Rachana Ranade. Blog

Investing can be a great way to build wealth and achieve financial freedom. However, it can also be risky if you don't know what you're doing. To become a successful investor, you need to have an understanding of the markets and a strategy that works for you. Here are 10 tips to help you get started:

1. Set clear goals: Before you start investing, it's important to know what you want to achieve. Are you saving for retirement, a down payment on a house, or a child's education? Set specific goals and create a plan to achieve them. When you are planning for the goals make sure they are S.M.A.R.T. If you don’t know what are SMART Goals, I have made a separate video you can check out on YouTube.

2. Diversify your portfolio: Don't put all your eggs in one basket. Spread your investments across different asset classes, sectors, and geographic regions. This can help reduce risk and increase returns over time. Understand that all the assets move in cycles, if one asset is in a negative cycle the other asset that has a lower correlation will set off the returns to avoid or minimize any possible underperformance.

3. Invest for the long-term: Investing is a marathon, not a sprint. Don't try to time the market or make short-term bets. Focus on your long-term goals and stick to your plan, even during market downturns. Have you seen a seed grow into a tree in a few days? No, it takes time. Similar is the case with investments.

4. Control your emotions: Investing can be emotional, but it's important to stay rational and avoid making impulsive decisions. Don't let fear or greed drive your investment decisions. Have you seen the image on our merchandise? It say’s “I Buy… Asa Kasa Kaay?”. Just after you buy, the stock falls and just after you sell the stock, the prices rally.

5. Do your research: Before you invest in a stock, bond, or mutual fund, do your due diligence. Research the company or fund's financials, management team, and industry trends. Make sure you understand the risks and potential rewards. If you need any help in the research of any stock, you can go through our YouTube channel and explore the knowledge bank.

6. Keep an eye on fees: Investing fees can eat into your returns over time. Look for low-cost index funds and ETFs, and be wary of high management fees and transaction costs.

7. Rebalance your portfolio regularly: Over time, your portfolio may become unbalanced as some investments outperform while others lag behind. Rebalancing can help keep your portfolio aligned with your goals and risk tolerance. Let me repeat the example of sowing a seed. It needs care and nourishment at regular intervals. You change the soil and add manure regularly to support the healthy growth of a plant. Similar is the case with investments.

8. Stay informed: Stay up-to-date on market news, economic indicators, and political events that could impact your investments. But don't let the news cycle distract you from your long-term goals.

9. Work with a professional: If you're new to investing or need help managing a large portfolio, consider working with a financial advisor. A good advisor can help you create a personalized plan, manage risk, and achieve your goals.

10. Learn from your mistakes: Investing involves trial and error. Don't be too afraid or be too hard on yourself when you make mistakes. I remember a quote by Theodore Roosevelt, 'The only person who never makes mistakes is the person who never does anything.' So, I will say just go out there, take risks, and learn from your experiences only then you will succeed. It's all part of the journey, accept and enjoy every bit of it!

In conclusion, investing can be a great way to build wealth over time, but it requires discipline, patience, and a solid strategy. By following these ten tips, you can become a successful investor and achieve your financial goals. Until next time!

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10 Investing tips to become a successful investor

1. A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.
2. The primary motive is to make shares more affordable for retail investors even though the underlying value of the company has not changed.
3. Since many retail investors think that the stock is now more affordable, they buy the stock and end up boosting demand which drives up prices. So, it results in an increase in share price following a decrease immediately after the split.

We can see this market reaction reflecting in the example of the Apple Stock split in June 2014. Apple Inc. split its shares 7-for-1 to make them more accessible to a larger number of investors. Right before the split, each share's opening price was approximately $649.88. After the split, the price per share at market open was $92.70, which is 648.90 ÷ 7.

The day after the stock split, the price had increased to a high of $95.05 to reflect the increased demand from the lower stock price.

The scenario of Stock Split in Indian Markets

On 22/05/2019, HDFC Bank announced a stock split of 1:1 (Old Face Value- 2, New Face Value- 1)Following were the key dates:

1.Record Date: 20/09/2019- determines which shareholders are entitled to receive additional shares due to the split.

2.Ex-Split Date: 19/09/2019- ex-date is usually set one business day prior to the record date since India follows a T+2 rolling settlement for delivery of shares.

To be eligible for a stock split, investors need to buy the stock at least on or before 18/09/2019 because the stock price will be split-adjusted on 19/09/2019. So, the record date is very important for shareholders to be eligible for a stock split because of the T+2 settlement.

The scenario of Stock Split in USA Market

Apple Stock Split Timeline 2020:There are several key dates.

1.The Record Date – August 24, 2020 - determines which shareholders are entitled to receive additional shares due to the split.
2.The Split Date – August 28, 2020 - shareholders are due to split shares after the close of business on this date.
3.Ex-Date – August 31, 2020 - the date determined by Nasdaq when Apple common shares will trade at the new split-adjusted price.

If you notice, Ex-Date in the USA stock market is after the record date! In USA markets Ex-Date is the most important date. This means that even if you buy the stock on 28th August 2020, you will be eligible for a stock split because the stock price will be split-adjusted after market hours on 28th August 2020. There is no significance of record date left in the USA stock market. Please note that 29th August and 30th August are holidays for the stock market.

This is clarified by FAQ on Apple’s website:
What happens if I buy or sell shares on or after the Record Date and before the Ex-Date? If you sell shares on or after the Record Date (August 24, 2020) but before the Ex-Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split. If you buy shares on or after the Record Date but before the Ex-Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.

Source: https://investor.apple.com/faq/default.aspxIf you are still not clear about the difference between a stock split concept in India and the USA, you can watch a detailed video on our Youtube Channel.

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Stock Split Concept

Many people find it difficult to buy insurance online directly, and hence they take the help of an insurance agent and end up paying high insurance commissions.

Insurance companies commission rates range from 7% to as high as 40%,

Do you know that depending on insurance plans and tenure of the plan the commission varies and hence we have tried here to decode the jargon terms related to insurance so that an individual can buy insurance plans online without the help of an agent and thus save on the commissions? Also buying online plans has become more beneficial because nowadays some insurance companies provide discounts on the premium amount if you buy it online, or if the amount is paid via credit card.

1. Sum Assured:

The sum assured is the guaranteed amount that the policy-holder will receive in case of death/permanent disability.

2. Rider:

Riders are additional features to enhance the scope and benefits of a life insurance policy.

For instance, in addition to life coverage, a subscriber can avail of riders like accidental death benefit rider and accidental permanent disability benefit rider which might help the policyholder get a claim in case of death in an accident.

Riders are beneficial for policyholders because there is no need to again purchase a separate policy for particular purposes.

3. Bonus:

To be eligible for bonuses, the policy should be participating in nature. It enables the policyholder to share the profits of the insurance company. It is also known as a “with-profit policy”.

Bonuses declared every year depends on the profitability of the insurance company, it is not fixed in nature.

4. Life Insured & Nominee:

Life insured is the person whose life is covered by the insurance company

The nominee is the legal heir of policyholder, who is entitled to receive the proceeds from the insurance company

5. Free–look period:

The Free-look period is a time period during which you can return the policy if you are not satisfied with what you wanted.

The Freelook period is generally 30 days from the date of receipt of the policy.

But there is a caveat attached by insurance companies while returning the premium paid (including taxes),

Proportionate risk premium (including taxes) and

Expenses incurred during medical examination (if any) and stamp duty

are deducted and all rights and benefits will now be extinguished

6. Surrender charges:

If a policy-holder for some reason does not want to continue its policy, it can be surrendered by paying a surrender charge.

7. Claim Settlement Ratio:

The claim settlement ratio (CSR) is the percentage of claims the insurer has paid out during a financial year.

For instance, if the death claim settlement ratio of an insurer is 95 percent, it means that the insurer has settled 95 death insurance claims out of every 100 insurance claims received.

"Higher the claim settlement ratio, better it is for policy-holders because it indicates the insurer's commitment to its policy-holders. Hence, a higher claim ratio is one of the parameters for a policy-holder to consider buying a policy from a particular company.

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Basic things to look in Insurance

After a long afternoon, you’ve finally finished your chores and got some time for yourself. You decide to put the radio on and enjoy some good music. After a few mainstream songs, you hear a song that you have never heard. It does not matter whether it’s an old song or a new one because you loved it. In fact, you loved that song so much that you add it to your daily playlist. You ask your friends about this great song that you discovered on the radio, but none of them have heard it. And that’s when you realize that you have stumbled upon a gem of an underrated song! Not just that, but the delight and the essence of this discovery makes it even more satisfying, isn’t it? I am sure we all have at least one such underrated song in our playlists. So how do you feel about discovering such an underrated stock or an undervalued stock as we call it in the markets and reaping the benefits out of it? Now an excited smart investor like you might say, “YASSS! But how do I find one?..” Well, you obviously won’t stumble upon it on the radio like you did with the song, so to find out “how?”... Keep reading ahead because you are about to learn it in the next 5-10 mins!

How to find an Undervalued Stock?

An Undervalued stock is the one whose market price is lower than its Intrinsic value and has promising growth potential. They might be undervalued for reasons like market crash, low recognition or sometimes because of bad press. Here are few metrics which we can look for, in order to identify these Gems in the stock market for Long term investing.

1) Price-to-Earnings Ratio (P/E)

P/E ratio is the most popular and favored metric amongst Value investors. This ratio tells us how much the market is willing to pay compared to a company’s earnings. It is calculated by dividing Market price per share (MPS) by Earning per share (EPS) of a company.

Formula:

P/E Ratio = Market Price per share/ Earnings per share

A high P/E indicates that the stock is expensive or overvalued whereas a low P/E indicates that the stock is low-priced or undervalued. It is important that you compare a stock with its industry peers to determine if it’s overvalued or undervalued
Let’s understand this with an example. Stock A has a market price of Rs. 50 and is earning Rs 40 per share. The P/E for Stock A would be 1.25 (50/40). Then, we have Stock B whose Market price is Rs. 20 and is earning Rs. 25 per share. Thus, the P/E for Stock B would be 0.8 (20/25). So, in our first case you are paying Rs 50 to earn profit of Rs 40 whereas in second case you are only paying Rs. 20 to earn profit of Rs. 25!...What does this tell us? Yes, you’re right. We need to look for lower P/E to identify an undervalued stock which is Stock B with 0.8 P/E from our example.

2) Price-Earnings to Growth Ratio (PEG)

PEG ratio takes P/E ratio little further by adding expected earnings growth rate in the equation. Hence, PEG is forward-looking. It is calculated by dividing P/E ratio by EPS Growth of a stock.

Formula:

PEG Ratio = P/E ratio / EPS Growth rate

Just like P/E, a high PEG indicates overvaluation and a low PEG indicates undervaluation. A company with low PEG ratio and strong earnings growth could prove to be promising. As a rule of thumb, a stock with PEG above 1 is considered to be overvalued and a stock with PEG below 1 is considered to be undervalued. Let’s take our previous example ahead to understand this. Stock A has a P/E ratio of 1.25 and Stock B has a P/E ratio of 0.8. Say Stock A has an EPS growth rate of 10% and Stock B has 12% EPS growth rate. The PEG for Stock A would be 0.125 (1.25/10) whereas that for Stock B would be 0.067 (0.8/12). Hence, Stock B wins again!

3) Price-to-Book Ratio (P/B)

The price-to-book ratio compares a company's market value to its book value. It is calculated by dividing Market price per share by Book value per share. It measures how much investors are willing to pay for each rupee of a company’s net value. Book value is the net asset value of a company which its shareholders would receive in case of liquidation. Book value per share is calculated by dividing Equity Share Capital less preferred stock by number of equity shareholders.

Formula:

P/B ratio = Market price per share/ Book value per share

Just like the previous 2 ratios, this ratio also reflects a high P/B ratio as overvaluation and low P/B as undervaluation.

Let’s continue with same example from before to understand this. Stock A has a Market price per share of Rs. 50 and let’s say its book value is Rs. 30. So, the P/B for stock A would be 1.67 (50/30). Stock B has a market price per share of Rs. 20 whereas its book value is Rs.22 per share. So, the P/B for stock B would be 0.9 (20/22) and here we have a winner.

4) Dividend Yield Ratio

If you’re looking for long term investment and wealth creation then obviously you would be interested in knowing how much dividends a company is paying to its shareholders. This is when Dividend yield ratio comes into picture. This ratio measures the amount paid by a company as Dividends to its shareholders compared to its Market price. It is calculated by dividing Dividend per share by Market price per share.

Formula:

Dividend Yield Ratio = (Dividend Per Share/Market Price Per Share) * 100

A dividend paying company is always in the good books of investors because these companies reflect good financial position enabling them to share their profits with us. Higher dividend yield is always favorable however, it is important to compare it with the industry average and its peers.

Let’s say Company A and B are both paying a dividend of Rs. 10 per share. But the market price for Company A is Rs. 50 whereas for Company B it’s Rs. 30 per share. Hence, the Dividend yield of Company A is 20% ([10/50] *100) and that of Company B is 33.34% ([10/30] *100). So, by paying only Rs 30 for a stock of Company B, I can get 33.34% dividend yield compared to the 20% dividend yield on paying Rs.50. This is the reason why investing in an undervalued stock can be fruitful in long run.

5) Debt-to-equity ratio (D/E)

This ratio is a simple measure of how much debt you use compared to your owned funds to run your business. It is calculated by dividing a company’s total liabilities by shareholders’ equity.

Formula:

D/E Ratio= Total Debt/ Shareholder’s Equity

If a company’s D/E ratio is too high, it may be a sign of financial distress and reliance on heavy debt to run your daily business activities. But if it’s too low, it’s a sign that your company is over-relying on equity to finance your business. Hence, it is important that a company manages to strike a good balance between the two whilst keeping its books intact. It would be reasonable to compare a company’s D/E ratio with its industry peers and industry average to know the overall scenario.

Let’s say, Company A has a Debt of Rs. 10 Lacs and shareholders’ equity of Rs. 4 Lacs. So, the D/E ratio would be 2.5 (10/4). On the other hand, Company B has a debt of Rs. 8 Lacs and shareholders’ equity of Rs. 10 Lacs then the D/E ratio would stand at 0.8 (8/10), which is much better than its peer- Company A.

6) Return on Equity (ROE)

Return on Equity ratio measures a company’s profitability with respect to its Equity. It tells us how efficiently a company is using its shareholder's equity fund to generate profits. It is calculated by dividing Net income by Shareholders Equity.

Formula:

ROE = (Net Income/ Shareholders Equity) * 100

ROE can differ from sector to sector because of different assets and debt requirements. Thus, it is best practice to compare a company’s ROE with the Industry ROE average. ROE above industry average is considered good. A company should be able to maintain a stable or rising ROE over the time. If a company's ROE is growing, its P/B ratio should be growing too. It is important to notice if the company’s high ROE is because of increasing profits or more debt, which is why D/E ratio is worth checking out.

Let’s look at an example. Say, Company A has a Net income of Rs. 100 Cr and Shareholders’ Equity of 1000 Cr, then ROE would be 10% ([100/1000] *100). Say, Company B has the same Net income of 100 Cr and Shareholders’ Equity of 500 Cr then ROE would be 20% ([100/500] *100). So, we can say that Company B is generating more profits more efficiently than Company A using its shareholder's equity fund.

There are many ratios and metrics you can look at beyond this list. What’s important is that they help you identify an undervalued stock at right time. You can use various platforms like Screener. in, Investing.com, Tradingview.com, etc. to filter stocks according to your favorite metrics and criterion

Look beyond numbers

Screening just the numbers isn’t enough. If you find such a company meeting your specified criterion, it is essential to study the business of that company too. For starters, go for a company whose business you understand,check whether that business is sustainable. Study their business model and various initiatives taken by them for conducting business seamlessly.

Look at the Shareholding pattern and the shareholding of the promoters in the company. That will tell you about the promoter’s interest and confidence in the company. A company having any kind of competitive advantage over its competitors is even more convincing. It is important to learn their future outlook, business strategy, and sectoral growth aspect before investing your hard-earned money.

Bottom line: Be patient!
All these factors combined together can re-assure your investment decision in a company. There are 5,500 stocks listed in India. Take it slow, find the metrics which suits your investment style best, and then make an informed investment decision. The aim here is to make the most out of the company with great potential. As per Dow theory, price always corrects itself to its fair value in the markets and when it does, guess who will be making money out of it? Yes! My friend. It’s you! I am sure you will find such underrated gems to add value to your portfolio.

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How to find an undervalued stock?

Our Indian culture has so many instances that teach us about various important aspects of our lives. Today, I am going to tell you one such Legend of “Paal Payasam”(Rice Pudding).

Long ago, there was a king who loved playing chess. Once, he challenged a traveler sage to play Chess. He was ready to reward him whatever he demands if he wins. The traveler is a modest guy asked only for some rice. The sage said, “On the chessboard, one rice grain will be placed on the first square, 2 rice grains will be placed on the second square, 4 rice grains will be placed on the third square, 8 rice grains will be placed on the fourth square and so on for all 64 squares”. The king confidently started adding the rice grains as instructed by the sage. He soon realized that on the 10th square, he needs to place 512 rice grains and the number would further grow exponentially making it impossible to finish the task. The sage won and he revealed his true identity as Lord Krishna. Lord Krishna asked the king to provide Paal Payasam (Rice pudding) in his Temple daily.

This story can accurately explain the Power of Compounding. Isn’t it rightly called the 8th Wonder of the world? Just imagine, how compounding can grow your wealth exponentially over a period of time. Let’s find out how we can put this to work.

50/30/20 Rule of thumb for Budgeting

Before we start putting our money to work, we must analyze our financial position. How much is the monthly spending? Can it be reduced? Figure it out first. The 50/30/20 thumb rule can help us with better allocation of our income. It suggests that we allocate 50% of our income to basic needs - Roti, Kapda, Makaan, and Internet. 30% goes to wants which can include hobbies, vacations, shopping, dining, etc. And the last 20% is allocated to savings and investments. This can cater to various financial goals like buying a house, child education, retirement planning, etc. The allocations suggested in this rule can be altered according to one's needs and financial position.

Emergency Fund

An emergency fund must be kept aside in case any unforeseen situation arises. Since such a situation can be unanticipated, the emergency fund should be invested in a highly liquid investment avenue. Make sure you park in an avenue which is promising your principal amount whenever you liquidate.

An Emergency Fund should comprise monthly expenses for the next 6 months. For instance, if the monthly expense is Rs. 30,000, then the corpus should be Rs. 1,80,000 (30,000*6). You can divide the corpus into Recurring Deposits, Fixed Deposits, and Liquid Funds. Apart from that, some portion of the emergency fund should be kept in savings account for easy access.

Start small with SIPs

A Systematic Investment Plan is a tool for investing a fixed sum at regular intervals in an investment avenue. This will gradually increase the corpus and at the same time compounding will work its magic as we discussed earlier. It will also inculcate a financial discipline. Another benefit is Rupee cost averaging. It simply means whenever markets are low you will gain more units and whenever markets are high you will gain fewer units. So, over the period of time, the cost of holding the units averages out. You can start SIP with as low as Rs. 500 or even Rs. 100 in some cases!

Bottom line

Stock markets can be intimidating but it is essential that we first lay down the foundation. One can gradually work their way up in the markets as they learn more about it.

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Stairway to personal finance

It is human tendency to imitate success stories. We frequently follow eminent Indian stock market investors who have achieved phenomenal success and attempt to participate in the same kinds of ventures that they have had. While it might not be a fine decision to duplicate their portfolios because we have our own restrictions and distinct investment philosophies, we can learn a few things from their investing and life experiences that will help us plan our own successful investing journey.

Let us have a look at the top investments of the top 3 individual investors.

1. Mr. Radhakishan Damani

Radha Kishan Damani, a low-profile trader, investor, entrepreneur, and veteran known as "Mr. White and White," is one of the top investors in the Indian market. He liked to speculate and watch the stock market tactics rather than getting personally involved in trading because he was a beginner in the broking industry in his 20s.

At the age of 32, he made his first investment and got registered with SEBI. He gained wealth through trading and soon understood that he could make money by investing in MNCs. He wasn't always successful; rather, he had some losses as well and picked himself up after them.

Mr. Damani had an interest in the consumer goods industry. He also acquired the franchise of the co-operative retail chain "Apna bazaar" prior to founding D-Mart.

Mr. Damani's top investments as of the June 2022 quarter include a 67.5% ownership in Avenue Supermarts Limited, valued at roughly 1.88 lakh crores. In addition to Avenue Supermarts Limited, he possesses around 32.3% of VST industries through his various entities.

2. Mr. Rakesh Jhunjhunwala

Undoubtedly, Rakesh Jhunjhunwala ruled the Indian stock market. His success has encouraged millions of Indians to trade stocks, and his tale is now used as a case study in nearly all business schools.

Mr. Jhunjhunwala’s lack of capital to trade or invest in was his biggest obstacle. After all, making money also costs money! Additionally, he didn't have the option of borrowing money from friends or relatives and only had 5000 rupees in his account.

His portfolio, which he started with just 5000 rupees, is now worth more than 40,000 crores. He holds almost 5.1% of Titan company limited valuing roughly 12000 crores making it one of the top investments in his portfolio.

3. Mr. Vijay Kedia

Born into a Marwari stockbroker family he joined the family business of stockbroking at the age of 19, after his father's death. While in Kolkata, Vijay Kedia discovered the "Punjab Tractor" for Rs 50, which increased tenfold over the following three years. However, he had relatively little investment in that stock.

Vijay believes that an investor must have three qualities: Knowledge, Courage, and Patience. He has been keeping himself updated since the beginning of his profession in investing by reading business publications, newspapers, and annual reports of companies. He continues to engage in these activities and has developed an interest in watching interviews with managers or CEOs of various companies

One of his top investments in his portfolio as of June 2022 is Tejas networks limited in which he has a 2.6% stake which is roughly valued at 278 crores.

I hope you enjoyed reading the blog and by now you likely have a better understanding of these top investors' best investments, and I hope you find it motivating and inspiring.

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Top investments of top 3 investors

Introduction
Axis Bluechip fund is the flagship fund of the AMC with an Asset Under Management (AUM) of more than Rs. 33,000 Cr. as of January 2023, this is a huge AUM. The highest AUM was in August 2022 of Rs. 36,979.68 Cr. The AUM has grown multifold between 2017 to 2020 because of its fantastic returns during these years. To give you an idea about the growth of the fund, you must know that the AUM of the fund in Jan 2017 was Rs. 1,942 Cr only. Wow! If this is the growth in AUM, let us check how the returns were.

Returns
1) Calendar Returns

Source: Value Research
In the above image, you can see that the fund has given amazing returns in 2014 and from 2017 to 2020. In 2021, the fund fell short to perform with the benchmark and the category. 2022 was not good as the benchmark and category both gave positive returns while the fund gave negative returns. This is where it started hurting the investors.
2) Trailing Returns

Source: Value Research
In the short term, the fund is bleeding. But, by now we all are aware that you should invest in large-cap funds with an investment horizon of more than 5 years. So, if we look at long-term returns, it is 12.14%, 15.30%, and 14.64% for 5 years, 7 years, and 10 years respectively which is a fair enough performance.

Risk Return Parameters
Similarly, if we look at the risk-returns parameters –

Source: Value Research
Mean returns should be higher the better, you can see that the fund is lagging in the category where it is ranked second from below. A silver lining can be seen in the form of standard deviation and beta where the fund manager has managed to keep a check on volatility. But the problem lies in Sharpe ratio and Alpha. The Sharpe ratio is low, and Alpha is negative. Those who have taken the course on the Magic of Mutual funds know in detail what these ratios mean, and how important they are in analyzing a fund. If you have still not enrolled in the course, you can click on the image below –

Portfolio Concentration
Now, let us dig deeper and try to understand what caused the problem. For that, we will have to compare the portfolio concentration of Axis bluechip fund with one of its peers. I think this peer can be the SBI Bluechip fund considering that it is the best-performing fund in the peers having an AUM of more than Rs. 30,000 Cr.
1) Axis Bluechip Fund -

2) SBI Bluechip Fund –

Source: Value Research
If we look at the above data, we can see that Axis Bluechip fund has 87% in equity whereas SBI Bluechip has a 93% allocation to equity. So, SBI is in a better position to generate additional returns. The allocation to the top 5 stocks is more in Axis Bluechip funds, this creates pressure on the fund manager that these 5 stocks will decide the fate of the fund. So, now it becomes necessary to see which are these 5 stocks.

Top stocks in the Portfolio
1) Axis Mutual Fund –

2) SBI Bluechip Fund –

Source: AMC website
I think there is no need for any explanation here. In the portfolio of Axis Bluechip fund, 3 out of the top 5 stocks have generated a negative return, while the score for SBI Bluechip fund is only 1 out of the top 5. Another stock that attracts attention in SBI bluechip fund which is missing from the Axis Bluechip fund is ITC Ltd. I hope the reason for underperformance is slowly getting clear now.

Fund Manager History
Usually, when there is a change in fund management, we have seen that the new fund manager takes his time to implement the strategies, which causes the fund to underperform for a brief period of time. Let us see if it is the case with Axis Bluechip Fund –

Source: Morningstar
In this chart, you can see that Shreyas Devalkar has been with the fund house since 2017. It is he who had delivered the golden returns of this fund. So, we cannot say that the underperformance is because of the change in fund management.

Will I redeem my investments in this fund?
We all know that the stock market moves in cycles and there are ups and downs. Axis blue chip fund has witnessed a positive cycle from 2017 to 2020 now it is time for the negative cycle. You cannot expect a fund manager to keep generating amazing performances every single year. It is not like the fund manager is selecting stocks that are not good. His stock picks are simply going through a rough phase. Maybe now he will relate to our merchandise which says “I Buy… Asa Kasa Kay?” :D. Jokes apart I think it is only a matter of time until the fund reverses to its glory days. All we need to do is be patient.
This was all and only about the Axis Bluechip fund, but there is more to this analysis. The lead trader/dealer of Axis Mutual Fund who was also one of the fund managers was recently barred by SEBI in a front-running case linked to the fund house. To know more about the front-running scandal and if this scandal changes my view about investment in this fund don’t forget to watch the video on my YouTube channel. Until then!

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Should I sell Axis Bluechip Fund?

What is Experience Timeline?

Experience Timeline is a visual presentation of a sequence of events, especially historical events which eventually indicates the experience of the entity.

Why Experience Timeline?

Since it indicates the experience of the entity based on which one understands how the company is growing operationally and strategically. Understanding of the entity’s operational and strategic movements is one of the important factors of consideration while performing fundamental analysis of the entity.

About Infosys Limited:

Infosys is a global leader in next-generation digital services and consulting. It enables clients in 46 countries to navigate their digital transformation.

With nearly four decades of experience in managing the systems and workings of global enterprises, it expertly steers their clients through their digital journey. They do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. It also empowers the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Their always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from their innovation ecosystem.

Experience Timeline of Infosys:

Infosys was established in 1981 by Mr. Narayana Murthy and 6 engineers in Pune. It was listed on NSE and NASDAQ in 1995 and 1999 respectively. The major landmark of Revenue of US$ 1 Bn. achieved by the entity in 2004 – within 24 years of establishment. Along with such landmarks, the entity acquired many global entities in this industry to expand the entity at a global level.

Conclusion:

Understanding of operational and strategic experience is one of the important points in fundamental analysis of the entity along with other operational and financial review points.

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Experience Timeline of Infosys Limited

Since the COVID-19 pandemic and global meltdown in stock markets, the whole Indian banking sector has underperformed due to fear of NPA. Even, RBI mandated banks to make COVID-19 related provisions in their books and instructed them to not declare any dividend till the end of September month. Before investing in banks, investors need to watch out for some of the key ratios, we have taken the top 5 banks as our examples based on market capitalization. Below are some of the important parameters to watch out for:

1. On the basis of Liquidity of Banks - Capital Adequacy Ratio:

Capital Adequacy Ratio (CAR) is simply the core capital of the bank. CAR is measured based on Tier-1 capital and Tier 2 capital. Tier 1 capital is such a capital where a bank can absorb the losses without disturbing normal business operations. Thus, it provides a liquidity cushion to the bank and it also protects the depositors. Tier 2 capital is such a capital where the bank can absorb the losses in the event of bankruptcy of a bank, it provides lesser protection to the depositors. Banks are required to maintain a minimum CAR of 10.5% including a Capital Conservation Buffer of 2.5% as per Basel III norms.

2. On the basis of Asset Quality:

Bank’s asset quality matter’s the most, higher the NPA ratio, the worst the case, NPA’s ultimately wipe out the capital of the bank, thus impacting the CAR ratio.NPA means the default of interest and the principal amount by the borrower. As per RBI, banks classify a borrower’s account as NPA when the interest due on the loan is not paid within 90 days. Investors need to analyze both Gross and Net NPA ratios Gross Non-Performing Assets as a % of Gross Advances (GNPA): GNPA is the sum of all the types of unpaid loans by the borrowers.
Net Non-Performing Assets as a % of Net Advances (NNPA): NNPA is the sum of unpaid loans less the provision made for these bad loans.

3. On the basis of Profitability:

One of the key profitability ratios to watch out for is Net interest Margin- NIM. Since the bank’s business model is to raise funds from depositors and lend it to individuals and businesses, it receives interest on an amount lent and pays interest on the funds raised via various routes. Thus, the difference between interest earned and interest expended over its average earning assets is called net interest earned, it is popularly expressed in % form and is popularly known as NIM.

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Parameters to analyze Banks

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Conclusion:

1. On the basis of Liquidity of Banks - Capital Adequacy Ratio:

2. On the basis of Asset Quality:

3. On the basis of Profitability:

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