Union Budget 2021: A Quantum Perspective

From the CIO

It is good to see the government focus on reviving growth. The reaction in the equity markets is a testament to that. It’s by far the best budget for equity markets. Lots of positive surprises and no major negatives.

The bond markets haven’t liked the budget at all. It’s a shock. No one expected that PM Modi will agree to shed his fiscal conservatism to such an extent. Long term Bond yields have already headed higher. We would expect the RBI to also begin normalization and interest rates hikes in the coming months. Bond yields have bottomed and the best of the returns from long term bond funds are behind us.

The key of course is the long-term outlook. This increase in spending over the next 4 years needs to revive growth back to at least the 7% level. If that happens, then the higher deficit will be forgiven. If not, high inflation and high deficits can cause macro instability in the years ahead.

Equity View

The pandemic & lockdown hit the Indian economy, in lieu of which we wanted a push for both capital & consumption in this budget.

Through the provisions of the Union Budget 2021-22, government has targeted increased spending on infra & other capital expenditure to kickstart the economy but, as witnessed through multiple rounds of stimulus announced last year, there is very little allocated to boost consumption.
On the contrary, the new ‘Agriculture Infrastructure Cess’ on petrol & diesel is inflationary and has the potential to reduce real income of the households thereby impacting near term consumption.

This time the government has followed a fiscally expansionary path to put the economy back on track. Though, the headline budgeted fiscal deficit numbers for FY21 & FY22 looks higher due to reclassification of NSSF [National Small SavingsFund] loans to FCI above the line.
Higher borrowings (even after adjusting for reclassification of FCI loan) by the government can crowd out the private sector demand for loans, until & unless, foreign flows in debts come to their rescue.
There have been some sector specific changes like change in FDI limit in insurance & scrappage policy for Autos which augurs well for respective sectors.
There were no significant changes on direct taxes.
Overall, the government’s planned spend on infra, if executed properly, has the potential to increase employment & expedite (though, boost to consumption would have expedited it much faster) the natural business cycle to revive corporate earnings which otherwise would be a gradual process. The earning upgrade cycle, similar to 2003-07 period, may give a fillip to equity returns.

Keep invested and use a staggered approach

Indian equities remain an attractive asset class and is expected to do well over the long term. Investors are advised to remain invested but stagger their fresh investments as the markets have run up recently.

Fixed Income View

From the bond market’s perspective, the budget had more negatives than positives.
Current fiscal year deficit of 9.5% of GDP and target of 6.8% for FY22 was a surprise. This, along with the extended fiscal consolidation roadmap indicate that the bond market will face heavy supply pressure not just in this year but over many years.
State governments may also pursue similar expansionary fiscal policy.
RBI’s role in facilitating this kind of market borrowing would be critical to determine its impact on the bond markets.
Nevertheless, it seems that the bond yields have already seen the bottom and reversal is coming sooner than anticipated.
Increased government spending for extended period and introduction of new cess & import duties on various products could also cause inflation to rise. The RBI may find it difficult to support the government’s borrowing program in this case.
Proposal to create a permanent institutional framework to provide liquidity will go a long way in the development of the corporate bond market. This will also bring down the liquidity and credit premiums and thus cost of capital for borrowers.
Lower return expectations

Investors should lower their returns expectations from fixed income funds and should follow a conservative approach while choosing fixed income products. Interest rate are likely to move higher in coming years. Long duration funds may face high volatility in coming months.

Gold View

Union Budget 2021 pleasantly surprised gold markets by announcing the reduction of custom duty on gold from 12.5% to 7.5%. However, introduction of levy called the Agriculture Infrastructure and Development cess of 2.5% will lead to less than the headline 5% reduction.

The immediate effect of this move will be that gold prices will decline to the extent of reduction of levies. All those holding gold will see the value erode to that extent whereas all those who want to buy more will get it relatively cheaper to that extent.
Still, this is a welcome move as it will reduce price distortions, bringing domestic gold prices closer to International prices to the extent of reduction in levy. It will enable more efficient functioning of the gold markets in India and discourage illicit gold imports of the precious metal.
Higher intervention through higher customs duty has all this while ensured that India could never be at the center of the global gold markets despite being the largest consumer and thus remain a price taker.
We hope this duty is incrementally reduced over the next few years to further remove the price distortions in form of levies and truly think about developing the gold sector and bring India at the center of International gold markets.

The Finance minister also set the ball rolling for the creation of the proposed spot gold exchange by announcing that the ministry will be notifying the Securities and Exchange Board of India (SEBI) as regulator for gold exchanges.

The creation of a spot gold exchange will bring twin benefits for Gold ETFs by adding to the liquidity pool as well as leading to more efficient price discovery.

Use the correction to add Gold to your portfolio

Gold remains as an efficient portfolio diversifier. Use the correction to increase allocation to Gold so that it occupies 10-15% of your overall portfolio.

Why Businesses Now Need To Balance Profit With Purpose

Social media is a powerful, strategic tool with the ability to connect millions of people around the world, and shape their opinions. The current President of the United States would agree.

But for businesses, it is a double-edged sword. While Instagram, Twitter and Facebook are an effective way for businesses to connect with their customers and build following, if something goes wrong, the mistake is on show for the world to see.

Social media has given a voice to, and shifted power from businesses and governments, to individuals who otherwise would not be heard. Did you know that almost half (45%) of the world’s population is now on social media? (Source: Statista)

People now have access to information about corporate behavior like never before. Socially conscious consumers show no restraint in sharing incidents of corporate negligence on social media. They use social media platforms to organize themselves around issues that are important to them, and strongly express their disapproval for unsustainable business practices.

As per the Cone Communications 2013 Global CSR study of more than 10,000 citizens in 10 of the largest countries in the world by GDP, including India, 62% consumers say they engage with companies via social media, and 26% use social media to share negative information.

They use their voice and purchasing power to punish irresponsible businesses, forcing them to clean up their act, thus bringing about the change they want to see in the world.

A study by the New York Times Consumer Insight Group identified major reasons people choose to share what they do on social media sites. 84% of participants in this study said that they shared to support a cause. Clearly, selling a good product or service is no longer enough. And doing business responsibly is no longer a choice.

Before the advent of social media, social, ethical, environmental misdeeds of corporates used to go unnoticed. But like Mark Zuckerberg correctly said, “When you give everyone a voice and give people power, the system usually ends up in a really good place”

For instance when Nike was accused of deploying child labor in the production of soccer balls, or when the garment factory of Benetton, Primark, and Walmart collapsed in Dhaka, the brands faced severe criticism and protests from consumers and activists all around the globe.

With growing number of socially conscious consumers, especially millennials and Gen Z, companies can expect to see many more instances of consumer-initiated protests and boycotts in the future.

Gen Z, those born between 1996 and 2010 are expected to account for 40% of all consumers by 2020, according to research from MNI Targeted Media. Doing their part to make the world a better place is important to 68% of them, and this directly impacts their buying behavior.

94% of Gen Z shoppers and 87% of millennials believe that companies should address urgent social and environmental issues. (Source: Cone Communications 2013 Global CSR study)

In the long run customers will choose companies that they trust, that share their values and that act responsibly. And businesses that don’t will end up losing their customer base.

In a survey by Greenmatch, a renewable energy consulting agency, 72% of Gen Z respondents said they are willing to shell out more money for goods and services produced in a sustainable way. And nearly half (49%) have boycotted a brand because it behaved in a way that was against their values.

In a mobile-savvy country like India, reputation loss due to negative social media publicity can have serious implications for the business. As per media reports, when high levels of lead and MSG were found in Nestlé’s star product Maggi noodles in 2015, the company lost much more than its market share due to their poorly managed social media responses.

Brands and businesses must now necessarily adapt to the new world order, and be as committed to and innovative about doing good as they are about maximizing profits.

So what would be our one tip to businesses that want to avoid a social media nightmare? Act responsibly, because there is no dodging the animal called social media.

What Makes The Best Tanning Lotion the Best?

A great tanning lotion services a number of purposes. When there are so many to choose from, you want the best. But what makes the best tanning lotion exactly what you need it to be? It’s a combination of a great scent, an exceptional performance, and perfect results.

What does the Best Tanning Lotion do?

A tanning bed lotion has a main job of protecting the skin from the UV rays of the tanning bed while still providing great bronzing and coloring capabilities. The best tanning lotion will color the skin a rich, dark color, but will protect it and keep it soft, as well. Flawless color is what is wanted, but not at the expense of the safety and health of the skin. The best tanning lotion is hand-crafted, free of harmful chemical agents, and keeps the skin soft and supple while tanning. It is also essential that the skin, including tattoos or other enhancements, remain vibrant as well so that every tan, indoor or outdoor, looks natural and healthy.

Even when used on a tanning bed, the best tanning lotion provides melanin stimulators to bring out the sun’s health benefits without overdoing it. The sun, as we know, can heal as well as harm. The best tanning lotion brings Vitamin D to the skin while blocking out harmful UV rays that burn and cause skin cancer. These can be present on a tanning bed as well; therefore, a tanning lotion is an essential to a great tan, and to good health.

What does the Best Tanning Lotion have?

The best tanning lotion smells lovely. The rich, warm scents of Jojoba and Coconut combine with the scent of sweet pomegranate to feel luxurious. Even when you can’t get outside to enjoy the sun, a tanning bed lotion can make you feel the warmth and the rays even on the cloudiest of days. Even in the cold of winter, a tanning bed and lotion can give the feel of a warm summer day, so the best tanning lotion will improve your mood as well as your health.

What Does a Tanning Bed Lotion Need To Be the Best?

Even though there are a lot of options for tanning lotions, they are not all the same, and they have different purposes. A tanning bed lotion has to be specially formulated to work with the acrylic of the tanning bed mattress. Some lotions have ingredients that can eat away at the fabric lining of the bed, and this makes them difficult to clean afterwards. It is necessary to use an indoor lotion indoors, but it is nice to be able to use your favorite lotion outdoors as well. So the best should be the best indoors and outdoors, but it’s important to understand the different needs.

No matter what, you can have the benefits of a great tan by using a lotion that is not sticky or messy, and that doesn’t stain. When you are looking for the best, consider the results that you are looking for and choose the best tanning lotion for a tanning bed.