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Find out the steps you should take to be ready for one of the biggest
tax reforms that comes into effect next month. PAGE 2

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02 The Economic Times Wealth, June 5-11, 2017 Cover Story

HOWTOGET
READYFOR

One of the biggest tax reforms comes into effect next month but many small
businesses, entrepreneurs and self-employed professionals are not prepared.
Find out the steps you should take to be GST ready.

BABAR ZAIDI touch with some tax professionals for

this,” says Arora.
Most businesses not ready for GST
n the five years she has been running Dhingra and Arora are not alone. Even 31% 38%

I a small business of gift packaging, Sa- though the new tax comes into effect bare-
Is the industry ready
Need Completely for transition to GST ?
miksha Dhingra has not felt the need ly three weeks from now, many businesses
to apply for a sales tax number. “My have not prepared themselves for GST. In a more ready
time
business is very small and doesn’t re-
quire sales tax registration,” says the Gur-
recent survey by CA Club India, a platform
for finance professionals, only 38% of the
31%
gaon-based entrepreneur. But this will 1,100-odd respondents said they were How Yes, transition should be smooth
soon change because Dhingra plans to take ready for the rollout on 1 July. The others prepared
her business online. The Goods and Servic- either needed more time or their clients
es Tax (GST), which comes into effect from were not fully prepared.
are you for 37%
1 July, requires all e-commerce businesses, “The GST is not just a tax reform or even GST? Transition will happen with difficulty
including tiny outfits like Dhingra’s, to reg- a business reform. It is a lifestyle reform
ister under the new tax regime.
In Surat, textile manufacturer Devrishi
that will change the way business is con-
ducted in the country,” says Minal Agarw- 15% 17% 31%
Arora (see picture) is vaguely aware that al, a chartered accountant who advises Client not
Somewhat Industry not ready,
GST will soon come into effect but is yet to corporate houses on GST compliance and prepared
prepared transition might be chaotic
take concrete steps for migrating his busi- related issues. “Nearly 50% of Indian busi-
ness to the new tax. “I have read a lot of nesses are not aware of the changes that Results of a survey by CA Club India, an online forum for finance profession-
newsreports on the GST and we are in GST will usher in. Most of them think it is als. The survey had 1,128 respondents, mostly chartered accountants.
Cover Story The Economic Times Wealth, June 5-11, 2017
03

Devrishi
Arora, 30
TEXTILE MANUFACTURER,
SURAT

Though he understands
that his business will
have to be registered
under GST, he is yet to
start the process. With
less than a month to go
before GST comes into
effect, businessmen
like him should take
immediate steps.
Samiksha Dhingra, 30
SMALL ENTREPRENEUR, GURGAON

The turnover of her ing cloud-based GST software, an end-to- everybody. Only manufacturers and specif-
end platform for filing GST returns and GST ic service providers (restaurants) can opt
small gift packaging compliant billing supported by integrated for this composition scheme. JOINING THE GST
business is well below learning modules. This single software can But though the composition scheme re-
How much companies charge for
be used to do full GST compliance,” says quires lesser GST compliance, it has several
the `20 lakh threshold Archit Gupta, founder and CEO of drawbacks. For one, only businesses which GST formalities and compliance
ClearTax.in. The cost of filing GST returns operate within a particular state can opt for
of GST. But since she through ClearTax.in is just `100 a month. this. Plus, opting for composition breaks GST registration
plans to take the Taxmann, a leading name in tax and cor-
porate law and a GST Suvidha Provider, has
the chain of seamless input tax credit.
“Those who buy from a composition dealer `2,500
business online soon, also introduced One Solution, an integrat- will not be able to take credit of any input
ed software that does all the GST-related tax. A composition dealer cannot levy and Basic e-course
Dhingra will have to get compliances. Though the rates vary de- collect any tax from its buyers. Should the
registered under GST. pending on the size of the organisation, composition dealer purchase from regis- Free
they start as low as 99 paise per invoice. tered persons, he will not get input credit
Other smaller outfits are also doing their on the tax paid by him on inputs,” says Advanced e-course
bit to spread awareness about GST and get Preeti Khurana, chartered accountant and
businesses to register. Delhi-based char- GST expert with ClearTax.in. `2,500
tered accountant Aditya Agarwal has set up In future, the government will also start
just another tax regime,” says Bharat Goen- GSTsamadhan.in. His team not only helps rating companies and businesses on the ba-
GST software (single user)
ka, Managing Director of Tally Solutions. in the registration formalities but also con- sis of how well they have complied with the
Tally’s accounting software is widely used ducts training workshops for companies. GST rules. “Right now, not complying with `8,500-18,000
by Indian companies. It is waiting for the In the past six months, Aditya has conduct- sales tax or excise rules means a penalty
GST rules to be finalized so that it can roll ed training sessions for nearly 25 corporate and interest. It can be prosecution in ex-
GST software (multi-user)
out its GST software for Indian companies. clients, with charges varying according to treme cases. But under GST, the Compli-
The level of unpreparedness is even the size and complexity of a company’s ac- ance Rating Score (CRS) could mean that a `54,000
greater among small businesses and tiny count books. poor score leads to loss of business,” warns
outfits. Many small entrepreneurs feel they Minal. Cloud based GST
can bypass the GST if their turnover is less Opting for composition scheme This is what many tax professionals are filing per month
than `20 lakh. That is true, but this exemp- GST will require a very high level of compli- worried about. They fear the compliance
tion comes with its own set of problems. “If ance. Out go the hand-written ledgers, ac- score will be used to assess the credibility `100
you are not in GST, the businesses you sup- counting books and notepads. Everything of a business. This could wipe out small
ply to will have to bear the burden of your will now be online and will need to be up- businesses that face cash-flow problems Training workshop for
compliance. They may eventually switch to dated regularly. A business will have to file and delay payments. Since their problems corporates for 2 hour session
vendors who are registered under GST,” 37 returns in a year (three returns per will now be public knowledge, buyers will `10,000-15,000
she warns. Her advice: even if you are a month and one annual return) per state. If avoid this company leading to further pay-
Sources: ClearTax.in, Tally Solutions, GSTSamadhan.in
small business with a turnover of less than it does business from offices in more than ment delays. “This will slowly, but with cer-
the GST threshold of `20 lakh, get yourself one state, the number of returns will go up tainty, drive almost every small business to
registered. accordingly. A business with a offices in eventual closure,” contends Goenka (see
It may come as a surprise, but joining the three states will have to file 111 tax returns column).
GST is not the Himalayan task that some
entrepreneurs and small businessmen pre-
sume it to be. One can register online by
logging on to gst.gov.in. Some companies,
in a year.
The GST provides some relief for smaller
outfits that may not be able to meet these
stiff requirements. An enterprise with a
Will postponement help?
As the GST deadline approaches, many in
the industry and in tax circles are hoping it
91%
such as tax filing portal ClearTax.in, charge turnover of less than `50 lakh can opt for will be deferred. Almost three out of five re- of tax professionals feel govt
a small fee for assisting companies and the composition scheme, which levies a spondents to the CA Club India poll wanted
small businesses to get on board (see graph- presumptive tax of 0.5-2.5% on the turno- the rollout to be postponed. “As Indians, should do more for GST
ic). “We offer a bouquet of services, includ- ver. However, this option is not open to procrastinating is in our DNA. It is also the training and awareness.
04 The Economic Times Wealth, June 5-11, 2017 Cover Story

Understanding
THE GST Don’t link input credit to
GST would replace the web of indirect taxes.
tax payment by supplier
ClearTax.in answers a few basic questions that Invoice matching can effectively avoid fraud claims. So why does the GST
are being asked by small business owners, insist on linking input credit to the payment of tax by the supplier?
entrepreneurs and self-employed professionals.
he Goods & Services Tax is a definitely improve with time, elimi-

Do you need GST registration?

Any person who sells goods and/or provides services of
T game changer for the econo-
my. The new tax regime
promises to simplify tax compli-
nating these fundamental flaws
early can make a big difference.
The most important of these
more than `20 lakh (`10 lakh for North East states) in a ance, eliminate tax on tax, make it flaws is the linkage of tax payment
financial year must seek registration under GST. Those easier to do business across states, by a supplier, to the availability of
making inter-state supplies or supplies via e-commerce reduce prices and dramatically in- input credit to the buyer—and not
must mandatorily register, no threshold limit is applicable crease the tax base. just the availability of a ‘matched
to these. Taxpayers already registered under VAT/service Inspite of its enormous promise, genuine invoice’. The CGST Bill
tax also need to migrate and register under GST. the present drafting of the law and clearly states that input credit will
rules have problems which can be either denied or reversed if the
How will GST registration help?
BHARAT cause disruption. Particularly, the supplier of the invoice fails to make
Registering under GST allows you to claim input tax credit. GOENKA small and medium businesses are the appropriate tax payment
Which means, at the time of paying GST which you have col- Managing Director, vulnerable to these clauses, and through a valid return.
lected on your sales, you can reduce the GST you have paid Tally Solutions are in potential danger of being The origin of this provision lies
driven out of business. There is still in the history of tax avoidance
on inputs used for your business. If you are unregistered,
time to make corrections—and through false representations by a
businesses to which you supply will have to do compliance
start the country on a journey of tiny fraction of businesses, and the
on your behalf. Some buyers may avoid dealing with non-
transformation with greater posi- fact that it was not feasible for the
registered suppliers due to higher burden of compliance.
tivity. While the law and rules will Government to systematically de-
How does one get registered?
All existing central excise and service tax registrants and
VAT dealers will be migrated to GST. To migrate to GST, a
provisional ID and password by the CBEC/State Commercial
Tax Departments will be provided. You can use this provi- Prableen
sional ID and password to log on to the GST Common Portal
(https://www.gst.gov.in). Fill up the form and submit Form
Bajpai, 35
20 along with necessary supporting documents.
FINANCIAL ANALYST,
What happens after registration? CHANDIGARH
Each entity registered under the previous indirect tax laws
shall get a certificate of registration on provisional basis. Till last year, her financial
This certificate would be valid for 6 months.
research outfit was only
Will GST be very complicated? exporting services but
All GST compliance will be paperless. GST returns will have
to be filed online. Therefore, it will be beneficial to move to was exempt from service
an electronic system of record keeping. Details of every B2B
invoice will have to be submitted to GSTN. Invoices must
tax. From this year, the
also be prepared in the format prescribed under GST Rules. company has started
The process of tax payment, tax credit, and refund of GST
would be carried out electronically. sales in India as well. She
Do small, part-time gigs also need to register? applied for registration
Small businesses and taxpayers with turnover of less than under GST when the win-
`50 lakh in a financial year can opt for the composition
scheme under which they will be taxed at fixed rates; 1% for dow opened on 1 June.
manufacturers, 2.5% for restaurants, 0.5% for other sup-
plies which may be notified in due course.
Composition dealers will have to file quarterly returns
instead of three returns every month. However, they cannot general human tendency to re- ironed out. “The level of com- itively,” says Khurana of
collect tax from customers. They also have to pay GST out sist change. Instead, we must pliance is very high under GST. ClearTax.in.
of their own pocket and are not allowed to claim any input embrace this change in a posi- We hope the government is le- GST registrations opened
tax credit. This scheme is not available to those who make tive light,” says Vivek Jain, nient towards compliance laps- last week and will continue till
interstate sales or sell via e-commerce. Founder of the CA Club India es so that businesses get used to 15 June. If you have a small busi-
online forum. “Deferring the the requirements under the ness or shop, it will be benefi-
What’s the penalty for non-compliance of GST? roll-out will not help. The gov- new law,” she says. cial to get your company regis-
Any person who supplies goods on which tax is not paid or ernment should stick to the 1 “GST will be a push for the tered under GST. We wish your
is short paid, must pay a penalty of 10% of the tax amount July deadline,” says Lakshmi- unorganised sector to become business good luck and pros-
due or `10,000, whichever is higher. The penalty can be priya, AVP Finance, Bankba- mainstream. See it as a club perity.
100% of the tax amount in case of deliberate evasion or zaar.com. Lakshmipriya says which offers its members cer-
fraud. There are other penalties mentioned in the law for there are likely to be teething tain benefits such as input tax
troubles when such a massive credit and access to a large
non-filing of returns, other non-compliance etc.
change is introduced, but over number of buyers and sellers, Please send your feedback to
time these problems will get which can impact business pos- etwealth@timesgroup.com
Cover Story The Economic Times Wealth, June 5-11, 2017
05

tect this and contain the problem. With nate fraud, but also act as an impetus to profitability, and they have to readjust increase the problem, leading to further
the framing of this law, the Government drive more taxpayers into the tax net. their cash cycles for a few weeks to take payment delays, and/or further reduction
hopes that the market will self-weed out However, the additional linkage of pay- advantage of it. A marriage in an employ- of rating and losing more customers.
the bad eggs—which is not wrong. What is ment ruins the beauty of the system. A ee’s family? The desire to help out comes This will slowly, but with certainty, drive
wrong is not understanding the cascading business can no longer assume that the at a cost of their cash flow management. almost every small business to eventual
consequences of doing this in practice and transaction is over but will have to wait for While the business will have no desire to closure. This is not the intent of the Gov-
the issues it will create. While the effort for 10 days after the return cycle (which is, cheat the Government out of its tax, it may ernment, it is simply an unexpected con-
driving compliance will reduce, the conse- 30th of the following month), to know still have difficulties in always meeting the sequence of a good intent. It is also cor-
quences of businesses shutting down, and whether it will be eligible to receive the in- compliance on time. And every such diffi- rectible, provided the causes, and the con-
therefore collections dipping, have not put credit for the tax it paid. culty will expose its vulnerability to its sequences, are appreciated.
been treated seriously enough. Several market behaviours will emerge. buyers, who may opt to change their sup-
Under normal business circumstances, Some will refuse to pay the supplier until plier and reduce their own risk. What can be done
a transaction gets completed when the the 30th of the following month, leading to A related provision is that the Govern- In the past, it was not feasible for the Gov-
goods or services are delivered, invoices abnormal increase in working capital ment intends to make public a compliance ernment to systematically mitigate the
received, and the payments made against needs. Some will refuse to pay the tax por- rating. You will know before you buy, risk of fraud, since there was no practical
them. An indirect tax regime requires the tion, leading to multi-step transactions whether your supplier has a ‘good or poor’ human ability to keep track of and trace
supplier to act as an agent of the Govern- and increase in both working capital rating. Since input tax credit is dependent the culprits. However, GST gives extraor-
ment to charge the tax on the invoice, col- needs as well as cost of doing business. on this quality of the supplier, buyers will dinary traceability. With invoice match-
lect it, and remit it. In a value added tax Some will be asked for bank guarantees to avoid outfits with poor rating. This means ing, false bills and wrong claims get elimi-
regime (like GST), the buyer avails the in- cover the possible risks, and most SMEs people will do everything to avoid a poor nated. Yes, the problem of false compa-
put credit of the tax thus paid on the in- will have no simple way to respond to such rating. nies continues. But with PAN and bank
voice, which has been paid to the supplier a demand. The rating becomes poor not just be- account linkage, it will be near impossible
in good faith as per the directions of law. cause the business delayed the filing of to commit fraud and remain undetected.
To prevent fraudulent claims, either of What it means for a small business data, but because it may be facing a delay An amendment to the proposed law to
non-existent invoices, or for amounts Small businesses typically suffer uneven- in payments. Taken together, these provi- the effect of de-linking payment with input
which are not as per the original invoice, ness of cash flow. Even a one-week delay sions mean any difficulty faced by a small tax credit availability and connecting it to
the concept of invoice matching has been in payment throws their routine out of business may now be public knowledge. invoice upload and matching will make
proposed in the law. It is a brilliant move. gear. A promising auction or offer for ma- This will have a snowball effect as its buy- the desired law come alive and make it ef-
Not only will this almost completely elimi- terials which would give them higher ers will play safe and avoid it. This will only fective and useful for all.
06 The Economic Times Wealth, June 5-11, 2017 Review Preview

Tax lens on cash dealings Product launches

I-T Dept says those receiving over `2 lakh in cash transactions will be penalised. MUTUAL FUND

T
he Income Tax Depart- started the email address HDFC Mutual Fund has launched
ment has warned peo- blackmoneyinfo@incometax. HDFC Equity Opportunities Fund II,
ple against indulging in gov.in in December last year 1,126 days. The scheme will pre-
cash transaction of `2 lakh or post the demonetisation of dominantly invest in equity and equity related
more. It has said that the re- `500 and `1,000 notes. instruments across market capitalization and sec-
ceiver of the amount will have It had then asked people tors. The minimum investment is `5,000 and the
to cough up an equal amount with knowledge about con- issue closes on 9 June.
as penalty. version of black money into
It also advised people who black/white to inform the gov- ICICI Prudential Mutual Fund has launched
have knowledge of such deal- ernment through this mail id. ICICI Value Fund, Series 14. The scheme will
ings to tip-off the tax depart- Post the demonetisation, invest in a well-diversified portfolio of stocks. The
ment by sending an email to people with unaccounted minimum investment is `5,000 and the issue clos-
blackmoneyinfo@incometax. wealth had illegally converted es on 8 June.
gov.in. The government 269ST would entail levy of Lok Sabha in March. their black money held in old
banned cash transactions of 100% penalty on receiver of The restriction is not appli- notes to new rupee notes. IDBI Mutual Fund has launched IDBI Small Cap
`2 lakh or more with effect the amount,” the tax depart- cable to any receipt by gov- The government had come Fund. The scheme will invest in equity and equity
from 1 April 2017. ment said in a public adver- ernment, banking company, out with a tax amnesty related instruments of small-cap companies. The
The newly inserted section tisement in leading dailies. post office savings bank or co- scheme under which people minimum investment is `5,000 and the scheme
269ST in the Income Tax Act In the last Budget, Finance operative bank. The move to holding unaccounted cash closes on 15 June.
bans such cash dealings on a Minister Arun Jaitley had pro- ban cash transaction above a could come clean by declar-
single day, in respect of a sin- posed to ban cash transaction threshold was aimed at curb- ing their wealth and pay 50% Sundaram Mutual Fund has launched Sundar-
gle transaction or transac- of over `3 lakh. This limit was ing black money by discour- as tax and penalty. A deposit am Select Small Cap Series V. The scheme will
tions relating to one event or lowered to `2 lakh as an aging cash transaction and of 25% of the black money invest in equity and equity related instruments of
occasion from an individual. amendment to the Finance promoting digital economy. was to be made in a zero-in- small-cap companies. The minimum investments
“Contravention of Section Bill, which was passed by the The tax department had terest account for four years. is `5,000. The NFO closes on 19 June.

Sundaram Mutual Fund has launched Sundar-

am Long Term Micro Cap Tax Advantage Fund
Series V. The scheme seeks to generate capital

60
appreciation over a period of 10 years by predomi-
Dilip Shanghvi slides down nantly investing in equity and equity-related

$ Bloomberg rich list

instruments of companies that can be termed as
micro-cap. The minimum investment is `500 and
the issue closes on 29 June.
billion
F
rom being the Pharma, in which he $15.5 billion, and Ste-
worth of foreign richest Indian and his family owns fano Pessina, CEO of
direct investments two years ago, 54.4%, has lost nearly drugstore chain Wal-
flowed into India in pharma baron Dilip 60% in value resulting greens Boots Alliance domestic calendar
Shanghvi has now in shrinking of the Inc, with a net worth
2016-17. This was slipped to being the pharma baron’s of $13.3 billion. Shang-
around $5 billion more sixth richest on the wealth. hvi is ranked 121st on Monday Wednesday Wednesday
Bloomberg Billionaire The developments the global Bloomberg JUN
than the record $55.6
billion that came into
Index, after a net
worth erosion of $10.6
that led to the slide in
the stock have been en
Billionaire Index and
is 30th richest in the
JUN
DEC
05 JUN
07 07
the country in 2015-16. billion. As much as $4 partly regulatory (US Asia-Pacific re-
Nikkei India PMI RBI repurchase RBI reverse
billion net worth got FDA issues at its key
ey gion of the
services data to rate to be repo rate to be
wiped out in the past plant) and partly mar- Index.
be released announced announced
three months as the ket-driven (price ero-
stock of his flagship sion amidst intensify-
sify-
company, Sun Phar- ing competition in n the
ma, lost one fourth of US market).
NPS registration its value during this Shanghvi is now w the

simplified period.
In March 2015, Sun
third richest in thee
global healthcare in- Tweet
Pharma founder Dilip dustry after Ernestosto
corner
I
n a bid to simplify operational is- Shanghvi raced ahead Bertarelli, co-own-n-
sues in the National Pension Sys- of Mukesh Ambani to er of specialty
tem (NPS), the Pension Fund Regu- become the country’s pharma compa-
latory and Development Authority richest person with a ny Stallergenes Nilesh Shah
(PFRDA) has introduced new func- net worth of $21.5 bil- Greer Plc with a @NileshShah68
MD, Kotak Mutual Fund
tionalities in the scheme. lion. Since then, Sun net worth of
A bilingual version of eNPS module Moody's remain Moody. Higher
has been developed for the conveni- debt Higher rating seems to be
ence of NPS subscribers. their mantra for white countries.
Earlier, subscribers who registered
through Aadhaar had to submit physi-
cal application forms within 90 days “It is possible to protect the jobs of Subramanyam PV
under eNPS. Now, eSign facility has quote of youngsters if the senior management @pvsubramanyam
been integrated with eNPS platform
to enable the subscriber to sign the the week people were to make some minor
Author
Investing is not gambling, not
PRAN application electronically. hunting, not a game, but an
“This process has eliminated the re- adjustments—of taking salary cuts.” amazingly scientific process –
quirement of submission of physical N.R. NARAYANA MURTHY dull and boring.
documents to the central record CO-FOUNDER, INFOSYS
keeping agency,” PFRDA said.
Review Preview The Economic Times Wealth, June 5-11, 2017
07

Bid to prevent Aaadhar data leaks Link Aadhaar

All ministries advised to put safeguards in place. Personnel to protect Aadhaar data proposed. with PAN
through SMS
T
he Centre has put in new safe- tion of residents, along with Aadhaar

T
guards following a number of cas- numbers and demographic informa- he Income Tax Department has urged tax-
es of Aadhaar data leaks on gov- tion, and other sensitive personal data payers to link their Aadhaar with their PAN,
ernment websites. All ministries are be- ... have been published online.” using an SMS-based facility. Through adver-
ing asked to encrypt all Aadhaar data The letter also spells out legal conse- tisements in national dailies, the department has
and personal financial details. Also, offi- quences of such data breach and warns described how both the unique identity numbers
cials are being “sensitised” about legal the government departments to check of an individual can be linked by sending an SMS
consequences of data breach. And every future leaks. “Publishing identity infor- to either 567678 or 56161.
government department is to now have mation, i.e. Aadhaar number along with People can also visit the official efiling website
one official responsible for Aadhaar demographic information is in clear of the department to link the two identities. The
data protection. contravention of the provisions of the department said linking the two numbers is the
The Ministry of Electronics and Infor- Aadhaar Act 2016 and constitutes an of- key to “seamlessly avail online, a world of income
mation Technology has written to all de- fence punishable with imprisonment up tax facilities.”
partments on better data security. ET to 3 years. Further, publishing of finan- “Aadhaar can also be seeded into PAN database
has reviewed the new guidelines. cial information including bank details, by quoting Aadhaar in PAN application form for
Aadhaar, a 12-digit unique identity being sensitive personal data, is also in new PAN allotment or by quoting Aadhaar in
number issued on the basis of biometric contravention of provision under IT Act change request form used for reprint of PAN
data, is linked to a person’s bank ac- 2000 with with violations liable to pay card,” it said in the advertisement.
count and used by government agencies damages by way of compensation to The Income-Tax-department had early this
to directly transfer benefits of several so- persons affected.” month launched a new e-facility to link a person’s
cial welfare schemes. The move to protect personal data Aadhaar with the Permanent Account Number
Senior officials, who spoke off record, comes after reports that data of 130 mil- (PAN), a mandatory procedure for filing I-T re-
told ET all departments have been asked data and bank details as well as encrypt- lion Aadhaar cardholders has been turns now.
to immediately review their website ing data. The government has mandated leaked from four government websites. The department’s e-filing website has hosted a
content to check if personal data is on regular audits to check safety of person- Reports, based on a study conducted by new link on its homepage to link the two unique
display. al data. the Centre for Internet and Society (CIS) identities.
A set of 27 dos and 9 don’ts has been The ministry letter says, “It has come said Aadhaar numbers and details have The link requires a person to punch in his PAN
circulated on data handling. This in- to notice there have been instances been leaked. number, Aadhaar number and the exact name as
cludes instructions on masking Aadhaar wherein personal identity or informa- —Nidhi Sharma given in the Aadhaar card.

New one rupee And elsewhere Ravi Narain quits

notes to be in NSE board
circulation soon Americans stumped by
N
SE Vice Chairman Ravi Narain has

fake financial news put in his papers amid regulators

intensifying their probe into al-
leged lapses in high-frequency trading of-

H
ey, we have a great stock tip fered through the exchange’s ‘co-location’
for you—a stone-cold lock, facility.
guaranteed profits! Do you be- The role of some top officials including
lieve us? We hope not. Narain, who is also an ex-CEO of the
The bad news is that financial “fake bourse, is also being looked into by mar-
news” does not present itself as such kets regulator Sebi.
very easily, and it is everywhere these Sources said Narain stepped down as
days. A recent Harris Poll conducted Vice Chairman to ensure that Sebi is able
for the American Institute of CPAs to take appropriate steps in the co- loca-
(AICPA) found 63% of Americans say tion case in a fair manner.

N
ew one rupee notes with pre- fake news “has made it more difficult
dominantly pink-green on ob- to make critical financial decisions.” such as healthcare decisions (for 44%
verse and reverse in combination And it is not just suckers or con- of respondents). It is also muddying
with other colours will be soon put into fused seniors who are at risk. the waters for stock-market investing
circulation. The U.S. Securities and Exchange (40% ), retirement (36% ) and buying
The notes bearing the rupee symbol Commission (SEC) recently issued an or selling a house (35%).
have been printed by the Government of investor alert entitled “Beware of It can be difficult to tell the differ-
India. At present, one rupee coins are Stock Recommendations on Invest- ence between what is real and what is
minted. Printing of one rupee notes was ment Research Websites.” not, especially in an era where we do
discontinued in 1994 but was re- The SEC also just charged a whop- not get our information from a single
launched in 2015. ping 27 parties with fraud—from com- trusted news source. Consider the
“The Reserve Bank of India will soon pany CEOs, to communications firm venues where the SEC suggests keep-
put into circulation currency notes in execs and writers—all of whom con- ing your guard up against fake news
one rupee denomination,” the central spired to talk up certain stocks and include: social media, investment
bank said in a statement. The note will goose share prices. newsletters, online ads, email, Inter-
bear the signature of Shaktikanta Das, The writers did not divulge that net chatrooms, direct mail, newspa-
Secretary, Ministry of Finance. The they were paid to do so. And in some pers, magazines, TV and radio.
numbering will be in black at right hand cases, explicitly (and falsely) stated Fake financial news has three ob-
bottom portion of the note. that they were not compensated. jectives: to get clicks to drive traffic, to
There is also a representation of the Some parties even engaged in un- get sign-ups for programs that charge
one rupee coin with the rupee symbol loading of inflated shares after issuing them to solve whatever problem the
having a floral design and the surround- the phony positive “news.” fake news is “reporting” on and out-
ing design consists of a picture of the According to the survey, such fak- right scams to get money and person-
“sagar samrat” oil exploration platform. ery is complicating important issues, al data. —Reuters
08 The Economic Times Wealth, June 5-11, 2017 Mutual Funds

In a soaring market, value

funds provide safety net
Such funds focus on stocks that are either priced at a discount or at a price that does not reflect their
true worth. This mitigates risks to some extent while enhancing the return potential.

SANKET DHANORKAR hardly any true-to-label, pure value-focused

funds. Most adopt a combination approach

T
he stock market is scaling new where value philosophy is used in conjunc-
heights and investors are at a loss tion with growth. While most funds have a
to understand where they should multi-cap approach, some are run with a
deploy their money now. With clear mid-cap or large-cap focus. The largest
valuations way above historical fund in this segment, ICICI Prudential Value
averages, the risk-reward equation is clearly Discovery, adopts a flexi-cap approach. The
not in favour of investors. In such a scenario, market-cap allocation of the portfolio can
equity funds with a value bias are the best vary significantly as it seeks to move into seg-
bet. They help you invest in a portfolio of ments where it reckons the risk-reward is
stocks that carries lower downside risk, and more favourable. While the fund maintained
yet offers healthy returns over time. a distinct mid/small-cap flavour for long,
Value funds are run with a clear emphasis stretched valuations in that segment have
on the tenets of value investing. The focus is prompted the fund manager to favour large-
on identifying stocks that are currently cap stocks in recent times. It has also sharply
priced at a discount to their intrinsic value— cut down its portfolio size from around 70
or at a price that is not reflective of their true stocks five years ago to just 40 stocks today,
worth. By buying a stock at a high margin of reflecting the limited value in the market.
safety, the risk is mitigated to some extent It also tends to look at the relative valua-
while enhancing the return potential. There tion of stocks while identifying its value bets,
are only a handful of equity funds in the mar- apart from its standalone valuation. So, it
ket which ply this strategy. Most funds availa- will gauge the value in a stock relative to that
ble today have a growth bias, meaning they of others in the same industry, rather than
invest in stocks with healthy earnings growth merely in relation to its own historical valua-
visibility, with lesser emphasis on the stock tion. This is similar to the approach taken by
price. As such, these funds carry higher risk L&T India Value, although the latter runs a
at times. Value funds offer a better risk-re- heavily diversified portfolio and carries a
ward proposition, particularly in a heated higher mid-cap bias.
market environment. Birla Sun Life Pure Value is a prominent of-
Value as a strategy has fared well in recent fering that largely remains true to its value
times and continues to hold potential. “Value mandate, while keeping a distinct mid-and-
funds are well placed to unearth good oppor- small cap tilt in its portfolio. The oldest fund
tunities and protect the downside at a time plying value-based strategy—Templeton In-
when valuations are steep,” says Vidya Bala, dia Growth Fund—runs a highly concentrat-
Head of Mutual Fund Research, FundsIndia. GETTY IMAGES
ed portfolio with up to 30 stocks, remaining
She reckons a mid-cap fund that follows a val- predominantly large-cap focused.
ue-based approach would be a better option Quantum Long Term Equity, another val-
now given the sharp run-up in valuations. “If Value funds deliver good returns over long term ue-based fund with a healthy track record,
one is looking for mid-cap exposure at this Such funds may underperform significantly during bull phases. has a differentiated approach where it tends
point, having a mid-cap fund with a value to increase cash levels in the portfolio if the
bias may help contain the downside risk to Returns (%) fund manager feels valuations are too high to
some extent,” Bala adds. AUM Market cap provide good investment opportunities. The
Investors should note that value funds can SCHEME Category 3-year 5-year fund currently holds 14% of its portfolio in
(`cr) (`cr)
underperform significantly during bull phas- cash—higher compared to its peers, but the
es, when value stocks go out of favour. How- fund has previously held more than 30% of
ICICI Prudential Value
ever, these tend to deliver healthy returns Multi-cap 17,306 17.2 23.1 77,415 the portfolio in cash. Such cash calls have at
over the long-term by outperforming during Discovery times led to bouts of underperformance, but
a downturn or a range-bound market. Pranav the approach has largely held the fund in
Uppal, AVP, Mutual Fund, Bonanza Portfolio, L&T India Value Mid-cap 3,899 25.5 27.5 19,596 good stead over longer time frames.
asserts, “These funds are good if you have a Newcomer Parag Parikh Long Term Value
long-term horizon. It can take a lot of time for Birla Sun Life Pure Value Mid-cap 1,215 19.3 28.2 14,940 follows a ‘go-anywhere’ approach which al-
the underlying value to unlock, during which lows it to take exposure across sectors, mar-
these funds can underperform.” Parag Parikh ket capitalisation and even geography. All of
Multi-cap 750 14.7 NA 66,792
Experts maintain the merit of a value fund Long Term Value these are well managed funds, but investors
lies in its use as a diversification tool. Kaus- should make their pick based on their indi-
tubh Belapurkar, Director, Fund Research, Quantum Long Term Equity Large-cap 743 15.3 19.1 95,845 vidual asset allocation preference and com-
Morningstar Investment Advisor India, says, fort with the fund’s investing approach.
“A value fund can be added to complement Templeton India Growth Multi-cap 556 17.6 18.8 35,247
the growth funds in the investor’s portfolio.”
Even within this small basket of funds, Return profile of value funds differ due to difference in investing style and focus. Please send your feedback to
there is a lot of variation in flavour. There are AUM data as on 30 April. Return as on 30 May. Source: Value Research. etwealth@timesgroup.com
Family Finance The Economic Times Wealth, June 5-11, 2017
09

Major goals to
be met easily
Aggressive saving and investing should help the
Delhi-based couple avoid any financial pitfalls.
RIJU DAVE latter, they should start an SIP of `8,000 in
an equity fund and invest `2,000 in the gold Shourya & Neha Asthana, 36 & 35, Salaried, Delhi

S
hourya and Neha Asthana stay in bond scheme. For retirement, they will need
a rented house in Delhi with their `15 crore and will have to allocate their land
five-year-old child. Together, as well as their PPF, EPF, NPS, stocks and How to invest for goals
they bring in a salary of `2 lakh a mutual funds. Besides these, they will need
month and also earn a rental in- to start an SIP of `30,000 in an equity fund
Investment
come of `20,000 from a house, for which and a contribution in the PPF, EPF and NPS Future cost (`) / Resources
GOAL needed
they are paying a home loan EMI of `30,000. till retirement. As for buying another house time to achieve used
(`/month)
They also have a plot of land. After expenses worth `1.25 crore, they want to sell their ex-
and investment, they are left with a surplus isting house, but this will not be enough and Emergency fund 4.9 lakh Cash -
of `617. Their goals include saving for contin- they don’t have any surplus to fund it. So Child’s education 68 lakh / 13 yrs - 17,000
gencies, child’s education and wedding, re- they should reconsider this goal. For vaca-
Child’s wedding 70 lakh / 20 yrs - 8,000
tirement, vacation and another house. tion in two years worth `10 lakh, they can as-
According to Financial Planner Pankaaj sign their balance fixed deposit and insur- PPF, EPF, NPS, stocks,
Retirement 15 crore / 24 yrs 30,000
Maalde, they should first repay the home ance surrender value, worth `6 lakh, but mutual funds, real estate
loan of `9.6 lakh from their fixed deposit. should avoid taking a personal loan. Investible surplus needed 55,000
They can then build an emergency corpus of The couple has six traditional plans, two
Annual return assumed to be 13% for equity, 8% for debt. Inflation assumed to be 8%.
`4.9 lakh by allocating their cash holding and term plans and two Ulips. They should close
investing it in an ultra short-term debt fund. the Ulips and two traditional plans. They
To save for their child’s education in 13
years, they will need `68 lakh and for his
should buy two term plans worth `50 lakh
for each. They don’t need more health insur-
Insurance portfolio
wedding in 25 years, they will require `70 ance (see table), but should pick critical ill- Existing Suggested
lakh. For the former goal, they should start ness and accident disability plans worth `25 Existing monthly monthly
SIPs of `17,000 in equity funds, and for the lakh and `50 lakh each. INSURANCE Suggestions
cover (`) premium premium
(`) (`)
Portfolio Cash flow Life insurance
Asset Current value (`) Existing Suggested 1,083 +
Buy `50 lakh term plans
(`) (`) Term plan (2) 2 crore 2,137 2,137
Real estate 37.25 lakh for both
(existing)
Cash 5 lakh Income 2.2 lakh 2.2 lakh
Traditional plan (6) 23 lakh 8,885 Surrender two plans 4,780
Debt Outflow
Ulips (2) 1.75 lakh 695 Surrender both plans -
EPF 18.99 lakh Household
1.28 lakh 1.28 lakh Total 2.24 crore 11,717 `3. 2 crore 8,000
PPF 13.69 lakh expenses
Health insurance
Fixed deposit 12.7 lakh Kid’s education 22,000 22,000
NPS 8.38 lakh Employer’s 10 lakh - - -
Home loan EMI 30,000 -
Bonds 20,000 Own 6 lakh 3,167 Continue 3,167
Insurance Total 16 lakh 3,167 16 lakh 3,167
Equity 14,884 13,667
premium
Mutual funds 7.55 lakh Buy `25 lakh critical illness
Critical illness &
Stocks 3.3 lakh Investment 24,000 55,000 - - & `50 lakh accident 2,500
accident disability
disability plans for both
Insurance 3.26 lakh Total outflow 2.19 lakh 2.19 lakh
Total - - - 2,500
Total 1.1 crore
Surplus 617 833 Insurance cost - 14,884 - 13,667
Liabilities Current value (`) Premiums are indicative and could vary for different insurers.

Loans 9.68 lakh

WRITE TO US Looking for a professional to analyse your investment portfolio? Write
Total liability 9.68 lakh to us at etwealth@timesgroup.com with ‘Family Finances’ as the
Financial plan by FOR EXPERT subject. Our experts will study your portfolio and offer objective advice
Pankaaj Maalde
Net worth (approx) `1 crore Certified Financial Planner ADVICE on where and how much you need to invest to reach your goals.
10 The Economic Times Wealth, June 5-11, 2017 Guest Column

TURN A STREAM OF INCOME

INTO A PILE OF CAPITAL
MONEY An equity SIP can perform the miraculous feat of transforming a bit of your
MYSTERIES monthly income into capital deployed in a business, says Dhirendra Kumar.

As Bogle points out, essentially, your income

stream has become part of a pool of capital that
is funding a business. Instead of being entitled to
just a fixed income on the money, you can—de-
pending on how well you invest—become enti-
tled to profits. Not just that, since the capital
markets price stocks on what they believe the fu-
ture holds, your investments gain in value based
on that too.
So where do SIPs fit in? Simply by aligning with
the pattern of income that most savers have, and
by making this conversion of your income into
capital effortless and automatic. Most of us earn
and spend our income on a monthly cycle. Hav-
ing a little bit of this flow systematically into an
SIP becomes an easy way of linking your income
to something that turns it into capital deployed
in a business. This is something that is a relatively
new phenomena in
Boiled down saving and invest-
ing.
to the basics, No one in an ear-
lier generation was
there are able to do this.
only two Open-ended mutu-
al funds, electronic
ways of transfer of funds
from banks, online
investing confirmations and
money— monitoring are
some of the tools
either you that have made this
possible.
can lend it to A long-term SIP
is the nearest thing
someone, or to a certainty that
you can own exists in investing.
When you look at it
your own with the perspec-
tive I’ve presented
business. above, that of a
GETTY IMAGES steady income transforming into capital, it be-
comes obvious that this should be the centre-

T
wo weeks ago, I discussed the maths kets ‘turn a stream of income into a pile of capi- piece of your lifetime investment plans. Some
and the psychology of Systematic tal?’ for an ordinary investor, and what does time ago, we did an extensive study at Value Re-
Investment Plans (SIPs) in these this have to do with SIPs? search on how long must one run an SIP for the
pages. We saw that the logic of SIPs Firstly, we have to appreciate that equity and chances of a loss to be minimised.
is impeccable and there is no better equity mutual funds are a unique type of invest- While you can find details in Mutual Fund In-
way to invest in mutual funds. However, there’s ment when compared to the various kinds of sight magazine, the main finding of was that an
actually more to it than just that—a lot more. deposits that Indian savers are so fond of. As I’d SIP investment period of a mere three years
Last month, I came across this statement by written in one of the early articles in this series, meant that the investments had positive returns
John Bogle, “[Without the equity markets,] when we invest in equity, we become part own- in more than 90% of the cases. At four years, this
there would be no way to turn a stream of in- er of a company. Boiled down to the basics, was up to 94%. Even for a two year investment,
come into a pile of capital or a pile of capital there are only two ways of investing money—ei- which is too short in every way, positive returns
into a stream of income.” Bogle is, for all practi- ther you can lend it to someone, or you can own are found in 84% of cases. If this is the kind of a
The author has
written about cal purposes, the inventor of the index invest- your own business. While founding and run- deal that equity SIPs offer, it’s foolhardy not to in-
personal finance ing as a practical product. There are few people ning an entire business is not everyone’s cup of vest.
for more than who have done as much as Bogle to make the tea, the existence of the stock markets means
two decades. He
is the Founder idea of steady, low-cost, long-term investing a that any of us can be part-owners of a business.
and CEO of success as Bogle as. So what does he mean by We can get a share in the profit stream of a busi- Please send your feedback to
Value Research the above statement? How do the equity mar- ness without the hassle of running a business. etwealth@timesgroup.com
12 The Economic Times Wealth, June 5-11, 2017 Financial Planning

THE MONEY QUESTION Paper

Work
What kind of financial advice should retirees ignore?
Aadhaar-based online
Sagar will retire in six EPF claim submission
months. His investments in A withdrawal claim is made with the
Employees Provident Fund Organisation
fixed deposits, PPF and (EPFO) at the time of retirement to receive
mutual funds have grown to accumulated provident fund. The EPFO has
now introduced an online facility to process
a sizeable amount. However, the withdrawal claim, which seeks to bring
Sagar wants to reinvest 80% down the processing time to 15- 20 days
and over a period of time, it is envisaged to
of this corpus to maximise bring the time down to a few hours.
his returns before he settles
down to a retired life. He has
been seeking advice from
friends and relatives. One of Prerequisites
The EPF member should have the
his friends has asked him to following in order to process an online
invest in a mobile app startup withdrawal claim:
� UAN: A Universal Account Number
that promises to double his should have been issued by the EPFO
money in six months. and this number must be activated.

Another has suggested a � The member’s mobile number must be

registered with the UAN database.
couple of ‘hot stocks’ to � The member’s Aadhaar details should
invest in. A relative has told be seeded in the EPFO website.
� Member’s bank details should be
him about a financing seeded with the UAN.
scheme he could borrow � Member’s PAN should be seeded in the
EPFO database.
from, invest the money, pay
off his loan and pocket the
difference. All these sound
like wonderful investment
Portal
Member e-Seva portal accessible at
advice to Sagar. He wonders https://unifiedportal-mem.epfindia.gov.in/
who he should listen to. memberinterface/ should be used for
GETTYIMAGES availing this facility.

S
agar should be such ventures if he wants to own due diligence or check a slow and boring process.
wary of anyone lead a peaceful retired life and with an expert. Also, he must When it comes to investing,
trying to secure avoid several years of hassle avoid investing with bor- anything that sounds too Process
his investment for over attorney fees and court rowed money. Typically, in- good to be true probably is. After logging into the portal, one should
a startup. It is as cases in order to get his mon- terest rates on such schemes There are no shortcuts to select the “Aadhaar based Online Claim
good as speculation, because ey back. tend to be high. Imagine the building wealth. Instead of Submission” tab. Next, the member needs
in most cases it is almost im- Sagar should also avoid any loss that he would incur if the trying to make a quick buck to verify his KYC details. From the different
possible to find out what one ‘hot’ stock tips that he may investment doesn’t perform barely six months before re- options for withdrawal claims, the required
is getting into. Be particularly have heard about on the according to expectations. tirement, Sagar should avoid option must be selected.
wary of those who promise to news, the radio or from a The last tip sounds simple, taking any risks with his cor-
make your money grow year- friend with little or no invest- but it’s incredibly important. pus. This is the time he should
on-year at a certain percent- ing experience. Wherever Successful investing is all secure his corpus, rather than
age! He should steer clear of possible, he must perform his about time and patience. It is take unnecessary risks.
Authentication
A one time password is sent to the
SMART THINGS TO KNOW: Buying resale property registered mobile number with UIDAI
Aadhaar database. Once this OTP is
entered, the claim form is submitted. This

1
The buyer
2
The buyer must use the
3
The documentation should
4
In case the buyer is looking for a
initiates withdrawal process. Once the
claim is processed, the withdrawal amount
is credited to the employee’s registered
bank account.
must services of a legal be clear. They should be home loan to finance the
establish expert or a lawyer to duly stamped and not purchase, keep in mind that most
the title of check if the documents already mortgaged. banks will have stringent pre-
the seller pertaining to the resale Otherwise, there could be conditions for older properties.
and whether of the property, that issues if and when the buyer They may insist on a higher down Points to note
he/she is were given by the wants to take a loan against payment for the home loan or � The member is not required to go to the
the real builder or original the same property or sell it may be unwilling to provide a employer to avail this facility.
owner. developer, are in order. subsequently. loan for a longer tenor.
� It is important that the mobile number
The content on this page is courtesy Centre for Investment Education and Learning (CIEL). registered with Aadhaar database and
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta. the one with EPFO is one and the same.
Financial Planning The Economic Times Wealth, June 5-11, 2017
13

Own an asset? Share it

to discover its value
Our sense of ownership often prevents us from enjoying the potential returns an asset
could earn. It’s time we changed the way we look at what we own, says Uma Shashikant.

W
e love to own things. To our user experience with the asset. Those
have something that we who lease cars are not only able to upgrade
can call our own, to ad- their vehicles more frequently, but are also
mire, appreciate and hold able to escape the pains of maintenance and
on to, is important to resale. Those who own homes are now seek-
many of us. We spend serious money on ac- ing renters who are willing to pay for the
quiring things that we want to own. We are spare bedroom, renting it online after check-
quite willing to allocate wealth and even ing a dynamic calendar for availability.
more willing to give up liquidity. Since per- The onslaught of renters is likely to do two
sonal finance is about the assets we acquire things, among others. First, the associations
and the use we put them to, it might help to built with objects are likely to become weak.
pause and think about why we own stuff, A house that has been occupied by hundreds
and whether we overdo it. of daily renters is likely to be valued for its
There are ancestral homes that remain accessibility, space and comfort, than for its
unsold, because the owners do not see it as ancient design and décor. Second, if a stable
brick and mortar. They associate memories income stream from rents is established as
with the house, and they perceive a value the reward for ownership, the illiquidity of
that they believe cannot be measured in the asset is likely to become less important
money. Psychologists point out that owner- compared to its earning capability. The fo-
ship is deeply ingrained too early in life, and cus will thus shift from future value to cur-
we develop a sense of ownership over things rent income. This will revive the market for
we control, things we shape, things we par- sale of assets that reluctant owners were un-
ticipate in creating, and things we associate willing to part with earlier.
with positive memories, with people we It will be interesting to see how these con-
love, respect or admire. flicting positions unravel. On the one hand
Rationally speaking, there should be no would be the psychological pull of owner-
market for old LP records in this age of digi- ship and its strong desire to see value in nos-
tal music; and there should be no demand talgia, antiquity and association. On the oth-
for physical books when reading can be ac- er would be the digitalised separation of ex-
complished more efficiently online. But periences from ownership, enabled by a
people associate memories and experiences large market of service providers who open
with the physical touch of these objects. up the use of assets to non-owners.
That makes up the market for collectibles What would we choose to be? Would we
and antiques. Our psychological connection be the ones to bundle away ancestral jewel-
with objects makes it tough for us to equate lery in the lockers in fond memory? Or the
the dog-eared copy of our favourite book ones who would bring it out and give it out
with its Kindle edition. We feel a bat auto- on rent to those who love to wear such peri-
graphed by a star batsman has somehow ac- od pieces? Would we be the ones who return
quired a quality of his, to be cherished and to our second homes by the sea, just to sa-
valued. vour the conversations with loved ones? Or
Experiments have shown that children re- would we place the picture on the web to
sent the idea of exchanging their favourite open up the balcony to hundreds who can
toy for a replica. Or students, who seemed GETTY IMAGES
romaticise about the sunset over the sea? My
indifferent to picking up either a coffee mug bet is that many are making that transition
or a bar of chocolate as a reward, were most- from owning to renting already, and that
ly unwilling to return or exchange what they will be perpetual. To see the disadvantages, that ideal, and the failure and collapse of would finally modify the markets for owning
first chose, for the other. Behavioral scien- we have to splice the use of the asset even Communism has sealed the notion of collec- assets.
tists refer to this enhanced love for what we better. If it is the experiences, memories and tive ownership in most minds. In a world were people are willing to pay
own, as the endowment effect. associations with the object that create the However, the markets for human experi- for experiences and not things, it might be
The endowment effect explains why we satisfaction from ownership, we have to ask ences have been growing very fast. How we more efficient for property management
do not sell an underperforming stock, al- if the object and the emotions associated use our time and resources has dramatically businesses to own homes, rather than indi-
most falling in love with it after buying it. with it can be separated. altered. We are able to use online searches viduals who juggle too many things anyway.
That may be true of our home, jewellery, Researchers studying the Tanzanian Haz- and services to find out what might come In that glorious world, people may begin to
clothes, cars and other assets that become da hunter-gatherer tribe found that they did close to the experience we are seeking— prefer financial assets over physical assets.
special to us, or more valuable than any- not suffer from the endowment effect. Or the whether it is a trek to the hills, a run in the
thing that may be equivalent, simply be- behavioral limitation of assuming that what morning, a trip to an exotic place, or a meal
cause we own them. They are better be- they owned was more precious. The primary at a specialty restaurant. This market for ex-
cause they are ours. reason for this attitude was that they were an periences and the presence of a large num-
What is wrong in this desire for owner- egalitarian community that shared most ber of service providers might modify the
ship? On the positive side, owning some- things. In the modern world of individual economics of ownership. The author is Chairperson,
thing makes it always accessible to us, avail- space, privacy, motivation and incentive, it is Renting out what we need, and being able Centre for Investment
able to us whenever we need it. To own an tough to switch to a model of common own- to enjoy an asset only for the time period we Education and Learning.
asset is like having the guarantee that its use ership. We may have travelled too far from need it, is serving the purpose of optimising
14 The Economic Times Wealth, June 5-11, 2017 Stocks

Why credit rating

downgrade should
concern you
A ratings downgrade indicates that the company has weak
financials. It may be best to avoid such firms.

YOGITA KHATRI
Banks with huge NPAs

C
redit ratings agencies recently
downgraded bonds issued by
IDBI Bank and Reliance Commu-
nications, seriously impacting cr cr cr
their stock prices. The counters
fell 22% and 40%, respectively over the past IDBI Bank PNB Bank of India
one month. To help make informed equity 25,206 32,702 25,305
investments, here is what you need to know 13.21%* 7.81% 6.90%

GETTY IMAGES
about a ratings downgrade.

What leads to a downgrade

One of the key reasons why companies face cr cr cr
credit ratings downgrade is because of their
deteriorating finances, usually high debt lev- Union Canara Bank of
els. It indicates that the company may not be Bank Bank Baroda
able to service its debt as per schedule or, in 18,832 21,649 18,080 Companies with high are unrealistic, you may exit your invest-
some cases, may even default. ICRA down- 6.57% 6.33% 4.72% ments once the prices recover, after the ini-
graded IDBI Bank’s ratings from AA- to A,
*Non-performing assets or NPAs as % of the debt-equity ratio tial knee-jerk reaction to a downgrade.
due to a substantial fall in the bank’s asset bank’s total assets. Data as of March 2017. A high DE ratio indicates that a firm may If you are a debt mutual fund investor,
quality—which led to high losses. “While the not be able to service its debt. keep an eye on the ratings of the debt invest-
ownership structure provides comfort, the ments made by the fund house. You may
risk on additional tier-I bonds has increased. action, it may face further downgrades. Shriram Trans 4.96 check it once every three months. “In case,
The bank may not be able to service the in- the exposure to bonds rated below AAA or
terest on these bonds, in accordance with How downgrades impact you M & M Fin. Serv 5.10 even AA+ is rising, you should check the ped-
the stated terms, if it is continues to be in vio- Usually, a rating downgrade is immediately igree of the companies in which the fund has
Bajaj Fin 5.21
lation of regulatory capital requirements,” followed by a fall in the company’s stock invested,” suggests Jasani. If the fund’s expo-
says Karthik Srinivasan, Senior VP and price, impacting your equity investments in Power Fin.Corpn 5.68 sure to lower-rated companies is high, it is
Group Head, Financial Sector Ratings, ICRA. the short run. Even your debt mutual fund advisable to exit the fund.
Typically, limited improvement in a com- investments can be adversely impacted. “In- Rural Elec.Corp 5.93
pany’s cash flows that’s riddled with debt vestors in debt instruments that witness a How to anticipate a downgrade
Indiabulls Hous 6.27
leads to downgrades. Not just banks, the sudden and sharp downgrade will be faced “If the rating outlook is negative, typically
same standard applies to capital-intensive with losses due to the fall in their prices be- GMR Infra the ratings are likely to be downgraded fur-
7.02
and commodity-driven sectors like thermal cause of the downgrade,” says Somasekhar ther,” says Srinivasan. You should also do
power, steel, construction, infrastructure Vemuri, Senior Director, CRISIL Ratings. LIC Housing Fin. 12.14 your own research. For instance, in the case
and mid-sized telecom entities. “Taking the of a bank, find out its non-performing asset
eye off the key ratios such as incremental Re- What you should do (NPA) levels or bad loans. If, compared to
turn on Capital Employed (RoCE) or incre- A ratings downgrade is an alarm bell. You Firms with poor peers, its NPAs have been rising, chances are
mental Return on Assets (RoA) for invest- need to wake up and take corrective action. interest coverage ratio it could face further downgrades. In the case
ment decisions and not initiating action to However, do not worry if there’s just been Higher ICR reflects a higher ability to of a company, pay close attention to its debt-
recover dues in time may lead to down- one downgrade. “A series of downgrades is a service debt. equity (DE) and interest coverage ratios
grades,” says Deepak Jasani, Head, Retail Re- cause for concern, not a single downgrade,” (ICR). The DE ratio indicates the proportion
search, HDFC Securities. says Jasani. Pay close attention to the recent Reliance Com. 1.10 of the company’s assets that are being fi-
credit ratings of a bank or a company and nanced through debt, while the ICR indi-
Hindalco Inds. 1.03
How does it impact companies also its future outlook, which is given in the cates the ability of a firm to service the debt
A ratings downgrade hampers the compa- rating notes by agencies. It is an indicator of JSW Steel 1.01 and repay it as per schedule. A DE ratio of
ny’s ability to borrow. Lenders may hesitate the likely direction in which the company’s one is considered optimal. While the higher
loaning to such companies and may not even rating is expected to move. For instance, all GMR Infra. 0.56 the ICR, the better is the ability of a borrower
roll-over (refinance) existing debt. “This long-term ratings from CRISIL carry an out- to service debt.
could in turn impact the future growth plans look which gives the likely direction in which Jindal Steel 0.18 “Be careful of betting on highly leveraged
of the company,” says Jasani. The cost of bor- the rating is expected to move in the next 12- stocks on the expectation of a turnaround.
-1.70 Tata Steel
rowing also increases for such companies be- 18 months. In majority of the cases, this turnaround
cause investors seek higher returns for the In order to take corrective action, go -2.42 SAIL never happens or happens after the inves-
additional risk they take. “To get funds from through the explanation provided by the tors lose patience and exit,” says Jasani.
investors at more attractive rates, these com- company in response to its rating down- -51.24 BHEL
panies need to improve their operational grade. Will the company be able to honour
Data is for 2015-16 (latest available numbers).
and financial matrices,” says Srinivasan. If its promises, within the stipulated time Source: Capitaline, Compiled by ETIG Database. Please send your feedback to
the company does not take quick corrective frame? If you think the measures announced The companies are from the BSE 100 basket. etwealth@timesgroup.com
Investing The Economic Times Wealth, June 5-11, 2017
15

“A good monsoon and GST

will help revive earnings”
correction is also possible. or Russia, because India is a domestic-driven
market.
Are the global factors expected to remain
positive for long? What are the themes you are playing now?
We are more bullish about the global factors We want to play the global economic revival
now because most governments and central theme by investing in export-oriented sec-
bankers, like those of the US, Europe, Japan, tors like auto parts and chemicals.
etc., are still pushing for growth.
What about big export sectors like IT and
With the volatility index (VIX) at a multi-year pharma?
low, are global investors ignoring the risks? While we are bullish on other export sectors,
Let us take a close look at those risks. The we are bearish on IT and pharma due to sec-
Trump rally has less to do with him, more to tor-specific problems. For IT, the period of
do with the revival in the US economy. He is tectonic growth is over; it is more of a com-
just a beneficiary. Trump is expected to sup- modity now. But the valuations are higher
port this recovery and not to hurt it, so that is than those of commodities. Although these
not a big risk. The worries about a big protec- companies are still generating significant
tionism move by Trump and a trade war be- cash flows and some are occasionally paying
tween US and China have not materialised. high dividends, to consider them in terms of
The fears about the elections in France are dividend yield play, they need to have con-
already out of the way. Brexit is also going to sistent high dividends. Moreover, stock pric-
take few more years. This is why the VIX is at es need to drop further to make the dividend
very low levels now. yield attractive. For pharma too, most of the
However, one needs to generic growth story is over.
be careful about the risk
posed by China. China is “Several other What about domestic
showing signs of slowing themes?
down again and some of emerging At the domestic end, the
its recent export-import
figures were well below
markets are GST is a theme we like. After
many years, we are bullish
market expectations. The cheaper than on FMCGs again because GST
country is also tightening
its monetary policy,
India. is going to be game changer
for this sector. In the liquor
which will impact the A significant industry, for instance, the en-
property market, as well
as shadow banking.
part of the new try barrier is quite high and it
is very expensive to set up a
FII allocations new plant in any state. There
Do you think valuations in
the Indian market are
might go there.” is also a plethora of state lev-
ies. GST will change all that.
stretched? The topline growth is expect-
Indian valuations are stretched because the ed to go up from 6-7% to the double digits.
Andrew Are you worried about Indian markets,
given that the major indices have already
expected earnings are not coming through.
There are several other emerging markets
This means FMCG is changing from a defen-
sive sector to a growth-oriented one.
that are cheaper than India. I am not expect- Affordable housing is another preferred
Holland rallied more than 14% since the beginning
of 2017? ing a major outflow of money from India, but theme. Although sectors like real estate and
While the Indian market has done well so far a significant chunk of the new FII allocations cement also stand to benefit from this push
CEO, Avendus Capital in 2017, so have several other emerging mar- may go elsewhere. The global economic re- by the government, housing finance compa-
Alternate Strategies kets. We might have outperformed others by vival theme being played by FIIs is another nies, especially the ones that concentrate on
a margin of 2-3%, but we need to understand reason for this. New money is flowing into small ticket housing loans, are going to be the
While the Indian market that what is happening is more of a global li- exporting countries like South Korea, which real beneficiaries.
has fared well, other quidity-driven rally. will be the biggest beneficiaries of the global We also like private sector banks because
While I am not negative on India, I am not pick-up in growth. of their ability to benefit from the problems
emerging markets are bullish either, for the remaining months of However, a pick up in Indian earnings may of PSU banks. Most PSU banks have reported
not far very behind, 2017. This is because the return for the year is finally happen in 2018, bringing the valua- poor numbers for the fourth quarter of 2016-
Andrew Holland tells already made, so it is reasonable if the mar- tions down. A good monsoon, the imple- 17. Half the PSU banks are now under RBI’s
ket remains relatively stable during the next mentation of GST, etc. are factors that will restrictive control due to high NPAs, render-
Narendra Nathan. 6 months before we get into the earnings help earnings revival. GST will cause some ing them incapable of expansions. So private
pick up in 2018. There is still a lot of ‘left out disruption for the first 3-6 months, but things sector banks will continue to take market
feeling’ among domestic investors and FIIs, should settle down before 2018. Further, the share from them.
so the flows will pick up at every small dip. risk in the Indian market is also much lower.
The corrections will also be small. However, If global growth doesn’t pick up as expected,
liquidity movement is unpredictable and if it Indian markets won’t be affected like export- Please send your feedback to
takes the market to much higher levels, a big oriented markets such as South Korea, Brazil etwealth@timesgroup.com
16 The Economic Times Wealth, June 5-11, 2017 Learn & Keep

REALTY OUTLOOK:
WAIT & WATCH
Despite the drastic fall in sentiment after the government's real estate policy changes last year, the overall mood
among real estate players is cautious and hopeful as they wait for further clarity in the next six months.

Realty players positive, but wary Residential developers in a tough situation

There is optimism for the future, but the sentiment has dipped over last year. They don't expect a rise in sales or price appreciation in the next six months.

100 RESIDENTIAL SALES PRICE APPRECIATION

LAUNCHES
90

Q2 2016
80
Q1 2016 Q3 2016
Q4 2016
Q1 2017
70 68
67 64
60
62 58
58
Q1 2016
53 53 53
50

46% 44% 10% 54% 37% 9% 41% 47% 12% BETTER

40 41
SAME

SENTIMENT SCORE*
30 WORSE

20

10

0
CURRENT SENTIMENT FUTURE SENTIMENT Q1 2017

The sentiment has improved slightly after the demonetisation gloom in the previous
quarter, but it remains the same as last year and is marginally positive. 45% 26% 29% 64% 14% 22% 40% 46% 14%

Western zone is the most optimistic Offices face slack supply, continued demand
Maharashtra is working hard to move towards RERA, lifting the sentiment. Leasing is affected by the slowing IT sector; rentals are rising due to poor supply.

63% 41%
23% 41%
66 56 57 58 NEW OFFICE 14% 17%
SUPPLY

NORTH 72% 50%

25% 38%
OFFICE RENTAL 3% 12%
EAST APPRECIATION
Q1 2016 Q1 2017

BETTER SAME WORSE

WEST 67 59
Lack of clarity pulls Players optimistic on
down developers funding for the sector
SOUTH
Financial institutions are a bit Nearly 79% stakeholders, the highest ever,
62 62 more optimistic with the rise in expect a good flow of funds in six months.
transparency in the sector.
ECONOMY FUNDING

8% 8%
Q1 2016 24% 38%
Q1 2017 FINANCIAL
DEVELOPERS INSTITUTIONS Q1 2016

68%
69 Q1 2016 57 54%

Q1 2017
60 58 17% 9%
12%
17%
Q1 2017 79%

66%

BETTER SAME WORSE

* Sentiment score
>50: Optimism
=50: Same/Neutral
<50: Pessimism

Source: The Real Estate Sentiment Index survey

was conducted by FICCI, NARDECO and Knight
Frank India among 200 developers, private
equity funds, banks and non-banking financial
companies between January and March 2017.
18 The Economic Times Wealth, June 5-11, 2017 Financial Planning

5
THINGS TO KNOW BEFORE
YOU USE A PAYMENT BANK
The Reserve Bank of India has given out 11 payment bank licences. To make the most of
these banks, it is essential you know what they bring to the table, says Hiral Thanawala.

INTEREST RATE ON CHARGES ON VALUE

DEPOSITS ADDED SERVICES
Payment banks offer enhanced services Just like interest rates, it is essential to be aware of
compared to a digital wallet, but are not in the charges levied on the services offered by pay-
the same league as the traditional banks. ment banks. For instance, Airtel payment bank
Before you opt for their services, take a charges 0.65% if you withdraw cash and 0.5% of the
look at the rate of interest being offered by transferred amount if you transfer funds to another
them. Like traditional banks, payment other bank. “Customers need to watch out for fee
banks too offer interest on deposits in sav- escalations on value-added features and transac-
ings account and it can significantly vary. tion charges which can be substantial for higher
Currently, Airtel payment bank offers ticket transactions,” says Kinger.
7.25%, India Post payment bank gives 5.5%
and Paytm payment bank offers 4% annual
interest.
%

Discount

CONVENIENCE
AND REACH
Inquire whether a payment bank
offers ATM cards that can be used
to withdraw money from other
banks. Currently, Airtel does not BUNDLED OFFERS
offer such ATM cards. “However, AND DISCOUNTS
Airtel has over 10 lakh outlets Most of the payment banks have a
across India and these will become non-NBFC heritage and will use pay-
banking outlets allowing custom- ment bank as a customer retention
ers to deposit and withdraw mon- and acquisition mechanism. “For in-
ey,” says Deepak Kinger, VP, Bank- stance, Paytm will offer cashbacks
ing and Financial Services, Virtu- and discounts on its ecommerce
saPolaris. However, if you need a
debit card, India Post or Paytm
portal if you pay for the shopping NOT A SUBSTITUTE FOR
through the Paytm payment bank
may suit you better. “Frequent account. Airtel may give out a dis- TRADITIONAL BANKS
travellers should also check wheth- count on utility bill payments made Payment banks cannot lend or offer credit advance to customers like tradi-
er a payment bank can provide fo- through an Airtel payment bank ac- tional banks. They can issue cheque books and debit cards but not credit
rex cards that can be used as a deb- count,” says Kinger. So, you will cards. Also, unlike traditional banks, you can keep a limited sum in a pay-
it or ATM card outside India,” says need to choose the payment bank ment bank account, currently capped at `1 lakh per account. “Payment
Harshil Mathur, Co-founder and depending on what kind of bundled banks are not a replacement for the established traditional banks. The lat-
CEO of payment gateway firm offers and services you are most er offers many more services. Both traditional banks and digital banks
Razorpay. likely to avail of. have their own merits and cannot replace each other,” says Mathur.
Investing The Economic Times Wealth, June 5-11, 2017
19

“GST may initially be a complex

tax mechanism to navigate”

to raise cash. Our team is focused on generat- tion, narrow current account and fiscal deficit
ing stock level investment ideas that can be should be robust enough to withstand such an
winners, and we see a flow of good ideas be- impact.
ing discussed.
What’s your view of the bond market and
How has IDFC Mutual Fund changed its how attractive is it to invest in it now?
style of investments with the appointment The RBI is likely to be on a prolonged pause
of new fund managers in the past year? for the foreseeable future, as it remains fo-
We have a clearly defined an investment the- cused on achieving 4% CPI target on a sustain-
sis and strategy for each of our funds. Our able basis. While the near-term inflation may
fund managers are implementing a process- undershoot RBI’s inflation target of 4.5% for
led, clearly segmented strategy for each the first half of 2016-17, its mainly driven by
fund, based on the underlying thesis. We re- base effects while cyclical factors such as ru-
view and refine our processes continually, ral wage growth and minimum support pric-
and are happy to have augmented our team es, have started to rise. One-off events such as
with fresh talent. Our current underlying the implementation of GST and increase in
theme is to invest in growth oriented compa- the house rent allowance under the Seventh
nies, with a focus on companies that benefit Pay Commission, could add to the long-term
from growth in domestic consumption. inflation.
For investors, it is important to tune out the
Given the new GST rates, which sectors noise regarding potential rate cuts or hikes by
seems positive to you and which are you the RBI. Instead, they must focus on the men-
looking to invest in? tal underlying point: that the yield curve to-
GST may initially be a day is steep enough to pro-
complex indirect tax vide lucrative ‘carry’ and
mechanism to navigate. “Given the hence offers adequate pro-
Although the expecta- tection against any moderate
tion was that several sec- government’s rate hike cycle that one can
tors would benefit from
lower GST rates, the re-
stance about encounter down the road.
There is more than a 100 bps
ality may be a bit more anti-profiteering, spread between overnight
nuanced. With the gov-
ernment being very vo-
one-off gains for and three-year AAA rates.
This carry buffer provides
cal about the anti-profi- any particular adequate protection against
teering clause, signifi-
cant one-off gains for
sector from GST any modest rate hikes that
the RBI may contemplate lat-
any particular sector should be er on in the cycle.
BHARAT CHANDA should be ruled out.
However, over the long
ruled out.” What is your advice for
term, organised players investors who have missed
With Sensex and Nifty at new highs, what should be able to gain market share from un- out on the current rally in the stock market?
Vishal Kapoor are your short- and long-term views on the
equity market?
organised players and benefit from a level
playing field. Organised retail, media, and
While headline index levels are at record lev-
els, investors must recognise that individual
CEO, IDFC Asset Our long-term view on the market is con- specific local and regional themes like radio stocks may not necessarily reflect an all-time
structive. There have been several positive and the aftermarket for auto components are high valuation. The investment process is dy-
Management fallouts of the three years the Modi govern- segments where the benefits of GST imple- namic, and while risks should be taken into
Company ment has been in power, including structural mentation are likely to be more immediately account, it’s important to be open to opportu-
reforms, government spending to accelerate visible. nities that keep emerging. Both growth ex-
growth and benign inflation. These, com- pectations and interest rates have a bearing
Given the high valuations, bined with an improving global macro-eco- What are the negative factors to watch out on valuations, so investor shouldn’t just con-
there can be short-term nomic scenario, are a big positive for equity for in the domestic and global markets? sider absolute levels.
investors. However, given the elevated levels While the global growth momentum has re- Several investors have been using every
volatility in the equity of valuations across market segments, short bounded since 2016, risks can arise from correction as an investment opportunity.
market, but the long-term term volatility cannot be ruled out. shifts in the economic and policy landscape Many have chosen to average out their entry
view is positive, in the US. There could also be some pressure point by using tools such as the systematic
How are you positioning your portfolios in from China due to its inherent reliance on transfer plans or through SIPs in mutual
Vishal Kapoor tells the current market? Will you deploy fresh credit and investment growth, high leverage funds. Our advice to investors in to maintain a
Hiral Thanawala. money at these levels? of the corporate sector and widespread ex- disciplined asset allocation across all market
Our portfolios are positioned for growth as cess capacity, as it tightens its monetary poli- segments.
we believe we are in the middle phase of a cy and shifts to a more sustainable consump-
multi-year rally. Cash positions across our tion-led model. However, the cyclical and
portfolios are at a ‘normal’ level. Currently, structural upturn in the Indian economy due Please send your feedback to
none of our funds has taken any tactical call to strong growth prospects, record low infla- etwealth@timesgroup.com
20 The Economic Times Wealth, June 5-11, 2017 Smart Stats

smart stats
In Mutual funds 21
This Loans and deposits 24
Section Alternate investments 25

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.
Vedanta 1 4 231.25 20.27 90.56 12.44 1.13 8.14 0.22 1.79 1.77 22 4.73
Cholamandalam Inv 78
PGCIL 2 1 207.65 24.67 29.85 14.58 2.18 1.21 0.49 0.96 0.78 41 4.56
ONGC 3 2 174.00 14.35 25.83 10.89 1.01 4.19 0.37 1.01 0.72 37 4.24 Indiabulls Housing 74
GAIL India 4 7 410.35 28.64 40.59 20.61 1.77 2.08 0.51 0.97 0.90 38 3.47 Lakshmi Vilas Bank 58
GSPL 5 NR 177.85 30.81 41.06 18.60 2.25 0.88 0.41 1.33 0.89 30 3.90
L&T Finance Holdings 47
Tata Power 6 9 80.70 23.04 128.92 29.28 1.64 1.60 0.17 1.03 1.45 26 3.12
UPL 45
Redington 7 14 134.10 35.46 24.14 12.59 1.92 3.13 0.53 1.14 1.12 10 4.60
M&M 8 5 1,425.25 14.65 47.94 20.88 2.60 0.85 0.61 0.96 1.27 45 4.44 See revenue column in the adjacent table.
CESC 9 16 908.90 13.51 25.77 17.49 1.14 1.09 0.27 1.43 1.24 26 4.27
Ashoka Buildcon 10 19 187.50 31.30 134.75 59.52 1.88 0.42 0.45 1.40 1.98 22 4.73
Hindalco Industries 11 NR 197.25 11.23 130.11 23.13 0.95 0.50 0.21 1.63 2.16 31 4.42 Least Expensive Stocks
JSW Energy 12 24 63.05 14.87 44.56 16.33 0.99 3.17 0.36 1.60 2.05 27 3.33 The 5 stocks with the lowest forward PE.
South Indian Bank 13 27 28.45 35.36 27.95 10.90 1.04 1.61 0.63 1.34 2.07 14 4.21
ONGC 10.89
UPL 14 18 876.95 45.21 72.61 25.74 6.08 0.58 0.54 1.27 2.06 29 4.55
South Indian Bank 10.90
VA Tech Wabag 15 10 662.50 18.12 82.94 35.75 3.65 0.61 0.43 1.18 1.06 21 4.67
Tata Motors 16 20 476.65 15.45 102.20 21.73 2.79 0.04 0.21 1.58 2.79 46 4.35 Karur Vysya Bank 11.91
Indiabulls Housing 17 23 1,145.05 74.03 28.10 16.64 4.13 3.10 0.60 1.39 1.93 14 4.36 Hindustan Zinc 12.13
Granules India 18 17 141.15 22.30 69.00 19.59 3.57 0.61 0.37 1.61 2.01 14 4.43 NTPC 12.36
J Kumar Infraprojects 19 21 296.30 39.22 35.13 21.16 1.74 0.66 0.58 2.43 2.36 15 4.87 See PE column in the adjacent table.
Cipla 20 37 515.55 19.65 77.68 41.18 3.31 0.39 0.52 0.97 0.51 43 3.30
Cyient 21 34 494.85 13.43 25.79 16.20 2.63 1.15 0.63 1.10 -0.35 22 4.32
Oil India 22 8 303.00 19.26 13.96 15.25 0.82 5.05 1.01 0.89 0.69 34 3.68 Best PEGs
Cholamandalam Investment 23 31 1,041.30 78.20 33.31 22.61 3.76 0.54 0.71 1.42 1.43 25 4.24 Top 5 stocks with the least price earning
L&T Finance Holdings 24 39 127.40 47.43 33.00 24.45 2.83 0.62 0.55 1.53 2.93 12 4.58 to growth ratio.
NMDC 25 25 112.95 8.73 36.58 17.60 1.58 11.25 0.32 1.44 2.27 24 2.75 Hindalco
Industries Vedanta
Engineers India 26 35 159.95 38.65 35.19 32.59 3.78 2.21 0.89 1.60 1.74 21 4.14
NTPC 27 22 160.65 15.63 8.37 12.36 1.35 2.72 1.34 0.93 0.91 37 4.51
0.21 0.22
Bharat Heavy Electrical 28 NR 138.50 14.78 193.47 74.46 1.05 0.87 0.38 1.46 2.24 45 2.20
0.17
Dr Reddy's Laboratories 29 29 2,522.80 13.20 57.85 34.92 3.37 0.79 0.59 1.15 0.25 45 2.93
Lakshmi Vilas Bank 30 43 188.65 58.28 25.92 14.10 1.69 1.58 1.01 1.55 1.49 10 4.20 0.21 0.27
Persistent Systems 31 41 608.05 12.85 19.40 16.13 2.56 0.99 0.83 0.89 0.31 34 4.09
Gujarat Gas 32 36 759.95 35.48 142.79 47.43 4.92 0.33 0.33 1.07 1.10 20 3.60 Tata Power Tata Motors CESC
Dishman Pharmaceuticals 33 47 301.20 16.70 70.07 33.43 1.01 0.40 0.48 1.76 1.40 11 4.27
See PEG column in the adjacent table.
HSIL 34 33 345.10 17.32 38.52 24.88 1.81 1.18 0.64 1.39 1.81 10 4.20
Jubilant Life Sciences 35 NR 740.40 18.46 40.46 20.03 3.36 0.40 0.53 1.81 2.50 13 4.92
JK Cement
Sobha
36
37
NR
NR
1,106.90
374.25
19.41
14.75
54.56
30.49
34.02
22.43
4.38
1.43
0.36
0.54
0.62
0.74
1.36
1.43
1.95
1.43
25
18
4.24
4.39
Income Generators
Top 5 stocks with the highest dividend yield.
Karur Vysya Bank 38 NR 118.50 24.05 15.47 11.91 1.43 0.69 0.89 1.04 0.95 17 3.94
Hindustan Zinc 39 49 238.70 14.19 18.89 12.13 3.27 12.23 0.64 1.39 1.22 28 3.36 Hindustan Zinc | 12.23
Techno Electric & Engineering 40 11 402.50 23.05 28.34 23.76 4.51 0.25 0.81 1.09 0.46 16 4.63
NMDC | 11.25
Emami 41 NR 1,114.65 20.62 89.75 74.03 14.37 0.80 0.80 1.22 1.29 34 4.06
Vedanta | 8.14
DB Corp 42 NR 378.60 15.10 18.05 18.68 5.17 2.18 0.94 0.82 0.52 21 4.38
Oil India | 5.05
JK Lakshmi Cement 43 48 485.90 28.49 167.04 66.65 4.08 0.05 0.40 1.47 1.96 25 3.72
ONGC | 4.19
ACC 44 NR 1,658.10 18.11 54.30 51.51 3.60 1.04 1.05 1.03 1.24 40 3.03
Ambuja Cements 45 NR 240.35 16.63 44.15 42.54 2.44 1.16 1.07 1.17 1.55 39 2.97
Dividend stocks are considered
Indoco Remedies 46 NR 193.10 22.35 49.18 23.09 3.05 0.11 0.47 1.22 0.21 10 3.10 safe stocks during a downturn.
JSW Steel 47 NR 195.45 15.94 20.78 13.33 2.15 0.39 0.63 1.31 1.35 32 3.72 Figures indicate what an investor
can earn as dividend for every
Arvind 48 NR 380.45 16.22 47.48 31.31 2.75 0.64 0.66 1.44 2.57 18 4.11 `100 invested.
India Cements 49 40 209.35 7.61 109.48 39.57 1.87 0.49 0.46 2.00 3.19 23 4.00
Havells India 50 NR 485.10 42.10 70.72 62.80 9.25 0.62 0.84 1.39 1.69 43 2.95
* The figures under this head are for expected growth. NR: Not in the ranking. Data as on 1 June 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 PGCIL
in the next four quarters. The final two for each parameter). Growth is consensus rating (a composite rating 0.96
The four filters used to arrive at filters were that the companies should calculated by comparing the based on the recommendations by all
the Top 50 stocks NTPC
have made profits in the past four ’consensus estimate’ for the next 12 analysts who track a stock. Again, the
quarters and have a positive net worth. months with the historical 12-month higher, the better).
0.93
Only traded stocks: Of the about 7,000
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
0.89 Persistent
Only big stocks: Only companies with universe, we ranked them using the Total weight: 40%, which comprises were considered. A 5% weight was
Systems
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 0.89
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). 0.82
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.
Smart Stats The Economic Times Wealth, June 5-11, 2017
21

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 12.15 22.69
returns while debt-oriented hybrid and income funds are ranked on 1-year returns. HSBC Dynamic Fund Mirae Asset India Opportunities Fund

13.66 21.56
LIC MF Index Sensex Plan SBI Bluechip Fund
VALUE NET R E T U R N S ( % ) 13.88 21.54
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
JM Multi Strategy Fund ���� 138.52 12.33 24.44 38.86 20.08 21.54 — 20.1%
The 3-year
13.97
Motilal Oswal MOSt Shares M50 ETF
21.02
JM Core 11 Fund
Mirae Asset India Opportunities Fund ����� 3,652.87 10.08 19.41 27.86 19.79 22.69 2.28
return of JM 13.98 20.66
Motilal Oswal MOSt Focused 25 Fund ����� 546.90 9.51 17.63 26.87 19.46 — 2.81 Multi Strategy is
SBI Bluechip Fund ����� 13,338.85 8.4 15.08 17.87 18.72 21.56 1.97 the highest in its IDBI Nifty Index Fund Birla Sun Life Frontline Equity Fund

DSP BlackRock Focus 25 Fund ���� 2,426.57 8.25 14.93 22.23 18.45 19.2 2.49 category.

Invesco India Growth Fund ���� 182.74 10.12 18.45 21.94 17.33 19.77 2.59
Reliance Top 200 Fund ���� 2,846.56 8.81 18.78 26.55 16.59 19.59 2.05 Equity: Multi cap 5-year returns
Franklin India Flexi Cap Fund ����� 2,953.84 6.13 14.07 16.79 16.27 20.6 2.3
IDBI India Top 100 Equity Fund ���� 450.53 11.1 19.36 22.07 16.24 18.17 2.98 12.97 26.12
Invesco India Business Leaders Fund ���� 130.40 9.16 15.73 17.04 16.19 18.07 2.64 Edelweiss Prudent Advantage Fund Franklin India High Growth Companies Fund
Kotak 50 Regular Plan ���� 1,339.14 8.01 16.24 18.15 15.82 17.84 2.18 13.20 24.52
Birla Sun Life Frontline Equity Fund ����� 16,961.75 7.49 16.24 21.29 15.47 20.66 2.06 LIC MF Equity Fund Birla Sun Life Advantage Fund
DHFL Pramerica Large Cap Fund ���� 265.42 9.38 18.03 18.99 15.08 18.38 2.55
14.34 24.12
Birla Sun Life Top 100 Fund ���� 2,803.33 6.66 15.96 21.82 14.99 20.54 2.22
Birla Sun Life International Equity Fund Birla Sun Life Equity Fund
SBI Magnum Equity Fund ���� 2,018.51 7.17 11.73 15.99 14.84 16.92 2.1
14.36 23.69
ICICI Prudential Focused Bluechip Equity Fund ���� 13,155.67 7.01 15.41 22.83 14.63 18.65 2.07
Union Equity Fund Kotak Select Focus Fund Regular Plan
Invesco India Dynamic Equity Fund ���� 187.25 8.45 16.66 21.39 14.57 18.32 2.47
Edelweiss Equity Opportunities Fund ���� 282.22 10.12 17.88 19 14.47 17.49 2.54 14.62 23.05
UTI Equity Fund ���� 5,344.30 6.19 12.98 14.69 13.85 17.84 2.06 UTI Dividend Yield Fund ICICI Prudential Value Discovery Fund

Equity: Multi Cap

Motilal Oswal MOSt Focused Multicap 35 Fund ����� 6,543.17 10.06 21.42 34.71 30 — 2.33 30%
The 3-year return
Equity: Mid cap 3-year returns
Franklin India High Growth Companies Fund ����� 6,343.17 7.58 16.62 25.39 23.08 26.12 2.31
of Motilal Oswal
SBI Magnum Multicap Fund ����� 2,151.24 8.03 16.39 23.72 22.04 22.54 2.1 MOSt Focused 35 0.35 31.71
Kotak Select Focus Fund ���� 10,270.33 10.12 20.25 30.99 21.8 23.69 1.98 is the highest in Baroda Pioneer Midcap Fund Mirae Asset Emerging Bluechip Fund
Birla Sun Life Advantage Fund ���� 3,405.59 8.8 18.82 29.96 21.55 24.52 2.26 its category.
13.58 29.61
DSP BlackRock Opportunities Fund ���� 2,344.02 8.29 17.13 30.14 20.8 22.53 2.54 Birla Sun Life Dividend Yield Plus Fund Escorts High Yield Equity Fund
Kotak Opportunities Fund ���� 1,502.05 10.19 19.62 31.2 20.66 21.55 2.16
14.24 29.41
Invesco India Contra Fund ���� 502.94 9.95 18.51 26.84 20.26 22.76 2.46 HDFC Core & Satellite Fund Canara Robeco Emerging Equities Fund
Birla Sun Life Equity Fund ���� 5,286.75 7.17 15.59 31.64 19.4 24.12 2.17
15.74 29.27
Reliance ETF Junior BeES ���� 129.55 7.12 18.08 33.03 19.19 22.62 1
Axis Midcap Fund Kotak Emerging Equity Scheme
ICICI Prudential Nifty Next 50 Index Fund ���� 62.25 7.32 18.36 33.51 19.15 22.06 0.81
16.48 26.78
Franklin India Prima Plus Fund ���� 10,963.74 5.95 14.66 17.62 19 21.03 2.24
ICICI Prudential Dividend Yield Equity Fund Principal Emerging Bluechip Fund
SBI Magnum Multiplier Fund ���� 1,843.09 7.69 16.55 20.98 18.66 21.27 2.12
BNP Paribas Dividend Yield Fund ���� 332.12 9.08 17.01 23.32 17.9 20.12 2.69
ICICI Prudential Value Discovery Fund ����� 17,305.79 4.26 10.01 17.03 17.33 23.05 2.14
ICICI Prudential Indo Asia Equity Fund ���� 169.67 10.7 19.08 33.39 17.13 20.12 2.56 Equity: Small cap 3-year returns
Equity: Mid Cap
Mirae Asset Emerging Bluechip Fund ����� 3,768.74 11.47 23.23 41.63 31.71 32.79 2.3
31.7%
3-year return
22.10
HDFC Small Cap Fund
35.00
DSP BlackRock Micro Cap Fund
Canara Robeco Emerging Equities Fund ���� 1,823.70 13.11 25.93 38.79 29.41 30.24 2.33 of Mirae Asset
Emerging 23.40 34.49
Kotak Emerging Equity Scheme Regular Plan ���� 1,892.61 8.57 18.81 31.23 29.27 27.15 2.12
Bluechip is the HSBC Midcap Equity Fund SBI Small & Midcap Fund
Principal Emerging Bluechip Fund ���� 981.66 10.24 19.99 35.79 26.78 29.01 2.45
highest in its
Motilal Oswal MOSt Focused Midcap 30 Fund ���� 1,384.45 6.31 11.89 24.69 26.11 — 2.62 category.
26.26 30.40
Sundaram S.M.I.L.E. Fund Reliance Small Cap Fund
L&T India Value Fund ����� 3,898.51 8.98 19 36.17 25.81 27.67 2.03
SBI Magnum Midcap Fund ���� 3,755.01 6.17 12.51 18.72 25.24 29.42 2.03
27.62 28.99

Franklin India Prima Fund ���� 5,718.48 8.45 18.85 26.9 25.03 28.33 2.32 Franklin India Smaller Companies Fund L&T Midcap Fund

HDFC Mid-Cap Opportunities Fund ���� 16,684.82 8.09 16.86 33.29 24.56 26.97 2.27 27.84 28.96
Birla Sun Life Small & Midcap Fund L&T Emerging Businesses Fund
Equity: Small Cap
DSP BlackRock Micro Cap Fund ���� 5,824.49 10.42 19.03 34.08 35 32.78 2.44
Franklin India Smaller Companies Fund ���� 5,579.26 9.82 18.11 28.47 27.62 32.73 2.39 Hybrid: Equity oriented 5-year returns
Equity: Tax Planning
IDBI Equity Advantage Fund
Tata India Tax Savings Fund
����
����
628.88
656.39
10.17
10.28
15.54
19.71
17.89
25.12
21.84
21.42
—
21.96
2.83
2.53
21.8%
The 3-year return
7.64
Principal Equity Savings Fund
20.39
Tata Retirement Savings Fund

Birla Sun Life Tax Relief 96 ����� 3,354.94 9.79 17.88 20.97 20.86 23.02 2.31 of IDBI Equity 8.75 20.27
Advantage Fund Tata Regular Saving Equity Fund L&T India Prudence Fund
L&T Tax Saver Fund ���� 30.71 12.26 19.8 30.97 20.59 21.65 2.67 is the highest in
DSP BlackRock Tax Saver Fund ���� 2,632.54 8.51 16.24 28.28 20.28 23.02 2.5 its category. 9.51 20.1
Birla Sun Life Tax Plan ���� 532.10 9.79 17.63 20.33 20.06 22.25 2.67 DHFL Pramerica Equity Income ICICI Prudential Balanced Fund

IDFC Tax Advantage Fund ���� 592.93 13.05 24.04 30.42 19.87 22.88 2.42 9.78 19.51
Axis Long Term Equity Fund ����� 12,915.63 9.88 15.38 16.67 19.33 24.46 1.97 L&T Equity Savings Fund HDFC Balanced Fund
Invesco India Tax Plan ���� 406.51 8.93 15.39 20.22 19.1 21.52 2.51 11.03 19.44
Franklin India Taxshield Fund ���� 2,959.12 6.05 13.81 17.08 18.59 20.42 2.41 HDFC Equity Savings Fund SBI Magnum Balanced Fund

Annualised returns in % as on 31 May 2017.

22 The Economic Times Wealth, June 5-11, 2017 Smart Stats

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
L&T India Prudence Fund
�����
�����
112.01
4,116.65
7.94
8.76
19.39
15.55
26.11
23.27
21.73
18.48
20.39
20.27
2.81
2.03
21.7%
The 3-year return
Canara Robeco Emerging Equities Fund
24.19
HDFC Balanced Fund ���� 10,920.00 8.09 13.13 23.17 17.72 19.51 2.03 of Tata Retire- Franklin India Smaller Companies Fund
ment Savings 23.56
ICICI Prudential Balanced Fund ���� 10,813.96 5.29 11.77 26.73 17.57 20.1 2.2
Fund is the high-
Birla Sun Life Balanced '95 Fund ���� 8,159.35 5.94 11.66 19.58 16.88 19.16 2.27 est in its category. L&T Midcap Fund
Tata Balanced Fund ���� 6,479.05 5.54 9.69 15.92 16.28 19.1 2.06 21.84
SBI Magnum Balanced Fund ���� 9,890.20 5.04 7.36 14.43 15.96 19.44 1.98 Sundaram Select Midcap Fund
21.43
Hybrid: Debt-oriented Conservative Franklin India Prima Fund
ICICI Prudential MIP 25 ���� 1,305.51 4.65 5.78 15.35 12.78 12.5 2.09 21.27
SBI Magnum Monthly Income Plan ���� 1,051.17 3.46 3.49 13.73 12.5 11.52 2
SIP: Systematic investment plan % annualised returns
SBI Regular Savings Fund ���� 609.35 2.61 4.04 13.05 11.08 10.75 1.2
SBI Magnum Monthly Income Plan ����� 221.15 2.28 4.04 9.51 11.28 11.2 2.32 As on 31 May 2017
ICICI Prudential Regular Income Fund ���� 2,550.80 1.75 3.19 9.07 10.25 9.04 1.55

Debt: Income
Franklin India Income Builder Fund ���� 979.59 2.06 3.62 10.65 9.66 9.77 2.1 10.7%
The 1-year return
ICICI Prudential Banking & PSU Debt Fund
DHFL Pramerica Medium Term Income Fund
����
����
6,957.71
743.81
2.32
2.2
1.59
1.49
10.61
10.43
9.87
10.38
9.54
—
—
1.03
of Franklin India Top 5 MIPs
Income Builder Top 5 MIP schemes based on 3-year SWP returns.
Kotak Medium Term Fund ����� 3,958.22 2.13 2.41 10.24 10.06 — 1.7 Fund is the highest
UTI Medium Term Fund ����� 158.16 2.08 2.64 10.1 — — 1.25 in its category.
SBI Magnum Monthly Income Plan
Birla Sun Life Treasury Optimizer Fund ���� 7,195.60 2.31 1.02 9.96 10.04 10.09 0.64
12.47
HDFC Medium Term Opportunities Fund ���� 8,839.44 1.75 2.25 9.54 9.39 9.52 0.31
ICICI Prudential MIP 25
Kotak Corporate Bond Fund ���� 588.23 1.7 3.04 8.98 10.03 8.77 0.5
12.25
Reliance Banking & PSU Debt Fund ���� 5,225.72 1.93 1.89 8.95 — — 0.43
Kotak Monthly Income Plan Regular Plan
Invesco India Medium Term Bond Fund ����� 1,359.34 1.92 3.53 8.47 8.9 8.46 0.85
11.38
SBI Magnum Monthly Income Plan - Floater
Debt: Short Term
UTI Banking & PSU Debt Fund ����
�����
1,508.28 1.81 2.67 10.15 9.33 — 0.3 10.2%
The 1-year return
Reliance Monthly Income Plan
11.07

Franklin India Low Duration Fund 3,427.12 2.04 4.12 9.96 9.7 9.74 0.78
of UTI Banking 10.84
Baroda Pioneer Short Term Bond Fund ���� 473.24 2.02 4.08 9.68 9.15 8.98 1.23
& PSU Debt is
BOI AXA Short Term Income Fund ���� 340.28 2.08 3.21 9.54 9.22 8.6 1.35 the highest in its SWP: Systematic withdrawal plan % annualised returns
DHFL Pramerica Short Maturity Fund ���� 1,485.56 2.04 3.14 9.48 9.24 9.25 1.3 category.
HDFC Regular Savings Fund ���� 4,648.42 1.83 3.12 9.34 9.73 9.41 1.69 As on 31 May 2017
Birla Sun Life Short Term Fund ���� 17,772.60 1.91 2.47 9.2 9.4 9.53 0.29
HDFC Short Term Opportunities Fund ���� 9,787.66 1.65 2.99 8.54 8.9 9.07 0.36
Reliance Medium Term Fund ���� 10,577.93 1.63 2.9 8.35 8.66 8.83 0.9
Indiabulls Short Term Fund ���� 805.99 1.67 2.86 7.93 8.69 — 1.5
Multi Cap
Debt: Ultra Short Term
BOI AXA Treasury Advantage Fund ����� 453.83 2.07 4 8.98 8.92 9.02 0.55 9% Cash Holdings
Baroda Pioneer Treasury Advantage Fund ���� 2,895.82 2 3.87 8.81 9.03 9.2 0.8 The 1-year return 8.15
L&T Floating Rate Fund ���� 575.65 1.85 3.5 8.8 8.53 8.91 0.72 of BOI AXA Treas-
ury Advantage is 6.81 6.43
Kotak Low Duration Fund ���� 5,632.76 1.82 3.41 8.63 9.06 8.78 1 6.49
the highest in its 5.96
DHFL Pramerica Low Duration Fund ���� 2,127.13 1.78 3.54 8.42 9 9.11 1.13 category.
Indiabulls Ultra Short Term Fund ���� 1,119.51 1.81 3.49 8.29 8.69 8.91 0.64
JM Money Manager Fund ���� 116.58 1.57 2.98 8.04 8.43 8.88 —
JM Floater Long Term Fund ����� 231.21 1.89 3.77 8.02 8.53 8.39 —
Principal Retail Money Manager Fund ���� 31.62 1.63 3.36 7.35 8.36 8.91 1.18
Invesco India Credit Opportunities Fund ���� 916.00 1.62 3.25 7.03 8.24 8.8 0.65

Debt: Dynamic Bond

Expense as on 30 April 2017
UTI Dynamic Bond Fund ���� 1,537.18 2.79 1.05 14.18 11 10.58 1.62 Principal DSP Franklin Sunda- UTI
Returns as on 31 May 2017 Growth BlackRock India Prima ram Equity Focussed
ICICI Prudential Long Term Fund ���� 2,126.15 3.53 0.84 13.77 12.06 11.92 1.27
Assets as on 30 April 2017 Fund Opportuni- Plus Fund Multiplier Equity Fund
All equity funds sorted on 3-year returns; debt funds ranked on 1-year returns Rating as on 31 May 2017 ties Fund Fund

% as on 30 April 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: Income
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
distribution: Mid-cap: Mostly invested in mid-cap companies.
RAISER 0.50
0.55

0.43 0.45
����� 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.
40% 0.31

��� Next 22.5% 100 listing) Income: Average maturity varies according to objective. Was the increase in
� � Bottom 10% Gilt: Medium- and long-term; invest in gilt securities. investors’ complaints to
Fixed-income funds less than 18 months old and equity Equity-oriented: Average equity exposure more
than 60%.
fund houses in 2016-17
funds less than three years old have been excluded. This
compared to 2015-16. HDFC Reliance Franklin Kotak Edelweiss
ensures that all the funds have existed long enough to be Debt-oriented aggressive: Average equity exposure Medium Banking & India Bank- Corporate Banking
tracked for consistency of performance. Given the focus on between 25-60%. Complaints pertain to Term Opp. PSU Debt ing & PSU Bond Fund and PSU
long-term investing, liquid funds, short-term funds and FMPs Fund Fund Debt Fund Debt Fund
are not part of the list. For the same reason, we have con-
Debt-oriented conservative: Average equity exposure incorrect investor details—
less than 25%.
sidered only the growth option of funds that reinvest returns PAN, address, nominee— % as on 30 April 2017
instead of offering dividends that increase the NAV of funds. Arbitrage: Seek arbitrage opportunities between equity
and derivatives. acording to Amfi data.
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:
Mutual Funds The Economic Times Wealth, June 5-11, 2017
23

L&T INDIA SPECIAL SITUATIONS

Healthy long-term track record

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 12.67%, the fund has outperformed both the
benchmark (8.95%) and the category average (11.78%).
FACTS FUND INVEST?
DATE OF LAUNCH
22 May 2006
Portfolio asset
Growth of `10,000 vis-a-vis category and benchmark Fund CATEGORY
allocation Debt & Cash
Fund style
` 32,964 Equity
TYPE
4.31% box
Category
Multi Cap Growth Blend Value
` 30,450

Small Medium Large

CAPITALISATION
AVERAGE AUM 20.79%
`964.35 cr SMALL CAP
`10,000 BENCHMARK
S&P BSE 200 Index 30.29% 48.93%
MID CAP LARGE CAP
Index INVESTMENT STYLE
` 23,570 WHAT IT Equity
95.69%

June 2007 June 2009 June 2012 June 2015 June 2017
COSTS The fundseeks to explore special situation
NAVS* opportunities across market cap spectrum.
As on 31 May 2017
GROWTH OPTION
`45
The fund has comfortably beaten its category Top 5 sectors in portfolio (%)
DIVIDEND OPTION
average and benchmark over the past decade.
`29 Financial 26.08
MINIMUM INVESTMENT FMCG 11.62
`5,000
Technology 8.55
Fund MINIMUM SIP AMOUNT
Index `500 Healthcare 7.11
Annualised performance (%) Category average EXPENSE RATIO^ (%)
Construction 7.08
2.27 The fund is currently heavily
30.83 EXIT LOAD invested in financials.
25.32 1% for redemption within
22.45 20.91
20.99 19.15 365 days
17.07 17.13 17.90 17.11
15.76 *As on 31 May 2017
Top 5 stocks in portfolio (%)
12.15
^As on 30 April 2017 ICICI Bank 5.07
State Bank of India 4.93
Federal Bank 4.60
6 month 1 year 3 year 5 year ITC 4.41
As on 31 May 2017 Larsen & Toubro 4.25
The fund’s outperformance is
visible across time periods. The fund portfolio is reasonably diversified
and is benchmark agnostic.

Yearly performance (%) HOW RISKY IS IT?

Fund Category Index
51.02 48.07
Standard Deviation 15.16 15.46 14.25
35.47
24.30 Sharpe Ratio 1.05 1.01 0.73

4.36 3.95 5.09

18.64 19.69
FUND Mean Return 20.52 20.22 14.99
1.49 -1.48 2.34

2014 2015 2016 2017

MANAGER Based on 3-year performance

Soumendra Nath Lahiri

TENURE: 4 YEARS AND 6 MONTHS The fund’s risk-reward profile is on
The fund’s performance slipped in last two As on 31 May 2017
Education: B.Tech, PGDM par with category average.
years, but has recovered since.
Wherever not specified, data as on 30 April 2017. Source: Value Research

SHOULD The fund seeks opportunities arising

out of special situations that compa-
growth, asset plays and corporate
actions. The aim is to spot these ideas
tor bias as it seeks to tap opportunities
across the spectrum. It is reasonably
tions in the same. The fund has out-
performed both the index and peers
YOU nies may find themselves in, including
turnarounds, restructuring, new busi-
early and hold onto them for the right
amount of time to capture their full
diversified, maintains significant expo-
sure to stocks outside of its bench-
comfortably over the long term. Inves-
tors may consider it for its differentiat-
BUY? ness streams, under-appreciated potential. It has no market cap or sec- mark and takes sizeable active posi- ed strategy in the multi-cap space.
24 The Economic Times Wealth, June 5-11, 2017 Smart Stats

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
7.40
10,771
10,771
Bank MCLR State Bank Of India 8.10 1 June 2017
DCB Bank 7.20 10,740 Marginal Cost of funds-based Lending Rate HDFC Bank 8.25 8 May 2017
City Union Bank 7.10 10,729 (MCLR) is the new benchmark lending rate Axis Bank 8.30 18 May 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 May 2017
RBL Bank 7.50 11,636 IDFC Bank 8.60 1 May 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 7.35 12,497 HDFC Bank 7.95 8 May 2017 State Bank Of India 8.15 1 June 2017
DCB Bank 7.25 12,405
IDFC Bank 7.20 12,387
State Bank Of India 7.95 1 June 2017 Axis Bank 8.35 18 May 2017
Yes Bank 7.10 12,351 Axis Bank 8.15 18 May 2017 HDFC Bank 8.45 8 May 2017
Lakshmi Vilas Bank 7.00 12,314
ICICI Bank 8.15 1 June 2017 Bank Of Baroda * 8.50 7 May 2017
Tenure: 5 years
RBL Bank 7.35 14,499
Bank Of Baroda * 8.30 7 May 2017 Punjab National Bank 8.50 1 June 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 June 2017 Bank Of Baroda * 8.65 7 May 2017
Top five senior citizen bank FDs HDFC Bank 8.15 8 May 2017 Punjab National Bank 8.65 1 June 2017
Interest rate (%) What `10,000
Tenure: 1 year compounded qtrly will grow to ICICI Bank 8.20 1 June 2017 Indian Bank 8.90 7 May 2017
RBL Bank 7.90 10,824
Axis Bank 8.25 18 May 2017 Punjab & Sind Bank 9.10 7 May 2017
Indusind Bank 7.65 10,787
Yes Bank 7.60 10,782 Bank Of Baroda * 8.35 7 May 2017
Axis Bank 7.50 10,771
DCB 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 8.00 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 7.85 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 7.85 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
Lakshmi Vilas 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 7.35 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
Dena 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
Non-traditional Investments The Economic Times Wealth, June 5-11, 2017
25

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

344.68
122.52 1,596.91 31 May 2017
19,200
31 May 2016 117.86 31 May 2016 1,679.84 31 May 2016
16,800
31 May 2017 31 May 2017
31 May 2017
285.01
31 May 2016
CHANGE

1 WEEK - 0.08% 1 WEEK 1.52% 1 WEEK 0.01%

- 1 WEEK 4%
-

1 YEAR - 3.8% 1 YEAR 5.19% 1 YEAR 20.94% 1 YEAR - 12.5%

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 (%)

TPI India 6.24 7.77 130.26 0.01 126 26.83 Midas Infra Trade 3.68 -4.17 -23.65 0.22 1,27,320.26 44.9
Shreyas Intermediates 7.65 26.87 80 0.08 71.55 12.32 Blue Circle Services 4.01 2.56 3.08 4.74 94,755.36 81.6
Shalimar Wires 8.14 0 73.19 0.02 65.95 30.61 India Finsec Ltd. 9.88 9.9 -30.86 1.05 7,254.38 24.64
Surat Textile Mills 7.41 8.81 71.93 7.36 492.85 164.58 Panafic Industrials 6.46 0.78 0.94 2.2 5,554.37 53.04
Funny Software 8.79 12.69 66.16 0.11 -78.61 17.65 Grandma Trading 8.24 10.01 17.71 2.57 4,525.66 107.61
Jagson Airlines 4.97 4.85 59.81 0.02 20.11 10.02 Negotium International 6.36 7.98 -4.79 0.68 3,006.3 24.93
Indosolar 9.97 2.68 57.26 11.99 713.58 357.06 Jackson Investments 3.74 -9 -2.35 19.14 1,734.13 108.72
Toyam Industries 3.52 10.34 40.24 1.9 28.43 74.8 Allied Computers Int. 0.8 0 -8.05 5.34 1,035.83 15.18
Transgene Biotek 2.97 -1.66 33.78 0.58 117.3 22.5 Swagruha Infra. 5.05 1 1 0.01 1,029.62 34.59
Royal Cushion Vinyl 8.49 0 30.02 0.01 -69.86 10.25 Intellivate Capital 9.28 -7.66 -25.16 0.01 1,019.49 27

Top Price Losers Top Volume Losers

Mangal Credit and Fincorp 2.35 -27.69 -47.54 2.39 635.55 37.15 Gennex Laboratories 5 6.16 -15.25 2.49 -84.28 63.25
Visagar Polytex 1.23 -19.61 -42.52 17.04 250.59 30.28 RattanIndia Infrastructure 3.74 3.6 -8.78 2.38 -84.01 516.96
Gyscoal Alloys 6.72 -4.27 -37.02 1.61 -58.82 106.38 KSK Energy Ventures 9.73 -0.82 -13.28 4.13 -82.35 412.54
India Finsec 9.88 9.9 -30.86 1.05 7,254.38 24.64 Cals Refineries 0.12 0 0 2.67 -81.49 99.53
JMT Auto 7.13 -3.26 -29.34 1.86 6.49 359.21 Electrosteel Steels 4.57 0 -13.61 3.95 -75.62 1,101.02
Tata Teleservices 6.52 -0.76 -28.27 13.15 65.09 1,274.61 Gammon India 9.22 -2.64 -16.18 1.12 -67 340.73
Neha International 8.06 -11.04 -28.1 1.19 -40.85 22.87 GTL Infrastructure 4.85 -1.02 -16.23 7.55 -65.58 2,013.87
Suryachakra Power Corp. 1.73 -12.63 -26.38 1.27 -12.07 25.89 Gammon Infrastructure 3.47 -11.25 -26.01 2.37 -60.86 326.82
Gammon Infrastructure 3.47 -11.25 -26.01 2.37 -60.86 326.82 Gyscoal Alloys 6.72 -4.27 -37.02 1.61 -58.82 106.38
Chromatic India 2.22 -11.9 -24.75 1.75 40.48 15.77 RattanIndia Power 7.24 -2.16 -15.42 4.45 -57.95 2,137.92

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 31 May 2017. Source: ETIG Database and Bloomberg
26 The Economic Times Wealth, June 5-11, 2017 Pick of the Week

Capital First: Steady rise in earnings

Healthy loan book growth, focus on high margin segments, among other factors, will drive earnings growth.

C
apital First is a fast-growing non-banking finance yield consumer durable and two-wheeler loan segments. Fundamentals
company which has transformed from being a The company’s strong revenue growth was partly offset by
wholesale-focused lender to a retail-centric busi- its higher operating expenditure, which increased 52% y-o-y. Actual Consensus estimate

ness. The switch has worked wonders for the com- The change in consumer mix—shift to high yield loan seg- 2015-16 2016-17 2017-18 2018-19
pany: Its retail loan book has grown from `3,500 ments—and a sustained investment in infrastructure, particu- Revenue (` cr) 702 1,061 1,852 2,137
crore in 2011-12 to `18,300 crore—a CAGR of nearly 40%. With- larly in the affordable housing segment, in pursuit of high Operating profit (` cr) 213 321 788 1,034
in the retail business, the company has focused on high- growth, has led to increased expenditure. Net profit (` cr) 114 166 226 319
EPS (`) 13.8 18.2 23.5 32.5
growth, high-yield segments such as Analysts expect a robust 30-40%
consumer durables, two-wheeler CAGR growth in the lender’s earnings
loans, among others, resulting in Analysts’ views over the next three financial years, rid- Valuation PBV PE
Dividend
yield (%)
healthy margin growth. Capital First’s ing on healthy loan book growth, prod- Capital First 3.01 29.04 0.32
retail loan book, which makes up 93% uct shift to high margin segments, oper- Bajaj Finserv 4.22 29.51 0.04
of its total loan portfolio, clocked 33% 3 ating leverage benefits, muted credit Mahindra & Mahindra Fin. Services 2.95 40.17 0.66
cost and higher cross-sell opportunities. Sundaram Finance 4.17 35.35 0.70
growth in the January-March quarter. Hold Muthoot Finance 2.50 13.85 1.46
Overall loan growth, however, was While stock valuation appears expen-
slightly lower at 24%, owing to a de- 12 sive relative to historical average, ana-
cline in the corporate loan book on Buy lysts expect it to re-rate further as earn- Latest brokerage calls
account of repayment of one-off ings visibility improves given the con- Reco date Research house Advice Target price (`)
short-term loans extended earlier. sistent growth and healthy uptick in 26 May ’17 Axis Capital buy 920
Despite the sharp rise in its loan return on equity. 15 May ’17 Centrum Wealth Management outperform 838
12 May ’17 Edelweiss Capital buy 885
portfolio, Capital First’s asset quality
11 May ’17 Sharekhan buy 880
remains stable with gross NPA at Selection Methodology: We pick the 10 May ’17 Prabhudas Lilladher accumulate 856
0.95% and net NPA at 0.30%. The stock that has shown the maximum in-
company will move to the 90-days crease in ‘consensus analyst rating’ in
past-due norm for NPA recognition in Robust asset quality, consistent revenue the past one month. Consensus rating is Relative performance
the current financial year, which growth, strong earnings visibility and rise in arrived at by averaging all analyst rec- Market price: `708 132.27
could result in a marginal increase in return on equity have made Capital First ommendations after attributing weights
its gross NPA. The impact on the com- analysts’ pick of the week. to each of them (5 for strong buy, 4 for 100
pany’s credit cost and profitability is buy, 3 for hold, 2 for sell and 1 for strong
also likely to be minimal as Capital sell) and any improvement in consensus
First already provides for its sub-standard assets based on the analyst rating indicates that the analysts are getting more bull- 116.76
90-day rule . Despite the robust asset quality, the lender in- ish on the stock. To make sure that we pick only companies
creased its provisioning coverage which led to higher credit with decent analyst coverage, this search is restricted to
cost. During the January-March quarter, the company’s net in- stocks that are covered by at least 10 analysts. You can see sim-
terest margin expanded 156 basis points to a healthy 9.3%, ilar consensus analyst rating changes during the past week in
year-on-year (y-o-y), mostly due to higher growth in the high- the ETW 50 table. —Sanket Dhanorkar 31 May 2016 Sensex Capital First 1 June 2017

Performance of Capital First 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

Maintain 'Buy'. Profit margins will enter a new zone once relived of
Britannia Industries Prabhudas Lilladher Buy 3,604 4,255 the current pressures. We factor in a 150 basis point margin
expansion over 2016-17 and 2018-19.

Maintain ‘Buy’. Commercialisation of new molecules in the CRAMS

Rallis India IIFL Buy 246 287 business, more product launches in domestic agrochemical space
and growth in seed business to drive revenue and earnings.

Maintain 'Buy'. Well positioned to benefit from the rising defense

Bharat Electronics Motilal Oswal Buy 172 200 expenditure, supported by strong manufacturing base and execution
track record, among other things.

SELL *Market price as on 1 June

Stock Research house Advice 1-year target

price (`) Comment

Downgrade to 'Reduce'. Results were below expectation because

Gujarat State Petronet IDBI Capital Reduce 177 155 of lower than expected volumes and higher than expected other
expenses.
Maintain 'Sell'. A lucrative organised market is attracting increased
Page Industries ICICI Securities Sell 14,207 12,500 competition, growth in realisations would be difficult, and will impact
overall growth rates
Maintain 'Sell'. Continues to suffer from weak private sector capital
Thermax HDFC Securities Sell 984 841 expenditure. Valuations are expensive and have priced-in a possible
recovery in the capex cycle
Retain 'Sell'. With low earnings growth and decline in return on
HPCL Nirmal Bang Sell 541 482 earnings and return on capital employed, the stock will get de-rated.
Also, we expect a highly adverse impact of rising capex on profits.
Career The Economic Times Wealth, June 5-11, 2017
27

You derive happiness from pursuit of suc-

cess and goals. Hence you are persistent and
are willing to work hard to be happy. Your
ability to invest in the present and postpone
immediate rewards for long term gains
makes you a professional who inspires teams
and leads successfully.

I hear you
Moving on from oneself, the next quality is
social awareness or the ability to hear out
the other person. Practice your listening
skills. Firstly, be genuinely interested in what
the other person has to say. Take out time to
listen to him and suspend your judgement
when you do so. Make sure you have heard
by paraphrasing your colleague and repeat-
ing what he said. The only measure here is
that the speaker felt heard and understood.

I understand you
The stronger the bonds you build with peo-
ple, the more successful you are as a leader.
Show empathy and connect deeply. After
you listen to what the other has said, learn to
figure out what the speaker is feeling. When
you treat people according to their emotion-
al reactions and convey your own feelings,
you show empathy to your colleagues.
GETTYIMAGES
I respect you

Don’t ignore the EQ

Relationship management comes after social
awareness. Your social skills grow from your
ability to respect others and earn respect in
return. Practice courtesy and kindness irre-
spective of the other person’s status. As you
Personality traits play important role at work, says Devashish Chakravarty. become more gracious, you tend to avoid
power struggles and backstabbing others,

S
omeone who is smart, remem- thoughts that trigger emotions and not the to be a leader they can talk to freely without thus earning the respect of people around
bers data or has high technical situation itself. Start choosing what you being afraid of how you will react. you. The more common ground you find
skills will definitely succeed, think and observe what happens. For in- and the rapport you build, the larger will be
right? Not really. Daniel Gole- stance, by daydreaming about your vacation I exude confidence your network and the more likely you will be
man, while researching hun- you can change your emotional state to hap- After awareness of their own emotions, top in a managerial position soon.
dreds of companies for his best-selling book, py. When you accept responsibility for your professionals show control of emotions or
Emotional Intelligence, discovered that peo- thoughts, then emotions, then actions and self-regulation. When you can show confi- I work with you
ple with average intelligence routinely out- its consequences, you are a successful lead- dence in all situations, you become a leader If you are going to be an agent of change, you
perform smarter people at work and end up er. The professional world bestows authority who people repose their faith in and a per- will gain mastery over conflicts and learn
as successful leaders. The missing link was on those who are willing to take responsibil- son to be promoted to leadership. Does emo- how to work with others who differ from you
EQ (Emotional Quotient) or the ability to un- ity for both successful and failed outcomes. tional control sound difficult? The process in their views. Don’t be perturbed by con-
derstand and manage emotions of self and for mastery is quite simple. Press the pause flicts and know that there will always be dif-
others. The good news is that though your IQ I can take feedback button every time you feel emotional. Let ferences and power struggles in any bunch
does not change from age 16 to 60, EQ is Your employer is interested in better results the peak emotion of anger or fear pass away of people at work or otherwise. When the
something you can develop. Here is how you each time and thus wants successful team instead of hijacking your judgement. Now conflict involves you, practice emotional de-
can work towards your next promotion. leaders like you to take feedback for con- choose your best response and act. Essen- tachment and treat it like a routine situation.
stant improvement. So, the next step is your tially you re-learn how to be an adult by When the conflict involves others, listen
I am responsible ability to handle criticism and feedback. Un- thinking before acting too quickly. calmly to everyone and practice your media-
Learn to recognise yourself and your emo- derstand how you respond when someone tion skills. Thus, the last step in relationship
tions. Self-awareness is the first quality of criticises you or attacks your ideas. The sur- I want to achieve management is a successful leader’s ability
emotional intelligence for a leader. What do vival instinct or the fight-or-flight response in Motivation is the third quality of EQ in a suc- to function beyond differences.
you feel and what circumstances and the human brain causes an immediate and cessful leader. Motivation is your desire to
thoughts trigger those feelings? Observe extreme surge of negative emotions. As you achieve—way beyond money, power or sta-
your emotional ebb and flow at different recognise your instantaneous emotions, you tus. Your passion or enthusiasm for doing
times of the day and in different situations. gain power over them. Learn to pause and well at work gives you the energy to pursue The writer is Director, Executive
Search at QuezX.com.
Soon you will recognise that it is only your hear out the feedback. Your team wants you challenges despite failure and frustration.

AGREEABLENESS CONSCIENTIOUSNESS EXTRAVERSION OPENNESS EMOTIONAL

Agreeableness is one of Malcolm Gladwell says 10,000 Optimism, positivity, ener- Openness comes from STABILITY
the Big 5 traits that define hours of deliberate practice gy and talkativeness your curiosity and a need This is resilience. When
BIG 5 your personality. You makes you world class. Consci- define your level of extra- for a variety of experi- you are perceived as a
being cooperative and entiousness or planned behav- version. When you start ences. As you volunteer stable or secure per-
TRAITS compassionate instead of iour driven by a desire to conversations with col- for and expose yourself son, people turn to you
confrontational or suspi- achieve gets you there. leagues, they respond, to diverse ideas and situ- in difficult times. Your
BETTER cious makes people see Get stuff done and your leading to deeper bonds ations at work, you ability to recognise
you as trustworthy. and smooth sailing at increase your independ-
THAN IQ Teammates want to work
employer will conspire to make
you succeed preferring you work. When you choose to ence and creativity. Both
your own emotions of
anger, fear or depres-
with you while your over others who are perceived be aloof, you cut yourself are qualities that mark sion and your control
employer wants you to to be unreliable or sloppy in out from growth opportu- and prepare you for over them makes you a
lead them. their work. nities. managerial roles. leader.
28 The Economic Times Wealth, June 5-11, 2017 Your Queries

QUESTION OF THE WEEK

Q A Q Idaughter’s
am 32 years old and want to build a corpus for my newborn

&
higher education. I can invest `15,000 per month. Please
suggest where I should invest.

Instruments whose returns beat inflation and allow you to adopt an asset
allocation-based strategy will suit you. So, we would recommend investing
in mutual funds. As you have a long-term investment horizon, you can
invest in a mix of equity mutual funds. Start with five monthly SIPs of
`3,000 each and invest across fund categories. You may choose from
among the following funds:
• Large-cap: Birla SL Frontline Equity, Franklin India Prima Plus or ICICI
Pru Top 100.
• Mid-cap: HDFC Mid-Cap Opp., FT India Smaller Companies, DSPBR Small
& Midcap.
• Value-style: ICICI Pru Value Discovery Fund or Birla SL Pure Value Fund.
• Flexi-cap: Franklin India High Growth Companies Fund, SBI Magnum
Multicap Fund, MOSt Focused Multicap 35 Fund.
To secure your family’s future financially you should also buy a term and
health insurance plan. It will add safety and security to your portfolio.

Our panel of experts will answer questions

related to any aspect of personal finance. If RAHUL PARIKH
CEO, BAJAJ CAPITAL
you have a query, mail it to us right away.

Q I`1.5
am 49 years old and want to invest
lakh in mutual funds for 6-7 years. Q Iacquired
have a house in Bengaluru, and a part of this house is being
by the Bangalore Metro. Will the compensation by Q Ibuy
am 27 years old. I want to
a house, worth `40-50
I am planning to invest `50,000 each in the Metro Corporation, in lieu of this acquisition, attract any tax? lakh, in five years’ time. I can
equity large- and multi-cap schemes and invest `15,000 towards building
hybrid debt-oriented conservative mutual a corpus. Where should I invest
funds. I aim to generate at least a 12% the money?
return. Please suggest schemes. If the compensation received is more than the purchase price of
the property being acquired, you will have to pay capital gains
tax. Since only a part your house is being acquired, you will need
You may consider a 70:30 equity-debt mix to determine the purchase price of that part. If the house has If you opt for a home loan, you
within the categories you have selected. You been held for less than two years, capital gains will be short term. will have to pay at least 20–25% of
may invest `45,000 each in SBI Bluechip If held for more than two years, capital gains will be long term. the property’s value from your
and Franklin India Prima Plus and the rest in Short-term capital gains are taxed at the marginal rate applicable own pocket. This will amount to
UTI MIS Advantage. It is advisable to invest to the individual and long-term gains are taxed at 20% after `8–12.5 lakh. To build this corpus
via systematic transfer plans instead of indexation. One of the ways in which you can save on long-term you can equally distribute your
making lump sum investments. capital gains is by investing the gains in REC or NHAI bonds. monthly surplus across SIPs of
four equity mutual funds: Birla
Equity Fund, Franklin India
Bluechip, ICICI Value Discovery
and Reliance Top 200 Fund.
C.R. CHANDRASEKAR SHUBHAM AGRAWAL
CEO AND CO-FOUNDER, SENIOR TAXATION ADVISOR, Consolidate your gains in the
FUNDSINDIA.COM TAXFILE.IN beginning of the fifth year by
redeeming these funds and
investing the proceeds in a
relatively lower-risk debt fund.
Q I am 34 and have an LIC endowment policy with an annual
premium `50,000. I bought it in 2013 and it has a 21 year Q The building in which I own a flat is being
redeveloped. After the construction is
You may pick from among
Franklin India Low Duration
term, after which I will get `22 lakh. This doesn’t seem a completed, I’ll get a bigger flat from the
worthy investment. Should I surrender the policy? developer. Will there be difference in capital Fund, Birla Sun Life Savings
gains liability if I sell the under-construction Fund and ICICI Pru. Flexible
flat instead of selling it after renovation? Income Plan.
It is a worthy investment only if you are looking for guaranteed
returns. If you are looking for higher returns, you should switch
your investment to Ulips or mutual funds. However, it is not Capital gains tax liability would arise for two
advisable to surrender the policy as you will receive only transactions. On the transfer of rights to
between 30% and 50% of the premium you have paid till date. builder to redevelop the flat and on the sale of
NAVEEN KUKREJA
So, you should make it a paid-up policy, and stop paying future the flat. The tax liability will be less if you take CEO AND CO-FOUNDER,
premiums. The policy will continue with reduced benefits, possession of the developed flat as in that case PAISABAZAAR.COM
which will be given on maturity, and there will not be much you can claim exemption from capital gains
to lose. tax under Section 54 on the first transaction.

Ask our experts

YASHISH DAHIYA
CO-FOUNDER AND CEO, RAKESH BHARGAVA Have a question for the experts? Mail it to
POLICYBAZAAR.COM DIRECTOR, TAXMANN etwealth@timesgroup.com with Query as subject.
Taxation The Economic Times Wealth, June 5-11, 2017
29

TAX OPTIMISER

Tax cut by over `1 lakh

Sudhir Kaushik of Taxspanner.com
advises readers on how to restructure
their income, investments and
expenses to optimise their tax.
INCOME
FROM EMPLOYER
ahesh Jasti has a very tax unfriendly

INCOME HEAD
Basic salary
House rent allowance
Special allowance
CURRENT
6,44,484
3,22,236
6,16,284
SUGGESTED
6,44,484
3,22,236
3,76,636
ACTIONS TO TAKE

Reduce this
taxable portion
of the pay
package.
M pay structure, wherein almost 15%
of his total income goes in tax. Tax-
spanner estimates that if he gets
more tax free perks, and invests
more for retirement in the NPS, his tax can come
down by more than `1 lakh.
Jasti should start by asking for more tax-free
Transport allowance Nil 19,200 perks. The transport allowance does not even re-
Medical allowance 15,000 15,000 This is a tax free quire submission of bills. If he gets `1.75 lakh in
allowance. tax-free reimbursements, his tax will come down
Conveyance, fuel reimbursements Nil 60,000
by almost `54,000. Jasti should also urge his com-
LTA Nil 60,000 These perks are pany to offer him the NPS benefit. Up to 10% of the
Newspapers and magazines Nil 12,000 tax free on basic pay put in the NPS under Section 80CCD(2d)
submission of is tax free. If `5,370 is put into the NPS every
Telephone reimbursements Nil 24,000 actual bills. month, his annual tax will come down by `20,000.
Meal coupons 13,200 13,200 The tax will come down further by `15,450 if Jasti
Performance bonus 3,00,000 3,00,000 puts `50,000 in the NPS under the new Section
80CCD(1b). However, Jasti must note that the NPS
Employer contribution to will lock up his money for the long term. Also, at
77,338 77,338
Provident Fund Up to 10% of least 40% of the corpus will have to be invested in
basic pay out in
Contribution to NPS under Sec an annuity plan to earn a pension. This is fully tax-
NPS is tax
Nil 64,448 able.
80CCD(2d) deductible.
Jasti also earns interest on his bank deposits.
TOTAL To avoid paying a high tax on these investments,
19,88,542 19,88,542
he should shift to debt mutual funds where the tax
is lower and he is eligible for indexation benefit.
Shift from FDs
INCOME FROM OTHER SOURCES to debt funds to
He should also buy a medical cover for himself and
cut tax. his family. These steps will save `10,000 in tax.
Interest income 25,000 0
Capital gains Nil Nil MAHESH JASTI’S TAX
Rental income NIl Nil All figures are in `
15,000
TOTAL 25,000 Nil TAX ON
TAX ON TAX ON
OTHER CAPITAL
SALARY
INCOME GAINS

TAX-SAVING INVESTMENTS CURRENT

CURRENT (`) SUGGESTED (`)
`2,88,128 7,725 Nil
Provident Fund contribution 77,338 77,338
`2,95,853
Insurance policies 52,656 52,656
PPF 25,000 25,000 Invest in this
new tax saving SUGGESTED
NPS under Sec 80CCD(1b) Nil 50,000 option.
`1,94,918 Nil Nil
TOTAL ADMISSIBLE 1,50,000 2,00,000 WRITE TO `1,94,918
US FOR
HELP
OTHER DEDUCTIONS Paying too much TOTAL TAX SAVED

HRA exemption
CURRENT (`)

1,75,552
SUGGESTED (`)

1,75,552
tax? Write to us
at etwealth@
timesgroup.com with
`1,00,935
Buy health ‘Optimise my tax’ as PER YEAR
Medical insurance under insurance for the subject. Our experts
Sec 80D
Nil 12,000 yourself and will tell you how to TAX RATIO
dependents. reduce your tax by (Total tax as % of annual income)
rejigging your pay and
TOTAL ADMISSIBLE 1,75,552 1,87,552 investments.
CURRENT SUGGESTED

Denotes suggestion to increase Denotes suggestion to reduce 14.7% 9.8%

30 The Economic Times Wealth, June 5-11, 2017 Your Feedback

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.

Public sector cover have more features in opt for cover. One realises Experience needed
place to protect themselves the importance of insurance The story, ‘Upskill to survive
insurers a than the insured person. only when a family member tech layoffs’, does not dwell
safer bet? Innumerable exclusions,
terms and conditions make
faces a medical emergency or
when there is a death and the
on the fact that upskilling
without related real project
Apropos of the cover story, ‘Why you the claim settlement process dependents are left destitute experience is of limited use.
need critical illness cover’, I would difficult. in the absence of insurance. It will only give some people
advise all to buy health policies from V. Sheshashar, e-mail Ali, e-mail a slight advantage when relat-
public sector insurance companies ed opportunities come along.
simply because their claim payment The tips provided in the Save the money, Atul, e-mail
ratio is very high. Further, if you have cover story, ‘Why you need grow wealth
been honest, you are unlikely to face critical illness cover’, were This is in reference to Uma Here is my advice on the
any issues in getting your dues. No extremely useful. What hurts Shashikant’s column, ‘See story, ‘Upskill to survive tech
matter who you are buying from, re- more than the disease itself is the world, but learn to save layoffs’. As the West ages, the
member insurance companies want the service tax component for it first’. Cutting back on human workforce will be
you to buy insurance early in life. that inflates the premium of suitable cover. A major prob- expenses, saving that money replaced by Artificial Intelli-
True Indian, e-mail health policies. The govern- lem is that we will never and then blowing it up on an gence and robots. They see
ment does not provide know how much the premi- extravagant holiday abroad immigrants as a threat.
The cover story, ‘Why you need criti- healthcare for all. So it um is going to go up by dur- is wrong. Spending less on a A. Kulkarni, e-mail
cal illness cover’, was comprehensive, should waive service tax or ing each renewal. It can be a regular basis means you are
useful and informative. It should GST on medical and general debt trap if the premium contributing less towards the Work from home
make people take stock of their health insurance premiums for the shoots up after you turn 40. domestic economy. Spend- Apropos of the article,
covers, given how terribly expensive benefit of all. Cyboy, e-mail ing that money in a foreign ‘Employers not keen on work
medical treatment is becoming in our T.S.R., e-mail location means you are giv- from home’, this policy is not
country. In reference to the cover ing away all the saved money suitable for all kinds of jobs.
Sameer, e-mail Apropos of the cover story, story, ‘Why you need critical to a different country. Earn- However, employers should
‘Why you need critical illness illness cover’, unless you ing in India and spending in not be averse to employees
This refers to the cover story, ‘Why cover’, I feel the options cur- have sufficient cash to take foreign country will drain occasionally working from
you need critical illness cover’. rently available are very con- care of all medical emergen- our country’s wealth. home.
Insurance companies offering health fusing for those looking for a cies, it will be foolish not to R. Goyal, e-mail S.K. Mehrotra, e-mail

Fear of layoffs all too real

A spate of layoffs in the private sector have put workers on edge, finds the ET Job Disruption Survey.
The fear of job losses is not overblown but a near-term reality suggests answers of employees.
Do you think your job prospects Are you adequately skilled Do you need reskilling for What is threatening your job?
will keep on shrinking? for the future? better job prospects?

62% Yes 47% Yes 81% Yes 52% 35% 13%

23% No 28% No 11% No
15% Can’t Say 25% Can’t 8% Can’t Say Sectoral New digital Younger, tech-
Say stress technology savvy employees

Do you see new tech replacing Can younger employees learn How will you react to new
workers in your firm in the future? new tech faster than you? technologies replacing jobs in
your company?
65% Yes 43% Yes
Learning new
25% No 45% No 81% technologies
10% Can’t Say 13% Can’t Say 11% Ask for a new profile
Do you think your job is going to Is there talk of layoffs in 9% Join another company
vanish due to emerging tech? your firm? Who is more worried about job
loss in your company?
38% Yes 49% Yes
44% No 40% No 66% Mid-level employees

17% Can’t Say 11% Can’t Say 22% Senior employees

12% Entry-level workers

Source: ET Job disruption survey that covered 11,282 respondents

The Economic Times Wealth, published by Bennett, Coleman & Co. Ltd. exercises due care and caution in collecting the data before publication. In spite PUBLISHED FOR THE PROPRIETORS, Bennett, Coleman & Co. Ltd. by Rajeev Yadav at Times House, 7, Bahadur Shah Zafar Marg, New Delhi-110 002,
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 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
held responsible or liable. The content hereof does not constitute any form of advice, recommendation or arrangement by the newspaper. The Eco- Dadabhai Naoroji Road, Mumbai 400 001. EDITOR: Babar Zaidi (Responsible for selection of news under PRB Act). © Reproduction in whole or in part
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 without written permission of the publisher is prohibited. All rights reserved.
decisions. Readers are recommended to make appropriate enquiries and seek appropriate advice before making any specific or other decisions. RNI NO. DELENG/2011/37994. MADE IN NEW DELHI VOLUME 07 NO. 23
Last Word The Economic Times Wealth, June 5-11, 2017
31

Designing homes made easy

This Bengaluru-based startup offers modular home design solutions—and peace of mind.
VINAY DWIVEDI Thankfully, we were quick to realise our mis-
take and chose to first focus on just four cit-
hen serial entrepreneur Sri- ies,” says Iyer.

W kanth Iyer bought a house a

few years ago, he was one
happy man. But before he
could truly enjoy his home,
he had to undertake a particularly arduous
exercise of getting it furnished. “We thought
we had achieved a big feat when we bought
Seeded with an investment of `1 crore,
raised from Tutorvista’s K. Ganesh, the start-
up has seen considerable investor interest. It
raised `27 crore in February 2015 from Se-
quoia Capital, Growth Story and Aarin Capi-
tal, and an additional `62 crore from a clutch
of investors in the past two years.
the house, only to realise that furnishing the Winner of the Emerging Kitchen Brand
house was a different game altogether,” says Award 2016 by Indian Kitchen Congress and
Iyer. The hassle of dealing with carpenters, Smart CEO Top 50 Startups in India Award
suppliers and interior designers proved to be 2016, HomeLane generated `36 crore in rev-
a ‘harrowing’ experience. But it also paved enue in 2016-17. The startup, which has a staff
the way for Iyer’s new venture. “My experi- of 160, expects to more than double its bot-
ence showed that there was an opportunity to tom line in 2017-18 to `80 crore. “We are see-
organise this completely chaotic home design Srikanth Iyer, Co-founder and CEO, HomeLane ing substantial growth and will meet our ex-
market. There were several visible pain pectation for this financial year,” says Iyer.
points and a complete lack of predictability started experimenting with external design- ness and quality—gradually won over cus- The company is betting big on its recently
on quality, timeliness and transparency,” ers—design partners (DPs)—and now it has a tomers and helped it expand operations. launched tech product: SpaceCraft. It is a vir-
says 46-year-old Iyer. So, in July 2014, along 100% DP-based model. Even for installations, “Once we were able to show that the quality tual design platform that allows homeowners
with Rama Harinath, Prabhu V. and Vivek it has moved from in-house personnel to we were offering was far superior to that of and designers to collaborate on design ideas
MP—sleeping partners—he founded online working with partners. “Over the past three the local vendors, and that customers could and visualise a furnished home in 3D. “Space-
home design company HomeLane. It offers years, we have intentionally shifted from an avoid the hassles of searching and dealing Craft can bring down the time taken to com-
customised modular home design solutions asset heavy to an asset light model,” says with multiple vendors, they saw our value plete a project by 30 days—33%. It will
and seeks to organise the home interiors in- Iyer, Co-founder and CEO. This has helped and this helped us scale up steadily,” says streamline our operational processes and
dustry and make designing homes less cum- the startup scale up faster and reduce costs. Iyer. Focus on rapid growth, however, had to will add an incremental 200% growth to our
bersome for homebuyers. The first big challenge for this Bengaluru- be diluted a bit as it began causing operation- revenue,” says Iyer.
When HomeLane started out, it had a team based company, which also has a presence in al challenges. “We took some hasty steps to
of full-time in-house designers and installers Chennai, Hyderabad and Mumbai, was scal- help boost our expansion in the initial days,
and had outsourced manufacturing to a ven- ing up operations. The value proposition put aiming to go from one city to 10 in a matter of Please send your feedback to
dor. Six months into operations, the startup forth by the startup—predictability, timeli- months. But it was easier said than done. etwealth@timesgroup.com

Retail investors shifting to liquid funds

These funds can be a more rewarding, tax efficient and low-risk investment alternative to fixed deposits.
YOGITA KHATRI more tax-efficient than those from fixed
deposits. While the interest received from
ccording to data from the As- Change in retail AUM of liquid funds fixed deposits is fully taxable, you become

A sociation of Mutual Funds in

India (AMFI), retail investors
are increasingly turning to
liquid funds. Over the past
two financial years, retail assets under
management (AUM) of liquid funds have
more than doubled from around `2,670
Period

March
2015
Retail AUM
(`crore)

2,670
Change in two years
(Mar 2015-Mar 2017)
Retail AUM as %
of total AUM

1.64
eligible for indexation benefit if you hold
the investment for over three years (you
would have to pay long-term capital gains
at 20% with indexation).
The category average return from liquid
funds has been reasonable at around 6.75%
in the past one year, according to data from
crore in to `5,799 crore, a growth of 117% Value Research. However, if you decide to
(see table). “We believe the increased trac- 117% invest in liquid funds, keep in mind that
tion of liquid funds is a result of improved March the returns from mutual funds are not as-
investor awareness about the product,” 2016 4,069 2.04 sured like those from bank deposits. But
says Manish Banthia, Senior Fund Manag- liquid funds do provide the opportunity to
er, ICICI Prudential Mutual Fund. earn market-linked returns.
However, the retail base as a percentage Given the falling interest rates, liquid
of AUM is still very low at only 1.85%, as of March fund returns are likely to remain on the
2017 1.85
March 2017 (see table). “On a low base, the 5,799 lower side in the future. “The overnight
growth in AUM appears meaningful, but benchmark rate in India is currently at
this is just the tip of the iceberg in terms of Source: AMFI 6.25%. Interest rates will probably remain
retail participation in liquid funds,” says stable with a chance of easing towards the
Lakshmi Iyer, CIO, Debt and Head, Prod- liquid to equities during market dips, and There’s no doubt that liquid funds are a end of this year. We can expect liquid
ucts, Kotak Mutual Fund. vice versa,” says Iyer. “Many investors wait good option to park your surplus funds in. funds to mirror the overnight rates with a
According to fund managers, as equity for opportunities to move into equities They offer higher liquidity and better re- tilt towards the higher side of these rates,”
participation from retail increases, so will from liquid funds or choose to make a grad- turns, and are also low risk. “As these funds says Iyer.
the amount of retail money in liquid funds. ual and disciplined move into equities invest only at the short end of the spectrum
“This will be caused by either systematic through an STP,” says Santosh Joseph, (tenure of up to three months), the interest
transfer plans (STPs) from liquid to equi- Founder and Managing Partner, Germinate rate risk is significantly reduced,” says Iyer. Please send your feedback to
ties, or by some investors switching from Wealth Solutions. The returns from these funds are also etwealth@timesgroup.com