May 2023 Newsletter

Election Fever:

Would you believe me if I said that elections have very little correlation with the stock market, but they tend to create some volatile environment for the short term? I was reading a research paper by Anushree Subramanya from University of London, and I want to layout the final findings before you.

“The market is bent on stability. It’s the only thing that drives the functioning of it at the end of the day. When there is uncertainty with respect to which party will come into power, the market reacts in an adverse manner. A stable government with valid and beneficial policies which will help in the growth of the economy means, a better functioning market. Although, effect of elections on the market is temporary and does not determine the wants of the country.”

State of Indian banks:

Non-performing loans or bad loans in India to the share of total gross loans is somewhere around 8%, after the introduction of insolvency and bankruptcy board of India. Greece, that defaulted has it at 5%, US is less than 1% and EU is around 3%. It’s a huge problem for free market economies as these are unsustainable levels of doing business. 8% of your margin is gone in thin air. Banks must transfer this to customers who pay high interest rates. Bad banks are forced to merge with State owned banks (like SBI) and the citizen is the one who will bear the cost. Looking forward though things seem to be getting better with the Finance Minister’s laser focus on this number.

Investing in Real Estate:

For NRI’s investing in Real Estate is more emotional than return oriented. Magic Bricks mentions that an immersive experience like Virtual Reality and 3D views has helped NRI’s to evaluate their options better. The use of professional services for making an investment decision is a meager 3% and improving very slowly. The JLL report indicates that working with a professional broker increases satisfaction at the end of the transaction. Finally, over the past 1 year, the residential sector has seen increased demand for ultra-luxury and luxury homes across the metros and flat demand for mid-size homes.

Taxation help:

There is an eternal question on whether I should file India taxes or I should not. I am a strong proponent of over compliance rather than under compliance. Hence answer is file it every year if you have income / assets in India. It could be Rs.0, totally fine – but do file it. Just remember the fact that the government can come back to you to ask for documentation all the way 10 years back.

Key Personal finance term – Emergency Fund:

This is the amount you can access when you are in a personal emergency (hospitalization, job loss etc). Enough research has shown that the money set aside should be around 6 times your minimum monthly expenses. You can keep it in the bank or money market accounts. Please don’t include your credit card available balance.