How Long Is Long Term?

THE ECONOMIC TIMES

SHOULD YOU BUY OR HIRE A CAR? P12

www.etwealth.co | Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | September 23-29, 2019 | 28 pages | `8

HOW LONG IS LONG TERM? Equity investments are not short-term gambits. For equities to be rewarding, remain invested for at least 7-10 years. P2

cover story The Economic Times Wealth September 23-29, 2019

ILLUSTRATIONS: ANIRBAN BORA

02

HOW LONG IS LONG TERM? Don’t look at equity investments as short-term gambits. For equities to be rewarding, one needs to remain invested for at least 7-10 years.

By Narendra Nathan

T

he cut in corporate tax rate triggered the biggest one-day rise in the Sensex on Friday. Investors who were thinking of exiting must now be reviewing their plans. However, this one-day rally should not be the reason to stay invested in equities. It is well known that equities generate better returns than any other asset

class over the long term. The question is, how long is long-term? For tax purposes, holding equity and equity funds for a period of one year is long-term—too short a time frame for a volatile asset class. Till a few years ago, most investors considered three years as long term and expected good returns from their equity investments in that time. However, the recent correction has torpedoed these dreams. With SIPs in several large-sized equity

schemes (AUM of more than `1,000 crore) generating negative returns even after three years (see table), investors are wondering what exactly does long term mean.

Wait and watch The choppy markets have got investors concerned, but there is no widespread panic yet. “Most investors are waiting for a recovery. With 2-3 year returns turning negative, a small number of investors are

panicking though,” says Santhosh Joseph, Founder & Managing Partner, Germinate Wealth Solutions. The continued faith of retail investors becomes apparent when one studies the collection figures of mutual funds. SIP investments in equity funds remain strong (see chart). But experts are worried about the incremental flow. “Investors are continuing with their SIPs, but the incremental money is getting invested somewhere else,” says Gajendra

cover story The Economic Times Wealth September 23-29, 2019

3-year SIPs in some big equity funds have given low or negative returns LARGE-CAP SCHEME NAME

AUM (` CR)

3-YEAR SIP RETURNS (%)

Franklin India Bluechip Fund

6,577

0.16

DSP Top 100 Equity Fund

2,317

2.37

20,094

2.70

CAT AVG RETURN

2,482

3.58

4.05%

11,819

3.87

Aditya Birla SL Frontline Equity Fund JM Large Cap Fund Reliance Large Cap Fund

Redefining long term

MID-CAP Aditya Birla SL Midcap Fund

2,174

-5.57

Sundaram Mid Cap Fund

5,420

-5.16

SBI Magnum Midcap Fund

3,290

-5.16

UTI Mid Cap Fund

3,422

-4.47

L&T Midcap Fund

4,905

-2.79

CAT AVG RETURN

-2.27%

SMALL-CAP Aditya Birla SL Small Cap Fund

2,110

-10.72

DSP Small Cap Fund

4,552

-8.38

Franklin India Smaller Cos Fund

6,584

-6.59

CAT AVG RETURN

Kotak Small Cap Fund

1,144

-3.39

-4.52%

HDFC Small Cap Fund

8,209

-0.97

MULTI-CAP Franklin India Equity Fund

-0.01

10,317

L&T Equity Fund

2,561

1.04

IDFC Multi Cap Fund

5,186

1.04

CAT AVG RETURN

Reliance Multi Cap Fund

9,403

1.77

3.65%

10,653

2.21

Aditya Birla SL Equity Fund

ELSS Reliance Tax Saver Fund

9,187

-7.94

Sundaram Diversified Equity

2,439

-0.95

HDFC TaxSaver

6,783

-0.42

CAT AVG RETURN

SBI Magnum TaxGain’93

6,683

-0.35

1%

L&T Tax Advantage Fund

3,153

-0.23

Note: Only schemes with `1,000 crore AUM considered. Source: ACE MF. Compiled by ETIG Database. Data as on 16 Sep

SIPs have not stopped but are not rising as before 9,000

8,231

Monthly SIP collections (` crore ) 8,000

7,000

6,000

5,000

4,000

3,497

3,000 Aug 2016 Source: AMFI

Aug 2017

Kothari, MD & CEO, Etica Wealth Advisors. This means investors are not topping their equity investments even after significant price cuts. No one is in a hurry to start new SIPs either. While the possibility of investors stopping their SIPs altogether if the market slides further is high, it would not be the right thing to do. “You started an SIP to benefit from volatile markets. So don’t stop your SIPs because the markets are volatile,” says Suresh Sadagopan, Founder, Ladder7 Financial Advisories.

Aug 2018

Aug 2019

Let us continue with the original debate. Since equity is expected to outperform debt over a 5-year horizon, increasing the definition of long term to 5 years seems a logical move. However, chart topping returns on 5-year holdings have been delivered by long duration gilt and debt funds (see chart). While the 5-year returns of equity funds is around 8% now, equity has generated negative returns for 5-year holding periods several times in the past. We selected Mastershare for our study as it was the first equity mutual fund in India (see chart). Similarly, investing in SIPs continuously for 5 years does not guarantee positive returns. Five-year SIPs in Sensex have also generated negative returns in the past (see chart). From a pure asset allocation perspective, long-term should be defined as 7-10 years because that matches the Indian equity market cycle. For example, several stock market peaks—1992, 2000, 2008 and 2018—have happened at these intervals. “I recommend aggressive equity allocation, depending

on the risk profile of the investor, only for 10-year goals. Equity allocation is usually restricted to 50% for goals that fall between 7 and 10 years,” says Melvin Joseph, Founder, Finvin Financial Planners. Please note the years mentioned above is the goal period and not actual equity holding period, which will be slightly less because investors should shift from equity to debt as the goal approaches.

Consider the present While a theoretical definition of long term is fine, investors should also consider the present situation. In other words, while there is no fixed definition for long term—the time fter which one can get guaranteed high returns from equities—investors can generate decent returns if they manage their equity portfolio according to market situations. “To make money from stock markets, investors need to do a bit of right timing,” says Anil Rego, Founder & CEO, Right Horizons. In other words, we need to tweak the long-term definition according to market situations. For example, we can reduce the long term definition from 7 to 5 years now because the correction phase has already completed 21 months from the January 2018 peak. This correction won’t be apparent if you have been tracking only benchmark indices like Sensex and Nifty. The correction at the broader market level has been steep. “Sensex and Nifty are driven by just 5-10 stocks. But with 65% of the stocks falling by more than 50%, the broader market saw a steep correction,” says Rego.

03

cover story 04

The Economic Times Wealth September 23-29, 2019

On a point to point basis, debt funds have beaten equities over 5-year horizons Category average returns (CAGR in %)

1-year

3-year

5-year

10-year

20.31

18.85 10.73 8.96

14.37

10.02

8.96

8.96

8.09

10.18

8.25

8.31

12.77

11.43

10.60

8.24

8.01

8.21

6.33

6.26 4.17

11.34

8.01

5.95

7.51

6.67

7.80

11.22

7.76

8.72 7.24

7.81

6.53

7.70

3.73

GILT

DEBT

EQUITY

DEBT

EQUITY

EQUITY

DEBT

EQUITY

DEBT

EQUITY

with 10 year duration

Long duration

Mid-cap

Dynamic bond

Large & mid-cap

Small-cap

Medium to long duration

Multi-cap

Floater

ELSS

-5.30

-4.14

-5.08

-9.16 Data as on Sep 16

|

Sorted on the basis of 5 year returns

Correction is good Investors have several positive factors to look forward to now and a negative return is one of them. “Markets after a large fall are always better than markets at a peak. When it moves up, you will get higher returns than average,” says Rego. Investors have always made more money when the market is going through a correction and the historical returns are very low or negative (see chart). Most investors, however, wait for high returns before investing, thus ending up investing at a peak.

Fundamentals will improve Bear markets usually coincide with other bad news. However, long-term investors have to consider all corrections, triggered by bad news, as investment opportunities. “Good news and good prices don’t come together. But investors want both and that is the problem,” says Kothari. The biggest concern right now is the economic slowdown. The GDP growth rate for the AprilJune quarter is down to 5%. The government’s efforts to revive problem sectors like auto, real estate, NBFC, etc should arrest the slide. “Though we can’t predict the exact bottom, we are close to it. The government usually comes at the end and therefore, we can reasonably assume that the economic pickup is not far away,” says Rego. The good monsoon this year will be another positive for the economy and the rural consumption in coming quarters will not be as bad as being made out to be. Corporate profitability will also increase in coming years due to the ongoing consolidation triggered by the slowdown. “With consolidation happening, there are few players left in most sectors and such companies should do well when the economic rebound happens,” says Sankaran Naren, ED &CIO, ICICI Prudential AMC. The reduction in corporate tax will also help India Inc. “We estimate an overall 5-10% increase in fair value of companies due to this measure,” says G. Pradeepkumar, CEO, Union AMC. However, the Indian equity markets also have to worry about the recent attacks on Saudi oil facilities and the resultant jump

|

Source: Value Research

-12.35

Holding for 5 years is no guarantee of positive returns 50

UTI Mastershare 5-year rolling returns (% CAGR)

45.83

2 Nov 2007

40

30

7.87

5.19 20

10

0.04

3 Sep 2009

23 Apr 2003

7.31

19 Nov 2012

-2.49 -8.41

21 Sep 2001

0

-10

-20

18 Sep 1999

17 Sep 2005

17 Sep 2012

17 Sep 2019

Data as on 17 Sep | Source: Value Research

Even 5-year SIPs can result in losses or low returns 60

Sensex 5-year SIP returns (% IRR) 50

48.06

Oct 2007

40

3.85

Feb 2016

30

-1.75

7.71

20

10

Feb 2009

Apr 2003

12.28

0.56

Dec 2011

7.19

-11.22 Sep 2001

0

-10

-20

Sep 1999

Sep 2005

Sep 2012

Sep 2019

cover story The Economic Times Wealth September 23-29, 2019

28%

Fix behavioural issues

Future SIP returns are good when past returns are bad Historical vs Future Returns Future returns

12%

11%

9%

Historical

< 0%

0 to 10%

10 to 20%

>20%

INDIANS ARE experts in getting bargain deals and we try to buy everything at a lower price. However, that does not hold true when it comes to investment products. Investors tend to buy at peaks and exit at the bottom because they get carried away by fear and greed. Excessive focus on historical returns and the tendency to chase it is the first reason. “Most investors keep chasing historical returns, because we have a tendency to go with recent experience,” says Gajendra Kothari, MD & CEO, Etica Wealth Advisors. A case in point are those who avoided debt and gold like the plague two years ago but are chasing them now. “People should chase their financial goals and not absolute returns,” says Suresh Sadagopan, Founder, Ladder7 Financial Advisories. The overall change happening in society is the next reason. “Just like we do everything in an instant now, we expect investment returns also to come in a short time,” says Santhosh Joseph, Founder & Managing Partner, Germinate Wealth Solutions.

Calculation based on 5-year SIPs in Sensex

Each asset class moves differently A well diversified portfolio protects the downside

ASSET CLASS RETURNS (%) YEAR

EQUITY MULTI CAP FUNDS

GILT FUNDS

GOLD ETFS

LIQUID FUNDS

2008

-53.23

23.02

25.59

9.07

2009

84.94

-7.06

22.42

5.38

2010

21.02

4.78

21.68

5.45

2011

-23.92

6.45

30.76

7.37

2012

34.14

10.94

10.93

9.60

2013

5.72

3.36

-14.11

9.21

2014

52.02

16.97

0.83

9.04

Time it automatically

2015

2.03

6.17

-8.02

8.26

2016

3.76

15.50

10.54

7.48

2017

36.74

2.58

2.90

6.53

2018

-6.58

6.73

6.65

6.82

2019

-1.67

9.00

22.31

4.82

While timing based on fundamentals and market sentiments are the way to go, it may not be possible for most investors to do so. This is because investors, who eagerly wait for corrections, usually don’t invest when the correction actually happens. They tend to panic when the noise turns negative during bear markets. Rule-based dynamic asset allocation funds work best for them. “Dynamic asset allocation funds will be useful for investors who are not so familiar. The valuation based shifting between equity and debt is automatic,” says Rego. Having a pre-determined asset allocation ratio and rebalancing it at regular intervals is the next option. Asset classes don’t move together and the loss in one category will be balanced out by another category. Long duration gilt and debt funds have generated annual returns of 18.85% and 20.31% during the past one year (see chart). Similarly, gold has generated an absolute return of 22.31% on year to date (see table). This kind of differential performances took place several times in the past. For instance, equities lost 53% in 2008, while debt gained by 23%. The scale

2019 value is y-t-d (absolute and not annualised) | Note: Only MFs that completed 12 years considered for calculating category average return | Source: ACE MF; Compiled by ETIG Database

in global crude oil prices (see page 8).

Valuations getting reasonable The fall in valuation is another reason why experts believe that it is a good time to enter the market. You need to consider stocks from the broader market and not just a handful of stocks that are quoting at obscene valuations. “Barring a few stocks, the broader market is valued reasonably now and investors could make reasonable returns if they buy now and hold patiently for 5 plus years,” says Naren. While the benchmark indices are being propped up by 5-10 stocks, the broader mar-

ket correction is still continuing, bringing their valuation below the large-cap peers. “We shifted from mid-caps to large-caps in 2018 and are slowly moving back to mid and small-caps now,” says Rego. Investors could wonder why the definition of long-term is being kept at 5 and not 3 years when factors are becoming favourable. “The cut and the recovery were sharp in 2009, but fall is slow this time and recovery is also taking time,” says Kothari.

Don’t overestimate debt, gold Just as people got carried away by equity returns in 2017, they are now getting car-

ried away by returns from gold and debt. However, chasing historical returns is a bad idea for any asset class. The rise in long duration debt funds is because of falling yield. Since the chance of a big fall in yield from current levels is remote, 20% returns from debt are unlikely in future.

changed in 2009 and equity gained 85% and debt lost 7%. Sell the asset class that has generated very high returns and shift to one that has underperformed. The benefit of such a strategy is that it will help you control greed and fear. “Since these shifts are tax incidents, rebalancing should be done only at decent intervals like annually or during life events like job change, addition of a new member in the family, etc,” says Amol Joshi, Founder, PlanRupee Investment Services. Another way is to fix bands and rebalance it when it crosses the bands. For instance, if equity allocation is fixed at 50%, rebalance it only when it crosses 60% or 40%.

Book regular profits Finally, long-term investing doesn’t mean that you can leave your portfolio untouched for decades. In addition to regular reviews and rebalancing as part of asset allocation mentioned above, equity investors also have to do tax-based churning now. Since the long-term capital gain is tax-free only up to `1 lakh per annum, investors need to keep booking that regularly. To make sure your asset allocation doesn’t change, shift from one equity or balanced fund to another equally good equity or balanced fund. This way you can keep booking profit and maintain the desired allocation.

Please send your feedback to [email protected]

05

guest column The Economic Times Wealth September 23-29, 2019

Why you shouldn’t try to second-guess big events Did the FM catch you out of the equity markets last week? It’s your fault if she did. Stop trying to figure what will happen next, says Dhirendra Kumar.

DHIRENDR A KUMAR CEO, VALUE RESE ARCH

money mysteries

It isn’t all that difficult to identify a good stock or fund, but predicting general ups and downs is complicated. In fact, it is arguable that general ups and downs are not predictable with any degree of useful certainty.

T

he ferocity with which the stock markets have risen in response to the corporate tax cuts is unprecedented. Whether these tax cuts have the desired impact on the economy remains to be seen, but those investors who had given up on the markets and moved out have surely been caught out badly. This shows that equity sentiment can turn very sharply, rapidly and trying to keep up with it is a fool’s errand. There were lots of investors who had decided to ‘sit out’ the stagnant phase of the markets and decided to invest when the direction of equity prices changed. Well, on Friday morning they got perhaps two minutes’ warning—not enough to terminate their sitting out in the way they had hoped to. Investing well and getting good returns requires a combination of skills of different kinds. Broadly, these can be broken up into figuring out which stocks or funds will do well on the one hand and figuring out broader, market-wide or economy-wide trends on the other. After years of observing the markets and investors, I have formed a firm belief that while the former is well within the capability of many investors—both amateur and professional—the latter is practically impossible to do on a sustained basis. The current episode that commenced with Nirmala Sitharaman’s blockbuster may look like an exception, but it’s actually not.

Stay invested and keep investing. Choose good funds, good companies and keep investing to get in at a good average price. What makes this important is that investors who do the first part right often lose money and give up gains by trying to do the second part. In theory, this boils down to choosing the right funds and then trying to redeem when you think the broad market is going to go down. On the way up, this means sitting with cash, waiting to invest till the last moment before the markets start rising. In practice, for most investors who try and do this, it means selling their funds after the markets have crashed and buying them back after they’ve shot up. The period starting last Friday’s press conference may have seen a particularly severe version of this cycle but actually this is a fairly routine event. Interestingly, this is not limited to individual investors. Professional investment managers too make such mistakes regularly. The reason is simple, yet hard to accept. It

GETTYIMAGES

06

isn’t all that difficult to identify a good stock or fund, but predicting general ups and downs is complicated. In fact, it is arguable that general ups and downs are not predictable with any degree of useful certainty. More importantly, I’ve observed that there’s no commonality between stock or fundpicking skills and the skill of being able to figure out broad movements. Someone could be a great investment analyst but that doesn’t say anything about his or her ability to pick out broader trends. What this means is that as an investor, one should accept that it’s best to stay invested and keep investing at all times. Choose good funds, choose good companies and keep investing to get in at a good average price. Improving one’s returns by timing

the broad markets is an illusion and there is no point in trying to chase it. Not just that, it’s now doubly difficult because of this government. The Narendra Modi government seems like a special case here because of its propensity of taking bold actions and its ability to keep things secret till a time of its own choosing. All kinds of people, in our country as well as in neighbouring ones, are finding this out the hard way. So don’t make investments more complicated by trying to second-guess what this government will do. Stick to the knitting, everything else will work out. Please send your feedback to [email protected]

mutual fund The Economic Times Wealth September 23-29, 2019

Are debt funds playing their cards right?

units at the time of the write-off. It ensures investors who come in later do not get an unfair advantage from the recovery. Only Tata MF created segregated portfolios in its DHFL-exposed schemes. After the default by Altico Capital, exposed schemes of UTI and Reliance MF activated the side-pocketing provision. But not many fund houses are keen to invoke this provision. Experts say this is due to prickly conditions imposed by the regulator. One requires the fund house to provide a 30-day exit window for existing investors, given that segregation in portfolio is deemed as a change in fundamental attributes of the scheme. Fund companies fear mass flight of assets when market sentiments are already weak. Another provision requires performance incentives of associated fund managers to be curtailed. This has put off fund houses from opting for side-pocketing. GETTY IMAGES

Existing investors have taken a hit with debt funds failing to protect their interests after credit events.

by Sanket Dhanorkar

A

year since the IL&FS blowout, multiple defaults and credit rating downgrades have wiped out a chunk of returns of multiple debt funds. Some of these funds have started getting back their dues, resulting in recovery of net asset value (NAV). But the response of the fund houses to these episodes has been varied. Have debt funds played their cards right? Or have they been toying with the interest of investors? Two prominent credit episodes were the defaults by DHFL and Essel (Zee) Group. In both cases, affected debt funds took different paths to cope. The mid-April default in Essel left fixed maturity plans (FMP) from Kotak and HDFC Mutual Funds exposed. Kotak gave back unit holders partial money on maturity of these schemes, with the promise of repaying the remaining amount upon recovery of dues from Essel group. HDFC MF gave unit holders the option to roll over or extend the maturity by another year or redeem partially upon maturity. It later turned out that the funds had entered into a standstill agreement with Essel, where they agreed not to sell the pledged shares and give promoters time till September to clear dues. HDFC MF eventually decided to buy the stressed bonds

due to mature before September and pay off its FMP investors, instead of waiting to recover dues. For bonds maturing after September, the fund house will wait it out. After DHFL defaulted on interest payments in June, fund houses marked down the value of the bad assets, as per law. This affected existing investors in exposed schemes. But it also opened doors for bargain hunters waiting to take advantage of the lower NAVs. Fresh investors got the opportunity to take part in any subsequent recovery in NAV, diluting the benefit for existing investors. “Some fund houses put existing investors’ assets at risk of dilution, and inadvertently encouraged shorttermism,” says Vidya Bala, Co-founder, Redwood Research. To prevent any dilution, some fund houses restricted fresh inflows into schemes holding troubled assets. Others imposed high exit loads on incoming investors, to deter speculation. However, these measures couldn’t prevent value erosion for existing investors. Feroze Azeez, Deputy CEO, Anand Rathi Wealth Management, says, “Investors who stayed back got shortchanged. As the good quality assets got sold off, the portfolio was left saddled with more bad assets as a proportion of the scheme’s corpus.” In many debt funds, the rotten apples took up more than 25-30% of the

basket. Clearly, there were holes in the approaches taken by fund houses. The wide divergence in the actions of debt funds has been jarring. “There has been no structure to the actions, leaving investors confused,” says Bala. Even the extent of mark-downs in case of the same borrower has varied. Says Azeez, “Funds have not been on the same page in dealing with the issue. Lack of unanimity in decision left investors with little clarity.”

Ignoring the trump card Amidst all this, the new side-pocketing provision—designed to protect existing investors—has largely been ignored. Barring a few, none of the fund houses activated this mechanism. It involves splitting the debt fund into two— a new fund containing the rotten eggs and the existing fund comprising the cleaner portfolio. Since this cleaner fund is not plagued by the troubled asset, it is protected from large-scale redemptions. Investors who hold on to units of the original scheme do not have to worry about their quality, liquid assets being sold off or NAV declining further. Those who redeem can be assured of realising fair value for the cleaner fund. In the event of any recovery in the side-pocket, investors can later sell their allotted units at fair value. This benefit is only available for investors who held

Light at the end of the tunnel After a period of uncertainty, debt funds that witnessed rating downgrades or defaults in their holdings are seeing dues being paid back gradually. Essel Group has partially paid debt funds. Aditya Birla Sun Life MF, HDFC MF, ICICI Prudential MF and Kotak MF have received 45-60% of the total dues. DSP Mutual Fund got back its dues of `150 crore from DHFL, resulting in a “complete recovery” for commercial papers held in various schemes. These funds had earlier marked down the value of these securities, resulting in a drop in NAV. With dues recovered, NAVs are also inching up. Fund houses have been caught on the wrong foot too often. High dependence on external credit ratings and lack of in-house research have left debt funds scrambling. Having burnt their fingers, fund houses are becoming more conscious of risks. “It has been a learning experience for fund managers,” points out Bala. “Many fund houses are now introducing internal alert mechanisms for credit deterioration, ensuring better portfolio liquidity and shunning concentrated exposure.” More credit events cannot be ruled out in future. How debt funds respond to them will show how much the funds have really learnt from this experience. Fund houses are now considering giving Essel more time to repay remaining dues, despite the regulator’s objections to such standstill pacts. Please send your feedback to [email protected]

Some debt funds continue to feel the pinch

Few funds have started recovering dues

Exposure to defaulting and downgraded companies have affected returns.

After a period of uncertainty, debt funds have recouped some of the dues.

BOI AXA Tata Credit Corporate Risk Bond

PGIM PGIM Ultra BOI AXA Short Term Short Short Term Maturity Term Income

-20.28 -47.06

-39.69

-13.61

Motilal Oswal Ultra Short Term

Sundaram Short Term Credit Risk

-6.16

-5.51

Edelweeiss Invesco Corporate India Credit Bond Risk

-5.36

UTI Credit Risk

-3.95 -3.52

-33.42 1-year return (%) Source: Value Research

ISSUER

AMOUNT RECOVERED (` CR)

TOTAL AMOUNT DUE (` CR)

ABSL Life MF

Essel

760

1,700

45%

ICICI Pru MF

Essel

435

725

60%

HDFC MF

Essel

580

1,200

48%

Kotak MF

Essel

599

1,152

52%

DSP MF

DHFL

150

150

100%

AMC

% RECOVERED

07

commodities 08

The Economic Times Wealth September 23-29, 2019

Brace for fallout of the Saudi strikes IMAGES: GETTYIMAGES

India imports more than 80% of its oil oil. The tension in the Middle East will push up the country’s oil bill.

Prices to soar

by Sanket Dhanorkar

A

major drone attack on two Saudi Arabian oil facilities last week spooked markets across the globe. The attack set off huge fires that disrupted over half of the kingdom’s oil supply. It became the single biggest oil supply disruption in history, topping the production hit caused by the Iranian Revolution in 1979 and Iraq’s invasion of Kuwait in 1990. With oil supplies taking a hit and tensions escalating in the region, repercussions are going to be felt in India too.

Global crude oil prices had been benign for the past few weeks, weighed down by surplus inventory in the face of weak demand. But the production halt in one of the world’s major oil producing nations is likely to send crude prices soaring in the near term. The attacks have impacted around 5.7 million barrels per day of crude production—translating into a significant 6% hit on global oil supplies. The country’s surplus capacity of around 2 million bpd has also been affected significantly. It will take a few weeks to get the facilities operational and restore production. It is hoped that activation of

US strategic oil reserves and other OPEC (Organisation of Petroleum Exporting Countries) economies stepping in to raise production would alleviate the supply conditions to some extent. Even if supplies resume partially, the threat of further attacks will keep oil prices artificially higher going ahead. “The concern that important Saudi oil facilities are now vulnerable to attacks would increase the geopolitical risk premium on oil prices,” argues Sabri Hazarika, research analyst at Emkay Global Financial Services. The unprecedented attack also raises the spectre of a full-blown war between Saudi

ally US and Iran, which is blamed for the attack. If this pans out, oil supplies will take a hit. “Any further escalation in geopolitical tensions may add to global oil supply woes given the lack of buffer in Saudi’s significant spare production capacity,” say analysts Tarun Lakhotia and Hemang Khanna of Kotak Securities. “With the US accusing the Iranian government of orchestrating the attack and Iran in turn threatening war, further destabilising the region at large and impacting future supplies, oil prices are expected to remain firm,” says Pritam Kumar Patnaik, Head, Commodities, Reliance Commodities.

Attacks on the Saudi oil facilities have topped the biggest oil disruptions in history The production halt in one of the world’s major oil producing nations is likely to send crude prices soaring in the near term. EVENT AND YEAR

SAUDI DRONE STRIKE

IRANIAN REVOLUTION

2019

1978-79

ARAB-ISRAELI WAR OIL EMBARGO

IRAQ INVASION OF KUWAIT

IRAN-IRAQ WAR

1973-74

1990-91

1980-81

VENEZUELAN STRIKE 2002-03

5.7

5.6

4.3

4.3

GROSS PEAK SUPPLY LOSS (MILLION BARRELS PER DAY)

4.1

2.6

WAR IN IRAQ 2003

2.3

IRAQI OIL EXPORT SUPSPENSION

SUEZ CRISIS

2001

1956-57

2.1

2

Source: Bloomberg

commodities The Economic Times Wealth September 23-29, 2019

High crude prices will push up oil bill... Threat of further attacks will keep oil prices artificially higher going ahead. 100

61.17

69.14

80 60 40 20

Brent crude ($ per barrel)

0

17 Jun 2019

17 Sep 2019

... and uncertainty will be good for gold... Escalation in tension in the Middle East will keep demand for gold high. 41000 Spot gold price (` per 10 gram)

38,400

39000 37000 35000

33,450

33000 31000

17 Jun 2019

16 Sep 2019

...but rising inflation will hit bond prices RBI may not cut rates immediately, leading to yields remaining elevated. 10

6.93

6.72

8 6

crude oil to India. The immediate impact of the Saudi attack would be downward pressure on Indian equities. Historically, crude oil prices have had a negative correlation with domestic equities. Investor sentiment is already fragile over the crippling slowdown in the economy. A spurt in oil imports will create fiscal imbalances and weigh heavily on the local currency. Increased risk aversion and weaker rupee will make foreign portfolio investors wary, keeping flows into domestic equities muted in the near term. The extent of impact will depend on how long oil prices remain elevated. HDFC Securities in a note points out that it should not be taken as a trend that will persist over several months. “Further action on crude prices will be a function of how quickly the full capacity is restored and how coordinated the global effort is to release strategic reserves,” the note says. The spike in crude oil prices, even if temporary, will be negative for downstream oil marketing companies (OMC) like HPCL, BPCL and IOC. “We do not rule out a possibility of moderation in marketing margins on auto fuels—a $10/bbl rise in global crude and product prices may require OMCs to increase retail price of diesel and gasoline by `5-6 per litre in the following fortnight,” say Kotak Securities analysts. Automobile manufacturers, reeling under severe volume decline, may face further squeeze as higher fuel prices push up car ownership costs. The impact may also be felt by companies using crude oil as raw material. Airlines may face higher air turbine fuel price while paint and battery makers may see input costs rise. On the other hand, higher crude prices may be positive for upstream PSUs such as ONGC, Oil India and GAIL. These will see higher realisations on every litre of crude oil they produce. Every $1 increase in Brent crude price results in up to 3% increase in earnings for these firms.

4

Gold 2 0

10-year bond yield (%) 17 Jun 2019

Data compiled by ETIG database

Equities The disruption in oil supply and uptick in oil prices have immediate ramifications for India. Considering India imports more than 80% of its oil requirements, any rise in price will hurt our finances. India is already trying to replace the loss of sup-

16 Sep 2019

ply from Iran, owing to US sanctions. According to a report by CARE Ratings, this has led to a decline in crude processing by domestic refiners by 2.3% and increase in import of petrol and diesel by 298% and 363.5% respectively. After Iraq, Saudi Arabia is the second largest supplier of

The attack on Saudi oil assets is likely to spur a shift to safe haven assets as risk appetite wanes. Any escalation in tension in the Middle East will keep the yellow metal in high demand. Chirag Mehta, Fund Manager – Alternative Investments, Quantum Mutual Fund, says, “Any flareup in geopolitical tensions is likely to keep gold price buoyant as investors tend to shun risky assets.” In the immediate aftermath of the event, international gold price surged above $1,500/oz. Domestic price of gold is hovering around `38,000 per 10 gram. Any

spillover effect of rising oil price on the rupee may also push local gold prices further north. Gold prices have been on the uptick for a while now, as tensions over the USChina trade war, spread of negative bond yields and slowing growth have turned investors risk averse.

Debt The likely spike in oil prices has negative implications for the bond markets as well. Bond markets have been buoyant in anticipation of RBI cutting rates in the near future on the back of benign inflation and slowing growth. However, rising oil prices are likely to upset the fiscal math and possibly create inflationary pressures in the economy. This may prevent the RBI from cutting rates immediately or to the extent anticipated, which will affect bond prices and keep yields elevated. “While a rate cut was widely expected by the RBI at their next meeting in early October, crude now throws a bit of a monkey wrench into that calculus,” says Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management. The yield on 10-year government bond inched up to 6.75% initially and is now hovering around 6.7%. With rise in bond yields, experts caution against betting heavily on longer duration strategy. Sharma indicates that a diversified portfolio of highest quality AAA rated, corporate bonds, banking and PSU bond funds, low to moderate duration remains his preferred positioning.

Please send your feedback to [email protected]

09

stocks 10

The Economic Times Wealth September 23-29, 2019

These capital goods stocks could create wealth Some bluechip stocks from the capital goods sector are available at attractive valuations. Find out why their long-term business prospects are looking good.

by Sameer Bhardwaj

GETTYIMAGES

T

he capital goods sector has underperformed during the past few years, which is evident from the difference in the returns of the BSE Capital Goods index and the Sensex. The BSE Capital Goods has underperformed the Sensex by 2.9% in the past one year, by 12.4% in past three years and by 20.5% in past five years. The reasons for this underperformance include lack of demand for the large scale equipment, increase in stalled or abandoned projects that were in implementation, very few new projects, and weak capex cycle of both government and the private sector. In addition, weak consumption activity in the economy and liquidity pressures have also negatively affected the prospects of the sector. The capital goods sector play a significant role in employment generation and economic growth. Due to the reluctance of the private sector, government capex is necessary to kickstart the investment activity. Such government expenditure fell 28% in the first quarter of 2019-20. However, recent data on the government capex has ignited hope for the revival of the capital goods sector. According to a report by SBI Cap Securities, the capital expenditure of the government has significantly picked up in the month of July 2019 and stood at approximately `45,000 crore. This translates into a year-on-year growth rate of 83%, bolstered mainly by a pickup in road and defence sectors. The report also highlights the strong order books of some players which will

cushion them from a decline in earnings in the near term. The management guidance for some of these players expects 1015% order inflow growth in 2019-20. Another report by Elara Capital has expressed confidence in the electrical equipment (EEI) sub-segment of the capital goods sector. The volumes of the segment are growing in double digits for the past two years and the ongoing electrification programme and T&D capex (Central & State) along with growth in infrastructure and metros will continue to fuel growth for the EEI. On the other hand, a report by ICICI Direct expects that there will be a pick-up in order inflows in the capital goods sector from the third quarter onwards. Increased order inflows will be due to the expected stronger tendering pipeline across infrastructure, T&D and power segments. Also, the revenue and profitability growth of the established players are expected to remain steady for 2019-20 due to the strong present order backlog. Even after the recent bounceback, some capital good players are available at compelling valuations in terms of their PE multiples. We have selected seven companies whose PE multiples, based on their future 12-month blended forward earnings, are at a reasonable discount relative to their past five-year and 10-year historical averages. These seven companies reported an year-on-year growth of 11% in aggregate consolidated sales and 25% growth in operating profits in the June 2019 quarter. Comparatively, the BSE Capital Goods index aggregate sales and operating profit grew at -1.7% and -9.3% respectively during the same period. Let us look at the inancial of these seven companies in detail:

KEC INTERNATIONAL Current PE

10-year average PE

Current price (`)

1-yr target price (`)

11.4

23.8

250

354

AN INFRASTRUCTURE EPC player with a presence across the power transmission and distribution, railways, smart infrastructure, cables and solar segments. Its strong diversified order book across segments and geographies, steady operating performance, better execution capacity and growth recovery in T&D segment are key growth catalysts. Moreover, orders from the railways for track laying, signalling, OHE and station building are likely to see traction in 2019-20. Also, the government’s long term capex targets will help the company to improve its sales and margins going forward.

POTENTIAL UPSIDE

41.8%

ANALYSTS’ RECOMMENDATIONS

BUY 27

HOLD 2

KEC INTERNATIONAL

SELL 1

BSE CAPITAL GOODS

BSE SENSEX

97 100 18 Sept 2018

92 82 17 Sept 2019 

stocks The Economic Times Wealth September 23-29, 2019

LARSEN & TOUBRO Current PE

10-year average PE

17.5

28.3

Current price (`)

1-yr target price (`)

1,314

1,661

FINOLEX CABLES POTENTIAL UPSIDE

26.4%

Current PE

10-year average PE

Current price (`)

1-yr target price (`)

12.2

17.7

368

488

FINOLEX CABLES

ANALYSTS’ RECOMMENDATIONS

BUY 8

100 18 Sept 2018

HOLD 2

32.5%

BSE CAPITAL GOODS

BSE SENSEX

HOLD 2

97

Current PE

10-year average PE

POTENTIAL UPSIDE

15.5

19.8

Current price (`)

1-yr target price (`)

16.6%

108

126

ANALYSTS’ RECOMMENDATIONS

92

ANALYSTS’ RECOMMENDATIONS

BUY 35

BHARAT ELECTRONICS

POTENTIAL UPSIDE

SELL 2

BUY 22

SELL 0

HOLD 1

SELL 2

67 17 Sept 2019 

LARSEN & TOUBRO

A MANUFACTURER OF electrical and telecommunication cables, lighting products, electrical accessories, switchgear, fans and water heaters, Finolex Cables is in a sweet spot. A report by Firstcall Research says its electrical cables segment is likely to get a boost from the government’s rural and infrastructure push. On the other hand, government’s focus on Digital India and its ambitious Bharat Net initiative will improve the prospects of the communication cables segment.

BSE CAPITAL GOODS

BSE SENSEX

97

100 18 Sept 2018

KEI INDUSTRIES

98 92

Current PE

10-year average PE

Current price (`)

1-yr target price (`)

15.8

43.3

467

552

17 Sept 2019 

A CONGLOMERATE WITH a presence in over 30 countries, it addresses critical needs of key sectors, including infrastructure, construction, defence, hydrocarbons, heavy engineering, power and shipbuilding among others. JP Morgan is bullish on the stock due to the company’s strong earnings growth track record, efficient and profitable execution capabilities, improvement in working capital management and RoE enhancement. The research house feels that guidance for 2019-20 appears achievable in terms of revenue growth and EBITDA margins. The profitability is likely to improve due to the sale proceeds from real estate monetisation (e.g. Hyderabad metro real estate). Even in a tough macro environment, L&T has won a larger share in the limited big order opportunities. Sebi’s nod to the share buyback proposal could be a near term catalyst.

BUY 12

HOLD 0

100 18 Sept 2018

Current price (`)

1-yr target price (`)

22.7

54.5

814

1,107

92

BUY 4

35.9% HOLD 0

BSE CAPITAL GOODS

97

17 Sept 2019 

A NAVRATNA PSU, it is engaged in the design, manufacture and supply of electronics products & systems for the defense requirements. Operational excellence, superior R&D, improved order execution, higher cash flows, and better working capital management are the key positives for the company. In addition, the focus on technological innovation which involves upgradation of machinery and infrastructure provides the much needed competitive advantage. It reported good numbers in the June 2019 quarter, with 16.9% year-on-year growth in operating profit and 13.9% growth in net profit. Analysts say the company will be the main beneficiary of the government’s reforms in the defence sector and its healthy order book provide strong revenue visibility going forward. Current PE is based on future 12-month blended forward earnings. Stock prices as on 17 September 2019. Source: ACE Equity & Bloomberg.

KALPATARU POWER TRANSMISSION

POTENTIAL UPSIDE

ANALYSTS’ RECOMMENDATIONS

BEML

97

17 Sept 2019 

10-year average PE

100 18 Sept 2018

18.2%

A WIRES AND cables manufacturer, Kei Industries offers a wide range of cabling solutions. AnandRathi is bullish on the company due to its leading position in institutional cables, strong earnings growth and improved balance sheet. Strong order book of Rs 4,530 crore offers robust revenue assurance in 2019-20. The brokerage house expects that the cables segment mix of EHV cables, retail and exports will aid margin expansion in the future and its ability to generate free cash flows will help in the stock’s re-rating.

Current PE

124

92

119

BSE SENSEX

BSE CAPITAL GOODS

BSE SENSEX

POTENTIAL UPSIDE

BSE CAPITAL GOODS

SELL 1

BEML

THIS MINIRATNA CATEGORY-1 PSU has three major business verticals: mining & construction, defence and rail and metro. According to a report by Antique Stock Broking, the metro rail projects will continue to provide large scale opportunities to the company as both the Centre and the states have stepped up their efforts towards increasing the metro network not just in big cities but also in tier II and tier III cities. In addition, BEML’s mining and construction business is expected to remain steady given robust Coal India capex outlook for 2019-20. The company expects to drive margin expansion through operating leverage, cost cutting measures and other operational excellence initiatives.

KEI INDUSTRIES

ANALYSTS’ RECOMMENDATIONS

BHARAT ELECTRONICS

SELL 0

BSE SENSEX

100

106

18 Sept 2018

92 97 17 Sept 2019 

Current PE

10-year average PE

Current price (`)

1-yr target price (`)

13.6

29.2

453

548

A DIVERSIFIED CONGLOMERATE, Kalpataru is engaged in the global power transmission and infrastructure EPC space. ICICI Direct believes that the strong order book with good traction in nonT&D business (railways, pipeline), improved subsidiary performance and operating leverage gains are likely to support consistent growth. Moreover, diversification in international T&D markets would provide good opportunities. The returns ratios are expected to improve because of the company’s strategy to monetise non-core assets and sales proceeds from the transmission assets.

POTENTIAL UPSIDE

21.1%

ANALYSTS’ RECOMMENDATIONS

BUY 17

HOLD 1

SELL 1

KALPATARU POWER TRANSMISSION BSE CAPITAL GOODS

BSE SENSEX

139

100 18 Sept 2018

97 92 17 Sept 2019 

11

12

`75,495

Total servicing & maintenance cost (3 years)

a car

HIRE

in 3 years, if you

1 lakh

`

Hiring an Uber is cheaper than buying a car, with or without a chauffeur. However, owning a car is a better option if you are impacted by surge pricing. Here are some other pros & cons of both the options.

ET WEALTH ANALYSIS

YOU SAVE

Without surge and without chauffeur

`50,000

Parking cost & miscellaneous charges (3 years)

`30,000

Resale value after 3 years

`72,000

Distance (For 20 km one way, or 40 km in a day)

If you hire a cab...

If you own a car...

575 X 1.5

`862

Cost per day

6.3 lakh

Better use of time Hiring a car, if you don't have a chauffeur, means plenty of time at hand to catch up with office mails and make calls.

The biggest benefit of a cab is that you don't have to drive yourself out of frequent traffic jams and bottlenecks.

3.7 lakh a car

HIRE

in 3 years, if you

`

`7.7 lakh

TOTAL COST FOR 3 YEARS

If your sense of direction is non-existent, it is easier to leave the complicated routes to the driver, particularly in metros.

No need for navigation

Given the cases of misconduct by cab drivers, it’s safer for women to drive on their own.

Safer for women

YOU SAVE

You have a car at your disposal at all times, without the hassle of booking, waiting or cancellation.

Instant access

a car

OWN

in 3 years, if you

1.5 lakh `

Dealing with traffic snarls

Ease of taking trips Dealing with an emergency or taking driving vacations are much easier to deal with if you have your own car.

YOU SAVE

With surge, without chauffeur

The sheer pleasure of buying and driving one's own car is incomparable.

a car

HIRE

in 3 years, if you

`

With surge, with chauffeur

Cost per day x multiplier (which can vary)

Personal satisfaction

YOU SAVE

Without surge and with chauffeur

Toll (Can vary and include tax, surcharge)

With surge pricing (including toll, etc)

`575

Cost per day

Time (For two trips of 50 minutes each)

`5.1 lakh Base fare (For two trips in a day)

`105 + `105 + `315 + `50

`7.8 TOTAL COST FOR 3 YEARS

`1.05

`52.5

Per km

Without surge pricing (with toll, etc)

Per minute

Base fare

Uber fare is the sum of base fare and charges for time and distance covered during each trip

Uber Go

ASSUMPTIONS Daily total distance covered: 40 km Daily trips: 2 Time taken in each trip: 50 minutes Tolls, tax and surge pricing included. Number of days the car is used in a month: 25 days Cost of petrol in Delhi on 19 September (actual): `72.7/litre

COST OF HIRING A CAR

HIRING IS BETTER WITHOUT SURGE PRICING

(with chauffeur)

`11.5 lakh

`6.1 lakh

Net cost

`3.7 lakh

(@`15,000 per month)

`15.2 lakh

Registration/taxes (3 years)

`9.8 lakh

Cost of ownership in 3 years

`1.18 lakh

Petrol cost: `72.7/lt Mileage: 22 km/lt Monthly running cost: `3,304 Total running cost:

Monthly distance covered: 1,000 km

Total running cost (3 years)

Total cost of owning in 3 years (with chauffeur)

`60,000

Total insurance cost (3 years)

`58,200

Interest rate: 9.5% Loan term: 3 years Down Loan payment interest

Loan cost

(Ex-showroom, Delhi)

`5.82 lakh

Price of Maruti Suzuki Dzire

COST OF OWNING A CAR

Let us compare the total cost of owning a Maruti Suzuki Dzire and hiring Uber cabs, in Delhi, over a period of three years. We have only considered office trips and excluded other personal trips, including holidays.

In the light of the debate over millennials' penchant for hiring cabs rather than buying their own cars, Riju Mehta does a cost comparison for both options to help you make a clear choice.

Should you buy or hire a car?

The Economic Times Wealth September 23-29, 2019

learn & keep

financial planning The Economic Times Wealth September 23-29, 2019

Why we all must save a little The only way to deal with uncertanities of the future is to save persistently, says Uma Shashikant.

IMAGES BAZAAR

14

L UMA SHASHIK ANT IS CHAIRPER SON, CENTRE FOR INVES TMENT EDUC ATION AND LE ARNING

The distaste for savings is to my mind the core problem. There isn’t any other easy solution to an uncertain future. Not the stringent saving that kills, or the erratic saving that is indisciplined, but a small and persistent saving as a habit.

ast week, the hashtag #MillennialRetirementPlans was trending on Twitter. The tweets offered humour, pragmatism and a range of emotions. It was interesting to see the need to break away from norms of the earlier generations. The young were persistent in pointing out that what worked earlier won’t work now. Maybe, maybe not. Should we be in charge of our retirement or let the government provide retirement benefits and social security? This debate is old, and we have lived through the cycles of one school dominating the other. The baby boomers (born 1946-64) broke away from handouts and expected their governments to only provide the framework for retirement security. The focus moved from benefit to contribution. People began to save early, invest without touching the corpus, and allowed it to grow and fund their retirement. Generation X (born 1965-1980) stepped into their work lives during the period of boom and bust, making money or losing jobs into their adulthood. They were the consumerist generation. They got themselves into debt for homes and used credit cards happily, and lived with the confidence of finding a job to do through their lives. They worried when conversations turned to retirement, felt guilty about not doing enough, but hoped to begin to save sooner than later. They wished the government offered some social security. The millennials (born 1981-96) are not sure what the long term holds. Many joke about not living long enough, or spending half their lives finding a job and the other half

paying off loans. They disapprove of the conservative approach of baby boomers, though many of them think they may fall back on inheritance or their parents’ incomes if all else fails. The primary marker for the millennials are that they are not in the formal workforce by choice; they like the gig economy instead. Working wherever their skill is sought, or starting small businesses that may or may not work, is how their work life pans out. They increasingly don’t own homes and cars, for they find loans burdensome. They blame the older generations for putting them through expensive but useless education and for advocating savings and owning assets, when their income itself isn’t stable. What would an educated generation that works hard, but finds the amount of uncertainty they have to deal with is too high do? Retirement would be the last thing on their minds. The traditional answer to an uncertain future was savings. The baby boomers denied themselves the luxuries to save for the future. They saw the savings as their insurance against unexpected events. The millennials do not have that world view. They do not divide their work lives into compartments. The idea that you would earn, save and retire seems not just staid, but difficult to pull off in their times. Their view of their finances revolves around the balance between spending and earning. Since they are currently struggling to get past this basic equation of comfort, their ability to have a long term view is limited. Many remain pessimistic about their future, their longevity, their retirement and their wealth.

The inequality in income rankles many who posted on Twitter. They find earlier generations have not only become very rich, but have also eliminated many traditional jobs that paid a steady income. They do not see themselves necessarily as entitled, but blame the earlier generation for the excesses and the lack of jobs across the spectrum. The gig economy, where every paying job is a risky contract, is not their making, they argue. They see it as a response to the excesses of the capitalist and consumerist economic models. The leaning of a significant number of millennials to somewhat socialistic models stems from their view that this inequality needs serious correction. Health is a big concern, expressed in various ways in which it affects the millennials’ lives. They worry about the lack of ethical selling in the food industry; they see themselves as being afflicted by lifestyle diseases, as they keep long hours and eat erratically; they find themselves short of money and time to address any health issues that may arise; and they worry about falling ill and losing their jobs. The highest level of pessimism is about aging and being afflicted with some disease that needs money and prolonged care. They don’t see themselves prepared, nor do they see solutions. The distaste for savings is to my mind the core problem. There isn’t any other easy solution to an uncertain future. Not the stringent saving that kills, or the erratic saving that is indisciplined, but a small and persistent saving as a habit. The modern times are not easy, and the millennials’ stories about uncertain jobs are real. How would you solve a problem you do not control? It is the nature of economic cycles to not reveal the trends until we are well into it. The conservative baby boomers would not have imagined themselves on top of a wealth pile. If they did, they would not have been so frugal. Gen X would not have taken loans, spends and job changes with abandon, if they knew their jobs will get redundant. The confused milliennials do not know how their creative solutions to uncertainty, their determination to set the wrong right, will make a better world for everyone. While we argue for what we see as effects and consequences, we discount what we do in action to enable change. That one ground rules remain unchallenged through this churn—the precious merit of our little savings that have been invested to protect us when in trouble. The millennials need not kill themselves to save; but holding back on one spend a day will go a long way. Put aside the cost of one meal a day, you will be surprised how it grows with time. Old fashioned, but immensely doable. Please send your feedback to [email protected]

financial planning The Economic Times Wealth September 23-29, 2019

Estimating equity returns

PAPER WORK :: Ways to assign life insurance policy

Look at the past return records to estimate gains from your investments.

Interest in a life insurance policy can be transferred from the policyholder to a lender or a relative by assignment of policy. Here the policyholder is known as the assignor and the person, in whose favour the policy has been assigned is called assignee.

Types of assignment

GETTY IMAGES

There are two types of assignment:  Conditional assignment: This is done when the insured wishes to pass benefits of the policy to a relative in case of early death or certain conditions. The rights of the policyholder are restored once the conditions are fulfilled.  Absolute assignment: This is done as a part of consideration for a loan in favour of the lender/bank/lending institution. In such an assignment, the insured loses his rights in the policy and the absolute assignee can deal with it independently.

Namita is a systematic investor in equity funds. She earns a decent salary and lives well. She does not have any specific financial goals, but is keen to ensure that her money grows. For investing regularly, she finds it easy to use the SIP route. However, she is concerned about the returns, not sure if they are good enough. Is there a way she can estimate her returns?

N

amita should know that returns from investments can only be estimated. There is no guarantee in the investment world. She can protect her investments from high risks by using a sound process, and earn market returns on her investments. The easiest thing to do while trying to estimate returns is to look at the past return records and form expectations on this basis. When it comes to equity, the returns can be volatile. But what Namita will notice is that if she diversifies her investment, so that she holds a basket of equity shares; invests over a period of time; and ensures that she stays invested for the long term across market cycles, her return is likely to be close to the long-term average. Using SIPs, she is already following this process. The long-term average return from equity

investments tends to beat the inflation numbers. The ability of equity to earn a higher return comes from businesses being able to use borrowed funds from investors and creditors, invest them in assets and earn a return that is higher. The business risk is compensated by the risk premium on equity investments available only to equity investors. Namita will find that in the Indian scenario, the average long-term return from investing systematically has been about 14-16%. This will come down only if inflation comes down. The return from equity will also be subject to short-term ups and downs. Therefore, Namita should not expect to earn a steady return every year but expect the ups and downs, which tend to average out over time. Since her investment plan is designed to reduce her risks, she should do well.

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

smart things to know

1

Stock exchange is a platform for listing securities, discovering their price, trading securities and sharing information. (BSE and NSE)

2

All stock market trades are conducted through the members of the exchange, called brokers for a fee or ‘brokerage’.

Secondary market participants

Issuers are companies that list their securities on the stock exchange after meeting listed criteria and signing the listing agreement with the exchange. (HDFC Bank, RIL)

3

4

Clearing Corporation enables settlement of funds or money and securities between buyer and seller (NSCCL, ICCL).

Investors open demat accounts with members of the depositories, called depository participants to hold their securities and settle their trades.

5

Notice of assignment The insured needs to either endorse the policy document or make a deed of assignment and register the same with the insurer. A form prescribed by the insurers must be filled and signed. In case of conditional assignment, reason also needs to be mentioned.

Documents needed  Proof of income.  Self attested copy of

photo ID and address proof.  Self attested copy of PAN card.

Fees and stamp duty If the assignment is made by endorsement on the policy document, it is exempt from the stamp duty. However, in case of a separate deed, stamp duty is payable.

Acceptance If the insurance company decides to register the assignment, it will record the assignment and inform the assignor. On paying a fee, the assignee can obtain an acknowledgement.

Right to reject The insurer has a right to reject if it believes that the assignment is not bona fide or against the interest of the policyholder or public interest or for the purpose of trading the insurance policy.

15

family finance 16

The Economic Times Wealth September 23-29, 2019

All goals within easy reach By utilising his existing resources and securing risks adequately, Shravan can ensure a smooth journey. by Riju Mehta

S

hravan I. is a 32-year-old software engineer from Tamil Nadu and gets a monthly salary of `89,500. He stays with his homemaker wife in a rented house. After considering his household expenses, rent and insurance premium, he is left with a surplus of `32,308. His portfolio, worth `1.8 crore, comprises real estate in the form of three plots of land worth `60 lakh, debt worth `40.6 lakh and equity worth `83 lakh. His goals include building a contingency corpus, buying a car and a house, taking a vacation, saving for his future child’s education and wedding, and his retirement. Financial Planner Pankaaj Maalde suggests he build an emergency corpus of `3.6 lakh for the couple and a medical buffer of `3.5 lakh for his parents. This can be done by allocating a portion of his cash, fixed deposit and P2P loan, which should be invested in an ultra short duration fund. Shravan wants to buy a car worth `8.5 lakh after three years and can amass the amount by starting an SIP of `30,000 in an equity savings fund. For his goal of taking a `3.5 lakh vacation in five years, he can invest his cash holding of `2 lakh in a short duration fund. No existing resource has been allocated to both these goals. Shravan also wants to buy a house worth `70 lakh in five years, for which he can sell his plots to get the desired amount. For the education of his future child in 18 years, Shravan has estimated a need of `1.7 crore. For this, he can assign a portion of his mutual fund corpus, which will help amass the required amount in the specified time. For the child’s wedding in 25 years, he wants `2.7 crore, and can allocate the remaining mutual fund corpus for this goal. For retirement, he will need `8.3 crore in 23 years as he wants to retire at 55 years. For this, he can assign his PPF, EPF, PMS and remaining mutual fund corpus. No fresh investment is needed for this goal. Shravan has no life insurance, and a `7.5 lakh family floater plan for health insurance, which has been provided by his employer. Maalde suggests he buy a `1 crore term plan, which will cost him `833 a month in premium. For health insurance, he should buy a `10 lakh family floater plan, which will cost him `1,000 a month in premium. He should also purchase a `25 lakh accident disability plan at a monthly premium of `333. This should take care of his insurance needs.

SHRAVAN I. & RADHIKA, 32 & 29 YEARS, SALARIED, TAMIL NADU

How to invest for goals

Portfolio

GOAL

FUTURE COST (`) / TIME TO ACHIEVE

RESOURCES USED

INVESTMENT NEEDED (`/MONTH)

Emergency fund

7.1 lakh

Cash, FD, P2P loan

-

Buying a car

8.5 lakh / 3 yrs

-

30,000

Vacation

3.5 lakh / 5 yrs

Cash

-

CURRENT VALUE (`)

ASSET

Real estate

60 lakh

Cash

2.8 lakh

Debt PPF

17.5 lakh

Buying a house

70 lakh / 5 yrs

Real estate

-

EPF

16.9 lakh

Future child’s education

1.7 crore / 18 yrs

Mutual funds

-

Future child’s wedding

2.7 crore / 25 yrs

Mutual funds

-

Retirement

8.3 crore / 23 yrs

Mutual funds, PMS, EPF, PPF

-

Fixed deposits

3 lakh

Others (P2P loan)

3.2 lakh

Equity Direct equity

44.4 lakh

PMS

38.6 lakh

Total

1.86 crore CURRENT VALUE (`)

LIABILITIES

Home loan

-

Total liability

-

Net worth

`1.86 crore

Cash flow SUGGESTED (`)

89,500

89,500

Outflow

30,000

Annual return assumed to be 12% for equity and 8% for debt funds. Inflation assumed to be 7%.

Insurance portfolio EXISTING COVER (`)

EXISTING MONTHLY PREMIUM (`)

SUGGESTIONS

SUGGESTED MONTHLY PREMIUM (`)

Term plan

-

-

Buy `1 crore plan

833

Traditional plan

-

-

-

-

-

-

-

-

-

`1 crore

833

Employer’s

7.5 lakh

2,025

-

-

Own

-

-

Buy `10 lakh family floater plan

1,000 + 2,025 (existing)

TOTAL

7.5 lakh

2,025

`17.5 lakh

3,025

INSURANCE

Life insurance

Ulips

EXISTING (`)

Income

Investible surplus needed

TOTAL Health insurance

Household expenses

55,167

55,167

Insurance premium

2,025

4,191

-

30,000

Critical illness & accident disability

-

-

Buy `25 lakh accident disability plan

333

Total outflow

57,192

89,500

TOTAL

-

-

-

333

Surplus

32,308

142

Insurance cost

-

2,025

-

4,191

Investment

Premiums are indicative and could vary for different insurers.

FINANCIAL PLAN BY

PANKAAJ MAALDE CERTIFIED FINANCIAL PLANNER

Write to us for expert advice

Looking for a professional to analyse your investment portfolio? Write to us at [email protected] with ‘Family Finances’ as the subject. Our experts will study your portfolio and offer objective advice on where and how much you need to invest to reach your goals.

SMART STATS ET WEALTH TOP 50 STOCKS

The Economic Times Wealth September 23-29, 2019

In This Section MUTUAL FUNDS - P18 LOANS AND DEPOSITS - P20

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 is the listing of the top 50 stocks based on the composite rating to help ease your fortune hunt. RANK

PRICE `

Current Previous Rank Rank

Stock Price

GROWTH%*

VA LUAT I O N R AT I O S

Revenue

Net Profit

PE

PB

Div Yield

RISK

PEG

Downside Risk

Bear Beta

R AT I N G No. of Consensus Analysts Rating

Apar Industries

1

1

537.95

19.71

48.41

15.10

1.71

1.75

0.31

1.11

0.92

10

4.90

KEC International

2

2

250.45

23.48

28.24

13.28

2.65

1.07

0.48

1.48

0.93

30

4.70

JK Cement

3

3

1019.95

20.58

63.78

27.75

2.92

0.98

0.32

1.06

0.87

22

4.64

HG Infra Engineering

4

4

189.35

32.76

38.70

9.62

1.85

0.26

0.24

2.09

0.70

13

5.00

Gujarat Gas

5

7

169.00

33.90

78.52

27.54

5.23

0.59

0.40

1.35

1.02

28

4.61

Aurobindo Pharma

6

5

606.20

30.44

25.04

15.00

2.55

0.40

0.56

1.39

1.04

36

4.64

Engineers India

7

6

109.35

26.61

25.94

18.69

2.94

3.66

0.79

1.61

0.75

18

1

Fast growing stocks Top 5 stocks with the highest expected revenue % growth over the previous year Sterlite Technologies

40

4.39

Gujarat Gas

34 33

Zensar Technologies

8

8

214.85

20.23

24.03

3.10

2.50

1.30

0.14

1.70

1.18

16

4.63

PI Industries

DB Corp

9

9

135.80

5.76

27.01

8.82

1.29

7.35

0.27

1.27

1.31

16

4.19

Ipca Laboratories

10

10

947.90

21.69

42.11

26.94

3.84

0.32

0.64

1.16

0.53

26

4.42

Bharat Heavy Electricals

11

11

47.40

9.66

37.99

17.07

0.54

4.11

0.49

1.79

1.37

34

3.06

HG Infra Engineering Aurobindo Pharma

Ahluwalia Contracts India

12

22

310.05

21.65

32.36

17.75

2.83

0.09

0.55

1.47

0.82

16

4.81

Century Plyboards India

13

14

135.30

15.25

42.23

20.34

3.10

0.72

0.48

1.75

1.11

19

4.53

UltraTech Cement

14

13

3866.30

25.75

76.08

43.59

3.74

0.29

0.61

1.27

1.35

40

4.13

Parag Milk Foods

15

12

155.65

22.56

24.13

10.91

1.59

0.47

0.47

1.74

0.83

15

4.40

Rallis India

16

21

161.15

17.86

27.75

20.22

2.44

1.52

0.73

1.12

0.43

19

3.89

Allcargo Logistics

17

15

98.65

14.96

15.36

10.08

1.22

3.49

0.48

1.37

0.91

10

4.70

Sun Pharmaceutical

18

24

411.15

20.19

44.60

36.88

2.37

0.66

0.84

1.70

0.94

43

3.54

Zensar Technologies Jagran Prakashan

Oberoi Realty

19

23

526.90

21.16

41.25

23.14

2.39

0.38

0.51

1.76

1.38

25

4.04

NTPC

Alkem Laboratories

20

16

1866.75

17.77

37.64

29.71

4.15

0.84

0.80

0.82

-0.15

18

4.61

Power Grid Corp of India

21

20

201.15

10.33

11.57

8.37

1.78

4.12

0.64

0.94

0.53

28

4.32

Redington India

22

17

104.45

15.25

15.76

8.18

1.04

3.15

0.53

1.82

0.58

10

4.70

Redington India Ashok Leyland

NBCC India

23

38

34.00

24.28

31.91

16.32

4.05

3.39

0.52

2.31

2.41

14

4.07

HeidelbergCement India

24

26

184.80

12.91

39.00

18.98

3.58

2.13

0.49

1.61

1.70

15

4.47

NTPC

25

27

121.70

13.52

4.83

7.96

1.10

4.48

1.03

1.10

0.89

26

4.85

Larsen & Toubro

26

30

1300.70

19.61

17.37

20.50

2.93

1.37

1.19

0.99

0.98

39

4.64

Jagran Prakashan

27

28

65.90

5.76

17.32

7.61

1.04

4.26

0.41

1.60

0.79

14

4.36

Emami

28

19

310.70

13.92

83.60

46.53

6.80

1.27

0.55

1.46

0.97

34

4.26

Grasim Industries

29

18

699.90

16.52

49.87

25.95

0.82

1.00

0.87

1.51

1.41

12

4.58

CCL Products India

30

25

246.90

24.43

25.45

21.22

3.92

0.71

0.84

0.95

0.38

10

4.70

Narayana Hrudayalaya

31

31

232.90

20.70

129.81

79.81

4.37

0.42

0.62

1.35

0.47

11

5.00

JSW Energy

32

33

63.90

5.18

37.08

15.09

0.89

1.55

0.40

1.36

0.96

16

3.19

Sobha

33

32

505.30

16.37

19.27

16.13

2.15

1.34

0.79

1.60

1.03

23

4.57

Reliance Industries

34

34

1179.05

10.19

27.63

17.70

1.81

0.54

0.71

1.25

1.05

36

4.28

Lupin

35

37

741.25

14.74

71.10

55.23

2.44

0.66

0.77

1.19

0.89

46

2.83

2

3

33 30

Least expensive stocks Top 5 stocks with the lowest price-earnings ratio 3.10 7.61 7.96 8.18 8.29

Best PEGs Top 5 stocks with the least price-earnings to growth ratio HG Infra Engineering 0.14

0.24

Zensar Technologies

4

Apar Industries

0.27

0.31

DB Corp

0.32

JK Cement

Income generators Top 5 stocks with the highest dividend yield (%)

Info Edge India

36

36

1928.50

29.45

63.33

39.15

9.30

0.26

0.32

1.72

0.15

29

3.52

Sterlite Technologies

37

29

153.15

40.03

19.36

10.80

3.59

2.21

0.62

2.45

1.47

12

4.42

DB Corp

7.35

Ashok Leyland

38

39

58.40

17.81

11.19

8.29

1.97

5.20

0.74

1.73

1.19

49

3.24

Hexaware Technologies

39

35

376.25

24.17

21.37

19.10

4.41

2.37

1.09

1.33

0.38

28

3.79

5.20 4.48

Jubilant Life Sciences

40

46

522.60

7.87

22.69

13.95

1.70

0.86

0.60

1.65

1.35

13

4.77

Adani Ports & SEZ

41

40

361.90

19.76

25.37

18.83

3.08

0.05

0.73

1.61

1.62

24

4.75

Ashok Leyland NTPC Jagran Prakashan Power Grid Corp of India

Mahanagar Gas

42

42

828.80

7.27

16.06

14.97

3.41

2.39

0.93

1.08

0.67

27

4.48

Cipla/India

43

44

452.05

13.50

25.50

24.05

2.45

0.65

0.94

1.07

0.62

42

3.60

PI Industries

44

--

1250.80

33.26

39.53

42.18

7.58

0.31

1.06

1.17

0.65

24

4.21

Mphasis

45

41

967.55

18.32

11.91

17.23

3.43

2.74

1.19

1.24

0.99

33

4.30

HCL Technologies

46

43

1049.55

21.52

7.96

14.27

3.39

0.76

1.53

1.21

0.45

49

4.12

Thermax

47

45

998.40

11.50

56.42

34.58

3.95

0.70

0.67

1.19

0.59

32

2.78

SRF

48

--

2702.45

20.01

39.94

24.28

3.77

0.47

0.62

1.41

1.38

17

3.82

Ramco Cements

49

48

707.45

20.22

39.94

30.76

3.68

0.42

0.77

1.07

1.33

27

3.52

Torrent Pharmaceuticals

50

49

1702.10

12.79

47.64

66.33

6.12

1.02

1.40

1.04

0.59

33

4.27

*REVENUE AND NET PROFIT GROWTH IS BASED ON CONSENSUS ANALYSTS' EXPECTATIONS. NR: NOT IN THE RANKING. DATA AS ON 19 SEPT 2019.

SOURCE: BLOOMBERG

5

4.26 4.12

Least risky Top 5 stocks with the lowest downside risk Power Grid Corp of India

0.82

0.94

Alkem Laboratories

0.95

Larsen & Toubro

0.99

CCL Products India

1.04

Torrent Pharmaceuticals

SEE DOWNSIDE RISK AND BEAR BETA COLUMNS IN THE ADJACENT TABLE.

smart stats 18

The Economic Times Wealth September 23-29, 2019

ETW FUNDS 100

LAGGARDS & LEADERS 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).

BEST FUNDS TO BUILD YOUR PORTFOLIO

LAGGARDS

ET Wealth collaborates with Value Research to identify the top-performing funds across 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.

Equity: Large-cap 5-year returns 10.43

3.22 Principal Nifty 100 Equal Weight

Value Research Fund Rating

Net Assets (` Cr) 3-Month

6-Month

1-Year

3-Year

5-Year

4.18

Expense Ratio (%)

Taurus Largecap Equity

4.88

EQUITY: LARGE-CAP

JM Large Cap

Axis Bluechip Fund



7005.1

-2.5

3.33

4.57

11.82

9.6

2

Mirae Asset Large Cap Fund



13946.19

-5.28

-4.04

-1.4

9.58

10.43

1.75

Sundaram Select Focus Fund



972.51

-4.85

-1.93

-1.29

9.55

7.13

2.38

HDFC Index Fund



467.63

-5.94

-3.41

-1.18

9.38

7.17

0.3

Canara Robeco Bluechip Equity Fund



220.65

-4.98

-2.09

-0.62

7.83

7.69

2.65

HDFC Top 100 Fund



16842.38

-9.28

-6.53

-2.14

7.57

6.59

1.88

Edelweiss Large Cap Fund



155.04

-5.31

-2.18

-4.7

7.33

7.95

1.99

ICICI Prudential Bluechip Fund



21672.64

-6

-4.11

-4.39

7.33

7.86

1.78



11819.31

-9.65

-9.33

-6.76

7.05

7.83

1.86

Motilal Oswal Focused 25 Fund



1059.55

-4.28

-0.7

-2.28

6.54

8.72

2.25

3.37

JM Core 11 Fund



49.56

-4.03

-6.35

-2.52

6.47

9.3

—

LIC MF Multicap

SBI Bluechip Fund



21483.76

-6.11

-2.62

-2.18

5.1

8.54

1.89

Reliance Large Cap Fund

5.1

11.8%

DSP Top 100 Equity

THE 3-YEAR RETURN OF AXIS BLUECHIP IS THE HIGHEST IN ITS CATEGORY.

3.28



7759.44

-3.71

-2.77

0.78

11.25

15.27

1.88



720.99

-5.45

-4.41

-4.51

9.21

9.75

2.6

Invesco India Growth Opportunities Fund



1658.8

-3.85

-4.27

-4.1

8.64

9.64

2.07

LIC MF Large & Mid Cap Fund



509.41

-2.36

-1.15

-2.77

8.5

—

2.77



4668.59

-7.8

-7.32

-8.73

7.39

11.64

2.07

Kotak Equity Opportunities Fund



2487.55

-5.25

-3.91

-1.41

6.61

9.38

2.17

Principal Emerging Bluechip Fund



2057.33

-6.54

-6.91

-11.42

5.68

10.57

2.09

Axis Focused 25 Fund



7841.41

-3.84

0.45

-4.05

10.65

11.46

2.03

Parag Parikh Long Term Equity Fund



2066.68

-1.13

0.2

-0.18

10.55

10.5

2.08

Canara Robeco Emerging Equities Fund

EQUITY: MULTI-CAP

Tata Retirement Savings Fund SBI Focused Equity Fund Edelweiss Multi Cap Fund Kotak Standard Multicap Fund SBI Magnum Multicap Fund



632.32

-4.48

-3.89

-4.85

8.7

10.55

2.45



5127.07

-4.35

-1.16

0.03

8.59

10.47

2.09 2.48



417.73

-7.07

-4.9

-5.04

8.31

—



25381.36

-6.1

-3.35

-0.96

8.17

10.82

1.75



7549.36

-4.47

-1.61

-0.5

7.66

10.83

2.07



12693.11

-5.49

-4.63

-5.63

7.05

13.02

1.76

Quant Active Fund*



6.27

-7.4

-7

-8.72

6.27

8.64

2.48

Aditya Birla Sun Life Equity Fund



10652.87

-4.95

-5.42

-6.16

5.81

9.37

1.96

Franklin India Focused Equity Fund



7981.32

-9.29

-6.21

-1.54

5.72

8.76

1.85

ICICI Prudential Multicap Fund



3990.54

-6.61

-5.65

-7.61

5.08

8.41

2.08

Axis Midcap Fund



2819.12

-1.63

-0.64

-1.72

10.25

9.73

2.17

L&T Midcap Fund



4905.48

-6.31

-8.38

-12.8

5.89

10.39

2



5920.68

-3.52

-3.68

-4.56

5.22

10.37

1.95



4469.53

-5.23

-4.48

-5.75

5.12

11.18

2.04

Motilal Oswal Multicap 35 Fund

Kotak Emerging Equity Scheme Franklin India Prima Fund



6694.33

-5.35

-6.86

-6.79

4.31

9.73

1.88

HDFC Mid-Cap Opportunities Fund



20943.79

-7.47

-9.23

-11.68

3.08

8.86

1.85

EQUITY: SMALL-CAP SBI Small Cap Fund



2413.24

-2.55

-3.68

-9.47

10.98

15.21

2.31 2.48

Axis Small Cap Fund



885.44

0.38

6.7

7.01

9.48

11.28

HDFC Small Cap Fund



8208.77

-9.17

-12.75

-15.16

7.86

9.95

2.1

Reliance Small Cap Fund



7491.46

-7.25

-8.74

-15.89

6.93

10.35

2.19

L&T Emerging Businesses Fund



5638.54

-6.78

-11.1

-17.16

6.92

11.06

2.02

4.2

11.3%

HDFC Focused 30

THE 3-YEAR RETURN OF MIRAE ASSET EMERGING BLUECHIP IS THE HIGHEST IN ITS CATEGORY.



818.74

-5.72

-4.71

-4.66

9.19

8.48

2.58

3991.92

-6.52

-7.59

-7.07

8.57

10.17

1.9

Tata Equity PE Fund



5208.24

-5.68

-6.88

-9.78

7.12

9.32

1.9

L&T India Value Fund



7633.41

-7.89

-6.98

-10.11

5.25

9.57

1.88

-1.97 -1.02 PGIM India Midcap Opportunities

0.2 UTI Mid Cap Fund

0.46 Aditya Birla Sun Life Mid Cap

0.64 Motilal Oswal Midcap 100 Exchange Traded

10.3% THE 3-YEAR RETURN OF AXIS MIDCAP FUND IS THE HIGHEST IN ITS CATEGORY.



2305.59

-4.44

-2.92

-0.54

12.18

—

2.02



19236.11

-3.01

0.77

-1.41

9.41

10.76

1.76



30.64

-3.66

-0.97

0.1

8.29

9.19

—

Motilal Oswal Long Term Equity Fund



1389.39

-3.99

-4.22

-6.5

8.08

—

2.15

Tata India Tax Savings Fund



1814.81

-6.47

-3.31

-0.52

7.59

10.67

2.12

DSP Tax Saver Fund



5482.26

-3.42

-1.84

0.58

6.96

9.69

1.88

Aditya Birla Sun Life Tax Relief 96



8561.62

-4.57

-6.87

-10.38

6.77

10.05

2.07

Invesco India Tax Plan



859.03

-5.98

-5.75

-6.91

6.65

8.94

2.35

IDFC Tax Advantage (ELSS) Fund



1876.67

-8.87

-8.41

-10.64

6.56

8.29

2.15

Kotak Tax Saver



895.56

-7.3

-3.53

-1.55

6.52

9.37

2.4

Quant Tax Plan*



9.36

-7.71

-6.93

-9.76

5.03

11.07

2.48

JM Tax Gain Fund

Axis Focused 25

10.83 SBI Magnum Multicap

10.82 Kotak Standard Multicap

10.55 Tata Retirement Savings

10.25 Axis Midcap Fund

6.14 Invesco India Mid Cap Fund

5.89 L&T Midcap Fund

5.7 Tata Midcap Growth Fund

5.22 DSP Midcap Fund

10.98

-6.48 Quant Small Cap Fund

-2.99 Sundaram Small Cap Fund

-1.45 -1.35 Union Small Cap Fund

-1.14

SBI Small Cap Fund

9.48 Axis Small Cap Fund

7.86 HDFC Small Cap Fund

6.93 Reliance Small Cap Fund

6.92 L&T Emerging Businesses Fund

Hybrid: Aggressive 5-year returns 0.98

Axis Long Term Equity Fund

Motilal Oswal Multicap 35

Equity: Small-cap 3-year returns

Aditya Birla Sun Life Small Cap

EQUITY: TAX-SAVING Mirae Asset Tax Saver Fund

8.99 Reliance ETF Junior BeES

Equity: Mid-cap 3-year returns

DSP Small Cap Fund 

Invesco India Contra Fund

4.84 ICICI Prudential Focused

SBI Magnum Midcap

EQUITY: VALUE-ORIENTED Kotak India EQ Contra Fund

9.3 JM Core 11 Fund

11.46

3.94

EQUITY: MID-CAP

DSP Midcap Fund

9.6 Axis Bluechip Fund

13.02

Taurus Starshare (Multi Cap)

Union Multi Cap

Sundaram Large and Mid Cap Fund

Quant Focused Fund

Equity: Multi-cap 5-year returns

EQUITY: LARGE- & MID-CAP Mirae Asset Emerging Bluechip Fund

Mirae Asset Large Cap Fund

4.02 9.93 Baroda Large Cap

RETURNS (%)

LEADERS

JM Equity Hybrid Fund

12.2% THE 3-YEAR RETURN OF MIRAE ASSET TAX SAVER FUND IS THE HIGHEST IN ITS CATEGORY.

4.33 PGIM India Hybrid Equity Fund

4.64 LIC MF Equity Hybrid Fund

5.06 Baroda Hybrid Equity Fund

5.54 Shriram Hybrid Equity Fund

10.2 Tata Retirement Savings Fund

9.64 SBI Equity Hybrid Fund

8.77 ICICI Prudential Equity & Debt Fund

8.7 Canara Robeco Equity Hybrid Fund

8.66 HDFC Hybrid Equity Fund

ANNUALISED RETURNS IN % AS ON 18 SEPTEMBER 2019.

smart stats The Economic Times Wealth September 23-29, 2019

ETW FUNDS 100 Value Research Fund Rating

Net Assets (` Cr) 3-Month

RETURNS (%) 6-Month

1-Year

3-Year

5-Year

Expense Ratio

HYBRID: EQUITY SAVINGS Kotak Equity Savings Fund



1949.79

-0.8

0.63

2.64

6.68

—

2.16

HDFC Equity Savings Fund



4909.64

-2.19

-0.5

1.78

6.56

7.34

1.93

ICICI Prudential Equity Savings Fund



1530.42

0.14

2.27

6.08

6.42

—

1.34

Edelweiss Equity Savings Fund



118.82

-0.68

1.26

2.81

6.38

—

1.74



2429.15

-3.97

-2.37

1.39

8.58

—

2.01

HYBRID: AGGRESSIVE (EQUITY-ORIENTED) Mirae Asset Hybrid Equity Fund



29353.7

-2.27

0.85

4.23

8.08

9.64

1.65

HDFC Retirement Savings Fund



312.73

-4.55

-2.99

-0.25

7.97

—

2.64

Tata Retirement Savings Fund



1048.75

-3.88

-4.89

-4.71

7.49

10.2

2.26

Principal Hybrid Equity Fund

SBI Equity Hybrid Fund



1558.56

-4.61

-6.39

-6.54

7.33

8.54

2.11

HDFC Children's Gift Fund



2780.12

-4

-3.23

-0.85

7.27

8.49

2.13

Canara Robeco Equity Hybrid Fund



2341.39

-4.14

-2.28

1.08

7.08

8.7

2.15

ICICI Prudential Equity & Debt Fund



23288.42

-4.77

-2.98

-1.66

6.74

8.77

1.73

HDFC Hybrid Equity Fund



20695.95

-4.99

-3.43

-0.06

6.72

8.66

1.77



1639.51

0.17

2.12

7.19

7.67

9.27

1.94



130.42

-0.45

1.2

4.41

6.05

7.95

2.23

HYBRID: CONSERVATIVE (DEBT-ORIENTED) ICICI Prudential Regular Savings Fund Tata Retirement Savings Fund



18.86

-1.21

1.2

4.3

8

—

2.22

Aditya Birla Sun Life Regular Savings Fund



2003.6

-0.72

1.15

1.64

4.57

8.36

1.86

UTI Regular Savings Fund



2379.01

-0.08

-1.85

-0.1

5.12

7.25

1.79



62.31

-1.29

-2.21

-0.48

8.32

10.21

2.26

IDFC Bond Fund Income Plan



673.28

3.35

7.98

15.5

7.71

9.09

1.89

ICICI Prudential Bond Fund



3318.48

3.09

6.17

11.84

6.92

8.82

1.08

SBI Magnum Income Fund



1204.3

2.81

6.54

11.84

7.62

8.85

1.47

Indiabulls Savings Income Fund

SBI Magnum Children's Benefit Fund

DEBT: MEDIUM- TO LONG-TERM

1 6.7%



1841.93

2.99

6.03

11.56

8.68

9.27



21.87

2.02

4.63

10.15

7.62

8.66

0.76



3587.02

1.27

2.64

7.96

7.99

8.55

1.71



1185.13

2.71

2.68

7.76

7.17

8.73

1.05

Indiabulls Income Fund Franklin India Income Opportunities Fund Axis Strategic Bond Fund



2153.68

3.83

5.21

10.29

7.46

8.15

0.9

HDFC Short Term Debt Fund



8487.64

2.75

5.09

10.13

7.72

8.39

0.4

Baroda Short Term Bond Fund*



297.92

2.24

4.89

9.34

7.91

8.43

1.29

Franklin India Short Term Income Plan



13155.95

1.32

2.36

8.35

8.18

8.61

1.49

Indiabulls Short Term Fund



67.78

1.23

3.61

8.13

7.03

7.95

1.48



120.69

4.04

2.77

7.55

6.63

7.61

1.19

Axis Short Term Fund

BNP Paribas Short Term Fund

19.04

17.04 Principal Emerging Bluechip Fund 14.73 SBI Focused Equity Fund 14.57 Kotak Emerging Equity Scheme 14.45 SIP: SYSTEMATIC INVESTMENT PLAN

7.2% THE 1-YEAR RETURN OF ICICI PRU REGULAR SAVINGS FUND IS THE HIGHEST IN ITS CATEGORY.

2



1126.07

3.56

9.1

14.94

8.21

9.51

1.66

PGIM India Dynamic Bond Fund



41.37

2.95

7.81

14.13

8.58

9.69

1.28

Kotak Dynamic Bond Fund



790.76

2.48

6.43

13.47

8.36

9.26

1.08



2779.93

2.52

6.02

10.62

7.83

9.82

1.32



3981.43

1.46

3.07

9.11

8.29

9.43

1.68



12910.11

2.89

5.9

11.75

8.01

8.82

0.45



16274.98

2.52

5.34

10.88

7.89

8.74

0.39



1033.42

1.21

4.29

10.37

8.21

8.75

0.87



2447.6

2.67

5.11

10.18

8.1

9.23

0.59

ICICI Prudential Corporate Bond Fund



9002.07

2.64

5.25

10.14

7.56

8.34

0.56

Reliance Prime Debt Fund



1139.9

2.75

3.98

8.64

7.31

8.03

0.71

ICICI Prudential All Seasons Bond Fund Franklin India Dynamic Accrual Fund

% ANNUALISED RETURNS AS ON 18 SEPTEMBER 2019

Top 5 MIPs Top 5 MIP schemes based on 3-year SWP returns Indiabulls Savings Income 7.88 ICICI Prudential Regular Savings 7.44 Baroda Conservative Hybrid 6.81 BNP Paribas Conservative Hybrid 5.62

10.3%

Canara Robeco Conservative Hybrid

THE 1-YEAR RETURN OF AXIS SHORT TERM FUND IS THE HIGHEST IN ITS CATEGORY.

DEBT: DYNAMIC BOND SBI Dynamic Bond Fund

Top 5 equity schemes based on 10-year SIP returns

Canara Robeco Emerging Equities Fund

1.09

DEBT: SHORT-TERM

Top 5 SIPs

SBI Small Cap Fund

THE 3-YEAR RETURN OF KOTAK EQUITY SAVINGS FUND IS THE HIGHEST IN ITS CATEGORY.

DEBT: MEDIUM-TERM SBI Magnum Medium Duration Fund

5.56 SWP: SYSTEMATIC WITHDRAWAL PLAN

3

% ANNUALISED RETURNS AS ON 18 SEPTEMBER 2019

Multi Cap Cash holdings 21.48 17.76

17.34

16.17

DEBT: CORPORATE BOND HDFC Corporate Bond Fund Aditya Birla Sun Life Corporate Bond Fund Franklin India Corporate Debt Fund Kotak Corporate Bond Fund

All equity funds ranked on 3-year returns. Debt funds ranked on 1-year returns.

Expense as on 31 August 2019 * : Expense as on before 31 August 2019 Returns as on 18 September 2019 Assets as on 31 August 2019 Rating as on 31 August 2019

Did not find your fund here?

Kotak Focused Equity Fund

HDFC Retirement Savings Fund

Methodology

EQUITIES (figures over the past one year)

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:

Large-cap: Mostly invested in large-cap companies.

  Top 10%

Small-cap: Mostly invested in small-cap companies.

 Next 22.5%



 Middle 35%



 Next 22.5%



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

FUND RAISER

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:

14.71

ICICI Pru- Shriram ITI Multi dential Multi- Cap Fund Retirecap ment % AS ON 31 AUGUST 2019

Log on to www.wealth.economictimes.com for an exhaustive list.



19

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.

15.84% of the total AUM of the equity funds was invested in small-cap stocks in the month of August 2019, compared to 18.1% in August 2018.

4

Debt Liquid: Expense ratio 0.15

0.15

0.16

0.17

0.11

Canara Robeco Liquid

IDFC Cash L&T Fund Liquid Fund

Axis Liquid Fund

Mirae Asset Cash Management

% AS ON 31 AUG 2019 % EXPENSE RATIO IS CHARGED ANNUALLY. METHODOLOGY OF TOP 100 FUNDS ON WWW.WEALTH.ECONOMICTIMES.COM

loans and deposits 20

The Economic Times Wealth September 23-29, 2019

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 TENURE: 1 YEAR IDFC First Bank

Interest rate (%) compounded qtrly

What `10,000 will grow to

8.00

10,824

RBL Bank

7.70

10,793

Indusind Bank

7.50

10,771

Lakshmi Vilas Bank

7.50

10,771

Yes Bank

7.25

10,745

TENURE: 2 YEARS IDFC First Bank

BANK MCLR

11,717

AU Small Finance Bank

7.87

11,687

RBL Bank

7.75

11,659

DCB Bank

7.50

11,602

Lakshmi Vilas Bank

7.50

11,602

DCB Bank

8.00

12,682

AU Small Finance Bank

8.00

12,682

Lakshmi Vilas Bank

7.50

12,497

State Bank Of India

IDFC First Bank

7.50

12,497

RBL Bank

7.50

12,497

TENURE: 5 YEARS AU Small Finance Bank

7.77

14,693

DCB Bank

7.75

14,678

IDFC First Bank

7.50

14,499

RBL Bank

7.50

14,499

Indusind Bank

7.35

14,393

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

What `10,000 will grow to

8.50

10,877

RBL Bank

8.20

10,846

Lakshmi Vilas Bank

8.10

10,835

TENURE: 1 YEAR IDFC First Bank

BANK NAME

Marginal Cost of funds-based Lending Rate (MCLR) is a benchmark lending rate designated by RBI and replaces the base rate.

8.00

TENURE: 3 YEARS

Top banks for 2 years

Top banks for 6 months BANK NAME

MCLR (%)

MCLR (%)

WITH EFFECT FROM

State Bank Of India

8.25

10 September 2019

Union Bank Of India

8.50

1 September 2019

Axis Bank

8.55

18 September 2019

HDFC Bank

8.60

7 September 2019

IOB

8.60

10 August 2019

Top banks for 3 years

WITH EFFECT FROM

BANK NAME

8.00

10 September 2019

State Bank Of India

8.35

10 September 2019

Central Bank Of India

8.15

15 September 2019

Punjab National Bank

8.50

1 September 2019

Punjab National Bank

8.20

1 September 2019

Union Bank Of India

8.55

1 September 2019

Union Bank Of India

8.20

1 September 2019

Axis Bank

8.60

18 September 2019

Allahabad Bank

8.25

14 August 2019

HDFC Bank

8.70

7 September 2019

Top banks for 1 year MCLR

BANK NAME

(%)

MCLR (%)

WITH EFFECT FROM

Top banks for 5 years BANK NAME

WITH EFFECT FROM

State Bank Of India

8.15

10 September 2019

Central Bank Of India

8.25

15 September 2019

Punjab National Bank

8.30

1 September 2019

8.35

10 September 2019

8.35

13 September 2019

Indusind Bank

8.00

10,824

Bank Of India

Bandhan Bank

8.00

10,824

Syndicate Bank

IDFC First Bank

8.50

11,832

AU Small Finance Bank

8.37

11,802

RBL Bank

8.25

11,774

Your EMI for a loan of `1 lakh

Bandhan Bank

8.15

11,751

TENURE

Lakshmi Vilas Bank

8.10

11,740

DCB Bank

8.50

12,870

AU Small Finance Bank

8.50

Lakshmi Vilas Bank

8.10

Bandhan Bank

8.10

12,720

IDFC First Bank

8.00

12,682

AU Small Finance Bank

8.27

15,057

DCB Bank

8.25

15,043

IDFC First Bank

8.00

14,859

Senior Citizens' Savings Scheme

8.60

1,000

RBL Bank

8.00

14,859

Sukanya Samriddhi Yojana

8.40

Bandhan Bank

8.00

14,859 Public Provident Fund 5-year NSC VIII Issue

MCLR (%)

WITH EFFECT FROM

Karur Vysya Bank

9.45

7 September 2019

City Union Bank

9.75

5 September 2019

FOR ANY CHANGES IN MCLR RATES, PLEASE E-MAIL US AT [email protected]

TENURE: 2 YEARS

5 YEARS

10 YEARS

15 YEARS

20 YEARS

25 YEARS

@ 8%

2,028

1,213

956

836

772

@ 10%

2,125

1,322

1,075

965

909

12,870

@ 12%

2,224

1,435

1,200

1,101

1,053

12,720

@ 15%

2,379

1,613

1,400

1,317

1,281

TENURE: 3 YEARS

TENURE: 5 YEARS

Top five tax-saving bank FDs Interest rate (%)

What `10,000 will grow to

7.77

14,693

DCB Bank

7.75

14,678

IDFC First Bank

7.75

14,678

Indusind Bank

7.50

14,499

RBL Bank

7.50

14,499

TENURE: 5 YEARS AND ABOVE AU Small Finance Bank

ALL DATA SOURCED FROM ECONOMIC TIMES INTELLIGENCE GROUP ([email protected])

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

Post office deposits

Interest (%)

Minimum invt. (`)

Maximum investment (`)

Tax benefits

Features

15 Lakh

5-year tenure, minimum age 60

80C

250

1.50 Lakhs

One account per girl child

80C

7.90

500

1.50 Lakhs p.a.

15-year tenure, tax-free returns

80C

7.90

100

No Limit

No TDS

80C

6.90-7.70

200

No Limit

Available in 1, 2, 3, 5 years

80C#

Post Office Monthly Income Scheme

7.60

1,500

Single 4.5 Lakhs

5-year tenure, monthly returns

Nil

Joint 9 Lakhs

5-year tenure, monthly returns

Nil

Kisan Vikas Patra

7.60

1,000

No Limit

Can be encashed after 2.5 years

Nil

Recurring deposits

7.20

10

No Limit

5-year tenure

Nil

Savings account

4.00

20

No Limit

`10,000 interest tax free

Nil

Time deposit

Data as on 19 Sept 2019

# Benefit available only for 5-year deposit

non-traditional investments The Economic Times Wealth September 23-29, 2019

21

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 119.65

18 SEP 2018

Precious Metals Index

115.76

1,560.84

17 SEP 2019

18 SEP 2018

1,967.3 18 SEP 2019

Wine Index

Coin Index 348.61

359.05

18 SEP 2019

18 SEP 2018

23,000

17,900

18 SEP 2019

18 SEP 2018

CHANGE X

I WEEK

-0.58%

I WEEK

0.62%

I WEEK

-0.01%

I WEEK

0%

X

I YEAR

-3.25%

I YEAR

26.04%

I YEAR

-2.91%

I YEAR

28.49%

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

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

MARKET PRICE (`)

Top volume gainers 1-WEEK (%) CHANGE

1-MTH (%) CHANGE

1-MONTH AVG VOL (LAKH)

Andhra Cement Nitin Fire Protection Ind. Noida Toll Bridge Co.

3.73 0.61 5.73

0.54 19.61 -1.21

101.62 69.44 68.53

0.56 0.17 0.26

Mercantile Ventures

7.23

-5.24

68.53

Soma Textiles & Ind. Balurghat Technologies Energy Development Co. Sintex Plastics Tech. Ansal Housing RattanIndia Power

4.28 8.00 7.49 5.33 6.10 1.69

7.81 -4.76 21.20 15.12 10.11 -6.63

65.25 60.64 54.43 48.47 46.63 43.22

1-MONTH AVG VOL CHG (%)

MKT CAP (`CR)

47.72 47.79 79.89

109.48 17.83 106.69

0.02

17.80

80.92

0.04 0.07 0.04 2.77 0.14 4.38

-41.78 246.84 -24.80 -3.39 203.97 83.19

14.14 14.56 35.58 336.32 36.23 499.05

Top price losers Housing Dev & Infra BAG Films & Media Cox & Kings Reliance Naval & Eng Vikas Proppant & Granite Sanwaria Consumer Kwality Alok Industries Suzlon Energy Ballarpur Industries

5.78 1.80 4.33 0.94 3.06 2.37 1.59 2.07 3.07 0.58

STOCK

MARKET PRICE (`)

1-WEEK (%) CHANGE

1-MTH (%) CHANGE

1-MTH AVG VOL (LAKH)

1-MONTH AVG VOL CHG (%)

MKT CAP (`CR)

BT Syndicate

8.74

-8.00

-1.80

0.28

47,709.14

89.76

Econo Trade (India) Swagruha Infrastructure Satkar Finlease Safal Herbs Frontier Informatics Ravi Kumar Distilleries

6.02 6.29 1.87 1.85 2.90 6.94

-11.86 4.66 14.72 17.09 9.85 -1.98

-43.74 15.41 8.72 37.04 11.54 -7.34

0.13 0.03 0.04 0.28 0.04 0.04

17,253.35 3,058.04 2,661.11 1,977.72 1,854.00 1,171.05

11.24 43.09 41.21 18.50 14.79 16.66

Amrapali Industries

4.11

0.00

19.83

0.06

1,044.28

21.13

Gold Line Int Finvest Global Offshore Services

1.80 8.51

-9.09 34.65

-25.00 37.48

0.03 0.26

1,027.75 1,019.97

93.78 21.05

Top volume losers -9.12 -10.00 26.61 23.68 -8.93 -18.84 -13.59 -29.59 1.66 -3.33

-48.94 -39.19 -34.49 -33.33 -31.24 -30.70 -30.57 -30.07 -29.43 -23.68

4.81 1.74 13.79 15.75 1.71 10.05 2.82 20.64 29.31 7.99

187.62 676.73 125.44 328.01 40.01 51.27 250.80 44.73 32.14 34.94

273.97 35.62 76.45 69.33 154.90 174.46 38.38 285.11 1,633.16 75.02

Reliance Communications Vodafone Idea Toyam Industries FCS Software Solutions Jaypee Infratech

0.93 4.86 2.84 0.27 1.38

17.72 -15.18 3.65 8.00 -6.12

-21.19 -18.86 2.53 -12.90 11.29

37.33 142.10 6.75 1.60 4.70

-63.02 -62.52 -49.72 -44.01 -37.16

Urja Global

1.92

-11.11

-20.99

1.81

-36.45

97.38

MTNL Punj Lloyd Syncom Formulations Gennex Laboratories

6.01 1.15 0.83 3.25

-1.96 -3.36 2.47 -2.69

-4.45 2.68 3.75 -3.27

1.63 1.13 3.87 1.01

-35.06 -29.77 -25.43 -21.47

378.63 38.59 64.80 41.11

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 14 AUGUST 2019. SOURCE: ETIG DATABASE AND BLOOMBERG.

257.20 13,965.4 60.35 46.16 191.67

pick of the week 22

The Economic Times Wealth September 23-29, 2019

BHEL: Stagger your purchases to gain Though still plagued by bad news, long-term outlook for heavy electric equipments sector has become very attractive.

B

harat Heavy Electricals Limited (BHEL), the start in thermal plant additions will only help companies second largest company from the heavy electric like BHEL to bag big orders. equipments sector, is a clear victim of the ongoDespite its bleak medium-term outlook, analysts are geting trouble in the power sector and the resultant ting bullish on this counter mostly because of its very valupostponement of new power generation projects. ation, triggered by its continuous price fall. For example, No wonder it has reported revenue fall during the last five BHEL has underperformed the Sensex and ET Capital Goods years, and the first quarter of 2018-19 was no exception. Its Index by 33% each during the last one year (See Chart ). While net sales for the quarter fell by 24% y-o-y and 56% q-o-q. Since its price to book value is placed at just 0.54 times, the dividend some of the factors for this fall (ie yield is placed at 4.22%. Other valutight liquidity, land availability ation parameters are also at comissues, local agitations against big fortable levels (eg – EV/Sales is only projects, etc) are medium term in at just 0.5 times). Though BHEL nature, these may weigh on future is a good long-term bet, investors 9 9 execution and sales also. need to stagger their purchase in Hold Buy Incremental order inf low to this counter, because the technical BHEL is also low owing to weak factors are also negative now and capacity additions happening in therefore, the ongoing downward the power sector. Though around spiral may continue for some more 16GW of orders is in the pipeline, time. the final award is getting delayedThis delay in order inflow has also Select ion Methodolog y: We 16 pulled down the order book/sales pick up the stock that has shown Sell ratio to 3.6 times as on 30 June, maximum increase in “consencompared to 4.1 times a year ago. sus analyst rating” in the past Though the situation will remain month. Consensus rating is arDomestic power demand is increasing faster than the capacity additions, now any kickstart in thermal plant bleak in the medium term, the longrived at by averaging all analyst additions will only help heavy electric equipments term outlook for the heavy electric recommendations after attributsector to bag big orders. This has made BHEL a equipments sector looks bright being weights to each of them (5 for favourite of analysts. cause the domestic power demand strong buy, 4 for buy, 3 for hold, is increasing faster than the capacity additions, which even2 for sell and 1 for strong sell) and any improvement in tually will take the country to a power deficit situation in the consensus analyst rating indicates that the analysts are next five to seven years. The Centre ’s pet projects like 100% getting more bullish on the stock. To make sure that we rural electrification, introduction of electric vehicles, etc pick only companies with decent analyst coverage, this are the factors boosting domestic electricity consumption. search will be restricted to stocks with at least 10 anaSince this increased demand cannot be met by renewable lysts covering it. You can see similar consensus analyst (hydro, solar or wind) energy sources, coal-based power genrating changes during the last one week in ETW 50 table. eration capacity has to increase in coming years. Any kick—Narendra Nathan

Analysts’ views

Fundamentals CONSENSUS ESTIMATE

ACTUAL

Revenue (` cr)

2017-18

2018-19

2019-20

2020-21

27,864.84

29,367.85

32,167.50

32,250.00

1,968.88

2,137.93

2,378.60

2,237.00

434.57

1,010.27

1,401.40

1,390.40

1.18

2.78

3.85

3.99

Ebitda (` cr) Net profit (` cr) EPS (`)

Valuations

PBV

PE

DIVIDEND YIELD (%)

Bharat Heavy Electricals

0.54

19.61

4.22

ABB India

6.99

50.68

0.36

Siemens

5.31

42.55

0.57

Cummins India

3.67

23.11

2.99

Bharat Electronics

2.76

13.02

3.26

Latest brokerage calls

TARGET PRICE (`)

RECO DATE

RESEARCH HOUSE

ADVICE

19 Sep ’19

Macquarie

Neutral

60

6 Sep ’19

SBICAP Securities

Buy

100

5 Sep ’19

Emkay

Buy

62

3 Sep ’19

Axis Capital Limited

Buy

70

27 Aug ’19

HSBC

Buy

60

Relative performance MARKET PRICE: `47.45 1 100

19 SEP 2018

BHEL

97.32 SENSEX 97.23

63.61 ET CAPITAL GOODS 19 SEP 2019

Bharat Heavy Electricals compared with ET Capital Goods. Stock price and index values normalised to a base of 100. Source: ETIG and Bloomberg.

WHAT EXPERTS ADVISE BUY

*STOCK PRICES AS ON 19 SEPTEMBER RESEARCH HOUSE

1-YEAR TARGET PRICE (`)

POTENTIAL UPSIDE (%)

ADVICE

HDFC Sec

Buy

172

350

104

Nirmal Bang

Buy

298

432

45

Second quarter is likely be robust and match or better than fourth quarter of 2018-19 (the best ever). This is in sharp contrast to second quarter of 2018-19 which was weakest that year.

Kajaria Ceramics

Jefferies India

Buy

535

720

35

Kajaria Ceramics’ revenue muted in Jul-Aug 2019, due to weak consumer sentiment and floods across regions; expect its revenue and margin traction to revive from second half of 2019-20.

Bharat Electronics

Motilal Oswal

Buy

104

127

22

Company aims to improve its efficiency which may help it clock higher margin in nomination-based orders. Another plan is to increase proportion of services in revenue.

Tata Chem

ICICI Direct

Buy

568

690

22

Demerger of consumer business provides base business of Tata Chem at `301 / share. Increasing contribution from nutrition is also expected to drive group return ratios and thereby valuations.

Blue Star

Reliance Sec

Buy

720

829

15

Be positive on Blue Star due to improving margin profile, healthy balance sheet, improving return ratios and improving market share.

STOCK

RESEARCH HOUSE

ADVICE

Sanofi India

IDBI Cap

Reduce

STOCK

Dishman Carbogen Inox Leisure

STOCK PRICE* (`)

COMMENT

Remain constructive on Dishman owing to strong visibility on order book, 15 plus late phase 3 molecules, expanded development capacity, its work on new molecules and favorable currency.

SELL STOCK PRICE* (`)

5,666

1-YEAR TARGET PRICE (`)

POTENTIAL DOWNSIDE (%)

5,470

-3

COMMENT

Downgraded to 'reduce' because divestment of Ankleswar assets will impact 2020 earnings (ie cross transfer of certain products from Ankleshwar and Goa may affect operations).

QA &

I bought a single premium Ulip in November 2013 for `10 lakh. The sum assured was `12.50 lakh. I surrendered the policy in July 2019 and received `15.40 lakh as surrender value (Less TDS @ 1 %). Do I have to pay tax on the entire maturity proceeds? I have not claimed Sec 80 (C) benefits in the year of investment. I am in the 30% tax slab.

For policies purchased after 1 April 2012, if the premium paid on the policy is less than 10% of the sum assured, the amount received on maturity is exempt from tax. This exemption is allowed under Section 10 (10D) of the Income Tax Act. In your case, since the premium is more than 10% of the sum assured, the maturity proceeds will be taxable. You will have to declare the net maturity proceeds (total maturity proceeds less sum of all premiums paid) in your tax return. This should be added to your income under the head ‘Income from other sources’ and charged to tax at your applicable slab rate.

Shubham Agrawal Senior Taxation Advisor, TaxFile.in

I am 82. I want to sell a flat for `20 lakh, which I bought more than three decades ago for less than `2 lakh. What will be the tax implications?

Since the house was purchased three decades ago, the gain will be considered as long term capital gains (LTCG). You can consider the market value of the property as on 1 April 2001 as its cost, which would be further indexed by applying the index for 2019-20. The cost inflation index notified recently for 2019-20 is 289. So for example, if the market value of the property as on 1 April 2001 was `5 lakh, the indexed cost would be `14.45 lakh and the resultant LTCG would be taxed @ 20%.

Amit Maheshwari

Partner, Ashok Maheshwary and Associates

I invest `43,000 in MFs through SIPs. I put `8,000 each in Aditya BSL Frontline Equity and Franklin India Bluechip, `5,000 each in Mirae Large Cap and L&T Equity, `6,000 each in Franklin India Prima and L&T India Value and `5,000 in Franklin India Smaller Companies. Am I on the right track? I want to invest another `30,000 a month.

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.

QUESTION OF THE WEEK My father will retire from his government job next December. He will get around `60 lakh in retiral benefits. How should he invest this money to generate a monthly income of `30,000, while keeping the principal intact? He also wants to build an emergency fund and invest in mutual funds. Please advise. A senior citizen’s portfolio should carry low to medium risk and yield assured income, along with capital protection. The target to generate `30,000 a month is achievable by investing in a mix of financial instruments. He should invest up to `15 lakh in the Senior Citizen’s Saving Scheme (SCSS). It is the safest investment option for retirees and offers 8.6% per annum, payable quarterly. He can contribute `4.5 lakh in the Post Office Monthly Income Scheme at 7.6 % per annum. As you want to keep the principal intact, it is advisable to save `15.5 lakh in Senior Citizen Fixed Deposit and earn 7.3% to 7.5%. Also, invest `10 lakh in tax-free bonds. The balance `15 lakh can be invested in debt and liquid mutual funds with a horizon of three years or more. You can invest `5 lakh each in Franklin India Short Term Income Plan, Aditya Birla Sun Life Liquid Fund, and SBI Magnum Ultra Short Duration Fund. The returns will be tax efficient and would offer liquidity for emergency. Retirees should stay away from equity funds which are highly volatile in nature.

Raj Khosla

Founder and Managing Director, Mymoneymantra.com

your queries The Economic Times Wealth September 23-29, 2019

I am 50 and have taken early retirement. I have `60 lakh invested in the stock market and I will be getting `1.5 crore in retirement benefits. I want to know how I should invest this corpus to generate a monthly post-tax income of `1.1 lakh. I live in my own house. Both my spouse and I have medical and term cover. I have property worth `65 lakh to take care of my teenage daughter’s education and marriage expenses. I pay insurance premium of approximately `1 lakh per annum.

Since the `2.1 crore corpus will be catering to your monthly expenses, capital preservation is primary. You require a post-tax monthly income of around `1.1 lakh per month, which means a yearly sum of `13.2 lakh. This translates to pre-tax returns of around 9%, which is hard to find in the low-risk product basket. Given that you are 50, you are ineligible for government schemes for pensioners. One of the best ways for you to manage your monthly income would be to invest your corpus in liquid funds or ultra-short duration funds from two different fund houses and opt for a systematic withdrawal plan (SWP). Such funds can earn around 7% pre-tax returns and the monthly amount can be fixed as per your need. Taking the SWP route will offer you three benefits: a) it will reduce your tax liability since the principal portion of withdrawal does not attract any tax; b) initially the capital gains will be taxed as per your tax slab and after three years, the same will be taxed at 20% with indexation; and c) if you set your monthly withdrawal lesser than interest earned, your capital will appreciate alongside. I would recommend that you identify some expenses which can be curtailed to trim down your monthly expenditure at this stage so that your capital invested can grow to cater to inflation going forward.

Prableen Bajpai

Founder, Managing Partner, FinFix Research & Analytics

I am 70 and my total income from all sources in a financial year is less than `5 lakh. I earn an interest of `15,000 a year from a NBFC FD. Do I need to pay income tax on this interest?

As a resident senior citizen, you are eligible for a basic exemption of `3 lakh plus a tax rebate under Section 87A on taxable income up to `5 lakh for the financial year 2019-20. Considering you qualify to be a resident for tax purposes, you will not be liable to pay income tax as your taxable income from all sources including interest on FDs is below `5 lakh.

Homi Mistry

A 49% allocation in the large-cap category is excessive. It can lead to concentration risk to the overall portfolio. Consider shifting from Franklin India Bluechip Fund to SBI Magnum Multi Cap Fund. For the additional `30,000, consider investing `10,000 each in Axis Small Cap & Kotak Emerging Equity Scheme. The remaining `10,000 can be divided equally among SBI Magnum Multi Cap and the existing L&T Equity Fund.

Rahul Parikh, CEO, Bajaj Capital

Partner, Deloitte Haskins & Sells

Ask our experts Have a question for the experts? [email protected]

23

technology check 24

The Economic Times Wealth September 23-29, 2019

FLYBOT BEAT

ZEBRONICS PEACE Even though these are the cheapest, the Zebronics true wireless earbuds impress with their overall performance. They offer secure comfortable fit and are water-resistant. Its charging case is capable of recharging the earbuds three times, giving you a total of 10 hours+ usage. You get a multifunction button on both earbuds for control. It can work in paired or individual mode and also has voice assistant support. The glossy finish on the charging case is a bit of an issue but for the price we can ignore this.

`3,799

NOISE SHOTS X3 BASS The Shots X3 Bass is aimed at users who demand deep thumping bass from their headphones. The earbuds are compact in size so they don’t stick out too much during use plus they come in a variety of colours. The charging case is compact, but the glossy finish does pick up scratches after a few weeks of use. Keep in mind that it has a 1,500mAh battery, so the case feels heavy but you get the benefit of 24-hour battery life.

`2,599 `2,219

Best true wireless earbuds on a budget Apple’s Airpods are credited with ushering in the era of true wireless earbuds. Initially such headphones were only available for a premium, but now there are multiple choices in less than `6,000. Karan Bajaj lists some of the best options.

BLAUPUNKT BTW01

`4,999

Blaupunkt is a known name when it comes to car audio system but now the brand has also started offering headphones. The BTW01 is the true wireless earbud from the German brand and the earbuds have an angled design for a comfortable yet secure fit. There are touch controls on the earbuds which give you easy control for volume, call accept and voice assistant. The earbuds have 75mAh battery giving six hours of playback on each charge. You can get over 24 hours of playback using the provided charging case.

NOISE SHOTS X5 CHARGE

Flybot is a new entrant and a relatively unknown brand in this space but their budget earbuds are great. Both the earbuds and the charging case are compact making it easier to carry along. Also, these are amongst the cheapest to offer Bluetooth 5.0 connectivity. Audio quality is great—bass heavy output with good clarity. You get voice assistant support, IP X5 sweat resistance, secure fit and a battery life of more than 24 hours.

`4,490

JABEES FIREFLY Another new brand in the market but it brings tonnes of features on a budget. You get USB Type-C port, Bluetooth 5.0 connectivity, wireless charging support as well as voice assistant support. The earbuds feature in-ear hooks for a secure fit and IP X5 certified for water resistance. Audio quality is great, thanks to the 6mm graphene composite membrane in the earbuds. You get a battery life of 14 hours and it also has fast charge support—10 minutes of charge gives you two hours' playback.

`4,999

Noise is the only brand to offer multiple options in the sub-`5,000 segment for true wireless earbuds. The X5 charge is an improved version of the X3 Bass and comes with a high capacity charging case. The case also has a full size USB port using which you can charge your phone in an emergency. The earbuds are IPX5 sweat-proof, come with Bluetooth 5.0 connectivity. You get five hours playback on a single charge and the case is capable of charging the earbuds up to 10 times, which means almost 50 hours of playback. The prices mentioned are taken from e-commerce websites and are subject to change

tax optimiser The Economic Times Wealth September 23-29, 2019

Opt for NPS to save `50k tax Sudhir Kaushik of Taxspanner.com tells readers how they can optimise their tax by rejigging their income and investments.

D

elhi-based doctor Ashish Ranjan pays a high tax even though his salary is quite tax friendly. Taxspanner estimates that Ranjan can reduce his tax by almost `50,000 if he opts for the NPS benefit given by his company and buys medical insurance for himself and his family. Saving for retirement is critical for Ranjan because his contribution to the Provident Fund is not too big. Ranjan invests in the NPS under Sec 80CCD(1b) but should increase this by opting for the NPS benefit under Section 80CCD(2d). Up to 10% of the basic salary put in NPS is tax deductible. If his company puts `10,846 (10% of his basic salary) in NPS every month, his tax will reduce by about `40,600. But this will also reduce his monthly take-home pay by about `7,500. Ranjan should opt for an aggressive allocation that allocates the maximum corpus to equity funds. Ranjan’s wife is a government employee and the family is fully covered for medical expenses. Even so, Ranjan should consider taking a critical illness cover for himself and the family. A premium of `25,000 will reduce his tax by roughly `7,800. He should also take sufficient life insurance cover. A term insurance cover of `2 crore will cost him about `20,000 a year. Another minor tax break is possible if he avoids bank deposits and switches to debt mutual funds. Gains from debt funds are taxed at a lower rate if the investment tenure exceeds three years.

INCOME FROM EMPLOYER INCOME HEAD

CURRENT

Basic salary

13,01,520

13,01,520

House rent allowance

11,10,720

9,80,568

8,000

8,000

Newspapers and periodicals

12,000

12,000

Entertainment allowance

60,000

60,000

Driver salary

9,600

9,600

Food coupons

26,400

26,400

Training

60,000

60,000

Employer's contribution to Provident Fund

21,600

21,600

0

1,30,152

26,09,840

26,09,840

Telephone and internet

Contribution to NPS under Sec 80CCD(2d)

TOTAL

Provident Fund

Interest income

2,600

0

Capital gains

0

0

Rental income

0

0

2,600

0

TOTAL

CURRENT (`)

21,600 1,20,000

0

12,000

Tuition fees

72,000

72,000

NPS under Sec 80CCD(1b)

50,000

50,000

2,00,000

2,00,000

TOTAL ADMISSIBLE

Denotes suggestion to increase

Buy term cover of `2 crore for yourself.

Home loan interest Medical insurance TOTAL

CURRENT (`)

2,00,000

0

25,000

2,00,000

2,25,000

TAX ON SALARY

TAX ON OTHER INCOME

`4,35,939 `811 `4,36,750

SUGGESTED (`)

2,00,000

Ashish Ranjan’s tax TAX ON CAPITAL GAINS

Denotes suggestion to reduce

0

`3,87,531

`0 `3,87,531

`49,219 TAX RATIO (Total tax as % of annual income) EXISTING (`)

SUGGESTED Buy critical illness cover for self and family.

TOTAL TAX SAVED

PER YEAR

CURRENT

Other deductions EXEMPTION OR DEDUCTION

Shift to debt funds to avoid tax on FD income.

SUGGESTED (`)

21,600

Life insurance

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

All figures are in `

1,20,000

Home loan principal

Reduce this taxable portion of the pay package.

INCOME FROM OTHER SOURCES

Tax-saving investments INVESTMENT OPTION

ACTIONS TO TAKE

SUGGESTED

0

16.7%

SUGGESTED (`)

14.8%

WRITE TO US FOR HELP 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.

25

your feedback & more... 26

The Economic Times Wealth September 23-29, 2019

Readers’ response, online and in print, to ET Wealth stories has been enlightening. We pick some that add information and perspective to our articles from previous issues. This is in reference to the cover story, ‘Active or passive: Which fund strategy works better?’ The point about underperformers causing damage to the index was well illustrated through the chart. Investors should heed the data which shows very clearly how stocks give muted returns after inclusion in the index.

The common tendency is to ignore the efforts the individual concerned put in to earn that windfall. You notice a similar attitude in those who have inherited family wealth. This wealth created by the previous generation by straightforward means and maintained or increased through the efforts of the inheritors needs to be preserved and invested so that it can grow.

Stay away from funds now This refers to the cover story, ‘Active or passive: Which fund strategy works better?’ If the economy as a whole does not perform, there is no point in investing in equity mutual funds, whether passive or active.

Balaji S.

The article, ‘How to work the new loan rate landscape’, was well written. Banks earn from net interest margins and fees. World over, banks and insurance companies are run by the rules and rarely fail. They do go through phases when they encounter headwinds, but even then they are one of the last institutions to collapse when an economy runs into trouble. Manohar Lal

This refers to the article, ‘Stay fit, drive safe to keep insurance premiums low’. The government should make efforts to bring every citizen under one common health

Vijay P. Srinivasan

I look forward to the Wealth Whines section. About the article, ‘Should you take a home loan jointly with your spouse?’ I strongly feel it is not a good idea. Should the couple split, the money and asset sharing can become messy, especially if one spouse bore the EMI burden.

Vilas Save

Gauri Gupta

insurance programme. This will ensure people pay their taxes. If quality healthcare is made available at a nominal cost by the government, people will at least know their money is being used for a good welfare programme.

linked to staying fit and driving safely was very informative and useful. The initiatives by the insurance companies are akin to indirect compensation for positive behaviour. Sanjeev Dawar

K.K.

The article by Uma Shashikant, ‘Spend that windfall wisely’, was well written.

The article on lower insurance premium

This refers to the article, ‘An area close to work and play’. This was a very wellsummarised piece on the Mumbai suburb. Metro has improved connectivity but there are very few options available for accommodation in the area. Rajeev Mahajan

A well-connected micro market

REALTY

Good social infrastructure is the key draw of this south Kolkata suburb.

HOT SPOT Sangali Colony

GariaPatuli

New Raipur Aurobindo Ashram

`2,900-5,800

Bansdroni Bidhanpally

Upanagari South End Block H Garden Block F Kanungo Park Sreerampur

Sonali Park

NG Park

Demand: MID Supply: MID

South Roy Nagar

Nathpara

Kayalpara Barhans Baidyapara Garia Place Ganguly Prantika Para

ia

D Block

Sarada Park

ain

M

Baliya

Distance from: Airport: 25 38 km

Railway Railway station: station: 15 km 45 km

Sound social infrastructure comprising schools, colleges, hospitals, restaurants and shopping complexes

Popular shopping malls well-connected with the area include Metropolis Mall and South City Mall Good overall connectivity through EM Bypass Road, Kolkata Local Rail and Metro Rail Network

NH-34: 0 km

1 BHK: 490 (sq ft)

17 lakh (avg)

`

Restaurants Restaurants10+ 20+

Banks 14+ 20+

Grocery GroceryStores Stores12+ 20+

Petrol PetrolPumps Pumps10+ 9+

VALUES

2 BHK: 860 (sq ft)

33 lakh (avg)

`

3 BHK: 1,220 (sq ft)

53

13%

` lakh (avg)

20% 29%

30-40 lakh 40-50 lakh 10-20 lakh Others

Consumer preference by BHK 1%

2 BHK

11% 33%

Hospitals Hospitals12+ 16+

SECTORS

32%

11%

3 BHK

Schools 15+ 20+

PROPERTIES AVAILABLE

20-30 lakh

15%

Key hospitals are Rabindranath Tagore International Institute of Cardiac Sciences, IRIS and Peerless Hospital

LOCALITY SNAPSHOT

Rd

Bijan Kanan Saradamani Park Jainal Pally Purbasa

Garia

r Ga

Purbapara

Consumer preference by budget segment (`)

Residential micro-market, well-connected with prominent areas and commercial centres in Kolkata

Patuli

Northern Park

per sq ft

Phase-1

Baishnabghata Patuli TWP

Naktala

KOLKATA PRICE RANGE

HIGHLIGHTS

Rabindrapally

Keya Bagan

Price

Rental

(`/sq ft)

(`/month)

Garia

2,900-4,900

10,000-16,500

Bansdroni

3,000-4,800

9,800-17,000

Naktala

3,200-5,400

10,700-18,900

Patuli

3,600-5,800

12,000-19,100

55%

1 BHK 4 BHK

Consumer preference by covered area (sq ft) 2% 750-1,000

9%

1,000-1,250

17% 27%

45%

500-750 1,250-1,500 Others

In dia’s No. 1 P ropert y Sit e The Economic Times Wealth is available at an invitation price of `8/issue. To book your copy, contact your newspaper vendor or call 022-39898090; Email: [email protected]; SMS ETWS to 58888 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.

PUBLISHED FOR THE PROPRIETORS, Bennett, Coleman & Co Ltd by R.Krishnamurthy at The Times of India Building, Dr. D.N. Road, Mumbai 400001. Tel. No.: (022) 6635 3535, 2273 3535. Fax: (022) 2273 2544 and printed by him at (1) The Times of India Suburban Press, Akurli Road, Western Express Highway, Kandivli (E), Mumbai-400101 . Tel. No.: (022) 28872324, 28872931, Fax: (022) 28874231. (2) The Times of India Print City, Plot No.4, T.T.C. Industrial Area, Thane Belapur Road, Airoli, Navi Mumbai-400708. Tel No.: (022) 2760 9999, Fax: (022) 2760 5275. 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.: MAHENG/2014/57046. VOLUME 06 NO. 38

THE ECONOMIC TIMES

How long is long term? P2

www.etwealth.co | Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | September 23-29, 2019 | 28 pages | `8