Moneylife 9 July 2015

SUCHETA DALAL ON:
DOES PM WANT WEAK

INSTITUTIONS?
Personal Finance Magazine
EXEMPLARY PUNISHMENT
FOR CHEATING CONSUMERS
ORPHANED INVESTORS;
DISHONEST PROMOTERS
9 July 2015
Pages 68
Rs 45
(SUBSCRIBER COPY NOT FOR RESALE)
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Mutual Funds
A step-by-step Guide
e
STOCK WATCH
How Did We Do
in 2014?
Cover Page_244.indd 2
Quality Trumps
Market Valuation
Are Consumer Products

Stocks Too Expensive?
Stories of Price
Manipulation
Market Trend:
Holding On
20-06-2015 16:46:22
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19-06-2015 21:44:42
15-06-2015 18:29:36
ISSUE CONTENTS
9 July 2015
Go Direct, Save Costs
f you know what to invest in, its sheer folly

not to take advantage of direct mutual fund
(MF) schemes that give higher returns than
the regular schemes. If you dont know what
to invest in, you will soon figure it out, as a
regular Moneylife reader. The savings of direct
investment will keep adding each year with
lower expense ratio along with compounding
effect and, hence, dont underestimate the
enormous benefit of going direct.
Raj Pradhan enumerates the steps along
with the real-life experiences of direct
investment, to ensure you save time and efforts.
Our survey reinforced the need for this Cover
Story, to bust the misleading campaigns being
run by intermediaries. Asset management
companies (AMCs) have done a good job to
ease direct investment. AMCs and registrars
will help you complete the initial formalities.
In her Crosshairs column, Sucheta
highlights how a doctor, based in Kolkata, was
taken for a ride by Standard Chartered Bank.
The Bank rigorously churned his portfolio over
a 19-month period leading to a loss of Rs68
lakh. Where are the regulators? In another
instance of regulatory breakdown, Sucheta
highlights how the unscrupulous promoters of
Dr Datsons Lab duped investors, running what
looks like a money-laundering operation.
With the Lalit Modi-Swaraj-Raje drama,
suddenly, the BJP is looking rather shaky
on delivery of good governance. Will prime
minister Narendra Modi exert enough control
to prevent such small scams from causing
major damage? A bigger issue, though,
is this governments senseless tardiness in
appointing the right people to various Central
institutions, or even filling vacancies on time,
as Sucheta explains in her Different Strokes
piece. This opens up the path to mistakes and
indiscretions.
We have lined up two seminars on
insurance, hosted by Moneylife Foundation,
on 26th June and 4th July. To know more and
to register for these events, do visitgoo.gl/
ztPR0q
Debashis Basu
28 Cover Story
Invest Directly in Mutual Funds
Direct investing in mutual funds will give far better returns than
regular plans. Raj Pradhan discusses, for the first time, the finer
points of online versus offline direct investment
14
When Banks Cheat Customers

Orphaned Investors; Unscrupulous Promoters
16 Different Strokes
Why Does Narendra Modi Want Weak Institutions?
18
MONEYLIFE
QUIZ
Moneylife
Quiz no
209
21 Your Money
Maharashtra To Appoint Housing Regulatory Body

Builders Giving Less Carpet Area than Promised Likely
To Be Prosecuted
Proof of Address for Bank Accounts
Unitech Asked To Pay for Delay
Disclaimer: Moneylife has a policy of not allowing its editorial staff to

buy and sell stocks that are written about in the magazine. All personal
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 9 July 2015 | 4
Content.indd 2
20-06-2015 16:32:54
17-06-2015 19:27:27
CONTENTS
INTERVIEW
look at
24 We
rowth,
top-line growth,
owth
margin growth
sh
and the cash
conversionn cycle
Gopal
Agrawal
STOCKS
22 Smart Money
What Next after SIP?
Look beyond well begun is
half done, if you want your
performance to be better
38 Stock Watch
How Did We Do in
n
2014-15?
reet
Stocks from our Street
Beat section were up
50% and those from
m
our Cover Story of
ere
20 March 2014 were
up 79%. From this
issue, we are closing
ng
the Street Beat section
tion
FIXED INCOME
Bonds Still
27 Tax-free
Attractive?
Yields Down Past Fortnight
Do Senior Citizens Get Higher FD
Rate Automatically?
G-Sec Yields Up
Are Consumer Products Stocks

Too Expensive?
Based on historical valuations,
they are
Unquoted:
Birdhi Chand Pannalal Agencies
INSURANCE
46
Insurance
Trends
Health Insurance
HDFC Lifes Cancer Care Cover
Home Insurance
New India Assurance Griha
Suvidha
Fine Print
Changes to Our Stocks

Section
Content.indd 4
Consumer courts can see through

inflated figures for damages and
compensation
Fishing
56 When
Becomes Fishy
When the police is held in contempt
ML FOUNDATION EVENTS
or Equity Mutual
58 Stocks
Funds?
AUTO
50 Dismal
R&D
Allocation for improvements are just
5% of advertising & marketing spend
of a
51 Virtues
Mobile Wallet
Mobile wallets are great for smallvalue transactions, writes Yogesh
Sapkale
HEALTH
People
52 95%
Are Sick
A Moneylife Foundation event

discussed the better route for
investing
EARNING CURVE
Chinas Retail
60 Now,
Investors Go Crazy
Stock bubble in China again
underlines how we never learn
BEYOND MONEY
the Betterment of
66 For
Underprivileged Rural
Children
Market Trends:
Big public investments can lift
earnings. Until then, hope for a
market decline
44 Long Term
ated Claims
54 Infl
Don't Work
YOU BE THE JUDGE
TECHNOLOGY: MOBILE
Quality Trumps Market

Valuation
Even if you buy quality stocks
when market valuation is high,
you will do fine
LEGALLY SPEAKING
Aham Bhumika works for rural

children to prevent migration to cities
Healthcare is the biggest industry:

a check-up is sure to make you a
patient forever
DEPARTMENTS
Pulse Beat: Medical developments

from around the world
Readers Response ........... 8

Money Facts ....................64
20-06-2015 16:33:20
20-06-2015 15:12:27
Volume 10, Issue 10

26 June 9 July 2015
Debashis Basu
Editor & Publisher

editor@moneylife.in
Sucheta Dalal
Managing Editor
sucheta@moneylife.in
Editorial Consultant
Dr Nita Mukherjee
nitamuk@gmail.com
Editorial, Advertisement,
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OKADA FINGER PRESSURE

THERAPY
This is with regard to Scientific MumboJumbo (Moneylife, 11 June 2015) by Prof
BM Hegde. My guru, Mokichi Okada (of
Japan), had said all this about Western medicine
way back in the 1920s, when he discovered
an alternative means of healing (Okada finger
pressure therapy or Jo Rei).
Suchindranath Aiyer S, online comment
subscribe@moneylife.in
TOOTHPASTE FOR CHILDREN

New Delhi
DDA Flats, J-3/66, Kalkaji,

New Delhi - 110 019
Bengaluru
1st Floor, 13/1, 7th Main Road,

1 Cross, Saibabanagar, Srirampuram,
Bengaluru - 560 021
st
Kolkata
395, Lake Gardens, Kolkata - 700 045

Tel: 033 2422 1173/4064 4318
Moneylife is printed and published by

Debashis Basu on behalf of
Moneywise Media Pvt Ltd and printed at
Magna Graphics,101C&D,
Government Industrial Estate,
Kandivli( West), Mumbai - 400 067
andpubl ished at 315, 3rd Floor,
HindS ervice Industries Premises,
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Dadar (W), Mumbai - 400 028
Editor: Debashis Basu
Total no of pages - 68, Including Covers
RNI No: MAHENG/2006/16653
This is with regard to Science and Business

Reality by Prof BM Hegde. Please name a few
toothpastes for children and for adults without
Triclosan.
Narendra Doshi, online comment
Mutual Fund investments

are subject to market risks,
read all scheme related
documents carefully.
Write to
the Editor!
WIN
a prize
BAIL IS THE RULE!

This is with regard to Bail, not Jail by Bapoo
Malcolm. It was Justice VR Krishna Iyer who
had laid down very important principles, like
jail is the exception, and bail is the rule,
decades ago and, in his judgements, he gave a
very strong human touch to criminal law.
Mohan, online comment
INVESTORS MUST SHOW PATIENCE

This is with regard to Fortnightly Market View: Disconnected from
Modi by Debashis Basu. The stock market movement is largely
dictated by three factorssentiment, liquidity and fundamentals.
Narendra Modis election victory suddenly improved the sentiment
resulting in rise in stock markets. But, the fundamentals of the
economy reflected in the financials of the companies, cannot be
ignored for long. The steps taken by this government will take time to
show results. Investors must show patience and not become greedy.
Rajat Dhar, online comment
``
Letters.indd 2
20-06-2015 15:25:53
5 Problems with
Mediclaim &
7 Tips To
Handle Them
Buying health insurance is one of the most worrisome tasks for us. The products
are complex, making it tough for us to compare them. Policies differ in exclusions,
conditions and fine print. If you slip on even one of the conditions, your claim may be
rejected or cut down. No wonder, a large number of cases generate disputes and
some end up as complaints with the Insurance Ombudsman or consumer courts.
There are several issues with a mediclaim contract.
1. The terms and conditions keep changing each year and premium
can get hiked suddenly.
2. No two health insurance policies are alike. Comparing the benefits is
tough.
3. Insurers are not bound to increase your sum assured at the time of
renewal.
4. At the time of buying, its difficult to know if the insurer will find
excuses to deny your claims.
5. Insurers entice you with a lower premium when you are young and
increase it once you get older.
Since savers are often not aware of these factors, they may fall for the
marketing blitz of insurers and the persuasion of agents. How to handle
all these issues?
What you need is an independent entity to help you with two things.
One, a short list of products right for you, based on unbiased and deep
research. Two, support you, if your claim is rejected.
This is precisely what we at Moneylife Smart Savers Network (MSSN) do.
We cut through the hype, hyperbole, duplication and complex fine
print to help you select the most suitable products. We know that as an
individual you will find it hard to do all the research yourself.
Also, you need a voice when you have to fight for your valid claim.
Being part of the MSSN community can be an advantage in this. If your
claim is wrongly denied, we would fight for you.
An important part of the membership is continuous handholding. As a
member, if you have any questions before or after you buy mediclaim,
you can ask our experts for unbiased and practical solutions.
savers.moneylife.in
Benefit More from Less
REV MSSN Promo Ad.indd 1
Tips to Remember
1. Lifelong renewal is an
important product feature
you must consider.
2. In-house claims processing
is better than third party
administrators (TPAs).
3. Some insurers offer
discounts for not having a
TPA, but you may have to
give up other features.
4. Check the premium for
older age band, which
would give you a fair
idea of the difference
between younger and older
customers.
5. Some insurers offer
discounts for buying online.
If you dont need an agents
help, buy online to save on
premium.
6. Disclose truthfully. Insurers
look out for even the slightest
error to deny claims.
7. Mediclaim also covers
pre- and post-hospitalisation
expenses such as doctors
visit, diagnostic tests, etc.
19-06-2015 21:46:16
LETTERS
the
Best
letter
New Income-tax Return

Forms
lease refer to Tax - New

Three-page Income-tax Return
Forms (Moneylife, 25 June
2015). The income-tax return
(ITR) forms have been revised
after public protest on lengthy
forms and cumbersome information sought earlier.
It is yet to be seen how these forms are simplified; as
on date, these are not notified. It is hoped that the
new ITR wont require assistance from professionals
to fill up. It would have been better still if the
one-page saral form for all taxpayers had been
re-introduced. Details of expenditure and all bank
details, etc, should have been avoided altogether
as these are matters of expenditure tax (which has
been abolished). For foreign income in foreign banks
and properties outside India, the government should
simply ask us to declare, if it is taxable and, if not, let
the figures of exempted foreign income be declared in
exempted income column.
The full details can be safely asked only in select
cases of scrutiny, and not in ITRs. To safeguard
against non-declaration of income, the declaration
in the formthat all income is truly reflected
in the returnis sufficient to prosecute, if not
true. The income-tax department has already
collected information relating to various financial
` CRIMINALS WILL ALWAYS EXIST!
This is with regard to What the Essar Diaries Mean

by Sucheta Dalal. Clearly, the mistake is with the
Rserve Bank of India (RBI) which appears grossly
inefficient and corrupt too.
Essar, Ispat, United Breweries,
Sahara, etc, have taken advantage of
the system, while being aided, abetted
by corrupt bank chairmen, who have
gone unchecked by RBI. If governor
Dr Raghuram Rajan spells out a
policy of sacking of bank chairmen
who allow such bad debts, these
industrialists will not have the courage
to cheat the system. Why is RBI keeping
quiet? Controlling inflation is not the
only job of RBI. The amounts owed by
these defaulters, if recovered, will fund
transactions through
Mutual Fund investments
various concerned
are subject to market risks,
organisations and
departments (TDS/
TCS/AIR). The rest of
the information must
Mahesh Kapasi
also form the part of
Form 26AS and the
YOU WIN A
necessary changes
PERSONALISED
must be made in the
CLOCK
existing Form 26AS
for this purpose. The
system on e-filing of
pre-filled I-T forms
as per information
with the income-tax
departmentmust
Mahesh Kapasi
continue not
only for TDS
(Form 26AS)
but also for all
information which
I-T department has obtained
ed fro
ffrom
rom
om vvarious
ario
ar
rio
ious
us ssources.
ourc
ou
rceeess.
rc
This is important so that no taxpayer h
has a chance
h
of non-declaration of such income like on sale of
properties, etc.
Mahesh Kapasi, by email
Congratulations
agriculture and, perhaps, we can write off the entire

agricultural loans of drought-hit states. Maybe, this
will also help reduce interest rates and rein inflation.
Perhaps, RBI does not want to antagonise
these defaulters and the powers that be. In
fact, our focus is to reform RBI. Criminals
will always exist. If we can set up a good
policing system, we can avoid such crimes.
S Padmanabhan, online comment
ISSUE TO DIE A NATURAL

DEATH?
This is with regard to Manufactured
Hysteria over Maggi by Sucheta Dalal.
Sure. Succinctly summarised. I am
wondering why the government did
not take cognizance of this revelation
when the product was launched? Is it ``
Letters.indd 4
20-06-2015 15:26:26
LETTERS
` the laxity of the regulator over the past three decades?
Or, is it that the firm refused to heed the advice of the

regulator? Why is it that regular roadside foodstalls,
or even budget hotels/restaurants, are spared? Why
cant the regulator ensure that safe and healthy food is
provided to the consumer by any source: be it streetside vendor or packaged food industry or licensed
restaurants? Again, this whole issue is going to die a
natural death, as we have seen in earlier instances.
Srinivas, online comment
REALLY, USEFUL ARTICLE

This is with regard to How to Use Your Smartphone,
Smartly by Yogesh Sapkale. This is a really, useful
article. Most of the information was new for me.

I would like to thank the author and Moneylife.
Kaviraj B Patil, online comment
PROBLEM WITH STOCKS

This is with regard to Tough Job for Fund Managers
by R Balakrishnan. I think, the problem with stocks is
this: Most of us are under-qualified, with not enough
time to gain chartered accountant-level knowledge
of finance. We are not able to acquire the in-depth
research skills needed to locate great stocks. Many
people owning stocks reflect the same herd mentality:
buy the most popular/talked-about stocks.
Anand Vaidya, online comment
OUR READERS WHO CLICK WITH US

Heres a sample of the kind of feedback that we receive from our readers on
our vibrant website, www.moneylife.in
IRREMEDIABLE SITUATION
This is with regard to Dr Subramanian Swamy on
black money, hawala, Rafale, taxes and politics. As
Dr Swamy says, he is not part of the government. If
he were, the replies would have certainly been very
different.
As regards cooperative banks, they are not the
source of black money. All the banks work under
dual regulation: SEBI, RBI and even the third
one, GOI insofar as public sector banks and
foreign banks are concerned. The pity is that for
cooperatives, the regulators do not understand
their domains. The registrar of cooperatives is not
accountable for the regulations he is expected to
administer which he hardly knows. By the time he
gets to know them, he gets transferred.
Governance and management are issues in
cooperatives and sensible legislative interventions
are not acceptable to any body politic in this
country. Cooperatives are in irremediable situation.

The Modi government should do skill-building and
knowledge-building of politicians. Simultaneously,
skill-building of youth should be taken as top
priority. The recent move to give away Rs25 crore
as MPLAD fund is the surest route for black money
accumulation in this country.
B Yerram Raju
REVIEW THE APPROACH!

This is with regard to Aadhaar is a disaster, says
Dr Swamy. Aadhaar, like the New (National)
Pension System came in without any legal backing;
hung around with support from certain vested
interests; and, now, is being supported by the
government. This is a government which dared to
dismantle the Planning Commission. It should have
reviewed the approach to Aadhaar and NPS.
MG Warrier
HOW TO REACH US
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11 | 9 July 2015 | MONEYLIFE
Letters.indd 5
20-06-2015 15:27:09
www.moneylife.in
Exclusive news & views with a big dierence
EXCLUSIVE NEWS
News you had beer not miss
Blowing the whistle

on manipulation in the
NSE
High-frequency trading using co-locaon
that give traders advantages by a few
milliseconds has come to occupy the
centre stage of equity markets all over the
world. Such automated trading, which

executes pre-programmed instrucons,
generang thousands to millions of
trades every trading day, come out of
Money lost in Bank of Maharashtra ATMs

Depositors suer delays in geng back their wrongly debited amounts
from ATMs. This me, its a father who lost Rs30,000 he needed for his
daughters college admission
black boxes designed by whiz kids in

the secret corners of trading rms. If
deployed unfairly, a ny unfair advantage
can translate into crores of rupees of
illegal prot.
Moneylife has repeatedly argued that
India has no system of monitoring
complex automated systems, leave along
trading transacons. Consequently,
organisaons that operate such
technology have become a law unto
themselves, supervised by nobody
ML FOUNDATION
MF Vs Stocks
Moneylife IMPACT: SEBI bars VPS Advisory from

oering PMS, collecng funds from investors
Moneylife wrote about VPS Advisory promising 20% assured return from
stock trading. Taking cognisance of the arcle, SEBI iniated a probe
If rst-in-rst-out (FIFO) is accepted, all vacancies lled and the principle

that 95% of all cases must be disposed within double the average me is
accepted, the maximum me for a case at the SC would be six months
>> Moneylife Foundaon conducted a

seminar by Debashis Basu focusing on
whether MFs or stocks are the right route
for invesng. You too can benet from
these programmes by registering at www.
mlfoundaon.in Membership is free
Voices grow to revoke permission required to le FIR

against babus, netas
HAVE YOUR SAY
Is me-bound jusce possible?
The Maharashtra government, in a shocking move, has amended a

provision of the Criminal Procedure Code (CrPC)
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Why should the

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Prof Anil Agashe
TDS credit mismatch

cannot be enforced
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Who cares for r-urban

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20-06-2015 16:35:58
Credit Helpline Ad.indd 1
17-06-2015 19:25:42
When Banks Cheat Customers

Stanchart robs a doctor in Kolkata with
churning and forgery. Will RBI act?
r Abhik De, a highly qualified doctor in

Kolkata, had an account with Standard
Chartered Bank. Since 2005, the Bank also
managed his mutual fund investment which was
Rs1.56 crore in 15 schemes. In a 19-month period
after May 2008, Stanchart switched and churned
his portfolio over 200 times causing a massive loss
of Rs68.28 lakh. In so doing, the Bank often forged
signatures on transaction slips. At least 50 transactions
in July-August 2009, all loss-making, were a give-away
since he was out of the country. Dr De confirmed the
forgery by writing to each mutual fund and seeking
photocopies of transaction slips. Dr De says that some
of the forged signatures were even attested by Stanchart
officials. When he complained, the Bank initially
dismissed his complaint as false and frivolous.
A reckless churning of mutual funds to earn
commissions as well as entry- and exit-loads can
only happen when there is a nexus between wealth
managers and the fund managers. Dr De complained
to the Reserve Bank of India (RBI) and the Securities
and Exchange Board of India (SEBI) but got nowhere.
Over the past four years, he has slowly gathered
enough evidence to file a police complaint.
Dr De describes the attitude of regulators succinctly
and colourfully. He says, If a person is murdered
with an unlicensed revolver, the judge does not ask
for the source of the weapon. He conducts a murder
trial. Our regulators have all been focused on trivial
technicalities rather than justice even when violation of
their own regulations is very clear.
Stancharts actions are a direct violation of SEBIs
prohibition of fraudulent and unfair trading practices
regulations, as well as the code of conduct for mutual
fund intermediaries. Readers would recall that

Moneylifes relentless pressure ensured SEBI action
against HSBC in a similar case of churning involving
singer-actress Suchitra Krishnamoorthi. The actress was
eventually paid Rs1.3 crore by HSBC as a settlement.
But SEBI has done nothing to help Abhik De.
Finally, the Kolkata police registered a first
information report (FIR) based on his complaint in
2014. It caused Stanchart to wake up at long last. The
Bank sacked its relationship manager and unilaterally
transferred Rs35 lakh into Dr Des account (November
2014) calling it a full and final satisfaction of all
claims, demands and contentions raised by you.
Adding insult to injury, it called this a goodwill
gesture to maintain cordial relations with its victim.
Obviously, Dr De is in no mood to accept or give up
the battle.
The question is why did RBI fail to redress the

complaint? An ordinary consumer who cannot repay
a small loan or defaults on credit card is declared a
defaulter and his financial life is crippled. But a bank
decimating a persons savings through mis-selling faces
no action. The collective clout of banks has swung the
pendulum of justice far against the ordinary consumer.
This cannot go on. RBIs consumer charter, issued in
``
MONEYLIFE | 9
27July
November
2015 |2014
14 | 14
Crosshair.indd 2
20-06-2015 15:44:37
` 2014, is supposed to protect people from such brazen
mis-selling. RBI must make an example of Dr Des case.

Awarding exemplary punishment will show that it is
serious about fair treatment of consumers.
Orphaned Investors;
Unscrupulous Promoters
Datsons Lab has no promoter. Was it
running a money-laundering operation?
few weeks ago, an investor wrote to say that the

two national exchanges were suspending the shares
of Dr Datson's Lab, a little known pharma company,
on 22nd May. Our investor said that the companys
promoters had pledged their entire shareholding which
was invoked by the lenders leaving it orphaned. Other
lenders had moved court and the official liquidator
had taken possession of the company and its registered
office on 30 April 2015. A month later, the stock
exchanges suspended trading in the company, although
its shares continued to be manipulated right until
23 April 2015, when they had shot up 183%, to Rs17.
A simple Google search reveals a shocking saga of
how companies are listed, subscribed to by foreign
investors and their stock prices manipulated right
under the nose of the capital market regulator and
stock exchanges. In fact, Dr Datsons Labs seems to
have been just a large money laundering operation.
And, yet, like the dubious Satyam Computers, it won a
series of awards for corporate governance, innovation,
transformation and leadership all the way until its
eventual collapse in 2015.
But, unlike Satyam, even a simple reading of its
corporate history suggests complicity of regulators
and listing department officials in allowing the
company to exist. Dr Datsons Labs started operations
in 2006, incorporated as a private company called
Aanjaneya Biotech which later became Aanjenaya
Lifecare. It claimed to be making salts of quinine, a
second-generation anti-malarial. Aanjaneya Lifecares
promoters are listed; these are: Aasda Life Care Limited
and Dr Kannan K Vishwanath. In 2009, Aanjaneya
Lifecare became a wholly-owned subsidiary of Aasda
Life Care Limited.
Over time, the company kept issuing shares to the
promoters, until Aanjaneya ceased to be a whollyowned subsidiary. It then decided to make an initial
public offering (IPO) in 2010; the issue was managed
by Anand Rathi Advisors and IDBI Capital Markets.
A series of stunning disclosures in its red-herring
prospectus were a declaration of its shady intentions,
but it was still listed on the BSE and the NSE.
The risk factors in the prospectus bluntly stated
the following: that the object for which funds were
being raised had not been appraised by any bank or

financial institution and their deployment is entirely
at our discretion. No plant or machinery was ordered,
and, at the time of going public, it had negative cash
flows for the prior four years at least. Several statutory
reporting requirements were not complied with and
could lead to penalties. Certain statutory licences and
approvals may have expired or were pending approval;
many trademarks were not registered and remained
with its promoter Dr Kannan Vishwanath who also
owned the registered office. It had not appointed
a company secretary as required by law and had
not even applied for permission to manufacture certain
products. While it claimed to have acquired the assets
of a company called Prophyla Biologicals (Pune), the
sale deed was not executed.
More stunning was the admission that it could not
even undertake any new activity without the permission
of its bankers, viz., State Bank of India and Shamrao
Vithal Bank. It also had unsecured loans of Rs10 crore
from its directors. This meant that the IPO funds
would be used to repay its bankers and directors.
Now lets look at the equally shady antecedents
of Dr Datsons corporate promoter Aasda Lifecare,
which was originally Finaventure Capital Ltd. In
2010, its name change failed the listing rules and was
disallowed. How and why was it cleared later? And
why did Aanjeneya Life Care not come in for greater
scrutiny when it was listed in 2010? All this requires a
full-fledged investigation. Well-known market expert
Ambareesh Baliga says that the name change to
Dr Datsons Labs happened in June 2013 when its
share price dropped sharply from over Rs800 to Rs60.
It was probably a ruse to ensnare a new set of gullible
investors.
Despite this shady background, Anjaneya Lifecare
attracted foreign institutional investors (FIIs) such as
Davos International Fund, Leman Diversified Fund,
Sparrow Asia Diversified Opportunities Fund, Stream
Value Fund, Kuvera Fund and Auctor Investments.
They held 56.79% of the equity in March 2014; but
their shareholding has dwindled to 2.20% in March
2015.
It also issued foreign currency convertible bonds
(FCCBs) in October 2014, a small portion of which
got converted into equity at Rs14.25 per share in
January 2015. The entire shareholding of promoter,
Dr Kannnan Vishwanath, was pledged and invoked by
lenders leaving the company virtually orphaned. Key
directors, including the compliance officer, have also
quit. Will the management get away with this and bide
their time until they can revive the company and con
investors again? A simple reading would suggest that
this is nothing but a money-laundering operation, fit
to be investigated by the ED (enforcement directorate),
income-tax department, SEBI and RBI. Will they?
Crosshair.indd 3
20-06-2015 15:44:49
DIFFERENT STROKES SUCHETA DALAL
Why Does Narendra Modi

Want Weak Institutions?
The PMs apparent lack of respect for institutions, and those who head them, is worrying
he media hysteria over the Lalit Modi-Shushma silence about the 41 mysterious deaths in the cash-for-jobs
Swaraj-Vasundhara Raje saga has exposed ethical scam (Vyapam scam) of Madhya Pradesh, which include
transgressions, incestuous equations and dubious even governor Ram Naresh Yadavs son.
Will prime minister (PM) Narendra Modi be able to
financial transactions which only show that the Bharatiya
Janata Party (BJP) was hardly different from the Congress exert enough control to prevent a string of small scams
and its allies. Deals of BJP leaders, either when they were from inflicting major damage? Mr Modis worst detractors
in the opposition or in BJP-ruled states, were well known; agree that he is personally honest. But the same was said
but they seemed distant memory after Narendra Modi took about Dr Manmohan Singh; and, yet, he presided over
charge. Now, two senior leaders stand badly exposed. As the most corrupt governments in recent history. Unlike
we go to print, a news channel is crowing about how the Dr Singh, Narendra Modi is a leader and not a proxy; he
two powerful ladies, caught in the crossfire, may soon also rules with an iron hand. But that can be a double-edged
resign.
sword if past indiscretions and newer
It is interesting to note that Lalit
ones begin to blow up in the media with
Now, two senior leaders regularity.
Modi had been in London for four
stand badly exposed.
years of the United Progressive
What should worry the BJPs core
As we go to print, a
Alliance (UPA) government. UPA
of middle-class supporters are some
made no attempt to extradite the news channel is crowing ominous signals that reflect the PMs
about how the two
flamboyant czar of the Indian Premier
apparent lack of respect for institutions
powerful ladies, caught and those who head them. A pattern is
League. Far from hiding, Lalit Modi
seemed to mock Indian authorities
beginning to emerge and this has nothing
in the crossfire, may
with his endless tweets and television
to do with BJP wanting its own people in
soon resign
interviews; he heckled politicians and
key positions. Consider these examples:
also had a lot to say about the Sunanda Pushkar murder. Public Sector Banks (PSBs): It is more than a year since
Indeed, Union minister Shushma Swaraj should not have the BJP has been in power, but key banks remain headless.
interceded on his behalf, especially when her husband and At Rs.2.78 lakh crore, the gross non-performing assets
daughter were on Lalit Modis legal team. And Vasundhara of PSBs are a serious problem. There is growing pressure
once again,
Raje role as a secret witness for him stinks, now
on the government to use taxpayers money, o
that Modis financial deals with her son are
to recapitalise them. A shortage of senior officers is
out in the open.
pen.
also a concern; but the government is in no hurry
Suddenly,
ly, the BJP is
to complete the
appointment proc
process. While
looking rather
her shaky on
banks have
remained headless
headl for over
its high moral perch.
a y e a r,
the swift ap
appointment
That there have been no
of former
Bank of Indi
India chairman
major scams
ms in National
Vijaylaxmi R Iyer as a
Democratic
ic Alliances
whole-time member of
(NDAs) first
rst year is an
the insuranc
insurance regulator
empty boast
st if many
less than a month
m
after
small oness begin
her retirement has raised
to erupt from
eyebrows. Why
various states
tates
isnt the same
alacrity shown
and ministries.
ries.
alacr
And let us not
in appointing
a
n o n - ``
forget the eerie
erie
even
DIFFERENT STROKES.indd 2
20-06-2015 15:49:41
DIFFERENT STROKES SUCHETA DALAL
` executive chairmen at PSBs after the post of chairman
when students of FTII have erupted in anger at the appoint

and managing director has been bifurcated? It is not even of a little-known television actor, Gajendra Chauhan, as
clear what knowledge of insurance she brings to the job. chairman of the governing council of FTII. Like with the
TM Bhasins appointment as vigilance commissioner on 9th Censor Board (where even avowedly pro-BJP members are
June is stranger still. While Indian Bank, reeling under bad at loggerheads with Mr Nihalani), the issue is not about
loans, remains headless, Mr Bhasin, who was its managing a political appointment but respect for the institution
director and CEO was allowed to quit and is appointed by appointing the right person to head it. Mr Chauhan
as the CVC. He was also the chairman of Indian Banks is merely known for playing the role of Yudhishtir in
Association. Now, both remain headless.
the television series Mahabharat. Eminent film-makers
Central Information Commissioner (CIC): Vijai Sharma, correctly say that a prestigious institution like the FTII,
the new CIC has only 179 days to retire. The backlog of which counts some of Indias finest actors and film-makers
cases has mounted to over 40,000,
among its alumni, must be headed
as the post was vacant for over
by a person of eminence and all
nine months. What is worse, the
round knowledge of film-making.
government filled only one out
It is not as though the BJP could
of four vacancies for the posts of
not find such people even among
information commissioners when it
its supporters. Media reports have
appointed Sudhir Bhargava. There
pointed out that someone like
is no explanation for why it did
Anupam Kher or Raj Kumar Hirani
not find any suitable candidates
(both FTII alumni), if appointed as
from over 500 applications.
chairman, would not have angered
Activists suspect that the PM has
students or the film fraternity.
never been in favour of the Right
Incidentally, Mr Nihalani continues
to Information (RTI) Act and
to spark new controversies at the
that is why it is being deliberately
Censor Board every few days.
weakened. This would be a real
Ironically, and in stark contrast,
pity. If India erupted in anger at
the government is simultaneously
the colossal corruption in every
working on an electronic system
walk of life and was swayed by
to streamline the functioning of
The appointment of
Narendra Modis promise of good
the appointments committee of the
KV Chowdary as CVC has
governance, it is because thousands
Cabinet headed by the PM. This
of empowered citizens used RTI to
created a furore even within will monitor vacancies, bring in
get facts and expose wrongdoing.
staunch BJP followers such more transparency and facilitate
A natural corollary to Mr Modis
proper appointment of Union
as Ram Jethmalani
secretaries and directors on the
election promises would have been
to strengthen this institution rather than weaken it.
boards of public sector entities. Since the government
Chief Vigilance Commissioner (CVC): The appointment does not communicate, we are clueless about the strange
of KV Chowdary, former chairman of the Central Board contradiction in its actions.
of Direct Taxes (CBDT), created a furore even within the
Appointing the wrong people to institutions, or failing
BJPs staunch followers. The formidable Ram Jethmalani, to fill vacancies, is the path to mistakes and indiscretions.
once the law minister in a BJP government, was incensed And, when you have a PM who is hands-on and unabashed
enough to write to the PM about his objection and post about centralised decision-making, the buck will only
his letter on social media. Pointing out that Mr Chowdary stop at his door. It is possible that you may not have
faces several inquiries, Mr Jethmalanis angry missive gigantic, UPA-style scams, but the lesson from the Lalit
ended with this flourish: Now we shall fight it out in Modi-Swaraj-Raje drama is that even small transgressions
the Supreme Court and the court of the people of India. flare into a media frenzy, especially as the country heads
My diminishing respect for you (the PM) ends today. towards major state-level elections.
Well-known advocate Prashant Bhushan has also levelled
several charges against the new CVC.
The Film & Television Institute of India (FTII): The Sucheta Dalal is the managing editor of Moneylife. She was
controversy over the appointment of Pahlaj Nihalani as awarded the Padma Shri in 2006 for her outstanding contribution
chairman of the Censor Board has not even died down to journalism. She can be reached at sucheta@moneylife.in
DIFFERENT STROKES.indd 3
20-06-2015 15:49:55
BOTTOMLINE BY MORPARIA
CURRENT ACCOUNT
MONEYLIFE
QUIZ
Moneylife
Quiz no
209
Another quiz to tease your brain. The answers are in

this very issue. The winner will be chosen by a lucky
draw from correct entries and answers published in the
issue dated 6 August 2015. Send in your answers to
quiz@moneylife.in with the Quiz no., name, address &
telephone number before 16th July.
Mutual Fund
investments are
subject to market risks,
Answer
Correctly! Win
a personalised
sed
clock with an
investment
nt
quote!
Roopa Khurana
1. At which university did Professor Li Gan do his research

work?
a. Harvard University
b. Southwestern University
c. University Of Georgia
d. University of Florida
5. What was the additive for which Maggi noodles were in

trouble with the regulatory authorities?
a. Sodium chloride
b. Potassium chloride
c. Monosodium glutamate
d. Diesel
2. Prior to 2008, what was the usual percentage of entry-load

permitted for mutual funds?
a. 2.25%
b. 2.5%
c. 2.75%
d. 3.00%
6. What was the business of Birdhi Chand Pannalal Agencies

Limited, before it became an NBFC?
a. Textiles business
b. Car dealership
c. Moneylending
d. Stockbroking
3. What is the per capita income of China?

a. More than $1,000
b. More than $3,000
c. More than $5,000
d. More than $7,000
7. Which are the two registrars for most mutual fund houses?
a. Tata and Birla
b. Reliance and UTI
c. Karvy and CAMS
d. Canara and PNB
4. Who is responsible for saying, Our research found that

patients having more severe diabetes had less brain tissue,
suggesting brain atrophy?
a. Cynthia Coyle
b. R Nick Bryan
c. Gilbert Ryle
d. Rachel Ryle
8. What is the cut-off time on working days for a mutual fund

online transaction?
a. 10:00am
b. 1:00pm
c. 2:00pm
d. 3:00pm
In all, 13 readers got all the answers right last time.

The winner of Quiz-207 is Roopa Khurana from Agra.
Congrats! You win a personalised clock with an
investment quote!
The answers to Moneylife Quiz-207 are:

1-b. 20%-50% 2-b. 28.84% 3-c. 15% 4-c. Facebook
5-b. 10 kmpl 6-a. Murugappa group 7- b. Rs2,000
8- b. Earnings before interest and tax / Capital Employed
Current Account.indd 2
20-06-2015 15:19:31
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Your Money
REAL ESTATE
REAL ESTATE
Maharashtra To Appoint Housing

Regulatory Body
he Maharashtra government
will soon appoint a regulator
to safeguard the interests of
home-buyers, after the Centre gave
a go ahead to the state to frame
rules to implement the Housing
Regulatory Act approved by the
President.
The process of framing of
rules is in progress and
the delay was because
the Centre had
framed a similar law
Real Estate (Regulation and

Development Bill) and wanted
the state to adopt it. However, the
Central governments Bill is pending
in the Rajya Sabha. We explained to
the Centre that Mumbais housing
needs are different from the rest of
the country. There was urgent need
for a housing regulator and that our
provisions were better than
the proposed Central law.
Our submission has been
accepted and we will
have our own housing
regulator, Shrikant
Singh, principal
secretary
housing
department,
government of
Maharashtra, said.
BANKING
Builders Giving Less

Carpet Area than
Promised Likely To
Be Prosecuted
he Legal Metrology Department (LMD)

has shot off letters to the Mumbai
police commissioner and commissioner of
Brihanmumbai Municipal Corporation (BMC)
asking them to take action on builders who
give less carpet area to buyers than what is
promised in the agreement. LMD is currently
probing 16 such cases.
In December 2014, LMD had seized
one flat in a building at Mulund (a Mumbai
suburb). This action was taken on the basis
of a complaint by an interior designer who
approached LMD stating that he had got
less carpet area for his flat than what was
set down in the purchase agreement. The
department got in touch with the builder
Kamalnath Universal Private Limited
and, later, seized a flat in Purvanchal
Cooperative Housing Society. It was found
that the carpet area of the flat was claimed
to be 50.17 sq m. The panchnama carried
out by LMD revealed that the area of the flat
was less than promised by 3.7262 sq m.
Proof of Address for Bank Accounts
Unitech Asked To Pay

for Delay
a)
b)
c)
d)
e)
f)
ccording to a Central government gaze e no fica on, the following

documents will be accepted as proof of address for bank accounts:
U lity bill, not more than two months old, of any service provider (electricity,
telephone, post-paid mobile phone, piped gas, water);
Property or municipal tax receipt;
Bank account or post-oce savings bank account statement;
Pension or family pension payment orders (PPOs) issued to re red
employees by government departments or public sector undertakings, if they
contain the address;
Le er of allotment of accommoda on from employer issued by state or
Central government departments, statutory or regulatory bodies, public
sector undertakings, scheduled commercial banks, financial ins tu ons and
listed companies. Similarly, leave & licence agreements with such employers
allo ng ocial accommoda on; and
Documents issued by government departments of foreign jurisdic on and
le er issued by a foreign embassy or mission in India.
ational Consumer Disputes Redressal

Commission (NCDRC) directed realty
major Unitech to pay compensation to
buyers for delay in delivery of flats. The
new delivery dates promised by Unitech
are between February 2016 and February
2018. NCDRC also ruled that any delay
beyond the new deadline promised will draw
compensation at 18% per annum.
In the last hearing of the case on 1st
June, the apex consumer court had rejected
Unitech counsel Sunil Goels contention that
it did not have the jurisdiction to surpass
the builder-buyer agreement. NCDRC
said that any unfair trade practice can be
challenged.
Your Money.indd 2
20-06-2015 15:22:56
SMART MONEY R BALAKRISHNAN
What Next after SIP?

Look beyond well begun is half done, if you want your performance to be better
n the previous issue, we wrote about picking up a few A few analysts put out quarterly earnings per share
stocks for systemic investment plan (SIP) of investing. (EPS) estimates (incredible how they do it, when I am sure
The logical question that follows is: I have made my that even companies cannot!) and there is a consensus
shortlist. I like five companies. Does it mean that I go on estimate formed by such analysts. When the actuals are
buying these until the end of my time horizon without below estimates, stocks are punished severely. If you look
looking at prices or any other factor? If you thought that at the company, the long term has not changed. This is
your role was over with selecting the stocks, I have news one noise that we have to ignore.
for you. As the saying goes: Well begun is half done.
Once we have successfully commenced our journey
And, surely, we do not want 50% for our efforts, do we? on the SIP route, there are some things to keep in mind.
What are our worries? Are the companies we picked Let us say we have completed 10 years and now we have
doing as well as they should? Are there any angles we missed two options: Do I keep these stocks? Do I sell them off?
If you decide to sell them, I would urge you to check
out and ended up making a poor
choice? Do I have
any reason to change my mind?
Of course, we whether the conditions are right. Ideally, for each stock,
will also tend to keep a lazy eye
o n t h e I would like to see where the stock is trading. Say, I have
price. Is there too much volatility? Is
t h e r e Hindustan Unilever Limited (HUL) and the stock is trading
some serious price correction either
way? at 35 P/E. I have estimated that this stock goes to a high
The first thing to do is to plan out a 10of around 40 P/E and low of around 20. Since I am closer
year calendar. One routine would be to get
to the top end, I am happy to sell now.
hold of the annual reports each year and kick
One important assumption I am making, while
the tyres again. Has the company maintained its
recommending the use of the price-earnings (P/E) band,
is that interest rates will not vary too much over time. If
growth and return on equity (RoE)? If the RoE
our 10-year bonds move from 8% to, say, 4%, it means
is down, is it because the year was bad, or did
the company experience something extraordinary?
that a structural change has taken place and P/E would go
I do not mind small shiftsthey are par for the
far higher. Similarly, if 10-year year bonds were to
course. Overall, the picture should look no
trade at 10%, our stock markets would look
worse than the year that went by. In our
expensive even at 10 times P/E!
During the process of our actions,
10-year cycle of planned investment,
if we discover that we have made an
we will get some bad news. However,
The SIP route
we are improving our chances by
error or that some stock we have
helps
us to create
picking companies with history,
chosen is not the right one, the best
a portfolio that
thing to do is to sell off all we have
with performance track-record and
of that stock immediately, without
in easy to understand businesses such
will turn out better
bothering about the price. We may
as consumer goods.
than plain index
I thought it would be best if we
like to pick up another stock from
investing
stick to companies that cater to domestic
our shortlist. Mistakes should not be
demand. The consumer goods sector
compounded by thinking that we can
is unlikely to see any serious slowdown.
average down.
The same should be the case with domestic
Over time, we will keep adding stocks to
pharmaceuticals. In sectors like automobiles, we could see
our SIP or we may choose to buy lumpy investments in
stress for some more time. In banking, we will see excesses single stocks. That would depend on our level of confidence
of good times extracting their price in bad times. Share and comfort. If we have come down to understanding the
prices will react to these and our SIP will take advantage basics, the SIP route helps us to create a portfolio that will
of that by buying more shares when prices are down and turn out better than plain index investing.
buying less when prices rise.
I would not bother too much about quarterly results. The author can be reached at balakrishnanr@gmail.com
column_Balakrishnan.indd 2
20-06-2015 15:17:30
Wealth Manager:
Are you paying for Vanity?
ndians have grown rich over the past decade.

Along with wealth, they have acquired a new
appendage: wealth manager. There is no free
lunch in life so it is natural that for getting such
a dedicated sherpa for your wealth, you would
the yields fell 50bps (basis points), the return was

calculated to be around 13.5% post the payment
of the loan.
A few months later, the benchmark yield shot
up to a high of 9.24%. Mr Shahs investment had
declined by over 10%. He was facing a capital
loss of over Rs80 lakh, not to forget the interest
payable. His wealth manager assured him that
interest rates would fall in the coming months and
his investment would deliver positive returns.
Interest rates didnt fall. In fact, the opposite
happened. At the end of the one-year, when
the debt schemes were to be sold and the loan
repaid with interest, the schemes had gained
about 2%, while the interest payable was 9.50%.
Mr Shah was facing a loss of around Rs50 lakh.
The investment bank stood to gain on this
transaction, on boththe interest on the loan as
well the commissions earned from the mutual
fund schemes. So much for your knowledgeable
wealth manager and the get-rich schemes.
be charged. Except that, it is worth wondering

whether you are actually paying for nothing other
than vanity. Read this story.
Rakesh Shah, a top manager with a multinational
company had crores lying with a bank. His wealth
manager oered him the best investment of
his life. He would take a loan with his existing
investments as a security and invest the loan
amount in the some debt schemes. At the end
of the year, he would sell his debt scheme and
pay the interest on the loan at a rate of 9.50%. If
Investing success comes out of simplicity,

method and patience. It is unglamorous. Wealth
managers peddle exactly the opposite
complexity and exotica. It leads to losses.
So, what should you be doing?
May we suggest Moneylife Smart Savers
Network, a no-bias, no-conflict platform that
will not allow financial companies and their
intermediaries to take you for a ride? By reducing
your choices to the right ones you need, we
dramatically increase the quality of selection. And
we support you with unbiased information and
continuous handholding. We can guarantee you
will not be a victim like Mr Shah.
savers.moneylife.in
Take No Chances. Fix Your Finances
REV MSSN Promo Ad.indd 4
19-06-2015 21:51:40
INTERVIEW EXCHANGES
We look at top-line growth,

margin growth and the cash
conversion cycle
s chief investment officer, Gopal Agrawal heads the equity

investment team for the India operations of Mirae Asset Global
Investments, a South Korean mutual fund giant. He is responsible
for overall fund management of equity and fixed-income products.
Excerpts from an interview with Jason Monteiro of Moneylife
Moneylife (ML): You started your career as a

chemical engineer and then moved on to investment
management. What was the reason for the transition?
Gopal Agrawal (GA): I have a basic knowledge of business
because of my engineering background. Adding financial
knowledge to it made sense. Because I understand the
intricacies of the business and business trends, I can forecast
earnings better, instead of solely relying on the past record.
ML: Can you describe how you and your team of
analysts identify sectors and pick stocks?
GA: We are a team of five on the equity side, including
three research analysts. The five of us have certain sector
responsibilities. We cover 200 stocks on a detailed basis
and 50-60 other stocks which include Nifty 50 stocks.
Whenever we pick a new stock, we look at the past 10
years performance, how its book value has changed, how
the return ratios have moved, how the business variables
are changing and then we meet the companys management.
And, if everything is in tune, we buy the stock.
ML: What are the different parameters you look at?
GA: We are mostly bottom-up in stock-picking. We look
at cash flows and return on equity (RoE). That is a strong
yardstick; because, ultimately, for a shareholder, RoE
is the most important. Then, we look at the size of the
opportunity. One would not buy small businesses which
can do well only for one or two years. A big re-rating
happens when the opportunity is larger. For example,
we bought Amar Raja Batteries at a market-cap of
Rs800 crore. Today, it has a market-cap of over
Rs12,000 crore. And as it was only a two-player
market, so there was a huge opportunity.
The parameters used also depend on what ``
Interview - Gopal Agrawal.indd 2
20-06-2015 15:46:25
` kind of businesses we are investing in. RoCE (return on
from what prevails in India. Investment in India is based

on a growth story. Therefore, we have a different set of
parameters. The foreign market is more an institutional
investor-driven market. In institutional practices, corporate
disclosures are very stringent, which is very good. I am
waiting for a time when we adopt the international standard
ML: On this basis, are there many opportunities now? of accounting practices where the corporates have to report
GA: Currently, the market is giving a very high weightage all the hedges, all the currency translation, all the inventory
to growth. But, at this juncture, growth of corporate valuation. Then, you will get the true picture. On hindsight,
earnings is very moderate. So, companies that are giving would anyone know which corporates were making money
you a relatively stable growth, are commanding very high in currency when the rupee was appreciating? Suppose
valuation. When you are buying a stock at a high multiple, you borrowed in ECB (External commercial borrowing)
you should be doubly sure that the trajectory of growth and your currency is appreciating, you are making gains,
is upward. At the current level, anything available in the no company has ever reported this. Other expenses were
market has to be justified by higher growth.
coming down and it implied that the margin is expanding,
which was not so. No IT company has ever reported that
ML: Where are we on the growth issue?
it has profited in cross-currency transactions. If you look
GA: If growth comes back, the domestic cyclicals are cheap. at the corporate disclosures of companies in Hong Kong,
Australia, Korea, etc, it is very
The problem lies in our growth
assumptions. Historically, the
comprehensive. This makes the
currency can only be protected
market very efficient. The price
I am waiting for a time when
by growth with moderate
discovery will be very high.
we adopt the international
inflation. If growth is rising, FII
standard of accounting
(foreign institutional investors)
ML: When it comes to selling
practices where the
flows will be there; debt inflows
a stock which has done well
will be there; FDI (foreign direct
or reducing its exposure in
corporates have to report all
investment) inflows will be
the portfolio, what would you
the hedges, all the currency
there; so, the currency will not
look at before doing so?
translation, all the inventory
GA: In our view, we will never
depreciate. We will have a crisis,
valuation. Then, you will get
if we dont grow with moderate
sell a stock until three things
inflation. Earlier, global growth
change. Either the top-line
the true picture
was very strong; this was a
growth falters or the margins
positive for many sectors of the
shrink or the working capital
economy. Now, growth is there mainly in India, so the cycle elongates. These are three negative undertones. We
government policies are very important.
will give no weightage to the PE multiple. Therefore,
instead of giving a high weightage to valuations, we will
ML: When picking mid-cap stocks, would you follow look at the business operationshow the cash conversion
the same parameters or do you have a stronger filter? cycle is affected. If all this is under control, we will continue
GA: We dont invest in a company with less than Rs100 to ride the stock. We may, at times, tend to reduce exposure
crore of operating cash flow. Smaller businesses will be at a price, to reduce its overall weightage in a portfolio;
more susceptible to fluctuations in the economy such as but we will not let go of our core position.
volatility of the currency, interest rates, etc. So we dont
want to buy businesses which are very small. Secondly, ML: What if a stock doesnt perform and begins to
we give more emphasis to our own research and views decline? What is the action you would take in such
on such stocks. These stocks are not widely covered by a situation?
research firms; so we have to be doubly sure on whats GA: We have some internal filters on the downside also.
happening in the business.
Lets assume if a stock is down 20% from the purchase
price. Then, our risk department will flag it off and we
ML: You also manage schemes which invest in foreign would have to give an explanation why we would like
stocks. While looking at foreign stocks, do you have to hold such a stock. And, if it goes below 50%, we
a different set of parameters?
may have to exit. In the past, there were just one or
GA: Yes, because the investing style abroad is very different two such instances. Those which come to my mind were ``
capital employed) is used for capital-intensive businesses.
Every business needs to be analysed in different ways.
All capital-intensive businesses should be valued on EV/
EBITDA and others should be valued on PE basis.
20-06-2015 15:46:42
INTERVIEW EXCHANGES
` JP Associates, TV 18 and Opto Circuits. There were mostly
balance-sheet issues; the off balance-sheet items, which

were not given in the annual report, etc, mainly due to
the lack of adequate corporate disclosures. These were a
few learnings, and another reason why we give a lot of
weightage on returns ratios, cash flows, balance-sheet and
not only P&L (profit & loss).
period of time, with low prices, no new capacity can come.

So maybe three years down the line, oil will boil again. Of
course, the exact timeframe could be different. It could
be three years or five years. But, for sure, at a sub-$80
oil price, with the world economy recovering, demand is
increasing and the market is expected to become tighter.
ML: Is your background as a chemical engineer a

reason for a large number of chemicals company
stocks in Mirae Asset Emerging Bluechip?
GA: The reasons are two-fold actually. If you look at
the past 10 years, the Yuan is the only currency which
appreciated over the dollar. It appreciated by 40% against
the rupee. So, for any business which has low volume and
high value addition, China is no longer a competition.
You can extrapolate it to engineering exports of high
quality; so China has vacated that space. It should be
of low volume and high value addition; that is why, we
have specialty chemicals, agrochemicals, pesticides, etc, those
kinds of businesses, especially in
Two main differentiations
smaller spaces where China is not
have happened after the
there.
ML: Has your investment style changed after the

financial crisis of 2008?
GA: Two main differentiations have happened after
the financial crisis. Before the financial crisis, we were
looking more at price-earnings-growth (PEG); now, we
are looking more into the return ratios and cash flows. In
my view, ultimately, the shareholder makes money when
the company reports superior returns. So, as I mentioned
earlier, we now look at three important factorstop-line
growth, margin growth and the cash conversion cycle.
ML: You manage Mirae Asset

Global Commodity Stocks. In
the scheme, you have a high
allocation to energy stocks and
financial crisis. Before the
mostly of companies based in
Australia. What is the reason?
ML: In the Mirae Asset Indiafinancial crisis, we were
GA: What I have done is to protect
China Consumption Fund, you
looking more at pricethe downturn in the performance
have a low allocation to Chinese
earnings-growth (PEG);
of the scheme. Liquefied natural
stocks. Are the reasons similar?
now, we are looking more GA: In this scheme, the stock
gas (LNG) is more of a utility and
the reason I chose Australia is
selection is a little different. We
into the return ratios and
because it is a very strong economy
invest in consumption-oriented
cash flows
and the currency is also relatively
stocks of India and China; but,
very strong. So, I will not lose on
because of taxation purpose, we
currency. Secondly, most of the companies in the portfolio have capped the India allocation at 70%. We normally
have a very strong growth potential and they have a invest up to 28% in Chinese stocks. The average age of
dividend payout of 60%-80%. What happens is that the working class people in China is 37 and the per capita
stock will not fall below a certain price level. Take, for income is more than $7,000. Hence, the demand for
example, Woodside Petroleum or Origin Energy or BHP
luxury goods is high. So, we invest in insurance, casinos,
Billiton or Rio Tinto. Their payout is very high
gaming, Internet, healthcare, high-quality real estate
around 50%-80%. Thus, the price will not fall
stocks. Though there may be lots of doubts about a
below a certain level. And touch wood! We are
bubble in China in the real estate space, but at the
very lucky; the NAV of this scheme has never
upper end, there is a lot of demand. In China, 870
gone below par since inception. We launched
million people access Internet. So, we have some
it in July 2008 at the peak of the energy price.
telecom stocks. They are now in 4G and would
My personal sense is that, whatever people
be now moving to 5G. Its a very stable growth
say, energy requirement will always be there in
situation. China is re-balancing the economy. They
this world. There may be five-six years
are moving from manufacturing to consumption
of downturn, as it is a commodity.
and the government is giving tax-breaks for
Everything has a cycle. So when
people to consume more. In my view,
super normal profits are there,
consumption in China, as a theme, has
more capacity will come and
a long way to go. At least, for a decade,
prices go down. But, after a
I do not see any issue there.
20-06-2015 15:46:52
FIXED INCOME
Tax-free Bonds Still Attractive?
information,
ax-free
without specifying
bonds from
current yield-togovernment
maturity (YTM),
companies of
is misleading for
rating AAA or
investors as a
AA+ are still a
novice may get
good option for
enticed thinking he
fixed income, for
will get 8.5%pa to
those in higher tax
9%pa tax free.
bracket of 20%
The current
or more, since
YTM for tax-free
FD rates are on a
bonds is 7.25%decline.
Be realistic about
7.5%pa. This is
But, you have
the returns you
the return you will
to be realistic
can get; there is no
about the returns
arbitrage opportunity get for holding
the investment
you can get; there
that can lead to
to maturity. New
is no arbitrage
investors flocking in
issues of tax-free
opportunity
huge numbers
bonds should be
that can lead
on offer in the
to investors
second half of the financial year.
flocking in huge numbers. Recently,
The coupon rate will depend on
a media report mentioned that
the government securities (G-Sec)
tax-free bonds give an interest
yield at the time of issuance.
rate of 8.5%pa to 9%pa. Such
Yields Down Past Fortnight
ond yields have decreased by 5-10bps in a fortnight. You can expect to get 8.60%
for AAA rated bonds and less than 9% or higher for lower than AAA rated bonds.
Issuer
Maturity
Date
Next
Last Yield
Coupon
(%)
ISIN
Rating
Power Fin 9.32%
17 Sep-19
17 Sep-15
8.61
INE134E08GJ4
CRISIL AAA
REC 8.56%
13 Nov-19 13 Nov-15
8.70
INE020B08864
CRISIL AAA
Power Grid 8.85%
19 Oct-20
19 Oct-15
8.6
INE752E07KF5
CRISIL AAA
NSE data of last trade date of 16 June 2015
Kotak Mahindra Prime

10.75%
19 Oct-15
19 Oct-15
8.82
INE916DA7FN6
CRISIL AA
REC 8.30%
10 Apr-25
10 Apr-16
8.59
INE020B08930
CRISIL AAA
Power Grid 8.40%
27 May-25 27 May-16
8.56
INE752E07MR6
CRISIL AAA
BSE data of last trade date of 16 June 2015
Do Senior Citizens
Get Higher FD Rate
Automatically?
or senior citizens (age 60 years),

banks offer fixed-deposits (FD)
rate of 0.25%-0.5%pa higher than
available for regular customers. But
do not be surprised if you do not
automatically get it. It is better to
check the FD rate on the printed
FD receipt to confirm as slip-ups do
happen even in the computerised
age. Another time to check the detail
is when your FD is auto renewed
and you happen to become senior
citizen before the renewal date. There
are chances of the FD would still
continuing with the regular rate. The
bank will give the senior citizen rate
only when you notify them.
G-Sec Yields Up
he 10-year benchmark G-Sec

yield rose by 13 basis points
(bps) in the past fortnight to end at
7.84% on 17th June. It has recovered
after its drop as the Reserve Bank of
India (RBI) cut the repo rate by 25bps,
to 7.25%, at its 2nd June policy review
meeting. Whether RBI will go for
another cut is a moot point. Experts
feel that retail inflation is likely to
be lower than RBIs projections and
would average around 5% this fiscal.
This can make the case for another
rate cut.
Exports and imports dipped in
May which helped to keep the trade
deficit under check. The decline in
exports in May was broad-based.
Exports of services too were impacted
due to a weak demand. Imports fell
the steepest since December 2014
due to a sudden drop in gold imports.
RBI is planning to issue sovereign
bonds linked to the bullion price to
reduce demand for physical gold bars
and coins.
Fixed Income.indd 1
20-06-2015 15:22:03
COVER STORY
GAIN MORE
Invest Directly in
Mutual Funds
Direct investing in mutual
al fundss
ns than
will give far better returns
han
regular plans. Raj Pradhan
discusses, for the rst time,
e versus
the ner points of online
ofine direct investmentt
nvesting in mutual funds (MFs) through direct

schemes, instead of regular schemes, gives higher
returns because you save on the commissions
that would otherwise be paid to distributors. The
returns would be higher between 0.5% to 1.5%pa,
depending upon the type of scheme (liquid, debt, equity)
as well as the asset management company (AMC). So,
if you invest Rs10 lakh in a mutual fund scheme, you
will earn 9%pa for direct plan instead of 8.5%pa for a
regular plan. If your bank paid you 8.5% on your fixed
deposit and another bank paid 9%, wont you shift? So,
why not invest directly in MF schemes and save money?
The expenses are recurring in nature and, hence, the
longer you remain with a scheme, the better off you are
with a direct plan. Almost all institutional investors now
invest by the direct route. A few savvy retail investors too
are investing directly. How do you to go about it? What
needs to be done? Heree is all that you need to know about

investing directly.
First, you need to be prepared to do some research
about the MF schemes yourself and avoid dependence on
distributors, media, etc. There are hundreds of MF schemes
available and huge difference between the best and worst
performing funds. So, if you just try to save money by
investing directly without paying attention to the schemes
you choose, you will end up with underperformance even
after benefiting from direct investment. Invest in a direct
plan of an appropriate scheme. One option for getting
unbiased advice is Moneylife magazine. The other is to join
Moneylife Smart Savers Network (MSSN). The next step
is to understand the myths associated with direct plans.
Myth 1: Lot of Paperwork, Separate Registrations
Sure, there will be additional legwork to be done as it is ``
Cover Story.indd 2
20-06-2015 15:32:11
COVER STORY
Gain More from Direct Plans

Portfolio Value (Rs)
10,00,000
Marginally higher return, significant difference in value
Rs9,57,480
Rs1 lakh invested in each plan
Rs7,90,988
8,00,000
6,00,000
Direct
Regular
4,00,000
2,00,000
0
Year
10
` a do-it-yourself (DIY) process. But even if you were to
invest with the help of an advisor, it is better to do the

papers yourself. You should not rely on the advisor to ll
up your personal details. It could lead to inaccuracies if
not properly done. So, the time taken for lling the forms
should be the same whether you go direct or through an
advisor.
You will need separate registrations for direct or
regular schemes. Its just that for regular schemes, you
can expect the advisor to do the running around to submit
the paperwork to each AMC or registrar. You, too, can cut
down on the time by visiting the registrars
ofce instead of the AMCs. Between Karvy
and CAMS, almost all the mutual fund houses
are covered. So, one visit each to Karvy and
CAMS ofce will sufce.
If you are doing online purchase, how will
an advisor do it more efciently? If you are
tech-savvy, nothing stops you from investing
in an MF scheme online. It is similar
to online term plan purchase. Why
would you rely on an intermediary
for term plan purchase, if you can
buy online? The same holds for MF
schemes.
Myth 2: Direct Plans Require
Substantial Prior Knowledge
of MFs
Distributors generally provide
comparisons and choices, if you go
through them. Banks and independent
15
20
25
30
brokers offer ratings and advice to help you with your

investments. But comparisons and the wide range of choices
offered by distributors will make it even more difcult
for you to choose. Also, nding a genuine advisor is not
easy. Distributors push schemes where they get a higher
commission. If you do it on your own, you need some
knowledge of MFs. It is well worth it.
Myth 3: No Consolidated View
Individual registrations make it difcult to get one view
of all your investments which a bank or broker may offer.
You can ask the AMC for your account statement
anytime. If you are really keen on a consolidated
view, the Consolidated Account Statement (CAS)
will work for you. Investors can now request for
email CAS across their entire holding in Karvy,
CAMS, FTAMIL (registrar for Frankin Templeton
Mutual Fund) and SBFS (Sundaram BNP Paribas
Fund Services)-serviced mutual funds. You may
have recently started getting CAS from
Central Depository Services Limited (CDSL)
or National Securities Depository Limited
(NSDL). SEBI (Securities and Exchange
Board of India) has mandated that all
AMCs should issue monthly CAS, based
on PAN of unit-holders for folios that
have nancial transactions in a month.
Myth 4: Getting KYC Done Is Tough
Since the completion of KYC (know your
customer) warrants in-person verication, it is
done ofine, in most cases. Once you get the ``
Cover Story.indd 3
20-06-2015 15:33:02
COVER STORY
Losing Interest
or non-liquid funds (equity and debt), for amounts

less than Rs2 lakh, where the application is received
before the cut-off time (3:00pm), the applicable
NAV shall be the closing NAV of the same business
day. It means if you are paying through an online
transaction, you will lose one
day of bank interest as the funds
left your savings account without
earning anything for a day in MF.
But, if you pay offlinethrough
cheque deposit at AMCs or
registrars office, you will not lose
one day of bank interest. In fact,
you may gain one day of bank
interest as the cheque will not even
get cleared the next day. So, if you
deposit cheque on Monday before
3:00pm, then it will get cleared on
Wednesday morning.
According to Quantum AMC,
Ideally offline through cheque
deposit or online transfer into
the schemes account is one of the
best ways, as investors money get
credited into the funds account
immediately and there is no loss
of time. Payments routed through
payment aggregators may have the issue of delay in
funds received by the AMCs and this may cause a
delay in allotment of units.
` form, fill in the details, get a few photographs, get the
address and identity proof and submit the form to any

one of the five KYC registration agencies (KRAs). KRA is
a centralised KYC agency set up under SEBIs guidelines.
This agency will store KYC records of multiple investors
and stock market intermediaries. KRAs can access each
others investor KYC records. If your KYC is done, you
should also be able to check your KYC status at any of the
KRAs websites. Have AMCs found a way to do online
KYC? According to Quantum, For locations where we
are not physically present, we do E-KYC, i.e., KYC using
Webex or Skype. For this, we first request the investors
to send the documents and the application form to us and
then the E-KYC session is scheduled. The KYC is further
sent for processing after doing online verification of the
documents. Having decided to invest directly, take care
Unlike AMCs and registrars offices, which

remain open for specific duration, online purchase
transaction can be done 24x7 and even on holidays.
But, doing MF purchase after cut-off time of 3:00pm
or on a holiday, is tantamount to loss of savings
account interest. The money will be out of your
account, but you will not get NAV of the same day.
You need to avoid doing such blunders and do online
transactions before 3:00pm of MF
working day. But, did you know
that there are some holidays only
for debt and liquid funds, but
not for equity funds? http://www.
fundsindia.com/pages/mutualfund-holidays-2015/
While the upper limit decided
by the AMC for online transactions
may be Rs1 crore, you have to
decide what is your upper limit,
depending on your comfort level.
There may be no issue for a high
amount of purchase; but there can
be minor chances of transaction
failure. You will not lose your
funds, but why take chances on a
high amount? At the other end, to
boost investor participation into
MFs from smaller centres, SEBI
has allowed AMCs to accept cash
investments of up to Rs50,000.
Earlier, the cash transaction limit was set at Rs20,000.
The popular options for investment are online
transaction or offline by cheque/DD.
of a few things.
1. Single or Joint? Do take care of the issue of nomination
irrespective of whether you have a single or joint account.
If you have not done the nomination for any of your MF
schemes portfolio, please add it. It is your prerogative,
whether you have a single or joint mutual fund account.
For safety reasons, it is better to have a joint account. You
may opt for anyone or survivor instead of joint option
which allows either one to purchase and redeem without
the consent of the other. It works similar to anyone or
survivor option of a bank fixed deposit.
The main drawback of anyone or survivor or joint
application is annual information return (AIR) reporting
of joint account-holder even if the investment is done by
first account-holder. So, even if your wife has no source of
income, AIR reporting will happen for both you and your ``
Cover Story.indd 4
20-06-2015 15:34:24
COVER STORY
` wife just because you have invested Rs2 lakh or more in
MFs. If your wife is not filing tax returns, IT department

can raise query about the source of investment, based on
the AIR report. She will have to clarify that she is just
second account-holder and that the investment was done
by her husband.
2. Using Offline as a Springboard: Many MF investors
may want to do online transactions only after a folio is
already in place through an offline transaction for the
initial subscription. The idea is to set up the folio and get
any personal details, scheme related errors corrected before
going direct online. There can be errors for address, mobile
number, email address, nominee, joint account-holder
details, etc. Remember, unless the scheme has the word
direct in it, it is not a direct scheme. You can do offline
transaction at the AMCs or registrars office. Ensure that
you do not leave the broker and sub-broker space empty.
Write Direct in both these boxes, to avoid misuse. If not,
Direct Investing: A
Real-life Experience
Raj Pradhan shares a Moneylife readers
experience of investing directly in mutual funds
which will help you avoid the pitfalls
rior to 2008, mutual funds (MFs) had entry-loads

(usually 2.25%). A good chunk of this was earmarked
for distributors commission. Then, SEBI (Securities
and Exchange Board of India) allowed Direct investing
in January 2008 when all asset management companies
(AMCs) were told to stop collecting any entry-load from
investors who invest directly with the fund house, via the
Internet or the AMCs own offices. Online transactions
you may end up getting regular plan instead of a direct one.

3. Bank, Broker or any Website Other than AMCs: There
are several websites, like fundsindia.com or fundsupermart.
com, which allow you to invest in mutual funds free. They
will even help you to complete the KYC. But they are not
offering direct plans. They are online distributors. You end
up with regular scheme instead of direct scheme. Free is a
misnomer here because they will get commissions from the
fund house which will lead to lower returns. Similarly, if
you are investing in an HDFC MF scheme with help from
HDFC Bank staff, then the Bank is the distributor. But,
if you visit bank branch and submit direct application,
will it be accepted? I tried at Axis bank branch and they
did accept my direct application for any scheme of Axis
mutual fund. If you buy through brokers, like ICICI Direct
or Share Khan, you will not be able to opt for direct plans.
Even moneycontrol.com will add its ARN-11770, when
you buy through their website.
were not in vogue in 2008; but walking into an AMCs

office for direct investment was a good option. Wanting
to save the 2.25%, I walked into an AMC office. It has
worked well over the years.
Then, in August 2009, SEBI abolished the entry-load
on all mutual fund schemes. This negated the difference
between these two category of investors (regular versus
direct). So, it was back to square one, with no incentive
for going direct. To incentivise investors, direct plan was
introduced from January 2013. Under this option, the
investor pays no distribution charges; hence his returns are
higher. While the difference may seem small, over a period,
when compounded, it works out to a lot of money (see
chart on page 29). AMCs were required to have separate
direct schemes with their own NAV.
By 2013, the online transactions process from AMC
was working smoothly and avoiding offline transactions
meant saving time and paperwork. So, I went to UTI
AMCs website for subscription to a direct plan. After
giving a few personal details, the transaction was aborted.
My KYC was incomplete. It was a surprise, considering
that my KYC was done in 2008. In January 2012, SEBI
had introduced new KYC norms which meant that anyone
with KYC prior to 2012 had to go through process of
re-compliance. The AMC saved my application and even
sent an email from Karvy about incomplete application
which could be completed once the KYC was done. But
there was no call to help complete the KYC.
After resubmitting the KYC documents, I was ready for
online investing. I soon discovered that a few AMCs, like
HDFC Mutual Fund and Tata Mutual Fund, do not allow ``
31| 9 July 2015 | MONEYLIFE
Cover Story.indd 5
20-06-2015 15:34:34
COVER STORY
W allow absolutely
We
pa
paperless online
fol
folio creation even
for new subscribers.
The
There is no need for
doi
doing any leg of the
tran
transaction offline.
For offline, it can be
don
done at AMC office
or at
a registrars office
Your application has to be completed and signed by

all applicants. PAN details are mandatory. Attach copy of
the KYC with the application form. It can be downloaded
from any one of the five KYC registration agencies (KRAs)
website, like CVL KRA.
Where To Submit Application? You have the option of
AMCs office or the registrars (Karvy, CAMS, etc) office.
Your city may not have office of all AMCs; this means going
to a registrars office will be your best bet. Make calls to
the local Karvy and CAMS office to check which AMCs
they service. You may be asked if you need the help of an ``
Direct Offline Investment
Aas
Aashish
P Somaiyaa, MD and
CEO, Motilal Oswal AMC
CEO
BASIC
Get your KYC

(if not done)
` complete online process for folio creation, even though
they allow online transaction for additional purchase once

a folio is created. A few others allow online process for
folio creation, but physically signed application forms
need to be submitted.
According to Aashish P Somaiyaa, MD and CEO,
Motilal Oswal AMC, We allow absolutely paperless
online folio creation even for new subscribers. There is
no need for doing any leg of the transaction offline. For
offline, it can be done at AMC office or at registrars office
depending on what the investor finds convenient. Our
registrar is Karvy.
Getting Started Offline: Some investors are comfortable
with online process for subscription, but I chose offline
subscription with a minimum investment of Rs5,000.
The idea was to get a folio created and then check the
account statement to find if all the personal details are
correctly captured. Also, to ensure that the subscription
was for Direct plan, which can work if you do not leave
the advisors name and ARN and the sub-brokers name
and ARN blank. Offline subscription will require you to
download the application form from the AMCs site which
is easier than visiting their office just to get the forms.
Double-check Your Application: AMCs have two schemes
for each type of product. The direct scheme has the
word Direct in it; hence, when you write a cheque for
subscription, you need to ensure that you have specified
the scheme with the word direct. Cheques are drawn in
favour of the Specific Scheme Name, dated and signed.
Fill up the full name of each holder, complete address,
bank mandate, PAN details, scheme, plan, option details,
payment details, mode of holding (first holder only, anyone
or survivor, joint), legal status, etc.
Mention
Direct in
scheme
name
Mention
Nominee
Put Direct
as ARN
Check the
registrar from
the AMC
website.
APPLICATION
Visit the closest

(AMC/registrar)
to submit form
before 3:00pm
Call, email AMC to

get corrections done.
Local office will also
help. Other option is
registrar office
Check account
statement for
accuracy (mobile,
email, single/joint,
PAN, investment
amount, etc)
Print
application
form from
AMC website
Fill the
details
CALL TO
CONFIRM
Get
acknowledgement
of submission
with date and time
stamp
CHECK
FOLIO
Cover Story.indd 6
20-06-2015 15:34:50
COVER STORY
` advisor for completion of the application form. Politely
decline it as it means you will not be able to go direct. Do

not let anyone help you to fill the application form as
it will mean they will put their ARN instead of Direct.
From my choice of schemes, two were with Karvy
and two with CAMS. Karvy wouldnt accept application
forms of UTI and Axis, even though Karvys website listed
them. I was told to go to the AMCs office. Getting a time
stamp on the acknowledgement of the application form is
important as any dispute with NAV can be resolved only
if you have the time of submission stamped.
Teething Issues: AMCs will create a folio, based on your
application, and also encash your cheque and send SMS/
email confirmations. Check the account statement which
the AMCs will send by email. If you do not receive it, ask
for it. One application made with CAMS did not carry
the joint account-holders details in the folio and one
application made with the AMCs office did not capture
the mobile number correctly. Calls to CAMS for getting
the joint account-holder details added to the folio did not
get a quick response. Finally, after a couple of days, a call
to the AMCs local office got the issue resolved in a jiffy.
Similarly, call to the customer-care of another AMC got
the mobile number corrected.
Time To Get Online
Your login id will be your registered email address. When
you subscribe to an MF scheme, the application form may
ask you if you want a PIN to be created. You can select it
as you want to go online to make additional purchase/s.
Some AMCs only require login password while others
need login password and PIN, to allow you to access
your account and make online transaction. Think about
PIN as an additional level of authentication. Some may
send PIN by SMS; others may send PIN via email in a
password-protected document. Just follow the steps of
each AMC to get the login password and PIN (if required)
so that you have access to your account and are able to
do transactions.
AMCs that require PIN have the option of transaction
without PIN. Try to avoid it as the without PIN option
does not show you account details; it merely allows you to
make additional purchase or other transactions. Getting
access to your account online is important to know if the
transaction was, indeed, completed and the units credited
to your account. If you dont have access to account
online, you will have to ask for the account statement
for each transaction to know if additional purchase was
really credited to your folio. Redemption through online
transaction may not be allowed without PIN. Kotak AMC
insisted on giving PIN after a physical form was signed
and submitted at its office or the registrars office. They
Direct Online Investment

FOR NEW
FOLIO
Get your KYC

(if not done)
Check folio
for accuracy
when created
by AMC
Make online
payment
SETUP YOUR
ONLINE ACCESS
FOR EXISTING
FOLIO
Login-id will
be registered
email
Check
calendar to know
the holidays. Some
holidays are only for
debt/liquid funds
Select the direct

scheme. Options
other than netbanking
and debit card
possible
Get account
statement if
required
MAKE ONLINE
PURCHASE
BEFORE 3:00PM
ON WORKING
DAY
Make payment.
You may get SMS,
email confirmation
of pending
transaction
You may get

SMS, email
confirmation
of completed
transaction
Check if AMC
supports online
for new folio
Fill personal,
bank account
details
Get login
password and
PIN (if required).
Given by SMS,
email or physical
mail
Use netbanking or
debit card of the
bank mentioned
in form
CONFIRM
YOUR
PURCHASE
Check online if
purchase was
done for requested
amount
sent the PIN by post which meant some delay in making

online purchase using PIN. So, do whatever it takes to
have full control over your online account and to make ``
Cover Story.indd 7
20-06-2015 15:35:05
COVER STORY
Top 10 Mutual Funds

Fund House
E-KYC
KYC @ AMC office
Online Folio Creation
Net Banking & debit

card option
PIN given online

OR offline
No
No
No
No
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Existing Folio Required

Yes
Courier documents
Courier documents
Yes
Yes
Courier documents
Yes
Net Banking & debit cards

Net Banking & debit cards*
Only Net Banking
Net Banking & debit cards**
Only Net Banking
Online
Online
Online
Online
Online
Online
Online
Online
Online
Offline
HDFC
ICICI Pru
Reliance
UTI
Birla Sun Life
Franklin Templeton
SBI
IDFC
DSP Blackrock
Kotak Mahindra
* Only VISA ** Only Citi and SBI
` transaction like additional purchase. If your folio has a
second account-holder, you will get two PINs. If the mode

of operation is anyone or survivor, then only one PIN
can complete the transaction; if it is a joint holding, both
PINs will be required.
Ready To Make Online Purchase? It is time to test if you
can really make an online purchase. You will be allowed
to make the payment from the account which you specified
as bank mandate when your folio was created. So, ensure
that you have netbanking facility with that bank account
with transaction password or facility to get one-time
password (OTP), to complete the transaction. The other
option for payment is by debit card from the same bank
account. Principal Mutual Fund did not allow netbanking
with the bank I had given in my mandate. It was perplexing
as the AMC had listed the bank as being supported for
netbanking. An email complaint took five days to resolve.
It could be some technical issue. Netbanking payment
happens through a vendor called Billdesk. I have tried
it multiple times for different AMCs and there have been
no issues. But each investor should have a limit up to
which you can be comfortable with online payment. Any
investment beyond your pre-decided limit should be done
offline preferably by cheque payment. You dont want to
have a failed online transaction for a large amount and
having to follow up to get back the credit to your account.
Other Online Payment Options: A few AMCs like Reliance,
Quantum and Tata AMC have One Time Bank Mandate
(OTBM) option which helps to avoid debit card or
netbanking option. It can take up to a month to set it up
as the bank is given an application by the AMC which
has to be signed by you. OTBM online option works like
offline without having to visit AMCs/registrars office.
The transaction amount is not debited immediately from
the savings account, but is presented like a cheque to
the bank. It can take four business days for funds to get
credited to your MF account and you will get the NAV
of the day the funds were credited.
While OTBM worked, NEFT (National Electronic
Funds Transfer) option to the MF account did not work for
me, even after trying twice with Reliance AMC. The AMC
specified a unique beneficiary account number containing
my PAN number to which NEFT was to be done. The
money was refunded to my bank savings account with
an error statement of Transaction rejected by RBI. The
key is to try any new payment option with the smallest
amount (Rs1,000) so that you can check if the process
works satisfactorily. Immediate Payment Service (IMPS)
is another new option.
Overall Satisfaction with Processes: Kudos to all the AMCs
that were tested out as all of them worked well. The
experience of email and phone to customer-care, email
and phone to local office was fine. The registrars, Karvy
and CAMS, are also good for submitting application for
purchase or redemption. But they may not be able to handle
some other needs. For example, if you are trying to add a
nominee to an existing folio or trying to correct the phone
number on an existing folio, you may be told to visit the
AMCs office. Once you have embarked on the route of
direct investment, you will not have any intermediary to
take care of service issues. You have to get it done with
the AMCs or Registrar help.
Today, there are numerous ways to invest in MF
schemes. You can do so with mobile app, SMS, phone
call to call centres, through stock exchange platform, etc.
But the most common will be offline application form and
online transaction through the AMCs website. Legwork
will need to be done, to get your folio set up and testing
out the online purchase for additional investment. It should
be smooth sailing after that. Go direct and save money.
Cover Story.indd 8
20-06-2015 16:00:02
19-06-2015 21:45:16
COVER STORY
MO NE Y L I F E S URVE Y
Do you think you can invest in MF

Direct plans through bank or website
other than AMC?
Direct Investing: Awareness

and Misconceptions
Many respondents are under the wrong impression that free
websites (other than those of AMCs or registrars) and banks offer
them direct plan
ur online survey
on direct mutual
fund (MF) investing
received
606
responses. At first
glance, the survey shows that
awareness and actual investment in
Have you invested in DIRECT plans of

mutual fund schemes (debt, equity,
liquid, hybrid)?
75.9%
3.3%
Yes
Not Aware
20.5%
0.3%
No
Not Sure
direct plans of MF schemes is high.

Three out of four respondents have
already invested in direct plans. But
only 45% of the respondents have
correctly stated that if you invest
through a bank or a website (other
than that of an AMC or a registrar),
it will not give you a direct plan. The
Cover Story will guide you in your
offline and online direct investment
in MF.
Nearly 70% of the respondents
correctly feel that there is a significant
benefit in direct investing. As a new
subscriber who invested direct with

AMC or registrar, 53% were able
to do it online through the AMCs
website; 32% did it offline at the
AMC office and 15% did it offline at
the registrars office. It means several
respondents were able to invest online
even as a new subscriber.
As existing subscribers who
invested direct with AMC or registrar,
70% invested online through AMCs
website and also stated that online
with netbanking was the preferable
route of direct investment; 22% did it
offline through the AMCs office and
8% did it offline through the registrar.
The number of online investors with
existing folio is higher than new
subscribers buying online.
Comments from direct investors
show that many think that investing
through Fundsindia, securities
Do you feel there is a significant

benefit of investing in MF Direct
plans?
69.8%
15.2%
Yes
Not Sure
15%
No
29.7%
25.1%
Yes
Not Sure
45.2%
No
companies, portfolio managers of

banks, brokers, etc, are good channels
for direct investments. But will they
really give you direct plans? You will
end up with regular plan without
knowing about it. CAMS online was
also identified as a direct channel and,
indeed, it is correct; it should give
direct plan as it is a registrars website.
One out of three

respondents feels that
KYC process is either not
so easy or it is difficult.
This is also reflected
in numerous survey
comments
Nearly 40% of the respondents
completed the KYC for MF investment
though a distributor/agent/bank. It
means direct investors take the help
of an intermediary for completion
of KYC and, subsequently, move to
direct mode of investment. Nearly
25% complete KYC through the
registrar and 29% with the help of
AMC. One out of three respondents
feels that KYC process is either not so
easy or it is difficult. This is reflected
in numerous comments like personal
visits with originals, submitting
hard copies for KYC process tedious ``
Cover Story.indd 10
20-06-2015 15:35:38
COVER STORY
Which is a preferable route of Direct

plan investment?
16.2%
12.7%
2.8%
Offline
68.3%
Online
I did not invest in Direct plans
Other (please specify)
Here are some of the respondent

experiences about direct investment:
You need to log in to each website
separately to invest. It would be a
good idea if AMFI can provide a
platform to invest on their website
for any of the MF direct plans.
The experience is good on the AMC
websites and awaiting for AMFI MF
Utilities for a common place to invest.
AMFI MF Utility is not offering
online investment facility. Hence,
useless to investor.
There is no standardised procedure
How did you complete your mutual

fund KYC?
` because service-providers are not
nearby; and not easy due to in-person

verification.
Two out of 10 respondents have
not invested direct. Of those who
have done direct investment, nearly
80% are happy with the experience of
investing in a direct plan. It shows that
investors are benefiting with higher
returns than available through regular
plans and feel it is worth the effort to
go direct.
Which of the following is a preferable

payment option for online investment
in Direct plans?
6.3%
18%
Debit card
71.3%
I do not invest online
4.5%
Net banking
for new subscriber is easy only for a

very few AMC who offer paperless,
seamless purchase.
Some easier process needs to be found
for new subscribers for generating
folio number.
With some AMCs and banks that
have efficient netbanking facilities,
the process is very convenient and
time-saving.
Special mention of CAMS online,
but it does not cater to all AMCs.
No tension of the agents meeting us
and forcing us to invest in more plans
and continuously disturbing us.
Can avoid the pressure of distributors/
brokers coming with all sorts of advice
and mostly contradicting one another
and causing more confusion. Also, this
makes you do homework on your own
and reach a reasonable conclusion.
Lot of difficulty in service. Change
of bank mandate was a pain.
No support from AMC, but if its
through agent, we get our query
solved.
How did you find mutual fund KYC

process?
39.3%
Through a MF distributor/agent/bank
29%
Through the AMC
24.3%
Through the registrar
3.1%
I have not invested in mutual funds
4.3%
across all AMC to invest in Direct

Plans of MF.
Online investing still requires you
to print and mail a physical form,
despite being KYC compliant! That's
ridiculous, as a couple of times, the
AMC has misplaced my application
form and not given me the folio
number!
Most AMCs require that you have
an existing folio with them in order to
invest online. Whereas some let you
invest online directly even though you
are a new customer.
Presently, investing in the Direct plan
61.2%
Easy
8.7%
2%
Difficult
4.8%
Cant say
I have not invested in mutual funds
23.3%
Not so easy
Loss due to wrong choice is bigger

than saving in NAV price.
Not equipped to analyse the scheme
other than performance and we might
end up buying the wrong scheme.
Lower the expense ratio... higher the
returns!
Cover Story.indd 11
20-06-2015 15:35:51
StockWatch
A section on stocks and sectors that catch our eye
How Did We Do in 2014?

Stocks from our Street Beat section were up 50% and those from our Cover Story of
20 March 2014 were up 79%. From this issue, we are closing the Street Beat section
Performance from Street Beat Stocks
Company
Vesuvius India
463.80
707.25
52%
Heritage Foods
23 Jan
227.50
329.40
45%
Acrysil
6 Feb
179.60
545.50
204%
20 Feb
84.05
283.70
238%
Ambika Cotton
6 Mar
302.35
783.75
159%
Narmada Gelatines
20 Mar
93.43
156.80
68%
Sandur Mang & Iron
17 Apr
559.55
587.75
5%
Hind Media Ventures
29 May
155.50
221.10
42%
10 Jul
260.90
488.10
87%
Bharat Electronics
24 Jul
1,779.50
3,347.25
88%
Morganite Cruc ible
21 Aug
395.00
548.00
39%
Indo Borax & Chem
18 Sep
220.55
234.60
6%
2 Oct
310.30
387.70
25%
Navneet Education
30 Oct
95.40
99.25
4%
R Systems Intl
27 Nov
64.00
86.85
36%
KSE
11 Dec
595.75
708.00
19%
National Peroxide
26 Jun
621.55
561.50
-10%
Kirloskar Pne umatic
7 Aug
584.90
546.25
-7%
Anuh Pharma
Igarashi Motors
Price 31 Mar-15 Return

Rs
9 Jan
Finolex Cables
ur stock research did very well over 2014,

beating all the indices and most mutual funds
handsomely. Street Beat active stocks, as on
31 March 2015, rose on an average of 50% (since
the date of recommendation) when the Sensex rose
just 15% on an average. Cover Story stocks managed
to give an average return of 79% when the Sensex
managed to gain 28% for the relevant period. An
active stock refers to a stock which has not been
exited up to 31 March 2015. Our Street Beat section
focused on many small-cap stocks because these are
not tracked by analysts and fly below the radar of
institutional investors. Such stocks had a great run in
2014. Here is our report card.
2014
Issue
Jaysynth Dyestuff
4 Sep
61.85
34.50
-44%
Excel Crop Care
16 Oct
900.00
824.50
-8%
MOIL
25 Dec
296.90
276.20
-7%
Exit
Aarti Drug s
Aarti Industries
PBM Polytex
APM Industries
Exit Price
3 Apr
263.30
597.50
127%
1 May
130.00
214.10
65%
15 May
57.50
75.45
31%
12 Jun
27.20
37.00
36%
``
StockWatch.indd 2
20-06-2015 15:40:47
STOCK WATCH
Profit from Cover Story Stocks

Company
Issue 2014
Price
31 Mar-15
Gain
Accelya Kale Solutions
20 Mar
Rs675.40
Rs931.65
38%
DPS Gain + Dividend

Rs33
Rs964.65
%age Gain
43%
Ador Fontech
20 Mar
Rs60.40
Rs88.50
47%
Rs3.50
Rs92.00
52%
Akzo Nobel India
20 Mar
Rs789.55
Rs1405.10
78%
Rs75
Rs1480.10
87%
Cheviot Co
20 Mar
Rs294.80
Rs337.20
14%
Rs15
Rs352.20
19%
Infinite Computer Solutions
20 Mar
Rs124.90
Rs253.20
103%
Rs2
Rs255.20
104%
Lumax Auto Technologies
20 M ar
Rs96.00
Rs282.30
194%
Rs6
Rs288.30
200%
Swaraj Engines
20 Mar
Rs650.25
Rs808.25
24%
Rs35
Rs843.25
30%
Andhra Bank
20 Mar
Rs58.60
Rs79.05
35%
Rs0
Rs79.05
35%
Syndicate Bank
20 Mar
Rs88.70
Rs101.30
14%
Rs3
Rs104.30
18%
GIC Housing Finance
20 Mar
Rs100.10
Rs222.75
123%
Rs6
Rs228.75
129%
Tourism Finance Corp of India
20 Mar
Rs23.05
Rs67.90
195%
Rs2.20
Rs70.10
204%
DPS - Dividend Per Share
Of the 26 stocks recommended in our Street Beat

section, four stocks were exited at profit. Aarti Drugs,
mentioned in our issue dated 3 April 2014, was added
on the merits of the companys ability to launch bulk
actives at low cost and provide contract research and
manufacturing to partners in the developed markets.
This stock was added at a price of Rs263.30 (when it
was trading at a price/earnings of 5.95). Within a span
of four months (18 July 2014), the stock reached at PE
of 11.72. This was close to its highest PE (10.78) since
September 2005. We booked a profit of 127%.
Similar was the price performance of Aarti
Industries which was exited at profit of 65% (issue
dated 7 August 2014) as it came close to its highest PE
level since June 2007. PBM Polytex, a cotton textiles
company, was added in our issue dated 15 May 2014
when it was trading at Rs57.50. The stock soon surged
from this level to Rs93.05 on 12 September 2014. We
exited from the stock, in our issue dated 16 October
2014, booking a profit of 31%. At the time of exit,
it was trading at PE of 3.41 which was its highest
since September 2012. APM Industries, yet another
textiles sector stock, which is into manufacturing and
marketing of synthetic blended yarn, surged 55% from
the time we added it. We exited at a profit of 36%
in our issue dated 16 October 2014. The stock hit its
highest PE of 3.91 since June 2009. Grindwell Norton,
which was added in our issue dated 13 November
2014, never hit its recommended price.
Of the remaining 21 stocks, our assessment
went wrong about Jaysynth Dyestuff which was
recommended when it was trading at Rs61.85. From
there, it went to hit its 52-week high closing at
Rs69.80 on 27 August 2014. However, deteriorating

fundamentals pulled the stock to its 52-week low
closing at Rs33 on 26 March 2015. It was trading 44%
below its recommended price on 31 March 2015.
There were a few more in this category, namely,
National Peroxide, Kirloskar Pneumatic and MOIL
which closed lower on 31 March 2015. National
Peroxide rose 34% by January 2015 from the
recommended price but since then, the stock moved
down. Excel Crop Care, technical-grade manufacturer
and formulator of agro-inputs, was mentioned in our
issue dated 16 October 2014 at Rs900. The stock hit
the price on 9 February 2015. By 19 March 2015, it
rose 8%. The five stocks which closed lower were, on
an average, down by 15%.
As many as 16 stocks surged an average of 70%.
Acrysil, aspiring to become a one-stop lifestyle kitchen
products manufacturer, was added when it was trading
at PE 9.78. By September 2014, it surged to a PE level
of 31.69. At the end of March 2015 (based on four
quarter trailing net profit for quarter ended December
2014), the stock was trading a PE of 28.11. This is
among the top two gainers (204%) in our list. Finolex
Cables, the top gainer in our list, closed 238% up.
The lowest gainer has been Navneet Education which
gained 4% since it was recommended.
Our cover story of 20 March 2014 on stocks with
dividend yield worked out very well. These stocks
delivered 84% returns (79% on price and 5% on
dividend). Of the 11 stocks only Andhra Bank did not
declare dividend between 1 April 2014 to 31 March
2015. Akzo Nobel paid the highest dividend of 750%.
It delivered 87% (inclusive of dividend).
StockWatch.indd 3
20-06-2015 15:41:32
STOCK WATCH
Quality Trumps Market

Valuation
Even if you buy quality stocks when market
valuation is high, you will do fine
e are advocates of timing the marketthat

is, avoiding investing in stocks when market
valuation is high by historical levels. We are for picking
stocks that sport high return on capital employed
(RoCE) but are available at relatively lower valuation.
What happens when you pursue the second factor
but not the first? That is, what if you buy really good
quality stocks when the overall market valuation is
high? Can they beat the market and give you good
returns? Or do you have to wait for years to get your
gains?
We did a study exactly on this issue and the
results are fascinating. Good quality stocks, bought at
High-quality Stocks in 2010

Company
Ponni Sugars (Erode)
Pasupati Acrylon
Mangalam Cement
RS Software (India)
Mayur Uniquoters
Symphony
Diamines & Chemicals
Ador Fontech
HIL
Supreme Petrochem
Prism Cement
Jenburkt Pharmaceuticals
Supreme Industries
Tasty Bite Eatables
Goodyear India
Navin Fluorine Intl
MRF
Ceat
Indag Rubber
Uni Abex Alloy Products
Nagarjuna Agrichem
Dharani Sugars & Chemicals
Birla Corporation
VST Tillers Tractors
Vardhman Acrylics
reasonable valuation, tend to do very well even when

they are bought during the periods of high overall
market valuation. For instance, the price earnings ratio
(PE) of the Nifty in January 2010 was a high 23.31.
If you had bought the following stocks then, you still
would have got an average return of 33.44%
for one year and 32.89% annualised return
upto June 2015. For the year 2010,
the Nifty gave a return of 17%; from
January 2010 up to 16 June 2015, it
gave 8% annualised return upto June
2015.
The following table shows how
value investing, even at high market
valuation, would have helped. If
you had selected the top 25 stocks
(companies other than those in
banking & finance), based on low market-cap
to operating profit (MC/OP) and having a return on
capital employed (RoCE) of 20% or above, your gains
``
---------------------- Price ---------------------- -------- Performance --------
RoCE *
MC/OP
4 Jan-10
31 Dec-10
16 Jun-15
1 Year
CAGR till
date
76%
56%
61%
48%
62%
75%
48%
56%
44%
40%
57%
41%
43%
44%
53%
41%
40%
31%
43%
35%
43%
31%
42%
58%
33%
1.85
1.58
2.15
1.81
2.58
3.30
2.69
3.08
2.63
1.98
3.33
2.79
3.10
3.22
3.63
2.73
2.82
1.59
3.60
2.32
3.65
1.91
3.86
5.47
2.36
137.95
9.03
165.00
20.92
14.91
38.54
44.93
33.10
463.75
31.85
50.80
39.95
77.54
161.85
195.45
339.85
6,142.95
149.25
18.24
150.45
24.21
103.25
346.65
351.90
12.85
129.05
7.97
132.05
22.32
34.46
166.71
57.20
69.62
486.10
58.20
52.95
81.25
144.45
164.00
283.00
292.05
7,207.60
134.00
19.70
153.05
14.52
47.10
362.90
463.60
12.05
143.00
7.80
238.25
153.40
401.95
2,086.10
28.00
92.05
591.50
76.90
111.30
355.90
671.60
1,072.50
528.25
880.25
32,406.40
634.80
155.10
507.50
14.15
12.60
405.10
1,363.25
26.20
-6%
-12%
-20%
7%
131%
333%
27%
110%
5%
83%
4%
103%
86%
1%
45%
-14%
17%
-10%
8%
2%
-40%
-54%
5%
32%
-6%
1%
-3%
7%
44%
83%
108%
-8%
21%
5%
18%
15%
49%
49%
41%
20%
19%
36%
30%
48%
25%
-9%
-32%
3%
28%
14%
* - Return on Capital Employed, based on four quarter trailing EBIT ending December 2009; based on 2009 capital employed
MC/OP - market-capitalisation/operating profit, based on four trailing operating profit ending December 2009
StockWatch.indd 4
20-06-2015 15:41:46
STOCK WATCH
` would have been really high. There were investments
which made losses. But this is where diversification

played an important role. It enabled investors make
good money, despite some of the investments not
offering good returns.
First, the stocks that disappointed. In
2010, sugar stocks looked promising. They
sported low valuation and high
RoCE. But the industry suffers
from intense political interference.
One of the reasons why the sugar
industry went into the doldrums
was the export ban on sugar, to keep
domestic prices in check. Then, sugar prices
weakened due to imports. This affected Indian
manufacturers again. On the positive side, performance
of stocks, like Symphony, Mayur Uniquoters, Jenburkt
Pharmaceuticals, Supreme Industries, Indag Rubber,
RS Software, VST Tillers Tractors and Ador Fontech,
to name a few, were great performers.
Mayur Uniquoters and Symphony were the major
gainers till date since the beginning of 2010. Did the
results get skewed by the presence of these outstanding
winners? Not exactly. Even though these stocks
witnessed a major run-up, the overall CAGR (32.89%)
wouldnt have been affected much had they not been
present in the portfolio. The CAGR of the top 23
stocks would have been at 31.58%.
What about now? The Nifty is trading at PE of
22.30. Against this PE, which are the stocks with low
valuation and high RoCE? Here is a short list as on
16 June 2015.
High-quality Stocks in 2015

Company
Bhageria Dye-Chem
Aksharchem (India)
RS Software (India)
KSE
Premco Global
Avanti Feeds
Vakrangee
VST Industries
Kesar Terminals & Infrastructure
Indo Count Inds
Accelya Kale Solutions
Orient Refractories
Manali Petrochemicals
Jenburkt Pharmaceuticals
Kriti Nutrients
NGL Fine-Chem
TVS Srichakra
Indag Rubber
MRF
Umang Dairies
Sonata Software
National Steel & Agro Inds
Waterbase
Sun TV N etwork
Bharat Rasayan
RoCE
MC/OP
71%
53%
51%
83%
51%
75%
43%
65%
40%
45%
109%
52%
29%
43%
28%
29%
33%
38%
30%
32%
38%
26%
29%
32%
28%
1.93
3.36
4.35
6.03
6.29
7.56
7.48
10.30
6.94
8.87
14.86
13.24
3.78
10.82
2.59
5.15
7.37
9.94
5.84
7.40
10.73
0.32
6.14
7.57
4.96
* - Return on capital employed, based on four quarter trailing EBIT ending

March 2015; based on recently available information on capital employed
MC/OP - market-capitalisation/operating profit, based on four trailing
operating profit ending March 2015
Debt- equity ratio = Debt / Debt+Equity

ebt Equity Ratio: This ratio is used
It can be read as the extent to which debt
to calculate how much of business
being used in the total funds employed by
assets are financed by debt and equity. A
the company.
higher ratio indicates more dependence on
Debt Service Coverage Ratio: It measures
debt which is risky. A higher debt equity
a companys ability to service its debt. This
ratio is particularly adverse when the cost
Some
Market
is done by comparing net operating income
of debt (interest) is high. Companies with
Terminologies
to debt commitments. Operating income
high debt equity ratio cannot create value
Explained
means the profit remaining after meeting
over the long term. Companies in capitalall operating expenses. We consider profit
intensive businesses, such as infrastructure
before interest and taxes (PBIT). Debt
and commodities, or commodity-oriented
industries, like textiles or steel, have a higher debt equity commitments include interest payments, loan instalment
and other commitments towards debt. The higher the
ratio. In contrast, well-run software and consumer
products companies have a have lower debt equity ratio. ratio, the higher is the ability of the company to meet its
debt obligation. Debt Service Coverage Ratio = PBIT /
Debt- equity ratio = Debt / Equity
Total debt service cost.
This ratio at times is also shown as
StockWatch.indd 5
20-06-2015 15:41:59
STOCK WATCH
Y-o-Y ML Consumer Product Growth

OP Growth
Sales Growth
20%
40%
y-o-y Sale Growth
y-o-y OP Growth
18%
30%
10%
-10%
Mar 15
0%
Sep 14
12%
Mar 14
10%
Sep 13
14%
Mar 13
20%
Sep 12
16%
Mar 12
f the 27 sectors we track, Moneylife Consumer

Products Index is trading at its historically high
valuation leveleven as the growth of consumer
products companies are stagnating. For this piece of
analysis, we have taken into consideration all large-cap
and mega-cap companies in this sector in our database.
The companies included in this Index are: Hindustan
Unilever, Dabur India, Godrej Consumer Products,
Colgate-Palmolive, Marico, Procter & Gamble
Hygiene, Emami, Gillette, Bajaj Corp and Jyothy
Laboratories.
The best of the lot is Bajaj Corp. For the March
2015 quarter, it recorded a revenue growth of 28%,
operating profit growth of 52% and net profit growth
of 42% on a year-on-year (y-o-y) basis. These are
above their respective five-quarter averages. The stock
hit its highest PE (since September 2010) of 39.07 at
the end March 2015. On 11 June 2015, the stock was
trading at a PE of 36.10. It is also close to its highest
valuation level. Its market-cap to sales (MC/sales)
is 7.62 times (highest at 8.25 times at end of March
2015) and market-cap to operating profit (MC/OP) is
32.57 times (highest at 35.25 times at end of March
2015).
For March 2015 quarter, revenue growth of
Colgate-Palmolive has stagnated at 10.92% which
is below its five quarter average. This is the lowest
revenue growth since June 2005. Its operating profit
growth was 26% and net profit growth was 24% on
a y-o-y basis. These are above their respective five
quarter averages. The stock hit its highest PE (since
March 2008) of 49.01 at the end March 2015. On
11 June 2015, it was trading at a PE of 45.66. Colgate
Palmolive is currently trading at MC/OP of 31.04 times
(highest was 33.32 times at end of March 2015).
For March 2015 quarter, Dabur
Indias revenue growth, operating
profit growth and net
profit growth were
below their respective
five quarter averages.
Currently, its PE and
valuation in terms of
MC/sales and MC/
OP are trading close
to its highest level
Sep 11
Mar 11
Based on historical valuations, they are
since March 2008.

For the second consecutive quarter (March 2015),
Hindustan Unilever recorded a revenue growth which
is below its five quarter average, though the operating
profit growth of 18% and net profit growth of 17%
are above their five quarter average. Currently, its PE
and valuation, in terms of MC/sales and MC/OP, are
trading close to its highest level since March 2008.
For the third consecutive quarter, Procter & Gamble
Sep 10
Are Consumer Products

Stocks Too Expensive?
has recorded revenue growth, operating profit growth

and net profit growth below the respective five quarter
average. The revenue growth of 11% for March 2015
has been the lowest growth since December 2010.
Operating profit growth of 13% has been the lowest
since December 2012. Net profit growth of 8% has
been its lowest growth since March 2013. The stock is
trading at an extraordinary valuation. Its PE is 62.23,
MC/sales is 9.05 and MC/OP is 43.52close to its
highest PE and valuation level since
March 2008.
This, of course, does not
mean that these overvalued
stocks will fall sharply from
their current levels. It merely
means that the future returns
from these stocks
will not be as great
as their past returns.
These stocks would be
more attractive after
they have declined
somewhat.
StockWatch.indd 6
20-06-2015 15:42:14
STOCK WATCH
UN UOTED
STORIES OF PRICE MANIPULATION
Birdhi Chand Pannalal

Agencies
irdhi Chand Pannalal Agencies

Limited (BCPAL) was earlier in
the textiles business. In May 2015,
the management decided to change
the name of the company to BPCL
International Ltd. Earlier, BCPAL had
also announced plans to diversify
into financial services and take over
control of a non-banking finance
company. Further, it plans to apply
for a dealership of Steel Authority of
Indias products. All this is rubbish.
Over the past four quarters, BCPAL
reported total revenue of just Rs40
(Rs)
615
495
3451%
375
255
135
15
Sep-14
Jan-15
Jun-15
lakh and a loss of Rs11 lakh. Yet, over

the past nine months, the stock price
appreciated by more than 3451%, or

36 times, to Rs559.25 on 11 June 2015,
from Rs15.75 on 8 September 2014.
In other words, if you had invested
Rs10,000, in just nine months, you
would be richer by over Rs3.55 lakh.
Just one to four stocks were traded
in each trading session over the past
year, except in a few bulk deals. Each
time, the stock hit the upper circuit.
However, from 3 June 2015, the trend
reversed direction, hitting the lower
circuit in each session. Another pump
& dump operation? The regulator
doesnt seem to care. The company
has some 1,200-odd shareholders.
Who are they?
MARKET TREND
Holding On
about being drawn into this game;

public sector banks are weighed
down by bad debt. So, kick-starting
Big public investments can lift earnings.
growth, even with public investment, will
Until then, hope for a market decline
have to wait.
s happens when the market is overvalued, the
In effect, for a durable rally, we need to seek the
indices are struggling to advance. On 5th June, the
help of valuation, not earnings growth. In other words,
Nifty closed at 8,114. On 19th June, it closed at 8,225.
the market will be attractive only on a decline to a
That was a rise of just 1.37%. Its been a tough slog for
fair valuation range. What is that range? We believe
the bulls as they wait patiently for the green shoots of
a Nifty PE of 21 and below, on a trailing basis, will be
ous issue, recovery
Ni of 7,600 and below. In
recovery. As mentioned in the previous
fair. This translates to a Nifty
s, when the
will happen when it happens; that is,
other words, if, for som
some reason, the market falls
le will, of
business cycle turns higher. The cycle
to this level, it would become
gher
course, turn higher when there is higher
attractiveeven if there
demand. Higher demand, in the
is not much scope of
e
Modi regime, could come from
earnings
growth.
stronger public investment. This
Of course, there is a bunch
in
is also the thinking in the Central
of individual
stocks that remain
attra
ministry of finance. Thats the bestattractive
even at the current
w
case scenario.
level which
we have written about
nario is that public
Now, the problem with this scenario
in the magazine and highlight
ve
investment goes into capital-intensive
them in the stockletters. These
projects and needs to be supported by
remain
investment-worthy even now,
Medium-term:
bank lending. Unfortunately, private

whether or not the business cycle turns
Long-term:
Up
sector banks are small and cautious
up. Debashis Basu
StockWatch.indd 7
20-06-2015 15:42:26
13.61%
NIFTY
17.70%
Changes to Our Stocks Section
LONG TERM PORTFOLIO
STOCKGRADER LONG TERM
ANNUALISED RETURN
SINCE 31 JANUARY 2013
Beginning this issue, we are dropping the Street Beat section and Long-term model portfolio
egular readers would have noticed that we

have now made extensive changes to the stock
information we publish. Earlier, our
stocks section consisted of analysis of onee
company in the Street Beat section; theree
was one item about stock manipulation,
a list of value stocks and a model
portfolio. We then added a new
sectionStock Watchwhich vastly
expanded the section even as we
dropped the list of value stocks. With
this issue, we are making two important
changes. We are dropping the Street
Beat section and ending the model long-term
portfolio we had started in 21 February 2013. We will
retain the Unquoted section in the Stock Watch section,
as it showcases, in every issue, examples of blatant price

manipulation.
The Street Beat section has been an outstanding
performer over the years, handsomely beating most
p
ttop mutual fund schemes. In fact, as our report
card on page 38 shows, over the past year, we
have notched up a return of 50%. The longterm stock portfolio, consisting of many large
cap stocks, has also easily beaten the Nifty
over this period. So, why are we closing these
two sections that have been an essential part
of the magazine?
We now put out a gamut of stock information
and there is a need to avoid overlap between them
to avoid confusion. Many readers of the magazine are
also subscribers of the stockletters. They have often ``
Return Ratios@
Valuation#
No. Company
ML Sector
RoE
RoCE
MC/OP
MC/Sales
Entry Price
CMP*
Hero MotoCorp
Auto
43%
48%
18.46
1.86
1,823.40
2,526.30
39%
Shree Cement
Cement
13%
10%
27.71
5.92
4,470.55
10,712.20
140%
TCS
Software & IT Services
44%
44%
35.42
6.59
1,344.15
2,530.05
88%
Sun TV Network
Media
23%
32%
7.20
5.56
472.10
309.50
-34%
Lupin
Pharma
34%
42%
37.68
9.32
629.05
1,794.85
185%
Mindtree
33%
36%
16.98
3.06
457.27
1,318.25
188%
HDFC
Financial Services
22%
19.65
6.62
845.00
1,213.30
44%
HDFC Bank
Banks
23%
13.54
4.11
683.00
1,019.60
49%
Kotak Mahindra Bank
Banks
15%
34.66
9.18
774.70
1,307.40
69%
10
Bajaj Auto
Auto
29%
35%
20.84
3.66
1,820.35
2,397.35
32%
11
Asian Paints
Paints
37%
48%
35.09
6.06
457.37
729.10
59%
12
Sun Pharma ^
Pharma
28%
29%
57.97
8.36
484.68
856.05
77%
13
IndusInd Bank
Banks
21%
12.89
3.39
427.45
825.55
93%
Change
14
Titan Company
Lifestyle & Leisure
33%
32%
29.48
3.19
241.85
358.80
48%
15
NMDC
Steel
21%
25%
8.55
4.13
140.05
117.80
-16%
16
Tech Mahindra
26%
28%
25.93
2.77
448.66
541.70
21%
17
Britannia Industries
Foods & Beverages
73%
74%
37.12
4.31
876.45
2,689.40
207%
18
Mahindra & Mahindra
Auto
20%
15%
21.62
2.04
938.90
1,253.95
34%
19
Divis Laboratories
Pharma
28%
33%
19.42
7.49
1,178.40
1,844.30
57%
20
Eicher Motors
Auto
50%
63%
52.66
13.76
4,910.15
19,495.65
297%
21
Hexaware Technologies
33%
37%
21.70
6.62
165.90
262.75
58%
22
Hindustan Unilever
Consumer Products
132%
148%
36.72
6.08
554.95
862.60
55%
23
Hindustan Zinc
Non-ferrous Metals
22%
18%
8.81
4.22
116.05
164.95
42%
24
Nestl India
Foods & Beverages
53%
49%
26.20
5.83
5,000.00
6,081.65
22%
25
Zydus Wellness
Foods & Beverages
33%
27%
61.42
18.76
483.40
911.15
88%
26
HCL Technologies
44%
45%
18.36
7.32
700.33
913.75
30%
``
Long Term.indd 2
20-06-2015 15:48:31
STOCKGRADER LONG TERM
` asked: between Street Beat stocks, long-
stocks to buy. The best of our ideas will

The Stock Watch
be available only in stockletters, from
term model portfolio stocks and also
section, we trust,
now on. Indeed, there was always a
stocks in stockletters, which are the ones
oers much food
question in our minds about which stocks
they should focus on? This confusion is
for thought for
to include in the Street Beat section and
now eliminated by dropping the Street
the serious stockBeat and model portfolio sections. The picker. We share our which stocks in the stockletters. This
magazine will now focus on stocks and perception on results conflict will no longer hamper us.
There was one more reason to drop
sectoral updates and thematic studies
and oer insights
the
Street Beat section. It was a fixture of
under the extensive Stock Watch section.
into valuation from
every
issue and had to be filled up with
The actual identification of stocks is done
multiple angles
a good stock once every fortnight. This
in stockletters, which will eventually be
housed under Moneylife Smart Savers, the platform for was not a problem earlier; but has become a problem over
the past 7-8 months, after the market ran up and made
choosing the right financial products.
The Stock Watch section, we trust, offers much food many small- and micro-cap stocks expensive. After all, it
for thought for the serious stock-picker. We share our is small- and micro-caps that we focused on, to offer a
perception on results and offer insights into valuation distinctive choice to our readers.
With such distractions out of the way, our stock team
from multiple angles, bearing in mind that it is valuation
that makes or breaks returns. This section will expand can now focus on honing various smart tools, such as
your understanding of sectors and stocks but will not systematic investment plans for investing in stocks. As
and when we launch them, they will be available on
offer any definitive recommendations any more.
Readers, of course, eventually want to know which savers.moneylife.in. Editor
Return Ratios@
Valuation#
No. Company
ML Sector
RoE
RoCE
MC/OP
MC/Sales
Entry Price
CMP*
Change
27
Bank of Baroda
Banks
10%
2.86
0.64
162.04
139.40
-14%
28
Dr Reddy's Lab
Pharma
18%
15%
19.04
5.35
2,439.40
3,377.45
38%
29
Eclerx Services
40%
43%
20.29
5.54
1,294.55
1,571.10
21%
30
Colgate-Palmolive
Consumer Products
93%
125%
26.94
6.48
1,640.55
1,961.10
20%
31
Axis Bank
Banks
19%
8.14
2.64
379.25
550.05
45%
32
ICICI Bank
Banks
15%
8.05
2.71
292.00
303.35
4%
33
Ultratech Cement
Cement
12%
14%
14.65
3.09
2,482.35
2,798.70
13%
34
Zee Entertainment
Media
43%
25%
43.78
9.12
354.90
347.00
-2%
35
GSK Consumer Healthcare Foods & Beverages
32%
37%
24.12
5.23
5,414.75
6051.70
12%
36
Aurobindo Pharma
Pharma
38%
28%
19.72
4.82
1,001.90
1,345.95
34%
37
Torrent Pharma
Pharma
27%
19%
38.76
6.31
922.25
1,337.70
45%
38
Havells India
Engineering
22%
26%
24.14
3.21
289.60
277.75
-4%
39
CRISIL
Financial Services
29%
50.46
15.40
1,818.30
1,919.45
6%
40
Suven Life Sciences
Pharma
41%
42%
35.35
7.19
248.70
249.95
1%
41
Indraprastha Gas
Oil & Gas
25%
30%
7.94
1.52
423.65
398.65
-6%
42
Amara Raja Batteries
Auto Components
30%
41%
20.98
3.54
824.00
886.45
8%
43
Bharti Airtel
Telecom Services
20%
15%
8.15
2.98
393.65
426.55
8%
44
Cipla
Pharma
12%
14%
31.00
4.51
628.40
607.05
-3%
45
ITC
Diversified
37%
48%
18.65
6.51
322.70
301.90
-6%
46
Bajaj Finance
Financial Services
22%
19.35
4.58
4,184.80
4,904.15
17%
47
Maruti Suzuki India
Auto
18%
18%
13.47
2.14
3,543.60
3,861.10
9%
48
Yes Bank
Banks
28%
9.19
2.34
798.75
824.65
3%
Exposure is assumed to be 2% for each stock. This means that the portfolio is 4% in cash now. For calculating portfolio return, the cash balance is expected
to earn 8% (pre-tax).*Latest price is the closing price of Thursday in Rs; MC: Market-cap; OP: Operating Profit; # Valuation based on the latest quarter result,
annualised; @ Return ratios based on the latest four quarters of profit; ^Consolidated; CMP: current market price
Moneylife Long Term Portfolio (MLTP) will have 50 stocks, weighted equally & will be benchmarked against Nifty and large-cap equity funds. But MLTP returns are not adjusted to the
cost & constraints of equity schemes: 1) Yearly equity fund charges of around 2% 2) Buying & selling, based on purchase or redemption pressures 3) Impact cost in buying/selling
Long Term.indd 3
20-06-2015 15:48:54
INSURANCE TRENDS
New products, regulations, features and options,
interpreted from your perspective
H e a lt h I n s uranc e
HDFC Lifes
Cancer Care
Cover
Innovative product but
has fine print of premium
guarantee of three years
cancer will pay 100% sum insured

(SI) minus any payment for early
stage cancer or CIS. The product
has no death benefit or maturity
benefit. HDFC Life Cancer Care
has option of a gold plan which
has benefits of silver plan plus
feature of SI increase by 10% of
initial SI every year. This increase
will continue until the following
DFC Life has launched

Cancer Care, a critical illness
product covering diagnosis of early,
or major, stages of cancer. The
innovative product differs from
other critical illness products in
the market which cover only major
states of cancer. HDFC Life Cancer
Care covers early stage cancer and
carcinoma-in-situ (CIS) which are
excluded by other products. The
silver plan pays 25% on diagnosis
of early stage cancer or CIS; the
premiums are also waived for three
policy years. Diagnosis of major
HDFC Life Cancer Care

Min
Max
Entry Age
18 Years
65 Years
Maturity Age
28 Years
75 Years
Policy Term
10 Years
20 Years
Sum Assured Rs
10 Lakh
40 Lakh
Premium
Frequency
Annual, Half-yearly,
Quarterly or
Monthly
HDFC Life Cancer Care
years. If you buy critical illness

product covering 35 to 37 illnesses
for the same SI, you will pay 3.5
to 4 times higher premium. You
can get several illnesses covered for
premium of Rs6,500 to Rs7,500
plus taxes. But these products do
not cover early stage cancer or CIS.
PROS
1. Treatment of cancer is very
expensive and can range from
Rs3 lakh to more than Rs20
lakh.
2. Those with family history of
cancer can consider buying this
product even at a young age.
It may work out better than
critical illness product covering
a large number of illnesses.
3. Covering early stage cancer and
CIS is an innovation.
4. Premium is guaranteed for three
years and revised premium after
that will be offered for another
three years. General insurers
have critical illness product
which can revise premium every
year.
CONS
developments: increased SI
becoming 200% of the initial SI or
any claim event. There is platinum
plan which has benefits of the gold
plan plus income benefit wherein a
monthly income equivalent to 1%
of applicable SI would be paid to
you on diagnosis of major cancer
for a fixed period of the next five
policy years.
The annual premium for silver
plan is a Rs20 lakh cover for a
period of 20 years being available
to a 35-year-old male is Rs1,900
plus taxes. But this premium is
only guaranteed for three policy
1. The premium guarantee is for

three years and subsequently for
a block of three years. A couple
of life insurers offer critical
illness product with premium
guarantee for five years.
2. There is specific definition of
early stage cancer and CIS
which is stated in product
brochure. For example, early
stage cancer means presence
of one of the five defined
malignant conditions. Similarly,
CIS means histologically proven,
localised pre-invasion lesion
meeting certain conditions for
specified organ groups.
3. The product covers only cancer;
there are other critical illness
products which cover up to 37
``
illnesses.
Insurance.indd 2
20-06-2015 15:29:01
INSURANCE TRENDS
` 4. There is no medical test. While
it is convenient, it can also lead

to disputes about when the
cancer was triggered.
5. The coverage is after a waiting
period of 180 days. There
should be seven days survival
period between the date of
diagnosis and the date of
eligibility of benefit payment.
6. The policy excludes pre-existing
cancer for which the customer
had signs, symptoms, diagnosis,
medical advice or treatment
within 48 months prior to the
date on which the policy was
issued.
H o me I ns u r anc e
New India
Assurance Griha
Suvidha
First-loss for home contents
cover is not a new feature
ew India Assurance has

launched a home insurance
product Griha Suvidha. The
product offers home contents cover
for various assets and belongings
of the household against natural
perils like flood, earthquake, fire,
burglary and terrorism. The home
contents are covered on firstloss basis. While this feature is
advertised as a selling point, there
are several other products already
offering it.
Assume that you have jewellery
items worth Rs5 lakh at home
and the cover is only for Rs2.5
lakh. If burglary results in loss
of jewellery items of Rs1 lakh,
how much of the claim will be
allowed? Full cover means that
the total value of contents kept
inside the house is taken as a base
for insurance. Whereas in a first-
loss cover, the insured declares

full value of all contents but takes
cover for only a percentage. The
insured has taken cover for only
50% of his/her jewellery. Hence,
in case of a full cover, the insured
will get a proportionate value of
Rs1 lakh, that is, Rs50,000 only
as the claim. Whereas, in case of a
first-loss cover, where the insured
has declared a proportion of 50%
at the time of purchase, he/she
will get a claim of Rs1 lakh. Prorating can be prevented by taking
a first-loss cover or by declaring
the correct value of ones contents.
If the loss is higher than the firstloss cover, it will be borne by the
customerthe disadvantage of
first-loss cover.
Griha Suvidha offers sum
assured ranging from Rs1 lakh to
Rs10 lakh for fire and allied perils
(contents excluding jewellery), Rs1
lakh to Rs10 lakh from burglary,
housebreaking and theft (contents
excluding jewellery), Rs50,000
to Rs4 lakh for valuables and
jewellery, Rs50,000 to Rs2 lakh for
breakdown of domestic appliances
among others and one can choose
from Rs25,000-Rs75,000 for
television/desktop cover. The total
premiums for all these covers range
from Rs1,125 to Rs7,175 annually.
The policy also has an optional
Section VI where the residential
premises can be covered on full
sum insured (full cover) basis. It
means the property (structure)
cannot be covered for first-loss.
The property cover is for fire and
allied perils. Cover for property
against earthquake and special
perils is usually an optional
feature and, hence, should not be
assumed to be implicitly covered.
The premium will be Rs0.30 per
thousand value of the property
which is a standard industry
rate for property cover without
earthquake and special perils.
Fine Print
Health Savings Account
nsurance Regulatory and

Development Authority of India
(IRDAI) may allow a savings-cumhealth insurance product. The
policyholder can put money to
save for future medical expenses.
The proposed product differs from
a regular health insurance plan
which has no savings component.
In the health savings account,
the premium is to be divided into
three components. The first will
be for the risk charges for health
insurance; the second will be for
expenses; and the third will be the
savings component. The health
insurance will have a guaranteed
renewability for life, but the risk
charges can vary with the insurer
and may be revised annually; this
means the premiums can increase.
Penaes on IndiaFirst Life &

Future Generali Life
RDAI has imposed fine of Rs65

lakh on IndiaFirst Life Insurance
for committing several violations.
The insurer gave gifts/rewards
and recognition programmes in
the name of training the staff
of corporate agents. IRDAI
has also imposed a fine of Rs50
lakh on Future Generali India
Life for violating various norms,
including financing a related entity
in a camouflaged way. During
2010-11, the company purchased
Big Bazaar Gift Vouchers worth
Rs23.5 crore under sales and
marketing promotions head from
Future E-Commerce Infrastructure
Ltd and distributed these to
unidentified beneficiaries in
the name of Brand Building
Activity and Recruitment Drive of
Potential Advisors.
Insurance.indd 3
20-06-2015 15:29:24
Warning:
Most Insurance
Products Destroy
Your Wealth
Over the past few years, thousands of savers have bought

what are called traditional insurance plans. These were sold
under the garb of protecting your capital and saving taxes.
But traditional plans are non-transparent, that is, you dont
know where your money is invested. These are inflexible and
illiquid too. You cannot change what you have bought. Worst
of all, you make pathetic returns on such insurance products.
You will end up getting 4%-6% return which is lower than
what you get from bank fixed deposits.
Read more on
https://www.moneylife.in/promotion/warning_insurance/index.html
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20-06-2015 16:58:43
11 GREAT BENEFITS
A service for everyone that meets
90% of personal finance needs
INSURANCE
1 Accident cover of Rs2.5 lakhs
2 Which life insurance?
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Which mediclaim with maternity benefits?
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MSSN Warning Insurance.indd 3
20-06-2015 16:59:02
PERSONAL BUSINESS AUTO
Dismal R&D
Good News for the

Differently-abled
ome months ago, we noted how difficult it was for

differently-abled to get their driving licencesnew or
renewedand to get excise waivers on purchase of new
motor vehicles. Well, over the past few months, there is
some good news from different states. In Indore (Madhya
Pradesh), a gentleman who uses his feet to drive, will
get a driving licence, if media reports are to be believed.
Likewise, in Maharashtra, a gentleman who has been
having a rough time with the authorities towards getting
the excise rebate for a purchase of a new motor car has
finally succeeded. However, some states still lag behind in
this context; we, at Moneylife, would like to know more
about how this issue is being handled in different states.
For those who are keen to know more, or do more, about
making mobility better for the differently-abled, write to us.
Allocation for improvements are just 5% of

advertising & marketing spend
ow much does a typical automobile company in

India spend on research and development (R&D)
vis--vis the amount spent on advertisements
and marketing? Hard numbers are difficult to come by,
especially since many automobile companies in India are
wholly-owned subsidiaries of foreign companies; trying to
read through the fine print is like trying to find a noodle
without MSG (monosodium glutamate) in it. However,
anecdotal evidence suggests that, even after being generous,
the number for actual R&D would be around 5% of the
amount spent on advertisements and marketing.
Yet, some manufacturers complain that sales are bad
for a variety of reasonsnone of which is obviously their
faultand then demand more tax sops. All this, when
R&D is 100% tax deductible, in most cases.
What do customers expect in terms of R&D for
automobiles made for Indian conditions? The answer
is not far to see. Just get on the road and see how old
vehicles look like and perform. It is easy to blame bad
maintenance for this; but what does R&D show? Should
the critical parts not have been engineered for Indian
conditions from the very start?
One manufacturer that spends a lot on R&D is
Tata Motors. This shows in their leadership position in
commercial vehicles. If they were to apply the same to
personal vehicles and motor cars, maybe they would have
a winner, and that would take some minor genuine R&D.
Tata Motors is skipping a dividend this year for the first
time since 2002.
Celerio Diesel as Taxi
his author ran into a diesel Celerio, a few days ago.

I have nothing against diesel clatter: a well-tuned
diesel engine will settle down into a pleasant purr after a
few minutes and give you years of driving joy. But there
are somein auto-rickshaws and cargo three-wheelers,
for examplewhich you know by intuition will never
settle down to a pleasant anything. The diesel
Celerio appears to be aimed at the Maruti
Alto taxi market. The higher ground
clearance suggested may or may
not last with five people inside.
High torque will pull it through
mountain roads, where the Alto is
popular, but where climate change
makes a diesel engine capable of
going through deeper waters than
possible. But, unless you are looking at driving more
than 3,000km a month in a very thin tin can, you may
wish to look elsewhere, even in Suzuki Marutis stable if
it comes to that, for a reasonable three- or four-cylinder
petrol engine car. The Celerio 125 diesel is, in my opinion,
for the taxi trade. It may well be cheaper than a bus.
Veeresh Malik started and sold a couple
of companies, is now back to his first
lovewriting. He is also involved in
helping small and midsize family-run
businesses re-invent themselves.
Auto.indd 2
20-06-2015 15:14:36
TECHNOLOGY MOBILE
Virtues of a
Mobile Wallet
Mobile wallets are great for small-value
transactions, writes Yogesh Sapkale
ndia has more mobile subscribers than bank

account-holders. So, using the mobile as a platform
for new age services makes great sense. While
mobile apps from banks have become popular, there is
a large number of people who think using mobile for
financial transactions is risky.
Now, let us see how a mobile wallet (another form
of mobile payments) works. The mobile wallet is a
virtual equivalent of your physical wallet. It stores
information about your bank account, credit or debit
card and personal identifaction details, like permanent

account number (PAN) or driving licence number.
This requires very strong security, for protecting the
stored as well as transaction data. Due to the absense
of standards and norms, the mobile wallet is creating
some quirky moments. For example, State-run Bharat
Sanchar Nigam Ltd (BSNL) tied up with State Bank
of India (SBI) to offer MobiCash, a mobile wallet that
promises users to withdraw money from SBI ATMs.
However, BSNL officials are clueless about how this
will happen, especially for withdrawing money without
an ATM card.
At present, Paytm, MobiKwik, Oxigen and Citrus
are the leading mobile wallet service-providers in India,
licensed by the Reserve Bank of India (RBI). As per the
current norms, a user can load money on her mobile
wallet and use it for making payments to merchants
which have a tie-up with that wallet service-provider.
For example, a user of Paytm can make payment only

to a merchant which has a tie-up with Paytm and,
thus, can accept mobile money. But things are changing
rapidly; soon users may be allowed to withdraw money
through mobile wallet. In addition, the user cannot
deposit more than Rs10,000 on her mobile wallet
without fulfilling RBIs know your customer (KYC)
norms.
What is the advantage of using a mobile wallet
over conventional or online payment systems? There
are two major factors that go in favour of using
mobile wallets. First, your personal details, especially
financial information like bank account number, are
not exposed. And, second, it limits your exposure in
terms of value transactions, because you can upload (in
most cases) just Rs10,000 without the KYC checks. So
even if there is some issue with the mobile wallet (not
likely, though), you may end up losing a maximum
Rs10,000 as against losing every single penny in your
bank account, in case your
is compromised.
Hopefully, soon, account
How can you use a
big players like
mobile wallet? Well, first
Google Wallet or identify the service that
Apple Pay, which you would be using for
are now available making small payments.
in the US, will be Then, check which is the
mobile wallet
allowed to make common
available for most of the
an entry in India services and use it. But
and the rest, as
make sure, you upload
they say, will fall the amount sufficient to
pay for services that you
in place
would be using.
The advantage of using mobile wallet is that it
requires minimum effort from the user to make a
payment. However, with RBI planning to make online
payments through one-step authentication, mobile
wallets may lose the advantage. But, as I said earlier,
for small value transactions, mobile wallets are still the
best bet, provided the service-providers make sure to
bring every merchant on their platform.
While there are about a dozen mobile wallet serviceproviders in India, each has tie-ups with different kinds
of merchants. This means, for each type of service, you
will have to use different mobile wallet; this explains
why, despite a rise in number of mobile wallet users,
there is no huge jump in terms of transactions and
revenues. Hopefully, soon, big players like Google
Wallet or Apple Pay, which are now available in the
US, will be allowed to make an entry in India and the
rest, as they say, will fall in place.
Technology.indd 1
20-06-2015 15:24:56
HEALTH BM HEGDE
95% People Are Sick

Healthcare is the biggest industry: a check-up
is sure to make you a patient forever
Much of your pain is the bitter potion by which the
physician within you heals your sick self. Khalil Gibran
had predicted, some time ago, that if the Alma-Ata

definition of health is applied to the entire population,
there will be no one who will be, well, well. All will
be ill! It makes lot of sense as sickness is the biggest
industry in the world today. If one goes for a check-up
when one is apparently well, one will have to come out
as a patient, by the present definition. We have to feed
the corporate technocracy at any cost because the latter

provides employment to people. An analogy can be drawn
with American military preparedness. They have built a
fighter plane which cost them two and a half trillion dollars.
Now, they have found that it cannot fly in the rain! Does
not matter; they have the capability to have such a plane
anyway. So is the story in health arena. We have built a
huge sickness fighting industry based on technocracy worth
trillions of dollars. Audits now show that that industry is
the leading cause of death and disability.
Health is defined as absence of physical, mental,
psychological, environmental and even spiritual wellbeing. This is impossible to achieve in life. We had defined
health as enthusiasm to work and enthusiasm to be
compassionate. Now, see the difference. To comply with
the Alma-Ata definition, one needs to undergo all screening
tests to be declared healthy.
Although I am happy that my predictions came
true, I am sorry, as people have to face the music of
being labelled ill and treated for no fault of theirs,
for the benefit of the industry. A study had said that

absence of senior cardiologists resulted in a fall in patient
mortality (Moneylife, 11 June 2015). Moral: Those divine
interventionists were causing more harm than good to
patients. This will hold good across the board, if similar
studies are conducted. This worries me a lot.
One country introduced a quarterly dental check-up
free of cost for its citizens of all ages, some years ago. A
decade later, audit showed that the country had the highest
dental illness in the world! Unwarranted interventions
made life miserable for their citizens. The Lancet study
did show that almost a third of the world population
has at least five diseases at any given time. This number
would go up when the screening machinery becomes
more sophisticated. For example, when we get to detect
a new rogue cell in circulation, we will have a few cancers
starting in every one of us;
rogue cells are those that
At least for our
escape apoptosis at their
appointed time, a natural
country, we
phenomenon. Most, if not
should invent a
all, those rogue cells will
new sicknessdie out; but there are a few
care policy
circulating daily. Imagine
taking the best in the anxiety and fear such
many systems of a scenario would bring on
treating diseases the already anxious people.
There is also a hidden
put together;
danger
inherent in all our
shall we call it
screening methods. There
Bharat System? is nothing normal in the
human body; all parameters
are just the average of a cohort of people. We change the
average for normal and, when such a trick is applied to a
healthy population, 5%-25% are declared sick. Anyone
who sees a doctor for check-up will be declared a patient.
Rarely do they revert to normalcy. Once a patient, always a
patient! Additionally, many of them get iatrogenic illnesses
added on! I am sorry for society, but happy for myself
that the truths that I had been warning about are being
proven right, almost on a daily basis. This is the reality.
At least for our country, we should invent a new
sickness care policy taking the best in many systems of
treating diseases put together; shall we call it Bharat
System?
Professor Dr BM Hegde, a Padma

Bhushan awardee in 2010, is an MD,
PhD, FRCP (London, Edinburgh,
Glasgow & Dublin), FACC and FAMS.
He can be reached at hegdebm@gmail.com
BM Hegde.indd 2
20-06-2015 15:15:53
HEALTH BM HEGDE
BRAIN AND DIABETES
EATING YOUR OWN
hat has diabetes

PLACENTA
got to do with
ome celebrities have
MEDICAL DEVELOPMENTS FROM
your brain? Well, it may
been eating their
AROUND THE WORLD
shrink your brain by two
own placenta to avoid
years every decade, an
postpartum depression
alarming research has indicated.
and have been advertising in its
resistant Clostridium difficile
The study involved the MRI study
favour. Many women in the West
infections which have become very
of 614 Type-II diabetic patients.
started doing that. In animal studies
common in the West. This germ
Our research found that patients
in rats, this has helped the rodent.
is otherwise a common one and
having more severe diabetes had
Studies did not support this claim in
should not produce any illness.
less brain tissue, suggesting brain
humans.
In the United States alone, it kills
atrophy, said R Nick Bryan, a
Researchers found that
about 15,000 people every year!
professor of radiology at University
the primary motivation for
Faecal transplant is a procedure
of Pennsylvanias Perleman School
most women for consuming
in which stool is collected from
of Medicine.
placenta is to prevent postpartum
a donor free of C. diff and those
depression, said studys cofriendly gut bacteria are isolated
author Cynthia Coyle, a
from the faecal matter. These are
clinical psychologist
then transferred to the recipients
at Northwestern
gut, through a Ryles tube, with
University
the aim of replacing the good
Feinberg School
gut bacteria that may have been
of Medicine
suppressed by overpopulation of C.
in Chicago.
diff.
But are
Any new life-saving procedure
women
looks good, to begin with. Now,
there is a new case report which has making
the
shown a very interesting side-effect
choice
of FMT. A middle-aged lady, who
to do this,
received repeated faecal transplant
and forgoing other scientifically
for recurrent C. diff infection from
For every 10 years of diabetic
proven treatments? We dont know
an obese lady, has now developed
duration, the brain looked two
the answer to that.
years older compared to the brain of obesity. She put on 35 pounds in
During her studies, Dr Coyle
six months. One lesson we learnt
non-diabetics. Longer the duration
was surprised to find how prevalent
of diabetes, the higher was the brain
this placenta eating habit was.
loss, especially of the grey matter.
Any new life-saving
Interestingly, this was not due to
procedure looks good, However, no study ever showed
that placenta eating has any benefit.
micro-vascular disease either. They
to begin with. Now,
Unfortunately, there were no
did not have increased vascular
there is a new case
studies done to show what harm
disease as is expected.
report which has shown placenta eating does to the person.
Though the authors of the study
a very interesting side- Dr Coyle also found that chemical
wrote that this is another reason to
elements such as selenium,
treat diabetes, there is no evidence
effect of FMT
cadmium, mercury and lead, as
to make that statement as yet.
well as bacteria, have been found in
Maybe the study got money from
is that FMT should not be done
placental tissues. And women who
the drug industry.
from any obese donor. The other,
buy placenta pills online should
more poignant, lesson is that the
know that there are no regulations
gut bacteria might hold the key
FAECAL MICROBIOTA
about what is in the pills, Dr Coyle
for obesity treatment in the future.
TRANSPLANT
said: The bottom line is that there
May be, this is a long shot; if this
therwise called faecal
are no human studies that show a
succeeds, we may be able to obviate
transplant, FMT has come to
benefit to eating the placenta.
the dangerous Bariatric surgery.
stay in the treatment of antibiotic
BM Hegde.indd 3
20-06-2015 15:16:15
LEGALLY SPEAKING SD ISRANI
Inflated Claims
Dont Work
Consumer courts can see through inflated
figures for damages and compensation
he Consumer Protection Act was enacted in 1986

to provide a simple and cost-effective remedy for
consumers. This is why the Central government
did not prescribe any court fee for seeking justice from
the consumer fora. However, all legislation created for the
benefit of citizens is also prone to misuse by some. It is
not uncommon to find aggrieved consumers inflating their
claims for damages and compensation while approaching
a consumer forum.
Many inflate the claim to bring it within the jurisdiction
on
of higher fora like the state commission or even the National
nal
Consumer Disputes Redressal Commission (NCDRC).
C).
Recently, NCDRC was faced with such a situation in the
he
case of M/s Harsoria Healthcare Pvt Ltd, Neeraj Gupta
ta
& Ors vs Royal Jordanian Airlines & Ibibo Group Pvt
Ltd (judgement of 8 May 2015). The complainants had
ad
booked flight tickets from New Delhi to Amman and
from Tel Aviv to Amman and Amman to New Delhi.
In Israel, the complainants were given the option
n
either to wait for the flight from Tel Aviv to Amman or to
travel to Amman on their own and take the Amman-New
ew
Delhi flight. The complainants travelled on their own under
der
difficult circumstances and managed to take a flight to
Delhi. They filed the complaint before the state commission
on
with the following prayers: Direct the Opposite Parties to
jointly and severally pay to the Complainants the following
ng
amounts as compensation/damages;
1. Actual expenses incurred by the Complainants
amounting to Rs46,129 towards travel expenses from
Tel Aviv to Amman, hotel accommodation in Eilat,
food, fee for land exit at Israel border, etc.
2. Cost of airfare of the flight from Tel Aviv to Amman
cancelled by the Opposite Party No. 1 on 14.08.2014
without any prior intimation to the Complainants.
3. Compensation of Rs25,00,000 on account of physical
and mental agony, ordeal, tension and harassment
caused due to the grave deficiency of services and unfair
trade practices on behalf of the Opposite Parties under
the Consumer Protection Act, 1986.
4. Cost of the Legal Notice amounting to Rs35,000.
5. Litigation Expenses incurred by the Complainant.
The state commission observed: No court fee on the
claims preferred before the foras concerned is payable.
Therefore, tendency to defeat the hierarchy as per the

scheme of the Act. Thus, in our considered view, the
consumer foras at various level are required to guard
against the inflated claims with malafide intentions The
amount allegedly spent by the complainant is Rs46,129 but
he has added disproportionate demand of compensation
of Rs25,35,000 approximately as compensation to bring
this case within the jurisdiction of the State Commission.
The above act of the complainant obviously is malafide
with a view to defeat the scheme of the Act.
The state commission made a reference to the matter
of Praveen Kumar Singhia vs State Bank of India and
drew support from the stand earlier taken by the NCDRC
on a similar issue. The state commission permitted the
complainants to approach the district forum. Instead, the
complainants filed a revision petition before the NCDRC
seeking reversal of the state commission order.
NCDRC, after hearing both the sides, opined that the
amount claimed by the complainants was on the higher side
and it had no connection with the cost incurred by them.
NCDRC also observed that while there was no upper limit
prescribed in the Consumer Protection Act for claiming
any amount as damages/compensation, at the same time,
the amount claimed should have some basis.
In fact, NCDRC further
observed that the

amount claimed
was a mere fantasy
as it was totally
unsupported by any evidence.
It also insisted that
a consumer forum cannot entertain such cases that would
require detail evidence and cross examination and, in such
a case, the complainant should approach the civil courts.
Finally, the NCDRC gave the complainants the option of
either following the state commission order or approaching
the civil court if they still wanted to pursue the case.
Consumers should avoid making wild, or highly
exaggerated, claims without any supporting evidence,
as it will not help them in getting higher amount of
compensation. In fact, such an approach can only harm
the interest of consumers.
SD Israni is a corporate lawyer & Fellow

of ICSI. Email: sdisrani@gmail.com
Legally Speaking.indd 2
20-06-2015 15:20:44
LRC.indd 3
19-06-2015 21:50:02
When Fishing
Becomes Fishy
When the police is held in contempt
he High Court at Hyderabad is housed in a

palace. It reeks of old-time majesty, in decay.
Especially in the courtrooms. Wooden panels,
semi-circular tables for advocates, walls lined with All
India Reporters giving instant access to
judgements. One dreads the invasion of
monitors on the judges table, especially
when two excellent legal issues were
argued this week. A fruitful visit was
concluded by this writer, in more ways
than one.
From Hyderabad, we bring you a case
that deals with easements, tribal rights
and contempt of court. Yes, these can all
be the matter of arguments in just one
case.
Contempt of court, to the popular
imagination, is an accused throwing his
chappal at the magistrate. Or hurling
the choicest swear words. A mild form
of punishment is a civil contempt order,
lasting for a few hours, usually called
till the rising of the court. A more
severe form is the criminal contempt
notice, culminating in a sentence
of incarceration, with or without a
monetary fine. Of course, punishments
for contempt. in earlier years. were
corporal in nature. One book talks of hands being cut
off and impaled on posts outside the court! We have,
fortunately, moved on.
Easements means a right acquired by one (or many)
without actually being a proprietor. Simply put, it is a
right to enjoy a facility. It can mean a passage through
anothers property to reach ones home. It can be a right
of way for traffic. An easement can be for fishing rights
in a stream or a pond or on the coast, most usually
available from long usage. It can be determined by a
court.
In our case, it was a negative order. Fishing was
banned, whatever be the reason. And that leads us
to tribal rights. These are definite privileges accorded
to certain people by demarcating areas for their use,
usually exclusive use. People, who live near these places
and whose families have lived off these parts for ages,
are allowed to continue their livelihood. Being pristine
zones, they are full of natural wealth like fruits, timber,
grazing lands, fish from the streams, rivers and water
bodies, eggs from birds nests and other God-given
bounty. Yet, no one kills the goose that lays the golden
eggs. Its a win-win trade-off. Champanwalli village was
one such hamlet and Ammanapalli was its fishing spot.
Civilisation is on the march. The fruit is limited.
Encroachment follows, insidiously at first, then more
vocal and, later, by force. The simple people find that
they have only one recourse; the court of law. Yet, a
favourable order is often only a piece
of paper in hand. Implementation by
the poor folk, facing the might of the
oppressors, is another kettle of fish. So,
once again they bang on the doors of the
court. Realising their plight, the court
orders the local constabulary to protect
the court-ordained rights. Usually, it turns
out to be wishful thinking. One need
not wonder why Naxalism and Chipko
movements seem the only way out, illegal
though they may be.
In our case, the cops did nothing,
when it came to fishing by those
exclusively banned from the site. The
police failed to prevent the breaches of the
law. Law enforcement agencies became
spectators to, and therefore participants
in, open flouting of the mandates. The
usual Nelsons eye syndrome.
You be the judge. What would you do,
if the affected people came to you once
again?
The court came down heavily on
the Karimnagar rural circle inspector and two cops.
Contempt of court was slapped on them. The cops were
sentenced to three months each and fined Rs2,000,
pending appeal. Yet, another victory for the common
man. Unfortunately, such judgements are few and
far between. More unfortunate is that they are little
advertised. A copy of such orders, posted on the walls of
every chowky, will not only to warn the errant but also
to allow the citizenry to know its rights, options and
recourses.
Bapoo Malcolm is a practising lawyer in
Mumbai. Please email your comments to
mail@moneylife.in
You Be the Judge.indd 2
20-06-2015 15:21:19
TION
MONEYLIFE FOUNDA
*
DONATE
to
make our
voices heard
Since February 2010, Moneylife Foundation,

the Voice of Savers has enrolled 35,701 members,
conducted 243 workshops, handled scores of grievances & made
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We need to do much more
As the Voice of Savers, Moneylife Foundation is proud to have

been one of the fastest growing NGOs, reaching out to savers
across India (Gurgaon, Kolkata, Bengaluru, Chennai, Nashik, Pune,
Hyderabad and Goa), covering a wide variety of subjects. On
advocacy, we continued to pursue the government for appropriate
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Donations may please be accompanied by a letter to
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on business, industry and personal finance. The Trustees are Debashis Basu, Sucheta Dalal & Dr Nita Mukherjee
Donate Ad.indd 1
19-06-2015 21:47:52
ML FOUNDATION EVENTS
A MONEYLIFE FOUNDATION SEMINAR ON BETTER ROUTE FOR INVESTING
Stocks or Equity Mutual Funds?

A Moneylife Foundation event discussed the better route for investing
nvestors have an option to invest in stocks of good

Many people tend to avoid stocks as they are considered
companies directly or they can get exposure to stocks riskier than equity funds. There is no difference in risks
through equity mutual funds. Which route should between buying stocks and holding funds, Mr Basu
they choose? Our research shows that investors explained. Both are volatile and can fall sharply leading to
familiar with financial terms who can spend some time a loss of capital. In terms of returns, however, a diversified
and resources to research stocks could generate higher portfolio of quality stocks will be expected to outperform
returns from stocks. One of the reasons is
most equity schemes over the long term, he
Equity schemes added.
costs.
would be ideal
Debashis Basu, trustee of Moneylife
He emphasised repeatedly that equity
Foundation, explained how stocks score over for those who are funds are wonderful instruments and those
just beginning
equity funds in terms of costs with several
who have no time and interest to analyse
to invest and are individual stocks or those who have a low
examples. If one has a huge corpus to invest,
over a long period, equity schemes turn out
looking to invest investment corpus should go for equity
to be more costly compared to
o stocks. The
schemes. Equity schemes
schem would be ideal
small amounts
reason is that for mutual fund investment
vestment you
for those who are just b
beginning to invest
pay a feeexpense ratiowhich
ch is a percentage
and are looking to invest small amoun
amounts. However, when
of the market value of the corpus.
pus. In the case
they gain confidence and have larger corpus, they need
of stocks, you need to pay fixed annual
to look at stocks because of highe
higher costs of staying
maintenance charges and one-time
ime transaction
invested in funds.
charges, which work out to be a tiny percentage
In terms of stock selection, too, m
most equity schemes
of the amount over the long term.
erm.
are not very efficient, Mr Basu said
said, the funds stick to
Costs eat into returns. In
n equity
the same basket of stocks and are h
heavily weighted to
schemes, the fees charged can range
their benchmark stocks. To win
w at stock-picking,
between 1.25% and 3% per year.
Mr Basu said
s that one should
In percentage terms, it may seem
eem
select stocks
s
with high
small, but as your corpus grows,
ows,
return o
on capital and hold
you are paying higher feess in
them for the long term. The
percentage terms, explained
ned
packed sseminar ended with
interaction.
Mr Basu.
a lively in
Event.indd 2
20-06-2015 16:30:21
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19-06-2015 21:45:30
Learn the
basics of
saving and
investing
Earning
Curve
Now, Chinas Retail

Investors Go Crazy
Stock bubble in China again underlines how we never learn
Southwestern University of Finance

and Economics, provides fresh
insights into what has been driving
the recent rally in Chinas markets.
The survey, which was conducted at
the end of last year and covers about
4,000 households across the country,
finds that a high number of the
new investors have less than a high
school education and relatively low
levels of asset ownership.
More than two-thirds of new
equity investors left the education
system by middle schoolwhich,
in China, means around the age of
15. More than 30% exited at age
12 or younger. Household wealth
for new investors is about half the
level of existing investors. Deutsche ``
n China, about 29 million new

stock accounts were opened in
2015 up to 22nd May. This was
more than the new accounts
opened in the four previous years
combined. More than 10 million
new stock trading accounts were
opened in 2014, more than the total
number for all of 2012 and 2013
combined, according to data from
China Securities Depository and
Clearing. About 1.6 million new
investors were added in the last week
of May 2015. This boom in stock
accounts has driven the benchmark
Shanghai Composite Index up 150%
in just a yearfrom around 2,000
in June 2014 to more than 5,000 as
on 7 June 2015. The Shenzhen-listed
companies now trade at an average
price to trailing earnings ratio of an
astounding 72 times, up from 35 at
the beginning of the year.
As happens, many new investors
are inexperienced retail investors
who are likely following the advice
of friends or state-controlled
media, mention a few surveys.
According to the China Household
Finance Survey, a large survey
of household income and assets,
headed by Professor Li Gan of
Stock speculation in China has gone crazy. This story from

the Wall Street Journal is illustrative: Chinese companies are
turning to an unlikely source for profits in the soft economy:
the countrys red-hot stock markets. Take Dong Jun, who earlier
this year shut down his factory making lighting equipment and
electrical wiring and let go some 100 workers. The 50-year-old
comes to the plant in the eastern city of Yancheng almost daily,
but spends his time trading stocks on behalf of his company,
Yanwu Keda Electric Co. Manufacturing is a very hard business
these days, said Mr Dong, chairman of the company. I want
to make some money from the stock market and use the profits
to restart my manufacturing business later, when the economy
turns for the better.
Earning Curve.indd 2
20-06-2015 15:53:02
EARNING CURVE
` Bank too noted that 6% of the new
equity investors are illiterate. Thus,

with the high valuations commanded
by China stocks, bulk of the
price movement has come from
momentum buying. Median earnings
multiples for Chinese technology
stocks are twice the US peer
valuations at their dot.com peak,
Deutsche Bank said. New trading
accounts and trading volumes have
soared. Expectations on growth and
profits have not.
China has a large population
with a substantial volume of savings
and limited alternative investment
options. It does mean that the
trajectory of Chinas markets will be
unpredictable and prone to sudden
reversals as sentiment shifts.
The survey also highlights the
growing appeal of equities relative
to the slumping property sector. For
survey participants with multiple
homes, expectations on share
prices are markedly higher than
expectations on property. That adds
to the evidence that the speculators,
who were a major driver of property
demand, are now steering clear. Will
the millions of retail investors be at
the losing end in case of a reversal in
stock prices? Its not if, but when.
Power of
Compounding
A small percentage difference
in returns can make a huge
difference over the years
hile several people know

about the power of
compounding, many fail to grasp
how powerful it can really bea
tiny difference in the rate of return
can create a huge difference to
wealth, over a long period of time.
To illustrate this, take a look at
Don't Ignore Costs

However little costs may seem, over the long term the difference is compounded
Rs crore
4.00
MutualFund - 14% pre-costs; 1.90% expense ratio

Stocks - 14% pre-costs; Annual Charges: Rs5,000
Rs3.89 crore
3.20
2.40
Mutual Fund Portfolio

Stock Portfolio
1.60
Rs2.75 crore
0.80
0
0
12
Benjamin Franklins last wish.

Franklin, one of the founding fathers
of the United States, was a renowned
polymath. Before he died in 1790,
Franklin distributed 2,000 pounds
sterling, or approximately $8,800
(about $225,000 today), equally to
the town of Boston (Massachusetts)
and Philadelphia. Being the
beneficiary of loans in his youth,
he wanted to return the favour. His
condition was that the capital should
be lent at a rate of 5% to citizens
so that they could finance their own
business.
Franklin had an extremely longterm view. He stated that after 100
years, the cities could use a portion
of the capital for public works; and,
after 200 years, the balance would
be distributed. What happened to the
money over 200 years? The value of
Boston and Philadelphia Trusts grew
to about $5million and $2 million,
respectively. The Philadelphia Trust
compounded at approximately
3.1% over the period. The Boston
Trust grew by just 50 basis points
more3.60%. This marginal
outperformance enabled the Boston
Trust to grow to two and half times
the value of the Philadelphia Trust.
How does this benefit us in
investing? Pay attention to costs
and returns. In equity mutual fund
schemes, expense ratios would vary
18
24
30
from 1.25% to 3% per annum.

Looks like a small amount to pay
someone to manage your money!
The alternative is to invest in stocks
directly. In the initial years, the
returns may be similar to those of
mutual funds. But a small difference
in yield can compound significantly
over the years.
Lets take an example of a
30-year-old individual who saves
Rs1 lakh towards retirement each
year. In the first scenario, he invests
the amount in a good equity mutual
fund scheme which, lets say, returns
14% per year pre-costs. Assuming
a moderate expense ratio of 1.90%,
post-costs the annual returns work
out to 12.10%. In the second
scenario, he invests in a portfolio of
quality stocks, which earn him 14%
annually pre-costs. Lets assume his
stock trading account costs work out
to Rs5,000 per year.
In the first, his mutual fund
corpus would grow to Rs2.75 crore.
In the second, his corpus would
have worked out to around Rs3.89
crore or 40% (Rs1.13 crore) more.
In terms of costs or fees, he would
have paid Rs1.31 crore in case of
mutual funds and just Rs17.84 lakh
in the case of stocks. We have taken
moderate returns as an example. But
good quality stocks can yield much
higher returns over the long term.
Earning Curve.indd 3
20-06-2015 15:53:18
BOOKS
THE VALUE ELEPHANT
In Search of Value
Whos the typical reader of this book?
here arent too many books on valuation,

shareholder value or wealth creation, in the Indian
context. The Value Elephant, by Sanjay Kulkarni,
is, therefore, an important addition to this slim sub-genre.
Kulkarni was the managing director and country head
of Stern Stewart & Co, a consulting firm that brought
the concept of economic value addition (EVA) that many
Indian companies embraced in the 1990s. EVA separated
businesses that create value, such as Nestl or Marico,
and those that dont and, hence, need additional capital
periodically to virtually stay where they are.
A company in the second category is Reliance Industries.
Its core businesses
upstream and downstream
petrochemicalsearn
a low return on capital.
About 16 years ago, it
went into oil exploration,
which not only requires a
lot of capital but is a hitor-miss business. Reliance
has had more hits there
than misses. Then, it went
into brick-and-mortar
retailingjust when
e-tailing business took off
in India. After nine years
and thousands of crores
of rupees of investments,
Reliance Retail is barely
THE VALUE ELEPHANT
profitable. And now
SANJAY KULKARNI
Reliance is getting into
Portfolio Penguin
the telecom business where
Pages 314; Rs799
competition is intense.
Kulkarni had mentored
group businesses and investments at the office of Mukesh
Ambani, chairman of Reliance Industries, proudly
mentions the book jacket.
The pages inside showcase better achievements by
him. He claims to have netted fantastic returns using his
model V-GRO which identifies stocks on the basis of
value, growth, risk and operating performance. According
to him, value is central to this framework. Valuation gets
expressed in price/earnings ratio, EBIDTA/enterprise value
and price/sales, etc. Kulkarni hastens to add that these
multiples may not provide you with complete information,

yet they are useful for better assessment of value as seen
on bourses... what you see on the bourses is price and not
value. Price is decided by the market. Value is your estimate
of the underlying worth of the company.
While this is correct, unfortunately, anyone even
with good grasp of finance will find it hard to move
any further with this piece of knowledge. As I like to
emphasise, a shareholder is an outsider. He really knows
too little about the company. What estimate could he
make, beyond extrapolating published information? By
highlighting objective valuation ratios as a guide and
immediately de-emphasising them and then shifting the
focus to subjective estimates, the author gives confusing
signals that will paralyse the average reader.
To calculate returns of V-GRO, go for trailing five years
of operating performance. But, of course, like valuation,
you need to have your own estimatesthe past only
provides some clues. Can an average person estimate
future earnings? Would the author himself be able to do
so without the analytical tools of a professional set up
like Stewart & Stern? The other aspects of the model are
harder still. Here is a partial list of the risks Kulkarni wants
you consider: risks of size, diversity, capital deployed in
different geographies, business segments as proportional a
of total capital deployed, concentration of revenues from
or capital in one geography, product, brand, etc.
Then the author wants you to assess strategic risks,
such as volatility revenues, economic profits and cash
flows as well as risks of operating leverage such as
fixed assets as a proportion to capital employed. You
could also consider variations in contributions margins,
working capital and its individual constituents such as
receivables, inventories and payables. You may consider
the newness of assetstrailing ratio of average gross
assets and depreciation over five years. Phew! And I
have not even gone into risk of financial leverage and
risk of investment. Then, beyond these quantifiable risk
parameters, there can be lot more to risk and you must
rely equally on qualitative assessments of risk.
Finally, even if you can figure out how to handle this
thicket of parameters breezily described, how do you apply
them? Investing is a matter of choosing the best bets from
a wide set of companies. Without the access to sort-able
database of companies and their parameters, how will
you even start this process? Start with any 50, or a sample
of your choice, is Kulkarnis advice. Also, there are two
parts to the book. The first is for individual investors (how
to find stocks to buy) and the second is for businessmen
(how to become stocks that people want to buy). This
is another cause of confusion: whom is this book meant
for? Debashis Basu
Book Review.indd 2
20-06-2015 15:51:42
UNIQUE BOOKS FROM MONEYLIFE/KENSOURCE

The most thrilling business book ever written in India.
A fast, colourful narrative knitting together the life
and times of all stock market players involved in two
of Indias biggest stock market scams.
LIST PRICE: `400

MONEYLIFE PRICE: `350
These commonsense guides tell you in an inimitable

easy-to-understand, peppered with lots of real-life
examples, what you must know to make successful
investments in stocks and funds.
LIST PRICE: `125

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LIST PRICE: `1,300

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Two priceless books of autobiographical

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unique thought processes, untiring
efforts and colourful anecdotes of top
achievers such as Ratan Tata, Amitabh
Bachchan, Mukesh Ambani, Aditya
Puri, Rajiv Bajaj, RA Mashelkar, Keki
Dadiseth, Geet Sethi and others.
COMBO
PRICE
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GET YOUR COPY NOW
AVAILABLE AT CROSSWORD BOOKSTORES

Contact details: Mail in your remittances to Moneywise Media Pvt Ltd, 315, 3rd Floor, Hind Service Industries Premises, Off Veer
Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400028. Credit card orders can be faxed to Mumbai 022-49205022.
In case payment is made by credit card, date of birth should be mentioned. Rates and offers are valid in India only. This offer is valid for a
limited period. Please allow 4-6 weeks for the delivery of your personal copy. All disputes shall be subject to Mumbai jurisdiction only.
Book Ad.indd 1
19-06-2015 21:49:14
MONEY FACTS STOCKS
INDIAN MARKET TRENDS
FUND FLOWS
The Sensex and the Nifty ended flat during the fortnight
ended 17 June 2015. ML Mid-cap Index rose 2%, while ML
Large-cap Index and ML Mega-cap Index fell 1% each. ML
Small-cap Index declined 2%.
Foreigners: Foreign institutional investors were net

sellers of stocks (Rs5,237.52 crore). They sold shares
worth Rs32,205.43 crore.
Share Prices, December 2014=100
-470
-565
120
-660
-755
110
FII Net Investments

(Rs Crore)
-850
100
-945
8 Jun-15
17 Jun-15
Indians: Domestic institutional investors were net

buyers of stocks (Rs6,047.39 crore). They bought
shares worth Rs14,678.80 crore.
90
80
Dec-14
Mar-15
ML Large-cap
ML Mid-cap
ML Small-cap
ML Mega-cap
Jun-15
1,265
ML Micro-cap
Nifty
Sensex
1,450
DII Net Investments

(Rs Crore)
1,080
Index
ML Mid-cap Index
05- Jun
17- Jun
+/-
895
710
98.96
100.67
2%
26768.49
26832.66
0%
8,114.70
8,091.55
0%
ML Large-cap Index
111.02
110.23
-1%
ML Mega-cap Index
109.94
108.80
-1%
GLOBAL MARKET TRENDS
ML Small-cap Index
100.68
99.09
-2%
5,175
ML Micro-cap Index
88.29
85.43
-3%
4,755
4,335
Sensex
-525
Nifty
Mega- cap Gainers/Losers

Essar Oil
Adani Enterprises
Large- cap Gainers/Losers
Chennai Petroleum Corp
Unitech
Mid- cap Gainers/Losers
TIL
Rattanindia Power
Small- cap Gainers/Losers
3I Infotech
Mastek
Micro- cap Gainers/Losers
05- Jun
17- Jun
Change
98.75
143.85
46%
115.25
99.25
-14%
05- Jun
17- Jun
Change
106.00
143.80
36%
8.95
7.65
-15%
05- Jun
17- Jun
Change
520.05
708.25
36%
7.75
6.25
-19%
05- Jun
17- Jun
Change
3.65
5.21
43%
449.40
142.40
-68%
05- Jun
17- Jun
Change
Uniply Industries
37.85
55.65
47%
Gangotri Textiles
1.50
1.00
-33%
(All Prices in Rs)
8 Jun-15
17 Jun-15
Shanghai Composite
3,915
3,495
3,075
Dec-14
Mar-15
Jun-15
S&P 500 and NASDAQ Composite ended flat, while

Shanghai Composite and Nikkei fell 1% each.
Bovespa rose 1%. The FTSE declined 2%.
Index
Bovespa
05- Jun
17- Jun
+/-
52,973
53,249
1%
S & P 500
2,093
2,100
0%
Nasdaq Composite
5,068
5,065
0%
Shanghai Composite
5,023
4,968
-1%
20,461
20,219
-1%
Korean Composite
2,068
2,035
-2%
Taiwan Weighted
9,340
9,190
-2%
FTSE
6,805
6,681
-2%
27,260
26,754
-2%
Nikkei
Hang Seng
Money Fact.indd 2
20-06-2015 15:53:45
MONEY FACTS STOCKS
Whats H
ML SECTORAL TRENDS
Shares of shipping companies were in demand during the fortnight. Varun

Shipping Co, Essar Ports, Great Eastern Shipping Co, Gujarat Pipavav Port
and ABG Shipyard advanced 14%, 7%, 6%, 4% and 3%, respectively.
Companies
ML Shipping Index
Varun Shipping Co
125
Essar Ports
Great Eastern
05-Jun
17-Jun
+/-
8.85
10.09
14%
96.80
103.45
7%
332.60
353.25
6%
Gujarat Pipavav Port
209.75
218.25
4%
ABG Shipyard
167.80
173.05
3%
59.60
60.15
1%
Seamec
111.30
110.30
-1%
Mercator
16.55
16.30
-2%
115
Pipavav Defence
105
Shipping Corp
48.60
47.30
-3%
702.10
679.50
-3%
95
Mar-15
Whats
Jun-15
Shreyas Shipping
N T
Ramsarup Industries
05-Jun
17-Jun
+/-
1.55
1.35
-13%
ML Steel Index
105
Rathi Steel & Power
3.92
3.42
-13%
Jindal Steel & Power
107.10
96.05
-10%
4.35
4.00
-8%
182.80
173.00
-5%
Sunag Iron & Steel
18.65
17.70
-5%
Steel Authority
63.90
61.20
-4%
Prakash Industries
32.95
31.60
-4%
Tayo Rolls
52.65
51.60
-2%
Tata Steel
311.10
305.10
-2%
Uttam Value Steels

Vedanta
Shipping
3% Trading
-10%
Reneries
3% Garments
Auto
2% Paints
-6%
Consumer Products
2% Ofce Equipment
-5%
Petrochemicals
2% Airlines
-4%
-6%
URBAN INFLATION
Shares of steel companies were punished. Ramsarup Industries and Rathi

Steel & Power delined 13% each. Jindal Steel & Power and Uttam Value
Steels declined 10% and 8%, respectively.
Companies
ML Sectoral Trends
All Prices in Rs
Dec-14
Shares of shipping companies

and refinery companies advanced
3% each, while shares of
garments companies and paints
companies declined 6% each.
Stocks of automobiles companies,
consumer products companies and
petrochemicals companies rose 2%
each. Stocks of airlines companies
declined 4%.
Combined inflation for urban

and rural areas increased
marginally, to 5.01% in May
2015, from 4.87%% in April.
Inflation in urban areas increased
to 4.41% in May from 4.36%
in April. Food inflation in urban
areas declined to 5.08% in May
from 5.41% in April. In urban
areas, inflation of vegetables
95
Steadying
85
8%
Annual Change
75
6%
Dec-14
Mar-15
Jun-15
All Prices in Rs
4%
BULK DEALS
May-14
Date
Company
Buyer
Seller
Rs Cr
16 Jun-15
Future Retail
Wgi Emerging Markets
Copthall Mauritius Investment
121.00
09 Jun-15
Bombay Swadeshi Stores Jyoti Varun Kabra
Milan Bhupendra Dalal
09 Jun-15
Panyam Cements
CLSA Global Markets Pte
CLSA (Mauritius)
2.86
08 Jun-15
Sangam Advisors
Binita H Doshi
Navratanmal Ashok Kumar
0.23
12 Jun-15
ICVL Steels
Girish K Sathe HUF
Ravindra Bishewarlal Agarwal
0.15
09 Jun-15
7Seas Entertainment
Palacharla Srinivasu
Maruti Sanker Lingamaneni
0.06
10 Jun-15
Mahavir Industries
Mukesh Ramchandra Lade
Gajanan Enterprises
0.04
13.20
Nov-14
May-15
declined to 6.77% year-on-year.

Inflation related to fuel & power
remained steady at 3.42% in
May. Inflation for housing, too,
steadied at 4.64%. Inflation for
clothing declined to 4.65% from
4.84%; for miscellaneous items,
it increased to 3.13% in May
from 2.51% in April.
Money Fact.indd 3
20-06-2015 15:54:02
BEYOND MONEY
For the Betterment of

Underprivileged Rural Children
Aham Bhumika works for rural children to
prevent migration to cities
A unique initiative is the Grain School run by

Aham Bhumika. Its objective is to teach illiterate women
labourers, often stone-crushers, to read, write and do
arithmetic. To ensure regular attendance at school, Aham
Bhumika gives students a monthly quota of grain for their
families. They are encouraged to continue their schooling
more as a study circle where they learn various skills to
improve their livelihood.
Aham Bhumika works at making women self-employed,
to the extent they can. And their children are able to do
well in a free schooling environment, even without tutors.
Where the mother is not able to educate the daughter,
the NGO is able to do something for the girl child, in
particular. Where professional tutors are not available,
volunteers help impart basic education.
Over time, the NGO has expanded its activities. Says
Mr Goswami, Aham Bhumika has set up an after-school
support centre in village Borda, where school children
are taught the basics of Hindi, English and arithmetic
after school hours. This year, the support centre has been
ural poverty is usually the result of lack of converted into an art & craft centre during weekends.
opportunity, training and resources. Subrat Here, the children are taught painting, paper-quilling and
Goswami and Kavita Bhattacharya, an idealist papier-mch work. As many as 35 children attend this
duo based in Bhopal, decided to do something about it art & craft centre.
and started Aham Bhumika in 2007. Their ideal and vision
Another interesting activity is organisation of summer
was clear: No one should die due lack of proper clothing. camps. Theae are aimed at creating excitement about
No one should sleep on an empty stomach. Importance education and school through a series of activities, learning
of education should be spread far and wide. Over time, arts, crafts or getting introduced to computers.
a diverse group comprising artists, housewives, engineers,
Aham Bhumika has trained 30 women and girls in
tourist guides, teachers and government employees have embroidery and sewing. It also commissions work from
come together to help realise Aham Bhumikas goal.
them to ensure a steady stream of income for them and
How is it achieved? Its mission statement has the answer. quality products that the NGO markets. Every week,
It says, Our mission was to help the underprivileged the NGO provides these women the fabric, design and
children, destitute and orphans by involving generous threads along with a sample of the work required. The
people from the cities by collecting material discarded by finished product, usually cushion covers and sling bags,
are deposited with the NGO for sale.
them (clothes, bicycles, books, toys, newspapers, etc).
If you would like to do your bit for society, you can
Subrat Goswami says, We have seen the problems of
rural India closely and have observed
volunteer of Aham Bhumika or
that the talent of rural children does
provide a helping hand by donating
to their cause. Or, if you are a trust
not get a chance to flower or get
AHAM BHUMIKA SWAYAM SEVI
exposure due to lack of basic materials
or organisation, you can help by
SANSTHA,
sponsoring events, buying their
like pencils, drawing books, paints
65, Elegant Estate, Sai Ganesh Mandir,
and colour crayons,. Also, without
products, donating art material or
Near Mother Teresa School, P.O. Bairagarh
training in skills, such as sewing and
computers or even grain and clothes.
Chichli, Kolar Road, Bhopal 462042
embroidery, rural women cannot earn
Donations to Aham Bhumika are
Madhya Pradesh Phone +91 98264 72718
some extra income, after doing the
exempt
under Section 80G of the
Email Aham Bhumika@gmail.com
household chores.
Income-tax
Act.
Aham Bhumika.org
Beyond_money.indd 1
20-06-2015 15:15:21
15-06-2015 18:29:19
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