Markets opened below Friday’s closing point.

IT stocks and pharma stocks rose the most today. Media stocks and PSU bank stocks fell the most.

Global markets: US markets and most Asian markets fell. Most European markets rose (as of 6 pm IST).

News

• India and Netherlands have elevated their bilateral ties to a Strategic Partnership and signed 17 MoUs in areas like semiconductors, renewable energy, critical minerals, defence, etc.

• UAE’s Barakah nuclear facility was under a drone attack, though authorities said there was no radiation leak or major damage. India has condemned the attack.

Stocks Updates

• Maruti Suzuki: commenced commercial production at the second plant of its Kharkhoda, Haryana facility with a capacity of 2.5 lakh units per annum.

• NTPC: subsidiary, Patratu Vidyut Utpadan Nigam Ltd, completed trial run operation of its 800 MW Unit-2, taking the NTPC group’s total installed capacity to 90,668 MW.

• Adani Power: incorporated a wholly owned subsidiary, Integrated Power Supply Ltd, to undertake electricity trading business.

• Bajaj Auto: subsidiary, Bajaj Auto International Holdings BV, fully repaid Euro 80 million in outstanding dues to JP Morgan Chase Bank and DBS Bank.

• Eicher Motors: Royal Enfield will invest around Rs 2,500 crore in phases to build a new greenfield manufacturing facility in Tada, Andhra Pradesh, subject to board approval. The Andhra government has approved around 215 acres of land for the project.

• TVS Motor: will acquire a 4.9% stake in Jana Small Finance Bank from Jana Holdings Ltd for Rs 193.31 crore.

• Tata Power: signed an MoU with Bhutan’s Druk Green Power Corporation to build a skill development ecosystem supporting the development of 5,000 MW clean energy capacity in Bhutan.

• Vodafone Idea: net profit rose to 51,970 crore in Jan-Mar quarter of FY26, from a loss of Rs 7,167 crore previous year.

• JSW Energy: sold 2.5 crore JSW Steel shares via a bulk deal on NSE for Rs 3,150 crore to release capital for growth plans.

Word of the Day

Offer for Sale (OFS)

It is a method through which an already listed company sell shares in the company through the stock exchange

In an OFS, the company does not issue new shares or raise fresh money. The money goes to the shareholders selling their stake.

Promoters or big investors of the company do this to reduce their stake, increase public ownership or meet the shareholding norms..

6 Day Course

Theme: imports & exports of India

Day 1: Monday

We are talking a lot about reducing fuel consumption in India.

This fuel consumption is causing a big imbalance in our imports/exports. One of the biggest factors affecting the exchange rate is our import bill.

In this week’s course, let’s look at India’s biggest exports and imports.

India’s largest import bill comes from crude oil and gas imports.

India is able to produce only about 20% of the oil we need. The remaining 80% are imported from various countries like the Middle East, Russia, etc.

Similarly, we import about 50% of the gas we consume.

To buy these, India has to convert INR to USD to pay for the oil and gas. This is the biggest reason for the weakening of INR.

We spent about $200 billion on energy imports.

We explored the question “What if you invested in a Nifty ETF instead of a Nifty index fund?”

Check out the full report here.

One might fly higher to catch a tailwind. Another might route slightly west to avoid turbulence. One pilot may be asked to slow down because Delhi airport is crowded. Another might be given a clearance to land.

The flight times may vary slightly. But none of this is visible to the passenger.

And then both planes land, within minutes of each other, at the same terminal.

The paths were different. The destination was the same.

ETFs and index funds behave similarly.

Both are trying to do the exact same thing: track the Nifty 50.

But the path they take is slightly different.

An ETF trades on the stock exchange in real time, which means its price keeps changing every second the market is open. When someone buys an ETF, they are buying it at the price the market is offering at that moment.

An index fund works differently. You place an order anytime before the cut-off time, usually around 3 PM, and after the market closes, the fund calculates the exact value of all the stocks it holds. Every investor who placed an order that day receives units at that same end-of-day price.

Even though both products are trying to track the same index, the way they function underneath is slightly different.

An ETF behaves more like a stock because it trades continuously on the exchange, while an index fund behaves more like a traditional mutual fund where transactions happen directly with the fund house.

But despite these differences, both are trying to mirror the performance of the Nifty 50

We decided to find out if the path taken actually makes a difference.

The Experiment

To make the comparison as fair as possible, we selected two passive investing setups where both the ETF and the index fund came from the same AMC.

The study covers September 2015 to May 2026, a period of approximately ten years and four months.

The pairs were:

• SBI Nifty ETF vs SBI Nifty Index Fund

• UTI Nifty ETF vs UTI Nifty Index Fund

This was important because we did not want differences in fund houses, fund management styles, or benchmark methodology affecting the results.

Then we simulated two investors.

Investor A: The ETF Investor

Every month, Investor A buys ETF units directly from the stock exchange at market price.

The closing market price on the SIP date was used as the purchase price for all ETF transactions.

Brokerage and STT costs on ETF purchases have not been factored into this study. Including these would widen the gap slightly further in favour of the index fund.

Investor B: The Index Fund Investor

Investor B invests in the matching index fund and receives units at NAV.

Both investors:

• invested Rs 10,000 every month

• followed a SIP on the 3rd of every month

• stayed invested through the full study period

The Results

The gap turned out to be much smaller than most people would expect.

Both ETFs and index funds tracked the same Nifty index. And after ten years of monthly investing, the final outcomes were almost identical.

But not perfectly identical.

Similar to the two flights that took different routes and landed within minutes of each other.

SBI: ETF vs Index Fund

Both investors started investing Rs 10,000 every month. One bought the SBI Nifty ETF from the stock exchange at market price. The other invested in the SBI Nifty Index Fund at NAV.

Over the full study period:

The index fund finished ahead by roughly Rs 21,000.

Not a huge difference.

But still enough to show that even when both products track the same index, the investor outcome was not perfectly identical.

UTI: ETF vs Index Fund

Then we repeated the exact same experiment using UTI products.

And once again, the results were extremely close.

The index fund again finished slightly ahead.

This time by around Rs 15,000.

Which is interesting. Because it suggests the SBI result was not a one-off. In a different AMC, with a different set of SIP execution dates, the same broad pattern appeared again.

Why did the index funds slightly outperform?

The study does not suggest ETFs are bad investments.

In fact, the more interesting takeaway is probably the opposite.

Despite operating through slightly different systems for many years, both the ETF and index fund portfolios ended up remarkably close to each other. That itself says a lot about how efficient passive investing has become in India.

But the study did reveal something subtle.

Two products tracking the exact same index are still not perfectly identical in real-world investing.

Because investment returns are influenced not only by what you own, but also how you access it.

An index fund investor deals directly with the fund house. At the end of the day, the AMC calculates the exact value of all the underlying stocks and gives every investor units at that same NAV.

An ETF investor, meanwhile, interacts with the stock market itself. The ETF trades live during market hours, and its price depends on ongoing buying and selling activity in the market.

That introduces very small inefficiencies along the way.

Sometimes the ETF may trade slightly above its actual value. Sometimes slightly below. Sometimes there may not be enough trading activity at the exact moment an SIP order gets executed. Sometimes the buying price and selling price in the market may not perfectly match.

Individually, these differences are tiny and almost invisible on any single day.

But SIP investing works through repetition.

When something repeats every month for ten years, even tiny differences slowly start compounding.

Enough to create small differences in the final portfolio value.

It is also worth noting that the specific funds chosen may have had slightly different tracking efficiencies relative to the Nifty 50 during this period.

This study does not claim that index funds as a category always outperform ETFs. It only tells that in these two specific fund pairs, over this specific period, the outcomes differed slightly.

So who should choose ETFs?

The study did not find ETFs to be meaningfully worse. The gap was small, but it did reveal where friction tends to accumulate, which helps clarify who each product naturally suits.

Since ETFs trade like stocks, they offer a level of flexibility that traditional index funds cannot.

An ETF investor can buy during market hours, place limit orders at specific prices, react instantly during sharp market falls, or move money quickly between different asset classes.

For investors who actively manage allocations or prefer more control over execution, these features can genuinely be useful.

Index funds, however, may suit a very different type of investor.

They work especially well for people who primarily invest through SIPs, prefer simplicity, and do not want to think about market prices, trading windows, liquidity, or execution timing every month.

You simply invest the money and receive units at the day’s NAV directly from the fund house. The process is automatic, predictable and operationally simple.

The study suggests that operational simplicity can matter alongside expense ratios.

Because long-term investing is not only about finding the theoretically perfect product.

It is also about finding the system that works most smoothly for the investor using it month after month for many years.

The Real Takeaway

Both investors still ended up in almost the same place after ten years.

For long-term passive investing, the structure matters far less than simply staying invested consistently for many years.

The ETF investor and the index fund investor both captured the same thing in the end. That is long-term growth of the Indian equity market.

They just travelled through slightly different systems to get there.

Note:

• This study uses closing ETF closing market prices for SIP purchases. In real life, investors may buy at slightly different prices during the trading day.

• Brokerage, STT, and demat-related costs on ETF transactions were not included. Depending on the platform used, these costs could slightly reduce ETF returns further.

• The study compares only two AMC pairs (SBI and UTI) because they had the longest available historical data. Results may differ for other ETFs, index funds, or different time periods.

• Some part of the return difference may also come from how efficiently each individual fund tracked the Nifty 50, not just from the ETF vs index fund structure itself.

• The study period runs from September 2015 to May 2026, which includes major market phases like the COVID crash and recovery. Results during other market periods may differ.

Research Analyst Disclaimer

It had to pay back a $134 million loan that day.

Filing for bankruptcy was formally saying they wouldn’t be able to pay or needed more time.

Sears was a department store in the USA that touched its peak some time in the 1980s.

In the 2010s, it was a struggling company with a large debt on its head.

Investors were aware of the company’s condition. It didn’t happen all of a sudden. It was a slow march downwards.

Its shares had been trading at a peak of around $115 in 2007. Since then, it had been on a downward path with some upward pulls in between.

When the company announced bankruptcy, it was not a shock to the investors. They saw it coming.

Long before Oct 2018, the share price had fallen below $1.

After the announcement, the share price more or less stayed in the same range. Somewhere moving above and below the $0.50 mark.

Why?

Why did it not fall to $0?

Well, it had fallen to a very low value because most investors thought it was not going to recover. So they sold and sold and sold.

Then, it reached a price that was incredibly low. At these levels, the only investors who were still holding the stock (or buying it) were those that believed that the company would turn around.

Many didn’t necessarily believe the turnaround would happen. But they bought anyway just in case (because the price was so low, they didn’t mind losing it).

Some were buying and selling every day (they didn’t care about the company). All they cared about was how the price was behaving. They were playing more on the human psychology of fear and greed.

The final nail in the coffin came a year later in 2019.

It was declared that the shareholders would get nothing. The company would be shut down. Its assets would be sold to recover the debt dues.

Shareholders would get nothing.

And yet, the share price did not fall to $0. It kept hovering somewhere in the $0.20 to $0.40 range.

Why?

It was declared that shareholders would not get anything. Why were there investors who were still buying these shares? Why didn’t all buyers vanish and the price fall to $0?

Different investors. Different ideas.

A very tiny portion of shareholders were still hoping for a miracle. Some did not understand the gravity of the situation and expected a bounce back.

Some didn’t care. They were just trading and speculating using the stock — playing games like passing a ball between two players.

Eventually, the shares were delisted and taken off the share markets. They were cancelled on 31st Oct 2022.

The last traded price was $0.10 (and not $0).

The message here is that the stock markets are filled with many different kinds of investors and traders. They all have different philosophies and timelines.

Those philosophies and timelines might not match. And that’s the beauty of the markets.

Because everyone is thinking in different ways, the buyer almost always thinks they are making a good deal. The seller (who is literally selling the same stocks to the buyer) is also thinking they are making a good deal.

The funny thing is, they both can be right in their own ways!

Types of Market Participants: Long Term

That heading, it’s just a fancy way of saying “Types of Investors in the Stock Markets”.

There are a few different types of ‘market participants’. They all may be in it for different durations, different goals, different returns, and different philosophies.

The one thing that unites them, though, is this: make money.

Let’s look at the major investing groups.

Promoters:

They are the founders or owning family of the companies that are listed. In India, they often command large portions of the share market.

That is, a large portion of Indian shares are owned by promoters. It is not uncommon to see promoters own 40-50% of a company. In the case of Western companies, this number is usually lower (closer to 10-20%).

This category of shareholders tends to stick around the longest. They almost never sell. They may sell small portions of their holdings during overvalued bull phases and buy the same shares back during undervalued bear phases.

Sometimes, they may sell or buy for other reasons.

But the point still holds. They do not usually sell. For them, it’s more about control over the company.

By the way, the Government can also be a promoter of a company. It’s not always a private player. That’s what happens in the case of PSU (Public Sector Undertaking).

Pension Funds:

In the case of India, this would be EPFO.

They blindly invest in index funds or ETFs. They are buying every month. They don’t care if the markets are undervalued, overvalued, or fairly valued.

They don’t even care if the company they are investing in has good future prospects or otherwise. Index investing only.

For that reason, they are incredibly long term investors. Running for decades. When a company falls out of an index is when they also sell.

SWFs:

SWFs or Sovereign Wealth Funds, are funds that are government-owned. It’s like a mutual fund with only one customer: a government body.

Different countries have different SWFs that invest across the globe. Norway’s SWF is one of the biggest in the world. Singapore’s SWF is also quite huge. There are many like that.

They often do actively choose the companies they want to invest in. But again, they are very patient investors. They do not invest in and exit companies very fast.

It is common to see them hold on to stocks for more than a decade.

Mutual funds:

Mutual funds usually hold stocks long-term. When they buy a stock, they do so with an aim of holding for a few years at least.

Yes, they do exit before that if some negative event happens or they feel the stock has reached an overvalued state and profit booking is possible.

But it is possible that they sell before that as well.

PMS:

PMS or Portfolio Management Services are similar to mutual funds, but for higher amounts.

They are allowed to accept a minimum of Rs 50 lakh. This is clearly designed for an investor comfortable with risk.

PMS tend to behave similar to mutual funds. But they can be more opportunistic. Which means, they can sell much sooner than mutual funds.

It is not uncommon for them to sell within 1-3 years of holding. Sometimes, they sell even before that.

Family Offices:

These investors are usually investing for one family. They tend to stick around long term, usually.

UHNIs (Ultra High Net Worth Individuals) and family offices are often the same thing or behave similarly.

Their investments could be held for any period from a few years to decades.

Types of Market Participants: Short Term

So far, we spoke about the kind of investors who buy and usually hold a stock for months, years, and decades.

When you go to buy or sell a stock, most large stocks are available almost all the time. Which means, someone is selling or buying those stocks all the time.

This is possible only if there are many different long term holders. So, inevitably, there is always someone buying or selling.

Or, there are other investors who buy and sell over much shorter periods of time.

Which do you think is the case?

Yes, there is a class of investors buying and selling over much shorter periods of time.

The reality is that we are easily able to buy or sell stocks because both long term and short term investors are plentiful in the markets.

Let’s look at some of the short term investor types.

Arbitrage Traders:

These are some of the fastest traders in the market. They do not care about what the company’s shares are, or how the company is doing.

They simply use arbitrage opportunities to trade.

The simplest example of this is if a stock is trading on two different exchanges (NSE and BSE), they monitor the shares’ price on both. If the price is even slightly different, they buy shares from the cheaper exchange and sell on the more expensive exchange.

This actually causes the share price to rise (where it used to be cheaper) and fall (where it used to be more expensive).

This is why shares of the same company have a very similar share price even on different exchanges. The difference is negligible.

This is how they earn their profit.

They can buy and sell shares in a matter of seconds or even milliseconds.

HFTs:

Similarly, High Frequency Traders (HFTs) rely on various strategies to buy and sell shares. They usually buy and sell within milliseconds.

HFTs can use a multitude of strategies that vary from HFT to HFT.

But the common theme across them is their speed.

Retail Traders:

These are individual traders. If you have a job or business, while also trading stocks, and you operate individually (not as a team), you come under this category.

This segment of investors tends to hold anywhere from a few minutes to a few hours (in case of intraday trading).

Many retail traders also take positional bets which may last a few days to few weeks.

Retail Investors:

These are individual stock market investors (not traders) who pick their own stocks.

This segment is very varied — there are all sorts of different investors, and they invest differently.

They usually hold a stock for anywhere from 1 year to a couple of years.

The Other Side

If there’s one thing you need to understand from this write up, it’s this: you never know who is on the other side of the trade.

And you do not need to.

There is an exception to this though.

Block Deal:

A block deal is a trade where both parties know each other. This is more like a traditional deal. Two parties meet. One is the seller. The other is the buyer. They agree on the number of shares, and the price per share.

At a fixed hour, their trade is settled. The shares change hands.

In India, this happens during two windows: 8:45 AM to 9:00 AM and 2:05 PM to 2:20 PM.

Block deals can only take place if the value of the deal is worth more than Rs 25 crore or a large number of shares are changing hands.

Since the price is fixed, it does not affect the share’s demand and supply in the open markets. So, it does not change or affect the live share price.

But when the news of a block deal gets out, many investors get influenced. Some might see it as a good event. Some might see it as a bad event. Buying/selling because of the news of a block deal can certainly affect the share price.

This must not be confused with another type of a deal called bulk deal.

Bulk Deal:

A bulk deal happens when one investor (or investing entity) buys/sells more than 0.5% of a company’s shares.

This happens during market hours and the buyer/seller does not need to know each other. It is an open market buy/sell order just like any other buy/sell order.

It’s just that this order is so big, it can affect the share price (increased demand leads to increased price and vice versa).

So there you go.

When you sell, you have no clue who the buyer is. When you buy, you have no clue who the seller is.

Maybe the other side is selling because they know something bad is going to happen. Or maybe, it’s all good but they need that money for a personal reason.

Maybe they found another better investment while this one continues to be very good.

They have their reasons to do what they are doing. You have yours. Win-win.

Quick Takes

+ India’s annual inflation rate rose marginally to 3.48% in April (vs 3.40% in March).

+ The Indian Rupee reached an all time low, falling beyond Rs 95.5 per USD.

+ India’s equity mutual funds inflows rose 58% year-on-year to Rs 38,440.20 crore in April (vs an inflow of Rs 40,450 crore in March). Debt funds inflows rose 12.9% to Rs 2.47 lakh crore (vs an outflow of Rs 2.94 lakh crore in March): AMFI

+ The government approved a scheme worth Rs 37,500 crore to support coal and lignite gasification projects, aiming to reduce India’s dependence on imports like LNG, urea, ammonia, and methanol.

+ India has signed an MoU with South Korea’s HD Korea Shipbuilding & Offshore Engineering to develop a mega greenfield shipyard at Thoothukudi, Tamil Nadu.

+ India’s wholesale inflation rose 8.3% year-on-year in April (vs 3.88% in March). Wholesale fuel and power inflation rose to 24.71% (vs 1.05% in March).

+ The Indian Rupee hit a fresh all-time low, crossing Rs 96 per USD during the day before settling at Rs 95.92 against the US dollar.

+ India’s merchandise exports grew 13.79% year-on-year in April and imports grew 10.03%. The merchandise trade deficit rose to $28.38 billion.

+ India’s forex reserves rose by $6.3 billion to $696.99 billion in the week that ended on 8 May.

+ India’s unemployment rate rose marginally to 5.2% in April, (vs to 5.1% in March).

+ India’s passenger vehicle sales rose 25.4% year-on-year to 4.37 lakh units in April: SIAM

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

Markets opened slightly above yesterday’s closing point.

Media stocks and IT stocks rose the most today. Metal stocks and PSU bank stocks fell the most.

Global markets: US markets rose. Asian markets and European markets fell (as of 6 pm IST).

News

• The Indian Rupee hit a fresh all-time low, crossing Rs 96 per USD during the day before settling at Rs 95.92.

• India’s merchandise exports grew 13.79% year-on-year in April and imports grew 10.03%. The merchandise trade deficit rose to $28.38 billion.

• India’s forex reserves rose by $6.3 billion to $696.99 billion in the week that ended on 8 May.

• India’s unemployment rate rose marginally to 5.2% in April, (vs to 5.1% in March).

• India’s passenger vehicle sales rose 25.4% year-on-year to 4.37 lakh units in April: SIAM

Stocks Updates

• Coal India: government approved IPO and listing of its subsidiary Mahanadi Coalfields through an up to 25% stake sale.

• Tata Steel: net profit rose 124.92% year-on-year to Rs 2,925.74 crore in the Jan-March quarter. Dividend announced: Rs 4 per share, with 12 June as the record date. It will also acquire an additional 23% stake in TM International Logistics for Rs 335 crore, raising its holding to 74%.

• Wipro: completed the acquisition of Olam Group’s IT and digital services business, Mindsprint, making it a wholly owned subsidiary of Wipro.

• Solar Industries: net profit rose 69.95% year-on-year to Rs 547.63 crore in the Jan-March quarter.

• Siemens Limited: received government approval to shift financial year from October-September to April-March cycle.

• Bharat Forge: subsidiary Agneyastra Energetics will invest Rs 1,500 crore in defence manufacturing facility in Andhra Pradesh.

Word of the Day

Sovereign Rating

It is the credit rating given to a country by global rating agencies to show its ability to repay debt

It reflects the country’s economic strength, financial stability, government finances, and risk of default.

A higher sovereign rating helps a country borrow money at lower interest rates and attracts more foreign investment.

Similarly, a lower rating might increase borrowing costs, and reduce investor confidence making foreign investors more cautious about investing in the country.

6 Day Course

Theme: making sense of MF returns

Day 5: Friday

Many times, some mutual funds give exceptionally high returns due to one-off reasons.

Example: one stock they own ends up massively, one sector does exceptionally well, etc.

In such cases, investors rush to invest in the mutual fund. This is often a bad strategy.

These mutual funds that have exceptional returns due to one-time reasons will likely not repeat the same success again.

In short, the investors are investing in it after it has already gone up.

The rationale is that the mutual fund will continue giving the exceptionally high return.

Yes, that also happens. Really good mutual funds do manage to do just that. But not commonly.

The long conclusion of all of this is that no matter what, investors must always look at long-term returns’ consistency to determine if a mutual fund (of any category) is doing well.

Featured Question

Q. “How to identify which stocks with low promoter holding are good for long-term? How to pickup ITC, ICICI HDFC, M&M as low promoter holding is also a red flag in most the cases.”NCDs are a type of bond.

Not necessarily.

Yes, a high promoter ownership shows that the founders/promotors/owners are bullish on the company’s future. Hence they are still holding on to it.

In case of such companies, if the promoter starts selling, it is often seen in a negative light because investors think the promoter is losing confidence in the company.

There are many companies where the promoter has already exited and sold off their shares (or reduced their ownership percentage to a very low value).

The selling could have happened for various reasons — the promoter wanted to resign and not deal with the company, the promoter wanted to pay off loans, etc.

This does not automatically mean the company is not good. There are many companies that are doing very well without a high promoter holding.

Investors must analyse the business and its fundamentals to understand its future better.

Promoter holding can be one of the many factors to look at, but not the only factor to look at.

Markets opened above yesterday’s closing point.

All sectors’ stocks rose today except for the IT stocks. Pharma stocks and healthcare stocks rose the most.

Global markets: US markets showed a mixed trend. Most Asian markets and European markets rose (as of 6 pm IST).

News

• India’s wholesale inflation rose 8.3% year-on-year in April (vs 3.88% in March). Wholesale fuel and power inflation rose to 24.71% (vs 1.05% in March).

• SEBI has proposed changes to the municipal bond framework to make it easier for urban local bodies to raise funds from the bond market.

Stocks Updates

• L&T: partnered with France-based Exail to develop unmanned mine countermeasure systems for the Indian Navy, with L&T as prime contractor and Exail as technology partner.

• NTPC: subsidiary, NTPC Green Energy Limited, declared commercial operation of 62.5 MW solar capacity in Rajasthan, taking total group capacity to around 89,868 MW.

• Muthoot Finance: net profit rose 126.67% year-on-year to Rs 3,349.47 crore in the Jan-March quarter.

• IRFC: net profit rose 0.14% year-on-year to Rs 1,684 crore in the Jan-March quarter.

• M&M: wholly owned subsidiary, Mahindra Overseas Investment Company (Mauritius) sold the remaining 3.58% stake in CIE Automotive for about EUR 126 million.

• Tata Motors Passenger: net profit fell 31.72% year-on-year to Rs 5,783 crore in the Jan-March quarter. Dividend announced: Rs 3 per share.

• Siemens Energy: net profit fell 52.21% year-on-year to Rs 3,746 crore in the Jan-March quarter.

• HAL: net profit rose 5.52% year-on-year to Rs 4,196.08 crore in the Jan-March quarter.

• JSW Steel: net profit rose 989.15% year-on-year to Rs 16,370 crore in the Jan-March quarter. Dividend announced: Rs 7.10 per share, with 7 July as the record date.

• United Spirits: net profit rose 27.9% year-on-year to Rs 541 crore in the Jan-March quarter. Dividend announced: Rs 11 per share, with 8 July as the record date.

• Lupin: received USFDA approval for Famotidine Injection used for gastric and ulcer treatment. The product had estimated annual US sales of about $8.7 million.

Word of the Day

Debt-to-Equity Ratio

It is a financial ratio that compares a company’s total debt with its shareholders’ equity.

It shows how much of the company’s business is financed through debt versus owners’ funds.

A higher debt-to-equity ratio means the company relies more on debt, which can increase financial risk. A lower ratio generally indicates a more conservative financial structure.

Example: if a company has Rs 200 crore debt and Rs 100 crore equity, the debt-to-equity ratio is 2:1.

6 Day Course

Theme: making sense of MF returns

Day 4: Thursday

Different mutual fund managers structure their investments differently.

Some are more aggressive, some are more conservative, some try to strike a balance between the two.

This shows in the returns too.

Some mutual funds’ returns tend to be more volatile. They fall more in bad times, and rise more in good times.

This leads to those mutual funds appearing very bad in bearish times, and similarly, they appear very good in bullish times.

What this means is that if they are good, their long term returns will also be higher than other mutual funds in the same category.

But if things don’t work out well, the returns can be low even in the long run.

This is why mutual funds that show a long term history of poor performance must be avoided. They have a track record of non-performance and are not being careful.

Featured Question

Q. “what is the difference between bonds and NCDs then? from what im reading It seems as though NCDs act just like bonds”Yes.

NCDs are a type of bond.

There are many types of bonds. Some bonds allow the option to convert the bond to shares.

This allows the bond-holder to convert the bond to shares (if they want). So instead of being paid back the principal and interest, they would get shares in the company.

NCDs stand for Non Convertible Debentures. These are corporate bonds that do not have the option to convert to shares.

The payout is only in the form of principal + interest.

Markets opened above yesterday’s closing point.

Metal stocks and oil and gas stocks rose the most today. IT stocks and realty stocks fell the most.

Global markets: Most US markets fell. Most Asian markets rose. European markets showed a mixed trend (as of 6 pm IST).

News

• The government approved a scheme worth Rs 37,500 crore to support coal and lignite gasification projects, aiming to reduce India’s dependence on imports like LNG, urea, ammonia, and methanol.

• The government approved the Ahmedabad (Sarkhej) - Dholera semi high-speed double line project with an approx total cost of Rs 20,667 crore.

• India has signed an MoU with South Korea’s HD Korea Shipbuilding & Offshore Engineering to develop a mega greenfield shipyard at Thoothukudi, Tamil Nadu.

Stocks Updates

• Airtel: net profit fell 33% year-on-year to Rs 7,325 crore in the Jan-March quarter. Dividend announced: Rs 24 per share, with 2 June as the record date.

• TVS Motors: net profit rose 19.03% year-on-year to Rs 771.52 crore in the Jan-March quarter.

• Tata Motors: net profit rose 33.81% year-on-year to Rs 1,793 crore in the Jan-March quarter. Dividend announced: Rs 4 per share. It also incorporated ‘Teesta Renewable Energy’ SPV with 26% stake to develop renewable power projects.

• Power Finance: net profit rose 2.86% year-on-year to Rs 8,597.61 crore in the Jan-March quarter. Dividend announced: Rs 3.95 per share.

• Cipla: net profit fell 54.6% year-on-year to Rs 554.64 crore in the Jan-March quarter. Dividend announced: Rs 13 per share, with 5 June as the record date.

• Jio Financial: incorporated a joint venture, Jio Allianz General Insurance, with Allianz Europe for 50% stake at an initial investment of Rs 4.95 crore to enter the general insurance business in India.

• Max Healthcare: received request to reclassify Radiant Life Care Hospital Foundation from promoter group to public category.

• L&T: its Power Transmission & Distribution business won significant orders (Rs 1,000 crore to 2,500 crore) from clients in the Middle East for construction of one 380 kV substation and two 132 kV substations on a turnkey basis.

Word of the Day

NCDs

They are fixed-income debt instruments through which companies raise money from investors

It stands for Non-Convertible Debentures.

Unlike convertible debentures, NCDs cannot be converted into company shares.

Investors earn returns through regular interest payments (coupon payments) and receive the principal amount back at maturity.

NCDs usually offer higher returns than bank fixed deposits, but they also carry credit risk, which means the company issuing them may face financial problems or fail to repay.

6 Day Course

Theme: making sense of MF returns

Day 3: Wednesday

Within the same subcategory of mutual funds, each mutual fund will mostly have different holdings.

Example: one mid cap fund may have a bulk of its investments in pharma industry stocks. Another may have a bulk in auto sector stocks.

We know all too well that sectors and industries go through ups and downs individually also.

So, let’s say the pharma industry is going through a tough phase. Pharma sector stocks would be giving lower returns.

So a mutual fund with more pharma stocks will show lower short term returns than others.

Each sector goes through these ups and downs. And thus, different mutual funds will keep going through these ups and downs at different times.

Similarly, different mutual funds are also affected by different stocks’ performance due to factors affecting individual stocks.

Featured Question

Q. “Is Expense ratio accounted for when NAV is reported and in 3 year CAGRs?”

Yes.

All mutual fund returns we see are after expense ratio.

The returns we see are the returns we’d get. The only deduction from it would be taxes (if applicable).

Markets opened significantly below yesterday’s closing point.

Nifty 50 fell throughout the day. The fall can be attributed to negative global sentiments due to the US-Iran conflict and the rising crude oil prices, the fall of the Indian Rupee and a sharp fall in IT stocks.

All sectors’ stocks fell today. Realty stocks and IT stocks fell the most.

There are only 3 stocks in the Nifty 50 that rose today. Hence, there are only 3 stocks in the ‘Top Gainers’ section.

Global markets: US markets closed almost flat. Most Asian markets and European markets fell (as of 6 pm IST).

News

• India’s annual inflation rate rose marginally to 3.48% in April (vs 3.40% in March).

• The Indian Rupee reached an all-time low, falling beyond Rs 95.5 per USD.

• India’s equity mutual funds inflows rose 58% year-on-year to Rs 38,440.20 crore in April (vs an inflow of Rs 40,450 crore in March). Debt funds inflows rose 12.9% to Rs 2.47 lakh crore (vs an outflow of Rs 2.94 lakh crore in March): AMFI

• BofA Securities India settled its case with SEBI by paying Rs 58.5 lakh following the alleged insider trading and merchant banking rule violations.

• The RBI and the European Central Bank (ECB) have signed an MoU to increase cooperation through regular information exchange and policy dialogue, updating the 2015 framework.

• The US annual inflation rate rose to 3.8% in April (vs 3.3% in March).

Stocks Updates

• Bajaj Finance: allotted NCDs worth Rs 2,892 crore via private placement. Option I: Rs 1,070.42 crore at 7.77% per annum, maturing 17 April 2029. Option II: Rs 1,822 crore at 8.00% per annum, maturing 12 May 2031.

• Adani Ports: company’s marine arm, Astro Offshore, has partnered with Oceaneering International to pursue specialised offshore and subsea opportunities in Europe.

• Coal India: wholly owned subsidiary, CIL Solar PV, has been struck off and dissolved by the Ministry of Corporate Affairs.

• Hindustan Zinc: signed an MoU with Group Nirmal to set up a zinc wire manufacturing facility in Khankhala, Bhilwara, Rajasthan.

• United Spirits: amended share purchase agreement for sale of stake in Royal Challengers Sports Pvt Ltd, with deal value unchanged at Rs 16,660 crore.

• Shree Cement: received GST demand order of around Rs 39.2 lakh plus interest and penalty, which it will challenge.

• Tata Capital: allotted NCDs worth Rs 765 crore via private placement at a coupon rate of 8%.

• Tata Power: net profit fell 4.5% year-on-year to Rs 995.91 crore in the Jan-March quarter. Dividend announced: Rs 2.50 per share, with 23 June as the record date.

• Dr Reddy’s: net profit fell 86% year-on-year to Rs 220.9 crore in the Jan-March quarter. Dividend announced: Rs 8 per share, with 10 July as the record date.

• Tata Consumer: fixed 25 May as the record date for its Rs 10 dividend.

• Indian Hotels: net profit rose 14.8% year-on-year to Rs 599.86 crore in the Jan-March quarter. Dividend announced: Rs 3.25 per share.

Word of the Day

Consumer Price Index (CPI)

It is a measure of inflation of a country.

CPI tracks the change in prices of a fixed basket of goods and services over time.

This basket is representative of the spending habits of an average household.

It includes essentials like food, clothing, and housing, as well as transportation, electricity, healthcare, etc.

CPI reflects the change in cost of living and purchasing power.

The rate at which the cost of this basket changes in a certain period of time is called the inflation rate.

6 Day Course

Theme: making sense of MF returns

Day 2: Tuesday

Mutual fund returns from different categories should not be compared.

Different categories of mutual funds aim towards different goals and therefore have different risk levels associated.

Example: a debt fund with a history of around 8% per annum returns does not aspire to give returns like 15%. Instead, it aims to keep the risk low instead.

So mutual fund returns from the same category should be compared more often.

Within each category (example: mid cap funds), comparisons must be done, but done carefully.

Just because one mutual fund’s recent returns are lower than another’s does not automatically mean it is a lower quality mutual fund.

This is because every mutual fund invests money differently and different investments grow at different times.

This is one reason why only longer term returns must be compared.

Featured Question

Q. “Who takes the money whch bse and nse earns.”

Yes.

All mutual fund returns we see are after expense ratio.

The returns we see are the returns we’d get. The only deduction from it would be taxes (if applicable).

‘Meditations’ by Marcus Aurelius, is a book heavily praised by many.

One such modern example is that of James Mattis, the former US Defence Secretary.

James Mattis has been through some very difficult phases in the US’ military operations.

His appreciation comes from being in somewhat of a similar position to Marcus.

Marcus Aurelius was the emperor of Rome about 2,000 years ago.

As a ruler, he had a hard life. He was constantly up north in his territory, fighting invaders, and protecting Rome from losing territory.

During Marcus’ reign, Rome was the biggest it had ever been. It was in its golden era.

Rome had been stable for about a century with well established internal systems. During this period, 5 emperors had ruled over Rome. Marcus was the 5th emperor.

It was not easy.

The role required a deep understanding of human nature, self control, and discipline.

‘Meditations’ was not a philosophical book written by Marcus. It was not a book at all. It was a personal diary. The writings were letters to himself. He wrote them throughout his life.

Marcus’ tenure was marked by many struggles.

Of the roughly 20 years he ruled, many years were spent in military tents. He believed in fighting wars from the front, not by sitting in the capital.

Rome was under attack and his struggles ranged from military strategy to arranging funds for the war effort.

Wars are expensive and Rome was always arranging money for them.

It didn’t help that simultaneously, Rome was suffering through a plague that resulted in the deaths of a significant portion of its population.

The plague itself caused death, illness, labour shortages, and an economic slowdown.

At the same time, only a few of Marcus’ 13 children survived to reach adulthood.

We also see a co-emperor of Marcus who had revolted and launched a campaign to break off from the Roman Empire.

Marcus was always under attack figuratively and literally.

It was in this setting that he wrote to himself in his diary. ‘Meditations’.

His demeanor, restraint, discipline and approach to life earned him the title of being a ‘philosopher-king’.

Today, he is most famous for ‘Stoicism’ — the philosophy of not reacting too much to any situation, and maintaining composure.

Rome was marked by constant chaos. While the kingdom gained and expanded, the internal chaos remained constant.

There were a string of absolutist rulers. They viewed their position as permission to do whatever they felt like.

Power led to reckless behaviour. Killing and seizing the property of citizens was easily possible. All sorts of rumours used to float around. Punishments based on the rumours, without verification, were also common.

Extreme amounts of internal politics and backstabbing coupled with assassinations were common among the ruling classes.

The period of the 5 emperors is often referred to as the golden period in the history of Rome.

Among other rules, one particular rule that enabled this period was that of succession.

Emperors of Rome were often appointed because the older one had been killed or forcefully replaced. If not that, then the son of the current ruler would take over the throne.

In Rome, the next ruler was selected from the existing senior bureaucrats. It was merit based. The best candidates were promoted.

The winner would then be adopted to become the son of the present ruler.

The adopted son and father would rule together until the death of the father. Then, the adopted son would continue as the ruler from there on — after having learnt the ropes along with an experienced ruler.

Marcus was extremely intelligent and able.

However, he did not follow this succession rule.

He simply appointed his biological son, Commodus, as the successor.

This was despite being well aware of Commodus’ faults.

Commodus was one of Marcus’ children who had survived to be an adult.

Commodus just wasn’t interested in being a ruler. He was more interested in keeping himself entertained.

Things didn’t go well after Marcus died.

He did not spend time on the frontiers. Rome was his primary location. He signed deals with others easily and without much pushback.

Commodus delegated most of the work to his favourite senior senators (many were corrupt).

Internal fault lines formed. Corruption, bureaucracy, inefficiency, and general public resentment built up.

Over time, many senators grew unhappy with Commodus. A general sense of trust in the system vanished. Everyone was suspicious of the other. Internal struggles started to take place.

All the while, Commodus thought of himself as a gladiator.

Gladiators were wrestlers who fought each other, sometimes to death. The public used to gather to watch these fights (similar to any sport).

He took a keen interest in these sporting events and even fought (staged) fights himself.

Commodus’ reign ended with his assassination.

After 5 great emperors selected by merit, Rome’s golden age ended.

Rome went back to utter chaos – similar to the situation before the 5 emperors.

Rome went from a good ruler to a bad ruler.

Domitian to Nerva

Domitian belonged to an era when the emperor’s throne was seen as family property. It was inherited.

Domitian inherited the throne from his brother.

He spent money building vast palaces and monuments, distancing himself from the public and senators.

He was afraid and suspicious. He was always scanning the room for rivals. When he noticed a rival voicing his opinions strongly, Domitian would have him killed.

This created a sense of fear in the senate’s atmosphere.

Senators avoided saying anything altogether. This resulted in crucial work in not getting done, including passage and amendment of laws.

The condition of Rome as an empire worsened. The period before Domitian hadn’t been any good.

Over time, Domitian became distrustful of most people around him.

He was left with an inner circle who he trusted.

Skepticism and doubt soon entered this inner circle as well.

Domitian started targeting members of this inner circle who he developed suspicions against.

He maintained a diary which he kept under his pillow. The diary contained the names of the people he wanted killed. They even found his own wife’s name in that diary.

In an act of self preservation, the senators and advisors who were a part of this circle started making plans to get rid of Domitian.

They planned his assassination.

But, before they assassinated him, they made preparations to prevent Rome’s collapse into chaos.

They chose Nerva.

Nerva was a senator who had been a diplomat and a lawyer.

He was old and had no sons. He did not have dynastic ambitions. His coming to power would signal the rule of law.

Because of his past work, it was believed that he would act as a good bridge between the military and the senators.

Nerva started facing problems soon after he took power.

He realised the army needed someone strict and strong, not a diplomat like him. Before leaving, he drafted a key rule: succession of power.

Nerva is credited with the merit-based succession system.

The one that allowed 5 great emperors to rule over the golden era of the Roman Empire. He laid the foundation for the era to start.

He was the first of the five emperors. Marcus was the fifth.

Rome went from a good ruler to a bad ruler.

Rome’s Golden Era

Nerva marked the start of one of the best periods of the Roman Civilisation.

As Nerva was getting old, he handed over the reins to his successor, Trajan.

Trajan was at the border areas when this happened. Instead of rushing back to Rome, Trajan decided to continue manning the frontiers, leading the military forces.

This signalled that he valued Rome more than personal power.

Trajan ruled for about 20 years. His death was sudden but the successor had already been selected. His name was Hadrian.

On his way out, Hadrian selected Antoninus as his successor. In fact, he even made Antoninus adopt Marcus.

In short, Hadrian ensured two generations of rulers had been appointed.

When Antoninus died, Marcus simply stepped into the role.

This century in Roman history was marked with unseen stability, peace, prosperity, and economic expansion.

Many new cities were built. Urbanisation became the theme.

An extremely fair system was built. People from newly conquered and ethnically different territories could rise through the ranks and become senators.

Trade flourished and the Roman economy grew stronger.

More peaceful professions like philosophers, architects, and intellectuals were celebrated.

It is said that Marcus was the peak of the golden era of Rome. He was the culmination of the great work done by the four emperors before him.

Between each of these five emperors’ succession, no blood was shed, no civil war took place, prosperity didn’t suffer.

Rome went from one good ruler to another good ruler.

Transition of Power

The lesson we are trying to highlight from Roman Civilization is this: a change of leader can mean many things.

You would have noticed that the section talking about transition from a good state to bad state is much longer.

The one that talks about going from good to another good ruler is relatively short.

That’s mostly because when things are good, there’s not much to record.

Any leadership change is an opportunity. But it can also be a threat.

But when done absolutely right, it barely feels like news.

As investors, we can see this happen all too often in corporate circles.

Good to Bad

This can be a bit controversial since these names can be opinion based.

Disney.

Bob Iger spent years building Disney to what it was. Then, Bob Chapek was appointed CEO of Disney in 2020.

The poor performance and loss of confidence led to a 40% drop in share price in the 2 years he was CEO. Market forces were involved too but the board was unhappy for other reasons as well.

Bob Iger was brought back from retirement and re-appointed the CEO of Disney.

Yahoo!

Marissa Mayer, an ex-Google top executive was hired as CEO of Yahoo. Under her, the company made some poor acquisitions and Yahoo! continued to perform poorly.

Bad to Good

Ford.

Alan Mulally was appointed CEO of Ford in 2006. Until his hiring, the previous CEO had struggled to build trust in the company. He repaired the culture in the company.

Ford was the only American car company that did not require a bailout post the 2008 Recession.

Microsoft.

This one’s a controversial one. Many argue that Steve Balmer had not done justice to his role as CEO of Microsoft.

Though the company was indeed profitable, it was losing ground fast. He was blamed for missing the smartphone revolution which was taken up well by Google (Android) and Apple (iOS).

He was succeeded by Satya Nadella, who turned the company’s fortunes around and took at back to the top — to being one of the top 10 biggest companies in the world.

Good to Good

PepsiCo.

Indra Nooyi took over as PepsiCo CEO from Reinemund.

She propelled an already successful brand into the 21st century and ensured the leadership transition was absolutely flawless.

Apple.

Steve Jobs leaving Apple was seen as a drastic change. But the new CEO, Tim Cook, took over the reins and continued pulling the company to newer heights.

Apple today is facing yet another power transition as Tim Cook steps down and the new CEO John Turnus, takes over.

Quick Takes

+ India’s manufacturing PMI rose to 54.7 in April (vs 53.9 in March). This means manufacturing activity grew more in April than in March.

+ India’s LPG consumption fell 16.2% year-on-year in April (vs a fall of 12.3% in March): Ministry of Petroleum and Natural Gas

+ SEBI has proposed allowing online bond platforms to offer overseas-listed debt securities regulated by the International Financial ​Services Centres Authority (IFSCA), as part of ease-of-doing-business measures.

+ The government approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, providing 100% government credit guarantee for MSMEs and 90% for the non-MSMEs as well as the airline sector to boost liquidity amid the disruptions due to the West Asia conflict.

+ India’s composite PMI (manufacturing + services) rose to 58.2 in April (vs 57.0 in March). Services PMI rose to 58.8 (vs 57.5 in March). This means economic activity rose more in April than in March.

+ India’s forex reserves fell by $7.79 billion to $690.69 billion in the week that ended on 1 March.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

Elevators (or lifts) were used for hoisting goods.

What’s peculiar about elevators is that despite being thousands of years old, they were almost never popular for transporting people.

The chances of ropes snapping were high. Goods falling to the ground and getting ruined is an acceptable risk.

The same is not acceptable for humans.

In 1954, Elisha Otis arranged for a stunt. He got into an elevator that went up a few floors. He then cut the rope. The elevator fell only a few inches before the safety brake kicked in.

This stunt left the audience absolutely stunned.

He repeated the stunt several times over the following months.

The demo finally changed the public perception of the elevator. Their use for transporting people finally became acceptable.

When buildings are built, the shaft is custom-made for the elevator in use. So once an elevator is installed, changing the elevator is hard.

Additionally, elevators require mandatory inspections and servicing by law.

Otis got an early head start because of their safety brake.

Since potential buyers loved the safety it offered, more buyers bought it. To help service these lifts easily, Otis was quick to expand their service network.

This had a reinforcing effect.

Many new buyers bought Otis lifts simply because their service network was better.

More lifts sold. More service centers opened. Therefore, increased ease of servicing. Therefore, more new customers prefer Otis lifts.

They just continued to grow big faster than all others — helped because they were the biggest already.

And thus, today, we don’t think twice before boarding an elevator.

Big Becomes Bigger

This effect is called the Matthew Effect.

The big continues to grow bigger. The winner keeps winning.

There’s an investment philosophy centered around this very idea. It’s called momentum investing.

The idea is as simple as it sounds. Stocks that have been going up will keep going up.

Obviously stocks do not keep going up all the time. So, the strategy involves switching. You buy stocks that are going up and sell the ones that have slowed or have started going down.

But how is the Otis case any different from regular investing? Isn’t that literally what investing is all about?

You analyse companies and the business behind them. You try to get an idea for how the future looks. And based on that future, you buy shares to gain from its good future.

That’s just plain investing.

Top 40 Charts

Globally, many radio programs and playlists have top songs’ lists.

It’ll be something like ‘Top 10 Best Songs of the Year’ or month or some version of that.

Many observed that once a song made it into the list, it tended to get more popular. And the more popular it got, the longer it stayed on the charts.

Similar to Otis’ success?

As in, were these songs staying in the charts because they were that good? Or were they simply there because being on such a list ensures greater visibility.

That would mean that a song is becoming more popular not because it is actually good.

It would mean the song is on the charts simply because more people are able to listen to it more often.

A few researchers from Columbia University decided to answer this question.

They created a website called MusicLab where songs could be downloaded from. They had about 14,000 listeners.

They divided this group in two parts.

One group could only listen to songs and vote which songs they liked. The list of top songs were made based on listeners’ listening habits. But the list of top songs was never shown publicly.

The other group could see the list of top songs. Which means, they could see the songs the others were liking too.

The results were sort of expected.

In the second group, a few songs emerged as the top choices and made massive leads compared to the others.

It appeared that more listeners had started enjoying the songs simply because others were listening to them too.

It wasn’t the songs themselves. It was that they were also liked by others.

Different parties concluded different theories.

But by and large, it was agreed that a song enters the charts because it is good. Its success is because of it being good, not popular.

But once a song has entered and climbed higher on the charts, the climb to the absolute top may just be merely because of its popularity.

Momentum Investing

Momentum investing sort of tries to take advantage of this.

It isn’t just about catching a good business early on. It is also about profiting from the hype around it.

Value investing is about buying stocks that are undervalued and sticking with them as they climb and succeed.

If a stock should cost ~Rs 300, they want to pay ~Rs 250 for it. And then they would hope the price rises from there. They would not want to pay ~Rs 350 for it (at that point in time).

Value investors dislike paying a high price. They are not comfortable buying overvalued stocks.

Momentum investors are more comfortable with overvalued prices — if they think the prices will go up even more, often because they feel the market hasn’t fully priced in the company’s growth yet.

If they feel the stock price will reach Rs 400 soon, they’d rather pay Rs 350 rather than wait for the price to fall before Rs 300.

Momentum Strategies

Great, so the idea behind momentum investing as a concept is somewhat understood. But how does it look in actual investing?

It starts with a simple strategy. And gets more and more complex. The specific strategy being used would depend on what the investor feels is right.

Many advanced investors (and traders) develop their own way of using this strategy which can be extremely complicated and even proprietary.

Simplest:

The simplest would be time series momentum.

Invest in Nifty 50 if it has been up over the last 12 months. Sell if it is negative over the last 12 months.

Individual investors might have different versions of this.

Next level:

Another strategy is to use the strongest in a group. This is called relative momentum.

So take a group (could be an index, or a sector). Then define the top in that. Top 3 pharma stocks. Top 10 Nifty 50 companies. So on.

Invest on only those. Sell the ones that exit the top criteria and buy the new top criteria.

Another level higher:

Combine the two. Buy only if the group (sector, index, etc) is moving up. And then choose only the top from that group.

Further:

A more complicated version would depend on a moving average instead of using an absolute price point. So instead of defining a criteria like “has the index moved up in the 12 months”, the investor would craft a condition based on the moving average of that index or sector.

Further:

Sector based. The investor defines a particular number of sectors. Say, top 3 sectors.

Then, among all sectors available, he/she invests in only the top 3 best performing sectors.

Similarly more conditions may be added to this.

More complicated strategies would involve going in greater depth. So, instead of price, they would use conditions like revenue, earnings, earnings growth, etc to decide when to buy/sell.

We can go on and on. The strategies are endless.

When It Works; When It Doesn’t

Well, momentum sounds perfect.

Why are more folks not talking about it?

They are, sort of. But yes, not enough folks.

And there’s a good reason behind it.

Momentum as a strategy works well during certain seasons in the markets. And it tends to perform poorly in others.

In 2000, the legendary Warren Buffett was addressing Berkshire Hathaway’s shareholders through the annual letter.

What he spoke about has now become very popular as the ‘Cinderella Ball’.

He was not talking about momentum investing. He was talking about the dotcom bubble.

But what he described perfectly explains a situation when momentum strategy fails often.

He talks about the separation between investing and pure speculation. The line between where investing ends and speculation starts is very blurry. There is no clear point where it stops being an investment and becomes only speculation.

Speculation is not about the underlying business or the revenues or profits. It’s about gaining from others’ behaviour.

Warren is famous for preaching not to take part in speculation.

Dotcom stocks or tech stocks had caused the share prices to balloon to astronomical levels. Those share prices were not justifiable given the revenues they were earning.

He says nobody likes to leave a party while it is fun. But nobody wants to stay after the party has ended.

Everyone wants to leave before midnight (when the party ends). But the clock in the room has no hands. So nobody can tell the time.

He is trying to highlight that when a share price goes up due to speculation only, it is a bubble. And nobody knows when the bubble will burst. But it will burst for sure.

This applies to momentum as well.

It works well when things are going up and up.

It performs poorly when there is a reversal.

When a falling market turns around. Or, when a rising market crashes.

Proponents of momentum argue that over a long period of time, despite those reversals, momentum as a strategy has given higher returns over some very long periods of time.

But the volatility — the ups and downs during reversals — is not for the faint of heart.

Hence, if someone does plan to use momentum strategy, nerves of steel are a mandatory requirement.

🔢 Quick Takes

+ India and New Zealand have signed a Free Trade Agreement to boost trade by reducing tariffs and improving market access.

+ India’s industrial output rose 4.1% year-on-year in March (vs 5.2% in Feb).

+ The RBI issued final norms on asset classification, provisioning, and income recognition for banks, introducing a new Expected Credit Loss (ECL) framework, effective April 2027. The new rules require banks to set aside money in advance for loans that might go bad in the future, instead of waiting for defaults to happen.

+ The United Arab Emirates has announced it will leave OPEC (Organization of the Petroleum Exporting Countries) effective 1 May 2026, which would cause a major shift in oil markets.

+ The US Fed kept the interest rate unchanged in the 3.5% to 3.75% range for the third consecutive time.

+ India’s forex reserves fell by $4.82 billion to Rs 698.49 billion in the week that ended on 24 April.

+ India’s gross GST collections rose 8.7% year-on-year to Rs 2.43 lakh crore in April. Net collections rose 7.3% to Rs 2.11 lakh crore.

+ The commercial LPG prices in India have been raised for the third time since February, with a hike of around Rs 993: as per media sources

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

Markets opened significantly below Friday’s closing point.

Healthcare stocks and pharma stocks rose the most today. Consumer durables stocks and realty stocks fell the most.

Global markets: US markets fell. Asian markets and European markets showed a mixed trend (as of 6 pm IST).

News

• SEBI has proposed changes to buyback rules, including completing open market buybacks within 66 working days, removing the separate trading window, sending electronic notification to shareholders, etc.

• India’s urban unemployment rate fell marginally to 6.6% in the Jan-March quarter (vs 6.7% in the previous quarter). Rural unemployment rate rose to 4.3% (vs 4% in the previous quarter).

• China’s annual inflation rate rose to 1.2% in April (vs 1% in March).

Stocks Updates

• Canara Bank: net profit fell 9.78% year-on-year to Rs 4,574.23 crore in the Jan-March quarter. Dividend announced: Rs 4.20 per share, with 12 June as the record date.

• Vodafone-Idea (Vi): following clarification sought by the exchanges on the sudden stock movement, the company said it has not received any communication from the Vodafone Group regarding any stake transfer to the company as treasury stock.

• JSW Energy: net profit fell 8.94% year-on-year to Rs 371.57 crore in the Jan-March quarter. Dividend announced: Rs 2 per share, with 5 June as the record date.

Word of the Day

Provisioning

It is the practice where banks set aside a portion of their profits to cover possible future losses, especially from bad loans (NPAs)

This amount is treated as an expense in the books, even though no actual cash is spent immediately.

This acts as a financial safety cushion. If a borrower fails to repay, the bank already has money kept aside to absorb the loss.

The RBI has set strict provisioning norms to ensure that banks stay safe and stable.

6 Day Course

Theme: India’s relation with USD

Day 1: Monday

Mutual Fund (MF) investors often simply chase the mutual funds with the highest returns.

Many times, this can be a bad strategy to invest money. In this week’s course, we will look at how investors can analyse mutual fund returns.

The very first step is to not chase mutual funds with the highest short-term returns.

Many times mutual funds outperform over short periods of time (last 6 months, 1 year, etc).

This can be due to luck or one-off reasons.

Often, the reason may not last long enough and the mutual fund’s high returns would likely not sustain.

As a rule of thumb, very short-term returns of mutual funds must be given low-priority while analysing.

Investors compare past returns, check ratings, read recommendations, and usually avoid funds that have recently performed poorly.

That instinct feels reasonable.

After all, if a fund has not given good returns in recent times, why would anyone want to put money into it?

But what if an investor ended up investing in a poorly performing fund?

Would that decision seriously damage long-term wealth?

We decided to put this to the test.

Instead of picking winners, we built a strategy that does the opposite. Every year, it invests in the lowest-performing large-cap mutual fund from the previous year.

In a way, this represents the unluckiest investor. Someone who consistently ends up in the weakest fund on the list, year after year.

What happens to their wealth over time?

The Experiment

We established a clear set of rules.

The universe was limited to Large Cap mutual funds that had existed for at least 10 years.

On 1st January of every year, the investor would:

• Identify the lowest performing large cap fund from the previous calendar year

• Invest Rs 1 lakh into that fund

• Repeat the same process every year for the next 10 years

For example, after identifying the lowest performing fund of 2015, the investor will invest in it in 2016. In 2017, the investor will invest in the lowest performing fund of 2016, and so on…

Also, throughout the 10 years, no selling will take place. If the lowest performing fund changed the next year, the earlier investment would remain untouched. A fresh Rs 1 lakh would simply go into the newly identified lowest performer.

This avoided taxes, exit loads, and unnecessary churn.

We ran the experiment starting from Jan 2016 to Dec 2025, a period of 10 calendar years.

Finally, as a benchmark, we compared this strategy against an index fund investor who put Rs 1 lakh into the UTI Nifty Index Fund on the same days.

Lowest Performing Funds Each Year

One thing becomes obvious immediately. No single fund stays at the bottom forever.

Some names appear multiple times, but the rankings constantly change depending on market cycles, portfolio decisions, etc.

It is also interesting to note that the lowest returns vary drastically depending on how the broader market performed that year. During strong bull market years like 2021 and 2023, even the lowest-performing large-cap funds still delivered double-digit returns (~17%).

Results

The result was surprising.

The strategy of investing in the previous year’s lowest performing large cap fund actually ended up outperforming the index fund over the 10-year period.

It was not significant.

But enough to challenge the assumption that the lowest performer automatically means that it is a bad investment.

Why Did This Happen?

In mutual funds, short-term underperformance does not always mean the fund is weak.

A fund can underperform simply because it did not own the stocks that were driving the market during that period. It may have held different sectors, avoided overheated stocks, or maintained cash while others stayed fully invested.

As the market experiences changes, the performance of the fund undergoes changes too.

This experiment also shows something important about large cap funds. Even the lowest performing fund in the category is mostly invested in large, established companies. It may lag behind other funds, but it is not taking extreme bets or investing in weak businesses.

Because of this, poor short-term performance does not automatically translate into long-term damage.

Also, remember that we have not considered any costs in this experiment. And while the fund’s expense ratio is already factored into the returns we calculated, other charges (if applicable) could slightly alter the exact final numbers.

Conclusion

Ultimately, this experiment reveals a highly comforting truth for everyday investors: a period of underperformance in your portfolio will not permanently destroy your wealth.

Even if you happen to invest in a fund that goes through a rough patch, it does not mean your returns are doomed. Because of market cycles (and in this case, the safety of established large-cap companies), today’s underperformers may often bounce back in the future.

The key to the strategy’s success was simple: the investor stayed in the market.

The anxiety we often feel about picking the ‘perfect’ mutual fund is largely misplaced.

We saw here that even if you possessed the worst luck imaginable, where you blindly picked the absolute bottom-ranked large-cap fund every single year for a decade, the compounding power of the broader Indian stock market still more than doubled your money. It even outperformed the index fund by a small margin.

To be clear, the takeaway isn’t that you should actively seek out poorly performing funds.

You should always do your due diligence before investing. It is just that an underperforming fund may not necessarily be a wealth destroyer, as long as you stay invested.

At the end of the day, consistently investing and staying in the market matters far more than perfectly timing or picking the absolute best fund.

Limitations of the Experiment

• The study is limited to large cap mutual funds, which are relatively stable and diversified. Results may not hold in small cap or sector funds where volatility is much higher.

• It uses a simplified selection rule of picking the previous year’s worst performing fund, without analysing why it underperformed or whether conditions were temporary or structural.

• The strategy assumes no selling at all, which removes real-world behaviour like profit booking, rebalancing, or exiting underperforming funds.

• It ignores taxes, exit loads, and transaction costs, which would reduce actual investor returns in practice.

• It is based on historical hindsight data, meaning the selection is easier in hindsight than it would be in real-time decision making.

• The holding period assumes long-term patience every time, which may not match how most investors actually behave during underperformance periods.

• It does not account for fund closures, mergers, or category changes, which can affect real-world portfolio continuity.

• The experiment uses a Rs 1 lakh lump sum at the start of every year, which makes timing very sensitive. In reality, SIPs spread investments over the year, reducing timing impact.

Overall, the strategy used here is a controlled thought experiment, not a practical investing strategy.

Research Analyst Disclaimer

Markets opened below yesterday’s closing point.

IT stocks and consumer durables stocks rose the most. PSU bank stocks and oil and gas stocks fell the most.

Global markets: US markets fell. Most Asian markets fell. European markets fell (as of 6 pm IST).

News

• India’s forex reserves fell by $7.79 billion to $690.69 billion in the week that ended on 1 March.

• Onemi Technology Solutions (Kissht) IPO listed on the stock exchanges at a premium of 11.11% over the issue price and closed 22.01% up at the end of the day.

• Zepto has received SEBI’s approval for its IPO.

• InCred Holdings has filed an updated DRHP (Draft Red Herring Prospectus) with SEBI for a Rs 1,250 crore IPO.

Stocks Updates

• Tata Consumer: will invest up to Rs 160 crore to set up a 2,000 MT instant tea manufacturing facility in India.

• Tata Power: partnered with Bhutan’s DGPC to develop 404 MW Nyera Amari hydropower project, taking the total pipeline to around 5,033 MW.

• Power Finance: subsidiary incorporated ‘Pune West Power Transmission’ SPV to a develop transmission project in Maharashtra.

• TVS Motor: received NCLT approval for merger of Sundaram Auto Components into the company.

• L&T: won significant order (Rs 1,000 crore to 2,500 crore) from BCGCL and BHEL for a Coal-to-Ammonium-Nitrate project in Odisha.

• Pidilite: net profit rose 37.15% year-on-year to Rs 579.27 crore in the Jan-March quarter. Dividend announced: Rs 11.50 per share.

• Britannia: net profit rose 21.14% year-on-year to 678.34 crore in the Jan-March quarter. Dividend announced: Rs 90.50 per share, with 31 July as the record date.

• SBI: net profit rose 1.1% year-on-year to Rs 20,161.30 crore in the Jan-Mar quarter. Dividend announced: Rs 17.35 per share, with 16 May as the record date.

• Bank of Baroda: profit rose 6.4% year-on-year to Rs 5647.96 crore in the Jan-March quarter. Net Interest Income rose 8.7% to Rs 12,494 crore. Dividend announced: Rs 8.50 per share.

• Hyundai Motors: net profit fell 22% to Rs 1255.63 crore in Jan-March quarter. Dividend announced: Rs 21 per share.

Word of the Day

Derivatives

It is a financial contract whose value is based on an underlying asset like stocks, commodities, currencies, or bonds.

Derivatives are primarily used for hedging (managing risk) or for speculation (betting on price movements for profit).

Their prices change based on the value of the underlying asset.

Common types of derivatives are futures, options, forwards, and swaps.

Example: an investor can buy a futures contract to purchase gold at a fixed price in the future, to protect (hedge) against price changes.

6 Day Course

Theme: India’s relation with USD

Day 5: Friday

How does the RBI ensure there are no sudden spikes in the USD-INR exchange rate?

One tool is to use the foreign exchange reserves.

The RBI has about ~$650 to $700 billion worth of USD in reserve.

It sells this USD to stabilise the prices when the volatility is too high.

When the INR starts appreciating and becoming strong, the RBI starts buying USD causing the price of USD to go up.

They also sell government bonds to reduce liquidity of the INR in the markets.

The RBI also brings out schemes for NRIs to make it attractive for them to park money in India (USD to INR).

Another tool in their toolbox is to increase/decrease the repo rate in India (interest rate).

This makes deposits in India attractive or unattractive based on what the RBI wants. A higher interest rate attracts more investment, and lower interest rates tend to cause money to flow out.

Featured Question

Q. “How does BSE, NSE or any other stock markets make money?”

Stock exchanges like BSE and NSE make money via charges.

When companies list themselves on the stock exchange, they are required to pay a fee.

They are also required to pay an annual fee to remain listed.

They charge transaction and trading fees (to brokers).

Exchanges also provide data services and information/insights to buyers.

Many exchanges offer co-location services wherein their own servers might host programs of HFTs and hedge funds for trading.

This allows for faster trading. They charge rent for such services.

Markets opened above yesterday’s closing point.

Auto stocks and realty stocks rose the most. Consumer durables stocks and IT stocks fell the most.

Global markets: US markets and Asian markets rose. Most European markets fell (as of 6 pm IST).

News

• The RBI has revised the foreign exchange regulations for authorised dealers and money changers, effective 30 April, 2026. The rules mandate RBI approval for authorised forex dealers and introduce revised eligibility, net worth, and operational requirements across categories.

• Royal Enfield will set up its first manufacturing plant outside Tamil Nadu, in Andhra Pradesh with an investment of Rs 2,200 crore.

Stocks Updates

• Reliance: will not proceed with acquisition of 100% equity stake in Kandla GHA Transmission from PFC Consulting after the bidding process was annulled.

• HDFC: received RBI approval to acquire up to 9.95% stake in ICICI Bank and Kotak Mahindra Bank via group entities, valid till 5 May 2027.

• L&T: buildings & factories business won multiple large orders (Rs 2,500 crore to 5,000 crore each) across multiple states. Projects include 10 high-rise towers in Hyderabad, a luxury tower in Mumbai, and villa & hotel projects in Karnataka.

• ITC: NCLT has approved the merger of Sresta Natural Bioproducts and Wimco into ITC, effective 1 June 2026. After this, both companies will be dissolved and stop existing separately.

• NTPC: has signed an agreement with MCD to acquire the remaining 26% stake in NTPC EDMC Waste Solutions (NEWS) for Rs 5.20 lakh, making NEWS a wholly owned subsidiary.

• UltraTech: received income tax demand of Rs 808.78 crore (including interest) for AY24, which it will challenge.

• Bajaj Auto: net profit rose 102.7% year-on-year to Rs 3,661.92 crore in the Jan-March quarter. Dividend declared: Rs 150 per share, with 29 May as the record date. The board also approved a buyback of Rs 5,633 crore.

• Bajaj Holdings: net profit rose 49.2% year-on-year to Rs 2,575 crore in the Jan-March quarter. Dividend declared: Rs 130 per share, with 30 June as the record date.

• Jio Financial: invested Rs 300 crore in subsidiary Jio Finance Platform and Service, taking total investment to Rs 335 crore.

• Adani Green: subsidiary, Adani Renewable Energy Sixty Four Ltd, incorporated two wholly owned step-down subsidiaries to expand the renewable energy business.

• Power Finance: subsidiary, PFC Consulting Ltd, incorporated SPV, Fatehgarh II Transmission, to develop a power transmission project.

• BSE: net profit rose 61.13% year-on-year to Rs 795.47 crore in the Jan-March quarter. Dividend announced: Rs 10 per share, with 10 July as the record date.

• Waaree Energies: step-down subsidiary, Waaree Forever Energies Four Pvt Ltd, signed a Power Purchase Agreement with Solar Energy Corporation of India for a 300 MW wind power project in Dwarka, Gujarat.

Word of the Day

Anchor Investors

They are institutional investors who buy a large portion of shares before an IPO opens to the public.

They invest one day before the regular investors and buy shares at a fixed price within the IPO’s price range.

Anchor investors cannot sell these shares immediately. They must hold them for a certain period of time.

Anchor investors can include mutual funds, foreign portfolio investors, insurance companies, pension funds, etc.

Their early investment aims to build trust and encourage more people to invest in the IPO.

6 Day Course

Theme: India’s relation with USD

Day 4: Thursday

- Case 1: Exchange rate is Rs 95/USD
- Case 2: Exchange rate is Rs 90/USD

Case 2 means it is cheaper to import crude oil and other items we regularly import.

Case 1 means our import bills increase (including that of crude oil).

But, case 1 also means exports increase because everything seems cheaper in India (to foreign buyers).

This is why neither case 1 nor case 2 is perfect.

In fact, many developing countries have deliberately devalued their currency in the past in order to increase their economic activity.

This is good when the economy is heavily export dependent. India is not export dependent but wants to export more.

RBI generally feels it is better to let market forces (natural demand and supply for USD and INR) determine the exchange rate.

They do not try to influence the exchange rate much. They do work towards ensuring that there are no sudden surprises.

Featured Question

Q. “what is Free float market cap?”

Market cap or ‘market capitalisation’ or ‘m cap’ is the total value of the company.

Formula:

M Cap = total number of shares x price of one share

This is the size of the company.

It includes every single share of the company in its calculation.

Free float market cap does not include shares that are locked in or are not readily available to trade on the stock markets.

This means, it does not include shares owned by the promoters, govt stake, insiders, etc.

Shares owned by individual investors, institutional investors, mutual funds, pension funds, etc are included in it.

So, formula:

Free float m cap = total non-locked shares x price of one share

Markets opened above yesterday’s closing point.

All sectors’ stocks rose today except for the FMCG stocks. PSU bank stocks and realty stocks rose the most.

Global markets: US markets and Asian markets rose. European markets rose (as of 6 pm IST).

News

• The government approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, providing 100% government credit guarantee for MSMEs and 90% for the non-MSMEs as well as the airline sector to boost liquidity amid the disruptions due to the West Asia conflict.

• India’s composite PMI (manufacturing + services) rose to 58.2 in April (vs 57.0 in March). Services PMI rose to 58.8 (vs 57.5 in March). This means economic activity rose more in April than in March.

• India and Vietnam have upgraded their ties to an Enhanced Comprehensive Strategic Partnership and set a $25 billion trade target by 2030. They also signed multiple MoUs across various sectors like rare earth, digital payments, medical regulation, etc.

• SEBI has defined ‘significant indices’ as those that are tracked and benchmarked by mutual funds with the cumulative AUM exceeding Rs 20,000 crore. Index providers managing such indices must now register with SEBI within 6 months.

Stocks Updates

• Bank of Baroda: received PFRDA approval to act as a sponsor for pension fund and plans to set up a pension fund management company, subject to regulatory approvals.

• Cholamandalam Investment: allotted NCDs worth Rs 500 crore on a private placement basis at a coupon rate of 8.08% per annum, maturing 5 June 2029.

• Polycab: net profit rose 32.28% year-on-year to Rs 2,672 crore in the Jan-March quarter. Dividend announced: Rs 47 per share.

• Hero Moto: net profit rose 25.72% year-on-year to Rs 1,460 crore in the Jan-March quarter. Dividend announced: Rs 75 per share, with 24 July as the record date.

• CG Power: net profit rose 34.39% year-on-year to Rs 365.49 crore in the Jan-March quarter.

• Godrej Consumer: net profit rose 9.68% year-on-year to Rs 451.77 crore in the Jan-March quarter. Dividend announced: Rs 5 per share, with 12 May as the record date.

• Trent: revised the record date for its 1:2 bonus share issuance from 29 May to 4 June. It also revised the record date for the dividend from 10 June to 12 June.

Word of the Day

Asset Reconstruction Company (ARC)

It is a company that buys bad loans (NPAs) from banks and tries to recover the money.

Banks sell these bad loans to ARCs at a discount to clean up their balance sheets and reduce risk.

The ARC then recovers money by restructuring the loan, coming to terms of settlement, selling the borrower’s assets, or taking legal action.

Example: A Rs 100 loan becomes bad. The bank sells the loan to the ARC for Rs 60 to avoid complete loss. The ARC works to recover more than Rs 60 and make a profit.

6 Day Course

Theme: India’s relation with USD

Day 3: Wednesday

Something to note is that the exchange rate is generally getting weaker.

Which means, over the last few decades, we have only needed more and more INR to get 1 USD.

Why is this?

The main reasons for this are our big crude import bill, our trade deficit, and US interest rates.

We spend a lot of money importing crude oil. This means demand for USD goes up, increasing its price.

Similarly, we tend to import more than we export. Again, this means we need more USD. This increases its price.

Another factor is the interest rates. When the US increases its interest rates, more money moves to the US since its bonds are considered very safe.

This results in more money flowing from all over the world to the US, increasing the price of the USD.

The RBI does not try to control it but does try to reduce the sudden ups/downs in the exchange rate.

Featured Question

Q. “After rebalancing of nifty 50 index, suppose a stocks comes out of Nifty. But then it would become the biggest stock in the Nifty Next 50 index, as it is no. 51 company by market cap. Is the above statement true?”

Simple answer: not necessarily.

Index rebalancing occurs only twice a year.

So, a company could have become smaller and its rank might have fallen much below the 51st rank before it might be removed from Nifty 50.

Many factors are at play when deciding which companies will be in the Nifty 50.

Free float market cap is used to decide the rankings of companies for Nifty 50.

This means it is possible for larger companies with higher promoter holdings to be ranked below a company with a lower total market cap but higher free float market cap.

Markets opened below yesterday’s closing point.

FMCG stocks and auto stocks rose the most. Realty stocks and consumer durables stocks fell the most.

Global markets: US markets fell. Asian markets showed a mixed trend. Most European markets rose (as of 6 pm IST).

News

• SEBI has proposed allowing online bond platforms to offer overseas-listed debt securities regulated by the International Financial ​Services Centres Authority (IFSCA), as part of ease-of-doing-business measures.

• Onemi Technology Solutions (Kissht) IPO has been subscribed 9.50 times. Retail subscription: 2.03 times. IPO is closed for subscription.

Stocks Updates

• BEL: received a Rs 1,251 crore order from the Ministry of Defence to supply Ground Based Mobile ELINT System (GBMES) to the Indian Army.

• Coal India: received the commissioning certificate from Gujarat Energy Development Agency (GEDA) for a 100 MW solar power plant in Banaskantha, Gujarat.

• Shriram Finance: allotted NCDs worth Rs 100 crore on a private placement basis at a coupon rate of 9.15% per annum, maturing on 19 Jan 2029.

• Tata Power: Dorjilung Hydro Power Limited, a joint venture in which Tata Power holds a 40% stake, secured $515 million financing from World Bank for the 1,125 MW Dorjilung Hydroelectric Power Project in Bhutan.

• Lupin: received USFDA approval for Glycerol Phenylbutyrate oral liquid used to treat rare metabolic disorders.

• L&T: net profit fell 3.1% year-on-year to Rs 5,325.6 crore in the Jan-March quarter. Dividend announced: Rs 38 per share, with 22 May as the record date. L&T Energy Hydrocarbon Onshore won a large order (Rs 2,500 to 5,000 crore) from Bharat Coal Gasification and Chemicals Ltd (BCGCL) for a coal-to-ammonia-nitrate project in Odisha.

• M&M: net profit rose 41.6% year-on-year to Rs 4,667.57 crore in the Jan-March quarter. Dividend announced: Rs 33 per share, with 3 July as the record date.

• Punjab National Bank: net profit rose 12.5% year-on-year to Rs 5,225.12 crore in the Jan-March quarter. Dividend announced: Rs 3 per share, with 13 June as the record date. Net Interest Income fell 3.5% to Rs 10,757 crore.

• Marico: net profit rose 13.99% year-on-year to Rs 391 crore in the Jan-March quarter. Dividend announced: Rs 4 per share, with 30 July as the record date.

Word of the Day

Loan Restructuring

It means changing the original terms of a loan to make it easier for the borrower to repay.

Sometimes, borrowers may have trouble paying their loans on time due to various reasons.

To avoid the risk of a default by the borrower, banks may lower the interest rate, give more time to repay, or reduce the monthly payments to ease the financial burden.

This may cause a temporary drop in the borrower’s credit score and may lead to an increase in the overall interest payments if the loan tenure is extended.

6 Day Course

Theme: India’s relation with USD

Day 2: Tuesday

If you notice, the exchange rate for USD-INR is changing every day.

This is because the currencies are being bought and sold real time, similar to any commodity or shares.

If you are a foreign investor wanting to set up a factory in India, you will buy Indian Rupees by spending your US dollars.

If you are importing some commodity (like crude oil), you will be using your Indian Rupees to buy US dollars to be able to pay the foreign seller.

Let’s say the exchange rate is Rs 95 per USD.

If suddenly a lot of people are trying to buy Indian Rupees (convert USD to INR), the demand for INR will be up.

This causes the exchange rate to fall.

Example: it might fall from Rs 95 to Rs 94.

If a foreign company operating in India is taking its profits back to its home country, it will convert INR to USD. So the demand for USD will be higher.

Example: it might rise from Rs 95 to Rs 96.

Many such parallel trades are always happening. The net of all these trades determine the live exchange rate.

They tell you everything.

They are mandated by SEBI to disclose their full portfolios.

This means, investment in every stock, every sector and the exact percentage of allocation is published on their website, available to anyone for free.

This transparency also brings up an interesting thought that has likely crossed the minds of anyone who has spent time reading these disclosures.

If I can see exactly what the fund manager bought, why do I need the fund?

The manager’s entire portfolio is available. Updated every 30 days.

You could, in theory, replicate it yourself. You could buy the same stocks and use the same proportions. Invest directly, without middlemen or any fees.

Would it work? Would it give better returns than the fund? We decided to test it.

We chose the ICICI Prudential Focused Equity Fund and tracked it through January 2020 to December 2025.

We chose a focused fund for two main reasons. Many mutual funds hold 60, 70, or sometimes even 100 stocks. Replicating those portfolios is practically unmanageable for an individual investor.

Two, the fund stays almost fully invested in equities, typically around 98-99%. That makes the comparison much closer to directly investing in stocks.

With almost no cash on the side, what you see is essentially the same set of companies the fund is invested in.

We considered two investors. Both of them invested Rs 1,00,000 every month. Both invested on the same day.

Investor A put their money in the mutual fund.

Investor B decided to copy the fund. So every month, whatever the fund disclosed, they adjusted their portfolio accordingly.

What you are always reading is last month’s decision

Before looking at any returns, there is one structural aspect of this strategy that needs to be understood.

Across all 72 months in this study, the ICICI Prudential Focused Equity Fund published data in 5 to 8 days after the month end.

For example, if we take a look at the data from 2024, the fund’s portfolio as of 31 Jan was published on 8 Feb. This is a 7-day reporting lag after month-end.

In reality the lag could be even bigger. If the fund manager started buying a stock on, say, 5 Jan, an individual investor would only get to know about that on 8 Feb. This specific decision becomes visible after a 34-day gap.

This creates a clear mismatch between the two investors.

So Investor B, as the copycat, is reacting to data which has been disclosed with a delay. Investor A is investing in real time based on the fund manager’s decisions as they happen.

So the two investors are not actually buying the same stocks, in the same composition, at the same time.

Results

Both investors appeared to be doing the same thing on the surface. But over time, their outcomes began to diverge.

At the end of 6 years, the mutual fund investor ended up with Rs 1.44 crore.

The copycat investor ended up with Rs 1.32 crore.

Both made good money. Both nearly doubled what they started with. But there was still a gap of Rs 11.7 lakh between them.

How did this happen?

In 2020, almost nothing changed in the portfolio. Hardly any stocks were bought or sold. When the COVID crash came, both investors faced similar losses. And when the market recovered, both went up. During this period, the delay did not have much impact.

The same pattern repeated in 2023. The drivers of returns were already part of the portfolio, so the copycat simply held on and participated in the move.

In both years, the copycat finished with slightly better returns.

In 2021, the fund manager made a lot of moves. By the time the copycat entered or exited, prices had already moved. Those delays accumulated quickly and erased its earlier lead within a short period. A similar pattern played out in 2024, where a larger reshuffling widened the gap again, and it never fully recovered.

Basically, in years where the fund didn’t change much, the copycat stayed close. Sometimes they even did slightly better. But in years where the fund was more active, buying new stocks or selling old ones, the copycat started falling behind.

When the portfolio is stable, the copycat stays close. When activity increases, the lag starts to matter. This is because the fund manager acts first. The copycat reacts later, which often means entering at slightly higher prices and exiting at slightly lower ones. Each difference is small, but they add up over time.

Fees and Charges

For the study, everything was calculated as gross returns. This means no brokerage fees, no government taxes, no execution costs.

But copying a fund means buying and selling constantly.

Every month, Investor B deployed fresh Rs 1 lakh by splitting it across every stock the fund currently held, between 20 and 30 stocks depending on the month. Each stock was a separate buy order. On top of that, every time the fund removed a stock from its portfolio, Investor B had to sell it too.

Over six years, that added up to 1,981 buy orders and 92 forced sell transactions, 2,073 trades in total. Investor A made 72. One per month.

Every single one of those 2,073 trades attracted brokerage and Securities Transaction Tax. On any individual trade, these costs feel small. But across 2,073 transactions over six years, they accumulate into a real and unavoidable drag on returns.

Then there is the tax on gains. Each of those 92 forced sells was a taxable event. Most of those stocks were held for less than a year, because the fund added them and removed them within months. Any profit made on a position held under 12 months is taxed at 20% as Short Term Capital Gains. So every time the fund rotated out of a stock and Investor B followed, money went to the government.

Investor A did not face any of this. Mutual funds buy and sell internally without triggering a tax event for the investor. You only pay tax when you personally sell your units. And if you held them for more than a year, the applicable rate is 12.5%, not 20%.

So in reality, the difference of Rs 11.7 lakh turns out to be superficial. The real gap, after brokerage, STT, and short-term capital gains tax, is likely between Rs 14 lakh and Rs 15.4 lakh on the total Rs 72 lakh invested.

The Real Takeaway

The copycat strategy is not broken in theory. It just does not work in practice. Because by the time you saw it, acted on it, paid for it, and got taxed on it, the advantage had already gone.

This is what the data actually says. Investing in the fund directly was simpler, cheaper, and more effective. One transaction a month.

Copying the fund looked clever but was not. Same stocks, more effort, worse outcome. The fee you were trying to save turned out to be the smallest cost in the entire process.

The real cost was the delay. Not the 0.59% expense ratio, but the gap between when the fund manager acted and when you found out. That lag changed everything. By the time you reacted, the opportunity had already moved.

So the conclusion is simple.

If you believe in the fund manager’s process, invest in the fund. Trying to replicate their decisions from a monthly disclosure is not a shortcut. It is a slower and more expensive way to get to a worse result.

A mutual fund does not just give you a list of stocks. It gives you timing, execution, tax efficiency, and judgement.

All of that comes bundled into a single transaction every month.

Research Analyst Disclaimer

Markets opened above Friday’s closing point.

Realty stocks and metal stocks rose the most. IT stocks and media stocks fell the most.

Global markets: US markets and most Asian markets rose. Most European markets fell (as of 6 pm IST).

News

• India’s manufacturing PMI rose to 54.7 in April (vs 53.9 in March). This means manufacturing activity grew more in April than in March.

• India’s LPG consumption fell 16.2% year-on-year in April (vs a fall of 12.3% in March): Ministry of Petroleum and Natural Gas

• Onemi Technology Solutions (Kissht) IPO has been subscribed 0.60 times. Retail subscription: 0.16 times. IPO closes tomorrow (5 May).

Stocks Updates

• Kotak Mahindra: net profit rose 10.04% year-on-year to Rs 5,401.55 crore in the Jan-March quarter. Dividend announced: Rs 0.65 per share.

• Avenue Supermarts: net profit rose 19.19% year-on-year to Rs 656.59 crore in the Jan-March quarter.

• Ambuja Cement: net profit rose 78.47% year-on-year to Rs 1,830.15 crore in the Jan-March quarter. Dividend announced: Rs 2 per share, with a 12 June record date.

• BHEL: net profit rose 155.8% year-on-year to Rs 1290.47 crore in the Jan-March quarter. Dividend announced: Rs 1.40 per share.

• NTPC: has started commercial operations of 100 MW from its 176 MW solar project in Ramagundam, Telangana, taking total group capacity to 89,805 MW.

Auto Updates (April)

• Maruti Suzuki: sales grew by 33.2% year-on-year to 2.40 lakh units. Domestic sales stood at 1.99 lakh units and exports stood at 40,054 units.

• M&M: sales grew 14% year-on-year to 94,627 units. Domestic passenger vehicle sales grew 8% to 56,331 units while commercial vehicle sales stood at 23,427 units.

• Tata Motors Passenger: sales grew 31.1% year-on-year to 59,701 units.

• Hyundai Motor: sales grew 17% year-on-year to 51,902 units including export sales of 13,708 units.

• Eicher Motors: sales grew 31% year-on-year to 1.13 lakh units. Exports fell 14% to 9,035 units.

• TVS Motor: sales grew 7% year-on-year to 4.74 lakh units. EV sales grew 36% to 37,771 units.

• Ashok Leyland: sales grew 9% year-on-year to 14,646 units.

• Escorts Kubota: sales grew 24.4% year-on-year to 10,857 units.

• Bajaj Auto: sales grew 40% year-on-year to 5.14 lakh units.

Word of the Day

Index Rebalancing

It is the process of updating the composition of an index to maintain its defined criteria.

Indices are reviewed at regular intervals. Stocks may be added or removed based on factors like market capitalization and liquidity.

This ensures the index continues to reflect the current market accurately.

After the rebalancing of an index, funds that track the index buy/sell to follow the composition, which may impact stock prices in the short term.

Example: the Nifty 50 index is updated bi-annually, in March and September, where stocks may be added or removed based on eligibility criteria.

6 Day Course

Theme: India’s relation with USD

Day 1: Monday

Many of us are aware that the US dollar is one of the most accepted currencies of the globe.

It is considered the reserve currency of the world.

When we in India buy crude oil, we often pay in USD. We also get paid in USD for some of our exports.

We also receive investments from foreign companies in USD.

This is why USD is important to us. It is also why the USD-INR relation is even more critical to us.

In this week’s course, we will try to understand this relation between our currency and the US dollar.

At present, the exchange rate is around Rs 95/USD. This means, we need to pay Rs 95 in Indian Rupees to get 1 USD.

This is called the exchange rate and it changes every day similar to how the price of shares change.

Featured Question

Q. “If a mutual fund company raises their total expense ratio for an ongoing fund, will current NAV also go down? Affecting past investment? Or does it only affect the NAV the day after?”

The past is not affected. It is applied from the point the new expense ratio comes into effect.

Its impact is on the present and the future, not on the past.

Expense ratio is deducted on a daily basis.

So once it is deducted for a day, that matter is closed. It will not be re-deducted for that day.

Think of it like this: if they increase the toll for a highway, you will not have to pay a higher toll for all the past trips you made. You will only pay the higher toll for the newer trips you will make.

You’ll see big brand names. Samsung, Xiaomi, Motorola, LG.

But here’s something most people don’t realise. Many of these products, even though they have different brand names, are actually made by the same company.

There’s a company working quietly in the background.
You don’t see its name on the product, but it plays a huge role in making it.

That company is Dixon Technologies.

In 2024, India sold about 16 million TVs. Dixon made more than half of them.

That means every second TV sold in India was likely made in a Dixon factory, even if it had a different brand name on it.

And it’s not just TVs.

Dixon also makes washing machines, smartphones, set-top boxes, wearables, telecom equipment, and even small but important parts that go inside these products.

So while you see many different brands on the outside, behind the scenes, one company is helping build a large part of India’s electronics.

Dixon is not a name you think of when buying an electronic product.

That’s because Dixon Technologies is not meant to be seen by consumers.

Instead, it works behind the scenes and is trusted by big brands to manufacture their products.

But a company doesn’t earn this kind of trust overnight.
It’s not built with just a few big deals or a short period of fast growth.

Dixon’s strength has been built slowly, over many years.

Through a series of long-term decisions, it has created a strong and lasting advantage in manufacturing.

This week, we’ll understand how Dixon built this foundation, why it worked, and why it has been so difficult for others to copy the same mix of scale, consistency, and trust.

Starting Early in a Changing India

The story of Dixon Technologies does not start with scale. It starts with timing.

The company was incorporated in 1993, at a point when India itself was going through a structural shift. Just two years earlier, economic liberalisation had begun. Before that, India had very high import taxes, more than 80%, which made foreign goods very expensive. Over the next few years, these taxes were reduced to around 30%, and the rupee lost value, which made it cheaper to export from India.

But the bigger opportunity was something less obvious.

India allowed companies to import electronic parts easily, but not finished products. This created a very specific situation where global brands could not easily import finished products at scale but could bring in parts and assemble them locally.

So if a company wanted to sell TVs or other electronics in India, it needed a local manufacturing partner.

Dixon focused on solving that problem.

Over time, it started working with clients like Goldstar, which later became LG Electronics. As LG expanded its presence in India through the late 1990s, Dixon expanded with it. But what mattered more was the nature of this relationship. LG was not simply looking for a low-cost manufacturer; it needed a partner that could deliver consistently and maintain quality across large volumes.

Dixon gradually built that capability.

At the same time, it did not restrict itself to a single product. It started manufacturing 14-inch televisions, Sega video game consoles, Philips video recorders, and push-button phones for Bharti Airtel. On the surface, this may look like diversification, but in reality it was a way of building deeper manufacturing capability across different product types, each with its own requirements but relying on the same core strengths.

This approach helped Dixon become more capable without depending too much on one product or one client.

At the same time, demand in India was growing fast.

During the 1990s and 2000s, more households started buying televisions as satellite channels like Zee TV, Sun TV, and Star TV became popular. Manufacturing output in India grew significantly during this period, and a large part of that growth came from new products made possible by access to imported components.

Dixon was positioned exactly where this demand turned into manufacturing.

A clear turning point came in 2006.

Dixon received a large order from the Tamil Nadu government to manufacture 2.5 million CRT televisions. Completing such a big order on time and with consistent quality proved that Dixon could handle large-scale production. This was an important moment for the company.

After this, Dixon kept expanding, but in a careful way.

It moved into lighting in 2008, LED TVs and washing machines in 2010, and mobiles in 2016. They also started making refrigerators by 2024.

This expansion followed a simple strategy. Move into related areas where it could use what it already knew instead of trying completely new and risky businesses. By the late 2000s, Dixon had also added products like air conditioners, microwave ovens, and DVD players, mostly by working with the same clients.

This was important because Dixon wasn’t starting from scratch each time. It was growing within the same network, working with the same clients across different products.

Over time, this did more than just increase production.

It built trust.

In contract manufacturing, trust is everything. Clients want a partner who can deliver consistently without problems. Every successful order made Dixon more reliable in the eyes of its clients. On the other hand, switching to a new manufacturer would involve risk, delays, and uncertainty.

So as Dixon kept delivering, it became harder for clients to replace it.

This is where Dixon’s advantage started to form.

Every time India started pushing electronics manufacturing more aggressively, Dixon was not building capability from scratch. It was scaling what it had already developed over time.

Scale and Cost Advantage

Dixon’s scale is not something built overnight. It’s the result of steady growth over nearly 30 years.

The company followed a simple cycle. As it produced more, its costs went down. Lower costs attracted more clients. More clients increased production volumes. And higher volumes again reduced costs. This cycle kept repeating over time. By the time others started noticing this opportunity, Dixon was already far ahead.

Today, that scale is visible in its operations. Dixon runs around 25 factories spread across about 4.5 million square feet, employs roughly 35,000 people, and is even building a new 1 million square foot plant in Noida. This kind of scale takes decades to build.

One of the biggest benefits of this scale is in purchasing raw materials.

In electronics manufacturing, most of the cost (around 80-90%) comes from components and raw materials. Dixon buys components at a scale. 50 million smartphones. 240 million LED bulbs a year. This makes it one of the most important customers for suppliers in Taiwan, Korea, and China.

This gives Dixon clear advantages. It gets better prices, more flexible payment terms, and priority supply during shortages. Since profit margins in this business are usually small, even a slight cost advantage can make a big difference. Smaller competitors, who buy in lower quantities, don’t get these benefits and over time, this gap keeps increasing.

Dixon’s strength also comes from being present across many product categories. It has about 33% share in smartphones EMS, 50% in LED lamps, 50% in LED TVs, 20 to 25% in washing machines, and 65% in hearables and wearables.

It is also the fourth largest LED lamp manufacturer globally. This spread reduces risk. If demand slows in one segment, other segments can support growth.

Its presence across states adds another layer of advantage. These factories create jobs and support local economies, so governments actively support Dixon with policies, faster approvals, and incentives. This kind of relationship is difficult for smaller companies to build.

In the end, this advantage comes from time.

It took 30 years to build supplier networks, trained teams, quality systems, and experience across multiple products. A new competitor can invest money to build factories, but it cannot quickly recreate decades of learning, relationships, and timing.

That is what makes Dixon’s position hard to replicate.

Deep Integration: Why Clients Can’t Easily Leave

Dixon’s second advantage comes from how deeply it is woven into its clients’ businesses.

Dixon does not just put products together. It builds its entire production line around each brand’s specific needs, from which parts go in, to how things are tested, to what quality levels are required. Over years, this becomes second nature to its factories and teams. A brand that wants to leave does not just need to find another manufacturer. It has to rebuild everything it had with Dixon, from scratch.

But there is a deeper layer to this.

In most cases, the brand comes to Dixon with a complete design and says: build this for me. Dixon just executes. Switching here is painful, involving a new factory, new teams, and months of testing, but it can be done.

There is a different kind of relationship, though, where the brand simply says: I want a washing machine. Dixon then designs the product, decides what goes inside it, builds the tools to make it, and runs the entire production. The brand sells it under its own name. But Dixon owns everything behind it.

If the brand wants to move to someone else, it cannot take the product with it. The design stays with Dixon. The tools stay with Dixon. The supplier network stays with Dixon. Starting over elsewhere takes 12 to 18 months and carries serious risk of defects and delays.

Every washing machine that Samsung, Panasonic, and Godrej sell in India was designed by Dixon. Dixon even convinced Panasonic, which used to arrive with its own designs, to hand that responsibility over entirely. The washing machine business earns around 11% margins. Smartphones, where brands own their designs and Dixon just assembles, earns around 3.3%. The margin gap shows what it means to be genuinely hard to replace.

This lock-in is also growing. In lighting, the share of products designed by Dixon has gone from 40% in 2018 to 87% today. In televisions, Dixon produces 60 to 65% of all units sold in India. Across washing machines, lighting, and TVs, brands spend 50 to 70% of their manufacturing budgets with Dixon. The longest relationships, Panasonic, Samsung, Philips, Godrej, go back over a decade. The longer a brand stays, the harder it becomes to leave.

This moat does have a limit.

In older, simpler categories like washing machines and light bulbs, Dixon owns the design completely and the lock-in is real. In smartphones, it mostly still just assembles what brands tell it to. Motorola, which at one point was responsible for 72% of Dixon’s phone assembly business, shifted 23% of its volumes to another manufacturer. Dixon’s share price fell 35% in three months.

Where Dixon owns the design, brands cannot easily walk away. Where it does not, they can. Dixon is steadily moving more of its business toward the first kind.

Policy and First-Mover Advantage

Dixon’s third advantage comes from how it positioned itself around government policy before others were paying attention.

When the PLI scheme for mobile phones launched in April 2020, it offered 4 to 6% incentives on incremental sales. 16 companies were approved, including Samsung, Foxconn, Wistron, Lava, and Micromax. But the benefits only went to companies that were already operational and could scale immediately. Most approved players were still building capacity. Dixon was already running.

Through Padget Electronics and its Noida plant, Dixon became the first company out of all 16 approved entities to receive PLI disbursement, collecting Rs 53.28 crore in a single quarter in 2021 while others were still setting up.

The industry that followed was enormous. Mobile production in India grew from Rs 18,000 crore in FY2014-15 to Rs 5.45 lakh crore by FY2024-25, a 28x increase in a decade. In FY15, mobile phone imports made up 78% of the market by value. By FY23 that had fallen to 4%. Domestic production now meets over 99% of demand, and smartphones have become one of India’s largest export categories.

Dixon was already inside this system when the wave hit.

A key advantage for Dixon comes from Press Note 3, which requires government approval for Chinese investment into India. Since critical components like displays and camera modules depend on Chinese technology, any company trying to make these locally needs a Chinese partner and a 12 to 24 month approval process. Dixon has already cleared this multiple times — Longcheer in 2025, HKC in 2026, while competitors would need to start from scratch.

The HKC joint venture targets smartphone displays below Rs 15,000, a segment entirely dependent on Chinese imports today. Trials begin Q2 FY27. If it works, Dixon becomes one of the only local sources for a component every affordable phone in India currently imports.

The mobile PLI scheme ended in March 2026, reducing direct incentive support. Future schemes, including IT hardware PLI and a possible PLI 2.0 with an outlay of Rs 46,000 crore, may continue support, but policy benefits are not permanent guarantees.

The real strength here was never just the incentives.

It was the ability to be first, collect benefits while others were setting up, secure regulatory approvals that take years to navigate, and build Chinese technology partnerships through structures that new entrants would need to replicate from scratch. By the time a competitor works through the same approvals, Dixon has already built the factory, ramped the volumes, and locked in the customers.

Design, Quality and Trust

Dixon’s fourth advantage is the hardest to copy and the easiest to underestimate.

Big global brands like Google or Samsung don’t just pick any manufacturer. They do strict checks on things like quality, worker conditions, environment, and processes—and they repeat these checks every year. If a company fails, the partnership can end. In fact, most factories don’t even pass these checks.

Dixon has been passing them for 30 years, working with some of the toughest global brands.

Today, it makes phones for 9 out of the 14 smartphone brands in India—including Samsung, Xiaomi, Motorola, Nokia, Oppo, Realme, and Google. Each of these partnerships took years to build, and once Dixon earns trust from one big brand, it becomes easier to win the next.

When companies like Nothing, Vivo, or Intel look for a manufacturing partner in India, Dixon is often the first choice because of its strong track record.

This is reflected in its growth. Dixon’s smartphone production rose 196% in Q2 2025, making it India’s largest manufacturer by volume. Its market share jumped from 8% to 22% in a year, while Indian players overall increased their share from 9% to 36%.

Google is the clearest proof of where accumulated trust leads.

Dixon became the first contract manufacturer in India to receive sublicensing rights for both Android TV and Google TV. Once it had those licences, it became the only factory in India where any brand could walk in and get a Google-platform TV built without going through the same 12 to 18 month approval process themselves. That trust then extended to smartphones.

Dixon’s subsidiary, Padget Electronics, partnered with Compal to make Google Pixel phones in India, mainly for export to the US and Europe.

For each Pixel phone, Dixon earns about Rs 25,000 to Rs26,000. Normally, it earns around ₹9,000 per smartphone. So Pixel phones bring in almost 3 times more revenue per phone. This kind of opportunity came because global brands already trust Dixon.

There’s also a bigger opportunity. If Google starts making 30% of its Pixel phones in India, it could mean orders worth Rs 90,000 to Rs 1,00,000 crore. And Dixon is one of the top companies likely to get that business.

Research Analyst Disclaimer

Hence, there won’t be any updates on the Nifty 50, Sensex, Top Gainers, and Top Losers sections today.

Global markets: most US markets rose. Asian markets and European markets showed a mixed trend (as of 6 pm IST).

News

• India’s forex reserves fell by $4.82 billion to Rs 698.49 billion in the week that ended on 24 April.

• India’s gross GST collections rose 8.7% year-on-year to Rs 2.43 lakh crore in April. Net collections rose 7.3% to Rs 2.11 lakh crore.

• The commercial LPG prices in India have been raised for the third time since February, with a hike of around Rs 993: as per media sources

• Since the Comprehensive Economic Partnership Agreement (CEPA), the India-UAE trade has crossed $100 billion: Minister of Commerce and Industry

Stocks Updates

• Bajaj Finserv: approved renaming two wholly owned subsidiaries, Bajaj Finserv Asset Management to Bajaj Asset Management and Bajaj Finserv Mutual Fund Trustee to Bajaj Mutual Fund Trustee as part of rebranding exercise.

• Tech Mahindra: will acquire Avant, a Canada-based payments modernization and wealth platform firm for around CAD 28 million to strengthen BFSI and payments capabilities.

• PFC: subsidiary incorporated 5 SPV subsidiaries to develop power transmission projects under competitive bidding.

• Samvardhana Motherson: incorporated wholly owned subsidiary Motherson Digital Technologies to expand IT services business. It also completed acquisition of a 51% equity stake in Nissin India from Nissin Electric Co Ltd, Japan, making Nissin India an indirect wholly owned subsidiary.

Word of the Day

Disinvestment

It is when the government sells/reduces its stake in a business

Disinvestment can be partial or full, depending on how much stake is sold.

Example: the government sells its stake in a Public Sector Undertaking (PSU) to private investors or the public.

The goal is to raise funds, improve efficiency, and reduce government involvement in business.

6 Day Course

Theme: fund manager role

Day 4: Thursday

Many fund managers rise to become CIOs or Chief Investment Officers.

A CIO is the head of investment at an AMC. This is the person to whom all fund managers report to.

The CIO dictates the investment style and philosophy to a great extent.

Which is why when a CIO retires or leaves, some advisors become alert since a change in investing style might be possible.

Many senior fund managers also leave their jobs to start their own AMC or offer Portfolio Management Services (PMS), etc.

This is why whenever fund managers change roles or retire, they often do so over a certain time period wherein a replacement fund manager spends considerable time also managing the fund or role.

This aims to ensure the transition is smooth and without surprises for investors.

This period can last anywhere from a few months to even years.

Featured Question

Q. “Why the expense ratio of commodities MFs is lesser compared to the equity and debt Mutual funds ? Even though they will give high return (In long term)”

Hence, their expense ratio (or mutual fund fees) is much lower too.

Also, commodities funds’ returns vary a lot.

It is incorrect to assume these commodity mutual funds will give higher returns than equity mutual funds.

Over longer periods of time, many equity mutual funds have managed to give higher returns when compared to many commodity mutual funds.

Currently, gold and silver prices have shot up to astronomical levels. Hence the returns of many silver and gold funds are skewed.

Markets opened below yesterday’s closing point.

All sectors’ stocks fell today except for IT stocks and pharma stocks. Metal stocks and PSU bank stocks fell the most.

Global markets: most US markets rose. Most Asian markets fell. European markets rose (as of 6 pm IST).

News

• The US Fed kept the interest rate unchanged in the 3.5% to 3.75% range for the third consecutive time.

• Onemi Technology Solutions (Kissht) IPO has been subscribed 0.24 times. Retail subscription: 0.06 times. IPO closes on 5 May.

Stocks Updates

• Bharat Forge: will acquire a 30% stake in Fortuna Engineering for Rs 129.6 crore, with an option to increase the stake to a majority.

• Tata Power: subsidiary, Tata Power Renewable Energy approved entry into a new line of business, solar PV ingot and wafer manufacturing, with an investment of around Rs 6,500 crore.

• HCL Tech: has partnered with the DP World Tour (a global professional golf tour) as a digital experience partner to drive global platform transformation.

• Reliance: subsidiary Reliance Retail acquired Priyanka Chopra’s haircare brand, Anomaly, to expand their beauty portfolio.

• Adani Ports: net profit rose 55.64% year-on-year to Rs 4,567.63 crore in the Jan-March quarter. Dividend announced: Rs 7.5 per share.

• Hindustan Unilever: net profit rose 32.15% year-on-year to Rs 3,227 crore in the Jan-March quarter. Dividend announced: Rs 22 per share, with 23 June as the record date.

• Bajaj Finserv: net profit rose 5.05% year-on-year to Rs 2,538.67 crore in the Jan-March quarter. Dividend announced: Rs 1.50 per share.

• Adani Enterprises: incurred a net loss of Rs 166.79 crore, a fall of 104% year-on-year in the Jan-March quarter. Dividend announced: Rs 1.30 per share.

• Adani Power: net profit rose 51.59% year-on-year to Rs 4,016.3 crore in the Jan-March quarter.

• Indian Bank: net profit rose 6.4% to Rs 3,173.05 crore in the Jan-March quarter. Dividend announced: Rs.18.25 per share, with 10 June as the record date.

• Cholamandalam Investment: net profit rose 30.6% year-on-year to Rs 1,645.20 crore in the Jan-March quarter. Dividend announced: Rs 0.70 per share, with 21 July as the record date.

• Waaree Energies: net profit rose 71.4% year-on-year to Rs 1,061.10 crore in the Jan-March quarter. Dividend announced Rs 2 per share.

Word of the Day

Public Sector Undertaking (PSU)

It is a company that is owned and controlled by the government (centre or state).

The government usually holds a majority stake, more than 50%, giving it control over decisions.

PSUs operate in sectors like banking, oil, power, and infrastructure.

They are created to serve public interest while also earning profits.

6 Day Course

Theme: fund manager role

Day 4: Thursday

In India, most fund managers lean towards fundamental analysis.

They look at the asset, its fundamentals, future scope, etc to form an opinion.

Now, with the emergence of various kinds of funds, newer kinds of fund managers can be seen in the industry.

For example, there are quant fund managers who specialise in quant and technical analysis based investments.

With the rise of passive funds, many fund managers are starting to manage only passive funds in which the level of decision making required is far lesser. It is more about managing inflows and outflows than about investment choices.

The emergence of passive funds has also led to more pressure on fund managers to perform and give better returns than these passive funds.

Failing to beat the passive funds is often seen as the mutual fund being unable to perform.

If non-performance continues for a long while, a fund manager might be removed from the mutual fund and allocated to lesser important funds only.

For all the stress and hard work they undertake, they are paid well.

Salaries can easily range above Rs 1 crore per annum. Very senior fund managers may also make more than Rs 10 crore per annum.

Featured Question

Q. “What is ‘buy back’ of a stock and what is the effect of this on a share price?”

A buyback is an indirect method used by companies to share profits with investors.

This is opposed to the more direct method of paying dividends.

In case of dividends, the company literally deposits the money in the investors’ accounts.

This could mean you are liable to pay tax if eligible.

The company can instead use this money to do share buybacks.

Companies buy shares from the share markets and destroy/cancel them. This leads to a reduction in the total number of shares in the market.

But since the company is still the same, the earnings per share, revenue per share, etc are all higher now.

This often leads to an increase in the share price.

So, instead of giving dividends, the company uses buybacks to increase the share price.

The share price increase is not guaranteed though. It still depends on the market conditions.

According to the latest regulations, buybacks are also being taxed now. The tax needs to be paid by the companies performing the buyback.

This would prevent immediate taxation for the investor.

In the case of a buyback, the investor would have to pay a tax only when he/she sells the shares.