Virtues of a monster

Inflation is most often a planned phenomenon. it has several benefits and therefore it is not a total evil and is a desirable device in hand of rulers. But this device is to be dealt very delicately otherwise it will take no time in turning into a monster.

A moderate level of inflation helps a country to meet the growth targets. And this is in line with this that the RBI has expressed it’s willingness to favour the 5-year’s inflation target set in 2016.  the retail inflation in India should be kept at 4% with an upper and lower limits at 6% and 2% respectively. Though Mint (daily) had earlier hinted the govt may reset the target at 5% to help the economy recover fast.

Let us understand the virtues of this monster if kept under control. An inflation is much better than a deflation. Why? Because in case of deflation (falling price) – 1. People would prefer to wait for purchase and so the whole economy would reel under lack of demand. 2. The real biting of EMIs on the limited monthly earning of a person will get deeper with each successive month which in normal circumstances get gradually tapered off due to inflation.

You may be surprised to know that as per the Phillip Curve the rise in inflation lowers unemployment rate at least to a certain extent. This is because the employer is able to reward an efficient worker with increment in wages without any real impact on his financial burden and very tactfully he is also able to keep the under-performing worker plausibly at same level of wages (which in real term has been lowered by inflation) without any hoo-ha.  

And the icing on the cake is that the export activities are automatically encouraged as the exporters would be able to get more rupees for a dollar earned after inflation. So the debt for export work he took in rupees can be easily repaid now. 

Though if administered imprudently inflation may make the domestic economy uncompetitive on global scale as the global traders may flinch to clinch a deal with a  country with unstable or falling currency. Moreover a hard-earned saving of middle-class loses sheen with each dose of inflation as it's valued erodes away gradually. Also, a daily-wage workers bear the brunt of rising prices the most as there may be a time-lag before their wage-rise and the price rise already happened.

We believe that the RBI and other authorities are thinking for an inflation rate where it is helpful for all of us.

(Author- Hemant K Das)

SEBI’s Risk-O-Meter

SEBI’s Risk-O-Meter is definitely a huge improvement on the earlier risk grading method adopted by it for securities and debt funds. As in earlier method the whole category of fund was rated letting the each constituent of the portfolio be unnoticed. But now what is rated is not fund category but the fund

itself and that too on the basis of it’s ingredients.

The earlier rating system as adopted in 2015 were measuring on five risk levels which has now in 2021 been raised to six levels– Low, Low to Moderate, Moderate, Moderately High, High and |Very High. Now the debt fund will be rated on three parameters – Credit (on 1-12 scale), Interest rate (on 1-6 scale) and Liquidity (on 1-14 scale). Portfolio risk will be the simple average of this three. Interestingly the interest rate risk measurement will be based on Macaulay Duration which is weighted average of maturity period of each ingredient of the portfolio.

So definitely an investor would gain more insight based on deeper understanding of fund’s likely behaviour.

And last but not the least, as the fund managers may keep changing the portfolio within the categories, the rating will also change each time. So an investor is expected to keep a keen watch on the dynamic rating which happened to be static earlier.

(Author - Hemant K Das)

Synergy gain of pair endorsement

Doubling expense to the tune of ₹5-8 Crore does not necessarily mean ₹10-16 Crore. It can be significantly less. And an ad manager uses his faculty for financial analysis to rope in duo charism of Virat-Anushka or Ranveer-Deepika. Though the blazing persona of a sole celebrity is enough to create a long living throb for the ever-upscaling volume but when put in conjunction with love-partner can just be disrupting. 

And no prize for guessing, gossiping flow abound for a high-profile glamour couple. This justifies the endorsement sagas of Ranbir Kapoor-Alia Bhatt’s flipkart fashion and Lays, Ranveer Singh-Deepika Padukon’s Jio, Lloyed Air-conditioners and Virat Kohli-Anushka Sharma’s Manyavar. Though our gut instinct says that even the celebrities may also be loving to appear with their best love-partners and so might be conceding on less that the total sum of their individual endorsement fees. In her interesting article published in the latest FE Sunday, Venkata Susmita B says “A star of the stature of Kohli charges about ₹ 5-6 Crore per days as his endorsement fee and the rate for a pair could be in the range of 8-12 Crore".

Now, it can really be highly insightful to make a valuation of the synergy gain in such pair endorsements.

(Author - Hemant K Das)

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