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WHY NPS IS GOOD FOR YOU The pension scheme has everything that an investor looks for in a retirement plan. P2

Extent of loss depends on what you see P6

Why debt fund liquidity can be an illusion P7

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New rules of personal finance P14

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The Economic Times Wealth May 25-31, 2020

Why

NPS is good for you

IMAGES BAZAAR

The pension scheme has everything an investor looks for in a retirement plan. P2

By Babar Zaidi

I

ndranil Halder wants to reduce his tax but won’t invest in an option that can shave off more than 20% from his tax liability. “I’m not interested in the NPS because it has a long lock-in and other complications,” the Pune-based IT professional wrote to ET Wealth last year. Indeed, the 25 year old will have to wait till 2055 before he can access the money poured into the pension scheme. Very few millennials like to think in such long terms. This is something worrying Supratim

Bandyopadhyay, the newly-appointed chairman of the Pension Fund Regulatory and Development Authority (PFRDA). “A lot of people do not realise the importance of saving for retirement. They postpone the decision to save till they are in their late 40s,” he says (see interview on page 4). At the same time, awareness about the need to start early is gradually growing. “We are seeing a growing interest in the NPS among younger people. More than 62% of the investors in NPS are in the age group 26-45 years,” says Bandyopadhyay. One of them is Pune-

based PSU banker Priti Kawara (see picture). As part of her retirement benefits, `13,500 is invested in her NPS account every month by her employer. She puts another `50,000 in the scheme every year to claim the additional tax benefit under Section 80CCD(1b). Indeed, the triple tax benefits of NPS are a big draw for investors. Firstly, NPS investments are eligible for deduction under Section 80C. If one has already exhausted the `1.5 lakh ceiling under Section 80C, one can claim an additional deduction of up to ` 50,000 under Section 80CCD (1B). For an investor in the 30%

tax bracket, this means additional tax savings of `15,450. More tax can be saved if one’s employer signs up with NPS and puts up to 10% of the basic salary in the NPS under Section 80CCD(2). “NPS offers significant tax benefits. If your company offers NPS, don’t miss the opportunity to cut your tax,” says Archit Gupta, CEO of tax filing portal Cleartax.in.

Unfair to tax annuity The other ‘complication’ that Halder refers to are the NPS rules on annuity. Over the years, the NPS has shed its rigidity and become more tax friendly. The

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cover story The Economic Times Wealth May 25-31, 2020

entire 60% of the corpus that can be withdrawn on maturity is tax free. However, the remaining 40% has to be compulsorily put into an annuity to earn a pension that is fully taxed as income. This effectively means an investor does not save tax but only defers it. Experts point out that the tax situation of a retiree is very different. The basic exemption is higher and there are other benefits such as tax exemption to interest income up to `50,000 under Section 80TTB. Even so, the tax on annuity is a tad unfair because the pension received is a mix of the principal and investment returns. Being taxed on investment returns is acceptable, but the tax on the principal portion is galling. “Tax on annuity makes NPS unattractive and unfair compared to other retirement products such as EPF and PPF,” says Chirag Mehta, a finance professional based in Kolkata (see picture). He says if not the entire annuity, at least the principal component should be exempt from tax. “There should also be indexation benefit while taxing the profit element,” he says. For several years now, tax exemption for annuity pension has been on the Budget wishlist that the PFRDA sends to the Finance Ministry. This year, the insurance regulator Irdai also joined the chorus, but to no avail. “If the Finance Ministry agrees and annuity becomes tax free, it will be a gamechanger for the pension sector in India,” says Bandyopadhyay. Apart from the tax benefits, the NPS is also an ultra low-cost investment option. The fund management charges are 0.01%. To be sure, this is not the only expense for investors. They also have to shell out onetime charges at the time of on-boarding and pay a flat fee on every transaction. Despite this, the NPS is still by far the cheapest market-linked investment product.

PSU banker

Priti Karawa 27 years, Mumbai Being a PSU employee, NPS is mandatory for her, though she also invests an additional `50,000 on her own under Sec 80CCD(1b). Has been investing for the past three years but never gave attention to the asset mix or changed her allocation.

Given the downturn in the equity market, this is a good time to hike equity exposure in NPS to the maximum 75%.

Automatic rebalancing Several studies have shown that rebalanced portfolios deliver better returns in the long run than static portfolios that don’t make any changes. Financial planners recommend that investors should rebalance their portfolios at least once a year or after a major market development, where a particular asset class moves up or down by more than 10-15%. “Rebalancing protects the portfolio against volatility,” says Rohit Shah, Founder and CEO of Getting You Rich. The NPS also offers a terrific advantage to investors by way of automatic rebalancing. Investors can choose from three lifecycle funds—aggressive, moderate and conservative. The aggressive portfolio allocates 75% to equities, moderate puts 50% and conservative invests only 25%. The portfolios get rebalanced on the investor’s birthday every year. “The lifecycle funds of NPS are the only products which automatically rebalance the corpus every year,” points out Bandyopadhyay.

Best performing pension funds If you are convinced that NPS is good for you, the next step is to open an account and start investing. You also need to choose from the seven pension fund managers. The returns of individual NPS schemes do not reflect the actual returns for the investor because the portfolio is usually a mix of 2-3 different classes of funds. ET Wealth studied the blended returns of four different combinations of the equity, corporate debt and gilt funds (see page 6). Ultra-safe investors are assumed to have put 60% in gilt funds, 40% in corporate bond funds and nothing in equity funds. A conservative investor would put 20% in stocks, 30% in corporate bonds and 50% in gilts. A balanced allocation would put 33.3% in each of the three classes of funds while an aggressive investor would invest the maximum 50% in the equity fund, 30% in corporate bonds and 20% in gilts. Aggressive investors can now put up to 75%, but this allocation does not have a very long track record. We have also not considered the 5% allowed to be put in alternative investments. Ultra-safe investors who stayed away from equities have earned the highest returns. They may have

Finance professional

Chirag Mehta 33 years, Kolkata He has opted for NPS contribution by his company under Sec 80CCD(2) and also contributes on his own under Sec 80CCD(1b). His combined contribution is `1.62 lakh per year, which saves him over `50,000 in tax.

I regularly make changes in the asset mix. In December 2019, I switched from aggressive mix with 75% in equities to conservative mix with 25% only.

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The Economic Times Wealth May 25-31, 2020

missed the stock market rallies in the past few years but also didn’t suffer when markets crashed with a thud in March. The long-term returns of these investors are also higher than what the Provident Fund or small savings schemes churned out in the past 3-5 years. Unsurprisingly, the LIC Pension Fund is the best performing pension fund for the ultra-safe allocation, generating 16.32% returns in the past one year and SIP returns of 10.50% in the past five years. Conservative investors, who put a sliver of their corpus in equity funds, have also done well. But these funds have not managed to beat the returns of the Provident Fund. Newcomer Aditya Birla Sun Life Pension Scheme is the best performing fund in the short term, but HDFC Pension Fund stays ahead in the longer term and in the SIP mode. Balanced investors who divided the corpus equally across all three fund classes suffered from the exposure to equities. Though gilt funds rallied, the crash in equity funds pulled down the overall returns. Here again, Aditya Birla Sun Life Pension Scheme has delivered the most impressive numbers. Aggressive investors, who put the maximum 50% in equity funds, have lost money in the past one year. Some even lost money in SIPs in the past three years, underlining the risks of investing in equities. Incidentally, the Provident Fund has also started investing in stocks. In August 2015, it started by putting 5% of fresh inflows in Nifty ETFs. This was raised to 10% of inflows in 2017 and later hiked to 15% in 2018. However, though it notched up good gains in the first few years, the stock crash in March this year has pushed its equity exposure into the red. Our calculations show that due to the losses in equity investments, the Provident Fund may not be able to give out more than 7% in 2019-20.

Businessman

Milind Gawade 44 years, Pune He has been investing in NPS for the past five years, primarily to save tax. He invests around `1 lakh in the scheme every year, claiming tax benefit under Section 80C and Section 80CCD(1b). Gawade invests in mutual funds for equity exposure and uses the NPS for the debt portion of his portfolio.

My entire corpus is in a gilt fund. It has generated better returns than debt mutual funds.

“If annuity is made tax free, it will be a gamechanger” PFRDA Chairman Supratim Bandyopadhyay spoke to ET Wealth on a range of issues facing investors in the NPS. The NPS offers several benefits to investors. Yet, the voluntary segment accounts for less than 15% of the total AUM. Why are investors staying away? Yes, the voluntary segment of NPS is still very small. A lot of people still do not realise the importance of retirement planning. They want to postpone the decision till they are in their late 40s. Data shows that the mortality rate in India is improving but morbidity is also growing. People are living longer but are afflicted by diseases in their old age. They need to save up enough so that their golden years are comfortable. Having said that, we are seeing a growing interest in the NPS among younger people. More than 62% of the investors in NPS are in the age group 26-45 years.

But other retirement products, such as endowment insurance policies, continue to attract investors of all age groups.

Supratim Bandyopadhyay Chairman, PFRDA

Endowment insurance policies are popular but in recent years there is a definite move towards pure protection term insurance. Also, insurance has tied agents that helps bring in customers. The NPS does not have that kind of distribution support. The move to enlist retirement advisers has not gained the desired traction.

A major concern of investors is the taxability of pension from annuity. Do you

think this will change anytime soon? We have been requesting for the tax exemption of annuity income for some years now. Even the insurance regulator Irdai wants annuity to be exempted from tax. If the Finance Ministry agrees and annuity becomes tax free, it will be a gamechanger for the pension sector in India.

In 2018, the PFRDA allowed pension funds to invest in A rated bonds. In the light of the recent turmoil, do you think this decision needs to be reviewed? Most pension fund managers follow their own investment guidelines which are stricter than what PFRDA has laid down. No pension fund has made investments in bonds rated below AA, so there is adequate safety. Also, the guidelines say that bonds have to be rated by at least two rating agencies and should be listed.

PFRDA has offered 3-month moratorium to NCD payments. If funds were investing in NCDs of good companies, what is the need for the moratorium? This is not a moratorium offered by PFRDA. RBI has permitted banks to grant moratorium of three months on payment of installments and subsequently Sebi has told rating agencies that any delay in interest or repayment on bonds or debentures due to Covid related issues should not be

treated as a default. The pension fund managers will go by the ratings of the credit rating agencies and the valuation provided by the valuation agency.

The `5,000 maximum pension under Atal Pension Yojana may amount to very little after 25-30 years. Why not roll out a premium version with a maximum pension of `50,000? The Atal Pension Yojana offers a guaranteed return of 8% during the accumulation stage and during the annuitisation stage. These rates are higher than the prevailing rates. We want to raise the pension amount to `10,000. But this decision has to be taken by the government since they are guaranteeing the payment.

In the auto choice, the asset allocation is automatically changed every year. How does that help? A large number of subscribers do not change their asset mix throughout the investing period. NPS is the only product which automatically rebalances the corpus every year if the investor has opted for the auto choice. So if you started off with 50% equity and due to a market rally it has gone up to 60%, the NPS will automatically reset it to 50% on your next birthday. This happens regularly and ensures that the risk profile of the investor is maintained.

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cover story The Economic Times Wealth May 25-31, 2020

How NPS funds have fared These are blended returns for four different types of investors with varying allocation to equity funds. RETURNS (%)

Investors with no exposure to equities have earned the highest returns. LIC Pension Fund remains the best option, having delivered doubledigit returns in past 3-5 years.

ULTRA SAFE

6-MONTH

1-YEAR

3-YEAR

5-YEAR

3-YEAR SIP

5-YEAR SIP

Aditya Birla SL Pension Scheme

7.07

15.87

10.34

-

11.27

-

HDFC Pension Fund

7.30

15.99

9.94

10.16

11.39

10.02

ICICI Prudential Pension Fund

6.42

15.12

9.70

10.03

10.98

9.75

Kotak Pension Fund

6.64

14.83

9.44

9.99

10.75

9.62

LIC Pension Fund

7.10

16.32

10.35

10.65

11.90

10.50

SBI Pension Fund

6.78

15.58

9.84

10.13

11.10

9.92

UTI Retirement Solutions

7.01

15.26

9.28

9.71

10.81

9.53

6.90

15.57

9.84

10.11

11.17

9.89

AVERAGE

Returns of the best performing schemes have been highlighted.

ASSET MIX

60%

40%

Gilt funds

Corporate bond funds

RETURNS (%)

CONSERVATIVE

ASSET MIX

50% Gilt funds

30%

20%

Corporate Equity bond funds funds

6-MONTH

1-YEAR

3-YEAR

5-YEAR

3-YEAR SIP

5-YEAR SIP

Aditya Birla SL Pension Scheme

1.07

9.16

8.13

-

7.53

-

HDFC Pension Fund

1.10

9.00

7.75

8.69

7.65

8.04

ICICI Prudential Pension Fund

0.02

7.68 1-YEAR

7.21

8.29

6.93

7.53

Kotak Pension Fund

0.40

7.90

6.95

8.38

6.87

7.51

LIC Pension Fund

0.37

8.33

7.41

8.59

7.50

7.98

SBI Pension Fund

0.58

8.23

7.42

8.49

7.21

7.77

UTI Retirement Solutions

0.51

7.88

6.89

8.15

6.77

7.37

AVERAGE

0.58

8.31

7.40

8.43

7.21

7.70

Conservative investors also did well, thanks to falling interest rates. Newcomer Aditya Birla Sun Life stood at top. Long-term bonds rose sharply, making up for the fall in equities.

RETURNS (%)

Investors with a balanced mix suffered some pain due to the fall in equities. The returns earned in past 3-5 years are misleading. SIP returns during the same time have not been so great.

BALANCED

6-MONTH

1-YEAR

3-YEAR

5-YEAR

3-YEAR SIP

5-YEAR SIP

Aditya Birla SL Pension Scheme

-3.21

4.36

6.66

-

4.70

-

HDFC Pension Fund

-3.48

3.87

6.11

7.63

4.70

6.47

ICICI Prudential Pension Fund

-4.74

2.18

5.36

7.05

3.70

5.75

Kotak Pension Fund

-4.19

2.63

5.04

7.17

3.70

5.75

LIC Pension Fund

-4.52

2.55

5.17

7.01

3.92

5.86

SBI Pension Fund

-3.93

2.91

5.64

7.30

4.15

6.08

UTI Retirement Solutions

-4.04

2.52

5.14

7.04

3.59

5.68

AVERAGE

-4.01

3.00

5.59

7.20

4.06

5.93

ASSET MIX

33.3%

33.3%

33.3%

Gilt funds

Corporate bond funds

Equity funds

RETURNS (%)

AGGRESSIVE

ASSET MIX

20% Gilt funds

30%

50%

Corporate Equity bond funds funds

6-MONTH

1-YEAR

3-YEAR

5-YEAR

3-YEAR SIP

5-YEAR SIP

Aditya Birla SL Pension Scheme

-8.35

-1.39

4.82

-

1.07

-

HDFC Pension Fund

-8.86

-2.19

4.19

6.37

1.00

4.52

ICICI Prudential Pension Fund

-10.31

-4.29

3.20

5.56

-0.36

3.54

Kotak Pension Fund

-9.60

-3.47

2.85

5.76

-0.22

3.62

LIC Pension Fund

-10.33

-4.34

2.58

5.19

-0.58

3.24

SBI Pension Fund

-9.29

-3.42

3.54

5.89

0.29

3.95

UTI Retirement Solutions

-9.57

-3.85

3.07

5.70

-0.43

3.56

AVERAGE

-9.47

-3.28

3.46

5.74

0.11

3-year and 5-year returns are annualised. Data as on 18 May 2020

|

3.74 Source: Value Research

Aggressive investors with 50% in equities lost money. Now that up to 75% can be invested in equity, some would have lost more. Aditya Birla SL Pension Fund was the top performer.

05

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guest column The Economic Times Wealth May 25-31, 2020

Extent of loss depends on what you see Investors who feel that the current fall in equity values is extraordinary should look closely at the past, says Dhirendra Kumar.

DHIRENDR A KUMAR CEO, VALUE RESE ARCH

money mysteries Lump sum investments and SIP investments are fundamentally different. In investing, the level at which you invest is just as important as the value when you exit. This is mathematically obvious.

N

owadays, I come across a lot of people—not physically, of course— who say that the losses that their equity fund investments have suffered shows that the idea of equity investments for the longterm stands invalidated. Here’s a typical such view, from an email I received: “Even long-term disciplined investors (investing for the last 5 years or so) have lost their money. What is long term now, is it seven to 10 years? What should such investors do now?” The writer then gives an example to illustrate his point of view—the five year change in the Nifty from 23 March 2015 to 23 March 2020, the latter being the date at which that index hit a low of 7,610 points. On 23 March this year, the Nifty was 11% lower in value than exactly five years ago. As kids nowadays like to say, this is a true fact. However, it is not a new fact. If anyone was waiting for the five year returns of the bellwether indexes to be negative to bid a permanent goodbye to equity investing, then they should have found many, many opportunities earlier. They could have done so in 1996 when the market dropped below its level in 1991, or in 1998-99 when it was below its level in 1993-94, or indeed in similar episodes

As far as an actual investment strategy in equity funds goes, there is no reasonable way to do it except through a regular SIP. in 2001, 2003 and 2011-12. Why hang around till 2020 to finally proclaim shock and awe at the fact that point-to-point five-year returns can occasionally turn negative? Why not stick to a bank fixed deposit, as is normal for most Indian savers? Not just that, it goes without saying that this is not the last time that such a thing will happen. Over the coming years and decades, there will be many, many occasions when this will happen again. It may even happen more often, or more severely than it has in the past. There are no guarantees. However, it also goes without saying that picking up a particular five year period and looking at it is good for today’s peculiar style of online point-proving but not an actual investment strategy. As far as an actual investment strategy in equity funds goes, there is no reasonable way to do it except in a regular Systematic Investment Plan (SIP). If one looks at the track record of SIP style investing over the decades, five year returns fell negative in a sustained way only during the 2001-2002 period and then recovered quickly. For the

GETTYIMAGES

06

actual 23 March example given above, it is notable that a five year SIP in a Sensexequivalent fund gave returns of 8.6 % on 1 March and -3.6% on 1 April. Equivalent returns for a seven year SIP were flat on 1 March and 3.2% on 1 April. However, this is not the whole story. Lump sum investments and SIP investments are fundamentally different. In investing, the level at which you invest is just as important as the value when you exit. This is mathematically obvious. When you invest in a lump sum, you are taking a gamble not just at the future but also, in a sense, at the present. The point at which you invest could turn out to be a high point, something that will destroy your returns for all time to come. SIPs, by averaging your entry point over a long

period, insulate you from that. What’s more, all experienced investors also try to average their exit point. As I wrote just last week, “For planned exits, where one knows before hand roughly when one needs the money, the thing to do is to start withdrawing the money through an SWP (Systematic Withdrawal Plan) some time before the target date arrives.” Historically, if one averages one’s exit from an investment over one to two years, the result is always far better than a lump sum exit. It’s very likely that this will also turn out to be true over the coming time.

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mutual funds The Economic Times Wealth May 25-31, 2020

Debt fund liquidity an illusion?

GETTYIMAGES

There could be a big gap between the actual maturity date and the nomenclature of the fund and category.

by Sanket Dhanorkar

A

fter the Franklin Templeton debacle, debt fund investors are waking up to the reality that returns are secondary to liquidity and safety. When large-scale redemptions from stressed debt schemes left Franklin Templeton short of cash, it decided to wind up the schemes. The lesson for investors was that actual liquidity may not be commensurate to the fund category profile and their own time horizon. A fund’s liquidity indicates its ability to quickly convert existing investments into cash. Why is liquidity so important? Debt fund investors are advised to marry the choice of fund with their own investing time horizon. Funds are now classified under various duration buckets—each carrying separate limits for bond maturities. Someone looking to park surplus funds for 3-6 months is advised to put it in an ultrashort duration fund. Those looking at a time horizon of 1-3 years may be advised short or low duration funds. The rationale is that the respective funds invest in bonds with a similar maturity profile. Since these are meant to provide for short term needs, they will not take undue liquidity risk. But what if the reality is different? Consider Franklin India Ultra Short Bond and Franklin India Low Duration, two of the six now closed schemes. These had an average maturity of 0.44 years (roughly 5 months) and 1 year and 5 months respectively as of 23 April 2020. Investors were under the impression that the funds would return money roughly

Funds may hold bonds that will mature long after the stated average maturity Average maturity

Maturity date of longest maturity bond

Axis Ultra Short Term

6 months

6 Jul 2077

Nippon India Ultra Short Duration

10 months

28 Aug 2030

ICICI Pru Ultra Short Term

5 months

31 Mar 2029

Aditya Birla SL Savings

9 months

24 Dec 2024

Sundaram Ultra Short Term

5 months

20 Apr 2023

HDFC Short Term Debt

3 years, 4 months

21 Aug 2072

UTI ST Income

4 yrs, 11 months

6 Mar 2050

Axis Short Term

3 years, 3 months

22 Jun 2045

SBI Short Term Debt

3 years, 4 months

28 Jan 2036

Baroda ST Bond

3 years, 2 months

29 Jul 2034

Scheme

Some bonds have call or put option dates closer to category maturity limits, allowing them to fit within rules. Data compiled by ETIG Database. Source: Ace MF

around the same time. But actual cash flow projection by the fund house suggested a waiting period of over two years. It turns out that the maturity of a large number of papers was far beyond the portfolio’s average maturity date. “It is definitely not telling the whole story,” says Kalpesh Ashar, Founder, Full Circle Financial Planners and Advisors. The maturity profile of a fund may not accurately reflect the true liquidity of the entire portfolio. Here is why your fund’s liquidity may be an illusion: Both maturity and duration are deceptive indicators of cash flow.

Despite what the fund category and the average maturity suggests, several underlying instruments held by the fund may actually be of much longer maturity. This is because the category defines the average maturity—it doesn’t mean every bond in the portfolio will mature at the same time. Rules say only the portfolio average should fall within the definition. So there may be a big gap between actual maturity and what is allowed by the category. “There is a lot of ambiguity in the way higher maturity papers are allowed to be be held by shorter duration funds,” says Ashar.

The duration of a fund is the weighted average time until all the cash flows from underlying bonds are received. A debt fund at any time may hold instruments like floating rate notes and perpetual bonds, apart from regular coupon bearing fixed tenure bonds. While a floating rate note may have any maturity, it typically comes with a reset clause, where the rate payable is adjusted at fixed intervals. “The duration measure considers only the nearest reset date for computation of bond duration,” points out Kirtan Shah, Chief Financial Planner, SRE. So a floating rate bond maturing in five years but with next reset falling in six months will sport duration of six months. Similarly, in case of perpetual bonds—where there is no defined maturity date—the nearest call date is taken as current maturity date. Bonds with put options will project the nearest put date as prevailing maturity. Call options gives the issuer the right to repay lender on a predefined date before maturity. Put option extends the lender right to demand repayment from issuer at a predefined date before maturity. It is not necessary either call or put will be exercised. These facets completely distort the liquidity profile of debt funds, say analysts. Vidya Bala, Head of Research and Product, Primeinvestor.in, says, “The fund maturity profile may give an impression of liquidity that may not actually transpire owing to complexity in underlying instruments.” In the case of Franklin’s debt funds, the liquidity mismatch was also compounded by heavy borrowings to provide for ongoing redemptions. Since the funds’ borrowings have to be repaid first from any maturity or sale proceeds, it will lead to delay in cash flow to investors. Finally, the liquidity profile of a fund is directly linked to its credit profile. If the quality of underlying bonds is strong, the fund will always be in a position to sell bonds if the need arises. But if the fund holds too many low rated instruments, the liquidity will suffer in a crisis. So, if an ultra-short duration fund has put 20% of its portfolio in bonds rated lower than AA, its liquidity or cash flow will be far poorer than what its duration suggests. On the other hand, if the fund has substantial allocation in government securities or AAA rated corporate bonds, its liquidity will be comfortable even in the worst of times. For investors, it may be time to look beyond category definitions and fund maturity profile. Actual liquidity is often far different due to the fund’s choice of bonds. Bonds with the longest maturity in the portfolio would give the actual timeframe within which the fund can return your money when facing stress.

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financial planning 08

The Economic Times Wealth May 25-31, 2020

Parents best at planning finances Nuclear families have the most financial freedom, while women are acutely aware about the need for a financial plan, states a recent HDFC Life’s Life Freedom survey. Riju Mehta analyses the data. GETTYIMAGES

Financial Planning

Life Freedom Index score in 2019, an increase of 8.7 over 2016.

66.6*

Women are acutely aware of the need for a financial plan

Financial Awareness Index (FAI)

51.3

Financial Sufficiency & Adequacy Index (FSI)

What best describes your financial planning to meet your and your family’s goals?

71.5

Financial Liberty Index (FLI)

73.4

Financial Planning Index (FPI)

71.9 Proud Parents

* LFI is a reflection of the individual’s perception and his family’s current and future financial aspects based on their financial plans. It is measured on four indices: Financial Awareness (25%), Financial Sufficiency & Adequacy (50%), Financial Planning (20%) and Financial Liberty (5%).

Financial Sufficiency & Adequacy Most respondents are highly confident of meeting their financial needs

Nuclear families feel the most free financially 71.2

72%

Comprehensive plan / Somewhat comprehensive plan

70%

18%

Basic financial plan

22%

10%

Financial planning in progress / No financial goals

7%

How confident are you of achieving future financial needs?

Nuclear families comprising only couples

74%

16%

10%

Proud Parents

69.5

69%

Nuclear families with parents

20%

11%

22%

10%

Young Aspirants

67.2

68% Wisdom Investors

Nuclear families with kids

64.3

Extremely confident / Very confident

Joint families

Confident

Tier I investors are most meticulous about reviewing their plans How often do you monitor/review your plans? Very regularly / somewhat regularly

Somewhat confident / Not at all confident

Smart Women

Once in a while

72%

Financial Awareness: Stark contrast in priorities of parents and youth 80%

Proud Parents

55% 44% 43% 30%

Young Aspirants

Key life priorities

Metros have the highest financial awareness

Tier I cities best at financial planning

Financial Awareness Index

Financial Sufficiency & Adequacy Index

53%

49% 35% 40% 38%

28% 29%

57

METROS

43

Financial security for my spouse

Improving Being Financial Planning for my my Physically security for my parents / life after standard and other family retirement of living mentally fit members

TIER II

43

Metros

54%

Tier I

23%

5%

16%

3%

29%

17%

METROS

68

73

TIER I Providing for child’s future

81%

Don’t update my financial plan / Don’t have a financial plan

TIER I

71

TIER II

Tier II Source: HDFC Life’s ‘Life Freedom Index’. The study was conducted in 2019-20 by Nielsen among 2,049 respondents in 14 metro, tier I and tier II cities. They were divided into four groups: Young Aspirants, Proud Parents, Wisdom Investors and Smart Women.

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stocks The Economic Times Wealth May 25-31, 2020

09

Buy stocks with high risk-adjusted returns GETTYIMAGES

To limit portfolio value erosion in the current volitile market, it is important to judge risk-adjusted returns on a relative basis.

by Sameer Bhardwaj

E

conomic growth uncertainties due to the coronavirus pandemic have badly affected the equity market. Volatility has intensified in the past four months and the majority of listed stocks have suffered substantial losses. Also, the India VIX index surged close to the 2008 global financial crisis levels in March. Irrespective of the fiscal and monetary measures undertaken by the government, the market movements continue to be erratic due to growing risk aversion. Fear and anxiety is gripping market players, making stock selection even more difficult during this volatility. With the rising risks, it is imperative to select stocks based on their risk-adjusted returns along with other fundamental attributes. As most of the stocks have delivered negative returns since the beginning of the year, it is appropriate to judge such risk-adjusted returns on a relative/ranking basis. There are two standard measures for calculating risk adjusted returns: the Sharpe ratio and the Treynor ratio. Frequently used for evaluating a portfolio or mutual fund returns, these can also be applied to direct equities. Sharpe ratio calculates the excess return generated by a stock relative to standard deviation, which is a measure of total risk (company-specific and marketspecific). On the other hand, the Treynor ratio measures the excess return generated by a stock relative to the beta, which is a measure of the market risk. The excess return is the return generated over the risk-free rate (or 10-year government bond yield). For example, if a stock has generated 10% in the past one year and the average government bond yield is 8%, the excess return will be 2%.

Names that score on risk-adjusted returns ANALYSTS’ RECOMMENDATIONS

COMPANY

PE

EV/ EBITDA

CURRENT PRICE (`)

1-YEAR TARGET PRICE (`)

UPSIDE POTENTIAL (%)

BUY

HOLD

SELL

Ashoka Buildcon

70.8

4.6

54

124

131.5

24

1

0

Hindalco Industries

6.2

4.5

115

191

65.2

24

2

0

Minda Industries

32.3

11.3

267

358

34.0

10

3

1

Rallis India

21.3

13.5

207

238

14.8

13

4

4

Current price, PE as on 18 May 2020. Data source: ACE Equity and Bloomberg.

Constituent stocks of the BSE500 index were considered to identify those that have scored well on the relative risk-adjusted returns. The Sharpe and the Treynor ratios were calculated for the past 4 months (volatile period), and the standard 1-year time frames. The stocks were ranked in the descending order of these ratios across the defined time frames. This means that the stock with the highest Sharpe ratio in the 4-month time frame was given rank 1, the second highest was given rank 2, and so on. Similar rankings were given to stocks on the Sharpe ratio calculated for the past one year. The average ranks for all the companies across these time frames were worked out. For example, if a stock had a rank of 5 on 4-month Sharpe ratio and rank 7 on 1 year Sharpe ratio, the average rank of the stock worked out to 6. Similar rankings were made for Treynor ratio for both the defined time frames and the average rank for each stock obtained. Eventually, the final average rank for each stock was worked out using the average ranks of Sharpe and Treynor ratios. Such ranks were then arranged in an ascending order to determine the companies that have scored well on the relative riskadjusted returns. The top 15% of the stocks

were selected from the list. To look at the future potential of such stocks, only those covered by at least five Bloomberg analysts and with one-year forward price potential greater than 10% were included. Let us look at four of such stocks:

Ashoka Buildcon The infrastructure development company engaged in construction, power transmission and distribution on EPC basis, has a strong balance-sheet to support its cash flows. Healthy order backlog led by hybrid annuities and EPC projects provide it strong revenue assurance. Analysts are bullish on the stock given its proven execution capabilities, improving gross collections, good performance of roads and power segments, and compelling valuations.

Hindalco Industries Engaged in aluminium and copper production, the company has a footprint in 11 countries outside India. In the fourth quarter of 2019-20, the company’s EBITDA remained strong despite a decline in volumes. The net debt/EBITDA stood at 2.1 times compared to 2.5 times last year. According to a report by Motilal Oswal, Hindalco will witness lower volatility in earnings as its

conversion business (Novelis and Aleris) contributes significantly to EBITDA. The brokerage house is bullish on the stock due to the company’s strong liquidity profile and attractive valuations of five times its EV/EBITDA and PE of six times based on its estimated 2021-22 earnings.

Minda Industries The company is a manufacturer of automotive components for Original Equipment Manufacturers that cater to passenger vehicles, commercial vehicles and twowheelers. New products, improved technology and customer acquisitions are likely to drive the company’s growth. Analysts believe that the profitability will increase given the high margin products like twowheeler alloys and reverse parking sensors. Moreover, the acquisition of Delvis will help the company to increase its market share in the vehicle lighting segment.

Rallis India A subsidiary of Tata Chemicals with presence in farm essentials like pesticides, fertilizers etc, the company’s domestic revenue increased by 29% in the fourth quarter of 2019-20 despite the loss of sales due to Covid. Though its international business revenue declined by 25%, the management expects recovery in the next few quarters. The company has improved its operating cash flows and receivable days (working capital) in 2019-20. Emkay maintains a buy rating on the stock due to the strong momentum in the domestic business and market share gains. The brokerage house has raised its revenue estimates for Rallis for 2020-21 and 2021-22 by 2% and 4% respectively.

Please send your feedback to [email protected]

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investing 10

The Economic Times Wealth May 25-31, 2020

‘Credit risk funds will be back in reckoning sooner than later’ After the recent Franklin Templeton episode, investors are wary of credit risks. However, as mutual funds are more exposed to structured credit, they are still safe, Amit Tripathi tells Sanket Dhanorkar. ment, I don’t see any names coming under pressure immediately. Some of your debt funds have seen sizeable redemptions. How are you tackling the situation? Redemptions were very high in the recent past. But we are more comfortably placed now. Even in some of the lower rated exposures, we have seen refinancing and cash flows through buybacks and prepayments. This allowed us to create liquidity outside the normal secondary market route. Infrastructure debt funds, FPIs have also come in to take advantage of the attractive yields. Through a combination of working with issuers for prepayments and by selling some exposures we have been able to generate sufficient liquidity even in credit funds. With the spotlight on credit risk funds, how do you plan to maneuver Nippon India Credit Risk through the stress? There are things we will do differently. In credit funds, we will focus only on those names where cash flow visibility is very high and structures are self-liquidating in nature, particularly in high yield bonds. This way, we won’t be at the mercy of balance sheet vagaries nor have to rely on refinancing. We will also focus on avoiding concentration risk—something we have suffered from both in terms of illiquidity and bigger impact from a credit event. The overall composition of the portfolio will have to undergo a change, maintaining reasonable allocation to high grade bonds to manage liquidity. We have also taken a decision not to invest below AA rated corporates across schemes other than credit risk funds. The size of the liquidity problem is not very significant now as a percentage of the total debt AUM— less than 5%. This is a viable category in the medium to long term, and will be back in the reckoning sooner than later.

lio shows a different picture now. Ultra Short invested in a mix of AAA, AA+ and AA- . However, there was a credit event in one of its holdings. The portfolio size after this event came down drastically. We were forced to sell many exposures. So because of a few credit events that were large in the context of the fund holdings, we saw significant redemptions which skewed our overall portfolio quality. Are investors right to flock towards relative safety of liquid funds and Banking and PSU funds? Has long duration strategy run its course for now? Both short and long term high-grade segments have delivered very good returns. However, long-term segment has the issue of visibility given the current fiscal uncertainty. While RBI has been cutting rates and providing liquidity, there are uncertainties on the medium term fiscal consolidation path. Hence, investors want to be in high grade short-end comprising liquid, ultra short term, corporate bond funds and Banking & PSU debt funds. Some flows have been seen in high grade long term duration funds as well. Currently the absolute levels across the curve for sovereign /AAA assets are low, but the curve is very steep. We have moved to a low growth / low inflation environment from medium to long term perspective. Hence, long duration makes more sense with a 3-5 year perspective. From a 3-12 month perspective, interim volatility can be very high, hence investors should stick to the shorter end. Overall, a 70:30 allocation where 70% goes into short term high-grade and the rest in long term high-grade could be a good strategy.

We will learn from our mistakes, and ensure negative surprises in debt funds are reduced.

Amit Tripathi CIO, Fixed Income Investments, Nippon India MF

With credit profile of India Inc set to sag further, do you see more pain for debt funds? The post-Covid environment will only add to the weakness that existed even before the lockdown. There are two aspects to this weakness—availability of liquidity for corporate balance sheets and debt servicing capability of India Inc amid slow growth. In the midst of this, the Franklin Templeton episode has turned the focus on concerns around credit. Going forward, the environment will be even less sanguine. One will have to be careful for the next six months. Credit quality deterioration will be more pronounced in the unsecured space. Among non-financials, discretionary consumer facing businesses will face issues. These businesses will need sufficient capital buffers to survive. Structured credit will continue to outperform plain vanilla credit. Mutual funds are more exposed to the former, and hence in better shape. While the incremental risk definitely exists in the current environ-

Why did Nippon India Strategic Debt & Nippon India Ultra Short Duration explore low quality credits? Nippon India Strategic Debt has never invested in any instrument with lower than AA- rating. Even the AA- component was fairly low. What happened is that 2-3 of our large exposures, which became larger as percentage of the portfolio when the scheme sizes reduced, saw significant deterioration in credit post-purchase. While they were AAA or AA rated at the time of purchase, they saw multiple rating downgrades subsequently. That is why the optics of the portfo-

Do you think the current categorisation of debt funds is flawed? If you add up all the credit events over the past 12-18 months, 80% of the papers would have started off AAA rated. But at the same time, it would not hurt to give investors some confidence at this time. Anything with higher AAA, AA exposure gives more confidence. Adding credit range along with duration risk might be workable and beneficial for investors. We should not extrapolate the event of the last 12 months. On our part, we will learn from our mistakes, and ensure the negative surprises in debt funds are reduced to near zero levels.

Please send your feedback to [email protected]

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financial planning The Economic Times Wealth May 25-31, 2020

WEALTH WHINES Money & Relationships

Should you discuss salary cut with your children? While it’s a good idea to share the bad news with your kids, find out about the things you should keep in mind before doing so, says Riju Mehta.

I

f you have suddenly lost your job or seen your salary slashed due to Covid, it would have come as a shock to you and your finances. Even as you start learning to live with the altered new reality and make changes to your spending and budgeting, there are other issues to deal with. For instance, how do you explain to your children why they can’t order the dress or gadget you were planning to buy them? Why have you suddenly cut down on expensive foods or online ordering? If you’ve been debating what to do about the uncomfortable questions and whether or not you should explain the situation to the kids, here’s what you should consider first:

ANIRBAN BORA

1

Consider the child’s age & maturity level

While it’s typically a good idea to disclose such developments to children, it would be quite pointless if the kid is just 5-6 years old. However, by the age of 12, most kids have a good grasp of what is going on in the household, financially or otherwise. So it would be prudent to sit with the child and explain about your salary cut or job loss in a relaxed

manner. It also makes sense to consider the child’s maturity level because each child is different and sometimes a 15-year-old may not be able to process the development, while a 13-year-old may do so with ease. So assess your child’s ability to process the information before deciding to divulge the financial details. Even if you feel your child is not ready to handle it and you should not tell him about the salary cut, remember not to lie to him about the situation. Lying will confuse the child as he will not be able to reconcile the developments with the false explanations you have peddled to him.

2

Explain without stress

It is important that if, and when, you decide to tell the children about the salary cut, you are in a completely relaxed frame of mind. If you are stressed, you will transfer the anxiety to the child and it may result in an undesirable reaction instead of easing the child’s fears. So convey the information in a matter-of-fact manner, with the underlying message being that it is a temporary phase and that you will find a way to handle it. It is also important to send across the message that you are in charge of

IF YOU HAVE A WEALTH WHINE, WRITE TO US... All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at [email protected] with ‘Wealth Whines’ as the subject.

Disclaimer: The advice in this column is not from a licensed healthcare professional and should not be construed as psychological counselling, therapy or medical advice. ET Wealth and the writer will not be responsible for the outcome of the suggestions made in the column.

the situation and and that things will be back to normal soon. If you are positive and optimistic, the child will not feel anxious or depressed.

3

Convey implications in a simple manner

When you tell the children that you’ve had a salary cut, explain what it means in terms of the day-to-day financial transactions and short-to-medium term implications. Try to explain how reduced income will translate to lower spending and, hence, the importance of separating the essentials from discretionary items. Also lead by example, stressing on how you will cut your personal spending for the time being. This will make the kids feel better about letting go of their purchases.

4

Seek contribution

If you present a difficult situation to the child in which he has no contribution to make, he will feel helpless and develop latent anxiety. Since he has no way of controlling the situation, he will not know what to do. So, when you tell the child about the salary cut, ask how he can help in the situation. Seek his help and support, explaining how contribution from every family member will help handle the situation better. Encourage him to forgo his monthly pocket money or save it so that he can buy something bigger later on.

READERS’ QUERIES

Q

My father is having an extra-marital affair and bears all her expenses. We have bought a house on loan. How can we claim a share in his PF or block it so that, after retirement, we can clear the loan as my dad is unlikely to do so? — Seema Sharma

Adequate maintenance can be claimed by your mother under Section 125 of the Criminal Procedure Code. The Provident Fund cannot be blocked by the family member during the life span of the PF account holder. However, after the death of your father, your mother and you, being legal heirs, can claim your right in his property.

I have a 15-year-old daughter and have some self-acquired property. I’m the only son and have two sisters, both of whom are employed and married, with their own houses. My father retired six years ago and has two self-acquired houses. My questions are as follows: 1. Can my daughter claim my father’s self-acquired property? 2. Can my daughter claim my selfacquired property or any inherited property from my father? 3. Can my daughter claim any portion of my savings? 4. Can my daughter claim any finan-

Q

cial aid from me, be it in the form of property or money? — Vinay Ramdas

1. No. As per the succession laws in India, your daughter cannot claim the shares of her grandfather’s intestate properties during your lifetime. 2. After your death, as a legal heir, your daughter is legally entitled to claim a share in your self-acquired properties if you die intestate. She can also claim a share in inherited property if that has been absolutely vested with you. 3. No, your daughter cannot claim any portion of your savings during your lifetime. She can only claim as a legal

heir after your death if you die without a will. 4. She can claim maintenance from you until she becomes a major with reference to Section 125 of the Criminal Procedure Code. If a person dies with more than `50 lakh in demat and mutual funds, can these be redeemed and sold on intimation of death or does it continue to be in the market till the probated will is presented? Since getting a will probated takes 5-6 months, is the money at market risk — Suhas Singh during this period?

Q

During the interim period (between death and granting of probate), the executor or administrator, or the nominee, can deal in securities for the benefit of the estate. If there is no executor, any beneficiary can apply for letter of administration and the permitted administrator can take care of the estate of the deceased, including such securities.

Raj Lakhotia Founder, Dilsewill

11

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learn & keep 12

The Economic Times Wealth May 25-31, 2020

Which debt product should you opt for? With banks slashing fixed deposit (FD) rates, investors are looking for alteratives. However, while chasing higher returns, you should not ignore safety or tax implications. Narendra Nathan explores various debt products to help you choose the one most suitable.

5-year bank fixed deposits Sr. Citizens

Senior Citizens’ Savings Scheme

Others

National Savings Certificate (NSC)

6.14

5.39

Rate

5.70

5.15

4.51

4.47

Effective yield if 80C availed @20.8%

6.80 3.92

7.40

5.86

5.09

7.40

7.40

Rate offered

5.33

Net yield @20.8% tax slab

6.80

Net yield @20.8% tax slab

6.50

RBI bonds Net yield @31.2% tax slab

7.75 Interest rate

6.80 4.68 Net yield @20.8% tax slab

Interest rate (SBI)

80C benefits

NO

Tax-free interest

NO

Net yield @31.2% tax slab

PROS

CONS

Premature withdrawal allowed with penalty.

Net yield very low for people in high tax brackets.

WHO FOR Those who want easy access to their money. Highly liquid.

Net yield @20.8% tax slab

Interest rate

80C benefits

YES

Tax-free interest

NO

Net yield @31.2% tax slab

PROS

CONS

High interest rates; No risk

5 year lockin; Only for people above 60; Maximum investment allowed is ` 15 lakh

Caution: Smaller banks offer better rates. However, weigh the risks before investing.

Tax saving fixed deposits Sr. Citizens

6.50

5.23

6.02 6.50

5.15

4.47

4.51

6.50

Net yield @20.8% tax slab

5.70

5.70 3.92

Net yield @20.8% tax slab

Net yield Net yield @20.8% tax slab @31.2% tax slab

80C benefits

YES

Tax-free interest

NO

PROS

The 80C benefit.

Effective yield if 80C availed @20.8%

Effective yield if 80C availed @31.2%

WHO FOR

NEGATIVES Long 5-year

People who only want to invest in their own bank.

lock-in, low net yield.

5-year company deposits 7.55

5.98

5.78

Net yield @20.8% tax slab

Interest rate (HDFC)

80C benefits

NO

Tax-free interest

NO

5.19

5.02

80C benefits

YES

Tax-free interest

NO

PROS

CONS

Moderate interest; No risk.

5-year lock-in period.

Rate

Effective yield if 80C availed @20.8%

8.65

Investors who want totally risk-free products.

Effective yield if 80C availed @31.2%

Interest rate

80C benefits Tax-free interest

YES

NO

PROS

CONS

High interest rates; No risk

New a/c can be opened only by parents with girl child; Maximum investment allowed is `1.5 lakh p.a.

WHO FOR

Parents who want to accumulate money for their daughter’s education or wedding.

7.10

Current interest rate

7.10

Net yield @20.8% tax slab

7.10

Net yield @31.2% tax slab

8.96

Effective yield if 80C availed @20.8%

10.32

Effective yield if 80C availed @31.2%

Rate offered*

Net yield @20.8% tax slab

YES

8.65

Tax-free interest

YES

PROS

Effective yield if 80C availed @20.8%

Effective yield if 80C availed @31.2%

CONS WHO FOR Only for those Great long term in EPF net. accumulation Withdrawal opportunity restrictions for salaried till retireindividuals. ment.

Listed tax-free bonds

4.94 Current yield

NO

CONS

Lock-in of 7 years. Invest only spare money.

PROS

CONS

Higher interest rates than bank FDs.

Higher risk; More restrictions on premature withdrawals.

WHO FOR

Those who can afford to take higher risk and forgo liquidity.

Caution: Risk increases with smaller banks, but risks multiply with smaller and weaker companies. So, restrict investments only to AAA rated companies.

YES

Tax-free interest

YES

PROS

CONS

High tax free rates; No risk

Long 15 year tenure. Maximum investment only `1.5 lakh p.a.

Investors who are ready to hold till maturity.

Safe categories LIQUID FUNDS

OVERNIGHT FUNDS

Historical returns *

5.58

4.70

Net yield @20.8% tax slab

5.25

4.55

Net yield @31.2% tax slab

5.25

4.55

*Historical 1-year returns; it may vary in future ** Long term capital gain tax of 20.8% with indexation; inflation assumed to be 4%

80C benefits

NO

Tax-free interest

NO

PROS

CONS

No lock-in, reasonable liquidity; no cap on investments.

Due to fall in interest rate structure, future returns expected to be low.

WHO FOR

HNIs who want to park large amounts of money and who need liquidity.

Pradhan Mantri Vaya Vandana Yojana

4.94 Net yield

4.94 Net yield

@20.8% tax slab

@31.2% tax slab

5.86 Net yield @20.8% tax slab

7.40 Rate offered

5.09 Net yield @31.2% tax slab

Net yield @31.2% tax slab

80C benefits

WHO FOR

IMPORTANT Rates still hgh. Lock-in before the rates are pared down.

PARTICULARS

Net yield @31.2% tax slab

Due to political pressure, rates offered are higher than market rates.

Tax-free interest

PROS

Safest debt product offering highest interest; no cap on investment.

12.57

*This is the rate for last year. It Is expected to come down this year.

80C benefits

NO

Debt mutual funds

10.92 8.65

80C benefits

WHO FOR

Voluntary Provident Fund

Public Provident Fund

Others

7.30

Senior citizens in higher tax brackets who can lock-in money for 5 years.

Effective yield if 80C availed @31.2%

Net yield @31.2% tax slab

7.60

Caution: Smaller banks offer better rates. However, weigh the risks before investing.

Sr. Citizens

SUITS WHOM

7.60

7.60 FD rate (SBI)

Effective yield if 80C availed @31.2%

Sukanya Samriddhi Yojana

Others

5.70

Effective yield if 80C availed @20.8%

WHO FOR

Those in high tax bracket can use this instrument for long term accumulation.

Note: Current yield to maturity of 9.01% NHB Bond, as on May 19

80C benefits

NO

Tax-free interest

YES

PROS

CONS

High rated PSU entities; decent post tax yield

Need to buy from market; Market liquidity not that great.

ILLUSTRATION: ANIRBAN BORA

WHO FOR

Suits only people in the highest tax bracket.

80C benefits

NO

Tax-free interest

NO

PROS

CONS

Moderate interest; No risk.

For those above 60; 10 year lock-in; Maximum pension up to `10,000.

Note: Though a pension plan, this works like an FD; Invested amount returned after 10 years or at the death of insured.

WHO FOR

Senior citizens looking for risk free products.

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financial planning The Economic Times Wealth May 25-31, 2020

New rules of personal finance The pillars of household finance—income, spending, saving and investing—have changed, says Uma Shashikant.

GETTY IMAGES

14

A UMA SHASHIK ANT IS CHAIRPER SON, CENTRE FOR INVES TMENT EDUC ATION AND LE ARNING

In the new world thus, across segments, income has vanished, reduced or has settled at a new low. Keeping the job and hunkering down to doing it as best as possible, is the most we are looking at.

s we switch from fear to a gradual state of restart, the questions about family finances after Covid-19 are stark. The going is too tough for some families, and easy for the fortunate. But the recast view of income, spending, saving and investing is tough to miss. Those four pillars of household finance have changed drastically. Risks to income are the most significant. The migrants struggling to get home have lost their livelihood. It is unclear if they will find work in their villages; it is unknown if there are better times ahead when they will comfortably travel back to cities for jobs. Millions of livelihoods have been wiped out by one pandemic. Our gross insensitivity to the shame of displacing millions without work, food and water, and letting them walk thousands of miles, is a black mark we cannot erase from our collective conscience. The next rung of wage earners who have made the cities their home are still around, but do not have jobs. Many employers who funded the first month of pay are now reluctant to extend the benevolence. Without economic activity, there is no work and no pay; nor do these households have enough savings to keep going without income. They are surviving on hand loans and pledging the few things they have accumulated. Among the more comfortable monthly income earners, many have lost their jobs; many have settled for significant pay cuts, and hope to hold their jobs; and many others are unsure how the work from home situations will extend over time. The children

are at home, with no hope of schools reopening. There are no summer camps, day care or play date. Either parent or a family elder must be present to take care of them and supervise their online studies. This reduces the hours of work the family can put in outside their home, if restart begins. Those who ran businesses have no income as the businesses are closed. Stocks remain unsold; bills remain unpaid; without buyers there is no revenue. From big businesses to small ones, there is an unbelievable standstill. No one would have expected to operate, if at all, at single digit capacity. When the first quarter numbers for this financial year come in, despite all expectations, the shock will be unbearable. In the new world thus, across segments, income has vanished, reduced or has settled at a new low. Keeping the job and hunkering down to doing it as best as possible, is the most we are looking at. This means demand for credit will have to increase sooner than later. The loan may be unsecured, or against assets that the more wealthy have accumulated, but as the liquidity reserves dry up, the demand for loans will move up. Banks and NBFCs have enough liquidity at this time and should be able to provide short term finance. Without economic activity they cannot go too far. Which is why the lack of government spending, and the lack of bold reforms that place money in the hands of people, sting. Spending has changed dramatically. The risk to income means families have learned to cut back on a lot of spending. Incurring

no expense on eating out, entertainment, travel, clothes, furniture and home décor, is the new norm. Beyond grocery and utility bills, most households are postponing expenses. This is needed given risks to income. The business impact of this lack of spending is deep too. Without consumption demand, most businesses that thrived on the spending habits of the household will bleed. The ability of these business to employ people, pay salaries and expand activity will be curtailed, creating a negative spiral of loss. Households might be willing to support local businesses and be valiant about using newer unbranded suppliers of goods and services. But the consumption basket has shrunk severely. Credit card usage is down, so is online shopping. Saving and investing are in the background as activities that represent a forgotten luxury. Households that are still managing a surplus have allowed the money to remain in the bank; and those that have enough wealth to consider investing strategies are quite sure they have not seen the bottom of the falling markets. Much as we like to stay positive about the new world that will emerge, signs that there would be a gradual and prolonged recovery is all around us. Until a cure or a vaccine is found, we may not be able to claim victory over this pandemic. We may restart with care, but the economic activity can only be a small percentage of what it was; we may step out, but only do so when needed; we may spend, but we may restrict it to only the essentials; and this is how the world might work, at a fraction of its economic capacities, for another 12-15 months before everyone is vaccinated. How prepared is the household finance for that possibility? Use the experiences of the last 60 days to evaluate how your financial life will pan out. Make a list of questions and take stock for the next 12 months. Is there money in the bank to cover basic costs for that period? What happens if one or both wage earners of the household lose their jobs? How much of a pay cut can be taken? What is the source of liquidity if the job is lost? How can one raise loans? What assets are available to sell or pledge? What are the loans already due to be paid? How does one renegotiate the EMIs and dues? It is good to know that the air is clean, the rivers are sparkling and that the mornings are filled with bird song. Will this crisis take us back to the very basics, and lead us all to living with content in our communities, focusing on food, rest and family? We might contemplate that fundamental truth about living, but that level of frugality might be unrealistic for most. Between the mindless excesses of unbridled consumption, growth, and expansion and the rigid frugality of minimalistic existence, lies a mean that we may not be able to choose or pursue. The next 12 months is about that exploration that might define the new character and culture of the household.

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financial planning The Economic Times Wealth May 25-31, 2020

Managing financial transactions efficiently

PAPER WORK :: Video KYC for MFs

New investors are required to complete their KYC process before making investments. Once completed, it is valid for investments across fund houses. Investors have the choice to complete the process through E-KYC.

Evaluate the suitability of your investments to your need for income, growth and liquidity.

KYC information To initiate the process, the investor must visit the fund website and click on the PAN based video KYC option. A KYC form is then displayed which needs to be filled. Next, an OTP is sent to the registered mobile number. On entering the OTP, the video KYC process is activated.

GETTY IMAGES

Upload documents

Vivek is happy that he is able to save and invest. He has been managing his money for the past 10 years. However, what concerns him is the way he conducts his financial transactions. While he does try to bring some order to the way his finances are managed, he feels there has to be a system in place for it to be effective. What should Vivek do?

V

ivek needs to organise his money matters and set in place a schedule for reviewing his financial decisions. This will give him control over his financial situation. First he has to divide his financial affairs under three categories: investments, insurance (including life, health and other insurance) and financial services including banking, credit cards and loans. The next step will be to schedule periodic reviews for each of these categories so that he can ensure that they are suitable and adequate to meet his requirements. During the review, Vivek’s focus should be on evaluating the performance and suitability of his investments to his current need for income, growth and liquidity. Based on this, he can decide whether he wants to remain invested, exit or increase holdings. This exercise needs to be done once a year unless it is a shortterm investment or there is a compelling situation that demands an investment decision to be reviewed immediately. As far as his insurance needs are concerned,

Vivek should make sure he is adequately covered and review his insurance needs every time he covers a milestone in his life. This will include marriage, children, taking on liabilities such as home loans, a promotion with an increase in income or reduced obligations. All of these events will require an increase or decrease in his insurance cover. Vivek’s ability to manage his affairs well will also depend upon his ablity to conduct his financial transactions easily and efficiently. Like he should evaluate service providers on the basis of their ability to provide the facilities that are essential to him, in a cost-efficient way. Another important activity that will make it easier for him to manage his financial matters is to keep the related paperwork updated and organised. He should reduce the clutter by eliminating outdated documents and statements that are not relevant or required to be maintained. Once he has a system in place he will find that he has greater control over his financial affairs, which will help him manage better.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

smart things to know

1

Rights issue is a primary market issue to raise additional capital from existing shareholders.

2

The company offers shares to its existing shareholders in the proportion approved by its board of directors.

3

The new shares are offered at a discount to the market price.

With a rights issue, because more shares are issued to the market, the stock price is diluted and can go down more.

Declaration page After uploading the documents, the investor is taken to a FATCA and CRS declaration page where necessary details need to be filled. A passport size photo and a scanned image of the investor’s signature must be uploaded here.

Video based verification Next is video verification process where the investor needs to keep handy original copies of the uploaded documents for verification. Once prompted these documents should be displayed in front of the computer camera and the OTP displayed on the screen should be read aloud. Once this process is completed, the video is uploaded and the investor is directed to a page where he can review the submitted information. Upon verification, one can click on the submit button. An acknowledgement number is provided.

Folio creation The investor can now create a folio by submitting information such as bank and nomination details. After submitting the details, the investor can verify and submit to complete the process.

Rights issue

4

KYC documents like scanned images of the PAN and address proof need to be uploaded. After each document upload, information in the documents is captured through a character recognition software. However, one can make necessary changes/edits to the pre-filled information.

A listed company has to announce a record date of the rights issue which will help determine the eligibility to the rights issue.

5

:: Points to note  Folio number is generated only once

the KYC application is approved.  While uploading scanned images,

one should make sure that the scanned image is legible.

15

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your queries 16

The Economic Times Wealth May 25-31, 2020

For the past three years, I have been investing `2,000 per month through SIPs in Aditya Birla SL Front line Equity, HDFC Hybrid Equity and Franklin India Focused Fund. My goal is wealth creation over the next 4-5 years. Given the current market scenario, should I continue with the SIPs? The funds are underperforming.

Our suggestion is you stop SIPs in Aditya Birla SL Frontline Equity and Franklin India Focused Fund and decide whether to hold or exit a year later after you cross the exit load for the SIPs. Continue SIPs in HDFC Hybrid Equity and take a call after 6 months. Start SIPs in Axis Nifty 100 Index Fund (in place of a large-cap fund) and SBI Focused Equity. Hope you have sufficient debt exposure through funds or traditional options.

Vidya Bala, Co-Founder, PrimeInvestor.in

My wife and I bring home around `1.2 lakh per month. My wife’s income doesn’t fall in any tax bracket. We are planning to buy a budget home in her name under the PMAY scheme. We will be taking a loan of `15 lakh. Can I show the housing loan interest in my tax return?

If the house is coowned by both of you and you will repay the loan jointly with your wife, the interest on housing loan can be claimed in the tax return by you and your wife in the ratio in which you both will repay the loan instalments. However, if the house is owned by your wife only and she will pay the loan instalments, the interest on housing loan cannot be claimed in your return. Moreover, if your wife owns the house while you have financed the property including the loan instalments, the income from house property will be clubbed in your hands and the applicable deduction for the interest on housing loan will be allowed to you against the clubbed income.

Homi Mistry Partner, Deloitte Haskins & Sells

The Finance Minister recently said that the employee’s contribution to PF will be reduced from 12% to 10%. Will it not increase our tax burden since PF is non-taxable? Also, is it to be done by choice of the employee or is it compulsory?

QA &

Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away.

QUESTION OF THE WEEK I have 350 shares of Vedanta. The company has announced delisting of its shares from BSE and NSE. If that happens, I will not be able to sell the shares on the bourses. The average cost per share is `189.65. If I sell now, the loss will be around `35,000. After delisting, the company has quoted a purchase price of `87.45 per share. What should I do? The floor price of the delisting proposal by Vedanta is `87.25, which is slightly lower than half its 52-week high of `180. It is important to remember that this is not the final price at which the shares will be delisted. The final offer price will be determined via the reverse book building mechanism, which is basically a process used for efficient price discovery of the stock. During the period for which the reverse book building is open, offers are collected from shareholders. These offers can be above or equal to the floor price. At the end of the offer, the merchant banker (SBI Capital Markets in this case) to the book building exercise shall announce the final price. The promotor shareholding in Vedanta is currently at 50.14% and that needs to go all the way up to 90% to enable delisting. There is a probability that the final price could be higher than what has been currently offered and thus as an investor, your focus now should be on the outcome of the price discovery. The process can take 2-3 months and thus you will get time to make a decision. Once the final price is decided, regulations allow an exit window up to one year from the date of delisting to remaining shareholders to tender shares to the promoter at the same final price. If you do not exercise any of the options, you can even continue to hold shares in the delisted company, but that will have its own constraints.

I am 33. I started monthly SIPs of `60,000 in April 2019. My target was to build a corpus of `25 lakh by end of February 2022. My debt allocation of `40,000 comprises two short term funds and one low duration fund whereas the equity allocation of `20,000 comprises one multi-cap and two large cap funds. After 13 months of investing, the NAV of my portfolio is -13%. Should I increase the SIP amount or invest in different category of mutual funds other than the above or change the overall allocation?

Currently we are witnessing an extraordinary market situation globally. Your fund allocation is well diversified. However, the goal of `25 lakh by February 2022 is too ambitious. You must continue SIPs in the same funds for at least 5 years. It will help you reap benefits by averaging cost. A time horizon of 3 years is too short for yielding the best returns out of equity market investments. Either start a bank recurring deposit of `20,000 per month for 2 years now or opt for a personal loan as a last resort to bridge the gap in 2022.

Raj Khosla Founder and Managing Director, MyMoneyMantra.com

I invest `70,000 per month in mutual funds while my wife invests `10,000. I invest `10,000 in SBI Small Cap, `20,000 in Mirae Asset Emerging Bluechip, `15,000 in Kotak Standard Multicap Fund, `10,000 in Axis Mid Cap, `10,000 in Nippon India Large Cap and `5,000 in ICICI Prudential Balanced Advantage Fund. My wife invests `5,000 each in Kotak Emerging Equity and Nippon India Large Cap Fund. Are we on the right track?

You and your wife should continue with your existing mutual fund SIPs, except for Nippon India Large Cap Fund. This fund has underperformed its peer funds for quite some time. Shift future SIPs to Axis Bluechip Fund instead. You should also look to top-up your existing SIPs with lump sum investments in a staggered manner. With around 25% correction in the equity markets from January peaks, topping up your existing equity funds will further average your investment cost and help restore your original asset mix. Choose Axis Bluechip Fund instead of Nippon India Large Cap for your lump sum top-ups too.

Prableen Bajpai Founder, Managing Partner, FinFix Research & Analytics

The reduction in contribution will lead to an increase in your takehome pay which, in turn, will be taxed at your income-tax slab rate. This reduction has to be undertaken by all companies falling within the ambit of EPF. As far as I am aware, employees too will have to mandatorily opt-in for this reduction.

Jayant R. Pai CFP and Head - Products, PPFAS, Mutual Fund

Naveen Kukreja CEO and Co-Founder, Paisabazaar.com

Ask our experts Have a question for the experts? [email protected]

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SMART STATS ET WEALTH TOP 50 STOCKS

The Economic Times Wealth May 25-31, 2020

In This Section MUTUAL FUNDS - P18 LOANS AND DEPOSITS - P20 ALTERNATE INVESTMENTS- P21

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 is the listing of the top 50 stocks based on the composite rating to help ease your fortune hunt. RANK

PRICE `

Current Previous Rank Rank

Stock Price

GROWTH%* Revenue

VA LUAT I O N R AT I O S

Net Profit

PE

PB

Div Yield

PEG

RISK Downside Risk

Bear Beta

R AT I N G No. of Consensus Analysts Rating

KEC International

1

1

197.35

23.53

32.46

10.40

2.08

3.03

0.33

2.19

1.15

34

4.74

HG Infra Engineering

2

3

159.85

42.40

73.39

8.26

1.59

0.32

0.13

2.39

1.00

16

5.00

Power Grid Corp of India

3

2

158.90

13.36

22.13

6.62

1.41

5.34

0.30

1.44

0.61

27

4.70

JK Cement

4

4

1,105.25

15.82

72.07

30.04

3.16

1.60

0.47

1.65

0.71

28

4.79

Birla Corp

5

7

412.65

9.59

54.39

12.40

0.71

1.90

0.30

2.11

0.96

11

5.00

JSW Energy

6

5

40.15

1.02

29.57

9.53

0.56

2.46

0.28

1.79

0.58

16

4.81

Emami

7

6

209.50

9.66

82.80

31.00

4.53

3.91

0.37

1.83

0.66

33

Fast growing stocks

1

Top 5 stocks with the highest expected revenue % growth over the previous year HG Infra Engineering

42

4.03

Bayer CropScience

42

Tata Consumer Products

40

Ajanta Pharma

40

Ipca Laboratories

39

Alkem Laboratories

8

8

2,474.95

29.62

78.59

38.76

5.42

1.23

0.51

1.33

0.36

21

4.24

Sun Pharmaceutical

9

10

466.45

24.20

49.05

41.55

2.67

1.26

0.88

1.60

0.61

40

3.92

Engineers India

10

9

62.40

22.41

17.81

10.64

1.68

7.09

0.50

1.93

0.63

15

4.47

Larsen & Toubro

11

13

820.50

15.38

16.71

12.90

1.84

3.35

0.90

1.84

1.07

43

4.77

CCL Products India

12

17

178.35

21.36

24.48

15.35

2.83

3.74

0.63

1.73

0.82

10

4.80

ITC

13

11

188.95

10.31

26.29

18.16

3.88

3.27

0.69

1.76

0.80

38

4.53

Gujarat Gas

14

18

250.00

32.17

142.72

41.27

7.83

0.40

0.27

1.84

0.82

30

3.97

Essel Propack

15

24

169.90

14.29

49.11

27.70

3.85

1.50

0.56

2.13

0.71

11

4.55

APL Apollo Tubes

16

20

1,382.60

18.94

57.06

22.25

3.44

1.06

0.46

2.21

1.23

10

4.60

Ipca Laboratories

17

16

1,604.70

39.35

84.98

46.46

6.62

0.31

0.56

1.51

0.14

24

4.13

NTPC

18

15

90.25

18.77

9.55

5.88

0.81

0.54

0.70

1.54

0.74

27

4.93

CESC

19

27

568.10

11.80

8.27

6.44

0.85

3.46

1.05

1.72

0.71

18

Jubilant Life Sciences

20

22

471.05

10.30

27.81

12.72

1.55

2.08

0.48

2.38

1.01

Century Plyboards India

21

32

103.55

5.81

40.73

15.54

2.37

0.95

0.52

1.97

Mahanagar Gas

22

28

906.95

0.86

32.75

16.40

3.74

2.23

0.45

1.87

Pfizer

23

30

4,219.20

17.92

40.63

45.22

6.44

7.92

1.11

Aurobindo Pharma

24

26

724.35

28.40

24.51

17.61

3.00

0.42

0.72

Ajanta Pharma

25

29

1,487.40

40.11

44.89

33.71

5.81

0.90

Transport Corp of India

26

31

151.40

12.11

20.08

8.01

1.30

Least expensive stocks

2

Top 5 stocks with the lowest price-earnings ratio NTPC

5.88

Dilip Buildcon

6.43

4.94

CESC

6.44

13

4.54

Power Grid Corp of India

6.62

0.73

20

4.45

30

4.27

Redington India

6.82

0.94

1.42

0.36

10

4.60

2.85

0.89

35

4.60

0.77

1.69

0.65

13

4.39

1.30

0.50

1.96

0.93

10

4.90

Dilip Buildcon

27

33

253.85

21.72

20.41

6.43

1.25

0.39

0.31

2.72

1.26

15

4.53

Cipla/India

28

23

616.60

11.31

26.81

32.03

3.14

0.64

1.20

1.34

0.28

43

4.35

Thermax

29

35

706.55

2.07

35.20

24.40

2.79

1.98

0.72

1.36

0.39

32

2.88

VRL Logistics

30

37

152.05

7.98

18.46

15.00

2.13

4.62

0.88

1.78

0.71

15

4.33

Ramco Cements/The

31

49

561.95

14.64

33.39

24.40

2.92

0.98

0.89

1.72

0.89

28

3.71

Info Edge India

32

40

2,456.05

32.76

53.38

49.38

11.74

0.33

0.37

2.16

0.74

27

3.30

Apollo Hospitals

33

43

1,280.30

25.03

47.60

75.72

5.36

0.50

1.32

1.96

1.01

23

4.87

SRF

34

42

3,370.45

14.51

45.69

30.36

4.72

0.41

0.64

2.01

1.11

20

4.35

HeidelbergCement

35

36

150.50

6.56

22.44

15.64

2.95

0.97

0.52

2.04

1.03

15

4.60

Torrent Pharmaceuticals

36

38

2,618.75

15.32

72.34

100.50

9.28

1.40

1.38

1.49

0.42

34

3.38

Coromandel International

37

41

615.00

5.73

45.68

24.97

5.36

0.57

0.54

1.49

0.73

15

4.33

Bayer CropScience/India

38

39

4,498.75

42.14

147.00

65.03

8.20

0.40

0.70

1.52

0.57

10

3.80

Tata Consumer Products

39

46

360.30

40.28

91.91

71.42

2.38

0.69

2.02

1.91

0.99

12

4.42

Carborundum Universal

40

47

205.90

12.93

23.20

15.84

2.28

1.95

0.96

1.80

0.90

11

4.27

Dr Reddy's Laboratories

41

34

3,847.50

7.75

30.28

32.62

4.11

0.51

1.02

1.20

0.32

47

3.60

Lupin

42

45

885.75

3.74

55.16

65.53

2.89

0.57

1.17

1.37

0.30

46

2.98

Prestige Estates Project

43

50

141.10

27.60

6.28

12.66

1.24

2.18

2.78

3.01

1.03

18

4.56

Redington India

44

48

87.50

19.27

1.14

6.82

0.87

8.65

12.88

2.63

0.93

10

4.80

Adani Ports & SEZ

45

--

317.15

9.57

13.12

17.06

2.51

1.05

1.11

2.00

1.16

26

4.85

Voltas

46

--

461.35

17.68

18.28

30.01

3.71

0.88

1.74

1.66

0.90

43

4.16

Ahluwalia Contracts

47

--

165.20

10.51

10.92

9.54

1.52

0.18

0.52

2.38

1.12

18

4.50

Bajaj Auto

48

--

2,640.35

2.27

10.09

14.70

3.54

7.04

1.47

1.66

0.84

53

3.91

Oberoi Realty

49

--

300.90

2.84

13.79

13.30

1.37

0.66

0.94

2.01

0.59

26

4.08

Asian Paints

50

--

1,574.30

13.15

43.16

69.17

15.69

1.21

1.64

1.51

0.78

40

3.83

*REVENUE AND NET PROFIT GROWTH IS BASED ON CONSENSUS ANALYSTS' EXPECTATIONS. NR: NOT IN THE RANKING. DATA AS ON 21 MAY 2020.

SOURCE: BLOOMBERG

Best PEGs

3

Top 5 stocks with the least price-earnings to growth ratio Gujarat Gas

0.13

0.27

HG Infra Engineering

4

5

Power Grid Corp of India

0.28

0.30

JSW Energy

0.30

Birla Corp

Income generators Top 5 stocks with the highest dividend yield (%) Redington India

8.65

Pfizer

7.92

Engineers India

7.09

Bajaj Auto

7.04

Power Grid Corp of India

5.34

Least risky Top 5 stocks with the lowest downside risk Alkem Laboratories

1.20

1.33

Dr Reddy's Laboratories

1.34

Cipla/India

Thermax

1.36

1.37

Lupin

SEE DOWNSIDE RISK AND BEAR BETA COLUMNS IN THE ADJACENT TABLE.

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smart stats 18

The Economic Times Wealth May 25-31, 2020

LAGGARDS & LEADERS

ETW FUNDS 100

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).

BEST FUNDS TO BUILD YOUR PORTFOLIO

LAGGARDS

ET Wealth collaborates with Value Research to identify the top-performing funds across 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.

LEADERS

Equity: Large-cap 5-year returns 6.6

-1.09 Taurus Largecap Equity

Axis Bluechip

5.28

-0.82 Principal Nifty 100 Equal Weight

Canara Robeco Bluechip Equity

0.26 Franklin India Bluechip Value Research Fund Rating

Net Assets (` Cr) 3-Month

RETURNS (%) 6-Month

1-Year

3-Year

5-Year



12,716.81

-20.79

-15.88

-9.90

6.86

6.60

1.98

Canara Robeco Bluechip Equity Fund



418.00

-20.20

-15.01

-9.45

3.30

5.28

2.56

Sundaram Select Focus Fund



932.85

-22.82

-20.07

-16.42

1.78

4.00

2.42

 

23.61

-24.72

-23.89

-20.76

1.13

2.65

1.00

1,177.38

-25.24

-24.40

-21.31

1.05

2.96

0.30

Edelweiss Large Cap Fund



165.33

-24.31

-21.89

-18.87

-0.08

2.18

2.44

UTI Nifty Index Fund



2,097.08

-25.01

-24.50

-22.72

-0.33

2.41

0.17



1,153.47

-21.27

-17.53

-10.68

-0.38

3.65

2.24



15,347.16

-25.66

-24.70

-21.37

-0.92

4.64

1.67

ICICI Prudential Bluechip Fund*



21,820.93

-23.26

-22.42

-20.63

-1.35

2.99

2.05

Indiabulls Bluechip Fund



127.95

-26.36

-25.34

-23.20

-2.92

2.89

2.43

Motilal Oswal Focused 25 Fund Mirae Asset Large Cap Fund

Nippon India Large Cap

6.86%

Tata Large Cap

THE 3-YEAR RETURN OF AXIS BLUECHIP IS THE HIGHEST IN ITS CATEGORY.

EQUITY: LARGE & MIDCAP 

2,282.43



8,838.98

-24.55

-20.84

-15.15

0.10

8.88

1.81

594.43

-26.12

-20.83

-14.51

-1.52

4.90

2.47



4,845.74

-24.56

-16.73

-15.46

-1.61

6.41

1.97

Kotak Equity Opportunities Fund



2,980.18

-24.84

-19.98

-15.84

-1.74

4.16

2.10

Sundaram Large and Mid Cap Fund



1,012.99

-29.96

-27.44

-23.02

-2.44

3.49

2.36

Principal Emerging Bluechip Fund



1,822.03

-24.89

-18.85

-16.33

-2.67

4.86

2.18

DSP Equity Opportunities Fund



4,439.07

-25.32

-22.71

-17.74

-2.98

4.17

1.96

Mirae Asset Emerging Bluechip Fund LIC MF Large & Mid Cap Fund Canara Robeco Emerging Equities Fund



-25.07

-22.05

-16.97

0.69

3.89

2.02



2,925.43

-15.36

-10.29

-4.32

5.99

7.15

2.09



7,967.80

-23.68

-18.72

-13.53

4.23

6.64

1.99

Axis Focused 25 Fund



9,493.38

-24.87

-19.93

-13.63

2.80

6.57

1.73

IIFL Focused Equity Fund



785.87

-26.33

-19.01

-12.26

2.69

5.66

2.30

1,896.90

-21.51

-15.15

-12.31

2.66

4.42

2.31

Canara Robeco Equity Diversified Fund



Tata Retirement Savings Fund



689.21

-21.12

-18.60

-13.71

0.43

5.97

2.45

Kotak Standard Multicap Fund



26,049.43

-25.92

-23.74

-21.18

-1.97

4.45

1.70

JM Multicap Fund



118.78

-26.00

-23.51

-15.62

-1.98

3.75

—

Edelweiss Multi Cap Fund



488.67

-25.87

-22.54

-21.39

-2.04

3.34

2.46

SBI Magnum Multicap Fund



7,912.14

-26.51

-24.52

-21.60

-2.67

3.54

2.01

Motilal Oswal Multicap 35 Fund



10,236.93

-27.14

-24.93

-23.30

-4.75

3.30

1.82



5,098.37

-18.71

-11.91

-3.36

7.12

6.49

1.94

EQUITY: MID CAP Axis Midcap Fund DSP Midcap Fund Kotak Emerging Equity Fund L&T Midcap Fund



6,487.64

-21.97

-14.54

-9.99

-2.18

6.47

1.92



5,911.85

-28.53

-21.50

-18.21

-4.66

3.83

1.92



5,366.51

-25.93

-19.48

-18.93

-5.68

4.43

1.98

EQUITY: SMALL CAP Axis Small Cap Fund



2,169.10

-28.68

-20.33

-9.66

1.23

5.64

2.23

SBI Small Cap Fund



3,280.30

-26.07

-20.52

-16.16

-0.44

7.05

2.24

Nippon India Small Cap Fund



6,994.88

-30.40

-23.83

-25.99

-7.49

4.04

2.18

L&T Emerging Businesses Fund



4,267.86

-32.37

-30.26

-33.52

-11.83

2.13

2.08

4,273.93

-23.54

-18.71

-16.97

0.54

5.41

2.12

Kotak India EQ Contra Fund



726.10

-26.40

-23.91

-21.58

0.26

3.18

2.49

Tata Equity PE Fund



4,018.95

-22.59

-22.33

-20.64

-4.44

3.84

1.98

L&T India Value Fund



5,709.96

-27.26

-24.14

-24.68

-7.08

2.63

1.93



19,632.01

-23.29

-17.76

-11.81

3.77

5.15

1.72

940.59

-21.96

-14.84

-12.21

2.27

4.41

2.27 1.79

EQUITY: ELSS Axis Long Term Equity Fund Canara Robeco Equity Tax Saver Fund Mirae Asset Tax Saver Fund

 

3,184.25

-25.28

-23.48

-18.35

0.52

—

Invesco India Tax Plan



930.37

-24.50

-19.34

-15.58

0.45

4.14

2.23

Aditya Birla Sun Life Tax Relief 96



9,371.50

-21.28

-18.51

-16.30

-0.60

3.97

1.94

Quant Tax Plan



8.83

-17.26

-17.15

-13.03

-0.78

6.32

2.48

DSP Tax Saver Fund



5,407.34

-24.61

-22.73

-17.72

-2.18

4.61

1.87



1,769.58

-26.24

-24.44

-21.68

-2.33

4.18

2.12

Kotak Tax Saver



1,040.28

-26.32

-21.69

-19.33

-2.35

3.04

2.29

JM Tax Gain Fund



31.80

-29.40

-25.40

-21.22

-2.41

2.83

—

Motilal Oswal Long Term Equity Fund



1,411.09

-29.96

-26.01

-20.43

-3.99

4.97

2.11

Tata India Tax Savings Fund

6.57 Axis Focused 25

-1.26

0.69% THE 3-YEAR RETURN OF INVESCO INDIA GROWTH OPPORTUNITIES FUND IS THE HIGHEST IN ITS CATEGORY.

HDFC Focused 30

5.97 Tata Retirement Savings

-0.76 LIC MF Multicap

5.66 IIFL Focused Equity

Equity: Mid-cap 3-year returns -11.42 -10.47 Motilal Oswal Midcap 100ET

-10 Sundaram Mid Cap

-9.5 SBI Magnum Midcap

-8.79 IDBI Midcap

7.12 Axis Midcap

0.21 Quant Mid Cap

-2.18 DSP Midcap

-2.98 Tata Midcap Growth

-3.75 Edelweiss Mid Cap

Equity: Small-cap 3-year returns

7.12% THE 3-YEAR RETURN OF AXIS MIDCAP FUND IS THE HIGHEST IN ITS CATEGORY.

-16.89 ABSL Small Cap

-16.62 Sundaram Small Cap

-13.63

Franklin India Smaller Companies

-13.34

EQUITY: VALUE ORIENTED 

6.64 SBI Focused Equity

-1.87

HSBC Small Cap Equity Invesco India Contra Fund

Parag Parikh Long Term Equity

-2.25 Nippon India Retirement

Aditya Birla Sun Life Mid Cap

SBI Focused Equity Fund

7.15

-3.22 Nippon India Multi Cap

EQUITY: MULTI CAP Parag Parikh Long Term Equity Fund

4.13 Nippon India ETF Shariah BeES

Equity: Multi-cap 5-year returns

Taurus Starshare (Multi Cap) Invesco India Growth Opportunities Fund

4.37 Quant Focused

0.72

Axis Bluechip Fund

HDFC Index Fund

0.55

Expense Ratio (%)

EQUITY: LARGE CAP

Tata Index Sensex Fund

4.64 Mirae Asset Large Cap

-12.19 Quant Small Cap

1.23 Axis Small Cap

-0.44 SBI Small Cap

-7.39 Union Small Cap

-7.49 Nippon India Small Cap

-8.84 Kotak Small Cap

Hybrid: Aggressive 5-year returns 3.77% THE 3-YEAR RETURN OF AXIS LONG TERM EQUITY FUND IS THE HIGHEST IN ITS CATEGORY.

-2.39 JM Equity Hybrid

-1.38 Nippon India Equity Hybrid

-0.05 PGIM India Hybrid Equity

0.32 Franklin India Life Stage

0.53 LIC MF Equity Hybrid

6.03 Canara Robeco Equity Hybrid

5.46 DSP Equity & Bond

5.18 Tata Retirement Savings

5.03 Principal Hybrid Equity

4.94 SBI Equity Hybrid

ANNUALISED RETURNS IN % AS ON 20 MAY 2020.

Get Stock Market Updates from Telegram app: https://t.me/KittusWealthJourney

smart stats The Economic Times Wealth May 25-31, 2020

ETW FUNDS 100 Value Research Fund Rating

Net Assets (` Cr) 3-Month

RETURNS (%) 6-Month

1-Year

3-Year

5-Year

1

Expense Ratio

HYBRID: EQUITY SAVINGS Edelweiss Equity Savings Fund



83.73

-4.46

-2.74

0.63

5.17

5.76

1.74

Kotak Equity Savings Fund



1,491.74

-8.67

-6.89

-3.15

3.89

5.29

2.15

700.38

-11.86

-9.56

-7.06

3.06

—

2.39

1,241.95

-12.18

-10.12

-5.84

2.13

4.86

1.33



Axis Equity Saver Fund



ICICI Prudential Equity Savings Fund*

Top 5 SIPs Top 5 equity schemes based on 10-year SIP returns SBI Small Cap 14.45 Canara Robeco Emerging Equities 13.47

HYBRID: AGGRESSIVE (EQUITY-ORIENTED) Canara Robeco Equity Hybrid Fund



2,912.43

-15.19

-9.92

-6.04

3.43

6.03

2.03

SBI Equity Hybrid Fund



29,105.88

-19.04

-15.73

-10.54

3.04

4.94

1.74



3,314.23

-17.83

-16.68

-13.00

1.63

—

1.90

Mirae Asset Hybrid Equity Fund



1,047.69

-17.58

-15.06

-12.04

0.77

5.18

2.23

DSP Equity & Bond Fund



5,538.45

-19.73

-13.97

-8.34

0.56

5.46

1.90

HDFC Retirement Savings Fund



367.19

-19.38

-16.42

-15.49

-0.16

—

2.63

Principal Hybrid Equity Fund



1,087.56

-17.99

-15.70

-16.49

-0.30

5.03

2.24

HDFC Children's Gift Fund



2,776.99

-19.88

-17.57

-15.19

-0.35

4.16

2.13

ICICI Prudential Equity & Debt Fund*



17,696.29

-17.73

-17.22

-15.54

-0.91

4.39

1.82

Tata Retirement Savings Fund

19

Axis Long Term Equity

3.43%

12.04

THE 3-YEAR RETURN OF CANARA ROBECO EQUITY IS THE HIGHEST IN ITS CATEGORY.

Principal Emerging Bluechip 11.24 DSP Midcap 10.91 SIP: SYSTEMATIC INVESTMENT PLAN

HYBRID: CONSERVATIVE (DEBT-ORIENTED) Baroda Conservative Hybrid Fund



22.10

0.77

3.30

9.55

7.31

7.18

2.05

Kotak Debt Hybrid Fund



236.39

-5.36

-2.64

3.02

4.09

6.58

2.23

Tata Retirement Savings Fund



133.22

-4.20

-1.94

2.44

4.44

6.57

2.20

ICICI Prudential Regular Savings Fund*



1,581.24

-5.00

-2.60

2.09

5.64

7.40

1.91

Indiabulls Savings Income Fund



24.56

-3.90

-3.32

-0.86

6.32

—

2.00

IDFC Bond Fund Income Plan



670.57

4.13

6.81

14.71

8.15

8.56

1.92

Nippon India Income Fund



305.89

3.52

6.23

14.52

8.51

8.53

1.75

SBI Magnum Income Fund



1,292.48

1.77

6.33

13.57

7.99

8.70

1.47



3,153.22

2.46

5.39

12.49

7.93

8.35

1.08

2

DEBT: MEDIUM- TO LONG-TERM

% ANNUALISED RETURNS AS ON 20 MAY 2020

Top 5 MIPs Top 5 MIP schemes based on 3-year SWP returns Indiabulls Savings Income

ICICI Prudential Bond Fund*

DEBT: MEDIUM-TERM 

3,192.04

2.08

5.49

12.29

8.57

9.20

1.23

IDFC Bond Fund



2,807.92

2.86

5.09

11.37

7.81

8.08

1.43

Indiabulls Income Fund



30.33

2.57

4.52

9.10

8.24

7.93

0.90

HDFC Medium Term Debt Fund



1,134.93

-0.57

2.58

7.79

6.65

7.57

1.29

SBI Magnum Medium Duration Fund

14.71%

6.68 Baroda Conservative Hybrid

THE 1-YEAR RETURN OF IDFC BOND FUND INCOME PLAN IS THE HIGHEST IN ITS CATEGORY.

6.59 ICICI Prudential Regular Savings 4.91 Canara Robeco Conservative Hybrid 4.82 LIC MF Debt Hybrid

DEBT: SHORT-TERM L&T Short Term Bond Fund



4,421.96

3.12

5.08

10.74

8.08

8.05

0.75

HDFC Short Term Debt Fund



11,000.38

1.95

4.57

10.47

8.18

8.34

0.39

Axis Short Term Fund IDFC Bond Fund Short Term Plan



5,560.05

2.29

4.54

10.45

7.90

8.13

0.95



11,459.35

2.34

4.44

10.30

7.94

8.01

0.80

4.39 SWP: SYSTEMATIC WITHDRAWAL PLAN

% ANNUALISED RETURNS AS ON 20 MAY 2020

DEBT: DYNAMIC BOND 

2,030.79

4.60

7.76

15.93

8.71

9.00

1.80

SBI Dynamic Bond Fund



1,352.43

3.71

7.04

15.61

8.67

9.24

1.66

Axis Dynamic Bond Fund



488.53

2.57

6.60

13.77

8.43

8.69

0.65

Quantum Dynamic Bond Fund



60.58

2.73

6.29

13.14

7.96

9.33

0.68

ICICI Prudential All Seasons Bond Fund*



3,014.13

2.49

6.19

12.23

8.32

9.28

1.34

IDFC Dynamic Bond Fund



PGIM India Dynamic Bond Fund

43.61

1.89

4.96

12.11

8.25

8.61

1.75

Kotak Dynamic Bond Fund



1,076.06

2.09

4.94

11.93

8.85

9.35

1.08

Edelweiss Dynamic Bond Fund



54.18

2.27

4.26

11.69

8.05

7.78

0.99

15.93% THE 1-YEAR RETURN OF IDFC DYNAMIC BOND FUND IS THE HIGHEST IN ITS CATEGORY.

3

Large Cap Cash holdings 17.25

16.54 13.77

12.77 8.87

DEBT: CORPORATE BOND HDFC Corporate Bond Fund



14,518.19

2.64

5.15

11.28

8.51

8.76

0.50

Aditya Birla Sun Life Corporate Bond Fund



17,647.81

2.90

5.22

10.85

8.45

8.69

0.45

ICICI Prudential Corporate Bond Fund*



11,860.11

2.28

4.63

10.34

8.02

8.36

0.56



4,031.53

1.81

3.81

9.34

8.17

8.33

0.60



1,071.73

-0.74

2.45

8.25

7.64

8.04

0.92

Kotak Corporate Bond Fund Franklin India Corporate Debt Fund

Did not find your fund here?

All equity funds ranked on 3-year returns. Debt funds ranked on 1-year returns.

Expense as on 30 April 2020 *Expense as on before 30 April 2020 Returns as on 20 May 2020 Assets as on 30 April 2020 Rating as on 30 April 2020

Quant Focused

LIC MF Large Cap

JM Large Cap

Indiabulls IDFC Bluechip Large Cap

% OF ASSETS AS ON 30 APRIL 2020

Log on to www.wealth.economictimes.com for an exhaustive list.

Methodology

EQUITIES (figures over the past one year)

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: Mostly invested in large-cap companies.

  Top 10%

Small-cap: Mostly invested in small-cap companies.



 Next 22.5%



 Middle 35%



 Next 22.5%



Multi-cap: Mostly invested in large- and mid-cap companies. Mid-cap: Mostly invested in mid-cap companies.

4

Debt: Ultra short duration

FUND RAISER

0.41

0.44

0.45

Baroda Ultra Short Duration

Aditya Birla Sun Life Savings

0.47

Tax planning: Offer tax rebate under Section 80C. (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:

International: More than 65% of assets invested abroad. Income: Average maturity varies according to objective. Gilt: Medium- and long-term; invest in gilt securities. 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.

31% of the total AUM of equity funds was invested in the top three sectors comprising private sector banks, IT and pharmaceuticals in April 2020.

0.08

Motilal Oswal Ultra Short Term

IDFC Ultra Short Term

HSBC Ultra Short Duration

% AS ON 30 APR 2020 % EXPENSE RATIO IS CHARGED ANNUALLY. METHODOLOGY OF TOP 100 FUNDS ON WWW.WEALTH.ECONOMICTIMES.COM

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loans and deposits 20

The Economic Times Wealth May 25-31, 2020

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.

HOME LOAN RATES

Top five bank FDs Interest rate (%) compounded qtrly

What `10,000 will grow to

7.50

10,771

IDFC First Bank

7.25

10,745

RBL Bank

7.20

10,740

Indusind Bank

7.00

10,719

DCB Bank

6.75

10,692

TENURE: 1 YEAR Ujjivan Small Finance Bank

With effect from 1 October, all banks have made the transition to external benchmarks for pricing new home loans. Most banks have picked the RBI repo rate as the external benchmark.

REPO RATE: 4.40% FOR SALARIED BANK

TENURE: 2 YEARS Ujjivan Small Finance Bank

7.50

11,602

IDFC First Bank

7.25

11,545

RBL Bank

7.25

11,545

AU Small Finance Bank

7.25

11,545

DCB Bank

FOR SELF EMPLOYED (%) WEF

RLLR (%)

FROM (%)

TO (%)

FROM (%)

TO (%)

Union Bank of India

7.20

7.10

7.55

7.35

7.55

1 April 2020

SBI Term Loan

7.05

7.20

7.55

7.35

7.70

1 April 2020

Punjab National Bank

7.05

7.20

7.80

7.20

7.80

1 April 2020

Bank of India

7.25

7.25

7.55

7.25

8.15

1 April 2020 1 April 2020

7.20

11,534

Central Bank of India

7.25

7.25

7.35

7.25

7.35

AU Small Finance Bank

7.53

12,508

Canara Bank

7.30

7.30

9.30

7.30

9.30

7 April 2020

RBL Bank

7.50

12,497

UCO Bank

7.30

7.30

7.40

7.30

7.40

28 Mar 2020

DCB Bank

7.35

12,442

IDFC First Bank

7.25

12,405

Punjab & Sind Bank

7.30

7.30

7.65

7.30

7.65

16 April 2020

Ujjivan Small Finance Bank

7.25

12,405

IDFC First Bank

7.40

7.40

8.40

7.40

8.40

SBI Max Gain

7.05

7.45

7.80

7.60

7.95

1 April 2020

TENURE: 3 YEARS

TENURE: 5 YEARS DCB Bank

7.35

14,393

Indian Overseas Bank

7.25

7.45

7.70

7.45

7.70

14 April 2020

IDFC First Bank

7.25

14,323

Indian Bank

7.20

7.55

7.85

7.60

7.90

1 April 2020

AU Small Finance Bank

7.25

14,323

J & K Bank

7.60

7.70

8.00

7.70

8.00

28 Mar 2020

RBL Bank

7.15

14,252

Indusind Bank

6.75

13,975

ICICI Bank

7.70

7.70

8.70

7.95

8.80

1 April 2020

IDBI Bank

7.80

7.80

8.40

7.80

8.80

12 April 2020

Axis Bank

8.10

8.10

8.65

8.35

8.85

28 April 2020

South Indian Bank

8.10

8.10

9.35

8.10

9.35

16 April 2020

Karur Vysya Bank

7.60

8.20

10.05

8.20

10.05

1 April 2020

Bank of Maharashtra

7.45

8.20

9.50

8.45

9.60

7 April 2020

8.20

8.20

9.15

8.30

9.25

16 April 2020

7.25

8.25

8.50

8.25

8.50

28 Mar 2020

Top five senior citizen bank FDs TENURE: 1 YEAR Ujjivan Small Finance Bank

Interest rate (%) compounded qtrly

What `10,000 will grow to

8.00

10,824

IDFC First Bank

7.75

10,798

Kotak Mahindra Bank

RBL Bank

7.70

10,793

Bank of Baroda

Indusind Bank

7.50

10,771

DCB Bank

7.25

10,745

Ujjivan Small Finance Bank

8.00

11,717

IDFC First Bank

7.75

11,659

RBL Bank

7.75

11,659

AU Small Finance Bank

7.75

11,659

DCB Bank

7.70

11,648

AU Small Finance Bank

8.03

12,694

RBL Bank

8.00

12,682

DCB Bank

7.85

12,627

IDFC First Bank

7.75

12,589

Ujjivan Small Finance Bank

7.75

12,589

TENURE: 2 YEARS

TENURE: 3 YEARS

TENURE: 5 YEARS DCB Bank

7.85

14,751

IDFC First Bank

7.75

14,678

AU Small Finance Bank

7.75

14,678

RBL Bank

7.65

14,607

Indusind Bank

7.25

14,323

Top five tax-saving bank FDs Interest rate (%)

What `10,000 will grow to

7.35

14,393

7.25

14,323

AU Small Finance Bank

7.25

14,323

RBL Bank

7.15

14,252

Ujjivan Small Finance Bank

6.75

13,975

TENURE: 5 YEARS AND ABOVE DCB Bank IDFC First Bank

ALL DATA SOURCED FROM ECONOMIC TIMES INTELLIGENCE GROUP ([email protected])

Your EMI for a loan of `1 lakh TENURE

5 YEARS

10 YEARS

15 YEARS

20 YEARS

25 YEARS

@ 8%

2,028

1,213

956

836

772

@ 10%

2,125

1,322

1,075

965

909

@ 12%

2,224

1,435

1,200

1,101

1,053

@ 15%

2,379

1,613

1,400

1,317

1,281

FIGURES ARE IN `. USE 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

Post office deposits

Interest (%)

Minimum investment (`)

Sukanya Samriddhi Yojana

7.60

250

Senior Citizens' Savings Scheme

7.40

1,000

Public Provident Fund

7.10

500

Kisan Vikas Patra

6.90

5-year NSC VIII Issue

Maximum investment (`)

Tax benefits

One account per girl child

80C

5-year tenure, minimum age 60 yrs

80C

1.50 lakh p.a.

15-year tenure, tax-free returns

80C

1,000

No limit

Can be encashed after 2.5 years

Nil

6.80

100

No limit

No TDS

80C

5.50-6.70

200

No limit

Available in 1, 2, 3, 5 year tenures

80C#

Post Office Monthly Income Scheme

6.60

1,500

Recurring deposits

5.80

10

Savings account

4.00

20

Time deposit

Data as on 21 May 2020

1.50 lakh

Features

15 lakh

Single 4.5 lakh

5-year tenure, monthly returns

Nil

Joint 9 lakh

5-year tenure, monthly returns

Nil

No limit

5-year tenure

Nil

No limit

`10,000 interest tax-free

Nil

# Benefit available only for 5-year deposit

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market watch The Economic Times Wealth May 25-31, 2020

21

HOW YOUR INVESTMENTS PERFORMED THIS WEEK This weekly tracker keeps you updated on the benchmark stock index, bond yields, forex movements and CPI-Combined. It also tracks the changes in the past one year to give investors an idea how their investments performed over a longer period.

CPI-Combined (%) 7.35

CHANGE X

1 WEEK

-0.61%

1 WEEK

-2.60 (bps)

1 WEEK

0.09%

LATEST

5.84%

X

1 YEAR

-20.62%

1 YEAR

-127.10 (bps)

1 YEAR

8.29%

1-YEAR AVG

4.76%

Markets remained volatile due to Covid-19 fears and heavy selling in banking and NBFC stocks. Investors were also concerned about the chances of demand revival in the near term as the recent stimulus measures are considered inadequate.

The rupee weakened due to the strengthening US dollar, rising crude oil prices, and extension of national lockdown.

The 10-year bond yield changed little due to the adequate liquidity surplus in the system.

6.58 5.84

3.99 4.62 3.28

Dec '19

3.18 3.05 2.99 3.15

Apr '19

` PER DOLL AR

7.59

5.54

21 MAY 2020

Oct '19

21 MAY 2019

Nov '19

21 MAY 2020

75.51

Sep '19

21 MAY 2019

69.73

Aug '19

21 MAY 2020

6.03

Jul '19

21 MAY 2019

7.30

Jun '19

30,933

May '19

38,970

Mar '20

USD-INR

Jan '20

10-yr bond yield (%)

Feb '20

Sensex

The CPI-Combined for the month of March 2020 is revised to 5.84%, which fell below the RBI's upper target limit of 6%.

PENNY STOCKS UPDATE Penny stocks as a recommended non-traditional investment? Not exactly. ET WEALTH neither has the expertise nor does it recommend investing in such stocks. But since the relatively ‘low’ cost of investment attracts some investors to penny stocks, we provide a weekly snapshot of this most volatile and uncertain type of stock investing.

Top price gainers STOCK

MARKET PRICE (`)

Top volume gainers 1-WEEK (%) CHANGE

1-MTH (%) CHANGE

1-MONTH AVG VOL (LAKH)

433.1 -51.34 47.81

MKT CAP (`CR)

Educomp Solutions Siti Networks Vikas Ecotech

3.74 2.28 3.36

26.78 25.97 26.79

DB Realty

8.15

26.95

115.61

1.40

69.21

198.26

Opto Circuits (India) Jyoti Sanwaria Consumer Hindustan Fluorocarbon Vikas Multicorp SE Power

5.82 5.60 3.36 6.78 2.33 3.00

-1.36 27.27 -5.35 5.94 11.48 -18.03

106.38 103.64 97.65 93.71 92.56 85.19

4.76 0 9.88 0.03 1.91 0.36

374.87 -79.84 973.05 96.65 9.84 849.35

174.97 12.93 247.33 13.29 154.6 12.18

159.72 159.09 127.03

0.44 0.97 3.39

1-MONTH AVG VOL CHG (%)

45.80 198.84 102.68

Top price losers Vikas Proppant & Granite PMC Fincorp Housing Development CG Power and Industrial RattanIndia Power GV Films South Indian Bank Reliance Naval Hindustan Construction Shiva Cement

2.99 0.23 1.57 5.71 1.14 0.24 4.96 1.13 4.52 8.26

STOCK

MARKET PRICE (`)

1-WEEK (%) CHANGE

1-MTH (%) CHANGE

1-MTH AVG VOL (LAKH)

1-MONTH AVG VOL CHG (%)

MKT CAP (`CR)

B2B Software

9.75

-0.51

-10.55

0.01

1,30,431.00

11.30

Uttam Value Steels KSS OCL Iron & Steel Vikas Proppant ISMT Prismx Global Ventures

0.22 0.19 1.89 2.99 3.00 7.68

-4.35 0 15.24 9.12 -13.04 -9.22

15.79 0 -20.92 -30.47 -0.66 -44.35

42.36 12.10 0.54 28.98 1.55 0.04

5,625.35 2,891.39 2,376.48 2,106.74 1,508.55 1,311.85

145.38 39.51 26.67 151.35 43.95 21.80

Birla Cotsyn (I)

0.10

25.00

25.00

4.74

1,256.12

26.87

Tuticorin Alkali Chemicals Swadeshi Polytex

6.18 3.99

21.18 3.64

43.72 -5.00

0.07 0.02

1,125.86 1,099.06

75.30 15.56

41.78 -2.33 23.29 -2.83 -13.41 -25.81 23.46 -3.16 62.22 -6.34

1.18 4.32 19.29 1.61 3.35 1.81 1.39 13.57 2.77 5.13

Top volume losers 9.12 4.55 -8.19 -12.15 -7.32 -7.69 -9.49 9.71 -5.64 1.23

-30.47 -25.81 -23.79 -22.52 -20.28 -17.24 -15.93 -15.04 -13.41 -11.75

28.98 1.81 1.99 1.49 7.98 1.06 11.89 19.02 3.35 1.11

2,106.74 -52.54 6.36 -13.32 18.39 53.68 40.1 556.83 -60.39 -27.59

151.35 11.71 74.42 357.87 563.13 21.95 897.61 83.35 683.88 161.07

JMT Auto Dish TV Jaiprakash Power SREI Infrastructure Hindustan Construction PMC Fincorp Toyam Industries Syncom Formulations JCT Trident

3.02 4.62 0.90 3.78 4.52 0.23 3.00 0.92 1.46 4.58

THE STOCKS HAVE BEEN SELECTED USING THE FOLLOWING FILTERS: PRICE LESS THAN `10, ONE-MONTH AVERAGE VOLUME GREATER THAN OR EQUAL TO 1 LAKH AND MARKET CAPITALISATION GREATER THAN OR EQUAL TO `10 CRORE. DATA AS ON 21 MAY 2020. SOURCE: ETIG DATABASE AND BLOOMBERG.

26.36 -3.14 1.12 -6.67 -5.64 4.55 15.38 1.10 5.04 -3.58

-75.16 -66.94 -62.84 -60.79 -60.39 -52.54 -46.04 -42.64 -37.71 -33.31

152.15 850.68 615.64 190.17 683.88 11.71 63.75 71.82 122.41 2,333.97

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mutual funds 22

The Economic Times Wealth May 25-31, 2020

ICICI PRUDENTIAL BLUECHIP

GOOD RECORD OUTSHINES LOW BOUTS ET Wealth collaborates with Value Research to analyse top mutual funds. We examine the key fundamentals of the fund, its portfolio and performance to help you make an informed investment decision.

HOW HAS THE FUND PERFORMED? Point To Point Return (%) FUND

BENCHMARK

CATEGORY AVERAGE

1-YEAR

2.68

3-YEAR

-2.00

-1.37

2.52

Top 5 sectors in portfolio (%)

BASIC FACTS

2.07

23 MAY 2008

5-YEAR

-1.47

CATEGORY TYPE

LARGE CAP -20.50

28.94

Energy

14.69

Technology

11.20

Automobile

8.04

FMCG

7.31

DATE OF LAUNCH

EQUITY

-19.35

Financial

AUM*

-18.87

The portfolio is underweight in financials, FMCG and tech, overweight in autos.

`21,820.93 CR

The fund has shed slightly more than its peers in the recent past.

AS ON 19 MAY 2020

Rolling Return (%)

FUND

BENCHMARK

13.38

BENCHMARK

NIFTY 100 TOTAL RETURN INDEX

WHAT IT COSTS

1-YEAR

NAV** GROWTH OPTION

10.96

`33.28

14.71

DIVIDEND OPTION

3-YEAR

9.26

Infosys

7.25

ICICI Bank

6.19

Reliance Ind

5.89

Bharti Airtel

5.76

The fund’s significant overweight bets are Bharti Airtel, SBI Life and NTPC.

`15.37

11.25

MINIMUM INVESTMENT

`100

14.95

MINIMUM SIP AMOUNT

5-YEAR

`100

11.41

EXPENSE RATIO*** (%)

The fund has delivered decent outperformance over index across time frames over the past decade.

AS ON 19 MAY 2020

2.05 EXIT LOAD

1% for redemption within 365 days

FIGURES DENOTE DAILY ROLLING RETURNS OVER LAST 10 YEARS BENCHMARK DATA USED S&P BSE 100 TRI

*AS ON 30 APR 2020 **AS ON 19 MAY 2020 ***AS ON 31 MAR 2020

WHERE DOES THE FUND INVEST? Portfolio asset allocation

Top 5 stocks in portfolio (%) HDFC Bank

Recent portfolio changes New Entrants Ambuja Cements, Bajaj Auto, Bank Of Baroda, Bharat Electronics, Cochin Shipyard, Hindustan Zinc, M&M, PVR, Trent, among others (March) Complete Exits Bajaj Auto, Bajaj Finserv, NBCC India, Zee Entertainment Enterprises (April) Additions Asian Paints, BPCL, Britannia Inds, Eicher Motors, ICICI Bank, M&M, Maruti Suzuki, TCS, Tata Power Co., Titan Company, Wipro (April)

Fund style box

How risky is it?

Growth Blend Value

Fund

Category

Index

Standard Deviation

19.54

19.90

20.50

Sharpe Ratio

-0.12

-0.07

-0.05

Mean Return

3.07

4.09

4.46

Mid-cap 10.88% Small-cap 0.20% Debt & Cash 6.40%

CAPITALISATION

Large-cap 88.92%

Small Medium Large

Equity 93.60%

INVESTMENT STYLE

The fund keeps some exposure to the larger mid-caps.

Should You Buy

This large-cap fund tries to squeeze alpha through individual stock picks rather than deliberately taking large deviations at sector level. It prefers to pick ideas from two

FUND MANAGER ANISH TAWAKLEY (IN PIC) AND RAJAT CHANDAK TENURE: 1 YEAR 7 MONTHS / 2 YEARS 9 MONTHS

ends of the spectrum - high quality businesses at a premium or cheap value stocks. It avoids the ‘growth at reasonable price’ basket. In the near term, the fund managers prefer to stick

BASED ON 3-YEAR PERFORMANCE.

The fund’s risk profile is reasonably good even though performance has been average in recent times.

with businesses with inherent balance sheet strength and ability to withstand turbulence. Its performance has dipped in the last few years, falling down the pecking order in its category.

SOURCE: VALUE RESEARCH

While the fund’s long term track record is impressive, the new fund managers are yet to demonstrate execution capabilities before it can be considered as a good pick in its category.

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pick of the week The Economic Times Wealth May 25-31, 2020

23

Manappuram Fin: Emerging stronger The Covid-19 induced financial stress may result in increased demand for gold loans.

W

non-gold loan portfolio is not expected to grow in 2020-21, ith a 30% increase in asset under managewhich may bring down the overall AUM growth to 10%. ment (AUM), the highest among non-banking There will be short term credit quality issues also on these finance companies (NBFCs), Manappuram segments due to Covid-19 and moratorium induced stresses. Finance has reported good numbers for the Comfortable funding environment is another reason why January-March quarter. Higher operating analysts are getting bullish on this medium-sized NBFC. profit that grew by 55% y-o-y and fall in corporate tax rate Despite the stress on NBFC Street, Manappuram continhelped it report 43% net profit y-o-y, much ahead of expectaues to get funds from banks and other funding sources at tions. reasonable cost (incremental Si nc e gold lo a n s c on s t i cost of funds is placed at 9.4%). tute two -thirds of its AU M, However, net interest margin Manappuram Finance is better (NIM) may come under presplaced compared to other NBFCs sure in the short term as the in 2020-21 due to several factors. 13 company is keeping high liquidFirst, Indian gold loan customBuy ity as a precautionary measure, ers usually don’t default because which is around 15% of its loan of emotional issues, since jewelas cash. Despite the drag from leries are pledged not gold bars. non-gold portfolio, Manappuram Second, the gold price is at higher is also expected to maintain its level now and therefore, recovery 1 return ratios like return on eqof loan by selling pledged gold is Hold uity (ROE) and return on assets easy even if there is a default. (ROA) at more than 20% and 4% Third, the demand for gold loan respectively in 2020-21. is expected to increase in coming Manappuram is better placed compared to other NBFCs since months because loans from other Indian gold loan customers hardly default and even if they Selection Methodology: We places will become difficult. do, the recovery will be easier given the high prices of gold pick up the stock that has shown Though the loan growth has currently. Comfortable funding environment is another reason why the company is a favourite of analysts. maximum increase in ‘consenbeen low during April and May, sus analyst rating’ during the due to lockdown induced operalast one month. Consensus rating is arrived at by averagtional issues, it is picking up now. Around 90% of its 3,529 gold ing all analyst recommendations after attributing weights loan branches have become operational. Manappuram has fought the lockdown blues by widening its online gold loan to each of them (ie 5 for strong buy, 4 for buy, 3 for hold, 2 for scheme. The online gold loan now stands at 61%, compared to sell and 1 for strong sell) and any improvement in consensus 45% before the lockdown and is expected to reach 70% by the analyst rating indicates that the analysts are getting bullend of 2020-21. On a conservative basis, analysts believe that ish on the stock. To make sure that we pick only companies its gold loan portfolio will grow by more than 15% in 2020-21. with decent analyst coverage, this search will be restricted The numbers for January-March were decent for non-gold to stocks with at least 10 analysts covering it. You can see loans. For example, the AUM of Asirvad micro finance and similar consensus analyst rating changes during the last one vehicle finance reported 43% and 21% y-o-y growth. However, week in ETW 50 table. —Narendra Nathan

Analysts’ views

Fundamentals CONSENSUS ESTIMATE

ACTUAL 2017-18

2018-19

2019-20

2020-21

Revenue (` cr)

2,859.40

3,633.09

4,051.55

4,489.92

Ebitda (` cr)

1,427.29

1,921.43

2,355.62

2,613.30

922.41

1,467.75

1,465.22

1,744.22

10.93

17.37

17.31

20.59

PBV

PE

DIVIDEND YIELD (%)

1.80

Net profit (` cr) EPS (`)

Valuations Manappuram Finance

2.23

6.86

Muthoot Finance

3.34

11.67

1.45

Sundaram Finance

2.12

11.11

1.46

Shriram Transport Finance

0.82

4.29

2.09

Cholamandalam Invest and Fin

1.71

8.13

0.95

Latest brokerage calls ADVICE

TARGET PRICE (`)

RECO DATE

RESEARCH HOUSE

15 May ’20

Daiwa Securities

Buy

160

15 May ’20

Phillip Securities

Buy

140

15 May ’20

IDBI Capital Market

Buy

160

15 May ’20

Nirmal Bang Inst

Buy

142

14 May ’20

YES Research

Buy

165

Relative performance 100 MARKET PRICE: `119.20

66.62 SENSEX 79.38 94.60

21 MAY 2019

MANAPPURAM FIN

ET NBFC

21 MAY 2020

Manappuram Fin compared with ET NBFC and Sensex. Stock price and index values normalised to a base of 100. Source: ETIG and Bloomberg.

WHAT EXPERTS ADVISE BUY

*STOCK PRICES AS ON 21 MAY RESEARCH HOUSE

ADVICE

HDFC Sec

Buy

Kalpataru Power

Yes Securities

UltraTech Cement Strides Pharma

STOCK

JMC Projects

Bharti Airtel

STOCK PRICE* (`)

1-YEAR TARGET PRICE (`)

POTENTIAL UPSIDE (%)

35

69

97

Expect 2020-21 to be a turnaround year as the likely restructuring of 3 BOT assets will cut loss. Along with the strong new domestic order bookings in April-May, international orders also saw an increase.

Buy

193

313

63

Though April has seen significant fall in execution and the ramp up would be very gradual going forward, valuation became reasonable after the recent sharp correction in stock price.

Motilal Oswal

Buy

3,571

4,305

21

Buy due to robust earnings growth and attractive valuations. While capacity expansion and sweating of existing assets will drive volume growth, revamping of Century assets to improve margins.

Jefferies India

Buy

421

500

19

Though Ranitidine ban by the US FDA is negative, rest of the product pipeline is strong. Its margins is also expected to be strong, led by the US ramp-up and strong growth in other developed markets.

ICICI Direct

Buy

594

700

18

Airtel continues to report revenue market share gains and also enjoys a comfortable leverage vis-à-vis peers. With a resilient performance amid challenging times, it is one of the better placed telecom players.

RESEARCH HOUSE

ADVICE

COMMENT

SELL STOCK

Dr Reddy’s Lab JK Lakshmi Cement

STOCK PRICE* (`)

1-YEAR TARGET PRICE (`)

POTENTIAL DOWNSIDE (%)

COMMENT

Nirmal Bang

Sell

3,847

3,647

5

While Dr Reddy’s earnings performance is expected to improve in future led by growth across all geographies, retain sell rating on the stock given the rich valuation it is trading at.

Centrum

Sell

206

207

0

Challenges posed by Covid-19 is likely to impact JK Lakshmi Cement’s operations. Since the revival will be gradual, it will impact performance of relatively higher leveraged companies like JK Lakshmi Cement.

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your feedback & more... 24

The Economic Times Wealth May 25-31, 2020

Readers’ response, online and in print, to ET Wealth stories has been enlightening. We pick some that add information and perspective to our articles from previous issues. This refers to the story, ‘Debt fund investors seem to have learnt their lesson’. Investors should say enough is enough! After the jolt of imposition of LTCG tax, the Franklin Templeton episode has shattered the confidence of retail investors. If one has to keep watching portfolios and other factors, then this is not an investment avenue for all. We expect more steps from Sebi and the government.

I have been reading ET Wealth right from the time it started and my Mondays are not complete without it. I find Uma Shashikant’s articles extremely relevant for the times that we live in. The article, ‘Treat this period as a pause’, gives valuable inputs on how to cope with retirement in the current climate. I am on the verge of retirement and have personally been badly affected by the current market crash. However, the article inspired me to believe that all is not lost. There is hope.

Who will explain the terms? The cover story, ‘Arogya Sanjeevani: Is it for you?’ well highlighted the benefits of this basic health plan. The problem with insurers is that not only are their products complex but so are the terms and conditions.. It’s difficult for a layman to understand the jargons, and while selling no efforts are made to explain them. The heartburn comess at the time of claim settlement.

Raj Krishnamurthy

Mutual funds sahi nahin hai. I invested in a low duration fund. I didn’t realise that it was low duration only in name and that it carried credit risk. Neither will I invest in any scheme of Franklin Templeton going forward, nor will I take the mutual fund industry seriously. Bank interest and peace of mind are better.

Sridhar

Arup Choudhury

or directly in the market. It’s better to stay away from funds right now. P.K.N.

Natarajan S.

The article, ‘Where to buy a house now’, provided valuable insight about where the residential real estate segment was headed. The point about companies thinking of adopting the hub and spoke model was

Not just debt fund investors, all mutual fund investors have learnt a lesson from this episode. We are better off investing in fixed deposits

interesting. This way, the companies would have their main offices in the city and smaller offices in the suburbs. This would be a welcome move for those who live in the suburbs of large metros right now. These office goers have to scramble to reach work on time daily and put up with punishing commutes.

The column must have been very comforting for all those who are retiring during this crisis period. Even for a person like me who retired a few years back and has seen the worth of investments in equity melting down in a matter of weeks, her advice shows the way forward. I wish I could read this article a few weeks back. She writes from her heart with the investors’ concern in mind.

Ajay N.

Manjunath

Good Metro connectivity is key

REALTY

This Hyderabad locality enjoys excellent connectivity with major job hubs in the city.

HOT SPOT

LOCALITY SNAPSHOT

SUPPLY BY BHK

MIYAPUR, HYDERABAD

1 BHK

10%

2 BHK

69%

Established area with good social infra & proximity to major IT hubs of Gachibowli and Hitec City Close to the major educational institutions of ISB, IIIT, University of Hyderabad and JNTU Key amenities nearby are Pranaam Hospital, Citizens Specialty Hospital, Forum Sujana Mall, etc. Good connectivity through Miyapur Road (NH-65), ORR & Chandanagar MMTS station Enjoys widespread metro connectivity through Miyapur-LB Nagar line of Hyderabad Metro VALUES

PRICE RANGE `2,150-5,800 per sq ft Nizampet Aminpur

LOCALITY

Pragathi Nagar

Miyapur

Aminpur

Price

Rent

(`/sqft)

(`/month)

2,150-3,400 11,400-18,200

3 BHK & above

Consumer preference by budget segment (`) Below 30 lakh

14% 13% 14%

30-40 lakh

25%

40-50 lakh 50-60 lakh

34%

Above 60 lakh

Airport: 41 km Railway station: 24 km

Miyapur

3,300-5,800

11,000-18,400

Nizampet

3,100-4,550

11,200-16,900

NH-65: 0 km 1 BHK 600 sq ft

2 BHK 1,100 sq ft

3 BHK 1,550 sq ft

`23 lakh (avg)

`45 lakh (avg)

`60 lakh (avg)

Schools 12+

Hospitals 10+

Restaurants 10+

21%

Consumer preference by covered area (sq ft) 12%

10% 5%

Below 750 750-1,000

14%

Pragathi Nagar 3,200-4,700 11,500-16,900

Banks 12+

Grocery Stores 15+

Petrol Pumps 10+

1,000-1,250

59%

1,250-1,500 Above 1,500

In dia’s No. 1 P ropert y Sit e

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