Bizz Buzz article discussed in IIM-Ahmedabad class

It came to me as a sudden surprise when my mobile rang and on the screen was Prof Prashant Das, IIM-Ahmedabad. It was unusual. Normally, I get his calls outside of office hours and vice versa for discussing any issues of mutual interest. Before going further, I must mention that Prof Das is the first amongst the professionals who took up the challenge to translate my ‘Nivesh Sutra’ in English and explained the concept in brief (please refer to 14/09/2023 edition of Bizz Buzz for details).

It was around 11:30 am. Prof Das, a finance professor and an avid sticker for simplicity, called me to tell that he had gone through the write-up that was published in Bizz Buzz on October 9, which explained the difference between ‘savings and investment’ in a very simple manner.

‘Bond market’ was the topic of his lecture scheduled at 11:55 am that day. It was his ingenuity that included the referred article in his lecture and have his students listen to the concepts straight from the horse’s mouth. That made him call me. Of course, it was an amazing proposition which I immediately acceded to as it was close to my profession as well as to my heart.

I received a Zoom link and I logged-in on time. It all started with a brief introduction by Prof Das and the microphone was handed over to me. It was evident to me quickly that IIM Ahmedabad students are capable of grasping very complex concepts quickly. My briefings highlighted on simplifying things so that people to the last mile could understand and be benefitted out of ‘India growth story’. I shared an anecdote on how I explained bonds to a naive villager in very simple terms and in the language that he could understand.

While discussing bond, it is often quoted that there exists a negative co-relation between bond prices and interest rate and they move in opposite directions. How to explain it to a simple investor who doesn’t understand math even up to middle school? I briefed them to imagine a farmer having a buffalo that gives 10 Kg of milk daily for Rs one lakh. The agreement between seller and buyer stipulates that the seller will buy back the buffalo after five years and will pay back Rs one lakh.

The seller will also ensure that there is no disruption in milk supply. One fine day the buyer wishes to sell the buffalo for Rs one lakh and brings her in mandi. He finds that in the Mandi, a buffalo giving 11 Kg of milk is also available for sale at the same price. In this situation he can understand, without any technical or mathematical knowledge, that he can’t sell it for Rs 1 lakh. He has to sell it either for an amount less or he has to wait till five years complete and the original seller takes it back.

The illustration was largely applauded as no mathematics was required to drive home the concept of mark to market.

Then followed the Q&A session. The questions were centred around active and passive fund, which one is better. Some queries were related to behavioural finances which I explained them to their satisfaction. It was easy for me to explain to them as they were technically qualified to understand the concepts in the language of finance.

Overall it’s been an enriching and fulfilling experience for me. I feel that financial and academic institutions must partner to de-mystify the concepts of investment and improve financial literacy in the nation. I appreciate Bizz Buzz’s support in publishing our series of Nivesh Sutra. Interacting with the IIM-A students affirmed my belief that those who are financially savvy are willing to take the task up.

(The writer is Senior Vice President, SBI Funds Management Ltd)