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MUTUAL FUND CHANGES

DOTHENEWPLANS
SUITYOU?
Several mutual
funds have altered
their investing style,
benchmarks and
other attributes in
recent months.
Find out if their new

GETTY IMAGES
flavours suit you.
PAGE 2

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02 The Economic Times Wealth, May 8-14, 2017 Cover Story

MUTUAL FUND CHANGES

DOTHENEW
PLANS SUIT
YOU?
Several mutual funds have
altered their investing
style, benchmarks and
other attributes in the past
few months. It’s time to
re-evaluate the funds in
your portfolio.

GETTY IMAGES

time to reassess whether the scheme de-

SANKET DHANORKAR
serves to be in your portfolio. Here we out- Fund sizes have ballooned

S
everal mutual funds have seen a line some of the changes that have occurred Mid- and small-caps have faced difficulty building a portfolio due to large inflows.
change in their flavour in recent in your mutual funds and how these could
times. Some of these changes impact you. `5,523 `5,238 AUM on Mar 2013 (` cr) AUM on Mar 2017(` cr)
have been a direct outcome of
the sharp rise in funds’ size, Change in fund style `3,344 `3,583 `3,828
`3,444 `3,532
change in the fund manager or altered in- Every mutual fund outlines certain objec-
vesting style. Others are a result of changes tives, an investment pattern and asset allo-
in some fundamental attributes of a cation in its scheme information document
scheme—investment mandate, change in (SID). The SID helps investors take an in-
benchmark index, etc. Some of these altera- formed investment decision, based on their `375 `292 `50 `138 `318 `199 `258
tions may be subtle and go unnoticed. But, risk profile, investing time horizon and
they could still impact the investor. If the goals. But the investing style and focus of DSP BR Franklin L&T India Mirae Asset Reliance SBI UTI Mid
Micro Cap India Value Emerg. Small Magnum Cap
changes have resulted in a scheme moving funds, at times, undergoes a change. Ac-
Smaller Co Bluechip Cap Midcap
away from its profile—key to why you invest- cording to the recent S&P Indices Versus Ac-
ed in the scheme in the first place—it may be tive Funds (SPIVA) India Scorecard, both eq- Source: ACE MF. Compiled by ETIG Database
Cover Story The Economic Times Wealth, May 8-14, 2017
03

Funds whose portfolio size has seen Funds which have sharply cut down
substantive growth AUM (` cr) Stocks in portfolio their portfolio AUM (` cr) Stocks in portfolio
SCHEME CATEGORY MAR ’13 MAR ’17 MAR ’13 MAR ’17
SCHEME CATEGORY MAR ’13 MAR ’17 MAR ’13 MAR ’17
Canara Robeco Emerg. Equities Small Cap 41 1,643 54 71
Franklin India High Growth
Multi Cap 530 6,027 41 32
DSP BlackRock Micro Cap Small Cap 375 5,523 47 83 Companies

Tata Ethical Multi Cap 101 476 30 55 HDFC Large Cap Large Cap 1,267 1,235 46 20

SBI Magnum Midcap Small Cap 199 3,583 39 57 SBI Small & Midcap Small Cap 23 684 42 24
ICICI Pru. Focused Bluechip Eq. Large Cap 4,193 12,843 29 50
Tata Dividend Yield Multi Cap 322 326 51 32
IDFC Classic Equity Multi Cap 139 852 31 65
Axis Midcap Mid Cap 202 1,208 54 40
Birla Sun Life Frontline Equity Large Cap 3,020 16,352 66 77

Rising corpus has led to bigger portfolios for these These schemes have reduced holdings, resulting Source: Value Research
schemes, resulting in heavy diversification. in greater concentration.

uity and bond funds have exhibited a sub-
stantial style drift in recent years. Over the
past three years, ending December 2016,
only 41% of the large-cap funds, and 51.5% of
mid- and small-cap funds maintained a style
consistency. The style drift has been partic-
ularly acute over the past five-year period:
Only 35.6% of the large-cap funds and 48%
of mid- and small-cap funds stayed true to
their style. Bond funds were more consist-
ent, but not immune to style drift. Across
one-, three-, and five-year periods, ending
December 2016, only equity-linked saving
schemes maintained a 100% style consist-
ency, according to SPIVA.
AUM-induced changes
Today, there are nine equity schemes with
assets under management (AUM) of more
than `10,000 crore. In 2015, there were only
three such schemes. This spike in funds’
AUM, in a short span of time, has affected
their portfolio management. Take, for in-
stance, DSP BlackRock Micro Cap, one of
the best-performing funds over the past
three years. The fund’s size has ballooned
from `374 crore in March 2013 to `5,523
crore today. This surge in inflows, coupled
with the sharp uptick in share prices and
valuations in small-caps has altered the
fund’s portfolio drastically. From a basket of
47 stocks—as on March 2013—the fund has al-
most doubled its portfolio size to 83 stocks.
Resultantly, its portfolio composition has
undergone a huge change. The fund has
now spread itself thin among its holdings
with its top 10 stocks accounting for just 27%
of its portfolio, down from 39% five years
ago. Modest exposure to its top picks could
dilute the fund’s alpha generation capabili-
ty. This shift in approach was an inevitable
outcome of the growth in the fund’s size,
says fund manager Vinit Sambre: “To ac-
commodate the bigger size, it was not possi-
ble to deploy money in the same stocks. We
had to spread the money to more stocks
while ensuring that the liquidity profile of
the portfolio remains healthy.” The fund,
however, has largely continued to maintain
its investing focus, unlike many of its peers.
Several other schemes from the small-
and mid-cap category have also seen similar
changes in their portfolio. “In the case of
“We had to spread the money
to more stocks while ensuring
that the liquidity profile of the
portfolio remains healthy.”
VINEET SAMBRE
FUND MANGER, DSP BLACKROCK MICRO CAP
Fund Research, Morningstar Investment
Advisor India. Some large-cap funds have
also been forced to expand their portfolio.
ICICI Focused Bluechip—a large cap scheme
mandated to take a concentrated ap-
proach—has diluted its portfolio from 29 to
50 stocks in the past five years.
Contrastingly, there are also schemes
which have cut down portfolio size sharply.
ICICI Prudential Select Large Cap, whose
AUM grew from `91 crore in March 2013 to
`753 crore now, has brought down its port-
folio size from 29 stocks to 14. Its top 10
stocks now account for 77% of its entire
portfolio compared to 58% earlier. ICICI
Prudential Value Discovery has also cut the
flab, shrinking its portfolio from 69 to 40
stocks. Meanwhile, it has also morphed
from a being distinctly mid-cap fund to be-
ing a flexi-cap scheme. Both the funds are
helmed by Mrinal Singh, who is known to
ply a strict value-conscious approach. “The
sharper concentration is a reflection of our
conviction in the businesses we own, and
the move towards large-caps is an outcome
of our value bias which guides us to areas
where the risk-reward is more favourable,”
says Singh. Franklin India High Growth,
HDFC Large Cap and SBI Small and Midcap,
are also among the schemes that have re-
duced their holdings in the past three years.
Key fund mergers since 2011
DATE SCHEME
8 Mar 2016 DHFL Pramerica Liquid
Fund
8 Mar 2016 DWS Treasury Cash Fund
7 Sep 2013 Reliance Natural Resources
Retail
27 Mar 2014 UTI Master Value Fund
30 Sep 2011 UTI Wealth-Builder Fund
When two schemes are merged, it may alter
the fund profile of both the schemes.
managers have brought their distinct in-
vesting style and philosophy to schemes,
resulting in visible tweaks in the funds’ con-
struct and approach. “A change in the fund
manager, particularly at a fund house that
depends more on fund manager expertise
than internal investment philosophy and
processes, usually brings uncertainty and
may also be accompanied by some degree
of style drift,” says Renu Pothen, Research
Head, Fundsupermart.com. For instance,
Anoop Bhaskar’s appointment as the Head
of Equities at IDFC Mutual Fund has been
followed by distinct changes in the fund
house’s equity schemes, previously helmed
by Kenneth Andrade. Known to take a con-
servative approach, Bhaskar has brought
his risk-conscious style to IDFC schemes.
His penchant for heavily diversified portfo-
lios is now visible in IDFC Classic Equity,
IDFC Premier Equity and IDFC Sterling Eq-
Today, there are
nine equity
schemes with
assets under
management of
over `10,000 crore.
In 2015, there were
MERGED INTO AUM* (` cr)
DHFL Pramerica Insta 776
Cash Plus Fund
DHFL Pramerica Insta 675
Cash Plus Fund
Reliance Vision Fund 748
UTI Mid Cap Fund 517
UTI Opportunities Fund 738
*At the time of merger. Source: Value Research
uity—all three funds now carry a bulkier
portfolio compared to two years ago. “He is
tuned more towards loss aversion and pro-
tecting the downside, and does not take an
aggressive stance in his funds unlike many
others,” says Kunal Bajaj, CEO, Clearfunds.
The impact of a fund manager change
needs to be evaluated at the depth it de-
serves. “Recently one star fund manager
was replaced by another, also with a prov-
en, superior long-term track record, but
vastly different fund management style. Of
the 81 stocks held by the previous fund
manager, the new manager exited from 56
within 6-7 months,” points out Roopali
Prabhu, Head, Investment Products, Sanc-
tum Wealth Management.
With new equity fund managers taking
over at fund houses like UTI, Invesco and
Tata, among others, investors can expect
changes in the investing approach of
schemes from these fund houses. There are
cases where change in fund manager has led
to a pure large-cap strategy being altered to
a more flexi-cap approach. “Every fund
manager has a unique investing style and it
is reasonable that he will play to his own
strengths. But it can be a concern if the fund
manager is straying from the limits specified
by the fund,” says Belapurkar. Such drift in
investing style or focus may actually boost
the return profile of the fund. But if the re-
turn comes at higher risk, it may not suit the
risk appetite of the investor.

mid- and small-cap funds, portfolio dilution Change in fund manager only three such Funds taking on higher risk
is inevitable beyond a certain corpus size,” Numerous fund manager exits have also led Vidya Bala, Head, Mutual Fund Research,
says Kaustubh Belapurkar, Director, Mutual to changes in some funds. Incoming fund schemes. FundsIndia, points out that many funds’ in-
04 The Economic Times Wealth, May 8-14, 2017 Cover Story

vestment approach is not consistent with

their declared strategy—and investors may
Many schemes have changed their benchmarks
not even be aware of this style drift. The ASSETS
problem is acute in the bond funds category. SCHEME CATEGORY CHANGE OLD BENCHMARK NEW BENCHMARK
(` cr)
Several debt funds have taken too much lee-
way, and have changed their style to suit the ICICI Prudential Value Discovery Multi Cap 17,029 1 Nov 2015 Nifty Free Float Midcap 100 S&P BSE 500
prevelant condition. For instance, there are
some short-term debt funds which have tak- UTI Opportunities Large Cap 4,479 13 Feb 2017 S&P BSE 100 S&P BSE 200
en undue credit risk, and others that have at-
tempted to play the interest rate movements, SBI Magnum Midcap Small Cap 3,583 17 June 2016 S&P BSE Mid Cap Nifty Mid Small Cap 400
almost mimicking duration funds. Such ac-
tions raise the fund’s risk profile even though Reliance Mid & Small Cap Fund Small Cap 2,758 1 Sep 2015 S&P BSE Mid Cap S&P BSE Mid Small Cap
investors may not have bargained for it. “In
bond funds, the investor typically has a pre- UTI Bluechip Flexicap Fund Large Cap 1,812 1 Dec 2015 Nifty 50 S&P BSE 200
determined investing time horizon and the
goal is quite clear. So, when an ultra short- Kotak Emerging Equity Small Cap 1,712 1 Aug 2015 S&P BSE Mid Cap S&P BSE Mid Small Cap
term fund carries portfolio with an average
maturity greater than 2-3 years, it is poten- HDFC Large Cap Fund Large Cap 1,235 28 June 2014 S&P BSE 100 Nifty 50
tially putting investors’ goals at risk,” says
Pothen. Average maturity profile of a debt HDFC Small Cap Fund Small Cap 992 28 June 2014 S&P BSE 200 Nifty Smallcap 100
fund indicates its risk profile: A fund that in-
vests in instruments with longer maturity is HSBC Equity Large Cap 599 11 Nov 2016 S&P BSE 200 Nifty 50
exposed to higher interest rate risk. Short-
term and ultra short-term funds are not A change in the benchmark index may Source: Value Research
meant to carry such high risk as their prima- indicate a shift in investing focus.
ry aim is to earn a stable return by investing
in instruments with lower maturity profile.
Scheme mandates have also changed
Scheme mergers
A widely prevalent practice among fund DATE OLD NAME NEW NAME CATEGORY ASSETS (` cr)
houses is to merge non-performing or small-
er schemes into bigger or better performing 9 Nov 2016 HDFC Small and Mid Cap Fund HDFC Small Cap Equity: Small Cap 992
ones. In September 2013, Reliance Natural
Resources was merged into Reliance Vision 22 Jan 2014 Reliance Equity Reliance Focused Large Cap Equity: Large Cap 1,106
Fund. In March 2014, UTI Master Value was
clubbed with UTI Mid Cap. Often, the merger 22 Jan 2015 Reliance Long Term Equity Reliance Mid & Small Cap Equity: Small Cap 2,758
can mean a drastic change in the fundamen-
tal attributes of a scheme—and, thereby, its 8 Mar 2016 DWS Investment Opportunity DHFL Pramerica Balanced Advan. Equity: Balanced 157
risk profile—if it is merged into a scheme that
has a different flavour. “If the theme of a 17 Mar 2017 Tata Treasury Manager Retail Tata Corporate Bond Debt: Ultra Short Term 351
scheme is altogether distinct from the
scheme it is being merged into, investors 1 Dec 2014 Franklin India Income Franklin India Dynamic Accrual Debt: Credit Opportunities 2,230
should consider exiting even if the larger
In some cases, the change in mandate has Source: Value Research
scheme is a healthy performer,” recom-
altered the profile of the fund.
mends Pothen. Also, you may already have a
similar fund in your portfolio, which would
only lead to duplication and skew your port- tors of both the schemes are given the op- companies by market cap. HDFC Small and Apart from altered mandates, changes in
folio allocation. UTI Master Value was already tion to exit if they feel the merger does not Midcap became HDFC Small Cap in Sep- the benchmark index, exit load structure
a diversified mid-cap oriented fund, which suit them. tember 2016. Among bond funds, Franklin or expense ratio can also have implications
made it compatible with the investing profile India Income fund was re-labelled as Frank- for the investor. “Choice of the benchmark
of UTI Mid Cap. Reliance Natural Resources, Changes in scheme attributes lin India Dynamic Accrual in December index, at times, may be indicative of the
on the other hand, was a thematic fund dis- Many schemes have witnessed changes in 2014, and now invests into higher yielding, changing profile of the fund,” says
tinct from the profile of Reliance Vision—a di- some of their fundamental attributes. A lower-rated debt instruments. Tata Treas- FundsIndia’s Bala. Often, schemes change
versified scheme. change in the scheme mandate is the most ury Manager was changed to Tata Corpo- their benchmark index to bring it in line
The bigger scheme absorbing the smaller visible shift in the profile of a fund. Among rate Bond in March this year as it became a with their prevailing asset mix and chang-
or underperforming fund may also undergo equity schemes, Reliance Equity was re- credit fund from being a short-term debt ing focus. ICICI Prudential Value Discov-
visible changes in its portfolio. Since it ab- named as Reliance Focused Large Cap in fund, allowing the fund to take on more ery, for instance, changed its benchmark
sorbs the entire portfolio of a scheme, the January 2014, and the scheme’s mandate credit risk. DHFL Pramerica Balanced Ad- index in 2015 from Nifty Free Float Midcap
fund manager may require some time before was revised from running a diversified port- vantage changed its category altogether. 100 Index to S&P BSE 500 Index, to better
he can realign the new portfolio to suit the folio comprising companies from the top Till March 2016, it was a 100% equity fund reflect its flexi-cap stance. Kotak Select Fo-
fund’s mandate. This may also result in high- 100 universe to a focused approach with up with a different name and now it is a bal- cus, Birla Sun Life Advantage and SBI Mag-
er churn, imposing costs on the fund. Inves- to 25 companies belonging to the top 100 anced fund with 60% equity exposure. num Multicap have also adopted a broader

Funds with elevated interest rate risk Funds with elevated credit risk
PORTFOLIO AVERAGE % EXPOSURE TO SUB-AA
SCHEME AUM (` cr) SCHEME AUM (` cr)
MATURITY (years) SECURITIES^

Birla SL Treasury Optimizer Plan 5.1 7,253 Franklin India Ultra Short Bond 48.9 7,909

ICICI Pru Short Term Plan 4.0 8,776 Kotak Low Duration 40.7 4,499

Birla SL ST Opportunities Fund 3.8 5,442 DHFL Pramerica Low Duration 38.7 1,612

HDFC High Interest-STP 3.7 1,959 Indiabulls Short Term Plan 30.0 615

JM Short Term 3.6 34 HDFC Banking & PSU Debt Plan 28.1 3,055

Some short-term bond funds have invested in longer tenure Source: Ace MF. Some short-term bonds have invested large ^Rated AA- and below, A1 and below (as on March
instruments, that may not match the category’s risk profile. Data as on 31 March 2017 chunk of corpus in lower rated instruments. 2017). Source: CRISIL
Cover Story
How mutual funds investing in
REITs and InvITs impacts you
S
everal fund houses
are planning to
invest into real
estate investment trusts
(REIT) and infrastructure
investment trusts (InvIT).
Funds are now permitted to
invest up to 5% of their net
asset value in alternative
securities—capped at 10%
for a single fund. This
change in investment
pattern is a fundamental
shift in the attribute of a
scheme, so fund houses are
asking investors to indicate
their consent or to exit the
investment.
REITs are companies that
own and lease out
commercial or residential
real estate. The rental
incomes from the
properties are shared
among REIT investors, who
` are falling, exposure to
are allotted units. These
units are tradeable on
exchanges. InvITs are
similar to REITs, except
these own infrastructure
assets not real estate. “The
risk profile for these
instruments is somewhat
different, since the
repayment capability of the
instrument is completely
dependent on the sales in
the projects and the cash
flows are usually volatile,”
says Feroze Azeez, Deputy
CEO, Anand Rathi Wealth
Management. In an
environment where yields
these instruments could
actually lift a fund’s return
profile. They could be a
good source of return for
funds provided adequate
due diligence is done and
risks are understood, says
Roopali Prabhu, Head,
Investment Products,
Sanctum Wealth Manage-
ment. Liquidity, however,
could also be an issue since
these are new, untested
instruments, she cautions.
Investors wishing to opt
out of the scheme can do
so within the window
specified by the fund house
without having to pay any
exit load. They can also
switch another scheme
from the same fund house
The Economic Times Wealth, May 8-14, 2017
“Shift to large-caps is because
of our value bias which guides
us to areas where the risk-
reward is more favourable.”
MRINAL SINGH
FUND MANAGER, ICICI PRU VALUE DISCOVERY
benchmark index that aligns with their
portfolio.
What you should do
If you are not being hand-held by an advisor,
it is prudent to monitor your investment
closely. It is critical that you keep your eyes
open to news of any change in your
scheme’s investment mandate or other
modifications. “Scheme mandates are not
watertight, which gives leeway to fund man-
05
agers to make sweeping changes in the port-
folio,” says Belapurkar. To decide what to do
in the event of changes in the fund you hold,
the first thing is to ask yourself why you had
picked the fund in the first place. If you are
comfortable with the revised scheme struc-
ture or approach and it aligns with your
needs, there is no reason to worry or exit.
But, if you are not comfortable with the
drift in style or change in the scheme man-
date, then it makes sense to pull out your
money. For instance, a shift in focus from a
pure mid- or large-cap to multi-cap, or a
concentrated fund taking a diversified ap-
proach may mean it no longer fits with your
specific needs. “For some, the shift may be
favourable as the risk gets diversified, but
aggressive investors would be more com-
fortable with a leaner portfolio,” says Rohit
Shah, Founder and CEO, Getting You Rich.
In some cases, the change may affect the
fund’s return profile. A change in funda-
mental attributes in a scheme or a scheme
merger is communicated to the investor,
providing the option to exit the fund within
a specified time frame. But other changes,
such as a shift in investing style are more
subtle, and require monitoring and careful
deliberation by the investor.
Please send your feedback to
etwealth@timesgroup.com
06 The Economic Times Wealth, May 8-14, 2017
How much is
too much loan
& insurance
Find out what
percentage of your
income should go
into loan EMIs,
insurance premi-
ums and rent, so
that these don’t
dent your budget
or impact your
investments.
GETTY IMAGES
YOGITA KHATRI
F
or most Indians, buying a house is
one of their biggest dreams. For
several, the dream is soured a few
years down the line. The loan that
they thought would help buy the
house, starts straining their budget and im-
pacting other goals. Home loan is not the
only culprit. High insurance premiums, ex-
pensive personal loans and car loans con-
tribute to the increasingly stressed finances
and jittery investors. To avoid distressing
your finances as well as your life, here’s how
to figure out what percentage of your in-
come should go into these expenses.
INSURANCE PREMIUMS
Most people make the mistake of mixing in-
surance with investment. So, instead of opt-
ing for low-cost pure life protection, they
pack their portfolios with traditional plans,
which yield low returns of 5-6% and come
with a huge premium. Add to these other in-
surance plans like health, critical illness, car
and home cover, and the premium outgo
swells up considerably. The pure life cover,
or term plan, should be about 8-10 times
your annual income, and should take into
account all dependants and loans. If you also
Financial Planning
have traditional plans and Ulips, the premi- SATISH SHENOY, 50
um should not exceed 6-7% of your total in-
Mumbai
come. According to Harshavardhan Bhusari,
Certified Financial Planner, FinPals, this fig-
ure should not cross 8%. “The premium on INCOME: `60,000
any kind of insurance policy should not be
more than 8% of your income.” EXPENSES: `66,000
Mumbai-based sales professional Satish
INSURANCE PREMIUM: `21,000
Shenoy, 50, didn’t know about this figure. A
few years ago, when he earned `60,000 a
month, he paid `21,000 for three Ulips and INSURANCE PREMIUM
two endowment plans. This translated to SHENOY’S
about 35% of his income. “I bought these to PREMIUM AS %
save on tax, get good returns and for safety,” OF HIS TOTAL
says Shenoy. After four years, he realised INCOME
that the money wasn’t growing fast enough 35%
to meet the goal of his son’s education.
If you have too many policies as an invest-
ment, get rid of the ones that don’t give you
returns high enough to combat inflation. THUMB RULE
“Calculate the surrender and paid-up value Insurance premiums should
of all your policies and take a decision,” says not be more than 6-7% What he did
financial planner Dilshad Billimoria, Direc- of total income.
tor, Dilzer Consultants. If you incur a small � Surrendered all his expensive traditional
loss and maturity date is years away, surren-
der it. If not, convert it into a paid-up plan.
6-7% plans and Ulips.
� Invested in a high-return option like mutual
For protection, go for low-cost term insur- funds to meet his financial goals.
ance. For investing, opt for equity-oriented
options for long-term goals and debt-orient-
ed ones for short- or medium-term goals.
Financial Planning The Economic Times Wealth, May 8-14, 2017
07

ASHISH WADHWA, 26 Vensiva Financial Solutions. 75% of his income, or `31,000, is going as EMI
for a personal loan. He took the loan after his
Chennai PERSONAL LOAN & OTHER LOANS business suffered losses two years ago.
Bengaluru-based Balaji K, 30, is beginning This is why it is best to pay yourself first. “It
INCOME: `53,000 to feel the heat too. Though he hasn’t taken may be daunting initially, but you pick up the
a home loan, the software professional is habit gradually,” says Ramesh Bukka, Co-
EXPENSES: `50,000 finding it hard to keep up with his expen- Founder and Director at Entrust Family
sive personal loans and high rent. These Office Investment Advisors. Equally impor-
HOME LOAN EMI: `31,000
comprise almost 80% of his income and re- tant is to remember the ceilings for loans and
sult in a deficit every month. “I had to take insurance premiums, and try not to exceed
HOME LOAN EMI various loans for a medical emergency and these at any cost.
WADHWA’S EMI my wedding,” says Balaji. To cut down the
AS % OF HIS expenses, he could look for a house with
TOTAL INCOME low rent and repay all loans at the earliest.
While it is not advisable to take expen-
60% sive personal loans at all, if one is forced to,
the amount should not exceed 10% of one’s
income. “If the total monthly loan servic-
ing amount is over 50% of the net income,
House-related expenses, it is a red flag to watch out for,” says Suresh
be it loan EMIs or Sadagopan, Founder, Ladder7 Financial
rent, should be What he should do Advisories. Billimoria agrees, “It means
40% of total one is earning to pay the bank and is likely
� As he is young with fewer financial
income.
40% responsibilities, he should try to prepay
to fall into a debt trap.”
Pune-based Nirdesh Jain, 28, a chartered
his home loan. accountant, knows it well. He is repaying
� He should also use any bonus or various loans, with the EMIs of 28,000
surplus funds to repay the loan. adding up to 45% of his monthly income.
While he seems confident about his earn-
ing capacity, it is important to focus on in-
vesting. Jain currently invests only `16,000
BALAJI K., 30 annually in mutual funds. Mumbai-based
businessman, Purushottam Bohra, 56, too
Bengaluru needs to plan for retirement, but currently

INCOME: `62,500

EXPENSES: `64,150

LOAN EMIS & RENT: `49,150

PERSONAL & OTHER LOANS

BALAJI’S EMIS &
RENT AS % OF HIS
TOTAL INCOME

80%
THUMB RULE
Personal loan
should be 10% of
total income What he should do

10% � Shift to a house with low rent.

� Repay the two expensive
personal loans at the earliest.

HOME LOAN EMI many financial responsibilities, a good op-

House-related expenses, be it loan EMIs
(equated monthly instalments) or rent,
can also send your cashflow haywire.
While the combined EMIs of all your loans
should not be more than 45-50% of the to-
tal income, home liabilities should not ex-
ceed 35-40% of the income.
Aashish Wadhwa, a 26-year-old home
owner from Chennai, was clearly unaware
of this thumb rule when he bought a house
recently. While he earns `53,000 a month,
he is paying an EMI of `31,000, nearly 60%
of his total income. “I bought the house to
save on taxes and rent,” he says. These fac-
tors, along with attractive interest rates,
double incomes and expectations of good
salary hikes, make one stretch the budget
to buy a house.
If you are young and don’t have too
tion is to prepay the home loan instead of
investing in other avenues. “A 9-9.5% loan
versus an expected return of 12-15% on in-
vestments may feel like a no-brainer, but
the psychology of a liability hanging over
your head makes the borrower uncomfort-
able. Prepaying is a better option,” says N.
Vishwanath, Founder and CEO, Blue
Ocean Financial Services. “In the initial
years, the interest component is higher
and provides tax benefits, so prepaying af-
ter 5-7 years works well,” says Amol Joshi,
Founder, PlanRupee Investment Services.
It makes even more sense to prepay if the
house is for self-use, not investment. “In to-
day’s uncertain job market, managing a
fixed expense like an EMI, especially when
it is high, can be a big challenge,” says Bal-
akrishnan Venkataramani, Proprietor,
08 The Economic Times Wealth, May 8-14, 2017 Review Preview

No blocking of NPS accounts Product launches

PFRDA to issue fresh guidelines for FATCA self certification by NPS subscribers MUTUAL FUND
he Pension Fund Regulatory and Axis Mutual Fund has launched the

T Development Authority has clari-

fied that NPS accounts of investors
who have not submitted the Foreign Ac-
count Tax Compliance Act (FATCA) self
certification will not be blocked. The
clarification, sent to the registered email
addresses of NPS investors on Thursday,
comes as a relief to some 40 lakh NPS in-
vestors.
These investors had been warned that
if they failed to submit a physical signed
self-certification of the FATCA by 30
April, their NPS account would be
blocked. The PFRDA says it will issue
fresh guidelines shortly.
Observers say the FATCA declaration
should not be offline because it will un-
necessarily add to paperwork. Besides,
the insistence on a physical document is
an anachronism at a time when the gov-
ernment is pushing everything to the dig-
ital format. Mutual funds accept online
submission of the FATCA declaration. “It
is a self-certification process, and does
not require any documents to be submit-
ted,” points out Manoj Nagpal, CEO of
Outlook Asia Capital.
The issue brings into focus the need for
a single-window KYC that applies to all fi-
nancial dealings of an individual. Ideally,
the FATCA self-certification submitted by
an individual to banks and mutual funds
should be good enough for the NPS as
well. Even the centralised KYC, which
was introduced to make life easy for in-
vestors, has not been of much help here.
“The PFRDA requirement for another
FATCA self certification shows how the
systems are still not talking to each oth-
er,” says Nagpal.
Axis Equity Advantage Fund Series 1, a
multi-cap fund that will invest in a diver-
sified portfolio of stocks and equity-related instruments.
The closed-ended scheme has a tenure of 1,590 days
(53 months). The NFO is open till 19 May.
PPFAS Mutual Fund has launched ‘PPFAS Self Invest’,
a mobile app to help manage one’s holding. The app can
help conduct a range of transactions. Existing investors
can register for ‘PPFAS Self Invest’ by registering and
choosing a mobile PIN for each folio.
INSURANCE
HDFC Life Insurance has launched
HDFC Life Click 2 Protect 3D Plus, an
online policy that provides nine different
protection options and covers all possible adversities,
raging from death, disability and disease.There is also a
top-up option to increase the coverage.
Bajaj Allianz General Insurance has launched Bharat
Bhraman, a travel policy aimed at covering people for
short or long-distance domestic tours. The premiums
start as low as `5 for a single trip insurance and the
coverage period can range from a few hours to up to
one year.

Edelweiss Tokio Life Insurance has launched India’s

Cognizant offers 6-9 months’

`200cr
first over the counter life insurance policy. The ‘POS
Saral Nivesh’ can be bought without any medical tests.
The minimum premium is `5,000 per year or `1,000
pay for leaving company monthly, with the insured sum ranging from `50,000 to
`10 lakh.
was the insurance

I
n a bid to cut its
cover for the film wage bill, software
Baahubali 2. The major Cognizant
Technology has of-
Future Cine Suraksha fered a golden hand-
policy covered the film shake to select senior
employees. Directors
against death or illness and senior vice-presi-
of actors or natural dents have been of-
calamities and acci- fered 6-9 months’ pay
as a severance pack-
dents leading to delays age. While directors
in the film schedule. are offered the nine-
month packages, as-
sistant vice-presidents Employees felt the
and senior vice-presi- heat of slower growth
dents will get the six for the first time in
months’ salaries for 2016, when the best
leaving. Sources say performers received domestic calendar
close to 1,000 employ- only 95% of their vari-
ees may be eligible for able pay, significantly
the voluntary separa- lower than the usual Tuesday
Monday Wednesday Friday
tion incentive. 150-200% they used to MAY
Cognizant has wit-
nessed terrific growth
earn earlier. Cogni-
zant employs 2.6 lakh
MAY
DEC
09 MAY
10 12
over the past two dec- employees globally,
Bharti Airtel Hero Motocorp India year-on-
ades but has slowed with 1.9 lakh of them
year CPI data
fourth quarter fourth quarter
down in recent years. based in India.
results results for April

New ITR forms RERA can’t rule on old projects

T
he Real Estate Reg- timelines. “We will de- said RERA can only func-
ready for e-filing ulatory Authority
(RERA) can’t pe-
cide the timeline for the
ongoing projects as they
tion under the specified
rules. “Home buyers will Tweet
corner
T
he Income Tax department has nalise builders for delays come to us for registra- have an option to reach
activated the e-filing facility for on projects started be- tions,” said Anthony De out to other courts of law
all categories of Income Tax Re- fore 1 May 2017. Officials Sa, chairman RERA & or RERA for resolving
turns (ITRs) for the assessment year have clarified that the former chief secretary, their issues. However, Vijay Kedia @VijayKedia1
Madhya Pradesh. Vini we can’t penalise a build- MD, Kedia Securities
2017-18. A taxpayer should keep ready RERA can only penalise
a copy of last year’s ITR, bank state- projects after they get Mahajan, additional sec- er for earlier delay, as the Don’t always trust what you see.
ments, TDS and savings certificates, registered and the build- retary, housing urban Act doesn’t allows us to,” In a bull market even a duck looks
Form-16 and other relevant docu- er defaults on the agreed development, Punjab said Mahajan. like a swan.
ments ready before attempting the e-
filing, an official said. Samir Arora @Iamsamirarora
The taxpayer’s Aadhaar number is Fund manager, Helios Capital
now mandatory for filing of income “SIPs are the best way to invest in ELSS. If Investor to company:
tax returns. The e-verification of ITRs quote of you can’t understand this simple logic, don’t Yr results are bad
can also be done through the Aadhaar Yes Sir
number. If e-verified, the ITR-V (ac- the week force your kids to study regularly from the Guidance-muted
knowledgment) does not have to be Yes
sent to the Central Processing Centre beginning of the academic year.” Yr history-so so
(CPC) in Bengaluru. Already 2.6 lakh VIJAI MANTRI Yes- but we are mid cap
ITRs have been e-verified in this fiscal CHIEF MENTOR & CO-FOUNDER, BUCKFAST INVESTMENT ADVISORY SERVICES Investor: Sorry-forgot that. BUY
using the Aadhaar.
Family Finance The Economic Times Wealth, May 8-14, 2017
09

Correct the
realty skew
The Hyderabad-based couple will need to revamp
their portfolio if they want to meet all their goals.
RIJU DAVE wedding, he wants `38.6 lakh in 20 years.
For this he will have to start an SIP of `2,310 Chandrashekhar T. & Shubhangi, 37 & 32, Salaried, Hyderabad

C
handrashekhar T. is 37 and stays in an equity fund for the given term. For re-
in Hyderabad with his wife and tirement, he will need `8.1 crore in 23 years.
three-year-old child. He brings in To meet this goal he will have to allocate his How to invest for goals
a salary of `1.08 lakh and, after PPF, EPF, NPS, debt plan and real estate
all expenses, is left with a surplus holdings. Though Chandrashekhar is not Investment
Future cost (`) / Resources
of `5,484. His portfolio is skewed heavily to- keen on getting rid of his land and proper- GOAL needed
time to achieve used
wards real estate and he has no equity invest- ties, he is advised to do so to be able to secure (`/month)
ment. He is also repaying three loans with his retirement. In addition, he will need to Emergency fund 2.8 lakh / 2 yrs Cash 7,004*
high rates, one of which is close to ending start an SIP of `8,901 in an equity fund. Due
and another, a credit card bill, will end in to lack of surplus, he can start with `6,000 Child’s education 55.1 lakh / 15 yrs Insurance 5,931
about nine months. and invest `42 a month in the PPF. Child’s wedding 38.6 lakh / 20 yrs - 2,310
The financial planning team of Fincart sug- As for insurance, Chandrashekhar has one
PPF, EPF, NPS, debt,
gests he build an emergency corpus of `2.8 term plan of `1 crore and one traditional Retirement 8.1 crore / 23 yrs 6,042**
real estate
lakh by allocating his cash and starting an SIP plan. He is advised to retain both the policies
of `7,004 in a short-term debt fund. Howev- and buy another `1.1 crore term plan. He also Investible surplus needed 21,287
er, he can do this after nine months, when he has health plans of `5 lakh each for himself * Investment for this goal will begin after repaying the credit card bill.
has repaid his second loan. and his wife, and a `3 lakh plan for his father. ** Investment for this goal is `8,901, but due to lack of surplus, he can begin with `6,000 and `42 in the PPF.
Annual return assumed to be 12% for equity, 8% for debt. Inflation assumed to be 7%.
As for his other goals, he wants to build a He is advised to buy a family floater plan of
sum of `55.1 lakh in 15 years for his child’s `5 lakh for himself, his wife and child, and a
education. For this, he can use the maturity top-up plan of `20 lakh. He should buy an- Insurance portfolio
amount of his traditional plan and start an other `5 lakh plan for his father with a similar
SIP of `5,931 in an equity fund. For the kid’s top-up plan of `20 lakh. Existing
Suggested
Existing monthly
INSURANCE Suggestions monthly
cover (`) premium
Portfolio Cash flow (`)
premium (`)

Asset Current value (`) Life insurance

Existing Suggested
Real estate 1.35 crore (`) (`) 1,564 + 1,583
Term plan (1) 1 crore 1,583 Buy `1.1 crore plan
(existing)
Cash 1 lakh Income 1.08 lakh 1.08 lakh Traditional plan (1) 3 lakh 1,833 Continue 1,833
Debt
Outflow Ulip - - - -
Insurance 3 lakh
Total 1.03 crore 3,416 `2.1 crore 4,980
Household
PPF 1.2 lakh 59,000 59,000 Health insurance
expenses
Fixed deposit 80,000 Employers’ - - - -
Loan EMIs 34,200 17,000
NPS 36,000 `5 lakh for family + `5
Insurance Own 13 lakh 2,900 5,289
6,316 10,269 lakh for father + top-ups
Debt plan 20,000 premium
Total 13 lakh 2,900 `10 lakh 5,289
EPF 12,000 Investment 3,000 21,287
Critical illness &
- - - -
Total 1.41 crore accident disability
Total outflow 1.02 lakh 1.07 lakh
Total - - - -
Liabilities Current value (`) Surplus 5,484 444 Insurance cost - 6,316 - 10,269
Loans 13.35 lakh Premiums are indicative and could vary for different insurers.

Total liability 13.35 lakh

WRITE TO US Looking for a professional to analyse your investment portfolio? Write
Financial plan by to us at etwealth@timesgroup.com with ‘Family Finances’ as the
Pankaaj Maalde FOR EXPERT subject. Our experts will study your portfolio and offer objective advice
Net worth (approx) `1.28 crore Certified Financial Planner ADVICE on where and how much you need to invest to reach your goals.
10 The Economic Times Wealth, May 8-14, 2017 Banking

Should investors be cautious

about banking stocks?
Despite the recent rally, experts are still of the opinion that there’s more in store for the banking sector.

NARENDRA NATHAN PSU banks

Most public sector banks are oriented to-

D
espite the lacklustre corporate
performance, banking stocks are
still rallying. The Bank Nifty has
generated a return of 35% during
the past year, compared to a gain
of 19% in Nifty. The rally was more concen-
trated on the PSU bank side, with the PSU
Bank Nifty generating one-year return of
52%. What are the reasons behind this? Since
the rally is continuing unabated (PSU Bank
Nifty rallied by another 3.37% in the past
week), should investors be cautious about
banking stocks at this juncture? More impor-
tantly, how should they play the sub-sections
within banking stocks?
Private retail banks
Retail loan-focused private sector banks like
HDFC Bank and Kotak Bank are the darlings
of the investment community. As of now, the
fundamentals are still improving and there is
nothing to worry about on this front. “The
Indian retail loan market should continue to
grow fast, since it is still under-penetrated,
as well as due to the pick-up in housing
loans,” says Anand Shah, Deputy CEO & CIO,
BNP Paribas MF.
However, they are currently quoting at the
highest valuations. While Kotak Bank and
HDFC Bank are priced at 6.6 times and 4.42
times their respective book values, many
other banks are quoting at very low levels.
Experts see no reason to exit high quality
companies like HDFC Bank due to high valu-
ations. “While the valuations of quality com-
panies, like HDFC Bank, are high, it is justi-
fied because of better earnings visibility,”
says Siddharth Purohit, Senior Equity Re-
search Analyst, Angel Broking.
wards corporate loans, and are therefore
harder hit by non-performing asset (NPA) is-
sues. Though some, like SBI, are aggressively
moving into the retail side, their retail portfo-
lios are still fewer than corporate ones. Con-
cerns about asset quality on corporate books
came to light when RBI enforced stricter rec-
ognition norms in 2015, forcing them to re-
port large NPAs. While some banks had to re-
port losses, others only suffered a big fall in
net profit. Recent events like demonetisation
compounded NPA issues for them.
But now their prices are climbing again,
because the investment community has
started seeing light at the end of the tunnel
on the NPA front. “Though new NPA addition
is still happening, it has slowed down consid-
erably,” says Purohit. Most experts feel that
the net NPA additions may drop to zero with-
in few quarters, following which, the gross
NPA too, will start falling. There is also specu-
lation in the market about the government
creating an NPA resolution mechanism.
“The economic recovery is slowly solving GETTY IMAGES
the NPA issues, and the expected govern-
ment action will only hasten it,” says Shah. ernment initiative on the NPA front. More im- vate banks that are already at new highs. An-
Since these banks have already provided for portantly, they may also gain from the ex- other question is whether you should bet on
NPAs through their profit and loss account, pected NPA resolution, economic recovery PSU banks or on private corporate banks
they can write back any gain from NPA reso- and higher loan growth. ICICI Bank reported now. “Both PSU banks and private banks are
lutions. Further, after demonetisation blues, a 189% jump in net profit last week, though it expected to do well,” says Gandhi. Shah con-
corporate loan growth is slowly picking up. was largely due to a low base effect. curs, saying “Money is to be made in both
“This is good news for large PSU banks which Though fundamentals are still improving, PSU banks and corporate private banks, but
have the bandwidth to benefit from it,” says PSU banks and midsized private banks have it’s difficult to say which one will do better”.
Kajal Gandhi, Banking Analyst at ICICI Direct. rallied significantly. So, should investors still
consider them? Experts are of the opinion Banking Funds
Private corporate banks that there is no reason to worry about their Mutual fund investors can also benefit from
Private banks focused on corporate lending past performance because even after dou- the banking sector rally by investing through
constitute another segment that is getting at- bling from the bottom, most of these banks banking funds or by buying ETFs dedicated
tention now. They will benefit from any gov- are still far from the top, unlike the large pri- to the banking sector.

Outstripping the competition Analysts prefer PSU and midsized private banks
PSU Bank Nifty rallied significantly more than other indices over the past year.
Valuation Ratios Analyst Views
160 Dividend
152.06 Bank CMP P/E PBV
yield
Buy Hold Sell

150 PSU BANK

Indian Bank 320.00 10.93 1.07 0.47 7 2 -
Nifty
140 Vijaya Bank 80.30 12.97 1.14 1.87 - 1 1

135.05 Federal Bank 112.55 23.35 2.29 0.62 31 4 2

130 BANK Nifty
Lakshmi Vilas Bank 180.80 13.51 1.84 1.66 8 2 1
120 DCB Bank 196.85 28.12 2.61 0.00 12 6 3
119.32
110
NIFTY Bank of India 181.20 (4.66) 0.59 2.76 2 7 17

Punjab National Bank 170.75 (8.44) 0.92 1.93 14 10 24

100 Despite the
rally, OBC 172.00 40.86 0.43 0.41 1 3 5
experts see
90 further Dhanlaxmi Bank 38.65 (6.34) 1.34 0.00 - - -
scope for
Canara Bank 366.60 (7.30) 0.78 2.86 5 6 12
banking
80 stocks
2 May 2016 2 May 2017 Source: Bloomberg; compiled by ETIG Database
INVESTOR CONNECT INITIATIVE THE ECONOMIC TIMES WEALTH, MAY 8-14, 2017 >> pg 11

There are various myths relating to investing. At

AVOID COMMON 23, someone in his/her first job may think he/she is
too young to start planning for retirement or make
a will. One may think investing in stocks is not for

INVESTING MYTHS him/her even when other factors may support

his/her suitability to invest in equities. Here are
some mythbusters for first time investors
Myth 1:

I AM STILL YOUNG. I DO NOT NEED When you start investing early, you can start with a small amount,
TO START SAVING SO SOON. Reality 1: say even `500 per month. As you grow, in age and in your career,
you can gradually increase your investment amount and gain from the power of
compounding. Time is the most important ingredient in creating wealth.

Myth 2:
Research shows that equity-oriented funds
I CANNOT HANDLE THE PRESSURE OF Reality 2: outperform assured-return investments over the
MARKET VOLATILITY. I NEED ASSURED long run. Investing small amounts regularly and in a disciplined
RETURNS. manner in diversified equity funds through SIP has proven to be
the seamless antidote to volatile markets.

Myth 3:
If you expect returns from
Reality 3: your investments in a
LONG TERM DOES NOT short period of time, you need to be
MATTER TO ME. I WANT SHORT ready to face unpredictability. The
TERM RETURNS. longer your investment horizon is,
higher is the probability of return.

Myth 4:

WHEN IT COMES TO Investment decisions relating to stocks require

Reality 4: in-depth knowledge of the market, meticulous
WEALTH CREATION,
STOCKS ARE THE WAY research, sustained tracking of portfolio's constituents and
TO GO, NOT MUTUAL also of the market as a whole, and an appetite for risk. In the
FUNDS. absence of all these attributes, mutual funds are one of the
preferred ways for long term wealth creation.

Reality 5: When you invest in any tax planning

instrument, meeting your financial and
life goals are just as important as saving taxes. Choose
Myth 5: an investment for its ability to build your wealth. While
investing, tax saving should be an added incentive and
TAX SAVING not your primary motive.
SHOULD BE
THE SOLE
AIM OF MY
ILLUSTRATIONS: SACHIN VARADKAR

INVESTMENT Mutual funds provide diversification,

Reality 6: professional management, economies of
PLANNING. Myth 6: scale and tax efficiency. To manage one's portfolio, one
needs lot of time, skills and a host of other attributes
I DO NOT NEED MUTUAL (mentioned in Point 4 above). So managing money is a
FUNDS, I CAN MANAGE job best left to fund managers.
MY OWN PORTFOLIO.
12 The Economic Times Wealth, May 8-14, 2017 Guest Column

THE INDIAN SAVER’S

MONEY
INSURANCE PROBLEM
MYSTERIES The first step in personal finance–buying life insurance–is also the
one that most savers get wrong, says Dhirendra Kumar.

ulator (IRDA) also measures success by how

much money the industry takes from customers,
rather than how much insurance they have deliv-
ered and to how many people. The IRDA annual
report, or any other published data in this coun-
try does not reveal the actual extent to which
people are insured. IRDA uses something called
‘insurance density’, which is the per capita pre-
mium charged from customers and as well as the
premium as ratio of GDP.
These numbers do not tell us how much insur-
ance cover is delivered, only how much money
the industry has extracted from people. The real
questions are: When
a customer dies, how
A lot of much money does
people know his family get? How
many customers
how much have what amount of
this cover? What is
premium the ratio of the total
they pay to premium collected
to the cover provid-
insurance ed? Shockingly, this
information either
companies, doesn’t exist (mean-
ing IRDA has not
but do not bothered to collate
know what it), or it’s a secret.
This attitude is per-
their family fectly reflected in the
behaviour of whoev-
will get if er sells you insur-
they die. ance. However, the
various ways in
GETTY IMAGES which agents will try
and befuddle you is too long a story. You should

I
nsurance should be the first step of every
saver. You should get insured before you
think of doing anything else financially.
However, to do this correctly you will have
to understand what insurance really is and
how much you actually need.
Here’s the dictionary definition of insurance:
an arrangement by which a company or the
state undertakes to provide a guarantee of com-
pensation for specified loss, damage, illness, or
death in return for payment of a specified pre-
mium. For life insurance, we can simplify this
to: an arrangement by which a company will
compensate your survivors if you die, in return
for payment of a specified premium.
This is the only definition of insurance. Keep
in mind that much of what insurance agents try
to sell you is not insurance.
The author has
written about How much should you be insured for? There
personal finance are a variety of ways to arrive upon the answer,
for more than but a starting point could be ten years worth of
two decades. He
is the Founder your current income. This will obviously vary
and CEO of according to other family members’ income,
Value Research assets, house etc, but rarely would an amount
less than ten years’ income suffice. If you don’t
believe me, quickly make a rough estimate of
what your family’s budget would be if you were
to die soon.
So here’s the most important question: Do
you have enough insurance? The answer is no.
And how do I know that? Because that’s the cor-
rect answer for a vast majority of Indians and so
statistically speaking, this is likely to be your an-
swer too. The strange thing is, in my experi-
ence, a lot of people know how much premium
they pay to insurance companies, but do not
know what their family will get if they were to
drop dead. Actually, it’s not strange because the
life insurance business is optimised around tak-
ing money and indeed, measures its success
not by how much its customers are insured for,
but how much money the customers pay. It
does so by ensuring that a vast majority of prod-
ucts are not insurance but expensive and
opaque investment products that have a small
smattering of real insurance as a statutory re-
quirement.
By the way, this is official. The insurance reg-
just focus on getting ten years’ income worth of
insurance. If you do this, you will get only the
right kind of insurance product which is a term in-
surance. The reason for that is that in other kind
of insurance products, getting ten years worth of
life cover will cost you your entire income.
The basic principle of buying insurance is to
keep insurance and investment separate and buy
only pure insurance (term insurance). In India,
insurance sellers have encouraged an investing
culture where people are averse to buying term
insurance because ‘you get back nothing’. Agents
do this because they earn far higher commissions
in other kinds of products. It’s not possible to be
charitable while commenting honestly about this
existing system so I won’t even try: this system
exists because the regulator is asleep, agents are
conniving and manipulative and customers are
foolish. The system won’t change, so it’s up to
you to learn how to actually buy insurance.
Please send your feedback to
etwealth@timesgroup.com
Financial Planning
5
TASKS YOU CAN’T
PUT OFF ANY LONGER
A recent study shows a spike in mortality rates in the 45-54 age group in the US. India is
witnessing a similar rise in this age bracket. To avoid problems for your dependants,
here’s how to set your financial life in order at the earliest, says Riju Dave.
STORE PASSWORDS
As our financial lives veer towards the digital—bank-
ing transactions, income tax returns, utility bill pay-
ments, insurance premium payments and mutual
fund investments—we are besieged by a set of pass-
words that only we have access to. Make a hard copy
of all the user names and passwords, including your
official mail, mobile apps, even social media ac-
counts, and put it in a locker or any other safe place.
If you have stored all these in a password manager
(it keeps all your passwords in an encrypted vault
and offers security against identity theft and fraud),
note down its password and keep it safe. More im-
portanly, keep your spouse in the loop.
BUY A CRITICAL
ILLNESS COVER
With the rising incidence of illnesses
like cancer and cardiac diseases, it’s
important to not just have health in-
surance, but also a critical illness
cover. This is because such plans
provide a lump sum on diagnosis of
specified illnesses and ensure the
availability of funds at regular inter-
vals for long-term treatment, expen-
sive medicines and rehabilitation.
While a contingency corpus can
take care of one-time surgery or hos-
pital care, critical illnesses can wipe
out most of your savings if you are
not prepared. Ideally, opt for a cov-
er of `25-30 lakh. It is available as a
standalone cover or as an add-on
with life insurance policies. These
plans typically cover about 20 dis-
eases and come with a waiting peri-
od clause.
The Economic Times Wealth, May 8-14, 2017
13
APPOINT NOMINEES
This crucial task is disregarded by most
people as they consider it dispensable.
However, appointing nominees—while
opening a bank account, buying an insur-
ance policy or investing in stocks or mutual
funds—makes the process of passing on
benefits or assets very smooth. Though a
nominee is technically just a trustee till the
investments are passed on to legal heirs, it
reduces the hassle for family members and
does not add to the emotional trauma.
COMPLETE YOUR
PAPERWORK
One of the most tedious and shunned tasks is es-
tate planning and documentation. It is, however,
one of the most critical. Earmark a few days in a
year for this task. First, prepare a will, clearly COVER YOUR LOANS
listing the heirs to avoid legal disputes. Next, If you are servicing a big loan, say for a house,
prepare a list of all your acquired assets, ongoing at the time of death, it could saddle your de-
investments and liabilities. Create a separate pendants with a huge burden. To avoid this,
folder for each: bank deposits, insurance poli- make sure that your life insurance covers all
cies for life, health, car, as well as traditional your loans as well. A term plan should ideally
plans or Ulips, small savings schemes, post office be 8-10 times your annual income to replace
schemes, stocks and mutual fund investments, the lost income and take care of the day-to-day
real estate deals, loan EMIs, among others. Make and future needs of your family. To this, add
sure these have all the details, including dates of the value of all the loans so that these can be re-
commencement and maturity, amounts, premi- paid easily. Another available option is a plan
um paying dates, etc. Keep your spouse in the that only covers loans. Here, the cover amount
know and deposit these in a bank locker. reduces in line with the loan.
14 The Economic Times Wealth, May 8-14, 2017 Financial Planning

THE MONEY QUESTION Paper

Work
Does higher income automatically lead to wealth accumulation?

Transfering your bank

Vikramjeet is an equity analyst who plans to
account
buy a house in five years. He has already
When you move to a new home, it is impor-
shortlisted some, and wants to prepare tant to also transfer your bank account to a
himself for the upcoming expense. But he branch nearby. Though normal banking
transactions such as deposits, withdraw-
finds himself unable to save much, despite als, can be done at any branch, getting a
locker, availing of loan and credit facilities,
getting paid more than the average at his activating dormant accounts, etc. can be
age. The type of house that he is looking at done only at the home branch. Here’s how
to go about transfering your account.
will be worth `5 crore in five years, but he
only has the capacity to shell out `2 crore.
He is confident that over the next five years, Application
his income levels will increase enough for The account holder(s) should submit a
him to be able to afford the house of his written application or form to either the
new branch or the old one (home branch).
choice, without taking a loan. But does The letter should clearly indicate account
numbers, which are to be transferred to
earning more guarantee wealth creation? another branch. The exact name of the
new branch, where the account is to be
transferred, must be mentioned in the
ikramjeet associates wealth with his income letter as well.

V level. If this was true, only individuals with low

income levels would be opting for car loans,
home loans, credit card spending, etc. The fact
is, there are takers for loans at all income levels;
only the quantum changes.
Those who once took a personal loan to plan a holiday to
Kerela might eventually want to take a loan to for a foreign
Surrendering the
cheque book
Along with the application, the account
holiday, and then for a cruise and so on. Many people like holders are required to return any
Vikramjeet can barely get by every month, irrespective of cheque book(s) and unused cheque
how much they earn. leaves.
Expenditure tends to increase with income. Therefore,
Vikramjeet must analyse his expenses and cut down the un-
necessary ones to free up some cash, which can be set aside
as savings. He must start by setting himself a goal. By saving
with a goal in mind, he is more likely to do so diligently, so Other documents
that he ultimately meets his target. He must invest for the Proof of new address should be accom-
long-term in a growth-oriented investment like equity. Fur- panied by the application. Contact
ther, he must consider topping up his investment amount details such as new landline or mobile
every year as his income increases. Ths should be easy to number should also be updated.
achieve with a higher income.
Paying off loans is also a crucial part of money manage-
ment. Vikramjeet should focus on paying off his debts at the
earliest, so that he is relieved of unnecessary financial bur- Process
dens. Once the application is received, the
Making more money instead of saving right is like hoping request is sent to the home branch. The
for a miracle. Higher income alone may not be enough to home branch closes the account and
fulfil all of Vikramjeet’s financial dreams. He should start transfers balances to the other branch. A
planning to arrange for the funds he needs, well in time. new account is then opened at the branch
GETTYIMAGES
where the account is transferred and
funds are deposited in this account. The
SMART THINGS TO KNOW: Return on Equity (ROE) whole transfer process may take 8-10
working days. Once the account is
transferred, the customer is allotted the

1 2 3 5
new account number, and a new cheque

ROE is a profitability ROE is expressed ROE also measures the

4
A rising ROE Write downs,
book can be issued.

measure that
calculates how much
profit a company has
made on the money
that the shareholders
have invested.
as a percentage efficiency of a company, suggests that a buybacks and a high
and calculated by indicating how well the company is level of debt reduce
dividing profit given company’s increasing its ability the value of the Points to note
after tax by management is to generate profit shareholders’ equity, � The customer ID usually remains
shareholder’s deploying the without needing which leads to an unchanged but the account number
equity shareholders’ capital. additional capital. artificial increase in may change depending on the bank
ROE. branch.
� Existing ECS and standing instructions
The content on this page is courtesy Centre for Investment Education and Learning (CIEL). will have to be revised if there is a
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta. change of account number.
Financial Planning
How homemakers get
left behind financially
A lot of women who give up their financial independence to take care of their families eventually
regret falling out of touch with their own household finances, says Uma Shashikant.
T
he protagonist of the story I’ll
tell you this week does not wish
to be named. She insisted that
nothing in this column should
even remotely be traced back to
her. This turned out to be quite easy, since
several other women to whom I posed the
same questions provided remarkably simi-
lar answers and shared similar life experi-
ences. There seems to be a segment of 50
plus women, who put on a brave face, but
actually live with tremendous regret.
Research shows that regret is quite a com-
mon feeling among both men and women
over 40. When people realise that the time
they have left is getting shorter than the life
they have already led, they begin to wonder
if they have lived the way they wanted or
just played out someone else’s life. They
start second guessing whether they have
missed moments and experiences that mat-
ter more than the career goals that they
have been pursuing. But the story is differ-
ent for women, whose life dramatically al-
ters with the arrival of a child.
An accomplished academic record, ex-
treme competitiveness at the graduate level,
and a superb start to what looks like an illus-
trious career, all come to a grinding halt
when women fall off the career path after
having a child. There are many who struggle
through the demands of their home and
work; there are some who find support and
manage to succeed in accomplishing their
career goals; there are some that pursue
something that enables them to care for the
children, even if it is not their career of
choice; and there are some who simply set-
tle for domesticity, without much com-
plaint. It is when the children grow up and
leave that they look back at their lives and
wish they could have made different choic-
es. The compromises stare them in the face
and seem very unfair and unacceptable.
There is a sense of regret about not being
financially independent. My friend tells me
that her husband’s generosity fails to fill up
the vacuum of not having her own earnings.
She is always guilted by the cost of what she
buys and constantly seeks bargains. But her
problem is not about spending, it is about
the general attitude towards money. Despite
the joint holding of assets and pursuing life
goals together, my friend does not influence
the financial decisions of the family as a
whole.
She is willing to take more risks with mon-
ey and is quite an involved equity investor.
She also is very adept at managing the pa-
perwork related to investments and financ-
es, since she works with the chartered ac-
countant on the tax returns and annual
statements. However, her husband is quite
conservative in his approach and dislikes
the stock markets. He is unwilling to risk the
hard earned money, and since he is the one
who earns, it is his call to make.
The risk profiling of the household has
been done by their financial planner based
on the preferences of her husband. My
friend feels constrained and upset that what
she knows and believes to be good for the
family will not be implemented with the
money they save, since she is not financially
independent to make those decisions.
The disconnect between the money atti-
tudes of spouses is a very common problem
in personal finance. Our upbringing, our
childhood experiences, our attitude to-
wards hoarding and giving, and our sense of
The Economic Times Wealth, May 8-14, 2017
GETTY IMAGES
security about the future, among other
things, determine our attitude towards
money and our orientation when it comes
to making financial decisions. It is very like-
ly that the husband and the wife do not
agree on spending, saving and investing.
There are no simple ways to resolve these
conflicts. It takes several years of negotia-
tion, understanding, experiences, and out-
comes before joint decisions are made eas-
ily by a household.
Women like my friend, who don’t contrib-
ute to the income of the household are fur-
ther constrained because they are back
footed, or because they are not interested in
getting involved in finance and investments.
The confidence among women to make the
15
decisions to spend and save for the house-
hold, does not translate into making actual
investment decisions.
My friend thinks that she should now pur-
sue an interest that will keep her engaged
and involved with the outside world, while
also helping her develop meaningful rela-
tionships outside her home. She finds this to
be a difficult, given her limited network of
relationships, somewhat outdated skills and
tentativeness with technology. Overcoming
the barriers of inadequacy that she feels
about her capabilities has taken her much
longer, but she is working at it. The fast-
paced modern world of work and network
can bewilder someone who has been out of
work for over 20 years. Without the helpful
groups of peers, colleagues and clients, how
far could those of us who have been fortu-
nate enough to continue to work go?
In personal finance, we emphasise the
fundamental linkages between earning, sav-
ing, investing and owning assets. When
women have given up all the other roles, as-
set ownership alone does not provide the
fulfilment and satisfaction that they seek.
While some have taken up volunteering and
socially relevant jobs, there are many like
my friend, who are keen to erase dominant
sense of regret that they feel about their
lives. They want to make a fresh start and
find something worthwhile to pursue that
provides them with a sense of success and
achievement. I tell my friend about several
women who have taken on various entre-
preneurial ventures in food, event manage-
ment, fashion, and the like. She remains
worried and tentative, hoping to find men-
tors who will guide her along.
Simplistic ideas like paying the woman
who chooses to remain a homemaker do not
even scratch the surface of the issues these
women face. It is easy to brush it all aside as
psychological complexes or insecurities.
Many women do not delve into these issues,
seeking happiness within the familiar con-
text of their households. But for those like
my friend, the question the potentially capa-
ble and competent woman returning to the
economic mainstream of earnings and fi-
nance, is critical. It is the existential debate
about what could have been, and we cannot
fault women who want their worth to be
measured by the money they earn them-
selves.
The author is Chairperson,
Centre for Investment
Education and Learning.
16 The Economic Times Wealth, May 8-14, 2017
Learn & Keep

Why pay 30% tax when you can pay 6.4%?

In the highest tax bracket, investors pay 30.9% tax on the interest they earn on fixed deposits. Babar Zaidi suggests an alternative that can reduce your tax liability to less than 7%.

Fixed deposit rates are down. Yet, many investors prefer them because Debt funds are treated as capital assets and gains are taxed at a
1 they are seen as safe and offer assured returns. 4 lower rate than FDs. The tax rate depends on the holding period.
FIXED DEPOSIT INTEREST RATE (%) HOLDING PERIOD TAX RATE
Close to `37 lakh Senior citizens are Indexation takes into
BANK 1-YEAR 3-YEAR 5-YEAR crore, or 21%, of a very important account the inflation
Less than three Same as applicable
IDFC Bank 7.5 7.2 7.2
total financial segment. They are years. to fixed deposits. during the holding
assets of Indians, offered higher period and accordingly
RBL Bank 7.5 7.5 7.5 raises the purchase
is in fixed deposits rates of 25-50 bps Over three years. 20% after price. This reduces the
DCB Bank 7.2 7.25 7.2 and bonds. on fixed deposits. indexation.
tax significantly.

How inflation indexation can bring down your tax

2 But the interest income from fixed deposits is fully taxable. Tax eats into
the returns. The higher the tax bracket, the lower is the post-tax return.
5 The tax rate is 20%
Purchase price x Cost inflation number in year of sale on gain. But after
Indexed cost = indexation, the
If you invest in a BELOW `3-5 `5-10 OVER Cost inflation number in year of purchase
ANNUAL INCOME
fixed deposit that `3 LAKH LAKH LAKH `10 LAKH effective tax is
gives 7.5% return,
Tax bracket 0% 5% 20% 30%
reduced to 6-7%.
here is what you Let us consider this with a real example:
will get Post-tax returns 7.50% 7.11% 5.96% 5.18% `
Date of purchase 10 Mar 2014 Date of sale 15 Mar 2017 Investment must
If you put `1 lakh Maturity `1.44 `1.41 `1.34 `1.29 be held for three
in a fixed deposit value lakh lakh lakh lakh years for the
for five years, here NAV of debt fund `12 NAV of debt fund `15.50
indexation
is what you will Tax bracket 0% 5% 20% 30%
benefit.
get on maturity Tax paid Nil `2,559 `10,023 `14,821 The fund has given a The capital gain of `3.50
return of 9% per year. per unit is taxable.

Instead of putting money in tax-inefficient fixed deposits,

3 investors should consider debt mutual funds. Bond yields have
come down, so
6 Indexation will reduce the tax by adjusting for the 6.2%
annual rise in inflation during the holding period
Funds that can replace fixed deposits in your portfolio
debt funds may
RETURNS (%) not give such high Cost inflation index of 2013-14 939 `12 x 1,125
FUND CATEGORY 1-YEAR 3-YEAR 5-YEAR
returns in future. The indexed cost =
939
Very low risk option. Rarely goes into the Cost inflation index of 2016-17 1,125
Liquid funds 6.8 7.9 8.3
negative. But returns won't be very high. Indexed cost comes to `14.38 per unit
Low risk option that is best at this stage. Expect
Short-term debt funds 8.8 9.1 8.7 stable returns in line with fixed deposits.
Capital gain is `1.12 per 20% tax on this would Effective tax rate on the
Moderate risk option that also has the poten- unit (`15.50 `14.38). be 22 paise per unit. gain would be only 6.4%.
Income funds 9.5 9.9 8.8 tial to give higher returns than fixed deposits.
18 The Economic Times Wealth, May 8-14, 2017
“By choosing a neutral position,
we did well during volatility”
Amandeep Chopra
Head of Fixed Income,
UTI Mutual Fund
The RBI’s shift to a
neutral stance took the
markets by surprise, and
reassured investors
about its plans
to target inflation,
Amandeep Chopra tells
Sanket Dhanorkar.
Bond market inflows are at a multi-year
high. What, in your opinion, is attracting
the attention of investors?
The high level of foreign portfolio investor
(FPI) inflows has been driven by a combi-
nation of factors. Concerns about local
rates and outlook, which emerged in
November and December 2016, have been
revisited. With the change of stance by the
RBI, investors have been reassured about
the cental bank’s objective to target infla-
tion. The corresponding reversal of sover-
eign and corporate yields have made local
yields quite attractive compared to that of
other emerging markets. Combined with
this, the prudent budget and continuity in
terms of political outlook have reinforced
the stability of India’s macro story. So,
while FPIs pulled out close to `8 billion in
November and December last year, they
have invested a similar amount in the
March-April period alone.
How is the bond market reading the
strength of the rupee?
The strength of the rupee is more of a fall-
out of the flows in debt and equity by
global investors and a relative softening of
US dollar against rest of emerging market
currencies. The sharp appreciation is un-
likely to be sustained, unless the flows
continue to remain as strong. The bond
markets saw a rally in yields initially but
have reversed due to supply pressures
and a neutral outlook.
How do you expect the RBI to move in
terms of interest rates for the coming
year?
Our reading is that the change to a neutral
stance by the RBI puts an end to any fur-
ther easing of interest rates. Given some
of the concerns related to tightening by
the Fed and the inflation trajectory in the
second half of financial year 2017-18, we
expect the RBI to adopt a wait and watch
policy.
How much will US Fed
moves influence the “Debt investors
central bank?
The Fed rate move does should stay
have a very strong influ- updated, but not
ence on the monetary
policies of most central get overtly
banks. Since rate hikes
began again in Decem-
concerned and
ber 2016, most central end up rejigging
banks have started recal-
ibrating their policies. I
their fixed
can’t see any central income
banks considering eas-
ing over the next 12
portfolios.”
months, till the Fed out-
look on terminal rate becomes clearer.
Many bond funds, even short-term ones,
were carrying a high duration when RBI
changed its monetary policy stance to
neutral earlier this year. Were fund
managers guilty of being too exuberant?
Income funds were sitting on high dura-
tion during demonetisation, expecting
some monetary policy stimulus. The sub-
sequent inaction in December and the
change of stance by the RBI in February
took everybody in the markets by sur-
prise.
Some funds were clearly complacent
and added duration, as an unitary strate-
gy for generating returns. But this only
compounded risks. This has not been our
approach. We evaluate exuberance and ir-
rational market expectations to suitably
modify our strategy. By choosing a neutral
position, we managed to do better during
the volatile period.
Investing
How are you positioning your duration
funds at this juncture? What would be the
ideal allocation for investors within bond
funds right now?
We have assumed a neutral position in our
bond funds and are at the lower band of
the duration our short term funds operate
in. The focus is more on improving the
yield to maturity of the portfolio and fo-
cus on income and capital preservation.
I think debt investors need to stay up-
dated, but not get overtly concerned and
end up rejigging their fixed income port-
folios. Investors who have followed an as-
set allocation approach for debt funds
should maintain that discipline. Those
who increased duration thematically and
hence moved up on the ladder of duration
funds could consider de-risking.
Has the credit profile of Indian firms de-
teriorated further? What are the major
pockets where issues persist?
Not really. The credit profile of corporate
India has been on the mend
for quite some time now.
The broad profile is im-
proving. If you look at a re-
cent study by CRISIL on up-
grade to downgrade ratios,
you will seee that it is now
at 1.24.
What is even more nota-
ble is that the value of debt
that has been upgraded to
that which has been down-
graded is at 0.88, which is
well above the bottom of
~0.10 we saw in financial
year 2012-13. This trend is
positive from the corporate
credit perspective, but it should not make
the markets complacent. Further, com-
mentary from most banks now indicates
that there hasn’t been any significant in-
cremental addition to their stock of
stressed assets in the recent quarters.
Are fund houses taking undue credit
risks by chasing higher yields in bond
funds?
I can’t make a general observation about
this. It depends on the risk framework of
funds and how they state it to investors. In
a low yielding environment, there is al-
ways a tendency to chase nominally high
yields. Therefore, investors should be
careful about the strategy and portfolio of
funds.
At UTI Mutual Fund, we don’t invest un-
less we completely understand the risks
or if we are unable to price it. Investing
only to chase high yields has never been
our investment style.
Financial Planning
Moms to be,
take stock
of your
finances
Before you go on maternity
break, plan out your savings
so that you’re ready for
child care costs.
HIRAL THANAWALA
W
hen Mumbai-
based interior
designer Radhi-
ka Jaju, 31, start-
ed planning to
have her second child, she also be-
gan savings and budgeting imme-
diately. She and her husband were
acutely aware of the additional
costs that would come with the ar-
rival of the baby, having struggled
to keep their finances in order and
meet all the expenses when their
first child was born.
“I took stock of all our household
expenses, and started cutting
down on unnecessary spending. I
had to take the loss of my pay dur- welcoming your bundle of joy. If
ing my extended maternity leave you are a working woman who is
into consideration and save for ad- planning to start a family, here are
ditional expenses for the baby,” the financial steps you should take
she says. Jaju started putting aside before going on maternity break.
`10,000 each month, then gradu-
ally increased the savings, so that Set a budget for the three
by the time the baby was born, the phases of parenthood
couple had managed to save `2 It’s easy to end up overspending
lakhs in a separate liquid fund. when buying adorable merchan-
Rishi Mehra, CEO of fintech dise for your little one, or by
firm, Wishfin.com says, “As you throwing a huge party to cele-
embark on the process of becom- brate. But this can land you in a
ing a mother, you must be pre- difficult financial position. Budg-
pared for a lot of changes, not only eting is at the core of planning for
physical and emotional, but finan- parenthood, which can be quite
cial as well.” While you can’t plan expensive. Sneha Mehta, partner
ahead for everything, it’s wise to at financial advisory firm, TBNG
do some financial planning before Capital Advisors says, “We advise
RADHIKA JAJU, 31
Interior designer,
Mumbai
Her financial plan for
motherhood
She started cutting out
unnecessary household
expenses. She also began saving
`10,000 each month, and grad-
ually increased the savings. By
the time the baby was born, the
couple had built a corpus of `2
lakh in a separate liquid fund
for child care expenses.
The Economic Times Wealth, May 8-14, 2017
our clients to divide the budget
into three phases: pre-delivery, out
of pocket expenses in the hospital
and post-delivery expenses. This
gives more clarity about how much
money is required at each stage.”
Build a contingency fund
Taking an extended break from
work can mean a serious financial
setback for your family. So it is cru-
cial to provision for future expens-
es in a planned manner, before you
become a mother. Open a separate
bank account or transfer a fixed
sum to a liquid fund and start cre-
ating a corpus, which can take care
of all the expenses related to all
three initial phases of motherhood.
Dinesh Rohira, Founder and CEO
of robo advisory firm 5nance.com
“We suggest having the provision
for 50% additional expenses be-
fore the birth of a child to tackle
unanticipated spends.”
Consult a mother with a
one-year-old baby
List all the expense heads related
to caring for a baby and plan it six
months in advance, for a better
overview of the cash outflows. Ro-
hira suggests seeking advice from
someone with a one-year-old, as
they will be able to give you a clear
baseline to plan for the monthly
budget under each expense head.
Review your health insurance
If you don’t have insurance cover
for maternity expenses, you could
end up making a dent in your fi-
nances. Rohira advices, “The in-
surance should cover not only the
19
IMAGESBAZAAR
expecting mother but also the
child.” Insurance policies like Reli-
gare Joy health insurance have a
waiting period of nine months for
applying for maternity benefits,
which can be availed of within
three years of buying a policy.
Pay off your high-interest debt
If you have a sword of debt hang-
ing over your head, it is advisable
to pay it off at the earliest, so that
you can give your child a more fi-
nancially stable environment.
Mehra says, “Try to reduce your
EMIs or eliminate your loan pay-
ments so that you can add that
amount to your childcare budget.”
Find an alternate source
of income
If you intend to go on maternity
leave for an extended period of
time, consider working from
home if the company policy allows
it. You can even consider taking on
freelance assignments for and ad-
ditional source of income.
Read up on maternity policy
Start reviewing your employer’s
maternity policy before going on
break. Understand each clause
carefully and consult the HR de-
partment, so that you can make
the most of your maternity leave.
As per the new law, female em-
ployees will now get paid materni-
ty leave of 26 weeks, up from 12
weeks, for the first two children.
Please send your feedback to
etwealth@timesgroup.com
20 The Economic Times Wealth, May 8-14, 2017
Switch from mid and small-
cap to large-cap funds
Sankalp Gore has multiple goals, including buying a car in 1-2 years, a house in 3-4 years,
saving for future children’s needs and his retirement. Here is what the doctor has advised him:
PORTFOLIO
CHECK UP
Started SIPs of `2,000 in
equity funds in 2009 and
gradually hiked amount.
Holds a mix of large-cap,
multi-cap, mid-cap, small
cap and sector funds.
Should shift from mid-
and small-cap funds to
large-cap funds.
Avoid investing in a sector
fund. Best to go with a
diversified equity fund.
Has also invested in FDs.
Should opt for short-term
debt funds instead.
Note from doctor
Shift from dividend
reinvestment option to
growth option.
Shift investments for
short-term goals (1-3
years) to debt funds.
Start STPs to gradually
shift funds from equity
plans to debt schemes.
Scale down goals or hike SIP amount
Tejas Jaiswal invests `45,000 a month in nine equity funds and want to hike the SIP
to `50,000. He is saving to buy a house and for his daughter’s education in 10 years.
INVESTOR’S EXISTING SIPs
FUND NAME
ICICI Prudential Focused Bluechip
ICICI Prudential Value Discovery
SBI Bluechip Fund Growth
DSP Blackrock Micro Cap
L&T India Value Fund
Mirae Asset Emerging Bluechip
Birla Sun Life Equity
HDFC Balanced
Franklin India Smaller Companies
Lump sum put in five equity funds
Birla Sunlife Dynamic Bond
TOTAL
Mutual Fund
PORTFOLIO
DOCTOR
INVESTOR’S EXISTING PORTFOLIO
AMOUNT EXISTING
FUND NAME RECOMMENDED ACTION NEW SIP (`)
INVESTED (`) SIP (`)
Continue SIPs but increase
HDFC Equity Fund 33,074 1,500 amount to `2,000 per month.
2,000
HDFC Long Term Fund is now closed. Shift
47,514 Nil corpus to HDFC Equity.
0
Advantage
HDFC Top 200 12,768 Nil Start SIP of `1,000 in this fund. 1,000
ICICI Pru Long Term Start SIP of `2,000 if you want
46,178 Nil to save tax under Sec 80C.
2,000
Equity
GETTY IMAGES
Stop SIPs and shift to large cap
Reliance Banking 69,072 1,500 diversified fund.
0
Stop SIPs and shift to Reliance
Reliance Growth 1,32,192 1,000 Top 200 fund.
1,000
Shift corpus to large cap
Reliance Mid & Small Cap 1,23,367 Nil diversified fund.
0
Stop SIPs in this mid-cap fund How is your mutual fund
SBI Global Magnum 44,882 2,000 and shift to SBI Bluechip
2,000
portfolio doing? Not many
DSP Blackrock Continue investing in this weel- investors are able to answer
2,052 1,000 performing multi-cap fund.
1,000
Opportunity
this. This section will provide
Stop SIPs and shift to DSP
DSP Blackrock Micro Cap 2,089 1,000 Blackrock Focus 25 Fund
1,000 the answer. The portfolio
doctors on our panel will
TOTAL `5,13,188 `8,000 `10,000
assess the health of the
mutual funds held by
PORTFOLIO
CHECK UP
individuals, examine their
suitability and, if required,
recommend corrective
Has about `9 lakh in
equity and balanced
funds, and about
measures. While doing so,
`50,000 in a debt fund. they will consider the
AMOUNT SIP
INVESTED (`) AMOUNT (`) RECOMMENDED ACTION All equity funds doing performance of the schemes,
well. But be cautious
about mid-cap and
the risk profile of the investor
1,55,833 1,500 Hold and increase SIP to `5,000.
small-cap funds. as well as the financial goals
Continue SIPs in this multi-cap
1,33,435 10,000 fund. Existing investments of the individual. The investor
can’t achieve all goals.
Continue SIPs in this large-cap Hike SIPs substantially
will get a detailed diagnosis of
1,21,565 13,000 fund.
or scale down goals. his fund portfolio and if he
Continue SIPs in this high
1,38,724 3,000 performer. Assuming 12% returns needs to make changes.
from equity funds and
23,128 2,000 Continue SIPs in this mid-cap fund. `50,000 SIP, amount
would grow to `57 lakh
16,423 5,000
Continue SIPs in this in five years. WRITE TO
outperforming fund.
Not enough for house
US FOR
9,443 6,000
Continue SIPs in this large-cap but can be used for HELP
fund. daughter’s education. In If you want to get your mutual
10 years, the amount fund portfolio examined, write to
9,448 3,000 Hold and increase SIP to `4,500.
would be `1.45 crore. us at etwealth@timesgroup.
com with “Portfolio Doctor” as
Continue SIPs in this small-cap If SIP increased by 10%
4,864 1,500 fund.
the subject. Mention the names
every year, corpus will of the funds, the amount invested
2,85,975 Nil Hold investments. be closer to target with till now and if you have SIPs
`1.95 crore. running in them. Also mention
50,964 Nil Hold investment. the goals for which you invested
Use debt funds to save
and the tenure you had in mind.
`9,49,802 `45,000 for short-term goals
such as buying a house.
smart stats
In Mutual funds 22
This Loans and deposits 25
Section Alternate investments 26

ET WEALTH TOP 50 STOCKS

Every week we put about 3,000 stocks through four key filters and rate them on a mix of factors. The end result of this
exercise is the listing of the top 50 stocks based on the composite rating to help ease your fortune hunt.
RANK PRICE ` GROWTH%* VA L UAT I O N R AT I O S RISK R AT I N G Fast Growing Stocks
Current Previous Stock Revenue Net Div Downside Bear No. of Consensus Top 5 stocks with the highest expected revenue
Rank Rank Price Profit PE PB Yield PEG Risk Beta Analysts Rating % growth over the previous year.
ONGC 1 2 188.90 26.91 81.16 17.16 1.31 3.93 0.20 1.02 0.71 37 3.97
Techno Electric & Eng 425
Power Grid Corporation 2 4 210.65 47.66 55.45 18.32 2.56 1.19 0.33 0.95 0.67 40 4.55
Indian Oil Corporation 3 1 435.65 24.61 87.83 18.86 2.78 5.10 0.19 1.24 1.39 36 4.58 Manappuram Finance 107
Mahindra & Mahindra 4 7 1,334.90 39.13 61.51 24.61 2.76 0.90 0.42 0.93 1.22 45 4.38 Natco Pharma 103
Manappuram Finance 5 6 92.80 106.97 135.09 22.10 2.83 1.62 0.16 2.34 2.68 11 5.00
Cholamandalam Inv. 76
CESC 6 5 951.05 32.45 168.25 34.41 2.01 1.05 0.21 1.05 0.97 26 4.00
Indiabulls Housing Fin 70
GAIL India 7 10 428.70 19.36 114.49 32.20 2.05 2.01 0.28 0.96 0.91 39 3.54
VA Tech Wabag 8 9 674.80 44.96 95.79 39.81 3.71 0.59 0.42 1.22 1.05 22 4.77 See revenue column in the adjacent table.
Techno Electric & Engineering 9 11 403.10 425.06 113.66 32.75 4.54 0.25 0.29 1.09 0.45 16 4.69
South Indian Bank 10 16 25.95 32.45 53.69 11.61 1.01 1.74 0.32 1.29 1.91 15 4.13
Oil India 11 14 331.10 20.15 36.16 13.24 1.18 4.68 0.35 0.88 0.72 34 3.62 Least Expensive Stocks
Petronet LNG 12 12 435.35 50.96 90.62 35.17 5.08 0.57 0.39 1.31 1.11 41 4.07 The 5 stocks with the lowest forward PE.
Lakshmi Vilas Bank 13 13 179.50 54.51 65.47 17.86 1.83 1.67 0.37 1.55 1.51 11 3.91
HPCL 10.97
DB Corp 14 21 368.90 26.80 49.68 22.84 5.03 2.24 0.46 0.83 0.76 20 4.45
South Indian Bank 11.61
Sun Pharma 15 22 631.50 24.83 67.97 32.22 4.84 0.16 0.49 1.16 -0.03 46 4.61
HSIL 16 18 347.60 24.23 74.54 28.21 1.82 1.15 0.38 1.44 1.76 11 4.55 Tech Mahindra 11.96
Glenmark Pharma 17 20 859.20 38.88 115.08 34.35 5.68 0.23 0.30 1.09 1.40 38 4.32 Redington India 12.54
Redington India 18 24 133.50 34.22 23.12 12.54 1.91 3.07 0.55 1.19 0.87 10 4.60 Karur Vysya Bank 12.88
JSW Energy 19 NR 62.90 17.98 51.69 16.30 0.99 3.18 0.31 1.55 2.04 27 3.33 See PE column in the adjacent table.
Lupin 20 30 1,261.75 41.16 44.62 25.01 5.18 0.59 0.57 1.17 0.75 46 4.04
Engineers India 21 26 169.85 37.22 79.29 43.78 4.19 2.06 0.54 1.57 1.73 21 4.38
Rallis India 22 31 238.95 26.32 48.30 15.62 4.18 1.05 0.32 1.17 1.19 22 3.86 Best PEGs
J Kumar Infraprojects 23 27 287.75 48.89 44.13 19.30 1.70 0.69 0.52 2.39 2.35 17 4.88 Top 5 stocks with the least price earning
Aurobindo Pharma 24 33 591.75 31.99 40.46 17.44 4.91 0.33 0.43 1.29 1.69 40 4.68 to growth ratio.
Ashoka Buildcon 25 17 212.05 29.91 130.73 67.32 2.12 0.38 0.52 1.38 1.91 23 4.65
Indian Oil Corp CESC
Cholamandalam Investments 26 29 1,085.05 76.17 63.75 28.60 4.62 0.51 0.50 1.42 1.43 25 4.12
Gateway Distriparks 27 38 255.45 23.84 32.54 25.34 2.95 2.35 0.66 1.33 0.71 21 4.43
0.19 0.21
UPL 28 37 811.40 40.66 66.61 26.78 5.12 0.62 0.61 1.26 2.05 29 4.55
0.16
NMDC 29 34 128.10 47.62 14.58 17.31 1.70 9.72 0.40 1.46 2.30 25 2.84
Shriram Transport Finance 30 19 1,019.65 23.39 40.92 18.28 2.04 0.98 0.40 1.46 2.46 39 3.64 0.20 0.26
Natco Pharma 31 35 891.85 103.38 213.78 98.01 11.96 0.76 0.47 1.39 0.38 19 4.11
ICICI Bank 32 NR 297.80 25.26 34.66 17.01 1.66 1.68 2.18 1.26 1.55 51 4.49 Manappuram ONGC JK Cement
JK Cement 33 36 995.45 23.34 418.42 109.87 4.28 0.40 0.26 1.36 1.85 25 4.52 Finance
See PEG column in the adjacent table.
NTPC 34 40 162.65 20.43 12.66 13.17 1.50 2.69 1.04 0.94 0.87 37 4.30
Indiabulls Housing Finance 35 15 1,076.85 70.10 26.55 15.65 3.88 3.34 0.60 1.41 1.96 13 4.31
Minda Inds
Skipper
36
37
39
42
485.35
189.70
62.01
39.65
87.87
35.12
34.68
20.40
8.22
5.09
0.41
0.75
0.44
0.58
1.55
1.26
2.50
1.80
12
16
4.75
4.75
Income Generators
Top 5 stocks with the highest dividend yield.
Granules India 38 43 140.50 27.37 69.32 24.52 4.57 0.60 0.50 1.57 2.00 13 4.46
Jubilant Life Science 39 46 734.20 16.53 86.52 27.10 4.02 0.41 0.31 1.80 2.44 13 4.85 NMDC | 9.72
Larsen & Toubro 40 45 1,731.65 24.65 26.47 31.66 3.67 1.05 1.15 0.94 1.18 42 4.50
HPCL | 8.16
Sobha 41 41 412.30 36.57 34.16 26.38 1.58 0.49 0.75 1.39 1.39 18 4.44
BPCL | 5.33
Tech Mahindra 42 48 419.10 13.98 10.48 11.96 2.32 2.86 1.20 1.07 1.06 51 4.28
Indian Oil Corp | 5.10
IRB Infras 43 44 263.85 31.90 20.07 14.59 1.92 0.76 0.71 1.48 2.87 24 4.54
Oil India | 4.68
Cyient 44 50 527.70 12.40 24.85 17.27 2.81 1.04 0.70 1.07 -0.24 23 4.35
BPCL 45 49 731.50 22.37 10.35 13.25 3.77 5.33 0.95 1.15 0.33 37 3.89
Dividend stocks are considered
HPCL 46 NR 531.45 2.61 16.53 10.97 3.12 8.16 0.63 1.41 0.94 37 3.92 safe stocks during a downturn.
Orient Cement 47 NR 166.50 66.21 74.54 54.77 3.36 0.60 0.69 1.64 1.17 14 3.64 Figures indicate what an investor
can earn as dividend for every
Grasim Inds 48 NR 1,203.45 18.70 56.90 23.81 2.17 0.37 0.45 1.32 1.65 19 3.84 `100 invested.
Karur Vysya Bank 49 NR 120.05 33.24 18.85 12.88 1.60 0.67 0.68 1.04 0.89 18 3.72
India Cements 50 47 213.60 20.90 146.85 48.88 1.91 0.47 0.37 1.91 3.20 22 3.68
* The figures under this head are for expected growth. NR: Not in the ranking. Data as on 4 May 2017. Source: Bloomberg
Least Risky
Top 5 stocks with the lowest downside risk.
expected to show growth in revenue, net weight to net profit growth and 10% to analysts covering the stock (the
Methodology profit and EPS (earnings per share) in the growth in EPS (the higher, the better, higher, the better) and 10% to Larsen &
in the next four quarters. The final two for each parameter). Growth is consensus rating (a composite rating Tourbo
The four filters used to arrive at filters were that the companies should calculated by comparing the based on the recommendations by all NTPC
0.94
the Top 50 stocks have made profits in the past four ’consensus estimate’ for the next 12 analysts who track a stock. Again, the 0.94
Only traded stocks: Of the about 7,000 quarters and have a positive net worth. months with the historical 12-month higher, the better).
listed stocks, only actively traded stocks Rating rationale values. 4. ... and so do the risks.
were considered. Having arrived at the final stocks 2. ... but only at reasonable valuation. Total weight: 10%. Two kinds of risks Oil India
Mahindra &
Only big stocks: Only companies with universe, we ranked them using the Total weight: 40%, which comprises were considered. A 5% weight was 0.88 Mahindra
an average market capitalisation and following four principles. 10% weight to PE ratio, 10% to PB assigned to downside risk and bear
revenue of over `1,000 crore were A percentile rating (on a 1-100 scale) is ratio, 10% to PEG ratio (the lower, beta each (the lower, the better, in 0.93
considered. given to each parameter and the the better, for all three parameters) both cases).
composite ranking is arrived at using the and 10% to dividend yield (the higher, DB Corp
Only well tracked: We picked stocks
that are tracked by at least 10 analysts. weighted average of these parameters. the better). 0.83
The ranking methodology has been developed
Only profitable and growing: We 1. Growth is the key... 3. Analysts’ views matter... by Narendra Nathan. A detailed explanation
considered only those stocks that are Total weight: 30%, which comprises Total Weight: 20%, which comprises of the methodology is available at See downside risk and bear beta columns
10% weight to revenue growth, 10% 10% weight to the total number of www.economictimes.com/wealth in the adjacent table.
22 The Economic Times Wealth, May 8-14, 2017 Smart Stats

LAGGARDS & LEADERS

ETW FUNDS 100
B E S T F U N D S T O B U I L D Y O U R P O R T F O L I O
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).

LAGGARDS LEADERS

ET Wealth collaborates with Value Research to identify the top-performing 100 funds Equity: Large cap 5-year returns
across 10 categories. Equity funds and equity-oriented hybrid funds are ranked on 3-year 10.64 20.82
returns while debt-oriented hybrid and income funds are ranked on 1-year returns. HSBC Dynamic Fund Mirae Asset India Opportunities Fund

11.62 20.3
LIC MF Index-Sensex Plan SBI Bluechip Fund
VALUE NET R E T U R N S ( % ) 11.79 19.49
RESEARCH ASSETS EXPENSE
FUND RATING (` cr) 3-MONTH 6-MONTH 1-YEAR 3-YEAR 5-YEAR RATIO Tata Index Sensex Fund JM Multi Strategy Fund
Equity: Large Cap
Mirae Asset India Opportunities Fund ����� 3,409.78 8.24 11.86 29.37 22.2 20.82 2.41 22.2%
The 3-year
11.94
Reliance Index Fund Sensex Plan
19.26
Birla Sun Life Frontline Equity Fund
DSP BlackRock Focus 25 Fund ���� 2,266.64 5.54 8.7 23.6 21.86 17.51 1.75
return of Mirae 11.95 19.18
SBI Bluechip Fund ����� 12,586.47 7.51 8.08 20.33 21.35 20.3 2.11 Asset India Opp
Motilal Oswal MOSt Focused 25 Fund ����� 494.97 9.62 12.58 28.88 20.96 — 2.65 is the highest in Reliance Quant Plus Fund Birla Sun Life Top 100 Fund

Reliance Top 200 Fund ���� 2,700.71 9.49 13.54 29.79 20.43 18.27 2.05 its category.

Franklin India Flexi Cap Fund ����� 2,935.15 6.88 9.34 18.86 20.03 18.97 2.32
Invesco India Growth Fund ���� 177.50 8.32 11.49 24.31 19.29 18.03 2.21 Equity: Multi cap 5-year returns
Birla Sun Life Top 100 Fund ����� 2,663.49 6.97 10.82 25.95 19.16 19.18 2.29
Birla Sun Life Frontline Equity Fund ����� 16,351.84 7.34 10.15 25.6 19.01 19.26 2 12.51 24.32
IDBI India Top 100 Equity Fund ���� 439.32 9.5 11.28 22.56 18.53 — 3.08 LIC MF Equity Fund Franklin India High Growth Companies Fund
Kotak 50 Regular Plan ���� 1,319.04 6.77 9.62 20.99 17.98 16.17 2.18 12.69 22.75
Edelweiss Equity Opportunities Fund ���� 282.81 8.82 8.51 20.54 17.91 15.87 2.54 Union Equity Fund Birla Sun Life Advantage Fund
Reliance NRI Equity Fund ���� 88.32 7.95 12.31 27.98 17.79 16.5 2.68
12.83 22.57
DHFL Pramerica Large Cap Fund ���� 257.35 8.51 10.9 21.88 17.65 16.58 2.94
Edelweiss Prudent Advantage Fund Birla Sun Life Equity Fund
Invesco India Business Leaders Fund ���� 131.94 5.78 7.2 19.2 17.46 16.11 2.39
12.98 22.19
UTI Equity Fund ���� 5,335.65 7.21 7.1 18.85 17.14 16.57 2.12
Birla Sun Life International Equity Kotak Select Focus Fund Regular Plan
ICICI Prudential Focused Bluechip Equity Fund ���� 12,842.72 5.82 10.09 24.2 17.13 16.9 1.67
SBI Magnum Equity Fund ���� 1,959.16 6.22 5.72 18.96 17.02 15.55 2.11 13.45 22.1
Invesco India Dynamic Equity Fund ���� 176.32 6.34 10.44 22.18 15.87 17.19 2.21 UTI Dividend Yield Fund ICICI Prudential Value Discovery Fund

Equity: Multi Cap 33.3%

Motilal Oswal MOSt Focused Multicap 35 Fund ����� 5,991.59 11.53 15.37 37.34 33.31 — 2.18 The 3-year return
of Motilal Oswal
Equity: Mid cap 3-year returns
Birla Sun Life Advantage Fund ���� 3,123.85 8.17 9.91 32.69 26.49 22.75 2.35
MOSt Focused is
Franklin India High Growth Companies Fund ����� 6,027.28 6.14 12.59 28.15 26.49 24.32 2.34 the highest in its 8.45 38.32
Kotak Select Focus Fund Regular Plan ���� 9,322.77 10.09 14.17 33.98 25.6 22.19 1.98 category. Baroda Pioneer Midcap Fund Canara Robeco Emerging Equities Fund
Birla Sun Life Special Situations Fund ���� 157.59 4.75 6.45 32.41 25.47 21.02 2.63 18.54 36.16
SBI Magnum Multicap Fund ����� 1,954.63 7.65 10.74 25.68 25.38 20.89 2.12 Birla Sun Life Dividend Yield Plus Fund Mirae Asset Emerging Bluechip Fund
Invesco India Contra Fund ���� 464.04 9.18 12.68 28.36 25.08 21.18 2.5
19.89 35.18
Reliance ETF Junior BeES ���� 124.56 11.34 16.19 37.04 25.01 21.71 1 HDFC Core & Satellite Fund Kotak Emerging Equity Scheme
Birla Sun Life Equity Fund ����� 4,801.13 6.06 9.2 33.88 24.72 22.57 2.2
21.11 34.39
DSP BlackRock Opportunities Fund ���� 2,073.09 7.33 13.03 34.19 24.61 21.19 1.99
DHFL Pramerica Midcap Opportunities Fund Escorts High Yield Equity Fund
ICICI Prudential Nifty Next 50 Index Fund ���� 56.00 11.51 16.54 37.53 24.54 21.16 0.81
21.54 33.48
Kotak Opportunities Regular Plan ���� 1,358.41 9.96 13.85 34.11 24.15 20.1 2.18
SBI Emerging Businesses Fund L&T India Value Fund
BNP Paribas Dividend Yield Fund ���� 313.40 10.73 13.63 26.77 23.2 19.75 2.73
ICICI Prudential Value Discovery Fund ����� 17,029.16 6.05 7.64 19.65 23.09 22.1 1.88
Franklin India Prima Plus Fund ���� 10,702.83 7.45 9.56 20.79 22.15 19.7 2.32
SBI Magnum Multiplier Fund ���� 1,781.32 7.99 8.7 23.06 21.63 19.88 2.12 Equity: Small cap 3-year returns
ICICI Prudential Indo Asia Equity Fund ���� 164.29 11.28 14.79 31.99 20.77 18.83 2.56

25.64 41.62
Equity: Mid Cap
Mirae Asset Emerging Bluechip Fund ����� 3,531.76 13.14 16.63 44.07 36.16 31.5 2.36
36.1%
3-year return
HDFC Small Cap Fund DSP BlackRock Micro Cap Fund

L&T India Value Fund ����� 3,444.12 10.68 16.87 40.68 33.48 26.94 2.1
29.97 39.28
of Mirae Asset
Emerging HSBC Midcap Equity Fund Reliance Small Cap Fund
Motilal Oswal MOSt Focused Midcap 30 Fund ���� 1,304.91 11.17 9.4 30.33 33.16 — 2.57
Bluechip is the 33.24 38.64
Principal Emerging Bluechip Fund ���� 884.33 11.92 15.81 40.14 31.94 28.12 2.52 highest in its
Edelweiss Mid and Small Cap Fund ���� 469.72 12.71 11.86 32.14 31.29 26.83 2.47 category. Franklin India Smaller Companies Fund SBI Small & Midcap Fund

Birla Sun Life Pure Value Fund ���� 1,059.28 13.32 17.28 40.3 30.92 28.44 2.56 34.06 35.75
Franklin India Prima Fund ���� 5,388.62 10.77 13.82 33.26 30.49 27.64 2.36 Birla Sun Life Small & Midcap Fund Sundaram S.M.I.L.E. Fund

HDFC Mid-Cap Opportunities Fund ���� 15,734.25 11.12 14.94 39.02 29.98 26.1 2.22 35.04 35.04
UTI Mid Cap Fund ���� 3,828.06 10.64 9.06 26.88 29.58 26.82 2.34 L&T Midcap Fund L&T Midcap Fund

Equity: Small Cap

DSP BlackRock Micro Cap Fund ����� 5,523.05 10.72 13.38 39.96 41.62 31.58 2.51 Hybrid: Equity oriented 5-year returns
SBI Small & Midcap Fund ���� 684.44 11.02 10.01 30.4 38.64 31.79 2.39
Franklin India Smaller Companies Fund ���� 5,238.18 9.95 11.88 33.08 33.24 31.69 2.38
7.62 20.29
Principal Equity Savings Fund Tata Retirement Savings Fund
Equity: Tax Planning
IDBI Equity Advantage Fund ���� 599.52 11.99 8.67 22.17 25.47 — 2.89 25.5%
The 3-year return
8.75
Tata Regular Saving Equity Fund
19.33
L&T India Prudence Fund
Tata India Tax Savings Fund ���� 600.73 10.86 13.17 29.45 25.22 20.96 2.56
of IDBI Equity
Birla Sun Life Tax Relief 96 ����� 3,189.37 11.47 11.1 24.71 25.1 21.76 2.35 9.35 18.81
Advantage Fund
DSP BlackRock Tax Saver Fund ���� 2,406.10 7.36 11.73 32.67 24.75 21.84 2.52 is the highest in DHFL Pramerica Equity Income ICICI Prudential Balanced Fund

Birla Sun Life Tax Plan ���� 506.75 11.49 11.02 24.05 24.25 21 2.74 its category.
9.5 18.43
Axis Long Term Equity Fund ����� 12,396.03 10.07 7.76 20.7 22.71 22.9 1.98 L&T Equity Savings Fund SBI Magnum Balanced Fund
IDFC Tax Advantage Fund ���� 564.99 12.32 15.47 29.06 22.29 21.18 2.44
10.72 18.33
Invesco India Tax Plan ���� 389.67 7.83 9.41 22.86 21.95 19.82 2.52 HDFC Equity Savings Fund Tata Balanced Fund
Franklin India Taxshield Fund ���� 2,849.77 6.81 8.95 20.1 21.62 19.17 2.53
Annualised returns in % as on 3 May 2017.
Smart Stats The Economic Times Wealth, May 8-14, 2017
23

ETW FUNDS 100 Top 5 SIPs

VALUE NET R E T U R N S ( % )
RESEARCH ASSETS EXPENSE Top 5 equity schemes based on 10-yr SIP returns.
FUND RATING (` cr) 3-MONTH 6-MONTH 1-YEAR 3-YEAR 5-YEAR RATIO
Hybrid: Equity-oriented
Tata Retirement Savings Fund ����� 95.85 12.5 16.51 31.47 26.19 20.29 2.81 26.2%
The 3-year return
Canara Robeco Emerging Equities Fund
24.72
L&T India Prudence Fund ���� 3,751.83 7.59 11.71 24.75 21.45 19.33 2.06
of Tata Retire- Franklin India Smaller Companies Fund
HDFC Balanced Fund ���� 10,185.98 6.33 9.83 24.42 20.3 18.14 1.95 ment Savings 23.86
Birla Sun Life Balanced '95 Fund ���� 7,419.15 5.42 8.34 23.19 20.26 18.17 2.29 Fund is the high-
est in its category. L&T Midcap Fund
Tata Balanced Fund ���� 6,395.98 5.28 6.62 18.8 20.02 18.33 2.06 22.08
ICICI Prudential Balanced Fund ���� 9,146.73 3.41 9.36 25.36 19.56 18.81 2.09
Sundaram Select Midcap Fund
SBI Magnum Balanced Fund ���� 10,004.31 4.01 3.76 15.24 17.53 18.43 1.98 22.07
DSP BlackRock Small and Mid Cap Fund
Hybrid: Debt-oriented Conservative
21.72
SBI Magnum Monthly Income Plan ���� 966.79 1.11 4.28 13.12 12.82 11.19 2.03
SIP: Systematic investment plan % annualised returns
SBI Regular Savings Fund ���� 451.76 1.58 5.6 12.78 11.83 10.39 1.12
SBI Magnum Monthly Income Plan ����� 207.96 2.02 4.08 10.51 12.12 11.14 2.33 As on 3 May 2017

ICICI Prudential Regular Income Fund ���� 2,558.25 1.48 3.83 9.05 10.76 9 1.65

Debt: Income
Kotak Medium Term Fund ����� 3,701.32 1.01 3.45 10.05 10.2 — 1.7 10.1%
DHFL Pramerica Medium Term Income Fund ���� 714.36 0.25 3.05 9.97 10.55 — 1.06 The 1-year return
of Kotak medium
Top 5 MIPs
ICICI Prudential Banking & PSU Debt Fund ���� 7,282.21 0.25 3.34 9.96 9.84 9.46 —
Term Fund is Top 5 MIP schemes based on 3-year SWP returns.
UTI Medium Term Fund ����� 151.03 0.91 3.53 9.86 — — 1.25 the highest in its
L&T Resurgent India Corporate Bond Fund ���� 1,314.25 1.11 3.4 9.65 — — 1.59 category.
ICICI Prudential MIP 25
Birla Sun Life Treasury Optimizer Fund ���� 7,252.61 -0.13 2.61 9.49 10.15 10.05 0.64 12.31
HDFC Medium Term Opportunities Fund ���� 8,621.85 0.68 3.33 9.33 9.54 9.44 0.31 SBI Magnum Monthly Income Plan
Kotak Corporate Bond Fund ���� 226.25 1.41 3.8 8.93 10.2 8.8 0.5 12.19
Reliance Banking & PSU Debt Fund ���� 5,236.21 0.56 3.06 8.63 — — 0.43 SBI Magnum Monthly Income Plan Floater
Invesco India Medium Term Bond Fund ����� 1,271.89 1.73 3.91 8.52 9.07 8.45 0.68 11.56
Kotak Monthly Income Plan
Debt: Short Term
Franklin India Low Duration Fund ����� 2,957.50 1.95 4.46 10 9.76 9.75 0.78 10%
The 1-year return
IDFC Monthly Income Plan
11.36

UTI Banking & PSU Debt Fund ���� 1,213.49 1.08 4.19 9.94 9.38 — 0.3 11.13
�����
of Franklin India
Baroda Pioneer Short Term Bond Fund 296.45 2.01 4.34 9.84 9.31 8.99 1.28
Low Duration Fund
BOI AXA Short Term Income Fund ���� 314.14 1.37 4.13 9.49 9.27 8.56 1.35 is the highest in its SWP: Systematic withdrawal plan % annualised returns
HDFC Regular Savings Fund ���� 4,433.42 1.45 3.81 9.33 9.89 9.4 1.84 category.
Birla Sun Life Short Term Fund ���� 16,190.58 0.95 3.42 9 9.53 9.51 0.29 As on 3 May 2017
HDFC Short Term Opportunities Fund ���� 9,564.13 1.34 3.6 8.57 9.08 9.1 0.36
Reliance Medium Term Fund ���� 8,925.02 1.32 3.5 8.42 8.74 8.87 0.9
Indiabulls Short Term Fund ���� 614.61 1.21 3.3 7.92 8.73 — 1.49

Debt: Ultra Short Term Mid Cap

BOI AXA Treasury Advantage Fund
Baroda Pioneer Treasury Advantage Fund
�����
����
367.04
1,543.79
2.01
1.9
4.26
4.06
9.08
8.88
9
9.07
9.02
9.25
0.55
0.86
9.1%
The 1-year return
Cash Holdings
of BOI AXA Treas-
8.64
L&T Floating Rate Fund ���� 517.06 1.69 3.77 8.78 8.58 8.94 0.71 7.9
ury Advantage is 7.37
Kotak Low Duration Fund ���� 4,498.84 1.68 3.83 8.75 9.2 8.83 1
the highest in its
DHFL Pramerica Low Duration Fund ���� 1,612.33 1.68 3.82 8.49 9.1 9.17 1.19 category. 6.3
Indiabulls Ultra Short Term Fund ���� 1,072.69 1.72 3.94 8.39 8.75 8.96 1.05 5.3
JM Money Manager Fund ���� 110.82 1.4 3.4 8.16 8.49 8.93 —
JM Floater Long Term Fund ����� 175.16 1.87 3.77 8.06 8.56 8.38 —
Principal Retail Money Manager Fund ���� 31.67 1.62 3.43 7.49 8.44 8.98 0.91
Invesco India Credit Opportunities Fund ���� 1,026.99 1.55 3.25 7.13 8.31 8.86 0.65

Debt: Dynamic Bond

UTI Dynamic Bond Fund ���� 1,486.50 0.32 5.42 13.27 11.2 10.59 1.66
Exp ratio as on 31 Mar 2017
ICICI Prudential Long Term Fund ���� 2,136.95 -0.42 3.52 12.29 12.38 11.66 1.27 DSP Franklin L&T India Tata Escorts
Returns as on 3 May 2017 BlackRock India Prima Value Equity PE Leading
Baroda Pioneer Dynamic Bond Fund ���� 25.62 0.2 3.1 10.51 11.28 — 1.87 Assets as on 31 Mar 2017 Small and Fund Fund Fund Sectors
All equity funds sorted on 3-year returns; debt funds ranked on 1-year returns Rating as on 30 Apr 2017 Mid Cap Fund
Fund
% as on 31 March 2017
Did not find your fund here?
Log on to www.wealth.economictimes.com for an exhaustive list.

Methodology
The Top 100 includes only those funds that have a 5- or
EQUITIES (figures over the past one year) Debt: Liquid
4-star rating from Value Research. The rating is determined
Large-cap: Mostly invested in large-cap companies.
Lowest Expense Ratio
by subtracting a fund’s risk score from its return score.
The result is assigned stars according to the following
Multi-cap: Mostly invested in large- and mid-cap
companies.
FUND
0.12
distribution: Mid-cap: Mostly invested in mid-cap companies.
RAISER 0.11
0.10
����� Top 10% Small-cap: Mostly invested in small-cap companies.
����
���
Next 22.5%
Middle 35%
(Not covered
in ETW Funds
Tax planning: Offer tax rebate under Section 80C.
International: More than 65% of assets invested abroad.
77 lakh 0.05
0.07

��� Next 22.5% 100 listing) Income: Average maturity varies according to objective. Mutual fund folios were
� � Bottom 10% Gilt: Medium- and long-term; invest in gilt securities. added in 2016-17, taking
Fixed-income funds less than 18 months old and equity Equity-oriented: Average equity exposure more
than 60%.
the total tally to 5.54 crore.
funds less than three years old have been excluded. This
High net worth individuals’ BNP UTI Liquid DHFL Canara Mirae Asset
ensures that all the funds have existed long enough to be Debt-oriented aggressive: Average equity exposure Paribas Cash Fund Pramerica Robeco Cash Man-
tracked for consistency of performance. Given the focus on between 25-60%. folios rose by 39%, while Overnight Inst. Plan Insta Cash Liquid agement
long-term investing, liquid funds, short-term funds and FMPs Fund Plus Fund Fund Fund
are not part of the list. For the same reason, we have con-
Debt-oriented conservative: Average equity exposure retail investors’ folios saw
less than 25%.
sidered only the growth option of funds that reinvest returns a 15% increase, compared % as on 31 March 2017
instead of offering dividends that increase the NAV of funds. Arbitrage: Seek arbitrage opportunities between equity
and derivatives. to 2015-16.
Despite these rigorous filters, the list includes 2/3 funds of % expense ratio is charged annually.
each category to maximise choice from the best funds. Asset allocation: Invest fully in equity or debt as per
market conditions. Methodology of Top 100 funds on www.wealth.economictimes.com
The fund categories are:
24 The Economic Times Wealth, May 8-14, 2017 Mutual Funds

BIRLA SL FRONTLINE EQUITY

A worthy long-term choice

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? BASIC WHERE DOES THE

With a 10-year return of 14.03%, the fund has outperformed both the
benchmark (9.21%) and the category average (9.96%) by a wide margin.
FACTS FUND INVEST?
DATE OF LAUNCH
30 Aug 2002
Portfolio asset
Growth of `10,000 vis-a-vis category and benchmark Fund
CATEGORY
allocation Debt & Cash
Fund style
`37,164 Equity
TYPE 0.34% 3.08% box
Category SMALL CAP Growth Blend Value
Large Cap

Small Medium Large

`25,849

CAPITALISATION
AVERAGE AUM
`16,351.84 cr 16.05%
MID CAP
`10,000 BENCHMARK
S&P BSE 200 Index
83.61%
LARGE CAP
Index INVESTMENT STYLE
`24,141 WHAT IT Equity
96.92%

May 2007 May 2009 May 2011 May 2013 May 2015 May 2017
COSTS The fund maintains its large-cap focus,
NAVS* while selectively investing in mid-caps.
As on 3 May 2017
GROWTH OPTION
`197
The fund has an impressive long-term Top 5 sectors in portfolio (%)
DIVIDEND OPTION
track record of outperformance.
`27 Financial 30.13
MINIMUM INVESTMENT Energy 13.61
`1,000
Automobile 9.33
Fund MINIMUM SIP AMOUNT
Index `1,000 FMCG 8.84
Annualised performance (%) Category average EXPENSE RATIO^ (%)
Technology 8.59
2.0 The fund remains heavily
25.60
24.17 23.36 EXIT LOAD invested in financials.
19.26 1% for redemption within
19.01
365 days
14.92 15.74 14.10 14.72
11.06 10.24 *As on 3 May 2017
Top 5 stocks in portfolio (%)
10.15
^As on 31 March 2017 HDFC Bank 4.34
Infosys 4.32
ICICI Bank 4.08
6 month 1 year 3 year 5 year ITC 3.99
As on 3 May 2017
Reliance Industries 3.60
The fund has outperformed
across time periods. The fund’s portfolio is heavily diversified but
it takes a heathy exposure in its top bets.

Yearly performance (%) HOW RISKY IS IT?

Fund Category Index

44.72 Standard Deviation 14.36 14.52 14.25

35.47 35.21
Sharpe Ratio 0.97 0.76 0.73

1.10 -1.48 -1.84

7.43
3.95 4.46
15.70 16.41 15.03 FUND Mean Return 18.61 15.68 14.99

2014 2015 2016 2017

MANAGER Based on 3-year performance. As on 30 March 2017

Mahesh Patil
The fund’s risk-reward profile is
The fund’s consistent outperformance As on 3 May 2017 TENURE: 11 YEARS AND 5 MONTHS
superior to many of its peers.
has continued in the last few years. Education: B.E, MMS, CFA

Wherever not specified, data as on 31 March 2017. Source: Value Research

SHOULD This large-cap focused fund has beat-

en its benchmark and peers consist-
YOU ently every year for the past decade.
The fund does not deviate much from
BUY? its benchmark at the sector level, but
takes healthy active positions in
stocks, despite a heavily diversified
portfolio. The fund manager does not
limit himself to a particular style, and
instead sticks to a pure bottom-up
stock selection approach. He is also
comfortable taking some contrarian or
remarkable style consistency across
the years. The fund continues to boast
tactical bets in the portfolio. A stable
management team and strict adher-
of a superior risk-reward profile and
execution capability in its category,
ence to the mandate has led to a making it a worthy long-term holding.
Smart Stats The Economic Times Wealth, May 8-14, 2017
25

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.

Top five bank FDs Top banks for 2 years

Interest rate (%) What `10,000
Tenure: 1 year compounded qtrly will grow to
BANK NAME MCLR WITH EFFECT FROM
IDFC Bank
RBL Bank
7.50
7.50
10,771
10,771
Bank MCLR State Bank Of India 8.10 1 April 2017
DCB Bank 7.20 10,740 Marginal Cost of funds-based Lending Rate HDFC Bank 8.20 7 April 2017
City Union Bank 7.10 10,729 (MCLR) is the new benchmark lending rate Axis Bank 8.30 18 April 2017
Yes Bank 7.10 10,729 designated by RBI and will replace the base
Tenure: 2 years rate for new borrowers. Union Bank Of India 8.55 1 April 2017
RBL Bank 7.65 11,636 IDFC Bank 8.65 1 April 2017
DCB Bank 7.25 11,545
IDFC Bank 7.25 11,545
Indusind Bank
Yes Bank
7.15
7.10
11,523
11,511
Top banks for 6 months Top banks for 3 years
Tenure: 3 years BANK NAME MCLR WITH EFFECT FROM BANK NAME MCLR WITH EFFECT FROM
RBL Bank 7.50 12,497 HDFC Bank 7.95 7 April 2017 State Bank Of India 8.15 1 April 2017
DCB Bank 7.25 12,405
IDFC Bank 7.20 12,387
State Bank Of India 7.95 1 April 2017 HDFC Bank 8.30 7 April 2017
Yes Bank 7.10 12,351 Axis Bank 8.15 18 April 2017 Axis Bank 8.35 18 April 2017
Punjab & Sind Bank 7.00 12,314
ICICI Bank 8.15 1 April 2017 Bank Of Baroda * 8.50 7 April 2017
Tenure: 5 years
RBL Bank 7.50 14,499
Bank Of Baroda * 8.30 7 April 2017 Punjab National Bank 8.60 1 April 2017
DCB Bank 7.25 14,323
IDFC Bank 7.20 14,287
Yes Bank 7.10 14,217 Top banks for 1 year Top banks for 5 years
Dena Bank 7.00 14,148
BANK NAME MCLR WITH EFFECT FROM BANK NAME MCLR WITH EFFECT FROM

State Bank Of India 8.00 1 April 2017 Bank Of Baroda * 8.65 7 April 2017
Top five senior citizen bank FDs HDFC Bank 8.15 7 April 2017 Punjab National Bank 8.75 1 April 2017
Interest rate (%) What `10,000
Tenure: 1 year compounded qtrly will grow to ICICI Bank 8.20 1 April 2017 Indian Bank 8.90 7 January 2017
RBL Bank 8.00 10,824
Axis Bank 8.25 18 April 2017 Punjab & Sind Bank 9.10 5 April 2017
Indusind Bank 7.65 10,787
Yes Bank 7.60 10,782 Bank Of Baroda * 8.35 7 April 2017
Karur Vysya Bank 7.50 10,771
Lakshmi Vilas Bank 7.50 10,771 * Strategic Premium of 0.25%. # Business Strategy Spread of 0.30%.
For any changes in MCLR rates, please email us at etigdb@timesgroup.com
Tenure: 2 years
RBL Bank 8.15 11,751
IDFC Bank 7.75 11,659
DCB Bank 7.70 11,648 Your EMI for a loan of `1 lakh
Indusind Bank 7.65 11,636 TENURE 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS
Yes Bank 7.60 11,625
@ 8% 2,028 1,213 956 836 772
Tenure: 3 years
RBL Bank 8.00 12,682 @ 10% 2,125 1,322 1,075 965 909
DCB Bank 7.75 12,589 @ 12% 2,224 1,435 1,200 1,101 1,053
IDFC Bank 7.70 12,571
Yes Bank 7.60 12,534
@ 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
Karur Vysya Bank 7.50 12,497

Tenure: 5 years
RBL Bank 8.00 14,859 Post office deposits Interest (%)
Minimum
invt. (`)
Maximum
investment (`)
Features
Tax
benefits
DCB Bank 7.75 14,678
IDFC Bank 7.70 14,642 Senior Citizens’ Saving Scheme 8.4 1,000 15 lakh 5-year tenure, minimum age 60 80C
Yes Bank 7.60 14,571 Sukanya Samriddhi Account 8.4 1,000 1.5 lakh per year One account per girl child 80C
Dena Bank 7.50 14,499
Public Provident Fund 7.9 500 1.5 lakh per year 15-year term, tax-free returns 80C

5-year NSC VIII Issue 7.9 100 No limit No TDS 80C

Top five tax-saving bank FDs Time deposit 6.9-7.7 200 No limit Available in 1, 2, 3, 5 years 80C #

Interest What `10,000

Post Office Monthly Income Single 4.5 lakh 5-year tenure, monthly returns Nil
Tenure: 5 years and above rate (%) will grow to 7.6 1500
Scheme Joint 9 lakh 5-year tenure, monthly returns Nil
RBL Bank 7.50 14,499
DCB Bank 7.25 14,323 Kisan Vikas Patra 7.6 1,000 No limit Can be encashed after 2.5 years Nil
IDFC Bank 7.20 14,287 Recurring deposits 7.2 10 No limit 5-year tenure Nil
Yes Bank 7.10 14,217
Karur Vysya Bank 7.00 14,148 Savings account 4 50 No limit `10,000 interest tax free Nil

All data sourced from Economic Times Intelligence Group (etigdatabase@timesgroup.com) # Benefit available only for 5-year deposit
26 The Economic Times Wealth, May 8-14, 2017 Non-traditional Investments

Alternative investment
returns monitor
The scope and attractiveness of alternative investments is increasing. Here’s a weekly tracker of returns from such investments. But don’t
compare these with returns from traditional investments since the proportion and purpose of alternative investments is vastly different.

Diamond Index Precious Metals Index Wine Index Coin Index

341.39
122.56 1,677.57 3 May 2017
3 May 2016 1,639.07 19,000 18,100
117.30 3 May 2016
3 May 2017 3 May 2016
3 May 2017
3 May 2017

284.51
3 May 2016
CHANGE

1 WEEK -0.55% 1 WEEK - 1.68% 1 WEEK 0.20%

- 1 WEEK 2.26%
1 YEAR 4.29%
- 1 YEAR - 2.29% 1 YEAR 19.99% 1 YEAR - 4.74%
Overall Diamond Index is based The S&P GSCI Precious Metals The Liv-ex Fine Wine 50 Index The Krugerrand Coin index
on actual transactions from 20 Index comprises gold (91.33%) and tracks daily price movement of the represents the denomination of a
different market players and silver (8.67%) and provides a bench- most heavily traded commodities in 22 carat gold bullion coin weighing
reflects price movements in the mark for investment performance in the wine market. It includes only the one troy ounce that is listed for
global diamond market. The the precious metals commodity 10 most recent vintages and is trading on the Johannesburg
index is updated daily. markets. It is updated daily. updated daily. Stock Exchange.

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 Top Volume Gainers

Stock Market price 1-week (%) 1-month (%) 1-month 1-month Market cap Stock Market price 1-week (%) 1-month (%) 1-month 1-month Market cap
(`) change change average volume average volume (` crore) (`) change change avg volume avg volume (` crore)
(lakh) change (%) (lakh) change (%)

Amsons Apparels 9.79 16.83 77.68 0.26 64.81 21.81 Midas Infra Trade 4.82 0.00 -30.95 0.12 55,690.48 58.80
Prag Bosimi Synthetics 5.62 20.60 69.28 0.18 130.80 41.80 Arnav Corporation 1.28 -5.88 -18.47 2.68 1,199.32 11.45
Padmalaya Telefilms 6.62 20.80 68.45 0.78 63.91 11.25 Consolidated Const. 4.96 8.06 27.84 1.12 678.68 197.66
Ind Swift 8.91 -5.01 58.82 0.49 618.17 48.25 Provogue India 4.84 -7.98 17.76 2.03 672.57 112.97
Satkar Finlease 7.60 -18.45 56.70 0.18 -89.15 167.50 Tijaria Polypipes 9.99 -9.02 51.59 0.59 658.52 23.61
Saptarishi Agro Inds. 3.14 0.00 56.22 0.02 -81.93 10.68 Ind Swift 8.91 -5.01 58.82 0.49 618.17 48.25
Vikas Granaries 9.51 -11.78 55.39 0.22 413.22 17.23 PVP Ventures 5.67 -5.34 15.95 1.98 583.81 138.94
Regent Enterprises 3.00 -2.28 52.28 0.04 0.74 10.04 Gennex Laboratories 6.07 6.87 5.38 14.57 574.53 76.79
TPI India 2.84 20.34 51.87 0.00 -100.00 12.21 Aadhaar Ventures India 0.80 -4.76 -20.00 3.41 546.56 12.57
Tijaria Polypipes 9.99 -9.02 51.59 0.59 658.52 23.61 Vikas Granaries 9.51 -11.78 55.39 0.22 413.22 17.23

Top Price Losers Top Volume Losers

Kaushalya Infra. Dev. Corp. 3.85 -1.28 -34.52 1.31 232.64 13.33 Assam Company India 7.53 -1.18 -3.71 2.58 -76.53 233.28
Cals Refineries 0.12 0.00 -20.00 13.70 242.07 99.53 Lycos Internet 7.01 -5.27 -12.92 2.04 -64.51 333.85
Aadhaar Ventures India 0.80 -4.76 -20.00 3.41 546.56 12.57 Urja Global 1.19 2.59 -15.00 4.80 -61.25 60.36
SRS 3.39 -7.38 -19.09 4.89 7.24 94.44 KSS 0.16 0.00 -5.88 9.84 -53.60 33.27
Arnav Corporation 1.28 -5.88 -18.47 2.68 1,199.32 11.45 Facor Alloys 4.29 6.45 0.70 3.00 -51.85 83.87
India Steel Works 3.79 1.07 -17.97 1.36 -47.19 150.88 Excel Castronics 2.51 -1.18 4.15 1.14 -50.51 10.22
Shekhawati Poly-Yarn 0.39 -2.50 -15.22 2.00 -1.21 13.44 GVK Power and Infra. 6.15 -1.44 -0.16 7.48 -50.16 971.21
Urja Global 1.19 2.59 -15.00 4.80 -61.25 60.36 India Steel Works 3.79 1.07 -17.97 1.36 -47.19 150.88
Cybermate Infotech 3.51 -9.77 -13.33 2.68 30.17 25.43 Gujarat NRE Coke 2.61 -1.14 -0.38 4.92 -43.54 418.79
Lycos Internet 7.01 -5.27 -12.92 2.04 -64.51 333.85 Indian Info. and Software 0.22 0.00 -4.35 14.01 -43.49 22.12

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 3 May 2017. Source: ETIG Database and Bloomberg
Pick of the Week The Economic Times Wealth, May 8-14, 2017
27

HPCL: Set for steady growth

Relief from subsidy burden and low crude oil prices have set the stage for HPCL’s growth.

P
SU oil refining and marketing firms, such as Hindu- Crude oil production from shale reserves in the US is compen- Fundamentals
stan Petroleum Corporation (HPCL), have always sating the production cuts imposed by OPEC (Organisation of
excelled in operational performance, even though the Petroleum Exporting Countries). Since shale oil produc- Actual Consensus estimate

they have been held back by the government-im- tion, at most sites, becomes viable at $60 per barrel, the chanc- 2014-15 2015-16 2016-17 2017-18
posed subsidy burden. But with the current ad- es of oil sustaining above this level are remote. After crossing Net Revenues (` cr) 2,16,395 1,86,760 1,83,769 2,15,661
ministration’s oil sector reforms, subsidy burden seems to be a $55 per barrel in the recent past, it has been falling and is now Operating Income (` cr) 2,236 7,112 8,570 8,896
thing of the past. There was no subsidy burden on HPCL in the below $45 per barrel. Crude at lower levels has also led to in- Net Profit / Loss (` cr) 1,499 4,921 6,085 5,659
EPS (`) 15 48 57 54
third quarter of 2016-17. creased demand for petroleum prod-
The company has reported good ucts, benefitting companies like HPCL.
numbers for the first nine months of Analysts’ views Since refining capacities are not get- Valuation PBV PE
Dividend
yield (%)
2016-17 because of the relative stability ting added fast, the gross refining mar- Hindustan Petroleum Corp. 3.17 9.08 2.17
in crude oil prices. Compared to the 7 gin (GRM) of refineries are also strong Bharat Petroleum Corp. 3.77 12.09 2.12
same period last year, its sales and net Sell now. HPCL is expected to report a GRM Indian Oil Corp. 2.79 12.74 1.61
profit increased by 9% and 90% re- of around $6 (`385) in the coming years. Reliance Industries 1.68 14.81 0.81

spectively. The trend is expected to To capitalise the situation, HPCL is plan-

continue into the fourth quarter of 24 ning to increase its capacity. The compa- Latest brokerage calls
2016-17 as well. Increased growth rates Buy ny has already got environmental clear- Reco date Research house Advice Target price (`)
are also a result of low base: HPCL had ance for its capacity enhancement plans 28 Apr ’17 Axis Capital buy 655
seen heavy inventory losses in the at its Vaisakh and Mumbai refineries. 17 Apr ’17 Macquarie outperform 650
fourth quarter of 2015-16 because 6 12 Apr ’17 Jefferies buy 618
Hold 11 Apr ’17 IDFC Securities outperform 650
crude had fallen below $30 per barrel. Selection Methodology: We pick the
10 Apr ’17 Morgan Stanley Overweight 629
Even though the base effect will grad- stock that has shown the maximum in- 07 Apr ’17 Nomura buy 640
ually wane in the coming quarters, crease in ‘consensus analyst rating’ in
HPCL is expected to report good num- the past one month. Consensus rating is
bers in 2017-18 as well. Its interest cost Splendid revenue and net profit growth, low arrived at by averaging all analyst recom- Relative performance
crude oil prices, relief from subsidy burden, Market price: `531.15
191.77
burden will also remain at lower levels mendations after attributing weights to
because of lesser working capital re- and rise in demand for petroleum products each of them (5 for strong buy, 4 for buy,
quirement. Subsidy burden was one have made HPCL analysts’ top pick. 3 for hold, 2 for sell and 1 for strong sell)
big reason for high working capital re- and any improvement in consensus ana-
quirement in the past. lyst rating indicates that the analysts are
HPCL’s fundamentals will improve further if the government getting more bullish on the stock. To make sure that we pick
sticks with its oil sector reform. Though the possibility is low, only companies with decent analyst coverage, this search is re-
100 120.02
the government could re-introduce price restrictions if the stricted to stocks that are covered by at least 10 analysts. You
crude flares up again—as it did in 2002. However, analysts are can see similar consensus analyst rating changes during the
not really worried on this front, because a sudden jump in past week in the ETW 50 table.
crude oil prices is an unlikely possibility in the near future. —Narendra Nathan 4 May 2016 Sensex HPCL 4 May 2017

Performance of HPCL compared with the Sensex. Figures are

normalised to a base of 100. Source: ETIG Database & Bloomberg

What experts advise

BUY
Stock Research house Advice Market 1-year target
price* (`) price (`) Comment

Initiate 'buy'. Navin Fluorine is one of India’s largest manufacturers of

Navin Fluorine JM Financial Buy 3,075 3,500 fluorochemicals with over five decades of experience in fluorination
and a portfolio of more than 60 fluorinated products.

Initiate 'buy'. Indo Counts’ unique asset-light business model, better

Indo Count Industries Centrum Wealth Buy 207 286 capital efficiency and focus on value added products are likely to
drive its growth.

Retain 'overweight'. The worst is behind JSW Energy. Operating

JSW Energy J P Morgan Overweight 63 70 performance has bottomed out in the past two quarters. Expect
quarterly earnings performance to improve now.

Maintain 'buy'. Debt restructuring, low capex requirement and

Zee Learn Edelweiss Buy 47 80 operational efficiency will result in improved margins and free cash
flow generation in the coming years.

SELL *Market price as on 27 April

Stock Research house Advice 1-year target

price (`) Comment

Downgrade to 'reduce'. Its current valuations are alarmingly high.

Marico Prabhudas Lilladher Reduce 310 281 It is trading at a premium of 7% to Hindustan Unilever and 40% to
Dabur.
Maintain 'sell'. High valuations: Enterprise value at 15-times its
Ambuja Cement HDFC Sec Sell 244 200 expected 2017 EBITDA. Reduced availability of fly ash, likely punitive
taxation on pet-coke and adapting to GST are sectoral challenges.
Reiterate 'sell'. Muted operating growth. Loan growth in core retail
HDFC Ambit Capital Sell 1,564 1,154 book was at a five-year low—16% year-on-year—operating income as
a percentage of AUM was flat despite easing funding costs.
28 The Economic Times Wealth, May 8-14, 2017 Career

team on how she expects everyone to rise to

the challenge and meet daily targets.

Liking
Your audience is easily influenced by you if
they like you. If you are in sales, you will sell
more if you are well groomed, impeccably
dressed, speak in a polished manner and are
humble in your interactions with the client.
But your sales will hit the roof if you connect
emotionally with the client, become a per-
sonal friend instead of vendor, and are able
to discuss non-business stuff of the time.
Similarly, if you are well liked by the team,
your leave application is always sanctioned
because others step in to do your work when
you need a break.

Scarcity
People want more of what they perceive to
be scarce. Announce a limited period offer
for your customers and see your sales go up.
Or get your entire sales team together and
announce a special bonus for the person
with the highest sales that month. The an-
nouncement of the single prize in the pres-
ence of competing colleagues will improve
every individual’s numbers, even if the cash
value of the prize is not significant.

GETTYIMAGES Unity
People are more strongly influenced when

How to be more persuasive they perceive a shared identity with you. For
instance, in a job interview, if you were to
find out and share with the interviewer that
she grew up in the same town and attended
The art of persuasion can help you get things done. Devashish Chakravarty the same school as you did, your chances of
landing the job would shoot up dramatically.
lists the eight principles that can enhance your ability to influence people. Similarly, when you build a team culture
where everyone feels that they can identify
with the team like a family, colleagues start

P
ersuasion is a positive word! It’s
not about forcing someone to
choose something harmful or
making them do what they dis-
like. It is the art of getting people
to work in both their own and your best in-
terests. Ever wondered why your new man-
ager is so amazingly persuasive? Or why your
junior colleague has more influence over
your boss and the team than you do? The
guru of social influence, Dr Robert Cialdini,
researched the art of persuasion and came
up with these eight principles, which can en-
hance your ability to get things done.
Reciprocity
Cialdini defines reciprocity as a principle of
persuasion where your listener feels the
need to reciprocate and return a favour that
you have done. So, when you mentor indi-
vidual members of your team, don’t be sur-
prised when, in return, they volunteer to
work over the weekend to help you com-
plete a critical project. Or when you use your
personal network to get a top doctor’s ap-
pointment for your client’s mother, and your
business with the client grows afterwards.
Now you know why the ‘good cop, bad cop’
strategy works, and how the good cop man-
ages to get what he needs from the target, in
reciprocation for his kindness and empathy.
Commitment
People have a strong desire to stick to com-
mitments they have made, and thus, be con-
sistent with their projected image. So, when
you ask a colleague to write down and share
the minutes of the meeting where he reluc-
tantly agreed to a common plan, he is more
likely to stick to his individual promises, sim-
ply because he has now made a written com-
mitment. Similarly get your team leader to
make a public commitment to your team or a
salesperson to record his promises on email
and both your team leader and the salesper-
son’s firm will go to great lengths to fulfil it.
Social proof
Cialdini says that people copy what they see
others do, in order to conform with the
crowd. Are you unable to convince one mav-
erick colleague to follow the new safety pro-
tocol? Don’t worry! Change the behaviour of
everyone else around him and in some time
the lone warrior will follow suit. Similarly, as
a team leader, start behaving and communi-
cating in the way you want your team to be-
have. At first, the newcomers and freshers
will start emulating you. Slowly the rest of
the team too will come around.
Authority
People tend to obey what authority figures
tell them. Get yourself published regularly in
an industry journal that is read by your col-
leagues and you will see a jump in your influ-
ence because now you are perceived to be an
expert. Want your team to work long hours
to meet the difficult demands of a client? Ask
the senior-most manager to speak to your
helping each other complete their assign-
ments without being forced to do so.
Timing
When you are trying to influence someone’s
decision, the timing of your request is criti-
cal for it to be accepted. Submit an assign-
ment that is important for your supervisor
and your immediate request thereafter for a
coveted role is likely to be accepted quickly,
in keeping with the principle of reciprocity.
Similarly, if you ask a customer to sign up for
an exclusive service package that costs a lit-
tle extra, immediately after closing a large
sale with him, he is likely to accept it right
away, because it represents a minor addition
to the base amount that he just agreed to.
The writer is Director, Executive
Search at QuezX.com.

CREDIBILITY EMOTION FRAME LOGIC FRAME LOSS FRAME EPISODE FRAME

FRAME
Ask the CEO to tell your
THE 5 sales team about how
he used that new sales
FRAMES OF technique to successful-
ly close deals. Thus, you
PERSUASION are leveraging the credi-
bility of the speaker
(CEO) to gain easy
acceptance. Aristotle
called this ‘Ethos’– an
appeal to authority.
‘Pathos’ is your appeal to
the emotion of a listener.
When you want a reluc-
tant team member to join
a tough project, ask him:
“Won’t you regret not
knowing if you have it in
you to crack it?”
Ads do this routinely, tell-
ing you to be a better par-
ent by buying their health-
ier products for your kids.
‘Logos’ means logic or per-
ceived logic, which is the
third of Aristotle’s tech-
niques where you rely on
reported facts or believed
truths. Tell your sales
team that with a 5% cold
call conversion rate, the
harder they work, and the
more cold calls they make,
the greater will be their
sales and commissions.
Reframe your argument to
show your audience what
they stand to lose if they
ignore your suggestion.
Don’t say “You will get a
10% hike and the maximum
bonus if you achieve the
new target. Instead, say
“Your maximum bonus is
guaranteed, but you will
lose 10% of it if you don’t
achieve the new target”.
When you draw the atten-
tion of your listener to a
specific episode or story
the influence is greater.
So, if you want to impress
the need to double-check
the data upon your data
entry team, speak about
the colleague who didn’t
get her increment when
an audit found discrepan-
cies in her recorded data.
Your Queries The Economic Times Wealth, May 8-14, 2017
29

QUESTION OF THE WEEK

Q A & Q I am 73 years old and am looking to generate a regular monthly or

quarterly income from mutual funds. Since debt funds give better returns
than fixed deposits, I want to invest in them. Please suggest schemes.

Debt funds are a better choice than fixed deposits, especially if you fall in the
higher tax bracket. Interest income from fixed deposits is taxed at marginal rates
but the income (capital gain) from debt funds is taxed at 20% after indexation—if
held for three years or more. For you, short-term debt funds focused on accrual
income will be suitable as traditional income funds can be quite volatile. You
may consider investing the lump-sum amount in short-term debt funds and may
opt for systematic withdrawal plans (SWP). SWPs are tax efficient compared to
dividend plans, provide more predictable monthly cash flows and work best
with funds that give stable returns such as accrual debt funds. The current yield
to maturity (return generated by the fund, if held till maturity) of accrual debt
funds stands at around 8.5-9%. So, you can easily withdraw 7-7.5% per annum.
You may choose from among the following accrual debt funds: DSPBR Income
Opportunities, HDFC Corporate Debt Opportunities, ICICI Pru Corporate Bond,
UTI Income Opportunities and Birla SunLife Corporate Bond.

RAHUL PARIKH
Our panel of experts will answer questions CEO, BAJAJ CAPITAL

related to any aspect of personal finance. If

you have a query, mail it to us right away.

Q I am 27 years old and invest `2,000 in

Kotak Select Focus Fund and `1,500 Q In case of an emergency, if my employer-provided insurance
pays less than the `5 lakh sum insured because of sub-limit Q I am 33 years old and covered
by a health insurance policy
in Quantum Long Term Equity Fund via conditions, such as room rent cap, even though the cost incurred provided by my employer. It has
monthly SIPs. I want to invest `10,000 is, say, `10 lakh, will my personal cover of `10 lakh, with a an insurance cover of `2 lakh.
more each month to build a corpus for deductible of `5 lakh work? Should I buy an individual health
buying a house—15 years, from now—and insurance policy as well?
for my children’s education—20 years.
Please suggest schemes. Yes, your personal cover of `10 lakh, with a deductible of `5 lakh
will cover hospitalisation expenses above the deductible limit, It is advisable to buy an individual
You can consider doubling the investments provided your deductible policy doesn’t have any restrictions on health insurance even if you are
in your existing funds and invest the room rent. You can pay the initial `5 lakh through your employer- covered by an employer provided
remaining in HDFC Balanced Fund. It is provided insurance and from your own pocket—so as to meet the mediclaim policy. An individual
advisable that you determine how much deductible limit. Bear in mind, your insurer will pay the claim cover is a safeguard against all
you wish to save for purchasing a house and amount over and above the specified deductible according to your kinds of medical emergencies at all
for your children’s education and maintain policy’s terms and conditions—waiting period, pre-existing stages of life. Healthcare costs have
separate portfolios for the two goals. disease cover, sub-limits, room rent cap, etc. seen a significant rise in the past
one decade and will continue to
grow in the years to come. The
group cover from your employer
SANJAY DATTA may not be sufficient. Also, your
C.R. CHANDRASEKAR CHIEF, UNDERWRITING
CEO AND CO-FOUNDER, CLAIMS AND REINSURANCE, organisation’s HR policies may
FUNDSINDIA.COM ICICI LOMBARD change or you may switch to
another company which may not
have a group mediclaim policy.
Since you are young, you can buy
an individual health insurance
Q My wife has been investing in mutual funds and PPF. Some
80% of her mutual fund investments are in balanced funds Q I have retired and just received my
Provident Fund in lump sum. I want to policy at a lower premium,
depending on your requirements.
and 20% in large- and mid-cap funds. She is retiring in July. Should gift a part of this sum to my wife. She
she continue with this strategy after retirement as well? already earns some interest income from It will be expensive five years from
her savings, but it is not in the taxable now. For a typical 33-year-old, the
range. What will be the tax implication of premiums could start from as low
Your wife’s portfolio has a moderate risk, which is a sound strategy. the money I gift her? as `15 a day
However, since she is close to retirement, she should start reducing
her equity exposure in a phased manner, while ensuring that tax-
adjusted returns are higher. After she retires, she should move some A gift of more than `50,000 is treated as
of the balanced and equity funds into fixed income options such as income and taxed at marginal rates. But gifts
the Senior Citizens’ Savings Scheme (SCSS) where one can invest up from certain relatives, including the spouse, YASHISH DAHIYA
CO-FOUNDER AND CEO,
to `15 lakh. Currently, SCSS offers an annual interest of 8.4%. She are exempt from tax. While the gift to your POLICYBAZAAR.COM
can also consider the Post Office Monthly Income Scheme or wife will have no tax implications, any
annuity plans offered by the insurance companies, though the income earned by investing that money will
interest there is lower at 6.5% and 7.5% respectively. be added to your income and tax accordingly.

Ask our experts

ANIL REGO
FOUNDER AND CEO, RAKESH BHARGAVA Have a question for the experts? Mail it to
RIGHT HORIZONS DIRECTOR, TAXMANN etwealth@timesgroup.com with Query as subject.
30 The Economic Times Wealth, May 8-14, 2017 Taxation

TAX OPTIMIZER

NPS, perks cut tax by 20%

Sudhir Kaushik of Taxspanner.com
advises readers on how to restructure
their income, investments and
expenses to optimise their tax.
INCOME
FROM EMPLOYER

G
Manoharan has a high salary, but his
INCOME HEAD CURRENT SUGGESTED salary structure is not very tax friend-
ACTIONS TO TAKE ly. More than 17% of his income goes in
Basic salary 8,10,000 8,10,000 tax, which is quite high. Though the
House rent allowance 4,05,000 4,05,000 Reduce this options are limited, Taxspanner esti-
taxable portion mates that Manoharan can reduce his tax by near-
Special allowance 13,03,600 10,60,600 of the pay
ly `80,000 if his company offers him some tax-free
package.
perks, he invests in the NPS for retirement and
Transport allowance 19,200 19,200
avoids tax-inefficient investments.
Medical reimbursements 15,000 15,000 Manoharan should start by asking his compa-
ny to reduce his special allowance and instead give
Leave travel assistance 50,000 50,000 him tax free perks such as reimbursement of ex-
Fuel and conveyance These perks are penses on fuel, conveyance, telephone and news-
reimbursements Nil 1,20,000 tax free on
papers. If he gets even `13,500 under these heads
submission of
Communications reimbursements Nil 36,000 actual bills. per month, his annual tax will reduce by `50,000.
Next, he should ask his company to put 10% of his
Books and newspapers Nil 6,000 basic pay in the NPS under Sec 80CCD(2d). This
Employer contribution to will reduce his tax by `25,000.
97,200 97,200 Up to 10% of Manoharan does not claim exemption for
Provident Fund basic pay out in
leave travel assistance (LTA) because he does not
NPS is tax
Contribution to NPS under Sec travel too much. The LTA is tax free if claimed
Nil 81,000 deductible.
80CCD(2d) twice in a block of four years for actual expenses
incurred on travel with family and dependents. If
TOTAL 27,00,000 27,00,000 he claims exemption for LTA, Manoharan’s tax will
Avoid tax ineffi- come down by another `15,450. He can also save
INCOME FROM OTHER SOURCES cient FDs and tax by shifting his investments from fixed deposits
invest in debt
and bonds to debt funds (see page 16).
Interest income 12,000 Nil funds instead.

Capital gains Nil Nil

Rental income NIl NIl All figures are in ` MANOHARAN’S TAX
15,000
TOTAL 12,000 Nil
TAX ON TAX ON
TAX ON
OTHER CAPITAL
SALARY
INCOME GAINS

TAX-SAVING INVESTMENTS CURRENT

CURRENT (`) SUGGESTED (`)
`4,76,972 3,708 Nil
Provident Fund contribution 97,200 97,200
Housing loan principal 60,000 60,000
`4,80,680
NPS under Sec 80CCD(1b) 50,000 50,000
SUGGESTED
TOTAL ADMISSIBLE 2,00,000 2,00,000 `3,86,435 0 Nil
WRITE TO `3,86,435
US FOR
OTHER DEDUCTIONS HELP
CURRENT (`) SUGGESTED (`) LTA exemption Paying too much TOTAL TAX SAVED
Home loan interest
Leave travel assistance
2,00,000
Nil
2,00,000
50,000
can be claimed
twice in a block
of four years.
tax? Write to us
at etwealth@
timesgroup.com with
`94,245
‘Optimise my tax’ as PER YEAR
Medical cover under Sec 80D 30,000 30,000 the subject. Our experts
will tell you how to TAX RATIO
TOTAL ADMISSIBLE 2,30,000 2,80,000 reduce your tax by (Total tax as % of annual income)
rejigging your pay and CURRENT SUGGESTED
investments.
Denotes suggestion to increase Denotes suggestion to reduce 17.7% 14.3%
Your Feedback The Economic Times Wealth, May 8-14, 2017
31

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

Use Aadhaar, investment going sour is

quite another. Investments in
Tax treatment of
buybacks incorrect
Sane advice
The story ‘Should you sell in
not PAN to open real estate face high risks. It
is common to see projects
The impact of the various
corporate actions was very
May and go away’ was a good
read. At a time when some
NPS account getting delayed by several
years. You never know if a
well analysed in the article ‘It
pays to know what corporate
experts are predicting that
Sensex will touch 100,000,
Your cover story, ‘the best NPS funds’ housing project will get actions mean’. However, the your advice on profit book-
was informative and the step-by-step completed in time. If media tax treatment of long-term ing may dampen the spirits
guide for opening an account was es- reports (not those funded by capital gains in a buyback of many. But it appears the
pecially useful. But you also need to developers) are to be was incorrect. As the buy- sane thing to do, given that
warn investors not to use their PAN to believed, more that 95% of back proceeds are not sub- markets have scaled record
open an NPS account. If they use the projects are not delivered on jected to securities transac- highs. It would have been
PAN and get it verified by their bank, time. Real estate only suits tion tax (STT), the long-term interesting to know the rea-
the bank becomes their PoP. Any fu- those who have loads of black gains in the hands of the soning behind the ‘Sell in
ture contribution, whether offline or money to hide. shareholder are not tax free. May and go away’ saying.
online, results in a deduction of `20 Raaj, e-mail The shareholder can claim Sangeeta, on e-mail
per transaction. The PoP gets this indexation benefit and pay
money for doing nothing. To avoid The article by Dhirendra Timely warning 20% tax on the post-indexa- No loans please
this charge, the investors should use Kumar is an eye opener for The feature on the pitfalls of tion gains or 10% tax without Apropos the feature on no-
their Aadhaar for verifying their de- those who blindly invest in using social media was very indexation. cost EMI loans for medical
tails, not the PAN. real estate. In the past, the timely. In their craze to be K.B. Mukund, on e-mail emergencies, I would say it’s
Francis Xavier, e-mail appreciation in real estate popular on social media, best to take adequate health
was due to the prevailing young people often ignore ET Wealth responds: This was cover. It will serve one better.
high interest rate and high the basic precautions. Your true when shareholders sold HImanshu, on e-mail
Real risk in real estate inflation scenario. It will not article offers very good their shares directly to the
This has reference to Dhirendra be replicated in future. Only advice to youngsters who are company. Now most buyback Corrigendum
Kumar’s column ‘Where do real stock investments can beat misled in their social media offers are routed through stock The Tweet Corner of the 1 May
estate profits come from’. A inflation. But there is a risk dealings and postings. Thank exchanges. STT is payable on issue carried a wrong picture
mathematical analysis is one thing, associated with stocks. you for the timely warning. such transactions so the long- with Pankaj Tibrewal’s tweet.
while the practical experience of an J.N. Kar, Bhubaneswar Natanam Iyer, e-mail term gains are tax free. The error is regretted.

35 lakh home loans in past five years

A TransUnion CIBIL study says the number of home loans grew at a fast clip of 23% per year between 2102 and 2016.
In 2016, `30,400 cr worth of HFCs now have a bigger share States with the largest number of new
loans were sanctioned. But of the pie than PSU lenders home loans in the past five years
ticket size of loans reduced. 68% HFCs
PSUs
1 Maharastra 6.53 lakh
4.9 4.9 47%
4.7 2 Madhya Pradesh 5.60 lakh
4.6
4.4 37%
4.2 4.3 3 Gujarat 3.13 lakh
4.1
4 Tamil Nadu 2.65 lakh
22%
5 Andhra Pradesh 2.28 lakh
These five states account for 55-60% of the total number
of new home loans. Their share in the total loan amount
2009 2010 2011 2012 2013 2014 2015 2016 2009 2016 sanctioned is also roughly the same.
Average ticket size of home loans in ` lakh

Delinquency
The delinquency rate has mostly
remained stable
The delinquency rate on affordable
housing loans was 1.1% in 2016.

The Economic Times Wealth, published by Bennett, Coleman & Co. Ltd. exercises due care and caution in collecting the data before publication. In spite
of this, if any omission, inaccuracy or printing errors occur with regard to the data contained in this newspaper, The Economic Times Wealth will not be
held responsible or liable. The content hereof does not constitute any form of advice, recommendation or arrangement by the newspaper. The Eco-
nomic Times Wealth will not be liable for any direct or indirect losses caused because of readers’ reliance on the same in making any specific or other
decisions. Readers are recommended to make appropriate enquiries and seek appropriate advice before making any specific or other decisions.
PUBLISHED FOR THE PROPRIETORS, Bennett, Coleman & Co. Ltd. by Rajeev Yadav at Times House, 7, Bahadur Shah Zafar Marg, New Delhi-110 002,
Phone: 011-23322000, Fax: 011-23323346 and printed by him at The Times of India Press, 13 & 15/1, Site IV, Industrial Area, Sahibabad, UP. Regd. Office: Dr
Dadabhai Naoroji Road, Mumbai 400 001. EDITOR: Babar Zaidi (Responsible for selection of news under PRB Act). © Reproduction in whole or in part
without written permission of the publisher is prohibited. All rights reserved.
RNI NO. DELENG/2011/37994. MADE IN NEW DELHI VOLUME 07 NO. 19
32 The Economic Times Wealth, May 8-14, 2017
Minting money from scrap
This Faridabad-based e-waste management startup has seen splendid growth in the past two years.
VINAY DWIVEDI
W
hen people come to know
about my business, their
reaction usually is: Kabadi-
wala,” says Akshay Jain,
Founder, Namo E-waste
Management, an e-waste recycling startup.
Mocking though hasn’t discouraged this 28
year old. “Snide reactions have simply moti-
vated me to change the image of the tradi-
tional Kabadiwala to that of a recycler with
professional degrees and an organized set-
up,” he says.
Jain was doing his MBA from Greenwich
Univiersity in the UK where he first saw how
organized waste management worked.
“Waste was properly segregated, identified
and disposed of according to specified norms
across the UK. I was inspired by the robust re-
cycling mechanism in place and wanted to do
something similar in India,” he says. After
graduating, Jain returned to India and, in Jan-
uary 2014, founded Namo E-waste Manage-
ment. “I focused on e-waste because of a near
total lack of awareness about it and also be-
cause it is the fastest growing solid waste
stream here,” he says. It took almost an year
to get the logistics in place and the company
stated operations in August 2015.
Less than two years into its operations,
NCR-based Namo E-waste now has a presence
to 12 states and Union Territories through its
Buy gold bonds from secondary market
Earlier tranches of the Sovereign Gold Bonds are trading 5-6% lower than the price of new bond issues
BABAR ZAIDI
S
hweta Agnihotri was furious with
her bank manager in August last
year because he failed to submit
her application for sovereign gold
bonds (SGB) in time and she
missed the issue. Agnihotri should actually
thank him. Had her application gone
through, her investment would be down by
more than 10%. The fourth tranche of the
SGB, issued at a price of `3,119 per gram in
August 2016, are trading below the issue
price. The bonds closed at `2,839 on Friday.
Even after factoring in the `42.90 paise
earned as interest in February this year, the
SGB is 10.55% in the red. The three other
tranches of SGBs issued later are also making
losses. Only the first two tranches of the
SGBs, which were issued at prices below
`2,700 a gram, have generated positive re-
turns (see table). The calculation takes into ac-
count the interest income from the bonds
which is paid out every six months.
It’s interesting to note that though SGBs are
considered the best way to invest in the met-
al, ETFs have given better returns. We looked
at the returns from ETFs bought on the same
Akshay Jain, Founder and Managing Director, Namo E-waste Management.
e-waste collection centres and channel part-
ners. “We have been able to reach 70% of the
e-waste generated in the country,” says Jain.
The startup has entered into contracts with
large corporates to collect their e-waste.
Some of the prominent clients include Flip-
kart, Havells, Voltas, TataSky, Godrej and Tel-
enor. The company also has a B2C vertical
and collects e-waste from housing societies,
resident welfare associations and individuals.
It is looking to expand its B2C business fur-
ther and is in the process of launching an app,
Planet Namo, to facilitate collections from in-
Four of seven Sovereign Gold Bonds are in losses
Gold ETFs bought on the same day would have given better returns.
Tranche Issue date Issue price `
1 5 Nov 2015 2,684
2 18 Jan 2016 2,600
3 8 Mar 2016 2,916
4 5 Aug 2016 3,119
5 1 Sep 2016 3,150
6 2 Nov 2016 2,957
7 27 Feb 2017 2,893
* Reliance ETF GoldBEES. Data as on 5 May 2017, Source: NSE
days as the different tranches of the SGBs. In
five out of seven cases, the ETFs have fared
better.
Observers point out that SGB trading vol-
umes are not very high in the secondary
market. On a typical day, the combined trad-
ed volumes of the seven series are around
2,000-3,000 bonds. “If you want to buy 10-
Last Word
startup generated a revenue of `4.4 crore
in 2016-17.
Namo E-waste’s challenge has been coun-
tering the lack of awareness among people
about e-waste disposal, competition from the
informal sector, and high costs. While a more
efficient e-waste collection system has re-
duced logistical costs, little awareness on how
to responsibly dispose of e-waste continues to
be a challenge. “Due to the lack of awareness,
e-waste is mostly routed to unorganised play-
ers, who may offer a better price but do not
adhere to the proper recycling norms,” says
Jain. Namo E-waste, which has run awareness
campaigns to educate the people on this is-
sue, has received welcome help in the form of
the government’s thrust on waste manage-
ment. “The government is coming up with
massive reforms in handling of e-waste, and
the intent shown in the recent times for waste
dividuals. “We have found that people are management across the country has boosted
even willing to donate their low-value e-waste our morale,” says Jain.
for charitable causes. There’s a market out Winner of the ‘Best Green Startup’ and ‘Re-
there,” says Jain. The e-waste collected by the furbisher of the Year’ awards by Franchise In-
company is segregated and usable devices are dia, Namo E-waste is now looking to set up a
refurbished. These are then sold through on- precious metal recovery plant to extract gold
line marketplaces and a dealers’ network. and silver from e-waste. “This will make us
The waste which is of no use is broken to ex- one of the most prominent e-waste manage-
tract commodities like copper, aluminium, ment facilities in the world,” says Jain.
iron, etc., which are sold to foundries.
Seeded with an investment of `2 crore—
the major chunk was invested by his father, Please send your feedback to
who is a sleeping partner in the venture—the etwealth@timesgroup.com
Returns ETF*
Current price `
earned (%) returns (%)
2,760 5.09 5.73
2,752 6.61 6.26 GETTY IMAGES
2,796 0.12 -2.72 For instance, the eighth tranche of the
SGB, which was open to investors last
2,799 -10.55 -9.19
month, was priced at `2,901 per gram. But
2,825 -15.32 -10.59 savvy investors could have purchased SGBs
of earlier tranches at a lower price from the
2,773 -13.78 -11.09
secondary market. However, very few inves-
2,787 -17.82 -17.36 tors actually take that route. “Though earlier
tranches of SGBs are trading at lower prices
in the secondary market (by 5-6%), most in-
vestors prefer to buy directly from the issu-
20 bonds, you can get lower prices in the er,” says Deepak Jasani, Head Retail Research
secondary market. But if someone wants to at HDFC Securities. “Either investors are not
buy a larger quantity, say 100-200 bonds, he financially aware or not comfortable buying
will have to bid higher prices,” says Manoj from anyone other than the issuer,” he adds.
Nagpal, CEO of Outlook Asia Capital. Even
so, a patient investor can gradually accumu-
late SGBs from the secondary market at pric- Please send your feedback to
es lower than the issue price of fresh SGBs. etwealth@timesgroup.com