Moneylife 12 May 2016

SUCHETA DALAL ON:

SEBI COMMITTEE CONFIRMS NSE LAPSES

Personal Finance Magazine

AUSTRALIAN LAW FIRM TO HELP PACL INVESTORS

FD HOLDERS PLIGHT: NO RESPITE IN SIGHT

12 May 2016

Pages 68

Rs 45

(SUBSCRIBER COPY NOT FOR RESALE)

www.moneylife.in

INSURANCE

Real-life examples of proposal rejections 12 ways you can improve you chances of getting insurance

VALUE STOCKS: The Toughest Part of Investing Page 46

STOCKS Sanghvi Movers: Winner of Core Sector Growth

Cover Page_266.indd 1

Tailwinds for Ceramic Tiles?

Ceat: On the Right Track?

WiproDisappoints Again

Manipulation: SAR Auto Products

22-04-2016 17:59:08

HOW CAN I ADD BALANCE TO MY FINANCIAL LIFE? Why choose between strong returns and low risk, when you can have both? The right balance of growth and safety can help you feel more confident and add stability to your investment portfolio. Which leads to one big question.

So what do I do with my money? Gain from the strategic approach of investing in a balanced combination of the high-return potential of equities along with the low-risk benefits of fixed income.

BALANCED FUND Growth potential: At least 65% invested in a well diversified equity portfolio Low risk: Up to 35% invested in quality debt and money market securities Tax free: No tax on capital gains if investment held for more than 12 months

GIVE US A MISSED CALL

1800 103 6765

Speak to your investment advisor or visit dspblackrock.com/balance

This Open Ended Balanced Scheme is suitable for investors who are seeking^ Capital growth and income over a long term investment horizon Investment primarily in equity/ equity related securities, with balance exposure in money market and debt securities

Advertisements.indd 2

RISKOMETER

^Investors should consult their financial advisors if in doubt about whether the product is suitable for them. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

18-04-2016 19:05:57

Advertisements.indd 4

18-04-2016 19:06:37

ISSUE CONTENTS

12 May 2016 Insurance Denied

D

enial of insurance claims is well known, but denial of insurance proposal, to prevent you from getting life, health or personal accident policy, is also a reality. Insurers may deny you a policy under the garb of their ‘right to underwrite’. Worse, you have to declare your prior rejection, postponement, premium-loading offer or modification to the policy offered. It puts you in a bind. In our Cover Story, Raj Pradhan highlights numerous real-life examples to help you know what you can expect during insurance purchase. He suggests some steps that you can take to improve your chances of getting a proposal accepted. We have often read about senior citizens being sold toxic financial products. Retirees are unaware of the risks. R Balakrishnan, on page 26, writes about the mistakes retirees make and what they can do to avoid losing their life’s savings. Once the money is invested in the wrong financial products, consumers find it impossible to get back their hard-earned money. In the Crosshairs column, Sucheta highlights two such problems. Her first piece shows how PACL owners are doing fine in Australia while depositors struggle to get the attention of regulator and investigators. Then there are the holders of corporate fixed deposits. Even after Moneylife Foundation highlighted the plight of over 1,100 savers who are struggling to get back their deposits from companies such as Helios & Matheson, Elder Pharmaceuticals and Jaiprakash Associates, government officials are showing no urgency to tackle the issue. The Securities & Exchange Board of India’s (SEBI’s) technical advisory committee (TAC) has now conclusively shown that the National Stock Exchange’s (NSE’s) systems allowed certain entities to make huge profits by giving them faster access. Last year, the NSE tried to silence us by filing a Rs100-crore defamation suit against Moneylife, when we published a whistleblower’s report on it. Sucheta, in Different Strokes, highlights TAC’s findings on the serious lapses on the part of the NSE and its recommendation that SEBI take immediate action. Will it? Or will it let the wrongdoers, inside and outside the NSE, get away?

32 Cover Story Insurance Denied Buying insurance may seem easy, considering the many cold calls we receive. Raj Pradhan lists the difficulties in getting insurance policy for life, health and personal accident. Read real-life examples of your proposal rejections and how you can improve you chances of getting insurance

12 Your Money

– Government Employees May Be Able To Invest up to 50% in Equities through NPS – IRDAI Asks Insurers Not To Depend on Banks for Selling Life Insurance Policies – I-T E-filing Appeal System Activated – Long-term Two-wheeler Insurance Policy Launched – Government Backtracks on EPF Issue

14 18

MONEYLIFE

QUIZ – Class Action in Australia – Unsecured, Not Fixed

20 Different Strokes

TAC Report Proves Systemic Lapses at the NSE

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.

MONEYLIFE | 12 May 2016 | 4

Content.indd 2

22-04-2016 17:14:01

Moneylife Foundation AD.indd 1

22-04-2016 17:38:15

CONTENTS FUND POINTERS

Did Investors Pull 22 Why out Their Money from these Schemes?

– Hot and Cold Stocks of Fund Managers

HEALTH

INSURANCE

30 Insurance Trends

Responds to 56 Pain Exercise and Not Rest!

Regulations – Poor Compliance of Ombudsman Awards under Scanner Motor Insurance – ICICI Lombard Refuses TP Cover in Amritsar

Is it possible to get rid of pain without a pain-killer pill and no rest?

FIXED INCOME

FD and Savings 25 Bank Interest under Tax Scrutiny

– Bond Yields Lower – G-Sec Yields Are Down

STOCKS

26 Smart Money 8 Mistakes Retirees Make Retirees are easy targets for sellers of financial products and fraudsters. They must acquire basic financial knowledge for their own safety

41 Stock Watch Sanghvi Movers: Winner of Core Sector Growth Sanghvi Movers earns a modest return on capital and has the largest share of the cranes business Tailwinds for Tiles? Low input costs, strong outsourcing linkages and government policies may keep the tiles sector growing On the Right Track Changed product mix and capacity expansion may sustain growth

LEGALLY SPEAKING

Fine Print

Infoline Penalised 59 India for Illegal Trading

VALUE STOCKS

Part of 46 Toughest Investing “You need a very definitive guide for selling,” Benjamin Graham had said. There is very little discussion on this EARNING CURVE

50

YOU BE THE JUDGE

or 60 ToNotSwear To Swear?

Prem Watsa believes that speculation in private high-tech companies “has ended with a thud” USEFUL APPS

Delete 52 BurnNote: Message Automatically – Addictive Dots: Connect and Earn Points – StayFocusd: Limit the Time You Waste

Quality 61 Management through Numbers How to judge management man quality before qua buying stocks buy

TECHNOLOGY: MOBILE

To Create 53 How Strong Passwords No password is 100% secure. But you can make one that is really hard to crack

Market Manipulation: SAR Auto Products TAX HELPLINE

Content.indd 4

Consumer forums compensate investor for losses in a landmark judgement

Why, when and where? Does this constitute a criminal liability?

Tech Bubble Bursting?

Wipro Disappoints These equity schemes are incurring opportunity cost

Market Trend: Bullls Getting Bolder

Pulse Beat: Medical developments from around the world

54

Queries at Moneylife Foundation’s Tax Helpline

BEYOND MONEY

in 66 AnRuralExperiment Reshaping Manavlok mobilises rural men and women to become beneficiaries by putting in equal time and energy in the current Marathwada drought

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

22-04-2016 17:17:21

Advertisements.indd 3

18-04-2016 19:06:19

Volume 11, Issue 6 29 April – 12 May 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

DDA Flats, J-3/66, Kalkaji, New Delhi - 110 019

Bengaluru

1st Floor, 13/1, 7th Main Road, 1 Cross, Saibabanagar, Srirampuram, Bengaluru - 560 021 st

Kolkata

395, Lake Gardens, Kolkata - 700 045 Tel: 033 2422 1173/4064 4318

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

AUDIT OF COOPERATIVE SOCIETIES I have been a regular reader and, regrettably, sporadic subscriber to Moneylife magazine for over five years. It carries a plethora of useful information. I am also an avid watcher of the Moneylife videos available on YouTube. So, thanks for the useful work being done by the Moneylife team. One area where I have not found enough material is about the rights of the members of a cooperative housing society (CHS) to seek information from the statutory auditors regarding the audit conducted by them. Using various provisions of the laws, these guys (it appears to me) are handin-glove with the members of CHS and help them cover the misdeeds. Considering that most of us now live in CHSs, it would be extremely useful to carry a series on the rights of the members of CHS to demand information from the CAs (chartered accountants). It would also be useful to know what the CAs required to check before they certify the accounts presented to them. I look forward to coverage of this issue in coming issues of Moneylife. Brijesh Gupta, online comment

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

Write to the Editor!

WIN a prize

Thank you for your suggestions. Meanwhile, you may like lik ikee to check check heck k outt the queries and replies that are provided by Moneylife Foundation’s legal resource centre at lrc.moneylife.in Issues relating to cooperative housing societies are extensively covered there. The Foundation also runs a free counselling session from 5pm to 7pm every Tuesday by Shirish Shanbagh which is extremely popular. You may want to attend that too.— Editor

BLOW TO COMMON MEN? This is with regard to the column Fixed Income “Are PPF, SCSS, Sukanya Samridhi Still Worthwhile?” (Moneylife, issue dated 14 April



MONEYLIFE | 12 May 2016 | 8

Letters.indd 2

21-04-2016 19:40:38

TION MONEYLIFE FOUNDA

* DONATE to

make our voices heard

Since February 2010, Moneylife Foundation, the Voice of Savers has enrolled 38,710 members, conducted 270 workshops, handled scores of grievances & made

four representations to policymakers. We need to do much more

As the Voice of Savers, Moneylife Foundation is proud to have been one of the fastest growing NGOs, reaching out to savers across India (Gurgaon, Kolkata, Bengaluru, Chennai, Nashik, Pune, Hyderabad and Goa), covering a wide variety of subjects. On advocacy, we continued to pursue the government for appropriate legislation to prevent people from being looted by thousands of money-chain schemes. We took up the issue of harassment of senior citizens because of problems with TDS. In August 2011, Moneylife Foundation was accepted as an affiliate member of OECD’s International Network on Financial Education (INFE).

(50% tax exemption). Please send a Cheque/Demand Draft in favour of ‘MONEYLIFE FOUNDATION’ accompanied by a letter indicating if it is a corpus donation.

We did all this with very limited resources. We need to strengthen our institutional and financial base to grow into a powerful entity that speaks for savers and can intervene in policy debates.

“I have made a donation of Rs ________to Moneylife Foundation. This donation shall form a part of the corpus of Moneylife Foundation. My PAN is ________________.” (Please also enclose details of your contribution through cheque/ demand draft/cash.)

There is an urgent need for neutral and non-partisan voices that strongly pitch for more sensible laws, better regulation and more accountability on behalf of the savers. We are sure you have seen the value in our work and recognise the need to help us achieve our objectives by donating to Moneylife Foundation. *Donations to Moneylife Foundation are eligible for tax benefits under Section 80G of the Income-Tax Act 1961

We will also need your Name, Address, Contact No., Email and PAN card details in order to send you the tax-exemption certificate. Donations may please be accompanied by a letter to Moneylife Foundation with the following declaration:

Our Address: Moneylife Foundation, 305, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400 028 Tel: 022-49205000

MF Trust Reg No: E-26571; MF Pan: AACTM4377J MF 80(G) Reg No: DIT(E)/MC/80G/685/2010-11 dated 7.2.11 effective 8.9.2010 Moneylife Foundation is a not-for-profit initiative of Moneylife Magazine & Moneylife Digital, which provide fair, fearless and unbiased information on business, industry and personal finance. The Trustees are TS Krishnamurthy, Dr KC Chakrabarty, Walter Vieira, Dr Anupam Saraph, Debashis Basu, Sucheta Dalal and Special Invitee Jamshed Mistry

Donate Ad.indd 1

22-04-2016 17:37:30

LETTERS

the

Best letter

Concept of Service?

T

his is with regard to “Go for Bank FD or RD?” Long ago, I had an FD (fixed deposit) with a prominent private sector bank. On every maturity amount, they would pay one paisa less. With all-India maturity/ renewals, it would amount to quite a sum. When I pointed it out, they took cover saying ‘system set-up’. Why not correct it? No answer. I asked them ‘why not give one paisa more to FD-holders? They were caught in their own web. I even wrote to the managing director. He was too lofty to reply to a commoner, especially when caught on the wrong foot. Most big-wigs are arrogant. They think it is infra-dig to attend to a common man. Banks mean trust and credibility. But it seems to be so only in books. Banks say that the effective date will be from the realisation of cheque for investment. Fine. But while paying interest, the banks pay by cheque posted, resulting in 4-5 days delay for credit. It is not done on the due date in the investor’s account. They boast of technology. Why not make instant payment on due date by ECS (electronic clearing service), NEFT (national electronic funds transfer), etc? I had approached an association or two. They

 2016).The cut in interest on small savings schemes

(SSS)—Public Provident Fund (PPF), National Savings Certificates, etc, is a blow, especially to senior citizens. With changed times and continuing inflationary trend, the real worth of the rupee is falling every day. Since the share market is not for common people, and especially senior citizens, the easiest mode for investment are the postoffice savings schemes as well as PPF and bank fixed deposits (FDs) (on which also the interest rates are too low, compared to earlier years). The one reason on the part of the government to cut down interest rates on SSS is to make interest rates more favourable to bank’s term deposits. This plea is not acceptable, especially for senior citizens. Even the additional interest of 0.05% for senior citizens in bank FDs does not offer reasonable returns on which senior citizens can live. SSSs are ideal for those who do not

offered me tea, lip-service and conveniently forgot! Mutual Fund investments Mera Bharat Mahan. are subject to market risks, read all scheme related The concept of documents carefully. service is alien to us Indians. My friend, a branch manager in a nationalised bank, NDDesai wanted to migrate to YOU WIN A USA. While he was PERSONALISED there, he submitted the CLOCK papers to the relevant office and asked for a receipt. The lady expressed shock and said come tomorrow at 9am. On the dot, she handed over the ND Desai completed papers and she wished him ‘good luck’. If such a thing ever happens in India, even in the 21st century-level tury y-l -le lev evel evel el o off te technology, chno ch hno nollo logy, logy gy, it gy would be a miracle. ND Desai, by email

Congratulations

wish to take the risk of market fluctuations—net asset value (NAV)-based investments, especially for older people (senior citizens). To safeguard returns of senior citizens, interest rates applicable to them should never be lowered; instead a much higher rate, say, of 12% must be guaranteed on all of their investments in SSS, PPF, and bank FDs, etc. The change in rate of interest on PPF must be applicable to new PPF accounts only and not to existing PPF / investments already made in PPF, as it is done in the case of FDs with banks. Mahesh Kapasi, by email

EVIDENCE-BASED INVESTORS NEEDED! This is with regard to “Investing as per Beliefs Vs Investing as per Data” by Debashis Basu. We have got to break away from the value religion and we should be evidence-based investors. I think there are



MONEYLIFE | 12 May 2016 | 10

Letters.indd 4

21-04-2016 19:41:31

LETTERS

 reasons why momentum works and the reasons are

precisely the same as why value works. Based on my research, the evidence is pretty clear. Buy cheap (value) and buy strong (momentum). The rest is just a waste of time, if you are a long-term investor. Just be an evidenced-based investor and put in hard-coded rules that essentially prevent overconfidence and a belief in stories. A simple asset allocation model, using both value and momentum, combined with a simple trend-following overlay, invests in equities only during sustained market uptrends and avoids all major bear markets. Sanjay Saxena, online comment

WHY NOT FOCUS ON STRENGTHS ONLY? This is with regard to “Patanjali: Emulating MNCs or Propagating Ayurveda?” by Sucheta Dalal. Yes, Patanjali is gradually diverting from its path. Patanjali was better and is still good as long as it focuses on Ayurvedic and healthy products. But since this marketing ghost entered, all products have new packaging with fake massages instead of showing Ayurvedic gains. Just compare Dant Kanti’s previous and current packaging with its pompous message like MNCs’— fights germs, white teeth, 24-hour protection, etc. MNCs fooled Indians with crass marketing with no actual details of effects of their product composition. Why is Patanjali doing the same? We wanted an Indian brand close to the nature with simple meaningful messages. Why the sudden craze to emulate MNCs with new packaging and with higher costs? Why is there so much of added sugar in biscuits? Patanjali’s products like noodles and honey failed for export quality check with added antibiotics just like other MNCs’. Why not focus on what its strength are? These are really disheartening signals from Patanjali. Prashant Naikwade, online comment

GOD ALSO CANNOT BLESS US! This is with regard to “Should Rapists Be Hanged?”

by Bapoo Malcolm. Can we inculcate better value systems, healthy attitudes towards women—among individuals, families, relatives and friends? Punishments have never deterred criminals; good values and fear have deterred persons doing wrong. Brutal reactionary laws have created rape and murder as a new challenge for society. Can we get better media representations of women in TV, Internet and newspapers? Women should themselves take this onus. Earlier, there was one cabaret in every film; but now heroines are scantily clad in entire movies with heroes too doing the same. God also cannot bless us, if we lose our guiding lines. Mahesh S Bhatt, online comment

ALERTS ABOUT EPIDEMICS ARE IMPORTANT This is with regard to “The Epidemic that Wasn’t” by Prof BM Hegde. The one good point in this article is the recommendation to give mosquito nets to people who live in mosquito-infested areas. It is strange that the article blames organisations like the WHO (World Health Organisation) for giving alerts about possible epidemics. As the writer should know, it is better to provide warnings of possible epidemics than try to stop the spread of one that is already in progress. Then, the author would blame the organisation for sitting by doing nothing, while the epidemic caused havoc. WHO can only announce alerts and report the possibility that something may happen. So, if it does not happen, should we blame WHO or should we thank it for alerting countries to take precautionary steps and stopping the infection from spreading and becoming an epidemic? This article reminds me of the argument my mother used to have with me. If her blood tests did not show any abnormality, she believed that her money was wasted and she had been defrauded. She had been raised with the practice in India that one only gets a test done after one has become ill. The idea of preventive medicine was novel to her, as it seems to be for this author. Meenal Mamdani, online comment

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 | 12 May 2016 | MONEYLIFE

Letters.indd 5

21-04-2016 19:42:03

Your Money RETIREMENT

TAX

Government Employees May Be Able To Invest up to 50% in Equities through NPS

G

overnment employees may soon be able to invest up to 50% of their

contribution in a pension fund in the equity market, from the current limit of 15%, India’s pension fund regulator said. “It is under government’s consideration.

We have sent a proposal to the government to give the government employees an option to invest up to 50% in equities,” Pension Fund Regulatory and Development Authority (PFRDA) chairman Hemant Contractor told reporters on the sidelines of a pension fund conference. He said PFRDA is also pushing for giving government subscribers the choice of selecting their pension fund manager. The number of government subscribers currently stands at nearly 4.5 million, accounting for 44% of the total pension fund subscribers. PFRDA is also deliberating on guidelines for allowing 2% of the government pension moneys to flow into alternative investment funds (AIFs) every year, he said.

LIFE INSURANCE

IRDAI Asks Insurers Not To Depend on Banks for Selling Life Insurance Policies

B

anks are now playing a predominant role in distributing policies of private insurers. Insurance regulator IRDAI (Insurance Regulatory and Development Authority of India) has warned life insurance companies against overdependence on banks for selling life insurance policies. The fear in the insurance industry is that if RBI (Reserve Bank of India) asks banks to refrain from selling insurance, sales of insurers dependent on banks would be hit. Bancassurance fears were discussed by IRDAI with chief executive officers of life insurance companies at a special meeting. IRDAI also made it clear to the insurance industry that they would not have the freedom to increase commission for selling life insurance policies.

I-T E-filing Appeal System Activated

I

ncome-tax (I-T) department activated the Aadhaar and netbanking-based e-filing verification system for taxpayers to file their first appeal before a tax officer, on the lines of online ITR filing. To reduce the interface between tax officials and the taxpayer, the department has operationalised the facility on its official e-filing portal. “One EVC can be used to validate one form of the assessee irrespective of the assessment year. The EVC will be stored against the assessee PAN along with other verification details. The EVC will be valid for 72 hours or as otherwise specified,” a notification said.

VEHICLE INSURANCE

Long-term Two-wheeler Insurance Policy Launched

B

ajaj Allianz General Insurance has launched a long-term two-wheeler package policy. Two-wheelers can be insured for up to three consecutive years under this policy. The insured do not have to renew the contract every year as they get one policy certificate for a maximum of three years of cover. The policy allows refund of premium with cancellation of policy, even if a claim for partial loss is filed during the policy period. Under the policy terms, there is 24x7 roadside assistance service. This service will be offered complimentary to women customers during the first year. The insured can save on paying higher premia due to annual third-party motor premium hikes.

MONEYLIFE | 12 May 2016 | 12

Your Money.indd 2

22-04-2016 11:56:51

MONEYLIFE FOUNDATION THE RIGHT THING TO DO

Moneylife Foundation’s

CREDIT HELPLINE The main objective of this helpline is to provide information, advice and preliminary guidance to indiv individuals needing help in credit-related areas. Our objective is to arrive at a solution that is acc acceptable to both the borrower and the lender. We encourage responsible borrowing.

ATIO

LIC APP

E T C E EJ N

LOA

Supported By

R

OUR EXPERTS

ANIL JALOTA

SURESH PRABHU

HOW IT WORKS

1 2 3 4

R BHUVANESHAWARI

RESHMA SURI

YOGESH SAPKALE

Every new query posted will be sent to our panel of experts When we get the opinion/advice from our expert, we will post the reply You can access similar issues faced by other borrowers Set also up a one-o-one meeting with our counsellors either at Moneylife Foundation’s Mumbai office or by Skype.

www.moneylife.in/credithelp hel To use our credit helpline, please confirm that you have read our terms and conditions.

IncomeTax Helpline.indd 2

08-10-2015 12:58:32

Your Money RETIREMENT

Government Backtracks on EPF Issue

T

he government once again, flip-flopped on its policies, relating to retirement and pension products. There is a clear disconnect between the government’s policies and the concerns of savers. Similar was the flip-flop seen after the budget on the proposal to tax the employees’ provident fund (EPF) corpus on withdrawal. The government faced another backlash for the restrictions on the withdrawal of the EPF corpus before retirement. The ministry of labour and employment introduced four changes to the EPF withdrawal process effective 10 February 2016. These included, retirement age increased from the current 55 years to 58

years, withdrawal of EPF balance only when you reach the age of 57 years and restriction on withdrawal of employer’s contribution to EPF before 58 years. However, after the backlash of trade unions, the labour secretary, Shankar Agarwal, announced the withdrawal of the 10th February notification. This withdrawal was announced just hours after labour minister Bandaru Dattatreya had announced the 10th February notification will be deferred to 1st

MONEYLIFE QUIZ

August. Mr Dattatreya had also relaxed the withdrawal norms; now a subscriber can withdraw his or her entire savings for the purpose of housing, treatment of himself/ herself or family members suffering from certain illnessess, marriage of children as well as professional education of children. When the finance minister announced the Budget for FY16-17, he stated the need to bring parity among pension products, and proposed taxation of the EPF corpus on withdrawal, similar to the National Pension System. However, this led to a huge backlash and the government had to roll-back the proposal. Will the government take the opinion of financial consumers before introducing policies which affect the life-savings of a person?

Moneylife Quiz no

231

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 9th June. Send in your answers to quiz@moneylife. in with the Quiz no., name, address & telephone number before 18 May 2016.

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!

G Balakrishnan

1. What was the value of investments pulled out by investors from equity mutual fund schemes, in March 2016? a. Rs4,085 crore b. Rs13,250 crore c. Rs17,451 crore d. Rs3,381 crore

5. What was the religion of Professor John Yudkin’s parents? a. Christianity b. Jewish c. Islam d. Atheism

2. What was the outflow from arbitrage equity schemes in March 2016? a. Rs3,876 crore b. Rs3,381 crore c. Rs13,250 crore d. Rs17,451 crore

6. Of which software product is StayFocusd an extension? a. Google Chrome b. Internet Explorer c. Microsoft Windows d. Microsoft Office

3. In how many stocks did 193 equity diversified mutual fund schemes trade, in March 2016? a. 500 stocks b. 495 stocks c. 450 stocks d. 400 stocks 4. In which part of USA was Wesley Gray raised? a. Chicago b. Colorado c. Washington DC d. New York In all, 21 readers got all the answers right last time. The winner of Quiz-229 is G Balakrishnan from Perumbavoor (Kerala). Congrats! You win a personalised clock with an investment quote!

7. On which of the following stock exchanges was SAR Auto Products not listed? a. Ahmedabad b. Vadodara c. Pune d. Mumbai 8. Which is the form in which income-tax deducted at source is reflected? a. Form 26AS b. Form 16-A c. Form 15-H d. Form 14-G The answers to Moneylife Quiz-229 are: • 1- c. Rs20,000 crore • 2- c. 17 schemes • 3- a. Four schemes • 4- c. Wallace Stevens • 5- d. Beta • 6- c. 207 • 7- a. Rs49,500 • 8- a. 2005

MONEYLIFE | 12 May 2016 | 14

Your Money.indd 4

22-04-2016 17:46:00

HAVE YOU SUBSCRIBED YET? Trusted to keep Your Saving Safe

(Subscription Form overleaf)

Magazine Subscription revised 28 April 15.indd 2

23-03-2016 16:32:56

Our boldness comes at a small price Print + Digital subscription

Guer Ctopy Yo Now!

Here is how you benefit 1. Avoid the traps of mis-selling which w burn a hole in your savings savings 2. Get our ffair ir and unbiased information info mation with no hidden agenda 3. Access the magazine online at the same time it hits the stands 4. Persons of Indian origin have family here who

Choice   

PAYMENT DETAILS

BASIC DETAILS

(Please tick)

need financial hhelp. elp. So, Moneylife is extremely xtremely useful for NRIs too 5. Automatically be be a member of Mone Moneylife ylife Foundation and receive our daily newsletters 6. Automatic basic membership of Moneylife Smart Savers, financial advisory service

Period 12 Months 24 Months 36 Months

NEW SUBSCRIBER

No. of Issues 26 Issues 52 Issues 78 Issues

Cover Price Rs1,170 Rs2,340 Rs3,510

EXISTING SUBSCRIBER YOUR SUBSCRIPTION NO.

NAME: ______________________________________________________________________________________ GENDER: ___________________ ADDRESS: _____________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________ PHONE: (Office):_______________________Phone (Res): _________________________E-mail address: ______________________________________ DATE OF BIRTH: _______________________(MM) (DD) (YY) (Please ensure correct date of birth if payment is by credit card) PROFESSION:_________________________DESIGNATION: ________________________ ( ) Please find enclosed ( ) Cash ( ) Cheque / ( ) Demand draft number ____________ Dated: ________________________ for (tick one) ( ) Rs1,170 ( ) Rs2,340 ( ) Rs3,510 Favouring Moneywise Media Pvt Ltd ( ) Please charge it to my ( ) /( ) My card number is ___________________________________________ & expiry date is _________ (MM/YY) DATE: __________________

Add Rs50 extra for outstation cheques

Please fill in this order form and mail it with your remittance to Moneywise Media Pvt Ltd, 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400 028. Credit card orders can be faxed to Mumbai 022-49205022. In case payment is through credit card, expiry date of card should be mentioned. # Rates and offers are valid in India only. This offer is valid for a limited period. #Please allow 4-6 weeks for the delivery of your personal copy. #All disputes shall be subject to Mumbai jurisdiction only. Introduce a friend: Fill in the details below & we will send a free copy to your friend. * Name: ___________________________________________________________________________________________________________________________ Address: __________________________________________________________________________________________________________________________ E-mail: _______________________________________________ Tel: ___________________________ *Free copy will be sent only to addresses which can be verified prior to sending

Magazine Subscription revised 28 April 15.indd 3

17-03-2016 20:05:48

www.moneylife.in Exclusive news & views with a big difference MCA services down, entrepreneurs can’t register new companies The webpage of the ministry of corporate affairs (MCA) for new company registration is down since 25 March 2016. This is in contrast with the Narendra Modi government’s promise to help entrepreneurs to register a new company within three minutes, with just a single

form. Taking cognisance of the ire on

Moneylife Impact: Ministry asks SFIO to look into Helios & Matheson; ROC in 3 other cases MCA has responded to Moneylife Foundation’s survey and memorandum of 1,500+ complaints

Banned drug seized from listed firm Avon Lifesciences may be the tip of the iceberg Several financially distressed small pharma companies can become easy prey to the underworld-controlled drugs business

A Visit to Patanjali Ayurved A team from Religare met the management led by Acharya Balkrishna. Some key points emerged from the meeting

Twitter, Nirmala Sitharaman, the minister of state for commerce and industry, asked one Ravi Kalantri, who has been tweeting on the issue, to contact joint secretary KVR Murthy of MCA. Following the tweet from the minister, the MCA page for company registration was displaying a message tendering apologies. However, there was no information about when the original webpage, and thus the service, would be restored

ML FOUNDATION Stop Bribes, Kill Corruption Shailesh Gandhi, former central information commissioner, continues his detailed discussions and insights into the Maharashtra Government Servants Regulation of Transfers and Prevention of Delay in Discharge of Official Duties - Act 21 of 2006, which has the same potential as RTI for getting better services, governance and accountability for citizens.

Rupee’s link with exports is weak: Ind-Ra While the Indian rupee can act as an enabler for export revival, it is unlikely to be a primary driver, says the ratings agency

India’s first property title law comes up in Rajasthan; to ease land acquisition: Report The new law allows the state to stand as a guarantor for land titles and provide compensation in case of issues of defective title

HAVE YOUR SAY Vote in the Moneylife poll on the top issues of the week Are Indian banks ready for the challenges in the new emerging market segments?

Govt endangering lives of RTI applicants by revealing postal address on its website Is it not dangerous for the applicant’s safety at the backdrop of threats and killings of RTI activists?

100%

Maple scam and PM Awas Yojana: Where is the transparency? – Vinita Deshmukh Yes

For the latest news, exclusives and reports on our activities http://twitter.com/Mldigital

Web Content.indd 1

http://www.facebook.com/moneylife.in

No

Can’t Say

TO GET THIS AND MUCH MORE INSTANTLY, SUBSCRIBE TO OUR DAILY & WEEKLY NEWSLETTER FREE

22-04-2016 17:47:31

CROSSHAIRs

Class Action in Australia Holds out hope for PACL victims

A

n Australian law firm, Piper Alderman, has offered to file a civil action suit to recover over AU$170 million transferred overseas by Nirmal Bhangoo, the alleged mastermind of the mammoth Rs49,100 crore ponzi scheme that has duped over 50 million Indians over a 25-year period. These investors were sold fractions of land in projects being developed by two Pearls group companies—Pearls Agrotech Corporation Ltd (PACL) and Pearls Golden Forest Ltd (PGFL). An extensive investigation in Australia by

Sheraton Mirage Resort, Australia, now controlled by Pearls. Out of reach of the long arm of Indian laws?

investigator Niall Coburn and the local media there has uncovered transfer of at least AU$170 million to companies in Australia, Hong Kong and Singapore that are directly or indirectly controlled by Nirmal Bhangoo, founder and brain behind the Pearls group. Many Indian investors, angry with the slow investigation and unexplained delay in freezing and

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

recovering their money, have formed two associations representing over 60,000 people duped by Pearls and are attempting civil action in Australia to get back their money. They are PACL Employees and Customers Protection Forum and the Janlok Prathishtan Sanghata Committee (India). The associations hired Temple Law and Nayak Associates to handle their case. These lawyers, in turn, approached Niall Coburn and Piper Alderman to pursue the class action in Australia to recover their funds. On 2 February 2016, based on an order of the Supreme Court of India (SC), the Securities & Exchange Board of India (SEBI) had constituted a committee headed by Justice RM Lodha to oversee the liquidation and sale of Pearls group’s assets and refund of money to investors at the earliest, preferably within six months from the date of the order. Hence, Piper Alderman, the law firm, has written to Justice Lodha and the SEBI chairman, offering to file cross-border proceedings in Australia to bring overseas assets under control, liquidate them and get back investors’ money. The law firm’s letter says that Niall Coburn, who has been investigating PACL assets in Australia for two months, has traced assets of around $170 million and there may be “more assets held in complex structures.” It provides an extensive list of assets that have been traced in Australia through their investigation, explains the connection with Mr Bhangoo’s family and even provides a chart of the group and its linkages. These include AU$100 million in properties such as Sheraton Mirage Resort (Sheraton) on the Gold Coast through a company called Pearls Australasia Mirage 1 Pty Ltd incorporated in October 2009, Pearls Infrastructure Projects Limited and several homes and properties that are connected through Nirmal Bhangoo’s children. Worryingly, Piper Alderman says that these foreign assets are not under receivership in India and can be dissipated during the slow investigation. In fact, the Sheraton is already listed for sale. Shockingly, it 

MONEYLIFE | 12 27 May November 2016 2014 | 18 | 14

Crosshair.indd 2

21-04-2016 20:46:24

 says that the Indian government has not even filed

applications to “preserve the investor funds in other jurisdictions, such as Australia, Singapore and Hong Kong.” An international class action of this type, with approval from the regulator, has never been attempted before. Even if the Australian legal process is swift and enables recovery of assets, the government will have to evolve a mechanism to distribute the money among an estimated 50 million investors. The task is humungous and SEBI is still in the process of collating investor data with proof of investment. It is, however, unclear why the government is not invoking the draconian provisions of the Prevention of Money Laundering Act or acting swiftly to preserve the overseas assets of Nirmal Bhangoo’s family. Meanwhile, the Pearls group, which has been adept at gaming the legal system for over 20 years, has already enlisted a phalanx of expensive and influential lawyers to continue its fight. There are also dark rumours about powerful people trying to derail action against the group. It is also curious that the PACL scam has evoked little interest in the Indian media, despite the massive sum involved; it is the Australian press that unearthed the massive transfer of funds and assets owned abroad. Will the Lodha committee really succeed in getting investors even a part of their investment back? Or will this be another lackadaisical pursuit that yields no result?

Fraud Investigation Office (SFIO). Here, again, the only instruction is only for ‘examination and incorporation’ into its court-ordered investigation. Finally, we have yet to hear what happened to the complaints against Elder Pharmaceuticals and Bilcare Ltd which were listed as companies with the highest number of complaints from investors. A dozen or more squiggles on a copy of the memorandum indicate the number of eyes that have perused, at least the front page, but none has found it fit to order action that would lead to refund of investors’ money. In fact, a simple and effective action is possible even under the new Companies Act 2013 which clearly says that “Deposits accepted before commencement of the new Act have to be refunded within a period of one year or on becoming due which ever is earlier.” Had MCA been concerned, immediate refunds could have been ordered under this Section, to turn the heat on companies. After all, most investors listed by us have been running from pillar-to-post and have already filed complaints with MCA, company law board and every regulator they could think of. Less than 2% of the complaints get resolved. Moneylife Foundation has now been advised that the next course of collective action may be to

Unsecured, Not Fixed Depositors’ struggle continues

T

he bad news for those who invest their life’s savings in unsecured corporate fixed deposits (FDs) is that the government doesn’t really care about their plight. On 10 February 2016, Moneylife Foundation sent a compendium of 1,596 complaints representing the savings of over 1,138 investors, mainly senior citizens, to the ministry of corporate affairs (MCA). There is neither a response to, nor a formal acknowledgement of, our memorandum. It is our Right to Information query that led to four responses. In every one of them, MCA had merely acted as a postoffice and forwarded the query to regional offices “for necessary examination and incorporation of findings thereof in investigation report.” So complaints against Jaiprakash Associates have been forwarded to Kanpur; those against Unitech Ltd to MCA’s regional director, north and complaints about Plethico Pharmaceuticals to regional director, north west. Only in case of Helios & Matheson (H&M), which has raised Rs55.25 crore from 6,540 depositors across India, was the complaint directed to the Serious

approach the National Consumers Disputes Redressal Commission (NCDRC) or a class action. This would require investors to cross the threshold of a collective loss of at least Rs1 crore and for the court to be convinced that these are consumers of financial services who have been cheated. For starters, those trying to get their money back from Helios & Matheson, Elder Pharmaceuticals, Jaiprakash Associates, Unitech, Plethico Pharmaceuticals and Bilcare can send us details online here: https://www.surveymonkey.com/r/ Corp_FD. But the battle is a long one and the outcome uncertain; so sensible investors would do well to follow Moneylife’s advice in future: It is not worth risking your hard-earned savings for a slightly higher interest rate.  19 | 12 May 2016 | MONEYLIFE

Crosshair.indd 3

21-04-2016 20:48:39

DIFFERENT STROKES SUCHETA DALAL

TAC Report Proves Systemic Lapses at the NSE Will SEBI act on the expert committee’s report?

T

he powerful technical advisory committee (TAC) intention was to bring the truth before the people through of the Securities & Exchange Board of India (SEBI) proper investigation. conducted a detailed investigation of the National Before we go into TAC’s findings, let me explain what Stock Exchange’s (NSE) high frequency trading (HFT) and HFT, or algo trading, is. These are automated trades vindicated the contentions of an anonymous whistleblower conducted at millisecond or microsecond speeds throughout who wrote three letters on how the Exchange’s trading the day by computer programs developed to process market systems gave better access to certain entities allowing them data. They buy and sell large quantities of securities, based to make huge profits. on price patterns without human intervention, making huge profits TAC’s investigation team prepared a detailed report and from wafer-thin margin on massive discussion of its findings and volumes. It is these that explain the follow-up have been extensively massive froth of trading turnover running into over Rs1 lakh crore reported by The Mint and every day. Bloomberg. Moneylife too has With this background, we will perused a copy of the findings discussed by TAC at SEBI. But let the findings of SEBI’s TAC speak before we proceed further, a for themselves. TAC, chaired by quick recap of the issue. Readers Dr Ashok Jhunjhunwala, met on of Moneylife know that the 15 March 2016 to discuss a report NSE has filed a Rs100-crore submitted by Prof Om Damani defamation suit against us for who was entrusted with the task bringing the contents of the letter of investigating the whistleblower’s The expert panel report to public attention sometime in letters. TAC recorded its thanks to says that it is ‘plausible’ that June 2015. A notice of motion Prof Damani for his ‘outstanding OPG and some other brokers to gag us until the suit comes up efforts’ and also noted that his were given preferential for hearing was, however, shot project team of IIT-Bombay had access to back-up servers... down by Justice Gautam Patel undertaken a data analysis that OPG ‘gained materially’ by of the Bombay High Court, who was in the nature of a forensic exploiting the system audit. It then took note of the also ordered the NSE to pay Rs50 lakh as penalty mainly to two following findings confirmed from hospitals in Mumbai. Unknown to us, the whistleblower the whistleblower’s letter. sent a second letter to SEBI in August 2015 detailing how 1. Technical details about how brokers could get advantage it can verify his allegations of how NSE’s systems were in connecting to the NSE’s servers because the Exchange compromised. SEBI kept mum about this even as it watched had no ‘load balancers’ and ‘randomisers’ in its systems the outcome of NSE’s defamation charge against us. architecture. In October 2015, the whistleblower sent me a 2. That OPG Securities, a brokerage firm mentioned in the first letter, had, indeed, tried to exploit loopholes third letter which would prove his charge that certain and it is ‘plausible’ that OPG and some other brokers influential entities managed to rake in huge profits through preferential access. This was sent only to me, but had were given preferential access to back-up servers. More explosive information on a ‘dark fiber’ link between the importantly, that OPG ‘gained materially’ by exploiting NSE and the Bombay Stock Exchange (BSE) which allowed the system. In this connection, it further said that while a huge advantage to a third entity. We decided to share it has studied data and submissions from the NSE, “It is the letter with SEBI and the finance ministry, since our not possible from the data available alone to investigate 

MONEYLIFE | 12 May 2016 | 20

DIFFERENT STROKES.indd 2

21-04-2016 20:40:18

DIFFERENT STROKES SUCHETA DALAL



and determine the extent of collusion of NSE officials and OPG.” with OPG/ others.” We are delighted that a full investigation by TAC 3. The team also found that OPG’s ability to happily has brought some larger issues to attention which the exploit the system ended when the system architecture committee plans to discuss, review and examine in future. changed. The committee agreed “that OPG Securities First is the all-important issue of how to build capacity was able to exploit the architecture to gain undue within SEBI to proactively detect wrongdoing/ system abuse and unfair advantage and NSE failed to prevent such at the brokers’ end and inside stock exchanges. Secondly, manipulative practices by OPG.” whether the “fibre connectivity between two co-location 4. The team found that the architecture of NSE with facility provides any unfair advantage to the brokers visrespect to dissemination of Tick-by-Tick (TBT) through à-vis retail players/ investors.” In fact, regulators around TCP/IP was prone to manipulation/abuse. When SEBI the world are debating the second issue of how automation requested NSE to investigate this, NSE claimed that their has made retail investors as well as institutional investors architecture could not be, and has not been, misused. outside the HFT group into second-class investors. But, In spite of NSE not providing adequate details on so far, hapless and disaggregated investors have been the issue, the available data losing the battle because they do was examined and the report not have a powerful and united conclusively shows that OPG voice. TAC plans to go deep into consistently logged in to the the larger issue of “the robustness servers with better hardware of the architecture of NSE and BSE specifications. It also finds and whether randomisation needs that information on back-up to be introduced” as well as SEBI’s servers was not transparently policy with regard to co-location communicated to all brokers and algorithmic trading, its impact in 2011-12 and earlier. and the actions that are required. 5. From the third letter, it was As always, we have emailed confirmed that the staff of SEBI chairman and NSE’s top Sampark Infotainment, visited brass as well as several members of NSE on multiple occasions for the NSE’s board of directors, but laying fibre cables, installation, have received no reply to findings etc, on behalf of Ways2Wealth of the TAC. The responses from and GKN. The whistleblower OPG Securities and Ways2Wealth The panel suggested that had contended that Sampark SEBI should constitute a team are already in the public domain; had provided a ‘dark fibre’ the former has denied the findings. of people with appropriate link to Ways2wealth, giving background to “investigate the Interestingly, after details of better access. Here is what SEBI’s findings were published collusion aspect between NSE by various media entities, the the TAC-commissioned report officials and OPG Securities...” says, “With regard to the issue Association of National Exchange of dark fibre, the Committee Members of India (ANMI), which was of the view that in violation of its own policy on represents 900 members, is understood to have told the allowing only ISPs, NSE allowed non-ISPs like Sampark, news agency Bloomberg that it plans to take up the issue with the regulator. to lay fibre in its premises for various members.” Clearly, the battle to get at the truth is far from over. 6. The report further said that NSE had “violated norms of fair access and allowed some brokers to benefit. Also, NSE’s defamation case against us and appeal against Justice when the complaint was made to NSE, its management Gautam Patel’s order persists. Let us not forget that the had dismissed it and did not initiate any steps to check finance ministry as well as the Standing Committee of the possibility of any collusion with the staff of NSE.” Parliament have asked SEBI for a copy of TAC’s report. TAC did not stop at merely accepting the report. It It remains to be seen if they initiate any action.  says, “SEBI may initiate immediate action for lapses on the part of NSE and exploitations made by OPG under the guidance of the Committee,” and that SEBI should Sucheta Dalal is the managing editor of Moneylife. She was constitute a team of people with appropriate background awarded the Padma Shri in 2006 for her outstanding contribution to “investigate the collusion aspect between NSE officials to journalism. She can be reached at [email protected]

21 | 12 May 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3

21-04-2016 20:45:32

MUTUAL FUNDS POINTERS

Why Did Investors Pull out Their Money from these Schemes? A few schemes suffered a massive exodus of money in March 2016. Bulk of the outflows were probably due to dividendstripping

I

n March 2016, investors pulled out as much as Rs4,085 crore from equity mutual fund schemes. While sales of equity mutual fund schemes brought in Rs13,366 crore, as much as Rs17,451 crore was redeemed by investors. These were the highest ever redemptions recorded in a month. The previous highest redemptions were reported in September 2010, when as much as Rs13,250 crore was redeemed from equity schemes. We take a look at schemes which faced the highest redemption pressure and which schemes saw their assets grow, in March 2016. We analyse the growth in assets under management (AUM) over the net asset value (NAV) growth of the scheme. For example, in February 2016, if we assume that the AUM of a scheme was Rs100 and the NAV was Rs10/unit and, in March 2016, the AUM grows to Rs125 crore and NAV is Rs11/unit, the net inflow will be approximately Rs15 crore. The additional Rs10 crore in the AUM is from NAV growth. Based on this, out of the 189 equity diversified schemes, around 89 schemes, or 47%, reported net inflows totalling Rs3,381 crore. The remaining 100 schemes saw their AUMs decline. The consolidated AUMs of these schemes declined by Rs4,800 crore. Other equity schemes, including arbitrage schemes, reported a net outflow of Rs3,372 crore. As many as six schemes saw their AUMs grow by Rs100 crore or more. These were: SBI Bluechip (Rs681

crore), Franklin India Prima Plus (Rs315 crore), Birla Sun Life Frontline Equity (Rs260 crore), ICICI Prudential Value Discovery (Rs164 crore), ICICI Prudential Focused Bluechip Equity (Rs138 crore) and SBI Magnum Global 94 (Rs111 crore). Most of these schemes have attracted investors based on their past performance. Schemes which have delivered robust returns in the past are rewarded with equally strong inflows from investors. There were as many as 11 schemes which saw their AUMs decline by over Rs100 crore. The five schemes with the highest outflows were: Reliance Quant Plus (Rs790 crore), Religare Invesco Contra (Rs667 crore), JM Equity (Rs347 crore), Sundaram Rural India (Rs340 crore) and Reliance Focused Large Cap (Rs272 crore). Reliance Quant Plus, which reported

an exodus of Rs790, saw its AUMs decline by 90% to Rs78 crore in March 2016 from Rs780 crore in February 2016. What led to this huge outflow? Dividend-stripping. High net worth investors use dividend-stripping to reduce tax on capital gains from other investments. The dividend paid is tax-free and the NAV reduces by the amount of dividend paid. The investor then shows the reduction in NAV as capital loss to be adjusted against capital gains from other investments. This adjustment is allowed only if the units are purchased three months earlier or held for 270 days after the dividend payment. In May 2015, Reliance Quant Plus had AUM of just Rs36 crore. In June 2015, the AUM shot up to Rs1,378 crore. In the same month, the scheme announced a dividend of Rs4.2 per unit. Over the period, the AUM gradually declined and, in March 2016, as much as Rs790 crore was redeemed. There were a few other schemes which reported a sharp decline in AUMs. Religare Invesco Contra suffered a 75% decline in AUM to Rs195 crore from Rs768 crore over the same period. Other schemes which saw their AUMs decline to less half their AUM of February 2016 were: Religare 

High Outflows an Outcome of Dividend Stripping? Equity Diversified Schemes

AUM Feb-16 AUM Mar-16 (Rs Cr) (Rs Cr)

NAV Growth

Net Flows (Rs Cr)

SBI Bluechip

4,050

5,124

10%

680.70

Franklin India Prima Plus

6,048

7,021

11%

314.80

Birla Sun Life Frontline Equity

9,434

10,684

10%

260.20

ICICI Pru Value Discovery

9,925

11,224

11%

164.30

ICICI Pru Focused Bluechip Eq

8,884

9,965

11%

138.30

Reliance Focused Large Cap

1,120

967

11%

(271.70)

Sundaram Rural India

449

161

12%

(340.10)

JM Equity

830

562

9%

(346.90)

Religare Invesco Contra

768

196

12%

(667.40)

Reliance Quant Plus

781

79

11%

(790.30)

MONEYLIFE | 12 May 2016 | 22

Fund Pointer.indd 2

22-04-2016 12:30:39

MUTUAL FUNDS POINTERS

No Interest in Arbitrage Schemes? Arbitrage Schemes* ICICI Pru Balanced Advantage

AUM Feb-16 AUM Mar-16 (Rs Cr) (Rs Cr)

NAV Growth

Net Flows (Rs Cr)

10,128

11,021

8.09%

72.70

SBI Equity Savings

184

201

4.90%

7.30

HDFC Equity Savings

127

136

6.21%

2.00

DHFL Pramerica Eq Income

36

38

2.53%

0.60

L&T Equity Savings

59

61

3.53%

(0.40)

Kotak Equity Arbitrage

4,278

3,939

0.77%

(372.10)

IDFC Arbitrage

2,862

2,497

0.72%

(385.90)

ICICI Pru Equity - Arbitrage

3,583

3,102

0.74%

(507.10)

JM Arbitrage Advantage

2,538

1,846

0.72%

(710.70)

HDFC Arbitrage

2,583

1,812

0.73%

(789.50)

*Including schemes which invest a part of the portfolio in arbitrage opportunities

 Invesco Business Leaders, Sundaram As a percentage of their initial corpus,

Rural India and Indiabulls Blue Chip. In October 2015, Indiabulls Blue Chip saw its AUM jump to Rs458 crore from Rs32 crore in September 2015. The scheme declared a dividend of Rs1.90 in March 2016. Similarly, Religare Invesco Contra and Religare Invesco Business Leaders reported a substantial increase in AUMs (of over Rs200 crore each) in October 2015 and August 2015, respectively. The schemes paid a dividend of Rs1.90 per unit and Rs2.65 per unit, respectively, in March 2016. But it was not just equity diversified schemes, even most arbitrage schemes, too, faced strong redemptions. This category of equity schemes reported a consolidated outflow of Rs3,876 crore in March 2016. Out of the 29 arbitrage schemes, 25 schemes reported a net outflow. Of these, nine schemes reported a net outflow of over Rs100 crore each. Among these were schemes such as HDFC Arbitrage, JM Arbitrage Advantage, ICICI Prudential Equity – Arbitrage, IDFC Arbitrage, Kotak Equity Arbitrage and Reliance Arbitrage Advantage which reported an outflow of over Rs300 crore each.

the outflow ranged between 10%30% for the schemes. Among the four schemes that reported an inflow was ICICI Prudential Balanced Advantage which reported a net inflow of Rs73 crore. The other three schemes reported an inflow of under Rs10 crore. Among the other category of equity schemes, which include tax-savings schemes, sector schemes and index schemes, around 50 schemes (out of the 113) reported a net outflow. Among the remaining schemes which reported

an inflow, as many as 26 were equity linked savings schemes (ELSSs). Being the last month of the financial year, ELSSs reported a net inflow of nearly Rs1,000 crore. Savers usually rush in to invest in tax-saving schemes in the last quarter of the financial year. Among the ELSSs, Axis Long Term Equity (Rs622 crore), Reliance Tax Saver (Rs164 crore) and ICICI Prudential Long Term Equity (Rs117 crore) attracted over Rs100 crore each. Axis Long Term Equity has not only performed well as an ELSS but, over the past year, it has outperformed most schemes of the equity diversified category. As investors chase star performers, it is not surprising to see a high inflow of assets in such schemes. This was the highest monthly inflow after SBI Bluechip. Among the schemes that reported an outflow were: Sundaram Financial Services Opportunities (Rs342 crore), Birla Sun Life Index, (Rs187 crore) and SBI Magnum Tax Gain Scheme 93 (Rs154 crore). As it can be seen from our analysis, a bulk of the inflows and outflows is limited to only a few schemes. Strong inflows or outflows may not always be related to scheme performance or the market. 

Strong Inflows Seen in Tax-saving Schemes Other Equity Schemes

AUM Feb-16 AUM Mar-16 (Rs Cr) (Rs Cr)

NAV Growth

Net Flows (Rs Cr)

Axis Long Term Equity

6,677

7,818

7.77%

622.20

Reliance Tax Saver

3,920

4,646

14.33%

164.40

ICICI Pru Long Term Equity

2,548

2,879

8.40%

116.90

Franklin India Taxshield

1,700

1,981

10.82%

97.30

Birla Sun Life MNC

2,766

3,101

9.93%

79.70

HDFC Taxsaver

4,018

4,543

14.44%

(55.50)

Reliance Banking

1,753

1,931

13.93%

(66.30)

SBI Magnum Tax Gain 93

4,094

4,361

10.25%

(153.50)

Birla Sun Life Index

418

276

10.96%

(187.30)

Sundaram Financial Services Opportunities

401

124

16.37%

(342.00)

23 | 12 May 2016 | MONEYLIFE

Fund Pointer.indd 3

22-04-2016 12:30:55

MUTUAL FUNDS POINTERS

Hot and Cold Stocks of Fund Managers In March 2016, Container Corporation was in demand while Reliance Industries was on the selling list

I

n March 2016, 193 equity diversified mutual fund schemes traded in as many as 495 stocks. For about 228 stocks, the holding remained unchanged in their portfolio reported for March compared to their February 2016 portfolio disclosure. We take a look at the top stocks bought and sold by equity schemes in March 2016. In terms of value, the top 10 stocks bought by equity mutual funds were: Container Corporation of India, Cipla, Axis Bank, Dabur, GlaxoSmithKline Consumer Healthcare, Bajaj Auto, Bajaj Finserv, State Bank of India, Lupin and Century Textiles & Industries. Equity schemes reduced their holdings in Reliance Industries, Coal India, Infosys, Bharti Airtel, ITC, Maruti Suzuki, Larsen & Toubro, Power Grid Corporation of India, Bharat Petroleum Corporation and Tata Consultancy Services. As many as 3.2 million shares of Container Corporation of India(CCIL), worth Rs383 crore, were bought by equity funds in March 2016. ICICI Mutual Fund was the top buyer of the stock; six schemes of the fund house added shares to their portfolio. ICICI Prudential Value Discovery picked up 1.48 million shares while ICICI Prudential Focused Bluechip Equity picked up 605,892 shares of the stock. Two schemes sold shares of the stocks. HDFC Top 200 sold 70,000 shares of CCIL. Schemes that bought shares of Cipla were: ICICI Prudential Dynamic Plan (Rs130 crore), ICICI Prudential Focused Bluechip Equity (Rs65 crore), Birla Sun Life

Hot Stocks

Frontline Equity (Rs50 crore), ICICI Prudential Top 100 (Rs35 crore) and Birla Sun Life Equity (Rs28 crore). Reliance Quant Plus sold 445,000 shares of the pharma stock worth about Rs23 crore. Axis Bank’s shares were in demand from 30 schemes. The top buyers from DSP BlackRock MF, namely, DSP BlackRock Top 100 Equity, DSP BlackRock Equity, DSP BlackRock Focus 25 and DSP BlackRock Opportunities, picked up shares worth Rs200 crore in March 2016. Among the few sellers were: Religare Invesco Contra (Rs35 crore) ICICI Prudential Multicap (Rs38 crore) and Reliance Quant Plus (Rs54 crore).

Giving Up on Reliance? Among the stocks that equity schemes reduced their holding in was Reliance Industries—37 schemes sold shares worth Rs770 crore of the stock, while about 16 schemes added shares worth Rs140 crore. Among the top sellers were: Axis Equity (Rs105 crore), Reliance Quant Plus (Rs85 crore), HDFC Equity (Rs80 crore), ICICI Prudential Dynamic Plan (Rs70 crore) and Reliance Equity Opportunities (Rs40 crore). Schemes which bought the stock included SBI Bluechip (Rs50 crore), Kotak Select Focus (Rs40 crore) and L&T Equity (Rs20 crore). As many as 30 schemes sold shares of Coal India worth Rs425 crore, while only five schemes added shares of the stock. Among the top sellers were: HDFC Top 200 (Rs110 crore), Birla Sun Life Frontline Equity (Rs43 crore), Reliance Vision (Rs35 crore), ICICI Prudential Multicap (Rs31 crore) and DSP BlackRock Top 100 Equity (Rs27 crore). The buyers included SBI Contra (Rs18 crore) and PPFAS Long Term Value (Rs8 crore). Shares of Infosys worth Rs485 crore were sold by 26 schemes, while another 27 schemes bought shares worth Rs100 crore. Among the top sellers were: ICICI Prudential Dynamic Plan (Rs70 crore), Reliance Quant Plus (Rs60 crore), HDFC Equity (Rs50 crore), Religare Invesco Contra (Rs48 crore) and HDFC Top 200 (Rs45 crore). Among the buyers were DSP BlackRock Focus 25 (Rs20 crore) and Motilal Oswal MOSt Focused Multicap 35 (Rs15 crore). 

Cold Stocks Bought

Sold

Value (Rs Cr)

Company Name

CCIL

13

2

382.90

Reliance Industries

Cipla

20

7

344.66

Coal India

Axis Bank

30

21

152.08

Infosys

Dabur India

6

2

149.98

Bharti Airtel

GSK Healthcare

8

3

129.41

ITC

Company Name

Number of Schemes

Number of Schemes Bought

Sold

Value (Rs Cr)

16

37

(628.14)

5

30

(391.81)

27

26

(385.99)

6

15

(246.37)

27

25

(231.61)

MONEYLIFE |12 May 2016 | 24

Fund Pointer.indd 4

22-04-2016 12:20:59

FIXED INCOME

Bank FD and Savings Interest under Tax Scrutiny Make sure you don’t fall foul of the IT department

T

he income-tax (I-T) department is keen to have taxpayers declare all the interest they earn. Tax-deductedat-source (TDS) gets reflected in Form 26AS which helps the I-T department to know the interest amount on bank fixed deposits (FD). If the taxpayer falls in the tax bracket of more than 10%, the returns should reflect the additional tax payment. But what if there is no TDS due to the interest being less than Rs10,000 in the financial year for that bank (across all branches)? You need to still report the interest and pay tax; but the taxpayer may intentionally or unintentionally not add such interest. For example, if interest on bank FDs earned in a financial year is Rs9,000, there is no TDS. If you are in the 10% tax bracket, you need to add the interest in your tax

returns and pay Rs900 as taxes. The I-T department has found that such interest is, often, not reported and is warning taxpayers to properly report it. A good reason

to do so is that banks send the details of earned interest to the I-T department, irrespective of whether tax is deducted at source or not. So, your tax return may be opened for scrutiny if you continue to ignore

the bank FD interest just because there is no TDS. Another avenue for underreporting of bank interest is that on savings account balances. As there is no TDS for any amount interest on savings account, taxpayers may not be keen to report it. With the revised tax forms since last year (FY14-15), which require listing of all the banks (IFSC code and account number) where you have savings account, current or cash credit account, it will be easier for the I-T department to check under-reporting of savings account interest. Section 80TTA allows savings account interest up to Rs10,000 in one financial year to be exempt from tax. But it is not applicable for bank FD interest which is fully taxable. It means that if you have an average balance of Rs2.5 lakh in your savings account during a financial year (on which most banks give interest @4%pa), the interest would be tax free. This average would be lower, if you had savings account with banks offering higher interest rates.

Bond Yields Are Down

G-Sec Yields Are Down

ond yields have headed down in the past fortnight. You can expect to get around 7.5%-7.75% for AAA rated bonds and around 9% for lower than AAA rated bonds.

T

B

Issuer

Maturity Date

Next Last Yield Coupon (%)

ISIN

Rating

Power Fin 8.4 5%

10 Aug-20 10 Aug-16

7.99

INE134E08HQ7

CRISIL AAA

REC 8.70%

01 Feb-18 01 Feb-17

7.65

INE020B08815

CRISIL AAA

IRFC Ltd 7.83%

22 Jan-17

22 Jan-17

7.50

INE053F07751

CRISIL AAA

IndiaBulls Housing Fin 10%

19 Mar-23 19 Mar-17

9.08

INE148I07241

ICRA AA+

Mahanagar Telephone Nigam 8.24%

19 Nov-24 19 Nov-16

8.12

INE153A08048

CARE AAA (structured obligation)

Power Grid Corp 8.85%

19 Oct-18 19 Oct-16

7.65

INE752E07KD0

CRISIL AAA

NSE data as of last trade date of 18 April 2016

BSE data as of last trade date of 18 April 2016

he 10-year benchmark G-Sec yield fell by five bais points (bps) in the past fortnight to end at 7.41% on 18th April. According to Nomura, “India’s trade deficit narrowed to a five-year low of US$5.1bn in March from US$6.5bn in February, beating expectations. Imports contracted 21.6% y-o-y, as gold imports slowed due to the jewellers’ strike. Overall, India’s trade deficit narrowed in FY1516, owing to lower commodity imports. We expect the current account deficit to narrow to 0.9% of GDP in FY-1516 from 1.3% in FY14-15,” says the report.

25 | 12 May 2016 | MONEYLIFE

Fixed Income.indd 1

20-04-2016 20:36:55

SMART MONEY R BALAKRISHNAN

8 Mistakes Retirees Make Retirees are easy targets for sellers of financial products and fraudsters. They must acquire basic financial knowledge for their own safety

W

hile Americans are notorious for poor longterm savings, I am sure that the plight of senior citizens living exclusively on their own savings is not too good either. Retirement just happens. Retirement means the loss of your earning and perhaps trying to live on your savings and, often, a reduced lifestyle with the prospect of unplanned medical emergencies looming ahead. But, in that country, the State provides a lot of social security in sunset years. In India, things are worse as the State takes no such responsibility—not even for those who have paid their taxes throughout their working lives. I also think that

there is a lot of foolishness and naiveté on the part of the just-retired or about-to-retire folks, when it comes to matters of money. Senior citizens are either very naïve or very aggressive as investors and savers. I have seen highly educated senior citizens take risks with their life’s savings, without understanding the risk. Often, they also do not understand the financial products suitable for them. I have come across so many cases where retirees have lost small fortunes. Fixed deposits (FDs) with unknown companies because a relative or a friend recommended it are among the most common cause of such self-afflicted pecuniary. For example, Subhiksha group company, Viswapriya, or PACL or so many ‘schemes’ where they think they will get higher returns than on bank FDs or on safe FDs with a rock-solid Sundaram Finance (once

a hot-favourite with savers in south India. The company would reach its legal limits and come out with ads saying they cannot accept more deposits!). After interacting with so many of them, I think the primary reasons are: 1. ‘Secrecy’ in Matters of Money. They do not want to tell anyone, or talk to anyone, about how much they have, where they have parked it, etc. Secrecy is an obsession with them. I know of several senior citizens who have lost big money in various schemes. They all know me well and know about me. However, they have never mentioned it to me or wanted to discuss personal investments with me. This penchant for secrecy makes them easy prey for the hustlers of financial products. 2. Reluctance To Understand Financial Products. In many cases, innumeracy blinds them totally to everything. They do not even bother to find out anything about the company or the outfit before they write out their cheque. For example, I asked someone who had invested in Viswapriya whether he knew who its promoter or owner was. He did not. Then, I asked him whether he knew about Subhiksha. He did. I asked him who was its owner and he knew the name, the background, etc. When I told him that Viswapriya’s owner/promoter was the same, he was flabbergasted. I told him to pull out the form for FD that he had filled up and showed him the names of the directors. Obviously, he had not bothered to read all that. He was more concerned with the higher rate of interest that was available. 3. Attempts To Avoid TDS. This leads many people to put in amounts below the TDS (tax deducted at source) threshold (around Rs50,000) in too many companies. In this attempt, they run out of good companies and are easy meat for brokers and agents who peddle FDs of companies like JP Associates, Helios & Matheson, etc. Many I know have 15 to 20 companies’ FDs! The vicarious pleasure of cheating on the taxman has caused losses to so many. And, now, they worry more because someone, somewhere got an I-T (income-tax) notice about interest receipts. They do not realise that in this information age technology digs out information from the deepest trenches. They are still cocooned in their mindset of having a second bank account hidden away from the taxman. 4. Operate in Single Names. Another common mistake I see is that many senior citizens still operate their investments in single names. A joint account-holder is 

MONEYLIFE | 12 May 2016 | 26

column_Balakrishnan.indd 2

16-04-2016 18:00:51

SMART MONEY R BALAKRISHNAN

 an absolute must, irrespective of age, more so if you are

closer to God than the rest. And they do not seem to have even a nomination in place. 5. Fear of Equities. A common feature I note amongst a lot of senior citizens is fear of equities. They do not want to consider even equity mutual funds. Even when they know that they are in good health, have just crossed the age of 60 and have many years to look forward to, they are blinkered. Only fixed-income investments appeal to them—fixed deposits, bank deposits, chit funds or ponzis recommended by friends. They have not bothered to understand equity and will not go to an adviser or a friend to try and decipher this animal called equity. So, they miss out on the one investment that could help them to protect themselves against inflation. On the other hand, I also come across some innocent (?) senior citizens who blindly trust their private bank relationship manager and have ended up with a bunch of (T)ULIPs. Once they are bitten, they become sceptical about everything and go into the security of bank FDs, with the occasional rush of blood to their head which pushes them to exotica. 6. IPO Memories. Most of them grew up in an era where the IPO (initial public offering) game was like a national lottery. They still get their urge to apply in the IPOs; but, luckily, many of them are scared by the free pricing. They still think of ‘premium’ as highway robbery. Most of them have not bothered to try and understand investment basics even after retirement when they have enough time. 7. No Advance Planning. Retirement is not planned or given any attention until it actually happens. No one seems to have given any thought to the fact that they would cease to get a regular pay cheque and that they have a lifetime of spending ahead of them. It seems to be a binary option. Either they have enough wealth or they are dependent on their children for their future daily bread. Thus, they take

each day as it comes, without concern for their spouse or their children. I know, it sounds harsh; but an unplanned retirement is very cruel on your spouse. And, in today’s world, you should not be a burden on your children who are already stressed out about the future of their children. 8. Spouses Remain Dependent. In all cases, spouses are kept out of the decision-making regarding all matters relating to money. The typical homemaker spouse never bothers with where the money is, which bank, etc, and is totally dependent on someone to handle the money. Should the earning spouse, who has retired, depart this world, the homemaker spouse is all at sea and is easy prey for scamsters. So, all you retired folks out there, please take some time out everyday and FORCE your spouse to understand what the financial resources are and how to access them, should something happen to you. Unless you do this, please understand that, after you, your spouse is going to be at the mercy of someone for finance, even if you may have provided for her. Making and saving money alone does not complete your task. Informing and educating your spouse about it is equally important. All the observations are based on specific instances I have come across. We do not have a senior-citizen-friendly ecosystem. So, we have to create it on our own. Start from scratch, if you have to. Use the Internet. Start reading financial magazines/financial papers, just to get a drift of things. Understand inflation which is the biggest enemy of the retired. Financial knowledge can make things easier for you and make your rupee work better. And, remember, you are alone in this. You are easy target for insurance salesmen and other fraudsters. They will find you as the soft target for meeting their goals. In the process of meeting their goals, they will empty your pockets.  The author can be reached at [email protected]

Invite your friend to subscribe to Moneylife at 25% discount. Get in 4 friends at 25% discount & your subscription is free. Everybody wins! Log in or register with h w ww.m mone ey liife e.in n/reffe rre r.h htm ml to avail this offer

27 | 12 May 2016 | MONEYLIFE

column_Balakrishnan.indd 3

16-04-2016 18:01:25

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

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

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

MSSN GB (Insurance 1-3 ).indd 2

18-11-2015 20:41:50

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

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

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

Subscription to Moneylife magazine is included in MSSN Premium Membership About MSSN MSSN 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. MSSN was set up to help investors and savers make the right financial decisions and handhold them through the entire process.

MONEYLIFE SMARTSAVERS FIX YOUR FINANCES, FOREVER

www.savers.moneylife.in

MSSN GB (Insurance 1-3 ).indd 3

18-11-2015 20:42:13

INSURANCE TRENDS New products, regulations, features and options, interpreted from your perspective R e g u l a t i o ns

Poor Compliance of Ombudsman Awards under Scanner IRDAI wants monthly reporting of pending compliance

G

etting an award in your favour at ombudsman hearing for a case may seem to be end of your struggle in making an insurance company pay your claim or redress any other grievance. But it may not be the end of your agony as the insurer may just sit on the award and keep procrastinating on the payment. Moneylife Foundation held an open house discussion with AK Dasgupta, Mumbai insurance ombudsman on 27 September 2014.

Fine Print Birla Pension Plan Mis-selling to Senior Citizens

B

irla Pension Plan is a scam targeting senior citizens with the pitch of being selected for the pension plan. The email gives a proper logo of the insurer along with registered

The Cover Story based on the discussion (http://www.moneylife.in/ article/learn-from-others-insurancemistakes/39133.html) raised an important point. “The insurer has to comply with the award in 15 days (however, several consumers complained to the ombudsman that this does not happen in practice).” A Moneylife reader complained, in May 2015, that the Delhi ombudsman’s award, dated 2 December 2014, under which HDFC Life was supposed to cancel the policy, and refund all the premiums paid, was not complied with. It was a classic case of an insurer being lax about compliance with an inexplicable delay of six months. Moneylife took the case to HDFC Life which replied: “On receipt of Ombudsman copy (sic), we have initiated the process of refunding the amount. Customer will receive the cheque within seven working days.” It is unlikely that

office address, even though it is in poorly-worded English. For Rs2 lakh one-time premium, there will be monthly pension of Rs3,000 for whole life and refund of the purchase price to the nominee. It also offers Rs2 lakh health insurance benefits and Rs4 lakh accidental cover. Interestingly, Birla SunLife has neither denied nor accepted the product offering.

Ombudsman award copy can take six months to reach the insurer and, hence, it’s not difficult to guess where the delay happened. Our prodding prompted the insurer to comply quickly. Insurance Regulatory and Development Authority of India (IRDAI) seems to have woken up to the lapses by insurers in complying with the ombudsman’s awards. It is unfortunate that the regulator had to crack the whip on insurers who should not keep the ombudsman awards pending as such decision is binding on the insurer. Inordinate delay reduces the trust in the insurance companies, especially since so few complain, and fewer, win an award. IRDAI has directed companies to furnish details of cases pending for compliance for the past three years. IRDAI has been receiving feedback from ombudsman’s offices bringing to its notice the unwarranted delay from insurers to implement the awards of the insurance ombudsman. IRDAI has also told the insurers that complaints have been received from the aggrieved policyholders. IRDAI had asked insurers to give a list of ombudsman awards that are pending for compliance for the past three years (2013-14, 2014-15 and 2015-16) by 7 April 2016. Insurers  will also have to file monthly

Telenor’s Free Life Insurance up to Rs50,000

M

obile operator Telenor is offering free life insurance up to Rs50,000 from Shriram Life to its mobile customers. For this, the customer is required to do a predetermined minimum recharge every month. The insurance amount is 100 times the recharge value. If the total recharges done in a 

MONEYLIFE | 12 May 2016 | 30

Insurance.indd 2

22-04-2016 15:31:50

INSURANCE TRENDS

 statement on status of ombudsman

cases and status of court cases. All this bureaucratic work could have been avoided with some exemplary punishment. A hefty fine and the wide publicity it would get can straighten up the insurers. IRDAI has asked insurers to ensure that orders of judicial and quasi-judicial bodies should be complied within the timeframe stipulated in the order or award. In cases where timeframe is not specified, the order/award should be complied within 60 days.

January 2016 from Amritsar office. According to ICICI Lombard, “Please note that we have sold 45,993 stand-alone TP policies between January 2016 and March 2016 amounting to premium of Rs47 crore. In terms of zonal share, West accounted for 51%, followed by South at 22%, North at 18% and East zone at 9%. With regard to your query on city specific data, we are not in a position to provide the same due to confidentiality issues.”

Mo t o r I n s uranc e

ICICI Lombard Refuses TP Cover in Amritsar Private vehicle is denied. What chances for commercial ones?

I

CICI Lombard’s Amritsar office refused stand-alone third-party (TP) car insurance for a private vehicle. If a private vehicle is refused TP cover then what chance does commercial vehicle with higher loss ratio have to get standalone TP cover? The consumer was told that insurer has stopped giving stand-alone TP cover since

 month amount to a total of Rs500,

the cover will be Rs50,000. The minimum recharge level to get cover is Rs50 per month which will give a cover of Rs5,000. The sum insured for the current month is determined by the recharges done in the past month. It will help the operator to get business of the required recharge every month. Life insurance should not be the reason

ICICI Lombard may be doing the same at other locations too. Overall, north India has higher TP claims than south India and, hence, more difficulty in getting standalone TP cover. It means that the insurer may be trying to analyse the TP claims from different locations and then deciding whether to allow consumer to buy TP cover or to make it difficult to buy. In the previous issue, we wrote that IRDAI is trying to make it

to move to Telenor; better tariff plan or better coverage should be the reason.

DHFL Pramerica Life Penalised Rs15 Lakh

I

RDAI has imposed Rs15 lakh fine on DHFL Pramerica Life Insurance Company for violation of guidelines on outsourcing norms for corporate agents licensing. The

difficult for insurers to refuse covering TP motor risk and even wanting insurers to sell TP cover online. But is it really working? ICICI Lombard’s example shows that the ground reality is different from what IRDAI is trying to implement. IRDAI needs to find if ICICI Lombard issued any standalone TP cover from Amritsar office between January-March 2016 to ascertain if the insurer is violating IRDAI guidelines. Similar checks needs to be done with other insurers to see if any location specific disallowance is made for stand-alone TP cover. Just checking the overall business underwritten for stand-alone TP or getting zonewise TP business will not give the full picture. Insurers are always a step ahead in trying to prevent losses which may entail denial of underwriting. There is a need to ensure that vehicles do not skip the mandated TP cover. It is unbelievable that 55% of vehicles running on Indian roads are uninsured. If insurers are making it difficult to buy standalone TP, then it is one of the reasons for such high number of uninsured vehicles in India. IRDAI needs to make stand-alone TP cover easily available for private as well as commercial vehicles. TP cover premium is under tariff and mandatory in India. 

insurer entered into outsourcing agreement with entities owned or related to individual agents, which is a violation of the corporate agency guidelines. It resulted in additional payment being made under the pretence of service-level agreements. IRDAI has told the insurer to be careful in future and not enter into such agreements. 

31 | 12 May 2016 | MONEYLIFE

Insurance.indd 3

22-04-2016 15:32:17

COVER STORY

INSURANCE

Buying insurance may seem easy, considering the many cold calls we receive. Raj Pradhan lists the difficulties in getting insurance policy for life, health and personal accident. Read real-life examples of your proposal rejections and how you can improve you chances of getting insurance

B

uying a term plan or mediclaim is easy for the young and healthy. With age or health issues, the chances of getting an insurance policy drop steeply. The insurer would rather lose the a customer than underwrite something risky. Insurers even say that it is easy to get a lot of ‘bad’ business; but they gain little by taking additional risks. If the risk is a little beyond their tolerance level, they will reject the proposal rather than offer the policy at a higher premium (loading). If you apply to another insurer, you have to make a declaration about the rejection which shows as a blot on your record. Life insurers are even postponing the underwriting by six months which is even more frustrating for the potential customer. They will get a full refund, but go through an unhappy experience. The insurer may not give any written report that explains the reasons for rejection, but a testing centre, or the insurer’s own call

centre, may sometimes tell you the reason. It is possible that if you independently do the medical tests, you may find nothing wrong which will lead to doubts about insurer’s tests. The postponement of underwriting, instead of offering a policy with increased premium, leaves customers hanging. You may be under the illusion that applying for a high sum assured of Rs1 crore to Rs3 crore term plan will fetch you special treatment by the insurer. Term plans are more difficult to get than insurance-cum-investment products. The higher the cover sought, the higher will be the scrutiny of the proposal for underwriting. In India, underwriting, at the proposal stage, is often coupled with underwriting at the claim stage. It means that at the time of the claim, the insurer may recheck everything to ensure that proposal was made in utmost good faith. Even when there is a claim after several years, it can give an opportunity to the insurer to scrutinise the proposal 

MONEYLIFE | 12 May 2016 | 32

Cover Story.indd 2

22-04-2016 16:52:27

COVER STORY

 form to find flaws which can lead to claims rejection.

Where medical tests are indicated due to declaration of Luckily, Section 45 of the Insurance Amendment Bill medical history/pre-existing illness or age higher than 50 states that a policy cannot be called into question after years, rejections can shoot up to 25%. three years of being issued. Insurers will find it almost impossible to repudiate claims after three policy years due Real-life Rejections for Strange Reasons to this suggested change. It puts the onus on the insurer Given below are some real-life cases, as first person to do proper checks at the time of underwriting. There is accounts, that Moneylife has come across where the a need for robust underwriting process so that all issues reason for rejection is not clear. The only option a are flagged before the policy inception. The insurer will consumer has is trying with other insurers as every insurer have three years to raise any objections regarding the has different underwriting rules. One insurer may accept declarations by the insured. The Amendment should be a case which has been rejected by another insurer. Risk a welcome change for genuine policyholders. It will not tolerance among insurers varies, for different medical allow insurers to reject a claim after three years under conditions. the garb of any misrepresentation, mis-statement or nondisclosure while buying the policy. Life Insurance But insurers are under no such pressure for health Case 1: I applied to HDFC Life Click2Protect Plus plan insurance which needs renewal after one or two years. for Rs3 crore. I went through the medical tests and So, health insurance claims after three years with the submitted all the documents asked for. After almost a insurer can still be rejected if there is any issue with month, I called them and I was told that the policy is the proposal. Buying health insurance at an older age ‘postponed’ for six months. I have received no other is diffi cult. Insurers are supposed to allow entry into intimation so far from HDFC Life. The reason that the regular mediclaim policy till age 65 years, but the ‘right call centre agent gave was TMT (tread mill text). Now, I to underwrite’ still rules. Some insurers just do not am not sure what to make of this. The process, in itself, entertain senior citizens trying to buy mediclaim. They was quite a pain with the number of emails and calls may have senior citizen mediclaim product in their that I received, despite submitting all documents online portfolio, but are they really selling it? Also, don’t think in one shot. Every email referred to some requirement that a top-up/super top-up is easier to buy. that had already been met. The In fact, since insurers don’t information from HDFC Life share the underwriting during the process was quite poor. formula to accept or I was kept absolutely clueless reject a case, one is about where things were stuck. completely in the dark. Based on the doubt that they had Insurance companies say planted in my mind, I underwent that they do not have the a thorough health check-up (and luxury of a good mix of additional tests) and every report healthy and less healthy has come absolutely clean. population. When more HDFC Life has only added a and more young and ‘black spot’ to all my future healthy buy insurance, insurance applications now, for insurers will have a no fault of mine. balanced portfolio which Case 2: I am told that due to can help insurers take more high ESR count, the policy has risks and accept more cases, been postponed for six months. instead of having strict rules HDFC Life is not sharing with of rejection. Until then, pure me the medical report. They insurance products will be are saying that it is given fe has only Li FC D "H tough to get if you are a after the policy is issued. : ds e eA ture insuranc y beyond th risky prospect. According to Realit a ‘black spot’ to all my fu mine." How does one confirm the added r no fault of fo , w one insurance official, there higher level of ESR? I don’t no ns applicatio can be 1%-2% rejections of know whether there was any problem in it. They even proposals received from the young and healthy have refunded the full amount. I would also like to see with no adverse declarations in the proposal form. the medical report. The sum assured was Rs1 crore. 

33 | 12 May 2016 | MONEYLIFE

Cover Story.indd 3

22-04-2016 16:57:39

MONEYLIFE SMARTSAVERS FIX YOUR FINANCES, FOREVER

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

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

Subscription to Moneylife magazine is included in MSSN Premium Membership

MSSN GB Ad_invest.indd 2

18-11-2015 20:37:14

MSSN Benefit #4 - 7 Equity Fund Choices •

Which Large-cap Funds?

•

Which Mid-cap Funds?

•

Which ELSS?

•

ELSS SIP Tool

Fixed Income Choices •

Which Bonds, NCDs?

•

Which Long term Debt Funds?

•

Which Short term Debt Funds?

•

Which Liquid Funds?

Investools with equity funds & stocks •

Monthly Investing

•

Investment Restructuring

•

Lump-sum Investing

•

Investing for Specific Goals

Stocks

MSSN GB Ad_invest.indd 3

•

Long-term Stock picks

•

SIP Tool for Stocks

18-11-2015 20:38:17

COVER STORY

Incompletely filled proposal forms, absence of documents, out of range BMI, adverse current medical ailments or history are among the main reasons for rejection of insurance proposals Shreeraj Deshpande, head of health insurance, Future Generali India

 Case 3: I applied for LIC eTerm in June 2015. After a

slow response and going through medical tests twice, the proposal has been postponed. No reason was given to me; but talking to an LIC employee, gave a clue that it was rejected due to change in haemoglobin levels during two medical tests. Now what should I do? Should I go for some other company’s plan or wait for six months as suggested by LIC? LIC did not share the reports. No rejection letter was given; the mail just mentioned ‘postponing for six months’. They asked whether I had gone for any medical treatment between the two tests. I emailed them stating clearly that I did not go through any medical treatment. Just after the first tests, LIC asked me to submit an independent test for BP and submit a questionnaire for hypertension which I sent them. My physician told me that since my BMI(body mass index) is slight higher, the BP reading is bit high (it was 150/100); I don’t have any medical condition. Super Top-up Case 4: I had applied for L&T Super top-up insurance of Rs20 lakh with deductible of Rs5 lakh. I had declared my pre-existing diseases and also stated my one-year old son was hospitalised because of typhoid infection. My son is out of hospital and hale and hearty but my insurance was rejected giving the reason of my son’s hospitalisation! Can they do that or was I too honest in declaration? Critical Illness Case 5: Max Bupa call centre personnel asked for my family’s medical history. I reported three things, knowing that honesty is the best policy. A) My mother is on medication for about five years for heart palpitation. So, I said ‘yes’ for this question. B) I have been advised to take Tonact tablet for 45 days since my cholesterol was high when I went for master health check-up through my employer-provided health insurance. I took the tablet and it came back to normal; that was about a year ago. So I said ‘yes’ for this question too. C) My wife went through Caesarean Section when we had our first child.

For this, the caller said it’s normal. He then articulated the decision. Since I have answered two questions as ‘Yes’, I cannot avail critical illness (CI) cover from Max Bupa. However, my wife was given CI cover which I accepted. Super Top-up Converted to Mediclaim Case 6: I have approached Apollo Munich for their Super Optima Top Up with a sum assured of Rs10 lakh and deductible of Rs7 lakh. I am a 48–year-old NRI (non-resident Indian) with sound health. The declaration I made was for my continuous medication for hypothyroidism detected 32 years back; I am on 75mg of thyroxin. I had produced all my latest medical reports to assess my medical status. Now, Apollo Munich has rejected my policy and the agent does not know why. Am I not entitled for health insurance policy even after all disclosures? I am meeting all the criteria and also ready to undergo their medical testing. Mediclaim Case 7: I am trying to buy mediclaim for my senior citizen father. I visited the local office of United India Insurance (UII). They refused to give a quote stating that they are not issuing senior citizen mediclaim to new applicants. I told them it is there on website. They said yes but they are not issuing; only renewing existing ones. It looks like it is at the discretion of the local office. I will try to visit another UII office in Pune. National Varishtha gave a quote of Rs9,784 for Rs1 lakh SI and Rs2 lakh critical illness cover. The only problem with this plan is that SI remains constant forever. With ever-increasing medical costs, Rs1 lakh cover won’t be sufficient a few years down the line. Besides, medical tests have to be done at one’s own cost. New India Assurance Senior Citizen policy has a maximum coverage of Rs1.5 lakh. It seems like most of the government insurers are reluctant to give a policy to senior citizens. New India Assurance’s personnel said that it seems difficult to get approved. On persuasion, he asked me to meet the 

MONEYLIFE | 12 May 2016 | 36

Cover Story.indd 4

22-04-2016 16:54:02

COVER STORY

Proposal can be rejected due to medical adversity, financial ineligibility for applied cover, lack of insurable interest or moral hazard

Pawan Mahajan, head of underwriting, Bajaj Allianz Life Insurance  branch manager who also said same thing. He asked for

medical tests (13 of them) based on which they would decide. But another precondition he put is that I should also buy my family insurance from them. He asked me why I was buying my father’s insurance from them and mine from a private insurer. Case 8: I tried to purchase L&T Medisure Classic Individual Health Policy for my younger sibling who has a hearing problem in one ear. I declared the medical condition in the proposal form and they asked me to send the scanned medical record which I sent. But the proposal was declined stating reason ‘deafness in one ear and head injury’. As far as we know, there was no head injury; other than ear problem, my sibling is perfectly fine. What should we do? Should we opt for some other company’s plan? Case 9: I wish to take a health insurance policy for my mother (66), my wife (31) and myself (40yrs). Last year, I had applied for L&T Health Insurance but they rejected the application stating that my mother was operated for otosclerosis half a decade ago! Just for your information, otosclerosis is a micro-surgery to fix a tiny bone issue in the ear and is a once-in-a-lifetime surgery with no side-effects or recurring effects and does not require any kind of ongoing medication/treatment. Every other parameter in my mother’s medicals was perfect (BP normal, no diabetes, no heart ailment). Her reports are better than most younger people! Despite this, without even understanding the implications of otosclerosis, they simply rejected the application. It’s like refusing to insure someone because one has had a cataract removal surgery! I really wanted to take the matter up with IRDAI (Insurance Regulatory and Development Authority of India) for rejecting the application without sufficient cause; but I was too busy to enter into a longdrawn battle. Thereafter, I am discouraged to apply with another insurer again. Case 10: I am 27 years old and my health insurance application (Religare) was rejected. I was operated in my left eye four years back and I have glaucoma for which eye-drops are needed. What do I do now? Apply to all

other companies till I get somewhere? I need a health insurance; I have a basic corporate health insurance. Diabetes Plan (Mediclaim) Case 11: A proposal was made for a lady of 40 years with diabetes. The diabetes is being controlled through medication and is not insulin dependent. We had shortlisted Apollo Munich’s Diabetes plan and, after all disclosures, done the medical test. However, the policy request has been rejected due to supposedly high albumin in the urine which is generally the case with most diabetics and, hence, it does not make sense. Personal Accident Case 12: I applied for a personal accident (PA) policy with Apollo Munich. I had voluntarily disclosed that I was involved in paragliding and mountaineering. They declined my application. What are my options? The application of my spouse went through. I have not pursued paragliding and /or mountaineering for almost eight years now and don’t see myself doing it in future. I am OK with exclusion being there for paragliding and mountaineering in the PA policy. Moneylife took the case to Apollo Munich for underwriting. The applicant had to give a declaration that he is no longer involved in paragliding and mountaineering and, only after that, they have issued the PA policy.

Reasons of Proposal Rejection According to Shreeraj Deshpande, head of health insurance, Future Generali India Insurance, “Incompletely filled proposal forms are one of the major reasons. However, lack of submission of documents, for example, income proofs in case of personal accident policies are also reasons for rejection. Other reasons for rejection include BMI (body mass index) not falling in acceptable range, adverse medical ailments in existence or history, etc.” Pawan Mahajan, head of underwriting, Bajaj Allianz Life Insurance, says, “Proposal can be rejected due to 

37 | 12 May 2016 | MONEYLIFE

Cover Story.indd 5

22-04-2016 16:54:42

COVER STORY

12 Ways To Reduce Your Chances of Getting Rejected

I

f you are serious about getting an adequate term plan or health insurance, you need to take a few steps to ensure that your proposal is not rejected. There are some things that are not in your hand while there are things which you can change. “Health is wealth” is not just a cliché. If you have a clean record of no hospitalisation, no past claims, no pre-existing diseases (PED), no family history of diseases, no issues with medical tests, etc, then your chances of getting an insurance policy improve, even when you are not so young. 1. Zero-defect Proposal Form: Proposal forms have to be fi lled completely with correct details. Previous medical details about illness/injury, any disability or deformity have to be mentioned. At the time of claim, non-disclosure of such material facts may result in repudiation of the claim or, in extreme conditions, may result in policy cancellation. It is, thus, very important to have all disclosures done correctly. If you answer all the questions of the proposal form honestly, the utmost good faith portion is almost covered. A few common errors are about non-disclosure of previous policy details with other insurers, non-disclosure of complete health history and medication n undertaken, incorrect income details, s, etc. 2. Age and Fitness: Age, personal al habits, lifestyle, past medical history, y, family medical history, current health h status, BMI, blood pressure, etc, impact ct the chances of getting a policy. If you are less than 45 years of age and in good shape, hape, you have a good chance of getting a term rm plan and mediclaim. If you have fitness issues which can be handled, it is better to tackle them before you apply for insurance policy. Regular exercise will go a long way to get better premium rates or even change the decision from rejection to acceptance of the proposal. 3. Your Lifestyle: If you are a non-smoker, you will get better rates for an online term plan. If you are a smoker, you will pay approximately 50% higher premium. If you have given up smoking and drinking,

it may help. Every insurer uses different criteria to determine how many years after you give up smoking you will be eligible for a ‘non-smoker’ policy. For example, if the insurer’s criteria for ‘non-smoker’ premium rates say that you have to completely give up smoking for a minimum three years, you should try to achieve it if you want to benefit from lower rates. 4. Lifestyle Diseases: With the rise in lifestyle diseases like diabetes, cancer, heart disease, stroke, liver disease, etc, buying insurance (life and health) becomes all the more important. If you have any of these major diseases, buying a policy can be very difficult. If you have any minor health issues, think about it as a wake-up call. 5. Nature of Work: This matters a lot for a PA policy which classifies a person’s occupation in categories of low, medium and high risk. If the job profile is highrisk, the premium can be double of what a person with standard (low) risk occupation will pay. Risk level I is for administrative, managing functions, doctors, lawyers, architects, teachers, etc. Risk level II is for manual labour, mechanic, machine operator, paid driver, builder, contractor, etc. Risk level III is for workers in underground mines, jockey, fo circus performers, hunters, mountaineers, ci installation of high-tension supply, etc. Some  in premium PA products with high cover may pr be offered only to risk level I. Occupation b aand nature of work does impact life and health insurance underwriting too. h 6. Financial Status: Better financial status will get g you higher insurance cover. The main reason ffor low premium for online term plans is the expected mortality of the targeted segment. Insurers expect net-savvy, financially-secure individuals to lead a healthy lifestyle and also to have access to better hospitals. Educated, net-savvy people are also supposed to understand the importance of proper declaration of medical conditions as well as giving correct information in the proposal form. There have been studies of mortality experience among different groups within the same organisation and it has been observed that mortality rate for employees with lower rank is sometimes as much as 

MONEYLIFE | 12 May 2016 | 38

Cover Story.indd 6

22-04-2016 16:55:15

COVER STORY

 four times the mortality rate of higher-ranked employees.

Customer segmentation makes a huge difference in the premiums offered by insurers. 7. Medical Tests: If you are aware of medical conditions which can be corrected (e.g., haemoglobin cholesterol levels in the blood), it is better to get the investigations done on your own before placing a proposal with an insurer. If you are diabetic, the chances of getting a policy reduce, even though few insurers are especially offering diabetes policy (mediclaim). The insurers are looking for strict criteria when underwriting diabetic. If diabetes is in initial stages or in control, the chances of underwriting improve. Do your own tests before you allow insurers to do their testing.

10. Need Intermediary Help? If you need an intermediary for help during claims, then choose wisely and verify from the insurer what proposal they received. Check your policy documents to verify your PED is shown. Remember, there have been cases when intermediaries have fraudulently removed the health conditions declaration page and replaced it with a blank declaration to ensure that the policy is underwritten.They do not want the insurer to reject the proposal based on adverse health conditions. They earn a commission only when a policy is underwritten. The policy is worthless and, tragically, this may be found after several years, a when claim arises.

11. Previous Proposals Matter: The proposal 8. Declaration: Stick to the questions for any material form can have questions like: “Has any proposal/ declaration. If the questions seem vague, avoid the reinstatement for life or health insurance ever been insurer, if possible. Answer in utmost good faith without refused, modified, postponed or offered with extra declaring the aberrations. If you premium (reason, month, year smoked or drank only a couple and name of the insurance If you are aware of medical of times in your life, there are company)?” So, any denial, conditions which can be no need to declare it. At the postponement, modification, same time, medical tests is not a corrected (e.g., haemoglobin, additional premium for cholesterol levels in the substitute for utmost good faith previously applied proposal declaration. It cannot discover all blood), it is better to get the will have to be disclosed; your health conditions and, hence, investigations done on your hence, it can impact your the proposal form declaration is own before placing a proposal current application. Relying critical. There are products which on an intermediary to get you with an insurer depend solely on the declaration. the answer will not work. Preference should be given to If the decision-maker in an medical tests; but if the insurer decides that there is no insurance company feels that there are slim chances need for it, you have no option if you wish to go with of underwriting, pay heed. There is no way you can that insurer. force an insurer to underwrite; hence, cut your losses by going to another insurer. Oral rejection for an 9. Avoid Intermediary, if Possible: A do-it-yourself informal proposal is better as it does not go on your approach works well and can even help avoid any fraud record. Future proposals need to declare all the insurer or mistakes an intermediary may make. Ensure that you rejections, which is a negative, and reduces chances of get a copy of the proposal received by the insurer. Just underwriting with another insurer. You will end up keeping a copy of the proposal you submitted is not only hurting your chances of getting a policy. Informal enough; what the insurer received is more important. rejection is better than a formal one. People trust intermediaries blindly which can leave them high and dry. 12. Choice for Medical Tests Centre: From the An intermediary cannot genuinely influence empanelled testing centres of the insurer, choose the insurance company to give you a policy. If you are one with a better trust factor. Testing centres have educated enough to buy on your own, you may want to different levels of accuracy if there are some false buy directly from the insurer. You should buy it online positive results. False negative can also be an issue, as from insurer website, if available, as it reduces chances it means that there is no medical condition shown in of discrepancy in the proposal form. Avoid buying from the report when it is present. If the insurer discovers Policybazaar.com. the medical condition, it can have an adverse impact.

39 | 12 May 2016 | MONEYLIFE

Cover Story.indd 7

22-04-2016 16:56:22

COVER STORY

Insurance as a concept is designed to cover uncertainties and potential problems that are not known. One should take an insurance to get covered from future health problems Mukesh Kumar, ED, HDFC ERGO  medical adversity, financial ineligibility for applied cover,

lack of insurable interest or moral hazard.” According to Mukesh Kumar, ED, HDFC ERGO, “An insurance proposal could be rejected if the applicant presents a clear risk. For instance, if an applicant is suffering from a known chronic or terminal health condition, then his application will be certainly rejected, as insurance protects policyholder against an unknown risk, not the known one. Insurance as a concept is designed to cover uncertainties and potential problems that are not known. One should take a health insurance policy to get covered from future health problems. People should not look for cover after a health problem is discovered; covering such conditions would be against the ethics and economics of insurance business. The ideal time to take a health insurance is when one is healthy and fit; to make sure they get covered for any long-term medical issues. An early start is a wiser decision.”

Reasons of Proposal Postponement Pregnant women are advised to propose again after six months of delivery, as per Future Generali. Also, proposals of individuals with recent major surgery may lead to postponement of proposal underwriting. According to Bajaj Allianz, postponement is normally done for medical conditions which are uncontrolled but can be brought within control by proper treatment like diabetes, hypertension, some sort of infection, etc. Postponement period normally varies between three months to one year. According to HDFC ERGO, if there are adversities which are ongoing the person can be covered later on. For instance, someone is currently hospitalised for an acute gastro-intestinal infection the policy, may be postponed for the time being and he can apply for insurance after full recovery.

Rejection Due to Health Conditions (Cancer, Diabetes) Proposals with pre-existing major ailments like cancer, uncontrolled chronic conditions and pre-existing

critical illnesses could be reasons of rejection, as per Future Generali. Cancer survivors would be specifically evaluated depending on what type of cancer it was, at what stage was it diagnosed, chances of recurrence, period elapsed after recovery, results of screening tests, etc. In case of diabetes, Future Genrali goes by the current pathology reports. For Bajaj Allianz Life, a health condition is evaluated on the basis of type of adversity, treatment taken, current health status, correlation between different adversities and their ultimate effect on longevity of the life proposed. For cancer survivors, it asks for complete medical history like type of cancer, treatment taken, period of record, follow-up and current status. Often, insurance is denied to cancer survivors. Even if insurance cover is offered, it is with re-insurer’s opinion and high medical loading. When it comes to a case of diabetes, insurance cover can be offered with slight medical loading if diabetes is within control. HDFC ERGO’s opinion is that any proposal that has a clear and present risk will be rejected by all insurers. They may still take the case with a limitation that any claim on account of a particular pre-existing condition may not be settled. Each case comes with its own set of subjective medical history and conditions. We scrutinise every case diligently and arrive at decisions. We may not be able to comment specifically for critical diseases, e.g., cancer as each case is peculiar and has to be analysed in detail before taking any decision. However chronic ailments like hypertension or diabetes may be evaluated on the basis of controls and accepted with loading. Denial of insurance proposal is a reality often faced by customers. Insurance is a business of risk handling; the higher the risk perceived by the insurer, the higher will be the premium or the higher the chances of proposal rejection. If you present yourself favourably, based on the steps suggested in the article, your chances of getting a policy improve. Insurers are only looking for an answer to “How risky is this proposal?” They don’t want to suffer losses from underwriting your policy. Build your case with positives so that the insurer wants to do business with you. 

MONEYLIFE | 12 May 2016 | 40

Cover Story.indd 8

22-04-2016 17:06:15

StockWatch A section on stocks and sectors that catch our eye

S a n g h v i Move rs

Winner of Core Sector Growth Sanghvi Movers earns a modest return on capital and has the largest share of the cranes business

S

anghvi Movers Limited (SML) is the largest crane rental company in India. It was ranked sixth largest in the world by Cranes International (June 2015). Its fleet includes 384 medium- to large-sized heavy-duty hydraulic telescopic and crawler cranes with capacities ranging from 20MT (metric tonnes) to 750MT. Its scope of work includes implementation of

Look beyond the Short-term Volume

Price in Rs 380

250,000

345

200,000

310

150,000

275

100,000

240

50,000

205

0

Feb-15

Aug-15

Feb-16

Shares Traded

Adjusted Closing Price

Key Financials Stand-alone (Rs Cr)

Jun-15

Sep-15

Dec-15

Revenue

109.53

124.27

134.03

71.64

85.24

89.34

OPM

65%

69%

67%

Y-o-Y Revenue Growth

90%

124%

55%

Y-o-Y OP Growth

150%

239%

77%

March Ending

FY13

FY14

FY15

6%

-2%

1%

OP

RoNW

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

turnkey projects, providing well-maintained equipment as well as expert technical services and skilled manpower. It has a good record of effective deployment of cranes at optimal rates, efficiency in operations, adherence to time-schedules and low mobilisation time. With these core competencies in procuring, maintaining and operating cranes, SML is a winner. Its average operating margin is as high as 65% and low-cost competitors, if any, are yet to catch up with it.

For the quarter ended December 2015, SML’s quarterly sales were Rs134.03 crore (Rs86.71 crore) and its quarterly operating profit was Rs89.34 crore (Rs50.61 crore). For the year ended March 2015, SML’s annual sales were Rs308.23 crore (Rs244.37 crore) and its annual net profit was Rs8.06 crore (loss of Rs14.5 crore). SML’s shareholding pattern includes 46.88% shares with promoters while 24.82% is with the general public. Foreign institutional investors hold 4.92% and Indian institutions hold 23.38%. The face value of the SML share is Rs2 and its book value is Rs151.17. SML is regular in its repayment obligations with banks. It has received ‘ICRA A+’ as credit rating for long-term loans, which indicates adequate degree of safety in 

41 | 12 May 2016 | MONEYLIFE

StockWatch.indd 2

22-04-2016 17:35:47

STOCK WATCH

 respect of bank loan profile, and ‘ICRA A1’ for its

short-term loans. SML’s operations involve significant outgo in foreign exchange without any avenue for exports. Hence, volatility of the rupee against the US dollar in the currency market could adversely affect its operational costs. The company is hoping that the Central government’s emphasis on renewable energy, more particularly on wind power generation and solar energy, would increase the demand for the crane rental business that will enhance its revenue streams. It is also hopeful of higher business coming from projects in refinery and gas, cement, power and steel sector. Over the past five quarters, SML’s average growth in quarterly sales was 76% and average growth in quarterly operating profit was 129%. Valuation is low. The market-capitalisation of SML is 2.61 times it sales and 3.87 times its operating profit. The return on net worth (RoNW) is 14% computed on the basis of trailing quarterly net profit. Its debt-equity ratio is 0.51 and return on capital employed (RoCE) is 20% computed on the basis of four-quarter trailing EBIT (earnings before interest and tax). SML distributed dividends of 150% (interim dividend) for FY15-16, 25% for FY14-15 and 50%

Declining Debt, Robust Free Cash Flows (Rs crore)

Debt Equity Ratio 1.20

250

150 0.80 50 0.40 -50

-150

10-11

11-12 Free cash flow

12-13

13-14

14-15

0

Debt Equity Ratio

for FY12-13. The SML share price fell from a 52-week high of Rs408 on 12 August 2015 to its 52-week low of Rs255 on 24 February 2016. The stock was trading at around Rs301 on 21 April 2016. The Indian economy has remained sluggish for a long time but is now seeing signs of revival. Any core sector growth, which is long overdue, will generate demand for cranes in which SML has a competitive advantage and a large market share. SML could be a big winner if core sector growth is sustained. 

Tailwinds for Tiles? Low input costs, strong outsourcing linkages and government policies may keep the tiles sector growing

T

he tiles sector has been doing well for the past few years, thanks to three key factors which will not disappear soon. One, the organised tiles sector has been following the joint venture (JV) model which has emerged as a key advantage for this sector. This helps the organised players, like Kajaria Ceramics and Somany Ceramics, expand their sales without investing in assets. This model ensures that

investment remains relatively low, enabling well-run companies enjoy high return on capital. The JV model



Exits & Returns from Erstwhile Street Beat Stocks: We continue to monitor stocks featured in the erstwhile Street Beat section. We will suggest an exit when they are no longer undervalued or not performing as per expectations. Keep an eye on this space. | 42% Return: Our recommendation has so far fetched 42% average annualised return since January 2012, based on booked profit and open positions of more than one year. 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 | 12 May 2016 | 42

StockWatch.indd 3

22-04-2016 17:36:23

STOCK WATCH

 also frees the organised players to focus on marketing

and building brands. This JV model has enabled organised players to capture market share from the unorganised players. In value and volume terms, the share of organised players has increased over the years. According to Edelweiss, a broking company, the share of organised players was merely 40% in FY07-08. This increased to 51% in FY14-15. The second positive factor for the tiles sector is that gas prices have reduced in the recent past, leading to reduction in costs. Power & fuel costs account for a significant proportion of the overall costs for the tiles sector. Many tiles suppliers have entered into long-term agreements with Gas Authority of India Ltd (GAIL) and other suppliers. The third favourable factor is growth prospects. As India prospers, there is huge potential for the growth of the tiles sector. India is urbanising and the government’s infrastructure push, such as for 100 smart cities and Swachh Bharat Abhiyaan, would be the key drivers for the tiles industry. Nearly two-thirds of the rural population lives in households with mud flooring which, over the years, would slowly shift to using tiles, as disposable incomes grow. Cheap Chinese tiles are a threat. The finance

On the Right Track? Changed product mix and capacity expansion may sustain growth

C

eat, the Mumbai-based tyre producing firm, has been a great wealth-creator over the past three years. From just around Rs100 in September 2013, the stock is now quoting at around Rs1,150, a humungous rally of 1,000% in less than three years. The rally was primarily based on valuation expansion. Since September 2014, the stock has recorded singledigit sales growth. Sales growth over the past five quarters has been -1%. It has done better with profits, thanks to falling rubber prices. The valuation expansion is on expectations of better growth and profitability. Ceat has shifted its focus towards twowheeler and four-wheeler tyre segments which are more profitable. According to a research report by Religare, Ceat has raised its market

Organised Sector Is Gaining Market Share 100 80 60 40 20 0 Year 07-08

08-09

09-10

10-11

Organised

11-12

12-13

13-14

14-15

Urorganised

ministry had imposed a provisional anti-dumping duty of $1.37 per sqm (sqaure metres) on certain vitrified/ porcelain tiles from China in early April 2016. This duty will be valid for a period of six months. The major players are Kajaria Ceramics, Somany Ceramics, Asian Granito, Nitco and H&R Johnson (unlisted). Among them, Kajaria Ceramics has the highest market share, is the most efficient and has been the highest value creator. 

share in two-wheelers segment—jumping to around 27% from 8% in FY10-11. Its market share in utility vehicles (UV) segment is currently at 15% and in passenger vehicles segment at 7%. In FY10-11, its market share in these segments was negligible. Ceat plans to expand its capacity to 1,020tpd (tonnes per day) by FY17-18 from 740tpd with a thrust on passenger vehicles, two-wheelers and specialty tyres. It has recently commissioned a new unit at its manufacturing plant at Buti Bori near Nagpur (Maharashtra). This will enhance the installed capacity of the plant by 15 metric tonnes per day (MTD). The full expansion project of 120MTD is expected to be commissioned, in phases, by the end of FY17-18. Ceat has been named the exclusive distributor for the premium tyre manufacturer, Pirelli, in India. This will help in expanding its product offerings to the premium segment. It will also help improve its brand image. Ceat has been in a sweet spot, cost-wise. The tyre industry is raw material-intensive with raw material costs (natural rubber and crude 

43 | 12 May 2016 | MONEYLIFE

StockWatch.indd 4

22-04-2016 17:25:28

STOCK WATCH

 oil derivatives) accounting for around 60% of sales.

Natural rubber as well as crude oil prices have gone down significantly in the past few years which has benefited the tyre industry. However, natural rubber prices have surged, hitting a one-year high of Rs133/kg on 19 April 2016. It may not be as smooth a ride for tyre companies in future. Due to the imposition of anti-dumping duty in USA on Chinese tyres and weak domestic demand in China, Chinese tyres have been diverted to India, though the use of Chinese tyres is limited to the replacement market. Tyre industry in India is now concentrated among four key players—MRF, Apollo Tyres, JK Tyres and Ceat. These players account for around 70% of the market share. Ceat’s share is around 12%. The company’s return on capital employed (RoCE) is a healthy 29%. Its price-to-earnings (P/E) ratio stood at a little more than 10 times its trailing 12-month earnings. Globally, tyre companies are known to trade at low P/E multiples. Its Indian counterparts, like

Wipro Disappoints

Comparison between Tyre Manufacturers Company Name

Sales Growth*

Profit Growth*

P/E Ratio

Market Share

Apollo Tyres

-4.7%

25.6%

7.5

12%

JK Tyre & Inds

-0.5%

45.0%

4.3

13%

MRF TVS Srichakra Ceat Tyre *

4.6%

48.6%

9.5

29%

12.3%

111.0%

10.7

4%

2.7%

32.1%

10.6

12%

Based on average growth for the past eight quarters

MRF, Apollo Tyres, Balkrishna Industries, JK Tyre & Industries and TVS Srichakra, too, are trading at lower P/E multiples. On 31 March 2012, the company had a high debtequity ratio of 1.62. It reduced its debt from Rs1,020 crore on 31 March 2014 to Rs626 crore on 31 March 2015. On 31 March 2015, the debt-equity ratio stood at 0.37—another reason for valuation expansion. 

Perpetual Low Growth 20%

These equity schemes are incurring opportunity cost

10%

W

ipro has been a laggard among the large-cap information technology (IT) companies over the past few years. Its Q4FY15-16 results also disappointed with poor growth. It reported poor revenue growth of 4.59% on a quarter-on-quarter (q-o-q) basis. Its corresponding net profit declined by 2%. Not only the results, but the guidance from the company was also muted—a 1%-3% q-o-q growth.

Top 10 Schemes Holding Wipro Scheme Name

% of Net Assets

Franklin Infotech

9.24%

ICICI Prude ntial Technology

7.31%

ICICI Prudential - Series 3

6.84%

ICICI Prudential Value - Series 4

6.70%

ICICI Prudential Exports and Other Services

5.94%

Tata Digital India

5.54%

ICICI Prudential Indo Asia Equity

5.11%

ICICI Prudential Growth - Series 7

4.89%

LIC Nomura MF Diversified Equity - Series 2

4.63%

ICICI Prudential Value - Series 6

4.48%

0%

-10% Jun-13

Mar-16

Dec-14 Revenue Growth (%)

Profit Growth (%)

The Street did not react kindly to this development; the stock declined a little over 7% on the day of the results. Brokerage firms like Credit Suisse and Morgan Stanley have downgraded the stock, given weak March quarter earnings. Wipro has delivered a measly 21% return in the past five years, while its peers like Infosys, HCL Technologies and Tata Consultancy Services have delivered far better returns during the corresponding period. This lack of growth has resulted in its poor stock price performance. The chart above shows the revenue and net profit growth for Wipro in the past 12 quarters. The poor performance of the stock would be for frustrating for investors and mutual funds schemes which have invested in it. They are losing the opportunity to gain from better-performing stocks. 

MONEYLIFE | 12 May 2016 | 44

StockWatch.indd 5

22-04-2016 17:25:54

STOCK WATCH

UN UOTED STORIES OF PRICE MANIPULATION

SAR Auto Products (Rs169)

(Rs)

S

AR Auto Products, an autocomponents manufacturer, got listed on the Bombay Stock Exchange (BSE) in March 2015. It used to be listed on the regional exchanges of Ahmedabad, Vadodara and Pune. As per its annual report for 2015, SAR Auto, which achieved a turnover of Rs2.21 crore in FY14-15 with a production of 43,156 parts, has just four employees on its payroll. Nearly half the revenue is derived from ‘export sales’. In the same financial year, out of Rs28.81 lakh paid as salary and wages, Rs22.17 lakh was the remuneration of the two directors (promoters) and Rs6.63 lakh was

250 200 150 100

1302%

50 0 Mar-15

Sep-15

Apr-16

paid as employee salaries. SAR Auto reported a net loss of Rs3.18 crore in 14-15. For the past nine-months ended December 2015, revenue was Rs2.09 crore and profit was Rs42 lakh. Despite

its poor financials, the stock rocketed on the BSE by 1737%, or nearly 19 times, to Rs241 on 16 October 2015 from Rs13.12 on 5 March 2015. From there, the stock fell to Rs138 on 14 December 2015, down 43% from peak. Despite this fall, the stock is still up 1302%, at Rs184 on 20 April 2016, from its listing date in March 2015. This pump-&-dump operation did not go unnoticed. In March 2015, BSE sought a clarification, to which SAR Auto replied that “the management is not doing any internal activities” and that the price increase of shares “is market driven.” On 31 December 2015, there were just 597 public shareholders. Will the BSE do something more than seeking clarifications? 

MARKET TREND

Bulls Getting Bolder Though valuation is expensive

L

ast fortnight, I had suggested that the market seemed to be under pressure, setting up for a bout of rally after a short decline. However, the market did not wait for a dip; it rallied immediately for about six days, punctuated by several holidays in ensex made a high between. On 22 April 2016, the Sensex of 26,080 and fell. The continuing rally, following the low on the Budget day, has now been running n for eight weeks. Inflows by foreign institutional investors (FIIs) have slowed down but positive news flows continue. Global markets are strong. n The rally off the lows has been g note of. Timeextremely strong and worth taking wise, the market has been down by more than a year l d d now. It appears that large investors h have concluded that the worst for the Indian economy is over and

that they should be positioned for a blast-off. Well, we don’t know about that because we have no crystal ball to gaze into. However, we respect the price action of collective investors. If the Sensex closes above 25,850 in April, it would mean a close above the 10-month moving average for the first time since last July. While this does not automatically mean that a bull market will follow, it means that, barring some hug hugely negative news, investors are positioned to buy rather than sell. It also means that any dip fr from now on could be a time to buy rather than a confirmation that another round of selling has begun. What worries us is valuation. It is unlikely that a major bull market star from an index valuation of 22. starts But market indices are constantly being shuff shuffled and higher valuation stocks are getting included in the indices. The market l ti t d is less comparable with that of valuation off today previous years. — Debashis Basu 

45 | 12 May 2016 | MONEYLIFE

StockWatch.indd 6

22-04-2016 17:26:15

VALUE STOCKS DEBASHIS BASU

Toughest Part of Investing “You need a very definitive guide for selling,” Benjamin Graham had said. There is very little discussion on this

M

arket practitioners of all kinds are constantly engaged in creating frameworks for how to buy stocks. There is serious analysis going on everywhere regarding valuation, earnings growth, price momentum, management quality, sector prospects, at the micro level; and interest rates, economic growth, inflation, policy changes, at the macro level—all with the objective of finding a formula or approach that tells us which stocks to buy, in order to reap great long-term returns. Thanks to social media and ease of setting up blogs, many such analyses are available for free as well. Letters, comments and articles by accomplished investors like Prem Watsa, Howard Marks, Jeremy Grantham, etc, are also available on the Internet. A new investor seriously looking for ways to educate herself had never had it so good. However, all such discussions are centred on ‘what to buy’. Every single blog, article, newsletter and interview is about stock-picking. There is too little information on when to sell. But buying a good stock is a child’s play compared to deciding when to sell it. In our own testing lab, we have come up with at least four different ways to buy stocks that will fetch returns that are far better than those of average mutual funds. In fact, even when market valuation is expensive (as it is now), it is easy to pick stocks that will beat the market and My favourite holding the mutual funds. Sticking to period is forever a bunch of low-debt, high- Warren Buffett quality stocks, for a few years or so, will do the job nicely. But, having bought them, any investor will have to deal with the issue of when to sell. Of course, we all know what Warren Buffett has famously said, “My favourite holding period is forever.” But that works when you can buy a great stock at the right price, and it just keeps going up. How many such businesses are there? How many investors can figure out a great business well in advance? In fact, most of the stocks we buy are such that we cannot hold them forever. We need a strategy to sell. Buffett’s guru, Benjaim Graham, is known as the ‘father of value investing’. Buffett learnt from his ideas,

modified them and is now the second-richest man in the world. Graham laid out clear ideas on selecting stocks that are going ‘cheap’. But Graham has also instructed us when to sell: Either sell once “Either sell once you’re up you’re up 50% or 50% or sell in two years, sell in two years, whichever comes first.” whichever comes How would this strategy first - Benjaim Graham have done? Wesley Gray and Tobias Carlisle, in their book Quantitative Value, calculated how well Graham’s strategy would have worked from 1976 to 2013. Following Graham’s strategy—of buying stocks cheap and selling them with the help of a predefined formula— would have fetched a US investor compounded annual rate of return of 17.8% when the broader S&P500 fetched an annualised return of 11%. This is stunning, since most fund managers cannot beat the S&P500. Everybody knows about Graham’s strategy of buying. Have you ever heard of anyone pointing to his selling strategy? There are three ways in which a poor selling strategy will cost you dear. 1. We need to sell in order to prevent a stock from inflicting large losses, when our analysis has gone wrong. After all, Warren Buffett’s famous two rules for investing are: one, never lose money; and, two, never forget rule number one. Large losses will drag down returns. We need to prevent that. 2. We need to sell when the stock has not gone up which inflicts huge opportunity cost. You need to decide early enough to switch to a car that is moving fast rather than continuing with your slow ride on a bullock cart. 3. Unless we sell, our profits are all on paper. Large paper profits can suddenly disappear, if something goes seriously wrong with the market or the stock. Let’s consider each of these issues. Suppose you had bought a stock like IPCA Laboratories, a great wealthcreator, which we had recommended in one of our stockletters. In July 2014, IPCA got into problems with US FDA over various violations. The stock fell sharply. Stock experts saw it as an excellent opportunity to pick a great stock at a cheaper price. Indeed, by August 2015, IPCA had shot up and looked 

MONEYLIFE | 12 May 2016 | 46

Value Stocks.indd 2

22-04-2016 17:28:19

VALUE STOCKS DEBASHIS BASU

Maimed 890

IPCA Laboratories 810 730 650 570 490 Jan-14



Feb-15

Apr-16

all set to reward its believers. But the price drifted lower and there was no earnings growth in sight. We exited the stock at a small loss. And then came a big blow. Global Fund (Geneva) announced that it would no longer source anti-malarial drug (the mainstay of the company) from IPCA. We suggested an exit not only because earnings growth did not pick up but because we were incurring an opportunity cost—not shifting to a car from bullock cart.

this does not bother the fund managers who have placed large bets on Reliance. Over the past seven years that Reliance has struggled to generate any returns, a stock like Hindustan Lever has gone up over 300%. As Warren Buffett said: “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” Indian mutual fund managers are patiently waiting for the boat to fix itself. There are occasions when you profits go up in smoke— that is when the whole market and economy is crashing. This is a rare event. It had happened in 2000-2001 and again in 2008. It would be great if you could reduce your exposure to stocks before such a crash. For this, you need to separate a normal bear market decline (which can last for months and the market goes down by 20%-25%) and a crash. Unfortunately, we know a lot about normal bear market declines and very little about crashes. From the little that we know, a market valuation (measured by price-earnings-ratio) of above 24, starts being a danger zone. A P/E of around 28 sets up a crash-like condition and it may be a good idea to bring down your

Huge Opportunity Lost

Equity Schemes’ exposure to RIL

1,145

Scheme Name

% of Assets

HDFC Large Cap

8.89%

Principal Smart Equity

8.54%

Canara Robeco Large Cap

7.62%

Sundaram Select Focus

7.62%

Canara Robeco Equity Div

7.35%

HSBC Dynamic

6.85%

Birla Sun Life India Opp

6.78%

Indiabulls Blue Chip

6.69%

Reliance Quant Plus

6.66%

Reliance NRI Equity

6.61%

1,020

Reliance Industries

895

770

645 Apr-09

Oct-12

Reliance: The Endless Wait Unfortunately, many fund managers are so careless about managing your money that they get stuck on the bullock cart for a very long time. Take a look at Reliance Industries which is in the portfolio of 362 schemes. Despite huge initiatives like retailing and telecom, the stock has gone nowhere. Indeed, it now appears that retailing can never make much money for the company; it has been overrun by the e-commerce revolution. It is anybody’s guess how Jio Telecom will perform in a highly competitive market. But

Apr-16

exposure to 25%. In a crash, even the strongest stocks go down. Remember, in the 2008 crash, Asian Paints, one the largest wealth-creators in India, had fallen by almost 50%. Lastly, if you stick to fundamental analysis for picking stocks, you will never hear of momentum. Momentum is a dirty word for the buy-and-hold camp. But a careful study of momentum can tell you well in advance whether your stock is weakening and warn you that it is time to sell. Indeed, a formula-driven buy-and-sell of momentum stocks has beaten the market easily in the US. I will explain momentum studies in a subsequent article. 

47 | 12 May 2016 | MONEYLIFE

Value Stocks.indd 3

22-04-2016 17:28:40

3 Long-term Stockletters for Excellent Returns Panther

Antelope

Lion

(includes dividend)

(includes dividend)

(includes dividend)

63.69%*

43.61%*

40.84%*

*Annualised. Since 25 April 2014

*Annualised. Since January 2012

* Annualised. Since January 2012

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

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

Long-term value stocks. Usually large companies are selected

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

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

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

Facts about the Stockletters What is the difference among these stockletters? The stockletters are for stocks for long term but with specific emphases. We hope to have a maximum of 30-32 stocks at any time. What is the investment horizon for these stockletters? The best results from good stocks come when they are held for five years or more. What is the investment strategy? Our investment strategy for the long-term stockletters is to select quality stocks at a reasonable price. We identify companies that are reporting high return on capital but are available cheaper than similar high-quality stocks. We then apply our knowledge of managements, including corporate governance. How much should one invest in each stock? You should invest equal amount in every single stock suggested. What if I cannot invest in all the stocks? If you cannot invest in all the stocks, invest equal amounts in as many stocks as possible, starting from the lowest in rupee terms to the most expensive in ascending order. It is also very important that you invest in stocks ONLY the money you will NOT NEED to touch for the next 5 years. Good quality stocks are likely to grow at 20%-22% annum but not in a smooth fashion. If some stocks have already run up sharply, will it be wise to invest in

Stockletter (MSSN) Ad Oct 15.indd 2

them still? These are all excellent stocks we have selected in long -term stockletters. 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

21-04-2016 19:45:15

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? The stockletter is currently sent as a pdf file by email. Subscribers can also download their stockletter by visiting their MSSN 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]

NOW SIP IN STOCKLETTER STOCKS Subscribers of our can now simply enter the amount they wish to invest. Our tool will divide the amount equally across the stockletter stocks to the extent possible

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. 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 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. 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. Moneylife is a media and information company and not investment advisor. Please consult an advisor about the appropriateness of your investment decisions. Cancel within two issues: You can cancel your subscription within two issues. We will return your money after deducting Rs150 for payment gateway and handling charges. You can cancel by email or phone.

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

YES, I wish to subscribe for one year to the following stockletters:

Antelope

Lion

Panther

Annual Subscription of Each Stockletter(Antelope/Lion/Panther): Rs2,500; Special Combo Offer for any Two: Rs4,000; Annual Price for all Three: Rs6,000 NAME: ____________________________________________________________________________________________ ADDRESS: __________________________________________________________________________________________ PHONE (Office): ____________ Phone (Res): ____________ E-mail address: _____________________________________________ Date of Birth: ____________________ (MM) (DD) (YY) Profession: _____________________ Designation: ____________________________________________________________ ( ) Please find enclosed ( ) Cheque / ( ) Demand draft number ____________________________________ dated __________________ favouring Moneylife Smart Savers Network Pvt. Ltd. ( ) Please charge it to my ( ) /( ) /( ) My card number is ______________________ & expiry date is ____________ (MM / YY) DATE: ______________________ SIGNATURE: ______________________ Please fill in this order form and mail it with your remittance to Moneylife Smart Savers Network Pvt. Ltd., 316, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400 028. Credit card orders can be faxed to Mumbai 022-49205022. In case payment is through credit card, expiry date of the card should be mentioned. # Rates and offers are valid only in India. This offer is valid for a limited period. # All disputes shall be subject to Mumbai jurisdiction only.

Privacy Policy: We do not give away your e-mail or address, telephone number, or any other information that you provide to us. We use this information solely to service your account

Stockletter (MSSN) Ad Oct 15.indd 3

21-04-2016 19:45:53

EARNING CURVE

Tech Bubble Bursting? Prem Watsa believes that speculation in private high-tech companies “has ended with a thud”

P

rem Watsa, chairman and chief executive of Fairfax Financial Holdings, is known as the Warren Buffett of Canada. He has just issued the annual letter to his shareholders which discusses a variety of current issues including private high-tech companies such as Uber, Dropbox, Airbnb and so on. These companies command huge valuations but are not making any money. Those that are valued at more than a billion dollars are called ‘unicorns’. His letter to the shareholders states that the speculation in private high-tech companies has ended with a thud. “A friend of mine said the new name for these companies is ‘unicorpse’ as many of them cannot fund their losses internally for more than a few months and now have almost no access to external funding.” Some of these companies are laying off employees. “Money is being raised at lower valuations aluations from previous rounds of financing and thee cycle is now in reverse,” states Mr Watsa. For instance, many private tech firms, like app-based cab companies mpanies Uber, vacation rental start up Airbnb, rbnb, and cloud storage firm Dropbox, faced ced mark-down in the value of investments ents by T Rowe Price, a US investment firm. m. The average prices paid for second-hand hand stakes in venture capital funds are falling due to concerns about the he real value of the start-ups the he funds have invested in. Most unlisted firms are valued according ding to conventional models dels of profitability/cashashflows. But one off the problems with highghtech companies iss that valuing them thuss is impossible. Valuing ng a Prem m Watsa, chairman an & CEO Fairfax Financial Holdings

company whose shares are not traded, and are losing money, is not easy. A case in point is Dropbox. In December last year, T Rowe Price valued Dropbox at $9.4 per share, compared to $15.20 per share set by Hartford Financial Services Group. This implies that it was valued by more than 60% by Hartford. Another problem with some of the high-tech companies is that they are loss-making, currently. Valuing them involves making too may assumptions about the future which is uncertain. In a majority of the cases, the future projections are way too optimistic. In India, too, money is being raised at lower valuations and layoffs have started. E-commerce major Flipkart was in the news in February when Morgan Stanley marked down the value of its holding by 27%, as disclosed in its regulatory filing. This implies it is valuing Flipkart at $11 billion from the earlier value of $15 billion. Similarly, online fashion retailer Jabong found no takers at a valuation of $100 million. This is merely 10% of the valuation of $ 1 billion which it was seeking in 2014. There have been news reports that companies like Zomato, Snapdeal and CarDekho have laid off hundreds of employees over the past eight months because they have little revenues and huge losses and new money is hard to come by. The fall in valuation in the private tech market comes in the wake of a sev severe rout of such companies in the public market. Micr Micro-blogging site Twitter’s stock, which touched a high of $73 in December 2013, has fallen by a humongous 76% to $17.31, currently. currently Social networking site LinkedIn has fa fallen by 56% from its all-time high, while the stock of Yelp, a site that lists local businesses, has crashed by 78%. busin Other tech-based tech-base companies, like Groupon, Service Now an and Netsuite have also crashed; Groupon fell around 60% from its highest aro price of $12.08 iin the past two years. But the worst is yet to come, com said Mr Watsa. “When it is all over, we w will not be surprised if most of these stocks are down 90%!” However, Howev there is another phenomenon phenomen which is incompatible with such outlook. Venture capital firms pos posted their best fund-raising quarter ssince the tech bubble, having raised $13 $1 billion in the first quarter of 2016 2016. This was their best fundraising quarter since 2000 (Source: Dow Jones VentureSource). Will J they try tr to keep the unicorns alive? 

MONEYLIFE | 12 May 2016 | 50

Earning Curve.indd 2

22-04-2016 12:42:19

UNBIASED INFORMATION: MSSN Benefit #8-10

• Moneylife Magazine • Handbook • Product Reviews

8. Moneylife Magazine:

9. Handbook:

Since March 2006, Moneylife magazine empowers individuals to invest and spend wisely by offering hard facts, insightful opinions, unbiased options and useful tips on fixed-income products, mutual funds, insurance, stocks, taxes. This bold and practical fortnightly guide is included in your MSSN premium membership.

A complete online guide on every aspect of personal finance— from annuities and bank accounts to Wills and zero-coupon bonds—all in the form of common questions and answers. This handbook helps you make correct decisions about all aspects of money. Whenever you are in doubt, all you need to do is to refer to it. You will get factual and unbiased information. No need to wonder; no need to ask. Part of your MSSN premium membership.

10. Unbiased Reviews:

Moneylife’s habit of calling a spade a spade comes in handy when our analysts review a financial product available in the public domain. Our reviews will leave you with no doubt about the good, the bad and the irrelevant. Part of your MSSN premium membership.

About MSSN

MSSN 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. MSSN was set up to help investors and savers make the right financial decisions and handhold them through the entire process.

MONEYLIFE SMARTSAVERS FIX YOUR FINANCES, FOREVER

www.savers.moneylife.in

MSSN - Unbiased.indd 1

20-11-2015 17:05:43

USEFUL APPS YAZDI TANTRA

BurnNote: Delete Message Automatically

M

any a times, it so happens that you have to communicate something private to a close friend/ family member. And you are worried that it may fall into the wrong hands. For example, in an emergency, you need to send your bank account number, or your credit card number, to your spouse. You may send it via email, but there is a chance that, after using that information, the recipient does not delete it from the mailbox. Anyone having access to that mailbox can then misuse that information. BurnNote allows a user to send a message to someone in such a manner that the message will be automatically deleted after a predefined number of seconds, once it has been read. So, if you have set it to 180 seconds, the message will destruct itself 180 seconds after it has been read by the recipient. The implementation is simple. Go to BurnNote.com or the BurnNote app, and fill up a simple registration form. Now, you can compose a mail to anyone and define, say, 180 seconds after reading it, it should self-destruct. If you want to be doubly sure, you can even create a password for accessing the mail. The site will generate a link and you can then copy-paste that link in your regular email. The recipient just needs to click on that link, enter the password (if any) and read the mail as desired. Once the mail has been read, after 180 seconds, the link will be inactive and no longer accessible to either the sender or the receiver. BurnNote can also be made copy-resistant using the Spotlight display option which limits how much of the message is viewable at once. In short, BurnNote puts you in total control of your privacy. Maybe the US government should have used it for their diplomatic cables! https://goo.gl/wGgP0j

Addictive Dots: Connect and Earn Points

H

ere, we have a simple game of connecting the dots and earning points, in the process. Not at all complicated; but the more you play it, the more you may get addicted. You have been warned!

The game is all about connecting similar coloured dots that appear on the screen and earn points! You get 60 seconds to do it. You can connect with your friends on Facebook and Twitter and compare and brag about your scores, if yours are higher! You can also prove that you are better at Dots than your friends with the local multiplayer mode. Simple, addictive fun—difficult to find these days. https://goo.gl/YqwDZP

StayFocusd: Limit the Time You Waste

M

any a times, when you are working, you tend to drift away—to websites where your time gets drained. You start by sitting down at the computer and swearing you'll be productive. You’ve checked your email, updated your Facebook status, browsed the trending topics on Twitter, read your RSS feeds, looked up your favourite band on Wikipedia, Googled yourself, and lost a week’s pay playing online poker. What you haven’t done is WORK. StayFocusd is a Chrome extension which helps you stay focused. It increases your productivity by voluntarily limiting the amount of time that you can spend on timewasting websites. Once installed, you can add multiple websites to the list of your time-wasting websites and also define how much total time during the day you would like to waste on such websites. Suppose you specify that you won’t spend more than an hour on such websites in a day, once you cross that limit, your browser won’t allow you to go those websites any more, during the day! And, if you wish to cheat/override for a particular day, it makes it difficult enough. It has some interesting tweaks, also worth exploring. But the prime objective is to STAY FOCUSED! http://www.stayfocusd.com/ 

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

MONEYLIFE | 12 May 2016 | 52

Tantra - column.indd 1

22-04-2016 11:27:00

TECHNOLOGY

How To Create Strong Passwords No password is 100% secure. But you can make one that is really hard to crack, explains Yogesh Sapkale

W

ith technological advances, almost everything that you use is susceptible to unauthorised usage which highlights the importance of having robust passwords and personal identification number (PIN) for everything, including network accounts, online services, websites, ATMs, credit cards and even the Wi-Fi connection. However, being human (and lazy), we find it difficult to create and remember robust passwords and end up compromising our security. Many people are reluctant even to create ‘difficult’ passwords. However, creating a good, robust and hard-to-crack password is not rocket science and can be done easily. To create a good, robust password, you must: 1. Choose a password that doesn’t contain a readable word. 2. Mix upper- and lower-case letters. Use a number or symbol in the middle of the word, not at the end. Don’t just use ‘1’ or ‘!’, and don’t use symbols as replacements for letters, such as ‘@’ for a lowercase ‘a’. It’s passé. Simple, isn’t it? However, some may still find it difficult to create good passwords. So, here are some simple and useful tips to create robust passwords. Start with an original, but memorable, phrase— for example, ‘Moneylife says know what’s coming’ or ‘My first Maruti was a real lemon so I bought a Toyota’. The phrase can be anything; but make sure it’s something you can remember easily without writing it down. The best phrase to use is one in your mother tongue. This will help you avoid using a guessable English dictionary word. Now, convert the simple, memorable phrase into an acronym and use some numbers, symbols and upper-lower case letters. The above-mentioned phrases can be converted into ‘MLskwc’ or ‘mL@skWsC’ and

‘M1stMwarlsIbaT!’. Using the same method, you can also create sitespecific passwords; for example, ‘It’s 45 degrees in May, so I use Gmail’ can become ‘i50dgiMsIuG’ (50 is not the real temperature; it’s for the month number multiplied by 10). Based on the phrase, you can change your password almost every month; for January, it becomes ‘i10dgiJsIuG’ and for September, it’s ‘i90dgiSsIuG’ and so on. For general sites, which do not affect you personally or financially, use simple phrases to create passwords. Reserve your strongest and most distinct passwords for critical services like your bank account, your computer and your personal e-mail. Also, try to create a password that contains minimum eight characters. For finance-related things, make sure it is at least 13 characters long. Remember, longer passwords make stronger passwords. There are about 645 trillion combinations for eight character passwords. For nine and 10 characters, the combinations go to 45 quadrillion (a thousand trillion) and 3 quintillion (a billion, billion) combinations. This, in short, means that the cracker or hacker will have to spend much more time to crack your password. For example, an eight character password like the one ‘abcd1234’ can be cracked instantly, while ‘Abcd123$’ takes around nine hours to crack. The password ‘Abcdefgh123456’ will take 10 million years to crack. Adding a simple wild character like ‘&’ in this password will take almost 16 billion years to crack, says HowSecureIsMyPassword.net. (Please refrain from entering your real password on this or any other irrelevant site) The PINs for ATM or debit and credit card can also be created using the method given above. However, since it contains just four numbers, you need to take the help of the keyboard of an old mobile which has numbers and letters (usually three-four) inscribed. Using this method, and the root phrase ‘Moneylife says know what’s coming’ you new PIN would be 6592 (using the digits corresponding to the first letter of each word—6 for ‘Moneylife’, 5 for ‘know’, 9 for ‘what’s’ and 2 for ‘coming’). Do not use your or the name of your family member, mobile number, date of birth, or PAN number, in the password. Go and find a memorable phrase, especially in your mother tongue, and create a robust password of 13 characters. 

53 | 12 May 2016 | MONEYLIFE

Technology.indd 1

22-04-2016 12:16:28

Supported By

Queries At Moneylife Foundation’s

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

Adjusting Rental Income

F

or some health and logistics reasons, we have rented our ownership flats and we are staying at another place, on rent. We receive Rs53,000 per month as rent and we pay Rs50,000 every month as rent. Now common sense and logic tell us that we can adjust rent received against rent paid and our income from house property is Rs3,000 per month. We are filing our tax return accordingly. Are we right in assuming this? Please advise. Ameet Patel’s Reply: Unfortunately, the common sense that you refer to does not apply to the Income-tax Act. Even if it did, your assumption is not correct. For tax purposes, when income is computed, what is generally deducted from it is an expense incurred to earn that income. In case of rental income, only a few specified expenses are deductible. Rent paid for a house that you live in is not deductible from the rent that you earn from your house. The main reason for this is that the rent expense paid by you is not connected to the income that you earn by way of rent from your own

house. Therefore, you cannot take your income to be only Rs3,000 per month for tax. Please take the advice of a tax consultant and understand how the income from house property is to be computed and also understand whether you can claim a deduction under Section 80GG of the Income-tax Act for the rent paid by you.

Capital Gain on House

I

purchased a house in July 2011 for Rs50 lakh (Rs45.80 lakh as loan) and I am selling it in July 2016 for Rs90 lakh. I still have to repay about Rs40 lakh loan amount which I will be closing. Is the capital gain calculated on the total value of Rs50 lakh or only on the capital which I had invested (Rs4.2 lakh + stamp duty + brokerage + registration). Second, if I re-invest in property or capital gains bonds, do I have to re-invest only the gains or the entire sale proceeds? Ameet Patel’s Reply: For the purpose of computing capital gains, what is relevant is the cost of acquisition, not the source of funds. In your case, the cost to be taken into consideration for the capital gains would be the purchase price paid for the property (Rs50 lakh) + stamp duty + registration fee + brokerage + legal fees. The loan taken by you is only a source

of money needed by you to pay for the house. As regards investment in capital gains bonds, it is the amount of capital gains that is required to be invested and not the entire sale proceeds.

Tax on Equalisation Transferred

F

our children have inherited (1) four distinct immoveable properties (2) fixed deposits (3) mutual funds (4) demat accounts. Each of the financial assets had a nominee for convenience. The parents’ will explicitly requires EQUAL division of the inheritance. A registered valuer has given an estimated value to each of the four immoveable properties. Based on the choice of immoveable property, and after attempting an equal division of the financial assets, the net result is that three of the children need to pay a sum of money to the fourth child to equalise the transfer. Is this equalisation transfer receipt tax-exempt in the hands of the fourth child? Is there a judgement or ruling to support this? Is it taxable in the hands of the fourth child? Is there a judgement or ruling in support? Nikhil Vadia’s Reply: We need more details about your case. Whether you have obtained a probate or this is a verbal arrangement. What is the document executed and signed by each legal heir, etc. I believe, since it involves immoveable properties, you need to take professional help of a chartered accountant who will be able to guide after looking at each document. If done properly, this ‘Inheritance Equalisation Receipt’ will not be taxable. 

MONEYLIFE | 12 May 2016 | 54

Tax Queries.indd 2

16-04-2016 18:05:33

Supported By

Moneylife Foundation’s

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

OUR EXPERTS

AMEET PATEL

SUBODH SHAH

HOW IT WORKS

AMEYA KUNTE

NIKHIL VADIA

VAIBHAV SANKLA

1

Every new query posted will be sent to our panel of tax experts

2

When we get the opinion/advice from our expert, we will post the reply

3

You can access similar issues faced by other taxpayers

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

Tax Helpline.indd 1

06-04-2016 13:33:11

HEALTH BM HEGDE

Pain Responds to Exercise and Not Rest! Is it possible to get rid of pain without a painkiller pill and no rest?

T

ake this as a case report, if you are one of those conventional scientists, or as my personal saga, if you are an ordinary man like me. The conventional wisdom in medicine is that when you are injured, even if you are able to move about, you are asked to take rest lest the healing should take a longer time than needed. This was believed to hold for other illnesses also, say, a heart attack. The latter ended when General Eisenhower had a heart attack at the end of the third year of his presidency. For his doctors, Sam Levine and Paul Dudley White, it was a big dilemma. The General was a very popular president and had a sure chance of reelection for a second term. A year or so earlier, Nobel Laureate Bernard Lown had published the chair treatment idea after a heart attack which involved putting heart patients on a chair, against the prevailing orthodoxy of complete bed rest. The president’s doctors took a very bold stand— that he should not only be mobilised early through chair treatment but also should run for the second term. History is a great teacher; he did very well, got his second term and went on to live for many more years. Early mobilisation after a heart attack and heart surgery became a mantra, since then. What of other injuries? We still do not have clear guidelines and doctors take the safer route for themselves by asking patients to take rest after any injury. I had a freak accident at the Bengaluru airport a couple of weeks ago. I was, as usual, sitting and looking at my emails when the announcement of my flight came on the public address system. I got up from my seat in that small

cubicle where the chair and the table are so close to each other that there is hardly any leg space. The aisle was on my left and in the aisle was a granite table. My left leg could easily get out of the cubicle while my right leg was still inside the small leg space. In my hurry, I didn’t realise that and tried to move on. Naturally, I was thrown forward on the left side—my head hitting the granite table and also my left forearm. Providentially, instead of my forehead hitting the hard granite table my chin hit it so hard that I had a big bump there along with a painful swelling of the left forearm in the middle. Eventually, when my right leg came out, my right knee fell and hit the leg of the granite table, giving me a big swelling and severe pain the right knee joint. People started rushing to help me but I told them not to do any such thing and I got up with difficulty myself and made my way slowly to the flight. In retrospect, I do not know how I made it. I must have been a sight for the Gods and the co-passengers. Sitting in the plane was difficult but it was just 25 minutes to Chennai where I was headed. I had no handbags and walked slowly, without help, to the luggage carousel. The Jet Airways boys helped me to pick up my bag and I walked out of the terminal using my trolley bag as a crutch. I had to go to our research centre for a meeting and seeing patients which I did with some difficulty, but the pain and the swelling were slowly getting worse. We have a Varma Kalai specialist in our team, Suresh, who is very good. He came in the evening when I had finished my day’s work. He worked on me so well for nearly an hour and half with his special oils and intelligent use of the pressure points (102 in all) and I was a lot better at the end. The pain was 50% but the Varma point pressures were too painful to bear when applied. I was not sure if I would be able to sleep with all the pain. However, all went well and I had a good night’s rest. The next morning, as usual, I went for a walk with some difficulty but did not cut down my walk time; I had my full quota. I went back to work as usual and did whole day’s work going up and down the stairs to see patients and to attend meetings. In the evening, Suresh had another go at me; this time, it was 

MONEYLIFE | 12 May 2016 | 56

BM Hegde.indd 2

20-04-2016 20:40:54

HEALTH BM HEGDE

 more painful than before. My pain disappeared almost

90% and I could walk freely. All the swelling had gone but I could not fully bend my right knee to sit in vajra asana. The following day, I was in Mangalore for my father’s death anniversary celebrations. During the puja there, I had to sit on the floor and get up at least 20 times. That took a toll on my back muscles that had to contract abnormally while sitting down with one knee almost disabled. The back started hurting so much that it was unbearable; but I went on as usual and went to Udupi and many other places by car in the following two days before leaving for Delhi with the backache in full intensity. I had a very busy schedule in Delhi and had to go back via Chennai where I had a lecture at IIT Chennai. My friend, Suresh, had two sittings with me and my backache has almost come down 99%. A week later, I was in Delhi and was able to do all asanas normally as well as take my usual one-hour walk. I am writing this note at the India International Centre, Delhi, with all my pain gone for good (I suppose, touch wood!). In essence, I did not take a single painkiller pill and had no rest at all after the

accident. My experience tells me that it would have taken much longer for the pain to disappear, if I had taken rest after the accident. I am wondering if early mobilisation is a good idea in post-accident periods also. Will the concerned people listen and do a larger study acceptable to conventional thinkers? Interestingly, there is now a rethink on our conventional reductionist large cohort studies most of which have not delivered the goods. Even the journal Science advocates one-for-one study in place of large cohort studies. This is a one-on-one study, if you like. I did not have to take any informed consent from the patient, as I was the patient myself. Knowledge advances, wrote Karl Popper, “Not by repeating known things but by refuting false dogmas.” How very true! Disease, rest and recovery need a fresh look to see if we should change for the better. Having said all that, I do not want the layman, a novice in the field, to decide what exercise or rest that he needs with any pain as s/he will not be able to assess what brought on the pain in the first place. If you have your family doctor and discuss the details with him, he will guide you. If you try on your own and come to grief, do not blame me. “Exercise is done against one’s wishes and maintained only because the alternative is worse.”— George A Sheehan 

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

Enrolled in a gym? What about fiscal fitness? Tone up your financial muscle Once every fortnight

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

57 | 12 May 2016 | MONEYLIFE

BM Hegde.indd 3

20-04-2016 20:41:30

HEALTH BM HEGDE

STRANGE BEDFELLOWS

book Pure, White and Deadly which got him so much publicity that it here is a strange new MEDICAL DEVELOPMENTS FROM attracted the wrath of his love between the AROUND THE WORLD colleagues who believed Amazon Forest loggers’ that fat alone is the factor mafia which has destroyed behind obesity. He was forced to the best part of Amazon for greed said that they would not take retire. and the greediest pharmaceutical chemotherapy themselves! Sadly, The University did a smokelobby in the US. Money and greed as reported by News Target, screen cover-up by giving him for money could bring strange “Statistics on chemotherapy-caused a small room in an old unused bedfellows together! The pharma deaths are difficult to come by, building in their campus to do his lobby thinks that the Amazon because hospitals and oncology research and replaced him by a physicians always assign the blame junior professor who was one of the to ‘cancer’.” How convenient that leaders in fat theory. John Yudkin is—even if the eventual cause of simply disappeared from the scene. I death is infection that is caused have been writing and talking about or aggravated by chemotherapyhis book over the years and showing induced immune system weakness, how fallacious the fat theory was. the official death diagnosis is Now, I have been proven right and blamed on the cancer itself. the American bosses have done a U-turn on the fat theory. PURE, WHITE AND DEADLY his is the title of an interesting book written by a professor of nutrition at London, in the and such large forests will have to 1960s when I was a student there, be preserved because they could at the peak of the fat theory of harbour some of the most potent atherosclerosis, riding the crest of drugs for the future, since the its success wave. Professor John chance of discovering something Yudkin was a brilliant scientist who new in the chemistry laboratory is came from a poor background as tough, dangerous and expensive. his parents, both Jews, were thrown They did taste blood with the out of Russia in the early part of the discovery of vincristine for cancer last century. John had a small house treatment from Vinca Rosea in one of the poorer localities in the found there; we have it in India midlands in England. With great abundantly. They have befriended difficulty, his parents managed to I used to think that such the forest mafia showing them that send him to a grammar school as he suppression of facts occurs only these newfound treasures could was very bright. John then earned in India. My own University had be much more lucrative compared his scholarship to Cambridge and condemned me for opposing oral to simple timber. Strangely, they there was no looking back. He polio drops for malnourished also want to preserve some of the became a professor at the London children by going to the press forest-dwellers who have no contact University. saying that I had forgotten my with the outside (‘civilised’) world Since the end of World War II, medicine and no one should believe as they could have some of the best Europe slowly became prosperous me. They were better than the remedies for longevity and good and people could buy good food London University but the disease health! for themselves. So, in Europe, is prevalent all over the world! I consumption of fat went up, along am happy to see that they are now with so many other things, sugar CANCER AND giving injectable polio vaccine in included. John found that the same CHEMOTHERAPY India, a good 15 years after my relationship holds good for sugar n a survey done in 2013 in struggle to stop oral polio. consumption. He wrote a popular the US, 75% of the doctors

T

T

I

MONEYLIFE | 12 May 2016 | 58

BM Hegde.indd 4

20-04-2016 20:42:03

LEGALLY SPEAKING SD ISRANI

India Infoline Penalised for Illegal Trading Consumer forums compensate investor for losses in a landmark judgement

I

n recent years, another item has been added to the kitty of ‘investment’ instruments—trading in commodities. But commodity trading is pure speculation and many investors have been victims of ‘investing’ in instruments of which they have no understanding and are misled by market intermediaries. One such investor Joseph Thomas was an employee in a private company and had a middle-class background. India Infoline Ltd showed him colourful brochures of commodities being traded and was persuaded to ‘invest’ in commodities trading by fancy claims of enormous profits. Falling for some claims, Joseph transferred certain amounts of money to India Infoline, from time to time. However, after some time, India Infoline admitted that most of the amount ‘invested’ by him was lost. He was forced to file a complaint for deficiency in service under the Consumer Protection Act, before a district forum. According to Joseph, when he used to enquire about the profits from his investment, the authorised representatives of India Infoline always informed him that his money was reaping good profits. However, in his complaint, Joseph stated that when he enquired about his money, he was told that he would have to invest additional sums whereby he would receive an additional profit of Rs10,000 per month. In the meantime, he started having fears about his investment; so he sought to check his account. He was first told that there were server and network problems in accessing the data. Then he was told that the password was despatched to him by the registered office in Mumbai; but he never received it. Even after a month elapsed, the authorised representatives continued to make the same excuses. Subsequently, he was told that the officers dealing with his account had quit their jobs and that he had to contact another officer designated for his account. Unfortunately for Joseph, the designated officer told him that the company itself had been cheated by those

two former officers. The investor pleaded before the district consumer forum that the finance company had traded with his hard-earned money without seeking his prior permission; that he was never given the details of his account, despite several requests; he also complained that the finance company appointed people with no knowledge and expertise in the area dealing with public money. He claimed that there was no transparency and legality in the conduct of the affairs of the finance company and its authorised representatives; the password for his account was never given, despite several requests; there was no reply to his legal notice and also to his e-mail. Therefore, the investor sought directions for refund of Rs1,85,000 together with damages of Rs3,00,000 and interest of 18%pa (per annum). However, the district forum rejected his claim on the ground that he had himself given the authority to India Infoline. He went in appeal before the state commission which understood the matter in the right perspective and reversed the order of the district forum. India Infoline could not digest this and it took the matter before the National Consumer Disputes Redressal Commission (NCDRC). NCDRC noted that, while India Infoline claimed that the investor was aware of the investments made and the transactions were done as per his authorisation, the material on record clearly showed that the complainant was not in the knowledge of the investments made by India Infoline and its representatives on his behalf which was against the terms and conditions of the agreement entered into and also the authorisation letter. Consequently, NCDRC rejected the petition (order pronounced on 7 April 2016) and refused to interfere with the order passed by the state commission. This case should hold a lesson for all investors not to get carried away by alluring advertisements, glossy brochures, snazzy offices and sweet-talking sales representatives making a pitch for your valuable savings. It is also a good judgement for thousands of others to refer to, if they have been similarly cheated by brokers, since the market regulator usually sides with the brokers, in most such cases. 

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

59 | 12 May 2016 | MONEYLIFE

Legally Speaking.indd 2

22-04-2016 12:14:32

YOU BE THE JUDGE BAPOO MALCOLM

To Swear or Not To Swear? Why, when and where? Does this constitute a criminal liability?

W

hat does one say, as a reaction, to a sudden catastrophe? Or to an unpleasant situation? ‘Oh! S ***’! ‘Bloody Hell’! ‘Damn it’! Some might invoke more colourful words in the local lingo. Does this constitute a criminal liability? Can words import so much attention? The law prohibits the use of certain derogatory words. The Scheduled castes (SC) must not be referred to by their birth, and punishment is severe. It is so not only in India. To address an American-African a ‘black’, is politically correct. But only a black can call another black, a ‘negro’. In India, that is Bharat, to use a caste appellation is punishable only when someone from another (‘higher’) caste utters it. Intra-caste references are not justiciable because all of them must flow as gravity ordains it, from a ‘higher’, to a ‘lower’, caste. One question remains. With so many caste classifications, if say, ‘xxx’ is punishable when used by a non-SC person, would the same be the case if ‘xxx’ is said by a member of the SC, but of a slightly higher denomination, to someone lower down the pecking order? The use of expletives is another matter. ‘Bloody’ was considered profane, until someone came up with its etymology. It’s a short form of ‘Bless our Lady’ and ‘Bless the Lord’, they lamented. Right or wrong, it has now found common usage. So, unfortunately, has the ‘f’ word in daily parlance, but which still is, and will remain, verboten. When problems arise, real or perceived, on the use of objectionable non-bon-mots, we tap the most human reaction of all. Pass a law. And that is exactly what the American state of Michigan did, in 1897, along with a caveat. Recognising that men being men, and that free speech among friends should be unfettered, swear words were geographically banned. The territorial jurisdiction began within the vicinity of women and children. ‘Earshot’ was the amplitudinal limit. Seventy-five years later, the infamous ‘expletive deleted’ Watergate tapes

Nixonised profanity. Hundred and one years passed. The law remained on the statute books. By then, Timothy Boomer had taken to canoeing. He selected a river, Rifle River. But he selected the wrong state; Michigan. As canoes and kayaks go, overturning is an occupational hazard. And Timothy took a hazard hit. OMG. Rifle River hath seen no fury as a canoeist drenched. As water gushed out of his nose and ears, along came a volley of expletives—close to a mother and her two children. Either the family was too near, or the torrent (of words, not of the water) was a few decibels too high. They heard; Timothy was booked. You be the judge. Would you convict Timothy, wet and forlorn? Or let him off? Guilty as charged, said the jury. Timothy faced 90 days in jail. Luckily, he got off with a small fine and just four days of social service. But the black mark of a conviction remained. He appealed. Judge William Murphy, of Michigan’s Court of Appeals, overturning, stated: “Allowing a prosecution where one utters ‘insulting’ language could possibly subject a vast percentage of the populace to a misdemeanour conviction. We find it unquestionable that [the law], as drafted, reaches constitutionally protected speech, and it operates to inhibit the exercise of First Amendment rights.” The American reliance on ‘The First’ seems to know no bounds. Thank God. But what of our unconstitutional enforcement of forced speech? In today’s vitiated atmosphere, not saying something invites the threat of decapitation. Silence is no longer golden. It is, now, a cross too huge to bear. Like so much else, Muteness is banned. Sound must prevail. Sound-bytes, actually. Will each new dispensation introduce a novel jingo-lingo? Why worry? No need for optics to shout. In fact, visual (and mental) incapacity should be a boon. As for Michigan, did it ever enforce the law against any woman for seething within audibility of other women? Gender bias, dammit! Expletive deleted.  Bapoo Malcolm is a practising lawyer in Mumbai. Please email your comments to [email protected]

MONEYLIFE | 12 May 2016 | 60

You Be the Judge.indd 2

22-04-2016 12:59:13

HANDHOLDING: MSSN Benefit #11

• One-on-on e-Help • Portfolio X-Ray

We are not agents, distributors, brokers or lead generators; so, you get ethically correct advice

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

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

Subscription to Moneylife magazine is included in MSSN Premium Membership About MSSN

MSSN 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. MSSN was set up to help investors and savers make the right financial decisions and handhold them through the entire process.

MONEYLIFE SMARTSAVERS FIX YOUR FINANCES, FOREVER

www.savers.moneylife.in

MSSN Handholding.indd 1

20-11-2015 17:04:55

BOOKS

DIY Financial Advisor

A Great Tool for the Serious Investor How to allocate assets, manage risk and select stocks

W

esley Gray is a new star in investment analysis with a very interesting background. He was raised on a cattle ranch in Colorado (USA) and graduated magna-cum-laude in economics from the Wharton School of the University of Pennsylvania. He enrolled at the University of Chicago but, in 2004, took a four-year sabbatical to serve as an intelligence officer in the United States Marine Corps. He spent two years as an intelligence officer in Asia and then served in Haditha (Iraq) as an embedded officer providing advice and support to the Iraqi Army. After leaving the army, Gray wrote Embedded: A Marine Corps Adviser Inside the Iraqi Army, based on 1,000 pages of personal notes that he took to share with his wife and daughter, which came out in April 2009. In 2010, Gray obtained both, an MBA and a PhD in finance, from the University DIY FINANCIAL of Chicago’s Booth School of ADVISOR Business. In December 2012, WESLEY GRAY, JACK VOGEL, DAVID FOULKE he co-authored Quantitative Wiley Value: A Practitioner's Guide Pages 207; $34.95 to Automating Intelligent Investment and Eliminating Behavioral Errors (reviewed in Moneylife, Issue 21 March 2013). That book is a tour de force showcasing rigorous tests on various value investing approaches. It proved that buying stocks, which are ranked low in value and high in returns, offers the best returns, an approach similar to Joel Greenblatt’s whose book The Little Book that Beats the Market has also been reviewed in Moneylife. Gray and Carlisle claimed to have improved upon Greenblatt’s approach. Gray is now an assistant professor of finance at Drexel University’s LeBow College of Business and runs Alpha Architect (AA), a money management firm. AA’s work is striking in its methodological rigour of testing

different investment and trading approaches. The blog posts of AA showcase the intellectual firepower of Gray. This basic premise of DIY Financial Advisor: A Simple Solution to Build and Protect Your Wealth is that you do not need professional help to manage your investments. The book has two clear parts. Part one questions the society’s reliance on ‘expert’ opinion. Expert opinion on anything, other than hard sciences, has been proven to be highly overrated, most spectacularly by Philip Tetlock in his book Expert Political Judgement: How Good Is It? How Can We Know? We have reviewed Tetlock’s latest book Superforecasting: The Art and Science of Prediction (Moneylife, Issue 1 April 2016). Even in hard sciences, like medicine and chemistry, Nobel Prize winners have been proven wrong subsequently. In finance, they are wrong more often than not, because experts are not disinterested observers, but interested players, are prone to the same biases that affect other humans and, often, rely on stories, not facts. We can beat the experts and manage our own investments quite nicely. What we need “is an evidencebased systematic decision-making process.” Part Two of the book outlines how to do it. According to Gray, individual investors need to be aware of three things: asset allocation, risk measures and security selection. Asset Allocation: Asset allocation is simply spreading your investments across different kinds of financial assets. Experts go to great lengths to make asset allocation complex by including different kinds of domestic and international equities, a wide variety of fixed assets and alternative asset classes. But Gray says simply staying invested in bonds, stocks and real estate is good enough. Risk Management: Managing risk is being aware of significant price declines which can come from studying price patterns, but is frowned upon by fundamental analysts. Gray advocates using simple priced-based rules, such as simple moving averages or time-series momentum or, better still, combining both these which will reduce losses and fetch the upside completely. Security Selection: As mentioned, Gray and Carlisle had already shown that the best results come from buying stocks ranked low in value and high in returns. In this book, he has also introduced the price momentum of stocks as another important factor for security selection. Gray’s studies show that combining value and momentum can increase risk-adjusted returns. This book is a terrific resource for the serious investor. Gray has generously shared his research on what works, including momentum, which is shunned by most fundamental investing approaches. However, it will require access to data, some deft Excel work and several hours of study every weekend to stay on the ball. If you are up to it, look no further. — Debashis Basu 

MONEYLIFE | 12 May 2016 | 62

Book Review.indd 2

22-04-2016 10:48:48

Management Quality through Numbers How to judge management quality before buying stocks

M

oneylife SmartSavers Investor Club organised its fourth programme on 16th April with a session “How To Assess the Management Quality before Buying Stocks”. The session was conducted by Dr Vijay Malik (whom Prof Sanjay Bakshi calls ‘Dr Stock’ because he is a qualified physician who can check the health of stocks) shared his insights on how to figure out whether the management is pro-shareholder or not, by looking through the annual reports carefully. Dr Vijay Malik, a rigorous stock-picker and a popular blogger, who spoke in public for the first time, enlightened the audience with his quantitative methods that help decipher whether the management is trustworthy or not. Judging the management quality is one of the most critical decisions while buying y g a stock. It assumes great significance for retail investors, as they have i absolutely no influence influe on the company’s management. “Whil “While it is common to come across statements like lik shareholders are partowners, this is not exactly true,” pointed out Dr Malik. “R “Retail investors cannot act like part-owner part-owners. They have no say in the manageme management. They are compelled to accept whatever w decisions are taken b by the management.” This is why we must be absolutely certain that the abso company whose stock Dr Stock as Dr Vijay Malik we have picked is run is popularly known by a management that

has the best interests of shareholders in mind. While everybody knows that management quality is paramount, investors frequently overlook this aspect because they do not have the right tools for such analysis. In his presentation, lasting for almost one hour 45 minutes, Dr Malik showed the audience how to search the Internet, read annual reports and scan the filings made by companies with the stock exchanges, to judge the management quality. The session started with Debashis Basu, director of Moneylife Smart Savers, giving a quick overview on how management quality cannot be decided simply on the basis of adverse news and events that may only have a shortterm impact. He gave real-life examples of managements with questionable decisions turning out better performance and so-called good managements ending up with mediocre performance. Dr Vijay Malik, with a unique combination— MBBS, MBA, stock-picker and biker—also explained with real-life case studies how profits/cash-flows of a company could be diverted to the promoters and related parties, defrauding minority shareholders. Pointing out that “Equity investing is a faith in management,” Dr Vijay Malik emphasised throughout the presentation that investors should “run at the first sign of trouble.” The programme ended with a Q&A session between Dr Malik, Mr Basu and an audience of more than 150, moderated by Sucheta Dalal, director of Moneylife Smart Savers. Dr Malik patiently answered questions concerning pledging of shares, warrants, promoters’ holding and contingent liabilities. The video of the programme is available for Rs700. To get access, please write to support@ moneylife.in 

63 | 12 May 2016 | MONEYLIFE

Event.indd 2

22-04-2016 17:53:02

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

The Nifty and the Sensex gained 5% each during the fortnight ended 20 April 2016. The ML Mega-cap Index gained 5%, while ML Large-cap Index, ML Mid-cap Index and ML Small-cap Index rose 4% each. 

Foreigners: Foreign institutional investors were net buyers of equities in the fortnight (Rs1,957.10 crore). They bought shares worth Rs25,121 crore.  1,000

Share Prices Index, October 2015=100

FII Net Investments (Rs Crore)

780

140

560 340

120

120 -100 11 Apr-16

100

20 Apr-16

Indians: Domestic institutional investors were net sellers of equities (Rs101.28 crore). They sold shares worth Rs8,670.39 crore. 

80 Oct-15

Jan-16 ML Large-cap ML Mid-cap

ML Small-cap ML Mega-cap

Apr-16

185

ML Micro-cap

Nifty Sensex

310

60

08-Apr

20-Apr

+/-

-65

91.71

96.30

5%

-190

7,555.20

7,914.75

5%

24,673.84

25,844.18

5%

ML Large-cap Index

94.84

99.00

4%

ML Mid-cap Index

96.38

100.39

4%

ML Small-cap Index

96.24

100.04

4%

19,900

ML Micro-cap Index

96.40

98.67

2%

18,900

Index ML Mega-cap Index Nifty Sensex

Mega-cap Gainers/Losers

DII Net Investments (Rs Crore)

-315

GLOBAL MARKET TRENDS

08-Apr

20-Apr

Change

17,900

11,043.00

14,080.50

28%

16,900

71.65

66.10

-8%

08-Apr

20-Apr

Change

1,179.85

1,512.15

28%

642.50

617.60

-4%

08-Apr

20-Apr

Change

Maithan Alloys

121.80

187.85

54%

G M Breweries

948.30

784.55

-17%

3M India Mangalore Refinery & Petrochemicals Large-cap Gainers/Losers Hitachi Home & Life Solutions Alstom India Mid-cap Gainers/Losers

Small-cap Gainers/Losers Electrotherm Mangalam Drugs & Organics Micro-cap Gainers/Losers Porwal Auto Components Nicco Corp (All Prices in Rs)

08-Apr

20-Apr

Change

53.20

90.25

70%

229.90

189.80

-17%

08-Apr

20-Apr

Change

20.15

26.65

32%

0.50

0.40

-20%

20 Apr-16

11 Apr-16

Nikkei

15,900 14,900 Oct-15

Jan-16

Apr-16

Nikkei and Bovespa advanced 7% each, Hang Seng rose 4%, the FTSE and S&P 500 rose 3% each. Shanghai Composite ended flat.  Index

08-Apr

20-Apr

+/-

Nikkei

15,822

16,907

7%

Bovespa

50,293

53,631

7%

Hang Seng

20,370

21,236

4%

FTSE

6,204

6,410

3%

S&P 500

2,048

2,102

3%

NASDAQ Composite

4,851

4,948

2%

Korean Composite

1,972

2,006

2%

Taiwan Weighted

8,542

8,514

0%

Shanghai Composite

2,985

2,973

0%

MONEYLIFE | 12 May 2016 | 64

Money Fact.indd 2

22-04-2016 17:51:01

MONEY FACTS STOCKS



What’s H

T

ML SECTORAL TRENDS

Non-ferrous metals companies were in demand during the fortnight. Hindalco Industries, National Aluminium, Hindustan Copper and Alicon Castalloy advanced 16%, 14%, 13% and 10%, respectively.  Companies

08-Apr

20-Apr

+/-

Stocks of non-ferrous metals companies, farm & farm inputs companies, printing & publishing companies and retail companies advanced 11%, 9%, 9% and 9%, respectively. Sugar companies’ stocks ended flat and stocks of shipping companies and airlines companies rose 1% each. 

ML Non-ferrous Metal Index

Hindalco Industries

87.85

101.80

16%

120

National Aluminium

38.85

44.20

14%

Hindustan Copper

50.20

56.70

13%

Alicon Castalloy

289.30

318.10

10%

Hindustan Zinc

160.20

174.95

9%

Odds

12% Glass

0%

24.20

26.10

8%

Non-ferrous Metals

11% Sugar

0%

0%

Farm & Farm Inputs

9% Airlines

1%

Printing & Publishing

9% Office Equipment

1%

Retail

9% Shipping

1%

110

100

Gravita India

90

Arcotech

383.30

382.70

Man Industries

73.30

71.85

-2%

Ram Ratna Wires

36.70

34.85

-5%

80 Jan-16

What’s

Apr-16

All Prices in Rs



Oct-15

URBAN INFLATION

N T

Sugar companies were punished. Thiru Arooran Sugars, Dharani Sugars & Chemicals, Rana Sugars and Kesar Enterprises and Sakthi Sugars declined 13%, 12%, 12%, 11%, 11% and 11%, respectively.  Companies

08-Apr

20-Apr

+/-

Thiru Arooran Sugars

75.00

65.05

-13%

ML Sugar Index

Dharani Sugars

35.70

31.40

-12%

160

7.65

6.75

-12%

45.45

40.35

-11%

Rana Sugars Kesar Enterprises Sakthi Sugars

42.95

38.40

-11%

KCP Sugar & Inds

29.60

26.60

-10%

7.04

6.35

-10%

KM Sugar Mills

ML Sectoral Trends

Rajshree Sugars

53.25

48.90

-8%

Oudh Sugar Mills

84.85

78.05

-8%

Parrys Sugar Inds

42.25

38.90

-8%

Combined inflation for urban and rural areas fell marginally, to 4.83% in March 2016, from 5.26% in February 2016. Inflation in urban areas fell to 3.95% in March, from 4.30% in February. Food inflation in urban areas fell to 3.98% in March, from 4.23% in February. In urban areas, prices of vegetables declined by 2.51%

140

On a Decline? 120 5.00% Annual Change

100

3.50%

80 Oct-15

Jan-16

Apr-16

All Prices in Rs

2.00%

BULK DEALS

Mar-15

Date

Company

Buyer

Seller

Rs Cr

11 Apr-16

Sun Pharmaceutical

Genesis Emerging Markets LP

Genesis Indian Investment

12 Apr-16

Aksharchem

Mrugesh Jaykrishna Family

Paru Mrugesh Jaykrishna

14.94

12 Apr-16

Asahi Songwon Colors Gokul M Jaykrishna Family

Gokul Mrugesh Jaykrishna

8.10

11 Apr-16

Gujarat Apollo

Parth Rashmikant Patel

Rashmikant H Patel HUF

2.04

12 Apr-16

NGL Fine-Chem

JSL Enterprises

Uphar Homefin Pvt

1.04

12 Apr-16

Trend Electronics

Nippon Investment and Finance

Shree Dhoot Trading

0.59

13 Apr-16

Uni Abex Alloy Products Dhiren Shevantilal Shah

Dhiren S Shah (HUF)

0.45

1,295.17

Sep-15

Mar-16

since last year. Inflation related to fuel & power decreased to 0.35% in March, from 1.75% in February. Inflation for housing increased to 5.31%. Inflation for clothing hovered around 4%; for miscellaneous items, it declined to 3.08% in March from 3.53% in February. 

65 | 12 May 2016 | MONEYLIFE

Money Fact.indd 3

22-04-2016 17:51:13

BEYOND MONEY

An Experiment in Rural Reshaping

for development rather than doling out money to them. Its work is not new nor of recent vintage. The thought behind the organisation dates back to the early 1970s when a young group of socialists began to seek solutions to social and political problems of the rural community and concluded that it can only be achieved with economic Manavlok mobilises rural men and women change. In 1982, they established Manavlok as a voluntary to become beneficiaries by putting in equal organisation for the socio-economic upliftment of the time and energy in the current Marathwada rural poor. drought Over the past 33 years, its activities have grown considerably, but never strayed from the tenet that ow many of us are unaffected by reports of the programmes should be based on the specific needs of awful water shortage and widespread drought the people. Based in the Ambajogai Tehsil of Beed district, across large parts of the country? Most people Manavlok works in 151 villages of Ambajogai, Majalgaon are looking to do their bit, at least by contributing to and Kaij Tehsils. genuine NGOs working to mitigate the plight of people Dr Dwarkadasji Lohiya laid the foundation of the in this crisis and to find solutions for the future. Some, voluntary organisation when he was studying in an Ayurvedic college in Nanded (Maharashtra). His close association with marginal farmers, landless labourers and traditional village artisans helped him understand their problems and it led to his committed work with Manavlok in the early stages, as the founder. The work is continued by Aniket D Lohiya, his son. In the past few months, drought relief and preparing for the monsoon has been an important part of its ongoing activities. It has started community kitchens in 11 of the worst drought-hit villages to ensure one free meal a day to the needy. In return, at least one member of each family has to do voluntary work (shramdan) for water conservation work in that particular village. Over 167,264 needy villagers had been provided meals until 31st March. This activity is sustained through donations from people. As a long-term water conservation activity, the project like V Vaidyanathan, chairman of Capital First, chose to ‘Revival of Holna River’ has been undertaken and over hop on to a bus, visit the drought-hit areas, eat at the 7.5km of de-silting has been done already. The silt acts as community kitchen and see for himself the work that was soil regenerator for nearby farms. The effort will directly benefit 12 villages through which the Holna River flows; being done before contributing an undisclosed amount. The NGO he visited is Manavlok, which stands other villages around this river will also indirectly benefit for Marathwada Navnirman Lokayat. The current by increase in water table and moisture maintenance. A Marathwada drought is among the most severe droughts major effort is also on in three villages to build bunds and in recent years in Maharashtra; but the problems are not dig deep trenches to capture rainwater to percolate and recharge the groundwater. new. Manavlok, which works in Beed Other than this, Manavlok runs district, calls itself ‘an experiment in rural reshaping’, which is what is 37 balwadis and conducts night study MANAVLOK truly required to bring about changes programmes at 35 centres to help Dhadpad, Post Box No - 23, Ring Road, that last beyond one drought year, students, especially school dropouts. Taluq Ambajogai, District Beed or are forgotten after a bountiful Manavlok is also running a Master PIN 431517, Maharashtra. of Social Work College at Beed. monsoon. Mobile No: +91 9823030005 Manavlok has an interesting You can do your bit by joining Phone: 02446 247217 approach to welfare—it believes in these efforts or sending a donation to E-mail: [email protected] providing people with the means help people in their hour of need.  [email protected]

H

Fax: 91 02446 248888 Web: www.manavlok.org

MONEYLIFE | 12 May 2016 | 66

Beyond_money.indd 1

22-04-2016 11:53:09

Advertisements.indd 2

23-01-2016 17:15:11

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

Advertisements.indd 1

02-04-2016 14:39:20