Marriage Divorce: Women, Know Your Rights

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The Economic Times Wealth January 27-February 2, 2020

By Riju Mehta

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ivya Kapoor got married at 21, separated at 40, and divorced at 50. Even as she ran the household and a startup for 19 years, she suffered severe verbal and emotional abuse at the hands of her husband. She walked out of the marriage with only `1,700 in hand, as all the assets and investments were in her husband’s name. Still, she did not ask for maintenance during divorce. And paid the fee for her husband’s lawyer. “At that point, closure and peace of mind were paramount, not money,” she says. She lost nearly `40 lakh in unclaimed assets and savings. By comparison, Shweta Karat, 48, got off easy. She lost only `24 lakh. “I’m still struggling financially but at least I’m happier now,” she says of the man who was physically abusive and an alcoholic, and left her with no house, car or asset. Divya says she was ‘foolish; Shweta claims she is ‘free’. What they certainly are, is floundering financially. Brought to financial ruin by marriage and the subsequent divorce. The 2011 Census pegs the number of divorced people in India at 1.36 million, even as the number of divorcees has doubled in the past two decades, as per a recent report from United Nations. The number of divorces has gone up from 1 in 1,000 to 13 over the past decade, but the number of women who are divorced and separated are far more than men because the latter have married again. These figures seem to bely India’s No. 1 ranking as the country with the lowest divorce rate of nearly 1% in the world, in 2017, according to a report from the Organisation

WHILE MARRIED… It goes without saying that before you marry, you should be clear about how both the partners will manage the finances. Since a pre-nuptial agreement is not legally enforceable in India, it is a good idea to be alert when it comes to your finances right from the start and not become totally dependent on the husband. It’s a situation Megha Gupta, 51, from Hyderabad, remains trapped in. Since she got married right after college and never worked, her financial dependence on her businessman husband has kept her captive in a miserably abusive marriage. “Since my parents don’t support me and I cannot get a job, I can’t separate or seek a divorce,” she says. Whether the marriage turns out to be a happy one and the husband takes care of you financially or whether the bond

for Economic Co-operation and Development. It’s a figure that is as divorced from reality or reason, as is the implied merriment from trauma, in an average marriage. It’s a figure revealing the social stigma of divorce, the deception about women’s financial independence, the lack of financial literacy among women, and the ruthless patriarchal tradition that fuels women with fear and forces them to suffer in faux marriages rather than seek freedom. The situation has certainly improved after the landmark Hindu Code Bill was passed in the mid1950s to give women property rights, outlaw polygamy and allow partners to file for divorce. In 1976, the laws were tweaked to allow divorce by mutual consent. Yet, women’s awareness about divorce and financial literacy levels remains grim. “For non-working women, the situation after divorce is difficult. With no future income and a life span that is longer than men, the one-time settlement is often not enough,” says Priya Sunder, Director, PeakAlpha Investments. “This is because they do not know how to arrive at a figure taking into account inflation and future expenses,” she adds. And this is only one of the aspects that they are ignorant about. They do not know their financial or legal rights or how to secure these either when they are married or while they are going through a divorce. What are the financial steps they need to take as soon as they realise there is trouble in the marriage? Which assets belong to them and which don’t? How should they divide the assets and property? In this story, we tell women not only how to secure themselves financially but also everything they need to know about their rights during a divorce.

breaks, never let down your financial guard. Women should be aware about their legal rights when it comes to finances, as well as their own financial participation in a marriage.

What are your legal rights? A Hindu woman is entitled to certain legal financial rights after her marriage, with some of the rights applicable to women from all religions. These include: Right to streedhan: Streedhan includes all the movable and immovable assets or gifts that a woman receives before, during or after her marriage from either side of the family. Under Section 14 of the Hindu Succession Act, 1956, she has an absolute right to any such property or gifts received even before her marriage. “However, this right is only for Hindu women, with financial security being the key idea behind this right,” says Raj Lakhotia, Founder,

Marriage & Divorce

Women know your rights Here are the steps you should take to secure your finances whether you are married or undergoing legal separation.

Dilsewill.com, an online will-maker. Right to residence: A wife has the right to stay in a matrimonial household, which means a household shared with the husband. This house doesn’t have to be selfacquired by the husband, but can belong to his parents, be an ancestral house, a joint family home, a rented house or one provided by his employer. Right to maintenance by husband: If a wife is unable to support herself financially, she has a right to claim maintenance by the husband. If the husband is not maintaining her, she can claim maintenance through court. If she files for divorce, she is entitled to temporary (during court proceedings) and permanent maintenance (final settlement after divorce). “While the protection of Hindu married women is governed by the Hindu Marriage Act, 1955, and the Hindu Adoption and Maintenance Act, 1956, other married women from all reli-

gions can also protect their financial and legal rights regarding their maintenance under Section 125 of the Code of Criminal Procedure Act, 1973,” says Lakhotia. Right to child maintenance: If the wife is incapable of earning, the husband is bound to provide financial support for the kids. Right to committed relationship: If the husband has an extra-marital relationship or marries another woman without a legal divorce, he can be charged with adultery under Section 497 of the Indian Penal Code. Right to live with dignity & self-respect: This right is again ensured to women from all religions under Section 125 of the Criminal Procedure Code. A wife has the right to have the same standard of lifestyle and comfort as her husband and in-laws, without being subjected to any physical or mental torture. Right to father’s property: After the amendment of the Hindu Succession Act in

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The Economic Times Wealth January 27-February 2, 2020

All about Divorce by mutual consent can be obtained within six months, but no petition in such a case can be filed within first year of marriage. There also has to be gap of six months between the first and second motions. The court can waive this cooling off period in some cases. So in case of divorce by mutual consent, it usually takes 18-24 months.

DIVORCE… Whether you are opting for a mutual consent divorce or contesting it, here are the details you should know.

VS

Mutual Consent divorce

Contested divorce

Sections under which it is filed

Section 13B of Hindu Marriage Act 1955 Filed jointly by husband and wife.

No grounds required.

Filed only by one spouse since the other does not consent.

Decisionmaking

Lawyers mediate on all these issues.

Grounds

Grounds include cruelty, adultery, desertion, conversion, mental disorder, leprosy, venereal disease, renunciation, no resumption of cohabitation, and not heard to be alive.

Short duration (18-24 months)

Time taken

Time-consuming (3-5 years)

Single, common lawyer

Lawyer

Separate divorce lawyers

What is the cost involved? The court fee is nominal at `15, but the bulk is taken up by lawyer’s fees. While women can avail of free legal services by getting an advocate from the legal aid cell, private lawyers’ fee can vary from `10,000 to `1 lakh, depending on the type of divorce and duration involved.

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Advocates can charge on the basis of each hearing or as a lump sum on an annual basis. Women can also ask for litigation expenses from husband via court, but the amount granted by the court is usually less.

Which documents will you need?

What are the steps involved? Mutual consent

In case of a contested divorce, the period is longer, ranging from three to five years because of complications and possibility that either party can challenge the decision in the High Court and Supreme Court.

Section 13 of Hindu Marriage Act 1955

Petition filed

Husband, wife decide on maintenance, child custody, property and investments.

How much time does it take?

First Motion involves joint filing of divorce petition.

Husband & wife appear before court to record statements after filing of petition.

Court examines petition, documents, tries reconciliation, records statements.

STEP 1

STEP 2

STEP 3

Depending on the type of divorce, the court may ask for: Address proof of husband and wife. Details of professions and current earnings of husband and wife. Certificate of marriage. Information regarding family background.

STEP 7

STEP 6

STEP 5

STEP 4

Decree of divorce passed by the court.

Filing of Second Motion is done within 18 months of First Motion.

Cooling off period of six months given to couple by court to rethink decision.

Court passes order on First Motion.

Photographs of marriage. Evidence to prove that the husband and wife have been living separately for more than a year. Evidence proving failed attempts at reconciliation. Income tax statements. Details of property and assets of the parties. Other documents too may be needed, depending on facts and circumstances of the case.

Contested divorce

Court issues summons and seeks reply from the other spouse.

Filing of petition by the husband or wife.

STEP 1

Court may suggest reconciliation.

STEP 2

STEP 3

STEP 6

STEP 5

STEP 4

Decree of divorce passed by the court.

Counsels for both parties present final arguments.

Examination and crossexamination of witnesses and evidence.

cover story The Economic Times Wealth January 27-February 2, 2020

2005, every woman, whether she is married or not, has the right to inherit the property of her father after his death and have a share in the mother’s property as well.

What is your financial awareness? Every married woman should actively participate in managing the household finances, not just regarding the outflow or expenses, but also when it comes to saving and investments. If she does not have the requisite knowledge or expertise to invest, she should at least be aware of the financial inflow and transactions being conducted by the husband. “If she doesn’t have a clear picture of the entire cash flow and income, how will she arrive at a figure that she is entitled to as alimony in case of a divorce,” asks Sunder. Here are some of the things a married woman should keep in mind: Don’t quit job right after marriage: If you are employed before getting married, do not take the sudden step of quitting. Continue to work, and if at all you are forced to quit after having kids, either return to work, continue the sabbatical till you are able to return, work from home, or have an arrangement with the husband whereby you are not forced to ask for the required money for yourself and the household every month. “I made the mistake of quitting my job right after marriage. Since my parents had been working, I had the flawed notion of being there for my kids at all times,” says Kapoor. She had to beg for money not just for herself but for the household expenses as well. Separate bank account: Whether you are working or not, have an individual bank account where you deposit all your earnings. For household expenses, have a joint account in which both husband and wife put in money in the proportion of their

Divya Kapoor

incomes. If you were ever to separate, you would not face the risk of your account being wiped clean by the husband. Assets and investments: Irrespective of whether one partner is earning or both, the investments and assets should be equally divided or jointly owned. If it is a house, ensure you are a joint owner; in case of investments, make sure you are a joint holder or at least a nominee. Since the law considers the owner as the person in whose name the asset is registered, you would have some form of security if you were to separate. You should know about all the investments made in your or your husband’s name. The ownership will also help you claim the asset or investment at the time of separation. This should include investments in stocks, mutual funds, gold and real estate. In case of real estate, have access to all the relevant documents.

DELHI, ENTREPRENEUR

Financial mistakes

Married in

1982

While married... Put all the savings in the NSCs and PPF only in husband’s name. Did not buy house because husband didn’t agree to it.

Divorced in

2011

While separating... Did not seek any maintenance even though she had no steady job. Paid the lawyer’s fee even for husband.

Expenses incurred in divorce

I didn’t take maintenance, not because I couldn’t or wasn’t aware, but because money wasn’t a priority for me. I just wanted to retain my sanity and get a closure.”

`70,000

Worth of unclaimed investments

`40 lakh

* All names have been changed to protect identities.

“It is important that the woman come out of a divorce with more liquid assets and no outstanding loans or liabilities.” PRIYA SUNDER DIREC TOR, PE AK ALPHA INVES TMENTS

Health and life insurance: “When my startup suffered losses and I was rushed into an emergency surgery, my husband refused to pay for it,” says Kapoor, whose mother and sister had to pitch in. This is why it is important that if you are not earning, your husband provides you a health cover and is himself insured for life with you as the nominee. This will ensure that if something happens to him, you are not left without any form of financial security.

Besides, information about all types of insurance—life, health, vehicle, house—is critical to making claims or withdrawing money on maturity. You should also know about the due dates for premium payments to avoid the lapsing of policies if these are in your name and you need to pay after separating. Have access to original documents. You can also scan and save them on your computer or keep photocopies. Keep all vital documents in a safe deposit or

Don’t let divorce destroy your finances! The financial tips that women should keep in mind before a divorce.

Gather documents in time The moment you realise that trouble is brewing in your marriage, get hold of all financial documents, including salary statements, rent receipts, property documents, household items receipts, monthly spending proof, proof of asset ownership, etc. If you leave it for later, the husband may make it difficult for you to access these.

Take alimony as a lump sum It’s better to opt for a lump sum instead of a monthly payout because the former is non-taxable and rules out erosion of wealth due to inflation. If you opt for monthly payouts, ensure it is pegged to inflation and increases every year.

Put away your assets

Hire a financial planner before a lawyer

Identify all the assets like jewellery and household items in your name and put these away in a safe place, say, in your individual locker or with your parents.

To ensure you get a fair maintenance, hire a financial planner before a divorce lawyer. It’s important you arrive at the right figure by taking into account inflation and future expenses to be able to maintain your lifestyle after divorce.

Maximise liquid assets, cut your liabilities

Alimony & child maintenance are separate

Try to get as many liquid assets as possible because it offers flexibility in rebooting your financial life after divorce. If you insist on securing a house but have no money for running the household, you will be in trouble.

Understand that the money you require for household expenses and maintaining your lifestyle is different from the money you will need to bring up your child. Factor in the future child goals like education and wedding expenses as well.

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The Economic Times Wealth January 27-February 2, 2020

Division of homes & loans… There is no legal provision for division of property at the time of divorce. So unless the divorce is contested, it is better to decide on the split by considering the following possibilities. If it is husband’s ancestral or self-acquired property... Q A woman has no right over such property and can stake a claim if she is a joint owner or has contributed in its purchase and can prove it.

If wife & husband are joint owners and loan co-applicants... Q Both can sell the house and divide the amount equally after repayment of loan. Q One partner can get the loan transferred in his/her name and is then responsible for repaying the loan. He/she can settle the other person’s contribution and have the title transferred to his/her name. In such a case, one must also take into account the stamp duty and registration cost. Q If one partner stops paying the EMI, the responsibility of repaying the loan will lie with the other partner. In such a case, the loan can be refinanced and ownership transferred to the person paying the loan after settling the other partner’s share.

If wife or husband is sole applicant and owner... Q In such a case, the house belongs to the owner and the responsibility of repaying the loan lies with the partner who has taken it.

If husband has taken the loan, but title is in wife’s name... Q The wife will be considered the legal owner, but if the husband can prove he paid the loan for the house, he can stake a claim to it. Q If the wife did not contribute to the house’s purchase, she cannot stake a claim to the house. Q The non-applicant wife can get the loan transferred in her name and take the ownership of the house, but after settling the amount paid by the husband.

locker, or store them online. Accounts and passwords: If you are planning a divorce and want to access crucial documents that are stored online, you will not be able to if these have been put away by your husband. This is why it is important to know all the account numbers, including those of savings bank accounts, provident fund, PPF, demat account, credit cards, mutual funds, insurance policies, and tax details. If the accounts are online, ensure access to login and password of each.

“A woman has no claim over the husband’s ancestral or selfacquired property.”

WHEN MARITAL TROUBLE BEGINS… In case your marriage is not working and you want to separate, do not rush into it by announcing it to the husband immediately. This one mistake can cost you financially since it may become difficult to access the documents that can ensure a fair split. It is advisable, of course, not to leave everything till the last moment. “It’s impossible to plug into the family’s finances all at once. The woman should be clued into the income, cash flow, assets and investments through the entire course of her marriage, so that it is easier to deal with finances if she were to separate,” says Sunder. “Before I separated permanently, I had left the house on one occasion when I couldn’t take the abuse,” says Karat. This meant that she had no access to her own things, streedhan or relevant documents. She did return eventually and collected some of her things. Here are some steps you should take at the earliest to bolster your case and protect your finances.

Take these financial steps Hire a financial planner and a lawyer: If you are a financial rookie and have no idea how to go about the process of separation and divorce, this should be your first step. Hire a good financial planner and a lawyer

ROHAN MAHAJAN FOUNDER & CEO, L AWR ATO.COM

because the financial benefits that will accrue to you will be worth every rupee spent on their fees. While the lawyer will apprise you of the documents and proof you need to strengthen your case, the planner will help you with the calculations to arrive at the optimum figure, which will help you seek sufficient alimony and child support. Collect information & documents: With the help of the lawyer and planner, make a list of all the documents you will need to submit in the court, such as address proof, marriage certificate, salary statements, marriage photos, bank statements and tax returns, among others. Access these and make photocopies. “The more you delay, the more difficult and inaccessible these documents might become,” says Sunder. List of assets & liabilities: “Next, make a list of all your assets and liabilities and collect the receipts or ownership documents for all these. Then write down the market value of all assets for the purpose of division,” says Mahajan. “Once the market value of assets has been assessed, evaluate the individual share of the husband and wife,” he adds. The distribution will take place between the spouses based on the individual

Shweta Karat NOIDA, BUSINESSWOMAN

Financial mistakes While married...

Married in

1992

Did not build any asset (house, car) or make investments in her name. Ran the household with her own income, without contribution from husband.

Divorced in

2019

While separating... Did not calculate future expenses or draw up a list of assets to be split. Did not ask for maintenance or make any other demands.

Expenses incurred in divorce

`40,000

“I continue to struggle financially, but at least I am at peace with myself and more happy now.”

Worth of unclaimed investments

`24 lakh

equity or as decided between the parties, if it is a mutual consent divorce. Get hold of streedhan: This is another important step since you will probably have a lot of assets gifted to you before marriage, during marriage ceremonies, and on the birth of kids. “A woman retains the ownership to streedhan even after separation, including all movable and immovable property, gifts, and money, among others,” says Lakhotia. The best option for you is to stash away your things either with your parents or in a safe place away from your current residence. Change nominee details: If you have made investments or taken insurance in which you have listed the husband as the nominee, change the details. These could include the Provident Fund, PPF, bank account, demat account, mutual funds and life insurance. Block credit cards: In case of add-on or supplementary cards in the name of husband, block immediately to prevent him from withdrawing money or spending. Close joint accounts: If you have a joint savings account with a lot of money, the spouse can take it out since the balance is shared equally, irrespective of who deposits it. Similarly, foreclose fixed deposits and other joint investments, which are shared equally between the partners. Alter your will: If you have a will and the husband is a beneficary, alter the names. Seek interim maintenance: If you don’t have a source of income and your relationship with the husband has soured to the extent that he refuses to give you any money, you can approach the court to seek maintenance for the duration before the final divorce settlement.

WHILE SEPARATING... The last leg of separation is, perhaps, the most excruciating, especially if the divorce is contested. The mutual consent divorce is always favoured not merely because it is less expensive and timeconsuming, but also because it is less exhausting emotionally (see All about Divorce). The most complicated issues that crop up at this stage include alimony, child custody and support, and division of property as well as other assets. It is also the stage where most financial mistakes take place, which can have a long-lasting impact on the woman. So prepare yourself well before approaching it. Division of assets: There is little confusion over streedhan, which exclusively belongs to the woman. “All the assets owned by the wife and in her name will also remain her property, but if the husband has contributed to its purchase, he can file a suit and claim ownership to the extent of his contribution,” says Mahindru. “However, while dividing the assets mutually, it is important to take into account the role played by each spouse in the marriage. This is because, while one might be taking care of all the expenses, the other was contributing towards savings,” says Mahajan. Unless the divorce is contested, it is better for the spouses to decide the distribution of assets themselves. If the assets have been bought from contributions made

cover story The Economic Times Wealth January 27-February 2, 2020

07

e child’s financial r u s n e secu Set up a trust o t rity How In case of a mutual consent divorce, a good option is to consider setting up a trust with the child as a beneficiary. This will ensure that the child’s needs are taken care of in case a parent passes away.

Calculate correct expenses

Health insurance If the husband stops paying the premium of a health insurance plan after divorce, and you have the child’s custody, make sure you purchase a family floater plan of at least `5 lakh immediately covering yourself and the child.

To decide the amount needed for the child, consider the dayto-day expenses of bringing up the child, education and medical expenses, and entertainment needs till he turns 18 or starts earning. If you are getting a lump sum, factor in the longterm expenses for child’s higher education and wedding.

Life insurance In case the wife is the nominee in a life insurance plan bought by the husband and he wants to stop paying the premium, the partners can decide to make the child the beneficiary, with the mother as a guardian. If the husband does not agree to this, it is a good idea to buy a life insurance plan immediately with the child as the nominee. You could then include the premium expense in the alimony calculation.

Claim separate child maintenance Remember, alimony is separate from child support. In case of a contested divorce, make separate calculations for both and ensure you get sufficient amount for the child’s upbringing.

Mahima Singh GURGAON, HR PROFESSIONAL

Financial mistakes While married...

Married in

1993

Did not keep track of cash flow or savings and investments. Did not buy movable or immovable property in her name.

Divorced in

2004

While separating... Settled for monthly payout instead of a lump-sum alimony, which is tax-free. Did not list the stock and mutual fund investments worth nearly `25 lakh in her name.

Expenses incurred in divorce

`20,000

Women should be given a list of their financial rights at the time of getting married, as is done in some developed countries.” by both, it’s best to share it on the basis of individual equity. This contribution can be checked through bank statements. Nominee in investments, insurance: In the case of investments and insurance where the woman is a nominee, says Mahindru: “A nominee under law has no right over the investment or insurance. The role of nominee comes only after the death of the person. So during the husband’s lifetime, the wife has no right over it. After his death, she is eligible to make a claim over the investment as she is a Class I legal heir.” Splitting homes & loans: Most conflicts expectedly and invariably take place over

Worth of unclaimed investments

`25 lakh

immovable property. “The wife has full right over her property and is the sole owner whether it is gifted, inherited or earned by her,” says Lakhotia. However, she has no right over the husband’s ancestral or self-acquired property unless she inherits it from the deceased husband. “The wife can only make a claim in case a property is jointly owned by the husband and wife at the time of divorce. If the property is bought by the husband while the two were together and he holds the title, the wife can make a claim if she can prove her equity in the property,” says Mahajan. In case a property is purchased and paid for by one

person and the title is held by the other, the person in whose name the property is will be considered its legal owner (see Division of homes and loans). If the house has been financed jointly through a loan, it can be sold and the money split as per the share of each spouse. If one spouse wants to retain the house, he or she can buy the share of the other and repay the loan. If, however, the husband refuses to pay the EMI, the entire responsibility of repaying the loan can shift to the wife. Alimony or maintenance: “You have only one go at alimony as there are no second chances. So make the most of it by arriving at the figure carefully,” says Sunder. Hence, this should ideally be done in consultation with a planner taking into account inflation and all future expenses. “It is fair that the woman gets a sum in which she is able to maintain her existing lifestyle, takes into account her longer life span and earning capacity,” says Sunder. It is also better to opt for a lump-sum settlement instead of a monthly payout as it is tax-free and not subject to erosion of value due to inflation. Another important point is that the woman should opt for as many liquid assets as possible, which will help her start her life afresh after divorce. The court decides on the quantum of maintenance by considering several factors, including the husband’s income, the needs of wife, liabilities, wife’s financial condition and earning capacity, among others. As per a Supreme Court ruling, 25% of the husband’s income is considered a just amount to be given as maintenance. However, if she is earning well while the husband is not, she may even be denied any maintenance. If she is earning but unable to maintain a comfortable lifestyle, the husband will have to shell out the required amount. The wife can claim maintenance under Section 125 of Code of Criminal Procedure, as also under provisions of

“When a divorce is impending, the woman should check all properties in her name and keep track of streedhan.” R AJ L AKHOTIA FOUNDE, DIL SEWILL.COM

the Hindu Marriage Act, 1955 and the Protection of Women against Domestic Violence Act, 2005. A Muslim wife is entitled to the amount of dower or mehr agreed to at the time of marriage, and after divorce, she is eligible to maintenance till the iddat period. After the iddat period ends, she can seek maintenance from her parents or District Waqf Board under Section 4 of the Muslim Women (Protection of Rights on Divorce) Act. If the woman has to take care of herself and her children, maintenance for two years can be claimed from the husband. If the child is born after the divorce, then the two-year period will begin from the child’s date of birth. The Indian Divorce Act, 1869 governs the maintenance rights of Christian married women. Under Section 37, women can apply for maintenance in a proper court as per the jurisdiction and the husband will be liable to pay maintenance till the woman’s lifetime. Under the Parsi Marriage and Divorce Act, 1936, the court can award a maximum of one-fifth of the husband’s net income to the woman. She can claim it till her lifetime if she remains unmarried and chaste after divorce. Please send your feedback to [email protected]

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financial planning The Economic Times Wealth January 27- February 2, 2020

Why value funds are underperforming Participants at the ET Wealth Investment Workshop wanted to know when category will regain its lost charm. by Shivani Bazaz

V

alue funds have been underperforming for a while now. Many mutual fund investors are asking their advisers, writing on mutual fund forums, and messaging us on our official Facebook page about the reasons for the sustained underperformance of value-oriented schemes. Nilesh Shetty, Co-Fund Manager of the pioneer value fund, Quantum Long Term Equity Value Fund, responded to these queries at the ET Wealth Investment Workshop held in Delhi on 17 January. Speaking on the prevailing market conditions, Shetty said, “We are seeing no earnings growth, but the market is expensive. Value investing doesn’t work in such situations.” Shetty explained that stocks were highly priced and undervalued companies were going through a liquidity crisis. “When expensive stocks become more expensive without actual growth on ground, there is no value,” he said. Quantum Long Term Equity Value Fund has underperformed its benchmark and category average in the past two years. Shetty maintained that such phases were a part and parcel of value investing. “If you want to invest in value funds, you have to have a lot of patience. They will not give

PHOTOS:GETTYIMAGES

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you phenomenal returns all the time, but they will protect also the downside better,” he said. A participant at the workshop asked about the long phase of underperformance

in value funds and their impact on longterm returns. Shetty explained how downside protection played an important role in conserving long-term returns. “One of the biggest lessons in mutual fund invest-

ments is not to lose money. Focus on managing the downside well. That’s the base of value investment,” he said. Given the decline in returns from value funds, many participants wanted to know when this category would regain its lost charm. “When we see no opportunity or value in the market, we sit on cash. We have sat on cash in phases when the markets have gone up. When the risk aversion comes back and valuations become saner, value investing will come back,” explained Shetty. Participants also raised questions regarding the markets being at an all-time high while the broader market was not performing. “It is not that there hasn’t been a correction in the large cap space, but the index doesn’t show it because concentration is so high to select stocks that are leading the rally,” said Shetty. He advised investors to follow a balanced 80-20 strategy. “Mutual fund investors shouldn’t have more than 20% in a value fund. This will ensure that they don’t lose heavily when value stocks underperform,” he said. Please send your feedback to [email protected]

Mistakes that prevent investors from getting rich Investors make some common mistakes that reduce their chances of earning good returns from mutual funds. earn maximum returns.

by Shivani Bazaz

D

ata shows that investor returns are usually lower than investment returns. Mutual fund advisers say this is because investors make some common mistakes that reduce their chances of earning the maximum returns. Speaking at the ET Wealth Investment Workshop in Delhi on 17 January, Puneet Oberoi, Founder & Director, Excellent Investment Advisorz, explained why fund investors did not make money in the equity market. Oberoi said the average investor had underperformed every asset class and hasn’t even beaten inflation in the past 20 years. He said that one out of three investors fail at long-term investing because they don’t pay attention to their asset allocation. On the other hand, 31% investors lose money because the try to time the market. He listed five common mistakes that fund investors should avoid to succeed:

Following the herd mentality Oberoi said fund investors should not do what everybody else is doing. “Don’t invest just because your relatives are investing in equity funds and making good returns.

Many investors get into these schemes without understanding them and burn their hands,” he said. “By the time you get in expecting the same returns, the market starts falling.” Oberoi said that this is why herd mentality can lead to failure in a cyclical market.

Chasing performance Another common mistake by fund investors is chasing the best returns. “No mutual fund scheme or category will top the return chart forever,” said Oberoi. He explained how many mutual fund investors lose returns while switching from one scheme to another. “Some investors pick an aggressive scheme for higher returns and then can’t take the fall and exit,” said Oberoi. Instead, he said investors should choose mutual fund schemes that are in line with their risk appetite and stay invested to

Timing the market This is one of the most common mistakes made by a lot of mutual fund investors. “Investors try to sell at the peak of the market and want to wait till the market touches the bottom. They don’t understand that there is no way someone can do this on a regular basis. In this process you lose out on the compounding and benefits of staggered investments,” he said.

Fearing a crash Oberoi said many investors are afraid to invest because they fear the markets could crash. Many clients asked him, ‘What if the market crashes’. He says that one can never avert the pos-

sibility of a market crash in the long term. Equity markets by nature are volatile and the markets can’t go up all the time. “The markets will keep going up and down. It is an investor’s choice to either fear and run away or stagger investments to make the most of the market falls,” he said. If they take the SIP route, mutual fund investors can accumulate more units when the market falls. SIPs average out the purchase cost in the long term.

Having a short-term focus Oberoi also explained the need for a long term invetsment horizon. he said that entering the equity markets with a short-term goal could be risky. The chances of losing money in a shortterm are high in the equity markets. “Don’t come in for 2-3 years. Many investors say they are long-term investors and then sell at the first bout of volatility. This eats into your returns. Stay focused on your long-term goal and invest with discipline across market cycles,” he said. Please send your feedback to [email protected]

1*4 UTI Mu t u al Fund

44 , e k be k f-Ar ZiA AAj i ka. INVESTOR CONNECT INITIATIVE

41

>> pg 09

THE ECONOMIC TIMES WEALTH, JANUARY 27-FEBRUARY 2, 2020

LIVE WORRY FREE YOU CAN ACHIEVE FINANCIAL FREEDOM THROUGH PROPER PLANNING USING MUTUAL FUND SCHEMES AS THE MAIN VEHICLE

GURU SPEAK

3 MANTRAS TO ACHIEVE FINANCIAL FREEDOM

LONG TERM GOALS

«

Financial goals which are to be achieved after seven years, qualify as long term goals. Planning to build one's own retirement corpus, to meet expenses for a child's wedding etc. qualify as long term goals. For these, for most people, SIPs in a mix of equity funds could be used.

t is everyone's dream to live a worry free life. Like in every walk of life, if one plans well one's investment with proper timelines for each of the short, medium and long term goals, financial freedom is achievable.

I

SHORT TERM GOALS Usually financial goals which could be met « within a year or two, qualify as a short term goal. One should have an emergency fund with 3-6 months of family's monthly expenses parked in liquid funds. Goals like annual vacations, schools fees, yearly insurance premiums etc. could also be met through SIPs in liquid funds.

O Ramneek Singh

Kochar

inancial freedom in today’s time is not just about investing your savings, but ensuring that your savings start earning more money for you i.e. ‘passive income’. It is the state of being where money does not restrict you from doing what you want to do. As wealth advisor, I have witnessed this transition and observed that there are some fundamentals which do not change with time like proper financial planning, regular saving and investment, positive outlook and clearly defined goals. I advise three basic 'mantras' for attaining financial freedom.

F

Mantra 1: Be positive, buy positive and stay positive The simplest way to make all the right choices with your money is to be positive. Never give into stress around you; remember the natural trajectory is upwards so if you remain positive, you will make money.

Mantra 2: Proper and diversified planning: It is VARADK AR

«

Financial goals which are to be achieved after a couple of years but in the next seven years, could qualify as a medium term goal. Down payment for the dream house could be a medium term goal. Going on a vacation to an

Scan this QR code to know how a good financial plan could help you achieve a completely worry free life

ILLUSTR ATION: SACHIN

MEDIUM TERM GOALS exotic location abroad could also be clubbed as a medium term goal. For such goals, one could use SIPs in hybrid (earlier balanced) funds or if you're a conservative investor then in SIPs medium term debt funds.

Scan this QR code to know how following some simple investment rules could bring in positive changes to your life

SIP H I PIN --STP " SWP !

THE

SOF

SUCCESS 6

unadvisable to keep all our eggs in one basket, thus your financial plan should always be a diversified investment portfolio i.e. you should invest in multiple ‘asset class’ like real estate, gold, high growth equity, tax saving instruments and more. The best part of investing in mutual funds is that they enable you to have the desired mix of asset class in your portfolio.

i

I

Mantra 3: Slowly, but surely: Multiple researches

STEPS TO DOWNLOAD AND SCAN A QR CODE

Scan this QR code to calculate the amount you need to invest to achieve all the milestones you have set for yourself

________.

..

It's important to choose one's goals judiciously, set timelines, invest in a disciplined manner and enjoy the fruits of good planning. One could always consider taking help of a qualified financial advisor or planner.

Download QR code app on your phone Run app and scan the QR code O Your smartphone will read the code & navigate to the destination O

have proven it conclusively that steady investments yield the best returns and predictable results over any given long investment horizon. Systematic Investment Plans or SIPs as they are called are the optimal way for common investors to reduce cyclic risks of equity market.

O

— The writer is an IFA, Motif People

4M , ek 6s f.I..H.l.yf krs

-

'Transfer can only be done between two schemes of the same mutua l fund. Subjecl to ovai labi l y of outstanding balance in occouns . T know oboot inc
M U T U A L

F U ND

INV E S T M E NT S

A R E

S U BJ E C T

T O

M A R K E T

RISKS ,

READ

ALL

SCHEME

RELATED

D O C U M E N T S

C A R E F U L L Y .

guest column The Economic Times Wealth January 27- February 2, 2020

How to earn a regular income from funds With interest rates unlikely to head upward anytime soon, retirees need to get out of the fixed deposit mindset, says Dhirendra Kumar.

DHIRENDR A KUMAR CEO, VALUE RESE ARCH

money mysteries

Over the past five years, a majority of equity funds have given returns of 12-14% or more. The returns may have fluctuated in individual years, but this is the way to defeat the threat of old age poverty.

W

ith the stressful growth situation continuing, higher interest rates are unlikely to be seen any time soon. This means smart savers need to think clearly about using equity-based mutual funds as a source of regular income. The realisation that bank fixed deposits are a poor way of earning an income hasn’t come a day too soon. On an inflation adjusted basis, fixed deposits (and other interest-bearing assets) were always a bad bet. In reality, for deriving a regular living income, specially for long periods as in retirement, equity mutual funds or balanced funds are by far the best option. Every kind of logic points to this: One, a lower tax rate. Two, taxation only on withdrawal. And three, higher returns. Taken together, this effectively closes the argument. Let’s see how. Let’s examine fixed deposits first. Suppose you have `1 crore as savings from which you need a regular income. In a bank FD, a year later, it will be `1.07 crore. So you have earned `7 lakh, effectively `58,000 a month, right? Only in theory. Assuming an inflation rate of 5%, if you want to preserve the real value of your `1 crore and continue earning for years, you must leave `1.05 crore in the bank. That leaves `2 lakh for you to spend, which is just a paltry `16,666 a month! This means that if you need `50,000 a month, you need `3 crore. Of course, at that level, income tax also kicks and about `30,000 a year will have to be paid. It’s actually even worse, because the tax has to be paid whether you realise the returns or not. The situation is very different when, instead of receiving interest, you are withdrawing from an investment in a hybrid (balanced) mutual fund. Unlike deposits, these are high-earning but volatile. In any given year, the returns could be high or low, but over five to seven years or more, they comfortably exceed inflation by 6-7% or even more. For example, over the past five years, a majority of equity funds have given returns of 12-14% or more. The returns may have fluctuated in individual years, and that’s something that the saver has to put up with, but this is the way to defeat the threat of old age poverty. In such funds, one can withdraw 4% a year and still have a comfortable safety margin. On top of that, the tax is much lower. Instead of being added to your income, as with interest income, you have to pay capital gains tax on withdrawal. As long as the period of investment is greater than one year, returns from equity funds are taxed at 10%. So for a monthly income of `50,000, `1.5 crore will suffice instead of `3 crore as with FDs. And no matter how high your savings

GETTYIMAGES

10

and expenditure, it’s still taxed at 10%. However, the tax advantage has yet another hidden factor. Let’s say you invest `10 lakh in a mutual fund. A year later, the value of the investment increased to `10.80 lakh. Now, you want to withdraw the `80,000 you have gained. In your holding, 7.4% is the gain and the rest (92.6%) is the original amount you invested. When you withdraw any money, the withdrawal shall be considered (for tax purposes) to consist of the gains and the principal in this same proportion. Therefore, of that `80,000, only `5,926 will be considered gains and will be added to your taxable income. Obviously, this makes a big

difference in the tax you pay. The conclusion is clear: in every possible way, it is better to draw your earnings as regular withdrawals from an equity mutual fund, rather than as interest income. The SWP (Systematic Withdrawal Plan) facility is available for regular withdrawals from every open-ended fund. The volatility may be a little uncomfortable in the short-term, but the maths and the logic are crystal clear.

Please send your feedback to [email protected]

stocks The Economic Times Wealth January 27- February 2, 2020

Will current beta rally sustain? Investors should be choosy as some low quality stocks may also get swept up in the rising tide. by Sanket Dhanorkar

T

GETTYIMAGES

here has been a tangible shift in stock market preferences over the past few weeks. The action has shifted away from the socalled quality basket towards the high-beta names. High beta stocks from frontline indices have outperformed sharply for over two months—a trend reversal from earlier when only quality stocks were flying. Does this beta rally have enough legs to push on? How can investors make the most of it? In market parlance, beta is a measure of a stock’s volatility relative to the overall market. High beta stocks are those in which prices fluctuate more than the market. A stock that swings more than the market over time has a beta above 1, while stocks that deviate lesser than the market have a beta less than 1. High beta stocks oscillate more as the businesses are typically cyclical in nature. These are either closely linked to the changing economic macros, government regulations or have political affiliations. Shares of companies in sectors like financial services, capital goods, construction, metals and certain consumer discretionary names belong to this segment. Some of these are assetheavy businesses with high debt. The quality basket—characterised by high earnings visibility, growing profitability, strong cash flow, low debt and high return on capital employed—has been favoured by investors over the past few years amid the broader economic slowdown and muted corporate earnings growth. Most of these stocks have a low beta or volatility, and are perceived to be more stable. Interestingly, high beta stocks within Nifty50 have outperformed low beta stocks since September 2019, points out a ICICI Securities report. This uptick has been led by metals stocks like Jindal Steel & Power,

Tata Steel and Steel Authority of India. Several stocks from the financials space have also contributed, like Motilal Oswal Financial Services, Indiabulls Housing and LIC Housing. Analysts say beta rallies tend to be driven by optimism about policy measures, improving growth outlook and low interest rates. Often, the fuel propelling a beta rally is ample liquidity. The current rally seems to be deriving much of its strength from global liquidity. “Globally, a risk-on sentiment has taken hold, driving investors towards riskier assets,” says Vikas

Gupta, CEO & Chief Investment Strategist, OmniScience Capital. Among reasons are lowering interest rates by dovish central banks, de-escalation of US-China trade war and waning of recession fears in developed markets. Among domestic factors, the government’s mega infrastructure push has raised hopes of higher credit growth and private sector capex. Expectations of a big-bang Budget are also fanning sentiment in high beta stocks. Some feel this shift has enough legs to run for a while. “This shift in market preferences towards beta marks the

High beta stocks have soared in the past few months Global liquidity and expectations of a big-bang Budget have been fanning sentiments in these stocks. Beta

Market cap (` cr)

Share price (`)

Jindal Steel & Power

Company

2.0

18,284

179

73.3

3-month return (%)

1-year return (%)

24.1

Tata Motors

2.0

60,250

195

47.9

7.5

DLF

1.7

64,135

259

45.4

46.2

Steel Authority of India

1.9

20,962

51

42.6

2.7

Tata Steel

1.5

55,278

491

38.5

4.1

Motilal Oswal Financial Services

1.5

12,746

861

36.7

29.7

L & T Finance Holdings

1.8

23,636

118

36.4

-15.6

Indiabulls Housing Finance

2.4

12,587

294

34.9

-63.4

Motherson Sumi Systems

1.8

43,468

138

32.8

-15.4

Adani Enterprises

2.0

24,905

226

26.8

55.2

Compiled by ETIG Database. Data as on 20 Jan 2020. Source: Capitaline

beginning of the pendulum swing from extreme risk aversion to rising risk appetite,” opines ICICI Securities. Tata Steel, Jubilant Foodworks, Tata Motors, SBI and Ultratech Cement are its preferred picks. According to Equirus Securities, while commodities have already seen a decent run, much more is on the cards. “Among cyclical stories, we are becoming constructive on the capital goods space, banks and utilities,” it says. Jyoti Roy, DVP, Equity Strategist, Angel Broking, says the broader markets will perform better in this scenario as valuations are in favour. On the contrary, expensive quality stocks have started underperforming, particularly where growth is not matching expectations. Shares of index heavyweights have come under pressure owing to earnings disappointments. However, analysts caution against putting large bets on a beta-led rally. Despite the rally, risk aversion continues to be high in the domestic market. High beta has outperformed selectively and is not broad based. So far, only the large beta stocks have outperformed. Beta stocks from the mid- and small-cap basket are yet to catch on meaningfully. The tide may also sweep up some undeserving, low quality stocks. Be particularly careful of high debt companies participating in the rally, warns Gupta. “Investors must distinguish between leveraged companies and low debt names taking part in this uptick,” he says. The latter have inherent fundamental strengths supporting the uptick, such as better cash flow, decent earnings traction etc. Betting on highly leveraged businesses is speculative play that could hurt. If things don’t pan out, the price will revert. Further, beta-driven rallies can often be short-lived. In the past, several false triggers have been seen, finally amounting to nothing. Recent experience also provides ample evidence that a global shock could increase risk aversion, thereby halting the global risk-on rally. Any flare-up in US-Iran tensions or lack of incremental progress in US-China trade deal may play spoilsport in global risk-on trade. Domestically, rising consumer inflation remains a threat to the low interest rate regime. The rally could fizzle out if the upcoming Budget 2020 fails to meet heightened expectations. In this scenario, investors looking to play the beta rally should exercise discretion. “Even as broader markets start participating, the focus within this pack will remain on quality businesses supported by earnings growth,” insists Roy.

Please send your feedback to [email protected]

11

stocks The Economic Times Wealth January 27- February 2, 2020

GETTYIMAGES

12

Go for reasonably valued stocks with solid financials As apprehensions about steep valuations and declining economic performance gain ground, investors should opt for the reasonably valued stocks with decent future prospects. by Sameer Bhardwaj

I

ncreasing global liquidity, easing trade wars and expectations of an income tax cut in the upcoming Budget are some of the factors making investors optimistic. The BSE Sensex has gained over 5,400 points since the corporate tax cut was announced in September 2019. However, experts are apprehensive about the steep valuations that are increasing the risk profile of equities. The estimated 2019-20 PE of BSE Sensex is 23.5 times and it is trading slightly above its 5-year historical average of 22.9. Moreover, such estimated PE creates a valuation premium of over 1.5 times relative to the MSCI Emerging Market Index, that trades at 2019-20 PE of 12.6 times. Further, there are macroeconomic issues ranging from declining consumption, weak investments, likely fiscal slippage to falling GDP growth and looming stagflation. According to a release by CMIE, sluggishness in tax collections that includes customs duty, excise duty and GST and declining corporate taxes consequent to the tax cut has made fiscal slippage in 2019-20 increasingly inevitable.

It is expected that the gross fiscal deficit could reach 3.85% of the GDP in 2019-20. Increasing government deficits can create upward pressure on bond yields and borrowing costs, which can significantly delay the economic recovery by hurting both consumption and investment. In addition, the recent spike in consumer inflation has increased the likelihood of a pause in future rate cuts. Such developments could contribute to increased erratic market movements in the future. Therefore, direct equity investors will have to select stocks cautiously. Moderately valued stocks with strong past performance and robust future prospects could prove effective under such market conditions. A moderately valued stock is defined as the one with valuation that is neither in the top defined fraction and nor in the bottom defined fraction of the market. The concept of percentiles is used for identifying such stocks. A percentile is a statistic that indicates the percentage of values that fall below a defined value. For example, in case of listed companies, if a company has sales revenue of `18,000 crore, which is 80th percentile, it implies

that 80% of the listed companies have sales revenue less than `18,000 crore. In other words, the company’s sales revenue is greater than that of 80% of the listed companies.

Moderately valued stocks with strong past performance and robust future prospects can prove effective now. The above concept is applied to two widely used valuation ratios, the PE multiple and EV/EBITDA multiple. PE compares the price with the earnings per share and generates an equity multiple. On the other hand, EV/EBITDA takes into account a company’s debt and cash levels and generates a firm multiple. Although both the ratios are extensively tracked by analysts in determining the worth of the stock, the latter is considered more superior. This is because, EV/EBITDA is based on the notion of most successful investors, who propose that equity investing is not just buying/selling shares, but buying/

selling the business. There are 763 companies that have a market cap of greater than `500 crore and with visible values for PE and EV/ EBITDA. Stocks whose ratios (both PE and EV/EBITDA) fall in a range which is more than 25th percentile of the market but less than 75th percentile of the market were filtered out. In other words, the valuations of such companies are neither in the top 25% nor in the bottom 25%. To identify financially sound companies from the above-defined percentile universe, the trailing 12 months (TTM) year-on-year growth was calculated for sales revenue, operating profit and net profit. Only those companies were included where all the three defined financial parameters were in a range that is greater than the 75th percentile of the market. In other words, the financials are in the top 25% of the market. Further, to look at the future prospects of such companies only those that are covered by at least four Bloomberg analysts and with a one-year forward price potential greater than 10% were included. Let us look at six such companies:

stocks The Economic Times Wealth January 27- February 2, 2020

BANDHAN BANK 2019-20 PE

Current price (`)

1-yr target price (`)

22.6

477

627

2019-20 PE

Current price (`)

1-yr target price (`)

15.8

531

629

POTENTIAL UPSIDE

18%

ANALYSTS’ RECOMMENDATIONS

BUY

12 KEI INDUSTRIES

HOLD

1 S&P BSE 500

SELL

0 145.63

100 18 Jan 2019

109.88 20 Jan 2020

THE WIRES AND cables manufacturer with a global presence offers a range of cabling solutions. Analysts feel the company’s earnings momentum will remain strong due to improved penetration in the domestic market, better exports and expected contribution from the newly expanded capacities. Its current order book provides strong revenue assurance for the next 2 years and the management is planning to raise funds through the QIP route to sustain growth. Moreover, KEI’s focus on various brandbuilding exercises, leading position in institutional cables, rising share of EHV cables, exports and house wires, strong balance sheet and expansion of dealer network are key growth drivers. Its optimal product mix will help strengthen financials with the likely improvement in demand consequent to the measures taken by the government for economic revival. According to Bloomberg consensus forecasts, the company is expected to deliver revenue growth and adjusted EPS growth of 19.6% and 36.3% respectively in the December quarter. The current 2019-20 estimated PE is trading at a 30% discount to the average estimated PE of the BSE500 index.

ANALYSTS’ RECOMMENDATIONS

31%

THIS UNIVERSAL BANK offers a range of banking and financial services to urban, semi-urban and rural customers. It has 4,288 outlets in India with 485 ATMs. In the December quarter, the bank’s credit growth was muted amid tensions in the North-east region and its asset quality weakened due to a change in NPA recognition norms of the Gruh housing loan portfolio. According to a report by KRChoksey, the bank management believes global economic slowdown and uncertain political challenges would be regular events and would be areas of concern for the microfinance business. However, the impact of these events would be minimal to its operations. Moreover, its diversified loan portfolio will minimise associated risks. Further, the gradual shift from borrowings to deposits will improve source of funding

KEI INDUSTRIES

SAGAR CEMENT

POTENTIAL UPSIDE

BUY

HOLD

14

3

BANDHAN BANK

SELL

2019-20 PE

Current price (`)

1-yr target price (`)

17.8

550

716

3 109.88

18 Jan 2019

109.73 20 Jan 2020

and its cost to income ratio is likely to increase in coming years. The brokerage says the bank’s valuation will improve going forward with growth in advances followed by stable asset quality.

PSP PROJECTS 2019-20 PE

Current price (`)

1-yr target price (`)

15.8

531

659

POTENTIAL UPSIDE

BUY

HOLD

9

0

SAGAR CEMENT

ANALYSTS’ RECOMMENDATIONS

PSP PROJECTS

BUY

HOLD

8

0

SELL

0

SELL

1

S&P BSE 500

109.88

100 18 Jan 2019

84.42

20 Jan 2020

to deliver adjusted net income growth of 55.1% in the December quarter. In terms of Bloomberg’s 2019-20 estimated PE, the stock is trading at over 20% discount to the estimated average PE of the BSE500 index.

DEEPAK NITRITE

24%

THIS CONSTRUCTION COMPANY offers a diversified range of construction and allied services across industrial, institutional, government and residential projects in India. It enjoys a reputation of completing projects ahead of time, which has helped it to secure repeat orders from existing clients. The current order book provides strong revenue visibility and analysts believe that it will continue to remain a net cash company going forward. Robust profitability, well-managed balance sheet and efficient working capital management will aid in improving the return ratios. Focus on geographical diversification, large projects and proven execution capabilities

ANALYSTS’ RECOMMENDATIONS

30%

THE TELANGANA-BASED cement manufacturer produces various a variety of cement like Ordinary Portland Cement, Portland Pozzalona Cement, and Sulphate Resistant Cement. The company improved its operating performance with cost optimisation measures like thermal plant efficiency, reduced lead distance, softening of input prices, commissioning of the captive power plant and favourable fuel mix. Analysts believe increased volumes from eastern markets, stable pricing environment, augmented production from new plants, ramp-up in waste-heat-recovery-systems (WHRS) capacity and hydel power are factors that will contribute to the company’s growth. According to Bloomberg consensus forecasts, the company is expected

S&P BSE 500

100

POTENTIAL UPSIDE

2019-20 PE

Current price (`)

1-yr target price (`)

11.3

390

453

POTENTIAL UPSIDE

16%

ANALYSTS’ RECOMMENDATIONS

S&P BSE 500

BUY

132.74

HOLD

7

100

0

18 Jan 2019

DEEPAK NITRITE

109.88

S&P BSE 500

SELL

0 170.65

100 18 Jan 2019

109.88 20 Jan 2020

are significant growth drivers for the company going forward. According to Bloomberg consensus forecasts, the company is expected to deliver operating profit growth and adjusted EPS growth of 48.2% and 25.8% respectively in the December 2019 quarter.

GATEWAY DISTRIPARKS 2019-20 PE

Current price (`)

1-yr target price (`)

POTENTIAL UPSIDE

16.8

134

150

12%

THIS INTEGRATED LOGISTICS service provider operates three verticals: container freight stations (CFS), inland container depots (ICD) with rail movement of containers to major maritime ports, and cold chain storage and logistics. The container segment is expected to maintain a strong growth trend in the future and provides opportunities to the company for expansion and improvement in profitability from India’s growing foreign trade. Analysts believe that risk-reward is turning favourable as the risks are reflected in the current distressed valuations. Moreover, the company’s focus on reducing debt by selling some of the

ANALYSTS’ RECOMMENDATIONS

BUY

HOLD

12

2

GATEWAY DISTRIPARKS

SELL

1

S&P BSE 500

100 18 Jan 2019

118.67 109.88

20 Jan 2020

non-core assets is another key positive factor. According to Bloomberg, the stock’s 2019-20 estimated PE trades at over 25% discount relative to the estimated average PE of the BSE500 index.

20 Jan 2020

THIS CHEMICAL MANUFACTURING company makes organic, inorganic and fine chemicals. All three segments of the company: performance products, basic chemicals and fine and specialty chemicals continue to do well helped by better exports, improved volumes and higher realisations. According to a latest research report by AnandRathi, the company’s increased focus on adding highvalue products and moving higher in the value chain bodes well for its base business which should continue to show improvement in margins. The brokerage house believes the company will be a key beneficiary as the global chemical industry is shifting gradually to the emerging Asian regions where the Indian chemical industry offers huge scope of growth. High per capita consumption, increase in agri-inputs, and growth in the pharma industry are some of the factors that will contribute to the growth of the Indian chemical industry. Further, the company is likely to improve margins from phenolic business going forward as signs are visible for the improvement in crack spreads from its historical levels. According to Bloomberg consensus forecasts, the company is expected to deliver revenue growth of 20.8% in the December 2019 quarter. Stock and index values have been normalised to a base of 100. Current price as on 21 Jan. Source: ACE Equity & Bloomberg.

13

learn & keep 14

The Economic Times Wealth January 27-February 2, 2020

HOW HAVE YOUR FUNDS PERFORMED? Though benchmark indices shot up in 2019, the broader market didn’t do too well. Sanket Dhanorkar analyses the returns of diversified equity mutual funds across time periods. How diversified equity funds fared across time frames % of schemes outperforming chosen index LARGE CAP

MID CAP

MULTI CAP

SMALL CAP

LARGE & MID CAP

100

100

92

89

ELSS

85

SCHEME

58

58

53

19

32

28

26 15

1 YEAR

5 YEARS

ELSS

LARGE CAP

MID CAP

MULTI CAP

SMALL CAP

26

31

818

9.4

AUM (`CR)

5-YR CAGR (%)

4,141

10.07

AUM (`CR)

5-YR CAGR (%)

9,110

13.0

IIFL Focused Equity

551

11.8

SBI Focused Equity

6,924

11.7

29,598

11.4

2,585

11.0

JM Multicap

143

10.8

DSP Equity

3,267

9.8

Sundaram Select Focus

1,056

9.4

UTI Equity

10,217

9.3

Canara Rob Equity Diversified

1,634

9.3

5-YR CAGR (%)

Mirae Asset Emerging Bluechip

9,516

16.1

Canara Rob Emerg Equities

5,339

12.1

Multi cap SCHEME

Axis Focused 25

11.2

1,016

Kotak Standard Multicap

10.8

2,239

Parag Parikh Long Term Equity

These schemes outperformed in all of past five calendar years as also across 3 & 5 year time frames.

52

These fund houses boast of a superior outperformance record

34

18

1 YEAR

3 YEARS

83

5 YEARS

SBI MF

Kotak MF

Kotak MF

80

86

SBI MF

JM MF

5-YEAR CAGR (%)

% of schemes outperforming index

100

All figures as on 31 Dec 2019 | The study includes only open-ended equity funds with minimum 5 year performance track record. Multi cap funds include value and focused schemes. | Source: Ace MF | Compiled by ETIG Database

AUM (`CR)

Canara Robeco MF

100

Large-cap and ELSS funds have struggled the most. Multi-cap funds have also struggled to outperform primarily because of their large-cap tilt. Mid-cap and small-cap funds reported 100% outperformance last year. While small-cap funds have performed very well over the 5 year period, mid-cap funds have not done as well. Better outperformance in AUM terms over 5 years shows that some of the larger sized funds have fared better.

These schemes generated the highest alpha over 5 years

88

96

83

2

BNP Paribas Large Cap

AUM (`CR)

62 36

10.1

Axis Midcap

72

43 42

301

10.1

87

47

Canara Robeco Bluechip Equity

SCHEME

98

51

10.8

Mid cap

LARGE & MID CAP

72

10,212

10.7

Invesco India Growth Opp

100 98

100

Axis Bluechip

1,068

Sundaram Large and Mid Cap

% of AUM outperforming chosen index

12.1

11.7

SCHEME

3 YEARS

16,873

36

Large & mid cap

22

Mirae Asset Large Cap

21,473

Kotak Tax Saver

44

5-YR CAGR (%)

5-YR CAGR (%)

JM Tax Gain

45

42

AUM (`CR)

AUM (`CR)

Axis Long Term Equity

63

SCHEME

Axis MF

Axis MF

75

Canara Robeco MF

ALPHA (%)

% of AUM outperforming index

Large & Mid Cap

Large Cap

Mid Cap

Multi Cap

Small Cap

1

1

1

1

1

1

2

3

2

3

DSP MF

The list only considers fund houses with atleast 4 equity schemes having five year track record

ELSS

3

85

These AMCs have shown the ability to outperform across different scheme mandates over the long-term.

2

3

2

3

2

3

6,260

2,094

21,473

5,339

9,516

2,928

10,212

16,873

301

6,957

5,888

5,992

13,131

9,110

6,924

3,156

1,542

9,232

11.2

12.2

11.7

12.1

16.1

10.8

10.8

12.1

10.1

11.0

11.2

10.8

12.1

13.0

11.7

13.7

11.9

9.3

2.1

2.3

2.1

2.3

6.3

1.5

1.5

2.5

0.8

3.5

3.7

3.3

3.0

3.6

2.5

8.4

8.7

6.0

DSP TAX SAVER

TATA INDIA TAX SAVINGS

AXIS LONG TERM EQUITY

CANARA ROB BLUECHIP EQUITY

MIRAE ASSET EMERGING BLUECHIP

KOTAK EQUITY OPP

AXIS BLUECHIP

MIRAE ASSET LARGE CAP

CANARA ROB BLUECHIP EQUITY

DSP MIDCAP

KOTAK EMERGING EQUITY

L&T MIDCAP

MOTILAL OSWAL MULTICAP 35

AXIS FOCUSED 25

SBI FOCUSED EQUITY

SBI SMALL CAP

AXIS SMALL CAP

HDFC SMALL CAP

These schemes have generated highest outperformance relative to benchmark index over past 5 years.

ILLUSTRATION: GETTY IMAGES

ELSS

Large cap

Schemes that delivered the most consistent performance

financial planning The Economic Times Wealth January 27- February 2, 2020

Equity and retirement planning It is unwise to depend only on traditional instruments while saving for old age, says Uma Shashikant.

GETTY IMAGES

16

S

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

What does equity do to a retirement portfolio? It offers long-term growth. Growth in portfolio value is an effective tool against inflation. It cushions risks to income when the investor becomes old.

hould I have equity in my retirement portfolio? A just-retired friend wanted to know. After dismissing equity investing as gambling, he finally became convinced by the many SIP stories he heard. It was in his 50s that he started investing small amounts. Now without a pension and only his savings to rely upon, he is worried. He wants to earn an interest on the retirement corpus, while not touching it, or risking it at all. But these ideas are so yesterday. There was a time when the government was the primary borrower and paid a benevolent interest and guaranteed the safety of money invested. Retired people simply queued up at the post office. Today, we live in times when we worry if a governmentowned bank will go belly up. We remain risk-averse, but around us risk is omnipresent. Bad borrowers, cheats and colluding corrupt lenders have made the lending markets too risky for the retired investor. We can throw a tantrum and demand the government assure the retired investor a sensible investment avenue. Fair point. However, that reform is miles away, because our policy makers still don’t get that the only way to manage risk is diversification, or that without accountable fiduciaries we cannot manage other people’s money. Thus, the largest insurance provider bails out failing companies, and the largest pension scheme runs in circles to put a robust investment process in place. We digress and rant.

The positive side to the story holds three strands: One, compared to the past, retirees are wealthy. They mostly live in a house they own, have accumulated some assets and managed to save out of their incomes. Recall the times when the PF was meant for taking a loan; the first house was bought close to retirement; and incomes barely covered expenses. We are better off . Second, inflation, the biggest threat to retirees, has been tamed to a single digit. Like most macro variables, it is tough to predict. However, we can reasonably expect it to be a small single digit number. Do not remind us of the 18% of the 1980s. Third, the next generation is better off. For many, including my friend, there is no need to leave an inheritance, as the children are earning well. They can support the parent if the need arises. Being able to spend the corpus on oneself is a perk the current generation of retirees can well afford. What does all this mean to my friend? He should look beyond the traditional and take some risks, given that he has the ability or the need to do so, given all the above. What does equity do to a retirement portfolio? It offers long-term growth. Growth in portfolio value is an effective tool against inflation. It cushions risks to income when the investor becomes old. Since only a portion is being used during his lifetime, the rest of the money can grow. The portion that he will leave behind for his children can be in equity, since they are young and have a longer investing horizon.

A portfolio that has one portion in equity, and one portion in fixed income instruments will serve his purpose well. Fixed income will serve routine needs; the equity will offer potential for growth. How much should be in equity? My friend tells me that 6% annual return is enough for the retired couple’s yearly expenses. Should he draw it annually, and keep all the money in equity? That would be a mismatch. The need of the investor is steady income; but the portfolio is in risky growth assets. The investment won’t generate income; a portion of it must be liquidated to meet the needs of the investor. The investor is drawing only a small amount, would it matter? Assume that the equity market corrects severely. The investor’s money shrinks and he runs the risk of outliving his falling corpus. Most don’t invest in equity for this fear. If my friend needs 6% of his corpus as income, and if the interest offered is about 6%, should we choose a 100% allocation to income assets? We will starve the corpus of growth to fight inflation, and leave a superfluous 100% to heirs. How do we decide between the extremes? We begin by exhausting all avenues of income, before depending on the retirement corpus to generate it: Rent, second career, dividends, and whatever else we can get. The comfortable retirement stories we see around us are mostly funded by pensions that do not stress the retirement corpus. Then we arrive at a small portion of the corpus that we will be willing to draw for our expenses. Assume we draw 2% of the principal for annual use. What does this do? This reduces the burden on the portfolio to generate income and frees up space for equity investing. How? Assume we have `100, and we need `6 every year. Since `2 is coming from drawdown, the income that the portfolio must generate is only `4. At an assumed market interest rate of 6%, this `4 can be generated by 67% of the corpus. The allocation is 67% debt and 33% equity—this is indicative of the principle and not cast in stone. The equity portion is preferably in a large cap mutual fund. Or the investment is in a balanced fund that invests primarily in debt, and the withdrawals are set up as systematic transactions. These are operational and implementation details. One can tailor whatever one is comfortable with. For my friend to invest in equity, the following are needed: One, he should see equity as enabling long term growth in his corpus. That is far better than letting it lie without any change in value. Two, he should be willing to drawdown a small portion of his corpus for his use. Keeping it small reduces the risks and enables the rest of the money to grow. Third, his ability to invest in equity grows if he has other sources of income that do not depend on his retirement corpus. Asset allocation and diversification hold more answers than we care to consider. Please send your feedback to [email protected]

financial planning The Economic Times Wealth January 27- February 2, 2020

Take control of your finances

PAPER WORK :: Investing in post office products online With the launch of the India Post Payments Bank (IPPB) it is now possible to access financial products offered by the post office such as the savings bank account, recurring deposit (RD) account, Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) online. The IPPB offers a single view of all the post office investments and allows subscribers to manage the investments efficiently. Subscribers are also able to deposit money online in their RD, SSY or PPF account using the IPPB application.

Assessing and updating your net worth periodically might help you determine the areas that require corrective action.

GETTY IMAGES

IPPB digital account

Ankur believes that it is time he took his personal finances seriously. He has bought a house with a loan and managed to make some investments. Though there have been times when he was short of funds, he has mostly been able to meet his obligations on loan repayments and his expenses. He now wants to have a proper financial plan in place for his future. As a first step, he wants to know how he can assess his current financial situation and, if required, make changes in his plan.

A

n efficient way for Ankur to take control of his financial situation is to start with his personal net worth. It will tell him what his current position is and then decide what efforts will be needed to improve his net worth, by improving his saving and spending habits. To calculate his net worth, he should list all his assets that have a realisable value, and his liabilities. Ankur should categorise and list all his assets under different heads such as cash and other immediately accessible liquid assets, financial assets including stocks, bonds and mutual funds, physical assets including real estate and gold, cash values of life insurance policies and retiral benefits and personal assets including furnishing, art and collectibles. He must take the current market value of the assets, which may be more or less than what he paid for it. From this he must reduce the current outstanding balance on all his liabilities such as loans, credit card dues etc. A positive net worth implies

a situation where Ankur is able to meet all his obligations. A negative net worth will imply that Ankur must do all it takes to reduce his debt since he is facing a situation of insolvency. Having a goal of a positive and growing net worth will help Ankur make right financial decisions. He will focus on reducing debt, which will reduce his interest costs and spare funds for investments. This in turn will increase his net worth. Any loans he will take will be for assets that appreciate and therefore add to his net worth. This exercise will also improve his credit profile and his ability to take loans at good rates which further strengthens his financial situation. Ankur has to understand that taking control of one’s financial future is a continuous process. Assessing and updating his net worth periodically will help him track his progress and determine the areas of his financial life that require corrective action.

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

This type of insurance focusses on a specific need and comes with a low premium and lower cover.

2

Most of the offerings are disease-specific (mosquitoborne disease), travel-specific, for home appliances (mobile, home protection, cycle theft) or for lifestyle needs (marathon, fitness).

Small ticket insurance

Companies such as Toffee Insurance, Digit Insurance and Mobikwik provide bitesize insurance online.

3

4

These insurance products require less documentation for underwriting unlike conventional policies.

It is targeted towards first time insurance buyers to introduce them to the concept of insurance and move them to full cover later.

5

Those who wish to access their post office related accounts online are required to download the IPPB mobile application. The application is available on Android and IoS. After downloading the application, one needs to open a digital account with IPPB by entering mobile number and PAN, followed by Aadhaar authentication. Once the registration process is completed, a four digit MPIN needs to be created.

Transfer of funds to IPPB In order to make contributions to the PPF, SSY, RD accounts, the subscriber needs to first transfer funds to the IPPB account. The bank account number and IFSC details need to be entered in order to make the transfer.

Contribution Once the IPPB account is funded, the subscriber can make a contribution to the SSY/PPF or RD account by going to Department of Post (DOP) Products tab and entering the relevant account number along with the customer ID. The subscriber should have an active account with the DOP in order to avail this facility. Amount of investment/ contribution needs to be entered (installment duration in case of RD). Once the investment/contribution is successful, the subscriber will get a notification confirming the same.

:: Points to note  Online access is possible only if

the post office account is KYC compliant and has internet and mobile banking services enabled.  If these services are not enabled, a physical form needs to be filled up and submitted at the nearest post office.

17

investing The Economic Times Wealth January 27- February 2, 2020

Bank FD rates low? Buy listed bonds that offer better yields Depending upon one’s tax slab, one should decide whether to invest in bonds directly or through bond ETFs. by Narendra Nathan

rated public sector undertakings, the risk involved here is also very low.

B

anks are continuing to slash fixed deposit (FD) rates, putting pressure on those who survive on interest income. For instance, SBI has cut FD rates to 6.6% for senior citizens and 6.1% for others as of 10 January. Big private banks are also not offering much more. The highest interest rate offered by HDFC Bank is only 6.9% for senior citizens and 6.4% for others. Though fixed deposit rates are low, yields on listed bonds from quality companies are at higher levels, providing an opportunity for savvy investors. Unlike FDs, buying bonds from the market can be complicated. Therefore, while getting into the listed bonds space, investors need to make sure they are investing in the right bonds. They can filter their needs based on the following factors.

Liquidity

GETTYIMAGES

18

Taxable bonds work for those in lower brackets Coupon rate (%)

YTM at LTP (%)

L&T Infra N4

-

11.18

1,000

M&M Fin N3

-

9.47

M&M Fin N2

9.00

SBI N2 SBI N5

Company series

Risk The first factor to consider is your risk appetite and risk taking ability. This is because several bonds from companies like Dewan Housing Finance, Reliance Home Finance, etc. are now trading at very high yields. Don’t be in a hurry to buy though. “Investors should be careful with papers offering very high yield and understand that high yields are due to the risk associated with it,” says Anil Rego, Founder & CEO, Right Horizons. In other words, these bonds are meant only for highrisk takers. Retail investors, especially those who want to shift from bank FDs, should steer clear of low-quality papers. “Considering the credit situation, it is better retail investors concentrate on highly rated bonds only,” says Amit Kachroo, Managing Partner, Aaneev Wealth. The bonds from several high quality companies are now trading at a yield of 8.5% or above. “Retail investors should consider investing in taxable listed bonds with AAA rating now because the return gap between safe bank FDs and AAA rated bonds is almost 2%,” says Deepak Jasani, Head of Retail Research, HDFC Securities. The yields on bonds from SBI are placed around 8.8% now (see table). Please note we have only included high quality bonds

Face value (`)

Turnover (` lakh)

Maturity date

1,882

7.02

Dec 2020

Consider bond ETFs too

1,000

1,330

1.33

Jun 2026

8.87

1,000

1,062

2.23

Jun 2026

9.50

8.86

10,000

11,199.90

6.27

Nov 2025

9.95

8.76

10,000

11,345.30

71.28

Mar 2026

Buying into listed fixed duration bond funds is another option investors can consider now, because mutual funds are treated differently. Since the 20% long term capital gain tax here is levied after indexation, the tax liability will be low. For instance, let us assume that one of these ETFs generates a return of 7% for a 3-year holding period and the inflation during the time is 4%. Since the 20% tax is applicable only to the inflation adjusted returns—3% in this case, the post-tax yield will be 6.4%. As visible from the bond ETF table, low liquidity is an issue in this segment too. Though there is enough liquidity in the recently introduced Edelweiss Bharat Bond ETF counter, experts are concerned that the scheme is not yet fully invested. However, the fund house says this issue has been resolved. “Portfolios are fully invested in both 3 and 10 year ETFs,” says Radhika Gupta, CEO, Edelweiss AMC. The main advantage with these listed ETFs is that you can time the market based on its running yields. “For new investors, the portfolio yield of the 3-year ETF is between 6.7% and 6.8% and posttax yield after indexation benefit can be around 6.2%. For the 10-year ETF, the yield is placed between 7.5% and 7.6% and the post-tax yield after indexation can be around 6.9%,” says Gupta. The default risk is not applicable for these ETFs because all these schemes are based either on government securities or with AAA rated PSUs.

Price (`)

Pre-tax yield is high for tax-free bonds Coupon rate (%)

YTM at LTP (%)

Price (`)

Turnover (` lakh)

Maturity date

Nabard N2

7.64

5.95

1,000

1,198.18

11.89

Mar 2031

PFC N4

8.20

5.91

1,000

1,065

10.29

Feb 2022

NHAI NA

7.60

5.90

1,000

1,196.18

23.64

Jan 2031

REC N9

8.71

5.89

1,000

1,200

46.04

Sep 2028

NHAI NE

7.69

5.88

1,000

1,167.94

1.52

Mar 2031

Company series

Most banks allow immediate withdrawal from FDs, but you can’t do the same with listed bonds. For liquidating your investments, you need to sell these in the market and money is credited to your account only after a few days (payout day). Another issue is all these listed bonds are not traded frequently. “While investing in listed bonds, investors should be careful with liquidity. You may get into trouble if you buy bonds with low liquidity and want to sell them before maturity,” says Rego. Spreading purchases and sales is another option. “Since the liquidity in many papers is not that great, large investors have to spread their purchases/sales over a few days,” says Jasani. As illustration, we have only included bonds with at least `1 lakh traded value.

Face value (`)

Note: Only bonds with `1 lakh turnover included. Data as on 22 Jan. Source: NSE website

in the table.

Tax Taxation and tax slabs should be considered next. Listed tax-free bonds are good options for people in the high tax brackets.

The yields on tax-free bonds are now in the range of 5.6-5.9% (see table). “Since the pre-tax yields on tax-free bonds are now at around 8.5% for people in the 30% tax slab, it is the best option for HNIs,” says Rego. Since these bond issuers are highly

Bond ETFs offer indexation benefits, and are suitable for HNIs ETF

Underlying Index

Edelweiss Bharat Bond ETF April 2030

Nifty BHARAT Bond

Price (`)

1,003.60

NAV (`)

1,002.08

Turnover (` lakh)

241.99

Edelweiss Bharat Bond ETF April 2023

Nifty BHARAT Bond

1,003.01

1,003.02

75.31

Nippon India Long Term Gilt ETF

Nifty GS 8 13Yr

20.24

20.20

0.68

SBI 10 Year Gilt ETF

Nifty 10 yr Benchmark G-Sec Index

189.35

186.49

0.61

LIC MF Long Term G-sec ETF

GSEC10 NSE Index

19.95

19.90

0.07

Please send your feedback to [email protected]

The Economic Times Wealth January 27- February 2, 2020

SMART STATS ET WEALTH TOP 50 STOCKS

In This Section MUTUAL FUNDS - P20 LOANS AND DEPOSITS - P22 ALTERNATE INVESTMENTS- P23

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

KEC International

1

1.00

329.80

26.30

43.17

17.40

3.48

0.82

0.40

1.37

1.05

33

4.82

JK Cement

2

2.00

1301.80

27.73

104.51

35.46

3.74

0.77

0.34

1.14

1.21

27

4.56

Granules India

3

--

159.80

46.59

129.64

17.18

2.66

0.67

0.13

1.62

1.93

10

4.70

Engineers India

4

3.00

100.50

30.50

41.92

17.18

2.71

4.03

0.42

1.55

0.85

15

4.40

Apar Industries

5

5.00

427.20

17.10

44.44

11.76

1.33

2.14

0.27

1.25

1.15

10

4.70

Aurobindo Pharma

6

6.00

490.05

33.16

26.82

12.18

2.07

0.50

0.44

1.88

0.67

35

4.49

Larsen & Toubro

7

4.00

1332.30

21.98

32.47

20.95

2.99

1.39

0.65

0.98

1.15

42

4.74

Fast growing stocks

1

Top 5 stocks with the highest expected revenue % growth over the previous year Granules India

47

Gujarat Gas

44

Power Grid Corp of India

8

7.00

201.95

12.35

18.37

8.23

1.75

4.17

0.45

0.91

0.32

27

4.30

Info Edge India 39

Reliance Industries

9

9.00

1526.85

14.71

45.90

22.89

2.34

0.42

0.54

1.06

0.53

37

4.43

10

37.00

231.55

28.36

48.25

29.04

3.51

1.08

0.60

1.17

0.54

20

3.90

Aurobindo Pharma

33

Rallis India Alkem Laboratories

11

14.00

2329.70

23.63

56.36

36.47

5.10

0.68

0.65

0.91

-0.26

19

4.53

UltraTech Cement

31

Gujarat Gas

12

11.00

290.65

43.78

126.42

47.73

9.06

0.36

0.38

1.39

1.04

29

4.59

Zensar Technologies

13

13.00

198.90

21.21

24.05

2.83

2.29

1.43

0.15

1.29

1.00

16

4.38

ITC

14

18.00

237.90

17.07

32.05

23.10

4.93

2.42

0.74

0.90

1.04

38

4.74

Transport Corp of India

15

17.00

268.90

19.78

31.13

14.19

2.31

0.75

0.50

1.18

0.89

10

4.90

Kalpataru Power Trans.

16

8.00

462.70

22.49

24.63

15.25

2.28

0.67

0.63

1.44

0.93

21

4.95

Century Plyboards India

17

12.00

170.75

15.36

57.60

25.72

3.92

0.59

0.44

1.52

0.76

20

4.65

UltraTech Cement

18

19.00

4526.40

30.59

88.89

51.12

4.38

0.26

0.62

1.22

1.33

45

4.18

CCL Products India

19

22.00

196.50

24.41

27.03

16.89

3.12

0.89

0.59

1.13

0.39

10

Emami

20

15.00

335.80

14.01

91.29

50.35

7.35

1.79

0.53

1.27

0.85

35

2.83

NTPC

7.41

4.70

Power Grid Corp of India

8.23

4.11

CESC

8.27

Redington India

9.04

21

16.00

202.85

15.54

47.70

20.87

3.93

1.52

0.43

1.47

2.11

18

4.44

NTPC

22

20.00

113.50

15.74

5.50

7.41

1.02

4.89

0.82

1.11

1.03

26

4.92

Ipca Laboratories

23

24.00

1226.45

29.97

60.01

34.57

4.93

0.24

0.58

1.12

0.91

26

4.39

DB Corp

24

21.00

147.70

0.05

33.79

9.63

1.41

11.54

0.25

1.16

1.23

14

4.07

HCL Technologies

25

33.00

598.95

27.01

16.21

16.31

3.87

0.68

0.93

0.90

0.35

48

4.31

Redington India

26

23.00

115.65

19.18

15.67

9.04

1.15

4.16

0.59

2.10

0.40

10

4.70

Mphasis

27

25.00

911.10

22.81

14.35

16.31

3.24

3.04

0.95

1.05

0.60

33

4.30

Sobha

28

26.00

446.40

18.73

18.82

14.24

1.90

1.59

0.68

1.55

1.44

24

4.67

JSW Energy

29

27.00

66.85

5.53

44.94

15.71

0.92

1.51

0.34

1.39

1.38

18

3.78

Oberoi Realty

30

30.00

553.70

27.93

36.71

24.34

2.51

0.36

0.57

1.69

1.82

25

4.24

Adani Ports & Special Eco.

31

32.00

385.85

27.71

31.88

19.98

3.27

0.05

0.59

1.50

1.04

25

4.76

Manappuram Finance

32

34.00

183.95

6.01

59.71

16.79

3.42

1.23

0.28

1.54

1.56

13

4.15

Allcargo Logistics

33

29.00

104.00

18.38

15.56

10.61

1.29

3.39

0.54

1.36

0.85

10

4.30

Blue Star

34

38.00

839.75

25.16

47.26

42.33

9.24

1.19

0.88

1.17

0.28

27

4.11

Lupin

35

36.00

737.85

10.61

73.97

55.03

2.43

0.68

0.70

1.15

0.71

47

2.96

Sun Pharmaceutical Ind.

36

39.00

449.85

21.53

50.16

40.54

2.61

0.62

0.84

1.33

0.98

42

3.60

Mahanagar Gas

37

31.00

1179.75

7.68

40.37

21.37

4.87

1.75

0.52

1.16

1.01

28

4.11

Parag Milk Foods

38

35.00

150.85

26.09

22.37

10.49

1.53

0.67

0.48

1.84

1.44

14

4.36

Bharat Heavy Electricals

39

28.00

43.45

2.55

27.29

15.63

0.49

4.60

0.44

1.87

1.72

34

3.03

Cipla

40

45.00

465.15

11.98

29.42

24.51

2.50

0.64

0.80

0.96

0.71

43

3.95

Crompton Greaves Consu.

41

40.00

260.10

22.15

40.76

40.45

14.79

0.77

1.03

1.24

0.35

38

4.63

Hexaware Technologies

42

41.00

344.15

21.16

20.77

17.02

3.80

2.54

0.90

1.17

-0.18

25

3.72

CESC

43

43.00

739.55

11.42

10.38

8.27

1.09

2.34

0.81

1.12

1.00

18

4.67

Ramco Cements /The

44

42.00

858.45

25.48

60.43

37.19

4.45

0.36

0.62

0.99

1.13

30

3.53

Apollo Hospitals Enterp.

45

44.00

1686.90

25.00

98.59

100.12

7.09

0.37

0.99

1.38

0.93

23

4.78

Thermax

46

47.00

1068.30

13.08

64.44

37.02

4.23

0.66

0.62

1.15

0.48

32

2.97

Infosys

47

49.00

784.35

10.35

9.96

20.50

5.45

2.92

0.80

1.39

0.48

49

4.18

Info Edge India

48

48.00

2591.50

39.20

67.68

52.23

12.41

0.24

0.40

1.63

0.42

27

3.37

Coromandel International

49

46.00

612.60

6.18

41.55

24.82

5.33

1.09

0.60

1.01

0.94

15

4.73

--

469.00

5.44

19.41

11.80

2.62

4.17

0.69

1.60

0.85

41

3.44

50

*REVENUE AND NET PROFIT GROWTH IS BASED ON CONSENSUS ANALYSTS' EXPECTATIONS. NR: NOT IN THE RANKING. DATA AS ON 23 JAN 2020.

Top 5 stocks with the lowest price-earnings ratio Zensar Technologies

HeidelbergCement India

Bharat Petroleum Corp

Least expensive stocks

2

SOURCE: BLOOMBERG

Best PEGs

3

Top 5 stocks with the least price-earnings to growth ratio Zensar Technologies

0.13

0.15

Granules India

4

Apar Industries

0.25

0.27

DB Corp

0.28

Manappuram Finance

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

11.54

NTPC

4.89

Bharat Heavy Electricals Power Grid Corp of India Bharat Petroleum Corp

5

4.60 4.17 4.17

Least risky Top 5 stocks with the lowest downside risk HCL Alkem Laboratories Technologies

0.90

ITC

0.90

0.91

0.91

Power Grid Corp of India

0.96

Cipla

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

smart stats 20

The Economic Times Wealth January 27- February 2, 2020

LAGGARDS & LEADERS

ETW FUNDS 100

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 10.64

3.74 JM Large Cap

3.82

Net Assets (` Cr) 3-Month

RETURNS (%) 6-Month

1-Year

3-Year

5-Year

HDFC Index Fund

 

10,211.88

3.22

11.46

18.86

19.22

9.69

1.74

681.65

5.46

8.2

13.54

15.79

8.26

0.3

Sundaram Select Focus Fund



1,056.19

4.52

9.1

14.27

15.7

7.93

2.18

Canara Robeco Bluechip Equity Fund



300.79

5.3

11.56

16.55

15.05

8.75

2.53

Mirae Asset Large Cap Fund



16,873.03

4.97

7.31

12.65

14.45

10.64

1.72

Edelweiss Large Cap Fund



176.58

5.05

9.72

13.11

14.14

7.97

2.02

Nippon India Large Cap Fund



12,955.39

5.47

3.92

7.88

12.89

7.73

1.78

Motilal Oswal Focused 25 Fund



1,205.28

3.12

13.61

18.18

12.28

8.36

2.22

JM Core 11 Fund



55.85

-0.03

11.47

12.83

12.14

9.27

—

ICICI Prudential Bluechip Fund



25,024.91

4.37

6.86

10.51

12

8.05

1.75

19.2%

Baroda Large Cap

5.7

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

Franklin India Bluechip

EQUITY: LARGE & MIDCAP 

9,516.48

8.48

12.71

17.55

16.39

15.08

2.02

3.79 4.07

16.4% THE 3-YEAR RETURN OF MIRAE ASSET EMERGING BLUECHIP FUND IS THE HIGHEST IN ITS CATEGORY.

4.13

12.39

13.54

14.81

9.81

2.04

1,015.82

3.94

13.74

15

14.5

10.37

2.19

Canara Robeco Emerging Equities Fund



5,339.34

7.29

11.49

12.61

13.22

11.19

1.99

LIC MF Large & Mid Cap Fund



603.30

7.21

14.34

15.57

12.87

—

2.5

Kotak Equity Opportunities Fund



2,928.05

10.23

13.51

17.69

12.66

9.71

2.02

Principal Emerging Bluechip Fund



2,116.80

7.11

13.12

11.67

11.49

10.45

2.08

DSP Equity Opportunities Fund



5,588.64

5.56

13.23

16.05

11.33

10.09

1.95

Axis Focused 25 Fund



9,109.64

3.42

13.33

20.02

18.04

11.7

1.85

SBI Focused Equity Fund



6,924.40

6.61

11.78

20.88

17

11.14

2.03

IIFL Focused Equity Fund



550.57

8.76

15.29

28.96

15.06

10.67

2.39

Canara Robeco Equity Diversified Fund



1,634.14

5.17

9.92

13.31

14.91

8.04

2.32

5.69

3.58

11.88

14.25

14.57

10.55

2.23

Aditya Birla Sun Life Mid Cap

EQUITY: MULTI CAP



742.66

Parag Parikh Long Term Equity Fund



4.47 Union Multi Cap

4.85 HDFC Focused 30

2,584.96

5.62

11.1

16.46

14.32

10.87

2.02

6.04

517.68

4.24

8.04

9.51

13.74

—

2.42

Motilal Oswal Midcap 100 ET

Kotak Standard Multicap Fund



29,597.85

5.39

8.84

14.1

13.39

9.96

1.63



6.16

Quant Active Fund

10.51

1.69

5.2

7.37

12.36

8.85

2.48

SBI Magnum Multicap Fund



Sundaram Mid Cap

8,479.69

3.41

7.56

12.62

12.13

10.2

2.01

Motilal Oswal Multicap 35 Fund



13,130.85

1.58

7.38

8.91

10.52

10.96

1.75

6.18 PGIM India Midcap Opportunities



4,140.72

4.66

15.41

17.86

17.36

9.7

1.99

673.52

10.3

16.04

11.57

12.36

9.09

2.51



5,887.95

11.69

15.93

17.22

11.37

10.61

1.86

DSP Midcap Fund



6,956.77

9.65

16.14

16.89

10.97

10.54

1.95

L&T Midcap Fund



5,992.33

8.38

11.7

7.06

9.97

10.05

1.95

Franklin India Prima Fund



7,583.30

5.67

9.19

8.17

9.32

8.5

1.92

Invesco India Mid Cap Fund



Kotak Emerging Equity Fund

17.4% THE 3-YEAR RETURN OF AXIS MIDCAP FUND IS THE HIGHEST IN ITS CATEGORY.

EQUITY: SMALL CAP 

1,542.18

8.62

19.63

27.35

15.52

11.86

2.04

SBI Small Cap Fund



3,156.01

7.65

14.03

14.41

15.01

13.24

2.26

HDFC Small Cap Fund



9,232.45

4.35

2.36

-3.48

10.77

9.02

2.04

Nippon India Small Cap Fund



8,524.70

10.06

12.52

6.32

10.07

10.07

1.85

L&T Emerging Businesses Fund



5,941.26

7.33

7.41

0.05

9.43

10.47

1.97

Kotak India EQ Contra Fund



882.35

5.28

9.77

12.66

14.73

8.89

2.32

4,596.09

7.35

9.51

9.84

14

10.11

1.93

Tata Equity PE Fund



5,183.76

3.08

7.76

8.18

9.74

9.1

1.6

L&T India Value Fund



7,759.49

7.4

6.56

8.35

8.3

9.12

1.87

Mirae Asset Tax Saver Fund



3,066.30

7.29

10.04

15.93

17.04

—

2.05

2.12 2.83 Aditya Birla Sun Life Small Cap

3.43

Axis Long Term Equity Fund



21,472.82

2.66

12.2

19.81

16.89

10.22

1.63

JM Tax Gain Fund



35.65

2.77

13.08

17.21

14.82

9.48

—



1,005.39

3.64

8.19

10.85

13.53

7.52

2.31



2,093.92

5.18

7.64

13.77

13.04

10.57

1.98

Tata India Tax Savings Fund

10.67 IIFL Focused Equity

Axis Midcap

12.36 Invesco India Mid Cap

11.37 Kotak Emerging Equity

10.99 Nippon India Growth

10.97 DSP Midcap

15.52 Axis Small Cap

15.01 SBI Small Cap

10.77 HDFC Small Cap

10.07 Nippon India Small Cap

9.43 L&T Emerging Businesses

Hybrid: Aggressive 5-year returns 1.48

EQUITY: ELSS

Canara Robeco Equity Tax Saver Fund

1.92

DSP Small Cap 

Invesco India Contra Fund

-4.46 Quant Small Cap

HSBC Small Cap Equity

EQUITY: VALUE ORIENTED

10.87 Parag Parikh Long Term Equity

Equity: Small-cap 3-year returns

Sundaram Small Cap

Axis Small Cap Fund

Motilal Oswal Multicap 35

17.36

3.46 SBI Magnum Midcap



EQUITY: MID CAP

SBI Focused Equity

Equity: Mid-cap 3-year returns

Edelweiss Multi Cap Fund

Axis Midcap Fund

Axis Focused 25

10.96

ICICI Prudential Focused Equity

2,238.96

Tata Retirement Savings Fund

8.75 Canara Robeco Bluechip Equity

11.14



Sundaram Large and Mid Cap Fund

8.94 Nippon India ETF Junior BeES

11.7

3.41 Taurus Starshare (Multi Cap)



Invesco India Growth Opportunities Fund

JM Core 11

Equity: Multi-cap 5-year returns

LIC MF Multicap Mirae Asset Emerging Bluechip Fund

Axis Bluechip

9.27

Taurus Largecap Equity

5.45

EQUITY: LARGE CAP Axis Bluechip Fund

4.07

Expense Ratio (%)

Mirae Asset Large Cap

9.69

Principal Nifty 100 Equal Weight Value Research Fund Rating

LEADERS

17% THE 3-YEAR RETURN OF MIRAE ASSET TAX SAVER FUND IS THE HIGHEST IN ITS CATEGORY.

JM Equity Hybrid

4.24

9.91 Tata Retirement Savings

9.16

PGIM India Hybrid Equity

SBI Equity Hybrid

9

4.66 LIC MF Equity Hybrid

Invesco India Tax Plan



988.23

4.46

10.64

11.46

12.98

9.25

2.2

Motilal Oswal Long Term Equity Fund



1,647.95

4.18

15.16

16.08

12.86

13.34

2.12

Kotak Tax Saver Regular Plan



1,067.51

8.13

10.38

16.51

12.52

8.75

2.49

Aditya Birla Sun Life Tax Relief 96



10,029.20

5.17

10.4

6.58

12.01

8.79

2.01

5.5

DSP Tax Saver Fund



6,259.99

3.87

10.97

16.79

11.79

9.92

1.96

Quant Tax Plan



Baroda Hybrid Equity

10.22

2.17

3.49

6.1

9.54

9.8

2.48

5.43 Shriram Hybrid Equity

DSP Equity & Bond

8.63 Principal Hybrid Equity

8.49 ICICI Prudential Equity & Debt

ANNUALISED RETURNS IN % AS ON 22 JANUARY 2020.

smart stats The Economic Times Wealth January 27- February 2, 2020

ETW FUNDS 100 Value Research Fund Rating

Net Assets (` Cr) 3-Month

RETURNS (%) 6-Month

1-Year

3-Year

5-Year

Expense Ratio

1

HYBRID: EQUITY SAVINGS Axis Equity Saver Fund



812.11

1.73

5.46

8.78

8.99

—

2.32

Edelweiss Equity Savings Fund



114.29

2.2

5

8.18

8.44

6.67

1.74



1,843.44

2.51

5.25

8.32

8.19

7.43

2.1



1,520.95

4

6

11.42

8.02

7.77

1.39

SBI Equity Hybrid Fund



31,619.69

4.22

8.4

15.04

12.62

9.16

1.72

Tata Retirement Savings Fund



1,156.70

3.31

10.53

10.86

12.19

9.91

2.05

Mirae Asset Hybrid Equity

Kotak Equity Savings Fund ICICI Prudential Equity Savings Fund

Top 5 SIPs Top 5 equity schemes based on 10-year SIP returns SBI Small Cap 20.53 Canara Robeco Emerging Equities 18.59

HYBRID: AGGRESSIVE (EQUITY-ORIENTED)



3,190.14

5.25

5.99

12.18

12.17

—

1.89

Canara Robeco Equity Hybrid



2,823.77

4.48

8.7

12.55

11.49

8.48

2.03

HDFC Children's Gift Fund



3,103.96

4.76

6.53

8.86

11.23

8.42

2.12

HDFC Retirement Savings Fund



371.10

4.86

5.69

8.78

10.69

—

2.73

DSP Equity & Bond Fund



6,279.17

3.74

11.77

16.83

10.35

9

1.93

Principal Hybrid Equity Fund



1,427.62

3.58

4.14

3.32

10.21

8.63

2.14

HDFC Hybrid Equity Fund



20,581.72

4.23

3.98

8.17

9.33

7.86

1.71

ICICI Prudential Equity & Debt Fund



23,072.62

5.46

4.94

10.78

9.25

8.49

1.74



2.01

12.6%

Axis Long Term Equity

THE 3-YEAR RETURN OF SBI EQUITY HYBRID FUND IS THE HIGHEST IN ITS CATEGORY.

17.01 Kotak Emerging Equity 16.61 Principal Emerging Bluechip 16.60 SIP: SYSTEMATIC INVESTMENT PLAN

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

% ANNUALISED RETURNS AS ON 22 JANUARY 2020

1,709.64

3.05

5.28

9.79

8.7

8.5

Tata Retirement Savings Fund



135.18

1.7

4.78

8.7

7.26

7.65

2.15

Indiabulls Savings Income Fund



17.06

1.68

2.25

6

8.41

—

2.22



64.60

2.14

3.66

4.12

8.45

9.48

2.26

Top 5 MIP schemes based on 3-year SWP returns Indiabulls Savings Income

SBI Magnum Children's Benefit Fund

2

DEBT: MEDIUM- TO LONG-TERM Nippon India Income Fund



297.99

1.02

2.03

11.74

6.3

7.28

1.62

ICICI Prudential Bond Fund



3,366.21

2.27

4.4

10.96

6.74

7.78

1.08

IDFC Bond Fund Income Plan



676.71

1.04

1.82

10.82

6.46

7.28

1.9

Canara Robeco Income Fund



108.37

1.33

2.16

10.58

6.07

7.04

1.88



2,469.84

2.74

4.85

11.5

8.12

8.77

1.18



1,184.49

2.45

3.92

9.41

6.74

7.73

1.29



2,929.09

1.33

3.08

9.4

6.8

7.52

1.44

DEBT: MEDIUM-TERM SBI Magnum Medium Duration Fund HDFC Medium Term Debt Fund IDFC Bond Fund Indiabulls Income Fund



10.94

1.05

1.82

7.63

7.14

7.38

0.76

Franklin India Income Opportunities Fund



3,100.03

-3.27

-3.12

0.3

5.42

6.71

1.74



10,518.92

2.18

4.56

9.82

7.68

8.18

Axis Short Term Fund



4,404.40

1.96

4.37

9.75

7.21

7.87

0.93

IDFC Bond Fund Short Term Plan



11,757.34

1.87

4.45

9.73

7.31

7.75

0.79

L&T Short Term Bond Fund



4,866.07

1.71

4.15

9.32

7.11

7.63

0.73

Indiabulls Short Term Fund



39.27

0.73

0.03

4.77

6.02

7.3

1.48

Franklin India Short Term Income Plan



10,964.46

-3.75

-3.42

-0.31

5.49

6.71

1.52



Top 5 MIPs

11.7%

9.45 ICICI Prudential Regular Savings

THE 1-YEAR RETURN OF NIPPON INDIA INCOME FUND IS THE HIGHEST IN ITS CATEGORY.

8.81 Baroda Conservative Hybrid 7.39 Canara Robeco Conservative Hybrid 7.17

DEBT: SHORT-TERM HDFC Short Term Debt Fund

21

BNP Paribas Conservative Hybrid

0.39

7.01 SWP: SYSTEMATIC WITHDRAWAL PLAN

% ANNUALISED RETURNS AS ON 22 JANUARY 2020

DEBT: DYNAMIC BOND SBI Dynamic Bond Fund

1,195.94

2.2

3.04

13.49

7.16

8.11

1.67

Quantum Dynamic Bond Fund



60.54

2.28

3.2

11.46

6.53

—

0.7

IDFC Dynamic Bond Fund



2,025.41

1.2

2.35

11.39

6.83

7.59

1.8

Kotak Dynamic Bond Fund



1,030.31

1.96

3.27

11.24

7.81

8.72

1.08

PGIM India Dynamic Bond Fund



41.58

1.58

3

11.04

7.1

8.02

1.75

ICICI Prudential All Seasons Bond Fund



3,070.57

2.71

3.8

10.33

6.96

8.4

1.32

Franklin India Dynamic Accrual Fund



3,850.57

-2.63

-1.64

1.92

6.11

7.65

1.66

DEBT: CORPORATE BOND HDFC Corporate Bond Fund



12,319.84

1.85

3.67

10.25

7.53

8.4

0.45



11,338.51

2.09

4.3

9.85

7.4

8.2

0.56

Aditya Birla Sun Life Corporate Bond Fund



17,587.32

1.85

3.9

9.61

7.59

8.35

0.39

Kotak Corporate Bond Fund



4,418.21

1.85

4.37

9.51

7.89

8.22

0.6

907.97

2.03

3.86

7.67

7.06

7.82

0.71

ICICI Prudential Corporate Bond Fund



Nippon India Prime Debt Fund

13.5%

3

THE 1-YEAR RETURN OF SBI DYNAMIC BOND FUND IS THE HIGHEST IN ITS CATEGORY.

Mid cap cash holdings 16.24

9.78 7.56

Expense as on 31 December 2019 Returns as on 22 January 2020 Assets as on 31 December 2019 Rating as on 31 December 2019

Axis Midcap

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

ICICI HDFC Prudential Mid-Cap Midcap Opportunities

7.17

DSP Midcap

6.14

Franklin India Prima

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

% AS ON 31 DECEMBER 2019

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

4

Debt: Credit risk 1.43

1.47

1.49

Sundaram HDFC Short Credit Term Risk Debt

IDFC Credit Risk

1.38 1.05

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

 Bottom 10%

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

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

87.1% was the growth of AUM of Mirae Asset Investment Managers India AMC between December 201819, highest among the 43 recognised AMCs.

DSP Credit Risk

IDBI Credit Risk

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

loans and deposits 22

The Economic Times Wealth January 27- February 2, 2020

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.

HOME LOAN RATES

Top five bank FDs Interest rate (%) compounded qtrly

What `10,000 will grow to

7.50

10,771

RBL Bank

7.40

10,761

Yes Bank

7.25

10,745

IDFC First Bank

7.25

10,745

DCB Bank

7.00

10,719

TENURE: 1 YEAR Lakshmi Vilas Bank

With effect from 1 October, all banks have made the transition to external benchmarks for pricing new home loans. Most banks have picked the RBI repo rate as the external benchmark.

REPO RATE: 5.15%

Lakshmi Vilas Bank

7.50

11,602

AU Small Finance Bank

7.50

11,602

RBL Bank

7.45

11,591

DCB Bank

7.40

11,579

Yes Bank

7.25

11,545

AU Small Finance Bank

7.77

12,597

DCB Bank

7.70

12,571

Lakshmi Vilas Bank

7.50

12,497

Yes Bank

7.25

12,405

IDFC First Bank

7.25

12,405

DCB Bank

7.50

14,499

AU Small Finance Bank

7.50

14,499

RBL Bank

7.35

14,393

Lakshmi Vilas Bank

7.25

14,323

Yes Bank

7.25

14,323

Punjab National Bank SBI Term Loan Syndicate Bank United Bank of India Central Bank of India Canara Bank UCO Bank Corporation Bank Bank of India SBI Max Gain Andhra Bank Bank of Baroda Indian Bank Oriental Bank of Commerce Indian Overseas Bank Union Bank of India Bank of Maharashtra Allahabad Bank ICICI Bank IDBI Bank Axis Bank Federal Bank Kotak Mahindra Bank Karur Vysya Bank South Indian Bank

TENURE: 3 YEARS

TENURE: 5 YEARS

Top five senior citizen bank FDs TENURE: 1 YEAR Lakshmi Vilas Bank

Interest rate (%) compounded qtrly

What `10,000 will grow to

8.10

10,835

RBL Bank

7.90

10,814

Yes Bank

7.75

10,798

IDFC First Bank

7.75

10,798

Bandhan Bank

7.70

10,793

Lakshmi Vilas Bank

8.10

11,740

AU Small Finance Bank

8.00

11,717

RBL Bank

7.95

11,705

DCB Bank

7.90

11,694

@ 10%

Yes Bank

7.75

11,659

@ 12%

AU Small Finance Bank

8.27

12,784

DCB Bank

8.20

12,757

Lakshmi Vilas Bank

8.10

12,720

Yes Bank

7.75

12,589

IDFC First Bank

7.75

12,589

TENURE: 2 YEARS

TENURE: 3 YEARS

DCB Bank

8.00

14,859

AU Small Finance Bank

8.00

14,859

Lakshmi Vilas Bank

7.85

14,751

RBL Bank

7.85

14,751

Yes Bank

7.75

14,678

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

What `10,000 will grow to

7.50

14,499

AU Small Finance Bank

7.50

14,499

RBL Bank

7.35

14,393

Lakshmi Vilas Bank

7.25

14,323

Yes Bank

7.25

14,323

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

FOR SELF EMPLOYED (%)

RLLR (%)

FROM (%)

TO (%)

FROM (%)

TO (%)

WEF

7.80 7.80 7.90 7.70 8.00 8.05 8.05 7.90 8.00 7.80 8.10 8.15 7.95 7.95 8.00 8.00 8.20 8.25 8.25 8.25 8.55 8.55 8.35 7.95 8.80

7.90 7.90 7.90 8.00 8.00 8.05 8.05 8.10 8.10 8.15 8.15 8.15 8.20 8.20 8.20 8.20 8.20 8.25 8.25 8.25 8.55 8.55 8.60 8.65 8.80

9.35 8.30 8.50 8.15 8.30 10.05 8.15 8.90 8.40 8.55 9.30 9.15 8.45 8.95 8.45 9.35

7.90 8.25 7.95 8.00 8.00 8.05 8.05 8.10 8.10 8.50 8.15 8.15 8.25 8.20 8.20 8.20 8.20 8.25 8.50 8.35 8.65 8.60 8.70 8.65 8.80

9.35 8.65 8.60 8.15 8.30 10.05 8.15 8.90 9.00 8.90 9.30 9.15 8.55 8.95 8.45 9.35

5 Oct 2019 1 Jan 2020 1 Nov 2019 1 Nov 2019 10 Oct 2019 7 Jan 2020 5 Oct 2019 15 Nov 2019 10 Oct 2019 1 Jan 2020 1 Nov 2019 1 Dec 2019 1 Nov 2019 5 Oct 2019 1 Nov 2019 11 Oct 2019 5 Dec 2019

8.85 9.25 8.60 9.20 8.65 9.30 12.50 10.05

8.85 9.35 8.80 9.40 8.70 9.40 12.50 10.05

4 Oct 2019 12 Oct 2019 2 Nov 2019 16 Dec 2019 16 Jan 2020 7 Oct 2019 1 Jan 2020

Your EMI for a loan of `1 lakh TENURE @ 8%

@ 15%

TENURE: 5 YEARS

TENURE: 5 YEARS AND ABOVE DCB Bank

FOR SALARIED

BANK

TENURE: 2 YEARS

5 YEARS

10 YEARS

15 YEARS

20 YEARS

25 YEARS

2,028

1,213

956

836

772

2,125

1,322

1,075

965

909

2,224

1,435

1,200

1,101

1,053

2,379

1,613

1,400

1,317

1,281

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 investment (`)

Maximum investment (`)

Features

Tax benefits

15 lakh

5-year tenure, minimum age 60 yrs

80C

One account per girl child

80C

15-year tenure, tax-free returns

80C

Senior Citizens' Savings Scheme

8.60

1,000

Sukanya Samriddhi Yojana

8.40

250

1.50 lakh

Public Provident Fund

7.90

500

1.50 lakh p.a.

5-year NSC VIII Issue

7.90

100

No limit

No TDS

80C

6.90-7.70

200

No limit

Available in 1, 2, 3, 5 year tenures

80C#

Post Office Monthly Income Scheme

7.60

1,500

Kisan Vikas Patra

7.60

Recurring deposits Savings account

Time deposit

Data as on 23 Jan 2020

Single 4.5 lakh

5-year tenure, monthly returns

Nil

Joint 9 lakh

5-year tenure, monthly returns

Nil

1,000

No limit

Can be encashed after 2.5 years

Nil

7.20

10

No limit

5-year tenure

Nil

4.00

20

No limit

`10,000 interest tax free

Nil

# Benefit available only for 5-year deposit

market watch The Economic Times Wealth January 27- February 2, 2020

23

HOW YOUR INVESTMENTS PERFORMED THIS WEEK This weekly tracker keeps you updated on the benchmark stock index, gold prices, bond yields and Index of Industrial Production (IIP). It also tracks the changes in the past one year to give investors an idea how their investments performed over a longer period.

Sensex 36,108

41,386

23 JAN 2019

10-yr yield (%)

Gold price (`) 23 JAN 2020

32,341

39,902

23 JAN 2019

23 JAN 2020

7.294

IIP (%)

6.618

23 JAN 2019

23 JAN 2020

4.9

4.5 2.7 3.2

PRICE OF 10 GM GOLD

1.6

1.8

1.3 0.2

Aug Sep Oct

Jan Feb Mar Apr May Jun Jul

Nov

-1.4 -4.3 -4

CHANGE X

I WEEK

-1.30%

I WEEK

0.44%

1 WEEK

1.5 (bps)

LATEST

X

I YEAR

14.62%

I YEAR

23.38%

1 YEAR

-69 (bps)

1-YEAR AVG

Markets turned volatile after the global economic growth downgrade by IMF subdued corporate earnings and increased profit booking ahead of the Budget. .

Likely contraction in the global economic growth and virus outbreak in China has increased the demand for safe haven asset-gold.

Bond yields increased after the foreigners dumped the Indian bonds fearing a widening fiscal deficit.

1.80% 0.95%

Moderate growth in the manufacturing sector and low base effect helped IIP index advance in November 2019 after three consecutive months of contraction.

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)

1-MONTH AVG VOL CHG (%)

MKT CAP (`CR)

PMC Fincorp Swadeshi Polytex Tilak Ventures

0.40 8.60 1.21

14.29 9.55 24.74

110.53 108.74 92.06

5.32 0.03 0.01

-42.54 309.96 -38.89

20.36 33.54 15.55

Maximaa Systems

2.05

15.17

91.59

0.13

192.78

11.89

Tarai Foods Ltd. Pazel International Rana Sugars Ltd. SRK Industries Saboo Sodium Chloro JITF Infralogistics

6.83 0.78 5.15 1.35 7.04 9.35

-4.74 11.43 24.70 18.42 17.73 -2.09

73.79 73.33 66.13 64.63 60.00 58.47

0.06 6.35 1.19 0.15 0.30 0.01

396.31 14.55 369.41 -91.35 1051.32 -67.50

12.11 13.74 79.09 10.59 17.02 24.03

Top price losers Reliance Naval & Engg Reliance Power Videocon Industries India Steel Works Vikas Multicorp Reliance Home Finance Cox & Kings Brightcom Group Siti Networks Jaypee Infratech

2.64 2.17 2.71 0.26 2.53 1.80 1.17 5.39 1.66 1.33

STOCK

MARKET PRICE (`)

1-WEEK (%) CHANGE

1-MTH (%) CHANGE

1-MTH AVG VOL (LAKH)

1-MONTH AVG VOL CHG (%)

MKT CAP (`CR)

Ruchi Infrastructure

3.48

26.55

44.40

9.07

1,8321.58

71.41

Manaksia Coated Metals Action Fin Services SE Power Venlon Enterprises Sahara One Media DQ Entertainment

4.45 8.01 2.50 3.04 9.87 1.30

3.49 0.00 2.04 0.00 5.00 -18.75

23.61 -1.96 -4.21 -4.70 -12.96 -41.44

1.02 0.01 0.62 0.01 0.04 0.43

7,213.19 7,003.85 5,900.00 2,603.85 1,896.73 1,845.82

29.15 10.01 10.15 15.88 21.25 10.31

Ashirwad Steels

8.88

21.31

45.57

0.01

1,768.18

11.10

Saboo Sodium Chloro Surana Solar

7.04 9.17

17.73 -0.22

60.00 56.75

0.30 0.20

1,051.32 714.22

17.02 45.12

9.44 -23.03 32.00 -10.94 -19.91 -3.95 0.00 -7.49 110.53 0.00

9.29 4.64 3.56 1.57 4.05 2.80 2.57 6.88 5.32 1.71

-76.02 -73.81 -70.26 -69.00 -61.31 -59.53 -53.34 -46.97 -42.54 -40.26

Top volume losers -16.72 -11.43 -21.90 13.04 -5.95 -14.69 -10.69 0.37 -9.29 17.70

-42.23 -35.61 -31.39 -29.73 -28.13 -25.62 -23.03 -19.91 -19.02 -17.39

3.28 73.47 1.35 2.91 1.47 15.18 4.64 4.05 1.05 24.19

-18.23 93.36 -29.86 280.37 58.96 196.02 -73.81 -61.31 -3.76 125.79

194.72 608.71 90.64 10.35 167.87 87.31 20.66 256.70 144.77 184.73

Alok Industries Cox & Kings Unitech Housing Development Brightcom Group Urja Global FCS Software Solutions Sanwaria Consumer PMC Fincorp Uttam Value Steels

3.13 1.17 1.32 2.85 5.39 1.70 0.22 1.73 0.40 0.19

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 23 JANUARY2020. SOURCE: ETIG DATABASE AND BLOOMBERG.

9.82 -10.69 25.71 -8.65 0.37 -2.30 4.76 -2.81 14.29 0.00

431.10 20.66 345.35 135.09 256.70 86.22 37.61 127.35 20.36 125.55

pick of the week 24

The Economic Times Wealth January 27- February 2, 2020

Oil India: Stagger your purchases Buy slowly because the share price may come down further in the short term due to immediate threats.

A

nalysts are getting bullish on the Oil India coun- den fears, it is not a big risk because Oil India is enjoying the ter not because of its immediate growth pros- nil subsidy burden status since 2016-17. There was no subsidy pects, but because of its very low valuations. For burden in the second quarter and analysts believe that there example, its current price to book (PB) ratio of won’t be any in the third quarter either. This is because the 0.52 represents strong pessimism in this counter. government has created a reasonable budgetary provision Though the earnings are expected to be volatile, valuation is of `37,500 crore for cooking fuel subsidy in 2019-20 and this cheap if one considers the price to earnings (PE) ratio. While means that there won’t be any subsidy for upstream oil comthe counter is currently trading at 5.26 times its historical panies like Oil India, as long as the average Brent prices reEarning Per Share (EPS), its main close to $65 per barrel. PE ratio will fall to 4.77 times if The government stake sale one considers the expected EPS method is another factor worryin 2020-21. Whether you are using the investors now. It will be 2 ing historical PE or forward PE, positive if government decides to 20 Sell this is the lowest valuation in the go with strategic sales. However, Buy past seven years. The current if government decides to sell dividend yield, which is placed stake slowly, like selling its stake 4 at 7.39%, is another major attracthrough the CPSE ETF route will Hold tion to this counter now. be negative for the counter. That Investors who get into bargain means investors in this counter in this counter should not forget need to stagger their purchases. about the risks involved. For example, the concern over lack of Selection Methodology: We production growth persists. Oil pick up the stock that has shown Oil India is enjoying the nil subsidy burden status since 2016-17 India has reported 14% fall in maximum increase in “consenand analysts believe that there won’t be any in the third quarter sales and 27% fall in adjusted net sus analyst rating” during the either, owing to the government provisions. Also, though the profit during the second quarter last one month. Consensus ratearnings of the company are expected to be volatile, valuation is cheap at present, which has made it a favourite of analysts. of 2019-20. Though the company ing is arrived at by averaging all is yet to report the third quarter analyst recommendations after numbers, analysts expect a similar trend in this quarter attributing weights to each of them (ie 5 for strong buy, 4 for also. The third quarter revenue will be lower as Oil India is buy, 3 for hold, 2 for sell and 1 for strong sell) and any improveexpected to report around 2% lesser crude oil production and ment in consensus analyst rating indicates that the analysts less realisation due to fall in benchmark prices (Brent was are getting more bullish on the stock. To make sure that down by 7% during the third quarter y-o-y). Though its gas we pick only companies with decent analyst coverage, this production is expected to show small uptick, lower crude oil search will be restricted to stocks with at least 10 analysts realisation will impact margins and therefore, the net profit covering it. You can see similar consensus analyst rating for the quarter will also be lower. changes during the last one week in ETW 50 table. Though the market price is still factoring in subsidy bur—Narendra Nathan

Analysts’ views

Fundamentals CONSENSUS ESTIMATE

ACTUAL 2017-18

2018-19

2019-20

2020-21

10,409.19

13,405.40

12,995.95

12,947.18

Ebitda (` cr)

4,040.56

5,590.52

5,278.39

5,031.96

Net profit (` cr)

2,734.62

3,237.80

3,344.84

3,186.14

23.90

35.09

30.07

29.17

PBV

PE

Oil India

0.52

5.26

7.39

Oil & Natural Gas Corp

0.68

5.72

5.94

Indian Oil Corporation

1.00

10.02

7.76

Bharat Petroleum Corp

2.62

15.50

4.05

GAIL (India)

1.27

9.77

2.75

Revenue (` cr)

EPS (`)

Valuations

Latest brokerage calls ADVICE

DIVIDEND YIELD (%)

TARGET PRICE (`)

RECO DATE

RESEARCH HOUSE

13 Jan

HSBC

Buy

180

10 Jan

Jefferies

Buy

285

10 Jan

Batlivala & Karani Sec.

Buy

250

10 Jan

Nomura

Buy

205

10 Jan

KR Choksey Shares

Buy

196

Relative performance 100 MARKET PRICE: `138.75

SENSEX 114.62 114.51

81.71 23 JAN 2019

ET OIL & GAS

OIL INDIA

23 JAN 2020

Oil India compared with ET Oil & Gas and Sensex. Stock price and index values normalised to a base of 100. Source: ETIG and Bloomberg.

WHAT EXPERTS ADVISE BUY

*STOCK PRICES AS ON 23 JANUARY RESEARCH HOUSE

ADVICE

Vedanta

J P Morgan

Overweight

Federal Bank

Elara Capital

STOCK

Godrej Agrovet Syngene International

STOCK PRICE* (`)

1-YEAR TARGET PRICE (`)

POTENTIAL UPSIDE (%)

154

220

43

Stock’s muted reaction highlights low probability of strategic investors coming in Cairn. Target price is based on valuation multiples, hence any actual transaction would be a positive surprise.

Buy

95

122

29

As expected, two large loan accounts (DHFL & Reliance Home Finance) slipped during the Q3. Since there are no large worrisome loan accounts, the credit cost is expected to average at 66 bps.

Prabhudas Lilladher

Buy

555

659

19

Initiate a 'buy' because Godrej Agrovet is an integrated play on agriculture with strong presence in animal feed (51% of revenue), crop protection (16%) and palm oil (9%) business.

Jefferies

Buy

305

350

15

Syngene remains well placed to gain market share and see strong revenue over the medium term. Announcement of new long-term contracts or acceleration in growth can be the triggers.

RESEARCH HOUSE

ADVICE

COMMENT

SELL STOCK

Kotak Mahindra Bank ICICI Sec Hindustan Zinc

STOCK PRICE* (`)

1-YEAR TARGET PRICE (`)

POTENTIAL DOWNSIDE (%)

COMMENT

Sbicaps Sec

Sell

1,606

1,365

-15

Maintain 'sell' due to high valuation. Wait for evidence around capital allocation to sustain momentum across businesses and clarity on dilution of promoter stake to turn constructive on the stock.

HDFC Sec

Sell

443

376

-15

Despite volumes increase, deteriorating mix is expected to keep yields under check. Retain 'sell' due to high valuation, as 16 times is a fair multiple for the stock given market linked nature of its business.

Systematix

Sell

209

180

-14

Downgrade to 'sell' because costs at Hindustan Zinc to remain high due to the production expense (up 8% CAGR), higher royalties (up 4.8 times) and staff costs (up 2.7 times) over the past10 years.

technology check The Economic Times Wealth January 27- February 2, 2020

5 SMARTPHONE TRENDS TO LOOK FOR IN 2020 After a happening year as far as smartphone launches were concerned, 2020 is expected to witness a lot more competition in innovation as well as on the design front, says Karan Bajaj.

High refresh rate screens OnePlus made sure it highlighted how its 90Hz screen refresh rate delivers a smooth experience. The majority of phones work at 60Hz refresh rate and only a few gaming phones were delivering high refresh rate screens until now. However, OnePlus changed that notion with its OnePlus 7 series in 2019 and even Realme delivered a 90hz screen with the X2 Pro. The major benefit of a high refresh rate is especially visible in gaming. In 2020, there are rumors of Samsung coming up with a 120Hz refresh rate on its flagship series while brands like OPPO, OnePlus, Realme, Vivo, and Xiaomi are expected to launch phones across price range with 90Hz/120Hz refresh rates.

Super fast charging

108MP and above cameras In 2019, 48MP cameras on smartphones became a norm while 64MP cameras also reached the mid-price segment. However, Xiaomi went a step ahead and showcased their concept Mi Mix Alpha smartphone with a whopping 108MP camera. Considering that the tech exists and is available for smartphone vendors, in 2020 we should see more and more phones with a 108MP camera. Considering Qualcomm’s latest flagship chipset, the Snapdragon 865, supports up to 200MP cameras, keep an eye out for a smartphone with a 200MP camera sometime this year.

Having a big battery makes your phone bulky, so not everyone prefers that even though everyone wants to have a long battery life. The alternate route is to have the option to fast charge so that you don’t have to spend hours waiting for the phone to charge. Fast charging has been there across brands but 2019 saw high speed charging from OnePlus, Realme and Huawei on its smartphones ranging between 40W to 65W charging which charged the phone from 0 to 100 in less than 40 minutes. With the feature being appreciated by users and reviewers alike, a lot more brands are expected to adapt and deliver this feature to the consumers.

More foldable screens

Samsung started a trend with the Galaxy Fold, their first smartphone with a foldable screen in 2019. This was followed by the announcement of the Moto RAZR 2019, a flipstyle phone with a foldable screen that is expected to be available in 2020. In addition to these, Xiaomi and Huawei also teased their foldable-screen phones in 2019 which are expected to be launched in 2020. Samsung is also rumored to launch its second foldable phone at their February unpacked event while OPPO is expected to showcase its foldable device at MWC (Mobile World Congress). We expect 2020 to be a year filled with foldable screen phones and hopefully one device at a consumer-friendly price.

More rear camera lenses Apart from the higher megapixel cameras, the other trend we expect to grow is of increased number of lenses on a smartphone. We already have smartphones with quad rear cameras and dual front cameras, but in 2020, expect the number to increase. Nokia already has a phone with five rear cameras so more brands should pick up this feature and give the users five or may be six cameras on the rear this year. If you count the different type of sensors, you can easily see the possibilities—a primary sensor, a telephoto, a wide-angle, a bokeh lens, a macro lens etc.

25

your queries 26

The Economic Times Wealth January 27-February 2, 2020

I am 72. In April 2018, I sold a plot for `80 lakh. I paid the capital gains tax in 20182019 after availing exemption for `50 lakh by investing in REC bonds. This `50 lakh will automatically be redeemed in June 2023, after a five-year lock-in. Will the money be considered as my income in 2023-24 and taxed accordingly? The annual interest of `2,87,500 from REC will be given to me in June every year till 2023. Will the interest be taxable?

The redemption amount of `50 lakh upon maturity will not be considered as income. You need not pay any tax on it. It is only considered income if the bonds are redeemed before the full term of five years. However, the annual interest received will be charged to tax every year under the head “other income” and taxed as per your applicable slab. Since you are a senior citizen, your basic exemption limit will be `3 lakh while calculating your total income.

Shubham Agrawal Senior Taxation Advisor, TaxFile.in

My daughter is an engineering student. I want to invest around `30,000 per month for the long term. My plan is to start an SIP in an equity mutual fund of around `12,000, which my daughter can redeem after 10 years. I also want to invest `12,000 a month in the PPF and `5,000 a month in NPS (tier 1). Is this fine?

We assume the entire `30,000 is planned as an investment for your daughter. Your plan looks good. Stick to regular equity funds and not tax-saving funds as you will get varied strategies outside the tax saving category. You can split between a multi-cap, mid-cap and possibly even a US-based international fund. For NPS, wait for her to join the workforce. If she gets any corporate NPS option, then that would be more beneficial in terms of deduction. Get her involved in managing her finances.

Vidya Bala Co-Founder, PrimeInvestor.in

QA &

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QUESTION OF THE WEEK I am a senior citizen and a housewife. I bought a plot for `2 lakh in my village, a taluk headquarter, in April 2012. It is not rural or agricultural land. I am selling the plot now for `8 lakh. What will be the tax liability? Should I file IT returns for 201920? If yes, how do I calculate CII? Can I take into consideration the exemption limit available to senior citizens while filing my return? I don’t want this amount to be reinvested in any scheme. Any gain on sale of immovable assets held for more than 3 years is considered long term and the cost of such assets can be indexed. The indexed cost of the plot will be `2.89 lakh [CII being 289 for 20192020 (year of sale) and 200 for 20122013 (year of purchase)]. Assuming that you do not have any income and you are between 60 and 80 years of age, the LTCG of `5.11 lakh (`8 lakh-`2.89 lakh) will be exempt to the extent of the basic exemption of `3 lakh applicable to senior citizens. The balance `2.11 lakh will be taxable at the rate of 20.8% (including cess), which works out to `43,888. Since your taxable income for 2019-20 exceeds the basic exemption limit, you will have to pay tax and file a return of income to report the capital gain and the tax paid thereon.

I am a 35-year-old single earner with two kids below 5. I bought 1,000 shares each of HCC and Gokul Agro. Now the values have depreciated by 40-60%. Should I wait for prices to revive or book losses? Since the amount involved is around `50,000, I am worried. Please advise.

Booking losses on stocks when they are 40-60% down should be avoided unless funds are needed urgently or a major overhaul in philosophy or financials of the stocks has been seen. The decision to exit depends on your risk tolerance and ability to assess market fluctuations. Since the companies are fundamentally strong, you must hold these stocks and wait for the market to rebound. The best way to enter the equity market and mitigate risk is through mutual funds. Start SIPs in various categories by identifying your goals and objectives. Consult a financial adviser to build an investment strategy befitting your requirements. Also, buy a family floater health insurance and term plan.

Raj Khosla Founder and Managing Director, MyMoneyMantra.com

I am 65, and in the 30% tax bracket. I am only claiming `50,000 as tax benefit under Section 80C. Should I invest another `1 lakh to avail the maximum benefit under 80 C? I am still working and hope to continue for many more years. I am not keen to invest in insurance, so please suggest alternate options I can enter and exit easily.

Taking your age and tax bracket into consideration, it seems you are losing out on tax benefits of `31,200 by not optimising taxsaving under Section 80C. You can park your money in alternative options like Senior Citizens’ Savings Scheme, tax-saving fixed deposits or ELSS. If you are looking for a safe option to invest in, choose SCSS or tax-saving FDs. SCSS has a five year lock-in like tax-saving FDs. The interest received from both is taxable in the hands of the investor. ELSS funds have a three-year lock-in and is riskier. However, its returns are also superior. Depending upon your time horizon, risk appetite and convenience, you can choose any of these options.

Homi Mistry I wish to invest `5,000 per month for my 4-year-old child’s education etc. Please suggest some long-term investment ideas.

Partner, Deloitte Haskins & Sells

Archit Gupta CEO, ClearTax

Assuming you need the money for his higher education, invest in a multi-cap scheme. Exposure to equities will offer you a better chance to keep pace with, or exceed the inflation rate prevailing for education. Such inflation ranges between 9-12%. Fixed-income options like bank FDs or government savings schemes currently offer interest rates lower than this figure. The volatility in equities reduces with time. Hence the risk of suffering capital loss over 15 years is low. Your financial adviser can gauge your risk appetite and help you choose a suitable scheme.

Jayant R. Pai, CFP and Head - Products, PPFAS Mutual Fund

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mutual funds The Economic Times Wealth January 27- February 2, 2020

Increase SIP amounts every year to reach targets easily

PORTFOLIO DOCTOR

GOALS

ARINDAM

Sunil Tyagi is investing in a mix of mutual funds for his goals. Here’s what the doctor advised him: 1

2

3

4

MISCELLANEOUS EXPENSES Every year or so

HOME RENOVATION 3 years

SON’S EDUCATION 17 years

RETIREMENT INCOME 25 years

PRESENT COST: `2-3 lakh

PRESENT COST : `10 lakh

PRESENT COST: `18 lakh

CURRENT COST: `1.5 crore (`60,000 per month)

FUTURE COST: `NA

FUTURE COST: `12.25 lakh

FUTURE COST: `95 lakh

CORPUS REQUIRED: `8 crore

INVESTOR’S EXISTING PORTFOLIO

PORTFOLIO CHECK-UP

Holds a good mix of small-cap, multi-cap and large-cap funds.

SBI Liquid

1

Uses debt funds to save for annual expenses and short-term goals. Early start means he can reach target easily. Small hike in SIPs will make it easier. Consider adding NPS to save for retirement and cut tax.

AMOUNT INVESTED (`)

FUND NAME

Investing in equity and debt funds for the past 3-4 years.

2

2,08,688

Axis Liquid

97,394

ICICI Pru All Seasons Bond

88,300

Continue SIPs in this fund to save for son's annual

10,000 school fees.

7,000 Continue to use this to save for holidays. Fund is stable but your goal is coming near. Start

HDFC Hybrid Equity

2,03,500

- start systematic withdrawals of `10,000 a month.

SBI Bluechip

Earmark Provident Fund for retirement, not child’s studies.

IDFC Tax Advantage

Review investments and rebalance at least once in a year.

Recent performance is patchy. As goal is nearing,

Start SIPs of `30,000 in this short-term debt fund to

0

0 save for home renovation.

5,86,271

10,000 and hike by 5% every year.

30,300

10,000 and hike by 5% every year.

1,86,179

Continue SIPs in this outperforming large-cap fund

Continue SIPs in this outperforming small-cap fund

Continue SIPs in this stable ELSS fund. Hike by 5%

8,000 every year.

Continue SIPs in this outperforming multi-cap fund and hike by 5% every year.

SBI Magnum Multicap

2,58,632

10,000

Provident Fund

6,00,000

15,000 Don't withdraw before retirement.

NPS

0

Continue contributions and hike by 5% every year.

Start SIP of `5,000 in NPS to avail tax benefit and

0 save for retirement.

The goals can be reached using the mutual funds marked in the same colour.

`25,28,822 `70,000

TOTAL

This millennial can retire early at 50 1 RETIREMENT INCOME: 21 years

GOAL

Sanket Sawant wants to stop working at 50 and is targeting a corpus of `1 crore. Here’s what the doctor has advised:

PRESENT NEED: `1.2 crore (`40,000 per month) CORPUS REQUIRED: `4.96 crore

AMOUNT INVESTED (`)

EXISTING SIP (`)

1,16,000

4,000

Nippon India Small Cap

96,000

4,000

Mirae Asset Emerging Bluechip

71,500

5,500

Canara Robeco Emerging Equities

42,000

3,000

1,08,000

3,000

FUND NAME

L&T Emerging Businesses

1

ICICI Pru Bluechip Provident Fund

TOTAL

0

- systematic withdrawals of `10,000 a month.

SBI Small Cap

4

0 Keep this fund for emergencies.

2,69,558

Note from the doctor

Home renovation goal is very near so gradually switch out of equity funds.

NEW SIP (`)

RECOMMENDED ACTION

DSP Small Cap

HDFC Short Term Debt

3

EXISTING SIP (`)

Not mentioned

0

`4,33,500

`19,500

RECOMMENDED ACTION Both small-cap funds have delivered stable performances. Continue SIPs and hike by 10% every year.

Continue SIPs in these outperforming large and midcap funds and hike by 10% every year. Continue SIPs in this stable large-cap fund and hike by 10% every year. Continue contributions to your Provident Fund and hike by 5-10% every year. Don't withdraw before retirement.

Not many investors know whether they have invested in the right funds and if their fund portfolio is on track. The Portfolio Doctor assesses the health of the fund portfolio, examines the schemes and their suitability with regard to the goals and, if required, recommends corrective measures. The advice given is based on the performance of the funds, the risk profile of the investor as well as his financial goals.

10,000 7,000 -10,000

-10,000

30,000 10,000 10,000 8,000 10,000 15,000 5,000

`85,000

Assumptions used in the calculations INFLATION Education expenses

For all other goals

10%

7%

RETURNS Equity funds

Debt options

12%

8%

PORTFOLIO CHECK-UP

PORTFOLIOS ANALYSED BY

Investing in a mix of small-, mid-cap and largecap equity funds for past 2-3 years.

RAJ KHOSLA, Managing Director and Founder, MyMoneyMantra

Retirement target of `1.2 crore too modest. Will yield monthly income of only `40,000 (today’s prices). Retiring early means needs bigger corpus to last 30-35 years in retirement. Provident Fund not mentioned by investor. Could help fatten the retirement kitty. Review investments and rebalance at least once in a year. Shift to debt funds 2-3 years before goal.

WRITE TO US FOR HELP If you want your portfolio examined, write to [email protected] with “Portfolio Doctor” as the subject. Mention the following information:  Names of the funds you hold.  Current value of the investment.  If you have SIPs running in any

of them.  The financial goals for which you

invested.  How much you need for each

financial goal.  How far away is each goal.

27

your feedback & more... 28

The Economic Times Wealth January 27- February 2, 2020

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, ‘Make most of your EPF and NPS’. EPF and EPS are a waste of time and money. I contributed to the EPF for over 25 years. Now I have retired, and the total EPF money I received was around `18 lakh. No matter where I invest this money, I wouldn’t earn more than `15,000 per month. From EPS, I’m getting less than `3,000 per month as pension. Had I invested the same amount as my and my employer’s EPF contribution elsewhere for the past 25 years, I would’ve got much more than what I got from the EPF. Also, while it was announced in the 2016 Budget that interest will be paid even if an EPF account is idle for over three years, I was not paid any interest from 2016. I have followed this up with the department, and have been told they are looking into the matter. G. Jagadish

In 1995, the government and the EPFO promised to pay handsome pension to subscribers. Many employees joined the EPS 1995 scheme by contributing

behave badly if they are surrounded by ugliness and disorder.

EPF, NPS not enough

B.B.

The culprits are the courts and the government. Why should their responsibility be limited to only collecting revenue and the many fees? If they can charge a hefty amount in the name of registry, they should also work as protector for those paying up that money.

This refers to the cover story, ‘Make most of your EPF and NPS’. These schemes will enhance your corpus but would require many visits to various offices to get your dues. The way inflation is galloping, it is unlikely what you save through these two instruments will be enough to take care of your needs in old age.

Deepwin

H.P.

demolition-safe?’ The Supreme Court should be lauded for its order. It restores our faith in the judiciary. It’s time we all learned to respect the law and protect the environment. The courts should now step in to make residents, tenants and owners responsible for the appearance of buildings in Mumbai. The many shabby buildings make the city look like a war zone. People

thousands of rupees. Now we EPS 1995 pensioners are getting only `1,000. My warning to all subscribers is watch your EPF account and contributions periodically, especially employees who change their jobs frequently. U.S. Rao

This refers to the story, ‘Is your home

The demolition of illegal buildings will not act as a deterrent as long as no action is taken against corrupt government officials who flouted regulations during the course of construction. The residents of nearby illegal constructions should be more vigilant and alert as their homes are also unsafe. Girish R. Edathitta

We should ensure that the government officials who gave the clearances are also held accountable. Rohit Joshi

REALTY

A sought-after micro market in NCR

HOT SPOT

Good infrastructure and availability of residential units work in favour of this Gurgaon locality.

LOCALITY SNAPSHOT

SUPPLY BY BHK

GOLF COURSE EXTENSION, GURGAON

2 BHK

12%

3 BHK

56%

4 BHK

30%

5 BHK

2%

Upscale micro-market with a good mix of completed and under construction apartment projects Proximity to key employement hubs of DLF Cyber City, Sohna Road & Golf Course Road Well-developed social infra such as schools, hospitals, malls, multiplexes, local markets, banks, etc Renowned hospitals situated nearby include Artemis, Medanta Medicity, W Pratiksha Extensive connectivity through NH-48, Sohna Road, Golf Course Road & Rapid Metro network Sector-62

VALUES

PRICE RANGE `7,100-11,700 Per sq ft

LOCALITY

Capital

Rental

(`/sqft)

(`/month)

Consumer preference by budget segment (`) 6% Below 1 crore

Sector-65

Sector 62

8,200-10,600 31,900-71,300

33% 7%

Sector-66

Railway station: 15 km

Sector 65

8,200-11,700 59,400-89,700

Sector 66

7,200-10,100 36,600-54,100

NH-248A: 4 km

Sector-67

2 BHK 1,350 sq ft

3 BHK 2,210 sq ft

4 BHK 2,960 sq ft

5 BHK 5,130 sq ft

`crore 1.09 (avg)

`crore 1.96 (avg)

`crore 2.63 (avg)

`crore 4.66 (avg)

Restaurants 15+

Consumer preference by covered area (sq ft) Below 1,000

27%

Banks 14+

Above 2.5 crore

2%

Sector 67 Hospitals 14+

1.5-2 crore 2-2.5 crore

27%

Airport: 21 km

Schools 16+

1-1.5 crore

27%

Grocery Stores 12+

7,100-9,300

36,100-54,900

Petrol Pumps 10+

21%

27% 23%

1,000-1,500 1,500-2,000 2,000-2,500 Above 2,500

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.

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