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ALSO INSIDE

10STOCKS

Why you should worry

about ChinaA threat of funds outflow looks real as the Chinese government's efforts to stem the freefall only leads to more panic.

13FINANCIAL PLANNING

Lessons for investors

from GreeceYou can't get away by borrowing more than you can repay is lesson number one. Also, don't cancel that Greek holiday just yet.

14INSURANCE

Don't let the premium

decide your health coverThe lowest premium and an array of benefits may look tempting when buying health insurance, but you need to consider more.

Learn and Keep PAGE 16

Tax optimiser PAGE 29

Tech PAGE 30

PLUSThe week’s best stocks, mutual funds, loans and deposits.

As robo-advisers take over the task of financial planning, find out if you should shift to the new option or stick with the traditional adviser. PAGE 2

www.wealth.economictimes.com | Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | July 13-19, 2015 | 32 pages | `7

wealthTHE ECONOMIC TIMES

As robo-advisers—online, automated platforms—take over the task of financial planning, find out if you should shift to the new option or stick with your traditional adviser.

SANKET DHANORKAR

This invasion can’t be stopped. They are every-where, these tech trojans, throbbing with the Net power and taking over eve-

ry aspect of our lives. Smartphones and watches, computers and cameras, all are driven by technology that threatens to overwhelm us, but at the same time provides unmatched comfort and con-venience. Our financial lives are not untouched either. From Net banking to mobile wallets, online bill payments to booking tickets, monetary transactions have undergone a sea change. Little wonder then that robo-advisers are stomping in, vying for a chance to shape our personal finances as well.

What exactly are robo-advisers? These are online wealth management services that provide automated, algo-rithm-based advice without human in-tervention. While such advisory servic-es are still in a nascent stage in India, they have become popular across the world, giving traditional advisers a run

for their money. According to Corpo-rate Insight, a financial research and consulting firm, robo-advisers were managing assets worth $19 billion in December 2014, a 21% increase since July the same year. By 2020, this figure is estimated to grow to $2 trillion in the US, as per a report by global consulting firm A.T. Kearney.

While companies like Wealthfront, Betterment and FutureAdvisor are at the forefront of this activity, it has also forced industry titans, Vanguard and Charles Schwab, to foray into the robo-advisory space.

However, when it comes to India, can you rely on these robo-advisers to provide sound financial advice? Or is the friendly neighbourhood planner still your best bet to steer your finances in the right direction? We shall try to find an answer to these questions by re-vealing how these platforms work and whether they suit your needs when compared with human planners.

TYPES OF ROBO-ADVISERSCurrently, there are three types of advi-

02 Cover StoryThe Economic Times Wealth, July 13-19, 2015

TYPES OF ROBO-ADVISERS IN INDIABeing in a nascent stage, most robo-advisers in the country offer basic services, but

others are beginning to evolve and provide a wider range of advice.

sory services available in the country—basic, advanced and evolved. Arthayantra, BigDe-cisions, FundsIndia, Scripbox and MyUni-verse are the prominent players in this arena.

Basic: The first type is not a full-fledged robo-advisory service since it only assists in designing a portfolio of mutual funds. Simply put, these portals use algorithms to recommend a basket of mutual funds and enable you to start investing through them. These schemes are recommended on the basis of internal models that crunch

relevant numbers to identify the best funds. Scripbox offers a ready basket of funds on

the basis of the user’s investing horizon. So, an investor with a longer time frame will be directed to a basket of four preselected equi-ty funds, while a shorter time frame will throw up a portfolio of debt schemes. It also has a separate basket of funds for those who want to invest just to save tax. The baskets are reviewed once a year and changes sug-gested, if required.

Advanced: Under this category, the services

BASIC ADVANCED EVOLVED

WHAT IT OFFERS

Customised mutual fund portfolio construction, with a ready basket of preselected funds.

Risk profiling and customisation is minimal or not at all.

WHAT IT OFFERS

Customised mutual fund portfolio construction.

Goal-based advice.

Comprehensive financial counselling (telephonic).

Extensive risk profiling and customisation.

WHAT IT OFFERS

Customised mutual fund portfolio construction.

Goal-based advice.

Basic life and health insurance coverage advice.

Tax optimisation.

Expense restructuring.

Extensive risk profiling and customisation.

COST COST COST

FREE FREE `1,000** This is the fee for services provided by Arthayantra.

The Economic Times Wealth, July 13-19, 2015 03Cover Story

ROBOT VS HUMANWe asked a 29-year-old investor to try out the services of both, a robo-adviser and a traditional financial planner.

Here’s the degree of difficulty and ease he experienced at various levels of the entire financial planning process.

ACCESSFrom a computer at home. Easy to locate advisory firms as there aren’t too many in India. Can start planning instantly. Cost is minimal or free.

ACCESSDifficult to identify a trustworthy planner, who will give good advice, not just sell products. Spend time and effort to contact the planner. Actual start to planning may take a couple of meetings. Cost is relatively high.

ASSESSMENTYou fill up forms, but also discuss your life situation, goals, liabilities, risk coverage, financial habits and biases. The planner takes a call on the basis of both inputs.

ANALYSISThe analysis can be subjective and cater to investor’s biases, not always what is right for him. It is, however, able to factor in complex scenarios and lifestage complications in the portfolio.

ADVICEThe advice for starters is comparable with that of the robo-adviser. However, the human interface eases the execution and offers stronger motivation. Also, it’s easier for a person to factor in sudden changes in life situation or handle more complicated portfolios.

ASSESSMENTSign up and register. Select the service you want. Fill up financial details. These help specify your risk profile, spending-saving pattern, investment horizon and goals.

ANALYSISA completely objective and detailed break-up of each aspect of your finances and financial patterns, without hidden agendas or sales pitches.

ADVICEIt is cut-and-dry, but will lay out a clear path to reach objectives, with specific asset allocation and tools to invest in. It also offers advice on tax, insurance and ways to improve cash flow. You can start execution and investment online, but need to be disciplined to carry it through on your own.

The traditional financial planner’s recommendation is comparable with

that of a robo-adviser, but comes with the reassurance of one-on-one

interaction and reviews.

This robo-adviser is evolved and in addition to asset allocation, offers

comprehensive advice on goal-linked investments and increasing

savings to reach goals.

This robo-adviser offers the basic services of mutual fund portfolio construction with a basket of pre-selected funds.

This is the broad classification of the investor’s existing asset port-

folio, where commodity is gold.

For person aged 29, time horizon of more than 10 years and a moderate risk profile.

PORTFOLIO COMPARISONCURRENT ASSET ALLOCATION RECOMMENDED ASSET ALLOCATION

5%20%

5%

60%60%

1%

41%

58% 20% 60%

35% 35%EQUITY

DEBT

COMMODITY (BALANCED FUND FOR ROBO-ADVIS-ER NO. 1)

ROBO-ADVISER

NO. 1

ROBO- ADVISER

NO. 2FINANCIAL PLANNER

bouquet grows, with platforms like FundsIndia and MyUniverse providing curated recommen-dations suited to the user’s risk profile.

Here’s how FundsIndia’s SIP Portfolio Design-er works. Based on inputs, such as age, investing time frame, amount of investible money and risk profile, the system assigns a risk score to the portfolio and creates an asset allocation pat-tern. Then, according to the categories of funds

in the asset allocation pattern, the platform as-signs the top schemes available to form a portfo-lio. MyUniverse also uses similar inputs in its ZipSIP platform. Those assessed as aggressive investors, for instance, will not only be recom-mended a higher equity allocation, but also a bigger allocation to a mid- and small-cap scheme. On the other hand, those assessed with a moderate risk tolerance are likely to be ad-

vised an even distribution of equity and debt schemes, with a large-cap equity fund making a bigger chunk of the equity portion.

Besides, FundsIndia offers ready portfolios tailored according to the investor’s time frame—less than one year, 1-3 years, 3-5 years, and so on—or as per the life stage of the user (25-35 years, 35-45 years, 45-55 years, and 55 plus). For an indepth, goal-based portfolio advice,

FundsIndia also offers Smart Solu-tions, a tool that helps you identify the money you need to invest per month to achieve each goal. It also recommends a portfolio of funds to achieve this goal and helps set up an SIP mandate for this objective. It monitors this portfolio continuous-ly and recommends changes as needed. Apart from this, the advi-sory provides comprehensive fi-nancial planning services, which are not algorithm-based and in-volve one-on-one interaction with a dedicated planner just like a tradi-tional advisory service.

BigDecisions.com is another unique portal that offers interactive tools powered by sophisticated al-gorithms, which help you make more informed decisions. These enable users to accurately identify the sum needed to invest for a par-ticular goal, the life and health in-surance required, even figure out the problem of buying or renting a house . However, it facilitates the execution of advice through other service providers.

Evolved: This final category of robo-adviser assists in the online creation of a comprehensive finan-cial plan, not merely a customised portfolio of mutual funds. Arthay-antra is a prime players here.

To generate a financial plan, the portal asks for relevant financial and personal details, such as age, marital status, income, expenses, existing assets and liabilities, and so on. It then provides a question-naire to assess the user’s risk toler-ance level, specify important life goals, identify time frames to achieve the goals, and helps ascer-tain the corpus needed to achieve them. Based on the inputs, the pro-gram identifies the optimum asset allocation, recommends invest-ments across asset classes, and sug-gests life and health insurance cov-ers as well. It also helps in linking the user’s existing investments with different goals and points out if he is on the right track to achieve each goal. Apart from this, it provides tax planning tips and suggests changes in budget to save more.

Given the apparent ease of finan-cial management, should you opt for robo-advisers? Before you ar-rive at a decision, consider these benefits and drawbacks.

ADVANTAGESLow cost: The USP of robo-adviso-ry platforms is the significantly low-er cost compared with a human ad-viser. While the latter offer services for ̀ 15,000-25,000, or 1-2% of the client’s assets, a robo-adviser is much lighter on the wallet. Arthay-antra, for instance, charges as low as ̀ 1,000. Others, such as FundsIn-dia, Scripbox and MyUniverse, cur-rently charge no fee at all, relying on the commission earned by sell-ing mutual funds for their cash flow. BigDecisions earns its revenue from exclusive tie-ups with other

04 Cover StoryThe Economic Times Wealth, July 13-19, 2015

OPT FOR A ROBO-ADVISER IF YOU ...

PICK A HUMAN PLANNER IF YOU ...... cannot identify a

trustworthy human planner

or pay a high fee.

... do not have a large sum of money to

invest.

... are more comfortable

working with an individual than an

automated platform.

... want to have a higher degree of

involvement in your

investments.

... have important goals

to be met in immediate

future.

... seek comprehensive advice on tax optimisation, debt

consolidation, estate planning, etc.

... have a large amount of

investible money or multiple

assets.

... seek easy access to portfolio

management and are fine to

let it run on auto-pilot.

... do not have complicated

financial issues like repaying a big loan or setting up

a business.

... do not have an erratic

income flow.

WHICH ONE SHOULD YOU OPT FOR?Consider these factors to decide the one that suits your lifestage and financial status.

IS YOUR MONEY SAFE? Here’s why investors need not worry on this front.his front.

The portal does not have access to your funds; your account is linked to your bank account. So, when you place online instructions, the bank transfers the amount directly to the fund house. When you withdraw or redeem, the money is transferred directly to your bank account.

Investors can keep track of their money by verifying the authenticity of any transaction with statements from the mutual fund company and service provider.

If the portal closes down, your investments are not affected as all assets are held in your name (in funds, the folios are maintained by RTAs like Karvy and CAMS) and, hence, protected.

All portals make use of standard security protocols for online transactions.

service providers. Leveraging tech-nology allows these platforms to charge lower fees. A traditional brick-and-mortar adviser, on the other hand, has to cover the over-heads of running the business.

Easy interface & convenience: The robo-advisory platforms offer a very simple interface, which makes using these a breeze even for those who are not tech-savvy.

There is also a high degree of convenience associated with a robo-adviser at every stage. Com-pared with the vexing problem of identifying a competent and trust-worthy financial planner who is not merely a salesman, the task of locating a robo-adviser is easy con-sidering the limited number of players in the market.

Besides, they facilitate design, execution and maintenance of the portfolio or financial plan from the comfort of your home or office. You can initiate your investments without a physical visit to submit documents or meet the adviser. Scripbox, for instance, asks you to take a printout of the application form filled online at the time of registration, attach the required KYC documents and a cancelled cheque, and submit these via cou-rier at no extra cost.

It is also easy to keep track of in-vestments. The account provides a summary of all your investments, shows unrealised gains or losses, allowing for assessment of capital gains at any point, and also lists historical transactions. Switching between funds, rebalancing the portfolio and withdrawing money

is also hassle-free. Users are alerted if there are any changes needed in the portfolio, which can be execut-ed at the click of a button.

Limited bias and subjectivity: A big benefit is that it is not affected by biases that creep into human decision-making. A machine deter-mines your optimum asset alloca-tion simply by considering the numbers fed into it. It is unlikely to design a portfolio that is skewed to-wards any favourites or direct you to invest in flavours of the season.

The robo-adviser also does not succumb to emotions like greed or fear. No matter what the market situation, you can depend on it to provide logical advice. Sanjiv Singhal, CEO, Scripbox, says, “Advisers being human are also prey to biases which are often un-intended. Using rule-based, algo-rithmic approach offers a way to eliminate such biases from creep-ing into your advice.”

No asset size bias: For many you-ngsters with low net worth, it is not easy to find a good financial advis-er. A study by Wells Fargo—Wells Fargo Millennial Study 2014—re-veals that only 16% of millennials work with financial advisers. No wonder then that Aegon found in its 2015 Retirement Readiness Sur-vey that millennials were not as well prepared for retirement as older investors. This is where robo-advisers, with their low entry bar-rier, can step in. Being driven by technology, they have no qualms serving investors with small bal-ances. “Very few people have ac-

cess to a wealth manager, an indus-try that predominantly serves the wealthy. However, every Indian de-serves access to low-cost financial advice,” says Nitin Vyakaranam, Co-founder and CEO, Arthayantra. SHORTCOMINGSNo holistic solution: While robo-

advisers can help you design a portfolio and plan for goals, they cannot offer value-added services like traditional advisers. Though making an investment plan to meet goals is a key part of financial plan-ning, it is not the entire process. Budgeting, tax optimisation and estate planning are other impor-

tant aspects that are facilitated by traditional advisers. Arthayantra claims to offer budgeting and tax planning services, but not estate planning as yet. At the very basic level, the latter entails the creation of a will to ensure smooth transfer of assets to legal heirs if an individ-ual dies.

The Economic Times Wealth, July 13-19, 2015 05Cover Story

ROBO-ADVISERS: ENSURING

ADVICE FOR ALL

Robo-advisers have been a hot topic of discussion across the financial world.

In the US and other developed countries, they have made a seri-ous dent in the market and have been growing at a rapid pace. Wealthfront, Betterment and Nut-meg are some of the leaders in this space in the US and the UK, while across the world, robo-advisers are managing close to $20 billion. Customers too are adapting and switching to these services from traditional planners.

Robo-advisers essentially pro-

KEY BENEFITS OF AUTOMATED ADVICE

Robo-advisers democratise access to financial advice without discriminating customers on the basis of assets.

They offer cost-effective services which are affordable for everyone.

They provide goal-based approach to advice, instead of indiscriminate product selling.

Instant advice is delivered in real time without having to wait for weeks.

Same quality of advice is provided consistently across geographies and demographics.

Best practices from across the world are delivered to customers.

The best minds in finance can ensure that their thought process reaches the common man.

vide online, automated, algorithm-based, wealth management ad-vice. Unlike traditional wealth managers, they do not have a mini-mum investment requirement for providing advice. From someone wanting to invest just ̀ 1,000 a month to those ready to put in several lakhs, anyone can get

comprehensive and customised financial advice.

India has over 6.2 crore households with incomes of over ̀ 5 lakh per annum. All these people can save mon-ey and make investments. However, most of the wealth management and financial advisory services are geared to address the

needs of only 2 lakh high net worth individuals in the coun-

try. The disparity between indi-viduals who get financial advice

and the rest who are subjected to product sales is very wide. The problem is compounded by the fact that there are very few quali-fied financial advisers. For start-ers, there are only 2,500 certified financial planners (CFPs) in the country, making it impossible to service the crores of households that seek and need advice.

A large percentage of the Indian population is expected to be of working age in the next couple of decades. As the average household income rises, there will be a need for money managers and financial planners to direct the retail domes-tic populace towards effective sav-ings and investments. The massive gap in demand and supply of finan-

cial advice services in India can be bridged only through the use of technology. Robo-advisers are at the forefront of solving this prob-lem by delivering cost-effective, unbiased, customised, compre-hensive and high-quality financial advice to retail customers. They not only solve the problem of ac-cess to advice, but also address other important issues, such as lack of transparency and excessive product-centric approach, which consistently plague the financial services industry.

India, with its vastness, diversity and varying levels of financial awareness, offers several chal-lenges to robo-advisers. Due to their ability to increase awareness, such platforms can have a far greater impact in India than their western counterparts. They can lower the barriers and bring more retail customers to the financial markets, helping increase the market depth. Besides, service delivery in India will be different from those in the developed markets, where they do not offer much human interface. In the Indian ecosystem, robo-advisers would need to wed technology with human touch points.

Robo advisory is in its infancy in our country. However, the sheer scale of demand and lack of other credible alternatives will help it make it to the mainstream. For retail customers, this is a welcome change and a sure way to start securing their financial future with professional help, irrespective of their asset size.

NITIN VYAKARANAMCO-FOUNDER & CEO, ARTHAYANTRA

Lack of flexibility: A financial plan should evolve with changing cir-cumstances. Events like the birth of a child, termination of job, onset of major illness or death of a family member impact one’s finances and require an immediate course cor-rection. “A plan requires constant intervention as needs evolve over time,” says Mimi Partha Sarathy, MD, Sinhasi Consultants.

Robo-advisory services are ill-equipped to guide individuals through such changes. A tradition-al adviser, on the other hand, will be in a position to hand-hold the person and navigate a potentially rocky financial terrain. Srikanth Meenakshi, Co-founder and COO, FundsIndia, agrees: “Such events require human intervention to pro-vide the perspective in handling fi-nances in a changed scenario.”

Limited customisation: Most robo-advisers claim to provide tai-lor-made solutions based on risk profile. While this is true, there is a

limit to the extent of customisa-tion. A robo-advisory firm typically has a limited number of risk pro-files that are used to categorise cli-ents. These may not be perfectly suited to the user’s situation. For instance, someone nearing retire-ment may be directed to switch in-vestments to less risky debt instru-ments. This may be ill-ad-vised if the person has sufficient cash flow in the form of pension or interest income.

Hemant Rustagi, CEO of financial planning outfit WiseInvest Advi-sors, says, “Thumb rules are not applicable to everyone uni-formly. Personal circumstances may be different for investors with similar risk profiles.” However, FundsIndia’s Meenakshi contends that there is enough scope for cus-tomisation. “Risk tolerance is just one of the considerations for build-ing a portfolio. The user’s age and time frame for investing are given

more weightage in our platform.” Arthayantra claims to have hun-dreds of risk profiles based on al-gorithms that can pick 7,000 dif-ferent behavioural traits, enabling it to offer advice catering to people with varying personalities and fi-nancial situations.

SHOULD YOU PICK A ROBO-ADVISER?

The sheer convenience offered by these plat-forms at an incredibly low cost opens the door for ordinary investors, who would otherwise

struggle to get access to quality financial advice. As

Singhal says, “He is now in a posi-tion to do what only well-heeled in-vestors could.”

However, it will be difficult for robo-advisory platforms to earn the customers’ trust. After all, an investor is counting on a faceless entity to provide sound financial advice. It will be difficult for him to

be comfortable dealing with an adviser he cannot meet. Rustagi believes that lack of personal inter-face makes it a challenge. “In finan-cial advice, one cannot convert emotions into numbers. There is a need to sit across the table and dis-cuss the personal situation. While convenience is important, the quality of advice matters the most.”

Others do not agree. Meenakshi argues, “It would be wrong to as-sume that a robo-advisory plat-form is just a computer working on your finances. There is an underly-ing human intelligence driving the platform.”

Besides, in an industry where in-tegrity of advice is often question-able, automated platforms aim to introduce a high degree of trans-parency. Manish Shah, Co-founder and CEO, BigDecisions, says, “In-vestors want to take advice from someone who is not only high on knowledge quotient but can also be trusted to keep the consumer’s

interest above everything else. Au-tomated advisory platforms offer both in abundance.”

For now, the big gap in financial advisory services will ensure that robo-advisers get their share of at-tention from a section of investors. However, as personal investment needs evolve and assets multiply, a traditional adviser would act as a better guide. The investors who cannot access good quality finan-cial advice should consider these platforms as a starting point for in-vesting. At a later stage, they can approach a financial adviser for more sophisticated and custom-ised advice. Partha Sarathy says, “These platforms can get you start-ed on the process of financial plan-ning. However, step two of the pro-cess will require dynamic interven-tion where you can engage with a financial adviser.”

Don’t letpremiums

decide cover choice

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Please send your feedback to etwealth@timesgroup.com

06 Cover StoryThe Economic Times Wealth, July 13-19, 2015

Product launchesMUTUAL FUNDS

Reliance Mutual Fund has launched Reliance US Equity Opportunities Fund. The fund aims to provide long-term capi-tal appreciation by investing in the stocks of companies listed on US exchanges. A

portion of its portfolio will be invested in debt and money market securities. The new fund offer ends on 17 July.

Mirae Asset Mutual Fund has launched the Mirae Asset Prudence Fund. The scheme will invest in a com-bined portfolio of equity and equity related instruments and debt and money market instruments. The minimum investment is `5,000. The NFO closes on 22 July.

INSURANCEICICI Lombard has introduced Photo Quote, a feature on the ILInsure mobile app that lets customers generate premi-um quotes while renewing their motor cover—with ICICI Lombard or other insur-

ers—by uploading a picture of their existing policy docu-ment. The customer will receive a message with a premi-um quote and customer and vehicle information pre-pop-ulated. Premium payment completes the process.

BANKINGAxis Bank has launched Touch ID, a one-touch authentication for transactions through its mobile app for customers using Apple iPhone 5s and above. Cus-tomers can pay bills, recharge mobiles

and transfer funds with this feature. Once the customer’s fingerprint is set up on the Axis Mobile app, they can authenticate subsequent financial transactions by either using Touch ID or their mPIN.

ICICI Bank has upgraded its mobile banking app iMobile by enhancing the number of services on offer to 100. New services include the facility to link ICICI Bank rela-tionships using the app and make direct calls to the call centre without having to authenticate oneself.

PF withdrawals may be cappedMove to stop premature withdrawals will ensure social security for workers in old age.

Jim Rogers predicts further fall in gold prices

The government is planning to put a cap on premature with-

drawal of provident fund (PF) mon-ey. The move is aimed at ensuring social security for all in old age.

The Employees’ Provident Fund Organisation (EPFO) has proposed that an employee be allowed to withdraw only 75% of the overall kitty, instead of 100% as permitted under the existing Employees’ Provident Funds Scheme, 1952, in case of resignation from a job or for any other use before retirement.

The change, once implemented, will impact working people who tend to withdraw PF money be-tween jobs or those planning to use it for either buying a house or for paying medical bills or for chil-dren’s higher education or wed-

dings. “The provision of 100% withdrawal at any time is being misused to a large extent. The idea of a PF account is to ensure social security for workers in old age,” Central Provident Fund Commis-sioner K.K. Jalan said last week.

Meanwhile, to stem a possible exodus of subscribers to the NPS, the EPFO has proposed an increase in benefits from the Employee’s De-posit Linked Insurance Scheme (EDLI), benchmarking it to depos-its under the PF account. “EPFO is exploring options to incentivise subscribers to keep money in PF accounts,” Jalan said. “We want to enhance the insurance benefits un-der EDLI to 30 times the monthly wage as against 24 times now.”See Page 12

Around the time gold prices tumbled to a three-month low of ̀ 26,170 per

10 gm last week, commodities expert and investor Jim Rogers said he expects the yellow metal to fall another 15-20% this year. Asked if he would buy gold as safe haven, he replied in the negative. “I am not buying gold for a while, though I own gold. But if something happens then I might think of buying gold again,” he said in an interview.

Rogers also predicted that the lows in oil will continue. He said he was not optimistic about iron ore as well. He, however, did not rule out a buy for some of the other base metals.

Meanwhile, silver also recorded a steep fall of ̀ 1,550 to ̀ 34,450 per kg.

Govt taps into Rakhi gifts to increase financial inclusion

This Raksha Bandhan, brothers can gift their sisters a secure future in the form of

fixed deposits. The government will use the upcoming festival to propose a fixed deposit scheme which will deepen financial inclusion. The finance ministry has suggested a FD scheme to banks in which brothers can open an FD of at least ̀ 5,000 for their sisters. The government will add free life and accident insurance schemes to these deposits.

A senior banker aware of the developments says the scheme may be christened Uphaar Yojana or Raksha Bandhan Yojana. The government’s idea is to keep the Jan Dhan accounts active through these schemes and also encourage financial savings in the unbanked segments.

Airlines will not be allowed to charge domestic flyers for checked-in baggage weighing

up to 15 kg. The Directorate-General of Civil Aviation (DGCA) is set to issue an order to the effect. “If some air-line wants to offer flyers with no check-in bag a rebate, we have no problem. But they will not be al-lowed to charge extra for first 15 kg of check-in bags. A consumer-friendly move is welcome but nothing that goes against flyers’ interest will be al-

lowed,” said a DGCA official.Meanwhile, DGCA chief M Sathiya-

vathy is looking into recent increase in cancellation charges by some air-lines.

“I’ve never seen this kind of slump before. I don’t think anyone has.”DU CHANGCHUN

ANALYST, NORTHEAST SECURITIES, ON THE CHINESE MARKET CRASH

quote of the week

`33kcroreInvested by fund managers in equities and equity-linked saving schemes during the first quarter (April-June) of the current financial year.

Euro area finance

ministers’ meet

JUL 13Monday

Russia hosting BRICS summit

till 20 July

JUL 13Monday

Calendar

EU, US hold TTIP

negotiations

Monday

DEC

Friday

JUL 17

HANGING IN THE BALANCE

Workers changing jobs

People who tend to withdraw PF money between jobs

Those planning to use it for either buying a house or for paying medical bills or for children’s higher education or weddings

WILL AFFECT

The labour ministry is keen on the idea and hence a notification to this effect could be in place within this month

COMING SOONOf the 13 million annual claims pending with the EPFO, over 6.5 million claims are for 100% withdrawal

CURRENT COUNT

Airlines cannot charge for first15 kg of check-in baggage

The Economic Times Wealth, July 13-19, 2015 07Review Preview

via exports of goods or services. The concerns are two-fold: a weak-er euro will result in lower transla-tion of European revenues in ru-pee terms. And, the possibility of a spillover impact onto other Euro-zone countries could affect overall demand. Companies that have ma-jor operations in Europe are main-ly from the automobiles, auto parts and metals space.

Motherson Sumi has the biggest exposure to the region, with 20% of its revenues coming from Euro-pean subsidiaries. The company has a strong presence in the auto interiors and bumpers market. However, analysts are not per-turbed, since Motherson mostly supplies to Germany—a strong market. “A lower translation of rev-enues when converted into rupees is possible, but a weaker Euro could also help its European facto-ries become more competitive,” reckons an analyst from a reputed brokerage firm.

Bharat Forge, with nearly 40% of 2015 revenues coming from Eu-rope, is another auto parts player in the line of fire. Over the past few years, the firm has relied heavily on exports to the US and Europe to counter the domestic slowdown. The strategy has paid off hand-somely. However, the stock could remain under pressure in the near term owing to the impact of weak-er translation of euro revenues.

Bank of America Merrill Lynch has an “underperform” rating in the stock citing slower earnings growth and earnings downgrade hurting the stock price.

Europe is a key market for Apol-lo Tyres, with 30% of its consolidat-ed sales attributed to the region. It has been the highest margin-gener-ating geography for the company. Apollo is scaling up manufacturing capacity in Europe with a second plant, which would further drive up the region’s revenue share in the company. Given the strong vol-ume traction being witnessed from this geography, analysts remain positive on the stock.

Tata Motors has a significant presence in Europe through its JLR operations, with more than 80% of JLR volumes coming from this re-gion. Europe volumes have grown at a robust pace for the past three months. Analysts feel investors need not worry about turmoil in the region affecting JLR. “We don’t see any major demand disruption for the company given the strong product pipeline and long waiting periods. Also, a possibly weaker euro would benefit the company as it is a net importer,” insists Kapil Singh, Analyst, Nomura Securities.

Tour operator Cox & Kings is an-other stock in the limelight, since it derives a chunk of its revenues from its education and Meininger businesses in Europe. The compa-

ny could be affected by any curren-cy fluctuations amid turmoil in the region, but analysts say this would be off-set by the strong outlook on its core leisure business. Brokerage firm Sharekhan reiterates that the Eurozone concerns are already factored in its stock price. “We be-lieve the Eurozone crisis would only temporarily affect the educa-tion and Meininger businesses. Moreover, the outlook for leisure business remains strong.”

Among commodities firms, Tata Steel and Hindalco have exposure to Europe through subsidiaries Corus and Novelis, respectively. Both are likely to be impacted due to translation of subsidiary reve-nues on the back of a softer euro. At a time their domestic operations are also facing a slump, troubles from Europe could put more pres-sure on these stocks. A weaker euro could dent earnings of some export-oriented businesses in the software services space. Among IT services firms, TCS, Infosys, Tech Mahindra and HCL Tech have a quarter-to-one third of revenues from exports to Europe. Bank of America Merrill Lynch mentions in its report that the impact on these firms could be marginal at around 2% of earnings. Considering that there is a lot of uncertainty on the future of the Eurozone, investors would do well to put these stocks on their watchlist.

Companies in the auto space will fare better

Indian investors need not be too concerned about a weaker euro impacting the earnings ofcompanies dependant on the European economy.

Are firms with high Europe exposure in trouble?

COMPANY REVENUE FROM EUROPE P/E CMP (`) 1 WEEK

RETURN 1YEAR RETURN

Motherson Sumi Systems 80% 52.6 514.1 1.3% 46.1%

Cox & Kings 65% 49.7 269.3 14% 6.7%

Tata Steel 56% -7.4 297.5 0.6% -42.1%

Bharat Forge 40% 34.8 1074.0 0.3% 67.6%

Tech Mahindra 31% 17.3 471.3 -2.7% -10.5%

HCL Technologies 29% 18.2 938.8 0.8% 27.4%

Tata Consultancy Services 28% 25.8 2619.1 1.0% 6.9%

Apollo Tyres 28% 9.3 177.9 7.4% -10.3%

Infosys 24% 18.3 982.1 -0.8% 17.8%

Hindalco Industries 23% 23.9 107.3 -4.9% -36.5%

Tata Motors 82% 8.9 431.8 0.7% -6.8%

Data as on 7 July 2015 Compiled By ETIG DatabaseSOURCE: Bloomberg, company reports

SANKET DHANORKAR

With Greeks refus-ing to accept fur-ther austerity measures for an economic bail-

out, the country stares at a split from the world’s biggest monetary union, the Eurozone. The ramifica-tions of a Grexit are profound, fore-most being the likely hit on the euro. For Indians, there is the risk of capital flight from our markets to safer dollar assets. It could also cast a shadow on Indian companies with exposure to Europe. Will these companies feel the heat or are we worrying needlessly?

Stocks on the Europe radar

For several Indian companies, a sizeable chunk of revenues comes from Europe. This is either through operating presence in the region or

08 StocksThe Economic Times Wealth, July 13-19, 2015

nvestors, including the bestof fund managers, are proneto making mistakes. Smallinvestors, however, mainlybecause of their lack of

knowledge and understanding ofthe process of investing, commitmistakes which are even psy-chological in nature. On the oth-er hand professional investmentmanagers mostly make analyti-cal errors and rarely make mis-takes due to emotional reasons.

According to financial plan-ners, there are major areaswhere retail investors err whileplanning their investments.Firstly, when investment deci-sions are taken based on emo-

tions and not logic. Secondly, in-vestments are made under peerpressure. And thirdly, a largenumber of investors have thisnotion that a simple investmentsolution can not be the best so-lution and they look for complexsolutions even if the final out-come is barely different.

EMOTIONS WHILE INVESTING➜ Owning a house is consideredas a sign of financial success, de-spite several drawbacks for realestate as an investment product,its illiquidity being the top most.Although in India we do not seethis much, but several othercountries have witnessed depre-

COMMON INVESTINGMISTAKES BY INVESTORS

INVESTOR CONNECT INITIATIVE

I

Q EQUITY FUNDS GIVEN GREAT RETURNSOVER THE LONG RUN. THEN WHY DO

FINANCIAL PLANNERS ASK PEOPLE NOT TOPUT ALL THEIR MONEY IN EQUITY SCHEMES?

AEquity funds have been the best assetclass over long term. However, in the

short run equity market performance canbe very volatile. The performance of theequity market is cyclical in nature.Financial planners evaluate investor’s riskappetite and time horizon, and accordinglyadvise the amount of equity proportion inthe total portfolio.

Q SHOULD I STOP MY SIP IN A FALLINGMARKET?

ANever. The basic purpose of SIPs is toaverage out market volatility. Stopping

SIPs in a falling market is contrarian tothe original principles of SIP. Last 36years of sensex data show that equityinvestment made in worst times havedelivered the best performance. In afalling market, when the stocks areavailable at a discount, SIP helps in buyingmore units per rupee invested. Fallingmarkets are a “sowing season”. Therefore,sow during the falling market, and reapduring the booming market.

Q I HAVE INVESTED MY MONEY INDIFFERENT FINANCIAL INSTRUMENTS

BUT HAVE NO CLUE WHETHER IT WOULD HELPME IN THE LONG RUN. WHAT DO I DO NOW?

AThis happens mostly in the absence ofa written financial plan. In India, focus

on financial literacy is least. Investors canbe very adhoc in their approach and endup buying flavor of the season products.This creates a mess and the portfoliobecomes directionless. Investors shouldstrictly adhere to a goal-based investmentapproach. They should seek help of anexpert financial advisor to help draw thelong term financial path.

Q IN THE LONG RUN WE ARE ALL DEAD. IWISH TO HAVE SHORT TERM RETURNS.

PLEASE COMMENT.

A In 1923, renowned economist J MKeynes said “In the long run, we are all

dead”. He said so in context of urgent needfrom government to handle the short termunemployment crisis. But 92 years later,an investor repeating the same statementand asking for quick returns reflects greedand restlessness, a fashionable statementfrom a financial hippie. The fact is that welive long years and are survived by ourloved ones. When we are alive, we willhave some long term goals like housing,education, marriage and retirement. So,buying adequate term assurance andsetting goals for short term and long termis the responsible approach.

SAMEER RASTOGIof Saksham WealthSolutions, Delhi,answered some of thequeries by Swatantrareaders

ALL INVESTORS VETERANS AS WELL AS NEWBIES MAKE MISTAKES WHILE INVESTING.IT’S IMPORTANT TO LEARN FROM THEM

ciation in the value of real estate.Another example of being car-

ried away by emotions while in-vesting is investors inclinationto invest most of his money intoone asset class if that assetclass had performed well in therecent past. Although pure in-vestment logic says that if an as-set class has outperformed oth-er assets classes by a substan-tial margin, there is a highchance for that asset class tostart underperforming. If it is so,then the common sense shoulddictate one to allocate a smallerportion in that asset class,rather than a large portion.However, most investors usuallydo the opposite.

DEMONSTRATION EFFECT➜ People are often influenced byherd mentality. Often it happensthat a group takes some invest-

ment decision and thenanother person, close-

ly associated withthe same

group, repli-

derstand and keep track of aportfolio with simple strategies.

INVESTING FOR SAVING TAXES➜ Another common mistakeamong most retail investors is toprefer investments which savetaxes for them even if there areinvestment options that can givethem better post-tax returnsthan the tax saving ones. “Taxsavings products should be oneof the options, but it should nev-er be the first option or the onlyoption,” an official with a mutualfund house said.

Worse is when an investor in-vests in financial products fortax saving purpose only. Accord-ing to Sameer Rastogi of Sak-sham Wealth Solutions, such anapproach is a planning hara-kiri.“While government provides taxincentives on certain instru-ments, investing purely to availthat subsidy is a risky proposi-tion for the long term,” he said.

This leads to two scenarios ofgreat concern. According to Ras-togi, firstly, they end up wastingprecious money and time in unde-sirable and underperforming in-vestments. For example moneyback insurance policies are stillone the worst yet most preferredtax saving vehicles in India. Sec-ondly, in the long term, their per-sonal balance sheet will becomeilliquid as it would be biased to-wards physical assets. For exam-

ple, we have a large number ofold couples who have high prop-erty net-worth but insufficientbank balance to pay for their min-imum lifestyle and medical bills.“Tax saving is important, but abalanced goal oriented portfolio ismany times more important forjoys of life,” Rastogi said.

TIME AND GOAL➜ There are some other commonmistakes also that investorscommit, financial planners andadvisors say. One of them is tonot have any timeframe for aninvestment. Ideally all invest-ments should be done with agoal and a timeframe in mind.

cates that. This is done even ifthe last person’s risk profile andneeds for investments may bemarkedly different from the othermembers of the group. Here peerpressure plays a role in commit-ting an investing mistake.

SIMPLE VS COMPLEX➜ When a portfolio is construct-ed by an investment profession-al, he usually prefers to keep itsimple. However, most investorsfeel that a complex portfolio isbetter than a simple one for thelong term. So they look for aportfolio that would involve com-plex strategies, forgetting thatfor them it’s much easier to un-

ILLU

STRA

TION

:DEB

ASIS

H SA

RMA

10 StocksThe Economic Times Wealth, July 13-19, 2015

kets, including India. Just to put things in perspective, the recent Chinese slide has wiped out $3.2 trillion worth of market capi-talisation—twice the size of the entire Indian stock market. So, how scary is the ‘Chinese Scare’ for India?

Overall impact

A continued sell-off in China poses a much greater risk to Indian market than a potential Grexit. This is because the typical interplay between the Chinese and the Indian stock market may not be replicated this time. Usually, whenever one of the two has experienced a slump, the other has benefitted from higher money flows from foreign investors. “India could suffer from outflows if the sell-off in China continues,” says Vinay Khattar, Head, Research, Edelweiss. Experts say that if China coughs harder, emerging markets, including India, could catch a cold. Vikas Gupta, Executive Vice President, Arthveda Fund Management, says, “Global investors are not nuanced enough to distinguish between India and China in such an event. If the value of Emerging Market ETFs declines because of China, the resulting sell-off will also affect other emerging markets to some

NARENDRA NATHAN, SANJAY KUMAR SINGH AND SANKET DHANORKAR

Despite frantic efforts, the Chinese government has failed to rein in the country’s plummeting stock market. The Shanghai Compos-ite index has plunged more than

30% from its June 5 high, effectively signal-ling the start of a bear market.

The fall could have been perceived as a stock market correction in a bull market, but for the government’s panic-stricken steps. Measures such as restricting IPOs, banning in-vestors with more than 5% stake in a company and insiders from selling stocks for the next six months, and asking insurance companies and banks to buy shares to prop up the mar-ket have only added to the sense of panic. In another retrograde step, more than 1,400 of the 2,800 stocks listed on the Shanghai and Shenzen exchanges, in a bid to prevent a fur-ther sell-off, have asked that trading be halted. These steps, at best, can only postpone the fall. Refraining from artificial props could have helped the market find its natural bot-tom sooner. The stark contrast in the value of Chinese stocks listed in Hong Kong—popularly known as H shares—compared to those listed in China, reveals that the Chinese market will correct further in the coming weeks. On a one-year basis, Index H shares are up 7%, while those listed in China are still up 77%.

Experts say, in the past few months, China has seen the makings of a classic bubble. “The bubble was fuelled by easing of rules on margin funding (buying stocks by money borrowed from brokerages). It was driven by retail investors who have very little knowl-edge of the fundamentals of investing but were lured by the high returns, at a time when real estate and bank deposits are giv-ing negative or low returns,” says V.K. Vijaya-kumar, Investment Strategist, BNP Geojit Paribas. That bubble has now been pricked. Corrections tend to be very sharp when a debt-fuelled bubble bursts.

Just when Indian markets seemed to have shrugged off the ‘Greece scare’, they were greeted by the ‘Chinese scare’. And unlike the situation in Greece, a crash of this magni-tude in China is bound to impact global mar-

extent.” Swapnil Pawar, CEO, Karvy Capital, reckons that India could escape unhurt unless the China situation worsens. “If the rout deepens, then it could subdue interest in the entire emerging market basket,” he says.

A slump in the Chinese economy is bound to keep commodity prices benign, which is a big positive for the Indian economy. With do-

mestic inflation already on the lower side, a further drop in commodity prices will help reduce its import bill further and keep infla-tion subdued. This will increase the room for the Reserve Bank to carry out more rate cuts, which will boost the domestic economy. Go-pal Agrawal, CIO, Mirae Asset Global Invest-ments says, “Since India is a net importer of commodities, any softening in global com-

Great maul of ChinaAfter a spectacular bull run, Chinese markets fell off the cliff last month

3,500

3,000

2,500

2,000

1,500

1,000

17,000

15,400

13,800

12,200

10,600

9,000

1,475

2,609

10,341 11,107

SHANGHAI 50 INDEX (LHS)

HONGKONG CHINA ENTERPRISE INDEX (RHS)

With a big fall in the Hong-kong market as well, the panic is spreading to other markets.

SOURCE: Bloomberg

9 July 2014 8 July 2015

Why China should make you worryA continued sell-off in China poses a much greater risk to the Indian market than a potential Grexit.

The Economic Times Wealth, July 13-19, 2015 11Stocks

Adding to the slumpThe largest commodity consumer, China, is likely to pull down prices further.

-18.61

-9.00-8.06 -7.38 -7.22

Compiled By ETIG Database

SOURCE: Bloomberg

The fear has started spreading to commodities market also.

NICKEL CRUDE OIL TIN ZINC COPPER

1,350

1,300

1,250

1,200

1,150

1,100

1,050

1,000

Platimun has been the real casualty of the Chinese crash, even as other metals too have seen prices fall.

Metals are losing their sheenPlatinum prices have plunged more than 6% in the past one month.

1,233

1,158

1,223

1,032

9 Jan 2015 8 July 2015

GOLD

PLATINUM

Company PE PBVCMP

(`)Return since 5 June

1-year return

VEDANTA N/A 0.80 146 -20.05% -50.43%

HINDALCO INDUSTRIES 22.71 0.52 102 -15.28% -40.46%

TATA STEEL N/A 0.88 283 -8.89% -45.22%

TATA MOTORS 8.36 1.86 405 -8.46% -10.38%

STEEL AUTHORITY OF INDIA 11.72 0.56 59 -6.90% -33.37%

JSW STEEL 11.42 0.92 849 -3.19% -28.76%

Indian stock casualtiesCommodity, metal and firms with a high exposure to China are feeling the heat.

Data as on 8 July 2015 Compiled By ETIG Database

GS HANG SENG BEES

JPMORGAN GR CHINA EQ OFF-SHORE

MIRAE ASSET CHINA ADVANTAGE

8.37%9.84%

3.34%

-13.50%-10.97%

-17.40%

1-YEAR RETURNS

DECLINE SINCE 12 JUNE *

Turbulent timesChina-focused funds have witnessed a sharp correction over the past month.

Data as on 8 July, 2015.

modity prices bodes well for its external def-icit.” Khattar argues, “It is definitely a big positive for inflation and raises the possibil-ity of more rate cuts, especially if the mon-soon also comes through.”

Impact on commodities

Since most of the Chinese stocks are held by retail investors in China, there is a fear that the stock market crash may impact consum-er sentiment and further reduce the Chinese growth rate. China is the largest consumer of industrial commodities and, therefore, this panic has started spreading to the commodities market, especially metals. Though gold and silver have remained relatively stable during this crisis, experts are still bearish on them because the crash may lead to a jump in the U.S. dollar, which is bad for bullion as well. “We are neutral to bearish on gold in the short- and medium-term. The gold rally usually occurs when the U.S. gets into trouble. These crises will trigger a strong dollar and, therefore, keep gold sub-dued in the coming months,” says Kishore Narne, Associate Director, Motilal Oswal Commodities Broker.

The expected weakness in the rupee, however, may cushion domestic investors from this bearish trend in bullion. According to an ET poll of 14 market participants, Indi-an rupee may weaken to ̀ 64.50 to a dollar from ̀ 63.50, in the next three months. In addition to the unhedged positions of local

borrowers, the slide may also be due to some knee-jerk capital outflows, triggered by global events.

Then, platinum, which has crashed more than 6% during the last one month, falling to a 6-year low, is getting battered on both the fronts: low investment demand because of a strengthening dollar and low industrial de-mand because of weakness in a key economy like China. Platinum used to quote at a pre-mium to gold, but now trades $126 dollar be-low it—for 1 troy ounce (approximately 31 grams). So, should investors capitalise on the

low prices and shift from gold to plati-num? Experts advise against such a

move: “Platinum will continue to underperform gold, till there is a global recovery in the auto sec-tor,” says Narne.

Impact on stocks

As stated before, firms dealing in commodities are likely to suffer. Ve-

danta and Hindalco have lost more than 20% and 15% respectively in the past one month “The slump in the Chinese economy further kills any hope of recovery in the commodity prices for domestic metals firms,” reckons Anand Shah, Executive Di-rector and CIO, BNP Paribas Investment Partners. With domestic metals and mining companies already weighed down by exces-sive dumping by China and huge interest burden, the situation could worsen. Lower prices will hurt profitability and further af-fect these companies’ debt-servicing capa-

bilities. Earnings growth estimates for these companies could be revised downward. Al-ready, the BSE Metal Index has been the worst index performer on the bourses, un-der-performing the BSE Sensex. Stocks of Vedanta, Hindalco, JSW Steel, Tata Steel and SAIL will continue to feel the heat.

There is also a possibility that the Chinese administration will devalue its currency to boost exports and prop up the economy. In this event, companies from certain export-reliant sectors such as textiles and to some extent, electronic goods, will be impacted by cheap Chinese exports.

On the other hand, benign commodity prices will help keep input costs for con-sumption-oriented companies muted. This could aid in margin expansion in these busi-nesses, which could drive up stock prices. “Companies which use commodities as raw materials will benefit from lower inputs costs,” insists Gupta. Auto, FMCG, paints, chemicals and select auto parts companies are likely to benefit. Automobile manufac-turers would benefit from the decline in nat-ural rubber and crude oil prices, while FMCG players will get a boost from decline in palm oil derivatives.

The Chinese crisis may also impact com-panies that have a very high direct exposure to China, especially those entailing discre-tionary spending. For example, Tata Motors has a lot riding on China. With a 25% contri-bution to sales of its luxury car business, JLR, China is a crucial market for the compa-ny. Its sales are likely to be impacted.

CHINA-FOCUSED FUNDS: NOT ALL IS LOST

THE RECENT correction has already taken a toll on the net asset values of China-focused funds. However, experts advise not to panic and make sudden withdrawals. This is because the recent crash has brought down valuations of Chinese companies listed in Hong Kong (H shares) to reasonable levels now. “The H shares, which our mutual fund invests in, are trading at a discount to their long-term average,” says Supreet Bhan, Executive Director and Head-Retail, JP Morgan AMC. The price to earnings (PE) multiple of the Shanghai Composite Index, which reflects the Chinese companies listed on the Shanghai stock exchange, is currently at 13.3-times forward PE compared to its 10-year average of 16.1. The MSCI China Index, which includes H shares, is trading at a PE of only 9.2 compared to its long-term average of 11.8 (as on 7 July). According to Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors: “Had valuations of H shares been very steep, we would have advised investors to exit the market entirely. But that’s not the case at present.”

Investors should stay

calm and stay in cashPage 21

12 RetirementThe Economic Times Wealth, July 13-19, 2015

Sundeep SikkaPresident and CEO,Reliance Capital Asset Management

NoPremature withdrawal of retirement sav-ings is not in the interest of inves-tors. They should not be al-lowed to dip into these funds, and defi-nitely not with-draw the entire amount. The corpus helps build financial stability and is often the only support for the

20-25 years in retirement. After one stops working, one’s daily expenses and healthcare costs keep rising but the income from the investments does not increase. To provide a meaningful income to cover all ex-penses, the corpus should be suffi-ciently large. This makes it important to start saving early, invest regularly, and not withdraw the savings before the retirement age.

There is a high cost to be paid for breaking this long-term saving. If you put ̀ 5,000 per month into your re-tirement savings and earn 9% re-turns, at the end of 30 years the cor-pus would be ̀ 91 lakh. However, if the investor decides to withdraw even 50% of the corpus after 15 years, the final corpus would be reduced to `65 lakh. Premature withdrawals from the retirement savings would deprive investors of a sufficiently large corpus.

In India, there are few social secu-rity options and only a small seg-ment of the population is covered under these options. As India ages, this will put an enormous pressure on our government to cater to the healthcare and well-being of our el-

derly. When compared globally, In-dia’s retirement assets (to GDP ratio) is 15% as compared to other coun-tries like US (80%) and Japan (65%).

It is with this objective that the EPFO has proposed restricting with-drawals to 75% of the balance. The core purpose of a Provident Fund ac-count is to ensure social security for employees in old age. The Provident Fund money should be used only in dire need. Investors should not treat these retirement savings as a savings bank account. Allowing full with-drawals would defeat the purpose of retirement savings.

Jayant PaiCFP and Head of Marketing,PPFAS Mutual Fund

NoThe proposed cap on prema-ture withdrawal from the Provi-dent Fund has raised many hackles. This is partly because no one likes fet-ters imposed upon them, more so in a rau-cous democracy like India and es-pecially where money is in-volved. Your re-action may differ markedly, de-

pending on whether you are 22, 42 or 62. The 22-year-olds are likely to be dead against this proposal. For them, retirement is an eon away and com-pulsory contribution to the EPF is, at best, a necessary evil. To them, a cap on premature withdrawals, is equiva-lent to the proverbial red rag flutter-ing before an incensed bull.

A 42-year-old (like me) will see things differently. Most of us have al-ready made the mistake of withdraw-

ing prematurely, at least once in our career, and profusely regretted doing so, after frittering away the proceeds on, what then seemed vital expendi-ture, but in hindsight, turned out to rather frivolous. To us, the cap is a welcome development because we still have about 15-20 years to rebuild our Provident Fund corpus. If you are 62 now, and have been reckless in the past, you may be wishing that such a cap was in effect when you were in your 30s.

Certain professions are naturally prone to ‘job-hopping’. Financial services, advertising and now, e-commerce are prime examples. Em-ployees in these sectors will object to the capping because premature withdrawal is the default option for them. Less jumpy employees, in sec-tors such as the armed forces or PSUs may be more tolerant of this proposal.

The proposed cap is correct in-principle. Over the years, besides withdrawals on switching jobs, the EPF has often been used as a quasi ‘lender-of-first-resort’. The cap will compel members to seek alternate sources of funding. It may also nudge them to cut their coat according to their cloth.

The EPFO has taken several steps to make Provident Fund accounts more user-friendly and portable. The introduction of the universal ac-count number (UAN) will do away with the problem of shifting the money when you change jobs. The digitisation of records and online access will make it easier for inves-tors to check their Provident Fund accounts. The decision to invest some portion of the corpus in equi-ties could result in higher returns in future.

The EPFO should devote time and money to explain the features and benefits of the scheme to the public at large. Once it is perceived as a long-term solution, offering competitive tax-free returns, Provident Fund in-vestors may resist the urge to raid the till at the first opportunity.

Ashok SinghNational Vice-President, INTUC

YesAny restriction on the withdraw-als from the Provi-dent Fund is not in the interest of the workers. The money belongs to the workers and they should be able to access it during a financial emergency. The government, which has not contributed even a single rupee to

the corpus, has no right to deny workers access to their own money.

Having said that, I agree that with-drawals should only be allowed in ex-treme circumstances. To that end, the EPFO should set up a mechanism to assess the applications for with-drawals. Internet connectivity has made this task easier. The worker can email his application along with sup-portive documents. If the need is gen-uine and the employee is facing a cash crunch, he should be allowed to withdraw up to 100% of the amount.

There is also the new rule of de-ducting TDS on withdrawals, which is also going to hurt the interest of the workers. There should not be any TDS on Provident Fund withdrawals. Investors only withdraw their Provi-dent Fund when they are in dire need of money. Taxing the withdrawal at that stage will add to their problems.

One of the reasons that the NPS has not taken off is that there were too many conditions attached. The cor-pus could not be withdrawn before the investor turned 60. Some of these conditions relating to withdrawals have recently been relaxed but the rules need to be liberalized further. I firmly believe that social security for all should not merely be a slogan but transform into a reality.

Should one be allowed to dip into retirement funds?

In a bid to discourage premature withdrawals from the Provident Fund, the Employees’ Provident Fund Organisation has proposed to limit the withdrawals to 75% of the balance. At the same time, the National Pension System (NPS), which used to be an airtight investment, has become more flexible and permitted withdrawals for certain specified needs. ET Wealth reached out to experts to know whether employees should be allowed to dip into their retirement savings prematurely.

“The savings are meant to fund your retirement. They should not be treated as a savings bank account.”

“Capping withdrawals will prevent investors from blowing away their savings on frivolous expenses.”

“It is the workers’ money and they should have access to it for tiding over contingencies.”

The Economic Times Wealth, July 13-19, 2015 13Financial Planning

Greece should set the alarm bells ringing for the individual borrower. If you haven’t learnt already, start right now.

...but take these precautions to avoid glitches in monetary transactions.

What the Greek crisis taught us

You can still fly to Greece

PREETI KULKARNI

Last week’s developments are not exactly all Greek to even those who do not track international mar-kets closely. The nation

faces bankruptcy if a bailout deal with EU countries, particularly Ger-many, is not reached soon. Do not dismiss the unfolding drama as an inconsequential event in a faraway place.Here are five lessons to learn from the crisis in Greece.Don’t borrow what you can’t re-

pay: The simple thumb rule to fol-low while taking fresh loans is: will the cumulative EMI of all your loans exceed 50% of your take-home salary? “If the answer is yes, you would be better off not bor-rowing, even if it means postpon-ing purchase decisions,” says Harshvardhan Roongta, CEO, Roongta Securities. In fact, being over-leveraged could result in just temporary ownership of objects of your desire; worse, you may have

to part with your more valuable possessions too. “When you are deep into loans, you may lose the items you really value due to the loans you took for items that could have been avoided,” says Suresh Sadagopan, Founder, Ladder7 Fi-nancial Advisories.Watch out for potential debt

traps: The future of Greece hinges on existing lenders continuing credit support. Many individuals too tend to borrow loans or use credit cards to repay existing loans. Many obtain personal loans to re-tire their high cost credit card debt. However, being unsecured debt, personal loans too charge a higher interest rate ranging from 15-25%, which means that total dues will not shrink in a hurry. Worse, if you choose to pay just the minimum amount due on your credit card every month, you will avoid the de-faulter tag, but you will get entan-gled further in the debt trap. In such cases, it’s best to borrow against assets and clear the loans.

Don’t be too optimistic: Hefty pay packages are the norm in sev-eral sectors today, even in the mid and junior levels. However, over-confidence can be your Achilles’ heel, jeopardising your financial plans. It’s best not borrow on the basis of your estimation of future income and career prospects. “Many take loans for cars and use their credit cards recklessly, run-ning up huge bills in anticipation of a 20% increment or a job switch that will yield better salary. They could land in trouble if things do not go as per plan,” says Roongta. Keep tabs on credit history: Credit scores are part of the loan el-igibility evaluation process. Issued by companies like CIBIL, Equifax and Experian, credit reports con-stitute a record of your loans and repayment track record. A CIBIL report rates borrowers on a scale of 300-900, with 900 indicating a high level of creditworthiness and 300 pointing to the reverse. You need to monitor your credit profile

RIJU DAVE

As debt-ridden Greece considers new bailout pro-posals, it faces one of its worst finan-

cial crises. You, on the other hand, are probably grappling with one of your own if you have booked a vacation to the coun-try this summer. While you

don’t have to cancel the trip just yet, consider these

cautionary steps before catching your flight.

Greece continues to remain depend-

ent on tourism, so it’s unlikely trav-ellers will be sub-jected to severe

hardship, but the financial con-

straints can’t be

wished away. The banks are like-ly to remain closed across the country till 14 July, as an-nounced by the Greek govern-ment. While there is no limit on the amount of cash you can withdraw from your (foreign) bank’s ATM—Greece Tourism Ministry has stated that restric-tions on withdrawals do not ap-ply to foreign tourists—it is high-ly probable that the machines will run dry. “So be prepared for problems with dispensing of cash from ATMs due to long queues and depletion of cash,” says Sharat Dhall, President, Yatra.com.

While you can use debit or credit cards at bigger hotels and car rental companies, smaller restaurants and shops may not accept them or levy extra charge, or even insist only on cash. In such a scenario, it is best

to carry a mix of cash and debit, credit or prepaid cards. In fact, travel experts recommend car-rying more euros in cash to tide over any contingency. Says Dhall: “Our advice is to carry a substantial amount of euros, enough to cover all likely expen-ditures and a bit more as a safety measure. You should also raise the credit limit of your cards in case there is an emergency re-quirement.”

There are also reports that parts of the country may face shortages of food and medical supplies, so stock up on dry ra-tion and medicines to last the entire trip, taking into account any delays. If you’ve done prior bookings, the main thing to wor-ry about is unplanned strikes which may lead to flight and fer-ry delays. “So far, though, tour-ism hasn’t been impacted and

local airlines are operational for people to travel within the coun-try,” says Dhall. Still, make sure you carry sufficient travel and medical insurance in case you are stranded.

On a positive note, you are likely to strike very good bar-gains with hotels and resorts as visitors opt out and bookings re-duce. This also means that ho-tels will go out of their way to make your stay comfortable and ensure there are no glitches. Be-sides, the weakening euro means you could land cheaper, never-before deals compared with last year, and shopping could be much less expensive too.

So if you like to spice up life, book a ticket to Greece, but to be on the safer side, opt for a pack-aged tour instead of planning your own itinerary.

50%YOUR TOTAL EMI OUTGO SHOULD NOT EXCEED HALF OF YOUR NET TAKE HOME SALARY

39-44%ANNUAL RATE OF INTEREST CHARGED BY CREDIT CARD ISSUERS ON THE AMOUNT OUTSTANDING

90%PERCENTAGE OF CREDIT SANCTIONED BY BANKS TO BORROWERS WITH A CREDIT SCORE OF OVER 700

700CREDIT SCORE THAT BANKS CONSIDER TO BE ‘GOOD’

by obtaining the reports from these companies, or at least before applying for a loan. Live within your means: Nobody has ever landed in trouble for being conservative when it comes to spending. Impulse purchases offer

momentary pleasure, but a cause a lot of pain when the credit card bill lands. If the latest gadget means us-ing your credit card without ade-quate money in your account to pay the bill, resist the temptation—you will thank yourself later.

14 InsuranceThe Economic Times Wealth, June 13-19, 2015

Policies with the lowest premium or those with a basket of benefits may not always be the best option for you. Here’s how you can make an informed choice.

Don’t let premium decide your health insurance

PREETI KULKARNI

If you knew that getting medi-cal bills reimbursed from your insurer is likely to fetch you half the sum compared to a cashless claim settlement, it is

unlikely that you will opt for the for-mer. But when it comes to selecting a policy, buyers often forget to keep such crucial facts in mind. So,

here’s a checklist you need to tick before you buy health insurance.

Your requirements

The type of health insurance policy you need may not be the same as that of your neighbour. Your policy should be determined by your fam-ily’s needs. The number of family members and their age is crucial to identifying a policy. For instance, a

young family can do with a basic cover of ̀ 5 lakh, while a family with senior citizens should opt for a larg-er floater cover, say experts. If the parents are too old, it may be pru-dent to get a separate cover for them, and not include them in the floater plan. Then, you need to be careful when opting for a maternity cover as part of your health insur-ance policy. If you are planning a

Please send your feedback to etwealth@timesgroup.com

Premium and plans

Experts say one should neither fo-cus on buying the cheapest policy nor one that offers a plethora of benefits. The emphasis should sim-ply be on whether a policy fulfils your requirements. Several health insurers have come out with pre-mium variants that offer services like doctors’ second opinion, vac-cination cover, wellness benefits, etc. “Paying higher premiums for benefits you may never use is not advisable,” says Laddha. Also, it is not advisable to buy a high-end cover merely for availing tax bene-fits. You can always invest in other tax-saving schemes that offer great-er rewards.

Cashless hospital network

According to the Insurance Regula-tory and Development Authority of India, the average claim payout in case of reimbursement settle-ments is just half that of cashless claim disbursals for the same ail-ment category. Even though insur-ers dispute this, you must find out about an insurer’s network of hos-pitals that offer cashless claim set-tlement. The information is usually available on the insurer’s website. “Taking the reimbursement route could strain your finances and, in extreme cases, even impact the quality of treatment you choose,” says Laddha. Opting for the cash-less facility also saves you the trou-ble of collating all the documents, submitting them to the insurer and following up.

Insurer’s track record

An insurer’s experience, financial strength and service record is also crucial. “An insurer with a lower claim settlement ratio may spell trouble,” says Laddha. If possible, you also need to take into account solvency margins—an insurer’s abil-ity to pay out claims—and premium growth registered by insurers. The number of years an insurance com-pany has been in business is also worth considering. “Its expertise in health insurance will be reflected in the types of policies. An insurer with a wider range of products may be a better choice,” adds Laddha.

baby within two years’ time, you will be better off without the mater-nity cover which comes with a long waiting period and almost doubles the policy premium.

Limitations and exclusions

Once you have shortlisted policies based on your specific require-ment, go through the fine print to understand the limitation and ex-clusions of the plans. Most basic plans carry sub-limits for specific treatments. For instance, hospital room rent restrictions. Ordinarily, a ̀ 5-lakh cover could restrict the daily room rent to 1% of the sum in-sured. Currently, this may get you a private room, unless you insist on high-end corporate hospitals, and you need not stretch your resourc-es to buy a premium variant, with-out a room rent sub limit.

“However, if you prefer access to high-end hospitals with better rooms, then plans with room rent sub-limits will not work for you,” says Arvind Laddha, CEO, Vantage Insurance Brokers. Also, given healthcare inflation, a few years from now, these room rent sub-limits may not even suffice for the not so high-end hospitals. “With such restrictions, it will become in-creasingly difficult to get private rooms. All the other expenses are linked to room rent eligibility, bringing down your entire claim el-igibility,” says Mahavir Chopra, Di-rector, Health Insurance and Per-sonal Accident, Coverfox.com.

No co-pay health insurance optionsCOMPANY PRODUCT RESTRICTIONS PREMIUM

APOLLO MUNICH Optima Restore No room rent limit, no co-pay `15,054

HDFC ERGO Health Suraksha No room rent sub-limit, no co-pay `13,607

BHARTI-AXA* Smart Health Insurance No room rent limit, no co-pay `12,307

APOLLO MUNICH Easy Health - Standard No room rent limit, no co-pay `12,660

STAR HEALTH Family Health Optima Single AC Room^, no co-pay `13,876

RELIGARE HEALTH Care, NCB Super Single private room^, no co-pay `13,398

IFFCO TOKIO Swasthtya Kavach Room rent limited to `5,000 per day, no co-pay `7,033

#For a `5-lakh family floater health policy covering a 35-year-old individual, spouse and two kids; premiums could vary as per the plan variant chosen.

SOURCE: Coverfox.com ^ Cheapest private room in the hospital chosen

The Economic Times Wealth, July 13-19, 2015 15Mutual Funds

Has the first year of the new government pro-vided enough reasons to look forward to higher growth in the coming years?The focus of the government has been on simplifying administration and improving ef-ficiency, the impact of which will be evident in years to come. We have seen positive poli-cy changes in mining, defence and railways and more recently a pick up in capital spend-ing, which should support an initial recovery of the investment cycle. Private capex, how-ever, is yet to see a significant pick up and therefore, growth recovery is likely to be gradual. In 2015-16, we expect a GDP growth of 6.9% y-o-y and a modest acceleration to 7.3% in 2016-17. The most important legisla-tion that can drive growth higher is the GST Bill, but that still needs to go through.

How are current market valuations placed with growth expectations reset?

benefit from government focus on capital spending as well as the ongoing changes in the distribution channels for consumer goods in the country.

Where would you avoid placing bets now? Metals and real estate are the two sectors that we remain cautious on as we expect con-tinuing price weakness in this sector. The former due to global overcapacity and the latter due to still leveraged balance sheets, are unlikely to deliver the earnings that the street currently forecasts, and there might be further negative earnings revisions.

To what extent will China’s inclusion in the MSCI emerging market index hurt flows into India? I believe the decision for inclusion of China A Shares in the MSCI EM Index is under evalua-tion, but no decision has been made so far. Also, our understanding is that the inclusion factor of China A shares in the MSCI Emerg-ing Markets would be subject to positive mar-ket liberalisation developments in China and would be a gradual process. The various country weight adjustments are a normal process and while there are short-term flow impacts, in the long-term, the structural sto-ry of India remains the key driver of the allo-cations that global investors make to India.

Do you believe the Greece debt situation has been allowed to drag for too long with stop-gap measures? Is another bailout the right solution for the long run? With the events unfolding over the last few days, we are now probably moving towards a more longer term outcome on Greece. Post the 5 July referendum wherein 61% of the Greek voters rejected the existing reform and restructuring plans of the EU, the risk of a Grexit has increased somewhat, but our central scenario still remains that a deal will be reached between Greece and its credi-tors. The Greek government has been given one last chance to submit a comprehensive list of new reform and fiscal proposals to support its application for a new rescue package by 10 July. In addition, a summit of all 28 EU member states would meet on 12 July to discuss the new Greek proposals and their acceptability. The less likely event of a Grexit would certainly cause short-term un-certainty and volatility in financial markets, but should be met with policy easing by ECB and ultimately economic and financial con-tagion should be limited.

We are currently trading at close to a 10-year historical average valuation (15x 2015-16 and 13x 2016-17 estimates), which is reasonable in our view. The political premium has now faded and the earnings reset caused by the sharp erosion in commodity prices is also factored in. More importantly, while bench-marking to historic valuation, one needs to be cognisant of the changing composition of the profit mix of the Sensex/Nifty. The profit weight of some of the high ROE, high multi-ple sectors such as consumer, automobiles, pharmaceuticals and IT has almost doubled since 2007-08, while the profit share of the cyclical sectors (which typically trade at low multiples) such as metals and energy has contracted significantly. The valuations therefore, are unlikely to fall to historic lows and may appear to be on steep compared to history, purely because of the greater share of high multiple sectors in the index today.

In light of the weak March quarter show, how soon do you expect corporate earnings to pick up? While we have seen earnings downgrades over the last few quarters, there is a signifi-cant divergence amid sectors. The compa-nies which benefit from benign commodity prices have actually witnessed earnings up-grades, while large parts of the downgrades have been driven by the materials or the en-ergy sectors. In the next few quarters, we are likely to see even more divergence in earn-ings of companies within the same sector. In-vestors will have to be extremely bottom up in their focus, and the ability to generate al-pha would completely depend on picking up companies that can continue to deliver posi-tive earnings momentum.

Do you think the clamour for further rate cuts by RBI to support growth is justified? After the last rate cut, we are now expecting a pause from the RBI. The rate cuts already delivered are yet to be fully transmitted into the system. Also, the risk of a pick-up in food inflation, given the extreme weather condi-tions witnessed in several parts of the coun-try, as well as the impending rate hike by the Fed, would limit the central banks’s ability to cut rates in the near term.

Which sectors are looking particularly at-tractive from a 2-3 year perspective? Structurally, consumers—both staples and discretionary, pharmaceuticals as well as se-lect financials offer attractive growth oppor-tunity for longer term investors. We are also positive on select product companies in the industrial sector as well as those linked to lo-gistics, ports, railways or defence. These

“We are cautious about metals and real estate”

While the country’s growth

recovery is expected to be gradual,

there are sectors that are already

looking attractive for investors

seeking good returns in the long

term , Toral Munshi tells

Sanket Dhanorkar.

Toral MunshiHead of India Equity

Research in Private

Banking and Wealth

Management,

Credit Suisse

Please send your feedback to etwealth@timesgroup.com

BHARAT CHANDA

Learn & Keep16 The Economic Times Wealth, July 13-19, 2015

The secret mantra for building wealth in the stock markets is simple — there is no secret mantra. All you need is discipline, patience and the courage of conviction. In this race, the slow and steady tortoise always wins over the fleet-footed hare.

BUILD WEALTH IN SMALL STEPS

One share may seem too small an investment to make a meaningful impact on your portfolio’s returns. But if you bought one share of blue-chip companies such as Infosys, HDFC Bank and Larsen & Toubro every month starting July 2010, your investment of `4.55 lakh would be worth `6.92 lakh today. Plus you would have also received `18,543 in dividends. We show you how much you would have accumulated in five years. All investments were made on the first trading day of each month. is the returns of

the worst performing tech fund in the past five years. Infosys has given only 11.4%

If you bought one share of these blue-chips every month since July 2010, you would have accumulated:

If the same funds were invested in the corresponding sector funds, the gains would have been bigger:

THE POWER OF ONE

While staggered purchases of these blue-chip stocks gave high returns, they could not beat mutual funds. If, instead

of buying one share every month, an equal amount was put in the best

performing sector fund, the investment would have yielded higher returns.

BUT MUTUAL

FUNDS DID BETTER

STOCK INFOSYS HDFC BANK LARSEN & TOUBRO TOTAL

Average investment `2,883 per month `3,215 per month `1,492 per month `7,590 per month

Number of shares 228 300 78

Invested amount `1.73 lakh `1.93 lakh `89,522 `4.55 lakh

Present value `2.23 lakh `3.26 lakh `1.42 lakh `6.92 lakh

Dividends received `10,465 `5,748 `2,330 `18,543

Net gains `61,017 `1.39 lakh `54,999 `2.55 lakh

Total returns 11.39% 24.81% 18.20% 18.75%

After 1:5 stock split in July 2011, bought 5 shares a month.

A 1:2 bonus in July 2013 pushed up the number of shares.

Two 1:1 bonuses have multiplied the number of shares.

15.7%

are returns of Kotak PSU Bank ETF in the past five years. It earned `13,990 compared to `1.64 lakh earned by the best fund.2.75%

FUND ICICI PRU TECH FUND ICICI PRU BANKING & FINANCIAL SERVICES

FRANKLIN BUILD INDIA FUND TOTAL

SIP amount `2,883 `3,215 `1,492 `7,590

Present value `3.07 lakh `3.57 lakh `1.95 lakh `8.59 lakh

Net gains `1.34 lakh `1.64 lakh `1.05 lakh `4.04 lakh

Total returns 23.03% 24.80% 31.50% 23.06%

MORE THAN SIP IN INFOSYS

`73,149 MORE THAN SIP IN HDFC BANK

`25,469 `49,945MORE THAN SIPS

IN BLUE-CHIP STOCKS

`1.49 lakhMORE THAN SIP

IN LARSEN & TOUBRO

NET WORTH OF SINGH

Aakash Vinod Singh, with his mother,in Mumbai.

-`1.96 lakhApproximate net worth

Asset Current value (`)

EPF 68,000

Stocks 25,000

Cash 11,000

Total assets 1.04 lakh

Liabilities Current value (`)

Education loan 3 lakh

Total liability 3 lakh

Singh’s cash flow

InflowTotal monthly

income`60,000

OutflowTotal monthly

expenses`45,000

Funds needed to achieve goals

GoalTime to achieve(years)

Future cost (`)

Resources usedFurther investment (`/month)

Emergency fund 2 2.7 lakh Cash, stocks 10,000

Education 2 1 lakh - 7,971

Education 3 1 lakh - 3,823

Retirement 28 9.2 crore EPF 13,650*

Investible surplus needed 35,444

Additional insurance cost 4,556

Total 40,000

Surplus -

All the goals will start after one year when Singh has repaid his education loan.

* Singh will need to invest `42,027 for this goal, but since he doesn’t have sufficient funds, he can start with `13,650 from next year and increase it as per the availability of funds.

Returns assumed to be 13% for equity and 8% for debt. Inflation assumed to be 8%.

A comprehensive plan has been mailed to Singh.

I want to know the basics of financial planning and how to build a corpus for studying further after a year.” AAKASH VINOD SINGH

Aakash’s income`60,000

Household expenses `20,000

Surplus`15,000

Educationloan EMI `25,000

18 Family FinancesThe Economic Times Wealth, July 13-19, 2015

RIJU DAVE

Aakash Vinod Singh is clueless about financial planning. At 28, this can be perceived as both a shortcoming and advan-tage. The drawback is that he

has a bare portfolio, with a neglible corpus to show in terms of savings, investments and net worth. He doesn’t know where to invest or how to reach his goals. The good thing is that at this early stage, it has made him seek professsional advice. Another positive is that he is clear about his goals and wants to be prepared to meet them. “I want to know how one can start financial planning from scratch, especially if one hasn’t taken any steps till now,” says Singh. The Fincart team has taken up the task of his financial educa-tion and answering his query. It will formulate a plan that will not only act as a guideline for him but also help him secure his financial future.

Existing financial statusSingh is salaried and stays in Mumbai with his parents, aged 55 and 60 years. He is sin-gle and has no immediate plan of marrying. In fact, he is planning to study further after a year to boost his career prospects. He is cur-rently bringing in a salary of ̀ 60,000 per month and is saving barely ̀ 15,000. A big chunk of his expenses, ̀ 25,000, goes into repaying an education loan of ̀ 3 lakh that he has taken. Besides this, ̀ 20,000 is used for household expenses.

As for his portfolio, he has ̀ 11,000 in his bank account, ̀ 25,000 invested in stocks and another ̀ 68,000 in the EPF. However, given the loan, his net worth is currently in the negative. Nevertheless, Singh wants to start planning for his goals, which include amassing funds for higher studies next year, saving for his future child’s education and wedding, as well as his own retirement. However, to begin with, the Fincart team will assess his family’s insurance needs and recommend changes.

Insurance portfolioSingh has not secured either his life or health though he has been planning to buy a term plan. Hence, Fincart suggests that he purchase a ̀ 1 crore term plan immediately, and it will cost him ̀ 10,056 a year in terms of premium.

As for a medical policy, he should consid-er buying health insurance worth ̀ 3 lakh for himself and his father, which will invite

a premium of ̀ 16,949 per annum. He should also opt for a diabetic plan worth ̀ 4 lakh for his mother, who suffers from dia-betes, and this will come at a higher price of `27,668 a year. This will result in a total pre-mium of ̀ 4,556 a month. Since he won’t have enough funds to buy all these immedi-ately, he should consider the health plans after a year when he has repaid his educa-tion loan.

Road map for the futureBefore Singh can start planning for his goals, he should get rid of his education loan by prepaying it in nine months. He can do so by increasing his EMI from the exist-ing ̀ 25,000 to ̀ 35,000. This means that till the loan is repaid, he will be left with a sur-plus of only ̀ 4,162 after accounting for the term plan premium. Hence, he will have to defer all his goals by one year.

Considering the fact that he has absolute-ly no buffer for emergencies, Singh should focus on cobbling together a contingency fund at the earliest. According to Fincart, he should have a corpus equal to six months’ expenses, which will amount to `2.7 lakh. For this, he should assign his cash holding of ̀ 11,000 and stock value of `25,000. Besides this, he should start in-vesting the surplus of ̀ 4,162 in a short-term debt fund to build the emergency corpus. To make up for the shortfall, he will have to invest another ̀ 10,000 for 16 months in the same fund.

Next, Singh wants to do a two-year

Aakash Singh needs to cover his risks and will have to push back some of his goals to be able to accumulate funds for all his primary objectives in later life.

course, starting next year, to boost his ca-reer. He will pursue this while continuing with his job. For this, he wants to accumu-late ̀ 1 lakh for each year. However, Fincart advises that he put off this goal by another year till he repays his loan. He will then have a surplus of ̀ 39,000. He can start an SIP of `7,971 in an arbitrage fund and will be able to amass the required amount in one year. For the additional ̀ 1 lakh he requires in the subsequent year, he should start another SIP of ̀ 3,823 in the same fund. This will help him save for the course.

Singh plans to get married after he finish-es the course and is settled in his career. When he does, he wants to save for his fu-ture child’s education and wedding. For the former, he has estimated a need of ̀ 46.6 lakh in 20 years, and for the latter, ̀ 1.36 crore in 25 years. However, these goals are likely to be pushed back by a couple of years. To meet the education goal, he will need to start an SIP of ̀ 6,549 in a diversified equity fund, while for the wedding, he should start an SIP of ̀ 10,905 in the same type of fund. He can start making these in-vestments after two years, when he has built the contingency fund and amassed the corpus for first year’s study.

Finally, he wants to save for retirement in 28 years. For this, he will require ̀ 9.25 crore, and will have to start an SIP of `42,027 in a diversified equity fund. Howev-er, he doesn’t have the required funds and, hence, should start with a sum of ̀ 13,650 from next year onwards. To this, he can continue to add the increase in income and any funds that are freed up after the com-pletion of his goals. He should also consider reviewing his financial position after he completes his course, which can result in an increase in income, and take required ac-tion at that time.

Staggered plan will help iron out irritants

WRITE TO US FOR EXPERT ADVICE

Looking for a professional to analyse your investment portfolio? Write to us at etwealth@timesgroup.com with ‘Family Finances’ as the subject. Our experts will study your portfolio and offer objective advice on where and how much you need to invest to reach your goals.

Financial planning by FINCART

SINGH’S GOOD MOVES...

Boosting earning prospects by studying further.

Seeking financial advice.

Starting early with financial planning.

AND THE BAD ONES...

Not buying any life or health insurance plans.

Not saving or investing aggressively.

Not aligning investment with financial goals.

ASSET ALLOCATION

EXISTING

24%Equity

11%Cash

100%Cash

65%Debt

RECOMMENDED

The Economic Times Wealth, July 13-19, 2015 19Family Finances

The content on this page is courtesy Centre for Investment Education and Learning (CIEL).

Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

1LTA can be claimed as a deduction from tax-able income where the employer provides LTA to employee and leave application has been made for a holi-day either individually or with family.

2The deduction is limited to the extent of actual travel costs incurred by the employee. The total cost of the hol-idays is not covered, only the travelling cost is covered.

3Travel has to be undertaken within India only. Overseas destinations are not covered for deduction.

4The tax rules provide for a deduction only in respect of two journeys performed in a block of four calendar years. The blocks are decided by government. They are 2010-2013, 2014-2017 and so on.

5If the employee does not use their exemp-tion during any block, the exemption can be carried over to the next block and used in the calendar year immedi-ately following that block.

THE MONEY QUESTIONShould one give a child pocket money or start a savings account?

Points to note� Each file to be uploaded should not

be more than 1MB in size.

� The file format for upload documents can be only pdf, jpg, jpeg, png, bmp and gif file.

Paper Work

DigiLockerThe government has launched a digital locker system—DigiLocker—which acts as a dedicated and secure personal stor-age space of up to 1 GB, linked to a per-son’s Aadhaar number. It can securely store e-documents and one can digitally e-sign documents using this facility. The e-documents can be shared easily with registered requester agencies or govern-ment departments. The DigiLocker will minimise the use of physical documents and provide authenticity of e-documents. It will provide secure access to govern-ment-issued documents. It will also reduce administrative overheads of gov-ernment departments and agencies.

SMART THINGS TO KNOW: Claiming LTA deduction

PortalTo sign up for the DigiLocker service, one can access the following portal:

https://digitallocker.gov.in

Valid AadhaarA valid Aadhar number is a prerequisite to register for the service. It is also recommended to have your mobile number registered in the UIDAI (Aadhaar) records for easier registration.

Sign upThere are two options for authentication—OTP and fingerprint. OTP can be used only if your mobile number is registered with UIDAI. On entering OTP and clicking on the “Validate” button, the user is taken to Set username/password page to complete sign up. For fingerprint option, you will have to put your thumb impression on the fingerprint device. If the fingerprint is valid, then the user is taken to Set username/password page to complete sign up.

Upload documentsOnce the registration process is completed, the user can upload documents under ‘My Documents’ section. Important identity, age proof documents, examination certificates (SSC, HSC, Graduation etc) can be uploaded from the user’s local machine to the digital locker. Based on the document type selected, the user needs to fill in the other details relevant to the document. On successful upload, the document will be listed under ‘Uploaded Documents’ section.

A bank account can take money lessons much far-ther than pocket money and enable better man-agement of personal finances as an adult. A bank account may be able to take away the drudgery of writing down accounts, and replace

it with review and tracking that can be exciting to a child.Tracking the account balance and finding it increasing or

decreasing is likely to not only get young children excited, but may also help them introspect about their spending and sav-ing habits. The pocket money can be credited to his account on a monthly basis, along with any gifts or earnings. Moreo-ver, he will be able to see how money can be put to work by keeping it in a bank account and how it earns interest income.

The minor-operated bank accounts come with various checks and balances that the parents can put in place. In or-der to keep a tab on spending, daily and monthly spending limits and withdrawal limits can be set on debit cards. Sohail and his wife can choose the account depending on how much transaction limit they want their child to be exposed to and make the spending limit known to him. They can also check the passbook or an online account summary of their child fortnightly to understand where and how much has been spent. They can take him through the schedule of charges be-fore opening the account and explain the situations when these can be levied. They should tell him about the need to maintain a minimum balance. All these would inculcate a sense of monetary discipline in the child.

Children of Sohail’s son’s age can start saving their cash in-flows into these account which keeps their money safe, pro-vides interest and allows them to withdraw money up to a lim-it through a debit card. Such savings accounts will prove to be the stepping stone for discussions on investment options and other financial concepts, which can be gradually introduced over the coming years.

Sohail’s son is 10 and wants pocket money. As parents, Sohail and his wife feel that giv-ing him pocket money would help him learn money management. They want to follow the usual practice of parents giving their children pocket money and telling them to meet their expenses with that, in turn edu-cating them about saving, budgeting and dealing with money. However, Sohail’s advis-er recommends a savings bank account for the child to educate him about money. Sohail wants to know if such accounts are indeed helpful in teaching children about finance?

20 Financial PlanningThe Economic Times Wealth, July 13-19, 2015

The Economic Times Wealth, July 13-19, 2015 21Financial Planning

We like change even as we secretly love the comforts of the status quo. Strange are the ways of change—it comes using different tac-

tics each time. When it comes with huge force, as with war, it breaks status quo and enables a fresh start. Seeds of a crisis creep in, beginning innocuously and then gaining momentum, ruthlessly altering status quo, catching us unawares. The meltdown of the Chinese market is a full-blown crisis, which can impact investors worldwide.

The Chinese markets ran up in the last 15 months, with unprecedented participation by locals (3 crore new trading accounts were opened since January 2015). The opening up of margin trading, or the facility to borrow from finance companies to buy stocks, fuelled this bubble. Frenzied buying of IPOs ensued even as simple households turned stock speculators, many mortgaging homes to buy stocks and turn rich. The col-lapse of this bubble is playing out now, with the markets having lost more than 30% and falling.

We are also seeing the most aggressive market intervention by any government, to stall the falling stock prices. After proclaim-ing just two years ago that China would in-creasingly allow market forces to work free-ly, the government is now claiming that the sell-off in its markets is harmful, and unsuc-cessfully clamping down on sellers. In a cri-sis, people will sell whatever they can. Se-lective bans simply extend the sell-off to other assets. After losing face in trying to calm its markets, it is unknown how China would react to the fury of its people who overestimated its government’s might.

China’s market crash will bring into the open several weaknesses in our intercon-nected world. Commodity prices have been falling and are likely to get worse. The im-pact on commodity-based economies such as Australia, Russia and Latin America, can be intense. The collapse of commodity pric-es will hurt Latin America the most, due to already existing vulnerabilities—low growth rates and falling exports. Tough times call for decisive action, which these govern-ments are unable to make, given the low popularity of their leaders. A full-fledged commodity crisis is staring at us.

Low economic growth in the Asian econ-omies, including India, is old news. China has been slowing down from its awe-induc-ing growth rates, and so have the rest of the Asian economies. In the aftermath of the global financial crisis in 2008, Asian export-ing nations faced a serious fall in demand for goods. In a role-reversal, they turned into importers of capital goods from devel-oped countries, thus helping the latter’s

but not entirely prevent depreciation. Those who think that gold is the asset to

run to in a crisis should remember the fol-lowing: Gold has been accumulated since 2009 and is over-weighted in most portfoli-os and therefore more likely to be liquidat-ed than further accumulated. In an envi-ronment of appreciating dollar and falling commodities, gold is more likely to fall than rise.

To ask about where to invest is foolhardy. Asset classes across the board will fall when global investors scramble for liquidity. Cri-ses like these will spread across the world, and alter status quo in a manner we cannot imagine. Staying calm is better than ventur-ing into the storm with bravado. It is a bless-ing to still have a job, income and a democ-racy. There are times when investors should be quiet and stay in cash. These are those times.

The crisis in China is bound to have an impact on India and the rest of the world. Ordinary investors should count the small blessings and ride out the storm with calm, says Uma Shashikant.

Investors, keep quiet and stay in cash

The author is Chairperson, Centre for Investment Educationand Learning.

limping revival. Japan’s revival rode on Chi-nese imports and the Eurozone and Ameri-ca pinned their hopes on export of capital goods to Asia, especially China. If China’s capital investment machine comes to a halt due to its capital market crisis, the deflation-ary pressure on the world will be huge.

The crisis in the Eurozone and the mat-ters in Greece pale in comparison to the size and impact of the Chinese collapse. But these events only point out the fragilities of the global economy that is ill-prepared for another shock. If Greece does not exit, the Eurozone will see resources being spent on bad debts, than on economic revival. If Greece exits, and the Euro still survives with one more round of steep depreciation, the member nations do not have a world with growing demand for its exports to make the most of the fall. Nor is it clear how Greece will pull itself out of the brink. The scary sto-ry of other weaker Euro members such as It-aly, Portugal and Spain facing the heat should Greece exit, will have to be dealt with.

Global economic revival cannot be engi-neered by liquidity alone, but needs revival of investment and consumption demand.

The US is best placed for this turnaround in its economic growth, but is also not moving at a pace it would have liked. At a time when it likes to push its own exports, its currency has become the safe haven of global inves-tors, leading to a sharp appreciation in the dollar. As the Chinese crisis deepens, it can only expect more inflow of global capital.

How do these events affect Indian inves-tors? We should desist getting smug. Global crises will impact our economic growth and corporate profitability anyway. Yes, we are an importing nation that will benefit from low commodity and oil prices. Yes, we are domestic consumption-driven and do not export much. Yes, we have a decisive gov-ernment that can act in a crisis. But a global crisis will channel itself through a demand for liquidity. Investors will liquidate risky as-sets when uncertainty increases. A sell-off in Indian equity and debt markets is very likely as the Chinese story plays out. This will put the rupee under pressure. We do not earn the dollars we need for our im-ports, but depend on global capital to fill the gap. An astute RBI has built reserves aggres-sively and delayed the interest rate cuts. It is in fighting position to defend the currency,

Oil India 1 1 421.80 26.10 38.49 9.85 1.19 2.44 0.24 1.21 0.76 41 4.59

Sobha 2 2 374.85 24.45 42.20 15.40 1.51 1.89 0.36 1.79 0.94 29 4.76

ONGC 3 4 298.70 6.62 53.29 14.07 1.43 3.05 0.27 1.28 1.14 47 4.40

LIC Housing 4 5 452.20 52.26 41.71 16.39 2.90 1.03 0.39 1.57 1.52 48 4.54

South Indian Bank 5 3 24.25 18.21 56.20 10.66 0.91 2.49 0.19 1.31 0.93 22 4.00

CESC 6 6 567.20 23.99 245.43 36.89 1.26 1.41 0.18 1.73 1.02 30 4.10

NIIT Tech 7 7 384.65 15.32 91.11 20.97 1.77 2.35 0.20 1.59 0.35 29 3.90

PGCIL 8 9 137.00 24.77 35.23 14.24 1.87 1.45 0.60 0.88 0.73 44 4.66

Tata Motors 9 10 397.80 16.78 44.71 9.26 2.30 0.49 0.22 1.37 1.14 55 4.75

JK Cement 10 11 623.55 34.61 89.91 30.62 2.72 0.48 0.34 1.48 1.04 26 4.68

JK Lakshmi 11 8 336.35 34.35 68.50 38.42 2.96 0.60 0.50 1.62 0.73 31 4.74

PTC India 12 12 70.45 16.33 35.59 8.12 0.68 2.85 0.25 1.69 1.67 19 4.68

Jagran Prakashan 13 14 121.00 24.25 30.94 16.38 3.34 2.53 0.55 1.09 0.43 23 4.61

Grasim Industries 14 13 3,516.65 18.77 47.24 18.58 1.40 0.60 0.36 1.04 1.21 32 4.50

Oriental Bank 15 16 179.30 11.38 164.05 10.87 0.39 1.89 0.07 2.06 1.87 19 3.68

Tata Chemicals 16 15 442.55 6.95 70.18 19.05 2.05 2.28 0.27 1.14 1.20 15 4.67

Yes Bank 17 21 799.80 29.02 29.78 16.35 2.88 1.13 0.62 1.45 1.44 59 4.38

Coromandel International 18 18 238.30 14.88 41.09 17.07 3.12 2.66 0.30 1.26 0.43 17 4.18

Hindalco Industries 19 19 104.00 8.47 224.50 24.96 0.56 0.98 0.11 1.73 1.42 39 3.67

IL&FS Transportation 20 20 140.95 21.84 11.21 9.87 0.61 2.80 0.41 1.54 0.73 18 4.39

HSIL 21 25 341.70 19.05 77.97 26.65 1.88 0.87 0.40 1.58 1.41 17 4.65

State Bank of India 22 24 267.75 15.09 27.22 11.87 1.25 1.31 0.47 1.28 1.48 58 4.36

Cadila Healthcare 23 22 1,901.40 24.42 97.23 33.73 9.13 0.48 0.35 1.26 0.60 43 4.02

Crompton Greaves 24 23 180.95 10.45 144.31 23.87 2.98 0.67 0.18 1.83 1.13 41 4.00

Indiabulls Housing 25 26 620.85 68.13 26.61 11.38 3.35 5.54 0.52 1.37 1.25 11 4.64

Prestige Estates 26 29 240.20 30.54 55.57 26.73 2.39 0.61 0.48 1.83 1.38 24 4.17

IndusInd Bank 27 28 893.00 33.31 82.76 26.08 4.41 0.39 0.76 1.13 1.16 57 4.32

Escorts 28 30 130.90 13.02 102.21 20.66 0.89 0.45 0.21 1.79 1.58 10 4.60

Cox & Kings 29 NR 266.95 0.40 357.63 43.31 1.75 0.38 0.14 1.51 0.85 14 5.00

Maruti Suzuki 30 36 3,935.65 22.45 39.15 31.24 4.89 0.30 0.77 0.88 0.70 59 4.66

Greaves Cotton 31 42 127.65 10.55 100.67 37.63 3.82 1.54 0.27 1.33 0.85 17 4.06

DB Corp 32 33 331.95 15.72 29.50 19.41 4.77 2.33 0.67 1.10 0.51 22 4.82

Power Finance Corp 33 38 257.05 24.45 9.95 5.65 1.05 3.41 0.57 1.84 1.70 33 4.12

Magma Fincorp 34 27 90.50 16.50 40.92 10.31 0.98 0.87 0.41 1.73 1.58 10 4.90

Chambal Fertilizers 35 39 58.35 2.82 21.88 8.26 1.08 3.27 0.37 1.50 0.90 11 4.55

Hero MotoCorp 36 32 2,604.75 13.65 33.39 21.96 7.94 2.35 0.66 1.07 0.40 58 3.93

DLF 37 35 116.85 20.65 63.25 38.71 0.72 1.72 0.52 2.63 1.09 26 3.27

HDFC Bank 38 41 1,074.05 28.84 21.25 24.26 4.25 0.75 1.08 0.79 0.78 60 4.62

J Kumar Infra 39 31 786.30 38.96 51.36 24.50 3.17 0.49 0.57 1.67 1.12 15 4.27

Ramco Cements 40 43 339.95 16.12 85.83 33.31 3.12 0.29 0.39 1.35 0.65 24 4.26

Glenmark Pharma 41 48 1,037.15 27.24 133.10 59.42 9.41 0.20 0.46 1.39 0.84 34 4.26

Motherson Sumi 42 45 502.60 25.78 95.44 51.61 13.39 0.50 0.54 1.40 0.89 32 4.31

Ultratech Cement 43 40 3,103.05 24.94 62.03 40.43 4.46 0.29 0.63 1.26 1.06 53 4.08

Mahindra & Mahindra 44 17 1,264.00 10.45 33.60 23.97 2.91 1.09 0.66 1.23 0.94 49 4.12

Godrej Properties 45 47 248.85 33.35 48.42 25.78 2.67 0.79 0.58 1.18 0.96 19 3.26

Kalpataru Power 46 37 268.45 15.10 82.88 34.57 1.87 0.57 0.41 1.87 1.38 19 4.37

Tech Mahindra 47 44 474.30 23.12 19.27 17.05 3.71 1.06 0.75 1.45 0.41 57 3.77

Axis Bank 48 49 571.70 24.71 19.62 18.07 3.01 0.69 0.88 1.32 1.60 63 4.60

Unichem Laboratories 49 34 209.35 18.36 56.34 25.19 2.19 0.98 0.45 1.56 0.86 13 3.77

IRB Infrastructure 50 NR 227.60 33.20 16.88 14.04 1.85 1.73 0.96 1.72 1.51 33 4.21

G R O W T H % *R A N K P R I C E ` V A L U A T I O N R A T I O S R I S K R A T I N G

Current Rank

Previous Stock Revenue Net Div Downside Bear No. of Consensus Rank Price Profit PE PB Yield PEG Risk Beta Analysts Rating

Least Expensive StocksThe 5 stocks with the lowest forward PE.

Power Finance Corp

PTC India

Chambal Fertilizers

Tata Motors

Oil India

5.65

8.12

8.26

9.26

9.85

Best PEGsTop 5 stocks with the least price earning to growth ratio.

Oriental Bank Cox & Kings

Hindalco Industries

0.14

0.18

CESC

0.180.07

0.11

See PEG column in the adjacent table.

See PE column in the adjacent table.

Fast Growing StocksTop 5 stocks with the highest expected revenue % growth over the previous year.

Indiabulls Housing

LIC Housing

J Kumar Infra

JK Cement

JK Lakshmi

See revenue column in the adjacent table.

68

52

39

35

34

ET WEALTH TOP 50 STOCKSEvery week we put about 3,000 stocks through four key filters and rate them on a mix of factors. The end result of this

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

Dividend stocks are considered safe stocks during a downturn.

Figures indicate what an investor can earn as dividend for every

`100 invested.

Income GeneratorsTop 5 stocks with the highest dividend yield.

Indiabulls Housing | 5.54

Power Finance Corp | 3.41

Chambal Fertilizers | 3.27

ONGC | 3.05

PTC India | 2.85

Crompton Greaves

MethodologyThe four filters used to arrive at the Top 50 stocks

Only traded stocks: Of the about 7,000 listed stocks, only actively traded stocks were considered.

Only big stocks: Only companies with an average market capitalisation and revenue of over `1,000 crore were con-sidered.

Only well tracked: We picked stocks that are tracked by at least 10 analysts.

Only profitable and growing: We considered only those stocks that are

expected to show growth in revenue, net profit and EPS (earnings per share) in the in the next four quarters. The final two filters were that the companies should have made profits in the past four quar-ters and have a positive net worth.

Rating rationale

Having arrived at the final stocks uni-verse, we ranked them using the follow-ing four principles.A percentile rating (on a 1-100 scale) is given to each parameter and the com-posite ranking is arrived at using the weighted average of these parameters.

1. Growth is the key... Total weight: 30%, which comprises

10% weight to revenue growth, 10%

weight to net profit growth and 10% to growth in EPS (the higher, the better, for each parameter). Growth is calcu-lated by comparing the ’consensus estimate’ for the next 12 months with the historical 12-month values.

2. ... but only at reasonable valuation. Total weight: 40%, which comprises

10% weight to PE ratio, 10% to PB ratio, 10% to PEG ratio (the lower, the better, for all three parameters) and 10% to dividend yield (the higher, the better).

3. Analysts’ views matter... Total Weight: 20%, which comprises

10% weight to the total number of analysts covering the stock (the

higher, the better) and 10% to consensus rating (a composite rating based on the recommendations by all analysts who track a stock. Again, the higher, the better).

4. ... and so do the risks. Total weight: 10%. Two kinds of risks

were considered. A 5% weight was assigned to downside risk and bear beta each (the lower, the better, in both cases).

The ranking methodology has been developed by Narendra Nathan. A detailed explanation of the methodology is available at www.wealth.economictimes.com

* The figures under this head are for expected growth. NR: Not in the ranking. Data as on 9 July 2015. Source: Bloomberg Least RiskyTop 5 stocks with the lowest downside risk.

Hero MotoCorp1.07

Maruti Suzuki0.88

Grasim Industries

1.04

HDFC Bank0.79

PGCIL0.88

See downside risk and bear beta columns in the adjacent table.

22 Smart StatsThe Economic Times Wealth, July 13-19, 2015

smart statsIn

ThisSection

Mutual funds 23

Loans & deposits 26

Alternate investments 27

ET Wealth collaborates with Value Research to identify the top-performing 100 funds across 10 categories. Equity funds and equity-oriented hybrid funds are ranked on 3-year returns while debt-oriented hybrid and income funds are ranked on 1-year returns.

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

LAGGARDS & LEADERSTaking a long-term view of fund returns, here is a list of 10 funds

in each category—five leaders (worth investing) and five laggards

(that may be a drag on your portfolio).

ICICI Pru Focused Bluechip Equity Inst.

15.357.21

8

8.08

8.17

UTI Equity Fund

ICICI Pru Focused Bluechip Equity Reg.

UTI Opportunities Fund

L&T India Large Cap Fund

Sahara Super 20 Fund

HDFC Large Cap Fund

IDFC Imperial Equity Fund

HSBC Dynamic Fund

14.92

14.41

14.04

12.75

BNP Paribas Equity Fund

16.614.92

6.22

8.44

8.55

8.83

Mirae Asset India Opportunities

Franklin India Prima Plus Fund

ICICI Pru Indo Asia Equity Fund Inst.

ICICI Pru Indo Asia Equity Fund Reg.

16.52

16.38

15.81

15.8

LAGGARDS LEADERS

Equity: Large cap 5-year returns

Equity: Large & Mid cap 5-year returns

Equity: Multi cap 3-year returns

Equity: Mid & Small cap 3-year returns

Hybrid: Equity oriented 5-year returns

Franklin India High Growth Companies

34.7616.48

16.9

17.58

18.02

18.03

L&T India Value Fund

Birla Sun Life Advantage Fund

Tata Ethical Fund

BNP Paribas Dividend Yield FundHDFC Core & Satellite

Birla Sun Life Dividend Yield Plus

Birla Sun Life Asset Allocation

Birla Sun Life India Reforms

Principal Dividend Yield

32.54

28.8

27.21

26.34

SBI Small & Midcap Fund

42.8514.39

19.74

20.42

20.85

22.27

SBI Magnum Midcap Fund

Franklin India Smaller Companies

DSP BlackRock Micro Cap Fund

Mirae Asset Emerging Bluechip Fund Motilal Oswal MOSt Shares M100 ETF

Sundaram Equity Multiplier

HSBC Progressive Themes

Templeton India Equity Income

Sahara Star Value Fund

40.38

40.35

38.29

37.77

ICICI Prudential Balanced Fund

16.56.37

6.78

8.65

9.28

9.35

Tata Balanced Fund

HDFC Balanced Fund

ICICI Prudential Balanced Advantage

Franklin India Balanced FundLIC Nomura MF Balanced Fund

DWS Equity Income Fund

LIC Nomura MF Unit Linked Insurance

Sundaram Balanced Fund

LIC Nomura MF Children Fund

16.34

15.88

14.54

14.16

Annualised returns in % as on 9 July 2015.

Sundaram Select Focus Fund

8.21

Goldman Sachs CNX 500 Fund

SBI Contra Fund

Sahara Growth Fund

Sundaram Growth Fund

JM Core 11 Fund

R E T U R N S ( % )VALUERESEARCHFUND RATING

EXPENSE RATIO

NET ASSETS

(` cr) 5-YEAR3-YEAR1-YEAR6-MONTH3-MONTH

Equity: Large CapIDBI India Top 100 Equity Fund ����� 155.57 -3.2 7.9 26.76 23.57 — 2.84

UTI Equity Fund ����� 4,195.95 -4.04 3.32 20.73 23 14.92 2.2

Axis Equity Fund ���� 1,735.22 -3.29 0 15.28 22.61 12.18 2.32

DWS Alpha Equity Fund ���� 97.87 -3.44 4.36 21.43 21.98 10.79 2.86

Religare Invesco Business Leaders Fund ���� 37.00 -4.15 5.95 23.46 21.98 11.97 3.02

DWS Alpha Equity Fund ���� 97.87 -3.43 4.37 21.44 21.96 10.8 2.86

L&T India Large Cap Fund ����� 368.29 -2.77 5.12 21.89 21.72 12.75 2.76

JP Morgan India Equity Fund ���� 257.50 -3.59 5.05 21.95 21.58 12.6 2.56

ICICI Prudential Focused Bluechip Equity Fund ����� 8,889.91 -4.05 2.14 15.94 21.57 14.41 2.19

Kotak 50 Regular Plan ���� 732.59 -3.38 5.25 22.96 21.19 11.57 2.61

UTI Top 100 Fund ���� 835.55 -5.19 4.26 21.64 20.97 12.65 2.62

SBI Magnum Equity Fund ���� 1,414.45 -4.15 3.2 20.43 20.25 12.13 2.42

UTI Mastershare Fund ���� 3,065.84 -5.98 2.7 19.53 20.2 12.07 2.3

Tata Pure Equity Fund ���� 824.09 -2.75 4.83 18.75 19.78 11.43 2.63

Franklin India Bluechip Fund ���� 6,294.83 -2.59 4.89 20.98 19.04 12.24 2.2

L&T Indo Asia Fund ����� 261.63 -3.44 5.54 17.88 18.96 12.09 2.54

UTI Opportunities Fund ����� 5,330.34 -6.05 -0.66 13.37 18.82 14.04 2.18

Peerless Equity Fund ���� 56.43 -0.57 5.8 19.28 18.71 — 3.13

ICICI Prudential Top 100 Fund ���� 1,653.76 -7.6 -2.77 6.63 18.61 12.57 2.36

Equity: Large & Mid CapSBI Bluechip Fund ���� 1,938.83 -2.4 8.84 27.17 26.93 14.63 2.39

Franklin India Flexi Cap Fund ����� 2,605.05 -3.1 4.22 28.53 26.76 15.11 2.31

SBI Magnum Multiplier Fund ���� 1,481.35 -1.45 9.7 29.26 26.75 14.19 2.47

Franklin India Prima Plus Fund ����� 4,223.68 -2.54 5.2 32.24 26.57 16.38 2.29

Kotak Select Focus Fund Regular Plan ���� 2,666.89 -2.74 3.05 28.45 26.51 15.09 2.24

Mirae Asset India Opportunities Fund ����� 1,078.35 -2.85 5.27 23.31 26.44 16.52 2.4

BNP Paribas Equity Fund ����� 720.71 -3.1 7.52 26.71 25.74 16.61 2.62

Birla Sun Life Long Term Advantage Fund ���� 297.43 -3.38 2.08 22.35 25.69 14.04 2.79

Birla Sun Life Frontline Equity Fund ���� 9,023.78 -2.93 3.97 19.8 24.73 14.31 2.21

Birla Sun Life Top 100 Fund ���� 1,529.26 -2.84 2.11 18.44 24.56 15.24 2.47

Religare Invesco Growth Fund ���� 135.42 -3.48 7.23 26.23 24.53 14.15 2.78

ICICI Prudential Indo Asia Equity Fund ����� 155.91 -3.93 4.37 20.35 24.2 15.8 2.71

HSBC India Opportunities Fund ���� 480.14 -4.05 3.03 20.12 23.36 14.36 2.63

Edelweiss Diversified Growth Equity Top 100 Fund ���� 85.10 -3.15 6.44 22.96 22.98 14.23 2.85

Equity: Multi CapFranklin India High Growth Companies Fund ����� 2,593.08 -3.29 4.15 39.09 34.76 18.89 2.45

L&T India Value Fund ����� 234.58 -1.78 6.9 30.97 32.54 17.56 3.03

Birla Sun Life Advantage Fund ���� 447.69 -2.5 7.05 29.83 28.8 13.54 2.77

Tata Ethical Fund ����� 304.85 -3.32 7.49 26.77 27.21 15.55 2.97

BNP Paribas Dividend Yield Fund ���� 142.41 -0.66 8.85 28.48 26.34 15.56 2.82

L&T India Special Situations Fund ���� 949.19 -2.15 5.23 24.98 24.83 15.23 2.53

Mirae Asset India-China Consumption Fund ���� 35.14 -5.95 2.06 24.02 24.27 — 2.77

Equity: Mid & Small CapSBI Magnum Midcap Fund ����� 972.47 1.58 12.08 43.87 40.38 21.69 2.54

Franklin India Smaller Companies Fund ����� 2,187.35 -4.04 3.68 36.5 40.35 21.86 2.45

DSP BlackRock Micro Cap Fund ���� 1,972.31 -2.52 9.33 49.65 38.29 20.44 2.41

Mirae Asset Emerging Bluechip Fund ����� 729.38 -0.31 8.56 40.61 37.77 — 2.5

UTI Mid Cap Fund ���� 2,902.11 -2.05 5.85 40.23 37.57 20.5 2.36

Reliance Small Cap Fund ���� 1,571.00 -2.62 -0.77 31.66 37.32 — 2.49

JP Morgan India Mid and Small Cap Fund ���� 451.22 -1.98 9.47 39.31 37.05 20.87 2.54

Canara Robeco Emerging Equities Fund ����� 473.77 -1.2 7.72 40.54 36.68 22.46 2.93

BNP Paribas Midcap Fund ����� 304.40 2.02 11.18 38.23 35.47 21.77 2.83

Franklin India Prima Fund ���� 3,516.09 -2.71 4.32 36.77 35.36 19.57 2.31

Religare Invesco Mid N Small Cap Fund ���� 423.81 -3.7 4.91 33.21 34.64 21.41 2.74

Religare Invesco Mid Cap Fund ���� 109.15 -3.45 4.74 34.64 33.37 20.44 3.06

SBI Magnum Global Fund ���� 1,992.32 -3.02 7.35 37.08 33.04 19.91 2.4

L&T Midcap Fund ���� 325.45 -3.1 5.53 34.5 32.98 17.31 2.89

HDFC Mid-Cap Opportunities Fund ���� 9,980.24 -2.59 3.17 31.08 31.7 20.75 2.28

ICICI Prudential Value Discovery Fund ���� 9,416.54 -5.03 4.71 27.83 31.58 19.39 2.23

24%The 3-year return of IDBI India Top 100 is the highest in its category.

27%The 3-year return of SBI Bluechip Fund is the highest in its category.

35%The 3-year return of Franklin India High Growth Companies Fund is the highest in the multi-cap category.

The Economic Times Wealth, July 13-19, 2015 23Smart Stats

Canara Robeco Emerging Equities Fund

ICICI Prudential Value Discovery Fund

Sundaram Select Midcap Fund

UTI Mid Cap Fund

SBI Magnum Global Fund

22.35

22.31

21.28

21.19

20.19

Top 5 SIPsTop 5 equity schemes based on 10-yr SIP returns.

SIP: Systematic investment plan % annualised returns

Franklin India Monthly Income Plan

ICICI Prudential MIP 25

UTI MIS Advantage Fund

IDFC Monthly Income Plan

SBI Magnum Monthly Income Plan

13.10

12.96

12.85

12.71

12.41

Top 5 MIPsTop 5 MIP schemes based on 3-year SWP returns.

As on 9 July 2015

As on 9 July 2015

SWP: Systematic withdrawal plan % annualised returns

PPFAS Long Term Value

Fund

Escorts Leading Sectors

Fund

DWS Mid Cap Fund Series 1

Escorts Growth

Fund

DSP Black-Rock Micro Cap Fund

Mid & Small Cap Cash Holdings28.85

20.30

11.079.09 8.93

R E T U R N S ( % )VALUERESEARCHFUND RATING

EXPENSE RATIO

NET ASSETS

(` cr) 5-YEAR3-YEAR1-YEAR6-MONTH3-MONTH

ETW FUNDS 100

Equity: Tax PlanningAxis Long Term Equity Fund ����� 5,129.74 -4.87 5.64 33.35 33.49 21.58 2.46

Reliance Tax Saver Fund ���� 4,448.14 -5.47 -0.09 25.35 29.87 18.25 2.45

IDFC Tax Advantage (ELSS) Fund ����� 345.83 -2.74 11.26 31.93 28.77 16.51 2.88

BNP Paribas Long Term Equity Fund ����� 391.28 -1.68 8.55 31.14 27.91 17.35 2.89

Birla Sun Life Tax Plan ���� 263.20 -4.37 5.64 31.11 27.79 15.82 3.06

Religare Invesco Tax Plan ���� 244.56 -2.99 6.42 29.18 27.44 16.14 2.87

DSP BlackRock Tax Saver Fund ���� 1,110.41 -2.7 3.93 22.35 26.17 13.95 2.64

Franklin India Taxshield Fund ����� 1,728.93 -2.59 4.97 32.12 26.08 17.1 2.43

Edelweiss ELSS Fund ���� 57.75 -2.59 7.9 27.88 25.29 14.24 2.85

ICICI Prudential Tax Plan ���� 2,625.19 -4.75 0.8 15.66 24.7 14.6 2.48

Tata Tax Saving Fund ���� 217.93 -4.19 6.1 27.34 24.51 14.98 2.74

Equity: InfrastructureFranklin Build India Fund ����� 457.39 -2.95 5.13 43.58 36.88 19.48 2.92

Religare Invesco Infrastructure Fund ����� 46.99 -6.35 4.16 26.1 26.57 10.53 3.05

Kotak Infrastructure and Economic Reform Fund ���� 146.21 -0.67 6.05 26.38 24.62 11.12 2.61

Birla Sun Life Infrastructure Fund ���� 821.94 -3.07 1.84 18.05 23.14 8.9 2.51

Canara Robeco Infrastructure Fund ���� 110.64 -3.66 6.56 25.18 21.38 11.1 2.99

DSP BlackRock T.I.G.E.R. Fund ���� 1,599.52 -3.35 5.55 20.17 21.23 8.36 2.37

Hybrid: Equity-orientedSBI Magnum Balanced Fund ���� 1,836.76 -2.2 4.72 24.41 25.72 13.9 2.48

Tata Balanced Fund ���� 3,267.77 -3.64 7.01 26.45 24.81 16.34 2.45

L&T India Prudence Fund ����� 420.47 -2.11 5.76 23.87 24.17 — 2.93

ICICI Prudential Balanced Fund ����� 2,035.14 -2.19 1.47 19.2 23.51 16.5 2.46

Franklin India Balanced Fund ���� 458.14 -1.33 4.94 28.35 22.61 14.16 2.95

Birla Sun Life 95 Fund ���� 1,456.18 -2.5 2.06 21.7 22.25 13.75 2.58

HDFC Balanced Fund ���� 3,854.30 -2.75 1.95 19.61 22.24 15.88 2.07

ICICI Prudential Balanced Advantage Fund ���� 6,272.44 0.19 4.79 15.75 19.87 14.54 2.34

Debt: IncomeBirla Sun Life Dynamic Bond Fund ���� 14,198.51 1.15 4.07 12.84 10.27 9.49 1.36

ICICI Prudential Long Term Fund ����� 633.96 -0.1 2.33 12.65 11.96 10.21 0.94

Franklin India Dynamic Accrual Fund ���� 1,098.63 1.97 5.07 11.28 9.06 8.31 1.65

Franklin India Income Builder Fund ���� 1,770.19 1.43 4.14 11.08 10.28 9.69 1.94

Tata Dynamic Bond Fund ���� 885.91 0.28 3.14 10.95 10.56 8.98 1.81

Franklin India Income Opportunities Fund ����� 4,509.06 1.83 4.54 10.6 10.09 9.19 1.67

Franklin India Corporate Bond Opportunities Fund ����� 8,589.57 1.93 4.55 10.5 10.2 — 1.8

UTI Dynamic Bond Fund ����� 681.35 0.64 2.79 10.3 10.32 9.64 1.07

JP Morgan India Banking and PSU Debt Fund ���� 430.10 1.56 4.29 10.1 — — 0.55

ICICI Prudential Regular Savings Fund ���� 5,313.29 1.87 4.54 10.05 9.3 — 1.78

DWS Banking & PSU Debt Fund ���� 729.56 1.61 4.51 10.04 — — 0.57

UTI Income Opportunities Fund ���� 850.48 1.85 4.37 10.03 — — 1.7

IDFC Super Saver Income Fund ���� 3,376.92 1.41 3.88 9.94 8.84 8.64 1.02

HDFC Medium Term Opportunities Fund ����� 3,502.10 1.84 4.42 9.89 9.64 9.15 0.28

Reliance Regular Savings Fund ����� 5,585.10 1.95 4.36 9.82 9.5 8.63 1.8

BNP Paribas Bond Fund ���� 105.57 1.42 3.64 9.56 8.81 8.62 1.44

ICICI Prudential Banking & PSU Debt Fund - Regular Plan ���� 2,718.17 1.42 3.94 9.21 9.13 — 0.33

ICICI Prudential Banking & PSU Debt Fund - Retail Plan ���� 2,718.17 1.42 3.94 9.21 8.72 — 0.33

IDFC Banking Debt Fund ���� 1,273.77 2.1 4.45 8.91 — — 0.32

All equity funds, including balanced equity funds, sorted on 3-year returns; all others ranked on 1-year returns

13%The 1-year return of Birla Sun Life Dynamic Bond Fund is the highest in its category.

37%The 3-year return of Franklin Build India Fund is the highest in its category.

Methodology of Top 100 funds on www.wealth.economictimes.com

0.0020.007

0.013

0.080

0.125

% as on 31 May 2015

Debt: Ultra Short Term: Lowest Expense Ratio

% expense ratio charged annually. As on 31 March 2015.

Did not find your fund here?Log on to www.wealth.economictimes.com for an exhaustive list.

Methodology

The Top 100 includes only those funds that have a 5- or 4-star rating from Value Research. The rating is determined by subtracting a fund’s risk score from its return score. The result is assigned stars according to the following distribution:

����� Top 10%

���� Next 22.5%

��� Middle 35%

�� Next 22.5%

� Bottom 10%

Fixed-income funds less than 18 months old and equity funds less than three years old have been excluded. This ensures that all the funds have existed long enough to be tracked for consistency of performance. Given the focus on long-term investing, liquid funds, short-term funds and FMPs are not part of the list. For the same reason, we have considered only the growth option of funds that reinvest returns instead of offering dividends that increase the NAV of funds.

Despite these rigorous filters, the list includes 2/3 funds of each category to maximise choice from the best funds. The fund categories are:

EQUITIES (figures over the past three years)

Large-cap: More than 80% assets in large-cap companies.

Large- and mid-cap: 60-80% assets in large-cap companies.

Multi-cap: 40-60% assets in large-cap companies.

Mid- & small-cap: At least 60% assets in small- and mid-cap companies.

Tax planning: Offer tax rebate under Section 80C.

International: More than 65% of assets invested abroad.

Income: Average maturity varies according to objective.

Gilt: Medium- and long-term; invest in gilt securities.

Equity-oriented: Average equity exposure more than 60%.

Debt-oriented aggressive: Average equity exposure between 25-60%.

Debt-oriented conservative: Average equity exposure less than 25%.

Arbitrage: Seek arbitrage opportunities between equity and derivatives.

Asset allocation: Invest fully in equity or debt as per market conditions.

Returns as on 09 July 2015

Assets as on 30 June 2015

Rating as on 30 June 2015

Expense Ratio as on 31 March 2015

(Not covered in ETW Funds 100 listing)

Principal Retail Money

Manager

Principal Bank CD

Fund

Principal Debt Opp.

Conservative Plan

HDFC Float-

ing Rate Income

Fund

Union KBC Ultra

Short Term Debt

24 Smart StatsThe Economic Times Wealth, July 13-19, 2015

The Economic Times Wealth, July 13-19, 2015 25Mutual Funds

Long-term wealth creator

LARGE CAP

MID CAP

Sm

all

Med

ium

Lar

ge

Growth Blend Value

INVESTMENT STYLE

CA

PIT

AL

ISA

TIO

N

BASIC FACTSDATE OF LAUNCH

1 Dec 1993

CATEGORYEquity

TYPE Large Cap

AVERAGE AUM`6,389.85 cr

BENCHMARKS&P BSE Sensex Index

WHAT IT COSTS

NAVS* GROWTH OPTION

`358

DIVIDEND OPTION`41.94

MINIMUM INVESTMENT `5,000

MINIMUM SIP AMOUNT `500

EXPENSE RATIO (%)^

2.20

EXIT LOAD1% for redemption

within 365 days

*As on 8 July 2015 ^As on 31 Mar 2015

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

Fund style box

Portfolio asset allocation

The fund has emerged a winner over a 10-year period, beating its benchmark and category by a wide margin.

This fund has built an impressive track record over the years, show-casing its ability to deliver across market cycles. The fund is steered by one of the most seasoned money

managers in the country, and backed by a stable investment team with solid research capabilities and robust in-house processes. The fund man-ager’s bets are highly portfolio-

agnostic and frequently contrarian in nature. Its strict focus on quality, well-established stocks helps the fund keep its head above the water during market downturns, although it

may struggle at times to catch up with peers in a rising market. This fund is a good option for investors looking at a pure large-cap play over an entire market cycle.

HOW HAS THE FUND PERFORMED? WHERE DOES THE FUND INVEST?

FRANKLIN INDIA BLUECHIP

As on 8 July 2015

As on 8 July 2015

Source: Value Research. All data on this page as on 30 June 2015, unlesss specified.

Growth of `10,000 vis-a-vis category and benchmark

The fund has delivered far superior returns compared to the benchmark and peers over the past decade.

The fund is purely large-cap focused and follows a blend of value and growth investment styles.

Top 5 stocks in portfolio (%)

HDFC Bank

Infosys

ICICI Bank

Bharti Airtel

IndusInd Bank

7.77

6.01

5.35

4.10

4.60

The fund portfolio holdings exhibit susbtantial deviation from benchmark index.

HOW RISKY IS IT? Fund Category CNX 100

Standard deviation 13.82 13.43 12.73

Sharpe ratio 0.86 0.81 0.76

Mean return 18.68 17.60 16.41

Based on 3-year performance data.

The fund has a slightly better risk-return profile than peers.

SHOULD YOU BUY?

5.90

26.79

1.51 2.97

25.70

16.45

29.89

17.88

35.81

10.68

0.68

9.42

2.53

27.41

8.98

13.64

7.06

20.51

4.08

37.22

12.64

5.92

2012 2013 2014

6 month 1 year 3 year 5 year

2015

The fund has outperfomed the category and benchmark across time periods.

Annualised performance (%)

The fund has had bouts of underperformance over the past few years.

Yearly performance (%)

93.18%Equity

Category`39,643.36

Index`38,362.48

Top 5 sectors in portfolio (%)

Financial

Technology

Energy

Automobile

Healthcare

28.62

7.78

8.36

10.03

11.64

The fund’s portfolio is skewed towards the financial services sector.

94.09%

5.91%

8.23

FundS&P BSE Sensex IndexCategory average

FUNDMANAGERS

Anand Radhakrishnan (above) and Anand Vasudevan

TENURE: 8.17 YEARS AND 4.33 YEARS

Education: Radhakrishnan is a B.Tech, CFA,

and PGDM from IIM Ahmedabad.

Vasudevan is a B.Tech from IIT Madras,

PGDBM from IIM Calcutta and Masters in

Finance from London Business School

18.86

July 2005 May 2007 May 2013 July 2015May 2009 May 2011

As on 8 July 2015

Fund`52,392.33

6.82%Debt & cash

`10,000

11 12 13 14 15 16 17 18 19 20 21 22 9 10 11 12 13 14 15 16 17 18 19

Use this calculator to check your loan affordability. For example, a `5 lakh loan at 12% for 10 years will translate into an EMI of `1,435 x 5 = `7,175 All data sourced from Economic Times Intelligence Group (etigdatabase@timesgroup.com)

Top five bank FDsTenure: 1 year

Interest rate (%)compounded qtrly

What `10,000 will grow to

RBL Bank 9.10 10,942DCB Bank 8.60 10,888Karnataka Bank 8.60 10,888Lakshmi Vilas Bank 8.60 10,888Andhra Bank 8.50 10,877

Tenure: 2 yearsRBL Bank 9.10 11,972

DCB Bank 8.70 11,878

Karnataka Bank 8.60 11,855

Lakshmi Vilas Bank 8.60 11,855

Andhra Bank 8.50 11,832

Tenure: 3 yearsRBL Bank 9.00 13,061Karur Vysya Bank 8.75 12,965DCB Bank 8.70 12,946Lakshmi Vilas Bank 8.60 12,908Bank of Maharashtra 8.50 12,870

Tenure: 5 yearsRBL Bank 9.00 15,605

Karur Vysya Bank 8.75 15,415

DCB Bank 8.70 15,378

Bank of Maharashtra 8.50 15,228IndusInd Bank 8.50 15,228

Up to `75 lakhInterestrate (%)

State Bank of India 9.75ICICI Bank 9.90HDFC Bank 9.90Axis Bank 9.95Central Bank of India 9.95

Above `75 lakhState Bank of India 9.75ICICI Bank 9.90HDFC Bank 9.90Allahabad Bank 9.95Axis Bank 9.95

Interestrate (%)

State Bank of India 9.75ICICI Bank 9.90HDFC Bank 9.90Allahabad Bank 9.95Bank of India 9.95

State Bank of India 9.75ICICI Bank 9.90HDFC Bank 9.90Allahabad Bank 9.95Axis Bank 9.95

Top five senior citizen bank FDsTenure: 1 year

Interest rate (%)compounded qtrly

What `10,000 will grow to

RBL Bank 9.60 10,995DCB Bank 9.10 10,942Karnataka Bank 9.10 10,942Lakshmi Vilas Bank 9.10 10,942Andhra Bank 9.00 10,931

Tenure: 2 yearsRBL Bank 9.60 12,089DCB Bank 9.20 11,995Karnataka Bank 9.10 11,972Lakshmi Vilas Bank 9.10 11,972Andhra Bank 9.00 11,948

Tenure: 3 yearsRBL Bank 9.50 13,253Karur Vysya Bank 9.25 13,157DCB Bank 9.20 13,137Lakshmi Vilas Bank 9.10 13,099Bank of Maharashtra 9.00 13,061

Tenure: 5 yearsRBL Bank 9.50 15,991Karur Vysya Bank 9.25 15,797DCB Bank 9.20 15,758Bank of Maharashtra 9.00 15,605IndusInd Bank 9.00 15,605

Top five tax-saving bank FDs Tenure: 5 years and above

Interest rate (%)

What `10,000 will grow to

RBL Bank 9.00 15,605

Karur Vysya Bank 8.75 15,415DCB Bank 8.70 15,378Bank of Maharashtra 8.50 15,228IndusInd Bank 8.50 15,228

LOANS & DEPOSITSET Wealth collaborates with ETIG to provide a comprehensive ready reckoner of loans and fixed-income

instruments. Don’t miss the information on investments for senior citizens and a simplified EMI calculator.

Cheapest home loans

Your EMI for a loan of `1 lakh

These are average rates for the entire tenure.

As on 9 July 2015

Home loan base rate (%)

10 YEARS 20 YEARS

9.70 9.70 9.709.85 9.90 9.95 9.95 9.95 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00

BANK HDFC Bank

State Bank of

India

ICICI Bank

Axis Bank

United Bank of

India

Alla-habad Bank

Bank of India

Central Bank of

India

Andhra Bank

Bank of Baroda

Bank of Maha-rashtra

Canara Bank

Corpora-tion Bank

Dena Bank

IDBI Bank

Punjab National

Bank

Base rates are reference rates for all floating-rate home loans.

5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARSTENURE

Cheapest education loans

United Bank of

India

Bank of Baroda

Central Bank of

India

Bank of India

Dena Bank

9.95

Cheapest auto loans

Bank of Baroda

Punjab & Sind Bank

Canara Bank

State Bank of India

Punjab National Bank

10.25

10.25

10.25 - 10.30

10.25 - 11.50

10.25 - 10.30

LOA

N A

MO

UN

T: `

5 LA

KH

INTEREST RATE (%)

Cheapest personal loans

ICICI Bank

Bank of India

IDBI Bank

Punjab National Bank

Central Bank of India

11.99 - 20

12.95 - 14.95

13 - 14

13 - 16

13.45

LOA

N A

MO

UN

T: `

2 LA

KH

INTEREST RATE (%)

9.95 - 12.95%

10- 11.55%

9.90 -13.50 10 -

12.50%

2,028 1,213 956 836 772

2,125 1,322 1,075 965 909

2,224 1,435 1,200 1,101 1,053

2,379 1,613 1,400 1,317 1,281

@ 10%

@ 12%

@ 15%

@ 8%

9 10 11 12 13 14 15 16 17 18 19

Cheapest gold

loans

Allahabad Bank

Central Bank of India

Syndicate Bank

Punjab National Bank

State Bank of Mysore

9.95 - 13.95

10.95 - 11.95

11.50 - 12.50

11.85

11.50

INTEREST RATE (%)

Interest (%)Minimum invt. (`)

Maximum investment (`)

Features Taxbenefits

Monthly Income Scheme 8.40 1,500Single 4.5 lakh 5-year tenure, monthly returns NIL

Joint 9 lakh 5-year tenure, monthly returns NIL

Recurring Deposits 8.40 10 No limit 5-year tenure NIL

Savings Account 4.00 50 No limit `10,000 interest tax free NIL

5-year NSC VIII Issue 8.50 100 No limit No TDS 80C

10-year NSC IX Issue 8.80 100 No limit TDS applicable 80C

Time Deposit 8.40 - 8.50 200 No limit Available in 1, 2, 3, 5 years 80C

Senior Citizen Saving Scheme 9.30 payable quarterly 1,000 15 lakh 5-year tenure, minimum age 60 80C

Kisan Vikas Patra 8.70 1,000 No limit Can be encashed after 2.5 years NIL

Public Provident Fund 8.70 500 1.5 lakh pa 15-year term, tax-free returns 80C

Sukanya Samriddhi Yojna 9.20 1,000 1.5 lakh pa For girls below the age of 10 80C

Postal deposits

26 Smart StatsThe Economic Times Wealth, July 13-19, 2015

Nakoda 0.55 -12.7 -60.14 3.11 947.92 16.5

Vandana Knit 3.13 -6.57 -45.28 2.58 -17.78 33.49

Birla Cotsyn 0.06 0 -40 33.27 138.99 16.01

Farmax India 0.34 -15 -33.33 1.24 42.09 18.16

Metkore Allo 3.5 -16.27 -32.04 2.52 86.35 24.66

PMC Fincorp 5.82 -7.18 -31.12 3.65 29.06 140.15

Rasoya Protn 0.24 -11.11 -29.41 41.48 29.31 41.01

Secund.Healt 2.53 -11.54 -26.24 1.64 -64.9 21.19

Luminaire Te 0.58 -20.55 -25.64 25.87 -36.49 17.05

VHCL Inds. 1.14 -13.64 -18.57 1.45 58.77 29.34

Alternative investment returns monitor

Penny stocks update

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

The stocks have been selected using the following filters: Price less than `10, one-month average volume greater than or equal to 1 lakh and market- capitalisation greater than or equal to `10 crore. Data as on 9 July 2015. Source: ETIG Database and Bloomberg

Top Price Losers

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

Top Volume Gainers

Top Volume Losers

Alps Inds. 4.46 45.75 151.98 0.29 51.39 17.44

Genus Paper 4.75 25.66 137.5 0.45 74.09 122.12

LN Inds. 4.6 24.32 101.75 0.4 -68 46.78

Sh.Laksh.Cot 7.76 90.2 101.56 0.13 -27.61 22.09

Syncom Form. 6.11 21.96 99.67 29.62 122.57 477.01

Country Cond 4.06 45.52 93.33 0.23 -30.4 31.51

South. Onlin 6.04 28.78 82.48 0.59 372.73 35.63

Goldstn.Tech 6.82 47.94 73.54 0.04 5.41 12.81

Megasoft 8.3 46.38 71.13 0.82 410.29 36.74

Escort Fin. 5.73 27.33 66.09 0.17 327.52 23.06

Secund.Healt 2.53 -11.54 -26.24 1.64 -64.9 21.19

Interworld D 0.62 8.77 5.08 2.6 -60.94 29.66

Yantra Nat.R 0.06 0 0 9.47 -58.09 37.68

KSS 0.22 -15.38 -15.38 36.34 -54.81 45.75

3i Infotech 4.64 -5.31 15.42 24.74 -53.78 284.17

Karuturi Glo 2.72 16.74 19.3 6.97 -44.71 220.24

Ankit Metal 2.65 -3.64 10.42 1.12 -40.61 32.35

Aadhaar Vent 0.16 -15.79 33.33 27.19 -37.69 25.14

Jagran Produ 0.16 -15.79 -11.11 2.56 -36.87 11.41

Luminaire Te 0.58 -20.55 -25.64 25.87 -36.49 17.05

Mah.Ras.Apex 7.13 -4.93 -24.15 0.01 4,442.85 10.09

Atharv Ent. 1.63 15.6 12.41 3.14 4,116.83 13.86

Timbor Home 6.3 17.76 21.62 0.63 3,256 10.07

Amit Intl. 9.31 13.54 49.68 0.44 2,166.51 17.64

Rajlaxmi Ind 3.97 0 9.67 8.12 1,739.85 123.07

Jain Studios 5 -2.72 -16.25 0.01 1,496.79 14.3

Nagarjuna Oi 4.67 -8.61 22.89 3.58 1,011.99 199.97

Rathi Graph. 8.5 6.65 -17.95 0.01 960.37 13.97

Nakoda 0.55 -12.7 -60.14 3.11 947.92 16.5

Picturehouse 8.41 -6.76 -3.33 0.11 718.12 43.94

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

Top Price Gainers

Diamond Index Precious Metals Index Wine Index Coin Index

146.849 July 2014

132.129 July 2015 1,522.89

9 July 2015

271.079 July 2015 14,800

9 July 2015

1,776.229 July 2014

1 WEEK 0.83%1 YEAR -10.02%

1 WEEK -0.4%1 YEAR -14.26%

1 WEEK 0.1%1 YEAR 2.19%

1 WEEK -1.33%1 YEAR 2.07%

Overall Diamond Index is based on actual transactions from 20 different market players and reflects price movements in the global diamond market. The index is updated daily.

The S&P GSCI Precious Metals

Index comprises gold (91.33%) and silver (8.67%) and provides a bench-mark for investment performance in the precious metals commodity markets. It is updated daily.

The Liv-ex Fine Wine 50 Index

tracks daily price movement of the most heavily traded commodities in the wine market. It includes only the 10 most recent vintages and is updated daily.

The Krugerrand Coin index

represents the denomination of a 22 carat gold bullion coin weighing one troy ounce that is listed for trading on the Johannesburg Stock Exchange.

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

265.259 July 2014

CH

AN

GE

14,5009 July 2014

The Economic Times Wealth, July 13-19, 2015 27Non-traditional Investments

Crompton Greaves J P Morgan Underweight 181 135 Retain 'underweight'. The problems in overseas businesses continue. In 2014-15, for the first time in 10 years, the company also reported an operating cash flow loss.

Global commodity prices have been under pressure for some time. The turmoil arising out of the sharp fall in the Chinese stock market has only severed

the situation (see page 10 for its impact on Indian mar-kets). Naturally, companies in the commodity business have been at the receiving end. For instance, in the past one month, Vedanta has seen its stock plummet by more than 20%.

Though weak commodity prices will continue to be an overhang on this counter, investors should not ig-nore positive developments in the company, most importantly, the merger of its cash-rich subsidiary, Cairn India, with itself. The boards of Vedanta and Cairn India have already approved the merger and the entire process is expected to be completed by end of 2015-16. This merger is will increase Vedanta’s earnings per share. Also, Cairn India, as of March 2015, had a cash balance of more than `16,000 crore, and this merger will help reduce the debt on Vedanta’s bal-ance sheet.

The share price fall in Cairn, due to the fall in crude prices, is also working out in favour of Vedanta and it will have to issue less number of prefer-ence shares to Cairn shareholders.

This merger will simplify the group structure further and, therefore, is consistent with the stated strategy of Ve-danta Group. It will also result in a diversified portfolio of metals and minerals and help Vedanta reduce earnings volatility and have stable cash flows. Since each commodi-ty usually moves in a separate cycle, a centralised struc-

ture will help Vedanta allocate capital to the highest-return projects across the portfolio. In addition to the merger, or-ganic growth is also picking up. Vedanta is increasing its production of zinc and aluminium businesses and is also ramping up its power business.

After the recent 20% cut in price, analysts are getting bullish on the counter mostly because of favourable valuations. For instance, Vedanta holds 64.92% in Hindustan Zinc and its market value works out to be ̀ 43,000 crore, higher than the cur-rent market capitalisation of the Ve-danta Group, which is valued at just `42,000. Possible triggers for the counter are the acquisition of the cen-tral government’s stake in Hindustan Zinc, winning bauxite mines in auction and completion of the proposed Cairn India merger.

Selection Methodology: We pick the stock that has shown the maximum in-crease in ‘consensus analyst rating’ in the past one month. Consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (5 for strong buy, 4 for buy, 3 for hold, 2 for sell and 1 for strong sell) and any improvement

in consensus analyst rating indicates that the analysts are getting more bullish on the stock. To make sure that we pick only companies with decent analyst coverage, this search is restricted to stocks that are covered by at least 10 analysts. You can see similar consensus analyst rating changes during the past week in the ETW 50 table.

—Narendra Nathan

Vedanta: Reasonable valuations

Reco date Research house Advice Target price (`)08 July ’15 Elara Securities India buy 240.00

03 July ’15 Axis Capital buy 219.00

17 June ’15 Goldman Sachs Buy 258.00

15 June ’15 Credit Suisse outperform 253.00

15 June ’15 Phillip Securities buy 235.00

15 June ’15 IDFC Securities outperform 281.00

Latest brokerage calls

Dividend PBV PE yield (%)Vedanta 0.76 N/A 2.95

Coal India 6.12 19.19 4.96

NMDC 1.40 7.02 7.52

MOIL 1.20 9.46 3.53

Valuation

The recent price crash has led to a fall in valuations, making it an attractive buy.

2013-14 2014-15 2015-16 2016-17

Revenues (` cr) 66,152.41 73,709.50 77,483.55 86,954.41

Operating profit (` cr) 13,509.49 14,885.39 23,660.77 28,673.57

Net profit / loss (` cr) 6,298.51 15,645.77 5,239.59 6,890.93

EPS (`) 21.46 52.77 17.46 24.49

FundamentalsConsensus estimateActual

Performance of Vedanta compared with the Sensex. Figures are normalised to a base of 100. Source: ETIG Database & Bloomberg

Yes Bank Bank of America ML Buy 801 1,100 Reiterate 'buy'. The concerns around asset quality are overblown. With nearly 3-times increase in distribution in the last five years, the bank is well-placed for a faster growth in market share.

Star Ferro and Cement Anand Rathi Buy 156 238 Initiate coverage with a 'buy'. A leading cement manufacturer in the North-east, with a consolidated capacity of 3.4 million tons and 23% market share, it is a niche player in the North-east’s growth story.

Shoppers Stop IIFL Buy 393 500 Maintain 'buy'. Expect double-digit growth in same store sales in the first quarter. Improving sales mix, cost control and reduction in contri-bution from new stores should support Ebitda margin expansion.

Persistent Systems Prabhudas Lilladher Buy 621 910 Retain 'buy'. Persistent Systems acquired 100% of the stock of Rgen Solution in the U.S. Inorganic endeavour continues to be key to its growth strategy.

Arvind Nimal Bang Buy 283 354 Retain 'buy'. It has signed an agreement with the largest U.S. youth specialty retailer, Aeropostale and is expected to set up 30 stand alone stores and 25 shop-in-shops of Aeropostale over the next three years.

Sobha Developers Axis Capital Buy 373 500 Retain 'buy'. Sobha reported 11% increase in new sales volume in the first quarter of 2015-16. It is looking to launch group housing project at its Gurgaon location to revive sales in that geography.

What experts adviseBUY Stock Research house Advice Market Target price* (`) price (`) Comment

SELLStock Research house Advice Market Target price (`) price (`) Comment

* Market price as on 9 July

A fall of more than 20% in valuation and the merger of its cash-rich

subsidiary Cairn India with itself has made analysts bullish on the counter.

9 July 2014 9 July 2015

Relative performance Market price: `139

100

Sensex Vedanta

108.37

47.16

Analysts’ views

4Sells

3Hold

23Buy

28 Pick of the WeekThe Economic Times Wealth, July 13-19, 2015

Take tax-free perksTAX OPTIMIZER

Sudhir Kaushik of Taxspanner.com advises readers on how to restructuretheir income, investments and expenses to optimise their tax.

INCOME HEAD CURRENT SUGGESTED

Basic salary 72,30,000 36,15,000

Special allowance 0 16,14,000

Contribution to PF 0 4,33,800

Car maintenance & fuel reimbursement 0 2,16,900

Car lease rental 0 6,00,000

Medical reimbursements 0 15,000

Phone bill reimbursements 0 36,000

Books and periodicals 0 24,000

NPS (under 80CCD2) 0 3,61,500

Leave Travel Allowance 0 1,00,000

Annual gifts 0 5,000

Taxable value of perks 0 39,600

Interest on deposits 6,50,000 0

Rental income 7,44,000 7,44,000

72,30,000 72,30,000TOTAL

13,94,000 7,44,000TOTAL

INCOME FROM OTHER SOURCES

TAX SAVING INVESTMENTS

INCOMEFROM EMPLOYER

TOTAL TAX SAVED

`8.22 lakhPER YEAR

VERMA’S TAX

TAX ON SALARY

TAX ON OTHER

INCOME

TAX ON CAPITAL

GAINS

`19.99 lakh `3.62 lakh Nil

CURRENT

`23.61 lakh

`13.78 lakh `1.61 lakh Nil

SUGGESTED

`15.39 lakh

Paying too much tax? Write to us at etwealth@timesgroup.com with ‘Optimise my tax’ as the subject. Our experts will tell you how to reduce your tax by rejigging your pay and investments.

WRITE TO US FOR HELP

OTHER DEDUCTIONS

25,000 3,86,500TOTAL

CURRENT (`) SUGGESTED (`)

NPS contribution (through employer) 0 3,61,500

Medical insurance under Sec 80D 25,000 25,000

Denotes suggestion to reduceDenotes suggestion to increase

1,50,000 2,00,000TOTAL

CURRENT (`) SUGGESTED (`)

Contribution to PF 1,25,000 1,25,000

Life insurance 25,000 25,000

NPS (Under Sec 80CCD1b) 0 50,000

Maximum

deduction has

been reached.

Invest in this

new tax saving

option.

Avoid tax ineffi-

cient FDs. Use

debt funds to

defer tax.

Let company buy

a car and include

EMIs, fuel and

driver salary in

CTC.

Seek reim-

bursement of

these expenses

against actual

bills.

This tax free

perk can be

availed once in

a block of two

years.

Rajiv Mohan Verma, 58, is a businessman and receives salary from the two compa-nies in which he is a director. His total annual income of ̀ 86.24 lakh also in-cludes rent from property and interest

on fixed deposits. More than 27% of this goes into tax. But some smart rejigging can reduce his tax lia-bility by more than ̀ 8 lakh.

Verma should get his company to pay for his con-veyance and transport needs. It can buy a car on lease and include the EMIs in his compensation package. Similarly, the maintenance costs and driv-er’s salary should also be added to his salary pack-age. The taxable value of these perks is only `39,600, but they can cut his tax by over ̀ 3 lakh.

Next, Verma should opt for the Provident Fund. If his company puts ̀ 4.3 lakh in the PF, he saves ̀ 1.34 lakh in tax. Similarly, if the company puts 10% of his basic salary in the NPS under Sec 80CCD2, he saves another ̀ 1.11 lakh. However, both these measures will mean a reduction in his take-home income by ̀ 8 lakh. Verma should also include other allowances that are tax-free on submission of bills. His phone, medical and newspaper bills can save him ̀ 23,000 in tax. Another ̀ 31,000 can be saved through the leave travel assistance (LTA).

Verma should avail of the new tax deduction un-der Sec 80CCD1b for investments in NPS. He should also avoid tax inefficient fixed deposits. Debt funds can help defer the tax, saving him almost ̀ 2 lakh.

ACTIONS TO TAKE

Additional

deduction for

investing in NPS

under Sec

80CCD2.

The Economic Times Wealth, July 13-19, 2015 29Taxation

DO MORE WITH

EVERYDAY GADGETS

Other than their primary functions, most everyday gadgets can be used for other

work too. Karan Bajaj shows you how to get the most out of your devices.

WIRED MEDIA PLAYBACKYou can connect compatible tablets and smartphones to a TV to output in full HD resolution along with audio. A num-ber of phones now come with MHL port that lets you con-nect the phone directly to the TV with an MHL-HDMI cable. Some phones/tablet also have a micro-HDMI port to con-nect with the TV. Once connected, you will see a mirror of your smartphone screen on the TV. Open the media player app and watch movies on the big screen. For Apple devices, a Lightning HDMI adapter will be required.

WIRELESS MEDIA PLAYBACKThe newer internet-connected smart TVs today are DLNA com-patible. DLNA (Digital Living Network Alliance) is a standard that allows interoperability between different multimedia de-vices. Connect your phone and TV to the same network and then you can seamlessly stream content from the phone to the TV using third party apps such as PlayTo for Android or Media: Connect for iOS. Alternatively you can get a HDMI dongle such as Chromecast or Teewe 2 to stream content stored on your hand-held device to your TV over the WiFi network.

CONVERT YOUR SMARTPHONE, TABLET INTO A MEDIA PLAYER

USE A DIGITAL CAMERA AS A WEBCAM

WEBCAM AS A SURVEILLANCE CAMERA

USE BROWSER TO MANAGE ANDROID PHONE

Almost all smartphones offer excellent multimedia capabilities. While some come preloaded with support for multiple audio-video formats, you can install apps to get the same functionality on others. Even today, most people watch movies on their TV via a DVD/Blu-Ray player, home theatre system or by plugging in a USB drive. Now, you can easily use your smartphone as a media player for your TV.

There are a few digital cameras available that come with a built-in webcam function. This feature can usually be found in connectivity settings of the camera. Just connect the camera to your computer using a USB cable and start the webcam function—you can then access the camera like a standard webcam in apps like Skype or Google Hangout. Canon camera users also have the option of using a software called Ex-traWebCam (US $10). Head to www.extrawebcam.com to view the list of supported cameras as well as to download and try a free demo before pur-chasing the program. It gives a live viewfinder function as well as lets you record videos and do remote monitoring with motion detection.

Every laptop today comes with a built-in webcam. Alternatively, you can purchase a webcam for a desktop for a few hundred ru-pees. What you don’t know is that you can very easily set up your webcam to act as a surveillance camera or as a baby monitor. You will need to go to www.yawcam.com and download the free Yawcam software. It lets you use your webcam for continuous live vid-eo streaming, as well as to take snapshots at pre-defined intervals. There is also the fea-ture of setting up the camera to function on motion detection or at a scheduled time. You can even set it to upload the photos automati-cally to a server to access it remotely. For se-curity, you can password protect the soft-ware and even hide it in Windows so that no one can detect and stop it.

Whenever a notification arrives on your phone, you tend to stop doing everything else to check it. However, you can use your com-puter’s web browser to view notifications of your phone as well as reply or manage the noti-fications from your computer. Get the free Air-Droid app for your Android phone—it lets you manage your phone on any computer via a web browser. You simply need to open http://web.airdroid.com in your browser and scan the QR code to connect the phone. The browser window will instantly show details about your phone as well as let you manage contacts, apps, storage and multimedia files. You can send and receive messages, transfer files from phone, install or uninstall apps, change ring-tones or take a screenshot of your phone’s dis-play. Alternatively, you can use the Pushbullet app and its browser extension to keep an eye on all notifications.

30 TechnologyThe Economic Times Wealth, July 13-19, 2015

8 out of 10: Respondents believe their personal and household income

will increase (the highest in the region) in the next 12 months.

USA: Is the most favoured destination (followed by the UK and Australia) for sending kids for higher education because of ‘good future job opportunities’.

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

BEST OF ARCHIVES

All these stories are available at

www.wealth.economictimes.com

Four things to check in a company FD: Checking a company’s credit history, financials, promoters’ background and liquidity can help you make the right choice.

What’s stopping you from buying a house: From high prices to delayed projects, the barriers buyers have to overcome are many. We tell you how to surmount the key ones.

How to handle tricky office relationships: Relationships at the workplace can be quite complex. But you can take steps to make your life easier.

wealthTHE ECONOMIC TIMES

Monday, July 13-19, 2015www.wealth.economictimes.com

FROMTHE WEB

LEARN & KEEP

Is there a leak in your budget: ‘Where did all my money go?’ If you’ve asked this question often enough, it’s time you prepared a budget. If you do have a budget, you’re probably not sticking to it.

Buy house to live in, not as investmentThis is in reference to the cover story, ‘10 questions to ask before you buy a house’. It is unfortunate that people are not buying property to live in, but rather acquiring them as investments. The day people will stop treating real estate as an investment, the market will crash to 50% of the current price. Simantad66847, Mumbai

Stay on rent and watch house prices slideThe cover story, ‘10 questions to ask before you buy a house’, was very informative. It very clearly tells the prospective homebuyer to wait. By continuing to stay on rent, you can put builders under pressure. They will soon have no option but to bring down house prices and that too in a year’s time. Sitting on in-ventory that has been building up for the last four years amounts to stupidity. It is time to teach the un-scrupulous builders a lesson. They have been conning homebuyers all these years now. It is time to make them taste their own pudding.Prospect Buyer, Mumbai

Wake-up call for prospective buyers The cover story, ‘10 questions to ask before you buy a house’ was su-perbly written. I hope this will serve as an eye-opener for those who are bent upon acquiring real estate, not

to live in but as an investment.Subhash, Mumbai

Head for MFs insteadThe cover story, ‘10 questions to ask before you buy a house’, was ex-tremely informative. It was espe-cially helpful for people dithering between deciding to purchase a house or start a systematic invest-ment plan in a mutual fund. I will now start on that SIP.Abhinav Singh, New Delhi

No retirement for someThe Learn and Keep section, ‘Indi-ans ready for retirement’, is rele-vant for those living in urban areas. In rural India, people can’t even think of retiring. They will have to work till the end of their lives.Abdul Rahman, Madikeri

Stop speculation The kind of schemes mentioned in the story, ‘How to own property for just ̀ 5 lakh’ are those which pro-

mote speculation in the residential real estate market. Housing is a ba-sic need. Therefore, the govern-ment should strongly discourage speculation in this segment. Why is black marketing of food wrong, when the same practice is allowed in real estate? With the number of apartments lying incomplete or un-sold due to low demand from end users increasing, such speculative arrangements will only lead to the biggest bubble in real estate. VP, Bengaluru

For crooks onlyIt is surprising that there has been no crackdown on the fractional ownership scheme mentioned in the story, ‘How to own property for just ̀ 5 lakh’. If you collect money from several people it becomes a collective investment subject to regulation. This works for small crooks working in government of-fices, not for honest tax payers.Tokru, Mumbai

Discretionary spending is set to rise in the coming year, reveals the Visa Affluent Study 2015.INDIANS SCORE HIGH ON WEALTH INDEX

is the annual household income of

affluent Indians.

Is the amount that affluent Indians keep aside for discretionary spending every month. Respondents have bought

an art piece in the past year, with 2/3rd buyers in the 25-35 year age group.

15lakh`

19,151`

34 yearsIs the average age of India’s

affluent population, younger than those in most Asia

Pacific countries.

Respondents say their discretionary spending—fine

dining, holidays, designer clothes, jewellery, donation—will increase

in the coming year.

The Visa Affluent Study 2015 was conducted across affluent consumers in Australia, China, Hong Kong, Indonesia, Japan, South Korea, Singapore and India.

In India, the consumer base was 500.

Indians consider children’s education ‘extremely important’, giving the

highest priority to family, followed by health and

work-life balance.

62%

64%

84%: Respondents plan to leave heirlooms (jewellery, watches, paintings, cars, etc) for their children, the highest in the Asia Pacific region.

1/3rd

The Economic Times Wealth, published by Bennett, Coleman & Co. Ltd. exercises due care and caution in collecting the data before publication. In spite of this, if any omission, inaccuracy or printing errors occur with regard to the data contained in this newspaper, The Economic Times Wealth will not be held responsible or liable. The content hereof does not constitute any form of advice, recommendation or arrangement by the newspaper. The Economic Times Wealth will not be liable for any direct or indirect losses caused because of readers’ reliance on the same in making any specific or other decisions. Readers are recommended to make appropriate enquiries and seek appropriate advice before making any specific or other decisions.

PUBLISHED FOR THE PROPRIETORS, Bennett, Coleman & Co Ltd by R.Krishnamurthy at The Times of India Building, Dr. D.N. Road, Mumbai 400001. Tel. No.: (022) 6635 3535, 2273 3535. Fax: (022) 2273 2544 and printed by him at (1) The Times of India Suburban Press, Akurli Road, Western Express Highway, Kandivli (E), Mumbai-400101 . Tel. No.: (022) 28872324, 28872931, Fax: (022) 28874231. (2) The Times of India Print City, Plot No.4, T.T.C. Industrial Area, Thane Belapur Road, Airoli, Navi Mumbai-400708. Tel No.: (022) 2760 9999, Fax: (022) 2760 5275. EDITOR: Babar Zaidi (Responsible for selection of news under PRB Act). © Reproduction in whole or in part without written permission of the publisher is prohibited. All rights reserved.RNI No.: MAHENG/2014/57046. VOLUME 02 NO. 28

The Economic Times Wealth, July 13-19, 2015 31Your Feedback

VINAY DWIVEDI

Artists usually find it hard to sell their work. Often, it is a result of inadequate sales and marketing skills. Spotting a business op-portunity in the unorganised

art market, Bharat Sethi, 25, a Delhi universi-ty economics graduate, founded ecommerce startup Postergully. It allows artists to just fo-cus on being creative while Sethi and his team take care of business. “As buying afford-able art on the Internet has gained traction over the past few years, we too wanted to catch on this wave and give easy access to In-dian artists and designers,” says Sethi.The company, which was incorporated in July 2013, has seen interest soar in its offer-ings and is currently clocking more than 2.5 lakh unique visitors every month. Of this, some 3% actually buy at Postergully. “Our customer acquisition cost is less than ̀ 60,” adds Sethi, who, while working as a trade an-alyst at a strategy consultancy firm, invested `1 lakh from his savings to start the business.

Sethi has come up with a novel business model. His company manufactures the goods on behalf of the artists, depending on de-

mand, and sells it to customers. Artists and designers, on their part, just upload their original designs at Postergully for customers to choose from. “Our curated marketplace enables artists and designers who hold origi-nal visual content to seamlessly contribute

and merchandise unique designs,” he says. This allows amateur artists to bypass their limitations, and the limitations of bulk art/artist websites, while allowing them to culti-vate their own followers and make sales. Sev-eral artists on the platform have attracted lakhs of followers. “Since artists now have to focus only on designing, and promotion via their social network, those who do it well, end up raking anywhere between ̀ 50,000 to `2.5 lakh a month,” says Sethi. Postergully’s 2014-15 gross revenue stands at ̀ 3 crore. It sells products across 20 categories, ranging from phone cases to art prints and from home décor to clothing.

Sethi, who is confident of almost trebling the revenue to ̀ 8 crore in 2015-16, says the first six months were a trial by fire. “I was in a full-time job and I had launched something not knowing the consequences of working without an operations team, customer care, packaging guys and design team. It was abso-lutely insane,” he says. Over time, on-the-job learning and a committed team of five helped Sethi restore sanity to business operations. Direct branding, exclusivity of product line and scalability of a marketplace/Just-In-Time inventory model, coupled with word-of-

mouth publicity, has helped drive business. Postergully currently has about 850 artists on board. Their designs, employed in various forms, have resulted in some 50,000 kinds of artwork, and the company has sold close to 5 lakh items till date. The startup’s prospects have also brought in investors. Funding and mentoring platform GSF India helped raise seed funding of close to ̀ 25 lakh in January 2014. In another round in June this year, the company raised close to ̀ 1 crore from a clutch of investors.

“Our vision is to grow our authentic com-munity, that has few means to monetise its artwork, manifold,” says Sethi. The company is looking to add more than a million designs and products in the next two years. It is look-ing to expand to footwear, furniture, kitchen-ware and upholstery in the next 12-18 months. By end of 2015-16, Sethi also plans to get into licensing and commissioning of art-work and designs. This will provide the com-pany with an added revenue stream. “It will be like being the Getty Images of art,” he says.

The art of sound business

Please send your feedback to etwealth@timesgroup.com

This Delhi-based startup helps artists monetise their work by taking care of their marketing needs.

32 Last WordThe Economic Times Wealth, July 13-19, 2015