Governance: For the Country and Your Portfolio

14 AUGUST 2020

A hundred years from now, when historians look back on the 20th and 21st centuries to name the country could have made the biggest positive impact on the world - but failed to deliver even a fraction of its promise, they will single out India.

For a country that reclaimed its independence by a largely non-violent movement led by Mahatma Gandhi, which was given birth by the inspiring "Tryst with Destiny" speech by Prime Minister Jawaharlal Nehru, and which adopted a towering Constitution authored by the humbling genius of Dr. Ambedkar - all against the backdrop of Tagore's Where the mind is without fear" - the 20th century looked ready to welcome India into its roster of the most evolved and accomplished countries on Planet Earth.

Yet, 73 years after Independence, India looks more like a tin-pot banana republic where the contribution to the destruction of Planet Earth may be its global legacy and where, at a local level, governments led by twisted leadership from the Congress to the BJP to the motley collection of regional parties failed to provide India's rapidly-growing population the basic amenities of food, clothing, shelter, health care and education.

Indians have voted in more elections than many of the wealthier, stable democratic nations - and this freedom to vote puts to shame the genocidal regimes that have ruled in China and Russia - yet, the governments in power have systematically slaughtered the Indian century.

Slogans don't make nations rich but they have the habit of making the slogan-shouters more powerful and wealthy - sometimes under suspicious circumstances.

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How did a government that was supposed to represent the people and their freedoms, oppose their desire for freedom? How did government that was supposed to enrich a people, enrich a select few? How did the people who are armed with the vote and the ballot paper, lose out so miserably in their "tryst with destiny".

Of course, India has its share of wins and success stories. Sure, there is some Roti, Kapda, and Makaan. And there has been tremendous Vikas. But if you believe that we have achieved even 10% of our potential, kindly stop reading.

But if you belong to the troubled many who have this nagging regret and belief that India has a long way to go and could do much better; and if you seek the best solution to right this historical wrong, click here to get your free copy of "Quest For Democracy 2.0". It is free. It will chalk out the path for true freedom.

Quest for Democracy 2.0 provides simple solution to correct what is commonly called, "a breakdown of governance". It is the equivalent of reading about 20 pages of a printed magazine and in 25,000 words it offers a powerful prescription to the root cause of India's failure to deliver the haloed promises to its citizens made as the tricolour was unfurled on August 15, 1947.

The solution of how India can fulfil the dream of its citizens for Surajya can be followed in this simple formula:


Governance falters when the rulers create a set of rules to suppress their subjects, rather than the nirvana where the rulers are willing to be ruled by the will of the people.

Learn: How to Potentially Accumulate Rs 7 Crore in Wealth Over the Long-term

India has been on a path to disaster since the draconian Mrs. Indira Gandhi (grandmother of Rahul Gandhi, heir not-apparent of the Con-gress Party) declared an Emergency in June 1975. While there was some glimmer of hope from the economic reforms since 1985 (ironically, initiated by Indira's son, Rajiv Gandhi); the more-path breaking IMF-induced reform of 1991 and the reminder of the social promises made to the people of India in the Constitution by the National Advisory Commission (Right to Information, Right to Food, Right to Work, Right to Education, were some of the rights fought for by National Advisory Council, headed by Sonia Gandhi, wife of Rajiv Gandhi), the overall trajectory for India's future relative to its true potential is downhill.

The religious, caste, regional, lingual divides have made it more difficult to power India "into that heaven of freedom", a prayer of Tagore.

The desh ki dharti that Manoj Kumar enthralled us with is being turned into a barren dustbowl as dharti is sold to a few to exploit in the name of development: as if the planet and profit are opposite ends of the spectrum when, in fact, they are two sides of the same coin.

Rather than the COVID-19 pandemic - or the annual floods in Chennai, Mumbai, New Delhi, and the North East states - being a moment for pause and reflection, the local, state and central government continues its pulverisation of the environment. The useless Coastal Road in Mumbai (sounds increasingly like a FSI real estate scandal?), the destruction of Aarey, Aravali, and Mollem forests, the bullet train between Gujarat and Mumbai, and the central vista project in New Delhi all reek of the desire to exhibit brute force over nature. Somewhere the stink of money may be lurking to justify this callousness and stupidity - particularly when the country is likely to be the most infected by COVID-19 in terms of cases and deaths. Monies that can be spent on health care are being used to build risky trophies - gold plated for a few?

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Governance in your investment portfolio.

While you read the book and start to dwell on how to achieve Surajya in 5 easy steps, here is a one-click suggestion for you for Surajya in your investment portfolio:

Look at the Quantum ESG India Fund.

Regular readers of The Honest Truth know the famous suggested asset allocation table at the end of every article. I have also pointed out that the only reason, I have not been talking about the Q India ESG Fund has been because we did not have a 1-year track record. I had suggested an allocation to the Quantum India ESG Fund though.

Well, now there is a 1 year track record.

And it's pretty impressive!

Table 1: Swarajya for your portfolio? No Reliance in this one!

Track record Since Inception* INR
Quantum India ESG Equity Fund +3.50%
MSCI India ESG Leaders Index +13.04%
Nifty 100 ESG Index +2.70%
MSCI India Index +1.31%
BSE-30 Index -1.52%
Quantum Long Term Equity Value Fund -11.97%
Reliance Industries
(has a 23.4% wt in the MSCI India ESG Index; Reliance is NOT owned by the Quantum India ESG Fund)
Source: Quantum Asset Management Company Pvt Ltd
As of July 31, 2020 *Returns Annualized: Inception Date July 12, 2019

Though a 1-year track record is not long, as such, and I prefer to see a track record over a market cycle (normally 3 years) the fact is that the recent collapse in the Indian stock markets in February and March and their subsequent recovery is pretty much one cycle! It happened quickly! In internet speed!

The India ESG Fund uses Quantum's proprietary research data to evaluate the impact that a company has on:

  1. Environment - the air, water, land where it operates,
  2. Society - its labour, its suppliers, its community where it operates,
  3. Governance - the fairness and transparency of its work and whether it supports good practices and protocols or supports shady and suspect dealings.

The ESG score assigned to the company by the research team at Quantum, determines whether the stock makes it to the portfolio or not - and its weight in the portfolio. There is no worry about whether its PE ratio is high or low; or PBV is high or metrics are not the reason why buys or sells the stock. The change in the ESG score (based on over 200 factors) determines the fate of the stock - and the potential returns of the portfolio.

So, do consider whether an allocation as indicated in the table below is suitable for you. It has worked for me.

Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)

Quantum Long Term Equity Fund, Quantum Equity Fund of Funds, Quantum ESG India Fund Quantum Gold Savings Fund Quantum Liquid Fund
Why you
should own
An investment for the future and an opportunity to profit from the long term economic growth in India A hedge against a global financial crisis and an "insurance" for your portfolio Cash in hand for any emergency uses but should get better returns than a savings account in a bank
Suggested allocation 80% in total in both; Maybe 15% in QLTEF, 10% in Q ESG and 75% in QEFOF 20% Keep aside money to meet your expenses for 12 months to 3 years
Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"
Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is Founder of Quantum Advisors Pvt. Ltd. which is the Sponsor of Quantum Asset Management Company Pvt. Ltd – the Investment Manager of the Quantum Mutual Funds. Ajit is also the Founder of Quantum Information Services which owns Equitymaster and PersonalFN. The views mentioned herein are that of the author only and not of Quantum Advisors, Quantum AMC or Equitymaster. The information provided herein is compiled on the basis of publicly available information, internally developed data and other sources believed to be reliable by the author. The information is meant for general reading purpose only and is not meant to serve as a professional guide / investment advice for the readers. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investment. Whilst no specific action has been suggested or offered based upon the information provided herein, due care has been taken to endeavour that the facts are correct, accurate and reasonable as on date. None of the Author, Quantum Advisors, Quantum AMC, Equitymaster, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in The Honest Truth.

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