID-19:

But at the same time, the COVID-19 pandemic has also helped the world to connect digitally for different reasons like work, purchase of goods, health, etc. One of the most propelling and safe investments was gold but when a liquidity crisis occurs, investments in gold are not up to the mark and fail to generate profits. Here comes the role of cryptocurrencies. The COVID-19 pandemic has caused the physical paper money usage to be minimized to control the spread of corona virus. This is because the virus stays on the objects for a longer time period. Cryptocurrencies acts as a solution to this problem.


Benefits of Cryptocurrency:

Cryptocurrency gives the freedom of converting it into money without any manipulation on behalf of the banks and other financial institutions. Cryptocurrencies have made transactions faster by helping the trade system to be efficient. Using the traditional method for transferring funds overseas nearly takes 3 to 5 days. With cryptocurrencies, the transactions can be done in a much shorter time period.

The block-chain technology used in cryptocurrency can serve as a solution in different ways. It can track the supply chain of medical and pharmaceutical products which are considered as essential goods. It can also be used for tracking the amounts received as donations for the cause of corona virus, for tracking the proximity of virus, etc


Opportunities brought by Cryptocurrency:

Cryptocurrencies can bring out new growth opportunities for emerging economy like India and also for developed countries. This is because cryptocurrencies provides faster payments between countries with no transfer fees or remittance charges. The stock prices have been hit tremendously and other investment avenues have also seen a downfall due to this outbreak. Investors are looking for much safer investment options in the long run.

Secondly, the growth in the usage of Fintech applications have made many companies to become curious. It could easily adapt to the new working conditions as they are using digital money for payments which has reduced the use of virus infected currencies. It acts as one of the best currencies developed so far and is one of the best alternative for fiat currencies. In future, the value of cryptocurrencies is likely to grow thus helping to be a digitalised paperless economy.



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