Latest news with #SwarupMohanty
Mint
5 days ago
- Business
- Mint
Why historical data on withdrawal rate misleads Indian retirees
How much can an Indian retiree withdraw each year without exhausting their savings? Unlike in developed markets where long-term data helps answer this question, India's limited market history and falling asset returns make the past a poor guide. In markets like the US, financial data stretches back over a century, providing a robust base for empirical research. William Bengen leveraged this long history in his landmark study on safe withdrawal rates. Analysing rolling 30-year retirement periods, he found that a 4% initial withdrawal—adjusted annually for inflation—would have preserved a retirement portfolio across all historical scenarios. This insight became known as the '4% rule." India, by contrast, has a much shorter data record. Its oldest equity index, the Sensex, dates back to 1979—just 45 years of history, which is relatively limited given that retirement typically spans about 30 years. To work around India's limited financial history, we examined all available rolling 30-year periods starting from June 1979. The first window spans June 1979 to May 2009, the next July 1979 to June 2009, and so on. For each period, we calculated the safe withdrawal rate—defined as the highest inflation-adjusted annual withdrawal that wouldn't exhaust the portfolio over the retirement horizon. Also read: What makes Mirae Asset's Swarup Mohanty paranoid about his retirement corpus Historically, most of these 30-year periods yielded safe withdrawal rates above 4%. But this does not mean future retirees can afford to be equally generous. India's asset returns have steadily declined over time. With both equity and debt returns trending lower, back-tested results may not just fail to predict future outcomes—they may actively mislead. Falling inflation offers little consolation. It hasn't fallen far enough to preserve real returns. The inflation-adjusted returns on a typical balanced portfolio have continued to shrink, suggesting that future retirees are unlikely to enjoy the same portfolio performance as earlier generations. Also read: Is early retirement a good idea? Not for your health Back-testing isn't enough When historical data reveals a clear directional trend—upward or downward—simple back-testing becomes an unreliable tool. In such cases, forward-looking models like Monte Carlo simulations provide a more realistic assessment. These simulations generate thousands of possible return paths under varying assumptions, capturing the uncertainty that lies ahead more effectively than backward-looking analyses. My 2022 study on withdrawal rates in India, which relied on Monte Carlo simulations, found the widely accepted 4% rule to be overly optimistic. In nearly one-third of simulated scenarios, a 4% withdrawal led to premature portfolio depletion. However, reducing the rate to 3% dramatically lowered this risk. A 2024 follow-up study, co-authored with Rajan Raju, reinforced these findings—estimating a safer withdrawal range of 3% to 3.5% for Indian retirees. In developed markets, where deep data histories exist, the past can serve as a reasonably reliable guide. In India, with a shorter and more flattering past, that luxury doesn't hold. Retirees must look forward, not back. In this environment, prudence—not nostalgia—calls for a lower safe withdrawal rate. Also read: How to effectively diversify the retirement corpus? Ravi Saraogi, CFA— Sebi registered investment adviser and co-founder, Samasthiti Advisors.
Mint
11-05-2025
- Business
- Mint
How the India-UK Double Contribution Convention benefits employers and employees
On 6 May, India and the UK took a monumental step in strengthening their economic ties by finalizing a landmark free trade agreement (FTA). It's not just a trade pact; it represents a commitment to fostering deeper economic collaboration between two of the world's largest democracies. Alongside the FTA, both nations have agreed to negotiate a reciprocal social security treaty—the Double Contributions Convention (DCC)—which is expected to significantly impact businesses and employees moving between the two countries. The Double Contributions Convention The DCC is designed to facilitate the movement of employees between India and the UK by addressing the complexities of social security contributions. Under the current system, Indian nationals working in the UK are required to contribute to the UK National Insurance Contributions (NIC) after a 52-week exemption, if applicable. Also Read: What makes Mirae Asset's Swarup Mohanty paranoid about his retirement corpus However, this system has its drawbacks, particularly for those who do not stay in the UK long enough to benefit from the contributions they make. For instance, Indian nationals may not receive any benefits if they work in the UK for less than 10 years. The DCC aims to resolve this issue by allowing employees temporarily working in the other country for up to three years to pay social security contributions in their home country. This provision is crucial as it prevents the fragmentation of social security records, ensuring that employees maintain continuous coverage and benefits. Benefits for Indian nationals in the UK One of the most significant advantages of the DCC for Indian nationals is the exemption from paying UK NIC for a period of three years. This exemption means that Indian employees can continue contributing to the Employees' Provident Fund (EPF) in India, enjoying uninterrupted social security benefits. This arrangement not only eases the financial burden on Indian workers but also allows them to retain their social security benefits in India, which is particularly important for those who plan to return home after their stint in the UK. However, it is essential to note that Indian nationals working in the UK may still be required to pay the UK immigration health surcharge. This surcharge is a separate fee that contributes to the National Health Service (NHS) and is applicable to all foreign workers in the UK. Implications for UK nationals in India The DCC also extends its benefits to UK nationals working in India. Currently, UK nationals qualify as 'international workers' under the EPF Scheme in India, which mandates that employers contribute 24% of the gross salary. Upon reaching the age of 58, individuals can claim a full refund of their contributions, along with interest, upon leaving India. Also Read: Details on rent, home loan, TDS: ITR forms seek more disclosures this year Under the DCC, UK nationals temporarily working in India will be exempt from contributing to the EPF for three years. Instead, they will continue to contribute to the UK NIC, ensuring that they maintain their social security benefits in the UK. This reciprocal arrangement is expected to encourage more UK nationals to consider employment opportunities in India, knowing that their social security contributions will not be adversely affected. Early withdrawal benefits and future considerations A critical aspect of the EPF Scheme is that it allows International Workers from countries with which India has entered into social security agreements to claim full withdrawal of their contributions upon completion of their Indian employment, regardless of their age. However, it remains unclear whether UK nationals who have previously contributed to the EPF will be eligible for early withdrawal benefits under the new DCC. As the DCC is still in the negotiation phase, both countries will need to clarify this point to ensure that UK nationals are fully informed of their rights and benefits. The successful implementation of the DCC will depend on the completion of relevant processes in both India and the UK, and stakeholders will be closely monitoring its progress. A step towards enhanced economic ties The India-UK FTA and the accompanying DCC represent a significant leap forward in the economic relationship between the two nations. By addressing the complexities of social security contributions, the DCC is poised to facilitate smoother employee mobility, fostering greater collaboration between Indian and UK businesses. Also Read: Fund houses suggest these four tweaks to make mutual funds even more sahi As both countries work towards finalizing the DCC, it is essential for employers and employees to stay informed about the benefits and implications of this agreement. The DCC not only promises to enhance the social security landscape for employees moving between India and the UK but also signifies a broader commitment to strengthening economic ties and promoting mutual growth. As these agreements come into force, they will undoubtedly pave the way for new opportunities and collaborations, benefiting businesses and employees alike. Sonu Iyer is partner and national leader, people advisory services-tax, EY India, and Puneet Gupta is tax partner, EY India.
Mint
11-05-2025
- Business
- Mint
What makes Mirae Asset's Swarup Mohanty paranoid about his retirement corpus
Swarup Mohanty, 54, chief executive officer of Mirae Asset Mutual Fund, is 'paranoid" about his retirement corpus. 'People are going to live longer. Most people plan for life till 80 post-retirement. If they start to live beyond that and there is no planning for that, it can start to really pinch. Besides this, if I have worked so hard during my working life, I should have a better life in my retirement. So, it is important for me to plan for a larger retirement kitty to take care of my inflation-adjusted lifestyle expenses," Mohanty said. Mohanty says these factors have prompted him to target a higher retirement corpus. 'I have crossed the minimum target on my retirement corpus. As these are the last years of my accumulation phase, I want to make most of it by continuing my investments and even take tactical calls, and get as close as possible to my new target," Mohanty said in an interaction with Mint on 'Guru Portfolio', a series where leaders from the financial services industry share how they manage their money. Investment mix Mohanty maintains an asset allocation mix of 70% in equities, 20% in debt and 10% in alternates. The alternate pie includes his investments in art and startups. Over the past 12 months, his portfolio has delivered returns of 6%, while over the past five-year period, it has returned 23% annualized returns. Mohanty says what worked for his portfolio over the past year was his large-cap exposure. "Large-cap funds outperformed their respective benchmark indices. Thematic investments such as healthcare and banking also did well." Also Read: Should you diversify your portfolio by adding mutual funds focused on quality strategy? Within his equity portfolio, Mohanty's market-cap split is largely skewed towards large-caps and mid-caps. He attributes this to his heavy exposure to Mirae Asset MF's Large- and Mid-Cap Fund. His large- and mid-cap fund exposure is 50%, while pure mid-cap and thematic funds account for the remaining 50%. He is betting on themes such as manufacturing, healthcare and banking. 'These themes are a long-term structural play in India," he said. So far, Mohanty says, he has avoided small-caps to avoid high volatility in his retirement-linked investments, but he may add some small-caps. 'After the correction, there are opportunities in the small-cap space." As mentioned earlier, Mohanty wants to be more tactical with his investments. He pointed out that he missed the gold rally over the past year (despite his bullish view), just to stick to his asset allocation grid. 'I have realized I need to be more vigilant of tactical opportunities and act on them in a timely manner." Mohanty has one-fourth of his equity exposure through passive funds. His passive fund investments include a factor-based fund, an international fund and banking & financial services fund, among others. About 80-85% of his mutual fund portfolio is invested in Mirae Asset MF's schemes. He says that he looks for non-Mirae schemes for style diversification. Alternatives Mohanty's alternate investments are spread across art and startups. Art investments account for 65% of his alternate portfolio, while 35% is in startups. His startup bets include a health tech startup and a regional-content OTT platform for Oriya-language content. As Mohanty himself originally hails from Odisha, he said the pitch appealed to him. Also Read: After large-cap switch last year, Quant MF's Sandeep Tandon starts to add small-caps He says his art investments are fully handled by his wife. 'She does all the research on the artists and art types that we should add to our portfolio. By now, she has created a wishlist and we add to our collection as and when there is an opportunity. Last year, we added another art piece from a 'master'," he said. Unlike market-linked investments such as mutual funds or ETFs, where price discovery happens on a minute-by-minute basis, how does Mohanty and his wife evaluate their art investments? 'Once you get into that circuit and you know the good galleries in the country, there is a broad consensus on the prices of each painter. Admittedly, it is not a very liquid market, but I am also not buying to sell in the near future," Mohanty said. According to Mohanty, alternates give his portfolio another dimension, but these are high risk, high return investments. He said he will not go beyond 10% on alternates in his overall portfolio, given these investments have lower liquidity. Insurance and contingency Mohanty has a large family health cover of ₹3.75 crore. 'I have seen ₹25 lakh of my savings just going for my father's medical expenditure. After this, I have tried to take as much medical insurance as I can for my family. I have got ₹3.75 crore medical cover for my family; ₹3 crore for my wife and I, and a separate ₹75-lakh health cover for my son," he said. Mohanty believes that life insurance should take care of debt and potential earnings of the earning member, as much as possible. So, he has three times his debt (home loan: ₹4 crore) for his term life cover, which is about ₹12 crore. He recently upgraded his house as his son has decided to stay with them instead of going abroad for work. This purchase was partly funded by the sale of his previous house and his Nifty 50 ETF investments. Also Read: Why Marcellus' Saurabh Mukherjea has 40% global weight 'As a net effect, my home loan is the same as what I was carrying for my previous house as of last year," he said. However, he doesn't maintain a separate contingency fund now. 'Now, my equity gains are large enough to meet any contingency requirements and can be easily liquidated, if needed. However, large insurance covers are also in place," Mohanty said. Travel goals Mohanty is an avid traveller. Next, he plans to visit the idyllic villages of England and says he would like to drive there. He plans for his travel expenses at the beginning of the year by parking the required funds in a liquid fund. Keeping finances in check Mohanty says he likes to track his expenses on a monthly basis, which helps him maintain his savings rate. He keeps his savings rate at 35%. He has been compiling a net worth statement annually for the past several years, which helps him keep him on track towards his financial goals.
Mint
08-05-2025
- Business
- Mint
Caution rings among investors as India -Pak tensions escalate
Mumbai: Markets which had so far discounted a full-fledged war between India and Pakistan seem to have raised a note of caution in the last two-and-a-half hours of trade on Thursday, when news surfaced of India thwarting Pakistan's missile attack on 15 of its military installations on the intervening night of 7-8 May. The escalation followed multiple air strikes conducted by India on Pakistan and Pakistan-occupied Kashmir in the wee hours of Wednesday to avenge the massacre of 26 tourists in Pahalgam by Pakistan-backed terrorists on 22 April. The aggregate Nifty put-call ratio (PCR) hit 1.89 on Thursday, the highest reading since the data has been collated on this variable from 1 April 2021, by analytics firm IndiaCharts. Simply put, this means for every 100 calls traded on Thursday, 189 puts changed hands. When more puts are traded relative to calls, it reflects heightened caution among investors and traders who demand more of them. While buyers wanted more of them, sellers refrained from selling them as many by end of the day, given that they would lose hugely if the Nifty falls on Friday or next week. Though volumes were high during the day, put sellers squared off their positions by the end of day, fearing volatility ahead. This became evident in the outstanding or open interest put-call ratio dipping to a provisional 0.86 on Thursday from 0.97 a day earlier-a clear sign of heightened volatility in the sessions ahead. Volumes refer to the number of contracts traded during the day and open interest refers to positions carried forward. While put-to-call volumes hit a multi-year high, the open interest PCR fell, reflecting fear among option sellers of carrying forward short put positions. If the Nifty falls in sessions ahead, the put sellers will be subjected to huge losses. That's why they sold fewer puts than calls by the end of day, a signal of heightened caution, said market analysts. 'While panic didn't strike stock market investors today (Thursday), following news reports of a rise in escalation between the two sides, they surely became more cautious, something which we didn't see since the Pahalgam attacks," said Rohit Srivastava, founder of IndiaCharts. The heightened caution was also reflected by fear gauge India Vix rising by 10.21% to 21.01, the highest since 7 April when Vix surged 65.69% to 22.79 in the wake of the global trade war intensifying. Vix rises when uncertainty increases and falls when investor confidence increases. A rise in Vix raises the price of puts relative to call options, while a fall means put prices rise less than calls. Weekly Nifty options now indicate a range of 2.17% up or down from 24300. The Nifty closed at 24,273.8 on Thursday, down 0.6%. Data indicates a range of 23,771-24,829 over the next few sessions, with a bias for the downside. Market expert Swarup Mohanty, vice chairman and chief executive officer of Mirae Asset Investment Managers, said his policy was to stay invested in Indian equities at all times and any drawdown is used to invest in 'quality'. Nilesh Shah, managing director of Kotak Mahindra Asset Management Company Ltd, expects any potential conflict between the two nuclear-armed neighbours to be limited and not prolonged despite the two sides climbing up the escalatory ladder on Wednesday and Thursday. He expects the markets to stabilise in light of a limited conflict.
