I AM at it again…making pre-budget wish list for this year’s budget. Given the background behind the forthcoming budget and realising that the Finance Minister has little to give away by way of financial sops I am going to be a little circumspect about my wish list from this budget.

The biggest expectation is about the revised Direct Tax code that he is expected to unveil during (or just after) the budget. These will off course be effective only from the next financial year. Some of the changes that have been universally demanded are

1. The normative rental income norms for owned properties defining the assumed incomes based on market value from year to year
2. Re-introduction of deduction for interest payable on a loan taken to acquire a self-occupied property

I do not seriously expect any changes in tax laws for the current year given that the implementation of the Direct Tax code is just a year away.

It is in the area of non tax side that we can perhaps expect some action. The passing of the necessary laws to appoint a real estate regulator may be commented on or given a phillip in the budget.

I would look forward to subsidised home loans, especially for the first time buyers of low value flats costing up to Rs 10 lakh and within specified sizes. This scheme should clearly be targeted at those who are currently staying in slums in inhuman conditions. The scheme needs to be run through commercial banks and specialized lenders. Given the current environment it is possible that the developers might see a big business opportunity in the area and we may finally see some action on the truly affordable homes meant for the lower middle classes who are the backbone of any economy.

A subsidised health care policy is recommended where the government should negotiate with the non-life companies for a universal micro health care policy (say for an amount of Rs 25,000) and then subsidize it (it should not be completely free) and distribute it widely through post offices and NGOs. There needs to be innovation on the premium payment options since a lump sum yearly payment is unlikely to work for the targeted population. Several pilot experiments on such policies have already been successful at the state level and it is about time that this is universalized across the country. Additional covers can also be negotiated by the government on behalf of the citizens who can buy them (and fully pay for them) on a voluntary basis over and above the base policy. The overall limits should be such that it is only the absolutely poor and the lower middle class that will opt for such covers. As this will give the consumers choices other than the poorly run government hospitals the health care industry will be spread more widely.

If the government finally implements its promise to set up the Education Guarantee fund it will be a step in the right direction for the education sector and the future well being of India. Also the Finance Minister had promised to set up an Education Re-finance Corporation from part of the “education cess” that all of us pay. That promise is languishing for the last 3 years. The promise needs some action now.
But only if wishes were horses….

The Wikipedia definition of ‘recession’ is - in economics, a general slowdown in economic activity over a sustained period of time, or a business cycle contraction. India was or rather is hit by recession and one of the reasons it started was the Reliance Power IPO in 2009 which sucked around Rs 11000 crore from the market, though it increased due to the political instability and touched the peak continued with the crash of the three biggest company’s in the US. Of course, there are a number of other reasons too which added to this phenomenon. Though India didn’t suffer from it so “significantly” they claim, but it did affect every individual in some or the other way!

However, post the elections of 2009, some growth and now stability is seen in the economy. These may be attributed to the following factors

1. The growing inflation
2. The rise in Corporate earnings
3. Resurgence of IPO’s

A daily newspaper reported on the 27^th of August 2009 “Inflation rose to -0.95% for week ended August 15 from -1.53% the previous week, according to data released on Wednesday. Analysts expect inflation to touch 7% by March.” The Inflation which is based on the Wholesale Price Index (WPI) rose last week as a result of the increase in prices of food articles. Thus over the next few weeks inflation does seem to be slowly but steadily growing.

There has been a remarkable improvement in the last quarter earnings of companies. The second quarter of this year showed a rise in the corporate earnings. This can be very evidently seen by analyzing reports of a few companies. Patni Computer Systems - Revenues for Q2CY09, at USD 161.9 mn (INR 7.7 bn), were flat and ahead of the guided range of USD 158-159 mn. In constant currency, revenues were up 2.2% Q-o-Q. Revenues for Tata Steel grew to 12% in FY09 and for Chennai Petroleum grew 0.7%.

New Initial Public Offerings (IPO) have started flooding the markets with Adani Power Limited (Rs 300 Crore), Jindal Cotex Limited (Rs 93.40 crore), Raj Oil Mills, Rishabhdev Technocable (Rs 150 crores), NHPC ( Rs 6000 Crore). OIL (Oil India Limited) - Rs 2000 crore is coming up with an IPO soon.

The steady increase in inflation and rise in corporate earnings along with the IPO’s being over subscribed so many times just shows that now companies are regaining investor confidence. The general public is now making sound decisions and investing rationally. The above few points showcase that India as a whole has been able to slowly but steadily recover from the so called “recession”.

Well well well!!! the New Year is finally upon us and that disaster of a year 2008 is finally behind us. Yes we all know that the Sensex which was suppose to touch 25,000 by now (last year’s prediction) has missed the mark by nearly a whopping 60% and we poor retail investors are left wondering what went wrong?

Ok, instead of rewinding and again drowning our sorrows in the local bar, let’s see what the so-called experts had predicted - their hits and misses.

Mind you these so called experts are not visionaries or financial stalwarts, they tend to form a collective opinion and disseminate that to us with confusing graphs and even more complicated jargon like ‘financial tsunami’ ‘decoupling,’ and, obviously word of the year, ‘bailout.’

Miss 1: India is decoupled and will continue to grow in excess of 8% (GDP growth) - Well not only did the economist pack get this one wrong, our very own economic agencies and the infamous ministers got their expectations horribly wrong. The only saving grace has been that the various economists have been fairly quick to revise their numbers while the others are still arguing that the next few months are tough but then we will bounce back just like a baby on a trampoline.

Miss 2: The classic market trap - 22nd January ‘08 - Sensex @ 17,000 - a life time buying opportunity - Well from the looks of it, the last 11 months have presented more buying opportunities. Everyone including the shoe shine boy at the station had formed a view on the market and 25,000 is the first target of 2008. Fun(d) managers who were on TV boldly stating that any fall in the market should be seen as a buying opportunity, were themselves holding on to cash levels of 25-30% in their funds…strange ?

Miss 3: Oil to boil - Oil, a commodity whose movements are most difficult to predict, saw everyone comment that from levels of USD 100/bl it will cross USD 200 then will peak at USD 250. No one understood the basic economics (Well, I have understood this in hindsight) that a weakening global economy - rising unemployment will see people being conservative thereby leading to demand destruction.

Miss 4: Chinese and Indians eat too much? - World wide there is a shortage of farm land and we Indians with our fellow neighbours are living it in style by eating more than required. This was suppose to keep agriculture commodity (rice, pulses etc) firm. Well, speculation got the better of this pack.

The only HIT: Developed nations are expected to weaken due to the housing crises. Well most of the economists were a tad bit correct in getting this one - though the quantum of the crises and its time line was not fathomed by them.

Enough of this re-wind, let’s see what’s in store for 2009 by the so called financial gurus:

Inflation in India expected to become negative by middle of the year - that does not mean that all our groceries will become cheaper; it means that prices of around 450 articles (of which we can associate ourselves with a maximum of 100) will ease.

India to grow at a slow pace of around 6% during the year and then bounce back with a bang in 2010 - Well these expectations are based on more policy actions by our central bank (read: more rate cuts - cheaper loans, etc)

Sensex to bounce back by end 2009 to levels of 13,000 - 15,000 - Wish my crystal ball was working as these seem to be shots in the dark

Logically, when a fall has been so steep and with our economic condition deteriorating, such predictions seem to very difficult to digest.

Anyways, as they say, avoid the noise to investing, keep a steady focus towards your financial goal and work towards them. Remember that the market has cycles and as the famous economist John Maynard Keynes said, ‘The market can stay irrational longer than you can stay solvent.’

Enjoy the ride!!

Prateek is a financial analyst and has been tracking the markets for more than five years. Views expressed here are his personal opinions.

Risk is all-pervasive. Wherever there is uncertainty, risk prevails. The concept of risk is omnipresent from the existence of mankind, but now it has become more relevant due to interdependence of economies throughout the globe. The recent financial crises in the developed economies not only affect domestic companies negatively, but are also capable of wiping of the entire net worth of companies. What appears to be safe for generations may not be safe now. The need of the hour is to look into these phenomena cautiously rather than suspiciously.

Risk management is the current favorite strategy, globally. It has helped global enterprises to face situations such as the Y2K problem or protecting against data loss in the aftermath of 9/11. It is impossible to predict all the incidents/events and their intensity in advance and to protect oneself against it. However, there is a well-laid procedure that can help predict possible threats and take remedial measures to reduce losses.

It is done in three stages.

Risk Identification: This is the first step towards mitigation/reduction of risk. The various sources of risk in today’s market place are interest rate risk, market risk, inflation risk, business risk, financial risk, liquidity risk, technology risk, political risk, sovereign risk, counterparty risk etc. Any of these risks can affect business adversely. Good knowledge of these sources can help to take appropriate action at the right times. One must try to understand the possible impact of these risks on the business and prepare a course of action to mitigate the adverse affect. Now regulators of many countries are making it mandatory to have a risk management committee that will understand the risk implications of existing or new products and suggest the measures required to be taken.

Risk Measurement: This is the second stage. One can choose from various risk-measurement models according to compatibility and the complexity of requirement. There are various risk measurement models available for different types of risk, such as VAR (delta normal method, historical simulation method, and Monte Carlo simulation method), stress testing, cash flow at risk, Merton model, credit scoring models, credit risk portfolio models, and so on. The most commonly used among these is the VAR.

The basic objective of all the models is to learn about the maximum loss a company can suffer in worst-case scenarios. Scenario analysis, stress test and the Monte Carlo simulation method gives enormous scope to management teams to use real time situations to get close-to-accurate results.

Risk Mitigation: Once an estimate of the risk is made, the next job is to mitigate that risk. This is crucial since it involves cost, effort, time, and resources.

There are a few risks that can not be mitigated like war, natural calamities, changes in economic policy, industrial recession etc.

However, many risks can be insured or protected.  Portfolio diversification in negatively correlated areas is one way to mitigate the impact of market risk. There are various derivative instruments available to reduce credit/counterparty risk; but in the current financial crisis it is difficult to rely on them. The recommendations of Counterparty Risk Management Policy Group II report further strengthens the global financial system by identifying private sector initiatives that will reduce the risk of global financial shocks and limit losses.

Liquidity risk can be addressed by matching the maturities of asset and liabilities in an organization. Further, investing a portion of an organization’s portfolio in highly liquid and sovereign bonds will support the organization in liquidity crises, besides earning regular returns.

Operational risk can be due to data loss, human failure, fraud and forgery etc. Operational risk can be avoided with proper precaution, comprehensive backup policy (including mirror image) at some remote area and foolproof management policy. To avoid frauds, policy makers put themselves in the shoes of person wants to commit fraud and make rules to plug the loopholes. One should always keep in mind that lack of proper checks and control may lead to financial disaster which could have been avoided in the cases like Barings Bank, Sumitomo, Daiwa Bank, and Allied Irish Bank.

Prabhat Varma works as General Manager (Finance), Sahara India Financial Corporation, Mumbai.

Imagine buying a stock at Rs 100, probably on the suggestion of a friend, neighbor, aunt, girlfriend, hoping to double, triple your money, touching the lunar surface in no time…

And then,

80,70,50,25,10,5 …..What the hell is happening? You question all deities you pray to as to why this is happening to you. And the final stage: investor and advisor resort to desperate measures as panic sets in quick and fast.

Sitting in front of their computer screens pressing that F5 key again and again believing against hope, hoping against hope, investors dig for some divine intervention that will move their stocks price up. The friend’s stock is up; the aunt’s stock is up, while our pal is still pressing that Refresh button hoping to make a killing. Let’s put him out of his misery, what?

It’s not going to happen.

It’s never going to happen

Unless you realize that you have made a wrong stock pick without knowing if that company makes pajamas or refines crude oil.

In times like these, when 15000 levels on the BSE Sensex seems folklore, your broker is pressing you to put money in a new rising star company, which might be a shooting star very soon. You don’t know. Fact is, nobody does. In markets like these, you don’t know what stock to buy at what levels because the benchmark index is at 9-10 PE on FY09 earning (PE is prices to earning ratio, which gauges how expensive it is to buy index stocks in comparison to other markets in the world, on the basis of earning). The best option is to be sold and stay put. The advisories and advocates of the stock markets burp out levels at which you should buy, hold, go long, go short,  specific stocks,… They are as clueless as you are as soon as one variable changes, be it interest rates, earnings of the company, and so on.

The Indian economy is not running away anywhere. Neither is the stock market. Having grown by near 9% average for the last 5 years in a row to reach $1 trillion in GDP (It’s about $700 billion now, due to FII money exit and rupee devaluation), the economy cannot and will not sink like the Titanic. It has a mass of over 1.3 billion people and with 240 million households, demand surely exists - for consumer durable and FMCG companies, for roads, bridges, dams, power, and what not. So consumption spending is surely there. What is missing is investment spending; this will take sometime from an individual’s point of view as the current interest regime is too high.

All the above-mentioned demand areas requires $100 billion of investments annually for the next 5 years. Let’s say FIIs might be able to pullout about $20 billion ($12 billion has already been pulled out this year so far). The numbers are still more than sufficiently optimistic to drive our economic growth.

To fuel all this government will surely relax investment norms in key critical sectors like railways, telecom, banking, airlines. So our growth story is still visible and we will surely see a ray of light at the end of the tunnel.

So all investors, new or old! Stop pressing that Refresh button and dig in a little deeper when you invest.

The author is working as Research Associate at Padmakshi Financial Services Ltd.

It is said that “If we all perform our duties meticulously then we are surely on the path of prosperity.” Every individual should be aware about his or her duties towards family members, relatives, friends, and society. In addition to social responsibilities, it is imperative that every individual should also have basic financial literacy.

To take the fist step towards financial literacy, following is a financial check list that you should prepare in consultation with your family members and professionals. This activity will make you more aware about your personal finance documents and will get you motivated towards knowing more about your finances.

Preparing this document will go a long way in enhancing your financial literacy. Do make a resolution to sit with your family members this weekend itself and prepare this important document.

Priyesh Shah is Chief Financial Planner, working with SRE Financial Planners.

Increasing costs of steel and other such inputs have already led to an increase in car prices. Add to that the sky-rocketing fuel prices and owning a car becomes bloody expensive.
What about those who already own a car, especially the ones who have bought them on loans? Rising interest rates have had a greater impact on these borrowers in terms of the increase in EMIs. The slack in the job markets, stop on salary increases…mounting pressures of inflation on expenditure… All these mean that a lot of borrowers are moving from being car owners to car loan defaulters.
Wait, this isn’t over.
Banks seem to be taking to tougher recovery measures. On the other hand, the Supreme Court extended the deadline on repossessing and selling defaulters’ cars to three months from the erstwhile 24 hours deadline.
These developments have had a two-pronged impact on the sector: lenders have made lending norms stricter and old car prices have dropped.
Finally the good news - old car prices have dropped by 15 to 25 per cent. About a quarter of the cars in this market are repossessed cars. Borrowers who can get a loan can get good cars at cut rates. They could also vie for a luxury car as these prices will see steeper falls.

The equity markets were up with a bang. The bulls had a party and celebrations post Diwali festival. It is considered as a remarkable recovery from the bottom. Well, it seems difficult to talk about whether this bull party will last for a long time. Global economic issues have still not been resolved and how much of that it’s going to affect other emerging markets, including India, is difficult to predict. The markets are facing many negative news and higher volatility in the day-to-day sessions. It’s getting difficult for investors to take a position in these market conditions. This is where the straddle strategy will play a vital role for the investors to hedge the position and profit from it.

This strategy is built on the concept of call and put options. Let’s understand what these mean before going in-depth to understand straddle.

Call Options - A call option gives its holder the right to buy a specified number of shares of the underlying stock at a predetermined price (strike price) between the date of purchase and the option’s expiration date.

Example: An investor who bought an ABC December 1000 call option would have the right, but not the obligation, to buy 100 shares of ABC common stock at a cost of Rs. 1000 per share at any time before the option expires in December.

The right to purchase common stock at a fixed price becomes more valuable as the price of the underlying common stock increases in the bullish trend.

Put Options - A put gives the holder the right to sell a specified number of shares of the underlying common stock at a predetermined price (strike price) on or before the expiration date of the contract.

Example: An investor who bought an ABC December 1000 put option would have the right, but not the obligation, to sell 100 shares of ABC common stock at a cost of Rs. 1000 per share at any time before the option expires in December.

The right to sell common stock at a fixed price becomes more valuable as the price of the underlying common stock decreases in the bearish trend.

Now let’s understand how the straddle strategy operates for investors. Fundamentally, a straddle is the simultaneous purchase of a call and a put on the same stock, with the identical strike price (the price at which the holder can sell or buy from the writer of the option) and expiration month. Typically, the buyer of a straddle anticipates a substantial movement in a stock but is uncertain what the direction will be. Because the investor is betting on an extraordinary stock movement in this the volatile markets. The probability of profiting is good.

A straddle buyer risks losing only the amount of premium (the price that the buyer of an option pays and the writer of the option receives). The maximum loss occurs only if the price of the stock on the expiration date of the options is exactly equal to the strike price. Although it is difficult to lose the entire premium paid for the straddle, it also can be difficult to make a profit. Either the put or the call side of a straddle is almost certain to expire worthless. As, a result, the stock has to move substantially for a profit to be made. Considering the trend of last few trading sessions there were many intense moves for investor. Therefore, it’s considered one of the best strategies to bet on these volatile markets, where the swing in stock prices to different levels in multiple/one trading session gives the opportunity for investors to fill their bag full of profits.

Example:

An investor purchases both a put and a call on a stock, paying Rs. 250 for the call and Rs. 200 for the put. Therefore, the total premium cost would be Rs. 450. Suppose the underlying stock’s price is Rs. 3000 and the strike price of the options is Rs. 3000. If the price of the stock rises above Rs. 3450 or drops below Rs. 2550, the investor will make a profit. Only if the stock expires at a strike price of Rs. 3000 will the investor lose the entire investment. The investor loses only part of the investment at any other price between Rs. 2550 and Rs. 3450.

The investor earns a profit if the stock sells at a price exceeding Rs. 3450 or drops to less than Rs. 2550. If the stock rises to Rs. 3750 per share and the investor exercises the call at Rs. 3000, the investors profit is Rs. 300 (Rs. 750 - Rs. 450 premium). Alternatively, if the stock drops to Rs. 2150 per share and the investor exercises his/her put at Rs. 3000, the profit is Rs. 400 (Rs. 850 - Rs. 450 premium). Thus, the investor is assured of a profit only if the stock moves by more than Rs. 450 in either direction.

The above strategy and example were discussed considering equity markets. This strategy is also useful to hedge a position on commodities in commodity market.

What has the RBI done?

On Saturday, November 1 2008 the RBI cut CRR by 100 basis points (50 bps effective October 25 and 50 bps effective November to 5.5%. Further the repo rate was reduced by 50 bps to 7.5%.

It also cut banks’ statutory liquidity ratio (SLR) by 1 percentage point to 24 percent of their deposits.

What are repo/reverse repo rates, CRR rate and SLR?

Repo and reverse repo rates are the tools of liquidity management. The RBI uses these measures either to inject liquidity into the system when the liquidity conditions in the markets are tight or suck out liquidity, when there is excess liquidity in the system.

Why does the RBI do this?

Excess liquidity in the system stokes up inflation. Higher inflation leads to higher prices, which in turn leads to lower demand adversely affecting the overall economic growth. In times like these, to control inflation, RBI sucks out liquidity from the market, thus reducing the money supply.
Similarly, tighter liquidity means banks have less money with them to lend, which forces them to raise interest rates. Raising rates leads to consumers postponing their purchases; businesses deferring their expansion plans, thus reducing the aggregate demand, adversely affecting the economic growth.

Thus it is the RBI’s prerogative to manage inflation without compromising on growth.

How does the RBI do this?

Simply defined, the repo rate is the rate at which RBI buys securities from the banks and lends them money. When the liquidity in the markets is tight, the RBI reduces the rate at which it lends to the banks to incentivise banks to borrow more money from them. Thus banks have more money with them to lend to consumers and businesses giving an impetus to economic growth.
Also, changes in repo rates have a direct bearing on other interest rates like your bank FD rates, home loan rates, and so on.

Cash Reserve Ratio (CRR): Banks are mandated to keep certain percentage of their deposits with RBI. This is the CRR. Thus, an increase in the CRR leads to banks parking more money with RBI reducing the funds available with banks.
On the other hand a reduction in the CRR keeps more money with banks boosting liquidity in the markets.

To put it simply, the repo rate is a rate management tool, whereas the CRR is a liquidity management tool of the RBI.

SLR: It is the amount that a bank has to maintain in the form of cash, gold, or approved securities. The quantum is specified as some percentage of a bank’s total demand and time liabilities i.e., the liabilities that are payable on demand anytime, and those liabilities that are accruing in one month’s time due to maturity. This ratio is fixed by the RBI.

What is the current scenario?

In line with its global peers, the RBI also was forced to reverse its tight monetary policy that was being followed to control inflation, to solve the problems arising due to shortfall of funds. Domestic events like advance tax payments, regulatory intervention by the RBI in forex markets to stabilize the depreciating rupee, (aggravated by merciless selling by FIIs in Indian equities) created a huge liquidity crunch in the markets. The liquidity shortage drove up the overnight call rates (rate at which banks give money to each other for short term needs) shooting up to over 20% levels. Banks raised their benchmark prime lending rate (PLR) and were reluctant to disburse loans against the sanctioned limits owing to the liquidity crunch. To cool off this liquidity crunch, the RBI in its credit policy on October 24 announced a 250 bps cut in CRR and 100 bps cut in repo rate. The cuts effectively added around Rs 1, 30,000 crore to the system. When even this was not enough to tackle the ongoing liquidity crunch, the RBI further announced a slew of rate cuts on Saturday.

• It cut CRR by 100 basis points (50 bps effective October 25 and 50 bps effective November to 5.5%. Further the repo rate was reduced by 50 bps to 7.5%.
• It cut SLR by 1 percentage point to 24 percent of their deposits.

If one considers the macro data points, the conditions for easing monetary policy appear favorable owing to:

1. Inflation showing signs of peaking out
2. Oil prices continuing their southward journey
3. Slowing economic growth

The one percentage point cut in CRR is set to release additional liquidity of Rs 40,000 crore into the system.

The SLR cut would inject about Rs 40,000 crore into the banking system.

The RBI now expects banks to pass on the benefit of rate cuts to final consumers in the form of lower interest rates on housing loans and personal loans to boost consumption and revive the slowing economy. Some of the banks have already reacted positively by proactively cutting the benchmark PLR.

Impact on equity markets:
The RBI move was a welcome trigger for the stock market, albeit a short-term one, as we saw the markets rallying from the lows of 7700 to 10600. As expected, banking stocks contributed the lion’s share to the rally on the expectation that lower rates will boost consumption demand positively affecting the margins of the banking sector. Also, a cut in CRR (on which banks don’t get any interest) and SLR would enable banks to earn higher margin on released funds.

Kapil Mokashi is an Associate Financial Planner, working with Sharekhan Ltd. as an equity advisor.

It took $500 billion in asset write-downs to bring the more than $13 trillion-dollar American economy to nearly a grinding halt with a list of casualties that would have been the envy of any asset manager in happier times. Bear Stearns, Lehman Bothers, Fannie Mae, Freddie Mac, Merrill Lynch, and insurance big boy AIG. Naturally the American economy which lives on leverage (borrowing more than it earns) looks to be in a deep mess.

Since the economic liberalization in 1991, India has seen staggering GDP growth backed by relaxations in FII and FDI norms, catapulting the benchmark market index to 21000 levels in January 2008. The market is down nearly 50% and the mood remains apprehensive and pensive.
But despair is the time when true character is revealed, be it of any organization or individual - when pushed to the corner, its time for the champion boxer to take one more up his chin and still stand his ground.

Will India survive?

The point here is to know can there be a simple way for a small investor to instill confidence back on the street.

As markets across the globe are looking to pack their bags for a long time, in this entire mess one investor segment just might prove to be the saving grace: you and me. On 2nd April 2007, the BSE Sensex closed at 12455.37. on 31 March 2008 it stood at 15644.4, returning a cool 25.8%, year-on-year. RBI data for 2007-2008 suggested that only 10.5% of household savings found its way into the equity and debt markets amounting to Rs 77000 crore, the rest probably cooling its heels in the banks as currency or currency equivalents (Gold). This means that domestic households have matched the $15-17 billion brought in by FIIs for FY ‘08. Now with FIIs deciding to retreat and having already pulled out just over $9 billion from domestic markets since January ‘08, they would be rethinking about their equity allocation for India in the future. This makes way for a huge opportunity to Indian households who by increasing their share of investment in the domestic markets can hope to turn its tide as well as their own. As an individual investor, every incremental investment shall improve his/her long term (>1 year) returns. At the same time, incremental investment in gold would hedge him/her against any inflationary pressure and any unforeseen down turn.

50 million people in India are at present in the middle class category. This is expected to balloon to 583 million by 2025 according to a study by McKinsey & Co. This represents the real buying power. Even if we assume that these 50 million actually only save and their savings find their way into the banking system, imagine what a higher percentage of investment will do to the economy if they decide to flirt a bit more with the investments to savings ratio. We need to realize that FIIs are like mercenaries who will flee their camps first when the chips are down and that domestic investors are the real face of the investment community.