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How to read a mutual fund fact sheet June 30, 2005 15:07 IST

For a number of investors, the fact sheet serves purely as a reminder that they are
invested in schemes from a given mutual fund house. The best response its arrival elicits is a quick check of the investment's present status or a meeting with the investment advisor to chart the future course of action. However there is much more to the fact sheet than that. The fact sheet is a storehouse, which can reveal loads of information about the fund. It informs investors where their monies have been invested and how their investments are performing. Most investors at some time are faced with the query, 'How do I evaluate my mutual fund investment?' The answer to this query lies in the fact sheet as well. While publishing the fact sheet is a statutory requirement (for the purpose of disclosing portfolios), it often acts as a mouthpiece for the Asset Management Company (AMC) as well. The AMC's view on the markets, its future course of action and strategies are some of the points you can expect to find in the fact sheet. From the investor's perspective, the key lies in being able to identify the relevant bits, reading between the lines and blocking all the noise. In this article we present pointers for the same. Equity-oriented funds Diversified Equity Funds Investment objective: The fund's investment objective lays out its area of operations, management style and what the fund aims to achieve. Investors should check if the fund manager has adhered to his mandate at all times. For example an investment objective could read, 'The scheme aims to generate long-term capital appreciation by investing in equity and equity related instruments and fixed income securities. The fund will only invest in stocks of the large cap variety. While the fund aims to predominantly invest in equity and equity related instruments, it could invest a substantial portion of its assets towards fixed income securities if required.' In the above case if the fund manager invests in stocks from the mid and small cap segments, despite a mandate to the contrary, it would reveal the opportunistic streak in his

fund management style. This in turn is indicative of the disproportionately high-risk levels, the fund exposes its investors to. Sectoral allocation A diversified equity fund is expected to invest across various sectors and thereby grant investors the benefits of diversification. A concentrated portfolio across a few sectors enhances the fund's risk profile and makes it prone to volatility. Funds at times tend to have allocations as high as 25 per cent in a single sector. While the same could be indicative of the fund manager's confidence in stocks from a given sector, it also makes the fund an over-leveraged one. Another area to watch out for is the presentation of sectors. The fact sheet might be window dressed to make it appear like a sectorally well-spread one. For example, similar sectors like auto, auto ancillaries and two wheelers might be presented as distinct ones. Investors should club similar sectors to judge the degree of sectoral diversification (or lack of it). Performance Fact sheets present returns clocked by the scheme across time horizons like 1-year, 3-year and since inception. Investors should focus their attention on the fund's performance over longer time horizons like 3 years and more. The fund's ability to clock impressive returns consistently over longer time horizons is a true indicator of its worthiness. Impressive performances over shorter time frames could be a 'flash in the pan' and it would be inappropriate to draw conclusions or make investment decisions based on them. Returns delivered by a fund in isolation reveal very little about the fund. Study the fund's performance vis-à-vis its benchmark index; also compare the fund's performance with that of similar-natured funds from other fund houses. Top stock picks The share of net assets accounted for by the top 10 stock holdings can reveal how welldiversified the fund is. For example a fund might hold a large number of stocks (say 5060 stocks) in its portfolio; however if the top 10 stock picks account for 60 per cent of the net assets, the fund would qualify as a top-heavy and concentrated one. Such a fund could be a candidate for volatility thanks to the high concentration levels. Similarly consistency in the top stock holdings can also reveal a lot about the fund's management style, for example a high churn would be indicative of an aggressive fund with a high risk profile. Expense ratio, loads and other measures

A responsive fund house will inform its investors of the fund's expense ratio and other factors, which have a vital bearing on the fund's performance. For example, high expenses for the fund eat into investors' returns. Similarly the load structure i.e. entry and exit loads represent the price an investor pays to participate in the fund. Like expenses, loads too have a direct bearing on the returns. Other measures like Standard Deviation and Sharpe Ratio (albeit not required to be declared statutorily) can reveal a lot about the fund. Standard Deviation measures the degree of volatility a fund exposes its investors to, while the Sharpe Ratio measures returns delivered per unit of risk borne. Find out if your fund provides you with information on these parameters and how it fares on the same. Balanced Funds A balanced fund is a hybrid instrument that holds both equity and debt. While factors like performance, top stock picks and sectoral allocation are equally relevant while dealing with the equity component, one area which deserves special mention is the investment objective. Investment objective A balanced fund's investment objective can reveal its risk profile. For example a fund which purports to invest upto 75 per cent of its corpus in equities could be termed as a far more risky fund vis-à-vis one which invests just 60 per cent in equities. Also the fund's adherence to its mandate should be studied closely. It is common to see balanced funds exceed their stated equity mandate during a bull run with a view to clock superior returns. Study the equity component held by your balanced fund during a bull run and bear phase alike, it will disclose the fund's true nature. On the debt component front, the credit and maturity profile of the instruments are areas to watch out for. If the debt component is populated by lower rated paper, for example of AA rating or below, the same is indicative of the credit risks the fund manager is taking on. Conversely, a debt component dominated by AAA rated instruments, sovereign paper like government securities will point to a conservative approach. The maturity profile of debt instruments also offers an opportunity to peek into the fund manager's stance. In an uncertain interest rate scenario like the present one, a cautious balanced fund would typically hold instruments with a shorter tenure like treasury bills, call money instruments, floating rate paper or a higher cash component.

On the other hand, if the balanced fund is invested in longer tenured instruments, the same should be read as an attempt to clock higher growth by taking interest rate risks. DON'T MISS TOMORROW: How to read a debt-oriented fund fact sheet

How to reduce interest rate on your loan Rajendra Palande in Mumbai | June 29, 2005 11:01 IST

Want to reduce interest rate on your outstanding personal loan by 2 percentage points? And, on top of it, want an additional loan at the reduced interest rate? If yes, there's an offer for the taking. Interest burden can be reduced not only on the outstanding amount, but also on an additional loan. All you need to have is a good past payment history. A borrower can not only save on interest on the existing loan, but also can fetch a personal loan at an interest up to 2 percentage points lower than on your existing borrowing. If one has paid EMIs for nine months and still have to pay EMIs for 15 more months against a loan of Rs 200,000, a 2 percentage points lower interest rate can help reduce interest outgo by about Rs 3,500 on the outstanding principal of about Rs 140,000. And also have an additional loan up to the principal amount paid (in this case Rs 60,000) at an interest rate, which will be lower by 2 percentage points. This is possible via Citibank's "Refill Ready Cash", which offers a flat 2 percentage point cut in interest rate for existing personal loan customers. Citibank says this is the bank's way of rewarding existing customers with good track record through better interest rates and zero processing fee. HDFC Bank too offers similar benefits to its existing customers. Through its "Top Up Loan" facility, it is offering a rebate of 1 to 2 percentage point in interest rate and 50 per cent less processing fee on the additional loan. Individuals need to follow a certain drill to improve their creditworthiness. The useful steps include: Immediately establish a budget in order to control cash outflows. Ensure income level permits an additional monthly outflow to service a loan. Always pay on time.

HDFC Bank employs behavioural scoring for collection purposes. Behaviourial scoring provides indications to the bank when to chase a borrower for payments, says the bank's vice president, retail lending, S Ramakrishnan. The bank lends to individuals equivalent to 10 to 11 times their net income. Citibank believes its loan refill offer in no way encourages indebtedness, as it is accessible only to experienced customers who have a good track record of paying back. Selection of existing customers with impeccable credit history typically weeds out likely defaulters in the future All you want to know about bonds June 28, 2005

Individuals have surplus funds in the form of savings which they want to invest.
Companies need funds to undertake good projects with high returns. Companies provide individuals with instruments to invest their savings in. One such instrument is corporate bonds. Similarly, governments also need funds for various developmental projects. Further, the government also needs to raise money to finance the fiscal deficit. They too tap the savings by issuing various kinds of bonds. Characteristics of a bond A bond, whether issued by a government or a corporation, has a specific maturity date, which can range from a few days to 20-30 years or even more. Based on the maturity period, bonds are referred to as bills or short-term bonds and long-term bonds. Bonds have a fixed face value, which is the amount to be returned to the investor upon maturity of the bond. During this period, the investors receive a regular payment of interest, semi-annually or annually, which is calculated as a certain percentage of the face value and know as a 'coupon payment.' A story goes that in the old days, bond certificates used to come with coupons to claim interest from the issuer of the bond; hence, the name coupon payments. However, nowadays, with paperless issues of scrips (demat), coupons are no longer in use, but the name has stuck and the interest payments are still known as coupon payments. Issuing a bond

The government, public sector units and corporates are the dominant issuers in the bond market. The central government raises funds through the issue of dated securities (securities with maturity period ranging from two years to 30 years, long-term) and treasury bills (securities with maturity periods of 91 or 364 days, short-term). The central government securities are issued for a minimum amount of Rs 10, 000 (face value). Thereafter they are issued in multiples of Rs 10,000. They are issued through an auction carried out by the Reserve Bank of India. State governments go about raising money through state development loans. Local bodies of various states like municipalities also tap the bond market from time to time. Bonds are also issued by public sector banks and PSUs. Corporates on the other hands raise funds by issuing commercial paper (short-term) and bonds (long-term). Bonds can be issued at par, which means that the price at which one unit of the bond is being sold is same as the face value. Alternatively, they can be issued at a discount (less than the face value) or a premium (more than the face value). For example, a bond with a face value of Rs 100, if issued at Rs 100, is said to be issued at par. If it is issued at, say, Rs 95, it will be said to have been issued at a discount and conversely, if issued for, say, Rs 110, at a premium. Investors Banks are the largest investors in the bond market. In the low-interest scenario that prevailed, it made more sense for banks to invest in government bonds than to give out loans. Mutual funds, in order capitalise on low interest rates, started a good number of debt funds that mobilised a significant amount of money from the investors. Thus, mutual funds emerged as important players in the bond markets. However, in the recent past with the interest rates on their way up, the performance of debt funds has not been good and so the presence of mutual funds in the bond market has been limited. Foreign institutional investors are also allowed to invest in the bond market, though within certain limits. Also, regulations mandate provident funds and pension funds to invest a significant proportion of their funds mobilised in government securities and PSU bonds. Hence, they continue to remain large investors in the bond market in India. The same holds true for charitable institutions, societies and trusts. Since January 2002, individuals categorised by RBI as retail investors can participate in the auction carried out by RBI. They can submit bids through banks or primary dealers to invest in these securities on a non-competitive basis.

The minimum bid has to be for an amount of Rs 10,000 (and there on in multiples of Rs 10,000) and a single bid cannot exceed Rs 1 crore (Rs 10 million). Secondary market Bonds issued by corporates and the Government of India can be traded in the secondary market. Most of the secondary market trading in government bonds happens on the negotiated dealing system (an electronic platform provided by the RBI for facilitating trading in government securities) and the wholesale debt market (WDM) segment of the National Stock Exchange. Corporate bonds and PSU bonds can also be traded on the WDM. The secondary market transactions in the bond market for the year 2003-04 was Rs 27,21,470.6 crore (Rs 272,147.06 billion), an increase of 36.6 per cent over the previous year. Of this, government securities accounted for 98.4 per cent of the total turnover. The number of retail trades in the year 2003-04 formed an insignificant 73 per cent of the total number of trades (189,518) in the secondary market. Returns from the bond The return on investment into bonds is in the form of coupon payments, as already mentioned before, and through capital gains. Capital gain occurs when the bond is bought at a discount. Bonds bought at a premium would result in capital loss. And bonds bought at par would have no capital gain or loss. Together, the total return is known as the Yield from the bond. Let us explain this with the help of an example. Let's say, that an investor buys one unit of a Long-term bond issued by a Company X Ltd for Rs 95 (i.e at a discount). The face value of the bond is Rs 100. The coupon is 5 per cent per annum, paid annually, and the maturity period of the bond is two years. This means, that the investor will get a payment of Rs 5 every year (calculated as 5 per cent of the face value) and at the end of the second year, he will receive Rs 100, the face value. The yield on this long-term bond can be calculated by solving for r in the equation below. 95 = 5/(1 + r) + 5/(1 + r)2 + 100/(1 + r)2 We get r=7.8% If we notice, in the above equation, the coupon payments are fixed, the face value is fixed; the maturity of the bond is fixed. Hence the yield from the bond effectively depends on the price of the bond.

The price of the bond is determined by the issuer, by taking the market forces into account. For example, if the price of a similar bond is Rs 94 in the market (all other characteristics being same) no one will be willing to pay Rs 95 for the bond being issued by company X (assuming similar risk as well). Hence, company X must ensure that the price, at which they are offering their Bond, is competitive with similar bonds in the market, and should provide similar yield to the investors. Interest rate risk Price and Yield share an inverse relationship. When price is high, yield is lower and when price is low, yield is higher (As can be seen in the way equation 1 would work). This brings us to the problem of Interest rate risk faced by bonds. If the government suddenly decides to raise the prevailing interest rates, the expected yield from bonds held by the investors would go up. This would result in a drop in the price of the bonds. And if the investor wants to sell the bond for some reason, instead of holding it till maturity, he will have to suffer a capital loss. On the contrary, if the interest rates are falling, the price of the bonds will rise and the investors can sell their bonds at higher prices in the secondary market than the price at which they bought the bond initially. The reason for this inverse relationship is that, when interest rates are raised, the newer bonds issued by the government and the corporates, other investments like fixed deposits, post office savings schemes, et cetera offer greater return, with more or less the same kind of risk. So an existing bond becomes less attractive. Investors want to sell off their existing investment in bonds and switch to other more attractive investments. The selling pressure in the bond market causes the prices of the bonds to drop. Similarly, when interest rates are dropped, price of bonds increases due to increase in demand. Over the last few years the treasury departments of banks in India have been responsible for a substantial part of profits made by banks. Between July 1997 and Oct 2003, as interest rates fell, the yield on 10-year government bonds fell, from 13 per cent to 4.9 per cent. With yields falling, the banks made huge profits on their bond portfolios. Conclusion As the reader must have realised by now, bonds are not really a retail investor friendly type of investment. In our next article we will take a look at what is probably the friendliest form of investment for the retail investor, the mutual fund.

Nupur Hetamsaria is Visiting Research Scholar, Syracuse University, NY; and Vivek Kaul is a freelance writer.

Home > Business > Columnists > Guest Column > Pavan Bajaj Want to be rich? Read this! June 25, 2005

These days, there are a lot of opportunities for youngsters to earn during their college
time or after completion of studies. But most of them spend all their money without saving anything. It always pays to save extra money for your later years that may be used for big ticket purchase like buying house, car, family needs, and higher studies. It can be used for retirement years when you will depend on your savings. Normally youngsters think that retirement planning needs to be done when you reach 40 or above. Why they should start thinking of retirement savings when they are just 25 years old? Normally people work about 40 years from age of 25 years to 65 years. During these 40 years they need to provide for assets like a house, good education for the children, some insurance, maybe a car, etc. They need to spend money on vacations, medical needs for family, marriage, etc. On top of all these expenses, they need to save for 25 years of retired life (from age 65 years to 90 years). During retired life you will need the same amount of money or even more due to medical expenses, vacations and -- most important -- inflation. Assume that an age of 65 you need Rs 30,000 for monthly expenses. Then by age of 80 you will need at least Rs 25,000 to maintain a similar life style at zero per cent inflation. Considering 5 per cent inflation, you will need at least Rs 67,000 for monthly expenses to maintain a similar lifestyle. All these expenses will be met through income earned during your working life. So more money saved during working life, better will be retired life.

You may argue that during the initial years in your career, one earns less. Thus, one cannot save more money. But during later years of life one earns more so one will be able to save more money. So why should you start saving some money earlier in your career, when you can save a lot more later in life? The following example will explain why investing smaller amounts earlier in life is better than saving big amounts later in life. Namit is careful spender and he ensures to save at least Rs 10,000 every year. Namit starts saving Rs 10,000 every year at age of 25 years. He invests money in various investment instruments like PPF, mutual funds, stocks, property and earns an average 15 per cent compound annual return. He saves only till age of 40 and then he stops saving due to family obligations like higher studies for children, children's marriage, buying a house and a car. Gagan, on the other hand, spends all his income during initial years and he is not bothered about retirement planning. When Gagan turns 40 years, he realises that he need to start saving for retirement too. Gagan starts saving Rs 80,000 every year at age 40. He invests money in various investment instruments like PPF, mutual funds, stocks, property and earns an average 15 per cent compound annual return. Both Namit and Gagan retire when they get 65 years old. So they are not able to invest any extra money for retirement after 65 years age. At age 65, who will have more money? Your initial guess will be that Gagan will have more money because: 1. Namit was saving just Rs 10,000 every year while Gagan was saving Rs 80,000 every year. 2. Namit saved money for just 15 years (from age 25 to 40). But Gagan saved money for 25 years (from age 40 to 65). You will be surprised to know that Namit will have more money at the age of 65 and Gagan will be far behind compared to Namit. See the tables below to see how this happens and then read on after the tables too. Namit saving Rs 10,000 yearly, from age 25 to 40
25 26

Amount Invested
10,000 10,000

Total Amount at year beginning
10,000 21,500

Total Amount Interest @15% at year end
1,500 3,225 11,500 24,725

27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 -

34,725 49,934 67,424 87,537 110,668 137,268 167,858 203,037 243,493 290,017 343,519 405,047 475,804 557,175 640,751 736,864 847,393 974,502 1,120,677 1,288,779 1,482,096 1,704,410 1,960,072 2,254,083 2,592,195 2,981,024 3,428,178 3,942,404 4,533,765 5,213,830 5,995,904 6,895,290 7,929,583 9,119,021 10,486,874 12,059,905 13,868,891 15,949,225 18,341,608

5,209 7,490 10,114 13,131 16,600 20,590 25,179 30,456 36,524 43,503 51,528 60,757 71,371 83,576 96,113 110,530 127,109 146,175 168,102 193,317 222,314 255,662 294,011 338,112 388,829 447,154 514,227 591,361 680,065 782,074 899,386 1,034,293 1,189,438 1,367,853 1,573,031 1,808,986 2,080,334 2,392,384 2,751,241

39,934 57,424 77,537 100,668 127,268 157,858 193,037 233,493 280,017 333,519 395,047 465,804 547,175 640,751 736,864 847,393 974,502 1,120,677 1,288,779 1,482,096 1,704,410 1,960,072 2,254,083 2,592,195 2,981,024 3,428,178 3,942,404 4,533,765 5,213,830 5,995,904 6,895,290 7,929,583 9,119,021 10,486,874 12,059,905 13,868,891 15,949,225 18,341,608 21,092,850

All figures in rupees

Gagan saving Rs 80,000 yearly, from age 40 to 65
Amount Invested

Total Amount at year beginning Interest @15%

Total Amount at year end

80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000

80,000 172,000 277,800 399,470 539,391 700,299 885,344 1,098,146 1,342,867 1,624,297 1,947,942 2,320,133 2,748,153 3,240,376 3,806,433 4,457,398 5,206,007 6,066,909 7,056,945 8,195,487 9,504,810 11,010,531 12,742,111 14,733,427 17,023,441

12,000 25,800 41,670 59,921 80,909 105,045 132,802 164,722 201,430 243,645 292,191 348,020 412,223 486,056 570,965 668,610 780,901 910,036 1,058,542 1,229,323 1,425,721 1,651,580 1,911,317 2,210,014 2,553,516

92,000 197,800 319,470 459,391 620,299 805,344 1,018,146 1,262,867 1,544,297 1,867,942 2,240,133 2,668,153 3,160,376 3,726,433 4,377,398 5,126,007 5,986,909 6,976,945 8,115,487 9,424,810 10,930,531 12,662,111 14,653,427 16,943,441 19,576,958

All figures in rupees

Few points to observe 1. Namit invested a total amount of Rs 150,000, whereas Gagan invested total amount of Rs 20,00,000. 2. Gagan invested more than 13 times the amount invested by Namit. 3. Still at retirement age, Namit was Rs 15,15,892 richer than Gagan. 4. At age of 40, Namit was earning more than Rs 80,000 every year just on interest income. So even if Namit was not investing any money from age of 40 onwards, the interest component was taking care of the growth of his investment till he was 65 years

old. 5. Due to this, even though Gagan was investing Rs 80,000 every year from age of 40 onwards he will still lag behind Namit forever. 6. Even if Gagan and his family invests Rs 80,000 for next 1,000 years, they will still not be able to beat Namit in terms of total wealth accumulated. 7. After retirement, Namit will continue to get Rs 27,51,241 every year as interest, even though he invested just Rs 150,000. Conclusion It always pays to invest early in life. Even if invested amount is very small it can grow big over time due to compounding returns. The author works with a software company in Bangalore. The opinions expressed here are personal.

How women can save money S Muhnot | June 14, 2005 10:04 IST

Sushma Gupta, a 32-year-old mom has been managing the household finances since the
last 12 years. Her husband gives her a fixed percentage of his salary every month for running the household. As you would know this task is not easy. It includes everything from buying groceries/ everyday consumption items to things that the kids might need. Sushma seems to be doing a remarkable job and manages to save a few thousands each month. One of her neighbours, Anita works for a mutual fund house and gave her an ideato invest the amount she saves each month in an equity fund. She has started a systematic investment plan and keeps aside Rs 3,000 every month for the same. The amount is not much but what matters is the investing habit. Remember that each brick helps in building a house. Traditionally a woman's role has been to manage and run the household while the man looks after all the money matters. But times are changing now. More and more women are getting involved in their financial matters.and rightly so. Like Sushma you can also help in growing your family income.

Managing finances is no rocket science. It is simply about being in control of your money and building your wealth overtime. It's about knowing what options are available to make your money grow and choosing the most suitable ones. So how do you take charge of your financial future? To begin with, you must have a financial plan. It is really very simple and you don't need a professional. It just takes some time to think about what's important to you. The suggestions in the box below will help you get started with a financial plan. Based on the information you can work out a monthly budget.
KNOW WHAT YOU HAVE Make a list of your assets. This may include: • • • • • Current a/c, savings a/c, fixed deposits and other bank accounts Stocks, bonds and mutual fund investments House and real estate property Retirement plans All other pension/retirement plans offered through your employer

OTHER INVESTMENTS OWNED Know what you owe. Make a list of your debts: This may include: • Car loan payments, housing loan, education loan, mortgage payments

OTHER LOANS Make a list of your monthly expenses. Think carefully and make sure you have included all expenditures. This may include: Utilities (electric/gas/water/sewer), phone (cell, home and long distance), cable television, newspapers/subscriptions,insurance (home/car, etc.), dry cleaning/ironing, groceries, eating out, clothes purchases, salon services (haircuts/manicure etc), charitable contributions and entertainment (plays, movies, etc.) OTHERS Now consider your lifestyle choices: For example, do you really need that new shirt/sari/skirt? It has been observed that people tend to spend more due to a credit card. Think if you had to pay cash for it right now, would you still really want it (or need it)? How often do you eat in restaurants? Do you eat out for convenience rather than a real desire to eat at a special restaurant? Are there other expenses that could be reduced or even cut out completely? Be honest, but don't forget to have a little fun!

While budgets should be somewhat flexible, they should also be a little restrictive on your spending. Include in the budget an amount to set aside in a bank account or money market fund as a reserve for emergencies and short-term goals (1-3 years). Aim to put aside 10 per cent of your gross income. If this is too much for you to manage, start with a smaller percentage and work your way up to 10 per cent as you pay down your credit cards and other debts. One of the best ways to ensure that you set aside some money each month is to pay yourself first. By investing a small amount every month you can build significant assets over time. The ideal thing to do is to start a systematic investment plan with any good mutual fund. You can instruct them to electronically transfer money (on a given day each month) from your bank account into your scheme. This type of disciplined investing is one of the best ways to invest in a Mutual Fund. Most systematic plans don't have an entry cost and you invest without worrying about whether the market is high or low. Even if you start with as low as Rs 500, the benefit of compounded growth over time will build a sizeable portfolio over time. Make sure you invest for your retirement. Younger women are often indifferent to saving for retirement, because they cannot even imagine what life will be like after a few years. According to a recent study, women are out of the work force for at least 10 years on an average. The author is MD & CEO of IDBI Capital Market Services

Pre-pay that home loan; save cash N Mahalakshmi in Mumbai | June 07, 2005 11:59 IST

People paranoid about housing loans can derive solace from the fact that lowering your
present debt is as good as a saving for the future -- in the taxman's eye. Actually, principal repayments can be a better alternative to savings. Why and how? Well, this is because of the exempt-exempt-tax regime, which is likely to kick in gradually.

Just to recall, the finance minister in this year's Budget had announced his intention to eventually move to an EET regime. It's a regime, which ensures that every penny you earn is taxed. Currently, there is considerable variation in the taxation of money invested in savings schemes, the tax levied on accumulations or the return earned thereon, and the tax treatment at the final stage of withdrawal. EET means contributions to specified savings is exempt from tax (E), the accumulation of investments made is also exempt (E) but at the time of withdrawal, the benefits from savings are then taxed (T). This means that even though an investor would benefit from a reduced tax burden by investing in various tax-savings investment schemes like public provident fund, pension plans among a host of others, at the end of the day he cannot be certain that when it is time to enjoy the benefits of his savings, whether or not the government would axe away his returns by way of imposing a tax. The idea is to ensure that the money you earn either by way of salary or through your investments gets taxed eventually. So wherever you invest, eventually, when your investment matures your principal amount will also be taxed, unless there is a special provision which makes the principle amount tax-free. So, clearly keeping this in mind, pre-paying the housing loan principal, which is eligible for tax deduction under Section 80C, seems like a lucrative option. This is because the principal you repay will never come back to you and hence cannot be taxed. One can save up to Rs 100,000 in prepaying the loan amount. Earlier, the amount allowed for deduction in tax in the case of repayment of the principle was just Rs 20,000. There is no way that the government can subsequently impose any tax unless of course one looks at the capital gains tax at the time of selling one's property. Even there one would get the benefit of long-term capital gains. Experts however, say that this is an anomaly in all likelihood, will get corrected next year. But till then, one can exploit the opportunity. According to Section 80C, the principal repayment alone can constitute the entire Rs 100,000 eligible for deduction. This deduction is over and above the deduction already available on housing loan interest up to Rs 1,50,000.

Since some part of your income as a salaried employee goes towards compulsory savings through your contribution to the employees provident fund, you can choose to simply reduce your debt burden and get the maximum tax break. House warming
• •

Pre-pay housing loan principal, which is eligible for tax deduction under Section 80C Principal repayed cannot be taxed. One can save up to Rs 1 lakh in prepaying the loan amount. Earlier, deduction in tax in the case of repayment of principle was just Rs 20,000 No way government can impose any tax unless one looks at the capital gains tax at the time of selling one's property

Loan processing fees: Get a better deal May 30, 2005 11:25 IST

There are different charges individuals have to pay to avail of any service. Home loans
are no different. A processing fee has to be paid to the housing finance company (HFC) for the home loan. Processing fees are charged differently by different HFCs. Some HFCs take a processing fee from the individual upfront before the loan is sanctioned. That is, when the individual walks into the HFC's office and once all the requisite documents have been submitted to the HFC, a processing fee is levied on the individual. This is generally a percentage of the loan amount. For example, say, an individual wants to take a home loan of Rs 1,000,000, then the processing fees charged will be 0.50% of the said amount, i.e. Rs 5,000. Some HFCs also have a minimum amount of processing fee -- that is, the processing fee is say, Rs 2,250 or 0.50% of the home loan amount, whichever is higher. In some cases, an HFC will take a part of the processing fee before the sanction (say, Rs 500). This part of the fee is non-refundable. Of course, they mention it to the client that the same (i.e. Rs 500) is non-refundable. The remaining amount is taken at a later stage. Some HFCs have a policy of refunding the said processing fees to the borrower if the loan is declined. This is the case even when the loan application has been withdrawn by the individual for whatever reason. Individuals will have to enquire about the HFC's refund policy to get a clarity on this.

Individuals also need to look into whether the said fees are 'flexible'. For example, individuals working for premium companies like say, Hindustan Lever or Reliance have to pay a lower processing fee than individuals working for second rung companies. In fact, individuals can also 'bargain' with HFCs for a lowering of the processing fee rates irrespective of which company they are working for. Bargaining for a lower processing fee is also possible if the borrower has already got his loan approved from one HFC but decides to shift to another HFC for actual disbursal. Of course, the said percentages are applicable only on home loans. The percentages applicable on loan against property (LAP) are different than those pertinent to home loans. They are generally higher than the applicable home loan rates.

Should you take loan against property? May 23, 2005 12:11 IST

Retail loans have seen a spurt in recent times. With the economy 'shining' and salaries heading northwards, individuals haven't really felt the pinch of borrowings as their disposable incomes have risen. But personal loans have not seen the spangled growth experienced by home loans or car loans. Blame the high interest rates. Individuals though do have the option of going for a loan against property. So how does it work? Simply put, a loan against property is what it actually connotes -- a loan given or disbursed against the mortgage of property. This is unlike a personal loan, which is disbursed to an individual; no questions asked. The loan is given as a certain percentage of the property's market value (usually around 40 per cent-60 per cent). But the threshold amount too is generally defined by most lending institutions like say, Rs 200,000. There are various advantages of taking a LAP: To begin with, it works out to be much cheaper than a personal loan, which is usually issued at interest rates in the region of 16 per cent-21 per cent. This is generally on a daily or a monthly reducing balance method. The rate at which LAP is issued is in the 9.75 per cent-11.50 per cent range. The lower rate is partly because the lending entity has a security in the form of the housing mortgage vis-à-vis a personal loan that is given without any security. LAP Rates

Interest rate (floating) IDBI Bank ICICI Bank Bank of Baroda 11.00% 11.00% NA (fixed) NA 10.50% 12.50%

(Tenure for LAP is 10 years)

The tenure for a LAP is usually longer than that for a personal loan. Generally, LAP is given for a maximum tenure of 10 years. Since the rate of interest is lower, many a times, LAP equated monthly instalments turn out to be cheaper than those under personal loans. LAP, just like a personal loan, can be taken for any reason. The motive for borrowing does not have to be disclosed to the lending institution. Also, the criteria for LAP are the same as those for any home loan. Part prepayment as well as full prepayment of LAP is also allowed by most lending institutions; many lending institutions do no levy extra charges on prepayment. However, the following points have to be borne in mind while applying for a LAP: Some financial institutions make LAP available only under the floating rate. Fixed rate loans are off limits. Borrowers need to enquire before finalising a LAP from lending institutions. The 'technical inspection report' of the individual's property needs to be in order. This report qualifies the merit of the property to be mortgaged. Otherwise the LAP could be rejected. Some financial institutions also have a floor on the area of the property to be mortgaged. For example, the area has to be say, at least 400 square feet for the FI to give a LAP. LAP is generally allowed against residential property. In other words, you cannot borrow by mortgaging your commercial premise. In fact, even if you own the property, which is rented out, or you own a property but aren't staying in it (e.g. a farmhouse), then too you might not be eligible to take a loan against that property. But of course, some lending institutions do not have any such criteria. Here too, the borrower needs to be aware of what is on offer and act accordingly. Many housing finance companies allow individuals to take LAP if they have taken a housing loan from them. The only pre-requisite- a minimum of one year's EMIs need to have been paid on the home loan. All in all, LAP proves to be a useful proposition. In fact, more so in case some individuals have been disqualified for the purpose of a home loan. There is a certain set of individuals to whom HFCs are apprehensive giving a home loan. For example, artists or individuals in the modelling profession are not looked at with a

favourable disposition by HFCs. Such individuals can always opt for a LAP in case they have a property in their name.

Swipe plastic, zip cash across Anita Bhoir in Mumbai | May 17, 2005 13:17 IST

Desperately seeking to send money to a relative? Not to worry. Help is at hand, as banks have begun offering card-to-card money transfer. IDBI Bank, ICICI Bank, HDFC Bank, UTI Bank, Citibank and Kotak Mahindra Bank, in association with Visa, the global payment company, have started card-to-card money transfer facility in the country. This service allows customers to transfer money online from their bank accounts to any valid Visa debit or credit card issued by any bank in India. Banks permit transfer of funds between Rs 25,000 and Rs 100,000 per day with no restriction on the number of transactions per day. At present most banks offer this facility free of cost. However, they are planning to levy around Rs 25 per transfer depending on the quantum of money from the next quarter, said bankers. Card-to-card fund transfer is a better option compared with other means of fund transfer such as cheque, demand drafts, money orders and electronic fund transfer, as it is instant, free of cost and the customer need not visit the bank's branch every time. The other options cost around Rs 50 and it takes a longer time -- normally three to four days -- for the money to reach its destination. The amount of funds that can be transferred through a card is also higher compared with the good ol' money order. But through this postal department vista, you can transfer only Rs 5,000. Customers can also send funds through the real time gross settlement system set up by the Reserve Bank of India. However, RTGS is economical only for high-value transactions and is a good proposition for corporates and not retail customers. The minimum amount that can be transferred under this is Rs 100,000.

Also, a customer will have to pay in excess of Rs 50 per transaction, said a banker. Another point is, to facilitate an RTGS transaction, all bank branches should be RTGSenabled. At present, only about 110 bank branches are part of the network. A global standard for managing fund transfer, RTGS reduces risks and boosts investor confidence, apart from helping companies manage their working capital requirements more effectively. How to choose a home loan firm in 6 steps May 03, 2005 12:49 IST

This year's budget is touted as being a 'good' one for the common man. And not without
reason. The tax benefits have been the main reason for this perception. Without any doubt investors have benefited from the largesse of the finance minister. And home loan seekers are also not complaining. Which brings us to the all-important question from his perspective -- now that tax sops are at an all time high, how does he go about zeroing in on the right housing finance company (HFC)? Here, we present a few guidelines on how to select an HFC, which is right for you. 1. Rate of interest This is where it all begins. Although the rate of interest offered by most HFCs is more or less the same on paper, some degree of bargaining in most cases, leads to a lowering of rates by as much as 0.25 to 0.50 percentage points. More so if your profile happens to match the requirement of the HFC. The lowering of interest rate has a significant impact over the long term although the difference is not so noticeable over the near term. For instance, a 0.50% interest rate 'concession' on a Rs 1,000, 000 loan over a 20-year tenure will reduce your liability by upto Rs 72,000. But care needs to be taken to ensure that the difference is not being offset elsewhere by the HFC under the guise of other 'charges'. 2. After-sales service And you thought after-sales service was synonymous only with consumer durables! After sales service plays an important role while choosing an HFC.

An HFC can differentiate itself with excellent after sales. Take the example of post-dated cheques (PDCs). It is general practice to give 36 PDCs during the time the loan is disbursed. It is after 36 months are over that after-sales will play a role. How diligent are the HFC's follow-ups? Are they prompt? Are reminders timely? Also, during the financial year-end, the HFC should be punctual in giving the borrower income tax statements so that he can file the necessary documents for availing tax benefits on home loans. 3. National presence The HFC should be present across the country or at least have branches in all major metros and towns. This assumes importance if the current job of an individual is of a transferable nature (e.g. bank jobs, defence personnel) or if he needs to make long and frequent outstation visits (e.g. consultants, businessmen). The individual shouldn't be put through the hassle of couriering his cheques to the resident branch every time or contacting the resident branch each time he has a difficulty or a query. So it helps if the HFC is well networked across the country. 4. Prepayment/Foreclosure benefits For many individuals, this plays a significant role in their decision to go in for a particular HFC. For example, many salaried individuals know for a fact that their salaries would be revised every year. This means that they can pay a higher EMI going forward. Some of these individuals also know that they would be getting a bonus, which they can utilise to pay off their home loan (either fully or partly). Some banks do not charge individuals for making a prepayment/foreclosing his account. Obviously such HFCs should get preference over other HFCs that do levy a prepayment charge. 5. Calculation of the exact home loan amount Here, HFCs differ in their calculation of the loan amount to be disbursed. Some HFCs calculate the amount to be disbursed on the basis of, say, the gross salary while some HFCs calculate it on the net salary. This might make a difference to individuals as the loan amount and the EMI will vary across HFCs. One needs to look into this and get a comparative analysis done across HFCs to understand which HFC offers him the best deal. 6. Do your homework

Many people have a tendency to buy into 'brands' rather than going for what suits them best. It's not about how big the brand is; it is more about whether that brand suits your requirements and satisfies your criteria. Make a list of your requirements first and then home in on an HFC. Talk to people who have already taken a loan from a particular HFC and get their feedback. Other factors like documentation, processing fees, document storage facilities and time taken for processing the loan should also be considered. For example, individuals do not like it if the documentation is an irksome process, or if the processing fee is exorbitant. How to file an insurance claim April 22, 2005 17:48 IST

Talk of life insurance and various things cross one's mind. Tax benefits, retirement
benefits, savings and cover against any unforeseen eventualities are just some of them. But what individuals many a times fail to conceive is what would happen in case the said 'unforeseen eventuality' was to actualise? In that case, filing for a claim in a timely and accurate manner assumes importance. We have outlined a few guidelines, which will aid individuals understand the intricacies of filing a claim. There are two kinds of life insurance claims: non-early death claims and early death claims. Early death claims are those, which fall within 3 years of buying the policy. Non-early death claims are those claims, which fall after 3 years from the commencement of the policy. Following are some of the important issues to be borne in mind while filing a death claim. 1. Original policy documents A policy document is issued when one buys life insurance. This is the most important document related to life insurance. It acts as proof of purchase, just like any receipt or challan does for goods bought. It is imperative for individuals to preserve this document very carefully to file claims (on death or maturity) at a later stage.

Along with this document, other related documents like assignment deeds and nomination deeds will also have to be submitted at the time of filing the claim. 2. Age proof Proof of age also needs to be submitted to the insurance company while filing a claim. Age proof is generally asked for at the time of issuing a policy document and filed in the company's records; but just in case it hasn't been done, it will be before the claim is disbursed. 3. Death certificate The insurance company will ask for the death certificate of the deceased. This acts as conclusive evidence that the individual has indeed ceased to survive and that the life insurance cover has now fallen due. 4. Filling the claim form In case of a non-early death claim, the nominees have to fill claim form no. 3783A. 5. Legal proof of the titleholder In cases where the person, who has laid claim to the settlement amount, is not an assignee or a nominee, he will have to submit legal evidence of the title to the claim amount. In cases where the claim is an early death claim, in addition to the above, the following procedures will be followed: Enquiry An enquiry will be conducted to probe into the reasons of demise. This is a standard procedure followed by all life insurance companies just to make sure that the demise occurred under natural circumstances and that there was no foul play involved. The insurance company will not entertain suicide cases within 1 year from the commencement of the policy. The logic behind the 1-year time frame is that insurance companies feel that suicide cannot be planned a year in advance. Apart from these, the claimant's statement in claim form A in form no. 3783 (this form is different to the one to be filled in case of a non-early death claim), a certificate from the hospital where the deceased was last treated, a certificate of burial (signed by a person who actually saw the body being cremated) and a certificate from the employer of the deceased also need to be submitted to the insurance firm. Also, for a death claim to be entertained, the life insurance policy, for which a claim has been raised, should be active (i.e. in force) at the time the claim is made. As obvious as that may sound, it is important, as it is not binding on the insurance company to settle claims made on policies, which are not in force.

Life insurance, unlike any other financial product, is considered as 'sacred' by most individuals. After all, it provides financial security to the survivors. Individuals would not like their loved ones to run from pillar to post to get the security that was envisioned for them by the policyholder. It is keeping this in mind that all individuals need to know the procedures, which have to be followed in case of claims. The examples given above are illustrative

How to check if your share price is okay Mobis Philipose in Mumbai | April 05, 2005 14:56 IST

The earnings season is almost here, and at a good time too, considering that share prices
are again flying high. Share prices are primarily driven by the earnings of companies, and now is a good time to check if the share prices of the companies (stocks) you own are in line with their (the companies') earnings. For this, one would have to start with the bottom of the earnings report where the EPS or the earnings per share is found. Dividing a company's share price by its EPS gives the price-earnings ratio (PE), which although shouldn't be used as a magic number, gives a fair idea on the valuation of a company relative to peers in the industry or the market as a whole. For instance, Hero Honda is expected to report an EPS of Rs 41 per share for the year ended March 2005. At its current price of around Rs 550, this gives it a PE of around 13.4 times FY05 earnings. On the other hand, Infosys Technologies is expected to report an EPS of close to Rs 70 per share in FY05, which gives it a PE of over 32 times based on its current price levels (Rs 2,240). Evidently, Infosys is more expensive relative to Hero Honda, but there are reasons for this. Earnings at Infosys are expected to grow at a faster pace in the future relative to Hero Honda. Which brings us to the PEG ratio, calculated by dividing the PE ratio by the earnings growth of a company. A PEG ratio of 1 is normally seen as fair valuation and anything above that is expensive.

Thus, if Infosys is being valued at over 32 times earnings, but it's expected earnings growth is less than 32 per cent on an average in the future, it would be overvalued based on the PEG ratio. The PE and the PEG ratios serve as important benchmarks while comparing stocks within an industry. Market leaders in the industry normally get a premium valuation relative to smaller players. Therefore, one needs to be cautious when, say, as a shareholder of Kinetic Motors or LML, you find that the PE of your company is much higher than Hero Honda, which is the market leader in the two-wheeler industry. As much as the EPS is important to determine the relation a company's share price has with its earnings, it's equally important to assess the quality of a company's earnings. To start with, one needs to check if growth in sales/revenues is healthy by comparing it with industry growth. Ideally, growth parameters need to be looked at over at least a three year period. This would help especially in times when there are wide fluctuations in growth rates because of some extraordinary circumstances. Next, one needs to check the impact the growth in sales or the lack of it had on profit growth. For this, it would be best to use the profit figure before accounting for other income, interest, depreciation and tax. This is known as the operating profit of the company, and as a percentage of sales it's known as operating margin. Essentially, operating margin = operating profit/sales x 100. An improvement in operating margin is a good sign, which could indicate a number of factors including economies of scale, better cost management, pricing power, etc. Decline in margins, on the other hand, could be on account of low pricing power or the inability to pass on higher costs, cost overruns, etc. Again, it makes sense to look at the trend within the industry. In some cases, there may be an increase in operating profit margins because of aggressive cost cutting in areas such as advertising and promotion, but this may hurt the company in the future as these expenses normally lead to sales in the future. Also, some companies may manage earnings growth only through rationalisation in costs and not through increase in sales. This is not a healthy sign, since there is a limit to which cost cutting is possible. In the long run, profit growth can be sustained only through a growth in revenues.

One should also check the contribution made by other income to the profit. This can be done by looking at it as a proportion of profit before tax (other income/PBT x 100). A big jump in this metric isn't a healthy sign, since it may not be repeated in the future. Therefore, it's necessary to check the source of the other income and whether it would continue even in the future. Bajaj Auto's other income, for instance, accounts for over 35 % of the company's profit before tax, which is high compared to most other corporates. However, the source of the other income is mainly treasury related thanks to the high amount of investments the company has. Because of this, other income is not expected to drop drastically, and is hence not a concern at least as far as its impact on earnings go. What one needs to watch out for are extraordinary, one-time sources of income. In fact, while calculating the EPS, it would make sense to exclude these extraordinary sources of income. One also needs to keep an eye on the interest and depreciation figures of a company, probably as a proportion of sales. These expenses could shoot up in case of capital expenditure undertaken by the company. What an investor needs to check is if such expenditures are delivering desired returns, in terms of in sales either in unit terms of revenues terms. Finally, even though earnings may have gone up, one may find that the EPS is pretty much constant. This can happen if there was also an increase in the company's equity capital, because of which the earnings attributable to each equity shareholder would be lower. In summary, look at what's driving earnings growth or the lack of it at the company and for measures taken by the company that will impact earnings growth in the future. Analyse this
• • • • •

Dividing a company's share price by its EPS gives the price-earnings ratio (PE), which although shouldn't be used as a magic number, gives a fair idea on the valuation of a company relative to peers in the industry. The PE and the PEG ratios serve as important benchmarks while comparing stocks within an industry. Market leaders in the industry normally get a premium valuation relative to smaller players. Iit's equally important to assess the quality of a company's earnings. To start with, one needs to check if growth in sales/revenues is healthy by comparing it with industry growth. Check the impact the growth in sales or the lack of it had on profit growth. For this, it would be best to use the profit figure before accounting for other income, interest, depreciation and tax. One should also check contribution made by other income to the profit. What one needs to watch out for are extraordinary, one-time sources of income. Keep an eye on interest and depreciation figures of a company, probably as a proportion

of sales.

Powered by Markets: How to emerge unhurt Vijay L Bhambwani in Mumbai | April 04, 2005 12:45 IST

Have the bulls run their course for now? That is the question most investors have been
asked after the markets fell from Sensex levels of 6900 to about 6400. While every upmove is followed by resistance at higher levels, technical studies do not point towards a termination of the bull run just as yet. The last several sessions have tested the patience of the bulls and have caused much consternation among the futures and options players, especially those who are caught on the wrong foot. The scenario is similar to the first half of January 2005 when the markets surrendered a good 8-10 per cent very rapidly. A majority of the leveraged positions was surrendered after abject dejection and the long players were taken to the cleaners. While the possibility of an encore cannot be ruled out, the important thing to note here is that the damage to your portfolio/open trading book is directly proportionate to your leverage factor. The calendar year 2005 is not one for aggressive, undisciplined and trigger-happy traders. While a variety of reasons can be attributed for the fall in the markets, your capital is eroding and margin calls (in case you are leveraged) are more a rule than exception. Under such circumstances, you could take the approach of either a trader or an investor. Trader's approach: The markets are falling, that's all you need to know. Dump your emotions and positions, go with the flow and short the markets. It is immaterial if you play the same stock that you are/were holding long or hedge against some other securities. You are committed to recoup your losses and take a fresh view on the situation when clarity emerges. While this approach is likely to yield superior results in the absolute near term, it will force you to digress from your medium/long-term view and catch you unawares whenever the turnaround occurs. You could salvage the situation now and take a hit later. The risk involved is high. Investor's approach: This approach is likely to exert stress in the immediate future but will ease matters in the medium term. After taking a hit on their investments,

traders/investors get disoriented. A sense of withdrawal from the markets is a direct result. That is a situation all seasoned players know how to avoid in adverse circumstances. In case a temporary setback has occurred, you have avenues open like writing options, buying puts/calls, and resorting to exotic/synthetic strategies to salvage the situation. Booking losses too often will mean that you are struggling to get your capital back to where you started from. However, there are situations where you need to cut your losses and run, and you need to determine whether you are in that situation. A practical understanding of your current situation is a pre-requisite. The capital involved is high. A few words of advice: If you are invested/have leveraged long positions in scrips where the long- and medium-term charts are still bullish/intact and the relative strength comparative vis-à-vis the indices is high, you should witness a revival in your stocks rapidly. It's only the short-term waves that are turning negative, which tend to correct more rapidly. Watching open interest and traded volumes on these counters will be another proposition. You must hold a fixed portion of your trading/investment pool amount in ready cash to meet contingencies like the present scenario. In case your personal finances allow it, average the high RSC (relative strength comparative)/low beta counters, but in a pyramid fashion. Just as a pyramid gets broader near the base, your averaging should get more aggressive as your scrips near significant threshold levels. For example, buy 100 shares at 500, buy 200 shares at 490, buy 400 shares at 480 etc. This way, your acquisition cost tends to be near the current market price. Is the bull market over? The short-term charts indicate that the indices will get support at 2004 (Nifty) and 6380 (Sensex) levels in the absolute near term. These are threshold levels of 0.618 per cent retracement of the upmove from January 27, 2005, which ended in March 2005. While these levels are not holy cows that will not get violated, immediate supports exist on the Nifty at the 1963 levels. This support is meaningful from two angles. The trendline in the weekly chart below shows a support there and a 1.618 per cent retracement of the entire upmove after the post-Budget rally that ensued also points towards this level being a support. The third support at the 1900 levels is a significant one and will provide many whipsaws, false signals and choppiness after which the trend determination process will be amply clear.

Wave theory enthusiasts will understand that the rally from 920+ levels to 2017 corrected nearly 62 per cent in May 2004 and resumed its northward journey in June 2004. The 2116 levels were 0.618 per cent extension of the prior upmove if calculated from the 1439 levels. We saw temporary profit-taking in January at the 2120 levels (four points away from this calculation) and a weak resumption above 2120 in March 2005. Even if the current wave from 1439 levels in June 2004 was to be of the same magnitude as the previous wave between May 2003 - January 2004, the eight-10 month target is 2500 and above. Traders should simply watch out for signs of violation of major support levels till then. Our outlook remains positive on the markets in the medium/long term. The author is CEO of Get risk-free 60% return! Here's how April 04, 2005

Most you might think it is impossible to earn a risk-free return of 60 per cent annually
during the current era of low interest rates. Nothing could be farther from truth. It is definitely possible for people earning over Rs 350,000 a year to earn those kinds of returns on their investments every year. Here's how. In the recent budget, Finance Minister P Chidambaram has allowed annual investments of up to Rs 100,000 to be deducted from total income before computing income tax. Investment can be done in various instruments like PPF (Public Provident Fund), EPF (Employees Provident Fund), ELSS (Equity Linked Savings Schemes), tax saving mutual funds, infrastructure bonds, insurance and so on. Let's assume that person invests a total of Rs 100,000 in various tax saving instruments this year. Because he is in the 33 per cent tax bracket (we have assumed that he earns Rs 350,000 at least a year), Rs 100,000 will be deducted from his income before calculating his income tax. His income tax will thus be reduced by Rs 33,000 (i.e. 33 per cent of Rs 100,000). Return in the first year As this person is investing Rs 100,000 and simultaneously saving Rs 33,000 in tax, he is effectively investing just Rs 67,000.

Assuming that this person gets an 8 per cent return, he will have Rs 108,000 by the end of the year by investing just Rs 67,000. So effectively he will earn more than 61 per cent in the first year. Return from second year onwards From the second year onwards, he will get an interest amount of Rs 8,640 (i.e. 8% of Rs 108,000) on the original investment of Rs 67,000. Effectively he will earn about 12.9 per cent from the second year onwards. This is one of the greatest opportunities that the Budget has offered in terms of earning high, but risk-free, return. And this opportunity must be used by all investors to the maximum extent possible. DON'T MISS!
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The easiest way to make BIG money Everone ought to and can be rich!

The author works with a software company in Bangalore. The opinions expressed here are personal. Easiest way to make BIG money! Pavan Bajaj | March 30, 2005

I have noticed that most people invest in stocks because they want to make quick money.
They see their relatives and friends investing in stocks and getting rich over time and want to follow suit. But then there are other ways of making money too. Ways that seem much safer than investing in the stock market. Like bonds, gold, real estate, Public Provident Fund, monthly savings scheme, etc. So why run the risk of losing money by investing in stocks where the risk is higher? Well, read on. Gold is a good hedge against inflation. Today, 100 gm of gold can purchase the same amount of goods and services as it could purchase 400 years ago. By investing in gold, one can preserve one's purchasing power, but one cannot increase it. But what else can you expect from the safest investment instrument?

In India, bonds have given annual return of about 10%-11% in the last 30 years. This return marginally beats inflation and investors could preserve all of their money if they invested in government securities or bonds floated by fundamentally sound companies. By investing in bonds, investor can improve their purchasing power over a period of time. Real estate investments have given a compounded annual return of about 12-15% over the last 30 years. But actual returns could vary depending upon the location of the property and the timing of the purchase. For example, land or a flat purchased in Mumbai about 30 years ago would have given much higher returns compared to land/flat bought in smaller cities. But a flat or land purchased in smaller cities about four years ago would have given much higher return compared to Mumbai! Stocks, however, have given a compounded annual return of about 20 per cent in last 30 years, including dividend. Bluechip stocks like HLL, Reliance, Infosys, Wipro, Bajaj Auto have outperformed the Sensex by a great extent due to growth momentum maintained by the companies over the years. From the above it is clear that stocks outperform all other class of investments over long period of time, but then the next question is: Should one strive to earn that extra 5%-10% by taking higher risks. On the face of it, look you may think it is not worth taking a bigger risk to earn just that 5%-10% extra. However, although it may not matter in the short term, it definitely matters in long term as shown in the table at the bottom. From the table you can see that during the initial years, low returns did not really matter much, when the original capital was safe and the risk taken was very low. But after 30 years, a person earning 20% return from stocks will have 13 times more money than the guy who earned just 10% from bonds! If a person earned 25% by investing in well-managed mutual funds, he will have 46 times more money than an investor who earned 10% by investing in bonds! And if a person earned 30% by investing in well-managed mutual funds through Systematic Investment Plans (SIPs) and booking profits when the markets were overvalued, he would have 150 times more money than the investor who earned just 10% by investing in bonds! Read my previous article Everyone ought to and can be rich on very simple methods to earn 30% returns in the stock market by applying simple and systematic methods of investing in well managed diversified mutual funds.

Some of the well-managed mutual funds like Franklin India Bluechip, Franklin India Prima Plus, Franklin India Prima have given compounded annual return between 25%30% for last 12 years through SIPs. Suppose, Investor A invests just Rs 5,000 every month systematically through SIPs in top performing diversified mutual funds for 30 years; and Investor B invests a huge amount of Rs 100,000 every month in bonds for 30 years. Despite this, Investor A will be able to accumulate more wealth than Investor B due to higher compounding over the years. From the above calculations, it is clear that over a longer period of time, bond investors are taking a much higher risk than equity investors. This risk is not about losing money, but the risk of losing a golden opportunity to make big money for a comfortable retirement without taking undue risks and without making any extra effort. The following table shows Rs 1,000 investment growing at different annual returns:
Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5% Annual Return 1000.00 1050.00 1102.50 1157.63 1215.51 1276.28 1340.10 1407.10 1477.46 1551.33 1628.89 1710.34 1795.86 1885.65 1979.93 2078.93 2182.87 2292.02 2406.62 2526.95 2653.30 2785.96 2925.26 3071.52 3225.10 3386.35 3555.67 3733.46 3920.13 10% Annual Return 1000.00 1100.00 1210.00 1331.00 1464.10 1610.51 1771.56 1948.72 2143.59 2357.95 2593.74 2853.12 3138.43 3452.27 3797.50 4177.25 4594.97 5054.47 5559.92 6115.91 6727.50 7400.25 8140.27 8954.30 9849.73 10834.71 11918.18 13109.99 14420.99 15% Annual Return 1000.00 1150.00 1322.50 1520.88 1749.01 2011.36 2313.06 2660.02 3059.02 3517.88 4045.56 4652.39 5350.25 6152.79 7075.71 8137.06 9357.62 10761.26 12375.45 14231.77 16366.54 18821.52 21644.75 24891.46 28625.18 32918.95 37856.80 43535.31 50065.61 20% Annual Return 1000.00 1200.00 1440.00 1728.00 2073.60 2488.32 2985.98 3583.18 4299.82 5159.78 6191.74 7430.08 8916.10 10699.32 12839.18 15407.02 18488.43 22186.11 26623.33 31948.00 38337.60 46005.12 55206.14 66247.37 79496.85 95396.22 114475.46 137370.55 164844.66 25% Annual Return 1000.00 1250.00 1562.50 1953.13 2441.41 3051.76 3814.70 4768.37 5960.46 7450.58 9313.23 11641.53 14551.92 18189.89 22737.37 28421.71 35527.14 44408.92 55511.15 69388.94 86736.17 108420.22 135525.27 169406.59 211758.24 264697.80 330872.25 413590.31 516987.88 30% Annual Return 1000.00 1300.00 1690.00 2197.00 2856.10 3712.93 4826.81 6274.85 8157.31 10604.50 13785.85 17921.60 23298.09 30287.51 39373.76 51185.89 66541.66 86504.16 112455.41 146192.03 190049.64 247064.53 321183.89 417539.05 542800.77 705641.00 917333.30 1192533.29 1550293.28

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The author works with a software company in Bangalore. The opinions expressed here are personal.

How to launch a career with your blog Leslie Taylor,

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November 01, 2006

Silicon Valley start-ups and media
behemoths aren't the only ones realizing the rewards of the rebounding Web economy. Already, many A-list bloggers have generated significant income from running advertisements on their blogs. Though with an estimated 53.4 million blogs expected to launch by year-end, according to Perseus Development Corporation, it's safe to assume that not everyone is going to get rich from blogging. So what's in it for the up-and-coming blogger, beyond creative selfexpression?

Blogging can be transformative -- placing you on a new career path, earning you a book deal, or catapulting you into the field of your dreams. Just ask some of the folks we spoke with.
• • •

The Next $1.65 Billion Start-Up? Salary-Plus Slideshow: The Best Office Perks

"My blog has led me to change my life," says Jeff Jarvis, author of the media and news blog, Buzz Machine. "I left my corporate job to take the consulting gigs, speaking gigs, and writing gigs that have come my way as a result of the reputation I built up through my blog." Jarvis, a former critic for People and TV Guide and a founding editor of Entertainment Weekly, gained blog popularity while criticizing mainstream media and lauding citizen media. He eventually said good-bye to his full time gig to consult for The New York Times Company and the Guardian, among other media companies. He's also associate professor and director of the interactive journalism program the City University of New York's new Graduate School of Journalism. "All of that came about from the blog," says Jarvis. Hugh McLeod, artist and creator of the blog, GapingVoid, which was rated as the most influential UK blog in a recent survey conducted by Edelman and Technorati, has also parlayed his blog into a consulting gig from his former career on Madison Avenue executive. McLeod's blog began in 2003 as a forum for sharing his thoughts and his cartoons about blogging, marketing, and life. He later turned Blog Cards and limited editions of t-shirts, both bearing images from his cartoons, into successful ventures. Later it led to other professional opportunities as a marketing and blogging consultant for the South African vineyard, Stormhoek. He also does marketing for a bespoke Savile Row tailoring firm, and recently acted as blog consultant for the feature film, Hallam Foe. "My focus has shifted away from the blogosphere a lot in the last year, towards the more capitalist world of selling wine," wrote McLeod on his blog this week.
• •

Slideshow: Hot Products from America's Hottest Companies Does Drinking Help Your Career? Maybe, CEOs Say

Blogs can also lead to full-time conventional employment, particularly for people who work in media. Blogs can provide a talent pool, from which mainstream media outlets recruit staff. In the past month, two bloggers were hired for high-profile positions in mainstream media because they earned reputations for their unique approaches to writing celebrity gossip.

Corynne Steindler, editor of the media gossip blog, Jossip, was hired to write for the New York Post's Page Six and Gawker's Jessica Coen was hired to be deputy online editor for Vanity Fair. "It makes sense for people to discover talent this way," says Jarvis. "I've had people tell me they wouldn't hire [a writer] without reading their blog. I've encouraged all my students to start one." Gone are the days of sending in clips or walking a portfolio into an office. Employers, like everyone else, are checking out potential hires on the Internet with a few clicks of a mouse. Writing a blog, could improve your chances as a candidate because an updated sites boosts your ranking in search engines and offers potential employers a full sense of who you are. "I have gotten a couple of freelance clients from my blog, simply because they liked my writing style," says Laina Dawes, a freelance writer and the creator of the blog, Writing is Fighting. "I also think that by linking to articles you have written, online or otherwise, tells your readers that you are active and serious about writing or whatever profession that matches your personal blog to your chosen profession," Dawes says. According to Jarvis, a personal blog can function as a promotional platform for people in any profession. "When people go looking for thoughtful people to work with, like anything else, they're going to Google it. If they come across you, and find that you have good things to say, you're steps ahead of the next guy, who the person doesn't know," says Jarvis. Sarah Brown, who writes the blog, Que Sera Sera, used her blog to promote Cringe, her reading series in which people read excerpts from their teenage diaries. "I've really lucked out in that my blog-reading audience has helped promote my non-blog endeavors," says Brown. Sarah now has a deal with Crown to write a book based on Cringe and she is coproducing a Cringe television show. "I'm glad that my recent success was buoyed by my blog and its readers, but is not actually blog-related," says Brown. "I'm much happier being known to the world as the person behind Cringe who also writes, rather than the person behind Que Sera Sera who also Cringes." Brown joins a long list of bloggers whose blogs have led to book deals with major publishing houses.

Stephanie Klein, writer of the blog, Greek Tragedy, caused a stir in 2005 with her sixfigure, two book deal. Ana Marie Cox of Wonkette and Jessica Cutler of Washingtonienne, also signed big blog-to-book deals. While books based on blogs have met with mixed success, the fiercely loyal community a writer can establish through a blog keeps agents and publishers searching the blogosphere for their next author. It is the community that a blog engenders that can lead directly or indirectly to career opportunities. "Blogs enable you to have a relationship with your public, whatever that public is," says Jarvis. "Having a conversation with people -- that will yield dividends."

With Good Looks Come Big Profits Get Business updates: What's this?

5 steps to get people to know your expertise Keith Ferrazzi,


November 01, 2006

Few things can have greater
impact on your personal brand and your organization's brand recognition than developing and sharing your expertise with the world. Whether you call it becoming a thought leader

or a public expert, or, as marketing guru Steven Yoder's book espouses, Getting Slightly Famous, you should do it. Trust me. I'm living proof that it works. My first job was with Imperial Chemical Industries. I was fresh out of college at Yale, and like all new graduates, I didn't know much. But when I noticed that Total Quality Management was the consultant-driven business trend du jour, I decided to make that my expertise. I studied all the texts that were available, interviewed experts at conferences, and endlessly discussed and debated the issues with my colleagues. Soon, I was writing articles, contributing to a self-published book, teaching inside the company, and speaking at conferences.
• • •

The Next $1.65 Billion Start-Up? Salary-Plus Slideshow: The Best Office Perks

And when it was clear I was one of ICI's three go-to guys for TQM knowledge, the company crafted a new position for me as one of the leaders of TQM in North America, a promotion that certainly bolstered my application to Harvard Business School. This simple formula: 1) Build expertise, 2) Get people to recognize it -- is one I used throughout my career. At Deloitte Consulting, my rise from post-MBA consultant to chief marketing officer was accelerated by my "getting slightly famous" in the fields of reengineering and customer relationship management. Then it was sharing my marketing acumen that helped me land jobs as CMO of Starwood Hotels and CEO of a computer games startup, as well as founding my own sales and marketing consultancy, Ferrazzi Greenlight. Even today, it's that simple one-two formula that we help large sales forces, marketing departments, and senior executives implement through Ferrazzi Greenlight coaching and training. For our purposes now, we'll assume that you already have an area of expertise. Here are the five steps to getting people to recognize it (originally taught to me at Deloitte by Bo Manning, who is now CEO of Orchestria). 1. Talk about your expertise, with everyone you meet: Your clients, colleagues, superiors, everyone. Even in social settings, it also makes for the perfect, confident response to the inevitable question: "What exactly do you do?" Hey, if you can explain it to your in-laws, you can explain it to anyone.
• •

Slideshow: Hot Products from America's Hottest Companies Does Drinking Help Your Career? Maybe, CEOs Say

2. Prepare a formal one-hour talk with a deck of slides: This forces you to organize your ideas and structure your arguments to make the most profound impact on an audience. When you have it ready, give the talk whenever and wherever you can - a lunch meeting in the office, conference breakout sessions, and professional organization meetings. 3. Write an article: It doesn't have to be on the front page of the Wall Street Journal to be effective. With a little bit of effort and a few phone calls, I guarantee you can find a publication that's eager for your contribution. 4. Write more articles: Yes, this is important enough to warrant its own step. Turn sharing your knowledge into a habit, and your thought leadership will command much more respect. 5. Write a book: Everyone, even you, can write a book. In fact, if you've written a series of articles, the book has already written itself. All you'll need to do is add a few anecdotes. If you can get a contract with a major publisher, great. If not, no worries. A good friend of mine, executive coach and productivity consultant Stever Robbins, published his first book It Takes A Lot More Than Attitude. . . To Lead a Stellar Organization by simply combining his best articles, and it's been a great calling card for his growing business. As long as it's bound and it doesn't look like it came from a personal printer, you'll be fine. While following these steps, I guarantee you'll begin to see your personal and organizational cachet grow in the marketplace. And if you complete step five and have that book in hand, you'll enter a club I never knew existed before I was a published author. Because being a thought leader does take hard work, people have tremendous respect for those who have taken it to the final stage. And they put their money where their mouth is. According to a recent study conducted by RainToday, 96 percent of authors report that writing a book produced positive results for their businesses. From personal experience, I can attest to that, too. My book Never Eat Alone has certainly helped my consulting business and completely exploded my speaking business. Now I can't wait to see what becoming a public expert will do for you.

Slideshow: 30 Under 30

They dared to dream and made it big

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November 02, 2006

Are you tired of your job? Or do you feel you could be using your time and talent in a
better manner and earning a lot more as well? I know, we all feel this way! But there are a few souls braver than the rest of us, who can and do take the plunge. They do this by themselves or find like-minded people, who are willing to go the distance with them. Two such people are Arpita Das and Parul Nayyar, who have founded Yoda Press, a publishing firm with a capital of Rs 200,000, which was their combined savings. This firm focused on publishing books on areas like urban studies, sexuality, contemporary art and popular culture. They intend to publish bold and offbeat titles. Nayyar told CNBC-TV18, "We found out that a lot of bookshops would not keep some of our books. On one particular day, we sent 25 people - family, friends, people that the editors knew - into the bookshop to ask for the book and the next day, they palced orders. I don't want to name the bookshop but it's happened not just in Delhi but across the country, where they will not keep titles, which they think are controversial." Das adds, "We have very good, respectable, solid, classical titles like The Aryans in British India by a well-known historian called Thomas Troutman but we are also very keen on doing some cutting edge scholarship and cutting edge writing, where a lot of publishers would often muzzle the author and say 'we might get protests and

demonstrations outside the office'. That sort of thing is something we want to break out of. We want to say - write what you feel and let there be demonstrations and protests outside the office because that's what excites us." Soon to hit bookshelves are Amar Chitra Katha and Essays in Anti-nationalism but their betting big on the adaptation of the screenplay of Rang De Basanti. So stick around and look for these titles at your nearest bookshop and if you can't find them, then you can just assume, it's so hot and controversial, that you just have to get your hands on them! For more on Yoda Press titles: Cuisine Caper Another young man who didn't look back after taking some friendly advice is former Wall Street banker and now owner and chef at Busaba, Nikhil Chib. This 35 year old came back in 1995 on a two-week holiday and stayed put ever since. Once he was here, his friends felt he should start a catering business. Chib aways knew he wanted to do something with food, so he started a small business with an initial amount of Rs 10,000 - yeah that's right and there is no extra zero missing on this figure! He then catered to a lot of A-list clients like the Birlas, Tatas etc, had over 500-600 parties over 5-6 years and then went to test the waters in Goa during the Millennium. He says, "My first restaurant was in Goa - I found a lovely little place in North Goa and went and opened a restaurant there for a season. I flew down a Thai chef from Bangkok. I had a Chinese guy, I taught some of my dishes, so they were stuck in the kitchen and I was moving back and forth between the restaurant, the bar and the kitchen. It was a crazy experience because we were serving almost 300 people a day. I didn't realise how good the response would be." But back in Mumbai, he found a dilapidated shack in Colaba that he proceeded to make into Busaba. But before that, he needed to run around to get 15-20 licenses, raise a loan from a bank and find investors but he credits some people who were early believers and who helped him get through all this. He acknowledges that he has lot of competition around him but his clientele have hepled him keep the faith. But he also feels that India needs some quality product restuarants and that we still don't have them. Which explains why he plans to revamp Busaba with a new name, look and management. He says, "It's time to move on. After spending time in Europe, I realised I want to appeal to a more serious food and bar clientele and also that's where the big pay packets are."

This young man sure knows how to keep improving and his customers are sure to keep wanting more from him. For more on management, log on to

A great guide to plan your finances Kayezad E. Adajania, Outlook Money

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October 03, 2006

may have grayed his hair but when it comes to planning his finances, Pheroze Bhathena, 77, a retired engineer from a multinational, is quite astute. Although he prefers safe options like bank deposits and National Savings Certificates, 5 per cent of his portfolio is allocated for diversified equity funds, wherein he opts for the dividend plan for some risk exposure. "Since I am retired, I need regular income to meet my daily expenditure. I can't afford to stash away my money for a very long time", he says. Simple enough, but choosing the right plan is an important part of asset allocation. Most mutual fund schemes offer three plans - dividend, dividend reinvestment and growth. Your choice will depend on your financial goals. Do you prefer dividends in your hands or want to see your money grow over a period of time. Since choosing the right plan also

has tax implications, Outlook Money gives you a definitive guide on how to choose a plan that is best for you. Debt funds You invest in debt funds because capital conservation and regular income are your objectives. But every time your debt fund pays you dividend, it pays tax out of the dividend declared and you get the remaining amount. Debt funds also impose short-term capital gains tax, depending on your income tax bracket, if you withdraw your units before one year, and long-term capital gains of 10 per cent for investments longer than one year. Stick to the dividend plan if you are investing for less than a year. For investors in higher tax brackets of 22.44 per cent and 33.66 per cent (all tax figures include surcharges), the divided plan is more tax-efficient with only 14.03 per cent "I need regular income to meet daily expenditure. I can't afford to stash dividend distribution tax. (See: Up The Ladder). away money for long periods" If you invest Rs 10,000 in a debt fund that appreciates by 10 per cent and distributes all its gains as dividends, you end up with Rs 10,877 after a year as against Rs 10,667 in a growth plan.
Pheroze Bhathena 77 Retired 5 per cent of Bhathena's investment is in dividend plans of diversified equity funds

Although dividend plans are more tax-efficient than growth plans for investments less than a year, what if you are not looking at dividends on a regular basis? Then opt for the dividend reinvestment option. Every time your debt fund declares dividends, it gets reinvested and an equivalent amount of units get added to your total number of units. For investments of more than a year, in a growth plan you pay 11.22 per cent long-term capital gains tax as against 14.03 per cent as dividend distribution tax. For an investment of Rs 10,000 that appreciates by 10 per cent in a year, your growth plan will return Rs 10,888 as against Rs 10,877 by the dividend plan.
Ruthesh Ganesan 25 Banker Ganesan invests Rs 20,000 per month in six SIPs of diversified equity funds and 80 per cent of his investments are in equity funds "Given my income, age and background, I do not need liquidity"

Regular income or tax savings? Tax compulsions aside, opt for the dividend plan if you want regular income, even if you are investing in debt funds for more than a year. Arjun Marfatia, CEO, Quantum Mutual, says, "Choosing taxefficient options should not come at the cost of your financial goals."

Equity Funds Not only are dividends from equity funds tax-free in the hands of the investor, the fund also does not pay any dividend distribution tax. An investment of Rs 10,000 in a diversified equity fund that grows by 10 per cent in a year and distributes it entirely as

dividends, will yield Rs 11,000 under all three plans, if you hold your units for more than a year. Your financial goal is important when it comes to choosing a plan in equity funds. Take 25 year-old banker Ruthesh Ganesan. About 80 per cent of his investments lie in equity funds. He saves regularly and invests Rs 20,000 every month in six diversified equity funds' Systematic Investment Plans. "Given my current income, age and my background, I don't need liquidity. I go for the growth plan", he says. If long-term wealth accumulation is what you are looking for then opt for the growth plan in equity funds. If you want to book profits periodically, opt for dividend plans, as equity funds are subject to market volatility. If you had invested Rs 10,000 in HDFC Equity Fund's growth plan on January 1, 1999 at an NAV of Rs 9.29 and withdrawn it on December 31, 2001 when the NAV was Rs 18.35, your investment would have grown 25.74 per cent. However, between 1999 and 2001, the scheme declared four dividends of 16, 20, 30 and 17 per cent. Had you invested in the scheme's dividend plan, you would have got a compounded annualised growth of 28 per cent because an equity fund's dividend plan distributes profits that it earns from the markets, while a growth plan doesn't. A word of caution: If you are investing in an Equity-Linked Savings Scheme, avoid dividend reinvestment. As ELSS locks your money for three years, each dividend that is reinvested is also locked for three years. In effect, you may never fully be able to withdraw your investment.
Up The Ladder Dividend For debt funds < 1yr Amount invested Net dividend received Tax distribution (DDT/Cap. gains) NAV at the end of 12 months Net amount at redemption For debt funds > 1yr Amount invested Net dividend received Tax distribution NAV at the end of 12 months Net amount at redemption For equity funds > 1yr 10,000 877 123 10 10,877 10,000 877 123 10 10,877 Plan Growth 10,000 Nil 333 11 10,667 10,000 Nil 112 11 10,888

Amount invested 10,000 10,000 Net dividend received 1,000 Nil Tax distribution Nil Nil NAV at the end of 12 10 11 months Net amount at 11,000 11,000 redemption All figures are in Rs. In the examples, the initial investment is invested at Rs 10 NAV. This grows by 10%, and the scheme distributes all its gains as dividend

The man most CEOs call in a crisis Bhupesh Bhandari

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October 18, 2006

The 84year-old founder chairman of Burson-Marsteller practices his PR explaining his firm's presence in China long before it came to India. For over five decades now, Harold Burson is the first man CEOs of famous companies call after they have caused an oil slick on a beachfront or have recalled a product from the market.

He is, according to PRWeek, the most influential public relations person of the century. The 84-year-old founder chairman of Burson-Marsteller, the global leader in public relations, may have doused many a fire all over the world in his long career, but he has travelled to India only twice. "Twice in the last one year, and I will come again next year. This is the shape of things to come," Burson puts it in perspective. We are sitting at Enoki, the Japanese restaurant at The Grand in distant Vasant Kunj, and Burson is telling me what India has come to mean for the company he founded in 1953 along with Bill Marsteller (who died in 1984) and sold some years back to Martin Sorrell's WPP. "With 200 people, India is our biggest office in the world after the US. Earlier, UK used to be number two. China is third with a staff of 180, though we went there before India," he says. But that can be explained easily: while Burson-Marsteller has built its business from scratch in China, it started out in India by taking over a leading agency, Genesis, last year. The bottomline is, like advertising agencies, public relations firms, too, follow their top clients whichever corner of the world they go to. As we order our drinks, Diet Pepsi for him and watermelon juice for me, Burson enquires if we grow oranges in India. While I fumble for an answer, Burson says he was looking for orange juice in the morning at breakfast but couldn't locate it in the restaurant. The Nagpur orange definitely needs a new publicity agent. Burson orders a Sasami and grilled lamb chops, I opt for a yakitori preparation of tofu and broccoli along with a helping of marinated pork. In the last few years, companies and businessmen alike have realised the importance of public relations in achieving corporate goals. One Indian CEO I know, I tell Burson, measures the output of his public relations officer in the appreciation of his share price. "How much have you added to my market capitalisation," thus begins his annual review of the function. (Of course, he has a new head of public relations every six months.) "The objective should be that the share price movement is consistent over a period of time," Burson says when I ask if CEOs have made a similar demand on him. "One should not raise expectations above what the company can perform," he says. However, Burson's memoirs on the Burson-Marsteller website mention an unconvinced businessman waking up to the benefits of good public relations when his bankers cut their interest rate by a quarter after he organised some "good press" for him. The food, which arrives in surprisingly quick time, is not very inspiring, though Burson seems to enjoy the chops. I order another watermelon juice to aid the food down my throat. But the rivetting conversation more than makes up for it. Burson tells me that he started out as a journalist at a very young age as he always wanted to be a journalist. In his early days, he even covered the Nuremberg trials after World War

II. But he soon switched to public relations and set up his own outfit called Harold Burson Public Relations in August 1946, seven years before he tied up with Marsteller. The story goes that Marsteller took a 51 per cent stake and Burson managed to have his name first in the company. "We were five people then; we are almost 2,000 now," he says, pride in the business he built from scratch evident in his eyes. In 1983, Burson-Marsteller became the world's largest public relations firm, a position it retained till 2001. Though it still counts among the top five agencies in the world, it is no longer at the top. "How did you lose out," I ask him. "Except in India, we have deliberately stayed away from playing the acquisitions game as we believe in a common culture and methodology," Burson says. Though he has dealt with top honchos of the corporate world (he was also an advisor to President Reagan for four years after he demitted office), Burson rates an assignment in a small US town as his most satisfying moment. The local college had old flags in its grounds that were remnants of the town's racist past. Burson was hired to devise a way to move the flags out of the college grounds. With opposition from locals, Burson knew it would be tough. Then he realised that all the African-American athletes stayed away because of the flags. So he mounted a campaign that the college should rather have a winning football team than retain the flags. In two weeks flat, the flags were off. "This was the quickest turnaround in public opinion I have ever seen," Burson says. Burson claims he has never got into a serious argument with a publication or a journalist, though he has had serious issues with environmental NGOs: "It was largely over the forest product industry. These people would say we were destroying forests; we said we were planting more trees than we were cutting." On the whole, Burson is reluctant to talk about his exploits. "Let the companies do all the talking. I am happy to remain in the background," he says. The food is over by now and the attendant suggests we try green tea ice cream for dessert. We agree to give it a shot. And it turns out to be the only delicious course of the meal. Powered by What's attractive? Rs 10 or Rs 50? April 01, 2005 11:33 IST

There are some myths that grip retail investors when it comes to investing in the stock markets. In
this article, we focus on what is important when it comes to selecting a stock, i.e. the stock 'price'

or the stock 'value'? Based on the feedback we get from readers, it seems it is a common perception among retail investors that a company's share is supposedly 'cheaper' when it is trading at Rs 10 as against Rs 50, i.e. after it appreciates. The interest level for low-priced stocks seem to be disproportionately higher these days because of two reasons. One, the stock market has been going up, and, two, prices have run up significantly in the last two years, thus the craze for small and mid-caps. The major attraction when it comes to mid-caps among retail investors, besides the upside, is that one could buy a lot more shares for the same outlay. We take a practical example and bring forward what is important. Here we compare, Tata Motors and Ashok Leyland. Remember, we are not recommending any stocks by this comparison. What is 'cheap'?
FY04 Valuation Current price (Rs) Face value (Rs) Price to earnings (times)* Price to book value (times)** Key ratios EBDITA margin Net profit margin Return on net worth 13.5% 5.6% 24.2% 12.6% 5.3% 20.9% *Based on trailing twelve months earnings. **FY04 414 10.0 12.8 4.1 21 1.0 10.9 2.5 Tata Motors Ashok Leyland



As a retail investor, it is possible that with a sum of Rs 1,000, one can buy 47 shares of Ashok Leyland whereas for a similar outlay, investors can get hold of only 2 shares of Tata Motors. But does that mean Ashok Leyland is 'more attractive' than Tata Motors? The answer is a clear 'no'! ALthough one may be buying fewer shares of Tata Motors, this should not be the governing factor for investing. What matters is 'at a price', what is the underlying 'value' that the investor is getting. The stock may be trading at a higher valuation also because the fundamentals are stronger. Some caveats: 1. Price is governed by value: The stock price (governed by value) is supposed to indicate

the long-term earnings growth potential of the company. What is history is already factored in into the stock price because everyone knows it. This long-term growth potential has to be 'valued', taking into account the industry dynamics, the past track record of the management and what the future looks like. It is for this reason that high-growth sectors (software and pharma, for instance) generally tend to command higher valuation as compared to a textile stock. 2. FIIs do not care about pennies: If you think the penny stocks will go up because foreign institutional investors are going to buy into these, then we must point out that your are most likely to be wrong and are being misled if you are being told that this is true. Serious FIIs and domestic mutual funds have stringent criteria's like floating stock (percentage of shares not owned by promoters and is liquid), minimum level of market capitalisation and sales turnover and so on. If any broker suggests buying into a penny stock because growth prospects are goods and FIIs 'would' buy, then it is time to exercise caution. 3. Face value: Investors have also got to keep in mind as to the face value of the share they are buying. Like in the case above, Ashok Leyland may be trading at Rs 21. But its face value is Re 1 (if we equate it, the buying price is actually Rs 210). Some companies change their face value to increase liquidity in the stock market with a good intention. 4. Same is the case with mutual funds: Just because the NAV (net asset value) of a mutual fund scheme is below par or at par (i.e. less than or equal to Rs 10), it does not become attractive. To conclude, focus on the 'value' and not on the 'price'. So, what is attractive? Rs 10 or Rs 50! is one of India's premier finance portals. The web site offers a user-friendly portfolio tracker, a weekly buy/sell recommendation service and research reports on India's top companies.

Great tips to save more tax! N Mahalakshmi in Mumbai | March 09, 2005 07:51 IST

Budget 2005-06 has been a bonanza for individual tax payers. Or so everyone thinks.
The increase in the income tax exemption limit has ensured that people across tax brackets pay lesser taxes (baring some specific cases where the tax incidence will be marginally higher). By consolidating the individual tax rebate and deduction schemes under the new section 80C with a overall limit of Rs 1,00,000 - without any sub-limits on the amount of individual investments - P Chidambaram has essentially given people the freedom to plan their taxes in a way that enables better financial planning. While you make investments to minimise your tax outgo, you can now formulate an investment portfolio consisting of debt, equity, mutual funds and real estate while providing for life and medical insurance, too. Besides, you can claim deduction for expenses like your children's education (well, only tuition) and principal repayment on housing loans. That is the good news. And, now, the bad news. The worst part of the deal is that the finance minister will ensure in the future that every penny that you earn is taxed. If not today, then tomorrow. How? Currently, there is considerable variation in the taxation of the money invested in savings schemes, the tax levied on accumulations or the return earned thereon, and the tax treatment at the final stage of withdrawal. The idea is to ensure that the money you earn either by way of salary or through your investments gets taxed eventually. This will happen under what is called the EET (exempt exempt taxed) scheme, wherein the contributions to specified savings is exempt from tax (E), the accumulation is also exempt (E) but the withdrawals/benefits from savings are taxed (T). Given this background, we compare various investment options across asset classes and suggest strategies to maximise your tax benefits without compromising on your financial goals. The window of opportunity Doing away with section 80L, which entailed tax exemptions for annual interest upto Rs 12,000 and an additional Rs 3,000 for income earned on government bonds, means that the return you earn on certain savings instruments is now taxable. So income from all post-office savings schemes and other government bonds is fully taxable. The only exception to this rule is the public provident fund (PPF), where the interest earned is not taxable.

Experts feel that in the transition to the EET regime, this exceptional benefit for PPF will be done away with for all new commitments to PPF. This announcement is expected to come in as early as April 1, 2005. It is important to note here that the death and survival benefits on insurance plans are also exempt from tax in the hands of the policyholder, but it may not be a wise idea to hike your contribution to insurance unless you really require it. Also, insurance investment schemes do not compare favourably with investments in mutual funds or equities due to lack of transparency and front-loading of expenses. Key takeaway: There is a one-month window of opportunity between now and April 2005 to earn a tax-free return on PPF. Since the amendment to the PPF scheme in order to make it EET-compliant is yet to be worked out, one can utilise this opportunity and pump in money into a PPF account. So those who have not already exhausted their deposit limits should now prefer PPF over other small-savings instruments. The more efficient fixed deposits The elimination of section 80L also means that income from bank deposits, RBI (taxable) bonds and infrastructure bonds are now fully taxable. Mutual funds now look more attractive based on tax-adjusted returns. Currently, debt-based mutual funds are required to pay an effective dividend distribution tax of 14.025 per cent (including the 10 per cent surcharge and 2 per cent cess). This income is tax-free in the hands of the investor. What about capital gains? Units sold within one year qualify as short-term capital gains and are subject to tax at the marginal income-tax rate. Units sold after one-year attract long-term capital gains of 20 per cent plus a surcharge of 10 per cent and 2 per cent cess after availing of indexation benefits or a flat 10 per cent plus a surcharge of 10 per cent and 2 per cent cess. Indexation is a relief provided by adjusting the return on which tax is calculated downward, to allow for reduced buying power of the saved amount due to inflation during the period of saving. If you are looking for a fixed-income product with a holding period of less than one year, the dividend plans of debt mutual funds score over fixed-deposits, especially if you are in the highest tax slab. The tax incidence is half of what it is in other deposits. However, most people fear mutual funds due to their volatility in returns. How does one avoid volatility in mutual funds? Rather, how does one ensure that you do not incur a capital loss and also a basic minimum return?

The answer lies in fixed maturity plans (FMPs) of mutual funds. These mutual funds work exactly like fixed-deposits. You get a pre-determined return based on current market yields, of course, after deducting fund management expenses which are lower than regular debt funds as there is less churning. Fixed maturity plans demystified
What is a fixed maturity plan? A fixed maturity plan is an income scheme that allows saving only during the initial offer period that usually lasts from one day to one month and ceases to exist after a certain fixed duration. FMPs of one-month, three-month, one-year, three-year and five-year durations are periodically launched by mutual funds. They provide an easy route to invest in different types of bonds - government securities, corporate bonds and money market instruments through mutual funds. Saving in a fixed maturity plan is like knowing the exact day of harvesting a field on the day of planting the seeds. The harvest day is called the maturity date in the language of investments. Since saving in a fixed maturity plans is allowed only during their Initial Public Offering (IPO) period, and the savings are returned on the maturity date, these schemes are also called 'closed-ended schemes'. In contrast to these, saving in other 'open-ended schemes' is allowed throughout the existence of the scheme. Options available for withdrawal before the maturity date vary from scheme to scheme. These are specified in the offer document of the scheme. What are the advantages of FMPs? FMPs are popular because of their relative predictability. Their closed-ended nature allows fund managers to purchase bonds that pay back their investment on or around the maturity date and thus hold on to them till the end. This allows the fund to keep getting the agreed rate of interest on the bonds, effectively reducing what is called price risk (the potential for making a loss on bonds due to pressure to sell them off in the market). Though FMPs do not guarantee returns, a person who saves in an FMP has a fair idea of his indicative returns based on returns of similar duration bonds available in the market. How do FMPs manage risks? Debt investments are exposed to three broad kinds of risks: 1. Interest rate/price risk/re-investment risk 2. Credit risk 3. Liquidity FMPs are able to mitigate most of the above risks by the very nature of their structure. They are less exposed to interest rate risk compared to other income schemes since instruments therein are typically held till maturity and hence yield a fixed rate of return which is equal to the yield at which investments were made. They also carry minimal liquidity risk as exit load is applicable for withdrawal before maturity. Hence, most investors withdraw only on the fixed maturity date of the

scheme. -- Standard Chartered Mutual Fund

Since they hold instruments till maturity, they also minimise expenses. As there is no regular churning of the portfolio, this significantly reduces the overall cost of transactions. Investors with a time-horizon of more than one year can actually end up paying zero tax by using a trick called double indexation. Double indexation gives an investor the advantage of indexing his investment to inflation for two years while remaining invested for a period of slightly more than an year. This can be done if the investor puts in his money just before the end of a financial year and withdraws it immediately after the end of the next financial year. How double indexation reduces your tax outgo
The indexation table published by the income-tax authorities is a series of numbers for every year from 1981-82 that reflects the impact of inflation. For example, let's see the use of double indexation for Rs 10,000 saved in a fixed maturity plan that opened on March 31, 1995, and returned Rs 11,000 on closing on April 1, 1996. Thus the yearly return on savings is 10 per cent. Now the person who saved the money calculates tax payable at the end of the year in three steps. a. Calculate the Inflation Index by dividing the Yearly Inflation Index corresponding to the ending financial year by the Yearly Inflation Index corresponding to the starting financial year. For our example this will be 305/259 = 1.178. b. Multiply the amount invested with the Index. Thus, the amount invested will become Rs 11,780. This gives you the amount that is to be used as the initial saving for calculating the gain on which tax is applicable. c. Since the amount used as initial saving (Rs 11,780) has become higher than the amount returned (Rs 11,000), there is no gain on which tax can be applied. Thus, in our example, no tax is applicable when double indexation benefit is claimed.


1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

100 109 115 125 133 140 150 161 172 182 199 223 244 259 291 305 331 351 389 406 426 447 468 480

Key takeaway: Short-duration fixed maturity plans (dividend plan) are ideal for less than one year. Thirteen month FMPs are best alternatives for one-year bank deposits. Do not commit yourself to more than one year of FMP as you run the risk of tax policy changes mid-way. If finance ministers start looking closely at FMPs, they may simply stop allowing indexation benefits for debt funds and that will make your calculation go awry. Home is where there is no tax Owning a house is imperative. Not just owning, but owning one on borrowed capital. The key change that the Budget has brought about is that there is no longer any cap on the amount of principal repaid on your housing loan for tax deduction. Under section 88, the limit was Rs 20,000. So your principal repayment alone can constitute the entire Rs 1,00,000 eligible for deduction. The deduction on principal repayment is over and above the deduction already available on housing loan interest up to Rs 1,50,000.

To put it simply, monthly installment of Rs 20,833 will be eligible for full deduction from your income if you have no other investments/expenses eligible for tax deduction. For people who are paranoid about housing loans, you can derive solace from the fact that lowering your present debt is as good as saving for your future in the taxman's eye. Actually, principal repayments can be a good alternative to savings. Since some part of your income as a salaried employee goes towards compulsory savings through your contribution to the employees provident fund, you can choose to simply reduce your debt burden to get tax breaks. For those who thrive on borrowed money, there is no limit on the amount of deduction you can claim on the interest paid on loans taken for house property (after deducting rental income from the same) which is not self-occupied. If the interest repaid is, say, Rs 5,00,000 in a particular year, this expense is fully deductible from your gross taxable income. So you actually end up paying no income-tax at all. Of course, you need to have a supplementary income to support your living expenses! Currently, home loans rates are hovering around 8 per cent. If you are in the top tax bracket, your tax savings can be upto 30 per cent, meaning your effective cost of funds comes down to less than 6 per cent. Key takeaway: Prepaying principal can be a good alternative to savings. People in the high income bracket can indulge in a second house to lower their tax burdens substantially. Equity for the long haul Another way to perk up your regular income is to invest a portion of your investments in equity-based dividend-yield schemes which invest in high-dividend paying stocks. By virtue of the fact that their stock price is low in comparison to the dividend they pay (that is what makes the dividend yield high), the stocks are less risky. Since these are equity-based schemes, the dividend paid by them is tax-free. When you buy and sell units of equity funds you pay a securities transaction tax of 0.2 per cent as in the case of equities. Short-term capital gains are taxed at 10 per cent while long-term capital gains are fully exempt from tax. Currently, there are three dividend-yield funds available in the market, one each from Birla Mutual, Principal PNB Mutual and Tata Mutual Fund. Besides, equity linked savings schemes are also a must-invest proposition now. The fact that investment in ELSSs entails a tax saving of upto 30 per cent (if you are in the top

bracket) is to say that you can buy equities at a 30 per cent discount or that you earn a 30 per cent return on day one of investing. Thus, ELSS can be an excellent alternative to investing directly in stocks. The prudent way to invest in ELSS is to commit a regular amount every month towards purchasing units of ELSS rather than bunch investments and buy units towards the end of the year. This will not only ease the burden towards the end of the year but also average out your cost of acquisition of shares since you would buy more units when the markets are high and less when the markets are low. Key takeaway: ELSS is smarter than direct equity purchases for most people. Repaying home loan? Read this! Freny Patel in Mumbai | March 09, 2005 07:57 IST

K V Gopalakrishnan is running pillar to post, not chasing the lowest possible deal in
home loan rates. Rather, it's because he is clueless as to what he should do post-Budget -- whether he should go for a fixed-rate loan or a floating rate loan, and, more importantly, in light of the recent amendments made in the taxation, he is trying to evaluate the best option in terms of whether to pay up his home loan at the earliest and thereby avail benefit under the Rs 1 lakh tax break by paying majority of the principle. Alternatively, whether he should extend his home loan to the longest period possible and thereby continue to avail the tax benefit in the payment of interest. The Budget has given a major boost to housing loans. On the one hand, it has retained the tax exemption benefit on repayment of home loans. This is the only section where the tax benefit for repayment of interest has been retained over and above the Rs 1 lakh limit. Today all other tax exemptions fall under the new section 80CCE. Under this section, an individual can invest a sum of up to Rs 1 lakh avenues like National Savings Certificate, public provident fund, infrastructure bonds and life insurance policies, and the same will be deducted from an individual's total income. Housing finance companies are receiving numerable queries from home buyers as to how best they can benefit from taking a home loan, and what would be the ideal product to go for.

Many consumers feel that it would be desirable to quickly pay up the loan and thereby get maximum advantage under the Rs 1 lakh slab as the principle deduction falls under this category. Some of the housing finance companies have come out with special products to address this. What one should remember is that it is not possible to take advantage of the tax break on both the principal repayment and interest payment sides. If one were to decide to maximise the principle repayment in a manner that one can avail of the Rs 1 lakh rebate under section 80CCE, then this would mean reducing the time period for paying back the home loan. In that case, the individual would not be able to get a higher tax saving benefit on the interest portion of the loan. Another thing one tends to forget is that employees' contribution towards the company's provident fund falls under the Rs 1 lakh tax break category. As such, it would not be advisable to repay a maximum of Rs 1 lakh a year unless one is self-employed and has not saved in any other tax-saving avenues. Moreover, when one can invest in other products and get a higher rate of return like in the case of public provident fund at 8 per cent or 9.5 per cent under Employees Provident Fund scheme, then it may well be wise to pay an interest on home loans varying between 7 per cent to 8.5 per cent. Here, too, one can have a sizeable cost savings. Not to mention the tax rebate one gets through the interest component of the home loan. So before you decide to call up your housing finance company to change your payment schedule, look through the following points.
• • • • •

Do you contribute to provident fund? Do you have an existing insurance policy, for which you are already paying regular premiums? Have you bought a pension plan where the annual pension outgo is Rs 10,000? Do you have school-going children for whom you'd get a tax break up to Rs 12,000? Are you looking at higher returns through investment in unit-linked savings plans or government approved tax saving plans, which offer a higher interest rate than your home loan?

If your answer is yes for any of the above, then you should not be taking any hasty decisions to quickly repay your loan just to avail of the Rs 1 lakh tax break. After all, all the above items and more fall into the same category under section 80CCE.

What one could do is take advantage of one's savings instrument and assign the securities -- National Savings Certificate (NSC) and life insurance policies -- to the housing finance company. This mechanism -- balloon payment -- is an enhancement tool, which helps increase the loan eligibility of the customer without increasing the equated monthly instalment (EMI). The present value of the maturity amount of assigned securities is combined with the loan amount to arrive at the enhanced loan eligibility. So as April draws near, a prudent tax planner should look into these issues and take an informed decision. 'Surf' and 'flip'

Yet should you decide that in future interest rates may balloon - considering the government borrowing programme and increase demand for credit from the banking sector - you might decide to do away with uncertainties especially if you have taken a floating rate loan. If so, there are a wide range of repayment options available in the market today. The Housing Development Finance Corporation (HDFC) is offering 'SURF' - step up repayment facility. This links the customer's repayment schedule to his expected growth in income. The essential advantage under this product is to help a customer avail a larger loan amount compared with what he would otherwise be entitled for. Hence initially he would pay low monthly equated instalments, which would accelerate proportionately with the assumed rise in his income. One could also go for 'FLIP' - flexible loan installment plan - should one's repayment capacity be prone to alterations during the term of the loan. The loan is therefore structured in such a manner that the monthly instalment is higher during the initial years and subsequently decreases in the latter part, proportionate to the reduced income of the customer.

The 5 best real estate options! Arun Rajendran in Mumbai | March 10, 2005 06:59 IST

The real estate scenario is looking quite upbeat. Real estate consultants are forecasting
rising rates and home owners are definitely a pleased bunch, especially since the Budget ensured that interest on home loans still remains one of the best ways to save taxes. Real estate consultants say Finance Minister P Chidambaram's decision to levy a 10 per cent service tax on construction would lift prices of residential housing by 4-5 per cent.

The stratospheric rise in real estate prices over the last year may compare closely with the stock market indices which are at their all-time highs. The analogy seems perfect given the difficulty involved in picking out stocks that could still yield good returns at these rarefied levels. Real estate consultants have apprehensions of an escalation of prices, but unlike stock market players they say there are still some multi-bagger locations that may yield bumper returns to investors. Then, of course, there are the momentum plays whose value has appreciated a great deal in the last few years. Here are a few samples -- suburban Mumbai, Bangalore, Pune, Gurgaon and Hyderabad. However, barring one or two locations, the chances of deriving a great deal of appreciation from properties in these areas are not very good. We asked real estate consultants to choose five best options in real estate to put your money in and suggest the best investment options for the following budgets -- Rs 10 lakh, Rs 25 lakh and Rs 50 lakh. Here are their picks: 1. Oh Kolkata! Surprise surprise, this is the number one choice of location where consultants feel one may derive maximum appreciation. The primary reason for this, they say, is that the demand is led by actual home seekers unlike other locations where the demand is built up by investors who buy properties and sell them at higher rates, which only jack up prices unreasonably. The ensuing bubble is not sustainable at all, they say. Realty check
City Chennai

"Kolkata is a completely rocking city," says Anuj Puri, chief executive officer of Chesterton Rate per sq.ft Meghraj Consultants. He gives full marks to Area the state government which has been actively (Rs) inviting private and foreign developers to CBD* 1,700-2,600 transform the city. Suburb 800- 1,800
s CBD Suburb s 2,200-3,200 800-1,100 1,700 - 2,500 1500-3000 1100-1400
* Central business districts

Kolkata Jaipur


Rajarhat may not be well known now but consultants say a few years down the line, this 10,000 hectare location is going to be the next hot destination for IT and ITES (information technology-enabled service) professionals. An abundance of power and water supply is the other advantage Kolkata offers.

2. Chennai -- southern superstar

The water projects announced in the Budget will make Chennai an attractive destination. The software boom and the arrival of expats have enhanced real estate prices in a major way. The government is promoting the area between Tidel Park and Kelambakkam as a software corridor. As a result, real estate prices have doubled in that area. Prices are going up in South Chennai because that is the most preferred locality among expats. Most companies feel that Chennai offers excellent manpower, particularly in the software industry, which compares better than that in Hyderabad and Bangalore. 3. Chandigarh -- professional interest The city has become a magnet for professionals who have fuelled the rise in property values in the city, say consultants. This, along with reforms like the Punjab Apartment Ownership Act, has eased ownership issues. Retail activity in the city is also on an upswing. The setting up of malls at Chandigarh as part of the government's plans to develop 20odd malls in northern India has also worked to the city's advantage. The familiar growth driver - information technology - is making its presence felt here as well with the Chandigarh Technology Park (CTP) getting filled with more and more IT professionals. Big names in the infotech arena like Wipro Spectramind, Convergys and IBM have shown interest in the city, looking at the infrastructure and proximity to the national capital region. Consultants say prices in locations like Mohali and Panchkula have been on the rise and the trend seems to be firmly up. 4. Jaipur -- right connections Residential space is going to be led by an IT park planned by the Rajasthan Industrial Corporation in Sitapur. Road connectivity to Jaipur, which has been improving at a fast clip, augurs well for the city, feel consultants. GE, the company that had redefined Gurgaon, has moved into Jaipur and this has paved the way for the entry of a number of IT and ITES companies, says Puri. Besides plans of IT companies like Infosys and Wipro to move in, the focus by a clutch of developers has also worked to the city's advantage. "Gurgaon and Jaipur have been the two fastest growing cities and still have potential for further growth," says Tariq Vaidya, head of advisory services at Knight Frank. 5. Nashik -- the next best thing Nashik boasts of a Pune-like climate. Besides consultants feel that the recent World Bank loan that the city got has worked well for its drainage and sewerage systems.

Construction and development activities are on an upswing and the city also boasts better professional education and recreational facilities. Development in the city is being done on the lines of major metros like Mumbai and Bangalore. Connectivity with Mumbai and an upcoming IT hub like Pune -- Nashik is equidistant from both the cities -- is generating a lot of demand for residential property. Consultants feel that after Mumbai and Pune, Nashik is going to be the next hot destination for IT and ITES companies in Maharashtra. Other cities like Kochi and Vizag are also worth a mention for their appreciation prospects, given the availability of quality infrastructure, amenities and unpolluted locations apart from the sizeable retail growth, feel consultants. Consultants suggest putting Rs 10 lakh in a 2 BHK residential property in Nashik, Kochi or Vizag. For the Rs 25 lakh budget, they suggest 3 BHK properties in suburban Mumbai (Mulund, Vashi or Thane), Jaipur or Chandigarh. For the Rs 50 lakh budget they suggest plum 3-4 BHK properties in Kolkata, Bangalore or suburban Mumbai for getting more bang for that buck.
• Rs 1 lakh = Rs 100,000

They make money when stock prices fall! Nikhil Lohade in Mumbai | March 21, 2005 10:01 IST

Susheel Sheth loves playing the contrarian: He buys stocks when others are selling (in a
falling market) and sells them when others are adding to their equity portfolios. But his first love is 'short-selling', he confesses. He makes money by 'going short' on counters that he feels may decline in the near term, specially in counters that are available in the derivatives segment. His modus operandi is simple: He keeps a close watch on companies that show a sudden spurt in prices, specially following some news reports and then goes short in the Futures & Options market. He has fine-tuned this strategy to extract maximum benefit at a minimum loss. And when he feels very strongly about certain companies, he borrows the shares from a broker and sells them in the market, hoping to buy back at a lower price. Since the margin lending and borrowing system is not very well used in India, borrowing sometimes becomes a bit of a problem, he says.

Sheth is not the only one using the short-selling strategy to make money. Short-selling allows a person to make profits from a falling stock and is used as a strategy effectively worldwide. Market sources said that the ability to short sell a stock should not come as a surprise as stock prices are constantly rising and falling. In fact, investors tend to keep a close tab on short interest: literally a market-sentiment indicator of stock trends. Short interest indicates trends The ability to short-sell a stock comes from the fact that stock prices are constantly rising and falling. In fact, broking houses research companies are not only looking for multi-baggers (shares that increase in value by more than 100%) but also for prime short-selling candidates. These are typically companies with weaknesses that the market may not have discounted yet or a company that is simply overvalued. They also look at the short interest, which serves as a market-sentiment indicator. Market entities define short interest as the total number of shares of a particular stock that have been sold short by investors but have not yet been squared off. This can be expressed as a number or as a percentage. When expressed as a percentage short interest is the number of shorted shares divided by the number of shares outstanding. Short interest allows investors to gauge overall market sentiment surrounding a particular stock. Typically, a large increase or decrease in a stock's short interest from the previous month can be a very telling indicator of investor sentiment. In India, where most of the action is in the derivatives segment, players keep a close watch on the open positions and then plan their strategy. Investors usually tend to take their short-term calls in the cash segment according to the trends in the F&O market. Besides having naked positions -- positions without taken any underlying shares -- they also use it to hedge their positions. What is short-selling
How to make money when the price of a stock is falling? Here's how. It's not magic. It's called 'selling short' and is becoming quite the rage.

Short-selling is the opposite of buying stocks -- it entails the selling of shares that the seller does not own in the hope that the price will fall. Market players can borrow the stock from their broker-dealer, sell it and get the proceeds from the sale. How it works: For instance, take the Hindustan Lever Ltd (HLL) stock. Suppose you analyse it over a period of time and then come to the conclusion that the price of this stock would soon fall rather than rise. Now suppose HLL is trading at Rs 100 per share. What you now do is borrow HLL shares (through your broker) at that price and sell them immediately. When, as you had foreseen, the stock price drops to Rs 90, you can buy back the HLL stocks at this price and pay off your debt. Since you have bought it at a lower price, you pocket the difference, which in this case is Rs 10, making a neat little profit. But there is a catch to this. If the stock price rises, you lose money since you have to buy the stock back at a higher price.

The scary truth about home loans! Rajendra Palande in Mumbai | March 31, 2005 09:54 IST

If you are hunting for a housing loan, you are certain to try and get the best deal on
interest rate. But you are certain to be equally careless about the fine prints when it comes to signing the loan agreement. The excitement of having closed a housing loan deal blinds you to the fact that certain clauses can be a cause of concern. Read this: "Provided further that from time to time, the bank may in its sole discretion alter the rate of interest suitably and prospectively on account of change in the internal policies or if unforeseen or extraordinary changes in the money market conditions take place during the period of the agreement. . . ." This clause can be part of even a fixed rate housing loan and therefore, can lead to consternation. And if you are opting for an adjustable interest rate loan, there could be a clause that reads:

"Notwithstanding anything to the contrary contained in this agreement, having regard to adjustable interest rate for the time being, the bank at its sole discretion shall be entitled to increase the EMI amount suitably if: (I) the EMI is not adequate to cover interest payments in full, and/or; (ii) the EMI results in the term of loan exceeding the retirement age or 65 years as applicable. (iii) if so required by the bank at its sole discretion for any reason whatsoever from time to time." A senior official with a housing finance company says no lender can have an agreement that says a fixed rate can be fixed for the entire tenure of the loan of say 15 or 20 years, as otherwise it is certain to cause asset-liability mismatch. None of the lenders' borrowings are for such longer terms and hence cannot guarantee a rate for that long a period. In this backdrop, what is needed is transparency in the manner in which housing finance companies determine the interest rates. Most housing finance players determine the benchmark rate, or the prime lending rate (PLR), based on internal policies. It is not linked to any transparent benchmark. IDBI Housing Finance and ING Vysya are among the few players which have linked their rates to external benchmarks. IDBI Housing Finance has linked its fixed rate loans adjustable every three years, to National Housing Bank's refinance rate. While ING Vysya has anchored its floating rate housing loans to the Mumbai inter-bank offered rate (MIBOR), a market determined benchmark. ICICI Bank recently withdrew the force majeure clause that excuses the lender from fulfilment of contract due to unforeseeable course of events. This was done following protests from customers. Housing Development Finance Corporation has introduced a third product, which is a fixed rate loan with 0.5 percentage point interest higher than normal fixed rate home loan where the rate is adjustable every three years. This higher interest factors in the risks of unforeseen events.