Wealth: He Conomic Imes

THE ECONOMIC TIMES

wealth

IS IT A GOOD TIME TO BUY PROPERTY? PAGE 9

www.wealth.economictimes.com | Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | November 19-25, 2012 | 32 pages | ` 7

13

15

29

STOCKS

FINANCIAL PLANNING

TECHNOLOGY

Is this a good time to raise stock holding?

Improving distributorinvestor relationship

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Over-diversification can pare your portfolio’s returns. Here’s how to optimise performance by picking the right number of funds. PAGE 2

ALSO INSIDE Financial planning PAGE 14 Be a Financial Wizard and win `5,000 PAGE 32

PLUS The week’s best stocks, mutual funds, loans, deposits and insurance.

HOW MANY STOCKS SHOULD YOU OWN? PAGE 3

HOW TO BUILD A FUND PORTFOLIO PAGE 6

HOW INVESTORS LOSE OUT TO EMOTION PAGE 16

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02

Cover Story

The Economic Times Wealth, November 19-25, 2012

Do you

have

too

many

funds? Diversification reduces the risk, but owning too many mutual funds or stocks will only make it difficult to track your investments and bring down your overall returns. Find out the optimum number of funds and stocks one should invest in.

SANKET DHANORKAR

F

or many people, investing is all about numbers. While the obsession with returns is natural, investors also tend to fuss about the number of holdings in their portfolio. Be it stocks or mutual funds, they are not sure about the optimum size and mix of investments. Given most experts’ opinion on the benefits of diversification, people are aware of the dangers of putting all

their eggs in one basket. Hence, investors seek safety in numbers to reduce the element of risk. But are you going too far in trying to spread the risk in your portfolio? Mutual fund investors often get trapped in the quest for diversification. Take 65-year-old Jaipal Singh from Delhi. He has as many as 20 schemes in his mutual fund portfolio. “I have been investing in funds for the past 10-12 years and mostly do my own research,” he says proudly. The result is a

hotchpotch portfolio with all kinds of schemes, some of which may not be best suited to his needs. In most cases, fund portfolios do not start out complicated; they grow thus over a period of time. Investors buy funds in an ad hoc fashion without any investment goal in sight. Very soon, the portfolio becomes a heady cocktail of sorts—too complex to understand and unwieldy to monitor. Many investors don’t even realise how complicated their portfolios have become till they get

Cover Story

03

How

many

stocks should you

own?

Standard deviation (risk)

only up to a reasonable extent. If you overdo down to figure out their returns. Sumeet it, diversification actually works against you. Vaid, founder, Ffreedom Financial Planners, Here’s how: attributes this practice to the lack of a proper No further mitigation of risk: You may financial plan or strategy. “Investors end up think that you are playing safe by adding with a messy portfolio as they don’t have a more schemes to your portfolio, but this is proactive approach to allocating their not always true. After a point, having more savings. In the absence of a proper blueprint, funds may not offer any value to your savings are invested in a haphazard portfolio. A Morningstar study found manner,” he says. that an investor can only reduce To be sure, one cannot blame risk to a certain extent. Beyond a the small investor for getting How investors lose out because point, there is no benefit from carried away. There are of emotions diversification. Morningstar creathundreds of schemes of myriad Page 16 ed hypothetical portfolios, flavours on offer and small ranging from 1-30 funds, using investors want a bite of each. every possible permutation. It then New fund offers (NFOs) of mutual calculated the five-year standard deviafunds ride on this mentality of the tion of each of these portfolios. The singleaverage investor. It is not uncommon to find fund portfolios had the highest standard in an investor’s portfolio schemes that may deviation—they delivered either the biggest not be suitable for his needs. However, this gains or suffered the heaviest losses. This habit of lapping up anything in the name of showed that owning just one fund can be diversification does more harm than good. risky and pointed to the need for Read on to find out how diversifying beyond diversification. Adding another fund to the a point may actually hurt your returns and portfolio brought down the standard the way you can create a truly diversified deviation significantly, thus reducing the portfolio. risk. This drop in risk was experienced with WHY OVER-DIVERSIFICATION IS each additional fund. After seven funds, however, Morningstar discovered that a NOT HEALTHY portfolio’s standard deviation remained Diversification is a prudent strategy that pretty much the same regardless of the reduces the investment risk by spreading it number of funds added. In other words, across a basket of securities. Investing in a there is no need for more funds once you mix of assets that has little correlation to each reach a critical number. other is advisable as this ensures that even if Problem of plenty: When you hold a large one or two assets face rough times, others number of funds, it is that much more may perform well enough to protect your difficult to keep track of your investments. portfolio. However, diversification is healthy

The Economic Times Wealth, November 19-25, 2012

1

The consensus is that a well-balanced stock portfolio with not more than 20 stocks offers the best possible diversification. "Empirically, it has been observed that 15-20 stocks lend optimum diversification to a portfolio. Beyond this, a portfolio becomes too stretched,” says Sandeep Sabharwal, CEO of PMS, Prabhudass Lilladher. STOCKWithin academic circles too, this number SPECIFIC seems to be the optimum choice. The RISK modern portfolio theory suggests that you will come very close to achieving optimal diversity after adding about the 20th stock to your portfolio. Stock researchers Edwin J Elton and Martin J MARKET RISK Gruber found that the average standard deviation (which is indicative of risk) of a portfolio of one stock was 49.2%. 20 200 Increasing the number of stocks in the Number of stocks average well-balanced portfolio could reduce the portfolio’s standard deviation to at most 19.2% (this number represents market risk). However, they also found that with a portfolio of 20 stocks, the risk was reduced to about 20%. Therefore, any incremental additions after 20 only reduced the portfolio’s risk by about 0.8%, while the first 20 stocks reduced the portfolio’s risk by 29.2%. So, the incremental benefit is negligible.

Cover Story

The Economic Times Wealth, November 19-25, 2012

Are

An online survey conducted by Economictimes.com, last week, shows that though small investors understand the need for diversification, they don’t know how to achieve it.

you

a smart

fund

investor? 43%

5-15

38% 17% 5-10

32%

<5

57%

<5

Buy stocks.

15-30

How many stocks do you own?

50%

34%

13%

10-15 >15

How do you invest in equity?

Mutual fund investors should ideally monitor their portfolios every 3-4 months to ensure the performance is up to the mark, and to check if there are no undesirable surprises, such as a change in manager or investment mandate, or a hike in expense ratio. This will be tedious if you have a fat bunch of fund statements to sift through. Neeraj Chauhan, CEO, Financial Mall, says, “A bloated portfolio becomes unmanageable, making it difficult to keep track.” If you don’t know how your investments are doing, you won’t be able to remove the underperformers. Dilutes impact of performers: Having too many funds also takes the bite out of your portfolio. Even if there are good schemes in your basket, it may not reflect in the portfolio returns because their contribution will be diluted by the slackers. This is similar to an over-diversified equity fund; owning hundreds of stocks waters down the potential of big gainers and affects the total returns. Suppose there are 50 stocks in your portfolio, each with equal weightage. If one stock shoots up by 40%, the overall portfolio will go up by less than 1%. If you diversify too much, you might not lose much, but you won’t gain much either. High possibility of overlap: The average diversified mutual fund invests in 40-50 stocks. Two funds from the same category are likely to invest in the same companies and sectors. As you add more funds to your portfolio, there is high chance of duplication and overlapping. If you buy the same stocks

>30

04

10% 6%

Through mutual funds.

How many mutual funds do you own? How often do you track your investments? 2%

through other funds, the diversification principle is defeated. “Owning too many mutual funds does not necessarily give you the underlying diversification if all the schemes own the same kind of stocks,” says Ajit Dayal, director, Quantum Advisors. We examined the portfolios of the 25 largest equity diversified funds and found that of the 351 stocks in their portfolios, only 126 stocks were unique. The remaining 225 stocks overlapped in the portfolios of these funds (see graphic on page 6).

FINDING THE RIGHT MIX For investors, the big question is: how much diversification will deliver the optimum results? If you are looking to build a welldiversified portfolio, remember that investing works best when kept simple. Investing in mutual funds is supposed to simplify life, not complicate it. The best way to make your portfolio work for you is to have a compact collection of quality funds. Broadly speaking, one should look at the following factors while building his portfolio: Asset mix: The key factor that determines the success of any portfolio is the asset allocation and its rebalancing. “Investors tend to go wrong mostly in finding the right asset allocation and maintaining the same throughout the investment period,” says Chauhan. Pankaaj Maalde, head of financial planning at Apnapaisa.com, says investors tend to be under-diversified across asset classes. “There is a lot of imbalance in the allocation. They

My broker does it for me.

“I have realised the value of following a goal-based approach to investing, instead of making ad hoc investments.”

83% Regularly as it’s online.

9%

6%

At least once a year.

I rarely track my investments.

17% As and when I had extra money.

10%

52%

Past returns.

On my broker’s advice

31%

Rajesh K Prasad, 35, Bangalore

What is the most important factor while buying a mutual fund?

How did you decide to buy these stocks or funds?

When I came across a good opportunity.

59% The fund category and past returns.

31% How it fits in the portfolio.

17%

20%

Investing in as many different mutual funds or stocks as possible.

Investing in assets that move in tandem with each other.

VARADHARAJAN SANTHANAM

What is true diversification?

63% Investing in assets that have little correlation with each other.

What is the true benefit of diversification? 31% Safety of capital invested.

60% Stability in performance.

9% Higher return on investment.

The survey was conducted by Economictimes.com on 14-15 Nov. The total number of respondents was 964.

Started investing in stocks and mutual funds on his own about five years ago, relying on advice from magazines and newspapers. Now, he owns a portfolio of 12 funds, worth approximately `4 lakh.

PLANNER’S ADVICE Pankaaj Maalde, Apnapaisa Mutual fund portfolio needs to be reviewed because there are too many schemes. It is advisable to invest in 4-5 good performing funds. The portfolio includes global and sectoral funds, which are not suitable for him given his financial situation.

Cover Story

The Economic Times Wealth, November 19-25, 2012

05

BHARAT PATHAK

are either heavily into property or deep into fixed income,” he says. Category mix: While investing in a fund, avoid schemes with similar attributes. Buying two large-cap funds doesn’t help because they will invest in the same stocks. Investors should own a mix of funds that have exposure to different segments of the equity market. Similarly, one can have exposure to both long and short tenure bond funds. “One should spread one’s investments within each asset class to achieve the right diversification,” says Vaid. Manager mix: Even when you invest in a diverse mix of funds, don’t rely on a single fund manager or team to handle your money. Though you might have preferences for a certain brand name, it is wise to diversify across fund houses. By doing so, your portfolio health will not be affected even if one of the fund houses witnesses a downturn in performance across its schemes. So, how many funds should one have in a portfolio? There is no one-size-fits-all answer, but experts say 4-5 diversified equity funds, 1-2 bond funds and a gold fund should be enough to create a well diversified portfolio. “Most investors would do well to have 8-10 mutual funds covering equity, debt and gold investments,” says Chauhan. If you broadly follow this structure, it should give you reasonable diversification. That

“I only invest in funds that have been given a high rating by fund research agencies.”

Amit Ranjan, 30, Vadodara

said, keep in mind that no matter how diversified your portfolio, the risk of investing in stocks can never be completely eliminated.

DECLUTTER THE PORTFOLIO If you have a messy portfolio of funds and stocks, it may be time to get it back into shape. But don’t start cutting your investments blindly. Prune your portfolio in a way that it achieves the desired asset allocation keeping your

He invests in mutual funds based on his own research. He currently has SIPs in nine funds and six other funds. His total mutual fund portfolio is around `2.35 lakh.

PLANNER’S ADVICE Pankaaj Maalde, Apnapaisa Consolidate mutual fund portfolio in five funds. For funding higher education of daughter, continue investment of `7,000 per month in HDFC Equity Fund, ICICI Prudential Focused Bluechip and Birla Sun Life Dividend Yield, while the remaining `3,000 per month can be invested in the PPF. Marriage funding can be continued through equity investment of `4,200 per month in IDFC Premier Equity and Reliance Regular Savings Fund and `1,800 in SBI Gold Fund.

06

Cover Story

The Economic Times Wealth, November 19-25, 2012

Howto

build a fund

portfolio

TENURE

ASSET ALLOCATION

How long do I want to stay invested? Short term: Debt Medium term: Balanced, FMPs Long term: Equity

How do I want to split my investment? Heavy in equity: Diversified, ELSS, mid-cap, sectoral Heavy in debt: Debt, FMPs Mix of both: Balanced, MIPs

Each financial goal has a different tenure, so invest in funds that give the best results in the time horizon for each goal.

Choose the fund that invests in avenues that suit your desired asset allocation.

RISK PROFILE How much risk can I take? Low risk: Debt, MIPs, arbitrage Moderate risk: Balanced, index, diversified High risk: Mid-cap, small-cap, sectoral

Take this short quiz to find out which option is best for you, depending on the risk level of the fund and the returns it can generate.

The funds in your portfolio must match your risk appetite. Also, factor in goal-related risks while picking funds.

TAXABILITY QUESTIONS TO ASK YOURSELF Remember that you will need to rebalance your mutual fund portfolio as you age and achieve your financial goals. This will be decided by your risk appetite, tax considerations and cashflow requirements.

Which tax breaks do I want? Low tax: Debt for over one year No tax: Equity, equity-oriented balanced funds for over one year Tax exemption on both investment and income: ELSS

LIQUIDITY Would I need money at short notice? If required at short notice: Liquid funds If not required immediately: Equity funds Your monthly surplus has two parts: ready-to-use cash and investible money. Choose funds that meet your cashflow needs.

“I am now looking to exit some of the nonperforming funds at reasonable valuations.”

The tax on income from funds depends on the kind of fund and investment tenure. Choose ones that are the most tax-efficient.

Duplication across funds The 25 largest equity funds have invested in similar stocks.

ASHWANI NAGPAL

NUMBER OF FUNDS THAT HAVE INVESTED IN THESE STOCKS

21

20 17

16 15 15

14 14 14 14

IC St IC at IB e an Ba k nk of In di a La In fo rs sy en s & Re To lia u nc br e o In du st rie HD s FC Oi Ba l& nk Ax Na is tu Ba ra lG nk as Co rp Bh n. ar ti Ai rt el

18 18

He started investing in mutual funds several years ago when the stock markets were doing well. He chose funds purely on the basis of past performance and currently has about `7 lakh invested in 20 different schemes.

PLANNER’S ADVICE Neeraj Chauhan, CEO, Financial Mall The existing portfolio has multiple schemes in the same asset class and categories. The portfolio is too big to manage and doesn’t serve the purpose of appropriate diversification. The investor is aged 65 and retired. Though he has adequate fixed deposits and pension for safe and regular income, his allocation to equity is not appropriate. His risk profile is moderately aggressive and has no goal left apart from a comfortable retired life. It is suggested that he put 32% in debt, 54% in equity and 14% in gold. Equity is better diversified among large-cap, mid-cap & small-cap funds with lesser schemes and different fund managers.

broader investment goals in mind. Consider these steps when you start consolidating: Get rid of duplicate holdings: Identify investments that are similar to each other. If you hold 3-4 large-cap equity funds, get rid of 2-3. “Investors should remove funds and stocks that are similar because they do not lend any diversification benefit,” says Hemant Rustagi, CEO, Wiseinvest Advisors. Keep the fund that has done better than the others. Don’t cut the winners: While trimming the portfolio, investors often end up selling their winners while keeping the underperformers intact. This strategy of booking profits on winners is not the right approach. Sandip Sabharwal, CEO, portfolio management services, Prabhudas Lilladher, says, “Stay with winners for some time, otherwise your

Ci pl a Co Gr a lI as nd im ia In du st rie s

Jaipal Singh, 65, Delhi

Data as on 30 Sept 2012 Source: Value Research

portfolio will not be able to outperform.” Instead, identify investments that are consistently underperforming and weed them out. Be wary of costs: Consolidating a portfolio will entail some costs. Every time you sell shares in a company or units in a mutual fund, there could be a tax incidence or an exit load. Make sure that you are not incurring an unduly high expense when you sell. Even though some costs are unavoidable, it should not deter you from the exercise. The benefits of having a leaner portfolio far outweigh the cost of achieving it. “If your returns are optimised, the cost won’t matter much,” says Rustagi.

Please send your feedback to [email protected]

Review Preview 1-week change (%)

Weekly wealth monitor 12.64

10.43

8.31

2.02 -0.41 10-yr GoI bond yield

Balanced funds

1-year change (%)

The top three

13.49 10.25

8.20

07

The Economic Times Wealth, November 19-25, 2012

-0.80 Equity funds

STOCKS

9.38

Price (`)

Weekly % change

L&T Finance Holdings 86.20 United Spirits 1,850.65 SREI Infrastructure Finance 34.15

57.30 51.74 31.85

0.14

Gold

Income funds

Weekly % change

WORLD INDICES

-1.99 Sensex

WIG20(Poland) JCI (Malaysia) Hermes (Egypt)

Wealth doesn’t get built or destroyed in a week. But you do need to broadly know how your investments in different asset classes are doing. This monitor tells you exactly that.

2,371.77 4,351.28 568.18

10-yr GOI yield is the average yield in the respective periods.

1.44 0.54 0.53

DEBT FUNDS

NAV (`)

Weekly % change

Canara Yield Advantage UTI Bond IDFC Asset Allocation Agg

11.38 33.38 12.87

0.35 0.33 0.31

EQUITY FUNDS

NAV ( `)

Weekly % change

Sundaram Entert. Opp SBI Magmum Emer. Bus. Reliance Media & Entert.

13.50 56.78 36.01

5.39 3.05 2.62

Stocks are from the BSE-500. Debt funds are income funds. Source: ETIG Database

Market pulse Top news METALS

Import tariff hiked for gold and silver In the wake of rising global prices of precious metals, the government has increased the import tariff of gold and silver. The tariff value, which is released every fortnight, is the base price on which the customs duty is determined to prevent under-invoicing. The tariff for gold has been hiked from $556 (`30,580) per 10 gm to $561 (`30,855), while for silver it has been raised from $1,039 (`57,145) a kg to $1,058 (`58,190).

■

Hurt by the contraction in industrial production in September and the disappointing 2G spectrum auction, the Nifty slipped below the 200 point range between 5,580 and 5,780 and ended at 5,574 for the week. The Sensex too slipped below its range of 18,400-18,900 and closed at 18,303. Volatility is likely to increase this week because the winter session of the Parliament begins on 22 November. Though the session is expected to be stormy, market participants will be closely watching the fate of bills pertaining to the recent economic reforms like insurance bill, pension bill, etc.

■

On the global front, the threat of the fiscal cliff in the US has already pulled the US markets down by more than 5% since the re-election of Barack Obama. This has begun denting the sentiments in other markets as well. With the Eurozone economy contracting by 0.1% during the July to September period, after it contracted by 0.2% during the previous quarter, the Eurozone has officially slipped into a recession now after a gap of four years. The decision regarding the Greece bailout could not materialise last week and some decision on this front is expected during this week.

ECONOMY

Product launches

KYC deadline pushed for LPG clients

INSURANCE

NPS

The Petroleum Ministry has extended the deadline by another 15 days, to 30 November, for submission of ‘know your customer’ details by customers holding multiple domestic LPG connections. Only customers whose names appear in the respective OMC Transparency Portal, as identified using/holding multiple LPG connections, need to submit KYC details along with proofs of identity and address before the deadline.

Bajaj Allianz General Insurance has launched an ‘extended warranty plan’ for consumer durables, under which a customer will be able to extend the warranty period for 12 months after expiry of the manufacturer’s product warranty. The premium for this policy will start from `350. The cover shall be equal to the invoice price of the product.

Muthoot Finance, a Kerala-based gold loan company, has tied up with the Pension Fund Regulatory and Development Authority, an autonomous body under the Ministry of Finance, to act as a service provider for the National Pension Scheme.

MUTUAL FUNDS

SAVINGS ACCOUNT

Fund houses allowed to deal in CDS The Securities and Exchange Board of India has announced that mutual funds can sell a credit default swap (CDS) only when they want to exit an existing ‘bought position’. However, this can be done only if the fund house’s total exposure through CDS in corporate bonds, along with equity, debt and derivative positions, exceeds 100% of the scheme’s net assets. A credit default swap is an insurance against potential nonpayment by a counterparty.

REGULATION

Sebi slaps fine on Earnest Healthcare Sebi has slapped a fine of `10 lakh on Earnest Healthcare for failing to redress investors’ grievances and submit a status report as specified by the market regulator. In April 2011, the regulator had directed the firm to resolve 51 investor grievances within 15 days from the date of receipt of the letter and submit a status report, but the company failed to do so within the stipulated time.

INSURANCE

LIC plea against cost on officials rejected The National Consumer Disputes Redressal Commission has dismissed a plea by LIC against a Haryana Consumer Commission’s order imposing cost upon its officials for rejecting a woman’s claim for cover after the death of her husband, who was a policyholder. Dismissing LIC’s revision petition which had said that the insurance company was ready to pay the costs and its officials not be burdened with the same, the apex consumer commission observed that there was ‘dereliction of duty’ by the LIC officers and instead of tackling the problem, it had challenged the state commission’s order. The insured had bought an LIC policy for a cover of `1 lakh in May 2004, the wife had said in her complaint.

Axis Bank has launched two savings bank products, one aimed at the younger section of the population and the other is for homemakers. The first one, called ‘YOUth account’, allows a zero balance and also lets accountholders pull funds from their parents’ account, which could be linked to the YOUth account. The second product is a debit card, Ladies First Card, which is targeted at stay-at-home women. It offers reward points on shopping for groceries and apparel. These points can be redeemed against gifts and vouchers.

PERSONAL LOAN Popley Group has tied up with Reliance Commercial Finance to offer a jewellery purchase loan for gold and diamond jewellery. Clients can buy the jewellery from Popley by paying 40% of the price as downpayment and the rest through EMIs.

wealthwise

weekly calendar Wednesday NOV

21

India to sell `50 billion 182-day bills & `50 billion 91-day bills.

Friday NOV

23

Siemens to release its quarterly results.

08

Pick of the Week

The Economic Times Wealth, November 19-25, 2012

BCM: Poised for further growth A strong inventory, along with higher sugar production in UP will help the company boost its sales. alrampur Chini Mills surprised street expectations with a 77% jump in its top line in the second quarter of 2012-13, helped by a rise in sugar volumes and high sugar prices. Distillery volumes and realisations have also been strong due to high prices for rectified spirit and alcohol. On the back of a seven-fold increase in its EBITDA, the company, which is one of the largest integrated sugar manufacturing firms in the country, reported a net profit of `49 crore. This is a healthy growth compared with a loss of `18 crore in the preceding quarter and a loss of `39 crore in the corresponding period 2 last year.

B

Balrampur Chini Mills to hike their sugar production. The government may allow increased non-levy sugar sales to control domestic prices and this will benefit companies with increased production like Balrampur Chini Mills. The deregulation of sugar prices, proposed by the former governor of the Reserve Bank of India, C Rangarajan, if implemented, can act as another trigger for sugar stocks. With a very strong balance sheet (debt equity ratio of only 0.5 times as on 30 September), Balrampur Chini Mills is the best play in the unfolding sugar sector story. However, the UP government is expected 17 to come out with the state advised price Buy (SAP) for sugarcane and any jump in SAP will be negative news for the company. Since the long-term outlook for sugar is still positive, investors should use any correction triggered by this event to buy shares of the company.

Analysts’ views

Sell

Strong numbers may continue: Balrampur Chini Mills is expected to report strong numbers in the coming 2 quarters as well. This is because the situation is tight on the domestic front. The Hold 2012-13 sugar season (that is, the October Selection methodology: We pick up the 2012-September 2013 period) started stock that has shown maximum increase with a low inventory of 45 lakh tonnes. in ‘consensus analyst rating’ during the The domestic production is expected to Analysts are bullish on the past one month. Consensus rating is be lower at around 2.4 crore tonnes counter since the company arrived at by averaging all analyst compared with about 2.6 crore tonnes of is likely to increase its sugar recommendations after attributing production during the sugar season of production. weights to each of them (5 for strong buy, 2011-12. With an inventory of 2.3 lakh 4 for buy, 3 for hold, 2 for sell and 1 for tonnes, the company will be able to benestrong sell). Any improvement in consensus analyst rating fit from the firm domestic sugar prices. indicates that the analysts are getting more bullish on the However, the domestic prices may not go up much higher stock. To make sure that we pick only companies with than the current levels because sugar is facing a case of decent analyst coverage, this search will be restricted to oversupply on the global level, thereby bringing the stocks with at least 10 analysts covering it. You can see similar international prices to much lower levels. While monsoon consensus analyst rating changes during the last one week in failure reduced sugarcane production in Maharashtra and ETW 100 table (page 23). Karnataka, good rains in UP helped to increase sugarcane —Narendra Nathan production there. This is likely to help companies like

Actual

Research house

Advice

Consensus estimate

2010-11

2011-12

2012-13

2013-14

2,977

2,310

2,951

3,128

EBITDA (in ` cr)

546

264

459

414

Net Profit (in ` cr)

163

0

154

135

EPS (in `)

4.15

0.02

6.03

5.64

Revenues (in ` cr)

Relative valuation PE 1.27

Balrampur Chini Mills

PB 15.90

Dividend yield (%) 0.00

EID Parry

1.67

12.80

1.72

Shree Renuka Sugars

0.95

-13.21

0.00

Bajaj Hindusthan

0.59

-7.37

1.50

Bannari Amman Sugars

1.36

8.78

1.03

Latest brokerage calls Recomm date

Research house

12 Nov

Prime Broking Company

9 Nov

Enam Securities

9 Nov

ICICI Direct

Buy

82

9 Nov

Centrum Broking

Buy

80

8 Nov

Jefferies

Buy

87

8 Nov

HDFC Securities

Buy

86

Advice

Target price (`)

Strong buy

98

Buy

83

Relative performance

132.81

111.84 100

Market price: `62.95 18 Nov 2011

Sensex

Balrampur Chini Mills

16 Nov 2012

Performance of Balrampur Chini Mill’s shares compared with the Sensex. The figures are normalised to the base of 100. Source: ETIG Database and Bloomberg

What experts advise

BUY Stock

Fundamentals

Market `) price (`

Target `) price (`

45

53

The company’s robust order book and scaling up of overseas operation will benefit it in the medium to long term.

Comment

Jyoti Structures

Angel Broking

Buy

Voltas

Prabhudas Lilladher

Accumulate

107

131

Voltas’ order flow is expected to improve due to its increasing reach in international markets and business segment in domestic market.

Gateway Distriparks

Karvy

Buy

139

188

The company is on course to double its cold chain capacity by next financial year despite increased competition.

PI Industries

Nirmal Bang

Buy

521

605

A sustained order book and low per-capita pesticides consumption make PI Industries a good long-term bet.

JBF Industries

Sushil Finance

Buy

130

180

The company’s persistent capacity addition, backward integration and waning risk of derivative loss makes it a good buy.

Market `) price (`

Target `) price (`

SELL Stock

Research house

Advice

Comment

Marico

Espirito Santo Securities

Sell

217

185

Second quarter result was lower than expected. Also, price cuts and increase in promotional spending will cut consensus earnings.

Bhushan Steel

Edelweiss Finance

Reduce

490

417

Despite factoring in benefits of project completion in 2013-14 and improvement in margins, the current valuations appear expensive.

GVK Power & Infra

MSFL Research

Sell

12.40

11.40

DLF

IIFL

Sell

204

180

Allowance of airport development fee for funding airport capex will help the stock, but there is no concrete outcome on this as yet. Maintains ‘sell’ as DLF's reported revenue, EBITDA and PAT were significantly below estimates on low value tier-II city sales.

Real Estate

The Economic Times Wealth, November 19-25, 2012

09

Is this a good time to buy property? Buying a house has high aspirational value in India. However, in the recent past, property prices have not shown any signs of correction, forcing many to live on rent. A study by ArthaYantra compares property prices and rentals in seven top cities. Know the cities in which you can buy a house and where it’s more cost-effective to rent.

I

A key outcome of the study is the ArthaYantra Buy versus Rent Score (ABRS) assigned to each city (see page 11). The ABRS is an objective indicator of whether it makes financial sense to buy a house or live on rent in a particular city. Since affordability is a function of income levels, the ABRS is calculated for six income levels, beginning from `8 lakh a year up to `25 lakh a year. With a score of 55 across all income levels, Delhi/NCR is a clear candidate for living on rent. However, there are pockets of affordability in several other cities. In Kolkata, Pune and Hyderabad, it makes more sense to buy a house if your income is above `15 lakh a year. This is because property prices are within reach, while the rents are comparatively high. This is reflected in the short break-even horizon in Kolkata. This is the time during which the decision to buy becomes financially viable. According to the ArthaYantra study, a buyer in Kolkata will break even within 12 years of purchasing a property. In Delhi, it will take him 16 years. If you plan to buy a home, go through the excerpts of the report for more such nuggets of information. It might help you in taking an informed decision on buying a house or renting one.

t is often said that anytime is a good time to buy property if it is for your own use. Only if the property is bought for investment should the buyer worry about the price, cost of capital and other factors. However, property prices are continuing to rule at high levels and there are no signs of a significant correction. In Mumbai, for instance, the average price of a 1,000 sq ft house is `1.09 crore. In the Delhi/National Capital Region (NCR), it is a tad cheaper at `1.08 crore (see graphic), but still out of reach of the average buyer. Even if someone earns `8 lakh a year and saves 25% of his income, he will have to wait for eight years to accumulate the 20% down payment in Delhi or Mumbai. According to a detailed study by Hyderabadbased financial advisory firm ArthaYantra, it is more cost-effective to live on rent than to buy a house in a city. ArthaYantra compared the property prices with rentals in seven top cities across India, taking into account the income and saving potential of the buyer, the cost of capital, as well as the increase in property prices and rentals. “Our research says that in the current situation, it is preferable to rent a home than buy one,” says Nitin Vyakaranam, CEO of ArthaYantra.

Should you buy or live on rent? Though rents are steep, the high prices of property in cities like Mumbai and Delhi/NCR make renting more cost-effective. But in Kolkata, high rents make buying more feasible. `1.2 crore

`18,137

Price and rent of 1,000 sq ft apartment

`28,830

`80 lakh

`20,000

`12,125

`60 lakh `40 lakh

`25,000

`14,955

`17,833 `10,438

`35,000 `30,000

`1 crore

`12,000

`15,000 `10,000

`20 lakh

`5,000

Average property prices

Average rent per month

`1.09 crore

M um ba i

De lh i/N CR

Ch en na i

Ba ng al or e

Ko lk at a

Pu ne

Hy de ra ba d

`37.64 lakh `42.76 lakh `51.23 lakh `54.38 lakh `71.62 lakh `1.09 crore

10

Real Estate

The Economic Times Wealth, November 19-25, 2012

Saving for down payment

How much can you buy with `1 lakh?

A critical decision in purchasing a home is the down payment. This is usually about 20% of the property value. Based on average property prices, the time required to accumulate the down payment for a house ranges from four to eight years.

In Mumbai and Delhi, you will get enough space for a small table. In Hyderabad, you may fit in a single bed. Here’s how much residential space can be bought with `1 lakh in these cities. Based on average property prices

8 years

Gross income

Saving rate

`8 lakh

25% pa This assumes that the balance 80% will be accounted for by a home loan.

6 years

Mumbai

9.15 sq ft

5 years 4 years

Mumbai

Delhi/NCR

Chennai

Bangalore

Kolkata

Pune

Delhi/NCR

Bangalore

9.19 sq ft

18.39 sq ft Chennai

Kolkata

13.96 sq ft

19.52 sq ft

Pune

Hyderabad

23.39 sq ft

26.57 sq ft

As buyers grapple with high property prices and rising EMIs, builders are trying to make their offerings more affordable by reducing the average size of house. The average dwelling size was around 1,100 sq ft about 10 years ago. Now, it is about 920 sq ft. If you take out the super area, the living space available to the family shrinks to around 700 sq ft.

Hyderabad

Cost of ownership vs cost of renting

When buyers break even

The rent to buy ratio explains the additional monthly payments to be paid in case of ownership compared to renting. The ratio also shows whether the property prices are impacting the rental value or not. The ratio is calculated based on the average monthly cost of renting (rental + maintenance) and average monthly cost of ownership (EMI + maintenance).

A crucial factor that resolves the rent versus buy dilemma is the time it would take to make the decision to purchase financially viable. If the property price is low and the rent is high, the break-even horizon is short. In Kolkata, it is 12 years. If the price is high, it can take a longer time as in Delhi/NCR, Chennai, Bangalore and Mumbai.

Cities

Average out-of- Average out-ofpocket cost for pocket cost of renting the owning the house (`) house (`)

Rent or buy ratio (renting the house)/ (owning the house)

Urgency to buy rank

16 years Delhi/NCR

Based on out-ofpocket expenses for owning a home versus renting one.

12 years Kolkata

DELHI/NCR

19,137

97,236

20%

7 15 years

KOLKATA

18,833

46,304

41%

1

MUMBAI

29,830

97,673

31%

4

Current average stay is seven years.

Mumbai

14 years Pune

PUNE

13,000

38,814

33%

2

HYDERABAD

11,438

34,288

33%

3

BANGALORE

13,125

48,085

27%

5

CHENNAI

15,955

64,331

25%

6

14 years Hyderabad

16 years Bangalore

16 years

The current average stay in a house is seven years, which means that most buyers will not achieve the break-even before they shift to a new location.

Chennai In Kolkata, buying is a compelling option because the cost of renting is 41% the cost of ownership. The situation is different in Delhi/NCR, where the cost of ownership is five times higher than the cost of renting.

Methodology ArthaYantra analysed the costs associated with owning a house or renting one across seven major cities, including Delhi/NCR, Pune, Mumbai, Hyderabad, Bangalore, Kolkata and Chennai. Here are the assumptions used in the study.

SOURCES: Property prices and rentals of residential properties were collected from multiple sources, including the National Housing Board, real estate aggregations and more than 100 estate agents in the cities included in the study.

 Average savings rate is assumed to be 25%.

Assumptions

 1.5% of the property value is considered as property tax to be paid.

 Sale price and rentals are for a 1,000 sq ft property.

 The rent is assumed to increase by 10% annually.

 20% of the cost of the house is considered as down payment.  The loan tenure is assumed to be 15 years with an interest rate of 10.50% per annum.

 The minimum gross income required to buy a house is calculated by considering 50% of monthly take-home salary as monthly EMI.  Gross income of the individual is assumed to rise by 10% annually.

 Real estate as an asset class is considered as having the same properties as other asset classes.  The ownership/buy case considered is for self-occupancy.

Real Estate

The Economic Times Wealth, November 19-25, 2012

Where to rent or buy a house The ABRS scores for the following cities and different income levels are objective indicators of the financial viability of buying or renting a house.

Gross annual income/ Cities

Delhi/ Kolkata Mumbai NCR

`8 LAKH

55

75

65

65

65

55

55

`10 LAKH

55

75

65

65

77.5

55

55

`12 LAKH

55

75

65

77.5

90

55

55

`15 LAKH

55

87.5

65

90

90

67.5

55

`20 LAKH

55

100

65

90

90

80

67.5

`25 LAKH

55

100

65

90

90

80

80

Pune Hyderabad Bangalore Chennai



What the scores mean Score

Recommended action

100

Buy (rents are very high).

90

Buy (rents are high).

87.5

Buy/Neutral (Buying is recommended as rents are very high).

77.5

Buy/Neutral (can afford both ownership and rent).

80

Can afford both ownership and renting, but because of low rent compared with ownership, rent is recommended.

75

It is advisable to buy, but EMI can’t be afforded. Have to rent.

67.5

Rent/Neutral (can afford both ownership and rent, but rent/EMI ratio is low).

55

Can afford to rent, but can’t afford to buy.

50

Can’t afford both ownership and renting.

What you should do How buyers should use ABRS scores to make informed decisions. DELHI/NCR: The low rental values compared with high property prices make it a place affordable for renting since the home loan EMIs are high. It is advisable to live on rent if the salary range is `8-25 lakh. KOLKATA: The ABRS score of 75 for a salary range of `8-12 lakh indicates that the rental value is critically high, but an individual can't afford to buy a house. For someone earning `13-25 lakh is better off owning a home than renting it. MUMBAI: The score of 65 signifies that though the rents are high, it is advisable to rent because the property prices are also high. The EMI payments to be made in case of ownership may not be affordable. PUNE: For a professional with a salary range of `8-11 lakh, it is advisable to rent. A professional with a salary of `12-15 lakh falls in the neutral zone. He can afford to buy, but will have to make a few adjustments in his lifestyle in order to afford the EMI payments. Those earning over `15 lakh should buy. HYDERABAD: If someone is earning `8-9 lakh a year in Hyderabad, he should live on rent. If the income is `10-11 lakh, it is advisable to buy, but he will have to make a few adjustments. Those earning more than `12 lakh are advised to buy. BANGALORE: The score of 55 for a professional with a salary range of `8-14 lakh signifies that the monthly cost of renting is cheaper than buying. The low rental prices also mean that though someone with an income of more than `15 lakh can afford to buy a house, renting is a better option. CHENNAI: The score of 55 for a professional with a salary range of `8-19 lakh signifies that the monthly cost of renting is cheaper than that of buying by more than 70%. The low rental prices also mean that though a professional with a salary of more than `20 lakh can afford to buy a house, renting is better.

11

Why it is smart to rent ools build houses and wise men live in them, goes an old saying. Given the high property prices in most metros, living on rent is perhaps the smartest financial move you can make today. As the ArthaYantra study has shown, in most cities and income ranges, living on rent is a better option than buying property at the current, overheated levels. Here are a few advantages of living on rent: Flexibility: If you don’t own the house you live in, you can move to another location without any inhibitions. This also means not having to forego career opportunities that come your way in a distant suburb or in another city. Home owners will necessarily look for jobs at places close to their homes, but tenants have more options. Liquidity: Buying a house is one of the biggest financial decisions in one’s life. It sucks up the liquidity of the household and leaves the buyer with very little elbow

F

room. In their desire to minimise the EMI, people often liquidate all other investments and savings. This can be disastrous for your finances and can put you in a spot in case there is a financial emergency. Savings: The rent you pay is likely to be only a fraction of what the EMI would have been. Use this to your advantage by saving the difference in a safe, yet liquid, option. Disciplined saving can help you accumulate a considerable amount, which can serve as the down payment for your house when you decide to buy one. Debt mutual funds are a good avenue to save for such a financial goal. No stress: Despite the rosy picture painted by analysts and government agencies, the economy is not in a very good shape. If things worsen, we might see a replay of 2008. A tenant will find it easier to tide through the hard times than a home owner with a huge EMI to service.

12

Banking

The Economic Times Wealth, November 19-25, 2012

Buying a house? Bank loan is your best bet The lender not only conducts due diligence for the property, but you can also avail of tax deductions.

interest paid for that assessment year is less than `1.5 lakh, the couple can share the benefit according to the amount contributed by each for the mortgage payment.

AMIT SHANBAUG

H

ariprasad Nair, a sales representative with a reputed multinational company, has saved enough money to buy a small house in a suburb of Mumbai. However, he has decided to take a bank loan to fund a part of his purchase. “The 1-BHK house I want to buy costs around `15 lakh. Though I can arrange for the money through my savings and by borrowing from friends, I prefer to take a loan worth `5-6 lakh,” says the 36-year-old. Nair’s reasoning is that since he doesn’t have the time to check on the property title and documentation, and doesn’t want to trust the broker implicitly, it will be better for him to pass on this job to a bank. “I don’t have the information or the time to exercise due diligence as far as the property is concerned. As the bank needs to safeguard its money, it will carry out a more detailed scrutiny, and furnish me the loan only after it is fully assured,” he adds.

Safety checks

Disadvantages Though taking a home loan from a bank seems to be a beneficial move, there are some pitfalls that borrowers should be aware of.

 Better discounts on lump-sum deals When it comes to negotiating the price of a property, buyers with ready cash always have an edge over those who fund their purchase through a home loan. This is because the former can expect an additional discount of 5-10%.

Before you take a home loan

A loan is often the only financially to `1.5 lakh a year viable method for a person to fund a for the interest How massive purchase like a house. to gift or paid. However, as Nair has discovered,  While selecting a home transfer shares loan lender, check for the If the buyer there are other advantages of Page 14 various terms and books a house that is still will push up taking a loan. Real estate experts conditions, and charges under construction and the property believe that buying property regarding the loan. gets partial disbursement prices much through a home loan ensures some of loan according to the higher in the level of safety to the property buyer.  Don’t choose a lender till you have identified a stages of completion, he future, taking a loan Says Sandeep Sadh, chief executive officer property. can still claim tax now seems to be a of mumbaipropertyexchange.com: “The benefits. Though he is not win–win situation for potential buyer is saved the time and hassle You should be able to  eligible for tax deductions the buyer,” he says. required to check the authenticity of fund 25-35% of the cost of the house yourself. till he actually gets the Apart from the fact the title and the various documents of possession (even if he has that a bank’s due the property.”  Approach at least three begun repaying the loan), diligence amounts to a Anuj Puri, chairman & country head, lenders, get their figures the interest paid can be legal check for the propJones Lang LaSalle India, cautions that for all fees and charges, claimed as deduction erty, there are though banks exercise due diligence for any and then bargain. after receiving the significant tax benefits property that a prospective home loan from the interest  Apart possession. Under available on a home borrower intends to purchase, it’s depth rates, check up on the Section 24, the interest loan. The mortgage payoften varies among banks. “Taking a home various charges, such as paid during the consments by the borrower loan does provide a reasonable safety net processing fees and truction phase can be help him get tax for the buyer most of the times. However, it valuation fees. claimed as deduction in deductions from his is prudent for the buyer to examine the five equal instalments, total taxable income. property’s antecedents himself if he has any subject to the upper limit The equated monthly indoubt,” adds Puri. of `1.5 lakh. stalment (EMI) comprises two Financial/tax benefits In case two people are buying a house components—principal and interest—both jointly, they can opt for a home loan of which qualify for tax deductions. Ganesh Vasudevan, chief executive officer together. The benefit is that both of them Under Section 80C of the Income Tax Act, of Chennai-based Indiaproperty.com, will be able to avail of the tax benefits on the a borrower can get a deduction for a explains that purchasing a property joint loan. Since the maximum tax maximum of `1 lakh for the principal through a bank loan also provides financial deduction available to a single borrower is amount paid each year, irrespective of his efficiency to the buyer. “Today, home loans `1.5 lakh and this applies to each borrower, tax bracket. Under Section 24(b), are available at 10.5-11% interest rate. If you the total deduction will be `3 lakh. If the the borrower can claim tax deduction of up factor in the inflation of 7-8% a year, which

 Five-year sale restriction If you sell the property within five years of the end of the financial year in which you purchase it, all the deductions claimed under Section 80C with respect to the property will be added to your taxable income in the year that you sell it. This means that the deduction in terms of the interest and principal will be added to your taxable income. Suppose you sell the property after four years of buying it and avail of the maximum deduction in terms of the principal amount and interest repaid, then `10 lakh (`2.5 lakh deduction each for four years) will be added to your taxable income. If you are in the highest tax bracket, you will end up paying an additional tax of `3 lakh.

What if the bank rejects the house? “One reason that the bank may not approve of the house is that it is not satisfied with the revelation from its due diligence of the property, or that the price stated is excessive. If this is the case, the aspiring buyer should take heed of the implications and perhaps not invest in the house,” says Puri. Another reason could be that the buyer’s credit worthiness has come into question. “In such a case, the borrower should check his credit score and try to repair it (in terms of the outstanding credit card bills, existing loans, etc) before approaching the same bank again or taking a loan from another lender,” adds Puri.

Please send your feedback to [email protected]

Stocks

The Economic Times Wealth, November 19-25, 2012

13

Time to raise stock holding The market will continue to move up for some time, so investors should use any correction to buy shares. India Vix

PE of the Sensex

The volatility index is at its lowest level, indicating complacency regarding risk.

15-yr average Price/earnings

18.16 29.61

}

18.16

{

14.86

12 Nov 2012

Source: NSE

As most market players seem to be oblivious to the risks at the moment, the stock market may be heading towards increased volatility.

What could drive up the markets... NARENDRA NATHAN

A

fter almost a year, investors finally have reason to cheer. The Sensex, which had hit a bottom of 15,135 in December 2011, has gone up by 23%. However, this upbeat mood has been tinged with anxiety. Should investors pour in more money into the stock market or use the current rally to earn profit? Market experts believe that the current upswing will continue for some time, so investors can use any correction to increase their stock holding. What are the reasons for this optimism, especially since several factors—global and domestic—could impact the current rally? The most important is the expected revival in the economic growth. The industrial production had contracted by 0.4% in September, and the RBI has already cut the expected growth rate for 2012-13 from 6.5% to 5.8%. So, the low base effect will make next year’s growth appear better. Moreover, the government’s recent announcement of economic reforms, such as FDI in retail and insurance, as well as power sector reforms, will aid the revival. The biggest glitch is whether the government will be able to get the reform bills passed in the upcoming Parliament session. “If there are concrete measures to

 Interest rate cuts by the RBI.  The reform bill being passed in the Parliament.  More quantitative easing money flowing to emerging markets like India.  A stabilised Indian GDP growth.  Bottoming out of the performance of India Inc.

What could pull down the markets...  A fiscal cliff in the US, which may trigger a recession there.  Aggravation of the sovereign debt crisis in the European Union.  India's fiscal/budgetary deficit going well above the target.  A cut in the credit rating of India.  A populist budget aimed at the 2014 general election.  Loose monetary policies, which could push up the price of crude oil.

implement the announced reforms, the market will be at a much higher level within a year,” says Mehraboon Irani, principal & head (PCG), Nirmal Bang Securities. The threat by global rating agencies to cut India’s sovereign rating to below BBB+ may force the government to push for economic

16.91

13.98

12 Nov 2009

7 Nov 1997

9 Nov 2012

PB ratio for the Sensex 15-yr average Price to book value

reforms. However, the next budget is the 3.43 last one before the general elections, so 3.43 any populist move may derail the correc2.67 2.87 tive efforts. The impact of the low base effect will 7 Nov 1997 9 Nov 2012 be visible in the corporate performance as well, so India Inc may report better Dividend yield of the Sensex numbers in the coming quarters. The increased focus by companies to reduce 15-yr average Dividend yield cost and increase profitability is another 1.62 good factor. This means that profitability 1.56 is expected to rise in the coming 1.55 1.55 quarters, even if it happens at the cost of lower sales growth. Currently, the market has managed to hold on 7 Nov 1997 9 Nov 2012 despite the below-average second Source: BSE Since the market quarter numbers because it is conis priced below companies. As a thumb rule, if the centrating on the expected future the historical valuations now, PE falls below its historical average, growth. “The stock market has long-term it indicates that the broader market already started discounting the investors can use is trading at cheaper valuations. It’s 2013-14 numbers,” says Shankar any correction to increase their the same case with the price to book Sharma, chief global trading equity exposure. value (PB) ratio. However, when it strategist, First Global. comes to dividend yield, a higherWhile the current low growth is than-average yield indicates cheap bad, it may force the RBI to reduce valuations. As evident from the above the interest rates faster. Any global shock charts, the market is trading at cheap triggered by the US fiscal cliff (automatic valuations on all three parameters at the spending cuts and tax increases of $600 moment. So, investors can use any billion from 1 January 2013) will pull the correction to increase their equity holdings. commodity prices down, thereby, making it However, the current valuations are not at a easy for the RBI to cut rates. This will help deep discount to the historical averages, so stimulate consumption/investment investments should be staggered. demand and take the broader market There is no guarantee that this upto much higher levels, in addition to ward move will be a one-way ride. helping stocks from rate-sensitive How to There are several factors that can sectors like banking and auto. build a puncture the rally in the short If the deadline for the US fiscal fund portfolio term (see What can pull the is not postponed, it may force its Page 6 economy back into a recession. markets down?). The fact that This may lead to a knee-jerk market participants have become selling, but investors should use it slightly complacent and are not too as an opportunity to enter the equity bothered about volatility is a major market. This is because while the fiscal cliff worry. This is evident from India Vix (which is bad for the global economy, the US measures the implied volatility), which is Federal Reserve may increase the size of its currently quoting at its lowest level of 15. third quantitative easing programme. The Since the volatility is expected to US Fed also intends to keep the interest increase, it is safer to invest in defensive secrates close to zero till mid-2015. Since tors, such as Pharma, FMCG and IT, in the growth in the developed markets is still low, short term. However, investors need to there is a high chance of this additional avoid stocks that are already quoting at stimulus money being routed into emerging much higher valuations. They should also markets like India. streamline their exposure to weak sectors Another factor favouring continued like infrastructure. investment is the relatively low valuations of the Sensex. The PE of the index is calculated Please send your feedback to by dividing its market cap with the sum of [email protected] the net profit generated by the 30

14

Financial Planning

The Economic Times Wealth, November 19-25, 2012

THE MONEY QUESTION How to optimise the return from investments by avoiding costs. Sabeer Awasthy considers himself a smart investor. He has invested according to a plan and makes his decisions with care. Lately, he has started noticing the costs associated with investments and knows that these eat into the latter. He wants to know the things he should be aware of on this count and the ways he can make sure that he is not losing money unnecessarily.

abeer Awasthy can make a significant impact on his investment returns by considering the costs as an integral part of decision-making. This is because these reduce the amount that he earns from compounding. He must remember that apart from costs like brokerage, which is incurred when he makes a direct payment, there are also the ones that are inbuilt in investments, such as mutual fund expenses, and are deducted from his investment value. The other cost that is likely to be overlooked is the penalty on investments, such as delayed payments or early withdrawals, which may cut into his returns. He must not let only the performance of his investments dictate his attitude to costs. What may seem a small charge when the investment returns are good will be a big drain on returns when performance dips. A high cost can be justified only if the investment is consistently generating much higher returns compared with the low-cost options. Meanwhile, Awasthy can avoid penalties to a large extent by automating the operational aspect of investing and making sure that his portfolio has adequate provision for his liquidity needs. He can also eliminate unwarranted costs by questioning every time he is advised to sell his current investment and put the money in a new one, since the churning will also translate into higher costs. Awasthy must use investment-related service providers, who link the fees to transactions and don’t charge a flat or annual rate. Flat charges can be beneficial only in situations where the number of transactions are high enough to apportion the costs. Being aware of the impact of costs on his investments and assessing those related to each investment before committing will go a long way to make sure that his money works in his interest.

S

SMART THINGS TO KNOW: Real estate terms

1 Down payment is made to the builder to confirm the purchase decision. It typically represents a percentage of the full purchase price. It could be nonrefundable if the deal falls through.

2

The sale deed is the agreement between the seller and the buyer and is proof of transfer of property to the buyer. It is signed by both the parties and also by a minimum of two witnesses along with all their details.

3 Stamp duty is the tax levied by the state government on the agreement value or the market value, whichever is higher. It is payable by the purchaser and may vary across states.

4 It is only after the payment of stamp duty that the sale deed is considered legally valid and can be admitted as evidence of transfer of property in courts. The sale deed has to be registered with the sub-registrar of the jurisdiction where the property is located.

Paper Work

How to gift or transfer shares If a person decides to gift his shares to another, it is legally considered a transfer. Hence, the same procedure applies. The person giving the gift is termed the donor, and the person receiving the shares is termed the donee. The shares can be transferred by initiating an offmarket transaction. An off-market transaction is initiated by the donor with his depository participant (DP) by submitting a delivery instruction slip (DIS) to transfer securities from his depository account to that of the donee.

Details The DIS should have the name of the donee’s DP, of the security being transferred, ISIN number of the company and quantity of shares being transferred. The donee must give a receipt instruction to his DP to accept the shares, if he has not already given a standing receipt instruction.

Deed execution Though it is not compulsory, it is best to execute the gift deed on a non-judicial stamp paper of appropriate amount for legal record and to avoid any tax queries in the future.

Share certificates If the shares are in certificate form, a share transfer deed in Form 7B, filled and signed by the donor, needs to be executed and registered. The stamp duty is payable at the rate of 25 paise for every `100 of the face value, or the market value of shares prevailing on the date of the document, whichever is higher.

Points to note

5

The registration fee is paid for getting the sale deed registered and is associated with getting the property transferred in the name of the buyer. The original document, along with two photocopies, has to be submitted and registration requires two witnesses.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Sunita Abraham, Girija Gadre and Arti Bhargava.

 The details mentioned in the delivery instruction slip and receipt instruction for off-market transfer must match, otherwise the transfer will not take place.  A gift from a relative (as defined under the Income Tax Act) or of a value less than `50,000 are not liable to be taxed in the hands of the donee.  Paper shares can be converted to the demat form by the donor before gifting. This will save stamp duty on the transfer.

Financial Planning

The Economic Times Wealth, November 19-25, 2012

15

Distributors vs investors Distributors must improve their credibility for investors to be more willing to pay, says Uma Shashikant. Second, acquiring saving and investing habits requires effort in education. Without creating a pull for investment products, it may be tough to create widespread awareness and demand for useful products like mutual funds. The industry needs to pool its resources to create serious educational initiatives that provide good quality inputs, which are unbiased, factual and persuasive. Third, distributors are very divergent in their quality and abilities. To get them to clear an exam and declare them as eligible to sell mutual funds is a necessary step, not a sufficient one. AMCs segment their distributors by asset size; investors have no basis for choosing from competing advisers and distributors. In a divergent market like India, it is not feasible to require distributors to align themselves to one grouping or other. There is a dire need for categorisation of services, clear labelling, written down code of conduct, ethics and professional behaviour, and periodic disclosures on parameters of professional excellence. This task is best done independent of the industry, preferably by the regulator, in the interest of investors. It should be possible for investors to assess and select their distributor based on clearly verified and disclosed proficiencies, performance and commitment to service standards. The reluctance of investors to pay is a symptom of a bigger problem. Most investors need help with their investments, but they do not know where to begin and whom to trust. Asking them to pay for vaguely defined services and performance might be too much to ask.

T

he upfront commission for selling mutual funds is all set to go. Enhancing revenue simply meant that distributors set themselves sales targets to push investor money in unsuitable products or churn it from one product to another. According to the regulatory direction that is now in place, distributors and advisers should earn their commissions from investors, not producers. The concern among distributors is that investors remain unwilling to pay. What lies ahead for distributors? What can be done to move to a regime where investors start paying? First, investing is not a felt need that spurs a buyer into immediate action. It lies in the same league of desirable, but poorly implemented, lifestyle changes. Like healthy diet, regular exercise and preventive care, everyone knows that it is important to save and invest for the future, but only a few devote time and resources for long-term benefit. Investment advice needs persuasion, motivation and coaching. The eager transition of the distribution community into advisers, financial planners and wealth managers comes from this understanding. Those who have built their practice into full-fledged advisory models that works with investors over longer time periods, have managed to charge for their services. Investors may be willing to pay for transformational services, not mere transactional services. Second, the pure distribution model of achieving a sales target has spurred a set of sharp practices. It is not uncommon for distributors to share their commissions with investors. The ‘payback’, as it is known, is an incentive passed on by the distributor to the investor, where both parties agree that they are in a simple buying transaction. There is no pretence of advice and relationship here. There are also distribution licences in the names of senior citizens, housewives, and other ‘passive’ family members, created to enhance commission income for the family. Investors are unwilling to pay for ‘professional fees’ to a distributor who had been doing what it takes to get mere sales numbers. Third, the low entry barriers to becoming a distributor of financial products have created a large mass that is poorly differentiated in quality. The identity of a distributor is usually linked to the ubiquitous insurance agent, who taps anyone with some income tax to pay. The simple pitch of saving taxes, compulsory saving, and a large, assured benefit is enough for most investors to sign on without making a payment for the service. A genuine multi-product distributor finds it tough to differentiate himself, his products, or his services. It takes time to establish a clientele, to protect them from predatory competition, and to establish oneself as working in the client’s interest. Most distributors are not confident enough to bring up the payment of a fee in this predatory environment. Fourth, distributors continue to

GETTYIMAGES

reasonable fee. Mutual funds are, by far, the pressurise producers to ‘find a way’ to pay only segment in financial services that is them. As the January deadline draws near, dominated by the private sector. Despite the mutual funds are huddled with their key tremendous operational efficiency, good distributors, trying to find out how to quality disclosures, and decent fund protect the latter’s incomes, without performance, mutual funds are viewed harming their own balance sheets and with suspicion associated with without running afoul of the regulator. private and foreign players. An The past 10 years of mutual fund endorsement of the industry’s distribution have been a story of Is this a good capability to manage a large distributors prospering at the time to raise corpus will come if all large cost of AMCs, and the former are stock holding? portfolios are handed over to not yet willing to let go. AMCs Page 13 mutual funds to manage. This continue to depend on includes pension, insurance, distributors, who continue to trusts, societies, endowments, prefer the easier route of getting treasuries and all other large pools of their income from the AMC than from money that need professional attention. investors. This umbilical cord has not This will achieve two objectives: one, been cut yet. enhance the professional stature of the If we truly care for a clean system that product as more information is available ensures the distributors serve their on how it works and delivers, and two, primary constituency, namely the investor, reduce the painful dependence on retail and that the investor acknowledges the funds for survival. Without a large pool value of the services and pays for it, what that provides the basic profit, mutual needs to be done? funds can never become the small First, the mutual fund industry needs investor’s product. Policy needs to see this acknowledgement and recognition as a economics with an open mind. professional manager of portfolios, at a

The author is Managing Director, Centre for Investment Education and Learning, and can be reached at uma.shashikant@ ciel.co.in

Learn & Keep

While the price to earnings (PE) ratio is used to evaluate stocks, it should not be considered in isolation. A company with a higher earnings growth and better operating performance would be justified in having a higher valuation.

A STOCK WITH LOWER PE IS BETTER THAN THE ONE WITH A HIGHER PE.

Some investors believe that a lowpriced stock is cheaper than the one trading at a higher price. The former may be costlier in terms of valuation if its profits are falling and there is poor revenue visibility.

A `25 SHARE IS CHEAPER THAN THE ONE TRADING AT `2,500.

Beware of these misconceptions that can interfere with your decisions.

V

E

S

Which stock has everyone else bought?

F

T

O

E N T

If the stock is trading at a considerable discount to its 52-week high, the price differential alone does not mean the stock is a bargain buy. There might be something wrong with the company, which is why its shares are being battered. Invest only if the company’s fundamentals are intact.

A STOCK TRADING AT A 52-WEEK LOW IS CHEAP.

These stocks are in the indices merely because they are the largest in terms of market capitalisation and are widely traded. Every stock is exposed to the same forces and sentiment that govern the broader markets.

INDEX-BASED STOCKS ARE SAFE INVESTMENTS.

N

C

Y

I

The herd starts turning bearish

T

C

The market has hit its absolute bottom.

I am a long-term investor.

As soon as the prices increase, I will sell.

Let’s average down further.

DON’T GET EMOTIONAL

INVEST IN WHAT YOU KNOW

LEARN FROM FAILURES

HAVE REALISTIC EXPECTATIONS

START WITH A SMALL AMOUNT

Graphics: ANOOP VERMA

Adapted from TRUSTABLEGOLD.COM

Don’t let greed, fear, excitement and frustration guide your decisions. Maintain a disciplined approach to investing.

Buy stocks in businesses that you understand. You should be familiar with the company and the sector dynamics.

As a novice, you are bound to make some mistakes. Don’t get discouraged. Instead, analyse what went wrong and learn from them.

Stocks can create wealth, but don’t expect to get rich overnight. You might earn muted returns till you get a hang of the markets.

Avoid investing large amounts in the beginning. Buy small quantities at regular intervals and try to get a feel of the market.

Follow this time-tested strategy while building your stock portfolio.,

STICK TO THE BASICS

I will never buy stocks again.

If a company is performing consistently well, its stock price may rise steadily. However, even a growing company may see its stock price fall if the market turns bearish. On the other hand, a company whose shares have been beaten down may never rise again, especially if it is poorly managed.

WHAT GOES DOWN IN THE MARKET MUST COME UP.

M

E T K M A R

MARKET TROUGH Lowest price, so it’s a good time to buy.

Most investors move in a direction opposite to that of the market cycle.

The investor sentiment wheel

MARKET PEAK Highest price, so it’s the best time to sell.

E S T O I N V R

CO NF ID EN CE S E

T

DON’T FALL FOR COMMON MYTHS

N

The herd starts turning bullish

C

L

E

HU T EN

SM SIA

EUPHORIA

I’ll increase my position at this bargain price.

PA NI C

Investors mostly have short memories, display herd behaviour and don’t like to adjust their own decisions made in the past.

Equity investors still haven’t learnt their lesson.

It’s still too early. i will watch the market.

M

OP T I M IS UNCERTAINTY

C

I got my stocks!

E

I’ll buy at the next market consolidation.

N

I missed the consolidation, so I have to get in now.

AGONY

DE

Y

The equity Th it market k t offers ff the th best b tb bett to t b beatt inflation, i fl ti but b t stock t k picking i ki can be b ttricky. i k H However, if you know k the th rules l off the th game and don’t let your emotions rule your decisions, you can build a profitable stock portfolio. Here’s how.

EMOTION

HOW INVESTORS LOSE OUT TO

The Economic Times Wealth, November 19-25, 2012

ION AT

PR E S SI O

I

UL IT

ST RE

M

E NT SI DI

E

N

L

IAL N DE

P CA

16

FEAR

18

Family Finances

The Economic Times Wealth, November 19-25, 2012

“Till now, I have been consulting friends while planning investments. Now I feel the need for professional advice for my goals.” DEO MISHRA

NET WORTH OF THE MISHRAs Asset

Current value (`)

Real estate

27 lakh

Equity MFs

3.04 lakh

Debt funds

1.8 lakh

FD

1.8 lakh

EPF

1.5 lakh

Cash

20,000

Total

35.34 lakh

Liabilities

Current value (`)

Home loan

23,781

Approximate net worth

S VARADHARAJAN

35.1lakh

Deo Mishra, with his wife Mamta and daughters Soumya and Shruti, in Chennai.

`

Mishras’ cash flow

Funds needed to achieve goals Goal

Inflow Deo `40,000

Total monthly income `40,000

Outflow Total monthly expenses `27,500

Household expenses

`15,200

EMIs

`8,000

`4,300

Further investment (`/month)

10 mths

1 lakh

Savings

4

4 lakh

Equity MFs, stocks

-

Shruti’s education

7

6 lakh

Insurance

-

Soumya’s marriage

8

8.5 lakh

-

Shruti’s marriage

10

9.5 lakh

-

Retirement

12

3.2 crore

Total A comprehensive plan has been mailed to the Mishras.

Resources used

Contingency fund

Cost of additional insurance (average)

`12,500*

Future cost (`)

Soumya’s education

Investible surplus needed

Investible surplus Insurance premium

Years to achieve

EPF, real estate

8,000

5,300 5,034 5,930** 18,334 1,356 19,690

Surplus * Surplus will rise to `20,500 after home laon ends in December 2012. **Investment for this goal will start after 10 months. Equity and debt are expected to give 14% and 7% annual returns, respectively. Inflation assumed to be 6%.

810

Family Finances

The Economic Times Wealth, November 19-25, 2012

19

Late start set to impact corpus for goals The Mishras need to realign their portfolio, with focus on equity, to make up for the lost time. EXPERT ADVICE EXISTING ASSET ALLOCATION

1% Cash

23% Equity

62% Real estate

14% Debt

PROPOSED ASSET ALLOCATION

2% Gold

15

% Equity

1% Cash

54% Real estate

28

% Debt

Proposed asset allocation to be achieved over time.

RECOMMENDATIONS EQUITY FUNDS Advice: HDFC Top 200, IDFC Premier Equity, DSP equities, BSL Dividend Yield Plus. Rationale: The Mishras do not have much time on their hands, so they must invest in well-performing equity funds. However, they must avoid sectoral funds at all cost.

SAKINA BABWANI

O

ne of the cornerstones of financial planning is to start early so that each goal gets adequate time for funding. If not, it becomes difficult to correct the anomalies and build a sufficient corpus. The Mishras exemplify the perils of a late start. They have five key goals, but little time on hand. Hence, Sumeet Vaid, CEO, Ffreedom Financial Planners, suggests they scale down the target amount for each goal to make them achievable. The good news is that their asset allocation is satisfactory and will need minor modification, which should not be too difficult for the Mishras. “Till now, I have consulted friends while planning my investments. Now, however, I feel the need for professional advice so that I can achieve the goals without stress,” says Mishra. Vaid has prepared a detailed plan for the family to help them fund their main goals of their daughters’ education and marriages, as well as planning for retirement. Deo Mishra, 46, lives with his 42-year-old wife, Mamta, and two daughters, Soumya, 15, and Shruti, 12, in Chennai. Employed as a government servant in the Defence Department, Mishra takes home a monthly salary of `40,000, while Mamta is a homemaker. The total monthly outflow is `27,500, of which `8,000 is incurred as EMI for a home loan that Mishra took in 2007. He had bought a house at Ambernath, Mumbai, for `3.8 lakh with this loan. They also have a property in Delhi worth `4 lakh. The loan will be settled in December this year and the freed sum of `8,000 can be directed towards investment of goals. So the current monthly surplus of `12,500 will rise to `20,500 from next month. However, before Mishra plans for the goals, he must ensure that his family is adequately protected. For this, he must buy life insurance and set up an emergency fund. Currently, Mishra has a combined life insurance of only `4.5 lakh from his three traditional plans and one Ulip, which is

MISHRAS’ GOOD MOVES ...

Investing in real estate at an early stage. Having a high rate of savings. … AND THE BAD ONES

Buying inadequate life insurance. Not maintaining a contingency fund. insufficient. Hence, he is advised to purchase a term plan of `50 lakh right away, which will cost `1,356 every month. Mishra must also build an emergency corpus of `1 lakh, for which he should allocate his current savings account balance of `20,000. To meet the shortfall of `80,000, Mishra must start a monthly SIP of `8,000 in ultra-short term debt funds for 10 months. Assuming a growth rate of 7%, the investment is likely to grow to `1 lakh in this period. Since he is employed by the central government, he and his family will be medically protected for life and, so, he does not need a health cover. Mishra can now focus on building a corpus for his daughters’ education. For Soumya, Mishra needs a fund of `4 lakh in four years. The original target was `12 lakh in two years, but since this cannot be achieved, Mishra has altered this goal and can allocate his fixed deposit of `1.8 lakh towards it. Mishra’s investment of `2.42 lakh in mutual funds can also be allocated towards this goal. As far as Shruti’s education is concerned, Mishra needs to amass about `7 lakh in seven years. His insurance plans will come in handy since his two endowment plans will fetch him `1.79 lakh and `2.62 lakh, when these mature in six and seven years, respectively. On the other hand, his Ulip will fetch `2 lakh when it matures in the next

three years. Another `71,000, which Mishra will receive in six years from the third insurance plan, can be added to the corpus. This will help achieve the set target. Once Mishra has planned for his children’s education, he can proceed towards building a corpus to fund their marriages. He has planned Soumya’s wedding in about eight years and this will require `8.5 lakh. For this goal, he needs to start a monthly SIP of `5,300 in equity mutual funds. Assuming a growth rate of 14%, the investment will grow to the desired corpus in the given time frame. Mutual fund investments worth `60,000 can also be allocated towards this goal. Shruti’s marriage will require a corpus of `9.5 lakh in 10 years, for which Mishra needs to start a monthly SIP of `5,034 in equity mutual funds. This investment is expected to grow to the desired corpus in the given time horizon. Mishra also needs to build a retirement kitty of `3.2 crore in 12 years, for which he can allocate his EPF and two properties at Ambernath and Delhi. After 12 years, his EPF is estimated to fetch him `33 lakh, while his properties are expected to be worth `53 lakh, assuming they grow at 10% annually. To make up for the shortfall, Mishra must start a monthly SIP of `5,930 in equity mutual funds. Assuming a growth rate of 14%, the investment will generate the desired corpus. However, at this juncture, Mishra doesn’t have sufficient surplus to invest for this goal. Hence, he is advised to push this objective by 10 months since his surplus will increase after this period. This will be due to a rise in his salary as well as the availability of `8,000, which is now being used to create the emergency fund.

Financial plan by Sumeet Vaid, CEO, Ffreedom Financial Planners Need help with your family finances? Write to us at [email protected]

20

Your Queries

The Economic Times Wealth, November 19-25, 2012

QUESTION OF THE WEEK

1

2

Q&A

3

4

6

5

PANEL MEMBERS 1. Taxation Vaibhav Sankla, Director, H&R Block

2. Mutual Funds Dhirendra Kumar, CEO, Value Research

3. Insurance Pankaj Mathpal, CFP, Managing Director, Optima Money Managers

4. Banking VN Kulkarni, Chief Counsellor, Abhay Credit Counselling Centre

5. Real Estate (Legal) Dhiraj D Jain, Partner (Real Estate), SNG & Partners

6. Real Estate Gulam Zia, Executive Director, Retail &Hospitality, Research & Advisory Services, Knight Frank India

ET Wealth brings the collective wisdom of six investing experts to help answer readers’ queries on issues related to personal finance.

TAXATION I live with my parents in their house. I have an HRA component in my salary and this comprises taxable income. Can I claim tax deduction for this amount? - M Macha

The income tax law does not prohibit you from paying rent to your parents. If you are actually doing this, you are eligible to claim HRA exemption. It is also advisable to enter into a formal agreement with your parents and pay the rent through cheques. Can the employer invest up to 10% of the basic salary in the New Pension Scheme (NPS) on behalf of the employee even if the latter does not invest in it? Can the employee claim deduction under Section 80 CCD(2) only for the employer’s contribution? - B Thomas

Yes, the employer can invest up to 10% of the basic salary of an employee in his NPS account without the employee having to make a contribution. Also, the employee can claim deduction under Section 80CCD(2) for the employer’s contribution to his NPS account. The deduction is restricted to 10% of the basic salary (plus dearness allowance, wherever applicable). This is in addition to the deduction of up to `1 lakh, which can be claimed under Sections 80C, 80CCC and 80CCD(1). If I want to save tax, should I invest in ELSS, Ulips, fixed deposits or some other product? I am looking at a 15-20% return, and security with a minimum lock-in period. - PK Antony

Investing to save tax is a good start, but you should align the tax-saving benefits with your financial goals. There are several products in which investments of up to `1 lakh in a financial year qualify for tax deduction under Section 80C. For this, you can consider tax-planning funds, insurance premium, Ulips, PPF, NSC, bank fixed deposits and pension plans. The lock-in period and assured or market-linked returns vary for each of these products. For instance the PPF, NSC and bank fixed deposits provide guaranteed returns,

whereas Ulips and tax-planning funds offer market-linked returns. None of these instruments guarantees a 15-20% return that you are expecting. If you are looking for guaranteed returns with the shortest lock-in period, a five-year bank fixed deposit is the ideal investment option for you to save tax. If you can stomach a little risk, the three-year lock-in period in case of tax-planning funds can suit your requirements. Depending on your comfort level, you can select any of these products to invest and save taxes.

INSURANCE I bought three Ulips in 2009 for an annual premium of `1 lakh as an investment for the higher education of my grandchildren. However, they did not show any capital appreciation at the end of three years. So I decided not to contribute to these and switched over to flexi/multi-cap options. Despite the switchover, the value of each is about `3.5 lakh after a period of five-and-a-half years. Should I continue with these funds or quit investing in them? Please advise. - P Vishwanathan

When you invest in unit-linked insurance plans, or Ulips, a part of the premium is deducted to meet the various charges in the policy and the balance premium is invested in the funds opted by you under the plan. The returns depend on the performance of the underlying asset in the fund portfolio. An investment period of three years is too short to evaluate the performance of Ulips. Considering that you have bought these policies for the higher education of your grandchildren, I recommend that you park all the units in the appropriate fund available under the plan based on your risk appetite and remain invested for the long term. I am 23 years old and want to buy a term insurance of about `50 lakh. Could you suggest the factors I should consider before selecting the policy? I checked online for the best quotes and got the cheapest ones from Aviva. Is it a good company to buy life insurance policy -

from? Should I also check the claims ratio of insurers before selecting the policy? - F D’Souza

It will be better to buy an online term policy as it will be cheaper than purchasing it through an agent. Remember that insurance is a contract based on the principle of utmost good faith. So if you provide correct information in the proposal form and disclose all material facts concerning your health, occupation and family history, you will not have to worry about claim settlement since all insurance companies settle genuine claims. You should also not be concerned about the credibility of Aviva, and if you have found its premium to be the lowest, go ahead and buy the policy.

REAL ESTATE I have paid 40% of the total cost of a resale flat to its owner after an agreement on a non-judicial paper. The flat owner has given me a photocopy of the agreement between the promoter and her at the time of occupying the flat, but not the registered sale deed. She will give me the same after completing the registration. She has also given me a photocopy of the plan of the building. This flat is in a village panchayat area. Could you inform me about the other documents that I should check before the sale deed registration? - D Chaudhari

You must check the registered copy of the sale deed in favour of the seller and the previous chain of registered sale deeds/ agreements from the first owner to the seller. Also make sure to check the share certificate duly endorsed in favour of the seller in case there is a society, besides a copy of occupation certificate/building completion certificate and latest property tax receipts. It is advisable to inspect the above mentioned original title deeds before the purchase of the property.

BANKING & FINANCE I deposited a cheque on 31 August 2012 through my bank’s ATM, but it was credited

I have a Ulip with a cover of `4 lakh, for which I pay a premium of `20,000 per annum. I paid three premiums, but was unable to pay the last one as I was not well. I received a letter from the company stating that the policy had lapsed. What should I do to revive it? If I surrender the policy, what will be my loss? - Sunil Kumar

The premium payment for life insurance policies should not be stopped, more so if you are ill. If you were not able to pay the premium, you should have opted for a premium holiday and cover continuance option. Under this, you would have been covered even if you had not paid the premiums. Now, you can revive your policy by paying the due premium, besides fulfilling the revival formalities of your insurance company. However, if you decide to surrender the policy, you will get the current fund value after the deduction of surrender charges under the policy.

to my account on 13 September. I deposited another cheque on 30 September and it was credited on 13 October. What can I do about these delays? - Pallavi Nair

When you deposit a cheque, typically you get an acknowledgement. This serves as proof of having deposited the cheque on a particular day. Banks are supposed to clear these from ATMs and send them to the clearing house through their designated branches. You can bring this to the notice of the bank’s nodal officer and claim interest for the delayed period. We had taken a `15 lakh mortgage loan from Citi Finance against our property worth around `70 lakh. Our EMI is `25,000. We have a delayed track record of payment. Our source of income is rent and business and we have not filed our income tax returns for the past three years. Now, we are considering a top-up loan of `10 lakh. We need the funds immediately to scale up our business and diversify. Is there a possibility of getting a loan with a Cibil rating of 836? - N Kumar

The company that has financed you has adequate security. Any lender first considers the repayment capacity of the borrower and track record so that the account does not have to be classified as a non-performing asset. If you have paid the instalments on time, there should not be any problem in getting the top-up loan considering your credit score. If you are liable to pay tax, you must file the returns. This will help you get a loan at a future date as it is one of the requirements of the lenders.

Ask Experts Have a question for our experts? Post it at [email protected]

Commodities

21

The Economic Times Wealth, November 19-25, 2012

Upbeat on mustard seed in the short term Though short-term fundamentals remain supportive for the upside, higher sowing expectations may cap sharp gains. the Canadian mustard oil production is exported globally, making it the world’s largest exporter. In India and China, rapeseed oil is usually produced to meet the domestic demand. In India, mustard seed is the third largest produced oilseed after soybean and groundnut. It has a negligible trade in mustard seed and oil, and so the prices are influenced mainly by domestic fundamentals rather than global factors. However, India has a high trade in mustard meal exports and is the second largest oil meal exported after soy meal. In India, mustard seed is grown as a rabi crop, which is sowed during October-December and the harvesting begins from February onwards. The largest mustard seed producing states in India are Rajasthan (45%), Haryana (13%), Madhya Pradesh (13%) and Uttar Pradesh (11%). The domestic mustard seed production has witnessed a huge fluctuation and marginal growth in the past two decades. In fact, there was a fall in production from 5.8 mn tonne to 3.9 mn tonne during 1991-2002, but shot up drastically to a record 8.8 mn tonne in 2010-11. In the past two years, the government has hiked the MSP of oilseeds, along with that of mustard seed, to boost production and reduce the dependency on import. From `1,800 per quintal in 2010-11, the government raised the support price to `2,500 per quintal in 2011-12. However, unfavourable weather conditions during November-December 2011 not only hampered planting but

NAVEEN MATHUR

M

ustard seed is the second largest produced oilseed in the world and is the third leading source of edible oil after palm and soy oils. Mustard seed yields around 38% oil, while the remaining 62% is converted into cake, which is used as cattle feed. Being an important source of edible oil and protein meal, the world production of mustard seed has grown at a significant pace. The global mustard seed production has grown at 4.08% CAGR in the past two decades and is currently 60.55 million tonne (201112). However, it has undergone a momentous shift with respect to countrywise contribution. During the 1990s, China and India accounted for over 28% and 21% share, respectively, followed by Canada’s 13%. With spectacular growth in Canadian production at 7.01% CAGR in the past two decades, it is now the world’s largest producer with a share of 24%. Meanwhile, China and India have witnessed marginal growth and now have around 21% and 11% share in the world production. The global consumption of mustard seed has grown at 4.13% CAGR in the past two decades and is currently 63.37 mn tonne (201112). China is the largest consumer, accounting for a 26% share in global consumption, followed by Canada and India, with 11% each. With respect to the consumption of mustard oil, Canada accounts for only 3% share. In fact, 85% of

also affected the mustard seed yield. The drop in area under mustard seed cultivation by 7% to 6.69 mn hectares and yield by 10% has resulted in a drop in output by 17% to 6.7 mn tonne in 2011-12. Accordingly, the upside rally in mustard seed prices that started in November 2011 continued till February 2012, when the prices witnessed a correction due to the start of harvesting. The correction was shortlived and the prices touched a new high of `4,489 per quintal in August 2012. The revival of monsoon in August and better prospects for 2012-13 sowing have led to a significant decline in prices since September. The sowing for the new season has begun and is expected to be higher as lucrative returns and hike in MSP will make farmers opt for the crop. The government has declared a `500 per quintal hike in MSP to `3,000 for the coming season and has targeted a record 8.9 mn tonne output for 2012-13. The prices are expected to remain in the positive territory as supply tightness will continue to push up prices till fresh arrivals begin in February. Also, the winter season demand will keep the sentiment upbeat for mustard seed in the domestic market. However, if the sowing increases significantly, the crop’s prospects for next season will improve and may cap a sharp upside in prices.

The writer is Associate Director, Commodities & Currencies, Angel Broking

Commodity update Change (%)

Commodities

Unit

Price (`)

1-week

1-year

`/kg

143

0.0

9.6

METALS Aluminium Copper

`/kg

438

-0.7

9.5

`/10 g

31,900

2.2

11.3

Nickel

`/kg

1,027

0.5

-4.5

Silver

`/kg

62,365

3.4

12.0

Zinc

`/kg

147

0.7

15.3

Gold

FOOD PRODUCTS Chilli

`/100 kg

7,500

1.4

-8.5

Turmeric

`/100 kg

9,500

3.3

1.1

`/kg

715

0.0

-14.9

Rajma

`/100 kg

9,200

-5.2

49.6

Potato

`/50 kg

500

0.0

42.9

Maize

`/100 kg

1,900

0.0

5.6

Sugar

`/100 kg

3,800

-1.3

11.0

Refined soy oil

`/100 kg

6,950

-0.7

6.1

Wheat

`/100 kg

1,635

-0.9

32.9

`/BBL

4,677

2.1

-6.7

Cardamom

ENERGY Crude oil Natural gas

`/mmBtu*

190

-1.9

10.1

OTHERS Lead

`/kg

138

0.0

3.8

Rubber

`/kg

170

-1.2

-8.1

`/100 kg

7,800

1.3

-19.6

Castor oil

Prices are rounded off. Data as on 15 November; *mmBtu = 1 million British thermal unit. Source: ETIG Database

Mustard seed futures: monthly average prices

Production, yield of mustard in India 1,300

10 8.9

8.8

9

1,200

8.1 8

7.6

7.4

6.3 6

7.0

1,100

5.1 4.2

{

Mustard seed prices are mainly influenced by the domestic demand-supply fundamentals. So keep track of sowing progress and weather conditions as these have a major impact on fundamentals and, hence, on prices. Also takes cues from prices of other oilseeds like soybean.

3,918

4,000 3,458 3,500

1,050 1,000

5 4

6.6 5.8

4,153

1,150

7.2

7

TIPS

4,392

4,500

1,250

FOR FIRST-TIME INVESTORS

3,112 3,000

}

950 900

3.9

TRADING STRATEGIES

2,500

850 3 2000-1 Production (mn tn)

Yield (kg/ha)

800 2012-13* *Output target for 2012-13 Source: Ministry of Agriculture

2,000 Jan 2011

Nov 2012 Prices are till 10 Nov 2012; Source: Reuters

NCDEX Mustard seed December contract is trading at around `4,292 per quintal and is expected to trade in the range of `4,170-4,420 per quintal in the short term.

22

Investing

The Economic Times Wealth, November 19-25, 2012

HOW REFORMS AFFECT YOUR INVESTMENTS As the winter session of Parliament starts this week, reforms will be back on the agenda. Their pace not only affects the economy but also your investments. Keep track of the past reforms and the ones to look out for.

Govt monopoly cut from 18 to 3 sectors. MRTP abolished. Licensing requirements eased. Import duties slashed.

Equity FIIs & private MFs allowed.

Direct taxes slashed.

Import licences for capital goods gone.

Ad hoc T-bills abolished.

Electricity Act.

Deepening of debt markets.

Airport modernisation.

FIPB decisions made time-bound.

Capital a/c opened. 7 PSUs privatised.

Debt swap for state governments.

FDI limits relaxed.

Govt staff reduction started.

PFRDA set up. NPS launched.

New telecom policy. NELP launched. Irda set up.

VDIS introduced.

New law for banks to recover loans.

Import duties cut 5pp.

FRBM passed.

Import quotas removed for consumer goods.

Currency on managed float.

VAT law. VAT effective. NHDP III launched.

Excise cut 1pp.

Unique ID Authority set up.

JNNURM launched.

Securitisation allowed.

Competition Commission set up.

Excise duty cut.

Import, excise duties cut.

Excise cut 50bps.

Customs, excise rates cut.

14 SSI dereserved.

Import duties cut.

Import duties cut 7pp.

79 items dereserved for SSI.

Money laundering bill passed.

1991

1993

1997

1999

2001

2003

2005

2007

2009

How reforms have kept pace with time and their impact on the market While the GDP growth accelerated from an average of 5.6% in the 1980s to 6% in the 1990s and then 8% in the 2000s, the market too responded positively to reform measures.

1991

1992

1993

1994

1995

1996

1997

The US housing market meltdown led to a global slump in consumer spending and industrial production. Foreign firms withdrew investments from Asia to repay debts back home.

The 9/11 terrorist attack in the US and slowdown in Japan & western Europe affected the market.

1998

1999

1992

1994

1996

1998

Positive list for import licences.

CCI abolished.

IDFC established.

Bank reforms.

Dual currency rate abolished.

Insurance regulator (interim) set up.

Currency: FEMA replaced FERA.

2000

2001

2002

2003

2005

2006

2007

2008

2009

2010

2011

2012*

2002

2004

2006

2010

Currency flow eased.

Tariff rationalistion by railways.

NTPC privatised.

Bids invited for five UMPPs.

Divestment restarted.

NHDP capex `540 bn.

Further decontrol of agriculture.

FII debt limits raised.

Habitations >2K to get banks.

Rural roads/electrification launched.

APM dismantled.

Excise cut 1 pp.

SERC/CERC for power tariffs.

Civil nuclear liability bill passed.

NSE set up.

Tax net widened, filing simplified.

Dept. of disinvestment set up.

Direct taxes simplified.

Cess on fuel to fund NHAI.

SEZ policy announced.

SEBs recapitalised; APDRP launched.

SLR cut from 38.5% to 30%. Import duties cut. Excise cut 1pp. Sebi got statutory powers.

Service tax introduced.

FDI limits relaxed.

SLR target of 25% by 1996-97.

Direct tax cut.

Corp tax cut.

LEGISLATIVE REFORMS Here are the amendments likely in the following four bills and what they will entail, if approved.

1. 2. 3. 4.

Recovery of Debts (Amendment) Bill Amends existing Acts (SARFAESI 2002, recovery of debts 1993) to help recover bad loans. Allows conversion of any part of debt into borrower’s shares, accepts immovable property if there’s no buyer for assets. Harder for borrower to get a stay.

Forward Contracts (Amendment) Bill Confers statutory powers on the Forward Markets Commission. Allows use of options, institutional participation in commodity markets. To help deepen market, reduce hedging cost.

Banking Laws (Amendment) Bill Strengthens regulatory powers of the RBI. New banking licences held up till the bill is approved. Eases capital raising for banks.

Insurance Laws (Amendment) Bill Seeks to amend three laws. Changes capital raising norms, allows 49% FDI from 26%. A few billion dollars of FDI for 2-3 years; jobs if the insurance industry does start growing again.

Stock futures approved.

2000

2004

European debt crisis and concerns over the US economic growth impacted markets across US, Middle East, Europe and Asia.

WHAT TO WATCH OUT FOR

What could pull down the markets Page 13

Import duties cut 3 pp.

SARFAESI Act passed.

{ } The reforms can be broadly divided into legislative, which need Parliament’s approval, and administrative, which don’t. Here are the ones to keep track of this season.

Service tax net widened.

Excise cut 1 pp. 193 items dereserved for SSI.

392 items dereserved for SSI.

ADMINISTRATIVE REFORMS Find out how these changes will be positive for the capital markets, retail investors, and power producers.

1. 2. 3. 4.

Disinvestment Budget target of 300 billion targeted through MMTC, NMDC, Nalco, NLC, Hind Copper, NALCO, SAIL, RINL, BHEL, OIL. Primary issuances positive for capital markets.

ETFs for state-run firms Creating an alternate route for disinvestment. To help the government sell stake in illiquid companies. It can result in diversification benefit for retail investors and low-cost access.

SEB restructuring State governments take over 50% of SEB ST loans and lenders restructure the rest if SEBs take adequate tariff hikes and reduce T&C losses. Will be positive for power producers and result in lower stress for banks.

Banking licences Issuance of new banking licences after a decade. New private banks have better NPAs and RoA; economy under-banked. It will have huge latent potential. Source: Credit Suisse

In This Section

smart stats ET WEALTH TOP 100 STOCKS Every week we put about 3,000 stocks through four key filters and rate them on a mix of factors. The end result of this exercise is the listing of the top 100 stocks based on the composite rating to help ease your fortune hunt.

25 ETW Funds 100 27 Insurance ranking Loans and deposits 28

Fast Growing Stocks Top 5 stocks with the highest expected revenue growth (in %). Kansai Nerolac Paints

129

Jaiprakash Power

126

Cox & Kings RANK Current Rank

GROWTH%

PRICE ` Previous Rank

Stock Price

Revenue

Net Profit

VALUATION RATIOS EPS

PE

PB

Div Yield

PEG

RISK Downside Risk

Prestige Estates

108

Oberoi Realty

105

RATING Bear Beta

118

No. of Consensus Analysts Rating

See revenue column in the adjacent table.

Gateway Distriparks

1

1

139.00

74.04

67.35

66.03

11.44

2.02

7.22

0.17

1.07

0.58

19

4.53

Orient Paper & Industrie

2

2

78.50

81.30

47.27

43.89

7.34

1.47

2.54

0.17

1.25

0.73

13

4.77

Least Expensive Stocks

Arshiya International

3

3

121.10

57.37

57.81

53.44

5.98

0.83

1.14

0.11

1.55

0.89

7

4.71

The 5 stocks with the lowest forward PE.

Dalmia Bharat Enterprise

4

5

160.70

21.10

87.44

97.41

9.05

0.45

0.94

0.09

1.66

0.41

6

5.00

Gujarat Inds Power

5

4

68.00

19.92

40.44

46.44

8.66

0.71

3.68

0.19

1.11

0.74

10

4.50

Indian Oil Corp

6

6

258.00

14.71

76.64

79.63

14.86

1.04

1.93

0.19

1.02

0.26

38

3.66

Alok Industries Vardhman Textiles Jubilant Life Sciences

7 8 9

7 14 8

11.45 243.00 211.40

28.20 17.75 30.74

496.79 108.23 3185.48

485.49 109.69 3147.59

10.03 10.84 233.60

0.33 0.69 1.46

2.59 1.82 1.39

0.02 0.10 0.07

1.77 1.43 1.36

0.88 0.92 0.52

5 7 17

JBF Industries

4.27

Arvind

5.16

Deepak Fertilizers

5.44

4.57

Ratnamani Metals & Tubes

5.54

4.24

Infinite Computer

3.40

5.86

See PE column in the adjacent table.

HPCL

10

11

295.00

8.89

632.76

616.17

57.42

0.76

2.87

0.09

1.43

0.52

46

Mangalam Cement

11

NR

185.05

29.19

60.08

61.11

9.11

1.18

3.22

0.15

1.48

1.16

8

3.70 4.13

Greenply Industries

12

10

293.00

33.61

103.99

103.94

12.45

1.95

0.69

0.12

1.37

0.45

6

5.00

United Phosphorus

13

17

112.95

21.32

37.55

41.28

9.41

1.25

2.29

0.23

1.57

0.56

25

4.60

Balkrishna Industries

14

12

258.85

42.43

41.00

41.04

9.32

2.26

0.57

0.23

1.34

0.14

19

4.79

Cairn India

15

15

331.30

60.01

27.69

27.35

8.00

1.32

1.48

0.29

1.42

1.10

56

4.09

Oberoi Realty

16

9

283.70

105.05

75.03

76.22

20.78

2.58

0.68

0.27

1.36

0.55

31

4.42

Persistent Systems

17

18

479.95

36.41

40.91

34.06

12.94

2.28

1.25

0.38

1.09

0.20

37

4.51

Cox & Kings

18

21

138.60

118.02

745.67

858.70

46.33

1.62

0.70

0.05

1.81

1.56

16

4.50

Motherson Sumi

19

20

163.45

85.98

164.63

170.70

37.11

5.07

0.93

0.22

1.31

0.72

22

4.68

HSIL

20

16

125.05

34.36

32.74

32.81

8.98

0.87

2.41

0.27

1.81

1.10

11

4.91

PVR

21

19

237.20

50.52

99.47

87.18

25.00

2.17

0.84

0.29

1.41

0.30

12

4.67

Ballarpur Industries

22

22

22.10

9.66

71.04

56.89

11.89

0.37

2.70

0.21

1.39

0.97

5

4.80

HEG

23

25

230.05

31.61

243.43

240.57

15.14

1.09

2.15

0.06

1.34

0.62

5

2.80

Elder Pharmaceuticals

24

NR

328.00

26.17

45.26

45.12

9.28

0.96

0.92

0.21

1.11

0.01

5

4.60

EID Parry India

25

23

232.80

11.33

65.18

64.78

12.93

1.67

1.73

0.20

1.12

0.49

8

4.75

Income Generators

CESC

26

24

279.75

22.43

72.13

62.15

14.39

0.73

1.80

0.23

1.91

1.19

33

4.09

Top 5 stocks with the highest dividend yield.

Best PEGs Top 5 stocks with the least price earning to growth ratio. Jubilant Life Sciences

Cox & Kings

0.05

0.07 0.02

Alok Industries

0.06

0.08

HEG

Chennai Petroleum

See PEG column in the adjacent table.

Infotech Enterprises

27

27

198.95

32.25

52.53

52.12

13.25

1.85

1.31

0.25

1.35

0.56

15

4.40

Graphite India

28

33

87.50

26.95

19.39

19.29

8.09

1.04

4.12

0.42

0.81

0.24

8

4.63

Prestige Estates

29

26

155.45

107.79

412.35

415.60

59.71

2.45

0.75

0.14

1.95

1.16

24

4.54

Pratibha Industries

30

28

50.05

44.38

30.72

26.90

6.30

0.94

1.17

0.23

2.07

1.69

16

4.88

J Kumar Infraprojects

31

36

222.00

52.28

34.31

34.41

9.11

1.41

1.00

0.26

1.24

0.50

6

4.50

Deepak Fertilizers | 4.23

Power Grid Corp

32

29

119.10

37.48

32.47

32.31

16.74

2.34

1.76

0.52

0.96

0.74

47

4.40

Graphite India | 4.12

Hexaware Techno

33

34

105.05

51.21

38.42

36.38

11.72

3.09

5.36

0.32

1.64

1.14

28

4.04

JBF Industries

34

13

130.05

10.77

44.87

35.96

4.27

0.59

5.97

0.12

1.19

0.46

7

3.14

Apollo Tyres

35

32

80.20

19.14

64.37

62.78

10.02

1.45

0.61

0.16

1.70

1.29

38

4.18

BPCL

36

39

329.05

5.76

99.09

114.42

30.37

1.49

1.66

0.27

1.25

0.75

46

4.00

CMC

37

35

1120.30

42.83

72.82

72.80

22.58

4.44

1.11

0.31

1.12

0.23

10

4.40

Ipca Laboratories

38

31

426.95

32.27

55.07

55.06

19.45

4.27

0.98

0.35

1.42

0.35

34

4.74 4.33

NIIT Technologies

39

37

278.00

34.99

22.06

21.13

8.41

1.81

2.95

0.40

1.50

0.79

27

Sobha Developers

40

38

364.90

47.26

40.13

39.85

17.62

1.81

1.35

0.44

1.72

0.15

32

4.13

Chambal Fertilizers

41

NR

66.00

3.21

127.29

127.30

17.25

1.60

2.88

0.14

1.55

1.33

14

3.93

Chennai Petroleum

42

42

130.00

10.33

328.98

394.38

31.25

0.51

1.56

0.08

0.99

0.52

7

3.14

KSK Energy Ventures

43

57

58.65

58.51

126.31

146.07

18.24

0.75

0.00

0.12

2.07

1.73

7

4.14

Jindal Saw

44

30

118.60

26.55

148.06

145.20

17.82

0.91

0.82

0.12

1.34

0.82

12

2.92

Essar Ports

45

47

94.05

49.09

377.89

203.06

63.38

1.84

0.52

0.31

1.82

1.39

12

4.83

G E Shipping Co

46

46

256.90

10.08

56.07

56.38

12.36

0.65

2.55

0.22

1.37

0.96

7

3.86

JK Cement

47

44

308.05

5.15

49.73

56.55

12.94

1.48

1.56

0.23

1.87

0.60

8

5.00

KPIT Cummins Info

48

43

122.90

60.21

56.87

53.77

15.05

3.08

0.56

0.28

1.80

1.24

26

4.35

MindTree

49

45

670.75

30.36

48.49

42.33

12.72

2.87

0.66

0.30

1.22

0.72

41

3.90

Kansai Nerolac Paints

50

41

1003.50

129.23

156.96

157.03

52.44

8.13

1.08

0.33

0.80

0.18

11

3.64

Mangalore Refinery

51

58

62.70

13.82

55.27

85.14

12.41

1.56

1.58

0.15

1.56

1.12

11

4.09

Shree Cement

52

62

4197.30

32.39

249.84

250.98

54.76

7.36

0.49

0.22

1.15

0.47

41

3.95

Geometric

53

40

106.75

37.97

63.24

62.52

11.79

3.74

1.58

0.19

2.06

1.37

5

4.40

Ajanta Pharma

54

52

365.65

38.92

50.46

50.82

11.00

2.85

1.04

0.22

1.69

0.48

7

4.00

Dishman Pharma

55

51

112.75

25.01

95.40

92.70

16.46

1.00

1.02

0.18

1.97

1.74

19

3.63

GMDC

56

50

210.05

31.71

42.51

43.00

13.86

3.30

1.42

0.32

1.24

0.92

10

4.80 4.20

HeidelbergCement

57

49

51.00

73.98

230.73

230.17

40.59

1.45

0.00

0.18

1.77

0.69

5

Sterlite Industries

58

NR

97.25

12.14

27.26

27.37

6.84

0.72

2.13

0.25

1.82

1.34

43

3.91

Lupin

59

54

575.00

41.30

52.53

52.96

29.69

6.42

0.55

0.56

1.12

0.13

60

4.18

JSW Steel

60

60

731.10

18.78

262.33

276.96

30.81

1.01

1.02

0.11

1.98

1.91

51

3.06

Simplex Infrastructures

61

53

191.75

22.40

47.30

47.08

11.47

0.80

1.02

0.24

1.75

0.78

21

3.67

Gateway Distriparks | 7.22 JBF Industries | 5.97 Hexaware Technology | 5.36

Dividend stocks are considered safe stocks during a downturn. Figures indicate what an investor can earn as dividend for every `100 invested.

See dividend yield column in the adjacent table.

24

Smart Stats

The Economic Times Wealth, November 19-25, 2012

RANK

GROWTH%

PRICE ` Previous Rank

Current Rank

Stock Price

Revenue

VALUATION RATIOS

Net Profit

EPS

PE

PB

Div Yield

RISK

RATING

PEG

Downside Risk

Bear Beta

Least Risky

No. of Consensus Analysts Rating

Top 5 stocks with the lowest downside risk. Jaiprakash Power

62

55

36.90

126.45

79.18

87.80

24.73

1.82

0.00

0.28

1.68

1.00

15

4.07

PI Industries

63

63

521.00

46.17

30.18

29.90

12.17

3.89

1.19

0.41

1.72

0.27

11

4.91

GlaxoSmithKline Pharma

Ashoka Buildcon

64

59

203.30

49.69

28.42

27.09

8.66

1.05

0.00

0.32

1.43

0.90

10

4.60

0.71

IL&FS Transportation

65

56

186.40

25.88

14.40

14.72

7.40

1.33

2.13

0.50

1.39

0.93

26

4.50

Infinite Computer

66

61

162.20

37.32

21.88

20.73

5.86

1.38

2.77

0.28

1.85

1.06

7

4.00

GlaxoSmithKline Consumer

0.87

India Cements

67

69

86.15

14.80

25.36

25.50

9.92

0.68

2.32

0.39

1.90

1.45

41

4.05

Solar Industries

68

NR

955.00

37.64

44.30

39.86

16.56

4.14

1.03

0.42

0.93

0.45

5

4.60

0.80

JSW Energy

69

65

60.95

40.68

423.47

423.43

59.75

1.78

0.81

0.14

2.08

1.75

28

2.50

Jaiprakash Associates

70

68

90.95

32.97

101.97

99.84

31.25

1.72

0.55

0.31

2.27

2.04

33

4.12

Solar Industries

Mahindra & Mahindra

71

73

894.45

29.70

33.98

31.86

16.83

3.14

1.39

0.53

1.21

1.06

60

4.15

0.93

Kalpataru Power

72

72

83.25

31.67

2.62

10.94

6.95

0.71

1.77

0.64

1.56

0.93

19

4.58

Kajaria Ceramics

73

66

237.00

37.49

60.98

61.64

21.38

6.13

1.09

0.35

1.33

0.95

10

4.50

Oil India

74

75

465.55

17.19

5.79

7.18

8.14

1.59

4.08

1.13

0.95

0.45

46

4.26

Deepak Fertilizers

75

84

128.65

14.77

5.62

8.69

5.44

0.95

4.23

0.63

1.16

0.81

11

4.64

Amara Raja Batteries

76

85

252.40

34.58

49.57

48.70

20.17

5.27

0.74

0.41

1.35

0.83

17

4.59

TVS Motor Co

77

71

38.10

12.24

34.11

60.11

13.77

2.51

3.38

0.23

1.62

1.61

40

3.30

NCC India

78

48

43.30

12.32

68.86

68.79

20.47

0.41

0.68

0.30

2.69

1.55

33

3.97

McLeod Russel

79

77

314.65

23.46

25.49

27.11

12.17

2.01

1.89

0.45

1.54

0.54

13

4.54

Eros International Media

80

76

165.20

39.52

28.65

32.31

10.19

1.81

0.00

0.32

1.45

1.12

8

4.88

GlaxoSmithKline Consumer

81

88

3026.20

33.62

42.89

43.15

35.87

11.14

1.17

0.83

0.87

0.27

31

4.55

Ratnamani Metals & Tubes

82

80

132.00

14.76

8.22

15.70

5.54

1.16

2.26

0.35

1.36

0.55

6

4.83

Hindustan Zinc

83

89

135.00

15.07

18.08

18.30

10.28

2.11

1.88

0.56

1.35

0.57

49

4.31

Grasim Industries

84

97

3179.65

19.73

19.35

18.36

11.15

1.73

0.70

0.61

1.01

0.56

37

4.65

Kansai Nerolac Paints

Graphite India

0.81 See downside risk and bear beta columns in the adjacent table.

What is Hot Stocks whose analyst rating improved in one week.

0.33 Natco Pharma 0.25 Graphite India 0.08 Dishman Pharma 0.07 Vardhman Textiles 0.06 CESC

HCL Technologies

85

81

607.75

22.67

32.82

31.15

17.55

4.34

1.61

0.56

1.10

1.02

67

4.15

GlaxoSmithKline Pharma

86

82

1995.05

24.12

78.50

78.20

39.54

8.75

2.28

0.51

0.71

0.33

29

2.83

Century Textiles

87

86

394.00

27.46

688.93

687.97

167.76

1.96

1.42

0.24

1.83

1.79

7

4.00

Maruti Suzuki

88

90

1438.10

35.52

48.34

46.41

25.01

2.68

0.51

0.54

1.42

0.69

63

3.60

PTC India

89

99

70.55

44.33

14.21

13.04

10.46

0.85

2.10

0.80

1.86

1.86

21

4.24

What is Not

Glenmark Pharmaceuticals

90

91

433.10

30.89

47.81

47.62

25.96

4.98

0.45

0.55

1.33

0.56

39

4.44

Aditya Birla Nuvo

91

70

967.10

19.00

45.86

36.86

12.39

1.47

0.62

0.34

1.32

0.87

8

4.50

Stocks that have gone down in analyst rating in one week.

Exide Industries

92

96

138.95

32.84

49.86

53.92

26.25

4.36

1.17

0.49

1.38

0.30

39

3.00

Cipla/India

93

98

379.55

29.47

40.60

40.64

26.95

4.04

0.51

0.66

1.01

0.35

52

4.13

IRB Infrastructure

94

92

123.25

32.58

6.74

7.00

8.56

1.49

2.98

1.22

2.66

1.69

42

4.64

Cadila Healthcare

95

93

819.20

37.51

35.90

35.85

25.92

6.57

0.91

0.72

1.20

0.19

52

4.04

Ambuja Cements

96

NR

202.80

30.15

45.00

43.41

25.62

3.91

1.54

0.59

1.29

0.75

59

3.14

Natco Pharma

97

NR

405.20

35.26

59.87

59.86

20.08

2.72

0.74

0.34

1.46

1.07

6

4.33

Arvind

98

94

85.50

17.47

26.86

26.82

5.16

1.09

1.15

0.19

2.12

1.61

7

4.57

Adani Ports and SEZ

99

NR

127.35

57.63

41.00

40.43

23.80

5.43

0.76

0.59

1.84

1.13

33

4.58

Godrej Properties

100

100

632.65

84.32

120.91

85.25

46.05

3.49

0.47

0.54

1.02

0.56

22

2.32

Figures show improvement in rating on a scale of 0-5.

Infinite Computer -0.57 Mangalam Cement -0.50 Aditya Birla Nuvo -0.25 J Kumar Infraprojects -0.17 Jindal Saw -0.17 Figures show dip in rating on a scale of 0-5.

NR: Not in the ranking. Data as on 16 November 2012. Source: Bloomberg

METHODOLOGY The four filters used to arrive at the Top 100 stocks Only traded stocks: Of the about 7,000 listed stocks, only actively traded stocks were considered. Only big stocks: Companies with a market capitalisation below `500 crore were dropped. However, if a company had a market cap higher than this, but its annual revenue was lower than `500, it was not considered. Only well tracked: We picked stocks that are tracked by at least five analysts. Only profitable and growing: We considered only those stocks that are

Total weight: 30%, which is further split into 10% weight to revenue growth, 10% weight to net profit growth and 10% to growth in EPS (the higher, the better, for each parameter). Growth is calculated by comparing the ’consensus estimate’ for the next 12 months with the historical 12-month values.

expected to show growth in revenue, net profit and EPS (earnings per share) in the in the next four quarters. The final two filters were that the companies should have made profits in the past four quarters and have a positive net worth. Rating rationale

weight to the total number of analysts covering the stock (the higher, the better) and 10% to consensus rating (a composite rating based on the recommendations by all analysts who track a stock. Again, the higher, the better). 4. ... and so do the risks. Total weight: 10%. Two kinds of risks were considered. A 5% weight was assigned to downside risk and bear beta each (the lower, the better, in both cases).

2. ... but only at reasonable valuation. Total weight: 40%, which comprises 10% weight to PE ratio, 10% to PB ratio, 10% to PEG ratio (the lower, the better, for all three parameters) and 10% to dividend yield (the higher, the better).

Having arrived at the final stocks universe, we ranked them using the following four principles. A percentile rating, that is, on a 1-100 scale is given to each parameter and the composite ranking is arrived at using the weighted average of these parameters.

The ranking methodology has been developed by Narendra Nathan.. A detailed explanation of the methodology is available at www.wealth.economictimes.com

3. Analysts’ views matter ... Total Weight: 20%—this consists of 10%

1. Growth is the key ...

Top 5 Large-cap Stocks

Top 5 Mid-cap Stocks

Top 5 Small-cap Stocks

Top 5 weekly gainers (price)

Top 5 weekly gainers (price)

Top 5 weekly gainers (price)

1

L&T Fin.Holdings Price: 83.55 | % chg: 50.13

2

1

United Spirits Price: 1791.50 | % chg: 44.03

3

Idea Cellular Price: 95.15 | % chg: 11.88

4

M & M Financial Price: 998.90 | % chg: 11.58

5

Wockhardt Price: 1738.95 | % chg: 11.49

Stock prices in `, as on 16 November. Source: ETIG Database

Tata Coffee Price: 1427.50 | % chg: 31.47

2

1

ITDC Price: 632.80 | % chg: 21.53

3

DB Realty Price: 123.90 | % chg: 15.96

4

Muthoot Fin. Price: 212.95 | % chg: 13.69

5

Ashok Leyland Price: 27.40 | % chg: 12.76

MPS Price: 101.80 | % chg: 60.82

2

J.K. Agri Gene. Price: 536.10 | % chg: 57.68

3

Money Matter Fin. Price: 137.45 | % chg: 41.70

4

Accelya Kale Solutions Price: 327.45 | % chg: 40.60

5

Rollatainers Price: 229.05 | % chg: 40.56

Smart Stats

The Economic Times Wealth, November 19-25, 2012

ETW FUNDS 100 B E S T

F U N D S

T O

B U I L D

Y O U R

25

LEADERS & LAGGARDS Taking a long-term view of fund returns, here is a list of 10 funds in each category—five leaders (worth investing) and five laggards (that may be a drag on your portfolio).

P O R T F O L I O LAGGARDS LEADERS

ET Wealth collaborates with Value Research to identify the top-performing 100 funds across 10 categories. Equity funds and equity-oriented hybrid funds are ranked on 3-year returns while debt-oriented hybrid and income funds are ranked on 1-year returns.

Equity: Large-cap 5-year returns -7.95 JM Equity

-6.34 LIC Nomura MF Opportunities

-4.08 LIC Nomura MF Equity

-3.13 VALUE RESEARCH FUND RATING

NET ASSETS (` cr)

R E T U R N S 3-MONTH

6-MONTH

1-YEAR

( % ) 3-YEAR

Sundaram Select Focus Reg EXPENSE RATIO 5-YEAR

Equity: Large Cap ICICI Prudential Focused Bluechip Equity



4025.37

5.98

Franklin India Bluechip



4852.84

SBI Magnum Equity



806.70

ICICI Prudential Top 100



373.88

14.49

12.08

10.11

—

1.83

4.00

12.22

10.05

7.92

3.93

1.82

5.73

13.39

14.78

7.51

1.65

2.26

4.99

11.46

16.27

7.15

1.91

2.27

Reliance Top 200 Retail



818.80

7.97

16.07

21.69

6.96

1.62

2.11

DSPBR Top 100 Equity Reg



3384.70

6.22

12.26

13.49

6.41

3.16

1.86

HDFC Index Sensex Plus



88.63

4.47

13.81

12.24

6.05

2.31

1.00

-2.96

10.11% The 3-year return of ICICI Pru Focused Bluechip is the highest in its category.

UTI Leadership Equity

-10.32 LIC Nomura MF India Vision

Reliance Quant Plus Retail



144.03

4.76

12.85

11.91

6.01

—

2.41

ICICI Prudential Target Returns



118.99

3.81

11.94

13.19

5.77

—

2.42

ING OptiMix Multi Manager Equity Option A

UTI Top 100



621.01

5.96

17.49

12.60

5.63

—

1.21

-5.43

Religare Business Leaders



28.82

5.57

15.74

10.33

4.98

—

2.50

Principal Growth

Kotak Sensex ETF



20.59

4.31

14.46

10.69

4.10

—

0.50

-5.31

Equity: Large & Mid Cap

Taurus Bonanza 

119.12

5.88

15.95

18.97

11.16

8.88

1.25

Canara Robeco Equity Diversified



680.91

6.45

15.26

15.84

10.60

4.79

2.25

UTI Opportunities



3035.75

6.46

14.57

14.91

10.22

6.08

1.86

Mirae Asset India Opportunities Regular



257.43

7.92

16.33

17.41

10.08

—

2.37

Franklin India Prima Plus



1834.08

7.42

15.54

13.99

8.97

3.75

1.90

ICICI Prudential Dynamic



4056.37

5.14

10.43

14.32

8.97

5.38

1.82

UTI Dividend Yield



3630.64

4.20

13.65

8.60

8.56

5.91

1.83

UTI Equity



2113.60

5.72

14.98

16.19

8.48

5.78

1.45

11.16% The 3-year return of Quantum Long Term is the highest in its category.

-4.17 SBI Magnum MultiCap

-7.97 JM Core 11

Fidelity International Opportunities



304.49

4.40

15.06

14.46

8.35

4.34

2.33



1226.22

5.40

13.51

12.40

8.05

3.67

1.99

1.43

Fidelity Equity



2792.69

5.01

13.96

10.21

7.99

3.76

1.84

Birla Sun Life Special Situations

Fidelity India Growth



272.21

4.38

13.19

8.48

7.54

4.11

2.33

1.84

Edelweiss Diversified Growth Equity Top 100



14.63

6.09

14.15

16.14

7.02

—

2.28

L&T Opportunities

HDFC Equity



9887.21

7.17

14.05

14.33

6.98

5.47

1.78

Kotak Select Focus



361.14

5.89

16.66

15.52

6.39

—

2.33

HDFC Top 200



11591.05

6.62

14.85

13.79

6.34

5.67

1.77

Morgan Stanley A.C.E.



243.01

8.48

17.10

13.50

6.34

—

2.26

2.5 L&T Contra

3.09 Birla Sun Life Equity

Equity: Multi Cap 

BNP Paribas Dividend Yield



Fidelity India Special Situations



Templeton India Equity Income



963.31

Principal Dividend Yield



102.95

Reliance Regular Savings Equity



2828.63

85.56

7.30

14.78

11.78

11.71

14.53

8.77

644.75

7.24

8.83

2.49

15.66

15.20

17.39

20.85

10.58

6.53

2.50

9.71

3.50

2.18

5.41

17.83

9.96

16.91

20.54

9.39

4.44

2.00

22.23

9.25

2.98

2.49

13.72

24.03

25.16

7.33

6.65

1.85

-2.93 HSBC Progressive Themes

DSPBR Equity



2536.78

7.40

13.31

13.67

7.25

4.27

1.88

-1.01



88.21

6.22

9.25

10.34

6.98

3.81

2.50

HSBC Midcap Equity

Religare Contra



60.75

9.16

16.20

13.11

5.99

5.06

2.50

1.66

Templeton India Growth



679.14

4.69

14.01

15.99

5.37

3.13

2.13

HSBC Small Cap

SBI Magnum Emerging Businesses



733.80

14.66

25.59

30.77

23.67

4.89

2.26

Sundaram S.M.I.L.E. Reg

DSPBR Micro Cap Reg



450.79

11.47

16.85

20.05

17.28

6.09

2.29

Reliance Equity Opportunities



3830.09

9.46

18.89

26.97

16.37

7.64

1.84

Canara Robeco Emerging Equities



37.91

HDFC Mid-Cap Opportunities



IDFC Premier Equity



Religare Mid Cap



52.53

ICICI Prudential Discovery



DSPBR Small and Mid Cap Reg



Tata Dividend Yield



325.61

4.82

8.18

11.10

11.20

5.88

2.35

Birla Sun Life Dividend Yield Plus



1279.73

6.88

11.64

12.01

10.24

9.89

2.02

Sundaram Select Midcap Reg



2039.91

8.99

20.29

20.32

10.08

5.12

1.89

UTI Master Value



636.89

8.95

13.12

9.38

9.89

5.08

2.18

Equity: Mid & Small Cap

2.04

16.76

26.30

15.99

2.44

2267.14

5.62

13.50

18.48

15.14

8.17

1.91

3070.90

11.76

17.09

19.11

14.77

9.58

1.88

12.15

19.75

21.51

14.61

4.75

2.50

1985.21

5.49

13.43

25.37

13.71

11.57

1.92

1169.21

11.57

18.65

19.35

12.47

6.21

2.01

3.11 Sundaram Equity Multiplier

2.50

Equity: Tax Planning

11.57%



Canara Robeco Equity Tax Saver



ICICI Prudential Tax Plan

1993.76

8.77

16.09

26.99

11.79

4.64

1.91

456.12

5.99

14.05

15.22

11.02

6.58

2.32



1362.85

7.57

16.46

17.72

10.28

5.99

1.99

Franklin India Taxshield



853.26

5.28

13.09

12.21

9.94

4.15

2.10

Religare Tax Plan



120.36

7.03

15.40

13.93

9.67

5.09

2.48

Fidelity Tax Advantage



1166.15

5.81

14.12

10.86

8.77

4.55

2.01

3.16 DSPBR Top 100 Equity Reg

2.31 HDFC Index Sensex Plus

2.14 ICICI Prudential Indo Asia Equity Inst

8.88 Quantum Long Term Equity

6.33 ICICI Prudential Dynamic Inst I

6.08 UTI Opportunities

5.91 UTI Dividend Yield

5.78 UTI Equity

11.71 ING Dividend Yield

10.58 BNP Paribas Dividend Yield

9.71 Fidelity India Special Situations

9.49 Tata Ethical

9.39 Templeton India Equity Income

The 5-year return of ICICI Pru Discovery is the highest in its category.

23.67 SBI Magnum Emerging Businesses

17.58 Religare Mid N Small Cap

17.28 DSPBR Micro Cap Reg

16.59 Reliance Equity Opportunities Inst

16.37 Reliance Equity Opportunities

Hybrid: Equity-oriented 5-year returns -5.68 JM Balanced

-3.61 Escorts Balanced

-3.45 Baroda Pioneer Balance

Reliance Tax Saver

ICICI Prudential Top 100 Inst I

Equity: Mid- & Small-cap 3-year returns

Tata Contra

9.34

3.49

Equity: Multi-cap 3-year returns

HDFC Growth

ING Dividend Yield

Franklin India Bluechip

Equity: Large- & Mid-cap 5-year returns

-6.76

Quantum Long Term Equity

3.93

-3.4 LIC Nomura MF ULIS

-1.71 LIC Nomura MF Balanced

9.67 HDFC Balanced

9.35 HDFC Children's Gift-Inv

8.7 Reliance Regular Savings Balanced

8.39 HDFC Prudence

7.63 UTI CCP Advantage

Returns as on 15 November

26

Smart Stats

The Economic Times Wealth, November 19-25, 2012

ETW FUNDS 100 VALUE RESEARCH FUND RATING

IDFC Tax Advantage (ELSS)



Taurus Tax Shield



NET ASSETS (` cr )

R E T U R N S 3-MONTH

6-MONTH

1-YEAR

( % ) 3-YEAR

5-YEAR

Top 5 SIPs

EXPENSE RATIO

144.27

8.73

21.61

16.32

8.20

—

2.44

Top 5 equity schemes based on 10-yr SIP returns.

85.75

6.84

16.00

13.53

6.52

4.17

2.50

Sundaram Select Midcap Reg

24.03

Equity: Banking Reliance Banking Retail



1728.60

13.61

27.15

29.19

12.89

12.07

1.93

ICICI Prudential Banking and Financial Services



155.57

14.19

31.66

38.71

12.74

—

2.44

Religare Banking



44.94

11.89

28.10

29.30

12.10

—

2.50

SBI Magnum Global

22.91 Reliance Growth

22.81

Equity: Infrastructure

DSPBR Equity

21.65

Franklin Build India



60.89

7.82

17.18

18.76

5.81

—

2.38

Canara Robeco Infrastructure



112.14

3.67

13.29

6.74

4.84

-2.70

2.33

PineBridge Infrastructure and Economic Reform Standard



86.80

6.06

16.24

3.84

2.06

—

2.49

Religare Infrastructure



37.63

5.87

13.69

2.92

-0.36

—

2.50

HDFC Infrastructure



660.01

6.23

11.59

10.84

-2.09

—

2.15

12.98%

HDFC Balanced



784.32

4.13

8.97

13.05

12.98

9.67

1.98

HDFC Prudence



6032.60

6.46

10.51

14.56

10.62

8.39

1.79

Canara Robeco Balance



192.00

5.18

12.00

15.24

10.58

5.42

1.66

Reliance Regular Savings Balanced



556.61

7.36

15.96

21.08

10.31

8.70

2.19

The 3-year return of HDFC Balanced is the highest in its category.

Tata Balanced



373.86

6.03

14.74

18.90

9.35

5.26

2.33

Birla Sun Life 95



537.20

5.36

13.55

12.25

8.24

7.31

2.24

UTI CCP Advantage



75.29

5.87

14.68

10.15

5.54

7.63

1.39

SBI Magnum MIP Floater

3423.37

3.71

6.85

14.59

8.14

11.33

1.56

Reliance MIP

Hybrid: Equity-oriented

HDFC Top 200

21.12 SIP: Systematic investment plan

% annualised returns

as on 15 November

Equity: SWPs Top 5 MIP schemes based on 3-year SWP returns. Canara Robeco MIP

8.24 8.23

Hybrid: Debt-oriented Conservative Reliance MIP



DSPBR MIP



290.89

3.33

5.79

13.81

7.60

7.32

2.13

Birla Sun Life MIP II Savings 5



309.81

2.65

5.56

10.51

7.72

10.41

1.32

Canara Robeco MIP



286.46

3.08

6.17

10.31

8.34

7.67

2.08

UTI Monthly Income Scheme



346.65

2.95

6.14

10.31

7.14

7.56

1.79

HDFC Multiple Yield Plan 2005



567.85

2.63

5.23

9.72

9.24

9.19

1.75

HDFC Multiple Yield



96.20

2.49

4.58

9.50

9.08

9.24

1.75

Birla Sun Life Monthly Income



403.96

2.84

5.60

9.44

7.17

7.80

2.00

L&T MIP



76.84

2.33

5.62

9.21

6.01

8.94

2.23

12.7%

Templeton India Income Builder



148.94

2.90

6.00

12.70

8.47

7.87

1.53

SBI Dynamic Bond



2466.66

2.73

5.23

12.64

9.69

5.26

1.67

Birla Sun Life Medium Term



215.73

2.29

5.14

11.18

8.68

—

0.10

IDFC SSI Medium-term Plan F



1210.68

2.59

5.40

11.08

—

—

1.00

The 1-year return of Templeton Income Builder is the highest in its category.

Birla Sun Life Dynamic Bond Ret



12125.20

2.59

5.23

11.03

8.18

9.66

1.19

Birla Sun Life Short Term



1966.92

2.65

5.58

10.85

7.88

8.23

0.25

IDFC SSI Medium-term Plan A



1210.68

2.49

5.20

10.72

8.63

9.30

1.24

ICICI Prudential Long-term



537.63

2.43

5.25

10.23

—

—

0.76

Debt: Income

Religare Active Income Fund Plan A



739.70

2.49

5.22

10.21

8.05

5.82

1.79

Templeton India Income Opportunities



2714.66

2.63

5.37

10.12

—

—

1.45

L&T Select Income-Flexi Debt Ret



126.56

2.00

4.30

9.18

7.70

—

0.57

ICICI Prudential Banking & PSU Debt



65.17

1.92

3.95

9.01

—

—

0.21

BNP Paribas Bond Reg



431.92

2.28

4.80

9.00

8.57

—

2.00

7.88 Birla Sun Life MIP II Savings 5

7.69 ICICI Prudential MIP 25 Reg

7.64 SWP: Systematic withdrawal plan

% annualised returns

as on 15 November

Debt: Liquid Lowest Expense Ratio 0.11 0.10

0.11

0.10

0.05

Debt: Gilt Short Term SBI Magnum Gilt Short-term



27.31

2.14

4.52

10.23

7.21

7.15

0.86

UTI G-Sec Short-term



19.67

1.76

3.91

9.48

6.27

5.95

0.74

Canara Robeco Gilt Advantage



3.75

1.72

3.65

8.10

—

—

1.11

Edelweiss Liquid

Religare Overnight

Principal Cash Mgmt

Morgan Stanley Liquid

Edelweiss Liquid Inst

All equity funds including balanced equity funds sorted on 3-year returns; all others ranked on 1-year returns. Data as on 31 March

Did not find your fund here? Log on to www.wealth.economictimes.com for an exhaustive list.

Methodology

EQUITIES (figures over the past three years)

The Top 100 includes only those funds that have a 5- or 4-star rating from Value Research. The rating is determined by subtracting a fund’s risk score from its return score. The result is assigned stars according to the following distribution:

Large-cap: More than 80% assets in large-cap companies.



Next 22.5%



Middle 35%



Next 22.5%



Large- and mid-cap: 60-80% assets in large-cap companies.

52.69

Multi-cap: 40-60% assets in large-cap companies.

45.78

Mid- & small-cap: At least 60% assets in small- and mid-cap companies.

Top 10%



Mid & Small Cap Exposure of Large & Mid Cap Funds

(Not covered in ETW Funds 100 listing)

Bottom 10%

Fixed-income funds less than 18 months old and equity funds less than three years old have been excluded. This ensures that all the funds have existed long enough to be tracked for consistency of performance. Given the focus on long-term investing, liquid funds, short-term funds and FMPs are not part of the list. For the same reason, we have considered only the growth option of funds that reinvest returns instead of offering dividends that increase the NAV of funds. Despite these rigorous filters, the list includes 2/3 funds of each category to maximise choice from the best funds. The fund categories are:

44.60

42.20

41.60

Tax planning: Offer tax rebate under Section 80C. International: More than 65% of assets invested abroad. Income: Average maturity varies according to objective. Gilt: Medium- and long-term; invest in gilt securities.

Returns as on 15 November Assets as on 30 September Rating as on 31 October Expense ratio as on 31 March

Equity-oriented: Average equity exposure more than 60%. Debt-oriented aggressive: Average equity exposure between 25-60%. Debt-oriented conservative: Average equity exposure less than 25%. Arbitrage: Seek arbitrage opportunities between equity and derivatives. Asset allocation: Invest fully in equity or debt as per market conditions.

Stock pick of the week Page 8

Reliance SBI Mag- SBI Principal Vision num Magnum Growth Contra MultiCap

ING OptiMix Multi Manager Equity Option A

Data as on 31 October Methdology of selected Top 100 funds on www.wealth.economictimes.com

Smart Stats

BEST HEALTH INSURANCE

Rating methodology

                     No Star        No Star   No Star No Star NA NA NA NA   

High scores across parameters helps Apollo Munich get superior ratings in 3 products

High scores on pricing and servicing gets Bajaj a superior rating on one of its products

Ratings: : i-save Health Insurance Ratings use a relative rating methodology to rate health insurance products on a 1-5 star scale. The product ratings are a weighted aggregate of the product price, product features and company service data, each rated on a relative 1-5 star scale. The star ratings assigned correspond to the following:      No star 

High scores on pricing and servicing gets ICICI Lombard an excellent rating

Max BUPA products make up for high pricing through superior feature scores

0

10

`) Insurance cover (`

1 lakh

2 lakh

1,784 N/A N/A 1,193 N/A N/A 1,229 1,574 N/A N/A N/A 3,611 1,262 1,420 1,578 N/A

2,843 N/A N/A 1,791 N/A N/A N/A 2,627 2,289 N/A N/A 4,212 2,072 2,333 2,592 3,217

3 lakh

3,878 4,601 N/A N/A 5,041 15,500 N/A 3,715 N/A N/A 3,197 4,719 2,856 3,214 3,570 3,721

5 lakh

6,017 6,902 8,628 N/A 6,303 N/A N/A 5,892 N/A 5,749 N/A 7,059 4,774 5,369 5,966 7,254

20

30

 

40



50

60

70

80

90

The relative position on the distribution curve highlights the overall ranking of the product relative to its peer group based on a comprehensive product score of its price competitiveness, features and flexibility, and servicing capabilities.

Tata AIG Mediprime scores high on both price and features

Price: Lower premiums get higher scores. Premiums are compared across multiple age bands (young, middle and mature) and multiple covers (`1-10 lakh). Product features: Features are assigned a numerical score based on product benefits, customer availability and flexibility. Servicing capabilities: Scores are awarded to customer servicing and claims settlement statistics. These are not product-specific and the data published by Irda for the past two years is used to compare and allocate a relative numerical score, adjusted for age. For detailed methodology, visit i-save.com.

Buying Guide

PREMIUM RECKONER Premiums of individual health insurance plans of all companies Premiums in ` for 35-year-old male



Parameters considered

 Where a company has recently commenced operations, service scores have not been considered for rating; where service scores could not be calculated due to lack of publicly available information, service stars are marked 'NA'.  i-save ratings are at a product level and provide a relative ranking to products in their peer group. They do not take into account personal or individual financial needs, circumstances or objectives. It is important to review and compare benefits, exclusions and limits on sub-benefits for each product.  i-save ratings are not financial advice or guidance or a recommendation to purchase, hold or terminate any policy. Data as on 15 June 2012.

Premiums in ` for 25-year-old male

Superior product Excellent product Good product Average product Below average product Low rating

Superior

Overall rating

Excellent

Service rating

                     No Star             NA NA NA NA   No Star

Average

Features rating

   No Star                      No Star No Star              

Below average

Price rating

     No Star              No Star         No Star No Star   No Star No Star       

Apollo Munich Easy Health Standard Apollo Munich Easy Health Exclusive Apollo Munich Easy Health Premium Apollo Munich Insure Health Apollo Munich Optima Restore Apollo Munich Maxima Bajaj Allianz Individual Health Guard Bajaj Allianz Health Ensure Bharti AXA Smart Health Insurance Basic Bharti AXA Smart Health Insurance Premium Bharti AXA Smart Health Insurance Optimum Cholamandalam MS Individual Healthline Standard Cholamandalam MS Individual Healthline Superior Cholamandalam MS Individual Healthline Advanced Future Generali Health Suraksha Basic Plan Future Generali Health Suraksha Silver Future Generali Health Suraksha Gold Future Generali Health Suraksha Platinum HDFC Ergo Health Suraksha Individual ICICI Lombard Health Advantage Plus ICICI Lombard Family Protect Premier - Single Adult Iffco Tokio Individual Medi Shield Max Bupa Heartbeat Silver Max Bupa Heartbeat Gold National Insurance Individual Mediclaim New India Assurance Individual Mediclaim Policy Oriental Insurance Individual Mediclaim Policy Reliance Healthwise Standard Reliance Healthwise Gold Reliance Healthwise Silver Royal Sundaram Family Good Health - Single Adult Star Health and Allied Medi Classic Star Health Gain Insurance Star Unique Insurance Tata AIG General Tata AIG Wellsurance Classic Tata AIG Wellsurance Supreme Tata AIG Wellsurance Elite Tata AIG Mediprime United India Health Insurance Gold United India Health Insurance Platinum Universal Sompo Individual Health Insurance

No star

Product name

Coverage: Comprehensive. All health insurance products (individual) whose prices and features data is available in the public domain have been covered. Some plans may have been excluded on account of not being comparable with the peer group as they may be targeted towards a specific customer segment.

Good

Every week ET Wealth brings you the rankings of one financial product done by i-save*. In this issue we look at the best individual health insurance plans available in the market.

Apollo Easy Health Standard Apollo Easy Health Exclusive Apollo Easy Health Premium Apollo Insure Health Apollo Optima Restore Apollo Maxima Bajaj Allianz Health Ensure Bajaj Allianz Individual Health Guard Bharti Axa Basic Plan Bharti Axa Optimum Plan Bharti Axa Premium Plan Chola Standard Individual Healthline Future Generali Health Suraksha Basic Plan Future Generali Health Suraksha Silver Plan Future Generali Health Suraksha Gold Plan HDFC Ergo Health Suraksha Individual

27

The Economic Times Wealth, November 19-25, 2012

 Health insurance protects you against

Premiums in ` for 45-year-old male

1 lakh

2 lakh

3 lakh

5 lakh

1 lakh

2 lakh

1,784 N/A N/A 1,193 N/A N/A 1,424 1,960 N/A N/A N/A 4,320 1,494 1,683 1,869 N/A

2,843 N/A N/A 1,791 N/A N/A N/A 3,689 2,289 N/A N/A 5,050 2,201 2,475 2,751 3,217

3,878 4,601 N/A N/A 5,041 15,500 N/A 4,977 N/A N/A 3,197 5,661 3,205 3,605 4,005 3,721

6,017 6,902 8,628 N/A 6,303 N/A N/A 6,917 N/A 5,749 N/A 8,544 5,202 5,853 6,503 7,254

2,933 N/A N/A 1,850 N/A N/A 1,824 2,510 N/A N/A N/A 5,761 1,571 1,766 1,963 N/A

3,101 N/A N/A 2,387 N/A N/A N/A 4,842 3,772 N/A N/A 6,765 2,811 3,162 3,512 4,037

3 lakh

4,130 4,955 N/A N/A 5,368 15,500 N/A 6,815 N/A N/A 4,243 7,606 3,708 4,171 4,635 4,479

5 lakh

6,842 8,094 10,079 N/A 7,186 N/A N/A 10,759 N/A 10,223 N/A 11,610 5,778 6,500 7,221 8,137

* Premiums as applicable for Delhi taken into account. For the complete list of family floater health insurance premiums visit www.wealth.economictimes.com  Premiums sourced from quotation engines on each individual company website. Premiums are inclusive of service tax except in cases where this information may not have been available at individual websites.  Given the nature of health insurance and varied benefits and exclusion related terms, it is important to review what each product does or does not offer.

rising healthcare costs and financial uncertainty arising from hospitalisation due to accidents or illnesses.  It is always better to start your health

insurance cover at an early age:  With age the risk to our health increases,

making insurance more expensive too.  Some companies now provide

guaranteed renewals for life.  Most policies have an exclusion period

(usually 2-4 years) for certain illnesses.  Do not restrict your cover just to meet

your tax-exemption limit.  Compare products not just on price, but

also on features, benefits, age till when renewability is available, sub-limits, etc. * i-saveTM ratings have been sourced from i-save.com, a unit of MAGI Research and Consultants Private Limited which analyses and rates financial products

28

Smart Stats

The Economic Times Wealth, November 19-25, 2012

LOANS & DEPOSITS ET Wealth collaborates with ETIG to provide a comprehensive ready reckoner of loans and fixed-income instruments. Don’t miss the information on investments for senior citizens and a simplified EMI calculator. Cheapest Personal loans

Tenure: 1 year Indian Bank UCO Bank IDBI Bank Yes Bank ING Vysya Bank

What `10,000 will grow to

9.25 9.10 8.75 8.75 8.70

10,958 10,942 10,904 10,904 10,899

Tenure: 2 years City Union Bank Indian Bank Lakshmi Vilas Bank Tamilnad Mercantile Bank Union Bank of India

9.25 9.25 9.25 9.25 9.25

12,007 12,007 12,007 12,007 12,007

Tenure: 3 years City Union Bank Indian Bank Karur Vysya Bank Tamilnad Mercantile Bank Union Bank of India

9.25 9.25 9.25 9.25 9.25

13,157 13,157 13,157 13,157 13,157

Tenure: 5 years City Union Bank Tamilnad Mercantile Bank Oriental Bank of Commerce Andhra Bank Axis Bank

9.25 9.25 9.10 9.00 9.00

15,797 15,797 15,682 15,605 15,605

Top five senior citizen deposits Interest rate (%) compounded qtrly

Tenure: 1 year Allahabad Bank Indian Bank UCO Bank Yes Bank Indian Overseas Bank

What `10,000 will grow to

10.00 10.00 9.60 9.50 9.25

11,038 11,038 10,995 10,984 10,958

Tenure: Above 2 years Indian Bank City Union Bank Indian Overseas Bank United Bank of India Yes Bank

10.00 9.75 9.75 9.75 9.75

12,184 12,125 12,125 12,125 12,125

Tenure: 3 years Indian Bank Axis Bank City Union Bank Indian Overseas Bank Yes Bank

10.00 9.75 9.75 9.75 9.75

13,449 13,351 13,351 13,351 13,351

Tenure: 5 years City Union Bank Dena Bank IDBI Bank Indian Bank Indian Overseas Bank

Cheapest Auto loans

INTEREST RATE (%) Bank of Maharashtra

INTEREST RATE (%)

11.50 - 13.50

Dena Suvidha

13 - 14

Bank of India

13- 15.5

Central Bank of India

13.25 - 15

ICICI Bank

14 - 18 11

12

13

14

15

16

17

18

19

20

21

22

10.50- 10.55

SBI

10.50 - 17.25

Allahabad Bank

10.75 - 11

Union Bank

10-95 15.75

Central Bank of India

11.-12 9

10

11

12

13

14

15

16

17

18

19

* These are floating interest rates while the others are fixed interest rate

Cheapest Home loans

Cheapest Education loans

10 YEARS

20 YEARS

Minimum loan: `50,000; Maximum loan: `2 lakh Interest rate (%)

Interest rate (%)

Up to `10 lakh State Bank of India HDFC LIC Housing Finance Dena Bank Syndicate Bank Up to `30 lakh State Bank of India HDFC LIC Housing Finance Corporation Bank Bank of Maharashtra

10.00 10.25 10.25 10.45 10.50

State Bank of India HDFC LIC Housing Finance Dena Bank Syndicate Bank

10.00 10.25 10.25 10.45 10.50

10.00 10.25 10.25 10.50 10.50

State Bank of India HDFC LIC Housing Finance Corporation Bank Bank of Maharashtra

10.00 10.25 10.25 10.50 10.50

Margin money: 15%

15 14

10.50 12.50%

13

11.50 13.50%

11.75 13.25%

10.95 13.20%

12.00%

12 11 10

Central Bank of India

United Bank of India

Allahabad Dena Bank Vidyalaxmi

State Bank of India

These are average rates for the entire tenure

Postal Deposits

Minimum Invt. (`)

Interest (%)

Monthly Income Scheme

8.50

Recurring Deposits

8.40

Savings Account

4.00

National Savings Certificate (5 yr)

8.60

National Savings Certificate (10 yr)

8.90

1,500

Maximum Investment (`)

Tax Benefits

Features

Single 4.5 lakh Joint 9 lakh

5 year tenure; monthly returns 5 year tenure; monthly returns

Nil Nil

10

No limit

5 year tenure

Nil

50

No limit

`10,000 interest tax free

Nil

100

No limit

No TDS

80C

100

No limit

TDS applicable

80C

200

No limit

Available in 1, 2, 3, 5 years

80C

1,000

15 lakh

5 year tenure; minimum age 60

80C

1 lakh a year

15-year term; tax-free returns

80C

-

Till retirement

80C

Time Deposit

8.20 - 8.50

Senior Citizen Saving Scheme

9.30 payable quarterly

Public Provident Fund

8.80

500

Employees' Provident Fund

8.60

-

Sec 80 C benefit: Investments up to `1 lakh in specified securities qualify for deduction.

9.75 9.75 9.75 9.75 9.75

16,187 16,187 16,187 16,187 16,187

Home loan Base rate (%)

Tenure: 5 years and above City Union Bank Tamilnad Mercantile Bank Oriental Bank of Commerce Andhra Bank Axis Bank

Interest rate (%)

Base rates are reference rates for all floating-rate home loans.

As on 15 November 2012

10%

10.25%

State Bank Axis of India Bank

State Bank of Mysore

9.75%

Top five tax-saving FDs

10.45%

10.45%

10.50%

10.50%

10.50%

10.50%

Punjab National Bank

Bank of Baroda

Bank of India

9.25 9.25 9.10 9.00 9.00

15,797 15,797 15,682 15,605 15,605

BANK

Dena Bank

10.50%

10.50%

10.50%

10.50%

United Bank of India

IDBI Bank

956

836

@ 10%

2,125 2,224

1,322 1,435

1,075 1,200

2,379

1,613

1,400

10

Bank of Maharashtra

Canara Bank

Central Bank of India

Corporation Bank

Union Bank of India

Allahabad Bank

Andhra Bank

INTEREST RATE (%)

1213

5

10.50%

Allahabad Bank

2,028

@ 15%

10.50%

Cheapest Gold loans

@ 8%

@ 12%

10.50%

What `10,000 will grow to

Your EMI for a Loan of `1 lakh

Tenure

Bank of Maharashtra

LOAN AMOUNT: `5 LAKH

Interest rate (%) compounded qtrly

LOAN AMOUNT: `2 LAKH

Top five FDs

15

772

Central Bank of India

965 1,101

909 1,053

Syndicate Bank

1,317

1,281

20

Choose this calculator to check your loan affordability. For example, a `5 lakh loan at 12% for 10 years will translate into an EMI of `1,435 x 5 = `7,175

10.50- 14.50 11.50 - 12.50 11.75

Dena Gold

12 - 13.75

Tamiland Mercantile Bank

25

12.25 - 15.25 9

10

11

12

13

14

15

16

17

18

19

All data sourced from Economic Times Intelligence Group ( [email protected])

Technology

The Economic Times Wealth, November 19-25, 2012

29

Click better images with your phone’s camera Pick from the following photo apps and editors to help you enhance the quality of your pictures. KARAN BAJAJ

Free photo editors

M

obile phones have evolved from the simple calling and texting devices of a decade ago into multi-functional gadgets with endless features. Take the cameras installed in these phones. With many sub-`10,000 phones sporting 8megapixel (MP) cameras, more people are using this pocketable device to click photos on the move. However, you may not get very good results from all of these. Here’s where a plethora of photo apps and editors come handy. Though some of these are free, you will have to buy others, but they can all help you enhance the images.

1

Also available for Android, Aviary allows you to adjust the brightness, contrast, saturation and sharpness of images. You can add free effects like sepia, soft focus and aqua, or purchase additional ones. You can also change the colour tone or add fun stickers to photographs before sharing them with friends.

Best camera apps 1

iPhone

2

2

Camera Zoom FX

($0.99 or `55)

($2.99 or `165)

Justifying its name, this app offers advanced features to iPhone users. You can control exposure, adjust focus using touch, or choose from 16 scene modes to get the best picture. It also has a built-in image editor to add various effects to your photographs.

($1.49 or `82)

How many stocks should you own? Page 3

With this app, you can preview the various effects and frames available in the app before taking a photo. The app provides easy access controls for flash, burst mode as well as effects and frames in a single window.

Fhotoroom (Free) Fhotoroom offers a built-in image stabiliser in its camera interface. It also has a self-timer, exposure adjustment, built-in image level to frame the shot better, various preset shooting modes and over 90 post-processing effects to enhance the image.

4

Symbian CameraPro `15

For a puny amount, this app offers a multitude of advanced features. It allows you to adjust white balance, exposure and ISO settings, as well as shoot high dynamic range (HDR) pictures. There is an onscreen compass and a virtual horizon to help with composition.

SCam (Free) This app offers advanced features, such as a real-time histogram and a horizon line to help with composition. It offers time lapse, HDR, exposure bracketing modes and a continuous autofocus mode, over and above the basic settings available on your smartphone.

Windows Phone: InstaCam The highlight of this photo editor is that it lets you combine multiple filters and effects to create your own filters. It has 26 photo effects, 12 frames and 9 predesign filters to enhance your photos and share them on various social networks. Instacam also calls itself the ‘unofficial Instagram client’ for Windows Phone OS. The limitation is that it only lets you browse through Instagram photos and does not let you upload your own.

Also available for the iPhone, Pudding Camera offers unique effects (50 mm, fisheye, triplex, etc) for your photographs. There is also a quick access dial for exposure control on the interface. The only issue is that it shoots at a maximum size of 1,280 x 1,280 pixels.

Windows Phone Camera Effects

3

Pudding Camera (Free)

If you need help with composition, Camera Awesome can show you grids to get the best subject placement. It also provides a timer, image stabiliser, burst shooting mode and has an integrated image effects editor.

Android: PicsArt With this free app, you can add frames, borders, stickers, Clipart graphics and text effects. There are also lots of artistic photo effects, in addition to the standard crop, rotate and colour adjustment options. You can also draw on the image with various artistic brushes, as well as make a collage with pictures.

This app offers advanced controls for ISO, focus, metering, exposure and white balance. Other features include a burst mode of 10 shots per second, customisation of hardware buttons to click or zoom and live preview of special effects.

Camera Awesome (Free)

3

Android

Camera+

iPhone: Aviary

4

5

This free app is the Symbian alternative to Instagram. It works in the same fashion—click a photo or select an existing one from your phone and then apply any of the effects available. The app keeps getting updated with new effects on a regular basis. You can share the image on various social networks, including Molome’s own network, where you can earn badges on completing certain milestones to improve your social reputation.

BlackBerry Pencil camera ($2.99 or `165)

In a simple two-step process, you just shoot an image with the app and it gets displayed instantly as pencil art. Pencil Camera gives you the option to choose the image size as well as to directly store the images in the internal memory or the memory card.

Camera Timer (Free) As the name suggests, the app lets you set a timer for the camera. You can choose between 0-20 seconds for taking pictures and even set time intervals between photos. You can shoot up to 10 images within the interval time.

Symbian: Molome

5

BlackBerry: Photo Editor Ultimate Offering various colour filters and effects, Photo Editor Ultimate lets you combine or overlay one photo over the other to create beautiful collages. Apart from options to adjust brightness, hue, saturation and colour, it also comes with tools to set the image quality as well as crop, rotate or resize an image. You can e-mail the photo or share it on various social networks, besides doing so with your BBM contacts from within the app.

30

The Economic Times Wealth, November 19-25, 2012

My Enterprise

Building on green projects T Chitty Babu’s decision to construct green buildings has paid off, making way for a `350 crore venture. S VARADHARAJAN

T Chitty Babu 45 years Company

Akshaya Homes Pvt Ltd Headquarters

Chennai, Tamil Nadu Seed capital

`10,000 Source of funds

Personal savings Current turnover

`350 crore

It is a myth that starting a real estate venture requires a lot of money. As long as you have established the right network and can deliver on time, money is not an issue.

Within a year, our firm had hit the `1 crore mark. Even then, I continued as a contractor, gaining more experience before starting my own projects.

In 2008, we decided to turn green and, since then, all our projects have been given top ratings by independent rating agencies. It helped us gain a stronger foothold.

G

rowing up in the 1970s in a quiet, little town tucked away in the southernmost tip of India, tall buildings were a rarity for me. At Nagercoil, near Kanyakumari, the tallest building I knew of was the clock tower. It fascinated me and I knew I wanted to design and construct big buildings for a career. However, since I came from a humble background, I had to take the longer route to achieve my dream. It took eight years and a long run at the corporate carousel before I got around to starting the first project under my banner, Akshaya Limited. After completing my five-year civil engineering degree programme from SIT Tumkur, I joined Dual Structurals Private Limited as first engineer, in 1987. I worked for the construction company for the next six years, eventually being promoted to director in 1993. However, two years on, boredom set in and I was itching to do something new. A comfortable job was no longer good enough as I was still working on someone else’s ideas and there was no challenge in terms of creativity. So I quit my job and, in October 1995, I started Akshaya with a seed capital of `10,000. It is a myth that one needs to have deep pockets to enter the realty market. I had already established a network of contacts during my previous job, so credibility and workflow were never a problem. To keep things simple at the outset, I took on the role of a contractor. Interested parties would entrust me with projects with a clearly specified budget and timeline. It was my responsibility to get the architect, engineers, raw material, and the like, and the amount I saved was my commission. I hired just one employee, a civil engineer, to help me while

been limited to Tamil Nadu so far. my wife pitched in with book-keeping. My Recognising the importance of any busifirst project was worth `2 crore and I made ness to keep innovating in order to grow a handsome profit. By the end of March organically, I took a call to concentrate sole1996, I had already started working on four ly on green projects at the beginning of projects and the profits enabled me to move 2008. Not only did this move send out a the company headquarters from my house strong message that we care for our planet, to a rented office at Adyar. but also captured the imagination and conAnother misconception is that the realty sciousness of the new buyers. In a way, sector is full of problems. I can vouch for we were among the first companies the fact that as long as you take up to join the green bandwagon, and projects you are sure of executing this gives us an edge today, in the given time and budget, it is How to when certifications and clean as easy or difficult as any other optimise returns by avoiding costs records are paramount. I am venture. Also, one needs to give Page 14 proud of the fact that we have every business some time to consistently bagged good ratings grow—it took a year for my compafrom all the important certifying ny’s revenues to hit the `1 crore agencies in the market. Three out of mark. It was not until October 1998 our nine projects till date are platinum that I attempted to go beyond playing the rated and the rest have been given gold contractor by taking on my first independratings by the Indian Green Building ent project, that of developing four apartCouncil, an independent rating agency. We ments. I invested `55 lakh in this venture. also received the best legal systems award It was small change compared with the from CNBC/Crisil for four years in a row projects that I had handled in the past, but it (2007-10). was a start and there has been no looking I am now looking forward to unveiling the back ever since. tallest residential tower in Tamil Nadu. KickHere’s another tip for realty entreprestarted last month, this two-acre project, neurs: guard against the temptation to called Abov, will boast 6,700 sq ft homes spread out too soon. I am not against with one on a floor, and each priced at ventures in different geographical locations, about `7 crore. In keeping with the growing but one must first master the area one starts demand, we have set up offices in Chennai, out from. Thankfully, for Akshaya, there has Salem, Coimbatore, and most recently been a lot of scope for growth in Tamil (2010) in Dubai. Our aim now is to reach out Nadu. Over the past 14 years, we have to a lot more customers while continuing to ventured into various cities within the state, meet the industry standards. from Coimbatore and Salem to Madurai and Trichy. It is a market that I understand and we have been able to execute more than 150 (As told to Amit Kumar) projects in the state so far. Between 1995 and 1998, I took on contractor roles for Please send your feedback to projects in Karnataka and Andhra Pradesh [email protected] too, but the self-developed projects have

Your Feedback

The Economic Times Wealth, November 19-25, 2012

Readers’ response, online and in print, to ET Wealth stories has been overwhelming and enlightening. We pick some that add information and perspective to our articles from previous issues.

31

THE ECONOMIC TIMES

wealth

FRO THE WM EB

November 19-25, 2012

www.wealth.economictimes.com

Need for cheaper loans for home renovation The cover story ‘Renovate or relocate’ was of immense help to me since I have been facing this dilemma. Of late, the steep rise in property prices has made it impossible to purchase new property. I have been looking at renovating my current home, instead of relocating, for a number of reasons. The most compelling one to overhaul an old property is its location. My house is in south Delhi and is well connected to the rest of the city, even though it is a bit small. However, even if I sell it, I will be unable to afford a new property in the area. Relocating is an easier option for younger couples and smaller families compared with senior citizens. It would be of big help if banks offer cheaper loans for renovation since the market for such loans will be immense. Right now, a number of people do not renovate due to the costs involved, which, unlike a home loan, has to be paid immediately. However, a low-cost loan will make it easier to do so. Pushpendra Varma, Delhi

Mid-cap funds must for a portfolio

Govt must push through reforms

Need to improve adviser-client ties

The story ‘Time to pick mid-cap funds’ provided a welcome change from the usual stories on mutual funds, which focus on large-cap and blue-chip funds. While there is no doubt that midcap funds are more risky, I think the biggest challenge is picking the right one. Unlike large-cap funds, where most of the AMCs have similar investing patterns, in mid-cap funds the difference can be massive. So, stick to just one good mid-cap fund instead of investing in different options. Also, as the story shows, investors with a low-risk appetite should avoid mid-cap funds at all cost as the returns can be bad during downturns.

The story ‘Stocks to pick after second quarter results’ provided an interesting analysis of India Inc. Like most investors, I had little hope from this quarter, but I was in for a pleasant surprise. I think the worst period for the industry is over and at least some sectors, such as FMCG and infotech, will continue to rally strongly. While the result of Union Bank was encouraging, unless the overall PSU banking space improves, the market rallies will remain short and unpredictable. I hope the government pushes through reforms to address these issues. In this regard, the infrastructure sector also needs some incentives, otherwise it will find it difficult to revive.

Uma Shashikant’s column ‘Client should be the core’ was an important take on the financial advisory business. While we can talk about it endlessly, things are unlikely to change unless there are proper rules and regulation. The advisory businesses that have been involved in mis-selling must be dealt with severely. The idea of providing financial advice is based on trust and considering how often people feel cheated by profit-driven companies, one can see why customers impose little faith in planners. Besides, the advisories need to come out and engage with people in a better and simpler manner. If not, the adviser-client relationship will never improve.

Pawan Negi, Delhi

Viren Sawhney, Kolkata

Manoj Sharma, Pune

BEST OF ARCHIVES Should you choose growth or dividend? Both fund options offer certain benefits to investors in specific situations. Go through this article to consider these before deciding. Five tips to secure your retirement corpus: If you want to build a sizeable retirement corpus and financially secure your sunset years, go through this story to find out how. Lost important documents? Here’s what you need to do: Read this story to know about the steps you should take to get duplicates in order to avoid financial loss or misuse. Are you losing `48 lakh in wasting food? Find out how a family can save a fortune through smart shopping, intelligent storage as well as careful food consumption.

All these stories are available at www.wealth.economictimes.com

LEARN & KEEP Also take a look at:  How much debt do

you carry?  Get your budget in

shape.  Ways of investing

in gold.

Life insurance in 2020 A recent study by PwC looks at how the insurance sector will change over the next decade.

Insurance penetration The low penetration in India highlights the huge uninsured population. The new regulatory controls precipitated a sharp fall in overall life premiums in 2011 and are likely to lead to a shift towards more traditional products, such as whole life insurance.

1.6% BRAZIL

2.5%

Call centre Partner/white label website

US Broker

CUSTOMER

Website

4% WORLD

4.4% INDIA

7.4%

Mobile Apps

Customer

FRANCE

investing.  Can you be a day

trader?

MOST READ OF THE WEEK

As customers research and buy products directly, insurers will offer interaction via virtual networks, offer guidance and access, and develop an infrastructure of multi-channel advice, sales and assistance. Consumers will use multiple online channels for research.

3.5%

CHINA

 Basics of bond

The Learn & Keep section is available at www.wealth.economictimes.com

Evolving model of advice, sales and service

Aggregators/ online intermediaries

How companies dress up their accounts: Though companies have to prepare their accounts as per defined standards, the pressure to report good results makes them fudge figures. Here are some of the tricks they use.

Should you renovate or relocate? Read the story to find out which of the two options gives you a better return on the time and money that you invest. How to delegate authority legally: If you want to allow another person to handle your financial matters, read this article to know about the documents you need to draw up. Check the fine print in festive home loan rates: As banks woo borrowers with attractive schemes, scan this article to find out if you actually benefit from them. Time to pick mid-cap funds: Go through this story to know how small- and mid-cap funds have outperformed their large-cap peers, the reason to invest in them.

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Last Word

The Economic Times Wealth, November 19-25, 2012

32

Financial wizards of the week Bring out the planner in you and suggest a strategy for a financial problem to one of our readers. The winners will receive gift vouchers worth

`5,000 and will be crowned the ET Wealth Financial Wizards of the week. The decision of ET Wealth regarding the winners of ‘Financial Wizard’ will be final. The vouchers will be e-mailed to the winners. Allow at least 30 days for the despatch of the voucher.

Last week’s winner VINAY KUMAR, DELHI

Last week’s question

I am a 53-year-old engineer and will retire Winner after seven years. I have built a corpus of `3,000 `50 lakh over the past 20 years by investing mainly in equity and equity funds. I have been thinking of moving my corpus to debt instruments now for capital protection, but since the markets are currently at low levels, I want to continue investing for another two years till the next bull run. However, my son thinks it is a risky option. Please advise. R Sharma, Thane

Kumar’s solution You have done well to invest regularly and create a large corpus, but do not get carried away. There is no guarantee as to when the next bull run will hit the market. If there is a further dip, you might lose out on your investment. Over the next one year, you should sell your low performing funds and start a systematic withdrawal plan from equity funds to debt funds, and four years before retirement, move it to fixed deposits. This will ensure a smooth transition and safety of capital. After retirement, move 85% of the corpus to the Senior Citizens Savings Scheme for regular income.

Solutions from the following were also useful RA Parekh, e-mail Prasad Gaikwad, Mumbai Solution: The markets are expected to do Solution: Considering you are 53, you well within a period of six months. The should move about 80% of your corpus market may continue to gain momentum to debt instruments. This will allow and hit the peak in 1-2 years to deliver a you to earn nearly `65,00075,000 per month once you Winners boost to your portfolio, which might retire. After reviewing your `1,000 be in the region of about 10-25% from the present levels. In view of the portfolio, ensure that you retain each above, get rid of the non-performers the best performing funds to in your portfolio and start investing in make for high growth, especially debt instruments, comprising long-term since the next bull run is expected soon. bank fixed deposits at a 9% return. You This will make sure that you continue to can continue to keep 10-15% in wellearn handsome rewards from equity, performing equity funds and opt for while taking care of your postdividend option for regular income. retirement expenses.

This week’s situation I have been investing `5,000 in mutual funds for the past three years, but the returns have barely beaten the market. I need a corpus of `2.5 lakh for my brother’s education in a year and was thinking of using my mutual fund corpus. However, since it is performing badly, I am considering redirecting my investments for the next year to a recurring deposit so that the returns are ensured. Since the markets are improving, my wife thinks I PN Hari, Mumbai should continue with the SIPs. Please advise. Send your solutions to [email protected]

MONEY-MAKING VENTURE

Rewards of a sporting gesture In inculcating the benefits of sports in schools, EduSports has grown to a `8.3 crore venture in three years. S VARADHARAJAN

MILAN SHARMA

W

hen a friend of Bangalorebased Saumil Majumdar complained that his kid preferred to watch television rather than sweat it out on the playground, Majumdar came up with a simple, but effective, solution. Along with three others—friends Meer Waqiruddin Khaleeq and Parminder Gill, and sister-inlaw Jyoti Majumdar—he founded the sports management services company, EduSports, in January 2009. EduSports was a shoot-off of SportzVillage, which Majumdar had set up in September 2003. A serial entrepreneur, the IIT (Mumbai) and IIM (Bangalore) graduate had also founded Learn@home and QSupport at the fag end of the 1990s. However, after suffering in the dotcom bust, he shut shop, grabbed a corporate job in the US, and returned home to start SportzVillage. The premise was that sports ought to be an integral part of every child’s education and upbringing. So the four created the infrastructure where kids could be trained in various sports under one roof. “However, it didn’t work because it was more a play of real estate. To have access to a centrally located property was a challenge,” admits 40-year-

From left: Parminder Gill, Jyoti Majumdar, Meer Waqiruddin Khaleeq and Saumil Majumdar

old Majumdar. So, by 2008, the team started thinking about approaching different stakeholders who could help them in nurturing a physically active generation. Majumdar soon realised that schools would make ideal partners since their facilities could be used to make sports an integral part of the school curriculum. While he admits that it was “cumbersome” to convince the school trustees, Majumdar persevered and finally set up a subsidiary,

The Economic Times Wealth, published by Bennett, Coleman & Co. Ltd. exercises due care and caution in collecting the data before publication. In spite of this, if any omission, inaccuracy or printing errors occur with regard to the data contained in this newspaper, The Economic Times Wealth will not be held responsible or liable. The content hereof does not constitute any form of advice, recommendation or arrangement by the newspaper. The Economic Times Wealth will not be liable for any direct or indirect losses caused because of readers’ reliance on the same in making any specific or other decisions. Readers are recommended to make appropriate enquiries and seek appropriate advice before making any specific or other decisions.

EduSports, dedicated to offering integrated sports management services to schools. (SportzVillage is no longer a functioning company.) The quartet invested a total of `2.5 crore in this venture, partly drummed out of their savings, and the rest coming from the parent company as well as angel funding. For the next five months, they had to play the waiting game, and finally got lucky in June 2009, when the TVS School from Madurai

contacted them to manage a comprehensive sports curriculum. By the end of the first year of operations, the company had managed to tap 10 more schools and posted a turnover of `60 lakh. In keeping with the growth, the team size too grew to 20 employees. Then, in January 2010, they were fortunate to get a fund infusion worth $2 million (`1.09 crore) from Seedfund. Today, EduSports has impacted over 1.5 lakh students in nearly 220 schools (nursery to class XII) across 70 cities, mostly tier II and III. In addition, it trains physical education instructors and has provided employment to more than 280 sport instructors to date. In September-October 2011, the company expanded its footprint to three schools in Saudi Arabia, all managed by Indian trustees. A team of three currently oversees the sports curriculum of these schools. Today, the company has 340 employees and it raked in `8.3 crore in 2011-12. Given that EduSports makes about `150-250 from each student, the growing awareness for fitness from a young age bodes very well for its future. In the next fiscal year, it hopes to make `13 crore.

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