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HR Post 1 (2)Consultancy is the new age choice of profession. And being a consultant is right there amongst the top dream jobs!

One of the most upcoming fields in this professional niche is in the sector of Human Resources. Consultants in this sphere are referred to as Human Resource Business Partners.

A Human Resource Business Partner goes beyond the regular functions of the organization’s HR team. As such, HR Business Partners generally tend to be very busy as they handle important head hunting and hiring mandates. With bigger mandates and responsibilities comes a much nicer pay package alas with no time to look at personal finances!

But like all professionals, Personal Financial Planning should infact be at the top of the priority list. Why you ask? Let’s delve into the reasons.

Time Restraint: Like all consultants are occupied 24/7, a HR Business Partner is always vying for personal time. And when they do find some, the last thing on their mind is personal financial matters. In the catch up for personal things to get done, personal finances are a low priority. Yet should it not be the complete opposite of this? The importance of financial planning is not just related to finding out how much to invest and where. Financial planning and giving a structure to overall finances is aimed to attain peace in the thought that despite all other commitments, you are working towards insuring that financially your dreams and aspirations will be taken care of. And that is a great source of calm for a person constantly on the move.

Contract based Income: As a consultant, you are a contractual worker in essence. In other words, you are in receipt of the handsome income only as long as you manage to keep the contracts alive. Shouldn’t simple logic dictate your actions that this hard earned should be channelized for situations when no contract is available? Or in layman’s terms, creating a Contingency Fund for those truly lull periods in the industry. Wouldn’t you want to make this hard earned money work as hard as you so that your dreams of an early retirement or that fancy foreign holiday come true?

Insurance: While you may have already thought of the regular health and life insurance policies, what is worth considering are additional risk covers in terms of Personal Accident and Critical Illness Policies. These provide features which help augment income in case you cannot report in to work due to major accidents. In addition insurance that is worth considering for senior HR Business partners or top executives of HR Consulting firms is the Keyman Insurance Policies. (More on all these in the subsequent posts.)

What is it that you truly fancy doing with your hard earned monies that you worked so relentlessly for? Would it not be nice to know that your efforts can be enough to fulfil your life dreams? Most likely your answer would be a resounding YES! So then, what is stopping you? Mere inertia? An inherent fear of doing something wrong that can’t be taken back? Lack of knowledge on how to go forward? The questions are many.

And yet, the solution might be as simple as the professional choice that you have made for yourself. Why not consult an expert consultant from the financial advisory field? It is after all why you are hired right? So why the hesistance in doing the same thing for your personal benefit.

As fellow consultants and advisors we believe, like you, that specialization leads to credibility and expertise. And like consultants, we understand that trust is only gained through repeatedly providing sound and quality advice. Being credible and trustworthy is essential, more so in matters of personal finance.

Having a word with a Financial Advisor to make certain your hard earned wealth is doing the right thing may be a good idea and most certainly worth your coveted personal time.

Till then…continue the good job of quality consulting!

 

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Crisis 5

In today’s ever changing world, with all the geo-political, social, and technological dynamics, job surety is no more a luxury anyone can afford. Be it the CEO of a M.N.C. or a mid level manager, the changing landscape compels us now more than ever to be prepared for the worst.

Even pilots aren’t immune to such extremes. From domestic industry uncertainties to global events, pilots need to be equipped to face such an eventuality. One such recent example is the Qatar diplomatic crisis. With the neighbouring countries cutting diplomatic ties with Qatar and shutting down their airspace for any Qatar bound plane or vice versa, a sense of being besieged looms in the country.  Now while this does not directly result in job losses, such incidents raise the fear, specifically for businesses closely linked to Qatar.

Therefore prudence calls for having certain provisions in place that can help ease this fear. A sort of backup or cushion for facing an event you might have never fathomed.

A checklist of such provisions could possibly look as follows:

Self funded health insurance coverage is important – Most pilots would argue that the employer already provides for this. But that’s the point right? What happens if you get the golden handshake? Guess what, no more health cover. And even if you get a new one, they always come with a waiting period. This means you won’t be covered for a certain period from any pre existing illness. This would not be a situation that you would like to end up with.

 

Personal Accident Policy and Critical Illness Policy coverage – Extending the above point, it’s critical that pilots have a personal accident and a critical illness policy. In the months of no income, one needs to ensure that one is covered for all kinds of risk. In cases where families may have accident or critical illness exigencies during such a period, such types of policies are a godsend. Such personal accident policies, for example provide the insured with either weekly allowances or in some cases a lump sum payout depending on the terms and features of the policy. These payouts can be used for medical expenses that come along with treating such eventualities.

 

An Emergency Fund is a must have – A highly liquid investment is the preferred choice to host such a fund, as it’s meant for immediate use. While Bank FDs and saving accounts is the age old choice, research and time has proven they are better options out there. One such alternative is Liquid Mutual Funds. These typically provide the similar liquidity and safety – principal features that a bank savings account offers, but with the added incentive of significantly higher returns on the investment. These returns currently are in the range of 6-7% versus 4% on your savings account.

 

The objective of this corpus should be to provide enough to maintaining the essential household expenses + EMIs in case of sudden exigencies and or temporary absence of income. Thumb rule states this corpus should ideally support 6 months of household expenses, including EMI’s and Insurance Premiums.

 

Move towards conservative assets – If you feel the crisis period is going to be prolonged then you are better off cutting down on riskier investments and moving towards conservative assets. Why so? Because liquidity needs could crop up anytime. Hence capital protection and not capital appreciation must take the driver’s seat.

 

While in all probability this crisis might be short lived, planning for it should not be left unattended. Like the saying goes, “Better to be safe than sorry”! And checking off this list could just go a long way in maintaining that safety net at all times, even when you might feel down in the dumps financially.

 

Till then, happy flying!!!

 

 

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Debu Blog Image

As a passenger, getting from point A to B simply includes sitting on your assigned seat and enjoying the flight till the destination. You are completely unaware of the preparation and planning that goes behind every flight.  A smooth flight is an end result of the meticulous preparatory work including facing any emergency.

All sorts of emergencies can happen during a flight. Engine malfunctions, instrument failures and unanticipated weather issues are just some of the emergencies pilots can face at any time.  In such times the long hours of training, learning from past experiences and pre flight preparations comes to the front and saves the day. Sometimes passengers are blissfully unaware of the issue and continue to enjoy the flight. All this all possible because one aspect, planning! More specifically, planning for an emergency.

Yet, more often than not, pilots in the Indian aviation sector seem to be unprepared for one kind of emergency that is their own personal financial emergencies.

Personal financial emergencies can be broadly classified into two types based on nature of emergency i.e. (A) loss of job or life and (B) unexpected big ticket financial commitments.

While both can prove to be a heavy toll on one’s finances, if we look back to the last 5 years of the Indian Aviation Industry, job losses have been a major theme throughout.

Now as a pilot you earn a handsome salary starting from a young age. Hence your lifestyle tends to be on the more plentiful side.  And this only increases in significant jumps as you climb higher in your career. As such expenses are always on higher side. Luxury cars, high discretionary expenses, significant EMI’s and top notch education for children. All well within your reach. That is as long as you continue to earn that kind of money.

But what happens if you can’t? What if salaries are not paid for months or worse, you are given the golden handshake. What then? Take a step back and think about this for a minute. Ask yourself, will I be able to continue to live the life I have led so far under such circumstances; at least temporarily till I can get things back on track?

A majority of pilots will fail to have an answer to this. And that’s far from ideal!

So what should you do now? How do you start preparing for such unforeseen events? A thousand questions and ideas might run through your mind. Maybe you can get it right, maybe not. But with the help of a trusted financial advisor, who knows the intricacies of the aviation sector, you could stand a much better chance of confidently facing such troublesome periods, safe in the knowledge that you were geared up for it in advance. Exactly like handling an emergency while flying a plane.

As professionals specialized in planning for the worse, it definitely be worth your time for us to meet and discuss how to enrich your life.

Till then, happy flying!

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policy3

Sixth bi monthly RBI Monetary Policy FY17

The RBI monetary policy committee ( MPC ) reiterated what it has indicated in its last meeting in December – concerns around core inflation continue to remain with seasonal impacts on currently low inflation on items like vegetables likely to go away over a period of time, a strong global recovery that could create inflationary risks though higher prices of commodities including oil, volatility in global currencies on the back of rate hikes in some developed economies and some pass through of the HRA component of the 7th pay commission implementation.

Whilst none of this was really new, there continues to be a view that what the MPC says and what they will do are different from each other. With two consecutive policies that have reiterated the same thing, we believe that markets will finally believe that the MPC means what they say, and their actions will be consistent with the same.

It is therefore critical to continue to remember that managing inflation in the 4-5% pa range continues to be the number one priority of the RBI , and therefore decisions are likely to be taken keeping this in mind, more than other data points.

Your investments

The RBI also moved its policy stance to ‘ neutral ‘ from ‘accommodative ‘ which possibly means that the interest rate cuts from its side are probably coming to an end. This may mean that investment strategies that were driven around interest rate cuts need to be pared down. However, we need to remember that a neutral policy does not mean that interest rates are going to go up on bonds and fixed income instruments, so there is no need for a complete change in investment strategy on fixed income side. A strong global recovery as indicated in the policy statement ,is actually excellent news for the Indian economy, as a global growth environment has traditionally been positive for Indian companies, and therefore one should expect corporate earnings to get better going forward. The MPC has also indicated that they expect the economy to start showing a recovery going forward, so investments in equities could be enhanced for longer term investors. One also needs to remember that even thought RBI has probably stopped cutting interest rates, banks would possibly continue to cut loan rates as the transmission of the 1.75% rate cuts have only been about 0.85% to 0.9%, meaning that corporate India could continue to see lower loan rates going forward, helping their bottomline.

Your loans

With the banking sector flush with funds, and transmission only partially done, you can expect to see loan rates continue to drop for individual borrowers as well. It is a good time to refinance your loans, especially your home loan, in case you have not done so already. Be choosy about the loan provider that you use, as different variants of loans available could mean that you need to pick what works best for you.

April 6 is the next date to watch for the MPC meeting – expect some volatility in bond and currency markets till then, as they react to this shift to a neutral stance as well as other global events.

 

 

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budget 2016
1. HRA benefits to be enhanced from Rs. 24000 per annum to Rs. 60000 per annum under section 80GG.

2. Pensions get boost with NPS benefits tax free upto 40%.Retirement savings boost begins, MF arbitrage continues though. Move to boost retirement savings,

3. Long term capital gains tax on equities seems like it is untouched.Biggest worry for the markets till this morning moves away

4. Tax on dividends in excess of Rs. 10 lakhs introduced at 10%. Double tax again?

5. TDS rationalization introduced. Details awaited.

6. A recent survey shows job application fraud at 5 year high -digital repository of certificates should help.Big benefits for biz

7. New Health Protection scheme upto 1 lakh & additional topup of Rs. 30000 for senior citizens.Good initiative -implementation key

8. Section87A rebate increase from Rs. 2000 to Rs. 5000 practical solution. Cost of compliance possibly higher than tax revs there

9. EPFO & NPS choice gets more complex for employers & employees,with new subsidies on EPS contribution for 3 yrs for new employees

10. First time home buyers – loans upto Rs 35 lkhs – for value of house Rs 50 lkhs – additional tax deductions announced.

11. NRI without pan to get relief. Customs baggage rules for passengers to be simplified.

12. Surcharge for incomes above Rs. 1 cr enhanced to 15%. Very much on expected lines. Clearly not a onetime levy as earlier promised.

13. Voluntary disclosure of domestic undisclosed income with payment of 45%.Hope the fine print does not dissuade disclosures.

14. Central legislation to deal with illicit schemes duping investors

15. Relief for MSMEs with turnover Rs. 2 cr or less – presumptive income

16. Comprehensive code -for resolution mechanism to deal with bankrupty situations. Banks to benefit.

17. Presumptive tax at 50% for professionals earning upto 50 lakhs seems too high. Not sure this works.

18. Deepening of corporate bond market big boost for corporates & Debt mkts. Steps to build retail participation in long term bonds needed

19. NHAI,etc to raise 15000 crore in 2016 to give impetus to infra -more tax free bonds? Good for retirement portfolios if continued.

20. 100% electrification in villages with a target date in 2018 is a big step. Greater confidence on back of past performance.

21. Rs. 55,000 cr for roads n highways – huge investment in road and infra rs 97,000 cr in the coming yearr, togethr with rail @ Rs 218k cr

22. Continued focus on road building is good long term step. Focus on what has a worked well is good mgmt. Build on what has worked.

23. Doubling of farmers income in 5 years will depend on the real income increase i.e. post inflation inc. Hope inflation is controlled.

24. CSR funds & donations for higher education capital fund creation -is Rs 1000 crores good enough for an initiative of this scale?

25. Digital literacy creates equal access, but self help requires intrinsic motivation & job access. Can enough new jobs be created?

26. Fiscal discipline, tax reforms & financial sector reforms as part of 9 pillars of 2016.

27. Fiscal target to be maintained at 3.5% – good news for bond markets & positive for India rating. Fiscal prudence wins for now.

28. Fiscal target range as a strategy to be reviewed through a committee to factor ext. environment changes. Hope range is narrow.

29. Govt gross borrowings and net borrowing numbers seem lower than expectations – positive for bond markets.

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With literally thousands of stocksbonds and mutual funds to choose from, picking the right investments can confuse even the most seasoned investor. However, starting to build a portfolio with which mutual fund or stock to buy might be the wrong approach. Instead, you should start by deciding what mix of assets in your portfolio you want to hold – this is referred to as your asset allocation. You should consider an asset allocation strategy based on your

  • Time horizon: Asset allocation will depend on how long can you hold on to that particular asset and whether you need it for a particular goal. If you need any of your assets for let’s say a down payment for your house which is due next year, then probably holding debt/fixed income oriented instruments is an option you should consider. Examples of debt include Bank or Corporate Fixed Deposits, short term bond funds, short term bonds and ultra short term or liquid Funds. On the other hand if you have a long term goal like retirement, you can allocate a large portion to equity oriented instruments and lesser towards fixed income oriented instruments. As you move closer to the goal, you can keep reducing the equity portion while increasing the debt component.
  • Risk tolerance: This is different for each one of us. An individual should have a realistic understanding of his or her ability and willingness to stomach large swings in the value of his or her investments. Risk tolerance will depend on age of an individual – middle aged individuals generally tend to be more risk tolerant, as they may have more capital available for investing and have longer term goals.

 

In a volatile market scenario like the one we are witnessing now, and have also witnessed in the past, asset allocation becomes all the more important. The table below shows Sensex High and low on various dates. It also shows percentage fall from high. As you can see , the 1 year returns are as high as 105.9% from April 2003, but are also accompanied by a negative 1 year return to the tune of -31% from January 2008 during the US subprime crisis. Thus, had someone invested all of their money in equity prior to 2008 without a proper asset allocation in place, he would have incurred high losses in 2008. If someone would have invested keeping their goals, time to goals, risk tolerance, savings and expense pattern in mind, they could have held on to their existing investments while strategically rebalancing their portfolio as against panic selling and booking losses. The situation that we are facing now in 2015 around the Greece bankruptcy crisis and Chinese slow down have also resulted in Indian markets correcting significantly. The fall might look attractive to a lot of investors, and they might start buying irrespective of the asset allocation they might have charted for themselves. In our opinion, such events will come and go, and it will always be a challenge for investors to know how much further they could fall. Therefore instead of trying to time the market or haphazardly investing in what looks attractive,e one should go by ones pre defined asset allocation, because what looks attractive today may lose its sheen tomorrow.

Table 1 : SENSEX fall history

UntitledSource: Bloomberg, Reliance Mutual Fund

Historically, broad asset classes move in relation to each other are fairly consistently (for eg., when stocks are up, bonds tend to be down and vice versa). In diversifying the allocation across asset classes, you can potentially create a portfolio with investments that do not all move in the same direction when the market changes. However, if you only spread investments only by industry (eg. automobiles vs. pharmaceuticals), they are all in the same asset class (i.e., all in equities) and respond similarly to market changes. You are therefore open to much greater market risk. Asset allocation helps keep volatility in check.

Ultimately, there is no one standardized solution for allocating your assets. Individual investors require individual solutions. Asset allocation is not a one-time event , it’s a life-long process of progression and fine-tuning. Empirical data shows that it pays to be diversified across asset classes.

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Asia’s biggest economy & the world’s second largest economy is slowing, the Federal Reserve is about to kick off an interest rate tightening cycle, and China has just devalued its currency. Is this the repeat of Asian Financial crisis we saw in 1997? There are certainly parallels, but important differences as well. This time around, Asian economies have stronger current account balances, fiscal positions and foreign exchange reserves that provide a thicker buffer against turbulence. In addition, the exchange pegs that existed at that point have seen significant changes as well.

China’s Yuan devaluation comes on top of a steep slowdown in the world’s second-biggest and Asia’s biggest economy (Japan was No. 1 back in 1994) and a commodities slump that is hurting nations from Brazil to Australia, Malaysia and South Africa. Chinese companies now threaten to displace exports from Asian and emerging market competitors just as the U.S. Federal Reserve prepares to raise interest rates for the first time since the global financial crisis.

Analysts have also questioned China’s growth outlook although it posted economic growth of 7% year on-year in the second quarter, unchanged from the first quarter. They point out that Chinese growth cannot be sustained in the second half of the year given the exports decline and the drop in financial services’ contribution to the economy following the Chinese equity rout. They said a lot more may be needed to achieve this year’s target growth rate of 7% for the economy, given the weaker-than-expected macroeconomic data in recent weeks. To-date, Beijing has cut interest rates four times since November and also reduced the amount of money that banks need to keep with the central bank. Also, large infrastructure projects continue to have funding. However, the good news is that falling real estate prices in China, which were seen as a very big threat, have started to stabilize.

Let’s take a look at why is this happening? After the sub-prime crisis in the US and the steep fall in markets following the Lehman Brothers bust, the world has tried to solve the problem by throwing more and more money at the problem – money printed and lent out at near zero interest rates almost all over the developed world.

The US, after seven years of grappling with the problem, is still making only intermittent noises about raising interest rates; if the markets continue to crash and the global economy slows down, it may yet chicken out; Europe is keeping near zero rates in the hope growth will revive even as Greece is trashing about for survival; Japan kept the money-printing presses working overtime for more than a decade, but has, under Shinzo Abe, gone back to the same trick of monetary expansion.

The Chinese are unable to grapple with the new challenges that come with becoming the world’s second largest economy and key driver of demand. Two issues are paramount: one, there is huge financial repression, where Chinese savers are paid low returns and the cheap money raised from them has been invested uneconomically in unwanted infrastructure; and two, while financial repression helped fund investment-led growth over the last three decades, today it is constricting consumption – which is what China needs to boost internal growth.

India could use the opportunity provided by China’s problems to get its own growth engines revving. The tumult in China’s stock markets has turned into a blessing for Indian shareholders. Investors who poured into India in 2014 pulled back this year over concerns about taxes and the slow pace of reforms, preferring markets such as China, Taiwan and South Korea..

Now, fears about Chinese stock market volatility and Beijing’s interventions are overriding those concerns and driving them back to India. In this way India can have a much bigger pie of global capital which it can use to fund infrastructure requirements.

We find India a good alternative, given its improved macro data.

On the inflation front, a fall in both Consumer Price Index(CPI) and Wholesale Price Index (WPI) continued. CPI based inflation in July decreased to 3.78% from 5.4% in June 2015 due to a higher base last year. WPI fell for 9th consecutive month to -4.05% from -2.4% in the previous month. India is gaining from cheaper commodity prices. Cheap global crude and commodity prices mean that the imported component of inflation will also be lower. In fact, its impact is clearly visible in the wholesale price index, which has been showing negative growth for nine consecutive months now, mainly due to high deflation in minerals and mineral oil. India imported $139 billion worth crude and petroleum products in the 2015 fiscal, and as a rough rule of thumb, every $1 drop in crude prices results in a $1 billion drop in the country’s oil import bill. This will be good for reduction in India’s Current Account Deficit. India also imports $3 billion of copper and copper products. Also, lower input costs translate into higher profit margins for many Indian corporates. This will be a major respite for them. Due to depressed domestic demand, they had been struggling with their pricing power over the past few years, and were not able to pass on the increased cost.

With the government of India focusing on “Make in India,” this may be the time to provide impetus to manufacturing and even invite Chinese companies to set up a manufacturing base in India. However, this may require fast-tracking several pending economic reforms and easing the norms for doing business in India.

The Indian rupee has also been relatively stable over the last couple of years, vis a vis other emerging market currencies. This relative stability of the Indian currency, adds comfort to investors looking to invest in India.

Last but not the least, whilst most parts of the developed world are currently sitting on record low interest rates, India is one of the few countries which can potentially see interest rates getting cut, making it attractive for both companies to begin their investment cycle, as well as improve margins for corporate India going forward.

All in all, China’s pain could be India’s gain, but it won’t come easy. After all, there are no easy roads to success, doors only open to a combination of hard work and the constant desire to get better.

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