Moneylife 10 November 2016

SUCHETA DALAL ON:

INVESTOR ADVISOR REGULATIONS: RIGHT STEP, BUT NOT ENOUGH

Personal Finance Magazine

PSBS : NO TURNAROUND YET Rs 45

28 October-10 November 2016

Pages 68

(SUBSCRIBER COPY NOT FOR RESALE)

www.moneylife.in

THE BIG LOOT! How Govt health insurers are looting both the taxpayers and retail insurance buyers

Group Policy Rs7,200

Retail Policy Rs30,000

VALUE STOCKS: Picking Stocks: Marrying Momentum with Fundamentals Page40

STOCKS Pennar Industries: Sluggish Sales, Growing Profit

Cover Page_279.indd 1

Monsoon Vs Sales Growth

Aries Agro Stands Out?

GM Breweries: Low Spirits

Manipulation: Kushal Tradelink

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ISSUE CONTENTS

28 Oct-10 Nov 2016 Unhealty Covers

C

ut-throat competition has led to government-owned insurers offering group covers at ridiculous premiums, to grab volume business. It seems that a rap from comptroller and auditor general of India a few years ago, on losses on account of group insurance, has had no impact on the insurance companies. The latest trend seems to be to offer covers at throwaway premiums to rich communities. Unlike employer cover for employees, community group policies have higher chances of going into staggering losses. Our insurance expert, Raj Pradhan, came across a few group policies that can only inflict heavy losses. With 200%-300% claims ratio for a couple of such policies, we were proved right. Another such policy has just been launched for Mumbai Diamond Merchant Association at an even lower premium. Can insurers justify such absurd pricing? Is the vigilance department doing its job? Ultimately, the losses of group insurance are extracted from us, retail customers, by charging us a higher premium. When will the Insurance Regulatory and Development Authority of India (IRDAI) wake up and take some action on such unhealthy practices by government-owned insurers? The stock market is bullish and many small stocks are flying. A rise of 50%-100% is common. It is easy to fall for these stocks which could turn out to be highly risky, if the tide turns. Bala’s piece, warning how to spot stocks that may give you trouble, is perfectly timed. Don’t miss it. Sucheta, in her Different Strokes piece, points to the slow progress in revamping public sector banks, while her Crosshairs piece explains how the financial consumer is still not being treated fairly, even though regulators are trying to separate the role of advisors and distributors. Finally, my piece, in the value stocks segment this time, addresses, once again, the issue of momentum, something that we, at Moneylife, are quite intrigued about. As always, please do write in with your views, what you would like us to cover and how we can add value to your understanding of financial products. Meanwhile, a Very Happy Diwali from Moneylife! Debashis Basu 

Group Policy Rs7,200

RRetailil PPolicy li Rs30,000

30 Cover Story THE BIG LOOT! Group Policy Rs7,200, Retail Policy Rs30,000 Six years after getting a rap from CAG, government insurers are still underwriting loss-making group policies. Raj Pradhan finds that rich communities are given group cover at throwaway prices. Ultimately, we, who are not part is such privileged groups, are paying a higher premium. Does IRDAI care?

12 Your Money

– Consumer Court Asks Builder To Pay Compensation; Hand Over House – Flat-buyers Complain to Economic Offences Wing about Reneging on Deal – CBDT Proposes To Fast-track Disposal of Tax Cases – Dewan Housing Finance Reduces Home Loan Interest Rate – Supreme Court: Builders Have an Attitude of Not Fulfilling Promises

14 18

MONEYLIFE

QUIZ SEBI’s Investor Advisor Regulations: Right Step but Not Enough

20 Different Strokes

Public Sector Banks: No Sign of a Turnaround Yet

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

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CONTENTS FUND POINTERS

INSURANCE

USEFUL APPS

of the Pharma 28 Insurance 22 Gimmick Trends Mimic FUND FACTS

and Cold Stocks 23 Hot of Mutual Funds in September 2016

Health insurance – Get Rewarded for Being Physically Active Regulations – MVA To Cap TP Liability at Rs10 Lakh for Accident Cases? Life Insurance – Aegon Life Insurance Re-launches ‘iTerm’ Fine Print

STOCKS

24 Smart Money 15 Telltale Signs of Stocks that May Give You Trouble

Know Who is 57 Truecaller: Calling – Smart Tools: Work Smart – TuneIn: Radio in Your Phone – Glympse: Share Your Location

LEGALLY SPEAKING

Delayed 58 Filing Complaints & Appeals

VALUE STOCKS TECHNOLOGY

Stocks: 40 Picking Marrying Momentum with Fundamentals

Do Mobile 59 Why Batteries Explode?

EARNING CURVE

44 Stock Watch Pennar Industries: Sluggish Sales, Growing Profit

Monsoon Vs Sales Growth

Aries Agro Stands Out?

GM Breweries: Low Spirits

US Fund Managers 50 How Changed Strategies

before, during and after the Financial Crisis

YOU BE THE JUDGE

Court Case Is Not a 60 AMoney-making Exercise, Yet…

TAX / FIXED INCOME

51

Post-office Monthly Income Scheme Decoded

– G-Sec Yields Down

BEYOND MONEY

Environment for 66 Healthy Underprivileged Children

TAX HELPLINE

at Moneylife 52 Queries Foundation’s Tax Helpline HEALTH

Market Manipulation: Kushal Tradelink

Market Trend: Endless Churn

Content.indd 4

54

Treating Patients through ‘Whole Person Healing’

DEPARTMENTS

Pulse Beat: Medical developments from around the world

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

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Volume 11, Issue 19 28 October–10 November 2016

Debashis Basu

Editor & Publisher [email protected]

Sucheta Dalal

Managing Editor [email protected]

Editorial Consultant Dr Nita Mukherjee [email protected]

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

E-mail:

[email protected]

Subscription e-mail [email protected]

New Delhi

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

Total no of pages - 68, Including Covers

RNI No: MAHENG/2006/16653

GOOD INSIGHT I’ve been exploring Moneylife magazine for the past five years. The serial columnists, like Debashis Basu, R Balakrishnan, Yazdi Tantra, Yogesh Sapkale, Prof Dr BM Hegde, lawyer SD Israni, lawyer Bapoo Malcolm, have all been providing fantabulous information to protect the readers and investors from all sorts of risks and losses. Duly crowning them all is Sucheta Dalal and contributors to the Cover Stories. Great going! I am a senior citizen now. I have been an investor in the stock market since 1992. Yet, I have not made gains of more than CAGR (compound annual growth rate) of 8% all these years. These five years of reading Moneylife have provided me a good insight into the stock market, in spite of my small profits. Saravanan Ramamoorthy, by email

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

Write to the Editor!

WIN a prize

FEE INCOME OF BANKS UNDER A CLOUD? I’ve been keenly following Moneylife for the past one year and it has been a delight to see straight to the point, unbiased and critical, articles on products, services and institutions in the financial sector as well as other corporates. We are customers of HDFC Bank Ltd and have seen a ph phenomenal hen enom omen enal a growth and quarter-on-quarter growth of the Bank. As customers, we come in close contact with the way the Bank has been moving to keep its fee income intact and, hence, profits, without much effort through levying ‘charges’. Recently, as a Premium customer, where we have been asked to keep balances of Rs1,00,000 (in aggregate of all accounts), we are offered some benefits. Now, the Bank has started a levying new a charge of Rs115 per customer on a quarterly basis as Programme Management Fee for upkeep of customers who are keeping good balances. Isn’t this an innovation 

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LETTERS

the

Best letter

Ban the Raids and Torture?

T

his is with regard to the article “How To Bring a Culture of Honesty and Transparency” by Sucheta Dalal. My comments are given below. All of us would have read about the suicide of the IAS officer BK Bansal and his family, because of the torture during investigation for having some unaccounted money in his house. And, this is not the first case of its kind. We might be thinking that the likes of Bansals are dishonest because of a culture contrary to honesty and transparency. We might be right, to some extent; but most of us have not understood the vicious circle behind the culture of ‘Dishonesty and Non-Disclosure of Information/Activities’. I have tried to understand the reasons behind hoarding hundreds of thousands of crores of rupees in cash at home and other secured nooks and corners, by all classes of society. Today, we have the economy performing with 75%-85% black money, which is used by people for payments of capitation fees for entry of wards into professional colleges—medical, business management, colleges and schools—medical expenses, consumption of alcohol, cigarettes and other drugs, purchase of property (movable and immovable), ostentatious weddings and moneylaundering. How will the likes of BK Bansal purchase property, pay crores of rupees for capitation fees, meet exorbitant medical expenses, etc, unless they have unaccounted money/property with them stacked in safe corners? This is possible when there are no ways and means to garner the unaccounted money. My point is, when our policies, plans, rules and regulations, and legal system provide for facilities to generate black money, are governments at the Centre and states justified in raiding premises of the likes of BK Bansal and torturing them to the extent of using force that makes them commit suicide? I am giving you the example of the most open methods of generation of black money: the cash memos of sale of goods and services; prior to VAT (value added tax), chemists in India used to charge

in the name of ‘local taxes extra’ without Mutual Fund investments mentioning them are subject to market risks, read all scheme related in the cash memos, documents carefully. because the tax on sale was chargeable at the first point of sales; after VAT came GC Mathur into force, the traders/ YOU WIN A restaurateurs of all hues PERSONALISED are charging VAT CLOCK on MRP (maximum retail price) without giving the benefit of ‘set-off’ value to consumers. How it is possible? Because the cash memos GC Mathur are not reckoned at the time of assessment. Instead, the assessment is based on the periodical returns submitted by traders. This is just one example; many more can be provided by Indian chartered accountants. The beauty is that in all these formulations of rules and procedures, the bureaucrats are involved, who later suffer like BK Bansal. My appeal to all the bureaucrats in the Government of India is that they must unite and demand that there should be no investigation by CBI (or any other such body) for unearthing black money, unless the very system of generating unaccounted money is stopped forthwith. This will stop suicide and murder of all bureaucrats and businessmen. Therefore, instead of building a culture of honesty and transparency, we should first talk of making policies, plans, rules and regulations, legal system which is fool-proof and guarantees that there is no generation of unaccounted money. Until such time, our Supreme Court must ban any such raids and investigations in the country. I hope you would appreciate my concern and you will be associated with me in this effort. GC Mathur, by email

Congratulations

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LETTERS

 which is the first of its kind? Customers may not notice

it with the good balances they keep. Isn’t the Bank earning enough by way of NII (net interest income) from the money kept in the account and other products like loans, trading, etc,? As I understand, this is applicable to all Premium banking customers. As per their website, the Bank categorises customers as follows: Classic, Preferred and Imperia. Imagine the lakhs of accounts and the income the Bank generates, on a quarterly basis, without any pains or effort from the hard-earned money of its customers? I urge Moneylife to look into the matter and dissect it to see how this Bank and, perhaps, all new generation banks have, so far, managed to create profits on their books through fee to the delight of their foreign institutional investors (FIIs). Moneylife should help stop banks from fleecing the customer through such unethical practices. Thank you, Moneylife for being a platform to echo the voice of customers and citizens! Anonymous well-wisher, online comment Thank you for your letter. What you have pointed out about HDFC Bank has been in the public domain for a while. We think it is unfair on the part of banks to keep fleecing middle-class customers with a whole bunch of unconscionable fees and charges, from time to time. Most banks are doing it and public sector banks are no exception. For instance, what started as free text messages about our transactions (especially credit-card transactions) as a security measure is now paid for. Banks are charging these fees, despite earning a hefty income on our savings account deposits. However, they get away with it for two reasons. The customer grumbles but pays. People do not change their bank account, often, because it

is tied to various electronic payments, credit cards, etc, or simply because it is too much of an effort. We have a sister entity, called Moneylife Foundation, which attempts to create awareness about such issues. We even tried to fight the fee on more than three withdrawals per month from one’s ATM accounts. Unfortunately, we are too small as yet and unless people support independent entities like ours, there will be no one to fight such practices. Stopping such practices needs a fight—not mere writing. We have done plenty of the latter. — Editor

MENACE OF FAKE CURRENCY NOTES We must have all come across chief minister of Andhra Pradesh, Chandrababu Naidu’s demand for total abolition of all high denomination currency notes of Rs500 and Rs1,000. However, before that demand is even considered, eradication of all fake currency notes in circulation should be topmost on the agenda of RBI (Reserve Bank of India). News about fake currency is common in newspapers; so the latest catch in Thane (Maharashtra) should not be considered some stray occurrence. It is only an ongoing part of our enemy nation’s regular plan to sabotage the Indian economy. The latter is emboldened by the lack of a concrete plan to defeat it. RBI must phase out all old currency with a time-bound programme with different designs, colour schemes, paper size variations, replacing the old duplicated lot. RBI should spend money on this most essential security aspect. I am on the look-out for a patriot to file a PIL (public interest litigation) in the High Court. I will be happy if the new RBI governor himself takes the action, instead. YS Madhav Apte, by email

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

Mumbai 400 028 or faxed to 02249205022. Letters must include the writer’s full name, address and telephone number and may be edited. Subscription Service: For new subscription requests,

complaints about current subscription and books, write to us at [email protected] or to Subscription Manager, Unit No. 316, 3rd Floor, Hind Service Industries, Off Veer Savarkar Marg, Dadar (W), Mumbai

400 028 or call 022-49205000 or fax to 022-49205022. Advertising: For information and rates, email us at [email protected] or call 91-022-49205000.

11 | 28 Oct-10 Nov 2016 | MONEYLIFE

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Your Money CONSUMER INTEREST

TAX

Consumer Court Asks Builder To Pay Compensation; Hand Over House

A

gitating flat-buyers are being helped by consumer courts. Chandrakant Gandhi and his wife Jyoti, from Ichalkaranji in Kolhapur district in Maharashtra, had jointly executed an agreement with Rohan Developers on 27 December 2006, for the

purchase of the row house under the ‘Rohan Seher’ scheme for Rs61.26 lakh. The unit was to be delivered by 31 August 2008. The Gandhis paid Rs24.5 lakh to the firm up to 4 January 2008, but found that the construction, as certified by the architect, was poor. The couple paid two cheques totally worth Rs9.18 lakh in January 2008, but the firm did

not encash them after accepting them. Instead, it issued a demand notice claiming that the couple defaulted on payment and sought the same with 15%pa interest. On 5 November 2008, the firm issued a notice informing the Gandhis that it was terminating their agreement.

The couple moved the Maharashtra State Consumer Disputes Redressal Commission which ordered the builder to pay Rs30,000 to the couple. The Commission also directed Rohan Developers to hand over possession of the row house after accepting the balance of Rs36.76 lakh from the couple within 90 days, with 9%pa interest since 5 January 2008.

Flat-buyers Complain to Economic Offences Wing about Reneging on Deal

F

rustrated and angry real estate buyers are getting more and more active about their rights. A group of persons lodged a complaint with the Economic Offences Wing (EOW), Bhubaneswar, alleging that real estate firm Seven Hills Sands duped them of crores of rupees. The complainants alleged that the company promised them single-room flats in a housing project in Puri, but reneged on the deal after collecting money from them.

CBDT Proposes To Fasttrack Disposal of Tax Cases

C

BDT (Central Board of Direct Taxes) asked its tax commissioners to submit data on the number of appeals they have disposed of every month against the given target. This has two objectives–to monitor officers’ performance and to speed up the disposal of cases.

It also asked commissioners of income tax (CIT) to upload the data of all the appeals pending before them as on 29 February 2016, on its data collection portal by 21 October 2016. CBDT has asked all commissioners (appeal), to send details of the number of cases disposed of to the statistics (R&S) wing of the office of director general of income-tax by the 7th of every month. HOME LOANS

Dewan Housing Finance Reduces Home Loan Interest Rate

T

he Reserve Bank of India cut the repo rate, by 25bps (basis points) to 6.25%, taking the total reduction to 175 basis points since January 2015. Many institutions, such as Dewan Housing Finance Corporation Ltd (DHFL), ICICI Bank, Syndicate Bank and Bank of India, have also lowered their interest rates for loans after this development.

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Your Money CONSUMER PROTECTION

Supreme Court: Builders Have an Attitude of Not Fulfilling Promises

T

he Supreme Court sharply criticised builders, after Parsvnath Buildwell Pvt Ltd said that there would be a delay in giving flats to 70 homebuyers. “In this country, builders have developed an attitude to make commitments to the purchasers and not fulfil them by delaying the projects,” the Supreme Court bench said. This observation came after the real estate firm said it will give flats to 70 homebuyers, by 17th December. In addition, the Supreme Court bench added, “They (homebuyers) do not have patience and trust in you and need

refund. Money should go back to them and they should not suffer.” In addition,

MONEYLIFE QUIZ

the bench also pulled up the realty firm for seeking time to deposit Rs10 crore.

Moneylife Quiz no

244

Another quiz to tease your brain. The answers are in this very issue. The winner will be chosen by a lucky draw from correct entries and answers published in the issue dated 8th December. Send in your answers to [email protected] with the Quiz no., name, address & telephone number before 16 November 2016. 1. Over the past five years, what is the lowest positive yield from sector mutual fund schemes? a. 25% b. 10% c. 5% d. 2% 2. How many pharma companies are listed on the BSE for mutual fund managers to choose from, for investment? a. 16 b. 20 c. 25 d. 150

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

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

TN Sunder Rajan

5. What was the profession of Suhrid Tembe? a. Surgeon b. Teacher c. Lawyer d. Chartered accountant 6. How many telephone numbers does the Truecaller database have? a. 2 billion b. 2 trillion c. 10 billion d. 10 trillion

3. In which city of the US is Wharton Research Data Services located? a. Pittsburgh b. Harrisburg c. Philadelphia d. Washington DC

7. What is the nature of batteries used in most mobile phones? a. lithium-ion batteries b. nickel-cadmium batteries c. dry cells d. Sulphuric acid and water with lead batteries

4. What is the estimated value of the market for cholesterollowering statin drug industry? a. US$100 million b. US$100 billion c. US$500 million d. US$500 billion

8. What is the proposed limit of the MVA (Motor Vehicles Act) third-party liability in road accident cases? a. Rs50 lakh b. Rs30 lakh c. Rs15 lakh d. Rs10 lakh

In all, 11 readers got all the answers right last time. The winner of Quiz-242 is TN Sunder Rajan from Thane. Congrats! You win a personalised clock with an investment quote!

The answers to Moneylife Quiz-242 are: • 1- b. Rs896.12 crore • 2- b. Three • 3- b. Measure of the return on investment as compared to a suitable market index • 4- b. Home security system • 5- c. Momentum • 6- d. Rs19 • 7- c. First do no harm • 8- a. Section 35(a)

MONEYLIFE | 28 Oct-10 Nov 2016 | 14

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www.moneylife.in News & views with a big difference Another murder of RTI activist: How about putting information in public domain? Maharashtra, which witnessed the first ever murder of an activist who was using Right to Information (RTI) Act in India, Satish Shetty, also has the dubious distinction of being the state with the highest number of assault and murder of

RTI activists. Since the implementation of RTI Act in 2005, the state saw 12 deaths and 24 assaults on activists. In October, Bhupendra Vira was shot dead in Mumbai. A local politician and his son

have been arrested. It has been six years since the murder of Satish Shetty, but the case is still proceeding at a snail’s pace. In fact, in most of the murders in Maharashtra, the culprits are roaming free. So, how long is this callous attitude towards whistleblowers going to continue? As per the study by Commonwealth Human Rights Initiative (CHRI), murders of such whistleblowers are brazenly taking place in every state

Continued losses can erase revenue reserves of public sector banks: CRISIL

Consumers with common interest can file or join class action suit: NCDRC

A sharp decline in profitability and mounting losses could wipe out reserves of some public sector banks and hamper their near-term ability to service coupon on additional tier-1 (AT1) bonds

The National Consumer Disputes Redressal Commission has upheld that consumers having a common interest or grievance can file class action suit against the other party

Is RBI’s upward projection for inflation, deliberate?

Essar Stake Sale: A big step for Indian banks?

The Reserve Bank of India, in its monetary policy, had forecast consumer inflation at 5% for FY16-17. According to a research note, the deceleration in CPI shows that RBI’s inflation projection was significantly off the mark

The Ruia brothers are selling 98% of their stake in Essar Oil and 100% stake in Vadinar port to Russia’s Rosneft Oil and a consortium of traders. A research report feels that this deal is significant for the Indian banking system

Does IDS 2016 give power to I-T officers to open decades-old files?

Beware: Scamsters duping people in the name of ICICI Bank NRI services!

The recently-concluded Income Declaration Scheme 2016, while being successful in garnering hidden money of about Rs65,000 crore, also opened a window of opportunity for tax officials to open or re-open old cases

Fraudsters are now using far more sophisticated techniques, posing an even bigger risk to gullible and careless people. Many people may have received an email recently regarding ICICI Bank’s non-resident Indian (NRI) services

EXCLUSIVE VIEWS

On issues that matter to you

ML FOUNDATION How to maintain tax papers in a paperless environment and not to fall victim to the taxman’s roving e-eyes

An ‘informer’ helping I-T dept on tax evasion through RTI is not ‘misuse’ of information Vinita Deshmukh

MONEYLIFE SURVEY: Mutual fund investors from US and Canada facing difficulty Raj Pradhan

“Going green helps the environment. However, unless you are careful and have preserved copies of your income and expenditure related transactions, electronically, you may attract the unnecessary attention of the taxman,” advised chartered accountant Ameet Patel. He was speaking on “Don’t fall victim to the taxman’s roving e-eyes and learn how to maintain tax papers in a paperless environment”, at a seminar of Moneylife Foundation, sponsored by Capital First.

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CROSSHAIRs

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

SEBI’s Investor Advisor Regulations: Right Step but Not Enough

O

ver the past few weeks, there has been a raging debate among distributors of financial products over the Securities & Exchange Board of India’s (SEBI’s) proposed regulations covering investment advisors. A key element to the regulations, first issued in 2013, which is being further tightened, is that those wanting to offer investment advice will have to register as investment advisors and become accountable for their advice. Separately, distributors will have to disclose their commissions, especially trail commissions. Who gets hurt in the process and who gains? These days, a substantial chunk of financial advice to middle-class savers comes from bank relationship managers. They have also been responsible for gross mis-selling of insurance and financial products, churning of mutual fund portfolios, portraying risky derivativesbased products as safe, tying up expensive insurance products to loans and other banking facilities and, worse, getting away with zero responsibility for losses or pathetic returns on wealth management services. Banks are regulated by the Reserve Bank of India (RBI). Unfortunately, RBI is most reluctant to check malpractices by banks. A consumer charter that would have fixed many of these issues has been kept toothless and in limbo for the past 20 months. Instead, in April 2016, RBI issued ‘Guidelines on Investment Advisory Services offered by Banks’ which requires investment advice to be offered by a separate subsidiary registered

with SEBI, that has an arms-length relationship with the bank. The catch is that banks have been given another three years to organise their businesses in accordance with these guidelines. The timeframe can only be contracted if SEBI’s amended guidelines kick-in sooner and make it mandatory for banks to comply. Sadly, even SEBI’s proposal to tighten rules for distributors and advisors gives the former three years to fall in line. Consider how reluctant RBI is to regulate sale of financial products by banks. It took three years to convert its draft guidelines on the subject, issued on 28 June 2013, to official guidelines (not regulation) and has now offered a further three years for compliance! In contrast, SEBI issued its draft guidelines in 2012 and issued its final guidelines in early 2013. At Moneylife, our view is that SEBI’s guidelines are a step in the right direction. Making investment advisors more accountable will certainly take away the incentive to mis-sell products for commissions, although it does burden advisors with onerous reporting and administrative work and forces investors to do some hard work too, in the process. What does this mean for originators of financial products? Will it force mutual fund companies to engage directly with their target customers? Today, their marketing efforts comprise mass-media campaigns with a general feel-good message while the real sales  come from wooing and incentivising ‘distributors/

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 banks’ to ‘push’ products with higher incentives.

Naturally, there is little motivation to cut high costs and improve returns to make the products more attractive to the saver.

Will It Cover Everybody? By shifting the burden of selling the right financial products on to advisors, SEBI will also reduce its own role in grievance redress effort. However, one big question remains. Has SEBI, which is mandated to protect investors, ensured that its regulations cover every possible source of mis-selling? Or will it end up making business tougher and more onerous only for those who want to comply, while fraudsters and paid influencers thrive unchecked? Let’s take a look at those who will continue to remain outside SEBI’s regulatory gaze. Paid Bloggers: Moneylife routinely receives requests from clueless ‘digital marketing’ companies, fishing for ‘content providers’ to plant articles in the media and on blogs. Here is just one example: On 10th October, Shalini from Buzzerati writes to say, “We have received a campaign request for a reputed Indian mutual funds company. They are looking for finance bloggers based out of Mumbai who will be able to attend a lunch event and be introduced to new policies and re-alignments done by the company.” She wants us to share the ‘package cost’ for “attending the event+blog post+ social media share of the same.” We are also inundated with offers to write ‘free’ blogposts for us, obviously, because marketing agencies pay them on the basis of clicks and views. Considering that any critical assessment of their schemes is anathema to most mutual fund companies (media houses face the brunt of it in terms of refusal of advertisements), paid blog posts will have to be positive, if not laudatory. Yet, they will appear as ‘independent’, spread across the Internet, and will be actively promoted on social media by the digital marketers who commission them. How does SEBI plan to tackle this? Will it monitor the content of such blogs or even know which ones peddle paid-praise? Will it question mutual funds that commission such content? Quid Pro Quo Deals: Large PR firms handle another form of paid publicity. They ‘place’ and promote columns on television and arrange ostensibly independent financial experts or lawyers to appear on television programmes and discussion panels to promote their client’s point of view. This is part of a fairly open quid-pro-quo for advertising campaigns and the best of companies is fairly brazen about making these demands. Does SEBI have the ability, or the will, to catch such dubious influence-peddling? Paid Academics, Lawyers and Consultants: Many academics, retired bureaucrats, consultants and lawyers on policy-making bodies/ boards/committees of the

government have remunerative relationships with banks and corporate houses. Corporate houses use them to influence regulation and policy or, at least, ensure that their point of view is represented. Yet, none of them is ever asked to disclose his/her financial associations. Simultaneously, they work at keeping out independent voices from such agencies. Does SEBI have any plan to insist on some ground rules and disclosures for this group of influence-peddlers? These academics and consultants not only help shape policy to suit their paymasters, but also draft regulation and legislation which is passed off as the work of the regulator/policy-making committee. I know of a couple of specific examples, where such experts ensured glaring loopholes in the rules and exploited them later for their corporate clients. One example that I had written about pertained to SEBI’s insider trading regulation. Such influence-peddling by unscrupulous academics and consultants is not an Indian phenomenon; it is a global problem that is not easily fixed because of the financial clout of giant multinational corporations. Fraudsters and Tipsters: Finally, at the lowest end, you have fraudsters and tipsters who continue to spam our mobile phones with stock tips, completely confident that they will fly below the regulator’s radar. Yet, they manage to cheat a large swathe of gullible investors. Does SEBI have a mechanism to track these, or at least put information in the public domain, for careful savers who like to do their homework? Yes, it does have such a platform in Sachet; but sachet.rbi.org, inaugurated with much fanfare by former governor Raghuram Rajan and SEBI chairman UK Sinha, is virtually stillborn. There is no attempt whatsoever to promote it, or to make it an active platform for engagement with savers or to collect feedback on frauds and tricks being unleashed on clueless investors. Although SEBI has come up with a discussion paper for better regulating investment advisors, it also needs to pay attention to all the other players listed above. Otherwise, SEBI will only end up regulating those it can (independent advisors), while letting off those who are either too big and powerful, or too small, to warrant its attention. And we haven’t even discussed the humungous mis-selling in insurance which most people see as ‘investment’ so far.  19 | 28 Oct-10 Nov 2016 | MONEYLIFE

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DIFFERENT STROKES SUCHETA DALAL

Public Sector Banks: No Sign of a Turnaround Yet

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ank nationalisation was celebrated as one of still does not put BBB on track for conversion into a the biggest achievements of Indira Gandhi, in holding company for the government stake in PSBs—but 1969. Successive governments, since then, touted it has moved forward a bit in that direction. The PJ Nayak rapid bank expansion as the most significant benefit of committee, in April 2014, had recommended setting up of nationalisation. And, yet, as we get ready to mark 50 years a Bank Investment Company to hold government shares, of bank nationalisation, the claims have turned out to be after repealing the Bank Nationalisation Act, the State hollow. India’s public sector banks (PSBs) are burdened Bank of India (SBI) Act and the SBI (Subsidiary Banks) with bad loans, lack in leadership, are mired in corruption, Act and bringing banks entirely under the purview of the hamstrung by red-tape and lack of operational flexibility, Companies Act. Speaking to CNBC in October, Vinod Rai, chairman and uncertain about their future. We are inducting private sector bankers from of BBB, had said: much smaller banks “Immediately our entire focus is on to manage large PSBs ensuring cleaning up and looking at mergers as the solution to PSBs’ the balance sheets with woes. The number of a view to ensure that unbanked Indians the lending process starts immediately.” remains at a high 233 million, even after the In another interview to massive push under The Economic Times the Jan Dhan Yojana in mid-October, he expressed frustration added over 125 million accounts in just two that senior management years. is reluctant to take hard decisions on What is mystifying Despite the PM’s personal interest, two gyan is that, despite the sangams, the creation of Banks Board Bureau (BBB) in recasting bad loans, prime minister’s (PM’s) February 2016 (whose mandate has been expanded despite a conducive personal interest, two a couple of times), there is still no light at the end of environment created by the government. gyan sangams to the downward spiral into which PSBs are locked “We are not making discuss banking issues, much progress and I the creation of Banks Board Bureau (BBB) in February 2016 (whose mandate don’t think we have anybody else to blame but the banks has been expanded a couple of times), there is still no light themselves,” he said. BBB, in consultation with the Reserve Bank of India at the end of the downward spiral into which PSBs are locked. In its latest effort, the government has expanded (RBI) and vigilance agencies, has set up an overseeing the role of BBB, reports The Economic Times. Now, apart committee (OC) to help banks deal with bad loans. It from helping select PSB directors and raise capital for PSBs comprises former State Bank of India chairman Janki as well as formulate their business development strategies, Ballabh and former chief vigilance commissioner Pradeep it will also advise the government on extension of tenure Kumar. Mr Rai says that bank consolidation cannot happen and termination of services of directors in State-run banks unless bad loans are cleaned up significantly. and institutions. The report further says that BBB will This move is interesting, because, just a couple of build a data bank containing information relating to the months ago, two former RBI governors were wringing performance of banks and financial institutions and help their hands over their own failure to act fast enough on them with succession planning and frame a code of ethics. the bad loan issue. In one of his many public engagements The new, improved mandate, reported on 20th October, before demitting office, Dr Raghuram Rajan had said 

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DIFFERENT STROKES SUCHETA DALAL

 that there was a need for ‘deep surgery’ to cleanse bank

a big worry. Or, maybe, BBB is making recommendations balance sheets and that the central bank should have done but the government has failed to act; there are no facts in the public domain. Moreover, Dr PJ Nayak has already the clean-up job earlier. In response, Dr D Subbarao, his predecessor, who expressed the view that, in its present form (with an RBI was then promoting his memoirs, admitted that “some deputy governor and secretary of the finance ministry on of the causes of present (banking) crisis owe to action or board), BBB is a far cry from the independent body that inaction of RBI under my watch.” Does this indicate that was envisaged in his report. responsibility for keeping a check on banks and ensuring Mr Rai, going by his record as CAG (comptroller a clean-up of their balance sheets has shifted from RBI to and auditor general of India), is capable of rising to the BBB? It would seem so; and this appears to be with the challenge of reviving PSBs; he also seems to have the ear support of RBI governor Urjit Patel. But it is not clear of the RBI governor as well as the government which if banks have got the signal as yet. Gross NPAs (non- has given him more powers. However, he will be judged performing assets) of PSBs stood at an enormous Rs4.76 by BBB’s primary mandate to ensure quick and clean lakh crore in FY15-16, compared to Rs2.67 lakh crore appointments to bank boards. in FY14-15. RBI deputy governor BBB’s expanded mandate SS Mundra put it in perspective, makes it clear that PSBs at a banking seminar on 28th will have to consult, if not September, when he said, “We report to it, on most aspects are able to talk about a driverof their management, senior less car but I think we are far appointments, succession away to talk about a leaderless planning and decision-making. bank. I think that is not going As it begins to play a more to happen tomorrow.” hands-on role in senior PSB He said, eight bank CMDs appointments, the change in would retire in 2017 and another 10 in 2018. At the power structure will become more pronounced. Clean and ED level, he said, five would merit-based appointments retire in 2017, 10 in 2018 at PSB boards, as well as and 12 in 2019. Mr Mundra posts of executive director also pleaded for a fixed, five(ED) and above will play a year tenure for bank chiefs. Vinod Rai is capable of rising to the crucial role in their potential Three days after the speech, challenge. He will be judged by BBB’s turnaround. In the past, senior mandate to ensure clean appointments to the government granted onePSB appointments were, often, bank boards. So far, BBB’s lack of urgency year extension to SBI chief Arundhati Bhattacharya on purchased by large corporate in filling up top posts is a big worry. Or, her last day in office. This houses in exchange for loans, maybe, BBB is making recommendations speaks volumes about the write-offs and restructuring but the government has failed to act government’s seriousness and for turning a blind eye on top appointments, to diversion of funds. Many PSB chairmen were appointed, despite adverse remarks accountability and succession at banks as well as BBB. Had in performance reports. BBB recommended anyone for the SBI post, or suggested This was the case with Archana Bhargava, former an extension for Ms Bhattacharya? We don’t know. BBB chairman and managing director (CMD) of United Bank has recently recommended nine names for promotion as of India, who was recently raided by the central bureau EDs of banks; we will watch how soon they are accepted. of investigation (CBI), as well as SK Jain, former CMD of You can have the best advisory board with a wide mandate, Syndicate Bank, who was arrested in 2014 for allegedly which makes effective recommendations, but unless the taking a bribe from Bhushan Steel. Government agencies government acts on them, nothing will change.  are also reportedly investigating a former SBI chairman and other senior bankers for serious violations during their tenure. Sucheta Dalal is the managing editor of Moneylife. She was Will BBB ensure a complete clean-up? It is too early to awarded the Padma Shri in 2006 for her outstanding contribution tell. So far, BBB’s lack of urgency in filling up top posts is to journalism. She can be reached at [email protected]

21 | 28 Oct-10 Nov 2016 | MONEYLIFE

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MUTUAL FUNDS POINTERS

holds, 12 (48%) are common with the stocks held by Reliance Pharma Fund. The latter holds 16 stocks in its portfolio; this means that UTI Pharma & Health Fund’s portfolio consists of 75% of stocks held by Reliance Pharma Fund. One might feel that this is fine. But what’s striking is that the total allocation to these stocks by UTI Pharma ver since they were introduced, mutual fund sector & Health Fund amounts to 77% of its total assets. Out of the 25 stocks that UTI Pharma & Health Fund schemes have been a priority for those with the ability to take risks and a clear understanding of the holds, 13 (52%) of its stocks are common with stocks prospects of the sector. No doubt, if one gets the sector’s held by SBI Pharma Fund. SBI Pharma Fund holds 20 prospects right, one can generate substantial returns—much stocks in its portfolio, which means that UTI Pharma & higher than those of the index or even an active scheme with Health Fund’s portfolio constitute 65% of stocks held by a diversified portfolio. Over the past five years, some sector SBI Pharma Fund. The total allocation to these stocks by schemes have delivered returns as high as 25%. However, UTI Pharma & Health Fund amounts to 66% of its total over the same five years, there have been schemes that have assets. On careful review, one will realise that 16 stocks or yields as low as 2%. This 64% of total stocks held by UTI Pharma & Health Fund is the main reason why it is Overlap between Reliance Pharma & UTI Pharma said that sector schemes are are in common with either Aurobindo Reliance Pharma UTI Pharma only for people who have Reliance Pharma Fund or SBI Biocon the ability to take higher Pharma Fund. Well, it is only Cadila risks and know what they a 64% of stocks in common Cipla 23% but they amount to a mindare doing. Few people have Divis 26% Dr. Reddy expertise in a certain field boggling 84% of UTI Pharma 77% Indoco 74% and are capable of taking & Health Fund’s total assets. IPCA a sector-specific exposure Remember, we are not Lupin saying that UTI Pharma to achieve higher returns. Narayana This is why sector schemes & Health Fund’s top 64% Sanofi Other Stocks Common Stocks are not very popular. stocks constitute 84% of its Sun Pharma One sector in which total assets. We are saying quite a few schemes are that 84% of its total assets available is the evergreen are invested in 64% of stocks Overlap between UTI Pharma & SBI Pharma p h a r m a s e c t o r. T h e that are common with the Alkem UTI Pharma SBI Pharma dominant schemes, larger schemes, as per AUMs. Aurobindo Cipla according to their AUMs Reliance Pharma Fund is five Divis (assets under management) times larger and SBI Pharma Indoco 22% 34% are: Reliance Pharma Fund, Fund is three times larger IPCA SBI Pharma Fund and UTI than UTI Pharma Fund. Lupin 78% 66% Narayana Pharma & Health Fund, Another doubt is whether Natco with AUMs of Rs1,565 these funds are mimicking Sanofi crore, Rs1,076 crore and each other. Reliance Pharma Strides Other Stocks Common Stocks Rs333 crore, respectively. Fund and UTI Pharma & Sun Pharma Torrent However, in addition to Health Fund have invested the large difference in the 74% and 72% of their AUMs of the various AMCs (asset management companies), respective assets in exactly the same stocks. Reliance there is a hidden untold story. Pharma Fund and SBI Pharma Fund have invested 62% A careful look at the portfolio of pharma schemes and 60% of their respective assets in exactly same stocks. reveals some striking facts. There are approximately 150 UTI Pharma & Health Fund and SBI Pharma Fund have pharma companies listed on the BSE (Bombay Stock invested 66% and 78% of their respective assets in exactly Exchange). Out of these only, 16, 20 and 25 stocks are same stocks. present in the portfolios of Reliance Pharma Fund, SBI The options available in sector schemes are very limited Pharma Fund and UTI Pharma & Health Fund, respectively. and taking a diversified exposure via the mutual fund route Out of the 25 stocks that UTI Pharma & Health Fund may be difficult. — Mitul Patel 

Gimmick of the Pharma Mimic

E

MONEYLIFE | 28 Oct-10 Nov 2016 | 22

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MUTUAL FUNDS FUND FACTS

Hot and Cold Stocks of Mutual Funds in September 2016 In September mutual funds bought Rs488.35 crore of Castrol India and sold Rs510.39 crore of Axis Bank. Reliance Equity Opportunities Fund purchased shares of Castrol India worth Rs113.41 crore while 44 schemes sold shares of Axis. Funds preferred Motherson Sumi Systems, Wipro and Tech Mahindra. ICICI Prudential Value Discovery bought Wipro shares worth Rs259.73 crore and Franklin India Bluechip Fund sold Infosys shares worth Rs79.77 crore. Top Bought Companies Company Name

Top Sold Companies Value (Rs Crore)

Company Name

Value (Rs Crore)

Castrol India

488.35

Axis Bank

(510.39)

Motherson Sumi Systems

359.79

Yes Bank

(294.72)

Wipro

349.49

Infosys

(230.22)

Kotak Mahindra Bank

309.64

Housing Development Finance Corporation

(181.20)

Mahindra & Mahindra

297.16

Cipla

(147.43)

Tata Steel

206.12

United Breweries

(134.31)

Cholamandalam Investment & Finance Co

200.45

Bharat Heavy Electricals

(125.04)

Aurobindo Pharma

187.62

Larsen & Toubro

(123.52)

Gail (India)

186.74

Crompton Greaves Consumer Electricals

(103.73)

Tech Mahindra

182.32

Tata Motors

(90.60)

HDFC Mutual Fund Beml

65.51

Maruti Suzuki India

(145.33)

Oil & Natural Gas Corpn

53.00

Bharat Petroleum Corporation

(84.83)

Dish TV India

39.75

Dhanuka Argitech

(71.06)

Yes Bank

37.34

Bharti Airtel

(68.31)

Cognizant Technology Solutions Corp

34.37

HDFC Bank

(57.33)

ICICI Prudential Mutual Fund Maruti Suzuki India

418.54

Cipla

(87.15)

Wipro

315.50

Punjab National Bank

(81.37)

Hindustan Unilever

154.75

UPL

(79.64)

Tech Mahindra

151.69

Oil India

(55.07)

Castrol India

141.76

Reliance Industries

(52.33)

Castrol India

225.85

Axis Bank

(188.60)

Reliance Industries

209.86

ICICI Bank

(105.27)

Reliance Mutual Fund

Tata Consultancy Services

71.17

Bharat Heavy Electricals

(96.99)

Nava Bharat Ventures

70.92

HDFC Bank

(79.64)

Mahindra & Mahindra

42.64

Jagran Prakashan

(76.87)

Franklin Templeton Mutual Fund Coal India

131.16

Infosys

(105.67)

Bharti Airtel

119.78

Housing Development Finance Corporation

(86.77)

Gail (India)

96.71

Axis Bank

(74.36)

Mahindra & Mahindra

61.42

Amara Raja Batteries

(73.42)

Lupin

58.88

Yes Bank

(68.97)

23 | 28 Oct-10 Nov 2016 | MONEYLIFE

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SMART MONEY R BALAKRISHNAN

15 Telltale Signs of Stocks that May Give You Trouble

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apital markets are an enabler of wealth creation for investors and businessmen. Better and better financial performance of a listed stock ensures that the stock price go up and everyone is, generally, smiling. However, this often leads to companies’ numbers getting manipulated. Manipulation can be done by any of the persons involved. It need not be only the promoter. It could be a member of the management team or even one individual whose personal goals override ethical and legal concerns. Today, when a fraud is discovered, the erosion in share prices is dramatic. We have seen instances of price collapse in stocks like Satyam, Financial Technologies, KS Oils, etc. There are cases where the story does not sustain (you can assign whatever reasons you want) like Bartronics, Suzlon, Opto Circuits, and stock prices slowly disintegrated. Large investors just dump these stocks and life goes on. From time to time, they try and resurface like the phoenix, but it is very rare for them to actually make a comeback. In many cases, the blind run-up in stock prices starts because the story is spun like a yarn and the investor simply does not do his homework well. Any investor would have stayed away from stocks like Bartronics or Suzlon, if he had subjected the annual reports to analysis. It would have raised too many questions and concerns. Sometimes, it seems to me that the world is too forgiving. Wrongdoing is permitted so long as it does not personally touch someone. Institutional investors talk ‘corporate’ governance, but that does not impact their investment strategy or choices, in any way. For instance, recently, we heard of a company called Welspun losing some of its prime customers because a customer found that what he got was not what he thought he was buying.

Well, the stock did ‘correct’, but nothing earth-shaking. The biggest dilemma that faces us when a fraud is discovered is about what to do with the stock. Should we sell out immediately? We sell out and then find that the stock price is staging a gradual recovery. Or we do not sell out and then the prices keep falling further. How to resolve this? Here, I suggest one acid test. Check the promoter holding. If it is more than 50%, the chances are that the company will come out of the ditch. Either it becomes a target for takeover or the promoter’s attitude changes, over time. The other test is to see if the company is in a business which impacts a lot of others as a chain effect. For instance, the government will not let a bank fail due to social reasons. A company like Satyam, of course, defies logic. Yes, it did have a good business. But an engineered rescue meant that there were some big stakeholders who would have been impacted had Satyam been allowed to find its own path. Frauds would be highest in the finance sector. A bank or a finance company borrows money or uses someone else’s money to lend at a profit. When it comes to borrowing, the best credit is the one that does not need money. So, as lending increases, the risk profile certainly increases. Managing risk is not easy, given that there are so many facets involved. There is enough vulnerability to encourage frauds. And accounting systems always give choices, more so when it comes to banking and finance. This sector is the toughest to evaluate. So how does one keep one’s investments free from risks of fraud? This is where knowledge of the promoter becomes important. Understanding every first-generation entrepreneur is a challenge, since there is nothing to fall back on. The best of colleges do not guarantee integrity 

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SMART MONEY R BALAKRISHNAN

 as an attribute of those who pass out of their portals.

Human greed is vastly underestimated. Of course, not everyone can figure out the promoter or what or who he is. And the ‘sell’ side is very careful. In no research report will they talk about the promoter, his background or publish any views about him. Media or journalists also avoid all mention, due to commercial considerations. Based on my experience, I take it that every company has this risk. An ethical fellow can turn unethical; but the reverse is not usually true. So, until proven otherwise, it is better to remain a sceptic. Some will say that they would prefer to avoid dealing with ‘promoter-driven’ companies and opt for ‘professional’ management-led companies. The risks, to my mind, are as high, if not higher, in these rudderless ships. The management team will vote itself fancy salaries and stock options. And, once they get trapped in the stock options, every action starts getting driven by the stock price. And, very often, the wrong route is easier than the right one. I generally keep away from a stock, if there are issues like: 1 Promoter holding below 30%; 2. Continuous diversifications or acquisitions; 3. Professional managed with no owner and high ESOPs; 4. Accounting policies that are aggressive; 5. Lack of free cash flow; 6. Huge divergence from industry trend; 7. Rising debt levels; 8. Rising level of ‘other loans and advances’; 9. Rising level of inventory and debtors; 10. Too many subsidiaries and associates; 11. High level of pledging of promoter shares; 12. Low level of income-tax payments; 13. Margin changes that seem too good to be true; 14. Frequent visits to capital markets—a true red signal; 15. Third-generation family and multiple successors.

Apart from these, I, of course, stay away from a sector or business I do not understand. These are but some obvious ones. More important, using a hurdle of Return on capital employed (RoCE) and RoE generally helps weed out most stocks. And accounting analysis should take care of most. Of course, no one is immune to a structured fraud. Enron was one which had many victims; but there were sharp analysts who sounded the bugle. They were laughed off. However, there is no excuse if you let your guard down. We are even seeing a multinational company Ricoh caught in accounting fraud. There were enough warning signals; but no one worried about it. Companies postponing accounts adoption meetings, changing the financial yearend, etc, are alarm bells. In general, when a ‘fraud’ attack happens on any share you hold, do not act in a hurry. If it is a manufacturing unit with good products, there is value left in the company. It could have a size or a brand which could have salvage value. The bad ones will be the small ones, tech companies or commodity companies. Remember, institutional investors tend to act as a herd. And they do not care much about ethics. They will evaluate if the company has a future, if the management is changed. If yes, they generally will stay put. Some of them will wait for the bad news to blow over and then exit when the price recovers. As the saying goes, ‘prevention is better than cure’. This would mean that you avoid too much commitment in a single stock, unless you know for sure that there is no promoter risk of diddling the shareholders. At some point in time, I will try and take up some companies where there was wealth erosion due to fraud and whether there were any warning signals. I, generally, find that ownership quality holds the key.  The author can be reached at [email protected]

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

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25 | 28 Oct-10 Nov 2016 | MONEYLIFE

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29-07-2016 16:42:29

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

Get Rewarded for Being Physically Active

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igna TTK Health “Get ProActiv India” is a programme designed to encourage and reward people who are physically active as measured activity can go a long way in

app can keep a daily log of your activities. The more you workout, the higher the reward points on the app. Is excess workout good for you? At the end of the year, you can use the points to pay less for your policy or use them towards availing other health benefits like pharmacy bills or doctors’ consultations. It is easy to track walking activity which can get automatically updated on the app. But, non-track-able activities like yoga, aerobics and dance will have to be manually entered by the policyholder. Is it just a marketing gimmick? It is unclear how the insurer can trust the policyholders manually entered data.

Re gulations

improving one’s health. The policyholders of Cigna TTK health products get rewarded for being fit. The insurer wants to encourage people to get physically active, as a lifestyle. Cigna TTK policyholders can register any time during the policy period. Customers have to download the “Get ProActiv” application and register the required details (such as customer ID, policy details). The application can sync with fitness wearable from Fitbit, Garmin or pedometers. The mobile

MVA To Cap TP Liability at Rs10 Lakh for Accident Cases?

A

proposal to amend the Motor Vehicles Act (MVA) aims to cap the third-party (TP) liability at Rs10 lakh in accident cases. At present, there is no cap on the insurer’s liability. It will be unfortunate if such a cap is legalised. It will certainly augur well for general insurance companies but at the cost of fair compensation for accident victims. Road accident victims may

lose their lives or end up with disability. While physical abilities are irreplaceable, financial compensation can alleviate the victims’ problems. Today, sky is the limit for the award that Motor Accident Claims Tribunal (MACT) can bestow. If there is proper justification, delay in claims filing is also pardoned. Road accident victims, thus, have a chance of reducing the extent of their misfortune.

MVA, 1988 is considered a strict law by the insurance companies. Insurance is a contract between the insurer and the insured. There is no privity of contract between the insurer and a third-party who suffers in an accident. The law gives the insurance company a limited right to defend against a third-party. In 99% of cases, the insurer will not be able to recover the money from the insured. While fixing an upper limit is a bad move for consumers, there is a silver lining. It is a positive if Rs10 lakh is provided as fixed compensation in all the cases. Today, a number of low incomegroup people suffer in accidents. Based on their income group and age, many MACT judgements have awarded an amount below Rs10 lakh as compensation for death and grievous injuries, with the average payout per TP claim being less than Rs5.5 lakh. Providing a fixed 

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INSURANCE TRENDS

 benefit of Rs10 lakh will ensure

that the poor are assured of this amount. Those who are well-off have other insurance policies too and are well-protected.

L i f e I ns u r anc e

Aegon Life Insurance Re-launches ‘iTerm’

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egon Life Insurance has re-launched its competitive online term product ‘iTerm’. The new features include the following: • Added life stage benefit for customers, wherein one can increase one’s protection cover as per the important milestones in life. • Premium can now be paid on

Fine Print SBI Life Penalised Rs10 Lakh

I

nsurance Regulatory and Development Authority of India (IRDAI) has imposed a

a monthly, half-yearly and annually unlike previously, when the customer was required to make annual payments. • The maximum maturity age has been raised to 80 years, raising the maximum policy term to 62 years. • The product now also offers flexibility to choose death benefit payout: as a lump-sum payment, as fixed monthly income for 100 months or as a combination. iTerm product features include the following:

policies after expiry of licence for which Rs5 lakh penalty was levied. Another penalty of Rs5 lakh was imposed for violation of the provisions of the regulation on accepting the business from unauthorised persons.

United India Still Strict with 24 Hours Intimation Rule?

U

penalty of Rs10 lakh on SBI Life Insurance Company for violations of various norms, including guidelines on accepting business from a corporate agent after the expiry of licence. The inspection report of the corporate agent Bonanza Assurance Advisors indicated that it had sold 621

nited India Insurance retail health insurance policyholders are required to intimate the insurer/TPA within 24 hours of hospitalisation. In the past, they used to reject claims if the intimation was not within this ridiculously strict time-limit. IRDAI had to issue a circular to life and non-life companies asking them not to reject claims on technical grounds like a delay in filing. But a recent decision by Thane District Consumer Redressal

•

•

Entry age for a customer is a minimum of 18 years and a maximum of 65 years with a minimum policy term of five years and a maximum of 62 years. • Inbuilt terminal illness benefit. • Option of additional optional coverage (riders) against accidental death, critical illness, women specific critical illnesses, and disability. • Lower premium rates for women and nonsmokers. Total sum assured: minimum Rs25 lakh and no maximum limit, subject to underwriting. 

Forum shows that this issue is very much alive and can hit you at any time if you are a United India customer. The Forum ordered United India Insurance and Medsave Healthcare (TPA) to pay Rs1.54 lakh to a Bhiwandi resident for the hospitalisation bill. The Forum rapped the insurer for its harsh decision of claims denial for timeline violation. It observed that it was difficult to expect that the relatives and friends of a patient will be able to meet the 24-hour intimation deadline when they may be busy with the policyholders’ hospitalisation needs. The Forum ordered United India to pay the claim with 6% interest as additional compensation. It is surprising that IRDAI has left the consumers to fend for themselves on a case-by-case basis. 

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THE BIG LOOT! Group Policy Rs7,200

Retail Policy Rs30,000 Six years after getting a rap from CAG, government insurers are still underwriting loss-making group policies. Raj Pradhan finds that rich communities are given group cover at throwaway prices. Ultimately, we, who are not part is such privileged groups, are paying a higher premium. Does IRDAI care?

I

n September 2014, Jain International Organisation (JIO) got a group policy underwritten by National Insurance. The premium of Rs7,200 was a throwaway price for a family floater policy of Rs5 lakh covering the proposer, spouse, two dependent children and two parents up to the age of 80 years. The comparable premium for retail policyholders was Rs30,000 or so. Six years ago, the Comptroller and Auditor General (CAG) had rapped health insurance companies for massive losses on group insurance, thanks to underwriting such policies. It made no impact. Nothing has changed. Such policies continue to be underwritten. The race to the bottom for government insurer underwritten

MONEYLIFE | 28 Oct-10 Nov 2016 | 30

group policy continues. The regulator had issued norms for higher solvency levels for health insurance due to high claims. Despite higher solvency requirement, government insurers are still offering ‘cheap’ premiums. Is it sustainable? Does it make any sense to underwrite policies at throwaway premiums? What are the implications? Moneylife had published a couple of articles on the JIO deal one of which one was titled “Health Insurance: Group Insurance for Jains with Taxpayers’ Money?” With the incurred claims ratio (ICR) of 300% in a year, Moneylife stands vindicated for questioning the pricing of that policy which no other media dared to ask. Did National Insurance sack any employee or 

COVER STORY

Our estimate is that government insurers may have group business ICR of 115%-120% while private insurers’ ICR could be 100%-110%. However, we have seen some tightening in the past few months which should help reduce losses in group businesses Arvind Laddha, deputy CEO, JLT Independent Insurance Brokers

 did Insurance Regulatory and Development Authority

of India (IRDAI) take any action against National Insurance for underwriting at such a throwaway price? Unlikely; but it is certain that taxpayers’ money was wasted by the government insurance company insuring a rich community at a ridiculously low premium. The latest group cover on a ridiculous premium—of Rs5,550 for Rs5 lakh cover—comes from United India for another rich group Mumbai Diamond Merchants’ Association (MDMA). It means that the offer is 23% lower premium than the JIO policy which suffered 300% ICR in one year. The question United India should ask itself is whether it will breach the ICR of 300% after one year? Why is a rich group offered a policy at a rate which is totally unjustified? Is United India too desperate to acquire loss-making business? There are several flaws with such group cover. First, there is no age-based premium. It means that even for a senior citizen the premium is same as it is for the young. Retail mediclaim premium is based on age. There is also no medical test; hence, anyone who is a part of the group is, by default, eligible to buy cover without undergoing tests. So, why are retail mediclaim buyers denied cover under the garb of ‘right to underwrite’ when group cover is easily given even to old and those in poor health? Second, there are high chances of adverse selection, as the insurer does not, by default, get business from every member of the organisation/association. A member has to agree to join the plan by paying the premium. So, there is a good chance the young and healthy members of the group may not buy it while the old, or those with preexisting diseases (PED), will quickly buy it. The insurer may not get good mix of customers which is possible for corporate cover which includes all employees. Third, covering PED from the first day and have no waiting periods for specific procedures means that those with PED have a bonanza with claims for PED or any pending procedure being paid immediately. So, any rich diamond merchant, who has parents requiring expensive procedure worth lakhs of rupees, has only to pay peanuts (Rs5,550 premium) for MDMA group policy and get

it done. United India is serving the rich community at taxpayers’ money. Fourth, some group policies, like that for Mumbai Press Club, even have maternity cover without a waiting period. The insurer can expect claims for sure. No wonder, Mumbai Press Club policy had ICR of 200% after one year. The insurer raised premium by just 42% in the second policy year. History repeats itself and the insurer is willing to take more losses. Some government group insurance schemes can be loss-making; but these are meant for the poorer sections. While the insurance company should not be lax in underwriting these policies, it may not be chastised for making mistakes here. There have been cases of poor people have died waiting for government schemes to cover them. It means they really did not have the money to do the procedure. If such a government scheme is making losses, we can consider the write-off as service to the needy. But giving a rich community a super deal in group insurance is a looting of the government by its own insurance companies. Also, to cover up its losses, insurers start overcharging us, the retail consumers.

Government Insurers with Massive ICR Ready for IPO? One estimate puts government insurers, bleeding with group health insurance portfolio, having ICR of 120%150%. According to Arvind Laddha, deputy CEO, JLT Independent Insurance Brokers, “Typically, corporate policies do not have negative selection as everyone is covered by the employer. These policies are better off than community based group policies which are based on subscription by group members. Our estimate is that government insurers may have group business ICR of 115%-120% while private insurers’ ICR could be 100110%. However, we have seen some tightening in the past few months that should help reduce losses in group business which some insurers may have in pursuit of achieving top-line growth.” Overall health insurance (group + retail) ICR for government insurers for 2014-15 has been an average of 

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COVER STORY

ICR for Health Insurance 2014-15 Insurance Company

Net Earned Premium (Rs in lakh)

Claims Incurred (Rs in lakh)

Incurred Claims Ratio (ICR for 2014-15)

National Insurance

3,32,965

3,66,344

110.02%

New India Assurance

3,68,785

3,64,302

98.78%

Oriental Insurance

2,00,410

2,34,517

117.02%

United Insurance

2,99,246

3,56,057

118.98%

12,01,406

13,21,220

109.97%

Total for Private Insurers

4,61,566

365414

79.17%

Total for Stand-alone Insurers

2,14,944

1,33,663

62.18%

Total for Government Insurers

Government insurers with high ICR when compared to private and stand-alone insurers

 110%; ICR for private insurers has been less than 100%

for most while for stand-alone health insurers’ ICR have been less than 65%. Retail policyholders are better for insurers; yet, government insurers are chasing group business. Insurers even keep bidding against each other to acquire such business. We wonder why would anyone underwrite lossmaking business at ridiculous rates unless there are some vested interests and corruption? Middlemen who help the community make a deal with the insurance company earn handsome profits. There have been cases of insurers undercutting their own previous year premium, despite the ICR being over 100%! Does that sound logical? Are they waiting for a miracle to happen in the second year, when, for us, they are quick to revise rates, based on previous year’s overall claim experience? IRDAI has been

talking about ensuring group health policies are not lossmaking, but the wrong practice continues unabated. So aggressive are group insurance quotes that many Indian corporates prefer to buy insurance from public sector providers rather than from their own group’s insurance company. Clients usually go with the lowest quote. Due to the existing scenario, several private insurers are less keen on group business or underwrite it on their own terms and pricing. Private insurers are turning their back on group cover as they have faced higher claims and, hence, learnt their lesson. Moneylife contacted eight private insurers and a couple of government insurers, to get their views on group health insurance. Strangely, only one of them responded. It means that even private insurers do not want to share their data on ICR for group health insurance, whether they plan to increase/decrease group business, issues with group health business and whether government insurers are still getting business by offering ridiculously low rates. That private insurers chose to keep mum, tells us a lot about the current practices, though this Cover Story will help private insurers who are doing better than government insurers. According to Mukesh Kumar, ED, HDFC ERGO General, “Pricing in group health has become tough and in turn a challenge in acquiring good and long sustainable group health business. Lack of treatment protocol in India leading to over utilization of resources, data quality issues leading to incorrect pricing, medical inflation, soft market are the main issues.” It is not enough for insurers to report net profits due to investment income earned from their reserves; underwriting losses shows the real picture. Only one general insurer is making underwriting profits; 21 out of 22 non-life insurers are incurring underwriting losses. So, why are group covers still underwritten? Insurers are relying on investment profits to show net profits, but it is time they focused on underwriting profits. Investment income is subject to market risks. Government has instructed these companies—New India Assurance, United India Assurance, National 

Pricing in group health has become tough. It is a challenge in acquiring good and long sustainable group health business. Lack of treatment protocol and data quality issues are leading to incorrect pricing Mukesh Kumar, ED, HDFC ERGO General Insurance

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COVER STORY

General Insurers Making Losses Insurer

FY15-16 Profit (Rs crore)

Combined Operating Ratio (%)

Bajaj Allianz

544

99

ICICI Lombard

507

107

New India Assurance

829

119

United India

221

120

Oriental Insurance

300

124

National Insurance

149

138

Only one insurer with underwriting profits

 Insurance Company, Oriental Insurance Company and

GIC Re to move a board resolution to list their companies on the stock exchanges. Instead of solving the issue, IRDAI is busy getting government general insurers to go public with the hope that listing might help improve underwriting discipline in companies. Mr Kumar adds, “While government insurers had the early entry advantage in the business, private players have also made significant inroads in this domain in the last ten years or so. As the market for group health insurance matures, we are competing on better products and quality of service.”

Rich or Powerful Groups Paying a Low Premium All sorts of groups are availing group cover at a throwaway price. If they are not rich, like JIO or MDMA, they are powerful like the Press Club in Mumbai, Bar Association and group cover for bureaucrats. Here are the various features that usually come with group cover: • No medical tests for underwriting; • PED coverage from day one; • Waiting period of 30 days waived; • Waiting period for specific procedures (usually one to 4 years) waived; • 30 days pre- and 60 days post-hospitalisation expenses covered; • Day-care procedure covered; • Disease/ailment capping—not applicable; • Higher room rent sub-limit; • Higher procedure sub-limit; • Relaxed claims intimation; • Relaxed claim documents submission; • Maternity benefit; • Day one baby cover; • Cashless facility; • Personal accident cover; • Porting option. According to an insurance industry expert, “It’s not

that insurance officials don’t understand. These are sane, rational officials who understand everything. They know that ICR will cross 100%, but still want business for the top-line business. Getting Rs10 crore premium to improve the top-line quickly is far easier for them than selling thousands of retail policies. There are many honest officials underwriting group policies, but there could be a few with vested interests having blessings of people in the know. It is unclear if the vigilance departments are seriously looking at it in the right spirit or just going by the rule book. IRDAI had issued norms for higher solvency levels for health insurance, but high ICR defeats it.” Take a look at some of the group policies.

Mumbai Diamond Merchants’ Association (MDMA) Employees and members of MDMA are offered group insurance policy from United India. The premium is an unbelievable Rs5,550 (that too inclusive of service taxes) for Rs5 lakh cover for self + any three family members (including parents up to age 80 years). Product benefits: 1. Pre-existing diseases (PED) are covered from day one; 2. 30 Days waiting period waived; 3. 1st, 2nd, 3rd, 4th year exclusion for special diseases waived; 3. 30 days pre- and 60 days post-hospitalisation expenses; 4. Day-care procedure covered; 5. Disease/ailment capping—not applicable; 6. Congenital internal diseases—covered; 7. Doctor’s charges and medical expenses capped on total bill—waived; 8. ABC clause. 25%, 25% and 50% capping on room rent—waived; 9. Per day 1% of sum insured on normal room rent capping and 4% of sum insured on ICU; 10. No waiting period; 11. Cashless facility covered; 12. Claims intimation—within 7 days from date of admission; 

Mumbai Diamond Merchants’ Association Cover Premium Sum Insured

Premium

Rs1 lakh

Rs1,200

Rs2 lakh

Rs2,230

Rs3 lakh

Rs3,340

Rs5 lakh

Rs5,550

Premium for self + any three family members (including parents up to age 80 years). Premium is inclusive of service taxes

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COVER STORY

Government Schemes—Leakages and Losses

T

he The Maharashtra government’s Rajiv Gandhi Jeevandayee Arogya Yojana (RGJAY), launched in July 2012, provides health insurance cover up to Rs1.5 lakh for families earning less than Rs1 lakh per year. The Scheme is meant for people below poverty line (BPL) families (yellow cardholders) and above poverty line (APL) (orange cardholders). A study conducted by the Tata Institute of Social Science (TISS) points to an unusually high level of leakages in the system. Nearly half of the people who have benefited from the Rajiv Gandhi Jeevandayee Arogya Yojana are not eligible. Private hospitals are charging for services that are already covered under the Scheme. Questions are also being raised about inefficiencies of the insurer or thirdparty administrators (TPAs). All this at taxpayers’ cost! The loss from different stakeholders—like false beneficiaries, hospitals, insurers and TPAs—is funded by taxpayers. This shows how another ambitious project

for the poor does not actually help the poor. The TISS study clearly indicates that poorer the beneficiary, the greater is the level of difficulty for availing benefits. Here are the main conclusions of the TISS study: 1. Arogyamitra should be at the hospital to help the beneficiaries about the amount approved, inclusions they are entitled to and protocols regarding registering complaints. 2. The analysis revealed that almost half of the RGJAY beneficiaries are actually from the non-eligible category with family income higher than Rs1 lakh per annum. 3. Out-of-pocket (OOP) expenses seem to be more than just OOPs moment for the RGJAY. Hospitals made beneficiaries pay for services like diagnostic tests, medications, and consumables, even when it was covered under the Scheme. A notable finding was that the mean OOP spending in private hospitals was more than twice that compared with public hospitals. 

 13. Claim documents submission—within 30 days from

Rs8,500 for family cover of Rs3 lakh cover, irrespective of age. The premium includes personal accident cover of Rs3 lakh for the member too. Just like MDMA, there is bound to be some adverse selection. There are chances that those in poor health, self or family, will be the quick to join. After all, getting into the group policy is much easier than buying retail policy. The insurer may assume that most of the Mumbai Press Club members will join it and not just those who have health issues. But are they really getting a good mix of healthy people too? What does the ICR say about the premium collected in the first policy year? In the first year, about Rs33 lakh have been claimed against the collection of Rs17 lakh under the Press Club Mediclaim policy. So, it means New India Assurance got a reward of nearly 200% ICR! Yet, it did not learn a lesson. The premium for the second policy year went up from Rs6,000 to Rs8,500 (only 42% increase), even though the claims ratio is nearly 200%. Will the insurer suffer more punches for the current policy too? A Mumbai Press Club communication to its members 

date of discharge. For retail policyholders, United India insists that the policyholder has to intimate within 24 hours of hospitalisation. United India has routinely rejected claims for this technical violation. For MDMA, it has given a relaxed timeframe of seven days. Claim documents must be submitted within seven days of discharge for retail customer while it is 30 days for MDMA group. Is it that United India feels that retail customers are more prone to cheating and, hence, shorter time-limit for them? United India used to reject claims mechanically based on delay in hospitalisation intimation and claims filing. IRDAI had to issue a circular to life and non-life companies asking them not to reject claims on technical grounds like a delay in filing.

Mumbai Press Club New India Assurance offers a coverage for Mumbai Press Club members, spouse and up to three dependent children. The policy covers PED, maternity benefit, no waiting period for procedures for a low premium of

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COVER STORY

 4. The most predominant reasons cited for paying for

services in private hospitals were “procedure was not covered under RGJAY,” (30%) followed by “lack of  knowledge” (18%). The other reasons were paying for food, “non-cooperation from hospital staff,” and “lack of time to complete the necessary paperwork.” 5. Those who cited “lack of information” as the reason for paying for services in public hospitals were the highest (33%), followed by “unavailability of time to complete all the necessary paperwork” to avail the services (19%). 6. Difficulty in reaching the poor is also as expected. According to the data provided by the food and civil supplies department of Maharashtra, of the total eligible families in Mumbai, 99.22% are orange ration cardholders (annual income between Rs15,000 and Rs1 lakh), 0.28% (annual income less than Rs15,000) are yellow ration cardholders. 7. For the year 2014-2015, according to the RGJAY, premium was paid for 21.9 million households. In other words, 85% of the population is currently covered by the Scheme. Punjab Government’s Health Schemes Punjab Government Employees and Pensioners’ Health Insurance Scheme (PGEPHIS) covered by Oriental Insurance is already in trouble on account of huge losses. It was supposed to offer cashless treatment in

 says it all. “After negotiating long and hard, this year too

we have inked a super-duper Health Insurance Scheme with the State owned New India Assurance Company for all ‘Ordinary’ Members of Press Club, but slightly higher premium compared to last year to adjust the increased service and other taxes and also to adjust nearly 100% higher claims. However, the premium under this scheme is nearly 50% cheaper than market rate for a family of three.”

350 hospitals. According to media reports, the insurer has now told the state health department that it will not be able to continue offering services on account of huge losses. It has refused to enrol new beneficiaries after 30th April though the state Cabinet had extended the date of enrolment of leftover cases from 30th April to 30th June. There are 3,500 employees and pensioners who have been refused enrolment. Apparently, the insurance company has now even started refusing payment to the hospitals. Clearly, Oriental had completely miscalculated the terms of the deal, offering too much for too little premium. Another scheme, Pooran Singh Sehat Bima Yojana, to ensure cashless health insurance cover up to Rs50,000 for all 2.8 million blue cardholder families enrolled under Atta-Dal Scheme is also headed in same direction. The coverage under the Scheme had been increased from Rs30,000 to Rs50,000 and compensation up to Rs5 lakh is given in case of accidental death and disability. United India Insurance has failed in timely reimbursement of the expenses to government hospitals. The hospitals are having difficult time in keeping the Scheme active. The charges reimbursed by the insurer for various treatments, investigations and surgical procedures are also too low. Clearly, the government insurers have completely miscalculated the terms of the contract and, hence, unable to make payments against the agreed premium.

pay, maternity benefit covered with nine months’ waiting period, all congenital diseases covered, high sub-limits for different surgeries, and so on. Retail policyholders do not have such privileges. Several pre-existing conditions, like cataract, arthritis, hernia, etc, are covered under the programme from the very first day. Moreover, JIO has added group personal accident policy to sweeten the deal. National Insurance is now out of the picture; in comes ICICI Lombard for providing JIO Shravak Arogyam 

Jain International Organisation: A rich community, which put 300% ICR for governmentowned National Insurance, has fleeced the taxpayers. National Insurance is no longer covering the community in the second policy year. It means that themassive losses incurred in the first year can never be recovered by National Insurance. Read - http://tinyurl.com/z47k6w4 JIO’s was offered incredible benefits like pre-existing diseases (PED) cover from the first day, no medical check-up, newborn covered from first day, cashless facility at 3,500+ network hospitals, entry up to 80 years of age, stem-cell transplantation covered with 50% co-

Mumbai Press Club Cover Premium Type

Premium (Rs)

Base Cover for Rs3 lakh

8,500

Base + Rs5 lakh Top-up

14,000

Base + Rs10 lakh Top-up

16,500

Only Top-up of Rs5 lakh

5,500

Only Top-up of Rs10 lakh

8,000

Premium inclusive of all taxes

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COVER STORY

Mumbai Press Club group cover features Persons Covered

Member, spouse and not exceeding 3 dependent children

Sum Insured

Rs3 lakh on floater basis

Coverage

Medical expenses for hospitalisation as per the terms of group health policy. Detailed terms and conditions will be provided

Room Rent Limit

Rs4,000 per day and for ICU Rs6,000 per day.

Deduction for Occupancy in Rooms Having Room Rents Higher than the Limit

Entire admissible claim would be paid in the proportion that the eligible room rent bears to the occupied room rent.

Maternity Benefit

Rs35,000 for normal delivery and Rs50,000 for caesarean. Pre- and post-natal expenses will also be covered, provided they are within the maternity limits.

Pre-existing Disease Covered

Yes

Period of Insurance

From 10.05.2016 to 09.05.2017

Day one Baby Cover

Yes, within the floater sum insured

Personal Accident Cover

Rs3 lakh. Cover is only for members and not for other insured persons.

Second policy year

 Phase–3 group mediclaim. ICICI Lombard’s premium for

family floater (of 1+5 persons), with sum insured of Rs5 lakh, is Rs17,060. The premium has more than doubled. Time will tell if the pricing is right and if any issues with claims settlement arise. Anoop Verma, associate director Alliance Insurance Brokers, says, “The policy operated at an ICR of 300% which clearly shows that it wasn't underwritten with due precautions considering this large group and the price corrections happened accordingly in the renewal.” He, rightly, dubs the policy as a deal not possible in any retail policy.

Bar Association Here is an email from a Moneylife reader. “I am an advocate in Delhi and member of several advocate Bar Associations. Now, some of the Bar Associations have tied up with insurance companies, such as New India Assurance, and are providing health insurance facility on a group basis to their members (means those who pay annual subscription). Normally, it is Rs3 lakh and Rs5 lakh cover for individual and his spouse and two kids. Premium is Rs7,000 and Rs13,000, respectively, for Rs3 lakh and Rs5 lakh cover, respectively. There is additional premium for covering parents. Do you think

these types of special health insurance schemes are good for professionals? I have seen there is one scheme for company secretary too.”

Do You Really Need Retail Mediclaim? Where are the losses of such group mediclaim dumped? Retail mediclaim is much more expensive than group mediclaim. Retail is still the popular, or the only, option for a common man; but looking at the features of group policies one wonders why should one remain with a retail policy? If you can get your employer to offer group cover, you should take it. If it can cover your parents, it is even better. That itself is worth a few lakhs of rupees, especially if parents are in need for a medical procedure. So, if your employer offers free cover, you need to jump at it. If you don’t have such a cover, you can try to get into a group cover at inexpensive premium. If the group cover is as expensive as retail product, it is not worth it, especially for the young and healthy. Health Insurance Regulations (HIR) 2016 allow insurance companies to give group cover to only seven members. The main purpose for forming a group should not be for insurance. But,there will be many ways to form a group for reasons other than insurance. It is fine to have employer cover and genuine group insurance but we don’t have good opinion about many other group products which may not be true group products. Getting into group cover can be a risky affair with chances of both premium escalation and even product discontinuation. There are also chances of claims rejection especially if the insurer is bleeding with high ICR. In short, both, government and private insurers can play a hardball when it comes to paying claims. Oriental Insurance had earlier worked with Karvat Group. The Karvat Group and Australia based CoverMore have formed a strategic partnership in India. A group product was provided, which Karvat Group was selling to its members. That product has been withdrawn and the insured have had lots of problems. It seems Karvat Cover-More Assist Pvt Ltd has now tied up with United India. If the group claims ratio is high, United India may just withdraw the product. These policies run until the insurer gives up after incurring losses. Buyers beware. The default option for anyone desperately wanting to buy group cover is bank mediclaim. There may be no medical tests and, hence, underwriting is purely based on self-declaration. Read our cover story - http://tinyurl. com/gs5t292 National Insurance discontinued mediclaim offered through banks. It forced the policyholders to move to 

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COVER STORY

 their retail product. It means that the future of such

schemes is uncertain. Insurers expect a high volume of business to negate any pressure on claims. If the claims ratio is not favourable, they may discontinue and force policyholders to move to a retail product. A Moneylife reader recently wrote, “I and my spouse both have retired voluntarily from a public sector bank after opting for VRS. We were both covered under the group medical insurance policy issued by United India Insurance to IBA’s (Indian Banks Association’s) member banks, for Rs4 lakh each, up to 31 October 2016. The premium for the said policy was Rs7,854 last year. This year, the premium quoted by the United India for a Rs4 lakh policy is Rs16,025 including service tax. If the domiciliary expenses are also covered, then the premium will be Rs20,010.” This case clearly shows that group policies run until they cannot run any more without a drastic increase in premium. Even worse, the product may be discontinued. Retail mediclaim is still preferred by those who don’t want to take chances of issues with group cover. Retail mediclaim offers lifelong renewal which gives us peace of mind. But what do retail customers get in return? Premium which keeps escalating; policy terms which keep changing at the time of renewal; government insurers offer cashless at a few hospitals even though group policyholders get cashless at more hospitals, retail customers have to comply with stringent timelines for hospitalisation intimation and claims submission. Retail policies, under the garb of ‘right to underwrite’ are rejected, while group covers are happily offered to the same people who have PEDs. Group mediclaim is an option, but is not as good as retail product. It is always better to pay a cheque directly to the insurer which does not happen for a group cover where the group administrator pays. You want to ensure policyholders’ rights are strong which is possible when you pay directly to the insurer.

Safeguard with Porting Option So, if you are ready to plunge into group cover, you need to safeguard yourself. It is fraught with possible discontinuation of the policy by the insurer. Even bank mediclaim products have been discontinued. However, the saving grace was that portability was offered to retail products of the insurer. But do not rely on it to happen for all group products. If your group cover is not a mainstream product, the insurer may just not offer portability. The issue that can happen with Karvatrelated group product is that regulator may not take it seriously to force the insurer to port the policyholder to same insurer’s retail product. This is due to lack of

visibility as they are not mainstream products. If you have a group cover, you should safeguard yourself by confirming if the group cover insurer will allow you to port to its retail product. Check the master group policy document for the portability feature. Be ready for a fight. Health Insurance Regulations state: “Individual members, including the family members covered under any group health insurance policy of a general insurer or health insurer shall have the right to migrate from such a group policy to an individual health insurance policy or a family floater policy with the same insurer. Thereafter, he/she shall be accorded the right to port to another insurer (subject to underwriting).” So, technically you can port from group to retail mediclaim of same insurer. The feature is available according to the health insurance regulations. Porting will help to avoid any waiting periods. Porting feature is important as retail product is the only one which guarantees lifelong renewal. Here is the ‘Exit’ clause for Mumbai Press Club policy: “In respect of any member who ceases to be a member of Mumbai Press Club during the currency of the policy, coverage will continue for the member and other insured persons until the expiry of this policy. However, such members who exit during the currency of the policy will not be covered at the time of renewal. They, however, have an option to port to any retail policy of New India at retail rates, without medical examination, and subject to the terms of the retail policy to which they port. Such option to port to a New India retail policy, should be received at least fifteen days before the expiry of the Mumbai Press Club Policy, and should be accompanied by a proposal form and the appropriate premium amount.” In the past, group health cover premiums were not under the scanner as insurers would get profitable business from the same corporate for fire, marine, etc. When premiums of these businesses were de-tariffed, the profits plummeted. The time to cross-subsidise health insurance was over, but insurers still continued the tradition. Moreover, they have started offering attractive features with low premium even to non-corporate groups which is a troubling sign for insurers. These rich community group products are incurring huge losses, but the lesson is not learnt. Retail policyholders, on the other hand, are suffering caps and co-payments, leading to shrinkage in the overall cover. In short, be prepared to deal with insurance providers who are under a lot of pressure and who will, therefore, try to get away by being nasty to retail customers. 

39 | 28 Oct-10 Nov 2016 | MONEYLIFE

Cover Story.indd 9

21-10-2016 16:12:34

VALUE STOCKS DEBASHIS BASU

Picking Stocks: Marrying Momentum with Fundamentals “Momentum is the center stage anomaly of recent years… an anomaly that is above suspicion… the premier market anomaly.” — Eugene Fama & Kenneth French, 2008

O

n 15 August 2008, Richard Roll, a top financial economist, was interviewing Eugene Fama, Nobel Laureate in economics, often referred to as ‘The Father of Finance’, best known for his work on portfolio theory, asset pricing and stock market behaviour. This was at the American Finance Association. Fama was one of the intellectual giants behind the idea that the market is efficient and that market price reflects all publicly available information. One cannot beat the market with available information. Roll and Fama went back and forth on the issue of ‘value premium’, or returns associated with cheap stocks and whether low stock price was a compensation for extra risk or mispricing. Professor Roll then asked Fama about momentum. Here is how the conversation went (edited for brevity). Richard Roll: What about other things in addition to value growth and size? You use momentum too? What is that? Eugene Fama: Momentum gives me a problem because the winners and the losers in momentum change so frequently that if momentum is a risk story; the risk has to be changing in a very volatile way. Richard Roll: If you look at prior six-month returns, to see if the ones that have done better continue to do well, that changes every month or so? Eugene Fama: This happens around the world, except Japan. The Japanese are somehow immune to this. Richard Roll: Well, maybe they’re more rational. Eugene Fama: Who knows, right? Richard Roll: Or maybe less, maybe they don’t care about risk. Eugene Fama: Another way to put it is, I don’t know what fraction the Japanese market is of the total, but the remaining fraction is basically the one that shows

momentum, and that (Japanese) fraction doesn’t, so the game is still open… you have thousands of finance professors spinning the tapes, and they all want is to get tenure. Some want to do even better than that. So they are going to find whatever is there, even if it is there by chance. Richard Roll: If you look at foreign markets for value and growth you generally find it works in most of these other markets as well. Eugene Fama: The premiums are all on the same order. Richard Roll: And momentum; is that generally true as well? Eugene Fama: Except for Japan. Richard Roll: What is it about Japan? Eugene Fama: In my mind, that raises hope; but it’s just a hope, that momentum is a result of data dredging. (emphasis mine) Richard Roll: Well, it would have to be an incredible kind of data dredging. These markets are not that correlated with each other. They are correlated but not that correlated. They are not completely independent samples, but they’re quite independent. If you look at twenty different markets, and it works in every single market except for one. Eugene Fama: I don’t know about 20 different markets. I’d say three. You’ve got the US, Britain (and developed Europe), and you’ve got Japan. That’s it. Richard Roll: But other people have looked at momentum in other markets. Eugene Fama: Emerging markets? Richard Roll: Sure. Indonesia and places like that. It works there too. Eugene Fama: Maybe you’re right. I don’t know that data. As the conversation shows, Fama, the high priest of efficient market hypothesis, was accepting that momentum works everywhere in the world. But he also insisted that, somehow, the Japanese stocks were immune to it. Roll needled him saying that, perhaps, the Japanese investors 

MONEYLIFE | 28 Oct-10 Nov 2016 |40

Value Stocks.indd 2

21-10-2016 15:17:38

VALUE STOCKS DEBASHIS BASU



were ‘more rational’. Fama stated that he hoped that the more powerful backing in the ivory towers of academia, better results of momentum-based stock selection were unlike a decade or two earlier, when discussions about exceptions to the rule that momentum does not work and momentum were confined only to traders and investors. It is now well-established that momentum works in some that they were simply a result of data-dredging. Cliff Asness, the founder of AQR Capital (AQR form or the other. But there is a problem for the human standing for Assness Quantitative Research), with a PhD mind in believing in momentum, which involves following in finance from the University of Chicago and a former some price-based model blindly. Investing is supposed to student of Fama, was surely aware of this exchange be a thoughtful and laborious process of turning stones between Roll and Fama. In 2011, he published a paper in not following prices mechanically. But, surely, there must The Journal of Portfolio Management called, “Momentum be some logical explanation for why momentum strategies in Japan: The Exception that Proves the Rule”. This work. disproved Fama’s comments in a technical manner. But The explanation is behavioural, not financial. Gray and Wesley Gray and his team at Alpha Architect went ahead Vogel, writing in Quantitative Momentum, point out that, and did a more relevant test. in 1998, Nicholas Barberis, Andrei Shleifer and Robert They took the long-only Japanese momentum portfolio Vishny published a model based on investor sentiment, using AQR’s data and compared it to the Japanese index “which described the possibility that behavioural biases of MSCI Japan Total Return Index between 1January drive under-reaction and overreaction, which lead to value 1982 and 31December 2014. This long-only momentum and momentum effects.” According to them, “value is portfolio clearly outperformed the index by a wide essentially an overreaction to bad news; momentum is margin. Wes Gray and Jack Vogel write in their latest an under-reaction to good news.” In 1996, Louis Chan, book, Quantitative Momentum, that “this result is not Narasimhan Jegadeesh, and Josef Lakonishok argued entirely surprising, since momentum that the momentum anomaly is partly works in just about every context due to sluggish response to past There is a problem for the where researchers can get access to news: “Security analysts’ earnings human mind in believing in a reasonably long dataset.” forecasts… respond sluggishly to past But it is EMH that is taught news, especially in the case of stocks momentum, which involves every day in financial and economics with the worst past performance. The following some price-based departments and at business schools; results suggest a market that responds model blindly. Investing is not momentum. Momentum is still supposed to be a thoughtful only gradually to new information.” regarded as an ‘anomaly’. EMH is Earnings is the glue that binds and laborious process of so powerful and dominant that it is fundamentals and momentum. turning stones not following Remember, price momentum is also the basis for hugely successful prices mechanically buying stocks with the strongest passive investment approach that asks past price performance (which you to ‘buy the market’ represented by index funds—an option that appeals to institutional tend to outperform those with the weakest past price and many intelligent retail investors alike. A lot of what performance), while, under earnings momentum, stocks passes for ‘robo advisory’ also puts your money in index with earnings surprisingly outperform those with earnings or index stocks. Indexing, or passive investing, drawing disappointments. from the academic orthodoxy, is getting stronger by the We intuitively know that they are correlated. Enough day. Indeed, the largest mutual fund in the US is now a research (Mitch Zacks is pre-eminent in the field) has passive fund from Vanguard. proven that earnings surprises (fundamentals) are one of What lends credence to the EMH believers’ position the biggest drivers of stock prices (momentum). Gray and are anecdotes and some robust statistics. There are only a Vogel refer to a paper titled “Fundamentally, Momentum handful of actively-managed funds that have outperformed is Fundamental Momentum,” where Robert Novy-Marx the most popular US index, Standard & Poor’s 500. The finds that the price momentum is a manifestation of longer the period, the fewer are the outperformers. The the earnings momentum anomaly. In other words, the thousands of fund companies that pretend to manage momentum anomaly works because investors under-react money smartly for you are simply incompetent. to earnings surprises. So, earning is the bridge between However, could it be that the way fund companies momentum strategy and fundamental analysis and should manage money is wrong? Could it be that a simpler, serve to calm the nerves of serious fundamental-oriented momentum-driven strategy will lead to better outcomes? investors who are allergic to slavishly following prices There is no doubt that momentum is getting more and because the momentum models say so. 

41 | 28 Oct-10 Nov 2016 | MONEYLIFE

Value Stocks.indd 3

21-10-2016 15:17:24

3 Long-term Stockletters for Excellent Returns Panther

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

07-10-2016 17:13:51

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

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

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07-10-2016 17:14:11

StockWatch Stocks and sectors that catch our eye

P e n na r I ndus t ries

Sluggish Sales, Growing Profit

S

mall-cap stocks and mid-cap stocks have had a fantastic run over the past two years as the market valuations are high, today. It is becoming increasingly difficult to identify stocks that are available at reasonable valuations. If they are reasonably valued, there is a reason for it—low growth. This is the case with Pennar Industries which has a market-capitalisation of 0.45 to sales and 3.76 to operating profits. Its price-to-book value is also low at 1.21 and price-to-earnings (P/E) ratio is 13.33. Given

its low valuation, the stock should attracted interest in the current bull market. But the share price has been flat over this year; it was trading at around Rs50.55 on 17 October 2016. Pennar Industries has four lines of business. The systems and projects line provides solar module mounting solutions, manufactures railway components and offers storage solutions. The industrial components line manufactures hydraulic cylinders, auto-components and white goods components. The steel products and profiles line manufactures cold-rolled steel strips, electrostatic precipitators (ESP) electrodes, building

components, metal crash barriers, sheet piles and automobile products. The precision tubes line is into electric resistance welded (ERW) tubes, cold-drawn welded (CDW) tubes and air pre-heater (APH) & Indian boiler regulation (IBR) tubes. For the quarter ended June 2016, revenues were Rs306.69 crore (Rs273.85 crore), up 12%, and the net profit was Rs7.81 crore (Rs6.60 crore), up 18.3%, which is not bad given the slow economic growth. For the year ended March 2016, sales were Rs1,306.67 crore (Rs1,267.46 crore), up 3.1%, and the net profit was Rs43.85 crore (Rs35.90 crore), up 22.14%. Over the past five quarters, the average growth in sales has been 3.80% and average growth in profits has been 35%. Clearly, Pennar has been able to keep its costs under control, even though sales growth has been sluggish. However, as the sales trend shows, the business is not growing; nor is there much margin in the business. The average operating profit margin is around 11%. It has debt which cuts into its profits. The debt:equity ratio for FY15-16 was 0.50. Its RoCE (return on capital employed), which is calculated on earnings before interest and taxes, is high, around 19%, but interest cost brings down the return on net worth to 9.2% computed on fourquarter trailing net profit. Pennar Industries has not been paying dividends for the past three years. Its last dividend payout was 20%for FY12-13 . Its planned capacity expansion and product diversification, which began in FY14-15, is continuing and is yet to make any impact on the revenue growth; fortunately, it is funded with internal accruals. The promoters hold 36.36%; 63.64% is held by the public. Mutual funds hold 6.77% of the total shares and foreign investors own 10.92% . The stock is valued low because the business is not growing. It would grow only with a revival of capital investment which, in turn, depends on overall economic growth. 

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

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

MONEYLIFE | 28 Oct-10 Nov 2016 | 44

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21-10-2016 15:28:33

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29-07-2016 16:09:26

STOCK WATCH

Monsoon Vs Sales Growth

I

t is widely believed that a bad monsoon affects the performance of companies in the farming sector. That was being said about Aries Agro—that its revenues have fallen because of bad monsoon. While this is generally true, it is good to check even obvious correlations. We have taken rainfall data for the past seven years and sales following the monsoon season

in sales was 15%. This increase in sales is lower than marginal increase in sales, even when there was decrease in marginal rainfall. We have taken stand-alone quarterly revenues because the major subsidiary adding to the company’s revenue is in the UAE whose fortunes have little to do with Indian monsoons. Also, the monsoon season in India is, generally, from June to September, but since it also rains in some parts of the country in October, we have taken data from June to October. The reason for the low correlation is the nature of Aries Agro’s business—as the next section shows. It is less sensitive to monsoon. It pays to test even obvious and wellestablished beliefs while investing. 

Aries Agro Stands Out?

T Rainfall Vs Sale Revenues Av Rainfall June-Sept (mm/cm)

Sales from July to June (Rs Crore)

Change in Rainfall

Change in Sales

2008

929.50

111.53

2009

769.70

2010

980.20

143.37

-17%

29%

164.41

27%

15%

2011

939.40

200.25

-4%

22%

2012

882.60

192.62

-6%

-4%

2013

1,066.60

235.94

21%

22%

2014

841.70

248.24

-21%

5%

Correlation

0.24

he fertiliser sector suffers from poor and unstable margins. This is because the sector is regulated, suffers from seasonality, and is highly sensitive to input costs. Among the major fertiliser companies, GSFC had high margins of 20.76% for the year 2011-12 but they have been constantly falling, reaching 9.95% for 2015-16. Mangalore Chemicals and Fertilizers’ operating profit margin (OPM) fell to -3.66% previous year and both, Coromandel International and Chambal Fertilizers, have witnessed plunging OPM for the past five years. Surprisingly,. Aries Agro has a stable and high margin—of around 18%. While the margins are down from 20% or so a few years ago, they are exceptionally stable compared to those of its peers. However, the stock is



Operating Profit Margin of Peers 25% 20% 15%

for Aries Agro and have found a correlation of only 0.24 between the two sets of data. Not only is the correlation low, but, when rainfall was marginally down by 17% in 2009, average sales were up by 29% for September 2009 quarter to June 2010 quarter. A similar correlation is seen for the 2011, when rainfall was marginally down by 4%, but average sales for the September 2011 quarter to June 2012 quarter were up by 22%. Also, looking at the year 2010, the marginal increase in rainfall was 27% and the marginal increase

10% 5% 0% -5%

11-12

12-13 Aries Agro GNFC GSFC

13-14

14-15

15-16

Chambal Fertilizers Coromandel International Mangalore Chemicals and Fertilizers

MONEYLIFE | 28 Oct-10 Nov 2016 | 46

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STOCK WATCH

WIll Falling Net Margins Reverse? Net Profit Margin 7% 6% 5% 4% 3% 2% 1% 0% 11-12

12-13

13-14

14-15

15-16

its trailing 12 months’ earnings. It has had robust free cash flows, of nearly Rs60 crore, in FY15-16. It paid off Rs32 crore of debt in FY15-16, making it debt-free at the end of the year. The promoter holding stood at a healthy 74.43% on 30 September 2016. The stock is trading at a price-to-earnings (P/E) multiple of 15 times its trailing 12 months’ earnings on 21 October 2016. Maharashtra is a key state for GM Breweries; it is the largest manufacturer of country liquor in Maharashtra. GM Breweries has virtual monopoly in the districts of Mumbai and Thane. It utilised less than half its capacity of bulk liquor, amounting to 137.6 million bulk litres of country liquor per annum, in FY15-16. This gives it scope to utilise a higher proportion of its capacity and enjoy the benefits of

 not performing, for now. This is because the market

rewards stocks that have growth potential, not just high and stable margins. Not only is Aries not growing, its net margin has collapsed over the years because of increasing debt. However, if Aries can pare its debt and increase sales, the stock price can shoot up. Investors seem to be betting precisely on this. This is why Aries is currently quoting at a P/E of over 30. 

Declining Debt:Equity Ratio (Rs crore)

Debt:Equity Ratio

0.30

60 50 40

0.20

30 20 0.10

10 0

G M B r e we r ie s

Low Spirits

A

fter GM Breweries reported its September quarter results, the stock slumped by more than 7%. The company’s net profits rose by 18% year-on-year (y-o-y). So, why was the Street in low spirits? At the EBITDA (earnings before interest tax depreciation and allowances) level, there was a decline in 5.52% y-o-y. This decline in EBITDA, despite a rise in net profits, was partly due to the rise in other income to Rs1.26 crore from merely Rs3 lakh in the same quarter of the preceding year. Secondly, its operating profits were partly impacted by a 42% jump in staff costs to Rs2.35 crore. The stock was a huge outperformer in 2015. So, what could have given the Street a high in the past year? GM Breweries has had an impressive return on equity (RoE) of 35%

0.00

-10 11-12

12-13

13-14

Free Cash Flows

14-15

15-16

Debt:Equity Ratio

operating leverage. The management states that it has tremendous potential to penetrate into the interior districts of Maharashtra due to its good brand image. GM Breweries’ products enjoy brand loyalty. Though it has the facility to blend and bottle both, Indianmade foreign liquor (IMFL) and country liquor, it has concentrated on country liquor due to competition prevailing in the IMFL segment. One of the key risks for any manufacturer of country liquor is the dent in brand image due to some alcohol tragedy occurring, if the quality standards are not met. Another risk could be the raising of the levels of taxation and change in regulation. The management also mentions that the parallel duty-evaded market, which eats into the company’s market share, is another threat. 

47 | 28 Oct-10 Nov 2016 | MONEYLIFE

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STOCK WATCH

UN UOTED STORIES OF PRICE MANIPULATION

Kushal Tradelink (Rs300) (Rs)

A

hmedabad-based paper trading company, Kushal Tradelink, claims to be a leading player in paper and paper products markets in Gujarat with a client base of over 600 customers. In the past, the company has not posted consolidated quarterly results regularly; hence, consolidated data is only available for quarters ended June 2015, March 2016 and June 2016. Sales for FY13-14 were around Rs302.52 crore while sales for FY14-15 were Rs433.11 crore. As expected of a trading company, Kushal reported low net profits, Rs4.49 crore for FY13-14 and Rs6.57 crore for FY14-15. The story changed dramatically in FY15-16. It acquired a wholly-owned subsidiary in UAE, Kashish Worldwide F.Z.E., in January 2016, and its sales suddenly rose to

300 240 180

7748%

120 60 0 Aug-14

Sep-15

Oct-16

Rs1,589.90 crore for the year, 63% of which came from the wh-olly owned subsidiary. For FY15-16, the reported profit stood at Rs98.99 crore, 70% of which is contributed by the subsidiary whose business is import and export of readymade garments, home appliances , mobile phones, electronic goods, electronic accessories, data-centre

equipment, steel and metals, bitumen, pharmaceuticals, such as generic drugs, paper waste and paper products, oilfield chemicals, oil-field instruments, and oil-field piping accessories. Kushal has another wholly-owned subsidiary, Kushal Impex Ltd, based in Singapore. Where did the promoters get the money to buy the UAE subsidiary? There are no clear answers. The company’s balance sheet reported a huge Rs910 crore increase in liabilities which are labelled as ‘other than acceptances’. Meanwhile, over the past three years, the stock has moved up a humongous 7,748%—from a low of Rs3.82 on 8 August 2014 to Rs299.80 on 17 October 2016. It also announced a stock split from Rs10 to Rs2 on 3 September 2015. Is this a case of rampant price manipulation? We don’t know. Maybe, the tax authorities and the regulator can find out. 

MARKET TREND

Endless Churn

Tof writing this piece, it is below 28,000. Over two

wo weeks ago, the Sensex was at 28,061. At the time

weeks, the index has made no meaningful progress. This is what happens, often, when the market goes up, thanks to a combination of liquidity, hopee and falling interest rates, even when earnings are nott going up. It goes sideways, teasing traders with th one or two up days and then a down day. There have been eight trading days in the past fortnight. Of these, exactly four were up days and four down days. Meanwhile, the September quarter uarter results have started rolling in and they have ave not been great for heavyweights like Tata Consultancy Services, Infosys, HCL Technologies and Reliance Industries. Some of them have beaten the market expectations but that does not

seem to be enough. As expected, banks are doing well, especially the smaller private banks. We also expect microfinance companies and select non-banking finance companies to report good growth numbers. In a falling interest rate regime, these companies compan are in a sweet spot. Their cost of funds goes down bu but low competition in the system does not make them reduce the interest rates they charge. Also in a sweet spot are companies that depend on derivatives of crude oil, like paints, plastics and chemicals, cr especially if they have a consumer and/or esp export expo focus. Unfortunately, too few companies in U the Sensex fit this bill. They are either large Se companies outside the main index, or smaller companies, where the real action is. For the index companies, it is an endless sideways churn. — Debashis Basu 

MONEYLIFE | 28 Oct-10 Nov 2016 | 48

StockWatch.indd 6

21-10-2016 16:52:58

HANDHOLDING: MAS Benefit #11

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

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

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MSSN Handholding.indd 1

29-07-2016 16:08:23

EARNING CURVE

How US Fund Managers Changed Strategies before, during and after the Financial Crisis

D

o fund managers consider momentum/ contrarian strategy in their trading? Do these strategies remain constant or are they dependent on the market conditions? Does financial crisis make them behave differently? Do fund managers really make good decisions on strategy selection, to respond market change? To explore these issues, Luyue Jin, Cheng Zhen, Mengyao Xu, Xiaoyu Wang, Yaolin Wang conducted a study, “Mutual Fund Managers’ Choice of Momentum Strategy- Pre/During/ Post Financial Crisis”. They studied the US data from September 2003 to March 2013 which was divided into three periods: pre-crisis (September 2003 to September 2007), during the crisis (October 2007 to February 2009) and post-crisis (March 2009 to March 2013). September 2003 is chosen as the starting point of sample period to exclude any influence from the previous dot-com crisis. From 2003 March, the stock market moved up until September 2007, when the market index reached its all-time high. The ending point of the sample period, March 2013, is the month when the market index went up as high as it was in September 2007, for the first time after the crisis. The study involved a total of 207 mutual fund schemes, selected on three criteria: the offer date before September 2003, the scheme should be a growth or a value fund and its total net asset should be higher than $10 million. An alternate way in which the samples were divided was through their market-capitalisation. Also, UMD (up-minus-down), SML (security market line), HML (high-minus-low) historical monthly data and historical benchmark rates, excess market returns and risk-free rates, were collected from Kenneth R French Data Library. The writers of the paper picked all the schemes and tested each scheme for the whole period to check the significance of the coefficient of UMD to see whether the fund managers take momentum or contrarian strategy in their trading. The fund managers were

then classified into three groups, momentum strategy (significantly positive coefficient), contrarian strategy (significantly negative coefficient) and no momentum (not significantly different from zero) consideration. Momentum in a stock is described as the tendency of the stock price to continue rising or to continue falling, based on the direction it initially is in. Thus, momentum strategy aims to capitalise from the continuing trends in the market. Contrarian strategy follows a method where purchasing and selling is done in contrast to the prevailing market sentiments. ‘No strategy’ refers to the mutual fund schemes whose managers didn’t follow either of these two strategies. By comparing the percentage of each strategy being followed, its popularity is gauged. Since the schemes are divided into three categories on the basis of the strategy, alpha can be estimated for each of the category and, if there is significant difference in returns by one strategy from the other two, that particular strategy has some significance. Which strategy produced the highest alpha under what situation was also determined. After dividing the mutual funds into various groups and segments, it was found that fund managers preferred momentum strategy before the financial crisis and shifted to ‘no strategy’ during crisis and moved to contrarian strategy after the crisis. The contrarian strategy usually becomes significant in the long run; thus, there is a fair question whether the fund managers realised this and adopted it during the financial crisis. The paper concluded that the strategies opted by fund managers are dependent on the market and they shift their strategies along with the changes in situation. The study explored a combination of 27 different ways by taking three different sub-periods during which the dominant strategy changed as well. Lastly, the shift in strategy influences a fund’s performance. Managers, who shifted to no strategy during crisis or to contrarian strategy after crisis, had an improved performance, to a large extent. 

MONEYLIFE | 28 Oct-10 Nov 2016 | 50

Earning Curve.indd 2

21-10-2016 14:53:11

TAX/ FIXED INCOME

Post-office Monthly Income Scheme Decoded

P

ost-office Monthly Income Scheme (POMIS) gives you guaranteed return on your investment. Currently, it offers 7.80%pa (per annum) payable as monthly income. The maturity term of POMIS is five years. There is no tax deducted at source (TDS) on the interest for POMIS, but the interest income is taxable in your hands. It does not offer any tax rebate under Section 80C. The investor should be a resident Indian; it is not available for HUFs and NRIs (non-resident Indians). There is a rather stiff premature withdrawal penalty. Premature withdrawal is not allowed within one year from inception. If you break it within one to three years, there is a 2% penalty on the deposit amount; if you break it after three years, the penalty is 1% on the deposit amount. A Moneylife reader recently

G-Sec Yields Down

T

G-Sec Maturity Date

handled along with investment by parents?” Minimum and maximum deposit for a single account is Rs1,500 and Rs4.5 lakh, respectively; for joint account, it is Rs15,00 and Rs9

Issuer

he 10-year benchmark G-Sec yield, which sets the tone of the fixedincome market, declined by eight basis points (bps) in the last fortnight to end at 6.73% on 14th October. According Yield to Maturity

01 December 2044

7.18

26 October 2055

7.15

10 November 2033

7.15

G-Sec yields on 14 October 2016

to CRISIL, “Inflation dropped sharply to 4.3%, a one-year low, in September from 5% in August. This was driven by a sharp drop in food inflation to

lakh, respectively. An individual can invest a maximum of Rs4.5 lakh in POMIS (including his share in joint accounts). A joint account can be opened by two or three adults. All joint account-holders have equal share in each joint account. A single account can be converted into joint account and vice versa. An account can be opened in the name of a minor; a minor of 10 years and above can open and operate the account. Minors, after becoming majors, have to apply for conversion of the account in their names. The web page POMIS is silent on the maximum limit for a minor’s investment and whether it is within the parents’ overall limit. Several financial websites specify that the maximum amount that a minor can invest is Rs3 lakh and that it would not be clubbed with the guardian’s limit.

pointed out: “There are conflicting views on the maximum limit that can be invested in one person’s name under POMIS. At one place, it says Rs4.5 lakh. At another place, it says, if it is held jointly, it can be Rs9 lakh. Moreover, how is investment in the name of a minor

Maturity Date

Next Last Yield Coupon (%)

ISIN

Rating

HDFC 7.90%

24 Aug-26 24 Aug-17

7.67

INE001A07PN8

CRISIL AAA

ICICI Bank 7.95%

07 Oct-23 07 Oct-17

7.58

INE090A08TU6

CARE AAA

LIC Hsg Fin 8.67%

26 Aug-20 26 Aug-17

7.57

INE115A07HS2

CRISIL AAA

NSE data as of last trade date of 14 October 2016

SREI Infra Fin 9.75%

06 Oct-19 06 Oct-17

9.82

INE872A07TX3

CARE A+

Edelweiss Housing Fin 10%

18 Jul-26

18 Jul-17

9.62

INE530L07228

CARE AA

Dewan Housing Fin 9.25%

09 Sep-23 09 Sep-17

9.29

INE202B07IO3

CARE AAA

BSE data as of last trade date of 14 October 2016

3.9% (drop of 200bps)—especially in vegetables, also core inflation edged down to 4.9%. Going ahead, we expect inflation to trend lower and average

4.8% in the second half of fiscal 2017, because of the good monsoon and supported by steps taken by the government to manage food supply.”

51 | 28 Oct-10 Nov 2016 | MONEYLIFE

Fixed Income.indd 1

21-10-2016 14:40:07

Supported By

Queries At Moneylife Foundation’s

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

Can an NRI Continue To Use Existing Saving Account

I

have been a non-resident Indian (NRI) for over three years now. However, while my residency status changed, I retained my savings account and continued using it as normal. The source of funding my Indian bank account was done through my overseas bank account. I have decided to open a non-resident external (NRE) saving account, as advised by a banker. Do I need to pay taxes on my Indian account before closing the existing regular account? All this while, unaware of the taxation process, I had continued to fund my Indian bank account with my overseas savings. Subodh Shah’s Reply: Once a person becomes a non-resident under the Foreign Exchange Management Act (FEMA) regulations, he is supposed to intimate the bank about the change in status and the ordinary saving account will get converted into an NRO (non-resident ordinary) account. Since this was not done earlier, it needs to be done now, if you want to continue to use that account. In addition, you can open an NRE

account also. Coming to the tax aspect, if you have earned any income in India during this period, you are liable to pay tax on it. However, you will get the benefit of the basic exemption of income before your tax liability kicks in.

How To Change One’s CA?

I

have engaged a chartered accountant (CA) locally in Bengaluru, who happens to be a distant relative of my better half. I have been using his services for the past five years. However, every year, I have had issues with this person. This year, due to no fault of mine, I had to pay a huge interest due to this CA’s negligence. I am a freelancer working in the information technology (IT) industry. I am looking at changing the CA. I have very little, or no experience, in this regard. I would like to know what are the implications and how to go about moving to another CA. Ameet Patel’s Reply: It is unfortunate that you have had an unpleasant experience with your CA. If you desire to change over to another CA, you have every right to do so. Nobody can prevent you from doing so—not even the existing CA. Since you have not clearly mentioned which services

you have availed from the existing CA, I am listing two possibilities: a) You have obtained only taxrelated services (without any audit services) from the CA. In this case, you can simply find another CA and appoint him/her to handle your tax matters. Such a CA would not need any ‘no objection certificate’ (NOC) from the earlier CA. However, before you do this, you must obtain all the documents that your existing CA has in his possession relating to your taxation. In particular, you must obtain the login password for your online access to www. incometaxindiaefiling.gov.in. This is crucial. So, even before you start thinking in terms of changing your CA, please obtain this password and change it so that only you have the new password. Ensure that the mobile number and email address registered on this e-filing site are those that belong to you and not to your existing (or future) CA. Always take care of this aspect. Do not allow anyone else to give his/her contact details for your income-tax matters. b) You have obtained not only tax-related services but also any audit services from the CA. In this case, you can definitely appoint another CA in place of your existing CA. However, before the new CA accepts the appointment, he/she will need an NOC from the existing CA. This NOC is, generally, always given without a fuss. However, if any fees are due to the CA, he/she may hold back the NOC until the fees are paid by you. Once you select a new CA, he/ she will be able to guide you in detail about the actual steps to be taken, especially in the second scenario mentioned above. 

MONEYLIFE | 28 Oct-10 Nov 2016 | 52

Tax Queries.indd 2

21-10-2016 14:12:25

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HEALTH BM HEGDE

Treating Patients through ‘Whole Person Healing’

T

reating sick human beings as a whole person was the original concept even in the Western medicine system of olden days—even in the 1950s, when I was a student. Thanks to the hi-tech new Western medicine, of complete reductionism, whole person healing (WPH) has almost disappeared from medical students’ vocabulary! As human beings, we have our worries and anxieties, social and environmental factors, our economic and social status and, above all, our religious beliefs which could collectively, and severally, affect our personality as a patient. The best doctor to know all these would db bee ou ourr family doctor. Again, thanks to the birth of sub-specialists eci cial alis ists ts who, in India, are called super-specialists making ng them the hem m God incarnates, WPH has been fully buried. The super specialists know more and more about out less les esss and less until they come to a stage where they know w mo more re and more about nothing. This tendency to diagnose ose and os and treat patients with the tinted glass of reductionism ism h has as become the bane of Western medicine today. In such set-ups, the patient is hardly listened d to, to, or examined, physically. They are subjected to a hugee list lis istt of investigations and, from then on, the specialist treats atss only at only the reports and NOT the sick human being. This leads lea eads ds to to much misery and economic loss to the patient and nd ggains ains ai ns to the medical and pharmaceutical establishments. s. It is usually outsiders who spot the lacunae in in any any system and think outside the box. Both, Albert Einstein tei ein n and and David Bohm, declared themselves outsiders for physics sic icss and and so were able to think outside the box during theirr times. tim imes es.. My good friend, a great scientist, Professor Rustum Rus ustu tum m Roy, who could think outside the box even in his his own own specialisation of chemistry and metallurgy, was appointed poin po inte ted d a professor of medicine at the University of Arizona na w with ith it h no conventional medical qualifications, based purely rely re ly on on his original research in human healing and his out-ofut-o ut -offthe-box thinking. It was he who coined the term Whole Person rson rs o Healing, while I used to write and think about itt as as bedside medicine. Professor Roy approached mee at one meeting where both of us were lecturing an and nd convinced me to join him in this journey of whatt h hee called WPH. Thus started our long journey which ended nde ded d only when he died a few years ago. Late professor Roy was a remarkable human n being bein be ingg and one of the best scientists I have known in my li life. life fe.. He was the first to think of nano particles way back in 1 1954 954 95 4

when he was a junior member of Linus Pauling’s chemistry department at Berkeley University. His original paper on So-Gel technique is still being used by nano scientists. The paper has had more than 75,000 citations till date! Although he was the Fellow of all science academies of the world with a Golden Ray Award from the Emperor of Japan, he was denied the Nobel Prize, despite being nominated 21 times! I think this was because of his pro-Indian bias and, moreover, his original works did not interest the industry so much. muc uch. h. Being Being ng the the founder-fellow fou ound nder er fel ello low w of o the the IOM IOM O (Institute (In nst tute of Medicine), Med edic icin ine) e),, he was was able abl blee to get get the the word wor ord d WPH WPH officially offi of fici cial ally ly accepted acce ac cept pted ed into int nto o the the medical medi me dica call vocabulary voca vo cabu bula lary ry in in 2009. 2009 20 09.. Since Sinc Si ncee then, then th en,, I have ha ve adopted ado dopt pted ed that tha hatt word word in n place of bedside d medicine med edic icin i e which whic wh ich h is p patient-centred atie at ient nt-c -cen entr tred ed aand nd not ot d disease-centred. isea is ease se-c -cen entr tred ed. We sstarted tarted the ta World Worl Wo rld d Academy Acad Ac adem emyy of Authentic Aut uthe hent ntic ic Healing Hea eali ling ng Sciences Sci cien ence ces in 2005 200 005 5 with ourr ow ou own n jo jour journal, urna nal, l, Th Thee Jo Jour Journal urna nall of tthe he SScience cien ci encce of Healin Healing ng Outcomes which Outc Ou tcom omes e ((thejsho.com), thejjsh th sho. o.co com) m), of w hich hi ch I be beca became came me tthe h eeditor-in-chief he dito di torr-in in-c -chi hief ef aand nd professor prof pr ofesssorr Ro Roy y be beca became came me tthe he co-editor-in-chief, co-e co -edi dito torr-in in-c -chi hief ef,, ti till ll his his death. Hee wa followed deat de ath. h. H wass fo foll llow owed ed d by Hans Peter Duerr, Duer Du err, r, tthe he eemeritus meri me ritu tuss director dire di rect ctor or of of the the Max Max P l a n c k 

MONEYLIFE | 28 Oct-10 Nov 2016 | 54

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HEALTH BM HEGDE

 Institute in Munich. Now, we have Evan Pugh professor

whole man considered as our primary interest? of obstetrics and paediatrics at Penn State University, Professor Mary Tinnetti of Yale University in her article Joanna Floros, as the co-editor-in-chief. She is a great in the American Medical Journal, entitled “The End of the researcher too. Disease Era”, convincingly argues that the organ-based I happened to see a very fit young man last week. He disease diagnosis has almost come to an end and she was 46 years young and was a good specimen of physical wants that be replaced by a new holistic approach. Sick fitness in every respect. The only mistake he made to human beings need our compassionate understanding and jog nearly five kilometres daily. One day, while jogging, a useful management and not heroic things done to set he thought he had some vague chest pain. He went for the anatomy right and physiology corrected without fully a check-up. To cut the long story short, he landed with understanding the patient. angioplasty, two stents and lifetime of blood-thinners with Western medicine is not a true science. It is just a some other medicines. statistical science where averages of all measurements are He was devastated as he is as fit as he used to be with converted into normal. When one converts averages into an ejection fraction of 59% coming down to 54% or so normal, one generates 5% to 25% false positives. Today, after the procedure. His family and he are now worried the diagnosis has becomes a disease in itself. stiff and he was even contemplating becoming a recluse! We can create epidemics where none exists and we Our reductionist intervention has had such an impact on convert the hapless human beings, who come to us with his whole family that, I am their anxiety for help, into sure, he will not be a useful patients for the rest of their Even young boys in the US army lives! Let us try to re-introduce citizen for the country. in Korea and Vietnam, with Now, Coronary artery WPH into the medical an average age of 20 years, blocks are not coronary artery curriculum for the common disease. Even young boys in angiographed post-mortem after good of mankind. We should the US army in Korea and they were shot dead (a total of 205 also teach medical students to Vietnam, with an average soldiers) had three vessel blocks understand the human mind age of 20 years, angiographed to get to know their patients post-mortem after they were (72%). Some of them had even left better. In the quantum world main equivalent blocks but they view, the human body is an shot dead (a total of 205 soldiers) had three vessel were in the pink of their health, to illusion of the human body. blocks (72%). Some of them This needs to be stressed, as be in the US army. Reductionist had even left main equivalent science equated coronary block today, in reductionism, we blocks but they were in the think that the mind is in the with coronary disease, a good brain! pink of their health, to be in business proposition the US army. Reductionist The future sickness-care science equated coronary has to incorporate all good block with coronary disease, a good business proposition. treatment methods in all systems authenticated by hard I have a very dear friend who, in his 80s, had bad scientific yardstick, not just the quick-fixes of modern knee joints, but was still active. I used to dissuade him Western medicine but from all scientifically validated from having his knee replaced. He also had aches and treatment methods in other systems also. Western quickpains everywhere. Our friends convinced him to have it fixes are a must for emergency-care only but the latter is done and one of his knees was operated upon. He never just 2% of the sick population. The earlier this is done the better. Benjamin Rush had fully recovered from his post-operative sickness and had pneumonia first, thanks to nosocomial infections and, as predicted this kind of unscientific monopoly of Western he was getting out of those episodes, his aches and pains medicine over all other systems. He did try his best to avoid increased to a great degree. caste system in healing process, but the 1910 Abraham After so much of investigations, they have come up Flexner report buried this hope for ever.  with a diagnosis of multiple-myeloma now. His knee pains have increased and so have his aches elsewhere. I wonder Professor Dr BM Hegde, a Padma Bhushan awardee in 2010, is an MD, if the diagnosis was missed pre-operatively or was it that PhD, FRCP (London, Edinburgh, multiple-myeloma was triggered by the surgery. God only Glasgow & Dublin), FACC and FAMS. knows. He is in bed at his age and is suffering. What is the He can be reached at [email protected] quality of life we have been able to offer him? When is the

55 | 28 Oct-10 Nov 2016 | MONEYLIFE

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HEALTH BM HEGDE

CANCER ‘RESEARCH’

According to statistics supplied by various law ometime back, the firms, there were 464 ‘famous’ journal MEDICAL DEVELOPMENTS FROM claims filed against statins Science published an AROUND THE WORLD as of 15 April 2014, article which upset the which increased to 703 by players in the field. The 15th May and then to 846 by study clearly showed that ‘bad luck’ to chance. I was reading a blog showing how cancer is not a disease 16th June. By mid-July 2014, over alone determined how unexplained but a trillion-dollar industry and gene mutations occurred in the 959 claims have been filed for most research in the area, funded by damages due to statins alone, stem-cell lines to start a cancer. In the vested interests in the industry, short, it did say that all our theories and those increased in August to is only a fraud. Take your pick. so far have no basis! 1,162. There are also many claims currently filed against statins. These lawsuits now number well over LAW SUITS AGAINST 1,200 and are increasing at a rapid CHOLESTEROL-LOWERING pace. DRUGS Let us see how the Big Pharma he $100 billion dollar is trying to fight the truth. Alberto cholesterol-lowering statin Donzelli, head of education, drug industry is under attack, as appropriateness, and evidencethousands of Americans are filing based medicine at Milan’s public lawsuits against the manufacturers health authority in Italy, has issued of cholesterol-lowering drugs such warnings about the dangers of as statins. Research continues to this drug, and advised doctors in confirm just how dangerous these Italy not to prescribe it. Merck drugs are, with yet another study responded with two cease-andpublished recently linking increased desist orders and the threat of The year 2016 is important for statin drug use to type-2 diabetes. suing Donzelli. Donzelli backed the so-called cancer research. In the Since the study was published down, but Merck is under a lot of October issue, the other ‘famous’ by the American Diabetes public pressure in Europe since the journal Nature published a paper Association, these known risks to story was picked up by the British from Stony Brook Cancer Center in cholesterol-lowering drugs can no Medical Journal. New York which makes a complete longer be denied or defended, and It was also reported in the Wall U-turn and shows that cancer is the lawsuits are pouring in, at a Street Journal in the US. When purely environmental (90%) and rapid pace. Most lawsuits, at this doctors and medical chance has a role. Six months, and point, are from women who have professionals the Atlantic Ocean, separate these suffered from diabetes as a result of oppose Big two studies, which are statistical taking cholesterol-lowering drugs; Pharma, they and done by people who have not but lawsuits over breast cancer, put their careers cared for any cancer patient and Alzheimer’s, liver damage, and and, sometimes, have no hands-on experience! others may soon follow, now that it their lives on Cancer has been killing mankind is generally known how dangerous the line. This is from eons and we, who boast of our these drugs are. the latest story great science, have no clue about This information, regarding on statins! how one gets the disease. Neither a tsunami of lawsuits against I have been have we won the battle against cholesterol drug manufacturers, saying this for cancer, so far. A lucky few who has yet to be widely published by decades. did survive have done so because the mainstream media, however. of their own immune system and To find out the magnitude of the  not due to our empirical treatment lawsuits being filed against statin modalities. manufacturers, we turn to law If the public has still some faith firms who are reaping the fruit of in our science it is, again, only due litigation against ‘Big Pharma’.

S

T

MONEYLIFE | 28 Oct-10 Nov 2016 | 56

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USEFUL APPS YAZDI TANTRA

Truecaller: Know Who is Calling

I

f you have been using a smartphone for a while, you should have Truecaller installed on your phone by now. If not, do it now! Truecaller is the best way not tto identify who is calling you, even if you do not have the number in your directory. They boast a database of over two billion numbers from all over the world. It not only goes online and looks up the number, it also displays the name on your screen, al even before you pick up the call. After the call is over, you can save the number directly in your directory. The best part is that you can mark a number as spam (to get rid of those pesky calls) and the number will be automatically blocked from then onwards. It will also display if others have marked a number as spam, helping you to decide whether you should pick up the call or not. A must-have utility—you will wonder how you managed without it for so long! Available for Android (https://goo.gl/ljEHn) iPhone and Windows phone users.

Smart Tools: Work Smart

S

mart Tools is a complete package of six app sets. It includes five professional sets for a total of 16 tools. In a word, an ‘all-in-one’ app. Set 1: Length, Angle, Slope, Level, Thread—Smart Ruler Pro Set 2: Distance, Height, Width, Area—Smart Measure Pro Set 3: Compass, Metal detector, GPS—Smart Compass Pro Set 4: Sound level meter, Vibrometer—Sound Meter Pro Set 5: Flashlight, Magnifier, Mirror—Smart Light Pro Set 6: Unit—Unit Converter Pro Work Smart—Use Smart Tools—the best all-in-one for those on the go! https://goo.gl/qRNUx

TuneIn: Radio in Your Phone

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uneIn lets you listen to real radio stations right on your phone. Sometimes, you want to listen to the traditional over-the-air radio. Luckily, TuneIn Radio has over 100,000 real radio stations covering everything—from music, sports, news and talk radio—and the app’s customisable

Ne Newsfeed shows you what stations aare currently on-air. If podcasts are more to your liking, you’re in luck. TuneIn has over four million. Get the old-fashioned radio back on your phone—enjoy the art of listening! This app is free for both, Android T and d iOS, with options to upgrade with more features. https://goo.gl/uDyxN

Glympse: Share Your Location

W

hen you are out and have to meet friends, you need to tell them your current location. When you are on your way home, your family needs to know exactly where you are and how you are moving towards home. Glympse is a simple app that helps you do all that. Just enter the person’s name from your address book and send him/her your location from Glympse. And you can specify for how long they can track your location. The recipient(s) need not have installed Glympse—they just get a web-link which will show them your current location, for the period specified. If you are going for a meeting and the attendees are on your calendar, Glympse can send the message to all the attendees, automatically. In short, Glympse is a fast, free, and simple way to share your location safely using GPS tracking in real time with friends and family! No sign-up required! And, of course, it is free!! Features: • Easy: no sign-up required or contact lists to manage; • Safe: your Glympse automatically expires; • Live: share location in real-time with dynamic map; • Open: share with anyone—no app required to view; • Passive: runs in the background; • Global: works anywhere you have GPS and a data connection. https://goo.gl/JFuMO 

Yazdi Tantra is a chartered accountant by training, computer consultant by profession, entrepreneur-developer by hobby and trainer in his leisure time. He is currently the vice-chairman of Zoroastrian Co-operative Bank Ltd and has been running a medium-sized computer company ON-LYNE for the past 24 years.

57 | 28 Oct-10 Nov 2016 | MONEYLIFE

Tantra - column.indd 1

21-10-2016 14:14:41

LEGALLY SPEAKING SD ISRANI

Filing Delayed Complaints & Appeals

I

f you are planning to make a complaint under the Consumer Protection Act, remember that you need to file it within two years from the date of the cause of action, with the District Forum or the State Commission or the National Consumer Disputes Redressal Commission (NCDRC), as the case may be. Many such complaints arise due to deficiency in service in the context of purchase of apartments / houses by consumers. Therefore, delay in filing could result in avoidable losses for consumers. Similarly, in the case of appeals also, it is important to be conscious about the time limit available to the consumer, else the chance to have the appeal filed may be lost. Here, I would like to stress the fact that just because two years are available for filing the complaint, it does not mean that a consumer should take his own time and deliberately, or negligently, delay the filing of the complaint, though it may still be within the limitation period. The principle to be followed lowed in filing a complaint should be, ‘sooner the better’,, because avoiding prompt action may eventually lead to delay beyond the period of limitation with the attendant consequences. Every consumer er should note that if a complaint is filed beyond the stipulated period, then it is for or the Forum to decide whether to entertain ain the complaint or dismiss it for delayed yed filing. However, if the complainant wants the delay to be condoned, he has to file an application seeking king condonation of delay; lay; he will have to show how sufficient cause due to which the delay was as caused. So what exactlyy is ‘sufficient cause’ that a complainant lainant has to provide when there has been en a delay in filing the complaint? The point to be noted is that there is no hard and fast rule to decide what is a ‘sufficient cause’, in a given case, as it would invariably depend on the facts and circumstances of each case. What may be held to be sufficient cause in one case may not be adequate cause in another case. So it will always depend on the circumstances of each case. It should be noted that a mistake of law, no matter how honestly made, cannot be held to be ‘sufficient cause’, unless it can be said that such a mistake was made ‘in good faith’, that is, the mistake was made, notwithstanding due care and attention on the part of the litigant. Similarly, the excuse of having no money or the business

suffering losses or having problems with the partner will not be treated as ‘sufficient cause’. It is not possible to lay down precisely what facts, or matters, would constitute ‘sufficient cause’ under the law. Any negligence in filing the complaint by the consumer will certainly damage his cause while seeking condonation of delay. The Bombay High Court has held that, “If the spirit behind the empowerment of discretionary power on the Court is taken into consideration, it is beyond doubt clear that the Court is required to adopt liberal approach in the matter of interpretation of the phase ‘sufficient cause’.” The settled law, as propounded by the Supreme Court in a number of cases, is that the term ‘sufficient cause’ in Section 5 of the Limitation Act must receive liberal construction so as to advance substantial justice and, generally, delays in bringing the appeal are required to be condoned in the interest of justice where no gross negligence or deliberate inaction or lack of bona fide is imputable to the parties seeking condonation of delay. However, some of the jud judgements of the Supreme Court, delivered in re recent years, indicate the hardening stance ad adopted by the apex court while considerin considering ‘sufficient cause’, as is evidenced by b the following cases. In Anshul Aggarwal A vs New Okhla Industrial Development Authority, Industri IV (20 (2011) CPJ 63 (SC), RB Ramlingam vs RB Bhavaneshwari, Ramlin I(2009) C CLT 188 (SC), Ram Lal and Others vs R Rewa Coalfields Ltd, AIR 1962 Supreme Court 361 & Office of the Chief Post Mast Master General & Ors vs Living Media India Ltd & Anr (2012). was taken by the apex court The latest view wa in the case of Sanjay SSidgonda Patil vs National Insurance Co Ltd & Ors, decided by the apex court while dismissing the Special Leave to Appeal (Civil). In that case, the apex court upheld the order of the NCDRC wherein delay of just 13 days was not condoned by the apex court. Hence, in their own interest, consumers need to be conscious of the various timelines available for filing complaints and appeals and ensure that they don’t miss the bus while seeking redress under the Act. 

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

MONEYLIFE | 28 Oct-10 Nov 2016 | 58

Legally Speaking.indd 2

21-10-2016 16:41:02

TECHNOLOGY MOBILE

Why Do Mobile Batteries Explode? Battery explosion of Note 7 has forced Samsung to withdraw this product after suffering huge brand damage. Yogesh Sapkale explains why batteries of mobiles explode

A

s I am writing this piece, following the increased allowed the two electrodes to touch, leading to fire and incidents of fire and explosion of Samsung explosion, in some cases. Nowadays, several manufactures are allowing Galaxy Note 7, that was touted as prime rival to iPhones, Samsung has stopped production and sales overcharging of the battery, either knowingly or of this device and withdrawn the model. In September unknowingly. As you may be aware, most batteries 2016, the company had recalled 250,000 devices after are designed to automatically prevent overcharging. a number of the units spontaneously burst into flames. However, sometimes, there may be some fault in the circuits which may lead The battery was the culprit. to battery overcharging and As I mentioned in one of my heating. previous articles, every mobileAdd to this, the fast-charging user wants to squeeze the phenomenon. What happens maximum out of the device’s when you are fast charging your battery. Earlier, users were mobile? In this case, the charger concerned if the battery would tries to push more current into last for a day or not. Now, the battery. If you are not using they want the battery to get the recommended charger (and charged in a few minutes. This cable) provided by the device desire to give customers the Lithium-ion Rechargeable Battery manufacturer, this can lead the ability charge fast, and some Charge Mechanism battery to freak accidents. compromises on quality, is what Charger Some manufacturers also led to freak fire and explosion. Electrons try to increase voltage so that Why did the device burst Current the batteries can store more into flames and explode, in energy. For this, they add some cases? As per reports, the Separator elements like nickel to lithium. main issue was about a weak Anode Cathode However, voltage is a force and physical barrier between two more voltage is more likely to nodes in the battery. This led combine electrolytes and make to sparks and fire and, in some them catch fire. cases, explosion of the battery. What we can do is take So what exactly is a battery and precautions while using and how can it catch fire? charging the mobile handset. Almost all mobile devices This includes keeping your use lithium-ion batteries. There handset cool and checking are two electrodes, or electrical Electrolyte regularly whether the device is conductors, inside the battery (Polymer Battery: Gel Polymer electrolyte) becoming hot while charging or placed on opposite sides. One © 2006 HowStuffWorks when in use. Never use a subcalled cathode holds positively charged ions and other known as anode, holds negatively standard charger for your handset. Also, refrain from charged ones. Cathode is filled with lithium. When we using a device if there the battery is swollen. Use the charge the battery, lithium ions move from cathode to battery prescribed for your handset and buy it only from anode. The opposite takes place when the battery is an authorised, or authentic, shop. Remember, technology in battery manufacture is discharging. To help the ions move freely from one side to the other, there are chemicals or electrolytes, in the advancing continuously but not at the speed of thought battery. Separators are inserted between cathode and and our desires like lightning-fast charging and longer anode, to keep them away and curb redirecting energy to battery life. Hope the manufacturers also remember this electrolytes. In Note 7, the separators were flawed and and do not pander to our desires! 

59 | 28 Oct -10 Nov 2016 | MONEYLIFE

Technology.indd 1

21-10-2016 16:38:14

YOU BE THE JUDGE BAPOO MALCOLM

A Court Case Is Not a Moneymaking Exercise, Yet… status, he needs to assure the court that he is the victim. A victim of a frivolous action, an attack on an innocent person, for which malady, a remedy is called for. The usual method is by way of costs. hould you be the recipient of a summons to appear The defendant needs keep a thorough in court, what would be your first reaction? track of expenses, of time spent, of ‘Where will I get the money?’ Then, when sleepless nights; the latter amounts you enter the court compound for the first time to mental agony. This adds up to in your life, what would be your gut monetary compensation. feeling? Intimidation; butterflies in Will the court allow your stomach. All is not lost; there it? This is where the is a way out. advocate’s acumen If you are guilty, try to cut comes into play. One your losses. If you are in the way is to milk the right, you have to proceed law of torts. Torts with a cool mind. Winning at are wrongs that are not always all costs, by legal means, codified. Argued must be first on the correctly, in a agenda. Put fear aside. way that This is the time to hit does not back. If you play the require a game well, you can written recover your costs; law, the and a bit more. court Not too much, but can be definitely a bit more. shown that the defendant was truly hurt. You be the judge. Equity, a sharing of plusses and minuses. A litigation in the US involved the reimbursement of There is no mathematical formula; it is the costs for a report. Concerned citizens filed a suit against force and direction of arguments that will the city authorities questioning costs paid to the lawyers carry the day. for work done. The citizens felt that if the municipal One question remains. How authorities had done the work themselves, the costs would be far less. Stands to reason. much does one ask for? A developer had agreed to bear all litigation The moon? Or the stars? costs that the municipality incurred. That The rainbow? Which is just a mirage. included the costs for reports needed to oppose citizens’ mirage Hard-headed calculation is the best answer. Add to suits. It paid the municipality. And then proceeded to recover costs from the citizens. The citizens balked; after the mixture a dose of angst. Season it with a rider of what this means to society at large. And face the courts all, they had pointed out flaws in the report. Whom with confidence. It works.  would you favour? The citizens lost. Because consultations were incomplete between all sides, prior to according Bapoo Malcolm is a practising lawyer in contracts. Loss of both, face and money. Mumbai. Please email your comments to How does this help us in warding off the evil eye [email protected] of litigation? Courts of law decide issues. They weigh the pros and cons. When the defendant is sure of his Why ask for the moon, when we have the stars, Why ask for the rainbow, when we know it’s ours? — A popular song of yesteryears

S

MONEYLIFE | 28 Oct-10 Nov 2016 | 60

You Be the Judge.indd 2

21-10-2016 19:10:56

24 YEARS OF THE SCAM: THE PERENNIAL BESTSELLER, READS LIKE A THRILLER! THE ONLY BOOK ON THE TWO BIGGEST STOCK MARKET SCAMS OF INDIA, NOW IN ITS EIGHTTH PRINTING

THE

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The skyscraper that houses BSE hadn’t yet come up. There used to be a trading ring, where brokers and jobbers struck deals, located in the adjacent three-storied structure. The ring was a reserved area, open only to jobbers and brokers. Harshad was just an onlooker. But he had a burning desire to get in and do deals. He cajoled the doorman and stepped in to watch how the world of the stocks spun on its invisible axis. That afternoon a new chapter began in the life of Harshad Mehta. A totally unfamiliar world that would be his kingdom ten years later...

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Scam Ad.indd 1

21-10-2016 18:07:06

BOOKS

Misbehaving: The Making of Behavioural Economics

The Rational Approach to Make Sense of Our Irrationality

R

ichard Thaler is the world’s foremost theorist on behavioural finance, a field that was developed by Daniel Kahneman (Nobel Prize-winner in 2002) and Amos Tversky from the 1970s. Most of them, and another top researcher, Cass Sunstein, have worked together at some stage or another to generate fabulous insights into how irrational out behaviour is. Behavioural economics, and its subset behavioural finance, of course, is designed to show that human beings are not rational while making decisions. Thaler’s previous book was Nudge, with Cass Sunstein, which discussed how public and private organisations can help people make better choices in their daily lives. His recent book Misbehaving: The Making of Behavioural Economics is a fascinating history of how this new discipline developed into such a major force over the past four decades and has come to dominate the mainstream economic thinking. After all, Thaler is now MISBEHAVING the president of the American RICHARD THALER Economic Association, a Penguin Random House position held by luminaries Pages 415; Rs818 from conventional economic stream, such as Milton Friedman, JK Galbraith and Amartya Sen. The book starts with a fascinating example of how irrational we are. For a mid-term exam, Thaler had set up a test that was designed to distinguish between three broad groups of students: those who really mastered the concepts taught; those who grasped the basic concepts; and those who just did not understand. For this, the exam had to have some questions that only the top students would get right, which meant that the test was tougher than usual. Thaler writes that “the exam succeeded in my goal—there was a wide dispersion of scores—but when the students got their results, they was an uproar among them. Their principal complaint was that the average score was only 72 points out of a possible 100.” As happens,

this reaction was irrational. The average numerical score had absolutely no effect on the grades since the average grade was a B or B+, and only a few got grades below C. Thaler writes that “I had anticipated the possibility that a low average numerical score might cause some confusion on this front, so I had reported how the numerical scores would be translated into actual grades in the class. Anything over 80 would get an A or A-, scores above 65 would get some kind of B, and only scores below 50 were in danger of getting a grade below C. The resulting distribution of grades was not different from normal, but this announcement had no apparent effect on the students’ mood. They still hated my exam, and they were none too happy with me either. As a young professor worried about keeping my job, I was determined to do something about his, but I did not want to make my exams any easier. What to do?” For the next exam, Thaler, the behavioural expert, made the total number of points available 137 instead of 100! This exam was harder than the first, with students getting only 70% of the answers right (as opposed to 72% in the first); but the average numerical score was a cheery 96 points. He says, “The students were delighted! No one’s actual grade was affected by this change but everyone was happy. From that point on, whenever I was teaching this course, I always gave exams a point total of 137, a number I chose for two reasons. First, it produced an average score well into the 90s, with some students even getting scores above 100, generating a reaction approaching ecstasy. Second, because dividing one’s score by 137 was not easy to do in one’s head, most students did not seem to bother to convert their scores into percentages. Lest you think I was somehow deceiving the students, in subsequent years, I included this statement, printed in bold type, in my course of syllabus: ‘Exams will have a total of 137 points rather than the usual 100. This scoring system has no effect on the grade you get in the course, but it seems to make you happier.’ And indeed, after I made that change, I never got a complaint that my exams were too hard.” This book is full of stories like these.

Behaviourial Finance Meets Quants One of the more interesting applications of behaviourial finance is, surprisingly, in clarifying a knotty investment conundrum which is the domain of quants. For instance, 

MONEYLIFE | 28 Oct-10 Nov 2016 | 62

Book Review.indd 2

21-10-2016 16:40:02

BOOKS

 academics have intensely debated an anomaly called the

forward to offer their explanations. Thaler and his associate ‘equity premium puzzle’, first announced by Raj Mehra Shlomo Benartzi offered theirs: people behave differently and Edward Prescott in a 1985 paper. over short term and long term. While Mehta and Prescott Prescott is a staunch member of the ‘rational arrived at a 6% figure reward figure for the risk one took expectations’ school, whose work in ‘real business cycles’, to buy stocks, it is worth asking why don’t more people later won him a Nobel Prize. As Thaler writes, “unlike go for that reward? Why do investors hold more bonds me, Prescott did not have declaring anomalies as part than stocks? The answer: they were taking too short-term of his agenda. I suspect he found this one to be a bit a view of their investments. Humans are not rational. embarrassing given his world view, but he and Mehra To test this, Thaler and Shlomo ran an experiment using knew they were on to something interesting.” This was employees at the University of Southern California which similar to the momentum anomaly, that has embarrassed had a defined contribution retirement plan. Under the plan, the ‘Efficient Market Hypothesis’ school which I have employees have to decide how to invest their retirement discussed on page 40. funds. They told each employee Now ‘equity risk premium’ is to imagine that there were only the difference in returns between two investment options in this equities (stocks) and some riskretirement plan, a riskier one with free assets such as government higher expected returns and a safer bonds. The premise is that one with lower expected returns. investors demand a premium They were shown charts for buying equities over riskshowing the distribution of 68-year free securities because equities returns. They were not told of the asset classes, to avoid any are risky. The question is: How big is this premium? We can look preconceptions they might have Economists have not always at history but the answer depends about stocks and bonds. The trick been so dense about selfon the period used and various was in what the charts revealed. control problems. For roughly In one version, the subjects were definitions. Mehra and Prescott two centuries, the economists shown the distribution of annual studied the period 1889-1978 and concluded that the equity who wrote on this topic knew rates of return; in another, they premium was about 6% per year. shown the distribution of their Humans. In fact, an early were “In many economics articles, simulated average annual rates of the analysis would stop at that pioneer of what we would now return for a 30-year horizon. call a behavioural treatment of point,” writes Thaler. “The “The first version captures the theory predicts that one asset self-control was none other than returns people see if they look at will earn higher returns than retirement statements once a the high priest of free market their another because it is riskier, the year, while the other represents the economics: Adam Smith authors find evidence confirming experience they might expect from this prediction, and the result is a thirty-year invest-and-forget-it scored as another win for economic theory. What makes strategy. Employees who were shown the annual rates of the analysis by Mehra and Prescott special is that they went return chose to put 40% of their hypothetical portfolio in beyond asking whether economic theory can explain the stocks, while those who looked at the long-term averages existence of an equity premium, and asked if economic elected to put 90% of their money into stocks,” writes theory can explain how large the premium actually is.” Thaler. Mehra and Prescott went ahead and developed a model The more often people look at their portfolios, the less to predict equity risk premium. The largest value they willing they will be to take on risk, because if you look could predict from their model was 0.35%, far lower more often, you will see more losses. Thaler later explored than the actual historical figure of 6%! This made no this idea in a paper with Kahneman and Tversky, the only sense. Stocks are highly risky. Why would investors take paper that these three stalwarts published together and the risk of buying stocks when all they get is 0.35% over that too after Taversky passed away. This is a book full of risk-free returns? interesting stories from the world of behavioural finance The model and its conclusions were controversial. that will keep you engrossed if you are interested in this Mehra and Prescott took six years to get the paper discipline, as every investor should be. The casual reader, published. Once it was published, many economists came too, will find these fascinating. — Debashis Basu 

63 | 28 Oct-10 Nov 2016 | MONEYLIFE

Book Review.indd 3

21-10-2016 16:40:19

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

The Sensex and Nifty were flat for the fortnight ended 19 October. ML Mega-cap Index declined by 2%. ML Mid-cap Index advanced 4%. ML Small-cap Index and ML Micro-cap Index rose by 3% and 1%, respectively.  th

Share Prices Index, April 2016=100

Foreigners: Foreign institutional investors were net sellers of stocks during the fortnight (Rs2,799.58 crore). They bought shares of Rs26,302.24 crore.  355

FII Net Investments (Rs Crore)

15

130 -325 120 -665 110

-1,005 10 Oct-16

19 Oct-16

Indians: Domestic institutional investors were net buyers of stocks during the fortnight (Rs2,838.92 crore). They bought shares of Rs15,269.94 crore. 

100

90 Apr-16

725 Jul-16 ML Large-cap ML Mid-cap

ML Small-cap ML Mega-cap

Oct-16 ML Micro-cap

Nifty Sensex

DII Net Investments (Rs Crore)

565

405

Index

07 Oct

19 Oct

+/-

125.05

129.77

4%

ML Small-cap Index

111.75

115.08

3%

ML Large-cap Index

115.59

117.52

2%

ML Micro-cap Index

111.98

113.57

1%

28,061.14

27,984.37

0%

8,697.60

8,659.10

0%

121.73

119.80

-2%

ML Mid-cap Index

Nifty Sensex ML Mega-cap Index Mega-cap Gainers/Losers

07 Oct

19 Oct

292.55

334.65

14%

Zee Entertainment Enterprises

572.20

509.30

-11%

Large-cap Gainers/Losers

07 Oct

19 Oct

Change

179.50

282.10

57%

87.15

67.05

-23%

07 Oct

19 Oct

Change

Jindal Stainless

28.95

41.70

44%

Gitanjali Gems

83.80

68.50

-18%

07 Oct

19 Oct

Change

Jammu & Kashmir Bank Mid-cap Gainers/Losers

Small-cap Gainers/Losers Diamond Power Infrastructure

33.30

57.45

73%

Piccadily Agro Inds

23.45

12.05

-49%

07 Oct

19 Oct

Change

4.56

7.45

63%

Micro-cap Gainers/Losers Ind-Swift MPS Infotecnics (All Prices in Rs)

0.15

0.10

85 10 Oct-16

-33%

19 Oct-16

GLOBAL MARKET TRENDS 64,000

60,250

Change

Dewan Housing Finance Corp

Ramco Industries

245

Bovespa

56,500

52,750

49,000 Apr-16

Jul-16

Oct-16

Bovespa, Shanghai Composite and Nikkei advanced 4%, 3% and 1%, respectively. Taiwan Weighted, the FTSE and S&P 500 were flat.  Index Bovespa

07 Oct

19 Oct

+/-

61,109

63,506

4%

Shanghai Composite

3,005*

3,085

3%

Nikkei

16,860

16,999

1%

Taiwan Weighted

9,266

9,284

0%

FTSE

7,044

7,022

0%

S&P 500

2,154

2,144

0%

Korean Composite

2,054

2,041

-1%

NASDAQ Composite

5,292

5,246

-1%

23,852

23,305

-2%

Hang Seng * 30 Sep-16

MONEYLIFE | 28 Oct-10 Nov 2016 | 64

Money Fact.indd 2

21-10-2016 18:29:27

MONEY FACTS STOCKS



What’s H

T

ML SECTORAL TRENDS

Farm and farm inputs companies were buzzing during the week. Tulsi Extrusions, Mangalore Chemicals & Fertilizers and Zuari Agro Chemicals rose by a whopping 53%, 36% and 31%, respectively.  Companies

07 Oct

19 Oct

+/-

4.00

6.10

53%

ML Farm & Farm Input Index

Tulsi Extrusions

140

Mangalore Chem

46.85

63.65

36%

Zuari Agro Chem

188.85

246.65

31%

Jayant Agro-Org

310.50

399.05

29%

97.85

125.05

28%

Guj Narmada Valley

187.40

226.30

21%

KSE

560.35

668.65

19%

1,418.60

1,677.95

18%

130

Zuari Global

120

110

Excel Crop Care Southern Petro

21.70

25.45

17%

100 Apr-16

Jul-16

Oct-16

Madras Fertilizers

14.10

16.50

17%

The steel products sector was the outperformer, rising by 7%. Telecom equipment sector rose by 6%. Oil & gas services, textiles and farm & farm products sector rose by 4% each. Besides media sector, which slumped by 6%, the sugar sector declined by 4%. Shipping and telecom services companies fell by 3% each, while stocks of real estate sector declined by 2%.  ML Sectoral Trends Steel Products

7% Media

-6%

Telecom Equipment

6% Sugar

-4%

Farm & Farm Inputs

4% Shipping

-3%

Oil & Gas Services

4% Telecom Services

-3%

Textiles

4% Real Estate

-2%

What’s



All Prices in Rs

N T

FOOD INFLATION Combined inflation in urban and rural areas continued its downward trend, falling to 4.31% in September 2016, from 5.05% in August 2016. Inflation in urban areas declined to 3.64% in September, from 4.22% in August. Rural inflation declined

Media companies were on a declining trend. Zee Entertainment and Tv18 Broadcast declined by 11% and 8% respectively. Other stocks like Entertainment Network (India), Sun TV Network declined by 5%.  Companies Zee Entertainment Tv18 Broadcast

07 Oct

19 Oct

+/-

572.20

509.30

-11%

48.05

44.05

-8%

ENIL

831.10

788.25

-5%

Sun TV Network

562.85

534.30

-5%

Network18 Media

46.15

43.95

-5%

Sea TV Network

5.95

5.74

-4%

Siti Networks

34.90

34.15

-2%

Ortel Comm

153.15

150.00

-2%

1,048.90

1,031.80

-2%

96.25

94.85

-1%

ML Media Index 130

Decline Continues

120

5.50% 110

Annual Change

5.00%

Sandesh Dish T V India

100

4.50% 4.00%

90 Apr-16

Jul-16

Oct-16

All Prices in Rs

3.50% Sep-15

BULK DEALS Date

Company

Buyer

Seller

Rs Cr

13 Oct-16 Edelweiss Financial Serv BIH SA

Privatbank Ihag Zurich AG

66.60

17 Oct-16 GVK Power InfrastructureHSBC Global Invt Indian Eq

HSBC Global Invt Funds Mauritius

36.00

17 Oct-16 Cox Kings

HSBC Global Invt Funds Mauritius

35.10

HSBC Global Invt Indian Eq

13 Oct-16 Invst Precision Castings Minal Securities Private

Minal Investments

0.52

18 Oct-16 Smiths Founders (India) Subhadraben R Shah

Subhadraben R Shah

0.63

19 Oct-16 Uday Jewellery Industries Mohit Gupta

Classic Filaments

0.15

17 Oct-16 Sashwat Technocrats

Mukesh Dhirajlal Mahetalia

0.01

Mandar Vijay Khavilkar

Mar-16

Sep-16

to 4.96% in September from 5.87% in August. Inflation for food and beverages stood at 4.12%. This is a decline from 5.83% in August. One of the key highlights for September was decline in the prices of vegetables by 7.16%. The inflation for pulses and products stood at 14.33% for September, which was lower than 21.94% for August. 

65 | 28 Oct-10 Nov 2016 | MONEYLIFE

Money Fact.indd 3

21-10-2016 18:29:45

BEYOND MONEY

Healthy Environment for Underprivileged Children

B

orn in Sangli district to a Maharashtrian family, involve parents, once it gets positive results, for subsequent Dr Suhrid Tembe moved to Jamnagar (Gujarat). improvements in health and hygiene. Dr Tembe did his schooling at St Xaviers and Suhrid’s work is not restricted to children. The completed his medical studies in MP Shah Medical College Foundation has conducted eight full-scale medical camps (Jamnagar). He worked as assistant professor of general since October 2012; its actual work includes general health surgery at Irwin Hospital (Jamnagar). A superb surgeon, and eye check-up camps and special camps for kids with the soft-spoken Suhrid Tambe devoted his life to helping the support of schools. It has distributed more than 200 poor and suffering patients, often working without food, spectacles, conducted cataract operations, administered rest or concern for his own health. When he died in 1993 tetanus injections where required got over 800 blood at the young age of 32, his friends and family, decided to investigations for children in the past three years. set up Suhrid Foundation in his name, to carry forward Another concern for Suhrid is undernourishment the work that he was passionate about. among school children. Although students get mid-day The Foundation started with intention of providing meals comprising rice, dal and matki from the government, support to underprivileged the meal does not meet the children in the field of vitamin, protein and mineral healthcare. Healthcare support needs of students. Hence, Suhrid is the first interaction of Suhrid launched the SUN project, in Foundation in any area that it March 2013, which provides a dietician-defined menu to works. It starts with a medical several schools. In the first survey of the region, mainly through a medical camp; followphase, it added locally available up camps are organised for vegetables, jaggery, etc. There subsequent procedures such as were immediate results in terms investigative tests or operations of better attendance and more that may be required for some consumption. Teachers track patients. Local leaders (such as the impact on children through daily and monthly reports that the sarpanch or the police patil) and school teachers from the region play a key role in include checking on height and weight, daily menu and organising such camps by way of logistics support and the cost incurred. coordination. Over time, it hopes to have its own primary Suhrid has also been working on infrastructure support healthcare centre that can provide sustainable support the for schools. Important infrastructure-related challenges community. Apart from medical camps, Suhrid Foundation include availability of gates, compound wall, minor repairs aims to provide advance medical support, cancer support, of the walls, bore-wells, motors, etc. Good infrastructure nutritional support, Suvarna Prashan (an Ayurvedic form motivates parents to send their children to school. Schools of immunisation for children under the age of 6 years). are graded, based on the infrastructure. If the schools The Mumbai chapter of the Foundation was launched score well, they may get permission to start higher classes in August 2012 at Vikramgad, a tribal area around 120km helping reduce school dropouts. In 2016, Suhrid Foundation expanded its community from Mumbai. Several medical camps were organised to understand the background, culture, health-related support by starting a drinking water project, increasing challenges, food habits and availability of healthcare. employability of youth and women to increase household The Foundation has covered schools around Vikramgad income and building check-dams on rivers or seasonal area making them an attractive place streams to recharge groundwater. for kids by providing holistic support Suhrid Foundation is registered under (beyond health) such as education, sports, Section 12AA of Income Tax Act, 1961. SUHRID FOUNDATION infrastructure, personal grooming, hygiene, You can get involved in its work or D/704, Panchsheel Heights, etc. The approach is to make each school make a donation which is eligible for tax Mahavir Nagar, Kandivili (W), self-sufficient for the basic needs and then exemption under Section 80G of I-T Act.  Mumbai 400067 Mobile: 9821239737 Email: [email protected] Web: http://suhrid.org/

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