Weekend links: Jan 26 2014

Let’s start with a Business Line blogpost about Arvind Kejriwal that features AAP in a slightly positive light before moving on to a Hindu article that features at least one aspect of AAP in a terrible light

I’m featuring both of these here because I agree with both of them, and also because they belong to the same publication, so that takes away some of the cynicism that we face while discussing such topics.

This is perhaps the most fascinating thing I’ve watched this week – fresh water fish hunting birds!

I really loved Amit Agarwal’s interview at Lifehacker. 

I never thought it could be someone’s job to legally sell their last name, but everyone’s got to make a living, right?

Dubai is using drones for firefighting, really amazing, right?

Finally, the ever brilliant xkcd offers the best definition of automation I’ve yet read.

Enjoy your weekend!


Overcharged top predator chased by bunny after sleeping too much

The most amazing thing I read this week was this new insight on the question of why we sleep. This might be the breakthrough that scientists are looking for to understand why we sleep, and why it is so important for us.

Another interesting piece about sleep: How many hours people of different age group need?

Every now and then you hear about people advising you to let your battery drain, and extend its life, some quick Googling reveals that this isn’t the case with lithium ion batteries which are common laptop batteries, so here’s a piece asking if your laptop battery really overcharges? 

What China has done in to improve their transportation situation is really impressive.

Fascinating piece on how top predators shape their whole environment. 

A short piece on the Pakistani teenage hero who gave up his life to save others. 

Finally, you have to see this to believe it – a bunny chases a snake into a tree! 

Enjoy your weekend!

Composition of UPA II

A few days ago I had a short exchange with Tejus Sajwani on Twitter (who by the way you should definitely follow) when he asked the following question:

Without AAP, if Modi hadn’t done well in coming elections, he would have lost his raison d’être. But now, even if BJP doesn’t do well, Modi can still stick around, saying that BJP was jilted at the altar by an errant bride that ran off with AAP! So perhaps then, we have a cobbled up coalition for a few months, which perhaps ends up giving BJP a better chance in a 2nd election in say 1.5-2 years? Plausible??

This was my initial response:


I’m embarrassed to say that at the time I didn’t realize that the current UPA II government has 276 MPs which is just one more than the 275 MPs required to stay in power, and also a little confused because the Lok Sabha website itself gives a different number.

Parties According to Lok Sabha Website According to Wikipedia
Indian National Congress 204 206
Nationalist Congress Party 9 9
Rashtriya Lok Dal 5 5
Jammu & Kashmir National Conference 3 3
Indian Union Muslim League 2 3
Kerala Congress (Mani) 1 1
Sikkim Democratic Front 1 1
All India United Democratic Front 1 1
Outside Support
Samajwadi Party 22 22
Bahujan Samaj Party 21 21
Rashtriya Janata Dal 3 4
Total 272 276

After checking with a few people, I feel that the Lok Sabha website is incorrect, but please leave a comment if you have any insight on this.

Going back to the original question, I think it is quite possible that the scenario Tejus mentioned plays out because AAP is planning to contest about 300 seats, and winning even 20 of those will give them significant sway over BJP which is expected to win the most seats.

This will create any coalition very difficult, and a distinct possibility for a re-election which the market never likes. I think this view is only beginning to gain momentum in the popular press now, but I feel it won’t be long before it gets a lot of attention, and rightly so.

Finally, it is worth mentioning here that I like AAP and although I frown upon many of their left leaning policies, overall, I think they are much better than the alternatives, and if nothing else, I feel that this is the best bad idea we have sir, by far.

NHAI’s 8.75% or 8.52% vs. IRFC’s 8.65% or 8.48% – Which Issue is Better?

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

As the NHAI issue opens today, many investors have not been able to decide which issue they should go for – NHAI 8.75%, 8.52% or IRFC 8.65%, 8.48%. This comparison also becomes significant as no other company has even filed the draft prospectus for its issue. Before I do the comparative analysis, let’s check once again why these tax free bonds have become so popular with the investors.

Investors’ response to the tax-free bonds this financial year has been quite better as compared to the last financial year. The reasons are simple:

Higher Rate of Interest – Last year, these tax-free bonds were carrying lower rate of interest rates, broadly in the range of 7-8%. This year, their interest rates have been higher by around 1%. At the same time, interest rates on other saving instruments, like bank fixed deposits (FDs), post office schemes, company FDs etc., are more or less stable or just slightly higher.

Thanks to the higher G-Sec rates, it is natural for the investors to opt for 9.01% tax free bonds from the National Housing Bank (NHB) as against 9% fixed deposit interest rates from the State Bank of India (SBI) or from some other banks.

Removal of “Step Down” Clause – Till last year, these bonds carried the “Step Down” clause, as per which the buyer(s) of these bonds from the secondary markets are entitled to a lower rate of interest as compared to the first allottees. This is not applicable with the bonds issued during the current financial year.

This is also the reason why the bonds issued last year attract a very low trading interest, which I think should not be the case with this year’s tax free bonds going forward.

Lower Rate Differential – Differential between the rates offered to the retail investors and the non-retail investors got fixed at 0.25% per annum this year, which stood at 0.50% till last year. Non-retail investors considered it to be on a higher side and their participation was quite limited last year. This year, non-retail investors’ participation has been considerably better, especially with NHPC, NTPC and NHB.

Losses in Gilt/Income Funds – Bloodbath in the debt markets or a steep fall in the NAVs of debt mutual funds, due to some incorrect policy measures by the government and the RBI and also QE3 tapering announcement by the US Fed, also led to a shift in the investors’ interest towards these tax free bonds.

Investors of these tax free bonds know that they are going to get at least some fixed interest income every year in their bank accounts, even if there is no capital appreciation or even if the interest rates move higher from the current levels, resulting in a notional capital loss.

So, with very few options left available for the current financial year, the investors at present are asking themselves:

NHAI 8.75% or 8.52% vs. IRFC 8.65% or 8.48% – which issue should I invest in?

In terms of interest rates, it is very much clear that NHAI is offering higher rate of interest than IRFC, so it is relatively better. But, is it that simple? Certainly not, at least not for a common investor. How are these two companies different and which company is fundamentally better? Let us try to do some analysis.

Though not strictly comparable, I’ve tried to do a comparison between IRFC and NHAI on certain parameters. While IRFC is the wholly-owned financial arm of Indian Railways, NHAI is an autonomous body of the Government of India. Both these companies are strategically important for the Government of India (GoI).

IRFC got constituted in December 1986 for the purpose of raising the necessary resources for meeting the developmental needs of the Indian Railways. NHAI got operationalised in February 1995 for the development, maintenance and management of India’s national highways.

While IRFC has been classified as the Infrastructure Finance Company (IFC) by the RBI, NHAI is the nodal agency for the development and maintenance of national highways across the country, which makes it an infrastructure developer itself.

Financial Position of IRFC and NHAI

IRFC has a net worth of Rs. 5,794.28 crore as on March 30, 2013, whereas the same stands at Rs. 81,053.11 crore for the NHAI. As IRFC lends almost all its borrowings to the Indian Railways for financing rolling stocks, it has zero non-performing assets (NPAs).

IRFC, on an annual basis, enters into a standard lease agreement with the MoR and earns an assured net interest margins from the MoR which has remained 0.50-0.51% in the last five fiscal years. MoR also bears the interest rate risk as well as the exchange rate risk. As it also gets regular capital infusion by the government of India, it got Rs. 600 crore during FY 2013.

Also, here are certain financial numbers of IRFC over the past few years:

As NHAI has been running into operational losses for the last few years, it is not practical to analyse its profitability position and make a comparison with that of IRFC. But, NHAI is a bigger organisation and has a total capital employed at Rs. 1,13,331 crore and capital work in progress (CWIP) at Rs. 1,06,440 crore as on March 31, 2013.

NHAI has been mandated by the GoI to implement National Highway Development Project (NHDP) with an estimated investment of about Rs. 2.48 lakh crore, spread over seven phases. NHDP envisages improvement of approximately 54,500 kms of national highway network.

As it is very difficult to conclude which organisation is better between the two in terms of overall financial performance and operational efficiency, personally I think NHAI issue is a better one as it offers a higher rate of interest, the size of the organisation can be considered as too big to fail and its strategic importance in India’s road & highways development is too significant to ignore.

Which one do you think is better between the two and how long do you think the NHAI issue will last? Please share your views.

Edelweiss’ ECL Finance Limited NCD Issue – January 2014

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Rashesh Shah promoted Edelweiss Financial Services’ 79.28% subsidiary, ECL Finance Limited is going to launch its public issue of secured, redeemable, non-convertible debentures (NCDs) from January 16th i.e. the coming Thursday. ECL Finance has issued such NCDs earlier also, but only through private placements. So, this is the first such public issue of NCDs by the company.

The issue will remain open for just eight days from January 16 and is scheduled to get closed on January 27, which is a Monday.

Size & Objective of the Issue – ECL Finance plans to raise Rs. 500 crore from this issue, including the green-shoe option of Rs. 250 crore. The company plans to use the proceeds for various financing activities including lending and investments, to repay existing loans, for capital expenditures and other working capital requirements.

Coupon Rates & Tenors on Offer – The company has decided to issue these NCDs for a duration of 36 months and 60 months. For 36 months, it is offering 11.60% per annum rate of interest, payable either monthly or at the end of this period on a cumulative basis.

For 60 months, it is going to pay 11.85% per annum, again payable either monthly or on a cumulative basis on maturity.

Higher Coupon Rate for Edelweiss Shareholders – ECL finance has decided to offer an additional 0.25% p.a. to the shareholders of Edelweiss Financial Services, its promoter company. So, even if you hold one equity share of Edelweiss, which closed at Rs. 28.80 per share on January 13, you are going to get this additional rate of interest.

But, you need to keep a couple of clauses in mind before you get attracted to this extra rate. One, you need to be a shareholder in the records of Edelweiss, on the deemed date of allotment as well as on the record date(s) i.e. both the dates.

Two, you are going to get this additional interest only on the lower number of NCDs held by you on the deemed date of allotment and the record date(s). So, if you buy some more NCDs from the secondary markets, you are not going to get the additional interest. Also, if you sell some NCDs after you get them in the initial allotment, you are going to lose out on this additional interest on those NCDs.

Interest Payment – With monthly option of interest payment, due interest will be paid on the first day of every month, except Sundays and public holidays on which commercial banks are closed in Mumbai.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three categories and each category will have the below mentioned percentage fixed in the allotment:

Category I – Institutional Investors – 20% of the issue is reserved

Category II – Non-Institutional Investors – 20% of the issue is reserved

Category III – (i) “Unreserved Individual Portion” including HUFs – 20% of the issue is reserved

Category III – (ii) “Reserved Individual Portion” including HUFs – 40% of the issue is reserved

Resident Indian individuals or HUFs, investing Rs. 10 lakhs or less, would fall under the “Reserved Individual Portion” and those who invest more than Rs. 10 lakhs would come under the “Unreserved Individual Portion”.

NCDs will be allotted on a first come first served basis.

NRI not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

Rating of the Issue – The issue has been rated by CARE and Brickwork Ratings and both have assigned it a ‘AA’ rating. Brickwork Ratings has a ‘Stable’ outlook for the issue.

Demat & TDS – Demat account is not mandatory to invest in these bonds as the investors have the option to apply these NCDs in physical form as well. Also, though the interest income would be taxable with these bonds, NCDs taken in demat form will not attract any TDS.

Listing, Premature Withdrawal & Put/Call Option – The company is going to get its NCDs listed on the Bombay Stock Exchange (BSE) only. The investors will not have the option to redeem these bonds back to the company before the maturity period gets over, but they can always sell these bonds on the BSE anytime they want. Liquidity remains low with these NCD issues though.

There is neither any put option with the investors of these bonds nor there is a call option with the company to pay back early.

Minimum Investment – The investors will be required to apply for at least 10 NCDs in this issue which makes it a minimum investment of Rs. 10,000.

Profile of ECL Finance Limited

ECL Finance is the 79.28% subsidiary of Edelweiss Financial Services Limited. Rest of its shareholders include Edelweiss Commodities Services Limited holding 7.77%, Edelweiss Securities Limited holding 5.15% and Waverly Pte Limited, an affiliate of GIC Singapore, holding 7.80% in the company as on November 30, 2013. It is one of the forty seven (47) subsidiaries of Edelweiss Financial Services Limited.

ECL Finance is into the business of lending and has diversified product line, including short-term/long-term finance to the corporates, loan against property & securities, financing to the real estate developers and small & medium enterprises (SMEs), ESOP financing, IPO financing, loan against mutual fund units/bonds etc.

(Note: Figures are in Rs. Crore)

Relatively speaking, I think this issue looks better to me as compared to the other issues of Muthoot Finance, Manappuram Finance, SREI Infra and even India Infoline Housing Finance Limited (IIHFL). ECL Finance has a diversified product portfolio and backing of a reputed promoter group. Its financial position also looks healthy.

But, again I think that the investors in the higher tax bracket are better off investing in tax-free bonds rather than these taxable NCDs. Investors, who are not liable to pay any taxes and who can bear some risk of investing their money with a private company, can consider these NCDs for their investment.

Application Form of ECL Finance NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in ECL Finance NCDs, you can contact me at +919811797407

NHAI Tax Free Bonds – January 2014

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

As National Highways Authority of India (NHAI) launches its tax-free bonds issue next week from January 15th i.e. the coming Wednesday, it would become the ninth such company to do that this financial year after REC, HUDCO, IIFCL, PFC, NHPC, NTPC, NHB and IRFC. NHAI would carry coupon rates of 8.75% per annum for the 15-year duration and 8.52% per annum for the 10-year duration.

Though the rates are not as attractive as National Housing Bank (NHB) offered, they are still better than IRFC. Like IRFC, NHAI has also decided not to offer the 20-year option. But, unlike IRFC, the issue is relatively smaller in size and will remain open for four more days i.e. fifteen days, to close on February 5th, Wednesday again.

Size of the Issue – NHAI is authorised to raise Rs. 5,000 crore from tax-free bonds this financial year, out of which it has already raised Rs. 1,301.60 crore through a private placement carried out on November 25, 2013. So, NHAI plans to raise the remaining Rs. 3,698.40 crore from this issue, with Rs. 1,000 crore as the base issue size and Rs. 2,698.40 crore as the green-shoe option.

Rating of the Issue – Being the nodal agency for the development and maintenance of national highways across the country and an autonomous body under the Ministry of Road Transport and Highways, this issue of NHAI has been rated as ‘AAA’ by three credit rating agencies, CRISIL, CARE and Brickwork Ratings, which is again the highest rating by these rating agencies.

Investor Categories & Allocation Ratio – The investors have been classified in the following four categories and each category will have certain percentage of the issue size reserved during the allocation process:

Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 369.84 crore is reserved

Category II – Non-Institutional Investors (NIIs) – 30% of the issue i.e. Rs. 1,109.52 crore is reserved

Category III – High Net Worth Individuals including HUFs – 20% of the issue i.e. Rs. 739.68 crore is reserved

Category IV – Resident Indian Individuals including HUFs – 40% of the issue i.e. Rs. 1,479.36 crore is reserved

NRI Investment – Non-Resident Indians (NRIs) and Qualified Foreign Investors (QFIs) would be disappointed to know that they have been left out as ineligible to invest in this issue.

Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first come first serve (FCFS) basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchanges.

Demat/Physical Option – Investors have the option to apply for these bonds either in physical/certificate form or in demat form, whichever they are comfortable with. But, it is mandatory to have a demat account to sell/trade these bonds. Interest will still get credited to your respective bank accounts through ECS or to that bank account which is linked to your demat account.

Lock-in Period, Premature Redemption & Listing – As these are not tax saving bonds, there is no lock-in period with these bonds. But, at the same time, the investors cannot redeem these bonds back to the company before the maturity period gets over. In order to encash your investment before maturity, you’ll have to compulsorily sell these bonds on the stock exchange(s) where they have been listed for trading.

NHAI has decided to get these bonds listed on both the stock exchanges, National Stock Exchange (NSE) as well as Bombay Stock Exchange (BSE). As always, the company will get these bonds allotted and listed within 12 working days from the closing date of the issue.

Interest on Application Money & Refund – NHAI will pay interest to the successful allottees on their application money at the applicable rate of 8.52% p.a. or 8.75% p.a. as the case may be. It will be calculated from the date of realization of application money up to one day prior to the deemed date of allotment. Investors, who don’t get these bonds allotted, will get interest @ 5% p.a. on their refund money.

Face Value of the bonds & Minimum Investment – NHAI has decided to fix the face value of these bonds at Rs. 1,000 each and minimum application size at 5 bonds. So, the investors will have to invest at least Rs. 5,000 with the company.

Interest Payment Date & Record Date – NHAI has fixed the interest payment date to be March 15. So, the investors investing in this issue will get their first due interest paid on March 15, 2014 and subsequently on March 15 every year, except Sundays and other public holidays.

Record date will be fixed 15 days prior to the interest payment date, except Saturdays, Sundays and other public holidays.

Out of thirteen companies which have been allowed to issue tax-free bonds this financial year, six companies, REC, PFC, NHPC and NTPC, HUDCO and NHB have already exhausted their quota of fund raising through their public issues. While IRFC issue is open and NHAI coupon rates are out, only five other companies, IIFCL, IREDA, Airport Authority of India, Cochin Ship Yard and Ennore Port are left to do such exercise.

While nobody knows in which direction the G-Sec rates are headed, the investors are now left with very few choices to take advantage of these tax-free bonds this financial year. If you still think that inflation, India’s fiscal deficit and G-Sec rates are headed higher, you can probably wait for either IIFCL to launch its Tranche III issue or IREDA to launch its maiden tax-free bonds issue. Otherwise, I think you have only IRFC and NHAI issues to make a choice.

Application Form of NHAI Tax Free Bonds

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in NHAI Tax Free Bonds, you can contact me at +919811797407

First weekend links of 2014

I really loved reading Rafael Nadal’s interview in the FT yesterday, the humility of the man is staggering.

I was fascinated to read that Zappos is getting rid of managers in the company, and replacing its somewhat traditional corporate hierarchy with a structure known as Holocracy. Whether it works or not only time will tell, but it surely is fascinating to think that you can run a company without traditional managers.

Self driving cars, trips to Mars, WiFi lights, how long before you can buy plates and cups that you never need to wash? A bit longer than you would hope, but at least someone is working on it. Take a look at the video in that article too, amazing that that’s ketchup in the bottle.

Whenever I read a good article on sleep, I’m reminded of how little we know about sleep.

I discovered this blog about a month ago, very funny.

The way drug legalization is going, most of America may legalize recreational Marijuana in a decade or so; The Economist has a good article on the subject.

Finally, does it annoy you when someone takes a picture instead of enjoying the scenery?

Enjoy your weekend!

Book Review: The Power of Full Engagement

I have recently finished reading The Power of Full Engagement by Jim Loehr and Tony Schwartz and found it quite useful.

The main idea behind the book is that you should focus on managing your energy, and not your time to excel in your professional and personal lives.

The authors train with athletes to manage their performance, and they have used the same principles to train corporate executives to better perform in their work.

The comparison with athletes is an interesting one and they speak about how athletes train 90% of the time to perform the remaining 10% time, and how this number is so skewed for corporate executives who probably work 90% of the time with just 10% time off.

This was a very interesting concept to me and while most of us may never feel the same performance pressure as an athlete; we also never get the same luxury of training and rejuvenating that they do.

The authors build on this concept of training the mind and body like athletes and talk about four different types of energies that you need to build in order to excel:

Physical: The foundation of success and well being is good health and they talk about the importance of building your physical energy reserves and how you can do so. There was a section here that spoke about how your physical capacity diminishes if you don’t exercise and I felt that although it is an easy to understand concept, it is not very intuitive. Before I started working out regularly, I never stopped to think that by not working out, I’m losing strength and my body is atrophying. While at the gym, I saw people much older than myself work out much harder, and while it is embarrassing, it is quite eye opening and inspiring to think that you can be that fit even decades from now.

Emotional: Emotional energy is the range of positive or negative emotions you experience, and the authors speak about doing things for the sake of doing them in order to renew your emotional energy. I could relate to this as I had stopped reading Mahabharata some time ago due to my busy schedule, and I felt that this is something I just can’t spend time on right now. The authors say that when you do things just because you like doing them, and not because they are required of you, those things renew your emotional energy and help become more focused in your professional and personal lives.

Mental: Mental energy is your power of concentration, ability to remain focused, creativity, activities that challenge your brain like solving a puzzle or playing a game of Chess. I see this as anything that pushes you out of your comfort zone intellectually, whether it be a game of Scrabble or in my case, trying to read a map!

Spiritual: Frankly, I had thought that I would just skip this section of the book as I’m usually not very keen on matters of religion, or spirituality but I found this part of the book most interesting.

The way they have defined spirituality is really in terms of virtues and values that are most important to you. And what is sometimes frustrating and even somewhat depressing is that you can’t name the values that are most important to you.

One of the things I liked best about this section was where they asked you to think about people you admire and then think about the qualities that you admire the most about them. At first I started thinking of public figures and leaders, and their qualities but then my mind wandered to people I knew in real life, and the qualities that I admire in them and that make me go wow, and lo behold these are your own personal values. What you admire in others is what you wish to see in yourself.

So, I realized that when I praised someone’s frank and straightforward attitude, that is the quality I want to see in myself as well. Doing this exercise was very meaningful and revealing for me.


I really liked The Power of Full Engagement and I think this is definitely a book that you should add to your list in this new year. Some of the concepts discussed are new and novel, while some others are refreshing reminders of what you may know already, all in all – very useful.

Disclosure: The links to the book will take you to Flipkart and if you buy the book from that website I will get a commission. 

Will 2014 be good for the markets?

As is customary, the new year brings forth several articles about whether the market will be up or down this new year, and what investors should do in the coming year.

I have been reading several articles about the markets and the answer to this question seems to be a qualified yes in the minds of most experts. If the election brings back a Congress led government or a weak coalition then that will probably be bad for the markets but outside of that everyone seems to think that the markets will do well this year.

I would have been surprised to read a different answer to the question simply because of how the past couple of years have been.

Here’s a chart that shows Nifty annual returns in the past few years.

Nifty Annual Returns
Nifty Annual Returns

The future is never more of the past

The chart above shows that things have been going okay for the last couple of years, and generally such an environment lulls you into thinking that more of the past will continue going forward in the future. I know for a fact that the general consensus was really gloomy when the market fell by 54% and absolutely no one expected that 2009 would be a +81% year.

In the short run, there is just no way to predict what the market will do. That is specially true of a year such as this where you have elections whose outcome is very uncertain.

If you are relying on short term market predictions to make your strategy then you aren’t going to be very successful in investing and you are better off sticking with fixed income investments.

What you need is a strategy that doesn’t require you to predict how the market will behave in this year or the next. If you are invested in the market then you do expect the market to be higher than where it is today in 5 or 10 years time but what happens in the short run shouldn’t make much difference to you.

What does such a strategy look like?

My own strategy is one of investing heavily when there is panic or the market crashes badly, and investing moderately and building up cash reserves at other times, and that doesn’t require you to predict the market; just be in a position to react to how the market moves.

As part of this strategy what I plan to do in the recent future is to be invested about 60% in the market and 40% in cash. Right now this equation is 75% in the market, and 25% in cash, and that ratio will change as I sell some of my better performing stocks, and also add more to my reserve. It is important for me to mention here that all of my investments are currently in the US, with about 20% of my equity invested in the India ETF – INDY.

How can you adapt this strategy? 

The point of this post is to see if this strategy appeals to you, and if so, how you can adapt this strategy to work for you. I think the easiest and most practical way to do that is to invest below your comfort level of equity investment. For example, if you’re comfortable with investing Rs. 20,000 per month in equities, invest just Rs. 10,000 and put the rest in a debt fund which you can access at the time of a crash, and invest heavily in the market at that time.

Why not just keep everything in a debt fund and invest at the time of a crash? Well, because you don’t know when the crash is going to come, one year from today, two years from today, or five years from today, and how much the market will grow in the interim, so you don’t want to miss out on the gains that accrue in the interim.

In conclusion, as part of your investing journey you should try to develop a system for yourself that you can adhere to regardless of market conditions, and specially one that doesn’t require you to predict (guess?) where the market will be in ten months or twelve months from now.