Finapolis june 2016 by The Finapolis

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Sankaran Naren of ICICI Pru AMC talks markets

Avoid these Five LinkedIn Mistakes

The Big Question for Apple and Tim Cook

Finapolis The

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1st June 2016 `60

Your Personal Finance Advisor

Rainfall Returns Good news for our farmers, our economy and our stock market

JUNE 2016 l The Finapolis The

EDITOR’S DIARY

Your Personal Finance Advisor

Volume 10

Issue 03

June 2016

Editor Mandar M Bakre editor@thefinapolis.com

Editorial Board Phani Sekhar Amit Saxena KP Jeewan Jagannadham T

Design & Production Vijayendra Kumar Ch Kerthi Saikumar

Rain, fall!

n Marathi, my mother tongue, there is a nursery rhyme that goes:

Ye re ye pausa, Tula deto paisa, Paisa zhala khota, Paus aala motha!

The first two lines invoke Rain to fall, with an offer to ‘pay’ for rainfall. The next

two say the offer was useless, because it rained heavily, anyway. The lines encapsulate the irrelevance or powerlessness of man against forces of nature.

Advertising & Circulation Shabna R Iyer Anamika Mitra Vijayendra Kumar Ch

As the Finapolis went to press, that song had been playing in my mind daily with alarming regularity. For me, it also highlighted the vagaries of nature. In April, the IMD had declared 106% rainfall with an onset from the middle of May. But as the weeks went by, and the IMD map (carried on Page

For Ad Sales Queries subscriptions@thefinapolis.com

Printed & Published by Mubashir Ansari on behalf of Karvy Consultants Limited. Karvy House, 46 Avenue 4, Street 1, Banjara Hills Hyderabad - 500 034. AP.

19) turned less ‘blue’, Rainfall Returns looked too optimistic for the cover. Until, that is, the rains finally rolled in. Beyond the cover story, we look this month at a specific side-effect of our country’s growth. India weakens as it urbanises, as healthy diets are replaced with processed food that offer a lot of the desired taste and none of the required nutrients.

Printed at Kala Jyothi Process Pvt. Ltd Regd.Office: 1-1-60/5 RTC Cross Roads, Musheerabad, Hyderabad - 500 020. AP. SVPCL Limited Regd.Office: 206/A, Concorse 7-1-58, Greenlands, Ameerpet Hyderabad - 500 016. AP. Published for the month of June 2016 Printed on June 1, 2016 Total No. of pages 68

All charts and tables are sourced from Bloomberg, unless otherwise indicated.

Our two-part series on the issue takes off from a 1987 study that tracked nutrition provided to newborns and mothers in villages around Hyderabad. The series will conclude next month. Tim Cook came to India, and landed, via a picture snapped outside the Taj Mahal Hotel, onto our Newsmaker page. Meantime, the question continues to brew: What will Apple do next? We look at what’s in store. Two specific political events dominate the global discourse at the moment: Brexit and the US presidential campaign of Donald Trump. We cover both, but remain unsure which could prove more destructive for the global policy regime. As usual, your Finapolis has more to offer: The lighter, Etcetera feature points you towards safaris beyond Africa, while the Chartist throws light on disability in our country and lists jobs suitable for the disabled, as suggested in a report sponsored by the NITI Aayog.

For Editorial Queries Please contact The Finapolis Karvy Centre, 8-2-609/K, Avenue 4, Street No.1, Banjara Hills, Hyderabad-500 034 Tel: +91 40 66072560 Copyright The Finapolis. All rights reserved throughout the world. Reproduction in any manner is prohibited. The Finapolis does not accept responsibility for returning unsolicited manuscripts and photographs. All unsolicited material should be accompanied by self addressed envelopes and sufficient postage.

A reader writes in with his review of American Icon, a book on the turnaround at Ford Motor; the Variety page asks you about painters and tells you about jalebis; and we discover that the decision between stocks and mutual funds is not unlike a decision between a car or a bus for a journey. Happy Reading!

Mandar M Bakre

The Finapolis l JUNE 2016

CONTENTS r Covey Stor

onwards

Happy Days Are Here Again The Rains Bring Cheer to Everybody

Gain from the Rain Stock Recommendations

26 Urban Effect The first of a two-part series es that looks at the decline in Indiaâ&#x20AC;&#x2122;s health as it urbanises es

31 Face To Face ce

COLUMNS

Sankaran Naren, n, Fund Manager, er, ICICI Prudential al

N Naveen Kukreja How many savings H aaccounts should yyou have?

A Shankar Smart Cities need Smart Citizens

Peter Schiff Donald Trump gets one thing right

44 4

Adhil Shetty The advantage of investing through SIPs

JUNE 2016 l The Finapolis

WE ARE DIGITAL

Contest Winners The three who come out on top

Money Chat An independent businessman gets sound advice

38 Brexit

The stakes are global as Britan votes

With the proliferation of smartphones and tablet devices, reading habits are slowly but surely changing. We understand the importance of giving readers a cross-platform choice to access the magazine. The Finapolis is now available in a digital avatar as well via a global publishing platform such as Magzter and Indiamags. Besides allowing you to read on the go, the digital version offers an enhanced reading experience. It also eliminates delivery delays. You can download the digital magazine on the first day of every month. Go to www.magzter.com, Indiamags.com or Rockstand mobile app, search for ‘The Finapolis’, sample some pages of the digital magazine, and buy a subscription through your netbanking or credit card account. A one-year subscription for The Finapolis digital costs only Rs 540. You need to have a device that runs on Apple’s iOs, Android or Windows 8 operating system. Do let us know what you think of the digital experience by writing in to feedback@thefinapolis.com

Buy on

ETCETERA

Safaris Beyond the African Usual

facebook.com/TheFinapolis

linkedin.com/company/karvy

The Finapolis l JUNE 2016

inbox Query resolved It was nice to see my question asked and answered in the Finapolis and reading the answer has helped me to make an informed choice for saving investment. Thank you to Col. Sanjiv Govila for shedding light on the same. — Ruchi Talwar, Thane

Annual Issue Responses The second annual issue was really nice to read. The articles told us what these leaders think and want to do for India. I liked Prithvi Haldea’s many dreams very much. He is very right when he says that we need to limit corruption and strengthen our political processes. Also, Chandra Shekhar Disclaimer: The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The

Ghosh’s article served as a good reminder of how much further we need to go in developing a financial ecosystem to which everybody can have access. — Proneeta Roy, Kolkata

information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we

***

consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their

The second annual issue of the Finapolis was very nice. It was good to see the leaders pick their article and tell us their views. In particular, I found the articles focussed on finance to be very articulate and clear-headed. The cover was also very exciting. — Cyrus Talati, Mumbai

specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned

***

in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any

The Finapolis selected nice theme for its annual issue. I liked reading the

associate companies of Karvy accepts any liability arising

articles. However, I missed seeing the first annual issue. Please upload the

from the use of this information and views mentioned in

same online.

this document. The author, directors and other employees

— Jatin S, Vadodara

of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every

Editor’s Note: Thank you Jatin, we are happy to hear your views. We are

employee of Karvy and its associate companies is required

currently redesigning our online footprint, and the issue will be online soon.

to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering

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corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities

There was a lot to read and learn in your second annual issue. I liked

till such a time this recommendation has either been dis-

Mr Parthasarathy’s article (Bharat in Full Bloom) for its focus away from

played or has been forwarded to clients of Karvy. All em-

finance and on rural India, to which we give little focus in our daily life.

ployees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restrict-

— Atul Rastogi, Hyderabad

ed audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Send your feedback and views on The Finapolis to feedback@thefinapolis.com

JUNE 2016 l The Finapolis

 MOVING FORWARD

RATE WATCH Markets sensing Fed rate hike in June

Govt kicks off divestment process The Department of Investment and Public Asset Management kicked off the divestment process in the second half of the month, with reports that it had approached merchant bankers to assist in the sale of minority stakes in state-owned companies. The government aims to collect ~Rs 6,400 crore by end of September this year and has lined up sale of stakes in State Trading Corp, MMTC, NMDC, Oil India, National Fertilizers and Rashtriya Chemicals and Fertilizers. The department is expected to offer 15% stake in STC, MMTC

and National Fertilizers, while 10% stake will be offloaded in NMDC and Oil India, whereas RCF will see divestment of a 5% stake. Meanwhile, shares of Indian Renewable Energy Development Agency (IREDA) and Housing & Urban Development Corporation (HUDCO) are also expected to be available as part of the divestment process, as both companies have approached the department for approval. The sale of shares in these two companies could raise an additional Rs 2,000 crore for the government.

May has seen a turnaround in US rate hike expectations. Minutes of the April meeting, released by the Fed in May, revealed that the central bank was considering increasing interest rates in June. Most participants in the Fed’s policy-setting committee meeting of April 26-27 said that they wanted to see signs that economic growth in the US was picking up in the second quarter, and that employment and inflation were firming up, according to the minutes released by the central bank on May 18. “Then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” the minutes noted. However, St. Louis Fed President James Bullard said towards the end of the month that although labour data suggested it was time to increase rates, an increase in June or July wasn’t set in stone.

UNDER CONSIDERATION Govt seeks to create land bank from surplus PSU holdings The government is examining the possibility of forming a land bank using surplus holdings across public sector units. A committee under Economic Affairs Secretary Shaktikanta Das is in the process of forming an inventory of land holdings, in coordination with the urban development ministry. It is expected to submit its report to the PMO by June. The committee will allow PSUs to keep land that could be used for strategic or other growth purposes. Defence land would remain outside the committee’s purview. “Land

will be sold only after it is established that the government companies need not hold on to it,” Das told reporters. The end-use of the parcels to be auctioned will be specified beforehand, he added. “If it is decided that an industrial

park has to be set up then land will be auctioned for solely that purpose,” he explained. Finance Minister Arun Jaitley had hinted at the possibility of selling PSU land in his Budget speech. “We will encourage CPSEs [Central Public Sector Enterprises] to divest individual assets like land, manufacturing units, etc. to realise their asset value for making investment in new projects,” Jaitley had said. The move towards a land bank comes after the government failed to clear the land acquisition bill.

The Finapolis l JUNE 2016

 BRIEFLY

BANKING ON BIG

L&T Infotech gets Sebi nod for initial public offering

State Banks to become one

The Securities and Exchange Board of India has approved the initial public offering (IPO) of L&T Infotech Ltd. The company had filed its draft red herring prospectus in April. The company will offer up to 17,500,000 equity shares.

Syndicate Bank to raise Rs 4,300 crore Syndicate Bank will seek to raise more than Rs 4,300 crore in FY17. According to a filing by the bank, its board approved raising equity of Rs 1,700 crore by way of qualified institutional placement/ rights issue/ preferential allotment, up to Rs 1,000 crore of Basel-III complaint tier-I bonds and Rs 1,600 crore of tier-II bonds in FY17. The bank had raised provisions towards bad loans and contingencies to Rs 2,411.83 crore in the last quarter of 2015-16.

Emergency number 112 to go active from Jan 2017 India is getting a national emergency number soon. The government has selected 112 to become operational from January 1, 2017. 112 will be a single point of contact to ask for help from the police, fire, ambulance and other related services.

State Bank of India is moving towards merging its associates with itself. “The proper merger will consolidate our group, make us more efficient and will be of great value to our all stakeholders,” SBI chairman Arundhati rundhati Bhattacharya told reporters. SBI has notified its associate ociate banks about the merger at their respective board meetings. The unification of SBI was initiated ed in August 2008, when SBI merged the State Bank nk of Saurashtra with itself. The second merger ger (with State Bank of Indore) happened in 2010, 010, but the parent received strong opposition on from employee unions. SBI’s five remaining ning associates that will be merged with the parent are State Bank of Bikaner and Jaipur, r, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank nk of Travancore. SBI will also merge the newwly-formed Bharatiya Mahila Bank with itself.

Banks Board chief bats for mergers Vinod Rai, head of the newly-created Banks Board Bureau, signalled in May that Indian banks would need to merge. Well-performing larger banks could tie up with one another, Rai said in an interview, while adding that smaller, troubled lenders could be acquired or taken over after they had been recapitalised. Specifically, Rai mentioned Bank of India, UCO Bank and Indian Overseas Bank (IOB). He said that Bank of India — the country’s third-largest public sector lender — would not be considered a merger candidate until it was recapitalised. He said the Kolkata-based UCO

Bank, which has a large presence in eastern India, would be “re-energised” and not merged, whereas IOB, which has a large branch network in southern India, could be absorbed by another bank seeking to take advantage of IOB’s branch locations. The BBB was set up in April to oversee an overhaul of the banking sector, including the clean-up of balance sheets. It is subsequently expected to into an investment holding company for public-sector banks. Reserve Bank of India Governor Raghuram Rajan has set a deadline of March 2017 to clean up the sector.

“An “Another month, another record… At the current rate of increase in CO2 levels, we are on track to reach the 2 degrees Celsius temperature limit lev within the next two generations” wit — Petteri Taalas, Secretary-General of the World Meteorological Organisation, after April 2016 become the 12th consecutive month to break global t temperature records. The combined average temperature over global land and ocean sur surfaces for April 2016 was 1.10°C above the 20th century average of 13.7°C, the highest since global records began in 1880.

Quote of the month

JUNE 2016 l The Finapolis

 NPPA INSTRUCTION Cancer, BP plus 52 essential drugs get price cut The government in May reduced the prices for 54 drugs, including medications commonly used to treat cancer (brain and breast), diabetes, hypertension or blood pressure, antibiotics and other heart disorders by up to 55%, newspapers reported. In a notification issued by the drug pricing regulator National Pharmaceutical Pricing Authority (NPPA), manufacturers, distributors and retailers were ordered to implement the ceiling prices with immediate effect. On April 28 as well, the government had issued notification to reduce prices on another 54 drugs. NPPA Chairman Bhupinder Singh said the instructions to reduce prices were aimed at bringing down prices of drugs commonly used for treatment of critical diseases. The 54 drugs whose prices were reduced in May are part of the revised National List of Essential Medicines, 2015. In De-

cember last year, the Union health ministry had issued a new list that expanded price control to 875 medicines from 684

medicines earlier. The NPPA has so far capped prices of 280 new drugs which are part of the revised list.

STOCK TALK

MF UPDATE

Indian life insurance companies are looking to get listed

Four lakh folios were added in April

Two of India’s largest private life insurance companies may be heading for a listing, according to news reports. ICICI Prudential Life is set to hire Bank of America Merrill Lynch and ICICI Securities for its IPO, which is expected to raise up to Rs 4,660 crore in size, according to a Thompson Reuters report. The report also said that HDFC Standard Life would hire Citigroup, JPMorgan, Kotak Investment Banking and Morgan Stanley to handle its IPO of up Rs 3,330 crore. Meantime, SBI Life, owned by public sector State Bank of India could announced an IPO this financial year, its chief executive said. India’s life insurance market is dominated by state-owned Life Insurance

Corp of India, but over two dozen private players also compete in an underpenetrated market. Most private insurers are joint ventures between Indian companies and foreign partners. Foreigners can own up to 49% stake in the ventures.

Fund houses across the country added 4.08 lakh folios during April, according to data released by the Securities and Exchange Board of India (Sebi). The additions were supported by the strong performance of equity funds and steady inflows from systematic investment plans (SIPs). Equity schemes recorded a net inflow of Rs 4,438 crore in April. According to the data from Association of Mutual Funds in India (Amfi), the mutual fund industry recorded in April recorded net inflows of Rs 1.70 lakh crore overall, owing to inflows into liquid and income funds.

The Finapolis l JUNE 2016

 news scan CLICKBAIT Tatas enter e-com, joining Mahindra, Birla and Reliance The Tata Group entered the Indian e-commerce market in May, launching online shopping website Tata Cliq. The website will offer apparel, footwear, electronics and jewellery from Tata companies as well as external brands and, according to Tata executives, took a year and a half to develop. Tata’s entry is in line with the development of the Indian e-commerce marketplace: as the market seems to have reached ‘critical mass’, India’s legacy business houses have turned their attention to the opportunity. Mahindra and Mahindra, the

Aditya Birla Group and Reliance Industries are among those who have entered the fray recently. They join start-ups such as Flipkart and Snapdeal, and international biggies like Amazon and the planned entry of China’s Alibaba in a competitive marketplace. India’s e-commerce market will touch $220 billion by 2025, according to Bank of America Merrill Lynch, while Goldman Sachs has forecast that the market will reach $ 300 billion by 2030. Tata said the focus of its e-commerce ven-

ture would be profit margins and unit economics, not volumes. “We don’t want to get into the discount wars,” Ashutosh Pandey, CEO of the website. He added that the portal would be a “phygital” (physical-cum-digital) marketplace that would blend the online and in-store shopping experience for customers through connections with Tata’s physical retail stores Westside, Star Bazaar and Landmark. Under this model, customers can buy products online and pick up their purchases at the nearest physical store, or make returns at the store, etc.

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JUNE 2016 l The Finapolis

 newsmaker TIM COOK

Tim Cook became the first Apple CEO to visit India. Over four hectic days, he inaugurated an iOS app development unit in Bengaluru and a map development unit in Hyderabad, talked shop with the prime minister and India Inc., hobnobbed with Bollywood biggies, and paid homage at two of the country’s most revered shrines: the Siddhivinayak temple in Mumbai and a cricket pitch (he watched an IPL match at Kanpur). He will need all the blessings that he can be showered with: Apple’s sales are sliding, and India, a huge potential market, has rejected the company’s application to sell refurbished phones.

The Finapolis l JUNE 2016

We thank all participants for sharing their vision for India. After some deliberation — there is a very ﬁne line between those who won and those who have missed out — we found Shivani Rawat, Vaishak Chilkeshwaram and Tushar Patil had hit the mark. Congratulations to our three winners!

Contest Winner Shivani Rawat #DreamsForMyCountry #Contest i love my country and i want to contribute towards its improvement. there is so much poverty in india and people are uneducated. i personally teach the poor people for free. i want to make a school for them. i have started saving for these people. i am also an animal lover. there are several hungry strays who dnt even get food to eat. everyone should feed a stray atleast once a day. indians waste soo much food in functions and weddings. people should donate the extra food to poor people rather than throwing. there are so much ill in the country which i want to improve but this comment section is not enough to mention it. THANK YOU

Contest Winners VAISHAK_HUNK @KarvyFinapolis Where children r encouraged to experiment & learn practically which improves their cognitive skills #DreamsForMyCountry

TUSHARP75788052 @KarvyFinapolis WILL START FROM FARMERS. WILL SET THEIR PROFILES FOR CROWD FUNDING & DONATE WHATEVER MONEY I RECEIVE #DreamsForMyCountry

JUNE 2016 l The Finapolis

Notable Participants ANKIT_CHOUDHRYY @KarvyFinapolis #DreamsForMyCountry Educated ,young, dynamic and creative politician.

AGGARWALSK2002 @KarvyFinapolis #DreamsForMyCountry To have Poverty free, corruption free and scam free country. Along with ease of business and opportunity.

_CLEON23 @KarvyFinapolis #DreamsForMyCountry I dream of an India where the citizens keep their doors open and walk on roads at midnight with no fear.

HELLOLALIT @KarvyFinapolis #DreamsForMyCountry is to create safe & secure environment for children and women to pursue dream education or career.

THEYELLOWFISH @karvyfinapolis #DreamsForMyCountry Giving equal importance to all sports. Most of the sports are not given the needed attention.

MYSCRIBBLINGS @KarvyFinapolis to ensure we send maximum # of participants in any international sports event and any category #DreamsForMyCountry.

AJAY_2408 @KarvyFinapolis I dream of a society where ‘money’ is a term used for exchange, and not the only motive of life. #dreamsformycountry.

SHAHDAFFODIL @KarvyFinapolis #DreamsForMyCountry My Dream for India is to remove quota system for studies, jobs.

VAISHAK_HUNK @KarvyFinapolis That India should be the land of new Innovations instead of copying others like chinese development #DreamsForMyCountry.

DJSHIVAMANUJA @KarvyFinapolis India attracting more number of tourists with better protection & showcasing the country’s rich heritage #DreamsForMyCountry.

SHASHANKGADHE51 #DreamsForMyCountry @KarvyFinapolis My dream for country India is to see as developed Country and to become India as No.1.

The Finapolis l JUNE 2016

results update We take a look at some companies’ quarterly results to figure out what impact they will have on the share prices Dalmia Bharatt Dalmia Bharat’s Q4FY16 operational performance came significantly better than our consensus estimates. Revenue/ EBITDA of Rs 19.1bn/Rs 5.0bn mn came 18%/24% higher than our estimates primarily on account of higher than expected cement volume and lower than expected energy cost. Cement volume increased significantly by 65.8% YoY to 3.88 mt (higher than our estimate of 3.29 mt) led by led by consolidation of OCL India & ramp-up of recent-

Cadila Healthcare Cadila’s revenues grew by 7% YoY to Rs 24.5 bn (our estimate of Rs 25.5 bn) during the quarter. Tepid US performance offset strong nos in domestic formulations. Domestic formulations grew at 12.9% 9% YoY to Rs 7,674 mn, higher than our estimates of Rs 7,341 mn. US biz declined by 1.8% YoY to Rs 9,610 mn, lower than our estimates of Rs 11,143 mn. Latam grew by 1.1% YoY to Rs 553 mn as against our estimate of Rs 542 mn. Europe de-grew by

Current Market Price Rs 327 Target Price Rs 360 Potential Upside 10%

ly co commissioned Ka Karnataka Plant. H However, blende ed realisation d declined 10.8% Y (down 1% YoY Qo to Rs 4931/t QoQ) (in-li with our (in-line estimate of Rs 4946/t) on account of decrease in cement prices across its selling markets of south and east region. Total blended cost/ton declined ~15% YoY to Rs 3368/t, led by lower variable costs (primarily energy cost, which declined 39% YoY due to lower pet-coke prices). However, despite lower cost on YoY basis, blended EBITDA/

4.6% YoY to Rs 706 mn, while API busi business/Animal Hea grew by Health 6% 6%/2.6% YoY to R Rs 922 mn/ Rs 8 844 mn. The Comp pany’s EBITDA ma margins at 23.9% were higher than our estimates of 23.4% due to higher other operating income and lower material cost & overheads. Other operating income at Rs 736 mn compared to 411 mn in Q4FY15. Tax rate during the quarter stood at 24.3% (higher than our estimate of 20%). We downgrade our Revenues by 1.1%/1.6% for FY17E/ FY18E due to downgrade in ROW and Consumer business. We upgrade our EBDITAM by 80 bps for FY17E due to lower overheads while we maintain our EBDITAM for FY18E. We upgrade our EPS by 1.8% to Rs 17.9

Current Market Price Rs 853 Target Price Rs 1,130 Potential Upside 31% ton increased moderately by 4% YoY to Rs 1293/t (better than estimate of Rs 1226/t). We increase EBITDA estimates for FY17E/18E by 6-7% to factor in better margins led by marginal increase in realisation assumptions and lowering energy cost. Improvement in

for FY17 while we downgrade it by 1.8% to Rs 19.4 for FY18E. On account of better outlook we maintain our price target of Rs 360 based on 18.5x FY18E and our ‘HOLD’ rating on the stock.

Lupin Lupin’s revenues increased 35.8% YoY to Rs 41.8 bn in Q4FY16, higher than our estimates of Rs 36.5 bn, on back of better performance in US, Europe, Japan and India business. Performance in US formulations increased by 58.7% YoY to Rs 21.9 bn (higher than our estimate of Rs 16.5 bn) due to Glumetza and Fortamet. Europe grew by 40.7% YoY clocking net sales of Rs 1254 mn as compared to our estimate Rs 1042. Japan revenues increased by 17% YoY to Rs 3442 mn as against our estimates of Rs 3329 mn. South Africa revenues decreased by 7% YoY to Rs 1135 mn as against our estimate of

utilisation rates and reduction in debt leaves a high potential for operating & financial leverage benefits going ahead for DBL. With no major capex over the next 2 years, EBITDA is expected to grow at 17% CAGR during FY16-18E (led by 12% volume growth & margin improvement). We expect DBL’s net debt/ equity to come down to 0.9x in FY18E from 1.4x in FY16. The stock trades at 5.9x FY18E EV/ EBITDA and $82/t on FY18E capacity (~40% discount to replacement cost). We maintain Buy on DBL with revised target price of Rs 1130 (based on 7x FY18E EV/EBITDA).

Rs 1251 mn. Domestic formulation business grew by 14.7% YoY to Rs 7615 mn (below our estimate of Rs 7765 mn) compared to Rs 6637 mn in Q4FY15. We marginally upgrade our revenues for FY17E while be maintain are revenue for FY18E. We upgrade our EBITDAM by 120bps/40bps to 28.1%/27.1% for FY17E/FY18E respectively on account of better gross margins. We downgrade our EPS by 7.3%/10.6% to Rs 65.8/Rs 72.8 for FY17E/FY18E respectively. We downgrade to SELL with a price target of Rs 1602 based on 22x FY 2018E.

Current Market Price Rs 1,656 Target Price Rs 1,602 Potential Downside 3%

JUNE 2016 l The Finapolis

results update to Rs 59.5bn/7.5bn/4.56bn

We broadly maintain our

Ashok Leyland’s Q4FY16 opera-

as against our estimate of Rs

volume, revenue and EPS

tional performance was margin-

59.2bn/7.6bn/4.2bn in Q4FY16.

estimates for FY17E/FY18E.

ally higher than our estimates

Operating performance benefit-

Accordingly, we maintain our

with strong margin and bottom

ed from lower commodity price

target price of Rs 125, valuing

line performance. The compa-

and price hike, while

the stock at 18x FY18E EPS and

ny’s Revenue/EBIDTA/Adj PAT

lower non-vehicular sales

reiterate our “BUY” on ALL

grew by 32.2%/64.8%/93% YoY

restricted margin expansion to

with potential upside of 20%

and 45.8%/75.3%/126% QoQ

certain extent.

from CMP.

Ashok Leyland

Motherson Sumi Motherson Sumi Systems Ltd.

profitability of MSSL. With increasing content per car

Hero MotoCorp Hero MotoCorp’s (HMCL)

(MSSL) Reported strong perfor-

and value addition to its ts ex-

mance in Q4FY16 despite overall

isting product portfolio, o,

challenging environment and

both SMR and SMP re--

headwinds in domestic business.

ceived new orders in

estimates. Its

It’s consolidated Revenues/EBID-

FY16. At present total

Revenue/EBIDTA/

TA/adj PAT grew by 8%/17%/34%

new order stands at

adj PAT grew

YoY and 4%/9%/26% QoQ to Rs

over € 13 bn, which

102.3bn/10.6bn/4.2bn (our esti-

would help company to o

mate of Rs 101.8bn/10.1bn/3.6bn).

achieve its targeted annual nnual

Its EBIDTA margin expanded

revenue of € 12 bn before target-

11.8bn/Rs 8.14bn, as against

83 bps YoY and 52 bps QoQ

ed time of 2020. We believe that

our estimate of Rs 75.1bn/

to 10.4%, benefited by lower

ongoing slowdown in global auto

Rs 11.9bn/Rs 8.4bn in

commodity prices. Revenues

industry would impact MSSL’s vol-

Q4FY16. Company’s EBIDTA

at SMR grew by 7% YoY and at

umes over near term, while its 17

margins came slightly below

SMP by 1.9% YoY in Euro terms,

new plants becoming operational

our estimate at 15.7% (our

is commendable. Its standalone

over next 1-2 years would help

Est was 15.8%). Lower RM

revenue grew by 13.2% YoY and

negate the impact and record

cost lifted the margins.

healthy growth going forward.

Its EBIDTA margins rose

Out of these 17 plants, 7 plants

331 bps YoY and flat QoQ.

already completed and balance

Its RM/Sales fell 425 bps

10 plants would be operational in

YoY and 98 bps QoQ to

next 1-2 years.

66%. Company benefited

Current Market Price Rs 290 Target Price Rs 330 Potential Upside 14%

We increase our volume and

Q4FY16 performance was in line with our as well as street’s

10.6%/40.2%/28.9% YoY and 3%/3.1%/2.3% QoQ to Rs 75.1bn/Rs

from better product mix

revenues estimates by 1% for

within domestic motorcycle

FY17E/FY18E. We expect healthy

segment. Its tax rate was

operating margins and increase

also higher at 30%, up 507

our EBIDTA and PAT estimates

bps YoY/167 bps QoQ.

by 8.7%/13.2% and 2.1%/8.3%

Management indicated

14.4% QoQ, on the back of strong

for FY17E/FY18E respectively. Ac-

single digit volume growth in

PV sales and better traction from

cordingly, we increase our target

FY17 and expressed limited

high end models. Better oper-

price by 8.3% to Rs 330, valuing

ability to pass on any sharp

ating margins at SMR and SMP

the stock at 24xFY18E EPS. In

increase in cost. In view of

benefited overall EBIDTA margins

view of strong business profile,

intensifying competition,

in Q4FY16. SMR’s EBIDTA mar-

strong order book, improving

RM prices going up and

gins expanded by 190 bps YoY

margin profile and strong perfor-

single digit industry growth,

and 196 bps QoQ to 12.5%, which

mance in very challenging busi-

company indicated EBIDTA

is the highest margins till now.

ness environment, we maintain

margins of 14-15% going

SMP’s EBIDTA margins expanded

our positive view on MSSL and

ahead. Impact of higher

by 150 bps YoY and 120 bps QoQ

reiterate our BUY recommenda-

RM would be seen Q2FY17

to 7.3% and improving overall

tion on the stock.

onwards. Though operating

Current Market Price Rs 104 Target Price Rs 125 Potential Upside 20% leverage and its cost saving programme would benefit company on margins front, competitive pressure and higher promotional expenses would offset the benefit to greater extent. Moreover, higher R&D expenses and discontinuation of tax benefit from Haridwar plant would put additional pressure on company’s profitability going forward. We broadly maintain our volume, revenue and EPS estimates for FY17E/FY18E. Accordingly we maintain our target price of Rs 2800, valuing the stock at 16x FY18E EPS. Going forward, we expect intensifying competition from Honda and Bajaj Auto to impact HMCL’s market shares and volumes. We see very slow recovery in rural market and lower growth from urban market amid higher penetration. In view of southward margin trend, price run up, valuation and unfavourable risk reward, we reiterate our SELL on HMCL.

Current Market Price Rs 2,894 Target Price Rs 2,800 Potential Downside 3%

The Finapolis l JUNE 2016

the chartist Direction for the Disabled The HARYALI Centre for Rural Development has identified and profiled skill development activities that could generate employment opportunities for disabled people. The final report, submitted in December 2015 and sponsored by the NITI Aayog, outlines the various professions that disabled people could be employed in. The report categorises people based on five disabilities: Speech, Hearing, Blind, Locomotors and Mental Illnesses. The last of these is not covered for job profiles.

Speech

Locomotors

Blind

Hearing

Speech, Hearing and Locomotors TV Repairing

Electrician

Furniture Making

Potato Planting

Candle Making

Furniture

Tailoring

Wiring

Bamboo

Embroidery

Computer Class

Watch Reparing

General Store

Mechanic

JUNE 2016 l The Finapolis

The Chartist Speech, Hearing, Locomotors & Blindness Shoe Making

Agarbathi Making

Plastic Wire Bag

Disability Statistics Disability by Category

Bakery

Plate Making

12000000

Population

10000000

0-19 Years

8000000 6000000 4000000 2000000 0

Seeing

21,906,769 The number of Indians with disabilities

Speech

Hearing Movement

Mental

Disability by Gender 6000000 54%

Male 46%

5000000

Female 64%

4000000 3000000

36% 2000000 60% 57%

1000000

43%

40%

53% 47%

0 Seeing

Reparing

Hearing

Movement

Mental

Total Disability By Location

Speech and Hearing Poultry Farming

Speech

8000000 74% Dairy Farming

Rural

7000000

Urban

6000000 5000000

76%

4000000 Goat Rearing

26%

3000000 Cycle Reparing

2000000

76%

1000000

24%

0 Seeing As of Census 2001

24%

81%

Speech

30%

19% Hearing

70%

Movement

Mental

The Finapolis l JUNE 2016

COVER STORY GOOD TIMES

Happy Days Are Here Again The arrival of Monsoon heralds cheer for our farmers, our economy and our stock market, finds Team Finapolis

he Monsoon is coming, if it hasn’t arrived at your town already. After two successive years of draught, the Indian Meteorological Department (IMD) has forecast rains at 106% of normal rainfall. “Monsoon rainfall will be 106% of the long period average which is above normal and there is a 94% probability that monsoon will be normal to excess,” L.S Rathore, director general of the IMD told reporters. Skymet, a private meteorological data provider, projects 109% of long-term average rainfall. As the Finapolis went to press however,

the rains played a waiting game. The IMD had pushed back its date for the onset of Monsoon to June 7. But predictions for rainfall in excess of the long-term average remained.

Rural revival After two successive years of draught, the return of rains portends cheer all around. Our farmers, our economy and our stock market should benefit, say market experts. “This is one of the most looked forward to Monsoon seasons in the last decade,” says Gautam Sinha Roy, fund manager at Motilal Oswal Asset Management Company, pointing out that “although a lot of

delinking from the Monsoon has happened over the last 10-12 years (through better irrigation, linkage with the global agri-cycle and other things), the monsoon has been so bad over the last two years that this year’s rains have become critical from the rural perspective and overall economic growth perspective.” “A good monsoon would stimulate depressed rural demand and rein in food inflation. Hence, it is a positive for FMCG and car and two-wheeler manufacturers etc,” says K P Jeewan, Director and Group Head – Fixed Income, Karvy Capital. But he cautions against reading too much into good rains. “While giving a much needed

JUNE 2016 l The Finapolis

COVER STORY “Urban sentiment remains upbeat as indicated by RBI’s latest consumer confidence survey,” the note said, before adding. “According to the Nielsen Consumer Confidence Index, Indian consumers were the most confident in the world in terms of job prospects, personal finances and concerns in the first three months of 2016 with their confidence index touching a nine-year high during the period.”

Global Clarity

Source:IMD

Legend :

Excess (+20% Or More) Scanty (-60% to -99%)

Normal (+19% To -19%) No Rain (-100%)

Deficient (-20% To -59%) No Data

Notes: (a) Rainfall figures are based on operational data (b) Small figures indicate actual rainfall (mm.), while bold figures indicate Normal ranfall (mm.) Percentage Departures of Rainfall are shown in Brackets relief to the parched hinterland, is not really a silver bullet for all that is ailing our economy,” he cautions. Gautam Sinha Roy too believes the consumption-oriented sector and automobile sector should benefit from the good rains. “Rural-oriented NBFCs should also do well,” he says.

Urban Bounce There’s positive news on the urban side too. The Centre for Monitoring Indian Economy (CMIE) believes urban consumption is likely to improve. “Promising consumer goods output in

2015-16 is signalling improving urban consumption demand in India”, the centre said in its Economic Outlook note, while pointing out that the consumer goods category (which has 30% weightage in the Index of Industrial Production), reversed two successive years of decline to record 3% growth in 2015-16, its fastest in four years. Within the category, the note said, output of consumer durables rose by 11.1%. Additionally, output of other consumer items such as gems & jewellery, apparel, mixers & grinders and wooden furniture accelerated, and passenger vehicles sales also grew.

June will also see the uncertainty recede on two key international events: an interest rate hike by the US Federal Reserve, and Britain’s status vis-a-vis the European Union (Brexit), which bodes well for Indian markets, news reports quoted fund managers as saying. “Indian markets will regain positive momentum once global uncertainty related to US Fed rate hike and Brexit are over,” A Balasubramanian, CEO, Birla Sun Life Mutual Fund, was quoted. “We anticipate stock markets to outperform post June this year, as expectations are high about reform execution from both central and state government, while the 7th Pay Commission is seen driving domestic consumption. The expected recovery in earnings will lift market sentiments and normal monsoon will increase chances of another interest rate cut.” Dharmesh Shah, head of technical at ICICI Securities, said the Nifty could move towards 8,300 over the medium term once uncertainty regarding Brexit and the US rate hike are over. “There are multiple positive triggers in domestic markets currently, including expectations of normal monsoon which should give the index support around 7,700 levels,” Shah told reporters. K P Jeewan sounds a note of caution. “Structural issues like deleveraging of corporate balance sheets and repair of bank balance sheets would take time to conclude,” he says. “The ongoing reforms and expected monetary easing would help the process which might take few more quarters, and a good monsoon would be a sentiment booster.” He adds “Stock markets, of course, would discount the developments well in advance as things fall in place.” F

20 The Finapolis l JUNE 2016

COVER STORY GAIN FROM THE RAIN: Select Stock Recommendations

Rallis India

Broker: ICICI Securities Call: Buy CMP: 208.9 TP: 236

Colgate Palmolive (India)

Broker: Emkay Call: Accumulate

CMP: 838.35

TP: 910

Rallis India is a leading agri input player in the domestic agrarian market with a strong brand presence among farmers. It is present across the agricultural value chain ranging from hybrid seeds to plant growth nutrients to organic manure & soil conditioners to crop protection chemicals. Considering the good monsoon forecast, we could see higher-than-average agri- and overall GDP growth, which is positive for all agri-input companies.

Colgate is hopeful of better FY17 led by likely normal monsoon and initiatives by government to step up rural consumption. Further, the company is positive on improving volumes trends led by increasing consumption, tapping new users and improved traction in high-growing naturals space.

Pidilite Industries

Eveready Industries

Broker: Motilal Oswal Call: Buy CMP: 692.85

TP: 750

Broker: Motilal Oswal Call: Buy CMP: 235.30

TP: 335

A potentially normal monsoon could further revive demand for the companyâ&#x20AC;&#x2122;s products. Pidilite is a high-quality discretionary play with strong competitive positioning, proven in-market excellence and impeccable track record of generating longterm shareholder value over multiple periods. The strategy of expanding into portfolio adjacencies seems to deliver success.

Management believes there is a high possibility of anti-dumping duty being levied by the end of 1HFY17 and if this happens, domestic battery companies are likely to record high growth and margin expansion. Even after lowering revenue and EBITDA forecasts to factor in the impact of fixed costs and lowering PAT estimates to factor in the higher depreciation and interest expenses, the stock offers remains strong.

United Spirits

Chennai Petroleum Corp.

Broker: Motilal Oswal Call: Buy CMP: 2485.90 TP: 4000

Despite negative news flow (liquor bans by state governments, etc), the long-term investment thesis remains intact. The company has improved its portfolio mix with relaunches, and the resulting margin expansion, debt reduction with further divestment of non-core assets, improved corporate governance and cost containment augur well. The industryâ&#x20AC;&#x2122;s focus on value growth will be a key medium-term positive for United Spirits.

Broker: KRChoksey Call: Buy CMP: 200.20

TP: 316

Long-term prospects remain strong with the potential upside to gross refining margin (GRM). CPCL has initiated efforts to reduce working capital requirement and substantial debt repayment is likely over next two years. Hence, company could generate higher operating cash flow in FY16E/FY17E. Resid upgradation project expected to get completed by end-FY17 could increase GRM.

JUNE 2016 l The Finapolis

EQUITY NUMBER GAME

Technical Analysis Our team of analysts pore through technical charts to offer some smart trading tips for the next couple of months By Team Finapolis

he stock has given the “V” shape recovery from the low of 55 levels on weekly charts. Prior P R I S M to that, the stock has C E M E N T seen profit taking from all time high of 133.45 levels posted on April 2015. The fall in the stock has dragged the stock to the low of 55 levels in span of ten months. Thereafter, the bounce from the above said lower levels with supportive volume has placed the stock above all its major moving averages on daily charts. Prism Cement was incorporated on 26th 120 110 100 90 80 70 60 May-15

Aug-15

Nov-15

Feb-16

May-16

Current Market Price Stop Loss Target Price 1, 2

Rs 92.25 Rs 79 Rs 110, Rs 115

March, 1992 by Dr. B V Raju and his associates. Company is one of the leading company in Building Materials. The company has a wide array of products ranging from cement to bath products. The division through which it operates is Prism Cement, H&R Jhonson (India) and RMC Readymix (India). Points of Observation  The recent bounce from the low of 55 levels has retraced its 50% of retracement levels drawn from the high of 133.45 to the low of 55 levels which indicated strength in the counter and the next retracement levels is placed around 104-117 levels, 61.8% and 78.6% respectively and above that 130 levels in medium term.

 The stock price is trading well above the Parabolic SAR on weekly charts which indicate that the bullishness in the stock will remain intact in near term.  In the weekly charts, the stock is trading above all its short and long term moving averages, indicating the bullishness in the counter.  We therefore recommend long term investors to go long in the stock around Rs. 90, for the above mentioned target levels of 110-115 levels with a strict stop loss placed below the level of Rs.80 on a weekly closing basis.

The Finapolis l JUNE 2016

EQUITY

OROMANDEL has witnessed a correction from a high of 353.3 in October 2014, to its 52 week low of 145.5 in February 2016 forming lower highs and lower lows on the weekly chart and bounced back from there to 228 levels which is just above 38.2% retracement levels for the said correction. During the

Current Market Price

Rs 228

Stop Loss

Rs 199

Target Price 1

Rs 272

bounce stock has formed a double bottom pattern in weekly chart and has given a breakout from the pattern on the daily chart the stock is consolidating above a significant unfilled gap indicating huge buying interest to come in coming days. We expect the stock to start a fresh leg of rally from these levels to the said targets. Points of Observation  On the daily charts as well as weekly charts, the stock is trading above all of its 21/50/100/200 day EMA levels indicating the positive momentum in the counter.  Among other leading indicators parabolic SAR is trading below the CMP and suggests a positive trend in the counter on weekly charts. Another leading

osch is a leading supplier of technology and services in the areas of Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology. Additionally, in India, Bosch has the largest development centre outside Germany, for end-to-end engineering and technology solutions. The promoter holding in the company stood at 71.18 % while Institutions and Non-Institutions held 19.32 % and 9.5 % respectively. BOSCHLTD has announced its Q4 results on 25th May 2016, in which the company has posted a net profit rises to 30.8% to Rs.376 crore for the quarter ended March 27000 25000 23000 21000 19000 17000 15000 May-15

Aug-15

Nov-15

Feb-16

May-16

Current Market Price

Rs 22,000

Stop Loss

Rs 19,000

Target Price 1

Rs 26,000

31, 2016 whereas the same was at Rs.287.4 crore for the quarter ended March 31, 2015. The company’s total income is Rs.2,816.3 crore for the quarter ended March 31, 2016 whereas the same was at Rs. 2,521 crore for the quarter ended March 31, 2015. Points of Observation  On the weekly chart, the stock has retraced more than 50% from its 52 week high of 26719.95 levels which was tested on 11-Aug-2015 to the 52 week low of Rs. 15736.05 levels which was tested on 12-Feb-2016.  On the weekly chart, the stock has made “FLAG PATTERN” breakout around 19750 levels on the back of robust volumes suggesting bull trend in the counter to continue in near future. Also according to the pattern breakout the next resistance is expected around 25000 levels.

258 240 222 204 186 168 150 May-15

Aug-15

Nov-15

Feb-16

May-16

indicator Heiken candlestick also indicates bullish trend in the counter.  Among the momentum indicators MACD is trading above the signal line in weekly charts indicating positive momentum in the stock on medium to long term perspective.  The stock has been consolidating above the gap created on 13th April 2016 indicating strong support it has around that level.  On fundamental side, Coromandel is one of the leading companies in the Indian agro-chemicals sector. The company will be the beneficiary of the above normal monsoon forecasts in upcoming farming.  The stock is well placed above all its major moving averages (short, medium, long) suggesting the stock to be in medium to long term bullish trend.  Buying interest was seen in the counter on the day of its Q4 earnings which was better than the market estimates and huge volumes were witnessed supporting the price to rally.  The stock might face resistance around 25000 levels which is also its target for the flag pattern breakout on the weekly chart. Sustaining the mentioned levels may boost the stock for a further rally of 1000 points on the higher side.  On oscillator front, the 14 period RSI has given a crossover its signal line and is pointing northwards supporting the Bull Run in the counter. Even the Parabolic SAR is trading well below the current market price of the stock suggesting inherent strength.  On the other hand, the counter is also rolling on the upper band of the Bollinger (20,2) on the daily chart affirming our bullish stance on the counter for medium to long term perspective.

JUNE 2016 l The Finapolis

EQUITY Current Market Price Stop Loss Target Price 1, 2

AJAJELEC has seen a stellar run in the last four months after making a panic low of 155 levels on 29.02.2016. The stock after taking support at the lower levels bounced back sharply towards 245 levels in a span of just four months, gaining more than 50%. The volume witnessed in the rally was significant as value based buying must have been witnessed in the stock as well as strong hands must have accumulated the counter at the lower levels. The stock faced minor resistance around 245 levels and it slipped towards 225 levels, where it has taken sup295 270 245 220 195 170 145 May-15

Aug-15

Nov-15

Feb-16

May-16

Points of Observation  On the daily charts, the stock has given breakout above its long term downward sloping trend line which was drawn by 316 295 274 253 232 211 190 May-15

Aug-15

Nov-15

Feb-16

May-16

Rs 210 Rs 290, Rs 300

port and has once again resumed its up move. Any decline in the stock towards 225 levels can be used as a buying opportunity to accumulate the stock for the targets of 290-300 levels in the short to medium term.

 The stock has seen accumulation at the lower levels and it has been moving higher with decent volumes from the last 2-3 trading sessions after it witnessed a minor dip towards 225 levels from 240-242 levels. The stock has a strong support around 225 levels and is likely to head towards 290-300 levels.  Among oscillators, the 14-day RSI line has already given a positive crossover with 9-day signal line, indicating strength in the counter.

Points of Observation  On the daily as well as weekly charts, the stock is trading above most of its major moving averages namely 21/50/100/200 –DEMA, indicating the inherent strength in the counter and is likely to head northward towards 290-300 levels in the short to medium term.  The counter has given a falling trend line breakout on the daily charts on closing basis drawn from the high all time levels of 382.85 with notable trading volumes. Going further, any breakout above 250255 levels in the stock may lead to more aggressive momentum in the counter.

Current Market Price &MFIN is making higher tops and higher bottoms on daily and weekly charts. The stock is also comfortably trading above its 50 and 200 day exponential moving averages on daily and weekly charts from last many trading sessions and hence we can conclude the stock is in up-trend.

Rs 240.95

Rs 308.60

Stop Loss

Rs 270

Target Price 1

Rs 340

joining the tops at 340 and 294 levels made on 5th Jan 2015 and 7th July 2015. The stock has also been comfortably sustaining above its double top pattern breakout levels at around 294 levels.  The 14-period RSI on daily charts has been sustaining above 60 levels clearly indicates that the stock is in very strong momentum and the directional movement is likely to continue in coming days. Among other indicators, the stock has taken support at its lower end of 20 periods Bollinger Band with standard deviation of two. The Bollinger band is witnessing contraction which suggests that the stock can give breakout in coming days.  On weekly charts the stock has been trading above its 13 period exponential

moving average indicating continuation in buy trend on weekly charts as well. The stock has also witnessed rise in trading volumes in past few weeks clearly indicating strong buying taking place and we can expect the uptrend to continue in coming weeks as well.  On daily charts the stock has been consolidating in a small trading range between 291 and 310. The stock has corrected till its 21 day exponential moving averages placed at 294 levels and consolidating above those levels. Technically in a buy trend, stock gives very good buying opportunity at around 21 day exponential moving average. F

24 The Finapolis l JUNE 2016 NAVEEN KUKREJA

Should You Maintain Multiple Savings Accounts?

lthough India is largely an under-banked country, many in urban and semi-urban India have more than one savings account. While a sizeable portion of these accounts are inherited from previous employments, people also open additional savings account in search of better features or customer service. Just like any other banking and financial product, having multiple savings accounts comes with its own set of pros and cons. Let us now discuss these points in some detail:

Positives Increase in daily withdrawal limit from ATM: As each savings account has its own limit on daily ATM withdrawals, having multiple savings account means that you can spread your bank balance across several accounts and increase total withdrawal limit. For example, assume that you have Rs 3 lakh in a savings account whose daily ATM withdrawal limit is Rs 60,000. Now, if you open another savings account with daily withdrawal limit of Rs 60,000 and transfer Rs 60,000 to that account, your daily withdrawal limit will increase to Rs 1.2 lakh while your total bank balance remains the same. Higher number of free ATM transactions: Most banks have caps on the number of free ATM transactions. Just like in the case of daily ATM withdrawals, having multiple accounts will increase the number of free ATM transactions by managing your ATM transactions between your various savings accounts. Higher number of branch transactions: Banks levy charges on transactions like clearing and collection of outstation cheques and cash deposits and withdrawals

by invite

JUNE 2016 l The Finapolis

BY INVITE beyond a certain free limit. Therefore, in case you route too many transactions through your savings account, then having two or more savings will allow you to spread those transactions between several accounts, and thereby incur less charges from your bank. Separation of investment & expense accounts: Most non-banking investment products, such as mutual funds, SIP, insurance and demat accounts require a savings account for making payments and depositing bonus or redemptions. Using your salary account for investment purposes will necessitate changing details whenever you change your job. You can avoid this by opening a permanent savings account for routing investment transactions. This account can also function as an emergency fund and for parking surplus cash. You can also open a joint account with

Let the type and frequency of your transactions decide the number of savings accounts: fewer for fewer transactions and more in case you make many of them your spouse for parking your joint savings and making investments under your joint names. Name your children as the nominees of such accounts. Alternative option in case of disruptions: Union strikes and technical reasons like link failure often affect the functioning of bank branches. A savings account with another bank will provide an alternative in case you fail to transact through your primary account.

Negatives Low returns from higher minimum/ average balance: Most banks require you to maintain a minimum/ average balance, which can range from Rs 500 to Rs 2 lakh per month. Having too many savings accounts will require you to keep higher amount of cash deposit as minimum/ average balance on which you will earn a low interest of 4â&#x20AC;&#x201C;7% p.a. Instead, this amount can be invested in fixed deposits or debt mutual funds to earn higher returns. Risk of non-maintenance charges: Failure to maintain minimum or average balance attracts non-maintenance charges, which can be as high as Rs 450 per month. Many free transactions may also become chargeable due to non-maintenance of minimum/average balance. Potentially increased cost: Having multiple savings accounts will translate into having multiple cards. Each card will attract annual charges. These annual charges can be anywhere between Rs 100 and Rs 750 per card. Thus, having multiple savings accounts will mean incurring additional annual charges for each card that you hold, instead of an annual charge for a single bank card. Tracking multiple accounts: Maintaining multiple savings accounts will result in multiple cheque books, net banking username and passwords, debit card PINs and account balances, which can be difficult to keep track of.

To Sum

The number of savings accounts that you should maintain depends on the type and frequency of your banking transactions. Opt for a permanent savings account (along with salary account, if you like) in case you make fewer transactions. On the other hand, consider maintaining multiple savings accounts in case you are routing for large volume of transactions (in case of businessmen). F

The author is Managing Director, Paisabazaar.com

26 The Finapolis l JUNE 2016

URBAN EFFECT SLIDING HEALTH

Can India’s Urban Future be Healthy? Ill-health is the price rural Indians have to pay for seeking a better life in the city. Twenty-nine villages near Hyderabad are helping to explain why, Michael Regnier discovers

warm egg, white shell almost translucent, plops into the wire mesh gutter and rolls forward. There is no let-up in the clucking din of the 16,000 other chickens in cages that stretch to the far end of the shed. They won’t survive more than a couple of years here, but their shit will be shovelled up for fertiliser and their eggs sold on for a few rupees each. The concrete shed stands between two rice fields, patches of green in the otherwise brown, dusty landscape of this part of central southern India. The farm belongs to Narasimha Reddy, who also grows oil palms and a traditional cereal called jowar. It is hard work but he says he is satisfied with his lot. Most of his neighbours have sold their land, which Reddy claims has made them less happy. He also says they are less healthy because they now don’t work as hard and have changed from jowar to rice in their diet. Reddy strives to be more traditional. He sticks to the same diet his elderly parents have eaten all their lives, and unlike many neighbouring families, he and his three brothers have all stayed in the village. He envisages his children living out their lives here as well. It is a rare vision of the future. Across India, so many

people are leaving the land in favour of the rapidly growing towns and cities that the rural population is predicted to peak around 900 million before starting to shrink in 2025. Already, this trend is bringing profound economic and social changes to individuals, families and the nation as a whole. It is changing the way people live. It may also change the way they die. As more Indians adopt more urban lives, chronic conditions like diabetes, obesity and heart disease are on the rise, replacing malnutrition and infectious diseases as the country’s most urgent health worries. Reddy doesn’t want to risk his family’s health. He has decided that being healthy and poor is better than taking their chances in the modern, more developed, more open India. But they are not immune in the familiar confines of the village, either. The same chronic diseases are rising in rural India too, albeit more slowly than in its cities. So what really lies behind this national trend, threatening the health of hundreds of millions of people in villages and cities alike? And is Reddy’s strategy of keeping his family locked in a traditional life of jowar and agricultural labour the answer, or is he spurning potential new opportunities in vain?

JUNE 2016 l The Finapolis

URBAN EFFECT The Good Doctor Sanjay Kinra is an urbane doctor with a lively, witty intelligence – good company as we drive out to Reddy’s village. It is one of 29 villages between 50 and 100 km south of Hyderabad, India’s fourth-largest city, that Kinra believes could unlock some answers about the rise in chronic, non-communicable diseases. A study of nutrition took place in the area some 25 years ago and Kinra, a paediatrician and public health researcher, has since recruited thousands of people in the 29 villages to revisit that long-forgotten study. He now wants to follow the participants’ long-term health in order to understand what factors have the most influence on their wellbeing.

In 1987, researchers from the National Institute of Nutrition in Hyderabad identified 29 nearby villages to assess a government welfare scheme Two doors up from Reddy’s house just off the village square, Kinra and I meet Mahmad Babumia, a retired police official. He wears a neat white beard on his chin and a neat white shirt with a ballpoint pen in the breast pocket. Life in the village was bad 30 years ago, he reports. The buildings were all ‘kachcha’ – mud huts – and everyone laboured on the land but there wasn’t enough to eat, even with the government providing subsidised rice at Rs 2 a kilo. A welfare scheme, initiated across India in the 1970s, aimed to supplement the diets of pregnant women, breastfeeding mothers and children under six. In 1987, researchers from the National Institute of Nutrition in Hyderabad identified 29 nearby villages where they would be able to assess how well this programme was working. When they started the Hyderabad Nutrition Trial, 15 of the villages were receiving free food for mothers and children; the other 14 were still waiting to start the programme, so acted as controls in the experiment. Over the next three years, researchers recorded the weight of babies born in all the villages to see what difference, if any, the extra food was making. One of the 4,300 babies born during the trial was Babumia’s son Mustak.

28 The Finapolis l JUNE 2016

URBAN EFFECT Overall, the results suggested that babies like Mustak, born in villages with the programme, were on average 60 to 80 grams heavier than those born in villages without it. And that was that. The findings were not widely disseminated and the study seemed destined for obscurity – until 2003, when Sanjay Kinra dusted it off and saw untapped potential. Having trained as a doctor in his hometown of Delhi, Kinra had then moved to the UK to practise medicine. He specialised in paediatrics but developed parallel interests in environmental health and epidemiology. When he began to wonder if there was a tangible link between a child’s diet and their risk of heart disease in adulthood, he looked for a PhD research project that would let him investigate further. He got wind of an old study that had tested the effect of supplementing the nutrition of children in some rural Indian villages. Perfect, thought Kinra: he could go back to these people and see whether differences in the children’s diet had produced any differences in health as they had grown up. There was a problem, though. When he got hold of the old trial records, they were incomplete and existed only on paper and outdated computer disks. Even when he was able to go through them, Kinra realised he didn’t have the names of the children born during the trial, only their dates of birth. Undaunted, he went to each of the 29 villages and tracked down as many of the original trial participants as he could. The mothers were relatively easy to find, but it’s rare for rural parents to know their child’s date of birth. By comparing lunar calendar dates and significant local events with the dates of birth recorded by the researchers 15 years before, he managed to identify about half of the children from the original trial. Together with parents and siblings, this gave Kinra a cohort of 7,000 people with whom he could do a follow-up study. However, it soon became clear to him that there was much more to be gained here: if he could continue to follow these children over many years, he might be

able to find associations between childhood nutrition, lifestyle, environment and other factors and the risk of developing chronic health conditions. The children were already teenagers by this time, of course. And in their lifetime, conditions in the 29 villages had been transformed – not by government welfare schemes, but by India’s rampant economy.

A Village Remade Just a few kilometres north-west of Reddy’s farm lies Ramoji Film City, a sprawling gated compound where the Hyderabad film industry rolls out enough movies each year to rival Bollywood. Busloads of workers are disgorged onto the 1,700-acre site each day to make films on elaborate sets and sound stages. The

morning we drove through on our way to the villages, I saw a mock-up of Chennai airport with a biplane parked in front of it, a stationary steam locomotive ready to play its part, and a side street with no main road to turn off but every type of urban housing you could wish for. All in the middle of the semi-arid, all-but-deserted countryside outside Hyderabad. This ‘dreamscape’ was the vision of Ramoji Rao, a wealthy entrepreneur and film producer, and he was able to realise it in the boom times of the mid1990s. When he opened Film City in 1996, everything changed for the nearby villages. Their land suddenly became worth something – developers thought that Hyderabad’s urban sprawl would be inevitably drawn their way. Unlike Reddy, Mahmad Babumia was

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URBAN EFFECT keen to cash in. Three-quarters of the families in their village have since sold up, although their former fields sit brown, barren and undeveloped, still waiting for the anticipated demand to materialise. Babumia used the windfall to buy a concrete house in the village; others built their own, used the money to move away, or took the opportunity to stop breaking their backs in the fields. Many found new jobs in Film City: Babumia’s five sons all work there now, handling the cameras and lights. They are earning cash, which they spend in the nearby town, occasionally going shopping in Hyderabad itself. Two of them have moved out and live in the town, closer to schools, healthcare and shops superior to anything the village has to offer. Outside a small shop on the far side of

Across India, so many people are leaving the land in favour of towns and cities that the rural population is predicted to peak around 900 mn before starting to shrink in 2025 the village square, men in white shirts and linen trousers perch on bicycles or motorbikes while women walk by in saris of green, burgundy or yellow. A rooster struts past the back door of Babumia’s new house, stopping occasionally to crow at the cloudless spring morning sky. Indoors, the house is cool and clean with white and blue walls. A TV stands in one

corner opposite rough shelves holding a mobile phone, toiletries and medicines. Now in his 60s, Babumia takes tablets for diabetes and high blood pressure that cost him Rs 150 a week, and he sees his doctor three or four times a year, paying between Rs 100 and Rs 500 each time. Kinra asks him why he thinks he got diabetes and high blood pressure. Babumia answers that earlier generations didn’t get these conditions. He says his father was healthier at his age than he is now because the quality of food has deteriorated even as quantity has increased. “The food has no power,” he grumbles. “The younger generation eat less vegetables, just white rice, and they get sick younger.” But this is inconsistent. Although Babumia remembers his parents’ generation living to 100 compared with 60 or 70 today, his father died during the food shortages, while Kinra knows that life expectancy in India 20 years ago was just 46. As for future generations, Babumia’s son Mustak, one of the original Hyderabad Nutrition Trial babies, still lives in the village – for now. But it’s when young men get married and start a family that they think about moving, so in a few years Mustak may well decide to join his two brothers who are already in the town. There are undoubtedly better opportunities for their children there, but would there also be a long-term cost?

We Are Where We Live Your health is inextricably linked to where you live. Changing where you live therefore influences your health. This phenomenon has been studied over decades in people who migrate between countries, radically switching living conditions in a matter of weeks or even days. You don’t have to change country to change environment, though. Across the globe, internal migrants outnumber international migrants four to one. Either way, most people who migrate go from a village or town to a bigger town or city. And although internal migration usually involves a less arduous process than crossing international borders, the change in environment can be just as

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URBAN EFFECT

Your health is inextricably linked to where you live. Changing where you live therefore influences your health. This phenomenon has been studied over decades in people who migrate between countries, radically switching living conditions in a matter of weeks or even days rapid and profound, and it can also affect migrants’ mental and physical health – for better or worse. According to 20th-century wisdom, people who migrated were generally healthier than those they left behind. They had to be fit to take on the rigours of travel and setting up a new life from scratch. When they arrived at their destination, migrants were expected to be less healthy than their new neighbours – city dwellers would, in theory, have the advantages of better access to healthcare, a more varied diet, and cleaner surroundings. However, some research showed that migrants tended to start out healthier than existing city dwellers, who had typically grown up with the city’s stresses, fast food and fattier, more sugary diets, alcohol, and more sedentary routines. The advantage didn’t last. As ‘healthy migrants’ adopted urban lifestyles, they became increasingly prone to metabolic disorders: chronic conditions like obesity and diabetes that, in turn, raised the risk of heart disease. Around the same time that he was tracking down the children of the Hyderabad Nutrition Trial, Sanjay Kinra started

working on another project. It was to test whether internal migrants in India experienced the same ‘healthy migrant effect’ that had been observed in international migrants, such as Japanese migrants to the USA. A migrant himself, Kinra was now working for another man who knew a thing or two about the process. Shah Ebrahim was born and raised in Yorkshire but has deep roots in other parts of the world, too. His grandfather migrated from India to South Africa at the end of the 19th century, then his father moved to the UK in the 1940s to escape apartheid and qualify as a doctor. Ebrahim followed his father into the medical profession but became increasingly interested in epidemiology and public health. Perhaps it was inevitable, given his family history, that he would eventually decide to investigate the effects of migration on health. “Migration is the story of modern times,” says Ebrahim. “Migration and encroachment, the absorption of small villages into urban sprawls and the clearing of habitat for roads and housing. But the patterns of human living require habitats to sustain them.”

In 1984, 5% of adults in India’s towns and cities had diabetes. By 2004, when Ebrahim started the Indian Migration Study, this had trebled to 15%. It was also rising in the villages but lagged behind at around 6%. Obesity and high blood pressure were on similar trajectories. If those trends proved to be linked to India’s inexorable urbanisation, public health responses could be tailored to reduce the impact of these conditions on people’s quality of life and life expectancy. The study was designed around four factories in cities along a rough north– south axis of India: Lucknow, Nagpur, Hyderabad and Bangalore. Rather than just compare people in rural and urban areas, the researchers wanted to look at migrant workers who had moved from one environment to the other. But they needed control groups. In each factory, therefore, they recruited employees who had moved from a rural village to come and work there and who, crucially, also had a brother or sister still living in their home village. The siblings were ‘negative controls’, accounting for factors associated with their origin. To account for destination factors, the researchers recruited other factory employees who were born and raised in the city, and some of their siblings too, to act as ‘positive controls’. What they couldn’t entirely account for was selection. “You have to be fairly fit to migrate,” says Ebrahim. “Or stupid.” Whatever differentiated the siblings who moved from those who stayed behind – be it fitness or stupidity, motivation or drive, optimism or a risk-taking personality – was impossible to measure. However, although unknown selection factors may conceivably have had some influence over their participants’ health, the researchers were satisfied that their study, with 6,500 participants, would yield robust information about the effects of migration – in particular, the effects of moving from a rural environment to an urban one. F

(The series will conclude next month)

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FACE TO FACE ‘Durable revival in the offing’ Sankaran Naren, who manages the ICICI Prudential Top 100 Fund, says it may be prudent to add balanced advantage and dynamic asset allocation funds, which increase allocation to equity when markets are cheap and book profits when they rise. Have the monsoon forecast/ other macro factors had any impact on your holdings? The India Meteorological Department’s forecast of above-normal monsoon and lower consumer price inflation numbers are encouraging signs for the economy. Lower minimum support prices, better management of food stocks and reducing freebies has helped in containing inflation. The key economic indicators like current account deficit, fiscal deficit and inflation have improved. Growth has not picked up to the same extent because the government seems intent on solving non-performing loan problems in the banking sector. We believe that over the next 2-3 years, there should be a durable economic revival which could help the Indian markets. Earnings are expected to pick-up in the medium term on the improving macro situation and signs of bottomingout in a few sectors. The incremental capex spending is coming mainly from government-led activity in areas like roads, railways, ports and defence. Therefore, sectors that benefit from these activities could provide favourable opportunities for investments. We continue to believe that largecap stocks are attractively valued as compared to mid-cap stocks, and thus present a good investing opportunity at this point in time. Which sectors would you focus on in the coming 2-3 years? Currently, the fund is overweight on oil and gas, metal, and power, sectors that are at discounted valuations. While oil and gas and metal sectors are expected to benefit from stabilisation in commodity prices, the power sector

We continue to believe that largecap stocks are attractively valued as compared to mid-cap stocks, thus presenting a good investing opportunity at this point in time could benefit from falling interest rates. The power sector is also expected to report good earnings growth over the long term. How do you see the markets playing out in the rest of the year? The market has recovered due to improving global flows — Foreign Institutional Investor (FII) inflows in India for two consecutive months reflect their confidence towards India’s longterm growth story. However, the global markets will continue to be volatile this year, and therefore Indian markets could be volatile in the near-term too. Over the next 3 years, economic and earnings growth could pick up in India. Therefore, investing today could help reap benefits in the long term. Tell us about your stock selection process. Do you follow a top-down or a bottom-up approach? ICICI Prudential Top 100 seeks to achieve capital appreciation through

investments in Indian companies or sectors with potential for growth. It aims to generate alpha by active sector rotation through a top-down approach. It intends to reduce concentration risk through diversification at the stock and sector levels and remains sector-agnostic. What is your advice to investors in the current scenario, with respect to equity investments? It may be a prudent strategy, to add funds in the balanced advantage and dynamic asset allocation category. These funds seek to increase allocation to equity when markets are cheap and book profits in equities when markets are rising, thereby reducing volatility and aiming to provide reasonable returns. However, if an investor is well invested in equities, we would recommend investing in a staggered manner through equity mutual funds over the course of next 6 months. The outlook for equity markets is positive for the next 3-5 years. F

The Finapolis l JUNE 2016

INVESTMENT ADVICE PARABLES

Investors Should Beware the Problem of Plenty A friend’s inability to restrict his photography and a family decision on the mode of transport gave Dharmendra Sathpathy insights into our approach to investing

he digital world has made a lot of stuff which was dear to our wallet erstwhile literally free. Digital cameras, for example, have made us very liberal in clicking pictures. After all, it is free. So why not click more? The question and focus is no longer in clicking good pictures, but more about how many clicks one can take. Quality has been clearly overwhelmed by quantity. Recently, my friend went to Europe and clicked 5,000 pictures and saved it on ‘cloud’. But he has never found the time to relive his holiday, because who has the time to see 5,000 pictures? Had it been 15 to 20 tastefully clicked snaps, I am sure he would have relieved his holiday more than once by now. Thus, a holiday of 5,000 pictures is lost in the cloud. Now think of those times when we would click just a few pictures per holiday

Instead of adding more schemes to your portfolio, why not go the other way? but those few pictures were time and emotion frozen in a frame. We would enlarge them, we would frame them and more importantly we would enjoy and relive the moments. This symptom, which I call the ‘problem of plenty’ can be extremely harmful

because human brains aren’t designed like the motherboard of a computer. The same trait is seen in investing too. People get a sense of comfort if they are invested in 10 to 15 mutual fund schemes (or even more). After all, it does not cost more to spread my money across five schemes or 50 schemes, so the reasoning is, “Let me own everything and I will feel safe”. This is how the human mind works. With that kind of a mind set and large appetite to want more and more, the natural short-term strategy is to feed this innate human greed.

But hold on and take a step back. Sometimes, it is better to zig while the rest zag. One need not always follow the herd. It pays to be unusual. Instead of adding more schemes to your portfolio, why not take the opposite route and prune the number of schemes in the portfolio? After all, each scheme itself contains more than companies. Secondly aren’t companies common across schemes? A small portfolio is also always better understood. This move will allow you to be more involved in the investment process.

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INVESTMENT ADVICE Stocks or MF is a Car or Bus Question I discovered this during our recent family holiday. We were in Medikeri, Coorg for our holidays and were planning our travel to Bangalore. The family was predisposed towards travelling by a private car. However, I convinced them to take the Volvo bus. Very reluctantly they agreed with my decision. However, the journey by Volvo was extremely comfortable and by the time we reached Bangalore all were convinced with my decision. As I kept thinking about this, my mind floated into my favourite space of ‘personal finance’ and I could see a beautiful comparison. Travelling by ‘private car’ was like investing directly in stocks and creating a personal portfolio while travelling by Volvo was akin to a mutual fund portfolio. In a private car, we do feel we are more in control because we are free to decide when to begin the journey (flexibility). The same feeling one gets when one invests directly in shares (equity). We can invest in any company we feel like unlike a mutual fund where this decision is left to the fund manager. In the Volvo bus we are quite sure about the driver because he drives under certain guidelines, while in a private car, we are not sure of the driver’s credentials and as such they tend to drive a bit too fast in the hope of reaching the destination earlier. The same thing holds good in direct equity investing where the greed to reach our goals faster makes us assume greater risks without considering many factors that a fund manager considers. The Volvo bus followed a process just like a fund manager does with his corpus: 1) It started on a scheduled time that forced discipline upon us. We couldn’t laze and delay our departure. We had no option but to reach the bus stop on time. 2) The bus had a maximum speed limit and could not take undue risk. Even though this meant some loss in time, it ensured safety. 3) The Volvo bus being technologically superior to any private vehicle, provided us more comfort than any car could have provided. Even after travelling for six hours we were not at all tired. The same is seen in mutual funds. By using diversification as the principle strategy and selection based on scientific evaluation methods, it provides a cushion of safety even though it might compromise ‘returns’ to some extent. This makes the experience a lot better. Now, comes the best part of the comparison. Although the average speed of the private car would have been more (with higher risk), the overall time taken to reach Bangalore would be more or less the same. This is because although the car might have overtaken the bus, the bus would catch up with the car either at the next traffic snarl or traffic signal. Likewise ‘returns’ are essentially guided by the economy and

Just like in the case of a road journey, in the investment journey, it often helps to be regular and boring in order to experience success therefore whether you invest directly and create your own portfolio or invest through a mutual fund, long term returns will tend to be similar. In fact, because of the process orientation of the fund manager, the mutual fund returns would be more likely to be better than the ‘returns’ of a private portfolio. In short, the Volvo bus followed a ‘process approach’ and delivered the goods. Likewise, investment gurus have always recommended a ‘process’ approach to investing like SIP investing, diversification, time in the market strategies etc, which delivers long -term results. In the investment journey, like the road journey it is often better to be regular and boring to experience success. Thus, a small trip in a Volvo bus taught me how direct investing compares with investing through a professionally managed mutual fund. F

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realty check

A. SHANKAR

Why Smart Cities Need Smart Citizens

raditionally, initiatives like Smart City are indicators of developed economies. A developing country will become a successfully developed country when its citizens also upgrade and update themselves. In India, the Smart City initiative is in full swing, with the top 20 smart cities stepping into the next stage of implementation. The Smart City mission focuses on the technology overlaying the basic infrastructure that will be built in right places and in sufficient quantities in the cities. However, the most vital aspect – the citizens who live and work in these cities – must be integral to the implementation process as well. The success of Indian Smart Cities is firmly vested in Smart Citizens. A smart citizen is one who has civic sense and respects the law. Some of unanswered questions about Smart Cities as far as citizen participation is concerned are: • Will people obey the traffic rules, drive within speed limits and desist from jumping signals? • Will they put pedestrians first and leave space for them? • Will they respect elders and give way to senior citizens? • Will they park their vehicles at designated lots and not anywhere else? • Will they maintain hygiene not only their flats but also in the common areas of their apartment complexes? • Will they throw garbage only in bins and practice source segregation during garbage disposal? Awareness about smart solutions plays crucial role in developing true smart citizens. Though the local authorities of our smart cities will make substantial investments in smart solutions, they cannot skimp on efforts to raise citizen awareness on the efficient usage of these solutions and services. For example, energy saving cannot

posed technology. Good governance is always measured by the extent to which it involves its citizens in the overall decision-making process. In an increasingly complex world, citizens’ inputs are a critical resource for policy-making. Good decision-making requires the knowledge, experiences, views and values of the public. The participation of citizens has become simpler through online Government portals. Such participation reduces the conflict of opinions and makes implementation easier. Smart citizens need to be fully inclusive, innovative and sustainable.

Joint Engagement of Citizens and Government:

be achieved merely with smart meters in the home. In order to reduce energy consumption and save money on bills, consumers need to not only monitor their energy use but also make an effort to change the whole family’s daily energy usage behaviour. This would include shifting to energy-efficient appliances, reducing TV time and switching off electrical appliances when not in use, especially during peak periods. A smart city connects people with their environment and city to create more efficient and optimal relationships between available resources, technology, community services, and events in the urban fabric. The aspects to be followed to make the Smart City mission successful through Smart Citizens across India:

Citizen Participation:

Most of developed cities ensure that citizens participate in every aspect from cleaning to safety requirements. Citizen participation ensures citizen satisfaction, which in turn ensures maximum efficiency of the pro-

Political will and the technical capacity to engage citizens in policy making, or providing accurate data on government performance, are the hallmarks of developed democracies. Though making policies for a city’s growth and comprehensive development is important, a smart city acknowledges that policies alone are not enough to reach their goals. It solicits support from its citizens and local stakeholders to make this happen. Citizens are called upon to jointly take responsibility and engage in the process. Building social capital is essential to ensure that smart citizens acquire the capabilities and skills to meet the challenges of the future. Only then does a city become ‘future ready’.

Technology Support: Technology has given the world new dimensions; globally, citizens are becoming technology-oriented in every aspect concerning their com-

Without smart citizens, the Smart City proposals will hold good only for documentation – not implementation

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REALTY CHECK

ANSWERS ARE AWAITED QUESTION#1 Will people obey traffic rules, drive within speed limits and desist from jumping signals?

QUESTION#2 Will they put pedestrians first and leave space for them?

fort, convenience and safety. Technology support has become an essential factor for the growth of a city and its citizens. The use of innovative information and communications technology (ICT) applications, smartphones and smart fixtures are all part of the process of making smart citizens. When city dwellers use the Internet to make smarter, more informed choices, cities become smarter too. The right approach towards the Smart City mission involves a balance between technological and non-technological approach. Already, the Government has launched the necessary tools to help citizens participate proactively in Smart City mission. These include street campaigning, education programmes in schools and colleges, media advertisements and hoardings, consultation programmes with Government officials, online participation etc. MyGov.in is an excellent example of ICT integrating and increasing the efficiency of citizen engagement. All policy-level decisions will directly involve

QUESTION#3 Will they respect elders and give way to senior citizens?

QUESTION#4 Will they park their vehicles at designated lots and not anywhere else?

citizens’ opinions. This platform will make the system more transparent and act as an interactive forum between citizens and the Government. It allows citizens to post their comments and suggestion on any proposal and also includes different types of participation (i.e., voting, raising public awareness, advocating for an issue, monitoring political processes) that will best promote democratic development in different contexts. It is a technology that is created to purposefully connect citizens’ groups and amplify their voices. In addition, private technology developers are continuously exploring smart technologies from smart mobiles to smart furniture and appliances, marketing them at affordable prices to reach to all categories of people. This not only helps in cost saving but also connecting with globally-employed smart technologies. To ensure a greater share of online participation channels such as through smartphone applications and social media, municipalities needs to

A Shankar is National Director & Head Operations - Strategic Consulting, JLL India

QUESTION#5 Will they maintain hygiene in their flats and common areas of the apartment complexes?

QUESTION#6 Will they throw garbage only in bins and practice source segregation during garbage disposal?

invest in smart people - not merely in smart technologies. Only then will tools like smartphones and mobile applications have the potential to revolutionize city governance and contribute to the making of people-centric Smart Cities.

To Sum •

Smart cities need to have inclusive, innovative and sustainable smart citizens. Smart cities are directly proportional to smart citizens • The smarter a city is, the greater is its dependence on equally efficient, smart citizens. A city is a reflection of how its citizens perceive it, and a smart city actually is a city as an innovative ecosystem. There is no such thing as a template or a magic all-in-one smart city application. Allowing citizens to become active in the process of city design and building enabling ‘bottom-up’ innovation and collaborative ways of developing systems out of many loosely-joined parts will help in implementing Smart City successfully. F

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CAREER SCOPE ONLINE STAMP

Fix These Five Mistakes That Are Killing Your LinkedIn Profile A proper profile is more important than ever and it needs to be different from your physical resume. Anish Majumdar lists some missteps to avoid

id you know that 89% of recruiters report having hired someone through LinkedIn? Or that over 10 million people found their current job through LinkedIn? If you’ve been satisfied with a “placeholder” LinkedIn profile up to this point, or feel like landing a job through the site isn’t a viable option, STOP.

The hiring landscape has changed, permanently, and those who adapt will secure the best opportunities. Here are five of the biggest mistakes people make on their LinkedIn profiles:

1. Not Using The Headline To Its Fullest Potential Pull up your profile and take a look at the “headline” that’s immediately underneath your name. If it all does is list your

current job title and the company you’re working at, CHANGE IT! LinkedIn headlines accept a maximum of 120 characters. Use this space to directly address your audience, whether it’s recruiters, fellow professionals, or potential clients. Here are some examples: • Hospitality & Gaming Executive with over 12 years of experience in revenue

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CAREER SCOPE • • •

4. Adding Non-Relevant Skills And Endorsements

growth and operational turnarounds Merchandising and Business Development Leader with a passion for building innovative Retail Programs Founder of AZPro, a 100% customizable B2B e-commerce application. Let’s talk Currently looking to re-engage into Pharma/Medical Device Sales (Note: this is WAY better than listing “Unemployed” in your headline)

If you are currently seeking a role as a Director of Human Resources, but the bulk of the skills and endorsements on your profile relate to your days as an administrative assistant, that mismatch is going to affect how frequently your profile turns up in searches recruiters and employers run for HR Director candidates. To overcome this hurdle, it is necessary that you align the skills in your profile with your current (not your past) aspirations. • Run an Advanced search on LinkedIn for people who have the job you want. Bring up the first few profiles that come up (these are usually the most visible professionals on the site) and review their Skills and Endorsements section. • Make a note of skills they’re frequently endorsed for which you possess. • Add these skills to your profile.

2. Rehashing Your Resume Within The Summary Section

While lifting content from your resume to fill out the “Summary” section of your LinkedIn profile is easy, it’s also ineffective. A great resume is about communicating fit for a specific position, but LinkedIn is geared towards a broader audience. For the latter, it’s far better to think in terms of sharing your story and/or core beliefs. Here’s an example: I believe that imparting a sense of MISSION to teams, building SCALABLE PROGRAMS, and leveraging POWERFUL BRANDING AND MARKETING strategies are at the heart of success in the food retail industry. I started in the business over 20 years ago as a cashier, and on the way to becoming Director of National Marketing for some of Canada’s largest chains, have truly seen it all from the ground-up. No task is beyond or beneath me if it moves the ball forward, and this is a mentality which I’m always seeking to instil in organisations. Major areas of focus: • Brand development, re-branding, and positioning within expedited time frames. • New product development & launches. • Development and execution of successful, creative annual Marketing Plans. • Management of advertising and promotion agencies and staff. • Providing solutions in challenging marketing situations, and successfully navigating downturns.

3. Not Having Recommendations Recommendations are crucial to establishing credibility on LinkedIn. A few sentences singing your praises by a former boss or colleague can do more for you than paragraphs of self-congratulatory prose. Here’s a message template you can use when reaching out to someone for a recommendation: Hi [Name] Hope all is well! I really enjoyed working with you on/at [project/company] and would be very grateful for a brief LinkedIn recommendation. If you could touch on my capabilities in [quality #1] and [quality #2] that would be a huge help. Just a few sentences is all I’m after. It was a real privilege working with you, and I know that a recommendation would significantly boost my profile. Thanks in advance for your time, and hope to hear from you soon. Thanks, [Your Name]

Expert tip: endorsing the skills of other people in your network is the fastest way to have your skills endorsed as well. Visit the profile page of anyone in your network and you’ll be greeted with opportunities to start endorsing them (and others).

5. Not Including Personal ‘Hooks’ It’s amazing how often a seemingly insignificant detail about a person’s nonwork life will result in an interview. Familiarity is a powerful motivator. If someone feels like they know you, or that you share a major interest, they’re much more likely to pursue a connection. Here are some sections you can fill out on LinkedIn to provide those personal ‘hooks’: • Volunteer Experience (avoid inserting anything polarising here, such as religious or political activities) • Causes you’re interested in • Joining Non-Professional LinkedIn Groups (ex. Awesome Mountain Biking, Women in Photography) • Personal Interests F

Anish Majumdar, CEO of ResumeOrbit.com is an executive resume writer, LinkedIn expert, and interview coach. Published by agreement with CAREEREALISM.com, a leading global jobs and career advice website.

38 The Finapolis l JUNE 2016

EYE ON EUROPE BREXIT

What Will Britons Decide? The outcome of the long-promised vote could have a tremendous impact on the economic future of Great Britain and much of the world, says John Browne

n February 20, UK Prime Minister David Cameron announced that the ‘in/out EU referendum’ he had promised in the campaign for the last parliamentary vote would finally take place on June 23. The outcome of the long-promised vote could have a tremendous impact not merely on the future of Cameron and his coalition but on the economic future of Great Britain and much of the world, including the European Union (EU) and the United States. It’s arguable that the referendum will be the most significant vote the world will see between now and the US presidential ballots in November. Of course, Cameron is desperately trying to convince Britons to cast their votes in favour of the UK remaining ‘in’ the European Union. In order to pacify the deeply held mistrust of the European Union that is harbored by many in Great Britain, Cameron has negotiations a list of “concessions” from the EU which he claimed would secure a special status for the UK within the EU. Ominously for Cameron, French President Francois Hollande expressed doubt that the concessions would even be included in any binding treaty. Already the fault lines have sharpened. But as with the current climate in the US, sentiment does not boil down to a simple left/right spectrum. A true understanding of the EU demands recognition of the basic rationale for its formation. In the late 1940s, European leaders, including Konrad Adenauer of West Germany and Jean Monnet of France, dreamed of a European superstate powerful enough to negotiate on

equal terms with the US and the Soviet Union. The resulting surrender of sovereignty by the once-proud European empire ruling nations was not to be achieved easily. Allegedly, Jean Monnet wrote to a friend in April 1952, “Europe’s nations should be guided towards the superstate without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.” Regardless of whether Monnet actually penned those words, the move towards ‘ever closer political union’ has been pursued rigidly, relentlessly and ruthlessly by the Euro elite exactly as those words suggested. The path was lubricated by huge amounts of targeted funding and activism by the European Central Bank, which showered monetary largesse on

those member nations facing financial strain. Although these wealth redistribution policies had become increasingly unpopular among the creditor nations of Europe’s northern tier, they were not enough to derail the drive for further unionisation. It was not until the recent wave of mass immigration from Muslim countries that the average European citizen began to realize just how much sovereignty their political leaders had yielded to the EU. In March, Angela Merkel’s Christian Democrat party, which has long championed greater EU integration, took a major drubbing in local German elections as a result of her fanatical support of open borders for Middle Eastern refugees. The big winners were far right parties that oppose open borders and are pushing for the return of greater national sovereignty. However, these rumblings have yet to

JUNE 2016 l The Finapolis

EYE ON EUROPE make a significant impact on policy. With the unique exception of Greenland, a Danish territory, the EU has allowed no national exits or even material retreats from its relentless drive towards ever closer political union. With this in mind, and in light of President Hollande’s comments, many Britons have come to doubt that Cameron’s promised “special status” will be all that special. Perhaps the biggest political development of recent months has been the defection of Boris Johnson, the charismatic and popular conservative mayor of London to the “out” camp. By breaking with the leader of his own party, Johnson has threatened to fragment the Conservatives (much as Donald Trump is doing with the Republican Party). But, as with Trump, there may be more than purely ideological motivations behind Johnson’s gambit. Even if victorious, Cameron could be h people, and seen by almost half the British rvative elein particular among conservative ments, as having sold short his country’s interests. Sensing this, he may have to 3rd vote and resign soon after the June 23rd p to his old try to hand the Premiership e Exchequer, friend, and Chancellor of the ion plan may George Osborne. The succession nson needed have been the push that Johnson aign. His outto finally join the ‘out’ campaign. mbined with standing oratorical skills, combined arty’s Nigel those of UK Independence Party’s Farage, could prove to be a major factor n of the unin convincing a major portion

Obama for meddling in internal British affairs and for supporting a surrender of sovereignty that would be wholly unpalatable to Americans. Great Britain, a late entrant, has long been the ‘odd-man-out’ among EU member-nations. Its language, culture, its common law legal system and its financial capital markets are aligned closely to those of the United States. Even as a cultural ‘misfit’, the UK’s membership is of great economic and political importance to the EU. According to 2014 figures from the IMF, Britain has the second largest European economy. Paying the second largest net contribution to the running costs (2013 figures from Highcharts.com), the UK is a key element in the EU’s continued viability. Those who have been attempting to spread economic fear through dire warnings on lost trade

decided vote. y need The “out” crowd will likely o-EU all the help it can get. The pro-EU loy forces are expected to deploy dimassive advertising expendide tures to allege that British trade ll and economic vitality will e plummet with an exit from the Eurozone. Even US President Barack Obama, who remains a popular political figure in Britain, travelled to the UK in April to galvanise support for an “in” vote. In response, ated Boris Johnson has excoriated

John Browne is Senior Economic Consultant to Euro Pacific Capital.

A Brexit would represent a precedent for other nations, such as Greece, Portugal and even Italy to leave the Eurozone. Any resultant threat to the euro, the world’s second fiat currency, could impact the international monetary order have failed to mention that the EU has enjoyed a trade surplus with Britain, which rose to over $6 billion per month in 2014 (Office for National Statistics). Politically, Great Britain has an independent nuclear deterrent and a permanent seat on the UN’s Security Council. In both of these critical areas, the UK has operated for over seven se decades in uniquely close collaborati collaboration with the US. Envious and covetous o of this quiet but most powerful ‘special relationship’, the EU may want it severe severed. The implications of a revolutionary ‘out’ vote by British vote voters should not be underestimated. It may iinfluence even the US election. Clearly, a BREXIT would represent a precedent for other nations, such as Greece, Portugal a and even Italy, which already may wish co covertly to leave the Germanic strictu strictures of the Eurozone. Any m major threat to the euro, tthe world’s second fiat curre currency, could impact an intern international monetary order built b on an unprecedente mountain of creddented it-base it-based debt. The uncertainth political future of ty of the the EU combined with the costly e effects of deeply negarate in European banks tive rates could incr increase interest in alternative store stores of value. June 23rd may m prove to be a day of destiny for the United Kingdom, if not the worl world at large. F

COOK’S CONUNDRUM THE ROAD AHEAD

What Next for Apple? Realisation is dawning that there may not be another iPhone-like hit that can drive the company’s growth in the future

pple’s disappointing second quarter earnings – including the first-ever drop in sales for the iPhone – sent the company’s stock tumbling for eight consecutive trading sessions. It was the first such drop since 1998 and, coupled with comments by activist investor Carl Icahn that he has dumped his shares in the company, it accelerated

worries about how Apple will deliver the strong future growth that investors have come to expect. Coming off more than a decade of blockbuster products, Apple – the most valuable company in the world based on market capitalization — has become so large that Wharton experts say it is now confronting the law of large numbers, which suggests that its high earn-

ings and growth in share price will eventually slow. At this point, what Apple needs is its next iPhone – but Wharton experts caution that it will take more than moonshots to cement robust future growth for the company. Moreover, it’s unlikely that the company can come up with a new hit product that will rapidly improve sales immediately. In the meantime, the iPhone is coming off a strong upgrade cy-

JUNE 2016 l The Finapolis

COOK’S CONUNDRUM cle, the iPad has lost momentum, and the Apple Watch, while successful to some degree, hasn’t moved the needle as significantly as many past new products. “No … company can grow forever. Apple has had an extraordinary run, and it’s still a phenomenally successful company,” says Kevin Werbach, a legal studies and business ethics professor at Wharton. “Few companies in history have ever had a product as successful as the iPhone, so it’s a bit much to expect that Apple find a second one.”

An Expectations Problem? Apple’s sales for the fiscal year ending September 30th, 2015, were $233.7 billion, up from $182.8 billion in fiscal 2014. By contrast, in fiscal 2011, Apple sales were $108.2 billion, which was up from $36.54 billion in fiscal 2009. Wall Street is expecting Apple to grow revenue by under 4% in fiscal 2016, compared with a 28% revenue expansion in the last fiscal year, Thomson Reuters reported in January. While the smartphone market globally may be hitting the saturation point, Apple CEO Tim Cook noted that the iPhone, which accounts for 65% of the company’s revenue, can still take share from Android users and grow globally. Though the earnings announcement was disappointing in the face of past successes, Apple is hardly hurting: Second quarter net income was $10.5 billion on revenue of $50.6 billion. A year ago, Apple reported second quarter earnings of $13.6 billion on revenue of $58 billion. Cook said on the company’s earnings call that Apple’s iPhone business is still

Apple’s key challenge would be to preserve its premium brand value for hardware. At a time when the smartphone market is starting to look more like the PC industry, with little differentiation in product lines, people pay more for Apple hardware, giving the company a unique advantage strong. “From an upgrade perspective, during the first half of this year, the upgrade rate for the iPhone 6s cycle has been slightly higher than what we experienced in the iPhone 5s cycle two years ago, but it is lower than the accelerated upgrade rate we saw with iPhone 6, which as you know, was a big contributor to our phenomenal revenue growth a year ago,” said Cook on the April 26 call. “We continued to see a very high level of customers switching to iPhone from Android and other operating systems. In fact, we added more switchers from Android and other platforms in the first half of this year than any other sixmonth period ever.” Nevertheless, analysts are anxious about what Apple has in the iPhone pipeline in the future. “There was massive pent up demand for larger screens. This led to the mother of all upgrades when the iPhone 6 was released,” explained Macquarie analyst Ben Schachter in a research note. “We don’t think this is anything structural and will be solved by time. However, a second issue is a more significant concern. We believe that the lack of new ‘must have’ innovative features will lengthen the upgrade cycle. If iPhone 7 doesn’t surprise with meaning-

ful new useful features, we worry that consumers won’t upgrade.” In other words, the smartphone market is starting to look more like the PC industry, where there is little to differentiate different companies’ product lines and customers stretch the lifespans of their systems for longer than vendors would like. “The market is gradually shifting from smartphone introduction to smartphones on a replacement cycle,” says Werbach. “That’s simply not going to be as dynamic a market opportunity, although it will still be a very good one. Microsoft is still doing fine after personal computers shifted from a rapid growth market to one based on replacement, although it’s not the rocket ship it once was.” But it’s clear that Apple’s once-hot product line is cooling. For the second quarter, Apple’s iPhone revenue was down 18%, iPad revenue fell 19% and Mac revenue fell 9%. On the bright side, Apple’s services category (which includes Apple Music and iCloud subscriptions, software sales and App and iTunes store revenue) was up 20% to $5.99 billion in the second quarter. Apple’s “Other Products” category, which includes Apple Watch, Apple TV and Beats headphones, increased 30% to $2.19 billion.

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COOK’S CONUNDRUM

“The next two to three quarters will be critical for Apple because there’s a problem of expectations for both the iPad and iPhone,” says Saikat Chaudhuri, an adjunct professor of management at Wharton and executive director of the school’s Mack Institute for Innovation Management. “There’s a natural maturation process, and Apple is big and slowing down.”

‘One Great Innovation Can Last for a Decade’ David Hsu, a management professor at Wharton, says that Apple’s conundrum isn’t unique. Many companies such as Microsoft and IBM have developed new technologies to grow quickly, but then are forced to reinvent their businesses. “One great innovation can last for a decade,” explains Hsu. “But the broader issue is that the smartphone category has matured and many people have multiple devices. It’s hard to sustain the iPhone growth and create new products because Apple is following up the most popular product in history. “There’s no doomsday picture here,” adds Hsu. “But the iPhone peak may have already passed.” Indeed, Apple projected further deceleration in sales as third quarter revenue is expected to be $41 billion to $43 billion. Average selling prices will also fall due to the launch of the iPhone SE, a 4-inch phone device that’s less expensive and aimed at emerging markets. “It is becoming clear that Apple has a significant iPhone growth problem on its hands,” said Neil Cybart, a former Wall Street analyst

Reports of an Apple car have been rampant, but an entry into the auto industry could reduce profit margins: for instance, Ford had annual sales of $140.56 bn in 2015, but its net profit margin is projected to be 5.6% this year, against Apple’s estimated projected 21% who follows the company via his subscription Above Avalon site. “The combination of a slowing iPhone upgrade rate and declining number of growth catalysts for expanding the iPhone’s addressable market will make it very difficult for management to report unit sales growth going forward given its current strategy.” However, Peter Fader, a marketing professor at Wharton, isn’t worried about Apple. “Customers are more in love with Apple than ever before. I’d be worried if Apple customers were switching to Android and Mac users were going to Windows,” says Fader. “There has been crazy growth, but Apple still has health and stability. Maybe Apple doesn’t have to swing for the fences.” After all, Fader adds, Apple’s greatest asset is its loyal customers. “The customer base is much more important to cash flow in the future,” says Fader, who notes that Apple will have to monetize its customer base better through cloud services and subscriptions.

Hits and Misses One factor behind Wall Street’s concerns about Apple is the realization that there may not be another iPhone-like hit that can drive the company’s growth in the future.

For years, rumours have surfaced about Apple getting into televisions and even automobiles. The Apple Watch is a new product line with potential, but it hasn’t approached the sales levels of the iPhone or iPad. “If Apple came up with a new product it may help,” says Chaudhuri. “Apple needs something new because rolling out next-generation products like the iPhone or iPad only carries the company so far.” Reports of an Apple car have been rampant. Apple’s entry into the auto industry could prove significant, but at the expense of profit margins. For instance, while Ford had 2015 annual sales of $140.56 billion, the company’s net profit margin is projected to be 5.6% this year compared to Apple’s estimated projected 21% for fiscal 2016. “It is not easy to become an automaker. I don’t know why Apple would take those profit margins,” says Chaudhuri. Werbach agrees that Apple shouldn’t fall into the trap of producing commodity hardware whether it’s a new category or the iPhone. “Apple’s key challenge is to preserve its premium brand value when it comes to hardware. People pay more for Apple hardware, even in markets where everyone else faces commodity margins. It gives them a unique advan-

JUNE 2016 l The Finapolis

COOK’S CONUNDRUM tage,” Werbach says. “If that goes away, Apple is unlikely to be able to differentiate enough on software and services to maintain its margins.” Fader says Apple needs to be careful about focusing on hit products as a way to drive sales. “Apple is going to have to be about running the business better than creating a ‘wow’ moment all the time,” says Fader. “How much of Apple’s future revenue is going to be product sales vs. services? The product upgrade approach is working for Apple, but the value is in all the stuff surrounding the hardware.” While chasing an automobile could be in Apple’s future, Fader says the company shouldn’t seriously consider the market for “10 to 15 years” — but it’s fine to have “a toe in the water.” Chaudhuri says that Apple can still develop hardware hits, but it will have to look to new markets. For instance, he argues that Apple’s partnership with IBM to develop corporate apps highlights how the company is aiming to target the business-to-business market. In addition, Apple could be more of a player in the Internet of Things, networks of sensors that are making everyday objects smarter. “Apple could play a role in telematics to even how automation is run,” says Chaudhuri. “There are other areas to exploit.” One way that Apple could develop new products and markets is through acquisition. To date, Apple has bought companies that can be easily integrated into its products, such as its 2014 purchase of Beats Electronics for $3 billion, which included the popular line of headphones, an audio hardware business and a streaming music service. Fader says Apple could acquire big brands in the future and fold them into the Apple culture. Maybe Apple even buys Tesla, he adds, which is one of the few startups in the auto industry to seriously challenge industry incumbents. According to Hsu, the larger question

The Apple Watch, while successful to some degree, hasn’t moved the needle as significantly as many past new products is about Apple’s ability to develop new products through its own research and development. “Apple will still play a big role, but it’s more about design for the company. Apple is more of a visionary, but doesn’t have a R&D heritage,” says Hsu. “Apple’s role has been to redesign existing categories.”

Beyond the Balance Sheet Given the pressure facing Apple, it’s not surprising that Cook has emphasized services and subscriptions for the last two quarters. “We feel really great about the early success of Apple’s first subscription business, and our music revenue has now hit an inflection point after many quarters of decline,” said Cook during the earnings call. He noted that App Store revenue was up 35% in the second quarter. “One billion-plus active devices are a source of recurring revenue that is growing independent of the unit shipments we report every three months.” While Apple searches for its next category to tackle, Fader says the company needs to focus more on selling services to is installed base of customers. To Fader, Apple’s growth conundrum is

analogous to software companies that have to transition from business models that revolve around licensing to one focused on subscriptions and cloud services. The difference for Apple is that its growth to date has been mostly about hardware. “Apple will have to move from selling things to retaining customers and selling services and subscriptions,” says Fader. Chaudhuri agrees with Fader, but has doubts about Apple’s ability to be a leader in services. “I don’t think Apple has it in its DNA to be a strong services provider,” he says. Fader says there is historical precedent for a company to transition to a new model. Adobe Systems was among the first companies to transition to cloud services, he notes, and Starbucks refocused on customer experience, easing transactions and then selling its customer base more products through a loyalty program and apps. “Starbucks also used to be about selling a product, but realized that the competition caught up,” says Fader. “Now it’s about a customer base, experience and related things to monetize.” Apple still has work to do, according to Fader. “Apple isn’t No. 1 in any cloud category,” he notes. “For instance, Apple Music has a user experience comparable to Spotify, but it can’t sell services without a shiny new object to attract customers.” The challenge for Apple is that it doesn’t have the analytics or customer knowledge that rivals like Amazon or Netflix have. “Apple has been bad with data and predictive analytics behind the scenes,” says Fader. “The key to victory will be valuing the customer base.” Apple should study Starbucks, says Fader. “Because of data and analytics, Starbucks has made it very easy to order more coffee,” he points out. Ultimately, Apple has to see its customer base as its primary asset much like Amazon does. “Apple’s most golden asset is the one that isn’t on the balance sheet,” says Fader. F

Republished with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.

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foreign eye

PETER SCHIFF

For All of Trump’s Prescriptions, He’s Got One Diagnosis Right

onald Trump’s critics have heaped scorn on his calls for protective tariffs to deal with America’s widening trade imbalance and the resulting loss of higher–paying blue collar jobs. Some have accused him of trying to turn back the clock in pursuit of a cheap populist ploy and have said that he simply refuses to acknowledge that America is now an information and service economy for which large trade deficits are the new normal. But voters are sensing that The Donald is right to sound alarm bells, and that something radical needs to be done to revive manufacturing to make America great again. But his tariff solution is hardly the best medicine. To be honest, given the even worse solutions that are being offered by the left, Trump’s instincts may be preferable. Ironically, in the late 19th and early 20th Centuries, the elimination of tariffs was a populist issue. A little more than a century later, the polls have reversed completely. Prior to the introduction of the income tax in 1913, tariffs were the Federal Government’s principal source of revenue. During the long and contentious campaign to enact the 16th Amendment (which allowed the government to tax incomes for the first time since the emergency Civil War-era 3% to 10% income tax), proponents argued that the passage of a “soak the rich” income tax would allow the government to repeal the tariffs and thereby transfer the tax burden from the working class, who paid the tariffs through higher prices on imports, to the ultra-wealthy, who were the sole target of the income tax as it was originally conceived, packaged and sold. (The tax originally imposed rates from 1% to 7%, and only applied to fewer than 1% of Americans. The 99% supported its enactment solely because they believed they were getting something for nothing, in this case, government

Although critics have heaped scorn on his calls for protective tariffs, voters are sensing that The Donald is right to sound alarm bells, and that something radical needs to be done to revive manufacturing in America

services paid for by the rich. In fact, in 1895, when the Supreme Court bravely declared the government’s first attempt to replace tariffs with an income tax unconstitutional, the justices were personally vilified as defenders of the rich.) But once the Federal Government got its foot in the door, it rapidly raised the tax rates and expanded the base of taxpayers, ultimately subjecting the middle class to rates far higher than anything originally contemplated for rich. If this does not provide a sterling example to the legions of Democrats “Feeling the Bern” of how class warfare can backfire on the class waging the war, I don’t know what does. Ironically, no single tax has done more harm to the middle class than the income tax. So while the populist movement of the early 20th Century demanded the removal of tariffs, the populist movement of today wants to bring them back. But Trump is not talking about replacing income taxes with tariffs. He simply wants to add tariffs to the existing tax structure (though he does want to lower the rates). This will only compound our problems and make our economy

far less competitive. It will not bring back our jobs; it will only increase the tax burden on the American economy, destroying even more jobs. If we want to undo the deal we made with the devil over 100 years ago, we need to repeal the income tax as well. If that substitution were on the table, I would argue that tariffs offer the lessor burden. Tariffs are a much simpler form of taxation that do not require armies of accountants, lawyers, and tax preparers, who are needed to comply. And while we are repealing the income tax, we should repeal most of the other federal taxes (particularly the payroll and estate taxes) and laws enacted since then as well. But that is not what is being discussed. Our trade deficits do not result from bad deals but bad laws. Put simply, the amount of taxation and regulation that have been layered on our business owners and their employees have made it impossible for US firms to compete with foreign rivals. Contrary to the currently popular talking points, low wages are not the only means to establish successful trade balances. The US became the dominant exporter in the world in the 19th and 20th centuries while our currency was strengthening, we were paying the highest wages, and our workers enjoyed the world’s highest living standards. Germany is doing so today. Strong economies compete with quality, innovation, efficiency, and flexibility. Those

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FOREIGN EYE

capacities have been stifled by government policies that have nothing to do with trade agreements and have everything to do with domestic policies. We need to repeal those laws. Trade deficits are not the problem. They are the consequence of the problem. The problem is big government, financed largely by the income tax, which has made America uncompetitive. But it is unlikely that tariffs alone, or even a broad-based national sales or value-added tax, could bring in all the revenue generated by the direct taxes we should eliminate. To survive on excise taxes, as the founding fathers envisioned, requires making the Federal Government a lot smaller. But Trump is not promising to make government smaller. If anything, he is promising to make it even bigger. He has made no promises to cut government spending across the board, including popular “entitlements” like social security,

The elimination of tariffs was a populist issue in the late 19th and early 20th centuries as well, but the polls have now reversed: the movements of the early 20th Century demanded the removal of tariffs, while today’s populist movement wants to bring them back which Trump has promised not to touch. To make America great again, we need to recreate the free-market environment that made her great in the first place. If tariffs were offered as a replacement to our ridiculous and destructive personal and corporate tax, and payroll and estate taxes, then America may become more competitive and our greater efficiency may even allow us to overcome the tariffs that other countries would likely impose on us in response. But slapping tariffs on imports, while doing nothing to improve the conditions for business efficiency, simply means that prices for American consumers will rise

significantly, without sparking a revitalization of American manufacturing prowess. Don’t forget the global market contains over 7 billion consumers, the US market just under 320 million. Insulating our manufacturers from this larger marketplace guarantees that we will never become globally competitive. So instead of criticising Trump for his misguided advocacy of tariffs as a panacea, we should at least give him credit for recognising a serious problem that so many others ignore. The real criticism should be directed at those who would allow America to continue down this self-destructive path. F

Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital. His podcasts are available on The Peter Schiff Channel on Youtube.

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BOOKMARK

Ford, back on road American Icon chronicles the carmaker’s many crises, while focussing on its last. Ajit Joshi finds it a superb manual for executing a corporate turnaround here are a few other books about the collapse of the US auto industry in 2008 and 2009, such as “Once Upon A Car”, “Crash Course” and “Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry”. Features of the Ford story appear in all those books, but “American Icon” is the first to look at Ford exclusively. The book explains the story of the Ford Motor Company and many existential crises it has seen in its 111 year old history. The company overcame each of them by launching breakout products such as the Model A, the Mustang and the Taurus. The book focusses primarily on the period 2006-2009, however it also throws light on Ford’s beginnings and its founding family. Bryce Hoffman, a journalist who has been covering Ford for the Detroit News from 2005, has captured the corporate culture that dominated the company for decades before the arrival of Alan Mulally. With his skills, access to Ford’s top executives and top-secret company documents, and diligence, Hoffman explains how Mulally turned Ford Motor Company around despite the extreme economic environment and financial crisis. The most important point Hoffman has made is, Bill Ford put aside his ego and accepted the fact that he could not change the company’s destructive culture and needed an outsider. Finally, he was able to convince Alan Mulally to leave his successful career at Boeing to turn around Ford. Bill Ford managed the Ford family and many outside stakeholders while Mulally handled

shortlisted for the purchase of JLR — Tata Motors, Mahindra & Mahindra and private equity firm One Equity Partners, headed by a former Ford CEO. The bidders made presentations to the unions, the Ford management, and the UK government. The unions supported the Tata bid. The book teaches you the steps the executives and implemented the for creating and executing any organisational changes the company turnaround plan, like shared sacrifice greatly needed. from all stakeholders, leadership by The book spells out in detail how all stakeholders to commit to change, Mulally’s vision and ruthless execution acceptance of the New Normal, helped him achieve the transformation. expenditure controls by eliminating His steps included starting his nownon-value services and outsourcing nonfamous weekly business performance core services, creation of a continuous review meetings, matching production improvement mentality throughout to demand, closing down many plants and finding ways to improve and make and easing out workers, and selling things better. brands such as Aston Martin, Volvo, This book is not only interesting Jaguar and Land Rover. Apart from (not what you normally expect from a these initiatives he made massive business book) but also inspiring. This investment in product development is a great story, well told, that excites and to integrate Ford globally (with the the mind. Hoffman has started each concept he called ‘One Ford’) by ending chapter with a quotes of Henry Ford, regional arenas. Further, his the company’s founder, and remarkable steps also include he has chosen the brilliantly raising $23 billion to fund the as each of them summarises company’s restructuring just the chapter that follows. before the financial markets Following is the quote that broke down. outlines the book: The book covers Tata’s “Businessmen go down acquisition of Jaguar and with their businesses because Land Rover (JLR). It feels they like the old way so well proud while reading about they cannot bring themselves the long-established to change. One sees them American Icon: Alan Mulally all about — men who do brands (once the crown and the Fight to Save Ford not know that yesterday is jewels of the British Motor Company motor industry) being past, and who woke up this Author: Bryce G. Hoffman taken over by Tata. morning with last year’s Three bidders had been ideas.” F Price: ` 599

JUNE 2016 l The Finapolis

VARIETY ANSWER BACK # 4 It’s only a few questions long, but the Finapolis quiz will still test the mettle of the best: we ask anything on everything. This month, we ask you to match five questions with the given artists. 5) Identify the painter based on the image shown below.

1) “Poor artists copy. Great artists steal”

3) This artist is famous for his painting Cypresses, among others 4) These two French painters are stalwarts of the impressionist period

Andrew Moore/ Flickr

2) This artist was so fascinated with a Hollywood actress that he designed a sofa in the shape of her lips and used it to create a room which looked like her face

Answers: A) Salvadore Dali B) Pablo Picasso C) Vincent Van Gogh D) Jackson Pollock E) Monet Manet

Send your answers to feedback@thefinapolis.com latest by May 31, 2016. Winners will be acknowledged in the quiz section of the subsequent month’s issue.

SEE AND SMILE

Answers to Answer Back #3 1- D; 2- B; 3-C; 4-C Winners: B S R Murthy, Cyrus Talati, J K Hangal

KNOW YOUR COUNTRY’S FOOD The Jalebi story

his ‘knotty’ sweet is never considered an import, but believe it or not, the Jalebi came to India via Persian-speaking invaders before the 15th century. According to the Anglo-Indian dictionary Hobson-Jobson, the word Jalebi is derived from the Arabic ‘zulabiya’ or the Persian ‘zalibiya’. The sweet is equally loved in West Asia: Christian communities serve ‘zulabiya’ on the Feast of the Theophany (Epiphany), whereas in Iran it was traditionally given to the poor during Ramadan. In India, Jalebi as ‘Kundalika ‘or ‘Jalavallika’ finds mention in ‘Priyamkarnrpakatha’ (1450) and in the Sanskrit work ‘Gunyagunabodhini’ (1600). Jalebis are always a tangled mess, have you ever thought of straightt ones? You can find them in Lebanon, where locals will ou offer you ‘zellabiy a ’ , shaped like a finger.

QUOTABLE The stock market is a device for transferring money from the impatient to the patient — Warren Buffett

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by invite

ADHIL SHETTY

Do SIPs Really Eliminate Investment Risk?

isk in the financial world means the possibility of losing your money. This is measured using the fluctuation in returns of an asset. Take mutual funds, for example. In one year, a fund can provide returns above 50% while in the next year, the returns may turn negative. This is the risk you take when you invest in any asset apart from fixed income securities. Often, investors are hesitant of buying equity as it is risky. Choosing the right equity requires expertise. So they prefer the mutual fund route to invest in a set of companies selected by a fund manager. The fund manager has the requisite expertise to select and manage investments in a broad set of companies that form his fund’s portfolio.

Pros and Cons of SIPs

There are plenty of tools to manage one’s investments in equity. Of them, Systematic Investment Plans (SIPs)are a popular tool due to their simplicity and effectiveness. Moreover, SIPs are longterm investments. An SIP is a regular investment done at fixed intervals. An investor spends a fixed sum periodically – typically, monthly – to buy a selected mutual fund. The amount is taken automatically for investment by the mutual fund company. This way, an investor is buying small quantities of a mutual fund over a long period of time instead of making a one-time lump purchase. This shields him from market fluctuations that can send his fund value soaring or crashing. For example, an investor makes a lump sum purchase of a fund for Rs 5 lakh. But if a market crash reduces the fund value by 30% in the next year, the investor will be poorer by Rs 1.5 lakh. To regain his principal the next year, the investor needs the fund

Adhil Shetty is the CEO of BankBazaar.com

SIPs not only reduce the risk of big fluctuations in portfolio value, they also help to instill investment discipline to grow by almost 50% — unlikely in times of slow economic growth. However, if the same fund is bought using an SIP, these fluctuations will have minimal impact on the investment value. If the net asset value (NAV), which is the fund’s equivalent of market price of stocks, goes down, the same amount of investment can buy more units of the fund. If the NAV goes up, the investor anyway makes money from purchased units. Conversely, the same Rs 5 lakh can become Rs 7.5 lakh if the market suddenly goes up by 50% after your investment. An SIP is unlikely to achieve this sudden growth in a short time period. However, remember that one of the SIP’s roles is to mitigate the risk in investment by investing small amounts so that large fluctuations do not crush your investments. Any risk mitigation strategy, while helping cut losses, also caps the upside.

The biggest advantage of SIPs

While the general view of SIPs is that

it is the safer way to invest and hence reduces risk in investment, this view is partially true. The other purpose of SIP, perhaps more important, is that it instils the discipline of investing a fixed amount every month. Not many people harbour this simple habit, which can make a huge difference to their financial positions in the future. Moreover, SIPs enable investors to start with as little as Rs 1,000 per month. You can invest in a portfolio of companies under a mutual fund scheme with this amount. This is unlike buying shares, which can require a much bigger investment.

And don’t forget…

First, the selection of the fund should be based on your investment horizon and risk profile. Investors with shorter investment horizon (2-3 years) should choose debt or balanced funds while investors with longer time periods can invest in equity funds. Secondly, investors with highrisk appetite should prefer equity mutual funds while conservative investors should opt for debt or balanced funds. Finally, stay invested till your objectives are met. The right time to exit is when you have an urgent need or you have found a better investment after analysing the net benefit of switching. There is no other reason to exit an investment. F

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50 The Finapolis l JUNE 2016

STAT DOSSIER All figures as on May 24, 2016

Indian Indices: Performance Close May 24, 2016

Close April 29, 2016

Return (%)

Return 6 M (%)

Return 12 M (%)

PE Ratio

25305.47

25606.62

-1.18

0.41

-6.38

19.84

7748.85

7849.80

-1.29

1.32

-5.20

20.53

BSE 500

10270.35

10406.12

-1.30

0.10

-4.41

23.37

BSE Auto

18012.37

18469.40

-2.47

-1.73

-4.11

22.18

BSE Bankex

18703.47

19114.83

-2.15

-0.68

-8.31

19.75

BSE Capital Goods

12901.63

13202.64

-2.28

-7.44

-19.55

35.72

BSE Consumer Durables

11693.47

11787.17

-0.79

-5.12

13.07

32.44

BSE Oil & Gas

8912.68

9356.16

-4.74

-1.83

-4.39

12.72

BSE Metal

7445.84

7958.93

-6.45

7.29

-22.34

BSE Realty

1355.18

1356.71

-0.11

5.71

-11.18

39.87

5925.45

6268.16

-5.47

-10.72

-21.21

15.49

BSE Power

1803.41

1846.34

-2.33

-1.56

-10.37

19.39

BSE Teck

5977.89

6121.75

-2.35

4.64

0.20

20.08

Sensex Nifty

BSE PSU

Global Indices: Performance Close May 24, 2016

Close April 29, 2016

Return (%)

Return 6 M (%)

Return 12 M (%)

PE Ratio

MSCI World Index

1654.36

1670.80

-0.98

-2.56

-8.29

20.78

MSCI Asia Pacific Ex Japan

394.90

416.42

-5.17

-5.56

-22.27

13.31

19830.43

21067.05

-5.87

-9.47

-27.24

10.16

Singapore Straits Times (STI)

2750.23

2838.52

-3.11

-4.32

-20.06

11.66

S. Korea

1937.68

1994.15

-2.83

-2.43

-8.65

16.49

16498.76

16666.05

-1.00

-15.57

-17.91

19.99

17706.05

17773.64

-0.38

-0.60

-2.88

16.80

S&P 500

2076.06

2065.30

0.52

-0.61

-2.35

19.20

NASDAQ

4861.06

4775.36

1.79

-4.99

-4.49

30.12

49345.19

53910.51

-8.47

5.29

-9.64

84.97

6219.26

6241.89

-0.36

-1.28

-11.03

47.04

DAX 30

10057.31

10038.97

0.18

-8.74

-13.72

21.92

CAC 40

4431.52

4428.96

0.06

-8.54

-12.54

22.72

ASIA Hang Seng

Nikkei 225 AMERICA Dow Jones

Brazil Bovespa EUROPE FTSE-100

JUNE 2016 l The Finapolis

STAT DOSSIER All figures as on May 24, 2016

May International Commodity Futures Price Trends Close May 24, 2016

Close April 29, 2016

% Change

52 Week High

% Change from 52 Week High

52 Week Low

% Change from 52 Week Low

LME Lead 3 Month ($/t)

1650.00

1805.00

-8.59%

2009.00

-17.87%

1551.50

6.35%

LME Zinc 3 Month ($/t)

1829.00

1938.50

-5.65%

2253.00

-18.82%

1444.50

26.62%

8400.00

9445.00

-11.06%

13680.00

-38.60%

7550.00

11.26%

16.24

17.79

-8.72%

18.03

-9.94%

13.64

19.09%

4601.00

5050.00

-8.89%

6230.00

-26.15%

4318.00

6.55%

48.62

45.92

5.88%

61.82

-21.35%

26.05

86.64%

1556.00

1679.00

-7.33%

1782.00

-12.68%

1432.50

8.62%

16.61

16.16

2.78%

17.29

-3.93%

10.13

63.97%

1229.20

1290.50

-4.75%

1306.00

-5.88%

1046.20

17.49%

CBOT Soy Oil (cents/lb)

30.89

32.88

-6.05%

35.29

-12.47%

25.38

21.71%

ICE Coffee (cents/lb)

121.80

120.85

0.79%

139.00

-12.37%

111.05

9.68%

ICE Cotton (cents/lb)

63.01

63.76

-1.18%

68.30

-7.75%

55.66

13.21%

468.70

467.40

0.28%

486.40

-3.64%

329.00

42.46%

1.98

2.18

-9.09%

2.96

-32.99%

1.61

22.91%

1054.75

1021.00

3.31%

1088.00

-3.06%

844.25

24.93%

CBOT Corn (cents/bushel)

397.50

390.25

1.86%

438.75

-9.40%

346.50

14.72%

CBOT CORN

397.50

390.25

1.86%

438.75

-9.40%

346.50

14.72%

CBOT Soy Meal ($/t)

388.90

332.10

17.10%

398.30

-2.36%

255.70

52.09%

CBOT Wheat (cents/bushel)

464.00

478.00

-2.93%

615.75

-24.64%

435.25

6.61%

LME Nickel 3 Month ($/t) Comex Silver (S.oz) LME Copper 3 Month ($/t) Nymex Crude Oil (S/bbl) LME Aluminium 3 Month ($/t) ICE Sugar (cents/lb) Comex Gold (S/oz)

LIFFE Sugar (S/t) Nymex Natural Gas ($/mmbtu) CBOT Soybean (cents/bushel)

Commodities: May Gainers and Losers (%) MCX Crude Oil, 9.03%

NCDEX Wheat, 2.08%

Cardamom, 8.11% Mentha Oil, 1.97%

Soybean, - 0.08%

CoÆ©on, 1.56% Gold, -3.19% Zinc, - 4.15%

Barley, - 0.29%

Silver, - 5.36% Aluminum, -5.39%

RM Seed, - 0.48%

Lead, - 6.21% Natural Gas, - 6.26%

Soy Oil, - 1.27%

Copper, - 6.81% Nickel, - 9.31%

Turmeric, - 5.52%

The Finapolis l JUNE 2016

STAT DOSSIER All figures as on May 24, 2016

NIFTY TOP

Company

May 24, 2016

Asian Paints

April 29, 2016

956.25

866.25

10.39

HDFC

1172.75

1088.45

7.74

ITC

348.05

324.95

7.11

Zee Entertainment

439.10

414.90

5.83

47.00

44.60

5.38

IDFC

Company

May 24, 2016

Bank Of Baroda Punjab National Bank

April 29, 2016

(%) Change

129.80

157.90

-17.80

71.85

86.95

-17.37

Hindalco Industries

86.30

96.35

-10.43

State Bank Of India

169.50

189.00

-10.32

Tata Steel

317.70

351.10

-9.51

NIFTY MOVEMENT

CNX-MIDCAP MOVEMENT 14150 13700 13250 12800 12350 11900 11450

8570 8295 8020 7745 7470 7195 6920 May-15

Aug-15

Nov-15

(%) Change

Feb-16

May-16

May-15

NIFTY BOTTOM

5 9%

Aug-15

Nov-15

Feb-16

May-16

Gain in MCX Crude Oil.

BSE BANKEX

BSE CAPITAL GOODS

22250 21100 19950 18800 17650 16500 15350 May-15

18800 17525 16250 14975 13700 12425 11150 Aug-15

Nov-15

Feb-16

May-16

DOW JONES

May-15

Aug-15

Nov-15

Feb-16

May-16

Aug-15

Nov-15

Feb-16

May-16

HANG SENG

18310 17875 17440 17005 16570 16135 15700 May-15

Crude oil prices rallied to 2016 highs on decline in US production and increased demand for petrol

28500 26750 25000 23250 21500 19750 18000 Aug-15

Nov-15

Feb-16

May-16

May-15

JUNE 2016 l The Finapolis

STAT DOSSIER CURRENCY

ENERGY

Rupee Movement

Brent Crude (US$/bbl)

68.7 67.8 66.8 65.9 64.9 64.0 63.0

72.0 65.0 58.0 51.0 44.0 37.0 30.0

May-15

Aug-15

Nov-15

Feb-16

May-16

9.3%

May-15

Aug-15

Nov-15

Feb-16

May-16

METALS Gold (US$/OZ)

Loss in MCX Nickel.

Silver (US$/OZ)

Weakness in Chinese exports dragged down nickel prices

17.85 17.15 16.45 15.75 15.05 14.35 13.65

1302 1260 1218 1176 1134 1092 1050 May-15

Aug-15

Nov-15

Feb-16

May-15

May-16

Aug-15

Nov-15

Feb-16

May-16

ECONOMY

Real GDP Growth 7.0

7.4

7.3

Dec-14 Mar-15 Jun-15 Sep-15 Dec-15

Prior (%)

6.75 6.50

Nov-15

Feb-16

Mar-16

Jan-16

Feb-16

Dec-15

Oct-15

Sep-15

Nov-15

DII (RHS)

10500 7000 3500 0 -3500 -7000 -10500 -14000

Copper prices plunged, tracking the volatile dollar index and on anticipation of a rise in US interest rate

RBI Monetary Data

8.0 7.9 7.8 7.7 7.6 7.5 7.4 Aug-15

Jul-15

FII

10-year bond yield (%)

May-15

Aug-15

FII vs. MF (Rs cr) 22500 14500 6500 -1500 -9500 -17500

Loss in MCX Copper.

May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16

6.1

Jun-15

Apr-15

Mar-15

10 8 6 4 2 0 -2 -4 May-15

Apr-16

Feb-16

Mar-16

Jan-16

Nov-15

0.0 -1.0 -2.0 -3.0 -4.0 -5.0

7.5

6.8%

IIP (%) Dec-15

Sep-15

Oct-15

Aug-15

Jun-15

Jul-15

Apr-15

May-15

Inﬂation (%)

May-16

Repo

Latest (%)

5.75 6.00

Reverse Repo

21.50 21.25

4.00 4.00

Cash Reserve RaƟŽ

SLR

All figures as on May 24, 2016

54 The Finapolis l JUNE 2016

STAT DOSSIER Performance of Mutual Funds Equity Diversified

ELSS

Mutual Fund Scheme

NAV

1 yr 2 yr 3 yr

Mutual Fund Scheme

DSP-BR Micro Cap Fund - Direct (G)

44.15

8.9

Escorts Tax Plan - Direct (G)

66.29

DSP-BR Micro Cap Fund - RP (G)

43.14

8.1 34.2 40.4

Escorts Tax Plan (G)

65.68

Reliance Small Cap - Direct (G)

26.01

6.7 26.2 39.3

Axis Long Term Equity - Direct (G)

30.78

-3.6

19.6 25.7

Reliance Small Cap Fund (G)

25.33

5.7

25.1 38.1

Axis Long Term Equity Fund (G)

29.56 -4.6

18.1 24.2

41.91

7.0

27.7 35.5

SBI Tax Advantage Sr-2 (G)

22.27

-3.0

15.5 23.3

Franklin (I) Smaller Co -Direct (G)

35.1 41.4

NAV

1 yr 2 yr 3 yr 12.0 25.9

26.1

11.7 25.3 25.9

Franklin (I) Smaller Cos (G)

40.47

5.6 25.9 34.0

Birla SL Tax Relief 96-Direct (G)

21.88

0.2

19.9

23.1

SBI Midcap Fund - Direct (G)

63.05

6.0 27.8 33.9

SBI Tax Advantage Sr-1 (G)

22.27

-4.1 16.0

23.1

Can Robeco Emer-Equities-Direct (G)

60.16

1.4 24.3 33.7

Reliance Tax Saver(ELSS)-Dir (G)

43.22

-9.2

11.7 22.5

Mirae Emerging Bluechip -Direct (G)

31.92

6.2 26.3 33.5

Birla Sun Life Tax Plan-Direct (G)

27.74

19.2 22.3

HSBC Midcap Equity - Direct (G)

39.85

2.3

Birla SL Tax Relief 96 (G)

21.30 -0.6 19.0 22.2

SBI Magnum Midcap Fund (G)

61.32

4.8 26.6 32.7

ICICI Pru RIGHT Fund (G)

27.64

-11.5

13.5

21.7

Can Robeco Emerg-Equities (G)

58.45

0.4 23.2 32.5

429.83

0.2

18.1

21.6

Sundaram SMILE Fund -Direct (G)

67.70

-2.0

21.7 32.4

-9.8 10.9

21.6

Mirae Emerging Bluechip Fund (G)

30.85

5.2

25.1 32.2

HSBC Midcap Equity Fund (G)

38.84

1.5

18.9 32.1

UTI Mid Cap - Direct (G)

79.65

-0.5

24.1 32.1

Sundaram SMILE Fund (G)

66.61

-2.4

21.1 31.7

Birla SL Opportunities -Direct (G)

113.95

19.8 33.1

Franklin (I) Tax Shield -Direct (G) Reliance Tax Saver (ELSS) (G)

42.21

Invesco India Tax Plan - DP (G)

35.63

-1.3

17.0

21.5

Birla Sun Life Tax Plan (G)

26.88

-1.0

18.1

21.2

ICICI Pru L Term Eq-Tax Svng-DP-G 268.95

-1.7

10.2

21.1

Franklin India Tax Shield (G)

UTI Mid Cap (G)

77.75

3.4 20.2 31.6 -1.4

23.1 31.2

418.74

-0.7

17.1 20.6

IDFC Tax Adv. (ELSS) -Direct (G)

38.33

-6.6

15.4 20.4

BNP Paribas L Term Equity-DP (G)

28.75

-3.5

14.6 20.3

ICICI Pru L Term Eq (Tax Svng)-G

261.14

-2.8

9.2 20.0

NAV

1 yr 2 yr

3 yr

ICICI Pru Exp&Other Services-DP (G)

44.07

Birla SL (I) Opportunities (G)

111.68

2.6

19.4 30.8

Birla SL Pure Value - Direct (G)

39.05

4.4

11.2 30.7

ICICI Pru Exp&Other Services-RP (G)

43.07

-3.6 22.8 30.1

ICICI Pru Bkg&Fin Serv -Direct (G)

36.25

-3.3

10.3

16.9

Kotak Emerging Equity - Direct (G)

27.42

4.4 28.5 30.0

ICICI Pru Bkg & Fin Serv-RP(G)

35.17

-4.4

9.2

15.8

19.21

-2.5

21.0 30.0

Invesco India Banking - Dir (G)

34.56

-1.8

11.2 13.0

L&T Midcap Fund -Direct (G)

87.44

0.5

21.6 29.8

Reliance Banking Fund - Direct (G) 166.07

-7.2

6.3

12.3

Birla SL Pure Value Fund (G)

38.04

3.5

10.2 29.7

Reliance Banking Fund (G)

163.16

-7.8

5.6

11.7

3.4 23.3 29.4

Invesco India Banking - RP (G)

32.99

-3.6

9.2

11.3

2.4

UTI Banking Sector - Direct (G)

64.34

-3.8

6.4

9.8

Sundaram Fin-Serv Opp. -Dir (G)

26.55

-8.3

5.6

9.1

JPMorgan (I) Mid and Sm Cap-DP (G)

Franklin (I) Prima - Direct (G)

698.00

BNP Paribas Mid Cap Fund -Dir (G)

25.13

Franklin Build India - Direct (G)

28.71

-2.8 23.7 31.0

21.0 29.0

-2.6 22.8 29.0

Equity (Banking) Mutual Fund Scheme

Source: moneycontrol.com; Note: All returns are annualized and expressed in percentage; all NAVs as on May 24, 2016

JUNE 2016 l The Finapolis

STAT DOSSIER Performance of Mutual Funds Equity (FMCG) Mutual Fund Scheme

Equity (Tech) NAV

1 yr 2 yr 3 yr

Mutual Fund Scheme

15.0

12.5

ICICI Pru Technology - Direct (G)

164.85

4.2 14.7

12.5

ICICI Pru FMCG Fund (G)

161.19

3.4 14.0

SBI FMCG Fund (G)

76.01

6.6 14.0

SBI FMCG Fund - Direct (G) ICICI Pru FMCG Fund - Direct (G)

78.64

7.6

1.1

18.1 28.5

ICICI Pru Tech. Fund (G)

40.60

0.1

17.2 27.6

11.8

Birla SL New Millennium-Dir (G)

36.66

4.9

17.8 24.8

11.5

SBI IT Fund - Direct (G)

46.64

-1.3 16.4 24.3

35.81

4.3 16.9 23.9

Birla SL New Millennium (G) SBI IT Fund (G) NAV

1 yr 2 yr 3 yr

SBI Pharma Fund - Direct (G)

136.68 -5.0 32.6 28.6

SBI Pharma Fund (G)

132.08

Reliance Pharma Fund - Direct (G)

132.30 -3.3 24.3 22.8

Reliance Pharma Fund (G)

128.84 -4.2 23.3 21.9

-6.2

1 yr 2 yr 3 yr

41.64

Equity (Pharma) Mutual Fund Scheme

NAV

31.0 27.3

45.05 -2.2 15.3 23.3

DSP-BR Technology.Com -Dir (G)

55.91

7.0

17.8 23.2

DSP-BR Technology.Com -RP (G)

54.89

6.4

17.2 22.6

Miscellaneous Mutual Fund Scheme

NAV

1 yr

2 yr

3 yr 38.2

UTI Pharma & Health - Direct (G)

88.36 -10.0 22.4 20.2

UTI Transport&Logistics -Dir (G)

85.77

-3.3

25.0

UTI Pharma & Health (G)

85.86 -10.8

UTI Transport & Logistics (G)

83.19

-4.3

23.7 36.9

Birla SL Buy India -Direct (G)

92.57

1.7

36.5 24.8

Birla Sun Life Buy India (G)

90.93

1.0

35.7 24.0

JM Basic Fund -Direct (G)

20.88

-3.7

11.2

15.9

JM Basic Fund (G)

20.17

-5.6

9.7

14.6

Reliance Media & Enter. -Dir (G)

55.21

10.4

9.9

14.5

Reliance Media & Entertain (G)

53.81

9.4

9.2

13.7

Reliance Diver. Power -Dir (G)

70.16

-4.9

-1.0

12.5

21.3

19.1

Balanced Mutual Fund Scheme

NAV

1 yr 2 yr 3 yr

Escorts Balanced Fund - Direct (G) 104.99

3.6

15.6 22.8

Escorts Balanced Fund (G)

104.56

3.6

15.4 22.6

HDFC Balanced Fund - Direct (G)

110.18

1.2

14.1 20.6

L&T India Prudence Fund -Dir (G)

19.89

1.5 16.0

20.1

103.87

0.6 10.0

19.8

19.87

-3.5

13.9

19.8

107.38

0.2

13.1

19.7

L&T India Prudence Fund (G)

19.26

0.4

14.8 19.0

Tata MIP Plus Fund - Direct (G)

25.38

14.7

17.3

SBI Balanced Fund - Direct (G)

97.95

0.9

16.4

18.9

Tata MIP Plus Fund (G)

24.80

13.8

16.2

12.1

ICICI Pru CCP - Gift Plan

101.30 -0.3

9.1

18.9

ICICI Prudential Reg Income-Dir (G)

15.57 10.6

12.1

9.0

Tata Balanced Fund - Direct (G)

168.51

-2.3

15.5

18.9

Franklin (I) Low Dura. -Direct (G)

HDFC Childrens Gift - Direct (Inv)

84.81

0.4

12.2

18.6

Sundaram MIP-Conservative-Dir-G

L&T Dynamic Equity Fund (G)

19.25 -4.6

12.8

ICICI Pru CCP - Gift Plan -Direct L&T Dynamic Equity Fund -Dir (G) HDFC Balanced Fund (G)

MIP Mutual Fund Scheme

NAV

1 yr 2 yr 3 yr

17.18

9.6

9.9

14.78

9.5

10.7

6.4

18.6

SBI Magnum MIP Floater -Direct (G) 22.59

9.4

12.7

12.4

Franklin India Bal Fund-DP (G)

93.99

2.5

17.6

18.4

Franklin (I) Low Duration (G)

17.01

9.3

9.6

ICICI Pru Balanced Fund- Dir (G)

94.19

0.6

12.9

18.4

ICICI Prudential Regular Income (G)

15.18

9.2

11.1

8.2

Source: moneycontrol.com; Note: All returns are annualized and expressed in percentage; all NAVs as on May 24, 2016

56 The Finapolis l JUNE 2016

FUND REPORT CARD Scheme Performance as on May 24, 2016

Sundaram Select Midcap (G)

Period

Fund Objective/Mission To seek capital appreciation by investing in diversified stocks that are generally termed as mid-caps.

Returns

B'mark

Rank

3 Months

15.03

13.66

37/(273)

6 Months

-1.00

0.62

101/(268)

1 Year

Fund House Details AMC Name: Website:

Sundaram Asset Management Company www.sundarammutual.com

2.63

3.33

57/(257)

3 Years

28.59

19.75

22/(163)

5 Years

18.53

10.49

24/(153)

Since Inception

28.97

20.94

SIP Details: Invested Rs 5000 Every Month Financial Details

Period

AUM As On (April 30, 2016) NAV As On (May 24, 2016) Min Investment (in Rs.)

Lumpsum SIP

NAV (52WeekHigh){August 05, 2015} NAV (52WeekLow){February 29, 2016}

3439.51 339.84 5000 250 372.64 290.63

Total Invest (`)

Scheme (`)

Bench mark

60,000

61,571

62,182

3 Years

1,80,000

2,57,806

2,36,458

5 Years

3,00,000

5,34,664

4,47,469

10 Years

6,00,000

15,78,983

10,43,151

1 Year

Investment Information

Fund Structure

Scheme

Open ended scheme

Launch Date

June 19, 2002

Fund Manager

S. Krishnakumar

Bench Mark

S&P BSE Mid-Cap

Max.Entry Load(%)

Max.Exit Load(%)

1.00

Total Stocks

Total Sectors

P/E Ratio

35.26

P/B Ratio

4.86

Avg. Market Cap Rs. On (Apr-2016)

Top 10 Companies Name

11309.80

Volatility Measures Fama

0.04

Beta

0.93

Std Dev

1.13

Sharpe

Top 10 Sector Wise Holding (%)

Industry Name

(%)

FAG Bearings India

4.7



Bank - Private

7.0



SRF

4.5



Bearings

6.9



Ashok Leyland

3.3



Auto Ancillary

5.7



UPL

3.3



Finance - NBFC

5.7



3.1



Cement & Construction Materials

4.8



Indraprastha Gas

3.0



Textile - Manmade Fibres

4.5



Bajaj Finance

3.0



IT - Software

3.4



The Ramco Cements

2.9



Automobiles-Trucks/Lcv

3.3



Sundaram-Clayton

2.6



Pesticides & Agrochemicals

3.3



Mahindra CIE Automotive

2.6



Gas Transmission/Marketing

3.0



Wabco India

5 Years History Financial Year NAV in ` (as on 31st March)

2015-16

2014-15

2013-14

2012-13

2011-12

327.70

333.16

194.57

154.94

146.09

Net Assets (` Crores.) (as on 31st March)

2896

2909

1790

1852

2062

Returns(%)

-2.82

72.34

24.51

4.87

-0.79

CNX NIFTY Returns(%)

-9.87

26.33

17.53

6.86

-9.11

42/(289)

23/(247)

49/(218)

101/(204)

44/(207)

Category Rank Latest As on 18 March, 16

*Absolute Returns

Source: ACEMF

JUNE 2016 l The Finapolis

FUND REPORT CARD Scheme Performance as on May 24, 2016

HDFC MIP-LTP (G)

Period

Fund Objective/Mission To generate regular returns through investment primarily in Debt and Money Market Instrument. The secondary objective of the Scheme is to generate long-term capital appreciation by investing a portion of the Scheme’s assets in equity and equity related instruments.

Returns

B'mark

Rank

3 Months

29.28

4.96

4/(43)

6 Months

2.81

3.58

41/(42)

1 Year

3.94

6.43

31/(42)

3 Years

9.71

8.05

15/(42)

Fund House Details

5 Years

9.41

8.93

19/(41)

AMC Name: Website:

Since Inception

10.85

8.42

HDFC Asset Management Company www.hdfcfund.com

SIP Details: Invested Rs 5000 Every Month Financial Details

Period

AUM As On (April 30, 2016) NAV As On (May 24, 2016) Min Investment (in Rs.)

Lumpsum SIP

3602.93 35.95 5000

NAV (52WeekHigh){April 26, 2015} NAV (52WeekLow){February 25, 2016}

Total Invest (`)

Scheme (`)

Bench mark

60,000

61,945

62,350

3 Years

1,80,000

2,08,424

2,06,985

5 Years

3,00,000

3,85,864

3,78,320

10 Years

6,00,000

10,15,233

9,22,810

1 Year

36.23 33.33

Investment Information

Fund Structure

Scheme

Open ended scheme

Launch Date

December 26, 2003

Fund Manager

Prashant Jain

Bench Mark

Crisil MIP Blended Index

Max.Entry Load(%)

Max.Exit Load(%)

1.00

Total Stocks

Total Sectors

P/E Ratio

P/B Ratio

Avg. Market Cap Rs. On (Apr-2016)

Top 10 Companies

20284.26

Volatility Measures Fama

-0.03

Beta

1.31

Std Dev

0.37

Sharpe

-0.01

Top 10 Sector Wise Holding

Name

(%)

Industry Name

(%)

08.28% GOI - 21-Sep-2027

7.2



Unspecified

28.4



07.73% GOI 2034

5.9



Other

21.1



Bank of Baroda SR-V 9.48% (09-Jan-20)

4.3



Bank - Public

17.4



Tata Power Co Ltd. -Reset Rate (02-Jun-21)

3.7



Power Generation/Distribution

4.4



08.32% GOI - 02-Aug-2032

3.5



Engineering - Construction

4.1



07.59% GOI 2029

2.8



Bank - Private

4.0



08.60% GOI - 02-Jun-2028

2.8



Aluminium & Aluminium Products

3.1



09.20% GOI - 30-Sep-2030

2.8



IT - Software

2.8



08.24% GOI - 10-Nov-2033

2.7



Steel/Sponge Iron/Pig Iron

2.8



Hindalco Industries Ltd. 9.55% (25-Apr-22

2.4



Electric Equipment

1.5



5 Years History Financial Year

2015-16

2014-15

2013-14

2012-13

2011-12

NAV in ` (as on 31st March)

35.44

34.59

28.47

26.22

24.26

Net Assets (` Crores.) (as on 31st March)

3584

3840

3751

5219

6143

1.96

21.15

8.03

7.76

4.74

-9.87

26.33

17.53

6.86

-9.11

34/(51)

10/(55)

23/(58)

28/(60)

Returns(%) CNX NIFTY Returns(%) Category Rank Latest As on 18 March, 16

*Absolute Returns

45/(60) Source: ACEMF

58 The Finapolis l JUNE 2016

Money

CHAT

This monthly series in The Finapolis talks to different families to understand their attitude towards financial planning. Certified Financial Planner Pankaaj Maalde prepares a financial plan and gives his recommendation to the family. If you’d like to talk to us and be featured, write to: feedback@theﬁnapolis.com

Realign Investments and Gradually Reduce Exposure to Real Estate We discuss the case of a settled businessman mid-career By Team Finapolis Rajib Patra is a 45-year-old living with his family comprising his spouse Mahuya, aged 37-year-old, two daughters, i.e. Ritu (16) and Rai (7). Mr Rajib has a jewellery business. His monthly income is Rs 1,40,000. Of this, Rs 53,667 goes towards household expenses, Rs 20,000 for education of two daughters, Rs 20,000 towards home loan EMI, Rs 20,000 is contributed to dependent parents, Rs 8,333 goes towards insurance premiums and Rs 18,000 goes into investments.

Financial Goals Rajib’s goals include building a corpus for his children’s education, marriage expenses and for his retirement. Financial advisor Pankaaj Maalde analyses his monthly cash flow, existing investments, insurance policies and future goals.

Analysing Life Insurance Portfolio Rajib has six traditional and one pension insurance plans. He pays annual premium of Rs 85,000 on these policies. Analysing his insurance portfolio, Pankaaj recommends continuing all the traditional plans as debt portion in his portfolio and to continue with his pension plan. As per need based theory,

“I am seeking advice to align existing investments with my family goals and to start savings based on recommendation for any deficit”– Rajib Patra Rajib’s Smart Moves Expenses are controlled and maintains good savings ratio Investing in mutual funds in a disciplined manner i.e. monthly SIP Buying health insurance plan for family

Rajib’s Poor Decisions High exposure to physical assets i.e. real estate Investments are not aligned with future goals Inadequate life insurance and directly investing into equities

JUNE 2016 l The Finapolis

Money Chat Rajib is inadequately covered for life insurance. So, Pankaaj advises him to buy an online term plan of 15 years for Rs 1 crore, at a cost of Rs 31,000 p.a.

Rajib’s current income and expense analysis (Rs) Rajib’s Income

Health and Disability Insurance Planning

Rental

Income 120,000 20,000

As for health insurance, Rajib has bought a policy with a cover for Rs 5 lakh from Oriental Insurance. This policy has room rent sub-limit of 1% of sum assured. So, Pankaaj advises him to port the same to another insurer, which does not have such sub-limit clause and

INFLOW Total monthly income

Asset Allocation

OUTFLOW

Total monthly expenses

Existing 10%

BANK

8% Household expenses

82%

Insurance premium

Investment

Loan EMIs

Children’s education

Contribution to dependants

Surplus

C*: 53,667

8,333

18,000

20,000

R : 53,667

14,000

30,000

20,000

20,000 C* = Current;

Debt

Equity

Real estate

Networth of Rajib Asset

Recommended

2,333 R* = Recommended

Current Value (Rs) Assets

Residential property

6,000,000 Investment Assets

30% 65%

Debt

Equity

Gold

also increase his sum assured to Rs 10 lakh. This will cost around Rs 30,000 p.a. He even advises Rajib to buy critical illness cover of Rs 25 lakh and accident disability insurance of Rs 50 lakh. This will incur cost of approx Rs 22,000 p.a., but ensures a cover for him in case of future misfortune.

Cash and Equivalents

80,000

Post Office Monthly Income Scheme

200,000

Public Provident Fund

900,000

Fixed Deposits

50,000

Direct Equity

700,000

Equity & Balanced Mutual Funds

450,000

Second Home

8,000,000

Commercial property

2,000,000

Plot of land

1,200,000

Total Assets (rounded off)

19,580,000 Less (-)

Liabilities

Current Value (Rs)

The Road Ahead

Outstanding home loan

400,000

 Contingency Funding: Rajib must

Approx Net Worth (rounded off)

19,180,000

60 The Finapolis l JUNE 2016

Money Chat Contingency Fund

Funds needed to achieve goals

BANK

Loan Repayment

Ritu’s Education

Rai’s Education

Time to achieve (yrs)

Future value of cost (Rs)

3.24 lakh

Time to achieve (yrs)

Future value of cost (Rs)

Resources utilised

Monthly investments required (Rs)

4 lakh

Sale of Plot (land)

Time to achieve (yrs)

Future value of cost (Rs)

Resources utilised

Monthly investments required (Rs)

9.33 lakh

Sale of Plot (land)

Time to achieve (yrs)

Future value of cost (Rs)

35 lakh

Time to achieve (yrs)

Future value of cost (Rs)

Resources utilised

Monthly investments required (Rs)

30 lakh

16,000

Time to achieve (yrs)

Future value of cost (Rs)

Resources utilised

Monthly investments required (Rs)

60 lakh

Direct equity

1,000

Retirement Future Time to value achieve of cost (yrs) (Rs)

Monthly Resources investments utilised required (Rs) Second home, commercial property, MF 5.14 6000 investments Crore (Reliance and HDFC), PPF and Insurance maturity

Assumptions

Ritu’s Marriage

Rai’s Marriage

Resources Monthly investutilised ments required (Rs) Savings bank, Post office MIS and fixed deposit

Resources Monthly investutilised ments required (Rs) MF investments (Birla Sunlife, Sundaram 7,000 and Franklin Templeton)

Total investment needed

Rs 30,000

Inflation rate = 8% Returns on Balanced fund = 11.5% p.a., real estate return = 10%, equity mutual fund = 13% p.a., Debt / PPF / Gold funds = 8% p.a. and Ultra short term and Arbitrage fund = 6% p.a.

set aside three months of expenses as a contingency fund, which amounts to Rs 3.24 lakh. For this, Pankaaj aligns his existing saving bank balance of Rs 80,000, postal investment of Rs 2 lakh and fixed deposit of Rs 50,000. He advises him to invest the amount in ultra-short-term funds.  Repayment of home loan: Rajib has outstanding home loan of Rs 4 lakh. He is paying EMI of Rs 20,000 at interest

rate of 10.75%. Pankaaj advises him to sell the plot of land and repay the entire home loan. This will make him debt free and savings of EMI can be used to build the desired corpus for his future goals.

For life’s major goals Pankaaj advises:  Children’s education: Ritu, elder daughter of Rajib, requires Rs 8 lakh in present value for her education after two years, which will grow to

Rs 9.33 lakh (future value). Pankaaj has allocated Rs 8 lakh from the sale value of plot of land and advises Rajib park the funds in an arbitrage fund till the goal is achieved. Similarly, Rai, his younger daughter, requires Rs 15 lakh in present value for her education after 11 years, which will grow to Rs 35 lakh (future value). Pankaaj has allocated existing mutual fund investments in Birla Sunlife Front-

JUNE 2016 l The Finapolis

Money Chat

Rajib plans to retire at age 60. Pankaaj aligns his investments in second home, commercial property, mutual funds, PPF and insurance maturity for this purpose line Equity, Sundaram Smile and Franklin Templeton Blue Chip. The current value of investment in these schemes is Rs 1.89 lakh, Rs 1.36 lakh and Rs 42,000, respectively. He advises to continue monthly SIP of Rs 3,000, Rs 2,000 and Rs 2,000, respectively, in these schemes to accumulate the desired corpus.  Children’s marriage fund: To build a corpus for Ritu’s marriage, Rajib requires Rs 15 lakh in present value. The required corpus will grow to Rs 30 lakh (future value) after nine years. Pankaaj advises Rajib to start monthly investment of Rs 15,000 in an equity fund and Rs 1,000 in a gold fund. Similarly, for his younger daughter Rai, Rajib requires Rs 15 lakh in present value. The required corpus will grow to Rs 60 lakh (future value) after 18 years. To achieve this goal, Pankaaj allocates direct equity investment of Rs 7 lakh and advises to start monthly investment of Rs 1,000 in gold fund. Pankaaj even advises shifting direct equity investments to a diversified equity mutual fund scheme. This execution should accumulate the desired funds for his daughters’ marriage.

EXPERT TAKE

Pankaaj Maalde Certified Financial Planner  Retirement funding: Rajib is planning to retire at the age of 60 year. Pankaaj aligns his existing investments in second home, commercial property, mutual funds (HDFC Mid-Cap Opportunity and Reliance Equity Opportunity), PPF and insurance maturity. This promises Rajib amounts of Rs 3.34 crore, Rs 83.5 lakh, Rs 6.63 lakh, Rs 28.55 lakh and Rs 28.82 lakh, respectively, after 15 years, as his retirement corpus. Additionally, Pankaaj advises that Rajib continue his monthly investment of Rs 3,000 in each of the two mutual fund schemes (HDFC Mid-Cap Opportunity

and Reliance Equity Opportunity) to build the desired corpus for his retirement. This execution will aid him in building his desired corpus for retirement, which is Rs 5.14 crore, and will be used up to 80 years of age after retiring at 60. The corpus required has been calculated assuming household expenses of Rs 52,500 per month in present value at 8% inflation.

Concluding remark  Rajib has higher exposure to real estate (82% of overall portfolio). This is too high and not desirable. So, it’s strongly recommended he sell the plot of land amounting to Rs 12 lakh. He is also advised to review his other real estate investments at regular intervals.  Shift existing investments in direct equity to diversified equity mutual fund schemes.  Reinvest insurance maturity into balanced category of mutual funds.  Review the plan and rebalance portfolio periodically, preferably every year. F

ETCETERA

Safaris of a Different Stripe

Jessica Festa heads outside the savannah and into deciduous forests, rainforests and tropical islands in search of animal adventures

hen most people hear the word “safari,” they envision piling into a jeep in Africa in search of the “Big Five”—elephants, lions, leopards, Cape buffalo, and rhinos. But from Australia to Sweden, a number of travel companies are reimagining the safari with trips that focus on less celebrated animals (think poisonous snakes and bats), require participants to hike instead of ride along passively in a 4×4, and take place well outside the savannah in deciduous forests, rainforests, and tropical islands. Read on for four of the most interesting alternative safaris.

Walking Safaris, Australia Hippocrates said, “Walking is man’s best medicine.” If he was right, the Arkaba Station’s walking safari should leave participants at the pinnacle of good health. During the four-day Arkaba Walk, which takes place in a 60,000-acre private wildlife conservancy in the Outback’s Flinders Ranges, a guide explains the geology and history of the landscape to groups of up to 10 hikers, while keeping a look out for the likes of emu (Image 1), wallaroos, kangaroos (2) and koalas (3). At the end of each long day, trekkers enjoy a three-course meal with plenty of Australian wine.

From The Financialist – Presented by Credit Suisse (www.thefinancialist.com)

JUNE 2016 l The Finapolis

ETCETERA 1

Beaver Safaris, Sweden Sweden may be known for its meatballs, modular furniture and beautiful locals, but the country also has a wild side. Well, wild for Scandinavia, anyway. On an evening Beaver Safari with Wild Sweden, travellers take a boat ride at sunset on a beaver-filled lake (4) followed by a dinner made with local ingredients (although no beaver meat). Those looking for something more Jack London than Henry David Thoreau can opt for the three-night Bergslagen Wildlife Experience, where they search for moose, wolves, bears, lynx and owls.

Bat Safaris, Zambia The best-known animal migration in the world is probably Great Migration, when thousands of wildebeest make their annual march across the Serengeti. But if you want to catch the largest migration, you need to venture into a remote part of the Kasanka National Park from October through December, where you will see up to 10 million enormous fruit bats (5) blanket the sky

at sunset, eager to feast on the wild fruits ripening on local trees. On the Robin Pope Safaris bat trip, guests stay at the rustic Wasa Camp in a traditional African rondavel with a private veranda â&#x20AC;&#x201C; perfect for viewing hippo, puku (6) and local birds while sipping a glass of South African wine.

Galapagos Tented Wildlife Safari, Galapagos Islands Not all safaris take place in dense forest and lush jungle. Galapagos Safari Camp, South Americaâ&#x20AC;&#x2122;s first luxury tented safari camp, pairs guests with a naturalist guide to explore Santa Cruz Island by car, foot, bike, yacht and kayak. Days are spent journeying to uninhabited islands and searching for giant tortoises (7), blue-footed boobies, sea turtles, marine iguanas (8), fur seals, hawks, penguins and more. The camp is located on a 55-hectare organic farm surrounded by the National Park Tortoise Reserve. At night, guests can dine on farm-to-fork meals, cozy up with a glass of wine by the fireplace, take a dip in the infinity pool or simply view the Pacific Ocean from their private balconies. F

64 The Finapolis l JUNE 2016

PERSONAL FINANCE

advisor Every month an expert on personal finance will answer all your queries related to the world of investments, taxation and financial management. The personal finance advisor will diagnose the health of your portfolio and offer better advice. In current edition, your questions have been answered by Col. Sanjeev Govila (retd), CEO, Hum Fauji Initiatives. He is Certified Financial Planner and SEBI Registered Investment Advisor. Write in to feedback@thefinapolis.com I had bought a car after taking loan from SBI. Now I want to sell this car, even though EMI for the loan is still going on. Can I sell this car and get new loan for new car? — Ramesh Shetty, Ahmedabad As the car is on loan, it would be hypothecated to SBI and this fact would be endorsed in the car’s registration papers. To start the process of sale, you need to pay off the loan and get a No Objection Certificate (NOC) from SBI. This NOC has to be submitted to the RTO (Regional Transport Office) along with your address proof and copy of the car insurance papers. The RTO may take about 2-4 weeks to remove the endorsement of SBI from your car registration papers. Side-by-side, you would have to submit this NOC to your car insurance company as well. Once you have the car registration papers in your hand, you can sell the car. To manage the finance to pay off the loan, you may use your money or that of the intended buyer if he’s a good man. If neither of this is feasible, you may have no option to borrow it from friends or relatives or maybe take

a personal loan which can be returned back once the car gets sold. Loan for the new car has no connection with your old car. Whether you are able to get a new loan or not entirely depends on your loan capacity as assessed by the loaning agency and your CIBIL score. I liked your story on robotic financial advisor softwares. Please advise which platform is best for retail investors? I am 26, married, and with one daughter. — Anup R, Gurgaon There are many robo advisory platforms operating in Indian financial space. The most prominent ones are FundsIndia, Arthayantra, ScripBox, BigDecisions, MyUniverse, Tract & Act from ICICI Securities, and 5nance. It is very difficult to say which is the best because each platform has its pluses and minuses and generally caters to a niche. You will have to go to their respective websites, read up there, read what the existing subscribers have to say and then make up your mind about what suits the best. Please also remember that lately, there has been a surfeit of such platforms. There is bound to be consolidation in the space and some may fall by the wayside – be aware of this issue as it may happen sooner than later. My brother-in-law is asking to refer me to his credit card company, even though I already have own credit card and told him I do not want any more card. He is telling me his card is best. Is there any way to tell whether his card is better than mine? He is also saying that he gets free tickets and bonus items and also gifts from his credit card using special loyalty points, but my credit card bank is not giving any such loyalty benefit. — UttamPhadke, Thane

JUNE 2016 l The Finapolis

PERSONAL FINANCE ADVISOR Generally most of the credit cards have some sort of loyalty program and reward points system. However, that cannot be the sole criteria for judging a credit card. The cost to you as initial and yearly maintenance charges, the ratio in which reward points (as translated into rupee benefits) accrue to you proportionate to your spend, penalties levied in case of late payments or defaulting on payments, grievance and query resolution systems, etc are the main factors which decide the suitability of a credit card to you. Eg, if you use your card sparingly, then the one with no initial and yearly maintenance charges is more suitable to you even if its reward program is not very good compared to a card which has high charges and a very good reward program. Hence, you will have to identify your credit card spend pattern and then do a research of available cards in the market to home on to what is the best for you. Next month, I am leaving India for work in America for three months project. I want to know, how much money can I take with me when going out of the country? My relatives are saying do not carry too much cash but all are also asking for gifts. I do not want to be bankrupt in new country. — V Bhat, Udipi If you are going abroad for business travel, attending conference or specialised training, you can take up to USD 25,000 with you. Out of this, you can take up to USD 3000 in currency notes and the rest has to be taken in the form of travellers’ cheque or travel

card. Personally, I would recommend you to take travel card since it can be very conveniently used, has a lot of safeguards against misuse and loss, and can also be recharged online at home branch or online if you run out of cash. I want to open a stock broking account to do trading in shares. However, I found that everyone is having different fees and money charged by some companies is more than other companies. But all are saying we give best service and our shares only go up. Is there a good or best brokerage firm to open an account in? — Jiju Thomas, Rajahmundry From the question it seems that you are looking for an advisory as also trading service. There are many such platforms available in India. The platforms need to be compared primarily on the brokerage and allied charges, ease of use, whether it is software or net based, day trading cut off time, convenient link to your bank and whether IPO /Mutual funds are allowed on it. Each platform has its own charges relating to account opening, yearly maintenance and brokerage (percentage of trade or flat rate or a combination of both). Advisory given by each is mired in claims and counter-claims and hence can only be commented upon by you when experienced as per your own need. The most common ones which are popular amongst retail investors are ICICI Direct, Sharekhan, Kotak, Motilal Oswal, SMC, Edelweiss, Bonanza etc. I have Rs 17 lakh and will not need this money for some years now. How should I invest this? My friend is suggesting to put it all in fixed deposit but I want to get better returns also. — K Gowda, Bengaluru Portfolio returns and risk taken are two ends of an investment scale. You will have to compromise on returns if you wants to take lesser risk. You will have to decide the point at which you wish to keep your sliding pointer on that investment scale. Ideal will be to approach a good financial advisor who will discuss the same with you and administer a rational risk profiling test to you so that you may know your comfort level of

risk. Asset allocation, ie what mix of investment avenues should you adopt, is actually a careful mix of time-frame of your requirements for which investment is being done, your risk profile and your already held portfolio. Since I do not have all these inputs here, I would recommend you to take slight amount of risk, ie invest in equity related products to the extent your risk profile allows since you have a long investing time frame. FDs will not only give you low returns but returns will also be fully taxable as per your tax slab. My choice of product here will be a careful mix of debt and equity mutual funds as per your level of comfort. My broker says I can only buy and sell shares from NSE. He says he does not buy on BSE. So if I want to buy shares from BSE sometimes, how can I do it? Also, does it make any difference from where I am buying shares? Are the prices same? — Jitin Kulkarni, Mumbai Your broker might only be empanelled with NSE. Hence, he cannot deal on BSE. You will have to use the services of another broker if you wish to dal on BSE. You will easily be able to find plenty of offline brokers and online website doing that. Due to various reasons, there generally is a small difference between the prices of same shares on the two exchanges almost all the time and this keeps fluctuating. If you’re a long term investor, the difference is too small to matter. But if you’re a frequent trader, such differences may matter. Then an online broker may be better for you where you can instantly see the difference of prices and deal at whatever is beneficial to you. F

66 The Finapolis l JUNE 2016

LEARNING CURVE We all come across issues and ideas related to the world of finance that sound Greek and Latin. Worry not. We are here to guide you through the maze

Demat & Trading Accounts and Key Financial Instruments

W D

hat do we need to invest/ trade in the stock market? The first requirement is a Demat account. What is it, and what can you do once you have it? Find on.

Bonds: Bonds, also known as fixed-income securities, are issued by borrowers to raise money from investors at an agreed interest rate (known as coupon rate) for a specific period of time (maturity date). It is less risky compared to stocks. Corporate, governments and other entities use bonds to fund projects as well as other activities. Investing in bonds mean lending money to a government or a company.

emat and Trading Accounts In order to invest in shares or stocks, one is required to have Demat and Trading accounts. Such an account can be opened with any registered share broker. Share brokers play the role of intermediary in between the investor and the stock exchanges.

Demat Account: An account where shares are stored in electronic form. Now-a-days, it has become compulsory to open a demat account before investing in shares.

Trading Account: An account which is used to place orders for buying and selling of shares. Trading account is a link between the bank account (where money is debited/ credit depending on purchase/ sale of shares) and demat account (where shares are added/ deducted depending on purchase/ sale). When a trader intends to buy shares, he/she needs to first transfer funds from his/her bank account to the trading account. Once a purchase is made from the trading account, the shares are stored in the demat account. Similarly, When a trader intends to sell stocks, his/her trading account takes back the shares from his/her demat account and sells them in the stock market. The money is transferred to the sellerâ&#x20AC;&#x2122;s bank account.

An alternative investment option to stocks and bonds is mutual funds. It is a professionally managed trust, known as an Asset Management Company (AMC), that pools money from investors who are also known as unitholders. The money is invested in various financial instruments and profit generated from the investment is distributed among unitholders in proportion to unit held by them. Mutual funds are low cost investment that provides professional management of funds and enables diversifying your portfolio across various securities to minimise risk as well as diversification of the portfolio.

Mutual Funds:

The first requirement for investing in the stock market is a demat account. Once you have such an account, there are various segments into which you can place your money Key Financial Instruments The following are key securities traded in the stock market.

Shares/ Equity: Equities or stocks represent ownership of a company. One can buy or sell shares through a broker. By investing in shares, an investor receives income in the form of dividends and appreciation in the value of shares.

A derivative is a contract between two parties which derives its value from the underlying asset. It can be index, equity, commodities, currencies etc. Derivatives provide a good leverage opportunity and are a great tool for hedging, speculations and arbitraging. They can be traded in index futures and index options, stock futures and stock options. F

Derivatives:

Published on 1st June 2016 Total No. of pages 68, including cover pages

Karvy The Finapolis RNI No: APENG/2007/20461 Regd. No.: L II/RNP/H-HD-1087/2014-16