Importance of Asset Allocation

Market participants have seen extreme volatility in Indian capital markets. There have been many incidents both global and domestic which have led to a fall in the indices. At this point, we are facing a Nationwide Contagion Effect.

Some of the factors contributing to the market turbulence are as follows

• US-China Trade War

• NBFC Crisis following the IL&FS fiasco in domestic market

• Prolonged slowdown in critical sectors of the economy like Auto and Realty

• Asset quality issues, NPA’s which haunt Public Sector Banks

• Corporate governance issues, Audit failures and credit rating agencies failure to red flag critical issues

In this era of VUCA – Volatility, Uncertainty, Complexity and Ambiguity, our main focus is on risk mitigation and protection of principal. Return Of Capital rather than Return On Capital is the underlying motive. We will be exposed to Market Risk at all times, however Individual Company Risk can be Mitigated by Diversification & Asset Allocation.

The two main traditional assets are Debt and Equity. The asset classes are evaluated with respect to liquidity, safety, yield, image, appreciation and growth. Equity asset class is high risk high reward where there is possibility of high appreciation. In the case of debt returns are stable and tend to be lower with high degree of safety

A proper Asset Allocation based on the clients Risk profile is the most suitable and apt method.

Our Aim is to allocate risk to different Instruments / Assets.

Based on our research, The following Data shows us how diversification and Strategic Asset Allocation would have benefited the client. (All data shown below are as on 30 October 2019)

Market has shown a positive trend in the recent Months. There have been many positive aspects as well like Reduction in tax rates for Corporate Firms (22% for Domestic Companies & 15% for new manufacturing companies).The central bank cut the repo rate by 25 bps  to 5.15% and the reverse repo by 25 bps to 4.90% (100 bps = 1 per cent).

Based on this Allocation, the Investor has managed to diversify his risk to different categories of Asset Classes. There is equal Allocation to each Asset Class.

Based on this Allocation, The investor has been aggressive and is willing to withstand the Risk of Market Volatility. He has been able to generate Positive returns in all Periods.

Gold acts as a Hedge during Uncertain events. Gold has a negative Correlation with the traditional Asset Classes (Debt & Equity).The demand for gold increases during inflationary times due to its inherent value and limited supply.

Increased Allocation towards Debt helps the Investor earn Stable Return as compared to Equity & Gold. Returns maybe lower due to lower Returns.

Conclusion: Asset Allocation is Important for every Individual. Market Risk & Business Risk is something which every Investor goes through. Thus our main aim is Capital Protection and Risk Aversion. During Volatile Periods like now, we fear about Capital Erosion. Thus a hedge can be done via investing in different Asset Classes with low Correlation with each Other.

Latin Manharlal Group

Sweet Smell of Success in Floriculture

With the domestic demand for flowers growing at 25% annually and offshore demand rising as fast, theres a great need for qualified individuals in this high potential agri-industry. It could be roses all the way for youth who opt for careers in floriculture. Incrementally people — especially within Indias expanding middle class — are saying what they have to say with flowers on birthdays, anniversaries, Valentines Day, Mothers Day etc. Little wonder, the floriculture industry, one of the most high-potential sectors in Indian agriculture, is in full bloom.

Floriculture, the art and knowledge of growing flora or flowers, is no longer the preferred hobby of retirees; its a fast growing sunrise industry. With the domestic demand for flowers of all shapes and hues growing at 25% annually and offshore demand rising as fast, even the somnolent government of India has woken up and accorded the floriculture industry 100 percent export-oriented status to help develop the country into an international hub of flower production, auction, distribution, and retailing.

However, despite being blessed with a facilitating agro-climatic profile, vast land resources, and availability of abundant labour and agricultural scientists, Indias share of the global floriculture market is a negligible 0.19%. But with several brave entrepreneurs establishing export-oriented floriculture units under controlled climatic (i.e greenhouse) conditions, India is slowly but surely making an impact in the international floriculture market centred in Netherlands.

Currently the states of Maharashtra, Karnataka, Andhra Pradesh, and Haryana are in the vanguard, with Kerala producing cut flowers and ornamental plants for domestic consumption. Fortuitously, India hosts many exclusive varieties of ornamental flowers, usually exported in the form of seeds or capsules. Roses, marigolds, chrysanthemum, and jasmine are among the popular varieties and about 10,000 hectares of total cultivated area in the country is devoted to growing them.

MARIGOLD BLOOMS. A typical example of a successful new genre of floriculturist is Megha Borse, a pioneer woman entrepreneur who has transformed her five-acre farm on the Nasik-Indore road into an export-oriented floriculture unit. Known as the ‘flower power woman of Nasik, Borses farm — Sheelman Flora — which blooms with marigolds the year round, attracts hundreds of visitors from around the country.

In 2004, there were only 10 flora farms in Nasik. Since then, 10–15 are being promoted every year.  Farmers here are being motivated to grow flowers on part of their land and have promised to take charge of marketing their produce.

Starting with a 1,008 sq mt poly-house in 2004 with an investment of Rs.10 lakh, Borse now has three greenhouses yielding 600,000 flowers per year and has acquired the reputation of a knowledgeable floriculture consultant. Borse also represents Maharashtra in an apex committee constituted by the Union ministry of agriculture, and with the floriculture industry all set to bloom, she believes theres growing demand for qualified individuals in this high-potential agri-industry. This is one of the best career options for graduates who dont necessarily have to be highly qualified horticulturists to enter this field. Practical experience of a greenhouse and enthusiasm for the subject is good enough for starters. The Horticultural Training Centre near Talegaon set up with Dutch collaboration imparts an excellent five-day training programme in greenhouse management. If several such training centres are provided, establishing floriculture units will become much easier. That is one way to enjoy the sweet smell of success.

Image Courtesy: Google

Latin Manharlal Group