Someone is sitting in the shade today because someone
planted a tree long time ago. The fruits today, are reaped for an effort made
in the past. This is exactly how investment in these financial instruments works.
They are small packets of capital traded to provide an efficient flow of funds with
returns.
COMMERCIAL
PAPERS
In India, commercial papers arrived in the year 1990.
It is a monetary instrument used in the form of a promissory note. Prior to
commercial papers, organisations were dependent on the crude and traditional
method of borrowing money to be used as working capital by pledging stock as
their collateral security. Commercial papers are subject to credit rating. A
major highlight in the history of commercial papers is the globalisation and
liberalisation of the economy. The journey of commercial papers shows that the
cost of borrowing through commercial papers became relatively cheaper for
corporates as compared to the cost of borrowing the same capital through cash
credit, making commercial papers grow successfully.
INSURANCE
Insurance today has ventured into various categories
but its inception was from the very ancient rule of King Hammurabi. The concept
of spreading risk that is parallel to human existence makes insurance an ever-growing
business. The first insurance policy was seen on a Babylonian monument. The law
offered basic insurance in which a debtor didn’t have to repay his loan if he
was struck by a personal catastrophe which made repayment difficult. Today, the
penetration of insurance in India is 3.69%. The recent scheme of Ayushman Bharat
launched in 2018 provides coverage to more than 100 million families. Private
companies are increasing their involvement in this industry making the business
penetrate deeper. The insurance
industry is expected to touch a valuation of US$ 280 billion by 2020.
MUTUAL
FUNDS
Some mutual funds have made investors millionaires,
while there are some which have failed to give a return of 20% since their
inception 25 years ago. The economy has witnessed market crashes like the Dot Com
bubble and the Global Recession. Some mutual funds that have been in the market
for over 20 years are Franklin India Prima Fund, Reliance growth fund, Aditya
Birla sun life, HDFC etc. The last 20 years have been exceptions for the
economy and markets of India but the returns and market conditions are highly
volatile.
These instruments have come a long way through the
economy keeping its stake high in the business. Let’s hope for more liquid and
broader markets that will make financial instruments more attractive aiding in
fund flow.
Thank You
Regards
Author- Kaushal Shah
Kautilya
IBS Mumbai
Comments
Post a Comment