Moneylife 29 September 2016

SUCHETA DALAL ON: NO PMS LOOPHOLE FOR INSIDERS: SEBI

CATCH THE COUNTLESS SMALL FRAUDS TOO

Personal Finance Magazine 16 September-29 September 2016

Pages 68

Rs 45

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STOCKS:

HIGHER RETURN LOWER RISK

VALUE STOCKS: Exciting News Vs Exciting Stock Page40

STOCKS Crompton Greaves: Sustainable?

Cover Page_276.indd 1

Cheviot: Solid Performer

JB Chemicals: Good Chemistry

Small Software Stocks: Cyclical Revenues?

JK Tyre: Stagnant Profit, Rising Stock Price

Manipulation: Optimus Finance

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ISSUE CONTENTS

16-29 Sep 2016 Managing Risks

S

tocks that offer higher return are also riskier. Financial academics tell you that the best investment strategy is to optimise return, for a given amount of risk. Can this be applied in practice? There are different ways to measure risk, to ensure that you have a good risk-return ratio. Many may have read about common risk ratios such as alpha, beta and standard deviation. While these ratios are, often, used to judge performance of mutual fund managers or performance of a portfolio, can these ratios, or a combination of these, be used to pick stocks which can deliver market-beating returns with a lower amount of risk? In our Cover Story, we apply these tools to stocks present in the Nifty 500 index. The returns over the past five years have been quite encouraging. Take a look at our findings on page 32 where the Cover Story starts. Reliance Industries has created a lot of excitement with the launch of Jio, its telecom service. But the exciting plans being drummed up by the media don’t make money for investors. In Value Stocks, I discuss what should really excite investors when it comes to investing in stocks. HDFC Bank wanted its managers to be immune from insider trading charges if they invest in a discretionary portfolio. In a smart move, the Securities and Exchange Board of India has refused to offer this blanket immunity. That would simply have opened the door to misusing portfolio management schemes for trading on insider information, as Sucheta highlights in her Different Strokes section. We have often seen how some promoters with deep pockets have managed to manipulate the system to their benefit. While some big names, like Ravi Ruia, Vijay Mallya, Subrata Roy, etc, have come under the scanner of the apex court, hundreds of similar cases, albeit on a smaller scale, go unnoticed. Unless the government takes strict action, investors and unsecured creditors will continue to suffer, writes Sucheta in Crosshairs column. As always, please do write to us what kind of articles you would like to read and your views and suggestions on ways we can improve. Debashis Basu 

30 Cover Story Stocks: Higher Return Lower Risk Investors look to earn the highest return with the lowest amount of risk. However, this is easier said than done. Can we pick a portfolio of stocks with the best risk-reward profile and outperform the market? Jason Monteiro back-tests investing in stocks, based on their risk measures such as alpha, beta and standard deviation. The results are quite encouraging

12 Your Money

– Homebuyers Favoured in Court Rulings – ‘Bharat Saves’ Website Planned To Offer Information on Financial Planning – Nashik Consumer Forum Directs Four Builders To Undergo Two Years’ Simple Imprisonment – RBI To Focus on Mis-Selling of Insurance Policies by Banks

14 18

MONEYLIFE

QUIZ Financial Crimes: Catch the Countless Small Fish Too

20 Different Strokes

SEBI Ensures No PMS Loophole for Insider Trading

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

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CONTENTS FUND POINTERS

INSURANCE

LEGALLY SPEAKING

Insurance Equity Mutual Funds 22 Why May Do Better than NPS 30 Trends FUND FACTS

24

Best & Worst Mutual Fund Schemes

Regulations – Health Insurance Regulations 2016 Decoded Fine Print

and Other Taxable 25 DHFL Bond Issues

Athlete

News 40 Exciting Vs Exciting Stock

TECHNOLOGY

– G-Sec and Bond Yields Flat

STOCKS

26 Smart Money It Is Your Money, Your Worry

42 Stock Watch Crompton Greaves: Is the Turnaround Sustainable? Cheviot: Not Glamorous but Solid Performer JB Chemicals & Pharmaceuticals: Good Chemistry Mindtree: Small Software StocksCyclical Revenues? JK Tyre: Stagnant Profit, Rising Stock Price Market Manipulation: Optimus Finance Market Trend: Be Cautious

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YOU BE THE JUDGE

the 60 Pity Overworked

VALUE STOCKS

TAX / FIXED INCOME

Does Not 58 Nomination Give Ownership Rights

Can You Benefit 50 How from UPI?

ML FOUNDATION EVENTS

Know 61 Cybercrimes: Your Rights Financial Crimes & Frauds: When and How To Approach the EOW

TAX HELPLINE

at Moneylife 52 Queries Foundation’s Tax Helpline USEFUL APPS

Test 54 Intelligencetest: Your IQ Levels – OnlineChartTool: Tell It Visually – Dinnertime Plus: Stop Them Playing during Dinner – Gaana: A Giant Storehouse of Bollywood Songs

BEYOND MONEY

Out to the 66 Reaching Families of the Bravehearts

HEALTH

News for Doctors 56 Great as Lawyers Train Their Guns on Drug Firms

DEPARTMENTS Pulse Beat: Medical developments from around the world

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

09-09-2016 17:42:18

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Volume 11, Issue 15 16 September–29 September 2016

Debashis Basu

Editor & Publisher [email protected]

Sucheta Dalal

Managing Editor [email protected]

Editorial Consultant Dr Nita Mukherjee [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

WILL E-GOVERNANCE BE IMPLEMENTED IN POLICE STATIONS? This is with regard to “How To File an FIR and What Are Your Rights” in Moneylife (issue dated 1 September 2106). It is difficult to file an FIR if the police do not cooperate. They usually don’t; often on the specious plea of jurisdiction. In the age of e-mail and computer technology, one should be able to lodge an FIR at any police station. An acknowledgement and receipt of the FIR can automatically be generated and sent to the complainant via e-mail. The e-mail address of every police station in a state should be advertised extensively. Way back in 2006, it was reported in the press that, to file an FIR, a person need not visit the police station. It was claimed that the government would bring a number of services online—to know the status of applications for ration cards, house sites, inclusion of names in voters’ list, birth and death certificate, copies of land records, etc. The message was that e-governance could affect a dramatic change in people’s lives. Mahesh Kumar, by email

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

Write to the Editor!

WIN a prize

TIMELY OBSERVATION AND ANALYSIS This is with regard to “Speciality Restaurants: ‘Consumption’ Recipe Gone Wrong?” It is a very timely observation and analysis. I hold Jubilant FoodWorks’ stock. I see that its net profit margin is gradually coming down and sales are increasing to compensate the loss. I would appreciate your view on this stock. Should one hold or get out? Narendra Khadse, online comment

FUTURE 10-BAGGER? This is with regard to “UCAL Fuel Systems: New Energy?” All multibaggers may not have solid RoNW (return on net worth) and RoCE



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LETTERS

the

Best letter

Difficult Decision

T

his is with regard to “When You Are ‘Dead’, while Still Alive” by Bapoo Malcolm. Yes, I understand that law is not on our side. It is only the love of our loved ones that can take decisions for us, when we are not capable of doing so. We had two cases in a hospital nearby. One was of a poor patient who was admitted late in the evening, brain dead, after a massive heart attack. The NGO, whose care she was under, wrote a letter to the hospital management, the next morning informing them that she was a person in need and could not afford to pay any hospital bill. She was kept for three more days on the ventilator and she passed away peacefully. No doctor or family could take the decision to withdraw the support system. No bill yet from the hospital. The next case was that of a highranking person admitted to the same hospital in the same situation. He was kept in the same situation for around 12-15 days. His hands and feet started swelling, but no doctor or family member could take a decision. When the man passed away, they were hit

 (return on capital employed) in the initial years. If we

screen the universe with high RoCE, we may miss the future 10-baggers. In the Cover Story on 10x-baggers, I note that 70% of the stocks had low RoCE initially— of under 10%. So, do you sense any ingredient of a potential high growth story here as well? Ranjan Kumar, online comment

KEEP YOUR FINGERS CROSSED? This is with regard to “All Stock Buying Is Speculation and What It Means for ‘Investing’” by Debashis Basu. I would like to put down my points for prudent investing: a. Do not ever put all your eggs in one basket. Certainly never more than 5% of portfolio on one stock. b. Use the pyramid approach comprising a base of 40-50 of large-caps, 30-20 mid-caps and 20-10 small-caps. c. Do not put in money you need for the next 5-7 years. That should be in fixed deposits or bond funds.

with a hospital bill running into lakhs of rupees. It is a very hard decision; but we, as family of our near and dear ones, should take the difficult decision with much empathy and prayer. This should be done by looking at the best interest of the patient. Lastly, there was the case of the raped nurse at KEM Hospital who was kept under a similar situation for 16 years by interested parties. But who is to blame? Sunil Rebello, online comment

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Congratulations Sunil Rebello

YOU WIN A PERSONALISED CLOCK

Sunil Rebello

d. Seek out good managements. e. Stay away from high debt companies. Avoid companies with high pledged shares. f. Seek companies that are focused on operating cash flows. g. Get to use, or know, the product and its competition. Get to experience the service and compare it with the competition. h. Last, but not least, keep your fingers crossed. Ralph Rau, online comment

AMAZED BY THE USE OF DISCOUNTED CASH METHOD! This is with regard to “All Stock Buying Is Speculation and What It Means for ‘Investing’” by Debashis Basu. Forgive me, if I sound stupid because my knowledge of the stock market is really zero; but I am amazed that the stock market would use the discounted cash method. In operations research (nowadays called analytics), the discount factor is just used to make algorithms work. The author is 100% correct in that the discount factor is very difficult to estimate and it is 

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LETTERS

 best to use average (undiscounted) cash returns—if you

must use cash returns in your analysis. Also, as far as US stocks go, inflation and interest rates have been so low in recent years that the discount factor is close to 1 anyway. Abhijit Gosavi, online comment

PATIENCE IS THE KEY! This is with regard to “Multi-baggers: Don’t Underestimate Timing” by Debashis Basu. Good report. I have always believed that you can time the market, although you won’t always catch the absolute peaks or the lows. Buy when everybody’s crying and the papers are full of bad news and they’re all blaming the Indian stock market as a useless place. Sell when all that is forgotten and IPOs are commonplace, when you get news of lakhs of new demat accounts being opened (these have started); as this article suggests, we’re probably there. Even so, I’m waiting for a Nifty P/E (price-earnings ratio) of 26 which, I have noticed, is where the real risk starts; although, in January 2008, that figure hit 28 before crashing. All recent bull markets have been unable to sustain Nifty P/Es far above 25.7. If you sell then and put your money in a liquid mutual fund scheme and wait—patience is the key—you are likely to get an opportunity to buy back your shares at a discount and save the change. Mohan Sivanand, online comment

MARKETS ARE OVERVALUED This is with regard to “Faster, Higher, Stronger: Momentum in Stocks & Indices” by Jason Monteiro. It is time to think of when to sell as markets are

overvalued. It would be great if Moneylife could do a detailed write-up on ‘when/how to sell’, when markets become overvalued. Ramesh Mehta, online comment

NOSTALGIA ABOUT AXIS BANK This is with regard to the book review of The Unusual Billionaires by Saurabh Mukherjea. The book is simply delightful and would be useful for young and old bankers. For me, reading this book, after coming to know from Moneylife (issue 19 August 2016), it was a nostalgic trip. I had joined the first branch of UTI Bank in Ahmedabad, right in the beginning when it was opened in April 1994. I still vividly recall the thrill of joining the new Bank and building the institution which continued till the last day, when I turned 60 last year and retired from my most beloved Axis Bank. It was the most memorable and satisfying journey for me. NK Bakshi, by email

A LOT CAN BE ACHIEVED BY SLOWING DOWN! This is with regard to “SEBI Tries To Fix the HFT Issue without Closing the NSE Probe” by Sucheta Dalal. It might benefit the stock exchanges, where they get more income (due to more automated volumes). But the common investor has to face highly volatile markets. I believe these recommendations are going to make markets much more complex and non-transparent. Suggestions like randomisation, etc, will make things more opaque and, in case of investigations, impossible to identify what went wrong. I think a lot of can be achieved by just slowing down than by introducing complex algorithms with unknown downsides. MV Subba Rao, online comment

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

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11 | 16-29 Sep 2016 | MONEYLIFE

Letters.indd 5

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Your Money CONSUMER PROTECTION

FINANCIAL PLANNING

Homebuyers Favoured in Court Rulings

T

he Supreme Court ordered real estate giant DLF to pay 9% interest to 50 buyers for the delay in handing over possession of flats in Haryana’s Panchkula town, adjoining Chandigarh. It has also ordered Supertech, which had

collected money from homebuyers and failed to deliver the flats satisfactorily, to return the money to the buyers unconditionally, in a recent judgement. “Either you (Supertech) sink or die, we are not concerned. You will have to pay back the money to home

buyers. We are least bothered about the financial status,” the Court said. The Supreme Court also directed Sahara India Commercial Corporation Limited (SICCL) to deposit Rs3.5 crore to pay back investors who had bought flats in its Gurgaon project but did not receive possession on time. The order came on an appeal filed by SICCL against order of the National Consumer Disputes Redressal Commission which had asked the firm to pay compensation at 12% to the Sahara Grace Consumers Grievance Association for delayed possession of flats. The Delhi High Court asked Unitech and its homebuyers to work out a formula under which the developer uses 90% of the funds collected from them to construct a project, if a majority of buyers votes in favour of completion. The Court ruled that the money collected from buyers for project completion has to be deposited in an escrow account and only 10% of the corpus can be used to refund payment to those who want to opt out.

REAL ESTATE

Nashik Consumer Forum Directs Four Builders To Undergo Two Years’ Simple Imprisonment

T

he District Consumer Grievance Redressal Forum at Nashik ordered two years’ simple imprisonment for four builders. The order related to builders’ failure to honour the Maharashtra State Consumer Disputes Redressal Commission (MSCDRC) orders of completing the conveyance deed for a housing society on time. However, this was not the only issue. The Forum said that additional construction was carried out in the housing society and the builders had not obtained completion certificate for it. Earlier, the builders were directed by MSCDRC to complete the conveyance deed within six months from 13 October 2008, the date of the order. However, the builders failed to abide by these orders. Hence, the aggrieved party approached the Forum.

‘Bharat Saves’ Website Planned To Offer Information on Financial Planning

G

oogle India is planning to develop a website, Bharat Saves, which will offer information on financial planning, reports The Economic Times. Google wants to align its Bharat Saves website to the government’s financial inclusion scheme, Jan Dhan Yojana. The digital platform may provide a range of financial literacy tools and information on financial products. A Google spokesperson told media that, in line with the prime minister’s vision to create greater financial inclusion, various BFSI (banking, financial services and insurance) organisations and industry associations are coming together to launch a digital platform. A financial literacy awareness campaign may be part of the plan. Bharat Saves will be an app and a website both of which are being designed by Google. Users logging into the website will need to take a financial literacy test the certifications for which will be given by the Indian government, Google and an industry organisation. There will be a second section of the app/website where users will be able to see, compare and purchase banking and insurance products. The target consumers for this platform will be home-makers, small business owners, the newly employed, retired persons and farmers. Apple has also held talks with the government on making Apple Pay, a mobile payment and digital wallet service, a part of financial inclusion programmes.

MONEYLIFE | 16-29 Sep 2016 | 12

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MONEYLIFE FOUNDATION THE RIGHT THING TO DO

Moneylife Foundation’s

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

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Your Money LIFE INSURANCE

RBI To Focus on Mis-Selling of Insurance Policies by Banks

T

he Reserve Bank of India (RBI) will train its focus on ‘mis-selling’ of insurance products by banks and also see whether new regulations are needed for protection of banking customers, outgoing RBI governor Raghuram Rajan said, reports IANS. Referring to the Charter of Customer Rights brought out by RBI in 2015, which banks had been asked to follow in dealing with customers, Dr Rajan said that banks were asked to appoint an internal ombudsman to monitor

MONEYLIFE QUIZ

grievance redress process. “We will examine how banks are faring and whether further regulations are needed to strengthen consumer protection. In particular, we will focus this year on the issue of mis-selling, especially of insurance products,” he said. Customers have been complaining against banks for misselling of policies of life insurance. Dr Rajan said that RBI will work to enhance grievance redress procedures within the financial institutions and, if the customer is still unsatisfied, through the RBI’s ombudsman scheme. Rajan said the grievane redressal mechanism in the rural areas as well for weaker sections of the society will be strengthened.

Moneylife Quiz no

241

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 27th October. Send in your answers to [email protected] with the Quiz no., name, address & telephone number before 5 October 2016.

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

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

Raykumar Panyam

1. What was the fund management charge when the National Pension System was launched for the public in 2009? a. 0.01% b. 0.0009% c. 0.25% d. 0.0275%

5. Which sporting activity was Ramanathan Krishnan famous for in the 20th century? a. Cricket b. Tennis c. Baseball d. Soccer

2. For debt mutual fund schemes, what is the estimated maximum expense ratio? a. 1.75% b. 2.75% c. 2.50% d. 3.00%

6. Which European country had its base in Hugli in Bengal, according to Sanjeev Sanyal? a. England b. France c. Portugal d. Germany

3. What is the total maximum tax rebate under Section 80C of 7. In 2011, who was the president of the Arizona State University in USA? the Income Tax Act for savers in the National Pension a. Michael Crow b. Cornelius M Kerwin System? c. Dr Björn Kjerfve d. Dr Dale T Knobel a. Rs2 lakh b. Rs2.5 lakh c. Rs3.00 lakhd. Rs4.00 lakh 8. What was the coupon rate of Reliance JIO Infocomm’s fixedincome instruments with the maturity date of 8 July 2021? 4. Who started the Flags of Honour Foundation? a. 9.01% b. 9.32% a. Sandeep Unnikrishnan b. Abdul Hameed c. 9.50% d. 9.65% c. Rajeev Chandrashekar d. Capt Saurabh Kalia In all, 11 readers got all the answers right last time. The winner of Quiz-239 is Raykumar Panyam from Hyderabad. Congrats! You win a personalised clock with an investment quote!

The answers to Moneylife Quiz-239 are: • 1- d. 20%-50% • 2- b. 11.75% • 3- b. three • 4- a. 214 • 5- c. 1964 • 6- b. December 2015 • 7- c. 2010 • 8- c. University of California-Santa Barbara

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www.moneylife.in Exclusive news & views with a big difference Is Socialtrade. biz another money circulation scheme? SocialTrade.biz, owned by Ghaziabadbased Ablaze Info Solutions Pvt Ltd, claims to provide a unique concept of online barter system through its Social Media Exchange (SME). However, on probing further, the whole scheme looks like a money circulation scheme, where the user gets paid not for clicking

on more ‘likes’ or promotions, but by enrolling more people in right-left (binary) combination.

Kotak sees no pockets of value in the current market The rally in bonds and equities of emerging markets post-‘Brexit’ referendum may slow down (if not reverse), according to Kotak Securities. This is due to a potential policy normalisation by the US Federal Reserve over the next few months and limited potential of accommodation from other central banks

The website claims “Social Media Exchange acts as a platform where a give and take relationship is built between different customers. You make others popular and others advertise you in return. SME refers to reciprocity (exchange) between two or more actors, generally for mutual benefit.” Ablaze Info Solutions, under the SME offers four different ‘packages’ to earn money. These range from Rs5,750 to Rs57,500.

ML FOUNDATION Financial crimes & frauds

33 out of 44 posts of teachers vacant at JJ School of Arts Mumbai-based Sir Jamsetjee Jeejeebhoy School of Art is functioning with just about 25% of sanctioned strength of teachers. According to information procured by Anil Galgali under the Right to Information (RTI) Act, 33 out of 44 posts of professors and lecturers are lying vacant

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Moneylife Foundation, with Police Reforms Watch and support from Saraswat Bank, has launched the 12-week programme (every Wednesday) that aims to spread knowledge about protecting yourself, your rights, the Indian Penal Code (IPC), cybercrime and economic offences. The eighth session has just been concluded.

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09-09-2016 17:50:14

CROSSHAIRs

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

Financial Crimes: Catch the Countless Small Fish Too

O

n 6th September, the Supreme Court of India refused to permit Ravi Ruia, promoter of the giant Essar group of companies to travel abroad. Here’s what a bench of Justices JS Khehar and Arun Mishra said while rejecting his plea. “We have allowed a person to go abroad but he never came back. He was no less big than you in monetary terms. We don’t want to take chances now. We are now once bitten twice shy. We are not going to give liberty to anyone.”

Although the Court did not name anyone, the immediate speculation was that the judges were referring to Vijay Mallya, the controversial UB group chairman and Member of Parliament who has failed to return to India to face trial.

The apex court’s tough stance is heartening for investors and creditors. Promoters of a slew of Indian companies can remain overseas indefinitely because they have plenty of funds stashed abroad. These funds have been siphoned out of their Indian businesses or raised from money circulation schemes that robbed the rich and poor alike. The Pearls Agro Tech Corporation (PACL), which has been asked by the market regulator to refund a stupendous Rs49,000 crore, has large assets in Australia and a few other countries. The Sahara group, built on alleged investments by India’s poorest people, has assets in the form of luxury hotels around the world including Macedonia. Subrata Roy’s wife and son are even understood to have acquired citizenship of the Republic of Macedonia. If this is the case with high-profile and flamboyant businessmen, smaller industrialists with dubious track records are not far behind in diverting funds to build nest eggs abroad. Investors faced with huge losses are ending up playing sleuth and setting up groups or associations to track the flow of funds, file cases, or merely support one another, in an effort to recover their investment. This has happened in the case of shady companies like PACL and QNet as well as with smaller listed companies where people have lost a lot of money. The Sahara group is the only exception where no investor seems concerned at the fate of her investment, raising another set of questions about who really invested in its schemes. Often, such investor groups do manage to track the  fraudulent diversion of funds from listed entities; but

MONEYLIFE | 16-29 Sep 2016 | 18 MONEYLIFE | 27 November 2014 | 14

Crosshair.indd 2

09-09-2016 17:48:26

 their effort is, eventually, frustrated by the tediously

recover money. One can understand investors being lazy and foolish and failing to read a prospectus. slow investigation and judicial process. A good But isn’t it time we, as a country, begin to act example is that of Dr Datsons Lab, a little-known against public sector bankers who extended fresh pharma company that was allowed to run, what seems loans to DDL without adequate monitoring, when like, a money laundering and price manipulation the disclosures in its offer documents proclaimed its operation, right until 22 May 2015 when the two allshady character? India stock exchanges, finally, suspended the shares. • The risk factors in the IPO document had clearly This was a month after its bankers had obtained a stated that it had negative cash flows at the time court order putting the company into liquidation, had of the issue, had placed no orders for plant & taken possession of its registered office (which was machinery and the object for which funds were owned by the promoter Dr Kannan K Vishwanath) and raised was not appraised by any bank or institution. invoked 100% of the promoter’s shareholding which Worse, many of its trademarks were also not was pledged with banks. And, yet, this company had registered in the company’s name but were held by managed to fool people with a massive investment the promoter. Why would Bank of Baroda lend to from foreign institutional investors (who held 56% of this company after project appraisal officers had its equity at one time) and ‘winning’ a series of awards read the stinking prospectus? The answer is obvious; for good governance, innovation, transformation and but is anyone asking questions? leadership! Dr Datsons Lab (DDL) is a fit case for investigation • Has the tax department sent any notices at all to Dr Kannan Vishwanath under the PMLA or under the draconian Prevention of Money Laundering obtained information that is being shared by its Act (PMLA); but we see no sign of any such action. investors about his brand new Hong Kong-based Instead, a group of investors continues to ferret out company called Windsonn Exim Ltd? This company information about the promoter’s latest antics and claims to hold the same 15 patents that once write to the government pleading for action. belonged to a wholly-owned In a letter to the finance subsidiary called Fair Success minister, an investor, Lt HK Ltd which was acquired Commander Joginder Pal The risk factors in the IPO by Dr Datsons Lab after fund Kanaujia, has listed seven frauds document had clearly stated raising. by DDL’s former promoter that it had negative cash • Which lender or government Dr Kannan Vishwanath. He flows, had placed no orders agency will be authorised to has painstakingly compiled for plant & machinery and the secure overseas assets of DDL this information, along with a object for which funds were such as the following whollygroup of investors, over the past raised was not appraised. Why owned subsidiaries --Eros 15 months. Each instance of would Bank of Baroda lend to Pharmachem Pte (Singapore), fraud, mentioned in the letter, is this company? The answer is Aanj Pharmalabs Limited Fze accompanied by some evidence in the form of court judgements, obvious; but is anyone asking (Dubai), Dr Datsons Labs Limited (UK) and Fair Success patent registration details, or questions? (HK) Limited? Of these, Fair mirror companies set up by the Success apparently has Rs80 promoter (mirror companies are crore in its bank account. entities with similar names set up in different countries Unless this government makes a break from the to obfuscate facts and fool regulators and investigation past and holds public sector bankers accountable for agencies). Lt Commander Kanaujia has sought an corrupt and collusive lending, the mountain of bad investigation by the Central Bureau of Investigation loans, which are eventually paid by the taxpayer, (CBI) to bring back Rs250 crore of DDL investors’ will continue to mount. When large lenders collude money which he believes was siphoned off to Hong with fraudulent promoters and allow them to strip Kong through a laundering operation. Here are some cash and assets from the company, they also deal a interesting questions raised by the letter. crippling blow to investors and unsecured creditors. • When DDL was first listed on the bourses, its IPO This has been going on for the past several decades; (initial public offer) document had disclosed that a unfortunately, there is no sign that things will change part of the issue proceeds would be used to repay even under this government. A focus on a few big its bankers, State Bank of India and Shamrao Vithal names like Mr Mallya and Mr Ruia only ensures Bank, and Rs10 crore of unsecured loans from that hundreds of such cases fly below the radars of directors. It now turns out that a ‘consortium’ of multiple investigative agencies tasked to bring financial bankers, led by Bank of Baroda, had gone ahead criminals to book.  and funded its plants which are now being sold to 19 | 16-29 Sep 2016 | MONEYLIFE

Crosshair.indd 3

09-09-2016 17:48:56

DIFFERENT STROKES SUCHETA DALAL

SEBI Ensures No PMS Loophole for Insider Trading

A

quarter century ago, when the capital market pay crores of rupees as fine, in two cases of front-running. watchdog had just come into existence but there That insider trading remains rampant in India is also were no insider trading regulations, we used to evident from stock price charts before and after many joke that 90% of all trading in the stock market is based major corporate announcements. Moneylife has frequently only on inside information. Even the last guy getting a reported this; but there is rarely any action, when the hot tip on a long train commute to the Bombay Stock violation is so widespread. Here are just a few links to our Exchange (BSE) thought he knew something that others reports on NR Narayana Murthy’s comeback to Infosys didn’t. Even after the Securities & Exchange Board of (http://tinyurl.com/zqfc5uy), Insider trading in Astrazeneca India (SEBI) got its statutory teeth, I used to hear about Pharma (http://tinyurl.com/zo5as8e), ING Vysya (http:// this secretive group of chief financial officers (CFOs) of tinyurl.com/hr2rbpu ), Ranbaxy (http://tinyurl.com/ companies who met regularly hdpcqzs), Geometric Software at a Mumbai five-star hotel to (http://tinyurl.com/jb7flq8), exchange inside information. Tata Motors (http://tinyurl.com/ In the past two decades, z3dsax3), among the many we the rich and powerful have have reported. occasionally been nailed for These anecdotes come to mind in the context a recent insider trading; but, more often than not, they get away. During query by HDFC Bank to SEBI. the many excesses of the United The Bank wanted to know whether its employees, who Progressive Alliance (UPA), a political columnist wrote a are in possession of unpublished snippet about a Cabinet minister price sensitive information (UPSI) of the Bank or its texting key government decisions clients and, hence, restricted to a television journalist even HDFC Bank wanted to know while the meeting was going on. from trading in the securities whether its employees, having The Intelligence Bureau of these entities, could invest price-sensitive information, (IB) reported the matter to their money in the stock market could invest their money government when it noticed through discretionary portfolio through discretionary portfolio that the channel was breaking management schemes (PMS) management schemes and be news on decisions even before where the client does not dictate the Cabinet meeting had ended. immune from insider trading rules the fund manager’s investment decisions. According to the column, the minister was so powerful that Essentially, the Bank wanted nobody dared to confront him; instead, it was decided to know whether its executives could avoid allegations of to install jammers outside the Cabinet meeting rooms to violative insider trading, if the portfolio manager bought or prevent information leaking out. I later learnt that the sold securities of companies where they had UPSI at a time minister’s cohorts tracked the channel in the knowledge when the trading window was closed for insiders. These that reports from that particular journalist were authentic executives, it said, would furnish declarations that they have no influence on the stock selection of the portfolio and probably traded on the information. In more recent times, Dilip Pendse, managing director of manager. Tata Finance, was found guilty of insider trading in 2014, SEBI’s informal guidance was an unambiguously after a long legal battle. The company secretary of Jagran negative. It, correctly, quoted SEBI’s insider trading Prakashan and his wife were found guilty of profiting to regulation (4)(1) to say that bankers could not escape the the tune of Rs10.4 crore from inside information, in 2009. application of insider trading regulations even if they were Even the venerable HDFC Mutual Fund was ordered to clients of a portfolio management scheme. SEBI should 

MONEYLIFE | 16-29 Sep 2016 | 20

DIFFERENT STROKES.indd 2

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DIFFERENT STROKES SUCHETA DALAL

 be congratulated for such an unambiguous guidance and

whom he reportedly had an intimate relationship. That probably seeing through the nice big loophole that would is the case which also implicated Raj Rajarathnam of open up in the difficult-to-prove insider trading regulations. Galleon Funds, who is serving out a long prison sentence. It must be noted that a SEBI committee, set up to SEBI’s own investigations have also shown that some update the insider trading regulations, had managed to foreign ‘institutional’ investors are individual portfolios insert precisely such an exception to exclude discretionary for the super-rich brought in disguised as an institution. portfolio managers’ decisions, if they were made without What would stop a group of executives from ensuring that reference to the client (unless circumstantial evidence a discretionary PMS is actually limited to a buddy-group? proved a nexus between the portfolio manager and The possibilities of misuse are endless and SEBI hardly has investor). SEBI seems to have shown rare wisdom by the capability, or the manpower, to track it. Let us also not forget that the PMS business in India dropping this exception even while announcing the new insider trading rules. Hence, HDFC Bank’s subsequent is run by bankers, brokers or mutual funds, who operate in a fairly incestuous set-up. They have constant dealings request for clarity. Now, consider what would happen if SEBI had accepted with one another (socially and professionally), making it the draft regulations or offered a different guidance to even more difficult to prove any charge of insider trading, HDFC Bank’s query. Insider unless there is a sting operation trading is already extremely of sorts. SEBI’s guidance has put the difficult to prove anywhere in the world, including countries where burden of following the letter regulators can deploy money and spirit of its regulations and technology and have the squarely on corporate insiders. This is how it should be. Yes, it power to conduct wiretaps and to offer plea-bargains that allow is possible that senior corporate them to let off the small fish to executives and top bankers will go after the big insider traders. not be able to avail the services Moreover, all the examples cited of a discretionary portfolio above, and scores of other cases manager; but so what? These investigated by SEBI, show that are financially savvy individuals those in powerful and privileged (minimum investment in a PMS positions, who have access to is Rs25 lakh) who are more than UPSI, are not above misusing SEBI’s guidance to HDFC Bank has capable of managing their own it for some illegal profiteering. portfolio. Most of them are put the burden of following the Had SEBI allowed letter and spirit of its regulations people who earn eight-figure salaries and, probably, have discretionary portfolio squarely on corporate insiders. management to remain out of stock options whose value runs This is how it should be the purview of insider trading into nine and ten digits. They rules, it would inflict a nearly are smarter than the average impossible burden on itself of proving insider trading portfolio manager and the small restriction on their through circumstantial evidence alone. Even if it were to investment options is not something that should make cobble together a reasonable case, everyone accused of our hearts bleed in sympathy, given the enormous scope insider trading would quote SEBI’s informal guidance, to of misuse. At a time when retail investors are slowly regaining ensure that the watchdog is held to extremely strict proof that the accused had influenced the portfolio manager’s confidence in the capital market mainly by routing investment decision. investments through mutual funds, SEBI needs to ensure Knowing how hard that will be, any exception to that it provides a fair and level playing field to investors, SEBI’s insider trading regulations, or any guidance other not one which allows powerful corporate insiders to get than the one it gave HDFC Bank, would open the doors a near carte blanche by routing trades through a portfolio for misuse of PMS by all unscrupulous insiders. This is not manager.  an imaginary situation. One of the most famous insider trading cases is that of Robert Moffat, a former IBM Sucheta Dalal is the managing editor of Moneylife. She was executive who admitted to providing inside information awarded the Padma Shri in 2006 for her outstanding contribution to Danielle Chiesi, a consultant of Newcastle Funds with to journalism. She can be reached at [email protected]

21 | 16-29 Sep 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3

09-09-2016 17:54:11

MUTUAL FUNDS POINTERS

Why Equity Mutual Funds May Do Better than NPS

M

any savers are lured by the National Pension System (NPS) because of the attractive tax rebates available. Apart from the Rs1.50 lakh rebate under Section 80C, savers can invest an additional Rs50,000 in NPS, taking the total rebate up to Rs2 lakh. Additionally, in the Finance Act 2016, it was announced that 40% of the NPS corpus withdrawn at retirement will be tax-exempt. Along with these benefits, the NPS boasts an extremely low investment management fee. While low cost is certainly a good thing, but are the portfolios of NPS optimally managed? We compare the performance of NPS with mutual fund schemes. When NPS was launched for the public in 2009, the fund management charge was negligible at 0.0009% per year. In 2012, the Pension Fund Regulatory and Development Authority (PFRDA) raised fund management charges for the private sector to 0.25% of assets under management (AUM), following demands from pension fund managers. Despite the comparatively low costs, savers were not attracted. In 2015, PFRDA, once again, slashed the fund management fee to 0.01% to make NPS look attractive to the public. Currently, about 0.0275%pa (per annum) will be deducted from the NAV as charges towards investment management (0.01%), asset servicing charge (0.0075%) and trust management charge (0.01%). Equity mutual fund schemes can charge nearly 3% as maximum expense ratio. For debt mutual fund schemes, the maximum expense ratio can touch 2.75%. Keeping these costs in mind, if NPS and equity mutual fund schemes deliver returns in line with the market benchmarks, NPS will be a clear winner. But, as we have seen in the past, most well-managed mutual fund schemes have consistently beaten their benchmarks. Therefore, post-costs, investing in good mutual fund schemes would have worked out to be a better proposition than NPS. Under NPS, subscribers can choose to allocate their investment over three categories of schemes—Asset Class G

(government bonds), Asset Class C (corporate bonds) and Asset Class E (equity). Under each category, they can choose one out of seven schemes which are managed by different pension fund managers. The investment by a subscriber in this Asset Class E would be subject to a cap of 50%. Under this category, the investment universe of the pension fund manager is restricted to listed shares (on the National Stock Exchange or the Bombay Stock Exchange) on which derivatives are available or which are part of the BSE Sensex or Nifty 50 Index. Thus, the portfolio will consist of mainly large- and mega-cap stocks that are actively traded. We compared the performance of the five NPS Asset Class E schemes to 87 equity diversified mutual fund schemes (corpus above Rs500 crore). We split the equity schemes based on their market-cap orientation. Thus, we had 28 large-cap, 33 multi-cap and 26 mid-cap schemes. We picked the performance of NPS Tier-I schemes from the annual report 2015-16 of the NPS Trust. As the performance of the schemes was available financial year-wise, we compared the returns to the equity MF schemes accordingly. In the one-year periods, the NPS equity schemes have done well in periods like FY10-11 and FY12-13. The performance has been much better than the average performance of equity funds. At the same time, it is important to note that these were volatile periods when the market was mainly directionless. Large-cap stocks tend to do better in such periods. Hence, these schemes have outperformed. If we take a look at most other periods, NPS equity schemes have failed to hold their ground. In the periods between 2013 and 2015, when the markets rallied, equity MF schemes outperformed NPS schemes by a significant margin. Even in periods when the market moved lower, schemes of the NPS were not able to curb their downside losses. Equity MF schemes, due to their diversified portfolio, were able to reduce the downside risk. Due to these reasons, we have seen all categories of 

MONEYLIFE | 16-29 Sep 2016 | 22

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MUTUAL FUNDS POINTERS

Choose Wisely NPS Scheme - Asset Class E ICICI Prudential Pension Funds

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

FY15-16

FY10-15*

FY11-16*

11.83%

-7.75%

9.05%

21.18%

28.65%

-7.37%

11.89%

7.75%

Kotak Mahindra Pension Fund

11.89%

-10.23%

11.52%

19.48%

28.41%

-6.88%

11.44%

7.42%

Reliance Capital Pension Fund

10.77%

-10.49%

7.75%

20.20%

28.30%

-7.26%

10.50%

6.64%

8.05%

-7.18%

8.24%

20.68%

28.37%

-7.16%

10.96%

7.64%

SBI Pension Funds UTI Retirement Solutions

8.35%

-10.58%

7.42%

21.29%

29.74%

-6.72%

10.37%

7.11%

Top 10 Large-cap MF

16.07%

-1.81%

10.87%

24.04%

46.81%

-4.70%

18.14%

13.57%

Top 10 Multi-cap MF

13.31%

0.31%

11.76%

25.33%

60.63%

-3.10%

20.66%

16.94%

Top 10 Mid-cap MF

11.22%

5.13%

12.85%

32.47%

86.22%

-0.88%

26.62%

23.74%

Average Large-cap MF

10.66%

-5.04%

6.65%

19.42%

39.78%

-7.76%

13.35%

9.29%

Average Multi-cap MF

8.61%

-4.67%

6.79%

20.49%

48.42%

-6.80%

14.61%

11.15%

Average Mid-cap MF

6.07%

-0.70%

7.38%

26.17%

72.28%

-4.81%

19.71%

17.15%

Bottom 10 Large-cap MF

4.69%

-8.21%

2.24%

14.60%

32.57%

-10.51%

8.34%

4.99%

Bottom 10 Multi-cap MF

3.05%

-8.72%

1.35%

15.73%

35.65%

-10.55%

8.40%

5.37%

Bottom 10 Mid-cap MF

0.60%

-6.23%

2.21%

19.50%

59.14%

-9.11%

12.89%

10.62%

10.30%

-9.11%

7.33%

17.58%

26.42%

-9.87%

9.92%

5.84%

Index Nifty 50 * Annualised returns

 equity MF schemes outperform NPS over the five-year managers were able to deliver a return in excess of 14%.

periods. While the performance of NPS schemes is much better than that of the worst equity MF schemes, the performance trailed the average performance of the equity funds by a significant margin in both the periods considered. There is no dearth of choice when it comes to selecting an equity MF scheme. However, if you are able to select a few schemes, which are well managed and have performed consistently in the past, your selection should outperform the average mutual fund scheme. If a scheme underperforms, you can always switch your investment to a better performing scheme. In NPS, too, a switch among fund managers is possible by filling out a form. The switch under NPS is restricted to once a year; but this limit should not be an issue. If fact, you may not even feel the need to switch under NPS as the performance of the various schemes is almost the same. This is not surprising, as they follow the same investment mandate and the expenses are a bare minimum. In another article published on the blog of Moneylife Advisory Services (http://goo.gl/psaSZ2), we highlighted how the debt schemes (Class C & G) of NPS, which invest in corporate bonds and government securities, returned between 11%-15% over the year ended 29 July 2016. Over the past year, schemes that invested in government securities did extremely well, as the benchmark G-Sec yield fell by over 50bps (basis points), from around 7.80% in July 2015 to 7.10% on 29 July 2016. All pension fund

Due to the recent performance, the annualised return over the past three-year and five-year periods looks quite attractive. When we examined the performance in each of the past six financial years, the returns have varied from under 1% to over 13%. Similarly, schemes that invested in corporate debt, too, did extremely well over the past year, returning about 12% each. However, on checking the performance over the past six years, the returns have varied between 6% and 12%. As subscribers need to stay invested in NPS till retirement, they should not get carried away by the performance over the past two years. The returns may work out to be much lower than their recent performance. Apart from this, as we have highlighted before, the allocation to equity is not only low, being capped at 50%, the investment of the fund managers is restricted to only large-caps. Investors lose on the return potential of investing in a diversified portfolio of stocks. Despite several initiatives to make NPS attractive for savers, NPS is still riddled with issues which make it a flawed choice for the discerning investor. Issues related to lack of clarity on taxation on maturity, mandatory investment in an annuity product and low liquidity are a deterrent for investors. Subscribers have better retirement options in the form of actively managed mutual funds. To get tax benefit, invest in equity-linked savings schemes (ELSSs) or mutual fund retirement plans. — Jason Monteiro 

23 | 16-29 Sep 2016 | MONEYLIFE

Fund Pointer.indd 3

09-09-2016 17:56:46

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 Advisory - savers.moneylife.in Equity Schemes (Quarterly Rolling Returns) Large Cap (Category Avg: 5.17%, Sensex: 3.49%)

Launch Date

Corpus (Rs Crore)*

Avg. Quarterly Rolling Returns

Mirae Asset India Opportunities HSBC India Opportunities

1-Year 3-Years**

Exp Ratio

04-Apr-08

2,191

6.61%

18.72%

29.19% 2.36%

24-Feb-04

510

6.56%

18.54%

28.92% 2.45%

Reliance Vision

08-Oct-95

3,138

6.49%

12.26%

28.61% 2.04%

HDFC Large Cap

18-Feb-94

1,187

3.56%

13.04%

15.03% 2.21%

Sundaram Growth

24-Apr-97

176

3.17%

6.23%

13.29% 2.92%

UTI Wealth B uilder

17-Dec-08

420

2.77%

10.94%

11.55% 2.66%

Multi-cap (Category Avg: 6.11%, BSE 200: 4.60%) L&T India Value

08-Jan-10

1,532

8.13%

17.33%

36.73% 2.18%

ICICI Prudential Value Discovery

16-Aug-04

13,883

8.04%

14.86%

36.27% 2.25%

Tata Equity P/E

29-Jun-04

658

7.94%

26.76%

35.73% 2.68%

Peerless Equity

28-Sep-11

100

4.45%

17.10%

19.03% 3.00%

LIC MF Equity

15-Apr-98

344

4.32%

8.02%

18.44% 2.82%

Union KBC Equity

10-Jun-11

172

4.21%

11.28%

17.92% 3.09%

Mid-and Small-cap (Category Avg: 8.94%, Nifty Midcap 100: 7.16%) DSP BlackRock Micro Cap

14-Jun-07

3,399

11.48%

26.48%

54.45% 2.53%

Reliance Small Cap

16-Sep-10

2,335

10.70%

21.60%

50.19% 2.08%

Canara Robeco Emerging Equities

11-Mar-05

1,205

10.08%

19.82%

46.83% 2.31%

SBI Emerging Business

17-Sep-04

1,795

6.79%

18.94%

30.06% 2.12%

HDFC Small and Mid Cap

03-Apr-08

915

6.50%

21.93%

28.63% 2.42%

IDFC Sterling Equity

07-Mar-08

1,350

6.39%

12.31%

28.12% 2.18%

Debt Schemes Income (Category Avg: 2.48%, Crisil Composite Bond: 2.78%) ICICI Prudential Long Term Plan

20-Jan-10

1,011

3.17%

12.81%

13.27% 1.22%

Birla Sun Life Dynamic Bond

24-Sep-04

13,022

2.99%

13.15%

12.52% 1.63%

Sundaram Flexible - Flexible Income

30-Dec-04

679

2.87%

10.94%

11.99% 0.83%

Union KBC Dynamic Bond

13-Feb-12

315

2.20%

9.61%

9.10% 1.92%

L&T Triple Ace B ond

31-Mar-97

872

2.17%

10.18%

8.98% 1.49%

Invesco India Bank Debt

29-Dec-12

473

1.93%

6.78%

7.93% 0.65%

Liquid (Category Avg: 2.10%, Crisil Liquid Index: 2.13%) Escorts Liquid Plan

03-Oct-05

230

2.21%

8.38%

9.13% 0.50%

Birla Sun Life Cash Plus

29-Mar-04

31,846

2.13%

8.00%

8.80% 0.36%

Indiabulls Liquid

25-Oct-11

3,741

2.13%

8.13%

8.79% 0.38%

Mirae Asset Cash Management

12-Jan-09

181

1.98%

7.26%

8.16% 0.26%

Reliance Liquid - Cash Plan

07-Dec-01

6,759

1.94%

7.18%

8.00% 1.08%

L&T Cash

27-Nov-06

591

1.88%

6.85%

7.72% 0.79%

# 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 | 16-29 Sep 2016 | 24

Fund Facts.indd 2

07-09-2016 20:10:49

TAX/ FIXED INCOME

DHFL and Other Taxable Bond Issues

S

everal taxable bond issues will hit the market in absence of tax-free bonds. The NCD (non-convertible debenture) issue of Dewan Housing Finance Ltd opened on 29th August and closed in a day on 30th August. It offered interest rates of up to 9.25% for 84 months, 9.15% for 60 months and 9.10% for 36 months. Rating is CARE AAA and BWR AAA rating by Brickwork. Demat and physical options are available. There is no TDS (tax deducted at source), if applied through demat route. Allotment was on a ‘first-comefirst-served basis’. Indiabulls Housing Finance, Srei Infrastructure Fin and several others will offer taxable bonds to investors in the next few months. Recently, Edelweiss Housing Finance hit the market with an offer of secured redeemable NCDs worth Rs500 crore with interest rates of up to 10% for 10 years, 9.75% for five years and 9.50% for three years. Taxable bonds can offer 100-

G-Sec and Bond Yields Flat

T

he 10-year benchmark G-Sec yield, which sets the tone of the fixed-income market, has increased

Bank was the first entity to default on subordinated upper tier-II bonds which carry equity-related risks due to payment linked to financial health of the entity. The Bank’s capital ratio dropped below the minimum regulatory requirement. Those in zero or 10% tax

Issuer

Yield to Maturity

Maturity Date

Next Last Yield Coupon (%)

ISIN

Rating

Dewan Housing 9.10%

16 Aug-19 16 Aug-17

9.20

INE202B07HQ0

CARE AAA

Reliance JIO Infocomm 9.32%

08 Jul-21 10 Jul-17

7.93

INE110L07070

CRISIL AAA (unsecured)

11 Dec-19 11 Dec-16

7.89

INE115A07GK1 CRISIL AAA

LIC Hsg Fin 8.61%

G-Sec Maturity Date

bracket could consider highly rated (prefer AAA rating) secured redeemable taxable bonds for small amount but avoid any hybrid debt instrument. Investors in 20%+ tax bracket could consider buying tax-free bonds from the secondary market through stockbrokers. For long-term investors, buying debt mutual funds with a good track record is a better option due to indexation benefits if they hold the investment for more than three years. Long-term capital gains (LTCG) tax for debt mutual funds is 20.6% with indexation. Holding bonds for over one year is taxable at LTCG which is 10.3% without indexation; no indexation feature is available. The 10-year benchmark rate is hovering close to 7%; it’s at a sevenyear low since 2009 when it saw levels of 7.15%. Appointment of the new Reserve Bank of India (RBI) governor Urjit Patel has reduced the prospects of interest rate cuts in the near future which may be good news for bond and FD investors.

150 basis points (bps) more than bank fixed deposits (FD) but carry higher risk than FDs of scheduled commercial banks. Currently, banks offer FD rates of 7.25% to 7.75% for one to three years’ term. Longerterm FDs, of over three years, may give lower rate of 7% to 7.5%. You have to be aware of the kind of bonds you invest in as there are hybrid debt instruments available in the market. Recently, Dhanlaxmi

NSE data as of last trade date of 2 September 2016

M & M Financial Serv 8.51% 22 Jun-18

22 Jun-17

7.99

INE774D07PB9 IND AAA/Stable

01 December 2044

7.28

LIC Hsg Fin 9.24%

30 Jun-19

30 Jun-17

7.90

INE115A07FV0

10 November 2033

7.27

HDFC 8.59%

14 Jun-19

14 Jun-17

7.87

INE001A07OM3 CRISIL AAA

02 June 2028

7.26

CRISIL AAA

BSE data as of last trade date of 2 September 2016

G-Sec yields on 2 September 2016

marginally, by one basis point (bps), in the last fortnight to end at 7.11%

on 2nd September. Bond yields are flat. You can expect to get yields of 7.90%

to 8.10% for AAA rated bonds and higher for lower rated ones.

25 | 16-29 Sep 2016 | MONEYLIFE

Fixed Income.indd 1

09-09-2016 17:57:37

SMART MONEY R BALAKRISHNAN

It Is Your Money, Your Worry

T

he debate about ‘investor education’ is perhaps the most enduring one and will continue to hold centre stage in personal finance, forever. The human mind is closed, when it comes to things like trust, financial education, numeracy and risk evaluation. It is closed in the sense that we either refuse to address it or think that we know everything and feel we know nothing and cannot learn in this lifetime. A lot of people are, nowadays, on social media. From those conversations, I notice that there is a lot of scepticism about financial advisers. Not all of it is justified. There are good ones and there are not-sogood ones. And there are a few rotten apples, probably the same as in every profession. With them around, either the investor vanishes or his savings do. “Do not trust all men, but trust men of worth; the former course is silly, the latter a mark of prudence,” wrote Democritus, philosopher (460BC–370BC). ‘Men of worth’ has a far bigger meaning than just pure worth measured in material terms. It is amazing that while we do not want to take any effort to understand the dynamics of investing in financial investments, all of us seem to be born experts while investing in real estate or gold. We seem to just spend / invest in it and forget it. For most middle-class individuals, these two assets (apart from life insurance and bank fixed deposits) will, perhaps, be the single biggest investment ever done. Most will not measure this in financial terms. It becomes an emotional investment decision involving the largest single-ticket spend in their lifetime. After taking such huge decisions, many get paralysis when it comes to investing in the financial markets. There is a reluctance to leave the comfort zone of bank deposits. Add to that some anecdote about someone

getting ripped off or some corporate mis-governance, and they withdraw into a shell. Is it better to be financially literate and adopt a DIY (do-it-yourself) approach or fully trust someone to be our financial adviser? I doubt, if any one of us can ever become financially literate in the fullest sense. The financial world is changing fast. New things are coming into the marketplace every day and even to someone in the industry; there will be new things that could be out of one’s knowledge. Investors are, of course, still reluctant to pay reasonably for advice. They can’t be blamed much. There are very few experienced persons who want to be advisers. This has created an assembly line of inexperienced greenhorns selling ‘advice’. They do not get paid by the consumer (the investor). They ‘sell’ products where they are paid by the producer. This, in turn, leads to mis-selling. Today, a private sector bank keeps stiff targets for ‘fee-based’ or ‘advisory’ income for its sales or relationship managers (RMs). This is an ever-increasing number. This, in turn, makes the employee sell wrong products to you. Before the excreta hit the ceiling, the RM is either transferred (a deliberate strategy played by bankers to silence the customers) or the person quits and joins another bank. This cycle is hard to break and will, probably, keep getting progressively worse. Regulators do not understand or simply feign ignorance. The other option seems even more daunting. Getting financially literate seems too complicated. But do you have a choice? Get out of this inertia or the feeling of helplessness. Arm yourselves with a few tools that I will say is ‘financial literacy’. You should be aware 

MONEYLIFE | 16-29 Sep 2016 | 26

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SMART MONEY R BALAKRISHNAN

 of what to look for. Once that is done, you will be able

to manage better. So let us start with the basics: A 360-degree View: We invest because we want a return that will beat inflation. If I keep my money under the pillow, it does not grow. Prices of almost everything keep going up. So, I need to make sure that my savings can buy at a future date, at least the same thing that it can buy today. Inflation is generally higher than the interest rates on bank deposits. Thus, by simply keeping it in a bank, we are unlikely to cope with inflation. To overcome this, we should either have plenty of money (far more than what we need) in the bank or we should find something that gives a better return. Basic Numeracy: A lot of us never liked math in school because we were not taught well. Now, we are afraid of simple financial calculations. Our mobile phone has a calculator. However, when someone says that he will give you 10 times your investment in 30 years, it sounds fabulous to you. One thing that one must learn is compound interest. It is not rocket science. You can use something as simple as the ‘Rule of 72’ (number of years multiplied by annual interest rate equals 72); it is a good weapon to have. Do not run away from this, because you are probably doing a more complex job at work for 10 hours a day to earn your money. So note down basics like amount/s to invest, when and what returns are promised and over what time-frame. Today, you can get free financial calculators on the Internet and Google is a great friend. So take your time to understand the proposition. If you cannot understand the proposition, say NO. NEVER make a ‘gunpoint’ decision when it comes to investment. Use a Checklist: Think methodically; for this, you need a checklist of questions that you must have answers to. 1. What is the duration of this investment? Can I spare my money for this duration?

2. What is the nature of my investment? Is it repayable on a fixed date? If so, what is the amount I get back? Is there any periodic payback that is guaranteed or written into the conditions of the investment? Or do I have to depend on market conditions to get my value? 3. Can the investment be liquidated at a short notice or do I have to wait for a specific time? And, if so, do I suffer any penalty? 4. Who is going to repay me, on maturity? Am I comfortable with that? Or is the repayment coming from market valuation where it could be subject to finding a buyer at that time? 5. Does the name (on which my investment risk is concentrated) give me comfort? What is associated with that name? Do some Googling. 6. Am I getting at least three to four days to say yes or no? If someone wants an immediate answer, the answer is NO. 7. Who can I talk to about the investment, for another view? Is there a write-up in Moneylife or any other good financial publication about that investment? Complex investments are best avoided and left to others. Understanding an Excel sheet and returns calculations are less important than a qualitative understanding of the investment. I have not included investing in shares in this article. That is a separate topic on which I have been writing and covering various angles. You spend a lot of time earning money. You save so that you have something for the years when you stop earning. Thus, financial literacy is YOUR responsibility. Depending on someone else for this is not the best approach. No one else is responsible for what happens to your money. 

The author can be reached at [email protected]

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

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

27 | 16-29 Sep 2016 | MONEYLIFE

column_Balakrishnan.indd 3

07-09-2016 20:07:56

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

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

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

MSSN GB (Insurance 1-3 ).indd 2

29-07-2016 16:40:37

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

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

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

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

MONEYLIFE ADVISORY FIX YOUR FINANCES, FOREVER

www.savers.moneylife.in

MSSN GB (Insurance 1-3 ).indd 3

29-07-2016 16:42:29

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

Health Insurance Regulations 2016 Decoded

I

nsurance Regulatory and Development Authority of India (IRDAI) has introduced Health Insurance Regulations (HIR), 2016, which replaces the 2013 regulations. Pilot Products Can Bring Innovation General, or stand-alone, health insurance companies can launch ‘pilot products’ which can cover innovative risks that are usually avoided in regular mediclaim products. This is especially true due to the lifelong renewal feature of regular mediclaim products. Pilot products will have a one-year term, but will run for five years. After five years, the insurer can offer it as a regular product or withdraw it. If it is being withdrawn, the insurance company will migrate (subject to portability conditions) the customers of pilot policies to its own existing product to offer continuity benefit. Hopefully, there will not be any issue for porting to the same insurer’s product. Beware of Combi Plans ‘Combi products’ may be promoted by all life insurers, general insurers

and stand-alone health insurers. Until now, combi plans could be a mix of a term plan and health plan. Even though it is not good to combine two products, the combi product was an option. The new regulations open up combi plans to have any life (endowment, moneyback, whole-life, ULIP) and health plan. The move should please life insurance industry; but, from the consumer viewpoint, it is a step backwards. It is better to avoid combi plans, going forward. Limiting TPAs’ Role The new regulations specify that insurers and third party administrators (TPAs) should put in place systems and procedures to identify, monitor and mitigate frauds. HIR 2013 had stated that “TPA may handle claims admission and recommend to the insurer for the payment of the claim settlement.” This has been omitted in the new regulations; this is good news. The new regulations state the following: “Insurers shall ensure that the TPAs are not carrying out the following activities as part of the agreement: i. Claim rejections/ repudiations with respect to the health insurance policies; ii. Payments to the policyholders, claimants or the network providers; iii. Any services directly to the policyholder or insured or to any other person unless such service is

in accordance with the terms and conditions of the Agreement entered into with the insurer and complies with the IRDAI (TPA-Health Services) Regulations, 2016.” HIR 2013 had stated that “TPA shall, in the correspondence to the policyholder with respect to settlement/denial of the claims, state clearly the following...” The new regulations put the onus on the insurers, which is a good thing. They state: “Where a claim is denied or repudiated, the communication about the denial or the repudiation shall be made only by the Insurer by specifically stating the reasons for the denial or repudiation, while necessarily referring to the corresponding policy conditions.” Benefit-based Products Can Have Cumulative Bonus Benefit-based products, like critical illness, personal accident, surgical benefits, etc, were not allowed

cumulative bonus, until now. Now, such products will be able to offer cumulative bonus just like mediclaim policies; these are usually in the form of a certain percent of the sum insured for claims-free years. It will help the policyholders to grow their sum insured over the years. But will insurers revise the premium of the product to reduce their increased risks? After all, fixed benefits products pay the predetermined benefits irrespective of the expenses incurred 

MONEYLIFE | 16-29 Sep 2016 | 30

Insurance.indd 2

09-09-2016 18:00:33

INSURANCE TRENDS

 by the policyholder; mediclaim

is an indemnity-based product which only pays for the actual hospitalisation expenses. Customer Incentive for Good Health At the time of underwriting, insurers can load the premium, based on the health condition of the customer. The new regulations allow insurers to remove loading on the premium at the time of renewal for an individual if there is an improvement in the person’s health. It will be at discretion of the insurer and, hence, results will vary. At the time of renewal, the insurer cannot ask the policyholder to go through a medical examination, unless there is a request for higher sum insured. New regulations reward policyholders on the basis of preventive and wellness habits by disclosing upfront such incentives in the prospectus and the policy document. Insurers can offer rewards in the form of discounted rates for outpatient consultations and health check-ups. A discount on renewal premium is also allowed. No discount, however, will be provided on any third-

Fine Print

party service (gym membership discount, etc) or merchandise. However, discounts and/or benefits on diagnostic or pharmaceuticals or consultation services of providers in the network are permitted. Special Provisions for Senior Citizens, Really? This is not new, but worth mentioning. “The premium charged for health insurance products offered by Life Insurers, General Insurers and Health Insurers to senior citizens shall be fair, justified, transparent and duly disclosed upfront. The insured shall be informed in writing of any underwriting loading charged as filed and approved under the Product Filing Guidelines over and above the premium and specific consent of the policyholder for such loadings shall be obtained before issuance of a policy. All Life Insurers, General Insurers and Health insurers and TPAs, as the case may be, shall establish a separate channel to address the health insurance related claims and grievances of senior citizens.” IRDAI needs to verify if all the quoted guidelines really work or

short, the regulator wants insurers to invest in companies with a good dividend track record.

Insurer’s Equity Investments

I

RDAI wants insurance companies to tighten equity investments. Insurers can invest in shares of any listed company, where at least 10% dividend has been paid for at least two consecutive years, under the approved investment category. The existing norm for equity investment was 4% in the past eight out of the nine years. In

Bariatric Procedures

C

overage for bariatric surgery is dependent on the insurance company as there are no clear guidelines. Companies that cover it will have own evaluation and allow on a case-to-case basis. With the alarming rise in bariatric surgeries in India, there is need for proper guidelines and to make the medical intervention

are they just on paper. Porting from Group, Retail This was already there in HIR 2013; but it is worth mentioning so that consumers are aware of it and can benefit from it. General insurers and health insurers offering health covers specific to age groups such as maternity covers, children under family floater policies, students, etc, will have to offer an option to migrate to a suitable alternative available health insurance policy at the end of the specific exit age or at the time of withdrawal of the policy at the option exercised by the covered lives by allowing suitable credits for all the previous policy years, provided the policy has been maintained without a break. Individual members, including the family members covered under any group health insurance policy of a general insurer or health insurer, will have the right to migrate from such a group policy to an individual health insurance policy or a family floater policy with the same insurer. Thereafter, he/she shall be accorded the right to port to another insurer (subject to underwriting). 

procedure (MIP) notifiable which can bring it under the ambit of IRDAI. There is a need to stop misuse of the treatment, with proper guidelines from the regulatory authorities. Surgeons from the Obesity and Metabolic Surgery Society of India and All India Association for Advancing Research in Obesity have approached the Indian Council of Medical Research (ICMR) for guidelines to make the MIP notifiable; this can help mediclaim policyholders. 

31 | 16-29 Sep 2016 | MONEYLIFE

Insurance.indd 3

09-09-2016 18:01:34

STOCKS:

COVER STORY

HIGHER RETURN LOWER RISK Investors look to earn the highest return with the lowest amount of risk. However, this is easier said than done. Can we pick a portfolio of stocks with the best risk-reward profile and outperform the market? Jason Monteiro back-tests investing in stocks, based on their risk measures such as alpha, beta and standard deviation. The results are quite encouraging

M

ost individuals are risk-averse, when it comes to investment decisions. This is one of the main reasons for many preferring to stick with bank deposits rather than investing in equity for the long term. But those looking for long-term wealth creation have to consider stocks and equity funds. And, for that, they must understand the risks they take, to make better decisions. The basic principle of most investments is that, the more calculated risk you take, the higher will be the chance of your returns. In the corporate bond market, this principle is clearly evident. The yield of low-rated securities is higher than that of securities which command a better credit rating. The risk of default is higher in the lower-rated securities; hence, to compensate the additional risk taken, investors are

rewarded with a higher yield. This is simply referred to the risk-reward ratio used to compare an investment’s expected return to the risk taken to get those returns. But can the same principle be successfully applied to stocks? In this Cover Story, we examine the ways to measure and manage risk in making stock investment decisions. To achieve a higher return over the long term, we will have to accept some amount of short-term volatility. This volatility can be compared to other securities or to a benchmark, like the Sensex, to arrive at the risk taken. How do we quantify risk? For this, some knowledge of basic statistics is needed. One of the most common measures of risk is standard deviation. This calculates the deviation in returns from the mean. In other words, risk is linked to volatility. The more volatile a stock, the higher is its deviation from the 

MONEYLIFE | 16-29 Sep 2016 | 32

Cover Story.indd 2

09-09-2016 18:03:29

COVER STORY

1-year Sensex Returns: High Volatility, High Gaines/Losses

5-year Sensex Returns: Low Volatility, Stable Gains/Losses

120%

50%

Sensex 1-year Rolling Returns

Sensex 5-year Rolling Returns

40% 30%

60%

20% 10%

0%

0% -60% Jul-97

Apr-02

Jan-07

Oct-11

Jul-16

 mean, and the more risky it is. Calculating volatility, or

standard deviation, from a series of data can be easily done in an Excel sheet. Take, for example, the yearly returns of the Sensex. Over the 10-year period from 1 August 1996 to 31 July 2016, the average yearly returns work out to 15.12%. The standard deviation of the yearly returns over the period works out to 30.02%. Statistically, there is a 67% chance that the expected returns will fall within the one standard deviation of the average of 15.12%, on either side. This means that returns could be 15.12%+30.02%, or 45.14% on the upside, and 15.12%-30.02%, or -14.90% on the downside. As you can see, the range is extremely high. What if we consider five-year returns? Over the five-year periods from 1 August 1996 to 31 July 2016, the average five-year returns work out to 12.94%. The standard deviation works out to 12.16%. Clearly, volatility, as measured by the standard deviation, is much lower than that of the one-year periods considered. Based on one standard deviation level, 67% of the time, returns would range between 0.78% and 25%. Clearly, investment over a one-year horizon on the Sensex involves more risk; but average returns are higher compared to those in the five-year periods. This is how risk and return are related. How can we use this information? For this, we can calculate the historic Sharpe Ratio which, basically, is the average excess return over the risk-free rate divided by the standard deviation of the excess return. For the one-year periods, the ratio works out to 30.39%, while for the five-year periods, it is 57.07%. This is called risk-adjusted return. Notice that the fiveyear ratio is higher than the ratio for one-year period. This is the math behind the standard advice—an investor looking for good returns with lower risk should invest

-10% Jul-01

Apr-05

Jan-09

Oct-12

Jul-16

for the longer term.

Applying Risk-return to Stocks We have now seen how to measure risk, based on the past returns of an asset, in this case the Sensex. But most people do not invest in an index. They invest in stocks. Stocks are more volatile than the index; therefore, we need to find out whether the returns of a stock come from inherent volatility or some other factor. If a stock is giving a higher return because it is volatile, we are simply being compensated to take a higher risk. Wealth is created when the return is higher than the risk being taken. To find this out, we need to know another statistical measure. Those investing in stocks, or equity mutual funds, may have heard of the term beta. Beta is simply the volatility of a stock, or a portfolio of stocks, compared to the benchmark. Put simply, stocks with a beta of one means that the stock price moves exactly how the market moves. If the beta is less than one, the stock has smaller price swings compared to that of the index. If the beta is above one, the stock price is more volatile than the index. A stock with a beta of two goes up, or down, twice as much as the benchmark, in a given period of time. Suppose the beta of a stock is 2. If you invest in a stock and it goes up by 20% while the Sensex has gone up by 10%, you might think that it is great performance, right? Not so fast. If the beta is 2, then the stock should go up by twice as much as the index, anyway. In this case, the index has gone up by 10% and the stock has gone up by 20%; but that is what it was supposed to do because it has a beta of 2. A fund manager holding this stock has not really generated great returns. He has simply taken a higher risk by buying a more volatile stock and has got compensated for it. Where is 

33 | 16-29 Sep 2016 | MONEYLIFE

Cover Story.indd 3

09-09-2016 18:03:55

MONEYLIFE ADVISORY FIX YOUR FINANCES, FOREVER

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

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

Subscription to Moneylife magazine is included in MAS Premium Membership

MSSN GB Ad_invest.indd 2

29-07-2016 16:12:48

MAS Benefit #4 - 7 Equity Fund Choices •

Which Large-cap Funds?

•

Which Mid-cap Funds?

•

Which ELSS?

•

ELSS SIP Tool

Fixed Income Choices •

Which Bonds, NCDs?

•

Which Long term Debt Funds?

•

Which Short term Debt Funds?

•

Which Liquid Funds?

Investools with equity funds & stocks •

Monthly Investing

•

Investment Restructuring

•

Lump-sum Investing

•

Investing for Specific Goals

Stocks

MSSN GB Ad_invest.indd 3

•

Long-term Stock picks

•

SIP Tool for Stocks

29-07-2016 16:14:07

COVER STORY

High Beta Stocks Underperform in Flat and Down Markets 120%

Nifty 500 60%

Top Decile Beta Stocks

12-month Forward Return

0%

-60% Jul-10

Jul-11

Jul-12

 the skill then? How do we measure performance? For

this, we to know another measure—alpha. Many would have heard portfolio managers use this term often. Alpha is basically the return in excess of beta. Suppose the index has gone up by 10% and the stock with a beta of 2 has gone up by 25%, the stock has delivered an alpha of 5%. If a fund is generating higher alpha, it means that the fund manager has chosen stocks that are rising more than the market and/or falling less than what they ought to. The fund manager is skilful. We have simplified the calculation of alpha as returns in excess of what is explained by beta. In financial literature, the calculation is a bit more complex. It is simply the return over riskfree rate adjusted for beta. (See Box).

Applying Alpha and Beta in Real Life How can we apply beta and alpha concepts of risk, in real life? For this, we analysed those stocks that are a part of the Nifty 500 and which have been traded regularly from July 2009 to August 2016. This gives us

Jul-13

Jul-14

Jul-15

a shortlist of 405 stocks. To calculate the ratios, we use the Nifty 500 index as the benchmark and the yield of the 90-day treasury bills as the risk-free rate. First, we

High Beta Vs Low Beta Portfolio 12-month Periods

Nifty 500

High Beta Stocks

Low Beta Stocks

Mean Return

9.07%

10.12%

29.63%

Maximum Return

52.32%

119.54%

121.04%

Minimum Return

-27.19%

-39.42%

-20.51%

19.32%

42.05%

33.81%

0.05

0.05

0.65

Standard Deviation Sharpe Ratio

calculate the beta of the stocks for each month, based on their monthly return over the past 12-months. For each month, we consider the top decile stocks (a decile is one of 10 equal groups) and the bottom decile stocks, to calculate the forward return. So, we are analysing 

Low Beta Stocks Outperform in Most Periods 180%

120%

12-month Forward Return

Nifty 500 Bottom Decile Beta Stocks

60%

0%

-60% Jul-10

Jul-11

Jul-12

Jul-13

Jul-14

Jul-15

MONEYLIFE | 16-29 Sep 2016 | 36

Cover Story.indd 4

09-09-2016 18:05:18

COVER STORY

High Alpha Stocks Deliver Huge Returns When the Market Is Doing Well 180%

120%

Nifty 500

12-month Forward Return

Top Decile Alpha Stocks 60%

0%

-60% Jul-10

Jul-11

Jul-12

Jul-13

 the most and the least volatile stocks. We calculate the

forward return over the next 12-month periods. High-beta Stocks: For the top decile stocks with

High Alpha Vs Low Alpha Portfolio 12-month Periods

Nifty 500

High Alpha Stocks

Low Alpha Stocks

Mean Return

9.07%

45.22%

15.21%

Maximum Return

52.32%

159.33%

148.81%

Minimum Return

-27.19%

-24.39%

-53.51%

19.32%

49.08%

51.27%

0.05

0.77

0.14

Standard Deviation Sharpe Ratio

the highest beta, the average return worked out to 10.12%, while the return of the Nifty 500 was 9.07%. While the high-beta strategy seems to have marginally outperformed the index, it is interesting to take a look at the volatility of the returns over the period. The high-

Jul-14

Jul-15

beta stocks had a standard deviation of 42%, while the Nifty 500 had a standard deviation of 19%. When you are buying a high-beta stock, you are taking a higher risk for very little additional return. High-beta investing would be rewarding only if you are able to ride a rising market. However, if you got your timing wrong, you would have faced significant losses. This is not an easy task for any investor, including institutional investors. Low-beta Stocks: What if you had picked low-beta stock portfolio? For the 12-month forward periods, the returns averaged 29.63% with a standard deviation of 34%. Clearly, the low-beta stocks not only delivered a higher average return, their standard deviation, too, was lower compared to the high-beta stocks. High-alpha Stocks: Coming to the alpha investing strategy, we analyse the returns of the top decile stocks with the highest alpha compared to stocks with the lowest alpha relative to the Nifty 500. The universe of stocks remains the same as in the beta strategy. Over the 12-month periods, the high-alpha portfolio 

Broadly, Low Alpha Stock Deliver Returns In-line with the Market 180%

120%

Nifty 500 Bottom Decile Alpha Stocks

12-month Forward Return

60%

0%

-60% Jul-10

Jul-11

Jul-12

Jul-13

Jul-14

Jul-15

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09-09-2016 18:05:41

COVER STORY

Beating the Market with High Reward-to-risk Stocks 6-month Periods

Nifty 500

High reward/risk Stocks

Low reward/ risk Stocks

Average Return

4.00%

17.70%

3.93%

Max Return Minimum Return Standard Deviation Sharpe Ratio

31.54%

73.22%

73.52%

-20.46%

-15.33%

-33.67%

11.79%

20.04%

24.24%

0.01

0.70

0.00

 outperformed significantly. The average return worked

out to 45.22% with a standard deviation of 49.08%, outperforming the low-beta portfolio. The volatility was higher; but, adjusted for it, the returns were much higher. Low-alpha Stocks: On analysing the returns of the low-alpha stocks, we find that, similar to the high-beta portfolio, risk-adjusted returns were lower than that of the index. For the 12-month periods of our analysis, the average returns worked out to 15.21% with a standard deviation of 51.27%. Though the returns were higher than those of the index, so was the volatility. With a lower amount of volatility, you would have averaged a return of 45.22% by investing in a high-alpha portfolio. Lesson: Stocks with a comparative Low-beta and highalpha do better. When you pick a stock, be sure to check this.

Calculating Alpha

F

or each stock, a required return is calculated, based on risk-free return (treasury bonds) and the beta of the stock. If the actual return is higher than that of this required return, the excess is alpha. The required rate of return is calculated using the formula risk-free rate+beta*(market return minus risk-free rate). Suppose you are looking at two stocks: Company X and Company Y. Both of them are a part of the Nifty 500 and their betas are 1.1 and 1.5, respectively. Clearly, one can say that the stock of Company Y will be more volatile than that of Company X and anyone buying it will expect to be

12-month Periods

Nifty 500

High reward/risk Stocks

Low reward/ risk Stocks

Average Return

9.07%

41.79%

15.41%

Max Return Minimum Return Standard Deviation Sharpe Ratio

52.32%

139.24%

137.62%

-27.19%

-13.62%

-49.11%

19.32%

39.67%

46.10%

0.05

0.86

0.16

Can These Strategies Be Improved? What if we combine the two strategies that worked well? Investor Louis G Navellier takes a somewhat similar approach—selecting stocks which have high alpha and low standard deviation. To calculate this, he divides the stocks’ alpha with their standard deviation. “Stocks with good reward/risk ratios tend to be lower-risk stocks that are plugging away, earning excess returns in a smooth consistent manner,” he explains. While he uses several other risk measures to rate stocks, we will focus only on the reward/risk ratio (alpha/standard deviation). Let’s apply this to the Indian context. Similar to the previous analysis for the alpha and beta portfolios, we consider a portfolio of the top decile and bottom decile of stocks, ranked by the high-reward and low-risk ratio. Based on Navellier’s strategy, stocks 

compensated more. In order to calculate alpha, let's assume that the one-year treasury bill yielded 6% and that the Nifty 500 grew by 10%. Now, assume that Company X’s stock rises by 11% and Company Y’s by 11.5%. Now, the required rate of return for Company X is 10.40% (6%+1.1*(10%-6%)) and 12% for Company Y (6%+1.5*(10%-6%)). If we calculate their alphas, we discover that Company X outperformed the market with an alpha of 0.60% (11% 10.4%), while Company Y underperformed with an alpha of -0.50% (11.5% - 12%). An investor screening for high alpha would, therefore, pick Company X’s stock over Company Y’s.

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COVER STORY

Outperforming the Market with High Reward-to-risk Stocks 160% 120% Nifty 500 Top Decile Reward-risk Stocks

80%

12-month Forward Return

40% 0% -40% Jul-10

Jul-11

Jul-12

Jul-13

Jul-14

Jul-15

 with a higher reward-risk ratio should deliver good risk-

adjusted returns. On testing this over 6-month periods, we fi nd that the average returns work out to 17.70% with a standard deviation of 20.04%. This gives the highest historic Sharpe ratio compared to the other strategies for the same period. For 12-month periods, the average forward returns work out to 41.79% with a standard deviation of 39.67%. Here, too, the Sharpe ratio was the highest. In the 12-month periods, the high reward-low risk portfolio outperformed the Nifty 500 in each monthly period over the past six years. Beating Nifty 500 is easy if you use this strategy! Moving to the bottom decile portfolio of rewardrisk stocks, we find that, over the 6-month periods, the average returns work out to 3.93% which is lower than the returns of the Nifty 500. The volatility, too, as measured by the standard deviation, is higher at 24.24%. Not surprisingly, this portfolio is among those with the lowest risk-adjusted returns. Over the 12-month periods, the average returns work out higher than the benchmark; but, here again, volatility too is higher. Therefore, based on this, it would have been best to avoid low reward-risk stocks.

Top Reward-to-risk Stocks: August 2016 Company Name JSW Steel

Alpha/SD*

Alpha*

Beta*

100.00%

99.00%

9.90%

Omaxe

99.70%

68.50%

9.60%

Biocon

99.50%

98.00%

36.10%

Balrampur Chini Mills

99.20%

100.00%

57.90%

Kajaria Ceramics

99.00%

95.70%

47.00%

Bajaj Finance

98.70%

98.20%

58.90%

JSW Holdings

98.50%

93.80%

7.40%

Finolex Industries

98.20%

96.00%

48.50%

SREI Infra Finance

98.00%

99.20%

15.50%

Jagran Prakashan

97.70%

80.10%

12.60%

Piramal Enterprises

97.50%

96.70%

48.00%

Pidilite Industries

97.20%

78.40%

4.20%

Petronet LNG

97.00%

93.00%

22.00%

Kansai Nerolac Paints

96.70%

79.20%

10.80%

Can Fin Homes

96.50%

95.00%

57.60%

Eclerx Services

96.20%

85.60%

5.40%

DCM Shriram

96.00%

98.50%

80.40%

Ramco Cements

95.70%

91.30%

43.30%

Conclusions & Action Points

3M India

95.50%

97.70%

4.40%

Based on the above analysis, an investor would prefer to be invested in a high-alpha, and low standard deviation stocks. Which are these stocks, as of now? Here is a shortlist. Remember, while these parameters can be used for selecting a stock, as this risk ratio is calculated based on a stock’s past performance, it cannot be the sole criterion for stock selection. Just by looking at these ratios of a single stock, one cannot judge the risk of the stock. This risk measure needs to be compared to a set of stocks, to give a relative measure of risk. When

Trent

95.20%

91.00%

31.10%

* Percentile rank among 405 stocks on the Nifty 500 index

creating the portfolios, we have considered only the topmost and bottom-most stocks, based on the various risk measures, from our shortlist of 400-odd stocks. Apart from selecting stocks that have a low beta, low standard deviation and high alpha, it is important to look at other fundamental parameters such as earnings growth, valuation and return ratios. A combination of all these factors can deliver enormous value. 

39 | 16-29 Sep 2016 | MONEYLIFE

Cover Story.indd 7

09-09-2016 18:06:48

VALUE STOCKS DEBASHIS BASU

Exciting News Vs Exciting Stock

A

fter years of wait, Reliance Jio has unleashed its agri-based retailing. For a variety of reasons, our economy telecom services on us with tantalising prices, did not get a chance to develop a sustainable value chain in getting all consumers interested. By making voice the foods business. The US and Europe saw large players in calls free and alluring us with low-priced data, Jio may food by the 1950s and 1960s; but, in India, food has always perhaps change the way we see and use telecom services. been a disorganised, fragmented value chain. We believe The company claims that this would be revolutionary. that India’s purchasing power will be food-dominated.” How would this happen? Mr Ambani told us that he Whether this turns out to be a game-changer or not, it has certainly generated a lot of excitement. wanted to capture the enormous arbitrage in the food chain. Excitement could be bad for successful investing. In his own words: “Take potatoes, the most common food Often, we get carried away by corporate plans that across the world. From Bill Gates to my driver, everybody are years away from yielding results, leading to serious eats potatoes. Now, plot the prices. Farmers in UP and misjudgement. Reliance itself offers us two excellent Bihar get about Rs4-Rs5 a kilo; in the Middle East, the examples of this. Remember wholesale price is about what happened when Reliance Rs25-Rs30 a kilo. In the Industries discovered gas in US, Sam’s Club, it is the Krishna-Godavari Basin? Rs90 a kilo. In Europe, Reliance’s gas was supposed to it is Rs110 a kilo. The transform India. arbitrage is 1:20. If we Analysts started creating get our produce right, economic scenarios when India’s and if the US market is opened up, you will be dependence on oil would drop drastically. That would allow us surprised how quickly to import other things, maybe we reach $20 billion. strengthen the rupee, attract The food market is much more foreign capital and set bigger than the software off a virtuous economic cycle, services market. And the they said. Besides, natural gas money goes straight into pollutes far less and, so, an the hands of millions of abundance of gas would be farmers. The spinoffs are enormous—jobs, great for environment. Pipelines criss-crossing the country would houses, durables, a new It is a long arduous path from announcements reduce the need for polluting consumption boom will to value creation start in rural areas.” heavy vehicles to transport fuel, we were told. Alas! All this scenario-building turned out This was an exciting idea. But this, too, has not to be premature. Over the past 14 years, Reliance has materialised. Not only has Reliance not been able to hardly produced much gas, compared to its potential. capture the arbitrage at the farm end, Reliance got beaten The promise of early2000s was a mirage. on the front-end as well, as e-commerce start-ups boomed Then came Reliance Retail, in 2006. This was another and consumers switched from physical stores to new online huge opportunity and, once again, most analysts were stores. Unthinkably, Reliance got beaten by a combination trying to get a sense of the game-changing nature of this of upstart entrepreneurs, technology and capital! initiative. This is because Reliance was not focused on I am not, for a moment, suggesting that the same thing selling packaged goods at low margin in an organised would happen to Reliance Jio. Indeed, the execution risks format like Big Bazaar. are lower in telecom, compared to gas extraction and Mukesh Ambani told us, in an interview in December retailing. It could well be that Reliance does succeed in 2007: “Within organised retailing, we are really talking of executing Jio well. But will the shareholders gain? The 

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Value Stocks.indd 2

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VALUE STOCKS DEBASHIS BASU

Just 5% Compounded Return in 10 Years 1,460

Rs

1,280 1,100

Reliance Industries

920 740 560 Oct-06



Oct-11

excitement for shareholders in not the launch of a new product but in earnings growth; not in the billions of dollars of investment outflow but healthy cash inflows for years that allow the company to pare down initial debt, if any, declare large dividends and plan for the next round of growth. I am not sure how Reliance plans to make oodles of money from its huge investments in Jio. Apparently, borrowing from Steve Jobs’ idea of Apple appstore, Reliance wants to make money from the Jio app ecosystem. The key to this, of course, is getting the customer hooked on to Jio. Apple could hook their customers through hardware that wowed them. Reliance can hook the customer through it data service; but is that a good enough hook? Consider the many hurdles in acquiring new customers. • Existing mobile users have to switch from whatever they are using to Jio. Users are usually reluctant to switch, even though there is number portability. • Reliance thinks that, by throwing the apps free to start with, it would kick-start the process of adoption. But this is not a given; unless the apps are compellingly rich in features. How easy would it be to make JioTV, JioCinema, Jio Music, a personal digital wallet, and Jio Magazine must-have apps? • Media reports say that Reliance would charge Rs15,000 a year for these apps. That seems too ambitious when many individual apps offering some of these service are available free. Perhaps Reliance will find solutions to all these issues. If it does, the revenue numbers will start reflecting this; in which case it would start making money in the data business—and enough of it—to beat the cost of capital. If all this happens, Reliance may, at long last, turn into an exciting stock for investors. But not today. Today, the excitement is about its plans. By the way, Reliance is not into businesses that throw

Sep-16

up free cash. This has been the situation for more than about 30 years now. It has always invested in cash-guzzling businesses which the market dislikes. Notice that the stock is up just 70% over 10 years at a princely annual compounded rate of 5%, worse than returns from bank FDs. The media’s job is to hunt for exciting stuff and, so, exciting news gets thrown at us by the minute. Well, these days the job of the media, apparently, is to create excitement even where there is none. But the excitement for investors lies elsewhere. It is in finding companies with one or more of these features: • Ability to pass on costs and raise prices (Asian Paints); • Having a high margin at the operating and net level so that slightly higher sales lead to a disproportionate increase in profits (Maruti); • Not requiring debt to fund expansion or, having funded expansion with debt, the ability to rapidly de-leverage (Shree Cement); • Once in a decade or so, finding a large new business that is analogous to the main business and can be rolled out using the same intangible strengths like dealer network, brand equity or even management bandwidth (ITC, Mahindra & Mahindra); • Expanding a small Indian operation into a global one, through exports and manufacturing on foreign soil (Motherson Sumi); • Expanding through successful acquisitions made at a low cost (Ultratech, Sun Pharma); • Relentlessly squeezing out costs in a business dominated by unorganised players who are more nimble and have lower costs (Relaxo Footwear). If you find companies that have any of these characteristics, get excited. It could well be that Reliance manages to develop one of these characteristics. If so, it will be a monster value-creator. We will be watching. 

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Value Stocks.indd 3

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StockWatch Stocks and sectors that catch our eye

C r o mp t o n Gre aves

Is the Turnaround Sustainable?

C

rompton Greaves reported good revenue growth for the June 2016 quarter. Its consolidated revenues for the June quarter rose by 39% % year-on-year (y-o-y) to Rs1,423 crore. However, it reported a net loss of Rs50 crore compared to o having broken-even in the same quarter of the he previous year. The margin of earnings before fore interest and tax (EBIT) was at a strong 44%. %. However, this his was driven by trading ading sales which may not be sustainable ainable in future. All ll this comes on the he back of a dramatic ic FY15-16 forr Crompton Greaves which witnessed essed a slump in stock price and huge uge losses. Revenues for FY15-16 declined by 60% to Rs5,716 crore y-o-y and the company reported ported a consolidated loss of nearly Rs400 crore. The stock price, too, plummeted by more than 80%—from a high of Rs203.50 in January 2016 to a low of Rs40.50 in mid-March. Since then, the stock has doubled settling at Rs82 currently. Crompton Greaves is into designing, manufacturing and marketing electrical products and services. These are related to power generation, transmission, distribution, and executing turnkey projects. It consists of three segments which are different from each other—power systems, industrial systems and automation systems. However, power systems and industrial systems, together, accounted for a major chunk (85%) of its June quarter revenues. It had demerged its consumer products business last year.

Among the different segments, revenues from its power systems jumped by 59%, though on a low base (due to shutdown in Nashik factory last year). Its revenues from industrial systems segment rose by a sedate 11% to Rs422 crore. The revenues from this segment were dragged down by railway business. However, strong growth was posted in low-tension (LT) and hightension (HT) motors business. Crompton’s current debt:equity ratio stands at 0.32. According to the management, the de-le de-leveraging will happen when it completes the Sp Spear deal which is expected by the end of Oc October. Crompton Greaves calls divestments divestmen of its power business in Hungary, Hun Belgium, Ireland, Indonesia Indone and US ‘Project Spear’. The T approval of Competition Comp Commission Commissio of India (CCI) (CCI was required by b the prospective buyer. Crompton Greaves has obtained obtain a confirmation confirmatio that this part is resolved. ‘Project Spear’ Spe is going on schedule as per its timeline and there is no slippage, according to the man management. 

Rising Debtor Days Debtor Days 250

200

150

100

50 11-12

13-14

15-16

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STOCK WATCH

quarter and 84.20% of this holding was pledged. focus on its India business and also Debtor days, which were reduce debt. relatively stable since 2011-12, Crompton’s unexecuted order re rose book stood at around Rs175 crore on ros dramatically to more than 200 2 September 2016. The managementt 20 days in 2014-15 from 90 days in 2013-14. These have declined has highlighted that pricing in the marginally to 169 days in domestic transformer industry 2015-16. According to the has improved. It has targeted • Divestments of power business to management, there has been Its FY17-18 utilisation to be completed by October-end an improvement in the pace of reach 75%-80% across • Will concentrate on its core collection from debtors in the different business. The power systems business by 14 promoter holding stood at business days since the past quarter.  34.42% for the June 2016

 This deal will enable Crompton to

Cheviot

Not Glamorous but Solid Performer

C

heviot, one of the few well-run jute mills, has reported good growth for the June 2016 quarter. Revenues rose by 22% year-on-year (y-o-y) to Rs70.33 crore from Rs57.42 crore. While profits were almost stagnant, at Rs10.19 crore, Cheviot enjoys remarkable operating leverage. Net profit margin is exceptionally high, at 15% of sales. Exports have been sluggish for Cheviot; the proportion of revenues from exports has declined in the past year to around 31% in FY15-16 from around 45% in FY14-15. However, domestic revenues rose by an impressive 61% in FY15-16 to Rs233 crore. Its exports for the period declined by 12% to Rs106 crore. Cheviot makes jute goods at two plants in West Bengal one of which is export-oriented and ran at a reduced capacity. Since the demand for export of jute yarn from India was sluggish, Cheviot is taking initiatives to export other diversified jute products including shopping bags, geo-textiles products and conventional and decorative hessian products. There are certain peculiar features and risks associated with the jute market in India. The business depends on the availability of raw jute which is

Good Free Cash Flows (Rs crore)

Debt:Equity Ratio 0.08

30

0.06 20 0.04 10 0.02

0.00

0 2012

2013 Free Cash Flows

2014

2015

2016

Debt:Equity Ratio

essential for the smooth functioning of mills. The production of raw jute is subject to the vagaries of nature. If there is a shortage of raw jute, like that witnessed in a part of FY15-16, business is adversely affected. Bangladesh, which dominates the jute market, also imposed certain restrictions during the year on the export of raw jute to keep supply smooth in its domestic market. Also, certain restrictions may be imposed by the regulator, the jute commissioner. The procurement level by the government for packaging food grains determines the demand in the domestic market. Lastly, the industry is finding it difficult attract new generation 

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.

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STOCK WATCH

 of labourers.

The general al trend, on a worldwide basis, is to move towardss eco-friendly and nd bio-degradablee materials like jute. It is expected that plastic shopping ng bags will be, to some extent, t, replaced by jute bags. But this has te bags been the hope for decades now. Similarly, man-made fibres may be replaced by jute which is a natural fibre. There are expectations among analysts that, since

J B C h e mi c a l s & P harm ac e ut ic al s

Good Chemistry

T

he stock of JB Chemicals and Pharmaceuticals has been buzzing for the past few months, thanks to some positive news. In last June, the United States Food and Drug Administration (USFDA) approved its tablet manufacturing facility at Panoli (Gujarat). The stock surged by 11%. Recently, it went

jute bags are eco-friendly, the demand for them will jut increase in the years ahead which will benefit players inc like Cheviot. Cheviot has generated • High H operating leverage positive free a and an exceptionally high cash flows in n profit margin net the past few D • Domestic revenues jumped years. This has enabled b 61%, but exports by it to remain d declined by 12% in FY15-16 a virtually debt-free. The promoter holding is high, at 75%. The stock trades prom at a trailing price-to-earnings (P/E) multiple of around 11 times. The return on equity (RoE) stands at around 11% and return on capital employed (RoCE) at around 13%, based on trailing 12 months’ earnings. 

pharmaceutical formulations, herbal remedies and active pharmaceutical ingredients (APIs). These are in different dosage forms including tablets, injectibles, creams & ointments, lozenges, herbal liquids and capsules. It exports to many countries worldwide and has a presence in US, Europe, Australia, South Africa, Russia and CIS and other developing countries. It also continues to invest, to grow its share in the regulated markets of US, Europe and Australia. In the past fiscal year, exports to the US and South Africa performed well and increased by 41% and 23%, respectively. Exports accounted for a significant 58% of its net sales in FY15-16. Its domestic formulations business registered a growth of 13% during FY15-16 while sales 

A Small Rise in Debt:Equity (Rs crore)

Debt:Equity Ratio 0.16

100

0.12

0.08

0

up 14%, hitting its life-time high of Rs357, after reporting its June quarter results. It reported impressive growth in stand-alone profits by 26% year-on-year (y-o-y) while its revenue growth for the quarter stood at 9%. JB Chemicals makes a diverse range of

0.04

0.00

-100 12-13

13-14 Free Cash Flows

14-15

15-16

Debt:Equity Ratio

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STOCK WATCH

 of its focus products rose by

Community (SADC) countries. It is also creating an impressive 19% during • Exports accounted for a significant additional capacity for the year. 58% of its net sales in FY15-16 the formulations business During the year, • It raised its interest in Biotech (including tablets, liquid, JB Chemicals raised Laboratories (Pty) Ltd to 95.24% from ointments, vials, eye-drops its interest in Biotech and lozenges) and also Laboratories (Pty) Ltd to 49% to expand its business in high for its API business. This 95.24% from 49%. Due to potential African countries investment is expected to this, Biotech Laboratories • Its capex is funded largely with generate additional growth in has become its subsidiary. internal accruals the near future. Due to good With this stake rise, the cash flows from operating management intends activities, this capex is being funded largely through to expand its business in high potential countries internal accruals, an extremely good sign.  like South Africa and South African Development

Mi ndt r e e

Small Software Stocks: Cyclical Revenues?

O

n 6th September, Mindtree announced a profit warning. It said that there will be a further decline in revenue and margins in the second quarter of this fiscal, compared with the previous quarter.

by seven times, should not be surprising for those who are aware of an important difference between smaller software stocks and the larger ones. The stock prices of smaller companies are more volatile. The reason is simple: their businesses are more volatile too. One way to calculate volatility is to examine the standard deviation (variability against the average) of sales. From the chart, it is clear that the standard deviation of the year-on-year (y-o-y) revenue growth for the past six quarters from March 2015 to June 2016, is lower for TCS and HCL Tech compared to that of Mindtree, Hexaware and Tech Mahindra. The revenues of TCS have steadily risen from Rs24,220 crore in March 2015 quarter to Rs29,305 crore in Jun 2016 maintaining a steady growth in the range of 12%-18%, thus signalling a very low volatility, or standard deviation of 2.2%. The revenues for HCL Technologies have grown y-o-y from Rs9,267



Volatility of Revenues 9%

6%

This comes on the back of: 1) cross-currency impact; 2) project cancellations and slower ramp up by a few large clients; and 3) continued weakness in its UK subsidiary, Bluefin. The stock, which has been weak for a while, fell by more than 5% on the day the profit-warning came, hitting a two-year low. This warning from Mindtree, which has been one of the strongest software stocks in the 2012-16 period, rising

3%

0% HCL Tech

Infosys

TCS

Mindtree Hexaware

Tech Mahindra

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STOCK WATCH

 crore in March 2015 to Rs11,336 crores in June 2016,

signalling stability at a low standard deviation of 3.6%. Infosys, among the large-cap stocks, seems to have a relatively higher volatility at 6.4%; but this was due to a one-time abnormally low y-o-y growth in the March 2015 quarter, of 4%. For all the following quarters up to Jun 2016, revenue growth has been consistently in the range of 13% to 23%; 23% was the highest y-o-y growth in March 2016. After a long period of struggle up to mid-2013, Mindtree was able to deliver strong y-o-y revenue growth, from 9.7% in March 2015 to 32.92% in March 2016, dipping down to 25.56% in only June 2016. In absolute terms, revenue had risen from

JK Tyre

Stagnant Profit, Rising Stock Price

T

he stock of JK Tyre & Industries Ltd (JK Tyre) has been shooting up ever since early August. From around Rs90 on 4th August, the stock has gone up to over Rs140 in a month. What’s going on? JK Tyre has completed the second phase of construction of its plant at Chennai which makes car and truck redials. Earlier, in April, JK Tyre completed the acquisition of a 64% 4% stake in Cavendish Industries at an enterprise value of around Rs2,200 crore. Cavendish, a unit of Kesoram Industries, has plants located in Laksar (Haridwar, UP) for manufacture of tyres, tubes and flaps. JK Tyree has also announced its plans to enter the aviation market which is a very lucrative segment. Yet, the price rise is a mystery, given JK Tyre’s stagnant revenues and profits since the quarter ended 31 March 2015. Barring a period of high growth in 2013-15, revenues have been stagnant over the past five years. It has reported an average revenue growth rate of merely 3% during these years. However, it has done exceedingly well in profit growth. From a loss of Rs32 crore for the year ended 31 March 2012, its profits have risen consistently over the years. Tyre companies enjoyed a surge in profits between June 2014 and

Rs904 crore in March 2015 quarter to Rs1,203 crore June 2016 quarter. All this resulted in a high volatility, at 8.36% of standard deviation, for Mindtree. And now, suddenly, it has announced that it will not meet its revenue and profit guidance. Revenues for Hexaware Technologies declined from 21.15% y-o-y growth in the quarter March 2015 to 12.62% in the latest quarter, June 2016, justifying the relatively high standard deviation. Tech Mahindra also displays a trajectory similar to Hexaware with the y-o-y quarterly revenue growth dwindling from 20.93% in March 2015 to 9.96% in June 2016. Smaller software companies are more cyclical in their revenues; this makes their stocks also cyclical. 

March 2015 as rubber prices fell sharply. Natural rubber prices have declined from around Rs220/kg in June 2011 to a low of around Rs95/kg in February 2016. While rubber prices remained subdued for much of 2015, a slowdown in China led to large-scale imports of Chinese tyres that affected the revenue growth. Import of Chinese tyres in the truck and bus redials (TBR) segment has risen by over 40% year-onyear (y-o-y) for the June 2016 quarter. JK Tyre trades at a price-to-earnings (P/E) multiple of eight times its trailing 12 months’ earnings. Apollo, Ceat, MRF and TVS Srichakra, too, are valued at 9–11 times their earnings. The reason why these stocks are so inexpensive, thes even in a bull market, is this: ev the t market is unsure about the trend in natural rubber prices which have been rising over the past few months. However, it seems that the market is estimating that tyre companies will w enjoy a period of growth and can absorb higher cost of an raw materials. On the positive front, since JK Tyre has already carried out significant capacity expansion, it may not require much capital expenditure in the next few years. This may help keep the debt:equity ratio stable. JK Tyre’s debt:equity ratio has declined since March 2013 when it stood at 3.06. It fell to 1.66 on 31 March 2016. In 2014-15, there was a slight rise in debt due to negative free cash flows. However, the debt:equity ratio declined to 2.12 from 2.51 on 31 March 2014. In the past five years, there were robust free cash flows only in 201314 and 2015-16. 

MONEYLIFE | 16-29 Sep 2016 | 46

StockWatch.indd 6

09-09-2016 18:14:05

STOCK WATCH

UN UOTED STORIES OF PRICE MANIPULATION

Optimus Finance (Rs32) (Rs)

O

ptimus Finance (earlier known as Transpek Finance) operates in two business segments—financing & investing activities and manufacturing & trading in chemicals. It has one subsidiary, namely, Maximus International, engaged in importing, trading and exporting various products. This Gujarat-based company reported a consolidated loss of nearly Rs0.36 crore for the year ended March 2016. For the quarter ended June 2016, the micro-cap stock reported a consolidated profit of Rs0.15 crore compared to a loss of Rs0.20 crore for the quarter ended March 2016.

40

30

878%

20

10

0 Jan-14

May-15

Sep-16

However, its consolidated financial reporting has been inconsistent. While it reported its consolidated numbers in FY12-13 and FY13-14, there was no

consolidated revenue statement for FY14-15. Despite such poor disclosures and financials, the stock price has shot up. From a low of Rs3.60 on 22 January 2014, it zoomed to Rs35.2 on 7 September 2016, up 878% or nearly nine times. In fact, over the past one year, the price has nearly tripled from around Rs13 at the beginning of September 2015. Over the past one year, the stock has had a median of just three trades a day; about 5001,000 shares have been traded. As on 30 June 2016, Optimus Finance had just 2,819 individual shareholders. Are there some individuals who are interested taking the stock price up? Will the regulator investigate? 

MARKET TREND

Be Cautious

Irisks are rising. I had mentioned that, trend is a friend n my previous piece on the market, I had written that

until its ends, and perhaps it is time to consider whether the medium-term trend is coming to an end. The Sensex was struggling to go past 28,200 and seemed to be weak, since foreign and domestic institutional ional investors were selling. At that time, the Sensex was as 27,782. At the time of writing this piece, it was as 28,797. It is up 1,100 points over two weeks. ks. At the current levels, the Nifty and the Sensex have gone into a seriously overvalued zone. If you buy when the market P/E is 24+, you are not likely to make much money oney over the next few years, unless you are very careful ful with your stock selection. The main hope for bulls is that the earnings will revive. Even so, valuations are truly expensive, according to a research report by Kotak Securities. Alarmed by high valuation of mid-cap stocks, Kotak has taken the bold step of removing its recommendations of mid-caps, altogether. “We have had to change several mid-cap stocks over the past few months on rapid

increase in stock prices and even their replacements do not offer much upside to our 12-month fair valuations,” says the report. Kotak also feels that emerging market (EM) rally may be over. “The accelerated foreign fund flows into EMs over the past 2-3 months reflect investors’ pursuit of higher high yields in EMs on assurance of more monetary accommodation by global central banks post acco the ‘Brexit’ referendum.” The report also says that investors should “expect modest returns from here he for the Indian market... The market has been front-running potential positive domestic news and events which suggests dom that returns from the Indian market will be r fairly modest from here. We note that valuations m in the consumption sectors are very rich (absurdly so in several cases) and the investment environment has significantly worsened in external sectors such as IT and pharmaceuticals. Finally, the domestic economy is showing little signs of a broad-based recovery. We are left with very few sectors and stocks to choose from.” Be cautious. — Debashis Basu 

47 | 16-29 Sep 2016 | MONEYLIFE

StockWatch.indd 7

09-09-2016 18:14:37

3 Long-term Stockletters for Excellent Returns Panther

Antelope

Lion

(includes dividend)

(includes dividend)

(includes dividend)

59.19%*

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

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

Long-term value stocks. Usually large companies are selected

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

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

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

Facts about the Stockletters What is the difference among these stockletters? The stockletters are for stocks for long term but with specific emphases. We hope to have a maximum of 25 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 them still? These are all excellent stocks we have selected in long -term stockletters.

Stockletter (MSSN) Ad Oct 15.indd 2

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

29-07-2016 15:57:45

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

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

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

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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09-09-2016 17:33:41

TECHNOLOGY MOBILE

How Can You Benefit from UPI? The best part of UPI is that it uses a unique ID that is linked only with a bank account without revealing its details, finds Yogesh Sapkale

N

ational Payments Corporation of India (NPCI) has launched a new payment solution which actually is a much improved way, in terms of ease of use, over the previous one, IMPS (Immediate Payment Service). This new solution, unified payments interface (UPI), allows customers to use virtual payment addresses, like myname@abcbank, as payment identifier for sending and collecting money. This UPI works on a single click, two-factor authentication. Two factors that work in favour of UPI are: 1) an option to push or pull financial transaction on schedule; and 2) linking it with only a bank account. The linking of UPI to a bank account, without revealing account details, should eliminate security concerns, largely.

How It Works First, as a user, you need to register with your payment service-provider (PSP) and create a virtual payment address (VPA), before sending or receiving funds using UPI and link it to your account. Also, remember, this UPI can be linked only with a bank account and not to a wallet. Money can be transferred either by using VPA or the bank account number and Indian Financial System Code (IFSC). For transactions using VPA, the fund und receiver also needs to have a VPA or account number and IFSC. The various channels for or transferring funds unds using UPI are: 1. Transfer through

virtual ID; 2. Account number + IFSC; 3. Collect / Pull money based on virtual ID (VPA). UPI also provides an option for scheduling push & pull transactions for various purposes like sharing bills among peers. One can use the UPI app instead of paying cash on delivery on receipt of product from online shopping websites. It can also be used for miscellaneous expenses, like paying utility bills, overthe-counter payments, barcode (scan and pay)-based payments, donations, school fees and other such cases. The interface is an advanced version of Immediate Payment Service (IMPS), which is a 24X7 funds transfer service. UPI allows a customer to have multiple virtual addresses for multiple accounts in various banks.

Security To ensure privacy of customer’s data, there is no account number mapper anywhere other than with the customer’s own bank. This allows the customer to freely share the financial address with others. A customer can also decide to use the mobile number as the name instead of the short name for the virtual address like 1234567890@xyz. The VPA acts as a financial address without having to reveal the bank account number and IFSC code. Once registered for VPA, users can send and receive payments instantly from any bank account using their mobile phone in a safe and secure way. They will also be able to make payments to merchants from their mobile phones where UPI is accepted as a payment mode.

How Much Money Can Be Transferred? Users can make payments with UPI 24x7 on all days, bank holidays, up to a maximum of including b Rs1 lakh. At present, 21 banks are on board with NPCI for tthe UPI application. In addition, this app is only on Android-based mobile phones. available o Here aare the names of banks and their official app (available on Google Play): Federal Bank (Lotza), Bank of Maharashtra (Maha UPI), TJSB Bank (TRANZAPP-UPI), Karnataka Bank SMARTZ (UPI)), DCB Bank (DCB Bank UPI (KBL SMA Union Bank of India (Union Bank UPI App), App), Unio Bank (VIJAYA UPI), United Bank of India Vijaya Ban (UNITED UPI), Punjab National Bank (PNB UPI), Axis (Axis Pay), South Indian Bank (SIB M-Pay (UPI Bank (Axi Syrian Bank (CSB-UPI), ICICI Bank Pay)), Catholic Cath (Pockets), Andhra Bank (Andhra ONE), UCO Bank (UCO-UPI), YES Bank and Canara Bank (Empower).  (UCO-UPI

MONEYLIFE | 16-29 Sep 2016 | 50

Technology.indd 1

09-09-2016 18:15:47

UNBIASED INFORMATION: MAS 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 MAS 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 MAS 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 MAS premium membership.

About MAS

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

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29-07-2016 16:09:26

Supported By

Carrying Loss Forward for LLP

Queries I At Moneylife Foundation’s

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

NRI Investing under Resident’s Name

I

am a non-resident Indian (NRI). I used to send money to my wife's account which was invested in mutual funds in her name. She is a resident Indian. Later, I was advised to open a non-resident external account and made investments in my name. All the earlier investments are still in her name. My query is: Should I continue to invest in her name? I also intend to transfer to her account, the amount realised from sale of property in my nonresident ordinary account, since costs, like brokerage, portfolio investment scheme (PIS) charges, tax deducted at source (TDS), etc, for NRIs are high and there are a lot of hassles in tracking. My wife is a homemaker, with no source of income. Ameet Patel’s Reply: For the investments made in her name, as and when these are sold, some capital gains/loss may arise. That would be your wife’s capital gain or loss. If any dividend and interest is earned on those investments, that income will also be your wife’s income and would have to be offered for tax (if it is taxable). If her total income is below the threshold limit, she need not file a return of income. It is always advisable to show such investments, made in the wife’s

name, as having been made out of loans given by the husband (and not gift). This would, obviously, mean that, at some point of time, the loan needs to be repaid to you. There is no written law or rule about the period for which the loan can be given. Similarly, there is no law that forces a husband to charge interest on loan given to his wife. Therefore, your wife may continue to hold the investments in her name. As regards the immovable property owned by you, merely receiving the money in her bank account does not mean that you will be saved the tax and other charges. If you are the owner of a property, it is you who will have to show the capital gains on sale of the property. Even presuming that the sale proceeds are received into your bank account, you will still need to show that capital gains in your tax returns. If the seller of a property is an NRI under Income-tax Act, the buyer will have to deduct tax as per Section 195. This will be @20%. You cannot avoid this. Therefore, it would be advisable to not resort to any ‘planning’ to avoid the tax and other consequences by attracting the sale as made by your wife. Ultimately, it is the real owner who will have to show the sale, income and TDS in his hands.

f a new share-broking LLP business start-up has a net loss for FY15-16, how are the tax returns to be shown? This is because the partners’ capital is also negative and the due date is also approaching; so the loss cannot be carried forward to the next year. Ameet Patel’s Reply: Section 139 of the Income-Tax Act says that if a taxpayer with business income has suffered a loss in any year and there is inadequate income from other heads to set off the loss, the unabsorbed loss can be carried forward to the next year, provided the return of income is filed within the prescribed time limit. If your business turnover exceeded the limit under Section 44AB of the Act, you need to get a tax audit done. In that case, your due date is 30 September 2016. Otherwise, your due date was 31 July 2016 which was extended to 5 August 2016). If you do not file returns within the prescribed time limit, the loss incurred will go waste. That cannot be carried forward to the next year.

Tax on SCSS deposits

I

have Rs5 lakh cash and I wish to deposit this in Senior Citizen Saving Scheme under my mother’s name. We live together. I plan to spend the interest from this deposit for household expenses. Will the interest be subject to my income tax? My mother is in no income tax bracket. Nikhil Vadia’s Reply: The first issue is how you will deposit so much cash in bank without being in tax department’s glare. Interest on SCSS deposit is taxable subject to income tax slabs. You can give Form 15H for non-deduction of TDS, if income is below the taxable limit. 

MONEYLIFE | 16-29 Sep 2016 | 52

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09-09-2016 18:16:53

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Tax Helpline.indd 1

29-07-2016 17:49:42

USEFUL APPS YAZDI TANTRA

Intelligencetest: Test Your IQ Levels ntelligencetest.com is a website which tests your IQ. Take a simple 15-minute test and get your IQ score instantly. The results give a detailed analysis of your skills of various types, how you fared and information on what is the average score of people in your sex / age profile. Be careful; you can take only one test in a day. So start the test only when you have 15 minutes to spare, at a stretch. If you miss out, you can try again after 24 hours. Besides the IQ test, it has many puzzles, mind games, facts and trivia and general knowledge resources. If you are a puzzle freak or just want to evaluate yourself one-time, this site will be fun to play with!

take a break! The breaks can be scheduled, or instant, depending on your needs. During these ‘break’ times, the child’s ability to use their device—everything from apps to the Internet to texting and calling friends—is temporarily disabled; only incoming calls are allowed while you spend quality time together. Kids can even see the countdown of how much time remains before they are able to access their device again, without any distractions from schoolwork, spending time with the family, or even getting to bed on time. The upgrade version, which requires a one-time payment, also lets you see what your kids are up to, in real time and add up to five kids to the app. If you need to add a second parent, you can do that too. Interesting and useful for new-age parents handling newer-age kids!

OnlineChartTool: Tell It Visually

Gaana: A Giant Storehouse of Bollywood Songs

C

F

I

harts are a great tool because they communicate information visually. At Onlinecharttool.com, you can design and share your own charts online and for free. They support a number of different chart types like: bar charts, pie charts, line charts, bubble charts and radar plots. You can create your own elaborate charts in a jiffy. Just click on Design Your Chart, select the type of chart, add data, add labels and fonts; and you are ready to preview your chart! You can then share and save your chart, download it on your computer, publish it online on Facebook or Twitter and also email it to yourself and others. A simple way to create charts without any technical knowledge / jargon.

Dinnertime Plus: Stop Them Playing during Dinner

D

innertime Plus is a wonderful app to ensure that your kids join you uninterrupted during dinner time. Nowadays, it is normal to see kids playing with their devices all through dinner. This app allows you to pause any activity on the kids’ phones for 30 minutes, one hour, or even 24 hours. This can be done remotely from the parent’s device. You also have options for bedtime and

or all you Bollywood song freaks, Gaana.com is a treat! It’s a giant repertoire of Bollywood songs, searchable by artist, song, album, playlist and radio. You can create your own playlists of your favourite songs / albums or artists. Once you start playing, you can keep it on, in the background and continue doing what you were doing. You can even share what you are hearing, live on Facebook, so that your friends know what you are currently enjoying. You can also view what your friends’ favourites are. You have an option for radio hits too which you can switch on and which will play without any breaks or ads. There is a free app to download on your mobile and you can carry your music wherever you go. If you enjoy Bollywood music, you will enjoy Gaana.com! http:// goo.gl/OuaEdq  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 | 16-29 Sep 2016 | 54

Tantra - column.indd 1

09-09-2016 18:19:27

HANDHOLDING: MAS Benefit #11

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

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

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

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

MONEYLIFE ADVISORY FIX YOUR FINANCES, FOREVER

www.savers.moneylife.in

MSSN Handholding.indd 1

29-07-2016 16:08:23

HEALTH BM HEGDE

Great News for Doctors as Lawyers Train Their Guns on Drug Firms

I

was just watching news in New York, a few weeks back, and came upon an advertisement. A lawyers’ firm in New York was inviting patients to send information on the side-effects of drugs they were taking to them directly so that they could get the patient compensation from the multinational petrochemicals corporations called the drug companies! Normally, one comes across such advertisements to sue doctors for malpractice, negligence and what have you. I then learnt that the US now permits drug companies to be sued directly for dangerous sideeffects of drugs. This must have been a great relief to American doctors who were the target of the ambulancechasing lawyers so far. Now, the lawyers, armed with this new law, are after the drug companies as they are the real large sharks that net trillions of dollars compared to doctors and hospitals that look like small fry now. Soon, there will be legal firms specialising in attacking the drug lords

instead of poor doctors. When this gathers full steam, many of our doctors need not have the anxiety of being sued for anything and everything. One of the advertisements that I saw looked like the pharmacology textbook’s chapter on statins. The lawyer was saying that almost everyone on statins gets muscle damage with or without symptoms like muscle-ache, etc. Between 10%-47% of people on statins become diabetics within their first year on statins; kidney damage is not unusual; and liver damage is a certainty. “If you have any one of those symptoms, do write to us and we will get maximum damage from the drug companies for you. No legal fees. If we win, we will share the booty.” So went the message of the advertisement. Does that not look attractive? While it is good for doctors to feel safe, it is good for

the patients also, since the drug companies may not go out of their way to wine and dine doctors to prescribe their medicines for indications for which they have not been permitted in the first place. Interestingly, this law does not cover vaccination injuries! Vaccine manufacturers must be richest among the drug lords, hence, they could make the government exempt them from this law. Extending this further, very soon, the cunning angiogram/angioplasty industrialists might pass on their mistakes on the devicemakers. The man-on-the-street has so much faith on the chemical drugs and surgery as the custodians of their well-being and their lives that they are ready to accept anything, in the name of science. Truth is otherwise. A substantial part of human healing is well outside the realm of materialistic reductionist science. Thinkers in mainline science seem to have woken up. In an article, in 2011, Michael Crow, the president of the Arizona State University and a leading science administrator, wrote that the US National Institutes of Health’s annual budget of $30 billion should not be just confined to molecular biological and other conventional ways of looking at human health; it must also look at health as a human experience in its biological, sociological and environmental angles. People’s feelings, their emotions and beliefs also matter in personal and societal health. I feel, we should be less arrogant about our scientific knowledge. Did our ancestors know how to communicate with plants and animals to know about our present knowledge of herbal and animal sources of therapy? With the Damocles’ sword hanging no longer on their necks of consumers’ claims, doctors should now be able to think outside the box for better intervention outcomes. With humility, better sense would prevail. Long live the time-honoured doctor-patient relationship which is very sacred and does the main job in healing, anyway. Let not mankind perish from the reductionist side-effects of drugs eventually.  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 | 16-29 Sep 2016 | 56

BM Hegde.indd 2

07-09-2016 20:04:43

HEALTH BM HEGDE

ALCOHOL AND FERTILITY

nervous system, kidney and liver, headaches and, rare, but serious, skin hen fertility clinics MEDICAL DEVELOPMENTS FROM conditions such as Stevens are doing very good AROUND THE WORLD Johnson syndrome and business, it is worthwhile toxic epidermal necrolysis. to look for avoidable She is asking for strict regulations preventive measures for normalising were 7,306 who suffered injuries to avoid serious damage. God only fertility. Although it might break the from medical complications and knows how many people have come drug treatments, and 8,331 who rice-bowl of these clinics, it would had injuries resulting from accidents to grief in India. Let us do a survey be good for mankind. Alcohol and build some guidelines sooner and self-harm that resulted in intake, as little as 14 units in a rather than later. hospital admission during the week, during the time when the diagnostic period. These were lady is trying to get pregnant, might Swedish patients. Central nervous significantly reduce her chances of US SURGEON-GENERAL, system and colorectal cancers had getting pregnant. This is a result DR VIVEK MURTHY, WARNS 14% increased risk and the risk, of a large cohort study. If I were to AGAINST PAINKILLERS! to a certain extent, depended on advise in an editorial in the same n a historic first in the USA, the socio-economic status of the journal (wishful thinking), I would the surgeon-general, the most patient! have said that alcohol damages powerful Federal government Psychiatric side-effects are also every single human organ, the officer, has sent letters to 2.3 million noted during investigations and, doctors there, asking “for their help later, on chemotherapy, in addition to end the epidemic of prescription to physical injuries that could be painkiller overdose deaths.” The quite serious. Investigations should landmark letter is a signal to be done, especially the invasive doctors across the country that it ones, only when it can give more is time for something to be done information for better management. about thee growing opioid painkiller problem in America. A humane CONCERNS OVER SKIN mane Indiandose notwithstanding and, as such, born doctor tor from BLEACHING doctors must discourage people lack is beautiful is an old adage; Karnataka, ka, from drinking alcohol routinely. Dr but, these days, everyone, Ranging from cardio-myopathy and including men, is desperate to Murthy, sudden death, to cancer and now wrote a become fairer. We see that many fertility, alcohol is a curse. Yet, we sensible people, many in the film industry, encourage alcohol intake socially. article a have suddenly becomes very fair. Some doctors, even today, tell their month ago A dermatologist in England did go about the sad state patients that alcohol, in small doses, a study to show that one of the of affairs in the medical field in is good for heart health. In fact, that country run by the moneybags. common ingredients of the fairness female alcoholism can adversely Readers of my column would treatment, internally and locally, is affect the menstrual cycle and male remember my fight against these glutathione. alcoholism could reduce the sperm menaces, for decades. I am happy Ophalia Dadzie, a consultant count! that a fellow Indian-born surgeondermatologist at Hillingdon Hospital and the director of London general has echoed my sentiments. In his letter, Dr Murthy discusses Ethnic Skin Ltd, has discovered PATIENTS WITH CANCER AT serious side-effects after intravenous how many doctors have been RISK DURING DIAGNOSIS incorrectly taught that opioids were (IV) use of glutathione along with ancer is a difficult disease for not addictive “when prescribed for local use. Most of these are done the patient; but recent studies legitimate pain.” Dr Murthy goes in beauty parlours where even the have shown that medical diagnostic on to lament that many doctors hygiene of IV injections is seriously interventions may often make them were “encouraged to be more compromised. Potential adverse more miserable for due to injuries. aggressive about treating pain.”  side-effects include toxicity of the Among 720,901 patients, there

W

I

B

C

57 | 16-29 Sep 2016 | MONEYLIFE

BM Hegde.indd 3

07-09-2016 20:05:09

LEGALLY SPEAKING SD ISRANI

Nomination Does Not Give Ownership Rights

I

Having got wind of the transfer of the membership of t is said that in life only two things are certain—death and taxes. So far as taxes are concerned, the person the Society to the name of his sister, the son addressed a himself faces the music; but, in case of death of a letter to the deputy registrar for cooperative societies, on person, it is his near and dear ones who have to deal with behalf of his mother. In the letter, the son asserted that the the hassles. Over the years, thanks to rising prosperity, membership of the flat should be transferred to the name it is now common to find individuals having insurance of his mother. The son also sent a letter, on behalf of his mother, to policies, bank accounts and also owning an apartment in a cooperative housing society. In the secretary of the housing society, such cases, inheritance issues arise reiterating his previous assertion, that the flat should be transferred after the death of the person and to the name of the mother. legal heirs may drag the insurance company, bank or the housing In response, the secretary of the society to court, to enforce their Society informed that the name of claims. the daughter was recorded by the To simplify the task of handing father himself as his nominee in over insurance policy proceeds respect of the said flat. The deputy after the death of the policyholder, registrar, cooperative societies, held or transferring the bank account, that the flat-owner had actually or membership of the housing nominated his wife as the nominee society, there are provisions in the (in terms of the nomination respective laws for appointment stipulated under Section 79 of the 1983 Act). of a nominee. But these provisions The transfer of the flat in the are not clear-cut and are, often, contested. name of the daughter was declined In a recently decided case on the ground that the daughter, by the Supreme Court, the being a married, did not fall within issue about the nominee in a the definition of term ‘family’ as contemplated under the said cooperative housing society came up for consideration. Section 79. One Biswa Ranjan Sengupta Aggrieved with the decision (the flat-owner) was member of taken by the authorities, in rejecting To simplify the task of a cooperative housing society, her claim with reference to the handing over insurance Kolkata (the Society). He had a transfer of the flat, the daughter policy proceeds after the wife and two children—a daughter challenged the order of the deputy death of the policyholder, or registrar before the Calcutta High and a son. The flat-owner recorded transferring the bank account, Court. the name of his daughter as the or membership of the housing The writ petition was allowed nominee in terms of the provisions society, there are laws for of Section 79 of the West Bengal by a learned single judge of the appointment of a nominee. Cooperative Societies Act, 1983. High Court and it, inter-alia, But these provisions are, After the death of the flatheld that the deputy registrar of owner, his daughter asked the the cooperative societies was not often, contested Society to enter her name as justified to exclude the appellant, member in place of her father’s being a daughter of the flat-owner, name. The managing committee of the Society passed a from the purview of the provisions of the said Act. unanimous resolution to transfer the membership of the The High Court held that the married daughters were deceased flat-owner to the name of his daughter. not excluded from the purview of the relevant Section.

MONEYLIFE | 16-29 Sep 2016 | 58

Legally Speaking.indd 2

09-09-2016 18:22:30

LEGALLY SPEAKING SD ISRANI

 Having so concluded, the learned single judge of the

the money secured by the policy shall be paid in the event High Court directed the deputy registrar of cooperative of his death. societies to grant the necessary approval for transfer of If the nominee is a minor, the policyholder may appoint the membership in the name of the daughter as nominee any person to receive the money in the event of his death of the flat-owner. during the minority of the nominee. It means that, if the The mother and son duo challenged the order passed policyholder is alive when the policy matures for payment, by the single judge. The matter came before the division he alone will receive payment of the money due under the bench of the High Court for consideration. The division policy and not the nominee. Any such nomination may be bench, relying on some earlier judgements, passed an cancelled or changed at any time before the policy matures interesting order. for payment. The Supreme Court held that It held that it may not be possible for the Court to direct Nomination only indicates the the provision in Sub-section (6) of the mother and son to be joint Section 39 of the Life Insurance hand which is authorised to members along with the daughter; Act, which says that the amount receive the amount, on the shall be payable to the nominee, but, to protect their interest in the payment of which the insurer flat which they had inherited, it does not mean that the amount gets a valid discharge of its was necessary for the Society to shall belong to the nominee. liability under the policy. record their interest expressly in The nomination only indicates However, the amount can the share certificate as well as in the hand which is authorised be claimed by the heirs, in to receive the amount, on the its records pertaining to members. accordance with the law of More particularly, the High payment of which the insurer gets succession Court directed that an entry be a valid discharge of its liability made in the register of members under the policy. However, the as follows. The daughter, merely amount can be claimed by the heirs because the nomination was in her favour, cannot transfer of the life assured, in accordance with the law of succession the share in which she has a part interest; her share can governing them. only be transferred by express consent of all the heirs. Similarly, in the case of a flat in a cooperative society Being dissatisfied with the direction of the division discussed earlier, the apex court held that the nomination bench of the High Court, the daughter approached the of the daughter in the instant case was valid; so the Society Supreme Court by filing an appeal. Before dealing with was bound to register her name. At the same time, legal heirs the issue raised in the appeal, the Supreme Court made a could enforce their rights through the due process of law.  reference to the judgements relied on by the division bench in recording its conclusion. In that context, the apex court considered some cases relating to role of ‘nominee’ under the Life Insurance Act, 1938. SD Israni is a corporate lawyer & Fellow The Supreme Court analysed the provisions of Section of ICSI. Email: [email protected] 39 of the Life Insurance Act and noted that a holder of a policy of life insurance may nominate a person to whom

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

59 | 16-29 Sep 2016 | MONEYLIFE

Legally Speaking.indd 3

09-09-2016 18:23:10

YOU BE THE JUDGE BAPOO MALCOLM

Pity the Overworked Athlete

T

his author loves sports, and the bias may show. Professional sports were historically looked down upon. The British institutionalised them, classifying the amateur cricketer, usually a rich man’s son, as a ‘Gentleman’, and the working-class chap, earning a few pennies, as a ‘Player’. Talk of caste systems! Next came the Olympics. Professionals were pariahs, paid trainers disallowed, the best athletes banned. Iron Curtain dope-filled ‘sportsmen’ were taking home the ‘gold’. India had sports-persons who did not know where their working desks were. They got salaries, promotions, special rations, equipment—the best and for free—special leave, the works. They were still called amateurs! There were no legal remedies. Times change. Distinctions and barriers were erased. Reports flaunted the money earned. Legal suits followed. Professionalism in every sport, from cricket to kabaddi, brought legal heads to TV channels and promoters. Welcome to the wide, wonderful, world of sports litigation. America has major league baseball and minor league softball games. There is money; top guns make big bucks, marry film stars. The minor leaguers struggled to go ‘up the ladder’ with long hours, hard work. As with wage-earners of the ‘jitna daam, utna kaam’ persuasion, they felt that they were overworked and underpaid. They trooped to court. Their grouse was that their employers had run afoul of the California Fair Labour Standards Act. This law presupposes two things. One, only those below a certain salary can claim overtime and only for certain nature of the work. ‘Cerebral’ activity is excluded, as opposed to ‘manual’. It does not recognise artists, music composers and inventors, who work with originality, talent or creative features. That left the labourer, the clerk, the slogger, the run-of-the-mill worker, within the pale. The ball-players insisted on overtime pay. The issue was critical. Come December, the cut-off salary was due to almost double, bringing in many other claimants, including the better-paid minor stars. The

bosses countered, “Nothing doing, the players are not labourers.” You be the judge. On which side would you lean and why? Which category did the baseball-players fit into? Was their work manual or creative? Would a ‘touch artist’, like Ramanathan Krishnan, be excluded, while a slogger, like McEnroe, be eligible? Which player would be better qualified for relief, a smart pitcher or a solid batter? Finally, had the honourable judge ever played baseball to sufficiently understand the nuances? Then there was that can of worms. Other support staff would follow the players. The ball-boys (and girls) in tennis, the mechanics in motor sports, the horsehandlers, the pitch curators, the rain-cover guys, the markers in snooker and billiards, maybe even the twelfth man who runs up with the drinks. The judge rejected the plaint. He based his decision on the argument that there was no basis of a commonality of the collective-action claim. The leaguers could not approach the court as class-action plaintiffs. While this would mean that individual athletes could ask for damages, each case would have to be filed, argued and determined separately. What you cannot get collectively, you may get individually. More suits, more time spent, more fees collected. Wonders never cease. The matter was now pregnant with problems. To stymie a slew of court cases, the legislature is working extra hours to introduce special legislation for the Minor League. Whether it will work for other sports is to be seen; but, in the meantime, who will look after the interests of the lawmakers? Having burnt midnight oil, are they not also eligible for overtime pay? It all depends on whether they admit that their work is non-cerebral. Most voters may agree.  Bapoo Malcolm is a practising lawyer in Mumbai. Please email your comments to [email protected]

MONEYLIFE | 16-29 Sep 2016 | 60

You Be the Judge.indd 2

09-09-2016 18:23:54

ML FOUNDATION EVENTS

POLICE & YOU, THE 12-WEEK SERIES

Cybercrimes: Know Your Rights

“W

ith changing times, the face or interface of crime has changed and criminals have become faceless in cyberspace. In cyberspace, you are fooled because fraudsters are smarter than you are. So be cautious, alert and on the vigil; only that will protect you in the cyberspace,” said Sanjay Saxena, joint commissioner of police (crime), Mumbai. Mr Saxena, a 1993-batch IPS officer, who was special inspector general with Force One, an elite counter-terrorism wing of Maharashtra police formed after the 26/11 terror attack, was speaking as the chief guest at the seventh session of the “Police & You” series of Moneylife Foundation. Moneylife Foundation, with Police Reforms Watch and support from Saraswat Bank, has launched the 12-week programme (every Wednesday) that aims to spread knowledge about protecting yourself, your rights, the Indian Penal Code (IPC), cybercrime and economic offences. This was the seventh session which also included presentations by advocate Prashant Mali and Ramesh Mohite, former police officer and director at Cyber-I Consultancy Services Pvt Ltd. Advocate Mali, who appears as an expert legal counsel in cybercrime and electronic and digital evidence-related cases, says, “Digital literacy, safety and security come with low awareness and knowledge of safeguards and laws governing the Internet usage. Laws in India, though enacted with full vigour, are not implemented with the same josh. Common IT users often do not know various sections of laws and their rights under the law.” The incidence of cybercrime is on the increase because of increased use of technology and its careless application. According to advocate Mali, every year, there are estimated 30 million incidents of bank phishing that cost crores of rupees to customers.

“Every month, I handle over 40 cases related to phishing and bank frauds. I would strongly urge everyone to change their password often and not share it with anyone, including your spouse, friends or even children. Secure your computer or laptop by activating a firewall and using good anti-virus and malware protection software. On social media, like Facebook Twitter and YouTube, keep your security settings at the highest point. Do not forget to secure your mobile phones and use updated apps and software. Be careful while sharing your personal information like name, address, contact number and financial information over Internet. And, if you are a victim, immediately report to the police and contact the right lawyer who knows about cybercrimes,” he said. 

Financial Crimes & Frauds: When and How To Approach the EOW

“G

reed is the main reason for people becoming victims of financial frauds or cheating. In fact, I was aghast to see people from all parts of the society falling prey to such schemes just because someone has promised them huge returns,” said S Jayakumar, the deputy commissioner of police, economic offences wing (EOW), Mumbai. He was speaking at the eighth session of the 12-week series “Police&You”. Mr Jayakumar, who has a commendable track record with postings at Malegaon as assistant commissioner of police (ACP) after a bomb blast and Naxal-infested Gadchiroli as superintendent of police (SP) during an election, says, “Irrespective of their reputation and achievements, people put their money into fraudulent schemes. I agree we are lagging behind in alerting S Jayakumar, Mahesh Aathavale, people. However, DCP former Police officer since we have to deal with people from across the strata, it becomes difficult to reach out to everyone. But we are doing our best and would do more to create awareness about these financial scams”. The multi-level marketing was conducted by Mr Jayakumar and Mahesh Aathavale, a former officer from Mumbai Police. Mr Athavale shared details of action taken, or being taken, on MLM (multi-level marketing) companies, like QNet, across the globe. He told the audience how, in 2002, the Australian government named QNet, GoldQuest and QuestNet as pyramid schemes. 

61 | 16-29 Sep 2016 | MONEYLIFE

Event.indd 2

09-09-2016 18:24:58

BOOKS

The Ocean of Churn

Alternative History

M

any have probably read how Sanjeev Sanyal, a thoughtful historian, economist and urban planner, has torn to shreds, Ashoka’s reputation as a pacifist. In case you didn’t, here is his story of the real Ashoka. In 274BC, Bindusara, son of Chandragupta, died. The crown prince, Sushima, was on the north-western frontier fighting incursions. When he rushed back to capital Pataliputra, he found that Ashoka, one of his half-brothers, had seized control. Ashoka got Sushima killed—possibly roasted alive! In the next four years, Ashoka seems to have killed all male rivals in his family. Buddhist texts mention that he killed 99 half-brothers and only spared his brother Tissa. Having consolidated his power, he was finally crowned emperor in 270BC. Ashoka invaded Kalinga a few years later and, shocked by the death and destruction he had wrought, converted to Buddhism and became a pacifist. Or, so we believe. THE OCEAN OF CHURN Sanyal argues that the rock SANJEEV SANYAL edicts tell us that he had Penguin Viking converted to Buddhism more Pages 297; Rs599 than two years earlier “and from what we know of his early rule, he was hardly a man to be easily shocked by the sight of blood.” Sanyal argues that the main evidence of Ashoka's repentance comes from his own inscriptions. “It is very curious, however, that this ‘regret’ is mentioned only in locations far away from Odisha (such as in Shahbazgarhi in north-western Pakistan) which can’t be challenged... If Ashoka was genuinely remorseful, he would have surely bothered to apologize to the people whom he had wronged. Far from it, he doesn’t even offer to free the captives. Even the supposedly regretful inscriptions include a clear threat of further violence against other groups like the forest tribes.” It is likely that it was pure propaganda by Ashoka to counter his reputation for cruelty. Indeed, the Buddhist text, Ashokavadana, tells us of more acts of genocide perpetrated many years after he supposedly turned pacifist; Ashoka once had 18,000 Ajivikas Jains

in Bengal put to death in a single episode. The job of any good book is to surprise us with facts, especially about known situations, and weave them in a flowing narrative to support an overarching theme. The Ocean of Churn does this very well. Sanyal skilfully weaves together stories picked from thousands of years history stretching from Europe to Southeast Asia to show how culture and commerce, religion and administration, family lineages and wars, kinship and genetics across centuries interacted around the Indian ocean. But this story has hardly been told from the perspective of those who lived around the Indian Ocean. Sanyal hopes to rectify that, with this book.

Pushed out of their base in Hugli, they (Portuguese) were reduced to piracy in Bengal and withdrew to Chittagong where they formed an alliance with the Arkanese king Thiri who believed that he was Buddha He has many surprises for us about our recent past, too, such as the role played by the revolutionaries in our freedom struggle. Sanyal argues that while the Netaji Subhash Chadra Bose’s role in the last stages of India’s freedom struggle is known, it was really the culmination of a strategy that had been devised decades ago. The simplest way to throw out the British was not civil disobedience but create a mutiny among the soldiers. After all, the backbone of the British empire was not the few British people who lived here but the vast army of Indian soldiers who fought for the British in many wars across the world. This was the plan of Rashbehari Bose, Sachindra Nath Sanyal (the author’s great grandfather), Har Dayal and others from the mid-1910s, influenced by Vinayak Savarkar. Another plan included bringing in arms across the sea from the east. Unfortunately, these plans failed each time. SN Sanyal was caught and sent to Cellular jail in Andaman and Bose fled to Japan. But the idea lived on and manifested years later with the dramatic escape of Subhash Bose from house arrest in Kolkata, contacting the Germans and the Japanese, and leading the charge with an Indian army from the east. Ultimately, Indian soldiers did rise up in mutiny in 1946 (naval revolt of Bombay). This short review only offers a flavour that the history we read is probably a deeply flawed. The stories appear more nuanced, global, richer and shaped by unsung heroes in Sanyal’s narrative, where Odiya and Omani seafarers, Chola and Chinese kings, Pallava and Portuguese warriors race through the pages. A must-read. — Debashis Basu 

MONEYLIFE | 16-29 Sep 2016 | 62

Book Review.indd 2

07-09-2016 20:06:22

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

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26-08-2016 17:34:17

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

The Sensex and the Nifty advanced 4% each during the fortnight ended 7 September 2016. ML Mega-cap Index and ML Large-cap Index advanced 4% and 3%, respectively. ML Small-cap Index and ML Mid-cap Index rose 2% each.

Foreigners: Foreign institutional investors were net buyers of stocks (Rs3,753.80 crore). They bought shares worth Rs40,847.66 crore. 

Share Prices Index, March 2016=100

1,450

FII Net Investments (Rs Crore)

1,010

130 570 120 130 110

-310 29 Aug-16

7 Sep-16

Indians: Domestic institutional investors were net buyers of stocks (Rs756.61 crore). They bought shares worth Rs17,333.43 crore. 

100

90 Mar-16

Jun-16 ML Large-cap ML Mid-cap

ML Small-cap ML Mega-cap

Sep-16 ML Micro-cap

Nifty Sensex

850

445

40

Index Sensex Nifty

26 Aug

07 Sep

+/-

27,782.25

28,926.36

4%

8,572.55

8,917.95

4%

ML Mega-cap Index

120.15

124.49

4%

ML Large-cap Index

119.35

122.38

3%

ML Small-cap Index

117.98

120.74

2%

ML Mid-cap Index

122.25

124.47

2%

60,150

ML Micro-cap Index

113.43

114.23

1%

57,930

-770 29 Aug-16

Bovespa

26 Aug

07 Sep

Change

55,710

Dalmia Bharat

1,494.80

1,788.45

20%

53,490

93.95

83.70

-11%

26 Aug

07 Sep

Change

23.50

33.10

41%

Jubilant Foodworks

1,207.25

1,087.45

-10%

Mid-cap Gainers/Losers

26 Aug

07 Sep

Change

46.60

85.25

83%

343.10

279.30

-19%

26 Aug

07 Sep

Change

Large-cap Gainers/Losers Hindustan Construction Co

Patel Engineering Kiri Industries Small-cap Gainers/Losers Pioneer Embroideries MBL Infrastructures Micro-cap Gainers/Losers C&C Constructions Lumax Automotive Systems (All Prices in Rs)

44.70

65.05

46%

114.30

76.20

-33%

26 Aug

07 Sep

Change

15.50

25.00

61%

35.75

26.05

-27%

7 Sep-16

GLOBAL MARKET TRENDS

Mega-cap Gainers/Losers

Idea Cellular

DII Net Investments (Rs Crore)

-365

51,270 49,050 Mar-16

Jun-16

Sep-16

Bovespa, Nikkei and Hang Seng advanced 4% each. NASDAQ Composite, S&P 500 and Shanghai Composite rose 1% each. The FTSE ended flat.  Index Bovespa

26 Aug

07 Sep

+/-

57,716

60,129@

4%

Nikkei

16,361

17,012

4%

Hang Seng

22,910

23,742

4%

Taiwan Weighted

9,132

9,259

1%

NASDAQ Composite

5,219

5,284

1%

Korean Composite

2,038

2,062

1%

S&P 500

2,169

2,186

1%

Shanghai Composite

3,070

3,092

1%

FTSE

6,838

6,847

0%

@ - 6 September 2016

MONEYLIFE | 16-29 Sep 2016 | 64

Money Fact.indd 2

09-09-2016 18:26:54

MONEY FACTS STOCKS



What’s H

T

ML SECTORAL TRENDS

Automobile companies were in demand during the fortnight. Tata Motors, Hero MotoCorp and Maruti Suzuki India soared 17%, 9% and 8%, respectively. Mahindra & Mahindra and Force Motors advanced 4% each.  Companies

Stocks of automobiles companies and retail companies advanced 8% each. Stocks of glass companies and banks rose 7% and 6%, respectively. Shares of telecom services companies declined 5%, while shares of printing & publishing companies and sugar companies fell 2% each. Shares of software & IT services companies fell 1%. 

26 Aug

07 Sep

+/-

ML Auto Index

Tata Motors

503.75

587.70

17%

140

TVS Motor Co

303.40

330.65

9%

Hero MotoCorp

3,316.80

3,609.85

9%

Maruti Suzuki India

4,920.90

5,338.00

8%

M&M

1,424.85

1,488.75

4%

ML Sectoral Trends

Force Motors

2,995.80

3,129.75

4%

Office Equipment

Bajaj Auto

2,858.25

2,985.85

4%

Eicher Motors

22,331

22,973.90

3%

Majestic Auto

96.30

99.05

130 120 110 100 90 Jun-16

What’s

Sep-16

Ashok Leyland

87.70

88.50

-5%

Auto

8% Printing & Publishing

-2%

Retail

8% Sugar

-2%

3%

Glass

7% Software & IT Serv

-1%

1%

Banks

6% Foods & Beverages

-1%

All Prices in Rs



Mar-16

9% Telecom services

FOOD INFLATION

N T

110

Combined food inflation increased to 7.87% in July 2016 compared with 7.46% recorded for June 2016. For rural and urban areas, food inflation in June was 7.84% and 7.95%, respectively. Vegetable prices increased by 13.98% in July compared with those prevailing in June 2016. Inflation in fruit

105

Continuing Upward Trend

Telecom services companies were a mixed bag. Idea Cellular and Tata Teleservices (Maharashtra) tumbled 11% and 9%, respectively. Reliance Communications and Bharti Airtel declined 7% each.  Companies

26 Aug

07 Sep

+/-

93.95

83.70

-11%

Tata Teleservices

6.60

5.98

-9%

Reliance Comm

53.95

49.95

-7%

Bharti Airtel

344.10

320.60

-7%

Tata Comm

524.60

519.35

-1%

100

Bharti Infratel

346.85

349.35

1%

95

20.85

21.80

5%

90

Idea Cellular

ML Telecom Service Index 115

8.00% Annual Change

MTNL

5.25%

Mar-16

All Prices in Rs

Jun-16

Sep-16

2.50%

BULK DEALS Date

Company

Jul-15 Buyer

Seller

30 Aug-16 Kalpataru Power

HSBC Global Invt Funds Indian

HSBC Global Inv Funds Mauritius

Rs Cr 84.11

06 Sep-16 IRB Infrastructure

HSBC Global Invt Funds Indian

HSBC Global Inv Funds Mauritius

70.76

29 Aug-16 Bodhtree Consulting

Anita Soni

Bodhtree Solutions

1.40

02 Sep-16 Scanpoint Geomatics Rajesh Chandubhai Thakkar

Karnavati Infrastructure Projects

0.39

06-09-2016 Suncare Traders

Sword Edge Commercials

Amrapali Capital and Finance Serv

0.24

30 Aug-16 Telecanor Global

Aarav Financial Services Pvt

Anita Rakeshkumar Ranka

0.12

06 Sep-16 Nalin Lease Finance

Dilipkumar Nalinkant Gandhi

Manishkumar Dashrathbhai Raval

0.05

Jan-16

Jul-16

prices was 3.53% in July, while pulses were dearer by 27.53% y-o-y. Inflation for cereals stood at 3.88% and inflation for milk products was 4.05%. Price rise of non-vegetarian items, such as meat and fish, was 6.49% in July compared with 6.60% in June 2016. 

65 | 16-29 Sep 2016 | MONEYLIFE

Money Fact.indd 3

09-09-2016 18:27:14

BEYOND MONEY

Reaching Out to the Families of the Brave-hearts

FOHF works closely with the armed forces to identify families of brave-hearts across the country. Its team of volunteers conducts programmes to commemorate our soldiers and spread the message of their service and sacrifice to the citizens to keep their memories alive. Shivani Sharma Dasmahapatra, programme director, FOHF says, “No one can bring back what they have lost, but for us it is of foremost importance to be there ow often does it happen that we are deeply moved for their families and let them know that they are not by the martyrdom of a brave soldier and want alone.” She points out that the nation comes together to to show support and solidarity to his distraught express grief when a brave-heart lays down his life for the family in a meaningful way? How many of us can actually nation; but public memory is short and everything is soon follow up on our feelings and do something about it? forgotten. Most people will answer in the negative. Well, here is an FOHF’s stated objectives include: advocacy about opportunity for you, as a concerned citizen, to engage the concerns of the armed forces and veterans; providing with an organisation that is dedicated to fostering a spirit assistance to families of martyrs and veterans with special of patriotism and ensuring “that the families of martyrs emphasis on helping war widows and ensure permanent do not endure alone.” housing for martyrs’ families; work at sustainable Flags of Honour Foundation (FOHF), a not-for-profit programmes and partnerships to ensure rehabilitation, organisation started by employment, education, Rajeev Chandrashekar, health and financial stability of families entrepreneur and of martyrs; educate Member of Parliament and inculcate values (MP), aspires to act as a bridge for civil society to of service and honour “engage with, recognise among people and instil patriotism and and support the Armed Forces and inspire the responsible citizenship younger generation among the youth. through stories of While the organisation valour and sacrifice of is based in Bengaluru, the men and women in it hopes to have a panuniform.” India presence. FOHF was registered Some important advocacy campaigns as a charitable trust a taken up by FOHF little after the Mumbai terror attacks of 2008 when Major Sandeep Unnikrishnan were to support the one-rank-one-pension agitation by sacrificed his life to save people. Mr Chandrashekar veterans, voting rights of armed forces soldiers who are presented a cheque of Rs25 lakh to Major Unnikrishnan’s away from home and helping Dr NK Kalia to petition family. Soon thereafter, he decided to put a formal face to the United Nations Human Rights Commission seeking the effort to support the families of martyrs and registered independent investigations on the torture and death of FOHF as a charitable trust in July 2009. The Foundation Capt Saurabh Kalia and five jawans in the Kargil War in provides financial assistance and grants to martyrs’ families 1999. The voting rights campaign registered a significant by reaching out to them and understanding their needs. victory, in March 2014, when the Supreme Court ordered For instance, FOHF offered financial assistance to the the Election Commission to facilitate voting by armed widow of martyr Havaldar Channalli forces and their families posted in peace (who died in Kashmir) to restore a zones; but the battle for voting rights to dilapidated memorial to the Param those posted in field areas continues. FLAGS OF HONOUR Vir Chakra awardee. It gave a grant to You can join the effort by volunteering FOUNDATION martyr Abdul Hameed at Dhampur in with FOHF or by donating to the cause. 54, Richmond Road, Uttar Pradesh to help his widow, Rasulan Donations are tax-exempt under Section Bengaluru - 560025 Bibi, renovate her house. 80-G of the Income-tax Act.  Telephone: 080 - 4093 3141

H

MONEYLIFE | 16-29 Sep 2016 | 66

Beyond_money.indd 1

Fax: 080 - 2532 3488 Email: [email protected] Web: http://www.flagsofhonour.in/

07-09-2016 20:03:25

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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 9 September 2016. Date of Posting Alternate Tuesday & Wednesday.

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