SUCHETA DALAL ON:

NO PMS LOOPHOLE FOR INSIDERS: SEBI CATCH THE COUNTLESS SMALL FRAUDS TOO

Personal Finance Magazine 16 September-29 September 2016 Rs 45

Pages 68 (SUBSCRIBER COPY NOT FOR RESALE) www.moneylife.in

STOCKS:

HIGHER
RETURN
LOWER
RISK VALUE STOCKS:
Exciting News Vs Exciting Stock
Page40

STOCKS

Crompton Greaves: Cheviot: Solid JB Chemicals: Small Software Stocks: JK Tyre: Stagnant Profit, Manipulation:
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Cover Page_276.indd 1 09-09-2016 17:37:48

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 ISSUE CONTENTS
16-29 Sep 2016

Managing Risks

S tocks that offer higher return are also riskier.

Financial academics tell you that the best
investment strategy is to optimise return, for
a given amount of risk. Can this be applied in
practice? There are different ways to measure
risk, to ensure that you have a good risk-return
ratio. Many may have read about common
risk ratios such as alpha, beta and standard
deviation. While these ratios are, often, used to
judge performance of mutual fund managers or
performance of a portfolio, can these ratios, or
a combination of these, be used to pick stocks
which can deliver market-beating returns with

30 Cover Story
a lower amount of risk? In our Cover Story, we
apply these tools to stocks present in the
Nifty 500 index. The returns over the past five
years have been quite encouraging. Take a look
at our findings on page 32 where the Cover Stocks: Higher Return Lower Risk
Story starts. Investors look to earn the highest return with the lowest
Reliance Industries has created a lot amount of risk. However, this is easier said than done. Can we
of excitement with the launch of Jio, its pick a portfolio of stocks with the best risk-reward profile and
outperform the market? Jason Monteiro back-tests investing in
telecom service. But the exciting plans being stocks, based on their risk measures such as alpha, beta and
drummed up by the media dont make money standard deviation. The results are quite encouraging
for investors. In Value Stocks, I discuss what
should really excite investors when it comes to
investing in stocks.
HDFC Bank wanted its managers to be
immune from insider trading charges if they
12 Your Money
Homebuyers Favoured in Court Rulings
Bharat Saves Website Planned To Offer Information
invest in a discretionary portfolio. In a smart on Financial Planning
move, the Securities and Exchange Board of Nashik Consumer Forum Directs Four Builders To
India has refused to offer this blanket immunity. Undergo Two Years Simple Imprisonment
That would simply have opened the door to RBI To Focus on Mis-Selling of Insurance Policies by
Banks
misusing portfolio management schemes for
trading on insider information, as Sucheta
highlights in her Different Strokes section.
We have often seen how some promoters
with deep pockets have managed to manipulate
the system to their benefit. While some big
14 MONEYLIFE

QUIZ
names, like Ravi Ruia, Vijay Mallya, Subrata
Roy, etc, have come under the scanner of the
apex court, hundreds of similar cases, albeit
on a smaller scale, go unnoticed. Unless the
18 Financial Crimes: Catch the Countless Small Fish Too
government takes strict action, investors and
unsecured creditors will continue to suffer,
writes Sucheta in Crosshairs column.
As always, please do write to us what kind
of articles you would like to read and your
20 Different Strokes
SEBI Ensures No PMS Loophole for Insider Trading

views and suggestions on ways we can improve.

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
Debashis Basu
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 16-29 Sep 2016 | 4

Content.indd 2 09-09-2016 17:41:37

Moneylife Foundation AD.indd 1 09-09-2016 17:34:14
 CONTENTS
FUND POINTERS INSURANCE LEGALLY SPEAKING

May Do Better than NPS 30 Trends

22 Why 58 Nomination
Equity Mutual Funds Insurance Does Not
Give Ownership Rights
Regulations
Health Insurance Regulations 2016
FUND FACTS Decoded YOU BE THE JUDGE

Fine Print

24 Best & Worst Mutual

Fund Schemes 60 Pity the
Overworked
VALUE STOCKS
Athlete
TAX / FIXED INCOME
40 Exciting News
Vs Exciting Stock ML FOUNDATION EVENTS

25 DHFL and Other Taxable

Bond Issues

G-Sec and Bond Yields Flat

TECHNOLOGY
61 Cybercrimes:
Your Rights
Know

STOCKS
50 How Can You Benefit
from UPI?
Financial Crimes & Frauds: When
and How To Approach the EOW

26 Smart Money TAX HELPLINE

It Is Your Money,
Your Worry

42 Stock Watch
Crompton Greaves: Is the
Turnaround Sustainable?
52 Queries at Moneylife
Foundations Tax Helpline
USEFUL APPS
BEYOND MONEY

Cheviot: Not Glamorous but

Solid Performer
54 Intelligencetest:
Your IQ Levels
Test
66 Reaching Out to the
Families of the Brave-
OnlineChartTool: Tell It Visually
Dinnertime Plus: Stop Them Playing hearts
JB Chemicals & Pharmaceuticals: during Dinner
Good Chemistry Gaana: A Giant Storehouse of
Bollywood Songs

Mindtree: Small Software Stocks-

Cyclical Revenues? HEALTH

JK Tyre: Stagnant Profit, Rising

Stock Price
Market Manipulation:
Optimus Finance
Market Trend: Be Cautious
56 Great News for Doctors
as Lawyers Train Their
Guns on Drug Firms
DEPARTMENTS
Readers Response ........... 8
Pulse Beat: Medical
developments from Book Review ....................62
around the world Money Facts ....................64

Content.indd 4 09-09-2016 17:42:18

Advertisements.indd 3 03-09-2016 19:33:44
 Volume 11, Issue 15
16 September29 September 2016

Debashis Basu
Editor & Publisher
editor@moneylife.in

Sucheta Dalal
Managing Editor
sucheta@moneylife.in

Editorial Consultant
Dr Nita Mukherjee
nitamuk@gmail.com

Editorial, Advertisement, WILL E-GOVERNANCE BE

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Moneywise Media Pvt Ltd and
published at 315, 3rd Floor,
Hind Service Industries Premises,
Off Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai - 400 028
Editor: Debashis Basu
IMPLEMENTED IN POLICE
STATIONS?
This is with regard to How To File an FIR and
What Are Your Rights in Moneylife (issue dated
1 September 2106). It is difficult to file an FIR if
Mutual Fund investments
the police do not cooperate. They usually dont; are subject to market risks,
read all scheme related
often on the specious plea of jurisdiction. documents carefully.
In the age of e-mail and computer technology,
one should be able to lodge an FIR at any police
station. An acknowledgement and receipt of the Write to
FIR can automatically be generated and sent to the Editor!
the complainant via e-mail. The e-mail address of
every police station in a state should be advertised
WIN
a prize
extensively. Way back in 2006, it was reported in
the press that, to file an FIR, a person need not
visit the police station. It was claimed that the
government would bring a number of services
onlineto know the status of applications for
ration cards, house sites, inclusion of names in
voters list, birth and death certificate, copies
of land records, etc. The message was that
e-governance could affect a dramatic change in
peoples lives.
Mahesh Kumar, by email
TIMELY OBSERVATION AND ANALYSIS
This is with regard to Speciality Restaurants: Consumption Recipe
Gone Wrong? It is a very timely observation and analysis. I hold
Jubilant FoodWorks stock. I see that its net profit margin is gradually
coming down and sales are increasing to compensate the loss. I would
appreciate your view on this stock. Should one hold or get out?
Narendra Khadse, online comment

Total no of pages - 68, Including Covers FUTURE 10-BAGGER?

This is with regard to UCAL Fuel Systems: New Energy? All multi-
baggers may not have solid RoNW (return on net worth) and RoCE
RNI No: MAHENG/2006/16653

MONEYLIFE | 16-29 Sep 2016 | 8

Letters.indd 2 07-09-2016 20:22:22

Advertisements.indd 2 03-09-2016 19:33:01
 LETTERS

Difficult Decision
the
Best
letter
T his is with regard to When
You Are Dead, while Still
with a hospital bill
running into lakhs
Alive by Bapoo Malcolm. Yes, of rupees.
Mutual Fund investments
I understand that law is not on It is a very hard are subject to market risks,
read all scheme related
our side. It is only the love of our decision; but we, as documents carefully.
loved ones that can take decisions family of our near and
for us, when we are not capable
of doing so.
dear ones, should take
the difficult decision Congratulations
We had two cases in a hospital nearby. One was of with much empathy Sunil Rebello
a poor patient who was admitted late in the evening, and prayer. This should
brain dead, after a massive heart attack. The NGO, be done by looking at
YOU WIN A
PERSONALISED
whose care she was under, wrote a letter to the the best interest of the CLOCK
hospital management, the next morning informing patient.
them that she was a person in need and could not Lastly, there was the
afford to pay any hospital bill. She was kept for case of the raped nurse
three more days on the ventilator and she passed at KEM Hospital
away peacefully. No doctor or family could take the who was kept under
decision to withdraw the support system. No bill yet a similar situation
from the hospital. The next case was that of a high- for 16 years by Sunil Rebello

ranking person admitted to the same hospital in the interested parties.

same situation. He was kept in the same situation But who is to
for around 12-15 days. His hands and feet started blame?
swelling, but no doctor or family member could take Sunil Rebello,
a decision. When the man passed away, they were hit online comment

(return on capital employed) in the initial years. If we
screen the universe with high RoCE, we may miss the
future 10-baggers. In the Cover Story on 10x-baggers,
I note that 70% of the stocks had low RoCE initially
of under 10%. So, do you sense any ingredient of a
potential high growth story here as well?
Ranjan Kumar, online comment
KEEP YOUR FINGERS CROSSED?
This is with regard to All Stock Buying Is Speculation
and What It Means for Investing by Debashis
Basu. I would like to put down my points for prudent
investing:
a. Do not ever put all your eggs in one basket.
Certainly never more than 5% of portfolio on one
stock.
b. Use the pyramid approach comprising a base of
40-50 of large-caps, 30-20 mid-caps and 20-10
small-caps.
c. Do not put in money you need for the next 5-7
years. That should be in fixed deposits or bond
funds.
d. Seek out good managements.
e. Stay away from high debt companies. Avoid
companies with high pledged shares.
f. Seek companies that are focused on operating cash
flows.
g. Get to use, or know, the product and its
competition. Get to experience the service and
compare it with the competition.
h. Last, but not least, keep your fingers crossed.
Ralph Rau, online comment
AMAZED BY THE USE OF DISCOUNTED
CASH METHOD!
This is with regard to All Stock Buying Is Speculation
and What It Means for Investing by Debashis Basu.
Forgive me, if I sound stupid because my knowledge
of the stock market is really zero; but I am amazed
that the stock market would use the discounted cash
method. In operations research (nowadays called
analytics), the discount factor is just used to make
algorithms work. The author is 100% correct in that
the discount factor is very difficult to estimate and it is

MONEYLIFE | 16-29 Sep 2016 | 10

Letters.indd 4 07-09-2016 20:23:16

 LETTERS

best to use average (undiscounted) cash returnsif you
must use cash returns in your analysis. Also, as far as
US stocks go, inflation and interest rates have been so
low in recent years that the discount factor is close to
1 anyway.
Abhijit Gosavi, online comment
PATIENCE IS THE KEY!
This is with regard to Multi-baggers: Dont
Underestimate Timing by Debashis Basu. Good
report. I have always believed that you can time the
market, although you wont always catch the absolute
peaks or the lows. Buy when everybodys
crying and the papers are full
of bad news and theyre all
blaming the Indian stock market
as a useless place. Sell when all
that is forgotten and IPOs are
commonplace, when you get news
of lakhs of new demat accounts
being opened (these have started); as
this article suggests, were probably
there.
Even so, Im waiting for a Nifty P/E
(price-earnings ratio) of 26 which, I
have noticed, is where the real risk
starts; although, in January 2008, that
figure hit 28 before crashing.
All recent bull markets have been unable
to sustain Nifty P/Es far above 25.7. If
you sell then and put your money in a liquid mutual
fund scheme and waitpatience is the keyyou are
likely to get an opportunity to buy back your shares at
a discount and save the change.
Mohan Sivanand, online comment
MARKETS ARE OVERVALUED
This is with regard to Faster, Higher, Stronger:
Momentum in Stocks & Indices by Jason Monteiro.
It is time to think of when to sell as markets are
overvalued. It would be great if Moneylife could do a
detailed write-up on when/how to sell, when markets
become overvalued.
Ramesh Mehta, online comment
NOSTALGIA ABOUT AXIS BANK
This is with regard to the book review of The Unusual
Billionaires by Saurabh Mukherjea. The book is simply
delightful and would be useful for young and old
bankers. For me, reading this book, after coming to
know from Moneylife (issue 19 August 2016), it was a
nostalgic trip. I had joined the first branch
of UTI Bank in Ahmedabad, right in the
beginning when it was opened in April
1994. I still vividly recall the thrill of
joining the new Bank and building the
institution which continued till the last
day, when I turned 60 last year and
retired from my most beloved Axis
Bank. It was the most memorable and
satisfying journey for me.
NK Bakshi, by email
A LOT CAN BE ACHIEVED BY
SLOWING DOWN!
This is with regard to SEBI Tries To
Fix the HFT Issue without Closing
the NSE Probe by Sucheta Dalal.
It might benefit the stock exchanges,
where they get more income (due to more automated
volumes). But the common investor has to face highly
volatile markets.
I believe these recommendations are going to make
markets much more complex and non-transparent.
Suggestions like randomisation, etc, will make things
more opaque and, in case of investigations, impossible
to identify what went wrong. I think a lot of can be
achieved by just slowing down than by introducing
complex algorithms with unknown downsides.
MV Subba Rao, online comment

Letters:
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emailed to editor@moneylife.
in or can be posted to: The Editor,
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11 | 16-29 Sep 2016 | MONEYLIFE

Letters.indd 5 07-09-2016 20:23:40

 Your Money
CONSUMER PROTECTION FINANCIAL PLANNING

Homebuyers Favoured in Court Rulings Bharat Saves Website

T
he Supreme Court ordered
real estate giant DLF to pay
9% interest to 50 buyers for
the delay in handing over possession
of flats in Haryanas Panchkula
town, adjoining Chandigarh. It has
also ordered Supertech, which had
collected money from homebuyers
and failed to deliver the flats
satisfactorily, to return the money
to the buyers unconditionally,
in a recent judgement. Either
you (Supertech) sink or die, we
are not concerned. You will have
to pay back the money to home
REAL ESTATE
Nashik Consumer Forum Directs Four Builders To Undergo Two
Years Simple Imprisonment
buyers. We are least bothered about
the financial status, the Court
said. The Supreme Court also
directed Sahara India Commercial
Corporation Limited (SICCL) to
deposit Rs3.5 crore to pay back
investors who had bought flats in its
Gurgaon project but did not receive
possession on time.
The order came on an appeal
filed by SICCL against order of
the National Consumer Disputes
Redressal Commission which had
asked the firm to pay compensation
at 12% to the Sahara Grace
Consumers Grievance Association
for delayed possession of flats.
The Delhi High Court asked
Unitech and its homebuyers to
work out a formula under which
the developer uses 90% of the funds
collected from them to construct a
project, if a majority of buyers votes
in favour of completion. The Court
ruled that the money collected from
buyers for project completion has to
be deposited in an escrow account
and only 10% of the corpus can be
used to refund payment to those
who want to opt out.
Planned To Offer
Information on Financial
Planning
G oogle India is planning to develop a
website, Bharat Saves, which will
offer information on financial planning,
reports The Economic Times. Google
wants to align its Bharat Saves website
to the governments financial inclusion
scheme, Jan Dhan Yojana. The digital
platform may provide a range of
financial literacy tools and information
on financial products.
A Google
spokesperson
told media
that, in line
with the prime
ministers
vision to create greater financial
inclusion, various BFSI (banking,
financial services and insurance)
organisations and industry associations
are coming together to launch a digital
platform.
A financial literacy awareness
campaign may be part of the plan.
Bharat Saves will be an app and
a website both of which are being
designed by Google. Users logging into
the website will need to take a financial
literacy test the certifications for which
will be given by the Indian government,
Google and an industry organisation.
There will be a second section of the
app/website where users will be able
to see, compare and purchase banking
and insurance products.

T he District Consumer Grievance Redressal Forum at Nashik ordered two years simple imprisonment
for four builders. The order related to builders failure to honour the Maharashtra State Consumer
Disputes Redressal Commission (MSCDRC) orders of completing the conveyance deed for a housing
The target consumers for this
platform will be home-makers, small
business owners, the newly employed,
society on time. However, this was not the only issue. The Forum said that additional construction was retired persons and farmers. Apple has
carried out in the housing society and the builders had not obtained completion certificate for it. Earlier, also held talks with the government on
the builders were directed by MSCDRC to complete the conveyance deed within six months from making Apple Pay, a mobile payment
13 October 2008, the date of the order. However, the builders failed to abide by these orders. Hence, the and digital wallet service, a part of
aggrieved party approached the Forum. financial inclusion programmes.

MONEYLIFE | 16-29 Sep 2016 | 12

Your Money.indd 2 09-09-2016 17:46:05

 MONEYLIFE
FOUNDATION
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Credit Helpline New.indd 1 29-07-2016 17:52:29

 Your Money
LIFE INSURANCE

RBI To Focus on Mis-Selling of Insurance grievance redress process.

We will examine how banks are faring and whether
Policies by Banks further regulations are needed to strengthen consumer
protection. In particular, we will focus this year on the issue of

T
he Reserve Bank of India (RBI) will train its focus on
mis-selling of insurance products by banks and also
see whether new regulations
are needed for protection of banking
customers, outgoing RBI governor
Raghuram Rajan said, reports IANS.
Referring to the Charter of Customer
Rights brought out by RBI in 2015,
which banks had been asked to follow
in dealing with customers, Dr Rajan
said that banks were asked to appoint
an internal ombudsman to monitor
mis-selling, especially of insurance products, he said.
Customers have been complaining against banks for mis-
selling of policies of life insurance.
Dr Rajan said that RBI will work to
enhance grievance redress procedures
within the financial institutions and, if
the customer is still unsatisfied, through
the RBIs ombudsman scheme. Rajan said
the grievane redressal mechanism in the
rural areas as well for weaker sections of
the society will be strengthened.

Moneylife

MONEYLIFE
Quiz no

241
QUIZ Answer
Correctly! Win
Another quiz to tease your brain. The answers are in a personalised
sed
this very issue. The winner will be chosen by a lucky clock with an Raykumar Panyam

draw from correct entries and answers published in Mutual Fund investmentnt
investments are quote!
the issue dated 27th October. Send in your answers to subject to market risks,
read all scheme related
quiz@moneylife.in with the Quiz no., name, address & documents carefully.
telephone number before 5 October 2016.

1. What was the fund management charge when the National 5. Which sporting activity was Ramanathan Krishnan famous
Pension System was launched for the public in 2009? for in the 20th century?
a. 0.01% b. 0.0009% a. Cricket b. Tennis
c. 0.25% d. 0.0275% c. Baseball d. Soccer

2. For debt mutual fund schemes, what is the estimated 6. Which European country had its base in Hugli in Bengal,
maximum expense ratio? according to Sanjeev Sanyal?
a. 1.75% b. 2.75% a. England b. France
c. 2.50% d. 3.00% c. Portugal d. Germany

3. What is the total maximum tax rebate under Section 80C of 7. In 2011, who was the president of the Arizona State
the Income Tax Act for savers in the National Pension University in USA?
System? a. Michael Crow b. Cornelius M Kerwin
a. Rs2 lakh b. Rs2.5 lakh c. Dr Bjrn Kjerfve d. Dr Dale T Knobel
c. Rs3.00 lakhd. Rs4.00 lakh
8. What was the coupon rate of Reliance JIO Infocomms fixed-
4. Who started the Flags of Honour Foundation? income instruments with the maturity date of 8 July 2021?
a. Sandeep Unnikrishnan b. Abdul Hameed a. 9.01% b. 9.32%
c. Rajeev Chandrashekar d. Capt Saurabh Kalia c. 9.50% d. 9.65%

In all, 11 readers got all the answers right last time.

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 CROSSHAIRs
Financial Crimes: Catch the Countless Small
Fish Too
O
n 6th September, the Supreme Court of India
refused to permit Ravi Ruia, promoter of
the giant Essar group of companies to travel
abroad. Heres what a bench of Justices JS Khehar
and Arun Mishra said while rejecting his plea. We
have allowed a person to go abroad but he never came
back. He was no less big than you in monetary terms.
We dont want to take chances now. We are now once
bitten twice shy. We are not going to give liberty to
anyone.
Although the Court did not name anyone, the
immediate speculation was that the judges were
referring to Vijay Mallya, the controversial UB group
chairman and Member of Parliament who has failed to
return to India to face trial.
MONEYLIFE | 16-29 Sep 2016 | 18
MONEYLIFE | 27 November 2014 | 14
Crosshair.indd 2
Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal
The apex courts tough stance is heartening for
investors and creditors. Promoters of a slew of Indian
companies can remain overseas indefinitely because
they have plenty of funds stashed abroad. These funds
have been siphoned out of their Indian businesses or
raised from money circulation schemes that robbed the
rich and poor alike. The Pearls Agro Tech Corporation
(PACL), which has been asked by the market regulator
to refund a stupendous Rs49,000 crore, has large assets
in Australia and a few other countries. The Sahara
group, built on alleged investments by Indias poorest
people, has assets in the form of luxury hotels around
the world including Macedonia. Subrata Roys wife and
son are even understood to have acquired citizenship of
the Republic of Macedonia.
If this is the case with high-profile and flamboyant
businessmen, smaller industrialists with dubious track
records are not far behind in diverting funds to build
nest eggs abroad.
Investors faced with huge losses are ending up
playing sleuth and setting up groups or associations to
track the flow of funds, file cases, or merely support
one another, in an effort to recover their investment.
This has happened in the case of shady companies
like PACL and QNet as well as with smaller listed
companies where people have lost a lot of money. The
Sahara group is the only exception where no investor
seems concerned at the fate of her investment, raising
another set of questions about who really invested in
its schemes.
Often, such investor groups do manage to track the
fraudulent diversion of funds from listed entities; but
09-09-2016 17:48:26
 their effort is, eventually, frustrated by the tediously recover money. One can understand investors being
slow investigation and judicial process. A good lazy and foolish and failing to read a prospectus.
example is that of Dr Datsons Lab, a little-known But isnt it time we, as a country, begin to act
pharma company that was allowed to run, what seems against public sector bankers who extended fresh
like, a money laundering and price manipulation loans to DDL without adequate monitoring, when
operation, right until 22 May 2015 when the two all- the disclosures in its offer documents proclaimed its
India stock exchanges, finally, suspended the shares. shady character?
This was a month after its bankers had obtained a The risk factors in the IPO document had clearly
court order putting the company into liquidation, had stated that it had negative cash flows at the time
taken possession of its registered office (which was of the issue, had placed no orders for plant &
owned by the promoter Dr Kannan K Vishwanath) and machinery and the object for which funds were
invoked 100% of the promoters shareholding which raised was not appraised by any bank or institution.
was pledged with banks. And, yet, this company had Worse, many of its trademarks were also not
managed to fool people with a massive investment registered in the companys name but were held by
from foreign institutional investors (who held 56% of the promoter. Why would Bank of Baroda lend to
its equity at one time) and winning a series of awards this company after project appraisal officers had
for good governance, innovation, transformation and read the stinking prospectus? The answer is obvious;
leadership! but is anyone asking questions?
Dr Datsons Lab (DDL) is a fit case for investigation Has the tax department sent any notices at all to
under the draconian Prevention of Money Laundering Dr Kannan Vishwanath under the PMLA or
Act (PMLA); but we see no sign of any such action. obtained information that is being shared by its
Instead, a group of investors continues to ferret out investors about his brand new Hong Kong-based
information about the promoters latest antics and company called Windsonn Exim Ltd? This company
write to the government pleading for action. claims to hold the same 15 patents that once
In a letter to the finance belonged to a wholly-owned
minister, an investor, Lt subsidiary called Fair Success
Commander Joginder Pal The risk factors in the IPO HK Ltd which was acquired
Kanaujia, has listed seven frauds document had clearly stated by Dr Datsons Lab after fund
by DDLs former promoter raising.
that it had negative cash
Dr Kannan Vishwanath. He Which lender or government
has painstakingly compiled
flows, had placed no orders agency will be authorised to
this information, along with a for plant & machinery and the secure overseas assets of DDL
group of investors, over the past object for which funds were such as the following wholly-
15 months. Each instance of raised was not appraised. Why owned subsidiaries --Eros
fraud, mentioned in the letter, is would Bank of Baroda lend to Pharmachem Pte (Singapore),
accompanied by some evidence this company? The answer is Aanj Pharmalabs Limited Fze
in the form of court judgements, obvious; but is anyone asking (Dubai), Dr Datsons Labs
patent registration details, or questions? Limited (UK) and Fair Success
mirror companies set up by the (HK) Limited? Of these, Fair
promoter (mirror companies are Success apparently has Rs80
entities with similar names set up in different countries crore in its bank account.
to obfuscate facts and fool regulators and investigation Unless this government makes a break from the
agencies). Lt Commander Kanaujia has sought an past and holds public sector bankers accountable for
investigation by the Central Bureau of Investigation corrupt and collusive lending, the mountain of bad
(CBI) to bring back Rs250 crore of DDL investors loans, which are eventually paid by the taxpayer,
money which he believes was siphoned off to Hong will continue to mount. When large lenders collude
Kong through a laundering operation. Here are some with fraudulent promoters and allow them to strip
interesting questions raised by the letter. cash and assets from the company, they also deal a
When DDL was first listed on the bourses, its IPO crippling blow to investors and unsecured creditors.
(initial public offer) document had disclosed that a This has been going on for the past several decades;
part of the issue proceeds would be used to repay unfortunately, there is no sign that things will change
its bankers, State Bank of India and Shamrao Vithal even under this government. A focus on a few big
Bank, and Rs10 crore of unsecured loans from names like Mr Mallya and Mr Ruia only ensures
directors. It now turns out that a consortium of that hundreds of such cases fly below the radars of
bankers, led by Bank of Baroda, had gone ahead multiple investigative agencies tasked to bring financial
and funded its plants which are now being sold to criminals to book.

19 | 16-29 Sep 2016 | MONEYLIFE

Crosshair.indd 3 09-09-2016 17:48:56

 DIFFERENT STROKES SUCHETA DALAL

SEBI Ensures No PMS

Loophole for Insider Trading

A
quarter century ago, when the capital market pay crores of rupees as fine, in two cases of front-running.
watchdog had just come into existence but there That insider trading remains rampant in India is also
were no insider trading regulations, we used to evident from stock price charts before and after many
joke that 90% of all trading in the stock market is based major corporate announcements. Moneylife has frequently
only on inside information. Even the last guy getting a reported this; but there is rarely any action, when the
hot tip on a long train commute to the Bombay Stock violation is so widespread. Here are just a few links to our
Exchange (BSE) thought he knew something that others reports on NR Narayana Murthys comeback to Infosys
didnt. Even after the Securities & Exchange Board of (http://tinyurl.com/zqfc5uy), Insider trading in Astrazeneca
India (SEBI) got its statutory teeth, I used to hear about Pharma (http://tinyurl.com/zo5as8e), ING Vysya (http://
this secretive group of chief financial officers (CFOs) of tinyurl.com/hr2rbpu ), Ranbaxy (http://tinyurl.com/
companies who met regularly hdpcqzs), Geometric Software
at a Mumbai five-star hotel to (http://tinyurl.com/jb7flq8),
exchange inside information. Tata Motors (http://tinyurl.com/
In the past two decades, z3dsax3), among the many we
the rich and powerful have have reported.
occasionally been nailed for These anecdotes come to
insider trading; but, more often mind in the context a recent
than not, they get away. During query by HDFC Bank to SEBI.
the many excesses of the United The Bank wanted to know
Progressive Alliance (UPA), a whether its employees, who
political columnist wrote a are in possession of unpublished
snippet about a Cabinet minister price sensitive information
texting key government decisions (UPSI) of the Bank or its
to a television journalist even clients and, hence, restricted
while the meeting was going on.
HDFC Bank wanted to know from trading in the securities
The Intelligence Bureau
whether its employees, having of these entities, could invest
(IB) reported the matter to price-sensitive information, their money in the stock market
government when it noticed could invest their money through discretionary portfolio
that the channel was breaking through discretionary portfolio management schemes (PMS)
news on decisions even before management schemes and be where the client does not dictate
the Cabinet meeting had ended. immune from insider trading rules the fund managers investment
According to the column, the decisions.
minister was so powerful that Essentially, the Bank wanted
nobody dared to confront him; instead, it was decided to know whether its executives could avoid allegations of
to install jammers outside the Cabinet meeting rooms to violative insider trading, if the portfolio manager bought or
prevent information leaking out. I later learnt that the sold securities of companies where they had UPSI at a time
ministers cohorts tracked the channel in the knowledge when the trading window was closed for insiders. These
that reports from that particular journalist were authentic executives, it said, would furnish declarations that they
and probably traded on the information. have no influence on the stock selection of the portfolio
In more recent times, Dilip Pendse, managing director of manager.
Tata Finance, was found guilty of insider trading in 2014, SEBIs informal guidance was an unambiguously
after a long legal battle. The company secretary of Jagran negative. It, correctly, quoted SEBIs insider trading
Prakashan and his wife were found guilty of profiting to regulation (4)(1) to say that bankers could not escape the
the tune of Rs10.4 crore from inside information, in 2009. application of insider trading regulations even if they were
Even the venerable HDFC Mutual Fund was ordered to clients of a portfolio management scheme. SEBI should

MONEYLIFE | 16-29 Sep 2016 | 20

DIFFERENT STROKES.indd 2 09-09-2016 17:53:39

 DIFFERENT STROKES SUCHETA DALAL

be congratulated for such an unambiguous guidance and whom he reportedly had an intimate relationship. That
probably seeing through the nice big loophole that would is the case which also implicated Raj Rajarathnam of
open up in the difficult-to-prove insider trading regulations. Galleon Funds, who is serving out a long prison sentence.
It must be noted that a SEBI committee, set up to SEBIs own investigations have also shown that some
update the insider trading regulations, had managed to foreign institutional investors are individual portfolios
insert precisely such an exception to exclude discretionary for the super-rich brought in disguised as an institution.
portfolio managers decisions, if they were made without What would stop a group of executives from ensuring that
reference to the client (unless circumstantial evidence a discretionary PMS is actually limited to a buddy-group?
proved a nexus between the portfolio manager and The possibilities of misuse are endless and SEBI hardly has
investor). SEBI seems to have shown rare wisdom by the capability, or the manpower, to track it.
dropping this exception even while announcing the new Let us also not forget that the PMS business in India
insider trading rules. Hence, HDFC Banks subsequent is run by bankers, brokers or mutual funds, who operate
request for clarity. in a fairly incestuous set-up. They have constant dealings
Now, consider what would happen if SEBI had accepted with one another (socially and professionally), making it
the draft regulations or offered a different guidance to even more difficult to prove any charge of insider trading,
HDFC Banks query. Insider unless there is a sting operation
trading is already extremely of sorts.
difficult to prove anywhere in the SEBIs guidance has put the
world, including countries where burden of following the letter
regulators can deploy money and spirit of its regulations
and technology and have the squarely on corporate insiders.
power to conduct wiretaps and This is how it should be. Yes, it
to offer plea-bargains that allow is possible that senior corporate
them to let off the small fish to executives and top bankers will
go after the big insider traders. not be able to avail the services
Moreover, all the examples cited of a discretionary portfolio
above, and scores of other cases manager; but so what? These
investigated by SEBI, show that are financially savvy individuals
those in powerful and privileged (minimum investment in a PMS
positions, who have access to is Rs25 lakh) who are more than
UPSI, are not above misusing SEBIs guidance to HDFC Bank has capable of managing their own
it for some illegal profiteering. put the burden of following the portfolio. Most of them are
Had SEBI allowed
letter and spirit of its regulations people who earn eight-figure
discretionary portfolio salaries and, probably, have
management to remain out of
squarely on corporate insiders. stock options whose value runs
the purview of insider trading This is how it should be into nine and ten digits. They
rules, it would inflict a nearly are smarter than the average
impossible burden on itself of proving insider trading portfolio manager and the small restriction on their
through circumstantial evidence alone. Even if it were to investment options is not something that should make
cobble together a reasonable case, everyone accused of our hearts bleed in sympathy, given the enormous scope
insider trading would quote SEBIs informal guidance, to of misuse.
ensure that the watchdog is held to extremely strict proof At a time when retail investors are slowly regaining
that the accused had influenced the portfolio managers confidence in the capital market mainly by routing
investment decision. investments through mutual funds, SEBI needs to ensure
Knowing how hard that will be, any exception to that it provides a fair and level playing field to investors,
SEBIs insider trading regulations, or any guidance other not one which allows powerful corporate insiders to get
than the one it gave HDFC Bank, would open the doors a near carte blanche by routing trades through a portfolio
for misuse of PMS by all unscrupulous insiders. This is not manager.
an imaginary situation. One of the most famous insider
trading cases is that of Robert Moffat, a former IBM Sucheta Dalal is the managing editor of Moneylife. She was
executive who admitted to providing inside information awarded the Padma Shri in 2006 for her outstanding contribution
to Danielle Chiesi, a consultant of Newcastle Funds with to journalism. She can be reached at sucheta@moneylife.in

21 | 16-29 Sep 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3 09-09-2016 17:54:11

 MUTUAL FUNDS POINTERS
Why Equity Mutual Funds May Do
Better than NPS
M
any savers are lured by the National Pension
System (NPS) because of the attractive tax
rebates available. Apart from the Rs1.50 lakh
rebate under Section 80C, savers can invest an additional
Rs50,000 in NPS, taking the total rebate up to Rs2 lakh.
Additionally, in the Finance Act 2016, it was announced
that 40% of the NPS corpus withdrawn at retirement will
be tax-exempt. Along with these benefits, the NPS boasts
an extremely low investment management fee. While low
cost is certainly a good thing, but are the portfolios of NPS
optimally managed? We compare the performance of NPS
with mutual fund schemes.
When NPS was launched for the public in 2009, the
fund management charge was negligible at 0.0009% per
year. In 2012, the Pension
Fund Regulatory and
Development Authority
(PFRDA) raised fund
management charges for
the private sector to 0.25%
of assets under management
(AUM), following demands
from pension fund managers.
Despite the comparatively
low costs, savers were not
attracted. In 2015, PFRDA,
once again, slashed the fund
management fee to 0.01%
to make NPS look attractive
to the public.
Currently, about 0.0275%pa (per annum) will be
deducted from the NAV as charges towards investment
management (0.01%), asset servicing charge (0.0075%)
and trust management charge (0.01%). Equity mutual fund
schemes can charge nearly 3% as maximum expense ratio.
For debt mutual fund schemes, the maximum expense ratio
can touch 2.75%.
Keeping these costs in mind, if NPS and equity mutual
fund schemes deliver returns in line with the market
benchmarks, NPS will be a clear winner. But, as we have
seen in the past, most well-managed mutual fund schemes
have consistently beaten their benchmarks. Therefore,
post-costs, investing in good mutual fund schemes would
have worked out to be a better proposition than NPS.
Under NPS, subscribers can choose to allocate their
investment over three categories of schemesAsset Class G
MONEYLIFE | 16-29 Sep 2016 | 22
Fund Pointer.indd 2
(government bonds), Asset Class C (corporate bonds)
and Asset Class E (equity). Under each category, they
can choose one out of seven schemes which are managed
by different pension fund managers. The investment by
a subscriber in this Asset Class E would be subject to a
cap of 50%. Under this category, the investment universe
of the pension fund manager is restricted to listed shares
(on the National Stock Exchange or the Bombay Stock
Exchange) on which derivatives are available or which
are part of the BSE Sensex or Nifty 50 Index. Thus, the
portfolio will consist of mainly large- and mega-cap stocks
that are actively traded.
We compared the performance of the five NPS Asset
Class E schemes to 87 equity diversified mutual fund schemes
(corpus above Rs500 crore).
We split the equity schemes
based on their market-cap
orientation. Thus, we had
28 large-cap, 33 multi-cap
and 26 mid-cap schemes.
We picked the performance
of NPS Tier-I schemes from
the annual report 2015-16
of the NPS Trust. As the
performance of the schemes
was available financial
year-wise, we compared the
returns to the equity MF
schemes accordingly.
In the one-year periods, the NPS equity schemes
have done well in periods like FY10-11 and FY12-13.
The performance has been much better than the average
performance of equity funds. At the same time, it is
important to note that these were volatile periods when
the market was mainly directionless. Large-cap stocks
tend to do better in such periods. Hence, these schemes
have outperformed.
If we take a look at most other periods, NPS equity
schemes have failed to hold their ground. In the periods
between 2013 and 2015, when the markets rallied, equity
MF schemes outperformed NPS schemes by a significant
margin. Even in periods when the market moved lower,
schemes of the NPS were not able to curb their downside
losses. Equity MF schemes, due to their diversified portfolio,
were able to reduce the downside risk.
Due to these reasons, we have seen all categories of
09-09-2016 17:55:58
 MUTUAL FUNDS POINTERS

Choose Wisely
NPS Scheme - Asset Class E FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 FY10-15* FY11-16*
ICICI Prudential Pension Funds 11.83% -7.75% 9.05% 21.18% 28.65% -7.37% 11.89% 7.75%
Kotak Mahindra Pension Fund 11.89% -10.23% 11.52% 19.48% 28.41% -6.88% 11.44% 7.42%
Reliance Capital Pension Fund 10.77% -10.49% 7.75% 20.20% 28.30% -7.26% 10.50% 6.64%
SBI Pension Funds 8.05% -7.18% 8.24% 20.68% 28.37% -7.16% 10.96% 7.64%
UTI Retirement Solutions 8.35% -10.58% 7.42% 21.29% 29.74% -6.72% 10.37% 7.11%
Top 10 Large-cap MF 16.07% -1.81% 10.87% 24.04% 46.81% -4.70% 18.14% 13.57%
Top 10 Multi-cap MF 13.31% 0.31% 11.76% 25.33% 60.63% -3.10% 20.66% 16.94%
Top 10 Mid-cap MF 11.22% 5.13% 12.85% 32.47% 86.22% -0.88% 26.62% 23.74%
Average Large-cap MF 10.66% -5.04% 6.65% 19.42% 39.78% -7.76% 13.35% 9.29%
Average Multi-cap MF 8.61% -4.67% 6.79% 20.49% 48.42% -6.80% 14.61% 11.15%
Average Mid-cap MF 6.07% -0.70% 7.38% 26.17% 72.28% -4.81% 19.71% 17.15%
Bottom 10 Large-cap MF 4.69% -8.21% 2.24% 14.60% 32.57% -10.51% 8.34% 4.99%
Bottom 10 Multi-cap MF 3.05% -8.72% 1.35% 15.73% 35.65% -10.55% 8.40% 5.37%
Bottom 10 Mid-cap MF 0.60% -6.23% 2.21% 19.50% 59.14% -9.11% 12.89% 10.62%
Index

Nifty 50 10.30% -9.11% 7.33% 17.58% 26.42% -9.87% 9.92% 5.84%

* Annualised returns

equity MF schemes outperform NPS over the five-year managers were able to deliver a return in excess of 14%.
periods. While the performance of NPS schemes is much
better than that of the worst equity MF schemes, the
performance trailed the average performance of the equity
funds by a significant margin in both the periods considered.
There is no dearth of choice when it comes to selecting
an equity MF scheme. However, if you are able to
select a few schemes, which are well managed and have
performed consistently in the past, your selection should
outperform the average mutual fund scheme. If a scheme
underperforms, you can always switch your investment to
a better performing scheme.
In NPS, too, a switch among fund managers is possible
by filling out a form. The switch under NPS is restricted to
once a year; but this limit should not be an issue. If fact,
you may not even feel the need to switch under NPS as the
performance of the various schemes is almost the same.
This is not surprising, as they follow the same investment
mandate and the expenses are a bare minimum.
In another article published on the blog of Moneylife
Advisory Services (http://goo.gl/psaSZ2), we highlighted
how the debt schemes (Class C & G) of NPS, which invest
in corporate bonds and government securities, returned
between 11%-15% over the year ended 29 July 2016.
Over the past year, schemes that invested in government
securities did extremely well, as the benchmark G-Sec yield
fell by over 50bps (basis points), from around 7.80% in
July 2015 to 7.10% on 29 July 2016. All pension fund
Due to the recent performance, the annualised return
over the past three-year and five-year periods looks quite
attractive. When we examined the performance in each of
the past six financial years, the returns have varied from
under 1% to over 13%. Similarly, schemes that invested
in corporate debt, too, did extremely well over the past
year, returning about 12% each. However, on checking
the performance over the past six years, the returns have
varied between 6% and 12%.
As subscribers need to stay invested in NPS till retirement,
they should not get carried away by the performance over
the past two years. The returns may work out to be much
lower than their recent performance. Apart from this, as
we have highlighted before, the allocation to equity is
not only low, being capped at 50%, the investment of the
fund managers is restricted to only large-caps. Investors
lose on the return potential of investing in a diversified
portfolio of stocks.
Despite several initiatives to make NPS attractive for
savers, NPS is still riddled with issues which make it a flawed
choice for the discerning investor. Issues related to lack of
clarity on taxation on maturity, mandatory investment in
an annuity product and low liquidity are a deterrent for
investors. Subscribers have better retirement options in the
form of actively managed mutual funds. To get tax benefit,
invest in equity-linked savings schemes (ELSSs) or mutual
fund retirement plans. Jason Monteiro

23 | 16-29 Sep 2016 | MONEYLIFE

Fund Pointer.indd 3 09-09-2016 17:56:46

 MUTUAL FUNDS FUND FACTS

Best & Worst Mutual Fund Schemes

The best# three and the worst three schemes over the past three years ranked by their
quarterly rolling returns. Premium members get access to a more refined list of top
schemes by logging in to Moneylife Advisory - savers.moneylife.in

Equity Schemes (Quarterly Rolling Returns)

Large Cap (Category Avg: 5.17%, Launch Corpus Avg. Quarterly 1-Year 3-Years** Exp
Sensex: 3.49%) Date (Rs Crore)* Rolling Returns Ratio
Mirae Asset India Opportunities 04-Apr-08 2,191 6.61% 18.72% 29.19% 2.36%
HSBC India Opportunities 24-Feb-04 510 6.56% 18.54% 28.92% 2.45%
Reliance Vision 08-Oct-95 3,138 6.49% 12.26% 28.61% 2.04%
HDFC Large Cap 18-Feb-94 1,187 3.56% 13.04% 15.03% 2.21%
Sundaram Growth 24-Apr-97 176 3.17% 6.23% 13.29% 2.92%
UTI Wealth B uilder 17-Dec-08 420 2.77% 10.94% 11.55% 2.66%
Multi-cap (Category Avg: 6.11%, BSE 200: 4.60%)
L&T India Value 08-Jan-10 1,532 8.13% 17.33% 36.73% 2.18%
ICICI Prudential Value Discovery 16-Aug-04 13,883 8.04% 14.86% 36.27% 2.25%
Tata Equity P/E 29-Jun-04 658 7.94% 26.76% 35.73% 2.68%
Peerless Equity 28-Sep-11 100 4.45% 17.10% 19.03% 3.00%
LIC MF Equity 15-Apr-98 344 4.32% 8.02% 18.44% 2.82%
Union KBC Equity 10-Jun-11 172 4.21% 11.28% 17.92% 3.09%
Mid-and Small-cap (Category Avg: 8.94%, Nifty Midcap 100: 7.16%)
DSP BlackRock Micro Cap 14-Jun-07 3,399 11.48% 26.48% 54.45% 2.53%
Reliance Small Cap 16-Sep-10 2,335 10.70% 21.60% 50.19% 2.08%
Canara Robeco Emerging Equities 11-Mar-05 1,205 10.08% 19.82% 46.83% 2.31%
SBI Emerging Business 17-Sep-04 1,795 6.79% 18.94% 30.06% 2.12%
HDFC Small and Mid Cap 03-Apr-08 915 6.50% 21.93% 28.63% 2.42%
IDFC Sterling Equity 07-Mar-08 1,350 6.39% 12.31% 28.12% 2.18%

Debt Schemes
Income (Category Avg: 2.48%, Crisil Composite Bond: 2.78%)
ICICI Prudential Long Term Plan 20-Jan-10 1,011 3.17% 12.81% 13.27% 1.22%
Birla Sun Life Dynamic Bond 24-Sep-04 13,022 2.99% 13.15% 12.52% 1.63%
Sundaram Flexible - Flexible Income 30-Dec-04 679 2.87% 10.94% 11.99% 0.83%
Union KBC Dynamic Bond 13-Feb-12 315 2.20% 9.61% 9.10% 1.92%
L&T Triple Ace B ond 31-Mar-97 872 2.17% 10.18% 8.98% 1.49%
Invesco India Bank Debt 29-Dec-12 473 1.93% 6.78% 7.93% 0.65%
Liquid (Category Avg: 2.10%, Crisil Liquid Index: 2.13%)
Escorts Liquid Plan 03-Oct-05 230 2.21% 8.38% 9.13% 0.50%
Birla Sun Life Cash Plus 29-Mar-04 31,846 2.13% 8.00% 8.80% 0.36%
Indiabulls Liquid 25-Oct-11 3,741 2.13% 8.13% 8.79% 0.38%
Mirae Asset Cash Management 12-Jan-09 181 1.98% 7.26% 8.16% 0.26%
Reliance Liquid - Cash Plan 07-Dec-01 6,759 1.94% 7.18% 8.00% 1.08%
L&T Cash 27-Nov-06 591 1.88% 6.85% 7.72% 0.79%
# Please note the table represents a comparative performance of mutual fund schemes over a three-year period and it is not a recommendation; * Latest quarter average assets
under management; We have only considered schemes having a corpus above Rs100 crore. **Annually compounded

MONEYLIFE | 16-29 Sep 2016 | 24

Fund Facts.indd 2 07-09-2016 20:10:49

 TAX/ FIXED INCOME

DHFL and Other Taxable Bond Issues

S
everal taxable bond issues
will hit the market in absence
of tax-free bonds. The NCD
(non-convertible debenture) issue
of Dewan Housing Finance Ltd
opened on 29th August and closed
in a day on 30th August. It offered
interest rates of up to 9.25% for
84 months, 9.15% for 60 months
and 9.10% for 36 months. Rating is
CARE AAA and BWR AAA rating
by Brickwork. Demat and physical
options are available. There is
no TDS (tax deducted at source),
if applied through demat route.
Allotment was on a first-come-
first-served basis.
Indiabulls Housing Finance,
Srei Infrastructure Fin and
several others will offer taxable
bonds to investors in the next
few months. Recently, Edelweiss
Housing Finance hit the market
with an offer of secured redeemable
NCDs worth Rs500 crore with
interest rates of up to 10% for 10
years, 9.75% for five years and
9.50% for three years.
Taxable bonds can offer 100-
150 basis points (bps) more than
bank fixed deposits (FD) but carry
higher risk than FDs of scheduled
commercial banks. Currently, banks
offer FD rates of 7.25% to 7.75%
for one to three years term. Longer-
term FDs, of over three years, may
give lower rate of 7% to 7.5%.
You have to be aware of the kind
of bonds you invest in as there are
hybrid debt instruments available
in the market. Recently, Dhanlaxmi
Bank was the first entity to default
on subordinated upper tier-II bonds
which carry equity-related risks
due to payment linked to financial
health of the entity. The Banks
capital ratio dropped below the
minimum regulatory requirement.
Those in zero or 10% tax
bracket could consider highly
rated (prefer AAA rating) secured
redeemable taxable bonds for small
amount but avoid any hybrid debt
instrument. Investors in 20%+
tax bracket could consider buying
tax-free bonds from the secondary
market through stockbrokers.
For long-term investors, buying
debt mutual funds with a good
track record is a better option due
to indexation benefits if they hold
the investment for more than
three years. Long-term capital
gains (LTCG) tax for debt mutual
funds is 20.6% with indexation.
Holding bonds for over one year
is taxable at LTCG which is
10.3% without indexation; no
indexation feature is available.
The 10-year benchmark rate is
hovering close to 7%; its at a seven-
year low since 2009 when it saw
levels of 7.15%. Appointment of
the new Reserve Bank of India (RBI)
governor Urjit Patel has reduced
the prospects of interest rate cuts in
the near future which may be good
news for bond and FD investors.

G-Sec and Bond Yields Flat Issuer Maturity Next Last Yield ISIN Rating
Date Coupon (%)

T he 10-year benchmark G-Sec

yield, which sets the tone of the
fixed-income market, has increased
Dewan Housing 9.10%
Reliance JIO Infocomm
16 Aug-19 16 Aug-17 9.20 INE202B07HQ0 CARE AAA
CRISIL AAA
08 Jul-21 10 Jul-17 7.93 INE110L07070
9.32% (unsecured)
LIC Hsg Fin 8.61% 11 Dec-19 11 Dec-16 7.89 INE115A07GK1 CRISIL AAA

G-Sec Maturity Yield to NSE data as of last trade date of 2 September 2016
Date Maturity M & M Financial Serv 8.51% 22 Jun-18 22 Jun-17 7.99 INE774D07PB9 IND AAA/Stable
01 December 2044 7.28 LIC Hsg Fin 9.24% 30 Jun-19 30 Jun-17 7.90 INE115A07FV0 CRISIL AAA
10 November 2033 7.27 HDFC 8.59% 14 Jun-19 14 Jun-17 7.87 INE001A07OM3 CRISIL AAA
02 June 2028 7.26
BSE data as of last trade date of 2 September 2016
G-Sec yields on 2 September 2016

marginally, by one basis point (bps), on 2nd September. Bond yields are flat. to 8.10% for AAA rated bonds and
in the last fortnight to end at 7.11% You can expect to get yields of 7.90% higher for lower rated ones.

25 | 16-29 Sep 2016 | MONEYLIFE

Fixed Income.indd 1 09-09-2016 17:57:37

 SMART MONEY R BALAKRISHNAN
It Is Your Money, Your Worry
T
he debate about investor education is perhaps
the most enduring one and will continue to hold
centre stage in personal finance, forever. The human
mind is closed, when it comes to things like trust, financial
education, numeracy and risk evaluation. It is closed in the
sense that we either refuse to address it or think that we
know everything and feel we know nothing and cannot
learn in this lifetime. A lot of people are, nowadays, on
social media. From those conversations, I notice that there
is a lot of scepticism about financial advisers. Not all of
it is justified. There are good ones and there are not-so-
good ones. And there are a few rotten apples, probably the
same as in every
profession. With
them around,
either the investor
vanishes or his
savings do.
Do not
trust all men,
but trust men of
worth; the former
course is silly, the
latter a mark of
prudence, wrote
Democritus,
philosopher
(460BC370BC).
Men of worth
has a far bigger
meaning than just
pure worth measured in material terms. It is amazing that
while we do not want to take any effort to understand
the dynamics of investing in financial investments, all of
us seem to be born experts while investing in real estate
or gold. We seem to just spend / invest in it and forget it.
For most middle-class individuals, these two assets (apart
from life insurance and bank fixed deposits) will, perhaps,
be the single biggest investment ever done. Most will not
measure this in financial terms. It becomes an emotional
investment decision involving the largest single-ticket spend
in their lifetime. After taking such huge decisions, many
get paralysis when it comes to investing in the financial
markets. There is a reluctance to leave the comfort zone of
bank deposits. Add to that some anecdote about someone
MONEYLIFE | 16-29 Sep 2016 | 26
column_Balakrishnan.indd 2
getting ripped off or some corporate mis-governance, and
they withdraw into a shell.
Is it better to be financially literate and adopt a DIY
(do-it-yourself) approach or fully trust someone to be our
financial adviser? I doubt, if any one of us can ever become
financially literate in the fullest sense. The financial world is
changing fast. New things are coming into the marketplace
every day and even to someone in the industry; there
will be new things that could be out of ones knowledge.
Investors are, of course, still reluctant to pay reasonably
for advice. They cant be blamed much. There are very
few experienced persons who want to be advisers.
This has
created an
assembly line of
inexperienced
greenhorns selling
advice. They do
not get paid by
the consumer (the
investor). They
sell products
where they are
paid by the
producer. This,
in turn, leads
to mis-selling.
Today, a private
sector bank keeps
stiff targets for
fee-based or
advisory income for its sales or relationship managers
(RMs). This is an ever-increasing number. This, in turn,
makes the employee sell wrong products to you. Before
the excreta hit the ceiling, the RM is either transferred
(a deliberate strategy played by bankers to silence the
customers) or the person quits and joins another bank.
This cycle is hard to break and will, probably, keep getting
progressively worse. Regulators do not understand or
simply feign ignorance. The other option seems even
more daunting. Getting financially literate seems too
complicated.
But do you have a choice? Get out of this inertia or the
feeling of helplessness. Arm yourselves with a few tools
that I will say is financial literacy. You should be aware
07-09-2016 20:07:17
 SMART MONEY R BALAKRISHNAN
of what to look for. Once that is done, you will be able
to manage better. So let us start with the basics:
A 360-degree View: We invest because we want a return
that will beat inflation. If I keep my money under the
pillow, it does not grow. Prices of almost everything keep
going up. So, I need to make sure that my savings can buy
at a future date, at least the same thing that it can buy
today. Inflation is generally higher than the interest rates
on bank deposits. Thus, by simply keeping it in a bank,
we are unlikely to cope with inflation. To overcome this,
we should either have plenty of money (far more than
what we need) in the bank or we should find something
that gives a better return.
Basic Numeracy: A lot of us never liked math in school
because we were not taught well. Now, we are afraid
of simple financial calculations. Our mobile phone
has a calculator. However, when someone says that he
will give you 10 times your investment in 30 years, it
sounds fabulous to you. One thing that one must learn is
compound interest. It is not rocket science. You can use
something as simple as the Rule of 72 (number of years
multiplied by annual interest rate equals 72); it is a good
weapon to have. Do not run away from this, because you
are probably doing a more complex job at work for 10
hours a day to earn your money. So note down basics like
amount/s to invest, when and what returns are promised
and over what time-frame. Today, you can get free financial
calculators on the Internet and Google is a great friend.
So take your time to understand the proposition. If you
cannot understand the proposition, say NO. NEVER
make a gunpoint decision when it comes to investment.
Use a Checklist: Think methodically; for this, you need
a checklist of questions that you must have answers to.
1. What is the duration of this investment? Can I spare
my money for this duration?
Whats Your Bahana for Not Subscribing?
I am not interested in honest & insightful advice on money matters
I never have any problems with banks, credit-cards or insurance companies
I always invest on the basis of tips from friends and brokers
Finance bores me to tears
I would rather spend two years of knowledge on one evening of eating out
I always buy from the newsstands
column_Balakrishnan.indd 3
2. What is the nature of my investment? Is it repayable
on a fixed date? If so, what is the amount I get back?
Is there any periodic payback that is guaranteed or
written into the conditions of the investment? Or do I
have to depend on market conditions to get my value?
3. Can the investment be liquidated at a short notice or
do I have to wait for a specific time? And, if so, do I
suffer any penalty?
4. Who is going to repay me, on maturity? Am I comfortable
with that? Or is the repayment coming from market
valuation where it could be subject to finding a buyer
at that time?
5. Does the name (on which my investment risk is
concentrated) give me comfort? What is associated
with that name? Do some Googling.
6. Am I getting at least three to four days to say yes or
no? If someone wants an immediate answer, the answer
is NO.
7. Who can I talk to about the investment, for another
view? Is there a write-up in Moneylife or any other
good financial publication about that investment?
Complex investments are best avoided and left to others.
Understanding an Excel sheet and returns calculations are
less important than a qualitative understanding of the
investment. I have not included investing in shares in
this article. That is a separate topic on which I have been
writing and covering various angles.
You spend a lot of time earning money. You save so that
you have something for the years when you stop earning.
Thus, financial literacy is YOUR responsibility. Depending
on someone else for this is not the best approach. No one
else is responsible for what happens to your money.
The author can be reached at balakrishnanr@gmail.com
For subscription offers
that are a steal, look for
a form elsewhere in this
issue or our website at
www.moneylife.in
27 | 16-29 Sep 2016 | MONEYLIFE
07-09-2016 20:07:56
 INSURE CORRECTLY:
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Subscription to Moneylife magazine is included in MAS Premium Membership

About MAS
MAS is a SEBI-registered investment adviser and part of Moneylife, Indias most unbiased and
pro-investor research and information group. We run Indias best personal finance magazine,
Moneylife. We are not afraid to call a spade a spade. We are Indias only media company to have
set up a non-profit trust, Moneylife Foundation, which is now the largest savers and investors
association with more than 35,000 members. MAS was set up to help investors and savers make
the right financial decisions and handhold them through the entire process.

MONEYLIFE
ADVISORY
FIX YOUR FINANCES, FOREVER

www.savers.moneylife.in

MSSN GB (Insurance 1-3 ).indd 3 29-07-2016 16:42:29


INSURANCE TRENDS
New products, regulations, features and options,
interpreted from your perspective
R e g u l a t i o ns
Health Insurance
Regulations 2016
Decoded
I nsurance Regulatory and
Development Authority of India
(IRDAI) has introduced Health
Insurance Regulations (HIR),
2016, which replaces the 2013
regulations.
Pilot Products Can Bring
Innovation
General, or stand-alone, health
insurance companies can launch
pilot products which can cover
innovative risks that are usually
avoided in regular mediclaim
products. This is especially true due
to the lifelong renewal feature of
regular mediclaim products. Pilot
products will have a one-year term,
but will run for five years. After
five years, the insurer can offer it
as a regular product or withdraw
it. If it is being withdrawn, the
insurance company will migrate
(subject to portability conditions)
the customers of pilot policies to
its own existing product to offer
continuity benefit. Hopefully, there
will not be any issue for porting to
the same insurers product.
Beware of Combi Plans
Combi products may be promoted
by all life insurers, general insurers
MONEYLIFE | 16-29 Sep 2016 | 30
Insurance.indd 2
and stand-alone health insurers.
Until now, combi plans could be
a mix of a term plan and health
plan. Even though it is not good to
combine two products, the combi
product was an option. The new
regulations open up combi plans to
have any life (endowment, money-
back, whole-life, ULIP) and health
plan. The move should please life
insurance industry; but, from the
consumer viewpoint, it is a step
backwards. It is better to avoid
combi plans, going forward.
Limiting TPAs Role
The new regulations specify
that insurers and third party
administrators (TPAs) should put
in place systems and procedures
to identify, monitor and mitigate
frauds. HIR 2013 had stated that
TPA may handle claims admission
and recommend to the insurer
for the payment of the claim
settlement. This has been omitted
in the new regulations; this is good
news. The new regulations state the
following:
Insurers shall ensure that the
TPAs are not carrying out the
following activities as part of the
agreement: i. Claim rejections/
repudiations with respect to the
health insurance policies;
ii. Payments to the policyholders,
claimants or the network providers;
iii. Any services directly to the
policyholder or insured or to any
other person unless such service is
in accordance with the terms and
conditions of the Agreement entered
into with the insurer and complies
with the IRDAI (TPA-Health
Services) Regulations, 2016.
HIR 2013 had stated that
TPA shall, in the correspondence
to the policyholder with respect
to settlement/denial of the claims,
state clearly the following...
The new regulations put the
onus on the insurers, which is a
good thing. They state: Where a
claim is denied or repudiated, the
communication about the denial
or the repudiation shall be made
only by the Insurer by specifically
stating the reasons for the denial
or repudiation, while necessarily
referring to the corresponding
policy conditions.
Benefit-based Products Can
Have Cumulative Bonus
Benefit-based products, like critical
illness, personal accident, surgical
benefits, etc, were not allowed
cumulative bonus, until now.
Now, such products will be able
to offer cumulative bonus just like
mediclaim policies; these are usually
in the form of a certain percent
of the sum insured for claims-free
years. It will help the policyholders
to grow their sum insured over
the years. But will insurers revise
the premium of the product to
reduce their increased risks?
After all, fixed benefits products
pay the predetermined benefits
irrespective of the expenses incurred
09-09-2016 18:00:33
 INSURANCE TRENDS
by the policyholder; mediclaim
is an indemnity-based product
which only pays for the actual
hospitalisation expenses.
Customer Incentive for Good
Health
At the time of underwriting,
insurers can load the premium,
based on the health condition of
the customer. The new regulations
allow insurers to remove loading on
the premium at the time of renewal
for an individual if there is an
improvement in the persons health.
It will be at discretion of the insurer
and, hence, results will vary. At the
time of renewal, the insurer cannot
ask the policyholder to go through
a medical examination, unless there
is a request for higher sum insured.
New regulations reward
policyholders on the basis of
preventive and wellness habits by
disclosing upfront such incentives
in the prospectus and the policy
document. Insurers can offer
rewards in the form of discounted
rates for outpatient consultations
and health check-ups. A discount
on renewal premium is also
allowed. No discount, however,
will be provided on any third-
Fine Print
Insurers Equity Investments
I RDAI wants insurance
companies to tighten equity
investments. Insurers can invest
in shares of any listed company,
where at least 10% dividend
has been paid for at least two
consecutive years, under the
approved investment category.
The existing norm for equity
investment was 4% in the past
eight out of the nine years. In
Insurance.indd 3
party service (gym membership
discount, etc) or merchandise.
However, discounts and/or benefits
on diagnostic or pharmaceuticals or
consultation services of providers in
the network are permitted.
Special Provisions for Senior
Citizens, Really?
This is not new, but worth
mentioning. The premium charged
for health insurance products
offered by Life Insurers, General
Insurers and Health Insurers
to senior citizens shall be fair,
justified, transparent and duly
disclosed upfront. The insured
shall be informed in writing of
any underwriting loading charged
as filed and approved under the
Product Filing Guidelines over and
above the premium and specific
consent of the policyholder for
such loadings shall be obtained
before issuance of a policy. All
Life Insurers, General Insurers
and Health insurers and TPAs, as
the case may be, shall establish a
separate channel to address the
health insurance related claims
and grievances of senior citizens.
IRDAI needs to verify if all the
quoted guidelines really work or
short, the regulator wants insurers
to invest in companies with a
good dividend track record.
Bariatric Procedures
C overage for bariatric surgery
is dependent on the insurance
company as there are no clear
guidelines. Companies that cover
it will have own evaluation and
allow on a case-to-case basis.
With the alarming rise in bariatric
surgeries in India, there is need
for proper guidelines and to
make the medical intervention
are they just on paper.
Porting from Group, Retail
This was already there in HIR
2013; but it is worth mentioning so
that consumers are aware of it and
can benefit from it. General insurers
and health insurers offering health
covers specific to age groups such
as maternity covers, children under
family floater policies, students,
etc, will have to offer an option
to migrate to a suitable alternative
available health insurance policy
at the end of the specific exit age
or at the time of withdrawal of the
policy at the option exercised by the
covered lives by allowing suitable
credits for all the previous policy
years, provided the policy has been
maintained without a break.
Individual members, including
the family members covered under
any group health insurance policy
of a general insurer or health
insurer, will have the right to
migrate from such a group policy
to an individual health insurance
policy or a family floater policy
with the same insurer. Thereafter,
he/she shall be accorded the right to
port to another insurer (subject to
underwriting).
procedure (MIP) notifiable which
can bring it under the ambit
of IRDAI. There is a need to
stop misuse of the treatment,
with proper guidelines from the
regulatory authorities. Surgeons
from the Obesity and Metabolic
Surgery Society of India and All
India Association for Advancing
Research in Obesity have
approached the Indian Council
of Medical Research (ICMR)
for guidelines to make the MIP
notifiable; this can help mediclaim
policyholders.
31 | 16-29 Sep 2016 | MONEYLIFE
09-09-2016 18:01:34
 COVER STORY
STOCKS:

HIGHER
RETURN
LOWER
RISK
Investors look to earn the highest return with the lowest amount of risk.
However, this is easier said than done. Can we pick a portfolio of stocks with the
best risk-reward profile and outperform the market? Jason Monteiro back-tests
investing in stocks, based on their risk measures such as alpha, beta and standard
deviation. The results are quite encouraging

M
ost individuals are risk-averse, when
it comes to investment decisions. This
is one of the main reasons for many
preferring to stick with bank deposits
rather than investing in equity for
the long term. But those looking for long-term wealth
creation have to consider stocks and equity funds. And,
for that, they must understand the risks they take, to
make better decisions. The basic principle of most
investments is that, the more calculated risk you take,
the higher will be the chance of your returns. In the
corporate bond market, this principle is clearly evident.
The yield of low-rated securities is higher than that of
securities which command a better credit rating. The risk
of default is higher in the lower-rated securities; hence,
to compensate the additional risk taken, investors are
rewarded with a higher yield. This is simply referred to
the risk-reward ratio used to compare an investments
expected return to the risk taken to get those returns. But
can the same principle be successfully applied to stocks?
In this Cover Story, we examine the ways to measure and
manage risk in making stock investment decisions.
To achieve a higher return over the long term, we
will have to accept some amount of short-term volatility.
This volatility can be compared to other securities or to
a benchmark, like the Sensex, to arrive at the risk taken.
How do we quantify risk? For this, some knowledge of
basic statistics is needed.
One of the most common measures of risk is standard
deviation. This calculates the deviation in returns from
the mean. In other words, risk is linked to volatility. The
more volatile a stock, the higher is its deviation from the

MONEYLIFE | 16-29 Sep 2016 | 32

Cover Story.indd 2 09-09-2016 18:03:29

 COVER STORY
1-year Sensex Returns:
High Volatility, High Gaines/Losses
120%
Sensex 1-year Rolling Returns
60%
0%
-60%
Jul-97 Apr-02 Jan-07 Oct-11
mean, and the more risky it is. Calculating volatility, or
standard deviation, from a series of data can be easily
done in an Excel sheet.
Take, for example, the yearly returns of the Sensex.
Over the 10-year period from 1 August 1996 to 31 July
2016, the average yearly returns work out to 15.12%.
The standard deviation of the yearly returns over the
period works out to 30.02%. Statistically, there is a 67%
chance that the expected returns will fall within the one
standard deviation of the average of 15.12%, on either
side. This means that returns could be 15.12%+30.02%,
or 45.14% on the upside, and 15.12%-30.02%, or
-14.90% on the downside. As you can see, the range is
extremely high. What if we consider five-year returns?
Over the five-year periods from 1 August 1996
to 31 July 2016, the average five-year returns work
out to 12.94%. The standard deviation works out to
12.16%. Clearly, volatility, as measured by the standard
deviation, is much lower than that of the one-year
periods considered. Based on one standard deviation
level, 67% of the time, returns would range between
0.78% and 25%.
Clearly, investment over a one-year horizon on
the Sensex involves more risk; but average returns are
higher compared to those in the five-year periods. This
is how risk and return are related. How can we use
this information? For this, we can calculate the historic
Sharpe Ratio which, basically, is the average excess
return over the risk-free rate divided by the standard
deviation of the excess return.
For the one-year periods, the ratio works out to
30.39%, while for the five-year periods, it is 57.07%.
This is called risk-adjusted return. Notice that the five-
year ratio is higher than the ratio for one-year period.
This is the math behind the standard advicean investor
looking for good returns with lower risk should invest
Cover Story.indd 3
5-year Sensex Returns:
Low Volatility, Stable Gains/Losses
50%
Sensex 5-year Rolling Returns
40%
30%
20%
10%
0%
-10%
Jul-16 Jul-01 Apr-05 Jan-09 Oct-12 Jul-16
for the longer term.
Applying Risk-return to Stocks
We have now seen how to measure risk, based on the
past returns of an asset, in this case the Sensex. But most
people do not invest in an index. They invest in stocks.
Stocks are more volatile than the index; therefore, we
need to find out whether the returns of a stock come
from inherent volatility or some other factor. If a stock
is giving a higher return because it is volatile, we are
simply being compensated to take a higher risk. Wealth
is created when the return is higher than the risk being
taken.
To find this out, we need to know another statistical
measure. Those investing in stocks, or equity mutual
funds, may have heard of the term beta. Beta is simply the
volatility of a stock, or a portfolio of stocks, compared
to the benchmark.
Put simply, stocks with a beta of one means that the
stock price moves exactly how the market moves. If the
beta is less than one, the stock has smaller price swings
compared to that of the index. If the beta is above one,
the stock price is more volatile than the index. A stock
with a beta of two goes up, or down, twice as much as
the benchmark, in a given period of time.
Suppose the beta of a stock is 2. If you invest in a
stock and it goes up by 20% while the Sensex has gone
up by 10%, you might think that it is great performance,
right? Not so fast. If the beta is 2, then the stock should
go up by twice as much as the index, anyway.
In this case, the index has gone up by 10% and
the stock has gone up by 20%; but that is what it was
supposed to do because it has a beta of 2. A fund manager
holding this stock has not really generated great returns.
He has simply taken a higher risk by buying a more
volatile stock and has got compensated for it. Where is
33 | 16-29 Sep 2016 | MONEYLIFE
09-09-2016 18:03:55
 MONEYLIFE
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 COVER STORY

High Beta Stocks Underperform in Flat and Down Markets

120%

Nifty 500
60% Top Decile Beta Stocks 12-month Forward Return

0%

-60%
Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

the skill then? How do we measure performance? For a shortlist of 405 stocks. To calculate the ratios, we use
this, we to know another measurealpha. Many would the Nifty 500 index as the benchmark and the yield of
have heard portfolio managers use this term often. Alpha the 90-day treasury bills as the risk-free rate. First, we
is basically the return in excess of beta. Suppose the index
has gone up by 10% and the stock with a beta of 2 has
gone up by 25%, the stock has delivered an alpha of 5%. High Beta Vs Low Beta Portfolio
If a fund is generating higher alpha, it means that 12-month Periods Nifty High Beta Low Beta
500 Stocks Stocks
the fund manager has chosen stocks that are rising more
than the market and/or falling less than what they ought Mean Return 9.07% 10.12% 29.63%
to. The fund manager is skilful. We have simplified Maximum Return 52.32% 119.54% 121.04%
the calculation of alpha as returns in excess of what is Minimum Return -27.19% -39.42% -20.51%
explained by beta. In financial literature, the calculation Standard Deviation 19.32% 42.05% 33.81%
is a bit more complex. It is simply the return over risk- Sharpe Ratio 0.05 0.05 0.65
free rate adjusted for beta. (See Box).

Applying Alpha and Beta in Real Life
How can we apply beta and alpha concepts of risk, in
real life? For this, we analysed those stocks that are
a part of the Nifty 500 and which have been traded
regularly from July 2009 to August 2016. This gives us
calculate the beta of the stocks for each month, based
on their monthly return over the past 12-months. For
each month, we consider the top decile stocks (a decile
is one of 10 equal groups) and the bottom decile stocks,
to calculate the forward return. So, we are analysing

Low Beta Stocks Outperform in Most Periods

180%

120% Nifty 500 12-month Forward Return

Bottom Decile Beta Stocks

60%

0%

-60%
Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

MONEYLIFE | 16-29 Sep 2016 | 36

Cover Story.indd 4 09-09-2016 18:05:18

 COVER STORY

High Alpha Stocks Deliver Huge Returns When the Market Is Doing Well
180%

120% Nifty 500 12-month Forward Return

Top Decile Alpha Stocks

60%

0%

-60%
Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

the most and the least volatile stocks. We calculate the beta stocks had a standard deviation of 42%, while the
forward return over the next 12-month periods. Nifty 500 had a standard deviation of 19%. When you
High-beta Stocks: For the top decile stocks with are buying a high-beta stock, you are taking a higher
risk for very little additional return. High-beta investing
would be rewarding only if you are able to ride a rising
High Alpha Vs Low Alpha Portfolio market. However, if you got your timing wrong, you
12-month Periods Nifty High Alpha Low Alpha would have faced significant losses. This is not an easy
500 Stocks Stocks
task for any investor, including institutional investors.
Mean Return 9.07% 45.22% 15.21% Low-beta Stocks: What if you had picked low-beta
Maximum Return 52.32% 159.33% 148.81% stock portfolio? For the 12-month forward periods, the
Minimum Return -27.19% -24.39% -53.51% returns averaged 29.63% with a standard deviation of
Standard Deviation 19.32% 49.08% 51.27% 34%. Clearly, the low-beta stocks not only delivered a
Sharpe Ratio 0.05 0.77 0.14 higher average return, their standard deviation, too, was
lower compared to the high-beta stocks.
High-alpha Stocks: Coming to the alpha investing
the highest beta, the average return worked out to strategy, we analyse the returns of the top decile stocks
10.12%, while the return of the Nifty 500 was 9.07%. with the highest alpha compared to stocks with the
While the high-beta strategy seems to have marginally lowest alpha relative to the Nifty 500. The universe
outperformed the index, it is interesting to take a look of stocks remains the same as in the beta strategy.
at the volatility of the returns over the period. The high- Over the 12-month periods, the high-alpha portfolio

Broadly, Low Alpha Stock Deliver Returns In-line with the Market
180%

120% Nifty 500

Bottom Decile Alpha Stocks 12-month Forward Return

60%

0%

-60%
Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

37 | 16-29 Sep 2016 | MONEYLIFE

Cover Story.indd 5 09-09-2016 18:05:41

 COVER STORY

Beating the Market with High Reward-to-risk Stocks

6-month Periods Nifty High Low reward/ 12-month Periods Nifty High Low reward/
500 reward/risk risk Stocks 500 reward/risk risk Stocks
Stocks Stocks
Average Return 4.00% 17.70% 3.93% Average Return 9.07% 41.79% 15.41%
Max Return 31.54% 73.22% 73.52% Max Return 52.32% 139.24% 137.62%
Minimum Return -20.46% -15.33% -33.67% Minimum Return -27.19% -13.62% -49.11%
Standard Deviation 11.79% 20.04% 24.24% Standard Deviation 19.32% 39.67% 46.10%
Sharpe Ratio 0.01 0.70 0.00 Sharpe Ratio 0.05 0.86 0.16

outperformed significantly. The average return worked
out to 45.22% with a standard deviation of 49.08%,
outperforming the low-beta portfolio. The volatility was
higher; but, adjusted for it, the returns were much higher.
Low-alpha Stocks: On analysing the returns of the
low-alpha stocks, we find that, similar to the high-beta
portfolio, risk-adjusted returns were lower than that of
the index. For the 12-month periods of our analysis, the
average returns worked out to 15.21% with a standard
deviation of 51.27%. Though the returns were higher
than those of the index, so was the volatility. With a
lower amount of volatility, you would have averaged a
return of 45.22% by investing in a high-alpha portfolio.
Lesson: Stocks with a comparative Low-beta and high-
alpha do better. When you pick a stock, be sure to check
this.
Can These Strategies Be Improved?
What if we combine the two strategies that worked well?
Investor Louis G Navellier takes a somewhat similar
approachselecting stocks which have high alpha and
low standard deviation. To calculate this, he divides the
stocks alpha with their standard deviation. Stocks with
good reward/risk ratios tend to be lower-risk stocks that
are plugging away, earning excess returns in a smooth
consistent manner, he explains. While he uses several
other risk measures to rate stocks, we will focus only
on the reward/risk ratio (alpha/standard deviation). Lets
apply this to the Indian context.
Similar to the previous analysis for the alpha and
beta portfolios, we consider a portfolio of the top decile
and bottom decile of stocks, ranked by the high-reward
and low-risk ratio. Based on Navelliers strategy, stocks

Calculating Alpha compensated more.

In order to calculate alpha, let's assume that the

F or each stock, a required return is calculated, based

on risk-free return (treasury bonds) and the beta
of the stock. If the actual return is higher than that
one-year treasury bill yielded 6% and that the Nifty
500 grew by 10%. Now, assume that Company Xs
stock rises by 11% and Company Ys by 11.5%. Now,
of this required return, the required rate of return
the excess is alpha. The for Company X is 10.40%
required rate of return is (6%+1.1*(10%-6%))
calculated using the formula and 12% for Company
risk-free rate+beta*(market Y (6%+1.5*(10%-6%)).
return minus risk-free rate). If we calculate their
Suppose you are looking at alphas, we discover that
two stocks: Company X and Company X outperformed
Company Y. Both of them the market with an
are a part of the Nifty 500 alpha of 0.60% (11% -
and their betas are 1.1 and 10.4%), while Company
1.5, respectively. Clearly, Y underperformed with an
one can say that the stock alpha of -0.50% (11.5%
of Company Y will be more volatile than that of - 12%). An investor screening for high alpha would,
Company X and anyone buying it will expect to be therefore, pick Company Xs stock over Company Ys.

MONEYLIFE | 16-29 Sep 2016 | 38

Cover Story.indd 6 09-09-2016 18:06:22

 COVER STORY

Outperforming the Market with High Reward-to-risk Stocks

160%

120%
Nifty 500
Top Decile Reward-risk Stocks 12-month Forward Return
80%

40%

0%

-40%
Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

with a higher reward-risk ratio should deliver good risk-

adjusted returns. On testing this over 6-month periods, Top Reward-to-risk Stocks: August 2016
we fi nd that the average returns work out to 17.70% Company Name Alpha/SD* Alpha* Beta*
with a standard deviation of 20.04%. This gives the JSW Steel 100.00% 99.00% 9.90%
highest historic Sharpe ratio compared to the other
Omaxe 99.70% 68.50% 9.60%
strategies for the same period. For 12-month periods,
Biocon 99.50% 98.00% 36.10%
the average forward returns work out to 41.79% with
a standard deviation of 39.67%. Here, too, the Sharpe Balrampur Chini Mills 99.20% 100.00% 57.90%
ratio was the highest. In the 12-month periods, the high Kajaria Ceramics 99.00% 95.70% 47.00%
reward-low risk portfolio outperformed the Nifty 500 Bajaj Finance 98.70% 98.20% 58.90%
in each monthly period over the past six years. Beating JSW Holdings 98.50% 93.80% 7.40%
Nifty 500 is easy if you use this strategy! Finolex Industries 98.20% 96.00% 48.50%
Moving to the bottom decile portfolio of reward- SREI Infra Finance 98.00% 99.20% 15.50%
risk stocks, we find that, over the 6-month periods,
Jagran Prakashan 97.70% 80.10% 12.60%
the average returns work out to 3.93% which is lower
Piramal Enterprises 97.50% 96.70% 48.00%
than the returns of the Nifty 500. The volatility, too, as
measured by the standard deviation, is higher at 24.24%. Pidilite Industries 97.20% 78.40% 4.20%
Not surprisingly, this portfolio is among those with the Petronet LNG 97.00% 93.00% 22.00%
lowest risk-adjusted returns. Over the 12-month periods, Kansai Nerolac Paints 96.70% 79.20% 10.80%
the average returns work out higher than the benchmark; Can Fin Homes 96.50% 95.00% 57.60%
but, here again, volatility too is higher. Therefore, based Eclerx Services 96.20% 85.60% 5.40%
on this, it would have been best to avoid low reward-risk DCM Shriram 96.00% 98.50% 80.40%
stocks.
Ramco Cements 95.70% 91.30% 43.30%

Conclusions & Action Points 3M India 95.50% 97.70% 4.40%

Based on the above analysis, an investor would prefer to Trent 95.20% 91.00% 31.10%
be invested in a high-alpha, and low standard deviation * Percentile rank among 405 stocks on the Nifty 500 index

stocks. Which are these stocks, as of now? Here is a

shortlist.
Remember, while these parameters can be used for
selecting a stock, as this risk ratio is calculated based
on a stocks past performance, it cannot be the sole
criterion for stock selection. Just by looking at these
ratios of a single stock, one cannot judge the risk of
the stock. This risk measure needs to be compared to
a set of stocks, to give a relative measure of risk. When
creating the portfolios, we have considered only the top-
most and bottom-most stocks, based on the various risk
measures, from our shortlist of 400-odd stocks. Apart
from selecting stocks that have a low beta, low standard
deviation and high alpha, it is important to look at
other fundamental parameters such as earnings growth,
valuation and return ratios. A combination of all these
factors can deliver enormous value.

39 | 16-29 Sep 2016 | MONEYLIFE

Cover Story.indd 7 09-09-2016 18:06:48

 VALUE STOCKS DEBASHIS BASU

Exciting News Vs Exciting Stock

A
fter years of wait, Reliance Jio has unleashed its agri-based retailing. For a variety of reasons, our economy
telecom services on us with tantalising prices, did not get a chance to develop a sustainable value chain in
getting all consumers interested. By making voice the foods business. The US and Europe saw large players in
calls free and alluring us with low-priced data, Jio may food by the 1950s and 1960s; but, in India, food has always
perhaps change the way we see and use telecom services. been a disorganised, fragmented value chain. We believe
The company claims that this would be revolutionary. that Indias purchasing power will be food-dominated.
Whether this turns out to be a game-changer or not, it How would this happen? Mr Ambani told us that he
has certainly generated a lot of excitement. wanted to capture the enormous arbitrage in the food chain.
Excitement could be bad for successful investing. In his own words: Take potatoes, the most common food
Often, we get carried away by corporate plans that across the world. From Bill Gates to my driver, everybody
are years away from yielding results, leading to serious eats potatoes. Now, plot the prices. Farmers in UP and
misjudgement. Reliance itself offers us two excellent Bihar get about Rs4-Rs5 a kilo; in the Middle East, the
examples of this. Remember wholesale price is about
what happened when Reliance Rs25-Rs30 a kilo. In the
Industries discovered gas in US, Sams Club, it is
the Krishna-Godavari Basin? Rs90 a kilo. In Europe,
Reliances gas was supposed to it is Rs110 a kilo. The
transform India. arbitrage is 1:20. If we
Analysts started creating get our produce right,
economic scenarios when Indias and if the US market is
dependence on oil would drop opened up, you will be
drastically. That would allow us surprised how quickly
to import other things, maybe we reach $20 billion.
strengthen the rupee, attract The food market is much
more foreign capital and set bigger than the software
off a virtuous economic cycle, services market. And the
they said. Besides, natural gas money goes straight into
pollutes far less and, so, an the hands of millions of
abundance of gas would be farmers. The spinoffs
great for environment. Pipelines are enormousjobs,
criss-crossing the country would houses, durables, a new
reduce the need for polluting It is a long arduous path from announcements consumption boom will
heavy vehicles to transport fuel,
to value creation start in rural areas.
we were told. Alas! All this scenario-building turned out This was an exciting idea. But this, too, has not
to be premature. Over the past 14 years, Reliance has materialised. Not only has Reliance not been able to
hardly produced much gas, compared to its potential. capture the arbitrage at the farm end, Reliance got beaten
The promise of early2000s was a mirage. on the front-end as well, as e-commerce start-ups boomed
Then came Reliance Retail, in 2006. This was another and consumers switched from physical stores to new online
huge opportunity and, once again, most analysts were stores. Unthinkably, Reliance got beaten by a combination
trying to get a sense of the game-changing nature of this of upstart entrepreneurs, technology and capital!
initiative. This is because Reliance was not focused on I am not, for a moment, suggesting that the same thing
selling packaged goods at low margin in an organised would happen to Reliance Jio. Indeed, the execution risks
format like Big Bazaar. are lower in telecom, compared to gas extraction and
Mukesh Ambani told us, in an interview in December retailing. It could well be that Reliance does succeed in
2007: Within organised retailing, we are really talking of executing Jio well. But will the shareholders gain? The

MONEYLIFE | 16-29 Sep 2016 |40

Value Stocks.indd 2 09-09-2016 18:07:54

 VALUE STOCKS DEBASHIS BASU
Just 5% Compounded Return in 10 Years
1,460 Rs
1,280
Reliance Industries
1,100
920
740
560
Oct-06
excitement for shareholders in not the launch of a new
product but in earnings growth; not in the billions of
dollars of investment outflow but healthy cash inflows
for years that allow the company to pare down initial
debt, if any, declare large dividends and plan for the next
round of growth.
I am not sure how Reliance plans to make oodles
of money from its huge investments in Jio. Apparently,
borrowing from Steve Jobs idea of Apple appstore,
Reliance wants to make money from the Jio app ecosystem.
The key to this, of course, is getting the customer hooked on
to Jio. Apple could hook their customers through hardware
that wowed them. Reliance can hook the customer through
it data service; but is that a good enough hook? Consider
the many hurdles in acquiring new customers.
Existing mobile users have to switch from whatever
they are using to Jio. Users are usually reluctant to
switch, even though there is number portability.
Reliance thinks that, by throwing the apps free to start
with, it would kick-start the process of adoption. But
this is not a given; unless the apps are compellingly
rich in features. How easy would it be to make JioTV,
JioCinema, Jio Music, a personal digital wallet, and
Jio Magazine must-have apps?
Media reports say that Reliance would charge Rs15,000
a year for these apps. That seems too ambitious when
many individual apps offering some of these service
are available free.
Perhaps Reliance will find solutions to all these issues.
If it does, the revenue numbers will start reflecting this;
in which case it would start making money in the data
businessand enough of itto beat the cost of capital.
If all this happens, Reliance may, at long last, turn into
an exciting stock for investors. But not today. Today, the
excitement is about its plans.
By the way, Reliance is not into businesses that throw
Value Stocks.indd 3
Oct-11 Sep-16
up free cash. This has been the situation for more than
about 30 years now. It has always invested in cash-guzzling
businesses which the market dislikes. Notice that the
stock is up just 70% over 10 years at a princely annual
compounded rate of 5%, worse than returns from bank
FDs.
The medias job is to hunt for exciting stuff and, so,
exciting news gets thrown at us by the minute. Well,
these days the job of the media, apparently, is to create
excitement even where there is none. But the excitement
for investors lies elsewhere. It is in finding companies with
one or more of these features:
Ability to pass on costs and raise prices (Asian Paints);
Having a high margin at the operating and net level
so that slightly higher sales lead to a disproportionate
increase in profits (Maruti);
Not requiring debt to fund expansion or, having funded
expansion with debt, the ability to rapidly de-leverage
(Shree Cement);
Once in a decade or so, finding a large new business that
is analogous to the main business and can be rolled out
using the same intangible strengths like dealer network,
brand equity or even management bandwidth (ITC,
Mahindra & Mahindra);
Expanding a small Indian operation into a global one,
through exports and manufacturing on foreign soil
(Motherson Sumi);
Expanding through successful acquisitions made at a
low cost (Ultratech, Sun Pharma);
Relentlessly squeezing out costs in a business dominated
by unorganised players who are more nimble and have
lower costs (Relaxo Footwear).
If you find companies that have any of these
characteristics, get excited. It could well be that Reliance
manages to develop one of these characteristics. If so, it
will be a monster value-creator. We will be watching.
41 | 16-29 Sep 2016 | MONEYLIFE
09-09-2016 18:08:36
 StockWatch Stocks and sectors that catch our eye

C r o mp t o n Gre aves Among the different segments, revenues from its power
systems jumped by 59%, though on a low base (due
Is the Turnaround to shutdown in Nashik factory last year). Its revenues
from industrial systems segment rose by a sedate 11%
Sustainable? to Rs422 crore. The revenues from this segment were
dragged down by railway business. However, strong

C
rompton Greaves reported good revenue growth was posted in low-tension (LT) and high-
growth for the June 2016 quarter. Its tension (HT) motors business.
consolidated revenues for the June quarter Cromptons current debt:equity ratio stands at
rose by 39% % year-on-year (y-o-y) to Rs1,423 crore. 0.32. According to the management, the de-le de-leveraging
However, it reported a net loss of Rs50 crore will happen when it completes the Sp Spear deal
compared to o having broken-even in the same which is expected by the end of Oc October.
quarter of the
he previous year. Crompton Greaves calls divestments
divestmen of
The margin of its power business in Hungary,
Hun
earnings before
fore Belgium, Ireland, Indonesia
Indone
interest and tax and US Project Spear. The
T
(EBIT) was at approval of Competition
Comp
a strong 44%.
%. Commission
Commissio of
However, this
his was India (CCI)
(CCI was
driven by trading
ading required by
b the
sales which may prospective buyer.
not be sustainable
ainable Crompton Greaves
in future. All
ll this has obtained
obtain a
comes on thehe back confirmation
confirmatio that
of a dramaticic this part is resolved.
FY15-16 forr Crompton Greaves Project Spear
Spe is
which witnessed
essed a slump in stock going on schedule as per its timeline
price and huge
uge losses. Revenues for FY15-16 and there is no slippage, according to the manmanagement.
declined by 60% to Rs5,716 crore y-o-y and the
company reported
ported a consolidated loss of nearly Rs400
crore. The stock price, too, plummeted by more than
Rising Debtor Days
80%from a high of Rs203.50 in January 2016 to a
Debtor Days
low of Rs40.50 in mid-March. Since then, the stock
250
has doubled settling at Rs82 currently.
Crompton Greaves is into designing, manufacturing
and marketing electrical products and services. 200

These are related to power generation, transmission,

distribution, and executing turnkey projects. It 150
consists of three segments which are different from
each otherpower systems, industrial systems and 100
automation systems. However, power systems and
industrial systems, together, accounted for a major 50
chunk (85%) of its June quarter revenues. It had 11-12 13-14 15-16
demerged its consumer products business last year.

MONEYLIFE | 16-29 Sep 2016 | 42

StockWatch.indd 2 09-09-2016 18:10:16

 STOCK WATCH

This deal will enable Crompton to quarter and 84.20% of this

focus on its India business and also holding was pledged.
reduce debt. Debtor days, which were
Cromptons unexecuted order relatively
re stable since 2011-12,
book stood at around Rs175 crore on rose
ros dramatically to more than
2 September 2016. The managementt 200
20 days in 2014-15 from 90 days
has highlighted that pricing in the in 2013-14. These have declined
domestic transformer industry marginally to 169 days in
has improved. It has targeted Divestments of power business to 2015-16. According to the
Its FY17-18 utilisation to management, there has been
be completed by October-end
reach 75%-80% across an improvement in the pace of
different business. The Will concentrate on its core collection from debtors in the
promoter holding stood at business power systems business by 14
34.42% for the June 2016 days since the past quarter.

Cheviot
Good Free Cash Flows
Not Glamorous but (Rs crore) Debt:Equity Ratio

Solid Performer 30 0.08

C
0.06
heviot, one of the few well-run jute mills,
20
has reported good growth for the June 2016
0.04
quarter. Revenues rose by 22% year-on-year
(y-o-y) to Rs70.33 crore from Rs57.42 crore. While 10
0.02
profits were almost stagnant, at Rs10.19 crore, Cheviot
enjoys remarkable operating leverage. Net profit
0 0.00
margin is exceptionally high, at 15% of sales. Exports 2012 2013 2014 2015 2016
have been sluggish for Cheviot; the proportion of Free Cash Flows Debt:Equity Ratio
revenues from exports has declined in the past year to
around 31% in FY15-16 from around 45% in
FY14-15. However, domestic revenues rose by an essential for the smooth functioning of mills. The
impressive 61% in FY15-16 to Rs233 crore. Its exports production of raw jute is subject to the vagaries of
for the period declined by 12% to Rs106 crore. nature. If there is a shortage of raw jute, like that
Cheviot makes jute goods at two plants in West witnessed in a part of FY15-16, business is adversely
Bengal one of which is export-oriented and ran at affected. Bangladesh, which dominates the jute market,
a reduced capacity. Since the demand for export of also imposed certain restrictions during the year on
jute yarn from India was sluggish, Cheviot is taking the export of raw jute to keep supply smooth in its
initiatives to export other diversified jute products domestic market.
including shopping bags, geo-textiles products and Also, certain restrictions may be imposed by the
conventional and decorative hessian products. regulator, the jute commissioner. The procurement
There are certain peculiar features and risks level by the government for packaging food grains
associated with the jute market in India. The business determines the demand in the domestic market. Lastly,
depends on the availability of raw jute which is the industry is finding it difficult attract new generation

Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into
account your individual circumstances, financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable, we do not guarantee its accuracy and the
information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future
results. Investors must do their own research before acting on them. Data Source: Centre for Monitoring Indian Economys Prowess database.

Those who have subscribed to the stockletters should only follow the stocks recommended there.

43 | 16-29 Sep 2016 | MONEYLIFE

StockWatch.indd 3 09-09-2016 18:11:23

 STOCK WATCH

of labourers. jute bags are eco-friendly, the demand for them will
jut
The general al increase in the years ahead which will benefit players
inc
trend, on a like Cheviot.
worldwide Cheviot
basis, is to has generated
High
H operating leverage
move towardss positive free
eco-friendly and nd a
and an exceptionally high cash flows in
bio-degradablee n profit margin
net the past few
materials D
Domestic revenues jumped years. This
like jute. It is has enabled
b 61%, but exports
by
expected that it to remain
plastic shopping ng d
declined by 12% in FY15-16 a virtually
bags will be, debt-free. The
to some extent, t, promoter holding is high, at 75%. The stock trades
prom
replaced by jute bags. But this has
te bags at a trailing price-to-earnings (P/E) multiple of around
been the hope for decades now. Similarly, man-made 11 times. The return on equity (RoE) stands at around
fibres may be replaced by jute which is a natural fibre. 11% and return on capital employed (RoCE) at around
There are expectations among analysts that, since 13%, based on trailing 12 months earnings.

J B C h e mi c a l s & P harm ac e ut ic al s pharmaceutical formulations, herbal remedies and

active pharmaceutical ingredients (APIs). These are in
Good Chemistry different dosage forms including tablets, injectibles,
creams & ointments, lozenges, herbal liquids and

T
he stock of JB Chemicals and Pharmaceuticals
has been buzzing for the past few months,
thanks to some positive news. In last June, the
United States Food and Drug Administration (USFDA)
approved its tablet manufacturing facility at Panoli
(Gujarat). The stock surged by 11%. Recently, it went
capsules. It exports to many countries worldwide and
has a presence in US, Europe, Australia, South Africa,
Russia and CIS and other developing countries. It also
continues to invest, to grow its share in the regulated
markets of US, Europe and Australia. In the past fiscal
year, exports to the US and South Africa performed
well and increased by 41% and 23%, respectively.
Exports accounted for a significant 58% of its net
sales in FY15-16. Its domestic formulations business
registered a growth of 13% during FY15-16 while sales

A Small Rise in Debt:Equity

(Rs crore) Debt:Equity Ratio

100 0.16

0.12

0 0.08

up 14%, hitting its life-time high of Rs357, after 0.04

reporting its June quarter results. It reported impressive
growth in stand-alone profits by 26% year-on-year -100 0.00
(y-o-y) while its revenue growth for the quarter stood 12-13 13-14 14-15 15-16
Free Cash Flows Debt:Equity Ratio
at 9%.
JB Chemicals makes a diverse range of

MONEYLIFE | 16-29 Sep 2016 | 44

StockWatch.indd 4 09-09-2016 18:12:12

 STOCK WATCH

of its focus products rose by Community (SADC)

an impressive 19% during Exports accounted for a significant countries. It is also creating
the year. 58% of its net sales in FY15-16 additional capacity for
During the year, the formulations business
JB Chemicals raised
It raised its interest in Biotech (including tablets, liquid,
its interest in Biotech Laboratories (Pty) Ltd to 95.24% from ointments, vials, eye-drops
Laboratories (Pty) Ltd to 49% to expand its business in high and lozenges) and also
95.24% from 49%. Due to potential African countries for its API business. This
this, Biotech Laboratories investment is expected to
has become its subsidiary.
Its capex is funded largely with generate additional growth in
With this stake rise, the internal accruals the near future. Due to good
management intends cash flows from operating
to expand its business in high potential countries activities, this capex is being funded largely through
like South Africa and South African Development internal accruals, an extremely good sign.

Mi ndt r e e by seven times, should not be surprising for those who

are aware of an important difference between smaller
Small Software software stocks and the larger ones. The stock prices
of smaller companies are more volatile. The reason is
Stocks: Cyclical simple: their businesses are more volatile too.
One way to calculate volatility is to examine the
Revenues? standard deviation (variability against the average)
of sales. From the chart, it is clear that the standard

O
n 6th September, Mindtree announced a profit
warning. It said that there will be a further
decline in revenue and margins in the second
quarter of this fiscal, compared with the previous
quarter.
deviation of the year-on-year (y-o-y) revenue growth
for the past six quarters from March 2015 to June
2016, is lower for TCS and HCL Tech compared to
that of Mindtree, Hexaware and Tech Mahindra.
The revenues of TCS have steadily risen from
Rs24,220 crore in March 2015 quarter to Rs29,305
crore in Jun 2016 maintaining a steady growth in
the range of 12%-18%, thus signalling a very low
volatility, or standard deviation of 2.2%. The revenues
for HCL Technologies have grown y-o-y from Rs9,267

Volatility of Revenues
9%

6%

This comes on the back of: 1) cross-currency

impact; 2) project cancellations and slower ramp up 3%
by a few large clients; and 3) continued weakness in
its UK subsidiary, Bluefin. The stock, which has been
weak for a while, fell by more than 5% on the day
0%
the profit-warning came, hitting a two-year low. This HCL Tech Infosys TCS Mindtree Hexaware Tech
warning from Mindtree, which has been one of the Mahindra

strongest software stocks in the 2012-16 period, rising

45 | 16-29 Sep 2016 | MONEYLIFE

StockWatch.indd 5 09-09-2016 18:12:57

 STOCK WATCH
crore in March 2015 to Rs11,336 crores in June 2016,
signalling stability at a low standard deviation of 3.6%.
Infosys, among the large-cap stocks, seems to have a
relatively higher volatility at 6.4%; but this was due to
a one-time abnormally low y-o-y growth in the March
2015 quarter, of 4%. For all the following quarters up
to Jun 2016, revenue growth has been consistently in
the range of 13% to 23%; 23% was the highest y-o-y
growth in March 2016.
After a long period of struggle up to mid-2013,
Mindtree was able to deliver strong y-o-y revenue
growth, from 9.7% in March 2015 to 32.92% in
March 2016, dipping down to 25.56% in only June
2016. In absolute terms, revenue had risen from
JK Tyre
Stagnant Profit, Rising
Stock Price
T
he stock of JK Tyre & Industries Ltd
(JK Tyre) has been shooting up ever since early
August. From around Rs90 on 4th August, the
stock has gone up to over Rs140 in a month. Whats
going on? JK Tyre has completed the second phase of
construction of its plant at Chennai which makes car
and truck redials. Earlier, in April, JK Tyre
completed the acquisition of a 64%4%
stake in Cavendish Industries at
an enterprise value of around
Rs2,200 crore. Cavendish, a
unit of Kesoram Industries,
has plants located in Laksar
(Haridwar, UP) for manufacture
of tyres, tubes and flaps. JK Tyree
has also announced its plans to
enter the aviation market which
is a very lucrative segment. Yet, the
price rise is a mystery, given JK Tyres
stagnant revenues and profits since the quarter ended
31 March 2015.
Barring a period of high growth in 2013-15,
revenues have been stagnant over the past five years.
It has reported an average revenue growth rate of
merely 3% during these years. However, it has done
exceedingly well in profit growth. From a loss of Rs32
crore for the year ended 31 March 2012, its profits
have risen consistently over the years. Tyre companies
enjoyed a surge in profits between June 2014 and
MONEYLIFE | 16-29 Sep 2016 | 46
StockWatch.indd 6
Rs904 crore in March 2015 quarter to Rs1,203 crore
June 2016 quarter. All this resulted in a high volatility,
at 8.36% of standard deviation, for Mindtree. And
now, suddenly, it has announced that it will not
meet its revenue and profit guidance. Revenues for
Hexaware Technologies declined from 21.15% y-o-y
growth in the quarter March 2015 to 12.62% in
the latest quarter, June 2016, justifying the relatively
high standard deviation. Tech Mahindra also displays
a trajectory similar to Hexaware with the y-o-y
quarterly revenue growth dwindling from 20.93% in
March 2015 to 9.96% in June 2016. Smaller software
companies are more cyclical in their revenues; this
makes their stocks also cyclical.
March 2015 as rubber prices fell sharply. Natural
rubber prices have declined from around Rs220/kg in
June 2011 to a low of around Rs95/kg in February
2016. While rubber prices remained subdued for
much of 2015, a slowdown in China led to large-scale
imports of Chinese tyres that affected the revenue
growth. Import of Chinese tyres in the truck and bus
redials (TBR) segment has risen by over 40% year-on-
year (y-o-y) for the June 2016 quarter.
JK Tyre trades at a price-to-earnings (P/E) multiple
of eight times its trailing 12 months earnings. Apollo,
Ceat, MRF and TVS Srichakra, too, are valued at 911
times their earnings. The reason why
these stocks are so inexpensive,
thes
even in a bull market, is this:
ev
the
t market is unsure about the
trend in natural rubber prices
which have been rising over
the past few months. However,
it seems that the market is
estimating that tyre companies
will
w enjoy a period of growth
and can absorb higher cost of
an
raw materials. On the positive
front, since JK Tyre has already carried
out significant capacity expansion, it may not require
much capital expenditure in the next few years. This
may help keep the debt:equity ratio stable. JK Tyres
debt:equity ratio has declined since March 2013 when
it stood at 3.06. It fell to 1.66 on 31 March 2016. In
2014-15, there was a slight rise in debt due to negative
free cash flows. However, the debt:equity ratio declined
to 2.12 from 2.51 on 31 March 2014. In the past five
years, there were robust free cash flows only in 2013-
14 and 2015-16.
09-09-2016 18:14:05
 STOCK WATCH
UN UOTED
STORIES OF PRICE MANIPULATION
Optimus Finance (Rs32)
(Rs)
O ptimus Finance (earlier known 40
as Transpek Finance) operates in
two business segmentsfinancing & 30
investing activities and manufacturing
& trading in chemicals. It has 20
one subsidiary, namely, Maximus
International, engaged in importing, 10
trading and exporting various products.
This Gujarat-based company reported
0
a consolidated loss of nearly Rs0.36
Jan-14
crore for the year ended March
2016. For the quarter ended June
2016, the micro-cap stock reported However, its consolidated financial
a consolidated profit of Rs0.15 crore reporting has been inconsistent. While
compared to a loss of Rs0.20 crore it reported its consolidated numbers
for the quarter ended March 2016. in FY12-13 and FY13-14, there was no
MARKET TREND
Be Cautious
Irisks are rising. I had mentioned that, trend is a friend
n my previous piece on the market, I had written that
until its ends, and perhaps it is time to consider whether
the medium-term trend is coming to an end. The Sensex
was struggling to go past 28,200 and seemed to be weak,
since foreign and domestic institutional
ional investors were
selling. At that time, the Sensex wasas 27,782. At
the time of writing this piece, it was
as 28,797.
It is up 1,100 points over two weeks.ks.
At the current levels, the
Nifty and the Sensex have gone
into a seriously overvalued zone.
If you buy when the market P/E is 24+,
you are not likely to make much money oney over the next
few years, unless you are very careful ful with your stock
selection. The main hope for bulls is that the earnings
will revive. Even so, valuations are truly expensive,
according to a research report by Kotak Securities.
Alarmed by high valuation of mid-cap stocks, Kotak has
taken the bold step of removing its recommendations
of mid-caps, altogether. We have had to change several
mid-cap stocks over the past few months on rapid
StockWatch.indd 7
consolidated revenue statement for
FY14-15. Despite such poor disclosures
and financials, the stock price has shot
up. From a low of Rs3.60 on
22 January 2014, it zoomed to Rs35.2
on 7 September 2016, up 878% or
878% nearly nine times. In fact, over the past
one year, the price has nearly tripled
from around Rs13 at the beginning of
September 2015. Over the past one
year, the stock has had a median of
just three trades a day; about 500-
May-15 Sep-16
1,000 shares have been traded. As on
30 June 2016, Optimus Finance had
just 2,819 individual shareholders.
Are there some individuals who are
interested taking the stock price up?
Will the regulator investigate?
increase in stock prices and even their
replacements do not offer much upside
to our 12-month fair valuations, says
the report.
Kotak also feels that emerging market
(EM) rally may be over. The accelerated foreign fund
flows into EMs over the past 2-3 months reflect investors
pursuit of higher
high yields in EMs on assurance of more
monetary accommodation
acco by global central banks post
the Brexit referendum.
The report also says that investors
should expect modest returns from
here
he for the Indian market... The market
has been front-running potential positive
domestic
dom news and events which suggests
that returns
r from the Indian market will be
fairly modest
m from here. We note that valuations
in the consumption sectors are very rich (absurdly so
in several cases) and the investment environment has
significantly worsened in external sectors such as IT
and pharmaceuticals. Finally, the domestic economy is
showing little signs of a broad-based recovery. We are
left with very few sectors and stocks to choose from. Be
cautious. Debashis Basu
47 | 16-29 Sep 2016 | MONEYLIFE
09-09-2016 18:14:37
 3 Long-term Stockletters
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What if I cannot invest in all the stocks?
If you cannot invest in all the stocks, invest equal amounts in as many
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Stockletter (MSSN) Ad Oct 15.indd 3 09-09-2016 17:33:41

 TECHNOLOGY MOBILE
How Can You
Benefit from UPI?
The best part of UPI is that it uses a unique
ID that is linked only with a bank account
without revealing its details, finds
Yogesh Sapkale
N
ational Payments Corporation of India (NPCI)
has launched a new payment solution which
actually is a much improved way, in terms of
ease of use, over the previous one, IMPS (Immediate
Payment Service). This new solution, unified payments
interface (UPI), allows customers to use virtual
payment addresses, like myname@abcbank, as payment
identifier for sending and collecting money. This UPI
works on a single click, two-factor authentication. Two
factors that work in favour of UPI are: 1) an option to
push or pull financial transaction on schedule; and 2)
linking it with only a bank account. The linking of UPI
to a bank account, without revealing account details,
should eliminate security concerns, largely.
How It Works
First, as a user, you need to register with your payment
service-provider (PSP) and create a virtual payment
address (VPA), before sending or receiving funds using
UPI and link it to your account. Also, remember, this
UPI can be linked only with a bank account and not
to a wallet. Money can be transferred either by using
VPA or the bank account number and Indian Financial
System Code (IFSC). For transactions using VPA, the
fund
und receiver also needs to have a VPA or account
number and IFSC.
The various channels
for
or transferring
funds
unds using UPI
are:
1. Transfer
through
MONEYLIFE | 16-29 Sep 2016 | 50
Technology.indd 1
virtual ID;
2. Account number + IFSC;
3. Collect / Pull money based on virtual ID (VPA).
UPI also provides an option for scheduling push
& pull transactions for various purposes like sharing
bills among peers. One can use the UPI app instead
of paying cash on delivery on receipt of product from
online shopping websites. It can also be used for
miscellaneous expenses, like paying utility bills, over-
the-counter payments, barcode (scan and pay)-based
payments, donations, school fees and other such cases.
The interface is an advanced version of Immediate
Payment Service (IMPS), which is a 24X7 funds
transfer service. UPI allows a customer to have multiple
virtual addresses for multiple accounts in various
banks.
Security
To ensure privacy of customers data, there is no
account number mapper anywhere other than with
the customers own bank. This allows the customer
to freely share the financial address with others. A
customer can also decide to use the mobile number
as the name instead of the short name for the virtual
address like 1234567890@xyz.
The VPA acts as a financial address without having
to reveal the bank account number and IFSC code.
Once registered for VPA, users can send and receive
payments instantly from any bank account using their
mobile phone in a safe and secure way. They will also
be able to make payments to merchants from their
mobile phones where UPI is accepted as a payment
mode.
How Much Money Can Be Transferred?
Users can make payments with UPI 24x7 on all days,
including bbank holidays, up to a maximum of
Rs1 lakh. At present, 21 banks are on board with
NPCI for tthe UPI application. In addition, this app is
only on Android-based mobile phones.
available o
Here aare the names of banks and their official app
(available on Google Play):
Federal Bank (Lotza), Bank of Maharashtra (Maha
UPI), TJSB Bank (TRANZAPP-UPI), Karnataka Bank
SMARTZ (UPI)), DCB Bank (DCB Bank UPI
(KBL SMA
Union Bank of India (Union Bank UPI App),
App), Unio
Bank (VIJAYA UPI), United Bank of India
Vijaya Ban
(UNITED UPI), Punjab National Bank (PNB UPI), Axis
(Axis Pay), South Indian Bank (SIB M-Pay (UPI
Bank (Axi
Pay)), Catholic
Cath Syrian Bank (CSB-UPI), ICICI Bank
(Pockets), Andhra Bank (Andhra ONE), UCO Bank
(UCO-UPI), YES Bank and Canara Bank (Empower).
(UCO-UPI
09-09-2016 18:15:47
 UNBIASED INFORMATION:
MAS Benefit #8-10
Moneylife Magazine Handbook Product Reviews

8. Moneylife Magazine: 9. Handbook:

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NRI Investing under
Residents Name
I am a non-resident Indian (NRI). I
used to send money to my wife's
account which was invested in
mutual funds in her name. She is a
resident Indian. Later, I was advised
to open a non-resident external
account and made investments in
my name. All the earlier investments
are still in her name. My query is:
Should I continue to invest in her
name? I also intend to transfer to
her account, the amount realised
from sale of property in my non-
resident ordinary account, since
costs, like brokerage, portfolio
investment scheme (PIS) charges,
tax deducted at source (TDS), etc,
for NRIs are high and there are a
lot of hassles in tracking. My wife
is a homemaker, with no source of
income.
Ameet Patels Reply: For the
investments made in her name,
as and when these are sold, some
capital gains/loss may arise. That
would be your wifes capital gain
or loss. If any dividend and interest
is earned on those investments,
that income will also be your
wifes income and would have to
be offered for tax (if it is taxable).
If her total income is below the
threshold limit, she need not file a
return of income.
It is always advisable to show
such investments, made in the wifes
MONEYLIFE | 16-29 Sep 2016 | 52
Tax Queries.indd 2
Tax Helpline
name, as having been made out of
loans given by the husband (and not
gift). This would, obviously, mean
that, at some point of time, the loan
needs to be repaid to you. There
is no written law or rule about
the period for which the loan can
be given. Similarly,
there is no law that
forces a husband
to charge interest
on loan given to
his wife. Therefore,
your wife may continue to hold the
investments in her name.
As regards the immovable
property owned by you, merely
receiving the money in her bank
account does not mean that you
will be saved the tax and other
charges. If you are the owner of a
property, it is you who will have to
show the capital gains on sale of the
property. Even presuming that the
sale proceeds are received into your
bank account, you will still need to
show that capital gains in your tax
returns. If the seller of a property is
an NRI under Income-tax Act, the
buyer will have to deduct tax as per
Section 195. This will be @20%.
You cannot avoid this. Therefore, it
would be advisable to not resort to
any planning to avoid the tax and
other consequences by attracting
the sale as made by your wife.
Ultimately, it is the real owner who
will have to show the sale, income
and TDS in his hands.
Supported By
Carrying Loss Forward
for LLP
f a new share-broking LLP
business start-up has a net loss for
FY15-16, how are the tax returns
to be shown? This is because the
partners capital is also negative and
the due date is also approaching; so
the loss cannot be carried forward
to the next year.
Ameet Patels Reply: Section 139
of the Income-Tax Act says that if
a taxpayer with business income
has suffered a loss in any year and
there is inadequate income from
other heads to set off the loss, the
unabsorbed loss can be carried
forward to the next year, provided
the return of income is filed within
the prescribed time limit. If your
business turnover exceeded the limit
under Section 44AB of the Act, you
need to get a tax audit done. In that
case, your due date is 30 September
2016. Otherwise, your due date was
31 July 2016 which was extended
to 5 August 2016). If you do not
file returns within the prescribed
time limit, the loss incurred will
go waste. That cannot be carried
forward to the next year.
Tax on SCSS deposits
I have Rs5 lakh cash and I wish
to deposit this in Senior Citizen
Saving Scheme under my mothers
name. We live together. I plan to
spend the interest from this deposit
for household expenses. Will the
interest be subject to my income
tax? My mother is in no income tax
bracket.
Nikhil Vadias Reply: The first issue
is how you will deposit so much
cash in bank without being in tax
departments glare. Interest on SCSS
deposit is taxable subject to income
tax slabs. You can give Form 15H
for non-deduction of TDS, if income
is below the taxable limit.
09-09-2016 18:16:53
 Supported By

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TAX HELPLINE
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1 Every new query posted will be sent to our

panel of tax experts

HOW IT 2 When we get the opinion/advice from our

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3 You can access similar issues
faced by other taxpayers

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elp
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Also, this is only for individual taxpayers and small businesses.

Tax Helpline.indd 1 29-07-2016 17:49:42

 USEFUL APPS YAZDI TANTRA
Intelligencetest: Test Your IQ
Levels
I ntelligencetest.com is a website which tests your IQ.
Take a simple 15-minute test and get your IQ score
instantly. The results give a detailed analysis of your skills
of various types, how you fared and information on what
is the average score of people
in your sex / age profile. Be
careful; you can take only
one test in a day. So start the
test only when you have 15
minutes to spare, at a stretch.
If you miss out, you can try again after 24 hours. Besides
the IQ test, it has many puzzles, mind games, facts and
trivia and general knowledge resources. If you are a puzzle
freak or just want to evaluate yourself one-time, this site
will be fun to play with!
OnlineChartTool: Tell It
Visually
C harts are a great tool because they communicate
information visually. At Onlinecharttool.com, you can
design and share your own charts online and for free. They
support a number of different chart
types like: bar charts, pie charts,
line charts, bubble charts and
radar plots. You can create your
own elaborate charts in a jiffy.
Just click on Design Your Chart,
select the type of chart, add data,
add labels and fonts; and you are
ready to preview your chart! You can
then share and save your chart, download it on your
computer, publish it online on Facebook or Twitter and
also email it to yourself and others. A simple way to create
charts without any technical knowledge / jargon.
Dinnertime Plus: Stop Them
Playing during Dinner
D innertime Plus is a wonderful app to ensure that
your kids join you uninterrupted during dinner time.
Nowadays, it is normal to see kids playing with their
devices all through dinner. This app allows you to pause
any activity on the kids phones for 30 minutes, one hour,
or even 24 hours. This can be done remotely from the
parents device. You also have options for bedtime and
MONEYLIFE | 16-29 Sep 2016 | 54
Tantra - column.indd 1
take a break! The breaks can be scheduled, or instant,
depending on your needs.
During these break times, the childs ability to use their
deviceeverything from apps to the Internet to texting and
calling friendsis temporarily
disabled; only incoming calls
are allowed while you spend
quality time together. Kids can
even see the countdown of how
much time remains before they
are able to access their device
again, without any distractions
from schoolwork, spending time
with the family, or even getting to bed on time. The upgrade
version, which requires a one-time payment, also lets you
see what your kids are up to, in real time and add up to
five kids to the app. If you need to add a second parent,
you can do that too. Interesting and useful for new-age
parents handling newer-age kids!
Gaana: A Giant Storehouse
of Bollywood Songs
F or all you Bollywood song freaks, Gaana.com is a treat!
Its a giant repertoire of Bollywood songs, searchable
by artist, song, album, playlist and radio. You can create
your own playlists of your favourite songs / albums or
artists. Once you start playing, you can keep it on, in
the background and continue
doing what you were doing.
You can even share what you
are hearing, live on Facebook,
so that your friends know what
you are currently enjoying. You
can also view what your friends
favourites are. You have an
option for radio hits too which
you can switch on and which will play without any breaks
or ads. There is a free app to download on your mobile
and you can carry your music wherever you go. If you
enjoy Bollywood music, you will enjoy Gaana.com! http://
goo.gl/OuaEdq
Yazdi Tantra is a chartered accountant
by training, computer consultant by
profession, entrepreneur-developer by
hobby and trainer in his leisure time.
He is currently the vice-chairman of
Zoroastrian Co-operative Bank Ltd
and has been running a medium-sized computer
company ON-LYNE for the past 24 years.
09-09-2016 18:19:27
 HANDHOLDING:
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MSSN Handholding.indd 1 29-07-2016 16:08:23

 HEALTH BM HEGDE
Great News for Doctors as Lawyers
Train Their Guns on Drug Firms
I
was just watching news in New York, a few weeks back,
and came upon an advertisement. A lawyers firm in
New York was inviting patients to send information
on the side-effects of drugs they were taking to them
directly so that they could get the patient compensation
from the multinational petrochemicals corporations called
the drug companies! Normally, one comes across such
advertisements to sue doctors for malpractice, negligence
and what have you. I then learnt that the US now permits
drug companies to be sued directly for dangerous side-
effects of drugs. This must have been a great relief to
American doctors who were the target of the ambulance-
chasing lawyers so far. Now, the lawyers, armed with this
new law, are after the drug companies as they are the
real large sharks that net trillions of dollars compared to
doctors and hospitals that look like small fry now.
Soon, there will be legal
firms specialising
in attacking the
drug lords
instead
of poor
doctors.
When this
gathers full steam,
many of our doctors need
not have the anxiety of being
sued for anything and everything. One
of the advertisements that I saw looked like the
pharmacology textbooks chapter on statins. The lawyer
was saying that almost everyone on statins gets muscle
damage with or without symptoms like muscle-ache,
etc. Between 10%-47% of people on statins become
diabetics within their first year on statins; kidney damage
is not unusual; and liver damage is a certainty. If you
have any one of those symptoms, do write to us and we
will get maximum damage from the drug companies for
you. No legal fees. If we win, we will share the booty.
So went the message of the advertisement. Does that not
look attractive?
While it is good for doctors to feel safe, it is good for
MONEYLIFE | 16-29 Sep 2016 | 56
BM Hegde.indd 2
the patients also, since the drug companies may not go out
of their way to wine and dine doctors to prescribe their
medicines for indications for which they have not been
permitted in the first place. Interestingly, this law does not
cover vaccination injuries! Vaccine manufacturers must be
richest among the drug lords, hence, they could make the
government exempt them from this law. Extending this
further, very soon, the cunning angiogram/angioplasty
industrialists might pass on their mistakes on the device-
makers.
The man-on-the-street has so much faith on the
chemical drugs and surgery as the custodians of their
well-being and their lives that they are ready to accept
anything, in the name of science. Truth is otherwise. A
substantial part of human healing is well outside the realm
of materialistic reductionist science. Thinkers in mainline
science seem to have woken up. In an article, in 2011,
Michael Crow, the president of the Arizona
State University and a
leading science administrator,
wrote that the US National Institutes of
Healths annual budget of $30 billion should
not be just confined to molecular biological and
other conventional ways of looking at human health;
it must also look at health as a human experience in its
biological, sociological and environmental angles. Peoples
feelings, their emotions and beliefs also matter in personal
and societal health. I feel, we should be less arrogant about
our scientific knowledge. Did our ancestors know how to
communicate with plants and animals to know about our
present knowledge of herbal and animal sources of therapy?
With the Damocles sword hanging no longer on their
necks of consumers claims, doctors should now be able
to think outside the box for better intervention outcomes.
With humility, better sense would prevail. Long live the
time-honoured doctor-patient relationship which is very
sacred and does the main job in healing, anyway. Let not
mankind perish from the reductionist side-effects of drugs
eventually.
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
07-09-2016 20:04:43
 HEALTH BM HEGDE
ALCOHOL AND
FERTILITY
W hen fertility clinics
are doing very good
business, it is worthwhile
MEDICAL DEVELOPMENTS FROM
to look for avoidable
preventive measures for normalising were 7,306 who suffered injuries
fertility. Although it might break the from medical complications and
rice-bowl of these clinics, it would
be good for mankind. Alcohol
intake, as little as 14 units in a
week, during the time when the
lady is trying to get pregnant, might
significantly reduce her chances of
getting pregnant. This is a result
of a large cohort study. If I were to
advise in an editorial in the same
journal (wishful thinking), I would
have said that alcohol damages
every single human organ, the
dose notwithstanding and, as such,
doctors must discourage people
from drinking alcohol routinely.
Ranging from cardio-myopathy and including men, is desperate to
sudden death, to cancer and now
fertility, alcohol is a curse. Yet, we
encourage alcohol intake socially.
Some doctors, even today, tell their
patients that alcohol, in small doses, a study to show that one of the
is good for heart health. In fact,
female alcoholism can adversely
affect the menstrual cycle and male
alcoholism could reduce the sperm
count!
PATIENTS WITH CANCER AT
RISK DURING DIAGNOSIS
C ancer is a difficult disease for
the patient; but recent studies
have shown that medical diagnostic
interventions may often make them
more miserable for due to injuries.
Among 720,901 patients, there
BM Hegde.indd 3
AROUND THE WORLD
drug treatments, and 8,331 who
had injuries resulting from accidents to grief in India. Let us do a survey
and self-harm that resulted in
hospital admission during the
diagnostic period. These were
Swedish patients. Central nervous
system and colorectal cancers had
14% increased risk and the risk,
to a certain extent, depended on
the socio-economic status of the
patient!
Psychiatric side-effects are also
noted during investigations and,
later, on chemotherapy, in addition
to physical injuries that could be
quite serious. Investigations should
be done, especially the invasive
ones, only when it can give more
information for better management. about thee growing opioid painkiller
CONCERNS OVER SKIN
BLEACHING
B lack is beautiful is an old adage; Karnataka,
but, these days, everyone,
become fairer. We see that many
people, many in the film industry,
have suddenly becomes very fair.
A dermatologist in England did
common ingredients of the fairness
treatment, internally and locally, is
glutathione.
Ophalia Dadzie, a consultant
dermatologist at Hillingdon
Hospital and the director of London general has echoed my sentiments.
Ethnic Skin Ltd, has discovered
serious side-effects after intravenous how many doctors have been
(IV) use of glutathione along with
local use. Most of these are done
in beauty parlours where even the
hygiene of IV injections is seriously
compromised. Potential adverse
side-effects include toxicity of the
nervous system, kidney
and liver, headaches and,
rare, but serious, skin
conditions such as Stevens
Johnson syndrome and
toxic epidermal necrolysis.
She is asking for strict regulations
to avoid serious damage. God only
knows how many people have come
and build some guidelines sooner
rather than later.
US SURGEON-GENERAL,
DR VIVEK MURTHY, WARNS
AGAINST PAINKILLERS!
I n a historic first in the USA,
the surgeon-general, the most
powerful Federal government
officer, has sent letters to 2.3 million
doctors there, asking for their help
to end the epidemic of prescription
painkiller overdose deaths. The
landmark letter is a signal to
doctors across the country that it
is time for something to be done
problem in America.
A humane
mane Indian-
born doctortor from
Dr
Murthy,
ka,
wrote a
sensible
article a
month ago go about the sad state
of affairs in the medical field in
that country run by the moneybags.
Readers of my column would
remember my fight against these
menaces, for decades. I am happy
that a fellow Indian-born surgeon-
In his letter, Dr Murthy discusses
incorrectly taught that opioids were
not addictive when prescribed for
legitimate pain. Dr Murthy goes
on to lament that many doctors
were encouraged to be more
aggressive about treating pain.
57 | 16-29 Sep 2016 | MONEYLIFE
07-09-2016 20:05:09
 LEGALLY SPEAKING SD ISRANI

Nomination Does Not Give

Ownership Rights

I
t is said that in life only two things are certaindeath Having got wind of the transfer of the membership of
and taxes. So far as taxes are concerned, the person the Society to the name of his sister, the son addressed a
himself faces the music; but, in case of death of a letter to the deputy registrar for cooperative societies, on
person, it is his near and dear ones who have to deal with behalf of his mother. In the letter, the son asserted that the
the hassles. Over the years, thanks to rising prosperity, membership of the flat should be transferred to the name
it is now common to find individuals having insurance of his mother.
policies, bank accounts and also owning an apartment in The son also sent a letter, on behalf of his mother, to
a cooperative housing society. In the secretary of the housing society,
such cases, inheritance issues arise reiterating his previous assertion,
after the death of the person and that the flat should be transferred
legal heirs may drag the insurance to the name of the mother.
company, bank or the housing In response, the secretary of the
society to court, to enforce their Society informed that the name of
claims. the daughter was recorded by the
To simplify the task of handing father himself as his nominee in
over insurance policy proceeds respect of the said flat. The deputy
after the death of the policyholder, registrar, cooperative societies, held
or transferring the bank account, that the flat-owner had actually
or membership of the housing nominated his wife as the nominee
society, there are provisions in the (in terms of the nomination
respective laws for appointment stipulated under Section 79 of the
of a nominee. But these provisions 1983 Act).
are not clear-cut and are, often, The transfer of the flat in the
contested. name of the daughter was declined
In a recently decided case on the ground that the daughter,
by the Supreme Court, the being a married, did not fall within
issue about the nominee in a the definition of term family
cooperative housing society came as contemplated under the said
up for consideration. Section 79.
One Biswa Ranjan Sengupta Aggrieved with the decision
(the flat-owner) was member of To simplify the task of taken by the authorities, in rejecting
a cooperative housing society, handing over insurance her claim with reference to the
Kolkata (the Society). He had a transfer of the flat, the daughter
policy proceeds after the
wife and two childrena daughter challenged the order of the deputy
and a son. The flat-owner recorded
death of the policyholder, or registrar before the Calcutta High
the name of his daughter as the transferring the bank account, Court.
nominee in terms of the provisions or membership of the housing The writ petition was allowed
of Section 79 of the West Bengal society, there are laws for by a learned single judge of the
Cooperative Societies Act, 1983. appointment of a nominee. High Court and it, inter-alia,
After the death of the flat- But these provisions are, held that the deputy registrar of
owner, his daughter asked the often, contested the cooperative societies was not
Society to enter her name as justified to exclude the appellant,
member in place of her fathers being a daughter of the flat-owner,
name. The managing committee of the Society passed a from the purview of the provisions of the said Act.
unanimous resolution to transfer the membership of the The High Court held that the married daughters were
deceased flat-owner to the name of his daughter. not excluded from the purview of the relevant Section.

MONEYLIFE | 16-29 Sep 2016 | 58

Legally Speaking.indd 2 09-09-2016 18:22:30

 LEGALLY SPEAKING SD ISRANI

Having so concluded, the learned single judge of the the money secured by the policy shall be paid in the event
High Court directed the deputy registrar of cooperative of his death.
societies to grant the necessary approval for transfer of If the nominee is a minor, the policyholder may appoint
the membership in the name of the daughter as nominee any person to receive the money in the event of his death
of the flat-owner. during the minority of the nominee. It means that, if the
The mother and son duo challenged the order passed policyholder is alive when the policy matures for payment,
by the single judge. The matter came before the division he alone will receive payment of the money due under the
bench of the High Court for consideration. The division policy and not the nominee. Any such nomination may be
bench, relying on some earlier judgements, passed an cancelled or changed at any time before the policy matures
interesting order. for payment.
It held that it may not be The Supreme Court held that
possible for the Court to direct Nomination only indicates the the provision in Sub-section (6) of
the mother and son to be joint hand which is authorised to Section 39 of the Life Insurance
members along with the daughter; receive the amount, on the Act, which says that the amount
but, to protect their interest in the payment of which the insurer shall be payable to the nominee,
flat which they had inherited, it gets a valid discharge of its does not mean that the amount
was necessary for the Society to shall belong to the nominee.
liability under the policy.
record their interest expressly in The nomination only indicates
the share certificate as well as in
However, the amount can the hand which is authorised
its records pertaining to members. be claimed by the heirs, in to receive the amount, on the
More particularly, the High accordance with the law of payment of which the insurer gets
Court directed that an entry be succession a valid discharge of its liability
made in the register of members under the policy. However, the
as follows. The daughter, merely amount can be claimed by the heirs
because the nomination was in her favour, cannot transfer of the life assured, in accordance with the law of succession
the share in which she has a part interest; her share can governing them.
only be transferred by express consent of all the heirs. Similarly, in the case of a flat in a cooperative society
Being dissatisfied with the direction of the division discussed earlier, the apex court held that the nomination
bench of the High Court, the daughter approached the of the daughter in the instant case was valid; so the Society
Supreme Court by filing an appeal. Before dealing with was bound to register her name. At the same time, legal heirs
the issue raised in the appeal, the Supreme Court made a could enforce their rights through the due process of law.
reference to the judgements relied on by the division bench
in recording its conclusion. In that context, the apex court
considered some cases relating to role of nominee under
the Life Insurance Act, 1938. SD Israni is a corporate lawyer & Fellow
The Supreme Court analysed the provisions of Section of ICSI. Email: sdisrani@gmail.com
39 of the Life Insurance Act and noted that a holder of a
policy of life insurance may nominate a person to whom

Eating a health food?

But what about financial health?
For subscription offers that
The best wealth food. are a steal, look for a form
elsewhere in this issue or our
Once every fortnight website at www.moneylife.in

59 | 16-29 Sep 2016 | MONEYLIFE

Legally Speaking.indd 3 09-09-2016 18:23:10

 YOU BE THE JUDGE BAPOO MALCOLM
Pity the Overworked Athlete
T
his author loves sports, and the bias may show.
Professional sports were historically looked
down upon. The British institutionalised them,
classifying the amateur cricketer, usually a rich mans
son, as a Gentleman, and the working-class chap,
earning a few pennies, as a Player. Talk of caste
systems!
Next came the Olympics. Professionals were pariahs,
paid trainers disallowed, the best athletes banned. Iron
Curtain dope-filled sportsmen were taking home the
gold. India had sports-persons who did not know
where their working desks were. They got salaries,
promotions, special rations, equipmentthe best and
for freespecial leave, the
works. They were still called
amateurs! There were no
legal remedies.
Times change.
Distinctions and barriers
were erased. Reports flaunted
the money earned. Legal suits
followed. Professionalism
in every sport, from cricket
to kabaddi, brought legal
heads to TV channels and
promoters.
Welcome to the wide,
wonderful, world of sports
litigation.
America has major league baseball and minor league
softball games. There is money; top guns make big
bucks, marry film stars. The minor leaguers struggled to
go up the ladder with long hours, hard work. As with
wage-earners of the jitna daam, utna kaam persuasion,
they felt that they were overworked and underpaid.
They trooped to court.
Their grouse was that their employers had run afoul
of the California Fair Labour Standards Act. This law
presupposes two things. One, only those below a certain
salary can claim overtime and only for certain nature of
the work. Cerebral activity is excluded, as opposed to
manual. It does not recognise artists, music composers
and inventors, who work with originality, talent or
creative features. That left the labourer, the clerk, the
slogger, the run-of-the-mill worker, within the pale.
The ball-players insisted on overtime pay. The
issue was critical. Come December, the cut-off salary
was due to almost double, bringing in many other
claimants, including the better-paid minor stars. The
MONEYLIFE | 16-29 Sep 2016 | 60
You Be the Judge.indd 2
bosses countered, Nothing doing, the players are not
labourers.
You be the judge. On which side would you lean and
why?
Which category did the baseball-players fit into? Was
their work manual or creative? Would a touch artist,
like Ramanathan Krishnan, be excluded, while a slogger,
like McEnroe, be eligible? Which player would be better
qualified for relief, a smart pitcher or a solid batter?
Finally, had the honourable judge ever played baseball
to sufficiently understand the nuances?
Then there was that can of worms. Other support
staff would follow the players. The ball-boys (and girls)
in tennis, the mechanics in
motor sports, the horse-
handlers, the pitch curators,
the rain-cover guys, the
markers in snooker and
billiards, maybe even the
twelfth man who runs up
with the drinks.
The judge rejected
the plaint. He based his
decision on the argument
that there was no basis
of a commonality of the
collective-action claim. The
leaguers could not approach
the court as class-action plaintiffs. While this would
mean that individual athletes could ask for damages,
each case would have to be filed, argued and determined
separately. What you cannot get collectively, you may
get individually. More suits, more time spent, more fees
collected. Wonders never cease.
The matter was now pregnant with problems. To
stymie a slew of court cases, the legislature is working
extra hours to introduce special legislation for the
Minor League. Whether it will work for other sports is
to be seen; but, in the meantime, who will look after the
interests of the lawmakers? Having burnt midnight oil,
are they not also eligible for overtime pay?
It all depends on whether they admit that their work
is non-cerebral. Most voters may agree.
Bapoo Malcolm is a practising lawyer in
Mumbai. Please email your comments to
mail@moneylife.in
09-09-2016 18:23:54
 ML FOUNDATION EVENTS
POLICE & YOU, THE 12-WEEK SERIES
Cybercrimes: Know
Your Rights
W
ith changing times, the face or interface
of crime has changed and criminals
have become faceless in cyberspace. In
cyberspace, you are fooled because fraudsters are smarter
than you are. So be cautious, alert and on the vigil; only
that will protect you in the cyberspace, said Sanjay
Saxena, joint commissioner of police (crime), Mumbai. Mr
Saxena, a 1993-batch IPS officer, who was special inspector
general with Force One, an elite counter-terrorism wing of
Maharashtra police formed after the 26/11 terror attack,
was speaking as the chief guest at the seventh session of
the Police & You series of Moneylife Foundation.
Moneylife Foundation, with Police Reforms Watch
and support from Saraswat Bank, has launched the
12-week programme (every Wednesday) that aims to
spread knowledge about protecting yourself, your rights,
the Indian Penal Code (IPC), cybercrime and economic
offences. This was the seventh session which also included
presentations by advocate Prashant Mali and Ramesh
Mohite, former police officer and director at Cyber-I
Consultancy Services Pvt Ltd.
Advocate Mali, who appears as an expert legal counsel
in cybercrime and electronic and digital evidence-related
cases, says, Digital literacy, safety and security come
with low awareness and knowledge of safeguards and
laws governing the Internet usage. Laws in India, though
enacted with full vigour, are not implemented with the
same josh. Common IT users often do not know various
sections of laws and their rights under the law.
The incidence of cybercrime is on the increase because
of increased use of technology and its careless application.
According to advocate Mali, every year, there are estimated
30 million incidents of bank phishing that cost crores of
rupees to customers.
Event.indd 2
Every month, I handle over 40 cases related to
phishing and bank frauds. I would strongly urge everyone
to change their password often and not share it with
anyone, including your spouse, friends or even children.
Secure your computer or laptop by activating a firewall and
using good anti-virus and malware protection software.
On social media, like Facebook Twitter and YouTube,
keep your security settings at the highest point. Do not
forget to secure your mobile phones and use updated
apps and software. Be careful while sharing your personal
information like name, address, contact number and
financial information over Internet. And, if you are a
victim, immediately report to the police and contact the
right lawyer who knows about cybercrimes, he said.
Financial Crimes &
Frauds: When and How
To Approach the EOW
G
reed is the main reason for people becoming
victims of financial frauds or cheating. In
fact, I was aghast to see people from all
parts of the society falling prey to such schemes just
because someone has promised them huge returns, said
S Jayakumar, the deputy commissioner of police, economic
offences wing (EOW), Mumbai. He was speaking at the
eighth session of the 12-week series Police&You.
Mr Jayakumar, who has a commendable track record
with postings at Malegaon as assistant commissioner
of police (ACP) after a bomb blast and Naxal-infested
Gadchiroli as superintendent of police (SP) during an election,
says, Irrespective of
their reputation and
achievements, people
put their money into
fraudulent schemes. I
agree we are lagging
behind in alerting
S Jayakumar, Mahesh Aathavale, people. However,
DCP former Police officer
since we have to deal
with people from across the strata, it becomes difficult to
reach out to everyone. But we are doing our best and would
do more to create awareness about these financial scams.
The multi-level marketing was conducted by Mr Jayakumar
and Mahesh Aathavale, a former officer from Mumbai
Police. Mr Athavale shared details of action taken, or being
taken, on MLM (multi-level marketing) companies, like
QNet, across the globe. He told the audience how, in 2002,
the Australian government named QNet, GoldQuest and
QuestNet as pyramid schemes.
61 | 16-29 Sep 2016 | MONEYLIFE
09-09-2016 18:24:58
 BOOKS

The Ocean of Churn in Bengal put to death in a single episode.

The job of any good book is to surprise us with facts,

Alternative History especially about known situations, and weave them in a

flowing narrative to support an overarching theme. The
Ocean of Churn does this very well. Sanyal skilfully weaves

M
any have probably read how Sanjeev Sanyal,
a thoughtful historian, economist and urban
planner, has torn to shreds, Ashokas reputation
as a pacifist. In case you didnt, here is his story of the real
Ashoka. In 274BC, Bindusara, son of Chandragupta, died.
The crown prince, Sushima, was on the north-western
frontier fighting incursions. When he rushed back to
capital Pataliputra, he found that Ashoka, one of his
half-brothers, had seized control. Ashoka got Sushima
killedpossibly roasted alive!
In the next four years, Ashoka
seems to have killed all male
rivals in his family. Buddhist
texts mention that he killed 99
half-brothers and only spared
his brother Tissa. Having
consolidated his power, he
was finally crowned emperor
in 270BC.
Ashoka invaded Kalinga a
few years later and, shocked
by the death and destruction
he had wrought, converted
to Buddhism and became a
pacifist. Or, so we believe.
THE OCEAN OF CHURN Sanyal argues that the rock
SANJEEV SANYAL edicts tell us that he had
Penguin Viking converted to Buddhism more
Pages 297; Rs599
than two years earlier and
from what we know of his
early rule, he was hardly a man to be easily shocked by
the sight of blood.
Sanyal argues that the main evidence of Ashoka's
repentance comes from his own inscriptions. It is very
curious, however, that this regret is mentioned only in
locations far away from Odisha (such as in Shahbazgarhi
in north-western Pakistan) which cant be challenged... If
Ashoka was genuinely remorseful, he would have surely
bothered to apologize to the people whom he had wronged.
Far from it, he doesnt even offer to free the captives.
Even the supposedly regretful inscriptions include a clear
threat of further violence against other groups like the
forest tribes. It is likely that it was pure propaganda
by Ashoka to counter his reputation for cruelty. Indeed,
the Buddhist text, Ashokavadana, tells us of more acts
of genocide perpetrated many years after he supposedly
turned pacifist; Ashoka once had 18,000 Ajivikas Jains
together stories picked from thousands of years history
stretching from Europe to Southeast Asia to show how
culture and commerce, religion and administration, family
lineages and wars, kinship and genetics across centuries
interacted around the Indian ocean. But this story has
hardly been told from the perspective of those who lived
around the Indian Ocean. Sanyal hopes to rectify that,
with this book.
Pushed out of their base in Hugli,
they (Portuguese) were reduced to
piracy in Bengal and withdrew to
Chittagong where they formed an
alliance with the Arkanese king Thiri
who believed that he was Buddha
He has many surprises for us about our recent past,
too, such as the role played by the revolutionaries in our
freedom struggle. Sanyal argues that while the Netaji
Subhash Chadra Boses role in the last stages of Indias
freedom struggle is known, it was really the culmination of
a strategy that had been devised decades ago. The simplest
way to throw out the British was not civil disobedience but
create a mutiny among the soldiers. After all, the backbone
of the British empire was not the few British people who
lived here but the vast army of Indian soldiers who fought
for the British in many wars across the world. This was
the plan of Rashbehari Bose, Sachindra Nath Sanyal (the
authors great grandfather), Har Dayal and others from
the mid-1910s, influenced by Vinayak Savarkar. Another
plan included bringing in arms across the sea from the east.
Unfortunately, these plans failed each time. SN Sanyal was
caught and sent to Cellular jail in Andaman and Bose fled
to Japan. But the idea lived on and manifested years later
with the dramatic escape of Subhash Bose from house arrest
in Kolkata, contacting the Germans and the Japanese, and
leading the charge with an Indian army from the east.
Ultimately, Indian soldiers did rise up in mutiny in 1946
(naval revolt of Bombay).
This short review only offers a flavour that the history
we read is probably a deeply flawed. The stories appear
more nuanced, global, richer and shaped by unsung heroes
in Sanyals narrative, where Odiya and Omani seafarers,
Chola and Chinese kings, Pallava and Portuguese warriors
race through the pages. A must-read. Debashis Basu

MONEYLIFE | 16-29 Sep 2016 | 62

Book Review.indd 2 07-09-2016 20:06:22

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During discussions that night, Subba Rao called
R Sinha, chief general manager (vigilance). They
discussed the course of action and then planned
to go to the Chairman, Maneck N Goiporias
house. But they were told that Goiporia was out
meeting
eeting somebody and would return only after
10 pm.
m. It was then that Khemani and Subba Rao
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roke open Sitaramans drawer. It was a
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26-08-2016 17:34:17
 MONEY FACTS STOCKS

INDIAN MARKET TRENDS FUND FLOWS

The Sensex and the Nifty advanced 4% each during the Foreigners: Foreign institutional investors were net
fortnight ended 7 September 2016. ML Mega-cap Index buyers of stocks (Rs3,753.80 crore). They bought
and ML Large-cap Index advanced 4% and 3%, respectively. shares worth Rs40,847.66 crore.
ML Small-cap Index and ML Mid-cap Index rose 2% each.
1,450
FII Net Investments
(Rs Crore)
Share Prices Index, March 2016=100 1,010
130

570

120
130

110
-310
29 Aug-16 7 Sep-16

100 Indians: Domestic institutional investors were net

buyers of stocks (Rs756.61 crore). They bought
shares worth Rs17,333.43 crore.
90 850
Mar-16 Jun-16 Sep-16

ML Large-cap ML Small-cap Nifty ML Micro-cap 445

ML Mid-cap ML Mega-cap Sensex

40

Index 26 Aug 07 Sep +/- DII Net Investments

-365 (Rs Crore)
Sensex 27,782.25 28,926.36 4%
Nifty 8,572.55 8,917.95 4%
-770
ML Mega-cap Index 120.15 124.49 4% 29 Aug-16 7 Sep-16

ML Large-cap Index 119.35 122.38 3%

ML Small-cap Index 117.98 120.74 2%
GLOBAL MARKET TRENDS
60,150
ML Mid-cap Index 122.25 124.47 2%
ML Micro-cap Index 113.43 114.23 1% 57,930
Bovespa
Mega-cap Gainers/Losers 26 Aug 07 Sep Change 55,710

Dalmia Bharat 1,494.80 1,788.45 20% 53,490

Idea Cellular 93.95 83.70 -11% 51,270

Large-cap Gainers/Losers 26 Aug 07 Sep Change

49,050
Mar-16 Jun-16 Sep-16
Hindustan Construction Co 23.50 33.10 41%

Jubilant Foodworks 1,207.25 1,087.45 -10% Bovespa, Nikkei and Hang Seng advanced 4%
each. NASDAQ Composite, S&P 500 and Shanghai
Mid-cap Gainers/Losers 26 Aug 07 Sep Change
Composite rose 1% each. The FTSE ended flat.
Patel Engineering 46.60 85.25 83%
Index 26 Aug 07 Sep +/-
Kiri Industries 343.10 279.30 -19% Bovespa 57,716 60,129@ 4%

Small-cap Gainers/Losers 26 Aug 07 Sep Change Nikkei 16,361 17,012 4%

Hang Seng 22,910 23,742 4%
Pioneer Embroideries 44.70 65.05 46%
Taiwan Weighted 9,132 9,259 1%
MBL Infrastructures 114.30 76.20 -33%
NASDAQ Composite 5,219 5,284 1%
Micro-cap Gainers/Losers 26 Aug 07 Sep Change Korean Composite 2,038 2,062 1%

C&C Constructions 15.50 25.00 61% S&P 500 2,169 2,186 1%

Shanghai Composite 3,070 3,092 1%
Lumax Automotive Systems 35.75 26.05 -27%
FTSE 6,838 6,847 0%
(All Prices in Rs) @ - 6 September 2016

MONEYLIFE | 16-29 Sep 2016 | 64

Money Fact.indd 2 09-09-2016 18:26:54

 MONEY FACTS STOCKS

Whats H T

Automobile companies were in demand during the fortnight. Tata
Motors, Hero MotoCorp and Maruti Suzuki India soared 17%, 9% and 8%,
ML SECTORAL TRENDS
Stocks of automobiles companies
and retail companies advanced 8%
respectively. Mahindra & Mahindra and Force Motors advanced 4% each. each. Stocks of glass companies and
banks rose 7% and 6%, respectively.
Companies 26 Aug 07 Sep +/- Shares of telecom services
companies declined 5%, while shares
ML Auto Index Tata Motors 503.75 587.70 17%
of printing & publishing companies
140 TVS Motor Co 303.40 330.65 9% and sugar companies fell 2% each.
Hero MotoCorp 3,316.80 3,609.85 9% Shares of software & IT services
130
companies fell 1%.
Maruti Suzuki India 4,920.90 5,338.00 8%
120 M&M 1,424.85 1,488.75 4% ML Sectoral Trends
Force Motors 2,995.80 3,129.75 4% Office Equipment 9% Telecom services -5%
110
Bajaj Auto 2,858.25 2,985.85 4% Auto 8% Printing & Publishing -2%
100 Eicher Motors 22,331 22,973.90 3% Retail 8% Sugar -2%

Majestic Auto 96.30 99.05 3% Glass 7% Software & IT Serv -1%

90
Ashok Leyland 87.70 88.50 1% Banks 6% Foods & Beverages -1%
Mar-16 Jun-16 Sep-16
All Prices in Rs

FOOD INFLATION
Whats N T Combined food inflation
increased to 7.87% in July 2016
Telecom services companies were a mixed bag. Idea Cellular and Tata
compared with 7.46% recorded
Teleservices (Maharashtra) tumbled 11% and 9%, respectively. Reliance
Communications and Bharti Airtel declined 7% each. for June 2016. For rural and
urban areas, food inflation in
Companies 26 Aug 07 Sep +/-
June was 7.84% and 7.95%,
ML Telecom Service Index respectively. Vegetable prices
Idea Cellular 93.95 83.70 -11% increased by 13.98% in July
115
Tata Teleservices 6.60 5.98 -9%
compared with those prevailing
110 in June 2016. Inflation in fruit
Reliance Comm 53.95 49.95 -7%

Bharti Airtel 344.10 320.60 -7%

105 Continuing Upward Trend
8.00%
Tata Comm 524.60 519.35 -1% 100
Annual Change
Bharti Infratel 346.85 349.35 1% 95

5.25%
MTNL 20.85 21.80 5% 90
Mar-16 Jun-16 Sep-16
All Prices in Rs

2.50%
BULK DEALS Jul-15 Jan-16 Jul-16

Date Company Buyer Seller Rs Cr

30 Aug-16 Kalpataru Power
06 Sep-16 IRB Infrastructure
29 Aug-16 Bodhtree Consulting
02 Sep-16 Scanpoint Geomatics Rajesh Chandubhai Thakkar
06-09-2016 Suncare Traders
30 Aug-16 Telecanor Global
06 Sep-16 Nalin Lease Finance
HSBC Global Invt Funds Indian
HSBC Global Invt Funds Indian
Anita Soni
Sword Edge Commercials
Aarav Financial Services Pvt
Dilipkumar Nalinkant Gandhi
prices was 3.53% in July, while
HSBC Global Inv Funds Mauritius 84.11 pulses were dearer by 27.53%
HSBC Global Inv Funds Mauritius 70.76
y-o-y. Inflation for cereals stood
at 3.88% and inflation for milk
Bodhtree Solutions 1.40
products was 4.05%. Price rise
Karnavati Infrastructure Projects 0.39
of non-vegetarian items, such as
Amrapali Capital and Finance Serv 0.24 meat and fish, was 6.49% in July
Anita Rakeshkumar Ranka 0.12 compared with 6.60% in June
2016.
Manishkumar Dashrathbhai Raval 0.05

65 | 16-29 Sep 2016 | MONEYLIFE

Money Fact.indd 3 09-09-2016 18:27:14

 BEYOND MONEY

Reaching Out to FOHF works closely with the armed forces to identify
families of brave-hearts across the country. Its team of
volunteers conducts programmes to commemorate our
the Families of the soldiers and spread the message of their service and sacrifice
to the citizens to keep their memories alive.
Brave-hearts Shivani Sharma Dasmahapatra, programme director,
FOHF says, No one can bring back what they have
lost, but for us it is of foremost importance to be there

H
ow often does it happen that we are deeply moved for their families and let them know that they are not
by the martyrdom of a brave soldier and want alone. She points out that the nation comes together to
to show support and solidarity to his distraught express grief when a brave-heart lays down his life for the
family in a meaningful way? How many of us can actually nation; but public memory is short and everything is soon
follow up on our feelings and do something about it? forgotten.
Most people will answer in the negative. Well, here is an FOHFs stated objectives include: advocacy about
opportunity for you, as a concerned citizen, to engage the concerns of the armed forces and veterans; providing
with an organisation that is dedicated to fostering a spirit assistance to families of martyrs and veterans with special
of patriotism and ensuring that the families of martyrs emphasis on helping war widows and ensure permanent
do not endure alone. housing for martyrs families; work at sustainable
Flags of Honour Foundation (FOHF), a not-for-profit programmes and partnerships to ensure rehabilitation,
organisation started by employment, education,
Rajeev Chandrashekar, health and financial
entrepreneur and stability of families
Member of Parliament of martyrs; educate
(MP), aspires to act as a and inculcate values
bridge for civil society to of service and honour
engage with, recognise among people and
and support the Armed instil patriotism and
Forces and inspire the responsible citizenship
younger generation among the youth.
through stories of While the organisation
valour and sacrifice of is based in Bengaluru,
the men and women in it hopes to have a pan-
uniform. India presence.
FOHF was registered Some important
as a charitable trust a advocacy campaigns
little after the Mumbai taken up by FOHF
terror attacks of 2008 when Major Sandeep Unnikrishnan were to support the one-rank-one-pension agitation by
sacrificed his life to save people. Mr Chandrashekar veterans, voting rights of armed forces soldiers who are
presented a cheque of Rs25 lakh to Major Unnikrishnans away from home and helping Dr NK Kalia to petition
family. Soon thereafter, he decided to put a formal face to the United Nations Human Rights Commission seeking
the effort to support the families of martyrs and registered independent investigations on the torture and death of
FOHF as a charitable trust in July 2009. The Foundation Capt Saurabh Kalia and five jawans in the Kargil War in
provides financial assistance and grants to martyrs families 1999. The voting rights campaign registered a significant
by reaching out to them and understanding their needs. victory, in March 2014, when the Supreme Court ordered
For instance, FOHF offered financial assistance to the the Election Commission to facilitate voting by armed
widow of martyr Havaldar Channalli forces and their families posted in peace
(who died in Kashmir) to restore a zones; but the battle for voting rights to
dilapidated memorial to the Param those posted in field areas continues.
Vir Chakra awardee. It gave a grant to FLAGS OF HONOUR You can join the effort by volunteering
martyr Abdul Hameed at Dhampur in FOUNDATION with FOHF or by donating to the cause.
54, Richmond Road,
Uttar Pradesh to help his widow, Rasulan Donations are tax-exempt under Section
Bengaluru - 560025
Bibi, renovate her house. Telephone: 080 - 4093 3141 80-G of the Income-tax Act.
Fax: 080 - 2532 3488
Email: suresh.nr@flagsofhonour.org
MONEYLIFE | 16-29 Sep 2016 | 66 Web: http://www.flagsofhonour.in/

Beyond_money.indd 1 07-09-2016 20:03:25

Advertisements.indd 2 03-10-2015 14:03:26
 REGISTERED WITH THE RNI UNDER NO. MAHENG/2006/16653. Postal Registration No:
MCW/184/2015-2017. POSTED AT PATRIKA CHANNEL SORTING OFFICE, MUMBAI 400001.
Date of Publishing 9 September 2016. Date of Posting Alternate Tuesday & Wednesday.

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