Moneylife 2 October 2014

SUCHETAA DALAL ON: CAN RBI STOP WILFUL DEFAULT THIS TIME? Personal Finance Magazine

Pages 68

WILL RBI’S LENIENCY WITH SAHARA CONTINUE?

RANJIT SINHA IS THE SYMPTOM Rs 30

2 October 2014

(SUBSCRIBER COPY NOT FOR RESALE)

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Best Stocks Best Equity Schemes 17 stocks selected with the same methodology that beat 88% of equity schemes last year YOUR MONEY 21 Cover Page_224.indd 2

INSURANCE 46

HEALTH 54

YOU BE THE JUDGE 58 13-09-2014 16:39:34

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ISSUE CONTENTS

2 October 2014

Picking the Winners

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he raison d’être of fund houses is that they use their knowledge and expertise to choose the best stocks for investors. However, at Moneylife we believe that asset management companies can do much better if they are less callous with your money. Often, schemes have overvalued stocks, or stocks that were picked only because they have a high weightage in their benchmark index. We think mutual fund portfolios can have fewer and better quality stocks. Therefore, over the past few years, we have been compiling a ‘Super Stock’ portfolio —a portfolio of the top stocks of top mutual fund schemes that excludes the stocks that are unlikely to add value. Our unique approach to stock-picking has done well in the past. We have not only beaten the Sensex but have outperformed a majority of ‘professionally managed and constantly monitored’ equity schemes. Turn to our Cover Story to see the top bets of best equity schemes and a review of how our portfolio has performed in the past. While mutual funds pick index stocks, such that their performance is in line with that of benchmark, one cannot blindly invest in companies simply because they are in the index. Our columnist, R Balakrishnan, points out in our Smart Money section, on how one should have a method for stock-picking. The malaise of corruption and influencebuying is deeply ingrained in the system. Sucheta, in her Different Strokes section, writes about the sordid episode of the goings-on at the residence of CBI director Ranjit Sinha and how high-ranking bureaucrats misuse their power. Like Mr Sinha, many of our top bureaucrats, including bank chairmen, seem compromised. Will the government do something about it? On 16th September, Moneylife Foundation proudly received the 10th MR Pai Memorial Award. This Award, in the memory of wellknown consumer activist MR Pai, is given to a consumer activist or consumer organisation each year by the All India Bank Depositors Association. We thank you for being with us on this eventful journey. Debashis Basu „

28 Cover Story

Top Bets of Best Funds Using Moneylife’s unique stock-selection formula, Jason Monteiro identifies the best stocks from the portfolio of top equity schemes

14

– RBI Goes after Guarantors – RBI Focus on Sahara – Master Communicator

16 Different Strokes

Ranjit Sinha Is the Symptom: The malaise of corruption and influence-buying is deeply ingrained in the system

18

MONEYLIFE

QUIZ

Moneylife Quiz no

189

21 Your Money

– ICICI Bank Offers Cardless Cash Withdrawal at ATMs – No Retrospective Effect of New Capital Gains Tax Rules – Forum Denies Death Claim for Suppressing Material Information – CBDT Rationalises Norms of Scrutiny

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

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CONTENTS SMART MONEY

INSURANCE

YOU BE THE JUDGE

the Sensex 22 Pick Winners

46 Insurance Trends

Which 58 Now Leg Was It?

To create wealth, buy stocks that compound your returns at high rates

Pension – LIC’s Varishtha Bima Pension Yojana Health Insurance – Group Insurance for Jains with Taxpayers’ Money? Fine Print

Be a pest and ask questions, before medical negligence ends up causing serious problems

ML FOUNDATION EVENTS

AUTO

Skewers Auto 50 CCI Manufacturers This judgement could turn the tide in favour of consumers and end-users MUTUAL FUND SERIES

24

Placing Sectoral Bets

REAL ESTATE

Notice to 52 SCTamilIssues Nadu on Building Collapse

FIXED INCOME

26

Tax-free Bonds: Still Your Best Bet

– Top-rated Corporate Bond Yields – Interest Rate May Not Soften Soon

– Not Giving Completion Certificate Costs Real Estate Company Rs1 lakh – Builder To Repay Rs33 Crore Maintenance Fees – E-Registration of Property Launched

HEALTH STOCKS

38 Street Beat

Relook at Evidence54 Abased Medicine

Igarashi Motors India: Riding the Auto Sector Growth

Is the relationship between scientific method and medicine fragile?

40 Which Way A Step Back, To Move Forward: A short-term decline and then a rally

41 Long Term

Pulse Beat: Medical developments from around the world

LEGALLY SPEAKING

Regulates 56 SEBI ‘Research Analysts’ Will investors benefit from this?

59 Safe & Smart Financial Planning for HUL’s Working Women Salary does not make you rich, but avoiding losses and sensible investing can

EARNING CURVE

Cost of Active 60 The Fund Management A majority of actively managed schemes underperform their benchmarks. Do not let high costs eat into your returns – Don’t Save 10% of Your Income, Spend 50% of Every Raise

BEYOND MONEY

Wastes 2,000MW PV 66 India Solar Energy Each Day! With its ample sunshine, India should use more solar energy and less fossil fuels on a daily basis, writes N Madhavan

Good Getting Better

42 Growth Picks – Positive Trend Continues

Content.indd 4

DEPARTMENTS Letters ............................ 8 Book Review ....................62 Money Facts ....................64

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Volume 9, Issue 16 19 September – 2 October 2014

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]

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Moneylife is printed and published by Debashis Basu on behalf of Moneywise Media Pvt Ltd and printed at Magna Graphics,101C&D, Government Industrial Estate, Kandivli (West), Mumbai - 400 067 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

STRUGGLE OF A BANK CUSTOMER It is disappointing to note that Dr Raghuram Rajan’s tenure as RBI governor seems to be nothing to write home about. When he was appointed governor, he Mutual Fund investments attracted attention for all the wrong reasons are subject to market risks, read all scheme related (smart & suave, handsome personality, an documents carefully. individual with international exposure, etc). However, after several months, one does not see any remarkable change in the banking system. Write to Any action taken is directed at causing further the Editor! mental torture to the average middle class. A news report on 16 August 2014 mentioned a prize that banks are going to levy charges for withdrawing your own money from ATMs. Tomorrow, you might be charged for requesting to update your passbook. The working of PSU (public sector undertakings) banks has plunged to abysmal levels, even as private sector banks have a field day charging customers for different services and misguiding them on services like mutual funds. Vijaya Bank has started charging Rs10 for sending account updates on mobile phones. When I asked the HAL stage III manager the reason for this, he said it is a small pricee tto o pa payy ffor or all the effort that goes into it. As a customer, I would urge all the readers of Moneylife to update their passbooks regularly and look out for debits in the account. Banks, it seems, are under liberty to change rules and charge you without your permission or approval. I had a bad time recently with recovering my original home loan document from Indian Bank. My loan tenure had got over but the staff in the branch was constantly playing musical chairs. Can you believe this? For close to a month, the concerned branch of Indian Bank, Indira Nagar, 80-ft Road, had a notice stuck on the entry to ``

WIN

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LETTERS

the

Best letter

Why Penalise the Account-holder?

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apping free transactions is totally contrary to justice to account-holders. On the one side, RBI (Reserve Bank of India) has made a provision to charge account-holders for having certain number of specified transactions. On other side of the story, which is either un-discovered or un-recognised, is that: (a) Public sector banks have maximum number of bank accounts. (b) Public sector banks have largest accountholder base. (c) Public sector banks have the largest ATM network. The darker side is that they are lethargic in maintaining their ATMs. When an account-holder visits the nearest ATM of his bank, most of the times, he finds the ATM out of order. Due to the inability to complete the transaction at that ATM, the accountholder is forced to visit a nearby ATM of a different bank, where he is forced to pay beyond the specific limit of transactions. Under these circumstances, RBI’s action has doubly penalised the account-holder: (a) he has to pay for travel expenses as the second nearest ATM could be at sizeable distance (b) he is forced to pay for the transaction at other banks’ ATM as his bank’s ATM is unable to serve him. One of the questions which RBI must have

` the home loan department. The notice said: “Home

loan department closed for two weeks. By order.” Is RBI even aware of this? On an earlier occasion, one of the office staff asked me not to open a fixed deposit in the bank! Every week, my visits to the branch proved futile with explanations ranging from so & so is not well to so & so’s daughter is getting married and so she had to go on leave. Confronting the branch manager proved to be another exercise in futility. “If there is anything, please call me on my mobile” was her retort. But when we called up on her mobile, she was more keen to disconnect than to talk. After struggling for close to six weeks, I thought enough is enough and decided to contact their head

ignored is: What Mutual Fund investments is the customer’s are subject to market risks, read all scheme related fault if currency is documents carefully. stuck in the ATM while withdrawing; subsequently, the Trivendra Sharma customer uses a different bank’s ATM YOU WIN A to withdraw to meet PERSONALISED CLOCK the need of the hour. This is one place where RBI has ready data on record to analyse. RBI must not permit banks to arbitrarily penalise account-holders Trivendra Sharma where the fault is on the part of the banks only. The need of the hour is to improve the banking system. RBI should collect data on transactions, denied n failed faile led d tr tran ansa sact sa cttio ctio ions ns,, den ns d de enied transactions, out-of-order machines, etc. It must order banks to indemnify customers for all such cases on a per-transaction basis with the same Rs25 per-transaction basis (or an enhanced value) so that banks are taught to maintain their ATMs in the best banking interest. Trivendra Sharma, by email

Congratulations

office near MG Road in Bengaluru. Prior to that, I had sent an email copying some of their directors, whose emails I could trace from the Indian Bank website. The regional/zonal officer was so rude on the phone that I could not believe my ears. It appeared as if he wanted to say: “why are you calling me and disturbing me? I have so much work to do!” I had to resend my email twice or thrice and then, as a last resort, I marked the email to their chairman’s office. It was then that things started progressing at a faster pace. I got my documents within a week. The branch staff explained to me how they were saddled with all the work and the clerical staff shirked work because they belonged to some union. After I received the document, I thanked the branch ``

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LETTERS

` staff and also copied the directors and the branch

managers. I even made some valid suggestions to Indian Bank as a customer. But I did not receive any response from them later on. The question is: Do I have to struggle so much to recover my own document? That too after paying all my EMIs (equated monthly instalments) without fail! How much patience should I have to deal with Indian Bank’s internal problems with its employees? Look

at the treatment that I got and look at the treatment people like Vijay Mallya get. Of course, I do not pay bribes to get loans sanctioned/ approved by banks. There lies the difference. During the entire process, I was worried sick about the safety of my original home loan documents. A ‘floating’ bank employee population does little to reassure you! Venkatesh Ganapathy, by email

OUR READERS WHO CLICK WITH US Here’s a sample of the kind of feedback that we receive from our readers on our vibrant website, www.moneylife.in

DEFINITELY AN IMPROVEMENT This is with regard to “Will Narendra Modi Go after Chain-money Schemes?” by Sucheta Dalal. A comprehensive and holistic approach to financial inclusion is yet to emerge. The present initiative is definitely an improvement, if we compare with earlier efforts. Here, life cover, a conditional loan (overdraft) facility, a credit card and a proposal for continued relationship, which both sides will have to nurture, are factored in. Several informal and formal arrangements for credit, especially in the rural areas and among small ‘borrowers’, do not get space in the picture emerging. MG Warrier

COMPLACENT FIAT MANAGEMENT This is with regard to “The Evo Arrives” by Veeresh Malik. There is something fundamentally wrong with Fiat management... their engines and AMT gearbox (from Fiat's sister company) are more successful compared to those of the rivals. Fiat is sitting on the fence and applauding them, being happy to sell engines/gearbox/spares to them. Fiat needs be the leader rather than just be a spectator. Manufacturers like Maruti and Tata source the same

engine from Fiat and tune it for more power in their cars... shame on you, Fiat management! Shib

LET THE CHIPS FALL? This is with regard to “What next for coal mining sector post Supreme Court ruling” by AK Ramdas. It is interesting to read that suddenly the Supreme Court has decided to take some action after sleeping for almost a decade in the case of Coal-Gate. Media has been shouting, but our judges slept. It is time to wake up our democratic system. Have the Hon'ble judges taken measures to protect the power and industry sectors? The Supreme Court must show its independence and show some teeth in taking action. Shadi Katyal

CREATING CONFUSION! This is with regard to “Non-filing of I-T return for assessees is subject to tax audit before 30th September” by Girish Borkar. Be it company law or income tax law, the authorities seem to excel in creating confusion where none exists. So much for simplification! Shivkumar

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www.moneylife.in Exclusive news & views with a big difference EXCLUSIVE NEWS

Settlement Systems Act, 2007 to regulate various payment systems. About 59 organisations are authorised by the RBI under this Act for setting up and operating payment systems in India. RBI states its mission is “to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards.” All key systems should be secure should be equipped with adequate safeguards.

News you had better not miss

How Aadhaar linkage can destroy banks Even if Aadhaar numbers were proof of identity, which it is not, its use to make money transfers make financial transfers un-auditable, propagate money laundering and financial fraud. There is no justification for introducing an unverified

and un-audited number to allow payments and settlements. The Reserve Bank of India (RBI) is empowered by the Payment and

EXCLUSIVE VIEWS

Govt destroys over 11,000 historical files on PM’s order!

On issues that matter to you

Between 5th and 8th July this year, over 11,100 files were destroyed without following any mandatory procedure on directions from the PM

Modi govt used first 100 days for ‘oiling the machinery’ Nomura says the Modi government’s approach will be incremental, although moving—ideology-wise—in the right direction. The government will be more efficient, which will be positive for productivity and growth

Non-filing of I-T return for assessees is subject to tax audit before 30th September The CBDT order has created confusion among taxpayers and tax professionals by not specifying the due date for filing the I-T returns

Maharashtra govt orders closure of Pune SOS Balagram to reclaim ‘elite’ land? –Vinita Deshmukh

Domestic airlines need to fend for themselves – AK Ramdas

Small-cap stocks rally, despite so-so results Even though the aggregate sales of small-caps on Moneylife’s database declined, the market valuation of these stocks has shot up by over 65%

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Vote in the Moneylife poll on the top issues of the week How would you rate Modi govt’s performance during its first 100 days?

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RBI Goes after Guarantors Will it stop wilful default this time?

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he notification of the Reserve Bank of India (RBI)—that individuals and companies who fail to honour guarantees provided to wilful defaulters can also be charged with ‘wilful default’—is welcome and long overdue. Especially since the notification says that the ‘group concept’ will come into play when persons, or entities, do not honour guarantees to companies within a group. This is a huge step forward. For the 30 years that we have been reporting on business and finance, there has been endless debate about applying the ‘group concept’ to bad loans, especially when there is deliberate mismanagement of companies in a group. After all, corporates grow when new entities in a group (sister companies and subsidiaries) piggy-back on the parent’s goodwill to raise funds. But RBI has also said that the new norms would apply prospectively; this means that all the games companies played in the past will have no consequences. In India, corporate guarantees, including personal guarantees of well-known industrialists, had a magical way of disappearing from

loan conditions after fund-raising needs were met, or the going got tough. Some of the most respected corporate groups in India have used this trick to evade responsibility for loss-making entities. The change in loan conditions could not have happened without the active collusion of lenders which means that RBI’s new norms will also work only if the regulator puts in place a system to monitor crucial changes in loan conditions. Vijay Mallya, recently declared a wilful defaulter by United Bank of India (UBI) in connection with Kingfisher Airlines, also escapes

the new provisions. While most industrialists used to keep room to wiggle out of the personal guarantee, the flamboyant Mr Mallya wanted to be different. He went to court to fight for the right to pay himself and UB

Holdings a fat fee for the loan guarantees provided to Kingfisher. It is a mystery why lenders are still fighting shy to invoke that guarantee. RBI governor, Dr Raghuram Rajan, recently said that the “wilful-defaulter tag is a powerful weapon in the hands of creditors for resolving distressed assets.” Indeed, it is; but a weapon is powerful only if used correctly and effectively. One recalls that RBI, bankers and government officials were just as gung-ho about the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) 2002 which was touted as the ultimate statute to end the bad loan problem by giving banks a powerful recovery mechanism. Strangely, RBI has never been called to explain why the monumental failure of SARFAESI was not anticipated or how just 50 corporates have run up a combined default of about Rs40,000 crore under its watch. If 33 debt recovery tribunals (DRTs) under SARFAESI failed to deliver (as of March 2012, there were 67,000 cases involving over Rs1,36,000 crore pending before the DRTs), will the new norms make a difference? After all, companies will still misuse the judicial system to delay any recovery action.

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Master Communicator Narendra Modi set twitter records

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rime minister (PM) Narendra Modi is now acknowledged as a master communicator. nicator. His massive electoral victory was a powerful and carefully arefully choreographed multidimensional effort, rt, but his big initial breakthrough rough was in bypassing a hostile mainstream

RBI Focus on Sahara Will whistleblowers’ missives work?

E

ven as Subrata Roy is working on a 15-day extension to meet the Supreme Court’s condition to release him from jail, a whistleblower has, after many efforts, managed to catch RBI’s attention on the issues at Sahara India Financial Corporation Limited (SIFCL). This is a residuary nonbanking company which is under RBI supervision. SIFCL was barred from accepting any fresh public deposits in June 2008 and asked to repay existing deposits as and when they mature. In 2011, RBI issued a notice warning depositors about Sahara which also said it would not guarantee repayment of deposits by SIFCL or other group entities. A similar warning was issued by the market regulator. Little information is available in the public domain about SIFCL, except a fact sheet which says that one Mr Madhukar and BM Chaturvedi are independent directors and Om Prakash Srivastava is a whole-time director

media and reaching out to people directly through social media. The PM is now using the very same tools to win friends and followers globally with spectacular results, so much so that his tweets to heads of State or the people of Japan (in Japanese) are rewriting the rule book for diplomacy. After his 100 days in office, Twitter Twitt put out a some blog post noting n of the new records set by Mr Mod Modi. It says, @ narendramodi is nare the second most followed politician fol in the world after

US President Barak Obama on Twitter. Mr Modi’s election victory tweet, “India has won” (in Hindi and English) is the most re-tweeted tweet (70,620 times) of all times from India. Today, following @narendramodi and @PMOIndia has become a necessity for diplomats, journalists, companies and policy-makers, since Twitter remains the primary communication tool of India’s prime minister. Given India’s population and the continuous accretion to the number of people acquiring smart phones, mobile connectivity and access to social media, it is only a matter of time before Narendra Modi becomes the most followed politician in the world.

Sahara and loyalty to the pariwar of the company as of 5 September seems unshakable, despite all the 2014. This means that Subrata Roy, allegations against the group. who was the chairman of SIFCL, He has stayed on, even when has also stepped down and there another loyalist, Amitav Ghosh, is no immediate family member on a controversial former deputy the board. Nobody is designated governor of RBI, stepped chairman either. down as independent This means that director on the SIHL the two independent board in April 2013 (well directors, Mr Madhukar after the path-breaking and Mr Chaturvedi, Supreme Court order who are accused by asking two Sahara group the whistleblower of companies to refund colluding with various Rs25,000 crore raised entities to sell off assets Mr Madhukar, a Sahara loyalist through hybrid convertible belonging to depositors, bonds without SEBI approval). form a majority on the board. He Mr Madhukar stepped in to replace claims in a letter to RBI that over by Mr Ghosh on that board. Rs500 crore had already been On 20th August, RBI’s Kanpur diverted until September this year. The whistleblower also alleges that office wrote to the whistleblower the two independent directors have that the “two issues flagged by been improperly appointed without you are being examined by our seeking prior approval from RBI. Central Office at Mumbai.” It Who are these directors? Mr remains to be seen if RBI will act Madhukar is on the board of several in time or take shelter behind a Sahara group companies including long-drawn ‘examination’ of issues. its mutual fund and Sahara The whistleblower’s emails seem to Infrastructure & Housing Limited suggest that nothing has changed (SIHL). More importantly, he is a at Sahara pariwar. As for RBI, the former whole-time member of the stringent action by the Supreme Securities & Exchange Board of Court has apparently not made India (SEBI) and former chairman this regulator more vigilant about of United Bank of India. the goings on at this controversial Mr Madhukar’s faith in group. „ 15 | 2 October 2014 | MONEYLIFE

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DIFFERENT STROKES SUCHETA DALAL

Ranjit Sinha Is the Symptom The malaise of corruption and influence-buying is deeply ingrained in the system

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ctivist and advocate Prashant Bhushan has rendered yeoman service by informing the Supreme Court of India about the goings-on at the residence of the Central Bureau of Investigation (CBI) director Ranjit Sinha. He added substance to his allegation that CBI’s Mr Sinha was going slow on various mega scam investigations by revealing the list of visitors to Mr Sinha’s home; and the list is truly startling. Key functionaries of the Anil Ambani group allegedly met Mr Sinha 50 times in 15 months. The accused in every major scam under CBI’s investigation, including controversial meat-exporter and alleged hawala-dealer Moin Akhtar Qureshi, have been frequenting Mr Sinha’s home; some even thrice a day. This is gross impropriety. The Supreme Court has issued a notice to Mr Sinha even as CBI tried to gag the media. As an aside, we also discover the CBI chief’s maharajalike lifestyle. The Economic Times says he has seven cooks, 22 domestic helpers and a cobbler at his disposal, all paid by the exchequer. That the CBI director, who is lower than a joint secretary in the pecking order of government, can live like a king, tells you how our public funds are being misused. The sordid episode throws light on the various investigating arms of the government. The CBI director has immense power over the lives and reputations of individuals, companies and institutions in India. He can or initiate, or close, investigations at will; arrest people peo destroy careers without accountability, accountabi to please political masters. The incomein tax and enforcement departments depart and the department of revenue rev intelligence (DRI) are equally willing w handmaidens when it com comes to working on political instruct instructions. A slow judicial system with its propensity to remain silent about judicial corruption, a as has been revealed by Justice J Makrandey Katju on his blog, dissuades people from fighting back. The bac

few, who do, often end up broken and frustrated by the system at every turn. The misuse of government investigation agencies began almost immediately after independence but peaked under United Progressive Alliance (UPA) government. We saw a decade when unbridled corruption and mind-boggling scams were allowed to flourish in the name of ‘coalition dharma’. The lay public may be shocked at reports about the CBI chief’s visitors, but many of us in the media have been helpless spectators of this gross corruption over the decades. Helpless because those who blithely give out details about corrupt people and practices will do nothing to stop it nor provide proof to allow publication. Consider some reactions that I have heard in the week that Mr Sinha was making news. • An IIM professor who conducted a training programme for senior income-tax officers was reportedly told by one attendee “some of us are losing Rs1 crore a day attending this programme.” We frequently hear from government insiders that top income-tax and police appointments, especially in Delhi and Mumbai, are auctioned. How do we prove it, when there are no whistleblowers? • A senior RBI (Reserve Bank of India) official names a couple of bank chairmen who, he thought, were more likely candidates for CBI’s sting operation on Syndicate Bank and Bhushan Steel. He claims that one chairman was cautioned by RBI after reports about his corrupt ways escalated. He cannot say why no action was initiated against him, instead of issuing a mere word of caution. The rise in corruption at banks is in direct proportion to the ballooning of bad loans even as RBI remains a silent spectator. • We have been hearing about a finance ministry bureaucrat who was exceedingly rude and humiliating to bank chairmen. Rampant corruption was also one of his qualities that has attracted the PM’s attention. Is the Central Vigilance Commission (CVC) only a bugbear for mid-career bureaucrats? Isn’t it curious that neither CVC nor CBI has such corrupt bureaucrats in its crosshairs? • The Serious Frauds Office of the United Kingdom brought corruption charges against Alstom (UK) for allegedly paying a bribe of over three million euros to the ``

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DIFFERENT STROKES SUCHETA DALAL

`

Delhi Metro Rail officials in 2001 to secure a contract for a train control, signalling and telecommunications system. It reminds us of how the Securities & Exchange Board of India (SEBI) under CB Bhave wound up an investigation into the round-tripping of a massive $250 million into Reliance Communications with a consent order and no admission of guilt. Anil Ambani’s Reliance ADAG paid just Rs50 crore and managed a vague and opaque public disclosure without admission of guilt, even though the Financial Services Authority (FSA) of the UK issued a far more explicit order and also fined the UBS bankers $2 million. Can we expect this to change? Prime minister Narendra Modi has made several clear commitments to the people of India. “We have to create systems where there is no injustice against anybody,” he tweeted. More specifically, he promised to act as a ‘chowkidar’ (guard) who would prevent the plunder of national wealth. “I will neither take a bribe not allow anyone else to accept one,” he has said. We know this is easier said than done. Other than a rumour about the PM having actually asked the son of a senior leader to return a bribe, we have yet to see any change down the line, especially in regulatory and investigation agencies. Conflict of interest often breeds corruption. The government is working on the Prevention of Corruption (Amendment) Bill, 2013, but who really believes it will make a difference? Then there is the lapsed private member’s Bill on conflict of interest introduced in the Rajya Sabha by Dr EMS Natchiappan. A multi-disciplinary group of NGOs called the Alliance against Conflict of Interest (AACI) is working to resurrect and improve on it by putting together a detailed note with documented cases of how conflict breeds corruption and skews policy-making and regulation in diverse areas—from education to public health, food, safety, environment or finance. Transparency International, a global NGO that tracks corruption, defines ‘conflict of interest’ as “any situation

where an individual or an entity, whether a government, business, media outlet or civil society organisation, is confronted with choosing between the duties and demands of their position and their own private interests.” In India, every position is influenced by corruption or nepotism and duty is never a consideration. This is at its worst when it comes to public servants and bureaucrats. While politicians face the ballot every five years, corrupt bureaucrats can damage the system for decades, especially when they are due to retire. Even the most egregious cases of conflict, where retiring bureaucrats or chairmen of nationalised banks, insurance companies or regulatory bodies have immediately accepted lucrative advisory positions or board directorships with private and foreign companies, are rarely questioned. The mandatory cooling-off period is usually invoked only as an act of revenge rather than regular discipline. The AACI points out how policies that decide people’s livelihoods and set standards for their food and health are set by advisory bodies/groups/committees that are riddled with conflict of interest. Powerful corporate influence is visible everywhere. This was legitimised over the past decade under the guise of public-private partnerships, such as the PHFI (Public Health Foundation of India), which also obtained huge tracts of land and funding from Union and state governments. Conflict of interest is just as destructive when it works in a covert fashion, where powerful corporate and vested interests influence policy-makers to engage only with NGOs under their control and influence. The consequence is bad law, unfair systems, more litigation and, in the worst case, public anger and protests. Suppressing any discussion on these issues in the mainstream media is another manifestation of the conflict-corruption nexus which is even harder to break. „ Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]

17 | 2 October 2014 | MONEYLIFE

DIFFERENT STROKES.indd 3

12-09-2014 21:04:05

Moneylife Quiz no

CURRENT ACCOUNT

189

MONEYLIFE

QUIZ

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 30 October 2014. Send in your answers to [email protected] with the Quiz no., name, address & telephone number before 9th October.

1. When was Pearl Electronics Ltd incorporated through the de-merger of the electronics division of Nouveau Global Ventures? a. January 2012 b. September 2012 c. October 2012 d. December 2012 2. What was the share price of Igarashi Motors India Ltd when it touched its 52-week low on 3 September 2013 on the BSE? a. Rs63.30 b. Rs63.50 c. Rs71.07 d. Rs283 3. What is the minimum monthly pension amount available under the Varishtha Bima of Pension Yojana of LIC? a. Rs100 b. Rs200 c. Rs500 d. Rs1,000 4. Which of these authors did not argue that evidencebased health system is “outrageously exclusionary and dangerously normative with regards to scientific knowledge?” a. Stuart J Murray b. AméliePerron RN c. Genevieve Rail d. Linus Pauling 5. Under SEBI’s new regulations for research analysts, what is the minimum value of net tangible assets that a research analyst should have? a. Rs10,000 b. Rs50,000 c. Rs1 lakh d. Rs2 lakh

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

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

In all, 30 readers got all the answers right last time. The winner of Quiz-187 is

U Radhakrishna Mallya from Udupi (Karnataka).

Congratulations! You win a personalised clock with an investment quote!

6. In which of the following mutual fund schemes is eClerx Services present as a holding? a. Quantum Long Term Equity b. ICICI Prudential Discovery Value c. HDFC Capital Builder d. Reliance Top 200 7. What is the weightage of Goodyear India in the portfolio of SMI Emerging Business Fund? a. 7.43% b. 2.18% c. 5.23% d. 2.43% 8. What is the total number of stocks present in the portfolio of ICICI Prudential Value Discovery Fund? a. 63 b. 36 c. 43 d. 53

The answers to Moneylife Quiz-187 are: • 1-b. Eswar S Prasad • 2-b. Martin Luther King, Jr. • 3-d. 1 September 2014 • 4-c. Raigad • 5-d. Meglon Infra–Real Limited • 6-b. 9.88% • 7-b. 1.67% • 8-b. 6.71%

MONEYLIFE | 2 October 2014 | 18

Current Account.indd 2

12-09-2014 21:15:39

In an era of paid news & half-baked analysis who tells you the truth about financial products?

M

oneylife has always put the reader first. Launched in 2006 by Debashis Basu and Sucheta Dalal, Moneylife delivers brutally honest opinion and hard facts about financial and consumer products. Our deep research and unbiased articles on all aspects of personal finance, such as gold, insurance, saving for your children, Wills & nomination, mis-selling and money circulation scams and even medical malpractices,, have stood the test of time. Unlike other media, we refused to accept paid news. Regular readers know that we argued that unit-linked insurance plans were harmful for your wealth, when others were handing out ‘Best ULIPs’ awards with big sponsorship funds. Naturally, there

was a cost attached to our pro-customer stand. But policy changes implemented by various regulators (usually after the horses had bolted) have proved us right many times over—on ULIPs, on misuse of the Pow of Attorney, on implications of SEBI rules on Power co commissions, or collective investment schemes, etc. M Moneylife Foundation is probably the only nonpr profit trust from a media house. We offer oneonn-one help to savers by handling grievances and on-one c counselling. M Moneylife s subscribers a automatically b become m members of M Moneylife F Foundation. If y are new you t Moneylife, to p please explore t content the Y won’t wo on’t find anything that’s biased of our website. You produucts or compromises comprom in favour financiall products your interests You will find loads lo interests. of pro-investor and proconsumer information.

Moneylife: A completely pro-investor and pro-consumer publication I am a regular subscriber to your magazine. I really enjoy and appreciate the articles that are published with such truthfulness and integrity. Truly, Moneylife stands head and shoulders above of all other personal finance magazines”

You are doing a fantastic job, filling a huge void and re-establishing trust in individuals and institutions who deal in finance. I live in the US and read your weekly updates online without fail. I feel that people like me should pay a monthly or annual subscription for this excellent piece of journalism”

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Magazine Subscription revised.indd 5

09-09-2014 16:17:40

Your Money BANKING

ICICI Bank Offers Cardless Cash Withdrawal at ATMs CICI Bank announced its ‘Cardless ss Cash Withdrawal’ service that allows its customers to transfer money from their account to anyone in India with a mobile number. The he recipient can withdraw money

I

INVESTMENTS

No Retrospective Effect of New Capital Gains Tax Rules

T

he Madras High Court, in a recent order, has held that the restrictive provisions introduced in the Income Tax (I-T) Act, which call for reinvestment in only ‘one’ residential house in India for claiming capital gains tax exemption, apply from fiscal

LIFE INSURANCE

Forum Denies Death Claim for Suppressing Material Information

T

he New Delhi Consumer Disputes Redressal Forum, presided by CK Chaturvedi, dismissed the plea filed by a Delhi

round the clock without using a debit card from over 10,000 ATMs of ICICI Bank across the country. The sender needs to be an ICICI Bank savings account holder. The facility can be initiated by any ICICI Bank savings account customer (sender) by logging into Internet banking of ICICI Bank website. The sender first needs to register the recipient’s name, mobile g p number and address. The ssender get a four-digit will four-dig verification code while the recipient a reci six-digit six reference ref code, co over o SMS. S

April 2014. The Finance Bill, 2014, had clarified that the benefit of capital gains tax exemption under Sections 54 and 54F was intended only in respect of reinvestment in one residential house in India. Thus, on enactment of the Bill, the relevant Sections of the I-T Act were amended. Earlier, the words used in the I-T Act were reinvestment in ‘a residential house’. Prior to the amendment, there was ambiguity on whether the term ‘a residential house’ meant a single unit or could include more than one house.

resident, Neeru Khosla, seeking death claim for her husband from Life Insurance Corporation (LIC) of India. The Forum noted that while taking the policy the man had hidden the fact that he was suffering from cancer and “suppressing material information is act of bad faith.” “The contract of insurance is based on utmost good faith and its violation by the insured by

TAX

CBDT Rationalises Norms of Scrutiny

he income-tax department has rationalised the norms for scrutiny of tax returns, to bring it in line with global best practices. As per the norms released by the Central Board of Direct Taxes (CBDT), all cases where income exceeds Rs10 lakh over the previous year’s will continue to be selected, as well as cases relating to survey, search and seizure and reassessment. However, the previous requirement of selection of all cases where value of international transactions exceeds Rs15 crore has been dropped. The CBDT norms said cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs10 crore “on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before an appellate authority” will be selected for scrutiny.

T

suppressing material information is act of bad faith. In our considered view, Opposite Party (LIC) has been able to discharge its burden to prove suppression of facts. In these circumstances the OP cannot be faulted for repudiating the death claim. The complaint is dismissed,” the Forum said.

21 | 2 October 2014 | MONEYLIFE

Your Money.indd 2

12-09-2014 20:07:33

SMART MONEY R BALAKRISHNAN

Pick the Sensex Winners To create wealth, buy stocks that compound your returns at high rates

W

e all know that Wipro is a great company. In those days, if you owned shares of an unlisted Recently, I got an email showing how an company, you had to pay wealth tax and, thus, many investment of Rs10,000 in WIPRO in 1980 promoters opted for listing. The listing could happen is worth nearly Rs500 crore today and the cumulative easily. Someone could go around distributing 200 forms dividends declared were over Rs100 crore. This return, to friends and family and the share could get listed. And, in arithmetic terms, would be something close to 48%pa each day, your jobber would organise some circular trades (per annum) at compounded annual growth rate (CAGR). and leave a price imprint on the stock exchange records. To put the power of compounding in perspective, over the The 1980 Wipro investment is like putting Rs10 lakh+ same period, a 15% return on the same principal would today in a single stock with no background. This is not be worth only around Rs12 lakh or so! possible for ordinary people. And no venture capitalist So, a four times CAGR has made the terminal value or private equity fund will hold on for such a long time. to be several hundred times! If the Wipro share had The only ones who probably get such returns are the given a return of 20%, the amount today would have entrepreneurs and a lucky few around them. been worth around Rs50 And, for every Wipro, lakh. So maybe this is a there will be hundreds of good time to understand companies which have gone The first ever BSE Sensex (formed in what difference one or two under without a trace. For 1986, with 1978 as the base year) had every Bill Gates or Warren percent differential can the following stocks make over a period of time. Buffett (who essentially Asian Cables Indian Organic made their wealth out of Then my mind goes back. This company was single businesses), there will Ballarpur Industries Limited Indian Rayon not known to anyone. It be a million entrepreneurs was named Western India who did not make it. So the Bombay Burmah ITC Vegetable Products Ltd and odds of our picking up big Ceat Limited Kirloskar Cummins winners are not very great. its main product used to be something called ‘Oomda’, To give a home-grown Century Textiles L&T a vegetable oil that was a example, when Rakesh Jhunjhunwala started desi competitor to ‘Dalda’ Crompton Greaves Mahindra & Mahindra the then market leader in investing, there were a few Glindia (Now Glaxo Mukand Iron vegetable oils (vanaspati) hundred other brokers who Smithkline Pharma) produced and sold by were trying to make it big Hindustan Lever Ltd. time. And, most of them, Grasim Nestlé Apart from this, I do would have had far more GSFC RIL not recall much about this money than what Rakesh company. I doubt whether had at that point in time. Hindalco Scindia Shipping I would have chosen to So, for every Rakesh, we have a few hundred invest in this company at Hindustan Motors Siemens nameless entities; there that time. I also think that, HLL Tata Motors at that time, the promoter are also a few whose lives must have owned nearly were ruined financially by Indian Hotels Company Tata Power all the shares and the only the investment or trading shares that were with the choices they made. Indian Organic Tata Steel ‘public’ would have been Hence, it is important to Indian Rayon Zenith with distributors, some understand where we put family and friends. our money. We cannot go ``

MONEYLIFE | 2 October 2014 | 22

column_Balakrishnan.indd 2

12-09-2014 20:06:19

SMART MONEY R BALAKRISHNAN

` blindly, investing in random companies simply because

they are in the Index. In the first ever BSE Sensex, there were names like Asian Cables, Indian Organic and Zenith Ltd which are today not even heard of. And there were many that came into the index and went out—Premier Automobiles, Hindustan Motors, etc. If you had chosen all the stocks of the Index in 1980 and stayed put, you would perhaps have got a single-digit return. The Sensex has changed its components several times and, hence, it is not a true measure of prosperity or otherwise. It just takes the biggest names and there are random and illogical changes that make a true measure hard to find. Remember, the difference of a single percentage point in CAGR can make a huge difference to your wealth: Rs10,000 of 1980 would be worth Rs4.7 lakh at 12%pa, Rs6.4 lakh at 13%pa and Rs8.60 lakh at 14%pa. A simple two percentage points lower return plays havoc with the sum you have at the end. Thus, the hike in the fees that mutual funds are going to charge may sound trivial, but the dent to your savings is big. So think if it is worthwhile spending time on investing and follow a direct approach. Choose companies you think will remain operational for the next 20 years or more in businesses you can understand and have been around for a long time. This will not give you spectacular returns like the example at the beginning, but a good probability of doing better than the Sensex. If you want one financial number in addition to understanding the company / business, etc, then use return on equity (ROE). Just divide the profit after taxes (PAT) by the total s h a r e capital plus reserves (also referred to as net worth or shareholders’ funds) and see if it is higher than 20% over the past 10 years in each of the years. Maybe one bad year is OK, but not more than that. Yes, you will not get 48% returns, like Wipro, but a decent rate that is better than the index. And use systematic investment plans rather than buying at one go. „

Can you confidently choose from the hundreds of financial products thrown at you daily?

M

illions of well- educated people across the world will struggle to say ‘yes’ to that question. Well, it’s not you. It’s them—the financial world—which churns out an ever- expanding list of financial products that we are supposed to keep abreast with? The wide choices overwhelm savers. In fact, scientists have found that since our brain has limited capacity, taxing it with too much information leads to fatigue and ‘decision impairment’. That’s a technical way of saying that it leads to ‘poor choices’. We need less, not more. And what you need is someone to make sense of the deluge of information and apply an ethical and well- researched process of selection of right products. Someone solid, unbiased, reliable.

Like Moneylife Smart Savers. We at MSSN have a mission to make your job of selecting the right financial products, based solely on your needs, and ensure you stay secure and gain wealth over the long term.

savers.moneylife.in Benefit More from Less

The author can be reached at [email protected]

23 | 2 October 2014 | MONEYLIFE

column_Balakrishnan.indd 3

12-09-2014 20:06:35

moneylife Mutual Fund Series

Placing Sectoral Bets

W

ith the market having rallied significantly

infrastructure, etc, begin to boom. These are known as

on positive economic prospects and

‘cyclical sectors’. From January 2004 to January 2008,

higher earnings, most sectors have

when the economy was in a growth phase, cyclical

performed well. But, going ahead, certain sectors will

sectors delivered average annual returns of 40%.

do better than others. In fact, there is some correlation

When there is an economic slowdown, ‘defensive

between the different stages of business cycles and

stocks’ from utilities, pharmaceuticals and healthcare

sectoral performance. Investing in the right sector

sectors tend to do well and provide relatively stable

which corresponds to the business cycle will mean

returns. From January 2008 to January 2014, which

better returns from your investment.

included one of the worst financial crises of our times,

A business

defensive

cycle essentially represents

companies

Different Phases of a Business Cycle

delivered

distinct changes

over 16%

in the rate

annually.

of economic

How can

activity. The

an investor

stage of a

benefit

business cycle

from this

can be identified by observing indicators

+ Economic Growth -

Early

Late

Recession

approach? An investor could

such as gross

choose a top

domestic

performing

product growth,

equity

employment, corporate profits, credit and inventories.

diversified scheme or an equity scheme that has no

Fluctuations in the business cycle can be a critical

static market-cap bias or sector bias and will invest

determinant of sector performance. Every business

across companies and industries based on economic

cycle is different in its own way, but certain patterns

trends. The managers of the scheme could use various

have tended to repeat themselves over time. While

indicators such as earnings growth trends, credit

unforeseen macroeconomic events can sometimes

growth, consumer spending and other relevant factors

disrupt a trend, changes in these key indicators have

to determine which sector or company would be likely

historically provided a relatively reliable guide to

to perform well. A fund manager, who picks the right

recognising the different phases of an economic cycle.

stocks from the right sector, is likely to outperform

In a rising cycle, automobiles, travel, hospitality,

L&T.indd 3

Mid

over the long term.

13-09-2014 12:24:43

Advertisements.indd 9

12-09-2014 21:41:59

FIXED INCOME

Tax-free Bonds: Still Your Best Bet

S

avers in the highest tax bracket looking for debt investment portion of their portfolio can still look forward to investment in tax-free bonds of government companies. There is no reason to wait for primary market issues as none is expected in the current fiscal, going by the Finance Bill 2014-15. The place to look for tax-free bonds is the secondary market. With interest rates on a mildly downward trend, bond values have displayed appreciation. With the expectation of rates going south, purchase of bonds in the secondary market may lead to future capital appreciation. Buying in the secondary market involves paying brokerage and depends on availability of the securities. There is increased liquidity in the secondary market, currently, due to renewed investor

interest in tax-free bonds. Choose bonds which had larger issues. They could be more liquid. It is advisable to stick with AAA rated bonds for higher safety. Check the yield-to-maturity (YTM) of the bonds to understand the returns you can expect till the end of bond term

which were issued for 10, 15 or 20 years. Do not make your decision on the basis of the coupon rate of

Top-rated Corporate Bond Yields

T

he yields have remained unchanged in the past couple of weeks. You can expect to get yield of around 9.50% for AAA rated bonds and approximately 10.5%11% for AA ratings for short and long tenor. The 10-year benchmark G-Sec yield decreased by 4bps in the past fortnight. Issuer

Maturity Date

Next Last Yield Coupon (%)

NHB Bonds 10.14%

23 Sept-16 23 Sept-14

HDFC 9.45%

20 Feb-15

LIC HSG Fin 9.45%

30 Jan-22

ISIN

Rating

10.09

INE557F08ET7 CARE AAA

20 Feb-15

9.5

INE001A07KE8 CARA AAA

30 Jan-15

9.5

INE115A07BY3 CARE AAA

12.81

INE121A08NT4 CARE AA-

NSE data as of last trade date of 8 September 2014

Chola Inv & Fin 12.90%

09 Jul-24

09 Jul-15

Punjab National Bank 10.85%

29 Sept-23 29 Sept-14

10.16

INE160A09223 CRISIL AA

Kotak Mahindra Prime 9.63%

16 Oct-15

9.72

INE916D073Z6 CRISIL AA

16 Oct-14

BSE data as of last trade date of 8 September 2014

the bond. It does not reflect the returns you can get when buying in the secondary market. If you are holding tax-free bonds, this is not the time to sell, even though you can book the recent capital gains. It is time to enjoy the tax-free interest you are earning and wait for further appreciation. Remember, for a person in the highest tax bracket it is important to earn an income that is also tax-free. For this, tax-free bonds are the best. With the demand for tax-free bonds increasing, it is prudent for buyers to understand that tax-free bonds sold in 2012-13 had a stepdown clause wherein the buyer in secondary market will get 0.50%pa lower coupon rate. It would be better to choose from the bonds issued in 2013-14 by government companies like REC, NHAI, NTPC, NHPC, NHB, HUDCO, etc.

Interest Rate May Not Soften Soon

T

he 10-year benchmark government security (G-Sec) yield, which sets the tone of the fixed-income market, has decreased by four basis points (bps) in the fortnight ended 8th September to end at 8.52%. A Bank of America Merrill Lynch report states that Reserve Bank of India (RBI) is likely to hold the key interest rates and these are expected to decline only from February 2015. RBI has made it clear that the rates are going to be driven by inflation trends. With inflation remaining high, the rates may remain where they are even though the Union finance minister had indicated that his ministry wants RBI to cut interest rates to boost the economy which is showing signs of revival.

MONEYLIFE | 2 October 2014 | 26

Fixed Income.indd 1

12-09-2014 21:13:17

FREE

• • • • •

Mutual Fund helpline.indd 3

• • • •

09-09-2014 16:12:37

COVER STORY

Using Moneylife’s unique stock-selection formula, Jason Monteiro identifies the best stocks from the portfolio of top equity schemes

W

ith this issue, we return to our annual feature that we initiated some years ago—selecting the best stocks from top-performing mutual fund (MF) schemes and creating a portfolio that tries to do better than most MF schemes. In other words, the attempt is to use our stock-picking skills and cherrypick stocks from the best equity schemes, leaving out the stocks that are not such great picks. But, before we present you this year’s portfolio, here is a record of last year’s portfolio. An equal-weighted investment in our chosen stocks has yielded a return of 48.76%, compared to a rise of 23.29% in the Sensex. We have beaten the index easily. While one may argue that all stocks would have done well in the ongoing bull market, how about a comparison with equity MF schemes? And it is here that our portfolio scores handsomely. Our portfolio has beaten 88% of the large- and multi-cap schemes. Our selection, which is based on a formula that combines value and return, along with insight into

industry trends and corporate governance, has worked well. This is the strategy we apply to stocks selected for the Street Beat section of the magazine and the Moneylife Stockletters. This Cover Story offers a fresh listing of the best stocks based on the latest portfolios of best-performing schemes, and also a review of the previous article (Moneylife, 26 December 2013, “Super Stocks Portfolio”). As in all our past analyses, we found that MF schemes invest in similar large-cap, well-known companies. The same is true even for the top performing schemes. However, we do not go by big, comfortable blue-chip names. Many of the stocks found in the portfolio of mutual fund schemes would not find a place in our portfolio. Therefore, this time, we have picked stocks from a larger set of MF schemes. We have picked the stocks with top weightage from the top 10 large-cap, multi-cap and mid-cap schemes. Thus, out of these 30 schemes, we got a base of 268 stocks, much more compared to a list of 134 stocks last year. ``

MONEYLIFE | 2 October 2014 | 28

Cover Story.indd 2

12-09-2014 20:47:54

COVER STORY

An equal-weighted investment in our chosen stocks has yielded a return of 48.76%, compared to a rise of 23.29% in the Sensex. We have beaten the index easily `

The Best Bets Compared to last year’s 15 stocks, we now have 17 stocks on our list. We will continue with four stocks and exit the remaining 11 of last year’s portfolio. Please remember, this is not our list of recommended stocks. This portfolio is a list of stocks that equity mutual fund schemes already have in their portfolio. We are merely compiling the best of their stocks, leaving out the possible laggards. Over the past few years, our portfolio selection has beaten the Sensex handsomely. Over the past nine months as well, our selection has beaten the Sensex by a significant margin. (See box: Market-beaters for the performance analysis). Last year, we suggested that 70% of your investment should be made in the 15 stocks according to the weightage that we had mentioned; the rest could be kept in cash. This year, we will follow the approach most

funds have—stay fully invested. From the last year’s selection, Mahindra & Mahindra Financial Services does not find a place in the top 75% of the portfolio of any of the 30 short-listed schemes; hence, it gets automatically excluded. MRF, Lupin, eClerx Services and HCL Technologies will continue on our list while we will replace the rest with new entries and add three more. This time around, we have four stocks each from the auto component, software and IT services sectors. Two are from the pharma industry, while the rest come from a diversified list of sectors. One of the industries we are bullish about is auto components which currently accounts for almost 7% of India’s gross domestic product and directly and indirectly employs about 19 million people. Exports in the sector grew by 4.4% to touch $9.69 billion in 2013, as per data ``

The Super Stock Portfolio Company Name

Present in the Portfolio of-

Goodyear India

SBI Emerging Business

Ceat

UTI Mid Cap

MRF

BSL Pure Value, IDFC Premier Equity, +3 more

Swaraj Engines

DSPBR Micro Cap & Franklin Smaller Comp.

City Union Bank

BNP Paribas Mid Cap, +2 more

Atul

DSPBR Micro Cap & Franklin Smaller Comp.

GMDC

UTI Mid Cap, Tata Dividend Yield, +1 more

Excel Crop Care TV Today Network Indraprastha Gas

BSL Pure Value

Finolex Industries Lupin

3-Q Revenue Growth#

MC/OP

RoCE*

7.71%

8.81

25%

10.89%

3.71

14%

9.55%

6.10

15%

24.19%

12.89

32%

9.32%

7.40

15%

29.70%

10.61

20%

0.00%

7.05

18%

DSPBR Micro Cap

27.02%

9.39

24%

Franklin Smaller Comp.

30.97%

9.20

21%

8.57%

6.91

18%

Franklin Smaller Companies & Tata Div.Yield

19.15%

10.61

19%

BSL Frontline Equity, HDFC Mid Cap Opp., +8 more

45.12%

15.38

41%

IPCA Laboratories

HDFC Capital Builder, SBI Magnum Global, +3 more

15.53%

11.57

21%

Hexaware Technologies

UTI Mid Cap

10.07%

12.66

38%

eClerx Services

ICICI Prudential Value Discovery, +1 more

24.87%

14.08

44%

HCL Technologies

BSL Frontline Equity, Franklin Bluechip, +9 more

30.73%

15.75

54%

Vardhman Textiles

IDFC Premier Equity & UTI Mid Cap

20.95%

2.22

12%

#

Past three quarter revenue growth; MC: Market-cap; OP: Operating Profit; * Return on Capital Employed is based on trailing four quarters of net profit

29 | 2 October 2014 | MONEYLIFE

Cover Story.indd 3

13-09-2014 16:19:25

COVER STORY

The recent data of auto sales suggest the onset of revival of the auto industry; this would result in higher order inflows for the tyre companies. Three tyre manufacturers are on our list ` provided by Automotive Component Manufacturing

Association of India (ACMA). The year 2013-14 was undoubtedly one of the most challenging ones for the automobile industry. Vehicle and auto component sales declined during the fiscal. The industry recorded a decline of 2%, with overall turnover standing at Rs2.11 lakh crore against the previous year’s Rs2.16 lakh crore. The annual growth rate of the industry has been 14% for the past six years, most of it being recorded in 2009-12. One of the sub-sectors in the auto components sector is tyre manufacturers. Three of the tyre manufacturers are on our list—Goodyear India, CEAT and MRF. Swaraj Engines, which manufactures engines, is also present on the list. The recent data of auto sales figures suggest the onset of revival of the auto industry; this would result in higher order inflows for the tyre companies. Goodyear India, a subsidiary of Goodyear Tire and Rubber Company (US), supplies tyres to Maruti, Hyundai, Tata Motors, Volkswagen, GM, Toyota and Ford. The tyre manufacturer reported a 12.84% increase in net profit at Rs28.91 crore for the quarter that ended on 30 June 2014. Goodyear, ar, with a focus on quality and efficient operations, has managed the recent business slowdown very well. Its return on capital employed (RoCE—Net CE—Net Profit ÷ Capital Employed) is an extremely healthy 25%. The company ompany is quoting at reasonable nable valuation for a multinational onal company with a market-cap ap to operating profit (MC/OP) P) of 8.81 times. The stock is present in the portfolio of SBI Emerging Business Fund und and had a weightage of 7.43% 43% as on 31 July 2014. Similarly, CEAT, too, would benefit from the weaker rubber ubber prices in the short term, and nd the pick-up in auto demand over the medium term. CEAT is looking at expansion in the two-wheeler market. It plans to expand the capacity in Bangladesh plant to 65 tonnes per day and the Halol plant capacity to 100 tonnes per

Top 10 Large-cap Scheme Name

Total Number of Stocks

Number of Stocks in Top 75% of Portfolio

Quantum Long-Term

21

20

HDFC Capital Builder

40

24

ICICI Prudential Focused Bluechip

50

23

Birla Sun Life Top 100

66

41

Birla Sun Life Frontline

70

35

L&T India Large Cap

47

26

Principal Large Cap

40

20

Reliance Top 200

40

17

Franklin India Bluechip

42

22

SBI Magnum Bluechip

51

26

day. It plans to invest Rs900 crore in its expansion project and expects a turnover of Rs400-Rs500 crore from the CEAT’s operations are less efficient Bangladesh market. CEAT’ Goodyear’s. That is why it has than Goo a RoCE of 14%. What the stock is not so great in terms of return on capital, it makes it up by valuation. CEAT is i quoting an MC/OP of just The stock is present in the top 3.71. Th holdings of UTI Midcap and with 10 holdi weightage of 2.16%. a weight Along with Goodyear and Apollo, Alon MRF is a leading tyre manufacturer. It has a diversified portfolio with a leading position in passenger cars, leadin motorcycles, tractor front tyre and motor medium and heavy commercial mediu vehicles (MHCV). Of the total vehicle tonnage off-take of MRF, the MHCV constitutes 47.9%, followed by segment con passenger car (11.2%), motorcycle (10.2%) and light commercial vehicle (9.3%). Revenues of MRF grew 9.4% year-on-year to Rs3,337 crore for the June 2014 quarter, but the net profit for the quarter was flat on a ``

MONEYLIFE | 2 October 2014 | 30

Cover Story.indd 4

12-09-2014 20:48:24

COVER STORY

Top 10 Multi-cap Total Number of Stocks

Number of Stocks in Top 75% of Portfolio

ICICI Prude ntial Value Discovery

63

36

Reliance Equity Opportunities

57

24

SBI Magnum Global 94

38

26

Mirae Asset India Opportunities

54

28

Scheme Name

HDFC Equity

57

22

ICICI Prudential Dynamic

48

32

Tata Div idend Yield

36

22

UTI Equity

69

31

UTI Opportunities

46

21

Franklin India Prima Plus

55

28

` y-o-y basis. MRF has a RoCE of 15%, around the same

level as CEAT but its valuation is already double that of CEAT, thanks to better perception among investors. Its MC/OP is 6.10. The stock is present in five of the top 30 schemes, two multi-cap schemes and three mid-cap schemes-and enjoys an average weightage of 2.03%. The main problem with buying this stock is its high absolute value. Each share costs close to Rs30,000. According to Nasscom, software exports in 2014-15 would rise to as much as 15% to $99 billion, from about $86 billion estimated for this fiscal ending 31 March 2014. Actual growth in software exports in 2011-12 was 16.5%, according to Nasscom data. According to data released by the department of industrial policy and promotion (DIPP), the computer software and hardware sector attracted foreign direct investment worth Rs60,503 crore between April 2000 and June 2014. These are mainly designed for exports. The Central

government and the respective state governments are expected to collectively spend $6.4 billion on IT products and services in 2014, an increase of 4.3% over 2013, according to a study by Gartner. From the IT sector, our selections are Hexaware Technologies, eClerx Services and HCL Technologies. Hexaware is a small software business that was being controlled by Atul Nishar who remains the chairman but Barings Private Equity now controls the company. This has led to an improved image of the company among investors. Hexaware’s dollar revenue grew 6.5% yearon-year to $102 million for the quarter ended June 2014 and its consolidated rupee revenues increased by 3.56% at Rs610 crore versus Rs589 crore. Growth has been slow. It reported an average growth of 10.07% over the past three quarters. But what is attractive about it is that it has a high RoCE of 38%. Valuation is reasonable too with an MC/OP of 12.66 times. The company is present in the portfolio of UTI Mid-cap with a weightage of 1.28%. eClerx Services, which is a top business process outsourcing company, continues to remain on our list from last year’s selection. The dollar revenue of eClerx Services was higher, though operating margins declined sequentially in the latest June quarter results. Dollar revenues grew 2% to $36.2 million. eClerx reiterated its stance that 2014-15 dollar revenue growth will be in line or marginally lower than in 2013-14. It has averaged a sales growth of 25% over the past three quarters. Even ``

Top 10 Small- and Mid-cap Total Number of Stocks

Number of Stocks in Top 75% of Portfolio

Religare Invesco Mid N Small Cap

48

26

DSP BlackRock Micro Cap

63

38

HDFC Mid-Cap Opportunities

66

41

Franklin India Smaller Companies

60

39

Scheme Name

BNP Paribas Mid Cap

54

34

SBI Emerging Business

26

14

UTI Mid Cap

94

49

IDFC Premier Equity

50

28

JPMorgan India Mid and Small Cap

61

36

Birla Sun Life Pure Value

56

36

31 | 2 October 2014 | MONEYLIFE

Cover Story.indd 5

12-09-2014 20:48:38

COVER STORY

Market-beaters

Portfolio Performance

Our last year’s selection has beaten 63 of the 71 large- and multi-cap schemes

O

ver the past nine months (13 December 2014 to 4 September 2014), our Super Stock portfolio has delivered an absolute return of 48.76%. This is despite an allocation of 70% to the Super Stocks and 30% to cash, as we had suggested. Compared to 71 large- and multi-cap schemes having a track record of five years or more (since our selection was predominantly from this category of schemes), the portfolio returns were better than 63 of the schemes present. Since our portfolio included a low weightage to small- and mid-cap stocks, which did extremely well over this period, small- and mid-

PI Industries Torrent Pharma Amara Raja Batt. Mindtree STFC Lupin Tech Mahindra HCL Tech MRF Tata Motors J&K Bank Eclerx Services TCS

How Our Portfolio Fared

Bajaj Auto 50% MMFS

40%

-6%

14%

34%

54%

74%

94%

30% 20% 10% 0% Super Stock Portfolio

Average Return of Equity Schemes

BSE Sensex

cap schemes did better than our portfolio. If you had invested 70% of your portfolio in the 30-stock Sensex and the rest in cash, your return would have worked out to 23.29%. The return delivered by our portfolio was better

` more than the robust growth rate, what is attractive is

the huge RoCE of 44%. Valuation is reasonable too. The stock is quoting at an MC/OP of 14.08 times. eClerx is present in the portfolio of two of the top 10 performing multi-cap schemes, namely, ICICI Prudential Discovery Value and Tata Dividend Yield, and has an average allocation of 2.29% in the portfolio of these schemes. Revenues of HCL Technologies for the quarter ended June 2014, grew by 3.4% quarter-on-quarter. The growth was led by the BPO segment at 17.7%, while core

than the average return of the 192 equity diversified schemes which worked out to 44.07% over the same period. We may have not factored in costs; but, even post-expenses, our Super Stocks portfolio would have done better than most large- and multi-cap equity MF schemes with just 15 stocks in the portfolio. PI Industries performed the best, with a return of 90% over the period. Torrent Pharmaceuticals followed closely with a return of 85%. Among the relative under-performers were Tata Consultancy Services, Bajaj Auto and Mahindra & Mahindra Financial Services, which delivered a return of 29%, 21% and -5%, respectively.

software grew 2.3%. The company has averaged a sales growth of 30.73% over the past three quarters. Its valuation in terms of MC/OP is high at 15.75 times but it has one of the highest RoCE in India at 54%. The stock is present in as many as 11 schemes with an average allocation of 2.81%. HCL Technologies was present on our list last year as well. From the pharma sector, we have Lupin and IPCA Laboratories ``

MONEYLIFE | 2 October 2014 | 32

Cover Story.indd 6

12-09-2014 20:48:55

COVER STORY

For selecting stocks, we have put emphasis on valuation. Therefore, even though the markets may be slightly overvalued, these stocks should be expected to do well over the long term ` on the list. Lupin continues on our list of last year’s

selection. Lupin has launched 19 new products in FY1314. In the current fiscal, it plans to launch another 20 products. It has established a significant presence in the US. In domestic formulations, it is improving its presence in lucrative chronic therapies. It is slowly, but surely, establishing itself in geographies such as Japan and Australia. The company has averaged a sales growth of 45% over the past three quarters, leading to an extraordinary RoCE of 41%. Its valuation is high with MC/OP at 15.38 times. The stock is present on as many as 10 of the top 30 mutual fund schemes with an average allocation of 1.84%. IPCA Laboratories’ June 2014 quarter revenues grew by 16% to Rs934 crore on the back of 21% growth in export formulations and 10% growth in the domestic formulations business. Net profit increased by 103% to Rs145.5 crore. Exports of formulations, which contribute 44% to the total turnover, have grown at an annualised rate of 27% in the last five years and surpassed the revenues from domestic formulations in the process. The pharma stock has an MC/OP of 11.57 times and a RoCE of 21%. The stock is present in five of the top mutual fund schemes—three mid-cap schemes, one large-cap scheme and one mid-cap scheme. We have just one bank on the list—City Union Bank. With over 100 years of history, it is the oldest in the list of ‘old private sector bank’ category. It is largely present in south India with a network of 425 branches of which 376 are located in five southern states and 291 in Tamil Nadu alone. The Bank has reported an average revenue growth of 9.32% over the past three quarters. It has an MC/OP of 7.40 times and enjoys a RoCE of 15%. This stock is present in three of the top 10 mid-cap schemes. Atul Ltd is a member of the Lalbhai Group, one of the oldest business houses in India. The integrated chemical manufacturer has established subsidiary companies in the US, UK, Germany, China and Brazil. The company manufactures about 900 products and 450 formulations divided into life science chemicals and performance and other chemicals. India contributes 50% to the total revenues, while North America contributes 11% and Europe contributes 13%. For the quarter ended June 2014, net profit shot up

47.7% to Rs59.7 crore from Rs40.4 crore in the same quarter last year. Net sales of the company jumped 25% to Rs636.2 crore from Rs508.3 crore over the same period. Atul commands a RoCE of 20%. Valuation is not cheap after the recent sharp run-up. The stock is quoted at an MC/OP of 10.61 times. Atul is present in two mid-cap schemes. Finolex Industries is one of the largest Indian rigid PVC pipes & fittings manufacturer and the second largest PVC resin manufacturer. The company has manufacturing plants in Pune, Ratnagiri and Vadodara. For the June 2014 quarter, Finolex Industries has reported revenues of Rs662.72 crore and a net profit of Rs50.20 crore up 17% and 22.65%, respectively, over the June 2013 quarter. While RoCE is a decent 19%, the stock has trebled in the last one year and now sports an MC/ OP of 10.61 times. The company is present in two of the top mutual fund scheme—one multi-cap and one midcap. Gujarat Mineral Development Corporation (GMDC) was set up to exploit the lignite, manganese, silica sand, limestone, fluorspar and bentonite reserves of Gujarat. For the June 2014 quarter, GMDC has reported a 14% rise in revenues and a 10% rise in net profit. Even though the company enjoys a RoCE of 18%, the stock has been languishing. Valuation is low with an MC/OP of 7.05 times. The stock is present in the portfolio of three mutual fund schemes. We are a bit surprised that the stock has not participated in the recent rally. However, we think that it will, given its strong fundamentals. Indraprastha Gas, which supplies Compressed Natural Gas (CNG) to the National Capital Region (NCR), recently bought a 50% stake in Pune’s leading city gas distributor, Maharashtra Natural Gas for Rs190 crore. This acquisition follows a 50% stake buy in Central UP Gas last June for Rs70 crore. In the June 2014 quarter, growth in CNG volumes was much below the historical growth rate on account of regular hikes in CNG prices. Buses constitute two-thirds of CNG sales, ``

33 | 2 October 2014 | MONEYLIFE

Cover Story.indd 7

12-09-2014 20:49:08

MSSN AD.indd 2

09-09-2014 16:20:21

MSSN AD.indd 3

09-09-2014 16:20:40

COVER STORY

Methodology

make up 75% of the portfolio of each scheme. This gave us 268 stocks. We then listed these stocks and ranked them according to our own formula. This gave How we picked the best stocks from the best us the basic shortlist of stocks from which we selected schemes our best picks from the best schemes. With a methodology of combining value and return, fortified by insights into industry trends e first ranked equity diversified mutual and corporate governance, we have been able fund schemes on the basis of their to choose stocks that have done well. Fund performance in the past five years, based managers do not stray away much from on their quarterly rolling returns. We benchmark stocks which make up half of picked the top 10 schemes each from their portfolio allocation. However, a few the large-cap, multi-cap and mid-cap stocks from the remaining part of their category. portfolio can deliver substantial value. On We assume that the quality of the stocktaking the latest portfolio of the picks of these schemes has helped top mutual funds, we leave out them beat their peers over the With a methodology of past five-year periods that we combining value and return, stocks that will not create wealth because of specific reasons, and have analysed. What are these fortified by insights into top performers holding now? industry trends and corporate apply our methodology that combines growth and value, to That takes us to the second part governance, we have been pick the best stocks from the best of our analysis: the stocks we able to choose stocks that schemes’ portfolio. select are from the top stocks that have done well

W

` making growth in the segment critical. Indraprastha Gas

has signed a 10-year agreement with Delhi Transport Corporation to supply CNG till December 2020, which provides strong visibility. This is another company, which offers a combination of reasonable return on capital employed (18%) with modest valuation (MC/OP of 6.91 times). It is present in the portfolio of Birla Sun Life Pure Value and has a weightage of 1.40%. Excel Crop Care has come out of the de-merged portfolio of the agricultural products segment of Excel Industries in 2002. It offers solutions in soil health, seed treatment, crop protection and pest management. After a few quarters of lacklustre growth, business has been robust over the last three quarters. Net profit rose 68.98% to Rs33.17 crore in the quarter ended June 2014 as against Rs19.63 crore during the previous quarter ended June 2013. Sales rose 26.86% to Rs322.93 crore from Rs254.55 crore over the same period. It earns an excellent return of 24% on capital but the stock has shot up. As a consequence, valuation has become expensive at an MC/OP of 9.39 times. The company is present in the portfolio of DSP BlackRock Micro Cap. TV Today Network, with its flagship channel Aaj Tak, has been able to maintain its dominant position in the fiercely competitive Hindi news segment. Ad revenues of TV Today are expected to grow at 16.4% annually over FYs14-16 to Rs460.2 crore, primarily led by rate

hikes. Subscription revenue is lower than that of half of its competitors. The media firm has an MC/OP of 9.20 times and a RoCE of 21%. TV Today Network is present in the portfolio of Franklin India Smaller Companies. Vardhman Textiles is a leading textiles conglomerate in India with 22 manufacturing facilities in five states across India. Revenues have increased at an annual rate of 15.8% during FY09-14 led by strong growth in the yarn and the fabric segment. Over the years, the company has benefited from capacity expansion and strong export demand. Over the past three quarters, revenue growth has averaged 26.95%. The company has a fairly low MC/OP of 2.22 times and a RoCE of 12%. The stock is present in the portfolio of two mid-cap schemes. For selecting these stocks we have put emphasis on valuation. Therefore, even though the markets may be slightly overvalued at the current juncture, these stocks should be expected to do well over the long term. After all, buying cheap, relative to business returns, is one of the strategies to ensure better returns. Hopefully, this portfolio will do better than broad market indices and most actively managed mutual fund schemes by picking good quality stocks and avoiding those that may be a drag on the portfolio. „

MONEYLIFE | 2 October 2014 | 36

Cover Story.indd 8

12-09-2014 20:49:22

5 Problems with Mediclaim & 7 Tips To Handle Them Buying health insurance is one of the most worrisome tasks for us. The products are complex, making it tough for us to compare them. Policies differ in exclusions, conditions and f ne print. If you slip on even one of the conditions, your claim may be rejected or cut down. No wonder, a large number of cases generate disputes and some end up as complaints with the Insurance Ombudsman or consumer courts. There are several issues with a mediclaim contract. 1. The terms and conditions keep changing each year and premium can get hiked suddenly. 2. No two health insurance policies are alike. Comparing the benefits is tough. 3. Insurers are not bound to increase your sum assured at the time of renewal. 4. At the time of buying, it’s difficult to know if the insurer will find excuses to deny your claims. 5. Insurers entice you with a lower premium when you are young and increase it once you get older. Since savers are often not aware of these factors, they may fall for the marketing blitz of insurers and the persuasion of agents. How to handle all these issues? What you need is an independent entity to help you with two things. One, a short list of products right for you, based on unbiased and deep research. Two, support you, if your claim is rejected. This is precisely what we at Moneylife Smart Savers Network (MSSN) do. We cut through the hype, hyperbole, duplication and complex f ne print to help you select the most suitable products. We know that as an individual you will f nd it hard to do all the research yourself. Also, you need a voice when you have to fight for your valid claim. Being part of the MSSN community can be an advantage in this. If your claim is wrongly denied, we would fight for you. An important part of the membership is continuous handholding. As a member, if you have any questions before or after you buy mediclaim, you can ask our experts for unbiased and practical solutions.

savers.moneylife.in Benefit More from Less

MSSN-Promotional Ads.indd 1

Tips to Remember 1. Lifelong renewal is an important product feature you must consider. 2. In- house claims processing is better than third party administrators (TPAs). 3. Some insurers offer discounts for not having a TPA, but you may have to give up other features. 4. Check the premium for older age band, which would give you a fair idea of the difference between younger and older customers. 5. Some insurers offer discounts for buying online. If you don’t need an agent’s help, buy online to save on premium. 6. Disclose truthfully. Insurers look out for even the slightest error to deny claims. 7. Mediclaim also covers pre- and post- hospitalisation expenses such as doctor’s visit, diagnostic tests, etc.

12-09-2014 20:59:04

STOCKS STREET BEAT

Unbiased & Methodical Stock Picking that Works!

I g a r a s h i M ot ors India

Riding the Auto Sector Growth With new products being launched in the automobile sector by market leaders, profitable component manufacturers are likely to see improved performance

I

garashi Motors India Ltd is engaged in the production of micro motors and its accessories mainly for the automotive sector. The company’s products include small DC (direct current) brush motor, geared motor and motor parts; it is also involved in contract manufacturing. The company has its manufacturing plant in Chennai. Igarashi was promoted as a joint venture between Crompton Greaves Ltd (CGL), Igarashi Electric Works (IEW), Japan and Igarashi Electric Works (HK) Limited, Hong Kong. During 2003, CGL divested its holding in favour of IEW. For the quarter ended 30 June 2014, Igarashi’s revenues were Rs90.07 crore (Rs87.65 crore) and its quarterly net profit was Rs10.17 crore (Rs8.79 crore). For the year ended 31 March 2014, Igarashi’s revenues were Rs361.23 crore (Rs290.78 crore) and its net profit was Rs46.14 crore (Rs21.36 crore). According to the company’s annual report for FY13-14, “The year 2013-14 was financially the best year for the company since inception. A robust combination of the right product and customer strategy, combined with sustainable operational efficiency actions, delivered a 24% growth in sales, with a 28% growth in EBIDTA and more than doubling of the profits compared to the previous ``

Key Financials Stand-alone (Rs Cr)

Dec-13

Mar-14

Jun-14

Revenue

92.70

92.27

90.07

OP

18.42

14.29

16.41

OPM

20%

15%

18%

Y-o-Y Revenue Growth

34%

21%

3%

Y-o-Y OP Growth

46%

10%

-5%

FY12

FY13

FY14

16%

17%

21%

March Ending RoNW

OP: Operating Profit,Y-o-Y:Year-on-Year, OPM: Operating Profit Margin, RoNW: Return on Net Worth

High Expectations 300

859,000

250

687,200

200

515,400

343,600

150

Price (Rs/share) 100

50 Oct-13

Volume

171,800

0 Mar-14

Sep-14

Recommended Price Rs263

MONEYLIFE STOCK IDEAS

THAT WORK

Moneylife Issue 3 April 2014

127%*

(AARTI DRUGS)

Exit Price Rs598 On 18 July 2014

* Non- annualised returns

MONEYLIFE | 2 October 2014 | 38

Stock-Streetbeat _rev.indd 2

12-09-2014 21:02:23

STOCKS STREET BEAT

Unbiased & Methodical Stock Picking that Works!

(Rs)

n Stories of Price Manipulatio

60.50

45.50

7579%

Pearl Electronics onics (Rs5 (Rs50)

P

earl Electronics cs Ltd (PEL) was incorporated in October 2012 through the de-merger of the electronics division of Nouveau Global Ventures, a listed company. In our previous issue (Unquoted, 18 September 2014), we covered Pearl Agriculture Ltd (PAL) which is the de-merged entity of the agriculture division of Nouveau Global Ventures.

30.50

15.50

0.50 Mar-13

Dec-13

Aug-14

Not surprisingly, PEL’S traits are similar to those of PAL. Over the past four quarters, revenues totalled just Rs78

` year… the depreciating rupee also played its favourable

role in the improved margins during the year.” The shareholding pattern of Igarashi includes 74.52% with the promoters and 0.02% with domestic institutional investors. The remaining 25.46% is with retail investors and the general public. Over the past five quarters, the average growth in quarterly sales of Igarashi was Valuation 20% and its Market-cap Rs867.29 cr average growth Debt Rs51.49 cr in quarterly operating Cash and Cash Equivalents Rs40.13 cr profit was Enterprise Value (EV) Rs878.64 cr 22%. The EBIT (annualised) Rs39.68 cr average EV/EBIT 22.14 operating Price/ BV 4.01 margin of Price/Earning (annualised) 21.32 Igarashi is 18%. Valuation is not cheap. The market-capitalisation of the company is 2.41 times its sales and 13.21 times its operating profit. The return on net worth (RoNW) is 21% and the return on capital employed (ROCE) is

About Our Stock Selection Process: The Street Beat stocks are selected from over 1294 stocks in the Moneylife database. We normally look for companies that are small, recording a high return on capital and are reasonably valued. After having selected stocks based on these criteria, we try to eliminate the ones that could throw up governance issues. How To Use this Section: Cumulative return is given at the end of the section under the head ‘Exits & Return’. Look at it for exits from street beat stocks. Disclaimer: This report is for informational purpose only. None of the stock information, data & company information presented constitutes a recommendation or a solicitation of any offer to buy

lakh and profit of Rs34 lakh. As a constituent of the S&P BSE Small Cap index, the price of this stock has shot up by an astounding 7,579%, or 76 times, to Rs43 as on 4 September 2014, from Rs0.56 as on 19 March 2013. The market-cap of this company is a ridiculous Rs850 crore. As in the case of PAL, the promoters have reduced their holding to 15% as on 30 June 2014 from 36% at the time of listing in March 2013. While the stocks of two companies of the same group are being brazenly manipulated, the market regulator and Exchange could not care less. „

19%. The cash earnings per share are Rs20.28. Igarashi has distributed dividends of 30% in FY1314, after not being able to declare any dividend over five years. In the past, in FY07-08 and two years prior to that, it has distributed dividends of 15% each. The share price of Igarashi has risen from a 52-week low of Rs63.45 (touched on 13 September 2013) to a 52-week high of Rs313 (achieved on 26 August 2014), a rise of more than 390%. Its shares are listed on the BSE and NSE, although it has de-listed from the Madras Stock Exchange. Its book value is Rs71.07. The share is currently trading at around Rs297 (as on 12 September 2014) and is a good buy, but only for the long term, at its current market price. Cautious investors may wish to wait for a decline to Rs250 or so. „ Exits & Returns Street Beat stocks are chosen from a list of undervalued stocks that are earning a high return on capital. We recommend an exit when they are no longer undervalued or not performing as per expectations. 59% Return: Our recommendation has so far fetched 59% since January 2012, based on booked profit and open positions of more than one year.

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. 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.

39 | 2 October 2014 | MONEYLIFE

Stock-Streetbeat _rev.indd 3

12-09-2014 21:03:01

STREET BEAT WHICH WAY

A Step Back, To Move Forward

us now. The trailing PE ratio for four quarters is about 22. In a bull market, this ratio can be as high as a 23-25 before a meaningful decline takes place. Since the Nifty PE is not close to such overvalued level, we think more gains are in store after a short-term dip. If the market does decline a bit more over the short A short-term decline and then a rally term, we expect a new rally to develop that could take the indices to a new high, marginally higher than ast fortnight, I had suggested that the market may the current high. Of course, most good-quality stocks undergo a short-term correction. The Sensex was present in the indices are already expensive; so the at 26,638 two weeks ago. It is now at 27,061.04, indices may have to be pushed up by stocks that have about 300 points higher over a two-week period. languished so far, if we are to get a new Even though investors have pushed the high. Can stocks like National Mineral market higher, the indices have found it hard to make much advance. My view Unfortunately, we Development Corp, National Thermal remains the same—we are due for a notice continued Power Corp, Bharat Heavy Electricals, Jindal Steel or DLF push the NIfty up? small pullback. This should take us to lack of visible Unfortunately, we notice continued the 26,000 region on the Sensex and action from the lack of visible action from the possibly a bit lower. government to fix government to fix the public sector While discussing valuation, last the public sector companies. If the Modi government fortnight, we looked at the forward companies moves in that direction, the market will PE of the Sensex based on consensus certainly make another big leap. Until estimates. By that estimate, the Sensex is then, we will have to depend on the same four horses— not overvalued. Especially since the economic benefits pharma, consumer products, finance and software—to of a more decisive government are about to flow. But pull the market up. there is a problem with consensus estimates. It’s a Meanwhile, as happens in major bull forecast of a bunch of stock analysts and, usually, stock markets, we see rampant speculation going analysts are bad at forecasting. on and punters having a field day. Tips So, while relying on consensus available on Internet forums and estimates is fine to get a sense of Twitter are yielding 50%where the market could be headed in 100% returns in a matter of the best-case scenario, one should also days and weeks. Stay away look at market valuation based on the from them. These tips will make trailing four quarters of earnings per share money for you for some time but, one fine day, (EPS) and the current PE ratio, based on this they will stop working and inflict large EPS. losses when you find yourself saddled This is called trailing PE, as opposed Medium-term: — with poor-quality stocks locked in lower to forward PE used in earnings estimate. Long-term: Up circuit. „ And here is what the trailing PE ratio tells

L

MONEYLIFE | 2 October 2014 | 40

Which way.indd 1

12-09-2014 17:12:51

STOCKGRADER LONG TERM

Good Getting Better Pharma, Software & IT services and FMCG stocks performed better last fortnight

No. 1 2 3 4 5 6 7 8 9

Company Hero MotoCorp Shree Cement VST Industries TCS ONGC Sun T V N etwork Lupin Mindtree

ML Sector Auto Cement Lifestyle & Leisure Software & IT Services Oil & Gas Media Pharma Software & IT Services

IDFC

Return Ratios@ Valuation# RoE RoCE MC/OP MC/Sales 38% 41% 14.54 1.96 21% 15% 17.43 4.60 51% 70% 9.20 2.98 46% 56% 23.27 7.32 19% 23% 10.36 5.73 23% 33% 9.34 5.42 42% 56% 10.47 5.08 27% 34% 14.44 2.89

Entry Price 1,823.40 4,470.55 1,786.15 1,344.15 339.7 472.10 629.05 457.27

CMP* 2,758.55 8,742.90 1,653.90 2,607.60 429.15 348.60 1,359.25 1,164.35

Change 51% 96% -7% 94% 26% -26% 116% 155% -3%

Financial services

11%

—

13.32

2.86

154.20

149.05

10 ITC

Diversified

35%

49%

21.63

7.66

334.90

355.85

6%

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

Financial services Banks Banks Auto Paints Pharma Banks Lifestyle & Leisure Steel Software & IT Services Foods & Beverages Auto Pharma Auto Software & IT Services Consumer Products Non-Ferrous metals Foods & Beverages Foods & Beverages Software & IT Services Banks Engineering Energy Oil & Gas Energy Steel Farm & Farm inputs Pharma Software & IT Services

21% 20% 12% 34% 33% 44% 17% 29% 25% 30% 46% 22% 26% 52% 38% 119% 18% 47% 28% 58% 14% 10% 77% 15% 11% 7% — 26% 44%

— — — 43% 48% 15% — 37% 31% 38% 60% 19% 33% 65% 37% 149% 17% 49% 27% 73% — 10% — 14% 14% 4% — 27% 59%

21.64 13.43 28.73 18.36 34.69 24.09 11.12 31.39 7.28 19.13 26.33 16.99 24.78 43.85 16.59 31.13 13.25 31.43 43.74 11.86 4.09 61.97 — 14.04 2.62 7.27 — 15.56 16.04

6.39 3.95 7.53 3.23 5.88 10.61 2.90 2.98 5.03 3.19 2.54 2.10 9.07 10.94 5.65 5.31 5.96 6.34 14.73 5.96 0.87 2.62 849.34 1.10 0.97 0.72 1.38 4.69 5.39

845.00 683.00 774.70 1,820.35 457.37 484.68 427.45 241.85 140.05 1,794.65 876.45 938.90 1,178.40 4,910.15 165.90 554.95 116.05 5,000.00 483.40 1,400.65 810.20 191.20 300.05 425.55 91.80 90.25 30.40 2,439.40 1,294.55

1,050.30 855.70 1,069.15 2,348.45 671.80 806.10 631.40 388.00 176.55 2,445.75 1,385.70 1,389.25 1,756.30 12,044.75 178.80 757.50 169.65 6,400.15 642.20 1,623.20 944.60 220.70 357.95 462.60 89.25 79.50 33.45 2,961.05 1,346.45

24% 25% 38% 29% 47% 66% 48% 60% 26% 36% 58% 48% 49% 145% 8% 36% 46% 28% 33% 16% 17% 15% 19% 9% -3% -12% 10% 21% 4%

HDFC HDFC Bank Kotak Mahindra Bank Bajaj Auto Asian Paints Sun Pharma ^ IndusInd Bank Titan Company NMDC Tech Mahindra Britannia Industries Mahindra & Mahindra Divi's Laboratories Eicher Motors Hexaware Technologies Hindustan Unilever Hindustan Zinc Nestlé India Zydus Wellness HCL Technologies Bank of Baroda Bharat Heavy Electricals Coal India GAIL (India) Gujarat Industries Power Steel Authority of India Fert & Chem, Travancore Dr. Reddy’s Lab Eclerx Services

Exposure is assumed to be 2% for each stock. This means that the portfolio is 22% in cash now. For calculating portfolio return, the cash balance is expected to earn 8% (pre-tax).*Latest price is the closing price of Friday in Rs; MC: Market-cap; OP: Operating Profit; # Valuation based on the latest quarter result, annualised; @ Return ratios based on the latest four quarters of profit; ^Consolidated; CMP: current market price

Moneylife Long Term Portfolio (MLTP) will have 50 stocks, weighted equally & will be benchmarked against Nifty and large-cap equity funds. But MLTP returns are not adjusted to the cost & constraints of equity schemes: 1) Yearly equity fund charges of around 2% 2) Buying & selling, based on purchase or redemption pressures 3) Impact cost in buying/selling

41 | 2 October 2014 | MONEYLIFE

Long Term.indd 2

12-09-2014 20:09:55

STOCKS GROWTH PICKS

Positive Trend Continues The below list of 95 stocks are ranked on the basis of a high return on net worth and low valuation. Almost all the stocks on the list are trending up. Therefore, apart from the valuations and returns, it is essential to consider other parameters as well, before investing. Company

KM Sugar Mills Tata Metaliks Ishan Dyes & Chemicals Indo Count Inds

ML Sector

Results Declared

Latest Qtr Revenue Growth

Average 3-Qtr Revenue Growth

Valuation (MC/OP) **

Return on Net Worth (%) *

Tax Rate

Price Trend Up

Sugar

Jun-14

26%

71%

0.73

129%

1%

Steel Products

Jun-14

1%

20%

1.42

1288%

-21%

Up

Chemicals

Jun-14

-35%

-20%

3.75

72%

-27%

Flat Up

Textiles

Jun-14

7%

16%

2.42

70%

6%

Bhageria Dye-Chem

Chemicals

Jun-14

265%

213%

1.58

86%

34%

Up

Aksharchem (India)

Chemicals

Jun-14

26%

30%

4.56

117%

-12%

Up

Software & It Services

Jun-14

14%

25%

1.52

46%

0%

Up

Textiles

Jun-14

9%

19%

1.32

43%

-30%

Up

Foods & Beverages

Jun-14

60%

50%

3.14

37%

31%

Up

Rolta India Pasupati Acrylon Chaman Lal Setia Exports

Odds

Jun-14

11%

15%

3.13

44%

0%

Up

Bharat Rasayan

Store One Retail India

Farm & Farm Inputs

Jun-14

58%

65%

3.45

44%

32%

Up

KSE

Farm & Farm Inputs

Jun-14

9%

9%

4.54

42%

31%

Up

Textiles

Jun-14

11%

12%

2.83

30%

24%

Up

Auto Components

Jun-14

-55%

-45%

10.47

53%

11%

Up

Sutlej Textiles & Inds Phoenix Lamps Bharat Agri Fert & Realty Accelya Kale Solutions Ceat Nitin Spinners Bharat Petroleum Corp Vardhman Textiles Birla Ericsson Optical Indian Terrain Fa shions DHP India VST Industries Suven Life Sciences

Real Estate

Jun-14

-8%

22%

5.81

30%

22%

Up

Software & It Services

Jun-14

-8%

5%

10.66

117%

32%

Flat

Auto Components

Jun-14

10%

11%

5.57

33%

31%

Up

Textiles

Jun-14

13%

11%

1.33

27%

33%

Up

Refineries

Jun-14

14%

10%

8.05

31%

36%

Up

Textiles

Jun-14

19%

21%

2.69

27%

29%

Up

Telecom Equipment

Jun-14

69%

144%

5.96

30%

18%

Up Up

Retail

Jun-14

27%

51%

10.26

40%

14%

Industrial Intermediates

Jun-14

-5%

61%

4.84

28%

33%

Up

Lifestyle & Leisure

Jun-14

21%

20%

9.10

51%

49%

Flat

Pharma

Jun-14

30%

66%

11.09

56%

29%

Up

Avanti Feeds

Farm & Farm Inputs

Jun-14

77%

84%

8.09

47%

34%

Up

KRBL

Foods & Beverages

Jun-14

17%

36%

4.41

28%

21%

Up

Chemicals

Jun-14

22%

20%

7.46

33%

33%

Up

Alkyl Amines Chemicals Vakrangee TVS Srichakra Atlanta

Software & It Services

Jun-14

69%

45%

10.16

47%

27%

Up

Auto Components

Jun-14

18%

18%

4.77

28%

15%

Up Up

Con_Epc_Infra

Jun-14

187%

86%

4.87

29%

-4%

Ujaas Energy

Engineering

Jun-14

-13%

8%

16.38

28%

38%

Up

Windsor Machines

Engineering

Jun-14

2%

7%

133.34

47%

0%

Up

HP Cotton Textile Mills

Textiles

Jun-14

-2%

10%

2.80

24%

37%

Flat

Transport & Logistics

Jun-14

24%

17%

5.09

28%

35%

Up

Pharma

Jun-14

-1%

15%

2.01

24%

35%

Up

Foods & Beverages

Jun-14

8%

-35%

2.25

23%

50%

Up

Empire Industries

Diversified

Jun-14

11%

14%

10.74

31%

24%

Up

Adi Finechem

Chemicals

Jun-14

39%

43%

12.44

45%

34%

Up

Pharma

Jun-14

19%

20%

5.93

27%

30%

Up

Auto Components

Jun-14

46%

38%

4.10

25%

34%

Up Up

Kesar Terminals & Infrastructure NGL Fine-Chem Kriti Nutrients

Aarti Drugs Samkrg Pistons & Rings MPS

Education

Jun-14

14%

18%

16.50

59%

34%

Zensar Technologies

Software & It Services

Jun-14

10%

10%

8.14

29%

27%

Up

Saurashtra Cement

Cement

Jun-14

60%

33%

2.00

24%

15%

Up

Virat Industries ASM Technologies Premco Global

Textiles

Jun-14

-7%

-17%

4.86

25%

33%

Up

Software & It Services

Jun-14

15%

18%

3.33

24%

29%

Up

Textiles

Jun-14

-23%

22%

3.04

23%

35%

Up

``

MONEYLIFE | 2 October 2014 | 42

Stocks Value Pick.indd 2

12-09-2014 20:04:12

STOCKS GROWTH PICKS

Company

`

ML Sector

Results Declared

Latest Qtr Revenue Growth

Average 3-Qtr Revenue Growth

Valuation (MC/OP) **

Return on Net Worth (%) *

Tax Rate

Price Trend

Gujarat Gas Co

Oil & Gas

Kothari Products

Lifestyle & Leisure

Jun-14

-8%

-2%

11.52

38%

30%

Up

Jun-14

-11%

3%

7.15

23%

34%

Up

Pharma

Jun-14

-1%

4%

13.42

34%

31%

Flat

JBM Auto

Auto Components

Jun-14

52%

51%

7.13

31%

32%

Up

B &A

Foods & Beverages

Jun-14

-3%

0%

13.54

23%

23%

Up

Software & It Services

Jun-14

20%

25%

15.75

44%

20%

Up

Industrial Intermediates

Jun-14

38%

24%

9.24

29%

33%

Up

Aarti Industries

Chemicals

Jun-14

25%

30%

5.76

25%

29%

Up

Roto Pumps

Engineering

Jun-14

4%

1%

10.57

27%

33%

Up

Ahlcon Parenterals (India)

Eclerx Services AVT Natural Products

HCL Technologies

Software & It Services

Jun-14

16%

31%

11.96

58%

18%

Up

RS Software (India)

Software & It Services

Jun-14

10%

19%

10.36

34%

31%

Up

Auto Components

Jun-14

16%

19%

10.60

32%

33%

Up

Tata Elxsi

Software & It Services

Jun-14

11%

25%

12.75

36%

35%

Up

Fluidomat

Engineering

Jun-14

5%

-6%

17.63

34%

33%

Up

Astra Microwave Products

Up

Lumax Auto Technologies

Engineering

Jun-14

411%

250%

8.29

28%

27%

Navneet Education

Education

Jun-14

25%

15%

4.05

30%

33%

Up

Shakti Pumps (India)

Engineering

Jun-14

36%

49%

7.19

25%

26%

Up

Orbit Exports

Textiles

Jun-14

14%

11%

10.03

32%

31%

Up

Auto Components

Jun-14

19%

20%

6.76

26%

4%

Up

Dynemic Products

Chemicals

Jun-14

16%

37%

4.21

22%

35%

Up

Aurobindo Pharma

Pharma

Jun-14

21%

30%

10.88

35%

23%

Up

Auto Components

Jun-14

18%

25%

8.11

27%

32%

Up

Ajanta Pharma

Pharma

Jun-14

32%

29%

16.29

46%

30%

Up

Torrent Pharmaceuticals

Pharma

Jun-14

4%

15%

9.77

37%

20%

Up

Industrial Intermediates

Jun-14

13%

17%

14.35

39%

34%

Up Flat

Munjal Auto Inds

Balkrishna Industries

Orient Refractories Warren Tea Hexaware Technologies Fiem Industries Jenburkt Pharmaceuticals Waterbase Granules India Oriental Carbon & Chemicals

Foods & Beverages

Jun-14

59%

5%

10.42

25%

25%

Software & It Services

Jun-14

-4%

10%

16.52

38%

18%

Up

Auto Components

Jun-14

18%

21%

8.83

26%

30%

Up Up

Pharma

Jun-14

13%

13%

12.74

29%

27%

Foods & Beverages

Jun-14

35%

51%

6.63

28%

21%

Up

Pharma

Jun-14

21%

45%

8.15

26%

33%

Up Up

Chemicals

Jun-14

12%

19%

5.71

22%

19%

Ambika Cotton Mills

Textiles

Jun-14

14%

19%

2.94

20%

19%

Up

APM Industries

Textiles

Jun-14

-1%

-2%

2.68

20%

36%

Up

Consumer Durables

Jun-14

168%

158%

8.27

31%

0%

Up

PBM Polytex

Sharp India

Textiles

Jun-14

-3%

5%

2.35

20%

34%

Up

Lupin

Pharma

Jun-14

59%

45%

10.36

42%

26%

Up

Swaraj Engines

Auto Components

Jun-14

13%

24%

12.35

32%

31%

Up

Excel Crop Care

Farm & Farm Inputs

Jun-14

26%

27%

6.36

28%

30%

Up

Hero Motocorp

Auto

Jun-14

14%

10%

14.14

38%

26%

Up

Atul

Chemicals

Jun-14

25%

30%

9.64

28%

28%

Up

Auto Components

Jun-14

1%

0%

9.66

26%

24%

Up

Chemicals

Jun-14

30%

23%

13.91

31%

33%

Up

Steel

Jun-14

21%

27%

7.46

25%

33%

Up

Building Material

Jun-14

12%

5%

4.09

21%

36%

Up

Heritage Foods

Foods & Beverages

Jun-14

16%

12%

11.34

25%

22%

Up

Arcotech

Non-Ferrous Metals

Jun-14

17%

63%

10.06

24%

35%

Up

Building Material

Jun-14

28%

17%

12.85

33%

3%

Up

Indag Rubber Vinati Organics NMDC Inani Marbles & Inds

Century Plyboards (India)

MC: Market-cap; OP: Operating Profit; * Return on net worth is based on trailing four quarters of net profit; ** Valuation is based on the recent quarter operating profit annualised How To Use the Data: This list is designed to reduce your effort while shortlisting value picks under different methods. You cannot buy these stocks mechanically. To actually select a stock to buy, you may want to glance at other parameters and apply your own understanding of a sector or a company. Remember, for value investors, there is something called a ‘value trap’. This refers to a situation when an attractive company is reasonably valued but its internals are deteriorating – which is probably why the stock was cheap to start with. One way to avoid this is to consider companies with strong sales growth and low debt. Also, keep an eye on the tax payout, which indicates the quality of governance.

43 | 2 October 2014 | MONEYLIFE

Stocks Value Pick.indd 3

12-09-2014 20:04:28

3 Long-term & 1 Short-term Stockletter for Excellent Returns Panther 27.51%*

Antelope 51.23%* *Annualised. Since January 2012

*Non-annualised. Since 25 April 2014

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

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

Cheetah 1% Avg/trade*

Lion 43.48%*

N EW

* Annualised. Since January 2012

Long-term value stocks. Usually large companies are selected

* Over 177 Trades

Short term movements • Weekly Market View • List of Stocks to Buy • List of Stocks to Sell • 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 four stockletters? The first three stockletters are for stocks for long term but with specific emphases. We hope to have a maximum of 30-32 stocks in any portfolio at any time. Cheetah is for the short-term and may have at the most 7 stocks a week What is the investment horizon for these stockletters? The long term stockletters are meant for at least one year. The best results from good stocks come when they are held for five years or more. In exceptional situation, when a stock has run up sharply, we may suggest an exit before one 1 year. Cheetah is meant for a few weeks at the most Can I know the performance of the stockletters? Yes. Since January 2012, that is, over two years, Lion has given a return of 43.48% while Antelope has given a return of 51.23%. More details of the portfolio are given on https://www.moneylife.in/ promotion/Stockperformance/index.html. This

Rev Stockletter Ad.indd 2

performance report is updated occasionally, usually every quarter. Cheetah has given a 1% average profit per trade over 177 trades How are these stocks different from the stocks given in Moneylife magazine? The selection pattern is different for Street Beat and stockletters. Street Beat is meant for the average investor and focuses on small-caps unknown to many, while the stockletters are designed to meet investment needs of serious investors who have deeper interest and focus in the stockmarket and want to commit a substantial part of their savings for the long term. Street Beat stocks are chosen for each financial year and the summary performance of these stocks is recorded sometime in May. The profit or loss of each ongoing idea can be analysed from the stockletter itself. Only Cheetah is meant for the short-term What is the reason behind this success and will it continue? We believe that the reason behind this performance

is our formula. We frankly do not know whether it will be as successful in future as we have been so far, but we think we can beat the returns of the majority of equity mutual fund schemes 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. Cheetah stocks are selected on the basis of short-term prie strengths and weaknesses How much should one invest in each stock? You should invest equal amount in every single stock suggested. If you are investing Rs 5000 per stock and TCS is valued at 2500, you would buy 2 shares. If Asian Paints is valued at Rs 500, you would buy 10 shares. The key point is exposure per stock is Rs5000, not the number of shares. If there

11-09-2014 13:58:33

is a 10% gain in both you should get the same profit from both 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 cheapest 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 How should a new subscriber interpret the ideas given in the stockletter? We identify stocks from the existing list that are still worth buying. New subscribers can buy these. We also identify the stocks that are not worth buying currently from the existing list because of fundamental or valuation reasons. New subscribers can avoid these. New subscribers can also invest in new stocks in the list after they have started subscribing. If some stocks have already run up sharply, will it be wise to invest in 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. This is why 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

stock selection but also how long a stock is held and at what valuation they are bought. We suggest investors hold stocks for at least five years. On our part, we will try to suggest stocks that are not expensive How do subscribers get the stockletter? The stockletter is currently sent as a pdf file only by email. Soon, subscribers will be required to download from www.moneylife.in/profile.html 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

How much do the stockletters cost? Antelope and Lion each costs Rs2,000 per year. If you buy two together, you pay Rs3,500. Panther and Cheetah stockletters each cost Rs2,500 per year

What if I have any queries about specific stocks? Well, we would rather let our performance do the talking but if you have any serious doubts email us at [email protected]

How 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

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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 weeks: You can cancel your subscription within two issues. We will return your money after deducting Rs150 for payment gateway and handling charges. You can cancel by email or phone.

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11-09-2014 13:59:10

Insurance Trends New products, regulations, features and options, interpreted from your perspective

Pension

he Union finance minister has re-launched an immediate annuity scheme for senior citizens (age 60 and above) that will provide monthly pension ranging from Rs500 to Rs5,000. The product is called Varishtha Bima Pension Yojana (VBPY) which will be administered by LIC. The minimum and maximum single lump-sum premium will

annuity rates offered today (7%7.5%). Any senior citizen interested in an immediate annuity product should consider VBPY option. The drawback is that the interest payout will be taxable. The annuity product guarantees the rate of return for lifetime. Just like annuity, on death, the full purchase price of the product will be given to the nominee. Loan of up to 75% of the subscribed amount will be available after three years. The drawback of any annuity product is its lack of liquidity. The insurance company may not allow withdrawal till death of the annuitant or may allow it only in cases of critical illness. VBPY allows exit/surrender after 15 years or earlier in special circumstances

be Rs66,665 and Rs6,66,665, respectively. The rate of return will be 9% monthly (9.38% annualised). Annuity payout options are monthly, quarterly, halfyearly or yearly. The rates are comparable with FD rates and better than the

like critical or terminal illness for self or spouse. One concern about VBPY raised by a Moneylife reader is regarding the service tax of 3.09% which is to be paid with the contribution. Service tax will eat into the returns of the product which will not

LIC’s Varishtha Bima Pension Yojana Better annuity option for senior citizens

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benefit the intended customer segment of senior citizens. We hope the government takes cognisance and waives the service tax to make VBPY attractive and worthy of recommendation.

Health Insurance

Group Insurance for Jains with Taxpayers’ Money? Will National Insurance lose in a sweet deal?

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he CAG (Comptroller and Auditor General) had pulled up public sector insurance companies for huge losses in group mediclaim where insurance is offered to groups at a very low rate. In April 2014, Insurance Regulatory and Development Authority (IRDA) sought details of the pricing of group mediclaim and had called for a meeting with all non-life insurers to address the issue of hefty discounts. If IRDA is really concerned, here is a perfect case to investigate. National Insurance is set to give cheap mediclaim policy to Jain International Organisation (JIO) for covering the Jain community. It comes at a time when National Insurance has withdrawn 11 products, much to displeasure of its customers. Existing policyholders are being forced to move to another product at rates, terms and conditions which may not be as good as those on the existing one. Even the bank mediclaim products are withdrawn and retail product ‘Parivar’ offered for the insured. The cheap mediclaims enjoyed by policyholders are getting over. If so, why is cheap mediclaim ``

MONEYLIFE | 2 October 2014 | 46

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Moneylife Insurance Helpline Success The initiative from your group is commendable as it will be helpful to spread awareness about the do’s and don’ts by customers before finalising an insurance product to prevent from being cheated. - Amit Mishra

I am extremely happy about the manner and speed with which my issue was handled. This speaks volumes about Moneylife Foundation. - N Kanitkar

262

cases handled

207

cases guided y correctly

I want to thank Moneylife Foundation for preventing us ordinary people from falling into financial traps. - Brijesh

Within 3 days of writing to the Helpline, Reliance credited the money. This was an amazing turnaround! My sincere heartfelt thanks to the entire team at Moneylife Foundation for acting so swiftly. - Dinesh Shanbhag

55 members got back over We thank you for the support you gave to our cause which also helped LIC accept their mistake. - N K Bhatt

I am honoured to have a great companion like Moneylife in my life. It is a matter of pride and privilege to be a part of it. - Uttam Kumar Dubey

`

47 lakh Special thanks to Moneylife for the comprehensive articles which are full of necessary information. I searched the internet and none is as good. - Girish Kodashettar

Aviva tried to pressurise me to purchase a policy. Thanks to Moneylife Foundation, I have taken an informed decision rather than hurry and fall into a pit. - Tushar

I am indebted to Moneylife for jumping in and taking the reins in their hands. I had lost all hopes of getting my money back till the day PNB Metlife called me and confirmed that they would put Rs25,000 in my account. - Shunila

Have any insurance-related problem? Contact us at http://moneylife.in/promotion/insurancehelp/unregistered.html

Insurance Helpline Success.indd 2

11-09-2014 20:21:34

INSURANCE TRENDS

` offered to JIO? The premium for

family floater of Rs5 lakh covering proposer, spouse, two dependent children and two parents up to age 80 years is Rs7,200. This is a throwaway price! The comparable cost for retail policyholders would be a premium of Rs30,000 or so. Moreover, the product covers pre-existing diseases (PED) from the first year itself. There will be no medical check-up. The only procedure which will have waiting period is total knee replacement, which is excluded for the first 12 months. Maternity will be covered after only nine months’ waiting period; if the insured gets pregnant soon after buying the policy, she

Fine Print LIC IniƟates E-insurance with Repository Tie-up

A

fter the initial inertia and concerns about cost of digitisation of insurance policies, Life Insurance Corporation of India (LIC) has tied up with all the Insurance Repositories (IRs)—NSDL Database Management Ltd (NDML) National Insurance Repository, Central Insurance Repository Ltd, Stock Holding Corporation of India Ltd Insurance Repository, CAMS

Repository Services Ltd and Karvy Insurance Repository Ltd. One year ago, Moneylife had raised concerns about IRDA’s e-insurance initiative being a non-starter because its

will be covered for maternity benefits. Expenses incurred for ayurvedic and homeopathic are admissible provided the treatment hospital is recognised by government. In contrast, retail mediclaim and bank mediclaim products have a waiting period of four years for PEDs and several specific procedures with waiting period of one / two years. Few retail mediclaim products cover maternity after waiting period of three-four years. Hence, it is surprising that National Insurance is able to offer such a lucrative deal for JIO. The scheme was widely publicised within the Jain

community. There will be 16 collection centres in Mumbai and Thane. Is National Insurance relying on volume to make up for the claims payout? But, will this lead to an adverse selection and a disaster for the insurer? The premium cheque is to be written in favour of JIO, which means you are only covered for the policy term. The product can be dropped after policy term. There is no guarantee of continuation. Portability will be tough, or impossible. The insurance is facilitated through prudent insurance broker. Is National Insurance being ‘prudent’ while offering such a policy? „

was not mandatory for every insurance company to tie-up with all IRs. While the facility is free for policyholders, insurers are required to bear the cost of digitising policies. IRDA had launched a twomonth pilot project in July, making it mandatory for all life insurers to convert a minimum of 1,000, or 5%, of the total individual policies issued.

history of diabetes and hypertension for 12 years and was chewing tobacco for 15 years. Mediclaim policy has an exclusion clause for any ailment that happens within 30 days of policy inception. This is to ensure that customer has not purchased the policy after discovering symptoms of any ailment. However, if there is claim due to accident, it is covered by mediclaim even if it happens within 30 days of the commencement of policy.

Claim within One Month Will Be Denied

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he New Delhi Consumer Disputes Redressal Forum rejected a plea seeking mediclaim payment of Rs3 lakh for a policyholder, who died of mouth cancer. The Forum noted that the ailment was reported within a month of taking the policy. The insurance company, IFFCO Tokio, had argued that the claim was repudiated on the ground that a disease which incepts within 30 days of the commencement of insurance cover, was excluded in terms and conditions of the policy. Moreover, the policyholder had a

HDFC Life Re-launches Health Assure Plan

H

DFC Life re-launched its Health Assure Plan to comply with new health insurance guidelines and to offer a more comprehensive solution. There are new features, namely, restore benefit and no cap on room rent. The Plan covers 200 day-care procedures, pre- and post-hospitalisation benefits, hospital cash benefit for sundry expenses, wellness benefit (health check-up vouchers to all insured lives under this Plan), maternity and other benefits. „

MONEYLIFE | 2 October 2014 | 48

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Your Insurance against Insurance In order to offer you diverse choices, insurers end up creating complexity. They seem to have an insurance product, no matter what your need! Children’s education? There is an ‘insurance’ product for that.

Need post-retirement income? There is an ‘insurance’ product for that too. Advertisements to sell these products assure a secure future.

But most of these products deliver poor returns, do not provide adequate coverage of risk and are designed to benefit the insurer.

What You need is insurance against insurance products that you are lured into buying.You will get this from our insurance coverage

Insurance ad.indd 1

Moneylife Insurance coverage: bold, unbiased & practical

09-09-2014 16:05:28

PERSONAL BUSINESS AUTO

CCI Skewers Auto Manufacturers

This judgement could turn the tide in favour of consumers and end-users

F

or decades now, we have been listening to the automobile industry moan and groan about the supposed high taxes and duties slowing sales. All this while, the same automobile industry has been happily notching up 100% to 1,000% margins on sales of spare parts and services. In addition to locking customers in with high repair costs simply because spares are not available anywhere else. Moneylife first wrote about this in 2010, again in 2011 and then in 2012. There have been more than a few exchanges between this writer and the authorities as well as the automobile companies in India on this subject. This outright theft was not always the case, and in an era ‘before Maruti’, it was like this: • Warranties were short, six months or a year at best, and difficult to implement. • Motor vehicles were simpler and could be fixed with parts that had multiple usage or across different brands. • Spare parts from original equipment manufacturers were available at nominal mark-ups of 25% or so in the open market. • All garages would repair all vehicles and, soon enough, you learnt who was good with which kind of repair or brand. As a result, small enterprises flourished in India and maintenance as well as repair skill-sets went across a broad spectrum of people, from owner-operator-drivers to workshop staff and owners. To some extent, this also provided a core of people who were real engineers, who knew what to do with their hands and tool-kits. The full Competition Commission of India (CCI)

judgement can be read at http://www.cci.gov.in/May2011/ OrderOfCommission/27/032011.pdf, but there are some additional points this column would like to raise in the appropriate forums as well as with the automobile manufacturers, dealers and their associations. • Motor vehicles have more computing power built-in now than powerful computers. So, software upgrades for these onboard computers and the hardware therein need to be free of charge on single-user per-vehicle basis for the life of the vehicle. The reasons are obvious—safety is directly impacted, if upgrades are not provided. • The CCI decision does not appear to include twowheelers, three-wheelers, trucks and buses. There should have been a parallel enquiry, investigation and decision on them, as well. • Some manufacturers have started introducing proprietary technologies on batteries and tyres too, like electronic controllers and software-based modules for resetting the controllers if you change them and charge huge extras for this locked-in service. • In other cases, manufacturers refuse to supply spare parts soon after a model is discontinued or replaced with a newer version in India, while in other countries, they continue to provide support for decades after production has ceased. • Automobile manufacturers claiming intellectual property rights (IPR) were informed that in a technology transfer, transfer of IPR is not automatic, as IPR is territorial in nature. • Likewise, copyright abroad is not automatic in India; it needs to be registered in India. And, if not registered, then copyright ceases to exist once the design in question is applied more than 50 times in an industrial process by the owner of the copyright or a licencee. • Confidentiality protection is not ‘automatic’ from manufacturer to supplier, and ‘trade secrets’ are not protected under IPR. In addition, it seems that the dealers are organising themselves to come out against these cartels and gouging tactics by manufacturers. It is this writer’s submission that automobile manufacturers should provide Indian customers with the same, or better, facilities than they do in other countries. As of now, that is not happening and customers are getting ripped off left, right and centre. „

Veeresh Malik started and sold a couple of companies, is now back to his first love— writing. He is also involved in helping small and midsize family-run businesses re-invent themselves.

MONEYLIFE | 2 October 2014 | 50

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11-09-2014 18:55:44

Moneylife Foundation AD.indd 1

12-09-2014 19:57:34

Real Estate SC Issues Notice to Tamil Nadu on Building Collapse

Builder To Repay Rs33 Crore Maintenance Fees

Tdeveloper in Gurgaon to refund he Supreme Court has asked a

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on wetland-like water bodies he Supreme Court issued especially near Chennai.” The notices to the Centre and petitioners sought directions to Tamil Nadu on a PIL which preserve wetlands and to restrain sought to hold government agencies construction on them in addition to accountable for the crash of a a CBI probe into the crash. building. The petition, filed by two A bench, headed by Justice HL Chennai-based lawyers Dattu, ordered notices R Krishna Murthy and There are many to be issued to Tamil N Rajaraman, said, buildings under Nadu government and “State government construction on other states on the officials like revenue, wetland-like water plea of the petitioner district town planning bodies especially seeking a CBI probe authority, fire and near Chennai into the multi-storeyed rescue services, building’s collapse. The crash of the hydrologist constituted under 12-storey building on a patch of the Central Wetlands Regulatory wetland on the outskirts of Chennai Authority have measurably failed killed 61 construction labourers and to uphold the fundamental right raised questions about procedures guaranteed under Article 21 of involved in issuing clearances for the Constitution. There are so new real estate projects. many buildings under construction

Not Giving Completion Certificate Costs Real Estate Company Rs1 lakh

T

he Chandigarh State Consumer Disputes Redressal Commission directed a Delhi-based developer, SMV Agencies Private Limited, to pay Rs1 lakh as compensation to a Zirakpur resident, Naveen Parkash Kashyap, for

unfair trade practices and deficiency in services. Disposing of a complaint filed by Mr Kashyap, the Commission directed the developer to obtain completion and occupation certificates from the

Rs33.38 crore to residents for failing to provide the amenities it had committed to at the time of purchase. Justices V Gopala Gowda and Adarsh Kumar Goel upheld a 19th March ruling of the National Consumer Disputes Redressal Commission directing the developers of Ambience Lagoon Apartments to refund 70% of the total maintenance money collected over 11 years to 345 flat-owners.

E-Registration of Property Launched

M

aharashtra revenue minister, Balasaheb Thorat, launched a facility under which people can now register properties online. Mr Thorat said that the facility is applicable for housing societies with more than 200 members. “... Users will not have to go to the registration offices and can save their time. Aadhaar card number of the buyer and seller will be required for it,” he said.

competent authority within six months and pay the complainant Rs15,000 as cost of litigation. In its order, the Commission said, “It clearly shows that the completion certificate has still not been issued to the developer by the competent authority, which is a clear cut deficiency in rendering service and unfair trade practice on their part.”

MONEYLIFE | 2 October 2014 | 52

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12-09-2014 20:55:02

TION MONEYLIFE FOUNDA

* DONATE to

make our voices heard

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12-09-2014 19:55:21

HEALTH BM HEGDE

A Relook at Evidence-based Medicine Is the relationship between scientific method and medicine fragile?

M

any years ago, I wrote an article titled “Evidence based or evidence burdened science” that attracted much criticism from the ‘great medical scientists’. Luckily, today, I chanced upon an article in the International Journal of Evidence Based Health Care 2006 (Volume 4: pp 180-186) wherein the authors, Dave Holmes, Stuart J Murray, Amélie Perron RN and Genevieve Rail, claim that evidencebased movement is not just a fraud but a dangerous game that the powerful people play to keep their industry moving. The abstract of their paper is reproduced below: “Drawing on the work of the late French philosophers Deleuze and Guattari, the objective of this paper is to demonstrate that the evidencebased movement in the health sciences is outrageously exclusionary and dangerously normative with regards to scientific knowledge. As such, we assert that the evidence-based movement in health sciences constitutes a good example of micro fascism at play in the contemporary scientific arena. “The philosophical work of Deleuze and Guattari proves to be useful in showing how health sciences are colonised (territorialised) by an all-encompassing scientific research paradigm—that of post-positivism—but also and foremost in showing the process by which a dominant ideology comes to exclude alternative forms of knowledge, therefore, acting as a fascist structure. “The Cochrane Group, among others, has created a hierarchy that has been endorsed by many academic institutions, and that serves to (re)produce the exclusion of certain forms of research. Because ‘regimes of truth’, such as the evidence-based movement currently enjoy a privileged status, scholars have not only a scientific duty, but also an ethical obligation to deconstruct these regimes of power.” The above abstract leads to the conclusion that medicine is NOT a science. The much-touted randomised controlled

trials (RCTs) that are sold as hard evidence in medicine are making a mockery of science. In fact, medicine is not a science; but is not unscientific either. It is better called non-science enquiry. The doctor’s job is to make a diagnosis which is exclusively done by trial & error and more by past experience of having seen hundreds of cases. That is where experience plays a vital role. The diagnosis can be supported by some investigations; but the final proof of the pudding is in the response to the treatment. The pain-in-the-neck is the side-effects of various drugs. If one uses very powerful drugs, one might feel that the disease comes under control sooner. This is, often, only an illusion. That is why adverse drug reactions (ADRs) have become a common cause of hospital admissions and death. Even simple antibiotics, like clarithromycin, can give rise to heart attacks in the ensuing months and years! In fact, a senior functionary of a well-known drug company said: “It is an open secret within the drugs industry that most of its products are ineffective on most patients.” Now, we also have strong evidence that the faith of the patient in the doctor is a vital part of the patient's response to treatment, even surgery! Therefore, medicine is less scientific but more humanistic. Case histories and individualised outcomes work better in medicine than large-scale trials which look at a large group. RCTs will not be admitted as evidence in a law court but case histories may be admitted as evidence. Medicine can learn more from law rather than from the so-called hard sciences like physics and chemistry. “The practice of medicine is largely observational and functions without the level of certainty essential to science. As the reign of ‘evidence-based medicine’ with its crippling flaws is replaced by evidence-informed individualised care, healthcare providers, physicians and surgeons will once again better appreciate the importance of and application of non-scientifically obtained evidence. Case reports and case series are examples fundamental to medical practice and education,” wrote Clifford Miller and Donald W Miller Jr in their article in the European Journal of Person Centred Healthcare (Volume 2, Issue 2, 2014, pp144-153). „

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]

MONEYLIFE | 2 October 2014 | 54

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HEALTH BM HEGDE

HOSPITALS MAY BE INJURIOUS TO YOUR HEALTH

deaths are only a statistic for the pharma lobby; profit being their God. MEDICAL DEVELOPMENTS FROM I have a gut feeling that ecent research AROUND THE WORLD giving beta-blockers in reveals 210,000 heart failure does not lives are lost each year stand logical scrutiny. In a closed that the evidence-based movement by preventable hospital errors! If system, if you block the betain health sciences constitutes a you choose to include diagnostic receptors in the heart, they are good example of micro-fascism errors, failure to follow proper immediately replaced by the body’s guidelines and omission errors, wisdom to keep the heart going. the number climbs to 440,000 In case the patient misses the doses preventable deaths each year. Turns for a day or so, the suppressed out that these errors are the third receptors get reactivated making leading cause of death in the US, too many receptors active. The tired immediately after heart disease and horse, the heart, gets whipped up to cancer,” writes Mike Adams, editor bring on arrhythmias. I know the of Naturalnews. ‘wise’ people will say that the RCTs A problem peculiar to hospital have shown otherwise! Luckily, I do environments is the possible not think RCTs are ‘science’. presence of super-bugs. Due to exposure to antibiotics and at play in the contemporary medicines over long periods of scientific arena.” They go on TISSUE ENGINEERING time, bacteria and pathogens to show “how health sciences issue engineering and organ evolve to become resistant to these are colonised (territorialised) by growing operations are leaving an all-encompassing scientific the realm of science fiction and research paradigm—that of postare becoming reality. The future of positivism—but also and foremost life-saving organ transplants hinges in showing the process by which a on organ farming technology which dominant ideology comes to exclude uses a patient’s own tissue. alternative forms of knowledge, Remarkably, this process is therefore acting as a fascist working. The artificial bladder, or structure.”

“R

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SCIENCE AND NONSCIENCE antibiotics. it becomes very difficult to treat a patient who contracts a super-bug in a hospital.

WESTERN MEDICINE NEEDS TO MOVE AWAY FROM ITS NORMATIVE APPROACH

W

riting in the International Journal of Evidence-based Health Care (2006: 4: 180-186), Dave Holmes, Stuart J Murray, Amélie Perron and Genevieve Rail argue that evidence-based health system is “...outrageously exclusionary and dangerously normative with regards to scientific knowledge. As such, we assert

W

e are still groping in the dark when it comes to randomised controlled trials (RCTs). For example, common sense tells us that giving beta-blockers perioperatively can only be foolish; it is not a matter of RCTs being misunderstood. Surgery is a big stress to even normal human bodies. Our only defence against stress is our autonomic nervous system which helps us survive in a fightflight-fright situation. Blocking such a protection in a “closed systems human biology” could be inviting disaster. No wonder, thousands of lives are lost in the bargain. But

any other organ, is derived from a patient’s own cells and grows around a scaffold. In stage-two testing, one company has already implanted the neo-bladder into patients and studied how their body reacts and adapts. Between five and seven weeks, the organ grows around the scaffold. „

55 | 2 October 2014 | MONEYLIFE

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12-09-2014 17:08:42

LEGALLY SPEAKING SD ISRANI

SEBI Regulates ‘Research Analysts’ Will investors benefit from this?

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e all love to make money; many of us consider investing in shares as the easiest way to make it, particularly if we get some helpful tips. So we are always on the lookout for a tip from our stockbroker or some hot news from our sources, including insider information. In such a scenario, rumours, halfbaked information and outright misleading information finds its way into the market, some even masquerading as ‘research’ reports. So SEBI has decided to regulate the activities of all entities who profess to be research analysts or produce research reports. With that in view, SEBI S has as just notified ot ed the “SEBI (Research Analysts) sts) Regulations, 2014” (for short rt referred to as ‘SRA Regulations’). ). Here is how the regulation is likelyy impact the interest of investors. A ‘research analyst’ meanss a person who is primarily responsible for: i. preparation or publication of the content of the research report; or ii. providing research report; or iii. making ‘buy/sell/hold’ recommendation; or iv. giving price target; or v. offering an opinion concerning public offer, with respect to securities that are listed or to be listed on a stock exchange. What is important to note is that it is not material even if the concerned person does not have the job title of ‘research analyst’. In fact, the definition of ‘research analysts’ also includes any other entity engaged in issuance of research report or research analysis. Further, even an associated person who reports directly or indirectly to such a research analyst in connection with activities provided above is deemed to be a research analyst. SEBI has attempted to include within the ambit of the term ‘research analysts’ as many types of persons connected with such activity as possible so at to protect the interest of investors. SRA Regulations have made it obligatory on every

individual/entity engaged in research analysts activity to get itself registered with SEBI. In fact, the regulations clearly provide that, after the commencement of these regulations, no person can act as a research analyst or research entity or hold itself out as a research analyst unless s/he has obtained a certificate of registration from SEBI. However, all the existing research analysts have been given a period of six months to make an application to SEBI for registration. Exemption from registration has been given to an investment adviser, credit rating agency, asset management company or fund manager, who issues research report or circulates/distributes research report to public or its director or employee who makes public appearance. The certificate of registration granted by SEBI will be valid for a period of five years from the date of its issue. All registered individuals/entities will have to comply with SRA Regulations; any failure on their part could result in penal consequences. Even foreign entities have been brought within the ambit of SRA Regulations. A person located outside India engaged in issuance ssua ce of o research es report or research analysis of securities listed or proposed to in respect o be listed on a stock exchange will have enter into an agreement with a research analyst or research entity registered ana under SRA Regulations. und SEBI has also provided some capital adequacy norms. A research cap aanalyst who is an individual or a partnership firm should have net tangible assets of value not less than Rs1 lakh. Similarly, a research analyst who is a body corporate or limited liability partnership firm should have a net worth of not less than Rs25 lakh. All existing research analysts have been given a period of 12 months from the date of commencement of these regulations for ensuring adequate capital as per the new regulations. These regulations have also provided the meaning of ‘research report’ and have made it incumbent upon the research analysts to maintain the prescribed records for at least five years. The regulations envisage the appointment of a compliance officer to ensure due compliance of the said regulations. Will SRA Regulations be effective? Only time will tell. „

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

MONEYLIFE | 2 October 2014 | 56

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LRC.indd 3

09-09-2014 16:08:15

Bapoo Malcolm to stop at his bed for longer than the mandatory one second. The man was sinking from acute bowel movements. “Oh, my God. You’re feeding milk to a Be a pest and ask questions, before medical diarrhoea patient?” Nearly 40 years later, the doctor’s negligence ends up causing serious problems exact words still ring in my ears. The old man died that night. Wrong medicines, incorrect nursing, over-burdened any years ago, a typically British-humour staff, rent-seeking cleaners, all combine to make the movie series had titles starting with “Carry hospital a disaster zone. No wonder, medical negligence On…” One was a film called “Carry On, practice is the lawyers’ new frontier. In fact, this very Doctor”. The protagonist was a rather nasal surgeon article had its birth in an advertisement for a certificate in charge of an operation. Having completed his course for advocates specialising in this now-lucrative ‘procedure’, he raised his hand to check the time. Oh! field. My God! Where was the wrist watch? You be the judge. Then follows the punch line. “And it’s an alarm.” Who was at fault? That is the question that must be Medical negligence; with daily warnings to boot. answered. If there is a malady (pun intended), there has Law has come a long way since this ‘bells and to be a remedy. In the instant case, it was the hospital, whistle’ episode. We have heard of cotton and gauze no doubt. And the doctor physician and his staff of being tucked away in tummies. An article in a medicos. Yet, having seen this episode unfolding previous issue of Moneylife had a reference to for four days, blame must also lie with the old mixed up ears while operating. And many more. man’s son. He would visit his father for a couple What follows are real-life experiences of minutes each evening, just to pay the involving the author personally. While lying private wardboy his daily wages and on the operating table for a broken femur, disappear. a nurse sounded a warning. “…make In today’s sure the doctor world, the whole operates on the team would have correct leg. He been hauled over the had once opened up coals. Manslaughter would the wrong knee of a woman.” have been too mild a charge. Forget Thanks, miss, but why not simply costs. Imprisonment would definitely paint the leg to be cut up? Or tag it have followed. The old man did not with a large sign? In the mid-1970s, an 80-year“… make sure the doctor die. He was killed. Negligence, at its old patient on the next bed was in operates on the correct leg. utmost. Duty of care, at its nadir. It agonising pain. He had to be tied He had once opened up the happened; it may still be happening; down; sides of the bed raised to wrong knee of a woman it will continue to happen. So what does the public do? Just cradle him, sedation had to be given as eternal vigilance is the price one pays for democracy to control him. He had just been through a skin graft, and freedom, constant enquiry will save your kin. Ask following gangrene. The operation was absolutely questions. The doctor is bound to answer. Ensure that perfect. After all, Dr Dastur never made mistakes. there is no mix-up in the application of medicines and The nurses swore that “no patient ever has any treatment. And bring any obvious fault to the notice of complications.” Maybe THAT was the problem. Complacency. After the management. In short, you have the right. Please enforce it. Even when hospitalisation is free. „ a most successful surgery, the patient was moved to the general ward for recovery. He was now under the physician’s care. A senior doctor, the physician, would troop in every morning, retinue of medicos in his wake, Bapoo Malcolm is a practising lawyer in and shout instructions left, right and centre. Awe was Mumbai. Please email your comments to the prevalent emotion. On Monday, the old man was [email protected] more than active. On Thursday, the physician deigned

Now Which Leg Was It?

M

MONEYLIFE | 2 October 2014 | 58

You Be the Judge.indd 2

11-09-2014 19:22:25

ML FOUNDATION EVENTS

MLF SEMINAR ON SAFE & SMART FINANCIAL PLANNING

Safe & Smart Financial Planning for HUL’s Working Women Salary does not make you rich, but avoiding losses and sensible investing can

M

oneylife Foundation conducted a seminar for women employed with Hindustan Unilever Limited, at their headquarters in Mumbai. Sucheta Dalal and Debashis Basu, both founder-trustees of Moneylife Foundation, took the audience through the various aspects of their current and future financial planning and how to deal with the challenges that it may throw up. In the first part of the session, Ms Dalal began by saying, “Women outlive their partners by about five to seven years, on an average, and these are usually the years when you live off your savings.” She laid out the basic mantras to securing a working woman’s future: minimising losses, right insurance, taking financial prophylactics such as Wills and nomination, avoiding emotional, credit and investment traps and, finally, keeping finances simple. Citing the large losses people seem to suffer in various wrong investments, she said, “The recouping of losses never includes the opportunity cost of the money lost, and there is no recompense for the troubles.” Ms Dalal explained how to identify secure financial products. She then discussed the intricacies and importance of having a clear Will and women’s rights under the law. She narrated some real-life examples where women had been cheated of their rightful inheritance because of unclear planning. Finally, she spoke of the role of credit in today’s life, and how this is central to how

finances are planned. “This is especially true for salaried professionals,” she said. In the second part of the session, Mr Basu unveiled the simple path to creation of wealth and future prosperity for salaried professionals, through investing smartly. “Salary does not make you rich, so what does?” he asked. He discussed how most salaried women’s (in fact, even men’s) path to creating wealth is undermined by poor saving and investment habits. Mr Basu enumerated the products that most effectively help achieve our simple goals: buying an apartment, marriage, education, etc. The biggest question on everyone’s minds when they speak of various investments, or investing in general, is: “How much returns will I get?” Mr Basu detailed the kind of returns that investors should realistically expect from various asset classes like equity, gold, FDs, real estate, etc. He also emphasised the corrosive effects of inflation on wealth. The one way to counter this is to compound your wealth through products that beat inflation, namely, good-quality stocks and mutual fund schemes. These can accelerate growth in the future, if handled systematically. He disputed the many myths about investing in gold and real estate which deliver far lower returns than good-quality stocks. “Less is more, even in investing,” he explained. “A simple financial life, with just a few products, will help your secure a great financial future,” he said. „

59 | 2 October 2014 | MONEYLIFE

Event.indd 2

12-09-2014 21:05:48

Learn the basics of saving and investing

In fact, schemes with a higher expense ratio, or costs, have delivered lower returns. You would be mistaken if you expect an actively managed scheme to provide higher returns. While some managers will be able to do so, as an aggregate, active managers would deliver returns in line with the index. Their higher fees eat into the alpha generated by the schemes and, hence, the returns are usually at par with those of index schemes. Over the past 10 years, just 64%, or 40, of the 62 equity diversified mutual fund schemes have beaten the returns of the Nifty Total Return Index. While the Nifty A majority of actively managed schemes underperform their Total Return Index delivered a benchmarks. Do not let high costs eat into your returns return of 18.89%, these 62 schemes averaged a combined return of 19.62% over the same period. Of an investment of Rs1 lakh would osts play a crucial role in course, this figure does not factor in be worth Rs5.70 lakh, i.e., Rs3.95 every financial product. the schemes that have been merged lakh would have been gone into Costs simply destroy the to hide their under-performance; expenses. On the other hand, in a returns of traditional insurance else, there would have been a lower scheme that had an expense ratio products, for instance. Similarly, percentage of schemes that would of just 1.25%, your corpus of Rs1 expenses of a mutual fund lakh, after 20 years, would be worth have beaten the benchmark. (MF) scheme are an important Therefore, without proper consideration in its selection. When Rs7.50 lakh. research of the fund management markets go sideways, these costs and performance of a scheme, sharply cut into a scheme’s returns. choosing the right actively managed Costs are an important reason for scheme would be equivalent to many MF schemes ending with tossing a coin. While one may sub-par performance, in a sideways spend significant amount of one’s market. You do not want the time comparing prices of consumer costs of asset management to eat durables and other consumer into your returns. Few investment products, when it comes to advisors emphasise the importance investment products, one is careless of low costs that can only come about taking into account the costs from low fund management fees. involved and the impact costs would But, naturally, they are the ones who have over the long term. benefit from the fees. Unfortunately, finance business One way to reduce fees is to is structured is such a way that Paying a higher fee would be use an index scheme rather than there is usually a conflict of interest justified if the scheme you are actively managed scheme. Few are for an advisor; an investor rarely investing in were able to beat the aware of the extra cost that they gets unbiased advice. The onus lies market consistently. However, pay for active management. Let’s on the investor to choose wisely. take the case of an equity fund with the reality is that the majority of If you are unable to decide on an MF schemes under-perform their an expense ratio of 2.60%. Let’s actively managed scheme, the next benchmarks over relatively long say the scheme earns a return of best approach is to choose a lowperiods. 12%, pre-expenses. After 20 years, ``

Earning Curve

The Cost of Active Fund Management

C

MONEYLIFE | 2 October 2014 | 60

Earning Curve.indd 2

12-09-2014 17:09:58

EARNING CURVE

` cost index scheme. Or better still,

buy select blue-chip stocks and hold them for the long term. To notice the benefit of investing in a low-cost scheme could take years or even a decade. It takes patience for the savings to gain from the effect on compounding.

Don’t Save 10% of Your Income, Spend 50% of Every Raise A different approach to saving more and spending less

F

inancial advisors widely propagate that one should save a fixed percentage of one’s income. While this concept does influence one to save regularly, it also indirectly implies that one should spend the remaining income. Therefore, if you plan to save 20% of your income, it also implicitly means that you would spend the other 80%. The impact of this concept can have a significant impact over the long term, as pointed out by Michael Kitces, director of research for Pinnacle Advisory Group, a private wealth management firm. Kitces mentions that “saving something like 10% of your income also implicitly means you’re spending the other 90%, and continuing to do so over time means you’ll also be saving (only) 10% and implicitly increasing your standard of living by 90% of every raise you receive in the future.” By doing this, your standard of living rises as fast as your retirement savings, which means the amount needed to reach retirement gets larger and larger, given the retirement costs to be supported. At the same time, Kitces mentions that a mere accumulation

approach—saving a percentage of your income every year—is not a bad way to begin and leads to a steadily rising contribution to savings. However, as pointed out earlier, it also inherently directs the individual to spend the other 90% of his/her income as well, which increases the standard of living so much that moves towards retirement goals barely progress. Kitces suggests an alternative approach—to focus on spending instead, in an effort to control the rising standard of living. He suggests, try to spend ‘just’ 50% of each pay raise you receive in the future (implicitly saving the other 50%). “The end result of such an approach is that increases in the standard of living are more

fund your retirement never grows as much, in the first place. After 40 years, by ‘only spending 50% of each raise’ you would have a standard of living that is 30% lower than in the scenario if you had saved only 10% of your income, but without ever needing to give up current spending or having let your lifestyle slide downward (it merely grew more slowly!) In fact, the increased retirement savings, combined with the decreased need for retirement funds due to the less expensive standard of living, means you can actually retire early. One of the interesting ‘indirect’ effects of the ‘spend 50% of your raise’ philosophy is that it can achieve astonishingly high savings

Benefit from Spending Less and Saving More $5,000,000

Saving 10% of Income Saving 50% of Raises

$3,000,000

$1,000,000 $0 25

28

31

34

37

40

43

46

49

52

55

58

61

64

Source: kitces.com

controlled and rise far more slowly, savings grow exponentially all while feeling like your lifestyle is steadily rising as you’re still committed to spending more every year, just not increasing as rapidly as saving 10% of your income (and spending the rest)!” he says. The reality is that by systematically NOT spending 50% of every raise, and thereby controlling your standard of living, the amount of money you need to

rates. If one starts at a 10% savings rate and begins to save 50% of every raise and, as a result, ends with a savings rate of more than 20% after less than a decade, one is saving more than 30% of the income after 20 years. The bottom line is that an effective retirement savings strategy should consider not only how much of income to save, but also how those savings habits can impact spending habits as well. „

61 | 2 October 2014 | MONEYLIFE

Earning Curve.indd 3

12-09-2014 17:10:28

BOOKS

T h e 5 2 - We ek L ow F orm ul a

Buy Low, Naturally An interesting formula that helps to buy stocks when they are down

T

here is a variety of ways to make money from shares. But, over time, it has become clear that all successful investing is based on accepting one essential feature of the markets: it is impossible to know what will happen to the price of a stock in future. From this understanding flow multiple trading and investing strategies. One of them is buy-low, sell-high. While this is one of the most popular and oft-repeated investment maxims, how does one define what is ‘low’? Luke Wiley suggests a simple formula. Look for stocks that have hit 52-week lows and judge them on four basic questions: 1. Do they have durable competitive advantage? Is it the kind of company that is hard to compete with, either because it has cornered a difficult market or because competing with it would require an unreasonably high investment by others? 2. What is the purchase value of the company relative to its THE 52-WEEK LOW free cash flow? FORMULA If someone were to come in LUKE WILEY and buy the entire company, Wiley would the free cash flow being Pages 198; $34.95 generated be well in excess of simply investing in a 10-year Treasury bond? After all, the cash flow on a 10-year Treasury bond is said to be ‘risk-free’ while the free cash flow from a company is not without risk. 3. What is the return on invested capital of the company? Is the company using its money wisely to create returns below its cost of capital? It is using its money well to create returns, or is it taking on bad investments that don’t pay off. 4. Can it pay off its long-term debt quickly? There are several companies that are making a lot of money, but should revenues stall or decelerate, could their long-term debt be paid off within a short period with free cash flow? Wiley claims to have spent years refining the principles

behind this—back-testing data and putting his own money on it; the results have been impressive. He asserts that his clients—those willing to take a slightly different approach to investing their requirement dollars—have never been happier. The 52-week low formula is based on the idea that even the best companies go through problems when their stock value heads down. This leads you to investing in a good business trading at an attractive valuation. You are buying into a company that is out of favour with the investing public and Wall Street analysts. Of course, you don’t just buy any company, trading close to its 52-week low. You have to always keep an eye on the first part of the investment approach: good quality business (that is temporarily out of favour with the market). The idea is to bet on something afflicted with a mild infection rather than a terminal disease. Buying 52-week low strategy is a clever way to take two important steps while buying stocks: narrow down a wide universe of stocks and remove behavioural bias. “It narrows down the wide world of possibility when it comes to investing by starting with an end goal—outperforming the

We don’t just buy any company trading close to its 52-week low; we buy good business at attractive valuations that are trading near their 52- week lows market, with less downside risk-and working backwards. It is a logic-based, disciplined approach to narrowing down the 3,000 publicly traded companies in the market to the 25 that represent the best opportunities for creating real value in the coming months,” writes Wiley. More importantly, the 52-week low formula ensures that our behavioural basis is dealt with effectively. Far from buying stocks at their lows, we are attracted to stocks that are shooting up. Too much money is lost because investors herd behind what is popular, follow emotions, instead of the data. This can be eliminated only by a disciplined system of staying away from the ‘highs’ and looking for the ‘lows’ through an objective formula. Zeroing in on 52-week lows is a big help in that process. I believe this facet of the approach (helping to deal with behavioural biases) makes it one of the best I have come across. There are lots of good approaches to buying stocks. Many cannot follow them because human beings, by nature, are not very rational. Successful investors train themselves to deal with their own biases. The 52-week low approach helps you remove your biases more easily. Definitely worth applying. — Debashis Basu „

MONEYLIFE | 2 October 2014 | 62

Book Review.indd 2

11-09-2014 20:15:00

UNIQUE BOOKS FROM MONEYLIFE/KENSOURCE The most thrilling business book ever written in India. A fast, colourful narrative knitting together the life and times of all stock market players involved in two of India’s biggest stock market scams.

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These commonsense guides tell you in an inimitable easy-to-understand, peppered with lots of real-life examples, what you must know to make successful investments in stocks and funds.

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LIST PRICE: `1,300 MONEYLIFE PRICE: `1,100

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Two priceless books of autobiographical narrative that candidly reveal the unique thought processes, untiring efforts and colourful anecdotes of top achievers such as Ratan Tata, Amitabh Bachchan, Mukesh Ambani, Aditya Puri, Rajiv Bajaj, RA Mashelkar, Keki Dadiseth, Geet Sethi and others.

COMBO PRICE `2,000

GET YOUR COPY NOW

AVAILABLE AT CROSSWORD BOOKSTORES Contact details: Mail in your remittances to Moneywise Media Pvt Ltd, 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400028. Credit card orders can be faxed to Mumbai 022-49205022. In case payment is made by credit card, date of birth 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.

Book Ad.indd 1

12-09-2014 12:20:10

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

The Sensex and the Nifty rose 1% & 2%, respectively, during the fortnight ended 11th September. ML Mid-cap Index surged 12%. ML Mega-cap Index and ML Large-cap Index advanced 8% & 7%, respectively. „

Foreigners: Foreign institutional investors were net buyers of stocks (Rs6,589.79 crore). They bought shares worth Rs37,163.29 crore. „

Share Prices, March 2014=100

1,715

FII Net Investments (Rs Crore)

1,370

200

1,025 680

175

335 150 -10 1 Sep-14

125

11 Sep-14

Indians: Domestic institutional investors were net sellers of stocks (Rs4,411.69 crore). They sold shares worth Rs16,731.44 crore. „

100

75 Mar-14

Jun-14 ML Large-cap ML Mid-cap

ML Small-cap ML Mega-cap

Sep-14

-275

ML Micro-cap

Nifty Sensex

-155

-395

+/-

-515

155.71

13%

-635

185.63

13%

165.90

185.16

12%

MLMega-capIndex

132.65

142.82

8%

MLLarge-capIndex

147.12

156.96

7%

7,954.35

8,085.70

2%

60,700

26,638.11

26,995.87

1%

57,550 54,400

Index

28- Aug

11- Sep

MLMi cro-capIndex

138.11

MLS mall-capIndex

164.71

MLMi d-capIndex

DII Net Investments (Rs Crore)

-750

Nifty Sensex Mega- cap Gainers/Losers MRF BharatH eavyE lectricals Large- cap Gainers/Losers Ceat Jaiprakash Associates Mid- cap Gainers/Losers MorepenLaboratori es Hubtown Small- cap Gainers/Losers BLK ashyap& S ons CMahendraE xports Micro- cap Gainers/Losers TVSE lectronics SuryaP harmaceutical (AllP ricesi nR s)

28- Aug

11- Sep

Change

24,030.95

31,301.85

30%

240.90

222.70

- 8%

28- Aug

11- Sep

Change

587.40

794.30

35%

46.65

36.60

- 22%

28- Aug

11- Sep

Change

7.46

11.53

55%

112.65

99.80

- 11%

28- Aug

11- Sep

Change

8.56

14.25

66%

46.55

29.45

- 37%

28- Aug

11- Sep

Change

28.65

55.45

94%

1.56

1.31

- 16%

1 Sep-14

11 Sep-14

GLOBAL MARKET TRENDS Bovespa

51,250 48,100 44,950 Mar-14

Jun-14

Sep-14

NASDAQ Composite rose 1%, while S&P 500, FTSE and Hang Seng ended flat. Shanghai Composite and Nikkei advanced 5% and 3%, respectively. „ Index

28- Aug

11- Sep

2,196

2,312

5%

15,460

15,909

3%

Nasdaq Composite

4,558

4,592

1%

S & P 500

1,997

1,997

0%

FTSE

6,806

6,800

0%

24,741

24,663

0%

Taiwan Weighted

9,478

9,323

- 2%

Korean Composite

2,076

2,034

- 2%

60,291

58,337

- 3%

Shanghai Composite Nikkei

Hang Seng

Bovespa

+/-

MONEYLIFE | 2 October 2014 | 64

Money Fact.indd 2

13-09-2014 17:12:44

MONEY FACTS STOCKS

5

What’s H

T

ML SECTORAL TRENDS

Farm & farm inputs companies were in demand during the fortnight. Jayant Agro-Organics, Gujarat State Fertilizer & Chemicals and Punjab Chemicals & Crop Protection soared 34%, 31% and 30%, respectively. „ Companies

ML Farm & Farm Inputs Index

Jayant Agro-Organi cs

180

GSFC PunjabC hem& C rop

160

28-A ug

11- Sep

+/-

112.85

150.75

34%

67.65

88.90

31%

106.60

138.90

30%

Escorts

113.85

145.30

28%

CoromandelIntl

259.35

327.90

26%

1,422.30

1,772.45

25%

Shares of farm & farm inputs companies advanced 14%, while shares of petrochemicals and packaging companies advanced 13% each. Stocks of hotels, transport & logistics companies and lifestyle & leisure companies rose 1% each, while stocks of oil & gas companies closed 0.24% up. „ ML Sectoral Trends Printing& publ ishing 18% Oil & Gas

140 VST Tillers Tractors

120

Jun-14

What’s

Sep-14

28- Aug

11- Sep

+/-

Oil& N aturalGas

435.15

429.50

-1%

CairnIndi a

326.25

332.80

2%

GAIL(Indi a)

443.80

459.70

4%

OilIndi a

615.65

638.20

4%

GujaratGasC o

446.30

481.40

8%

IndraprasthaGas

378.30

410.15

8%

SelanE xpl Tech

551.70

611.55

11%

12,131.75

14,777.90

22%

49.95

71.35

43%

HindustanOi lE xpl

1%

24%

AvantiFeeds

1,250.20

1,544.50

24%

Packaging

13% Diversified

1%

21.40

26.20

22%

AutoC omponents

12% Lifestyle& Le isure

1%

180.75

220.65

22%

Zuari Agro Chemicals

URBAN INFLATION Combined inflation for urban and rural areas eased marginally to 7.80% in August 2014 from 7.96% in July 2014. Inflation in urban areas eased to 7.04% in August from 7.42% in July. Food inflation in urban areas eased marginally to 8.40% in August from 8.45% in July. Inflation for vegetables in urban areas

Oil & gas companies were uneven performers. Oil & Natural Gas Corp fell 1%, while Cairn India rose 2%, and GAIL (India) & Oil India advanced 4% each. Hindustan Oil Exploration Co, however, soared 43%. „

TideW aterOi lC o

13% Transport& Logi stics

2,745.20

N T

Companies

1%

Petrochemicals

2,209.90

AllP ricesi nR s

5

Mar-14

14% Hotels

MonsantoIndi a

SouthernP etro

100

0%

Farm& Farmi nputs

ML Oil & Gas Index 145

130

Headed Lower?

115

11% 10% 9%

100

8%

Annual Change

7%

85 Mar-14

Jun-14

Sep-14

AllP ricesi nR s

6% Aug-13

BULK DEALS Date

Company

Buyer

Seller

Rs Cr

05S ep-14

AroraFi b

ParS olarP vt

R Arora

25.53

05S ep-14

EraIn fra

NomuraS ingapore

CitigroupGbl MktsMa uritius Pvt

09S ep-14

Modern

EriskaInvestmen tFund

Jaipuria Silk Mills Pvt

2.04

04S ep-14

UrjaG lobal

ArindamS ekhar GarmentsMkgP vt

Nandkishor Brijanand Chaturvedi

1.34

09S ep-14

CochinMal abar

Madhav Trading Corporation

Hemant Bangur

0.40

05S ep-14

CeetaInd

CeetaS yntheticsand Turfs

Vaibhav Heavy Vehicles

0.30

11S ep-14

Emedcom Tech

YokeS ecurities

VeeralS hantilal Tank

0.21

8.26

Feb-14

Aug-14

declined significantly, to 7.68% in August from 11.38% in July. Inflation related to fuel & power declined marginally to 2.69% in August from 3.24% in July. Inflation for housing remained steady at around 8.50%. Inflation for clothing stayed at 7% and miscellaneous items declined marginally to 5% in August from 6% in July. „

65 | 2 October 2014 | MONEYLIFE

Money Fact.indd 3

13-09-2014 17:12:59

BEYOND MONEY

India Wastes 2,000MW PV Solar Energy Each Day! With its ample sunshine, India should use more solar energy and less fossil fuels on a daily basis, writes N Madhavan

This entire process is corrupt; agencies swallow the subsidy and sell sub-standard solar lights which work for just a few days. Worse, most of these are sold at Rs8,000 to Rs10,000 or more, to get higher percentage subsidy. Solar power, Mr Deodhar says, is an ideal solution for them. With this in mind, he set up MITRAMAX Energy as an Indo-German joint venture company in 2009 which has created a hi-tech long-life product that is simple to use and maintenance-free. “I realised that one can give a better product much cheaper without even bothering about the government subsidy,” says Mr Deodhar. His focus is to enable the family to live safely and for children to study or play after dark and add a few more productive hours to their life. SUNGRACE 25 has a 25Wp PV solar panel with a current controller that harvests peak power, the SOLARPOT that stores 168WH of energy and two 5W LED lights. One mong the fresh bright minds that Rajiv Gandhi is a uniquely designed portable 5W LED light that can brought into government in the first flush of be used at home and while venturing outdoors with its his landslide victory was PS Deodhar, who was built-in battery. The other is a bright 5W pendent bulb, appointed technology advisor to the prime minister and the USB port and a multi-plug cellular phone charger cable. How is any of this relevant to this particular section chairman of the Electronics Commission of the government. Mr Deodhar was among those techies who worked at of the magazine, which looks at issues beyond money? making panchayati raj a reality by harnessing technology Well, because Mr Deodhar gives away hundreds of these for growth. In the early 1980s, Mr Deodhar was involved products to NGOs who, in turn, give them to people in in building low-cost computers and making them available need. Interestingly, those who use these solar power gadgets to people. He says, “I got Rajiv the ZX80 computer have actually managed to save up to Rs200 a month on kit and later ZX81 and Spectrum with 128K RAM for kerosene. He is also working with a professor of sociology hands-on computing.” Later, he made available an IBM to study the impact of solar power on the lives of people. PC XT clone at Rs10,000 via ET&T Corp, which was at For those who can afford solar power, Mr Deodhar has half the prevailing price. started an advisory service at MITRAMAX Energy to tell Now, at the age of 80, he believes that if solar energy them what kind of plant they should ideally purchase for were utilised in rural areas, technology could become their specific needs based on a complex energy calculation. a binding tool for the entire country by reaching areas Mr Deodhar now wants to give each one of us the that have no stable power supply. With this in mind, opportunity to participate in empowering rural people Mr Deodhar has made pioneering efforts in solar-powered through solar energy. While solar lamp sells at Rs6,650 (list price), the company is willing to offer it at Rs5,000 gadgets through MITRAMAX Energy Private Limited. He says, “Do you know that 350 million Indians to donors (for an order of 50 pieces) or at Rs5,300 for (around 80 million homes) do not get electricity from those who wish to make individual donations. the power grid at all? Most homes in India get bad quality MITRAMAX is a commercial organisation with a of power. Voltage swings from 150V social purpose, so its big challenge is to 270V causing bulbs to fuse, gadget to spread the word about the product failures and motors burning out.” without advertising, to keep the cost Extending the grid power to these low. This requires public participation MITRAMAX ENERGY PVT LTD homes is expensive and our government and support. You can help make this Deodhar Centre, 424, Marol Maroshi Road, has subsidy schemes for companies to happen through donations or by telling Andheri East, Mumbai 400059 people about these solar lamps. „ sell solar products at a reasonable price. Tel: +91-22-28290059, 28292055 Fax: +91-22-28290470 E-mail : [email protected] MONEYLIFE | 2 October 2014 | 66 www.mitramax.com



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