You are on page 1of 68



Personal Finance Magazine 30 September-13 October 2016 Rs 45



How To Make

Your Claim

Winning Stocks via Shareholder
Yield Page40


FMCG: Poor Growth, Institutional Buys and IG Petrochemicals: Pidilite: Reliance Capital Demergers: Manipulation:
High Margins Sales in June Quarter Turning Around? Strong Going Commercial Opportunism? Agri-Tech (India)

Cover Page_277.indd 1 23-09-2016 19:07:40

Advertisements.indd 5 22-09-2016 21:24:28
Advertisements.indd 4 20-09-2016 17:54:23
30 Sep-13 Oct 201

Hassle-free Mediclaims

H ealth Insurance Regulations 2016 made

interesting changes to curtail the role of
the third-party administrator (TPA) and to make
the insurer responsible for directly paying the
insured. Now the insurer, not the TPA, needs
to give reasons for claims denial. The changes
do not imply that claims processing is going
to be without any hiccups. In our Cover Story,
Raj Pradhan outlines the process for cashless
and reimbursement claims. Avoid the pitfalls by
knowing your policy in detail and buying it after
full and honest disclosures.
In Value Stocks, I write on a hardly-

30 Cover Story
known investing strategy called Shareholders
Yield. This is a relatively new idea with a lot
of promise. By focusing on dividends, share
purchases and falling debt, it could be a tool for
identifying candidates for an early turnaround. Health Insurance: How To Make Your Claim
Its been over a year since we first published Trouble-free
a whistleblowers letter highlighting the issue of If you had multiple mediclaim policies, claim filing used to be
manipulation and collusion with select players difficult. The new regulations have made things easier. TPAs role
in algorithm trading and use of co-located has been curtailed. Insurers will have to make payment from their
own account. Raj Pradhan analyses
servers at the National Stock Exchange (NSE).
NSE dragged us to court and got rapped on the
knuckles by the order against its injunction. And
now, the Securities and Exchange Board of India
has demanded a forensic investigation and also
12 Your Money
Soon an Easier System for Senior Citizens To Prove
They Are Alive
asked that any revenue accruing from NSEs co- PFRDA Approves 75% in Equity for NPS for Private
location facilities must be paid into an escrow Sector Employees
account. Sucheta, in Crosshairs, points out that Mutual Funds To Disclose Distributor Commission
the regulator may need to dig deeper and be Deposit Rs12 Crore with Court, SC Directs Parsvnath
more transparent in its actions, in future. Developers
Insurance Policies To Be Issued Online
Moneylife has often highlighted the
aggressive sales tactics and mis-selling by
banks. Not surprisingly, banks are one of the
largest earners of mutual fund commissions
and, probably, insurance commissions as well.
Will the Reserve Bank of India wait till banks

go the Wells Fargo route of gypping millions of
customers before it takes any action? Sucheta
asks these questions in Different Strokes.
The penultimate session of Moneylife
18 SEBI Finally Cracks down on NSEs Suspect Algo
Trading; Algo Revenue To Go into Escrow Account
Foundations The Police and You series will
be held on 1st October. The programme will
cover the functioning of the Anti Corruption
Bureau and the role of citizens in filing
complaints. Dont miss it. (
20 Different Strokes
Wells Fargos of India neither Get Caught nor Pay a Price

Disclaimer: Moneylife has a policy of not allowing its editorial staff to
buy and sell stocks that are written about in the magazine. All personal
Debashis Basu
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 30 Sep-13 Oct 2016 | 4

Content.indd 2 23-09-2016 19:03:53


Investor Club Videos

P off San
Pr nja
jay Baks
ja kshi
ks hi:: In
hi Inve
v stin
ing R Ba
la kriisshnnaann: Ho
How T To
o Re
eaad an
an Deba ash
is Bas
asuu:: In
T ap
Tr ps & Ho
How To Avoid id Th hem Annu
al Re
ep poorrt
rt ffo
or In
ng Strattte
Stra egi
e Poosst-
d ett

Dr Vij
Dr ijay Malik
ik: How
H ow T To
o Assses
e s th
he Ayus
Ay ush & PrPrrat
at yuush
ush h Mitta
it tall:: Ho
ta ow To
To Vija
Vi j y Kediia: a: My
My Inv
nvestmen nt
Ma na
nt Quallliit
ty be
orre Bu
B yi
y ng
ng Eect
E ctive
elly U
Usse ssccrre
in Journ
Jo ney so o forr & wha
at I le
nt frro
Stocks m Fa
my aiillu
r s

How to Access the Videos

These videos are uploaded on a private channel of YouTube. You will not be able to
download but there are no restrictions on the number of times you can view them. You
can pay using any email id but you will need to use a gmail id to access the videos
Speaker Event Amount

Prof Sanjay Bakshi Investing Traps & How To Avoid Them Rs.800

R Balakrishnan How To Read an Annual Report for Investing Rs.650

Debashis Basu Investment Strategies Post-Budget Rs.500

Dr Vijay Malik How To Assess the Management Quality before Buying Stocks Rs.700

Ayush & Pratyush Mittal How To Eectively Use Rs.700

Vijay Kedia My Investment Journey so for & what I learnt from my Failures Rs.700

Investor Club Video Ad.indd 2 26-08-2016 17:30:16


22 Hot and Cold Stocks

of Mutual Funds in 26 Insurance
Trends 60 Jio: Why Its
August 2016 Life insurance
LICs One-time 60th Year
Anniversary Bonus
TAX / FIXED INCOME Mobile Insurance
New India Assurance Told To Pay

23 G-Secs Investment Made

Easy, but Is It Enough?
for Theft of Mobile
Regulations 2016: Mediclaim
61 Easing into Easements,
Not Easy
Policyholders Rights
Group Insurance Can Be for Just
Seven Members


G-Sec Yields Down 40 Picking Winning Stocks

Via Shareholder Yield
63 Police Reforms for a

TAX HELPLINE Better Society

24 Smart Money
Margin of Recklessness
52 Queries at Moneylife
Foundations Tax Helpline
42 Stock Watch
FMCG: Poor USEFUL APPS What Can You Do if Someone Goes
Growth, High Missing?
54 Lapse It: Time-lapse and
Stop-motion Videos
Runtastic: Achieve Your Fitness
Institutional Buys and Sales in Targets

June quarter Snopes and Izitru: Separate Fact

IG Petrochemicals: Turning
from Fiction
Salient Eye: Home Security System 66 Remembering Those
Who Cannot Remember
Around? Is Our Social Duty

Pidilite: Strong
56 Treating Heart: The Good,
Bad and Ugly in Modern
Medical Research
Reliance Capital Demergers: Pulse Beat: Medical developments
Commercial Opportunism? from around the world

Market Manipulation:
Agri-Tech (India)
Market Trend: Risk Vs Reward
59 On Death of the First
Holder of Shares and
Readers Response ........... 8
Book Review ....................62
Debentures Money Facts ....................64

Content.indd 4 23-09-2016 17:47:49

Moneylife Foundation AD.indd 1 23-09-2016 18:30:33
Volume 11, Issue 17
30 September13 October 2016

Debashis Basu
Editor & Publisher

Sucheta Dalal
Managing Editor

Editorial Consultant
Dr Nita Mukherjee

Editorial, Advertisement, This is with regard to the article Beware
Circulation & Subscription Office Investors in Indian Mutual Funds from US and
315, 3rd Floor, Hind Service Industries
Premises, Off Veer Savarkar Marg, Shivaji
Canada by Raj Pradhan. It was an eye-opener.
Park, Dadar (W), Mumbai - 400 028 Can you please provide similar insights on life
Tel: 022 49205000 insurance; investors from US and Canada are
Fax: 022 49205022 Mutual Fund investments
E-mail: interested in buying ULIPs (unit-linked insurance are subject to market risks,
read all scheme related
products). What are the FATCA (Foreign Account documents carefully.
Tax Compliance Act) implications on these
E-mail: products for them?
Subscription e-mail Puneet Aggarwal, online comment Write to the Editor!
Raj Pradhan replies:
As mentioned in our Cover Story, FATCA has
a prize
New Delhi
DDA Flats, J-3/66, Kalkaji, implications for the insurance industry too. We do
New Delhi - 110 019 not have the details about which insurer will allow
you to buy ULIPs and which will not. Moneylife
believes that it is not worth buying insurance-
1st Floor, 13/1, 7th Main Road, cum-investment products from life insurance
1 Cross, Saibabanagar, Srirampuram,
companies. FATCA will not be an issue, if you
Bengaluru - 560 021
avoid such products.
Pure term plan is the best way to cover life.
Kolkata Online term plan is the only product we
395, Lake Gardens, Kolkata - 700 045 suggest. NRI (non-resident Indian) /PIO
Tel: 033 2422 1173/4064 4318
(person of Indian origin)/OCI (overseas
citizen of India) can buy online term
Moneylife is printed and published by plans from some insurers. Please read our Cover Story
ory - http://
Debashis Basu on behalf of
Moneywise Media Pvt Ltd and
published at 315, 3rd Floor, insurance/38662.html. It gives details which no other media has given.
Hind Service Industries Premises, It will help you understand how to handle buying a term plan if you
Off Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai - 400 028 are an NRI/PIO/OCI.
Editor: Debashis Basu


This is with regard to Financial Crimes: Catch the Countless Small
Fish Too by Sucheta Dalal. Bankers get the first feel of the misuse of
Total no of pages - 68, Including Covers funds by the promoters and it is for them to tighten the discipline on
the wrongdoers and fraudsters. Most of the promoters have fudged
balance sheets and their own contribution in the business is, by and
RNI No: MAHENG/2006/16653

MONEYLIFE | 30 Sep-13 Oct 2016 | 8

Letters.indd 2 23-09-2016 16:52:49


Documents Safety in
the Storage
T his is with regard to When
Citibank Lost the Original
Title Deeds on a Home Loan
loans will have to be
classified as unsecured
loans on par with
Mutual Fund investments
are subject to market risks,
read all scheme related
documents carefully.
by SD Israni. I understand that personal loans.
it is the standard practice of
most banks, who are into retail
It is important to
remember that home Congratulations
home loans, to outsource the custody of all such loans are long-term TS Easwaran
mortgage documents to a third party. As and when loans of 10 to 15
the documents need to be retrieved, they send a years tenor and it is
requisition to the service-provider, get the documents the responsibility of CLOCK
back and hand them over to the customer. The bankers to safeguard
internal auditors of banks do an existence check, or the property papers.
inventory check, to ensure that all such documents It may be a good idea
are stored properly by the service-provider, indexed for customers to get
and kept in strong / fireproof storages. a periodic certificate
They must be stored in such a way that they are from bankers that
protected from damage by floods, fire, etc. We do their property TS Easwaran

not know how many bank documents were damaged documents are safe,
(if at all) in last years floods in Tamil Nadu. in their custody,
Lastly, how do the external/ statutory auditors and this fact has
satisfy themselves that banks do have all the been verified by
mortgaged property documents based on which the bank before
they are classifying these mortgage loans as secured giving this certificate.
advances? In the absence of such documents, these TS Easwaran, online comment

large, in the form of lands with value inflated beyond ulterior motives, who have plans to play with the
imagination. Promoters come with the idea of loot, not financial system with. Moneylife is doing a wonderful
to run any business. Many defaulters of banks have the service to society by keeping a close watch on the
backing of chartered accountants, bankers, lawyers, wrongdoings of key institutions and the corporates
bureaucrats, tax officials and institutions like SEBI who want to enjoy everything at the cost of taxpayers
(Securities and Exchange Board of India). Most of the and other stakeholders in the economy.
corporates have umpteen subsidiaries which facilitate Gopalakrishnan TV, online comment
them to fudge the accounts in such a manner that even
the most intelligent auditor cannot find anything wrong KEEP THE LEGAL PROFESSION NOBLE
with the accounting. This is with regard to Judges Need Not Know All
Banks can have an immediate feel of the problems Laws by Bapoo Malcolm. I have one experience of
and, if they are shrewd to warn the borrowers and fighting a case personally when I dragged Tata Motors
their contacts at the right time, many frauds taking to the consumer court... It is true that a human being
place in the economy, involving banks and government is not expected to know everything under the Sun...
authorities, can be easily prevented. The approach of However, the only purpose why a matter goes to court,
the courts is in the right direction; they should give and we seek a judgement, is to get someone who can
sufficient warnings to borrowers, banks, chartered look at both the parties perspective. Then, the judge
accountants, bureaucrats and all other associates that would ideally come to a conclusion based on his
it is becoming difficult to loot the system and get away perspective, his knowledge, experience and wisdom.
permanently, like Vijay Mallya. Nothing is wrong in learning from the lawyers who are
This article also is an eye-opener for those, with fighting against each other.

9 | 30 Sep-13 Oct 2016 | MONEYLIFE

Letters.indd 4 23-09-2016 16:53:22


I was once guided by a judge whose view was said than done. No one wants to be proved wrong. Its
contested by the opposite lawyer. But, I am sorry to human nature.
say, while there may be many good lawyers who have As for paying money and dancing to their tune,
understood their critical role in justice and fair play, you will not believe how many clients want just that.
there are a few who have downgraded the noble legal Including lying in court, on their behalf. No self-
profession to a pedestrian level... you pay money and respecting lawyer will submit to that. And, eventually,
they are willing to dance to your tune; truth, justice the truth does come out. That's what
and fair play are alien to them... They courts are forthe truth. The judgement
have no conscience. comes later. So, feed you lawyer the truth
Except a few, in most of the cases, it and await the outcome. Good Luck.
is clear right from the beginning what
the truth is. But the cases go to the MONITORING PMS MANAGERS
court because the party which is wrong This is with regard to SEBI Ensures
is stronger and has the money power No PMS Loophole for Insider Trading
to hire the best law firms with shrewd by Sucheta Dalal. SEBI should
lawyers to armtwist or deny the rightful carefully monitor portfolio holdings in
benefits to a weaker party. PMS (portfolio management schemes)
Except for some landmark judgements schemes, twitter messages from PMS
from the Supreme Court and the high managers and their generally bogus
courts, people dont have much hope at claim about annual returns of PMS,
the lower courts... thanks to our tareek in their presentations to potential
pe tareek adjournments. Sometimes, legal clients.
cases take decades. Kumar Swamy, online comment
Shyamsunder Nambiar, online comment
Bapoo Malcolm replies: This is with regard to How the Rich & Powerful
You say you dragged Tata Motors to court. That Abuse the Legal Process by SD Israni. I agree that the
one word put me off immensely. You file a suit, ask appeal options are a major reason for the mess in our
for reliefs; dragging gives an image of a caveman judiciary. I was reading about the Supreme Court order
dragging his mate by her hair! We need to remember on the height of dahi handi! If the topmost court is
that ours is an adversarial system; all court cases going to get into such matters, one can only wonder.
are. One wins, another loses. The latter grumbles. Anil Kumar, online comment
Unfortunately. Very often, people think they are in
the right; but the law is against them. Maybe on a
technicality that the person was unaware of. It happens Errata: In the Beyond Money article on Page 66 of Moneylife
with amazing regularity. A CA (chartered accountant), magazine (Issue 29 September 2016), there is a correction and
just because he was a CA, thought he knew all the text should read as, For instance, FOHF offered financial
assistance to the widow of martyr Havaldar Channalli (who died
laws and chewed our brains with wild theories on a in Kashmir). FOHF undertook restoration of his dilapidated
six-hour journey. He was fighting his cases himself memorial for Param Vir Chakra awardee, CQMH Abdul Hamid
and, obviously, annoying the judges. So, even litigants and also gave a grant to his widow, Rasulan Bibi, to renovate her
house. The error is regretted. Editor
need to study the law; dispassionately. But thats easier

Letters: Mumbai 400 028 or faxed to 022- complaints about current 400 028 or call 022-49205000 or
Letters to the Editor can be 49205022. Letters must include subscription and books, write to fax to 022-49205022.
emailed to editor@moneylife. the writers full name, address us at
in or can be posted to: The Editor, and telephone number and may or to Subscription Manager, Unit Advertising: For information and
Moneylife Magazine, Unit No. 316, be edited. No. 316, 3rd Floor, Hind Service rates, email us at
3rd Floor, Hind Service Industries, Subscription Service: Industries, Off Veer Savarkar or call
Off Veer Savarkar Marg, Dadar(W), For new subscription requests, Marg, Dadar (W), Mumbai 91-022-49205000.

MONEYLIFE | 30 Sep-13 Oct 2016 | 10

Letters.indd 5 23-09-2016 16:53:45


Moneylife Foundations

The main objective of this helpline is to provide information, advice and preliminary guidance
to indiv
individuals needing help in credit-related areas. Our objective is to arrive at a solution that
is acc
acceptable to both the borrower and the lender. We encourage responsible borrowing.
Supported By LOA



1 Every new query posted will be sent to our

panel of experts

HOW IT 2 When we get the opinion/advice from

our expert, we will post the reply

WORKS 3 You can access similar issues faced

by other borrowers

4 Set also up a one-o-one meeting with our counsellors either

at Moneylife Foundations Mumbai oce or by Skype.
To use our credit helpline, please confirm that you have read our terms and conditions.

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

Your Money

Soon an Easier System for Senior Mutual Funds To Disclose

Distributor Commission
Citizens To Prove They Are Alive
S ecurities and Exchange Board of
India (SEBI) has asked for additional

here is a new proposal to 5 million pensioners of the Central disclosures in the consolidated account
allow senior citizens to government and a similar number statement (CAS) sent to investors by
prove that they are alive of pensioners of state governments. mutual funds (MFs), from 1 October
by just sending an email, by post, Jeevan Pramaan, as it functions 2016. These include disclosure on the
their latest Aadhaar authentication now, has enabled pensioners to gross commission paid to distributors.
statement, to the government office. authenticate their proof of existence Gross commission comprises
Ajay Bhushan Pandey, CEO, Unique using Aadhaarinstead of reporting the amount of actual commission
Identification Authority of India physically at a government office. paid by AMCs (asset management
companies) to distributors during the
half-year period against the concerned
investors total investments in each
MF scheme. Commission refers to all
direct monetary payments and other
payments made in the form of gifts/
rewards, trips, event sponsorships,
etc. CAS will have to give the schemes
average total expense ratio for the
half-year period for each schemes
applicable plan where the concerned
(UIDAI) told media persons that In Jeevan Pramaan 2.0, they can investor has invested.
it will be called Jeevan Pramaan just sit at home and send across the
2.0 and will save the pensioners statement that will be enough to
from going to a nearby centre to process their pension, said REAL ESTATE
authenticate proof of existence Mr Pandey. The finer details of
through Aadhaar. According to the the proposal will be worked out Deposit Rs12 Crore with
official website of Jeevan Pramaan, by the nodal agency for disbursing Court, SC Directs Parsvnath
10 million families in India are
pensioners, which include
pensions. We are in talks with
them, he added.

T he Supreme Court (SC) asked Parsvnath

Developers to deposit Rs12 crore with
the Courts registry in four weeks of the SC
PFRDA Approves 75% in Equity for NPS for ruling. The National Consumer Disputes
Private Sector Employees Redressal Commission (NCDRC) had asked
Parsvnath to refund money paid by 70

T he Pension Fund Regulatory and Development Authority (PFRDA) approved an

additional fund for private sector employees, enabling them to increase the
portion of their money under the National Pension System (NPS)
buyers of apartments at its Exotica project
in Ghaziabad with an interest of 12%. The
apex court refused to stay NCRDCs order
in equity up to 75%. PFRDA plans to allow private sector and asked the developer to deposit the
employees to raise their contribution in stocks, as well as money with the Court. The Exotica project
to choose private fund managers under NPS. A separate in Ghaziabad had hit a roadblock after the
fund would be launched to allow private sector employees Ghaziabad Development Authority quashed
to lower the portion up to 25% in stocks under NPS. Both a revised plan of construction. The Supreme
choices would be available up to the age of 35 years after Court came into the picture after Parsvnath
which investment in equity would be reduced every year. Developers appealed on NCDRCs ruling.

MONEYLIFE | 30 Sep-13 Oct 2016 | 12

Your Money.indd 2 23-09-2016 16:55:29


Insurance Policies To Be Issued Online repositories in the country that are

licensed by IRDAI. These include:

tarting 1 October 2016, it has CAMS Repository Services, SHCIL
become compulsory for every Projects Limited, Central Insurance
insurance company to issue all Repository, Karvy Insurance Repository
insurance policies in online format. and NSDL Database Management. The
This includes life insurance, health policyholder needs to choose one of
insurance, motor insurance, pension these.
policies and all general insurance A special feature called Authorised
policies. The policyholder will need to Representative is introduced in this eIA
have an e-insurance account (eIA) and where an investor can assign someone
the policies will be issued in demat form trustworthy, or close to the authorised
only in that account. This will apply to most of the policies, like term plans and representative, who will be able to
renewal policies as well. health insurance, or if the sum assured is access the details of the account in case
The e-account is required only if the above Rs5 lakh-Rs10 lakh. of death of the policyholder. This person
annual premium crosses Rs10,000 for There are five registered insurance may be dierent from the nominee.


Quiz no

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

draw from correct entries and answers published in the Mutual Fund investmentnt
investments are quote!
issue dated 10th November. Send in your answers to subject to market risks,
read all scheme related with the Quiz no., name, address & documents carefully.
telephone number before 19 October 2016.

1. In August 2016, what was the value of investments by all 5. What is the factor added by the Fama-French-Carhart model
equity MFs, in the top bought company, HDFC Bank? to the Fama-French model in stock market investments by
a. Rs2,350 crore b. Rs896.12 crore fund managers?
c. Rs456.37 crore d. Rs218.73 crore a. Return on investment b. Return on capital employed
c. Momentum d. Shifts in currency market
2. How many PSU oil companies were there in the list of most
sold companies by all equity MFs in August 2016? 6. What is the lowest tariff in the prepaid subscription plans of
a. Four b. Three Reliance Jios service?
c. Two d. One a. Rs500 b. Rs250
c. Rs99 d. Rs19
3. What is alpha, in the capital asset pricing model?
a. Return on investment 7. What is the meaning of primum non nocere?
b. Measure of the return on investment as compared to a a. First heal the patient
suitable market index b. First start the prescribed treatment
c. Price-earnings ratio as a percentage of a market index c. First do no harm d. First study the symptoms
d. Weighted average of return on investment of index shares.
8. Which Section of HIR 216 says that the TPA has to
4. What is the function of the app Salient Eye? transfer the claims document to the insurer for a decision?
a. Phone camera b. Home security system a. Section 35(a) b. Section 40(a)
c. SMS storage system d. News compiler c. Section 26 d. Section 80-G

In all, 15 readers got all the answers right last time.

The winner of Quiz-240 is RA Murali Mohan from The answers to Moneylife Quiz-240 are: 1- b. Anchoring
Bangalore. Congrats! You win a personalised clock with 2- a. Information Technology 3- d. Nadge Krebs 4- c. Tractors
an investment quote! 5- b. 29.73% 6- a. Artem Vaulin 7- d. Axis Bank 8- b. 9.87%

13 | 30 Sep-13 Oct 2016 | MONEYLIFE

Your Money.indd 3 23-09-2016 16:56:01

Trusted to keep
Your Saving Safe

Magazine Subscription revised 28 April 15.indd 2 23-09-2016 18:18:24

Our boldness comes at a small price Guer Ctopy
Print + Digital subscription

Here is how you benefit

1. Avoid the traps of mis-selling which

w burn a hole need financial hhelp.
elp. So, Moneylife is extremely
in your savings
savings useful for NRIs too
2. Get our ffair
ir and unbiased information
info mation with no 5. Automatically be
be a member of Mone
hidden agenda Foundation and receive our daily newsletters
3. Access the magazine online at the same time it 6. Automatic basic membership of Moneylife
hits the stands Advisory Services, financial advisory service
4. Persons of Indian origin have family here who

Period No. of Issues Cover Price

1Year Subscription 26 Issues Rs1,170



NAME: ______________________________________________________________________________________ GENDER: ___________________

ADDRESS: _____________________________________________________________________________________________________________

PHONE: (Office):_______________________Phone (Res): _________________________E-mail address: ______________________________________
DATE OF BIRTH: _______________________(MM) (DD) (YY)
PROFESSION:_________________________DESIGNATION: ________________________

( ) Please find enclosed ( ) Cash ( ) Cheque / ( ) Demand draft number ____________ Dated: _____________ for Rs1,170 Favouring Moneywise Media Pvt Ltd

DATE: _________________ SIGNATURE: ________________________________

Add Rs50 extra for outstation cheques

Please fill in this order form and mail it with your remittance to Moneywise Media Pvt Ltd, 316, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W),
Mumbai 400 028. # Rates and offers are valid in India only. #Please allow 2 weeks for the delivery of your personal copy. #All disputes shall be subject to Mumbai jurisdiction only.

Introduce a friend: Fill in the details below & we will send a free copy to your friend. *
Name: ___________________________________________________________________________________________________________________________
Address: __________________________________________________________________________________________________________________________
E-mail: _______________________________________________ Tel: ___________________________
*Free copy will be sent only to addresses which can be verified prior to sending

Magazine Subscription revised 28 April 15.indd 3 25-08-2016 20:49:37
Exclusive news & views with a big dierence

NSE ordered to appoint SEBI also asked the Exchange to deposit

in an escrow account all revenues from
auditor to investigate the practice, including fibre connectivity
wrongdoing and between co-location facilities of brokers
deposit unlawful gains and their oces, the report from
in escrow account: Economic Times added.
Quoting an ocial from the NSE, who
Reports did not want to be named, Livemint, in
The market regulator, Securities its report, says, We have been asked to
and Exchange Board of India (SEBI), has examine allegations of unfair access submit a report within three months. We
ordered the National Stock Exchange to the Exchange for some brokers in will get the issues raised by the regulator
to appoint a third-party auditor to algorithmic trading, say media reports. by a third party external agency.

CIC calls father for hearing eight months after ML FOUNDATION

comatose son dies
Despite the delay, and after his sons death, Ingle (the father) says does
Why policing requires reforms
not matter if my son has died. I still want to know what was the sequence
and accountability for a better
of events that led to his death
civil society

SEBI puts a brake on crowdfunding

The Securities and Exchange Board of India (SEBI) has issued a warning
and asked investors to stay away from participating in fund-raising through
digital platforms

QNet: Supreme Court rejects anticipatory bail

applications of five, including Michael Ferreira, Suresh
The Supreme Court rejected anticipatory bail applications of five accused
in the multi-crore QNet scam While talking about police reforms and
accountability, we need to make sure
that there is an eective mechanism
Where does RCom-Aircel stand after the merger? like allowing people to register
The merger of the wireless business of Reliance Communications (RCom) complaints without making them face its
with Aircel Limited (Aircel) is a key milestone in the ongoing consolidation consequences , said senior counsel Mihir
in the telecom sector, says India Ratings and Research (Ind-Ra). The Desai. He was speaking at the 9th session
combined entity RCom-Aircel will now be the third largest telecom entity under the Police & You series.

EXCLUSIVE VIEWS On issues that matter to you

Asset reconstruction companies Noise pollution and road or train If you see Pink, you will see Red Why business needs to focus on
in India at an inflection point rage in Mumbai Bapoo Malcolm disabled, pregnant women and
Rajendra M Ganatra Sumaira Abdulali senior citizens Dr Ketna L Mehta

For the latest news, exclusives and reports on our activities TO GET THIS AND MUCH MORE INSTANTLY, SUBSCRIBE TO OUR DAILY & WEEKLY

Web Content.indd 1 23-09-2016 16:56:54

Advertisements.indd 6 23-09-2016 17:07:17
Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal

SEBI Finally Cracks down on NSEs Suspect

Algo Trading; Algo Revenue to go into
Escrow Account

he story that began on 19 June 2015, when was dismissed by the order of Justice Gautam Patel of
Moneylife published a whistleblowers letter on the Bombay High Court which also imposed costs of
manipulation and collusion with select players Rs50 lakh on the Exchange. The NSE had appealed
in algorithm (algo) trading and use of co-located (Colo) the order and a division bench issued a stay on the
servers at the National Stock Exchange (NSE), seems payment of costs; the matter is in a limbo ever since.
headed to a conclusion. Almost immediately after the stay, the report of
On 9th September, the Securities and Exchange SEBIs technical advisory committee became available
Board of India (SEBI) wrote to NSEs new chairman, to the media and it confirmed all the whistleblowers
Ashok Chawla, asking the NSE to immediately allegations. But the NSE, which had always denied
initiate an independent examination (including forensic wrongdoing, continued to aggressively defend
investigation by an external agency) of all the concerns itself and, according to one media report, had even
highlighted by the SEBI expert committee in its report rubbished and challenged the findings of SEBIs expert
alleging lack of process that allowed this to happen committee.
and collusion if any and fix accountability for the Some former regulators wonder at the absence of a
aforesaid breachess covering NSE and stock brokers, formal show-cause
show cause notice to the NSE in such a serious
vendors and outsourced
ourced entities involved in the issue. matter. They are also intrigued by th the fact that the
Apart from a forensic investigation, the most NSE has been asked to inv investigate its own
significant punitive
ve aspect of SEBIs directive is actions and act on the possible collusion
that all revenue accruing
ccruing from its co-location of its officials with tthose who
facilities, includingg from fibre connectivity obtained unfair ac access to the system.
between brokers co-location facilities and their How feasible is th that, in a closed,
offices, must be paidaid into an escrow account. secretive, unlisted entity? However,
The NSE has been n asked to get all concerns directly connected to
my sources, direct
expressed by the committee addressed, and emphatic that SEBI
the action, are emp
take necessary action,
tion, within three months. concluded that there was
has already conclud
There are several
eral interesting queries that wrongdoing and the NSE has only to
arise out of the regulatory
egulatory action finally going identify the persons re responsible and act.
public. Remember, r, the NSE had filed action was possible
Even this actio
a Rs100-crore defamation
famation suit overcoming stiff and
after ove
against Moneylifee and this powerful resistance, we
writer for publishinging are told.
the whistleblowersrs While SEBI has
letter. Its attempt asked the NSE
Ashok Chawla, chairman NSE
to gag Moneylife to deposit the

MONEYLIFE | 30 Sep-13 Oct 2016 | 18

MONEYLIFE | 27 November 2014 | 14

Crosshair.indd 2 23-09-2016 16:58:18

revenue accruing from co-location into an escrow to provide preferential access to certain brokers, or
account, market sources are unclear how this would be worse, those who obtained a dark fibre link to give
calculated. SEBI has not disclosed its action through a themselves faster access and bigger profits?
clear press release. An exchange, typically, earns over It may be recalled that the first whistleblowers
60% of its revenue from listing fees and transaction letter specifically mentioned OPG Securities as
charges. In the NSEs case, its income is now in the a beneficiary. This was confirmed by the SEBI-
region of Rs2,000 crore. However, co-location fees are appointed expert committee. The third letter from the
unlikely to be over Rs20 crore. On the other hand, whistleblower of 3 October 2015, signed by Ken Fong,
if SEBI asks for transaction charges accruing from made a more alarming charge. It said that AlphaGrep,
co-located servers to be included, then the amount a Singapore-based HFT (high frequency trading) trader
going into the escrow account will be nearly (connected to Ways2Wealth, which is, in turn, a part
Rs1,000 crore. of the Caf Coffee Day group) had access to a near
This is bound to have an impact on its Rs45,000 dark fibre link through a company called Sampark
crore valuation and affect the interest of existing Infotainment which allowed it faster access and a big
shareholders until the investigation is completed. My increase in market share.
sources insist that co-location fees and transaction But, he alleged, since Sampark Infotainment did not
charges will have to be deposited into an escrow qualify to be an ISP, there was a post facto attempt to
account. Since the NSE is working on an initial legitimise an illegal activity by brokering an agreement
public offering (IPO) and has already appointed four between Sampark and Reliance Infocomm. All the
investment bankers, there players mentioned above have
Chitra Ramkrishna,
will either be a pressure to CEO NSE issued denials to the media.
complete the investigation However, SEBIs technical
and clean-up before the issue, advisory had said, With
or it would mean a delay in regard to the issue of dark
the listing. Interestingly, three fibre, the committee was of the
of the four lead managers view that, in violation of its
Citibank, Kotak Bank and own policy on allowing only
Morgan Stanley, have a stake ISPs, NSE allowed non-ISPs
in the NSE and, hence, a direct like Sampark (Infotainment),
interest in the valuation and to lay fibre in its premises for
pricing of the IPO. various members.
It may be recalled that Will there be a separate
SEBIs technical advisory committee (TAC) had investigation into these beneficiary entities? Or will it
appointed a committee comprising experts from be part of the NSEs inquiry in the next three months?
IIT Mumbai to investigate three letters from a Nobody knows. Strangely enough, the regulator has
whistleblower, of which the last was sent to the not bothered to make a full disclosure of its action,
regulator by me, while the first two letters were even though the NSE has a near-monopoly over trading
addressed to SEBI and copied to me. in India and is among the top five exchanges in the
In April 2016, a Bloomberg report said that the world. Surely, investors have a right to understand
NSE planned to challenge SEBIs findings and insisted what the bourse on which they trade, which is also a
that there was no wrongdoing at all. The report also first-line regulator, has been pulled up for.
quoted anonymous sources connected with the NSE The fact that SEBIs action against the NSE has
on its stand that the committee had, simply repeated repeatedly taken the form of media leaks also indicates
allegations made by an unidentified whistle-blower that the market regulator, which mandates, regulates
without doing a thorough investigation. This time, and supervises disclosure and transparency by listed
however, the NSE has not reacted to SEBIs directive. companies and market intermediaries, is rather fuzzy
Media reports quote the NSE chairman Mr Chawla about the logic and need for disclosure.
as merely confirming the receipt of the letter with no Someone needs to tell the regulator that transparent
mention of whether the bourse planned to challenge action and full disclosure, no matter how powerful
the order before the appellate tribunal. An email from the parties involved, is essential for building investor
Moneylife to the NSE on its reaction was not answered confidence in regulation and supervision. Selected leaks
at the time of writing this column. only lead to needless speculation and mis-reporting.
While a forensic investigation into wrongdoing, This pussyfooting over action and investigation also
and possible collusion at the NSE, is a good first step, confuses SEBI employees, who are already agitated at
the bigger issues is: What happens to the beneficiaries being made the scapegoat of decisions taken by the top
of NSEs faulty system that could be manipulated brass.

19 | 30 Sep-13 Oct 2016 | MONEYLIFE

Crosshair.indd 3 23-09-2016 16:58:38


Wells Fargos of India neither

Get Caught nor Pay a Price

ne of Warren Buffetts favourite investee charged for insufficient funds or overdraft fees, because
companies is caught cheating customers and the the money was not in their original accounts. Customers
senior management, who benefited the most from were also billed annual fees, interest and other charges for
it, reacts by sacking 5,300 employees. But is Wells Fargo unauthorised credit cards opened in their names. The bank
alone in squeezing profits by cross-selling and mis-selling is now in the process of reimbursing approximately $2.5
financial products? Dont we continue to have similar million to customers who were duped, without requiring
problems in India with no system in place to catch the any action from the customers themselves.
culprits or force them to cough up hefty penalties? Readers would recall that the most profitable and
Let us first look at what Wells Fargo did. In the five aggressive banks in India (mainly private and foreign ones)
years since 2011, employees of the bank opened over did a much of what Wells Fargo is accused of, right until the
1.5m (million) bogus deposit global financial crisis of 2008.
accounts, 565,000 credit-card Most of them were forced to
accounts and unwanted debit clean up their act by the then
cards, without the consent of Reserve Bank of India (RBI)
clients. governor Y Venugopal Reddy
They also created fake and they did it by taking a hit
e-mail addresses to enrol on their books and selling their
people for online banking and bad loan portfolio to recovery
generated PINs to activate agents and asset recovery
unauthorised debit cards. companies.
All this was done to meet Nearly 10 years later,
stringent cross-selling targets Moneylife Foundation
that were part of the banks continues to hear about
strategy. It has, since, fired customers who are harassed
5,300 employees who it held John Stumpf, CEO, Wells Fargo by recovery agents or struggle
accountable for opening these Media reports are now suggesting with poor credit records, mainly
dubious accounts. because of poor financial
that many employees, who
Media reports are
attempted to blow the whistle and awareness.
now suggesting that many Heres one latest example,
employees, who attempted to
refused to open such accounts or with names changed. Rajesh
blow the whistle and refused to pointed out to their illegality, were has an account with two leading
open such accounts or pointed also fired by the bank private banks. He is a careful
out to their illegality, were also customer who also insists on
fired by the bank. controlling risk on his debit
The Consumer Financial Protection Bureau (CFPB), a and credit cards, by insisting on a ceiling of Rs40,000
watchdog body set up in US after the global financial crisis on withdrawals as a precaution. A month ago, he sold
of 2008, brought the scandal to light. Wells Fargo has paid a property, leading to a huge cash injection of Rs1 crore
up a fine of $185 million. Of this, $100 million was levied into his savings account.
by CFPB which accused the bank of widespread abusive A couple of weeks later, on 9th September, two thick
and illegal sales practices dating back to the beginning envelopes came, via a courier who asked Rajesh for
of 2011. identification as they contained a credit card and debit
The CFPB investigation revealed that Wells Fargos card. Since Rajesh had not applied for either card, he
employees had transferred funds from customers existing refused to accept them.
accounts into new accounts created without their knowledge As a matter of abundant caution, he wrote to the banks
or consent. Worse, this led to some customers being senior management informing them about his refusal to

MONEYLIFE | 30 Sep-13 Oct 2016 | 20

DIFFERENT STROKES.indd 2 23-09-2016 17:31:40


accept unsolicited cards. The main objective was to ensure will be reversed forthwith and a penalty equal to twice the
that the cards, printed with his name on them, are properly value of charges will be paid without demur.
destroyed and dont fall into wrong hands. He also pointed The victim can also approach the banking ombudsman
out that a higher card limit increases his own risk if it is to claim a compensation for loss of time, harassment,
misused. Moreover, he said, it was his understanding that mental anguish, etc. Is it any surprise that the bank is
RBI specifically banned unsolicited cards. Now, there is simply denying that it continues to send out unsolicited
a strange twist. credit and debit cards in complete violation of the RBI
The bank responds to say that it has checked with the circular? And, it has been getting away with it too, because
leading courier company handling its work and there was consumers do not know the rules or their rights.
no delivery for Rajesh on 9th September. It also claims that In fact, every time a bank upgrades your card and
it has not issued any cards to Rajesh. Is this believable? It enhances your credit or withdrawal limit (in case of a debit
is even more worrisome. Is the bank fudging facts because card), it also increases your risk, when things go wrong.
it knows it has no business sending out unsolicited cards? The misuse of debit cards is so widespread that RBI has
Most likely. Here is probably why the cards were issued. recently put out a draft notification seeking to limit the
Every Indian bank has automated systems to monitor liability of innocent victims and to transfer the burden of
clients savings accounts, to spot opportunities to sell a host proving customer liability on to banks.
of financial products (mutual funds, hybrid investments, Over the past few months, RBI deputy governor
insurance, wealth management SS Mundra has repeatedly
services and credit and debit pulled up banks for their
cards). shabby treatment of consumers,
A large sum in your savings rampant mis-selling of third-
accounts immediately alerts party products and flagrant
the entire system to target the violation of the customer code
individual. It happened to the of the Banking Codes and
singer Suchitra Krishnamoorthi Standards Board of India.
when she got a large divorce And, yet, when it comes to
settlement that was, later, action, India has nothing like
systematically ripped off the CFPB which nailed Wells
under a wealth management Fargo and forced it to pay a
programme; Rajeshs property hefty fine. Or a situation where
sale proceeds would have a bank CEO is hauled before
triggered a similar alert. a parliamentary committee
The first stage of softening RBI deputy governor SS Mundra on live television, like the US
the customer is to flatter him has repeatedly pulled up banks... congressional hearings in this
with high-value plastic (a And, yet, when it comes to action, case.
platinum, titanium or credit card Forget about live televised
India has nothing like the CFPB
of similar nomenclature). The grilling, RBI has yet to name or
which nailed Wells Fargo and
next is to send over a smooth, punish a single bank for failing
glib-talking, jargon-spewing,
forced it to pay a hefty fine to treat consumers fairly or
investment expert along with to single out egregious cases
the relationship manager to for exemplary action. On the
pitch investment ideas based on risk assessment. Rajesh contrary, RBI insists that it has no power to punish banks
had such a session too. and financial intermediaries. Earlier, we were told that RBI
Now, heres the worry. If the bank had merely said, did not have a structure and framework for initiating such
sorry to have bothered you; we will destroy the card, the action. But, even after it has put in place a framework in
matter would have ended right there. But the elaborate the form of a Consumer Charter, RBI has ensured that it
effort to claim that no card was sent at all suggests that the remains toothless by making no attempt to frame polices
bank knows it is flouting RBI rules and trying to cover up. for punishment and compensation.
So we checked out RBIs master circulars. The key directive,
under the right to privacy section says, unsolicited cards Sucheta Dalal is the managing editor of Moneylife. She was
should not be issued; if issued, activated (without the awarded the Padma Shri in 2006 for her outstanding contribution
written consent of the recipient) and billed, then charges to journalism. She can be reached at

21 | 30 Sep-13 Oct 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3 23-09-2016 17:32:09


Hot and Cold Stocks of Mutual Funds in August 2016

Equity mutual funds together sold about Rs2,350 crore worth of Axis Bank shares. There was
a huge demand from foreign investors for the shares of Axis Bank, Yes Bank and BPCL due to
the rebalancing of the MSCI global indices and increase in FII limit. HDFC Bank, State Bank
of India and ICICI Bank were among the top three most bought stocks. The shares of Sun
Pharmaceuticals and Reliance Industries were also in demand

Top Bought Companies Top Sold Companies

Company Name Value Company Name Value
(Rs Crore) (Rs Crore)
HDFC Bank 896.12 Axis Bank (2,358.79)
State Bank of India 281.26 HPCL (456.37)
ICICI Bank 274.68 BPCL (323.95)
Sun Pharmaceuticals 254.64 Grasim Industries (310.78)
Reliance Industries 167.07 Yes Bank (251.69)
Mahindra & Mahindra 166.40 Indian Oil Corporation (219.87)
Gail (India) 153.12 HDFC (218.73)
Hindustan Unilever 136.94 Pidilite Industries (166.94)
Wipro 121.29 Larsen & Toubro (163.72)
LIC Housing Finance 108.83 United Spirits (156.35)
HDFC Mutual Fund
Rural Electrification Corporation 115.88 Axis Bank (420.22)
Atul 91.18 Bayer Cropscience (112.42)
Power Finance Corporation 75.45 BPCL (104.29)
Beml 70.06 Infosys (63.29)
ICICI Bank 52.09 Reliance Industries (59.65)
ICICI Prudential Mutual Fund
HDFC Bank 650.56 Axis Bank (1,220.54)
Sun Pharmaceuticals 249.72 Hero MotoCorp (134.89)
Reliance Industries 223.05 HCL Technologies (119.55)
Hindustan Unilever 160.28 Grasim Industries (118.24)
Infosys 146.79 Cognizant Technology Solutions Corp (108.48)
Reliance Mutual Fund
ITC 107.60 Axis Bank (335.04)
Larsen & Toubro 92.24 Lakshmi Machine Works (99.38)
Ashok Leyland 61.24 Indian Oil Corporation (85.50)
Cipla 58.71 Trent (52.49)
Tata Steel 48.59 Abbott India (50.28)
Franklin Templeton Mutual Fund
Lupin 162.72 Larsen & Toubro (215.37)
HDFC Bank 98.96 Axis Bank (128.59)
Bharti Airtel 87.41 HDFC (101.47)
HT Media 43.05 Ultratech Cement (62.06)
Coal India 41.49 IndusInd Bank (42.51)

MONEYLIFE | 30 Sep-13 Oct 2016 | 22

Fund Facts.indd 2 20-09-2016 18:01:06


G-Secs investment made easy, but is it enough?

nvestment in Government met with similar results. demat form and transfer it to the
Securities (G-Secs) for retail To improve the bond market, account of the demat-holder.
investor has, traditionally, been RBI has allowed retail investors With the current G-Sec yields
through the mutual fund (MF) to invest directly into G-Secs. at their lowest in seven years,
route. With rate cuts by the Reserve All demat account-holders of will retail investors really be keen
Bank of India (RBI) for more than depositories NSDL and CDSL can now? What else will keep the retail
one year, MFs exposure to G-Secs transact in G-Secs through the investor away? First, the tax rates
has been on the rise. Investment on interest is the same that you
through the MF route (growth pay for bank FDs; this makes MF
option) is still a good option, due to schemes the preferred route. Second,
tax efficiency. The long-term capital there are products, such as PPF
gains on bond funds are taxed at (public provident fund) and NSC
20% with indexation benefit. (national savings certificates) which
G-Secs are the safest instrument are popular with retail investors.
available for an investor, with Third, those in the 20% or higher
maturities of one year to up to 30 tax bracket find tax-free bonds
years. Buying G-Secs directly is more attractive. Those in the zero
rarely explored as an investment trading platform of RBI. Retail to 10% tax bracket buy taxable
option by retail investors, due investors having demat accounts bonds which have higher yields.
to numerous reasons. It is not can ask their depository participants Fourth, there is no initial public
as easy to buy them as it is to (DPs), who are also primary offer (IPO) route for G-Secs like it
open a bank FD (fixed deposit) members of Negotiated Dealing is available for taxable and tax-
or invest in an MF scheme. IDBI SystemOrder Matching (NDS- free bonds. IPO offers are easy for
Bank has launched Indias first OM), to place orders on their behalf investor to understand and know
online G-Sec web portal Samriddhi on the NDS-OM trading platform. the rate of interest that will be paid
(, to The Clearing Corporation of India for the specified term. Secondary
promote retail investment in G-Secs. Ltd (CCIL) maintains the NDS-OM market pricing, volumes and yield
But this route has not attracted on which banks and primary dealers information are difficult for a
retail customers so far. Axis Banks transact in G-Secs. After order layman to understand. There is also
online facility to enable retail execution through the DP, CCIL broker commission to be paid for
investors to invest in G-Secs has also will convert the bond holding into buying and selling.

G-Sec Yields Down

Issuer Maturity Next Last Yield ISIN Rating

Date Coupon (%)
he 10-year benchmark G-Sec yield,
which sets the tone of the fixed- Apollo Hospitals 22 Aug-28 22 Aug-17 9.86 INE437A07104 CRISIL AA
income market, declined steeply, by 25 Dewan Housing Fin 9.74% 09 Jun-17 09 Apr-17 9.15 INE202B07EG8 CARE AAA
basis points (bps), in the last fortnight,
to end at 6.86% on 16th September. ICICI Lombard GIC 8.25% 28 Jul-26 28 Jul-17 8.24 INE765G08012

NSE data as of last trade date of 16 September 2016

G-Sec Maturity Yield to
Date Maturity Dewan Housing Fin 9.25% 09 Sep-23 09 Sep-17 9.30 INE202B07IO3 CARE AAA

12 December 2041 7.31 Indiabulls Housing Fin 9% 30 Jun-26 30 Jun-17 9.12 INE148I07FG5 CARE AAA

30 September 2030 7.28 CARE AAA

Reliance Capital 9% 09 Sep-26 09 Sep-17 8.99 INE013A079D5
(Credit Watch)
02 June 2028 7.25
G-Sec yields on 20 September 2016 BSE data as of last trade date of 16 September 2016

23 | 30 Sep-13 Oct 2016 | MONEYLIFE

Fixed Income.indd 1 23-09-2016 17:10:26


Margin of Recklessness

very equity portfolio is constructed differently. Each in Delhi; there are new rules; the Goods & Services (GST)
investor thinks differently and, to that extent, the Bill has been passed and, so, stocks are great.
outcomes differ, performances differ. When the Fundamentals get ignored, in the process. This happens
market hits rock bottom, everyone first loads up with when the markets are down, up or flat. Crowd behaviour
heavyweights, the proven large-caps, seeking safety in that drives markets does not respect fundamentals.
established names. These stocks are the ones that rally Investors are either on speed or on depressants. Nothing
first and lead the surge in indices. While this is happening in between.
currently, the smaller companies stocks are languishing. Against this backdrop, building an investment portfolio
Smart money then starts moving to this area. that endures is helpful, if you think equities is serious
Once the main indices shoot up, big money starts business. And you also realise that preservation of capital
chasing small things. It is ironical that the structure of has some relevance. This would mean that we have to
industry is such that every large investor wants investible construct a portfolio of stocks that can withstand most
ideas defined by size and liquidity. They want minimum downturns. I am not saying that I can help construct
ticket-sizes and are compelled to first chase the large-cap a portfolio that is always rising. Every stock can fall.
stocks. Only then, attention shifts to smaller ones which However, the thoughts behind a portfolio construction are:
shoot up rapidly with small amounts of investments, given i) Capital preservation, to the extent possible; and
their inherent illiquidity. ii) Take some chances for super-normal returns.
The smaller companies hog the limelight for some Boring as it sounds, I assume that investment in equities
time. Everyone has his/her own stories that they discover. is with the money you can spare for 20-30 years. It can
Logic takes a back seat. Momentum m go up or down,
d but largely up, during these
matters. As more people join the years. The objective is to get a return
bandwagon, everyone feels like that will beat inflation. To sell
a genius. The smaller stocks keep it, you need a separate plan. You
hitting the upper circuit repeatedly do not decide, on one fine day,
and the stock market seems like that you want to sell. Just like we
a one-way street. Everyone is cannot get the best results by
talking about India having the buying without a plan, we are
highest growth rates, while others unlikely to get the best results
are slowing down; global trade is on selling without a plan.
shrinking and commodity prices To do this, it is useful to
are not recovering. understand how the market
It is like saying that the one- behaves and use crowd behaviour
eyed is king when the world is blind. We seem to be great to ones advantage rather than being part of the crowd.
because China is slowing down. We seem to be great Do not worry about where the crowd will come from if
because Europe seems headed into a recession. Right everyone were to become smart. There is always a herd.
statements, perhaps. But are these valid reasons to take New crowds are mobilised every day. A bull market is a
exuberance to new levels in the Indian markets? One party to which latecomers never stop coming.
interesting thing is that everyone seems to be very wise As an investment strategy in such a market, I will
about the market risks and seems to know every market divide my investments into two buckets. Let us call one
move in advance. bucket Core and the other chance. How much does
Market movements, of the recent couple of years, have one allocate to each one? Well, that would depend on the
actually brought back greed into the market. Maybe we money you have, your need to save, your need to provide
are in a multi-year bull run. Ah, you say, let us ignore for someone and the circumstances you are in. And, of
fundamentals. Our markets have seen P/Es of 40+ and we course, your attitude and tolerance would be key factors.
are nowhere near that. And, of course, it is a new regime Someone, who is well off, well provided for and not

MONEYLIFE | 30 Sep-13 Oct 2016 | 24

column_Balakrishnan.indd 2 20-09-2016 17:56:00


worried about tomorrow, could have as much as he wishes than, the nominal GDP growth.
in the chance bucket. The core bucket will be filled with By nature, these are growing companies, probably,
stocks of companies that are established names, high- they have a low level of fan following, poor liquidity and,
quality businesses, leadership positions and long history. while they may be easy to buy, the impact cost of buying
These stocks, if bought right, can give you market to or selling is very high. What it means is that you could
above-market returns. They will never rise too high nor fall easily have a difference of anything up to 5% of the quoted
too low (or, even if they fall too low in panic, remain so). price, should you decide to buy or sell modest quantities.
These are liquid stocks. They are preferred by Thus, your calculation of returns and realisable returns
institutional investors and very well researched. Most will have a gap. Hence, the returns have to be large enough
probably, these companies deal in goods or services that to absorb this factor of impact cost.
are easily understood and have brands that command This satellite portfolio is a high-reward high-risk
leadership positions. They rarely disappoint in terms of investment plan. Of course, if you are what is referred to
performance. It is very unlikely that they will give you in poker as a high roller, you make your own rules. For
shocks either. you, core and satellite are irrelevant. What you seek is
In a bull market, these companies will lead the rally excitement and so you have only these satellite stocks.
and, at some point, will just stagnate for a long time. When Make sure you always live to fight another day.
the bull run is over and the decline starts, these stocks will Thus, portfolio quality, diversification, etc, are personal
also fall, but its unlikely that they will crash to nothing. preferences. For those who live by an Excel sheet and like
Being large in size and being liquid, they will always find textbook-style investing, it is good to stick to high-quality
buyers at every level. They are generally shock-proof and stocks or mutual fund investments.
considered as core holdings. What is useful to understand is that, when there is
The core is, thus, a universe of high-quality, proven euphoria, the small horses run very fast. And they also
companies. The worry about company performance over slip back very rapidly, should the euphoria disappear. In
a long term is minimal or chance. an illiquid stock, when the selling comes, you do not have
The other one is the satellite group. Here, we put in sufficient buyers. So, such stocks will just disintegrate in
our wealth-creating ideas into action. We buy a group price. At the top of the bull market, it makes sense to
of small company stocks hoping that some of them will shift out of the satellite kinds and move into the core
emerge as multi baggers and give CAGR (compounded type of stocks.
annual growth rate) that could be upward of 25% per It all narrows down to being aware and keeping a close
annum. track. Cut out the noise. Look at valuations. Keep a goal
We know that the mortality rates in these stocks are (for buying the stock) in mind. Unless things have changed
going to be high. However, these are stories which, I think, with the company, do not worry much about macro issues.
will play out over the next 10 years or so and, hence, I Markets are not designed to behave according to logic or
am not going to disturb this portfolio. These companies design. Understand Mr Market and take advantage.
have the potential to become leaders in their industry.
They have growth rates which could be twice, or more The author can be reached at

Whats Your Bahana for Not Subscribing?

I am not interested in honest & insightful advice on money matters

I never have any problems with banks, credit-cards or insurance companies

I always invest on the basis of tips from friends and brokers

For subscription offers
Finance bores me to tears that are a steal, look for
a form elsewhere in this
I would rather spend two years of knowledge on one evening of eating out
issue or our website at
I always buy from the newsstands

25 | 30 Sep-13 Oct 2016 | MONEYLIFE

column_Balakrishnan.indd 3 20-09-2016 17:56:26

the present value of the declared
bonus can be so low that trying to
revive a paid-up policy may not
yield attractive returns, after all.


New products, regulations, features and options, New India

interpreted from your perspective Assurance Told To
Pay for Theft of
L i f e i n s u r anc e force for 20 years or more. For Mobile
newer policies, of less than five
LICs One- years since inception, the bonus
amount is a pittance. It is highest T he Amritsar District Consumer
Disputes Redressal Forum
time 60th Year for policyholders who have a policy has directed New India Assurance
Anniversary Bonus in force for 30 years or more; this
would constitute only a small
(NIA) to pay the cost of the
mobile phone (Rs61,000) and

L ICs one-time diamond jubilee

bonus made big news and will
boost the selling pitch by agents.
portfolio for LIC. The bonus is only
for for profit policies. It is not for
non-participating plans.
compensation of Rs5,000 along
with Rs2,000 as litigation expenses.
NIA had given a written reply to
Is LIC being generous to its 290 Moreover, the one-time bonus is the consumer forum
million customers as its claim not going to be paid to the insured stating that the
suggests? It may be, for a select immediately. It will be added to complainant was
few. The bonus is a decent amount the policy just like other bonuses not a consumer
for policies which have been in which may be declared during the of theirs and, as
policy term. For example, a Jeevan such, he had not
Anand policy, purchased in 2013 paid any premium
for sum assured of Rs5 lakh and a to the firm.
policy term of 25 years, will have This raises a
one-time bonus of Rs2,500. This serious
amount of Rs2,500 bonus will be concern
realised when the policy matures on how
(after more than 20 years) or the mobile
policyholder dies. The discounted insurance
value of Rs2,500 which will be paid is peddled to
Better Bonus for Older after several years is very low after innocent mobile buyers and the
Policies considering the impact of inflation. ways in which insurers try to avoid
Policy Inception during the Bonus The one-time bonus is paying claims. It is important to
Period Rate
(Rs)* applicable for policies in force as ascertain if the entity selling mobile
of 31 March 2016 and maturing insurance really has any business
1 April 2011 to 31 March 2016 5
on or after 1 September 2016. agreement with the insurance
1 April 2006 to 31 March 2011 10
Policies lapsed as of 31st March will company. This can be difficult,
1 April 2001 to 31 March 2006 15 be eligible for the bonus provided as the buyer usually relies on the
1 April 1996 to 31 March 2001 25 they are revived subsequently. It mobile shop to sell an authentic
1 April 1991 to 31 March 1996 35 means that another objective of insurance policy.
1 April 1986 to 31 March 1991 45 LICs bonus is to help revival of The shopkeeper sold the mobile
Up to 31 March 1986 60 lapsed policies. Agents may go into insurance from Smart App Shield
*One-time bonus rate per Rs1,000 sum an overdrive to push customers to which claimed to have insurance
assured revive lapsed policies. However, arrangements with NIA. The policy
there is a need to understand that was sold for Rs2,299 to cover

MONEYLIFE | 30 Sep-13 Oct 2016 | 26

Insurance.indd 2 23-09-2016 17:08:56


the risk of theft, breakage, water would also be portable), as per Group Insurance, from time to
damage, etc. The mobile phone of Schedule I, Section(1) & (18). time.
the complainant was snatched by Free-look in period is 15 days as Whether a group of seven
unknown persons; a complaint was per Section 14. members is too small for group
lodged with police. The consumer Cumulative bonus amount has insurance is debatable, considering
forum examined the customers to be clearly mentioned in the the amount of losses with group
copy of the insurance policy and policy, as per Section 16(i). cover. But even a big group
the police complaint along with All disclosures as per the new can inflict huge losses if it is
untraceable report, to come up regulations have to be included not underwritten with justified
with its decision. It found that the in the policy document, as per premium. It has been happening for
insurance claim was denied without Section 28. not just government schemes but
any reasonable excuse. For multiple policies, claims even for private ones.
under other policies can be made National Insurance had
Regulations after exhaustion of the sum extended health insurance cover
insured in the earlier policy, as for Jain International Organisation
Regulations per Section 24 (ii)2. The option
to choose will remain with the
(JIO) members since September
2014. Moneylife had written a
2016: Mediclaim insured. There is no contribution couple of articles one of which
Policyholders clause. was titled Health Insurance:

Group Insurance for Jains with
Re gulations Taxpayers Money? It was a
no-brainer, considering that

H ealth Insurance Regulations Group Insurance National Insurances premiumof

(HIR) 2016 addresses the issue
of mediclaim policyholders rights. Can Be for Just Rs7,200was a throwaway price
for a family floater policy of Rs5
Here is what you need to know: Seven Members lakh covering the proposer, spouse,
Premium for individual policies two dependent children and two
cannot be increased at renewals
in an arbitrary way, especially
after a claim is made, as per
G uidelines for group insurance
policies had already stated:
No Group Health Insurance Policy
parents up to the age of 80 years.
The comparable premium for retail
policyholders was Rs30,000 or so.
Section 25(i). shall be issued by any Insurer With the incurred claims
There will be no change in where a Group is formed with the ratio (ICR) of 300% in a year,
premiums in individual policies main purpose of availing itself of Moneylife stands vindicated for
for three years after the initial insurance. There shall be a clearly questioning the policy pricing
offering of the product, as per evident relationship as specified which no other media dared to ask.
Section 10(c). by the Authority from Did National Insurance
Insurers cannot force a consumer time to time between sack any employee
to shift to other product as per the members of or did Insurance
Section 11(c) and 17. the group and Regulatory and
All policies will be ordinarily the group policy Development
renewable under Section 13. holder. Authority of
The customer information sheet HIR 2016 adds India (IRDAI) take
must be a part of the policy The Group shall have any action against
document, as per Section 26. a size as determined by National Insurance
ID card to have logo of the the insurer which shall for underwriting at
insurance company (not of the be applicable for all such a throwaway
third party administratorTPA) its group policies, price? Unlikely;
and the card may be permanent, subject to a minimum but it is certain that
as per Section 30(f). of 7, to be eligible for issuance of taxpayers money was wasted by
Policy is portable from one a Group Insurance Policy. Further, the government insurance company
insurer to another, 45 days prior Insurer shall follow the Guidelines for insuring a rich community at a
to its maturity (cumulative bonus specified by the Authority on ridiculously low premium.

27 | 30 Sep-13 Oct 2016 | MONEYLIFE

Insurance.indd 3 23-09-2016 17:09:29

MAS Benefit #1-3
The Right Life Insurance Life Insurance Surrender Tool
The Right Health Insurance Health Insurance Selection Tool
Free Accident Insurance

We are not agents, distributors, brokers or lead

generators; so, you get ethically correct advice

1. Right Life Insurance

Insurance is supposed to protect you. But the

real business of insurance companies is pooling
money; they earn fees and their agents earn
commissions. All their income and expenses
come out of your money, invested with them.
And you get poor returns, after all the costs and

Which insurance product then is right for you? As a member of Moneylife Advisory, you
get advice on selected term insurance products, identified after deep, unbiased research.
Most importantly, you will get special support during your claims, as long as you make the
right declarations.

+ Tool Advises on Your Existing Insurance

Worried that the investment you had made in insurance is a dud? You can surrender,
go paid-up or continue. What should you do? If you surrender, where do you invest and
what new insurance do you buy? What are the tax implications? This tool from Moneylife
Advisory will help you decide easily and quickly.

MSSN GB (Insurance 1-3 ).indd 2 29-07-2016 16:40:37

2. Right Health Insurance

es dier
Health insurance products are complex. Policies
in exclusions, conditions and fine print. If
you slip up on even one of the conditions,
your claim may be rejected or cut down. A
large number of cases generate disputes
and some end up as complaints with the
Insurance Ombudsman or consumer courts.

We cut through the hype, hyperbole,

duplication and complex fine print to help
you select the most suitable products. To help
you decide quickly, we have launched a healthh
insurance selector tool.

3.Personal Accident Cover of Rs2.5 Lakh

Bundled with your MAS membership is a

Rs2.5 lakh of accident insurance.

This is all you need on the insurance front. Be an MAS member today and stay safe.
MAS is a no-bias, no-conflict platform. We are not in the business of selling any
financial product and so can advise you ethically.

Subscription to Moneylife magazine is included in MAS Premium Membership

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


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



How To Make

Your Claim

If you had multiple mediclaim policies, claim filing used to be difficult. The new
regulations have made things easier. TPAs role has been curtailed. Insurers will
have to make payment from their own account. Raj Pradhan analyses

uying health insurance can be difficult if you your family aware of the policy details and what is to be
are old or have health issues. Getting a claim done, in case of an emergency hospitalisation.
paid can be an uphill task too. Having more Today, consumers may have a corporate cover along
than one mediclaim policy used to add to the with a retail policy. There can be more than one retail
complexity. Not anymore. Health Insurance mediclaim policy or mediclaim along with top-up/super
Regulations (HIR) 2016 has scrapped the Contribution top-up policy. Under which policy should you make the
Clause completely under which two or more insurers claim, when the need arises? Should you go for cashless
would proportionately pay the claim amount (based on or reimbursement claim, especially if the hospital of
the sum insured of each policy) if the claim cannot be your choice is not on cashless network? Insurance
fully paid by one insurer policy. You can claim with any companies are competing to offer assurance of cashless
insurer of your choice. Under HIR 2016, if the claim approval within record time. Does it really work or is it
amount is more than the sum insured (SI) of one policy, a marketing gimmick to attract customers?
the balance can be claimed from the other insurance Buying mediclaim is not the end of your financial
company. There is no concept of the insurers prorating planning. It is just the beginning of a journey which
your claim when you claim from more than one insurer. should lead to getting a claim paid, if the need arises. Pay
It will also help to improve your claim payout. Make attention to policy clauses and claims documentation.

MONEYLIFE | 30 Sep-13 Oct 2016 | 30

Cover Story.indd 2 23-09-2016 19:05:02


The process starts with the proposal form which displayed on the policy document, you need to get it
needs to have all the declarations made honestly. It is corrected.
a major reason for claim rejection even if the claim is The policy can have exclusions, cooling off period,
totally unrelated to the lapse in the declaration. All the sub-limits, room rent limit, co-pay, deductible, etc. Just
premiums, paid over the years, will go down the drain ensure that there are no permanent exclusions for PED;
if your claim is rejected. So, make your start honestly to it usually involves a waiting period of two to four years.
ensure that the claims are paid. Despite this, if a claim is There can be waiting period for specific procedures like
rejected, you will be on a strong wicket to fight a case. cataract, kidney stone removal, hernia, appendectomy,
As you probably know, there is a very short time limit knee cap surgery, etc. Corporate mediclaim may have no
for intimating the insurers about hospitalisation. Some waiting period for PED or for specific procedures.
insurers are taking advantage of this to mechanically Cooling period is an initial waiting period which,
reject claims. The Insurance Regulatory and Development typically, is for one to three months, when you buy
Authority of India (IRDAI) has clarified that insurers the policy for the first time. Hospitalisation due to an
cannot a reject claim only on the ground that the time ailment is, typically, not covered during this time; but
limit for intimation of hospitalisation has been violated. hospitalisation due to an accident is covered.
But the delay has to be justified. So, ensure that the family
does its best to inform the insurer of your hospitalisation
and also to file the claim in time. Dont give a chance to
the insurer to raise any issue.
There is no claims-based loading anymore under the
regulations, effective 2013. So, do not hesitate to lodge
a claim even if it is of a small amount. Your no-claim-
bonus (NCB) may go down a notch, but hospitalisation
in India is not cheap; you paid the premium to get claims
paid and not to see your NCB grow. While doctor visits,
diagnostic tests and medicines are not covered stand-
alone by mediclaim, they are covered when there is a
hospitalisation claim. A fixed number of days for pre-
and post-hospitalisation expenses is covered for these
expenses which should be claimed, even though they Sub-limits cap the liability of the insurer. These can
may be through a separate claim. apply to specific procedures or ailments. Room rent limit
Delays in getting a claim paid are not uncommon. is, often, tricky. Usually, room rent is not just limited the
Many are relieved to get the claim paid and do not insist room rent which is allowed, but it also pro rates the claim
that the insurer pays a penalty for late payment. Dont based on the room rent availed vis-a-vis how much the
let the insurer go scot-free. Consumers will get interest policy allows for room rent. Co-payment clause means
of 2% over the prevailing bank rates on claims payment you will bear a percentage of the claim amount. For
delayed beyond 30 days and it will have to be specified in example, a 10% co-payment clause means that you will
the policy document, as per Section 28(iv) of HIR 2016. pay 10% of the claim amount and the insurer will pay
the remaining claim up to the SI, subject to other limits.
Policy Wordings Are Sacrosanct There is a grace period of 30 days for renewing your
Understanding the policy details will help you know policy. The policy will be considered as continuous for all
what claim is valid and what the insurer should pay. If the waiting periods. If the renewal is done after 30 days,
you are aware of the policy, you know you are fighting the waiting periods (PED, specific procedure waiting
to get a valid claim paid. First, check your details on the period) will again be applicable. The insurer may or may
policy. The Customer Information Sheet must be part not even renew the policy if there is more than 30 days
of the policy document, as per Section 26 of HIR 2016. break; it is almost like buying a new policy, if there is
Ensure that all your information is accurate. If not, get more than 30-day break in renewal.
it corrected. The insurer is not mandated to send renewal notice.
Your proposal should be filled by you with full The policyholder will have to be proactive and ask for
disclosure and accuracy. Declare existing insurance renewal premium and pay it on time. Ensure that the
policies, health conditions, smoking and drinking habits, insurer clears your cheque on time. Avoid even a few
family history, etc. If PED (pre-existing disease) is not days delay after the renewal date, as any hospitalisation

31 | 30 Sep-13 Oct 2016 | MONEYLIFE

Cover Story.indd 3 23-09-2016 18:24:49


during the unpaid period after renewal date will not be be expected to pay some advance to the hospital (less
covered. than 10% of the estimated cost) which will be adjusted
after cashless approval. If there is cashless denial, for
Moment of TruthCLAIM some reason, you will have to pay the hospital bill and
In a pre-planned hospitalisation, the policyholder try for the reimbursement route.
should intimate the insurers about the forthcoming Keep copies of old insurance policies to prove
hospitalisation, irrespective of whether it is cashless or continuous coverage with the insurer. If portability is
reimbursement claim. In emergency hospitalisation, the done, the old policy document will also help; waiting
intimation must be sent to the insurance company or the periods are not applicable again. If any ailment was
third-party administrator (TPA) within 24-48 hours of first detected after buying mediclaim, it is not a PED.
hospitalisation, depending on the policy. The insurer/ But you should be able to prove that its inception was
TPA should be given an opportunity to visit the hospital after the initial purchase of the policy. Any doctors
for verification, if they wish to do so. note, diagnosis report, hospital record, employer record,
You need to be aware of which neighbourhood clinical evidence which contradicts it will put your claim
hospital is in the network of your insurer. Give preference in jeopardy as it would mean that you did not declare
to get pre-planned or emergency hospitalisation done your PED when buying the policy. It is a grave blunder
that can lead to policy cancellation along with claim
Cashless: For cashless claims, you need to fill up a pre-
authorisation form giving personal and policy details.
The doctor will fill details of the treatment/procedure
along with estimated costs given by the hospital
billing department. The form, along with supporting
documents, is sent to insurer/TPA. In-house claims
department has an edge over insurers operating with
TPA. But do not assume that in-house claims department
will always be able to make a quick turnaround as
marketed by the insurer. Advertisement stating cashless
approval in specified hours is subject to fine print of the
insurer receiving all the required documentation and
information to their satisfaction. In reality, the approval
can take even longer than a day or more.
at a network hospital so that cashless can be availed. Keep track of hospital bills so that you can check if
Network hospitals have a proper agreement with they will exceed the approved cashless amount. If the
insurer/TPA for negotiated payment for various medical amount is going to be more, you need to approach the
procedures which helps smooth claims processing. If it insurer/TPA again with details of the bills. The insurer/
is not possible, you have to go with the reimbursement TPA will try to find why the costs are higher than the
route for non-network hospital claims. estimate. Keep following up with them and provide any
Reimbursement claim carries more risk than cashless. required documentation from the doctor or hospital. Do
You have to pay from your pocket to the hospital and all the legwork to get the additional expenses approved
then claim from the insurer. It is possible that some of the by the insurer/TPA, for cashless.
charges levied by the non-network hospital are higher Reimbursement: With cashless approval, your worry
than reasonable and customary payment for such about a claim is over. Reimbursement puts you in
services. If so, the insurer may only partially settle the financial stress as you have to foot the hospital bill
claim which can defeat the purpose of buying a policy. upfront and claim it later from the insurer. It means
So, your priority should be cashless for all claims. getting all the discharge documentations to file with
For pre-planned claims, you have time to get the claim form. These include: hospital bills, hospital notes,
approval for a cashless claim before hospitalisation; doctors consultation details and bills, investigation/
hence, you will not have to pay from your pocket or diagnostic reports, discharge card, doctors prescriptions
face the issue of being denied a cashless claim during the and medicine bills, proof of payment to hospital, etc.
hospitalisation. For emergency situations, cashless may A bank mandate with the policyholders bank account
not be approved before hospitalisation; hence, you may details and IFSC or a cancelled cheque may be required

MONEYLIFE | 30 Sep-13 Oct 2016 | 32

Cover Story.indd 4 23-09-2016 18:25:29


to be submitted, as the payment will be made with ECS an assessment of what can be claimed and the final
(electronic clearing system). payment would be close to the given estimation.
The insurer will insist on getting the original copies Check with your insurance company about it.
of all documents; in case of multiple insurers, get attested 5. If the day-care procedure you intend to undergo is
copies of hospital documentation and claims settlement not specified in the policy wordings, it is a grey area.
summary from the first insurer you approach for the But dont lose heart, as you may be able to persuade
claim. Ensure that all the documents are submitted and prevail. A lot will depend on the negotiation
in proper sequence so that it is easy for the insurance power, to prove to the insurer/TPA that the medical
companys decision-maker to comprehend your claim. It nuances of the procedure will actually help the
is your responsibility to present your case in a proper insurer due to lower cost than regular procedures
way, to ensure smooth claims processing. The claim is that need hospitalisation.
usually to be filed in seven to 15 days from the date of 6. If the insurer/TPA brushes you off, you can still seek
discharge from the hospital, depending on the policy justice with the insurance ombudsman or a consumer
terms. Irrespective of whether your hospitalisation court. If you purchased mediclaim in good faith and
claim is in cashless or reimbursement mode, pre- and are convinced that the insurance company should
post-hospitalisation expenses claim will always be in pay, go for the fight.
reimbursement mode. 7. Remember, there are always costs involved, even in
cashless (registration, deposits, incidentals, etc); it is
Steps To Take When Hospitalised better to try and get an estimate of these costs before
1. Mediclaim usually covers treatment that requires choosing where to get yourself treated.
24-hour hospitalisation, with a few exceptions. 8. Insurance advertisements make it appear that
Insurers cover day-care procedures like lithotripsy, insurance is easy to buy and easy to claim. In reality,
chemotherapy, dialysis, etc. More and more day- the claims process is tough to negotiate, especially
care procedures are covered in mediclaim, due for those who are less educated.
to technological advancements that do not need 9. Finally, be meticulous in your paper work and dont,
24 hours or more of hospitalisation. You need to be under any circumstance, delay the submission of
aware of them. hospitalisation intimation and claims request.
2. Claiming insurance money is a fairly tough process. 10. The difference in the cost of diagnostic tests is
If it is not an emergency, it is worth your while to enormous. So put your foot down, if needless and
spend time to learn; ask plenty of questions and repetitive tests are prescribed. Diagnostic tests,
make an appropriate choice. doctors charges and medicines are covered for pre-
3. Ideally, go for cashless. It eliminates nasty surprises and post-hospitalisation period.
on what the insurance company is willing to pay. 11. Medicine costs can also upset budgets. Some
It will also mean restricting yourself to network pharmacists offer discounts ranging from 5% to
hospitals. 10%; hence, always ask for a discount when buying
4. In case of reimbursement, some medicines.
insurers allow patients to
get an estimate of Dealing with Emergency Hospitalisation Cashless
costs before the In case of emergency hospitalisation, it is best if you
hospitalisation and your family are prepared to work in an organised
by submitting manner. Here are a few tips:
details to the Know your insurer/TPA, broker/agent. Have all the
insurer/TPA contact details. Confirm with the intermediaries the
prior to the role they will play, in case of your medical emergency.
procedure Understand what is covered and not covered. Ideally,
they will find out things when there is no emergency! Ensure
give you that there is no change in policy wording during
Keep mediclaim policy documents, policy ID card,
updated cashless hospitals list, insurer/TPA phone
numbers, email and postal address in a place
accessible to your family at home and even during

33 | 30 Sep-13 Oct 2016 | MONEYLIFE

Cover Story.indd 5 23-09-2016 18:27:08


Finally, Fix Your

Finances, Forever
Actionable advice on investment that works.
Plus continuous one-on-one online support

No Bias, No Conflict of Interest
MAS is a SEBI-registered investment adviser and part of Moneylife,
Indias most unbiased and pro-investor research and information group.

Subscription to Moneylife magazine is included in MAS Premium Membership

MSSN GB Ad_invest.indd 2 29-07-2016 16:12:48

MAS Benefit #4 - 7

Equity Fund Choices

Which Large-cap Funds?
Which Mid-cap Funds?
Which ELSS?

Fixed Income Choices

Which Bonds, NCDs?
Which Long term Debt Funds?
Which Short term Debt Funds?
Which Liquid Funds?

Investools with
equity funds & stocks
Monthly Investing
Investment Restructuring
Lump-sum Investing
Investing for Specific Goals

Long-term Stock picks
SIP Tool for Stocks

MSSN GB Ad_invest.indd 3 29-07-2016 16:14:07


Unrelated Claim Rejection due to Proposal

T he health insurance proposal form can have
a questionHas anyone been diagnosed/
hospitalized or under any treatment for any illness/
consulted a neurologist and even took medicines for it
and, hence, ought to have given declaration about it.
Unfortunately, the person met with an accident
injury during the last 48 months? Another question and had to be hospitalised for more than 1.5 months.
in the proposal can be for declaration of Pre-existing The insurer rejected the claim stating There has been
Diseases (PED) Details non disclosure of material
mentioning specific illness/ facts/PED at the time of
diseases by name and an proposal. The patient had
option others'. a history/known case of
If your health condition epilepsy and this fact was
is not in the given list, you not disclosed at the time of
should declare it under taking policy.
others. You cannot try to So, lets assume that
say later that you did not the policyholder, indeed,
understand the meaning did not have epilepsy as
of other. If someone has a PED; this means that
normal fever, cough or cold the insurer is wrong in
and does not declare it, it is OK. To be on safer side, we its reasoning. But the customer is also wrong in not
advise declare everything. In one proposal, the customer declaring non-epileptic seizure. The fact of the matter
did not declare one episode of non-epileptic seizure is that epilepsy or non-epilepsy has nothing to do with
which happened in the past 48 months. This was a the accident. But, its non-declaration in the proposal
blunder. A seizure not declared is a major omission cost the customer a lot. The premiums paid were
tantamounting to misrepresentation. The person wasted and the claim also rejected.

travel. The postal address is needed for pre- and post- Limited TPA Role Will Help Policyholders
hospitalisation expenses (which is a reimbursement The new regulations specify that insurers and TPAs
claim). should put systems and procedures in place to identify,
Photo identity proof (passport, drivers licence, monitor and mitigate frauds. HIR 2013 had stated that
PAN card) of the insured are needed during cashless TPA may handle claims admission and recommend to
application and reimbursement claim submission. the insurer for the payment of the claim settlement.
Research the local hospitals and nursing homes. This has been dropped from the new regulations which
Narrow down to one or two hospitals which offer is good news.
cashless as well as facilitate most of the medical HIR 2016 states: Insurers shall ensure that the TPAs
procedures. Check the TPA desk at these hospitals are not carrying out the following activities as part of
and get their contact information. the agreement: i. Claim rejections/repudiations with
Keep all medical reports, pharmacy bills, lab/ respect to the health insurance policies; ii. Payments to
diagnostic bills, etc, to establish a trail for your the policyholders, claimants or the network providers;
medical need. It is required for cashless approval iii. Any services directly to the policyholder or insured or
and claims reimbursement. Keep photocopies of all to any other person, unless such service is in accordance
the documents before submitting originals to insurer/ with the terms and conditions of the Agreement entered
TPA. into with the insurer and complies with the IRDAI (TPA-
Be ready to pay for incidentals (that may or may Health Services) Regulations, 2016.
not be reimbursed). Keep emergency cash at home HIR 2013 had stated that TPA shall, in the
as it may be needed even for cashless treatment. correspondence to the policyholder with respect
Registration and non-medical expenses are not to settlement/denial of the claims, state clearly the
covered. Until cashless approval is obtained, you will following.... HIR 2016 puts the onus on insurers.
need to pay a deposit to the hospital. It states, Where a claim is denied or repudiated, the

MONEYLIFE | 30 Sep-13 Oct 2016 | 36

Cover Story.indd 6 23-09-2016 18:27:46


communication about the denial or the repudiation shall Policyholder ID card to have logo of insurance
be made only by the insurer by specifically stating the company (not of TPA) and the card may be
reasons for the denial or repudiation, while necessarily permanent, as per Section 30(f).
referring to the corresponding policy conditions. Consumer will get interest of 2% over the prevailing
Other important clauses in HIR 2016 (listed on social savings account interest rates, on claims payment
activist Gaurang Damanis website) are as follows: delayed beyond 30 days and will have to be mentioned
The claims payment will be made from the insurers in the policy document, as per Section 28(iv).
bank account and not the TPAs, as per Section 32 Fees to the TPA will not be related to reduction of
of HIR 2016. Earlier, claim cheques were issued to claims costs, as per Section 20(6) of Health Services
the customer by the TPA; but, now, the insurance Regulations for TPA, 2016. Discounts offered by
company would have to write a claim cheque or ECS hospitals have to be passed on to policyholders, as
directly to the customers bank account. This would per Section 20(9) of these Regulations.
eliminate the float that some TPAs were enjoying.
Also, there was never any public audit of the claim Contribution Clause Loophole Closed
amount sanctioned by the insurance company versus Prior to HIR 2013, if you had more than one health
the actual amount disbursed by the TPA. policy, the claim was to be pro-rated, depending on the
TPA has to electronically transfer the claims document sum insured of each policy. For example, if there were
to the insurer for a decision, as per Section 35(a). two policies of Rs2 lakh and Rs4 lakh, respectively, and
The TPA will ask for claims-related papers from the there was a claim of 1.2 lakh, then Rs40,000 would
policyholder at one time only, and not in a piecemeal be paid by the Rs2 lakh policy while Rs80,000 would
manner, as per Section 27(ii). be paid by Rs4 lakh policy. This is called contribution
The claims settlement (rejection) letter should clause. It was a lot of hassle for the insured who could
mention the specific grounds for denial/ rejection of have easily got paid for the claim amount from just one
claim, as per Section 33(d)(iv). policy. It made having multiple policies a headache for
Change of TPA will be intimated to the consumer in claim reimbursement.
writing 30 days before hand, as per Section 34(a). This was done away with in HIR 2013; but there

Day-care Procedure versus OPD

M ediclaim covers specified day-care procedures

like chemotherapy, dialysis, and lithotripsy; but it
usually it does not cover OPD (out patient department)
relates primarily to small-time expenses, while day-
care procedures pertain to expensive procedures which
would have entailed at least 24-hour hospitalisation,
procedures. There are specialised mediclaims which but due to advancements in medical technology, it is
cover OPD; but these policies taking less than that.
come at a higher premium and Sometimes, there is not
are, usually, taken for availing much difference between
Section 80D tax deduction the two and hospitals take
limit. So, unless you have a advantage of it by charging
mediclaim with OPD product, a higher amount if you wish
you should ensure that what to file the claim as day-care
you are doing is a day-care procedure instead of OPD. You
procedure and not OPD. can ask the hospital if they will
There is a fine line of give any better service or room
difference between the two. In a to rest after the procedure for
day-care procedure, you should the extra charge they will levy.
be hospitalised for the treatment, There are separate forms for
even if it takes a lesser time. Only then, will you be able day-care procedure and OPD. Hospitals have their
to claim your expenses under a day-care treatment. own way of fleecing the patients, as they know that the
OPD treatments do not require hospitalisation. OPD insurer is, ultimately, paying for it.

37 | 30 Sep-13 Oct 2016 | MONEYLIFE

Cover Story.indd 7 23-09-2016 18:28:12


Cashless Approval in Just Minutes!

W ith insurance companies competing with each

other to get a slice of the business, the latest pitch
is cashless approval in just minutes and not hours. It
time limit of making a decision in 30 minutes! Is it
possible that, due to short timeframe, of 30 minutes to
make a decision, the personnel end up asking for more
started with offers for cashless approval in four hours; documentation (and, hence, time)?
then it came The truth is that the time limit is not for approval,
down to two but for a response (turnaround) which can mean
hours and, asking for additional documentation that will delay
now, even in the process of approval. The fine print is: insurer
30 minutes! receiving all documents and information up to their
Imagine satisfaction. In the end, there can even be rejection
the cashless of cashless and, hence, approval cannot be taken as
processing a given. Hence, Cashless approval in XX minutes or
personnel XX hours is misleading. It is only Cashless response
having a in XX minutes or XX hours.

was a loophole. HIR 2013 allowed the policyholder to it. If the claim amount is higher than the SI of one policy,
settle with the insurer of his/her choice. It stated: If you can claim from one policy and the balance from the
two or more policies are taken by an insured during a second policy without worrying about the contribution
period from one or more insurers to indemnify treatment clause to complicate the matter.
costs, the policyholder shall have the right to require You have to obtain a claims settlement summary
a settlement of his/her claim in terms of any of his/her from the first insurer you approach for claim settlement.
policies. It has to be sent to the second insurance company along
But what if the claim amount were higher than the with attested copies of all the hospital bills. So, ask the
sum insured of each of the policies? HIR 2013 said: If hospital to give original bills as well as attested copies
the amount to be claimed exceeds the sum insured under of it, when you have multiple insurance policies. You
a single policy after considering the deductibles or co-pay, cannot make a claim for the same hospitalisation bill
the policyholder shall have the right to choose insurers by to both insurers, as you cannot profit from mediclaim
whom the claim to be settled. In such cases, the insurer policy.
may settle the claim with contribution clause. So, in this Inform all the insurers when hospitalised; for pre-
case, the contribution clause could still be applicable; planned hospitalisation, intimate ahead of hospitalisation.
this meant hassles for the policyholder. Once all the insurers are intimated of the possibility of
HIR 2016 completely removes the contribution a claim, you can decide if you want to go for cashless or
clause. It says: If the amount to be claimed exceeds reimbursement. Priority should be for cashless, especially
the sum insured under a single policy after considering if you are hospitalised in a network hospital. You can get
the deductibles or co-pay, the policyholder shall have cashless approval from one insurer and obtain the claims
the right to choose insurers from whom he/she wants to settlement summary.
claim the balance amount. It will help to improve claim If the amount is going to cover all the hospital bills,
payout. your job is done. If not, approach the second insurer for
In the past, insurer liability of the claim amount was either cashless or reimbursement of the balance hospital
proportionate to the sum insured of each of the policy bills.
when claim was to be paid by multiple insurers. With If you are aware, from inception, that the hospital
no such restriction in place, you can expect better claim bill will be higher than the SI of one policy, you could fill
settlement. up two authorisation forms which the hospital can send
to both insurance companies. The insurers will settle the
How To Handle Multiple Policies? bills directly with the hospital.
Deletion of the contribution clause in HIR 2016 is a
good move by the regulator. If the claim amount is lower Which Policy To Claim from?
than the SI of one policy, you can get full payment from There will be times when you will have to claim from

MONEYLIFE | 30 Sep-13 Oct 2016 | 38

Cover Story.indd 8 23-09-2016 18:29:23


Documents for Life Insurance Claim

F or life insurance maturity/surrender claim to be

processed, you will need to submit following
attested copy of death certificate
D. Claimants current address, ID proof, bank pass
book/bank statement/crossed cheque NEFT
1. Original policy (electronic) mandate along with a cancelled cheque
2. Maturity/Surrender discharge with the customers name
form printed (if not registered
3. NEFT (electronic) mandate along earlier)
with a cancelled cheque with the E. Medical records (medical
customers name printed (if not attendant certificate, hospital
registered earlier) treatment certificate,
4. PAN card copy (especially when admission notes, discharge/
tax has to be deducted at source death summary, test reports,
TDS) etc)
5. Claimants current address and ID F. Copy of post-mortem /
proof; for life insurance death claim, you will need chemical analysis report*
to submit following documents: G. Copy of FIR/panchnama report/inquest report/
A. Duly filled claim form police final report / magistrates verdict*
B. Original policy document *Documents required in case of unnatural death
C. Original death certificate issued by local authority/ (accident/suicide/murder).

both insurers. With the contribution clause gone, the under such policy, to keep the high NCB of 100% of
process should be smooth. So, from which policy should basic SI. First lodge the claim with other policy. If full
you claim first? claim is not settled, make the claim with the policy that
Corporate Cover/Group Policies: It may cover PED from has high NCB.
the first day. There may not be any other waiting period. Policy with Sub-limits: If you plan to claim under two
The claims process may also be easier but not as a norm. policies, make the claim first under the policy where
If you have a group policy, apart from the individual the sub-limits or room rent limits are applicable. Let
cover, it makes sense to make a claim under the group them apply the sub-limits, room-rent limit and pay
cover first. Moreover, avoiding the retail policy will help accordingly. The second insurer with less, or no, limits
preserve its no-claims-bonus (NCB). can then reimburse, to the balance extent. It works out
Cashless: Preference for cashless can dictate which policy to be a better deal for getting the payout rather than the
to claim from first. If the hospital is on a cashless basis other way around.
for one of the policies and not from the other, go for the Top-up/Super top-up: Having a super top-up is much
policy which offers cashless. better than just top-up. You will first claim with one
Older Policy: Newer policy will have waiting period for or more corporate or retail mediclaim policies. If full
specifi c procedures/treatment, PED waiting period and payment is not done and super top-up deductible is
cooling off period. If the claim is going to fall under met, claim from the super top-up policy. If you have no
any of these and, hence, rejected, why should you apply mediclaim policy, you should make the claim for super
under that policy? Go for the older policy for which the top-up when the deductible is met.
waiting periods are over. But, if the waiting periods are Getting claims paid can be hard work. But, if the
over for the newer policy, then go for, it instead of the process from buying until the claim is properly followed,
older policy which would have higher NCB amount that the chances of rejection of partial claims payment are
you may want to preserve. low. You need to be able to talk the insurers language
Policy with High NCB: Some products offer high NCB and deal with them in a professional way. If you are not
of 50%for first claims-free year which grows to 100% able to put your case properly, the insurer/TPA can pick
of basic SI after two years. holes in your claim. Buying a mediclaim policy is not
When there is a claim, the high NCB falls at the same end of covering yourself; understand the product and
rate. It may be worthwhile to avoid making the claim process, to protect yourself.

39 | 30 Sep-13 Oct 2016 | MONEYLIFE

Cover Story.indd 9 23-09-2016 18:29:48


Picking Winning Stocks Via

Shareholder Yield

have just finished reading a book on investment purchase price. The remaining $80 million came from a
(published in 2007) Free Cash Flow and Shareholder $40 million loan from General Electric Credit Corporation
Yield by William Priest and Lindsay McClelland and a $13 million loan from Barclays American Business
where I found this nice little story. In the words of Priest Credit.
and McClelland, in 1984, a little-known private equity To finance the rest of the purchase price, Gibson sold,
company called W.E.S. Ray (founded By Bill Simon, a and then leased back, its three major manufacturing
former secretary of the US Treasury, and Ray Chambers, and distribution facilities. Then, 18 months after the
an accountant) bought a company called Gibson Greeting acquisition, W.E.S. Ray made a public issue of 10 million
Cards. shares of Gibson at $27.50 per share. With this, W.E.S. Ray
Gibson had already been the target of several acquirers realised a final payoff of $66 million on an investment of
before that. In 1964, it had been acquired by CIT Financial about two-thirds of a million dollars. W.E.S.Rays return
Corporation, which was acquired, in turn, by RCA, in 1980. was nearly 100 times its initial equity investment.
Soon after its acquisition of CIT, RCA shifted its strategic As for the $80 million debt, the newly-public Gibson
focus to its core business, (NBC, was now responsible for using its
Hertz and several high-profile own free cash flow to repay these
electronics and communication loans. This event, according to
companies). Priest and McClelland, would
So, RCA decided to sell Gibson transform the common perceptions
Greeting Cards, one of its non-core of what determines investment
subsidiaries, to W.E.S. Ray, for value and stock prices.
$81 million.
Gibson was a boring Profits Vs Cash Flows
investment for Wall Street, even All of us believe that the most
though it was the third largest significant driver of stock prices is
Benjamin Graham David Dodd
greeting cards company in the US. earnings or net profits. As they say,
This is because most investment The discussion of cash flow prices are a slave of earnings. This
analysts still looked for earnings was confined to eight pages of is largely true. There is nothing
growth. a 723-page Graham and Dodd that can get investors excited as
To them, Gibson was hardly classic Security Analysis much as higher earnings can. This
investment-worthy; there was was identified decades ago by the
nothing great about the companys high priest of investment analysis:
financial composition, growth potential, or strategic Benjamin Graham. The standard textbook on investment
capabilities, write Priest and McClelland. But, to Bill analysis, Security Analysis: Principles and Techniques by
Simon and Ray Chambers, Gibson was a hugely attractive Graham and Dodd, published in 1934, focused almost
investment opportunity. This is because they were valuing completely on earnings. As a result of this early singular
companies differentlyon the basis of cash flows. In focus on earnings, most of those who study, or work in,
Gibson, W.E.S. Ray saw: the investment field believe that the fundamental analysis
A stable revenue base that could take on a significant of a company was all about the bottom-line, argue Priest
amount of leverage; and McClelland.
The ability to consistently generate high levels of free However, they write in their book Free Cash Flow and
cash flow that could cover the cost of the acquirer's Shareholder Yield, in most MBA programs, there was a
debt and still allow the firm to grow. quiet revolution taking place that subsequently led to an
W.E.S. Ray went about restructuring Gibson. They explosion of novel ideas in finance that would turn the
gave the Gibson management a 20% stake in the company. traditional earnings paradigm on its head. What was it?
Simon and Chambers put up $1 million for $81 million It was the displacement of earnings with cash flows as the

MONEYLIFE | 30 Sep-13 Oct 2016 |40

Value Stocks.indd 2 23-09-2016 17:43:36


cornerstone of investment valuation. For cash flow to gain widespread

The authors write that there was acceptance as a singularly valuable
a growing belief among investors investment metric, it would take
and analysts that cash flowsnot an event of great relevance to the
earningswas the true determinant of investment community. This event
investment value. But didnt Graham was the Gibson deal of 1984. Suddenly,
and Dodd talk about cash flows? Priest everyone, certainly the private equity
and McClelland point out that the industry, was valuing companies on a
discussion of cash flow was confined cash flow basis.
to eight pages of a 723-page book! So, whats wrong with earnings
Actually, the idea of using cash flow John Burr Williams (profits) and how is focusing on
for valuation was not new, according Williams argued in 1934 cash flow a better idea? Profit is an
to the authors. Cash flows figured that the investment value accounting figure based on booked
in the seminal work of John Burr
of a stock is the present sales, expenses and some adjustments.
Williams The Theory of Investment It does not tell you where the profits
Value, a book that established a slightly
worth of all dividends and are.
different theoretical framework for
that should essentially What if the profits are locked
valuing investments, immediately after drive valuation. This was up in debtors and stocks? What the
Graham and Dodd. Williams enrolled intuitive but the financial investor would like to know is whether
at Harvard for a PhD in economics, industry went in the the company has converted finished
with the hopes of learning what had direction of worshipping goods into sales, sales into debtors and
caused the crash of 1929 and the earnings even though debtors into cash. In other words, have
following economic Depression. profit is an accounting the book profits been converted into
For his thesis, Joseph Schumpeter, artifice cash profits? This can be known only
the great economist who popularised through an analysis of operating cash
the term creative destruction, flows. The cash flow of a company
suggested to Williams that he should find ways to establish is put to use for five purposes, according to Priest and
the intrinsic value of a common stock. McClelland. These are:
Williams presented the concept of Present Value, for 1. Pay out dividends;
comparing investment opportunities, in his thesis and 2. Buy back stock;
received his doctorate in 1940. He had sent his manuscript 3. Reduce debt;
to the publishers, well before he got his PhD and the book 4. Capital expenditure;
was published in 1938. 5. Acquire new businesses.
At the heart of present value was cash flow. He wrote In India, acquiring new businesses is rare. Companies
that the investment value of a stock is the present worth that have minimal capital expenditures are highly preferred.
of all dividends and that should essentially drive valuation. This is why consumer goods companies are highly valued.
This was intuitive; but the financial industry went in the That leaves us with the first three factors.
direction of worshipping earnings, even though profit is These three factors directly and indirectly benefit the
an accounting artifice. shareholders. Dividend puts money directly into their
Over the years, we have come to know that dividend is pockets. Buying back stocks reduces the available number
the only part of the cash flow that benefits the shareholders of shares and should push up the price, other things being
by coming to them directly. There are two other aspects equal. Reducing debt is another way in which shareholders
of cash flow from which shareholders benefit but more gain because the interest cost goes down and cash flows
about that later. increase.
According to Priest and McClelland, the insight that Williams had only considered what investors get out
cash flows were a key determinant of investment value, of a stock, which was dividend, during his time. We now
however revolutionary, were not immediately embraced have two other payouts to add, as it were. The three
by the investment community. Because the cash flow combined creates what is known Shareholder Yield. Not
philosophy flew in the face of those who continued to too many people talk of shareholder yield as an investing
subscribe to the accounting earnings paradigm, a gap strategy; but it looks highly promising to apply, especially
was created between the traditional model of equity to find companies that are turning around or improving
analysis and the model suggested by these new findings. progressively.

41 | 30 Sep-13 Oct 2016 | MONEYLIFE

Value Stocks.indd 3 23-09-2016 17:44:19

StockWatch Stocks and sectors that catch our eye

F MC G earnings growth before interest tax depreciation and

amortisation (EBITDA) of 11.6% year-on-year (y-o-y)
Poor Growth, High and profit after tax (PAT) growth of 12.7%.
What steps are these consumer goods majors
Margins taking to drive volume growth? Firstly, they have had
a number of price offers. Secondly, they are enhancing

he consumer sector in India is reeling under advertisement spends. For instance, the advertisement
tepid growth in volumes with a challenging
g g spend
p of Colgate
g Palmolive India has risen to 15.5% of
macro-level environment sales in the June quarter compared to
characterised by low growth 12.5% in the same quarter
in demand. In addition, of the previous year, reports
competition from the new Religare research.
entrant Patanjali products What about the margins?
is giving sleepless nights to According to Religare, gross
consumer majors. margins have risen by 120
The sales growth across basis points y-o-y. EBITDA
the FMCG (fast moving margins expanded by 85 basis
consumer goods) majors was points y-o-y to 22%. This is
just 7.3% for the June quarter. the highest margin in the last
Except Emami, Asian Paints eight quarters. These margins
and Nestl, all the consumer were aided by soft raw material
majors have reported single digit prices with the raw materials
growth in the June quarter. Nestles
es index rising by merely 3.5% y-o-y
growth number is not comparablee due and 1 1.3% quarte-on-quarter (q-o-
to the low base effect on account of small rise in margins implies that
q). The sma
the Maggi fiasco last year. Thanks to a benign raw is extremely difficult for margins to expand further,
materials scenario, FMCG companies have reported especially as raw materials prices seem to have already

Tepid Sales Growth (June 2016 quarter)

Sales Growth (%)




Emami Nestl Asian Paints ITC Britannia United Colgate Godrej Jubilant HUL Titan Dabur Marico
Spirits Consumer Foodworks

MONEYLIFE | 30 Sep-13 Oct 2016 | 42

StockWatch.indd 2 23-09-2016 16:37:03


bottomed out. ConAgra Foods. According to Marico, Saffola had a

FMCG major have to now reckon with huge market share of around 63% in the edible oils market
expansion plans. Patanjali Products is no longer in FY15-16. What will Patanjalis aggressiveness do to
the new kid in the block. There is no stopping this the other players in the FMCG sector?
company, despite the fact that its revenues have already Majority of the FMCG companies trade at huge
zoomed to a whopping Rs5,000 crore. It is all set on valuations. FMCG giant Hindustan Unilever Ltd (HUL)
the expansion drive, setting up its biggest unit spanning trades at a price-to-earnings (P/E) multiple of 47.
across a humungous 40 lakh square feet at Multi- Others like Godrej Consumer Products, Dabur India,
modal International Hub Airport at Nagpur (MIHAN) Marico, Colgate (Palmolive) and Procter & Gamble
in Nagpur. This unit is bigger than its unit in Haridwar, too have high P/Es. Emami trades at a whopping
which is currently the largest one in the country. It is P/E of 81. ITC trades at a multiple of 31. In such a
also in setting up units in Madhya Pradesh, Assam, scenario, there is little room for P/E expansion for these
Jammu & Kashmir (J&K), Madhya Pradesh, Uttar FMCG companies. The managements of some of these
Pradesh, besides maintaining subsidiary units. Patanjali companies are optimistic on this front due to good
Products is also launching its refined edible oil later in monsoons and payments from 7th Pay Commission.
the year. This a huge business dominated by Marico, But the extent to which this actually results in top-line
Adani Wilmar (Fortune brand) and Agrotech Foods of growth remains to be seen.

financial institutions and insurance companies (BFIs),

Institutional Buys and too, increased to 11.4% in the June quarter compared
that in to 11.1% in the March quarter. This data comes
Sales in June quarter from Kotak Securities.
Besides these companies, FPI holding rose

wnership of foreign portfolio investors (FPIs) significantly in Crompton Greaves, Axis Bank and
in the BSE-200 Index rose by 6.87%, to Eicher Motors. It declined significantly in Rural
US$311 billion, in the June 2016 quarter Electrification Corp (REC) and Dhanuka Agritech.
compared to that in the March 2016 quarter. In In addition, holdings of Life Insurance Corporation
percentage terms, FPI holdings in BSE-200 companies (LIC) saw a significant increase in NHPC, Tata
increased to 24.9% vis--vis 24.5% in the previous Communications and Oil India. Mahindra and
quarter. Holdings of domestic institutional investors Mahindra, Indraprastha Gas, Ashok Leyland and
(DIIs), including mutual funds (MFs) and banks, Grasim Industries saw a decline in stake by this life

Change in Stakes in Individual Companies (June 2016 quarter over March 2016 quarter)
Category Highest Increase in Stake Highest Decrease in Sectoral Changes
Foreign Portfolio Investors HDIL, Bharat Financial Inclusion J&K Bank, IPCA Laboratories Bought automobiles and banking; sold
(includes ADRs and GDRs) and Castrol India and United Breweries pharmaceuticals
Mutual Funds Castrol India, United Breweries Sanofi India, Kaveri Seed and Bought pharmaceuticals and banking;
and Ipca Laboratories Vedanta sold automobiles and metals & mining
Banks, Financial Institutions NHPC, Tata Communications and Axis Bank, Ambuja Cement Bought pharmaceuticals and metals
and Insurance Companies Indraprastha Gas and Asian Pa ints & mining; sold consumers and
Source: Kotak Institutional Equities

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

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

43 | 30 Sep-13 Oct 2016 | MONEYLIFE

StockWatch.indd 3 23-09-2016 16:37:40


Holding for June 2016 Quarter Top 5 Companies in Terms of Highest Stake by
Various Investors
Category Companies
4.32% Indian Promoters
(non-government) FPI HDFC, Bharat Financial Inclusion, ICICI Bank,
6.80% FPIs, ADRs and GDRs Indiabulls Housing and Infosys
7.06% 28.27% Government
Mutual Funds Crompton Greaves, Sadbhav Engineering, Federal
Bank, Orient Cement and KEC International
7.67% Foreign Promoters
BFIs Tata Power, ITC, MCX India, Larsen & Toubro and
9.26% Retail Tata Steel
24.85% BFI Retail Karnataka Bank, Karur Vysya Bank, City Union
11.78% Bank, South Indian Bank and Tata Elxsi
Source: Kotak Institutional Securities
Mutual Funds

Coming to various sectors, banking sector was

insurance major. the favourite with FPIs and MFs; their holding
The retail holding in the June 2016 quarter rose was a significant 32.4% and 30.4%, respectively.
marginally to 7.67% from 7.61% in the March 2016 Automobiles and technology were the other two
quarter. Government holding, too, rose to 11.78% in favourite sectors with them. However, there was a
June 2016 from 11.61% in March 2016. significant gap in their holdings of technology sector
Castrol India, NHPC, Eicher Motors and Jubilant companies. Technology sector accounted for 14.8%
Food works were some of the companies that witnessed of FPIs portfolio, while it constituted merely 9.4% of
a decline in promoter/ promoter group holding in the MFs portfolio.
June 2016 quarter. Some public sector banks, including FPIs are the dominant players, when it comes to
Oriental Bank of Commerce, Bank of India and Central holding in Indian equities, with their holding at $311
Bank of India, along with Kansai Nerolac, saw an billion. MFs, BFIs and LIC are far behind, in their
increase in promoter/promoter group holding. holdings.

I G P E T R O C HE M IC AL S However, the past

financial data does not
Turning Around? support such claims. The
quarterly sales of IGPL for

G Petrochemicals Ltd (IGPL) which the quarter ended June 2016
makes phthalic-anhydride (PAN) is were Rs255.53 crore (Rs283.93
equipped with one of the largest production crore), down 10.00%, and the
capacities at a single location. The company quarterly net profit was Rs30.08
has the ability to cater to local and international crore (Rs29.29 crore), up 2.71%.
market requirements. PAN is used in industries The annual sales of IGPL for the year ended
such as flexible PVC, plastics, paints, construction, March 2016 were Rs952.84 crore (Rs1,186.65
transportation and marine. crore), down 19.70%, and the annual net profit was
IGPL has a technical collaboration with Lurgi Rs60.37 crore (Rs8.90 crore), up 578.51%, from a
GmbH (Germany). The plant is located at MIDC, really low base.
Taloja (in Raigad district, Maharashtra), 50km from Over the past five quarters, the quarterly rate of
Jawaharlal Nehru Port Trust (JNPT), Nhavasheva, growth of the companys quarterly sales was negative
Maharashtra. at 18% and the growth rate of its quarterly operating
IGPL claims that its strengths include: being one profit was 71%. The average operating margin is
of the lowest cost producers of PAN; a strategic plant 13%. But the stock is very reasonably valued. The
location; strong clientele across industries; consistent market-capitalisation of IGPL is 0.64 times its sales
high capacity utilisation and better recovery processes. and 5.25 times its operating profit. The RoNW (return

MONEYLIFE | 30 Sep-13 Oct 2016 | 44

StockWatch.indd 4 23-09-2016 16:37:56


growth in revenues.
Anticipating a Turnaround? The book value of the companys share is Rs94.73
Volume and the cash earnings per share were Rs25.30.
Price in Rs
The shareholding pattern of IGP includes 72.22%
210 691,100 shareholding with promoters and 27.78% shareholding
with the public. IGPL distributed dividends of 20%
180 552,880 for FY15-16 and 10% for FY14-15. Previously, in
FY-06-07, IGPL had distributed a dividend of 5%.
150 414,660 The company is a constituent of S&P BSE SmallCap
Index on the Bombay Stock Exchange with a face
120 276,440
value of Rs10. The IGPL share price has risen from
a 52-week low of Rs72.00 on 26 February 2016 to a
90 138,220
52-week high of Rs210.00 on 20 September 2016. The
60 0
companys share price closed at Rs197.45 on Friday,
23 September 2016.
Jun-15 Jan-16 Sep-16

Shares Traded Adjusted Closing Price

Key Financials Pidilite

Stand-alone (Rs Cr)
Strong Going
OP 16.80 23.27 46.70

harat Puri, with experience of over 30 years
OPM 8% 11% 18%
Y-o-Y Revenue Growth -22% -23% -10%
in FMCG/ paints sector, has joined Pidilite as
Y-o-Y OP Growth 272% -51% -2% managing director. He was a director of Pidilite
March Ending FY14 FY15 FY16 in mid-2008. Edelweiss Securities met him and CFO,
RoNW 1% 4% 21% Pradeep Jain, recently for a discussion. These are a
OP: operating profit, OPM: operating profit margin, RoNW: return on net worth few takeaways from Edelweiss report which could be
useful for those tracking the stock:

Current Scenario & Plans

Rising Free Cash Flows Overall volume growth stood at 9.3%. Consumer
(Rs crore) Debt:Equity Ratio and bazaar (C&B) volume growth stood at 9%
80 1.00 y-o-y and industrial bazaar at 11.3%.
Earnings before interest, tax, depreciation and
40 0.80 amortisation (EBITDA) margin is in the 19%-20%
-40 Margin expansion on a q-o-q basis aided by decline
0.40 in advertising and promotion (A&P) spends.
Overall international sales grew by 18% y-o-y in
-40 constant currency terms. SAARC sales jumped by
-120 0.00 42% y-o-y.
2013 2014 2015 2016
In terms of volumes, management expects to grow
Free Cash Flows Debt:Equity Ratio
at 1.5 times the countrys gross domestic product
It is the biggest player in Bangladesh with a huge
on net worth) is 21%, calculated on trailing 4-quarter margin. It is expanding its capacity in Bangladesh.
net profit basis. The debt:equity ratio is 0.40 and the Innovations include Fevikwik gel, M-Seal Phataphat,
RoCE (return on capital employed) is 23%, calculated Fevicol Power, Fevistik (including highlighter); it has
on 4-quarter trailing EBIT (earnings before interest and a strong innovation pipeline.
tax). Such high return on capital is due to high inherent Effective tax rate is a little less than 23%, aiding net
profitability of the business, even if there is hardly any margins.

45 | 30 Sep-13 Oct 2016 | MONEYLIFE

StockWatch.indd 5 23-09-2016 16:38:11


It does not intend to increase

crease its pricing segment, it be
believes that there is
significantly in future. immense scope
sco for this business in India
Overall capex for FY16-176-17 is expected due to:
to be 3.5%-4% of net sales. - Ratio of waterproofing
wa to paints
worldwide is 1:6, compared to India
Plans for Other Segments nts 1:20;
where it is 1:2
Pidilite does not plan to o enter - A whopping 8 out of 10 Indians face
the paints segment (likee its leakage problems, while merely
counterpart Asian Paints ts 2 out of 10 Indians address it;
which entered adhesivess Ratio of new waterproofing
- Ra
segment) as it intends too and repairs for waterproofing
focus on core business. worldwide is 70:30; In India, it
Currently, 2/3rd of stands at 50:50.
its sales channel for N
No plan
l tto enter
t paints
i t segmentt
adhesives has not Acquisitions
been touched by
To focus on Africa where countries have It recently acquired
Asian Paints; this is to features similar to India adhesive player Chemifix
Pidilites advantage. Volumes to grow at 1.5 times the in Sri Lanka and Bluecoat
Management expects countrys gross domestic product (GDP) and Falcofix in adhesives
2/3rd growth to come segments.
from core business. It will focus on Africa
Balance will come from innovations. as most countries have characteristics similar to the
Despite rising competitive intensity in waterproofing Indian market.

R e l i a n c e Capit al Dem erge rs enterprises have done extremely well, drawing more
and more investors. Does Reliance want to cash in
Commercial on this? What would be the speciality of Reliance
Commercial Finance in lending to small and medium
Opportunism? enterprises (SMEs) and Reliance Housing in a crowded
housing finance market?
According to the management, it is a leading

he shareholders of Anil Ambani-run Reliance player in the SME segment with focus on asset-backed
Capital have approved the transfer of its lending and productive asset creation. Its various
commercial finance division into a separate divisions include SME, infrastructure financing, loan
wholly-owned subsidiary; the demerger process will against property and commercial vehicle loans. It had
be over by October 2016. Currently, the shares of total assets under management (AUMs) amounting
Reliance Commercial Finance are held by various to Rs16,451 crore (US$2.5 billion) on 30 June 2016.
arms of Reliance Capital. After the demerger, Reliance These assets also include securitised portfolio.
Capital will apply to the Reserve Bank of India It had net interest margins (NIMs) at 6.8%, for
(RBI) to become a core investment company (CIC). the June 2016 quarter, which rose from 6%. Its entire
The management intends to complete the changes in book is secured, as it has wound up its unsecured loans
Reliance Capital between October 2016 and January portfolio. The business has a strong seasonality factor;
2017, to be in compliance with CIC guidelines. The it does 15% of its business in the first quarter. Around
board has also approved a proposal to independently 40% of its business happens in the fourth quarter.
list its home finance businessReliance Home Finance Going forward, the management intends to reduce
Ltd. its focus on the commercial vehicles segment as this
Is Anil Ambani-run Reliance trying to jump into industry is under stress. According to the management,
two areas that are currently seen as hot by market- this demerger will enhance management focus and
men? Over the past couple of years, housing finance provide flexibility to the company to unlock value
companies and non-banking finance companies through stake sale. We will have to wait to see how it
(NBFCs) lending to small- and medium-sized performs over the coming quarters.

MONEYLIFE | 30 Sep-13 Oct 2016 | 46

StockWatch.indd 6 23-09-2016 16:38:38



Agri-Tech (India) (Rs28) a day over the past year, in July and
August 2016, the number of shares

A gri-Tech (India), earlier a part of 50 traded averaged about 100 per day.
Nath Seeds, is into horticulture The result?
business, as per its latest annual In just over a month, the stock
report. 30 483% price shot up 347%, from Rs10.39 at
However, this micro-cap stock has the beginning of July 2016 to a peak
not generated any significant revenue 20 of Rs46.45 on 18 August 2016. The
over the past few years. For the year stock consistently hit the upper circuit
ended June 2016, the Aurangabad- 10 limit of 5% on the BSE. The euphoria
based company reported revenues did not last long as in all pump and
of just Rs7 lakh compared to sales dump operations; the stock price soon
Apr-15 Dec-15 Sep-16
of Rs8 lakh reported a year ago. It crashed. Even though the stock is now
reported a net loss in eight of the past down 40% from the peak, to Rs28 on
10 quarters. Strangely, a few months the stock, despite its poor financials. 22 September 2016, it is still up 483%
ago, a strong interest developed in From just about 1-10 shares traded from a low of Rs4.8 on 28 April 2015.


Risk Vs Reward driven by: one, normalisation of profits in a few sectors

such as government banks, metals & mining and

Lat 28,797. Almost a fortnight later, it is at 28,773.

ast fortnight when I wrote my piece, the Sensex was pharmaceuticals; and, two, consumption-
led economic recovery. The bigger
Over the course of two weeks, the index has been almost question is: What will such earnings
flat. There is a proverb in French, which translates as growth do to valuations? Kotak finds
retreating to jump further. Has the Sensex retreated valuations of the market (Nifty-50
a bit from the recent highs to make the next jump? Index) expensive at 19.6X of FY2017E
It could. The momentum has not weakened as I had EPS and 16.3X of FY2018E EPS.
expected it would, and possibly willll not unless At the momen
moment though, the market is unconcerned
there is a fresh scare of US raising interest about all this, driven up by liquidity and
rates. But a rising market should bee expectations of a stronger economy.
viewed as increasing our risk The market is also expecting interest
rather than increasing our rates
ra to remain low. In fact, there is
reward. At the risk of repetition, almost
alm a consensus that interest rates will
if you buy when the market P/E is not rise; they could possibly fall. It may
24+, you are not likely to make much ch money be quite
qu a surprise for the market if this
over the next few years, unless yourur stock selection is does not
n quite work out that way. Interest
exceptionally good. rates mmay not rise; but how will they fall?
Remember, the rally from March up to now was The Indian economy has inefficiencies built into its
entirely a matter of expansion of market prices without structure. A large government sector, no open market
expansion of earnings. There have been hopes that for agriculture and a huge disparity in the cost of living
earnings will revive. Research houses now believe that between urban and rural areas keep Indian costs high,
the next two quarters would be robust. According to relative to its economic condition. In this situation we can
Kotak Securities, net profits of the Nifty-50 Index are expect higher growth or low interest rates, but not both.
set to grow by 15% and 19% in FY16-17 and FY17-18 Debashis Basu

47 | 30 Sep-13 Oct 2016 | MONEYLIFE

StockWatch.indd 7 23-09-2016 16:39:07

3 Long-term Stockletters
for Excellent Returns
Panther Antelope Lion
59.19%* 44.95%* 41.82%*
(includes dividend) (includes dividend) (includes dividend)

*Annualised. Since 25 April 2014 *Annualised. Since January 2012 * Annualised. Since January 2012
For small-cap/ low-price stocks with Long-term value stocks. More of mid- Long-term value stocks. Usually large
big growth potential cap stocks to be held for 1 year or more companies are selected
A shortlist of stocks to invest in Weekly market view Weekly market view
Fundamental data we rely on A shortlist of stocks to invest in A shortlist of stocks to invest in
Brief description of the companies Fundamental data we rely on Fundamental data we rely on
Weekly updates on all stocks Weekly updates on all stocks Weekly updates on all stocks

Facts about the Stockletters

What is the difference among these stockletters? We separately identify stocks that are still worth buying at current prices
The stockletters are for stocks for long term but with specific emphases. even if they have run up sharply. You must remember though that stocks
We hope to have a maximum of 25 stocks at any time. may go down after your purchase. That is the nature of stocks. So it is
important to follow these two principles about stock investing 1. Investing
What is the investment horizon for these stockletters? only that money you will not need for 5 years 2. Not looking at the share
The best results from good stocks come when they are held for five years price in the short term.
or more.
How do we know when to exit from the stocks selected?
What is the investment strategy? Exit suggestions are spelt out clearly every week.
Our investment strategy for the long-term stockletters is to select quality
stocks at a reasonable price. We identify companies that are reporting How many stocks are changed every week?
high return on capital but are available cheaper than similar high-quality Our list of long term stocks do not change much. Deletions are usually
stocks. We then apply our knowledge of managements, including made after one year, if the performance is not too good. This also helps
corporate governance. one avoid short-term capital gains. We may add a new company after
several weeks. If the market crashes we may suddenly add many more
How much should one invest in each stock? names.
You should invest equal amount in every single stock suggested.
How much do the stockletters cost?
What if I cannot invest in all the stocks? Antelope, Lion, Panther each costs Rs2,500 per year. If you buy two
If you cannot invest in all the stocks, invest equal amounts in as many together, you pay Rs4,000. If you buy all three, you pay Rs6,000.
stocks as possible, starting from the lowest in rupee terms to the most
expensive in ascending order. It is also very important that you invest in How risky are the stocks mentioned in the stockletters?
stocks ONLY the money you will NOT NEED to touch for the next 5 years. Stocks by nature are risky and volatile over the short-term and can lead to
Good quality stocks are likely to grow at 20%-22% annum but not in a losses. But loss of capital in good quality stocks is not a function of stock
smooth fashion. selection but also how long a stock is held and at what valuation they are
bought. We suggest investors hold stocks for at least five years. On our
If some stocks have already run up sharply, will it be wise to invest in part, we will try to suggest stocks that are not expensive.
them still?
These are all excellent stocks we have selected in long -term stockletters. How do subscribers get the stockletter?

Stockletter (MSSN) Ad Oct 15.indd 2 29-07-2016 15:57:45

The stockletter is currently sent as a pdf file by email. Subscribers can
also download their stockletter by visiting their MAS dashboard on our site
What is the frequency?
You will receive your chosen stockletter every Saturday evening. STOCKLETTER STOCKS
Can I share the stockletter?
The stockletters are meant for a single user and is backed by years of Subscribers of our can now simply
research. Hence, we urge you not to share them.
enter the amount they wish to invest.
What if I have any queries about specific stocks? Our tool will divide the amount
Well, we would rather let our performance do the talking but if you have
any serious doubts email us at equally across the stockletter stocks to
the extent possible
How can I buy the stockletter?
You can buy online at
html or you can send us a cheque or a demand draft by using the form

More info at:

Caution: The returns shown here are much higher than average.
Average annual rise in the Nifty/Sensex is likely to be 12%-14%
per annum over 10 years and more. Well-chosen stocks may
rise by 20%-22% per annum over ve year and more.

Disclaimer: The Stockletters are part of multiple services offered by Moneylife Advisory
Services which is a SEBI registered investor advisor (Registration No: INA000003429).
The stockletters are for information purposes only and none of the stock information,
data and company information presented constitutes a legally binding recommendation
or a solicitation of any offer to buy or sell any securities. Although information has been
Log on to with
obtained from and is based upon sources we believe to be reliable, we do not guarantee your email id and password and
its accuracy and the information may be incomplete or condensed. All opinions and check the dropdown menu under
estimates constitute our judgment as of the date of the report and are subject to change
without notice. Information presented is general information that does not take into Investool to find Stock SIP
account your individual circumstances, financial situation, or needs, nor does it present a
personalised recommendation to you. Individual stocks presented may not be suitable for
you. Please read the terms and conditions before subscribing.
Cancel within two issues: You can cancel your subscription within two issues. We will
If you dont have a login id and password
return your money after deducting Rs150 for payment gateway and handling charges. email us at
You can cancel by email or phone.

YES, I wish to subscribe for one year to the following stockletters:

Antelope Lion Panther
Annual Subscription of Each Stockletter(Antelope/Lion/Panther): Rs2,500;
Special Combo Offer for any Two: Rs4,000; Annual Price for all Three: Rs6,000
NAME: ____________________________________________________________________________________________
ADDRESS: __________________________________________________________________________________________
PHONE (Office): ____________ Phone (Res): ____________ E-mail address: _____________________________________________
Date of Birth: ____________________ (MM) (DD) (YY)
Profession: _____________________ Designation: ____________________________________________________________
( ) Please find enclosed ( ) Cheque / ( ) Demand draft number ____________________________________ dated __________________
favouring Moneylife Smart Savers Network Pvt. Ltd.

DATE: ______________________ SIGNATURE: ______________________

Please fill in this order form and mail it with your remittance to Moneylife Advisory Services Pvt. Ltd., 317, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg,
Shivaji Park, Dadar (W), Mumbai 400 028. # Rates and offers are valid only in India. This offer is valid for a limited period. # All disputes shall be subject to Mumbai jurisdiction only.

Privacy Policy: We do not give away your e-mail or address, telephone number, or any other information that you provide to us. We use this information solely to service your account

Stockletter (MSSN) Ad Oct 15.indd 3 09-09-2016 17:33:41


Record of US Investment
Consultants Recommendations

nvestment consultants have been an integral spread in performance was negative for an equally
part of the financial system. They are considered weighted portfolio. The results from a value-weighted
experts in their field and believed to be more portfolio were a little better; the spread was flat.
knowledgeable than the ordinary Joe. Many However, investment advisors are hired to deliver
individuals and institutions actively seek their out-performance and not flat performance. The gross
recommendations and depend on them for their returns from the recommended products for a value-
investment decisions. A few of them become famous weighted portfolio stood at 4.90% compared to
with their recommendations, being actively tracked 5.16% for the products which were not recommended.
and followed by the public. Do investment consultants The average excess returns over the benchmark for
really add value? Do their recommendations actually recommended products stood at 1.25% compared to
outperform the broader indices? 2.35% for products which were not recommended.
Tim Jenkinson, Howard Jones and Jose Vincente The spread for one-factor, three-factor and four-
Martinez carried out a factor alpha models was
study to find out whether negative for an equally
recommendations of investment weighted portfolio. One-factor
consultants add value. For alpha relates to use of capital
this, they constructed two asset pricing model (CAPM)
portfoliosone consisted of model which says that the
recommended products and the expected return of a portfolio
other one of not recommended or a security is the risk-free
products. They further divided rate of the security plus the risk
the portfolios into equally premium. Alpha is a measure
weighted and value weighted of the return on investment
portfolios. The weights were over a suitable market index.
defined by using total net assets at the end of the The components of three-factor model include size and
previous year. They compiled the performance of value, in addition to market risk. Four-factor model
portfolio of all US actively managed equity products adds the momentum factor to the three factors. Coming
recommended by investment consultants during the to a value-weighted portfolio, the gross returns spread
period between 1999 and 2011 as well as the returns was negative for one-alpha model. However, it was
of institutional products not recommended by them. slightly positive for three-factor alpha and four-factor
Their value addition was gauged by the difference in alpha models at 0.72% and 0.62%, respectively.
performance between the two. Hence, the researchers concluded that there was
They calculated the difference in performance no evidence that the recommendations of investment
relating to raw returns, the returns in excess of the consultants add value. According to the researchers, it
benchmark (taking into account the product style is futile to search for winners, encouraged and guided
and market-capitalisation) and one, three and four by investment consultants. We agree with the results.
factor alphas. The returns were expressed in terms The fact is that it takes a lot of hard work and strong
of percentage per year. To compute the returns, they passion to identify winning ideas. Those simply running
calculated the monthly returns and annualised them by a plain vanilla business of advising wont have the
multiplying them by twelve. time, patience and resources to pull it off.
The results of the study would appear surprising The study covered some other issues as well. What
to many who believe investment consultants are are the factors that drive recommendations of these
experts. The average gross returns in an equally consultants? It is not the past performance, but the soft
weighted portfolio of recommended products was factors that drive these recommendations. They also
a little lower, at 7.13%, than those of the products found that these recommendations have a significant
which were not recommended, at 8.13%. Thus, the effect on fund flows.

MONEYLIFE | 30 Sep-13 Oct 2016 | 50

Earning Curve.indd 2 23-09-2016 16:47:26

MAS Benefit #8-10
Moneylife Magazine Handbook Product Reviews

8. Moneylife Magazine: 9. Handbook:

Since March 2006, Moneylife magazine A complete online guide on every aspect of
empowers individuals to invest and spend personal finance
wisely by oering hard facts, insightful from annuities and
opinions, unbiased bank accounts to
options and Wills and zero-coupon
useful tips on bondsall in the form
fixed-income of common questions
products, and answers. This
mutual funds, handbook helps
insurance, you make correct
stocks, taxes. decisions about all
This bold aspects of money.
and practical Whenever you are in
fortnightly doubt, all you need to do is to refer to it. You
guide is included will get factual and unbiased information. No
in your MAS premium need to wonder; no need to ask. Part of your
membership. MAS premium membership.

10. Unbiased Reviews:

Moneylifes habit of calling a spade a spade comes in handy when our analysts review a financial
product available in the public domain. Our reviews will leave you with no doubt about the good, the
bad and the irrelevant. Part of your MAS premium membership.

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


MSSN - Unbiased.indd 1 29-07-2016 16:09:26

Supported By

allowance exempt under Section


At Moneylife Foundations
3) This exemption has not been
shown in Form 16 provided by my
previous employer, i.e., it has been
shown as taxable gross income and
no deduction shown. Does this have
any impact on claiming exemption
Tax Helpline in ITR?
4) My understanding is that
Ask tax-related questions at Its free exemption is lower of (a) actual
encashment (b) up to Rs3 lakh
cumulative till date (c) average
Income from Second the house during the financial year, salary for 10 months and
interest for that full year would be (d) encashment computed on basis
Home allowed. For EMI in February and of maximum 30 days leave. My

I am a salaried professional and

living in self-owned house in
Mumbai. For investment purpose,
March 2015, you will be allowed
deduction in five
equal instalments.
query here is that if the annual leave
provided by the employer is less
than 30 days, does the step (d) come
I have bought another house in Notional income on into the picture?
Lucknow (co-owner wife). While I the second house 5) Since my Form 16 does not
have received the possession of this needs to be shown consider this income as exempt,
house in December 2015, it is still from the date of what will be the implication, if I
vacant and yet to be let out on rent. possession. You have to use ITR 2 claim the amount in ITR? What is
Both the properties are on loan for filing your return. I would also the penalty if the tax assessor does
from banks. recommend that you read a special not agree with the computation?
I want to understand the tax feature that had done
implications arising out of the (in June 2016) on house property Subodh Shahs Reply: 1. You
second house and the tax benefit income which covered information are correct. U/s 10(10AA), leave
from the properties. Also, the on most of the questions you have encashment received at the time of
second loan started in February asked. retirement (including separation
2015 but the possession of the due to resignation, retrenchment,
house was in December 2015. So, Taxation on Leave voluntary retirement scheme-
two months worth of EMI (equated Encashment VRS, other than
monthly instalment) was in the termination) or
previous financial year (FY). Can I
add all the EMIs for home loan in
this years ITR? And for notional
I am a salaried employee who had
changed jobs in the previous
financial year. While changing jobs,
death is eligible for
2. It should be
income from the house, will I have I received leave encashment amount shown under the
to show it from December 2015 of about Rs1.2 lakh. I have the allowance exempt under Section 10.
(possession of the house) or for the following questions: 3. This should not be a problem.
whole FY? The same question I 1) If I understand right, leave You can directly claim the
have for interest and principal on encashment on resignation for exemption in your ITR.
the loan (only four months or full private employees is tax-exempt up 4. Step (d) is mandatory, even if
year). In addition, I am not sure to a certain limit under Section10 leave eligibility as per company
which ITR (income-tax return) form (10AA), even if I have immediately policy is less than 30 days.
to use in such a case. joined another employer. Is this 5. In my opinion, if you have proper
correct? evidence of having received the
Nikhil Vadias Reply: You have 2) If this is true, how should this leave encashment at the time of
an option to declare either of amount be shown in the ITR? retirement or change, then
the houses as self-occupied and Should it be excluded from gross your claim is legally tenable in the
deemed let out. For possession of salary? Or should it be shown under ITR.

MONEYLIFE | 30 Sep-13 Oct 2016 | 52

Tax Queries.indd 2 23-09-2016 17:18:22

Supported By

Moneylife Foundations

This helpline is for tax-related queries for individuals and small businesses who file
their own tax returns or want to double-check the advice they have received from
others. It will not attempt to substitute a tax advisor or tax expert whose help is
required for complex issues. Nor is it a grievance redress forum.



1 Every new query posted will be sent to our

panel of tax experts

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

expert, we will post the reply
3 You can access similar issues
faced by other taxpayers
To use our tax helpline, please confirm that you have read our terms and conditions.
Also, this is only for individual taxpayers and small businesses.

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


Lapse It: Time-lapse and means to verify whether the stories we get are really true. comes to the rescue in such situations. It is
Stop-motion Videos the definitive Internet reference source for urban legends,
folklore, myths,

F or all those who like to have fun with their phone

camera, Lapse It is a full-featured
amazing time-lapse and stop-motion
d app for capturing
rumours and
misinformation. Use
the search box to
videos. It is simple, fast and intuitive.
e. locate your item of
There are plenty of features forr interest, or click the icons to browse the site by category.
you to customise your sequence off If you dont find the story you are looking for, you can
pictures in many different ways. You u even submit a rumour on the site to find out whether it
can even apply different stylish camera ra is true or not. Similarly, if you get a photograph which is
effects to them. The new version bringsngs difficult to believe, you can upload it on
more integration with social networks; so you can easily il and get an instant report on whether the photograph is an
publish your videos or share through the built-in Lapse It original or modified! Both are very useful tools to satiate
gallery, where other users can watch and vote. your curiosity and be a better-informed citizen.
Apart from clicking wonderful pictures, you can import
pre-recorded videos to speed them up or slow them down
Salient Eye: Home Security
and use any song from your library as the sound track of
your video. There is an adjustable exposure, focus, white
balance and scene modes. The stunning filter effects make
your Lapse It even more awesome. So, go ahead and have
fun with your camera! Just Lapse It!! S alient Eye is a home security system which you can
set up using your old Android Smartphone. It is very
simple to use either at home or at work. Just download
Runtastic: Achieve Your the app, set it up on your Android phone, and place your

Fitness Targets
phone pointing to a strategic area such as the door or the
window where a break-in is most likely.
It uses the phones camera to detect motion. Once

R untastic features a series of apps which takes fitness

freaks to a new level: Runtastic Running and Fitness.
It uses GPS to map and track sports and fitness activities
it detects a break-in, it will start taking pictures and
instantly send them to you on
email or via SMS, as you may
such as running, jogging, biking & walking. It tracks have defined, to another phone
cardio workout progress (duration, of your choice. Once sufficient
distance, elevation change, calories evidence is gathered, it will also
burned and more) to help you build optionally sound an alarm.
healthy lifestyle habits and reach Salient Eye is extremely simple
exercise goals. It has a personal to set up and use. It works up to
workout diary and also a live 10 hours on the battery. You can
tracking and cheering mode to even set it up to switch on or off on certain days or time
motivate you to achieve greater of the day. So now, your old/used Smartphone can double
heights! The other apps in the Runtastic family include up as a burglar alarm! Its an Android app but coming in
those for mountain bike, push-ups, six packs, sit-ups, Appstore soon.
squats, pedometer and many more. If you value your
fitness regime and want to achieve your targets, dont
miss this one! Yazdi Tantra is a chartered accountant
by training, computer consultant by
Snopes and Izitru: Separate profession, entrepreneur-developer by
hobby and trainer in his leisure time.
Fact from Fiction He is currently the vice-chairman of
Zoroastrian Co-operative Bank Ltd
and has been running a medium-sized computer

T hese days, we receive so many mails, some of them well

meaning but, sometimes, incredible. We need some
company ON-LYNE for the past 24 years.

MONEYLIFE | 30 Sep-13 Oct 2016 | 54

Tantra - column.indd 1 20-09-2016 17:58:32

MAS Benefit #11
One-on-one-Help Portfolio X-Ray

We are not agents, distributors, brokers or lead

generators; so, you get ethically correct advice

There are thousands of mutual fund schemes,

hundreds of insurance products, bank FDs,
corporate FDs, corporate bonds, over 3,000
actively traded stocks How is an average saver
supposed to choose? You have 5 options

Option1: Do nothing.

Option2: Rely on friends, relatives, neighbours, oce accountant, derived wisdom from social media
or the press/TV. (But do they know more than you? And how do you know that?)

Option3: Rely on relationship managers, insurance agents, distributors, wealth managers. (But you
are only a sales target for them)

Option4: Research insurance, mutual funds, markets, stocks, financial theories Become a financial
expert yourself. (Is this practical?)

Option 5: Choose Moneylife Advisory

A no-bias, no-conflict platform. Ask any confidential question about investments, insurance and taxes
and you get the right answer.

Subscription to Moneylife magazine is included in MAS Premium Membership

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


MSSN Handholding.indd 1 29-07-2016 16:08:23


Treating Heart: The Good, Bad and

Ugly in Modern Medical Research
Is the scientific paper a fraud? asked Sir Peter B Medawar, control of the brains master clock, the suprachiasmatic
Nobel Laureate in the Listener (12 Sep 1963), 377-78. nucleus, which orchestrates the bodys circadian rhythms.
Some diagnosed cases of high blood pressure are

e claim that our research, which is based on accompanied by large swings; a daytime measure of high
the short-term randomised controlled trials blood pressure may actually become low blood pressure
(RCT), is very scientific and based on evidence. at night, and there are some indications that this change
Is this premise right? Do our RCTs, even remotely, have may be a bigger concern than blood pressure itself.
anything to do with reality and science? I do not think so, I had been opposing the night doses of BP pills for this
especially in the realm of so-called killer lifestyle diseases very reason; lest I should fall into the trap of disregarding
like hypertension, diabetes, cancer and coronary artery primum non nocere (first do no harm)!
disease. Studying BP over a period in the same person would
Hypertension has been my research interest for more give us great insight into this enigma called hypertension,
than four decades; I have had a feeling that we have been if it is a disease at all. Labelling hypertension with
predicting the unpredictable future of our patients based one or even many readings over a short period
on our short and dirty experiments called RCTs where might have a specificity and sensitivity of less
the researcher can manipulate one measure in the cohort than 50% making it look like a roulette
as s/he wants. gamea big gamble.
Long-term observational studies, on the other hand, Of course, people
allow one to study what happens to the subjects over a have studied
period of time where one cannot manipulate the measures. continuous BP
This apart, humans are not identical, like molecules in a monitoring
laboratory, to be compared with others.
I had written about this in my book on hypertension,
in 1993. In retrospect, three major very long-term
observational studies have now proved me right. Multiple
risk factor intervention trial (MRFIT) study is a very long-
term observational study of a large cohort over a period of
25 long years. It has proved that both, hypertension and
diabetes, are, at best, ONLY risk factors. MRFIT clearly
showed that there have been NO RISK FACTORS that
could lead to heart attacks and stroke.
Even if one were to believe in the risk factor theory over
and modify those risk factors with outside interventions, a period,
the risk will still be the same! MRFIT clearly shows the may be for
hollowness of our thinking in this area. What is average days at best; but
for the general population may be an alarming disease that does not refine the
for any given person when we treat averages as normal in diagnosis significantly. I tried it
our RCTs which give a distorted version and label many and stopped doing that when I realised the
healthy people as sick needing unnecessary intervention futility of that approach.
(false positives); but the industry loves that. I am reminded of what the German author, Jorg
Longitudinal monitoring can look at trends as a Blech, wrote in his book Disease Inventors about the
function of age in the same person, starting with presumably early days of labelling hypertensives in those small cute
healthy subjects, feels Germaine Cornellissen, head of WellMan clinic vans outside the churches and malls in
the Halberg Chronobiology Centre at the University of Germany offering to check their BP for free! This is how it
Minnesota. He feels that Blood pressure and heart rate all started. He opposed it then; see how right he was in the
rise during the day and fall at night. The changes are under light of new knowledge! (Inventing Disease and Pushing

MONEYLIFE | 30 Sep-13 Oct 2016 | 56

BM Hegde.indd 2 20-09-2016 19:16:52


Pills: Pharmaceutical Companies and the Medicalization good health is love.

of Normal Life, Routledge, 2006). The new findings A study at Tokyo Womens Medical University tracked
suggest that these vascular variability disorders, called BP based on multiple readings (almost monitoring it) over
circadian over-swings, might be labelling healthy people a 48-hour period to separate simple raised pressures from
as hypertensive when the measures of BP are checked at those with vascular arhythmicity, either in the size of the
noon in the doctors clinics only. Some patients even have a change or in its timing.
shift in their timings where they peak at night and are low This, in itself, has thrown up some surprises; but the
during the day, out of synch with the rest of their body. next six years follow-up showed that only 10% of those
with genuine high BP had cardiovascular (CVS) events.
Even in those with vascular problems, ONLY 29% had CVS
Labelling hypertension with problems. Surely 10% and 29% do not by themselves make
one or even many readings over BP a risk factor. However, in todays world, even one raised
reading, warrants chemical drugs which looks dangerous,
a short period might have a to say the least. Of course, this is only a womens study
specificity and sensitivity of less and has its shortcomings vis--vis men.
than 50% making it look like a RCTs, especially short ones, in small cohorts funded by
roulette gamea big gamble the industry, have been a menace in the area of coronary
interventions. Whereas there are no large-scale studies of
either bypass surgery or angioplasty having any special
Another large study, of more than 75 years longitudinal benefit except pain relief, there are many small RCTs
observation of a large cohort of healthy young men after showing multiple benefits from angioplasty and coronary
the Second World War (The Grant and The Gluech studies), artery bypass grafting (CABG).
by a group of researchers from Harvard (going on to the None of those, so-called, studies has observed the
third generation of researchers today) has thrown up some patient after intervention on a long-term basis, like the
scientific surprises in this area; alcohol and smoking observational studies quoted above. Our experience of
are the greatest killers. Love, compassion and strong industry-funded studies, which are published selectively
relationships, including social support, came and suppresses negative studies, makes the scenario in this
out as the leading causes of happiness and area doubtful. In practice, they have become a menace for
longevity. In short, as Dr poor patients. See this pathetic note from a patient son
George Vaillant put it which I received recently:
happiness and Sir, yesterday evening my mother got heart attack,
so we took her to heart centre, and they (have) done
angioplasty and placed 3 stents. They are saying that (the)
cost will be around Rs6 lakh. I cannot afford this much
sir. I spoke with (the) management. They (are) saying that
if our chairman agrees, they will make it in lower cost.
So I request you, if possible, please speak with Dr. and
make the bill subsidised, sir.
Is it a stent or an unscientific stunt?
One of the most successful physicians I have ever
known has assured me that he used more bread pills,
drops of coloured water, and powders of hickory ashes,
than of all other medicines put together. It was certainly
a pious fraud. Thomas Jefferson

Professor Dr BM Hegde, a Padma

Bhushan awardee in 2010, is an MD,
PhD, FRCP (London, Edinburgh,
Glasgow & Dublin), FACC and FAMS.
He can be reached at

57 | 30 Sep-13 Oct 2016 | MONEYLIFE

BM Hegde.indd 3 20-09-2016 19:17:16




E arly menopause
has been found to
be an additional risk
G erman drug and
crop chemical
maker Bayer clinched
factor for heart attacks, high BP saviour! In a shocking revelation, a a $66 billion takeover of U.S.
(blood pressure) and many other new study has shown that the sugar seeds company Monsanto on
vascular complications says a study industry paid Harvard scientists in Wednesday, reports Reuters. If
published in the British Medical the 1960s to play down the risks the deal closes, it will create a
Journal (BMJ) recently. However, of sugar associated with coronary company commanding more than
what worries me is why women heart disease and highlight fat as a quarter of the combined world
have premature menopause these the culprit, instead. market for seeds and pesticides
days. Is it because they have early An industry group, then called in the fast-consolidating farm
menarche with all the hormones in the Sugar Research Foundation,
quill and our food, thanks to greedy which is known as the Sugar
industry? If that were so, we will Association today, sponsored some
have to tackle it at the root. To treat research on fat as the dietary
menopausal women with drugs is culprit in heart diseasean attempt
a foolish reductionist science in a to refute concerns about sugars role
holistic closed system of human in heart disease.
biology (physiology). The Sugar Association paid
three Harvard scientists the
THE STORY OF FAT PROFILE equivalent of about $50,000 in
AND THAT GHOST, todays dollars to publish the supplies industry. I am sure that
CHOLESTEROL research, which they published future medical scientists, when they

T he world of medical science is

yet to get out of the shock of
cholesterol being declared a friend
in the prestigious New England
Journal of Medicine (NEJM) in
1967. Researchers, however, noted
sift through the medical sciences
greatest curse on mankind, this
new dispensation might figure
of human health by the US diet that there was no disclosure of the prominently in the decline and
guidelines which urged people to sugar industry funding the research destruction of human health!
eat fats in their diet to regain their that minimized the link between
health. Meanwhile, there are stray sugar and heart health, says TRAUMA SURGERY AND
reports trickling in to show how the report. Funding research is DEEP VEIN THROMBUS WITH
this myth was first created in the ethical, Nestl told Reuters Health PULMONARY INFARCTS
late 1950s and early 1960s.
A recent paper in JAMA Internal
Medicine shows the level to which
by email. Bribing researchers to
produce the evidence you want is
T his causes about 300,000
deaths annually in the US.
There is an attempt to find the
the greedy industry can stoop to Increasingly, epidemiological best way to prevent this hazard
achieve their aim of making money, reports suggested that blood sugar, in a very large new study at the
even at the cost of human lives of rather than blood cholesterol or Maryland School of Medicine with
the gullible public who depend high BP, was a better predictor of 13 other centres at a phenomenal
blindly on the faith that Western plaque build-up in the arteries.The cost of $100 million. It would study
science is our Sugar Association paid very more than 13,000 patients who
prestigious Harvard scientists
pres undergo trauma surgery with bone
publish a review focusing on
to pu fractures. This study proposes to
saturated fat and cholesterol as
satu compare simple oral aspirin with
the main causes of heart disease
th low molecular heparin injections.
aat the time when studies Both these drugs could increase
were starting to accumulate bleeding in those patients. The study
indicating that sugar is a risk is supposed to settle this question
factor for heart disease. for ever.

MONEYLIFE | 30 Sep-13 Oct 2016 | 58

BM Hegde.indd 4 23-09-2016 17:20:59


On Death of the First Holder of

Shares and Debentures

hen securities are held jointly in two or three deed duly notarised; and
names, on the death of the first holder, the b. An Indemnity bond made on appropriate non-judicial
securities will stand transmitted to the surviving stamp paperindemnifying the issuer company.
security-holders; the name of the first holder will be deleted. c) For value of securities more than Rs2,00,000 per issuer
However, there is no automatic deletion of the name of company as on the date of application:
the deceased shareholder/debenture-holder. The surviving It will be necessary to produce the succession certificate,
shareholder/debenture-holder has to submit a certified or probate of Will, or Will, or letter of administration,
copy of the death certificate with a request to delete his/her or court decree, as may be applicable in terms of Indian
name. While, on the face of it, the process of transmission Succession Act, 1925.
appears simple, different companies follow different Investors should note that the best way to avoid the
procedures. cumbersome procedure is to ensure that all the securities are
To make the process more investor-friendly, SEBI held in joint names and or, at least, a nominee is appointed
(Securities & Exchange Board of India) had issued a circular and registered with the company in accordance with the
on 28 October 2013. But the confusion continued. So, now, provisions of the Companies Act, 2013 and, in case of
SEBI has decided to modify a clause of the 2013 circular. demat securities, with the concerned depository.
The following rules apply, in case of transmission:
1. For securities held in single name, with a nominee, Investor Education & Protection Fund (IEPF)
a company may ask for: An important change in the interest of securities-holders
i. Duly signed transmission request form by the nominee. has been made by the ministry of corporate affairs (MCA)
ii. Original or copy of death certificate duly attested in the rules relating to IEPF. Investors would be aware that,
by a notary public or by a gazetted officer. until now, the entire amount of unclaimed / unpaid dividend
iii. Self-attested copy of PAN card of the nominee. and interest lying with a company has to be remitted to
(Copy of PAN card may be substituted with ID proof, in MCA after a period of seven years. Once deposited, the
case of residents of Sikkim, after collecting address proof). securities-holder lost all rights to claim any refund.
2. For securities held in single name, without a Now, in addition to the aforesaid amount, even
nominee, the documents mentioned above and the underlying shares on which dividend has remained
the following additional documents may be sought unclaimed for seven years or more have to be transferred
by the company: by the concerned company in favour of the IEPF Authority,
a.) Affidavit from all the legal heirs made on appropriate a newly created statutory authority which will administer
non-judicial stamp paperto the effect of identification the IEPF.
and claim of legal ownership to the securities.
According to SEBI, in case the legal heir(s)/claimant(s) Good News for Investors
is named in the succession certificate or probate of Will, The good news for investors is that they can now reclaim
or Will, or letter of administration, an affidavit from such the unclaimed/unpaid dividend, interest, matured deposit
legal heir/claimant(s) alone would be sufficient. amounts, matured debentures, share application money,
b) Where the value of securities is up to Rs2,00,000 per etc, for seven years or more. They can now approach the
issuer company, as on date of application, one or more of IEPF Authority to claim it. The Authority has prescribed
the following documents will be necessary: the procedure to be followed by the investors while lodging
i. Succession certificate or probate of Will or letter of their claim with the authority.
administration or court decree, as may be applicable in
terms of Indian Succession Act, 1925.
ii. In the absence of the documents as mentioned at (i)
above, the following will be required: SD Israni is a corporate lawyer & Fellow
a. A no objection certificate, (NOC) from all legal heir(s) of ICSI. Email:
executed by all the legal heirs of the deceased holder not
objecting to such transmission (or) copy of family settlement

59 | 30 Sep-13 Oct 2016 | MONEYLIFE

Legally Speaking.indd 2 23-09-2016 16:48:54


Jio: Why Its there are no boundaries. The subscriber can use Jio
across the country without worrying about roaming
(exorbitant) charges. In addition, Jio has clarified that
Different the data used for the voice calls will neither be charged
nor deducted from the data balance of the subscriber.
Nevertheless, keep in mind that a Jio subscriber may
Jio offers only 4G (not 2G and 3G) and, so, face difficulty while calling a subscriber from other
will ensure that a subscriber can always networks due to inter-connectivity issues. Other
access the network, says Yogesh Sapkale operators are already up in arms against Jio, over this

he entry of Reliance Jio in the Indian telecom This brings us to the tariff of Jio. Similar to
segment is important for three reasons. One, other operators, Jio offers pre-paid and post-paid
it has created a buzz in the mobile market subscription, with plans ranging from Rs19 to
that was stagnating for quite some time. Second, it Rs4,999 in pre-paid (28 days validity), and from
has forced other players to reduce tariffs and increase Rs149 to Rs4,999 for post-paid monthly billing cycle.
customer-care. Third, Jio operates only in fourth Subscribers are offered 100MB to 75GB data per
generation (4G) space. This means that, even if it wants month, in addition to almost double the data in Wi-Fi.
to, it cannot offer to a subscriber 2G or 3G network. Jio also offers unlimited data at night. However, the
So, the subscriber is assured of minimum basic data night, for Jio, lasts only for three hours, between 2am
speed for which she is paying. Add to this the free voice to 5am!
calls and you will understand why people are thronging So, can you simply buy a Jio SIM and start using
to Jio stores. this service? Yes, if you have a 4G-enabled handset
In addition to the existing pan-India 2,300MHz capable of voice over LTE (Long Term Evolution).
spectrum and 1,800MHz in 14 circles, Jio has invested Handsets (even if you have bought a new one) that
over Rs10,000 crore during this years auction to use 3G, cannot be used for Jio. Yes, if you are ready
acquire 800MHz spectrum in 10 circles and 1,800MHz to stand in the long queues at Jio stores and have the
spectrum in six circles. Also, Jios 250,000 kilometres patience for your SIM card activation. The company
of fibre-optic cables cover 18,000 cities and over says that, with Aadhaar e-know your customer
100,000 villages. With h such high-scale infrastructure in connection faster
(e-KYC), it can activate a new conne
place, Jio is better placed
ced than incumbents in coverage according to feedback from
within 48 hours. However, accordin
as well as capacity. Moreover,
oreover, all this is pure several customers, tthis is not the case.
4G with capacity to migrate to higher I have met some ccustomers who are
standards (5G & 6G) as and when required. activation for the past 20
waiting for activa
The main differencee between 4G and the days or more. This is for a new
previous standards, likeke 3G (denoted by H connection.
connection Mobile number
or HSPA+ or simply H+) and 2.5G (denoted portability (MNP), although
by E), is the use of network
twork nodes. Both, offered by Jio, may take even
3G and 2.5G, use packet-switched
ket-switched time.
more time
nodes for data servicess and circuit- you want full value
If yo
switched nodes for voiceice calls. In of your money, especially
4G systems, the circuit-switched
t-switched for data,
dat then go for it.
infrastructure is abandoned
doned and Voice ccalling to other
only a packet-switched d network is networks is not really
provided. Thus, in 4G,, traditional good, at prpresent, and you
voice calls are routed through may want to continue to use
Internet telephony, as data. your current
curren SIM. In any
What does this mean an to a case, Jio is free up to 31
common subscriber? The December
Dece 2016; so, no
subscriber may get Jios s harm
ha in testing it
4G network across thee out, especially if
country, well, most you have a 4G
of the times. And handset.

MONEYLIFE | 30 Sep-13 Oct 2016 | 60

Technology.indd 1 23-09-2016 17:24:46


Easing into Easements, Not Easy

ou own a home. A mans home is his castle. It Smith, circa 2016, again Scottish, Sherriff Reid was
means that you can let in, or keep out, anyone more distinct. The case involved parking of caravans
you want. None can use that which belongs to since 1989. Twenty years, without notice, helps establish
another. Period. a right. The judge (Sherriff) called for records but, more
Why then does the State, to whom the roads importantly, clarified what parking actually meant.
belong, allow you to use them for free, but charges the He queried if it was temporary, and for varying and
motorists? It is due to the law of easements, a law extended periods. What of broken down vehicles? Did
based on the use of property owned by others. It allows the parking amount to storage? Were the balls red,
the use, enjoyment and extraction of profit from that white or pink? Horses for courses.
property. The fisherman casts his net and sells the catch; These cases show that the problem is perennial
the forest-dweller has rights over forest produce, just and not susceptible to rigid solution. Each matter will
as herders have over certain grazing lands. But does be decided on a case-to-case basis. The contractual
the law allow indiscriminate car parking, a big bone document needs be thoroughly drawn up. While it may
of contention with city- be impossible to touch all
wallahs!? bases, and we have amongst
You be the judge. us brilliant minds seeking
A man owns a plot of loopholes, the positive
land. He is surrounded by and negative actions need
others and has no access to amplifying.
the main road. You are one In India, access is an
of the neighbours. Would easement must. Locked-in
you, even as a judge, allow properties get the easiest
him ingress and egress route, a minimum of five
through your plot? Good metres width, to allow heavy
neighbourly relations? vehicles. If the road is used
Some Scottish cases by many, parking must be
caught our attention. banned and so specified.
In 1899, in Cronin v/s Pedestrians have easement
Sutherland, a court had to rights per se. Motorists pay
decide whether horse-drawn carts could carry asphalt, for use of public roads and, therefore, can legally be
on a road where the right existed only for manure and denied that right, just as the railways restrict use of
fuel transport. It opted for strict interpretation. Coming over-bridges to ticket-holders.
to modern times, another problem cropped up in To end an exhilarating exercise, the best remark
Moncrieff v/s Jamieson. This time, it was cars. And the comes from a British judge. There is a common
problem was with the right to park. misunderstanding that an Englishmans home is his
You be the judge. castle in the sense that he can build walls, put up gates
Would the right to traverse a road also allow parking and do other acts on his land whenever he chooses, and
thereon? Your answer may depend on whether you without regard for his neighbours. While it is often true
own the land or the car. But what would be the judicial that a person can do what he wants on his own land, it
remedy? is not always so. The law expects neighbours to show
Feudal societies had ideas of ownership that were some give and take towards each other.
different from ours. Where once drovers drove animals And then what would the lawyers do? Make-in-India
over vast tracts of land, the animals naturally rested. loopholes?
They ate the grass. Cattle bit it. Sheep pulled out the
roots too. The implications were built in.
Times change. While Cronin stuck to the letter of Bapoo Malcolm is a practising lawyer in
the contract, so as not to make the burden upon the Mumbai. Please email your comments to
servient tenement more heavy, Moncrieff wavered.
However, in Johnson, Thomas and Thomas v/s Thomas

61 | 30 Sep-13 Oct 2016 | MONEYLIFE

You Be the Judge.indd 2 23-09-2016 16:50:37


Sue the Messenger and South Gujarat baited the Bombayite. Vapi was the
preferred destination. Asias biggest chemicals estate, it

A Muffled Voice was billed; and caution was thrown to the winds. Winds
carried the deadly fumes for miles around. Rivers turned
to every rainbow hue, fruits shrunk by 30%. Well-water

he first two chapters made me jot down: was contaminated, effluent discharged into nullahs.
putdownable. Thank God, I continued. Sue the I know. As a young salesman, I had tried to sell pollution
Messenger then starts to read like a detective novel. control equipment in Vapi. I sold none. The stock excuse
Each Smart-Alec chapter-title is followed by journalistic was that the inspector could be paid off; why invest in
sleuthing, digging up dirt, exposing the filthy tricks bag of equipment and waste money.
corporatesbe they chemicals manufactures, the fourth With this attitude, chemicals banned in other countries,
pillar robber baronsor sundry nasty characters, out to along with forbidden and scrapped plants, found ready
stifle, not dissent, but truth. buyers in India. Worse was to follow. The font of the estates
Shooting the messenger may seem more humane. Here sprayed the entire country with poison. And any attempt
are examples of harassment, hounding, ingestion of fatal to expose the noxious nexus was thwarted by crushing
substances; and the ever- litigation. Read it. Its all there in this book.
present halo-backed denials. There are two distinct writing styles discernible in the
Sabse Badaa Rupaiya. And book. One staid. The other racy. But the research and facts
to hell with the public! Mark stand out. One never feels that there is any wavering from
Twain said, attributing to the truth. Where the authors, Paranjoy Guha Thakurta
Benjamin Disraeli, that and Subir Ghosh, were personally involved, they make
there are lies, damn lies it clear. It is for the reader to decide whether they have
and statistics. We now add axes to grind.
unholy refutations, doctored
reports, manipulative
press conferences, et al. In the penultimate paragraph of his
Finally, there is resort to 29-page ruling, Justice Bhat spoke of
ruinous litigation where the perils of SLAPPs, Free speech
the small guy is driven into
the ground, not allowed and expression is the life blood of
to function, financially democracy. Any actionthreat
decimated and made to to damages, are bound to chill the
shut up. exercise of that invaluable right of
As a lawyer, I asked
myself: Would I issue the people and the press
notices, actually legally
Pages 203; Rs216
worded threats, if I were Constant vigilance is the price of freedom. Newsmen,
offered a million bucks? and women, help in no small measure. But investigative
As one who has often said that the Lets-teach-him-a- journalism is not for the faint of heart nor for the weak
lesson litigation is taboo, what would I do? The answer, of spirit.
my friends, is blowing in the wind. The answer is blowing Moreover, is there a journalist who has made his pile
in the wind. by exposing the crooks and the corrupt, the high and
This very magazine has faced similar tribulations. the mighty? Methinks not. The breed will live and die
Laws do not allow me to elaborate on sub-judice matters, penniless. But we, and the truth, will survive.
especially where I was involved; but the reader will find At the end of the day, we must understand this. Every
fairly accurate reportage in the book. Maybe one day, time David slays Goliath, we can rejoice. Not because of
Sucheta and Debashis (and why not I too), will be able victory, wherein we need to demonstrate magnanimity, but
to pen a volume. Till then, this is all you get. because we live in a free world. A world where informed
Its frightening to read. To think that we are exposed choice overcomes lies and deceit, where human bulldozers
to toxicity every waking and sleeping moment. In the are stopped in their tracks, and men and women enjoy the
mad rush of the 1950s and 1960s, the Holy Grail was fruits of their labour; and those that seek to prosper by
import substitution. Chemicals formed no mean part oppression are laid waste. Bapoo Malcolm

MONEYLIFE | 30 Sep-13 Oct 2016 | 62

Book Review.indd 2 23-09-2016 16:42:08


responsible as many elements are emboldened to do this

because of political support.
Ms Daruwala, from CHRI, argued that, for better
policing, there is a need for three Ps, policy, provisioning
for performance and participation by citizenry. Police
needs to keep active peace so that everybody can enjoy
their constitutional rights, she said. The CHRI director
also hit out at the Maharashtra government for the new
internal security law and said, This law will cast suspicions
on everyone. This is what we all have to fight with help
from active citizenry.

Police Reforms for a What Can You Do if

Better Society Someone Goes Missing?

hile talking about police reforms and f you come across a missing person, contact the nearest
accountability, we need to make sure police station and a hospital, if required. Seniors suffering
that there is an effective mechanism, like from dementia should always have an identification card
allowing people to register complaints without making with them. Also, make it a habit to keep a mobile with
them face consequences of it, said senior counsel Mihir them with numbers that can be contacted when required
Desai. He was speaking at the 9th session under the Police by someone who is helping them. This advice came from
& You series. Moneylife Foundation, with Police Reforms Prabhat Kumar, Special IG of police for law & order in
Watch, supported by Saraswat Bank, has launched the Maharashtra. He was speaking at the 10th session under
12-week programme (every Wednesday) that aims to the Police & You series. Mr Kumar, the man behind
spread knowledge about protecting yourself, your rights, Shodh, a search engine dedicated for searching accident
victims and missing persons says, We should have a
unified portal with an integrated system. This must run
on artificial intelligence software which can identify faces
and other details.
Also speaking at the session were Vasant Dhoble,
former assistant commissioner of police (ACP) in Mumbai
and activist Samir Zaveri. Mr Dhoble, who developed
Mihir Desai Sudhakar Suradkar Maja Daruwala and implemented new protocols for the Missing Persons
Senior Advocate (IPS) retired IGP Advocate
Unit at Mumbai Police, which resulted in finding about
the Indian Penal Code (IPC), cybercrime and economic 7,000 missing individuals, including children, in just six
offences. months, says, I have witnessed and rescued women and
Advocate Desai, who has been practising in matters children from flesh trade, begging rackets, child labour and
related to human rights and civil liberties said, While organ-trafficking. It had become unbearable and, therefore,
expecting accountability from the police, we also need after retirement, I decided to take the initiative to curb
to understand the conditions under which they are made such immoral activities. For locating mission person, we
to work. Police are on duty virtually all times of the day use search engine, face recognition and detection engine,
and night. This is also extremely stressful job, laden with web and Internet services. The former ACP is now using
interference from seniors and politicians. his vast network of informants and volunteers, along
Also speaking at the The Police & You- Demanding with some Bollywood celebrities, like Ajay Devgn, for
Reforms and Accountability in Policing were: Sudhakar sharing information on missing persons on a website,
Suradkar, former inspector general of police, Maja
Daruwala, director of Commonwealth Human Rights Mr Zaveri, a rail accident victim, informed the audience
Initiative (CHRI), apart from advocate Desai. Mr Suradkar about efforts being taken by the Central and Western
said, The fear of the police has waned. Corruption by Railways as well as government railway police (GRP) in
some in the force is one of the reasons. Politicians are also providing information on missing persons on rail tracks.

63 | 30 Sep-13 Oct 2016 | MONEYLIFE

Event.indd 2 23-09-2016 17:50:04



The Sensex and the Nifty lost 1% each during the fortnight Foreigners: Foreign institutional investors were
ended 21st September. ML Mid-cap Index, ML Small-cap net sellers of stocks during the fortnight (Rs822.63
Index and ML Mega-cap Index gained 1% each, while crore). They sold shares worth Rs35,997.95 crore.
ML Micro-cap Index advanced 3%.

Share Prices Index, March 2016=100 210



FII Net Investments
(Rs Crore)

12 Sep-16 21 Sep-16

100 Indians: Domestic institutional investors were net

sellers of stocks (Rs396.82 crore). They sold shares
worth Rs17,134.71 crore.
90 780
Mar-16 Jun-16 Sep-16

ML Large-cap ML Small-cap Nifty ML Micro-cap 470

ML Mid-cap ML Mega-cap Sensex DII Net Investments
(Rs Crore)

Index 9 Sep 21 Sep +/-

ML Micro-cap Index 114.28 117.50 3%
ML Mid-cap Index 123.89 125.60 1%
ML Small-cap Index 117.96 119.51 1% 12 Sep-16 21 Sep-16

ML Mega-cap Index 119.45 120.39 1%

ML Large-cap Index 118.82 118.51 0%
Sensex 28,797.25 28,507.42 -1%
Nifty 8,866.70 8,777.15 -1% 5,180
NASDAQ Composite
Mega-cap Gainers/Losers 09 Sep 21 Sep Change 5,060

Edelweiss Financial Services 106.35 121.45 14% 4,940

Central Bank of India 108.75 96.60 -11% 4,820

Large-cap Gainers/Losers 09 Sep 21 Sep Change

Mar-16 Jun-16 Sep-16
Time Technoplast 84.60 105.30 24%

Housing Development & Infrastructure 100.95 83.70 -17% NASDAQ Composite advanced 3%. The FTSE and
Bovespa rose 1% each. Shanghai Composite and
Mid-cap Gainers/Losers 09 Sep 21 Sep Change
Hang Seng fell 2% each.
Gitanjali Gems 47.70 64.50 35%
Index 09 Sep 21 Sep +/-
Hinduja Foundries 55.00 34.60 -37%
NASDAQ Composite 5,126 5,295 3%
Small-cap Gainers/Losers 09 Sep 21 Sep Change
S&P 500 2,128 2,163 2%
SVOGL Oil Gas & Energy 3.34 4.87 46% FTSE 6,777 6,835 1%

Man Industries (India) 58.75 49.75 -15% Taiwan Weighted 9,165 9,229 1%
Bovespa 58,000 58,394 1%
Micro-cap Gainers/Losers 09 Sep 21 Sep Change
Korean Composite 2,038 2,036 0%
Sarda Plywood Inds 53.50 83.00 55%
Nikkei 16,966 16,808 -1%
Supreme Tex Mart 9.60 6.85 -29% Shanghai Composite 3,079 3,026 -2%

(All Prices in Rs) Hang Seng 24,100 23,670 -2%

MONEYLIFE | 30 Sep-13 Oct 2016 | 64

Money Fact.indd 2 23-09-2016 16:40:08


Whats H T

Chemicals companies were in demand during the fortnight. Bhageria
Industries, Thirumalai Chemicals, Aksharchem (India) and Pondy Oxides &
Shares of packaging companies and
chemicals companies advanced 5%
Chemicals soared 37%, 33%, 32% and 30%, respectively. and 4%, respectively. Shares of sugar
companies, textiles companies and
Companies 09 Sep 21 Sep +/- garment companies rose 3% each.
Stocks of shipping companies, steel
ML Chemical Index Bhageria Industries 376.05 515.05 37%
companies, glass companies and
150 Thirumalai Chem 429.85 571.05 33% retail companies declined 5%. Stocks
Aksharchem (India) 346.45 458.25 32% of oil & gas services companies
fell 4%.
Pondy Oxides 143.95 186.75 30%
130 Kiri Industries 282.95 357.75 26% ML Sectoral Trends
Dynemic Products 64.60 80.20 24% Packaging 5% Shipping -5%
Ultramarine 141.00 169.35 20% Chemicals 4% Steel -5%
110 Sudarshan Chemical 351.10 413.20 18% Sugar 3% Glass -5%

Chemfab Alkalis 250.30 293.80 17% Textiles 3% Retail -5%

India Glycols 108.40 125.75 16% Garments 3% Oil & Gas Services -4%
Mar-16 Jun-16 Sep-16
All Prices in Rs

Whats N T Combined inflation for urban
and rural areas declined to
Shipping companies were a mixed bag. Gujarat Pipavav Port, Reliance
5.13% in August 2016, from
Defence & Engg, Mercator and Bharati Defence & Infrastructure declined
11%, 9%, 2% and 1%, respectively. 6.07% in July 2016. Inflation in
urban areas declined to 4.31%
Companies 09 Sep 21 Sep +/- in August, from 5.39% in July.
ML Shipping Index Food inflation in urban areas
Gujarat Pipavav Port 194.90 172.50 -11%

Significant Decline
Reliance Defence 65.15 59.00 -9% 110

Mercator 49.45 48.25 -2% 5.50%

Bharati Defence 25.35 25.00 -1%
Annual Change
Shreyas Shipping 259.70 261.55 1% 4.50%

Shipping Corp 69.30 69.90 1% 95

Great Eastern 361.70 371.45 3% 3.50%

Seamec 87.25 90.70 4%
85 2.50%
ABG Shipyard 28.45 30.20 6%
Mar-16 Jun-16 Sep-16 Aug-15 Feb-16 Aug-16
All Prices in Rs

declined significantly, to 4.96%

BULK DEALS in August, from 7.95% in July. In
urban areas, prices of vegetables
Date Company Buyer Seller Rs Cr
declined by 1.21% since last year.
16 Sep-16 United Breweries Heineken International B V Yes Bank 152.00 Prices of fuel & power remained
19 Sep-16 Cox Kings HSBC Glb Inv Funds Ind Equity HSBC Global Inv Funds Mauritius 36.42
steady in August compared to a
year ago. Inflation for housing fell
12 Sep-16 Rama Phosphates Jupiter Corporate Services Pvt Lajwanti Ramsinghani Daulat 5.72
marginally to 5.29%. Inflation for
15 Sep-16 Kisan Mouldings IC Jain (HUF) Nipur Chemicals 2.01
clothing increased marginally to
19 Sep-16 Kisan Mouldings Rajasthan Global Securities Pvt Ishwar Enterprises 2.00 3.66%; for miscellaneous items,
21 Sep-16 Sangam Advisors Ishwar Enterprises Dear Projects Pvt 1.73 inflation moved up marginally to
3.27% compared to July 2016.
14 Sep-16 Iris Mediaworks LTS Investment Fund Seema Aggarwal 1.16

65 | 30 Sep-13 Oct 2016 | MONEYLIFE

Money Fact.indd 3 23-09-2016 16:40:23


Remembering Those Who Cannot

Remember Is Our Social Duty
ementia, and one of its deadlier forms, Alzheimers, ARDSI, represents India on the World Dementia Council.
is a disease that affects the elderly. It is a We, at the Mumbai Chapter, are very proactive in our
degenerative disease that leads to a gradual loss operations. We hold many awareness talks for corporates,
of memory, impaired judgement, loss of communication housing complexes and social groups, and sensitise students
skills or speech, disorientation, loss of motor ability of schools and colleges. We also organise Memory Walks,
and balance. It is not only hard on the sufferer, but also screening sessions at health camps, educational and training
extremely stressful for caregivers who witness the slow modules for caregivers and volunteers, hold support/ peer
degeneration of a loved one. With an ageing population, group sessions and social activities for those affected by
dementia and Alzheimers are set to increase rapidly in dementia. Even sky is not the limit for us to be there
India. The bad news is that there is, as yet, low awareness for these seniors who feel lost and cannot even recognise
about this dreaded disease with the result that, often, it their own family members: children, grandchildren or
goes undiagnosed. even spouse, says Vidya.
Shockingly, about 2,500 new cases are reported in ARDSI (Mumbai Chapter) aspires to reach out to many,
India every day and these are only the registered cases. The many more by spreading awareness and dissemination of
number of diagnosed cases may be as low as 10% of the information on prevention and management with help
total sufferers, according of alternative therapies.
to some estimates. The Most important, on its
Dementia India Report high-priority wish list, is
2010 estimated that around the need to establish day-
4.1 million Indians would care centres, whereby
be afflicted by dementia families know that their
by 2015 and the financial cared one with dementia
burden of their lifelong is being looked after
care would would be well. After all, they, too,
approximately Rs16,300 need some respite from
crore. Worldwide, it is the onus of looking
estimated that a massive after them continuously.
4.8 million people are Care-giving, whether by
living with dementia and the number of people with the a family member or hired help, takes its toll on them
disease has a risk of doubling every 20 years. too. Furthermore, Alzheimers is a debilitating disease,
Most types of dementia are irreversible; various aetiology of which is yet unknown. This makes it absolutely
symptomatic therapies help in managing the disease, necessary to have 24-hour homes for palliative care. In later
if diagnosed early enough. Only in rare cases, it can be stages, persons affected by dementia cannot be managed
reversed, if detected early. at home.
With medical research leading to a larger percentage Eager to add numbers and funds to her purpose, Vidya
of population of senior citizens, it is imperative that we has clear ideas about how you can help its effort. To
must work hand-in-hand with all stakeholders concerned to begin with, may we ask you to be our Dementia Friend
draw up a viable policy that can be actually implemented and actively contribute, in your own waybe it as an
effectively, points out Vidya Shenoy, honorary secretary, individual or as a corporateto the cause of Alzheimers,
ARDSI (Alzheimers & Related Disorders she says. Donations to ARDSI (Mumbai
Society of India), Mumbai Chapter. Chapter) enjoy Section 80-G tax benefits
Founded by Dr Jacob Roy K, honorary under the Income Tax Act.
vice president of ADI (Alzheimers ARDSI - MUMBAI CHAPTER World Alzheimers Day was observed
Disease International) in 1992, ARDSI BMC School Building, Room on 21st September. This is just the time
has 20 chapters throughout the country Number 27 (2nd Floor), to gain expertise and spread awareness
and has a research affiliation with ADI. JJ Hospital Complex, Byculla, for this social cause. Life membership
Meera Pattabiraman, chairperson Mumbai - 400 008, of ARDSI is also available.
Telephone +91 222 374 2479
MONEYLIFE | 30 Sep-13 Oct 2016 | 66 Website:

Beyond_money.indd 1 23-09-2016 16:41:04

Advertisements.indd 6 10-08-2016 20:08:18
REGISTERED WITH THE RNI UNDER NO. MAHENG/2006/16653. Postal Registration No:
Date of Publishing 23 September 2016. Date of Posting Alternate Tuesday & Wednesday.

Advertisements.indd 1 20-09-2016 17:53:12