'Data' is the rising factor for Alternative Investments in India

Data in the current world is tricky and its usage even trickier for investment purposes. The usage of data should not fall under the ambit of phishing or invasion of privacy.

It is difficult to quantify the amount of data being collected. If we could, it would be humongous! This decade has predominantly gone into collecting data rather than processing it.

Newer aspects have emerged to analyse this data and evolution is but natural and necessary. Let us look at some familiar incidents where data processing is already under use for decision making.

Traffic signals are now equipped with cameras which are not only video recording what is happening but can scout for number plates in the video flips to punish lawbreakers.

It might not be long before vehicles have GPS preinstalled or map service providers provide data on restricted way entry and exits to the authorities for adherence and keep of the law.

With these rising trends, it might be interesting to explore how data is driving decision making for investments in India. Let’s first look at the credit side and see how certain new-age firms are interlinking qualitative and quantitative aspects.

Quick turn arounds are critical to today’s businesses and to the customers for the lack of it may be detrimental. There are several lenders who advertise the speed of credit evaluation.

They certainly evaluate the 4C’s of credit (collateral, character, covenants, and capacity) but along with that, there is a focus on SILK (social, interactions, linkages, and k-constant).

With the type of data available, one can be classified as socially active or passive and hence the factor gets embedded in the decision-making process. An individual who fears social retribution is more likely to be not a wilful defaulter.

The conversation an individual has over the counter gives a binary judgment on the quality and motive of the credit. Proxy customer ratings (such as cab customer ratings) are also used here.

Likewise, individuals who are well connected and whose peers are well placed from a credit perspective are likely to be of a similar breed. Lastly, having consistency removes risk.

If an individual is going to work at the same place every single day at a similar time or is spending time at certain locations consistently would be considered a safer credit bet, ceteris paribus. Location data is shared by various applications in this regard.

Investments is a space where there is a lot of noise. There are opinions of people and these keep coming through time. Just like performance if one could keep a track of these opinions and the proportionate times it was vindicated it would be so much easier to rely on them.

Unfortunately, the traditional methods don’t capture commentary and backtest commentary or observe investment mandates and compare it to its implementation.

With machine learning, a lot is possible. Machine learning is vividly described as the ability of a machine to learn by itself. Machine learning can focus upon individuals on what they said and have predefined parameters to test for the future. Interviews and opinions hence through this method can be objectively backtested.

Likewise, data can also be focused on companies and not on fund managers or fund houses. Satellite images, heat maps and others are examples to gain perspective of the business activity.

The quarterly results get reported only with a lag but if the direction of the result can be ascertained then an investor is in for a windfall gain. Progress of infrastructure projects can be monitored as well as footfall at company-owned outlets.

Data can also be used to pre-empt the decision making of companies by tracking management and hence have a signal to upcoming corporate announcements such as a merger or an acquisition.

Data in the current world is tricky and its usage even trickier for investment purposes. The usage of data should not fall under the ambit of phishing or invasion of privacy.

Data may be anonymous, but it may also render it useful if done so in certain instances. There is a thin line and it needs to be maintained.

Source By- Moneycontrol

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