Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
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Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 10.6741Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 10.6893Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 10.5364Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 10.5532Motilal Oswal Dynamic Fund (Div-A) - 13.5064Motilal Oswal Dynamic Fund (Div-Q) - 12.0966Motilal Oswal Dynamic Fund (G) - 14.9036Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.6715Motilal Oswal Dynamic Fund-Dir (Div-Q) - 12.2594Motilal Oswal Dynamic Fund-Dir (G) - 15.7315Motilal Oswal Equity Hybrid Fund - Direct (G) - 14.9593Motilal Oswal Equity Hybrid Fund - Regular (G) - 14.3119Motilal Oswal Flexi Cap Fund(D) - 24.9521Motilal Oswal Flexi Cap Fund(G) - 33.1944Motilal Oswal Flexi Cap Fund-Dir(D) - 24.9694Motilal Oswal Flexi Cap Fund-Dir(G) - 35.5144Motilal Oswal Focused 25 Fund - Direct (D) - 20.4246Motilal Oswal Focused 25 Fund - Direct (G) - 34.8895Motilal Oswal Focused 25 Fund (D) - 18.3723Motilal Oswal Focused 25 Fund (G) - 31.3034Motilal Oswal Large and Midcap Fund - Dir (D) - 15.0008Motilal Oswal Large and Midcap Fund - Dir (G) - 15.0008Motilal Oswal Large and Midcap Fund (D) - 14.57Motilal Oswal Large and Midcap Fund (G) - 14.57Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0068Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0442Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0694Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0083Motilal Oswal Liquid Fund - Direct (G) - 11.1042Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0066Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0434Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0663Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0154Motilal Oswal Liquid Fund - Regular (G) - 11.0628Motilal Oswal Long Term Equity Fund (D) - 18.9673Motilal Oswal Long Term Equity Fund (G) - 24.1448Motilal Oswal Long Term Equity Fund -Dir (D) - 22.5586Motilal Oswal Long Term Equity Fund -Dir (G) - 26.3202Motilal Oswal Midcap 30 Fund (D) - 21.9396Motilal Oswal Midcap 30 Fund (G) - 35.9137Motilal Oswal Midcap 30 Fund-Dir (D) - 22.6487Motilal Oswal Midcap 30 Fund-Dir (G) - 39.3237Motilal Oswal Multi Asset Fund - Direct (G) - 10.7049Motilal Oswal Multi Asset Fund (G) - 10.5652Motilal Oswal Nasdaq 100 FOF - Direct (G) - 21.7182Motilal Oswal Nasdaq 100 FOF - Regular (G) - 21.4982Motilal Oswal Nifty 50 Index Fund - Direct (G) - 13.1123Motilal Oswal Nifty 50 Index Fund (G) - 13.0304Motilal Oswal Nifty 500 Fund - Direct (G) - 15.2785Motilal Oswal Nifty 500 Fund (G) - 15.1033Motilal Oswal Nifty Bank Index Fund - Direct (G) - 12.6493Motilal Oswal Nifty Bank Index Fund (G) - 12.505Motilal Oswal Nifty Midcap 150 Index Fund (G) - 17.9037Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 18.1149Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 13.6955Motilal Oswal Nifty Next 50 Index Fund (G) - 13.5607Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 18.3538Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 18.5688Motilal Oswal S&P 500 Index Fund - Direct (G) - 14.0875Motilal Oswal S&P 500 Index Fund (G) - 13.9767Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 9.91Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 9.9314Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 9.9171Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.0598Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 9.921Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.0415Motilal Oswal Ultra Short Term Fund (Div-D) - 9.8772Motilal Oswal Ultra Short Term Fund (Div-F) - 9.8877Motilal Oswal Ultra Short Term Fund (Div-M) - 9.8777Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.0212Motilal Oswal Ultra Short Term Fund (Div-W) - 9.8807Motilal Oswal Ultra Short Term Fund (G) - 13.6038

Don’t Bet Against India

Blog Blog Details
  • May 22, 2020
  • Susmit Patodia|
  • Associate Director - PMS
There are very few things that are worth staying up the whole night for! Topping the list is the live telecast of Berkshire’s shareholder meeting and to be able to listen to Mr. Warren Buffet. In the first hour and a half, the repeated messages that Buffet gave us are 

1.Never bet against Amercia
2.EQUITIES is the only way to create wealth in a sustainable manner in the long term

I think the above are the two simplest dots that you can join on the starting line to be successful as an investor. My third guiding dot – Be at it every day. 

Diving Straight Into The 3 Trillion Dollar Question – Impact On The Economy?
The Indian economy had one of its toughest 5 years periods (2015-19) since 1991. The economy was just starting to show initial signs of recovery in early 2020 with GST collections trending up, Auto sector completing transition to BS 6, Corporate NPA cycle flattening out and healthy Forex Reserves. The CoVID pandemic hit us and rewound the tape on recovery but it is unlikely to have broken the tape altogether.
 
Before we understand the impact on the economy, there are two unique aspects of our economy that are worth spending a few seconds on – A) Distributed supply chain B) Demand drives supply

A) Distributed Supply Chain
In India, most supply chains are distributed across the country. This is due to the fact that we are a land of SMEs which are efficient. But the flip side to efficiency is reduced resilience, which is why most of our SMEs are in a spot of bother today. Take a look at these numbers - We have 63 Mn registered companies in India, but only 5% of them have more than 10 employees and only 19,000 have paid up capital more than INR 10 Cr. This mass distribution across a large set of companies leads to significant issues of coordination as well. The best illustration of the same is in Autos - You may have a ready-to-produce mother auto plant in the green zone, the maker of the brake pads in amber and the dealers in red district - You can image the near impossible supply chain problem to fix. Hence, the re-start of the economy may be ineffective if majority of our country is non-green. SMALL gives efficiency but not resilience. 

B) Demand Drives Supply
With perennial capital shortage (Unlike China), India’s supply reacts to demand and not the other way round. What do we mean by that? We don’t build outsized malls or airports and wait for demand to fill them over a long period of time. Most of our infrastructure on completion are filled to capacity in just a few years and we then do incremental augmentation. As you can infer, this leads to lag in supply creation and the reason that our country has episodic inflation spikes.

The above two factors complicate the estimation of IMPACT (how many SMEs will survive) and REVIVAL (which will come first – Spend or Demand). 

So how do we think about the impact on the economy then?
Indian Economy is largely a consumption driven economy where Private consumption accounts for 60%. The other large constituent is Gross Fixed Capital Formation (GFCF), simply put Investments, which is 31%. To break GFCF down further, 53% is Real Estate and Structures and 31% is Machinery and Equipment.  

The consumption piece is complex to project. The one framework that we are using to understand the impact on our portfolio companies is what we are plugging in for the country as a whole. We start with our consumption basket and categorizing them into three buckets – 1) Largely Un-impacted 2) Lost Sales 3) Postponed Sales. The below analysis is for the aggregate consumption basket of our country*

1. LARGELY UNIMPACTED - 53% of our basket is largely un-impacted (Food, Utilities, Communication)

2. LOST SALES – Goods and services where if one has foregone consumption, it cannot be recouped by consuming more of it in the future (Travel, Hospitality). This is ~31% of our basket

3. POSTPONED SALES – This is the bucket where foregone consumption can be made up in the future. Some examples being Automobile, White Goods etc. This is ~16% of our basket

The next question is how much of the demand can come back post normalization. This is subjective and ever changing. But with this framework, you could do a back of the envelope calculation to get to an impact. We estimate the drop to be in the range of 10-12% in FY21 for consumption. To this, we optimistically bake in only a 10% drop in GFCF as this sector should be able to recoup a lot of the lost activity. The other two components are Govt. Spend and Net Exports which could be growth areas in FY21. Taking all this into consideration, we get a 5-7% drop in GDP for this year. Most of it will be front loaded and we should start seeing positive print in Q4. This is the bad news, but there is some good news as well. Going back to where we started!

Don’t Bet Against India

Age of Country

73 Years

GDP in 1950

INR 95 Bn

GDP in 2020

INR 200 Tn

CAGR

11.5% -> 2100x


If you were to sit back and think about the above – IT IS STAGGERING – We have done a phenomenal job and I have no doubt that we will add our entire GDP of the last 73 years in the next 10-12 years! This could be the most important phase of wealth creation for most of us. 

The only thing left to do then is to buy Quality companies which will Grow profitably for a Long period and buy them at a Price which is reasonable – What we call at Motilal Oswal as Q G L P 

A piece of trivia – Warren Buffet was 50 in 1980, had a networth of USD 100 Mn and US’s GDP was 2.5 Tn! Buffet compounded his way to USD 35 Bn networth in 2005 while USA’s GDP reached USD 13 Tn
Stay Safe, Happy Investing

Susmit Patodia, Motilal Oswal AMC
P.S. The title of the series of memo is “Observing, Not Thinking”…. Someone rightly said, Observing is humility, thinking is arrogance!

Source: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/4T_HB150920195BFFCDECAD5C4602B40BFDA3AA084500.PDF

Disclaimer:
This article has been issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. The information / data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, estimates and data included in this article are as on date. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The recipient should exercise due caution and/ or seek professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein. 

Investment in securities is subject to market and other risks, and there is no assurance or guarantee that the objectives of any of the strategies of the Portfolio Management Services will be achieved. Please read Disclosure document carefully.




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