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SUCHETA DALAL ON:

INVESTOR ADVISOR REGULATIONS: PSBS : NO


RIGHT STEP, BUT NOT ENOUGH TURNAROUND YET
Personal Finance Magazine 28 October-10 November 2016 Rs 45

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

THE BIG LOOT!


How Govt health insurers are
looting both the taxpayers and
retail insurance buyers

Group Policy
Rs7,200

Retail Policy
Rs30,000 VALUE STOCKS:
Picking Stocks: Marrying Momentum
with Fundamentals Page40

STOCKS

Pennar Industries: Sluggish Monsoon Vs Aries Agro GM Breweries: Manipulation:


Sales, Growing Profit Sales Growth Stands Out? Low Spirits Kushal Tradelink

Cover Page_279.indd 1 21-10-2016 18:21:40


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ISSUE CONTENTS
28 Oct-10 Nov 2016

Unhealty Covers
Group Policy
C ut-throat competition has led to
government-owned insurers offering group
covers at ridiculous premiums, to grab volume Rs7,200
business. It seems that a rap from comptroller
and auditor general of India a few years ago,
on losses on account of group insurance, has RRetailil PPolicy
li
had no impact on the insurance companies.
The latest trend seems to be to offer covers at Rs30,000
throwaway premiums to rich communities.
Unlike employer cover for employees,
community group policies have higher chances
of going into staggering losses. Our insurance
expert, Raj Pradhan, came across a few group

30 Cover Story
policies that can only inflict heavy losses. With
200%-300% claims ratio for a couple of such
policies, we were proved right. Another such
policy has just been launched for Mumbai
Diamond Merchant Association at an even THE BIG LOOT! Group Policy Rs7,200, Retail
lower premium. Can insurers justify such absurd Policy Rs30,000
pricing? Is the vigilance department doing its Six years after getting a rap from CAG, government insurers are
job? Ultimately, the losses of group insurance still underwriting loss-making group policies. Raj Pradhan finds
are extracted from us, retail customers, by that rich communities are given group cover at throwaway prices.
Ultimately, we, who are not part is such privileged groups, are
charging us a higher premium. When will paying a higher premium. Does IRDAI care?
the Insurance Regulatory and Development
Authority of India (IRDAI) wake up and take
some action on such unhealthy practices by
government-owned insurers? 12 Your Money
Consumer Court Asks Builder To Pay Compensation;
The stock market is bullish and many Hand Over House
small stocks are flying. A rise of 50%-100% is Flat-buyers Complain to Economic Offences Wing about
common. It is easy to fall for these stocks which Reneging on Deal
CBDT Proposes To Fast-track Disposal of Tax Cases
could turn out to be highly risky, if the tide Dewan Housing Finance Reduces Home Loan Interest
turns. Balas piece, warning how to spot stocks Rate
that may give you trouble, is perfectly timed. Supreme Court: Builders Have an Attitude of Not
Dont miss it. Sucheta, in her Different Strokes Fulfilling Promises
piece, points to the slow progress in revamping
public sector banks, while her Crosshairs piece
explains how the financial consumer is still not
being treated fairly, even though regulators
are trying to separate the role of advisors and
14 MONEYLIFE

QUIZ
distributors.
Finally, my piece, in the value stocks segment
this time, addresses, once again, the issue of 18 SEBIs Investor Advisor Regulations:
momentum, something that we, at Moneylife, Right Step but Not Enough
are quite intrigued about. As always, please do
write in with your views, what you would like
us to cover and how we can add value to your
understanding of financial products. Meanwhile,
20 Different Strokes
Public Sector Banks: No Sign of a Turnaround Yet
a Very Happy Diwali from Moneylife!
Disclaimer: Moneylife has a policy of not allowing its editorial staff to
Debashis Basu buy and sell stocks that are written about in the magazine. All personal
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 28 Oct-10 Nov 2016 | 4

Content.indd 2 21-10-2016 18:24:07


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CONTENTS
FUND POINTERS INSURANCE USEFUL APPS

22 Gimmick
Mimic
of the Pharma 28 Insurance
Trends 57 Truecaller:
Calling
Know Who is
Health insurance Smart Tools: Work Smart
Get Rewarded for Being Physically TuneIn: Radio in Your Phone
Active Glympse: Share Your Location
FUND FACTS Regulations
MVA To Cap TP Liability at Rs10
Lakh for Accident Cases?

23 Hot and Cold Stocks


of Mutual Funds in
Life Insurance
Aegon Life Insurance Re-launches
LEGALLY SPEAKING

September 2016 iTerm

Fine Print 58 Filing Delayed


Complaints & Appeals
VALUE STOCKS
STOCKS
TECHNOLOGY

24 Smart Money 40 Picking Stocks:


Marrying Momentum 59 Why Do Mobile
Batteries Explode?
15 Telltale Signs of Stocks that
May Give You Trouble with Fundamentals

EARNING CURVE

44 Stock Watch 50 How US Fund Managers


Changed Strategies
YOU BE THE JUDGE

Pennar
Industries:
before, during and after
the Financial Crisis 60 AMoney-making
Court Case Is Not a
Exercise,
Sluggish Sales,
Growing Profit
Yet
TAX / FIXED INCOME

51 Post-office Monthly
BEYOND MONEY

Monsoon
Income Scheme Decoded
Vs Sales
Growth
G-Sec Yields Down 66 Healthy Environment for
Underprivileged Children
Aries Agro Stands Out? TAX HELPLINE

GM Breweries:
52 Queries at Moneylife
Foundations Tax Helpline
Low Spirits
HEALTH

Market Manipulation:
Kushal Tradelink 54 Treating Patients
through Whole
Person Healing DEPARTMENTS
Market Trend: Endless Churn Readers Response ........... 8
Pulse Beat: Medical
developments from Book Review ....................62
around the world Money Facts ....................64

Content.indd 4 21-10-2016 18:25:01


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Volume 11, Issue 19
28 October10 November 2016

Debashis Basu
Editor & Publisher
editor@moneylife.in

Sucheta Dalal
Managing Editor
sucheta@moneylife.in

Editorial Consultant
Dr Nita Mukherjee
nitamuk@gmail.com

Editorial, Advertisement, GOOD INSIGHT


Circulation & Subscription Office Ive been exploring Moneylife magazine for
315, 3rd Floor, Hind Service Industries
Premises, Off Veer Savarkar Marg, Shivaji
the past five years. The serial columnists, like
Park, Dadar (W), Mumbai - 400 028 Debashis Basu, R Balakrishnan, Yazdi Tantra,
Tel: 022 49205000 Yogesh Sapkale, Prof Dr BM Hegde, lawyer
Fax: 022 49205022
E-mail: mail@moneylife.in SD Israni, lawyer Bapoo Malcolm, have all been
Mutual Fund investments
providing fantabulous information to protect the are subject to market risks,
read all scheme related
readers and investors from all sorts of risks and documents carefully.
E-mail: losses.
sales@moneylife.in
Subscription e-mail Duly crowning them all is Sucheta Dalal and
subscribe@moneylife.in contributors to the Cover Stories. Great going! Write to
I am a senior citizen now. I have been an investor the Editor!

New Delhi
in the stock market since 1992. Yet, I have not
made gains of more than CAGR (compound annual
WIN
a prize
DDA Flats, J-3/66, Kalkaji,
New Delhi - 110 019 growth rate) of 8% all these years. These five years
of reading Moneylife have provided me a good
insight into the stock market, in spite of my small
Bengaluru
1st Floor, 13/1, 7th Main Road, profits.
1 Cross, Saibabanagar, Srirampuram,
st
Saravanan Ramamoorthy, by email
Bengaluru - 560 021

FEE INCOME OF BANKS UNDER A


Kolkata CLOUD?
395, Lake Gardens, Kolkata - 700 045 Ive been keenly following Moneylife for the
Tel: 033 2422 1173/4064 4318
past one year and it has been a delight to see
straight to the point, unbiased and critical,
Moneylife is printed and published by articles on products, services and institutions in the
Debashis Basu on behalf of financial sector as well as other corporates.
Moneywise Media Pvt Ltd and
published at 315, 3rd Floor, We are customers of HDFC Bank Ltd and have seen a ph phenomenal
hen
enom
omen
enal
a
Hind Service Industries Premises, growth and quarter-on-quarter growth of the Bank.
Off Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai - 400 028 As customers, we come in close contact with the way the Bank
Editor: Debashis Basu
has been moving to keep its fee income intact and, hence, profits,
without much effort through levying charges. Recently, as a Premium
customer, where we have been asked to keep balances of Rs1,00,000
(in aggregate of all accounts), we are offered some benefits. Now,
Total no of pages - 68, Including Covers the Bank has started a levying new a charge of Rs115 per customer
on a quarterly basis as Programme Management Fee for upkeep of
customers who are keeping good balances. Isnt this an innovation
RNI No: MAHENG/2006/16653

MONEYLIFE | 28 Oct-10 Nov 2016 | 8

Letters.indd 2 21-10-2016 14:21:20


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LETTERS

Ban the Raids and Torture?


the
Best
letter T his is with regard to the
article How To Bring
a Culture of Honesty and
in the name of local
taxes extra without
mentioning them Mutual Fund investments
are subject to market risks,
read all scheme related
Transparency by Sucheta Dalal. in the cash memos, documents carefully.
My comments are given below. because the tax on
All of us would have read about
the suicide of the IAS officer
sale was chargeable
at the first point of Congratulations
BK Bansal and his family, because of the torture sales; after VAT came GC Mathur
during investigation for having some unaccounted into force, the traders/
money in his house. And, this is not the first case restaurateurs of all hues
YOU WIN A
PERSONALISED
of its kind. We might be thinking that the likes of are charging VAT CLOCK
Bansals are dishonest because of a culture contrary on MRP (maximum
to honesty and transparency. retail price) without
We might be right, to some extent; but most of giving the benefit
us have not understood the vicious circle behind of set-off value to
the culture of Dishonesty and Non-Disclosure of consumers. How it
Information/Activities. is possible? Because
I have tried to understand the reasons behind the cash memos GC Mathur

hoarding hundreds of thousands of crores of rupees are not reckoned


in cash at home and other secured nooks and at the time of
corners, by all classes of society. assessment.
Today, we have the economy performing with Instead, the
75%-85% black money, which is used by people assessment is based
for payments of capitation fees for entry of wards on the periodical
into professional collegesmedical, business returns submitted by traders. This is just one
management, colleges and schoolsmedical example; many more can be provided by Indian
expenses, consumption of alcohol, cigarettes and chartered accountants.
other drugs, purchase of property (movable and The beauty is that in all these formulations of rules
immovable), ostentatious weddings and money- and procedures, the bureaucrats are involved, who
laundering. later suffer like BK Bansal.
How will the likes of BK Bansal purchase property, My appeal to all the bureaucrats in the Government
pay crores of rupees for capitation fees, meet of India is that they must unite and demand that
exorbitant medical expenses, etc, unless they have there should be no investigation by CBI (or any
unaccounted money/property with them stacked in other such body) for unearthing black money, unless
safe corners? the very system of generating unaccounted money is
This is possible when there are no ways and means stopped forthwith. This will stop suicide and murder
to garner the unaccounted money. My point is, of all bureaucrats and businessmen.
when our policies, plans, rules and regulations, and Therefore, instead of building a culture of honesty
legal system provide for facilities to generate black and transparency, we should first talk of making
money, are governments at the Centre and states policies, plans, rules and regulations, legal system
justified in raiding premises of the likes of BK Bansal which is fool-proof and guarantees that there is no
and torturing them to the extent of using force that generation of unaccounted money. Until such time,
makes them commit suicide? our Supreme Court must ban any such raids and
I am giving you the example of the most open investigations in the country.
methods of generation of black money: the cash I hope you would appreciate my concern and you
memos of sale of goods and services; prior to VAT will be associated with me in this effort.
(value added tax), chemists in India used to charge GC Mathur, by email

MONEYLIFE | 28 Oct-10 Nov 2016 | 10

Letters.indd 4 21-10-2016 14:21:48


LETTERS

which is the first of its kind? Customers may not notice is tied to various electronic payments, credit cards,
it with the good balances they keep. Isnt the Bank etc, or simply because it is too much of an effort.
earning enough by way of NII (net interest income) We have a sister entity, called Moneylife Foundation,
from the money kept in the account and other products which attempts to create awareness about such issues.
like loans, trading, etc,? We even tried to fight the fee on more than three
As I understand, this is applicable to all Premium withdrawals per month from ones ATM accounts.
banking customers. As per their website, the Bank Unfortunately, we are too small as yet and unless
categorises customers as follows: Classic, Preferred and people support independent entities like ours, there
Imperia. Imagine the lakhs of accounts and the income will be no one to fight such practices. Stopping such
the Bank generates, on a quarterly basis, without any practices needs a fightnot mere writing. We have
pains or effort from the hard-earned money of its done plenty of the latter. Editor
customers?
I urge Moneylife to look into the matter and dissect it MENACE OF FAKE CURRENCY NOTES
to see how this Bank and, perhaps, all new generation We must have all come across chief minister of
banks have, so far, managed to create profits on their Andhra Pradesh, Chandrababu Naidus demand for
books through fee to the delight of their foreign total abolition of all high denomination
institutional investors (FIIs). Moneylife currency notes of Rs500 and Rs1,000.
should help stop banks from fleecing However, before that demand is even
the customer through such unethical considered, eradication of all fake
practices. currency notes in circulation should
Thank you, Moneylife for being a be topmost on the agenda of RBI
platform to echo the voice of customers (Reserve Bank of India). News
and citizens! about fake currency is common in
Anonymous well-wisher, online comment newspapers; so the latest catch in
Thane (Maharashtra) should not be
Thank you for your letter. What you have considered some stray occurrence. It
pointed out about HDFC Bank has been is only an ongoing part of our enemy
in the public domain for a while. We think nations regular plan to sabotage
it is unfair on the part of banks to keep the Indian economy. The latter is
fleecing middle-class customers with a whole emboldened by the lack of a concrete
bunch of unconscionable fees and charges, plan to defeat it.
from time to time. Most banks are doing it and public RBI must phase out all old currency with a time-bound
sector banks are no exception. For instance, what programme with different designs, colour schemes,
started as free text messages about our transactions paper size variations, replacing the old duplicated lot.
(especially credit-card transactions) as a security RBI should spend money on this most essential security
measure is now paid for. Banks are charging these aspect.
fees, despite earning a hefty income on our savings I am on the look-out for a patriot to file a PIL (public
account deposits. However, they get away with it for interest litigation) in the High Court. I will be happy if
two reasons. The customer grumbles but pays. People the new RBI governor himself takes the action, instead.
do not change their bank account, often, because it YS Madhav Apte, by email

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11 | 28 Oct-10 Nov 2016 | MONEYLIFE

Letters.indd 5 21-10-2016 14:22:16


Your Money
CONSUMER INTEREST TAX

Consumer Court Asks Builder To Pay CBDT Proposes To Fast-


track Disposal of Tax Cases
Compensation; Hand Over House
A gitating flat-buyers are being
helped by consumer courts.
not encash them after accepting
them. Instead, it issued a demand
C BDT (Central Board of Direct Taxes)
asked its tax commissioners to
submit data on the number of appeals
Chandrakant Gandhi and his notice claiming that the couple they have disposed of every month
wife Jyoti, from Ichalkaranji in defaulted on payment and sought against the given target. This has
Kolhapur district in Maharashtra, the same with 15%pa interest. On two objectivesto monitor officers
had jointly executed an agreement 5 November 2008, the firm issued performance and to speed up the
with Rohan Developers on a notice informing the Gandhis that disposal of cases.
27 December 2006, for the it was terminating their agreement.

It also asked commissioners of


income tax (CIT) to upload the data of
all the appeals pending before them
as on 29 February 2016, on its data
collection portal by 21 October 2016.
CBDT has asked all commissioners
(appeal), to send details of the number
purchase of the row house under The couple moved the Maharashtra of cases disposed of to the statistics
the Rohan Seher scheme for State Consumer Disputes Redressal (R&S) wing of the office of director
Rs61.26 lakh. The unit was to be Commission which ordered the general of income-tax by the 7th of
delivered by 31 August 2008. The builder to pay Rs30,000 to the every month.
Gandhis paid Rs24.5 lakh to the couple. The Commission also
firm up to 4 January 2008, but directed Rohan Developers to
HOME LOANS
found that the construction, as hand over possession of the row
certified by the architect, was poor. house after accepting the balance
The couple paid two cheques of Rs36.76 lakh from the couple Dewan Housing Finance
totally worth Rs9.18 lakh in within 90 days, with 9%pa interest Reduces Home Loan
January 2008, but the firm did since 5 January 2008. Interest Rate

Flat-buyers Complain to Economic Oences T he Reserve Bank of India cut the


repo rate, by 25bps (basis points)
Wing about Reneging on Deal to 6.25%, taking the total reduction
to 175 basis points since January

F rustrated and angry real estate buyers are getting more and more active about
their rights. A group of persons lodged a complaint with the Economic Offences
Wing (EOW), Bhubaneswar, alleging that real estate firm Seven Hills Sands duped
2015. Many institutions, such as
Dewan Housing Finance Corporation
Ltd (DHFL), ICICI Bank, Syndicate
them of crores of rupees. The complainants alleged that the company promised Bank and Bank of India, have also
them single-room flats in a housing project in Puri, but reneged on the deal after lowered their interest rates for loans
collecting money from them. after this development.

MONEYLIFE | 28 Oct-10 Nov 2016 | 12

Your Money.indd 2 21-10-2016 17:48:47


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Your Money
CONSUMER PROTECTION

Supreme Court: Builders Have an Attitude of Not Fulfilling Promises

T
he Supreme Court sharply
criticised builders, after Parsvnath
Buildwell Pvt Ltd said that there
would be a delay in giving flats to 70
homebuyers. In this country, builders
have developed an attitude to make
commitments to the purchasers
and not fulfil them by delaying the
projects, the Supreme Court bench
said. This observation came after the
real estate firm said it will give flats to
70 homebuyers, by 17th December. In
addition, the Supreme Court bench
added, They (homebuyers) do not refund. Money should go back to them the bench also pulled up the realty firm
have patience and trust in you and need and they should not suer. In addition, for seeking time to deposit Rs10 crore.

Moneylife

MONEYLIFE
Quiz no

244
QUIZ Answer
Correctly! Win
Another quiz to tease your brain. The answers are in a personalised
sed
this very issue. The winner will be chosen by a lucky clock with an TN Sunder Rajan

draw from correct entries and answers published in Mutual Fund investmentnt
investments are quote!
the issue dated 8th December. Send in your answers to subject to market risks,
read all scheme related
quiz@moneylife.in with the Quiz no., name, address & documents carefully.
telephone number before 16 November 2016.
1. Over the past five years, what is the lowest positive yield 5. What was the profession of Suhrid Tembe?
from sector mutual fund schemes? a. Surgeon b. Teacher
a. 25% b. 10% c. Lawyer d. Chartered accountant
c. 5% d. 2%
6. How many telephone numbers does the Truecaller database
2. How many pharma companies are listed on the BSE for have?
mutual fund managers to choose from, for investment? a. 2 billion b. 2 trillion
a. 16 b. 20 c. 10 billion d. 10 trillion
c. 25 d. 150
7. What is the nature of batteries used in most mobile phones?
3. In which city of the US is Wharton Research Data Services a. lithium-ion batteries
located? b. nickel-cadmium batteries
a. Pittsburgh b. Harrisburg c. dry cells
c. Philadelphia d. Washington DC d. Sulphuric acid and water with lead batteries

4. What is the estimated value of the market for cholesterol- 8. What is the proposed limit of the MVA (Motor Vehicles Act)
lowering statin drug industry? third-party liability in road accident cases?
a. US$100 million b. US$100 billion a. Rs50 lakh b. Rs30 lakh
c. US$500 million d. US$500 billion c. Rs15 lakh d. Rs10 lakh

In all, 11 readers got all the answers right last time. The answers to Moneylife Quiz-242 are: 1- b. Rs896.12 crore
The winner of Quiz-242 is TN Sunder Rajan from 2- b. Three 3- b. Measure of the return on investment as compared
Thane. Congrats! You win a personalised clock with an to a suitable market index 4- b. Home security system 5- c.
investment quote! Momentum 6- d. Rs19 7- c. First do no harm 8- a. Section 35(a)

MONEYLIFE | 28 Oct-10 Nov 2016 | 14

Your Money.indd 4 21-10-2016 17:49:21


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Magazine Subscription revised 28 April 15.indd 3 25-08-2016 20:49:37


www.moneylife.in
News & views with a big dierence

Another murder of RTI have been arrested.


It has been six years since the murder
activist: How about of Satish Shetty, but the case is still
putting information in proceeding at a snails pace. In fact, in
public domain? most of the murders in Maharashtra,
the culprits are roaming free. So, how
Maharashtra, which witnessed the first long is this callous attitude towards
ever murder of an activist who was RTI activists. Since the implementation whistleblowers going to continue? As
using Right to Information (RTI) Act in of RTI Act in 2005, the state saw 12 per the study by Commonwealth Human
India, Satish Shetty, also has the dubious deaths and 24 assaults on activists. In Rights Initiative (CHRI), murders of such
distinction of being the state with the October, Bhupendra Vira was shot dead whistleblowers are brazenly taking place
highest number of assault and murder of in Mumbai. A local politician and his son in every state

Continued losses can erase revenue Consumers with common interest


reserves of public sector banks: can file or join class action suit:
CRISIL NCDRC
A sharp decline in profitability and mounting The National Consumer Disputes Redressal
losses could wipe out reserves of some public Commission has upheld that consumers having a
sector banks and hamper their near-term ability common interest or grievance can file class action
to service coupon on additional tier-1 (AT1) bonds suit against the other party

Is RBIs upward projection for Essar Stake Sale: A big step for
inflation, deliberate? Indian banks?
The Reserve Bank of India, in its monetary policy, The Ruia brothers are selling 98% of their stake
had forecast consumer inflation at 5% for FY16-17. in Essar Oil and 100% stake in Vadinar port to
According to a research note, the deceleration Russias Rosneft Oil and a consortium of traders.
in CPI shows that RBIs inflation projection was A research report feels that this deal is significant
significantly o the mark for the Indian banking system

Does IDS 2016 give power to I-T Beware: Scamsters duping people in
ocers to open decades-old files? the name of ICICI Bank NRI services!
The recently-concluded Income Declaration Fraudsters are now using far more sophisticated
Scheme 2016, while being successful in garnering techniques, posing an even bigger risk to gullible
hidden money of about Rs65,000 crore, also and careless people. Many people may have
opened a window of opportunity for tax ocials received an email recently regarding ICICI Banks
to open or re-open old cases non-resident Indian (NRI) services

EXCLUSIVE VIEWS On issues that matter to you ML FOUNDATION


How to maintain tax papers in a paperless
environment and not to fall victim to the taxmans
roving e-eyes

Going green helps the environment. However,


unless you are careful and have preserved
copies of your income and expenditure related
transactions, electronically, you may attract the
An informer helping MONEYLIFE SURVEY: unnecessary attention of the taxman, advised
I-T dept on tax evasion Mutual fund investors from chartered accountant Ameet Patel. He was
through RTI is not misuse US and Canada speaking on Dont fall victim to the taxmans roving e-eyes and
of information facing diculty learn how to maintain tax papers in a paperless environment, at
Vinita Deshmukh Raj Pradhan a seminar of Moneylife Foundation, sponsored by Capital First.

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Web Content.indd 1 21-10-2016 16:32:50


CROSSHAIRs
Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal

SEBIs Investor Advisor Regulations:


Right Step but Not Enough

O
ver the past few weeks, there has been a with SEBI, that has an arms-length relationship with
raging debate among distributors of financial the bank. The catch is that banks have been given
products over the Securities & Exchange another three years to organise their businesses in
Board of Indias (SEBIs) proposed regulations covering accordance with these guidelines.
investment advisors. A key element to the regulations, The timeframe can only be contracted if SEBIs
first issued in 2013, which is being further tightened, amended guidelines kick-in sooner and make it
is that those wanting to offer investment advice will mandatory for banks to comply. Sadly, even SEBIs
have to register as investment advisors and become proposal to tighten rules for distributors and advisors
accountable for their advice. gives the former three years
Separately, distributors will have to fall in line. Consider how
to disclose their commissions, reluctant RBI is to regulate sale
especially trail commissions. of financial products by banks.
Who gets hurt in the process It took three years to convert its
and who gains? These days, a draft guidelines on the subject,
substantial chunk of financial issued on 28 June 2013, to official
advice to middle-class savers guidelines (not regulation) and has
comes from bank relationship now offered a further three years
managers. They have also been for compliance! In contrast, SEBI
responsible for gross mis-selling of issued its draft guidelines in 2012
insurance and financial products, and issued its final guidelines in
churning of mutual fund portfolios, early 2013.
portraying risky derivatives- At Moneylife, our view is that
based products as safe, tying up SEBIs guidelines are a step in the
expensive insurance products to right direction. Making investment
loans and other banking facilities advisors more accountable
and, worse, getting away with zero will certainly take away the
responsibility for losses or pathetic incentive to mis-sell products for
returns on wealth management commissions, although it does
services. burden advisors with onerous
Banks are regulated by the Reserve Bank of India reporting and administrative work and forces investors
(RBI). Unfortunately, RBI is most reluctant to check to do some hard work too, in the process.
malpractices by banks. A consumer charter that would What does this mean for originators of financial
have fixed many of these issues has been kept toothless products? Will it force mutual fund companies to
and in limbo for the past 20 months. Instead, in April engage directly with their target customers? Today,
2016, RBI issued Guidelines on Investment Advisory their marketing efforts comprise mass-media campaigns
Services offered by Banks which requires investment with a general feel-good message while the real sales
advice to be offered by a separate subsidiary registered come from wooing and incentivising distributors/

MONEYLIFE | 28
27 Oct-10
November
Nov2014
2016| |14
18

Crosshair.indd 2 21-10-2016 16:44:41


banks to push products with higher incentives. government have remunerative relationships with
Naturally, there is little motivation to cut high costs banks and corporate houses. Corporate houses use
and improve returns to make the products more them to influence regulation and policy or, at least,
attractive to the saver. ensure that their point of view is represented. Yet,
none of them is ever asked to disclose his/her financial
Will It Cover Everybody? associations. Simultaneously, they work at keeping out
By shifting the burden of selling the right financial independent voices from such agencies. Does SEBI have
products on to advisors, SEBI will also reduce its any plan to insist on some ground rules and disclosures
own role in grievance redress effort. However, one for this group of influence-peddlers?
big question remains. Has SEBI, which is mandated These academics and consultants not only help
to protect investors, ensured that its regulations cover shape policy to suit their paymasters, but also draft
every possible source of mis-selling? Or will it end up regulation and legislation which is passed off as the
making business tougher and more onerous only for work of the regulator/policy-making committee. I
those who want to comply, while fraudsters and paid know of a couple of specific examples, where such
influencers thrive unchecked? Lets take a look at those experts ensured glaring loopholes in the rules and
who will continue to remain outside SEBIs regulatory exploited them later for their corporate clients. One
gaze. example that I had written about pertained to SEBIs
Paid Bloggers: Moneylife routinely receives requests insider trading regulation. Such influence-peddling
from clueless digital marketing companies, fishing for by unscrupulous academics and consultants is not
content providers to plant articles in the media and an Indian phenomenon; it is a global problem that is
on blogs. Here is just one example: On 10th October, not easily fixed because of the financial clout of giant
Shalini from Buzzerati writes to say, We have received multinational corporations.
a campaign request for a reputed Indian mutual Fraudsters and Tipsters: Finally, at the lowest end, you
funds company. They are looking for finance bloggers have fraudsters and tipsters who continue to spam our
based out of Mumbai who will be able to attend a mobile phones with stock tips, completely confident
lunch event and be introduced to new policies and that they will fly below the regulators radar. Yet, they
re-alignments done by the company. She wants us to manage to cheat a large swathe of gullible investors.
share the package cost for attending the event+blog Does SEBI have a mechanism to track these, or at
post+ social media share of the same. least put information in the public domain, for careful
We are also inundated with offers to write free savers who like to do their homework? Yes, it does
blogposts for us, obviously, because marketing agencies have such a platform in Sachet; but sachet.rbi.org,
pay them on the basis of clicks and views. inaugurated with much fanfare by former governor
Considering that any critical assessment of their Raghuram Rajan and SEBI chairman UK Sinha, is
schemes is anathema to most mutual fund companies virtually stillborn. There is no attempt whatsoever to
(media houses face the brunt of it in terms of refusal promote it, or to make
of advertisements), paid blog posts will have to be it an active platform for
positive, if not laudatory. Yet, they will appear as engagement with savers
independent, spread across the Internet, and will or to collect feedback
be actively promoted on social media by the digital on frauds and tricks
marketers who commission them. How does SEBI plan being unleashed on
to tackle this? Will it monitor the content of such blogs clueless investors.
or even know which ones peddle paid-praise? Will it Although SEBI
question mutual funds that commission such content? has come up with
Quid Pro Quo Deals: Large PR firms handle another a discussion paper
form of paid publicity. They place and promote for better regulating
columns on television and arrange ostensibly investment advisors,
independent financial experts or lawyers to appear it also needs to pay
on television programmes and discussion panels to attention to all the
promote their clients point of view. This is part of a other players listed
fairly open quid-pro-quo for advertising campaigns and above. Otherwise, SEBI
the best of companies is fairly brazen about making will only end up regulating those it can (independent
these demands. Does SEBI have the ability, or the will, advisors), while letting off those who are either too big
to catch such dubious influence-peddling? and powerful, or too small, to warrant its attention.
Paid Academics, Lawyers and Consultants: Many And we havent even discussed the humungous
academics, retired bureaucrats, consultants and lawyers mis-selling in insurance which most people see as
on policy-making bodies/ boards/committees of the investment so far.

19 | 28 Oct-10 Nov 2016 | MONEYLIFE

Crosshair.indd 3 21-10-2016 16:45:37


DIFFERENT STROKES SUCHETA DALAL

Public Sector Banks: No Sign


of a Turnaround Yet

B
ank nationalisation was celebrated as one of still does not put BBB on track for conversion into a
the biggest achievements of Indira Gandhi, in holding company for the government stake in PSBsbut
1969. Successive governments, since then, touted it has moved forward a bit in that direction. The PJ Nayak
rapid bank expansion as the most significant benefit of committee, in April 2014, had recommended setting up of
nationalisation. And, yet, as we get ready to mark 50 years a Bank Investment Company to hold government shares,
of bank nationalisation, the claims have turned out to be after repealing the Bank Nationalisation Act, the State
hollow. Indias public sector banks (PSBs) are burdened Bank of India (SBI) Act and the SBI (Subsidiary Banks)
with bad loans, lack in leadership, are mired in corruption, Act and bringing banks entirely under the purview of the
hamstrung by red-tape and lack of operational flexibility, Companies Act.
and uncertain about their future. We are inducting private Speaking to CNBC in October, Vinod Rai, chairman
sector bankers from of BBB, had said:
much smaller banks Immediately our
to manage large PSBs entire focus is on
and looking at mergers ensuring cleaning up
as the solution to PSBs the balance sheets with
woes. The number of a view to ensure that
unbanked Indians the lending process
remains at a high 233 starts immediately.
million, even after the In another interview to
massive push under The Economic Times
the Jan Dhan Yojana in mid-October, he
added over 125 million expressed frustration
accounts in just two that senior management
years. is reluctant to take
What is mystifying Despite the PMs personal interest, two gyan hard decisions on
is that, despite the sangams, the creation of Banks Board Bureau (BBB) in recasting bad loans,
prime ministers (PMs) February 2016 (whose mandate has been expanded despite a conducive
personal interest, two a couple of times), there is still no light at the end of environment created
gyan sangams to by the government.
the downward spiral into which PSBs are locked
discuss banking issues, We are not making
the creation of Banks much progress and I
Board Bureau (BBB) in February 2016 (whose mandate dont think we have anybody else to blame but the banks
has been expanded a couple of times), there is still no light themselves, he said.
at the end of the downward spiral into which PSBs are BBB, in consultation with the Reserve Bank of India
locked. In its latest effort, the government has expanded (RBI) and vigilance agencies, has set up an overseeing
the role of BBB, reports The Economic Times. Now, apart committee (OC) to help banks deal with bad loans. It
from helping select PSB directors and raise capital for PSBs comprises former State Bank of India chairman Janki
as well as formulate their business development strategies, Ballabh and former chief vigilance commissioner Pradeep
it will also advise the government on extension of tenure Kumar. Mr Rai says that bank consolidation cannot happen
and termination of services of directors in State-run banks unless bad loans are cleaned up significantly.
and institutions. The report further says that BBB will This move is interesting, because, just a couple of
build a data bank containing information relating to the months ago, two former RBI governors were wringing
performance of banks and financial institutions and help their hands over their own failure to act fast enough on
them with succession planning and frame a code of ethics. the bad loan issue. In one of his many public engagements
The new, improved mandate, reported on 20th October, before demitting office, Dr Raghuram Rajan had said

MONEYLIFE | 28 Oct-10 Nov 2016 | 20

DIFFERENT STROKES.indd 2 21-10-2016 16:54:18


DIFFERENT STROKES SUCHETA DALAL

that there was a need for deep surgery to cleanse bank a big worry. Or, maybe, BBB is making recommendations
balance sheets and that the central bank should have done but the government has failed to act; there are no facts in
the clean-up job earlier. the public domain. Moreover, Dr PJ Nayak has already
In response, Dr D Subbarao, his predecessor, who expressed the view that, in its present form (with an RBI
was then promoting his memoirs, admitted that some deputy governor and secretary of the finance ministry on
of the causes of present (banking) crisis owe to action or board), BBB is a far cry from the independent body that
inaction of RBI under my watch. Does this indicate that was envisaged in his report.
responsibility for keeping a check on banks and ensuring Mr Rai, going by his record as CAG (comptroller
a clean-up of their balance sheets has shifted from RBI to and auditor general of India), is capable of rising to the
BBB? It would seem so; and this appears to be with the challenge of reviving PSBs; he also seems to have the ear
support of RBI governor Urjit Patel. But it is not clear of the RBI governor as well as the government which
if banks have got the signal as yet. Gross NPAs (non- has given him more powers. However, he will be judged
performing assets) of PSBs stood at an enormous Rs4.76 by BBBs primary mandate to ensure quick and clean
lakh crore in FY15-16, compared to Rs2.67 lakh crore appointments to bank boards.
in FY14-15. RBI deputy governor
BBBs expanded mandate SS Mundra put it in perspective,
makes it clear that PSBs at a banking seminar on 28th
will have to consult, if not September, when he said, We
report to it, on most aspects are able to talk about a driver-
of their management, senior less car but I think we are far
appointments, succession away to talk about a leaderless
planning and decision-making. bank. I think that is not going
As it begins to play a more to happen tomorrow.
hands-on role in senior PSB He said, eight bank CMDs
appointments, the change in would retire in 2017 and
power structure will become another 10 in 2018. At the
more pronounced. Clean and ED level, he said, five would
merit-based appointments retire in 2017, 10 in 2018
at PSB boards, as well as and 12 in 2019. Mr Mundra
posts of executive director also pleaded for a fixed, five-
(ED) and above will play a Vinod Rai is capable of rising to the year tenure for bank chiefs.
crucial role in their potential challenge. He will be judged by BBBs Three days after the speech,
turnaround. In the past, senior mandate to ensure clean appointments to the government granted one-
PSB appointments were, often,
bank boards. So far, BBBs lack of urgency year extension to SBI chief
purchased by large corporate Arundhati Bhattacharya on
in filling up top posts is a big worry. Or,
houses in exchange for loans, her last day in office. This
write-offs and restructuring
maybe, BBB is making recommendations speaks volumes about the
and for turning a blind eye but the government has failed to act governments seriousness
to diversion of funds. Many on top appointments,
PSB chairmen were appointed, despite adverse remarks accountability and succession at banks as well as BBB. Had
in performance reports. BBB recommended anyone for the SBI post, or suggested
This was the case with Archana Bhargava, former an extension for Ms Bhattacharya? We dont know. BBB
chairman and managing director (CMD) of United Bank has recently recommended nine names for promotion as
of India, who was recently raided by the central bureau EDs of banks; we will watch how soon they are accepted.
of investigation (CBI), as well as SK Jain, former CMD of You can have the best advisory board with a wide mandate,
Syndicate Bank, who was arrested in 2014 for allegedly which makes effective recommendations, but unless the
taking a bribe from Bhushan Steel. Government agencies government acts on them, nothing will change.
are also reportedly investigating a former SBI chairman
and other senior bankers for serious violations during
their tenure. Sucheta Dalal is the managing editor of Moneylife. She was
Will BBB ensure a complete clean-up? It is too early to awarded the Padma Shri in 2006 for her outstanding contribution
tell. So far, BBBs lack of urgency in filling up top posts is to journalism. She can be reached at sucheta@moneylife.in

21 | 28 Oct-10 Nov 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3 21-10-2016 16:54:39


MUTUAL FUNDS POINTERS

holds, 12 (48%) are common with the stocks held by


Gimmick of the Reliance Pharma Fund. The latter holds 16 stocks in its
portfolio; this means that UTI Pharma & Health Funds

Pharma Mimic portfolio consists of 75% of stocks held by Reliance Pharma


Fund. One might feel that this is fine. But whats striking
is that the total allocation to these stocks by UTI Pharma

E
ver since they were introduced, mutual fund sector & Health Fund amounts to 77% of its total assets.
schemes have been a priority for those with the Out of the 25 stocks that UTI Pharma & Health Fund
ability to take risks and a clear understanding of the holds, 13 (52%) of its stocks are common with stocks
prospects of the sector. No doubt, if one gets the sectors held by SBI Pharma Fund. SBI Pharma Fund holds 20
prospects right, one can generate substantial returnsmuch stocks in its portfolio, which means that UTI Pharma &
higher than those of the index or even an active scheme with Health Funds portfolio constitute 65% of stocks held by
a diversified portfolio. Over the past five years, some sector SBI Pharma Fund. The total allocation to these stocks by
schemes have delivered returns as high as 25%. However, UTI Pharma & Health Fund amounts to 66% of its total
over the same five years, there have been schemes that have assets. On careful review, one will realise that 16 stocks or
yields as low as 2%. This 64% of total stocks held by
is the main reason why it is UTI Pharma & Health Fund
Overlap between Reliance Pharma & UTI Pharma
said that sector schemes are are in common with either
Aurobindo Reliance Pharma UTI Pharma
only for people who have Reliance Pharma Fund or SBI
Biocon
the ability to take higher Cadila
Pharma Fund. Well, it is only
risks and know what they Cipla a 64% of stocks in common
are doing. Few people have Divis 26% 23% but they amount to a mind-
expertise in a certain field Dr. Reddy boggling 84% of UTI Pharma
and are capable of taking Indoco 74% 77% & Health Funds total assets.
IPCA
a sector-specific exposure Remember, we are not
Lupin
to achieve higher returns. saying that UTI Pharma
Narayana
This is why sector schemes Sanofi Common Stocks Other Stocks
& Health Funds top 64%
are not very popular. Sun Pharma stocks constitute 84% of its
One sector in which total assets. We are saying
quite a few schemes are that 84% of its total assets
available is the evergreen Overlap between UTI Pharma & SBI Pharma are invested in 64% of stocks
p h a r m a s e c t o r. T h e Alkem UTI Pharma that are common with the
SBI Pharma
dominant schemes, Aurobindo larger schemes, as per AUMs.
according to their AUMs Cipla Reliance Pharma Fund is five
Divis
(assets under management) times larger and SBI Pharma
Indoco 22%
are: Reliance Pharma Fund, 34% Fund is three times larger
IPCA
SBI Pharma Fund and UTI Lupin 78% than UTI Pharma Fund.
66%
Pharma & Health Fund, Narayana Another doubt is whether
Natco
with AUMs of Rs1,565 these funds are mimicking
Sanofi
crore, Rs1,076 crore and Strides each other. Reliance Pharma
Rs333 crore, respectively. Sun Pharma Common Stocks Other Stocks Fund and UTI Pharma &
However, in addition to Torrent Health Fund have invested
the large difference in the 74% and 72% of their
AUMs of the various AMCs (asset management companies), respective assets in exactly the same stocks. Reliance
there is a hidden untold story. Pharma Fund and SBI Pharma Fund have invested 62%
A careful look at the portfolio of pharma schemes and 60% of their respective assets in exactly same stocks.
reveals some striking facts. There are approximately 150 UTI Pharma & Health Fund and SBI Pharma Fund have
pharma companies listed on the BSE (Bombay Stock invested 66% and 78% of their respective assets in exactly
Exchange). Out of these only, 16, 20 and 25 stocks are same stocks.
present in the portfolios of Reliance Pharma Fund, SBI The options available in sector schemes are very limited
Pharma Fund and UTI Pharma & Health Fund, respectively. and taking a diversified exposure via the mutual fund route
Out of the 25 stocks that UTI Pharma & Health Fund may be difficult. Mitul Patel

MONEYLIFE | 28 Oct-10 Nov 2016 | 22

Fund Pointer.indd 2 21-10-2016 16:41:51


MUTUAL FUNDS FUND FACTS

Hot and Cold Stocks of Mutual Funds in September 2016


In September mutual funds bought Rs488.35 crore of Castrol India and sold Rs510.39 crore of
Axis Bank. Reliance Equity Opportunities Fund purchased shares of Castrol India worth Rs113.41
crore while 44 schemes sold shares of Axis. Funds preferred Motherson Sumi Systems, Wipro and
Tech Mahindra. ICICI Prudential Value Discovery bought Wipro shares worth Rs259.73 crore and
Franklin India Bluechip Fund sold Infosys shares worth Rs79.77 crore.

Top Bought Companies Top Sold Companies


Company Name Value Company Name Value
(Rs Crore) (Rs Crore)
Castrol India 488.35 Axis Bank (510.39)
Motherson Sumi Systems 359.79 Yes Bank (294.72)
Wipro 349.49 Infosys (230.22)
Kotak Mahindra Bank 309.64 Housing Development Finance Corporation (181.20)
Mahindra & Mahindra 297.16 Cipla (147.43)
Tata Steel 206.12 United Breweries (134.31)
Cholamandalam Investment & Finance Co 200.45 Bharat Heavy Electricals (125.04)
Aurobindo Pharma 187.62 Larsen & Toubro (123.52)
Gail (India) 186.74 Crompton Greaves Consumer Electricals (103.73)
Tech Mahindra 182.32 Tata Motors (90.60)
HDFC Mutual Fund
Beml 65.51 Maruti Suzuki India (145.33)
Oil & Natural Gas Corpn 53.00 Bharat Petroleum Corporation (84.83)
Dish TV India 39.75 Dhanuka Argitech (71.06)
Yes Bank 37.34 Bharti Airtel (68.31)
Cognizant Technology Solutions Corp 34.37 HDFC Bank (57.33)
ICICI Prudential Mutual Fund
Maruti Suzuki India 418.54 Cipla (87.15)
Wipro 315.50 Punjab National Bank (81.37)
Hindustan Unilever 154.75 UPL (79.64)
Tech Mahindra 151.69 Oil India (55.07)
Castrol India 141.76 Reliance Industries (52.33)
Reliance Mutual Fund
Castrol India 225.85 Axis Bank (188.60)
Reliance Industries 209.86 ICICI Bank (105.27)
Tata Consultancy Services 71.17 Bharat Heavy Electricals (96.99)
Nava Bharat Ventures 70.92 HDFC Bank (79.64)
Mahindra & Mahindra 42.64 Jagran Prakashan (76.87)
Franklin Templeton Mutual Fund
Coal India 131.16 Infosys (105.67)
Bharti Airtel 119.78 Housing Development Finance Corporation (86.77)
Gail (India) 96.71 Axis Bank (74.36)
Mahindra & Mahindra 61.42 Amara Raja Batteries (73.42)
Lupin 58.88 Yes Bank (68.97)

23 | 28 Oct-10 Nov 2016 | MONEYLIFE

Fund Facts.indd 2 21-10-2016 17:22:00


SMART MONEY R BALAKRISHNAN

15 Telltale Signs of Stocks


that May Give You Trouble

C
apital markets are an enabler of wealth creation Well, the stock did correct, but nothing earth-shaking.
for investors and businessmen. Better and better The biggest dilemma that faces us when a fraud is
financial performance of a listed stock ensures discovered is about what to do with the stock. Should
that the stock price go up and everyone is, generally, we sell out immediately? We sell out and then find that
smiling. However, this often leads to companies numbers the stock price is staging a gradual recovery. Or we do
getting manipulated. Manipulation can be done by any not sell out and then the prices keep falling further. How
of the persons involved. It need not be only the promoter. to resolve this? Here, I suggest one acid test. Check the
It could be a member of the management team or even promoter holding. If it is more than 50%, the chances
one individual whose personal goals override ethical and are that the company will come out of the ditch. Either it
legal concerns. becomes a target for takeover or the promoters attitude
Today, when a fraud is discovered, the erosion in share changes, over time.
prices is dramatic. We have seen instances of price collapse The other test is to see if the company is in a business
in stocks like Satyam, Financial Technologies, KS Oils, which impacts a lot of others as a chain effect. For
etc. There are cases where the story does not sustain (you instance, the government will not let a bank fail due to
can assign whatever reasons you want) like Bartronics, social reasons. A company like Satyam, of course, defies
Suzlon, Opto Circuits, logic. Yes, it did have
and stock prices a good business. But
slowly disintegrated. an engineered rescue
Large investors just meant that there were
dump these stocks some big stakeholders
and life goes on. From who would have been
time to time, they try impacted had Satyam
and resurface like been allowed to find its
the phoenix, but it is own path.
very rare for them to Frauds would be
actually make a come- highest in the finance
back. sector. A bank or
In many cases, the a finance company
blind run-up in stock borrows money or
prices starts because uses someone elses
the story is spun like a money to lend at a
yarn and the investor profit. When it comes
simply does not do his to borrowing, the best
homework well. Any investor would have stayed away credit is the one that does not need money. So, as lending
from stocks like Bartronics or Suzlon, if he had subjected increases, the risk profile certainly increases. Managing risk
the annual reports to analysis. It would have raised too is not easy, given that there are so many facets involved.
many questions and concerns. There is enough vulnerability to encourage frauds. And
Sometimes, it seems to me that the world is too accounting systems always give choices, more so when it
forgiving. Wrongdoing is permitted so long as it does comes to banking and finance. This sector is the toughest
not personally touch someone. Institutional investors talk to evaluate.
corporate governance, but that does not impact their So how does one keep ones investments free from
investment strategy or choices, in any way. For instance, risks of fraud? This is where knowledge of the promoter
recently, we heard of a company called Welspun losing becomes important. Understanding every first-generation
some of its prime customers because a customer found entrepreneur is a challenge, since there is nothing to fall
that what he got was not what he thought he was buying. back on. The best of colleges do not guarantee integrity

MONEYLIFE | 28 Oct-10 Nov 2016 | 24

column_Balakrishnan.indd 2 21-10-2016 15:08:28


SMART MONEY R BALAKRISHNAN

as an attribute of those who pass out of their portals. Apart from these, I, of course, stay away from a sector
Human greed is vastly underestimated. or business I do not understand. These are but some
Of course, not everyone can figure out the promoter obvious ones. More important, using a hurdle of Return
or what or who he is. And the sell side is very careful. on capital employed (RoCE) and RoE generally helps
In no research report will they talk about the promoter, weed out most stocks. And accounting analysis should
his background or publish any views about him. Media take care of most.
or journalists also avoid all mention, due to commercial Of course, no one is immune to a structured fraud.
considerations. Enron was one which had many victims; but there were
Based on my experience, I take it that every company sharp analysts who sounded the bugle. They were laughed
has this risk. An ethical fellow can turn unethical; but the off. However, there is no excuse if you let your guard down.
reverse is not usually true. So, until proven otherwise, it is We are even seeing a multinational company Ricoh
better to remain a sceptic. Some will say that they would caught in accounting fraud. There were enough warning
prefer to avoid dealing with promoter-driven companies signals; but no one worried about it. Companies postponing
and opt for professional management-led companies. accounts adoption meetings, changing the financial year-
The risks, to my mind, are as high, if not higher, in these end, etc, are alarm bells.
rudderless ships. The management team will vote itself In general, when a fraud attack happens on any share
fancy salaries and stock options. And, once they get trapped you hold, do not act in a hurry. If it is a manufacturing unit
in the stock options, every action starts getting driven by with good products, there is value left in the company. It
the stock price. And, very often, the wrong route is easier could have a size or a brand which could have salvage value.
than the right one. I generally keep away from a stock, if The bad ones will be the small ones, tech companies or
there are issues like: commodity companies. Remember, institutional investors
1 Promoter holding below 30%; tend to act as a herd. And they do not care much about
2. Continuous diversifications or acquisitions; ethics. They will evaluate if the company has a future, if
3. Professional managed with no owner and high ESOPs; the management is changed. If yes, they generally will stay
4. Accounting policies that are aggressive; put. Some of them will wait for the bad news to blow over
5. Lack of free cash flow; and then exit when the price recovers.
6. Huge divergence from industry trend; As the saying goes, prevention is better than cure.
7. Rising debt levels; This would mean that you avoid too much commitment
8. Rising level of other loans and advances; in a single stock, unless you know for sure that there is
9. Rising level of inventory and debtors; no promoter risk of diddling the shareholders. At some
10. Too many subsidiaries and associates; point in time, I will try and take up some companies where
11. High level of pledging of promoter shares; there was wealth erosion due to fraud and whether there
12. Low level of income-tax payments; were any warning signals. I, generally, find that ownership
13. Margin changes that seem too good to be true; quality holds the key.
14. Frequent visits to capital marketsa true red signal;
15. Third-generation family and multiple successors. The author can be reached at balakrishnanr@gmail.com

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25 | 28 Oct-10 Nov 2016 | MONEYLIFE

column_Balakrishnan.indd 3 21-10-2016 15:08:43


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


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Health insurance products are complex. Policies
in exclusions, conditions and fine print. If
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About MAS
MAS is a SEBI-registered investment adviser and part of Moneylife, Indias most unbiased and
pro-investor research and information group. We run Indias best personal finance magazine,
Moneylife. We are not afraid to call a spade a spade. We are Indias only media company to have
set up a non-profit trust, Moneylife Foundation, which is now the largest savers and investors
association with more than 35,000 members. MAS was set up to help investors and savers make
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MSSN GB (Insurance 1-3 ).indd 3 29-07-2016 16:42:29


lose their lives or end up with
disability. While physical abilities
are irreplaceable, financial
compensation can alleviate the
victims problems. Today, sky is

INSURANCE TRENDS the limit for the award that Motor


Accident Claims Tribunal (MACT)
can bestow. If there is proper
New products, regulations, features and options, justification, delay in claims filing
interpreted from your perspective is also pardoned. Road accident
victims, thus, have a chance
of reducing the extent of their
H e a lt h i n s uranc e app can keep a daily log of your misfortune.
activities. The more you workout,
Get Rewarded for the higher the reward points on the
app. Is excess workout good for
Being Physically you? At the end of the year, you can
Active use the points to pay less for your
policy or use them towards availing

C igna TTK Health Get


ProActiv India is a
programme designed to encourage
other health benefits like pharmacy
bills or doctors consultations. It is
easy to track walking activity which
and reward people who are can get automatically updated
physically active as measured on the app. But, non-track-able
activity can go a long way in activities like yoga, aerobics and
dance will have to be manually MVA, 1988 is considered a strict
entered by the policyholder. Is it law by the insurance companies.
just a marketing gimmick? It is Insurance is a contract between
unclear how the insurer can trust the insurer and the insured. There
the policyholders manually entered is no privity of contract between
data. the insurer and a third-party who
suffers in an accident.
Re gulations The law gives the insurance
company a limited right to defend
MVA To Cap TP against a third-party. In 99% of
Liability at Rs10 cases, the insurer will not be able
to recover the money from the
improving ones health. The Lakh for Accident insured.
policyholders of Cigna TTK health
products get rewarded for being
Cases? While fixing an upper limit is
a bad move for consumers, there
fit. The insurer wants to encourage
people to get physically active, as a
lifestyle. Cigna TTK policyholders
A proposal to amend the
Motor Vehicles Act (MVA)
aims to cap the third-party (TP)
is a silver lining. It is a positive
if Rs10 lakh is provided as fixed
compensation in all the cases.
can register any time during the liability at Rs10 lakh in accident Today, a number of low income-
policy period. Customers have cases. At present, there is no cap group people suffer in accidents.
to download the Get ProActiv on the insurers liability. It will Based on their income group and
application and register the required be unfortunate if such a cap is age, many MACT judgements have
details (such as customer ID, policy legalised. It will certainly augur well awarded an amount below Rs10
details). for general insurance companies but lakh as compensation for death and
The application can sync at the cost of fair compensation for grievous injuries, with the average
with fitness wearable from Fitbit, accident victims. payout per TP claim being less
Garmin or pedometers. The mobile Road accident victims may than Rs5.5 lakh. Providing a fixed

MONEYLIFE | 28 Oct-10 Nov 2016 | 28

Insurance.indd 2 21-10-2016 17:39:47


INSURANCE TRENDS

benefit of Rs10 lakh will ensure a monthly, half-yearly and Entry age for a customer is a
that the poor are assured of this annually unlike previously, minimum of 18 years and a
amount. Those who are well-off when the customer was required maximum of 65 years with a
have other insurance policies too to make annual payments. minimum policy term of five
and are well-protected. The maximum maturity age has years and a maximum of
been raised to 80 years, 62 years.
L i f e I ns u r anc e raising the Inbuilt terminal
maximum illness benefit.
Aegon Life policy term Option of
Insurance to 62 years. additional

Re-launches
The product optional coverage
now also (riders) against
iTerm offers accidental death,
flexibility critical illness,

A egon Life Insurance has


re-launched its competitive
online term product iTerm. The
to choose
death benefit
payout: as
women specific
critical illnesses,
and disability.
new features include the following: a lump-sum Lower
Added life stage benefit for payment, as premium
customers, wherein one can fixed monthly rates for women and non-
increase ones protection cover income for 100 months or smokers.
as per the important milestones as a combination. Total sum assured: minimum
in life. iTerm product features include the Rs25 lakh and no maximum
Premium can now be paid on following: limit, subject to underwriting.

Fine Print policies after expiry of licence


for which Rs5 lakh penalty was
Forum shows that this issue is
very much alive and can hit you
levied. Another penalty of Rs5 at any time if you are a United
SBI Life Penalised Rs10 Lakh lakh was imposed for violation of India customer. The Forum

I nsurance Regulatory and


Development Authority of
India (IRDAI) has imposed a
the provisions of the regulation
on accepting the business from
unauthorised persons.
ordered United India Insurance
and Medsave Healthcare (TPA)
to pay Rs1.54 lakh to a Bhiwandi
resident for the hospitalisation
United India Still Strict with 24 bill.
Hours Intimation Rule? The Forum rapped the insurer

U nited India Insurance


retail health insurance
policyholders are required to
for its harsh decision of claims
denial for timeline violation. It
observed that it was difficult
intimate the insurer/TPA within to expect that the relatives and
24 hours of hospitalisation. In the friends of a patient will be able
past, they used to reject claims to meet the 24-hour intimation
penalty of Rs10 lakh on SBI Life if the intimation was not within deadline when they may be
Insurance Company for violations this ridiculously strict time-limit. busy with the policyholders
of various norms, including IRDAI had to issue a circular hospitalisation needs. The Forum
guidelines on accepting business to life and non-life companies ordered United India to pay
from a corporate agent after the asking them not to reject claims the claim with 6% interest as
expiry of licence. The inspection on technical grounds like a delay additional compensation. It is
report of the corporate agent in filing. surprising that IRDAI has left the
Bonanza Assurance Advisors But a recent decision by Thane consumers to fend for themselves
indicated that it had sold 621 District Consumer Redressal on a case-by-case basis.

29 | 28 Oct-10 Nov 2016 | MONEYLIFE

Insurance.indd 3 21-10-2016 17:38:43


THE BIG LOOT!
Group Policy
Rs7,200

Retail Policy
Rs30,000

Six years after getting a rap from CAG, government insurers are still underwriting
loss-making group policies. Raj Pradhan finds that rich communities are given
group cover at throwaway prices. Ultimately, we, who are not part is such
privileged groups, are paying a higher premium. Does IRDAI care?

I
n September 2014, Jain International Organisation group policy continues. The regulator had issued norms
(JIO) got a group policy underwritten by National for higher solvency levels for health insurance due
Insurance. The premium of Rs7,200 was a to high claims. Despite higher solvency requirement,
throwaway price for a family floater policy of Rs5 government insurers are still offering cheap premiums.
lakh covering the proposer, spouse, two dependent Is it sustainable?
children and two parents up to the age of 80 years. Does it make any sense to underwrite policies at
The comparable premium for retail policyholders was throwaway premiums? What are the implications?
Rs30,000 or so. Moneylife had published a couple of articles on the JIO
Six years ago, the Comptroller and Auditor General deal one of which one was titled Health Insurance:
(CAG) had rapped health insurance companies for Group Insurance for Jains with Taxpayers Money?
massive losses on group insurance, thanks to underwriting With the incurred claims ratio (ICR) of 300% in
such policies. It made no impact. Nothing has changed. a year, Moneylife stands vindicated for questioning
Such policies continue to be underwritten. The race the pricing of that policy which no other media dared
to the bottom for government insurer underwritten to ask. Did National Insurance sack any employee or

MONEYLIFE | 28 Oct-10 Nov 2016 | 30


COVER STORY

Our estimate is that government insurers may have


group business ICR of 115%-120% while private
insurers ICR could be 100%-110%. However, we have
seen some tightening in the past few months which
should help reduce losses in group businesses

Arvind Laddha, deputy CEO, JLT Independent Insurance Brokers

did Insurance Regulatory and Development Authority it done. United India is serving the rich community at
of India (IRDAI) take any action against National taxpayers money.
Insurance for underwriting at such a throwaway price? Fourth, some group policies, like that for Mumbai
Unlikely; but it is certain that taxpayers money was Press Club, even have maternity cover without a waiting
wasted by the government insurance company insuring a period. The insurer can expect claims for sure. No
rich community at a ridiculously low premium. wonder, Mumbai Press Club policy had ICR of 200%
The latest group cover on a ridiculous premiumof after one year. The insurer raised premium by just 42%
Rs5,550 for Rs5 lakh covercomes from United India in the second policy year. History repeats itself and the
for another rich group Mumbai Diamond Merchants insurer is willing to take more losses.
Association (MDMA). It means that the offer is 23% Some government group insurance schemes can be
lower premium than the JIO policy which suffered 300% loss-making; but these are meant for the poorer sections.
ICR in one year. The question United India should ask While the insurance company should not be lax in
itself is whether it will breach the ICR of 300% after underwriting these policies, it may not be chastised for
one year? Why is a rich group offered a policy at a rate making mistakes here. There have been cases of poor
which is totally unjustified? Is United India too desperate people have died waiting for government schemes to
to acquire loss-making business? cover them. It means they really did not have the money
There are several flaws with such group cover. First, to do the procedure. If such a government scheme is
there is no age-based premium. It means that even for a making losses, we can consider the write-off as service
senior citizen the premium is same as it is for the young. to the needy. But giving a rich community a super deal
Retail mediclaim premium is based on age. There is also in group insurance is a looting of the government by its
no medical test; hence, anyone who is a part of the group own insurance companies. Also, to cover up its losses,
is, by default, eligible to buy cover without undergoing insurers start overcharging us, the retail consumers.
tests. So, why are retail mediclaim buyers denied cover
under the garb of right to underwrite when group cover Government Insurers with Massive ICR Ready for IPO?
is easily given even to old and those in poor health? One estimate puts government insurers, bleeding with
Second, there are high chances of adverse selection, group health insurance portfolio, having ICR of 120%-
as the insurer does not, by default, get business from 150%.
every member of the organisation/association. A member According to Arvind Laddha, deputy CEO, JLT
has to agree to join the plan by paying the premium. So, Independent Insurance Brokers, Typically, corporate
there is a good chance the young and healthy members of policies do not have negative selection as everyone is
the group may not buy it while the old, or those with pre- covered by the employer. These policies are better off
existing diseases (PED), will quickly buy it. The insurer than community based group policies which are based
may not get good mix of customers which is possible for on subscription by group members. Our estimate is that
corporate cover which includes all employees. government insurers may have group business ICR of
Third, covering PED from the first day and have no 115%-120% while private insurers ICR could be 100-
waiting periods for specific procedures means that those 110%. However, we have seen some tightening in the
with PED have a bonanza with claims for PED or any past few months that should help reduce losses in group
pending procedure being paid immediately. So, any rich business which some insurers may have in pursuit of
diamond merchant, who has parents requiring expensive achieving top-line growth.
procedure worth lakhs of rupees, has only to pay peanuts Overall health insurance (group + retail) ICR for
(Rs5,550 premium) for MDMA group policy and get government insurers for 2014-15 has been an average of

31 | 28 Oct-10 Nov 2016 | MONEYLIFE

Cover Story.indd 3 21-10-2016 16:10:22


COVER STORY

talking about ensuring group health policies are not loss-


ICR for Health Insurance 2014-15 making, but the wrong practice continues unabated.
Insurance Net Earned Claims Incurred Claims So aggressive are group insurance quotes that many
Company Premium Incurred Ratio (ICR for Indian corporates prefer to buy insurance from public
(Rs in lakh) (Rs in lakh) 2014-15) sector providers rather than from their own groups
National 3,32,965 3,66,344 110.02% insurance company. Clients usually go with the lowest
Insurance quote. Due to the existing scenario, several private
New India 3,68,785 3,64,302 98.78% insurers are less keen on group business or underwrite
Assurance it on their own terms and pricing. Private insurers are
Oriental 2,00,410 2,34,517 117.02% turning their back on group cover as they have faced
Insurance higher claims and, hence, learnt their lesson.
United 2,99,246 3,56,057 118.98% Moneylife contacted eight private insurers and a
Insurance couple of government insurers, to get their views on group
Total for 12,01,406 13,21,220 109.97% health insurance. Strangely, only one of them responded.
Government It means that even private insurers do not want to share
Insurers
their data on ICR for group health insurance, whether
Total for 4,61,566 365414 79.17% they plan to increase/decrease group business, issues
Private
Insurers with group health business and whether government
insurers are still getting business by offering ridiculously
Total for 2,14,944 1,33,663 62.18%
Stand-alone low rates. That private insurers chose to keep mum, tells
Insurers us a lot about the current practices, though this Cover
Government insurers with high ICR when compared to private and Story will help private insurers who are doing better than
stand-alone insurers government insurers.
According to Mukesh Kumar, ED, HDFC ERGO
General, Pricing in group health has become tough
110%; ICR for private insurers has been less than 100% and in turn a challenge in acquiring good and long
for most while for stand-alone health insurers ICR have sustainable group health business. Lack of treatment
been less than 65%. Retail policyholders are better for protocol in India leading to over utilization of resources,
insurers; yet, government insurers are chasing group data quality issues leading to incorrect pricing, medical
business. Insurers even keep bidding against each other inflation, soft market are the main issues.
to acquire such business. It is not enough for insurers to report net profits
We wonder why would anyone underwrite loss- due to investment income earned from their reserves;
making business at ridiculous rates unless there are some underwriting losses shows the real picture. Only one
vested interests and corruption? Middlemen who help general insurer is making underwriting profits; 21 out
the community make a deal with the insurance company of 22 non-life insurers are incurring underwriting losses.
earn handsome profits. There have been cases of insurers So, why are group covers still underwritten? Insurers are
undercutting their own previous year premium, despite relying on investment profits to show net profits, but it
the ICR being over 100%! Does that sound logical? Are is time they focused on underwriting profits. Investment
they waiting for a miracle to happen in the second year, income is subject to market risks.
when, for us, they are quick to revise rates, based on Government has instructed these companiesNew
previous years overall claim experience? IRDAI has been India Assurance, United India Assurance, National

Pricing in group health has become tough.


It is a challenge in acquiring good and long
sustainable group health business. Lack of
treatment protocol and data quality issues are
leading to incorrect pricing

Mukesh Kumar, ED, HDFC ERGO General Insurance

MONEYLIFE | 28 Oct-10 Nov 2016 | 32

Cover Story.indd 4 21-10-2016 16:10:51


COVER STORY

that insurance officials dont understand. These are sane,


General Insurers Making Losses rational officials who understand everything. They know
Insurer FY15-16 Profit Combined that ICR will cross 100%, but still want business for
(Rs crore) Operating Ratio (%) the top-line business. Getting Rs10 crore premium to
Bajaj Allianz 544 99 improve the top-line quickly is far easier for them than
selling thousands of retail policies. There are many honest
ICICI Lombard 507 107
officials underwriting group policies, but there could be
New India Assurance 829 119
a few with vested interests having blessings of people in
United India 221 120 the know. It is unclear if the vigilance departments are
Oriental Insurance 300 124 seriously looking at it in the right spirit or just going
National Insurance 149 138 by the rule book. IRDAI had issued norms for higher
Only one insurer with underwriting profits solvency levels for health insurance, but high ICR defeats
it. Take a look at some of the group policies.

Insurance Company, Oriental Insurance Company and Mumbai Diamond Merchants Association (MDMA)
GIC Re to move a board resolution to list their companies Employees and members of MDMA are offered group
on the stock exchanges. Instead of solving the issue, insurance policy from United India. The premium is an
IRDAI is busy getting government general insurers to unbelievable Rs5,550 (that too inclusive of service taxes)
go public with the hope that listing might help improve for Rs5 lakh cover for self + any three family members
underwriting discipline in companies. (including parents up to age 80 years). Product benefits:
Mr Kumar adds, While government insurers had 1. Pre-existing diseases (PED) are covered from day
the early entry advantage in the business, private players one;
have also made significant inroads in this domain in 2. 30 Days waiting period waived;
the last ten years or so. As the market for group health 3. 1st, 2nd, 3rd, 4th year exclusion for special diseases
insurance matures, we are competing on better products waived;
and quality of service. 3. 30 days pre- and 60 days post-hospitalisation
expenses;
Rich or Powerful Groups Paying a Low Premium 4. Day-care procedure covered;
All sorts of groups are availing group cover at a 5. Disease/ailment cappingnot applicable;
throwaway price. If they are not rich, like JIO or MDMA, 6. Congenital internal diseasescovered;
they are powerful like the Press Club in Mumbai, Bar 7. Doctors charges and medical expenses capped on
Association and group cover for bureaucrats. Here are total billwaived;
the various features that usually come with group cover: 8. ABC clause. 25%, 25% and 50% capping on room
No medical tests for underwriting; rentwaived;
PED coverage from day one; 9. Per day 1% of sum insured on normal room rent
Waiting period of 30 days waived; capping and 4% of sum insured on ICU;
Waiting period for specific procedures (usually one 10. No waiting period;
to 4 years) waived; 11. Cashless facility covered;
30 days pre- and 60 days post-hospitalisation 12. Claims intimationwithin 7 days from date of
expenses covered; admission;
Day-care procedure covered;
Disease/ailment cappingnot applicable;
Mumbai Diamond Merchants Association
Higher room rent sub-limit; Cover Premium
Higher procedure sub-limit;
Sum Insured Premium
Relaxed claims intimation;
Relaxed claim documents submission; Rs1 lakh Rs1,200
Maternity benefit; Rs2 lakh Rs2,230
Day one baby cover; Rs3 lakh Rs3,340
Cashless facility; Rs5 lakh Rs5,550
Personal accident cover; Premium for self + any three family members (including parents up to
Porting option. age 80 years). Premium is inclusive of service taxes
According to an insurance industry expert, Its not

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Cover Story.indd 5 21-10-2016 16:11:11


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COVER STORY

Government SchemesLeakages and Losses


T he The Maharashtra governments Rajiv Gandhi
Jeevandayee Arogya Yojana (RGJAY), launched
in July 2012, provides health insurance cover up to
for the poor does not actually help the poor. The TISS
study clearly indicates that poorer the beneficiary, the
greater is the level of difficulty for availing benefits. Here
Rs1.5 lakh for families earning less than Rs1 lakh per are the main conclusions of the TISS study:
year. The Scheme is meant for people below poverty 1. Arogyamitra should
line (BPL) families (yellow be at the hospital to help
cardholders) and above the beneficiaries about
poverty line (APL) the amount approved,
(orange cardholders). A inclusions they are entitled
study conducted by the to and protocols regarding
Tata Institute of Social registering complaints.
Science (TISS) points to 2. The analysis revealed that
an unusually high level of almost half of the RGJAY
leakages in the system. beneficiaries are actually
Nearly half of the people from the non-eligible
who have benefited from the category with family
Rajiv Gandhi Jeevandayee income higher than Rs1
Arogya Yojana are not lakh per annum.
eligible. Private hospitals are 3. Out-of-pocket (OOP)
charging for services that are expenses seem to be more than just OOPs moment
already covered under the Scheme. Questions are also for the RGJAY. Hospitals made beneficiaries pay
being raised about inefficiencies of the insurer or third- for services like diagnostic tests, medications, and
party administrators (TPAs). All this at taxpayers cost! consumables, even when it was covered under the
The loss from different stakeholderslike false Scheme. A notable finding was that the mean OOP
beneficiaries, hospitals, insurers and TPAsis funded by spending in private hospitals was more than twice
taxpayers. This shows how another ambitious project that compared with public hospitals.

13. Claim documents submissionwithin 30 days from Rs8,500 for family cover of Rs3 lakh cover, irrespective
date of discharge. of age. The premium includes personal accident cover of
For retail policyholders, United India insists that Rs3 lakh for the member too.
the policyholder has to intimate within 24 hours of Just like MDMA, there is bound to be some adverse
hospitalisation. United India has routinely rejected claims selection. There are chances that those in poor health,
for this technical violation. For MDMA, it has given a self or family, will be the quick to join. After all, getting
relaxed timeframe of seven days. Claim documents must into the group policy is much easier than buying retail
be submitted within seven days of discharge for retail policy. The insurer may assume that most of the Mumbai
customer while it is 30 days for MDMA group. Is it that Press Club members will join it and not just those who
United India feels that retail customers are more prone to have health issues. But are they really getting a good mix
cheating and, hence, shorter time-limit for them? United of healthy people too?
India used to reject claims mechanically based on delay What does the ICR say about the premium collected
in hospitalisation intimation and claims filing. IRDAI in the first policy year? In the first year, about Rs33 lakh
had to issue a circular to life and non-life companies have been claimed against the collection of Rs17 lakh
asking them not to reject claims on technical grounds under the Press Club Mediclaim policy. So, it means New
like a delay in filing. India Assurance got a reward of nearly 200% ICR! Yet,
it did not learn a lesson. The premium for the second
Mumbai Press Club policy year went up from Rs6,000 to Rs8,500 (only 42%
New India Assurance offers a coverage for Mumbai increase), even though the claims ratio is nearly 200%.
Press Club members, spouse and up to three dependent Will the insurer suffer more punches for the current
children. The policy covers PED, maternity benefit, no policy too?
waiting period for procedures for a low premium of A Mumbai Press Club communication to its members

MONEYLIFE | 28 Oct-10 Nov 2016 | 36

Cover Story.indd 6 21-10-2016 16:11:30


COVER STORY

4. The most predominant reasons cited for paying for 350 hospitals. According to media reports, the insurer
services in private hospitals were procedure was not has now told the state health department that it will not
covered under RGJAY, (30%) followed by lack of be able to continue offering services on account of huge
knowledge (18%). The other reasons were paying losses. It has refused to enrol new beneficiaries after 30th
for food, non-cooperation from hospital staff, and April though the state Cabinet had extended the date
lack of time to complete the necessary paperwork. of enrolment of leftover cases from 30th April to 30th
5. Those who cited lack of information as the reason June. There are 3,500 employees and pensioners who
for paying for services in public hospitals were the have been refused enrolment. Apparently, the insurance
highest (33%), followed by unavailability of time to company has now even started refusing payment to the
complete all the necessary paperwork to avail the hospitals. Clearly, Oriental had completely miscalculated
services (19%). the terms of the deal, offering too much for too little
6. Difficulty in reaching the poor is also as expected. premium.
According to the data provided by the food and civil Another scheme, Pooran Singh Sehat Bima Yojana,
supplies department of Maharashtra, of the total to ensure cashless health insurance cover up to Rs50,000
eligible families in Mumbai, 99.22% are orange for all 2.8 million blue cardholder families enrolled
ration cardholders (annual income between Rs15,000 under Atta-Dal Scheme is also headed in same direction.
and Rs1 lakh), 0.28% (annual income less than The coverage under the Scheme had been increased from
Rs15,000) are yellow ration cardholders. Rs30,000 to Rs50,000 and compensation up to Rs5 lakh
7. For the year 2014-2015, according to the RGJAY, is given in case of accidental death and disability.
premium was paid for 21.9 million households. In United India Insurance has failed in timely
other words, 85% of the population is currently reimbursement of the expenses to government hospitals.
covered by the Scheme. The hospitals are having difficult time in keeping the
Scheme active. The charges reimbursed by the insurer
Punjab Governments Health Schemes for various treatments, investigations and surgical
Punjab Government Employees and Pensioners Health procedures are also too low. Clearly, the government
Insurance Scheme (PGEPHIS) covered by Oriental insurers have completely miscalculated the terms of the
Insurance is already in trouble on account of huge contract and, hence, unable to make payments against
losses. It was supposed to offer cashless treatment in the agreed premium.

says it all. After negotiating long and hard, this year too pay, maternity benefit covered with nine months waiting
we have inked a super-duper Health Insurance Scheme period, all congenital diseases covered, high sub-limits
with the State owned New India Assurance Company for for different surgeries, and so on. Retail policyholders do
all Ordinary Members of Press Club, but slightly higher not have such privileges. Several pre-existing conditions,
premium compared to last year to adjust the increased like cataract, arthritis, hernia, etc, are covered under the
service and other taxes and also to adjust nearly 100% programme from the very first day. Moreover, JIO has
higher claims. However, the premium under this scheme added group personal accident policy to sweeten the
is nearly 50% cheaper than market rate for a family of deal.
three. National Insurance is now out of the picture; in comes
ICICI Lombard for providing JIO Shravak Arogyam
Jain International Organisation:
A rich community, which put 300% ICR for government-
owned National Insurance, has fleeced the taxpayers. Mumbai Press Club Cover Premium
National Insurance is no longer covering the community Type Premium (Rs)
in the second policy year. It means that themassive losses Base Cover for Rs3 lakh 8,500
incurred in the first year can never be recovered by Base + Rs5 lakh Top-up 14,000
National Insurance. Read - http://tinyurl.com/z47k6w4
Base + Rs10 lakh Top-up 16,500
JIOs was offered incredible benefits like pre-existing
Only Top-up of Rs5 lakh 5,500
diseases (PED) cover from the first day, no medical
check-up, newborn covered from first day, cashless Only Top-up of Rs10 lakh 8,000
facility at 3,500+ network hospitals, entry up to 80 years Premium inclusive of all taxes
of age, stem-cell transplantation covered with 50% co-

37 | 28 Oct-10 Nov 2016 | MONEYLIFE

Cover Story.indd 7 21-10-2016 16:11:51


COVER STORY

these types of special health insurance schemes are good


Mumbai Press Club group cover features for professionals? I have seen there is one scheme for
Persons Covered Member, spouse and not exceeding company secretary too.
3 dependent children
Sum Insured Rs3 lakh on floater basis Do You Really Need Retail Mediclaim?
Where are the losses of such group mediclaim dumped?
Coverage Medical expenses for hospitalisation
as per the terms of group health Retail mediclaim is much more expensive than group
policy. Detailed terms and conditions mediclaim. Retail is still the popular, or the only, option
will be provided for a common man; but looking at the features of group
Room Rent Limit Rs4,000 per day and for ICU Rs6,000 policies one wonders why should one remain with a
per day. retail policy? If you can get your employer to offer group
Deduction for Entire admissible claim would be paid cover, you should take it. If it can cover your parents, it
Occupancy in Rooms in the proportion that the eligible is even better. That itself is worth a few lakhs of rupees,
Having Room Rents room rent bears to the occupied room
Higher than the Limit rent.
especially if parents are in need for a medical procedure.
So, if your employer offers free cover, you need to jump
Maternity Benefit Rs35,000 for normal delivery and
Rs50,000 for caesarean. Pre- and at it.
post-natal expenses will also be If you dont have such a cover, you can try to get
covered, provided they are within the into a group cover at inexpensive premium. If the group
maternity limits. cover is as expensive as retail product, it is not worth it,
Pre-existing Disease Yes especially for the young and healthy. Health Insurance
Covered Regulations (HIR) 2016 allow insurance companies
Period of Insurance From 10.05.2016 to 09.05.2017 to give group cover to only seven members. The main
Day one Baby Cover Yes, within the floater sum insured purpose for forming a group should not be for insurance.
Personal Accident Rs3 lakh. Cover is only for members But,there will be many ways to form a group for reasons
Cover and not for other insured persons. other than insurance.
Second policy year It is fine to have employer cover and genuine group
insurance but we dont have good opinion about many
other group products which may not be true group
Phase3 group mediclaim. ICICI Lombards premium for products. Getting into group cover can be a risky affair
family floater (of 1+5 persons), with sum insured of Rs5 with chances of both premium escalation and even
lakh, is Rs17,060. The premium has more than doubled. product discontinuation. There are also chances of claims
Time will tell if the pricing is right and if any issues with rejection especially if the insurer is bleeding with high
claims settlement arise. Anoop Verma, associate director ICR. In short, both, government and private insurers can
Alliance Insurance Brokers, says, The policy operated play a hardball when it comes to paying claims.
at an ICR of 300% which clearly shows that it wasn't Oriental Insurance had earlier worked with Karvat
underwritten with due precautions considering this large Group. The Karvat Group and Australia based Cover-
group and the price corrections happened accordingly in More have formed a strategic partnership in India. A
the renewal. He, rightly, dubs the policy as a deal not group product was provided, which Karvat Group was
possible in any retail policy. selling to its members. That product has been withdrawn
and the insured have had lots of problems. It seems
Bar Association Karvat Cover-More Assist Pvt Ltd has now tied up with
Here is an email from a Moneylife reader. I am an United India. If the group claims ratio is high, United
advocate in Delhi and member of several advocate Bar India may just withdraw the product. These policies run
Associations. Now, some of the Bar Associations have until the insurer gives up after incurring losses. Buyers
tied up with insurance companies, such as New India beware.
Assurance, and are providing health insurance facility The default option for anyone desperately wanting
on a group basis to their members (means those who to buy group cover is bank mediclaim. There may be no
pay annual subscription). Normally, it is Rs3 lakh and medical tests and, hence, underwriting is purely based
Rs5 lakh cover for individual and his spouse and two on self-declaration. Read our cover story - http://tinyurl.
kids. Premium is Rs7,000 and Rs13,000, respectively, com/gs5t292
for Rs3 lakh and Rs5 lakh cover, respectively. There is National Insurance discontinued mediclaim offered
additional premium for covering parents. Do you think through banks. It forced the policyholders to move to

MONEYLIFE | 28 Oct-10 Nov 2016 | 38

Cover Story.indd 8 21-10-2016 16:12:17


COVER STORY

their retail product. It means that the future of such visibility as they are not mainstream products.
schemes is uncertain. Insurers expect a high volume of If you have a group cover, you should safeguard
business to negate any pressure on claims. If the claims yourself by confirming if the group cover insurer will
ratio is not favourable, they may discontinue and force allow you to port to its retail product. Check the master
policyholders to move to a retail product. group policy document for the portability feature. Be
A Moneylife reader recently wrote, I and my spouse ready for a fight.
both have retired voluntarily from a public sector bank Health Insurance Regulations state: Individual
after opting for VRS. We were both covered under the members, including the family members covered under
group medical insurance policy issued by United India any group health insurance policy of a general insurer or
Insurance to IBAs (Indian Banks Associations) member health insurer shall have the right to migrate from such a
banks, for Rs4 lakh each, up to 31 October 2016. The group policy to an individual health insurance policy or
premium for the said policy was Rs7,854 last year. This a family floater policy with the same insurer. Thereafter,
year, the premium quoted by the United India for a Rs4 he/she shall be accorded the right to port to another
lakh policy is Rs16,025 including service tax. If the insurer (subject to underwriting).
domiciliary expenses are also covered, then the premium So, technically you can port from group to retail
will be Rs20,010. This case clearly shows that group mediclaim of same insurer. The feature is available
policies run until they cannot run any more without a according to the health insurance regulations. Porting
drastic increase in premium. Even worse, the product will help to avoid any waiting periods. Porting feature
may be discontinued. is important as retail product is the only one which
Retail mediclaim is still preferred by those who guarantees lifelong renewal.
dont want to take chances of issues with group cover. Here is the Exit clause for Mumbai Press Club
Retail mediclaim offers lifelong renewal which gives policy: In respect of any member who ceases to be a
us peace of mind. But what do retail customers get in member of Mumbai Press Club during the currency of
return? Premium which keeps escalating; policy terms the policy, coverage will continue for the member and
which keep changing at the time of renewal; government other insured persons until the expiry of this policy.
insurers offer cashless at a few hospitals even though However, such members who exit during the currency
group policyholders get cashless at more hospitals, retail of the policy will not be covered at the time of renewal.
customers have to comply with stringent timelines for They, however, have an option to port to any retail
hospitalisation intimation and claims submission. Retail policy of New India at retail rates, without medical
policies, under the garb of right to underwrite are examination, and subject to the terms of the retail policy
rejected, while group covers are happily offered to the to which they port. Such option to port to a New India
same people who have PEDs. retail policy, should be received at least fifteen days before
Group mediclaim is an option, but is not as good as the expiry of the Mumbai Press Club Policy, and should
retail product. It is always better to pay a cheque directly be accompanied by a proposal form and the appropriate
to the insurer which does not happen for a group cover premium amount.
where the group administrator pays. You want to ensure In the past, group health cover premiums were
policyholders rights are strong which is possible when not under the scanner as insurers would get profitable
you pay directly to the insurer. business from the same corporate for fire, marine, etc.
When premiums of these businesses were de-tariffed, the
Safeguard with Porting Option profits plummeted. The time to cross-subsidise health
So, if you are ready to plunge into group cover, you insurance was over, but insurers still continued the
need to safeguard yourself. It is fraught with possible tradition.
discontinuation of the policy by the insurer. Even bank Moreover, they have started offering attractive
mediclaim products have been discontinued. However, features with low premium even to non-corporate
the saving grace was that portability was offered to groups which is a troubling sign for insurers. These rich
retail products of the insurer. But do not rely on it to community group products are incurring huge losses,
happen for all group products. If your group cover is but the lesson is not learnt. Retail policyholders, on the
not a mainstream product, the insurer may just not other hand, are suffering caps and co-payments, leading
offer portability. The issue that can happen with Karvat- to shrinkage in the overall cover. In short, be prepared
related group product is that regulator may not take it to deal with insurance providers who are under a lot
seriously to force the insurer to port the policyholder of pressure and who will, therefore, try to get away by
to same insurers retail product. This is due to lack of being nasty to retail customers.

39 | 28 Oct-10 Nov 2016 | MONEYLIFE

Cover Story.indd 9 21-10-2016 16:12:34


VALUE STOCKS DEBASHIS BASU

Picking Stocks: Marrying


Momentum with Fundamentals
Momentum is the center stage anomaly of recent years momentum, and that (Japanese) fraction doesnt, so
an anomaly that is above suspicion the premier market the game is still open you have thousands of finance
anomaly. Eugene Fama & Kenneth French, 2008 professors spinning the tapes, and they all want is to get
tenure. Some want to do even better than that. So they are

O
n 15 August 2008, Richard Roll, a top financial going to find whatever is there, even if it is there by chance.
economist, was interviewing Eugene Fama, Nobel Richard Roll: If you look at foreign markets for value
Laureate in economics, often referred to as The and growth you generally find it works in most of these
Father of Finance, best known for his work on portfolio other markets as well.
theory, asset pricing and stock market behaviour. This was Eugene Fama: The premiums are all on the same order.
at the American Finance Association. Fama was one of Richard Roll: And momentum; is that generally true as
the intellectual giants behind the idea that the market is well?
efficient and that market price reflects all publicly available Eugene Fama: Except for Japan.
information. One cannot Richard Roll: What is it
beat the market with about Japan?
available information. Eugene Fama: In my
Roll and Fama went back mind, that raises hope;
and forth on the issue but its just a hope, that
of value premium, or momentum is a result of
returns associated with data dredging. (emphasis
cheap stocks and whether mine)
low stock price was a Richard Roll: Well, it
compensation for extra risk would have to be an
or mispricing. Professor incredible kind of data
Roll then asked Fama dredging. These markets
about momentum. Here are not that correlated
is how the conversation with each other. They
went (edited for brevity). are correlated but not
Richard Roll: What about other things in addition to value that correlated. They are not completely independent
growth and size? You use momentum too? What is that? samples, but theyre quite independent. If you look at
Eugene Fama: Momentum gives me a problem because the twenty different markets, and it works in every single
winners and the losers in momentum change so frequently market except for one.
that if momentum is a risk story; the risk has to be changing Eugene Fama: I dont know about 20 different markets.
in a very volatile way. Id say three. Youve got the US, Britain (and developed
Richard Roll: If you look at prior six-month returns, to Europe), and youve got Japan. Thats it.
see if the ones that have done better continue to do well, Richard Roll: But other people have looked at momentum
that changes every month or so? in other markets.
Eugene Fama: This happens around the world, except Eugene Fama: Emerging markets?
Japan. The Japanese are somehow immune to this. Richard Roll: Sure. Indonesia and places like that. It
Richard Roll: Well, maybe theyre more rational. works there too.
Eugene Fama: Who knows, right? Eugene Fama: Maybe youre right. I dont know that data.
Richard Roll: Or maybe less, maybe they dont care about As the conversation shows, Fama, the high priest of
risk. efficient market hypothesis, was accepting that momentum
Eugene Fama: Another way to put it is, I dont know works everywhere in the world. But he also insisted that,
what fraction the Japanese market is of the total, but somehow, the Japanese stocks were immune to it. Roll
the remaining fraction is basically the one that shows needled him saying that, perhaps, the Japanese investors

MONEYLIFE | 28 Oct-10 Nov 2016 |40

Value Stocks.indd 2 21-10-2016 15:17:38


VALUE STOCKS DEBASHIS BASU

were more rational. Fama stated that he hoped that the more powerful backing in the ivory towers of academia,
better results of momentum-based stock selection were unlike a decade or two earlier, when discussions about
exceptions to the rule that momentum does not work and momentum were confined only to traders and investors.
that they were simply a result of data-dredging. It is now well-established that momentum works in some
Cliff Asness, the founder of AQR Capital (AQR form or the other. But there is a problem for the human
standing for Assness Quantitative Research), with a PhD mind in believing in momentum, which involves following
in finance from the University of Chicago and a former some price-based model blindly. Investing is supposed to
student of Fama, was surely aware of this exchange be a thoughtful and laborious process of turning stones
between Roll and Fama. In 2011, he published a paper in not following prices mechanically. But, surely, there must
The Journal of Portfolio Management called, Momentum be some logical explanation for why momentum strategies
in Japan: The Exception that Proves the Rule. This work.
disproved Famas comments in a technical manner. But The explanation is behavioural, not financial. Gray and
Wesley Gray and his team at Alpha Architect went ahead Vogel, writing in Quantitative Momentum, point out that,
and did a more relevant test. in 1998, Nicholas Barberis, Andrei Shleifer and Robert
They took the long-only Japanese momentum portfolio Vishny published a model based on investor sentiment,
using AQRs data and compared it to the Japanese index which described the possibility that behavioural biases
of MSCI Japan Total Return Index between 1January drive under-reaction and overreaction, which lead to value
1982 and 31December 2014. This long-only momentum and momentum effects. According to them, value is
portfolio clearly outperformed the index by a wide essentially an overreaction to bad news; momentum is
margin. Wes Gray and Jack Vogel write in their latest an under-reaction to good news. In 1996, Louis Chan,
book, Quantitative Momentum, that this result is not Narasimhan Jegadeesh, and Josef Lakonishok argued
entirely surprising, since momentum that the momentum anomaly is partly
works in just about every context due to sluggish response to past
where researchers can get access to There is a problem for the news: Security analysts earnings
a reasonably long dataset. human mind in believing in forecasts respond sluggishly to past
But it is EMH that is taught momentum, which involves news, especially in the case of stocks
every day in financial and economics following some price-based with the worst past performance. The
departments and at business schools; model blindly. Investing is results suggest a market that responds
not momentum. Momentum is still supposed to be a thoughtful only gradually to new information.
regarded as an anomaly. EMH is Earnings is the glue that binds
and laborious process of
so powerful and dominant that it is fundamentals and momentum.
turning stones not following
also the basis for hugely successful Remember, price momentum is
passive investment approach that asks
prices mechanically buying stocks with the strongest
you to buy the market represented past price performance (which
by index fundsan option that appeals to institutional tend to outperform those with the weakest past price
and many intelligent retail investors alike. A lot of what performance), while, under earnings momentum, stocks
passes for robo advisory also puts your money in index with earnings surprisingly outperform those with earnings
or index stocks. Indexing, or passive investing, drawing disappointments.
from the academic orthodoxy, is getting stronger by the We intuitively know that they are correlated. Enough
day. Indeed, the largest mutual fund in the US is now a research (Mitch Zacks is pre-eminent in the field) has
passive fund from Vanguard. proven that earnings surprises (fundamentals) are one of
What lends credence to the EMH believers position the biggest drivers of stock prices (momentum). Gray and
are anecdotes and some robust statistics. There are only a Vogel refer to a paper titled Fundamentally, Momentum
handful of actively-managed funds that have outperformed is Fundamental Momentum, where Robert Novy-Marx
the most popular US index, Standard & Poors 500. The finds that the price momentum is a manifestation of
longer the period, the fewer are the outperformers. The the earnings momentum anomaly. In other words, the
thousands of fund companies that pretend to manage momentum anomaly works because investors under-react
money smartly for you are simply incompetent. to earnings surprises. So, earning is the bridge between
However, could it be that the way fund companies momentum strategy and fundamental analysis and should
manage money is wrong? Could it be that a simpler, serve to calm the nerves of serious fundamental-oriented
momentum-driven strategy will lead to better outcomes? investors who are allergic to slavishly following prices
There is no doubt that momentum is getting more and because the momentum models say so.

41 | 28 Oct-10 Nov 2016 | MONEYLIFE

Value Stocks.indd 3 21-10-2016 15:17:24


3 Long-term Stockletters
for Excellent Returns
Panther Antelope Lion
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(includes dividend) (includes dividend) (includes dividend)

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

Facts about the Stockletters


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

Stockletter (MSSN) Ad Oct 15.indd 2 07-10-2016 17:13:51


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Stockletter (MSSN) Ad Oct 15.indd 3 07-10-2016 17:14:11


StockWatch Stocks and sectors that catch our eye

P e n na r I ndus t ries components, metal crash barriers, sheet piles and


automobile products. The precision tubes line is into
Sluggish Sales, electric resistance welded (ERW) tubes, cold-drawn
welded (CDW) tubes and air pre-heater (APH) &
Growing Profit Indian boiler regulation (IBR) tubes.
For the quarter ended June 2016, revenues were

S
mall-cap stocks and mid-cap stocks have had Rs306.69 crore (Rs273.85 crore), up 12%, and the
a fantastic run over the past two years as net profit was Rs7.81 crore (Rs6.60 crore), up 18.3%,
the market valuations are high, today. It is which is not bad given the slow economic growth. For
becoming increasingly difficult to identify stocks the year ended March 2016, sales were Rs1,306.67
that are available at reasonable valuations. If they crore (Rs1,267.46 crore), up 3.1%, and the net profit
are reasonably valued, there is a reason for itlow was Rs43.85 crore (Rs35.90 crore), up 22.14%. Over
growth. This is the case with Pennar Industries which the past five quarters, the average growth in sales has
has a market-capitalisation of 0.45 to sales and 3.76 to been 3.80% and average growth in profits has been
operating profits. Its price-to-book value is also low at 35%. Clearly, Pennar has been able to keep its costs
1.21 and price-to-earnings (P/E) ratio is 13.33. Given under control, even though sales growth has been
sluggish.
However, as the sales trend shows, the business is
not growing; nor is there much margin in the business.
The average operating profit margin is around 11%.
It has debt which cuts into its profits. The debt:equity
ratio for FY15-16 was 0.50.
Its RoCE (return on capital employed), which
is calculated on earnings before interest and taxes,
is high, around 19%, but interest cost brings down
the return on net worth to 9.2% computed on four-
quarter trailing net profit. Pennar Industries has not
its low valuation, the stock should attracted interest in been paying dividends for the past three years. Its last
the current bull market. But the share price has been dividend payout was 20%for FY12-13 . Its planned
flat over this year; it was trading at around Rs50.55 on capacity expansion and product diversification, which
17 October 2016. began in FY14-15, is continuing and is yet to make any
Pennar Industries has four lines of business. The impact on the revenue growth; fortunately, it is funded
systems and projects line provides solar module with internal accruals. The promoters hold 36.36%;
mounting solutions, manufactures railway components 63.64% is held by the public. Mutual funds hold
and offers storage solutions. The industrial components 6.77% of the total shares and foreign investors own
line manufactures hydraulic cylinders, auto-components 10.92% . The stock is valued low because the business
and white goods components. The steel products and is not growing. It would grow only with a revival of
profiles line manufactures cold-rolled steel strips, capital investment which, in turn, depends on overall
electrostatic precipitators (ESP) electrodes, building economic growth.

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

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

MONEYLIFE | 28 Oct-10 Nov 2016 | 44

StockWatch.indd 2 21-10-2016 15:28:33


UNBIASED INFORMATION:
MAS Benefit #8-10
Moneylife Magazine Handbook Product Reviews

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


STOCK WATCH

Monsoon Vs Sales in sales was 15%. This increase in sales is lower


than marginal increase in sales, even when there was
Growth decrease in marginal rainfall.
We have taken stand-alone quarterly revenues
because the major subsidiary adding to the companys

I
t is widely believed that a bad monsoon affects the revenue is in the UAE whose fortunes have little to do
performance of companies in the farming sector. with Indian monsoons. Also, the monsoon season in
That was being said about Aries Agrothat its India is, generally, from June to September, but since
revenues have fallen because of bad monsoon. While it also rains in some parts of the country in October,
this is generally true, it is good to check even obvious we have taken data from June to October. The reason
correlations. We have taken rainfall data for the past for the low correlation is the nature of Aries Agros
seven years and sales following the monsoon season businessas the next section shows. It is less sensitive
to monsoon. It pays to test even obvious and well-
established beliefs while investing.

Aries Agro Stands Out?

T
he fertiliser sector suffers from poor and
unstable margins. This is because the sector is
regulated, suffers from seasonality, and is highly
sensitive to input costs. Among the major fertiliser
companies, GSFC had high margins of 20.76% for the
year 2011-12 but they have been constantly falling,
reaching 9.95% for 2015-16. Mangalore Chemicals
and Fertilizers operating profit margin (OPM) fell
Rainfall Vs Sale Revenues
to -3.66% previous year and both, Coromandel
Av Rainfall Sales from Change in Change
International and Chambal Fertilizers, have witnessed
June-Sept July to June Rainfall in Sales
(mm/cm) (Rs Crore) plunging OPM for the past five years. Surprisingly,.
2008 929.50 111.53
Aries Agro has a stable and high marginof around
18%. While the margins are down from 20% or
2009 769.70 143.37 -17% 29%
so a few years ago, they are exceptionally stable
2010 980.20 164.41 27% 15% compared to those of its peers. However, the stock is
2011 939.40 200.25 -4% 22%
2012 882.60 192.62 -6% -4%
2013 1,066.60 235.94 21% 22% Operating Profit Margin of Peers
2014 841.70 248.24 -21% 5% 25%
Correlation 0.24
20%

15%

for Aries Agro and have found a correlation of only 10%

0.24 between the two sets of data. Not only is the 5%


correlation low, but, when rainfall was marginally
0%
down by 17% in 2009, average sales were up by 29%
for September 2009 quarter to June 2010 quarter. A -5%
11-12 12-13 13-14 14-15 15-16
similar correlation is seen for the 2011, when rainfall
Aries Agro Chambal Fertilizers
was marginally down by 4%, but average sales for the GNFC Coromandel International
September 2011 quarter to June 2012 quarter were up GSFC Mangalore Chemicals
by 22%. Also, looking at the year 2010, the marginal and Fertilizers
increase in rainfall was 27% and the marginal increase

MONEYLIFE | 28 Oct-10 Nov 2016 | 46

StockWatch.indd 4 21-10-2016 15:29:03


STOCK WATCH

its trailing 12 months earnings. It has had robust free


WIll Falling Net Margins Reverse? cash flows, of nearly Rs60 crore, in FY15-16. It paid
Net Profit Margin off Rs32 crore of debt in FY15-16, making it debt-free
7% at the end of the year. The promoter holding stood at
6% a healthy 74.43% on 30 September 2016. The stock is
5% trading at a price-to-earnings (P/E) multiple of 15 times
4%
its trailing 12 months earnings on 21 October 2016.
Maharashtra is a key state for GM Breweries;
3%
it is the largest manufacturer of country liquor in
2% Maharashtra. GM Breweries has virtual monopoly
1% in the districts of Mumbai and Thane. It utilised less
0% than half its capacity of bulk liquor, amounting to
11-12 12-13 13-14 14-15 15-16 137.6 million bulk litres of country liquor per annum,
in FY15-16. This gives it scope to utilise a higher
proportion of its capacity and enjoy the benefits of
not performing, for now. This is because the market
rewards stocks that have growth potential, not just
high and stable margins. Not only is Aries not growing, Declining Debt:Equity Ratio
(Rs crore) Debt:Equity Ratio
its net margin has collapsed over the years because of
60 0.30
increasing debt.
50
However, if Aries can pare its debt and increase
sales, the stock price can shoot up. Investors seem to be 40 0.20
betting precisely on this. This is why Aries is currently 30
quoting at a P/E of over 30. 20
0.10
10
0

G M B r e we r ie s -10 0.00
11-12 12-13 13-14 14-15 15-16

Low Spirits Free Cash Flows Debt:Equity Ratio

A
fter GM Breweries reported its September operating leverage. The management states that it has
quarter results, the stock slumped by more than tremendous potential to penetrate into the interior
7%. The companys net profits rose by 18% districts of Maharashtra due to its good brand image.
year-on-year (y-o-y). So, why was the Street in low GM Breweries products enjoy brand loyalty. Though
spirits? At the EBITDA (earnings before interest tax it has the facility to blend and bottle both, Indian-
depreciation and allowances) level, there was a decline made foreign liquor (IMFL) and country liquor, it has
in 5.52% y-o-y. This decline in EBITDA, despite a concentrated on country liquor due to competition
rise in net profits, was partly due to the rise in other prevailing in the IMFL segment.
income to Rs1.26 crore from merely Rs3 lakh in the One of the key risks for any manufacturer of
same quarter of the preceding year. country liquor is the dent in brand image due
Secondly, its operating profits to some alcohol tragedy occurring, if the
were partly impacted by a 42% quality standards are not met. Another
jump in staff costs to Rs2.35 risk could be the raising of the
crore. The stock was a huge levels of taxation and
outperformer in 2015. change in regulation.
So, what could have The management also
given the Street a high mentions that the parallel
in the past year? GM duty-evaded market,
Breweries has had an which eats into the
impressive return on companys market share,
equity (RoE) of 35% is another threat.

47 | 28 Oct-10 Nov 2016 | MONEYLIFE

StockWatch.indd 5 21-10-2016 15:29:38


STOCK WATCH

UN UOTED
STORIES OF PRICE MANIPULATION

Kushal Tradelink (Rs300) equipment, steel and metals, bitumen,


(Rs) pharmaceuticals, such as generic drugs,

A hmedabad-based paper trading


company, Kushal Tradelink, claims
to be a leading player in paper and
300

240
paper waste and paper products, oil-
field chemicals, oil-field instruments,
and oil-field piping accessories. Kushal
paper products markets in Gujarat with 180
has another wholly-owned subsidiary,
a client base of over 600 customers. 7748% Kushal Impex Ltd, based in Singapore.
In the past, the company has not 120 Where did the promoters get the
posted consolidated quarterly results money to buy the UAE subsidiary?
regularly; hence, consolidated data 60 There are no clear answers. The
is only available for quarters ended companys balance sheet reported a
0
June 2015, March 2016 and June huge Rs910 crore increase in liabilities
Aug-14 Sep-15 Oct-16
2016. Sales for FY13-14 were around which are labelled as other than
Rs302.52 crore while sales for FY14-15 acceptances. Meanwhile, over the past
were Rs433.11 crore. As expected of a Rs1,589.90 crore for the year, 63% of three years, the stock has moved up
trading company, Kushal reported low which came from the wh-olly owned a humongous 7,748%from a low of
net profits, Rs4.49 crore for subsidiary. For FY15-16, the reported Rs3.82 on 8 August 2014 to Rs299.80
FY13-14 and Rs6.57 crore for profit stood at Rs98.99 crore, 70% of on 17 October 2016. It also announced
FY14-15. The story changed which is contributed by the subsidiary a stock split from Rs10 to Rs2 on
dramatically in FY15-16. It acquired whose business is import and export of 3 September 2015. Is this a case of
a wholly-owned subsidiary in UAE, readymade garments, home appliances rampant price manipulation? We dont
Kashish Worldwide F.Z.E., in January , mobile phones, electronic goods, know. Maybe, the tax authorities and
2016, and its sales suddenly rose to electronic accessories, data-centre the regulator can find out.

MARKET TREND

Endless Churn seem to be enough. As expected,


banks are doing well, especially the

Tof writing this piece, it is below 28,000. Over two


wo weeks ago, the Sensex was at 28,061. At the time smaller private banks. We also expect
microfinance companies and select
weeks, the index has made no meaningful progress. This non-banking finance companies to report
is what happens, often, when the market goes up, thanks good growth numbers. In a falling interest rate regime,
to a combination of liquidity, hopee and falling interest these companies
compan are in a sweet spot. Their cost of funds
rates, even when earnings are nott going up. It goes down bubut low competition in the system does not
goes sideways, teasing traders with
th one make them reduce the interest rates
or two up days and then a down day. they charge. Also in a sweet spot are
There have been eight trading companies that depend on derivatives of
days in the past fortnight. Of crude
cr oil, like paints, plastics and chemicals,
these, exactly four were up days especially
esp if they have a consumer and/or
and four down days. export
expo focus.
Meanwhile, the September quarter
uarter results Unfortunately,
U too few companies in
have started rolling in and they have
ave not been great the Sensex
Se fit this bill. They are either large
for heavyweights like Tata Consultancy Services, Infosys, companies outside the main index, or smaller companies,
HCL Technologies and Reliance Industries. Some of them where the real action is. For the index companies, it is an
have beaten the market expectations but that does not endless sideways churn. Debashis Basu

MONEYLIFE | 28 Oct-10 Nov 2016 | 48

StockWatch.indd 6 21-10-2016 16:52:58


HANDHOLDING:
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Option1: Do nothing.

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

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are only a sales target for them)

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


EARNING CURVE

How US Fund Managers Changed


Strategies before, during and after the
Financial Crisis

D
o fund managers consider momentum/ then classified into three groups, momentum strategy
contrarian strategy in their trading? Do (significantly positive coefficient), contrarian strategy
these strategies remain constant or are (significantly negative coefficient) and no momentum
they dependent on the market conditions? (not significantly different from zero) consideration.
Does financial crisis make them behave differently? Do Momentum in a stock is described as the tendency
fund managers really make good decisions on strategy of the stock price to continue rising or to continue
selection, to respond market change? To explore these falling, based on the direction it initially is in. Thus,
issues, Luyue Jin, Cheng Zhen, Mengyao Xu, Xiaoyu momentum strategy aims to capitalise from the
Wang, Yaolin Wang conducted a study, Mutual Fund continuing trends in the market. Contrarian strategy
Managers Choice of Momentum Strategy- Pre/During/ follows a method where purchasing and selling is done
Post Financial Crisis. They studied the US data from in contrast to the prevailing market sentiments. No
September 2003 to March 2013 which was divided into strategy refers to the mutual fund schemes whose
three periods: pre-crisis (September 2003 to September managers didnt follow either of these two strategies.
2007), during the crisis (October 2007 to February By comparing the percentage of each strategy being
2009) and post-crisis (March followed, its popularity is gauged.
2009 to March 2013). Since the schemes are divided
September 2003 is chosen as into three categories on the
the starting point of sample period basis of the strategy, alpha
to exclude any influence from the can be estimated for each of
previous dot-com crisis. From the category and, if there is
2003 March, the stock market significant difference in returns
moved up until September 2007, by one strategy from the other
when the market index reached its two, that particular strategy
all-time high. The ending point of has some significance. Which
the sample period, March 2013, strategy produced the highest
is the month when the market alpha under what situation was
index went up as high as it was in also determined. After dividing
September 2007, for the first time the mutual funds into various
after the crisis. groups and segments, it was found that fund managers
The study involved a total of 207 mutual fund preferred momentum strategy before the financial crisis
schemes, selected on three criteria: the offer date before and shifted to no strategy during crisis and moved
September 2003, the scheme should be a growth or a to contrarian strategy after the crisis. The contrarian
value fund and its total net asset should be higher than strategy usually becomes significant in the long run;
$10 million. An alternate way in which the samples thus, there is a fair question whether the fund managers
were divided was through their market-capitalisation. realised this and adopted it during the financial crisis.
Also, UMD (up-minus-down), SML (security market The paper concluded that the strategies opted by
line), HML (high-minus-low) historical monthly data fund managers are dependent on the market and they
and historical benchmark rates, excess market returns shift their strategies along with the changes in situation.
and risk-free rates, were collected from Kenneth R The study explored a combination of 27 different ways
French Data Library. by taking three different sub-periods during which the
The writers of the paper picked all the schemes and dominant strategy changed as well. Lastly, the shift in
tested each scheme for the whole period to check the strategy influences a funds performance. Managers,
significance of the coefficient of UMD to see whether who shifted to no strategy during crisis or to contrarian
the fund managers take momentum or contrarian strategy after crisis, had an improved performance, to a
strategy in their trading. The fund managers were large extent.

MONEYLIFE | 28 Oct-10 Nov 2016 | 50

Earning Curve.indd 2 21-10-2016 14:53:11


TAX/ FIXED INCOME

Post-ofce Monthly Income Scheme Decoded

P
ost-office Monthly Income pointed out: There are conflicting lakh, respectively. An individual can
Scheme (POMIS) gives you views on the maximum limit that invest a maximum of Rs4.5 lakh in
guaranteed return on your can be invested in one persons POMIS (including his share in joint
investment. Currently, it offers name under POMIS. At one place, accounts). A joint account can be
7.80%pa (per annum) payable as it says Rs4.5 lakh. At another opened by two or three adults. All
monthly income. The maturity term place, it says, if it is held jointly, it joint account-holders have equal
of POMIS is five years. There is no can be Rs9 lakh. Moreover, how is share in each joint account. A single
tax deducted at source (TDS) on the investment in the name of a minor account can be converted into joint
interest for POMIS, but the account and vice versa.
interest income is taxable in An account can be opened
your hands. It does not offer in the name of a minor;
any tax rebate under Section a minor of 10 years and
80C. The investor should be above can open and operate
a resident Indian; it is not the account. Minors, after
available for HUFs and NRIs becoming majors, have to
(non-resident Indians). apply for conversion of
There is a rather stiff the account in their names.
premature withdrawal The web page POMIS is
penalty. Premature silent on the maximum limit
withdrawal is not allowed for a minors investment
within one year from and whether it is within
inception. If you break it within one handled along with investment by the parents overall limit. Several
to three years, there is a 2% penalty parents? financial websites specify that the
on the deposit amount; if you break Minimum and maximum deposit maximum amount that a minor can
it after three years, the penalty is for a single account is Rs1,500 and invest is Rs3 lakh and that it would
1% on the deposit amount. Rs4.5 lakh, respectively; for joint not be clubbed with the guardians
A Moneylife reader recently account, it is Rs15,00 and Rs9 limit.

G-Sec Yields Down


Issuer Maturity Next Last Yield ISIN Rating

T he 10-year benchmark G-Sec yield, Date Coupon (%)


which sets the tone of the fixed- HDFC 7.90% 24 Aug-26 24 Aug-17 7.67 INE001A07PN8 CRISIL AAA
income market, declined by eight basis
points (bps) in the last fortnight to end ICICI Bank 7.95% 07 Oct-23 07 Oct-17 7.58 INE090A08TU6 CARE AAA

at 6.73% on 14th October. According LIC Hsg Fin 8.67% 26 Aug-20 26 Aug-17 7.57 INE115A07HS2 CRISIL AAA

NSE data as of last trade date of 14 October 2016


G-Sec Maturity Yield to
Date Maturity SREI Infra Fin 9.75% 06 Oct-19 06 Oct-17 9.82 INE872A07TX3 CARE A+
01 December 2044 7.18 Edelweiss Housing Fin 10% 18 Jul-26 18 Jul-17 9.62 INE530L07228 CARE AA
26 October 2055 7.15
Dewan Housing Fin 9.25% 09 Sep-23 09 Sep-17 9.29 INE202B07IO3 CARE AAA
10 November 2033 7.15
BSE data as of last trade date of 14 October 2016
G-Sec yields on 14 October 2016

to CRISIL, Inflation dropped sharply 3.9% (drop of 200bps)especially in 4.8% in the second half of fiscal 2017,
to 4.3%, a one-year low, in September vegetables, also core inflation edged because of the good monsoon and
from 5% in August. This was driven down to 4.9%. Going ahead, we expect supported by steps taken by the
by a sharp drop in food inflation to inflation to trend lower and average government to manage food supply.

51 | 28 Oct-10 Nov 2016 | MONEYLIFE

Fixed Income.indd 1 21-10-2016 14:40:07


Supported By

you have availed from the existing


CA, I am listing two possibilities:

Queries
At Moneylife Foundations
a) You have obtained only tax-
related services (without any audit
services) from the CA. In this case,
you can simply find another CA and
appoint him/her to handle your tax
matters. Such a CA would not need
Tax Helpline any no objection
certificate (NOC)
Ask tax-related questions at moneylife.in/taxhelp. Its free from the earlier CA.
However, before
you do this, you
Can an NRI Continue account also. Coming to the tax must obtain all the
To Use Existing Saving aspect, if you have earned any
income in India during this period,
documents that your existing CA
has in his possession relating to
Account you are liable to pay tax on it. your taxation. In particular, you

I have been a non-resident Indian


(NRI) for over three years now.
However, while my residency status
However, you will get the benefit
of the basic exemption of income
before your tax liability kicks in.
must obtain the login password
for your online access to www.
incometaxindiaefiling.gov.in. This is
changed, I retained my savings crucial.
account and continued using it How To Change Ones So, even before you start
as normal. The source of funding CA? thinking in terms of changing your
my Indian bank account was CA, please obtain this password
done through my overseas bank
account. I have decided to open a
non-resident external (NRE) saving
I have engaged a chartered
accountant (CA) locally in
Bengaluru, who happens to be a
and change it so that only you have
the new password. Ensure that the
mobile number and email address
account, as advised by a banker. Do distant relative of my better half. registered on this e-filing site are
I need to pay taxes on my Indian I have been using his services those that belong to you and not
account before closing the existing for the past five years. However, to your existing (or future) CA.
regular account? every year, I have had issues with Always take care of this aspect. Do
All this while, unaware of the this person. This year, due to no not allow anyone else to give his/her
taxation process, I had continued to fault of mine, I had to pay a huge contact details for your income-tax
fund my Indian bank account with interest due to this CAs negligence. matters.
my overseas savings. I am a freelancer working in b) You have obtained not only
the information technology (IT) tax-related services but also any
Subodh Shahs Reply: Once a industry. I am looking at changing audit services from the CA. In this
person becomes a non-resident the CA. I have very little, or case, you can definitely appoint
under the Foreign Exchange no experience, in this regard. I another CA in place of your existing
Management Act (FEMA) would like to know what are the CA. However, before the new CA
regulations, he is supposed to implications and how to go about accepts the appointment, he/she
intimate the bank about the moving to another CA. will need an NOC from the existing
change in status and CA. This NOC is, generally, always
the ordinary saving Ameet Patels Reply: It is given without a fuss. However, if
account will get unfortunate that you have had an any fees are due to the CA, he/she
converted into an unpleasant experience with your may hold back the NOC until the
NRO (non-resident CA. If you desire to change over fees are paid by you.
ordinary) account. to another CA, you have every Once you select a new CA, he/
Since this was not done earlier, it right to do so. Nobody can prevent she will be able to guide you in
needs to be done now, if you want you from doing sonot even the detail about the actual steps to
to continue to use that account. In existing CA. Since you have not be taken, especially in the second
addition, you can open an NRE clearly mentioned which services scenario mentioned above.

MONEYLIFE | 28 Oct-10 Nov 2016 | 52

Tax Queries.indd 2 21-10-2016 14:12:25


Th
is
pa
ge
in
th
e
pr
in
te
di
tio
n
ha
sa
n
ad
/a
nn
ou
nc
em
en
t
HEALTH BM HEGDE

Treating Patients through


Whole Person Healing

T
reating sick human beings as a whole person was when he was a junior member of Linus Paulings chemistry
the original concept even in the Western medicine department at Berkeley University. His original paper on
system of olden dayseven in the 1950s, when I So-Gel technique is still being used by nano scientists.
was a student. Thanks to the hi-tech new Western medicine, The paper has had more than 75,000 citations till date!
of complete reductionism, whole person healing (WPH) Although he was the Fellow of all science academies of
has almost disappeared from medical students vocabulary! the world with a Golden Ray Award from the Emperor
As human beings, we have our worries and anxieties, of Japan, he was denied the Nobel Prize, despite being
social and environmental factors, our economic and social nominated 21 times!
status and, above all, our religious beliefs which could I think this was because of his pro-Indian bias and,
collectively, and severally, affect our personality as a moreover, his original works did not interest the industry
patient. The best doctor to know all these would db bee ouourr so much.
muc
uch. h. Being
Beingng the
the founder-fellow
fou
oundnderer fel
ello
loww of
o the
the IOMO (Institute
IOM (In
nst tute
family doctor. Again, thanks to the birth of sub-specialists
eci
cial
alis
ists
ts of Medicine),
Med edicicin e),, he was
ine) was able blee to get
abl get the
the word
worordd WPH
WPH officially
offi
of fici
cial
ally
ly
who, in India, are called super-specialists making ng them
the
hem m accepted
acce
ac cept
pteded into
int
ntoo the
the medical
medi
me dicacall vocabulary
voca
vo cabu
bula
lary
ry in
in 2009.
2009
20 09.. Since
Sinc
Sincee then,
then
then,, I
God incarnates, WPH has been fully buried. have
ha ve adopted
ado
doptpted
ed that
tha
hatt word
word in n place of bedside d medicine
med
edicicin
i e which
whic
wh ichh
The super specialists know more and more about out less
les
esss is p
patient-centred
atie
at ient
nt-c
-cen
entrtred
ed aandnd not ot ddisease-centred.
isea
isease
se-c
-cen
entr
tred
ed. We sstarted
tarted the
ta
and less until they come to a stage where they know w momore re World
Worl
Wo rld
d Academy
Acad
Ac adememyy of Authentic
Aututhe
hentntic
ic Healing
Heaeali
ling
ng Sciences
Sci
cien
enceces in 2005
200
0055 with
and more about nothing. This tendency to diagnose ose and
os and ourr ow
ou own n jo
jour
journal,
urna
nal,l, Th
Thee JoJour
Journal
urna
nall of tthe
he SScience
cien
ciencce of Healin
Healing ng
treat patients with the tinted glass of reductionismism h has
as Outcomes
Outc
Ou tcom
omes e ((thejsho.com),
thejjsh
th sho.o.co
com) m), of w which
hich
hi ch
become the bane of Western medicine today. I be
beca
became
cameme ttheh eeditor-in-chief
he dito
di tor-r-in
in-c
-chi
hief
ef aand
nd
In such set-ups, the patient is hardly listened d to,
to, or professor
prof
pr ofesssorr Ro Roy y be
beca
became
came
me tthe he
examined, physically. They are subjected to a hugee listlis
istt of co-editor-in-chief,
co-e
co -edi
ditotor-
r-in
in-c
-chi
hief
ef,, ti
till
ll his
his
investigations and, from then on, the specialist treats
atss only
at only death.
deat
de ath.
h. HHee wa followed
wass fo
follllow
owed ed
d
the reports and NOT the sick human being. This leadslea
eadsds to
to by Hans Peter
much misery and economic loss to the patient and nd ggains
ains
ai ns Duerr,
Duer
Du err,
r, tthe
he eemeritus
meri
me ritu
tuss
to the medical and pharmaceutical establishments. s. director
dire
di rect
ctor
or of
of the
the Max
Max
It is usually outsiders who spot the lacunae in in any
any P l a n c k
system and think outside the box. Both, Albert Einstein
tei
einn and
and
David Bohm, declared themselves outsiders for physicssic
icss and
and
so were able to think outside the box during theirr times.
tim
imes es..
My good friend, a great scientist, Professor Rustum
Rusustutum m
Roy, who could think outside the box even in his his own
own
specialisation of chemistry and metallurgy, was appointed
poin
po intetedd
a professor of medicine at the University of Arizonana w with
ith
it h
no conventional medical qualifications, based purelyrely
re ly on
on
his original research in human healing and his out-of-
ut-o
ut -of-f-
the-box thinking.
It was he who coined the term Whole Person rson
rs o
Healing, while I used to write and think about itt as as
bedside medicine. Professor Roy approached mee at
one meeting where both of us were lecturing an and
nd
convinced me to join him in this journey of whatt h hee
called WPH. Thus started our long journey which ended
ndededd
only when he died a few years ago.
Late professor Roy was a remarkable human n being
bein
be ingg
and one of the best scientists I have known in my li life.
life
fe.. He
was the first to think of nano particles way back in 1 1954
954
95 4

MONEYLIFE | 28 Oct-10 Nov 2016 | 54

BM Hegde.indd 2 21-10-2016 16:23:25


HEALTH BM HEGDE

Institute in Munich. Now, we have Evan Pugh professor whole man considered as our primary interest?
of obstetrics and paediatrics at Penn State University, Professor Mary Tinnetti of Yale University in her article
Joanna Floros, as the co-editor-in-chief. She is a great in the American Medical Journal, entitled The End of the
researcher too. Disease Era, convincingly argues that the organ-based
I happened to see a very fit young man last week. He disease diagnosis has almost come to an end and she
was 46 years young and was a good specimen of physical wants that be replaced by a new holistic approach. Sick
fitness in every respect. The only mistake he made to human beings need our compassionate understanding and
jog nearly five kilometres daily. One day, while jogging, a useful management and not heroic things done to set
he thought he had some vague chest pain. He went for the anatomy right and physiology corrected without fully
a check-up. To cut the long story short, he landed with understanding the patient.
angioplasty, two stents and lifetime of blood-thinners with Western medicine is not a true science. It is just a
some other medicines. statistical science where averages of all measurements are
He was devastated as he is as fit as he used to be with converted into normal. When one converts averages into
an ejection fraction of 59% coming down to 54% or so normal, one generates 5% to 25% false positives. Today,
after the procedure. His family and he are now worried the diagnosis has becomes a disease in itself.
stiff and he was even contemplating becoming a recluse! We can create epidemics where none exists and we
Our reductionist intervention has had such an impact on convert the hapless human beings, who come to us with
his whole family that, I am their anxiety for help, into
sure, he will not be a useful patients for the rest of their
citizen for the country. Even young boys in the US army lives! Let us try to re-introduce
Now, Coronary artery in Korea and Vietnam, with WPH into the medical
blocks are not coronary artery an average age of 20 years, curriculum for the common
disease. Even young boys in angiographed post-mortem after good of mankind. We should
the US army in Korea and they were shot dead (a total of 205 also teach medical students to
Vietnam, with an average
soldiers) had three vessel blocks understand the human mind
age of 20 years, angiographed to get to know their patients
post-mortem after they were (72%). Some of them had even left better. In the quantum world
shot dead (a total of 205 main equivalent blocks but they view, the human body is an
soldiers) had three vessel were in the pink of their health, to illusion of the human body.
blocks (72%). Some of them be in the US army. Reductionist This needs to be stressed, as
had even left main equivalent science equated coronary block today, in reductionism, we
blocks but they were in the think that the mind is in the
with coronary disease, a good
pink of their health, to be in brain!
the US army. Reductionist business proposition The future sickness-care
science equated coronary has to incorporate all good
block with coronary disease, a good business proposition. treatment methods in all systems authenticated by hard
I have a very dear friend who, in his 80s, had bad scientific yardstick, not just the quick-fixes of modern
knee joints, but was still active. I used to dissuade him Western medicine but from all scientifically validated
from having his knee replaced. He also had aches and treatment methods in other systems also. Western quick-
pains everywhere. Our friends convinced him to have it fixes are a must for emergency-care only but the latter is
done and one of his knees was operated upon. He never just 2% of the sick population.
fully recovered from his post-operative sickness and had The earlier this is done the better. Benjamin Rush had
pneumonia first, thanks to nosocomial infections and, as predicted this kind of unscientific monopoly of Western
he was getting out of those episodes, his aches and pains medicine over all other systems. He did try his best to avoid
increased to a great degree. caste system in healing process, but the 1910 Abraham
After so much of investigations, they have come up Flexner report buried this hope for ever.
with a diagnosis of multiple-myeloma now. His knee pains
have increased and so have his aches elsewhere. I wonder Professor Dr BM Hegde, a Padma
if the diagnosis was missed pre-operatively or was it that Bhushan awardee in 2010, is an MD,
multiple-myeloma was triggered by the surgery. God only PhD, FRCP (London, Edinburgh,
knows. He is in bed at his age and is suffering. What is the Glasgow & Dublin), FACC and FAMS.
He can be reached at hegdebm@gmail.com
quality of life we have been able to offer him? When is the

55 | 28 Oct-10 Nov 2016 | MONEYLIFE

BM Hegde.indd 3 21-10-2016 16:23:59


HEALTH BM HEGDE

CANCER RESEARCH According to statistics

S ometime back, the


famous journal
Science published an
MEDICAL DEVELOPMENTS FROM
supplied by various law
firms, there were 464
claims filed against statins
AROUND THE WORLD
article which upset the as of 15 April 2014,
players in the field. The which increased to 703 by
study clearly showed that bad luck to chance. I was reading a blog 15th May and then to 846 by
alone determined how unexplained showing how cancer is not a disease 16th June. By mid-July 2014, over
gene mutations occurred in the but a trillion-dollar industry and 959 claims have been filed for
stem-cell lines to start a cancer. In most research in the area, funded by damages due to statins alone,
short, it did say that all our theories the vested interests in the industry, and those increased in August to
so far have no basis! is only a fraud. Take your pick. 1,162. There are also many claims
currently filed against statins. These
LAW SUITS AGAINST lawsuits now number well over
CHOLESTEROL-LOWERING 1,200 and are increasing at a rapid
DRUGS pace.

T he $100 billion dollar


cholesterol-lowering statin
drug industry is under attack, as
Let us see how the Big Pharma
is trying to fight the truth. Alberto
Donzelli, head of education,
thousands of Americans are filing appropriateness, and evidence-
lawsuits against the manufacturers based medicine at Milans public
of cholesterol-lowering drugs such health authority in Italy, has issued
as statins. Research continues to warnings about the dangers of
confirm just how dangerous these this drug, and advised doctors in
drugs are, with yet another study Italy not to prescribe it. Merck
published recently linking increased responded with two cease-and-
The year 2016 is important for statin drug use to type-2 diabetes. desist orders and the threat of
the so-called cancer research. In the Since the study was published suing Donzelli. Donzelli backed
October issue, the other famous by the American Diabetes down, but Merck is under a lot of
journal Nature published a paper Association, these known risks to public pressure in Europe since the
from Stony Brook Cancer Center in cholesterol-lowering drugs can no story was picked up by the British
New York which makes a complete longer be denied or defended, and Medical Journal.
U-turn and shows that cancer is the lawsuits are pouring in, at a It was also reported in the Wall
purely environmental (90%) and rapid pace. Most lawsuits, at this Street Journal in the US. When
chance has a role. Six months, and point, are from women who have doctors and medical
the Atlantic Ocean, separate these suffered from diabetes as a result of professionals
two studies, which are statistical taking cholesterol-lowering drugs; oppose Big
and done by people who have not but lawsuits over breast cancer, Pharma, they
cared for any cancer patient and Alzheimers, liver damage, and put their careers
have no hands-on experience! others may soon follow, now that it and, sometimes,
Cancer has been killing mankind is generally known how dangerous their lives on
from eons and we, who boast of our these drugs are. the line. This is
great science, have no clue about This information, regarding the latest story
how one gets the disease. Neither a tsunami of lawsuits against on statins!
have we won the battle against cholesterol drug manufacturers, I have been
cancer, so far. A lucky few who has yet to be widely published by saying this for
did survive have done so because the mainstream media, however. decades.
of their own immune system and To find out the magnitude of the
not due to our empirical treatment lawsuits being filed against statin
modalities. manufacturers, we turn to law
If the public has still some faith firms who are reaping the fruit of
in our science it is, again, only due litigation against Big Pharma.

MONEYLIFE | 28 Oct-10 Nov 2016 | 56

BM Hegde.indd 4 21-10-2016 16:24:29


USEFUL APPS YAZDI TANTRA

Truecaller: Know Who is Ne


Newsfeed shows you what stations
aare currently on-air. If podcasts are
Calling more to your liking, youre in luck.
TuneIn has over four million. Get

I f you have been using a smartphone for a while, you


should have Truecaller installed on your phone by now. If
not, do it now! Truecaller is the best way
not
the old-fashioned radio back on your
phoneenjoy the art of listening!
This app is free for both, Android
T
tto identify who is calling you, even if andd iOS, with options to upgrade with
you do not have the number in your more features. https://goo.gl/uDyxN
directory. They boast a database
of over two billion numbers from
all over the world. It not only goes Glympse: Share Your Location
online and looks up the number, it
also displays the name on your screen,
al
even before you pick up the call. After the call is over, you
can save the number directly in your directory. The best
W hen you are out and have to meet friends, you need
to tell them your current location. When you are
on your way home, your family needs to know exactly
part is that you can mark a number as spam (to get rid of where you are and how you are moving towards home.
those pesky calls) and the number will be automatically Glympse is a simple app that helps you do all that.
blocked from then onwards. It will also display if others Just enter the persons name from your address book and
have marked a number as spam, helping you to decide send him/her your location from Glympse. And you can
whether you should pick up the call or not. A must-have specify for how long they can track
utilityyou will wonder how you managed without it your location. The recipient(s) need
for so long! Available for Android (https://goo.gl/ljEHn) not have installed Glympsethey
iPhone and Windows phone users. just get a web-link which will show
them your current location, for the
period specified. If you are going
Smart Tools: Work Smart for a meeting and the attendees
are on your calendar, Glympse can

S mart Tools is a complete package of six app sets. It


includes five professional
sets for a total of 16 tools. In a
send the message to all the attendees, automatically. In
short, Glympse is a fast, free, and simple way to share
your location safely using GPS tracking in real time with
word, an all-in-one app. friends and family! No sign-up required! And, of course,
Set 1: Length, Angle, Slope, it is free!!
Level, ThreadSmart Ruler Pro Features:
Set 2: Distance, Height, Width, Easy: no sign-up required or contact lists to manage;
AreaSmart Measure Pro Safe: your Glympse automatically expires;
Set 3: Compass, Metal detector, Live: share location in real-time with dynamic map;
GPSSmart Compass Pro Open: share with anyoneno app required to view;
Set 4: Sound level meter, VibrometerSound Meter Pro Passive: runs in the background;
Set 5: Flashlight, Magnifier, MirrorSmart Light Pro Global: works anywhere you have GPS and a data
Set 6: UnitUnit Converter Pro connection.
Work SmartUse Smart Toolsthe best all-in-one for https://goo.gl/JFuMO
those on the go! https://goo.gl/qRNUx

Yazdi Tantra is a chartered accountant


TuneIn: Radio in Your Phone by training, computer consultant by
profession, entrepreneur-developer by
hobby and trainer in his leisure time.
T uneIn lets you listen to real radio stations right on your
phone. Sometimes, you want to listen to the traditional
over-the-air radio. Luckily, TuneIn Radio has over 100,000
He is currently the vice-chairman of
Zoroastrian Co-operative Bank Ltd
and has been running a medium-sized computer
real radio stations covering everythingfrom music, company ON-LYNE for the past 24 years.
sports, news and talk radioand the apps customisable

57 | 28 Oct-10 Nov 2016 | MONEYLIFE

Tantra - column.indd 1 21-10-2016 14:14:41


LEGALLY SPEAKING SD ISRANI

Filing Delayed Complaints & Appeals


I
f you are planning to make a complaint under the suffering losses or having problems with the partner will
Consumer Protection Act, remember that you need to not be treated as sufficient cause. It is not possible to lay
file it within two years from the date of the cause of down precisely what facts, or matters, would constitute
action, with the District Forum or the State Commission sufficient cause under the law. Any negligence in filing
or the National Consumer Disputes Redressal Commission the complaint by the consumer will certainly damage his
(NCDRC), as the case may be. Many such complaints arise cause while seeking condonation of delay.
due to deficiency in service in the context of purchase of The Bombay High Court has held that, If the spirit
apartments / houses by consumers. Therefore, delay in filing behind the empowerment of discretionary power on the
could result in avoidable losses for consumers. Similarly, Court is taken into consideration, it is beyond doubt clear
in the case of appeals also, it is important to be conscious that the Court is required to adopt liberal approach in the
about the time limit available to the consumer, else the matter of interpretation of the phase sufficient cause.
chance to have the appeal filed may be lost. The settled law, as propounded by the Supreme Court
Here, I would like to stress the fact that just because in a number of cases, is that the term sufficient cause
two years are available for filing the complaint, it does in Section 5 of the Limitation Act must receive liberal
not mean that a consumer should take his own time and construction so as to advance substantial justice and,
deliberately, or negligently, delay the filing of the complaint, generally, delays in bringing the appeal are required to be
though it may still be within the limitation period. The condoned in the interest of justice where no gross negligence
principle to be followed
lowed in filing a complaint should be, or deliberate inaction or lack of bona fide is imputable to
sooner the better,, because avoiding prompt action may the parties seeking condonation of delay.
eventually lead to delay beyond the period of limitation However, some of the jud judgements of the Supreme
with the attendant consequences. Court, delivered in re recent years, indicate the
Every consumer er should note that if a hardening stance adadopted by the apex court
complaint is filed beyond the stipulated while considerin
considering sufficient cause, as is
period, then it is for
or the Forum to decide evidenced byb the following cases. In
whether to entertain ain the complaint or Anshul Aggarwal
A vs New Okhla
dismiss it for delayed yed filing. However, Industrial Development Authority,
Industri
if the complainant wants the delay to be IV (20
(2011) CPJ 63 (SC), RB
condoned, he has to file Ramlingam vs RB Bhavaneshwari,
Ramlin
an application seeking
king I(2009) C
CLT 188 (SC), Ram Lal and
condonation of delay; lay; Others vs RRewa Coalfields Ltd, AIR
he will have to show how 1962 Supreme Court 361 & Office of the
sufficient cause due to Chief Post Mast
Master General & Ors vs Living
which the delay was as caused. Media India Ltd & Anr (2012).
So what exactlyy is sufficient was taken by the apex court
The latest view wa
cause that a complainant
lainant has to provide in the case of Sanjay SSidgonda Patil vs National
when there has been en a delay in filing the Insurance Co Ltd & Ors, decided by the apex
complaint? court while dismissing the Special Leave to Appeal
The point to be noted is that there is no hard and fast (Civil). In that case, the apex court upheld the order of the
rule to decide what is a sufficient cause, in a given case, as NCDRC wherein delay of just 13 days was not condoned
it would invariably depend on the facts and circumstances by the apex court. Hence, in their own interest, consumers
of each case. What may be held to be sufficient cause in need to be conscious of the various timelines available for
one case may not be adequate cause in another case. So filing complaints and appeals and ensure that they dont
it will always depend on the circumstances of each case. miss the bus while seeking redress under the Act.
It should be noted that a mistake of law, no matter
how honestly made, cannot be held to be sufficient cause,
unless it can be said that such a mistake was made in good SD Israni is a corporate lawyer & Fellow
faith, that is, the mistake was made, notwithstanding due of ICSI. Email: sdisrani@gmail.com
care and attention on the part of the litigant.
Similarly, the excuse of having no money or the business

MONEYLIFE | 28 Oct-10 Nov 2016 | 58

Legally Speaking.indd 2 21-10-2016 16:41:02


TECHNOLOGY MOBILE

Why Do Mobile Batteries Explode?


Battery explosion of Note 7 has forced Samsung to withdraw this product after suffering huge
brand damage. Yogesh Sapkale explains why batteries of mobiles explode

A
s I am writing this piece, following the increased allowed the two electrodes to touch, leading to fire and
incidents of fire and explosion of Samsung explosion, in some cases.
Galaxy Note 7, that was touted as prime rival Nowadays, several manufactures are allowing
to iPhones, Samsung has stopped production and sales overcharging of the battery, either knowingly or
of this device and withdrawn the model. In September unknowingly. As you may be aware, most batteries
2016, the company had recalled 250,000 devices after are designed to automatically prevent overcharging.
a number of the units spontaneously burst into flames. However, sometimes, there may be some fault in
The battery was the culprit. the circuits which may lead
As I mentioned in one of my to battery overcharging and
previous articles, every mobile- heating.
user wants to squeeze the Add to this, the fast-charging
maximum out of the devices phenomenon. What happens
battery. Earlier, users were when you are fast charging your
concerned if the battery would mobile? In this case, the charger
last for a day or not. Now, tries to push more current into
they want the battery to get the battery. If you are not using
charged in a few minutes. This the recommended charger (and
desire to give customers the Lithium-ion Rechargeable Battery cable) provided by the device
ability charge fast, and some Charge Mechanism manufacturer, this can lead the
compromises on quality, is what Charger battery to freak accidents.
led to freak fire and explosion. Electrons Some manufacturers also
Why did the device burst Current try to increase voltage so that
into flames and explode, in the batteries can store more
some cases? As per reports, the energy. For this, they add
main issue was about a weak Separator elements like nickel to lithium.
physical barrier between two Anode Cathode However, voltage is a force and
nodes in the battery. This led more voltage is more likely to
to sparks and fire and, in some combine electrolytes and make
cases, explosion of the battery. them catch fire.
So what exactly is a battery and What we can do is take
how can it catch fire? precautions while using and
Almost all mobile devices charging the mobile handset.
use lithium-ion batteries. There This includes keeping your
are two electrodes, or electrical handset cool and checking
conductors, inside the battery Electrolyte regularly whether the device is
placed on opposite sides. One (Polymer Battery: Gel Polymer electrolyte) becoming hot while charging or
2006 HowStuffWorks
called cathode holds positively when in use. Never use a sub-
charged ions and other known as anode, holds negatively standard charger for your handset. Also, refrain from
charged ones. Cathode is filled with lithium. When we using a device if there the battery is swollen. Use the
charge the battery, lithium ions move from cathode to battery prescribed for your handset and buy it only from
anode. The opposite takes place when the battery is an authorised, or authentic, shop.
discharging. To help the ions move freely from one side Remember, technology in battery manufacture is
to the other, there are chemicals or electrolytes, in the advancing continuously but not at the speed of thought
battery. Separators are inserted between cathode and and our desires like lightning-fast charging and longer
anode, to keep them away and curb redirecting energy to battery life. Hope the manufacturers also remember this
electrolytes. In Note 7, the separators were flawed and and do not pander to our desires!

59 | 28 Oct -10 Nov 2016 | MONEYLIFE

Technology.indd 1 21-10-2016 16:38:14


YOU BE THE JUDGE BAPOO MALCOLM

A Court Case Is Not a Money-


making Exercise, Yet
Why ask for the moon, when we have the stars, status, he needs to assure the court that he is the victim.
Why ask for the rainbow, when we know its ours? A victim of a frivolous action, an attack on an innocent
A popular song of yesteryears person, for which malady, a remedy is called for. The
usual method is by way of costs.

S
hould you be the recipient of a summons to appear The defendant needs keep a thorough
in court, what would be your first reaction? track of expenses, of time spent, of
Where will I get the money? Then, when sleepless nights; the latter amounts
you enter the court compound for the first time to mental agony. This adds up to
in your life, what would be your gut monetary compensation.
feeling? Intimidation; butterflies in Will the court allow
your stomach. All is not lost; there it? This is where the
is a way out. advocates acumen
If you are guilty, try to cut comes into play. One
your losses. If you are in the way is to milk the
right, you have to proceed law of torts. Torts
with a cool mind. Winning at are wrongs that
all costs, by legal means, are not always
must be first on the codified. Argued
agenda. Put fear aside. correctly, in a
This is the time to hit way that
back. If you play the does not
game well, you can require a
recover your costs; written
and a bit more. law, the
Not too much, but court
definitely a bit more. can be
You be the judge. shown that the defendant was truly hurt.
A litigation in the US involved the reimbursement of Equity, a sharing of plusses and minuses.
costs for a report. Concerned citizens filed a suit against There is no mathematical formula; it is the
the city authorities questioning costs paid to the lawyers force and direction of arguments that will
for work done. The citizens felt that if the municipal carry the day.
authorities had done the work themselves, the One question remains. How
costs would be far less. Stands to reason. much does one ask for?
A developer had agreed to bear all litigation The moon? Or the stars?
costs that the municipality incurred. That The rainbow? Which is just a
mirage.
included the costs for reports needed to oppose citizens mirage
suits. It paid the municipality. And then proceeded to Hard-headed calculation is the best answer. Add to
recover costs from the citizens. The citizens balked; after the mixture a dose of angst. Season it with a rider of
all, they had pointed out flaws in the report. Whom what this means to society at large. And face the courts
would you favour? with confidence. It works.
The citizens lost. Because consultations were
incomplete between all sides, prior to according
contracts. Loss of both, face and money. Bapoo Malcolm is a practising lawyer in
How does this help us in warding off the evil eye Mumbai. Please email your comments to
mail@moneylife.in
of litigation? Courts of law decide issues. They weigh
the pros and cons. When the defendant is sure of his

MONEYLIFE | 28 Oct-10 Nov 2016 | 60

You Be the Judge.indd 2 21-10-2016 19:10:56


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BOOKS

Misbehaving: The Making of Behavioural Economics

The Rational Approach to Make Sense


of Our Irrationality

R
ichard Thaler is the worlds foremost theorist on this reaction was irrational. The average numerical score
behavioural finance, a field that was developed had absolutely no effect on the grades since the average
by Daniel Kahneman (Nobel Prize-winner in grade was a B or B+, and only a few got grades below C.
2002) and Amos Tversky from the 1970s. Most of them, Thaler writes that I had anticipated the possibility that
and another top researcher, Cass Sunstein, have worked a low average numerical score might cause some confusion
together at some stage or another to generate fabulous on this front, so I had reported how the numerical scores
insights into how irrational out behaviour is. Behavioural would be translated into actual grades in the class. Anything
economics, and its subset behavioural finance, of course, over 80 would get an A or A-, scores above 65 would get
is designed to show that human beings are not rational some kind of B, and only scores below 50 were in danger of
while making decisions. getting a grade below C. The resulting distribution of grades
Thalers previous book was was not different from normal, but this announcement
Nudge, with Cass Sunstein, had no apparent effect on the students mood. They still
which discussed how public hated my exam, and they were none too happy with me
and private organisations either. As a young professor worried about keeping my
can help people make better job, I was determined to do something about his, but I
choices in their daily lives. did not want to make my exams any easier. What to do?
His recent book For the next exam, Thaler, the behavioural expert,
Misbehaving: The Making of made the total number of points available 137 instead of
Behavioural Economics is a 100! This exam was harder than the first, with students
fascinating history of how this getting only 70% of the answers right (as opposed to
new discipline developed into 72% in the first); but the average numerical score was a
such a major force over the cheery 96 points.
past four decades and has come He says, The students were delighted! No ones actual
to dominate the mainstream grade was affected by this change but everyone was happy.
economic thinking. From that point on, whenever I was teaching this course, I
After all, Thaler is now always gave exams a point total of 137, a number I chose
MISBEHAVING
the president of the American for two reasons. First, it produced an average score well
RICHARD THALER
Economic Association, a into the 90s, with some students even getting scores above
Penguin Random House
position held by luminaries 100, generating a reaction approaching ecstasy. Second,
Pages 415; Rs818
from conventional economic because dividing ones score by 137 was not easy to do
stream, such as Milton in ones head, most students did not seem to bother to
Friedman, JK Galbraith and Amartya Sen. convert their scores into percentages. Lest you think I was
The book starts with a fascinating example of how somehow deceiving the students, in subsequent years, I
irrational we are. For a mid-term exam, Thaler had set included this statement, printed in bold type, in my course
up a test that was designed to distinguish between three of syllabus: Exams will have a total of 137 points rather
broad groups of students: those who really mastered the than the usual 100. This scoring system has no effect on
concepts taught; those who grasped the basic concepts; the grade you get in the course, but it seems to make you
and those who just did not understand. For this, the exam happier. And indeed, after I made that change, I never got
had to have some questions that only the top students a complaint that my exams were too hard. This book is
would get right, which meant that the test was tougher full of stories like these.
than usual. Thaler writes that the exam succeeded in my
goalthere was a wide dispersion of scoresbut when Behaviourial Finance Meets Quants
the students got their results, they was an uproar among One of the more interesting applications of behaviourial
them. Their principal complaint was that the average score finance is, surprisingly, in clarifying a knotty investment
was only 72 points out of a possible 100. As happens, conundrum which is the domain of quants. For instance,

MONEYLIFE | 28 Oct-10 Nov 2016 | 62

Book Review.indd 2 21-10-2016 16:40:02


BOOKS

academics have intensely debated an anomaly called the forward to offer their explanations. Thaler and his associate
equity premium puzzle, first announced by Raj Mehra Shlomo Benartzi offered theirs: people behave differently
and Edward Prescott in a 1985 paper. over short term and long term. While Mehta and Prescott
Prescott is a staunch member of the rational arrived at a 6% figure reward figure for the risk one took
expectations school, whose work in real business cycles, to buy stocks, it is worth asking why dont more people
later won him a Nobel Prize. As Thaler writes, unlike go for that reward? Why do investors hold more bonds
me, Prescott did not have declaring anomalies as part than stocks? The answer: they were taking too short-term
of his agenda. I suspect he found this one to be a bit a view of their investments. Humans are not rational.
embarrassing given his world view, but he and Mehra To test this, Thaler and Shlomo ran an experiment using
knew they were on to something interesting. This was employees at the University of Southern California which
similar to the momentum anomaly, that has embarrassed had a defined contribution retirement plan. Under the plan,
the Efficient Market Hypothesis school which I have employees have to decide how to invest their retirement
discussed on page 40. funds. They told each employee
Now equity risk premium is to imagine that there were only
the difference in returns between two investment options in this
equities (stocks) and some risk- retirement plan, a riskier one with
free assets such as government higher expected returns and a safer
bonds. The premise is that one with lower expected returns.
investors demand a premium They were shown charts
for buying equities over risk- showing the distribution of 68-year
free securities because equities returns. They were not told of
are risky. The question is: How the asset classes, to avoid any
big is this premium? We can look Economists have not always preconceptions they might have
at history but the answer depends
on the period used and various
been so dense about self- about stocks and bonds. The trick
was in what the charts revealed.
definitions. Mehra and Prescott control problems. For roughly In one version, the subjects were
studied the period 1889-1978 two centuries, the economists shown the distribution of annual
and concluded that the equity who wrote on this topic knew rates of return; in another, they
premium was about 6% per year.
In many economics articles,
their Humans. In fact, an early were shown the distribution of
simulated average annual rates of
the analysis would stop at that pioneer of what we would now return for a 30-year horizon.
point, writes Thaler. The call a behavioural treatment of The first version captures the
theory predicts that one asset self-control was none other than returns people see if they look at
will earn higher returns than
another because it is riskier, the
the high priest of free market their retirement statements once a
year, while the other represents the
authors find evidence confirming economics: Adam Smith experience they might expect from
this prediction, and the result is a thirty-year invest-and-forget-it
scored as another win for economic theory. What makes strategy. Employees who were shown the annual rates of
the analysis by Mehra and Prescott special is that they went return chose to put 40% of their hypothetical portfolio in
beyond asking whether economic theory can explain the stocks, while those who looked at the long-term averages
existence of an equity premium, and asked if economic elected to put 90% of their money into stocks, writes
theory can explain how large the premium actually is. Thaler.
Mehra and Prescott went ahead and developed a model The more often people look at their portfolios, the less
to predict equity risk premium. The largest value they willing they will be to take on risk, because if you look
could predict from their model was 0.35%, far lower more often, you will see more losses. Thaler later explored
than the actual historical figure of 6%! This made no this idea in a paper with Kahneman and Tversky, the only
sense. Stocks are highly risky. Why would investors take paper that these three stalwarts published together and
the risk of buying stocks when all they get is 0.35% over that too after Taversky passed away. This is a book full of
risk-free returns? interesting stories from the world of behavioural finance
The model and its conclusions were controversial. that will keep you engrossed if you are interested in this
Mehra and Prescott took six years to get the paper discipline, as every investor should be. The casual reader,
published. Once it was published, many economists came too, will find these fascinating. Debashis Basu

63 | 28 Oct-10 Nov 2016 | MONEYLIFE

Book Review.indd 3 21-10-2016 16:40:19


MONEY FACTS STOCKS

INDIAN MARKET TRENDS FUND FLOWS


The Sensex and Nifty were flat for the fortnight ended 19 th
Foreigners: Foreign institutional investors were net
October. ML Mega-cap Index declined by 2%. ML Mid-cap sellers of stocks during the fortnight (Rs2,799.58
Index advanced 4%. ML Small-cap Index and ML Micro-cap crore). They bought shares of Rs26,302.24 crore.
Index rose by 3% and 1%, respectively.
355
FII Net Investments
(Rs Crore)
Share Prices Index, April 2016=100 15
130

-325

120
-665

110
-1,005
10 Oct-16 19 Oct-16

100 Indians: Domestic institutional investors were net


buyers of stocks during the fortnight (Rs2,838.92
crore). They bought shares of Rs15,269.94 crore.
90 725
Apr-16 Jul-16 Oct-16
DII Net Investments
ML Large-cap ML Small-cap Nifty ML Micro-cap 565
(Rs Crore)
ML Mid-cap ML Mega-cap Sensex

405

Index 07 Oct 19 Oct +/-


245
ML Mid-cap Index 125.05 129.77 4%
ML Small-cap Index 111.75 115.08 3%
85
ML Large-cap Index 115.59 117.52 2% 10 Oct-16 19 Oct-16

ML Micro-cap Index 111.98 113.57 1%


Nifty 28,061.14 27,984.37 0%
GLOBAL MARKET TRENDS
64,000
Sensex 8,697.60 8,659.10 0%
ML Mega-cap Index 121.73 119.80 -2%
60,250
Mega-cap Gainers/Losers 07 Oct 19 Oct Change Bovespa
56,500
Dewan Housing Finance Corp 292.55 334.65 14%

Zee Entertainment Enterprises 572.20 509.30 -11% 52,750

Large-cap Gainers/Losers 07 Oct 19 Oct Change


49,000
Apr-16 Jul-16 Oct-16
Ramco Industries 179.50 282.10 57%

Jammu & Kashmir Bank 87.15 67.05 -23% Bovespa, Shanghai Composite and Nikkei advanced
4%, 3% and 1%, respectively. Taiwan Weighted, the
Mid-cap Gainers/Losers 07 Oct 19 Oct Change
FTSE and S&P 500 were flat.
Jindal Stainless 28.95 41.70 44%
Index 07 Oct 19 Oct +/-
Gitanjali Gems 83.80 68.50 -18% Bovespa 61,109 63,506 4%

Small-cap Gainers/Losers 07 Oct 19 Oct Change Shanghai Composite 3,005* 3,085 3%


Nikkei 16,860 16,999 1%
Diamond Power Infrastructure 33.30 57.45 73%
Taiwan Weighted 9,266 9,284 0%
Piccadily Agro Inds 23.45 12.05 -49%
FTSE 7,044 7,022 0%
Micro-cap Gainers/Losers 07 Oct 19 Oct Change S&P 500 2,154 2,144 0%
Korean Composite 2,054 2,041 -1%
Ind-Swift 4.56 7.45 63%
NASDAQ Composite 5,292 5,246 -1%
MPS Infotecnics 0.15 0.10 -33%
Hang Seng 23,852 23,305 -2%
(All Prices in Rs) * 30 Sep-16

MONEYLIFE | 28 Oct-10 Nov 2016 | 64

Money Fact.indd 2 21-10-2016 18:29:27


MONEY FACTS STOCKS

Whats H T

Farm and farm inputs companies were buzzing during the week. Tulsi
Extrusions, Mangalore Chemicals & Fertilizers and Zuari Agro Chemicals rose
ML SECTORAL TRENDS
The steel products sector was the
outperformer, rising by 7%. Telecom
by a whopping 53%, 36% and 31%, respectively. equipment sector rose by 6%. Oil &
gas services, textiles and farm & farm
Companies 07 Oct 19 Oct +/- products sector rose by 4% each.
Besides media sector, which slumped
ML Farm & Farm Input Index Tulsi Extrusions 4.00 6.10 53%
by 6%, the sugar sector declined by
140 Mangalore Chem 46.85 63.65 36% 4%. Shipping and telecom services
Zuari Agro Chem 188.85 246.65 31% companies fell by 3% each, while
130 Jayant Agro-Org 310.50 399.05 29%
stocks of real estate sector declined
by 2%.
Zuari Global 97.85 125.05 28%
120
Guj Narmada Valley 187.40 226.30 21% ML Sectoral Trends

Steel Products 7% Media -6%


KSE 560.35 668.65 19%
110 Telecom Equipment 6% Sugar -4%
Excel Crop Care 1,418.60 1,677.95 18%
Farm & Farm Inputs 4% Shipping -3%
Southern Petro 21.70 25.45 17%
100 Oil & Gas Services 4% Telecom Services -3%
Madras Fertilizers 14.10 16.50 17%
Apr-16 Jul-16 Oct-16 Textiles 4% Real Estate -2%
All Prices in Rs

Whats N T FOOD INFLATION


Combined inflation in urban
Media companies were on a declining trend. Zee Entertainment and and rural areas continued its
Tv18 Broadcast declined by 11% and 8% respectively. Other stocks like downward trend, falling to
Entertainment Network (India), Sun TV Network declined by 5%. 4.31% in September 2016, from
5.05% in August 2016. Inflation
Companies 07 Oct 19 Oct +/-
in urban areas declined to 3.64%
Zee Entertainment 572.20 509.30 -11% ML Media Index
in September, from 4.22% in
Tv18 Broadcast 48.05 44.05 -8% 130 August. Rural inflation declined
ENIL 831.10 788.25 -5%

Sun TV Network 562.85 534.30 -5% 120 Decline Continues


Network18 Media 46.15 43.95 -5% 5.50%

Sea TV Network 5.95 5.74 -4% 110 Annual Change


5.00%
Siti Networks 34.90 34.15 -2%
100
Ortel Comm 153.15 150.00 -2% 4.50%

Sandesh 1,048.90 1,031.80 -2%


90 4.00%
Dish T V India 96.25 94.85 -1%
Apr-16 Jul-16 Oct-16
All Prices in Rs 3.50%
Sep-15 Mar-16 Sep-16

BULK DEALS
to 4.96% in September from
Date Company Buyer Seller Rs Cr 5.87% in August. Inflation for
13 Oct-16 Edelweiss Financial Serv BIH SA Privatbank Ihag Zurich AG 66.60
food and beverages stood at
4.12%. This is a decline from
17 Oct-16 GVK Power InfrastructureHSBC Global Invt Indian Eq HSBC Global Invt Funds Mauritius 36.00
5.83% in August. One of the key
17 Oct-16 Cox Kings HSBC Global Invt Indian Eq HSBC Global Invt Funds Mauritius 35.10 highlights for September was
13 Oct-16 Invst Precision Castings Minal Securities Private Minal Investments 0.52 decline in the prices of vegetables
18 Oct-16 Smiths Founders (India) Subhadraben R Shah Subhadraben R Shah 0.63
by 7.16%. The inflation for pulses
and products stood at 14.33% for
19 Oct-16 Uday Jewellery Industries Mohit Gupta Classic Filaments 0.15
September, which was lower than
17 Oct-16 Sashwat Technocrats Mandar Vijay Khavilkar Mukesh Dhirajlal Mahetalia 0.01 21.94% for August.

65 | 28 Oct-10 Nov 2016 | MONEYLIFE

Money Fact.indd 3 21-10-2016 18:29:45


BEYOND MONEY

Healthy Environment for


Underprivileged Children
B
orn in Sangli district to a Maharashtrian family, involve parents, once it gets positive results, for subsequent
Dr Suhrid Tembe moved to Jamnagar (Gujarat). improvements in health and hygiene.
Dr Tembe did his schooling at St Xaviers and Suhrids work is not restricted to children. The
completed his medical studies in MP Shah Medical College Foundation has conducted eight full-scale medical camps
(Jamnagar). He worked as assistant professor of general since October 2012; its actual work includes general health
surgery at Irwin Hospital (Jamnagar). A superb surgeon, and eye check-up camps and special camps for kids with
the soft-spoken Suhrid Tambe devoted his life to helping the support of schools. It has distributed more than 200
poor and suffering patients, often working without food, spectacles, conducted cataract operations, administered
rest or concern for his own health. When he died in 1993 tetanus injections where required got over 800 blood
at the young age of 32, his friends and family, decided to investigations for children in the past three years.
set up Suhrid Foundation in his name, to carry forward Another concern for Suhrid is undernourishment
the work that he was passionate about. among school children. Although students get mid-day
The Foundation started with intention of providing meals comprising rice, dal and matki from the government,
support to underprivileged the meal does not meet the
children in the field of vitamin, protein and mineral
healthcare. Healthcare support needs of students. Hence, Suhrid
is the first interaction of Suhrid launched the SUN project, in
Foundation in any area that it March 2013, which provides
works. It starts with a medical a dietician-defined menu to
survey of the region, mainly several schools. In the first
through a medical camp; follow- phase, it added locally available
up camps are organised for vegetables, jaggery, etc. There
subsequent procedures such as were immediate results in terms
investigative tests or operations of better attendance and more
that may be required for some consumption. Teachers track
patients. Local leaders (such as the impact on children through
the sarpanch or the police patil) daily and monthly reports that
and school teachers from the region play a key role in include checking on height and weight, daily menu and
organising such camps by way of logistics support and the cost incurred.
coordination. Over time, it hopes to have its own primary Suhrid has also been working on infrastructure support
healthcare centre that can provide sustainable support the for schools. Important infrastructure-related challenges
community. Apart from medical camps, Suhrid Foundation include availability of gates, compound wall, minor repairs
aims to provide advance medical support, cancer support, of the walls, bore-wells, motors, etc. Good infrastructure
nutritional support, Suvarna Prashan (an Ayurvedic form motivates parents to send their children to school. Schools
of immunisation for children under the age of 6 years). are graded, based on the infrastructure. If the schools
The Mumbai chapter of the Foundation was launched score well, they may get permission to start higher classes
in August 2012 at Vikramgad, a tribal area around 120km helping reduce school dropouts.
from Mumbai. Several medical camps were organised In 2016, Suhrid Foundation expanded its community
to understand the background, culture, health-related support by starting a drinking water project, increasing
challenges, food habits and availability of healthcare. employability of youth and women to increase household
The Foundation has covered schools around Vikramgad income and building check-dams on rivers or seasonal
area making them an attractive place streams to recharge groundwater.
for kids by providing holistic support Suhrid Foundation is registered under
(beyond health) such as education, sports, Section 12AA of Income Tax Act, 1961.
infrastructure, personal grooming, hygiene,
SUHRID FOUNDATION You can get involved in its work or
D/704, Panchsheel Heights,
etc. The approach is to make each school Mahavir Nagar, Kandivili (W), make a donation which is eligible for tax
self-sufficient for the basic needs and then Mumbai 400067 exemption under Section 80G of I-T Act.
Mobile: 9821239737
Email: ritin@suhrid.org
Web: http://suhrid.org/
MONEYLIFE | 28 Oct-10 Nov 2016 | 66

Beyond_money.indd 1 21-10-2016 14:37:06


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