He Conomic Imes: Wealth

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HOW TO

BARGAIN ...and get what you want Find out how to hone your haggling skills so that you can land the best deals while shopping this festive season. PAGE 2

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The Economic Times Wealth, September 18-24, 2017

Cover Story

RIJU MEHTA

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e it the planned purchase of a house or a hurried hop to the fruit vendor, if you don’t take a calculated shot at bargaining, you probably can’t stake claim to the Indian genetic pool. Haggling, after all, is such an integral part of the shopping experience in the country that even a salesperson would feel cheated if you docilely accepted the product at MRP, without whipping out a strategy or two to wear him down with bargaining. Though online sales and snooty malls have drastically pared down this opportunity to negotiate, there’s still scope to hone your skills while purchasing highvalue items like houses, cars, white goods, electronic items, even furniture and apparel. Bargaining is an art that can help you bring down the price of a product in direct proportion to your skills. Ironically, despite hordes of self-proclaimed master bargainers, very few actually manage to snare a good deal. This could be for various reasons, be it lack of research or poor communication skills. “Whether you are buying potatoes or a `2 crore house, it is important to talk to a minimum of 4-5 dealers to gauge the price and discounts,” says Anil Agrawal, V-P, retail, in a private organisation, and a good bargainer when it comes to electronic appliances. Without this basic research, you cannot be on firm ground to negotiate your way to a good deal. The other decider is the caliber of your communication and ability to read people. If you cannot convey what you

BARGAIN.. ...AND GET WHAT YOU WANT Find out how to hone your haggling skills so that you can land the best deals while shopping this festive season.

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HOW TO

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The Economic Times Wealth, September 18-24, 2017

want for the price you want, or lack the conviction to do so, it is unlikely you will cut a good deal. Connecting well with people and having a psychological advantage over salespeople also result in a good negotiation and can fetch you a better price than you had bargained for. “It is, however, important to understand the difference between negotiation and bargaining,” says Prerna Kohli, Delhi-based psychologist. “Bargaining means you are trying to get the best price without compromising on any features or benefits. It is competitive, aggressive and a win-lose strategy, and neither party is generally satisfied. On the other hand, negotiation happens in an environment of trust and openness. It is a win-win strategy where both the parties leave the table satisfied,” she adds. Whether you are looking for satisfaction or the best value for your money, here is a strategy that will help you in every situation. Follow these 10 tips and it’s a cinch you will nail the art of bargaining by the time you start shopping for the festive season.

Narendra Agarwal 39, Doctor, Gurugram

Never criticise the car if you buy it from the end user. Appreciate it and speak nicely, but at the same time, be firm.”

CLAIM TO FAME Knack for buying secondhand cars at a bargain. Has bought eight cars for himself and has helped friends and relatives buy nearly 20 cars since 2007. BARGAINING CHIPS ��� Goes for less popular models that are technically sound. ��� Looks for more expensive cars as the depreciation is higher. ��� If the car is not up to the mark, gives a quote that the seller will never accept.

ASHWANI NAGPAL

Psychological tricks: Customer vs Salesperson Find out the tactics and mind games that dealers or salespeople resort to and the ones that you as a consumer can equip yourself with.

SALESPERSON STRETCH THE NEGOTIATION According to Delhi-based psychologist, Prerna Kohli, some salespeople extend the negotiation till you get tired, frustrated and thirsty. This weakens you and you may give in. “Be particular about how much time you spend in the store and leave if the deal is not done. Ask them to e-mail the revised quote after discussing with manager,” she advises.

PSYCHOLOGICAL PROFILING The salesperson or dealer is trained to persuade people and know their weak spots and desires, says Kohli. They do this through the process of questioning. “Your strategy should be to stay focused and say, “We’ll get to that later. Let’s focus on this now.” Or, you can go out of the way to counter their questions with questions of your own.

TALKING TO DECISION-MAKER If you and your spouse go shopping together, understand that salespeople are adept at identifying the decisionmaker and will try to convince that person. So make sure you work as a team and put off the decision for later.

SCARCITY OR DEADLINE The threat of shortage or time-bound availability for the product you want is a typical trick used by stores to create a sense of urgency and force you into buying a thing. Counter this by checking its availability with other dealers.

REVERSE PSYCHOLOGY Almost everyone comes across the salesperson who says, “You don’t have to agree with me or buy the product, but…” This is a smart strategy to create trust by telling the customer he has the option to walk away. It often results in the customer obliging the salesperson and buying the item.

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CUSTOMER SPEAK QUICKLY If you want to corner the salesperson into agreeing to your price, speak a little fast. According to research, if you speak quickly, the other person has less time to process and formulate a response. It is more likely that he will agree to your spiel and price point.

TIME YOUR ENTRY It’s a good idea to go to a store at the close of the day because it is easy to coerce a dealer or salesperson to agree to your price when he is tired and is not keen to argue with you.

STAY SILENT When the salesperson quotes a price, stay silent for some time. Most people do not like awkward silences. So the salesperson will be unsure and either repeat the offer or try to sweeten the deal. Most often than not, silence is golden and gets you the desired product for a bargain.

DON’T BE IMPULSIVE If you like something, don’t let the salesperson know it because it places you at a disadvantage and gives him a chance to push the product. Be firm and let him know that you will buy it only at a particular price.

SHOCKED LOOK When the shopkeeper quotes his price, it’s a good idea to display shock and dismay as if the offer is nothing short of outrageous. This immediately puts the salesperson on the back foot and makes him defensive. This is the right time to wedge your foot in and launch an offensive about the unfairness of the price and the need to downgrade it. Most times, it works.

Cover Story

DO YOUR HOMEWORK Whether you are looking for a house, car or an appliance, research is the foundation on which bargaining power rests. Never go blindly into a negotiation. “Go with enough preparation of products and market pricing. The more the preparation, the lesser the risk of being taken advantage of,” says Kohli. Narendra Agrawal, a surgeon at a renowned hospital in the NCR, agrees. His passion for cars has spurred him into honing his bargaining skills and has helped nearly 20 of his family and friends purchase pre-owned cars since 2007. He buys one for himself every two years and conducts clinical research for extensive spans of time to ensure a bargain each time. “Even if you don’t have to buy, you should constantly keep searching, comparing prices, checking mileage, etc. Cars should not be bought in a hurry,” he says.

FIX YOUR BUDGET Outlining a budget and sticking to it is essential because this will define the extent to which you stretch a negotiation. The ability to say no and walk away is a powerful leverage and can turn the talks in your

The Economic Times Wealth, September 18-24, 2017

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Shikha Nayyar 46, Entrepreneur, Noida CLAIM TO FAME Buys bulk appliances at very low EMIs.

Bargaining is a battle of wits. While I’m firm about how the deal needs to be done, I am very polite and consider the seller’s interests as well.”

BARGAINING CHIPS ��Approaches the stakeholder (owner) directly; avoids middlemen like dealers, salesmen and shop managers. ��Is clear about spending capacity and doesn’t waver.

ASHWANI NAGPAL

��Exhibits high confidence and conveys she is a serious buyer.

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The Economic Times Wealth, September 18-24, 2017

favour. Noida-based Shikha Nayyar, an entrepreneur, never swerves from her budget. “I don’t beat around the bush and if the dealer doesn’t agree, I simply go to the next dealer.” She doesn’t have to do that often as the seriousness of her intent and past record of fairness almost always get her a good deal. “Besides, it’s not worth risking your financial status by breaching the budget,” says Agarwal.

GET THE TIMING RIGHT The bargaining skills are almost as important as the time at which you apply them. So, while it’s a good idea to shop during the festive season, you could get better discounts on cars at the end of the year because the new year means the next year’s date on registration, which will fetch a better price in a resale. But if you want to use the car for the long term, it makes sense to purchase it in December at a high discount. Month-end or year-end are also good times to go on a buying spree as stores have to meet their targets and would be more willing to get rid of the inventory at a higher-than-normal discount. Another good trick is to approach a salesperson at the close of the day as he would be too tired to indulge in a long-winded negotiation. Similarly, early mornings may work for some as salespeople may be keen to initiate the day’s sales.

BE POLITE, NOT IMPULSIVE “At all times, be respectful and speak nicely to the end user,” says Agarwal of the used car owners he interacts with. It never pays to lose your cool because you cannot take the right decision when angry or upset. Besides, you may have to return to the same shop or salesman for other purchases and a bad rapport never made for a good bargain. Also, make sure never to be impulsive. Even if you like something, don’t let the salespeople in on it as it puts them at an advantage. Even if they realise you are keen on something, “don’t give them the advantage of knowing that you’re hiding the need to have it. Be upfront about wanting it, but only at a particular price, thus giving an impression that you are not an impulse buyer and mean business”, says Kohli.

Listen to the body talk while buying Non-verbal communication is often a big indicator of whether a sale will take place or not. Find out the meaning of various gestures and facial expressions and how these tell if you are going to get a good deal.

FIDGETING

OPEN BODY

If the dealer or salesman is restless and touches his mouth, chin or ears, he is definitely not comfortable talking to you and could even be lying about what he is selling.

Open palms, sweeping arm movements and relaxed, calm behaviour often indicate an honest, open and more reliable approach. So you are more likely to believe the salesperson and buy.

CLOSED APPROACH Crossed arms or legs, clenched or curled up fists indicate the dealer is not open to the negotiation and is unlikely to agree to your offer. Time to shop elsewhere.

HAPPY/SCOWLING FACE An unhappy face, with pursed lips, clenched jaw or a scowl definitely shows no interest in forging a deal or conceding to your bargaining. Don’t waste your time here. Similarly, a happy face, where the salesperson is smiling and nodding, shows he is open to your proposal.

Anil Agrawal, 43, Salaried, Noida CLAIM TO FAME Brings down price by a huge margin for appliances and gadgets.

Non-verbal cues are important. The price beyond which the retailer’s body language turns negative is the best price that he’ll offer.”

BARGAINING CHIPS ��� Researches extensively. ��� Maximises discounts through offers on cards and wallets, cash discounts, free EMIs, etc. ��� If the salesperson’s body language turns negative, he goes elsewhere.

ASHWANI NAGPAL

FOCUS ON BODY LANGUAGE “Non-verbal cues like gestures and postures communicate your true attitudes and intentions and account for about 55% of the message conveyed,” says Kohli. These, along with facial expressions, can not only give the salesperson cues about your intentions, but also vice versa (see ‘Listen to the body talk…’). “So, as long as the salesperson is maintaining eye contact and smiling at you, he is paying attention and is interested, but the moment his body language turns negative,

that is, he starts looking away or scowls, it’s a clear sign he is not interested in making a deal. That’s the point till which you can bargain with him and can decide to exit,” says Anil Agrawal.

BUILD A RELATIONSHIP It often pays to bargain hard, but it is equally important to connect

with the salesperson in a way that he is willing to offer you more than he would other customers. There are two ways you can do this: find a way that will offer him long-term benefits or charm him in a way that he finds it difficult to refuse. For instance, if you agree to buy in bulk or provide regular long-term business or purchases, he is sure to of-

fer a deep discount. “Since my business required me to buy LCD TVs in bulk, I offered to pay via EMIs without a down payment. Since the shopkeeper knew I would come back for more business, he agreed,” says Nayyar.

LOOK FOR FLAWS Another good strategy to increase

your bargaining power is to zero in on any flaws or defects that may not affect the product’s functionality or usage, but is nevertheless enough to demand a sizeable discount. It could be as small as a scratch or dent, or even an unsuitable location for a house. However, you’d be doing the salesperson or dealer a favour by taking such an

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The Economic Times Wealth, September 18-24, 2017

item off his hands and can rightfully ask for a discount for it.

DIRECTION OF FEET

MIMICKING BEHAVIOUR

If the dealer’s feet are pointing towards you, he is interested in continuing with the deal. If the feet point away from you, he is probably no longer keen on serving you and looking for an exit.

The moment a salesperson starts to mirror your body language, gestures or tone, know that you will end up becoming more agreeable to his sales pitch and will close a deal.

EYE CONTACT Lack of interest in serving a customer is clearly reflected in reduced eye contact. Greater eye contact by the salesperson will create greater trust and you are more likely to end up buying something.

LEANING Leaning forward or coming closer indicates definite interest, while leaning backward shows disengagement. So if you are at a price point where the dealer starts to lean towards you, go for the closure.

HAGGLE UP THE HIERARCHY After you and the salesperson have agreed upon a price, a smart move is to climb up the ranks and press for a further cut. “Once the salesperson has been stretched to the maximum, I make him speak to the store manager, who has the authority to offer additional discounts,” says Anil Agrawal. Nayyar agrees. “I almost always eradicate the middleman and go directly to the stakeholder, be it the house owner/builder or the shopkeeper,” she says. This is probably the reason that she managed to get a `12 lakh studio apartment for `10 lakh after insisting that the property dealer speak directly to the builder, even though he persisted that the price could not be brought down below `11.5 lakh. “When I told him that I would pay the entire sum instantly if he agreed on `10 lakh, the owner perceived my seriousness and agreed,” she says.

MAXIMISE YOUR DISCOUNTS Even after the final price has been agreed upon and the deal sealed, do not give up. There is scope for a further discount at the final stretch

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of making the payment. “Look for discounts if you make on-the-spot payments by cash, cheque or RTGS, instead of credit card,” says H.C. Sogani, a 65-year-old chartered accountant, who is adept at getting good bargains for white goods, electronics and furniture. “At the time of billing, I check for free EMI and cashback offers. If the seller accepts cards, I check with him if he can offer any cash discount in lieu of the card fees. Finally, I check the offers on cards and wallets like Paytm, PayZapp, etc,” says Anil Agrawal.

BE PREPARED TO WALK OUT Despite prolonged discussions on price, there may be times when the deal falls through. Don’t feel guilty about taking up too much of the dealer or shopkeeper’s time, and simply leave. At other times, you may have played up the attractive prices by a rival dealer, threatening to take up his offer. If the salesperson does not budge, be prepared to walk away. Don’t get so attached to a product that you find it difficult to leave. “I am very confident and know my limits. So if one dealer doesn’t give me what I need, I simply move to the next one,” says Nayyar.

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Cover Story

The Economic Times Wealth, September 18-24, 2017

Strike a bargain: steps in the right direction Find out how to manage the best deal while buying a car, house or appliances.

USED CARS

STEP 1

STEP 2

STEP 3

STEP 4

STEP 5

STEP 6

Fix a financially viable budget and stick to it.

Check OLX, online forums for pre-owned cars, newspaper advertisements, or one of the best options, talk to people with multiple cars.

Go for expensive or high-end models which see a high depreciation (typically 30% in two years), or popular models that will retain value in secondary market.

Don’t buy in a hurry. Keep looking all year round and zero in when you spot a bargain. Keep comparing prices.

Inspect the car for paint jobs and repair work and mention it to the owner. If he accepts it, leverage it to lower the price. If not, quote a price that he will not be interested in, and leave.

If the car is up to the mark and you are interested, quote a price lower than demanded. Raise the bar only till the point it is within your budget.

NEW CARS STEP 1

STEP 5

Fix the purchase price and do not go beyond it.

While finalising a deal, ask for freebies or goodies, and avail of cash discounts or credit card schemes.

STEP 2 Go to several dealers, even rivals, to check the prices and discounts. Ideally buy around festive season, before December or financial year-end when you can get the maximum discounts.

STEP 3 Approach the dealer who gives the best offer or go back and forth between dealers to play one against the other. This will help you lower the price. Also consider those who can give you good after-sales service.

APPLIANCES

STEP 1

STEP 3

Fix your budget, get loan approval and have the down payment ready. At the same time, be on the outlook for a good deal. House purchase doesn’t happen overnight.

If buying a new house, consider the builder’s track record, location of the property, documentation and other legalities.

STEP 2 While word of mouth works best, you can check portals like MagicBricks, 99Acres, Sulekha, etc, or approach a property agent for resale property. Buying directly from the developer or owner is always advisable.

STEP 4 You can avail of at least seven types of discounts from dealers, which they may not reveal. These range from dealer discounts (manufacturer gives a discount or target incentive to dealers) and corporate discounts, to exchange bonus, loyalty discount, discounts on financing and insurance premium, discounts on registration or handling charges, etc. While some may reveal the dealer discount, you can maximise this by bargaining hard.

STEP 1

STEP 2

Find out about product specification, brands, models and prices by searching on the Internet, with e-retailers and company websites, in newspapers and by talking to the people in the know.

Go to 4-5 dealers or shops and understand the prices and discounts they are offering.

STEP 3 Pick the shop that offers the best combination of low prices and product features.

HOUSES

STEP 4

STEP 6

For good discounts, conduct a thorough research on prices in the area. Get back to the developer if he has quoted a higher price than is the norm in the area.

Once you are satisfied with the deal, close it quickly.

STEP 4

STEP 5

Bargain hard by quoting a price much lower than the one offered. If the salesperson does not relent, look for other freebies or discounts. If even this doesn’t work and the salesperson doesn’t budge, go to some other dealer.

Check if there is unsold inventory and the developer’s financial position is weak. In both cases you can leverage for a high discount. Showing seriousness to make a quick purchase will also earn you a good discount, and so will cash payment. If owners are desperate to sell, the distress sale can also get you a good bargain.

STEP 5

STEP 6

If an agreement is reached, ask for further discount by talking to the shop owner or the manager.

While making the payment, avail of cash discounts, credit card or wallet schemes, free EMIs, or any other goodies.

Please send your feedback to [email protected]

Guest Column

The Economic Times Wealth, September 18-24, 2017

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BARGAINS ARE THE KEY TO INVESTING MONEY MYSTERIES

It is simply not possible to judge an investment without the context of its price, at least in the positive sense, says Dhirendra Kumar. fining value investing, but they all boil down to the fairly simple concept of buying quality stocks that are undervalued. It’s about buying cheap, and about being aware (and suspicious!) of the idea that if something is expensive, then it must be good. Look at it another way. Investing in a stock is an exercise in accepting uncertainty. You can analyse the likely future and hope that the company will do better and the stock will rise. When the stock rises you will be able to sell it a higher price eventually. These future events are not dependent upon anything you can do. Anything could happen to the company, its market, its industry, the country’s economy and indeed the global economy that could derail your expectations. All this is in the future and you have no control over it. The only thing you can control is the price at which you can buy the stock, or rather, whether you buy it at all at a given price. Everything that happens in the future gets shaped by the price. The same investment can be good or bad depend-

People look for bargains, but they don’t necessarily make correct judgements about the inherent value of things.

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P The author is the Founder and CEO of Value Research

eople’s instincts about what makes a purchase worthwhile can have harmful side effects if applied to investing. However, overcoming these instincts can be very profitable. This is what the powerful concept called value investing is all about. There are two opposite instincts that govern how people spend their money. One is to buy expensive things in order to signal status, and the other is to get a good bargain. Ideally, we would like to combine both. We would like status-symbol possessions that normally cost a lot, but we would like to get them at a good bargain. That sounds like an impossibly good deal but then, the fun of getting a deal is the maximum when it’s good. It’s a basic human instinct to use

the price of something to judge its intrinsic value. People express their wealth and their status in society by buying things that are more expensive. Whether it’s something trivial like a shaving blade or some substantial expense like a car, or even a massive layout on a house, rich people spend more on the same kind of things. This behaviour is a part of human nature and really, there’s nothing fundamentally wrong with it. People acquire wealth to signal status and it brings them a feeling of fulfilment to be able to do so. This belief that expensive things are better, shapes human behaviour in some surprising ways. The most surprising example that I have found is that in drug testing, patients have been observed to improve more if they are told that the medicine that they are being given

is more expensive. It sounds unbelievable but the same medicine appears to have a more beneficial effect on disease if the patient believes that it’s more expensive. That means that although people instinctively look for bargains, they don’t necessarily make correct judgements about the inherent value of things. Instead, they use price itself as an input for whether something is a good bargain. That sounds like circular logic, and it is. If this is what human nature is like, then what is its effect on investing? The more a stock rises, the more people believe, instinctively, that there must be something good about it. In a sense, the cause and effect is reversed. At its heart, value investing is the style of investing that does the opposite. There are a variety of ways of de-

ing on what your price was. It is simply not possible to judge an investment without the context of its price, at least in the positive sense. I mean there are equity investments which are bad regardless of the price. However, there aren’t any investments that are good regardless of the price. Which is why the instinct of buying only at a bargain—and not investing unless there is a bargain to be had—is the most important thing in investing.

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Financial Planning

The Economic Times Wealth, September 18-24, 2017

THE MONEY QUESTION

Paper Work

How to generate a monthly investible surplus?

Managing SIPs The Systematic Investment Plan is a powerful tool to create long-term wealth by starting with as little as `500. To build a sustainable corpus, one should top up these investments as income rises. However, investors must not compromise their current cash needs with too restrictive SIP commitments. Mutual funds have tailor-made SIPs to help investors efficiently manage them. The facilities allow investors to alter SIPs according to different life situations.

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Registration

Aarav is 30 and single. He has no responsibility other than taking care of his own needs. Despite working for the last four years, he has no savings or investments except for some money in Ulips and ELSS funds. While he has not begun planning for the future, the fact that he has nothing left in his bank account at the end of a month is bothering him. He blames it on casual spending on weekends and impulse buys. Aarav wants to know how he can stop spending and start saving. arav’s tendency to spend can be blamed on easily accessible money that has not been earmarked for a specific purpose. He needs to address the issue to resolve his poor money habits. Keeping all his money in the savings bank account is not advisable for two reasons. Very often, the thought of a good amount of money in the bank encourages unnecessary and irrational spending. Aarav must switch to using a debit card linked to his account and sign up for an SMS intimation of expense and account

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balance when he uses the card. His depleting balance every time he spends will act as a strong de-motivator for unnecessary spending. Moreover, the low interest rate that banks pay on balances in savings accounts is also an important reason to not hold too much money in such accounts. It is time Aarav deploys the surplus towards generating wealth. In the time that it takes to plan his future goals, he must initiate a few things. He should make an estimate of his monthly expenses including money required for things he enjoys doing and a margin for unexpected expenses. The re-

maining funds should be invested immediately. He should identify a couple of diversified equity funds and start a systematic investment plan (SIP). Or he can sign up for the excess funds to be automatically transferred to a fixed deposit with the bank. Once he decides on goals for which he wants to save, he can assign the investments he is making to them. Knowing that money has already been allocated and not available to him will curb Aarav’s spending habits. Over time, as he sees wealth being created, savings will become a habit with him.

Products with income-orientation are designed to provide regular income to investors and are suitable for investors with lower risk and return specifications.

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Deposit products of banks, post offices and companies, government savings schemes, bonds issued by the government, companies including infra companies and debt funds of mutual funds are income oriented products.

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These investments typically do not provide capital appreciation since the focus is on generating and distributing income.

Step up SIP As and when incomes rise, a step up SIP can be used to increase the SIP amount. The SIP instalment will increase at predetermined intervals to match the rise in income level of the investor. A step up SIP form needs to be filled at the time of SIP registration to use this facility. This facility is also known as top up SIP.

Pause SIP In a cash crunch, one may not want to completely stop SIPs but put them on hold for a while till the situation eases. A pause SIP form may be used to do this. The period for pausing the SIP can be mentioned in the form. A bank mandate also needs to be filled and submitted.

Flexi SIP

SMART THINGS TO KNOW: Income-oriented investment products

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An enrolment form must be filled up to register for an SIP. The scheme, SIP date, amount, start date and frequency must be added. It is a good idea to opt for the “perpetual” option so that the SIP does not stop midway. If this option is not available, a date long enough to complete the goal may be chosen.

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Liquidity in such investments may be affected by the penalty associated with withdrawing funds from most of the deposit products.

5

Income earned in the form of interest is subject to tax on accrual at the marginal rate of tax applicable to the investor.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

Many fund houses provide flexible SIP options that allow changes in SIP amounts based on occurrence of certain events or triggers. These triggers may be based on certain pre-determined formula (eg. index level or target amount). Flexi SIP forms need to be filled with minimum and maximum SIP instalment that can be opted.

Points to note � Registering an auto debit mandate ensures continuity of SIP instalments. � It is important to read instructions applicable to each of these facilities before enrolment.

Financial Planning

The Economic Times Wealth, September 18-24, 2017

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Teach kids good cash habits A child’s money habits are shaped by the family environment. Be a responsible role model so that when the time comes for children to be independent, they won’t flounder, says Uma Shashikant.

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ast week we met friends whose children had just joined college. They remained anxious about how the 18-year old young adults would manage their lives independently after leaving home. Every action has a consequence, most parents tell their children. Perhaps several times over. However, in their heart they would like a world where their children could grow up into responsible adults, without being bruised by illthought out actions that bring about regret and remorse. They asked me to make my usual list of points for parents and children to think about. First, the attitude of your children towards money is shaped mostly by your family environment. If you have been the type of person who considers the merit of every financial decision and consistently makes it only after deliberation, your children would have picked it up. Swiping your card carelessly for impulsive purchases, and hoping that the children will somehow turn out to be better versions only because you extolled on the virtues of careful spending, is expecting too much. Consider your money habits as a family, so you know what to expect from the children you have sent to college. Second, unlimited cash out of the ATM and unquestioned replenishment of the bank account so that you do not displease your child, are harmful for their well-being. The single-most important money lesson to learn early is that it is but a limited resource, and even if you had plenty it always comes with alternative uses. Agree on a monthly allowance and stick to it. Make sure you have a good idea of all the other extraordinary costs for books, memberships, travel and other big-ticket items and provide for it in advance. Third, make the budgeting exercise a joint affair in which your child agrees on how much will be spent and on what. Make it an exercise of assessment of the cost of living, including mandatory expenses and discretionary expenses, so your child knows how to allocate between eating out and paying the cellphone bills. If there are other little luxuries that your child wants to indulge in, encourage the possibility of taking on parttime work. Even if it is a menial task of waiting tables, they will learn how to show up on time, do what is expected, perform to a standard, and earn money they can call their

IMAGES BAZAAR

own. Do not dismiss it as not worth the few rupees it fetches. Fourth, teach your child the use of online software that will account for their expenses under multiple heads. Teach them how to make electronic transactions, how to keep the account secure, how to manage an electronic wallet, and minimise the use of cash so that accounting becomes easy. Ask for the accounts to be shared with you, so you know what is going on. You don’t have to question each spend, but since you are the one financing it all, do not give up the authority to hold them accountable. Little amounts add up, and children will be able to better appreciate how their lazy take-outs for food have snowballed into a hefty sum. Fifth, remind the child that the money habits they display are noted by their peers and friends, and will lay the foundations of how money transactions will happen in a group. Many are shy about bringing up the question of how to split the grocery bills, or

how to pay for joint trips and eating out. Since no one is earning most of the money that is being spent, it is better to split the expenses equitably. Lending to friends is an avoidable habit, as one loses both the money and the friend, unless recovery is prompt. There are many mobile apps that help boarders manage group expenses efficiently. Sixth, allow the child the dignity of not having to ask and remind you about sending them the allowances you had agreed. Set a specific date and make sure you have remitted the money as promised, so that they learn to await the credit and manage themselves better. A fixed sum that will pay for their transport back home, in case there is an emergency, can be left in the bank account or with a trusted relative or friend who is willing to take on the responsibility. Such amounts are also useful in case of any medical or other emergencies, and provide a sense of comfort to the child. Seventh, teach the child the basic rules of

safe banking, using a credit card, and online transactions. These conversations tend to be boring and the child might protest. Ensure that you create an environment of learning, even if it means the child will teach you or your spouse, about how to do these transactions safely. Ensure that they know what they should do if they lose their debit cards or identify any misuse. Financial literacy is an essential skill and the minimum the child should know are operational and security features associated with the financial products that they use. Eighth, if there are investments back home in which they are first or second holders, after they reach the age of 18, these folios, accounts and other investments will not be accessible to you. Before they leave home, ensure you have converted them all from minor accounts into major accounts, by completing the paperwork. You will not be able to access, redeem or close any of these accounts without their consent and signature. Their signatures have to be attested by the bank, and submitted to the concerned institutions. Ninth, let them know that you will wean away from their finances over time, and look forward to them leading their independent financial lives when they graduate and find a job. Do not be too eager to know what their salary would be, or compare them with others, or brag about their earnings. Allow them to enjoy the financial freedom for which they have worked hard. Do let them know that defaulting on their educational loan will hurt their credit score, and if you are the guarantor, make sure the loan is repaid. When the children turn 18 and leave the house, you have to also move from the arena where you worked with them, and sit in the gallery to watch and cheer, coach and encourage. Do not yearn to be their friend, or be scared about offending them. Parental love allows authority that you must exercise without being overbearing and intolerable. Tread responsibly.

The author is Chairperson, Centre for Investment Education and Learning.

12

Review Preview

The Economic Times Wealth, September 18-24, 2017

Tax lens on cash deposits

Product launches

Explanations sought for deposits made in 2010-11. Notice sent to homebuyers.

crore

was the amount of money held by Indians in off-shore tax havens in 2015. That’s about 3.1% of India’s GDP in 2015, the latest year for which data is available. Over half this wealth was in Asian tax havens.

New `100 coins on the way

T

he Centre is all set to roll out `100 coins for the first time in the country. The Ministry of Finance has issued a notification regarding the introduction of `100 coins to commemorate the birth centenary of AIADMK founder M.G. Ramachandaran and renowned Carnatic singer M.S. Subbulakshmi. The obverse side of the coin shall bear the Lion Capitol in the centre with Satyamev Jayate inscribed below, flanked by the words Bharat in Devnagari and India in English. It will bear the Rupee symbol and denominational value “100”. The reverse side shall bear the portrait of M.S. Subbulakshmi. In the second design, the face of the coin will bear the portrait of M.G. Ramachandran.

ority and general queries issued. The department has asked these individuals and entities to furnish permanent account numbers as well as returns filed for the financial year in question. Tax authorities have the power of assessment or reassessment of any income chargeable to tax under Sections 147 and

148 of the Income Tax Act. Formal notices will be issued if the explanation is found to be unsatisfactory. In the case of property transactions, the authorities have sought to add the difference between guidance value and the declared value to the assessed income. Their argument is that the difference would have been paid but hadn’t been declared, putting both seller and buyer under the scanner. The income tax department is getting information from multiple sources including banks and financial institutions as part of its anti-black money drive aimed at nabbing tax evaders. “This is a clear evidence of enhanced data mining capabilities of the tax department,” said Amit Maheshwari, partner, Ashok Maheshwary and Associates LLP. “This kind of targeted approach would lead to widening of the tax base and increase in tax collections.” —Deepshikha Sikarwar

Restaurants slapping service charge face income tax blow

quote of the week

ICICI Prudential Mutual Fund has launched ICICI Prudential Sensex Index Fund. The open-ended index linked growth scheme will track the returns of the BSE Sensex through investments in a basket of stocks drawn from the constituents of the index. The minimum investment is `5,000. The NFO closes on 18 September. UTI Mutual Fund has launched UTI Equity Focused Fund Series IV (1,104 days). The scheme will invest predominantly in equity and equity related securities of listed companies. The minimum investment is `5,000 and the scheme closes on 25 September.

BANKING Equitas Small Finance Bank is offering 6.5% interest on savings bank deposits of above `10 lakh. The interest is 6% on deposits below `10 lakh. It is also offering FD rates of 7.25%. The deposit rates are upwards of 7.75% for senior citizens.

Monday SEP DEC

18

T

he Department of Consumer Affairs has written to the Central Board of Direct Taxes for the inclusion of service charge levied by hotels and restaurants in the assessment of tax. This was revealed by Minister of Consumer Affairs, Food and Public Distribution Ram Vilas Paswan in a tweet. The move comes after the department issued advisories for making service charge voluntary, and restaurants continued to ignore the government’s directive. “We have been pursuing the service charge issue for some time now and the department had also issued guidelines, but still some people are

SBI Mutual Fund has launched SBI Dual Advantage Fund Series XXIV. The scheme will invest in a portfolio of fixed income securities maturing on or before the maturity of the scheme. The minimum investment is `5,000 and the scheme closes on 25 September.

domestic calendar

Trade balance figures to be announced GETTY IMAGES

`4 lakh

SL SHANTH KUMAR

I

f you thought cash deposits made prior to 8 November last year—when the government announced its demonetisation exercise—will escape the eagle eye of the tax department, you are mistaken. Tax authorities have sought explanations related to deposits of cash made in 2010-11. Not only that, notices have also been sent to homebuyers where the declared value of a purchase has been found much lower than the guidance, or indicative prices based on past transactions in the area. A reassessment can be ordered if the tax authorities don’t receive a response or they don’t find the reply satisfactory. “Cases on the basis of information available have been classified into two categories—high risk and low risk,” said a tax official. “High-risk category cases have to be immediately attended to.” Cases from 2010-11 will soon become time-barred owing to the statute of limitations, hence the rush, the official added. These have been classified as high pri-

MUTUAL FUNDS

not abiding and continue to levy service charge. Especially in five-star hotels, where the amount is very large,” said an official in the know. The department wrote to the CBDT chairman last week, stating since hotels and restaurants are taking money from customers, it is part of their income, the official added. “But they don’t show it as part of their income, which is

basically evasion of tax. This is more of a detrimental take, after continued efforts to stop the practice,” the official added. The Department of Consumer Affairs had earlier this year issued an advisory stating that service charge levied at hotels and restaurants should not be mandatory and ought to be voluntary basis, depending on the experience of a consumer. —Nishtha Saluja

“Stop this subversion of the debate that money is going into the pocket of the government. It is not. The government has no pocket.” ARUN JAITLEY, FINANCE MINISTER

Monday SEP

Monday SEP

Exports y-o-y figures to be announced

Imports y-o-y figures to be announced

18

18

Petrol price at 3-year high, but daily price revision to stay

T

he government will not go back on reforms in the fuel retail market and the daily revision of petrol and diesel prices introduced from 16 June will continue, Oil Minister Dharmendra Pradhan has said, amid growing public clamour for a reduction in Central excise to arrest rising pump prices since July. Petrol has become costlier by `7 per litre since July, pushing pump prices to a three-year high in cities like Mumbai as high level of state taxes amplified the impact of rise in international prices. Though the Centre and states both make handsome gains from fuel sales, the continuous rise in pump prices has turned the focus on the Centre raising excise duty on nine occasions between November 2014 and January 2016 to keep part of the savings from falling global crude prices. These hikes pushed up excise duty on petrol by `11.77 per litre and by `13.47 on diesel. Remaining non-commital on excise cut, Pradhan turned the government’s criticism on its head to make a case for bringing petrol and diesel under GST—something the Centre has been trying hard to do—and indirectly shift the blame on high state taxes.

Insurance

The Economic Times Wealth, September 18-24, 2017

13

Should you buy annuities when rates are high? IMAGESBAZAAR

Annuity products are becoming more lucrative as the rate gap narrows. Find out if they will pay off.

Why you should wait and watch Annualised LIC Jeevan Akshay rates show that annuity rates increase significantly with age. NARENDRA NATHAN

I

n an unusual move, the Insurance Regulatory Authority of India (Irdai) has asked LIC to review the return on its flagship immediate annuity product Jeevan Akshay, because it is too high. The regulator wants the insurance company to ensure that returns are in line with yield on LIC’s investments. “The rates offered by LIC now match that of the 10-year yield. Since LIC also has to incur additional expenses for managing the portfolio, paying distribution charges, etc., they have no choice but to lower the rate,” says Ankur Agrawal, Category Head, Life Insurance, Bank Bazaar. “It makes sense to invest before the rate comes down, but no need to rush because LIC may take some time to review it,” says Abhishek Mishra, CEO, Bonanza Insurance. LIC is not as proactive as its private sector counterparts but it may not take very long for the rates to come down this time, since the push has come from the regulator. Insurance companies usually review their annuity rates on a monthly basis, so the reduction may happen at the beginning of next month. Here are the factors you should consider before locking in to very long term annuity products like Jeevan Akshay. Returns: Immediate annuity products used to give low returns compared to market rates. However, with the market rates coming down, the returns offered by these products is now comparable with that of others. For instance, the rates available for annuity with return of premium after the death of the annuitant works out to be 6.48% for someone aged 60 (the rate is calculated after adjusting for the 1.8% GST payable when buying annuity). This 6.48% return is similar to long term fixed deposit (FD) rates offered by SBI.

Options*

AGE 40

AGE 50

AGE 60

AGE 70

1

6.95%

7.57%

8.77%

11.44%

2

6.90%

7.40%

8.24%

9.29%

3

6.36%

6.40%

6.48%

6.61%

4

5.14%

5.80%

7.01%

9.65%

5

6.75%

7.20%

8.07%

9.95%

6

6.56%

6.87%

7.49%

8.81%

7

6.32%

6.36%

6.41%

6.50%

Source: LIC India website; Annuity returns calculated after adjusting for GST. *1. Annuity payable for life at an uniform rate. 2. Annuity payable for 15 years certain and thereafter as long as the annuitant is alive. 3. Annuity for life with return of purchase price on death of the annuitant. 4. Annuity payable for life increasing at a simple rate of 3% p.a. 5. Annuity for life with provision of 50% of annuity payable to spouse for his/her lifetime on death of the annuitant. 6. Annuity for life with provision of 100% of annuity payable to spouse during his/her lifetime on death of annuitant. 7. Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of annuitant. The purchase price will be returned on the death of last survivor.

Restrictions: Although other schemes like Senior Citizen Savings Scheme offer higher yield (8.3% ), there are restrictions on tenure and amount invested (maximum of `15 lakh for 5 years). Another good option is the Pradhan Mantri Vaya Vandana Yojana (PMVVY) by LIC, which also offers 8.3% returns, but here again the time period is restricted to 10 years and maximum amount one can invest is `7.5 lakh. “The main advantage of annuity is that it offers guaranteed rates for life. Every other product comes with some restrictions or the other,” says Deepak Yohannan, CEO, My Insurance Club.

Safety: “Safety is paramount for older investors, so they look for assured return products like annuities,” says Mishra. This is why the rates are comparable to SBI FD rates. If you increase the risk level a bit and go with FDs from a smaller private sector banks, you can get slightly higher returns. Debt mutual fund is another option that generates similar returns now. However, the returns are not guaranteed and it carries the interest rate risk and re-investment risk. Even if you go with liquid fund, the safest option, there is the risk of returns coming down if broad market rates fall.

Diversification: “Guaranteed annuity for life is a very big positive feature, but that doesn’t mean you should invest everything in it,” says Agrawal. Diversification is necessary because one can’t rule out an increase in interest rate. Experts suggest locking in no more than 33% of your retirement corpus. “Given the falling interest scenario and the fact that the return offered is similar to that of bank FDs, it makes sense to invest around 50% in annuities. The remaining 50% can be invested in other instruments,” says Yohannan. Taxation: The annnuity amount is treated as pension and taxed at marginal rates. However, investors in annuity for life will be at a disadvantage because annuity includes a part of their principal, which is taxable. “Debt mutual funds score from the taxability perspective,” says Amol Joshi, Founder, PlanRupee Investment Services. Since the capital gains from debt mutual funds are taxed at 20% after indexation, the tax incidence is lower. Therefore, this is a good option for investors in the highest tax slab. However, the tax incidences of debt mutual funds have been going up in recent past. Age: You are eligible to buy annuities from the age of 30, but it pays to wait, especially if you opt for annuity for life, since the rates increase significantly with age. However, this holds only if the interest rate structure remains stable in the interim. Though rates move up slowly with age for return of premium annuities as well, the difference is very low, so it doesn’t make sense to wait. “The decision to lock in should be based on age and the rates available. Since the rate offered is good and expected to fall further, this is a good time to invest,” says Agrawal. However, younger investors also need to consider the issue of taxability before the take the plunge.

Please send your feedback to [email protected]

14

Stocks

The Economic Times Wealth, September 18-24, 2017

Should you bet on holding companies or subsidiaries? Valuation discount of some holding companies has widened. But that‘s not reason enough to invest in them. NARENDRA NATHAN Holding companies’ stocks are usually less volatile because of their high promoter holding—and limited trading in the market. This also means that they may not see a sustained rally. However, there are exceptions. For instance, Maharashtra Scooters’ stock price has almost doubled in the past one year. Experts are still bullish on this company whose holdings include Bajaj Auto, Bajaj Finance, Bajaj Finserv, Bajaj Holdings, Bajaj Hindustan, among other. “Despite the recent rally, Maharashtra Scooter is worth investing because all the companies it holds are doing well,” says Agarwal.

E

ven though the stock market has been rising and the benchmark indices, Sensex and Nifty, are close to all-time highs, the valuations of holding companies are not in sync with that of their subsidiaries. In fact, the discounts at which parent companies are trading, compared to the valuations of their holdings, have widened further. This phenomenon usually happens when the market is hot. “Typically holding companies quote at a discount. Since the holding companies don’t move up in line with underlying companies in a rising market, the discount usually widen,” says Ravi Gopalakrishnan, Head, Equities, Canara Robeco Mutual Fund. He advises that investors should look beyond just the discount when making an investment decision. A big reason for the valuation discount is the diversified portfolio of a holding company. Not all the subsidiaries of a holding company fare equally well and the poor performers pull down the valuations of holding companies. “So, if you are bullish on one particular company, buy that company—not its parent,” says Gopalakrishnan. INTERESTED IN HOLDING COMPANIES? Investors can bet on holding companies with only limited subsidiaries in their kitty. Balmer Lawrie Investments is one such company. “Since a major portion of the dividend received from Balmer Lawrie & Company is distributed as dividends, the dividend yield at Balmer Lawrie Investments is high,” says Rajesh Agarwal, Head of Research, AUM Capi-

GETTYIMAGES

tal. Besides limited number of subsidiaries, investors also need to take into account the quality of holding companies’ management. “Sometimes promoters get greedy and decide the swap ratio (the ratio in which a company offers its shares in exchange for the shares of the company it is acquiring) in their favour,” warns Daljeet S. Kohli, an independent market analyst. Due to a lack of liquidity and low institu-

tional participation in Indian holding companies, buying holding company shares also poses a problem. “Due to low liquidity, the bid-ask spread will be high and some discount will go in that,” says Gopalakrishnan. However, this should not be a big issue for long-term investors. “While short-term investors should avoid this segment (holding companies), longterm investors with 3-5 year holding period can consider them,” says Agarwal.

NEW DEVELOPMENTS The merger between Grasim Industries with Aditya Birla Nuvo has created a mega holding company which has stakes in companies across industries—cement, textiles, chemicals, insulators, solar, retail, telecom and financial services. Will this massive merger help reduce the holding company’s discount? Experts do not think so. “The new exercise is likely to attract a higher discount than earlier. We thus value its stake in Ultratech Cement and Aditya Birla Capital at a 45% discount,” says a recent Motilal Oswal report. However, analysts are bullish on CESC because the company is looking to undergo a demerger. “The proposed demerger and restructuring would create four distinct entities and unlock substantial value for investors,” says a recent HDFC Sec report. Its subsidiaries include First Source Solutions (55% holding), a profit-making business process outsourcing firm with several Fortune 500 companies as clients.

MAHARASHTRA SCOOTERS

CESC

GRASIM INDUSTRIES

BALMER LAWRIE INVESTMENTS

Focused holdings to boost stock further

Demerger will help unlock value

Merger with Birla Nuvo will widen the discount

Has consistently offered high dividend yield

250

195.23

250

200

Maharashtra Scooters

200

250

250

163.88 CESC

132.95

200

200

120.14

Grasim Industries 150

150

150

150

100

100

100

100

113.52 SENSEX

50

12 Sep 2016

Stock price (`)

13 Sep 2017

113.52 SENSEX

50

12 Sep 2016

2,898

BUY

Stock price (`)

Market cap (`cr) 3,312

NA

PE

270.09

SELL

PBV

10.21

Div yield

1.04

NA HOLD

NA

13 Sep 2017

113.52 SENSEX

50

12 Sep 2016

BUY

Stock price (`)

Market cap (`cr) 13,862

20

PE

15.99

SELL

PBV

1.30

Div yield

0.96

1,046

1 HOLD

6

13 Sep 2017

Balmer Lawrie

113.52 SENSEX

50

12 Sep 2016

13 Sep 2017

BUY

Stock price (`)

409

BUY

Market cap (`cr) 80,854

9

Market cap (`cr) 907

NA

PE

19.76

SELL

PE

23.23

SELL

PBV

2.57

PBV

9.87

Div yield

0.32

Div yield

4.16

1,230

1 HOLD

5

NA HOLD

NA

Figures in the charts have been normalised to a base of 100. Source: BSE, Bloomberg. Compiled by ETIG Database

Taxation

The Economic Times Wealth, September 18-24, 2017

15

Low inflation means you pay more capital gains tax With inflation coming down, the effective tax rate on capital gains after indexation has steadily moved up. Lower inflation, higher tax When inflation was high, investors booked loss and claimed benefits. *Average debt fund return

Gain (`)on investment of `1 lakh

Cost Inflation Index

Gain/loss (`) after indexation

April 2008-11

6.8%

21,921

10.3%

-12,385

April 2009-12

6.6%

20,965

10.6%

-14,170

April 2010-13

7.9%

25,691

9.6%

-6,045

April 2011-14

8.7%

28,401

9.3%

-2,034

April 2012-15

9.4%

30,862

8.3%

3,862

April 2013-16

8.7%

28,366

6.3%

8,366

April 2014-17

8.9%

29,076

4.3%

15,742

GETTYIMAGES

Period

Notional losses can be adjusted against long-term gains or carried forward for up to eight years.

*Short-term debt funds. Returns and CII figures are annualised Source: Ace MF. Compiled by ETIG

SANKET DHANORKAR

P

rices rising at a slower rate should be good news. But not if you have earned longterm capital gains. The consistent decline in inflation in the past 3-4 years means that long-term capital gains can no longer escape tax through indexation. Indexation takes into account the inflation during the holding period and accordingly adjusts the purchase price of certain assets. This upward revision in purchase price reduces the capital gains and brings down the tax liability. Between 2008 and 2012, consumer inflation was raging in double digits, which meant that debt fund investors were earning tax free gains. In fact, the inflation was so high that they could book notional losses and adjust them against other taxable longterm capital gains. Someone who invested `1 lakh in a debt fund on 1 April 2011 would have earned `28,400 over the next three years. However,

with the cost inflation index (CII) shooting up 9.3% during the same period, the investor would have booked a notional loss of `2,034 on the investment. This loss could be set-off against other long-term capital gains. What’s more, the unadjusted loss could be carried forward for up to eight financial years. Low inflation, lower benefits Declining inflation has ended this party. The government-notified CII figure for the current year (2017-18) stands at 272. This puts the rise in inflation over past one year at 3%. The rise in the CII has consistently slowed down since 2013-14 when it had shot up 10%. Accordingly, the incidence of capital gains tax has steadily risen. An investment of `1 lakh made in April 2012 would have earned around `30,000 for the investor over the next three years. But inflation was lower at 6.3% during this period, so the investor was saddled with a small taxable amount of `3,862 after indexation.

This year, investors would have to shell out even higher tax. Shortterm bond funds clocked an average 8.9% return as on 1 April, over a three-year period, but inflation for the corresponding period was 4.3%. This translates into an effective capital gains tax of 10.4%. With inflation expected to remain muted in the near term, higher capital gains tax is likely to continue. “Due to the higher inflation few years ago, investors got used to zero tax incidence on capital gains. They are now likely to face a higher tax burden on their investments,” says Manoj Nagpal, CEO, Outlook Asia Capital. “All instruments where indexation benefit is available will see their posttax return come down,” says Amol Joshi, Founder, PlanRupee Investment Services. Keeping record of transactions It is easy for mutual fund investors to calculate their tax liability. Nearly all fund houses allow investors to download yearwise statements of their capital gains. But records of other transactions,

such as purchase of gold jewellery, will have to be maintained by the investor himself. Many mutual fund investors also do not claim the tax benefits available on capital losses because it complicates their tax return. Unfortunately, tax rules do not allow an asseessee to revise his tax return after the assessment is over. So, if someone did not mention a capital loss booked a few years ago, it is gone forever. What investors should do Experts maintain that investors still stand to benefit from these instruments, given that indexation helps bring down the tax liability. “Investors are still better off with the indexation benefits they enjoy under the new debt fund taxation regime,” says Nagpal. Without indexation, the tax incidence would be much higher. “Those who have invested in bond funds over the past 6-12 months should stay invested until the three-year holding period is complete. Else the gains will be taxed at the rate corresponding to their income tax

slab,” says Joshi. For those looking to deploy fresh money in safe alternatives, Joshi suggests arbitrage funds. The returns are slightly lower than those of short-term debt funds, but they are tax free after one year. This means the investor does not have to stay invested for three years just to ensure a lower tax liability. Change in rules Some of the rules for capital gains have changed in recent years. Three years ago, the minimum holding period for debt and debt-oriented mutual funds to be classified as long-term assets was extended from one year to three years. On the other hand, the minimum holding period for real estate has been reduced from three years to two years. So, keep an eye on the calendar when you invest in a capital asset.

Please send your feedback to [email protected]

16

Learn & Keep

The Economic Times Wealth, September 18-24, 2017

Child’s higher education more important than retirement for Indians Family is a huge part of our lives. The HSBC Power of Protection study analyses how much members of a family in India depend on and support each other financially.

Nine out of 10 people (87%) are providing financial assistance to someone or the other in the family.

Supporting family members is a strain and a source of satisfaction

Supporting others call for hard financial choices

61%

67% of those with parents would give priority to parent’s health and social care rather than their own retirement.

68%

52%

of those with children would give priority to their children’s higher education than to their own retirement fund.

of those with parents and children would choose child’s higher education over parents’ welfare.

have put off their aspirations to support others

75%

76%

63%

are assisting their children

give financial help to parents

provide aid to partner

Family’s health and well-being is of utmost importance.

People are spending a significant portion of their disposal income on others

If they had to choose, people would prioritise their family over themselves.

For financial aid givers, threat of unforeseen risks loom

51% feel guilty spending money on themselves

There are plus points

GETTY IMAGES

77% feel they are good providers

is for parents

The time toll is high too

40%

31%

28%

of non-working time is spent supporting children under 18

for grown up children

for parents

The commitments take a toll on the giver’s finances, lifestyle and emotional well-being.

25% are wary of an economic downturn 24% are anxious about increasing or unexpected bills

don’t have a policy that would pay them a lump sum if they contracted a serious illness.

38% 31%

27% feel unemployment is a threat

61%

of disposal income is spent supporting children under 18

is for grown-up children (above 18)

27% fear reduced income

Planning for the unexpected remains poor among those providing financial support to others

78% feel appreciated for the support they give

39%

38% fear a sharp increase in cost of living would impact financial security

The monetary cost of providing financial support to family members is high

28% 23% 23% 20% 18% 15%

60%

53%

don’t have a policy to cover an illness or accident that can prevent them from working.

don’t have a policy that would pay out a lump sum to take care of their family in the event of death.

have withdrawn money from savings and investments

THE STEPS TO TAKE

have cut back on treats for self

IDENTIFY PRIORITIES

ASSESS FINANCES

PLAN FOR THE FAMILY

TALK ABOUT THE FUTURE

Think about your priorities. Make sure you have a financial plan that addresses your needs as well as those of your family. Don’t neglect your own aspirations.

Think if any financial support you are giving others is likely to increase or decrease in the future and if you need to update your financial plan.

Unexpected life events can have knock-on effects for the whole family. Bear this in mind when reviewing if you have enough financial protection in place.

Talk to your family about the future. Discuss what could happen to them if you experience a life-changing event and what financial safeguards you have in place.

have had to take on more work say they have less money to do what they want feel financially drained have incurred debts

Source: HSBC’s Power of Protection study. This report, Facing the future, is the third in the series. The study covered 1,000 people above the age of 25. Answers don’t add up to 100% due to multiple choices.

18

Investing

The Economic Times Wealth, September 18-24, 2017

“Expect rebound in earnings in second half of 2017-18” there are flaws in India’s growth model? GDP growth has slowed to a three-year low. The slowdown is largely attributed to inventory destocking in the run-up to GST implementation. This, in turn, dragged manufacturing sector growth to a five-year low. Further, gold demand surged in the June quarter as consumers and traders advanced their gold purchases ahead of the GST rollout. This led to a meaningful negative contribution of net exports to the headline GDP. Both these events are expected to normalise over the coming months. As such, GDP growth seems to have bottomed out and is expected to recover gradually on inventory re-stocking, pick-up in consumption, government capex and a favourable base. What sectors are you investing in now? We remain positive on India’s consumption story. Low interest rates, a normal monsoon and government thrust on the rural sector are likely to drive consumption growth, benefiting the consumer discretionary space. We are positive on private banks which have leveraged well on rising consumer affordability in the wake of low interest rates. Retail assets of private banks such as auto loans, personal loans, consumer durable loans, credit cards and housing loans have grown at a robust 20-25%. This trend is likely to continue given low penetration levels. We expect a shift in market share from PSU to private banks. The expected housing boom, amid the government’s strong push for low cost housing, augers well for housing finance companies. These companies have delivered strong loan growth and have fairly robust asset quality. We are positive on cement, as well as good quality infrastructure and construction companies, given the government’s focus on roads and infrastructure. We also have an overweight stance on oil marketing companies (OMCs) and gas stocks. A dynamic fuel pricing regime, coupled with robust growth in fuel consumption, is driving earnings growth for OMCs, while the government’s thrust towards cleaner fuel is beneficial for gas stocks.

The weak fundamentals of mid-size and smaller PSU banks would make fund raising a challenge for these banks. As a consequence, the government would have been required to periodically infuse capital in these banks which would have adversely impacted its fiscal situation. Bigger PSU banks would be better positioned to raise capital. Secondly, the bigger PSU banks have been able to demonstrate higher non-performing loan recovery and upgradations in the past. As such, bigger banks are likely to be better placed to enforce NPL recovery mechanisms post consolidation, particularly given that these banks would have a larger share of loan composition (collaterals) with them. Lastly, consolidation of PSU banks may prevent market share loss facilitated by creation of a stronger balance sheet, fresh capital and bigger scale post consolidation. What’s your view on the telecom sector? The telecom sector has been undergoing consolidation over the last couple of years. From 10-12 players, the telecom industry now has three large players. Post the entry of new incumbents with significant 4G capacity; we have seen a sharp increase in competitive intensity in the sector. Falling tariffs, increasing leverage and decline in profitability have compelled several small players to scale down expansion plans. Bigger players with strong balance sheets have started the process of consolidating into nationwide players. Industry dynamics are likely to remain challenging in the near-term given high competitive intensity. We continue to remain cautious on the sector.

“The expected housing boom, amid the government’s strong push for low cost housing, augers well for housing finance companies.”

Sanjay Kumar CIO, PNB MetLife Equities generate robust risk-adjusted returns in the long-term. However, there may be some years of sub-optimal returns. Investors should stay invested in equities for a longer period to earn expected returns, Sanjay Kumar tells Hiral Thanawala.

Where are the equity markets headed? Equity markets have run up significantly this year, led by high domestic and global liquidity. This has been despite disruptions like demonetisation and GST implementation. While the impact of demonetisation is behind us, GST-led disruptions should normalise over the next few months. We expect a rebound in corporate earnings in the second half of 2017-18. It will be led by pick up in consumption, supported by low interest rates, robust government spending and a favourable base. Increasing formalisation of the economy and continuing shift in household savings from physical to financial assets bode well for equity markets in the mediumterm. This, along with robust domestic liquidity, is likely to keep investor sentiments strong, providing support to current market valuations. In the near-term, we expect equity markets to consolidate at current levels. With GDP growth rate at 5.7%, do you think

Do you think the merger of PSU banks will benefit investors? We see the proposed merger of PSU banks as a positive development. First, it is likely to improve the government’s fiscal balance.

What is your advice for investors? Equities, as an asset class, generate robust risk-adjusted returns in the long-term. However, there may be some years of sub-optimal returns. Investors should, therefore, stay invested in equities for a longer period to earn expected returns. Additionally, investors should invest on a regular basis so as to generate superior returns in the long run. Investors with limited market information should seek guidance of experienced advisers to understand their risk-return profile.

Please send your feedback to [email protected]

Banking

The Economic Times Wealth, September 18-24, 2017

19

Need money in a hurry? Here are 7 easy options From salary advance to loans against shares, the cash-generating options to explore are many. NAMRATA DADWAL

A

financial emergency can hit any time—a sudden hospitalisation, a natural calamity or even an unexpected celebration at short notice.

While money pundits say you must have an emergency fund equal to six months’ expenses in place, not everyone follows this rule diligently. So, where do you get cash instantly to tide over a financial disaster? Don’t despair. There are a few ways you can get money in a pinch, depending on

Upside: The loan can be custom-

BankBazaar.com. Before you opt to borrow money, be sure that it is really needed. Even then, borrow as little as possible. Remember, it is a loan and you need to ultimately repay it. If you are unable to do it on time, you could end up in a debt trap.

CASH WITHDRAWAL ON A CREDIT CARD

BORROW FROM YOUR EMPLOYER “If you need funds ASAP, consider your workplace first. Many companies extend an advance on salaries,” says financial trainer P.V. Subramanyam. The funds could be equivalent to 1-6 month’s takehome pay and will be deducted from the salary over 3-24 months.

how urgently you want the funds. “The key things that will determine where you get the money from are how urgently you want the funds, the tenure of the loan, the interest and how expensive will it be to source the funds,” says Navin Chandani, Chief Business Development Officer,

ised to your needs, and you will be able to get the money within three days.

Interest rate

Downside: The loan will be taxable as part of your salary. It will be exempt only if the funds are used for certain medical treatments or if the amount is less than `20,000.

Could also be interest-free.

5-8%

A credit card can be used to withdraw money from an ATM, the amount being equivalent to 40-80% of your card limit. However, there might be a cap on daily cash withdrawal. Most banks will allow you to over-extend your limit on a caseto-case basis. Be ready to cough up an over-limit fee over and above the usual interest rate on cash advance.

TOP-UP LOAN

Upside: Instant cash, available anywhere, anytime. Downside: A transaction fee of 2.5-3%. Interest is levied on the money from the day it is withdrawn until it is fully repaid.

Interest rate

2-3.5%

a month

PERSONAL LOAN

Already have a home loan? If yes, you can use it to get a top-up loan of up to `50 lakh for a maximum of 20 years or till the balance tenure of your original home. This option works if you have repaid the original home loan for some years as the combined value of the home loan and the top-up cannot exceed 75% of the value of the house.

One of the quickest options for borrowing money. You can get a loan within 30 minutes to three days, depending on your relationship with the bank. In fact, you might already have a preapproved loan in your name from your bank which will make the process faster.

Upside: You can get a loan quickly, in three days, since the bank has your documents. Downside: Any default in repayment could cost you big.

Downside: High interest rate and processing fee of 2-3%. You will also have to pay GST on EMIs. For prepayment, a foreclosure fee of 2.5% of the outstanding amount is charged.

Interest rate

Interest rate

Upside: Quick disbursement if you borrow from your own bank.

9-13%

13-24%

IMAGES BAZAAR

LOAN AGAINST PROPERTY

LOAN AGAINST SECURITIES

LOAN AGAINST GOLD

If you want a large loan and own a house, you could take a loan against property. You can loan `5 lakh to `10 crore, depending on the market value of your house. The loan tenure varies between 2 and 15 years. Both residential and commercial properties can be used as collateral. Banks could to lend you up to 65% of the value of your property. However, the house must be insured. Processing fee is 1.52% while prepayment charges are 2-3% of the outstanding.

You can pledge your shares, mutual funds, FDs and insurance policies as collateral. In case of mutual funds and shares, banks will loan you funds equal to 50% of their value, while they will offer you up to 75% of a fixed deposit (FD). The funds are transferred into a current account from where you can access them.

You can get 60% of the value of your gold and can borrow from `10,000 to `25 lakh. The tenure is usually 6 months or 12 months but you can renew the loan at a nominal charge. While you can repay part of the loan whenever you want, gold you have pledged as collateral is released only after you repay the entire loan.

Upside: Quick disbursement, lower interest charges.

Upside: You can get funds within a day.

Upside: Lower interest rates, larger loans. Downside: Longer process of 3-10 days to get the loan.

Downside: If portfolio value declines, you will have to put in the differential or pledge more funds/shares.

Downside: Gold appraisal charges of `250-2,500. If you are unable to repay loan, you will lose the gold.

Interest rate

Interest rate

Interest rate

9.5-13%

9-15%

10-17%

banks

14-26 % (non-banking financial companies)

20

Retirement

The Economic Times Wealth, September 18-24, 2017

Where to live after retirement Senior living housing projects and assisted living facilities are transforming the way senior citizens live. IMAGES BAZAAR

NILANJANA CHAKRABORTY

W

hile many of us have grandiose notions about settling into a cottage in the hills or travelling the world after retirement, the reality is often very different. The need for security and stability trumps all else. Retirement planning is therefore crucial, but finances are not the only thing to worry about. In 2011, roughly one in 11 Indians were over the age of 60. According to projections by Census of India, this figure is expected to grow to around one in eight by 2025. This calls for major sociological changes to accommodate the needs of senior citizens. What is senior living? Given that India has no social security framework to offer senior citizens the support they need, both financially and socially, the private sector has stepped in. “Senior living options are definitely on the rise in India, particularly in the past few years, propelled not only by the growth of nuclear families with children living abroad or away from their parents, but also by the increase in the number of seniors who are financially independent,” says Pavithra Gangadharan, Director, Heritage ElderCare Services. These facilities feature conveniences like security services, cleaning and maintenance facilities, medical care and meals. There are two categories of senior living services: independent living and assisted living. The former includes housing units designed with seniors in mind. These projects have special features like skid-proof tiles, ramps for wheelchair access, grip rails, panic buttons, etc. Assisted living, on the other hand, feature round the clock care and is more suitable for older seniors or those with ailments. There are attendants present to assist residents with tasks like eating, dressing and getting around.

Senior living: What are your options? Facilities offer a choice of renting, leasing or buying specially designed units.

Option 3: Buy Option 1: Rent Pay a registration fee of `5 lakh. Refundable deposit of `20 lakh. Also pay `25,000 for services each month.

Our assessment This option allows you to test the waters before you make a decision. You can choose to have your deposit refunded and leave if the lifestyle or facility doesn’t suit you. Offered by Jagriti Dham, Kolkata

Lifestyle upgrade A group of niche developers across the country have come up with residential projects aimed at senior citizens. These are typically equipped with facilities like health centres, specialised kitchens, gyms and recreational spaces. Most offer housekeeping,

Pay between `45 lakh and `1 crore to buy 2BHK unit.

maintenance and laundry services as part of a service package. Some have doctors, therapists and dieticians on site to help their residents with physical and mental health concerns. Needs like a specific diet or exercise regimen are also accommodated.

Option 2: Lifetime lease Register with a fee of `5 lakh. Pay a monthly rent of `30,000 for the rest of life. Also pay `25,000 for services each month.

Our assessment This is a major commitment. Once you lease the unit, you’re tied in for the rest of your life. It would be wiser to rent first and then migrate to a lifetime lease when you see fit. Offered by Jagriti Dham, Kolkata

A wide range of options The options range from luxury to low budget. While the more expensive can be priced in crores, there are also plenty of reasonably priced options. Ashiana Housing Limited’s senior living projects, Jagriti Dham in Kolkata,

Pay nominal charges of `500 for meals, cleaning. All other services are charged individually.

Our assessment This gives you complete ownership of the property and you can choose to sell it or pass it on to your legal heirs. However, some facilities have conditions about only senior citizens being eligible to buy or occupy the units. Carefully study the agreement to know your rights. Offered by facilities like Oasis Senior Living, Ashiana and Dignity Lifestyle Township

Kshetra in Hyderabad, Oasis Senior Living Communes and Dignity Lifestyle Township, in Neral, Maharashtra, and are a few examples. These facilities offer rentals, leases and residential units for sale at slightly higher prices than market rates, complete with a

lifestyle element and opportunities to socialise. However, this might not work as a permanent arrangement. “Many seniors who are currently in independent living facilities would need more care as they age,” says M.H. Dalal, Chairman and MD of Oasis Senior Living. For that there are assisted living facilities like Vardaan Senior Citizen Centre in Delhi, which charges anywhere between `50,000 to `1 lakh for care services, depending on the needs of each resident. Choose carefully While there are various advantages of moving into a senior living facility, there are also a few downsides that you should consider. For instance, while most such facilities promise medical attention in emergencies, the facility can deny having any direct responsibility for critical care unless otherwise specified in the contract. Some facilities can even have hidden charges, clauses that don’t allow you to resell an unit you own, or rules that curb your independence as a resident. Study the terms of the contract carefully before making a final decision.

Please send your feedback to [email protected]

smart stats ET WEALTH TOP 50 STOCKS

In This Section

Mutual funds

22

Loans and deposits

25

Alternate investments 26

Every week we put about 3,000 stocks through four key filters and rate them on a mix of factors. The end result of this exercise is the listing of the top 50 stocks based on the composite rating to help ease your fortune hunt. RANK Current Rank

PRICE `

Previous Rank

GROWTH%*

Stock Price

Revenue

VA L UAT I O N R AT I O S

Net Profit

PE

PB

Div Yield

PEG

RISK Downside Risk

R AT I N G Bear Beta

No. of Consensus Analysts Rating

Fast Growing Stocks Top 5 stocks with the highest expected revenue % growth over the previous year.

Power Grid Corporation

1

2

213.30

30.26

33.21

15.03

2.25

2.04

0.44

0.88

0.70

40

4.53

Vedanta Apollo Tyres Gujarat State Petronet

2 3 4

1 3 4

319.70 259.60 196.35

25.32 15.04 35.85

109.64 359.76 62.55

17.18 12.06 20.52

1.96 1.82 2.49

5.95 1.15 0.76

0.27 0.03 0.33

1.61 1.37 1.39

1.40 1.66 1.11

22 23 29

4.82 4.30 4.07

GAIL India

5

5

400.95

32.34

38.57

20.13

1.72

2.22

0.47

1.01

1.18

38

3.50

PTC India

6

NR

124.40

38.86

25.47

8.89

0.96

2.48

0.35

1.41

2.34

12

4.67

ONGC

7

6

159.35

9.22

19.91

9.96

0.92

4.61

0.43

0.94

0.49

36

4.28

J Kumar Infraprojects

8

7

213.05

41.06

38.43

15.22

1.16

0.95

0.35

2.36

2.92

13

4.77

CESC

9

9

1,058.90

15.64

40.40

20.34

1.39

0.95

0.25

1.44

1.63

27

4.33

Hindalco Inds

10

12

247.05

14.09

153.68

26.70

1.19

0.44

0.20

1.51

1.80

31

4.58

NMDC

11

11

133.05

20.28

47.28

16.50

1.86

3.12

0.23

1.43

2.32

25

3.28

Least Expensive Stocks

VA Tech Wabag

12

10

630.05

22.69

90.83

33.50

3.46

0.63

0.37

1.31

0.91

20

4.65

The 5 stocks with the lowest forward PE.

Oberoi Realty

13

NR

388.65

143.91

175.60

34.85

2.30

0.50

0.20

1.72

2.20

18

4.17

Cyient

14

13

509.55

15.90

25.97

16.90

2.74

1.53

0.64

1.07

-0.13

25

4.56

NTPC

15

17

168.65

19.78

15.09

13.02

1.43

2.83

0.87

0.90

1.08

36

4.44

Tata Power

16

16

85.25

15.98

134.42

36.37

1.73

1.53

0.22

0.98

1.63

26

3.19

IRB Infrastructure

JK Cement

17

15

1,038.45

22.78

73.00

32.45

4.18

0.76

0.44

1.31

1.81

25

4.44

Apollo Tyres

Kalpataru Power

18

14

349.45

11.19

59.22

28.79

2.22

0.57

0.32

1.11

1.18

21

4.67

NTPC

BHEL

19

18

136.85

17.62

204.69

74.14

1.04

1.19

0.36

1.32

2.06

45

2.18

Oil India

20

19

318.10

29.35

10.07

15.82

0.86

4.79

1.14

0.99

0.43

31

3.77

Cadila Healthcare

21

24

480.50

35.31

50.82

33.18

7.09

0.66

0.67

1.54

1.61

40

4.13

DB Corp

22

21

367.30

17.29

23.31

18.09

4.25

2.26

0.73

0.83

0.51

22

4.50

Jain Irrigation Systems

23

20

104.30

26.67

106.65

29.62

1.21

0.48

0.32

1.84

3.12

10

4.40

Cipla ACC IRB Infrastructure

24 25 26

23 25 22

565.95 1,844.85 219.95

21.66 26.97 5.81

86.99 85.60 23.18

45.13 57.27 10.77

3.63 4.01 1.46

0.36 0.92 3.52

0.50 0.73 0.45

0.99 1.02 1.56

0.53 1.41 3.19

43 40 25

3.56 3.15 4.40

Sobha

27

27

401.70

20.12

34.87

24.15

1.46

0.62

0.60

1.42

1.57

18

4.50

Trident

28

26

98.60

16.41

30.57

14.93

1.83

1.39

0.49

1.75

3.05

12

4.83

JSW Steel

29

30

265.20

19.35

31.00

18.00

2.80

0.85

0.58

1.33

1.40

32

3.66

JK Lakshmi Cement

30

35

426.50

33.04

198.06

58.30

3.57

0.18

0.30

1.42

2.11

25

3.68

Dr Reddy's Lab

31

28

2,253.35

14.43

41.71

31.22

3.01

0.90

0.79

1.16

0.17

45

2.73

Coromandel International

32

39

420.50

21.55

41.68

25.71

4.24

1.18

0.61

1.46

2.41

16

4.13

Jubilant Life Sciences

33

33

707.20

22.10

39.09

19.21

3.29

0.43

0.48

1.62

2.52

13

4.92

India Cements

34

31

196.05

14.19

124.68

40.03

1.17

0.53

0.25

2.03

3.78

22

4.00

KEC International

35

37

329.65

20.75

39.53

27.38

5.26

0.50

0.69

1.46

1.23

30

4.47

Gujarat Gas

36

36

835.70

30.14

124.11

52.12

6.91

0.30

0.44

1.05

0.68

20

3.90

Ambuja Cements

37

38

283.55

20.25

64.20

50.48

2.90

0.98

0.87

1.11

1.60

39

3.03

Persistent Systems

38

29

620.10

14.05

21.08

16.35

2.51

0.97

0.79

0.91

0.64

35

3.89

Arvind

39

34

409.30

22.93

52.34

33.73

2.97

0.58

0.65

1.38

2.60

18

4.22

Engineers India

40

40

157.20

38.66

25.14

32.14

3.73

1.89

1.50

1.52

1.82

21

4.43

Exide Inds

41

32

220.45

13.24

36.97

23.39

3.72

1.10

0.64

1.32

2.17

34

3.97

InterGlobe Aviation

42

41

1,184.50

34.29

20.40

25.86

11.36

2.84

0.65

1.21

1.04

18

3.83

Havells India

43

43

504.85

54.03

77.04

65.23

9.61

0.70

0.80

1.44

1.69

43

3.09

Container Corporation

44

49

1,364.25

20.71

21.33

48.11

3.74

1.11

0.73

1.08

0.79

31

3.39

Grasim Inds

45

45

1,233.15

32.77

25.45

17.97

1.81

0.45

0.78

1.27

1.92

15

3.93

Dalmia Bharat

46

NR

2,798.00

25.23

139.23

71.87

5.00

0.08

0.52

1.72

3.01

23

4.65

Larsen & Toubro

47

42

1,214.20

17.48

16.15

28.28

3.40

1.14

1.64

0.76

0.77

42

4.24

VRL Logistics

48

46

348.50

15.05

65.98

44.92

5.85

1.16

0.53

1.20

1.41

10

4.20

Motherson Sumi Systems

49

NR

330.25

40.53

17.35

43.77

8.44

0.60

0.71

1.27

2.06

36

4.11

Apollo Hospitals

50

NR

1,063.10

23.26

46.50

67.07

4.04

0.56

1.33

1.10

1.14

22

4.27

* The figures under this head are for expected growth. NR: Not in the ranking. Data as on 13 Sep 2017. Source: Bloomberg

Oberoi Realty

144

Havells India

54

J Kumar Infraprojects

41

Motherson Sumi Syst.

41

PTC India

39

See revenue column in the adjacent table.

PTC India

8.89

ONGC

9.96 10.77 12.06 13.02 See PE column in the adjacent table.

Best PEGs Top 5 stocks with the least price earning to growth ratio. Hindalco Inds

Tata Power

0.20

0.22

0.03

Apollo Tyres

0.20

0.23

Oberoi Realty

NMDC

See PEG column in the adjacent table.

Income Generators Top 5 stocks with the highest dividend yield. Vedanta | 5.95 Oil India | 4.79 ONGC | 4.61 IRB Infrastructure | 3.52 NMDC | 3.12

Dividend stocks are considered safe stocks during a downturn. Figures indicate what an investor can earn as dividend for every `100 invested.

Least Risky Top 5 stocks with the lowest downside risk.

Methodology The four filters used to arrive at the Top 50 stocks Only traded stocks: Of the about 7,000 listed stocks, only actively traded stocks were considered. Only big stocks: Only companies with an average market capitalisation and revenue of over `1,000 crore were considered. Only well tracked: We picked stocks that are tracked by at least 10 analysts. Only profitable and growing: We considered only those stocks that are

expected to show growth in revenue, net profit and EPS (earnings per share) in the in the next four quarters. The final two filters were that the companies should have made profits in the past four quarters and have a positive net worth. Rating rationale Having arrived at the final stocks universe, we ranked them using the following four principles. A percentile rating (on a 1-100 scale) is given to each parameter and the composite ranking is arrived at using the weighted average of these parameters. 1. Growth is the key... Total weight: 30%, which comprises 10% weight to revenue growth, 10%

weight to net profit growth and 10% to growth in EPS (the higher, the better, for each parameter). Growth is calculated by comparing the ’consensus estimate’ for the next 12 months with the historical 12-month values. 2. ... but only at reasonable valuation. Total weight: 40%, which comprises 10% weight to PE ratio, 10% to PB ratio, 10% to PEG ratio (the lower, the better, for all three parameters) and 10% to dividend yield (the higher, the better). 3. Analysts’ views matter... Total Weight: 20%, which comprises 10% weight to the total number of

analysts covering the stock (the higher, the better) and 10% to consensus rating (a composite rating based on the recommendations by all analysts who track a stock. Again, the higher, the better). 4. ... and so do the risks. Total weight: 10%. Two kinds of risks were considered. A 5% weight was assigned to downside risk and bear beta each (the lower, the better, in both cases).

Persistent Systems NTPC 0.90

DB Corp

0.83

0.91

Power Grid Corp

0.88 Larsen & Toubro

The ranking methodology has been developed by Narendra Nathan. A detailed explanation of the methodology is available at

www.economictimes.com/wealth

0.76 See downside risk and bear beta columns in the adjacent table.

22

Smart Stats

The Economic Times Wealth, September 18-24, 2017

LAGGARDS & LEADERS

ETW FUNDS 100 B E S T

F U N D S

T O

B U I L D

Y O U R

Taking a long-term view of fund returns, here is a list of 10 funds in each category—five leaders (worth investing) and five laggards (that may be a drag on your portfolio).

P O R T F O L I O

LAGGARDS

Equity: Large cap 5-year returns

ET Wealth collaborates with Value Research to identify the top-performing 100 funds across 10 categories. Equity funds and equity-oriented hybrid funds are ranked on 3-year returns while debt-oriented hybrid and income funds are ranked on 1-year returns.

11.91 HSBC Dynamic Fund

11.98 LIC MF Index-Sensex Plan NET ASSETS (` cr)

3-MONTH

6-MONTH

����

151.56

8.17

Mirae Asset India Opportunities Fund

�����

4510.08

Motilal Oswal MOSt Focused 25 Fund*

�����

Invesco India Growth Fund SBI Bluechip Fund*

VALUE RESEARCH FUND RATING

R E T U R N S

( % )

12.27

1-YEAR

3-YEAR

5-YEAR

EXPENSE RATIO

22.02

29.07

15.69

21.42

—

7.54

18.93

24.87

15.47

22.05

2.35

771.24

5.93

18.47

22.18

15.09

—

2.52

�����

208.79

8.7

19.42

22.56

14.42

19.66

2.47

�����

15,569.99

5.55

15.04

16.17

14.15

19.93

1.97

DSP BlackRock Focus 25 Fund*

����

2,860.32

6.36

15.46

14.84

13.16

18.55

2.47

Aditya Birla Sun Life Frontline Equity Fund

����

18,948.38

6.48

15.25

17.66

13.13

19.62

2.14

Aditya Birla Sun Life Top 100 Fund

����

3,335.67

7.68

15.25

19.54

13.02

19.72

2.27

Invesco India Dynamic Equity Fund

����

368.11

9.4

18.18

21.93

12.5

17.76

2.41

Reliance Top 200 Fund

����

4,588.8

4.93

15.78

20.5

12.41

18.68

2.01

IDBI India Top 100 Equity Fund

����

456.05

4.51

17.29

16.95

12.28

18.02

—

Edelweiss Equity Opportunities Fund

����

260.62

6.61

17.74

17.52

11.93

17

2.54

ICICI Prudential Focused Bluechip Equity Fund

����

14,336.63

6.47

14.59

19

11.76

17.84

2.09

Invesco India Business Leaders Fund

����

133.18

4.41

13.38

13.33

11.68

16.62

2.64

�����

2,883.21

3.72

11.14

13.79

11.34

19.38

2.32

13.50

Reliance NRI Equity Fund

����

91.01

5.43

14.6

20.76

10.96

16.85

2.68

Union Equity Fund

DHFL Pramerica Large Cap Fund*

����

319.75

4.09

13.52

15.1

10.87

16.65

2.53

13.92

Equity: Large Cap JM Multi Strategy Fund

Franklin India Flexi Cap Fund*

Tata Index Sensex Fund

15.7%

12.37

The 3-year return of JM Multi Strategy Fund is the highest in its category.

Reliance Index Fund Sensex Plan

12.67 Taurus Nifty Index Fund

11.21 LIC MF Equity Fund

13.34 Edelweiss Prudent Advantage Fund

13.45 UTI Dividend Yield Fund

25.5%

Motilal Oswal MOSt Focused Multicap 35 Fund

�����

8,677.83

8.73

24.03

32.75

25.52

—

2.09

Aditya Birla Sun Life Advantage Fund

�����

4,258.08

10.17

23.93

25.72

20.17

25.16

2.3

Tata Retirement Savings Fund Progressive Plan

����

265.11

10.42

24.04

31.75

18.77

19.94

2.75

Reliance ETF Junior BeES

����

151

8.38

20.28

27.76

18.07

23.54

0.42

ICICI Prudential Nifty Next 50 Index Fund

����

89.45

8.19

20.25

28.17

17.88

23.05

0.81

Aditya Birla Sun Life Equity Fund

����

6,915.94

7.56

17.32

24.35

17.35

23.73

2.24

9.90

Aditya Birla Sun Life Special Situations Fund

����

169.51

9.26

18.66

21.86

17.31

22.57

2.63

HDFC Core & Satellite Fund

�����

2,954.72

6.46

16.93

21.81

17.17

21.7

2.06

10.57

Kotak Select Focus Fund Regular Plan

����

1,3491.91

6.26

17.01

23.07

17.12

22.56

1.97

Aditya Birla Sun Life Dividend Yield Plus Fund

IDBI Nifty Junior Index Fund

����

41.34

8

19.51

26.71

16.99

22.49

—

DSP BlackRock Opportunities Fund*

����

3,363.83

7.45

16.64

22.89

16.64

21.71

2.52

DHFL Pramerica Midcap Opportunities Fund

Kotak Opportunities Regular Plan

����

1823.4

5.65

17.03

22.59

16.16

20.39

2.12

11.33

Invesco India Contra Fund

����

635.85

5.59

16.47

22.89

15.19

22.45

2.4

SBI Magnum Global Fund

BNP Paribas Dividend Yield Fund*

����

427.94

8.64

21.67

25.85

15.08

20.47

2.57

SBI Magnum Multiplier Fund*

����

1,925.51

4.72

13.9

15.75

13.96

20.47

2.11

Franklin India Prima Plus Fund*

����

1,1362.56

4.47

11.16

15.26

13.75

20.13

2.26

�����

6,850.69

1.65

10.18

15.8

13.51

23.93

2.33

SBI Magnum Multicap Fund*

Franklin India High Growth Companies Fund*

Equity: Mid Cap

The Motilal Oswal MOSt Focused Multicap 35 is the highest in its category.

0.88 Baroda Pioneer Midcap Fund

11.21

21.86 JM Core 11 Fund

21.42 JM Multi Strategy Fund

19.93 SBI Bluechip Fund

19.72 Aditya Birla Sun Life Top 100 Fund

25.16 Aditya Birla Sun Life Advantage Fund

23.93 Franklin India High Growth Companies Fund

23.73 Aditya Birla Sun Life Equity Fund

23.54 Reliance ETF Junior BeES

23.05 ICICI Prudential Nifty Next 50 Index Fund

23.96 Mirae Asset Emerging Bluechip Fund

23.04 Escorts High Yield Equity Fund

21.66 Canara Robeco Emerging Equities Fund

20.84 Principal Emerging Bluechip Fund

20.29 Kotak Emerging Equity Scheme

Equity: Small cap 3-year returns 11.29

23.9%

Union Small and Midcap Fund

4,304.67

5.22

20.31

31.68

23.96

31.86

2.41

Escorts High Yield Equity Fund

����

8.79

4.28

13.54

23.71

23.04

24.96

—

Canara Robeco Emerging Equities Fund

����

2,291.44

6.12

21.63

31.08

21.66

30.08

2.33

Principal Emerging Bluechip Fund

����

1,207.46

8.31

21.92

28.47

20.84

29

2.42

Kotak Emerging Equity Scheme

����

2,303.8

3.33

13.78

21.61

20.29

26.41

2.09

�����

5,256.3

6.13

18.11

30.74

20.28

27.24

2.02

18.65

HDFC Mid-Cap Opportunities Fund*

����

17,714.71

4.23

15.3

21.13

18.15

26.36

2.23

Sundaram S.M.I.L.E. Fund

Franklin India Prima Fund*

����

5,983.52

3.24

14.32

19.32

18.08

27.01

2.39

18.98

SBI Magnum Midcap Fund*

����

3,779.01

1.2

11.23

12.65

17.32

27.82

2.03

Franklin India Smaller Companies Fund

SBI Small & Midcap Fund*

����

727.34

10.52

23.08

35.11

25.54

33.1

2.36

DSP BlackRock Micro Cap Fund*

����

5791.12

-2.67

10.29

19.58

22.9

30.27

2.45

Franklin India Smaller Companies Fund*

����

6,160.81

3.77

16.66

21.01

18.98

31.12

2.41

L&T India Value Fund

Mirae Asset India Opportunities Fund

Equity: Mid cap 3-year returns

�����

Mirae Asset Emerging Bluechip Fund

22.05

Equity: Multi cap 5-year returns

Aditya Birla Sun Life Int Fund

Equity: Multi Cap

LEADERS

The 3-year return of Mirae Asset Emerging Bluechip is the highest in its category.

16.24 HDFC Small Cap Fund

17.28 HSBC Midcap Equity Fund

25.54 SBI Small & Midcap Fund

24.42 L&T Emerging Businesses Fund

22.91 L&T Midcap Fund

22.9 DSP BlackRock Micro Cap Fund

22.54 Aditya Birla Sun Life Small & Midcap Fund

Equity: Small Cap

����

803.15

7.66

21.31

24.2

17.86

21.58

2.52

�����

3,776.07

7.09

18.76

21.83

16.95

22.43

2.31

Aditya Birla Sun Life Tax Savings Fund

����

25.44

7.48

18.69

22.44

16.7

18.92

2.7

Aditya Birla Sun Life Tax Plan

����

575.87

7.03

18.65

21.43

16.24

21.65

2.61

IDFC Tax Advantage Fund

����

674.53

8.2

23.6

29.17

15.9

22.2

2.39

DSP BlackRock Tax Saver Fund*

����

3,137.88

6.99

16.61

21.16

15.8

22.23

2.52

L&T Tax Advantage Fund

����

2,488.5

5.7

19.41

26.62

15.46

19.55

2.08

Axis Long Term Equity Fund

�����

14,362.68

6.79

20.01

19.67

14.34

23.91

1.97

IDBI Equity Advantage Fund

����

655.26

3.58

17

16.03

14.34

—

—

Franklin India Taxshield Fund*

����

3,201.95

3.94

11.01

13.88

12.98

19.53

2.36

Aditya Birla Sun Life Tax Relief 96

7.72 Principal Equity Savings Fund

Equity: Tax Planning Tata India Tax Savings Fund

Hybrid: Equity oriented 5-year returns

17.9% The 3-year return of Tata India Tax Savings Fund is the highest in its category.

8.31 Tata Regular Saving Equity Fund

9.30 DHFL Pramerica Equity Income

9.50 L&T Equity Savings Fund

10.7 LIC MF Balanced Fund

20.54 Tata Retirement Savings Fund

19.78 L&T India Prudence Fund

19.35 HDFC Balanced Fund

19.34 ICICI Prudential Balanced Fund

18.83 HDFC Childrens Gift Fund Annualised returns in % as on 13 Sep 2017.

Smart Stats

23

The Economic Times Wealth, September 18-24, 2017

ETW FUNDS 100

Top 5 SIPs

VALUE RESEARCH FUND RATING

NET ASSETS (` cr)

3-MONTH

6-MONTH

Tata Retirement Savings Fund Moderate Plan

�����

211.63

8.25

19.28

L&T India Prudence Fund

�����

6,425.61

3.83

Aditya Birla Sun Life Balanced '95 Fund

����

10,821.09

HDFC Balanced Fund*

����

ICICI Prudential Balanced Fund

R E T U R N S

( % ) 3-YEAR

5-YEAR

EXPENSE RATIO

26.86

17.8

20.54

2.8

14.85

19.7

14.73

19.78

2.01

5.22

13.83

16.91

14.33

18.68

2.26

14,766.71

4.08

13.7

18.67

13.41

19.35

1.95

����

18,096.78

3.48

9.13

16.66

13

19.34

2.21

SBI Magnum Balanced Fund*

����

14,418.63

5.15

12.39

14.07

12.04

18.68

1.97

HDFC Childrens Gift Fund*

����

1,706.98

3.72

13.67

16.97

11.99

18.83

2.18

Hybrid: Equity-oriented

1-YEAR

Top 5 equity schemes based on 10-yr SIP returns.

17.8% The 3-year return of Tata Retirement Savings Fund is the highest in its category.

DSP BlackRock Micro Cap Fund

25.61 Canara Robeco Emerging Equities Fund

25.12 Franklin India Smaller Companies Fund

24.18 HDFC Mid-Cap Opportunities Fund

23.14

Hybrid: Debt-oriented Conservative

L&T Midcap Fund

SBI Magnum Children's Benefit Plan*

����

48.48

4.73

10.37

17.12

14.24

14.94

2.45

ICICI Prudential MIP 25

����

1,439.54

2.03

9.44

12.67

11.97

12.55

2.16

�����

122.94

1.53

8.05

11.33

12.61

15.78

1.39

UTI MIS Advantage Fund*

����

1,069.77

3.2

8.02

10.76

10.58

11.73

1.6

SBI Magnum Monthly Income Plan*

����

1,428.27

1.71

7.02

10.42

11.69

11.45

1.94

ICICI Prudential Regular Income Fund

����

2,413.32

1.93

4.16

8.28

10.18

9.05

1.46

�����

265.43

1.72

4.64

7.74

10.05

11.09

2.3

SBI Regular Savings Fund*

����

1,123.92

1.73

5.65

11.21

10.45

10.56

1.2

Franklin India Income Builder Fund*

����

968.9

2.06

5.09

9.62

9.64

9.62

2.11

ICICI Prudential Banking & PSU Debt Fund

����

9,538.44

1.74

5.85

9.21

10.12

9.74

—

UTI Medium Term Fund*

����

177.42

2.13

5.27

9.08

—

—

1.25

BNP Paribas Corporate Bond Fund*

����

97.19

1.98

4.85

8.66

9.37

8.85

0.76

HDFC Medium Term Opportunities Fund*

����

12,150.06

2.06

5.15

8.59

9.58

9.39

0.36

DHFL Pramerica Medium Term Income Fund

����

604.81

1.79

5.7

8.51

10.6

—

1.03

Kotak Medium Term Fund

����

4,577.08

1.61

4.87

8.28

10

—

1.7

Kotak Corporate Bond Fund

����

1,068.58

1.82

4.19

8.19

10.11

8.73

0.55

Invesco India Medium Term Bond Fund

����

1,220.13

1.83

4.05

7.93

8.87

8.38

0.9

ICICI Prudential Child Care Plan

SBI Magnum Monthly Income Plan*

22.88 SIP: Systematic investment plan

% annualised returns As on 13 Sep 2017

Debt: Income

11.2%

Top 5 MIPs

The 1-year return of SBI Regular Savings is the highest in its category.

Top 5 MIP schemes based on 3-year SWP returns. SBI Magnum Monthly Income Plan

12.11 ICICI Prudential MIP 25

12.04 Kotak Monthly Income Plan Regular Plan

10.92 UTI MIS Advantage Fund

10.81

Debt: Short Term Franklin India Short Term Income Plan*

�����

8,704.73

2.51

5.53

10.34

9.65

9.66

1.57

Franklin India Low Duration Fund*

�����

4,797.32

2.21

4.8

9.52

9.71

9.7

0.78

UTI Banking & PSU Debt Fund*

����

1,208.51

1.65

4.35

8.9

9.33

—

0.3

DHFL Pramerica Short Maturity Fund*

����

1,888.29

1.93

4.97

8.81

9.3

9.18

1.3

Baroda Pioneer Short Term Bond Fund

�����

619.46

1.92

4.3

8.75

9.05

8.92

1.25

BOI AXA Short Term Income Fund

����

392.7

1.65

4.25

8.48

9.21

8.61

1.25

HDFC Regular Savings Fund*

����

5,281.89

1.81

4.28

8.45

9.65

9.26

1.72

HDFC Short Term Opportunities Fund*

����

9,628.46

1.91

4.18

7.94

8.91

9.02

0.37

IDFC Money Manager Fund

����

1,767.41

2.1

4.03

7.94

8.61

8.65

0.45

Reliance Medium Term Fund

����

1,2309.28

1.89

4.08

7.76

8.66

8.69

0.9

10.3% The 1-year return of Franklin India Low Duration Fund is the highest in its category.

�����

557.68

1.93

4.16

8.55

8.89

8.99

0.55

����

516.59

1.99

4.15

8.33

8.56

8.83

0.7

�����

2,845.27

1.9

4.16

8.26

8.96

9.09

0.81

Kotak Low Duration Fund

����

6,074.14

1.83

3.98

8.03

9.07

8.59

1

Indiabulls Ultra Short Term Fund*

����

2,155.38

1.8

3.84

8

8.56

8.76

0.73

DHFL Pramerica Low Duration Fund*

����

1,265.48

1.81

3.88

7.91

8.9

8.98

1.13

JM Floater Long Term Fund

����

186.72

1.85

3.83

7.83

8.47

8.39

—

UTI Dynamic Bond Fund*

����

1,662.61

1.05

5.94

11.1

11.05

10.49

1.62

ICICI Prudential Long Term Fund

����

3,134.43

1.16

7.96

10.95

12.35

11.98

1.26

SBI Dynamic Bond Fund*

����

3,576.84

0.64

5.52

10.34

11.15

9.22

1.58

L&T Floating Rate Fund Baroda Pioneer Treasury Advantage Fund

10.67 SWP: Systematic withdrawal plan

% annualised returns As on 13 Sep 2017

Mid & Small Cap exposure of Multi Cap funds

Debt: Ultra Short Term BOI AXA Treasury Advantage Fund

Reliance Monthly Income Plan

8.5%

57.46

55.69

53.81

53.25

52.55

Templeton India Equity Income Fund

Templeton India Growth Fund

BNP Paribas Dividend Yield Fund

The 1-year return of BOI AXA Treasury Advantage is the highest in its category.

Debt: Dynamic Bond

All equity funds sorted on 3-year returns; debt funds ranked on 1-year returns

Exp ratio as on 31 Aug 2017 *Exp ratio before 31 Aug 2017 Returns as on 13 Sep 2017 Assets as on 31 Aug2017 Rating as on 31 Aug 2017

ICICI Parag Prudential Parikh Indo Asia Long Term Equity Value Fund Fund

% as on 31 Jul 2017

Did not find your fund here? Log on to www.wealth.economictimes.com for an exhaustive list.

Methodology The Top 100 includes only those funds that have a 5- or 4-star rating from Value Research. The rating is determined by subtracting a fund’s risk score from its return score. The result is assigned stars according to the following distribution: ����� ���� ���

Next 22.5%

��� Next 22.5% �

�

Large-cap: Mostly invested in large-cap companies. Multi-cap: Mostly invested in large- and mid-cap companies. Mid-cap: Mostly invested in mid-cap companies. Small-cap: Mostly invested in small-cap companies.

Top 10% Middle 35%

EQUITIES (figures over the past one year)

Tax planning: Offer tax rebate under Section 80C. (Not covered in ETW Funds 100 listing)

Bottom 10%

Fixed-income funds less than 18 months old and equity funds less than three years old have been excluded. This ensures that all the funds have existed long enough to be tracked for consistency of performance. Given the focus on long-term investing, liquid funds, short-term funds and FMPs are not part of the list. For the same reason, we have considered only the growth option of funds that reinvest returns instead of offering dividends that increase the NAV of funds. Despite these rigorous filters, the list includes 2/3 funds of each category to maximise choice from the best funds. The fund categories are:

International: More than 65% of assets invested abroad. Income: Average maturity varies according to objective. Gilt: Medium- and long-term; invest in gilt securities. Equity-oriented: Average equity exposure more than 60%. Debt-oriented aggressive: Average equity exposure between 25-60%. Debt-oriented conservative: Average equity exposure less than 25%. Arbitrage: Seek arbitrage opportunities between equity and derivatives. Asset allocation: Invest fully in equity or debt as per market conditions.

FUND RAISER

Debt: Short Term Expense Ratio 0.37 0.29

50% Is the likely reduction in the number of mutual fund schemes available in the market, once Sebi’s stricter criteria for defining mutual fund schemes come into play.

0.30

0.31

0.26

HDFC Floating Rate Income Fund

Sundaram Banking & PSU Debt Fund

UTI Bank- Aditya Birla HDFC Short ing & PSU Sun Life Term OpDebt Fund Short Term portunities Fund Fund % as on 31 Jul 2017

% expense ratio is charged annually. Methodology of Top 100 funds on www.wealth.economictimes.com

24

Mutual Funds

The Economic Times Wealth, September 18-24, 2017

DSP BLACK ROCK TAX SAVER

A conservative tax-saving pick ET Wealth collaborates with Value Research to analyse top mutual funds. We examine the key fundamentals of the fund, its portfolio and performance to help you make an informed investment decision.

Fund

Growth of `10,000 vis-a-vis category and benchmark

`36,048

DATE OF LAUNCH

18 Jan 2007 CATEGORY

Equity

Category

TYPE

`28,552

Tax Planning AVERAGE AUM `3,137.88 cr

`10,000

WHERE DOES THE FUND INVEST? Portfolio asset allocation

Fund style box

Debt & Cash 4.06%

4.64% SMALL CAP

BENCHMARK

Nifty 500 Index Index

`23,444 Aug 2007

Aug 2009

Aug 2011

Aug 2013

Aug 2015

Aug 2017 As on 12 Sep 2017

The fund has beaten both the category average and the index comfortably over the past decade.

WHAT IT COSTS NAVS* GROWTH OPTION `46 DIVIDEND OPTION `18 MINIMUM INVESTMENT

`500 MINIMUM SIP AMOUNT

Fund Index Category average

Annualised performance (%)

17.42

17.77

19.81

22.42

22.03

EXPENSE RATIO^ (%)

16.09

15.30

19.33 15.84

13.93

EXIT LOAD NIL *As on 12 Sep 2017

10.58

71.86%

MID CAP

LARGE CAP

^As on 31 Jul 2017

INVESTMENT STYLE

Equity 95.94%

The fund maintains a heavy large cap tilt.

Top 5 sectors in portfolio (%) 35.37

Financial

10.74 9.64 8.90

Energy Construction Metals

`500 2.52

22

23.50%

Growth Blend Value CAPITALISATION

With a 10-year return of 13.68%, the fund has outperformed the benchmark (8.89%) and the category average (11.06%) by a wide margin.

BASIC FACTS

Small Medium Large

HOW HAS THE FUND PERFORMED?

Automobile

8.01

The fund is heavily invested in financials.

Top 5 stocks in portfolio (%) 5.69

HDFC Bank

4.34 4.14 3.84 3.46

ICICI Bank Yes Bank 6 month

1 year

3 year

5 year

Tata Steel ITC

As on 12 Sep 2017

The fund has outperformed over 3- and 5-year periods.

The fund is heavily diversified but takes healthy exposure in top picks.

HOW RISKY IS IT?

Yearly performance (%) 52.21

51.14 37.82

29 4.40

2014

-0.72 3.55 2015

11.27

27.32 29.47

3.84 4.90 2016

2017

FUND MANAGER

Fund

Category

Index

Standard Deviation

14.48

14.20

13.49

Sharpe Ratio

0.83

0.72

0.51

Mean Return

16.57

14.78

11.35

Based on 3-year performance. As on 31 Aug 2017.

Rohit Singhania The fund has mostly outperformed its category in recent years.

As on 12 Sep 2017

TENURE: 2 YEARS Education: MMS

The fund’s risk-reward profile is superior to many of its peers. Wherever not specified, data as on 31 Jul 2017. Source: Value Research

SHOULD YOU BUY?

This fund enjoys an impressive track record, having outperformed its category average in seven of the past nine calendar years. It maintains a heavy largecap bias, where its exposure is

higher compared to peers in the same category. With around 70 stocks, the fund’s portfolio is heavily diversified but it retains a healthy exposure in its top picks, allowing higher impact of convic-

tion bets on portfolio returns. The portfolio turnover is on the higher side, which suggests the fund manager churns stocks often to capitalise on market trends. The fund has managed to deliver high-

er alpha than many of its peers, despite its large-cap tilt. With a healthy risk-reward profile, this fund is a worthy pick for conservative investors looking for a taxsaving fund.

Smart Stats

25

The Economic Times Wealth, September 18-24, 2017

LOANS & DEPOSITS ET Wealth collaborates with ETIG to provide a comprehensive ready reckoner of loans and fixed-income instruments. Don’t miss the information on investments for senior citizens and a simplified EMI calculator. Top five bank FDs

Top banks for 2 years Interest rate (%) compounded qtrly

What `10,000 will grow to

7.50

10,771

RBL Bank

7.20

10,740

City Union Bank

7.10

10,729

Lakshmi Vilas Bank

7.00

10,719

DCB Bank

6.85

10,703

Tenure: 1 year IDFC Bank

Tenure: 2 years RBL Bank

7.30

11,557

IDFC Bank

7.25

11,545

DCB Bank

7.00

11,489

Karur Vysya Bank

7.00

11,489

Lakshmi Vilas Bank

7.00

11,489

Tenure: 3 years IDFC Bank

7.20

12,387

RBL Bank

7.20

12,387

DCB Bank

7.10

12,351

Karur Vysya Bank

7.00

12,314

Lakshmi Vilas Bank

7.00

12,314

IDFC Bank

7.20

14,287

RBL Bank

7.20

14,287

DCB Bank

7.10

14,217

Karur Vysya Bank

7.00

14,148

Lakshmi Vilas Bank

7.00

14,148

Tenure: 5 years

Top five senior citizen bank FDs Interest rate (%) compounded qtrly

What `10,000 will grow to

7.70

10,793

City Union Bank

7.50

10,771

Lakshmi Vilas Bank

7.50

10,771

IDFC Bank

7.50

10,771

DCB Bank

7.35

10,756

RBL Bank

7.80

11,671

IDFC Bank

7.75

11,659

DCB Bank

7.50

11,602

Karur Vysya Bank

7.50

11,602

Lakshmi Vilas Bank

7.50

11,602

Tenure: 1 year RBL Bank

Bank MCLR

BANK NAME

MCLR

WITH EFFECT FROM

State Bank Of India

8.10

1 September 2017

Marginal Cost of funds-based Lending Rate (MCLR) is the new benchmark lending rate designated by RBI and will replace the base rate for new borrowers.

HDFC Bank

8.25

7 September 2017

Union Bank Of India

8.25

1 September 2017

Axis Bank

8.30

18 August 2017

IDBI Bank

8.60

7 September 2017

Top banks for 3 years

Top banks for 6 months BANK NAME

MCLR

WITH EFFECT FROM

BANK NAME

MCLR

WITH EFFECT FROM

HDFC Bank

7.95

7 September 2017

State Bank Of India

8.15

1 September 2017

State Bank Of India

7.95

1 September 2017

Punjab National Bank

8.30

1 September 2017

Union Bank Of India

8.05

1 September 2017

Union Bank Of India

8.30

1 September 2017

Punjab National Bank

8.10

1 September 2017

Axis Bank

8.35

18 August 2017

Axis Bank

8.15

18 August 2017

HDFC Bank

8.45

7 September 2017

Top banks for 1 year

Top banks for 5 years

BANK NAME

MCLR

WITH EFFECT FROM

BANK NAME

MCLR

WITH EFFECT FROM

State Bank Of India

8.00

1 September 2017

Punjab National Bank

8.45

1 September 2017

HDFC Bank

8.15

7 September 2017

Bank Of Baroda *

8.65

7 September 2017

Punjab National Bank

8.15

1 September 2017

Indian Bank

8.75

7 September 2017

ICICI Bank

8.20

1 September 2017

Karur Vysya Bank

9.10

7 August 2017

Union Bank Of India

8.20

1 September 2017

Punjab & Sind Bank

9.10

7 September 2017

* Strategic Premium of 0.25%. # Business Strategy Spread of 0.30%. For any changes in MCLR rates, please email us at [email protected]

Tenure: 2 years

Tenure: 3 years

Your EMI for a loan of `1 lakh TENURE

5 YEARS

10 YEARS

15 YEARS

20 YEARS

25 YEARS

@ 8%

2,028

1,213

956

836

772

IDFC Bank

7.70

12,571

@ 10%

2,125

1,322

1,075

965

909

RBL Bank

7.70

12,571

@ 12%

2,224

1,435

1,200

1,101

1,053

DCB Bank

7.60

12,534

Karur Vysya Bank

7.50

12,497

@ 15%

2,379

1,613

1,400

1,317

1,281

Lakshmi Vilas Bank

7.50

12,497

IDFC Bank

7.70

14,642

RBL Bank

7.70

14,642

DCB Bank

7.60

14,571

Senior Citizens’ Saving Scheme

8.3

1,000

15 lakh

5-year tenure, minimum age 60

80C

Karur Vysya Bank

7.50

14,499

Sukanya Samriddhi Account

8.3

1,000

1.5 lakh per year

One account per girl child

80C

Lakshmi Vilas Bank

7.50

14,499

Public Provident Fund

7.8

500

1.5 lakh per year

15-year term, tax-free returns

80C

5-year NSC VIII Issue

7.8

100

No limit

No TDS

80C

6.8-7.6

200

No limit

Available in 1, 2, 3, 5 years

80C #

Post Office Monthly Income Scheme

Single 4.5 lakh

5-year tenure, monthly returns

Nil

7.5

1500 Joint 9 lakh

5-year tenure, monthly returns

Nil

Figures are in `. Use this calculator to check your loan affordability. For example, a `5 lakh loan at 12% for 10 years will translate into an EMI of `1,435 x 5 = `7,175

Tenure: 5 years

Top five tax-saving bank FDs

Post office deposits

Time deposit

Minimum invt. (`)

Interest (%)

Maximum investment (`)

Tax benefits

Features

Interest rate (%)

What `10,000 will grow to

7.20

14,287

RBL Bank

7.20

14,287

Kisan Vikas Patra

7.6

1,000

No limit

Can be encashed after 2.5 years

Nil

DCB Bank

7.10

14,217

Recurring deposits

7.1

10

No limit

5-year tenure

Nil

Karur Vysya Bank

7.00

14,148

Lakshmi Vilas Bank

7.00

14,148

4

50

No limit

`10,000 interest tax free

Nil

Tenure: 5 years and above IDFC Bank

All data sourced from Economic Times Intelligence Group ([email protected]).

Savings account

# Benefit available only for 5-year deposit

26

Non-traditional Investments

The Economic Times Wealth, September 18-24, 2017

Alternative investment returns monitor The scope and attractiveness of alternative investments is increasing. Here’s a weekly tracker of returns from such investments. But don’t compare these with returns from traditional investments since the proportion and purpose of alternative investments is vastly different. Diamond Index

Precious Metals Index

13 Sep 2017

1,746.34

13 Sep 2016

115.3

13 Sep 2016

Coin Index 350.39

1,753.29 121.36

Wine Index

17,500

13 Sep 2016

13 Sep 2017

13 Sep 2017

19,540

13 Sep 2017

317.22

CHANGE

13 Sep 2016

1 WEEK

-0.68%

1 WEEK

-0.76%

1 WEEK

-0.08%

1 WEEK

1 YEAR

-4.99%

1 YEAR

-0.40%

1 YEAR

10.46%

1 YEAR

The S&P GSCI Precious Metals Index comprises gold (91.33%) and silver (8.67%) and provides a benchmark for investment performance in the precious metals commodity markets. It is updated daily.

Overall Diamond Index is based on actual transactions from 20 different market players and reflects price movements in the global diamond market. The index is updated daily.

The Liv-ex Fine Wine 50 Index tracks daily price movement of the most heavily traded commodities in the wine market. It includes only the 10 most recent vintages and is updated daily.

0.0% -10.44%

The Krugerrand Coin index represents the denomination of a 22 carat gold bullion coin weighing one troy ounce that is listed for trading on the Johannesburg Stock Exchange.

Penny stocks update Penny stocks as a recommended non-traditional investment? Not exactly. ET Wealth neither has the expertise nor does it recommend investing in such stocks. But since the relatively ‘low’ cost of investment attracts some investors to penny stocks, we provide a weekly snapshot of this most volatile and uncertain type of stock investing.

Top Price Gainers Stock

Top Volume Gainers

Market price (`)

1-week (%) change

1-month (%) change

1-month average volume (lakh)

1-month average volume change (%)

Market cap (` crore)

Ashirwad Capital Dolat Investments Cranes Softwares

5.15 4.25 1.51

2.79 24.63 25.83

84.59 72.76 60.64

5.06 1.24 0.38

975.90 203.63 -15.76

20.60 74.80 17.78

Sharon Bio-Medicine

8.75

47.31

49.83

1.69

280.94

104.08

Toyam Industries Shree Bhawani Paper Techindia Nirman Jaiprakash Power Karuturi Global CNI Research

7.90 3.99 9.68 8.05 1.55 3.32

11.74 15.32 6.02 18.21 7.64 25.28

46.84 46.15 45.56 41.98 33.62 32.80

9.21 0.00 0.09 20.02 5.22 0.47

26.21 -47.98 37.42 -55.25 14.74 97.63

167.88 13.90 13.87 4,826.78 125.50 38.11

Top Price Losers Virtual Global Education Panafic Industrials Capital Trade Links Swadeshi Ind. & Leasing Gammon Infra. Projects IVRCL VKJ Infradevelopers Lycos Internet JCT Assam Company India

1.26 1.77 4.64 5.38 3.18 4.55 5.61 6.09 3.60 4.64

Stock

Market price (`)

1-week (%) change

1-month (%) change

1-month avg volume (lakh)

1-month avg volume change (%)

Market cap (` crore)

Metkore Alloys & Ind.

3.40

-17.27

-11.69

0.93

1,315.14

23.95

Ashirwad Capital ACI Infocom Amsons Apparels Global Capital Markets Lycos Internet Tarapur Transformers Frontline Business Sharon Bio-Medicine ANG Industries

5.15 5.39 9.35 5.69 6.09 8.52 7.09 8.75 7.65

2.79 -0.37 5.17 1.61 1.16 26.79 -0.98 47.31 23.79

84.59 -25.96 20.18 7.36 -11.99 29.68 1.29 49.83 19.72

5.06 0.01 2.64 0.10 8.71 0.12 1.63 1.69 0.22

975.90 716.22 682.99 460.45 432.60 417.09 300.87 280.94 266.21

20.60 59.56 20.83 14.16 290.04 16.61 15.12 104.08 12.31

Top Volume Losers -10.64 0.00 -3.13 -5.61 -16.54 1.11 3.70 1.16 3.15 -5.69

-39.71 -33.21 -23.56 -19.94 -19.49 -13.17 -12.89 -11.99 -11.33 -11.28

22.69 1.70 1.00 1.03 16.05 2.48 6.70 8.71 5.22 3.49

0.77 -63.49 -11.32 -89.78 -21.10 -70.57 -11.70 432.60 0.51 20.20

53.39 14.53 23.66 58.21 299.51 356.22 100.14 290.04 215.32 143.75

Swadeshi Ind. & Leasing Gujarat NRE Coke Subex Lanco Infratech JMT Auto

5.38 1.80 8.57 1.03 3.96

-5.61 1.12 -2.28 24.10 -2.46

-19.94 -0.55 -0.23 13.19 -9.17

1.03 2.37 3.87 33.79 1.92

-89.78 -82.38 -81.08 -76.27 -72.00

58.21 288.82 481.63 341.35 199.50

IVRCL

4.55

1.11

-13.17

2.48

-70.57

356.22

Unitech Tata Teleservices Alok Industries GTL Infrastructure

7.46 6.70 2.81 6.56

-6.75 -4.56 -1.40 -6.15

-5.33 -0.74 -3.44 -9.27

43.25 3.37 9.80 10.27

-66.80 -66.60 -65.53 -65.20

1,951.76 1,309.80 387.03 2,724.23

The stocks have been selected using the following filters: Price less than `10, one-month average volume greater than or equal to 1 lakh and market-capitalisation greater than or equal to `10 crore. Data as on 13 Sep 2017. Source: ETIG Database and Bloomberg

Pick of the Week

The Economic Times Wealth, September 18-24, 2017

27

Power Fin Corp: Sectoral woes abate The company will be a major beneficiary of the turnaround in the power sector.

P

alysts’ consensus estimate, PFC’s net profit should climb ower Finance Corporation (PFC), a Navratna back to `6,572 crore in 2017-18—it was `6,113 crore in 2015-16. company, reported 17% year-on-year (y-o-y) net Though the central government’s Uday scheme is playing profit fall in the first quarter of 2017-18. However, a positive role in transforming the financials of state elecanalysts are happy with the company’s results as tricity boards by reducing their borrowing costs and therethey were better than expected. Improved marby improving the power sector prospects, it is adversely imgins and lower provisioning helped PFC surpass market expacting PFC’s margin. Due to Uday and intensified competipectations. After falling to abysmal levels of 2.57% in the tion—general fall in interest rates— fourth quarter of 2016-17, net interest PFC was forced to reduce its rates for margin (NIM) returned to its normal almost 60% of its loan book. With the level of 4.44% in the first quarter. rates settling now, analysts don’t The recovery in the power sector think PFC will be forced to reduce and the resultant robust business them further. growth during the first quarter was 6 10 The downside for the counter from another reason for PFC’s improved Sell Buy the current level is limited because performance. The company’s loan the stock now trades at a price-tosanctions rose 47%, taking its outbook ratio of 0.94. Significant under standing sanctions to `1.84 lakh performance in the past four crore. Disbursements grew 66% and months—the counter fell 21% comnet loan assets increased 10% to `2.47 pared to the 7% rise in the Sensex—is lakh crore. Since the outstanding 3 another reason for limited downside. loan sanctions now are placed at Hold 0.74-times its loan book, there is clear Selection Methodology: We pick the growth visibility for the next few stock that has shown the maximum years. Better-than-expected results, growth increase in ‘consensus analyst rating’ The massive 65% net profit fall in visibility, stabilising interest rate environin the past one month. Consensus rat2016-17 was triggered by the Reserve ment and a sharp fall in the counter in recent ing is arrived at by averaging all anaBank of India’s stricter provisioning months have made it analysts’ top pick. lyst recommendations after attributnorms, that led to additional proviing weights to each of them (5 for sioning by PFC in the fourth quarter strong buy, 4 for buy, 3 for hold, 2 for of 2016-17. The reversal of the provisell and 1 for strong sell) and any improvement in consensus sions, especially on account of the NPAs from government analyst rating indicates that the analysts are getting more sector, has already started. For instance, an outstanding bullish on the stock. To make sure that we pick only compaloan of `11,000 crore from MP Genco was upgraded on 15 nies with decent analyst coverage, this search is restricted July (this will reflect in the second quarter numbers). Anato stocks that are covered by at least 10 analysts. You can see lysts expect NPAs worth `7,000 crore will be upgraded in similar consensus analyst rating changes during the past the third quarter. This means normalcy is expected to reweek in the ETW 50 table. —Narendra Nathan turn in 2017-18, after the deep cut in 2016-17. According to an-

Analysts’ views

Shankara Building Products Dishman Carbogen Amcis Bharat Electronics Torrent Pharma Tata Communications

Actual

Revenue (` cr) Operating profit (` cr) Net profit (` cr)

Research house

ICICI Direct

HDFC Sec

JM Financial

Reliance Sec

BOB Caps

Advice

Buy

Buy

Buy

Buy

Buy

Market price* (`)

1,436 293 190 1,218 705

1-year target price (`)

1,725

Amara Raja Batteries Colgate India

2016-17

2017-18

2018-19

11,343.65 9,408.11

10,721.18 5,102.24

11,374.09 10,170.34

12,317.55 11,203.03

6,113.48

2,126.39

6,572.19

7,087.88

23.16

8.05

23.60

27.02

Valuation

PBV

PE

Dividend yield (%)

Power Finance Corporation PNB Housing Finance

0.94 4.89

18.78 44.52

3.88 0.36

Indiabulls Housing Finance

4.44

17.55

2.12

LIC Housing Finance Shriram Transport Finance Company

2.99 2.16

16.71 23.75

0.94 0.38

Rural Electrification Corporation

0.99

5.44

4.09

Latest brokerage calls Reco date

Research house

Advice

6 Sep ’17 HSBC 1 Sep ’17 Axis Capital

Target price (`)

hold buy

150 150

17 Aug ’17

Quantum Securities

buy

158

11 Aug ’17

Edelweiss Capital

buy

173

11 Aug ’17

Daiwa Securities

buy

155

Relative performance Market price: `131

113.64 100

109.25 14 Sep 2016

Sensex

PFC

14 Sep 2017

Performance of PFC compared with the Sensex. Figures are normalised to a base of 100. Source: ETIG Database & Bloomberg

Comment Initiate 'buy'. With Shankara Building Products' focus on expanding business in the asset-light retail store business, it is in a sweet spot to capture the growing organised home improvement market.

405

Initiate 'buy'. Seeds that were sown 6-7 years ago are now yielding results and with strong visibility on commercial launches and future orders, Dishman will sustainable growth in 2017-18.

220

Initiate 'buy. The domestic defence sector is at an inflexion point with investment by foreign majors. Among listed firms, Bharat Electronics is likely to be the biggest beneficiary of these investments.

1,450

Initiate 'buy. Torrent Pharma’s domestic formulation business will improve owing to increased focus on brand building, improvement in field force productivity and higher focus on specialty business.

740

Initiate 'buy'. Tata Comm's shift towards infrastructure-bundled telecom services is expanding its market, and should drive stronger ROCE and EBITDA between 2016-17 and 2019-20.

SELL Stock

Consensus estimate

2015-16

EPS (`)

What experts advise

BUY Stock

Fundamentals

*Market price as on 14 September

Research house

Anand Rathi

IIFL

Advice

Sell

Reduce

1-year target price (`)

785 1,141

683 1,110

Comment Initiate 'sell'. Though its auto division will see strong growth, the telecom division would arrest industrial revenue growth and margin expansion. Eearnings growth will be slower than revenue growth. Downgrade to 'reduce'. Colgate is likely to disappoint on sales and profit growth in the near and medium term. Penetration-led growth has petered out and company does not have other levers to grow now.

28

Your Queries

The Economic Times Wealth, September 18-24, 2017

QUESTION OF THE WEEK 35-year-old son and 30-year-old daughter-in-law want to buy a Q My health insurance policy. They have a cover of `3 lakh each, provided

Q A &

by their employers. They want to buy insurance that provides coverage against critical ailments. What kind of a policy should they buy?

Healthcare costs have risen significantly in the past decade and will continue to increase. Therefore, employer-provided cover of `3 lakh will not be sufficient. There is also the possibility of change in HR policies of the employer or shift to another job, and the new employer may not have a group mediclaim policy in place. So, it is best to buy individual health covers. Considering the age of your son and daughter-in-law, they could buy a family floater super top policy worth `5 lakh with a `3 lakh deductible. The premium would be between `2,000 and `3,500. To safeguard against critical ailments, it is advisable to have a separate family floater critical illness policy. The premium for a `10-lakh critical illness cover would range between `5,600 and `9,000. Some of the options they can look at are Apollo Munich Optima Vital, Max Bupa Health Assurance Critical Illness and Religare Health Insurance Assure.

YASHISH DAHIYA

Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away.

Q

I want to invest `15 lakh, for a five year period, towards my daughter’s wedding and my retirement. I am 56 years old. Please suggest investment options.

You may invest in equity mutual funds through monthly SIPs, as you have a five year investment horizon. Three diversified equity schemes should suffice. The monthly amount could be in the range of `25,000 to `31,250, based on whether you want to invest the sum over 60 months or 48 months, respectively. In the fifth year, park the sum in a liquid fund, in order to reduce the risk of any sudden loss. You may either park the principal (`15 lakh) in liquid funds of three mutual funds and opt for systematic transfer into equity schemes of those funds or retain the money in your savings bank account to pay for the SIPs. However, please ensure that you have adequate liquidity to meet emergencies, before commencing the SIPs. Otherwise, you may be compelled to redeem your fund units prematurely.

CO-FOUNDER AND CEO, POLICYBAZAAR.COM

I am 34 years old and have a 3-yearold daughter. I want to invest a lump sum `1.5 lakh straightaway and `1.5 lakh in the next financial year, for 15 years, to fund her education and wedding. Please suggest where to invest this sum.

Q

I am 23 and invest `2,500 each in Reliance Tax Saver and Birla SL Tax Relief via monthly SIPs. I can invest `25,000 more per month for 5-10 years. Please suggest schemes.

Considering your time frame, you can consider a 75:25 equity-debt portfolio. While you can invest a lump sum amount or stagger your investment in debt, you must invest in equity funds via SIPs or systematic transfer plan. HDFC Balanced (40%), DSP BR Opportunities (20%), Franklin India Prima (15%) and UTI Income Opportunities (25%) are good schemes to invest in.

Considering your age and assuming that you will need the money at the end of 10 years, SIPs in equity mutual funds is the best option. Within equity funds, focus on diversified equity funds in the large-, flexi- and mid-cap space. The `25,000 can be allocated as follows: `9,000 each in large- and mid-caps and `7,000 in flexi-caps. You may choose from among the following: Birla Sun Life Frontline Equity, HDFC Top 200 and ICICI Prudential Focused Bluechip Equity for large-caps. Mirae Asset India Opportunities, SBI Magnum Multicap and UTI Opportunities in the flexi-cap space. Birla Sun Life Pure Value, HDFC Midcap Opportunities and Franklin India Smaller Companies Fund for midcaps. Please shift your investments from equity funds to fixed income funds 1-2 years prior to exiting the market. This will help avoid any negative surprises arising from short-term volatility.

JAYANT R. PAI C.R. CHANDRASEKAR

CFP AND HEAD OF MARKETING, PPFAS MUTUAL FUND

Q

I forgot to switch off the headlights of my car which drained its battery. I had a comprehensive car insurance plan but was not reimbursed for the cost of a new battery. How can I claim the expenses?

Your car insurance contract comes with certain exclusions for which you cannot make a claim. This includes cases of mechanical or electrical breakdown. Since the car battery failure is due to a handling error and not due to any untoward incident, your insurer may reject your claim. Please check the terms and conditions of your policy for greater clarity.

CEO AND CO-FOUNDER, FUNDSINDIA.COM

Q

My mother received `30 lakh after my father passed away. Of this, she wants to invest `24 lakh for 3-5 years. The goal is capital appreciation. Please suggest funds to invest in.

She may invest in a fund each from the large-cap, multi-cap and balanced fund categories through systematic transfer plan (STP). She can consider from among SBI Bluechip, Reliance Top 200 and Birla Sun Life Frontline Equity for investments in the large-cap category. Franklin India High Growth Companies, Kotak Select Focus and ICICI Pru Value Discovery for multi-cap category. And ICICI Pru Balanced, SBI Balanced and Birla Sun Life Balanced ’95 for the balanced fund category. Under the STP route, her surplus will be invested in a lump sum in ultra-short term debt funds of the respective fund houses. A pre-determined amount will be transferred from the debt funds to the chosen equity funds.

Q

RAHUL PARIKH CEO, BAJAJ CAPITAL

Ask our experts NAVEEN KUKREJA RAKESH BHARGAVA DIRECTOR, TAXMANN

CEO AND CO-FOUNDER, PAISABAZAAR.COM

Have a question for the experts? Mail it to [email protected] with Query as subject.

Technology

The Economic Times Wealth, September 18-24, 2017

29

SIX ANDROID ALTERNATIVES TO APPLE iPHONE X Apple’s latest flagship device, iPhone X, comes with a number of firsts in awe-inspring features for an iPhone. However, Android fans need not despair. There are devices available on Android too that boast of enviable features at a cheaper price, says Karan Bajaj.

2 1

APPLE IPHONE X `89,000

The S8 is not the top-of-the-line offering from Samsung and yet it compares with the iPhone X. It has a gorgeous 5.7-inch super amoled Infinity display with curved screen and a resolution of 2,960 x 1,440 pixels. Powered by an octa core processor, the S8 has 4GB RAM, 64GB storage and a 3,000mAh battery. On the rear, it has a 12MP camera with f1.7 aperture and optical image stabilisation. The front has a 8MP autofocus camera with f1.7 aperture for low light. The phone is water and dust proof, has Iris scanner, dual SIM slot, expandable storage, 4G with VoLTE, dual band WiFi ac, Bluetooth 5.0 and wireless charging support.

SCREEN: 5.8-inch OLED RESOLUTION: 2,436 x 1,125 pixels PROCESSOR: 6-core RAM: 3GB STORAGE: 64/256GB REAR CAMERA: dual 12MP with OIS on both lenses FRONT CAMERA: 7MP CONNECTIVITY: 4G, VoLTE, WiFi ac, Bluetooth 5.0, NFC OTHER FEATURES: Wireless charging, dust & water resistant, single SIM, Face ID unlock

3 5 LG G6 `37,990 LG G6 gets the credit for bringing the noncurved 18:9 aspect ratio display which has become a trend. The G6 features a HDR 10 compliant 5.7-inch IPS display with a resolution of 2,880 x 1,440 pixels plus it is water and dust proof. It runs Android 7.1 on a Snapdragon 821 processor, 4GB RAM, 64GB storage and a 3,300mAh battery. You get a dual 13MP camera with optical image stabilisation on the rear while the front has a 5MP selfie shooter. Other features include fingerprint scanner, wireless charging support, dual SIM slot, expandable storage, 4G with VoLTE, dual band WiFi ac, Bluetooth 4.2, NFC & GPS.

SAMSUNG GALAXY S8 `57,900

6

ONEPLUS 5 `32,999 There is no phone we have seen so far that can beat the OnePlus 5 in terms of sheer power and performance. Powered by a Qualcomm Snapdragon 835 processor, the OnePlus 5 comes in two variants—6GB RAM with 64GB storage or 8GB RAM with 128GB storage along with a 3,300mAh battery. It has a 16MP + 20MP rear camera setup (no OIS) along with a 16MP front camera with f2.0 aperture for superior low-light performance. The dual SIM phone has a 5.5-inch Amoled screen with a resolution of 1,920 x 1,080 pixels and runs Android 7.1. Other features include fingerprint scanner, dual band WiFi ac, Bluetooth 5.0, NFC and GPS.

MI MIX 2 `35,000 EXPECTED Unlike the Mi Mix, Xiaomi will launch the Mi Mix 2 in India. The Mi Mix 2 has an edge to edge 5.99-inch IPS display with a resolution of 2,160 x 1,080 pixels and a ceramic body. Powered by Qualcomm Snapdragon 835 processor, the Mix 2 has 6 RAM and 64/128/256GB storage variants along with a 3,400mAh battery. It comes with a 12MP rear camera with 4-axis optical image stabilisation and a 5MP front camera. Other features include dual SIM slot, fingerprint scanner, dual band WiFi ac, Bluetooth 5.0 and NFC connectivity. The phone runs the latest MiUi UI based on Android 7.1.

HTC U11 `51,990 HTC’s flagship device features the highest rated rear camera on a smartphone till date. You get a 12MP camera with f1.7 aperture, phase detection autofocus and optical image stabilisation. On the front is a 16MP camera with f2.0 aperture. The U11 has a 5.5-inch SuperLCD5 screen with a resolution of 2,560 x 1,440 pixels and is IP67 certified for dust and water resistance. Inside is the top-of-the-line Snapdragon 835 processor, 6GB RAM, 128GB storage and a 3,000mAh battery. The phone also features expandable storage, dual speakers, 4G with VoLTE, dual band WiFi ac, Bluetooth 4.2, NFC and runs Android 7.1.

4 HONOR 8 PRO `29,999 This is one of our favorites in the sub `30,000 price segment. The Honor 8 Pro comes with a 5.7-inch IPS display with a resolution of 2,560 x 1,440 pixels and runs Honor’s custom user interface based on Android 7.0. It has one of the best dual camera system (dual 12MP with phase and laser autofocus) and also an excellent 8MP front camera. Inside is an octa core HiSilicon Kirin 960 processor, 6GB RAM, 128GB storage and a 4,000mAh battery. Other features include expandable storage, dual SIM slot, fingerprint scanner, IR blaster, 4G, VoLTE, WiFi and Bluetooth connectivity.

30

Taxation

The Economic Times Wealth, September 18-24, 2017

TAX OPTIMIZER

Opt for NPS to cut tax Sudhir Kaushik of Taxspanner.com advises readers on how to restructure their income, investments and expenses to optimise their tax.

INCOME FROM EMPLOYER INCOME HEAD

CURRENT

SUGGESTED

Basic salary

5,31,744

5,31,744

House rent allowance

2,12,700

2,12,700

Special allowance

7,56,000

7,02,826

Transport allowance

19,200

19,200

Medical allowance

15,000

15,000

Conveyance reimbursement

72,000

72,000

Newspaper and magazines

12,000

12,000

Leave travel assistance Employer's contribution to Provident Fund

52,000

52,000

63,810

63,810

Performance bonus

56,000

56,000

0

53,174

17,90,454

17,90,454

Contribution to NPS under Sec 80CCD(2d) TOTAL

INCOME FROM OTHER SOURCES Interest income

9,200

Nil

Capital gains

Nil

Nil

Rental income

NIl

Nil

9,200

TOTAL

Nil

M

rinmoy Saha pays a high tax because he has not availed of all the tax-saving avenues open to him. Taxspanner estimates that Saha can cut his tax by almost `40,000 if he takes the NPS benefit offered by his company, invests in the scheme on his own and opts for tax-efficient debt funds instead of fixed deposits. Saha’s company offers him the the option to put 10% of his basic pay in the NPS under Sec 80CCD(2d). This will cut his tax by roughly `16,430. However, this will bring down his takehome salary by `3,000. Another `15,450 can be saved if Saha invests `50,000 in the NPS under Sec 80CCD(1b) on his own. He is only 34, so Saha should opt for an aggressive asset allocation with the maximum 50% in equity funds. But NPS investments get locked up for the long term and are available only at the time of retirement. Also, up to 40% of the corpus has to be invested in an annuity to earn a monthly pension. Saha does not have a health insurance plan of his own. He should buy a medical insurance plan of about `5 lakh for his family. If the premium is `15,000, his tax will come down by around `4,500. Another `3,000 will be saved if he invests in debt funds instead of fixed deposits.

ACTIONS TO TAKE Reduce this taxable portion of the pay package.

Up to 10% of basic salary put in NPS is tax deductible.

Shift FDs to tax efficient debt funds.

SAHA’S TAX All figures are in `

TAX ON OTHER INCOME

TAX ON SALARY

TAX ON CAPITAL GAINS

TAX-SAVING INVESTMENTS CURRENT (`)

SUGGESTED (`)

Provident Fund contribution

63,810

63,810

Insurance policies

25,000

25,000

1,00,000

1,00,000

Nil

50,000

PPF NPS under Sec 80CCD(1b) TOTAL ADMISSIBLE

1,50,000

CURRENT

House rent Medical insurance under Sec 80D TOTAL ADMISSIBLE Denotes suggestion to increase

SUGGESTED (`)

2,04,000

2,04,000

Nil

15,000

2,04,000 Denotes suggestion to reduce

2,19,000

SUGGESTED Nil

`1,41,914

WRITE TO US FOR HELP

OTHER DEDUCTIONS Buy health insurance for your family.

Nil

`1,81,273

Invest in this new tax saving option.

2,00,000

CURRENT (`)

2,843

`1,78,430

Paying too much tax? Write to us at etwealth@ timesgroup.com with ‘Optimise my tax’ as the subject. Our experts will tell you how to reduce your tax by rejigging your pay and investments.

Nil

`1,41,914 TOTAL TAX SAVED

`39,359 PER YEAR

TAX RATIO (Total tax as % of annual income) CURRENT

SUGGESTED

10.1%

7.9%

Your Feedback

The Economic Times Wealth, September 18-24, 2017

31

Readers’ response, online and in print, to ET Wealth stories has been overwhelming and enlightening. We pick some that add information and perspective to our articles from previous issues.

Reduce taxes on gold to stop smuggling This refers to the cover story, ‘Will gold shine?’ Gold ETFs should be scrapped, considering the poor returns they have given. If the government is not going to reduce taxes on gold, illegal gold smuggling and associated evils will flourish. Sincerely hope sense shall prevail among policy makers sooner rather than later. Kanniahhari, e-mail

Buying gold as investment made sense in an era where the threat of war or a similar national calamity was real. Since we are better equipped to deal with any such emergencies now, gold has lost its lure as an investment option.

overall tax burden has only increased. The hidden agenda of the Finance Ministry is to levy more taxes.

always known right? Alpesh, e-mail

Hold to winners as long as you can

Naresh Juneja, e-mail

Apropos of the column, ‘How long is long-term investing?’ I think the one who chooses the right stock is king. If you have a winner in hand, you can stay invested for even a decade. If you hold shares of companies like TVS Motors, Eicher, TCC or Titan, hang on to them for a long time. Never ever invest in penny stocks. However, there is one problem with long-term holding. If we sell after five years and earn good returns, where should we reinvest the money?

No time to look

put back into the portfolio. Investments never end. All you need is to pass them on to the next generation with the right mindset and education to take over. Vijay Kant, e-mail

Prabu, e-mail

Just another tax slap

Ajai Pillai, e-mail

With sovereign gold bonds underperforming and gold ETFs giving poor returns, buying physical gold seems to be the best option. But that is something Indians have

Long term is a lifetime. The equity portfolio I built in my 30s is still going strong and growing even after my retirement. It pays me enough dividends to live on as well as to

In reference to the article, ‘After GST, govt must bring in DTC’, I think it would just be another move by the government to fool the people. Under this government, our

While the jobs listed in the article, “Travel and make money’, sounded great, one needs time to sit and find such opportunities and then go about bagging them. However, for people like me who already have full-time jobs, commute for four to six hours a day, where is the time to search for such jobs? Guru Kalle, e-mail

When I started out on my career 30 years ago, hardly any opportunities existed like the ones mentioned in the atory for working abroad. Envy the people today who can choose to travel the world and earn at the same time. Kedar Bhatt, e-mail

Tech to the rescue The story, ‘Settle car insurance claim in an hour’, was interesting. It proves if used correctly, technology can ease processes in every business. Zahid Qureshi, e-mail

More on tax This refers to the cover story, ‘Don’t slip on tax’, dated 4 September. While the story was very informative, the writer missed taking into consideration the tax rebate of `2,500 available under Sec 87A for individuals whose total income does not exceed `3.5 lakh. This is applicable to regular taxpayers below 60 years as well as senior citizens above 60 years. Hence for people having net taxable income, eligibility for filing Form 15 G would be `3 lakh and Form 15 H would be `3.5 lakh. This is not applicable for very senior citizens. Aloysius Xavier, e-mail

HIRING OUTLOOK IMPROVES OVER PREVIOUS QUARTER Indian employers expect hiring to remain positive in the Oct-Dec timeframe, finds the Manpower Group Employment Outlook survey. Of the 5,005 employers asked how they expected total employment in their current location to change in the next three months compared to the current quarter

24%

4%

56%

16%

said they plan to increase workforce

expect to decrease workforce

see no change

are unsure

The hiring outlook has rebounded slightly from the prior quarter. Once the data is adjusted to allow for seasonal variation, employers report an outlook of +19%

Employers in all 7 industry sectors expect to add to payrolls THE TOP HIRING SECTORS ARE 21% of large-scale organisations (hiring 250+ employees) reported positive hiring plans over Oct-Dec.

10% of medium scale employers (50-249 employees) are optimistic about hiring plans in the coming quarter.

Small-scale organisations (10-49 employees) expect a shrinking payroll

Mining and construction

Services Transportation and utility Public administration and education

The Economic Times Wealth, published by Bennett, Coleman & Co. Ltd. exercises due care and caution in collecting the data before publication. In spite of this, if any omission, inaccuracy or printing errors occur with regard to the data contained in this newspaper, The Economic Times Wealth will not be held responsible or liable. The content hereof does not constitute any form of advice, recommendation or arrangement by the newspaper. The Economic Times Wealth will not be liable for any direct or indirect losses caused because of readers’ reliance on the same in making any specific or other decisions. Readers are recommended to make appropriate enquiries and seek appropriate advice before making any specific or other decisions.

Whole sale and retail trade sectors

The strongest labour market is anticipated by employers in the North, who reported a net employment outlook of +27%. Source: Manpower Group Employment Outlook survey.

PUBLISHED FOR THE PROPRIETORS, Bennett, Coleman & Co. Ltd. by Rajeev Yadav at Times House, 7, Bahadur Shah Zafar Marg, New Delhi-110 002, Phone: 011-23322000, Fax: 011-23323346 and printed by him at The Times of India Press, 13 & 15/1, Site IV, Industrial Area, Sahibabad, UP. Regd. Office: Dr Dadabhai Naoroji Road, Mumbai 400 001. EDITOR: Babar Zaidi (Responsible for selection of news under PRB Act). © Reproduction in whole or in part without written permission of the publisher is prohibited. All rights reserved. RNI NO. DELENG/2011/37994. MADE IN NEW DELHI VOLUME 07 NO. 38

32

Last Word

The Economic Times Wealth, September 18-24, 2017

Helping garment makers cut cost This startup offers tech solutions to help garment manufacturers check fabric wastage. VINAY DWIVEDI aving been associated with the garments industry for 12 years, Mausmi Ambastha had seen at close quarters the amount of fabric being wasted every day. “I realised that there was a dire need for an advanced and a practical software that could optimise the usage of fabric,” says Ambastha, a postgraduate in fashion technology and graduate in computer science. The scope for boosting the fabrics industry by cutting wastage and saving on labour and time offered a promising business opportunity. And Ambastha was quick to capitalise on it. She teamed up with her husband Manasij Ganguli and his colleagues Abhishek Srivastava and Bratish Goswami to found Threadsol in March 2012. The startup proThreadsol co-founders (from left): Bratish Goswami, Abhishek Srivastava, Mausmi Ambastha and Manasij Ganguly. vides enterprise material management techey and improve operational efficiency. “At tya Birla Fashion and Retail (formerly Pantanology to enable manufacturers buy just the first, many apparel manufacturers were loons), Blackberry’s and Raymond, among right amount of fabric and use that fabric skeptical about our product, but once we exothers. Despite this impressive list of customwith minimum wastage. “Our product has plained how it functioned, they were willing ers, getting the garments industry adopt managed to cut down wastage to less than to try us. We may have received a delayed retechnology is still a challenge for Threadsol. 1%. This translates into savings of up to sponse, but we never faced rejections,” says “It’s the problem of being the first-mover. 10%—millions of dollars for manufacturers,” Ambastha. Very few technologies exist in the garment says 38-year-old Ambastha, Co-founder and Now the company, which operates out of and apparel domain, so many big players are COO. Bengaluru and Delhi, has a presence in 15 still reluctant in adopting technology, deInitially, the uniqueness of Threadsol’s socountries. It’s more than 85-strong client list spite its compelling value proposition,” says lution, says Ambastha, also made it difficult includes manufacturers of Zara, Adidas, Ambastha. to pitch the solution to clients. It took some Nike, Levi’s, Victoria’s Secret, JC Penny and The startup, which has drawn investments time to explain the viability of their product Walmart products. Indian client list has Adiof more than `20 crore from Blume Ventures and how it could help companies save mon-

H

and Narayna Murthy’s Catamaran Ventures, at one time struggled to stay afloat. “When we started out, we worked hard, tried to acquire customers and get investors, but things weren’t working out for us,” says Ambastha. Each time the founders had to take out their debit cards to finance the startup’s operations, they felt a little bit more reluctant to carry on. But they didn’t give up. “With just 28 days of money (to run operations) left in our bank, we had to make a tough choice. Keep going or close down. We decided to give one last push. And then it all just clicked. We went to the brink and came back,” recalls Ambastha. Threadsol, which offers its solutions both as a one-time buy and on a monthly subscription basis, generated a revenue of close to `13 crore in 2016-17. Its staff strength across the globe has swelled to 130, and the startup has added several awards to its kitty: Microsoft Bizspark 2012, Grace Hopper Women Entrepreneur of the Year, 2013, Venture Engine 2014, Parivartan Award for sustainability, among others. “We are constantly innovating our current products, updating and upgrading every three months to offer better solutions. Our approach makes us unique and has helped us scale new heights,” says Ambastha.

Please send your feedback to [email protected]

Bitcoins lose lustre in the face of flak China has taken steps to curb bitcoin trading and the cryptocurrency has been facing criticism from various quarters. ET WEALTH itcoin prices in India have fallen 48% in September and the cryptocurrency is now trading at `2,29,417 per unit. The fall comes amid crticism of the unregulated currency from various quarters. A major Chinese bitcoin exchange, BTC China, last week said it will stop all trading activities by the end of this month as Chinese regulators have directed the country’s cryptocurrency trading platforms to close down by end-September. BTC China will immediately stop accepting new account registrations, said Bobby Lee, CEO. China accounts for 23% of all bitcoin trade and the move by the Chinese regulators is being seen as the major reason for the 27% fall in bitcoin’s value in the past 10 days. The Reserve Bank of India (RBI) has also been cautioning people against bitcoin trading though, unlike China, it hasn’t asked trading platforms to close operations. Speaking at the India Fintech Day conference last week, Sudarshan Sen, Executive Director, Reserve

GETTY IMAGES

B

Bank of India, said: “As regards non-fiat cryptocurrencies, I think we are not comfortable.” Non-fiat currency refers to currency that is not regulated by a central bank. The RBI’s stance has been criticised by the Indian bitcoin trading platforms. They argue that the opposition to the digital currency is largely due to its novelty. “Any history textbook will reveal how any disruptive and radical transformations were written off, in the beginning, only to become a part of our lives eventually. The criticism of Bitcoin is in line with the same inertia that resists change,” said Hesham Rehman, Co-Founder and CEO, Bitxoxo. Trading platforms have been demanding that the government come out with a clear policy on bitcoin trading and their regulation. “Government has set up a committee to prepare a framework and guidelines on to how regulate bitcoins. Exchanges are waiting for the outcome of this committee’s report,” said Sandeep Goenka, Co- Founder and COO, Zebpay.

Bitcoin trading has also faced serious flak by investment advisers and financial services executives. “It won’t end well. Someone is going to get killed,” said Jamie Dimon, CEO, JP Morgan. He also labelled the cryptocurrency a ‘fraud’ and said he would fire any person in his company found trading in bitcoins. “It’s against our rules and they (bitcoins) are stupid,” he said. Though the RBI has cautioned against bitcoin trading, the central bank is open to the idea of introducing its own digital currency. “Right now, we have a group of people who are looking at fiat cryptocurrencies. Something that is an alternative to the Indian rupee, so to speak. We are looking at that closely,” said Sen. But till such time as the government comes out with a regulatory framework cryptocurrency enthusiasts would do well to heed the RBI’s advice: “Any user, holder, investor or trader dealing with virtual currencies is doing it at their own risk.”

Please send your feedback to [email protected]