Moneylife 4 February 2016

SUCHETA DALAL ON:
ALGO LENDING: BLOCKCHAIN TECH: WILL BANKERS ACT ON

AN INCLUSION TOOL SIGNALS FUTURE TREND DR RAJAN'S MISSIVE?
Personal Finance Magazine 4 February 2016 Rs 45
Pages 68 (SUBSCRIBER COPY NOT FOR RESALE) www.moneylife.in
BEST
STOCKS
FROM TOP
EQUITY
SCHEMES
STOCK WATCH
JK Tyre: Zee Entertainment: Indraprastha Gas: Eveready: IndusInd Bank: Manipulation:

Chinese Threat Strong & Steady Benefits Unfolding? Flash or Flicker? Profit Growth, Again Dhoot Industries
Cover Page_259.indd 1 20-01-2016 17:49:20

Advertisements.indd 6 13-01-2016 18:28:58
ISSUE CONTENTS
4 February 2016
Cherry-picking Works!
M utual fund managers, with their skills

and expertise, are expected to pick top-
quality stocks that will deliver superior returns.
Yet, time and again, we find most mutual fund
(MF) schemes picking from a common set of
stocks. Therefore, while there may be some
good-quality stocks in the schemes portfolios,
these may also contain stocks that can be a
drag on the portfolio performance. Through
our research and unique stock-picking formula,
we have experimented with picking top stocks
from the top equity schemes to create a portfolio
that is expected to outperform the average
32 Cover Story
equity scheme. We started our study in 2013,
and have handsomely outperformed not only
the benchmark, but majority of equity schemes
in each and every year. This time, we pick 20
stocks. Which are these? Turn to our Cover Best Stocks from Top Equity Schemes
Story to find out. Our selection, which is based on a formula that combines value
Even top MF schemes have a high proportion and return, has worked very well, again. Jason Monteiro explains
of stocks in their portfolio that are picked by
other schemes. Yet, there are a few schemes
that have identified stocks ignored by most
other schemes and succeeded. Read our analysis
on stocks that are common to MF scheme
portfolios.
14 Innovating with Algo Lending
Digital Currency Future
On the topic of investing, for those looking
to make money in equities, R Balakrishnan
outlines a few simple steps one should follow. As
with all equity investments, time and patience
are important. Most investors get impatient,
especially when they start losing money
16 Different Strokes
When the Going Gets
temporarily.
In his New Year email to bank officers, the Moneylife
RBI governor, Dr Raghuram Rajan, has pointed Quiz no
out several issues that ail the system. Sucheta,
in Different Strokes, writes that though he has
correctly identified all the shortcomings, will this
20 MONEYLIFE
QUIZ
224
lead to the much needed change?
In Crosshairs, Sucheta writes on how RBI
should consult its own regulated entities with
on-ground experience first when looking for
innovative ways to lend to the MSME (micro,
small and medium enterprises) segment. She
21 Your Money
PFRDA Issues Draft Norms for NPS Retirement Advisers
Negotiable Instruments (Amendment) Act, 2015,
writes how one finance company is able to drive Notified
loan growth and keep loan defaults low, through eNPS-Online Subscriber Registration Developed
the use of financial modelling. As always, do 10-year National Savings Certificate Discontinued
write to us to with your views and suggestions.
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 | 4 February 2016 | 4
Content.indd 2 14-01-2016 22:39:21

CONTENTS
FUND POINTERS FIXED INCOME TAX HELPLINE
24 Top Schemes, Popular

Stocks 27 Should You Invest in a
Recurring Deposit? 56 Queries at Moneylife
Foundations Tax Helpline
Most stocks are common across Yields Down Past Fortnight
different equity schemes, points out G-Sec Yields Flat HEALTH
Jason Monteiro
FUND FACTS
INSURANCE
58 NothisPillIll for
26 Best & Worst
Mutual Fund Schemes 30 Insurance
Trends
Regulations
IRDAI Wants Wider Cashless
STOCKS Network
Life Insurance
22 Smart Money Dont Fall into ULIP Trap Again
Time in the Market BHARTI AXA Life Invest Once
To make money in equities, Does the medical profession really
Fine Print want society to be healthy?
be patient and make time your
friend
Pulse Beat: Medical developments
from around the world
TECHNOLOGY: MOBILE
40 Stock Watch
JK Tyre and Industries
Cheaper imports a worry but
50 Are You Ready for
Netflix?
YOU BE THE JUDGE
more than compensated by lower

rubber prices 59 Punishment for
Honest Mistake
The law allows a lot of leeway
Zee Entertainment
High valuation comes from
predictability HOW I WORK
Indraprastha Gas Limited

Measures to curb pollution On-demand
O
Onn-ddeman
eman
em and
nd stre
sstreaming
sttreeam
amin
amiing sounds
sso
ou
un
nnd
ds ggreat;
ds reat
re at;
at;
61 Fast Burst
Camera
may help the gas distribution butt sl
bu slow
ow IInternet
nter
nterne
nett sp
spee
speeds
eeds
ds aand
nd hhigh
ig
gh The app is great for sports shots,
company data charges will afflict Netflix pictures of kids or pets or even to
analyse your cricketing action, frame
by frame!
Eveready Industries EARNING CURVE
Extraordinary share price growth
52
does not appear justified
Low Value,
BEYOND MONEY
High Returns
IndusInd Bank
Fantastic revenue and profit
Undervalued stocks fetch higher
66 Equal Access for the
Disabled
growth, again returns EKansh Trust believes that the first
step towards inclusion of people with
disabilities is creating awareness
Market Manipulation: Dhoot
Industries LEGALLY SPEAKING
Market Trend: Slow Realisation

Fund managers are beginning to
54 Bombay Hospital To
Pay for Negligence DEPARTMENTS
Readers Response ........... 8
see the reality NCDRC orders Hospital to pay Rs40
lakh to doctor-parents who lost their Book Review ....................62
daughter Money Facts ....................64
Content.indd 4 14-01-2016 23:35:37

foundation.moneylife.in
Anniversary
Saturday, 6 February 2016
TRANSFORMING INDIA FROM WITHIN

Some unusual Indians are bringing about transformation working within the same
dysfunctional system. Moneylife Foundations 6th Anniversary celebrates them.
Dr RC Sinha will preside over the function

advisor, ministry of road transport & highways;
ministry of shipping; former addl chief secretary, Maharashtra
Dr Praveen Gedam chief guest & keynote speaker

The dynamic municipal commissioner of Nashik, Dr Gedam has
used technology for better governance, while tackling entrenched
corruption in each of his jobs. A physician who joined the IAS,
Dr Gedam is known for his honesty, fearlessness and dogged pursuit
of his goals. Come and hear him explain how transformation is
possible from within. Show your support for his incredible work.
Panel Discussion: Governance and Transformation from within the System
Presided over by Panelists Dr Anupam Saraph Shailesh Gandhi Debashis Basu

Dr RC Sinha Dr Praveen Gedam former CIO of Pune city former central ca, editor &
and former IT advisor to information publisher of moneylife
CM Goa. commissioner
Registration: 2.30pm | Session Time: 3pm to 5pm

ADMISSION Registration
Register online at moneylife.in/event/116.html FREE is mandatory!
Venue: YB Chavan Hall, 1st Floor, RSVP: Shilpa at 022-49205000 or

Yashwantrao Chavan Pratishthan, email foundation@moneylife.in or
Gen. Jagannathrao Bhosale Marg, Call/SMS/ WhatsApp on +91-7045156415
Nariman Point, Mumbai - 400021. (Please give your name. email ID &
Landmark: Opp Mantralaya contact number)
Technology Partner
6 Anniversary Ad.indd 1 14-01-2016 22:42:27

Volume 10, Issue 25
22 January 4 February 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, MISSED OUT SOME FINER POINTS!

Circulation & Subscription Office The Cover Story on Fixed Income (Moneylife,
315, 3rd Floor, Hind Service Industries
Premises, Off Veer Savarkar Marg, Shivaji
Issue 24 December 2015) is obviously a well-
Park, Dadar (W), Mumbai - 400 028 researched piece. But I feel that Jason Monteiro
Tel: 022 49205000 has missed out some of the finer points on some
Fax: 022 49205022
E-mail: mail@moneylife.in recent developments in this space. He has argued
Mutual Fund investments
that 10-year G-Sec yield movement in the past 10 are subject to market risks,
read all scheme related
months has been sideways. But the reality has documents carefully.
E-mail: been that the yield has actually strengthened after
sales@moneylife.in
Subscription e-mail the 50bps (basis points) rate cut from Reserve
subscribe@moneylife.in Bank of India. There has been no explanation for Write to
this. The cause of this anomaly seems to be the the Editor!
New Delhi
supply-demand equation; this factor fails to get
attention in the article which focuses only on a
WIN
a prize
DDA Flats, J-3/66, Kalkaji,
New Delhi - 110 019 simple reasoning of the timeline involved in impact
of the rate cut on the yield.
Balaji Balagopalakrishnan, by email
Bengaluru
1st Floor, 13/1, 7th Main Road,
1 Cross, Saibabanagar, Srirampuram,
st
Jason Monteiro replies: Thank you for your
Bengaluru - 560 021
feedback. For any market-linked security, the
price is determined by demand and supply
Kolkata of the securities. Specifically, this equation
395, Lake Gardens, Kolkata - 700 045 is influenced by the level and changes in
Tel: 033 2422 1173/4064 4318
interest rates, macro-economic factors and
developments in other marketsmoney,
Moneylife is printed and published by foreign exchange, credit and capital markets.
Debashis Basu on behalf of We have kept the Cover Story simple and focused on the main
he m ain
ai factors
n fa
fact
ctor
ors
Moneywise Media Pvt Ltd and printed at
Magna Graphics,101C&D, (interest rates and demand from foreign institutional investors) which
Government Industrial Estate, influence yields over a longer period and which retail investors can
Kandivli (West), Mumbai - 400 067
and published at 315, 3rd Floor, keep a track of. From the beginning of 2015, the yields have declined
Hind Service Industries Premises,
Off Veer Savarkar Marg, Shivaji Park,
by just about 13bpsfrom 7.88% to 7.75% on 23 December 2015.
Dadar (W), Mumbai - 400 028 Yes, over this period, the benchmark yield has moved between 7.50%
Editor: Debashis Basu
and 8%; this volatility is defined by supply and demand.
Total no of pages - 68, Including Covers INADEQUATE COMMUNICATION BY THE DOCTOR

This is with regard to Diagnosing Medical Negligence by
Prof BM Hegde. As a physician, I agree with Dr Hegde. This article
RNI No: MAHENG/2006/16653
Letters.indd 2 11-01-2016 20:34:57

LETTERS
Anomaly in Online Booking

the
Best
letter
System of Rail Tickets
Mutual Fund investments
O ne would have thought

Indian Railways are as eager
as our honourable prime minister,
confirmed berths
on the basis of
tickets booked
are subject to market risks,
documents carefully.
Narendra Modi, to usher in

digital India. But the fact is
online.
b) The new procedure
Congratulations
otherwise. Let me illustrate: is putting those who Hoshang R Nekoo
Recently, I travelled from Bengaluru to Palakkad book tickets online
YOU WIN A
and back. While I had confirmed reservation for my at a disadvantage. PERSONALISED
onward journey, my return journey was waitlisted This, in turn, CLOCK
as PQWL3 (pooled quota waiting list). On the date will lead to more
of the return journey, i.e., 8 December 2015, I was people opting
still waitlisted at number 3. However, I boarded to book tickets
the train and was asked by the TTE (travelling from railway
ticket examiner) to wait in the 3A (three-tier air- reservation
conditioned sleeper) compartment until he checked counters. This
the availability of berths. After about an hour or so, is against the BV Krishnan
he came to me and asked for my ticket. avowed goal of

When I told him that I had booked my ticket online the railways,
and showed him the confirmatory message on my and indeed
mobile phone, he told me that it was no more valid, that of the
since it had already been automatically cancelled government of
by the ticketing system. He said only for those India, which wants to mak
make digital
ke d
ke igit
ig
git
ital
tal
al a access
cces
cc more
esss mo
es m
mor
ore
who have booked tickets manually from the ticket universal.
counters, would the waitlist be applicable. Not This particular TTE, in fact, agreed with this point.
only that, but he also asked me to disembark from My suggestion to the railways is to discontinue this
the train at the next station as I was, technically, a procedure.
ticket-less traveller. I protested that even after the Instead of automatic cancellation of unconfirmed
chart was prepared, when I had checked online, my online reservations at the time of chart preparation,
ticket was still shown as WL3. The TTE showed they should include these online bookings also in
me the hard copy of the chart and my name was the physical chart given to the TTE. If the TTE gives
not included even in the waiting list that he had. confirmed berth to any such ticket-holder, it should
The reason for this, he explained, was that after be updated in the system the next day and only after
preparing final chart at the commencement of the that, they should cancel unconfirmed tickets and
trains journey, all unconfirmed (or waitlisted) online refund the amount.
tickets get automatically cancelled by the system Alternatively, the passengers themselves should be
and the money would be refunded through the asked to claim the refund via the IRCTC (Indian
corresponding payment portal. Railway Catering and Tourism Corporation) portal,
If the online waitlisted passengers are allowed to as was the case earlier.
travel, the railways have no means to recover the This procedure used to work without any problem
fare as it is already refunded. He then proceeded and I wonder why this was changed. Is it to save
to give the available berth to another wait-listed extra work for the railway staff (as there will be no
passenger, who had booked the ticket from the need to update on the next day)? If so, it is at the
railway counter. cost of hapless passengers who put their trust on the
Here I would like to point out following: online reservation system!
a) I remember, on earlier occasions, I was given BV Krishnan, by email
Letters.indd 4 11-01-2016 20:35:31

LETTERS
describes the problems in making a diagnosis and resources to get better informed and be available to
assuring optimal treatment. I feel, the main problem answer doubts that may arise after the patient has left
is inadequate communication by the doctor. Doctors the clinic/hospital. A second opinion is valuable only
either do not wish to spend the time to explain to if the referring physician has no conflict of interest
patients or lack the skill to do so. with the second physician. I am afraid that the only
If the problem is the former, it could be rectified by way to force the doctors and hospitals to change their
having a well-trained nurse or physician assistant behaviour is through litigation. And, yes, this will hurt
who can decode the cryptic doctors notes and give the honest doctors but that is unavoidable.
enough time to the patient to ask questions, suggest Meenal Mamdani, online comment
OUR READERS WHO CLICK WITH US

Heres a sample of the kind of feedback that we receive from our readers on
our vibrant website, www.moneylife.in
MOST IMPORTANT FACTOR IN BUYING can take while making investment decisions, but
SMARTPHONES also in helping those whose decisions subsequently
This is with regard to Buying Tech Devices turn out to be wrong because of inadequate pre-
by Yogesh Sapkale. The most important factor investment study or the institutions in which money
while buying a smartphone is its CPU (central was invested. Moneylife has also been encouraging
processing unit) architecture. Always check the CPU investors to share their good and bad experiences
architecture type either on Google or specific sites with banks and other financial institutions.
such as GSMArena. An example of architecture: I am not aware of any other organisation engaged
ARM A6, A9, A15, etc. The higher the number, the in educating savers and confronting institutions,
better the performance and the more expensive the including regulatory bodies, when they do not play
phone. For any comparison, use Google. A 2GB their mandated roles or play them inefficiently.
RAM on A9 will be much better than a 3GB RAM It is in this context that one should view the
on A6 type. Lastly, if you are not into technically observations on transparency and accountability
modifying your phone, ensure that you buy a phone here. Because of our pre-independence legacy,
which has at least 4GB of system reserved memory our civil and criminal statutes, including those
(this is unavailable to you for your use). Of course, applicable to the financial sector, have provisions
RAM is important. which insulate the rich and the powerful from
Vaibhav Trivedi punishment, or at least help them in getting the final
punishment delayed. A section of the media also
COMMENDABLE WORK! plays into the hands of the rich and the powerful
This is with regard to Taking Stock of 2015 by blacking out the names of celebrities and the
Preparing for 2016 by Sucheta Dalal. Moneylife rich when they are involved in unethical practices.
has been doing commendable work in creating In such situations, the presence of institutions like
awareness among savers and investors not only Moneylife is comforting to the victims.
about their rights and possible precautions they MG Warrier
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11 | 4 February 2016 | MONEYLIFE
Letters.indd 5 11-01-2016 20:36:11

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The Insurance Regulatory and agents and insurance intermediaries, up getting much higher rewards than
Development Authority of India regulations, 2016 caps the reward individual agents. The reference is to
(IRDAI) has ushered the New Year with based on an objective and transparent rewards which are over and above the
bad news for agents. The IRDAI draft criteria to individual insurance agents. commissions!
Debt restructuring is a Band-Aid for a bullet wound ML FOUNDATION

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Foundation on
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Dr RC Sinha will
Is Champcash app a new form of chain-money scheme? preside over the function. Dr Praveen
The Champcash app on Google Play store wants you to install 10 other Gedam will be the chief guest and
apps and refer it to others to earn unlimited money, much like money keynote speaker. You too can benefit from
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IncomeTax Helpline.indd 2 08-10-2015 12:58:32

CROSSHAIRs
Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal
Innovating with Algo Lending identified the common characteristics of borrowers

trying to fudge while taking a loan, or more likely to
Profit motive and competition funnels default. Simply put, he arrived at these characteristics
funding to the unfunded by first giving loans to a bunch of people, profiling
them under numerous parameters, and then studying
T he Reserve Bank of Indias (RBIs) College of

Agricultural Banking has announced a case study
competition for bankers to find innovative ways of
their repayment patterns. This model, based on the
law of probability, works better when more data of
borrowing and repayment continues to be added.
lending to the MSME (micro, small and medium Some of the findings are material for further
enterprises) segment. The objective of sensitising research by those keen on financial inclusion and
bankers and getting them to think innovatively is its cost. For instance, the company discovered that
laudable; but RBI officials would probably learn more borrowing through equated-monthly instalments
about innovative lending by speaking to their own (EMIs) for high-end, large-screen televisions are a
regulated entities in the private sector. cover for un-banked persons to get a formal loan. The
Last week, I was talking to the head of a rapidly shopkeeper colludes with the borrower to create loan
growing finance company with a massive year-on-year records for EMI payments, but no TV is sold. Instead,
growth in loans to first-time borrowers. He told me the borrower gets the cash and the shopkeeper a nice
about the big increase in loans to micro-borrowers commission. While many borrowers diligently pay
back their loans, some default. The trick is to minimise
the risk on such loans. By matching income and
social profiles of the borrowers, the company found
that, often, when the customer was trying to buy an
unusually large television, it represented a financing
deal and could be weeded out.
Another tiny scam that the company discovered
was that borrowers tried to use the same know your
customer (KYC) data with two different identities, and
a minor misspelling of the name (Rajiv or Rajeev). This
would, often, fly under the radar of the lending agency
as a typographical error, allowing the person to avail
two separate loans. A de-duplication effort, as well as a
scan for past record flags such cases.
Private sector has better options. A trick by those who have a previous loan default
to avoid detection by credit bureau records is to apply
that included hawkers, small shopkeepers and non- for a new PAN card and submit it with fresh loan
salaried individuals, who were shut out of the formal applications. The company had to develop a way
borrowing system. Typically, these were loans of to flag such cases through its algorithm. Their data
Rs30,000 to Rs1 lakh with tenure of about 12 months. analysis showed that a fresh PAN, obtained by people
He called it algo lending. who were 45+, was a red flag.
His lending is based on evolving a proprietary Yet another finding, that is being analysed, is
model that minimises the risk of default, having the distance between the borrower and his place of
MONEYLIFE | 4
27February
November2016
2014
| 14
| 14
Crosshair.indd 2 14-01-2016 22:33:24

work with that of the lending organisation. When a and allows payment systems to operate in a
borrower sought out a lender, whose office was far decentralised way without the need for a centralised
away, it raised a red flag. The work being done by registry or ledger. This allows multiple entities to rely
this finance company, and its success at keeping bad on the same, shared, authenticated information and
loans to the minimum, only proves that profit is the drastically reduce the cost of record keeping.
best driver of high-quality research, innovation, as well Banks and financial companies, now, believe that
as risk-takingsomething that will not be possible the technology in various forms will transform financial
through case study contests or government-mandated sector architecture and offer a new way of trading
programmes. financial instruments without the need for expensive
central depositories that are also prone to cyber
fraud. A complex process of validating transactions
Digital Currency Future by globally distributed miners, adding blocks to a
dispersed chain, makes it almost impossible to go back
RBI acknowledges possibilities for on a transaction, say experts.
blockchain technology Major finance companies around the world
are devoting significant resources to study the
O n 24 December 2013, RBI officially warned the

public about the potential financial, operational,
legal, customer protection and security-related risks
technology and its usesand regulators are watching
developments very closely to study the risks associated
with the systems. One key issue is the scalability of
they are exposing themselves to by using virtual the technology, if it is to be used for global financial
currencies such as Bitcoins. Specifically, it warned that transactions. What is certain is that the technology
transactions were on a peer-to-peer basis and there is evolving fast and companies such as Deloitte
was no underlying backing for the digital currency, or Consulting are predicting that 2016 will see the
central registry, nor any recourse, in case of disputes. emergence of new uses of blockchain technology as
RBI took note of Bitcoins and their use, nearly various experiments and prototypes become a reality.
five years after the crypto-currency was launched and
because it was fast gaining ground through social
media and Bitcoin exchanges. RBIs warning had an
immediate impact and the spread of Bitcoins slowed
down considerably. Some exchanges also shut down.
But, in December 2014, RBI governor, Dr
Raghuram Rajan, indicated a change in stance. In a
television interview, he said that digital currency was
getting safer and, over time, could be an acceptable
form of transaction. By December 2015, there has
been a further change of heart at RBI, when its
financial stability report said, With its potential to
fight counterfeiting, the blockchain is likely to bring
about a major transformation in the functioning of
financial markets, collateral identification (land records RBI thinks digital currencies are getting safer
for instance) and payments system. This has caused
a lot of excitement among Bitcoin enthusiasts around An article by David Wessel, posted on the
the world, since Indias large population and record Brookings.edu website, puts the hype and the hope
of quick adaptation of technology makes it a fertile that is built around this disruptive technology in
ground for the proliferation of this new currency. perspective. He says, The evolving technology faces
Technically, Bitcoins and crypto-currency can grow risks and obstacles. Some of these stem from the public
without any reference to the regulator. However, it is impression of Bitcoin, a currency created with this new
important to remember that RBIs warning in 2013 technology. These problems include hacking attacks
triggered raids on a Bitcoin exchange. Anything that on Bitcoin wallets, governance challenges, threats to
is not formally regulated in India faces the risk of consumer protection, money-laundering concerns,
harassment by investigation agencies and even a shut resistance from entrenched financial institutions and
down, when regulators decide to take note of it or raised regulatory eyebrows. It could turn out to be
choose to disapprove. an infant technology, one that most of us dont yet
Blockchain technology is attracting the attention understand, one that is about to change the world;
of global regulators because it is distributed ledger think the Internet before browsers. Or it could fizzle
technology, which adds verified blocks of transactions out.
Crosshair.indd 3 14-01-2016 22:33:39

DIFFERENT STROKES SUCHETA DALAL
When the Going Gets

RBI governors New Year missive promises radical change, but the odds seem to
be stacked against him
I
t has often been said that India is a weak a denial of access to journalists and internal vilification,
State. Not only are we accused of not having while amplification of its point of view ensured interviews,
the administrative capacity of ferreting out exclusives and tip-offs about press statements issued after
wrongdoing, we do not punish the wrongdoer, unless newspaper deadlines. We are extremely keen to see whether
he is small and weak, said Reserve Bank of India (RBI) this will change in the rest of Dr Rajans current tenure
governor, Dr Raghuram Rajan, in a New Year email to which ends in September 2016.
bank officers. Excerpts of the email have been published However, the issue of larger national importance is
by The Economic Times and other media. whether RBI, or the banks and financial institutions that it
The governor goes on to say, This belief feeds on regulates, will dare to punish or act against powerful and
itself. No one wants to go after the rich and well-connected mighty borrowers whose loans continue to be restructured
wrongdoer which means they with impunity through multiple
get away with even more. If we corporate debt restructuring
are to have strong sustainable (CDR) schemes and under
growth, this culture of impunity RBIs 5:25 scheme (five-year
should stop. Importantly, this moratorium on payments and
does not mean being against a 25-year loan tenure), which
riches or business, as some has even been described as The
would like to portray, but Great Indian Banking Ponzi
being against wrongdoing. Scheme!
As always, Dr Rajans words, Significantly, the governors
and their expression, have a New Year email follows a
way of gladdening our hearts. landmark order of the Supreme
The email reveals that in just Court of India (SC) which
over two years, the governor demolished the central banks
has, correctly, identified all frequent denial of information
the shortcomings or a sense of The issue is whether RBI, or the on the grounds of having been
hubris that seems to envelop received from regulated entities
banks and financial institutions
regulatory bodies in India. in a fiduciary capacity. The
Here are some other issues
that it regulates, will dare to punish apex court reminded RBI of
highlighted by Dr Rajan, but or act against powerful and mighty its statutory duty to uphold
paraphrased by me: lack of borrowers whose loans continue to public interest and not the
clarity in regulations; many ill- be restructured with impunity interest of individual banks
informed, complacent and self- and also expressed surprise
styled officials who have no desire to improve themselves; that RBI, as a watchdog, was not more dedicated
extraordinarily slow and bureaucratic responses (a serious towards disclosing information to the general public
issue); and not adhering to timelines. under the RTI (Right to Information) Act. Some of the
The letter also highlights the governors keen apex courts observations are a serious indictment of how
understanding of how the media works. He asks for better RBI functions. For instance, the order said, We have
communication that highlights specific achievements or surmised that many financial institutions have resorted
regulations rather than starting with irrelevant history. to such acts which are neither clean nor transparent. The
He wants press releases sent out by 5.30pm in order to RBI in association with them has been trying to cover up
show up in the press the next day. These observations are their acts from public scrutiny. It is the responsibility of
extremely interesting, because access to RBIs top brass the RBI to take rigid action against those banks which
and its external communicationhas been under the iron have been practising disreputable business practices.
grip one individual for 25 years. Criticism of RBI led to In these circumstances, can we hope that the governors
DIFFERENT STROKES.indd 2 14-01-2016 22:29:39

DIFFERENT STROKES SUCHETA DALAL
brutally frank New Year missive promises a radical chance to give shape to an international bank (offered by
change in the central banks regulation, supervision and S Venkitaramanan, the then RBI governor, who joined
communication? Dr Rajan, with his formidable reputation the Reliance board after his retirement). IDBI chairman,
and global standing, is certainly capable of reshaping RBI. SS Nadkarni and N Vaghul, who headed ICICI, turned
But consider the odds. brusque in their attitude towards him. The LIC chairman,
Having just read the memoirs of DN Ghosh, a highly AS Gupta, not-so-subtly warned him of rough times and
regarded bureaucrat and former chairman of State Bank controversies. There was even a suggestion that his family
of India, the task seems gigantic, if not impossible. The could be harmed. The powerful West Bengal chief minister,
centrepiece of Mr Ghoshs book, No Regrets, is a ringside Jyoti Basu, was also co-opted to convey Reliances view
account and superb narration of the three extraordinary that he was being obstructive.
days that forever changed the face of Indian banking with If that werent enough, members of L&Ts management
the nationalisation of 14 banks in 1969. committee began to receive investigation notices from the
However, the most dramatic part, to me, is his candid income-tax department. When Mr Ghosh approached the
account of his short tenure as the chairman of Larsen & revenue secretary about it, he did not even bother with a
Toubro, when he reversed a dramatic coup of the blue-chip denial. It later turned out that the secretary owned 50,000
engineering firm by Dhirubhai shares of Reliance Industries. The
Ambanis Reliance group in the bulk of the media was hostile, but
late 1980s. a leading newspapers editor went
Mr Ghosh, who took charge so far as to have his correspondents
of L&T at the instance of prime ask for a meeting with Mr Ghosh,
minister VP Singh, ensured that at which the latter asked if the
L&T remained an independent, editor was acting at the behest
professionally-run company, of S Gurumurthy (who had led
but not without being singed by The Indian Express campaign
Reliances machinations. For those against Reliance for its owner
who are too young to remember, Ramnath Goenka). Finally, finance
the chapter on this sordid saga minister Yashwant Sinha called for
illustrates how powerful corporate Mr Ghosh and told him, Whichever
houses control the government post you have held, you have shown
more effectively than the hundreds remarkable dignity and finesse.
of leaked conversations of lobbyist Sometimes circumstances become
Niira Radia with the movers and unfavourable and it is better not to
shakers of India. While Raghuram Rajan may allow it to tarnish your reputation.
Reliance acquired control be well-meaning, read DN DN Ghosh quit the next day, but
L&T by getting Premjit Singh, the Ghosh's memoirs No Regrets his letter made it clear that he
then chairman of Bank of Baroda, to know that nothing has was leaving at the request of the
to accumulate a substantial changed in the past 25 years. government.
shareholding from public sector It will require a lot more than Nothing has changed in the past
entities (through a subsidiary a blunt email from the RBI 25 years. If anything, the collusion
called BOB Fiscal which was between business and politics
governor to change the system
shut down) and transfer it to three reached a new high under the United
Ambani entities. The venal heads Progressive Alliance and even their
of our powerful public sector financial institutions and the roles had become inter-changeable as they worked to
Controller of Capital Issues were a willing party to the corner national resources such as coal, steel and telecom
coup, but did a swift about-turn to save their skins when spectrum. It will require a lot more than a blunt email
VP Singh chose to halt the brazen takeover. They changed from the RBI governor to change the system. Does he have
sides again as soon as Mr Singhs government collapsed. a game plan? Or is the missive a nice way of distancing
Mr Ghosh has done well to expose the brazen complicity himself from the mess that he is presiding over?
of the top guns in government and their dubious tactics
to get him to resign from L&T. The lures he was offered Sucheta Dalal is the managing editor of Moneylife. She was
included an ambassadorial assignment (offered through awarded the Padma Shri in 2006 for her outstanding contribution
the brother of Congress politician ML Fotedar) and the to journalism. She can be reached at sucheta@moneylife.in
DIFFERENT STROKES.indd 3 14-01-2016 22:29:56

CURRENT ACCOUNT BOTTOMLINE BY MORPARIA
Moneylife
MONEYLIFE
Quiz no
224
QUIZ Answer
Correctly! Win
Another quiz to tease your brain. The answers are in this a personalised
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very issue. The winner will be chosen by a lucky draw clock with an E Krishna Variar
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investments are quote!
dated 3rd March. Send in your answers to quiz@moneylife. subject to market risks,
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before 10 February 2016.
1. What was the average return delivered by 196 equity 5. What is the name of the editor of Journal of Dental
diversified MF schemes over the period 19 September 2014 Research?
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a. 9.44% b. 14.41% c. William Giannobile d. Tracy Streep
c. 14.19% d. -3.59%
6. How many large- and multi-cap MF schemes were able to
2. In the portfolios of how many equity MF schemes does outperform the Moneylife portfolio of top stocks, over the
Hindustan Zinc figure? past 15 months?
a. Two b. Five a. 10 b. 14
c. Six d. Ten c. 15 d. 20
3. In which year did EKansh Trust conduct its first job fair for 7. How many years ago was ICICI Bank iWish launched?
people with disabilities? a. One year b. Two years
a. 2005 b. 2008 c. Three years d. Four years
c. 2010 d. 2013
8. Which state government in India has been the first to
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a. Manifest intention b. Unintended crime a. Delhi b. Goa
c. Punishment for crime d. Innocent action c. Maharashtra d. Telangana
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Current Account.indd 2 14-01-2016 22:36:30

In an era of paid news & half-baked
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consumer products. Our deep Pow of Attorney, on implications of SEBI rules on
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unbiased articles M
Moneylife Foundation is probably the only non-
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Your Money
RETIREMENT RETIREMENT
PFRDA Issues Draft Norms for eNPS-Online Subscriber

NPS Retirement Advisers Registration Developed
A n online platform has been
T
he Pension Fund Regulatory and responsibility, PFRDA said in a developed for registration
and Development Authority press note. of subscribers and receipt of
(PFRDA) is framing rules As per the draft, an individual, contribution under NPS, called
for retirement advisers who are firm or a corporate body, acting eNPS, through the NPS Trust at
expected to play a major role in as a retirement adviser on NPS, www.npstrust.org.in. Through
will have to obtain a certificate this platform, subscribers can
of registration from PFRDA. The register for NPS and contribute
individual, proprietors, partners to their permanent retirement
and representatives of a retirement account. Subscribers who already
adviser should be at least graduates. have an NPS account can make
Advisers, which are a body contributions through eNPS
corporate or partnership firm, directly. While registering, a
would have to provide a security subscriber needs to provide his/
deposit or performance guarantee her name and PAN (permanent
of Rs1 lakh to PFRDA; in case of account number) details which
individuals, the amount proposed is will be validated online with
Rs10,000. the income-tax department.
Educating and making people The subscriber has to then
propagating the New Pension aware of the benefits of the select the bank, fill up personal
System (NPS). The regulations retirement planning and creating details and upload a photograph
provide a framework for their awareness about pension schemes is and signature. After filling up
eligibility, registration process, fees critical for increasing participation the details, the subscriber can
and define the scope of their work in the voluntary segment of NPS. contribute through netbanking.
BANKING FIXED INCOME
Negotiable Instruments (Amendment) Act, 10-year National

2015, Notified Savings Certificate
Discontinued
T he government has notified the Negotiable Instruments (Amendment)
Bill, 2015 to clarify the jurisdictional issue for filing of cheque dishonour
cases that was approved by parliament in its recent N ational Savings Certificate (NSC)
issue IX, which had a term of
winter session. The provisions of the Negotiable 10 years, has been discontinued.
Instruments (Amendment) Act, 2015 shall be deemed The move was approved and
to have come into force on the 15th day of June, notified by the ministry of finance
2015, the day on which the Negotiable Instruments on 1 December 2015. The postal
(Amendment) Ordinance, 2015 was promulgated to department stopped issuing these
further amend the Negotiable Instruments Act, 1881, certificates 20 December 2015
a finance ministry release said. The amendments to onwards. Observers believe that
the Negotiable Instruments Act, 1881, clarify jurisdiction-related issues for filing the instrument was discontinued
cases for oence committed under Section 138 of the Act. The amendment because it locked the government
provides that the jurisdiction for filing a case of cheque dishonour will be a court into a long-term commitment in a
in whose jurisdiction the bank branch of the payee is located. falling interest rate regime.
Your Money.indd 2 14-01-2016 21:40:10

SMART MONEY R BALAKRISHNAN
Time in the Market

To make money in equities, be patient and make time your friend
Alice: Would you tell me, please, which way I ought to given price, and wait for a pre-determined period and get
go from here? the return. We still have to take some efforts to get there.
The Cheshire Cat: That depends a good deal on where Some of the things we should keep in mind are:
you want to get to. 1. If we can figure out a fair buy price, the probability
Alice: I dont much care where. of getting the expected returns over a 10-year period
The Cheshire Cat: Then it doesnt much matter which goes higher. If we cannot figure it out, the best way to
way you go. get these returns is to buy the stock in the form of a
Alice: ...So long as I get somewhere. systematic investment plan (SIP) over a 10-year period.
The Cheshire Cat: Oh, youre sure to do that, if only you 2. Stocks can be overpriced, underpriced or fairly priced.
walk long enough. For companies with a great track record,
the chances are very, very low that
T
o me, this exchange, from the best book we can buy them at below fair
ever written, is an excellent way to define value. High-quality stocks are
investment, especially when it comes always the last to crack and,
to equities. Read it a few times. Maybe the unless there is a catastrophe,
message becomes very clear. their prices are not likely to
As the calendar changes its year, we are go below the fair value.
bombarded with lists of: 10 best stocks, 10 Thus, we have to look at
worst stocks, 10 best mutual funds and so on. other ways to buy them. I
To me, these are pointless exercises, unless there use the P/E (price-to-earning)
is a context. When we take a particular period band while deciding to buy.
and calculate returns, we deliberately choose a For example, if a stock like
specific start date and an end date. Hindustan Unilever (HUL) has
We have an undervalued market, fair value traded between a 25 to 50 P/E in the
market and overvalued market. The start and end past 10 years or so, then I am better
could be in a combination of these three. Depending off buying the stock closer to 25 P/E
on that, asset classes will turn out to be superior rather than 50. It is likely that, if the going
or inferior. These lists cannot be used to decide is good, the stock may never see a 25 P/E; so I
your investment strategy or choices. These may have to buy it when it is, say, around 30 to
are nothing but noise. Exactly the way the 35 P/E rather than 40 to 45 P/E. By acquiring
media and the investment industry come the stock closer to the lower P/E, I am trying
up with screaming headlines like The to protect my prospective return. In other
Best Performer of 20XX, etc. words, when the earnings increase over time,
My point is that a good the stock needs to trade at closer to the
selection of quality stocks lower P/E for me to get my return. The
can give returns in excess of risk I run is if the growth rate decelerates
15% per annum. (I think or the RoE (return on equity) declines
it is a fair assumption, if permanently, the stock now shifts to a
you take only high-quality lower P/E band. To avoid such a sharp
companies with a great track decline, I have to just choose the right
record). Provided you hold sector and the right company. History
them for a period of 10 years helps.
or more. However, it does not 3. If the above-mentioned exercise seems
automatically follow that you buy confusing to you, the option is to go in for an
some shares on any given day, at any SIP route. Keep buying, over time. For SIP route,
column_Balakrishnan.indd 2 14-01-2016 22:04:15

SMART MONEY R BALAKRISHNAN
it is essential to start early and you should have the hold on to it. In 10 years, the stocks earnings would
money to buy regularly. Often, financial surplus starts have grown and, if it commands the same P/E, we have
to arise only later in life, since a lot of people buy a got our returns. Thus, we are likely to end up owning
property early these days and pay out huge amounts stocks with P/E far above the market P/E.
as equated monthly instalments (EMIs), leaving little Using the P/E band comes laterafter you have selected
investible surplus. If you wish to take the SIP route, I the stocks. For this, shortlist companies, based on their
would urge you to take some effort in understanding RoE. Then look at the companys history, dividend, debt
the point above. You make a list of, say, 20 stocks equity, product, management, etc. You want companies that
you like. Check the current P/E in relation to the will live for 20-30 years. You will end up picking companies
historical P/E band. Put more in consumer and pharmaceuticals
money into those stocks where There are two options with a space, some banks, some great
the prevailing P/E is closer to high-quality portfolio. Either manufacturing companies, etc,
the lower end of the P/E band. you keep it alive for your and technology companies, if you
On stocks where the current lifetime and pass it on to your have the ability to visualise and
P/E is closer to the higher end understand.
family or charity as it is. The
of the P/E band, buy small Of course, such investing
quantities. Wait until you see
other choice is that you may demands a lot of understanding
a better opportunity to add to
decide to liquidate some stocks and very little action. You do not
that stock. It may take you a in your lifetime. For this, do not have to trade day in and day out,
couple of years to build your wait for a precise date in future nor keep shuffling your portfolio
investment portfolio. each time you get a new calendar.
4. There are two options with a high-quality portfolio. Yes, if you can, try and read their annual results. Or, if there
Either you keep it alive for your lifetime and pass it is a merger, acquisition and restructuring or a corporate
on to your family or charity as it is. The other choice action, which is not in the investors favour, you need to
is that you may decide to liquidate some stocks in analyse and then act. If the company you own is being
your lifetime. For this, do not wait for a precise date acquired by a larger company, it is generally good to
in future. Once you have made up your mind to take exit. Of course, exit is something that we should discuss
some money off the table, use the P/E bands to help and I leave it for another occasion. Exit is an important
choose which stocks to sell. Sell those that are closer thing, if we do not want value erosion. But, for now, let
to the upper end of the P/E band. us just leave it at this, with one more dialogue from the
5. The most important thing to get a satisfactory return best book in the world:
from any investment is time. I say: Look to invest for Alice: Where should I go?
at least 10 years. We are not skilled enough to precisely The Cheshire Cat: That depends on where you want
time every up or down move in a stock. Thus, we buy to end up.
at what we calculate to be a reasonable price and The author can be reached at balakrishnanr@gmail.com
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column_Balakrishnan.indd 3 14-01-2016 22:05:00

MUTUAL FUNDS POINTERS
Top Schemes, Common Stocks

Company Name Total No. of Schemes with
Popular Stocks HDFC Bank
Schemes
135
Exposure >5%
102
Axis Bank 120 9
Most stocks are common across different Infosys 119 73
equity schemes, points out Jason Monteiro ICICI Bank 115 28
Maruti Suzuki India 111 19
Larsen & Toubro 110 10
State Bank of India 104 24
IndusInd Bank 97 8
Tata Motors 93 13
Reliance Industries 91 17
HCL Technologies 87 7
TCS 86 5
Sun Pharma 85 3
ITC 83 7
Ultratech Cement 79 1
HPCL 77 11
Bank of Baroda 75 2
Kotak Mahindra Bank 74 5
HDFC 71 11
Coal India 69 6
T
ime and again, we have found that equity mutual
fund (MF) schemes invest in the same set of well- over 5% to Infosys. ICICI Bank comes next in the list
known stocks. Most often, the common stocks of popular stocks; 115 schemes have included the stock
are those which are a part of the benchmark index. in their portfolio. Maruti Suzuki, Larsen & Toubro and
Equity schemes rarely stray away from the benchmark State Bank of India are present in the portfolio of over
stocks. Though there may be hundreds of listed stocks 100 schemes. IndusInd Bank, Tata Motors and Reliance
to choose from, fund houses usually limit their research Industries follow closely behind.
to the top 300 stocks. This time, we examine the Is the stock selection of the top-30 schemes any
portfolio of the top-10 schemes of each category (based different? Not really. The schemes invested from a set
on their five-year quarterly rolling return as on of 468 stocks; 29 stocks were present in the portfolio
31 December 2015)large-cap, multi-cap and mid- and of 10 or more schemes. HDFC Bank continues as the
small-capto analyse whether their selection of stocks most-picked stock among the top schemes, followed by
was any different from the rest. Infosys. Axis Bank was present in the portfolio of 16
Based on the November 2015 portfolio, the entire schemes. IndusInd Bank, ICICI Bank and Federal Bank
set of 193 open-ended equity diversified schemes were picked by 18 schemes, while 16 schemes invested
had invested in 701 stocks. Of these, 235 stocks are in Sun Pharma and Britannia.
common to 10 or more schemes, while 50 or more In the large-cap schemes category, Tata Motors
schemes invest in a set of just 36 stocks. The list of most and Infosys were present in each of the 10 schemes.
popular stocks does not spring any surprises. HDFC Reliance Industries was present in nine schemes; the
Bank tops the list as it is present in the portfolio of as only exception was Quantum Long Term Equity. Larsen
many as 135 schemes. Of these, 102 schemes have an & Toubro, State Bank of India, HDFC Bank and ICICI
exposure of over 5% to this stock. Axis Bank is the next Bank were present in the portfolio of nine schemes.
most popular stock; 120 schemes have invested in it. Canara Robeco Large Cap+, ICICI Prudential Bluechip
Infosys is the third most-picked stock by 119 Equity, Quantum Long Term Equity and SBI Bluechip
schemes. As many as 73 schemes have a weightage of have invested in stocks that were common to all the
Fund Pointer.indd 2 14-01-2016 22:57:15

MUTUAL FUNDS POINTERS
Large-cap Schemes Multi-cap Schemes

Scheme Name Unique Weight Return* Scheme Name Unique Weight Return*
Stocks/ to Stocks/ to
Total Unique Total Unique
Stocks Stocks Stocks Stocks
HDFC Capital Builder 8/56 6.18% 12.37% L&T India Value 17/86 11.56% 17.53%
Edelweiss D.G.E Top 100 5/64 4.51% 10.90% Birla Sun Life India Opp. 4/26 10.21% 15.67%
Reliance Top 200 1/37 2.29% 12.35% Reliance Equity Opportunities 13/57 8.79% 15.32%
Axis Equity 1/40 0.82% 10.66% SBI Magnum Global 94 2/38 5.04% 18.63%
Birla Sun Life Top 100 2/74 0.48% 12.44% SBI Magnum Multiplier 3/43 3.13% 13.33%
Birla Sun Life Frontline Equity 1/73 0.04% 11.58% BNP Paribas Dividend Yield 1/42 1.01% 13.79%
SBI Bluechip 0/47 0.00% 13.12% Franklin India Prima Plus 4/64 0.91% 14.08%
Quantum Long-Term Equity 0/24 0.00% 11.21% Mirae Asset India 1/60 0.78% 13.92%
Opportunities
ICICI Prudential Focused 0/55 0.00% 10.91%
Bluechip Equity Kotak Select Focus 1/51 0.30% 13.07%
Canara Robeco Large Cap+ 0/40 0.00% 10.10% BNP Paribas Equity 0/40 0.00% 13.04%
*Five-year annualised rolling return as on 31 December 2015 *Five-year annualised rolling return as on 31 December 2015
10 large-cap equity schemes. In other words, there were Schemes with more unique stocks may not
no unique stocks in the portfolio of these schemes. necessarily do well. Schemes with common stocks,
HDFC Capital Builder had eight stocks which were not too, may do well, based on the fund managers timing
present in the portfolio of any scheme. Interestingly, it of entry and exit and weightage of each stock in the
was among the top performers. Edelweiss D.G.E Top portfolio. The 30 schemes we have analysed have all
100 had five unique stocks in its portfolio. done well, based on fund managers selection of the
In the multi-cap schemes category, the top schemes portfolio and asset allocation. While some have done
form their portfolio out of a set of just 269 stocks. As well by picking stocks that were common to other
many as 20 stocks were present in the portfolio of five schemes, a few have ventured to discover stocks that are
schemes or more. HCL Technologies and Infosys top rarely picked by others and have done well, if not, better
the list with nine schemes investing in these stocks. Axis than the rest.
Bank, ICICI Bank and Sun Pharma were among the top
five stocks common to the portfolio of top-10 multi-cap Mid- and Small-cap Schemes
schemes. BNP Paribas Equity did not have a single stock
Scheme Name Unique Weight Return*
common with others. L&T India Value had as many as Stocks/ to
17 unique stocks, while Reliance Equity Opportunities Total Unique
had 13. Interestingly, both were among the top-five Stocks Stocks
schemes, based on returns. The remaining schemes had Reliance Small Cap 23/65 30.30% 23.90%
less than five stocks which were unique. DSP BlackRock Micro Cap 25/61 29.83% 22.64%
In the small- and mid-cap schemes category, the SBI Small & Midcap 8/26 19.02% 22.63%
variety of stocks increases. The combined portfolio of Franklin India Smaller Comp. 14/71 12.93% 22.42%
the 10 schemes has a total of 341 stocks. Only a few
UTI Mid Cap 21/104 12.69% 20.42%
stocks are common to other schemes of the category.
Canara Robeco Emerging Eq. 6/61 8.97% 22.76%
Atul was the most-picked stock of small- and mid-cap
schemes; it was present in the portfolio of seven Religare Invesco Mid N Small 6/48 6.07% 19.84%
Cap
schemes. Fag Bearings, Britannia and Federal Bank were
SBI Magnum Midcap 6/54 4.55% 20.86%
present in the portfolio of six schemes. DSP BlackRock
Micro Cap had as many as 25 unique stocks, Reliance BNP Paribas Mid Cap 3/48 4.04% 20.97%
Small Cap and UTI Mid Cap had 23 and 21 unique Mirae Asset Emerging Bluechip 2/62 1.19% 23.43%
stocks, respectively. Franklin India Smaller Companies *Five-year annualised rolling return as on 31 December 2015
had as many as 14 unique stocks.
Fund Pointer.indd 3 14-01-2016 22:57:26

MUTUAL FUNDS FUND FACTS
Best & Worst Mutual Fund Schemes

The best# three and the worst three schemes over the past three years ranked by their
quarterly rolling returns. Premium members get access to a more refined list of top
schemes by logging in to Moneylife Smart Savers - savers.moneylife.in
Equity Schemes (Quarterly Rolling Returns)

Large Cap (Category Avg: 2.93%, Launch Corpus Avg. Quarterly 1-Year 3-Years** Exp
Sensex: 1.96%) Date (Rs Crore)* Rolling Returns Ratio
HDFC Capital Builder 01-Feb-94 1,035 4.28% -0.11% 18.27% 2.67%

SBI Bluechip 14-Feb-06 3,624 4.23% 4.58% 18.03% 2.04%
Birla Sun Life Top 100 24-Oct-05 1,822 3.76% -3.55% 15.91% 2.46%
Reliance Quant Plus 18-Apr-08 1,087 1.69% -10.11% 6.94% 2.22%
HDFC Large Cap 18-Feb-94 1,139 1.54% -9.09% 6.29% 2.47%
Sundaram Growth 24-Apr-97 224 0.43% -20.07% 1.72% 2.93%
Multi-cap (Category Avg: 3.40%, BSE 200: 2.37%)
Birla Sun Life India Opportunities 27-Dec-99 113 6.35% 9.83% 27.90% 3.23%
L&T India Value 08-Jan-10 881 6.11% 9.69% 26.76% 2.36%
SBI Magnum Global 94 30-Sep-94 2,474 5.51% 4.23% 23.95% 2.08%
IDFC Equity 09-Jun-06 253 1.96% -9.96% 8.08% 2.30%
Principal Dividend Yield 15-Oct-04 109 1.95% -8.11% 8.04% 2.99%
IDFC Imperial Equity 16-Mar-06 115 1.72% -9.62% 7.06% 2.31%
Mid-and Small-cap (Category Avg: 5.87%, CNX Midcap: 3.68%)
SBI Small & Midcap 09-Sep-09 786 8.49% 18.11% 38.52% 2.37%
Reliance Small Cap 16-Sep-10 2,017 8.00% 9.76% 36.07% 2.10%
DSP BlackRock Micro Cap 14-Jun-07 2,413 7.81% 16.53% 35.11% 2.58%
Tata Equity Opportunities 25-Feb-93 1,130 4.23% 3.13% 18.00% 2.46%
IDFC Sterling Equity 07-Mar-08 1,435 3.95% -1.57% 16.77% 2.02%
SBI Emerging Business 17-Sep-04 1,628 3.38% 1.47% 14.21% 2.13%
Debt Schemes
Income (Category Avg: 1.97%, Crisil Composite Bond: 2.09%)
ICICI Prudential Long Term Plan 20-Jan-10 862 2.75% 5.84% 11.45% 1.18%
Tata Dynamic Bond 03-Sep-03 1,015 2.36% 7.36% 9.77% 1.66%
UTI Dynamic Bond 23-Jun-10 900 2.27% 7.10% 9.41% 1.67%
L&T Triple Ace Bond 31-Mar-97 857 1.59% 4.68% 6.49% 1.49%
Religare Invesco Active Income 02-Aug-07 315 1.58% 5.58% 6.49% 1.70%
DWS Premier Bond 21-Jan-03 907 1.76% 7.28% 7.24% 1.58%
Liquid (Category Avg: 2.13%, Crisil Liquid Index: 2.13%)
Escorts Liquid Plan 03-Oct-05 217 2.26% 8.79% 9.34% 0.50%
Franklin India Treasury Management Account 30-Apr-98 2,688 2.19% 8.50% 9.03% 0.20%
Taurus Liquid 01-Sep-06 1,691 2.19% 8.47% 9.04% 0.20%
Reliance Liquid - Cash Plan 07-Dec-01 4,665 1.98% 7.61% 8.18% 0.99%
L&T Cash 27-Nov-06 828 1.96% 7.37% 8.09% 0.83%
HDFC Cash Management - Call Plan 06-Feb-02 105 1.91% 7.26% 7.88% 0.20%
# Please note the table represents a comparative performance of mutual fund schemes over a three-year period and it is not a recommendation; * Latest quarter average assets
under management; We have only considered schemes having a corpus above Rs100 crore. **Annually compounded
Fund Facts.indd 2 12-01-2016 17:21:09

FIXED INCOME
Should You Invest in a Recurring for NRIs (non-resident Indians).

It is targeted for the younger
Deposit? segment which needs to save to
realise various financial goals
Make use of the flexibility of the product to earn higher returns at different stages of life. Savers
can monitor the goal and know
B
ank interest rates are on a falling interest rate scenario. Savers exactly how much they are ahead,
decline. It means that interest need to understand the fine print on or behind, in realising the goals.
on fixed deposits (FDs) and the upper limit of monthly savings. There can be only 10 active goals
recurring deposits (RDs) is lower iWish is an online product for at a time and the goal amount
than what was offered a year ago. those who already have a savings can be up to a maximum of Rs10
RDs give the same interest rate as account and use Internet banking. lakh. The maximum initial deposit
FDs, for the same period. If you It is not a product that you can amount is Rs49,999. You can
want to invest periodically and purchase at a branch; also, it is not pay higheror lowerthan the
lock-in at the current rate, RD monthly instalment; but you cannot
is a good option. ICICI Banks pay after the goal amount limit is
iWish was launched three years reached. The term of the RD can be
ago. It is an RD offering flexibility six months to 10 years; you can set
of the amount you pay each the goal duration anywhere in this
month, deposit multiple times in period.
a month, and have the ability to Central Bank of India (CBI) has
skip an instalment. The product a scheme called Cent Swa-Shakti
is innovative, considering that Flexi RDS. This scheme allows
regular RD accounts expect a fixed depositors the flexibility to deposit
instalment to be paid on the same up to 10 times the originally decided
day every month. Offering flexibility minimum amount every month.
of the instalment amount can lead It does not offer the flexibility of
to customers taking advantage in a skipping an instalment.
Yields Down Past Fortnight G-Sec Yields Flat
B ond yields have headed down in the past fortnight. You can expect to get less
than 8.50% for AAA rated bonds and around 9% for lower than AAA rated
bonds.
T he 10-year benchmark G-Sec
yield has been unchanged
over the period of past fortnight to
end at 7.74% on 8 January 2016.
Inflation in November 2015, with
Issuer Maturity Next Last Yield ISIN Rating
Date Coupon (%) consumer prices rising 5.4%, is
above RBIs (Reserve Bank of Indias)
LIC Hsg Fin 9.76% 08 Mar-19 10 Mar-16 8.47 INE115A07FB2 CRISIL AAA
comfort level of 5%, thus reducing
HDFC 8.57% 12 Jun-18 13 Jun-16 8.46 INE001A07NY0 CRISIL AAA hopes of further rate cuts in the
HDFC 8.43% 04 Mar-25 04 Mar-16 8.45 INE001A07NP8 CRISIL AAA
near future. The manufacturing PMI
(Purchasing Managers Index) slipped
NSE data as of last trade date of 8 January 2016
into contraction territory, at 49.1 in
Shriram Transport December, from 50.3 in November. It
13 Nov-24 13 Nov-16 9.41 INE721A07IO4 CAREAA+
Finance 10% may be due to the massive floods in
Aditya Birla Finance 9.75% 28 May-19 28 May-16 8.90 INE860H07441 CARE AA+ Chennai in December, apart from the
persistently muted domestic demand.
PNB HSG FIN 8.23% 09 Apr-19 31 Mar-16 8.43 INE572E09296 CRISIL AAA
The rupee has extended its losses to
BSE data as of last trade date of 8 January 2016 close at a three-week low of Rs66.93/
US$ on 7 January 2016.
Fixed Income.indd 1 12-01-2016 18:37:06

INSURE CORRECTLY:
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you get advice on selected term insurance products, identified after deep, unbiased
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MSSN GB (Insurance 1-3 ).indd 2 18-11-2015 20:41:50

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es dier
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MSSN GB (Insurance 1-3 ).indd 3 18-11-2015 20:42:13

number of service-providers
for cashless treatment facility.
IRDAIs circular argues that, under
Regulation (10) (c) of the IRDA
(Health Insurance) Regulations,
INSURANCE TRENDS 2013, the insurance company shall

endeavour to enter into agreements
with an adequate number of both,
New products, regulations, features and options, public and private sector, providers
interpreted from your perspective with adequate geographical spread.
These are the views of Bombay
High Court while closing public
Regulations July 2010 for retail policyholders interest litigation (PIL) 12 of 2011:
in Mumbai, Delhi and other The Insurance companies have
IRDAI Wants metros, but continued it for group

insurance customers. Government
provided cashless facility at about
250 hospitals/clinics in Mumbai
Wider Cashless insurers did bring under PPN a under the PPN facility. There are
Network few hospitals which agreed to
offer treatment at the negotiated
in all 3,000 hospitals/public clinics
in the city of Mumbai and that
rates for 42 or more specified therefore more and more hospitals
Regulator woken up by two procedures. and clinics ought to be brought
high courts judgements Private hospitals in Pune and under this PPN facility.
Pimpri-Chinchwad in Maharashra The Gujarat High Courts
I nsurance Regulatory and

Development Authority of India
(IRDAI) wants health insurance
discontinued cashless treatment
facility for individuals policyholders
of government insurers from
views, while closing PIL 81 of 2011
and asking the petitioner to make a
representation to IRDAI were:
providers to bring more hospitals 1 December 2014 while the bigger Very few hospitals for
under the preferred provider hospitals continue to offer cashless mysterious reasons known only
network (PPN) to offer cashless facility to corporate policyholders. to insurance companies or TPA
facility. It seems to be another The regulator has, finally, been are empanelled which definitely
feeble attempt to nudge government nudged into action by judgements raises eyebrows and it seems that
insurers to bring more hospitals from two high courts; but whether they are favoured by the Insurance
under PPN for retail customers. IRDAIs circular will have any Companies/TPAs. This makes the
Nothing much has been done to impact on government insurers is limited choice of the hospitals.
restart the cashless facility after the moot point. The circular directs Again Ahmedabad is a Metro city
government insurers stopped it in insurers to tie up with a sufficient where from one corner of city to
Fine Print floods. The premium increase may

be justified by insurers business
will be rejected by Indian insurance
companies. But international
needs, but what about the rejection insurers do pay such claims after
Vehicle Insurance Premium To of claims due to consequential loss considering their genuineness.
Go Up in Metros? exclusion clause? It is often misused
V ehicle insurance premium

may increase up to 15% in
by insurance companies to deny
genuine claims.
IRDAI to Crack Down on
Uninsured Vehicles
metro cities due to the perceived
risk of insuring in metros after
the floods in Chennai resulted
For example, if you try to start
the car which is submerged in
rainwater, it can lead to the water
I nsurance Regulatory and
Development Authority of India
(IRDAI) plans to act on the menace
in over Rs1,500 crore worth entering the engine and causing of nearly 55% uninsured vehicles
of claimsdouble the claims major damage. Such engine damage plying on the roads. Third-party
those for the 2005 Mumbai is consequential loss and the claim (TP) insurance is mandatory. The
Insurance.indd 2 14-01-2016 22:11:19

INSURANCE TRENDS
other will take minimum 1.5 hours after September 2010. The product Life Insurance
so at the time of emergency it has a lock-in period of five years.
will be difficult to reach hospital
having PPN facility, thereby we feel
This means that if you surrendered
the new ULIP five years ago, BHARTI AXA Life
that there should be empanelled you will get the surrender value Invest Once
hospitals in each and every corner back. When you stopped paying
of city. Insurance companies/ the premium for a new ULIP, Tax benefits only if you pay
TPAs have enrolled under PPN the funds were moved to a optional premium
network only 98 hospitals which discontinuance fund after deducting
are approximately 0.5% of the
total number of hospitals situated
in the Ahmedabad Municipal
surrender charges, which was
capped at Rs6,000 for premium
over Rs25,000 and Rs3,000 for
B harti AXA Life Invest Once is
a single-premium traditional,
non-participating endowment plan.
Corporation Limits. premium up to Rs25,000. The There is no bonus declaration; only
discontinuance fund was mandated fixed benefits are paid. Moneylife
by IRDAI to earn minimum returns does not suggest buying anything
L i f e I ns u r anc e
of 4% per annum (pa). other than a term plan for life
If your policy has earned insurance needs; hence, you may
Dont Fall into more than 4%pa after being skip this product. If you wish
ULIP Trap Again discontinued, it is good for you.
While ULIPs may have performed
to buy it, be aware that full tax
benefits are not possible by just
well in the past couple of years paying the single premium. The
You will soon get surrender due to a rally in the equity market, product has introduced a feature
value for units surrendered do not fall for the pitch of putting called mortality premium to
five years ago back the surrendered money into enhance the life cover.
another ULIP or traditional life It means that you will have
I nsurance companies will start

giving back the surrender
value of new ULIPs ((unit-linked
insurance policy. While ULIPs sold
prior to September 2010 had cover
continuance feature,, new ULIPs
to pay the optional mortality
premium to ensure that you have
10 times the premium as life cover
insurance policies) which have it. It means
do not hav to get the full tax benefit. If you
were sold that if you stopped dont, the policy will not qualify for
premium, the
paying pre tax benefit under Section 10(10D)
policy will auto- and will have only a fraction of tax
surrender if you
surr benefit on under Section 80C. Be
have completed
ha aware of this as life insurers push
five policy
fiv their products to those who are
years.
ye eager to save taxes.
ministry of road transport and capital region (NCR) and in satisfaction, elimination of
highways has agreed to share Telangana. revenue leakages, analytics and
data on vehicles with IRDAI to so on. The e-motor insurance
identify those without TP insurance. Are You Ready for e-Vahan Bima? policy would be issued in digital
The data will be shared with the
Insurance Information Bureau (IIB),
an advisory body of IRDAI which
T he Telangana government
has become the first state
to recognise e-motor insurance
format which can be stored
in any smartphone. A Quick
Response Code would also be
has now become independent. The policies. It may be adopted by issued that can be scanned for
data will help state police to detect other states like Madhya Pradesh, verification of policy details.
the owners of uninsured vehicles Rajasthan, NCR, Kerala and The initiative was a joint effort
and take necessary action. Karnataka. It offers benefits of IRDAI with IT department,
The pilot system has been like faster issuance of policies, police and transport department
already introduced in the national reduction of fraud, higher customer of Telangana.
Insurance.indd 3 14-01-2016 22:11:39

COVER STORY
BEST
STOCKS
FROM TOP
EQUITY
SCHEMES
Our selection, which is based on a formula that combines value and
return, has worked very well, again. Jason Monteiro explains
T
he year 2015 may have been disappointing declines. This was not the case over the past year. Picking
for most equity mutual fund (MF) investors. the right stocks was crucial. Multi-cap schemes, which
Those who invested in large-cap-oriented were oriented to mid-cap stocks, did well too. For savvy
schemes would have suffered a decline in investors, this automatically raises the question: Should
their portfolio value. Only those who had one rely on the skills of the fund manager or should one
invested in select mid- and small-cap schemes would create one's own portfolio of undervalued stocks?
have earned a decent return. In 2015, the S&P BSE There is a way to combine the two. For this, we
Sensex declined by 5%, while the BSE Mid and Small return to our annual study that we initiated some years
Cap index was up by 8%. This year bucked the general ago: selecting the best stocks from top-performing MF
trend that mid- and small-cap stocks turn out to be schemes and creating a portfolio that tries to do better
the worst performers during periods of broad market than most MF schemes. In other words, the attempt is to
Cover Story.indd 2 14-01-2016 22:15:45

COVER STORY
The Super Stock Portfolio

Company Name Present in 3-Q Revenue Growth* P/E^ RoCE#
TVS Srichakra L&T India Value 7% 13.63 33%
Indo Count Industries L&T India Value & UTI Mid Cap 32% 21.85 30%
Cadila Healthcare Edelweiss D.G.E Top 100 + 8 more 53% 17.09 31%
Sun TV Network HDFC Capital Builder 9% 20.16 25%
Glenmark Pharmaceuticals Mirae Asset Emerging Bluechip + 2 more 197% 17.72 28%
Hindustan Zinc Birla Sun Life India Opportunities + 5 more 13% 7.45 20%
Alembic Pharmaceuticals BNP Paribas Mid Cap 33% 27.19 46%
Yes Bank Franklin India Smaller Companies + 8 more 22% 13.19 19%
Indiabulls Housing Finance Edelweiss D.G.E Top 100 35% 16.08 31%
Hexaware Technologies SBI Magnum Midcap + 3 more 18% 22.99 32%
Supreme Industries SBI Magnum Global Fund 94 + 3 more 5% 27.39 21%
Axis Bank ICICI Prudential Focused Bluechip + 15 more 19% 13.02 18%
LIC Housing Finance Religare Invesco Mid N Small Cap + 4 more 17% 16.68 19%
Mindtree Franklin India Smaller Companies 15% 22.38 27%
Infosys Quantum Long-Term Equity + 18 more 10% 20.16 25%
Ajanta Pharma Edelweiss D.G.E Top 100 18% 33.51 40%
GIC Housing Finance Reliance Small Cap 21% 11.42 17%
Persistent Systems SBI Magnum Midcap + 3 more 12% 18.58 20%
Credit Analysis & Research Canara Robeco Emerging Equities + 5 more 7% 31.81 32%
Century Plyboards Franklin India Smaller Companies 10% 22.19 20%
* Past three quarters revenue growth as on September 2015; ^Price-to-earnings ratio as on 5 January 2016; #Return on capital employed is based on trailing
four quarters net profit. Return on net worth mentioned for banks and finance companies
use our stock-picking skills and cherry-pick stocks from mid-cap schemes. Refer to our Methodology on page 37
the best equity schemes, leaving out the stocks whose for details. Many of the stocks found in the portfolio of
performance has been nothing to write home about. MF schemes would not find a place in our portfolio. Out
As in the previous years, our portfolio continued to of the 30 schemes, we got a base of 304 stocks compared
do well in the past year. Our equal weighted portfolio to a list of 268 stocks last year. Of these 300-odd stocks,
delivered a return of 14.41% during 19 September 2014 just 166 stocks made it to the final ranking after applying
to 31 December 2015. Over this period, the Nifty our stringent short-listing criteria. Below is the list of
Midcap 100 delivered a return of 14.19% and the S&P top-20 stocks, based on our ranking.
BSE Sensex returned -3.59%. Our portfolio outperformed
both the indices. The 196 equity diversified schemes Cherry-picking
delivered an average return of 9.44%. Our portfolio This year, only one stock from our previous analysis will
was able to outperform nearly 75% of the 196 equity continue in the portfolio as many companies ranking
schemes. The schemes that did better than our portfolio has either gone down, or they are no longer present in
were only small- and mid-cap schemes. the portfolio of top equity schemes. Compared to last
Our selection, which is based on a formula that years 17 stocks, we now have 20 stocks on our list. As
combines value and return, along with insight into we have highlighted in our prior analyses as well, this
industry trends and corporate governance, has worked is not our list of recommended stocks. We are merely
well again. This is the strategy we apply to stocks selected compiling the best stocks present in the portfolio of top
for Moneylife Stockletters. mutual fund schemes, leaving out the possible laggards.
This Cover Story offers a fresh listing of the best With this exercise, we expect our cherry-picked portfolio
stocks based on the latest portfolios of best-performing to outperform most equity schemes; it has done so in the
schemes. We consider a mix of large-cap, multi-cap and past. In this years list, we have four companies each from
Cover Story.indd 3 14-01-2016 22:16:13

COVER STORY
United Kingdom, Japan, Latin America, the Middle East,

Top Large-cap Schemes Canada and Australia. ICI reported a strong sales growth
Scheme Name No. of Stocks Return* averaging 32% and an operating profit growth averaging
SBI Bluechip 48 13.12% 60% for the three quarters ended 30 September 2015. It
has a strong RoCE of 29.91%.
Birla Sun Life Top 100 75 12.44%
Cadila Healthcare, Glenmark Pharmaceuticals,
HDFC Capital Builder 56 12.37%
Alembic Pharmaceuticals and Ajanta Pharma are the four
Reliance Top 200 38 12.35% drug manufacturers that make it to the list. All four have
Birla Sun Life Frontline Equity 74 11.58% strong domestic as well as global presence in the drug
Quantum Long-Term Equity 25 11.21% formulation business. Cadilas formulations exports to
ICICI Pru Focused Bluechip Equity 55 10.91% the US grew at a compounded rate of 38% over the
Edelweiss D.G.E Top 100 64 10.90% five-year period ending 31 March 2015. Sales to
the US now constitute 39% of the companys
Axis Equity 40 10.66%
total turnover. It is also the third largest player
Canara Robeco Large Cap+ 40 10.10%
in the domestic formulations market with
*Five-year annualised rolling return as on 31 December 2015 a market share of 3.73%, as per All
Indian Origin Chemists
& Distributors.
pharmaceuticals, software & IT services and financial Cadila averaged a
services and two banks. The remaining six stocks are sales growth of
from different sectors. 53% for three
Topping our list is TVS Srichakra, the only auto- quarters ended
components manufacturer on the list. TVS Srichakra 30 September
manufactures two-wheeler and three-wheeler tyres and 2015. Operating
enjoys a market share of about 25%. For exports, this profit grew @125% over this
mid-cap company manufactures industrial pneumatic period. Cadila has a P/E of 17.09 and high RoCE of 31%.
tyres, farm and implements tyres, skid steer tyres, multi- On 31 December 2015, Cadila received a warning letter
purpose tyres and floatation tyres, among others. It from the US Food and Drug Administration (USFDA)
exports to the United States, Europe, South America, relating to its Moraiya, Gujarat, formulation facility
Africa and Australia. Over the past three quarters ended and Ahmedabad API (active pharmaceutical ingredient)
30 September 2015, TVS Srichakra reported a sales facility. This hit the stock price hard.
growth of 7% and an operating profit (OP) growth of as Glenmark Pharmaceuticals markets over 350 products
high as 83%. Natural rubber prices have fallen over the in India and ranks 16th in the domestic formulations
past year, leading to tyre manufacturers reporting high business. It has a strong research pipeline which focuses
margins. The price-to-earnings (P/E) ratio of the stock
is 13.63 and it has a high return on capital employed
(RoCE) of 32.84%. Top Multi-cap Schemes
From the textiles sector, Indo Count Industries (ICI)
Scheme Name No. of Stocks Return*
makes it to our list. ICI exports its combed cotton yarn to
SBI Magnum Global 94 38 18.63%
various countries and has established a niche in the global
market. In 2006, the home textiles division was set up L&T India Value 86 17.53%
making it a vertically integrated textiles manufacturing Birla Sun Life India Opportunities 26 15.67%
and exports company. It operates in three business Reliance Equity Opportunities 57 15.32%
segmentshome textiles, yarn and consumer goods. The Franklin India Prima Plus 66 14.08%
US is its largest market, accounting for a major share Mirae Asset India Opportunities 60 13.92%
in the total exports of home textiles products. ICI has a
BNP Paribas Dividend Yield 42 13.79%
total of 80,016 spindles producing around 14,000 tonnes
SBI Magnum Multiplier 43 13.33%
of combed cotton yarn per annum. It is the third largest
exporter of bed linen from India and the fourth largest Kotak Select Focus 52 13.07%
bed-sheet exporter to the US. It is a net exporter with BNP Paribas Equity 40 13.04%
nearly 70% of its clientele in the international markets. *Five-year annualised rolling return as on 31 December 2015
Apart from the US, it also exports its products to Europe,
Cover Story.indd 4 14-01-2016 22:17:31

COVER STORY
and Axis Bank. Yes Bank has grown its credit almost
Top Mid- and Small-cap Schemes entirely from the corporate sector which constitutes
Scheme Name No. of Stocks Return* approximately 65% of its outstanding credit of
Reliance Small Cap 65 23.90% Rs75,550 crore in FY14-15. In September 2015, its gross
Mirae Asset Emerging Bluechip 62 23.43% NPA (non-performing assets) and net NPA ratios were at
0.61% and 0.20%, respectively, compared to 0.46% and
Canara Robeco Emerging Equities 61 22.76%
0.13%, respectively, in the sequential previous quarter.
DSP BlackRock Micro Cap 61 22.64%
The profit of Yes Bank has grown at a compounded rate
SBI Small & Midcap 26 22.63% of 33.2% for the five years ended 31 March 2015. The
Franklin India Smaller Companies 71 22.42% Bank reported a revenue growth of 22% for the three
BNP Paribas Mid Cap 48 20.97% quarters ended 30 September 2015. The stock is quoting
SBI Magnum Midcap 54 20.86% at a P/E of 13.19. Yes Bank has a return on net worth
UTI Mid Cap 104 20.42% (RoNW) of 19.29%.
Religare Invesco Mid N Small Cap 48 19.84%
Axis Bank is the third largest Indian bank in terms
of credit and profitability. As on 30 September 2015,
*Five-year annualised rolling return as on 31 December 2015
its loan book was Rs2.98 lakh crore. The Banks loan
book grew at 30% annually over the past eight years,
on niche areas: dermatology, respiratory diseases and higher than the average industry growth (which was
cardiology. The US and India are the largest markets and 19% annually). In the past five-six years, the gross NPA
contribute to 16% of the companys revenues. Brazil, ratio has stayed in the range of 0.8%-1.3% while the
Mexico, Russia and east European countries contribute net NPA ratio has consistently stayed at approximately
to its international presence. The pharma stock averaged 0.4%. Axis Banks income growth averaged 19% over
a sales growth of 197% and an operating profit growth the three quarters ended 30 September 2015. The Bank
of 167% over the three quarters ended 30 September has P/E of 13.02 and RoNW of 17.85%. The price of
2015. The stock is quoting a P/E of 17.72 and has RoCE Axis Bank has crashed from over Rs600 in March 2015
of 28%. to below Rs400 in January 2016.
Alembic Pharmaceuticals created a niche in the anti- Other than banks, four companies from the financial
infective and cough & cold segments. Its formulations services sector make it to our list. These stocks include:
business accounts for 82% of revenues, while the rest Indiabulls Housing Finance, LIC Housing Finance, GIC
comes from APIs. Domestic formulations constitute Housing Finance and Credit Analysis and Research.
53% of its revenues, the rest being contributed by export Stocks focused on housing finance are better than other
formulations. Nearly 90% of export formulations non-banking financial companies (NBFCs). The asset
are generics catering to the regulated markets of the quality of the housing finance companies is relatively
US, Canada and Europe. For the three quarters ended better and the gross NPAs for the industry are around
30 September 2015, Alembic averaged a sales growth 0.8%. A steady demand has pushed up the revenues of
of 33% and an operating profit growth of 75%. Its this sector. In addition, the government has announced
valuation is high with P/E of 27.19 while its returns are Housing for All by 2022 as one of its missions, along
exceptional with RoCE of 46%. with the plan for creating 100 smart cities. If well-
A top wealth creator, Ajanta Pharma continues to implemented, this will boost the demand for housing
hold its ground. Its domestic formulations constitute finance. However, a slow recovery in demand for real
32.7% of total revenues; with the export formulations estate and adverse regulatory changes can affect the
constituting 65% of the total revenues. It currently sector.
derives almost its entire export revenues from emerging In the housing finance space, Indiabulls Housing
regions like Africa (Franco-Africa), Asia and Latin Finance (IHF) is one of the largest among private sector
America and has a presence in more than 35 countries. companies with a net worth of Rs10,367 crore on
Its export formulations have grown at an annual rate of 30 September 2015. Its loan book grew @26%
30% over the five-year period ended 31 March 2015. compounded annually over six years, ended 30
In the three quarters ended 30 September 2015, Ajanta September 2015. IHF has a network of 220 branches
Pharma reported a revenue growth of 18% and an and provides home loans to salaried and self-employed
operating profit growth of 20%. Its P/E is high at 33.51, individuals. As of FY14-15, IHF has a loan book mix
but its RoCE is exceptional at 40.18%. of 50% home loans, 27% loan against property (LAP),
The two banks that make it to the list are Yes Bank 22% commercial credit and, approximately, 2% for
Cover Story.indd 6 14-01-2016 22:22:26

COVER STORY
commercial vehicles. For the three quarters ended book. LICHF averaged an income growth of 17% for
30 September 2015, IHF had an average income growth the three quarters ended 30 September 2015. Over this
of 35%, while operating profit grew @60% over this period, the housing finance company averaged operating
period. The stock is expensive, with a P/E of 16.08, but profit growth of 25%. LICHFs P/E is 16.68 and RoNW
a good return ratioRoNW of 31%. is 19%.
LIC Housing Finance (LICHF) has a loan book of The third housing finance company on our list is
Rs1.14 lakh crore, making it the second largest housing GIC Housing Finance (GICHF). The focus of GICHF is
fi nance company among NBFCs and third largest, if mainly the middle-income group where the average ticket
banks are included. Over the past eight years, LICHFs size of loans is Rs12 lakh-Rs13 lakh approximately;
95% of individual borrowers are from the salaried
income group. Its major business is focused in western
and southern India. GICHF averaged an income growth
of 21% over the three quarters ended 30 September
2015. Its operating profit grew at an average rate of
13%. Valuations are low, with a P/E of 11.42 as against
RoNW of 16.99%.
Rating agency Credit Analysis & Research (CARE)
ranks 19th among the top-20 stocks. Six out of the 30
equity schemes have CARE in their portfolio. It is the
second largest rating company by market share. It has
reported strong margins and has improved its market
share over the past few years. However, compared to
other rating agencies, almost its entire revenue is derived
from the rating business. CRISIL and ICRA derive only
loan book has grown by 25% annually. Its market round 37% and 58% of their revenues, respectively,
share nearly doubled bringing it to, approximately, from the rating business, according to research by ICICI
10% now. Its lending rates, too, are among the lowest Securities. In the past six years, CARE outpaced the
in the industry, making it highly competitive. Salaried industry in terms of rating revenue growth, growing at
individuals account for nearly 85% of its retail loan 28% annually. CARE has high P/E of 31.81 and high
of each scheme. This gave us 304 stocks. We then

Methodology excluded stocks which did not meet our parameters
defined for short-listing good-quality companies. We
How we picked the best stocks from the then ranked the remaining 166 according to our own
best schemes formula and picked the top-20 stocks.
With a methodology of combining value and
W e first ranked equity diversified mutual

fund schemes on the basis of their
performance in the past five years, based
return, fortified by insights into industry trends and
corporate governance, we have been able to
choose stocks that have done well. Fund
on their quarterly rolling returns. We managers do not stray away much from
picked the top-10 schemes each from benchmark stocks which constitute half
the large-cap, multi-cap and mid- and of their portfolio allocation. However,
small-cap category. a few stocks from the remaining part
We assume that the quality of the of their portfolio can deliver substantial
stock-picks of these schemes has helped value. On taking the latest portfolio of
them beat their peers over the past five the top mutual funds, we leave out stocks
years that we have analysed. What do these that will not create wealth because of specific
top performers hold now? That takes us to the reasons, and apply our methodology that combines
second part of our analysis: the stocks we select are growth and value, to pick the best stocks from the best
from the top stocks that make up 75% of the portfolio schemes portfolio.
Cover Story.indd 7 14-01-2016 22:23:20

COVER STORY
RoCE of 32.37%. and financial services sector contributes 25%. Mindtree

Hexaware Technologies, MindTree, Infosys and reported average sales growth of 15% and an operating
Persistent Systems were the four stocks that made it to the profit growth of 12% for the three quarters ended
list from the software and IT services sector. Hexaware 30 September 2015. Franklin India Smaller Companies is
Technologies ranks the highest among these and the only scheme among the top-30 MF schemes that has
continues on our list from the previous year. Out of the Mindtree in its portfolio. Mindtree has a P/E of 22.38
top-30 schemes, four have Hexaware in their portfolio. and RoCE of 27.17%.
Hexaware provides enterprise solutions, infrastructure
management services and business process services.
Approximately 80% of its revenues are derived from
the US and 13% from Europe, based on the September
2015 quarter data. The banking and financial services
sector contributes the maximum, approximately 38%,
to its revenues. It has averaged sales growth of 18% for
the three quarters ended 30 September 2015. Operating
profi t grew @22% over this period. Valuation is high
with a P/E of 22.99, but its RoCE is strong at 31.69%.
Mindtree is a global provider for application
development, maintenance and infrastructure
management services. While about 60% of its revenue
is derived from the US, Europe contributes nearly 25%.
The technology, media and services sectors contribute Infosys still remains one of the top most-picked
the maximum to its revenues, at 30.4%. The banking stocks; as many as 19 of our selected top-30 equity
31 December 2015). Our Super Stock Portfolio

Market-beating Portfolio delivered an absolute return of 14.41% over this
period. The 14 schemes that outperformed our portfolio
Our portfolio beat 101 out of the 115 large- delivered an average return 19.57%. The 101 schemes
and multi-cap schemes last year delivered an average return of just 6.75%.
Even if we consider small- and mid-cap schemes, the
J ust 14 large- and multi-cap schemes were able to

outperform our portfolio of top stocks over the
past 15 months (19 September 2014 to
average return of the 159 schemes worked out to just
10.12%. Our portfolio was diversified across stocks
of all market-caps and still managed to do
well. Compared to the benchmark indices,
the Nifty Midcap 100 delivered a return of
How Our Portfolio Fared 14.19% and the S&P BSE Sensex returned
-3.59%. Our portfolio outperformed both
16% the indices. We have not factored in costs
but costs are negligible today, if your do not
12% churn your portfolio. Our portfolio was a
buy-and-hold portfolio, with just 17 stocks.
8% Among the stocks present, as many as
nine stocks delivered a return in excess of
4%
15%. Even though six stocks delivered
negative returns, the remaining stocks on
0%
the list were able to balance the portfolio.
-4% Average Return of
Among the top performers were: Vardhman
Super Stock
Large- & Multi-cap Portfolio Textiles (75%), TV Today Network (51%),
Schemes
S&P BSE Sensex eClerx Services (38%), Ceat (32%) and
Lupin (31%). Among the underperformers
Cover Story.indd 8 14-01-2016 22:23:40

COVER STORY
schemes have Infosys in their portfolio. Client additions invested in this stock. Sun TV dominates the Tamil and
and order bookings growth have become healthy Kannada markets and boasts strong ad revenue growth.
after the change in top management, two years ago. Subscriptions revenues, too, have grown at a good
The business IT services segment, which includes paceof 20%for the two-year period ended 31 March
application development, application maintenance and 2015. The September 2015 quarter witnessed continued
infrastructure management services, contributes the strong ad revenue growth of 15.8%. For the three
maximum to the revenues, followed by consulting and quarters ended 30 September 2015, revenue growth and
package implementation. The banking and financial operating profit growth averaged 9% each. The mega-
services sector contributes 33% to the revenues followed cap company has a P/E of 20.16 and RoCE of 24.64%.
by the manufacturing sector. Revenue growth for the Hindustan Zinc Limited (HZL) produces zinc, lead
three quarters ended 30 September 2015 averaged 10%, and silver. Zinc and lead have reported a strong production
while operating profit growth averaged 9%. Infosys has growth of 13% year-on-year for the September 2015
a P/E of 20.16 and RoCE of 25.48%. quarter. The production volume of silver grew at 40%
Persistent Systems derives the bulk of its revenues over this period. HZLs management expects a 32 50%
(85%) from the US. Over the past five years, it has increase in the production of silver to 350-400 tonnes in
reported 23% compounded growth in revenues. FY15-16. HZL averaged revenue growth of 13% over
Persistent Systems averaged revenue growth of 12% for the past three quarters ended 30 September 2015, while
the three quarters ended 30 September 2015. Operating operating profit growth averaged 15% over this period.
profi t growth averaged 25% over this period. It has a It has a P/E of 7.45 and RoCE of 19.80%. The stock is
P/E of 18.58 and RoCE of 20.32%. Four schemes have present in the portfolio of six equity schemes.
Persistent Systems in their portfolio. Supreme Industries has a diversified product portfolio
Sun TV Network is the only media firm on our which includes
udes plastic piping division, packaging
list. HDFC Capital Builder is the only scheme that has products, industrial
ndustrial products and consumer products
that contribute 54%, 23%, 16% and 7%, respectively,
to its revenues. Supreme has 23 plants across
were IPCA Laboratories (-5%), Finolex Industries 11 states.
(-10%), Goodyear India (-18%) and Gujarat Mineral Revenue growth
Development Corporation (-43%). declined over the
past two
quarters;
Portfolio Performance* thus, the
average
Vardhman Textiles
growth
TV Today N etwork
rate over
Eclerx Services
Ceat
the three
Lupin
quarters ended 30 September
MRF 2015 works out to just 5%. Operating profit growth
Indraprastha Gas averaged 27% over this period due to lower raw material
Hexaware Tech costs. Supreme Industries is quoting a P/E of 27.39 and
Atul RoCE of 21.49%. Just four of the top-30 schemes invest
City Union Bank in the stock.
HCL Technologies Plyboard manufacturer Century Plyboard (CPL) is
Excel Crop Care present only in the portfolio of Franklin India Smaller
Swaraj Engines
Companies. CPL is one of the largest producers of
IPCA Laboratories
plywood in India and has as many as seven manufacturing
Finolex Industries
plants. Apart from plywood, CPL manufactures
Goodyear India
GMDC
laminates and decorative veneers. After increasing its
laminates capacity recently, it became one of the largest
-50% -25% 0% 25% 50% 75%
producers of laminates in India as well. For the three
*Return from 19 September 2014 to 31 December 2015
quarters ended 30 September 2015, the stock averaged
a sales growth of 10% and operating profit growth of
53%. CPL has a P/E of 22.19 and RoCE of 19.74%.
Cover Story.indd 9 14-01-2016 22:24:31

StockWatch
A section on stocks and sectors that catch our eye
J K T y r e a nd Indus t ries
Will It Skid?
Chinese Threat Price in Rs
Volume
130 1,556,400
Cheaper imports a worry but more than
compensated by lower rubber prices 120 1,167,300
J
K Tyre is an old and established tyre manufacturer
105 778,200
with the latest manufacturing know-how.
The company went through a difficult patch,
a few years ago. But, in 2014-15, according to 90 389,100
the management, all categories, other than light

commercial vehicles (LCVs), did very well. 75 0
India is now the sixth-largest automobile market, Jan-15 Jul-15 Jan-16
behind China, the United States, Japan, Brazil and
Germany. So the demand for new and replacement Shares Traded Adjusted Closing Price
tyres is high. But Indian tyres are threatened by imports

from China. As the chairman of the company, in his Key Financials
statement to shareholders, points out: Despite the Stand-alone (Rs Cr) Mar-15 Jun-15 Sep-15
emphasis laid on infrastructural development by the Revenue 1,503.56 1,502.08 1,506.83
newly-instated Central Government primarily via the OP 205.17 256.32 261.33
Make in India campaign, the threats posed by Chinese OPM 14% 17% 17%
manufacturers and the inverted tax duty structure Y-o-Y Revenue growth -5% -4% -2%
showed no sign of abatement. The low import tariffs Y-o-Y OP growth 32% 58% 41%
in India encouraged large volumes of imported tyres. March Ending FY13 FY14 FY15
Despite India possessing adequate domestic capacity as RoNW 15% 16% 23%
well as investments in new capacity creation, Chinese OP: Operating Profit, OPM: Operating Profit Margin, RoNW: Return on Net Worth
tyre imports into India increased to Rs800 crore during

2014-15, adversely affecting the prospects
pects of
Indian tyre makers. which has cut into the production of Indian
In an interview with a business tyre companies. The situation is exacerbated
TV channel in early January 2016, by the fact that the main export market for
AK Bajoria, president of JK Indian
I companies, Brazil, has suffered a
Tyre, complained that a further 49% currency devaluation making Indian
devaluation of the Chinese Yuan tyres less competitive.
will be terrible for the industry. However, the industry has benefited
Tyre imports into India account hugely from a sharp drop in rubber
for 25%-30% in the truck/bus prices. This dichotomyof sluggish sales
radial segment and up to 45% in due to global factors and higher profits
the passenger cars segment. The due to lower raw material pricesis
industry also claims that China has reflected
r in the financial results for the
50% surplus tyre capacity and has quarter
qu ended 30 September 2015.
doubled its exports to India in 2015, JK Tyre recorded quarterly sales of
StockWatch.indd 2 14-01-2016 22:06:11

STOCK WATCH
Rs1,506.83 crore (Rs1,531.86 crore), down 1.63%, been sluggish. The market-capitalisation is just 0.44
but quarterly net profit, of Rs109.70 crore (Rs58.20 times sales and 2.86 times operating profit. The return
crore), was up a huge 88.49%. For the year ended on net worth (RoNW) is 23%. Cash earnings per share
March 2015, the annual sales were Rs6,125.23 crore are Rs17.30. The debt-equity ratio is 2.69 and the
(Rs5,951.08 crore), up 2.92%, and the annual net return on capital employed (RoCE) is 15%.
profit was Rs253.30 crore (Rs134.68 crore), up The company distributed dividends of 75% for
88.08%. FY14-15 and 50% and 35%, respectively, for
The shareholding pattern of JK Tyre includes FY13-14 and FY12-13. In December 2014, there was
52.34% shareholding with promoters, 10.75% with a stock split from Rs10 to Rs2. The share price hit a
foreign institutional investors, 2.39% with domestic 52-week low of Rs78.25 on 30 June 2015 while it hit
institutional investors and 34.52% with retail investors. its 52-week high of Rs133.65 on 15 April 2015, in
Over the past five quarters, quarterly sales have expectation of better prospects. The book value of the
remained flat and the average growth in operating companys share is Rs48.12. The companys share was
profit was 34%. The average operating margin is 15%. trading at around Rs98 on 14 January 2016.
Valuation is reasonable, mainly because growth has
Ze e E n t e r t ainm ent organisations are struggling. This is thanks to careful

strategies deployed for each category, or genre, of
Strong & Steady business. For instance, on the digital media front,
ZEEL is running Ditto TV which is a subscription-
High valuation comes from predictability
Z
ee Entertainment Enterprises Limited (ZEEL),
one of Indias leading television media and
entertainment companies, has risen sharply
from a low of Rs106 on 18 January 2011 to Rs437 on
31 December 2015. It has been among the best value
creators among large-cap stocks. It trades at around
39 times consolidated earnings for 12 months ended
30 September 2015. Its market-capitalisation stands
at around 34 times operating profit. Can such high
valuations be justified? Yes, if strong earnings growth
continues. The management believes that advertisement
revenue momentum is strong and subscription revenue
will pick up in H2FY15-16. Institutional investors based model. This is completely different from the
are betting that the management, which is extremely competitor, Star TVs Hotstar app, which is free,
focused on the bottom line, will deliver. supported by advertisements. ZEEL has also launched
So far, it has. ZEEL has had the distinction of saturation coverage for a movie cluster comprising Zee
outperforming the benchmark Nifty for the past Cinema, & Pictures, Zee Classic and Zee Action.
five calendar years, at a time when most media Thanks to its strategy, ZEELs advertising revenue
Exits & Returns from Erstwhile Street Beat Stocks: We continue to monitor stocks featured in the erstwhile Street Beat section. We will suggest an exit
when they are no longer undervalued or not performing as per expectations. Keep an eye on this space. | 43% Return: Our recommendation has so far
fetched 43% average annualised return since January 2012, based on booked profit and open positions of more than one year.
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.
StockWatch.indd 3 14-01-2016 22:06:54

MONEYLIFE
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Indias most unbiased and pro-investor research and information group.
MSSN GB Ad_invest.indd 2 18-11-2015 20:37:14

MSSN Benefit #4 - 7
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MSSN GB Ad_invest.indd 3 18-11-2015 20:38:17

STOCK WATCH
far better than Colors, being one of the few media

Beating Sensex Easily companies that has consistently generated profits over
the years.
350
Edelweiss analysts have compared Star India and
300
Zee TV and come up a few interesting insights. Zee
250 TVs advertisement rates are estimated to be around
200
0.75 times Star Plus rates which is the market leader
in GEC space. Star Plus has around 38 hours of
150
original programming compared to Zees 32 hours.
100 Revenues of Star Indias and Zee Entertainment
50 were roughly similar in FY09-10 at Rs233 crore
and Rs220 crore. Thereafter, revenues of Star India
0
Jan-11 Jun-13 Jan-16 have more than tripled up to FY13-14, while Zee
Zee Entertainment Enterprises Ltd S&P BSE Sensex
Entertainments corresponding revenues have doubled.
But Zee Entertainment scores over Star India in terms
of profitability. Based on the operating profit numbers
grew by a stellar 35% y-o-y (year-on-year), rising (FY13-14) from the report, Zee Entertainments
to Rs843 crore, based on consolidated numbers for operating profit margins were at a robust 27%
the quarter ended 30 September 2015. This revenue compared to Star Indias 9%. With respect to the
growth was aided by advertising for its newly-launched future, Edelweiss analysts believe that Star Indias
general entertainment channel (GEC) &TV. If the strong focus and aggression in sports and digital media
new launches were excluded, revenue growth would will give it an edge over Zee in these segments. We
be in the mid-twenties (presumably in the range of disagree with this assessment. Zee is a better allocator
23%-27%), as per recent analysts reports based on of capital and that is what matters to investors.
discussions with the management. Sports business did The stock has attracted tremendous interest from
not add much to the bottom line for that quarterits institutional investors over the years because of its
revenues were Rs128 crore and costs Rs126 crore. visibility. However, investors need to make a fair
Since the India-Pakistan cricket series is not expected comparison with other companies across the sector. For
to resume soon, given the current political scenario, the quarter ended 30 September 2015, 43.07% of the
sports business will be a drag on Zees bottom line this companys shares were held by the promoters, 48.39%
financial year. However, this is a segment with excellent by foreign institutional investors, 3.53% by domestic
long-term potential. institutional investors and 5.01% by others. As much
As per the results for FY14-15, advertising as 35.74% of promoter holding was pledged on
contributes 54% of its revenues, subscription 37% 30 September 2015.
and the balance is contributed by sales: media content,
which includes syndication sale of sports rights,
programmes and film rights. The domestic market
contributes around 78% of its total subscription Indraprastha Gas Limited
revenues; the balance comes from international market,
mainly West Asia and North America. Benefits Unfolding?
Virtually Debt-free
The companys return on capital employed (RoCE) on
Measures to curb pollution may help
the basis of consolidated earnings for year ended
the gas distribution company
30 September 2015 is a healthy 21%. The
corresponding return on equity (RoE) is an impressive
29%. It is virtually debt-free and has cash & cash
equivalents of Rs1,551 crore.
T he Supreme Court has asked the ministry of
petroleum and natural gas to set up 104 new
compressed natural gas (CNG) pumps in the NCR
Several media companies are listed on the Indian (national capital region). The management of the gas
bourses, but not many have focused on entertainment. distribution company, Indraprastha Gas Ltd (IGL),
News channels are doing badly, including Zee News, has indicated that this mandate can be executed in
listed as Zee Media. Zee Entertainment is doing one year. Analysts estimate the incremental investment
StockWatch.indd 4 14-01-2016 23:02:02

STOCK WATCH
per CNG outlet to be Rs2 crore. This implies that the

company will have to invest an additional Rs208 crore,
approximately, in the next year for these 104 outlets.
IGL has already received proposals from around 150
fuel outlets belonging to oil marketing companies
(OMCs) to set up CNG-dispensing machines. The
details of these proposals are not yet fully available.
The administration of Gautam Buddh Nagar district
in Uttar Pradesh, falling under the NCR, has directed
all industrial units in Noida to switch to piped natural
gas (PNG) by 31 March 2016, on pollution concerns.
Although this move is being treated with scepticism,
many industrial units are likely to switch to PNG in
the next few years, benefiting IGL. At present, it is
estimated that out of the 8,000-odd industrial units in affect the companys margins a tad, in the short term,
Noida, around 330 are running on PNG. as more consumers are likely to fill their CNG tanks
IGL is likely to gain due to increasing focus on during non-peak hours. The company had a superb
cleaner fuels to tackle pollution. This is expected return on capital employed (RoCE) of around 27%
to give a fillip to its sales volumes which have been for the 12 months ended 30 September 2015. With the
stagnant. CNG prices during non-peak hours have political consensus behind cleaner fuel, has IGL been
been reduced by Rs1.5/kg, to avoid queuing. This may given a good long-term competitive advantage?
E ve r e a dy Indus t ries organised bulb segment. It believes it can leverage its

distribution network and brand to expand its topline
Flash or Flicker? for LED business. However, the company will have to
compete with major players like Philips, Osram, Bajaj
Electricals, Havells and Syska in this segment.
Extraordinary share price growth does
not look justified
Flashing Warning Sign?
T
he stock of Eveready Industries Ltd has had Price (in Rs)
an extraordinary run over the past two years. 420
From a price of Rs35 on 1 January 2014, it
skyrocketed to Rs301 on 31 December 2015, after
320
touching a high of Rs374 in mid-July 2015. On what
basis? Eveready is a market leader in flashlightswith
220
a whopping 70% market shareand in dry batteries
in India: its core business. It has more than 50% Adjusted Closing Price
market share in this segment, but is facing challenging 120
times due to the dumping of Chinese batteries. The

managements guidance for FY15-16 has been that 20
volumes are expected to remain flat due to dumping Jan-14 Jan-15 Jan-16
by China.
The company has entered the light-emitting
diode (LED) bulb segment and analysts are going The companys outsourced manufacturing facility
ga-ga about this high growth area. At present, LED in India for LED lighting products, commencing
segment accounts for 7%-8% of the revenues of the operations from January 2016, as per the management,
company. The management is bullish on this business will aid in increasing manufacturing for this segment.
and expects this segment to contribute a much higher The company will bid for government tenders in the
proportion. The management strategy is to focus on the LED category.
StockWatch.indd 5 14-01-2016 23:02:18

STOCK WATCH
The share price hass risen entirely on hope. So far, it 12 months ended 30 September 2015. The stock seems
has had a low return on capital employed (RoCE) and to have run up too fast, despite the tepid sales growth,
return on equity (RoE). ). Its RoCE stands at 11% and near-term headwinds in its
low RoCE and RoE and near-te
RoE at 8% based on stand-alone numbers for the 12 core business of batteries.
batteri Promoter holding
months ended has risen over the ppast two years from
30 September 2015. 40.86% on 31 December
40.86
Though its profitability y 2013 to 43.92% on 30
20
has risen over the JJune 2015. Subsequently,
past three years, it has it increased to 44.01%
delivered a marginal sales
ales on 30 September 2015.
growth of around 5% CAGR The stock seems to have
(compound annual growth owth rate) attracted the interest
interes of foreign institutional
over this period. Its results
sults for the investors (FIIs) over the past two years. FII
quarter ended 30 September
ember 2015 were unimpressive holding on 31 December 2013201 stood at 0.53%.
with the net profits dipping 21% on a y-o-y (year-on- It has increased over the years to 16.89% on 30
year) basis. On the valuations front, the stock looks September 2015. Will FIIs continue to enjoy a dream
hugely expensive with a price-to earnings (P/E) ratio run or will it end badly, as has often happened in the
of around 43 times based on trailing earnings for the past?
I ndu s I nd B ank y-o-y. However, the adjusted loan book growth, after
accounting for migration from Royal Bank of Scotland
Fantastic Revenue and (RBS) of Rs4,100 crore, was at around 23%.
The retail loan book grew at around 27%, greatly
Profit Growth, Again aided by its commercial vehicles loan book, which
expanded at an impressive 32%. The robust growth
It is the most expensive stock among the in retail loan book is in line with the managements
large listed banks. Why? strategy of rebalancing its portfolio in favour of retail
lending. On the revenue front, its fee income rose by a
whopping 39% y-o-y, aided by rise in loan processing
T
he stock of IndusInd Bank has been trading at fees. Are these numbers sustainable? We dont know
premium valuations, with a price-to-earnings
(P/E) ratio of around 28 times its trailing
On Sterioids
12-month earnings. It is the most expensive stock,
among the large listed banks. Why? Incredible growth, Particulars Q3FY15-16 Q3FY14-15 Growth
quarter after quarter. Take a look at its December 2015 Net Revenue (Rs crore) 2,012.00 1,510.00 33%
quarter results. Net Profit (Rs crore) 581.00 447.00 30%
how IndusInd is able to grow the topline as well as

the bottomline, at a time when competition in retail
lending is intense. Stressed assets are a major problem
with the Indian banks, but IndusInd claims to have
very good asset quality; its gross non-performing assets
(NPAs) constitute only 0.83% of its total assets. Net
interest margins (NIMs) during the December 2015
quarter improved to 3.91%. Only time will tell if this
trend will continue. Institutional investors seem to
IndusInd Bank reported stellar Q3FY15-16 believe that the robust growth of IndusInd will not
numbers; its net profits rose 30% on a year-on-year slow down. If they are mistaken, they will pay a heavy
(y-o-y) basis. Its overall loan book grew at around 29% price. The stock is priced to perfection.
StockWatch.indd 6 14-01-2016 23:02:33

STOCK WATCH
UN UOTED
STORIES OF PRICE MANIPULATION
Dhoot Industries (Rs9) shareholders, such as PNB Capital

(Rs)
Services, Central Bank of India and
T he main business of Dhoot

Industries is financingloans
and project financeaccording
10.25
8.40
UCO Bank together hold a stake of
about 7%.
Trading was infrequent and trading
to its annual report for FY14-15. volumes were low in the months
Strangely, on the companys website
6.55 697% prior to May 2015 compared to the
(dhootindustries.net), it is mentioned 4.70
six-month period ended 31 December
that it deals in real estate development 2015. Only one or two trades were
and granite trading. Not surprisingly, 2.85 conducted each day over this six-
there is no mention of the projects month period. The average trading
financed, or any details of trading 1.00 turnover was just Rs3,400 over the
May-15 Sep-15 Jan-16
activities neither in the annual same period. Huge gains were posted
report nor on its website. For the year as the stock was up nearly 1.50%-2%
ended 30 September 2015, it reported was Nil. The companys business may in each trading session. In November
revenue of just Rs40 lakh and a net be skeletal but the stock price shot 2007, Dhoot Industries was suspended
profit of Rs5 lakh. Revenues were up an astonishing 697%, to Rs9.17 by the BSE for not complying with the
Rs39 lakhthe same as in the same on 6 January 2016, from Rs1.15 on listing agreement. Will the regulator
period in the previous year; net profit 4 May 2015. Strangely, institutional investigate this brazen price-rigging?
MARKET TREND
Slow Realisation the bulls to push the market much

higher because the three factors
Fund managers are beginning to that drive market pricesliquidity,
see the reality earnings and sentimenthave been
severely damaged. Liquidity is reducing;
G lobal stock markets are in the grip of a major sell-

off. We have been bearish on the market for most
of 2015. In October, we did a Cover Story titled, Bulls
companies are not showing any earnings growth;
and sentiment is distinctly bearish. Fund managers,
who had bet on the India Story under the new
on the Backfoot. The bulls have not ot been able to able look
government, are looking foolish. A slow realisation is
to step forward with any confidence, ce, since then. sinking in root that lit
little can be expected from this
In December, the market was sluggish,gish, and gove
government to create conditions for
foreign institutional investors (FIIs) were sustained growth. The way the
light sellers throughout. In January government has grabbed all the
2016, they started selling b
benefits of falling oil prices, the
heavily. In nine trading days (as an
announcement of many schemes
we go to press), they have already that will have no impact on job
sold more than Rs5500 crore of shares,ares, grow the lack of accountability of
growth,
ember. Domestic
following over Rs2300 crore in December. public sector banksall paint a very
institutional investors are trying to match them but p
sorry picture of a clueless government.
have failed, so far. What makes it worse for the bulls Investors
Investors, too their eyes off hardcore data
who took
is that emerging markets, like Brazil and Russia, are and believed in the story, are paying the price. Pity
crashing, while China, the source of much of global that this includes millions of mutual fund investors
growth over the past decades, is stumbling. who believed that fund managers will invest their
What should we expect? It will not be easy for money intelligently. Debashis Basu
StockWatch.indd 7 14-01-2016 23:02:52

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Good quality stocks are likely to grow at 20%-22% annum but not in a How risky are the stocks mentioned in the stockletters?
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losses. But loss of capital in good quality stocks is not a function of stock
If some stocks have already run up sharply, will it be wise to invest in selection but also how long a stock is held and at what valuation they are
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Stockletter (MSSN) Ad Oct 15.indd 3 12-01-2016 15:13:56

TECHNOLOGY MOBILE
speed in Tier-II and Tier-III cities. Next is the issue of

Are You Ready data tariff. Consumers, especially mobile users, are
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for Netflix? data connection. For example, charges for a prepaid
3G mobile service are over Rs250 (for actually 28 days,
another kind of fleecing). Internet connection at home
On-demand streaming sounds great; but slow can go anywhere towards Rs1,000 per month with a
Internet speeds and high data charges will limit either on downloads or data speed. But, even after
afflict Netflix, says Yogesh Sapkale spending the money, there is no guarantee that you
would receive the promised speed.
N
etflix, the on-demand streaming service that According to Netflix, watching films or TV shows
allows people to sign up and decide what, on its site can exhaust about 1GB of data per hour, for
where and when to watch TV shows and each stream of standard HD (high definition) video,
films, is now available in India. Netflix has changed and up to 3GB per hour for each stream of ultra
the way people consume entertainment; will it fly easily HD video. In addition, you need to have a minimum
in India? For one, the service may have been launched connection speed of 0.5 megabits per second (Mbps).
in a hurry. But even for watching standard quality content, the
Peter Theobald, a senior executive from IT industry, required speed is 3Mbps, which goes towards 25Mbps
found it very difficult to connect with Neflix from his for ultra HD quality streaming. So if you are on a
smart TV, Win10 running PC, smartphone or even limited data plan, please take note. Another issue:
XBox gaming Netflix is a
console. After streaming service.
spending over This means, you
two hours in vain, are watching it
his son suggested online and there
that he create is no provision
a new Hotmail for download
account and a and to watch
new XBox live the content later.
account with a US This is what we
address, link both Indians love to
these accounts, do the most.
and then log in We download
to his existing content, especially
XBox. In a post videos and songs,
on Facebook, Mr and watch or
Theobald said, listen later as per
...Voila, Netflix our time schedule.
shows up, we Netflix is
can download, offering free
create a Netflix account in India, finally, we are on. subscription for one month to users. After that, three
Is it worth it? We are not interested in TV shows, and monthly paid plans are available: Rs500, Rs650 and
the English movies available dont seem worth it. But, Rs800, which can be paid with an international credit
surely, Netflix should have taken more efforts to see card via Netflix, through the iTunes app store in most
that their users in India had a more seamless experience markets and via PayPal. Although these plans are
connecting to their service. given in Indian rupees, under the billing section on its
However, interconnecting Netflix with other devices website, Netflix says that it submits an authorisation
is only one of the problems. The more important for a certain dollar amount which can vary by region
ones are: data consumption and Internet speed. We or by financial institution.
know that, in practice, we never get the speeds that Netflix is great streaming service which will work
service-providers claim. And I am talking only about only when we have seamless connectivity with high
the situation in metros. So imagine what would be the speeds and lower data tariff.
Technology.indd 1 11-01-2016 20:42:22

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MSSN - Unbiased.indd 1 20-11-2015 17:05:43

Earning
negative P/E ratios, where a company with a P/E of
-100 is cheaper or more undervalued than one with a
P/E of -3.
Curve
The returns of the 10 portfolios created were then
compared to the unweighted FTSE (Financial Times
Stock Exchange) All-Share Index. The returns were
compared over a nine-year period from November
2006 to November 2015. All the portfolios delivered an
Fresh investing annual return of 10.45% over this period.
insights The most undervalued portfolios, ranging one
Distribution of Returns
Decile P/E Lower P/E Median Annual Return
Quartile over Index
1 4.16 5.77 3.70%
Low Value, High 2

3
7.98
10.08
9.39
11.81
1.07%
2.10%
Returns 4 12.04 14.24 0.61%
5 14.10 16.50 -0.41%
Undervalued stocks fetch higher returns 6 16.19 19.10 -0.79%
7 19.00 22.59 -0.44%
I
n the investing world, the price-to-earnings (P/E)
8 24.16 29.48 -2.29%
ratio is often used as an indicator to value a
9 40.98 73.47 -1.72%
company or to predict stock market direction.
The P/E ratio can be a good measure of the level 10 -30.70 -10.03 -0.11%
of stock market valuation, when properly calculated
and used. However, can a portfolio of undervalued to four, earned more than the expensive ones and
stocks (low P/E ratio) outperform the market over the performed a lot better than the unweighted portfolio
long term? Multiple research studies have found that of all stocks. The portfolios numbered five and above
started to underperform the market. This meant that
stocks with a P/E value of more than 14, or negative
P/E stocks, performed poorly. The researchers, then,
created an unweighted index of each portfolio and
compared it to the unweighted FTSE All-Share Index
over the same nine-year period. The indices of first
three most inexpensive portfolios remained for the
maximum time above the FTSE all-share index. The
index of the third portfolio (cheap stocks) remained
75% of the time above the index of all stocks. Of
course, even expensive portfolios, from six to eight,
were able to outperform the FTSE all-share index more
than 50% of the time. This meant that even higher-
investing in undervalued stocks may deliver significant priced stocks were able to create value for investors, if
returns over the long term. In a new research, published they had earnings momentum.
by bargainvalue.co.uk, the authors created 10 portfolios To factor this in, the researchers tried to identify the
based on the P/E ratio of stocks listed on the London number of pearlsstocks that earn 50% and more
Stock Exchange. The portfolios ranged from extremely in each portfolioand bad stocks which performed
cheap stocks to extremely expensive stocks, and were poorly. For each portfolio, they then calculated a
numbered 1 to 10. The first portfolio started with the ratio of pearls to bad stocks, to identify in which P/E
lowest positive P/E stocks and the very expensive and portfolio the chances of picking good stocks are higher.
the extremely expensive portfolios included stocks with The first three portfolios of stocks contained more
Earning Curve.indd 2 12-01-2016 15:06:18

EARNING CURVE
Pearls Minus Bad Stocks Distribution The Worst Year of Folio vs Market
for P/E
0%
3%
On calculating the ratio of pearls to bad -4%

2% stocks, the researchers found the best
ratio in the first two portfolios
1% -8%
0%
-12%
More undervalued stocks lose more value
-1% than more expensive stocks, during bad
-16% years. Therefore, in bear market periods, it
may make sense to shift to higher P/E stocks,
-2% especially large blue-chip companies
-20%
-3%
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
than 10% of pearls. At the same time, these portfolios more undervalued stocks lose more value than more
contained more bad stocks than portfolios numbered expensive stocks, during bad years. This trend can
four to eight. The reason may be that low valuation be seen from portfolios one to eight. Portfolios seven
can identify bad companies that dont have negative and eight, which had a median P/E of 23 and 30,
earnings yet, but no one may believe that they would respectively, declined the least. Portfolios nine and 10,
maintain their earnings growth in the future; so they which contain the stocks of many troubled companies,
dont create value. were not a good investment when the market was going
Portfolios numbered four to nine had less than 10% down. Therefore, in bear market periods, it may make
each of pearls. However, the 10th portfolio threw up sense to shift to higher P/E stocks, especially large blue-
some surprising results. It had a fair share of pearls, chip companies.
despite the stocks delivering negative returns. Reason: This study throws up some interesting insights.
There were companies, like Twitter, which have been While inexpensive stocks have the potential to deliver
plagued by negative earnings for a very long time, higher returns, they also come with higher risk. These
but investors believe that the business will do well, are usually smaller-cap stocks with low liquidity.
eventually, given that it has millions of users. Or it Stocks with high P/E are supported by strong investor
could be that the portfolio had good companies with sentiment marked by expectations of higher and
temporary problems. The last two portfolios, with the consistent earnings growth. Therefore, in hard times,
most expensive stocks, had a lot of underperformers. stocks with a P/E between 20 and 40 tend to do well.
This is logical, because they include stocks with But if you are looking to create a long-term portfolio of
negative earnings which indicate that these companies stocks, identify stocks available at a discount and with
may be having trouble. a sound management.
On calculating the ratio of pearls to bad stocks, The researchers performed a similar exercise with
the researchers found the best ratio in the first the price-to-sales (P/S) ratio. Their findings were
two portfolios, indicating that there is a lot higher similar. The first five low-value portfolios earned more
likelihood to find a pearl among very undervalued than the last five. The best results were achieved by
stocks. Portfolios three and four contain almost the portfolios numbered two and three, while portfolios
same amount of good and bad stocks. The rest of the eight and above underperformed the FTSE all-share
portfolios include more bad stocks than good stocks, index. Stocks with P/S below 0.91 were considered
with the exception of portfolios nine and 10, as undervalued, while stocks with a P/S over 2.19 were
explained above. seen as expensive and to be avoided. However, it may
While it may be clear that stocks with a low P/E, not always be that a low P/S stock will outperform
as seen in portfolio numbered one and two, offer a because more inexpensive stocks with a P/S of less the
better chance of picking outperformers, the researchers 0.26 were not among the best performers. The authors
went on to check the riskiness of each portfolio. further say that compared with P/S, analysis of P/E
For this, they examined how badly the portfolios gives the most straightforward results. It shows that the
performed during their worst year. It was clear that most undervalued stocks are the best ones.
Earning Curve.indd 3 12-01-2016 15:06:45

LEGALLY SPEAKING SD ISRANI
Bombay Hospital medical practice, it was claimed. She was operated upon
and, yet, lost her life. The parents filed a complaint with
the National Consumer Disputes Redressal Commission
To Pay for (NCDRC), on the following grounds of negligence:
1. The Hospital and its doctors did not take proper care
Negligence and precautions which led to death of their daughter;

2. There was an inordinate and unexplainable delay in
performing the surgery after the patients reporting to
NCDRC orders Hospital to pay Rs40 lakh to the Hospital, which caused perforation and spread of
doctor-parents who lost their daughter infection to the peritoneal cavity;
3. The Hospital and its doctors ignored crucial laboratory
T
he daughter of a doctor couple, Kaberi Roy, 29, findings which diagnosed acute appendicitis, but
suffered acute abdominal pain on 27 June 2002. unnecessarily administered pain-killers without
Their family physician diagnosed it as acute performing emergency surgery;
appendicitis and advised immediate surgery at any hospital. 4. It was a case of gangrenous appendicitis and was not
Her parents took her to Bombay Hospital (run by Birla managed properly post-operation.
Hospital Trust) and sought to admit her in a semi-private NCDRC observed that for it to establish the liability
of a doctor for medical negligence, the complainant must
prove that the doctor deviated, or departed, from accepted
standards of practice and that such departure was the
proximate cause of the patients injuries. It held: An
appropriate standard of care had not been met as surgery
took place after 17 hours. The core issue was: whether
the doctors and others breached their duty of care towards
the patient by failing to provide an adequate system for
the diagnosis and treatment. They failed to foresee the risk
that a patient with acute appendicitis, having a ruptured
appendix, was at least 1% and probably nearer to 3%. A
one per cent risk of serious harm is not inconsequential.
The NCDRC held (vide judgement on 5 January
2016) that the patient was a victim of medical negligence.
Considering her life expectancy, future prospects and mental
agony suffered by the parents, NCDRC directed Bombay
room. It was claimed that the admission was delayed by Hospital to pay Rs40,00,000 to the complainants, with
the Hospitals authorities by about 1 hours for want of interest @6% per annum from the date of filing of the
a deposit amount. Her mother was carrying a cheque for complaint, within 90 days from the date of receipt of the
Rs35,000 which the Hospital refused initially, but, finally, copy of the order. Otherwise, further interest @12% per
she was admitted at 10.30pm, under Dr BL Chitlangia annum will apply till its realisation.
(senior surgeon) and Dr Vikram Agarwal (clinical assistant). In this case, the parentsthemselves being doctorswere
The medical officer at the casualty desk examined her knowledgeable about the applicable medical procedures
and diagnosed it as a case of acute appendicitis. The clinical and it was much easier for them to gather evidence and
assistant also examined the patient and confirmed the fight the case. For a layman, it would be almost impossible
diagnosis. The patient was investigated for routine complete to bring the negligent doctors and the Hospital to book
blood count (CBC) and X-ray of chest and abdomen. The and get justice, especially since doctors have a policy of
results of the investigations indicated severity of appendicitis not testifying against others in their profession, no matter
and possibility of perforation. There was rapid increase how horrible the case of negligence.
in the abdominal pain during the waiting period of 1
hours. The concerned doctor allegedly failed to care for the
emergency condition of patient, ignored the vital lab reports SD Israni is a corporate lawyer & Fellow
and the need for urgent surgery to prevent perforation. The of ICSI. Email: sdisrani@gmail.com
patient was only given pain-killer (injections) and made to
sleep. Thus, the initial treatment was against the standard
Legally Speaking.indd 2 12-01-2016 15:14:54

HANDHOLDING:
MSSN Benefit #11
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MSSN Handholding.indd 1 20-11-2015 17:04:55

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on the interest earned, based on

the interest certificates issued by
Queries
At Moneylife Foundations
individual banks for my deposits
after the end of March of the
respective financial year. I do this
to prevent banks and, particularly,
the post-office, from deducting tax
as they do not always reconcile
Tax Helpline with 26AS data. The post-office
and some government banks are
Ask tax-related questions at moneylife.in/taxhelp. Its free particularly found wanting in this. I
ensure that all taxes are paid before
the due date. I want to know if this
Taxation for Disabled threshold limit. For the current year, is correct because in Form15G/H
Persons the threshold limit is Rs2,50,000.
So, if you feel that your total
there is a declaration to the effect
that the annual income is below
I n 2008, I met with an accident

that left me a paraplegic due to
head and spinal cord injury, which
income will be below this amount,
you could consider submitting the
Form to the bank, in which case,
taxable limits.
Nikhil Vadias Reply: I agree with
your issue that some banks and
is permanent 80% locomotive post-offices are among the biggest
injury. Last year, I was awarded defaulters in reporting correct data
Rs25 lakh from MACT (Motor for 26AS. However, while signing
Accident Claims Tribunal), the Form 15H, you are certifying
including interest of 12% for eight that your income is below the
years. In November 2015, I opened taxable limit after due deductions
a fixed deposit (FD) account with and, hence, not liable for TDS.
this amount in a bank with interest This statement itself is not true.
@9% per annum. I receive monthly The declaration can only be given
interest of Rs18,750. Do I have to in cases where the tax on estimated
pay any income-tax on this amount? total income of the previous year in
If yes, can I avoid it by submitting the bank will not deduct TDS. which such income is to be included
any form like 15H? I have no job Please note that this still does not in computing total income will be
and no other income and now I live mean that your income is exempt. It nil. Though you
with my retired parents. only means that because it is below are paying taxes
Ameet Patels Reply: I am the threshold limit, you dont need on all such income,
restricting the answer to the to pay tax and, therefore, the bank it is not advisable
taxability of interest on the FD that need not deduct tax at source based to give a false
you have placed with your bank. I on your declaration. In addition, declaration through
am not commenting you can claim deductions of up these forms. You may become
on the taxability of to Rs75,000 to Rs1,25,000 under liable for penalty and prosecution
the grant that you Section 80U, depending on the type for submitting false and incorrect
have got. Interest of disability. information knowing it to be false.
on bank FD is In case neither the PAN (permanent
taxable income. account number) nor the Form
By giving Form 15H, it does not
Validity of Form15H for 15H/G are submitted and interest
become tax-exempt. Form 15H Bank FDs exceeds Rs10,000 on FDs, the bank
only prevents TDS (tax deduction deducts TDS @20%. In both cases,
at source) from the income by
the payer of the income. You can
submit Form 15H only if your total
I give Form 15H for all bank
FDs held by me and also the
post-office deposits, though my
banks are mandated to provide the
TDS certificate to the FD-holder.
Using the TDS certificate, you can
income from all sources, including gross annual income is above the file your tax returns and claim
the bank interest is below the threshold limit. I pay all taxes dues refunds, if any.
MONEYLIFE | 4 Feburary 2016 | 56
Tax Queries.indd 2 12-01-2016 15:07:29

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Tax Helpline.indd 1 14-01-2016 22:51:36

HEALTH BM HEGDE
of normalising the bowel flora of seriously infected child

No Pill for this Ill with excreta from the mother of the childor from any
healthy personfed through the Ryles tube to the sick
child. She found it to be remarkably successful; this has
Does the medical profession really want now become a routine, called by a very dignified name
society to be healthy? faecal microbiota transplant (FMT).
The non-science of Western medicine treats the human
D
oes this world, where business and money body as machine made from bits and pieces (parts of an
interests are supreme, want society to be healthy engine). The human body is a dynamic whole working
and tranquil? The answer is a big NO. No one in tandem with its consciousness and environment. Most
wants to break her/his own rice bowl. The pharmaceutical of our interventions upset both these tenets and land
industry, the most powerful lobby in the world today the poor patient in soup. Western medicine thinks that
thrice as big and powerful as there is a pill for every ill and
the oil industrywill certainly a surgical correction for every
not want people to be healthy. defect. While this is not true, there
The medical profession is trying is an ill following every pill, thus
its best to make more and more getting us, doctors, more clients
people come into their net by to sell our wares. Therefore, most
regular health check-ups of of what we do does not seem to
the healthy, run for the heart, do much good and, at times,
run for cancer and so on; it more harm. Faith in the doctor
is also doing its best to create is the one factor that stimulates
iatrogenic illnesses. Hospitals, our inner healer to heal the sick;
especially the corporate ones, thank God for that!
seek more surgical post-operative Our ancient healers had
complications, as the latter nets divine blessings and they did
more money into their kitty than not charge any money from the
the original surgery itself. patients. It was believed that if
Last years budget to treat the healer charges for his services,
non-fatal adverse drug reactions his healing powers will decrease
(ADRs) in Europe alone was and, eventually, vanish! Todays
$80 billion! Please give me one The pharmaceutical industry, world believes that the more you
good reason why anyone should the most powerful lobby today charge, the better doctor you are.
want to treat simple acne with thrice as big and powerful as The root cause of all ills in society
azithromycin; but that is exactly the oil industrywill certainly is human greed. A doctor, or
what is done and on a long-term not want people to reduce their engineer, is valued by the income
basis. A recent issue of The Times dependency on drugs that he makes.
of India, in a front page news I was reminded of the time
report, mentioned a study done when the New World was
in one Delhi medical college hospital, which showed that discovered, thanks to India, the poor in Europe were trying
all (did I say all?) germs in the acne now have become to go the New World in search of greener pastures. King
resistant to azithromycin, a high-end antibiotic reserved Ferdinand, in France, made a statute which prohibited
for respiratory infections like pneumonia! Antibiotics are anyone who had learned jurisprudence to be barred from
the time bombs waiting to explode anytime now. going thereto let people there remain happy and tranquil.
Super-bugs, produced in hospital environments, are How I wish he had barred the medical profession as well!
now threatening to make every hospital a death trap for
terminally ill patients. Children in intensive care units
(ICUs), in American hospitals, are dying like flies even Professor Dr BM Hegde, a Padma
with such silly germs like Clostridium difficile. This made Bhushan awardee in 2010, is an MD,
a professor at Johns Hopkins recall an old Indian system in PhD, FRCP (London, Edinburgh,
Glasgow & Dublin), FACC and FAMS.
veterinary scienceof feeding cows with severe infection He can be reached at hegdebm@gmail.com
with the dung of a healthy cow. She tried the same logic
BM Hegde.indd 2 12-01-2016 16:53:52

HEALTH BM HEGDE
MOTHERS CHEST IS illness, but our general

THE BEST PLACE FOR state of health can also
HEALTHY INFANTS MEDICAL DEVELOPMENTS FROM affect their levels; stress,
T his old grannys

wisdom has recently
been reinforced by
AROUND THE WORLD diet, exercise, alcohol and
smoking can all influence
those levels.
an elegant study of newborns RSV. Until now, we knew that these
conducted at the Harvard School of cells are seen in mice; but this study PAYING THROUGH YOUR
Public Health and Boston Childrens show that these cells are very active TEETH?
Hospital. Grace Chan, who led the
study, says that, each year, four
million babies die worldwide during
in humans. Resident memory T-cells
are immune cells that appear at the
site and then, as and when needed,
I am a sceptic and was always
cautious about dental implants
which have become a big money-
their first month. Premature babies recruit other immune cells to the spinner all over the world. Now, an
are more vulnerable. Mothers chest, battle. This has provoked the usual exhaustive study of implantology,
with skin-to-skin contact, is the suspects to finding a vaccine reported by international and
best place to be in, if the child does aka making very big moneyas American associations for dental
not need any emergency procedure common cold is almost ubiquitous research (IADR/AADR) has
which may require separation/ in winters in the West and not published articles in the January
isolation. Skin-to-skin contact, uncommon in other parts. The 2016 issue of Journal of Dental
also known as kangaroo mother vaccine-wallahs have discovered Research (JDR) that explore
care (KMC), is often encouraged a nasal spray vaccine which you new evidence on the biological
after birth as a way to improve would take easily in place of a jab. complications of dental implants
breastfeeding practices. According Only time will tell what this vaccine and the great challenges.
to the Centre for Disease Control does to the human system. While dental implant therapy
and Prevention (CDCP), immediate remains an
skin-to-skin contact between the CAN SALIVA TEST INDICATE
mother and child is associated with FUTURE HEALTH RISK?
longer duration of breastfeeding.
COMMON COLD:
S eems too good to be true;
lets not get carried away. The
antibodies against external invaders
UNCOMMON are secreted mainly in the saliva, gut
BREAKTHROUGH and the eyes. Measuring the levels
R espiratory syncytial virus (RSV)

is the usual culprit for common
cold in infants, young children
of IgA (Immunoglobin A) antibodies
might give us an idea about
the status of the bodys defence
and elderly people. This could mechanism. important treatment modality to
lead to pneumonia and respiratory IgA secretion rate was negatively replace missing teeth, these studies
infection. associated with all-cause mortality. also underscore the importance
Further analysis revealed an of tooth preservation in patients
underlying association with cancer susceptible to gum infections such
mortality and, in particular, with as periodontitis. The caution is that
non-lung cancers. Low levels of careful assessments and treatment
antibodies in saliva appear to planning amongst dental generalists
indicate a greater risk of mortality and specialists should be performed
and could be an early warning sign, to optimise the clinical decision-
according to research published in making for patients receiving
PLOS ONE. However, There are advanced reconstructive implant
a number of factors that can affect or periodontal therapy, said JDR
A new study from The Imperial how well we produce antibodies editor William Giannobile. We
College (London) has discovered and maintain their levels. There believe the outcomes of these
that there are special immune cells are some that we have no control studies will be beneficial to patient
that prevent, or protect against, over, such as age, heritability or care and oral health.
BM Hegde.indd 3 11-01-2016 20:20:48

YOU BE THE JUDGE BAPOO MALCOLM
Punishment for neutralise the threat. Here, one is reminded of Gilbert

& Sullivans Mikado. It has a delightful piece called
Let the punishment fit the crime. In the same way,
Honest Mistake let the response suit the danger. No more. Shooting
several times, through a locked door, not stopping on
hearing screams, is definitely an over-reaction, even to a
The law allows a lot of leeway supposedly perceived threat.
A mans home is his castle. He can, and must,
E
vent 1: A boy of 15 is offered a choice of protect it with any means at his disposal. Brave words,
presents. An Agfa camera or a Diana air rifle. quoted by many. Yet, bravado must not blinker sense.
The father prudently advises against the camera, To be sure, the time between threat and response is,
photography being an expensive hobby. It is early 1957. often, a micro second. Reflexes outrun rational thought.
One day, the boy wants to discharge the only pellet One shoots first and asks questions later. That could
in the gun. He casually aims it at a metal corrugated lead to trouble.
door. He fires. The bullet ricochets and hits the father, What should a person do under such difficult
standing next to the boy, in the chest. Fortunately, little circumstances? Unfortunately, there is no formula; there
damage is done: except a birth-mark. The father sets never will be. The normal answer, to a sudden fraught
the boy down and tells him a story. situation, is reaction. If attacked, an unarmed man
Event 2: This is his story.
y. A kid of 10 years, will raise his hand in self-defence. He may take
son of the fathers friend, wasas fond of shelter behind a tree or a wall or under a table.
the game of darts. Innocent fun. He may turn about and run, if the situation
The board was hung on a door oor permits
perm and he is capable.
curtain, separating two rooms ms Or he may hit back. Its this
in the home. One day, the boy oy hitting back, and the intensity
h
throws a dart. His sister, entering
tering the room, of the counter-attack, that
shifts the curtain. The dart penetrates her weighs in court. And, if the
eye. She is blinded, in that eye,
ye, for life. defendant is proved to be
Event 3: A world-renowned ned athlete short of temper or prone to
deified for his disability, a grown-up
rown-up man, aggression, the scale will not
fires his high-powered rifle into
nto a closed tilt in his favour.
bathroom door, of his own home. The The law distinctly allows
gun is aimed at the toilet. Thehe shots for a genuine mistake. It also
kill his girlfriend. He claimed d allows for an exaggeration
that he thought his girlfriend d of the threat, if it is unseen
o
was in bed at the time and or unfathomable. If the attack
he mistook her for an intruder. The trial court finds him is in the dead of night, one cannot gauge the danger. Is
guilty of culpable homicide. It means death without the attacker bare-handed or armed? If armed, does he
intent to kill. Minimal punishment. have a gun or a knife? Is he alone or with someone?
You be the judge. Or are there many? Thought, at the speed of light,
Event 1 saw, thankfully, small damage. Moreover, may be too slow. Quicksilver response is the need of
the law was not as developed then as it is now. Event 2, the hour; rather, of the split second. Preservation is
the kid was too young to foresee the danger, though his the overwhelming emotion. In such cases, the court
parents should have. Family matter; end of story. understands.
Event 3 saw ups and downs. In an appeal preferred A word of caution, though. Do not take the court
by the South African state, the man is convicted for granted.
of murder. The verdict hinged on the Doctrine of
Intent, in the form of dolus eventualis, or manifest
intention, or reasonable knowledge, that an action
would have necessary consequences. The law allows Bapoo Malcolm is a practising lawyer in
one to protect his life and property; but not rashly. The Mumbai. Please email your comments to
mail@moneylife.in
reaction to the threat needs be measured. It must be
just enough to protect oneself, disarm the aggressor or
You Be the Judge.indd 2 13-01-2016 18:00:19

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He is currently the vice-chairman of
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BOOKS
LEFT BRAIN, RIGHT STUFF to take advantage of our behavioural flaws buy nudging
us to do the right things. (Britain has an official Nudge
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Better Decisions In his 2007 book, The Halo Effect, Phil Rosenzweig
addressed how our biases find their way into studies of
Why business leaders cant learn from business performance, leading us to glorify successful
behavioural research companies. His 2014 book, Left Brain, Right Stuff: How
Leaders Make Winning Decisions, details the enormous
C
ognitive biases leading to human misjudgement influence of decision research in domains from finance to
and errors have emerged as a major area of study public policy but notes that business leaders havent taken
over the past decades. Behavioural research advantage of it. The book explores the many reasons for
experiments, under which humans have been put through this. For instance, while it is easy to condemn a decision
systematic analysis and investigation under controlled and that fails, it is hard for experts in decision-making to
naturalistic observation, have shattered the illusion that our suggest what the business leaders should do in real-life
decision-making is rational. situations, to avoid disastrous decisions.
Biases, such as following Indeed, it is not possible to apply most of the experiments
the herd, overconfidence, from which we learn about our cognitive biases, in high-
fear, greed, etc, lead us stakes business situations such as a takeover or bidding
to making gross errors in for a big new project. These experiments (would you have
judgement all the time, no $90 for sure or a 90% chance of getting 100% and 10%
matter how sophisticated chance of nothing) are not only simplistic but also, we
our knowledge base. The cannot alter the terms of the deal. If you could, the decision-
entire global financial crisis making would become infinitely more complexexactly
was a live example of such what happens in the business world.
a misjudgement on a global Also, what behavioural science suggests we do to
scale. Our realisation, improve ourselves is difficult for business leaders to apply.
that irrationality of One idea is deliberate practiceimprove yourself through
decision-making in action, feedback and adjustment. This can work for simple
certain circumstances is tasks of life, such as memory games or musical instruments,
LEFT BRAIN, RIGHT STUFF the norm, has spawned but it is tough to apply in business situations, since feedback
PHIL ROSENZWEIG many interesting books, from a crucial action can come years later. Rosenzweig has
Hachette fetched Daniel Kahneman many real-life cases and advice on what to do in certain
Pages 322 pages; Rs399 a Nobel Prize and led to situations. They are all eye-opening and challenging. A
even policy prescriptions very useful read. Debashis Basu
JOHN BOGLE ON INVESTING investment newsletters, etc, have not been able to beat the
benchmark index returns. He, thus, builds the case for
Industry Legend Speaks investing in index funds. The section explains that risk
keeps on moderating as the time horizon for investing
J ohn Bogle is an institution in the US financial market.

He is a true pioneer, having created index funds (under
the Vanguard label) and having led a lifelong battle for the
increases, while time magnifies the impact of costs.
The second part deals with the past trends and future
prospects
p p of the mutual fund industry, emphasising the
small investor by advocating low-cost funds. He importance of keeping fund costs down. It moves
has also been a powerful writer; his books are now on to corporate governance issues and explains
being re-issued as investment classics. John Bogle the role of mutual funds on corporate governance
on Investing: The First 50 Years offers insights of companies they invest in. The book also deals
into his guiding principles. It consists of the most with the evolution of Vanguard mutual fund and
important essays organised into five sections. the challenges faced by Bogle in creating it. It ends
The first deals with investment strategies for with the economic role of investment company,
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investing. It argues that experts like fund managers, industry to shame. Ram Bhimani
Book Review.indd 2 14-01-2016 22:44:43

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Book Ad.indd 1 31-10-2015 12:24:40

MONEY FACTS STOCKS
INDIAN MARKET TRENDS FUND FLOWS

The Sensex and the Nifty were down 5% each during the Foreigners: Foreign institutional investors were net
fortnight ended 13 January 2016. ML Mega-cap Index, ML sellers of stocks (Rs5,486.87 crore). They sold shares
Small-cap Index and ML Large-cap Index were down 5% worth Rs33,375.59 crore.
each, while ML Mid-cap Index was down 6%. 0
Share prices, July 2015=100 -265
130
-530
-795
FII Net Investments
(Rs Crore)
115
-1,060
-1,325
4 Jan-16 13 Jan-16
100
Indians: Domestic institutional investors were net
buyers of stocks (Rs3,222.85 crore). They bought
shares worth Rs15,744.37 crore.
85 1,015
Jul-15 Oct-15 Dec-15
765 DII Net Investments

ML Large-cap ML Small-cap Nifty ML Micro-cap (Rs Crore)
ML Mid-cap ML Mega-cap Sensex
515
265
Index 01-Jan 13-Jan +/-
ML Micro-cap Index 118.24 123.82 5% 15
ML Mega-cap Index 98.47 93.94 -5%

-235
Sensex 26,160.90 24,854.11 -5% 4 Jan-16 13 Jan-16
Nifty 7,963.20 7,562.40 -5%

ML Small-cap Index 111.96 106.14 -5%
GLOBAL MARKET TRENDS
ML Large-cap Index 112.68 106.74 -5% 4,090
ML Mid-cap Index 108.76 102.33 -6% 3,860 Shanghai Composite
Mega-cap Gainers/Losers 01-Jan 13-Jan Change 3,630
Torrent Power 180.75 237.55 31%

3,400
IDBI Bank 89.90 70.30 -22%

3,170
Large-cap Gainers/Losers 01-Jan 13-Jan Change
2,940
Jul-15 Oct-15 Jan-16
Balrampur Chini Mills 72.05 87.85 22%
Marksans Pharma 104.60 75.80 -28% The FTSE, Nikkei and S&P 500 fell 5%, 7% and 8%,
respectively. NASDAQ and Bovespa declined 10%
Mid-cap Gainers/Losers 01-Jan 13-Jan Change
each, while Shanghai Composite tumbled 17%.
Dalmia Bharat Sugar & Inds 65.05 75.75 16%
Index 01-Jan 13-Jan +/-
Ess Dee Aluminium 264.30 173.45 -34%
Korean Composite 1,961 1,916 -2%
Small-cap Gainers/Losers 01-Jan 13-Jan Change FTSE 6,242 5,961 -5%
Arrow Textiles 33.55 56.75 69% Taiwan Weighted 8,338 7,825 -6%
Nikkei 19,034 17,716 -7%
Piramal Phytocare 118.35 87.20 -26%
S & P 500 2,044 1,890 -8%
Micro-cap Gainers/Losers 01-Jan 13-Jan Change
Hang Seng 21,914 19,935 -9%
Texmo Pipes & Products 16.40 28.23 72% Nasdaq Composite 5,007 4,526 -10%
Valecha Engineering 53.45 39.75 -26% Bovespa 43,350 38,944 -10%
(All Prices in Rs) Shanghai Composite 3,539 2,950 -17%
Money Fact.indd 2 14-01-2016 22:45:50

MONEY FACTS STOCKS
Whats H T

Sugar companies were in demand during the fortnight. Balrampur Chini
Mills, KM Sugar Mills, Oudh Sugar Mills and Rana Sugars advanced 22%,
ML SECTORAL TRENDS
Shares of sugar companies and
refineries were up 6% and 4%,
20%, 16% and 15%, respectively.
respectively, while shares of oil &
gas services companies and airlines
Companies 01-Jan 13-Jan +/- companies ended flat. Stocks of
ML Sugar Index Balrampur Chini 72.05 87.85 22% construction, engineering and
infrastructure companies and
175 KM Sugar Mills 5.21 6.25 20%
telecom services companies declined
Oudh Sugar Mills 36.65 42.35 16% 10% each.
150
Rana Sugars 4.26 4.91 15%
Triveni Engineering 46.40 53.05 14% ML Sectoral Trends

125 Sugar 6% Con_EPC_Infra -10%
Dwarikesh Sugar 101.90 113.90 12%
Sakthi Sugars 34.10 37.35 10% Refineries 4% Telecom Services -10%

100 Oil & Gas Services 0% Printing & Publishing -10%
Rajshree Sugars 32.45 35.50 9%
Airlines 0% Trading -9%
KCP Sugar & Inds 27.60 30.15 9%
75 Glass -1% Packaging -9%
Bannari Amman 1,061.75 1,159.65 9%
Jul-15 Oct-15 Jan-16
All Prices in Rs

URBAN INFLATION
Whats N T Combined inflation for urban and

rural areas increased to 5.61%
Construction, engineering and infrastructure companies tumbled. Valecha
Engineering and Shriram EPC fell 26% and 18%, respectively. Supreme in December 2015, from 5.41%
Infrastructure India and Vascon Engineers declined 16% each. in November 2015. Inflation in
urban areas increased to 4.73%
Companies 01-Jan 13-Jan +/- in December, from 4.71% in
Valecha Engineering 53.45 39.75 -26% ML Con_EPC_Infra Index November. Food inflation in urban
areas declined marginally to
Shriram EPC 35.45 29.05 -18% 110
6.05% in December from 6.30%
Jaiprakash Assoc 12.40 10.20 -18%
in November. In urban areas,
Supreme Infra India 148.10 123.80 -16% 100
Vascon Engineers 36.80 30.80 -16% Inching Up

90
Tantia Constructions 27.80 23.45 -16%
6%
Welspun Enterprises 63.90 54.20 -15%
80
ABG Infralogistics 165.30 140.50 -15% Annual Change
Unity Infraprojects 16.55 14.10 -15% 4%

70
Adani Ports 267.55 230.20 -14% Jul-15 Oct-15 Jan-16
All Prices in Rs
2%
BULK DEALS Dec-14 Jun-15 Dec-15
Date Company Buyer Seller Rs Cr prices of vegetables increased

13-Jan-16 Rajapalayam Mills PV Abinav R Raja The Ramco Cements 25.44
by 5.67% since last year.
Inflation related to fuel & power
08-Jan-16 Aptech Sameer K Koticha Ask Sec Advisory Serv Pvt 5.02
increased marginally, to 2.65%, in
08-Jan-16 PPAP Automotive Smart Commotrade Pvt Vinay Kumari Jain 2.64 December. Inflation for housing
11-Jan-16 Intellivate Capital Ventures Team India Managers Vipul Jayantilal Modi 2.50 increased marginally to 5.06%.
Inflation for clothing hovered
08-Jan-16 Intellivate Capital Ventures New Berry Advisors Vipul Jayantilal Modi 2.50
around 4%; for miscellaneous
04-Jan-16 Intellivate Capital Ventures Team India Managers Vipul Jayantilal Modi 2.50
items, it increased to 2.91% in
11--Jan-16 National Fittings Vinithra Sekhar Ojas Consulting Pvt 0.72 December.
Money Fact.indd 3 14-01-2016 22:46:02

BEYOND MONEY
Equal Access for An office in the heart of Pune is the nucleus of its
diverse activities. EKansh conducts workshops at colleges
of management, design and communication, to sensitise
the Disabled people. It has story and colouring books for children in
schools so that they grow up as sensitive adults. The Pune
EKansh Trust believes that the first step Municipal Corporation (PMC) has printed its colouring
towards inclusion of people with disabilities is books for PMC schools. Many other private schools are
adopting its story books for their students. EKansh also
creating awareness works in slums and semi-rural areas spreading disability
awareness through anganwadi workers.
A
s a child, I had watched a group of men who However, awareness and sensitising is not the whole
were hearing-impaired signing animatedly story. Anita adds, This work for people with disabilities
outside the park in Mumbai that I used to led to many candidates approaching us for jobs. We
frequent with my grandfather. It had always fascinated conducted our first job fair for them, in 2010. Weve
me. It stayed in my memory and, when I moved from had two such fairs, in 2013 and 2015, in which all major
Gurgaon to Pune, I set up a group and decided to teach equal opportunity employers participated. We believe, we
hearing people to sign (using sign language) so that we have changed mind-sets in the corporate world and among
can communicate with the deaf. people with disabilities too. They now
At different times in my life, my aspire for bigger and better things,
husband with his broken foot, the just like everyone else. However,
two of us with our baby daughter in a with their basic education and
stroller and my grandmother with her training being substandard, thanks
illness in her last days, all struggled to archaic methods of teaching,
with the physical infrastructure in their employability levels suffer.
India. The condition and design of We conduct training programmes
built-up spaces, including footpaths, for them in basic English language
public areas, parks, etc, are not really communication, soft skills and
people-friendly. The last straw was computer operations.
when my grandmother could not EKanshs future plan is to have
use her wheelchair in the lift of the a full-fledged, well-equipped, state-
building because it was too small. of-the-art training centre for people
She had to undergo the indignity of with disabilities. It is not only about
being taken down three floors on computers, but also other employable
a makeshift stretcher, says Anita skills. Anita feels that scribes scoring
Narayan, founder and managing on behalf of candidates, who are
trustee of EKansh Trust, musing visually or physically challenged, is a
about the factors that motivated trend that should not be encouraged.
her to set up the Trust along with Bhakti Karia (a silent She proudly continues with her ambitious goals by saying,
partner). We need to ensure that candidates are well qualified so
EKansh works for people with physical/mobility and that equal opportunity does not mean allowances. Often,
sensory impairments in several ways. People with disabilities we are asked to focus on low hanging fruit; it is not just
are entitled to the same courtesies you would extend to offensive but also discriminative. We are here to help those
anyone, including personal privacy. Their simple message who are denied help elsewhere.
is: If you find it inappropriate to ask people about their However, funding is a constraint at EKansh and Anita
sex lives, or their complexions, or their concludes by saying, We hope a patron
incomes, extend the courtesy to people with deep pockets and a big heart will
with disabilities. It works at making come forward to fund such a training
this happen through advocacy for equal centre and partner with us so that we
EKANSH TRUST
access for people with disabilities as Amit Samruddhi 2 floor,
nd are able to rope in the best trainers in
well as early intervention, education, Jungli Maharaj Road, the country and equip our candidates
employment, entertainment, recreation, Pune -411004, Maharashtra with all the skills they need to progress
legal and medical aid. Telephone: 020-30241273 in life.
Mobile: 09503715015
Email: info@ekansh.org
Web: http://www.ekansh.org/
Beyond_money.indd 1 14-01-2016 21:44:39

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Registration No: MCW/184/2015-2017. POSTED AT PATRIKA CHANNEL
SORTING OFFICE, MUMBAI 400001. Date of Publishing Alternate Friday.
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