Quantum View


  • Jan 02, 2017
    Nilesh Shetty - Associate Fund Manager - Equity

    The year gone by..

    The Year started off on a pessimistic note with equity markets moving sharply lower as weak corporate earnings belied lofty valuations. Rural India was particularly struggling on the back of two successive droughts. The government, albeit a bit late, realised the same and tilted the orientation of its budget to address the concerns of rural India. After the clouds came the silver lining. The weatherman forecasted above normal monsoons, so equity markets cheered and started moving higher. FII Flows, which had been negative till February, quickly reversed and India again became the standout emerging market poised to show strong economic growth while others were struggling.

    Despite the strong growth suggested by the new GDP series, the fact remains that for the last three years, most companies have faced weak consumer demand. Hopes of an economic recovery were belied each year as company after company delivered weak earnings growth. This year a combination of economic factors meant the story of a possible economic recovery had real credibility. Rural income was poised to pick up after two successive droughts. Lower interest rates, the seventh pay commission, and “one rank one pension” payouts suggested a positive outlook. Government finances as well as India’s external account looked well under control. All these factors pointed to an economy on the cusp of a leap in consumer discretionary spend. Equity markets reacted appropriately and continued to rally in anticipation of the same. But then the Government launched what may eventually become one of the most ill-planned and executed schemes in the history of modern India. On Nov 8 the government launched a currency exchange scheme which delegitimised 85% of the cash in circulation. Cash available for transactions suddenly disappeared, while new cash with limited printing capacity was not even close to filling the gap. FII’s staring at rising international yields and an uncertain economic impact of the policy decided to bail, reversing the prior strong flows.

    The government’s launch of the demonetisation scheme has now become a textbook case of how not to execute a currency exchange program. No sooner was the announcement made to replace old currency notes than immediately a parallel economy to convert ill-gotten cash sprung up. What ensued was a race between economic agents – taking advantage of the situation with ingenious avenues to convert cash – and the RBI, as it introduced a flurry of rules every day to stem this conversion. The pace at which cash came gushing back into the banking system belied any hopes of major recovery of black money held in cash. After the first few days most people gave up on trying to keep up with the daily rule changes and just wanted to get some cash out of the bank to get back to their daily lives. The government finally threw in the towel by launching the Income declaration scheme which now ensures all the money will come back into the system. Looking at the economic costs involved with loss of productivity, lower revenues, loss of taxes, and stalling of the consumption cycle, the payoffs could never justify whatever the government was trying to achieve. Given that the upcoming implementation of the GST will make it increasingly difficult for the informal sector to under-declare revenues, one wonders why this scheme was even necessary.

    Internationally two major events marked the calendar year, both unexpected and misforecasted by pundits: Britain voted to leave the European Union and Donald Trump won the US presidential election. Both events were a result of populations reacting to years of stalled economic activity and negligible wage growth, trying to find avenues to change the status quo. The worrying aspect remains how disconnected the mainstream media has become with ground realities. Both outcomes were originally thought to be low probability by the media and ended up being a major shock when the actual results were declared. They signify that we may over the next few years see a world which is a lot more insular and protectionist in policymaking. One may also see economic costs being imposed on businesses which thrive on the free movement of goods and labour.

    Outlook
    Demonetisation has come at a crucial time for the Indian economy. Companies that were looking at a strong economic revival – especially the ones linked to consumer discretionary spend – are now staring at a sharp drop in revenues in H2FY17. Our channel check with companies suggests that even a full month after demonetisation, demand remains ~30%-50% below normal. The popular expectation that consumer demand will come rushing back once cash in the system normalises is looking more and more like wishful thinking. Lower demand leads to lower income leads to lower wage growth/job losses; the exact opposite of a virtuous economic cycle. The government may be forced to launch a stimulus program to break out of this descent, putting pressure on its finances.

    The next few months could be testing for India as the population waits for a normalisation to take hold and becomes increasingly restless, potentially triggering a political backlash. Weak corporate performance coupled with rising international yields may test flows into India as FII’s look at other commodity-linked economies delivering stronger corporate performance. Rising government expenditures and increasing commodity prices internationally could let the inflation genie out of the bottle – a genie which has been tamed as of late. But India has never been a story for the near-sighted. The India story remains: 6.2% average GDP growth for the last 36 years! It is a story of skilful managements trying to meet the requirements of an underpenetrated 1.2 billion-person-market despite constrained infrastructure and erratic government policy. Any major correction would be a great opportunity for long term investors to solidify their equity portfolios by buying India low.


    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

  • Jan 02, 2017
    Murthy Nagarajan - Head - Fixed Income

    The year gone by..

    The year 2016 was an eventful year for the bond markets. The government stuck to its fiscal deficit target of 3.7 % as per the FRBM target against market expectation of a hike in fiscal deficit. The RBI also changed its stance on system liquidity from deficit to bringing the system liquidity to neutral over a period of time. The RBI did conduct Open Market Purchases of Government securities amounting to Rs. 110000 crores in order to infuse liquidity into the system. The yields on ten year government bonds, which had touched 7.90 % levels before the budget, fell to 7.25 % levels after these events. The RBI also started providing liquidity via longer tenure term repos to even out a call money spike at quarter end due to frictional liquidity created in the system.

    CPI inflation was high in the first half, primarily due to high food inflation – notably in vegetables and pulses – on the heels of two consecutive years of drought. The Southwest monsoon for the current year was normal at 97 % of the long period average of 10 years. The total area sowed is 1071 Lakh hectares against normal sowing of 1064 Lakh hectares during the kharif season. The total area sowed under Rabi till 16th December 2016 is 256.19 Lakh hectares versus a normal area of 258.52 lakh hectares. Due to demonetisation, however, prices of perishables have come down: vegetable inflation is negative 6 %, while pulses have fallen by 22 % on a year on year basis. That said, the deflation caused due to excess pulse production has not percolated into retail prices yet, so this should provide some scope for CPI inflation to come down in the coming months. On the flip side, OPEC member production cuts amounting to 1.2 million barrels per day have sent Brent crude up to around USD 55 compared with USD 33 dollars at the beginning of the year. The Bloomberg Commodity index has risen a whopping 50 % during the current calendar year. Meanwhile, the government has raised the minimum wage by 42 % to Rs. 350, and this along with the implementation of the 7th Pay commission and introduction of GST  could led to higher CPI inflation in the coming months. We expect CPI inflation to average around 5 % next year due to these adverse factors.

    Global bond yields and currency fell with the election of Donald Trump as the US President. The President-elect is expected to increase infrastructure spending and cut corporate taxes, leading to higher fiscal deficits and higher Inflation. The Fed recently raised its Funds rate by 25 basis points, as non-farm payrolls have climbed 20 Million in 2016, CPI inflation has moved up to 1.6 %, and core inflation reached 2.2 % in November. The real surprise for the market was the Federal Open Market Committee saying it expects to hike the Funds rate by 25 basis points three times next year versus their September forecast of just two 2017 hikes. The US ten year Yield moved up from 1.65 % to 2.60 % levels. Emerging markets bonds sold off due to continuous FII outflows which led to their currency depreciating by 2 to 3 %. Out of cumulative outflows from emerging market of 23 billion USD after Donald Trump’s surprise win, India contributed nearly half: 10 billion USD in November across Equity and Debt. The cumulative debt outflow for the calendar year was only USD 7.5 billion due to the Indian currency remaining strong and capital appreciation in bonds.

    Outlook
    The monetary policy committee minutes release revealed a hawkish tone, with members worried about high oil prices, rising US yields and FII outflows from the Indian markets. It cites higher CPI inflation risks due to global economies recovering and the room for fiscal stimulus created by the US election. The room to cut rates does not now seem automatic. We expect CPI inflation to come around the 5 % band by March and we expect it to remain in that band of 4.5- 5 % in the subsequent financial year. We expect current GDP growth to fall to 4 % levels for the year, as we are factoring negative 4 % growth in the Dec 2016 quarter due to demonetisation. This will create pressure on the RBI to cut rates in February if the Government sticks to its fiscal deficit target. The ten year yield at 6.50% is already factoring in a 50 basis point rate cut, so there could be some volatility around that. We expect debt markets to be range bound and investors would be advised to invest in a short term bond fund or in a dynamic bond fund.

    Data Source: Bloomberg, RBI, Indiabudget.nic.in


    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

  • Jan 02, 2017
    Chirag Mehta - Senior Fund Manager - Alternative Investments

    The year gone by..

    2016 has been one of the most interesting years for gold that I have witnessed in many years. Importantly, breaking out from a string of yearly losses, this year gold delivered gains of +7%. We saw a number of shocking developments with central bank experiment getting more unconventional than one can imagine. At the other end of the spectrum were the more surprising outcomes like the Brexit or be it the Trump election win. However, the way the markets have reacted has been completely counterintuitive to expectations. One thing that clearly emerges from this year’s dramatic episodes is the move against anti establishment and towards de-globalization.

    The year started with a risk off environment following the first fed rate hike in December 2015. The risk off exacerbated with growing china slowdown and related currency devaluation concerns leading to a selloff in asset markets. As one would expect, central banks reacted to market turmoil by further unorthodox measures introducing negative rates for the first time ever. The central banks of Europe and Japan continued with the asset market purchases in their attempts to lift financial markets. Britain’s vote to exit the European Union further lifted gold prices. As central banks realized that their stance towards negative rates was not yielding desired results and just causing a big backlash from people as they became unsecure and rushed towards real asset like gold; they back paddled. This is when yields started to move up without any corresponding impact on inflation leading to improvement on real rates.

    Even with the uncertain outcomes like the Trump presidency and Italian referendum, gold prices have continued to fall. This has more to do with the sharp increase in yields post the trump win. The mere probability of the US economy improving under Trump’s presidency has financial markets bracing themselves for higher interest rates. Interest rates have gone up more than any increase in inflation expectations leading to higher real interest rates. All this has manifested into renewed dollar strength, tightening of credit spreads and positive stock markets; ensuring a correction in gold prices.

    Outlook

    The flipside of Trump Euphoria
    Much of the newly founded optimism is based on the view that Trump will be able to kick-start the US economy through his plans to spend up to a $1-trillion on infrastructure and other projects. With this spending and trade tariffs & regulations, he proposes to create new jobs and bring back jobs totaling 25 million jobs over 10 years. It is also potentially inflationary since it would put upward pressure on wages in America especially on the skilled labour side. If Trump succeeds in enacting laws that bring jobs back to the united sates in droves, it would certainly start to reverse the longstanding deflationary trend created by free trade and globalization and end up extremely inflationary and also create turmoil in emerging markets.

    Various estimates have put the cost of Trump’s proposed tax cuts at some $6 trillion over 10 years. In addition to this, Trump has also promised to boost infrastructure and military spending.  Obviously, this is a contradiction since it is not possible to effectively lower taxes without a corresponding reduction in government outlays. In reality, the plan will only help to boost the money supply growth rate. The resulting loose fiscal policy will increase government borrowings, which ultimately is going to be monetized by the US central bank.  Nothing in Trump’s plan suggests that he is aiming at generating more real wealth. His entire focus is to generate an increase in employment regardless of whether this increase in employment is in response to wealth generating activities or not. The second policy focus is tax cuts that may not seem sustainable or credible if there is no agenda to meaningfully shrink big government.

    Trump has been widely inconsistent on monetary policy coming out as both an opponent and supporter of low interest rates. One of the great challenges is likely to be the growing cost of financing the debt with interest rates creeping up. Also, a stronger dollar might encourage Donald Trump to lurch towards protectionism. The dollar appreciation in the 1980s pushed the US current account deficit to over 3% of GDP by 1986. This prompted then-President Reagan to pressure Japan to accept voluntary restraints on car exports to the US, and to agree the Plaza Accord designed to weaken the dollar. This time, all this may compel Trump to pressure the Fed to design policies to not only keep interest rates low but also intervene to weaken the dollar. Such a scenario can be extremely beneficial for gold.

    Fed, Real Rates and Gold
    US inflation expectations have been inching higher this year. Part of the increase in bond yields was likely on account of increasing inflation expectations which would compel the Fed to increase rates. However, since Trump’s becoming president elect, the rate of increase in nominal interest rates has exceeded the rate of increase in inflation expectations. This led to a scenario of higher real rates. In effect, over the past month economic growth expectations have risen faster than inflation expectations. As discussed above, in reality, Trumps proposed plan can actually quicken the pace of price inflation than what he can deliver on economic growth. This would eventually lead to a domino effect of rising inflation expectations and lowering of real interest rates. As real interest rates start to decline, the strength of the dollar would reverse and also make the lower end of the yield curve fall faster in anticipation of lower rate hikes. This will be extremely bullish for gold.

    Markets were playing the “lower for longer” theme.  If yields continue to increase it won't just be bond prices that will collapse but every asset that has been priced off that so called "risk free rate of return" offered by sovereign debt. The problem is that with such a leveraged economy, elevated asset prices, rising bond yields and the anticipation of further increase in rates may well cause risk premia to rise i.e. volatility in the market to increase, possibly causing overvalued equity markets to correct. The associated volatility may cause financial conditions to deteriorate as the Fed likes to put it, providing them enough excuse to abandon rate hikes. The anticipation of higher real rates may fizzle out yet again, providing support for the price of gold.

    The problems in Euro zone likely to get worse
    The United Kingdom’s Brexit decision has already dealt a heavy blow to peoples’ confidence in the European Union. The structural problems of the common currency bloc emanating from a common monetary policy make it fundamentally self defeating. The chances of the project stalling are now even greater, and the ties that bind the union together may even unravel. Doubts about its viability will exacerbate the economic misery especially of weak euro member states. Investment in these countries will slow down, further suppressing production and employment.

    More than ever, the survivability of euro banks is in the hands of the European Central Bank. However, the unhealthy liaison between the ECB and governments and banks in the euro area could now take a really bad turn as the stage is set for political upheaval in some European countries. The dynamic has now changed in German politics ever since the loss in popularity suffered by German Chancellor Angela Merkel last summer over the immigration issue. This means that it is extremely risky for the German leader to make further concessions towards fiscal union even if she wanted to with the German federal election due to be held in September 2017. This also translates into a loss of critical support for Draghi in terms of any future unorthodox measures he might want to introduce. The ensuing banking crisis can lead to a general worsening of economic conditions throughout Europe and widening of the already-large gaps between the performances of the relatively-strong and relatively-weak European economies.

    A banking crisis that emanates from Europe would not remain confined to Europe in today’s interconnected financial world. This could lead to concerns on banks health in U.S and elsewhere. This can suddenly translate to weakness in banking stocks and spillover to overall risk off sentiment in financial markets. The rush to safety will see bond yields moving lower faster than inflation expectations, resulting in lower real interest rates. Falling rates would also curtail rising hopes for further rate hikes from U.S Federal reserve and therefore be positive for gold. 


    Headwinds

    The current reflationary exuberance may persist into the first few weeks or may be months of Trump’s presidency. This would make real yields rise further. In which case the dollar will stay firm and gold will remain under pressure.

    However, we do not expect big downsides in gold as much of it is now baked into prices and rising yields will start showing negative effects on other aspects of the economy and asset markets as well. The prospects of a hike in interest rates have been rising faster than inflation expectations, which is bad for gold in the short term but we doubt this will continue for long. With the increase in commodity and energy prices, the labour market tightening and a hawkish trade policy could soon manifest into rapidly rising inflation expectations. The potential headwind for gold could arise from the proposed Trump tax plan of providing a onetime tax cut to incentivize repatriation of corporate money stashed abroad. This repatriation would lead to a large one-off boost to the Treasury’s revenues. However, history suggests that would just postpone the inevitable.

    There exist more uncertainties than certainties in the global macroeconomic environment of which Trump’s presidency is a big unknown. We believe that barring the near term, gold prices should start moving gradually upwards in 2017.

    Source: The World Gold Council, Bloomberg

    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

  • 19th January, 2017

    Run, But Mind the Potholes!

    Dear Investor,

    The Mumbai marathon ended recently with over 40,000 runners participating. It is extremely inspiring to see runners who are differently enabled, septuagenarians and youngsters - all of them running against their greatest competition - themselves. One of the most impressive sights of the marathon is that it is held on the pockmarked roads of Mumbai, which get a facelift for this event - rubbish is cleaned and the roads are gleaming, only for the monsoons to create havoc again.

    The government is also running a marathon of its own on improving the financial and payments sector of India, it is a run for the long haul for sure with a lot of rule changes and improvement coming in from the government, the RBI and the Ministry of Finance, each of them have suggested improvements that could improve the financial and payments landscape of India, however one hopes that the government is aware of the potholes along this run.

    The Run - Preparing the groundwork

    Going digital seems to be the buzzword for this government, with slogans like Digital India being touted around and most ministries now offering downloadable apps to the citizens, going digital seems to be the mantra of the Modi regime.

    In this respect the Ministry of Finance has instituted several measures, including establishing a Committee for Digital Payments, which gave its first report out earlier this month*. The Jan Dhan Yojna too seems to be gathering steam with more than 26 crore accounts opened under this scheme, Aadhaar card issuance has touched 1.09 billion (that's around 85% of estimated 2015 population, according to Wikipedia).

    The only silver lining of the well-intended but execution-leaving-a-lot-to-be-desired demonetization drive is the increase of issuance and use of Digital wallets for payments. In the city of Mumbai at least we notice cab drivers, vegetable vendors and even the friendly neighborhood dhobi seem to have embraced the concept of digital wallets (mostly out of no choice rather than any tilt at modernization). In the rural areas though we have a different story altogether but then that is material for another article; coming back to this one...

    The Pothole - that everyone seems to have ignored

    In a marathon, the easiest thing is to run around a pothole right? Or leap over it? The answer is no, where every ounce of energy is needed to complete the marathon, a slight deviation, or an extra burst of energy needed to leap over the marathon can cost the runner seconds and also wastes energy, hence if the road you're running on isn't well paved and maintained then it could be uncomfortable for those running on it. The authorities, therefore, take cognizance of this and ensure that the roads are even enough, so that the run is smooth and without any hitches.

    The government too has been ignoring a pothole in its policies, could be a small blip or the proverbial black knight in the Arthurian tales, that keeps getting bigger and tougher to beat if ignored for too long - the pothole - third party payments. When there are rules that make payments simpler, there also need to be checks and balances that ensure that the government's black knight (read black money) is kept tamed at all costs. The issue with all these committees etc is the fact none of them even scratch the surface to create rules that restrict or make it obligatory to the issuing bank / paying entity to disclose payer details and facilitate monitoring of third party payments.

    What are Third Party Payments?

    It is important to know what third party payments are, this can be best explained with the help on an example. Assume Mr. A is an official who wishes to take a bribe, for a favour offered to Mr. B. Due to a crackdown Mr. A isn't able to so, hence all he tells Mr. B is to make an investment or a payment in the name of Mr. A. This investment, though in the name of Mr. A is actually being paid from the pocket of Mr. B - a third, 'unrelated' party.

    The problem with this is that investments, loan repayments, insurance premium payments, school fees etc can be paid digitally and if third party payment detection mechanisms are not strong enough then the government is on the back foot as far as the fight against black money is concerned.

    The Issue

    Thus, if the lawmakers are blind about this mechanism of third party payments; it is leaving open a massive back door for black money to thrive in the system. This is one of the biggest issues we face as a fund house too, checking for third party payments and trying to ensure that the payment is made correctly. Even in our industry, though third party payments is a chronic problem we face, the regulator and IBA / AMFI have a lot of ground to cover before we can effectively control this and ensure that the payments made for purchasing the fund are made by the primary investor and not through some other means.

    Unfortunately there is no concentrated effort from any financial / paying entity to record and share the names of those who invest through them, with other financial entities. Banks, and other payment entities are not willing to make the investment needed to create and run such a system. In my humble opinion the banks, which will have the most data since they have the most customers should take the lead and help create and maintain a system that will allow data to be shared with all financial entities in order to curb the menace of third party payments.

    A Potential Solution...

    Again lies in the Digital world, every payment made needs to be made through an authorized account which belongs to the primary investor or payer, use of Biometrics to authenticate transactions should become the ultimate norm over a period of time with more availability of cheap biometric devices. UIDAI needs to be able to provide such authentication for transactions quickly by signing up, using an API or any encrypted digital method.

    The Committee on Digital Payments has touched upon, the issue of exchanging data between entities to prevent money laundering. This practice of data sharing may according to a few, currently flout the prevailing Privacy laws that bind various financial entities. However, the Committee correctly observes that payment service providers should be allowed to access/process data to improve fraud monitoring and anti-money laundering services. Therefore the submission is that maybe banks could take the lead in creating this system and verify the names and details of their customers. If banks are unwilling to share customer details on concern of privacy Laws, then the same can be confirmed as a Y or N based on name / details shared to the banks by the payment receiving financial entity.

    KYC of every investor or payer needs to be done, centrally and all financial entities should be able to share details and data seamlessly at the backend. Offenders need to be suitably punished and a roster of those guilty of third party transactions needs to be maintained and financial entities should be able to access this list easily.

    Thus while planning for, working towards and eventually running the marathon is great, the 'devil is in the details' we need to ensure that the potholes along the road are not merely smoothed over, but also eliminated altogether. Similarly a digital mechanism to track and stop third party payments needs to be brought into being sooner rather than later.


    Disclaimer, Statutory Details & Risk Factors:

    The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

    Mutual fund investments are subject to market risks read all scheme related documents carefully.

    Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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