HOW

THE ECONOMIC TIMES

wealth
A PONZI
SCHEME
WORKS
PAGE 16

www.wealth.economictimes.com | Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | November 26-December 2, 2012 | 32 pages | ` 7

12 13 29 ALSO INSIDE
Financial planning PAGE 14
STOCKS REAL ESTATE TRAVEL
Be a Financial Wizard
Firms with low working Don’t fall for warranties How Indians holiday
and win `5,000 PAGE 31
capital can be good bets offered by builders Did you know Indians are one of
Find out the stocks and sectors Property developers have start- the most vacation-deprived in the
world? Find out other travel PLUS
with negative working capital that ed offering guarantees to buyers,
The week’s best stocks, mutual funds,
can make for attractive picks in but these may not be worth the trends for 2012 culled from
loans, deposits and insurance.
the current scenario. premium that you pay. various surveys and studies.

The recent scam highlights the ease with

which small investors can be defrauded.
Here’s how to spot a Ponzi scheme and
ways to avoid falling into the trap. PAGE 2

HOW SUBSIDIARIES BEFORE YOU

CAN ERODE A TURN A LOAN
STOCK’S VALUE GUARANTOR
PAGE 10 PAGE 27

EIGHT
QUESTIONS
TO ASK
BEFORE
INVESTING
PAGE 15

The Economic Times Wealth is available at an invitation price of `7/issue. To book your copy*, contact your newspaper vendor or call 011 - 39898090; Email: crm.delhi@timesgroup.com; SMS ETWS to 58888
02 The Economic Times Wealth, November 26-December 2, 2012
Don’t fall
for these
scams
The Stock Guru scam shows
how easy it is to defraud
small investors. ET Wealth
looks at the modus operandi
of fraudsters and tells you
how to avoid falling into the
traps they lay out for you.
BABAR ZAIDI
I
n a story on Speak Asia in May 2011,
ET Wealth had pointed out how the
business model of the survey
company was suspiciously similar to
a Ponzi scheme. In the weeks that
followed, the Speak Asia bubble burst and
top functionaries were taken into custody
for financial irregularities. Tucked away in
a small corner of the story was informa-
tion on another case of cheating: the Stock
Guru scam by Ulhas Khaire. Earlier this
month, the police arrested Khaire and his
wife Raksha for allegedly cheating almost
2 lakh investors of `1,100 crore.
These are only two cases in a minefield
littered with scams and fraudulent
schemes. Speak Asia went bust because it
made the cardinal mistake of appearing in
the limelight. The company launched a
multimedia blitzkrieg and tapped the
upper layer of the urban market, thus
inviting a scrutiny by the authorities.
Other, similar survey companies continue
to operate in smaller towns and semi-
urban areas without any hitch.
Hundreds of unauthorised outfits are
collecting money from the public by
promising 40-50% returns.
Awareness is the first level of defence
against such scams. In the following
pages, we look at some of the most
common types of scams and tell you how
you can avoid them. Some of these fraudu-
lent schemes have obvious red flags. In
other cases, the catch is more nuanced
and you have to be more careful.
Cover Story
Take the projections of companies with
a pinch of salt. For instance, teak
plantation companies like to calculate the
returns from trees based on the retail
price of wood. So, if you own 100 trees
and each tree yields around 40 cu ft of
teak, you have about 4,000 cu ft of wood.
The retail price of this wood can certainly
fund your retirement, but you must
remember that cutting the trees,
transporting them to the factory, waiting
for the wood to dry and mature, and
ultimately sawing it into logs will incur
their own cost. As a planter, you won’t
even get 50% of the retail price for your
produce. Keep this in mind when you
invest in a plantation company. As Prime
Minister Manmohan Singh warned,
money doesn’t grow on trees!
Cover Story The Economic Times Wealth, November 26-December 2, 2012 03

you, they start sending you investment tips menace in the bud before such activities

Don’t be by SMS. It turns out that you can gain up to

`30,000 in 3-4 months if you act on those
become full-fledged scams.

lured by investment tips. Krishna Stocks and Radhe

Advisory are two such companies that have
cheated investors in this manner. Though
HOW TO AVOID BEING CHEATED
At the very basic level, the fantastic returns
promised by the fraudsters should serve as a

supernormal these firms have closed down, the fraudsters

are probably using a different name now.
red flag for investors. It is virtually impossible
to churn out 10-20% returns every month.

returns Unfortunately for investors, the authorities

step into the picture very late. Action
is taken only after a large number
of investors file a complaint.
Fraudsters usually operate in
tier II cities and smaller towns,
financial decision
where financial literacy is low
and people are not aware of the
Only high-risk leveraged bets in derivatives
can earn you such returns. Even then,
there can be no certainty of income.
It is just not possible to be right
8 questions to every time, all the time. This is
ask before a
something that Sebi wants stressed
Page 15 repeatedly. It is mandatory for

T
he best way to double your
money is to fold it in half and
keep it in your pocket, goes an
old joke. The victims of the Stock
Guru scam may not find this
amusing. Nearly 2 lakh small investors
poured in an estimated `1,100 crore into the
scheme, convinced that it would earn them
20% per month. Many of the victims were
poorly educated and financial illiterates,
such as Karnal-based Sandeep Sharma. This
high school dropout claims to have lost `1.25
crore in the scam. However, even well-
educated professionals and seemingly savvy
businessmen did not question how Ulhas
Khaire could pay 20% per month for six
months and return the principal in the
seventh month. “We were blinded by the
greed of high returns,” admits Ankur
Sachdeva (see picture). The Delhi-based
businessman has spearheaded the efforts of
Stock Guru victims to bring Khaire and his mutual fund ads and brochures to
wife Raksha to justice. perils of pyramid schemes. In declare that the investments are
Earlier this year, investors in the Gold Sukh Surat and Vadodara, a High Yield subject to market risk and that there is
scheme in Jaipur suffered the same fate. The Investment Plan that offers up to 48% no assurance of returns. Two years ago,
scheme had promised to pay investors up to returns to investors (see visual) is currently when the Irda asked insurance companies to
150% returns in 18 months by investing in inviting investments from the public. It only offer a minimum guaranteed return of as low
gold futures. It was obviously a sham and the has a handful of investors right now, but in as 4% per year on their pension plans, there
scheme promoter, Narendra Singh, made off due course, it will become bigger as more were howls of protests and companies
with `200 crore. However, the long arm of join in. The authorities need to be more withdrew their pension products. Yet,
the law caught up with him in Vietnam, proactive in their approach and nip the investors didn’t see anything wrong in the
from where he was extradited to India.
Singh died of a heart attack in a Jaipur jail
in September this year.
Similarly, there are stock advisory
companies that promise to more than double
your money in 3-4 months. A telemarketing
executive will call you with a plan that turns
your `10,000 into `30,000 in 3-4 months.
Gujarat is a minefield of such investment
advisory companies. Once you deposit the
money in the bank account number given to

LOST
`11.6 lakh RAJESH MEHTA

in Ankur Sachdeva,
Stock Guru
33, Delhi
He was initially sceptical about the high returns
offered by Stock Guru and hesitantly invested `2
lakh in the scheme. When he got back `40,000 in a
month, he poured in `10 lakh more.

“When they paid me the promised

amount as per schedule, all my
doubts vanished.”
04 The Economic Times Wealth, November 26-December 2, 2012
Cover Story

Returns from different members in the scheme. Speak Asia

closed down operations last year and the
investment options in the matter is now in court.
past one year Not everyone loses money in these
Avoid scams. The upper layers of the pyramid
make money. Ghaziabad-based
Sensex 12%

offers
government school teacher Sudhir
Sharma made almost `2 lakh from an
investment of `33,000 in Speak Asia.

of easy
However, Delhi-based Ashok Vishwa-
Best performing 59% karma (see picture) was not so lucky. A
Sensex stock
late entrant to the Speak Asia pyramid,
(Maruti Suzuki)

Gold 11%
money this 40-year-old has not earned a rupee
from the `33,000 he put in the company
three months before the bubble burst.

HOW TO AVOID BEING CHEATED

A bit of common sense can help avoid
Low-rated bonds 14%

E
ver got an e-mail from the
accountant of a deposed
African dictator, who wants to
High Yield transfer a large sum of money
Investment 48% to a reliable person? Or an
Plan (Surat) SMS announcing that your mobile
number has been chosen for a lottery of a
million pounds? These are common ploys
adopted by Nigerian scamsters to trap
gullible people. The victim is asked to
Supernormal remit a small sum for certain legal
Gold Sukh
returns formalities. Once you pay up, the
100% scamsters will ask for more. Every time
offered by
you pay, you are digging a deeper hole for
scamsters
yourself. Finally, the victim loses his
are red flags
patience and stops paying and the
parasites move to another host.
Stock Guru
In most cases, it is too late before the
240% victim realises that he is being conned. A
Hyderabad-based retired government
employee was lured into depositing `55
lakh in nine different bank accounts over a
period of eight months. She was told that
she had won a lottery of 7 million pounds
(`60 crore) but had to remit some fee for
the paperwork and legal procedures for
transferring the money to her account.
Radhe Advisory
600%
Another Hyderabad-based victim, S Hara-
iah, lost his entire life savings of `9 lakh to
a similar scam. “I got an e-mail that the UK
diplomat Dr Jeff Ken William was coming
to India with 5,00,000 pounds (`4.4
crore) to deliver the prize,” he says.
Besides lotteries and legacies of
deposed dictators, the lure of easy money
also tempts investors. Two years ago,
there was a mad rush to join Speak Asia.
The survey company was offering an
income of `900 per week on an
investment of `11,000. The investment
was supposed to be recouped within three
months, and then it was profits for the
remaining nine months of the year. The
survey itself was child’s play—answer a few
basic questions on some products and
services and your account gets credited
with `450.
The biggest draw was the referral
bonus. You also earned rewards for every
survey taken by the members you roped
into the scheme. Incidentally, the Prize
Chits and Money Circulation Schemes
(Banning) Act, 1978, prohibits any scheme
that pays money for the enrolment of
such scams. Why would anybody want to
share a fortune with you? There are no
shortcuts to wealth. If anybody is offering
you a million pounds, there has to be a
catch. Nigerian scams and lottery frauds
work on the principle of utmost secrecy.
The victim is told not to discuss the matter
even with close relatives and friends. Con-
vinced that he is going to be rich soon, the
victim surreptitiously does whatever the
fraudsters ask him to do. Never act surrep-
titiously in money matters. Discuss
financial deals with relatives, especially
your spouse.
When you join a scheme, make sure you
understand how it will operate and gener-
ate the profits it has promised. Speak Asia
was offering `900 a week for answering
10-12 dumbed down questions. The Speak
Asia members never really knew how the
company would make money. The
company made a vague claim that its
clients included ICICI Bank, Bata and
Bharti, but later retracted.
A big red flag is that the company had
no physical presence in India. All tran-
sactions were being conducted online.

Ashok
Vishwakarma,
The Sensex, gold and bond returns as on 20 Nov 2012. 40, Delhi
He entered the Speak Asia pyramid
barely three months before the bubble
burst. He has applied for a refund under
a scheme offered by the survey
Stock Guru promise of 20% assured returns company, but is yet to hear from them.
per month.
The other basic check is to consider
whether the scheme is approved by the “I am more worried about
regulator. All investment schemes must have
Sebi approval. Stock Guru and Gold Sukh had
facing the people who
nothing to show in this regard. Fraudsters try invested on my advice.”
to mislead investors by uploading images of
PAN cards and certificate of incorporation.
But these documents don’t mean that the
scheme has been approved by Sebi or any
other government agency.
A key telltale sign of fraud is that there will LOST
be no postal address or landline number of
the promoter or the company. Online frauds
operate through faceless, nameless entities. ASHWANI NAGPAL
`33,000
Even if the name is given, chances are that it
is an alias. Khaire used as many as five names
in
and aliases to defraud investors across the Speak Asia
country. Though it is difficult to tell whether a
person is genuine, find out the background of
the company and the antecedants of the
promoters before you invest in a scheme.
Cover Story The Economic Times Wealth,
November 26-December 2, 2012 05

Don’t
trust
anybody
(especially brokers)

I
t’s not easy selling life insurance in In-
dia. Buyers often don’t see the value
of spending on insurance and are
more focused on returns and tax
benefits. So, agents resort to mis-
selling, enticing the buyer with half truths
and saddling him with unsuitable policies.
It’s a dirty game, but not half as bad as the
tactics used by some of the really rotten
apples in this field.
Pune-based Padamsinh Harshe, 84, got a
taste of this when he paid the renewal
premium of the policy he bought for his
daughter last year. His elder granddaughter
is the nominee of the policy. The agent who
came to pick up the cheque advised the
Harshes to include the younger
granddaughter as a nominee as well. He
took a photocopy of her passport for the
purpose. A week later, Harshe got two new
policies issued in the name of his younger
granddaughter. “We never applied for
these policies. They forged her signature in
the application form,” says Harshe. Worse,
the existing policy lapsed because of non-
payment of premium.
This is not a flash in the pan. Patiala-
based Sham Kalra (see picture) was
approached by an agent when it was time to
pay the premium of the term plan he had
bought last year. Instead of renewing the
premium, the agent used the cheque to sell
him another policy. As a result, his term
plan lapsed because of non-payment of pre-
mium. The fraudulently sold policy was
cancelled and the old one reinstated after
ET Wealth wrote to the insurance company
on behalf of Kalra.
It’s common for agents to sell regular
premium policies in the name of single
premium plans. The buyer thinks he has to
make a one-time payment, but ends up
with a plan that has to be renewed every
year. Rajendra Khosla, 78, has an even
more bizarre story to tell. He wanted to
invest in fixed deposits and gave signed
cheques to the relationship manager from a
bank. Six months later, instead of fixed
deposit certificates, he got a premium
notice for three policies that had been
fraudulently sold to him.
Even mutual fund investors have been

Rights of investors in collective

investment schemes
Any scheme that collects money from the public and offers profits, income,
produce or property to the investors is a collective investment scheme. Though
investors do not have day-to-day control over the operation of the scheme, they
have certain rights as laid down by the Sebi.
INFORMATION ABOUT SCHEME
Investors are entitled to receive a copy of the balance sheet, profit and loss account, and a
copy of the summary of the yearly appraisal report from the company that is managing
the collective investment scheme, within two months of the closure of the financial year.
The company must publish the scheme-wise annual report or an abridged form in a
national daily within two months of the date of finalisation of accounts. Also, scheme-wise
unaudited quarterly financial results have to be published in a national daily within a
month of the close of each quarter.
REDRESSAL OF GRIEVANCES
For schemes launched after 15 October 1999, investors can write to Sebi if they don’t get a
satisfactory response from the promoter of the scheme. They can also approach district
consumer redressal forums in case the company fails to honour its commitments or if
there is a deficiency in service. For bouncing of cheques, investors can move the courts
under Section 138 of the Negotiable Instruments Act.
However, if the investors do not have a right to land or produce and the investment is a
deposit, the company’s failure to repay the money to investors would attract the provi-
sions of Section 58A of the Indian Companies Act, 1956. Sebi has no jurisdiction over
such deposits.
REGISTRATION STATUS OF ENTITIES
Investors can find out about the registration status of collective investment schemes on
the Sebi website. The regulator issues a press release giving the name and address of the
entities which have been granted registration.
06 The Economic Times Wealth, November 26-December 2, 2012
Cover Story

conned by their agents. Two years ago, a Delhi-based

senior citizen couple was cheated of `88 lakh by the
Sham Kalra, relationship manager of a small brokerage house. The
agent took cheques from Kulbhushan Suri, 76, and his
52, Patiala wife Vinod Suri, 75, for investing in mutual funds, but
used them to invest in his own name by filling up new
The premium renewal cheque he gave application forms. After the scam was discovered, Sebi
to the agent was used to sell him another changed the rules, disallowing third-party cheques for
policy with a forged application form.
investment in mutual funds.
Meanwhile, his existing policy lapsed
because of non-payment of premium. A similar rule can help prevent scams in the insurance
space. Mutual fund cheques are made to a specific
scheme. Irda must make it mandatory for insurance
“Now I cannot trust any premium cheques to specify the policy number. This will
be difficult but not impossible. Just like a credit card
agent even if he is from a payment, the money would go to the specified account.
reputed company.” HOW TO AVOID BEING CHEATED
The first rule is not to trust anybody. Not all agents are
scamsters, but it is best to be safe than sorry. The Suris
had been investing through the agency for more than a
decade and blindly trusted the new relationship manager
assigned to them. Khosla, too, was taken in by the calling
card of the relationship manager.
VICTIM Till Irda makes it a rule, investors should take their own
precautions. Never issue a cheque to anybody without ex-
of forgery plicitly mentioning the policy number and policyholder’s
by an name at the back of the cheque. In case of new policies,
write down the name of the plan behind the cheque. This
insurance will ensure that if you buy a single premium plan you are
not sold a regular premium policy.
agent If you are fraudulently sold a policy, you have 15 days to
return it. As soon as you receive the policy documents, go
through these in detail. Even before that, the company
calls you to tell you about the plan you have purchased. If
there is something amiss, cancel the policy immediately.
Be sure to retain the postal evidence of having received
the policy documents and the date on which you sent
them back for cancellation.

current is passed. The water typically
turns reddish brown. However, this has
nothing to do with the toxins in your body.
The colour is due to the oxidised iron on the
Verify electrodes of the device. The water would
change colour whether or not a foot is placed
with losses confined to triple digits.
Things can become serious if you fall into a
direct recruitment trap. Posing as HR
managers of well-known companies (Maruti
Suzuki, HCL Technologies, Indian Railways),
scamsters write to victims saying that they

claims
in it. A Delhi-based distributor of such have been shortlisted for an interview. The
machines was ready to show testimonials victim is asked to deposit a certain amount as
from UK-based doctors about the efficacy of

before you
these detox ionisers. However, he quickly cut
the line when ET Wealth asked whether any
local doctor or agency could vouch for
security or told to pay for his air ticket. He is
promised that the amount will be refunded
when he appears for the interview.
Some scamsters are more ingenious. A

buy the treatment.

The net is a handy tool for scamsters. They
offer free products through websites and the
victim is led to believe that all he needs to pay
Chennai-based houseowner was swindled by
a company, which wanted to instal a mobile
phone tower on his property. He was asked
to pay `10,000 for a viability survey.
is the shipping charge. A personal loan at an
unbelievably low rate of interest is another HOW TO AVOID BEING CHEATED

D
elhi-based trader Ashok Arora
has an offer you can’t refuse.
He’s selling the Japan Life Health
Mattress for as less as `15,000.
The mattress has magnets inside
it and these help cure a range of illnesses from
arthritis to diabetes. “It is brand new. Just a
few years ago, these mattresses were selling
for as much as `2-3 lakh apiece,” he writes on
a free online sale portal. In Mumbai, DB Khan-
dvelkar wants to sell the mattress he bought in
1998. “It helped cure my wife’s arthritis,” he
claims. There is no medical evidence to show
that the magnetic field created in the mattress
has therapeutic effect. Yet, Japan Life
mattress was once a craze. Fooled by Japan
Life, victims such as Arora and Khandvelkar
are now looking for bigger fools.
Healthcare is a minefield for such product
scams. Take the detox ioniser foot bath,
which claims to remove toxins from the body.
You have to dip your feet in the container of
salt water through which a low-voltage
common lure. The victim is asked to deposit
the application fee and processing charges in
a bank account. Both are low value scams
Detox foot bath
It supposedly removes
toxins from the body when
the user dips his feet in the
container of salt water. The
proof? The water turns
reddish brown. The truth,
however, is that the colour
changes due to the oxidised
iron on the electrodes.
TV channels and the Net are flooded with ads
of products and services. Before you buy,
verify the claims made by the seller. Seek
your doctor’s advice on healthcare products,
especially medicines and supplements. A
detox ioniser that does not work won’t harm
you but a wonder drug supposed to enhance
your physique could spell big trouble. The
testimonials given by foreign agencies and
doctors are probably fake. Don’t believe in
recruitment offers from companies you
haven’t applied to. Even if you have applied,
a mail asking for money should be summarily
deleted. No firm will ask for a security
deposit or air fare from a prospective
candidate. Call up the company directly to
know if there is an interview.
Please send your feedback to
etwealth@indiatimes.com
Review Preview The Economic Times Wealth, November 26-December 2, 2012 07

1-week
Weekly wealth monitor change (%)
1-year
change (%) The top three
17.64
14.96 15.22 STOCKS Price (`) Weekly
% change
DEBT FUNDS NAV (`) Weekly
% change
11 10.2 Blue Dart Express 2,056.60 21.99 Escorts Income Plan 37.53 0.63
8.2 8.3
Strides Acrolab 993.75 12.29 Canara Robeco InDiGo 11.70 0.37
Sunteck Realty 349.05 11.84 Fidelity Global Real Assets 15.86 0.23
0.21 0.06 0.25
Weekly
-0.2 -0.83 WORLD INDICES % change EQUITY FUNDS NAV ( `) Weekly
% change
10-yr GoI Balanced Equity Gold Income Sensex Nikkei (Japan) 9,366.80 6.08 Goldman HangSeng BeES 1,654.21 3.96
bond yield funds funds funds
Mexbol (Mexico) 42,035.35 3.60 Birla Intnl Eqty A 11.70 3.82
Wealth doesn’t get built or destroyed in a week. But you do need to broadly know how your investments CAC (France) 3,498.22 3.42 Fidelity Global Real Assets 15.26 3.11
in different asset classes are doing. This monitor tells you exactly that.
10-yr GOI yield is the average yield in the respective periods. Stocks are from the BSE-500. Debt funds are income funds. Source: ETIG Database

Market pulse
Top news ■ As expected, the first two days of the winter er major event is the release of GDP data on 30
session of the Parliament were washed out. The November for the second quarter. According to
squabble over whether FDI in retail should be dis- consensus estimates, the economy is expected to
cussed with or without voting was the reason grow only by 5.3% in the second quarter as
behind it. Each day that the Parliament is compared to the 5.5% growth it showed previously.
MUTUAL FUND adjourned will raise concerns about the fate of bills ■ Though crude oil prices cooled a bit due to the end
pertaining to the economic reforms announced of hostility in the Middle East, the Brent variety is
Mutual funds to levy brokerage fees recently, such as the insurance bill and the pension still trading above the $110 a barrel mark. Another
The Securities and Exchange Board of India has allowed mutual fund bill. So, how the Parliament functions this week week has passed without any solution for the US
houses to levy brokerage and transaction costs, with a ceiling of 0.12% will be critical to the market. fiscal cliff and Greece’s bailout. Each passing day
for cash market transactions and 0.05% for derivatives dealings for exe- ■ This will be a volatile week because the futures without any solution to these major issues will
cution of trades. According to the regulator, any payment towards bro- and options cycle will end on 29 November. Anoth- increase the market’s nervousness.
kerage and transaction costs over and above the prescribed limit will be
borne by the AMC, trustee or sponsors. Besides this, mutual funds can
charge additional expenses of up to 0.3% of daily net assets if the new
inflows from places other than the top 15 cities are 30% of the gross new
Product launches
inflows in the scheme, or are 15% of the average AUM of the scheme, MUTUAL FUND MOBILE BANKING
whichever is higher. Reliance Mutual Fund has launched portfolio SIP HDFC Bank has announced three new offerings
(PSIP) through which retail investors can invest in up for its Hindi speaking customers. A mobile app in
REGULATION to five different schemes of the fund house with a min- Hindi for Android smartphones, Hindi SMS
imum of `6,000. They can invest monthly or quarterly banking service accessible from all basic
Sebi bans mini F&O contracts and will have to define percentage allocation to each handsets and ‘Netsafe on Mobile’, a single-use
scheme. This will save them the trouble of writing virtual card for online shopping.
To curb excessive speculation by small investors, market regulator Sebi
multiple cheques for various schemes.
has banned trading in futures & options (F&O) contracts that had a mini-
mum contract size of `1 lakh and were popularly called mini-derivatives INSURANCE
contracts. Sebi had introduced these contracts on the two premier Aviva Life Insurance has launched Dhan Samruddhi,
indices in December 2007. Sebi said that the bourses will not issue any a traditional money back plan. The minimum age for weekly calendar
fresh mini-derivatives contracts of this size, while the existing unexpired entry is 13 years and the maximum is 55 years. The
contracts may be permitted to trade till expiry and new strikes may also age of maturity is from 23-70 years and the policy
term for the plan is 10, 15 and 20 years. Tuesday Friday
be introduced in the existing contract months. Exchanges have been
directed to inform investors about the ban on mini-derivatives. Bajaj Allianz Life Insurance has launched Life
Assure Insurance Plan, a unit-linked endowment plan
NOV
27 NOV
30
BULLION with a minimum monthly premium of `1,000. The plan
offers two variants—Sure and More—to cater to vary- India to sell `50 Quarterly GDP
RBI bans bank loan for buying gold ing risk appetites of different customers. billion 91-day bills data and fiscal
and `50 billion deficit data to
The Reserve Bank of India (RBI) has notified a total ban on banks from STOCKS 364-day bills. released.
advancing loans to their customers for purchasing gold in any form. India Index Services and Products, a JV between
This includes primary gold, bullion, jewellery, coins, bars and units of the NSE and Crisil, has launched three new indices—
gold ETFs as well as gold mutual funds. The notification was issued after CNX Low Volatility Index, CNX High Beta Index and
it was found that there was a significant rise in the import of gold into CNX Alpha Index. The stocks have been selected from
India in recent years. The surge in gold imports has been putting pres- the top 300 companies on the NSE.
sure on the country’s trade balance. However, the central bank said that
the banks can provide finance for genuine working capital requirements
of jewellers. wealthwise
CURRENCY

`500, `10 notes to carry rupee symbol

The Reserve Bank has announced that it will issue `500 and `10 denom-
ination bank notes with rupee symbols soon. The `10 denomination
banknotes to be issued with rupee symbol would bear inset letter ‘A’.
Both the banknotes in the Mahatama Gandhi Series-2005 bearing signa-
ture of Governor D Subbarao will carry the year to printing ‘2012’ on the
reverse, it said in a release. The design of the banknotes to be issued
would be similar in all respects to the banknotes issued earlier in the
2005 series, the RBI added. The central bank said both the kind of ban-
knotes issued by it in the past would continue to be legal tender.
08 The Economic Times Wealth, November 26-December 2, 2012
Pick of the Week

Berger Paints: Steady growth

The company’s improved product portfolio and renewed focus on premium products will boost profitability.
erger Paints has reported muted numbers for the Berger Paints is also expected to show more profitability in

B second quarter of 2012-13, with its revenue and net

profit for the period growing by 13% and 8%,
respectively, on a year-on-year basis. While the
the future due to a steady change in the product mix. While
the company continues to be the key player in the medium
and economy products, it has renewed its focus on premi-
Fundamentals

2010-11
Actual

2011-12
Consensus

2012-13
estimate
2013-14

international operations continued to do well, the drag um products, which offer better margins. The company’s Revenue (` crore) 2,341 2,948 3,411 3,984
came from the domestic market. The delayed festive sea- recent TV advertising campaign to increase brand recall in EBITDA (` crore) 211 263 363 444
Net profit (` crore) 150 180 212 253
son is one reason for the slow sales growth in the second the premium products category is an example of this. The
EPS (`) 4.34 5.20 6.07 7.24
quarter. The extended monsoon this year is another reason normal domestic consumer upgradation from distemper to
because decorative paints contribute to emulsion paints will also help Berger
around 80% of Berger Paints’ domestic Paints because of a strong presence
Relative valuation Dividend
PE PB yield (%)
sales, and the rains significantly impact- there. Though growth is expected to Berger Paints India 25.79 6.25 0.98
ed the sales of exterior paints. Analysts’ views accelerate in the future, the company is Asian Paints 37.19 14.13 0.99
However, things have started improv- 1 11 still trading at a significant discount to Kansai Nerolac Paints 25.23 4.94 1.13

ing in the third quarter and the compa- Buy the market leader, Asian Paints. More- Akzo Nobel India 20.56 3.02 2.13
Sell
Shalimar Paints 16.23 0.84 1.49
ny has reported brisk sales in October. over, the underperformance of Berger
Improving consumer sentiments, along Paints in the past six months as com-
with the low base effect since the second pared to the Sensex has brought down Latest brokerage calls
half of 2011-12 was not that great, should 3 its valuation. Recomm Research Advice Target price
date house (`)
help Berger Paints to report good num- Hold
19 Nov Ambit Capital Buy 151
bers in the second half of the current Selection methodology: We pick the 9 Nov SPA Securities Hold 152
financial year. To augment its long-term stock that has shown the maximum 8 Nov Equirus Securities Neutral 153
growth rate, Berger Paints has launched increase in ‘consensus analyst rating’ 7 Nov Emkay Share & Stock Brokers Accumulate 152
several new products in the past few during the past month. Consensus rat- 7 Nov Dolat Capital Market Accumulate 150
Analysts are optimistic
quarters to widen its portfolio. The com- ing is arrived at by averaging all analyst 4 Nov Elara Securities India Buy 176
pany also plans to double its production since the company boasts a recommendations after attributing 3 Nov Firstcall India Equity Advisors Buy 163

capacity by the end of 2013 at a cost of strong presence in the weightages to each of them (5 for strong
`140 crore. domestic consumer market. buy, 4 for buy, 3 for hold, 2 for sell and 1
Relative performance 138.51
The company has a wide distribution for strong sell). Any improvement in rat-
network under its belt, which is only 30% smaller than that ing indicates that the analysts are becoming more bullish
of Asian Paints in size and depth. Since it has one of the on the stock. To make sure that we pick only companies
strongest relationships with dealers and painters across the with decent analyst coverage, this search will be restricted 117.91
country, Berger Paints will be able to grow without invest- to stocks that have been covered by at least 10 analysts. You 100
ing further in network expansion. This means that the can see similar consensus analyst rating changes during the
company should be able to report a sales growth of 20% in past week in ETW 100 table (page 21). Market price: `142.60
the future and, thereby, consolidate its number two posi- 25 Nov 2011 Sensex Berger Paints 23 Nov 2012
tion in the domestic decorative paint segment. —Narendra Nathan Performance of Berger Paints’ shares compared with the Sensex. The
figures are normalised to the base of 100.

Source: ETIG Database and Bloomberg

What experts advise

BUY
Stock Research house Advice Market Target
price (`
`) price (`
`) Comment

Monnet Ispat Angel Broking Buy 285 344 We recommend ‘buy’ since the company has reported robust top line
and operating performance in the second quarter.

The recent correction in the stock price of the company provides a

Petronet LNG Prabhudas Lilladher Accumulate 155 179 good opportunity to accumulate more shares.

BPCL Motilal Oswal Buy 321 400 BPCL is drilling at its prospective Brazil blocks and it could result in
discoveries and further reserve addition.

Arshiya International Karvy Buy 122 200 We reiterate ‘buy’ since the company is expected to benefit from
positive developments on GST implementation.

Commercial Engineers & Body IDBI Capital Buy 102 144 The company is expected to clock 34% annualised growth in
revenues and 47% annualised growth in PAT over 2012-14.

Simplex Infrastructure SPA Securities Buy 178 243 We retain ‘buy’ since the company’s strong and good quality order
backlog and risk mitigation provides comfort on long-term growth.

SELL
Stock Research house Advice Market Target
price (`
`) price (`
`) Comment

Espirito Santo Securities Sell 75 64 The stock is downgraded to ‘sell’ since it is trading at a valuation that
L&T Finance Holdings is at a premium to other good quality NBFCs like Shriram Transport.

Educomp Anand Rathi Securities Sell 146 110 Educomp will find it arduous to scale up with about 56% revenue and
65% EBIT coming from school learning solutions.

AIA Engineering Spark Capital Advisors Sell 349 307 We downgrade to ‘sell’ due to margin headwinds, pricing pressure in
the mining segment and higher operating expenses.
Your Queries
1 2 3 4
PANEL MEMBERS
PANEL MEMBERS
1. Taxation 2. Mutual 3. Insurance
Vaibhav Funds Pankaj
Sankla, Dhirendra Mathpal,
Director, Kumar, CFP, Managing
H&R Block CEO, Value Director, Optima
Research Money Managers
Q&A
ET Wealth asks six experts to help answer readers’
queries on issues related to personal finance.
MUTUAL FUNDS
I am 30 years old and want to start invest-
ing through SIPs of `1,000 each in Canara
Robeco Tax Saver, HDFC Top 200, HDFC
Balanced, UTI Equity and ICICI Pru Discov-
ery Growth. I plan to remain invested for
15-20 years. Have I selected the right
funds or do I need to change my portfolio?
- Mohanraj
You are investing in a diverse portfolio,
comprising highly rated and well-per-
forming fund schemes. You should
continue investing in these through SIPs.
However, make sure that you regularly
track their performance and make
changes to the fund selection, if neces-
sary, because a fund that is doing well
may not necessarily continue to do so in
the future as well. You must review the
performance of the funds annually and at
the time you plan to increase your invest-
ment in these.
INSURANCE
I have two sons aged 6 and 2. I wanted to
buy term insurance for them, but was told
that no such plans are available. What
should I do?
- S Purushothanam
Term insurance plans are usually not
available for children because they don’t
need to be covered. It is the parents who
need to guarantee that their child’s finan-
cial goals are protected in case of an
unforeseen event. Hence, instead of
taking a term plan for your child,
you should buy adequate insurance
for yourself.
TAXATION
I bought a plot from the government at a
concessional rate and constructed a
house after taking a loan. After I repaid
the loan, I replaced my name as the
owner of the property with that of my
wife. I have now given the house on rent.
The lease deed has been made in my
wife’s name and the monthly rent is being
deposited in my bank account. Can the
rental income be considered a loan given
to me by my wife?
- Sonu Patel
The Economic Times Wealth,
November 26-December 2, 2012 09
5 6
4. Banking 5. Real Estate 6. Real Estate
VN Kulkarni, (Legal) Gulam Zia,
Chief Dhiraj D Jain, Executive Director,
Counsellor, Abhay Partner Retail &Hospitality,
Credit Coun- (Real Estate), Research & Advisory
selling Centre SNG & Partners Services, Knight
Frank India
The entire cost of the house was funded
by you. Therefore, the rental income
would be considered as your taxable
income even if the lease deed is in your
wife’s name.
I owned stocks of Piramal Healthcare,
which I submitted during a buyback
offer and made a short-term gain.
How will it be taxed? Can I set it off
against short-term losses from shares
for which I had paid the securities
transaction tax (STT)?
-Jitesh
Short-term capital gains from the sale of
shares in a buy-back scheme are taxed as
per the slab rate applicable to you. Short-
term losses incurred from the sale of
equity shares on which STT has been
paid at the time of sale can be set off
against the short-term capital gains from
sale of shares during a buy-back scheme.
REAL ESTATE
I bought a flat last year along with stilt
parking space. The previous owner had
enclosed a copy of his agreement, along
with a letter from the builder, which said
that the parking space was being allotted
with the flat. Now, six months later, the
society says I cannot buy the parking
space as per a Supreme Court judgement
and that it will be allotted on a priority
basis. What should I do?
- Bhushan Chandra
Under the Maharashtra Ownership Flats
Act, the developer’s right is restricted to
the extent of disposal of flats, shops
and/or garages. The stilt parking space is
not included in the floor space index, nor
is it assessable for corporation taxes. The
builder has no right to sell the parking
space as it is neither a flat nor an attach-
ment to a flat. In case the society has
approved the said transfer, it cannot
revoke its own decision.
Ask Experts
Have a question for our experts? Post it at
etwquery@indiatimes.com
10 The Economic Times Wealth, November 26-December 2, 2012
Stocks

Are subsidiaries eroding

your company’s value?
If a corporate entity is performing
well, but its subsidiaries aren’t, they How subsidiary
could drag down the overall performance
profitability of the company. reflects on a
company

Currently, the generally accepted

accounting principles (GAAP) define a
subsidiary as ‘an entity where the
investor entity has more than 50%
voting rights or majority of the board
members’. However, the Indian Accou-
nting Standards defines a subsidiary as
that ‘which is in substance controlled
SANKET DHANORKAR by the investor entity, that is, it has the
power to unilaterally govern the finan-
cial and operating policies’. According

T
oday, most of the top corporate
entities aren’t just a single unit. Like a to the GAAP, a company should follow
the following rules when it publishes
tree’s roots and branches that spread
consolidated financial results.
far and wide, the subsidiaries of most
companies span verticals, industries, 1 If a company holds more than 50%
stake in a subsidiary company, the
countries, even continents. Each of these is a
consolidated financial results of the
separate, legal entity with its unique identity and company should add the revenue,
can be owned, either wholly or partially, by the expenditure and other items to its
parent company. The reasons for creating a financial results for respective items.
subsidiary vary. It is either borne out of necessity However, the profit should not be
(the nature of the parent firm’s business, added as it does not belong only to the
expansion to other geographies, etc), is company, but also to the minority
shareholders who own shares of the
the result of acquisitions or forays in a subsidiary, which should be shown as
new line of business, or is formed pure- How to file
minority interest.
wealth tax
ly as a legal wall to limit the liability of
one company if either firm fails.
return
Page 14
2 If a company holds more than 20%
stake in a subsidiary company, but less
Whatever be the reason, once a than 50%, its consolidated financial
subsidiary company is formed, its stock results should add the proportionate
is counted as an asset in the balance sheet revenue, expenditure, profits and other
of the parent company. So, ideally, a Weak consolidated numbers items to its financial results in respec-
Standalone tive items. Say, company A owns 25%
subsidiary should add value to the parent firm. Standalone Consolidated revenue
stake in company B. So, company B’s
However, this may not always be the case. Poor as % of
Company Net sales PAT Net sales PAT consolidated 25% revenue, 25% expenditure, 25%
performance of the subsidiary could pull down profit, etc, should be added to the
the performance of the entire group of Gammon India 5,533 87.04 8,080 -114.81 68% respective items of A’s standalone
companies. Let us consider why it is important to results to get the consolidated results.
Tata Power Company 8,052 1169.73 26,153 -968.29 31%
evaluate the performance of the entire company,
which includes all its subsidiaries, to get a real UB Holdings 485 7.64 6,004 -1569.19 8%
3 If a company holds less than 20%
stake in a subsidiary company, the
picture of the parent company’s health. consolidated financial results of the
Videocon Industries* 12,639 545.56 13,415 -1358.54 94%
company should not be any different
Why consider consolidated performance Shoppers’ Stop 2,166 64.26 3,082 -24.42 70% from its standalone results.
The presence of a parent-subsidiary structure GMR Infrastructure 1,091 120.30 8,473 -1058.84 13%
means that many companies report two different
sets of financial numbers—standalone and Shree Renuka Sugar 6,362 84.10 12,369 -30.20 51%
consolidated. Standalone numbers pertain only
to the financial performance of the parent different picture. There are also
company. Consolidated numbers, on the other instances where a firm’s standalone
hand, include the financials of both the parent performance is weak, but seems
firm and its subsidiaries. Often, investors concen-
Strong consolidated numbers healthy when the performance of its
Standalone
trate purely on the performance of the parent Standalone Consolidated revenue subsidiaries is taken into account.
company on a standalone basis, ignoring the con- as % of Strong financials of even one or two
Company Net sales PAT Net sales PAT consolidated
solidated numbers. However, it is crucial to know subsidiaries can lift the performance of
how the company is doing on an overall basis, not Aban Offshore 639 -120.73 3,163 321.52 20% the entire entity.
just in isolation. Dipen Shah, head, private client Essar Ports 36 -71.00 1,109 98.84 3% By evaluating the consolidated
group research, Kotak Securities, says, “It is performance of a corporate entity,
important to get an overall view of company Jubilant Life 2,641 -80.91 4,303 45.69 61% investors can ascertain the health of not
performance, especially if the subsidiaries are Max India 747 -15.44 8,546 237.88 9% only the parent company but also its
losing money.” subsidiaries. Says Pankaj Pandey, head
For the holding company to report healthy Mercator 548 -118.67 3,700 30.14 15% of research, ICICI Securities: “Consoli-
performance, its subsidiaries need to be in good Usha Martin 2,837 -32.77 3,361 6.62 84% dated financials should be considered
shape too. In many cases, while the standalone Data is for financial year ending March 2012. * Figures are for calendar year ending December 2011.
when subsidiaries are contributing
numbers portray strong financial performance, Net sales and PAT in ` crore. Source: ETIG Database more than 20% to the combined
the figures on the consolidated front paint a revenues.”
Stocks
Ideally, a company should be able to
report a healthy set of numbers on both
fronts, standalone and consolidated.
However, if a company has subsidiaries
that are consistently making losses and
damaging the overall profitability, it may be
a good idea to refrain from investing in
such a company. Shah says, “Investors
should avoid the stock of a company that is
trading at high valuations, but whose
subsidiaries are performing below par.”
Also, any firm whose performance is being
propelled purely by its subsidiaries needs
to be watched cautiously.
Here is a set of companies that are weak at
the consolidated level. These have loss-
making subsidiaries that are pulling down
the overall performance.
UB Holdings
Analyst calls
Buy
0 CMP: `110
Hold Sell No of subsidiaries:
0 1
Subsidiary Holding (%) PAT (` cr)
Kingfisher Finvest (India) 100
UBHL (BVI) 100
UB Overseas 100
The Vijay Mallya-led UB group’s holding
company boasts some glamorous
subsidiary/associate businesses, such as
United Spirits and United Breweries,
among others. However, one of these
assets, the troubled Kingfisher Airlines, has
been a major drag on the company for a
while now. While the airline has ceased to
be a subsidiary (it was converted into an
associate company on 18 February this
year), the holding company continues to
have a significant exposure to the carrier in
the form of numerous bank guarantees
given on behalf of its subsidiaries and
associate companies.
As on 31 March, UB Holdings’ exposure
to Kingfisher Airlines totalled `12,215 crore.
Several of these guarantees have now been
invoked by lenders to recover dues, but the
UB group management claims that none of
the guarantees will eventually devolve to
the company. The recent deal with Diageo
to sell a majority stake in group associate
company, United Spirits, for $2.1 billion is
not expected to do much to revive the
ailing carrier.
GMR Infrastructure
Analyst calls
Buy
12 CMP: `18
Hold Sell No of subsidiaries:
6 4
Subsidiary Holding (%) PAT (` cr)
Delhi International Airport 52.82 -1,085.4
GMR Infrastructure (Cyprus) 61.2
Homeland Mining & Energy SA 96.93
The Economic Times Wealth, November 26-December 2, 2012 11
GMR Infra is a healthy, profitable entity on purpose vehicle, Coastal Gujarat Power The huge losses from its direct-to-home
a standalone basis. However, it is suffering Limited, which raised a huge dollar- (DTH) services operations and the
heavy losses when combined with its many denominated debt (`14,000 crore) to set up problems of being a telecom operator
subsidiaries. Being a project-driven the 4,000 MW Mundra ultra-mega power resulted in a loss of `1,747 crore for the
infrastructure firm, the company creates project. However, the project has faced company in the previous fiscal. Videocon In-
separate subsidiaries for the projects it several problems—inability to raise prices dustries is now planning to sell its DTH busi-
undertakes. Several of these projects, such due to the fixed price arrangement with its ness and is reportedly in talks with rival
as the Delhi International Airport, are still purchaser, increased interest burden on firms. While its oil & gas exploration
making losses, as are some of its overseas account of currency depreciation, etc. businesses are also in the red, it is because
energy projects. GMR Infra’s operations in A higher tariff structure could be the many of its foreign gas blocks are yet to
the power sector are facing tough times only way out for the struggling project become operational. These will start output
due to broader issues of non-availability of and erase some of the losses at the only by 2015.
gas, non-realisation of receivables, etc. Cur- consolidated level.
rently faced with a debt of `35,000 crore, Gammon India
the company is planning a partial dilution Shoppers’ Stop
of its assets to bring down the interest Analyst calls
Analyst calls
burden and loss.
Buy
Shree Renuka Sugars Buy 2 CMP: `38
2 CMP: `412
Analyst calls Hold Sell No of subsidiaries: 68
Hold Sell No of subsidiaries: 6 2
5 7
1
Buy
4 CMP: `30 Subsidiary Holding (%) PAT (` cr)
Subsidiary Holding (%) PAT (` cr)
Gammon International BV 100 -27.71
Hold Sell No of subsidiaries: 26
Hypercity Retail 51 -88.63
6 5 Gammon Holdings BV 100 -27.86
Crossword Bookstores 100 -2.25
Campo Puma Oriente SA 73.76 -28.13
21 Subsidiary Holding (%) PAT (` cr)
NA: Not available. Current market price as on 20
Renuka do Brasil SA NA -494.9 While apparel retailer Shoppers’ Stop has
November. Source: ETIG Database.
Revati Agropecuaria NA -165.3 done reasonably well on the standalone
front, its consolidated financials have been
-78.75 Ivaicana Agropecuaria NA -58.07 affected due to the poor performance of
-18.28
subsidiaries, Hypercity Retail and Gammon India is another infrastructure
Crossword Bookstores. Though consolidat- major bogged down by its many subsidiary
-3.07 India’s largest sugar refiner, Shree Renuka ed revenues have grown at a healthy clip of assets and a pile of debt. The company’s
Sugars, reports a healthy set of numbers on around 30% over the past few years, the foray in domestic real estate, which
a standalone basis. However, since the company’s bottom line has gone into the required heavy initial investments, is yet to
acquisition of its twin assets in Brazil two red, with mounting losses in the hyper- pay off. This, coupled with the slowing
years ago (at nearly the then prevalent market format. The aggressive rolling out order inflow in the infrastructure space,
market capitalisation), the company’s of stores in the previous fiscal year have led has compounded the problems for the
consolidated figures have gone haywire. to an increased cost structure and reduced company. It has revealed its intention to
Statistics clearly show how the overseas operating margins. offload stake in its real estate assets as
subsidiaries, which contribute to half the Till recently, strong growth in the muted sales and higher financing costs
company’s revenues, have been a drag on flagship format was compensating for the resulted in a loss in the September quarter.
the company performance. losses in the hypermarket stores, but with Gammon’s overseas ventures are also facing
The consolidated profits have fallen from the recent sluggishness in volume growth tough times. Its Italian subsidiaries, which
`703 crore in September 2010 to a loss of in the core business, the standalone profits manufacture power and industrial boilers,
`30 crore for 2011-12. The company’s have also shrunk 67% in the recent quarter. as well as waste and environment
stock price has fallen sharply since the The festive season was expected to prop up management systems, are also a drag on the
acquisition, while the debt on the balance revenues from Shoppers’ Stop, but the company. Profitability on a standalone basis
sheet has doubled to `9,100 crore and the haemorrhage in Hypercity is likely to has also been dented due to the rising costs
interest expense continues to eat into continue for a while. and flat revenues.
profitability. Analysts are, however,
hopeful of improved operating Videocon Industries
performance from its Brazilian assets in Please send your feedback to
Analyst calls
the coming few years. etwealth@indiatimes.com
Tata Power Buy
0 CMP: `169
Analyst calls
Hold Sell No of subsidiaries: 30
0 1
Buy
20 CMP: `98
Subsidiary Holding (%) PAT (` cr)
Hold Sell No of subsidiaries: 21
14
Videocon Global 100 -196.83
12
Videocon Telecommunications 99.9 -1,747.17
Subsidiary Holding (%) PAT (` cr) Videocon International Electronics 100 -46
Coastal Gujarat Power 100 -2,180.54
Maithon Power 74 -174.15
Videocon has transformed itself from a
127 Khopoli Investments 100 -24.26 pure-play electronics maker into an energy
and telecommunications conglomerate.
However, this diversification has had an
Tata Power’s standalone and consolidated adverse impact on the company’s
figures show a stark contrast. While the financials. The group is now saddled with
-95.65 company reported a strong `1,170 crore debt amounting to `18,656 crore as of
profit on a standalone basis, the poor 31 December 2011, an increase of 58.5%
-60.58 financials of its subsidiaries resulted in from a year earlier. Videocon Telecommu-
consolidated losses of `969 crore. A chunk nications is the subsidiary that is causing a
of the losses can be attributed to its special lot of strain on the company’s financials.
12 The Economic Times Wealth, November 26-December 2, 2012
Stocks

Firms with low working

capital can be good bets
A consistent negative working capital isn’t always a bad thing. In fact, investors can use this parameter to
select sectors and companies that have high operational efficiency and are good investment picks.
NARENDRA NATHAN investors can expect only about 10% upside
from the current level,” says Anand Tandon,

A
mong the several factors that CEO, JRG Securities.
investors can consider while Aviation is another industry that has a high
picking stocks is the working cap- negative working capital because airlines
ital of a company. This is because collect the money at the time of booking,
it can be an important parameter months before they spend it to transport you.
to judge its operational efficiency as it However, aviation isn’t a good bet now. “Since
represents the liquidity available to it. Working the sector is heavily in debt currently, the
capital is calculated by deducting the negative working capital may not be of much
company’s current liabilities from its current as- relevance,” says Subramaniam. The domestic
sets. A positive working capital means that the aviation industry is also plagued by several
company can pay off its short-term liabilities other problems like over-capacity, high airport
comfortably, while a negative figure obviously charges, high fuel cost, etc.
means that the company’s liabilities are high. Some industries are known for generating
However, since there are several exceptions fast cash and the FMCG sector is the best
to this rule, a negative working capital need not example for this. Several FMCG companies have
always be a bad thing. Let us consider why a high negative working capital. This may be be-
some companies have huge negative work- cause their strong brand loyalty helps them
Before ing capital year after year. The answer is maintain a low inventory as well as generate
you turn a simple: because they can. speedy sales. Since these large companies have
loan guarantor
Typically, large companies have a a high bargaining power, they are also able to
Page 27
consistent negative working capital since extract favourable terms from their suppliers.
they have the muscle power and can The products are sold to the customers and the
demand longer credit periods from their cash generated even before the company pays
fragmented suppliers. They are also able to its suppliers. The additional cash generated can
make sales in cash or collect payments within a be utilised for other purposes.
few days. Whatever the reason, the companies Though FMCG majors are fundamentally
find it a beneficial position to be in. To strong and well-managed companies, retail
understand this better, consider the analogy of investors should avoid them for now because
a trader, who buys goods on a credit card that most of them are quoting at very high
has a cycle of 45 days. If he can sell all his goods valuations. “Most FMCG stocks are overpriced
and collect the proceeds within a month, he can now. However, if you want to invest for the long
roll the money till the card payment due date. term, you can buy shares of ITC. Its original
This means he can invest for the short term and business, cigarettes, will continue to generate
make additional profit on it. cash in the future. The other two businesses,
The negative working capital phenomenon food and hotel, where ITC is has been making
not only depends on the size of the company, but investment for some time, should also generate
also on the kind of business. “Negative working significant cash in future,” says Tandon.
capital is visible in companies with strong brand
and consumer franchise, which is why it is most- Other parameters
ly seen in the consumer sector,” says Vetri Subra- The negative working capital can be used as a
maniam, CIO, Religare Mutual Fund. As is screening criterion, but it’s not the final stock
Companies that top the list evident from the table, consumer-centric firms
top the list of the BSE-500 companies that have
selection tool. What are the other parameters
that investors should consider? The most
Telecom companies have a high negative working capital as they take care the highest negative working capital. important is the ability to weed out capital
of most of their costs at the beginning of their operations. guzzlers, especially from sectors that don’t offer
Which sectors should investors consider? very high operating margins. “Some capital-
Current Current Working PE PB Div yield (%)
assets liabilities capital
On the sectoral front, telecom companies lead intensive businesses may have negative working
the pack. It may seem puzzling that a capital- capital. Investors should look at those where the
Bharti Airtel 12,995 37,487 -24,492 33.61 2.38 0.32 intensive sector like telecom could have need for fixed capital is also less,” says Tandon.
Jet Airways 3,856 7,887 -4,031 - -2.17 - negative working capital, but it’s not difficult to “Along with the negative working capital,
understand this. Firstly, the sector does not investors should also check whether the compa-
Kingfisher Airlines 1,625 5,419 -3,793 - -0.17 -
require raw material. Secondly, most of the ny can generate free cash flow,” says Subrama-
Idea Cellular 2,608 4,997 -2,390 34.21 2.32 - capital requirements like licence fee, spectrum niam. This is calculated as operating cash flow
Hero MotoCorp 1,541 3,622 -2,081 16.19 6.88 2.44 cost, tower installation cost, etc, are taken care minus capital expenditure. So, free cash flow
MTNL 1,728 3,613 -1,885 - 0.65 -
of at the initial stage. Finally, these companies represents the cash that a company has even af-
collect money from prepaid customers in ter using the money required to maintain or
Reliance Comm 12,026 13,747 -1,721 16.42 0.35 0.41 advance, and from postpaid customers, without expand its asset base. It is important for raising
Tata Comm 3,752 5,450 -1,697 - 2.91 0.86 much delay. shareholder value as it allows a firm to pursue
JP Power Venture 1,923 3,357 -1,434 23.15 1.70 - Does this mean that the sector is a good opportunities—develop new products or make
investment opportunity now? “With several acquisitions—without capital dilution.
JSW Steel 12,563 13,805 -1,242 7.83 0.94 1.04 licences coming up for renewal, the 2G auction
failure is good news for telecom companies.
All figures for working capital calculation in ` crore. Working capital data for previous financial year. Though they are not very expensive at the Please send your feedback to
Valuation data as on 19 November. Source: ETIG Database etwealth@indiatimes.com
moment, the growth rate has come down. So
Real Estate
Don’t fall for warranties
offered by builders
Property developers have started offering warranties, but these may not be worth the premium you pay.
AMIT SHANBAUG
M
any of the top property
developers in metro cities
like Mumbai and Delhi
have come out with a new
marketing strategy to lure
potential buyers. They are offering warra-
nties on the houses they sell, similar to those
offered by manufacturers of electronic
appliances like TVs and refrigerators. The
warranty period ranges from 1-3 years on all
electronic appliances in a fully-furnished
apartment, to as high as 10 years for
waterproofing of flats. The Maharashtra
Chamber of Housing and Industry claims
that nearly 80% of its members are offering
such guarantees across the country.
However, is this warranty a convincing
reason to buy a flat at a premium? Most
real estate experts don’t believe so.
Here’s why.
How
It’s the appliances, not Indians
apartments holiday
Most warranties being Page 29
advertised by developers are for
the appliances that come with a
semi- or fully-furnished flat, not
much on the construction-related aspects
of the house. While offering appliances with
apartments is nothing new, the only
difference is that a few builders have started
handing out the warranty cards to buyers
when they take possession of the house.
“The developer purchases these products
from various companies, which offer their
warranties. The builder merely passes them
on to the customer as his own,” says Pankaj
Kapoor, managing director of Liases Foras,
a real estate research firm.
A significant construction-related guaran-
tee some developers have begun to offer is
on the paint job. However, many reputed
paint companies already offer a warranty of
5-7 years, subject to a minimum quantity of
paint purchased by the builder. The warran-
ty includes shade fading, growth of fungus
and algae on walls, flaking and peeling of
paint. The company maintains records of
the customer warranty electronically and
issues a warranty identification number.
Even if the builder offers other construc-
tion-related guarantees, say, for water-
proofing, these come with the building, not
individual apartments. “In the case of
warranties on construction materials, the
buyer should ask for relevant documents
from the developer and scrutinise the level
of accountability implied,” says Om Ahuja,
CEO, residential services, Jones Lang
LaSalle India.
No extra cost for developer
The builder is only offering convenience in
terms of providing access to guarantee
The Economic Times Wealth, November 26-December 2, 2012 13
papers. You are anyway entitled to warra- appliances. This is because the maintenance proper sealing of doors and windows and
nties on products that come with the house, cost is minimal if the flat is locked up, or the your electricity bill may go up if this is not
such as electrical wiring, switchboards, tenant will pay the charges,” says a Delhi- done. Similarly, if the chimney in the modu-
appliances like CFLs and ceiling fans, based real estate expert. lar kitchen is not powerful enough, you will
kitchen chimneys, exhaust fans and have to spend more on getting it cleaned
bathroom fittings like branded taps. Before you buy more frequently.
So, is offering warranties just a gimmick? Another important factor to be kept in mind
The builders want you to believe otherwise. is whether the construction is suitable for all
“Most top developers want to protect their the fancy appliances on offer. For instance, Please send your feedback to
etwealth@indiatimes.com
reputation, so they opt for branded a fully air-conditioned apartment requires
material. The guarantees are a genuine
effort by builders, not a gimmick to sell their
projects,” says Boman Rustom Irani,
chairman & managing director of
Rustomjee Group.
However, the fact is that when a home
owner wants to use the warranty, he will
have to approach the manufacturers. The
developer could wash his hands off any
defects later. The only solace for buyers is
that the guarantee may mean it is a
better product than an unbranded
one. “Appliances covered by man-
ufacturer warranties tend to be of
a better quality,” says Ahuja.
Cash discount is better
While most such warranties are offered for
fully furnished premium projects and
projected as being free with the apartment,
if the builder offers these at a premium, ask
for a cash discount instead. This may work
to your advantage in two ways: you get to
buy what you like, even at a lesser cost, and
something that suits your needs.
Besides, the builder has low incentive to
buy the most energy-efficient appliances
since it is you who will pay the bills, not him.
The motivation for the builder is minimising
investments and maximising returns, and he
is more likely to choose not-so-efficient
appliance at a lower cost rather than an
expensive five-star one. The large number of
investors today is also a reason for
minimising the cost on appliances. “When
an apartment is being bought just as an
investment or to rent it, the owner would
want the builder to install cheaper
14 The Economic Times Wealth, November 26-December 2, 2012
Financial Planning

THE MONEY QUESTION Paper

Work
How to assess the risk associated with various investments.

Arpita Shankar and her husband have

been investing for the past few years
to realise their future plans. They
have ended up parking their money in
bank deposits because they were
unsure of their risk appetite. They
have already had to postpone their
holiday due to lack of sufficient funds
and are considering transferring
some money to a high-return
investment so that they can quickly
generate money for their holiday and
other plans. How should they identify
the risk they can take with their
investments?
he Shankars’ willingness to take risks with their
Filing wealth
tax return
The Wealth Tax Act requires tax to be
paid on the wealth held by an individual.
Wealth is defined as unproductive assets,
such as cash over `50,000, land, motor
cars, gold, silver, utensils or bullion and
ornaments, luxury cars. Tax at the rate of
1% has to be paid on wealth over `30
lakh, which is calculated according to the
provisions of the Act, and a wealth tax
return has to be filed. Individuals, Hindu
Undivided Families and companies
should file their wealth tax return in
Form BA, which has to be signed by the
assessee.
Due date
The due date for filing wealth tax

T
investments is essential for identifying different
options suitable for their goals and plans. The
first thing they need to do is to segregate their goals
because each will be best served by a specific
investment based on the risk, return and liquidity it
offers. A good way for them will be to categorise the
goals based on the time frame available. Fixing a time
horizon for goals will help them decide how much risk
they should take for better returns since some
investments may give high returns in the long term, but
may be volatile in shorter durations. They may be
tempted to assign high-return investments to short-
term goals since they don’t have enough funds for
these, but this can be risky and they may realise that
the value of investments has dropped when they
actually need the money.
While selecting investments based on the time
horizon of their goals, the Shankars must remember
that a longer time frame alone does not make a
fundamentally bad investment less risky. They must
invest only in sound investments after evaluating their
strengths and features. They must also consider the
fact that the time frame of their goals will keep reducing
and they should shift the investments to ones with low-
er risk as they start approaching a goal. By aligning
their investments to the time horizon of their goals,
they will ensure that the risk level is appropriate and
does not put their savings at risk. In this manner, they
can earn good returns without risking inadequate
funds for their goals.
RAJ
return is the same as the one applica-
ble to an assessee for filing the income
tax return. For individuals and HUFs,
the due date is 31 July of the following
financial year for which the return is
being filed.
Documents
The calculation for the value of each
asset, according to Schedule III of the
Wealth Tax Act, needs to be attached
along with the return. The relevant
documents supporting the valuation of
the asset must also be attached with
the return.
Filing return
The wealth tax return needs to be filed
with the income tax office ward/circle
applicable for one’s income tax return.
If a person fails to file the return and
pays the applicable wealth tax, he is
liable to pay interest at 1% for every
month of delay.

SMART THINGS TO KNOW: CAS for mutual fund investments Points to note

1
A consolidated account
2
It is sent to the investor
3
The purchase, redemptions,
4
The PAN is used to
5
The CAS is sent free of cost
 The assets transferred to a spouse or
minor child or any other person without
consideration are to be included in the net
wealth of the individual.
statement (CAS) is a by the 10th of each transactions, dividend payout identify investors for to investors, who must
single statement that month and includes and reinvestment, and switch the purpose of consoli- ensure that all the mutual  Any one residential property can be
lists the transactions information on the transactions are included in dating transactions fund folios are compliant excluded from the wealth of an assessee
and holdings of the transactions carried out the CAS. Non-financial trans- under CAS. The folios and updated with PAN and
investor across mutual in the folios during the with the same holding KYC requirements. This will
and a person is free to choose which prop-
actions like a change in bank
fund schemes of all previous month as details, contact details, and pattern will be included enable them to receive a erty he wants to exclude.
fund houses under well as the account nomination are not consid- in a consolidated consolidated statement
 The financial assets, such as investments
different folios, for a balances. ered for inclusion in the CAS. statement. giving details of all their
calendar month. transactions.
in shares and mutual funds, are exempt
from wealth tax.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Sunita Abraham, Girija Gadre and Arti Bhargava.
Financial Planning
How to avoid being cheated
Ask and write down answers to important questions to ensure your financial safety, says Uma Shashikant.
A
lot of people want to know
about simple things they can do
to protect themselves from
fraud. They want to make
informed decisions, but wonder if it means
learning too many complex concepts and
grappling with jargon. I would propose a
simple approach. Before making a financial
decision, take a sheet of paper and write
down the answers to a few important
questions. Do it yourself, or engage your
adviser to provide the answers. Keep it
brief, to the point.
First, ask for the name of the entity
whose product you plan to buy. I have met
savvy, smart investors fumbling when
asked the name of the issuer. A close friend
insisted that the insurance he had bought
was actually a mutual fund product by the
same promoting bank. However, when he
went through the papers, he sheepishly
found out the truth. Many stock operators
do not have membership with exchanges.
Refuse to deal with them unless you find
out about the registered broker in whose
name your trade will be executed, so you
know who you are dealing with. Ensure
you have this name for all your papers, con-
tract notes, documents or whatever you re-
ceive as proof of investment.
Second, ask if the entity is accountable
to any regulatory authority. The answer
has to be Sebi, RBI, Irda, PFRDA or the
government. If only the investors in
Stock Guru had asked for this piece of
information. There are elaborate laws on
the type of firms that can raise money from
the public and under what conditions.
Unfortunately, none of the financial
regulators have the resources to monitor
and prohibit mushrooming operators.
These fraudulent entities have to be
checked by local police and booked
under criminal law, even if they engage
in financial frauds. The best recourse is
to ask for the regulator’s name. It is manda-
tory for them to show you proof of their
registration if you ask for it.
Third, ask for the document that carries
the name of the product and proof that it
has met with approvals from a regulator.
Do not go by printed pamphlets, advertise-
ments, hand-outs, or presentations.
Demand a copy of the offer document, an
information memorandum, a detailed
formal offer that has the name of the entity
you have listed above. You don’t have to
read the legalese, you don’t need a copy of
this voluminous document, but you need
to know it exists and that the scheme is not
a concoction. Ignore messages that tell you
to invest an amount, earn an assured sum,
and save taxes. Ask for the name of the
product, and ask for confirmation that it
exists, and was created by an entity you can
identify and confirm.
Fourth, ask how your money will be used
and how it will generate returns. Do not ac-
cept generalities. If it is an IPO, ask for the
business of the company that is raising
money. If it is a mutual fund, write down
where it will invest. Will it be equity, debt or
GETTYIMAGES
Firms with low
working capital
gold? If you bought a bond of a fi- can be good bets
nance company, write down its Page 12
main business. If your money is
being used to offer other loans,
you know that your return will
depend on the quality of those loans. You
also need to ask how you can find out what
happened to the money.
Fifth, write down your obligations in full.
If an insurance agent tells you that you have
to pay a single premium, or for only five
years, put it on paper. Then ask the agent to
show you where it is written that you
should pay only this much. Know the fee
you have to pay. If the stock broker tells you
that you can buy stocks worth `10 lakh
when your bank balance is `2 lakh, ask how
The Economic Times Wealth, November 26-December 2, 2012 15
note, in rupees, how much interest will be
paid to you and when.
Seventh, insist on knowing what can go
wrong. Several relationship managers are
keen sellers and may only talk to you about
the positives for the fear of losing you as a
client. Kill this fraud by asking upfront about
what can go wrong. If you are buying an IPO,
you need to know that the share price may be
lower than the purchase price. If you are
taking a bond, you need to know that the
credit rating might change. If you are
investing in a mutual fund, you need to know
that the returns depend on the market, and
can be more or less than the market indices.
Write down what you should look out for and
ask where you will get the information. Make
sure you know what happens if you do not
pay the premium.
Eighth, ask if you have to stay with the
product for any specific period of time. What
are your options if your situation changes?
What happens if it does not? Does your credit
card have a charge after the first year? Does
your loan enable you to pay it earlier? Does
your insurance policy allow you to draw
some of the funds? Does your mutual fund al-
low you to redeem money, when needed?
Write down this detail in brief, simple terms
that you understand.
Review this sheet with your financial
adviser. If you invest in a team—which is a
good idea—pool your sheets and review it.
Product literature is filled with jargon; take
your time to figure out the product on your
terms, in your language. In this process, you
will either understand the investments
better, or you will be able to evaluate how
competent and honest your adviser is. Either
way, you win.
The author is Managing Director,
Centre for Investment Education and
Learning, and can be reached at
uma.shashikant@ ciel.co.in
the balance will be paid and
when. If it is a futures contract,
ask about the likely margin and
how often you will have to pay.
Sixth, ask what you will get, in
complete detail. Do not accept any
assurance from anyone. If the answer is
that your return will depend on the market
value of your investment, make a note. Ask
how often you will know what the said mar-
ket value is, so you can evaluate how the in-
vestment is doing. If there is a dividend,
pen it down and remember that dividend is
a discretionary payment. If it is bond, there
are multiple variations of the payment you
will get and how. So make sure you
understand these choices and are able to
 16 The Economic Times Wealth, November 26-December 2, 2012
Learn & Keep

What is a
Who was Ponzi?
Such schemes are named
after Charles Ponzi, who
Ponzi scheme?
The scheme is designed to convince people into placing money in a duped thousands of New
England residents into
fraudulent investment by promising outrageous or consistent returns. investing in a postage stamp
speculation scheme in the
Once the scamster has collected enough money, he disappears. 1920s. At a time when the
annual interest rate for bank
accounts was 5%, he promised
a 50% return in 90 days. Ponzi
How does it work? bought a small number of
international mail coupons in
support of his scheme, but
quickly switched to incoming
funds to pay earlier investors.

THE
SCHEMER

FIRST ROUND 1 In the first month, the schemer

takes `100 each from the first
TWO INVESTORS two investors.

2 Since the fraudster has pocketed `200, he

SECOND ROUND needs to get `400 (four investors) in the
FOUR INVESTORS second month to pay the returns promised.

3 In the third month, he owes

`800, so he has to find eight
THIRD ROUND new investors. He will have to
EIGHT INVESTORS get more than `100 from
each if he wants to keep
skimming the money.

4 In the next month,

FOURTH ROUND he will need 16
16 INVESTORS investors, and
so on.

5 By the 10th round, he will need to find a new group of 1,024 investors. By the 18th round,
Source: US SEC, THE NEW YORK TIMES he would have to come up with over a quarter of a million investors.
Graphics: CHANDER

The trick to trap investors Spotting a Ponzi Scheme

Such investments, especially those

Step 2 seeking high returns, tend to go up
and down over time. Be suspicious of Avoid the investments
After the that you don’t
an investment that continues to
specified time, generate regular, positive returns understand or for
return the money regardless of the market conditions. which you can’t get
to investors complete information.
along with the
Step 1 specified interest
Convince a few rate or return. TREE
people to invest
money in the plan.
Overly Secretive
consistent and/or
Recent returns complex
strategies
Ponzi
schemes G O AT
High Look
The investment Issues
have used returns
for these with
schemer odd with little or warning paperwork
trap no risk.
investment signs
options to Difficulty in
Unregistered receiving
lure people investments payments
into parting EMU
with their Every investment carries
a degree of risk, and Ignore excuses
money. investments yielding about the
Step 4 higher returns typically inavailability of
Repeat steps 1 to 3 a involve more risk. Be information on an
Step 3 cautious about any investment in
number of times. During
Pointing to the ‘guaranteed’ investment writing. Read the
step 2, in one of the cycles, prospectus or
historical success of opportunity.
break the pattern. Instead BIOFUELS LIKE disclosure
the investment, Be suspicious if you don’t
of returning the investment J AT R O P H A Ponzi schemes statement before
convince more receive a payment or investing. Account
money and paying the typically involve
investors to place have difficulty cashing statement errors
promised return, escape investments that
their money in the out your investment. may be a sign that
have not been
with the money and start Ponzi scheme promoters funds are not
system. Typically, the registered with the
a new life. encourage participants being invested as
vast majority of earlier regulators.
to ‘roll over’ promised promised.
investors return. CACTUS payments by offering
higher returns.
18 The Economic Times Wealth, November 26-December 2, 2012
Family Finances

Sydney
Williams, with
wife Carol and
son Keith.

NET WORTH OF THE

WILLIAMSs
Asset Current
value (`)
Real estate 50 lakh
Equity MFs 3.26 lakh
EPF 3.15 lakh
Gold 1 lakh
FD 80,000
Cash 35,000
Direct equity 9,200
PPF 5,000
Total 58.70 lakh

Liabilities Current
value (`)
Home loan 17 lakh
Car loan 3 lakh
Personal loan 1.5 lakh
Total 21.5 lakh

Approximate net worth

` 37.2lakh
“I feel that I may have made some mistakes. Hence, I want the advice of an
expert on whether my investments are going in the right direction.”
SYDNEY WILLIAMS

Williams’ cash flow Funds needed to achieve goals

Inflow Goal Years to
achieve
Future
cost (`)
Resources
used
Further
investment
Total monthly (`/month)
income Sydney Carol
`94,600 `52,600 `42,000 Contingency fund 1 1.4 lakh FDs, cash in bank 3,000

Second home 5 10 lakh Nil 15,500

Outflow Keith’s education 16 40 lakh Existing SIP -
Total monthly
expenses Keith’s marriage 25 25 lakh Existing SIP -
Household
`64,900 expenses EMIs Retirement 30 4 crore EPF 12,000
`30,000 `17,400
Investible surplus needed 30,500
Investible
Cost of additional insurance (average) 3,916
surplus
`29,700* Total 34,416
Insurance
SIPs premium Surplus 284*
`9,000 `8,500
* Surplus will rise to `34,700 after surrendering the child plans and LIC term plan.
** Equity and debt are expected to give 12% and 9% annual returns, respectively.
A comprehensive plan has been Inflation assumed to be 6%.
mailed to the Williams.
Family Finances
Prudent investors,
balanced approach
Minor changes in their plan and better risk coverage will enable the Williams to reach their goals with ease.
SAKINA BABWANI
EXPERT ADVICE
A
n early start, a disciplined
EXISTING ASSET ALLOCATION approach to investing and a
balanced portfolio are the
4 %
37%
perfect recipe for financial
Cash success. The Williams know
Equity
it well. They have invested 46% of their
portfolio in debt, 37% is in equities, ano-
ther 13% is in gold, and the cash in hand is
close to 4%. “So far, I have invested on my
own, but I feel that I may have made some
mistakes. Hence, I want the advice of an
expert on whether my investments are going
in the right direction,” says 30-year-old
Sydney. To add to the list of positives, their
13% goals are realistic, which makes things easy
Gold
46% for the young couple, who are set for a
smooth journey despite the three loans
Debt
they are servicing.
Sydney lives at Kolhapur, Maharashtra,
while his 29-year-old wife Carol resides in
PROPOSED ASSET ALLOCATION
Pune with their three-year-old son Keith.
24 % Sydney is employed with a public-sector
bank and takes home a monthly salary of
Equity 9% `52,600, while Carol earns `42,000 as an
Debt
64% MNC executive. The couple spend `30,000
Real every month on household expenses, while
estate
`1,500 is incurred on Keith’s education
every month. They also spend `8,500 as
insurance premium, while `17,400 is used to
service three loans—home, car and personal.
The couple had bought a house in Pune in
2010 for `17 lakh, for which they took a loan,
and the EMI for this works out to `7,900.
1% They also bought a car on loan in 2012 for `3
Cash 2% lakh, the EMI for which is `2,500. Apart
Gold from this, a personal loan of `1.5 lakh was
taken in 2011. Sydney shells out an EMI of
Proposed asset allocation to be achieved over time.
`7,000 to service this. Sydney also incurs a
monthly rent of `6,000 at Kolhapur. How-
RECOMMENDATIONS ever, this is a temporary expense as he will
shift to Pune in two years. Despite these
EQUITY FUNDS
expenses and EMIs, the couple manages to
Current SIPs: Franklin India Taxshield,
save `29,700 per month, which must be
Canara Robeco Tax Saver, DSP Blackrock
invested to achieve the four primary goals:
Equity, HDFC Mid-cap Opportunities,
accumulating funds for their son’s education
Reliance Gold Savings.
and marriage, retirement, and the down
Rationale: The Williams are investing in well- payment for a second home.
performing SIPs and can continue with them.
According to Shiv Kukreja of Ojas Capital,
The Economic Times Wealth, November 26-December 2, 2012
WILLIAMS’ GOOD MOVES ...
Investing across various
asset classes.
Having a high rate of savings.
… AND THE BAD ONES
Buying inadequate life,
health insurance.
Not maintaining a
contingency fund.
to start with, the couple must build a
contingency fund, which is worth at least
three months’ expenses of `1.41 lakh. To
achieve this goal in one year, they can
allocate their fixed deposit and cash, which
will amount to `1.15 lakh. For the remaining
amount, they can allocate the surplus left
after investing for other goals.
The only visible chink in their financial
plan is lack of adequate protection. Sydney
has a traditional plan, which gives him a
cover of `5 lakh, and a term plan of `50 lakh
from LIC. Carol, too, has two traditional
plans, which offer a combined cover of `9
lakh. For Keith, Sydney has bought two child
plans as well, which provide a combined
cover of `3 lakh. Given their current liability,
Kukreja recommends that they buy a term
plan of `1.5 crore for Sydney and `75 lakh for
Carol immediately. This will cost them
`3,000 every month. While they can contin-
ue with their traditional plans, they must
surrender the child plan and discontinue the
expensive term plan of `50 lakh, which costs
`3,000 a month. This will free the monthly
premium of `5,000, which can be added to
the monthly surplus. The couple also relies
solely on the health cover provided by
Sydney’s employer. So, Kukreja advises
them to purchase a family floater plan of `5
lakh, which will cost them `916 a month.
After arranging insurance, they can plan
for their goals. First, the couple wants to
amass `40 lakh in 16 years to fund Keith’s ed-
ucation. For this, they can allocate their cur-
19
rent mutual fund investments. A monthly
SIP of `7,000 in equity mutual funds is likely
to grow to `29 lakh in 13 years. When they
are three years away from the goal, they
should park the amount in a fixed deposit or
short-term debt fund to protect it from
volatility. This is expected to grow to `37
lakh in the last three years. Also, they should
continue with the monthly SIP of `7,000
during this period, but in debt funds. This in-
vestment is expected to generate `3 lakh.
Next, the couple needs to plan for Keith’s
wedding in 25 years. Again, their current
mutual fund investments can be allocated to
this goal. To build a corpus of `25 lakh, they
can assign `1,500 per month, which is
expected to grow to `19 lakh in 22 years.
When they are three years away from their
goal, they must move the corpus of `19 lakh
to a fixed deposit or short-term debt fund
and the amount will grow to `25 lakh.
The couple wants to build a corpus of `4
crore in 30 years for their retirement. For
this goal, they need to start a monthly SIP of
`12,000 in equity mutual funds. This
investment is likely to grow to `2.5 crore in
27 years. Meanwhile, their EPF contribu-
tions of `6,400 per month will build a
corpus of `1 crore. As in the case of other
goals, they must shift the equity funds to
debt in the last three years.
The couple also plans to buy a second
house worth `30 lakh in Pune or Kolhapur in
five years, for which they need `10 lakh as
down payment. They need to invest `15,500
a month in short-term debt funds. Since Syd-
ney works with a PSU bank, he can take a
staff home loan, for which the EMI is likely to
be around `20,000. Kukreja feels that in the
next five years, the couple’s income will rise
sufficiently for them to afford this EMI.
Financial plan by
Shiv Kukreja, CFP, Founder &
Managing Partner, Ojas Capital
Need help with your family finances?
Write to us at etwealth@indiatimes.com
20 The Economic Times Wealth, November 26-December 2, 2012
Formation
of triangles
These patterns are created when the market
interest and the volume of a stock start falling.
NARENDRA NATHAN
A
fter dealing with several
major patterns, we shall
now consider the minor
ones. Since most of the
former occur at the end
of a sustained bull or bear market,
these are also known as ‘reversal’ pat-
terns. On the other hand, most of the
minor formations occur in the middle
of an uptrend or downtrend and, there-
fore, are usually clubbed as ‘continua-
tion’ patterns. However, traders should
note that some minor patterns may act
Ascending: Canara Bank
Such a triangle is usually formed in the middle of
an uptrend and has a definitive bullish bias.
800
400
200
100
1/1/2009 30/11/2010
GETTY IMAGES
as reversal as well as continuation,
depending on the place at which they
occur and the manner in which the
final breakout takes place. The triangle
pattern is the best example of this.
Triangles are formed when the market
loses interest in a counter. The market
activity in any stock usually reduces
when the direction of the move (up or
down) is not clear. During this sideways
movement, the volatility, or the trading
range within which the price moves, also
comes down. This explains why the
triangle is the widest during the
formative stage and narrows as time
Descending: ABB
A mirror image of the ascending triangle, such a
pattern is usually formed in the downtrend.
1,000
900
800
700
600
500
1/12/2011 16/11/2012
progresses. Since triangles are formed when
the market’s interest in a counter falls, the
volume also usually falls during this period.
There are three types of triangles: symmet-
rical, ascending and descending. Since each
has distinct properties, let us consider each
one separately.
Symmetrical
Symmetrical triangles are formed when
neither the bulls nor bears have an upper
hand in a directionless market and can be
identified when the stock makes lower highs
and higher lows. If you connect these lower
highs, you get a falling trend line. This
resistance line is also known as supply line.
Similarly, the uptrend line that is formed
when you connect the higher lows is also
known as support or demand line. As is
evident from the HDIL chart, both these
trend lines form a symmetrical triangle. The
time taken to form this pattern is very
important and usually takes 1-3 months. If it
is formed in a smaller time frame, say 10-15
days, it is called a ‘pennant’.
Though a symmetrical triangle is
commonly considered a continuation
pattern, there are instances when it acts as
reversal pattern and, hence, one needs to
wait for the final breakout—when the price
goes above the resistance line or falls below
the support line—to identify the direction of
next move. For instance, a breakout on the
upside when the market is in an uptrend,
can be considered a continuation pattern.
However, a downward breakout after an
uptrend should be considered a reversal
pattern. Similarly, an upward breakout after
a downtrend is a reversal pattern, while a
downward breakout after a downtrend is a
continuation pattern. The symmetrical
triangle formed in the HDIL chart is a contin-
uation pattern and the price continued to
drop after the downward breakout.
Since the trading range comes down
during the formation of a symmetrical
triangle, the chance of a false breakout is
high (any increase in volatility can result in
the price going above or below these lines).
To avoid this, one needs to introduce strict
breakout rules. First, the breakout has to
occur on the basis of closing, which means
that any intra-day penetration of lines is
usually ignored. Some traders also apply the
price-based rule, that is, the price should
move at least 3% above or below the
breakout point; or the time-based rule, that
is, the price needs to close above or below
the breakout points for three consecutive
days. Like any other trading pattern, the
breakout should be supported by volume,
Symmetrical: HDIL
This triangle is formed when neither the bulls nor
bears have an upper hand in the market.
200
100
50
2/8/2010 30/12/2011
Stocks
especially when it is an upward break-
out. An accelerated price movement, gap
formation, etc, can also be considered as
breakout confirmation. Once the
breakout is confirmed, the next step is to
identify the possible target price. This is
arrived at by measuring the widest
distance of the symmetrical triangle and
adding/deducting this value to/from the
final breakout point.
Ascending
Unlike a symmetrical triangle, the
resistance line is almost horizontal here,
which means that the highs need not be
at the exact price and are close to each
other. The lows, on the other hand, keep
on increasing on a successive basis. This
hint at the bulls slowly gaining control,
though they are not able to break the
resistance level. As is evident in the
Canara Bank chart, an ascending triangle
is usually formed in the middle of an
uptrend and, therefore, can be
considered a bullish continuation
pattern. However, investors need to be
careful about its appearance even in the
middle of a downtrend because it can
signal a possible trend reversal. Irr-
espective of the place at which it is
formed, the ascending triangle indicates
accumulation and, therefore, has a
definitive bullish bias even before the
breakout occurs. However, the
downward breakout is not ruled out
and, hence, traders should take
positions only after an upward break-
out is confirmed. The other rules
mentioned for a symmetric triangle are
applicable here as well.
Descending
A descending triangle is a mirror image
of the ascending triangle and is formed
when the supports are at the same level
but the highs keep coming down, that is,
form a falling resistance line. Descending
triangles are formed when a group of
investors wants to sell a large quantity,
but only above a certain price level. Since
these investors stop selling once the
price goes below the threshold, this level
acts as a support. There may even be
instances of these sellers buying small
quantities at that price to support the
counter from falling below it. Once the
sellers finish their quota, they withdraw
the artificial support and the price starts
tumbling. The descending triangles are
usually formed in a downtrend and,
therefore, are treated as a continuation
pattern. However, one should pay
attention if one notices a descending
triangle in an uptrend because it can act
as a trend reversal signal (see ABB chart).
Irrespective of where it is formed, a
descending triangle is a distribution
pattern and, hence, has a bearish bias
even before the breakout. However, it is
better to wait for a final downward break-
out before assuming trading positions.
The other rules about volume, target,
etc, are also applicable here.
Next: Flag, wedge
and pennant
Please send your feedback to
etwealth@indiatimes.com
 In

smart stats
ETW Funds 100 23
This Insurance ranking 25
Section Loans and deposits 26

ET WEALTH TOP 100 STOCKS

Every week we put about 3,000 stocks through four key filters and rate them on a mix of factors. The end result of this exercise
Fast Growing Stocks
Top 5 stocks with the highest expected revenue
growth (in %).

Pipavav Defence 136

is the listing of the top 100 stocks based on the composite rating to help ease your fortune hunt. Kansai Nerolac Paints 130
Jaiprakash Power 128
Cox & Kings 128
RANK PRICE ` GROWTH% VALUATION RATIOS RISK RATING
Prestige Estates 109
Current Previous Stock Revenue Net Div Downside Bear No. of Consensus
Rank Rank Price Profit EPS PE PB Yield PEG Risk Beta Analysts Rating See revenue column in the adjacent table.

Gateway Distriparks 1 1 127.30 74.11 65.52 65.26 10.60 1.88 7.75 0.16 1.11 0.69 19 4.53
Orient Paper & Industrie 2 2 76.05 81.64 47.56 44.18 6.95 1.39 2.63 0.16 1.22 0.65 13 4.92 Least Expensive Stocks
Dalmia Bharat Enterprise 3 4 142.25 22.45 119.86 123.57 8.33 0.41 1.02 0.07 1.71 0.36 6 5.00 The 5 stocks with the lowest forward PE.
Arshiya International 4 3 122.05 57.62 59.59 46.44 5.73 0.80 1.16 0.12 1.54 1.07 7 4.71
JBF Industries 4.13
Gujarat Inds Power 5 5 67.65 19.99 44.14 46.75 8.60 0.71 3.70 0.18 1.08 0.81 10 4.50
Arvind 4.91
Alok Industries 6 7 11.15 30.89 447.30 436.95 9.68 0.32 2.68 0.02 1.76 0.86 5 3.40
Deepak Fertilizers 5.25
Indian Oil Corp 7 6 259.05 14.54 77.02 80.36 14.85 1.04 1.94 0.18 1.00 0.24 38 3.66
Jubilant Life Sciences 8 9 200.55 31.10 3202.06 3199.55 222.06 1.39 1.48 0.07 1.35 0.35 17 4.24 Infinite Computer 5.47
HPCL 9 10 279.65 7.54 649.41 634.47 54.58 0.72 3.02 0.09 1.38 0.42 46 3.65 Arshiya International 5.73
Vardhman Textiles 10 8 250.05 18.03 109.06 110.52 10.84 0.69 1.80 0.10 1.46 0.98 7 4.57 See PE column in the adjacent table.
Cox & Kings 11 18 133.65 127.58 751.50 870.20 44.30 1.55 0.74 0.05 1.81 1.60 16 4.75
United Phosphorus
Oberoi Realty
12
13
13
16
111.05
275.30
21.39
106.81
37.47
76.48
41.17
77.57
9.23
19.71
1.23
2.44
2.27
0.72
0.22
0.25
1.57
1.38
0.68
0.51
25
30
4.60
4.40
Best PEGs
Top 5 stocks with the least price earning
Balkrishna Industries 14 14 246.90 40.44 39.70 39.88 8.99 2.18 0.61 0.23 1.33 0.11 20 4.80 to growth ratio.
Greenply Industries 15 12 292.00 33.98 104.88 104.82 12.55 1.96 0.69 0.12 1.39 0.47 6 5.00 Dalmia Bharat
Cox & Kings
Persistent Systems 16 17 475.50 36.98 41.16 34.57 12.87 2.27 1.26 0.37 1.08 0.26 37 4.51 Enterprise
0.05
Cairn India 17 15 327.35 58.89 27.22 27.13 7.83 1.29 1.53 0.29 1.38 1.00 55 4.07 0.07
Infotech Enterprises 18 27 186.25 32.54 52.78 52.38 12.81 1.79 1.73 0.24 1.36 0.52 15 4.40
0.02 0.06 0.07
Tube Investments 19 NR 166.35 31.96 46.03 41.40 11.51 2.37 1.81 0.28 1.26 0.42 8 5.00
EID Parry India 20 25 225.35 11.74 66.17 65.77 12.67 1.64 1.77 0.19 1.12 0.44 8 4.75
Ballarpur Industries 21 22 22.45 9.73 72.43 58.27 11.57 0.36 2.77 0.20 1.38 1.04 5 4.80 Alok HEG Jubilant Life
CESC 22 26 278.50 23.09 70.15 60.32 14.13 0.72 1.79 0.23 1.89 1.18 33 4.09 Industries Sciences
HEG 23 23 233.00 31.91 244.17 241.06 14.99 1.08 2.18 0.06 1.32 0.65 5 2.80 See PEG column in the adjacent table.
HSIL 24 20 123.00 33.56 33.27 33.05 8.71 0.84 2.43 0.26 1.82 1.18 12 4.83
Motherson Sumi 25 19 167.60 86.40 167.18 165.31 37.50 5.12 0.91 0.23 1.29 0.79 22 4.59 Income Generators
Graphite India 26 28 85.35 27.21 19.85 20.07 7.81 1.00 4.11 0.39 0.83 0.28 8 4.63 Top 5 stocks with the highest dividend yield.
PVR 27 21 244.10 51.64 100.09 86.94 26.17 2.27 0.80 0.30 1.42 0.44 12 4.67
Infinite Computer | 9.50
Prestige Estates 28 29 156.10 108.97 416.26 419.52 58.27 2.39 0.75 0.14 1.96 1.25 24 4.54
Gateway Distriparks | 7.75
Monnet Ispat & Energy 29 NR 285.15 60.71 36.87 36.88 7.03 0.76 0.88 0.19 1.47 0.48 6 4.17
JBF Industries | 6.30
Hexaware Technologies 30 33 101.45 52.74 39.64 36.64 11.28 2.97 5.60 0.31 1.62 1.08 29 4.07
CMC 31 37 1100.00 43.31 73.55 73.53 22.09 4.34 1.15 0.30 1.12 0.23 10 4.40 Hexaware Technologies | 5.60

J Kumar Infraprojects 32 31 224.00 52.96 34.89 34.98 9.32 1.45 0.98 0.27 1.20 0.68 6 4.50 Deepak Fertilizers | 4.39
Bharat Petroleum Corp 33 36 321.45 6.28 99.09 119.54 30.09 1.48 1.69 0.25 1.20 0.68 46 4.00 Dividend stocks are considered
Sobha Developers 34 40 341.60 47.75 40.90 40.64 16.44 1.69 1.45 0.40 1.72 0.39 32 4.13 safe stocks during a downturn.
Figures indicate what an investor
Power Grid Corp 35 32 119.75 37.88 32.84 32.68 16.71 2.34 1.77 0.51 0.96 0.79 47 4.40 can earn as dividend for every
Apollo Tyres 36 35 82.25 19.35 64.87 63.21 10.24 1.48 0.60 0.16 1.71 1.39 37 4.22 `100 invested.

JBF Industries 37 34 127.25 10.89 44.13 35.25 4.13 0.57 6.30 0.12 1.21 0.53 7 3.14 See dividend yield column
Ipca Laboratories 38 38 444.80 32.80 55.74 55.71 20.22 4.44 0.95 0.36 1.42 0.42 34 4.79 in the adjacent table.
JK Cement 39 47 303.10 7.53 53.68 58.77 12.13 1.39 1.64 0.21 1.88 0.66 8 5.00
NIIT Technologies 40 39 286.25 35.27 22.33 21.40 8.63 1.85 2.85 0.40 1.49 0.99 27 4.33
MAX India 41 NR 233.95 36.42 93.56 90.23 39.36 2.46 4.28 0.44 1.38 0.69 10 4.00
Jindal Saw 42 44 120.55 26.93 149.46 146.74 17.67 0.90 0.84 0.12 1.32 0.75 11 2.91
GMDC 43 56 209.50 32.01 42.75 43.34 13.33 3.17 1.47 0.31 1.19 0.86 10 4.80
Mangalore Refinery 44 51 61.45 13.84 59.83 89.50 12.05 1.51 1.61 0.13 1.56 1.21 11 4.09
KSK Energy Ventures 45 43 52.70 60.48 125.86 141.75 16.18 0.67 0.00 0.11 2.04 1.70 6 4.00
Chambal Fertilizers 46 41 65.65 1.35 126.47 126.62 17.19 1.60 2.89 0.14 1.54 1.46 13 3.85
Essar Ports 47 45 92.25 49.65 380.33 204.56 59.69 1.73 0.54 0.29 1.79 1.40 12 4.83
Chennai Petroleum 48 42 125.25 10.31 339.42 399.65 30.46 0.50 1.59 0.08 1.00 0.56 7 2.86
G E Shipping Co 49 46 253.35 10.23 57.00 57.30 12.19 0.64 2.60 0.21 1.33 1.03 7 3.86
Lupin 50 59 560.20 41.80 52.98 53.17 29.03 6.28 0.57 0.55 1.12 0.05 59 4.20
Geometric 51 53 103.40 38.25 63.85 63.12 11.03 3.50 1.53 0.17 2.06 1.31 5 4.40
Kansai Nerolac Paints 52 50 970.00 129.76 157.72 157.79 50.87 7.88 1.13 0.32 0.80 0.19 11 3.64
HeidelbergCement 53 57 50.00 75.03 233.53 232.98 39.03 1.40 0.00 0.17 1.76 0.62 5 4.20
KPIT Cummins Info 54 48 126.50 60.58 57.96 54.79 15.23 3.12 0.57 0.28 1.80 1.22 26 4.35
Jaiprakash Power 55 62 36.45 127.87 79.71 88.59 23.84 1.75 0.00 0.27 1.72 1.10 17 4.18
JSW Steel 56 60 718.65 19.14 259.79 274.41 29.67 0.97 1.05 0.11 1.92 1.83 50 3.10
Sterlite Industries 57 58 96.50 12.35 27.54 28.00 6.73 0.71 2.16 0.24 1.79 1.25 42 3.90
MindTree 58 49 665.25 30.42 48.88 42.67 12.40 2.79 0.68 0.29 1.22 0.83 41 3.90
Dishman Pharmaceuticals 59 55 113.05 25.02 92.94 90.21 16.18 0.99 1.03 0.18 1.97 1.78 18 3.67
Shree Cement 60 52 4261.45 32.75 249.79 252.25 56.76 7.63 0.47 0.23 1.19 0.49 40 3.90
IL&FS Transportation 61 65 182.70 25.90 15.00 15.19 7.19 1.29 2.16 0.47 1.34 0.98 26 4.50
22 The Economic Times Wealth, November 26-December 2, 2012
Smart Stats

RANK PRICE ` GROWTH% VALUATION RATIOS RISK RATING

Current
Rank
Previous
Rank
Stock
Price
Revenue Net
Profit EPS PE PB
Div
Yield PEG
Downside
Risk
Bear
Beta
No. of Consensus
Analysts Rating
Least Risky
Top 5 stocks with the lowest downside risk.
Ajanta Pharma 62 54 368.90 39.35 50.98 51.35 11.26 2.92 1.00 0.22 1.65 0.54 7 4.00 GlaxoSmithKline
PI Industries 63 63 510.20 46.02 29.67 29.38 12.29 3.93 1.17 0.42 1.70 0.38 11 4.91 Pharma
India Cements 64 67 82.90 15.00 25.88 26.01 9.45 0.65 2.39 0.36 1.89 1.48 40 4.08 0.71
Solar Industries India 65 68 959.85 38.14 44.84 40.38 16.35 4.09 1.04 0.40 0.91 0.41 5 4.60
GSK Consumer Kansai
Oil India 66 74 459.15 18.59 6.48 7.79 7.97 1.56 4.18 1.02 0.95 0.43 46 4.28 Health Nerolac
Ashoka Buildcon 67 64 205.00 50.06 23.81 25.99 8.65 1.05 0.00 0.33 1.48 0.94 10 4.60 0.84 Paints
Infinite Computer 68 66 148.85 37.55 22.08 20.92 5.47 1.28 9.50 0.26 1.82 1.36 7 3.71 0.80
JSW Energy 69 69 60.90 40.90 426.20 426.07 58.11 1.73 0.84 0.14 2.01 1.73 28 2.50
Solar Graphite India
Kalpataru Power Trans 70 72 80.90 31.97 2.93 11.28 6.59 0.67 1.85 0.58 1.56 1.08 19 4.58
Industries 0.83
Jaiprakash Associates 71 70 89.10 34.02 101.92 96.55 30.15 1.66 0.56 0.31 2.25 2.05 33 4.09 0.91
Kajaria Ceramics 72 73 245.65 37.94 61.79 62.47 22.11 6.34 1.02 0.35 1.29 0.86 10 4.50
See downside risk and bear beta
NCC/India 73 78 41.85 12.50 69.82 69.72 19.69 0.40 0.71 0.28 2.68 1.54 33 3.91 columns in the adjacent table.
Hindustan Zinc 74 83 131.40 15.26 18.25 18.48 10.18 2.09 1.88 0.55 1.31 0.53 48 4.29
TVS Motor Co 75 77 37.00 12.47 34.19 60.67 13.28 2.42 3.52 0.22 1.62 1.73 40 3.30
Mahindra & Mahindra 76 71 954.05 31.32 35.34 32.75 18.00 3.36 1.31 0.55 1.20 1.11 59 4.10
What is Hot
Stocks whose analyst rating improved in one week.
Amara Raja Batteries 77 76 256.50 35.60 50.43 50.52 20.45 5.34 0.73 0.40 1.32 0.78 18 4.50
Simplex Infrastructures 78 61 178.05 23.17 34.46 34.63 10.57 0.73 1.11 0.31 1.72 0.66 21 3.33
0.25 Cox & Kings
GSK Consumer Health 79 81 3050.00 33.98 43.31 42.89 36.11 11.21 1.15 0.84 0.84 0.25 30 4.53
McLeod Russel India 80 79 332.90 24.20 25.50 27.13 12.58 2.07 1.83 0.46 1.52 0.50 13 4.54 0.15 Orient Paper & Industrie
Grasim Industries 81 84 3181.20 20.04 19.67 18.69 11.13 1.73 0.69 0.60 0.99 0.50 37 4.65
Ambuja Cements 82 96 203.25 32.01 45.88 46.18 25.29 3.86 1.58 0.55 1.29 0.68 58 3.19 0.07 Solar Industries India
Eros International 83 80 184.20 40.01 29.10 32.75 10.67 1.90 0.00 0.33 1.42 0.99 8 4.88
0.07 Glaxo SmithKline Pharma
GlaxoSmithKline Pharma 84 86 2002.25 24.39 78.87 77.67 39.62 8.76 2.23 0.51 0.71 0.32 29 2.90
Cipla/India 85 93 381.70 29.69 41.00 41.13 26.79 4.01 0.52 0.65 1.01 0.33 51 4.16 0.05 Jaiprakash Power
VA Tech Wabag 86 NR 517.25 25.78 40.33 40.46 18.78 2.16 1.14 0.46 1.25 0.73 10 4.50
Figures show improvement in rating on a scale of 0-5.
Pipavav Defence 87 NR 85.35 135.64 1804.48 1748.25 265.22 2.95 0.00 0.15 1.71 0.39 6 3.33
Glenmark Pharmaceuticals 88 90 444.10 31.68 49.00 48.80 26.09 5.00 0.45 0.53 1.31 0.55 39 4.44
Maruti Suzuki India 89 88 1493.30 35.95 49.35 47.40 25.66 2.75 0.50 0.54 1.40 0.70 62 3.58 What is Not
Aditya Birla Nuvo 90 91 975.20 19.21 46.48 37.37 12.46 1.48 0.62 0.33 1.31 0.92 8 4.50 Stocks that have gone down in analyst
rating in one week.
Century Textiles 91 87 384.90 27.79 689.82 688.87 162.71 1.90 1.42 0.24 1.82 1.80 7 4.00
Deepak Fertilizers 92 75 125.75 14.32 3.46 6.81 5.25 0.92 4.39 0.77 1.12 0.94 10 4.80
Chennai Petroleum -0.29
Arvind 93 98 82.85 17.69 27.48 27.43 4.91 1.04 1.20 0.18 2.10 1.64 7 4.57
IRB Infrastructure 94 94 122.45 32.89 6.54 6.82 8.21 1.43 3.09 1.20 2.67 1.91 42 4.64
KSK Energy Ventures -0.14
Exide Industries 95 92 139.90 33.24 50.39 54.45 26.64 4.42 1.14 0.49 1.37 0.31 39 3.00
Ashok Leyland 96 NR 26.85 21.84 17.81 16.45 12.32 1.66 3.84 0.75 1.51 0.92 54 4.06 Simplex Infrastructures -0.10
Adani Ports & SEZ 97 99 123.35 59.10 41.92 41.13 22.50 5.13 0.81 0.55 1.78 1.17 32 4.56
Cadila Healthcare 98 95 821.40 37.88 35.22 35.25 25.73 6.52 0.92 0.73 1.22 0.21 51 4.02 Hindustan Zinc -0.04
HCL Technologies 99 85 636.45 22.87 33.57 31.47 18.11 4.47 1.60 0.58 1.09 1.04 67 4.15
Shree Cement -0.02
Godrej Properties 100 100 627.90 85.67 122.75 86.95 44.94 3.40 0.48 0.52 1.02 0.63 22 2.32
Figures show dip in rating on a scale of 0-5.
NR: Not in the ranking. Data as on 23 November 2012. Source: Bloomberg

METHODOLOGY expected to show growth in revenue, net Total weight: 30%, which is further split into weight to the total number of analysts
The four filters used to arrive at the Top profit and EPS (earnings per share) in the in 10% weight to revenue growth, 10% weight to covering the stock (the higher, the better)
100 stocks the next four quarters. The final two filters net profit growth and 10% to growth in EPS and 10% to consensus rating (a composite
were that the companies should have made (the higher, the better, for each parameter). rating based on the recommendations by all
Only traded stocks: Of the about 7,000
profits in the past four quarters and have a Growth is calculated by comparing the analysts who track a stock. Again, the higher,
listed stocks, only actively traded stocks
positive net worth. ’consensus estimate’ for the next 12 months the better).
were considered.
Rating rationale with the historical 12-month values. 4. ... and so do the risks.
Only big stocks: Companies with a market
Having arrived at the final stocks universe, 2. ... but only at reasonable valuation. Total weight: 10%. Two kinds of risks were
capitalisation below `500 crore were dropped.
However, if a company had a market cap we ranked them using the following four Total weight: 40%, which comprises 10% considered. A 5% weight was assigned to
higher than this, but its annual revenue was principles. weight to PE ratio, 10% to PB ratio, 10% to downside risk and bear beta each (the lower,
lower than `500, it was not considered. A percentile rating, that is, on a 1-100 scale is PEG ratio (the lower, the better, for all three the better, in both cases).
given to each parameter and the composite parameters) and 10% to dividend yield (the
Only well tracked: We picked stocks that
ranking is arrived at using the weighted higher, the better). The ranking methodology has been developed
are tracked by at least five analysts. by Narendra Nathan..
average of these parameters. 3. Analysts’ views matter ... A detailed explanation of the methodology
Only profitable and growing: We is available at
1. Growth is the key ... Total Weight: 20%—this consists of 10%
considered only those stocks that are www.wealth.economictimes.com

Top 5 Large-cap Stocks Top 5 Mid-cap Stocks Top 5 Small-cap Stocks

Top 5 weekly gainers (price) Top 5 weekly gainers (price) Top 5 weekly gainers (price)

Sun TV Network Jet Airways Compucom Soft.

1 Price: 384.60 | % chg: 7.64 1 Price: 505.75 | % chg: 27.91 1 Price: 19.28 | % chg: 37.91
M&M Blue Dart Express Heritage Foods
2 Price: 954.15 | % chg: 6.67 2 Price: 1993.15 | % chg: 18.42 2 Price: 529.10 | % chg: 31.45
Zee Entertainment Manappuram Fin. Mudit Finlease
3 Price: 204.20 | % chg: 5.69 3 Price: 35.65 | % chg: 8.69 3 Price: 138.30 | % chg: 27.47
United Spirits Mahindra Holidays Stampede Cap.
4 Price: 1879.10 | % chg: 4.89 4 Price: 303.70 | % chg: 8.39 4 Price: 90.75 | % chg: 27.46

Upasana Fin.
5 HCL Tech.
Price: 636.20 | % chg: 4.56 5 eClerx Services
Price: 702.50 | % chg: 7.93 5 Price: 16.11 | % chg: 27.45
Stock prices in `, as on 23 November. Source: ETIG Database
Smart Stats The Economic Times Wealth, November 26-December 2, 2012 23

ETW FUNDS 100

B E S T F U N D S T O B U I L D Y O U R P O R T F O L I O
LEADERS & LAGGARDS
Taking a long-term view of fund returns, here is a list of 10 funds
in each category—five leaders (worth investing) and five laggards
(that may be a drag on your portfolio).

LAGGARDS LEADERS

ET Wealth collaborates with Value Research to identify the top-performing 100 Equity: Large-cap 5-year returns
funds across 10 categories. Equity funds and equity-oriented hybrid funds are -7.42 4.88
ranked on 3-year returns while debt-oriented hybrid and income funds are JM Equity Franklin India Bluechip

-5.01 4.78
ranked on 1-year returns. LIC Nomura MF Opportunities ICICI Prudential Top 100 Inst I

-2.85 4.52
LIC Nomura MF Equity DSPBR Top 100 Equity Reg

-1.92 3.68
VALUE NET
RESEARCH R E T U R N S ( % ) Sundaram Select Focus Reg HDFC Index Sensex Plus
ASSETS EXPENSE
FUND RATING RATIO
(` cr) 3-MONTH 6-MONTH 1-YEAR 3-YEAR 5-YEAR -1.79 3.2
Equity: Large Cap
ICICI Prudential Focused Bluechip Equity *
Franklin India Bluechip *


4025.37
4852.84
5.97
4.37
17.21
14.85
17.76
15.13
9.89
7.86
—
4.88
1.83
1.82
9.89%
The 3-year
HSBC Dynamic ICICI Prudential Indo Asia Equity Inst

SBI Magnum Equity *

ICICI Prudential Top 100 *


806.70
373.88
5.88
4.61
15.34
13.73
19.75
20.42
7.41
6.98
2.25
3.19
2.26
2.27
return of ICICI Pru
Focused Bluechip
Equity: Large- & Mid-cap 5-year returns
Reliance Top 200 Retail  818.80 6.03 17.40 26.03 6.61 2.92 2.11 is the highest in
-9.26 9.28
DSPBR Top 100 Equity Reg  3384.70 4.95 13.51 17.91 5.79 4.52 1.84 its category.
LIC Nomura MF India Vision Quantum Long Term Equity
HDFC Index Sensex Plus  88.63 3.79 15.53 17.59 5.66 3.68 1.00
Reliance Quant Plus Retail  144.03 3.43 14.30 17.37 5.61 — 2.42 -5.89 7.44
ICICI Prudential Target Returns *  118.99 3.36 14.66 17.80 5.39 — 2.42 ING OptiMix Multi Manager Equity Option A UTI Opportunities

UTI Top 100 *  621.01 5.23 18.30 18.07 4.92 — 1.21 -4.87 7.21
Religare Business Leaders  28.82 5.82 18.06 16.53 4.77 — 2.50 Taurus Bonanza UTI Dividend Yield
Kotak Sensex ETF *  20.59 3.85 16.90 16.61 3.83 — 0.50
-4.4 7.08
Equity: Large & Mid Cap Principal Growth ICICI Prudential Dynamic Inst I
Quantum Long Term Equity
Canara Robeco Equity Diversified


119.12
680.91
4.51
5.65
16.71
16.35
22.14
20.54
10.59
9.94
9.28
6.00
1.25
2.19 10.59% -3.44
SBI Magnum MultiCap
6.73
UTI Equity
UTI Opportunities *  3035.75 6.03 15.85 20.43 9.70 7.44 1.86 The 3-year
Mirae Asset India Opportunities Regular  257.43 6.23 17.28 21.51 9.33 — 2.35 return of Quan-
ICICI Prudential Dynamic  4056.37 4.76 12.32 18.01 8.70 6.12 1.82 tum Long Term
Franklin India Prima Plus *  1834.08 6.94 17.63 18.47 8.63 4.49 1.90 is the highest in Equity: Multi-cap 3-year returns
its category.
UTI Equity *  2113.60 5.12 16.16 20.86 8.17 6.73 1.45 -8.58
10.65
Fidelity International Opportunities  304.49 4.17 16.41 18.87 8.03 5.22 2.33
JM Core 11 ING Dividend Yield
HDFC Growth  1226.22 3.68 13.35 16.49 7.72 4.38 2.00
UTI Dividend Yield *  3630.64 3.44 14.02 12.72 7.72 7.21 1.83 1.24 9.73
Fidelity Equity  2792.69 4.16 14.74 15.19 7.61 4.61 1.85 Birla Sun Life Special Situations Tata Ethical
Fidelity India Growth  272.21 3.39 13.89 13.93 7.14 5.03 2.34 1.32 9.73
Edelweiss Diversified Growth Equity Top 100  14.63 4.88 15.08 20.35 6.57 — 2.29 L&T Opportunities BNP Paribas Dividend Yield
HDFC Equity  9887.21 5.76 13.96 17.88 6.48 6.39 1.78
2.01 9.16
HDFC Top 200  11591.05 5.83 15.45 18.31 6.01 6.71 1.78
L&T Contra
Morgan Stanley A.C.E.  243.01 7.94 18.13 18.72 6.01 — 2.35 Fidelity India Special Situations

Kotak Select Focus *  361.14 4.68 17.42 19.15 5.85 — 2.33 2.3 8.71
Birla Sun Life Equity
Equity: Multi Cap Templeton India Equity Income

ING Dividend Yield  85.56 5.19 14.42 14.58 10.65 9.59 2.50

BNP Paribas Dividend Yield
Fidelity India Special Situations 
14.53
644.75
8.04
5.24
16.88
17.27
20.39
25.23
9.73
9.16
7.26
4.11
2.50
2.19
Equity: Mid- & Small-cap 3-year returns
Templeton India Equity Income *  963.31 5.46 18.76 24.57 8.71 5.50 2.00
-3.74 22.75
Principal Dividend Yield  102.95 8.44 16.75 25.03 8.09 3.17 2.49
HSBC Progressive Themes SBI Magnum Emerging Businesses
Tata Contra  88.21 5.74 12.15 15.49 7.46 4.94 2.50
Reliance Regular Savings Equity  2828.63 10.95 23.94 28.40 6.62 7.01 1.85 -2.03 16.97
DSPBR Equity  2536.78 5.09 12.49 16.57 6.23 5.09 1.87 HSBC Midcap Equity Religare Mid N Small Cap
Religare Contra  60.75 7.53 16.54 17.71 5.42 5.63 2.50 0.31 15.9
Templeton India Growth *  679.14 3.64 15.45 19.40 4.46 3.86 2.13 HSBC Small Cap Reliance Equity Opportunities Inst
Equity: Mid & Small Cap 1.42 15.86
SBI Magnum Emerging Businesses *  733.80 12.13 24.58 34.45 22.75 4.94 2.26 Sundaram S.M.I.L.E. Reg DSPBR Micro Cap Reg
DSPBR Micro Cap Reg  450.79 9.32 15.11 24.23 15.86 5.67 2.28
2.23 15.68
Reliance Equity Opportunities  3830.09 7.72 18.65 30.82 15.68 8.24 1.83
Escorts Growth Reliance Equity Opportunities
Canara Robeco Emerging Equities  37.91 8.42 16.89 30.26 15.28 3.18 2.50
HDFC Mid-Cap Opportunities  2267.14 5.63 14.14 23.43 14.86 9.06 1.89
IDFC Premier Equity
Religare Mid Cap
ICICI Prudential Discovery



3070.90
52.53
1985.21
10.05
9.55
4.68
17.21
19.78
14.24
24.30
25.36
27.29
14.32
13.84
12.87
10.57
4.93
11.23
1.85
2.50
1.90
11.23% Hybrid: Equity-oriented 5-year returns
The 5-year
-5.46 10.39
DSPBR Small and Mid Cap Reg  1169.21 8.66 16.55 22.56 11.31 6.45 2.01 return of ICICI
JM Balanced HDFC Balanced
Tata Dividend Yield  325.61 3.36 10.35 15.14 11.07 6.91 2.33 Pru Discovery is

the highest in its 9.99
Birla Sun Life Dividend Yield Plus 1279.73 5.36 12.15 14.87 9.34 10.39 1.99 -2.69
category.
UTI Master Value *  636.89 7.09 13.07 13.41 9.29 4.12 2.18 Baroda Pioneer Balance HDFC Children's Gift-Inv
Sundaram Select Midcap Reg  2039.91 7.22 20.67 22.74 8.94 5.78 1.90 9.69
-2.4
Equity: Tax Planning LIC Nomura MF ULIS Reliance Regular Savings Balanced
Reliance Tax Saver  1993.76 6.04 13.91 29.43 10.54 5.01 1.90
-2.36 8.76
Canara Robeco Equity Tax Saver  456.12 5.13 15.19 19.53 10.41 7.84 2.29
Escorts Balanced HDFC Prudence
Franklin India Taxshield *  853.26 5.13 15.47 17.11 9.90 5.24 2.10
-0.95 7.58
ICICI Prudential Tax Plan *  1362.85 6.54 17.83 21.78 9.79 6.09 1.99
Religare Tax Plan  120.36 6.13 16.73 18.65 9.25 5.71 2.46 LIC Nomura MF Balanced UTI CCP Advantage
Fidelity Tax Advantage  1166.15 5.19 15.19 16.81 8.45 5.44 2.01 Returns as on 22 November
24 The Economic Times Wealth, November 26-December 2, 2012
Smart Stats

ETW FUNDS 100

VALUE NET
R E T U R N S ( % )
RESEARCH
FUND RATING
ASSETS
(` cr ) 3-MONTH 6-MONTH 1-YEAR 3-YEAR 5-YEAR
EXPENSE
RATIO Top 5 SIPs
IDFC Tax Advantage (ELSS)  144.27 7.20 21.21 21.03 7.91 — 2.43 Top 5 equity schemes based on 10-yr SIP returns.
Taurus Tax Shield  85.75 5.58 17.39 17.70 5.92 4.04 2.50 Sundaram Select Midcap Reg
Equity: Banking 23.78
SBI Magnum Global
ICICI Prudential Banking and Financial Services  155.57 14.06 31.88 45.35 12.01 — 2.42
22.84
Reliance Banking  1728.60 13.14 26.58 33.93 11.99 12.62 1.93
Reliance Growth
Religare Banking  44.94 11.56 28.41 36.45 11.23 — 2.50 22.57
Equity: Infrastructure DSPBR Equity
Franklin Build India *  60.89 6.43 17.99 22.56 5.31 — 2.38 21.32
Canara Robeco Infrastructure  112.14 2.17 13.69 11.68 4.29 -1.54 2.47 HDFC Top 200
20.97
PineBridge Infrastructure and Economic Reform Standard  86.80 5.03 17.02 8.76 1.11 — 2.47
Religare Infrastructure  37.63 4.43 14.78 7.04 -1.29 -6.06 2.50 SIP: Systematic investment plan % annualised returns

HDFC Infrastructure  660.01 3.74 10.67 15.46 -2.80 — 2.18 as on 22 November

Hybrid: Equity-oriented
HDFC Balanced  784.32 3.63 9.08 15.77 12.50 10.39 1.91
12.5%
The 3-year return of
Canara Robeco Balance  192.00 4.62 12.51 18.96 10.12 6.55 2.38 HDFC Balanced is
HDFC Prudence  6032.60 5.37 10.46 17.16 9.93 8.76 1.80 the highest in its Equity: SWPs
Reliance Regular Savings Balanced  556.61 6.47 16.71 23.68 9.49 9.69 2.22
category. Top 5 MIP schemes based on 3-year SWP returns.
Tata Balanced  373.86 5.13 15.23 22.47 9.24 6.21 2.32
SBI Magnum MIP Floater
Birla Sun Life 95  537.20 4.71 14.57 15.09 7.63 7.48 2.24
8.27
UTI CCP Advantage *  75.29 5.59 16.09 14.63 5.37 7.58 1.39 Canara Robeco MIP
Hybrid: Debt-oriented Conservative 8.02
Reliance MIP *  3423.37 3.15 6.48 14.97 7.75 11.46 1.56 Reliance MIP
7.82
DSPBR MIP  290.89 2.54 5.47 13.72 7.28 7.69 2.09
ICICI Prudential MIP 25 Reg
Canara Robeco MIP  286.46 2.64 6.13 10.87 8.15 7.79 2.09
7.79
UTI Monthly Income Scheme *  346.65 2.82 6.50 10.86 7.05 7.77 1.79
Birla Sun Life MIP II Savings 5
Birla Sun Life MIP II Savings 5  309.81 2.43 5.64 10.69 7.56 10.39 1.33
7.71
HDFC Multiple Yield  96.20 2.16 4.92 9.82 8.94 9.32 1.75
SWP: Systematic withdrawal plan % annualised returns
L&T MIP  76.84 2.18 5.75 9.75 5.85 9.23 2.25
HDFC Multiple Yield Plan 2005  567.85 2.54 5.25 9.73 9.17 9.25 1.75 as on 22 November

Birla Sun Life Monthly Income

Debt: Income
Templeton India Income Builder * 
403.96

148.94
2.72

2.83
5.75

6.05
9.72

12.72
6.93

8.35
7.83

7.87
2.05

1.53
12.72%
The 1-year return of
SBI Dynamic Bond *  2466.66 2.40 5.03 12.17 9.64 5.24 1.67 Templeton Income Debt: Liquid
Birla Sun Life Medium Term  215.73 2.28 5.20 11.14 8.63 — 1.47 Builder is the high-
est in its category.
Lowest Expense Ratio
Birla Sun Life Dynamic Bond Ret  12125.20 2.48 5.20 10.91 8.13 9.63 1.14
IDFC SSI Medium-term Plan F  1210.68 2.49 5.37 10.89 — — 1.00 0.11 0.11
Birla Sun Life Short Term  1966.92 2.52 5.55 10.74 7.52 8.20 0.29 0.10 0.10
IDFC SSI Medium-term Plan A  1210.68 2.38 5.16 10.52 8.41 9.30 1.38
ICICI Prudential Long-term *  537.63 2.35 5.33 10.17 — — 0.76
Templeton India Income Opportunities *  2714.66 2.59 5.42 10.13 — — 1.45
Religare Active Income Fund Plan A *  739.70 2.27 5.08 10.04 7.82 5.76 1.79
L&T Select Income-Flexi Debt Ret  126.56 1.96 4.27 9.16 7.72 — 0.93 0.05
BNP Paribas Bond Reg  431.92 2.25 4.83 8.96 8.56 — 2.00
ICICI Prudential Banking & PSU Debt  65.17 1.89 3.91 8.96 — — 1.44

Debt: Gilt Short Term

SBI Magnum Gilt Short-term *  27.31 1.99 4.41 10.04 7.09 7.10 0.86
UTI G-Sec Short-term *  19.67 1.76 3.92 8.98 6.23 5.95 0.74
Edelweiss Religare Principal Morgan Stan- Edelweiss
Canara Robeco Gilt Advantage *  3.75 1.70 3.63 8.08 — — 1.11 Liquid Overnight Cash Mgmt ley Liquid Liquid Inst

* Expense ratio as on 31 March. All equity funds including balanced equity funds sorted on 3-year returns; all others ranked on 1-year returns.

Data as on 31 March
Did not find your fund here?
Log on to www.wealth.economictimes.com for an exhaustive list.

Methodology EQUITIES (figures over the past three years)

The Top 100 includes only those funds that have a 5- or Large-cap: More than 80% assets in large-cap companies.
4-star rating from Value Research. The rating is determined Large- and mid-cap: 60-80% assets in large-cap
Large Cap Cash Holdings
by subtracting a fund’s risk score from its return score. The companies.
result is assigned stars according to the following 30.34
distribution: Multi-cap: 40-60% assets in large-cap companies.
Mid- & small-cap: At least 60% assets in small- and
 Top 10%
mid-cap companies.
 Next 22.5% 21.35
(Not covered Tax planning: Offer tax rebate under Section 80C.
 Middle 35% in ETW Funds
International: More than 65% of assets invested abroad. Returns as on 22 November
 Next 22.5% 100 listing) Assets as on 30 September
Income: Average maturity varies according to objective.
 Bottom 10% Rating as on 31 October
11.48
Gilt: Medium- and long-term; invest in gilt securities. Expense ratio as on 31 March
Fixed-income funds less than 18 months old and equity funds 8.63 8.19
less than three years old have been excluded. This ensures Equity-oriented: Average equity exposure more than 60%.
that all the funds have existed long enough to be tracked for Debt-oriented aggressive: Average equity exposure
consistency of performance. Given the focus on long-term between 25-60%. Stock
investing, liquid funds, short-term funds and FMPs are not pick of
part of the list. For the same reason, we have considered only Debt-oriented conservative: Average equity exposure
the week HSBC
less than 25%. Edel- ICICI Pru- Sahara ICICI Prudential
the growth option of funds that reinvest returns instead of Page 8 Dynamic weiss dential Super Focused
offering dividends that increase the NAV of funds. Arbitrage: Seek arbitrage opportunities between equity Equity Indo Asia 20 Bluechip Equity
Despite these rigorous filters, the list includes 2/3 funds of and derivatives. Enhancer Equity
each category to maximise choice from the best funds. The Asset allocation: Invest fully in equity or debt as per As on 31 October
fund categories are: market conditions. Methdology of selected Top 100 funds on www.wealth.economictimes.com
Smart Stats The Economic Times Wealth, November 26-December 2, 2012 25

BEST HEALTH INSURANCE

Every week ET Wealth brings you the rankings of one financial product done by i-save*. In this issue we look at the best
Rating methodology
Coverage: Comprehensive. All health insurance products
(family) whose prices and features data is available in the public
family floater health insurance plans available in the market. domain have been covered. Some plans may have been exclud-
Product name Price rating Features rating Service rating Overall rating ed on account of not being comparable with the peer group as
Apollo Munich they may be targeted towards a specific customer segment.
Apollo Munich Easy Health Standard     and Bajaj Ratings: : i-save Health Insurance Ratings use a relative rating
Apollo Munich Easy Health Exclusive     Allianz plans methodology to rate health insurance products on a 0-5 star
Apollo Munich Easy Health Premium     score well
scale. The product ratings are a weighted aggregate of the
Apollo Munich Maxima No Star    across
parameters product price, product features and company service data, each
Apollo Munich Optima Restore     rated on a relative 0-5 star scale. The star ratings assigned
Bajaj Allianz Health Guard Family     correspond to the following:
Bajaj Allianz Insta Insure      Superior product
Bharti Axa Smart Health Basic      Excellent product
Bharti Axa Smart Health Premium      Good product
Bharti Axa Smart Health Optimum    No Star  Average product
Cholamandalam Chola Family Healthline Standard      Below average product
Cholamandalam Chola Family Healthline Advanced     No star Low rating
Cholamandalam Chola Family Healthline Superior         
Future Generali Health Suraksha Basic    

No star

Below average

Excellent

Superior
Future Generali Health Suraksha Gold    
Future Generali Health Suraksha Silver    

Good
Future Generali Health Suraksha Platinum    

Average
HDFC Ergo Health Suraksha     High scores on
ICICI Lombard Family Protect Premier     all parameters
ICICI Lombard Health Advantage Plus Family     get HDFC Ergo
and ICICI Lom-
Iffco Tokio Base Plan   No Star  bard plans high
Iffco Tokio Wider Plan   No Star  product ratings
Max Bupa Heartbeat Silver Plan    
Max Bupa Heartbeat Gold Plan     0 10 20 30 40 50 60 70 80 90

Oriental Happy Family Floater Silver  No Star   The relative position on the distribution curve highlights the overall
Oriental Happy Family Floater Gold  No Star   ranking of the product relative to its peer group based on a
Reliance Healthwise Policy Standard     Religare Health, comprehensive product score of its price competitiveness,
a new launch, features and flexibility, and servicing capabilities.
Reliance Healthwise Policy Silver No Star    gets an excel-
Reliance Healthwise Policy Gold No Star    lent overall
Religare Health Religare Care   Recent Launch  rating Parameters considered
Royal Sundaram Family Good Health     Price: Lower premiums get higher scores. Premiums are
Star Health Family Optima     compared across multiple age bands (young, middle and
Star Health Medi Classic  No Star   mature) and multiple covers (`1-10 lakh).
Star Health Wedding Gift No Star   No Star Product features: Features are assigned a numerical score
Tata AIG Wellsurance Classic Plan   NA NA based on product benefits, customer availability and flexibility.
Tata AIG Wellsurance Supreme Plan No Star  NA NA Servicing capabilities: Scores are awarded to customer
Tata AIG MediPrime   NA NA servicing and claims settlement statistics. These are not
United India Family Medicare     High scores on product-specific and the data published by Irda for the past
all parameters
Universal Sompo Family Floater   No Star  two years is used to compare and allocate a relative numerical
gets United
score, adjusted for age.
 Service scores and ratings based on IRDA data / public disclosures by companies for 2009-10 and 2010-11. Where a company has recently commenced operations, service scores have India a superior
not been considered for rating. Where service scores could not be calculated due to lack of publicly available information, service stars are marked 'NA'.  i-save ratings are at a product product rating For detailed methodology, visit i-save.com.
level and provide a relative ranking to products in their peer group. They do not take into account personal or individual financial needs, circumstances or objectives. It is important to
review and compare benefits, exclusions and limits on sub-benefits for each product.  i-save ratings are not financial advice or guidance or a recommendation to purchase, hold or
terminate any policy. Data as on 7 September 2012. The ratings, since last published, include two additional products and premium changes to two existing products.

PREMIUM RECKONER Premiums of family floater health insurance plans of all companies Buying Guide
 Health insurance protects you against
Premiums for 2 Premiums for 2 Premiums for 2 Premiumsfor
Premiums for22
Premiums for 2 Premiums for 2 adults + 2 children, rising healthcare costs and financial
adults + 1 child, adults + 1 child, adults++22children,
adults children,
adults, eldest adults, eldest eldest member uncertainty arising from hospitalisation
eldest member eldest member eldestmember
eldest member
member 35 years member 45 years 35 years
35 years 45 years 45years
45 years due to accidents or illnesses.
Insurance cover (`
`) 3 lakh 5 lakh 3 lakh 5 lakh 3 lakh 5 lakh 3 lakh 5 lakh 3 lakh 5 lakh 3 lakh 5 lakh  It is always better to start your health
insurance cover at an early age:
Apollo Munich Easy Health Standard 5,267 8,226 6,500 9,969 6,489 10,501 7,550 11,796 8,258 11,796 9,438 13,494
 With age the risk to our health
Apollo Munich Easy Health Exclusive 6,282 9,459 7,476 11,465 7,905 12,075 8,683 13,567 9,497 13,567 10,854 15,519 increases, making insurance more
Apollo Munich Easy Health Premium N/A 11,824 N/A 14,331 N/A 15,094 N/A 16,958 N/A 16,958 N/A 19,398 expensive too.
Apollo Munich Maxima 21,500 N/A 21,500 N/A N/A N/A N/A N/A 29,000 N/A 29,000 N/A  Some companies now provide
Apollo Munich Optima Restore 6,848 8,637 8,452 10,469 8,436 11,149 9,816 12,270 10,736 14,070 12,270 15,337 guaranteed renewals for life.
Bajaj Allianz Health Guard Family 7,466 10,375 10,222 16,139 8,712 12,105 11,926 18,829 9,956 13,834 13,629 21,520  Most policies have an exclusion period
Bharti Axa Smart Health Premium 4,250 N/A 5,450 N/A 5,550 N/A 6,890 N/A 6,680 N/A 7,990 N/A (usually 2-4 years) for certain illnesses.
Bharti Axa Smart Health Optimum N/A 9,000 N/A 16,002 N/A 12,370 N/A 19,410 N/A 14,925 N/A 21,890  Do not restrict your cover just to meet
your tax-exemption limit.
Cholamandalam Standard Family Healthline 7,195 9,304 11,679 14,479 7,947 10,674 12,135 17,216 10,202 12,728 14,665 19,520
 Compare products not just on price, but
Future Generali Health Suraksha Basic 4,806 7,804 5,562 8,667 5,607 9,105 6,489 10,111 6,408 10,405 7,416 11,556
also on features, benefits, age till when
Future Generali Health Suraksha Gold 6,008 9,755 6,952 10,834 7,010 11,381 8,112 12,640 8,011 13,006 9,270 14,445 renewability is available, sub-limits, etc.
Future Generali Health Suraksha Silver 5,407 8,779 6,258 9,751 6,309 10,243 7,300 11,376 7,210 11,705 8,343 13,000
HDFC Ergo Health Suraksha 5,582 10,880 6,718 12,206 7,209 14,064 8,345 15,389 8,837 17,288 9,973 18,571 * i-saveTM ratings have been
ICICI Lombard Family Protect Premier 5,790 N/A 7,153 N/A 7,632 N/A 8,995 N/A 9,475 N/A 10,837 N/A sourced from i-save.com, a
unit of MAGI Research and
ICICI Lombard Health Advtg. Plus Family Floater 3,207 4,348 4,469 6,683 N/A N/A N/A N/A N/A N/A N/A N/A
Consultants Private
* Premiums as applicable for Delhi taken into account. For the complete list of family floater health insurance premiums visit www.wealth.economictimes.com Limited which analyses and
 Premiums sourced from quotation engines on each individual company website. Premiums are inclusive of service tax except in cases where this information may not have been available at individual websites. rates financial products
 Given the nature of health insurance and varied benefits and exclusion related terms, it is important to review what each product does or does not offer.
26 The Economic Times Wealth, November 26-December 2, 2012
Smart Stats

LOANS & DEPOSITS

ET Wealth collaborates with ETIG to provide a comprehensive ready reckoner of loans and fixed-income
instruments. Don’t miss the information on investments for senior citizens and a simplified EMI calculator.

Top five FDs Cheapest Personal loans Cheapest Auto loans

Interest rate (%) What `10,000
compounded qtrly will grow to
Tenure: 1 year INTEREST RATE (%) INTEREST RATE (%)
Indian Bank 9.25 10,958
Bank of Maharashtra 11.50 - 13.50 Bank of Maharashtra 10.50- 10.55

LOAN AMOUNT: `2 LAKH

UCO Bank 9.10 10,942

LOAN AMOUNT: `5 LAKH

IDBI Bank 8.75 10,904 Dena Suvidha 13 - 14 SBI 10.50 - 17.25
Yes Bank 8.75 10,904
Bank of India 13- 15.5 Allahabad Bank
ING Vysya Bank 8.70 10,899 10.75 - 11
Central Bank of India 13.25 - 15 Union Bank 10-95 15.75
Tenure: 2 years
City Union Bank 9.25 12,007 ICICI Bank 14 - 18 Central Bank of India 11.-12
Development Credit Bank 9.25 12,007
11 12 13 14 15 16 17 18 19 20 21 22 9 10 11 12 13 14 15 16 17 18 19
Indian Bank 9.25 12,007
Lakshmi Vilas Bank 9.25 12,007 * These are floating interest rates while the others are fixed interest rate
Tamilnad Mercantile Bank 9.25 12,007

Tenure: 3 years
City Union Bank 9.25 13,157
Cheapest Home loans Cheapest Education loans
Dhanlaxmi Bank 9.25 13,157 10 YEARS 20 YEARS
Indian Bank 9.25 13,157 Minimum loan: `50,000; Maximum loan: `2 lakh
Interest Interest Margin money: 15%
Karur Vysya Bank 9.25 13,157
rate (%) rate (%)
Tamilnad Mercantile Bank 9.25 13,157 Up to `10 lakh
State Bank of India 10.00 State Bank of India 10.00
Tenure: 5 years 15
HDFC 10.25 HDFC 10.25
City Union Bank 9.25 15,797 LIC Housing Finance 10.25 LIC Housing Finance 10.25 14 11.50 -
10.95 - 11.25 -
Tamilnad Mercantile Bank 9.25 15,797 Allahabad Bank 10.50 Allahabad Bank 10.50 13.50%
13.20% 13.25%
Oriental Bank of Commerce 9.10 15,682 13
10.50 -
Bank of Baroda 10.50 Bank of Baroda 10.50 12.50%
Dena Bank 9.00 15,605
Deutsche Bank 9.00 15,605 12.00%
Up to `30 lakh 12

State Bank of India 10.00 State Bank of India 10.00

Top five senior citizen deposits HDFC 10.25 HDFC 10.25
11

LIC Housing Finance 10.25 LIC Housing Finance 10.25 10

Interest rate (%) What `10,000
Bank of Baroda 10.50 Bank of Baroda 10.50 Central United State Allahabad Dena
Tenure: 1 year compounded qtrly will grow to
Bank of Bank of Bank of Bank Vidyalaxmi
Bank of India 10.50 Bank of India 10.50 India India India
Indian Bank 10.00 11,038
These are average rates for the entire tenure
UCO Bank 9.60 10,995
Yes Bank 9.50 10,984
Dena Bank 9.25 10,958
IDBI Bank 9.25 10,958 Postal Deposits Interest (%)
Minimum
Invt. (`)
Maximum
Investment (`) Features
Tax
Benefits
Tenure: Above 2 years
Monthly Income Scheme 8.50 1,500 Single 4.5 lakh 5 year tenure; monthly returns Nil
Indian Bank 10.00 12,184
Joint 9 lakh 5 year tenure; monthly returns Nil
City Union Bank 9.75 12,125
Development Credit Bank 9.75 12,125 Recurring Deposits 8.40 10 No limit 5 year tenure Nil
IDBI Bank 9.75 12,125 Savings Account 4.00 50 No limit `10,000 interest tax free Nil
Indian Overseas Bank 9.75 12,125
National Savings Certificate (5 yr) 8.60 100 No limit No TDS 80C
Tenure: 3 years National Savings Certificate (10 yr) 8.90 100 No limit TDS applicable 80C
Indian Bank 10.00 13,449
City Union Bank 9.75 13,351 Time Deposit 8.20 - 8.50 200 No limit Available in 1, 2, 3, 5 years 80C
IDBI Bank 9.75 13,351 Senior Citizen Saving Scheme 9.30 payable quarterly 1,000 15 lakh 5 year tenure; minimum age 60 80C
Indian Overseas Bank 9.75 13,351
Public Provident Fund 8.80 500 1 lakh a year 15-year term; tax-free returns 80C
Karur Vysya Bank 9.75 13,351
Employees' Provident Fund 8.60 - - Till retirement 80C
Tenure: 5 years Sec 80 C benefit: Investments up to `1 lakh in specified securities qualify for deduction.
Axis Bank 9.75 16,187
City Union Bank 9.75 16,187
Dena Bank
IDBI Bank
9.75
9.75
16,187
16,187
Home loan Base rate (%) Base rates are reference rates for all floating-rate home loans.

Indian Bank 9.75 16,187 As on 22 November 2012

10.45% 10.45% 10.50% 10.50% 10.50% 10.50% 10.50% 10.50% 10.50% 10.50% 10.50% 10.50% 10.50%
10% 10.25%
9.75%
Top five tax-saving FDs
Interest What `10,000
rate (%) will grow to
Tenure: 5 years and above
City Union Bank 9.25 15,797 BANK State Bank Axis State Dena United IDBI Punjab Bank of Bank of Bank of Canara Central Corpo- Union Alla- Andhra
Tamilnad Mercantile Bank 9.25 15,797 of India Bank Bank of Bank Bank of Bank National Baroda India Maha- Bank Bank of ration Bank of habad Bank
Oriental Bank of Commerce 9.10 15,682 Mysore India Bank rashtra India Bank India Bank

Dena Bank 9.00 15,605

Deutsche Bank 9.00 15,605 Cheapest Gold loans
INTEREST RATE (%)
Your EMI for a Loan of `1 lakh Allahabad Bank 10.50- 14.50

@ 8% 2,028 1213 956 836 772 Central Bank of India 11.50 - 12.50
@ 10% 2,125 1,322 1,075 965 909 Syndicate Bank 11.75
@ 12% 2,224 1,435 1,200 1,101 1,053 Dena Gold 12 - 13.75
@ 15%
2,379 1,613 1,400 1,317 1,281 Tamiland Mercantile Bank 12.25 - 15.25

9 10 11 12 13 14 15 16 17 18 19
Tenure 5 10 15 20 25
Choose this calculator to check your loan affordability. For example, a `5 lakh loan at 12% for 10 years will translate into an EMI of `1,435 x 5 = `7,175 All data sourced from Economic Times Intelligence Group ( etigdatabase@timesgroup.com)
Banking
Before you turn
a guarantor...
It is important to understand the financial
liabilities you will incur since you may have to
pay the dues if the borrower were to default.
SAKINA BABWANI
H
as your best friend decided to
take a bank loan and asked you
to be a guarantor? Before you
feel weighed down by
obligation and agree to become
one, consider the consequences. For, accord-
ing to a ruling passed by the Supreme Court in
May this year, if a debtor defaults, it is the
guarantor’s responsibility to repay the entire
loan. The apex court ruling was passed on a
case filed by one Ganga Kishun of Uttar
Pradesh, who had stood guarantor for a loan
taken by his friend, Ganga Prasad, who died
without clearing the loan. The Supreme Court
held Kishun liable to pay Prasad’s dues as he
had been the guarantor for the loan.
So if you don’t want to land in a problem, it
is important to doublecheck the borrower’s
financial record and repayment ability. Here
are the other things you should consider
before you agree to turn a guarantor.
The responsibility of repaying the debt
doesn’t automatically fall to the heirs. It’s the
guarantor’s obligation to pay if the debtor
defaults or dies. “Before you take the
onerous responsibility of being a guarantor,
you must check the credit score of the
borrower and ensure that he is
creditworthy,” says Suresh Surana, founder,
RSM Astute Consulting Group. You should
also ensure that you have the financial
wherewithal to shoulder the additional liabil-
ity that will come in case the debtor defaults.
The bank will not immediately begin to
pester you the first time a borrower is unable
to pay an EMI. It will first send him a notice. If
the debtor continues to default on three pay-
ments, the bank will send him a registered
notice. It will send a legal notice to the
debtor and the guarantor only after the
borrower does not pay the EMI for more than
four months. Depending on the terms and
conditions of the agreement, the bank may
initiate legal proceedings against the debtor
and guarantor simultaneously, or
Situations where a
independently.
guarantor is needed
How it impacts you
Many people agree to become loan
guarantors believing that their responsibility
is limited to ensuring that the debtor pays his
EMIs on time. However, a guarantor is
not only bound to pay the loan amount if
the debtor defaults, but the transaction
could impact his credit score and loan
The borrower
eligibility too.
has a dubious
If the borrower defaults, it will negatively
affect your credit score. “This is because as a
guarantor you are as liable to pay the loan
The Economic Times Wealth, November 26-December 2, 2012 27
amount as the debtor,” says Mohan. A bad
credit score could make it difficult for you to
borrow when you want to take a loan
yourself. This is because the lender will
determine your borrowing capacity only
after taking into account the loan for which
you are a guarantor. “This doesn’t mean
that you will not be given a loan at all, but
banks will definitely be cautious while
assessing your repayment capacity,” says
Madan Mohan, credit counsellor, Disha
Counselling Centre.
This is why experts advise that if you do
need to be a guarantor, agree for loans with
shorter tenures instead of long-term ones
such as home loans. Not only will your
responsibility end sooner, but the loan value
will also be usually lower in a short-term loan
Do you gain than in a long-term one.
from warranties The only exception to this rule is if you
offered by need to guarantee a home loan. This is
builders? because if there is a default, the lender can
Page 13
always recover its dues by selling the asset.
However, in cases where there is no asset as
in the case of an education loan, the bank will
force you as the guarantor to repay the loan
in case of a default, and if you are unable to
pay the EMI, it is entitled to recover the dues
from your estate. This is why banks ask guar-
antors for a collateral too.
Know your liability
You cannot choose to limit your liability as a
guarantor. The sole purpose of getting a
guarantor for a loan is to ensure that the bank
doesn’t lose its money in case of a default by
the debtor. In fact, if you are willing to pay
the EMI, you won’t even be able to ask the
lender to tweak it in terms of the interest rate
or tenure. So, do not go by the creditwor-
thiness of the debtor alone. Check
4. your own financial capability
5.
before signing on the dotted line.
Students taking Loans above Take into account your own
education `10 lakh for financial goals to see if you will
loans,
especially to
small and
medium
require a loan in the future.
One way to lessen your
study abroad. enterprises. burden is to ask the borrower to
get another guarantor. Of course,
if a default occurs, you will have to
3. pay, but in this case, the EMI could be
The value of the split between the two guarantors.
The loan applicant has security is lower than Another way to protect yourself is to insist
a transferable job or that of the loan. In case of that if the borrower has taken a long-term
2.
1. one that involves a home loan, the bank loan, he should take a loan payment
frequent overseas may ask for a guarantor if insurance. So, if the borrower dies, the insur-
travel, doesn't have a it fears that the value of ance could be used to pay the loan.
permanent address or the mortgaged property
payment changes addresses will fall in the future.
record. often. Please send your feedback to
etwealth@indiatimes.com
28 The Economic Times Wealth, November 26-December 2, 2012
Rewardz of persistence
After reviving a defunct firm through VC funding, Jayaraj has finally profited from loyalty programmes.
Bijaei Jayaraj
38 years
Company
Loylty Rewardz
Headquarters
Mumbai
Seed capital
`8 crore
Source of funds
Venture capital
Current turnover
`14 crore
Expected turnover
`25 crore
I consider the
T
hirty seven seconds. That’s the
time it took to make a business
venture capital fund- pitch for venture funding to
ing of `8 crore my help resurrect my dream and
dead company, Loylty Rewar-
lucky break because
dz. Set up in mid-2006, the one-man ven-
without it I couldn’t ture operating from my home at Powai,
have breathed new life Mumbai, aimed to be a one-stop shop for all
activities related to the development and
into Loylty Rewardz.
management of loyalty programmes for
corporates. This was done by analysing
consumer behavioural patterns and
installing appropriate rewards. However, I
realised I couldn’t run it alone and execu-
tion was a problem. So, the company didn’t
Infrastructural take off as expected and I was forced to
and technological shut shop within a couple of months. I
issues were our realised that cash is the life blood of any
start-up and 90% of the companies fail for
biggest challenge and this reason, not because the ideas aren’t
affected execution. good or they aren’t profitable.
So, we focused on So, in October 2006, I was forced to take
up a job, joining MasterCard as head of
hiring techies to relationship building with the State Bank of
overcome this hurdle. India group. This was my second run at the
corporate carousel. After completing my
MBA from the Indian School of Business
(ISB), Hyderabad, in June 2002, I was
picked up by Jet Airways. A year later, I was
Next on the heading their loyalty programme, Jet Privi-
lege, in Mumbai. At the time, this was the
cards are centres in largest customer loyalty programme in
Hyderabad and India and, recognising the potential this
Chandigarh. Our presented for an entrepreneur, I registered
Loylty Rewardz in June 2006, quitting my
expansion plans job a month later.
expect us to earn However, I refused to accept failure,
believing that I had bought myself time to
`25 crore in the next
put things in place. In February 2008, while
fiscal year. serving the notice period at MasterCard, I
happened to return to my alma mater to
participate in an initiative, where aspiring
entrepreneurs could meet venture capital-
ists to gather funds for their businesses.
Here, I met the managing director of
VentureEast and got a chance to outline my
idea while walking with him from the atrium
to the auditorium. Thirty seven seconds
later, he was interested enough to schedule
a meeting the same evening, and the next
thing I knew, I was signing the official
papers to receive my first round of
funding to the tune of about $1.5
million (`8 crore). I consider this
my lucky break because without
it I would not have been able to
breathe new life into Loylty
Rewardz.
After quitting MasterCard in
March 2008, I focused on my busi-
ness, setting up office in a rented space
at Andheri (east). To begin with, I invested
half the funding in infrastructure and tech-
nology for large programmes. Of the
remaining funds, about 20% went into
operational costs and 30% on employee
salaries—I hired my first batch of employees
in July-August 2008, and by the end of the
year, we were a team of 18-19. Our first cus-
tomer, Deutsche Bank, signed on with us
for their customer loyalty programme, Fre-
quent Flier Airline Agnostic, in October-
November 2008. Three months later, the
State Bank of India came calling for a debit
card loyalty programme, but this one went
live first (in April 2009). In the first year of
operations, we earned just `5 lakh, but
there has been no looking back.
Of course, there were several challenges.
For a bank’s loyalty programme that was
supposed to reach a consumer base of 55
million people, infrastructural and techno-
logical issues were our biggest challenge,
which affected execution. So, we focused
My Enterprise
ASHWANI NAGPAL
on hiring techies to overcome this hurdle.
We also consistently ploughed back every
spare paisa into the business in the initial
years. This steamlining helped us break
even and generate revenues of `5.5 crore in
2010-11, and `14 crore in the last fiscal. To
grow aggressively, we raised another round
of funding worth `17.5 crore through Cain
and Partners, in September 2011.
Today, we have associated our-
selves with 11 leading banks,
Are
subsidiaries
including Punjab National Bank,
eroding your Central Bank, Union Bank,
company’s value? Bank of India, Federal Bank and
Page 10 Citibank. Our 127-strong team
cumulatively manages loyalty
programmes for close to 175 mil-
lion debit and credit card users in
India. We have offices in Mumbai,
Delhi, Chennai, Kolkata, Bangalore, and
have recently opened one in Kochi. Another
new development is the accelerated accrual
platform we’ve created, Max Get More,
which is offered through 1,500 outlets
across India.
Next on the cards are centres in Hyder-
abad and Chandigarh before the year ends.
We expect to earn `25 crore in the next fis-
cal through these expansion plans. We also
intend to reach out internationally to coun-
tries like Malaysia, Singapore, Thailand,
Hong Kong and Philippines. In fact, we have
already acquired a subsidiary in Singapore.
While we continue to dream big, I believe
that execution is the key to a successful busi-
ness and many things need to be integrated
for the best-lain plans to become a success.
(As told to Milan Sharma)
Please send your feedback to
etwealth@indiatimes.com
Travel The Economic Times Wealth, November 26-December 2, 2012 29

How Indians holiday

Here’s what various surveys and studies reveal about the vacationing trends among Indians this year.

SUSHMITA CHOUDHURY AGARWAL

Why Indians don’t vacation

D
id you know that India is the fourth most
vacation-deprived country in the world? Or
that 47% of Indians feel compelled to check
their e-mails even on these rare holidays? The
good news is that they don’t really count their
pennies when they do manage to travel—the top 10 favourite
overseas destinations in 2012 have witnessed hotel price
hikes of 9-59%. Here’s a look at other such revelations culled
from various surveys and studies conducted this year.
37% 31% 23% 22% 22% 21%
I like to It is diffi- If I don’t I can get I feel My work
accumulate cult to schedule money in important is my
Not all Indians avail of the holidays sanctioned vacation
days for
coordi-
nate with
vacation
time far
exchange
for my
work
decisions
life and
it’s hard
trips I may the travel enough in unused will be to get
take in the partner. advance, I vacation made away.
36% future. never seem
to be able to
days. without
me.
take all of it.

The study, conducted online As in 2011, this year too Indian employees were most likely to fear that
28% 27% among 8,687 employed people important decisions would take place in their absence. The number of para-
noid employees in the country is 22%, while in the rest of the world the cor-
across 22 countries, found that
the median number of holidays responding figure is 10% or less. This, despite the fact that the percentage
Holidays sanctioned
23% given to Indians dropped by five of Indian bosses supporting an employee’s vacation has moved up from 72%
last year to 76% in 2012. In fact, Indian bosses have emerged as the most
Holidays taken days to 20 this year. Says
20% 19% Manmeet Ahluwalia, marketing supportive, second only to Brazil. Also, the overall trend has shifted from
head, Expedia India: “In India, ‘not being able to plan’ to ‘saving/accumulating vacation days in exchange
while the bosses have softened for money or future use’ this year.
15% their stance on leaves com- Source: Expedia.com 2012 Vacation Deprivation Study
13% pared with last year, we still
rank second globally among
those logging in during a vaca-
9% 8% tion, with 47% checking regular-
ly and 39% checking some-
times.”
Hike in hotel rates no deterrent
Source: Expedia.com 2012
2% 1% Vacation Deprivation Study

Days 0 1-10 11-20 21-20 30+ Don’t know/

Not sure Hotel deals
Destination 2012 2011 %
Top holiday (room rate in ` in first half) change

Where youth travelled Cost cutting in business travel destinations Kuala Lumpur 6,594 4,160 59%
Rank Destination Hong Kong 8,812 6,950 27%
As per TripAdvisor,
Bromance hot spots Companies increas-
42% 17% 15% 14% 59% of business
1 Bangkok Dubai 7,628 5,991 27%
4.9 Spain ingly recommend- 9% travellers from 2 Singapore New York 12,936 10,464 24%
ing use of remote over 1,300 respon-
meeting tools. dents admitted that 3 Dubai Bangkok 4,501 3,814 18%
Amsterdam 6.3 their firm had intro-
duced travel cost 4 New York Las Vegas 6,649 5,769 15%
Companies that reduction meas- London 11,311 10,055 12%
lowered grade of ures in the past 5 London
Thailand 18.1 airline travel. CHENNAI 4,867 4,397 11%
51.3 Las Vegas year. Says Nikhil
6 Pattaya
Ganju, country
Companies that low- Companies Pattaya 3,811 3,468 10%
manager, TripAdvi- 7 Hong Kong
Goa 19.4 ered average room that sor India: “Over Singapore 9,182 8,413 9%
night allowance. Companies that suggested reduced one-third respon- 8 Las Vegas
use of public transport, daily cash dents confirmed a Phuket 5,713 5,225 9%
instead of cabs. allowance. decline in trips this 9 Kuala Lumpur MUMBAI 7,005 6,555 7%
year from 2011.”
Girls-only dream trips Source: India Business Travel Survey (2012) by TripAdvisor 10 Phuket NEW DELHI 6,233 5,990 4%
Thailand
KOLKATA 5,620 5,504 2%
9.3
Las Vegas 10.7 ... was the average spend on a holiday by a family of
three, in 2012. According to Goibibo’s latest
42.5 How to
Paris 15.4
Spain
`21,999 research findings, this figure has increased by 15%
over the past two years. Currently the preferred avoid being
Given that seven of the top overseas destinations for Indian
package duration is four nights, with 33% of the cheated
travellers booking it through the portal. travellers in 2012 were via short-haul flights, you would think the
Page 15
vacationers were trying to cut corners on travel budget. Not true.
Goa 22.1 This is because the average hotel rates in each of these destina-
tions jumped up by 9-59% (comparing first half of 2011 with the
This is the projected air fare increase in India in corresponding period this year). However, in 2012, given the
Men and women may come from different planets, but the
2013. According to the latest American Express rupee’s slide, Indians preferred to vacation within the country,
youth, across genders, just want to have fun. The Bolly-
wood influence when it comes to destination choices con-
tinues unabated. The only difference in the line-up is that
Global Business Travel survey, this hike will be
the highest in the Asia Pacific region, 8% where the room rates have risen by 12% on an average.

Source: Hotel Price Index report by Hotels.com

prompted largely by the current volatility in
while Amsterdam appeals to boys, girls want Paris.
the domestic air industry.
Source: MakeMyTrip.com
30 The Economic Times Wealth, November 26-December 2, 2012
Your Feedback

Readers’ response, online and in print, to ET Wealth stories has been THE ECONOMIC TIMES
overwhelming and enlightening. We pick some that add information
and perspective to our articles from previous issues.
wealth
November 26-December 2, 2012
www.wealth.economictimes.com
FRO
THE WM
EB

Greed, not mis-selling, results in excessive funds

The cover story ‘Do you have too many funds?’ highlighted an increasingly visible trend in the world of mutual fund invest- BEST OF ARCHIVES
ing. Over the past few years, the average number of funds in investors’ portfolios have risen and, most of the times, it has
done little to help them. While the companies may be at fault since they launch a new scheme every week, I feel this is Bigger, Better, Smarter: Read to find out
more a case of the investors’ greed than mis-selling. Unlike Ulips, buying an extra mutual fund does not entitle you to tax how to make the most of the small savings
benefits. People usually follow the logic of ‘the more the merrier’ and this brings down the overall returns. In fact, a friend schemes that have been revamped and
interest rates that are no longer fixed.
had 15 funds in his portfolio simply because he wanted one fund from every fund house. The story explained well that
what you select, not how much you select, decides the returns from your portfolio. This is one area where people need to Is a bank account better than fixed
be educated better, especially the first-time investors. deposits and liquid funds? Find out how the
Payal Chatterjee, Mumbai `10,000 exemption on bank interest has
changed the investment equation.

Real estate still the
safest investment
The story ‘Is this a good time to
buy property?’ provided an
interesting insight into the world
of real estate. Over the past few
years, real estate seems to have
lost much of its sheen, thanks to
the flawed practices of compa-
nies, saturation in the larger
market and increasing popularity
of other investment avenues.
However, I still believe that realty
remains one of the easiest and
safest places to invest in the
market. The article is bound to be
of immense help to the people
who are considering buying
property. However, considering
the high prices, I think the
younger generation is likely to
prefer to live on rent.
RN Singh, Delhi
Pick mid-cap stocks
for future bull run
The story ‘Time to raise stock hold-
ing’ once again proved the point
that stock investing remains a long-
term bet. In the past five years, the
Sensex has seen several ups and
downs. The current situation pres-
ents one more opportunity to pick
future winners, but I think the good
picks are in the mid- and small-cap
segment. Of late, there has been
little to cheer in the large-cap
segment, with most of the compa-
nies quoting at high premium
despite corrections. Moreover, the
returns on large-cap stocks have
hovered in the 10-12% range, mak-
ing them unattractive. In such an
event, the people who pick good
mid-cap stocks will benefit the
most from the next bull run.
Shivendra Amarnath, Kolkata
Commodity invest- Do you gain from gold SIPs? Scan the article
to understand how fresh incentives on gold
ment to pick up soon savings schemes offered by jewellers may not
I have been highly impressed by offer any real advantage.
Naveen Mathur’s fortnightly column
Go on a holiday to save tax: If you are entitled
on commodities. His analysis is
to leave travel allowance, you can claim it to
precise and easy to understand and reduce your tax. Find out when and how to claim
helps readers like me, who are first- it before you catch your next flight.
time investors in the commodities
market. Considering the develop-
ments in this sector, it is surprising
that it is has not yet caught the All these stories are available at
attention of investors. While it is www.wealth.economictimes.com
clear that unlike other investments,
commodities require a lot more
attention, the returns are equally
LEARN & KEEP
rewarding. In the next few years, I
see the interest in commodities Also take a look at:
picking up and a lot of retail
 Calculate your
investors getting into it. I hope ET income and tax.
Wealth comes up with more invest-
ment strategies for investors in the  Will you overspend
commodities market. this festive season?
Pratap Gupta, Delhi  Turning 18: How a
major child can help
save tax.
How big should be your contin-
gency fund? The amount you stash  Choose your asset
away for unforeseen events depends on allocation.
various factors. Take this quiz to find
 Time your finances.

Test your MQ out how much you need.

The Learn & Keep section is available at

Are you a savvy investor and an informed spender? Take this
quick test to find out your money quotient (MQ).
All the answers are in the stories that have appeared in this
issue of ET Wealth. So you don’t need to be a financial wizard
to know these things. You just need to be an ET Wealth reader.
1 You need a guarantor to borrow more than `10 lakh to start a
business.
www.wealth.economictimes.com
MOST READ OF THE WEEK
Do you have too many funds? Read the
story to know why too many mutual funds or
stocks will make it difficult to track your
Y/N investments and bring down your returns.

Give yourself one point for
every correct answer
>> 8-10: You are a smart investor and know the
tricks. Try to fine-tune your portfolio.
>> 4-7: Your money quotient is average. You know
the basics but you have a lot to learn.
>> 0-3: You have a lot of catching up to do.
Remember it’s never too late.
7. No 8. Yes 9. Yes 10. Yes
Answers: 1. Yes 2. No 3. No 4. Yes 5. Yes 6. No
2 Investments in shares and mutual funds attract wealth tax.
Property developers are currently offering only construction-related
3 warranties to home buyers.
4 Any insurance policy can be returned within 15 days of
receiving the policy documents.
5 Sebi has no jurisdiction over deposits in a company.
6 A corporate entity’s under-performing subsidiary does not
affect its overall profitability.
7 Investors must pay a monthly fee to receive the consolidated
account statement of investments in all mutual funds.
8 Capital-intensive businesses can also have a negative working
capital, making such companies good stock picks.
9 A Ponzi scheme generally involves an investment that is not
registered with the regulators.
10 A triangle pattern is seen in a stock’s movement when the
market’s interest in it begins to fall.
Y/N Is this a good time to buy property? Buying
a house has high aspirational value in India. A
Y/N study by ArthaYantra compares property
prices and rentals in seven top cities.
Y/N Click better images with your phone’s
camera: Peruse the piece to pick from photo
Y/N apps and editors that can help you enhance
the quality of your pictures.
Y/N
Time to raise stock holding: The market
will continue to move up for a while, say
Y/N experts. Go through the story to know why
any correction should be used to buy shares.
Y/N
YOUR FEEDBACK
Please send your feedback to etwealth@indiatimes.com, or
Y/N you can write to us at Times House, 7, Bahadur Shah Zafar Marg,
New Delhi-110002
Note: The letters have been edited for grammatical errors
Y/N and better reading.
Last Word The Economic Times Wealth, November 26-December 2, 2012 31

Financial wizards of the week

Bring out the planner in Solutions from the following were also useful
you and suggest a Last week’s winner Prakash Chandra, Mumbai Bal Govind, Noida
strategy for a financial SRINATH HR, BANGALORE Solution: Since you need the money Solution: Given that you require a
problem to one of our for your brother’s education, the corpus of `2.5 lakh in a year, it is
Last week’s question preservation of capital is more advisable to move your current corpus
readers. I have been investing `5,000 in mutual Winner important than returns. You can from mutual funds to either debt or
funds for the past three years, but the
`3,000 put your mutual fund corpus of Winners liquid fund, as it is a short term
The winners will returns have barely beaten the market. I
need a corpus of `2.5 lakh for my brother’s
about `1.8 lakh in a bank fixed `1,000 requirement. In the future, you
deposit for one year, which will must avoid investing in mutual
receive gift vouchers education in a year and was thinking of using give you a post-tax return of `1.95
each funds for short-term goals. Also, it
worth my mutual fund corpus. However, since it is performing lakh, assuming an 8% return. I makes sense to invest in RDs, instead of
badly, I am considering redirecting my investments for the suggest you open a recurring deposit in mutual funds, for the goal. However, if
next year to a recurring deposit so that the returns are your brother can avail of an education
`5,000 ensured. Since the markets are improving, my wife thinks I
should continue with the SIPs. Please advise.
PN Hari, Mumbai
a bank with `5,000 per month for 12
months, which will give you a post-tax
return of `61,000. So, at the end of one
loan, then continue with your mutual
fund investments and redeem the funds
year, you will have `2.56 lakh. that are not performing well.
and will be crowned the
ET Wealth Financial Sreenath’s solution
One should not expect returns from mutual funds in the first
This week’s situation
Wizards of the week.
three years and invest in these for the long term. So you I am 27 years old, earning `50,000 a month and saving `15,000. Next
should continue investing via SIPs, but you need to review year, I want to study abroad and the course cost is `21 lakh. My current
The decision of ET Wealth your portfolio. As far as funding your brother’s education is
investments are worth `4 lakh. By March 2012, my EPF corpus will grow
regarding the winners of concerned, it makes sense to go for an education loan from
‘Financial Wizard’ will be one of the nationalised banks. The interest rates are
to `1 lakh and my father will give me `2 lakh. I can get an education loan
final. The vouchers will be attractive and you will also have the option to start repaying of `7.5 lakh without collateral. These will add up to `14.5 lakh. How can I
e-mailed to the winners. the loan after your brother completes his education. By that fund the balance amount? Should I take a personal loan or put off my
Allow at least 30 days for the time, your mutual fund investments would have also given plans by a year? MK Singh, Delhi
despatch of the voucher. good returns, making the repayment easier.
Send your solutions to etwealth@indiatimes.com

MONEY-MAKING VENTURE

Taking the organic route to success

A Chennai-based couple has used an environment-friendly detergent to average sales of `1 lakh a month.
S VARADHARAJAN
MILAN SHARMA India and Europe that they figured Krya had built a potential customer
out how to integrate their personal base without spending much—`6
lakh for the entire process, from

T
here’s nothing new quest of sustainable urban living
about people leaving with a business venture. The idea inception and registering the
lucrative MNC jobs to solution was to create a basket of company to renting a 250-sq-ft
start their own ventu- sustainable, organic goodies. On re- office space at Mylapore, Chennai,
res, but how many are turning home in 2010, the duo and launching the product.
enterprising enough to quit researched the market for organic Currently, the business is averag-
without knowing what they want to products, and zeroed in on organic ing sales of about `1 lakh a month.
do or how to go about it? Meet washing detergent as their first A more encouraging sign has been
Chennai-based Preethi Sukumaran product. “In 2009, we had started the re-trials and recommendations
and Srinivas Krishnaswamy, spous- using soapberries for washing our from their customers. “As of now,
es-turned-business partners, who clothes and realised that not only we not only sell the product, but
opted out of the corporate rat race were they environment-friendly also offer after-sales service. As
on the same day, 31 January 2009, compared with the usual deter- more people use it, the awareness
with one sure idea: to work on an gents, but were equally, if not more, will increase,” she adds.
environment-related concept. effective,” says Sukumaran. Within They are now working on pro-
“After graduating from IIM in the organic product universe, the duct packaging, keen to source
2001, we both worked in various humble detergent had remained on vegetable ink for printing the
FMCG MNCs for eight years. So, we the sidelines despite contributing brand name and launch other
were confident about brand heavily to soil and water pollution. is, first launching and then promot- we were going about it,” says Suku- products like dishwashing soap, in
building, marketing and handling “Till that time, the players in this ing it. In fact, they did the reverse. maran. Before long, the couple got January 2013, followed by skincare
the venture, but weren’t sure about market were small and unorgani- “After registering our company, an active Net community. They products in 2014. The company ex-
the product itself,” says Krishna- sed, so we decided to launch organ- while we were looking at sourcing also finalised the soapberries they pects to break even by the end of
swamy, who graduated from IIM- ic washing detergent,” she adds. In our product, working on the wanted to use and struck a deal the financial year, which hopefully,
Bangalore, while his wife is from May 2010, they finally figured on a website design and other back-end with an organic farm near Guntur, will allow the founders to finally
IIM-Calcutta. So, the couple, who name, Krya, meaning mindful issues, we started a Facebook page Andhra Pradesh. “The latter would start taking home a salary.
got married in 2003, decided to see action, and by October 2010, the and a blog. Over the next six process and manufacture the prod-
the world while waiting for company had been registered. months, we interacted online with uct and send it to our office in
inspiration to strike. Indeed, it was The couple did not set up the a lot of people, telling them what Chennai,” she adds. By the time the Please send your feedback to
etwealth@indiatimes.com
during their year-long travel across venture in the traditional way, that we were planning to do and how product was launched in May 2011,

The Economic Times Wealth, published by Bennett, Coleman & Co. Ltd. exercises due care and caution in collecting the data
before publication. In spite of this, if any omission, inaccuracy or printing errors occur with regard to the data contained in this
newspaper, The Economic Times Wealth will not be held responsible or liable. The content hereof does not constitute any form of
advice, recommendation or arrangement by the newspaper. The Economic Times Wealth will not be liable for any direct or
indirect losses caused because of readers’ reliance on the same in making any specific or other decisions. Readers are
recommended to make appropriate enquiries and seek appropriate advice before making any specific or other decisions.
Published for the proprietors, Bennett, Coleman & Co. Ltd. by Balraj Arora at Times House, 7, Bahadur Shah Zafar Marg, New Delhi-110 002, Phone: 011-23302000, Fax: 011-23323346 and printed by him at (A) The Times
of India Press, 13 & 15/1, Site IV, Industrial Area, Sahibabad, UP (B) Vardhaman Publishers Ltd, Vejalpur, Ahmedabad. Office: 139, Ashram Road, Ahmedabad-9. Ph: (079) 67773300, Fax (079) 26574485 (C) Bennett,
Coleman & Co. Limited, No 9/10/11-A, 4th Main Bommasandra Industrial Area, Hosur Road, Bangalore 560099, Ph: (080) 22899999. (D) The Times of India Press, No. 140, Old Mahabalipuram Road, Chemmenchery,
Chennai 600119, Kacheepuram District (E) The Times of India Print City, Plot No.4, TTC Industrial Area, Thane Belapur Road, Airoli, Navi Mumbai 400708. (F) Times Press, Plot No. 5A, Road No. 1, IDA Nacharam,
Hyderabad 500076. (District Rangareddy) (G) Times House, Plot no. 2, Block- EM, Sector-V, Salt Lake City, Kolkata 700091. Regd. Office: Dr Dadabhai Naoroji Road, Mumbai 400 001. Editor: Rakesh Rai (Responsible for
selection of news under PRB Act). © Reproduction in whole or in part without written permission of the publisher is prohibited. All rights reserved. RNI No. DELENG/2011/37994. MADE IN NEW DELHI Volume 2 No. 48