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SUCHETA DALAL ON:

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Personal Finance Magazine

WHY THE STRIKE AGAINST BLACK MONEY FALTERED SO QUICKLY

9 December-22 December 2016

Pages 68

(SUBSCRIBER COPY NOT FOR RESALE)

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ISSUE CONTENTS

9-22 Dec 2016 Buying Life Insurance Right

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erm life insurance is a must-have cover for those with dependents. The product is easy to understand and meets your life insurance needs. New online term plans are launched with lower premium, higher term and maximum maturity age. But do you really need a term plan till you are 80 years of age? You need to know how to buy a term plan correctly. In our Cover Story this time, Raj Pradhan, our insurance expert, provides examples that debunk some myths about term plans. He points out that many of the features and the flexibility offered by term plans may not necessarily help you. A plain-vanilla term plan, and a dose of financial literacy for the entire family, may be your best approach. After all, you don’t want to buy into product features that will only help the insurer earn a higher margin. Our idea is to help even a layperson understand various options available. Sucheta Dalal, in her Different Strokes column, analyses the impact of the demonetisation exercise and why a decision that found a huge support among ordinary Indians is now faltering and may have missed the target. In her Crosshairs column, she talks about the prime minister’s effort to push India to use less cash. However, there are issues with the digital world—we need better protection, effective grievance redress, financial literacy and more incentives to switch to electronic payments. With our popular columnist R Balakrishnan also analysing the impact of demonetisation on various important sections of the economy and businesses, we have a whole package on an event that has shaken the country. We have been exploring momentum in stocks, for some months now. Momentum strategies work when the market is trending higher or if there is a correction, as is happening now. I have listed a few stocks that seem to have bucked the market downtrend and headed higher. Those interested can explore these strong stocks. As always, please do write to us with comments on the published articles and about what you would like to read. Debashis Basu 

30 Cover Story Buying Life Insurance Right Life insurance has a definite place in our life. It is the best step you can take for your family to ensure they survive financially even when you are not there. Raj Pradhan offers key lessons for buying life insurance properly for safeguarding your assets

12 Your Money

– Rs1 Crore Health Insurance Policy Soon – Benami Property Owners under Watch by I-T Department – Jitendra Jain of Kamlashri Builders Held – RBI Counters Will Allow Exchange of the Demonetised Currency Notes – Realty Law Finalised in Delhi – EPFO Pensioners Are Required To Submit Life Certificate by 15th January

14 18

MONEYLIFE

QUIZ On the Digital Highway without a Seat Belt

20 Different Strokes

Why the Strike against Black Money Faltered

Disclaimer: Moneylife has a policy of not allowing its editorial staff to buy and sell stocks that are written about in the magazine. All personal transactions in individual stocks are subjected to internal disclosure rules.

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CONTENTS FUND POINTERS

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FUND FACTS

INSURANCE

HEALTH

28 Insurance Trends

Your Genes 56 It’orsYour Lifestyle?

Health insurance – Religare Health’s New Version of ‘Care’ – Exide Life Cover for Heart and Cancer conditions

Pulse Beat: Medical developments from around the world

Fine Print

ATMs 58 How Function

& Worst 23 Best Mutual Fund Schemes

TECHNOLOGY

TAX / FIXED INCOME YOU BE THE JUDGE

xSTOCKS

from Bank FDs to 40 Shift Smart Man, Liquid/ Ultra-short-term 59 Smarter Funds? Wife

24 Smart Money Demonetisation & Stocks

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– G-Sec Yields Decline Steeply

Transformers & Rectifiers: Getting Transformed?

ML FOUNDATION EVENTS

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Bodal Chemicals: Strong Growth USEFUL APPS

IFB Agro: Agressive Growth

Apcotex: Short-term Blip

52 Skyscanner: Find the Flight

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BEYOND MONEY

Benefit from 66 Tribals Scientific Approach and Spiritual Outlook

of Your Choice

– First Aid: Expert Advice for Emergencies – Cozi: The Ultimate Family Organiser – Swipes: A Better To-do App

LEGALLY SPEAKING

Market Trend: Slow Realisation for the Bulls

What 60 Domonetisation: You Need To Know

54

Open Offer, Once Made, Can’t Be Withdrawn

DEPARTMENTS Readers’ Response ........... 8 Book Review ....................62 Money Facts ....................64

02-12-2016 17:59:29

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Volume 11, Issue 22 9 December–22 December 2016

Debashis Basu

Editor & Publisher [email protected]

Sucheta Dalal

Managing Editor [email protected]

Editorial Consultant Dr Nita Mukherjee [email protected]

Editorial, Advertisement, Circulation & Subscription Office 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai - 400 028 Tel: 022 49205000 Fax: 022 49205022 E-mail: [email protected]

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Moneylife is printed and published by Debashis Basu on behalf of Moneywise Media Pvt Ltd and published at 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai - 400 028 Editor: Debashis Basu

Total no of pages - 68, Including Covers

RNI No: MAHENG/2006/16653

SAD HAPPENINGS AT THE HOUSE OF TATAS: ML BHAKTA I compliment Debashis Basu and Sucheta Dalal for their articles in Moneylife on the recent sad happenings at the house of Tatas. The articles provide a fair and unbiased review of the known Mutual Fund investments facts and an independent assessment of the exact are subject to market risks, read all scheme related situation. documents carefully. I am not a friend or a foe of Ratan Tata or Cyrus Mistry. Even as a professional, I do not have any association or relationship with Tata group Write to the Editor! of companies, except that I served as a director of one of the small Tata group companies, Hitech Drilling, for a brief period, as a nominee director a prize on behalf of Schlumberger which had a stake in the company. However, as a corporate lawyer and a person who has served on the boards of many Indian, and some multinational, companies as an independent director, I have keenly observed the Tata-Mistry episode. The purpose of this letter is to share with the readers of Moneylife how I, as an outside observer, view the matter. It is apparent that after taking over as the chairman of Tata Sons, Cyrus Mistry went deeper into the workings of the various group companies and started taking remedial action on the decisions taken by Ratan Tata which, to him, looked to be bad and un-businesslike. Corus, which was acquired 2007, uired d iin n 20 2007 07 continued to be in bad shape and could not be turned around in spite of all efforts. Cyrus Mistry decided to stop the daily losses suffered by Tata Steel and announced liquidation of assets. It is reliably learnt that the acquisition of Pierre Hotel in USA was done by Ratan Tata at a very high value against the advice of some of the senior executives of Indian Hotels. After realising the loss-making investment done by Ratan Tata, Cyrus Mistry seems to have decided to sell off the Hotel. It is understood that one personal friend of Ratan Tata was made a highly paid executive at Tata Power without being required to render 

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LETTERS

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Best letter

Why a Public Execution?

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his is with regard to the series of articles in Moneylife on Ratan Tata asking Cyrus Mistry to step down. Here is a quote from the Mint newspaper (on its website): “Cyrus was fired in October, his contract ends in April. They could have simply said look your contract ends in April and it’s not working out, so let’s figure out a way for you to step down. Instead, what they did is public execution and humiliated a gentleman who didn’t deserve it.” As an investor in mutual funds of Tatas and in TCS shares, I would like to state: 1) WISDOM: Better wisdom should have prevailed upon all the persons involved in this decision. Any organisation, small or big, listed or otherwise, can get simple counsel to just buy time or grace from the presiding chairman of the organisation. If you can’t buy either, you can always persuade the chairman to stay till the end of the contract with least damage to all stakeholders. But, alas! 2) PATIENCE: Patience is called a virtue. One can really see, feel and deeply appreciate it is a virtue, in the light of the saga at Tata. An organisation that has a history of 100+ years did not have patience of ‘five months’, for its chosen chairman. And, on top of it, I am sure, Tata’s are not going to get a reasonable person to wear the crown before that time, i.e., before end of FY16-17, anyway. So, why this hurry? Sad, really, sad! 3) FAIR & JUST: I personally think, Tatas are not ‘fair & just’ to the outgoing chairman, let alone to all stakeholders. How & why? After showing the door to the chairman, Tatas have failed to give accurate, correct and reasonable account of why they had to take the precipitous decision, on the spot, at the board meeting. As far as all other stakeholders (government., media, shareholders, vendors, customers, investors, etc) are concerned, we need to know ‘real & honest truth’ before we take economic decisions. They (Tatas themselves) are destroying our faith in the Tata brand. Kalyug! Really, bad omen! 4) BRAND: I really don’t know what is going on inside Bombay House, other than the media blitz that is more on ‘guess, opinions & conjectures’ rather than ‘facts, figures (data), analysis &

investigation’. But, I am pretty sure, Mutual Fund investments the Tata brand shall are subject to market risks, read all scheme related never, ever get the documents carefully. cherished coveted position of ‘excellent brand’ in my lifetime. Why? If the Tata group Sharad Shah can do this to the single YOU WIN A largest shareholder PERSONALISED and its own chosen CLOCK chairman, I am sure, they are capable of going very far in playing devil’s games in their ‘hearts & minds’. Earlier, I have Sharad Shah heard from a very senior working professional (MD) in Tata group, that they are not as ‘ethical’ as I was led to believe. I did not dig into it and here we are! Bad. Really bad! 5) TRUTH: Satyamevjayate. In the first bench of the high court, I have personally seen how this emblem of our faith gets tossed around in the name of ‘justice’ by lawyers, judges, etc. Now, you can see how casually ‘truth’ is sidelined in the biggest corporate conglomerate of India, boasting of being a home-grown multinational corporation. All agencies of overnment and the people are sitting on the sidelines watching the ‘game of thrones’ instead of seeking ‘truth’, not for any reason other than, for the sake of it! But, alas! Now, as a citizen of this country, personally, I feel, Mr Tata has a lot more to answer for than Mr Mistry. But, unfortunately, after all wars, history is written by winner! India is not a great country and is becoming a ‘zombie’ state, on the way down every day, year after year, decade after decade, sadly after independence! Sharad Shah, online comment

Congratulations

MONEYLIFE | 9-22 Dec 2016 | 10

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LETTERS

 any services and Cyrus Mistry got him dismissed. It

seems that these and similar decisions taken by Cyrus Mistry to reorganise the group companies were not liked by Ratan Tata and, hence, the removal. As regards the working of Cyrus Mistry as the chairman of various group companies, the law requires the board, and/or the independent directors’ group and/or the nomination and remuneration committee of every public company, to make an assessment of the performance of the company’s chairman annually. I am sure that all the public companies must have clearly recorded such assessments for the period since Cyrus Mistry was appointed chairman and it should be interesting to examine the records, to ascertain the reality. It is shocking that with a view to serve their own purpose, Ratan Tata and his team have thought it fit to raise doubts about the independence of eminent independent directors like Deepak Parekh, Keki Dadiseth, Nadir Godrej and even gone to the extent of maligning a wellknown industrialist like Nusli Wadia who has been associated with the group even before Ratan Tata came on the scene. The suddenness and the manner in which Cyrus Mistry has been removed do not leave much to be said. This is a distinct case where SEBI (Securities and Exchange Board of India) can play a role and the importance of Tata group in the corporate sector of the country calls for intervention and action by SEBI. Apart from holding of Tata Sons in various group companies, the remaining shareholders are financial institutions, FIIs (foreign institutional investors), mutual funds and small public shareholders. It will be unfair to treat Tata Sons, which is fully controlled by the Trusts chaired by Ratan Tata, as a non-interested shareholder of the group companies. In fairness, the decision—whether Cyrus Mistry should continue as the chairman of various group

companies—should be left to the other shareholders (excluding Tata Sons). If SEBI is permitted to act without being influenced by Ratan Tata, and without any political interference, the voting of Tata Sons at the EGMs (extraordinary general meetings) proposed for removal of Cyrus Mistry should be barred. Let us see who wins, David or Goliath. ML Bhakta, senior partner, Kanga & Co, by email

GOOD SENSE SHOULD PREVAIL I have read the Moneylife articles on the feud between the two giant industrialists in Tata Sons and it is, indeed, unfortunate that it has happened between the two Parsi families which have great reputation globally. If one were to go through the history of Parsis in India, one will come across a very well-known event when they landed the shores of Sanjan (Gujarat). They promised the then rulers of Sajan that they would spread sweet fragrance throughout the country. Just as sugar mixes with milk, they would maintain harmony and peace and spread sweet fragrance. The Parsi community is known for its patriotism, philanthropy and business skills. Jamsetji Tata, the pioneer who build the Tata empire, believed in three cardinal principles: good thoughts, good words and good deeds. However, any immediate truce seems remote. But a serious attempt has to be made to resolve the present crisis which will impact all the stakeholders globally and, particularly, small retail investors who have immense faith and confidence in good governance. The situation is quite similar to what prevailed in the case of the Ambani brothers who, ultimately, chose the path of a good arbitrator and resolved the crisis amicably. Hope good sense prevails, for the betterment of the country’s economy. Ramesh Kapadia, by email

HOW TO REACH US Letters: Letters to the Editor can be emailed to editor@moneylife. in or can be posted to: The Editor, Moneylife Magazine, Unit No. 316, 3rd Floor, Hind Service Industries, Off Veer Savarkar Marg, Dadar(W),

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11 | 9-22 Dec 2016 | MONEYLIFE

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Your Money TAX

MEDICLAIM

Rs1 Crore Health Insurance Policy Soon

N

ew India Assurance Company Ltd said it has formulated a health insurance scheme for high net-worth individuals with a sum insured of up to Rs1 crore. It was awaiting approval of the Insurance Regulatory and Development Authority of India (IRDAI) for the launch. New India Assurance chairmancummanaging director G Srinivasan told reporters, “The sum insured on this new product could go

up to Rs1 crore and will include many advanced features, besides having complete protection to policyholders and family, in any eventuality.” The insurer has also made changes to its Mediclaim 2012 product by removing some of the deficiencies. “This is expected to be rolled out in three to four months and the improved product is also awaiting IRDAI’s approval,” said Srinivasan.

REAL ESTATE

Jitendra Jain of Kamlashri Builders Held

T

he economic offences wing (EOW) of Mumbai police arrested 37-year-old Jitendra Jain of Kamlashri Builders. The Bombay High Court (BHC) had directed the EOW to investigate the “fabricated commencement certificate (CC) till 17th floor” for the building called Shimmer. The complaint accused Mr Jain of criminal conspiracy, forgery and cheating alleging that he also failed to give flats to buyers, despite collecting over Rs60 crore from them since 2009. After buyers moved the BHC, the civic body informed the Court that the CC was till the fifth floor while its former architect said it was only till the stilt level. Mr Jain cheated buyers by falsely representing that he had permission to build beyond the fifth floor. He sold two flats to more than one buyer each, according to the EOW.

Benami Property Owners under Watch by I-T Department

T

he income-tax (I-T) department has instructed its officials to clamp down on people having benami properties and question those found depositing banned currency notes in banks in large amounts without known sources of income. The newly enforced Benami Property Transactions Act carries a penalty and imprisonment of up to seven years. The I-T department is responsible for enforcing the Act and attachment of properties under it. Under the Benami Property Transactions Act, a taxman can confiscate and prosecute both the depositor and the person whose illegal money he/ she ‘adjusted’. “The person who deposits old currency in the bank account shall be treated as beneficial owner and the person in whose bank account it has been deposited shall be categorised under this law as a benamidar,” an I-T department official said. BANKING

RBI Counters Will Allow Exchange of the Demonetised Currency Notes

R

eserve Bank of India (RBI) said that it will exchange old currency notes of Rs500 and Rs1,000 at their counters even after it disallowed banks from exchanging old notes at their counters. RBI has not specified until what date the exchange facility would be available at their counters. RBI has 19 exchange counters across India where it is exchanging old invalid notes since 10th November. RBI’s notification said that exchange facility will be available at their counter ‘up to the current limits per person’.

MONEYLIFE | 9-22 Dec 2016 | 12

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Your Money REAL ESTATE

RETIREMENT

Realty Law Finalised in Delhi

T

he urban development ministry has finalised the rules to make the Real Estate (Regulation and Development) Act operational in the city of Delhi. Parliament had cleared the realty law in March and states and Union Territories were given six months to notify the rules. The vice-chairman of the Delhi Development Authority has been designated as the real estate regulator. While registering with the regulator, developers of ongoing projects will have to make public the original sanctioned plans with

specifications as well as changes made later, the total amount collected from allottees and the money that has been used already. Within three months of applying for registration of a project, the developer will have to deposit 70% of the unused portion of the amount collected in a separate bank account for ensuring completion of ongoing projects. The registration fee for realty projects has been reduced to Rs5 per sq mtr for up to 1,000 sq mtr area and Rs10 per sq mtr beyond this limit, subject to a maximum of Rs50 lakh per project.

MONEYLIFE QUIZ

EPFO Pensioners Are Required To Submit Life Certificate by 15th January

T

he Employees’ Provident Fund Organisation (EPFO) has informed its 120+ field offices that the last date for submission of life certificate by pensioners is extended up to 15 January 2017, a senior official told news agencies. In case pensioners don’t submit their life certificate, their pension is stopped. EPFO accepts life certificate through Jeevan Pramaan software application through mobile phones. Besides, the pensioners can use over 200,000 common service centres.

Moneylife Quiz no

247

Another quiz to tease your brain. The answers are in this very issue. The winner will be chosen by a lucky draw from correct entries and answers published in the issue dated 19 January 2017. Send in your answers to [email protected] with the Quiz no., name, address & telephone number before 28 December 2016. 1. According to the Moneylife analysis of, how sector mutual fund (MF) schemes, many times in 12 five-year periods have the pharmaceutical sector MF schemes outperformed the information technology sector MF schemes? a. eight times b. four times c. twice d. once 2. What is meant by inter alia? a. Internal alliance b. International alliance c. Alien from Internet d. Among other things 3. When was SEWA-Rural formed? a. 26 October 1980 b. 26 November 1985 c. 2 October 1988 d. 1 January 2000

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Answer Correctly! Win a personalised sed clock with an investment nt quote!

Francis F Fernandes

5. How many times have the average returns for pharmaceutical sector MF schemes been less than 15% in a five-year period? a. never b. once c. five times d. seven times 6. What was the lowest return by an information technology sector MF scheme in a particular five-year period? a. -2.32% b. 1.55% c. 2.32% d. 5.41%

7. What was the yield of 10-year G-Sec on 25 November 2016? a. 6.05% b. 6.23% c. 6.77% d. 7.08%

4. What is the estimated number of downloads of the popular 8. Which bank installed its first cash machine on 27 June 1967 app Skyscanner? in north London? a. 10 million b. 15 million a. Barclays Bank b. Standard Chartered Bank c. Citibank N.A. d. Bank of England? c. 30 million d. 50 million In all, 13 readers got all the answers right last time. The winner of Quiz-245 is Sudesh Kumar Roy from Hyderabad. Congrats! You win a personalised clock with an investment quote!

The answers to Moneylife Quiz-245 are: • 1- a. William Bernstein • 2- c. 7-10 years • 3- d. Ahmednagar • 4- d. German stock market • 5- d. Rs845 crore • 6- c. 1982 • 7- a. 1,200 metric tonnes per annum • 8- c. Singapore

MONEYLIFE | 9-22 Dec 2016 | 14

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www.moneylife.in News & views with a big difference Demonetisation Impact: Decoding the note shortage Starting 5th December 2016, the Reserve Bank of India (RBI)’s presses will start printing the new Rs500 denomination currency, after stopping the print run of Rs2,000 denomination at around 1,900 million (190 crore) pieces. The decision is a recognition of the huge mess up in anticipating currency requirements and the blunder in failing to recognise that people cannot possibly be asked to manage with

absolutely no intermediate denomination between Rs100 and Rs2,000 notes. The blame for this has to lie squarely at the doors of RBI which is responsible for currency management and for advising the government on preparedness. They are also responsible for what turned out to be a deadly blunder in printing and reducing the size of the currency, thus rendering over 220,000 ATMs useless at a crucial time. These ATMs have not been fully recalibrated as yet, despite a massive team being pressed into action. The function is headed by one deputy governor of RBI, who also heads RBI’s wholly-owned subsidiary the Bharatiya Reserve Bank Note Mudran Pvt Ltd

Demonetisation: Implementation is highly anti-poor, says Dr KC Chakrabarty

Demonetisation: Govt needs to give incentives for digital transactions Following the demonetisation drive, the number of digital transactions is going up. However, in value terms per transaction, it is still very low and the Indian government should come up with a detailed list of incentives to popularise digital transactions, says a research report

In an interview with Moneylife, Dr KC Chakrabarty, former deputy governor of the Reserve Bank of India, gave us his no-nonsense views on how to tackle the issues raised by demonetisation of currency

Don’t pre-pone Taxes; scrap the ICDS standards, appeal CAs

Strange request from slayed ‘unmarried’ RTI activist Satish Shetty’s ‘wife’ to remove report on his murder

The Bombay Chartered Accountants Society (BCAS) has requested the finance minister, Arun Jaitley, to scrap the Income Computation and Disclosure Standards (ICDS) – Section 145(2) of the Income-tax Act, 1961. BCAS has launched a petition under change.org to urge that the ICDS should be withdrawn completely

EXCLUSIVE VIEWS

On issues that matter to you

In what turns out to be a sinister attempt to scrub all news about the murder of Right to Information (RTI) activist, Satish Shetty, Moneylife received an email, purportedly from his wife, asking for reports about his murder to be deleted from our website, because it causes pain to the family

ML FOUNDATION Scope for Tax Terrorism

India needs a Rs200 note, not a Rs2,000 note and the science behind it Ravi Abhyankar

RTI success stories officially compiled for the first time Vinita Deshmukh

Loan write-offs, demonetisation and black money PV Vijay Kumar

As per the amendments, the Central Board of Direct Taxes (CBDT) has authorised income-tax officers (ITOs) powers to be an I-T authority which may be misused by ITOs to send notices or scrutiny notices to genuine taxpayers, said Nikhil Vadia, a chartered accountant. He was speaking at a seminarcum-guidance session organised by Moneylife Foundation on demonetisation of high currency notes and its implications

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02-12-2016 18:05:19

CROSSHAIRs

Exclusive news, the stories behind the headlines and the truth between the lines by Sucheta Dalal

On the Digital Highway without a Seat Belt B

P

rime minister (PM) Narendra Modi Modi’ss mega campaign to go cashless may, in the long run, lead to transformation like his much-needed Swachh Bharat initiative. We are a cash-based economy; over 68% of transactions happen in cash and the push to get, at least, urban, educated Indians to switch to cashless payments is necessary and long overdue. Starting with his radio talk (Maan ki Baat), the PM’s slogan of ‘My Mobile, My Wallet, My Bank’ has been amplified by leading bankers, e-payment companies, Union ministers, NITI Aayog officials and high-profile bureaucrats. But people won’t change just by being shoved in a particular direction. Moreover, in the short run, the pain in accessing one’s own money is very real. The government needs to work harder to make the switchover easier, by providing adequate infrastructure (telecom coverage, Internet connectivity), safety and ease of transactions and proper grievance redress. Unfortunately, the effort to push e-payments seems driven by the th need to hastily correct the co h massive failure of currency management after demonetisation, rather than a genuine desire to bring about a paradigm shift. Let’s look at a few decisions that are urgently needed to ensure that the switch to cashless transactions is both, safe and permanent.

encourage 1. Beneficiaries Must Pay: The first step is to enc ‘convenience’ and incentivise e-payments by scrapping ‘conven been a charges and transaction charges. So far, it has be (makemytrip, sellers’ market. So ticket booking agents (makem principals cleartrip, etc, or Bookmyshow) and even principa (Jet Airways) conveniently turned the logic on its head and decided that we, the consumers, must pay for the used to ‘convenience’ of getting tickets online. Airlines use offer hefty commissions to travel agents who did the hard work of selecting the best route and the lowest fare op option; the customer did not pay. pay Today, Today there are no travel trav agents; the consumer consume does all the hard work of searching and selecting; and also pays for the th alleged convenience. We need to ensure that beneficiary beneficia companies, at least, share the convenience. But what about movie theatres and airlines which are able to save on ticketing and box-office costs? This is the best time to do it because they need our business at a time when discretionary spending has dried up ssubstantially. b 2. Regulation Regulatio off E-wallet Companies: Information technology experts will tell you that most apps and e-wallets collect a lot of sensitive customer data by seeking omnibus permissions from not-so-savvy users. According to a report by medianama.com, leading payment apps get access to your Internet history, bookmarks, and even really sensitive data such as IMEI  number, saved Wi-Fi network info and the MacID.

MONEYLIFE | 9-22 27 November Dec 2016 2014 | 18| 14

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02-12-2016 18:06:55

 They record audio info, modify contacts and even use

in online transactions has led to a manifold surge in call logs to make calls. Many e-wallets will save credit/ customer complaints. Addressing a public meeting on 23rd May, he had said that these complaints relate to debit card details used to transfer money to the wallet without your permission. electronic transactions, unauthorised fund transfers, This increases the security risks for users, without fraudulent ATM withdrawals using duplicate cards, their knowledge. If the data is hacked, we, as phishing, vishing, etc. And yet, on 31st August, RBI individuals, are in no position to track the source of the only issued a draft regulation proposing to limit leak and we have no access to easy grievance redress customer liability instead of notifying formal rules. either. We need to have clear rules on what information These regulations propose to shift the onus of proving can be collated by apps and their liability spelt out, wrongdoing or carelessness on the part of the customer in case there is a large-scale data breach or even if to the bank. They will also ensure that the money lost an individual consumer has a complaint. Will every is immediately credited back to customer accounts minister of the NDA government, who is dutifully pending investigation. Isn’t it strange that RBI has not promoting e-wallets, take up the issue of regulation as been asked to notify these regulations even while a well? nationwide campaign to go cashless has been launched 3. Grievance Redress: This is an issue that we have from the highest office in the land? RBI must also been agitating for several years through Moneylife be asked to notify its much-touted consumer charter Foundation, our not-for-profit entity involved in and take responsibility for its implementation. The advocacy and financial literacy. At a social gathering, charter must prescribe clear penalties for banks’ lapses recently, a leading industrialist and amend the banking and a retired police chief were ombudsman regulations to In one case, a domestic helper’s narrating interesting stories empower it to initiate stringent account, which had her precious about how their domestic action. Instead, an unworkable helpers and cooks had adapted savings of over Rs70,000, was hacked. consumer charter has been to technology, using it to put out in the public domain The hacker, pretending to be a transfer money to their village banker, claimed that the account was and RBI seems to have no in Bihar and Odisha through intention of holding banks being tested to ensure that a link ATMs. strictly accountable for treating to her mobile phone was working While this is, indeed, very effectively and she should read out customers fairly. heartening, it is also a fact that 4. Financial Literacy: The buck the number received in an ATM ATM PINs are easily shared for spreading financial literacy with the family because of also stops at RBI’s doors. The ignorance. In one case, a domestic helper’s account, central bank, as is its style, works at an excruciatingly which had her precious savings of over Rs70,000, was slow pace on most issues; it is probably the slowest on hacked. The hacker, pretending to be a banker, claimed consumer protection. Two years ago, RBI took charge that the account was being tested to ensure that a of over Rs3,500 crore of unclaimed cash deposits link to her mobile phone was working effectively and that were lying with banks and set up the Depositor she should read out the number received in an ATM. Education and Awareness Fund (DEAF). This money The unsuspecting woman ended up giving her OTP could have been put to excellent use today to spread (one-time password) six times, until the bank itself financial literacy using modern tools to spread the noticed something amiss and blocked her account. A message. well-known consumer activist, who is helping the lady Two years later, DEAF has little to show. It took a recover her money, related this story to me; how many year to grant accreditation to a few NGOs and another are so lucky? year to sanction small sums to be spent on workshops As Dr KC Chakrabarty, former deputy governor of to a few of them. Worse, DEAF will simply not engage the Reserve Bank of India (RBI), told me in a recent with people in the field. Another effort to reach out interview, “You may push a person to do digital to rural consumers under the aegis of RBI and with transaction; but once a person has lost money at an support from banks is similarly chugging at a snail’s ATM or in a digital transaction, he will stay away speed. This is not the pace at which the PM operates; for 10 years. All over the world, unless the bank can but then, why doesn’t someone push RBI to act, or prove that the customer is at fault, his money should take away these responsibilities and allow it to remain first be credited to his account. That is a global rule. India’s monetary authority? At a time when people are This is not yet implemented in India.” The reason for going through enormous hardship to access their own not notifying consumer protection regulations is rather hard-earned money, being pushed into driving along perplexing, especially when RBI deputy governor, the digital highway without a safety belt will be even SS Mundra has publicly acknowledged that the increase more insensitive.  19 | 9-22 Dec 2016 | MONEYLIFE

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02-12-2016 18:07:28

DIFFERENT STROKES SUCHETA DALAL

Why the Strike against Black Money Faltered so Quickly

M

unicipal council elections in Gujarat and and turmoil faced by ordinary people has not even shaken Maharashtra seem to suggest that prime minister the confidence of the corrupt who continue to manipulate (PM) Narendra Modi and the Bharatiya Janata the banking system to corner new currency. Party (BJP) have scored big with the strike on black money The government and its diehard supporters will argue through demonetisation of Rs500 and Rs,1000 notes. At that it is too early to pass any judgement. After all, the least, that is what the Party believes, as is apparent from frequent policy changes are being announced, precisely to their social media messages. plug every new leak that is detected. Unfortunately, the However, a series of rapid-fire actions by the government atmosphere of uncertainly and confusion is causing a new set indicate a dawning realisation that the rollout of the of problems. For starters, it is fuelling rumours and fanning demonetisation plan is riddled with errors, misjudgement fears of an authoritarian State that encroaches on our and big blunders such as printing new Rs500 and Rs2,000 rights in the name of fighting corruption. On 1st December, notes in different sizez (which the finance ministry had to clarify that it was not rendered 220,000 ATMs until they are painstakingly planning to change the law to recalibrated), complete clamp down on the amount lack of preparedness and of gold that Indians can hold, leadership at the Central or which the government can government presses at Nashik seize during tax raids. It is not and Dewas, shortage of Rs500 clear if the clarification has, notes and failing to anticipate indeed, allayed fears. The the problem of having no Reserve Bank of India (RBI) currency between Rs100 and also issued a press release Rs2,000 after demonetisation asking people not to believe and lack of understanding anything that is not officially about the extent of India’s announced on its website. cash economy. The PM has not admitted to any problem. But, remember, the rumours But the PM has not had found wide acceptance Instead, as is his style, he is leading a admitted to any problem massive campaign to persuade people to because of a pattern of with the rollout. Instead, as policy announcements and switch to electronic transactions, using his legislative changes. Fears of is his style, he is leading a personal charisma and goodwill massive campaign to persuade intrusive government and tax people to switch to electronic terrorism are not without a transactions, using his personal charisma and good will basis. It is important to understand the sequence. Nikhil Vadia, a well-regarded chartered accountant, to great effect. Unfortunately, all the positive actions are being undermined by two factors. told Moneylife Foundation members, at a recent workshop, One, the constant change in regulations, policies and about how Rule 12E was introduced on 16 November decisions of the government seem to suggest that the 2016, under what is known as the scrutiny Section, government is shooting in the dark on the black money allowing an income-tax officer (ITO), the first level in the issue and is clueless about the contours of the problem hierarchy, to order a tax scrutiny. This has the potential to and the solutions. Two, daily reports of large cash seizures unleash tax terrorism all over again and reverses the earlier in new notes. As much as Rs4.7 crore in new notes were efforts by this very government to end the harassment of seized from government officials in Bengaluru; a BJP district genuine taxpayers. secretary was caught with over Rs20 lakh in cash in Tamil On a recent trip to Delhi, we were told by a very senior Nadu; and Rs95 lakh has been seized in Hyderabad. This official in one of the government agencies about plans to leads to the chilling conclusion that the enormous pain recruit thousands of retired tax officers to scrutinise all the 

MONEYLIFE | 9-22 Dec 2016 | 20

DIFFERENT STROKES.indd 2

02-12-2016 18:07:52

DIFFERENT STROKES SUCHETA DALAL

 deposits made between 8th November and 31 December

to reason that Rs2 lakh crore or more would come into 2016. While people were still trying to understand these the system till 30 December, thus throwing to the winds changes, the government hurriedly passed the Taxation all calculation of the government to tackle black money,”it Laws (Second Amendment) Bill, 2016, announcing another says. In fact, there are jokes and memes circulating on opportunity to come clean on undisclosed income or face social media about the attempt to trap unaccounted steep penalties. wealth through demonetisation. One, attributed to a This change, which is seen as another income declaration tax official, says, “With amount of money already back scheme, also seems to suggest a drastic course-correction in bank, I fear it may be like Black Label whiskey, more in the government’s plan to deal with black money. There money may come back than has been printed by the RBI.” are reports that over Rs11 lakh crore of demonetised Whether this could actually happen was also posed as a currency has already been deposited into banks, signalling serious question at a discussion organised by the Bombay that black money hoarders were merrily depositing their Chartered Accountants’ Society a couple of weeks ago. stash of undeclared wealth without fear of punishment It will be another 30 days before a clear picture emerges, or coercive action. but the government is clearly worried. The spate of tax This is most plausible, because tax experts and notices and raids on hoarders is a sign; but it still does retired income-tax commissioners have been confidently not include measures to root out the generation of black encouraging people to deposit their unaccounted money money and its illegitimate use in funding political parties as this year’s income under Sections 68 and 69 of the and elections (unrealistic spending cap per candidate), Income-tax Act and get away or the sale of government by paying 30% tax. While appointments and postings there is a good chance that with its consequence of rampant corruption in this may lead to litigation, case law from the two delivering public services. previous instances of currency At the same time, it has demonetisation in India put every single person in the entire country through (1946 and 1978) may support this stand. Nikhil Vadia cited enormous hardship, and at several examples where even a great cost to the economy the most egregious cases of itself. After two consecutive conversion were decided by years of drought, the the apex court in favour of economy was just beginning the taxpayer, after protracted to pick up. Banks, which litigation. People with large There are reports that over Rs11 lakh crore were struggling with losses, amounts of unaccounted of demonetised currency has already been bad loans and shrinkage of money would clearly prefer deposited into banks, signalling that black lending opportunities, are now fully occupied only to take their chances with money hoarders were merrily depositing with exchanging currency; our slow legal system their stash of undeclared wealth than allow the currency to all other work has come to turn worthless. Will such a standstill. Depositors are declarants be willing to make this money legitimate under not only unable to withdraw their funds, but deposit the new amendment? It remains to be seen and depends rates are shrinking. Foreign investors are systematically on what else the government does to end corruption and pulling money out of our stock markets. If all this weren’t expropriate black money. enough, oil prices, which have a significant impact on our The government’s action also indicates that its surgical economy, are gradually beginning to rise. strike on black money has missed its target. An article on PM Modi took a huge gamble with demonetisation IANS offers a simple arithmetic: currency deposited in and he will certainly work very hard to make it pay off; banks in the first 20 days after demonetisation (Rs8.45 lakh but at this point of time, it is anybody’s guess which way crore) plus the cash reserve ratio (CRR) as on 8th November it will go.  (over Rs4 lakh), plus another Rs50,000 crore as cash-inhand adds up to Rs13 lakh crore, which is just short of the Sucheta Dalal is the managing editor of Moneylife. She was Rs14.5 lakh crore worth of higher denomination notes that awarded the Padma Shri in 2006 for her outstanding contribution were demonetised. With another 30 days to go, “it stands to journalism. She can be reached at [email protected]

21 | 9-22 Dec 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3

02-12-2016 18:08:22

MUTUAL FUNDS POINTERS

Time for Pharma & Tech Funds?

A

popular topic in the investment community now is performance of the pharma and information technology (IT) sectors. Both have delivered great returns over the years and seem to be in a consolidation phase for some time now. The BSE Healthcare Index touched a high of 18,843 on 20 August 2015 and is at 15,624 as of 2 December 2016 down 17.09% from its high. It touched a low of 13,955 on 9 November 2016. The BSE IT Index touched a high of 12,196 on 4 March 2015 and is trading at 9,704 as of 2 December 2016 down 20.43% from its high. It touched a low of 9,123 on 15 November 2016. Is it worth buying units of mutual fund schemes focused on these sectors? Let us see how these sectors have performed over the years and what one can expect. Given that sector turnarounds do not happen overnight, one needs to have a time horizon of at least five years for gains from sector-oriented mutual funds. We took five-year rolling returns of the handful of schemes available in each sector, from October 2000 till September 2016. The results of all 12 five-year periods are given in the tables below. Pharma schemes have always been a favourite and rightly so because of the high returns the sector has yielded. The average returns have been impressive, with the least being 18.71% by UTI Pharma and Healthcare over all the 12 five-year periods; the highest was 24.61% by Reliance Pharma over the same period. Pharma is one of the safest

Pharma Schemes Reliance Pharma Fund

Minimum

Maximum

Average

21.00 %

27.99 %

24.61%

SBI Pharma Fund UTI Pharma and Healthcare Fund

4.29 %

39.29 %

22.45%

11.83 %

25.27 %

18.71%

Tech Schemes Minimum

Maximum

Average

Birla Sun Life New Millennium

-2.32%

45.37%

15.99%

DSP BlackRock Technology.com Fund

-0.24 %

48.22 %

19.55%

Franklin Infotech Fund

3.59%

41.44%

16.51%

ICICI Prudential Technology Fund

5.27 %

40.27 %

19.63%

defensive sectors and only a strong contrarian would say that the sector has run out of steam. The IT sector is in the limelight currently, thanks to the depreciating rupee. The schemes have yielded extreme returns ranging -2.32% to 48.22% in a five-year period. The average has been 16%-19%. Is one willing to take on enormous additional risk inherent in sector schemes for returns that are akin to diversified schemes? Taking a close look at historical perfoemance helps. The graph shows returns of all individual five-year periods. Pharma schemes have outperformed the IT schemes in eight out of times and usually by a higher margin. Only in one out of 12 five-year periods have the average returns of the pharma sector schemes been less than 15%, whereas the average returns of IT sector schemes have been very volatile. The returns range from 2.33% for five years ending 28 September 2012 to 42.98% for five years ending 29 September 2006. While sector schemes can yield big returns, the timing of entry is crucial and understanding the prospects is necessary. Invest in sector schemes only if you have the ability and capability of making high-risk investments. — Mitul Patel 

Category Average Returns % Returns 50

Pharma

IT

42.98 39.29

40

31.43 30 22.79 20

15.43

24.67

32.07

26.90

26.29 22.38

17.03 13.50

16.15

15.49

10 2.33

13.17

16.98 14.87

19.06 16.49

20.57 17.25 8.47

5.34

0 Sep-16

Sep-15

Sep-14

Sep-13

Sep-12

Sep-11

Sep-10

Sep-09

Sep-08

Sep-07

Sep-06

Sep-05

MONEYLIFE | 9-22 Dec 2016 | 22

Fund Pointer.indd 2

02-12-2016 18:13:29

MUTUAL FUNDS FUND FACTS

Best & Worst Mutual Fund Schemes The best# three and the worst three schemes over the past three years ranked by their quarterly rolling returns. Premium members get access to a more refined list of top schemes by logging in to Moneylife Advisory - advisor.moneylife.in Equity Schemes (Quarterly Rolling Returns) Large Cap (Category Avg: 5.02%, Sensex: 3.38%)

Launch Date

Corpus (Rs Crore)*

Avg. Quarterly Rolling Returns

Mirae Asset India Opportunities Reliance Vision

1-Year 3-Years**

Exp Ratio

04-Apr-08

2,441

6.50%

8.86%

26.00% 2.37%

08-Oct-95

3,076

6.44%

2.40%

25.77% 2.04%

HDFC Equity

01-Jan-95

16,238

6.43%

5.61%

25.72% 2.03%

IDFC Imperial Equity

16-Mar-06

109

3.69%

3.11%

14.76% 2.68%

HDFC Large Cap

18-Feb-94

1,183

3.55%

0.85%

14.20% 2.20%

UTI Wealth B uilder

17-Dec-08

746

2.66%

7.10%

10.64% 2.61%

2,063

8.48%

11.45%

33.90% 2.15%

Multi-cap (Category Avg: 6.04%, BSE 200: 4.49%) L&T India Value

08-Jan-10

Tata Equity P/E

29-Jun-04

684

8.20%

16.90%

32.81% 2.75%

ICICI Prudential Value Discovery

16-Aug-04

14,979

7.93%

4.18%

31.72% 2.26%

UTI Bluechip Flexicap

20-Feb-06

1,868

4.40%

3.44%

17.61% 2.18%

Axis Equity

05-Jan-10

2,106

4.23%

-1.78%

16.92% 2.09%

Union Equity

10-Jun-11

173

4.10%

0.86%

16.39% 3.08%

Mid-and Small-cap (Category Avg: 8.72%, Nifty Midcap 100: 7.09%) DSP BlackRock Micro Cap

14-Jun-07

4,264

11.45%

17.25%

45.80% 2.52%

Reliance Small Cap

16-Sep-10

2,730

10.87%

7.63%

43.46% 2.06%

Sundaram SMILE

15-Feb-05

1,185

10.22%

0.20%

40.88% 2.51%

HDFC Small Cap

03-Apr-08

969

6.46%

8.75%

25.84% 2.45%

IDFC Sterling Equity

07-Mar-08

1,327

6.41%

5.38%

25.64% 2.18%

SBI Emerging Bussiness

17-Sep-04

1,861

6.23%

8.16%

24.94% 2.11%

Debt Schemes Income (Category Avg: 2.75%, Crisil Composite Bond: 3.09%) ICICI Prudential Long Term Plan

20-Jan-10

1,509

3.45%

18.08%

13.82% 1.21%

ICICI Prudential Income

09-Jul-98

2,753

3.19%

17.34%

12.76% 1.81%

HDFC Income

11-Sep-00

2,610

3.17%

17.72%

12.66% 1.84%

Invesco India Medium Term Bond

30-Dec-10

1,325

2.31%

9.50%

9.24% 0.75%

Axis Banking Debt

8-Jun-12

556

2.27%

8.68%

9.06% 0.35%

Invesco India Bank Debt

29-Dec-12

430

2.02%

7.85%

8.08% 0.65%

Liquid (Category Avg: 2.07%, Crisil Liquid Index: 2.11%) Escorts Liquid

03-Oct-05

244

2.19%

8.14%

8.76% 0.50%

Peerless Liquid

19-Feb-10

583

2.11%

7.84%

8.45% 0.21%

Indiabulls Liquid

25-Oct-11

6,423

2.11%

7.93%

8.45% 0.21%

Reliance Liquid - Cash Plan

07-Dec-01

4,185

1.92%

6.96%

7.68% 1.04%

L&T Cash

27-Nov-06

640

1.85%

6.62%

7.41% 0.79%

HDFC Cash Management - Call Plan

06-Feb-02

150

1.83%

6.46%

7.31% 0.20%

# Please note the table represents a comparative performance of mutual fund schemes over a three-year period and it is not a recommendation; * Latest quarter average assets under management; We have only considered schemes having a corpus above Rs100 crore. **Annually compounded

23 | 9-22 Dec 2016 | MONEYLIFE

Fund Facts.indd 2

02-12-2016 18:48:13

SMART MONEY R BALAKRISHNAN

Demonetisation & Stocks

T

he demonetisation of 500 and 1,000 rupee notes, announced on 8th November, has virtually touched every life in the country. Whether you had a currency note of that denomination or not, you have not escaped its impact. My focus, in this column, is simply on what happens to the fundamentals of stocks, following this monumental decision. Does demonetisation mean a lower, or higher, profit for them or does it mean that life goes on as usual? I am not trying to either explain or anticipate which way the markets are headed. My focus is more to see if the stocks themselves become more attractive or less attractive because of demonetisation.

Where Cash Is King Demonetisation, among other things, has primarily put brakes on discretionary consumer spending. There are two sets of people who are now going to take time, to come back to buying. First are those who are in cash-based system. For instance, the wholesale markets have a range of people from owners, employees, loaders and freight-operators for deliveries. The owner buys from the organised sector as well as from the unorganised sector. The unorganised sector is a large cottage industry which does not pay any taxes—direct or indirect. The inefficiencies of scale are more than offset by avoidance of taxes. The entire chain operates on cash payments. Salaries, raw materials, packaging, despatch, transport, etc, are all paid in cash. If you go to the shop to buy, most will get a cash memo with the word ‘estimate’ printed on it. You will pay cash. If you flash a card or want to make a cheque payment, you will be told that there would be 16% tax, extra. Since these are not big tickets (typical bills could be from Rs5,000 toRs50,000), most transactions happen in cash. This group of people is suddenly impacted. Cash is in short supply and there is a newly instilled fear of dealing in cash. It will take a long time for this ecosystem to adjust to be a part of the tax-paying universe of commerce. It will change the dynamics and there could be casualties along the way. In this business chain, there will be financiers

who lend in cash, take interest in cash and provide the working capital to this sector. This example can be extended to things like plastics, household items, electricals, etc. The participants of this sector, in turn, contribute to demand for a range of products like consumer durables, automobiles, etc. In addition, we have the millions of business-to-consumer (B-to-C) businesses that include everything—from a food vendor with a basket on his head, to the corner store selling day-today products. In a country where connectivity is poor and digital outreach is not great, electronic payment systems have not caught on. And, in addition, the reluctance to pay taxes, etc, means that our economy is predominantly a cash economy. The second set is the business-to-business (B-to-B) segment. Logic says that they may not be affected Think again. The B, in the B-to-C segment, buys something critical that is the output of the B-to-B segment. A hardware fellow will need aluminium. A utensil manufacturer will need steel, copper, etc. The B-to-B distributor is the facilitator. He has no hesitation in selling and collecting cash, whether he reports it or not. The B-to-B sector will suffer a deep knock-on effect, if the B-to-C sector slows down. There is also a loss of wealth for some who would have provided capital to the B-to-B sector. Even if they have not lost all, their coming back to business is going to take a long time before new dynamics are established. The B-to-B also outsources a lot from the medium and small enterprises (MSMEs) which, in turn, rely a lot on the cash-driven economy. The cash-driven economy has a lower cost structure which more than offsets the dis-economies of scale. All of these will have to find a new equilibrium. Many will go out of business and there will be a disruption. At the point of writing, the cash withdrawal limit for a business is just 50,000 rupees a day. Most businesses need several times this on a daily basis. So everyone will try and find ways to live within that which means that, somewhere, there is a huge contraction in spending taking place. If you consider the truck operators, each one needs upwards of Rs20,000 per day to meet fuel, bribes and toll costs. Not 

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SMART MONEY R BALAKRISHNAN

 everyone has a fuel card. Bribes (police harassment, for

overloading or for some violation or the other) are paid in cash. For the truck operators, it has become a regular expenditure, like the toll. Thus, a general slowdown is on the cards due to demonetisation. How long could it extend? My view is that it could be anything from 6-18 months. Our economy is too deeply entrenched in cash transactions and the new order will take time. The government has pushed the Budget forward by around four weeks. This means that the government has armed itself with a way to apply some quick-fix relief measures, as the extent of the fallout would be clearly visible by December-end. I expect interest rates to come down, as banks will have more money. Whether business has the confidence to spend is something difficult to say. The move against illicit wealth will get intensified and this will surely mean that there would be less money getting invested, in the short term. The government will, probably, have to give a big infrastructure spending push in the Budget to revive the sagging spirits. Private investment could be encouraged, to some extent, as interest rates start declining. All of this will take time. So far as 2016-17 is concerned, the last four to five months of the current fiscal (April to March) will see some contraction in the economy. This means that the corporate results for the last quarter will bear the the full impact of demonetisation and also whatever measures come, between now and the Budget, in the government’s attempts to attack black money. It is logical to expect a sharp fall in that quarter. Among the different sectors, banks are happy (lower cost of money, thanks to a spike in deposits for some time and book gains on falling interest rates). The non-banking financial companies are unhappy, as they are impacted on loans to individuals, and the MSME segment, which is impacted

by the currency shortage. High-end durables and luxury goods segments would hurt. The real estate sector is yet to face some music from the government. Home finance should see a slowdown even if house prices fall, as the investment demand slows down. Maybe, if home loan rates drop to 8% after the Budget, there could be a small revival. Automobiles should suffer a slowdown, too. Infrastructure would be in the spotlight as expectations are high about government being compelled to spend on infrastructure, to revive sentiments. Some big tax changes could come, as GST (goods & services tax) will also be making its debut in the coming year. Stock markets should go down more. Don’t forget, we are witnessing a chain of happenings as the US sets to chart a new path that has resulted in the dollar strengthening and interest rates firming up. In other words, global money flows into US have got a leg up. The flows into emerging markets have, consequently, thinned. And we all know that our markets are driven by foreign portfolio investors, though domestic mutual funds are acquiring some heft. This may be an opportunity to get hold of high-quality stocks at attractive valuations. The key is not to invest at the first fall. I think, the next 12 months are an open season for buying. So plan your buying gradually. Or start doing SIP in high-quality stocks. And be alert for sharp corrections, when there is disappointment on a quarter’s result. Sectors like pharma and software should do reasonably well. And the other thing to remember is that we are not falling from a reasonably valued market. We are falling from an over-valued market. In the history of economic India, we have entered uncharted waters. No one knows the true and final outcome of demonetisation. We all hope that we will emerge stronger.  The author can be reached at [email protected]

What’s Your Bahana for Not Subscribing? I am not interested in honest & insightful advice on money matters I never have any problems with banks, credit-cards or insurance companies I always invest on the basis of tips from friends and brokers Finance bores me to tears I would rather spend two year’s of knowledge on one evening of eating out I always buy from the newsstands

For subscription offers that are a steal, look for a form elsewhere in this issue or our website at www.moneylife.in

25 | 9-22 Dec 2016 | MONEYLIFE

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01-12-2016 21:02:15

INSURE CORRECTLY: MAS Benefit #1-3 The Right Life Insurance • Life Insurance Surrender Tool • The Right Health Insurance • Health Insurance Selection Tool • Free Accident Insurance We are not agents, distributors, brokers or lead generators; so, you get ethically correct advice

1. Right Life Insurance Insurance is supposed to protect you. But the real business of insurance companies is pooling money; they earn fees and their agents earn commissions. All their income and expenses come out of your money, ‘invested’ with them. And you get poor returns, after all the costs and charges.

Which insurance product then is right for you? As a member of Moneylife Advisory, you get advice on selected term insurance products, identified after deep, unbiased research. Most importantly, you will get special support during your claims, as long as you make the right declarations. + Tool Advises on Your Existing Insurance Worried that the ‘investment’ you had made in insurance is a dud? You can surrender, go paid-up or continue. What should you do? If you surrender, where do you invest and what new insurance do you buy? What are the tax implications? This tool from Moneylife Advisory will help you decide easily and quickly.

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29-07-2016 16:40:37

2. Right Health Insurance es differ Health insurance products are complex. Policies in exclusions, conditions and fine print. If you slip up on even one of the conditions, your claim may be rejected or cut down. A large number of cases generate disputes and some end up as complaints with the Insurance Ombudsman or consumer courts. We cut through the hype, hyperbole, duplication and complex fine print to help p you select the most suitable products. To help h you decide quickly, we have launched a health insurance selector tool.

3.Personal Accident Cover of Rs2.5 Lakh Bundled with your MAS membership is a Rs2.5 lakh of accident insurance.

This is all you need on the insurance front. Be an MAS member today and stay safe. MAS is a no-bias, no-conflict platform. We are not in the business of selling any financial product and so can advise you ethically.

Subscription to Moneylife magazine is included in MAS Premium Membership About MAS MAS is a SEBI-registered investment adviser and part of Moneylife, India’s most unbiased and pro-investor research and information group. We run India’s best personal finance magazine, Moneylife. We are not afraid to call a spade a spade. We are India’s only media company to have set up a non-profit trust, Moneylife Foundation, which is now the largest savers’ and investors’ association with more than 35,000 members. MAS was set up to help investors and savers make the right financial decisions and handhold them through the entire process.

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www.savers.moneylife.in

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29-07-2016 16:42:29

INSURANCE TRENDS New products, regulations, features and options, interpreted from your perspective H e a lt h i n s uranc e

Religare Health’s New Version of ‘Care’

R

eligare Health Insurance launched a new version of its flagship product—Care. Here are some of the upgraded features, along with Moneylife’s comments. • The product now offers sum insured (SI) of Rs75 lakh; the maximum limit, until now, was Rs60 lakh. Few people can afford to pay the premium for such high cover. • The product offers ‘Care Anywhere’ benefit which allows convenience of global coverage for SI of Rs50 lakh, Rs60 lakh and Rs75 lakh. The feature can now be availed for 12 critical illnesses (CI) instead of the earlier five CIs. The ‘Care Anywhere’ feature is applicable only for high SI which customers may not be able to afford. The global coverage is applicable for specific CIs and not all health conditions. • The plan of SI Rs50 lakh, Rs60 lakh and Rs75 lakh comes with an in-built maternity cover of up to Rs1 lakh. While maternity cover benefit is good for the high cover amount, there is no

maternity benefit for less than Rs50 lakh cover. • The list of named day-care medical procedures has been increased from 175 to 541. • The policy includes a preventive ‘annual health check-up’ at no extra cost to all insured members, including children. • The policy offers coverage of AYUSH treatments, i.e., ayurveda, unani, sidha and homeopathy (for SI of Rs3 lakh and above). There are sublimits for alternative treatments which start with Rs15,000 and go up to Rs40,000 for high cover of Rs50 lakh, Rs60 lakh and Rs75 lakh. A claim will be admissible under this benefit only if it is admissible under ‘in-patient care’ of benefit (hospitalisation expenses). Such hospitals should be run directly by a local/state/ Central government body. In addition to these features, some new ‘optional covers’ are being introduced at additional premium payment. Unlimited Automatic Recharge of SI: Recharge of SI is only for future claims which are not in relation to any illness or injury for which a claim has already been admitted for that insured person during a policy year. So, the feature may not always be helpful, even if it offers optional cover for unlimited recharge.

Personal Accident (PA) Cover: The optional cover includes two benefits, namely, accidental death and permanent total disablement. It is not comprehensive as it does not cover permanent partial disablement and temporary total disability which is covered by PA stand-alone product.

Health Insurance

Exide Life Cover for Heart and Cancer conditions

E

xide Life Insurance has launched ‘Sanjeevani’. It is a fixed benefit health insurance offering coverage against heart and cancer-related conditions. The plan differs from standard critical illness policies as it provides a fixed lump-sum benefit on diagnosis of early and major stages of heart and cancer-related conditions. The product will pay you the benefit on diagnosis of covered heart and cancer conditions, even if you have filed a claim under any existing health insurance policy (e.g., mediclaim) that you may have. Option-A: Cover for heartrelated conditions where a lumpsum amount is paid to you on diagnosis of a covered heart related condition. Option-B: Cover for heart and cancer-related conditions where you can cover yourself against cancerrelated conditions, in addition to heart, by paying a nominal additional premium. A lump-sum amount is paid to you on diagnosis of the covered heart or cancerrelated condition. The insurer has classified all covered heart and cancer-related conditions under three categories— mild, moderate and severe. These 

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INSURANCE TRENDS

 categories are based on the severity

of the diagnosed illness and define the extent of payout as a percentage of your chosen sum assured (SA). Mild: 25% of the chosen SA is paid to you on diagnosis of a mild condition. You can claim a mild condition only once, under plan Option-A, and twice under plan Option-B (one each from heart and cancer related conditions). Moderate: 50% of SA is paid to you on diagnosis of a moderate condition. Exide Life Insurance will pay the premium for the next five years on your behalf. Multiple claims are allowed under this category; your policy will terminate on payment of 100% of SA. Severe: 100% of SA is paid to you on diagnosis of a severe condition. The amount paid to you prior to diagnosis of a severe condition will be deducted. The policy will terminate on payout. The minimum and maximum entry age is 18 and 65 years, respectively. The maturity age is

Fine Print Insurer Delay Can Mean ‘Deemed Approval’

T

he guidelines of Insurance Regulatory and Development Authority of India (IRDAI) require the insurer to inform the policyholder about the acceptance or rejection of his/ her request for revival of lapsed policy within a period of 15 days. The Maharashtra State Consumer Disputes Redressal Commission observed that the failure to communicate the rejection of the revival application within 15 days, as provided under the IRDAI regulations, would constitute a ‘deemed

Exide Life Sanjeevani Premium Sum Assured

Option A: Cardiovascular – Male Life

Option B: Cardiovascular and Cancer – Male Life

Option A: Cardiovascular – Female Life

Option B: Cardiovascular and Cancer – Female Life

Rs5 lakh

Rs3,020

Rs4,005

Rs2,535

Rs3,480

Rs10 lakh

Rs4,730

Rs6,700

Rs3,020

Rs5,650

Rs15 lakh

Rs6,510

Rs9,465

Rs3,945

Rs7,890

Rs20 lakh

Rs8,400

Rs12,340

Rs4,980

Rs10,240

Rs25 lakh

Rs10,500

Rs15,425

Rs6,225

Rs12,800

Premium (excluding taxes) for 35-year-old person buying 35 years’ policy term. The premium rates are guaranteed for five years and can be revised post-IRDAI approval

70 years; there is no lifelong renewal option. The policy term is five to 35 years, subject to maturity age of 70 years. The longer the policy term you choose, the higher will be the premium. The premium rates are guaranteed for five years and can be reviewed post-IRDAI approval. Under this policy, you will be required to wait for a period of 180 days from policy commencement date or reinstatement date, whichever

approval’. Life insurance policies allow for a specific number of years for policy revival, subject to a medical check-up. The Commission differentiated between a fresh proposal, where there was no confirmed contract till its acceptance, versus an already underwritten policy which was pending for revival. For a policy which was pending revival, absence of any communication from the insurer confirming the acceptance of the proposal within 15 days can be considered as ‘deemed approval’ as per the Commission.

Max Life Insurance ‘InstaClaim’

M

ax Life Insurance has launched ‘InstaClaim’

is later, before you apply for a claim. Survival period is the time for which the life assured has to survive, once the covered condition is detected, to be eligible for the claim payout. The survival period in case of heart-related conditions is 28 days from the date of diagnosis. In case of cancer-related conditions, no survival period is applicable. Exide Life Sanjeevani does not offer any life insurance cover or maturity benefit. 

to enhance overall customer experience. InstaClaim will provide claim approval to Max Life customers in case of eligible policies within one day from the receipt of the claim with the necessary documents. It will be available to the registered beneficiary in all eligible policies which have completed three or more continuous years, in which the claim amount is less than Rs25 lakh and the claim does not warrant any field verification. Necessary documents should be submitted before 3pm on any working day from Monday to Friday at any of Max Life’s offices. 

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BUYING

LIFE INSURANCE

RIGHT Life insurance has a definite place in our life. It is the best step you can take for your family to ensure they survive financially even when you are not there. Raj Pradhan offers key lessons for buying life insurance properly for safeguarding your assets

T

he death of a bread-winner is an emotional shock for a family. If the person’s life is not covered, it can be a financial disaster as well. If the person had adequate insurance on his/her life, the family can at least use the death benefit to carry on with life. Insurance is a transfer of your risk to the insurance company, for a cost. The golden rule is that you should insure what you cannot afford to lose. If the impact of the rare event can lead the family to poverty, or huge loss of assets, you need to be insured against the possibility of such an event. Life insurance is a necessity for most people; it is best gift for your family. If you outlive the policy term, your

family is lucky, even when it means that the premium is you paid is ‘wasted’. If you are not lucky enough to survive, the family gets a gift of the security of a lifetime due to your wise decision of buying life insurance. There are people who may over-insure, to be on safer side; there may be those, at the other extreme, who will under-insure or buy no insurance. Based on your age, family, location, assets, income, liabilities, you can decide which insurance cover or covers you need and for what amount. You may need to prioritise the insurance requirements, in case you cannot afford to buy all the required covers. Life insurance should be high on your priority list, 

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COVER STORY

 especially if you have dependents. But avoid insurance-

cum-investment products like ULIPs (unit linked insurance plans), endowment, money-back and wholelife policies. Keep your insurance and investment needs separate. Buying a term insurance ‘return of premium’ (TROP) product is also an unwise choice, even though it is a term plan. The ‘return of premium’ feature makes it an insurance-cum-investment product that is best avoided. Buy an insurance product that is simple to understand. Offline term plans are expensive; hence, skip them. Even LIC has its online term plan (e-Term) which is much cheaper than its own offline term plan. So, you have a choice of online term plans from LIC as well as private insurers. An online term plan is the best option. But is it really easy to buy, with multiple options that go with the base product? Keep your focus on the base cover which is simple to understand, instead of going for features which you don’t need or are unable to understand. The flexibility and features offered by term plans usually benefit the insurance company. They sell higher margin features which may not be cost-effective. It is difficult for customers to decipher. Buying a plain-vanilla online term plan, with no bells and whistles, will be a wise decision. Stay away from life insurance agents, bank personnel or any other intermediary, including online sellers or web aggregators. Buying an online term plan from insurance company website is the best way to purchase.

up to 25 times the annual salary. The general rule is that insurers do not want someone to be over-insured as it can mean fraud. It’s not always true, but buying high cover than what you are eligible for is a red flag that you may be hiding some illness while making the purchase. While filling the proposal form, declare your existing life insurance policies (if any). It is important to make all declarations in the proposal form in utmost good faith. Ask for a copy of the submitted proposal, along with the policy document. The proposal is a crucial document, as medical tests may not detect all the health conditions. Insist on a medical test before you buy life insurance. Talk with the insurer about medical tests before the purchase. An insurer may not do the medical tests in all cases. Insurance companies keep changing the criteria for medical tests to not require it for higher age or higher sum assured. It is not good news for customers as medical tests help in robust underwriting.

2. Go for Single Premium? Single-premium products offer a discount in premium compared with regular annual premium policies. The discount can be tempting, but resist the temptation. You should never buy a single-premium term plan. It can tie you up with the insurance company till end of the policy

1. Getting the Basics Right If you don’t have any dependents, you do not need a life insurance policy. It does not mean your life has no worth; it only means that life insurance is not your requirement. You may need other insurance policies, like health, personal accident and so on. Don’t let anyone sell you life insurance policy when you do not have someone who is financially dependent on you. If you have dependents, you need to evaluate your life insurance needs. You need to have a cover which is at least 10-12 times your annual salary plus any liability (loan, etc) minus assets (excluding the home where you reside). You need to do this exercise every year, to eliminate the problems of having to calculate the future value of assets. You will need a term plan to cover you up to your retirement. If you need beyond it it means your retirement planning was insufficient or your liabilities (loan, children’s education, marriage) are still pending. A term plan is a plain-vanilla product which pays nothing if you survive the term. On death of the insured, the sum assured is paid. While some insurers may restrict the cover to 10 times the annual salary, others may offer

term. With online term plans offering lower premium for newer products, why would one want to give up the flexibility of being able to change policies? When a newer and better online term plan is available, you can simply switch to a new policy. Even the same insurer may offer a lower-premium term plan which is possible to opt for, if you have a regular premium policy. So, do not get stuck with any insurer by paying single premium. Moreover, if the policyholder dies soon after buying a single-premium policy, it is big loss; there is no pro-rated refund or any adjustment of the single premium. Regular 

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COVER STORY

Increasing Income Plan Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Increasing Income Benefit

20

22

24

26

28

30

32

34

36

38

NPV @8% Discount

20

20.37

20.57

20.63

20.58

20.41

20.16

19.83

19.44

19

Increasing income benefit amount in Rs lakh. It starts with Rs20 lakh paid in first year and increases by 10% of the base amount every year. It is paid for 10 years. Discount rate is taken as 8%, to calculate the NPV

 premium is better because you pay as you go. While one-

time payment is convenient, one must not ignore the time value of money. The money you save by not going with single premium can be invested. It may do better than any discount offered for single-premium mode. Don’t fall for the single-premium mode.

3. Why Go for Lump-sum Payout? Many term plans offer the options of death benefit as a lump-sum or monthly income (fixed or increasing). The argument in favour of periodic payment (income benefit payout) is that the lump-sum amount may be misused by the dependents intentionally or otherwise. There can be selfish relatives or advisers who can misguide the family to invest in toxic products that can put the lump-sum received at risk. Buyers of life insurance should take into account the financial literacy of dependents as much as the amount of insurance for proper coverage. But if the family can efficiently manage the lump-sum payout, it is better than income benefit. A Moneylife reader, Dhananjay Vaidyanathan, has made an excellent comparison of lump-sum death benefit payout versus income benefit payout that shows the lump-sum death benefit to be a better option. Check the three cases below to know how make a financially prudent decision. The family can decide to invest it as per their or your wishes. It is best to state your wishes in writing for the family so that they know where they can invest it safely and avoid risky investments. It is especially important if the family is not savvy about investment. The selling pitch for income benefit payout is that it saves the nominee the burden of managing a large pool of money. But is it really cost-effective? It is not easy for a layperson

to work out the math and make a financially correct decision. Insurers can take advantage of it and sell you the less cost-effective option. You need to safeguard your interest. Mr Vaidyanathan evaluated the three payout options offered by ICICI Pru iProtect Smart and concluded the following: At 8% discount rate, the NPV (net present value) works out to roughly the same for lump-sum versus increasing income benefit, but the premium is 26% higher for increasing income benefit. So, lump-sum works out to be better option financially. Why would you want to pay 26% higher premium just to get payout as increasing income benefit? Moreover, the comparison of lump-sum with same amount paid as income benefit reveals that the NPV works out to be 28% lower than the lump-sum payout, but the premium is only 15% lower than lump-sum option. Is that a marketing gimmick? It again reinforces the argument that lump-sum payout can work out to be financially better option. The income benefit option seems to be a feature designed to help the insurance company earn higher margin. CASE 1: Lump-sum Payout ICICI Pru iProtect Smart premium for a 31-year-old male buying cover of Rs2 crore is Rs15,216. The NPV is Rs2 crore—the same as the cash flow from death benefit lump-sum payout. CASE 2: Increasing Income Plan for 10 Years The NPV is Rs2.01 crore—close to NPV of the lumpsum option. The premium isRs19,172 which is 26% more expensive compared to the lump–sum payout. Why would you opt for increasing income benefit, especially if 

Fixed Income Plan Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Same Income Benefit

20

20

20

20

20

20

20

20

20

20

NPV @ 8% Discount

20

18.51

17.14

15.87

14.70

13.61

12.60

11.66

10.80

10

Same income benefit amount in Rs lakh. Rs20 lakh is paid for 10 years. Discount rate is taken at 8%, to calculate the NPV

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COVER STORY

Do Insurers Reject High Value Claims?

W

ith term plans, there are higher chances of fraud. Is that the reason why some newer insurers have a high It is, after all, a low premium product giving high number of high-value claims rejections? In 2013-14, HDFC Life and ICICI Pru Life were cover. So, fraudulent policies, such as buying cover for someone already dead, buying cover without declaring in the second and third positions for claims rejection about smoking or existing PED are a reality. Insurance (number of policies) of 4.70% and 4.98%, respectively; the claims companies reject rejection (benefit claims when Claims Rejection amount) was 9% they arise. If a and 12.73%, genuine claim is SBI Life respectively. For rejected, one has Canara HSBC OBC 2014-15, ICICI to go through HDFC Life Pru Life has the redressal Sahara India Life fallen to sixth process. It will be Kotak Life position (5.42%), interesting to see Claims Rejection (Benefit Amount) SUD Life while HDFC how the recent Claims Rejection (No. of Policies) PNB Metlife Life (7.24%) Section 45 ICICI Pru Life ranks at 11th amendment Bajaj Allianz place. Both fare will help the Tata AIA even worse with policyholders as claims rejection insurers cannot Max Life (benefit amount) reject claims Birla SunLife at 17.25% after three LIC and 21.13%, years of policy 0% 5% 10% 15% 20% 25% respectively. This purchase citing Top-13 insurers ranked according to claims rejection for 2014-15 is a high number discrepancies in compared with declaration. But is it possible that insurance companies are other insurers in the same range for the number of strict with high-value claims? They may pay low-value policies rejection ratio. It certainly helps LIC keep its claims to improve their claim settlement ratio, but the top position secure. An insurance company’s inefficiencies, or poor key is to keep track of the benefit amount rejection. It will tell if high-value claims are rejected by insurance underwriting practices, can be a reason for high company. After all, how many death claims of high repudiation ratios. It can also be due to incorrect or value (Rs50 lakh or more) paid by insurers is an hidden details in policy forms filled by a policyholder important criterion. Online term plans, being a recent with or without abetment of an agent. It is imperative phenomenon, may have many early claims (death that the policyholder fills up the proposal form in within three years of purchase). Early death claims are good faith without the agent filling any policyholder’s subjected to higher scrutiny for veracity from insurer. personal data.

 your family is financially literate?

CASE 3: Fixed Income Plan for 10 Years The NPV is close to Rs1.45 crore—28% lower than the NPV of the lump-sum payout. The premium is Rs12,934, only 15% lower than the premium for lump-sum. So, with same income benefit, you get a lower NPV, but the premium is not as much lower. It proves that lumpsum option remains your best bet for ICICI Pru iProtect Smart. For term plans, go with the lump-sum option and

get the family educated on handling finances.

4. Buy Increasing Cover To Beat Inflation? The need for life cover does increase after having children. But, at one point, the need will start decreasing, when children have completed their education, have a job and are married. So, life insurance need grows with age and drops later. It should come down to zero, when you retire. It is not a good idea to have increasing sum assured cover even if you want to consider the impact of 

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MONEYLIFE ADVISORY FIX YOUR FINANCES, FOREVER

Finally, Fix Your Finances, Forever Actionable advice on investment that works. Plus continuous one-on-one online support No Bias, No Conflict of Interest

savers.moneylife.in MAS is a SEBI-registered investment adviser and part of Moneylife, India’s most unbiased and pro-investor research and information group.

Subscription to Moneylife magazine is included in MAS Premium Membership

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MAS Benefit #4 - 7 Equity Fund Choices •

Which Large-cap Funds?

•

Which Mid-cap Funds?

•

Which ELSS?

•

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29-07-2016 16:14:07

COVER STORY

 infl ation to get increased cover. The reason is that such

products (increasing sum assured) are not cost-effective. It is better to buy a simple online term plan. If there is a better product you come across in future, you can easily discontinue the existing term plan and buy the new product. It starts with a cover of Rs25 lakh or more. When the need increases due to inflation or increased family responsibilities, you can buy another online term plan. It can be discontinued when your need goes down. So, you may have two or three policies over a period and discontinue one or more when the need for life insurance decreases. As long as you are healthy and under 50 years age, buying online term plan should not be difficult.

5. Buying High Cover To Lock Rates? The policy term for a term plan can be long with duration of 40 years or more. A term plan can lock the premium for the full policy term which is a good thing. So, should you over-insure yourself today just to lock-in with the premium? Premium increases with age. So, the premium is more for higher age. It means that buying a term plan at a younger age helps to lock-in at a lower premium for the full policy term. But it is better to buy the cover amount which is needed today rather than buying a high cover for future needs. The money saved (and grown by investing) by not buying more than required cover will help in future even if the premium were to increase. Moreover, buying in future will mean that you will buy for a lower policy term which can offset the premium rise with age. The total premium paid by a 28-year-old for a period of 35 years is Rs1,93,200; the total premium paid by a 38-year old for a period of 25 years is Rs2,14,175. The difference is only Rs20,975 over the period of the policy term. The difference for a smoker is a marginally higher amount of Rs46,850. You do not need to over-insure today, especially if you are in good health. If health is an issue, or there is a family history of adverse health conditions, better to buy a little higher cover today. Moreover, insurers will not allow over-insurance as it can signal fraud. Depending on

Are You NRI/OCI/PIO?

A

pure term plan is the best way to cover life. NRIs (non-resident Indians) can buy life insurance. What are the options for OCI (overseas citizen of India)/PIO (person of Indian origin)? Please read our Cover Story - http://tinyurl.com/jl2kbcz. It gives details which no other media has given. It will help you understand how to handle buying a term plan if you are an NRI/OCI/PIO.

your income level, the insurer will offer an appropriate cover amount. Premiums for online term plans have been decreasing; hence, the increase of premium with age should not be a worry. Insurers are coming out with new online term plans with lower premium than what they were offering earlier. It helps customers to increase their cover at a lower rate. They can even discontinue an existing cover and buy a new product with lower rates. If the premium for online term plans starts increasing (reversal of current trend) in future, it will be better to lock-in with a higher cover. Till then, just buy what you need today. Avoid over-insurance.

6. New Trend: Higher Maximum Age and Term In the past, life insurance used to be available up to 55 years. The maximum age increased to 60, then to 65, 70, and 75; now, there are products for up to the age of 80 years as well. It offers flexibility, since people may consider late retirement and/or have outstanding liabilities like loans, children’s education and marriage. But the longer the policy term you try to buy, the higher will be the premium. So, buy based on your need. Having life insurance till age 80 years should not be a requirement, normally. Life insurance needs should be till retirement. By the time you retire, you should have enough retirement corpus to live on and, hopefully, the responsibilities of children’s education and marriage may be over. If you are 

Impact of Age on Premium Type

28-year-old male buying policy of term of 35 years

Total premium paid by 28-year-old over the period of 35 years

38-year-old male buying policy of term of 25 years

Total premium paid by 38-year-old over the period of 25 years

Non-smoker

Rs5,520

Rs1,93,200

Rs8,567

Rs2,14,175

Smoker

Rs7,245

Rs2,53,575

Rs12,017

Rs3,00,425

Tata AIA Sampoorna Raksha premium for Rs50 lakh lump-sum death benefit. The policy will be over at age 63 years. Standard life assumed (no premium loading)

MONEYLIFE | 9-22 Dec 2016 | 36

Cover Story.indd 6

02-12-2016 18:16:44

COVER STORY

Want To Change the Country or Occupation?

W

hen buying life insurance, the country of present residence and current occupation matter. After you buy life insurance, change of country ountry or location does not have impact on the existing policy. So, buy life insurancee before you move to a country which may be considered ‘unsafe’ by insurers or changing your occupation to what may be considered as ‘higher risk’ by insurers. Your current profile matters when you buy life insurance. Where you u move in future or what work you do in n future has no bearing.

The proposal can be rejected if you live in a country which is excluded by the insurer. If the profession is not safe, life insurance can be denied. Make all proposal declarations in good faith else pro there ther may be issues with the claim. After a life l insurance policy is underwritten, based on existing profile from the b proposal form, it will cover death p anywhere. So, if you are travelling an abroad, death will be covered. If you ab change residence country, the address cha needs n eed to be updated. But coverage would continue. cco onti

maturity age has been raised to 80 years, raising the maximum policy term to 62 years. Type Policy Term of 25 Years Policy Term of 40 Years Premium Difference Entry age for a customer Non-smoker Rs8,567 Rs9,257 Rs690pa is a minimum of 18 years and Smoker Rs12,017 Rs13,167 Rs1,150pa a maximum of 65 years, with Tata AIA Sampoorna Raksha premium for a 38-year-old male with Rs50 lakh lump-sum death benefit. a minimum policy term of five Standard life assumed (no premium loading) years and a maximum of 62 years. Tata AIA has just launched Sampoorna Raksha. It is  dependent on life insurance policy even after retirement, it means your retirement corpus is not enough or you a term plan with a wide range of policy terms starting did not plan properly for retirement. But there could from 10 years and going to as high as 40 years, coupled be some genuine reasons due to which your financial with the maximum maturity age of 80 years. The longer responsibilities may continue beyond your retirement the policy term, the higher will be the premium. In the age. If you foresee such a situation, you can buy a longer example given in table, the non-smoker person will pay Rs690 per annum (pa) higher premium to avail 40 term plan to lock the rates. The maximum policy term of 40 years or more is years term instead of 25 years; smoker person will pay a helpful innovation. If a married individual of age 27 Rs1,150pa higher amount. years is buying an online term plan, the policy term of 40 years will ensure that it gets over when the customer is 7. Buying Life Cover in Old Age? 67 years. But, if the maximum policy term were only 30 Today, term plans can be purchased up to the age of 65 years, the policy would have got over at the of 57 years; to 70 years. For example, Tata AIA Sampoorna Raksha which would have been a wrong age. You don’t want the allows entry up to 70 years. Buying a term plan in your policy to get over when you are in your 50s. It will be 50s or 60s will be at a higher premium; there are also difficult to buy another term plan at that age. higher chances of proposal rejection. You may land in Max Life Online Term Plan Plus is a new product the same problem if your existing term plan gets over launched with maximum maturity age of 75 years and in your 50s. Buying with a term which ensures cover maximum policy term of 40 years. It has extended the till retirement is important. It is possible that you may maximum policy term and maturity age. So, at age 33 discontinue the existing term plan and buy a new one years, you can get a policy up to age 73 years. If you buy for various reasons like lower premium, better settlement after two years, you can get cover up to age 75 years. ratio of the insurer, insurer brand, etc. But always buy a Another product which was re-launched with a higher term plan with adequate policy term. policy term and age is Aegon Life iTerm. The maximum Today, senior citizens are trying to buy term plans 

Impact of Policy Term on Premium

37 | 9-22 Dec 2016 | MONEYLIFE

Cover Story.indd 7

02-12-2016 18:17:00

COVER STORY

Should You Ride with Riders?

A

term plan will pay in the event of death, irrespective of whether it is accidental or otherwise. If you have accidental death rider with life insurance or personal accident (PA) policy, it will pay additional sum assured if death was due to an accident. So, accidental death will give additional benefit to family. It will pay term plan sum assured plus accidental death rider/PA policy cover. If there is non-accidental death, the family gets paid from only term plan cover. We do not suggest buying riders of accidental death and disability along with term plans. They do not offer comprehensive cover. You can buy a stand-alone PA product from general insurers. So, buy an online term plan without consideration of accidental death and disability riders. Buy a comprehensive PA policy instead. The premium for a PA policy does not change with age up to 70 years. It also offers lifelong renewal. But the life insurance rider works only up to policy maturity. Accidental death and disability rider premium can be higher, based on age at purchase, which makes it unattractive if you buy it along with life insurance at older age. A good stand-alone PA policy will cover accidental death, permanent total disability (PTD), permanent partial disability (PPD) and temporary total disability (TTD). PTD and PPD are defined in the policy document. For example, loss of both hands will be PTD and loss of one hand will be PPD. The main reason for, and benefit of, a PA policy is TTD. Most of the PA claims are for TTD. If any accidental injury prevents you from going to work, TTD is the cover

 due to various reasons like loan, etc. If you are healthy,

there are good chances of getting a term plan, albeit at higher premium due to age. Any adverse declaration in the proposal may mean denial of life insurance proposal. There can be loading instead of rejection for certain cases. Read our Cover Stories - http://tinyurl.com/zuyquka and

which will pay. The possibility of accidental death, PTD and PPD is remote. TTD pays a fixed amount if you miss work due to temporary disability for a period of up to two years. Even a critical illness (CI) rider with life insurance is not needed as you can buy a comprehensive CI product from general insurers. CI will supplement mediclaim for your health insurance needs. A CI product pays lump–sum, irrespective of the expenses for the medical treatment. When there is a critical illness, hospitalisation may be one expense. In some illness, hospitalisation may not be required and, hence, mediclaim will not pay; exceptions being some daycare procedures like chemotherapy and dialysis which are covered by mediclaim. There are other expenses like loss or leave from job, other family member busy with helping, nonhospitalisation expenses. A CI cover helps to defray these costs. There is an incorrect perception that the premium will remain constant for a CI rider or a cancer product from life insurer. The premium rate for CI rider and cancer product is guaranteed for an initial period of three to five years from the date of issuance of the policy and thereafter for every block of three to five years. There are a couple of new CI products from life insurers which offer fixed premium for policy term of up to 30 years. It is surely an innovation. We are suggesting one such product for Moneylife Advisory Services (MAS) subscribers. But there is no lifelong renewal for CI product from life insurers. A stand-alone CI product from general insurers offers lifelong renewal. But the premium may change at renewal and it gets expensive as age increases; choose the cover amount wisely.

http://tinyurl.com/glmc5kj For Sampoorna Raksha, the total premium paid by a 60-year-old for a period of 20 years is Rs8,09,600; the total premium paid by 70-year-old for a period of 10 years is Rs7,55,550. It means that a 70-year old will pay a lower total premium than a 60-year-old. It contradicts 

MONEYLIFE | 9-22 Dec 2016 | 38

Cover Story.indd 8

02-12-2016 18:17:30

COVER STORY

Senior Citizens Buying Term Plan Type

60-year-old male buying policy of term of 20 years

Total premium paid by 60-year-old over the period of 20 years

70-year-old male buying policy of term of 10 years

Total premium paid by 70– year-old over the period of 10 years

Non-smoker

Rs40,480

Rs8,09,600

Rs75,555

Rs7,55,550

Smoker

Rs63,940

Rs12,78,800

Rs1,20,635

Rs12,06,350

Tata AIA Sampoorna Raksha premium for Rs50 lakh lump-sum death benefit. The policy will be over at age 80 years. Standard life assumed (no premium loading)

 the assumption that, with advancing age, you pay higher

premium!

8. Should You Split into Multiple Policies? Based on your high income and, possibly, need for a high cover, you can think about splitting into two or more policies. It will also help, in case you plan to discontinue one or more policies in future. If you do not foresee the need to give up one policy before the other, you can go with one online term plan, especially if there is discount for high sum assured (SA). For example, you can check the premium of two Rs1crore policies versus one Rs2 crore policy. If the product offers lower premium for a Rs2-crore policy compared to two Rs1-crore policies, you can consider going with Rs2-crore policy. If you wish to split the policies, declare your existing policy when you buy new one. Insurers do not want you to be over-insured. It is usually better to go with one policy, but cover

of Rs3 crore or more is better to split. Even though high sum assured may fetch you a discount, split policy can help to get rid of one policy when responsibilities (child education, marriage) are over by retirement. It also helps to not put all the dependency on one insurer to have to pay a large sum assured amount. If there are issues with the declaration, even split policies will not help, as there can be rejection from each insurer. They all do due diligence when they have to pay claims. The recent Section 45 amendment will help policyholders as insurers cannot reject claims after three years of policy purchase citing discrepancies in declaration.

Keep in Mind

Term plan covers include death due to terrorist attacks or natural calamities. Declaration of the correct age and/or gender of the life insured are important for calculation of premiums payable under the policy. Fraud, misrepresentation and forfeiture would be dealt with in accordance with provisions of Section 45 of the Insurance Act, 1938, Buying One Rs2-crore Policy versus Two Rs1-crore Policies as amended periodically. If the life insured commits suicide, whether sane Type Premium for one Total premium for two Savings due to high Rs2-crore policy Rs1-crore policies sum assured discount or insane, within 12 months from the date of commencement or from the Non-smoker Rs25,760 Rs27,370 Rs1,610pa date of revival of the policy, all risks Smoker Rs36,110 Rs38,410 Rs2,300pa and benefits under the policy shall Tata AIA Sampoorna Raksha premium for 38-year-old male for 25 years term. Standard life cease and the insurer may only refund assumed (no premium loading) the premiums received. 

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For subscription offers that are a steal, look for a form elsewhere in this issue or our website at www.moneylife.in

39 | 9-22 Dec 2016 | MONEYLIFE

Cover Story.indd 9

02-12-2016 18:17:54

TAX/ FIXED INCOME

he government’s move to demonetise Rs1,000 and Rs500 currency notes, to curb black money, has led to lowering of interest rates on bank fixed deposits (FDs). Low bank FD rates, coupled with taxation as per individual tax bracket, can be disastrous for savers. Should you invest in liquid or ultra-short-term (UST) mutual fund (MF) schemes instead of bank FDs? Mutual fund companies are trying to woo customers, knowing that bank savings accounts are flush with cash. Returns on liquid and UST MF schemes can also be affected in the current scenario, but they may deliver better returns than bank savings account and bank FDs. It is possible due to the tax benefits (indexation) that come with investment in these and other debt mutual fund schemes for more than three years. Liquid and UST MF schemes invest in commercial paper

(CP), certificates of deposit (CDs), treasury bills, short-term debentures, FDs and other similar instruments. Most liquid schemes invest in instruments with a maximum residual maturity of 61 days; UST instruments have

maturity of one month to one year. But investors can remain invested in liquid and UST MF schemes for any duration, even though experts say that one should invest in liquid or UST MF schemes for short-term purposes. Avoid long-term debt schemes which will work well as long as interest rates are on a decline. They will not work well, once the current

trend reverses. Liquid and UST MF schemes will not be impacted much due to the short maturity dates of the investment which means less volatility. There is no exit-load (in most liquid/UST MF schemes) and, hence, there is no minimum waiting period to remain invested. Moreover, you can get access to your cash fairly quickly. Withdrawals from liquid schemes are processed within 24 hours on business days. If you place a redemption request by the cut-off time on a business day, the redeemed amount will be credited to your bank savings account on the next business day. Investing in a liquid and debt mutual fund scheme with a growth option can help you defer your tax liability, if you don’t redeem any units. Until redemption, you have no tax liability which is in contrast to a bank FD where the tax liability arises even for accrued interest on cumulative FDs. You may not get income until the cumulative FD matures, but you have to pay tax on the accrued interest every year.

G-Sec Yields Decline Steeply

to a record low level of Rs68.86/US$ and some experts feel that it could slip to Rs70-Rs72/US$ in the near term,

due to the belief that Reserve Bank of India (RBI) may want to conserve its foreign exchange reserves.

Shift from Bank FDs to Liquid/ Ultra-short-term Funds?

T

T

he 10-year benchmark G-Sec yield, which sets the tone of the fixed-income market, has nosedived by whopping 49 basis points (bps) in the last fortnight, to end at 6.23% on 25th November. The rupee has fallen

Issuer Dewan Housing 9.25% Tata Capital Hsg Finance 9% LIC Hsg Fin 8.72%

G-Sec Maturity Date

Yield to Maturity

02 July 2040

6.87%

30 September 2030

6.76%

26 October 2055

6.71%

G-Sec yields on 28 November 2016

Maturity Date

Next Last Yield Coupon (%)

09 Sep-23 09 Sep-17

9.30

ISIN

Rating

INE202B07IO3

CARE AAA CRISIL AA+

01 Jun-18 01 Jun-17

7.75

INE033L07CO4

28 Nov-19 28 Nov-16

7.69

INE115A07GH7 CRISIL AAA

NSE data as of last trade date of 25 November 2016

Reliance Capital Ltd 8.90%

09 Sep-21 09 Sep-17

8.42

INE013A071E0

CARE AAA

Bajaj Finance Ltd 7.9%

16 Sep-19 16 Sep-17

7.45

INE296A07MK7

CRISIL AA+

HDB Financial Serv 9.32%

17 Nov-17 17 Nov-17

7.56

INE756I07480

CARE AAA

BSE data as of last trade date of 25 November 2016

MONEYLIFE | 9-22 Dec 2016 | 40

Fixed Income.indd 1

01-12-2016 21:12:19

VALUE STOCKS DEBASHIS BASU

Strong Stocks in A Weak Market

R

egular readers would know that we have been researching momentum strategies for some time. While there are multiple approaches to capture momentum, the core idea in all the approaches is the same: buy stocks that are stronger, relative to the overall market/ index. (I am ignoring the academic studies that show the results of buying strong stocks and selling weak stocks— which can be done only by way of stock borrowing. We cannot borrow stocks in India). The issue is whether to buy stocks that are stronger irrespective of the market condition, or whether to buy stronger stocks only in a market trending higher. If you buy stocks that are exhibiting relative strength in a very weak market, you will do better than weaker stocks but that is no consolation; you may only end up losing less money. This is why any strategy to buy stocks must be preceded by some sense of the market climate. My view is that there are only three kinds of market situations: strong bull market (rare), non-trending market, whether mildly bearish or mildly bullish (frequent) and strong bear market (rarest). Momentum strategies work well in the first two market situations. We are in the second kind of market climate now—mildly bearish. Under this market condition, momentum may work. If so, how does one compile a basic list of momentum stocks? Here is what I did. I pulled out all stocks that make

a minimum return on assets (RoA) of 7%. If a company cannot even make 7%, it would be better off to take no risk—which running a business entails—and keep the money in bank. A 7% filter of RoA yielded a list of 620 companies. You may wish to eliminate micro-cap (less than Rs100 crore by market value as per our definition) and small-cap companies (Rs100 crore-Rs500 crore) from the list because they could be illiquid. That leaves us with mid-cap (Rs500 crore-Rs2,000 crore), large-cap (Rs2,000 crore-Rs10,000 crore) and mega-cap (Rs10,000 crore+). This gave us a list of 464 companies. Let’s now do a simple relative strength analysis of these stocks between the close of 8th November and 29th November. During this period, the Sensex was down by 4%. But 206 companies reflected a higher relative strength than the Sensex. Of these, as many as 96 companies actually went up. Which were these stocks? Here is a list of topperforming stocks when the market fell under the impact demonetisation. We now have a short list of 45 stocks which are fundamentally sound and have bucked the downtrend. Their shareholders are not panicking. In fact, these companies are attracting new shareholders. Maybe they are doing something right. The most fertile areas for such enquiry are large-caps and mid-caps. This is how we can start the process of identifying momentum stocks. 

Momentum in Action: Between 8th-29th November the Sensex was down 4% but these stocks were up Mid-cap

Large-cap

Mega-cap

PNB Gilts

44%

Balmer Lawrie & Co

25%

Power Finance Corp

15%

Ujaas Energy

37%

Quess Corp

19%

Sun Pharma

11%

Kovai Medical Centre

28%

Advanced Enzyme Technologies

14%

Mangalore Refinery

11%

Merck

23%

Engineers India

12%

Hindustan Zinc

IFGL Refractories

22%

Shilpa Medicare

12%

Rural Electrification.

8%

Arrow Greentech

15%

KRBL

10%

Alkem Laboratories

7%

9%

Garware-Wall Ropes

12%

Mahanagar Gas

9%

Torrent Pharma

7%

Dwarikesh Sugar Ind

12%

Cyient

7%

Bharat Electronics

7%

Voltamp Transformers

11%

Mindtree

7%

Tech Mahindra

7%

Nucleus Software

10%

VA Tech Wabag

7%

Cipla

6%

RPG Life Sciences

9%

Navneet Education

7%

Cadila Healthcare

6%

Shemaroo

8%

Zensar Technologies

6%

Bharat Forge

6%

Dalmia Bharat Sugar

7%

Sharda Cropchem

6%

SJVN

6%

Kellton Tech Solutions

5%

Balrampur Chini Mills

6%

Natco Pharma

6%

R Systems

5%

Thyrocare Technologies

6%

Hindustan Petroleum

5%

41 | 9-22 Dec 2016 | MONEYLIFE

Value Stocks.indd 2

02-12-2016 18:31:25

3 Long-term Stockletters for Excellent Returns Panther

Antelope

Lion

(includes dividend)

(includes dividend)

(includes dividend)

58.42%*

41.06%*

40.48%*

*Annualised. Since 25 April 2014

*Annualised. Since January 2012

* Annualised. Since January 2012

For small-cap/ low-price stocks with big growth potential

Long-term value stocks. More of midcap stocks to be held for 1 year or more

Long-term value stocks. Usually large companies are selected

• A shortlist of stocks to invest in • Fundamental data we rely on • Brief description of the companies • Weekly updates on all stocks

• Weekly market view • A shortlist of stocks to invest in • Fundamental data we rely on • Weekly updates on all stocks

• Weekly market view • A shortlist of stocks to invest in • Fundamental data we rely on • Weekly updates on all stocks

Facts about the Stockletters What is the difference among these stockletters? The stockletters are for stocks for long term but with specific emphases. We hope to have a maximum of 25 stocks at any time. What is the investment horizon for these stockletters? The best results from good stocks come when they are held for five years or more. What is the investment strategy? Our investment strategy for the long-term stockletters is to select quality stocks at a reasonable price. We identify companies that are reporting high return on capital but are available cheaper than similar high-quality stocks. We then apply our knowledge of managements, including corporate governance. How much should one invest in each stock? You should invest equal amount in every single stock suggested. What if I cannot invest in all the stocks? If you cannot invest in all the stocks, invest equal amounts in as many stocks as possible, starting from the lowest in rupee terms to the most expensive in ascending order. It is also very important that you invest in stocks ONLY the money you will NOT NEED to touch for the next 5 years. Good quality stocks are likely to grow at 20%-22% annum but not in a smooth fashion. If some stocks have already run up sharply, will it be wise to invest in them still? These are all excellent stocks we have selected in long -term stockletters.

Stockletter (MSSN) Ad Oct 15.indd 2

We separately identify stocks that are still worth buying at current prices even if they have run up sharply. You must remember though that stocks may go down after your purchase. That is the nature of stocks. So it is important to follow these two principles about stock investing 1. Investing only that money you will not need for 5 years 2. Not looking at the share price in the short term. How do we know when to exit from the stocks selected? Exit suggestions are spelt out clearly every week. How many stocks are changed every week? Our list of long term stocks do not change much. Deletions are usually made after one year, if the performance is not too good. This also helps one avoid short-term capital gains. We may add a new company after several weeks. If the market crashes we may suddenly add many more names. How much do the stockletters cost? Antelope, Lion, Panther each costs Rs2,500 per year. If you buy two together, you pay Rs4,000. If you buy all three, you pay Rs6,000. How risky are the stocks mentioned in the stockletters? Stocks by nature are risky and volatile over the short-term and can lead to losses. But loss of capital in good quality stocks is not a function of stock selection but also how long a stock is held and at what valuation they are bought. We suggest investors hold stocks for at least five years. On our part, we will try to suggest stocks that are not expensive. How do subscribers get the stockletter?

02-12-2016 13:00:08

The stockletter is currently sent as a pdf file by email. Subscribers can also download their stockletter by visiting their MAS dashboard on our site savers.moneylife.in What is the frequency? You will receive your chosen stockletter every Saturday evening. Can I share the stockletter? The stockletters are meant for a single user and is backed by years of research. Hence, we urge you not to share them. What if I have any queries about specific stocks? Well, we would rather let our performance do the talking but if you have any serious doubts email us at [email protected] How can I buy the stockletter? You can buy online at https://savers.moneylife.in/prelogin/stockletters. html or you can send us a cheque or a demand draft by using the form below.

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More info at: https://savers.moneylife.in/sldownload/ Caution: The returns shown here are much higher than average. Average annual rise in the Nifty/Sensex is likely to be 12%-14% per annum over 10 years and more. Well-chosen stocks may rise by 20%-22% per annum over five year and more. Disclaimer: The Stockletters are part of multiple services offered by Moneylife Advisory Services which is a SEBI registered investor advisor (Registration No: INA000003429). The stockletters are for information purposes only and none of the stock information, data and company information presented constitutes a legally binding recommendation or a solicitation of any offer to buy or sell any securities. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute our judgment as of the date of the report and are subject to change without notice. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalised recommendation to you. Individual stocks presented may not be suitable for you. Please read the terms and conditions before subscribing. Cancel within two issues: You can cancel your subscription within two issues. We will return your money after deducting Rs150 for payment gateway and handling charges. You can cancel by email or phone.

Log on to savers.moneylife.in with your email id and password and check the dropdown menu under Investool to find Stock SIP If you don’t have a login id and password email us at [email protected]

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Stockletter (MSSN) Ad Oct 15.indd 3

02-12-2016 13:00:34

StockWatch Stocks and sectors that catch our eye

T r a n s f o r me rs & Rec t if iers

Getting Transformed?

F

or the past several years, Transformers & Rectifiers India Ltd (TRIL) has not shown any major increase in sales or profits. In fact, the company had been showing losses or, in a quarter or two, reported some negligible profits. The average growth in sales for the past five years stands at 3.51% and the net profit growth stands at a negative 65.12%. However, the scenario seems to have changed in the past three quarters. For the quarter ended September 2016, sales growth was 88% y-o-y (year-on-year), reaching Rs263.24 crore (Rs139.79 crore), and the net profit hit Rs9 crore from a loss of Rs2.35 crore. The electrical equipment sector has been stagnating for the past five years. TRIL, currently, has an order

book of Rs948 crore of around 29,622MVA (megavolt ampere). It also received a breakthrough order for 13,765kV (kilo-volt) class reactors from Power Grid Corporation of India Limited. TRIL is expected to get some further benefits from the ‘Make in India’ requirement that only companies that have a manufacturing set-up in India can participate in the bidding process of PSUs (public sector units) /SEBs (state electricity boards). This requirement has eliminated the competition from Chinese and South Korean vendors. For FY15-16, TRIL’s return on capital employed (RoCE) was 5% and the return on net worth (RoNW) was -3%. These figures are expected to improve as the management expects to increase its top-line and bottom-line figures. TRIL has also managed to bring down debtor days to 140 from 156-160 

Turning Around? Rs Cr 65

Transformers & Rectifiers Stand-alone (Rs Cr) Revenue OP

Mar-16

Jun-16

Sep-16

248.05

159.17

263.24

27.58

112.03

127.04

OPM

11.12%

70.38%

48.26%

Y-o-Y Revenue Growth

51.78%

156.27%

88.31%

Y-o-Y OP Growth

188.19%

22.96%

18.94%

March Ending

FY14

FY15

FY16

RoNW

1.40%

-1.93%

-2.61%

OP: operating profit, OPM: operating profit margin, RoNW: return on net worth

35

Free Cash Flows

5 -25 -55 -85 11-12

12-13

13-14

14-15

15-16

Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into account your individual circumstances, financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future results. Investors must do their own research before acting on them. Data Source: Centre for Monitoring Indian Economy’s Prowess database.

Those who have subscribed to the stockletters should only follow the stocks recommended there.

MONEYLIFE | 9-22 Dec 2016 | 44

StockWatch.indd 2

02-12-2016 18:32:57

STOCK WATCH

Attracting Interest Adjusted closing Price in Rs 400

340

280

220

160 Nov-15

May-16

Nov-16

 levels and aims to bring them further down to 120

days. The promoters hold 74.9% of the total shares and the rest is held by the public. The stock rose from its 52-week low of Rs180.10 on 24 November 2015 to its 52-week high of Rs389 on 11 October 2016 on

expectations of a turnaround. The stock was trading at Rs315.50 on 22 November 2016. TRIL is a manufacturer of wide range of transformers, producing power, distribution and specialty transformers. It has three manufacturing plants in Odhav, Chandogar and Moraiya. The Moraiya plant has the facilities to produce 765kV transformers and capacity to produce 16,000MVA per annum. The Chandogar plant produces 245kV transformers and has a total capacity to produce 7,000MVA per annum. The Odhav plant has a manufacturing capacity of manufacturing 1,200MVA/ per annum and a testing capacity up to 10,000kVA (kilo-volt-ampere) - 66kV. TRIL has entered in a 60% joint venture agreement with a Chinese company, Jiangsu Jingke Smart Electric Company Limited (Jingke), for manufacturing and marketing of transformers of 220kV and below and distribution of products of 40.5kV and below in India. Currently, the company has no further capital expenditure plans and is planning for backward integration in the near future. 

B o da l C h e mic al s

Strong Growth

Bodal Chemicals Stand-alone (Rs Cr) Revenue

B

odal Chemicals has reported excellent results for the quarter ended September 2016. Sales were Rs330.95 crore (Rs254.27 crore), up 30% (y-o-y) year-on-year, and the net profit was Rs34.05

OP OPM

Mar-16

Jun-16

Sep-16

205.57

270.54

330.95

30.47

56.45

58.47

14.82%

20.87%

17.67%

-12.46%

9.92%

30.16%

Y-o-Y OP Growth

3.01%

40.96%

48.74%

March Ending

FY14

FY15

FY16

33.58%

50.57%

36.66%

Y-o-Y Revenue Growth

RoNW

OP: operating profit, OPM: operating profit margin, RoNW: return on net worth

crore (Rs23.39 crore), a huge jump of 46% y-o-y. For the past five years, the average sales growth has been 14.32%. This increase in net profit is because of increased economies of scale due to expansion and better capacity utilisation, better product optimisation between dye intermediates & dyestuff products, and

favourable market conditions resulting from reduced competitive pressures. Bodal has benefited from the shutdown of a major chemicals company in China due to environmental issues. Bodal makes dye intermediates, dyestuff and sulphuric acid. It has nine plants located in Gujarat. The total production capacity is: sulphuric acid 190,000MTPA (metric tonnes per annum), dye intermediates 30,000MTPA and dyestuff 17,000MTPA. While the recent profit growth has been strong, Bodal runs a commodity business with low returns. The company’s return on capital employed (RoCE) in 2015-16 was 10% and the return on net worth 

45 | 9-22 Dec 2016 | MONEYLIFE

StockWatch.indd 3

02-12-2016 18:33:33

STOCK WATCH

Cash Machine

Bull Charge

Rs Cr

Adjusted closing Price in Rs

165 135

145 Free Cash Flows

125

115

105 95

85 65

75

45 25

55

5

35

-15 11-12

12-13

13-14

14-15

15-16

 (RoNW) was 13%. Valuation is low, despite profit

growth. The market-cap to sales ratio is 1.15 and market-cap to operating profit ratio is 6.26. The debt:equity ratio has declined to 0.61 for FY15-16 from 1.33 in FY14-15, with increased cash flow being used to pay back debt. The company exited from its corporate debt restructuring programme in September 2015 and capital expenditure on a new plant is also over. This should result in higher free cash flows. During FY15-16, the company announced two interim dividends—of 10% and 20%. The dividend yield of the company, however, stands low, at 0.55%. The promoter holding in the company has been declining and was 65.55% for the September 2016 quarter (69.67% for September 2015 quarter). Of the balance, 5.30% is held by foreign institutional investors and 29.15% by the public. The share price of Bodal rose from its 52-week low of Rs38.05 on 26 November 2015 to its 52-week high

Nov-15

May-16

Nov-16

of Rs155 on 6 October 2016. The share was trading at Rs111.95 on 24 November 2016. Bodal’s new plant for linear alkyl benzene sulphonic acid (LABSA) has commenced production from March 2016. LABSA is an anionic surfactant widely used in all ranges of domestic detergent powders, cake & dishwash cleaners. The total annual capacity of this plant is 18,000MTPA. Bodal has also invested Rs15 crore in Trion Chemicals Private Limited (TCPL) which makes a compound that is a disinfectant, algaecide and bactericide (mainly for swimming pools). It is used as a bleaching agent in textiles industry. TCPL is expected to start production in H2FY16-17. Bodal will have a 42% stake in TCPL. The management has planned capacity expansion of dyestuff, by 24,000MTPA in the next three to four years. Bodal exports its products to over 35 countries and, for FY15-16, 32.25% of its total sales was derived from exports. 

IFB Agro

Agressive Growth

I

FB Agro has announced excellent results for the quarter ended September 2016. Sales jumped by 48% y-o-y (year-on-year) to Rs273.44 crore (Rs185.25 crore) and net profit was up 22% to Rs8.9 crore (Rs7.27 crore). The liquor and marine food manufacturer has achieved an average sales growth of 7.7% and net profit growth of 26.50% for the past five years. Exports, mainly of marine food products, account for around 17.24% of the total sales. However, there

IFB Agro Stand-alone (Rs Cr) Revenue OP OPM Y-o-Y Revenue Growth Y-o-Y OP Growth March Ending

Mar-16 130.98 8.79 6.71% 23.60% 33.99% FY14

Jun-16 216.07 15.71 7.27% 41.23% 20.11% FY15

Sep-16 273.44 13.36 4.89% 47.61% 1.75% FY16

RoNW

20.23%

7.03%

11.69%

OP: operating profit, OPM: operating profit margin, RoNW: return on net worth

has been a 14% decline in revenue from exports of the marine segment because of the fall in price of shrimp.



MONEYLIFE | 9-22 Dec 2016 | 46

StockWatch.indd 4

02-12-2016 18:34:12

STOCK WATCH

Investment Drag Rs Cr 10 -5 Free Cash Flows -20 -35 -50 -65 -80 -95 11-12



12-13

13-14

14-15

15-16

IFB Agro has planned expansion of its distillery facilities for which it acquired a loan worth US$7.5 million. This loan has made the debt:equity ratio reach 0.20 for FY15-16. The company had no, or very low, borrowings for the past five years. For FY15-16, the return on capital employed (RoCE) was 12.06% and return on net worth (RoNW) was 11.69%. Valuation is low. The marketcapitalisation to sales ratio is 0.45 and marketcapitalisation to operating profit ratio is 7.67. The stock is trading at price to earnings (P/E) ratio of

APCOTEX

Short-term Blip

F

or the quarter ended September 2016, Apcotex reported sales of Rs92.46 crore (Rs67.84 crore), a growth of 36% year-on-year (y-o-y). The increased sales were partially contributed by its subsidiary, Apcotex Solutions India Private Limited which was acquired in March 2016. Apcotex, however, has not been able to convert its sales into profits. For the same quarter, the operating profit decreased by 51% y-o-y, to Rs4.62 crore (Rs9.52 crore) and the net profit was 33% to Rs3.56 crore (Rs5.33 crore). It earned 12% of its total sales from exports.

10.69. The promoters of the company hold 64.99% of the total shares of the company; the balance 35.01% is held by the public. Well-known investor, Dolly Khanna, holds 1.46% of the capital. The share price fell from its 52-week high of Rs518.90 on 6 January 206 to its 52-week low of Rs327.20 on 22 November 2016. The stock was trading at Rs365 on 23 November 2016. IFB Agro, incorporated in 1982, operates in two segments. One is spirit, liquor and spirituous beverages (grain alcohol and alcoholic beverages) and the second is marine (aqua feed and processed frozen shrimps for domestic and export markets). It also into organic manure. 

The reason for decrease in profits for this quarter was that production of high styrene rubber had to be shut down because of repairs at the plant and had to shift to another plant at Vaila from Taloja(Maharashtra). This shift imposed a higher conversion cost which affected profits. The paper and paperboard segment also faced a slowdown because of the shutdown of one of the largest customers of the company. The margins fell further because the price of butadiene, one of the major raw materials, shot up and Apcotex was not able to pass it on to the customers. Sales of Apcotex were up 9.04% and average net profit growth was 33.04% over the past five years. It has also managed to bring down the debt:equity ratio to 0.14 for FY15-16 from 0.62 for FY12-13. The return on net worth (RoNW) and return on capital employed (RoCE) for FY15-16 was 21% and 17%, respectively. Last year, Apcotex allotted one bonus share of Rs5 each for every one share held. The management has been paying out dividends regularly for the past five years; it paid 90% dividend last year. The company has fair amount of free cash flows even after giving out 

47 | 9-22 Dec 2016 | MONEYLIFE

StockWatch.indd 5

02-12-2016 18:34:33

STOCK WATCH

Throwing Lots of Cash

Apcotex Stand-alone (Rs Cr) Revenue OP OPM

Mar-16

Jun-16

Sep-16

96.06

106.44

92.46

9.52

10.69

4.62

9.91%

10.04%

5.00%

Y-o-Y Revenue Growth

24.54%

59.20%

36.29%

Y-o-Y OP Growth

-0.82%

12.41%

-51.47%

FY14

FY15

FY16

15.41%

24.74%

20.56%

March Ending RoNW

Rs Cr 24 19

Free Cash Flows

14 9

OP: operating profit, OPM: operating profit margin, RoNW: return on net worth 4

 high dividends.

-1

For a small company in the commodity business, the stock is not cheap. The market-capitalisation to sales ratio is 1.85 and the market-capitalisation to operating profit ratio is 18.66. The stock is trading at a price-to-earnings (P/E) ratio of 17.76. The promoters hold 57.89% of the total shares; the rest 42.11% is held by the public. The share price rose to its 52-week high of Rs435 on 28 August 2016 from its 52-week low of Rs181.50 on 12 February 2016. The share was trading at Rs325 on 30 November 2016.

11-12

12-13

13-14

14-15

15-16

Apcotex, which produces performance emulsion polymer, was originally formed in 1980 as a division under Asian Paints and was spun off as a separate entity in 1991. It manufactures two major products, namely, synthetic latex and synthetic rubber. Synthetic latex is used in paper, carpets, construction, tyres, paints, textiles and the automotive components sector. Synthetic rubber is used in the footwear industry. 

MARKET TREND

Slow Realisation for the Bulls

Lwith a major change in the form of demonetisation.

ast fortnight, I had mentioned that we are confronted

Initially, the market had reacted strongly. ngly. The Sensex was at 26,150 two weeks ago. o. At the time of writing, it was above 26,500.. At a first glance, it seems that investors have taken the impact of demonetisation in their stride. Serpentine queues outside banks, ubiquitous signs of ‘No Cash’ at ATMs, Ms, moving television reports of workers not being ng paid, etc, have not dented investors’ enthusiasm. Even a steady d stream of reports of corporate distress—stocks not moving from the dealers and drop in orders—has not impacted the market. Sometimes, market prices are the wrong gauge. The more complex the issue, the more difficult it is for the market to figure out the implications. If the mood before

the negative impact was positive, it is difficult for investors to shake off the positivity and switch to a negative mindset. In that situation, investors can get caught like a deer in the headlights. Are we in a different complex situation now? It depends on what this government re really wants to do next. The cash crunch will ease out over a month. But, if the black money continues to be generated as before through the two clearly visible routes of extortion and cl unreported income, the government will unr face an enormous backlash over the pain the current purge has inflicted. Hence, it is c quite likely that the government will continue with against black money. This means i h its i tirade i making sure that most of the income is reported and tax paid on It. This, in turn, will mean higher prices and a transfer of money from the pockets of the citizens to the government. I am not sure if investors have thought through all the implications of what promises to be a Long March to tackle black money. — Debashis Basu 

MONEYLIFE | 9-22 Dec 2016 | 48

StockWatch.indd 6

02-12-2016 18:35:02

STOCKSCREEN

September Quarter Stars The September 2016 quarterly reporting season approaching its end and in our database of 1,535 companies, 1,271 have come out with their quarterly results. Of these, 1,031 companies have posted profits. These companies have recorded a 6% revenue growth but have posted net profit growth of 25%. Given below is the top five companies (based on market cap size) by revenue growth and net profit growth.

Micro-cap Sale Growth

NP Growth

Vijay Shanthi Builders

616%

Vijay Shanthi Builders

4783%

Bharatiya Global Infomedia

190%

Malu Paper Mills

1314%

Prakash Constrowell

81%

Ishan Dyes & Chemicals

1078%

Indo Thai Securities

71%

VBC Ferro Alloys

1056%

Fluidomat

62%

Vijay Textiles

635%

Small-cap Sale Growth

NP Growth

TVS Electronics

275%

Gujarat Apollo Inds.

10762%

Intense Technologies

201%

Ponni Sugars (Erode)

7331%

Sphere Global Services

194%

Upper Ganges Sugar & Inds

5008%

Inventure Growth & Securities

134%

HIL

4467%

Genesys International Corpn

108%

Shreyans Industries

2236%

Mid-cap Sale Growth Ujaas Energy

130%

NP Growth Dynamatic Technologies

2416%

Capital Trust

119%

Zuari Agro Chemicals

2192%

Shree Renuka Sugars

110%

Atlanta

1481%

Deep Industries

97%

Dhanlaxmi Bank

1238%

Centum Electronics

93%

Rane Holdings

1073%

Large-cap Sale Growth

NP Growth

Monsanto India

155%

Bannari Amman Sugars

1088%

Sun Pharma Advanced Research Co

120%

Healthcare Global Enterprises

1080%

8K Miles Software Services

100%

Balrampur Chini Mills

880%

Indian Hume Pipe Co

96%

Dr Lal Pathlabs

714%

Texmaco Rail & Engg

82%

Heidelberg Cement India

667%

Mega-cap Sale Growth

NP Growth

Bajaj Holdings & Invst

140%

Biocon

8663%

Ambuja Cements

114%

JSW Steel

1844%

Reliance Capital

108%

Siemens

1026%

Natco Pharma

93%

Indian Oil Corpn

793%

Bharat Financial Inclusion

40%

Tata Power Co

748%

* - consolidated revenue and net profit used wherever available

49 | 9-22 Dec 2016 | MONEYLIFE

Stockscreen.indd 1

02-12-2016 18:50:30

Supported By

Queries At Moneylife Foundation’s

Tax Helpline Ask tax-related questions at moneylife.in/taxhelp. It’s free

How To Show Cash after Father’s Demise

W

e sold our flat in the month of March 2016 and, before buying a new flat, we moved into a rental apartment to search for a good place which fits into our budget. My father also sold a lot of my mother’s gold ornaments in the month of March 2016, basically to have enough money to buy a new flat. While we were searching for the new house, my father expired on 1 April 2016. Now my mother and I are left with cash worth Rs10.17 lakh, in Rs500 & Rs1,000 notes. As my father sold the gold ornaments, we do not have any receipt for them. My question is: Can we deposit Rs2 lakh in four accounts of my mother and the balance Rs2.17 lakh in my account and pay tax accordingly?

Ameet Patel’s Reply: It would be against my ethics to give you ways of converting black money into white. If your father had actually sold gold jewellery or raw gold, he ought to have declared the capital gains from that in his tax return for the year ended 31 March 2016. Since he expired on 1st April, the tax return should have been filed by his legal heirs. At that time, the calculation

of the capital gains should have been done on a reasonable and honest basis. If the cost is not known, some estimation could have been done and the gains could have been calculated. I would suggest that you still have the time to do this and, therefore, you should do this immediately. Once you do that, you can then deposit the cash into your or your mother’s bank accounts. You will need to be ready to explain this cash if and when the tax department questions it.

Housewife’s Cash Deposits

I

n the context of demonetisation, please clarify my following query. One homemaker has been accumulating the cash being received regularly from her parents on various occasions since her marriage. Her marriage is 13 years old and she has accumulated around Rs31 lakh of cash over that period. She has not disclosed it even to her in-laws and has kept it with her parents only. What should she do in the current situation, since she can deposit only Rs2.5 lakh in the bank? Ameet Patel’s Reply: The eradication of black money is a massive effort on the part of the government. Considering the hardship that is obviously going to

be faced by the common man, the government has provided a leniency to people who deposit up to Rs2.50 lakh in their bank account(s). The leniency is that, in such cases, the deposit of cash will not be reported to the income-tax department. They have nowhere said that in such cases, the tax department does not have the right to question the source of the cash. In the case mentioned by you, if the amount is Rs31 lakh, obviously, the housewife will have to work hard to convince the tax department that it is out of savings. That would depend on how much money the parents were giving to the housewife every month or year. Prima facie, the case looks very difficult to defend. However, several facts need to be looked into. It would be best if this person consults a CA and takes professional advice. Most households in the country would have a few of the high denomination notes which are now no longer legal tender. Do not rush or take hasty decisions based on some posts on social media, WhatsApp or email messages.

Tax on Medical Reimbursement

I

have paid my mother’s hospital bill amounting Rs98,000, in cash and it was reimbursed by the insurance company which is reflected in my 26AS. Now the question is: How do I show this amount while filing my returns? Nikhil Vadia’s Reply: Reimbursement of actual expenses for medical treatment of your mother incurred by you by the insurance company, is not taxable; hence, you do not need to show this in your income-tax return. 

MONEYLIFE | 9-22 Dec 2016 | 50

Tax Queries.indd 2

02-12-2016 18:39:45

Supported By

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TAX HELPLINE This helpline is for tax-related queries for individuals and small businesses who file their own tax returns or want to double-check the advice they have received from others. It will not attempt to substitute a tax advisor or tax expert whose help is required for complex issues. Nor is it a grievance redress forum.

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You can access similar issues faced by other taxpayers

www.moneylife.in/taxhelp elp To use our tax helpline, please confirm that you have read our terms and conditions. Also, this is only for individual taxpayers and small businesses.

Tax Helpline.indd 1

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USEFUL APPS YAZDI TANTRA

Skyscanner: Find the Flight of Cozi: The Ultimate Family Your Choice Organiser

S

kyscanner is an app that compares millions of flights across hundreds of airlines, putting the world’s top travel deals at your fingertips. It is quick and easy to find cheap flights with Skyscanner. With over 30 million downloads, the app is a must-have for the savvy world-traveller. It saves you time and money—whether you’re looking for the cheapest flights for your holiday, or lastminute flights for a spontaneous getaway. It only takes a few seconds to search for flights using Skyscanner. If you need to buy flight tickets on the go, the app can search for, and book, flights instantly from your Smartphone. There are no added fees—just cheap flights. You can also search hotels and cars from the app. So all your travel needs are taken care of. Fast, flexible and free, there’s no doubt Skyscanner is the best way to compare flights and get great travel deals, wherever you are. Try it and find a new way to find the flight of your choice, instantly! https://goo.gl/BkVAe4

First Aid: Expert Advice for Emergencies

M

any a times, during emergencies, our mind stops working. Despite the fact that we have a first-aid book at home and many tips are available online, when an emergency occurs, our mind just goes blank. This is where First Aid, by St John Ambulance, comes to the rescue. This simple app puts expert advice for everyday emergencies in your hand. With videos, interactive quizzes and simple step-by-step advice, it’s never been easier to know firstaid. Whether it is severe weather or hurricanes, earthquakes and tornadoes, or a bout of asthma, burns, fits or just a fall, this app helps you prepare for emergencies and act, in case you are in the midst of one. Some of the numbers are foreign to us, but the basic procedures remain the same for human bodies across the world! Go ahead, download it and keep it handy on your phone—you never know when you will need it! https://goo.gl/eiUQjq

C

ozi is a simple family organiser. There’s nothing stationary about your life; so why depend on a family calendar that hangs on a fridge or wall? Cozi turns all your devices into ultimate family organisers with a shared calendar, shopping lists, to-do lists, family journal, recipe box and more, which everyone can access, on the go. Cozi is an easy-to-use colourcoded calendar, where you can view an individual’s schedule, or the whole family’s, at once. You can set reminders so no one misses an important event. Shopping lists are shared across the family - you can retrieve lists when you're at the store and quickly cross off items or add new ones while you shop. To-do lists, family journal, etc, add to the fun of sharing stuff for the entire family. So, install Cozi immediately, enter errands and you can conveniently forget reminding your better half about them! https://goo.gl/ogO31k

Swipes: A Better To-do App

T

here are many to-do apps available on the Play Store. If you are still looking for a minimalist and robust app, look at Swipes. It has now come to Android Play Store with the same ease of use as it was on the iPhone app. You can quickly add an item to your to-do list. You can then add tags to your reminders, schedule them in a variety of ways and filter them easily. It is all-inone list, a good combination and a happy middle-ground between complex lists and a very minimal interface with a very light footprint. The item remains on your to-do list till the time you dispose it off. The best part is that it is FREE! Happy Swiping! Try it and let me know if you like it. (www.swipesapp.com) https://goo.gl/Psn2te  Yazdi Tantra is a chartered accountant by training, computer consultant by profession, entrepreneur-developer by hobby and trainer in his leisure time. He is currently the vice-chairman of Zoroastrian Co-operative Bank Ltd and has been running a medium-sized computer company ON-LYNE for the past 24 years.

MONEYLIFE | 9-22 Dec 2016 | 52

Tantra - column.indd 1

01-12-2016 21:22:16

HANDHOLDING: MAS Benefit #11

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There are thousands of mutual fund schemes, hundreds of insurance products, bank FDs, corporate FDs, corporate bonds, over 3,000 actively traded stocks… How is an average saver supposed to choose? You have 5 options

Option1: Do nothing. Option2: Rely on friends, relatives, neighbours, office accountant, derived wisdom from social media or the press/TV. (But do they know more than you? And how do you know that?) Option3: Rely on ‘relationship’ managers, insurance agents, distributors, wealth managers. (But you are only a sales target for them) Option4: Research insurance, mutual funds, markets, stocks, financial theories… Become a financial expert yourself. (Is this practical?) Option 5: Choose Moneylife Advisory A no-bias, no-conflict platform. Ask any confidential question about investments, insurance and taxes and you get the right answer.

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LEGALLY SPEAKING SD ISRANI

Open Offer, Once Made, Can’t Be Withdrawn

T

here are certain situations under the takeover code (Takeover Regulations) of SEBI (Securities and Exchange Board of India) which mandate an acquirer to make an open offer of shares to the existing shareholders. Can such an open offer be withdrawn? This question came up in the matter of Pramod Jain and Others Vs SEBI [Civil Appeal No.9103 of 2014—judgement delivered on 7 November 2016]. Here are the facts of the case. Golden Tobacco Limited (GTC Ltd), a Mumbai-based company listed on the BSE and the NSE, was the target of acquisition. The acquirers along with a person acting in concert (PAC) made a public announcement (PA) on 12 November 2009, when they collectively held 6.47% of the equity shares. The acquirers were to acquire up to 25% of GTC from its equity shareholders at a price of Rs101 (the offer price) per share. At that time, the market price of the target company’s shares was Rs109. The offer was for a hostile takeover of GTC. The draft letter of offer also mentioned that the PAC had given a loan against shares of GTC and. when it could not repay, the acquirers got shares representing 5.05% of the capital. The acquirers and the PAC had also acquired 71,034 equity shares at highest and average price of Rs100.15 and Rs89.13, respectively. The draft letter of offer (DLO) was filed with SEBI on 26 November 2009. During examination of the DLO, SEBI got some complaints against the acquirers and PAC. The acquirers, too, had complaints against GTC and also initiated other proceedings, including a petition under Section 397/398 of the Companies Act before the Company Law Board; a suit before the Civil Court inter alia questioned the transaction for joint development of prime property with two builders. But, on 8 October 2011, the acquirers asked permission from SEBI to withdraw the offer, arguing that SEBI had not taken any decision on the DLO in two years during which the GTC management had systematically siphoned off its coffers, depleted its valuable fixed assets and eroded its net worth substantially with the intention of making it a shell company. So, the very object of the open offer was defeated without any fault on their part. The acquirers also contended that the management had availed huge high-cost

borrowings from banks and financial institutions against its property, including 18.7% shares out of the promoters’ shareholdings. Disputes were pending before the arbitrator arising out of default in payments. The acquirers alleged that the most valuable assets of the target company had been encumbered in violation of SEBI regulations and against the interest of minority shareholders and the acquirers. On 13 April 2012, SEBI declined to permit withdrawal of the offer but observed that the alleged violations by GTC shall be investigated. SEBI held that, as per the applicable regulation, the target company was entitled to dispose of its assets with the approval of the shareholders even after the PA. It said that public offer, once made, could not be withdrawn except in the circumstances provided in the Takeover Regulations which had to be construed strictly. It would also violate the Contract Act, 1872. SEBI observed that the acquirers and the PAC had already purchased substantial shares of the target company and, thus, could not make a PA without exercising due diligence regarding the financial condition and quality of management. SEBI’s position was affirmed by SAT (Securities Appellate Tribunal), but, at the same time, it observed that SEBI was wholly unjustified in taking more than two years for offering its comments on the DLO. But the delay did not constitute a ground to permit withdrawal of the PA. The acquirers challenged SAT’s decision in the Supreme Court. The apex court held that SEBI was not justified in delaying its response to the DLO, but the acquirers had not made out a case to withdraw the DLO. The apex court held that the acquirers could not wriggle out from their offer by raising untenable grounds as it was their duty to conduct due diligence before making the open offer. The irony of the situation is that, after traversing all the way to the Supreme Court, the ball is back in SEBI’s court as the DLO submitted to SEBI on 26 November 2009 continues to remain in limbo and no one is any the wiser. 

SD Israni is a corporate lawyer & Fellow of ICSI. Email: [email protected]

MONEYLIFE | 9-22 Dec 2016 | 54

Legally Speaking.indd 2

02-12-2016 18:41:36

UNBIASED INFORMATION: MAS Benefit #8-10

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29-07-2016 16:09:26

HEALTH BM HEGDE

Is it Your Genes or Your Lifestyle? “The most important factors for a long life, I think, are partly in the genes; number two is lifestyle, which includes healthy diet and regular exercise. However, I think too much exercise is also unhealthy because of over-stress; sometimes people who exercise too many hours per day die early.” — John Gokongwei

H

uman genome has millions of times more germ genes compared to the small 23,000 human genes. Unlike what illiterate doctors (illiterate, today, is one who is incapable of unlearning the wrong things one has learnt, to re-learn new facts) and greedy biotechnology industry, which wants to amass wealth by selling genetic counselling, cord blood freezing, stem-cell therapy and what have you, tell—genes are the be-all and end-all of our inheritance. Doctors keep generating fear in the minds of healthy young people that, if their parents had suffered fatal diseases, they are likely to develop those diseases. Such disease-mongering is good for business but could ruin young lives and the mortal fear can, by itself, bring on such diseases. It is now well known, for more than 25 years, that human evolution is not genetic but environmental; while a few of the dominant human genes (among the 23,000) might help transmit certain genetically inherited disorders, they are incapable of contributing to chronic lifestyle diseases like heart disease, diabetes and cancer. Evolutionary biologists have been shouting from housetops about the ascendency of environment, above genes, in evolution and disease inheritance. Unfortunately, most of our cross-sectional short-term small cohort studies generate false positive data mostly to appease the grant givers’ needs and they give us the false impression about disease inheritance. The New England Journal of Medicine (12 November 2016) has published a milestone paper on this subject which looked at a very large set of human beings (more than 55,000 people) studied for genetic mapping and lifestyle. It was also significant in that all the 50-odd genes connected with heart attack have been studied in detail as were lifestyle factors, ranging from really horrible ones, to simple smoking, drinking and obesity. The study clearly brought out the importance of healthy

lifestyle in preventing a heart attack even in those with a very bad genetic history and gene patterns. This was the first study that looked at genes and lifestyle in the same cohort—a brainchild of the leader of the research team, Dr Sekar Katiresan, the director of genetic research at The Mass General Hospital in Boston. This young man found that there were no studies in the past that looked simultaneously, in the same cohort; they looked at them individually. That did the trick for this study. Here are the take-home messages for lay readers: 1. The boss in inheritance is environment and not genes. 2. One does not need to be worried, even if one is dealt a bad hand in genetic play. 3. Even those with strong genetic background could avoid heart attacks, if they switch to a healthy lifestyle. 4. One does not have to undergo hardships in trying to change lifestyle. For those with extreme obesity, it is not easy to lose weight. If they just add regular exercise, hard work, avoided alcohol and tobacco, they could alter their genetic risks. 5. Even minor changes in lifestyle could bring significant benefits. There was near unanimity among all sections of researchers in this area on the wonderful results of this study which used the best statistical methods. An on-going study of one million such people is in the pipeline. The leading researcher of that study feels that his outcomes might just reinforce the results of this study as he was very impressed by the rigours of this study. The results, he said, should quell the cries of those who emphasise that genes are above all as well as those who emphasise that elements of lifestyle are above all. “It’s not nature or nurture; it’s both,” says the study. We can now safely say that heredity is not to be feared like in the past. Most diseases depend on the lifestyle (environment); to be healthy, one can follow a healthy lifestyle which is not difficult and is very inexpensive. An appeal through this article to practising doctors is that they should not scare patients about their bad heredity; it can now be mended by changing one’s lifestyle. 

Professor Dr BM Hegde, a Padma Bhushan awardee in 2010, is an MD, PhD, FRCP (London, Edinburgh, Glasgow & Dublin), FACC and FAMS. He can be reached at [email protected]

MONEYLIFE | 9-22 Dec 2016 | 56

BM Hegde.indd 2

01-12-2016 21:08:01

HEALTH BM HEGDE

CHOLESTEROL GUIDELINES

instead of chemotherapy. Keytruda is the only immunotherapy drug he subtle efforts of MEDICAL DEVELOPMENTS FROM approved for first-line the sugar lobby in AROUND THE WORLD treatment for these the 1950s to show fat patients. in bad light, vis-à-vis For decades, I have been writing sugar, as the main factor behind the LAVISH MEDICAL that our own immune system can killer disease of vessels blocks were CONFERENCES cure cancer. This could be done eventually found out and the world was in Delhi to deliver a by the various immune boosters in was disabused of the false myth keynote address at a criticalAyurveda which were in existence about fat, by the American Diet care meet organised by the GB for eons! Who bothers? Now that Guidelines. It is now known that fat Pant Hospital, department of America says this, our ‘great’ Indian and cholesterol are not the demons critical-care medicine. It was at medical players will embrace this the India Habitat Centre on a low idea. President Jimmy Carter (of budget. Interestingly, I did not see the USA) announced that he is a single drug company banner. The cancer-free now, thanks to immune volunteers only came to fetch me from the India International Centre. boosting with this new drug. There are Indian research groups that The talks were good and, all in have put together methods to even all, it was a good effort to educate treat heart attacks with immune the audience from many parts of boosting. Logically, our immune India, without a vulgar display system is the in-built healer inside of hospitality. Interestingly, I saw the human body. another intensive-care meeting at the Leela Palace, a 7-star facility, with the speakers staying there. Posters and drugs were on display that they were made out to be; they all over. The budget must have run are vital parts of human nutrition, into crores of rupees. Another lavish as every cell in the human body programme was going on at the must have a strong cell embrace for Habitat Centre. If there could three healthy living. The cell membrane such conferences, in one city, on one is cholesterol. Body cholesterol is day, imagine the total money spent made by our own liver; a paltry on those all over India. Imagine, 10% comes from food. The 1972 for a minute, where all this money thinker-professor of nutrition at the comes from? Mark my words, when London University, John Yudkin, I say that every sick person is paying wrote Pure, White, and Deadly Humankind has existed for those meetings. The drug and about the dangers of sugar. Yudkin, for 900,000 years, in 50,000 device prices go up partially due to discredited by the sugar lobby, left generations, without any chemical such lavish hospitality. teaching and retired. His book has drugs of the Western medical now been republished. Thank God system. Cancers are not new for that! Interestingly, the recent CANCER IMMUNE THERAPY either. So, logically, if surgery, statin recommendation committee he Food and Drug chemotherapy and radiation were of the American cardiology group Administration, USA has the only life-savers from cancer, still recommends statins for some approved an immunotherapy drug, as the rich cancer industry claims, sub-groups. An investigation about called Keytruda, which stimulates humankind should have been the team members revealed that the body’s immune system, for extinct long before the dinosaurs! most of them were (are) on the the first-line treatment of patients Now, the new quantum healing statin manufacturing company’s with metastatic non-small-cell lung could help your own consciousness rolls! This is the truth about most cancer. In other words, the drug to heal your cancer. I have faith in Western guidelines for medical could be the very first treatment that. Let us try.  management. a patient receives for the disease,

T

I

T

57 | 9-22 Dec 2016 | MONEYLIFE

BM Hegde.indd 3

01-12-2016 21:08:19

TECHNOLOGY MOBILE

How ATMs Function ATMs are now a part of our lives. Yogesh Sapkale explains how they work

T

he demonetisation announcement has caught out various functions. Most ATMs across the world not only money hoarders, but also banks and use Microsoft Windows OS, with Linux and CEN XFS financial institutional on the wrong foot. What making some inroads in this field as well (Banrisul of followed was a massive rush either to exchange Rs500 Brazil uses Linux, while Triton, Diebold, NCR use XFS and Rs1,000 notes or withdraw money from banks. The for their cash machines). reason for the overload on banks, especially for allowing customers to withdraw cash, was the non-functioning How Do ATMs Work? automatic teller machines (ATMs). Many of them are still When a customer swipes her card at the ATM, and verifies waiting to be ‘recalibrated’ for the new currency which her identity through the PIN, she is allowed to perform would take weeks, if not months, before normalcy can transactions like checking balances, transferring money, be restored. changing PIN So what (at own bank The ATM receives the request and exactly is ATM) and so dispenses the requested amount an ATM? on. This routine, Customer swipes B a s i c a l l y, however, is not his/her ATM card The processor transmits approval code back to the ATM, telling it how much to dispense an ATM is fixed and some The ATM dials to the processor and a machine ATMs may ask transmits the customer’s request The network transmits approval connected for the PIN only code back to processor with the after allowing The bank approves the transaction The processor (i.e. core data) receives the bank or a you to enter & submits an approval code back request and sends it on to the networks, to the network (i.e. Visa/MC) for approval financial the transactions institution details. Besides, The network requests authorisation that allows Visa and from the cardholder‘s account customers MasterCard, cardholder’s account to perform India has its various transactions. Never mind, most ATMs across own network, RuPay, developed and managed by the world are used only to withdraw cash and, hence, National Payment Corporation of India. RuPay’s fees sometimes are referred as cash machines. Development are lower than that of Visa and MasterCard. of ATMs started at various places. However, it was Barclays Bank which installed its first cash machine on Demonetisation Effects on ATMs 27 June 1967 in north London. It was developed by an As mentioned above, most ATMs are used as cash engineering team led by John Shepherd-Barron from the dispensing machines. There are different currency printing company De La Rue. The ATM was called as denominations and, depending on the size of the currency De La Rue Automatic Cash System or DACS. A small note, the holding slot (cassette) needs to be recalibrated start-up Spytec was the first company to use a card with or adjusted. During the latest demonetisation drive, magnetic stripe at the back. In 1965, a British engineer, recalibration of cassettes seems to have escaped the James Goodfellow, developed the idea of storing a decision-making process, resulting in several ATMs personal identification number (PIN) on the card which, being unable to dispense new currency notes of Rs500 till date, is used by ATM-makers across the world. and Rs2,000. Considering that India has about 220,000 However, it was IBM that came out with the first true ATMs spread over the country, and the number of ATM machine named 2984, in December 1972. personnel required to recalibrate each machine, it would An ATM consists of a central processing unit (CPU), take a few more days before people can use these cash magnetic or/and chip-card reader, PIN pad, a crypto- machines again. While the recalibration work is going processor, display screen, function keys (placed near full swing, ATMs are facing the other issue of currency the screen), printer, vault, housing and sensors and supply. So, unless this demand & supply gap is narrowed indicators. Just like PCs (personal computers), ATMs or closed, ATMs would be able to dispense only limited also have an operating system (OS) installed to carry cash to customers. 

MONEYLIFE | 9-22 Dec 2016 | 58

Technology.indd 1

01-12-2016 21:14:58

YOU BE THE JUDGE BAPOO MALCOLM

Smart Man, Smarter Wife

M

arriages are made in Heaven, money in courts, currency notes in mints and acrimony in homes. Hell is made when all of them

meet. Mr and Mrs Seal were involved in a divorce case, in a Kolkata family court. The man was asked to pay an amount to his ex-wife. Americans proudly announce their divorce settlements. Elsewhere, there is a prolonged tug-of-war. The poor? The husband was dragged to court for non-compliance. He agreed to pay. That too, in cash. He would make the payment in court in front of the judge. He did. The wife refused to accept the money. Our dear man had laid the money on the table in old notes, which Narendra Modi had just ndra declared to be pieces off paper. The amount wass Rs2.25 lakh, in Rs500 and Rs1,000 notes. Mr Seal had brought the money; Mrs Seal did not want it. How was the honourable judge to settle the issue? Miya razi, bibi na razi, To kya karay bechara kazi? You be the judge. The judge sent the husband to jail for a month. The husband is appealing the verdict. He may get out of jail shortly; but why was he convicted in the first place? Let us ask ourselves that question. A few days ago, there was a report that a van filled with old notes had been seized. If one gets caught with billions of rupees, one is answerable to the income-tax authorities. One must explain the source of currency. After demonetisation, even a mountain of bank notes in one’s possession cannot be a crime. It is not money that is in his possession, but tonnes of paper—raddi. The government has declared it to be so. In the context of what is said above, Mr Seal was, in effect, playing a fraud on the court. He wanted to pass off loads of junk paper as legitimate money. He was, therefore, guilty of passing off counterfeit cash, that too, in court, one month being too short a time. We are with

the judge on that, piqued though he might be. But what was his advocate doing? Why did he not prevent his client from such a disaster? We often talk of equity. What if the husband had handed over the cash a day before? He could have. The depositing of cash, immediately after the declaration, meant he had the resources, but was procrastinating. That, too, would get the judge’s goat. Counterfeiting coupled with contempt? More than likely. One does not throw dice in court. What if the woman had accepted the cash? If I were her advocate, I would have advised it. Cash is at the top of all balance sheets and, as my late finance director always said, nothing works work better. Say ‘Yes’, but with a rider. She would try to exchange it as swiftly as possible; but, if unable, the husband would still sti have to make good the balance. Her g counsellor failed on c another count too. She a could have deposited c all the amount into her al account; then declared ac that she had got it th under a court order! u Would she have made an illegal move? No. Old notes note are on a pendulum. At one end, one can refuse; on against accepting, the other, there is no law agai legitimately, in open court—in especially when it is done legitimat pursuance of its order. Is ‘demonetisation’ correct terminology? As catchy as ‘surgical strike’, the currency in hand is actually in limbo. It exists, but cannot be used. It can be exchanged, its value, post-exchange, being left intact, thereby giving a lie to the word associated with it. If four Rs500 notes fetch you one Rs2,000 note, it is the reverse of demonetisation, where notes worth millions in face value are exchanged with notes of far lower denomination, but with higher worth. 

Bapoo Malcolm is a practising lawyer in Mumbai. Please email your comments to [email protected]

59 | 9-22 Dec 2016 | MONEYLIFE

You Be the Judge.indd 2

01-12-2016 20:58:56

ML FOUNDATION EVENTS

MONEYLIFE FOUNDATION SEMINAR ON DEMONETISATION & TAX IMPLICATIONS

Domonetisation: What You Need To Know

T

here is a lot of confusion in the minds of people about the implications of demonetisation of Rs500 and Rs1,000 notes announced by the prime minister Narendra Modi on the night of 8th November. To explain what it means from the incometax (I-T) perspective, Moneylife Foundation invited Nikhil Vadia, well-known practising tax consultant, to address the Foundation members. Mr Vadia explained the history of demonetisation and its tax implications as well as the burning question: How much cash can one deposit safely? However, the most important aspect of Mr Vadia’s presentation was the revelation that, on 16th November, the government inserted Rule 12E in the Income-Tax Act which states: “The prescribed authority under Sub-Section (2) of Section 143 shall be an income-tax authority not below the rank of an Income-tax Officer...” Section 143 covers under-reporting of income (or what is known as the scrutiny Section). Earlier, cases under this Section were picked by a computerised system or needed the okay of an I-T commissioner. It now gives powers to the lowest rung of the I-T administration, with enormous scope for misuse, such as sending notices or scrutiny notices to several genuine and tax-compliant taxpayers. Mr Vadia touched upon the history of demonetisation undertaken in India in 1946 and 1978 and explained several fascinating courts cases they attracted. Another issue that Mr Vadia highlighted was about the reporting period for banks to disclose cash deposits in accounts. “By 31 January 2017, banks are required to report all cash deposited above Rs2.50 lakh in savings account and

Rs12.50 lakh in current account from 10 November 2016 to 30 December 2016. Therefore, those who deposited, or are depositing, cash in banks, can expect notices after February 2017,” he said. “The Government has said up to Rs2.5 lakh deposited between 10 November and 30 December 2016 will not be questioned. Income-tax returns are to be filed for entire year of 2016-17 and cash deposits and withdrawals for entire year have to be explained. Large cash deposits, with no history of previous income, would be difficult to explain,” he said. He then briefed the audience about the various provisions of I-T Act which the taxpayers should be aware of. Mr Vadia touched upon various penalties and provisions for prosecution applicable in case of wilful default by assessees under different scenarios. He also explained the impact of demonetisation on value added tax (VAT), service-tax and benami property transactions, and cited the effective taxes payable in select cases. “The Act with respect to benami transactions was amended on 1 November 2016 and ensures that those trying to evade the law will be taken to task,” he said. Mr Vadia also explained a few cases that had arisen after earlier demonetisations. He concluded the session with an advice to the audience: ‘Do not panic and act in haste.’ He emphasised the need to think before depositing any money and to consult an honest tax consultant before taking any action. It is critical that people do not rely on WhatsApp messages, not get caught up in media frenzy, and believe and disseminate information only from official sources. The event was recorded and has been uploaded on YouTube. 

MONEYLIFE | 9-22 Dec 2016 | 60

Event.indd 2

02-12-2016 18:46:19

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BOOKS

SIMPLY BRILLIANT

People Ahead of Everything Else

W

hich was the best-performing stock in the US in the 25 years, following the Black Monday crash of October 1987? When BloombergBusinessweek went searching for the answer, it did not end up in Apple (Silicon Valley), or Microsoft (Redmond) or Berkshire Hathaway (Nebraska). It ended up at Fastenal, based in the quiet town near Winona (Minnesota) which has a population 28,000. (Actress Winona Ryder, who was born in nearby Olmsted County, was named after the town.) Fastenal’s shares rose 38,565% in the 25 years after Black Monday. In contrast, Microsoft was up 10,000% and Apple was up 5,542%. An investor who bought and held $10,000 worth of Fastenal stock in October 1987 would have had $3 million by October 2015. At the time of its IPO in August 1987, Fastenal had 250 employees and $20 million of revenue. By 2015, it had more than 18,500 employees and $3.7 billion of revenue. To understand this incredible story, Williams travelled to Fastenal’s headquarters, as he did for all the other fascinating organisations in SIMPLY BRILLIANT this book. WILLIAM C TAYLOR Fastenal is into one of the Penguin UK most mundane businesses; it Pages 272; Rs1,250 sells industrial products such as nuts and bolts, cutting tools, safety equipment, lighting and all sorts of specialty parts that are needed in factories, mills and construction sites. “It has 11 factories worldwide that can manufacture anything, from fasteners to specialty parts for Arctic energy exploration, mining, and manufacturing, for all kinds of technically demanding endeavors,” writes William C Taylor, the author of Simply Brilliant. Fastenal likes to say about itself: “We make the unavailable part available.” Fastenal employs more than 18,500 people who work in nearly 2,700 stores, with locations that stretch from the country’s biggest cities and industrial centres to remote, rural communities. Its online catalogue offers hundreds of thousands of different items. It has installed more than 60,000 “fully customized and automated, vending

machines stores at factories, warehouses, construction sites.” What makes Fastenal tick? The company’s goal is to make its staff, entrepreneurial, self-driven—work like you own the business it. “When you trust people to solve problems and make decisions, and then let them go, that’s when the magic happens,” writes Williams. Each of its 2,700 stores operates as a stand-alone business, with a clear leader, profit & loss account and “grassroots zeal for growth and service.” Its human resources approach is old-school: “it recruits many employees while they're still attending college, starts a majority of them in part-time jobs, prizes lifetime careers, and drills everyone on the timeless basics of sales and service.” Gary Polipnick, a senior executive, told Williams, “We call ourselves a blue-collar sales company. When our folks in the stores are doing it right, customers say, ‘This guy knows my business better than I do.’ We don't care where you went to school, we care about what they can't teach in school—wisdom, savvy, entrepreneurial spirit.” To codify and formalise its knowledge base, actually, Fastenal has created a school of its own, to teach the business skills, sales techniques and service mentality around which its bottom-up culture is built. The Fastenal School of Business, launched in 1999, has 39 instructors, 20 campus locations, and more than 300 different courses, from 10-minute e-learning modules to one-week and twoweek programmes. Fastenal designs and develops all the course material itself. It even offers introductory courses in welding and metalworking, to help salespeople relate to their customers. “Nearly 9,000 employees spent time in the classroom in 2014, and the workforce as a whole completed nearly 280,000 online courses. It also publishes a widely read paperback, The Little Blue Book of Customer Service, which has become a bible of sorts for parables on how to treat customers,” writes Williams. From this small town in Minnesota, travel to another less-known location in the US—Kingsport, Tennessee—to Pal’s Sudden Service, which sells standard fast-food like hamburgers, hot dogs, chicken sandwiches, fries and shakes from 28 locations in northeast Tennessee and southwest Virginia, all within an 80-mile radius of its home base. What is so great about this company? Pal’s does not offer sit-down service. Customers pull up to a window, place their orders with an employee, pull around to the other side of the facility, take their orders and drive off. Other 

MONEYLIFE | 9-22 Dec 2016 | 62

Book Review.indd 2

01-12-2016 21:05:46

BOOKS

 fast-food companies offer

years, a demographic slice the same but here is what that is notoriously taxing happens at Pal’s: to manage. • It takes an average of Pal’s screens its new hires through a 60-point 18 seconds at the driveup window to place psychometric survey drawn an order. That's four from attributes of star times faster than the performers. The selected second-fastest quickcandidates are put through serve restaurant in the massive amounts of training country which requires and retraining, certification more than a minute on and recertification. “New average to take an order. employees get 120 hours In a country with a financial system • It takes an average of 12 training before they are infamous for limited hours and plentiful of seconds to get the order. allowed to work on their ‘bank holidays’, Metro locations are Hence, the firm’s name. own, and must be certified in each of the jobs they do: When Fred ‘Pal’ Barger open 362 days per year, twelve hours founded the company, grilling burgers, making a day during the week, ten hours on he asked: what is faster fries, mixing shakes, taking Saturday, six on Sunday. (The bank’s than fast? Sudden orders. (Most employees are locations are closed only on Christmas, certified in as many as eight service. The company’s slogan: “Great food in Easter, and New Year’s Day.) Moreover, different jobs, although a flash.” in an industry plagued by long lines and some specialise in just one • But what about errors, or two.)” painfully slow response times, Metro when you try to serve Then, every day, vows that new customers can walk into on every shift, in every so fast? Pal’s makes a mistake only once in a branch, open an account, and leave restaurant, a computer every 3,600 orders. with a working debit card and full access randomly generates the That’s 10 times better names of 2-4 employees to to online banking—all within fifteen than the average fastbe recertified in one of their minutes and without any paper forms. jobs—pop quizzes, if you food joint. Speed and accuracy are interlinked. will. They take a quick test; One reason customers pull away from the handout see whether they pass; and, if they fail, they get retrained window in 12 seconds is that almost none of them for that job before they can do it again. (The average bothers to check their orders before they drive off. employee gets two or three pop quizzes per month.) The • Pal’s customers visit its restaurants an average of goal is for everyone at the company to be so good at what three times per week. McDonald’s customers visit its he or she does, to stay at the top of their game throughout restaurants an average of three times per month. their tenure at Pal’s, that the company operates at what • An individual Pal’s location requires only 1,100 square it calls the ‘Triple 100’ –100% execution, 100% of the feet of space and generates $2 million of annual time, even when restaurants are operating at 100% of revenue, a sales-per-square-foot performance $1,800. capacity. These are just two stories, of the many that Williams The typical McDonald’s location generates less than $650 of annual sales per square foot. narrates. They range from Metro Bank, which is challenging Pal’s knows that its customers are in a hurry and how banking is done in UK (which was dominated by five that its job is to help them get on with their lives. And banks, who often work against customers’ interests), to its treats them like adults. It does not ‘helpfully’ suggest an organisation that gave permanent homes to thousands, ‘Would you like a drink with that?’ It gives back their to a unique healthcare system for the local population in time. Plus, the confidence that the bag has what they asked Alaska, to the John Lewis Partnership of UK and so on. for. How does Pal’s manage to pull off such incredible This is a fascinating book that will open your eyes to how efficiency? The key is hiring, training, sharing ideas with unique and successful some organisations have been by its employees. But here is a breathtaking fact: 90% of Pal’s being dedicated to the interests of customers and employees over 1,000 employees are part-time, 40% between 16-18 simultaneously. — Debashis Basu 

63 | 9-22 Dec 2016 | MONEYLIFE

Book Review.indd 3

01-12-2016 21:06:01

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

The Sensex and the Nifty rose 2% each during the fortnight ended 30 November 2016. ML Mega-cap Index, ML Microcap Index and ML Large-cap Index advanced 3% each. ML Mid-cap Index surged 6%. 

Foreigners: Foreign institutional investors were net sellers of stocks during the fortnight (Rs7,995.94 crore). They sold shares worth Rs54,240.47 crore. 

Share Prices Index, June 2016=100

0

-420

130 -955 120

FII Net Investments (Rs Crore)

-1,490 110

-2,025 21 Nov-16

30 Nov-16

Indians: Domestic institutional investors were net buyers of stocks (Rs8,631.61 crore). They bought shares worth Rs22,234.47 crore. 

100

90 Jun-16

1,680 Sep-16 ML Large-cap ML Mid-cap

ML Small-cap ML Mega-cap

DII Net Investments (Rs Crore)

Nov-16 ML Micro-cap

Nifty Sensex

1,260

840

Index

18 Nov

30 Nov

+/-

ML Mid-cap Index

111.29

118.38

6%

ML Small-cap Index

105.78

111.39

5%

ML Mega-cap Index

105.95

109.07

3%

ML Micro-cap Index

104.98

107.79

3%

ML Large-cap Index

107.59

110.42

3%

26,150.24

26,652.81

2%

8,074.10

8,224.50

2%

Sensex Nifty Mega-cap Gainers/Losers

18 Nov

30 Nov

Change

Berger Paints India

188.00

228.85

22%

Punjab National Bank

149.75

138.20

-8%

18 Nov

30 Nov

Change

Shilpa Medicare

563.45

678.50

20%

Indoco Remedies

283.00

257.90

-9%

18 Nov

30 Nov

Change

102.50

153.40

50%

76.50

62.75

-18%

420

0 21 Nov-16

30 Nov-16

GLOBAL MARKET TRENDS 65,000

Bovespa 59,500

54,000

Large-cap Gainers/Losers

Mid-cap Gainers/Losers Ajmera Realty & Infra India Den Networks Small-cap Gainers/Losers TVS Electronics Control Print Micro-cap Gainers/Losers

18 Nov

30 Nov

Change

93.50

177.30

90%

256.55

230.40

-10%

18 Nov

30 Nov

Change

MPS Infotecnics

0.12

0.25

108%

Prakash Constrowell

8.20

5.65

-31%

(All Prices in Rs)

48,500 Jun-16

Sep-16

Dec-16

Bovespa advanced 3%, while Hang Seng, Nikkei and Shanghai Composite rose 2% each. The FTSE and NASDAQ Composite ended flat.  Index Bovespa Taiwan Weighted

18 Nov

30 Nov

+/-

59,962

61,906

3%

9,009

9,241

3%

Hang Seng

22,344

22,790

2%

Nikkei

17,967

18,308

2%

3,193

3,250

2%

Shanghai Composite S&P 500

2,182

2,199

1%

Korean Composite

1,975

1,983

0%

FTSE

6,776

6,784

0%

NASDAQ Composite

5,322

5,324

0%

MONEYLIFE | 9-22 Dec 2016 | 64

Money Fact.indd 2

* 20 O

16 ** 1 N

16

02-12-2016 18:52:12

MONEY FACTS STOCKS



What’s H

T

ML SECTORAL TRENDS

Shares of non-ferrous metals companies were in demand during the fortnight. Gravita India, Arcotech, National Aluminium, Hindustan Zinc and Man Industries advanced 19%, 15%, 14%, 13% and 11%, respectively.  Companies

ML Non-ferrous Metal Index

Gravita India

175

Arcotech

145 130 115

42.05

19%

400.25

15%

50.20

57.10

14%

Hindustan Zinc

249.80

282.60

13%

Man Industries

43.90

48.75

11%

11% Banks

-2%

Hindustan Copper

55.35

58.90

6%

Paper & Paper Prod 11% Retail

-1%

Hindalco Industries

165.50

175.90

6%

Office Equipment

Ram Ratna Wires

Jun-16

Sep-16

+/-

35.45

Alicon Castalloy

100

30 Nov

348.90

National Aluminium

160

18 Nov

Shares of non-ferrous metals companies and paper & paper products companies advanced 11% each. Shares of paints companies and petrochemicals companies advanced 9% and 8%, respectively. Stocks of banks and retail companies fell 2% and1%, respectively. Stocks of refinery companies rose 1%. 

377.20

398.00

63.85

6%

67.30

ML Sectoral Trends Non-ferrous Metals

10% Transport & Logistics

0%

Paints

9% Refineries

1%

Petrochemicals

8% Odds

1%

5%

Nov-16

What’s



All Prices in Rs

FOOD INFLATION

N T

Shares of banks were punished. Karur Vysya Bank and Punjab National Bank declined 8% each. State Bank of India, United Bank of India and Dena Bank declined 6% each. Vijaya Bank and UCO Bank fell 5% each.  Companies Karur Vysya Bank

18 Nov

30 Nov

+/-

91.05

83.90

-8%

ML Bank Index 125

Trending Lower

120

8.00%

PNB

149.75

138.20

-8%

Bank of Baroda

176.95

164.25

-7%

State Bank of India

275.80

258.40

-6%

United Bank of India

22.50

21.25

-6%

Dena Bank

37.05

35.00

-6%

Vijaya Bank

47.15

44.75

-5%

746.70

710.45

-5%

35.65

33.95

-5%

585.20

560.25

-4%

SBBJ Uco Bank St Bank of Mysore

Combined food inflation declined steeply, to 3.71% in October 2016, compared with 4.12% recorded for September 2016. For rural and urban areas, food inflation in October 2016 was 4.25% and 2.79%, respectively.

Annual Change

115 5.25%

110 105 100 Jun-16

Sep-16

Nov-16

2.50% Oct-15

Apr-16

Oct-16

All Prices in Rs

BULK DEALS Date

Buyer

Seller

Rs Cr

28 Nov-16 Mac Charles (India)

Company

Embassy Property

Chatrabhuj Bassarmal Pardhanani

432.78

29 Nov-16 Mac Charles (India)

Embassy Property

Chatrabhuj Bassarmal Pardhanani

184.66

23 Nov-16 Apcotex Industries

Saldhar Investments

Abhiraj Atul Choksey (HUF)

6.14

30 Nov-16 Raunaq Epc International Gulab Merchandise Pvt

Surinder Pal Kanwar

5.11

22 Nov-16 Zuari Global

Coltrane Corporation

4.32

18 Nov-16 Lloyds Metals and Energy Lloyds Metals and Minerals

Uttam Exports Private

3.15

25 Nov-16 Future Enterprises

Sumanthkumarreddy Bathina

0.42

Globalware Trading

Kumaraswamy Reddy

Vegetable prices fell by 5.85% in October 2016 compared with those prevailing in September 2016. Inflation in fruit prices was 4.50% in October 2016, while pulses were dearer by 4.24% year-on-year. Inflation for cereals stood at 4.40% and inflation for milk products was 4.42%. Price rise of non-vegetarian items, such as meat and fish, was 6.00% in October 2016 compared with 4.25% in September 2016. 

65 | 9-22 Dec 2016 | MONEYLIFE

Money Fact.indd 3

02-12-2016 18:52:26

BEYOND MONEY

Tribals Benefit from Scientific Approach and Spiritual Outlook

T

his story began in the early 1960s. A group of states. It is fully equipped with facilities like laboratory & students from various colleges in Gujarat were blood storage, X-ray and sonography, operation theatres, disturbed about poverty, inequality and the labour-room, intensive-care-unit (ICU) and neonatal ICU. exploitation people in our society, but could do little about About 150 eye camps are organised in the field every year it then. Many of them went to the USA for higher studies. and over 4,500 cataract surgeries performed. More than By the late 1970s, many of them had completed their 100,000 patients are managed in the OPD, while 18,000 studies and worked for a few years in the US. But the dream patients are admitted every year. About 5,000 deliveries of working for the poor in India hadn’t been forgotten; and 7,000 operations are also conducted. some of them chose to come back and follow the path SEWA-Rural runs a vocational training centre that prescribed by Mahatma Gandhi and Swami Vivekananda. has a one-year residential programme to train around The result was the formation of the Society for Education, 150 rural, poor and tribal youths in various technical Welfare & Action-Rural (SEWA-Rural) on 26 October skills; it also focuses on character building and becoming responsible citizens. A 100% 1980. The initial founders were Dr Anilbhai Desai (MS, job placement with nearby General Surgery), Dr Lata industries is ensured and this Desai (MD, Paediatrics), has benefited 2,000 students Dr Pratimaben Desai (PhD) so far. All these have been and Arvindbhai Desai (MSc). made possible by more than A beginning was made 250 full-time staff including with a small 30-bed hospital a 25-doctor team, 100 in Jhagadia (district Bharuch, para-medicals, and about 500-village level frontline Gujarat). Over the years, other like-minded professionals health volunteers. joined the group and SEWA-Rural is able to started imbibing the spirit mobilise funds to the tune of of organisation. Hence, the scope and range of various Rs10 crore every year from multiple sources including services, activities and programmes to serve and empower government grants, international funding and donations. the ‘last man standing’ started growing. A comprehensive mHealth innovation (ImTeCHO) for SEWA-Rural is a voluntary organisation involved in empowering accredited social health activists (ASHAs) has health and development activities in rural tribal areas been introduced by SEWA-Rural in partnership with the of south Gujarat with its headquarters at Jhagadia. All health department of Government of Gujarat. More than the activities and programmes incorporate, as well as 600 village-level ASHAs are now utilising smart phones balance, the three basic principles: social service, scientific with a specially designed software to provide maternal and approach and spiritual outlook. The idea is to encourage childcare at the doorstep with better quality and timely young medical professionals to work for the poor and management in the districts of Bharuch, Narmada and the disadvantaged sections of society. Over the years, Valsad (Gujarat). SEWA-Rural’s work has earned rich accolades from the The doctors in SEWA-Rural aspire to lower the maternal government, donors and the public. It has also increased mortality ratio (MMR), infant mortality rate (IMR) and in size and reach. neonatal mortality rate. They are also The 200-bed Kasturba Hospital working towards reduction in poverty runs a round the clock OPD (outthrough employment opportunities for patient department) as well as indoor community and empowering women SEWA-RURAL and emergency services in the fields of through educational and employment Jhagadia, District Bharuch, Gujarat, PIN: 393110. OBGYN (obstetrician and gynaecology), opportunities. Phone number 091-2645- 220021, paediatrics, ophthalmology and general Donations to SEWA-Rural have 50% 091-2645-220868 medicine. It serves patients from 3,000income-tax exemption under Section Fax number 091-2645-220313 odd villages as well as neighbouring 80-G of the Income-tax Act.  Mobile +91 9978228689 Email [email protected] Website: http://sewarural.org/ MONEYLIFE | 9-22 Dec 2016 | 66

Beyond_money.indd 1

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REGISTERED WITH THE RNI UNDER NO. MAHENG/2006/16653. Postal Registration No: MCW/184/2015-2017. POSTED AT PATRIKA CHANNEL SORTING OFFICE, MUMBAI 400001. Date of Publishing 2 December 2016. Date of Posting Alternate Tuesday & Wednesday.

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