Moneylife 28 April 2016

SUCHETA DALAL ON:

AYURVED & SWADESHI PATANJALI PROPOSITION

Personal Finance Magazine

DEFAULTER DATA DIFFERING VIEWS

PANAMA PAPERS IMPACT IN INDIA

28 April 2016

Pages 68

Rs 45

(SUBSCRIBER COPY NOT FOR RESALE)

www.moneylife.in

Do Equity Funds Take a Short-term View?

Only 8% of the stocks were held for five years or more Only16% of the stocks were held for a period of 3-5 years As many as 38% of the stocks were sold within a year VALUE STOCKS: Are You Riding the Profit Momentum? Page 46

STOCKS Jay Bharat Maruti: Squeezed by Slowdown

Cover Page_265.indd 1

Geometric Gets Taken Over, As We Had Hoped

How To Handle Overvaluation

Will Asian Paints Unsettle Pidilite

Manipulation: Gini Silk Mills

07-04-2016 18:22:41

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ISSUE CONTENTS

28 April 2016 Short-term-itis

M

ost investment professionals and fund managers preach that investors should not invest in equity mutual funds with a shortterm outlook. However, when we analysed the monthly portfolios of equity schemes having a corpus of over Rs1,000 crore, we found that while most fund managers talk the talk, they fail to walk the walk. In our analysis of 59 equity schemes, out of the total number of stocks bought, on an average, only 8% of the stocks were held for five years or more. Just about 16% of the stocks remained in their portfolios for a period of 3-5 years and as many as 38% of the stocks were sold within a year. The high proportion of stocks sold-off within a year shows that fund managers have a totally confused investing strategy and are swayed by short-term price movements rather than staying focused on the long term. Can this shorttermism affect the performance of a scheme? Or do fund investors benefit from this buying and selling? Turn to our Cover Story to find out. As a corollary to our Cover Story, in our Fund Pointer section, we analyse which stocks fund managers held continuously for a period of five years or more. We find that schemes maintaining a long-term focus did well. But few have the conviction. Most of the stocks were held for the short term. Fast-moving consumer goods (FMCG) companies have done very well for the past 20 years or so making enormous wealth for those who have stayed invested. However, it is time to examine whether they will deliver equally great results in the future. R Balakrishnan lists the challenges they face to sustain their high returns in future. When it comes to India, the Panama Papers have been a damp squib. Maybe, Indians have their money in some other tax havens. The government has set up a committee to examine the issues; but will the revelations also lead us think about sensible tax policies, asks Sucheta in her Different Strokes column. In her Crosshairs section, Sucheta questions whether Patanjali’s breakneck expansion into biscuits and noodles is to spread Ayurveda or simply empire-building. Debashis Basu 

32 Cover Story Do Equity Funds Take a Short-term View? Only about 8% of the stocks bought by 59 large equity schemes were purchased more than five years ago, finds Jason Monteiro

12 Your Money

– Equity MFs Pull Out More than Rs8,000 Crore in March – Bank Bazaar Also Ventures into Online Distribution of Mutual Funds – Inoperative PF Accounts To Earn Interest from 1st April – Pension Regulator Comes Out with Partial Withdrawal Rules for NPS

14 Current Account 18

Moneylife Quiz no

230

– Emulating MNCs or Propagating Ayruveda? – RBI Digs In Its Heels on Disclosure about Defaulters

20 Different Strokes

Panama Papers and What They Mean to India

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

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CONTENTS FUND POINTERS

HEALTH

INSURANCE

Equity Schemes 22 Stocks Have Held for 5 Years

30 Insurance Trends

Runs 56 Money Science and Medicine

Most of the stocks are from benchmark indices irrespective of the prospects, analyses Jason Monteiro

Regulations – IRDAI Effects Hike of Motor TP Premium – TP Cover Cannot Be Refused

Research and regulatory actions are rife with conflict of interest

FUND FACTS

24

Best & Worst Mutual Fund Schemes

FIXED INCOME

25

G-Sec Purchase from IDBI ATM

Fine Print

LEGALLY SPEAKING VALUE STOCKS

You Riding the Profit 42 Are Momentum? A strong focus on stocks whose profits are rising sharply may be very rewarding, if you know why you are buying and have a method to exit

– Bond Yields Are Down – G-Sec Yields Down STOCKS

26 Smart Money Slow-moving Consumer Share Prices Fundamental changes are afoot in the FMCG sector which may affect future returns of past top performers

40 Stock Watch Jay Bharat Maruti: Squeezed by Slowdown JBM is an inexpensive stock which could do well if car companies get back their growth Geometric Gets Taken Over, As We Had Hoped In our January 2015 issue, we had suggested that the best thing shareholders can expect is a takeover of the slow-growing Geometric

Pulse Beat: Medical developments from around the world

Property Buyers 58 Can Now Breathe Easy? The new real estate law should make a difference YOU BE THE JUDGE

Lawyer 60 The as Juggler Don’t mess with his decisions

USEFUL APPS

Mail but 48 Maildrop: No Spam

ML FOUNDATION EVENTS

– Mighty Optical Illusions: Marvel at these Illusions – Yahoo Aviate Launcher: Intelligent Homescreen

TECHNOLOGY: MOBILE

50

Is Your Phone Secure?

While Apple vehemently opposed access to its iPhone data, FBI found a third-party who cracked the security function on the phone. Is your mobile phone and data secure anymore, wonders Yogesh Sapkale

Netbanking 61 Using & ECS Smartly Netbanking is safe and easy for everyone, especially women and senior citizens, explained Abhay Datar at a Moneylife Foundation event

BEYOND MONEY

How To Handle Overvaluation Pay up for quality, only if you are sure that earnings growth will continue Will Asian Paints Unsettle Pidilite but Weaken Itself? Competition heats up in branded adhesives market Market Manipulation: Gini Silk Mills Market Trend: Under Pressure

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EARNING CURVE

‘Smart Money’ 52 IsReally Smart? A study decodes the effects of smart money and dumb money on stock valuations

TAX HELPLINE

54

Queries at Moneylife Foundation’s Tax Helpline

Them a 66 Giving Better Start Tanuja Deshrajan helps street children learn basic skills so that they get admission into the best government schools

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

07-04-2016 18:30:27

MONEYLIFE SMARTSAVERS

&

FIX YOUR FINANCES, FOREVER

present

Dr Vijay Malik on

HOW TO ASSESS THE MANAGEMENT QUALITY BEFORE BUYING STOCKS The first-ever opportunity to hear Dr Malik whom Prof Sanjay Bakshi calls ‘Dr Stock’. Followed by conversation with Debashis Basu, moderated by Sucheta Dalal

Hurry! Grab the Early Bird Discount Pay till 9th April: Rs500 After 9th April: Rs700

Saturday, 16 April 2016 3.00pm to 5.30pm

Venue: Walchand Hirachand Hall, 4th Floor, Indian Merchants Chamber Bldg, IMC Marg, Churchgate, Mumbai 400 020

Register: https://savers.moneylife.in/events/dr_vijaymalik_event/ Retail investors often overlook management quality of companies because they usually do not get access to a company’s management. They also carry the misconception that management of a company which pays regular dividends is good, without realising that the company might be paying dividends by borrowing funds primarily to benefit promoters/majority shareholders. It is a rare opportunity to learn how to assess the management of a company by using data that is freely available. A session from a rigorous stock-picker, speaking in public for the first time, that you simply cannot miss. Dr Vijay Malik is an extremely popular writer on stocks. His website http://www.drvijaymalik. com features rigorous analysis into all aspects of stock-picking. Dr Malik completed his MBBS from Government Medical College, Solapur, in 2005 and obtained an MBA from IIFT Delhi (a premier business school) where he won a gold medal for his academic achievement.

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Volume 11, Issue 5 15 April – 28 April 2016

Debashis Basu

Editor & Publisher [email protected]

Sucheta Dalal

Managing Editor [email protected]

Editorial Consultant Dr Nita Mukherjee [email protected]

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

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

Total no of pages - 68, Including Covers

RNI No: MAHENG/2006/16653

INDIANISATION OF JUDICIAL PROCESS NEEDED? This is with regard to “Private Bankers Are Public Servants, Decrees the SC” by Sucheta Dalal. This is yet another occasion when one feels proud of being part of the efforts that Mutual Fund investments Moneylife makes to spread awareness about are subject to market risks, read all scheme related the implications of legal decisions affecting the documents carefully. financial sector. The judicial process and the law books passed on to us by the British have not, even after several decades of legislative action, Write to undergone the kind of Indianisation needed to the Editor! serve a growing economy like ours. If the common man has to benefit from the several a prize provisions of law intended to protect his interests, there has to be more transparency and speed in judicial procedures. In most of the court cases affecting financial interests of citizens, the legal battle is between the citizen on the one side and government/corporate body on the other side. Governments and corporates can fight endlessly using public funds (yes, for me, the funds with corporates also come under the broad classification ‘public funds’). These result in prolonged litigation and, sometimes, even small issues reach the Supreme Court. The differentiation between the public sector and private sector banks rivatte se sect ctor or b anks k for enforcement of laws like the Prevention of Corruption Act, by itself, does not stand to reason. Both categories of banks in India mobilise resource from the same source (public deposits) and do business in similar areas/sectors. MG Warrier, online comment

WIN

MONEY THAT YOU CAN AFFORD TO LOSE? This is with regard to “Why Savers Have Stayed Away from Stocks for Two Decades” by Sucheta Dalal. The question now is how will

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LETTERS

the

Best letter

Will the Banking System Collapse?

T

his is a topic which nobody discusses, or cares about, except a few; even there things don’t move beyond discussions. This concern is about our millions of middle-class elderly senior citizens in India, whose children do not, or cannot, support them. They cannot invest their lifetime savings in businesses or stock market and are not in a position to start, or run, a small business themselves. They don’t want to take any risk at an older age. In such a scenario, the only option left for this category is to invest their money as bank fixed deposits (FDs). Now, this helpless category has so much of worrying to do. If not consciously (but subconsciously), they worry about their deteriorating health, fear of death, fear of losing their partner, loneliness, daily routine work, etc; above all, they worry about the cost of living which is going up day by day and their bank FD rates going down day by day! I will be grateful to Moneylife if it can research and let us know if a collapse happens in the US or Europe, will our Indian banks also fall along with them like a pack of cards? Is our hard-earned money,

 somebody convince investors that the stock market is a

good place to grow one’s wealth? Most people ‘invest’ in insurance products because there are agents to lure them. An equity-investment culture can be created only if youngsters are financially educated. If that happens, the next generation will change things. It may now be difficult to convince older market-sceptics, especially those who may have lost money to scams and IPOs (initial public offers) that never did well. Mohan Sivanand, online comment

NATURAL SEA-SALT IS NUTRITIOUS This is with regard to “Salt Restriction Myth Busted” by Prof BM Hegde. Refined salt may be harmful but the best salt is natural, unrefined and

which is the only Mutual Fund investments support we have and are subject to market risks, read all scheme related which is just enough documents carefully. for our daily food and medicines, will also be snatched from us? Don’t you think this is OmarSK cruel on the part of the YOU WIN A government, politicians, PERSONALISED corporates, policyCLOCK makers, intellectuals and the media to allow these greedy bankers to silently, or ignorantly, mass murder millions of middle-class Omar SK senior citizens and not give them a chance to even die in peace? Moneylife and its team will receive huge blessings and good wishes ssin ngs g a nd g nd ood oo d wi ish shes hes es from millions of helpless senior citizens ffor or ta taking g up p this cause and bringing some solace to our elderly. Omar SK, by email

Congratulations

unprocessed salt from the sea. It is a nutritious food. Among the many minerals that make sea-salt nutritious are: magnesium, manganese, boron, copper, silicon, iron and nickel. It has all the trace mineral elements that are naturally found in our blood. Just take a cue; five decades ago did anyone have an issue of salt intake? The answer is No, because we used to ingest natural salt and sweetener like jaggery. The only issue is now to find good organic material at reasonable price. Jayendra Pandya, online comment

WHICH ONE IS BETTER FOR A LAYMAN? This is with regard to “Which Critical Illness Policy?” by Raj Pradhan. This is one of the better written articles on critical illness (CI) cover. Can you also

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LETTERS

 suggest a flowchart to aid decision-making on which

product type would be better for a layman? Anurag, online comment

BLAME THE MINORITIES? This is with regard to review of ‘The Turn of the

Tortoise’ by Debashis Basu. As we are being reminded about this by the right-wing RSS, BJP and Shiv Sena, the lack of development can be blamed on the minorities. Once pure Hindutva is implemented, all these problems will be automatically solved. J Pinto, online comment

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

ESSENCE OF GROWTH-INVESTING

UGLY ROLE OF OPPOSITION POLITICIANS

This is with regard to “Buying Quality Vs Paying Less” by Debashis Basu. This is very well written. I have been investing in high-quality companies and nothing captures the essence of growth-investing as this article did. Growth-investing is a very tough field and has humbled quite a few people. But, on the flip side, you get to think like a businessman. I almost put myself in the promoter’s shoes when I think of the potential of the businesses. Prashant Rishi

This is with regard to “I’m Back!” by Debashis Basu and Jason Monteiro. I wish the authors had mentioned the ugly role played by the Opposition politicians, i.e., the ‘dynasty slaves’, plus the new crook on the block and his coterie of Leftists, ably aided by their Left allies and Pak-leaning media. A large part of the blame should fall on these crooks who have just a one-point agenda: to pull down Narendra Modi and nothing else. They have failed to play the role of an intelligent, honest Opposition. And now it looks like the Opposition is willing to go anti-India desh ki barbaadi tak way to destroy Mr Modi. This reminds me of the joke: “Every woman needs a husband because you can’t blame everything on God or Modi.” The article does not have even a reference to any of these Opposition anti-nationals. Anand Vaidya

MARK IT DOWN TO THEIR WHIM? This is with regard to “Investing to Retire Comfortably” by Jason Monteiro. This is a wellwritten article. I think the problem is something else. Each government can come and change the taxation rules for this corpus whenever it wants. It is our money until we get our hands on it. In the US (and even in Europe), when Detroit’s local government goes bankrupt, the retirement/ pensions funds are ‘marked down’. My fear is that when India goes through a bad phase in future, the government would use these pension funds the way it uses LIC (Life Insurance Corporation of India) to save the stock market or worse mark-it-down-totheir-whim. Aditya Kumar Pandey

TOMORROW’S WINNERS? This is with regard to “Wealth Creators 2005— 2015” by Jason Monteiro and Pratibha Kamath. Great analysis, the past two decades were the turning point for our economy and it was because of the reforms in 1993. I doubt if there are any winners (for tomorrow) that are available cheap? Sudharshan Katipally

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

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

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

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11 | 28 April 2016 | MONEYLIFE

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Your Money MUTUAL FUNDS

RETIREMENT

Equity MFs Pull Out More than Rs8,000 Crore in March

E

quity mutual funds saw huge outflows—of more than Rs8,000 crore—in March 2016. Mutual funds have been net buyers in the past; they reported a net outflow for the first time in 23 months. Despite this significant outflow in the last month of the fiscal, in FY15-16, equity mutual funds reported net inflows of more than Rs68,000 crore. In FY14-15, they registered a net inflow of a little more than Rs40,000 crore. Experts reckon that the fund outflows in March could be due

to profit-booking and the fact that many banks and corporates would have pulled out their investments in view of the financial year-end. The behaviour of foreign institutional investors (FIIs) was quite different. FIIs were net buyers in March; they invested more than Rs21,000 crore in the month. They had been net sellers since the past nine months. March has been a superb month for Indian equity investors; the benchmark index delivered more than 10% returns during the month.

Bank Bazaar Also Ventures into Online Distribution of Mutual Funds

B

ankbazaar.com has announced its plans to expand its portfolio into investment category, starting with mutual funds in the first quarter of FY16-17. Well-funded Bankbazaar.com will provide retail investors customised suggestions on mutual fund schemes through its online platform. It also plans to offer mutual fund schemes from select asset management companies (AMCs). However, the online distribution platform is already crowded. Websites like fundsindia.com, scripbox.com and others are selling mutual funds online, apart from brokers. Bankbazaar’s entry would make this space overcrowded. Bankbazaar claims to be taking on the role of ‘Robo-advisors’, and will use a ‘proprietary research methodology’ to provide ‘research-based’ suggestions. However, it is not clear if Bankbazaar is an adviser or a distributor.

Inoperative PF Accounts To Earn Interest from 1st April

I

n a move that will enthuse account-holders of inoperative employees’ provident fund (EPF) accounts, the Employees’ Provident Fund Organisation (EPFO) has decided to provide interest on inoperative accounts from 1 April 2016. This will benefit over 90 million such accountholders having total deposits of over Rs32,000 crore. EPFO had stopped payment of interest to such accounts from 1 April 2011 to discourage parking of funds with EPFO in these dormant accounts. Inoperative accounts are those in which the contribution has not been received for 36 months.

Pension Regulator Comes Out with Partial Withdrawal Rules for NPS

P

ension Fund Regulatory and Development Authority’s (PFRDA’s) circular on partial withdrawal states that a subscriber, whose NPS account is at least 10 years old, can withdraw 25% of his/her contribution. However, this 25% of own contribution limit does not include the accrued income earned thereon. A limitation is that the amount can be withdrawn for only specific purposes like higher education and marriage of children and purchase/construction of residential house/flat. It also includes treatment of specified illnesses of the subscriber or his/her relatives, and accidents of a serious/life-threatening nature. A maximum of three withdrawals are allowed during the entire tenure of subscription.

MONEYLIFE | 28 April 2016 | 12

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MONEYLIFE FOUNDATION THE RIGHT THING TO DO

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

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CURRENT ACCOUNT

MONEYLIFE QUIZ

Moneylife Quiz no

230

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 26th May. Send in your answers to quiz@moneylife. in with the Quiz no., name, address & telephone number before 4 May 2016. 1. Which one of the following stocks was present in the portfolios of equity mutual fund schemes for five years or more? a. HDFC Bank b. Coal India c. Hindustan Unilever d. Hero MotoCorp 2. In how many equity mutual fund schemes’ portfolios was Britannia Industries present continuously for five years? a. One b. Two c. Three d. Four

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

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

Anchal Gupta

5. What percentage of stocks was sold within 12 months of purchase by equity schemes over the past five years? a. 28% b. 38% c. 68% d. 58% 6. Which one of the following terms relates to the phrase ‘dumb money’? a. Retail investors b. Fund managers c. Hedge funds d. Institutional investors

7. What was the fine imposed on OJ Simpson by the US civil 3. What is the portfolio-turnover ratio of a scheme if it reports court? purchases of Rs500 crore and has a corpus of Rs1,000 crore? a. $4 million b. $5 million a. 5% b. 15% c. $1 million d. $2 million c. 50% d. 150% 8. Which of the following actions cannot be performed by the 4. Where is the manufacturing facility of Gini Silk Mills located? Android Device Manager? a. Nagpur b. Tarapur a. Ring phone b. Lock phone c. Solapur d. Kolhapur c. Erase data d. Turn on Wi-Fi or mobile data In all, 12 readers got all the answers right last time. The winner of Quiz-228 is Anchal Gupta from Bhopal. Congrats! You win a personalised clock with an investment quote!

The answers to Moneylife Quiz-228 are: • 1- c. 8 March 2016 • 2- b. Section 80C • 3- b. four • 4- c. 58 years • 5- a. University of Minnesota • 6- b. 1.2 million • 7- c. Mahim • 8- d. 10 million

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

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www.moneylife.in Exclusive news & views with a big difference EXCLUSIVE NEWS News you had better not miss

Beware. Your housing society land might just have been stolen Shockingly, an open plot of a housing society in Pune, and hold your breath, also the land on which two of its buildings stand tall, have been grabbed

by an outsider, fraudulently changing the ownership in the land records, reveals

RTI. Incredible though it may sound, a new criminal activity is emerging in the property market, in which lands belonging to housing societies are allegedly being usurped through fake power of attorney leading to change of ownership of land. This, in effect, means that you might think you own your flat, but the ground beneath, that is the land, on which your building stands, might have been robbed in daylight, without your knowledge

Insider Trading in Geometric Software?

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The stock, which has remained stagnant for the past several years, rose 35% in just one month before announcement of its takeover by HCL Technologies

Daily Guidance Clinics

A time bomb is ticking away in India’s northern belt: Report A combination of skewed gender ratio, economic destitution and a large population of unemployed youth has resulted in social unrest

CEO, CFO and COO of Ricoh India have been sent on leave Ricoh India has appointed an independent agency to probe serious governance issues

Moneylife Foundation has been conducting daily guidance clinics for its members in Mumbai, Monday through Friday, on solid waste management, housing societies, RTI, insurance, saving for retirement, etc, at the Moneylife Knowledge Centre (Dadar, Mumbai). You too can participate in these programmes by registering at www.mlfoundation.in Membership is free

Maheshwar Peri, chairman of Careers360, vanquishes IIPM in court

HAVE YOUR SAY

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When Dr Rajan trashed the Economic Survey – MG Warrier

Will the Panama Papers leak help India recover illegal money?

Promoting mediocrity – An Indian trait – Sunil Mahajan

100% Pune citizen fights for three years to remove illegal mobile towers – Vinita Deshmukh

Beware of spinal cord injury and take steps to prevent it – Dr Ketna L Mehta and Dr Himanshu Doshi

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CROSSHAIRs

Emulating MNCs or Propagating Ayruveda? Patanjali is a true challenger, but its goal and objective is unclear as yet

I

t is no longer a question of whether yoga guru Baba Ramdev’s Patanjali Ayurved will challenge large listed companies; but it is not clear which ones will be affected and how seriously. Large brokerage firms have begun to analyse this unlisted competitor that is recording scorching growth, to keep track of the ‘babathreat’ to a range of listed companies. Many of us,

who have tried Patanjali soaps, toothpastes, shampoos, ghee, honey and a host of daily-use products, have not gone back to regular MNC brands. So the value proposition in terms of product quality and pricing is high even without the additional ingredient of ‘blind trust’ that millions of his followers have in the man. The baba-impact is also evident in the not-sosubtle change in the product propositions of large multinational companies: a malted beverage has suddenly discovered the virtues of almonds and honey and a multinational corporation’s (MNC’s) toothpaste

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

has discovered the virtues of neem and charcoal. But where exactly is Patanjali headed? If you try matching the statements of Baba Ramdev and his partner Acharya Balakrishna with actions, things get rather confusing. Both have piously said that their goal is to propagate Ayurveda, packaged attractively. In an interview to The Economic Times, Acharya Balakrishna says, “We are here to propagate ayurveda, not compete.” But aren’t facts on the ground rather contrary? Patanjali’s recent fruit juice advertisement appeals to stockists to give prominence to Patanjali products in “your shops as well as your hearts” and has some babble like—“together we can turn the SWADESHI dream of Mahatma Gandhi, Bhagat Singh and Ram Prasad Bismil into a reality.” If Patanjali’s focus is on pure, healthy food that incorporates the benefits of ayurvedic herbs and medicines, it is excellent. But selling fruit juices with preservatives (just a claim of more fruit pulp), with packaging that emulates big home-grown brands such as Dabur and then setting up a ‘swadeshi-videshi’ situation, is rather disingenuous. In fact, the whole swadeshi-based value proposition sounds like a sham, 69 years after independence; that, too, when the nation takes pride in the fact that people of Indian origin are heading those very multinationals that the baba wants to take on. Similarly, what is ‘ayurvedic’ about noodles, cornflakes and biscuits, coming off the assembly lines of a factory which imitate large MNC brands with just ‘whole wheat’ as the health proposition? Or about detergents and floor-cleaners set up in direct competition with MNC brands? And do the claims of ‘anti-bacterial neem and lemon’ go beyond added fragrance? It is these mixed signals and confusion that is worrying. As a convert to Patanjali products, I would rather see Baba Ramdev making products that discard all the high sugar and sodium content as well as chemical stabilisers, emulsifiers, colour, PH-balancers and tastemakers that give the slick look and tempting feel 

MONEYLIFE | 28 27 April November 20162014 | 18 | 14

Crosshair.indd 2

07-04-2016 18:41:27

 to mass-produced food. If Baba Ramdev’s swadeshi

proposition involved production and propagation of nutritious and hygienically produced Indian foods, rather than imitating MNC biscuit brands like Marie, and Monaco, it would ring more true. That would really be about “taking Indians back to their roots,” as Baba Ramdev claimed to an international publication. Undoubtedly, Patanjali has successfully disrupted various distinct multinational fiefdoms. He is a threat to a wide swathe of companies from P&G, Colgate and Unilever to Nestlé Rickett Benkiser, Dabur, Emami, Marico, Godrej and others with his arsenal of 500+ products. It was already a Rs2,000-crore brand before large companies and analysts took note of him and, in less than two years since then, Patanjali Ayurveda is set to be a Rs5,000-crore conglomerate. But does he really have the wherewithal to take on so many multinationals simultaneously with Ayurveda and swadeshi as his marketing theme? Or will he, at some time, scale back and stick to a bunch of products that stand for his core value proposition of trust, healthy and close to nature? At the moment, Patanjali is riding the crest of a wave; only time will tell if he can stay on top of it.

RBI Digs In Its Heels on Disclosure about Defaulters

issued to the top four banks in India, received the standard rejection from the banking regulator saying that disclosure of the information would not be in the economic interest of the State and, hence, exempted under Section 8 (1)a and d of the RTI Act. It will be interesting to see how the Supreme Court reacts to Dr Rajan’s stand, if the petitioners take the issue to the court again. However, the powerful All India Bank Employees Association (AIBEA) has come out strongly against the governor’s statement. On 6th April, CH Venkatachalam, AIBEA’s general secretary, wrote to Dr Rajan: “Mr Governor, we are of the strong view that in most of the cases involving the big-ticket defaulters, there is lethargy, leniency and accommodation but when it comes to the common man, our experience is different. At least what is sauce for the goose must be for the gander too.” His letter said that AIBEA is aware that there could be some genuine reasons for loan defaults. However, when gross non-performing assets have risen alarmingly in the post-reform era from Rs39,250 crore in 1992-93 to Rs3,61,000 crore at the end of December 2015, “there seems to be some clear method in this madness of bulging bad loans.” Pointing out

Governor says not okay to disclose all willful default data

T

he Reserve Bank of India (RBI) governor, Dr Raghuram Rajan, seems to have taken a stand on not disclosing information on wilful defaulters, despite a Supreme Court ruling on the issue. So far as we know, RBI has not filed a review petition or obtained a stay on the December 2015 judgement delivered by a bench of Justices MY Eqbal and C Nagappan in a matter pertaining to 11 cases pertaining to denial of information by RBI and others under the Right to Information (RTI) Act. However, on 5th April, during the interaction following the credit policy, Dr Rajan came out strongly against ‘indiscriminate naming of defaulters’. He is quoted as saying, “The act of default is sometimes not your fault—demand is weak, prices are low, dumping is going on, etc. So, there are a variety of reasons as to why a project gets stalled. Putting the promoter’s name up to say he defaulted, without giving the reason why, might not be right. We have no problem in publishing the wilful defaulter list—that is, where the promoter has, in the eyes of the bank, taken the bank for granted.” A little before the credit policy, an activist who had filed an RTI application, seeking information on the inspection reports as well as show-cause notices

how industrialists remain rich and healthy even when their companies default, AIBEA asks Dr Rajan to make a beginning by publishing the names of 5,600 identified wilful defaulters who owe over Rs60,000 crore to banks. He also wants RBI to ask the government to ensure that such defaulters cannot hold public office. AIBEA has also thrown its weight behind individual borrowers who are harassed by recovery agents for credit card defaults; he writes about a person in Tamil Nadu being beaten up by the police, at the behest of a private bank, for failing to pay a tractor loan. It is pertinent to note that RBI’s consumer charter announced over a year ago has not been implemented yet by prescribing penalties for failure to treat consumers fairly. The wilful defaulter issue seems set to go back to the Supreme Court again.  19 | 28 April 2016 | MONEYLIFE

Crosshair.indd 3

07-04-2016 18:41:48

DIFFERENT STROKES SUCHETA DALAL

Panama Papers and What They Mean to India The biggest ever leak is a bit of a damp squib about India; but that is precisely why it may be an opportunity for putting ground rules in place to stop tax evasion

E

A handful of industrialists, a couple of movie stars, a dward Snowdon said it well when he tweeted, the “Biggest leak in the history of data journalism deceased mafia-type and someone who says he has $100 just went live, and it’s about corruption.” The in his son-in-law’s company are among the Indian names whopping 11.5 million files of the Panama-based law that made headlines on the day of the big-bang global firm, Mossack Fonseca & Co, investigated for almost release. It will be hard to find any Indian who believes that a year by the International Consortium of Investigative our politicians do not have a fat stash of funds abroad; Journalists (ICIJ)—a global alliance of newspapers and they were probably fortunate to patronise a different tax haven and law firm. investigative journalists—released simultaneously around the world Apart from the President of on 4th April is, indeed, an explosive Iceland, the Panama Papers reveal new development in the history of offshore accounts and companies media and journalism. Revealing of British Prime Minister David the names of so many global Cameron’s late father, several political leaders, celebrities, sports Tory MPs, Russian Vladimir Putin stars and businessmen, has the (transactions worth $2 billon, potential to force countries around albeit through a childhood friend the world to rewrite tax polices and Sergei Roldugin), links to China’s stop the super-rich from evading powerful Politburo members, taxes and also to rationalise taxes President Xi Jinping and former for disincentivising evasion. Premier Li Peng through their Think about it. In a highly kin, the Presidents of Pakistan, competitive media world, every Argentina and Ukraine, the President and Prime Minister single media organisation has of Azerbaijan and the King of been forced to report and It will be hard to find any reproduce the findings of news Saudi Arabia. Yet, not a single Indian who believes that our and television companies that heavyweight Indian politician, or politicians do not have a fat were part of the alliance, with even a small-time one, figures in stash of funds abroad; they due acknowledgement. This is the revelations. were probably fortunate to an immense credibility boost for As hard as this is to patronise a different tax haven comprehend, it is probably the the media and for investigative and law firm journalism at a time when best thing to have happened. It advertising had been dictating allowed the government to react ‘breaking news’ on TV and all that is fit to print. quickly and decisively. Finance minister Arun Jaitley’s move At the time of writing, the Panama Papers had already to set up a multidisciplinary committee (comprising the RBI, snagged one major political scalp—that of the President central board of direct taxes and financial intelligence unit of Iceland. Other global leaders will face serious political of the finance ministry but not the enforcement directorate repercussions in the days to come. Ironically enough, or the directorate of revenue intelligence) to investigate the leak has also nailed the Chilean branch head of the Panama Papers was among the fastest reactions to the Transparency International (TI), forcing him to resign. leak by any country. Even the US Department of Justice TI, a Germany-based NGO publishes a global corruption had only said that it is studying the papers. index, in which India figures somewhere near the bottom Also, contrast the government’s swift reaction this time of the heap. And, yet, when it comes to India, the Panama with how the Congress-led United Progressive Alliance Papers have been a damp squib. responded to Germany’s offer to share information on 

MONEYLIFE | 28 April 2016 | 20

DIFFERENT STROKES.indd 2

07-04-2016 17:49:22

DIFFERENT STROKES SUCHETA DALAL

 tax-evaders. In February 2008, the German authorities

Reserve Bank of India (RBI) governor injected the necessary had bought information about illegal money stashed away sobriety into the investigation process by saying, “there by citizens of various countries in LGT, a Liechtenstein could be genuine reasons for having offshore accounts” bank. The list contained the names of 1,400 clients of and the multidisciplinary committee (of which RBI is a whom 600 were Germans. A spokesman for the German part) will probe the legitimacy of the offshore accounts. finance ministry, Thorstein Albig, had said in March It is important to do this without a needless witchhunt, 2008 that information on the other accounts would be because several of those named by The Indian Express shared with other countries for free. Finland, Sweden, reports have emphatically claimed that they have legitimate and Norway quickly obtained the data, but the UPA accounts whose transactions have been disclosed in their government did not wish to have anything to do with it. tax filings. RBI’s Liberalised Remittance Scheme (LRS) has Only after much prodding by the Opposition did it ask permitted resident Indians, including minors, to freely remit for the list in late-2008. funds overseas for permissible current or capital account A multi-disciplinary committee comprising officers who transactions or both. The sum that is allowed to be invested are senior enough is the only way to ensure an investigation overseas has increased from $25,000 in 2004 to as much that is not marred by investigative agencies working at as $250,000 since then; the remittances could easily have cross-purposes or indulging in been routed through tax havens mindless one-upmanship and which permit extraordinary ease of transactions. undermining one another’s efforts. It also reduces the chances of The multi-disciplinary information being compromised committee will, at some point, by corrupt officers. In 1992, in come up with its report; but, all the aftermath of the Harshad said and done, India’s political Mehta scam, such an interclass has nothing to fear from this disciplinary committee headed particular leak. What will worry by R Janakiraman produced them, though, is that the Panama excellent and detailed factPapers may just be the beginning of a new trend—of hacking and finding reports. In fact, the Joint Parliamentary Committee (JPC) leaking information available with top tax lawyers. The big set up after the Ketan Parekh scam of 2000-01 pointedly recorded message from Wikileaks, Edward the view that it “did not have the Snowden’s disclosures and the benefit of a report on the lines Panama Papers, to politicians and RBI’s Liberalised Remittance of the Janakiraman Committee the super-rich is that nothing is Scheme (LRS) has permitted Report which was made available secret anymore; every database resident Indians, including to the previous JPC on the can be hacked sometime and minors, to freely remit funds scam in securities and banking the disclosures can ruin political overseas for permissible careers. transactions. Reliable evidence current or capital account was difficult to find and took If world leaders, including transactions or both much time to cull.” (para 2.18). those in India, react to the Panama A multi-disciplinary committee Papers by implementing sensible lends credibility to the government’s action. This time, the tax policies that make it unattractive to evade taxes by fact that the Supreme Court-appointed special investigation routing them through expensive offshore structures, that team (SIT) on black money headed by Justice (retired) would be the most positive outcome of this path-breaking MB Shah has already announced its intention of journalistic exercise. But that is a utopian expectation investigating the list ‘thoroughly’. This will further keep so long as tax havens are useful in routing illicit funds the government-appointed committee on its toes. to terrorist groups and to finance insurgencies or the However, I must mention that the Janakiraman machinations of spy agencies of powerful nations.  committee’s hard work did not lead to faster filing of charge-sheets by the Central Bureau of Investigation (CBI) and the cases continue to drag through the courts for nearly Sucheta Dalal is the managing editor of Moneylife. She was 25 years. Hopefully, there will be pressure to address this awarded the Padma Shri in 2006 for her outstanding contribution issue with the SC-appointed SIT watching the action. The to journalism. She can be reached at [email protected]

21 | 28 April 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3

07-04-2016 18:43:52

MUTUAL FUNDS POINTERS

Stocks Equity Schemes Have Held for 5 Years Most of the stocks are from benchmark indices irrespective of the prospects, analyses Jason Monteiro

I

t is surprising that only a handful of stocks remain in an equity scheme’s portfolio for five years or more. Our analysis of the monthly portfolio of 59 equity mutual fund schemes (with a corpus of above Rs1,000 crore), over the five years (31 December 2010 to 31 December 2015), has shown that just about 8% of the stocks were held for five years or more. In our sample, this works out to just about 10 stocks in each portfolio, on an average. However, this does not mean that the schemes held a total of over 500 unique stocks for five years or more. There were many common stocks. Which of these stocks are common to equity schemes’ portfolios and have they added value to the portfolios? Most of the common stocks, often, turn out to be index stocks. Stocks, such as ICICI Bank, Infosys, HDFC Bank, L&T, Reliance Industries, TCS, ITC, Bharti Airtel and State Bank of India, were present in the portfolio of 10 schemes or more. Were these good choices? Not really. Except HDFC Bank, TCS and ITC, which returned over 12% annually, no other stock delivered a return of over 10%. In fact, State Bank of India, Bharti Airtel, Reliance Industries and L&T delivered negative returns. At the same time, this may not represent the actual returns derived by the schemes as they may have bought or sold some shares of the companies over the five-year period, to average costs, and this may affect returns. But the question one should ask is: Did fund managers hold on to these stocks

just because they were index heavyweights or because they were good-quality stocks? Among the better long-term stock-picks of fund houses were: Eicher Motors, Amara Raja Batteries, Page industries, Britannia Industries and Solar Industries. Of course, we know this only in hindsight. Eicher Motors, present in the schemes of Franklin India Prima Plus, UTI Equity and UTI Mid Cap, delivered an annualised return of 69% over the five-year period. Amara Raja Batteries was present in the portfolio of nine schemes. The stock delivered an annualised return of 55% and schemes, such as ICICI Prudential Value Discovery, Franklin India Flexi Cap, Mirae Asset Emerging Bluechip, Franklin India Prima and SBI Magnum Global 94, would have benefited the most as they had the highest allocation. Page Industries delivered an annualised return of 54%. IDFC Premier Equity has an allocation of nearly 5% to this stock which has been in its portfolio since 2008. Other schemes which have been holding this stock over the past five years were: SBI Emerging Business, SBI Magnum Global 94 and SBI Magnum Midcap. Britannia Industries, too, has created significant wealth for its shareholders over the past five years. The stock delivered an annualised return of 49% and was present continuously in the portfolio of two schemes. Similarly, Solar Industries returned 44% annually over the past five years. HDFC Mid-Cap Opportunities and Birla Sun Life Mid Cap have been holding the stock for the past five years. Long-term bets which did not work in the favour of the schemes include: Tata Steel, Crompton Greaves, ONGC, State Bank of India and Bank of Baroda. Tata Steel fell 

Most Picked Long-term Stocks Company Name

No. of Schemes

Return

ICICI Bank

29

2.69%

Infosys

28

5.10%

HDFC Bank

23

18.20%

L& T

17

-0.67%

Reliance Industries

16

-0.88%

ITC

15

13.43%

TCS

15

15.93%

Bharti Airtel

14

-1.05%

SBI

13

-4.41%

Amara Raja Batteries

9

55.23%

Grasim Industries

8

9.87%

BPCL

8

22.12%

HDFC

8

11.64%

IndusInd Bank

8

29.55%

MONEYLIFE | 28 April 2016 | 22

Fund Pointer.indd 2

07-04-2016 15:17:03

MUTUAL FUNDS POINTERS

 by over 15% over

the actual returns of Picking the Right Stocks Is Crucial to Performance the past five years the scheme. If we work out a and is present in the Equity Scheme Number Average Weighted Scheme of Stocks* Return* Return* Return portfolio of HDFC correlation between Equity, HDFC Top the average return UTI Equity 37 12.85% 9.06% 11.31% of the long-term 200 and Mirae Asset Sundaram Select Midcap 9 22.94% 7.42% 16.54% portfolio of the India Opportunities. UTI Mastershare 20 13.13% 7.23% 8.75% schemes and the S u r p r i s i n g l y, UTI Mid Cap 19 32.01% 7.04% 19.23% Crompton Greaves, actual returns of the SBI Magnum Global 94 8 35.54% 6.47% 18.14% too, which fell by scheme, it works Franklin India Prima Plus 16 17.53% 5.93% 13.69% out to as much as 9%, and State Bank IDFC Premier Equity 7 22.99% 5.74% 16.04% 58%. This shows of India, which fell UTI Opportunities 11 14.50% 5.37% 9.56% that the better the by 4%, were present performance of the in the portfolios Birla Sun Life Frontline Equity 23 8.07% 5.18% 10.97% of the same set of long-term stocks the Franklin India Prima 10 23.35% 5.18% 18.30% schemes—HDFC better is the scheme’s Reliance Equity Opport. 14 10.86% 5.10% 14.27% Equity, HDFC Top performance. In Reliance Mid & Small Cap 12 11.64% 4.30% 15.55% other words, the 200 and Mirae Asset HDFC Mid-Cap Opport. 20 14.36% 4.28% 18.64% performance of India Opportunities. Axis Equity 9 11.21% 4.21% 10.07% short-term holdings Do the managements * For stocks held for 5 years or more may have a little of these fund houses see something in these impact on the overall performance of the scheme. stocks which others have not? ONGC, which was hit by falling oil prices, continues Fund managers adjust the weightage of stocks in such a to be present in the portfolio of seven schemes. Franklin way that better quality stocks, according to their analysis, India Bluechip and UTI Dividend Yield are among the have a higher weightage in the portfolio. Therefore, we schemes with the highest holding. Bank of Baroda, which work out the long-term holding of the stock portfolio fell 5%, has an allocation of above 2% in the portfolios as per the weights in the December 2015 portfolio. For of UTI Dividend Yield, HDFC Top 200 and HDFC Equity. some schemes, such as UTI Mastershare, UTI Equity, UTI Dividend Yield and UTI Opportunities, the returns of the weighted long-term holdings contributed more than 50% Conviction in Long-term Holdings After discussing the performance of individual stocks, we to the actual scheme returns. take a look at how the returns of these long-term holdings On an average, the returns of weighted long-term contributed to the performance of the schemes. Though holdings contributed nearly 27% of the scheme’s returns. the actual return of a stock investment through buying and The 10 schemes, where the weighted returns were the selling of shares will be different from the point-to-point highest, delivered an average return of 14.25%, while the returns that we have considered, we assume a constant 10 schemes, where the weighted returns were the lowest, holding which will give us a representative picture of delivered an average return of 11.91%. A correlation whether or not a stock added value to the portfolio. between the portfolio weighted returns and the scheme returns works out to 15%. In other words, fund managers should have greater confidence in their own long-term bets. The top 15 schemes, where the portfolio weighted returns were the highest, included names such as Sundaram Select Midcap (7.72%), UTI Mid Cap (7.04%), SBI Magnum Over the past five years, the S&P BSE Sensex delivered Global 94 (6.47%), Franklin India Prima Plus (5.93%), an annualised return of 5% while the Nifty Midcap 100 IDFC Premier Equity (5.74%), UTI Opportunities (5.37%), returned 8.62% over the same period. Had the fund Birla Sun Life Frontline Equity (5.18%), Reliance Equity managers invested equally across their five-year holdings, as Opportunities (5.10%) and HDFC Mid-Cap Opportunities many as 34 schemes would have delivered a return in excess (4.28%). All these schemes have performed consistently of 10%. In fact, for as many as 25 schemes, the average over the past five years. Therefore, the stocks picked for the returns of the portfolio of 5-year+ stocks were better than long term are crucial for the performance of the scheme. 

Schemes with a long-term focus have done better. But funds don’t seem to have the conviction

23 | 28 April 2016 | MONEYLIFE

Fund Pointer.indd 3

07-04-2016 15:17:25

MUTUAL FUNDS FUND FACTS

Best & Worst Mutual Fund Schemes The best# three and the worst three schemes over the past three years ranked by their quarterly rolling returns. Premium members get access to a more refined list of top schemes by logging in to Moneylife Smart Savers - savers.moneylife.in Equity Schemes (Quarterly Rolling Returns) Large Cap (Category Avg: 3.50%, Sensex: 2.49%)

Launch Date

Corpus (Rs Crore)*

Avg. Quarterly Rolling Returns

1-Year 3-Years**

Exp Ratio

SBI Bluechip

14-Feb-06

4,050

4.61%

-3.18%

19.77% 2.03%

HDFC Capital Builder

01-Feb-94

958

4.56%

-4.18%

19.54% 2.70%

Birla Sun Life Top 100

24-Oct-05

1,638

4.38%

-6.32%

18.70% 2.44%

Reliance Quant Plus

18-Apr-08

781

2.28%

-13.79%

9.45% 2.32%

HDFC Large Cap

18-Feb-94

1,024

2.13%

-10.13%

8.80% 2.53%

Sundaram Growth

24-Apr-97

189

1.65%

-19.21%

6.77% 2.84%

Birla Sun Life India Opportunities

27-Dec-99

110

6.66%

1.57%

29.41% 3.23%

L&T India Value

08-Jan-10

876

6.19%

-0.89%

27.14% 2.32%

SBI Magnum Global 94

30-Sep-94

2,289

5.70%

-7.65%

24.84% 2.08%

LIC Nomura Equity

11-Jan-93

272

2.75%

-12.29%

11.48% 2.84%

IDFC Equity

09-Jun-06

226

2.53%

-11.41%

10.49% 2.30%

Union KBC Equity

10-Jun-11

127

2.46%

-15.31%

10.21% 3.11%

Multi-cap (Avg: 4.02%, BSE 200: 2.93%)

Mid-and Small-cap (Avg: 6.30%, CNX Midcap: 4.47%) DSP BlackRock Micro Cap

14-Jun-07

2,004

8.66%

0.92%

39.38% 2.60%

SBI Small & Midcap

09-Sep-09

653

8.26%

6.84%

37.34% 2.38%

Reliance Small Cap

16-Sep-10

1,652

8.18%

-0.49%

36.95% 2.12%

Tata Equity Opportunities

25-Feb-93

1,008

4.45%

-6.86%

19.01% 2.57%

SBI Emerging Business

17-Sep-04

1,451

4.30%

-3.21%

18.35% 2.15%

IDFC Sterling Equity

07-Mar-08

1,120

4.09%

-13.72%

17.37% 2.02%

Debt Schemes Income (Avg: 2%, Crisil Composite Bond: 2.16%) ICICI Prudential Long Term Plan

20-Jan-10

808

2.86%

6.33%

11.92% 1.18%

Tata Dynamic Bond

03-Sep-03

1,009

2.37%

5.89%

9.80% 1.66%

Birla Sun Life Dynamic Bond

24-Sep-04

14,833

2.36%

7.47%

9.78% 1.62%

L&T Triple Ace Bond

31-Mar-97

836

1.71%

4.67%

7.03% 1.49%

Religare Invesco Active Income

02-Aug-07

436

1.68%

4.20%

6.89% 1.80%

JM Income

01-Apr-95

670

1.62%

1.97%

6.65% 2.25%

Liquid (Avg: 2.12%, Crisil Liquid Index: 2.13%) Escorts Liquid Plan

03-Oct-05

222

2.24%

8.65%

9.25% 0.50%

Taurus Liquid

14-Apr-09

2,779

2.17%

8.30%

8.98% 0.30%

Franklin India Treasury Management Account

04-Sep-05

3,891

2.17%

8.24%

8.96% 0.20%

Reliance Liquid - Cash Plan

07-Dec-01

4,079

1.97%

7.33%

8.10% 1.04%

L&T Cash

27-Nov-06

664

1.93%

7.16%

7.96% 0.82%

HDFC Cash Management - Call Plan

06-Feb-02

115

1.89%

7.07%

7.78% 0.20%

# Please note the table represents a comparative performance of mutual fund schemes over a three-year period and it is not a recommendation; * Latest quarter average assets under management; We have only considered schemes having a corpus above Rs100 crore. **Annually compounded

MONEYLIFE | 24 April 2016 | 24

Fund Facts.indd 2

02-04-2016 14:45:45

FIXED INCOME

G-Sec Purchase from IDBI ATM IDBI already offers G-Secs through its Samriddhi portal

I

DBI Bank’s customers can invest in government securities (G-Secs) through the Bank’s ATMs. It is an initiative to popularise investment in G-Secs for the retail segment. G-Secs have ‘sovereign’ rating; hence, they are safer than even bank fixed deposits (FDs). Retail customers of the Bank can register, one time, for this facility and invest in G-Secs through any ATM of IDBI Bank which is an extension of IDBI Bank’s Samriddhi G-Sec Portal (samriddhigsec. idbibank.co.in). Investment in G-Secs will pay you a fixed coupon annually. But the value of G-Secs can be lower or higher than the principal amount, based on market interest rates. Remember, it is a bond and not a fixed deposit. To use the G-Sec portal, you don’t need to be an IDBI Bank customer. You will need Internet access, a bank account in your name

and a normal demat account in your name that you use for buying equities/bonds. In the case of joint accounts for demat and/or bank accounts, the investor should be the

G-Secs Maturity Date

first-holder. You will need to register with the website to buy and sell G-Secs. After successful registration, you will get a login ID, a password and a unique identification number through which you can access the portal. An investor can transact on this

Bond Yields Are Down

B

Last Yield

22 June 2045

7.90%

2 June2028

7.83%

19 December 2034

7.83%

21 September 2027

7.80%

Indicative G-Sec options on 4 April 2016

IDBI Bank through NEFT or RTGS transaction. Cash/demand draft/ cheques are not allowed. Once the transaction is completed, the G-Secs will be credited to your demat account.

G-Sec Yields Down

ond yields have headed down in the past fortnight. You can expect to get around 8.5%-8.6% for AAA rated bonds and around 9% for lower than AAA rated bonds.

Issuer

Maturity Date

Next Last Yield Coupon (%)

ISIN

Rating

Reliance JIO Infocomm 9.25%

16 Jun-24

16 Jun-16

8.73

INE110L08037

CRISIL AAA (unsecured)

LIC Hsg Fin 8.89%

25 Apr-23

25 Apr-16

8.57

INE115A07DT9

CRISIL AAA

HDFC Ltd 8.43%

12 Dec-18 12 Dec-17

8.55

INE001A07OJ9

CRISIL AAA

NSE data as of last trade date of 31 March 2016

Shriram Transport Finance 10.25%

18 Sep-24 18 Sep-16

9.30

INE721A07HY5

CARE AA+

HDFC Ltd 9.65%

19 Jan-19

19 Jan-17

8.53

INE001A07MH7

CRISIL AAA

LIC Hsg Fin 8.75%

14 Jan-20

14 Jan-17

8.53

INE115A07GM7

CRISIL AAA

BSE data as of last trade date of 31 March 2016

portal from 9am to 2pm on the Bank’s working days. The minimum investment is Rs10,000. There is a small commission built into the price of the bond. A fee of 0.05% is charged per transaction involving a sale. For making a purchase, you can select the security from the list of G-Secs with varying maturity dates. Once you select the G-Sec you want to invest in, you will be given an offer price. This is the price at which IDBI Bank will sell that G-Sec. The payment can be made to

T

he 10-year benchmark G-Sec yield, which sets the tone of the fixed-income market, fell by six basis points (bps) in the past fortnight to end at 7.46% on 1st April. On 5th April, at the first bi-monthly monetary policy for fiscal 2016-17, the Reserve Bank of India (RBI) lowered the repo rate to 6.5%. Core sector growth has recorded a 13-month high. The eight core sectors, viz., of coal, steel, electricity, cement, fertiliser, refinery products, natural gas and crude oil, grew at an annual 5.7% in February compared to the 2.9% increase in January 2016.

25 | 28 April 2016 | MONEYLIFE

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07-04-2016 15:41:17

SMART MONEY R BALAKRISHNAN

Slow-moving Consumer Share Prices Fundamental changes are afoot in the FMCG sector which may affect future returns of past top performers

T

he fast-moving consumer goods (FMCG) sector has been a much-debated sector these days. With the humungous population base, the demand for every consumer product can only keep going up. The annual addition to India’s population is as much as some countries’ total population. Given this demand, one would have thought that the listed space would be dominated by FMCGs. However, if you look closely, the few listed FMCG companies earlier used to be foreign companies like Hindustan Unilever, Nestlé, Britannia, Colgate, etc. And all of them enjoy RoEs (return on equity) close to a mind-boggling 100%. In other words, every rupee of their present capital is earned back within a year! Their operating profits are a heady 20%+ of sales—after spending 8%-10% on advertising. In the past couple of decades, strong Indian contenders to multinational companies (MNC) have emerged, like Marico, Godrej, Emami, etc. The universe of listed companies struggles to report volume growth of around 10% each year. And, at the same time, the market witnesses the birth of newer and newer brands every year. Now, the FMCG space is being disrupted in a big way by the entry of Patanjali products. This is also accompanied by a lot of ‘Indian’ herbal or ayurvedic products that claim ‘natural’ attributes and are imploring the Indian consumer to switch from ‘chemical-based’ products. Listed companies that have been dominating the markets thus far, with overpriced products (pricing at what the market can bear), are shaken up. They are also trying to become ‘Indian’ and there is a lot of defensive reaction as they start buying up old and nearly forgotten Indian brands at fancy prices. Who can ignore Parlé products or Amul that are national giants in the FMCG space today? And I suspect Parlé products would have profitability that would put

many MNCs to shame. The launch and penetration of Patanjali in double quick time must, surely, be a marketing case-study keeping the MNCs awake at night. Newer entrants, like ITC, have discovered that its cost structure has, so far, been keeping it away from breaking even as it just became a ‘me-too’ brand, whether in soaps or noodles. The older companies peddling natural products, like Dabur, Himalaya, etc, are going back in time to dig out old brands or attaching ‘health’ tags to new products. Following Patanjali, we also have several other gurus like Sri Sri Ravi Shankar who are trying to break into this game. I recall that Sahara had also forayed into consumer products long ago, but it did not take wing. The new entrants are not only fighting the existing national players but even the regional ones. While all this action is taking place, consumers, as they climb the ladder of economic prosperity, are pulled in by advertising campaigns and their own aspirations. They want to move on to ‘bigger’ brands. Perception is everything. Then there is a rapidly expanding segment that seeks ‘natural’, ‘traditional’, ‘organic’, etc. This is surely a big change. Every brand or company is not going to be a winner. Clearly, we are headed for no-holds-barred fights. While everyone is scrambling for market share, there is a simultaneous expansion of marketing and distribution channels. Online presence and push is very visible. We are witnessing new tricks, new promotions and new channels—everyone is searching for something unique that will open the consumer doors for them. However, the issue is: Where is the growth? The FMCG sector should normally grow at more than the nominal rate of GDP growth. In other words, if GDP is 5% and inflation is 5%, then nominal growth rate is 10%. The revenue growth of FMCG firms should be at least higher than this. 

MONEYLIFE | 28 April 2016 | 26

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02-04-2016 14:58:48

SMART MONEY R BALAKRISHNAN

 However, we rarely see such growth from the big boys.

There two parts to FMCG—durables and non-durables. Durables are now with global giants—Korean, Japanese and Chinese. There are not too many listed options, unless you count the likes of Videocon, Symphony, Voltas, etc. The unlisted space is several times larger than that of the listed companies. The durables space has been shaken up with the advent of online sellers like Amazon, Flipkart, etc. And many have also initiated their own online selling. Online sellers, funded by VCs, have been offering a wonderful experience for buyers in the form of huge discounts on virtually everything. This party will end soon, but the process is certainly a beneficial one for consumers as they focus on price. Thus far, FMCG stocks have been perceived to be a safe haven and command premium valuation. While RoEs are holding up, growth is not supporting this. Let us look at the returns some of the stocks have fetched over the past five years: 5 Years Ago

Now

Change

Rs271

Rs848

213%

Rs3,689

Rs5,186

41%

Rs354

Rs2,685

658%

Marico

Rs64

Rs247

286%

Dabur

Rs97

Rs250

158%

Godrej

Rs355

Rs1,326

274%

Nifty

5,654

7,604

34%

HUL Nestlé Britannia

Clearly, investors would have done extremely well with FMCG stocks. The question bothering me is: Will these returns continue at the same pace or magnitude? The differential in returns between the Nifty and FMCG stocks can be explained by the fact that the RoE of the

FMCG pack would be three times the Nifty average. So, the issue to address is whether the FMCG companies can sustain their RoEs, going forward? The existing players will be doing, or undergoing, the following over the next few years: • Price wars • Competing for shelf space with higher distributor margins • Higher ad spend • Overpriced acquisitions • Higher discounts to intermediaries • Legal and other troubles which would be motivated • Higher compliance costs • Poaching of key managers • Erosion of bargaining power which would include higher investment in working capital • Companies unable to grow volumes use acquisition as a way to ‘show’ growth. There could be some possible upside, should the promised income-tax rates come down to 25%. My call is that valuations will come off. We may not see sharp declines in prices but it is more likely that prices would stagnate for long periods. In effect, there will be a ‘de’-rating of these stocks as there is downward pressure on their RoEs. Old FMCG companies are unlikely to penetrate the markets where there is price sensitivity. Their cost structures are simply too high. So, they are battling for market share of the more affluent population. Growth can come from the base of the pyramid which is extremely price sensitive. To repeat, I am not saying that stock prices of FMCG companies will come off today or tomorrow. However, their future performance may not be as attractive as in the past, since there are fundamental changes under way. Caution: Markets need not believe in what I think.  The author can be reached at [email protected]

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27 | 28 April 2016 | MONEYLIFE

column_Balakrishnan.indd 3

02-04-2016 14:44:07

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18-11-2015 20:42:13

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

IRDAI Effects Hike of Motor TP Premium Private and commercial vehicles will feel the pinch

T

he Insurance Regulatory and Development Authority of India (IRDAI) has hiked thirdparty (TP) motor premium rate from 1 April 2016. Small cars, like Maruti Alto (not exceeding 1000cc), will suffer a steep 40% hike of premium—from Rs1,468 to Rs2,055. Cars, like Maruti Swift (1000cc to 1500cc), will also have 40% hike of premium—from Rs1,598 to 2,237. If you are driving a car like Mercedes (above 1500cc), the premium hike is 25%—from Rs4,931 to Rs6,164.

Fine Print Health Insurance Penetration in Only Five States

I

RDAI data shows that health insurance in India has good penetration only in five states—Maharashtra, Tamil Nadu, Karnataka, Delhi and Gujarat—which contributed to 71% of the total premium while

The hike for two-wheelers would range from 10% to 25% depending on the engine capacity. Two-wheelers not exceeding 75cc will face a 10% hike; those exceeding 75cc but below 150cc will face a 15% hike and those above 150cc but below 350cc will have 25% hike in premium. Twowheelers above 350cc will enjoy a decrease by 10%. This is the sixth

TP premium hike in six years and takes into consideration the loss ratio of insurers, inflation, awards decided for TP claims and so on. IRDAI has allowed a hike of 30% in the case of public commercial vehicles with GVW (gross vehicle weight) of 40 tonnes, 25% for GVW of 20-40 tonnes and 15% for GVW of 12-20 tonnes. Increase in TP premium of commercial vehicles always invites protest from truckers’ associations which demand transparency of data for justifying the increase. They feel that the number of policies have increased significantly which translates into higher collection of premium and lowering of claim payout as a percentage. The hike in premium in line with the exposure draft of IRDAI should bring cheer for general insurers as IRDAI used 

Vehicles for Hire or Reward Four wheeled vehicles used for ‘hire or reward’

Basic TP Premium (A) Rs

Premium (per Hike licensed passenger) Compared (B) Rs with 2015-16 Premium

Not Exceeding 1,000cc

6,396

1,230

30%

Exceeding 1,000cc but Not Exceeding 1500cc

8,408

1,035

25%

Exceeding 1,500cc

11,144

1,183

25%

Premium for four-wheelers with capacity not exceeding six passengers. TP premium is the total of a basic amount (A) plus an amount derived by multiplying the licensed carrying capacity by the amount in (B)

the rest of the 31 states and Union Territories contributed only 29% of the premium collection. For 2014-15, Maharashtra contributed Rs6,575 crore (33%) of the total premium while the combined premium from the eight north-

eastern states was only Rs158 crore (0.79%).

ICICI Lombard ‘Health Advisor’

I

CICI Lombard has launched ‘Health Advisor’ (www. healthadvisor.icicilombard.com), a web-enabled platform that allows consumers to get answers to critical questions pertaining to healthcare providers and treatment. The insurer has created a hospital and 

MONEYLIFE | 28 April 2016 | 30

Insurance.indd 2

07-04-2016 15:46:06

INSURANCE TRENDS

 to lower the hike in the final order

after protests from associations in the past. Taxi unions will not be happy to shell out 25% to 30% hike in TP premium. Will it increase customer fares? For vehicles with four or more wheels, used for carrying passengers (more than six passengers), the base premium will be Rs10,294 (A) and per passenger premium of Rs629 (B). The increase is by 25%. TP premium is the total of a basic amount (A) plus an amount derived by multiplying the licensed carrying capacity by the amount in (B).

Regulations

TP Cover Cannot Be Refused More steps needed to ensure that uninsured vehicles do not ply

I

RDAI is making it difficult for insurers to refuse to cover TP motor risk. To help consumers get TP cover easily, IRDAI wants insurers to sell motor TP products online. Insurers used to avoid underwriting of stand-alone TP cover, especially for commercial vehicles, due to higher loss ratio. TP cover premium is under tariff

 consumer feedback-based rating

mechanism wherein consumers can get treatment-related details and gain from actual experience from patients for over 1,000 hospitals across primary, secondary and tertiary segments. ICICI Lombard Health Advisor provides information on more than 30 treatment procedures selected on the basis of incidence rate. The procedures include removal of

and mandatory in India. There is no limit for the compensation for victims which can be decided by MACT (Motor Accident Claims Tribunal). It is based on numerous factors including the human value factor. A family of young, highly educated person with dependents and having huge earnings can expect to get a compensation in crores of rupees, for disabilities or death due to accident. Insurers are keen on an amendment to Motor Vehicles Act (MVA) to put a cap on the compensation value. From the consumer’s point of view, increase in accidents which lead to death or disability should have adequate compensation decided by MACT to give justice to victims or victim’s family. The existing law benefits accident victims many of whom are from the lower strata of society. Any change to MVA to benefit the insurers by putting a limit on the award decided by MACT can lead to injustice for accident victims. The TP liability cover, which is mandatory in India, does not provide any benefit to the insured; however, it covers the insured’s legal liability for death/disability of third-party loss or damage to

third-party property. The optional component of car insurance is ‘Own Damage’ (OD) covers the damage to your car and includes loss due to theft. The OD premium varies by insurance company for the same car model. Consumers need to check the offers for OD premium from different insurers before making the purchase.There is a need to ensure that vehicles do not skip the mandated TP cover. Half the vehicles running on Indian roads are uninsured. It is

appendix, hernia, piles, bypass surgery, cataract operation, knee replacement surgery, etc.

life insurer should monitor all the activities of the corporate agents. Exide Life had not ensured compliance of the provisions of the regulations and circulars. Penalty of Rs5 lakh was imposed for denial of claims on grounds of non-disclosures in declaration of health (DoH) form at the time of revival of the policy. 

Exide Life Penalised Rs11 Lakh

I

RDAI has levied a penalty of Rs11 lakh on Exide Life for violating various provisions of insurance norms. There were violations of provisions with regard to business sourced by corporate agents. The order states that the

a significant risk for citizens, and even for cars, on the road. Many do not even know what TP covers and, hence, do not bother to buy it. If higher numbers of vehicles are covered for TP, the premium will be lower for everyone. IRDAI, with help of RTO and the police, should ensure that penalties are levied on uninsured vehicles. 

31 | 28 April 2016 | MONEYLIFE

Insurance.indd 3

07-04-2016 15:46:35

COVER STORY

Do Equity Funds Take a Short-term View?

Only about 8% of the stocks bought by 59 large equity schemes were purchased more than five years ago, finds Jason Monteiro

E

quity mutual funds are expected to buy good-quality stocks that will outperform the broad market over the long term. While fund houses preach that investors should remain invested for the long term, while managing their portfolios, do they stick to the same principle? In this Cover Story, we analyse whether equity schemes invest for the long term or whether they constantly churn their portfolios for short-term gains or, maybe, losses. To check how much a fund manager churns a portfolio, many refer to the portfolio-turnover ratio (PTR). PTR divides either the total sales or purchase transactions over a period by the average net assets of the scheme. Therefore, if the average assets under management (AUM) of the scheme is Rs1,000 crore, and over the

period, the scheme reported total purchases of Rs500 crore, its PTR will work out to 50%. Can this ratio be gainfully used by investors to shortlist equity schemes? In fact, there is no single correct ratio or an acceptable ratio. Just because a Rs1,000crore scheme reports sales of Rs1,000 crore, it does not mean that the entire portfolio was changed. Buying and selling of a certain set of stocks (probably for short-term gains) can increase the turnover of the portfolio without affecting the long-term positions. But, more than portfolio churn, one needs to understand the underlying philosophy. Fund managers are often under pressure to deliver ‘alpha’ or returns in excess of benchmark returns. This leads them into the trap of thinking in terms of months and quarters, not years 

MONEYLIFE | 28 April 2016 | 32

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07-04-2016 17:34:59

COVER STORY

 and decades. If one is under pressure to deliver consistent

growth, quarter after quarter, to beat the market, the fund manager doesn’t have the luxury of buying an undervalued stock and waiting for it to take off. That might take years and short-term underperformance may not be acceptable to investors. When Kenneth Andrade quit IDFC Mutual Fund as chief investment officer, in an interview to Forbes India magazine, he candidly said that “the mutual fund model is participatory. There is always pressure on the fund manager to beat the index. I wish that it was more about buying businesses than buying stocks. That way, longterm investors will gain the most. When we are buying the business, you will beat the index. Most investors stay with a mutual fund only for 18 months. That is something which also needs to change. It is important that the fund manager and the investor both stay in sync. But this does not happen in most equity schemes.” The interview also mentions that “… investors are promised long-term returns but fund managers are forced to perform for the short run. The mutual fund model is completely sales-driven and it becomes more of a vehicle that collects money (rather) than manages money. That creates a conflict which, many times, has an adverse effect on investment decisions.” Is there enough hard evidence that fund managers buy and hold for the long term, or do they aim to generate alpha by frequent buying and selling over the short term? We analyse the monthly portfolios, over five years, of 59 equity diversified schemes with a corpus of over Rs1,000 crore as on 31 December 2015.

Do What I Say, Not What I Do While most fund managers claim that one should invest for the long term, surprisingly, on an average, only 8% of the total stocks bought (by the 59 schemes) were held

Only 8% of stocks are held for more than than 5 years while 38% for less than a year 8%

38%

Over 70% of schemes hold less than 10% of the stocks bought for more than five years Number of Schemes

17

22

More than 10% 5% to 10% Less than 5%

20

Percentage of total stocks held for 5 years or more

for a period of five years or more. On an average, 16% of the stocks are held for a period of three to five years and 38% of the stocks are sold within one year to three years. An equally high percentage (38%) of stocks is sold off within a year. For as many as 44 schemes, 30% of the stocks were sold within a year. Only in 17 schemes were 10% of the stocks held for a period of five years or more. In 26 schemes, only 5% of the stocks were held for five years or more. This analysis shows that mutual fund managers have an increasingly short-term focus. But the number of stocks bought or sold may not be representative of the weightage of the stocks in the portfolio. Therefore, we even looked at how long individual stocks were present in the portfolios based on the December 2015 portfolios of the sample. On an average, 24% of the portfolios have stocks which have been held for over five years. In 20 schemes, the weightage is over 30%, while in 31 schemes, the weightage of stocks held for five years or more is less than 20%. This means that, in most schemes, only 20% of the portfolios  consists of stocks bought five years ago.

The latest portfolios have only 18% stocks which are held for over 5 years Number of Stocks

Number of Stocks

16%

More than 5 Years

18%

27%

3-5 Years

3-5 Years

16%

1-3 Years

38%

More than 5 Years

Less than 1 Year

Number of stocks as a percentage of total stocks bought

39%

1-3 Years Less than 1 Year

Number of stocks as a percentage of total stocks in Dec-2015 portfolios

33 | 28 April 2016 | MONEYLIFE

COVER STORY

Only 8% of the schemes have large weightage for stocks held for over 5 years 5

Number of Schemes More than 50%

34

20

20%

More than 5 Years

25%

3-5 Years 25% to 50% Less than 25%

Weightage of total stocks held for over 5 years in the Dec-2015 portfolios



Just one-fourth of the portfolios are weighted to stocks bought five years ago

The top five schemes with the highest allocation to stocks held for more than five years are: UTI Equity (61%), UTI Dividend Yield (59%), UTI Mastershare (56%), HDFC Top 200 (52%) and Franklin India Bluechip (47%). Schemes which have the least allocation to stocks held for more than five years in their portfolios include: Birla Sun Life Mid Cap (5%), SBI Magnum Midcap (2%), ICICI Prudential MidCap (1%). IDFC Sterling Equity and DSP BlackRock Focus 25 did not have any stock in their portfolios that was present for more than five years. The 59 schemes had an average allocation of 38% in stocks held for one to three years. In 20 schemes, 40% of the assets were in such stocks. Of this, a high weightage was in stocks that have been in the portfolios for less than a year. On an average, 20% of the assets were allocated to stocks which have been in the portfolios for less than a year. Schemes with the highest weightage to stocks held for less than a year include: UTI Bluechip Flexicap (58%), IDFC Sterling Equity (57%), DSP BlackRock Small and Midcap (43%), Birla Sun Life Equity (39%) and Reliance Top 200 (33%). Schemes with the lowest allocation to stocks added over a one-year period include: Franklin India Flexi Cap (5%), Reliance Equity Opportunities (5%), UTI Mastershare (4%), Franklin India Bluechip (4%) and UTI Dividend Yield (2%). Therefore, even if we go by the weightage of stocks in the portfolios, on an average, over 55% of the portfolios consists of stocks which have been invested in over the past three years and one-fourth of the portfolios was allocated to stocks invested in over the past one year. Long-term anyone? What can lead to frequent buying and selling of stocks? According to Saravana Kumar, chief investment offi cer of LIC Nomura MF, “Portfolio reviews are done with regular frequency. The purpose of the review is

17%

1-3 Years

38%

Less than 1 Year

Weightage of stocks in the Dec-2015 portfolios

to rebalance the portfolio with following objective: 1. Risk management; 2. Addition / reduction of weights in line with investment framework and portfolio strategy; 3. Meet the redemption requirement / deployment of cash inflows. The actions related to specific positions are to do with company-specific events.” On being asked about the ideal holding period for stocks, he says, “There is no ideal period per se. The view is based on the fundamentals. However, we try to base our investment decision on three years’ outlook.”

Short-termism Vs Fund Performance We analyse the category-wise performance of the schemes and their weightage to stocks based on their holding period in their portfolios. This will help us to understand whether schemes with a short-term focus have done better, or worse, than other schemes. Among large-cap schemes, the top five performers 

Large-cap Schemes Top Five Schemes

Return*

Weight#

SBI Bluechip

12.53%

49%

Birla Sun Life Top 100

11.75%

47%

Reliance Top 200

11.14%

51%

Birla Sun Life Frontline Equity

10.97%

30%

ICICI Pru Focused Bluechip Equity

10.54%

44%

DSP BlackRock Focus 25

8.88%

97% 35%

Bottom Five Schemes

Franklin India Bluechip

8.65%

DSP BlackRock Top 100 Equity

7.61%

91%

UTI Bluechip Flexicap

7.42%

64%

HDFC Large Cap

4.09%

59%

* Five-year return as on 31 Dec-15; # Stocks held for less than three years

MONEYLIFE | 28 April 2016 | 34

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07-04-2016 15:02:22

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06-04-2016 13:26:48

COVER STORY

 were: SBI Bluechip (12.53%), Birla Sun Life Top 100

(11.75%), Reliance Top 200 (11.14%), Birla Sun Life Frontline Equity (10.97%) and ICICI Prudential Focused Bluechip Equity (10.54%). At the bottom of the list were schemes like DSP BlackRock Focus 25 (8.88%), Franklin India Bluechip (8.65%), DSP BlackRock Top 100 Equity (7.61%), UTI Bluechip Flexicap (7.42%) and HDFC Large Cap (4.09%). In the top five schemes, 44% of the stocks were of less than three years’ vintage. Birla Sun Life Frontline Equity had the lowest weightage to such stocks, with an allocation of 30%. ICICI Prudential Focused Bluechip Equity, Birla Sun Life Top 100 and SBI Bluechip had an allocation of 44%, 47% and 49%, respectively. Signifi cantly, in the bottom five schemes, 69% of the stocks were added in the past three years. For DSP BlackRock Focus 25 and DSP BlackRock Top 100 Equity, the allocation to these stocks was as high as 97% and 91%, respectively. UTI Bluechip Flexicap, HDFC Large Cap and Franklin India Bluechip had an allocation of 64%, 59% and 35%, respectively. Among the 14 large-cap schemes in the sample, the correlation between the scheme returns and weightage to stocks held for less than three years in the portfolio works out to -43%. This indicates that a higher allocation of stocks bought over the three-year period has led to a lower return. Even if we take a look at the average holding period for the top five schemes, 33% of the stocks were held for less than a year, while for the bottom five schemes, 41% of the stocks were exited within a year. Here, again, the correlation of returns for the 14 schemes works out to -14% compared to percentage of stocks exited in less than one-year period

and -36% compared to percentage of stocks exited in less than three years. Here the negative correlation indicates that the performance of the scheme deteriorated when the percentage of stocks exited within one year or three years was greater. In the multi-cap scheme category, there was no clear relation to the five-year performance and the holding period of stocks by the schemes. The top five schemes in this category were: SBI Magnum Global 94 (18.14%), Reliance Equity Opportunities (14.27%), Franklin India Prima Plus (13.69%), Mirae Asset India Opportunities (13.28%) and BNP Paribas Equity (12.77%). At the bottom of the list were schemes like UTI Mastershare (8.75%), HDFC Equity (8.45%), Reliance Vision (7.78%), HDFC Top 200 (7.63%) and UTI Dividend Yield (6.33%). The top five schemes had bought 47% of the stocks in the past three years, while the bottom five schemes had bought 34% the stocks in the past three years. In this sample, the correlation to performance was higher to schemes which portrayed short-termism. Schemes which bought and sold stocks within a one-year or three-year period did better. Multi-cap schemes have the flexibility to invest across stocks of all capitalisation. Hence, they can vary their allocation based on their outlook of which category of stocks will do better. For example, in Reliance Equity Opportunities, the allocation to Mega-cap stocks increased from around 44% in December 2011 to 63% in December 2015. Similarly, the allocation to stocks of other market-cap sizes was not constant. This was the case for most other schemes in the category. SBI Magnum Global 94 had an allocation of 51% to large-cap stocks 

Multi-cap: Stocks held for less than 3 years

Mid-cap: Stocks held for less than 3 years

Top Five Schemes

Top Five Schemes

Return*

Weight#

Return*

Weight#

SBI Magnum Global 94

18.14%

57%

Mirae Asset Emerging Bluechip

23.18%

63%

Reliance Equity Opportunities

14.27%

36%

Reliance Small Cap

22.24%

66%

Franklin India Prima Plus

13.69%

41%

Franklin India Smaller Companies

21.61%

60%

Mirae Asset India Opportunities

13.28%

41%

DSP BlackRock Micro Cap

21.04%

72%

BNP Paribas Equity

12.77%

60%

SBI Magnum Midcap

19.81%

76%

Bottom Five Schemes

Bottom Five Schemes

UTI Mastershare

8.75%

29%

ICICI Prudential MidCap

14.99%

81%

HDFC Equity

8.45%

43%

DSP BlackRock Small and Midcap

14.68%

79%

Reliance Vision

7.78%

51%

Birla Sun Life Mid Cap - Plan A

13.46%

76%

HDFC Top 200

7.63%

23%

IDFC Sterling Equity

13.27%

82%

UTI Div idend Yield

6.33%

23%

Tata Equity Opportunities

12.27%

69%

#

* Five-year return as on 31 Dec-15; Stocks held for less than three years

#

* Five-year return as on 31 Dec-15; Stocks held for less than three years

MONEYLIFE | 28 April 2016 | 36

Cover Story.indd 6

07-04-2016 15:02:43

COVER STORY

Short-termism in the US A misalignment of interests between fund managers and their clients?

A

2010 study, titled “Investment Horizons—Do Managers Do What They Say?”, found that there is a strong tendency for active (long-only) equity fund managers to have higher portfolio turnover rates than they claim. The study conducted by Mercer, a consulting firm, and funded by the not-for-profit Investors Responsibility Research Centre Institute, found a disconnect between fund managers’ understanding of the wider negative impacts of short-termism for end investors, such as higher trading costs, higher market volatility/risk and their perception of what this means for them as active fund managers. More importantly, their case-studies revealed that some managers who greatly exceed the expected turnover do not see this as an issue to be explained or addressed. Mercer analysed the average holding period of over 900 institutional actively managed equity portfolios, calculated for the period June 2006 to June 2009, across all major regions and styles for which they had available data, including value, growth, small- , large-cap and socially responsible investment strategies. Short-termism is defined as an average holding period of 12 months or less. They found that 20% of schemes turn over their portfolio completely every year. The average annual turnover of the sample was 72%. Many active managers claim that they can utilise short-horizon investing as a means to generate alpha. They also found that large-cap schemes have a lower turnover rate than small-cap schemes. What was the reason for short-termism? According to the feedback from fund managers, the main reasons could be linked to volatile markets and changing macroeconomic conditions, short-term incentive

systems and behavioural biases such as herding and recency bias. Volatile markets throw up apparent buying and selling opportunities. Therefore, portfolio churning tends to be higher when markets are volatile. Some felt that the volatility produced new opportunities for them to exploit, while others were forced to close positions and cut their losses. Some of the fund managers interviewed by Mercer believed that the incentive systems are often devised to pay fund managers to be aggressive over shorter time periods. This was considered to be especially pronounced for mutual funds, where managers are often incentivised against quarterly performance versus a market benchmark or quartile rankings. Some fund managers stated that their bonuses were linked to performance over annual periods. A couple of fund managers with a longer horizon believed that higher-than-expected portfolio turnover could reflect a lack of discipline in the investment process and, as such, be symptomatic of a potential problem with the process itself. The interviewees even cited ‘herding’ or ‘panic’ as reasons for turnover increase at certain points in time. Some believe that momentum-based strategies are more at risk of falling prey to such biases. The risk of ‘recency bias’ also emerged as a possible driver of the short-term cycle, whereby end investors allocate funds to schemes that have performed well recently and shift out of underperforming schemes. This leads fund managers to buy or sell stocks even if they felt it was not the right time to buy or sell stocks. Based on their analysis and interviews with various stakeholders, the authors concluded that short-termism is part of how the market functions; it places short-term pressure on companies; it increases market volatility; it potentially demonstrates a lack of discipline in fund managers’ investment processes; and it potentially creates a misalignment of interests between fund managers and their clients.

37 | 28 April 2016 | MONEYLIFE

Cover Story.indd 7

07-04-2016 15:03:04

COVER STORY

 in December 2011. This increased to 60% in December

2012. The allocation was gradually reduced to 34% in December 2014. Its allocation to mega-cap stocks has increased from around 18% in December 2011 to 50% in December 2015. The 24 schemes in this category had an average allocation of 47% to stocks in their portfolios for less than three years—marginally lower than the average of all scheme categories and that of the large-cap category. In the small- and mid-cap category, short-termism was much more prevalent. On an average, these schemes had 66% of stocks invested in over the past three years. As much as 23% of the portfolio allocation was to stocks added over the past one year. Small- and mid-cap stocks are less researched, can be highly volatile and require rigorous monitoring by fund managers. But does a shortterm outlook on small- and mid-cap stocks affect the scheme performance? The top five schemes in the category were: Mirae Asset Emerging Bluechip (23.18%), Reliance Small Cap (22.24%), Franklin India Smaller Companies (21.61%), DSP BlackRock Micro Cap (21.04%) and SBI Magnum Midcap (19.81%). The bottom five schemes were: ICICI Prudential MidCap (14.99%), DSP BlackRock Small and Midcap (14.68%), Birla Sun Life Mid Cap (13.46%), IDFC Sterling Equity (13.27%) and Tata Equity Opportunities (12.27%). The top five schemes had an average weightage of 67% to stocks which were in their portfolios for less than three years. For the bottom five schemes, this was as high as 78%. Even if we take a look at the allocation to stocks in the portfolios for five years or more, the top fi ve schemes had an average allocation of 10%, while the bottom five schemes had an average allocation of 6%. For stocks held for three to five years, the average allocation for the top five schemes was 17%, while that for the bottom five schemes was 10%. There is a negative correlation of -30% between the performance of the schemes and the weightage to stocks which were in the portfolios for less than three years. Funds with a short-term outlook delivered lower returns. Similarly, the correlation is high as -51% for schemes which invested in stocks for a period of less than a year. Among the schemes with the highest allocation to stocks held for five years or more in their portfolios were: HDFC Mid-Cap Opportunities and Sundaram Select Midcap. Each had an allocation of 26% to such stocks and delivered a return of 18.64% and 16.54%, respectively. In fact, over 60% of the portfolio of HDFC Mid-Cap Opportunities is invested in stocks that have been in the portfolio for over three years. This is the highest among all schemes in the category. Sundaram

Select Midcap had an allocation of 44% to stocks held for three years and more. Reliance Mid & Small Cap, IDFC Premier Equity and Franklin India Prima were the other schemes with a high allocation to such stocks. Small- and mid-cap stocks throw up great opportunities. However, patience is essential for investing in such stocks. This analysis is a clear indicator that schemes which have churned their stocks within three years have not done too well compared to schemes which have held on to stocks for three years or more. Our analysis has thrown up some interesting insights. Schemes which are focused on a specific category of stocks, like large-cap schemes or small- and mid-cap schemes, have done well if they have held on to stocks for three years or more. In the multi-cap scheme category, most schemes have churned their portfolio. Some have succeeded while others have not. Keeping a short-term focus, the schemes may have succeeded over the short term, but long-term returns would have suffered. There are many ways one can pick good equity mutual fund schemes. Most investors pick schemes based

on their past performance. Most rating websites rank schemes on past performance over specific one-year or three-year periods. We have often highlighted in the past that past performance should not be the only criterion for picking schemes. There are many other factors one should consider. The short-term focus of schemes should be analysed as well. Not all stocks can be winners. Some stocks may deliver extraordinary returns over the short term. Others may go down or remain directionless before rallying. Some others may not perform at all. It is impossible to have only winners in a portfolio. Fund managers need to chop and change their portfolios periodically. But they seem to be churning too much too often, enriching brokers and delivering poor performance for investors, all this while singing paeans for long-term investing. 

MONEYLIFE | 28 April 2016 | 38

Cover Story.indd 8

07-04-2016 15:03:20

StockWatch A section on stocks and sectors that catch our eye

J ay B h a r a t M arut i

Squeezed by Slowdown

Waiting for Better Times Volume

Price in Rs 175

51,000

JBM is an inexpensive stock which could do well if car companies get back their growth

160

40,800

145

30,600

J

130

20,400

115

10,200

ay Bharat Maruti (JBM) is one of the earliest autoancillary companies that was set up when Suzuki came into India and changed the passenger car segment, creating a robust automobiles sector. The business is somewhat cyclical, especially if the supplier depends on a few major buyers. JBM’s first customer was Maruti Suzuki which also took a stake in it. JBM has been growing since then, continually expanding its

100

0

Feb-15

Sep-15

Mar-16

Shares Traded

Adjusted Closing Price

Key Financials Stand-alone (Rs Cr)

Jun-15

Sep-15

Dec-15

Revenue

321.37

329.47

311.85

26.08

29.88

28.29

OPM

8%

9%

9%

Y-o-Y Revenue Growth

4%

-5%

3%

Y-o-Y OP Growth

2%

-6%

14%

FY13

FY14

FY15

14%

10%

19%

OP

March Ending RoNW

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

manufacturing capacity and recording steady growth in revenues and operating profits. Its manufacturing capabilities include imported and indigenous presslines, robotic welding lines as well as plating and painting facilities. It has added exhaust systems, axles and fuel neck-fillers to the existing capabilities of sheet-metal components and welded modules. JBM has embraced international systems and processes, implementing them at all levels. This has resulted in certification from global institutions. Unfortunately, vendors of parts, like JBM, are usually at the mercy of the car-makers. If car

companies are not doing well, ancillaries get squeezed. This is why the operating margin of the company is an unexciting 8%. For the quarter ended December 2015, JBM had sales of Rs311.85 crore (Rs303.50 crore), up 2.75%, and quarterly operating profit of Rs28.29 crore (Rs24.85 crore), up 13.84%. For the year ended March 2015, JBM had annual sales of Rs1,294.14 crore (Rs1,211.58 crore), up 6.81%, and net profit of Rs39.98 crore (Rs16.52 crore), up 142.01%. The shareholding pattern of JBM includes 58.56% shareholding with promoters and 41.44% shareholding with the general public. Over the past five quarters, the average quarterly growth in sales was 1% and the average quarterly 

39 | 28 April 2016 | MONEYLIFE

StockWatch.indd 3

07-04-2016 16:31:09

STOCK WATCH

 growth in operating profit was 14%. The market-

capitalisation of JBM is just 0.22 times its sales and 2.61 times its operating profit. However, the return on net worth (RoNW), computed on a four-quarter trailing basis (quarter ended December 2015), is a high 18% while the return on capital employed (RoCE) was 19% computed on a four-quarter trailing EBIT (earnings before interest and tax). Debt is at a reasonable level. The debt-equity ratio is around 0.77. The face value of the company’s share is Rs5 and its

Geometric Gets Taken Over, As We Had Hoped In our January 2015 issue, we had suggested that the best thing shareholders can expect is a takeover of the slowgrowing Geometric

M

oneylife had carried an article in January 2015 that stating that the real value of Geometric may be unlocked either with a change in management that can add more profitable business lines, or through a takeover by a much larger company. HCL Tech has now announced the acquisition of software company Geometric Ltd, promoted by the Godrej group, for US $ 192 million (around Rs1,270 crore). It is an all-stock deal where shareholders will get 10 shares for 43 shares in Geometric. It is a 100% acquisition by HCL Tech, 58% stake in Geometric’s joint venture—3DPLM Software Solutions. We had stated in the January 2015 article that Geometric had disappointed shareholders, due to its poor return on capital. This was despite the fact that it operates in one of the most profitable business segments of India, namely, software development. Its growth was slow and uneven with

book value is Rs93.75.The stock has no takers now which is why it is very reasonably valued. The priceearnings-ratio is just 7.42. A slight growth momentum in the passenger car business can attract interest in stocks like JBM’s. JBM distributed dividends of 40% for FY14-15. The share price of the company fell from its 52-week high of Rs184.40 on 4 January 2016 to its 52-week low of Rs114 on 12 February 2016. The share was trading at around Rs131 on 5 April 2016. 

unimpressive operating profit margins. The situation hasn’t changed much since then with Geometric’s revenue growth in the last five quarters at just around 6.5%. We had suggested that a takeover will unlock its value.

HCL To The Rescue Volume (No. of Shares)

Share Price 240

20,33,000 16,26,400

220

12,19,800 180 8,13,200 160

4,06,600

140 Feb-16

0 Mar-16 Adjusted Closing Price

Apr-16 Share traded

It is a relatively small acquisition for the IT major HCL Tech. The part of Geometric’s business that is acquired is estimated to have revenues of around Rs900 crore. Geometric’s services cover product lifecycle management, software product development, embedded systems and global engineering services. Geometric has as many as 60 clients in the automotive

Exits & Returns from Erstwhile Street Beat Stocks: We continue to monitor stocks featured in the erstwhile Street Beat section. We will suggest an exit when they are no longer undervalued or not performing as per expectations. Keep an eye on this space. | 42% Return: Our recommendation has so far fetched 42% average annualised return since January 2012, based on booked profit and open positions of more than one year. Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into account your individual circumstances, financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future results. Investors must do their own research before acting on them. Data Source: Centre for Monitoring Indian Economy’s Prowess database.

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

MONEYLIFE | 28 April 2016 | 40



STOCK WATCH

 and engineering segments. Its focus is on engineering

services and software services that account for around 88% of its revenues (excluding revenues of 3DPLM Software solutions). This acquisition is expected to give cross-selling opportunities to HCL Tech. HCL Tech rose on news of the acquisition by 2.35% to Rs840. The markets considered the merger to be extremely positive for Geometric; it skyrocketed by around 19% on the day of the acquisition, closing at Rs234. 

How To Handle Overvaluation Pay up for quality, only if you are sure that earnings growth will continue

O

ne of the most vexing issues for investors is handling overvaluation of quality companies. Often, the best of companies go up sharply, in a bull run, and become highly overvalued. After this happens, it could well be that such high-quality stock gets sold off sharply which can lop off 30%-40% of the value rather quickly. On the other hand, some stocks may simply not go down, even after getting overvalued. How does one differentiate between the two kinds of overvaluation? We looked back to 2010-end when the market was very expensive. We screened stocks (other than those

Overvalued Stocks of 2011 Company

of banks and NBFCs) on the basis of our parameter of low valuation ( market-capitalisation/sales) and high return on capital employed (RoCE) (11% and above their five-year average). We found 138 companies trading at a valuation (MC/sales) above their average valuation of the past 21 quarters. The top-10 overvalued stocks gave an annualised return of 30% from December 2010 to 17 February 2016. What differentiated the big winners? In almost all cases, it was continued earnings momentum that defied their gross overvaluation. What if you had bought the so-called undervalued stocks (even from among a sample of stocks with 11% RoCE)? Your return would be 4%. A similar study for 2011 has a list of 168 companies. Of these, 42 companies were trading at a valuation (market-capitalisation/sales) above their past 21-quarter average. These fetched an annualised return of 32% from the end of December 2011 to 17 February 2016. The top-10 overvalued stocks gave an annualised return of 44% over the period. What if you had bought the so-called undervalued stocks (even from among a sample of stocks with 11% RoCE)? Your return would be 26%. The lesson: Overvaluation cannot be the sole reason for selling. If one foresees a future growth, which will support the high valuation, continue to hold, even though the stocks go down temporarily. To take an example, Mayur Uniquoters had hit Rs42.50 in November 2010. Three months later, it had hit Rs28.38, a fall of 33%. The stock is now at Rs409, five years later. The same was the story about Orbit Exports, down 46% over one year (between October 2010 and July 2012) and a 400% jump thereafter. 

Overvalued Stocks of 2012

Annualised Gain/Loss Overvaluation

Company

Annualised Gain/Loss Overvaluation

VIP Industries

-6%

278%

PI Industries

51%

179%

TTK Prestige

21%

257%

TTK Prestige

13%

121%

Hawkins Cookers

13%

254%

Agro Tech F oods

4%

103%

2%

211%

Kitex Garments

69%

77%

Zydus Wellness Poly Medicure

27%

197%

Orbit Exports

49%

72%

Ganesha Ecosphere

11%

177%

Mayur Uniquoters

74%

63%

Safari Industries

56%

152%

VST Industries

11%

52%

Relaxo Footwears

58%

147%

Bata India

15%

49%

PI Industries

61%

145%

GSK Consumer

21%

48%

Kitex Garments

57%

140%

Ajanta Pharma

130%

44%

Annualised price performance between 31 December 2010 to 17 February 2016

Annualised price performance between 31 December 2011 to 17 February 2016

41 | 28 April 2016 | MONEYLIFE

StockWatch.indd 5

07-04-2016 16:32:13

STOCK WATCH

Will Asian Paints Unsettle Pidilite but Weaken Itself? Competition heats up in branded adhesives market

I

n what appears to be a natural expansion, Asian Paints has entered into the branded adhesives space by launching three offerings, namely, Loctite Quick, Loctite Rapid and Loctite Tough. This marks diversification by Asian Paints, the paints major, into the adhesives segment. Asian Paints came out with extensive print advertisements announcing the launch of these adhesives. This entry may dent Pidilite’s command in this space. Pidilite is the market leader in this segment, with more than 70% market share. It sells adhesives through its extremely strong brands Fevicol and Fevikwik. One of the greatest strengths for Pidilite is its distribution network which has prevented entry of any challenger so far. Asian Paints, too, has a wide distribution network but of a different kind. According to Edelweiss, Asian Paints has a distribution network of around 36,000 hardware shops that can be tapped to distribute its adhesives. It has no access to small stores which have a ready supply of Pidilite products. Asian Paints has entered into a distribution arrangement with Germany’s Henkel Adhesive Technologies for its adhesive category. Henkel’s adhesive brand Loctite will be sold at the retail level through a co-branding initiative. Currently, the company is selling Loctite in certain markets in

western India. Henkel has been an old player globally with more than 100 years of experience worldwide in adhesives. Strengthening its distribution network across smaller stores/kirana stores would be a key challenge for Asian Paints to match Pidilite. Its products are priced on par with Pidilite’s. Asian Paints’ retail focus is apparent as its brands Rapid and Tough will be available in syringe packs. Astral Poly Technik Ltd has also entered into adhesives segment by buying out Kanpur-based specialty chemicals manufacturer Resinova Chemie Ltd. It had acquired 80% stake in UK-based adhesive and sealants maker Seal It Services Ltd, in 2014. However, according to analyst estimates, it is too small a player to seriously challenge Pidilite. At present, the branded adhesives market has numerous small players who have not been able to challenge Pidilite’s dominance in this segment. Branded adhesives and sealants contributed to 50% of the sales for Pidilite, while industrial adhesives accounted for 6%, in FY14-15. Pidilite’s net sales of branded adhesives and sealants grew by 14.1% in FY14-15. Pidilite’s stock was under pressure on 28th March, presumably due to this new competition, declining nearly 4% from its previous close of Rs599.65. However, it recovered the next day. On 31st March, the stock closed at Rs592. The stock trades at a price-to-earnings (P/E) multiple of 44 while the P/E of Asian Paints is 50. Pidilite has grown its revenues at 20% per annum for the past 10 years while Asian Paints has notched up revenue growth of 18.8%. Both the companies have excellent managements that have created enormous value for shareholders. Both were started by chemical engineers from the University Department of Chemical Technology (UDCT) of the Mumbai University, now called Institute of Chemical Technology (ICT). But this could be a debilitating fight for the shareholders of both companies. 

MONEYLIFE | 28 April 2016 | 42

StockWatch.indd 6

07-04-2016 18:14:19

STOCK WATCH

UN UOTED STORIES OF PRICE MANIPULATION

Gini Silk Mills (Rs282) (Rs)

G

ini Silk Mills manufactures woven and printed fabrics. With its manufacturing facility located at Tarapur (Maharashtra), Gini Silk Mills states on its website that it supplies fabric to Wills Lifestyle, Westside, Peter England, Indigo Nation and Shoppers Stop. However, there is no mention of its clients in the company’s annual report for 2014-15. The textiles manufacturer reported revenue of Rs41.02 crore and a profit of Rs2.86 crore for the year ended December 2015. For the previous year, the

315 255 195

951%

135 75 15 Mar-15

Sep-15

Mar-16

revenue reported was almost the same, at Rs41.38 crore, and profit was

slightly lower, at Rs2.24 crore. With no significant growth in sales or profits, the stock price of Gini Silk Mills shot up an astonishing 951%, or nearly 11 times, over the past one year. From a low of Rs29 on 23 March 2015, the stock shot up to Rs305 on 31 March 2016, with an average of just 40 trades a day. As on 31 December 2015, Gini Silk Mills had 614 shareholders holding 25% stake in the company. The number of shareholders has reduced from around 800 in December 2013. Is this another pump & dump operation? Will the regulator investigate? 

MARKET TREND

Under Pressure Is the Post-Budget Rally Over?

T

he market has done what it is expected to do at a time when news flows are benign but valuation is not low: move sideways. Over the past one month or so, foreigners have invested heavily in India while mutual funds and domestic institutional investors have been selling. The flow of news is mostly positive. There is action on bad loans;; there are more schemes he government and announcements from the which institutional investors are bal eager to latch on to; and global markets have been rallying. But market valuation is already high and it will take a lot of effort for bulls to make stocks fly. thout a strong I had mentioned that, without omewhere, the market unexpected stimulus from somewhere, will not head anywhere overr this year and, possibly, the next. The only ray of hope is a great monsoon. But, as of now, earnings are not expected to grow much in 2017. According to UBS, a global investment bank, consensus earnings growth projections for the

Nifty50 are still too high, i.e., 20% growth for FY16-17 and 19% for FY17-18, respectively. UBS’s forecasts for Nifty50 earnings growth are just 10% for FY16-17 and 16% for FY17-18, respectively. UBS says that its Nifty target for December 2016 is 7,500; that is no upside from the current level. Last fortnight, the Reserve Bank of India cut the repo rate by .25%. This was a much-awaited event for which punter punters had built up a position. But after the rate cut, the market fell sharply and the decline con continued for the next few days. The rate cut will not mean much, says UBS. The challenge for the market rremains reality vs expectations, as ref reflected in the still optimistic earnings esti estimates. It said: “The rate cut is not nece necessarily bullish for Indian equity marke as it typically coincides with a slow market, growth phase.” We continue to see bouts of decline and rallies. Right now, the market seems to be under pressure. By the next fortnight, though, if the market has declined enough, it would be time to rally. — Debashis Basu 

43 | 28 April 2016 | MONEYLIFE

StockWatch.indd 7

07-04-2016 18:14:52

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18-11-2015 20:38:17

VALUE STOCKS DEBASHIS BASU

Are You Riding the Profit Momentum? A strong focus on stocks whose profits are rising sharply may be very rewarding, if you know why you are buying and have a method to exit

O

ne of the reasons why a majority of equity schemes of mutual funds don’t perform so well is their self-imposed constraint of remaining tied to benchmark stocks. But the bigger problem is their strange stock selection that often leaves us flummoxed. Why will mutual fund scheme portfolios sport a Larsen & Toubro here and a Reliance Industries there? We are surprised that anybody would be interested in putting retail investors’ money in anything other than quality stocks with a clear growth potential and that they opt to bet on hunches, theories, thesis, stories, etc. We don’t do that. Maybe that is why, over the past four calendar years, our stockletters have performed quite well. The returns from the Lion stockletter, which has an accent on large-caps, have beaten the best equity schemes in 2013, 2014 and 2015. Over 2012-15, too, our returns have beaten the best equity schemes. Remember, the best schemes are known only byy hindsight. Our principle of focusing on Returns at Reasonable Price (RARP) is working, at least for now. Even if we don’t beatt all the schemes every year, we hope ope to be among the top 10 (a list that keeps changing). N o w, m u t u a l f u n d s don’t have to follow RARP. RP. Indeed, we ourselves have ve modified our process to make ake it GARARP that is, Growth wth and Return at Reasonable le Price. But if there is one ne thing you can learn from the average performance of the majority of mutual ffunds, d it i is i this: hi focus f on profit growth. Funds don’t do that and you should not make a similar mistake. Let me explain how staying focused on profit growth alone could be a profitable strategy. But, before that, here is a caveat. Profit growth a) can be a short-term phenomenon, b) can also happen to a mediocre company due to luck, not skill, and c) can happen through excessive borrowing by the company. In all these cases, you need to

keep an eye on the exit and have a short-term, possibly a price-based or technical indicator, to tell you when you need to sell and run. I am not advocating this process and it is unlikely we will ever follow it. The risks of buying anything other than quality stocks and ignoring the price is far too much. But, having noticed that this is the Achilles’ heel of poorlyperforming funds, I have cursorily tested whether, by following rising profit momentum of companies, we could convert the poor performance of equity schemes into superior investment results. Alongside are some examples of profit growth and stock prices. In each case, as profit growth took off, the share prices rose dramatically. At one level, this is logical. Profitable growth is the dream P of all businesses. Sustaining double-digit growth, quarter after quarter, is a rare feat which will immediately turn heads. If the ccompany is medium to large and has a clean management, investors ha would see it as an extremely rare wo opportunity, in a world of slow growth oppo and ma margin pressure caused by product saturation. And when they do that investors would look at the recent past pa and extrapolate. In an uncertain world of stocks stocks, there is nothing more comforting than a line risin rising from the left to right, on sales and profit charts. chart Fund managers, analysts and retail investors wo would, without an iota of doubt, extend that line into the future and calculate future stock prices that follow rising sales and profits. This will Thi ill d draw in i more and more investors. If the company has high debt, spreadsheets will tell the analysts how future profits, quarter after quarter, would melt the debt away, thanks to rising profits. As interest cost goes down, profit will get a further boost. Profit momentum is growth elixir for stock prices.

Windfall Gains One of the rewarding aspects of finding yourself riding 

MONEYLIFE | 28 April 2016 | 46

Value Stocks.indd 2

07-04-2016 18:45:48

VALUE STOCKS DEBASHIS BASU

DIC India

Force Motors

Net Profit (Rs Cr)

Stock Price (Rs)

Net Profit (Rs Cr)

Stock Price (Rs)

8.70

735

50

3,520

7.20

655

40

2,904

5.70

575

30

2,288

4.20

495

20

1,672

2.70

415

10

1,056

335

0

1.20 Jun-15

Sep-14 Net Profit

Apr-16

440 Jun-14

Mar-15 Net Profit

Adjusted Closing Price

SRF

Apr-16 Adjusted Closing Price

TVS Motor

Net Profit (Rs Cr)

Stock Price (Rs)

110

1,425

Net Profit (Rs Cr) 125

95

1,165

110

265

80

905

95

205

65

645

80

145

50

385

65

85

35

125

50

Jun-13

Apr-16

Sep-14 Net Profit

Adjusted Closing Price

 a stock with a strong profit momentum behind it, is

windfall gains, as the stock gets hugely overvalued. Prices of such stocks attract buyers at higher and higher prices, turning them into can’t-miss stocks. The buyers, of course, include mutual fund managers who suffer from the same behavioural biases as you and I. As a result, a laggard in the two-wheeler business, TVS Motor, will start sporting a P/E of 32 while its bigger and more competitive rivals Hero MotoCorp (which remains valued at 17.7) and Bajaj Auto (at 19.46). Well, you see, Bajaj Auto, even though its return on capital employed (RoCE) is 39%, it is hardly able to grow its sales and profits. The same used to be the case with Hero MotoCorp, which has got its act together in the past three quarters and has been rewarded with a higher stock price. If you make a buying decision based on earnings momentum, when do you sell? Frankly, I don’t have clear answers and I am still researching this. But remember the original premise. You have invested in the stock because its profits are rising, for some reason. If the valuation and return on capital is also good, then you have a big winner on your hands. It is a stock worth holding for the long term.

Stock Price (Rs) 325

25 Jun-13

Dec-14 Net Profit

Apr-16

Adjusted Closing Price

But if the valuation is high and return on capital is not so good, then you have to be extremely alert and may wish to exit at a preset target price (although I have never been able to fix ‘target prices’) or a significant breakdown in prices. If the profit growth is accompanied by large debt and the debt is not reducing, or no free cash is generated, then consider yourself lucky to have a got a good rise and it is time to exit anyway if your returns are upwards of 30%-40%. If the company’s profit is rising because the business was lucky, like the shutdown in the operations of a competitor (many chemicals companies are enjoying this luck right now), you may need to monitor that fact. In short, there are multiple factors that can generate short-term earnings momentum. Identify what these factors are and track them. If you wish to combine this with some form of trend-following indicator, you may like to keep an eye on the break of three-month moving average below 10-month moving average. Once again, we do not pick stocks on this basis but there are a hundred different ways to make money in stocks. This could be one of them. 

47 | 28 April 2016 | MONEYLIFE

Value Stocks.indd 3

07-04-2016 18:49:18

3 Long-term Stockletters for Excellent Returns Panther 63.69%*

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

Long-term value stocks. Usually large companies are selected

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

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

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

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

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

06-04-2016 13:29:43

bought. We suggest investors hold stocks for at least five years. On our part, we will try to suggest stocks that are not expensive. How do subscribers get the stockletter? The stockletter is currently sent as a pdf file by email. Subscribers can also download their stockletter by visiting their MSSN dashboard on our site savers.moneylife.in What is the frequency? You will receive your chosen stockletter every Saturday evening. Can I share the stockletter? The stockletters are meant for a single user and is backed by years of research. Hence, we urge you not to share them. What if I have any queries about specific stocks? Well, we would rather let our performance do the talking but if you have any serious doubts email us at [email protected]

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

How can I buy the stockletter? You can buy online at https://savers.moneylife.in/prelogin/stockletters. html or you can send us a cheque or a demand draft by using the form below. More info at: https://savers.moneylife.in/sldownload/ Caution: The returns shown here are much higher than average. Average annual rise in the Nifty/Sensex is likely to be 12%-14% per annum over 10 years and more. Well-chosen stocks may rise by 20%-22% per annum over five year and more. Disclaimer: The stockletters are for information purposes only and none of the stock information, data and company information presented constitutes a legally binding recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalised recommendation to you. Individual stocks presented may not be suitable for you. Moneylife is a media and information company and not investment advisor. Please consult an advisor about the appropriateness of your investment decisions. Cancel within two issues: You can cancel your subscription within two issues. We will return your money after deducting Rs150 for payment gateway and handling charges. You can cancel by email or phone.

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

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06-04-2016 13:30:07

TECHNOLOGY MOBILE

Is Your Phone Secure? While Apple vehemently opposed access to its iPhone data, FBI found a third-party, who cracked the security function on the phone. Is your mobile phone and data secure anymore, wonders Yogesh Sapkale

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fter successfully hacking into the encrypted Apple iPhone of one of the terrorists in San Bernardino shooting, the US Department of Justice has withdrawn legal action against the tech giant. A third-party helped the Federal Bureau of Investigation (FBI) to crack the security function without erasing contents of the iPhone used by Syed Farook who, along with his wife, killed 14 people in December 2015. Apple has strongly defended its position—of not revealing or sharing software that would bypass its security features. iPhone has a feature that erases data after 10 unsuccessful unlocking attempts. A similar feature is available for other mobile phones, albeit it is not as secure as that of an iPhone. This makes you wonder whether your mobile phone, or all your data on the handset, is really secure. Can a third-party gain access to your important data easily? Well, this is a grey area. There is nothing like 100% security or lack of security. Higher security level just takes more time to crack. That’s it. There are some basic security features available on a handset; but not everybody is aware of, or knows about, it. In addition, most handsets provide software-based encryption and not hardware-backed one. All Apple products carry the encryption feature. Also, almost every Android-based handset has an encryption feature, but not many know or use it.

So What Is this ‘Encrypt Phone’ Facility? Using the ‘encrypt phone’ facility, you can encrypt your accounts, settings, downloaded apps and their data, media and other files. After you encrypt your phone, assuming you have set up a screen lock (that is

a pattern or numeric PIN or password), you will need to unlock the screen to decrypt the phone every time you power it on. The only other way to decrypt is to perform a factory data reset, erasing all your data. This means that only with the unlock key, you, or someone with that knowledge, can gain access. Encryption takes an hour. If you interrupt the process, you will lose some or all of your data. Another feature you may want to check is the auto-wipe which automatically erases all data and reset it to factory settings on the phone after certain unsuccessful attempts to unlock the device. But, before using this feature, make sure to back up all your data regularly.

Is Your Data Secure? What happens with stolen mobile phones? Thieves will either switch off your phone or throw away the SIM card. If there is no phone lock, it’s a cakewalk for them to sell it. If the handset is locked, it is sold at a cheaper price or taken to another regular ‘techie’. This techie will unlock the device and reset it to factory setting after which it gets sold. In short, people who get access to your device will be in a hurry to sell it off and will not be interested in the data. They may use some data on micro SD card, though. The techie may access the data and, if he finds something of interest, he may use it or sell it to others for a fee. What you can do is either use in-built encryption facility or wipe out the data remotely. On Android, there is one such facility; but you will have to download it from Play Store. It is called Android Device Manager. This helps you to find the approximate location of your phone on a map and when it was last used. However, it requires the device’s location access feature to be enabled and the mobile data or Wi-Fi connection active. If these features are turned off, Android Device Manager cannot provide any information. Once you locate your device, you can remotely ring, lock, or erase all the data using Android Device Manager. However, I wonder how many Android users in India keep the location feature on; if not, this facility is unusable. So what is your best bet to keep your mobile phone data secure? For Android devices, the encrypt phone feature is the best bet, at present. While it will give you peace of mind as long as the handset is in your possession, it will make it difficult for thieves to access the data. 

MONEYLIFE | 28 April 2016 | 50

Technology.indd 1

02-04-2016 14:50:53

USEFUL APPS YAZDI TANTRA

Maildrop: Mail but No Spam Get free, disposable email address

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hen you visit a website and it insists that you enter your email address first, before proceeding, what is your reaction? For a large number of people, there is a feeling of unease and distrust and they may just move away. Email, a very effective way of communication, is today plagued by spams and unwanted mails which waste a lot of your time. Hence, we are scared to give our email ID to an unknown site. At such times, just head to maildrop.cc. It helps you with a free, disposable email address. There are no sign-ins, no passwords to remember, no security and no privacy. It just gives you a valid email address which you can enter without fear of spam. Use that address on any site and visit maildrop.cc to receive replies. If you get too much spam there, create another maildrop address and move on! The next time a web form or app asks you to ‘please enter your e-mail address’, you’ll be ready. No problem, it’s “[email protected]” When that site sells your e-mail address, you can shrug, move on to another disposable MailDrop address, and your real e-mail won’t get filled with junk mail. Just try it! www.maildrop.cc

Mighty Optical Illusions: Marvel at these Illusions Exotic stimulation for your brain

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ighty Optical Illusions—that’s what this site is all about. During lunch time, take time off work and marvel at the various types of illusions presented—a treat for your eyes and ears and some exotic stimulation for your brain. The site carries various types of illusions in terms of pictures and videos. 3D—drawings that jump off the page, arty animations and even interesting video illusions. One interesting illusion is about the McGurk Effect—a perceptual phenomenon which demonstrates an interaction between hearing and vision in speech perception—how the brain reacts to visuals when combined with audio. Be sure to go through the

Tests section too, to sharpen your perception and to find out how much you can be challenged by your own senses. They have some gadgets which you could download on to your desktop, a Google Chrome extension and iPhone / iPad apps too! Great for getting a smile on your face in between those heavy tasks and rushed appointments. www. moillusions.com

Yahoo Aviate Launcher: Intelligent Homescreen Shows the app that you are most likely to run, depending on the time and place

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ndroid is a great place for customisation. And a Desktop Launcher is an App which replaces your Android Desktop and allows you to customise it in a variety of ways. Aviate is a Desktop Launcher which almost ‘knows’ and ‘shows’ what your desktop should look like, depending on where you are and the time of the day! As a result, your desktop may change automatically in the morning, when it will display the weather, your appointments app and your favourite news app; as you proceed to work, it has maps and music apps that are ready to go; and when you reach work, it may have your favourite email apps. If you visit the gym, your favourite workout apps may stare you in your face! In the evening, maybe some restaurant apps would be more appropriate and when you are ready to go to bed, your alarm settings would pop up on your home screen. The idea is to show you the appropriate app that you are most likely to run, depending on the time and place you are in, without your having to search for them. Briefly stated, it is an intelligent homescreen that simplifies your phone. Try it, it is free! https://goo.gl/58HYaX 

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

MONEYLIFE | 28 April 2016 | 51

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07-04-2016 14:32:29

EARNING CURVE

Is ‘Smart Money’ Really Smart?

stocks and sell overvalued, popular stocks. The validity of this notion was examined by Ferhat Akbas, Will J Armstrong, Sorin Sorescu and Avanidhar Subrahmanyam in their research paper titled “Smart Money, Dumb Money, and Capital Market A study decodes the effects of smart money Anomalies”. The research found that aggregate flows and dumb money on stock valuations to mutual funds (dumb money) appear to exacerbate cross-sectional mis-pricing. In contrast, hedge fund flows (smart money) appear to attenuate aggregate he commonly held belief is that ‘dumb mis-pricing. The researchers concluded that aggregate money’—investments by retail investors mutual fund flows fit the ‘dumb money’ description, either directly or through mutual funds— while aggregate flows to hedge funds are better suited exacerbates mis-pricing of stocks; while ‘smart money’—investments by the more knowledgeable for the ‘smart money’ description. The paper considered stocks in the US markets as hedge funds—has the effect of reducing this mis-pricing. the sample used included common stocks listed on the In other words, dumb money flows make overvalued stocks more expensive and undervalued stocks cheaper. NYSE, AMEX, and NASDAQ over the period January The reverse is true for smart money flows. Smart money 1994 to December 2012. A hypothetical long-short portfolio was constructed that took long positions in makes overvalued as well as undervalued stocks move the most undervalued stocks and short positions in the closer to their fair valuation. Thus, smart money flows most overvalued stocks. The paper found that when exert the right kind of pressure on valuation. Is this mutual fund flows are high, stocks in the undervalued true? ‘long’ portfolio become even more undervalued while Why are mutual fund flows considered dumb when managers of hedge funds and mutual funds have expert stocks in the overvalued ‘short’ portfolio become more overvalued. However, for hedge funds, the opposite knowledge? Suppose a particular scheme is delivering finding was obtained. When hedge fund flows are good performance. It is likely that the stocks in its high, stocks in the undervalued portfolio become less portfolio are overvalued due to good returns in the undervalued while stocks in the overvalued portfolio past. Investors, in general, are likely to direct their become less overvalued. money to these schemes due to ‘performance chasing’. The paper found that, in general, monthly mutual This money is to be deployed by the scheme. This fund flows are associated with a simultaneous increase money will, most likely, be deployed in top performing in the price of stocks that are already overvalued stocks in its portfolio which are already at the beginning of the month, causing these overvalued. The effect of stocks to become even more overvalued this is that they become by the end of the month. There was a more overvalued than reversal in the price they currently are, due of these exact stocks to huge inflows into during the subsequent that stock. Thus, three months. mutual fund flows are Monthly flows to likely to exacerbate hedge funds are the effect of associated with overvaluation. a simultaneous Even in case of a decrease in the scheme delivering price of stocks poor performance, that are something similar may occur. Due overvalued at to redemption pressure, the existing the beginning stocks which are undervalued are sold of the month. off, making them more undervalued The paper found that there was no than they currently are. Hedge funds reversal in the price of these stocks are supposed to do exactly the opposite: during the subsequent three-month go against the market trend and buy period.  undervalued, beaten down and unpopular

T

MONEYLIFE | 28 April 2016 | 52

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07-04-2016 15:34:58

UNBIASED INFORMATION: MSSN Benefit #8-10

• Moneylife Magazine • Handbook • Product Reviews

8. Moneylife Magazine:

9. Handbook:

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

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

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

About MSSN

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

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20-11-2015 17:05:43

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Queries At Moneylife Foundation’s

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

Forgot To Deduct TDS in Property Sale

income-tax department makes you pay the TDS with interest.

I

Retirement and Senior Citizen Taxability

bought a property in excess of Rs50 lakh and did not deduct tax at source (TDS) while making the payment. What should I do if seller is not ready to cooperate? This TDS payment would be a huge financial burden on me and the refund will go to the seller anyway. Ameet Patel’s Reply: Section 194IA requires the purchaser of immovable property in excess of Rs50 lakh to deduct tax @1% before making payment to the seller. This is a compulsory Section. In your case, you have forgotten to deduct the tax. If and when the income-tax department gets information about the transaction (and they will definitely get it because the value exceeds Rs50 lakh), they will proceed against you for recovery of the TDS. At that time, they will also levy interest on you. The better thing for you to do is to pay the TDS now along with interest. If the seller is not cooperating, you will have to bear the TDS. That would be an additional cost for you. But, in my opinion, and based on my experience, that cost would be less than the cost that you will incur if, at a later date, the

I

retired on 31 January 2016. My office deducted tax from my last salary. After my retirement, I got arrears of Rs22,120 in March 2016, due to promotion, from which Rs5,422 was deducted as tax. My question is: When I have crossed the age of 60 years, I moved into the tax threshold for senior citizens. So what should have been the actual deduction of tax and whether I can claim refund? Nikhil Vadia’s Reply: If you have crossed the age limit for senior citizen during the financial year, the new slab will be applicable to you. In your case, since you have crossed 60 years of age in 2015-16, the higher slab of Rs3 lakh would be applicable for FY15-16.

STCG on Stocks Bought with Mother’s Money

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y mother got her share of money of her deceased father. She deposited the money into my savings account. I have invested this entire sum of money in certain stocks with a long-term view, in

my name. But I needed to sell these stocks to meet some family exigency and got a short-term profit of Rs85,000. I am employed and already paying tax at 20%. What is my tax liability and that of my mother on the shortterm gain made from stocks bought with my mother’s money in my name? Subodh Shah’s Reply: In my opinion, the deposit of money into your savings account will have to be treated as a gift from your mother to you. Hence, the investment in shares made by you in your own name will be treated as a personal investment and the gain, if any, will accrue to you. Thus, the short-term capital gain—STCG —will be liable to be taxed in your hands. Assuming the transaction is of listed shares, and subject to securities transaction tax, the rate of tax will be 15% u/s 111A.

HRA Claims

I

am a salaried employee but I forgot to submit the rent agreement and rent slip to my employer. As a result, the HRA amount in my salary was taxed. Now, while filing my return, can I put rent under Section 80GG? I understand that the maximum can be Rs24,000 only. Ameya Kunte’s Reply: You should claim HRA exemption u/s 10(13A) while filing your tax return. You can do so even though it does not reflect in your Form 16. Since your employer has provided HRA, you are not covered for deduction under Section 80GG. 

MONEYLIFE | 28 April 2016 | 54

Tax Queries.indd 2

07-04-2016 16:38:28

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

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Tax Helpline.indd 1

06-04-2016 13:33:11

HEALTH BM HEGDE

Money Runs Science and Medicine Research and regulatory actions are rife with conflict of interest

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any, if not all, of our regulatory agencies have a long history of protecting industry interests over public and environmental health. In the first week of November 2015, Jonathan Lundgren, who spent the past 11 years working as an entomologist at the USFDA (US Food and Drug Administration), filed a whistleblower complaint against the agency, “claiming he’d suffered retaliation after speaking out about research showing that neonicotinoids had adverse effects on bees.” In the US, nearly all corn, about 90% of canola and, approximately, half of all soybeans are treated with neonicotinoids. As the use of these pesticides has gone up, bee and Monarch butterfly populations have plummeted. USFDA managers blocked publication of his research, barred him from talking to the media and disrupted operations at the laboratory he oversaw. That is what Lundgren complains, according to the Washington Post article. USFDA is all for genetically engineered seeds, etc, while true science says that genetically engineered seeds could be deadly, in the long run. The story is the same in India. When we stopped using PL480 funds for agricultural imports, we decided, rightly so, to be self-reliant, that led to the Green Revolution. However, while the late C Subramanian, a great son of India, was passionate about it, his scientific advisers must have been working under instructions from their masters in the West. They succeeded in going headlong on to use of chemical fertilisers and pesticides which, today, has brought us to almost total land and water degradation due to chemicals and fertilisers. Our soil is losing all its fertility. Thanks to that, we have vitiated our environment so much that newer diseases are invading us. The industry, on its part, is trying its best to keep its hold on the powers that be through devious means. The same holds good for medical research in the country which is under the control of vested groups in the industry. Real science is going to be destroyed. A recent study showed more than 200 dangerous chemicals in a newborn baby’s umbilical cord blood! While you would think that the governments exist to protect you against the vagaries of industry, this is

not the case. The chemical, agricultural, and medical drug industries spend millions of dollars to lobby for regulations that are favourable to them and there is a constantly revolving door between government watchdog agencies and private corporations all over the world. The New York Times recently published an in-depth exposé on the legal battle fought against DuPont for the past 15 years over chemical contamination and its toxic effects on human health. We were taught, in school and college, that science can help us make rational decisions that serve the people and promote public health. “But now we are facing a world so rife with corruption and conflict of interest facilitated by the very sciences that were supposed to keep us healthy, safe, and productive, it’s quite clear that we’re heading toward more than one proverbial brick wall,” writes Dr Joseph Mercola on his website www.mercola.com. He goes on: “In a sense, the fundamental role of science itself has been hijacked for selfish gain. Looking back, you can now see that the preferred business model of an industry was created first, followed by ‘scientific evidence’ that supports the established business model. When the science doesn’t support the company’s economic gains, it’s swept under the rug, even if people are dying and the planet is becoming irreparably poisoned as a result. Today, we live in a world where chemical companies and

biotech giants can easily buy and pay for their own research studies, as well as the lobbying to support whatever legislation they need passed in their favour.” I have been trying my best to bring out the secrets about this dangerous marriage between industry and the powers that be, without much impact. Unless we have total transparency in research, this dangerous corruption can never be detected and corrected. Money runs this world— science and medicine included. Putting an end to the revolving door between private industry and government would be one step in the right direction. 

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 | 28 April 2016 | 56

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02-04-2016 14:41:35

HEALTH BM HEGDE

INTEGRATED MEDICINE FOR THE FUTURE

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recent day-long workshop, on the future of healing, came up with the need for bringing all systems of medicine, without any caste system, under one

MEDICAL DEVELOPMENTS FROM AROUND THE WORLD

roof; picking the best in every system would be the best for the future of medicine. This needs lots of hard work to bring disparate elements like the egoistic Western medical doctors and naturopaths under one roof. The meeting concluded that it can only be done if each of these doctors left their elephantine egos behind and began working for the good of mankind. Every system is fallible but has good effects under many circumstances. The time has come to give up the wrong notion that diagnosis is the most important part medicalcare, before we do anything else. This myth, though blown over scientifically decades ago, does not go away as diagnostic tests are big money-spinners. This meeting gave me a ray of hope for mankind. Let us hope that wisdom will dawn on doctors to work collectively to do most good to most people most of the time.

CHOLESTEROL IS A FRIEND!

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hat I had been shouting from housetops for decades has now come to the attention of the powers that be in the US. Cholesterol is not bad for health;

in fact, it is good for health. There is nothing like good and bad cholesterol. LDL, HDL and other classes are all myths. We have killed millions over the years by calling cholesterol a ghost. Now, even the US doctors are joining the bandwagon to decry the cholesterol mania; they were on the same bandwagon until the other day. But the Indian faithful doctors are yet to join in. They still harp on statins for lowering cholesterol. Probably they aren’t interested in saving human lives.

NEW LIGHT ON ALZHEIMER’S DISEASE

P

eople living in a new Pacific island of Guam (a US territory) have shown the relationship between some environmental toxins and Alzheimer’s and also some other neurodegenerative diseases. This toxin is found in some lakes and soil of that island. This might give us a clue to search for some such environmental toxins in other patients also. The relation between amyloid plaques and Alzheimer’s is well known. The bad news is that bad gums, with bad halitosis, could be a very important risk for Alzheimer’s. Gum disease can also speed up the progress of this disease.

well. That should not be an excuse for doing mammograms as the latter could be counterproductive.

DAY’S NAPS, SITTING & EXERTION

D

aytime sleeping is not a good health practice, although short naps might help to build your health. Any nap longer than 40 minutes is really bad during the daytime, when the sun is up. In a large study, people found that sitting in one place for more than three hours at a time, on a longterm basis, has killed more than 43,000 people per year. Do not sit for a long time and sitting is bad for health. These days, the younger generation going to the gym has cultivated a new way of intensifying their exercise levels to lose more calories and get better body shape. Studies have shown that such short bouts of intense exertion without long warm up and equally long cooling could even bring on a heart attack. Moderation in every walk of life is good for health. Daily low-grade exercise, the best being normal walking, is the best insurance against premature deaths and all kinds of illnesses including cancer and stroke.

DIGITAL MAMMOGRAMS HAVE COLLATERAL BENEFITS

D

igital mammograms, when they show calcification of the breast arteries, could be a pointer for calcification of coronary arteries thereby warning women to take care of their hearts as

57 | 28 April 2016 | MONEYLIFE

BM Hegde.indd 3

06-04-2016 21:41:15

LEGALLY SPEAKING SD ISRANI

The new real estate law should make a difference

T

he plight of property buyers in India is terrible. As it is, only a small percentage of the population can afford to buy their own dwelling units. Flat-buyers not only put all their savings into booking an apartment but also take huge loans to meet the exorbitant cost. In such a scenario, imagine the plight of a buyer if the project is delayed indefinitely or if the builder seeks additional contribution. Apart from the courts, buyers can now approach a consumer forum, under the Consumer Protection Act. However, the scope of such forums is limited to redressing issues arising out of any deficiency in service. In the process, builders often go scot-free. The enactment of the Real Estate (Regulation and Development) Act, 2016 (real estate law), may change things. Some highlights of the new law are discussed below. Regulator: Establishment of a Regulatory Authority and adjudicating mechanism for speedy dispute redressal. The new law also proposes to establish an appellate tribunal to hear appeals against orders passed by the authorities. Compulsory Registration: Today, every Tom, Dick and Harry can call himself a developer because no registration or declaration is required. However, under the new law, no promoter can advertise, market, book, sell or offer for sale, or even invite persons to purchase a plot, apartment or building, without registering the project with the Real Estate Regulatory Authority. Even existing real estate projects, which are under implementation, have to be registered with the Authority within a period of three months from the date of implementation of the new law. Only projects of less than 500 square metres (sq mtr) and less than eight flats are exempt. Disclosures: Every promoter will have to disclose details of the current project, projects launched by him in the past five years, status of those projects, any delay in their completion, details of cases pending, etc. The builder will

have to submit prescribed documents, including sanctioned plans, necessary approvals, commencement certificate, proforma of the allotment letter, agreement for sale and the conveyance deed. Declaration and Affidavit: Every promoter of a real estate project will have to give a declaration which will have to be supported by an affidavit that would contain specified information including legal title to the land and details of encumbrances, if any. He has also to mention the timeframe within which the project will be completed. Separate Account: A promoter will have to give an undertaking that 70% of the amount received from the allottees will be deposited in a separate bank account. Moreover, the funds in the separate account have to be used only for the purpose of the project for which the money has been received and that, too, after due certification by an engineer, architect and a chartered accountant in practice. Project Schedule: Promoters will have to file their project schedule with the Regulatory Authority and will have to seek extension for additional time for which they may be made to pay a fee. Failure to complete the project within the specified time can entail penalties. Functions and Duties: The new law also specifies in detail the functions, duties and obligations of a promoter and the consequences of any breach committed by him. The law also specifies the rights and duties of the allottees. Defaults by a Promoter: A promoter has to adhere to the sanctioned plans and any change effected, without due approval, will invite adverse consequences. Similarly, breach of any condition or obligation by a promoter could result in penal consequences and, in certain circumstances, can lead to imprisonment as well. Regulatory Authority: Each state government will have to constitute a Regulatory Authority within one year. In addition, the government will also have to constitute an appellate tribunal for hearing appeals against orders passed by the Regulatory Authority. Hopefully, the advent of new real estate law will have a salutary effect on the builders and the woes of property buyers will come to an end.  Photo Courtesy: The Hindu

Can Property Buyers Now Breathe Easy?

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

MONEYLIFE | 28 April 2016 | 58

Legally Speaking.indd 2

02-04-2016 14:51:49

HANDHOLDING: MSSN Benefit #11

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

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MSSN Handholding.indd 1

20-11-2015 17:04:55

YOU BE THE JUDGE BAPOO MALCOLM

The Lawyer as Juggler Don’t mess with his decisions

M

ost readers will know that there are two types of ‘court cases’, commonly called civil and criminal matters. In one, the respondent is called a defendant, and in the other, the accused. Since cases of the latter type involve penal provisions, they are more feared. But, often, both types are invoked simultaneously. What then are the options available to the defendant, who is also the accused? The author’s favourite example is the OJ Simpson case. It involved the gruesome killing of OJ’s wife, Nicole Browne, and her boyfriend. The end result was that OJ was acquitted of the murder charge in a criminal trial; thanks to some fancy footwork by his defence team. However, later, the civil court fined OJ four million US dollars. The civil matter had followed the completion of the criminal trial. Different trials have different rules. In civil matters, the usual decision is a matter of establishing rights, the claim or the ‘hukk’ as we would put it in Hindi. It calls for one party, the plaintiff, to ask for his rights as against the other party, the defendant. These demands can be true, frivolous, exorbitant or downright crooked. The court decides in whose favour the balance should tilt, but not before giving the other side the opportunity to air its views. Both sides give evidence and can be crossexamined. This is crucial to us. It is a bit different in criminal cases. The accused is allowed to keep his peace. It is for the accuser to prove everything, every little bit. No help is given by the man in the dock. A small gap, an error, a miss, and the accused is let off. It has to be a clean ‘yes’ or ‘no’. No maybes. It is either a conviction beyond any reasonable doubt, or being let-off. If a man has both, a criminal and civil case against him and he comes to court asking for one trial to be stalled, or ‘stayed’, till the other is over, what would you do?

You be the judge. Would you allow one trial to stop? Which one would you allow first? And why? The OJ way? Or the Indian way? This is where the lawyer’s brain is most tested. He has to play with many balls up in the air and not drop a single one. In India, the common application is for a stay on the criminal proceedings; till the civil court decides. Is it a solution? And is it the right one? Will it allow the responding party more relief than compulsory attendance in court? Will time lost make any difference? Remember, in the civil trial, the defendant has to reply to certain claims. Even silence will be construed adversely. AND THE SAME EVIDENCE WILL BE USED AGAINST HIM IN THE CRIMINAL MATTER. The law allows it and we do use this strategy. The rules allow for the judge’s discretion. Usually, and backed by past judgements, the courts refuse a stay, thereby not stalling the criminal trial. Would the judge then be right in allowing the civil matter to be halted, because the man might be forced to ‘self-incriminate’ himself in the civil case? This is where the smart lawyer shows his true understanding of the issues and takes the tough, but right, decisions. And this is what OJ’s lawyer did. Four million dollars as opposed to the wired chair. Sit tight in the criminal matter, sow doubts about the evidence (in this case, the testing of blood samples on the glove), obtain an acquittal. Then, who cares what happens in the civil proceedings? But some lawyers think differently. Maybe they wish to prolong the civil trial as much as possible. Maybe it is no more than a knee-jerk decision, showing the persistent client that he is on the ball. Closer examination, and deeper reflection, may show that this tactic is counterproductive. Yet, it is best to let your lawyer do his job, unimpeded. Remember, you can run, but you cannot hide.  Bapoo Malcolm is a practising lawyer in Mumbai. Please email your comments to [email protected]

MONEYLIFE | 28 April 2016 | 60

You Be the Judge.indd 2

02-04-2016 14:42:17

MONEYLIFE FOUNDATION SEMINAR ON INTERNET BANKING

Using Netbanking & ECS Smartly Netbanking is safe and easy for everyone, especially women and senior citizens, explained Abhay Datar at a Moneylife Foundation event

W

ith technological advances in financial transactions, like using Internet banking facility or electronic clearing system (ECS), life has become much easier, provided you follow some basic rules and take precautions, said Abhay Datar, a retired banker and consumer activist. He was speaking at Moneylife Foundation Found workshop on “Understanding ECS, ECS Direct Debits, Online Banking and ATMs”. ATM He explained what consumers should do if they have been defrauded. Mr Datar, who retired retire from Bank of Baroda as its IT manager, manage explained the process for obtaining logi login ID, password and transaction passwo password by filling the appropriate forms from the bank branch, where the customer h has her account. “After receiving the llogin credentials, at the first login, the system would prompt you to change the password. Since it is for S your own safety, yo do change the password at

first login, and then, after regular intervals,” Mr Datar advised. According to Mr Datar, using the virtual keyboard for login into netbanking is a better way to keep your credentials secure. He then informed the audience about various safety features like one-time password (OTP), transaction limits and timeout for completing transactions. Mr Datar, who is also a managing committee member of Mumbai Grahak Panchayat (MGP), then spoke about using the ECS facility of banks. He said, “The ECS credit is for receiving various credits to our account, such as dividend and interest; whereas ECS debit is used for paying telephone, mobile, electricity bills, insurance premium, and SIP of mutual funds. In both the cases, we have to fill up a form and register these with our bank, which may charge Rs100 as one-time fee,” he said. Mr Datar explained the logic behind the MICR code, allotted by the Reserve Bank of India and bank account numbers. Explaining the benefits of using ECS facility, Mr Datar said, “In ECS debit form, we can define maximum debit limit thereby restricting funds outflow. As far as SIP and insurance premium are concerned, the amount is fixed and does not change every time. For utility payments, we can define the maximum debit limit. The best way to define this limit while availing ECS is to check our previous bills, find out the bill with the maximum amount, keep some buffer and set the limit.” 

61 | 28 April 2016 | MONEYLIFE

Event.indd 2

07-04-2016 15:22:00

BOOKS

Buffett and Beyond

Data Scrubbing, the Buffett Way Companies with high ‘clean surplus’ returns beat the market averages

D

r Joseph Belmonte was a marine engineer. One of his voyages was on a ship carrying grain from the US to the former Soviet Union. The ship had entered the Mediterranean Sea through the Strait of Gibraltar, when a Liberian freight carrier rammed into the first ship, shattering her hull “like paper and smashed into the engine room above our heads.” Five men died. Dr Belmonte was lucky to live, thanks to the brave and quick-thinking chief engineer, to whom he dedicates this book. Dr Belmonte decided to quit his career on the high seas and started taking interest in finance and investing. During the next 10 years, he made a living from real estate and stocks. He learned about technical analysis and covered option writing. After becoming successful in investing, he wanted to teach and share his knowledge. He wrote an investment course and submitted it to a university that was close to where he lived. BUFFETT AND BEYOND They politely told him that DR JOSEPH BELMONTE he was ‘only’ a bachelor of Wiley engineering (BE) and what did Pages 272; Rs499 a BE know about investing? He was asked to get a PhD in finance, if he wanted to teach investing. Dr Belmonte did his master’s programme in finance and then a PhD during which he came across a simple process of stock selection which relied on “Clean Accounting Surplus”—the subject of this book. The main parameter that separates an exceptional company from an ordinary one is a high return on equity (RoE). RoE is calculated by dividing net profit by shareholders’ funds (which includes capital and reserves). Now, net profit can, often, be marred by extraordinary or exceptional items. This can distort comparisons between companies. If a company has written off an exceptional item in one year, its net profit will be depressed and so will be shareholders’ funds, making

nonsense of any comparison with another company that has no exceptional items. Hence, taking the reported net profit as the basis for RoE is not correct. Clean accounting surplus, which Dr Belmonte advocates, takes the net profit before exceptional items, making comparison and predictability of profits a bit easier. Shareholders’ funds also should be shielded from the impact of exceptional items. This will give us a ‘clean RoE’. Dr Belmonte suggests that we should buy stocks of clean RoE companies. It’s a process that Warren Buffett uses. But do portfolios with above-average clean surplus RoEs outperform market averages and does the clean surplus RoE have any correlation with the future returns of portfolios? Dr Belmonte’s doctoral dissertation attempted to statistically answer these questions. The results were encouraging. In a back-tested study, companies with high ‘clean RoEs’ did far better than the market average Dow and S&P 500. Dr Belmonte’s work shows that every portfolio selected from the S&P 500 index with aboveaverage clean surplus RoEs outperformed the S&P 500 average during the test periods from1987 to the present. His study of two test periods, comparing returns from ‘Clean RoEs’ with S&P 500 formed his doctoral dissertation. The superiority of clean RoE is the core of the book. The book also has guidance on rules for structuring a great growth portfolio, how to select stocks for growth and dividend, how to avoid stocks with declining RoEs and how to earn money writing covered calls (an option strategy). It is the latter part of the book which describes these strategies that are more useful. The first part of the book, that explains clean RoE, should have been restricted to just two chapters. Instead, it is spread across 14 chapters, repeating the same thing over and over again. Also, I am not aware of any analyst, fund manager or any serious individual investor being blindsided, exceptional items. Dr Belmonte claims that there is just one academic reference to clean accounting. But cleaning up reported data is a common practice. In India, a corporate database provider like Centre for Monitoring Indian Economy cleans up data on various parameters; it does not compile and present them as reported. Dr Belmonte also charges that 98% of fund managers in the US cannot beat the market because they don’t seem to rely on clean surplus accounting. I find this claim unbelievable. Not only do analysts make numerous adjustments to reported data, but they make a very detailed refined analysis of not just financial performance but product sales by market segments and geographies as well as raw materials and other cost analysis. In fact, their underperformance could be due to a paralysis of analysis and behavioural mistakes, rather than lack of knowledge of clean surplus accounting.— Debashis Basu 

MONEYLIFE | 28 April 2016 | 62

Book Review.indd 2

07-04-2016 18:02:42

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Book Ad.indd 1

31-10-2015 12:24:40

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

All the ML indices were trading in the green for the fortnight ended 5 April 2016. ML Micro-cap Index and ML Small-cap Index rose 2% each. The Nifty fell 1% while the Sensex fell 2%. 

Foreigners: Foreign institutional investors (FIIs) were net buyers except on the last day. FIIs brought in Rs7,705.52 crore during the fortnight.  4,060

Share Prices Index, October 2015=100

FII Net Investments (Rs Crore)

3,085

140

2,110 1,135

120

160 -815 28 Mar-16

100

05 Apr-16

Indians: Domestic institutional investors (DIIs) were net sellers to the tune of Rs7,136.40 crore. They sold stock worth Rs19,968.76 crore. 

80 Oct-15

Jan-16 ML Large-cap ML Mid-cap

ML Small-cap ML Mega-cap

Apr-16

-520

ML Micro-cap

Nifty Sensex

75

-1,115

23-Mar

05-Apr

+/-

-1,710

ML Micro-cap Index

99.32

101.40

2%

-2,305

ML Small-cap Index

95.50

97.45

2%

ML Mid-cap Index

95.35

96.16

1%

ML Large-cap Index

95.31

95.83

1%

ML Mega-cap Index

92.41

92.46

0%

7,716.50

7,603.20

-1%

5,150

25,337.56

24,883.59

-2%

4,985

Index

Nifty Sensex Mega-cap Gainers/Losers

DII Net Investments (Rs Crore)

-2,900 05 Apr-16

28 Mar-16

GLOBAL MARKET TRENDS

NASDAQ Composite

23-Mar

05-Apr

Change

4,820

463.95

527.40

14%

4,655

96.85

85.85

-11%

23-Mar

05-Apr

Change

Relaxo Footwears

373.05

503.00

35%

Welspun India

108.20

93.45

-14%

Mid-cap Gainers/Losers

23-Mar

05-Apr

Change

Shreyas Shipping & Logistics

237.90

318.40

34%

23-Mar

05-Apr

+/-

Ricoh India

516.25

372.80

-28%

NASDAQ Composite

4,769

4,844

2%

23-Mar

05-Apr

Change

Shanghai Composite

3,010

3,053

1%

S&P 500

2,037

2,045

0% -1%

Biocon Vedanta Large-cap Gainers/Losers

Small-cap Gainers/Losers Ugar Sugar Works Nutraplus India Micro-cap Gainers/Losers Cineline India Shri Aster Silicates (All Prices in Rs)

14.40

22.70

58%

293.80

193.40

-34%

23-Mar

05-Apr

Change

19.45

26.45

36%

4.25

2.67

-37%

4,490 4,325 Oct-15

Jan-16

Apr-16

NASDAQ Composite, Shanghai Composite and S&P 500, the only gainers on the list, rose 2%, 1% and 0.42% respectively.  Index

Taiwan Weighted Bovespa Korean Composite FTSE

8,766

8,658*

49,690

49,054

-1%

1,995

1,963

-2%

6,199

6,091

-2%

Hang Seng

20,615

20,177

-2%

Nikkei

17,001

15,733

-7%

* - 1 Apr-16

MONEYLIFE | 28 April 2016 | 64

Money Fact.indd 2

07-04-2016 18:47:50

MONEY FACTS STOCKS



What’s H

T

ML SECTORAL TRENDS

Sugar stocks were in demand this fortnight. DCM Shriram Industries was the top gainer (up 34%) followed by Dharani Sugars & Chemicals (up 18%) and Bannari Amman Sugars (up 11%).  Companies

23-Mar

05-Apr

+/-

105.85

141.60

34%

Airlines and sugar companies’ stocks rose 7% and 6%, respectively, while stocks of consumer durables and paper & paper products companies rose 4% each. Office equipment companies’ stocks were the top losers, falling 8%. Telecom services, oil & gas and steel fell 4%. 

ML Sugar Index

DCM Shriram Inds

175

Dharani Sugars

26.12

30.90

18%

Bannari Amman

1,321.25

1,462.10

11%

Dhampur Sugar

85.40

92.35

8%

ML Sectoral Trends

Bajaj Hind Sugar

18.95

20.20

7%

Airlines

7% Office Equipment

-8%

Balrampur Chini

100.80

106.45

6%

Sugar

6% Telecom Services

-4%

27.55

28.70

4%

Non-ferrous Metals

5% Oil & Gas

-4%

160 145 130

KCP Sugar & Inds

115 100 Jan-16

What’s

Apr-16

103.00

106.05

3%

Consumer Durables

4% Steel

-4%

Dwarikesh Sugar

193.45

199.15

3%

Paper & Paper Prod

4% Con_EPC_Infra

-3%

EID-Parry (India)

207.45

211.20

2%

All Prices in Rs



Oct-15

Dalmia Bharat Sugar

FOOD INFLATION

N T

Four of the eight telecom services companies’ stocks fell this fortnight. Bharti Airtel was the top loser (down 8%) while Idea Cellular was a gainer (up 4%).  Companies

23-Mar

05-Apr

+/-

358.55

330.50

-8%

Tata Teleservices

6.96

6.57

-6%

Reliance Comm

52.00

49.40

-5%

384.95

374.50

-3%

17.40

17.40

Tata Comm

374.95

Idea Cellular

105.20

Bharti Airtel

ML Telecom Service Index 105

Combined food inflation declined to 5.52% in February 2016, compared to 6.66% recorded for January 2016. For rural and urban areas, food inflation in February was 6.11% and 4.37%, respectively. Vegetable prices increased by 0.70% in February compared to those prevailing in January 2016. Inflation in fruit

100

Bharti Infratel MTNL

95

Marginally Lower

0%

90

7.50%

385.45

3%

85

109.40

4%

80

Annual Change

5.00%

Oct-15

Jan-16

Apr-16

All Prices in Rs

2.50%

BULK DEALS

Feb-15

Date

Company

Buyer

Seller

Rs Cr

31 Mar-16

Saint-Gobain Sekurit India

Saint Gobain India Pvt

Saint Gobain Sekurit France

43.82

05 Apr-16

Centrum Capital

Nirmal Arora

Crawford Baxley & Co

39.98

30 Mar-16

Future Consumer Enterprise

Anamudi Real Estates LLP

Godrej Agrovet

35.10

29 Mar-16

Asahi Songwon Colors

Mrugesh JK Family Trust-1

Paru Mrugesh Jaykrishna

19.43

29 Mar-16

Graphite India

GKW

Kiwi Investments

14.28

04 Apr-16

Aksharchem

Mrugesh JK Family Trust-2

Paru Mrugesh Jaykrishna

10.94

31 Mar-16

Ashapura Minechem

Shah Chetan Dina

Chetan Navnitlal Shah

7.38

Aug-15

Feb-16

prices was -0.72% in February, while pulses were dearer by 38.30% y-o-y. Inflation for cereals stood at 2.18% and inflation for milk products was 4%. Price rise of non-vegetarian items, such as meat and fish, was 7.19% in February compared to 8.23% in January 2016. 

65 | 28 April 2016 | MONEYLIFE

Money Fact.indd 3

07-04-2016 18:48:28

BEYOND MONEY

Giving Them a Better Start

from her strong belief that children must be able to learn, free of cost, and that her own educational qualifications would be of value only if they serve a useful social purpose. “Each of us, who is proud of our teachers and our educational qualifications, should pass on the benefit of education on to children,” she says. Tanuja Deshrajan helps children learn basic With justifiable pride, she says, “Most people have skills so that get admission into the best stories to tell of the education they received in their first government schools 22 years. My story isn't about that luxury; it is one of providing it. My story is about how I gave the latter 22 s a young mother, Tanuja Deshrajan was moved by years of my life to create and continuously improve the the plight of a group of young children, who were education system in a village called Mainath, and how the age of her own toddler son and whose life was that still continues to be a privilege.” Children at her school are taught with the objective about playing on the streets and begging for a living. She began to reflect on the futility of their existence and their that they should get admission into the best government grim future and decided that she must make the effort to schools for higher education. This means a focus on quality give their lives the same chance as that of her own son. as well as bringing more children into the fold. The latter is The way forward was possible by involving their mothers as well. education. “I started a school Tanuja explains it best under the shade of when she says, “We, a tree with a small as a community of number of children. people, tend to It has now turned discriminate on the basis of caste and into a movement and gender; domestic we have 200 children in our school that violence and lack of has classes up to 5th education for women are a part of life. Our standard. We also run women empowerment children must also grow out of such programmes like a mindsets and our sewing centre, a centre women, especially to make dry nashtas and adult education mothers, should move programmes.” away from this. Our boys, as adults, should be trained Tanuja, with an MSc degree in organic chemistry and to give up such discriminatory attitudes and behaviour.” Tanuja’s effort to expand her work received support an MBA (Master of Business Administration) from IGNOU (Indira Gandhi National Open University), is also involved from Vaibhav Lall, chief editor of Rise for India, who in a struggle to change mindsets even at home. “The first has created an online crowd funding platform to raise difficulty I faced was to convince those closest to me—my Rs1.5 lakh for her school to get furniture, stationery, family. They couldn't understand why their daughter-in-law books, computers, sports equipment and library facilities wanted to help children of ‘lesser’ families go to school, and to pay salaries for the teachers. He says, “Tanuja’s or why women, in general, should do story is not only an inspiration for work of their choice. I believed that if her village, but for the entire nation. the women and children who needed You can also become a part of her BALIRAJA SUNRISE SCHOOL education understood, everyone else story by contributing in the fund Tanuja Deshrajan, would follow.” raising campaign going on to help c/o Rakesh Deshrajan Here perseverance worked and her in sustaining the noble initiative.” Village – Mainath, Post – Mukundpur, she now provides free education to You can contribute by clicking on Agra Road, District Aligarh, children at Baliraja Sunrise School, http://www.giveripple.in/campaign/ Uttar Pradesh 202001 Mainath village (Aligarh district, helptanuja and help change the lives Mobile: 9639337566, 9639576766 Uttar Pradesh). Her passion emanates of some children.  Email: [email protected]

A

http://facebook.com/tanuja.deshrajan

MONEYLIFE | 28 April 2016 | 66

Beyond_money.indd 1

06-04-2016 21:40:22

Advertisements.indd 3

06-04-2016 13:26:17

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

Advertisements.indd 1

02-04-2016 14:39:20