Outlook Money November 2017

MFs’ Small Town Investors pg 50

Making Travel Inclusive pg 70

D e c e m b e r 2 0 1 7, ` 5 0

o u tlo okmone y.c om

MUTUAL FUNDS VS

ETF

MF

ETFs Low in cost, passive investment products like ETFs & Index funds set to challenge large cap mutual funds

Vidya Balan’s Money Wisdom

8 904150 800027

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Highlights

Cover Story

Fund Review In-depth research and analysis to help you pick the right mutual fund

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MUTUAL FUNDS

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Low-cost passive investment products like ETFs and Index funds are set to challenge large-cap equity mutual fund schemes. Malini Bhupta delves deeper into the new trend playing out in the equity markets

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32 Enterprise

Smart Money

Vidya Balan’s Money Wisdom The National Award-winning actor bares her heart on all things money in an exclusive tête-à-tête with OLM Editor Malini Bhupta

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82

ETFs

Joy of Making Travel More Accessible With Planet Abled, the enterprising Neha Arora has created a one-stop travel shop for the disabled. Rimme Dirchi tracks the travel firm’s journey so far

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66

Travel Exploring Kerala on

Shoe-String Budget pg

70

From rustic bus rides to sumptuous fish curries to mesmerising backwaters, travelling across Kerala as a solo woman backpacker is an unparalleled experience, says Shipra Singh

Fintech Watch

Borrow Against Salary to Ease Cash Crunch To help young professionals tide over the month-end blues, some companies are offering quick loans online for short durations. Anagh Pal evaluates the pros and cons

pg

Trends

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50

Everything you need to know about latest offers from telecom majors Bharti Airtel and Reliance Jio

Small is the Next Big Thing

The lure of higher returns is drawing individuals from the not-so-big cities to equity investing, but do they have the appetite to stomach stormy market movements in the short-term? Preeti Kulkarni seeks answers

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78

Personal Tech

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Contents December 2017 ■ Volume 16 ■ Issue 12

MUTUAL FUNDS

ETFs

pg

32

Regulars

6 Letter 14 Queries 20 News Roll 82 Smart Money Cover Design: Praveen kumar .g Head Office AB-10, S.J. Enclave, New Delhi 110 029; Tel: (011) 33505500, Fax: (011) 26191420 OtHer Offices Bangalore: (080) 45236100, Fax: (080) 45236105; Kolkata: (033) 33545400, Fax: (033) 24650145; Chennai: (044) 42615225, 42615224; Fax: (044) 42615095; Mumbai: (022) 33545000, Fax: (022) 33545100. Printed and published by Vinayak Aggarwal on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: Malini Bhupta. Printed at Kalajyothi Process Pvt. Ltd., Plot No. W-17 & W-18, MIDC, Taloja - 410208, Navi Mumbai and published from AB-10 Safdarjung Enclave, New Delhi 110029 For Subscription queries, please call: 011-33505562, 33505500 or email: [email protected] Published for the month of December 2017; Release on 1 December 2017. Total no. of pages 84 Outlook Money does not accept responsibility for any investment decision taken by readers on the basis of information provided herein. The objective is to keep readers better informed and help them decide for themselves.

www.outlookmoney.com December 2017 Outlook Money

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Contents

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70

travel : Solo women travellers venture on budget trips and bring you stories that have not been told before

25 LI Made Easy

What sets Life Insurance apart from all other financial instruments!

26 Morningstar Fund Review In-depth research and analysis to help you pick the right mutual fund scheme

50 Trends

Small cities’ growing fascination with equity mutual funds: Will it last over long-term?

55 Investment Risk

Gaurav Mashruwala talks about mismatch of risks when aligning financial goals

pg

56 Stock Pick

OLM picks Aurobindo Pharma and Maruti Suzuki as the stock to watch out for this season

76 Market Outlook

Motilal Oswal explains what December has in store for you

78 Personal Tech

Everything you need to know about latest offers from Airtel and Jio

80 Investment Destination Kota, the coaching capital of India, is all set for its muchneeded makeover

58

Fintech Watch Bidding month-end cash crunches goodbye, with the latest crop of borrowing options

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Outlook Money December 2017 www.outlookmoney.com

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66

enterprise

With Planet Abled, Neha Arora provides customised travel solutions to people with disabilities

@

A SIP of ` 10,000 = ` 6.82 Cr.^ today in HDFC Equity Fund @

since inception

CALL YOUR FINANCIAL ADVISER TODAY. SIP Performance - Regular Plan - Growth Option Since Inception 15 year SIP 10 year SIP 5 year SIP Total Amount Invested (`) 2,740,000 1,800,000 1,200,000 600,000 Mkt Value as on October 31, 2017 (`) 68,282,833.75 9,536,715.84 2,855,912.40 962,827.32 Mkt Value of SIP in Benchmark (`) 17,313,336.63 5,826,493.17 2,352,777.05 904,329.39 Returns (Annualised) (%) 23.27% 19.97% 16.53% 18.98% Benchmark Returns (Annualised) (%) # 13.95% 14.34% 12.91% 16.42% ^ Assuming ` 10,000 invested systematically on the first Business Day of every month over a period of time. Past performance may or may not be sustained in the future. CAGR returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return). The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. The AMC/Mutual Fund is not guaranteeing or promising or forecasting any returns. Performance - Regular Plan - Growth Option Period Scheme Returns (%) Benchmark Returns (%)#

NAV as on October 31, 2017 ` 628.802 Value of ` 10,000 invested Scheme (`) Benchmark (`)# Additional Benchmark (`)## Last 1 Year 22.77 21.95 19.47 12,298 12,214 11,965 Last 3 Years 10.83 11.03 7.48 13,618 13,691 12,419 Last 5 Years 18.20 15.51 12.95 23,082 20,575 18,391 Since Inception 19.87 10.18 N.A. 628,802 91,536 N.A. Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualized (CAGR). Load is not taken into consideration for computation of above performance(s). # NIFTY 500 Index ## NIFTY 50 Index. N.A. Not Available. Inception date of the scheme January 01, 1995. The scheme has been managed by Mr. Prashant Jain since June 19, 2003. Different plans viz. Regular Plan and Direct Plan have a different expense structure. The expenses of the Direct Plan under the Scheme will be lower to the extent of the distribution expenses/commission charged in the Regular Plan. Additional Benchmark Returns (%)

Other Funds Managed By Prashant Jain, Fund Manager of HDFC Equity Fund Returns (%) as on October 31, 2017) Managing Scheme since Last 1 year (%) Last 3 years (%) Last HDFC Top 200 Fund $ June 19, 2003 22.90 10.45 20.77 10.20 S&P BSE 200 $$ HDFC Prudence Fund $ June 19, 2003 19.38 12.05 15.18 8.56 CRISIL Balanced Fund - Aggressive Index $$ HDFC MF MIP Long Term Plan + December 26, 2003 10.36 10.19 (Monthly income is not assured and is subject to availability of distributable surplus) 9.02 9.68 CRISIL MIP Blended Index $$

5 years (%) 16.87 14.81 17.88 11.89 11.66 9.93

Performance return of Category I - FPI Portfolio(s) managed by the Fund Manager (Mr. Prashant Jain) Returns (%) as on October 31, 2017 Managing Portfolio since Last 1 year (%) Last 3 years (%) Last 5 years (%) Category I - FPI Portfolio (managed under a bilateral agreement under March 23, 2016 20.41 N.A. N.A. Regulation 24(b) and subject to applicable laws) Benchmark- MSCI India (Total Returns) 19.26 N.A. N.A. ^^

Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). Load is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have a different expense structure. The expenses of the Direct Plan under the Scheme will be lower to the extent of the distribution expenses / commission charged in the Regular Plan. $ All dividends declared prior to the splitting of the Scheme into Dividend & Growth Options are assumed to be reinvested in the units of the Scheme at the then prevailing NAV (ex-dividend NAV). +The Scheme is co-managed by Prashant Jain (Equities) and Shobhit Mehrotra (Debt). $$ Benchmark. ^^ FPI Portfolio. Inception date is 23rd March, 2016. The performance is not comparable with the performance of the aforementioned scheme(s) of HDFC Mutual Fund due to differing investment objective/s and fundamental differences in asset allocation, investment strategy and the regulatory environment. The said disclosure is pursuant to SEBI no. Cir/IMD/DF/7/2012 dated February 28, 2012 pertaining to Regulation 24(b) of SEBI (Mutual Funds) Regulations, 1996. N.A. Not Applicable. HDFC Equity Fund is suitable for investors who are seeking*: l l

Riskometer

Capital appreciation over long term. Investment predominantly in equity and equity related instruments of medium to large sized companies.

INVESTORS UNDERSTAND THAT THEIR PRINCIPAL WILL BE AT MODERATELY HIGH RISK

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY

Editor’s Letter

Making the most of disruptions

F It’s all about costs High charges can eat into returns, so it is important to evaluate what you are paying for

Malini Bhupta [email protected]

6

or nearly two decades, Outlook Money has brought you best-in-class personal finance coverage and we will continue to do that, but we will look at it through the prism of disruption that the financial services industry faces and implications for investors and customers. We will bring you features and analysis that will help you take informed decisions—and this, we will do fearlessly. Given that existing business models are being challenged at every level, we will look at these shifts closely. For example, new-age fintech companies and their offerings are challenging lenders like never before, while some low-cost products are set to impact existing distribution models. In the current issue, we have endeavoured to put the spotlight on such trends. In this issue, we look at fintech companies that offer quick and easy loans to Millennials against their salaries, so that they can deal with the month-end cash crunch. While some disruptions are driven by technological changes, others are driven by regulators and market maturity. Our Cover Story on Exchange Traded Funds/Index Funds is about one such disruption that is going to take the asset management industry by storm in times to come. For the first time equity investor, low-cost exchange traded funds (ETFs) are an ideal vehicle to enter the markets. These funds have always been around in India but they have gained traction only after the Labour Ministry allowed the Employees Provident Fund Organisation to invest a part of incremental flows in the market through ETFs. Given that equity ETFs simply track indices like the Sensex or Nifty, investors have to pay less than 50 basis points as management fee. Chances are your mutual fund distributor will never recommend an

Outlook Money December 2017 www.outlookmoney.com

ETF to you because there is little incentive for him to do so. But we put the spotlight on ETFs this time. Globally, passive investment funds are bigger than actively managed mutual funds. Back in 2007, Warren Buffett publicly wagered a bet that the S&P 500 Index would outperform the hedge funds over a 10-year period. In his letter to investors he wrote, “I then sat back and waited expectantly for a parade of fund managers to come forth and defend their occupation.” Buffet won the bet ahead of schedule. ETFs are the new game in town for Indian investors too. Talking of the big shifts, the equity cult is truly spreading far and wide after last year’s move to demonetise `500 and `1000 currency notes. OLM’s Preeti Kulkarni has delved deep into this trend. The rush of money into equity MFs is coming from small towns where first-time equity investors are betting big. Kulkarni says: “Even as first-time investors claim to have the appetite to stomach risks in the short-term and stay invested, their faith will be truly tested in volatile market conditions.” We are also introducing Morningstar’s Fund Review from this issue to help you select the best mutual funds. We have also brought back our ‘Stock Pick’ section on readers’ demand. And in our Smart Money section, we get you money lessons from celebrities. This time actor Vidya Balan shared with OLM her money mantras and mistakes. Last, but not the least, we have introduced new design elements to make OLM more reader-friendly. Here’s hoping you all like the new design elements and info-graphics. Watch this space for more!

Talk Back

Must in your protection portfolio I always had doubts about the various insurers’ protection covers. The article “A must in your Protection Portfolio” has cleared a lot of them. With tons of options available it is always a gamble to try and pick the right insurer. Would be great if you could suggest some insurance companies to take the plan from. Will look for them in the coming issues.

Editor

Malini Bhupta ASSiStANt EditorS

Anagh Pal, Preeti Kulkarni SENior CorrESPoNdENt

Himali Patel

SUB-EditorS

Devanjana Nag, Rimme Dirchi, Shipra Singh, Anupam Pandey Art

Praveen Kumar. G, Vinay Dominic (Senior Designers) Rohit Kumar Rai (Designer) Girish Chand (Operator) PhotogrAPhy

Gireesh. GV (Picture Editor) Soumik Kar, R.A. Chandroo (Photographers) tECh tEAm

Raman Awasthi, Suraj Wadhwa

Business Office ChiEf ExECUtivE offiCEr

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viCE PrESidENt

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SR. GEN MANAGER: Mohan Sahasranaman CHIEF MANAGER: Suchitra Vaidya DEPUTY MANAGER: Vivek Singh

I have been reading OLM for more than a decade now. I have still not found another magazine on personal finance as comprehensive as OLM. I find it focused towards salaried professionals like me, so it is easy to relate to the articles. It covers almost all topics in the financial arena and every time a new financial product is launched, it finds a mention in Naveesh Goyal, the magazine. Chandigarh In particular I like the Reader’s Queries section as it contains solutions to almost all the financial dilemmas one can be facing at a given time. Further, reading through the systematic and consistent approach of OLM in solving reader’s issues over time brings about a greater level of financial understanding and maturity in the readers minds. Thanks for reserving a big share for such case studies in each edition of the magazine. However, I miss the regular coverage of the OLM50 fund selection and would request you to bring it back as that section completes OLM as a go to person finance planning and advice product.

Digital Team Amit Mishra Sumit Srivastava

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Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, New Delhi 110029, or [email protected]. Please mention your full name and residential address.

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Contact your Mutual Fund Distributor or visit askwhatelss.com

Talk Back

“

“

I love the OLM Elite section in the magazine. It is very well researched and helps me with the insights of various funds. I have started my SIPs after going through this section and they are showing great results.

Himanshu Mishra, Lucknow

“

“

Saumya, Delhi

Thanks to Outlook Money that I have understood the basics of personal finance and have rightly invested across various mutual funds for my future financial needs. The financial checklists that you feature in the magazine are of great help; would love to see more of them.

“

“

It has been very enlightening to be a reader of Outlook Money. The financial solutions given by your magazine are commendable. Reading these have helped me plan my future finances. The performance of various funds based on your suggestions is another eye catcher. Thanks for all your comprehensible articles. Hope the learning continues.

Gaurav Chandra, Gurugram

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Kudos to the team for a very well written cover story. The writer beautifully showcased some invisible stats of the various spends that we exercise on our child’s future. This story will certainly help me plan my child’s future much better, financially. Suyash Pandey, Bengaluru

Kshitij Pal, Lucknow

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Outlook Money December 2017 www.outlookmoney.com

“

“

A fund to match your profile section has something for everyone. I personally like the way these funds are listed as per the risk profile. The table is well researched and helps people like us who are not very good with numbers in choosing the right fund to invest in.

Queries Ramesh KumaR, Bhopal

my father renewed his fixed deposit with a cooperative bank last year in which I was the nominee. now, with my father’s demise, the bank is asking us to wait for the FD tenure to get over before the money can be paid. Is this correct? The bank cannot deny you the proceedings of the fixed deposit as you are the nominee. Unless there is a Will left behind by your father clearly stating that the maturity proceedings should go to someone other than you. As the account needs to be closed, you need to submit a copy of death certificate along

Deepak Rawat, Dehradun

I want to sell my car, which was insured only last month. Can I ask the insurance company to refund me the premium amount for the remaining time? Is the policy transferable and can I take the premium amount from the new owner? Generally, while selling a car it is a good practice to cancel the insurance policy and transfer the No Claim Bonus (NCB) to another car that a seller may be purchasing. The NCB belongs to the car owner and not to the car, therefore the NCB is not transferable. For cancelling your car insurance policy, you may request your insurance company in writing along with a filled copy of Form 29 and Form 30 and notify the Regional Transport Authority (RTO) with respect to the change in the ownership of the car. Further, the insurance company may also ask you for the submission of the original policy certificate and proof of delivery of the vehicle to the new owner. The NCB certificate issued

14

with a letter stating for the closure of the account, and the nominee’s photo ID and proof of address. Although most banks don’t charge exit penalty on the deposit, you need to check and ask the bank for the same. Further, these days most

banks are asked by RBI to incorporate a clause in account opening form stating that during the death of the depositor, premature termination would be allowed.

by the insurance company is valid for three years and you can utilise it for insuring your new car. However, in case you wish to transfer the car insurance to the new owner, you may factor the same in your sales price. But, since the insurance contract is between the insurer and you, the same cannot be automatically transferred. As per the Section 157 (2) of the Motor Vehicles Act, the new car owner needs to apply to the insurance company within 14 days of car purchase for the transfer of the car insurance policy in his name.

`5 lakh mediclaim policy and your first claim comes for `1 lakh, you still have `4 lakh in your account to utilise in that year and if you are through with your sum insured, it will automatically refill on renewal.

PRashant KaPooR, CFP

kumaR anshuman, Indore

my wife has a health policy. she recently underwent an operation and made a claim for it. now, she needs to go for another operation. Can she make another claim? Mediclaim is an indemnity policy, which means it will reimburse every amount to maximum limit of your insurance cover i.e. you can claim multiple times, subject to your sum insured. For example, if you have a

Outlook Money December 2017 www.outlookmoney.com

himali Patel, senioR CoRResPondent, OutlOOk MOney

Puneet obeRoi, FoundeR, Finadwise

kunal JaIn, Delhi

I am 30 years old and my insurance agent advised me to buy accident insurance instead of a term policy on the premise that my age makes it much less likely that I would die of an illness than an accident. he said that accident insurance is cheaper than term covers. Is his logic tenable? Below the age of 50 years taking term insurance with accidental cover is suggested. For example, if your yearly income is `10 lakh then you can preferably take 10x insurance, that is `10 lakh multiplied by 10 will equal to `1 crore term insurance with `1 crore accidental benefit. Premium for this additional `1 crore is very less and

when combined, it will be known as one plus one policy. Moreover, to all my investors I usually suggest buying term insurance with accidental cover online as the rate of premium will be lower in case of buying it online.

PanKaj ladha, FoundeR, PanKajladha.Com

sanJay ahlawat, Ghaziabad

my `2.5 lakh FD will mature next month. please suggest how I can invest this amount for a period of one year and reap the maximum returns? It is good that you are planning a re-investment option for your fixed

Rajan awasthi, Bhopal

a friend has been diagnosed with terminal stage cancer. Is it possible for his life insurance policy to pay off before he actually dies? Generally, in plain vanilla life insurance policies, the insurance benefit is payable only upon the demise of the life assured. However, in case your friend’s life insurance policy has a built in or an additional rider for terminal illness, the accelerated death benefits may be payable either as a lump sum or in installments. In addition, if your friend has an additional critical insurance rider or separate policy, the benefits may be payable out of the same as well, in addition to the life insurance policy, and your friend may utilise the said amount for his treatment. It is unfortunate that your friend is undergoing such a severe situation, however it is for the similar reasons only that one needs to plan for life insurance holistically at an early age while one is in pink of health to account for such eventualities. While the mental trauma during such unfortunate scenarios cannot be mitigated, the overall mental state of the family could be assuaged if there is availability of sufficient financial resources for managing the treatment for the terminal illness. PRashant KaPooR, CFP

deposit in advance rather than waiting for the maturity of your fixed deposit or for the auto transfer of the amount in your saving account where it may start earning negative real interest rate, after accounting for inflation. In the current scenario, where bank interest rates have been on a downward spiral, it is quite unlikely that you may find a similar interest paying fixed deposit as your last one. In addition, your objective is to maximise your returns, but your investment period is very less at one year. One option would be to compare FD rates across banks for various tenures and choose the highest paying one for the period you are comfortable investing for. Another option would be to consider AAA rated company fixed deposits, which may pay slightly higher interest rates but are riskier investments than FDs. Third option, which you may consider are short term debt mutual funds. While the returns are not guaranteed in mutual funds, a good short-term debt fund may be able to provide you comparable returns. Further, you may consider investing in dividend option in case you are in the highest taxation slab since dividend distribution tax may be marginally lesser than the tax you may pay in other options. However, marginal taxation benefits should not be your sole aim of choosing investment options like debt mutual funds. The ideal scenario for you would be to link your investment to your tangible goals which may increase your investment horizon as well, and accordingly if your investment horizon is say five years, then you may be able to look at higher riskhigher expected reward, equity linked investment options rather than keeping yourself bound in low returns debt options. PRashant KaPooR, CFP

www.outlookmoney.com December 2017 Outlook Money

15

Queries anIRuDh BhasIn, Noida

I want to know how the insurers calculate mortality charges. Do they hike the charges every year with increase in age or keep it fixed at the age at which the policy was taken? Mortality charges are a function of actuary calculation made by professional and experienced actuarial managers. It is important because sufficient experience and skill goes into calculation of mortality charges which form the basis of premiums paid for various age bands. Mortality charges calculation is based on a number of factors: • Gender costing—mortality charges differ for both women and men (women are said to have a higher mortality than men) • Inflation rates. • Future Growth rates . • Administration and policy handling charges. • Further, every premium paid is divided into cash value, which is the interest earned on the policy

and pure risk cover charges. • The discounted rate of future lapsed policies is covered in the mortality charges calculation. For life insurance policies, premium rates are not hiked every year because the probability of losing a life in a pool of insured policy holders is lower. For health and general insurance policies, the premium rates are reset every year and increase by 1015 per cent per annum depending on profitability of the company and positive claim ratio the company has earned over the years.

dilshad billimoRia, CFP, dilzeR Consultants sanJIt kumaR, Delhi

my cousin is a heavy drinker and is unlikely to survive any longer. will his life insurer pay for the policy proceeds if his death is due to alcoholism? Life insurance claim depends on declarations. If a person has taken a policy 10 years back and has declared all relevant information correctly but started drinking

RItesh pathak, Bhopal

I have zeroed down on two flats which I wish to buy. Can I take two separate home loans at the same time for these two flats? Can I borrow from the same bank for these two loans? Multiple home loans are allowed for different properties with the same bank. Further, bank will evaluate your applicability which will include your income, current job, and credit score. However, banks can reject your application in case you have poor repayment capabilities with existing or past loans. So, before taking multiple loans, you need to evaluate all the above mentioned factors to avoid your credit score from getting impacted.

himali Patel, senioR CoRResPondent, OutlOOk MOney

how do life insurance companies deal with the claim of life assured if the life assured dies after the date of maturity of the policy but before receiving the maturity proceeds?

what points should be kept in mind before deciding in favour of any particular insurance agent or a broker?

16

Puneet obeRoi, FoundeR, Finadwise

naveen saRIn, Gurugram

ViKas nagPal, Gurugram

Choose an agent who is honest and puts the interest of his clients first. Your agent should be willing to give you advice on a financial product based on your need and not on the basis of the commission he earns out of the deal. Make sure that your agent has sufficient qualification and skills to advise you. A timely response to clients’ queries is agent’s responsibility. For efficient client servicing, an

heavily after 4-5 years down the line, he will be paid his claim regardless of anything. It comes under self injury. In case of life insurance even suicide is covered after one year of the policy.

agent must ensure that he has the required infrastructure and staff with sound general and technical knowledge to help you. You can do the reference check through existing clients before availing the services. PanKaj mathPal, Ceo, oPtima money manageRs

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If the policy has matured and the insured dies just after, the claim paid is the same as maturity proceeds, which may include bonus and other terminal benefits. In addition to this, the family of the life assured would have to submit the original policy documents in addition to the beneficiary documents title to receive the benefits from the insurance provider.

dilshad billimoRia, CFP, dilzeR Consultants

Queries vIvek soota, Delhi

I would like to invest in mutual funds for funding my son’s college education abroad. my son is 7 years old, and I am investing `50,000 a year in a child plan from lIC for this goal. I would like some guidance to achieve this goal 10 years from now. At the outset, let me complement you for identifying a focused goal i.e. child education. For effective goal setting, it is important for you to identify the present cost of education that you want to fund through this investment. To make the planning more focused, apart from the tuition and college fee, you may also like to provision for additional costs like travel and living expenses for the duration of the education abroad. Assuming that the present cost of total funds that you require for your child’s education abroad is `30-`40 lakh, the same cost after 10 years would increase to `48.31-`64.42 lakh. This is after taking into account a conservative inflation of 5 per cent per year in the total costs. For getting to this future cost, assuming investment returns of 10 per cent per year, you’ll need to invest `3.03 -4.04 lakh per year. You should consider investing on a monthly basis into diversified equity mutual funds, since you have investment time of 10 years on your side.

PRashant KaPooR, CFP

vIpul shaRma, Delhi

what is the difference between diversified equity scheme and elss? which one of them is more secure and profitable? Like any other diversified equity mutual fund, equity-linked saving schemes, or ELSS, invest in a diversified portfolio of equity shares. However, unlike an openended diversified equity scheme,

18

manjunath, Bengaluru

my mother holds some equity shares which she inherited from my father when he passed away. the holdings are in physical form. she now wishes to gift them to me and I want to hold them in my demat account. Could you please advise me on the process to convert them into demat form? Your mother can transfer the shares to you through the registrar and share transfer agents of the company. She needs to submit her original share certificates to the R&T agent along with the Share Transfer Deed in Form No SH-4 (Securities Transfer Form) duly filled in, executed and affixed with appropriate share transfer stamps. A self-attested copy of your PAN card will also be needed. Stamp duty for transfer of shares is 25 paise for every `100 or part thereof of the value of shares on the date of the execution of the transfer deed. Once shares are transferred to you, you can get them dematerialised through the depository participant (DP) where you hold your demat account. PanKaj mathPal, Ceo, oPtima money manageRs

ELSS comes with a lock-in period of three years from the date of investment, which means, the units cannot be redeemed during this period. Investment in ELSS funds qualifies for a deduction of up to `1.5 lakh under section 80C of the Income Tax Act. Schemes under both these categories bear the same kind of risk and have a similar growth potential. You can make the choice of your investment based on your needs.

Outlook Money December 2017 www.outlookmoney.com

PanKaj mathPal, Ceo, oPtima money manageRs

BRIJesh malIk, Hyderabad

I have a home insurance policy, can I also add the expensive fittings that I have recently included? This is a very subjective matter. For this you need to read the annexure of the policy which clearly contains the ifs and buts. For this, you should contact your advisor via whom you purchased the policy. Usually add ons are not included but please read the policy note. PanKaj ladha, FoundeR, PanKajladha.Com

News Roll

Know Your Aadhaar linkage deadlines With the Supreme Court deliberating on whether Aadhaar should be made mandatory, some important deadlines to keep tab on

E

ven as the Supreme Court prepares to deliver its verdict on the mandatory Aadhaar seeding for various services, many have been getting frantic calls and messages from financial services and telecom companies urging them to complete the linking process. Be it banking, insurance, mutual funds, stocks or post office schemes

—all regulated financial services are now under the Aadhaar ambit. This is in line with the central government’s decision to amend the Prevention of Money Laundering (maintenance of records) Act, 2005. The deadline for seeding Aadhaar with PAN was extended from August 31 to December 31. For telecom companies, the last date for the purpose is February 28, 2018.

While banks had been exhorting their customers to comply with the rule for several weeks now, insurance companies have jumped on to the bandwagon after the Insurance Regulatory and Development Authority of India (IRDAI) clarified that Aadhaar linkage was mandatory for all insurance policies—existing and new. Many insurers have welcomed the move, pointing out

Bharti-AXA launches Smart Super Health policy

W

ith rising medical costs and varied needs of customers, general insurance companies are introducing products with added features and more flexibility. Bharti AXA General Insurance has launched a new plan called the ‘Smart Super Health Policy’ that comes with some key features.

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Outlook Money December 2017 www.outlookmoney.com

The policy is designed to cater to a larger audience covering up to five family members, including the policyholder. It allows customers to modify their policy features later. For example if the policy is taken without maternity benefit, it can be bought later should the need arise. There is no capping on room rent in any of the plans

Important Deadlines Service

Deadline for Consequences of linking Aadhaar non-compliance

PAN

December 31, 2017

I-T returns will not be processed

Banking

December 31, 2017

Accounts will be blocked

Mutual funds/ Stocks

December 31, 2017

Account will turn non-operational

Insurance policies

December 31, 2017

Policies will be inaccessible

Post office schemes – PPF, December 31, 2017 KVP, deposits, NSC, etc

Accounts will be blocked

Telecom

February 28, 2018

Number will be deactivated

Social benefit services like LPG and pension

March 31, 2018*

Access to benefits will be curtailed

SC issues notice on bitcoin regulation

With bitcoin and other cryptocurrencies being widely used despite lack of clarity around its regulations, their popularity continues to soar, putting gullible investors who are not savvy enough to make an informed choice at risk. The current situation where circulation of such cryptocurrencies continues unabated without being bound by any rules prompted advocate Dwaipayan Bhowmick to file a petition in the Supreme Court seeking regulations for the cryptocurrency space. The SC has now sought responses from the central government, SEBI and RBI, among others on the matter.

*The central government has agreed to extend the deadline up to March 31 for those who do not have Aadhaar

that the framework will boost their ability to detect and prevent frauds. However, given the mammoth Aadhaar numbers in operation, service providers have their task cut out over the next one and a half months. Nearly 118 crore Aadhaar numbers have been generated so far, with 4 to 5 crore authentications taking place every day, according

to the Unique Indentification Authority of India (UIDAI). Earlier, the finance ministry had made it clear that even post office schemes–National Savings Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP), etc. had to be linked. Alternatively, users could submit Aadhaar application or enrollment details.

which means that a patient can choose any room when being treated at a hospital. The plan also covers medical expenses for in-patient treatment for alternative treatments like ayurveda, yoga, naturopathy, unani, siddha, and homeopathy. In case of an emergency, air transportation from the site of emergency to the nearest hospital is also covered. It also pays for organ donation expenses.

GST Council takes 28 per cent slab list down to 50

End-consumers bearing the brunt of high GST rates can now heave a sigh of relief. Only 50 items will attract the highest tax rate of 28 per cent now, with the GST Council moving nearly 175 items to the lower slab. The council, which took a call on widely expected relief measures ahead of the crucial Gujarat polls, agreed to shift mass consumption products like shampoos, washing powder, detergent and shaving items into the 18 per cent bracket. “This is a crucial decision, as India has very high tax slab of 28 per cent excluding cess. In future, we may expect that the government will further slash tax rates by moving from 4-tier tax slabs to fewer slabs

www.outlookmoney.com December 2017 Outlook Money

21

News Roll

GST will reduce your restaurant bills but only just I

t was good news for consumers when the GST tax rates were revised to a uniform 5 per cent from 12 per cent for non-air-conditioned restaurants and 18 per cent for air-conditioned restaurants. Will this lead to a significant reduction in restaurant bills? Let us take a look. Says Aditya Singhania, DGM-GST, Taxmann, “the rates have been significantly reduced from 18-12 per cent to 5 per cent on the output side but at the cost of Input Tax Credit (ITC) being withdrawn. The blocked ITC is certainly going to be a part of the cost of the menu prices as no restaurant is going to bear the same from its own pocket and it appears that they are going to recover the same from the customers.” Rahul Singh, Founder & CEO, The Beer Cafe and also the Vice President of National Restaurant Association of India elaborates, “on 15th November, the restaurants were moved to a 5 per cent flat GST without ITC, which means that the input tax which is in the range of 4 to 12 per cent becomes a cost to the restaurant. The menu base price increases from `100 to `104-112 (depending on the restaurant input taxes). And the customer would pay 5 per cent GST on this base price.” The overall bill to the customer still would be lower than the `118 paid earlier, but the reduction in prices will not be as much as expected.

Gold demand dips 24 per cent post GST GST and anti-money laundering legislations pertaining to jewellery have severely affected the segment in India, with gold demand in the third quarter of 2017 slipping 24 per cent to 145.9 tonne. During the same period last year, gold demand stood at 193 tonne. The fall was a result of retail buyers staying away from jewellery transactions, according to a World Gold Council (WGC) report. In value terms, gold demand plummeted 30 per cent to touch `38,540 crore. Investment demand for the precious metal fell 29 per cent to `8,200 crore compared to `11,520 crore in the third quarter of 2016. However, WGC is upbeat about the yellow metal’s prospects, thanks to rollback of the AML legislation and progress made in GST transition. The recovery is expected to take root in 2018.

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Outlook Money December 2017 www.outlookmoney.com

or even single GST rate,” says Vishal Raheja, DGM, Taxmann. Concerns around transmission of these benefits, however, persist. “The government should ensure that the benefit of the rate reduction goes to the consumers. It appears that after this mass rate reduction various anti-profiteering problems may kickoff for businesses which would not pass on the benefit to the consumers,” cautioned Abhishek Rastogi, partner, Khaitan & Co.

SBI General introduces a simplified home insurance policy

The complex structure and wordings of home insurance policies are often seen as impediments to pick up in demand for such products, despite rising awareness around the need for insurance post the earthquakes and floods in the last couple of years. To bridge this gap, insurers like New India and Bajaj Allianz have rolled out simpler products. Private non-life insurer SBI General Insurance has joined the list with the launch of its Simple Home Insurance Policy—a package product providing coverage for a tenure of up to three years. It allows policyholders to cover apartments on an agreed value basis as against reconstruction cost approach. It provides protection for your house against public liability, personal accident, breakdown of appliances and so on. House owners as well as tenants are eligible to buy this policy. The product also offers discounts to those choosing longer tenures of two and three years.

Edelweiss Tokio rolls out Wealth Plus Ulip

Private life insurer Edelweiss Tokio Life has launched a unit-linked insurance plan (Ulip) targetted at digitally-savvy individuals who do not rely greatly on distributors for their investment decisions. Launched in associated with Policybazaar, the product does not levy any premium allocation or policy administration charges. It also contributes additional

Paytm, ICICI Bank tie up to launch digital credit account P

units on every premium paid by the customer. These additional allocations start at 1 per cent for the first five years, rising subsequently to 3 per cent, 5 per cent and 7 per cent every five years. As per the company, the rationale is to get policyholders to stay invested over the long term.

Bajaj Allianz unveils cyber insurance cover

Bajaj Allianz General Insurance has come up with a cyber liability cover for individuals that insures against risks like identity theft, malware attack, IT theft loss, phishing, e-mail spoofing, cyber extortion, and cyber stalking. Termed Cyber Safe Insurance Policy, it will cover financial losses and legal costs related to identity theft, IT theft loss as also restoration cost of retrieving or reinstalling data damaged by entry of Malware. It also provides coverage for expenses incurred on counselling services treatment, claim for damages against third party for privacy and data breach, cyber extortion loss, and transportation expenses for attending court summons. The minimum sum

aytm has partnered with ICICI Bank to launch ‘Paytm-ICICI Bank Postpaid’, a digital credit account to provide digital credit instantly to customers. This account can be activated online instantly and a customer does not need to visit a branch. There is also no transaction, administration or hidden fee. The app can be used to avail interest free credit for up to 45 days. So it actually is in essence a virtual credit card. The credit limit ranges from `3,000 to `10,000 and can be extended to `20,000 depending on the payment history of the customer. The app is available 24X7 and works using big data-based algorithm by ICICI Bank to make a real time credit assessment of the customer. The algorithm will use a combination of financial and digital behaviour of the customer including credit bureau check, purchase patterns, frequency of purchase to ascertain the credit-worthiness of a customer within seconds, and decide on his credit limit. “If you are going to Paytm and making a purchase, you will have various options of payment—wallet, debit card, credit card or so on. This will give you a ‘buy now, pay later’ option. We will give a credit line, using which a customer can purchase goods through Paytm,” says Anup Bagchi, Executive Director, ICICI Bank. Once the credit limit is set up for a customer, a consolidated bill is generated on the first day of the next month, which has to be paid by the 15th day of the same month. Customers can use their Paytm Wallet, debit card or internet banking of any bank to repay their dues. In the beginning, this product will be offered only to the ICICI Bank customers who use the Paytm app. Later it will also be extended to non-ICICI bank users. Such short-term loans for small amounts are in demand, but banks do not offer any product in this space. It will come in handy for those who are new to loans and do not have a credit history to tide over short-term cash requirements. Like credit cards, a customer has to make sure that he pays back the money within the stipulated period, beyond which he would have to pay interest at the rate of 3 per cent per month, same as that in the case of credit cards. Says Vijay Shekhar Sharma, Founder & CEO - Paytm, “it’s common for us to ask a trusted friend for money for frequent expenses and promise to pay later. We believe our customers are sincere with their payments and Paytm post-paid will play a major role in helping them pay for their daily expenses on time.”

www.outlookmoney.com December 2017 Outlook Money

23

News Roll

RBI launches awareness drive to caution customers against scams

R

ecognising that SMS, email and phone call are fraudsters’ favourite platforms to ensnare gullible users, the Reserve Bank of India (RBI) has decided to beat the fraudsters at their own game by using these tools to spread awareness among customers. The banking regulator plans to send emails and SMSes to the general public cautioning them against falling prey to “unsolicited and fictitious offers received through emails/SMSes/phone calls.” Now, how can customers ascertain whether these messages are genuine or not? To start with, they should look for messages from the ‘RBISAY’ sender ID. This is the first time it will be using the same media (SMS and emails) as those used by the fraudsters. Make it a habit to ignore or report any messages that seek bank or card details and PIN. Do not believe any SMSes that claim that you have won a lottery. “Members of public can give a missed call to 8691960000 to get more information through Interactive Voice Response System (IVRS) on fake calls/emails as well as investing wisely and cautiously in chit funds,” an official release said. Despite constant warnings from RBI and other financial regulators, such frauds are rampant, swindling unsuspecting customers across the country. Many masquerade as official emails to gain customers’ trust and elicit bank details, password or even an ‘advance fee’ to transfer lottery winnings. The central bank’s latest move aims to counter tricksters by using similar platforms. In addition to anti-fraud warnings, the messages will also educate individuals about various banking regulations and facilities available to them. The initiative which carries the tagline ‘Suno RBI kya kehta hai,’ will also seek feedback on the campaign by email. Customers who want to share their suggestions can send an email to [email protected]. While RBI’s proactive communication will certainly help, it would do well not to leave out Whatsapp from its ambit, given that it is fast becoming their new platform of choice to trap gullible users.

insured that one can opt for under the policy is `1 lakh, while the maximum is `1 crore. Any adult insuranceseeker who uses internet facility on a computer system and digital devices is eligible for this cover.

Max Bupa launches ATH machines for instant policy issuance

Soon, health insurance-seekers will be able to get health insurance policies issued through machines, without human intervention. Standalone private health insurer Max Bupa has announced the launch of AnyTimeHealth (ATH) machines, a technology-based solution that the company claims will allows insurance-seekers to run instant health assessment, choose the policy best suited for them and leave with the policy document in hand within three minutes. To avail of the facility, the proposer has to register using email and phone number, proceed to a health assessment, evaluate an automated health insurance policy recommendation based on details entered and pay the premium to complete the instantaneous policy issuance process. The machines will installed at the company’s banking distribution partners’ branches, including those of Bank of Baroda. In the first phase, the company will install 20 ATH machines at its partner banks’ branches across multiple cities. In the next 12-15 months, the health insurer plans to put up these machines across retail locations such as malls, housing societies, airport lounges and hotels. [email protected]

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Outlook Money December 2017 www.outlookmoney.com

Life Insurance Made Easy

Tax Edge Life insurance is not just about protection, savings, and investments; there are also tax benefits to be claimed on the premiums paid and on maturity

T

he manifold benefits of a life insurance policy are well documented: protection, savings, and investments. A feature that sets life insurance apart from other financial instruments is the tax benefits that one can claim. So, when you pay the premium towards your life insurance cover, you can claim tax benefits under Section 80C of Income Tax Act, up to a maximum sum of `1.5 lakh. The benefits under Section 80C exist only if the policy has been in force for at least five years, because if the policy is terminated within five years, the deductions are added to income and taxed accordingly. The condition to claim tax benefit is that the sum assured has to be at least 10 times the annual premium being paid. For instance, if the sum assured is `15 lakh and the annual premium paid is less than `1.5 lakh, then the entire amount can be claimed as deduction under Section 80C. If the premium is more than 10 per cent, say `2 lakh for the same sum assured,

AdvAntAge Premiums paid towards servicing a life insurance policy qualify for tax deductions under Section 80C of the Income Tax Act The maximum deduction that can be claimed under Section 80C is `1.5 lakh Tax-free proceeds on maturity/death under Section 10(D) are subject to conditions mentioned therein. Premiums towards health riders like critical illness qualify for tax deductions under Section 80D Premiums up to `30,000 for senior citizens and `25,000 for others are eligible for tax benefit.

attached to your base life insurance. Health insurance offers tax benefits under Section 80D, wherein premiums up to `30,000 for senior citizens and `25,000 for others are eligible for tax benefits. Remember that regardless of its nature, life insurance not only helps you meet the financial needs at every stage in life but also offers tax benefits; a trait that makes it useful to align financial goals and tax savings. [email protected]

then the deduction amount is capped at `1 lakh. However, for policies purchased before April 1, 2012, the premium to sum assured should not exceed 20 per cent for the proceeds to be tax-free. There are also tax benefits to be claimed in case of maturity of a life policy or in case of a death claim. Under Section 10(10) D, the proceeds from maturity/ death are tax free subject to conditions mentioned therein. Additionally, there are also tax benefits to be claimed through health riders like critical illness when

www.outlookmoney.com December 2017 Outlook Money

25

Morning Star Fund Review

Morningstar Mutual Fund Guide Kaustubh belaPurKar

Picking the right Mutual Funds Morningstar Analyst Ratings help identify those funds which have the ability to outperform their benchmark and/or peer group

I

nvestors today are faced with a plethora of options when it comes to investing in Mutual Funds. Picking funds is often a hard task as there is a sea of information available to investors and the sheer number of funds to pick from can make the task seem daunting. Many investors tend to rely purely on historical shortterm performance to make investment decisions, which to our mind can be misleading. For starters, historical performance may or may not be repeatable in the future. Secondly, it is important to ascertain the attribution of the performance—is it due to the fund being invested in specific segments of the market that have done really well? Or is the performance more broad-based across stocks and sectors? The latter would suggest a more repeatable performance going forward. Founded in 1984 in the United States, Morningstar is an independent investment research firm with operations in 27 countries. Our mission is to create great products that help investors reach their financial goals. We are fiercely independent in our research and put investors at the center of everything. Morningstar has been in India since 2008 and produces two ratings on funds – Morningstar Ratings (Star Ratings), which are quantitative ratings based on historical performance and Morningstar Analyst Ratings, which are a qualitative forward-looking assessment of the fund manager and the strategy. The Morningstar Ratings are based on the historical risk adjusted returns of fund versus their peer group.

Don’t pick funds purely looking at past performance, which to our mind can be misleading

These ratings capture the risk adjusted returns of the fund over longer time horizons and as well use proprietary metrics to penalise funds with large downsides. Star Ratings are based on a 5 point scale from 1-star to 5-star, with 5-star being the best. We believe these are a good starting point for investors to shortlist more consistent funds basis their historical performance. While Star Ratings are a good starting point, the Morningstar Analyst Ratings help identify those funds which, we believe, have the ability to outperform their benchmark and/or peer group, within the context of the level of risk taken, over the longer term. Analyst Ratings use a globally consistent five pillar process to assess funds on “People”, “Process”, “Parent”, “Performance” and “Price”. Analysts carry out extensive research followed by fund manager interviews to assess funds on these criteria. The first three pillars (People, Process, and Parent) form the core of our assessment and believe these eventually translate into long term consistent performance going forward. Funds are rated again on a five point scale – Gold, Silver, Bronze, Neutral, and Negative. These fund reviews are intended to help new investors looking to invest into mutual funds as well as help existing investors take a decision whether to stay invested in a particular fund. We are glad to be associated with Outlook Money to bring our best investment ideas across to investors to help them make the right investment decisions. Happy investing!

The author is Director Fund Research Morningstar Investment Advisor India Disclaimer

@2017. all rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. This Report is issued by Morningstar Investment Adviser India Private Limited (“Morningstar”), which is registered with SEBI (Registration number INA000001357) and provides investment advice and research. Please visit http://www.outlookindia.com/outlookmoney/invest/picking-the-right-mutual-funds-2542 and read important statutory disclosures, as mandated by SEBI, regarding the information, data, analyses and opinions given in this report.

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Outlook Money December 2017 www.outlookmoney.com

Franklin India High Growth Companies Fund Manager biography and Fund strategy

R

oshi Jain has 12+ years of experience in equity research and portfolio management. She has been a comanager of this fund since 2012 and the lead manager since 2014. The investment process is research intensive and relies heavily on a bottom-up approach. Only companies that have durable competitive advantages versus peers, sustainable business models, strong entry barriers, able management teams, and good corporate governance standards are included in the coverage list. The portfolio is currently positioned to benefit from a turnaround in the economic growth. Also, Jain has been investing in sectors and companies which are related to domestic growth recovery rather than export oriented. She is flexible in her investment approach while constructing the

portfolio and invests in stocks from across market segments (large, mid, and small) without any bias. She does not shy away from taking significant sector and stock bets. Jain is cognizant of the underlying risk in this strategy and takes requisite measure to mitigate them. Hence, single stock weight in the portfolio is capped at 10 per cent. Also, while constructing the portfolio, she ensures that it doesn’t have significant exposures in two sectors which are fundamentally aligned. For instance, given she has high exposure to banking stocks, she has avoided investing in metal and mining companies. In our opinion, the process is sound and workable over the long term and it has been executed with skill by the manager so far, which results in long term sustainable performance.

Calendar Year returns

Return

Calculation Benchmark: S&P BSE 500 India INR 100.0 79.6 80.0 60.0 37.0 30.3 31.3 40.0 20.0 5.0 3.8 1.5 00.0 -0.8 -20.0 YTD 2016 2015 2014 Franklin India High Growth Cos Gr

42.5 9.2

31.2

3.3

2013

2012

S&P BSE 500 India INR

equity sectors

Portfolio Date: 10/31/2017

% Basic Materials Consumer Cyclical Financial Services Real Estate Consumer Defensive Healthcare Utilities Communication Services Energy Industrials Technology total

top holdings

5.0 12.9 40.5 1.3 0.0 7.1 3.7 9.2 7.5 5.1 7.6 100.0

Portfolio Weighting (%)

HDFC Bank Ltd State Bank of India ICICI Bank Ltd Axis Bank Ltd Bharti Airtel Ltd Tata Motors Ltd Class A Whirlpool of India Ltd Indian Oil Corp Ltd NTPC Ltd Idea Cellular Ltd

8.63 8.28 8.27 8.06 5.42 4.93 4.09 3.63 3.39 2.88

Fund snapshot

trailing returns Data Point: Return Calculation Benchmark: S&P BSE 500 India INR YTD 1 Year 3 Years 5 Years 10 Years Franklin India High Growth Cos Gr 30.28

21.75

15.10

24.26

12.09

S&P BSE 500 India INR

31.25

21.94

10.99

15.27

6.41

Average

28.54 20.05

10.84

15.61

7.83

Morningstar Category India Fund Flexicap 73 billion Fund Size (`) Inception Date 7/26/2007 Annual Report Net Expense Ratio 2.31 Morningstar Rating Overall **** Multiple Manager Name Minimum Investment (`) 5,000 Deferred Load 1.00 Data Source: Morningstar India

www.outlookmoney.com December 2017 Outlook Money

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Morning Star Fund Review

Morningstar Mutual Fund Guide ICICI Prudential Top 100 Manager biography and Fund strategy

N

aren has 25+ years of experience in research and fund management and has been associated with ICICI Mutual Fund for the last 13 years. Naren is known for being a contrarian and has a good understanding of “value” stocks. Naren follows a disciplined investment process and an active portfolio management approach. The fund has a large cap bias with a focus on stocks which have significant long term growth potential. He aims to generate alpha by active sector rotation through a top-down approach. Within the chosen sectors, Naren makes use of relative valuation parameters to invest in large-cap stocks he believes are attractively priced relative to their growth prospects. While picking stocks, he focusses on the financial strength of the company and knocks out stocks with

high leverage. He favours companies with attractive fundamentals, shifting away from ones where he thinks valuations are stretched. He does not take cash calls and remains fully invested; cash levels are unlikely to exceed 5 per cent of assets. The strategy is complex, but we believe in Naren’s execution skill which makes the process robust. The fund runs a concentrated portfolio based on the number of stocks in its portfolio than its peers. With Naren’s excellent stock picking skills we are comfortable of the concentrated portfolio, which could have the potential to fetch higher returns. The fund’s long term performance track record is good, but it can underperform its peers in the short run due to its valuationconscious approach.

Return

Calculation Benchmark: S&P BSE 100 India INR 26.9

38.3

28.5

10.3

32.8

32.3

11.4 3.6

30.0

5.9

-0.6 YTD

2016

Franklin India High Growth Cos Gr

-3.2 2015

2014

2013

2012

S&P BSE 500 India INR

trailing returns

% Basic Materials Consumer Cyclical Financial Services Real Estate Consumer Defensive Healthcare Utilities Communication Services Energy Industrials Technology total

ICICI Bank Ltd Infosys Ltd Oil & Natural Gas Corp Ltd Axis Bank Ltd Tata Chemicals Ltd State Bank of India Bharti Airtel Ltd Power Grid Corp Of India Ltd Larsen & Toubro Ltd Tata Motors Ltd Class A

12.6 8.2 24.7 00 6.4 7.4 11.3 3.7 8.2 9.6 8.1 100.0 Portfolio Weighting (%) 5.66 4.69 4.66 4.49 4.27 3.65 3.53 3.51 3.35 3.20

Fund snapshot

Data Point: Return Calculation Benchmark: S&P BSE 100 India INR YTD 1 Year 3 Years 5 Years 10 Years ICICI Pru Top 100 Gr

26.91

21.87

11.25

17.86

9.57

S&P BSE 100 India INR

28.49 20.70

8.73

13.90

5.98

Average

28.54 20.05

10.84

15.61

7.83

28

Portfolio Date: 10/31/2017

top holdings

Calendar Year returns 30.0 22.5 15 7.5 00.0 -7.5

equity sectors

Outlook Money December 2017 www.outlookmoney.com

Morningstar Category India Fund Large-Cap 29 billion Fund Size (`) Inception Date 7/9/1998 Annual Report Net Expense Ratio 2.58 Morningstar Rating Overall **** Multiple Manager Name Minimum Investment (`) 5,000 Deferred Load 1.00

Aditya BSL Short Term Fixed-Income stats

M

aneesh Dangi heads the fixed income team at Aditya Birla Sun Life AMC and is also the co-CIO at the AMC. He has 15+ years of experience in research and fund management and has been with Aditya BSL AMC since 2006. Dangi is an experienced portfolio manager and we view his in-depth understanding of the macro-economy as being an advantage. The fund house runs one of the largest teams on the Fixed Income side, consisting of a 12-member analyst team. This includes four portfolio managers who also double up as analysts. Analysts too take on dual/ multiple roles based on their expertise. The fund typically invests in high quality debt papers and has not taken active credit bets in the past. The issuer-selection process on the corporate bond side is extremely detailed and based on a welldefined set of processes. The team relies on their internal ratings and processes as opposed to external credit rating agencies. Given their focus on quality and liquidity,

analysts tend to undertake an in-depth evaluation of the management, corporate governance practices, financial standing of the issuers, liquidity, and risk. Overall, the investment process seems robust, given the manager’s focus on conducting competitor analysis, scenario analysis, and client profiling that form important aspects of the process. The core of the strategy lies in a combination of taking a duration view based on the interest rate directional movements and taking some credit bets in high quality corporate bonds at the shorter end of the yield curve. In line with its philosophy, the strategy allocates a portion of its assets to G-Secs and State Development Loans (SDL) in addition to investing in high quality debt papers. Dangi can vary his allocation towards these based on their valuations and relative spreads. The execution of the strategy is reflected in the fund’s noteworthy performance. The fund has remained a consistent performer over the years.

Performance relative to Peer Group

Top Quatile 2nd Quartile 3rd Quartile Bottom Quartile

Peer Group (5-95%): Open End Funds - India - Short-Term Bond Calculation Benchmark: None 11.0

Return

9.0 7.0 5.0 3.0

YTD

2016

2015

2014

2013

2012

India Fund Short-Term Bond

Aditya BSL Short Term Reg Gr

Portfolio Date: 10/31/2017 2.4 8.1 AAA

Average Eff Duration Average Eff Maturity Average Coupon Average Price Average Credit Quality

risk-reward Time Period: 11/1/2012 to 10/31/2017 12.0 Return

Investment strategy

Aditya BSL Short Term Reg Gr

8.0 4.0 0.0

0.0 0.3 0.6 0.9 1.2 1.5 1.8

top holdings

India Fund Short-Term Bond

Portfolio Weighting (%)

8.40% Govt Stock 2024 Power Finance Corporation Ltd. ONGC Petro Additions Ltd. Rural Electrification Corporation Ltd. Aditya BSL Cash Plus Dir Gr Reliance Jio Infocomm Limited 8.83% Govt Stock 2023 Tata Sons Ltd. Mahindra & Mahindra Financial Services Ltd 6.84% Govt Stock 2022

2.52 1.96 1.93 1.91 1.87 1.76 1.23 1.20 1.20 1.09

Key Information Morningstar Category

trailing returns Data Point: Return Calculation Benchmark: None YTD 1 Year 3 Years 5 Years 10 Years 15 Years Aditya BSL Short Term Reg Gr

6.19

7.69

9.05

9.21

8.67

8.09

India Fund Short-Term Bond

4.86

6.10

7.21

7.45

7.32

6.74

India Fund Short-Term Bond Fund Size (`) 209 Inception Date 3/3/1997 Annual Report Net Expense Ratio 0.32 Morningstar Rating Overall **** Manager Name Multiple Minimum Investment(`) 1,000 Data Source: Morningstar India

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Cover story

ETFs Mutual Funds Vs

Low-cost passive investment products like ETFs and Index Funds are set to challenge large-cap mutual fund schemes, says Malini Bhupta

Mutual Funds ETFs

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Outlook Money December 2017 www.outlookmoney.com

change with time as these funds have become the vehicle of choice in other world markets for both institutional and retail investors. Morgan Stanley expects retirement funds to invest $170 billion into such funds by FY26. As Indian financial markets mature, equity products that generate returns which closely track the benchmark indices will become more

Key Index Performance over 1 year Benchmark

% Change

S&P BSE SmallCap S&P BSE MidCap S&P BSE 500 S&P BSE 200 S&P BSE 100 S&P BSE LargeCap Nifty 50 S&P BSE Sensex

35.4% 27.6% 24.7% 23.1% 22.8% 22.2% 21.1% 20.9%

ETF’s Annualised Returns AUM in crores (Figures Annualised return as on 6th Nov) in last 1 year

ETF's ETF Nifty ETF Sensex Banking ETFs Gold ETFs Debt ETFs CPSE ETF

31,646 9084 7074 5300 1809 5082

24.50% 25.30% 34.85% 7.27% 4.92% 25.12%

Source: LIC Mutual Fund research

Market share of largest ETF providers by assets as on Sep 2017 2.8% 2.2% 3.4% 4.1% 4.2% 14.5% 18.6% 50.3% Reliance AMC

ICICI

HDFC MF

UTI AM

Kotak Mahindra

Others

SBI

LIC Nomura

www.outlookmoney.com December 2017 Outlook Money

Source: ETFGI Research Data

magine walking into a retail store and seeing two similar products priced differently. Which one would you choose? Obviously, the one that is priced less, if all other things remain the same. It is time then that investors view financial products in the same light as they do other products because the charges you pay to manufacturers erode returns. This is more relevant for investments made in large-cap equity mutual funds because their expense ratios are anywhere between 2.5-3.5 per cent. So, if investors are looking at participating in equity markets at significantly lower costs, then passive investment options like exchange traded funds (ETFs) make for a compelling option. ETFs are similar to mutual funds, but they follow benchmark indices like the Nifty or Sensex. On the other hand, mutual funds are actively managed by fund managers. Among other reasons, actively managed funds charge higher management fee because such funds can generate higher returns than the benchmarks. But even globally, it is widely accepted that beating the benchmarks is becoming tough. So if a fund manager cannot beat the benchmark and continues to charge higher expenses, then returns will be comparatively lower. Interestingly, in developed markets like the US, such passive funds have consistently done better than actively managed funds. Says Ashishkumar Chauhan, MD and CEO, BSE: “Internationally, ETFs have taken over the world such that they are bigger than all funds. An ETF investor knows exactly where the money is invested and that too at lower costs. In an ETF, the cost of distribution goes away as funds are traded on the exchange.” ETFs are nothing but a bunch of listed securities that investors can buy as units on exchanges. ETFs have been around for several years now, but they are gaining currency only now as Indian markets are maturing. In August 2015, the government allowed Employees' Provident Fund Organisation (EPFO) to invest upto 5 per cent of the incremental flows into equity markets through the ETF route. Now, 15 per cent of incremental flows are invested in equity ETFs. Even though it is a cheaper investment option with returns almost identical to those of the benchmark indices, ETFs are not yet popular with retail investors. But, this is expected to

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Cover Story popular because such The A to Z passive funds are priced of passive significantly cheaper. This investment category of products that ETFs compare well with I clearly see ETFs ape indices are known as large-cap diversified challenging large-cap passive funds, because no mutual funds that mutual funds. active intervention of a track specific indices or Natural maturity will lead fund manager is required benchmarks. However, to markets moving to ETFs in these funds. what makes ETFs relevant for large-caps. It is like buying a bunch from a retail investor’s of stocks that constitute perspective is the low total SuNdEEp SIkka the BSE Sensex, Nifty expense ratio (TER) or CEO, Reliance Nippon Life or any other specified the charge that the asset Asset Management Company index. Steve Rive, chief management company commercial officer of levies from investors. S&P Dow Jones Indices The cost of investing in LLP, who was in India for passive funds is as low as the launch of Bharat-22 20 basis points (100 basis ETF, says: “Passive investments are points makes one per cent), while a lot simpler. Where markets are diversified equity mutual funds can efficient, it is hard to better the charge between 2.5 per cent to 3.5 indices. A major factor that leads to per cent. So, an ETF that tracks the greater acceptance of ETFs is when Nifty 50 or the Sensex will deliver there is a move to fee-based advise. similar returns but the charges that This has happened in the US. Unless this the investors pay are significantly lower. happens, advisor has no interest in passive Explaining the importance of ETFs in India, investments like ETFs.” Anuradha Rao, managing director and CEO of SBI Mutual Fund says: “Both the regulators and the government understand that returns are Sectoral Returns over 1 year under pressure and they would like to ensure Consumer Durable 58.6% that distribution cost should not affect returns. ETFs allow investors an opportunity to generate Realty 57.9% decent returns at lower costs. As a product, Energy 44.7% ETFs are appropriate for new equity investors.” Telecom 43.5% But don’t expect your distributor to sell you Metal 40.5% an ETF because they don’t get commission on it. Basic Materials 37.9% Since there is no incentive for the distributor to Oil & Gas 37.0% push such products to the investor, awareness for Finance 30.7% such products is low, laments Rao. “But natural maturity will lead the market to move towards Bankex 28.2% ETFs for those looking to invest in large-caps. Capital Goods 27.8% ETFs cannot be ignored,” Rao believes. Consumer Discretionary 26.4% The reason that ETFs charge very low fund Utilities 26.2% management fee is because the discretion or Industrials 22.3% active intervention of fund managers in these FMCG 20.0% schemes is negligible. Money is allocated on the Power 15.2% basis of the index. Fund allocation in an exchange traded fund or an index fund is based on the Auto 13.8% Nifty or the Sensex, and follows the weightage of TECK 12.8% stocks in the index. Since ETFs are designed to Information Technology 8.6% track indices, the fund management fee is 20-30 Healthcare -7.90% basis points. Source: BSE But ETFs need not be plain vanilla offerings that

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Outlook Money December 2017 www.outlookmoney.com

ETFs

An ETF is like a mutual fund but the units of these funds are actually listed on exchanges and can be traded in real time. These units are like shares of listed companies and can be bought during the market hours. An ETF basically follows an index or a benchmark like Nifty or Sensex. Investors typically get the same returns as that of the index the ETF tracks, minus the charges. So, buying a Nifty 50 ETF is like buying a share of the Sensex, which is a basket of 30 companies. An ETF apes the index it is based on or designed to follow. The price of an ETF is a reflection of the real time price of the underlying security like stocks or gold. So, the price of an equity (Nifty 50) ETF will be a reflection of the real time prices of these 50 stocks. Each unit of an ETF will change depending on the prices of the underlying securities like stocks. Within the same day, ETF price will vary and investors can trade (buy or sell) them like shares. It is cheaper to invest in ETFs as they are not actively managed by fund managers. The charges for ETFs are less than 0.5 per cent as the asset allocation is based on the index it apes. While buying ETFs, investor would have to pay a small fee to the broker every time the ETF is traded as is the case with stocks. Tax treatment of equity ETFs is 15 per cent short-term capital gains tax for selling the security in less than one year. For long term investors, there is no capital gains tax on equity ETFs. Same is the case for sector specific equity ETFs. For Gold ETF, the tax is based on income tax slab of the individual. For index and sector ETFs, securities transaction tax of 0.125 per cent is charged. ETF investors can buy a fixed number of units every month in a systematic way just as you buy stocks through SIP (systematic investment plan). The purchase would need to be done through the broker.

Mutual Funds

A mutual fund is an investment scheme that is actively managed by fund managers and the underlying securities can be stocks or bonds. However, a fund manager actively decides on the asset allocation strategy. Even in a large-cap diversified mutual fund, a fund manager can take aggressive calls and invest in illiquid stocks to generate higher returns (alpha). A mutual fund manages the money investors put into different schemes — equity, debt or a mix of both — which is why MFs are actively managed schemes. Mutual fund units can be bought at the day’s declared NAV (net asset value). A mutual fund investor cannot trade the units during the day at different prices. So if you have invested in a large-cap mutual fund, you can only buy it at the day’s declared NAV and not during the course of the day as it is not listed on the exchange. Mutual funds are relatively expensive, as they charge a fund management fee of 2.5-3.5 per cent. The fund manager actively manages the fund and, therefore, he/she uses discretion to allocate funds to different securities. Actively managed funds are, therefore, expected to deliver returns that are better than the indices. However, over time the alpha has been shrinking as market matures. Equity mutual funds are exempt from long-term capital gains tax. If an investor sells equity mutual fund in less than 12 months then there is a flat capital gains tax of 15 per cent. A securities transaction tax will be levied for all equity mutual funds redeemed. Mutual fund investments can be made through the systematic investment plan by buying a few units of the mutual fund scheme every month.

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Cover Story Management and at the follow the big benchmarks. end of September, SBI ETF Seeing the writing on the Nifty 50 had `24,067 crore wall, both the NSE and Many investors are in assets. the BSE are constantly wary of active fund Another factor that has designing interesting managers and their given a boost to this asset indices on which new adventurous investments. class is the government’s ETFs can be constituted. an investor of ETF knows divestment process India Index Services and exactly where the money through the ETF route. Products Limited (IISL), a is invested and that too The government launched group company of the NSE, at reduced cost. In an ETF, its CPSE ETF in March 2014 has been launching new the cost of distribution with an issue size of `3,000 and innovative indices goes away as funds crore. A second edition across multiple strategy are traded on the of the CPSE ETF with an and asset classes. exchange. issue size of `6,000 crore For instance, the gold was launched in January ETF has been very popular, aShIShkuMar 2017 by Reliance Nippon which allows the investor ChauhaN Life Asset Management. to buy units where the CEO, BSE Through the third tranche, underlying security is gold. the central government The first ETF in India was mopped up over `2,500 launched in December 2001, crore. Interestingly, the which was benchmarked government gave an to Nifty 50 index. In India, upfront discount of 3-5 per cent to the AUM of equity ETFs has grown investors for ETFs like CPSE and around six times in last two financial Bharat-22 ETF. The funds charge years (ending March 31, 2017). In FY11 very low management fee. Bharat-22 there were 11 equity ETFs with `1,976 ETF charges less than one basis point. crore assets under management (AUM). Even though ETFs are not so popular At the end of September, ETFs AUMs with retail investors in India, globally they touched `53,609 crore. In India, the largest are the vehicle of choice for both institutions and ETF is the Nifty 50 based ETF issued by SBI Funds

Liquidity: A Key Factor for ETFs

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egarded as one of the key features that give exchanged traded funds (ETFs) an upperhand over regular mutual fund schemes, liquidity lends this advantage to ETFs through two sources – primary and secondary. In the primary market, the authorised participants (APs) or market makers (MMs) transact directly with the issuers of ETFs to buy as well as redeem their ETF holdings. In the secondary market, liquidity originates from the continuous buying and selling of ETF units traded on the exchanges, with

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Indicative Net Asset Value (iNAV) – the underlying value of an ETF unit – as the core metric. Adequate trading volumes on the exchanges hold the key to creating ample liquidity for investors. Put simply, retail investors can access ETFs through two routes – NFOs and the stock exchanges, once they are listed. For example, the central government floated NFOs for the marquee CPSE ETF and Bharat-22 ETF schemes, post which the former was listed for trading on the bourses. Now, the government has raised nearly `14,500 crore through the Bharat-22 ETF.

Outlook Money December 2017 www.outlookmoney.com

High liquidity is considered an attractive proposition as it provides investors an opportunity to stay or exit their investment positions at fair values, with minimal risk and expense. “ETF liquidity gives investors the flexibility to enter and exit the investment. The more the liquidity, the finer are the prices that are offered on the exchange thereby ensuring more flexibility,” says Koel Ghosh, Head— Business Development, S&P Dow Jones Indices in South Asia. by Himali Patel

Cover Story and their whims. This made Indian markets more volatile because Both the regulators asset allocation of foreign and the government investments depended understand that returns a lot on both global and are under pressure and local developments. Over they would like to ensure the last three years, that distribution cost Indian equities have should not affect returns. delivered steady returns ETFs allow investors an because the government opportunity to generate has taken steps to decent returns at ensure that markets low cost. are insulated from the vagaries of foreign capital aNuradha rao flows. Take for instance, Managing Director and CEO, increase in investment SBI Mutual Fund of incremental inflows in EPFO into Indian equities from 5 per cent in 2015 to 15 per cent at present. In a steady state when the indices are rising steadily upwards, generating alpha (index beating returns) is rather difficult. Explains Sundeep Sikka, Do ETFs score over CEO of Reliance Nippon Life Asset large-cap mutual funds? Management Company: “Like Indian markets have undergone a any industry, financial services too structural shift over the last three are maturing in India. It is impractical years. Policies of the government have a lot to do with this shift. Earlier, Indian equities were that large-cap funds can charge 3.5 per cent largely driven by foreign institutional investors management fees. Why on earth will someone pay such a high fee because the alpha that an active fund house will generate will not justify the management fee. I clearly see ETFs challenging Investment Activities: Then & Now! large-cap funds. Natural maturity will lead market moving to ETFs from large-caps.” Nov 2016 Oct 2017 Few fund houses like Reliance and ICICI MF AUM (` Cr) 1650011 2141346 30% Prudential are realising that generating returns higher than the benchmarks to justify high EQ AUM (` Cr) 531575 855449 61% management fees will be tough. ICICI Prudential for instance has filed for 8-9 ETF products MF Folios 5.20 Crs. 6.32 Crs 22% because it needs to have more such offerings as it is a financial super market. But, some large fund EQ Folios 4.17 Crs. 5.15 Crs 24% houses still believe that India is an active market EQ. Avg. Ticket Size (`) 1,27,603 1,65,984 30% and fund managers will continue to outperform the benchmark indices. Fund managers typically charge investors 2.5MF Inflows (` Cr) 36021 51148 42% 3.5 per cent of assets as fees. Once an investor EQ Inflows (` Cr) 12711 21899 72% factors in these charges, the returns in the hands of investors would be that much lower. Monthly Folio Addition 6.96 Lks 10.27 Lks 48% Like in gold jewellery, making charges are a Source: AMFI percentage of the gold price, expense ratios retail investors. Globally, assets worth $4.4 trillion are being managed by 5179 ETFs and investors are choosing a passive investment strategy rather than an active one, where expensive fees are paid to fund managers who very often don’t beat the benchmark indices. Beating the market or benchmark indices depends on a number of factors like volatility, depth of the market, and deviation between the performance of stocks and benchmarks. BSE’s Chauhan asks: “Why do you want to take a fund manager risk when you are already taking market risk?”

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Outlook Money December 2017 www.outlookmoney.com

ETF Returns Scheme Name

Tracking Error

AUM (as on Oct 31, 2017)

1 Year

3 Years

Aditya Birla Sun Life Nifty ETF Aditya Birla Sun Life SENSEX ETF Axis Nifty ETF

20.51 22.66 --

8.83 ---

---

CPSE ETF

18.92

5.14

0.28

5395.39

Edelweiss ETF - Nifty 50 Edelweiss ETF - Nifty Bank Edelweiss ETF - Nifty Quality 30 HDFC Nifty ETF HDFC Sensex ETF ICICI Prudential Midcap Select iWIN ETF ICICI Prudential Nifty 100 iWIN ETF ICICI Prudential Nifty iWIN ETF ICICI Prudential Nifty Low Vol 30 iWIN ETF ICICI Prudential NV20 iWIN ETF ICICI Prudential Sensex iWIN ETF IDFC Nifty ETF IDFC Sensex ETF Invesco India Nifty ETF Kotak Banking ETF Kotak Nifty ETF Kotak NV 20 ETF Kotak PSU Bank ETF Kotak Sensex ETF LIC MF ETF - Nifty 50 LIC MF ETF - Sensex LIC MF Exchange Traded Fund - Nifty 100 LIC MF G-Sec Long Term ETF - Reg - Growth MOSt Shares M100 MOSt Shares M50 MOSt Shares NASDAQ 100 Quantum Nifty ETF - Growth Reliance ETF Bank BeES Reliance ETF Consumption Reliance ETF Dividend Opportunities Reliance ETF Hang Seng BeES Reliance ETF Infra BeES Reliance ETF Junior BeES Reliance ETF Nifty 100 Reliance ETF Nifty BeES Reliance ETF NV20 Reliance ETF PSU Bank BeES Reliance ETF Sensex Reliance ETF Shariah BeES SBI ETF BSE 100 SBI ETF Nifty 50 SBI ETF Nifty Bank SBI ETF Nifty Next 50 SBI ETF Sensex UTI Nifty ETF UTI Nifty Next 50 ETF UTI Sensex ETF

21.69 28.33 11.56 20.74 20.23 25.93 21.14 20.71 -23.81 19.84 20.52 20.12 20.89 28.28 20.75 24.52 19.08 19.87 20.72 20.12 21.77 4.75 22.58 18.97 23.61 20.63 28.08 23.18 23.18 21.19 24.93 26.95 20.95 20.64 24.22 19.1 20.15 27.12 22 21.17 28.57 27.4 20.31 21.04 -20.31

------10.01 8.73 --7.31 --8.61 -8.72 -1.01 7.18 ----17.97 7.53 16.5 8.54 14.09 13.45 9.23 9.78 3.39 19.09 9.54 8.47 -1.02 7.42 10.68 ----7.7 ----

---0.08 0.03 -0.34 0.09 --0.22 ---0.08 0.08 0.18 0.25 0.12 --------0.08 0.18 0.34 0.33 0.13 0.11 0.19 0.06 -0.15 0.13 0.15 0.40 0.04 0.12 0.32 0.55 ----

2.98 1.45 4.41 179.91 29.33 11.14 38.36 1228.39 11.45 8.11 3.14 4.62 0.81 1.80 3870.33 539.72 2.74 141.55 11.16 448.62 328.36 291.02 72.36 22.86 20.84 68.10 4.82 2607.08 19.86 17.76 6.68 18.05 199.65 8.64 842.98 17.41 193.49 34.69 2.61 1.51 26515.33 749.19 9.69 8164.91 4749.06 57.81 1522.84

216.57 11.14 7.49

Note: Kotak ETF tracking error calculated based on daily value since inception as on 30th Oct, 2017; Reliance ETF tracking error calculated using daily value for 36 months period as on 30th Sep, 2017; HDFC ETF tracking error calculated based on daily rolling returns for the last 12 months as on 30th Sep, 2017; SBI ETF tracking error calculated based on daily value since inception 30th Sep, 2017; AUM Source: MFI Explorer. CAGR returns as on 31st Oct, 2017 and tracking error Source: Factsheet

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Cover Story are also a percentage of Regulatory push funds invested. Higher for ETFs expenses impact returns The government is keen when investors redeem to push low-cost equity We have been their mutual funds units. products like ETFs, pioneers in promoting So, if a large diversified which is why it is taking ETFs among our retail equity fund has to charge the ETF route for all its clients and believe that 3.5 per cent as fees, the divestment programmes. retail investors should fund has to give returns The response seen by look at this low-cost index that are higher than the all the CPSE ETFs has tracking product even benchmarks to justify been very good as the though the market for ETF the cost. Imagine this, upfront discount given to has not grown the extent if the Sensex returns the investors has helped it should have. 15 per cent in a year, an generate double-digit actively managed fund returns for the investors. dEEpak JaSaNI will have to generate Both institutions and retail Retail Head, returns that are at least participation has been HDFC Securities 4-5 per cent higher if it healthy in these funds. has to charge a 2.5 per Additionally, the cent management fee government has also from investors. allowed the EPFO to invest In comparison, ETFs upto 15 per cent of its charge only 20-50 basis points incremental flows into equity ETFs. (100 basis points make one per So far, `43,000 crore of this money cent) and tend to deliver returns has gone into equity ETFs, which has that are marginally lower than propelled the rise of the benchmarks. benchmark indices they track. The NSE too has been promoting ETFs Deepak Jasani, retail head of HDFC to investors as they provide attractive Securities, which is one of the largest returns at low cost. The exchange has intermediaries for ETFs, says: “We have also organised several investor camps in been pioneers in pushing ETFs to our retail partnership with market regulator SEBI to clients and believe that retail investors should educate retail investors on ETFs. look at it even though the market for ETF has not In FY15, the labour ministry, for the first grown to the extent it should have. This is due time, mandated employee provident funds to to lack of awareness among investors because invest a minimum of 5 per cent investment of equity is a push product in India.” incremental flows into equity. This has been increased to 15 per cent of incremental flows in FY17. This flow is directed into equities through domestic ETFs. Morgan Stanley believes that the Inflows since Dec'16 till Oct'17 government’s move could imply additional flows of `30,000 crore into Indian stocks through Total MF Net Inflow ` 2,93,279 Crore ETFs. These flows will not only support markets, Equity Net Inflow ` 1,96,727 Crore but also further reduce volatility in the markets, making it that much more difficult to beat the Total MF Folios added 1.11 Crore benchmark indices. The Securities and Exchange Board of India Equity Folios added 98.79 Lakh (SEBI) too has been nudging the industry towards becoming more transparent while disclosing Net EQ Invt since De-Mo(Dec' 16-Oct'17) returns. The regulator wants mutual fund houses to benchmark equity schemes against By FIIs ` 26,953 Crore the Total Returns Index (TRI), which will give a By MFs ` 1,05,809 Crore true picture of the returns generated by these Source: AMFI, NSDL, and Reliance Nippon Life AMC actively managed schemes when compared Continued on p44

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Outlook Money December 2017 www.outlookmoney.com

Exchange Traded Funds are Part of Everyday Lexicon of International Investors This class of funds are tapped by institutions, professional investors, and active traders as it offers strong liquidity

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he Exchange Traded Funds (ETFs) have become part of everyday lexicon of international investors, with the global exchange traded fund industry smashing past $4.3 trillion in assets, according to figures from ETFGI, an industry data provider and independent research and consultancy firm. Since the introduction of first ETF more than two-and-half decades back, the ETF industry has come a long way, with appetite for cheaper and passive alternatives continuing to grow at rapid pace, predominantly with institutional and professional investors and individual active traders.

Raghav IyengaR Head- Retail & Institutional Business, ICICI Prudential AMC

Growing Popularity of Passive Alternatives From one fund in 1993, the ETF market grew to almost 7,000 exchange-traded products managed by 313 providers. This class of funds is extensively tapped by institutional, professional investors and individual active traders as ETFs offer strong liquidity, convenience, diversification, transparency and cost advantage. ETFs have expense ratios that are a fraction of the cost of actively managed fund, which are estimated to have an average expense ratio of less than 1.5 per cent; whereas ETFs expense ratios can be as low as 0.05 per cent. This can make a difference in the returns earned by investors over a long period of time. The Exchange Traded Funds are reshaping the way people are investing for their financial future. ETFs provide an opportunity to participate in a growth story of country’s bellwether companies and allow investors to diversify risks across sectors. Over the recent years, intense competition among ETF providers has resulted in lowering prices making ETFs

more lucrative investment option for retail investors.

Evolving Indian Investment Panorama India is also fast catching up the trend with more number of investors considering ETFs as a medium for passive investing with an upsurge in assets and products. India is among the leading countries globally in terms of growth in domestic ETFs, as assets have witnessed tremendous growth in past three years to about $8.5 billion and counting. The Indian ETF evolution that took off with the gold ETFs is seen moving into a whole new direction, with the government approving its divestment strategy through ETF. In addition, the Ministry of Labour and Employment approving 15 per cent of Employees Provident Fund Organisation (EPFO) flows into ETF investment is a booster for the domestic ETF industry that may grow multifold over the next decade. India should certainly draw inspiration the way global ETF industry has exponentially grown over the last decade, and implement the necessaries to make ETFs more investor friendly. India-focused offshore equity funds and ETFs are gaining immense popularity among international investors. The combined asset base of the India-focused offshore equity funds and ETFs currently stands at more than $55 billion. An investor looking to remain invested for the long term in Indian stock markets can consider ETFs based on benchmark indices. One can select ETFs linked to large-cap indices like Sensex, Nifty, etc. or mid-cap indices like BSE Midcap 100, Nifty Midcap 100, etc based on market-cap orientation.

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Interview

Cover Story

VIKRAM LIMAYE MD & CEO, NSE

NSE Promoting ETF for Indian Investor Series of incentive schemes have been implemented by NSE for enhancing ETF liquidity After the government allowed a portion of incremental flows of EPFO into equities through the ETF route, almost `60,000 crore has flown into such funds. Do you see ETFs gaining momentum among retail investors? As on September 30, 2017, the equity ETF AUM accounted for 9 per cent of total equity mutual fund AUM. It was only 4 per cent of total equity mutual fund AUM as on March 31, 2016. In addition to equity ETFs, asset management companies in India have also launched ETFs on G-Secs. Another trend which we are seeing is focused on smart beta ETFs, which have done very well internationally. We believe that ETFs in India will gain momentum in the coming years.

Going by global experience, how do you see ETFs growing in India? Globally, ETF is more than a $4 trillion industry. In terms of AUM, USA is largest followed by Europe and Asia. India is still at a nascent stage as compared to global peers. Even in

Asia, we are smaller than Japan, Hong Kong, Korea, Taiwan etc. However, there is potential to make Indian ETF industry big in the next few years. All the stakeholders need to collaborate to make it a successful product category.

Are ETFs popular with retail investors? Retail participation in ETFs is increasing. Retail accounts for 64 per cent of total daily trading volume of ETFs. A few financial advisors are advising monthly SIPs in ETFs also, which is a good sign for the industry. Increasing product awareness is going to play an important role in further increasing retail participation in ETFs.

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Outlook Money December 2017 www.outlookmoney.com

Photo: soumik kar

Even though a lot of money has gone into these schemes, liquidity is still a concern. Is NSE planning to do anything to improve the liquidity in these funds? Most of the increase in AUMs of ETFs in the recent past has been on account of EPFO, which, essentially, is a long-term investment. That may not directly add to the liquidity. NSE has been constantly endeavouring to promote ETFs for Indian investors. While Securities Transaction Tax (STT) has been reduced significantly for ETFs, liquidity providers, which are Authorised Participants (APs) appointed by AMCs, still face high STT for their transactions as they have to constantly provide buy/sell quotes throughout the day. NSE has been working with the government to reduce STT for AP transactions so as to enable them to quote with tight spreads which would help build further liquidity. NSE has also implemented series of incentive schemes for enhancing ETF liquidity by providing discounts on transaction charges to trading members who invest in ETFs. NSE also incentivised trading members to bring more of their clients to ETFs.

Interview AShIShKUMAR ChAUhAN MD & CEO, BSE

ETF is an Idea Whose Time has Come When markets are driven by institutions, then investors don’t like to take fund manager risk. Compared to active funds, ETFs are more transparent Passive investment funds like ETFs are big internationally, where fund manager plays no role in managing a fund. What is the reason? In most countries, for the longest time fund managers were considered to be heroes, who were capable of generating returns higher than the Index on a consistent basis. But over time, passive funds - index funds started coming into markets, where the fund had stocks exactly in the same proportion as that on the Index. You could buy and sell the fund on exchanges, so cost was very little for managing and distributing the index funds. In that sense, what is happening in India now has happened in global markets earlier. The distribution cost for active mutual funds and insurance products was high even in the US back in time. It is the index that is giving you the returns. My job as a fund manager is to act as a clerk. In active funds, some fund managers would buy illiquid stocks and show very large returns on paper but when they went to sell, very little was coming out. That was not the case in index funds. Funds had to invest in only liquid stocks.

In an index fund, the fund manager’s job is to act as a clerk Is the risk lower for ETFs compared to actively managed mutual funds? In some sense the win of the passive funds is the victory of an idea, which became larger than the hot shot fund managers. Transparency and lower costs have made ETFs what they are. They are engines of finance globally.

How should retail investors view ETFs? If India is going to do well as a nation and if an Index represents India, then at the lowest possible cost we will do well. If you believe

in government enterprises, then you can invest in S&P BSE Bharat-22 ETF or if you believe in IT sector then you can invest in a S&P BSE IT sectoral ETF. If you are investing in S&P BSE Sensex, very few people have beaten it over a period of 10 years other than the greats like Warren Buffet.

Do you see ETFs becoming popular in India? Recently, when EPFO started investing in the market through such funds, asset management companies started managing a larger corpus. The government also created a PSU index. And now, S&P BSE Bharat-22

ETF has been launched. The index fund evolution in India is at the halfway mark, but the inflexion point has come.

If mutual fund houses are not going to push ETFs, then do they have a future in India? Over time people will look at returns and costs. For instance, S&P BSE Bharat-22 index ETF will have less than 1bp cost in a year. When markets become institutions oriented, they don’t want to take a fund manager risk. The index funds give them low cost fund management and enhanced transparency. No amount of de-marketing can stop ETFs from becoming popular.

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Cover Story Continued from p40

only about 1-2 per cent to the benchmarks rise. higher returns than the The returns generated benchmark. With this by the schemes often do kind of outperformance, not include dividends regulatory action it is hard to justify high paid by the companies on will lead to shrinkage in fund charges. the benchmark indices. alpha which the (mutual Also, in India fund Mutual fund schemes fund) industry has been managers claim that simply compare the generating so far. alpha generation was returns generated by high because of the loose their schemes to the kapEN parEkh definition of large-cap benchmarks, but do not President, funds so far. In October include the dividends paid DSP BlackRock this year, SEBI has by the companies listed on defined the top 100 listed the exchange. What this companies by market will do is pare the alpha capitalisation as largegenerated by these mutual cap stocks. So largefunds. And if the mutual cap diversified mutual fund houses are not able fund schemes will no longer be to deliver a significantly higher able to invest in companies with return, then the higher fees they a smaller market capitalisation. charge will also come into question. Kalpen Parekh, president of DSP So, if a large-cap diversified mutual BlackRock, believes this move fund is charging a fund fees or Total will also impact the ability of fund Expense Ratio of 2.5-3.5 per cent, managers to generate returns that then that will impact the returns by a are superior to benchmarks or passive funds similar number. like ETFs, which follow benchmarks. In fact, globally ETFs are now charging zero fees as Has the mutual fund industry they are managed using technologies like been over-stating alpha? Ask any fund manager at any leading fund house artificial intelligence. In India, mutual funds have been showing and they will claim that 65 per cent of funds in India generate alpha. But, the reality could be returns based on absolute index performance, slightly different. While there is no doubt that which excluded the dividend payouts. If one active fund management has its own advantages, weeds out the returns after factoring in the in the large-cap space the returns are not dividends, then performance of large-cap mutual sufficiently high to justify a high expense ratio funds schemes would show lower returns. of 2.5-3.5 per cent, believe the industry experts. Returns that factor in total returns (including In the last ten years, mutual fund industry has dividend payouts) are called TRI. Quantum generated an alpha of 4 per cent but this has Mutual Fund was the first to voluntarily move come down to 1 per cent. This means that to benchmarking their schemes against the TRI the performance of large-cap funds and now even DSP BlackRock is doing the same. has been higher by 4 per cent in the Parekh also believes that regulatory action will last ten years but is now generating lead to shrinkage in alpha, which the activelymanaged funds have been generating so far. According to HDFC Securities, one study shows that active large-cap equity mutual ETF Returns funds generated alpha of 4 per cent (20002007) compared to TRI Nifty, but now this is ETF product 1 Year 3 Year 5 Year 10 Year down to 1 per cent (2008-2017). Some reasons NIFTYBEES 17.38% 9.86% 14.39% 8.55% for this shrinkage include increasing size of That means, `10,000 invested before 1 year, 3 year, 5 year, and 10 corpus (leading to risk-averse behavior by fund years would have become `11,738, `13,259, `19,585, and `22,714 managers) and overlap in portfolios. respectively. Going forward, beating the Index will become a

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Outlook Money December 2017 www.outlookmoney.com

The SPIVA Difference

1 2 3 4

*Regional benchmarks included here are large-cap, with the exception of Brazil, Chile, and Mexico where SPIVA results displayed reflect regional broad market indices. Multiple benchmarks exist in all regions tracked by SPIVA. For more information on SPIVA methodology, including a full list of regional benchmarks and results, visit www.spdji.com/spiva

Accounts for the entire opportunity set–not just the survivors–thereby eliminating survivorship bias. Applies an apples-to-apples comparison by measuring a fund’s returns against the returns of a benchmark appropriate for that particular investment category. Shows that asset-weighting matters by using both equal- and asset-weighted averages. Uses only the share class with greater assets, which avoids double counting multiple share classes in all count-based calculations.

challenge and the demand for passive products like ETFs will increase as investors will not be willing to pay for higher charges. Industry veterans believe that returns generated by large-cap mutual funds will come down. SBI’s Rao also believes that investors need to be prepared for lower returns in future compared to the past 10 years.

Downside of ETFs

Even though nobody denies that ETFs are the future and that investors will move towards them, this asset class will remain a pull product. Given that the ETFs are low cost and distributors don’t get commission to push this product, not many would advise investors to opt for this. Some fund houses themselves are not terribly

Source: S&P Dow Jones Indices LLC, Morningstar, Fundata, CRSP. Data as of June 30, 2017. Charts and tables are provided for illustrative purposes. Past performance is no guarantee of future results.

keen on promoting it for this very reason. Explains Lakshmi Iyer of Kotak Mahindra Asset Management: “Equity in India is a push product and distributors have to be incentivised to sell mutual funds. Distributors have a cost too, so why would they sell mutual funds if expense ratios are as low as 10-15 basis points?” Iyer also believes that while the opportunities to generate alpha in the Indian market are coming down, they still exist. Reliance Nippon’s Sikka begs to differ and says that the industry at times tends to get carried away by the distributors and what they want. In the longer-term, the distributor will do what is good for the customer, he says. Other than this, another disadvantage of such funds is that investors have to buy ETFs only Continued on p48

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Cover Story

Global investors have been unable to take meaningful exposure to India through ETFs A dual listing of Bharat-22 ETF on global exchanges could serve as a huge opportunity for the government to redefine investing in India

Sanjay Sachdev Chairman, ZyFin Holding PTE Ltd.

D

isinvestment through the route of ETFs with the underlying of strong fundamental companies has been a unique initiative that the Indian government has taken. Bharat-22 ETF is a step forward in this direction with the underlying of smart beta formulation, making the deal sweeter for local investors. This comes on the back of the success that Indian government had with the Central Public Sector Enterprise (CPSE) ETF launched in 2014, which was more of a pure passive investment strategy. The Bharat-22 ETF comprises many stocks in a unique combination of private and public sector companies. Of these, 16 companies are Maharatnas/ Navratnas or Miniratna-1. These 22 stocks span six different sectors of the Indian economy - industrials, finance, utilities, energy, FMCG, and basic materials, which directly stand to benefit from the various key reform initiatives undertaken by the government, like financial inclusion, Make in India, infrastructure development and others. With sectoral capping at 20 per cent and stock-specific capping at 15 per cent in place with an annual rebalance, the Bharat-22 ETF ensures diversification and is likely the only smart beta ETF that offers investors the opportunity to

partake in India’s growth story in a balanced way. ETFs have globally received a lot of attention from both large institutional investors managing long-term sovereign funds as well as retail investors, and have increasingly become a preferred mode of investment. Assets under Management (AUM) of ETFs have grown from US$ 1.75 trn to over US$ 4.3 trn in a space of five years – representing a CAGR of 19.70 per cent. Number of ETFs have also grown exponentially from 3330 in 2012 to more than 5150 in 2017. A large part of this growth can be attributed to the fact that ETFs are the most efficient and lowest cost financial products resulting in higher returns in the hands of the investor and also due to mature markets offering limited alpha generation opportunities to fund managers, thus making a strong case for smart beta and passive investing. This, in turn, has driven investors’ attention increasingly towards smart beta and rule-based asset management strategies where ETFs score over other products. Despite the trailblazing growth in ETF AUM, global investors have been unable to take any meaningful exposure to India through ETFs. A case in point is the fact that while USA has ETF AUM of over US$ 3 trn, which amounts to close to 70 per cent of the Global ETF AUM, India focused ETFs (ETFs with more than 90 per cent allocation to India and over 90 per cent assets exposure to equities) have a cumulative AUM of less than US$ 15 bn. This is less than 0.5 per cent of the total USA ETF AUM. The comparable figure is even lower for the whole of Europe.

ETFs have globally received attention from institutional investors managing long-term sovereign funds 46

Outlook Money December 2017 www.outlookmoney.com

Cross listing or a dual listing of the Bharat-22 ETF in global markets viz USA and London would be an ideal first step to bridge this gap and provide global investors with the option to diversify their holdings and take exposure to a high yielding asset class in their portfolio. They can derive extra comfort from the fact that the Indian government holds a substantial stake in most of the constituent stocks of the Bharat-22 ETF. Also, it has allowed Employees Provident Fund Organisation (EPFO), India’s largest provident fund body, to take part in equities only via CPSE ETF and in all likelihood, would continue to do so through Bharat-22 ETF. This will enable greater participation in the ETF from a larger ecosystem of investors. Also, as the investor base widens, it will lead to greater liquidity in the ETF, which in turn would benefit all participants. The success of Masala Bonds, as witnessed in the recent past, is a definite sign of global investors acknowledging India’s improving macros and increasing allocation to India. This way, global investors, including the retail category of investors, will have an option to take exposure to India at low cost merely at the click of a button. A dual listing of Bharat ETF on global exchanges could serve as a huge opportunity for the government to redefine investing in India and take India to the global markets as opposed to bringing global investors to India, as has been the trend in the past. Additionally, with several pro-growth reforms undertaken by the government and the resulting improvement in India’s macroeconomic scenario, the timing may be ideal to consider such a move.

Important to get Retail Investor Acclimatised to Investing through MFs It is important to learn to walk before before you learn to dance and few are as privileged as Prabhu Deva or Michael Jackson to do both seamlessly

LakShmI IyeR CIO (Debt) & Head, Kotak Mutual Fund

E

xchange Traded Funds (ETFs) play an important role for an investor in his/her investment strategy. ETFs provide ease of asset allocation and convenience of capturing the index potential without the hassle of basket formation and regular recalibration. This way ETFs take the benefits of mutual fund investing to the next level. For an active investor, ETFs allow almost real time investment into the fund. The index experiences price changes throughout the day. ETFs reflect these changes like a stock. Thus, an investor can use ETF to buy and sell at near index levels. ETFs by nature are low-cost products as compared to active mutual funds. Since ETFs broadly replicate the index, the need for active trading, fund management and analysis does not arise per se. This reduces the cost of fund management. For this reason, the regulators limit the chargeable expenses to the ETF. Here, it is important to understand that asset class ownership via ETF is also for the more financially aware investor. In a country like India, financial asset classes like equities still have a ‘Cinderella’ kind of treatment i.e. allocate only when all other asset classes like real estate, gold, traditional mode of investments are consummated. Barring banking products like fixed deposits,

savings account, etc, most financial products are actually ‘push’ products. The population of India is over 1.3 billion (130 crore). Yet the number of Demat accounts in India is only around 30 million (3 crore). The number of Mutual Fund (MF) folios is a little over 60 million (6 crore). In that, the unique mutual fund folios would be much lower. Additionally, Indian equity markets still continue to be a ‘land of alpha’ meaning most active equity funds still continue to outperform their benchmarks across market capitalisation with the net of expense ratios charged. Therefore, initially, it is important to get a retail investor acclimatized to the world of investing through actively managed mutual fund schemes. It is important to ‘learn to walk’ before ‘you learn to dance’ and very few are as privileged as Michael Jackson or Prabhu Deva to do both almost seamlessly! In most parts of the country, especially in non-metro cities in India, a Systematic Investment Plan (SIP) is construed as a mutual fund product rather than a facility to participate in an asset class like equities. Hence, there

is much of education / awareness that needs to be done before we proclaim —financial nirvana in terms of investor understanding. Herein, the role of a financial advisor/ distributor is of significance, where enough time and effort is being spent to convert a physical mode investor to a financial asset investor. And as it is said, 'There is no free lunch…’ there has to be a monetary incentive for the advisor to get in prospective clients. With the low expense ratios in ETFs, it is an onerous task to get an intermediary to advise ETFs to clients. However, if you are a financially savvy investor, you could use ETFs as an ‘addon’ to your current investment portfolio. Also, institutional investors who are more financially aware could use ETFs as an effective tool as part of their portfolio. In such cases, you can actually have your cake with icing and a cherry on the top! But for the average Indian retail investor, while it is good to have proteins in the diet, the time to understand ‘quinoa’ as high in protein is still some time away.

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Cover Story

The ETF Path to Divestment by Himali Patel

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he year 2014 saw the central government adopt a novel approach for diluting its stake in premier state-owned enterprises. It launched CPSE (Central Public Sector Enterprises) ETF in March that year, following it up with two more tranches in January and March 2017. Reliance Mutual Fund managed the second and the third tranches. The combined issue size was `11,500 crore, with the three tranches seeing oversubscriptions of 45 per cent, 128 per cent, and 303 per cent respectively—a strong indicator of investors’ enthusiasm for such funds. So far, they seem to have justified the investors’ faith. As on November 10, 2017, the three CPSE tranches had delivered returns of 16.29 per cent, 19.62 per cent, and 12.33 per cent respectively, since inception. In November, the centre tapped the ETF route again to mop up over `14,500 crore through the Bharat-22 ETF. Managed by ICICI Prudential Mutual Fund, the new ETF is part of the government’s ambitious plan to achieve the `72,500 crore divestment target for FY 2017-18. While both CPSE and Bharat-22 ETF offers have tasted success, whetting investors’ appetite further, Saravana Kumar, CIO, LIC Mutual Fund has a few words of advice for them. “Keep in mind that the underlying assets owned by ETFs should also have ample liquidity, which would enable the fundhouse to effectively invest in those underlying assets ensuring lower cost of buying the shares,” he cautions. Lower liquidity in underlying assets will have a bearing on the returns, making it imperative for investors to factor it in while making investment decisions.

Continued from p45

through the exchanges. For this they need a broking account and a demat account. Some fund houses believe that given the low penetration of direct equities, investors may not want to invest in ETFs because a demat account can be a deterrent. In contrast, investing in a mutual fund is easier as distributors make life easier for investors. Interestingly, fund houses like DSP BlackRock have a solution for this too. Fund houses are coming up with Index Funds, which are passive and have low expense ratios but are not traded on exchanges. The investor then gets the benefit of a passive fund with the advantage of a mutual fund. Given that there are only three crore demat accounts in India, many intermediaries and mutual fund houses believe that investors will not invest in ETFs simply because it is more cumbersome. In comparison, there are five crore mutual fund folios as the distributors play a key role in pushing the funds to retail investors. In an Index Fund, the fund management fee is significantly lower and almost similar to ETFs, but is still a mutual fund. An investor

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can invest in it at lower cost without having to purchase it on a stock exchange.

An idea whose time has come?

In India, equity investments are still a push product where distributors have to convince investors to participate in it. But over time, as Indian markets and investors mature, ETFs will become the instrument of choice. Given that the government is investing a lot of retirement funds into ETFs, the liquidity of these products is also critical. While the government currently is the biggest subscriber/buyer of ETFs, the product also needs liquidity (there must be large number of buyers and sellers) to make the product attractive. To this effect, broking houses and exchanges are working towards creating more awareness among investors. HDFC Securities conducts seminars and comes out with research for its retail investors regularly, as do other brokerages. Even if retail participation is currently low, passive investing is an idea whose time has come. [email protected]

®

Trends

Small is the Next Big Thing First-time investors from smaller cities are increasingly showing greater appetite for mutual fund investments, but is the trend here to stay? Preeti Kulkarni probes for answers

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oopesh Kumar Yadav, a 37-year-old central government employee based in Meerut, is not associated with the city’s famed sports equipment manufacturing industry, which has supplied its sought-after willows to many a celebrated cricketer. Yet, Meerut’s legendary status as the Sports City of India has lent its flavour to his investment approach. He believes in accumulating the ones and twos while not losing sight of the occasional sixer to push up total gains. “I have been investing in an equity mutual fund since June through an SIP of `4,000 per month. Recently, I also directed an additional savings of `20,000 to this fund to boost my corpus,” explains Yadav. Why settle for a 280odd score when 350-plus is the new normal seems to be his mantra. “My PF is unlikely to grow into a sizeable corpus as it does not fetch

Name: Rajesh Arun Bara Age: 32 Location: Nashik Investment Rationale: Tax-saving; prefers ELSS over other section 80C instruments due to these schemes’ ability to generate higher returns. Photo: sanjit kundu

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lucrative returns. Moreover, interest rates offered by post office and bank deposits are also quite low. Equity funds are my best bet to create a large enough retirement fund,” he reasons.

Aiming Big

Yadav represents the growing tribe of retail investors from the not-so-big cities who are increasingly relying on mutual funds to realise their dreams. As per data from mutual fund research firm Morningstar India, investors from B-15 cities – the ones beyond the list of top 15 cities – accounted for 17.7 per cent of the overall industry assets under management (AUM) as of September 2017, up from 17 per cent in October 2016 (See: Upward March). A close look at the Association of Mutual Funds in India (AMFI) data on AUM by geographies (see: Gaining ground) reveals that

Name: Alamelu Vishwanathan Sundaram Age: 60 Location: Coimbatore Investment Rationale: Building a corpus for post-retirement requirements and grandchildren’s secure future.

the share of top five cities—Mumbai, Delhi, Chennai, Bengaluru, and Kolkata—has dipped slightly from 72.42 per cent in January-March 2017 to 71.57 per cent in the subsequent quarter, and further to 71.53 per cent during July-September 2017. Correspondingly, the contribution from the other cities has risen during the period. “We are seeing a strong interest from retail investors in smaller cities. What we are witnessing is a structural change in investors’ mindsets. There is a clear shift away from physical assets and towards financial instruments,” asserts Sundeep Sikka, Executive Director and CEO, Reliance Nippon Life AMC, which has recorded considerable interest from the North-eastern states too. The total AUM from the region shot up nearly 80 per cent to cross `14,905 crore in October 2017 (See: North-east rising) compared to the year ago period. “We continue to see good traction from

Upward March

B-15

25

T-15

20 15 10 5 0

October 2016

September 2017 Source: Morningstar India

Gaining Ground City Mumbai Delhi Bangalore Chennai Kolkata Total Other Cities Source: AMFI

Share in AUM (%) Jan-Mar ‘17

Apr-June ‘17

July-Sept ‘17

43.06 14.46 5.74

42.37 14.1 5.66

41 13.8 5.82

4.6

4.83

6.35

4.56 72.42 27.58

4.61 71.57 28.43

4.56 71.53 28.47

Photo:guna amugathum

smaller cities. For the period March-September 2017, we witnessed a 40 per cent growth in overall AUM and more than 50 per cent in equity,” adds Manish Mehta, National Head Sales and Distribution Alliances, Kotak Mutual Fund. However, he believes that the decline in share of larger cities could also be attributed towards the quarter-end redemptions by institutional investors.

DeMo the Catalyst?

Sikka attributes this trend to multiple factors. “The trend started with Jan Dhan accounts when a large number of people gained access to bank accounts. Next, with demonetisation, money flowed into these accounts,” he notes. Sundaram AMC CEO Sunil Subramaniam concurs with Sikka on demonetisation’s role as a catalyst. “It hurt real estate and gold, besides prompting banks to ease interest rates as they were flush with liquidity. Mutual funds offer much higher returns, attracting more retail investors,” he says. SEBI rules for distribution in B-15 cities have helped as well. “We can now offer attractive incentives to distributors to source new investors from smaller cities. The industry’s ad campaign too has played a role,” suggests Subramaniam. Mutual fund distributors based in such

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Trends Name: Roopesh Kumar Yadav Age: 37 Location: Meerut Investment Rationale: Creating an adequate retirement kitty, as he feels his provident fund is not capable of yielding the desired performance.

Photo: deePak

cities back these views. “I manage to convert more enquiries into actual investments these days—it has gone up 25-30 per cent since demonetisation,” informs Sachin Uddhav Chumble, partner, WealthGuru Financial Services, a Nashik-based mutual fund distribution firm. “Now that the cash lying in their house is parked in their bank accounts, they want the money to earn returns.” While

Sunil Subramaniam CEO, Sundaram AMC

People in smaller cities typically rely on avenues like real estate and gold, where the horizon is one year or more. They are attuned to longer-tenured instruments.

52

maniSh mehta

National Head Sales & Distribution Alliances, Kotak Mutual Fund

Digitalisation can be a key driver for distributors in smaller cities to improve coverage and productivity.

Outlook Money December 2017 www.outlookmoney.com

acknowledging the role of demonetisation, Jamnagar-based mutual fund distributor Raj Jivrajani of Money Matrix Advisors also credits factors other than the disruptive event for the trend. “Interest rates offered by banks are down. So, people have realised that mutual funds can provide better returns. Also, awareness levels have risen in the last two years,” says Jivrajani. Chumble is confident that these new investors are aware of the market risks involved. “Most of them are recurring deposit investors who can see that SIPs are better option even if they yield 9-10 per cent returns,” he adds. Technology has played a pivotal role in deepening mutual fund penetration, ensuring ease of communication and execution. “What investors look for is a mobile-friendly platform to execute their transactions. Language is not a huge barrier, as people are conversant with English as the language of transactions. However, the next level to be unlocked would be that of regionspecific portals and communication channels,” says Kunal Bajaj, founder and CEO, Clearfunds.

The Long-term-SIP Fix

It cannot be ruled out that many have jumped on to the bandwagon purely due to the bull run. Many investors do recognise the risks and also the importance of systematic investment over the long term. “We have observed that people in

smaller cities typically rely on avenues like real estate, gold, National Savings Certificate (NSC) and Kisan Vikas Patra, where the horizon is one year or more. They are, therefore, attuned to longer-tenured instruments,” explains Subramaniam. What’s more, many seem to prefer the SIP mode for investing in mutual funds, which is not surprising given the overall SIP inflows recorded (See: SIP by SIP). First-time mutual fund investor Bathindabased Hitesh Pant, 35, falls in this category. He started investing in equity mutual funds through the SIP route since July this year to build an education corpus for his four-year-old daughter by the time she turns 17. “Since funding her higher education is a long-term goal, I don’t intend to redeem my investments in the near future even if the market cycle turns,” he clarifies. The goals of the newer crop of first-time mutual fund investors may be as varied as their age-groups, professions, and locations, but there seems to be unanimity in their vehicle of choice for achieving them—SIPs. Take the case of Coimbatore resident Alamelu Vishwanathan Sundaram, 60, for instance. A retired school teacher, she stepped into the world of mutual funds in August with a monthly SIP of `3,000. “I want to create a savings fund for my postretirement needs, in addition to creating wealth for my grandchildren,” she says. Nashik-based banker Rajesh Arun Bara, 32, zeroed in on an ELSS for a far simpler purpose—tax-planning. “I have started a monthly SIP of `4,000 in a tax-saving fund since April. Compared to other instruments, an equity scheme is likely to fetch higher returns,” says Bara. This is the common thread that runs across all four first-time investors—the realisation that

SIP by SIP Month Sep' 17 Aug' 17 Jul' 17

SIP Contribution (Rs crore)

Monthon-month Growth (%)

5,516 5,206 4,947

5.95 5.24 4.28

Jun' 17

4,744

3.5

May' 17 Apr' 17 Mar' 17 Feb' 17 Jan' 17

4,584 4,269 4,335 4,050 4,095

7.34 -1.5 7.03 -1% --

Source: AMFI

AUM Ascent Mutual Fund Category Equity (other than ELSS) Equity - ELSS Balanced Income Liquid/ Money Market Gilt Gold ETF

Jan-Mar AprilJuly-Sep 2017 June 2017 2017 AUM (` Crore)

AUM (` Crore)

AUM (` Crore)

4,82,138

5,25,264

5,88,478

61,403 84,763

66,113 1,09,513

70,704 1,34,868

7,43,783

7,78,266

8,09,965

3,14,086

3,44,923

3,55,408

14,875 5,480

14,863 5,174

16,753 5,148

Note: As on last date of each quarter; Source: AMFI

North-east Rising Industry AAUM (in Cr)

Oct'16

Oct'17

Arunachal Pradesh Assam Manipur

248.54 4984.17 249.68

636.84 9154.49 351.24

Meghalaya

1086.52

1814.3

Mizoram Nagaland Sikkim Tripura Total

222.33 368.68 579.13 553.92 8292.97

347.09 523.25 948.84 1129.67 14905.72

Source: AMFI

even if markets turn choppy, their investments are likely to yield better returns when compared to bank fixed deposits or post office schemes. “Interest rates are very low at present and even PPF rate has been slashed. After tax, the returns will not add any value to my portfolio. ELSS is a more remunerative option even if returns plummet to say 9-10 per cent in case of a market crash,” reckons Bara. Asset management companies acknowledge the durable nature of such inflows, which largely come in through the SIP route. “The ticket size is small, but the quality of inflow is quite good. Even if the market cycle were to turn, these investors are likely to stay invested,” says Sikka. According to him, it is the high networth investors with large chunks of money who tend to make panic withdrawals. “For smaller investors directing `2,000 per month into the funds, such downturns do not matter,” he affirms. Put simply, the future looks bright, according to industry-watchers and players. “While it will be interesting to see the impact if there is a sharp correction in the market, there are enough reasons to believe that increasing awareness and

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Trends Name: Hitesh Pant Age: 35 Location: Bathinda Investment Rationale: Creating a fund for his daughter’s education when she turns 17; is prepared to stay invested in equities over the long term. Not Just Equities

While equity mutual fund SIPs feature in the list of most-discussed topics, debt funds’ legion of loyalists too has grown in size (See: AUM’s Ascent). “A lot of money is also coming into debt funds. With FD rates hovering around 6 per cent, many are moving towards debt mutual funds,” says Sikka. Jivrajani’s experience with his clients sounds similar. “Investors are not making blanket investments in equities. Given that bank deposit rates are down, they realise that debt mutual funds will offer better returns,” he explains.

A Note of Caution

Photo: kulbir beera

maturity of investors coupled with a sizeable SIP book should result in investors staying put,” says Kaustubh Belapurkar, director-manager research, Morningstar India.

kunal bajaj

Pankaj mathPal

Language is not a barrier in smaller cities, as people are conversant with English as the language of transactions. The next level to be unlocked would be region-specific communication channels.

While small town investors are aware of the risks, they would do well to shun the greed that typically takes root during a bull run.

Founder and CEO, Clearfunds

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CEO, Optima Money Managers

Outlook Money December 2017 www.outlookmoney.com

Clearly, smaller cities’ share in the industry’s AUM has seen an expansion, but they have a long way to go before they make a noticeable dent in the larger cities’ dominant position. “Large cities will continue to play a pivotal role in the overall industry. Incremental wealth creation in large cities will continue to remain strong,” says Mehta. Bajaj echoes his sentiments. “The interest has grown, but bulk of the business is still sourced from larger cities,” he points out. Also, it is tempting to believe that retail investors across cities have matured into seasoned equity investors mindful of the riskreward trade-off, but their resolve can be truly tested only during a market collapse. “While small town investors are aware of the risks, they would do well to shun the greed that typically takes root during a bull run,” cautions Pankaj Mathpal, CEO, Optima Money Managers. Bear your risk appetite in mind instead of blindly investing in schemes that yields eye-catching returns. “Start with less-risky schemes like large-cap equity funds and balanced funds rather than small and mid-cap equity funds,” advises Mathpal. Finally, ensure that you link your investments to goals, identify schemes that have a reliable track record and commit to equities only if you are willing to stay invested over a period of at least five to seven years. [email protected]

Debunking Risk Series

Mismatch Risks Aligning financial goals with investments is important for generating optimum returns from investments

I

properties, and a few shops. Out of `5 crore, only about `25 lakh of investment were liquid in the form of bank fixed deposits, shares, mutual funds, etc. Rest were all in illiquid form, indivisible real estate. They had called me because they needed `47 lakh to fund their daughter’s forthcoming education abroad. They had two choices, either to take an education loan or liquidate portion from their real estate property, which was approximately costing `90 lakh. Hence, there was an apparent mismatch between their financial goals and investments. Most of us never spend time to make an appropriate list of our financial goals; the financial goals for which we are saving and investing money. Due to this habit we are unknowingly exposed to mismatch risk. All of us want to invest in instruments which generate higher, faster, and maximum returns. Now consider this, between an airplane and cycle which will move higher and Most of us never faster? The obvious answer is make an appropriate airplane. However, if we want to go to a place that is 3 km away, list of our financial which one should we opt for goals for which between the two? Everyone will agree for cycle. we are saving and Always focus on optimum investing money. If returns and not on maximum returns. What is the point in investment is not generating maximum returns if aligned to a financial they are not of any use to you when you need them? Everytime goal, unknowingly we invest, we should ask we are exposed to ourselves which financial goal the investment is for? If investment mismatch risk is not aligned to a financial goal, unknowingly we are exposed to mismatch in risk.

n the month of May, I was returning from Ahmedabad in Duronto Express, which is a non-stop train between Ahmedabad and Mumbai. One of the fellow passengers wanted to get off at Borivali. However, he did not know that train does not have a stoppage at Borivali. He had two options—either to jump at Borivali, which was obviously a riskier option, or to travel upto Mumbai Central and return to Borivali from there. He opted for the second option. He had to make arrangements for going back to Borivali; his time got wasted, money spent, and energy drained. There was a mismatch between the station he wished to get off at and the train he had chosen. Most of us end up making similar mistakes while investing. Several years ago, a middle aged, well off couple called me from a small city in Gujarat. Apart from the bungalow they lived in, total value of assets they owned was about `5 crore. This mainly consisted of real estate in form of plot of land, two residential

Gaurav Mashruwala (Financial Planner & Author of Yogic Wealth) [email protected]

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Stock Pick Aurobindo Pharma x CMP: 695.8 x PE: 17.224

Why Buy? n Solid perforamce in H1 of FY18. n Focus on injectables to drive

*As on Nov 23

future growth n Goldman Sachs says Aurobindo faces limited regulatory risk

Best in play

Watch Out for

The company is best placed to weather the regulatory storm, as it is building capabilities and entering new geographies, says Malini Bhupta `122.10

120 100 80 60

`61.71

Aurobindo Pharma BSE Sensex

40 20

Jan 1, 2015

A

urobindo Pharma has emerged as a favoured pick of analysts, as it is among few pharma companies to have reported strong sales growth in the first six months of FY18. The reason for this is diversification in its product portfolio and geographical mix. For instance, in the July-September quarter, revenues from Europe were up by 37 per cent compared to the corresponding period in the previous fiscal year, while rest of the world markets grew by 38 per cent. With its peers facing significant regulatory risks, Aurobindo pharma has been busy scaling up its capabilities in complex generics and injectables. Revenues from the injectables business in FY17 stood at $150 million, analysts expect this to grow at a CAGR (compounded annual growth rate) of 40

56

products by regulators n The company has got approval for only 2 new products in Q2FY18

Financials

140

00

n Pricing pressure in key markets n Delays in approvals for new

Nov 23, 2017

per cent over the next few years. Like most other generics manufacturers, the price erosion (companies having to charge lower prices for the same products due to competition) is very high. But this is more so in the oral solids (tablets and capsules), claim analysts. The company is building capability in nutraceuticals, over-the-counter drugs, controlled substances, and injectables. There has been no price erosion in the injectables business. Despite the change in focus, 70 per cent of the company’s US sales still come from oral solids and it will take the company some time to build muscle in these new areas. In addition to defocusing from oral solids, where the competition is very high, Aurobindo Pharma is also bringing new manufacturing facilities, which will aid new launches. The company intends to spend 5 per cent

Outlook Money December 2017 www.outlookmoney.com

net Sales (` crore) pat (`crore) FY17

14909.54

FY17

2296.17

FY16

13794.65

FY16

2022.14

FY15

12120.52

FY15

1571.26

Op (`crore) 3550.17

FY17

39.284

FY16

3391.92

FY16

34.605

FY15

2660.33

FY15

53.965

FY17

EpS (`)

Op: Operating profit; pat: profit after tax; EpS: Earnings per share

Note : aurobindo pharma had announced bonus in 2015 in the ratio of 1:1.the share has been quoting exbonus from July 20, 2015.

of revenues on research and development in FY18. On the downside, the company’s interest payout will increase as its debt is also rising because of the acquisition of Generis Farmaceutica SA and this acquisition was funded by debt. The stock price has risen 33 per cent in the last six months, even as the stock has delivered measly returns of 4 per cent in last 12 months. Leading brokerages like Citi Equities Research and Goldman Sachs have a ‘Buy’ rating on the stock. Goldman Sachs is of the opinion that the company faces limited regulatory risk, unlike most other players. However, erosion in its base business (oral solids) in the US will continue to be a downside.

Maruti Suzuki x CMP: 8481.85

Why Buy

x PE: 33.895

n Strong growth in domestic sales and exports in October n Market dominance with cost advantage in the small car segment and strong pipeline of new launches

*As on Nov 23

In Top Gear

Watch out

Maruti Suzuki looks set for a great ride, but capacity constraints could call for deft manoeuvering, says prEEti KulKarni

n Capacity constraints could lead to

lower growth in rest of FY 18 n Sharp jump in commodity prices

could mean lower earnings

`253.83 250

net Sales (` crore) pat (`crore)

Maruti Suzuki BSE Sensex 200

150

`122.10

100

50

Jan 1, 2015

Nov 23, 2017 Graphics: Praveen Kumar .G

T

he bellwether of India’s automobile industry, Maruti Suzuki has emerged as the top pick for analysts on the back of strong domestic sales, exports, demand, and a healthy pipeline of new launches. Foreign brokerage firm JP Morgan is overweight on the stock, while Nomura maintains a ‘Buy’ recommendation because the company is on track to premiumisation of its portfolio. This will drive profitability. The festive demand was up 15-20 per cent YoY. Nomura expects volumes, revenues, and earning per share (EPS) to grow at CAGR of 13 per cent, 17 per cent and 21 per cent respectively over financial year 2017-18 to FY19-20. The stock got a thumbs-up from JP Morgan for a similar reason. The automaker’s domestic sales were up 9.9 per cent YoY in October and exports grew 4 per cent YoY. “Maruti’s

Financials

October 2017 wholesales were up 9.5 per cent YoY to 146000 units and YTD volumes are up 15 per cent YoY,” the report says. The line-up of model launches will keep the demand momentum going. “This should continue into FY18 with the launch of Ignis, Dzire, recent facelift of S-Cross, and the likely launch of Swift later in the year,” JP Morgan analysis reckons. Edelweiss Securities too is upbeat on the stock as it sees the auto giant sustaining its market share, thanks to long waiting periods for key products, superior franchise and strong financials. During the second quarter of FY18, Maruti posted EBITDA `36.7 billion (growth of 21 per cent YoY), 17 per cent higher than Edelweiss’ estimates, primarily due to lower discounts and benefits of product mix. Demand for new models - Baleno, Brezza and Dzire remained healthy. According to the

FY17

68085

FY17

7338.2

FY16

57589

FY16

5378.3

FY15

50801.4

FY15

3790.6

Op (`crore) 12647.7

FY17

248.672

FY16

10369.3

FY16

181.99

FY15

7709.1

FY15

126.073

FY17

EpS (`)

Op: Operating profit; pat: profit after tax; EpS: Earnings per share

brokerage firm, 50 per cent buyers of new Dzire were first-time buyers. Higher share of these models will help Maruti’s cause further as it will boost margins by lowering discounts. As per Edelweiss, discounts for older models too could see a dip in the backdrop of weakening competitive intensity and a revival in macro demand. JP Morgan fears lower growth over remainder of FY 18 due to production constraints. Given that the second phase of Suzuki’s plant is likely to be commissioned only by early 2019, capacity issues will continue in the next financial year. Even as it maintained a ‘Buy’ recommendation, Edelweiss Securities has raised EPS estimates for FY19 by only 4 per cent after factoring in the sharp jump in commodity prices. With inputs from Himali Patel

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Fintech Watch

CASH CRUNCH?

NOW BORROW AGAINST YOUR SALARY In a bid to help young professionals tide over the month-end blues, a clutch of companies are offering quick loans online for short durations at 24-36 per cent per annum interest rates, finds Anagh Pal

A

ll of us at some point would have faced a cash crunch, especially towards the end of the month. This could be due to several reasons—a medical emergency, car breakdown or a sudden plan for a friend’s bachelor trip. While that puts us in urgent need of cash, it could still be few days before the salary is credited. Or let us take another scenario. Your SIPs (systematic investment plan) and EMIs (equated monthly installments) would normally be due at the start of the month. But, your salary is delayed from normal and will only come in a week later. Again, you need some cash, could be for a short period of time, but you need it immediately. What do you do in the above situations?

Way out

Today, for many young working Indians borrowing money from parents is generally the last resort. Friends can help, but they too could be in a similar situation. You may ask your employer for advance salary, but your employer may not have such a policy in place. This is one need that new age financial technology (fintech) companies are looking to address through a loan product known as ‘salary advance’. Most of these companies tie up with RBI-registered NBFCs to extend such loans. Despite good planning, a salaried class person may face a financial challenge, especially during the middle of the month

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owing to some unforeseen situation. In such a case, requesting advance salary from your employer is one fitting way out. However, less than two per cent companies in India provide advance salary support to their employees. For those who run out of cash at the end of the month, there is help at hand. A handful

Subro Sengupta, 25, Mumbai

Associate at a law firm

Has taken a salary advance from EarlySalary several times to meet short-term cash crunch. Prefers this over other options because of minimum paperwork and the money is credited to his account within 15 minutes. Avoids overspending on the credit card. His recent borrowing from EarlySalary was of `28,000 to cover some medical expenses. To repay `28,857 within 30 days.

of companies like EarlySalary, PayMeIndia among others offer instant loans to professionals for a short duration that helps people tide over the immediate cash crunch. Mahesh Shukla, co-founder and CEO of PayMeIndia, a fintech company, says that in the scenarios where salaries are delayed or people have run out of money, a salary advance comes in handy. Fintech companies are also seeing an opportunity because banks don’t cater to this need. A salary advance loan is a quick solution to help avoid the embarrassment of asking someone for money. It’s a new and hassle-free way to get your salary just when you need it, that too within minutes. “Banks would require you to have a strong CIBIL score to be able to borrow. Moreover, banks will provide you with personal loan schemes for around `3 lakh for a time period of 36 months rather than shortterm loans like `20,000 for 10 days till the next salary day,” says Akshay Mehrotra, cofounder and CEO, EarlySalary.com, a fintech company, which focuses on providing salary advance options. What also makes this a strong business proposition is that employers are tying up with Fintech companies to offer salary advance

options to their employees; an association that benefits all parties. Mehrotra claims to have associated with 150 companies for providing salary advance, “We have tie-ups with various companies including large IT companies like KPIT, and e-commerce companies like Flipkart to offer instant loans to employees. One of the most interesting tie-up includes the one with Enrich Salon as the hair stylists were never able to borrow with such ease from a regular financial institution.” If a company is associated with EarlySalary, the eligibility criterion is relaxed; there is no restriction for minimum salary of `20,000 per month or minimum three month’s salary credit. Employees of these companies get an edge over others as they can borrow large amount and pay-back in EMIs for specific problems like house deposits, medical emergencies, school fees payment, etc, along with reduced interest rates. One also gets options for interest free online shopping on EMIs. Employers on the other hand benefit by not having to worry about setting an internal process that extends salary advances around the clock. These fintech companies also free the employer from liability in case of non–payment. Elaborating on the merits of these tie-ups Shukla says: Photo: Soumik kar

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Fintech Watch “The employees get dynamic credit limit and quick credit into their account, if their company is listed with us. Additionally, the charges are quite low for such customers. For advance salary support, we have tied up with some leading BPOs and a company, which provides manpower to various industries, and are working towards adding more companies to the list.” The tie-ups, hence, are a win-win proposition for both the employees and the employers.

Simple borrowing process

The best bit about salary advance is the simple process and that the money is credited to your account almost instantly. This is possible because of the technology that these loan providers run in the background. Apart from the CIBIL score and repayment track record of customers, these companies also consider a social score, which is derived from tracking

digital footprints of the customers from their social media accounts, mainly Facebook. “We have built a social media-based decision making system, which uses complex machine algorithms to help us take faster decisions and give out the loan in minutes. We consider nontraditional data adding a layer, which further gives confidence to lend to a young customer when Credit Bureau like CIBIL/Equifax data is not available or inaccurate for lending or creditworthiness,” says Mehrotra. Cashkumar, a peer-to-peer lending company gives salary advances only to existing borrowers who have taken a short-term loan from them. “We thought of the product when some borrowers would call us to say they might delay an EMI as their salary was not credited yet. It was a difficult situation because even with intent to pay, the borrower would have defaulted and borne penalties. Obviously, they would not have funds to meet other expenses too. So instead of

PayMeIndia

EarlySalary.com

Cashkumar

Co-founder Mahesh Shukla, 33

Co-founder Akshay Mehrotra, 36

Co-founder Dhiren Makhija, 36

What they do: Provide easy and quick short term financial support in the form of salary advance to salaried persons to sail through mid or month end financial crunch. Business model: They partner with NBFCs to disburse the loan. Interest rates, average age, and loan size: Interest rates on loans range from 0.1% to 0.3% per day with the loan amount ranging from `5,000 to `1 lakh. Major age group that they serve is 21-35. Number of customers: 3,000 plus customers avail their service in a month.

What they do: Provide instant ultra short term loans and salary advance on a mobile app. Business model: The loan is given by their partner banks/NBFCs registered with RBI. Interest rates, average age, and loan size: Interest of `9 per `10,000 per day is charged. Average loan amount is `18,000 for a period of 22 days. Average customer age is 26 years. Number of customers: They have garnered 1 million app downloads and have provided 60,000 loans worth `85 crore. They are ambitious with a target of 18,000 loans in November.

What they do: Connect verified loan seekers with lenders for short term loans. Salary advance is one of their products. Business model: Individual lenders provide funds and it does not advance any loans from its own books. Interest rates, average age and loan size: Have a fixed interest rate of 24% per annum on the full loan amount. The average size of loans is `50,000 with an average repayment period of 8 months. Number of customers: Currently, doing about 100 short term loans per month. On average, about 5,000 loan requests are placed every month.

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LokeSh VaddLa, 28, bengaluru

IT Services Professional

Has taken salary advances from EarlySalary several times over the last one year. Chooses this option because of the ease of repayment, which is either within 30 days or split into EMIs over 3 months. Likes the process and instant cash. Borrowed `22,000 from EarlySalary.Com last month to meet medical expenses related to health tests of a family member. He has to pay back a total amount of `23,500 over three months. Photo: DeePak G Pawar

undergoing this we thought the borrower could just take a small loan of `10,000 and pay back soon as salary was credited. It is not something which is given every month and only approved in the time of need,” says Dhiren Makhija, co-founder, Cashkumar.

A word of caution

As attractive as borrowing may seem from these platforms due to their user-oriented interfaces and processes, do not plunge into a borrowing spree just because the service comes in handy and offers flexible re-payment options. Remember, that a salary advance is still a loan and you need to pay it back with interest as soon as you receive your salary. So, if you have taken a salary advance of `20,000 this month, your effective salary next month will be `20,000 less. Says Chenthil Iyer, CEO, Horus Financial Consultants and author of Everyone has an Eye on Your Wallet! Do You?, “Anyone going for a salary advance loan should really think why one’s expenses are more than the income. If it is due to some temporary emergencies, it is alright to borrow, but care should be taken to create one’s own

emergency reserves instead of having to depend on such loans. A conscious budgeting exercise can also help one prevent needing such expensive loans.” Another important thing to consider when taking salary advance loan is how it will affect your credit score. If you take a salary advance and pay it back on time, it will facilitate building a healthy credit score, especially if you are new to credit and do not have any credit history. “We feed data on loan performance back to all four credit bureaus each month helping form users’ credit scores, which would help them get access to other formats of credit instruments like home, personal, and car loans,” says Mehrotra. But for reasons mentioned above, while salary advance may come in handy during a cash requirement, it is best not to make a habit of it. Remember the time when one had to stand by the roadside and flag down a cab? Then entered technology and changed it all. It is the same for your finances. If used wisely, a salary advance will help you tide over end of the month financial shortage. [email protected]

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event | WOMEN OF WORTH 2017|

Grit, glamour,

I

t was a night of celebration. Right from the resplendent jewels in the green room to the glamour on the red carpet and the inspirational speeches on stage — there was never a dull moment at Outlook Business Women of Worth. And the packed ballroom at The Four Seasons, Mumbai can stand testimony to this. The evening kickstarted with two starkly different personalities, restaurateur Monica Liu and Lata Bajoria of The Hooghly Mills, enthralling the audience with their life stories.

We then invited an interesting trio comprising Payal Nath, Pankaja Munde and Zarina Screwvala — who helped us discover that the only place women must look for empowerment is within themselves. The crowd couldn’t help but cheer on incessantly as all our

glory Presents

DRIVEN BY

WEALTH PARTNER

AWARDS GALORE: (Clockwise) Outlook Business editor N Mahalakshmi, Vipin Sharma of PC Jeweller, Bollywood actor, Vidya Balan and Outlook Group CEO Indranil Roy unveil the 2017 Women of Worth edition. Women, child welfare and rural development minister of Maharashtra, Pankaja Munde is felicitated; Vandana Mohan of The Wedding Design Company, Sandhya Chandrasekharayya of Indiahikes, Aakanksha Bhargava of PM Relocations, Monisha Advani of Emmay Entertainment, restaurateur Monica Liu, editor N Mahalakshmi, Neeru Sharma of Infibeam, Vidya Balan, Zarina Screwvala of Swades Foundation, Lata Bajoria of The Hooghly Mills and Meena Kaushik of Quantum Consumer Solutions pose for the shutterbugs

Women of Worth made their acceptance speeches. And then they watched with rapt attention as our cover girl, Vidya Balan, unveiled the edition and sat down for a candid chat with editor, N Mahalakshmi. No matter where they came from, each of our women achievers epitomise our tagline — They dreamt, They dared. And through their entrepreneurial journeys, these unstoppables inspired several more women entrepreneurs present that evening to get going b

In association with

BEAUTY RETAIL PARTNER

WELLNESS PARTNER

OUTDOOR PARTNER

www.wow.outlookbusiness.com Follow us on #WOW2017 OutlookBusiness OutlookBusinessIndia outlook_business Outlook Business

event | WOMEN OF WORTH 2017|

STANDING TALL: (Clockwise) Vipin Sharma of PC Jeweller; Usha Ramoo, head, HR, Volkswagen Group Sales India; restaurateur Monica Liu, Lata Bajoria off The Hooghly j g y Mills, Dr Umakant Tiwari of Organic India, CK Kumaravel of Naturals aturals Salon & Spa; ASK Group CEO and MD, Sunil Rohokale, address the audience at Four Seasons, Mumbai

ALL SMILES: (Clockwise) Meena Kaushik of Quantum receives es her award from Renuka Ramnath of Multiples, WOW2015; Aakanksha Bhargava, va, Monisha Advani, Neeru Sharma and Vandana Mohan try jewellery at the WOW green room

ENLIGHTENING VOICES: (L-R) Payal Nath of Kadam India; Pankaja Munde, minister of state for Women and Child Welfare; Zarina Screwvala of Swades and Laveena Iyer of Outlook Business on Za how women professionals can rise up to the challenge ho

LADIES’ NIGHT: (Clockwise) Aditi Kothari, Zarina Screwvala and Schauna Chauhan strike a pose; Vidya Menon, publisher, Outlook Business; Sandhya Chandrasekharayya of Indiahikes with the Volkswagen Passat and editor N Mahalakshmi shares a laugh with Vidya Balan

DRESS DESIGNER: SAMANT CHAUHAN DR

Enterprise

Joy of Making Travel More Accessible With Planet Abled, the enterprising Neha Arora has created a one-stop travel shop for the disabled. By Rimme Dirchi

T

he journey of Planet Abled, a company that provides travel solutions to the disabled, began when its founder Neha Arora was a little girl. Trained to be an engineer, 33-year old Arora spent nine years in the corporate sector, but she always knew what she wanted to do in life. With disabled parents—her mother is wheelchair-bound and her father is blind —Arora believes there is a sense of discrimination when it comes to access to public spaces. Arora explains: “As kids, my sister and I wanted to travel with our parents. All of us shared our love for travel, despite many complications along the way. We have always been there to take care of our parents, but I realised there was more that I could do. Everyone loves to travel, including people with disabilities, that is where the idea of Planet Abled germinated.’’ Given that public infrastructure is still not very accessible to people like her parents, Arora wanted to start a conversation on social inclusion. She hosts workshops on the subject with different entities and even engages with not for profits to create more

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awareness. Public transport in India, like buses and trains, are devoid of accessible platforms for people with disabilities. Even when it comes to every day work commute, there are many challenges one faces with public transport. In such scenarios, travelling can sometimes feel like a luxury, she says. Planet Abled intends to bring universal accessibility to the forefront. “We make customised, tailor-made travel happen for anyone who is interested. We have had group trips with people with great mix of all kinds of disabilities and these have been enriching interactions for everyone involved. Whether it is about visiting heritage sites, religious spots, and regular get-togethers,

Company Name: Planet Abled Founder: Neha Arora Profile: Customised travel solutions company for people with disabilities Launched in: January 2016 Destinations: 30 locations within India Awards: NCPEDP Mphasis Universal Design Awards, World Responsible Tourism Awards (WRTA)

everyone learns a lot about the environment and even about each other’s lives,’’ Arora adds. As a society, we are aware of the taboos involving disabilities. While there are efforts being made by the government on policy level, at the execution level there are not enough mechanisms in place for these reforms to organically fall in place. For instance, apart from enabling a travel platform to people with disabilities, what Planet Abled also tries to encourage is a sense of inclusion. For this, Planet Abled organises group meetings in restaurants over dinner, walks to heritage sites across Delhi, apart from the usual workshops. Neha says, “…the idea is to encourage and allow everyone to see each other with a genuine sense of curiosity. We encourage conversations between people who have never stepped out of their comfort zones or homes to just hang out at clubs or go out for walks. We want them to be seen and in turn, we want them to see as much as possible.’’ It is well known that changes take some time to take place and it seldom happens overnight. Many among the developed and developing countries are making efforts to make their infrastructure disability friendly. India is no exception; recently, Kerala Education Minister C Raveendranath has announced that the Kerala government is planning to construct autism parks for the children with disabilities in all the 140 assembly constituencies in the state in the coming three years. Professionals will be appointed in these parks to train children for their overall engagement and development. These are baby steps in the direction towards bridging these spaces closer.

I have always travelled with my family. Solo trip to Rishikesh was a revelation, it gave me the confidence to travel more

Photo: gireesh gv

Name: Rahul Rawal Age: 34 Occupation: Operations Manager, AON

Photo: gireesh gv

Experience: Rawal has gone on a customised solo trip to Rishikesh with Planet Abled. He also takes active part in group interactions hosted by Planet Abled in Delhi. His next trip will be to Goa.

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Enterprise However, currently when the conversations are picking up pace in India, it is important to note that India is nowhere close to becoming universally inclusive. One of the earliest day-trips organised by Planet Abled was to Qutub Minar and the company hit its first hurdle because the washroom for the disabled was locked and nobody in the premises had a key for it. A year later, however, the washrooms in Qutub Minar are clean and open to visitors. While it may seem like a small feat, it happens to be a victory nevertheless for Arora. “I faced similar problems when we went to religious places. I think overall, there is plenty of room to still work on for improvement,’’ she believes. It has been a journey like no other for Neha Arora and Planet Abled, as there are no previous set models that she could emulate and take lessons from, when she started out this venture. At the end of two years, Arora has 300 happy customers. Planet Abled organises both group tours and customised ones for people who wish to travel by themselves.

Name: Mohit Gupta Age: 30 Occupation: Family Business Experience: Gupta, who is visually impaired, has gone on city tours with Planet Abled and participates in group interactions with all forms of disabilities.

Photo: gireesh gv

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While the idea to set up a company was always in her mind, it was a matter of taking that step towards this exciting adventure trip of her own. After a nine year long career in the corporate sector with multinational companies, she took the plunge to strike out on her own. Like all entrepreneurs, she too was assailed with some doubts, but starting from her first city trip to this day, the numbers have not disappointed her. “While I was working with other companies, I spent time doing my research and took up job profiles that allowed me to learn more with my future venture in mind. I enjoyed high salary that my work permitted and I saved portions from it. When I launched Planet Abled, I was very well prepared despite the nerves. I relied on savings and on grants from fellowships that I had taken up. It gives me immense satisfaction to meet so many of my clients and hear their stories and learn about them and my own self,’’ she explains humbly. Mohit Gupta is an old customer of Planet Abled, is all praises and plans to go on his first solo trip next year. He wants to gift himself a fun trip with the help of Planet Abled, as he is visually impaired. He is among many who have expressed how Planet Abled has helped them get out more and make new friends. “My family has always been protective of me but I informed them about my decision to travel and they have been very supportive. Neha also personally spoke to my family and gave them confidence to support my decision to travel without family. It would be my first trip of this kind,’’ says the 30-year-old. For Arora, this is personal because several times she has to handhold people, both literally and metaphorically. When most of her clients decide to take the plunge to step out for trips, their parents worry about these decisions. “I speak to families as they worry for very obvious reasons, I help them see that we are here to take care of everything. I even encourage them to come for trips, workshops and for our in-city gatherings,’’ she explains. Another avid traveller is Pranav Lal. He is fairly famous in his own right, delivering TED Talks and being written about in the media. Lal is well known for being a blind photographer and writer. He is very profound in his selection of words when it comes to expressing himself, “I really enjoy the visual

Name: Pranav Lal Age: 38 Occupation: Writer, Photographer, Cyber Security Specialist

Photo: gireesh gv

medium and wanted to express myself through my photography and writing. It challenges me and helps me push myself. With Planet Abled, I have gone on heritage walks within the city and experienced history in forts and old world architecture like never before. I also make new friends and just hang out and chit-chat with them. I have expressed my wish to Neha about visiting shipyards in India so I can learn about ships.’’ The uniqueness of Planet Abled lies in its diversity when it comes to clients it caters to. Unlike most other travel service models across the world, where people with disabilities are usually clubbed together with only their own section, let us say, blind groups or groups of children with autism, but at Planet Abled, everyone is welcome to interact with each other on trips so they develop a sense of camaraderie without even realising. They encourage mixed group interactions, making the whole experience unique. Rahul Rawal, 34, is an operations manager with AON and has been wheelchair-bound since childhood. He went on several heritage walks with Planet Abled, before going on a solo trip to Rishikesh last year with aid from Planet Abled. “A couple of years ago, I was looking

Experience: Lal has a love for parks and forts of Delhi and visits them with the help of Planet Abled. Plans to visit shipyards in India and Planet Abled is gearing up to make it happen.

I enjoy expressing myself through photography; travel has proved to be a vehicle for new visual experiences

for travel packages online for people with disabilities and then I stumbled upon Planet Abled last year. I got in touch with Neha and the rest is history. I have always wanted to travel and I love to write during my spare time. I am wheelchair-bound and my family was very sceptical about letting me travel by myself, but Neha spoke to them personally and they have been very supportive and trusting. I plan to go to Goa sometime early next year with Planet Abled. I also want to visit Landour in Uttarakhand as I am a fan of Ruskin Bond’s work. To me travel is not just about enjoying a new place, it is also about experiencing a sense of self confidence of having done something great for my soul,” says Rahul Rawal. It is hard to quantify in words what these experiences can mean to everyone who are part of the inspiring Planet Abled journey. Neha likes to goof around and says, “Planet Abled is a travel company started by someone who has never travelled much.’’ All in all, this world is kaleidoscopic and made of myriad hues and nuances, with one better than the next. [email protected]

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Travel

Exploring Kerala on

Shoe-String Budget From rustic bus rides to sumptuous fish curries to mesmerising backwaters—traveling across Kerala as a solo woman backpacker is an unparalled experience, says Shipra Singh

T

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hey say Kerala is God’s own country. I wasn’t too sure what that meant when I embarked on my solo trip across Kerala from Bengaluru. With a tight budget and loose itinerary, I was brimming with excitement about the coming six days. Bus ride from Ernakulam (Cochin) bus stand to Fort Kochi was my first brush with Kerala and its culture. Arriving at Fort Kochi, I dumped my rucksack in the hostel I had booked and set out for city tour on my ride; a bicycle. The port city is a perfect amalgam of the old and the new. It offers historical sites like Indo-Portuguese museum, Synagogue in Jew Town, Mattancherry Palace, Santa Cruz Cathedral Basilica, St. Francis Church, etc. and has a vibrant art and café scene. The day went by exploring the tourist attractions and concluded watching sunset on the beach

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while exchanging stories with a fellow Canadian backpacker I had befriended in my hostel. Day two started with a ferry ride from Fort Kochi to Ernakulam bus stand at six in the morning watching sunrise against humongous ships docked at ports. Hesitantly enough, I took a rustic, non-AC KSRTC bus for Munnar as it was going to be my first one such long journey. However, now I can claim without exaggerating that the bus rides were the highlight of my entire trip. Shared with locals, each ride through lush green mountains and little towns was breathtakingly beautiful. One peculiar detail about Kerala government buses which amused me was absence of glass windows, and even iron bars for that matter, to which nobody had a clear explanation. Either you get an all-clear unhindered view or an opaque shutter on your face.

After arriving in Munnar, I did a quick search for accommodation on foot and found a private room for `400 per night in a little guesthouse managed by a middleaged couple. They helped me hire a scooty for the day and advised me to replace the 30 km ride to top station with Kathakali show in Punarjani traditional village for a better experience. Needless to say, the dance indeed was magical and is a must watch when in Kerala. Covered in endless trails of tea plantations, Munnar is a delight to eyes for its scenic beauty but, is like any other hill station and does not offer much. After riding through the hilly roads to Mattupetty Dam and back to Punarjali village, I decided to curtail my stay in Munnar to one day as against the initial plan of two days. Next stop was Thekkady. By the end of second day I had overcome my doubts surrounding communication and safety as a solo woman traveller. People were friendly and except a few gazes here and there, I did not experience any degree of hostility. In fact, I did a lot of impromptu planning based on my interaction with locals as most people understood English well enough to guide me through.

How to reach: Cochin is the perfect destination to start from, easily accessible via air, train, and road Must do: Shikara backwater ride in Alleppy, Synagogue in Fort Kochi, Ayurveda body massage, spice plantation

in Thekkady, Kalaripayattu performance Must try delicacies: Fish Molly and Kerala prawn curry Appam with stew (for vegetarians) Expense: Under `10,000 for 6 days

Thekkady bypass road near the bus stop hosts several budget homestays and guesthouses flooded mostly with foreign travelers. After much striding around and negotiations, to my satisfaction I managed to get a private room for `400 per night in Rose Garden homestay. The room was equipped with essentials I look for—clean sheets and blanket, and hygienically maintained washroom with running hot water. A private balcony was an added bonus. The hosting family was delighted to see an Indian woman solo traveller for a change and offered me to join them for lunch, which I gladly accepted for a local food experience.

Villagers riding Canoe in Alleppey backwaters

Elephant ride at Elephant junction, Thekkady

Mattupetty Dam

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Travel

Periyar National Park

Cliff beach in Varkala

Plans for Thekkady consisted of Safari in Periyar National Park, however, after reaching there I discovered that the only option available to me was the boat ride as most other activities were organised for groups—first downside of solo traveling. So, after my original plans for Thekkady got defeated, with the help of my hosts I had put together a stereotypically touristy itinerary for the day, saving the boat ride for next morning. I began with fulfilling my ardent wish of riding an Elephant at Elephant junction. The bumpy ride on the mighty but calm animal was exhilarating. Next was an excursion to Green Spice Plantation. In the lingering aroma of cardamoms, cloves and pepper among other spices, the guide gave us an insightful walk through the plantation explaining the growing and processing of

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spices; a memorable experience one cannot miss when in the heartland of spices. Kalaripayattu, a martial art form that originated in Kerala was the next venture. Action-packed with sword fights and fire stunts, Kalaripayattu, likewise Kathakali, is a must-watch. Post the dramatics, I decided to conclude the eventful day with an ayurveda massage. Next morning was the day to spot some animals in their natural reserve. On my way to Periyar Park, driver of the autorickshaw instructed me to start running soon after getting off the auto. Finding it absurd I didn’t enquire further only to find a few minutes later as we approached the entry gate that people indeed were running hysterically towards the lake. Seeing the apparent confusion on my face, the driver explained that tickets are being sold on first come first serve basis and I too should join the race, which I did. Laughing hysterically, I was living the Forrest Gump moment. With great scenic charm the jungle was nothing short of majestic. However, I wasn’t too lucky to spot many animals except a few wild boars and a bison. Post the rather comical boat ride experience, I took a bus for Kottayam to catch a train for the cliff city, Varkala. Varkala was a stoppage for my love for beaches and to unwind after the incessant running around in last four days. Hunt for accommodation on the clifftop didn’t begin too well as after an hour-long failed attempt for a place in my budget, I had to shell out `1000 for a sub-standard room in a guesthouse. However, during my search I managed to book a room in Daffodils homestay for `500 for the following day. Daffodils experience was that of a quintessential homestay with a kitchen for travellers to use and joint meals organised for the guests by the host Ricchu, a cheerful local guy nearly my age who had also helped me in finding a room for the night. Nestled at the bottom of the red cliff, Varkala beach is a paradise for water sports enthusiasts with activities such as parasailing, surfing, etc on offer. However, for me the day was only about soaking sun on the beach only interrupted by dips in the sea and gorging myself on sea food at several cafes on the cliff. Post sunset, the

cliff when seen from the beach gives an awe-inspiring sight of a jewel twinkling with countless lights. On the last morning of my trip I took a train to Alleppey for the much awaited backwater ride. Alapphuza port was packed with agencies offering backwater rides so it didn’t take me a lot of effort to snag a good deal of `650 for a five hour ride including lunch. Finally began the ride in the enchanting backwaters and I was spellbound with the sweeping vistas. Cruising along narrow lanes of the canals, we got a glimpse into full glory of village life. Canoes were used by villagers and even schoolchildren to move around just as we use cycles and bikes. Backwater ride was everything and much more than touted in the brochures. I took a train back to Bengaluru in the evening convinced of the title conferred to Kerala—it truly is God’s own country. But, was I satisfied? Not so much. I finished my trip with a longing to come back again, and with more time in hands this time.

TipS for Solo BACkpACking Safety: Pair of scissors or pepper spray for defence. Avoid taking deserted lanes/ routes, even during the day. What not to do Avoid taking private taxis for both budget travelling and safety reaons. Build a financial cushion in your budget apart from the set amount for instances where you may have to book a costelier hotel or private taxi. Accommodation Look for hostels with foreign travellers as such places are used to hosting female solo travellers. Based on reviews, I’d booked a shared dormitory for `400 in Rampart

Backpacker hostel, Fort Kochi through hostelworld.com. A quick hunt on feet will come in cheaper. After Cochin, I’d managed to find private rooms in the range of `400`500 in homestays. Take accomodation near bus stand to simlify conveyance. Conveyance KSRTC buses are easily accessible, safe and rockbottom cheap—tickets range from `80-`120. Timings for buses can be gathered from information booths at bus stands. For longer distances, look for trains on irctc.com. Carry your driving licence for local traveling on a scooty/bike.

[email protected]

Tea plantations in Munnar

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73

Travel

Paradise Trekking in

View of Tungnath from above

Escaping the rush hour of the city to the quaint, snow-clad mountain tops can be more than enriching for the solo travellers, discovers Saachi dhillon

I

Majestic Tungnath temple

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first discovered the joy of solo travel on my back packing trip to Europe. Nine years and nineteen countries later, my passion for exploring new places continues. I work full time as a marketer in a renowned media company. My annual leave is used for travel only, unless there is a medical emergency. I made full use of all the long weekends this year including the Dussehra long weekend. I wanted to escape the frenetic crowds of the city and decided to go on a trek. After doing a lot of research, I finalised on the trek to Chopta – Chandrashila lake, which would be for 3 days. There are multiple online travel start-ups that are offering hassle free adventures for solo travellers these days; I decided to travel with one of them. For `6,800, my travel, stay and meals at the camp were taken care of. From Delhi, we took the 11 pm Volvo to Haridwar. We then got onto

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a private bus to continue our journey to Chopta, a picturesque valley with evergreen forests and never-ending meadows. The bus ride was eleven hours long and wove along the banks of the rivers Ganga and Alaknanda. We journeyed past dense forests, verdant green mountainsides and cascading waterfalls; stopping along the way for frequent rest breaks. We reached our camp aptly called Moksha around 5 pm and were allocated our tents. I could not get enough of the lush green meadows around the campsite. Soon after the excitement of the new surroundings had died down, I climbed up the adjoining mountainside and was rewarded by a fantastic view of the mighty, snow-clad Chaukhamba peak (7,138 m) in the setting sun. The local guide told us that a lot of people had attempted to climb its summit but only a few had been successful. After breakfast the next morning,

camping in chopta

with my rucksack in tow, I made my way to Tungnath (3,680 m), it is the highest Shiva temple in world. Believed to be around 1000 years, Tungnath temple dedicated to Lord Shiva, is one of the sacred Panch Kedar and the highest of them all. Although it was a short 4 km trek, the incline was fairly steep. I climbed up cross country for most of the way in order to avoid the donkeys and their dung strewn along the stone pathway. While climbing up the green slopes, I came across wild red berries and flowers growing on the mountainside. Largely known as an easy trek, I found the incline challenging and took several breaks in order to pace myself. About an hour later, a thick blanket of mist enveloped the mountain. Thankfully, we reached our local home stay where we were to spend the night. I was drenched in sweat by the time we got there. As the washroom was very basic, I decided to splash my face with cold water and use wet wipes thereafter. Simple but delicious vegetarian food was provided at a neighbouring dhaba. I climbed up the last few steps to the temple and made an offering there. The view of the surrounding snow crested mountain peaks from the temple was amazing. Electricity is only available between 7–10 pm in this region. Hot water for a bath is hard to come by; although the friendly locals try their best to help you out. I woke up at 4 am the next day in order to get

Travel Tips

How to reach: Frequent volvo bus services are available from Delhi to Haridwar or Rishikesh. Buses also ply from Rishikesh to Ukhimath which is the closest town. Must do: Trek at sunrise trek to the Chandrashila peak, stay in the camps at Chopta , bask in the sun at the meadows of Tungnath and trek to snow-clad Chaukhamba peak at sunset. Must try delicacies: Pahadi (local) pumpkin vegetable and local sweets that are sold by the villagers Expense: Under `10,000 Duration: 3 day trek Safety : The area is relatively safe and one can see solo as well group

ready to climb up to Chandrashila peak (4000 m) to watch the sunrise. Equipped with a torch, I started climbing up under a blanket of stars. Although it was a 1.5 km hike, the path was incredibly steep. As the horizon lit up in orange, I made it to the summit. There were at least a hundred people there, waiting to capture the sunrise on their cameras. The snowy mountains stood tall in front of me, providing the perfect 180 degree panoramic view of the entire area. With the sun rising up from

travellers along the way. It is always crucial to ensure that your phone and power banks are well charged as access to electricity is limited in the area. Also, make sure your loved ones are aware of your itinerary as you would be trekking at high altitudes. Essentials: Don’t forget to carry a power bank, medicines and a torch. Accommodation: Camping. Many camping sites are available for all types of budgets. Moksha is a good choice for people on a budget. They arrange group treks as well. Conveyance: Roadways is the most reliable form of conveyance; taxi, own vehicle or bus. Itinerary: Chopta - Tungnath Chandrashila. Add Deorit taal lake to your itinerary if you have tim extra time.

behind the Nanda Devi (7816 m), the second highest mountain peak in India, the snow-capped mountain peaks seemed to catch on fiery reddish hue and then turn a glittering white as the sun rays reflected off them. The warm glow of the sun felt very comforting in the chill of the morning and filled my heart with happiness. The writer is a full time marketer with a media company and part time traveller.

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Market Outlook

Markets will take a breather before making decisive move upwards With stronger foundations being laid, it is only a matter of time before current measures begin reflecting in revival of economic growth

S

ince 2014, when the Modi-led government assumed office, Indian markets have been on a bull run. Investors perceive this government as pro-business and expected that economic growth, which was languishing then largely due to policy inertia, would revive quickly under the new regime. Three years on, and despite (or due to, if you so believe) the bold measures taken by the government, this is yet to happen. Valuations have been running ahead of fundamentals and investors are concerned that Indian stocks have moved too far, too fast. However, there is little doubt that the longer-term prospects for Indian equities remain bright. I believe we are only at the beginning of a multiyear structural bull run. At this juncture, the markets could take a breather and consolidate before making a decisive move upwards. I believe the markets are already discounting an increase in the US Fed rate in December. Domestically, a rate cut looks unlikely in the short term. Rising commodity prices, especially crude oil, need to be watched closely—in the absence of bigger triggers, it is concerns around these which will drive short-term market movements. I wouldn’t hazard a guess on the outcome of the assembly elections in Himachal Pradesh and

Concerns around rising commodity prices will drive short-term market movements 76

Gujarat, though wins by the BJP would be perceived positively by the markets. India is in the midst of a massive renovation, not only in terms of physical infrastructure, but also in terms of mindset. The renovation will yield sizable benefits in the medium to long term. Until earnings revival becomes clearly evident, the market movements will be driven by renewed hopes of a brighter future and, at times, by these recurrent doubts. Though not yet an ideal solution, GST has already seen a round of improvements. With a few more such rounds, we should quickly move towards the goal of a truly one-India-onemarket. Not only are inter-state tariff barriers being dismantled, the physical infrastructure for efficient movement of goods and people across the country is also being enlarged through initiatives, like DFCC, Sagarmala and Bharatmala. The banking system, which forms the bedrock for economic growth is being strengthened through continued focus on asset quality, recoveries, and recapitalisation of the state-owned banks. Demonetisation has significantly hastened the financialisation of household savings, reflecting in unprecedented flows into mutual fund SIPs and the all-time high equity AUM of domestic mutual funds. The Indian stock markets are no longer dictated solely by foreign buying or selling. India is recognising the fallacies of poorly-targeted subsidies that resulted in leakages and inefficient allocation of capital. It is, therefore, cutting subsidies in

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Motilal oswal Chairman & Managing Director, Motilal Oswal Financial Services

general. Where it is necessary to continue subsidies for social good, it is ensuring that they are properly targeted and the benefits are being credited directly to the targeted recipients. Aadhaar-linkage is ensuring the veracity of the recipients themselves. Fiscal expenditure aimed at pumppriming the economy is no longer seen as merely pump-priming but also as an opportunity to create national assets for longer-term benefits. This is evident in the nature of projects taken under schemes such as MNREGA. Though the main emphasis remains on providing employment, the aim is also to create durable productive assets. There is also a growing realisation among India’s citizens that they need to begin paying their share of taxes if they wish to enjoy the privileges of being Indian. Following demonetisation, there has been a rise in the number of income tax return filers. Also, the GST framework is intended to significantly increase indirect tax compliance. As overall tax compliance increases, there should be a progressive reduction in tax rates, fuelling a virtuous cycle of rising tax compliance and declining tax rates. Strong foundations for a vibrant India are being laid. It is only a matter of time before these measures begin reflecting in revival of economic growth. Given the growing domestic flows into equity and foreign funds continuing to invest selectively even in an otherwise fairlyvalued market, would you like to risk waiting on the sidelines?

Get ready to be pampered like never before. Your body and mind are worth it.

Discover the wonders of alternative therapies at a centre for naturopathic healing, or be surprised by how flexible your body can be at a Yoga ashram. If you're more at home in a spa then take your pick from the fabulous spas we've selected for you. Prepare to return home a brand new person.

Jio

Personal Tech Telecom behemoths Airtel and Jio are rolling out the red carpet for consumers. Outlook Money tells you what's on offer

feature phone

Airtel Prepaid Plans `8

Local+STD mobile calls 30p/m for 56 days

`93

Jio Prepaid Plans*

Local+STD unlimited calls and 1GB 3G/4G data for 10 days

`19

`149

`98

Unlimited Local & STD Airtel Mobile calls and 300 MB 3G/4G data for 4G Handset (50 MB for other Handset) for 28 days

0.15 GB data and 20 SMS for 1 day 2.1 GB data and 140 SMS for 14 days

`149

4.2 GB data and 300 SMS for 28 days

`309

49 GB data and unlimited SMS for 49 days

`399

70 GB data and unlimited SMS for 70 days

* Unlimited voice calls included

`349

Unlimited Local, STD, Roaming outgoing calls along with 1.5 GB data/day and 100 SMS/day for 28 days

Reliance Jio

feature phone

`399

Unlimited Local and STD calls along with 84GB data (3 GB/ day) for 28 days

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Display Size: 2.40-inch display Resolution: 240 X 320 pixels Processor: 1.2GHz dual-core processor RAM: 512 MB Internal Storage: 4GB, can be expanded up to 128GB Battery: 2000mAh removable battery Connectivity: Wi-Fi, GPS, Bluetooth, NFC, FM, 4G SIM: Single SIM (GSM), accepts Nano-SIM Primary Camera: 2 megapixel Front Camera: 0.3 megapixel Operating System: KAI OS

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V

s Airtel

smart phone

R

n Karbo0n 4 A Indian

Mera Pehla tphone Smar Karbonn A40 Indian smart phone Display Size: 4-inch display Resolution: 480 X 800 pixels Processor: 1.3GHz processor RAM: 1 GB Internal Storage: 8 GB Battery: 1400mAh battery Connectivity: Wi-Fi, Bluetooth, FM, 3G, 4G SIM: Dual SIM Primary Camera: 2 megapixel Front Camera: 0.3 megapixel Operating System: Android 7.0

eliance Jio Phone, an affordable feature phone that has gained huge popularity in recent months comes with a bagful of offers. Jio members can enjoy free voice calls, unlimited data, free SMS with their special Jio Dhan Dhana Dhan packs. The company has finished delivering the first batch of phones and it will launch its second phase of prebooking soon. Some news reports suggest that their next offering may be an Android phone, unlike the current phone which runs on KAI OS, a modified version of the Firefox OS. The Jio phone comes with a refundable deposit of `1,500. Under this scheme, the user pays `1,500 for the phone and has to return the phone by the end of three years to claim this amount. As the amount is interest free, the user will not bear any deduction on this, but they will have to recharge their phones with `1,500 to get the refund. Airtel along with Karbonn and Celkon has launched a similar offer. With Karbonn, after the success of 4G - Karbonn A40, under the ‘Mera Pehla Smartphone’ initiative, Airtel has announced two new Android smartphones - Karbonn A41, and Karbonn AI Indian. Celkon is offering one smartphone, Celkon Smart 4G. The prices of these phones start from `2,849. However, there are cash back offers. The Karbonn A40 or Celkon smart 4G user shall recharge with `3000 for 18 months and get cash back of `500. Further, if the user continues to recharge with `3,000 for another 18 months, then additional cash back of `1,000 is provided, reducing the effective price of the phone. The cash back will be credited to a user’s Airtel Payments account. Unlike Jio phone, the user of these phones will not have to return back the phone sets to claim the cash back. These phones also support most Indian languages and give access to the Google Play Store.

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Investment Destination

The Coaching Capital of India

The city of Kota has been listed under the Smart City Project and it is all set for its overall transformation

K

ota, famously known as ‘the coaching capital of India,’ is part of the northern state of India, Rajasthan. Located approximately 250 kilometers from its capital, Jaipur, the city finds itself nestled on the banks of Chambal River. It has been identified as a Smart City Project, which is likely to aid in overall development of the city, significantly improving the infrastructure as well as the business and other trade opportunities. Kota is a well-established regional urban centre and a focal point of industrial development within the state of Rajasthan. It is widely known as an educational hub with over two lakh students travelling to Kota from

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across the country to prepare for various competitive entrance exams.

Housing Demand

The coaching centers have played a vital role in increasing the demand for real estate in the city. With students flocking from every part of the country to study, the city has witnessed an increase in the demand for affordable housing as they are easy to rent and easy on pocket for the student community. The city has also been drawn to the emergence of several medium and big companies in and around Kota, which has largely contributed to the boom in commercial and residential property market.

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With increasing number of students coming in with employment opportunities being created, the city is attracting high demand the in affordable housing segment. The Urban Improvement Trust Kota has launched a new housing scheme for the economically weaker section of the society and lower income group for allotment of flats under affordable housing. The flat prices range from `4 lakh to `6.30 lakh. Additionally, several real estate developers are also keen to develop flats in the low price segment. Areas near the Kota Railway Station and Mala Road are the prime locations where real estate players are

Education Hub

developing flats under affordable housing scheme.

Kota is attracting developers and investors alike with slew of latest investments

Infrastructure Growth

Army Area

Kota Zoological park

Manpura Godavari Dham

Kota

SFC Captive Power Plant

Development indicators

Booming Kota

■

The city will get assistance of `1000 crore in next five years under Smart City Project

■

The Delhi-Mumbai Industrial Corridor passes through the city

■

The government is working on interlinking several rail lines including, Katni - Bina - Kota and Udaipur - Chittaurgarh– Kota

■

■

Railway station area and Mala road are promising destinations for real estate developers

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Every year, close to two lakh engineering aspirants move to Kota to prepare for competitive examinations

■

The presence of several industries in Kota have made this city economically prosperous in last few years

Ajmer/Nasirabad-Devli and DevliKota (NH-12) links to be developed

Kota is one of the industrial hubs in northern India, with several chemical, engineering and power plants based within the city. The total number of industrial units in the district from 2010-11 stood at 12908 with 705 registered units Kota City will be receiving `1,000 crore in next five years under the smart city project which would be distributed to augment and boost the green belt, the city’s roads, sewerage system, tourism development, water supply network, parking system, gardens and other development projects. The Delhi-Mumbai Industrial Corridor which will pass through Kota will act as a key driver in growth of trade and investments in the region. As the city will get benefited from the east-west corridor highway project and the investments coming to their door steps, the demand for real estate, both residential and commercial, will also grow rapidly. The Ajmer/Nasirabad-Devli and Devli-Kota (NH-12) links will further undergo development. The proposal to interlink several rail lines including, Katni - Bina - Kota and Udaipur - Chittaurgarh– Kota will not only enable connectivity but also give a rise to the flow of capital in the city. With the Smart City tagline under its belt, Kota is all set to witness exponential growth in the low cost real estate segment.

Affordable Housing In Kota Developers Name

Location

Shree Pvt Ltd

Near Station Area

25 Lakh

KRP Industries Ltd

Mala Road

28 lakh

KRP Industries Ltd

Mala Road

36 lakh

Direct Logo

Price range (`)

IFAN (Independent Financial Associates Network) is a webenabled distribution platform of Reverse Logo IFAN Finserv Pvt. Ltd. (ifan.co.in)

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Smart Money

Vidya Balan’s Money Wisdom

L

ike success, money means different things to different people. Like all other relationships, people’s relationship with money is rather complex. It is driven not just by social stereotypes but by their perception of self worth. In a no-holds barred interview with Outlook Money’s Malini Bhupta, actor Vidya Balan talks about what money means to her and big money lessons she has learned over the years. While for most it is a measure of success, Balan believes it is purchasing power at a very basic level, but for women, “Money is power and security. Money gives you the strength and courage to live your life on your terms.” Incidentally, Balan’s latest film Tumhari Sulu is about the journey of a married woman who steps out to earn a living as a radio jockey, after 12 years of marriage. Other than financial independence, Balan says: “Money is also a measure of one’s self worth, which is why it is power.”

She should know this because it took her a while to accept the kind of money she was beginning to be paid as an actor. “I was almost scared of the money I was making. So, I turned down some offers early on in my career as I believed I didn’t deserve it.” Even if money is about self-worth as much as it is about freedom, Balan doesn’t compare herself with the male counterparts in Bollywood. But, she can rattle off the returns her film has made for producers, which is 10 times the cost of production. The same cannot be said for male stars. Kahaani, for instance, was made for `6 crore but went on to make `60 crore at the box office. The ratio is still the highest in Bollywood. And she has actually taken the trouble to understand the returns that her films make for producers, rather than chase a headline figure. Of course, Balan’s films are not in the `100 crore league yet, but it doesn’t bother her because like all other investments, it is the returns that count.

 Money Mantra for WoMen Realise your worth and don’t be

It is important that you handle your own money. There is no guilt or shame in having control over your own money. I encourage my female staff to save for themselves and set aside a sum every month diligently. Women who don’t work must also do the same with the money they get from their husbands or fathers.  Big Money Mistake

I remember, I was scared when I was offered big sums to sign brand endorsements, after my film Parineeta. I could have bought a few penthouses in Bandra with that money.

scared of the money you make.

 first Big Purchase

A flat in Chembur. Now, I invest in debt or equity as the returns are superior.  Money advise

Understand your own investments. Don’t leave it to the discretion of others, even if they are experts. My father forced me to understand different asset classes, even though I hated it. Now, I understand asset classes, returns and take my own decisions on where to invest my money.

RNI NO. DELENG/2002/08292