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Make Market Volatility Your Friend pg 46 Life Planning For Seniors pg 54

M ay 2 0 18 , `5 0

o u t lo o k m o ne y.c o m

Teach Them
Young
Money lessons should start
early in life because what
children learn in the formative
years will determine their
future behaviour. From running
chocolate banks to delaying
gratification, there are plenty of
things parents can do to impart
financial literacy

pg 82
Bharti Singh’S
Money WiSdoM
Contents May 2018 ■ VoluMe 17 ■ Issue 5

Money Lessons For Kids


If children are taught the importance of savings early on, they
will handle money better as adults

pg 24
Regulars
6 Letter 12 Queries 18 News Roll
Cover Design: Vinay dominic, Cover photograph: s kumar

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Published for the month of May 2018; Release on 1 May 2018. Total no. of pages 84
Outlook Money does not accept responsibility for any investment decision taken by readers on the basis of information provided herein.
The objective is to keep readers better informed and help them decide for themselves.

www.outlookmoney.com May 2018 Outlook Money 3


Contents

pg Small Banks, Big


50 Benefits
Small banks offer
higher interest rates on
deposits. Should you
consider it?

46 Market Special: What to pg Fintech Watch


Expect From Equities in the 68 Finzy: A new platform for borrowers and lenders
New Fiscal
The markets could witness some
volatility, but it will throw up
opportunities too

52 PWC Column
Myths about filing income tax returns

54 Life Planning For


Senior Citizens
As people live longer, financial needs of
seniors also need special attention

58 Morningstar Fund Review 76 Insurance For


UTI Dynamic Bond Fund &
Reliance Equity Opportunities
Chronic Illnesses
Health insurance for those
Fund in focus with pre-existing conditions
may be tough, but there are
62 My Plan customised plans too
Investing for a healthy and
financially sound tomorrow 79 Spend: Hotels By
pg
64 Financial Planning The Hour
82 Review your investments in the
Now pay only for the
number of hours you spend
new financial year
in a hotel room
Smart Money
Bharti Singh’s
Money Mantra
66 Column: New ITR Forms
How it will affect tax payers

4 Outlook Money May 2018 www.outlookmoney.com


Editor’s Letter

Money Lessons Early

M
oney is a complex children. Priya Nair, who put the
subject and so is our cover story together, says, “While it’s
relationship with it. For important to teach children about
some, money is merely saving and spending money wisely,
a means to an end, while for others it there are no fixed rules or methods.
is often an end in itself. A couple of However, parents should follow a
months ago, I was sitting with Gaurav balanced and systematic approach.”
Mashruwala, financial advisor and Some parents feel that instead of
author of Yogic Wealth, and discussing giving money to children, setting an
how our behaviour and biases impact example by leading a disciplined and
our financial health. What Mashruwala frugal life is the right way to teach
said was very interesting. He believes them the value of money. Yet other
that our relationship with money is parents reward their children with
determined at a very early age. Just cash or treats for good behaviour
as children tend to learn from their to teach them concepts like earning
parents – all things good and bad – they and saving. Indeed, such life lessons
Exposing kids to the also tend to pick up money habits from have to be taught. What route
purchasing power of them. And habits formed back in our parents choose to follow would
money, we are leaving childhood are hard to break as adults. depend on their comfort levels and
them with half-knowledge Interestingly, parents believe that individual preferences.
children are too young to discuss or Anagh Pal has compiled a list
learn money management. In fact, of investment options available
a former landlord of mine kept his for parents looking to save for
assets and investments a secret from their children’s future. From bank
his son because he believed his son accounts to insurance and mutual
did not have any ‘money sense’ and funds, these days there are specific
would spend it all on frivolous things products catering to children’s
if he knew just how rich his father future needs such as higher
was. Someday these ‘children’ will education or marriage. And as
inherit their parents’ money and then always, the advice from experts is to
they will find it challenging to deal start early.
with the inherited wealth. Even today, While talking of money wisdom,
most people don’t believe in paying for stand-up comedian and television
professional guidance and prefer to rely personality Bharti Singh has lots to
on friends and family for advice. offer. She claims she treats money
It is for this reason that our cover like a guest in her life. “Just as guests
story for this month addresses the come and go unannounced, flow of
importance of financial literacy among money too cannot be predicted –
children. By exposing kids to the and therefore, one must never take it
purchasing power of money, we are for granted,” she says.
leaving them with half-knowledge, In this issue, we also have an
which can be very dangerous. It is entire package on stocks and how
essential for children to learn the investors can battle volatility. Suyash
importance of saving, earning, and Desai spoke to market experts to
spending. And this can be done in decode how markets would fare in
fun ways too, say the experts. We also the new fiscal, and explains how
Malini Bhupta have interesting case studies of parents investors can tide over turbulent
malini@outlookindia.com and the money lessons they give their times.

6 Outlook Money May 2018 www.outlookmoney.com


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Talk Back

More travel
stories please
Editor
Malini Bhupta

Iread Outlook Money’s recent edition where


SEnior ASSiStAnt Editor
Priya Nair
the cover story was on travel. ASSiStAnt EditorS
Being an avid traveler, I must say that it was Anagh Pal, Preeti Kulkarni

a very detailed story covering almost all aspects SEnior CorrESPondEnt


that affect /influence travel-related decisions, be it Himali Patel

budgeting, planning, finance options, destinations, CorrESPondEnt

and other tips. My husband, 8-year old daughter Suyash Desai

and I look forward to our annual trip, and start Art

planning and booking months in advance. I could


Praveen Kumar. G, Vinay Dominic (Senior Designers)
Rohit Kumar Rai (Designer)
relate to almost all points on how one should Girish Chand (DTP Operator)

budget a holiday, as that is exactly what we do too. PhotogrAPhy


Look forward to more travel-related stories. Gireesh. GV (Picture Editor)
Soumik Kar, R.A. Chandroo (Photographers)

tECh tEAm
Chaitali Raval, Mumbai Raman Awasthi, Suraj Wadhwa

Business Office
ChiEf ExECutivE offiCEr
Indranil Roy
PubliShEr
Vidya Menon
ASSiStAnt viCE PrESidEnt

I
Tushar Kanti Ghosh
have started reading Outlook nAtionAl hEAd
Money from the past few Santosh Nair
SR. GEN MANAGER: Mohan Sahasranaman
months and I am thoroughly
impressed by the kind of articles Digital Team
you and your team churn out every Amit Mishra
Sumit Srivastava
month on various aspects related
to personal finance and investment. Circulation & Subscriptions
Outlook Money has not only helped Raj Kumar Mitra, Anindya Banerjee
Vinod Kumar (North), G Ramesh (South)
me on a professional front, but also Arun Kumar Jha (East)
Arup Choudhury,
personally to understand the nitty- Shekhar Suvarna
Kolkata
gritty of finance. Production
Finance is not tough to understand gEnErAl mAnAgEr
and your style of writing proves that. Sections on Life Planning Shashank Dixit
and Morning Star Mutual Fund Guide are really helpful. ChiEf mAnAgEr
Shekhar Kumar Pandey
I believe personal finance should be a part of our school mAnAgEr
curriculum as learning the tricks of trade when young will Sudha Sharma
dEPuty mAnAgEr
help every individual to take critical financial decisions and be Ganesh Sah
disciplined with money, so essential for addressing various ASSiStAnt mAnAgEr
life goals. Keep up the good work and looking forward to more Gaurav Shrivas
interesting articles. Accounts
ASSiStAnt gEnErAl mAnAgEr
Diwan Singh Bisht
ComPAny SECrEtAry & lAw offiCEr
Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave,
Ankit Mangal
New Delhi 110029, or letters@outlookmoney.com. Please mention your full name and residential address.

8 Outlook Money May 2018 www.outlookmoney.com


Talk Back

The April issue of OM was a big shocking experience for the readers. It was too hard to
decide if you are going through the pages of Outlook Traveller or Outlook Money.
All the pages seem to be sponsored by travel agencies. All the agencies were
advertising their discounted travel packages. It was just spending, spending... Nothing
to save and invest. Remaining pages were wasted on ‘Buisness Leading Edge’. This was
another Sponsored event by Outlook Group. I didn’t find anything new and innovative
write ups. I missed my regular features and tits bits of investing and saving. I think OM
wasted the whole issue on useless write-up.
Sandeep Kumar, Amritsar

With summer vacations approaching, I was in the positive


mood for a trip. Your travelogue “North Sikkim: Nature
at its Pristine Best” just helped me decide where shall
I spend my 1-week trip. Best part was that I got an
estimate of the budget too.

Amit Pal, New Delhi

Planning and executing an international trip is not an easy


task as it sounds. “How to Fund your Dream Holiday” just
tells you how to make it an easy task. Travellers should
invest accordingly rather than cracking the piggy banks or
taking a loan.

Krishna Mohan Singh, Delhi

A passion to observe, examine and disseminate the


information based on such efforts has always been useful to
arrive at a conclusion, if we are in dilemma. Your article under
the title “Off --------” published in Outlook Money in April
2018 edition is well placed under such passion.
I am overwhelmed and appreciate your views that the real
pleasure of travel lies in exploring the unexplored destinations
Pravin Bhushan
which signifies the true spirit of travelling.

The travel issue of Outlook Money was fabulous, the content and deatails were well
chosen. Especially where you covered various types of tours -- eco tours, adventure
tours, world tours , domestic etc...the information provided was quite handy.
But we were trying to contact Doreen of Doe’s Ecotours, but the details obtained
from net is faulty. So requesting you to share her contact details or kindly send our
contact details to her. As our family wants to travel through her,
(if possible) as her style is different then others -- as you have aptly noted.
Chandresh Mamtora

10 Outlook Money May 2018 www.outlookmoney.com


Queries

Rajnath BIRaj, Noida


Satya Ranjan BiSwaS, Noida I am a retired person from the defence
service. I work as an engineering consultant.
I’d like to invest a lumpsum amount of I sold my property at another station. I get
`10 lakh in mutual funds for a five-year pension. What should be my financial plan?
time horizon. Please suggest some good This is a very subjective question. I suggest you consult
mutual funds. a financial planner locally and share with him your
assets, cost of living, expenses and insurance details.
The financial planner would be able to examine your
situation based on the submitted facts and recommend
a plan of action that works for you and meets all your
financial requirements.
amit Kukreja
Founder, WealthBeing Advisors

B SRInIvaS, Nizamabad
I am a 42-year-old central government
railway employee. I have taken a `35 lakh
home loan from State Bank of India for 30
years. I am going to get `5 lakh from Sri
Ram Chit Fund, which is in my mother’s
name. Shall I repay the loan or invest
this amount?
Home loan generally comes at a low interest rate.
Currently, it would be about 8.5 per cent. Over this,
There is no data about you. Normally, we you also get deductions on interest upto `2 lakh. This
need to look at your risk profile, goals, makes the effective interest rate even lower. Hence, it
liquidity requirements, past investments, is a good idea to keep the home loan intact and invest
asset allocations etc. before suggesting the `5 lakh which you are getting back. Where to invest
anything. Assuming that you have the is something that you can decide based on your risk
risk appetite to invest in equity, your appetite and goals.
asset allocations allow you to invest in it Suresh Sadagopan
provided you don’t need this money and Founder, Ladder7 Financial Advisories
have a time horizon of over five years. You
may look at a large-cap fund like Aditya vIjay S DeSaI, Bangalore
Birla Frontline Equity Fund and a multi-cap how is LtCG taxed on GoI/RBI gold bonds
fund like ICICI Pru Nifty Next Fifty Fund. You and gold etFs. Should my broker deduct the
can invest in them in equal proportion. Securities transaction tax (Stt)? What are
Suresh Sadagopan the holding periods and LtCG taxes for gold
Founder, Ladder7 Financial Advisories bonds and etFs?
Capital gains tax is calculated based on the holding
period for the capital asset sold. In case of gold ETF, a
Manoj Dutta, Jalpaiguri holding period of less than three years is considered as
I invested a lumpsum `60,000 in utI Mid short-term. More than three years is considered as long-
Cap Fund in january 2017 and in February term. Short-term capital gains tax on gold ETF is based
2018. Its valuation is `65,000 and I want to on the slab rates applicable to individuals and long-term
invest for 18 years. Can I continue the plan? capital gains is taxable at 20 per cent with the benefit of
Which is the best alternative fund? cost inflation index. STT is not applicable for trading in
UTI Mid Cap Fund was launched in April 2004. gold ETF. The capital gains tax arising on redemption of
Since its inception, it has been delivering over 19 per Sovereign Gold Bond at the time of maturity has been
cent compounded annual growth. Since the fund is exempted. The indexation benefits will be provided to
performing well, you can continue your SIP. LTGC on transfer of such bonds before maturity.
Pankaj Mathpal Pankaj Mathpal
Founder, Optima Money Managers Founder, Optima Money Managers

12 Outlook Money May 2018 www.outlookmoney.com


aRun MISRa, Varanasi funds, but uses alternate investment approaches
how does one save capital gains against to manage the investment risks against market
sale of residential property? volatility. In India, these funds are classified under
There are two ways to do this. One can buy another AIF (Alternative Investments Funds) category III,
residential property at least to the extent of capital gains, and a minimum `1 crore investment is required.
or invest to the extent of capital gains in capital gains Derivatives strategies are extensively used in their
bond (subject to a maximum amount of `50 lakh). portfolios and both long and short positions are taken
Suresh Sadagopan in stocks, bonds, currencies and commodities, as per
Founder, Ladder7 Financial Advisories the objectives laid down in a specific fund. Players like
Edelweiss, Avendus Capital and Motilal Oswal have
naRayana BooRGuLa, Karimnagar such funds in their portfolio.
What is a hedge fund? how can I invest in it? Manikaran Singal
A hedge fund is a pool of money just like mutual Founder, Good Moneying Financial Solutions

Vinod MehRa, New Delhi

I have been investing in mutual funds (regular plan) for the past five years through
SIPs. Most of my funds are not performing well and a few of them are sectoral
funds. I’ve decided to restructure my porfolio. I plan to buy direct funds for the
long-term (15-20 years) with a moderate risk appetite and select a few funds from
my existing portfolio. the selected funds are: Kotak Select Focus Fund Direct Plan
(`2,000), Reliance Small Cap Fund Direct Growth (`2,000), Motilal oswal Most
Focused Multicap 35 Direct Fund (`2,000), Mirae asset emerging Bluechip Direct
Fund (`2,000), Principal emerging Bluechip Direct Fund (`2,000), hDFC Balance
Direct Fund (`2,000), Birla tax 96 - Relief Direct Growth (`2,000). Please let me
know if any modification is required.
Two things I could not understand from your query. What was there in your previous
portfolio which made you believe that they were not performing well? Second, what does
moderate risk appetite mean to you?
If good performance in a mutual fund means better than others, then you can never
make a good portfolio. Star performers keep changing, but your portfolio should not
change that quickly. Be it direct fund or regular fund, the first thing you need to understand
is that you should always start with a goal in mind. What is the 15-20 years time horizon
for? Is it because you have some goal around that time or is it because this time-frame is
normal to be called long-term. Is this plan for 15 or 20 years?
I do not see any debt fund in your
moderately designed portfolio. It has a
mix of large-cap, small-cap, mid-cap,
multi-cap, balanced and ELSS funds.
Covering all the fund categories does not
mean that the portfolio is well-diversified.
What matters is what is in the funds.
More importantly, they should suit your
clearly defined and understandable risk
profile. The funds that you’ve shared are
all good in themselves. But whether they
will suit your requirements is something
that is difficult to comment on.
Manikaran Singal
Good Moneying Financial Solutions

www.outlookmoney.com May 2018 Outlook Money 13


Queries

Cd SolanKi

Since january 2001 I have invested `5000


every month in utI’s Retirement Benefit
Fund (RBF), which is a debt fund. I’m
going to withdraw the maturity amount
very soon on completion of 58 years.
Please tell me how to calculate long-term
capital gains (LtCG) since the investment
is not a lumpsum but a SIP. how to apply
indexation formula for this? In case Retirement
of equity funds (SIPs) how does one Benefit
calculate LtCG? I’ll appreciate it if you can Fund
offer an illustration as well.
As you’re going to withdraw the money from
the fund in which you have been investing
through SIP, first identify the total number of
UNITS to be sold. For every unit sold, find out
its cost of acquisition/purchase price as per
the FIFO (First In, First Out) method – that
is, units that were purchased first will be sold
first, and units purchased later will be sold
later for the purpose of calculation.
In case of Debt-Based Mutual Funds, any units when it comes to calculating capital gains
held for more than 36 months from the date tax on mutual fund units. Focus should be
of sale would be treated as long-term capital. on the number of units and not the amount.
Long-term capital gains are taxed at 20 per Calculate capital gains or loss and long-
cent with indexation as shown below. term and short-term for each unit.
Where indexed cost of acquisition is (2)Secondly, there will be instances of capital
calculated as: loss, please remember to set them off
Actual Purchase Price x (Index of year of against gains. This will reduce your tax
sale/ Index of year of purchase or 2001-02; burden.
whichever is later) (3)Since debt funds are subject to capital
LTCG Tax = [(Selling Price of long-term gains tax, you also have the option to invest
units x no. of units held in the long term) – in long-term capital gains in various bonds
(Indexed cost of acquisition)] x 20% which qualify u/s 54 E/C
Units held for less than 36 months are
considered as short-term capital, and are In the case of Equity Mutual Funds, as per the
taxed as per the slab rate shown below: revised regulations of Budget 2018:
STCG = (Selling Price of short-term units (1) Units held for less than 12 months are
x no. of units held in short term) – (Actual considered as short-term. The gains on
Cost of Purchase) these units are taxed at 15 per cent.
This amount of STCG is then added to your (2) Units held for more than 12 months are
total taxable income for that financial year considered as long-term. The gains on
and taxed as per your tax slab rate. these units are taxed at 10 per cent if total
gains for that financial year exceeds 1 lakh.
Please keep in mind three most important (3) Cost of acquisition to be considered for
points. calculating LTCG tax is either actual NAV at
(1)When it comes to direct equity, while which they were purchased or NAV as on 31
calculating capital gains tax we focus on the Jan 2018, whichever is higher.
number of shares and not their value. The Gaurav Mashruwala
exact same principal should be applicable Financial Planner and Author of Yogic Wealth

14 Outlook Money May 2018 www.outlookmoney.com


Kv Manjunath, Bengaluru Interest from an NRO account is `10,000 per annum that’s available
I have a PnB MetLife Met similar to interest from a savings for residents. You would need
Smart policy for sum assured account and hence taxable. It is to to file your returns in India as a
of `15 lakh purchased in be offered in the return of income consequence, and if your overall
2006. the present fund filed in India. income from India is below the
value of this scheme is archit Gupta taxable limit you can get a refund of
around `6 lakh. the sales Founder & CEO - ClearTax the amount deducted.
manager of PnB MetLife anil Rego,
is advising me to take out anIta KuMaRI, Sahebganj Founder and CEO - Right Horizons
say `1 lakh or `2 lakh and What is the insurance
use this money to purchase available for a person whose evoLu20@hotMaIL.CoM
PnB MetLife Pure term annual income is `3 lakh? Currently I have `1.2 crore
Plan which gives insurance Insurance companies are careful worth of FCnR FDs earning
cover till the age of 99. Is it not to over-insure since it creates an interest of 3%. I want
advisable to do so? the risk of misuse. It also creates a to invest this in the market
I’m not aware of your age but potential threat on the life assured or some other kind of
pure term plan premiums are by the nominee/beneficiary. The investment for three or
not high when compared to quantum of life cover is assessed by more years and earn at
investment-based insurance plans. the insurance company based on least 12% interest/income
The premium for a 40-year-old the age, income, liabilities, and the annually. Kindly advise me
for `1 crore cover till age 99 will state of health. On an average, the of any suitable investment
be `25,000 approximately, so you sum assured can be 10 to 25 times area, and their merits and
may not need to withdraw a large your earning capacity based on demerits. I would also like to
amount from your Met Smart your age and other factors. Ideally know if it is worth investing
Policy. You need to evaluate your the insurance you take needs to in FD of PMC Cooperative
insurance requirements and then be based on the Human Life Value bank, which is offering
decide if you need additional (HLV) which in simple terms is the 8% interest for 24 months
cover. A pure term insurance is earning capacity of an individual duration.
nevertheless the best insurance over one’s work life. As per your time horizon and
plan you can take. You can also use anil Rego return expectations, you should
the opportunity to evaluate if your Founder and CEO - Right Horizons consider investing in mutual funds.
MetLife Smart plan has performed A good mix of debt and equity MFs
well over the last 12 years. RaMeSh MathuR, Denver, USA in keeping with your risk profile
Steven Fernandes I am a PIo over the age of should help you get better returns
Founder - Proficient Financial Planners 60 (but not yet 80) living than the FCNR deposit. The equity
in the uS as a uS citizen. I MFs can be large and multicap
Zeya aLaM, Varanasi had some interest income funds while the debt investment can
a classmate of mine wants generated on a bank be a combination of ultra-short and
to know if it’s necessary account that I maintain in short-term funds. Note that equity
for an nRI to convert his India. I have no other income MFs will not give you an annual
savings account from there. I understand that return like FDs as returns are not
Resident status if he is senior citizens with income guaranteed. A time horizon of more
showing his received less than `2.5 lakh in India than three years should help you
interest in the saving do not need to file taxes get decent returns. There could be
account in his Income tax there. Does this rule apply times when your equity investment
return while filing it as nRI? to me? every quarter the value will give you negative returns
As per FEMA regulations, if your bank automatically deducts in the short term; only if you stay
residential status changes to NRI, taxes from my deposit; am invested for the longer term will
your savings account will have to be I eligible for getting that you be suitably rewarded. Interest
re-designated as an NRO account. money back? earned on FD is taxable, so evaluate
Continuing to hold a savings Banks are required to deduct tax your taxable income and then
account without converting the on interest income for NRIs and decide if you want to invest in FDs.
same even after acquiring an NRI PIOs at the highest tax rate. NRIs Steven Fernandes
status will be considered illegal. are not eligible for the exemption of Founder - Proficient Financial Planners

www.outlookmoney.com May 2018 Outlook Money 15


MDRT - Million Dollar Round Table, COT - Court of the Table, TOT - Top of the Table, LIMRA - Life Insurance and Market Research Association
Focal Point
News Roll

Choices galore for IPO investors


The primary equity market in 2017-18 has seen a growth of over 100 per cent
over the previous record high in FY 2009-10

P
ublic equity markets market was `41,323 crore in 2007- The largest IPO raised was from
witnessed an all-time high 08, while the previous high for QIPs General Insurance Corp. for `11,257
of `1,77,116 crore being was `39,768 in FY 2009-10. (For crore, while the largest QIP raised
raised in FY 2017-18, a number of IPOs raised since 2012 was from SBI for `15,000 crore,
growth of more than 100 per cent and QIPs since 2006, please refer to accounting for 24 per cent of the
over the previous high of `86,710 the tables.) total QIP amount. According to
crore in FY 2009-10. According to
Pranav Haldea, Managing Director
of PRIME Database (a database Some companies that have received IPO
provider on the Indian primary
capital market), the figure for FY approval for 2018-19:
2017-18 was 3.46 times that raised ■ GANDHAR OIL REFINERY (INDIA) LTD: `195.00

in the previous year. In 2016-17 the ■ PRINCE PIPES & FITTINGS LTD: `800.00
amount raised was `51,120 crore. ■ SEVEN ISLANDS SHIPPING LTD: `450.00
According to Haldea, 45 ■ RELIANCE GENERAL INSURANCE CO.LTD: `1600.00
mainboard IPOs came to the ■ CMS INFO SYSTEMS LTD: `1300.00
market collectively raising `82,109 ■ ACME SOLAR HOLDINGS LTD: `2200.00
crore, while 52 already listed ■ BARBEQUE-NATION HOSPITALITY LTD: `700.00
companies used the QIP route to ■ INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LTD: `900.00
mobilise `62,358 crore in FY 2017- ■ RITES LTD: `600.00
18. The amount raised through both ■ PATEL INFRASTRUCTURE LTD: `400.00
IPOs and QIPs was an all-time high.
■ KRISHNA INSTITUTE OF MEDICAL SCIENCES LTD: `600.00
The previous high for the IPO

18 Outlook Money May 2018 www.outlookmoney.com


Some companies awaiting IPO Air travel may cost
more if crude oil
approval for 2018-19: prices rise
■ NATIONAL STOCK EXCHANGE OF INDIA LTD: `10000.00 Air travellers may have to pay more
■ SREI EQUIPMENT FINANCE LTD: `2000.00
for their travel as airlines grapple
with higher ATF prices. With prices
■ VISHWARAJ SUGAR INDUSTRIES LTD: `374.00
of crude oil firming up, an ATF
■ ROUTE MOBILE LTD: `600.00
price rise is inevitable. A 20 per
■ CREDIT ACCESS GRAMEEN LTD: `90.00
cent rise in crude oil prices from
■ NAZARA TECHNOLOGIES LTD: `1000.00 the current $65-70 per barrel could
■ CAPRICORN FOOD PRODUCTS INDIA LTD: `500.00 bring down operating margins to
■ INDOSTAR CAPITAL FINANCE LTD: `700.00 4-6 per cent. Airlines may have
■ FLEMINGO TRAVEL RETAIL LTD: `2423.00. to pass on the increased fuel cost
■ JOHN ENERGY LTD: `300.00 to consumers, which could affect
■ SEMBCORP ENERGY INDIA LTD: `4095.00 demand, according to a report by
■ SANDHYA MARINES LTD: `600.00 CARE Ratings.
■ TCNS CLOTHING CO.LTD: `750.00 The report says that the combined
■ DEVI SEA FOODS LTD: `900.00
passenger traffic is expected to
double in the next five years with
■ NEKKANTI SEA FOODS LTD: `750.00
a growth rate of 14-15 per cent
■ HDFC ASSET MANAGEMENT CO.LTD: `4000.00
annually. It adds that the ratio of
■ K.P.R.AGROCHEM LTD: `210.00
domestic vis-à-vis international
■ ATRIA CONVERGENCE TECHNOLOGIES PVT.LTD: `1500.00 passengers is expected to narrow
All the amount is in Rs Crore and the source for it is PRIME database.
further as airlines offer tickets priced
at par with train tickets between
select destinations. Two new major
airports at Navi Mumbai (Mumbai
Haldea, QIPs were dominated by divestments as well. According region) and Noida (NCR) are
banks, with their contribution to him, there were 155 SME expected to add sizeable capacity.
being 53 per cent (`33,248 crore) IPOs with the highest ever
of the overall amount.Out of 45 amount collected (`2247 crore),
IPOs that were raised in the while the divestments target was
market, 17 had a prior PE/VC overachieved as the Government
investment. Offers for sale (OFS) raised `98,965 crore in FY 2017-
by such PE/VC investors 18. Apart from this, offers for
accounted for 13 per cent of the sale through stock exchanges,
total IPO amount and stood at which is for dilution of
`10,831 crore, while offers for promoters’ holdings, saw an
sale by promoters accounted for increase from `8,390 crore last
a further 64 per cent of the IPO year to `18,438 crore raised in
amount at `52,340 crore. this year.
According to Haldea, 17 out of Outlook for 2018-19, according Domestic traffic growth is
45 IPOs got a mega-response of to Haldea, is likely to see more expected to emanate from the
more than ten times while eight volatility in the secondary smaller and UDAN cities which
IPOs were oversubscribed by market, and this is expected to were untapped and unserved till
more than three times. While 14 have an impact on companies’ now, says the report. Addition of up
IPOs were oversubscribed fundraising plans. While there to 100 million passenger capacity is
between one and three times, are 12 companies holding SEBI expected at UDAN scheme airports
data for six IPOs was not yet approval and wanting to raise over the next 3-5 years.
available. over `10,395 crore, another 18 With the expected rise in capacity,
Haldea also highlighted that await SEBI approval for raising airlines expect to add 500-600
FY 2017-18 witnessed an all-time around `29,282 crore. aircraft over the next 5-7 years to
high for SME IPOs and By Suyash Desai meet the increased demand.

www.outlookmoney.com May 2018 Outlook Money 19


News Roll

SBI Card partners


with IMA to launch Drop in motor insurance
Doctor`s Card
premium for small cars
S BI Card, has partnered with
Indian Medical Association
(IMA) to launch ‘Doctor’s SBI Card’, O wners of small cars and two-wheelers stand to benefit from
lower motor insurance premiums following a reduction in third-
an exclusive credit card for doctors. party premium rates by the Insurance Regulatory and Development
This card will offer facility of Authority of India (IRDAI). Third-party insurance is mandatory for
indemnity insurance of `10 lakh, every vehicle owner, both private and commercial. This component
The Credit Card offers an covers damage to other people’s vehicles and property in case of an
indemnity insurance cover of `10 accident. This, along with the own-damage component, makes up the
lakh to protect doctors against total or comprehensive motor insurance premium.
professional risks and liabilities Every year in April, the regulator announces third-party premium
form of unforeseen events such rates. This decides the motor premium rates for the year.
as claims from patients or related This year IRDAI has reduced third-party premium rates for small
parties. This includes legal and cars with engines not exceeding 1000cc, such as Alto and Kwid, and
defence costs and the facility is bikes not exceeding 75cc[S1] . The rates remain mostly unchanged for
also extended to out of court other cars, but third-party premium rates for bikes with engines of
settlements and court awards. over 350cc have seen a significant hike.
Besides, the card drives “Premium rates for small cars have been lowered to `1850 from
maximum value for doctors `2055, a reduction of 10 per cent. For two-wheelers under 75cc it’s
through accelerated rewards on been reduced to `427 from the current `569. This works out to a
spend categories such as medical saving of `205 and `142 respectively, in case of small cars and two-
supplies, travel and international wheelers of lower engine capacity,” said Devendra Rane, Founder and
spends. The card has been CTO, Coverfox.com, an insurance broking firm.
launched on the Visa Signature However, in case of bikes with engines of over 350cc capacity, the
platform and the cardholders can regulator has more than doubled the third-party premium to `2323
choose to avail EMI facility, either from the earlier `1019.According to Rajiv Kumar, MD and CEO,
at point of purchase or convert Universal Sompo General Insurance Company, “First-time owners
unpaid balances to EMIs, at of four-wheeled vehicles come from tier-2 and tier-3 cities and rural
attractive rates of interest. pockets, For these customers, any mandatory added cost becomes a
Speaking on the occasion, Mr. deterrent towards purchase of their dream vehicle.” he said.
Hardayal Prasad, MD and CEO, The reduction in third-party premium rates will also offer insurers
SBI Card said, “Based on research a chance to bring down premiums for comprehensive insurance
and insights into the unique policies. This should motivate vehicle owners who were previously
lifestyles and requirements of hesitant in renewing motor insurance, said Rane.
doctors, the Doctor`s SBI Card Third-party rates were increased for bikes above 150cc because of
integrates industry first features higher claims in this segment, said Animesh Das, Head – Product
such as professional indemnity Strategy, Acko General Insurance.
insurance cover and accelerated By Priya Nair
5X rewards on medical supplies
purchase for the benefit of doctors Four Wheeler Vehicle not exceeding 1000 Cubic Capacity (CC):
running private clinics.”
Doctor’s SBI Card is the Bank Old rates New Rates
only credit card in partnership
with IMA.Each card will be Own Third Net Own Third Net
personalized with ‘Dr.’ embossed Damage Party Premium Damage Party Premium
Premium Premium Premium Premium
on the card front against the
Hyundai
name of the cardholder together Eon 11970 2055 14025 11970 1850 13820
with qualification degrees of the Maruti
alto 9401 2055 11456 9401 1850 11251
medical practitioner, making it an
Source: Universal Sompo General Insurance, *Rates are in rupees and can vary depending on the city
exclusive product.

20 Outlook Money May 2018 www.outlookmoney.com


News Roll

SBI makes Cash


HDFC Hikes Home Loan withdrawal free from
POS Machines
Rates by up to 20 bps S tate Bank of India (SBI) debit
card holders can now withdraw
cash, free of cost, from PoS

H DFC, one of India’s largest mortgage financiers, recently increased


its retail prime lending rate (PLR). The raise, effective from April
1, is the first since December 2013.
machines installed by SBI and other
banks across various locations.
This move comes after the cash
Mortgage rates for loans above `30 lakh have been raised by up to 20 crunch recently seen many parts of
basis points while those below `30 lakh – which includes priority sector the country.
loans – have been increased by 5 basis points. One basis point is 0.01 As per the current Reserve Bank
percentage point. of India guidelines, customers can
Loans under `30 lakh for women will now be available at 8.40 per withdraw `1000 in Tier I and Tier II
cent, while for other borrowers it will be available for 8.45 per cent. cities and `2000 in Tier III to Tier
Loans between `30 lakh to `75 lakh for women borrowers will be IV cities per day per card. Customer
available at 8.55 per cent while others will get it for 8.60 per cent. Loans charges, if any, levied on cash
above `75 lakh will be 8.65 per cent for women and 8.70 per cent for withdrawals shall not exceed 1% of
others. the transaction amount at all centres
Jaikishan Parmar, Senior Equity Research Analyst at Angel Broking , irrespective of the limit of `1000 /
says, “HDFC has raised its home loan rate by 20 basis points for loans `2000. SBI is urging customers to use
exceeding `30 lakh. However, rate for home loans under `30 lakh was the POS for the withdrawal of cash
hiked by just 5 basis points. For loans between `30 lakh and `75 lakh and has decided not to charge fees for
the rate of interest was hiked from 8.40 per cent to 8.60 per cent, while the customers availing this facility for
for loans above `75 lakh the rate was hiked from 8.50 per cent to 8.70 the time being.
per cent. In all these cases, women home loan borrowers will get a Neeraj Vyas, DMD (chief operating
rebate of 5 basis points.” officer) of SBI in a tweet said:
Parmar adds that the rate hike has come at a time when the RBI “For withdrawals up to `2000, @
has not exactly hiked its repo rates. “This rate hike by HDFC can also TheOfficialSBI has cash@POS facility
be attributed to liquidity tightness in the last few weeks. In practice, @ 4.78 lakh POS machines. Customer
mortgage lenders do not increase the EMI of borrowers but extend the can use SBI and any other bank debit
tenure accordingly,” he says. card to withdraw cash up to `2000
The regime of raising interest rates on home loans started with in Tier 3 to 6 & up to `1000 in Tier 1
private sector lenders such as Axis Bank, Yes Bank and Kotak Mahindra & 2 cities per card per day presently
Bank, who set the trend by hiking their marginal cost of funding-based without any charges”. SBI has a total
lending rates. It was followed by all the banks in the system, including of 6.08 lakh PoS machines of which
the largest lender – State Bank of India. 4.78 lakh PoS machines are enabled
By Suyash Desai to dispense cash to customers.
Previously, after demonetization,
RBI had increased the cash
Here is a comparison of home loan interest rates withdrawals at Point of Sales (POS)
charged by major banks in India:
up to `2000 for all Tier I to VI cities
Up to `30-75 Above and had also for some time waived
Bank
`30 lakh lakh `75 lakh off the withdrawal charge. India
Axis Bank 8.35 8.65 8.7 witnessed a cash crunch in the
third week of April 2018. Regions
ICICI Bank 8.5 8.8 8.85 like Andhra Pradesh, Telangana,
State Bank of India* 8.40-8.50 8.55-8.65 8.65-8.75 Karnataka, northern Bihar, parts of
Uttar Pradesh, parts of Punjab, the
HDFC Bank 8.45 8.6 8.7 border areas of Gujarat and Madhya
All figures in percentage. Source: Bank websites Pradesh and some parts of interior
*Interest rate will vary as per the risk score of the customer and rates are also based on LTV of the Customer
Maharashtra were severally affected
by this cash crunch.

22 Outlook Money May 2018 www.outlookmoney.com


Cover
story

O
ld habits die hard. And when saving for adulthood. This creates an unrealistic
it comes to money, what we impression in the minds of young children, who
learn about it in childhood believe that money is something that magically
has a deep bearing on our comes out of ATMs.
relationship with it in our Financially savvy parents tend to teach
adult life. Most parents their children important aspects of money –
today unflinchingly expose including earning and saving from an early
their children to the power of spending, but age – using innovative techniques. For instance,
keep other important aspects like earning and renowned financial advisor Gaurav Mashruwala

24 Outlook Money May 2018 www.outlookmoney.com


CATCH
THEM
YOUNG
While it’s important to teach
children about saving and
spending money wisely, there are
no fixed rules or methods. However,
parents should follow a balanced
and systematic approach, says
Priya Nair

Amrit rAi (6)


Money Lessons: Amrit gets rewarded
in cash or by way of treats for doing well
in studies and for helping his mother with
household chores. If he misbehaves or does
not finish his food, money is taken away. He
uses the money to buy toys and gifts for
friends. there’s a fixed budget – if he likes
an expensive toy, he has to wait till he saves
more.
Photos: S Kumar
How it Helps: the age is right to introduce
the concept of saving using a piggy bank.
started inculcating financial awareness setting a budget, encouraging him to stick to
in his daughter Sanaa when she was very it, and saving up money if it’s falling short are
young. He helped her understand the power all good lessons for him to learn.
of saving and building a corpus through
a transparent chocolate bank – each time What Needs to be Done: the line between
Sanaa took chocolates out of the ‘bank’, she normal behaviour (which need not be
saw the stock deplete. Today, as a 16-year- rewarded) and good behaviour (which will be
old, she’s the family bookkeeper when they rewarded) should be made clear.
travel. She maintains an expense diary

www.outlookmoney.com May 2018 Outlook Money 25


Cover Story

If parents keep relating everything to money,


that message will travel to the child, points
How you handle cash, how
out Dr Niranjana Gokarn, a family and child
you make payments when welfare counsellor and retired professor from
you go out for eating or Tata Institute of Social Sciences. “The child sees
shopping, how you decide what is happening and then does, rather than
what to buy and what being told what to do. Some kind of discipline,
for wanting things, must develop from a very
to leave, the discussions
young age. And that can develop only if parents
between you and your spouse live like that,” she says.
– all these will definitely Most financial institutions claim that
impact the minds of children millennials and young adults only believe
who will be listening. in spending and are not at all interested in
saving, largely because the focus today is
MANIKARAN SINGAL on living the good life. We live in a world of
instant gratification and people are not averse
Founder and Chief Financial Planner, to enjoying life on borrowed money. It is for
Good Moneying Financial Solutions this reason that financial literacy should start
very early on. Amrit Rai, a six-year-old boy in
Mumbai, gets rewarded for his good behaviour
and is currently saving to buy a remote-
controlled rocket. His piggy bank is a ‘special
that helps her track her outflows and inflows box’ where he collects money. He has over
(pocket money). `2000 in it but wants to save more because he
Most of us had a piggy bank while growing does not know how much his rocket will cost.
up and the financial discipline (or the lack of Amrit’s ‘good behaviour’ includes helping
it) that we displayed then shows up even in our his mother tidy up the house, completing his
adult life. It is for this reason that some people homework and doing lessons by himself, or at
like to live on borrowed money while others times just behaving himself in public. Money is
are more prudent. Outlook Money spoke to some deducted if Amrit misbehaves – for instance, if
families to see what they are doing right and he doesn’t finish his food or refuses to obey his
what they can do differently. Some parents mother. It is to build a sense of independence
feel that instead of giving money to children, in Amrit that his mother Anuradha Rai started
setting an example by leading a disciplined and rewarding him for good behaviour. And taking
frugal life is the right way to teach them the away money is to let him know that it’s the
value of money. Some parents reward children result of his bad behaviour. “I reward him
with cash or treats for good behaviour to teach when he does things on his own without our
them concepts like earning and saving. prompting. This encourages him to do things
However, as the psychologist we spoke to better than he normally does. He knows that
says, there is no one right or wrong. These life only then will he get rewarded. I’m building up
lessons have to be taught. What route parents his expectations, but he should realise that this
choose to follow would depend on their comfort is how it will be when he grows up. He should
and individual preferences. do work exceptionally well in order to get
rewarded,” says Rai.
The Carrot-and-Stick Approach The family is saving for Amrit’s higher
Parents’ attitudes towards money inevitably studies based on his current school fees. They
have a deep influence on their children. But also save for their annual vacations. Rai is also
there are questions galore – would a tight- particular about saving for buying anything
fisted parent end up raising a mean child? Will expensive, such as an iPhone. “We don’t pay
someone who spends money lavishly raise a any EMIs, other than on our home. I don’t allow
spendthrift child? Most people tend to leave my husband to use his credit card recklessly.
important money lessons for much later, but I insist that he saves money to upgrade his
specialists believe that need not be the case. iPhone,” she says.

26 Outlook Money May 2018 www.outlookmoney.com


Photos: aPoorva SalKade
SwArAj rAvirAj (17) &
Leading By Example
ShrAvyAA rAvirAj (13)
According to Manikaran Singal, founder and Money Lessons: swaraj and shravya get
Chief Financial Planner at Good Moneying money for eating out or going to movies
Financial Solutions, children learn by with friends, so long as they tell their mother
observation and imitation. So parents need to how and where they spend the money. they
be careful how they behave with money. “How are encouraged to take the bus instead of
you handle cash, how you make payments a cab. they often prepare snacks at home
when you go out for eating or shopping, how and this saves money. While shopping
you decide what to buy and what to leave, shravya chooses her clothes, but sticks to
the discussions between you and your spouse the expense limit set by her mother. Next
– all these will definitely impact the minds year swaraj will get his own bank account
of children who will be listening. They will and AtM card when he moves to a hostel.
indirectly imbibe that in their own money Both children have been told briefly about
behaviour,” he says. the family’s business and other investments.
Teaching children about money can start
early, even at ages as young as six or seven. How it Helps: setting a budget and
Give them a money box or piggy bank and keeping track of their spending will help the
encourage them to start collecting small siblings manage their finances later in life.
amounts over a period of time in order to buy Informing them about the family business is
something later, because this can also be a also a good practice.
lesson in saving and investing. Later, when
they are 12 years or older, parents could open
What Needs to be Done: Given the age
of the children, they need to be made more
independent bank accounts for them.
independent. While encouraging kids to
Referring to Amrit’s special money box,
spend sensibly, parents should also instil in
Singal says, “It looks like a good arrangement.
them the importance of earning and saving.
However, there’s a probability that the child

www.outlookmoney.com May 2018 Outlook Money 27


Cover Story

Photos: rajineeSh
Somin ShAh (14)
might start expecting a reward for every good
Money Lessons: somin only gets money
deed he does. A lot of things for which he’s getting
for travelling to his tuition class and
rewarded are part of standard expected behaviour
occasionally for buying snacks in the school
in Indian society. So rewarding him with money for
canteen. His mother buys everything he
these might entail a small chance of developing the
needs, including gifts for his friends. He is
wrong mindset. Saving money for buying things
allowed to purchase only one new video
later is a good way to teach. It can also be taken
game a year.
from his pocket money. He can use savings from
How it Helps: Controlling his expenses his pocket money to buy toys or other small things
and restricting video game purchases that he wants.”
discourages him from wasting money on
non-essentials. Teach the Art of Saving, Not
Stinginess
What Needs to be Done: Give the child Just like Amrit saves money in his special box,
more freedom to spend money in order to 14-year-old Abhishek Bhosale used to save money
help build his financial independence. teach in his mother’s old purse till recently. While some
him about banks, deposits, withdrawals, parents are overgenerous with their children out
transactions, interest, etc to impart practical of a sense of guilt, others go to the other extreme
knowledge. when it comes to saving and cutting back on
treats. Abhishek’s mother shows him how much

28 Outlook Money May 2018 www.outlookmoney.com


he’s earned for his good behaviour and what’s
deducted for bad behaviour or for doing badly
in school. Recently his parents opened a bank
account for him. Now the money gets deposited
in his account and Abhishek regularly checks
the balance in his passbook. The family is saving
for his higher education through mutual funds,
and also encourages him to invest any extra
Ho w
t o Tea
money in his account in mutual funds. “By

Chi ld r ch
opening his account we wanted to show him

e n Go
how the value of money can increase when it is
invested, which doesn’t happen when it’s kept at
Mo n e od
y Hab
home,” says his mother Kalaivani Atul.
Parents typically give Abhishek `500 for
good behaviour. He also gets money from his
it s
grandparents when he visits them during
holidays. He spends the money on football shoes
and other sports equipment. Since his parents
will not let him splurge on expensive brands,
he goes online to check for good deals and also
visits several stores till he gets the best pair he
can afford. “I save for two to three months and
Parents should start by taking kids
then buy. If I go to McDonald’s I don’t spend with them when they go shopping
more than `500. I’m not allowed to spend more so that they can observe how
than `6000-7000 for a pair of shoes. Recently transactions take place; how money
I saw a pair of Adidas shoes online. But I also is given in exchange for goods.
found a similar pair in a local store that I got
for a good price. Next I want an electronic When the children are slightly older,
skateboard and I’m saving for that,” he says. give them small amounts of money
Similaly, he also helped his father get a good to buy something from the store and
deal on the latest iPhone. For his birthday, his tell them to bring back the balance.
parents took him and his friends out to lunch. this should start when children learn
At that time Abhishek had insisted they eat at counting, say at six or seven years.
McDonald’s and not at the Chinese restaurant
his mother had in mind, to save money. older children over the age of
“He’s quite conscious about spending. I had 10 years should be introduced to
to explain that since we invited his friends we concepts like value of money and
should consider what everyone would like to eat.
gratification. For instance, if the
In fact, I’ve decided I will give him my money
only after my death. I’m worried he may not take
child wants something expensive,
care of me,” says his mother. But she agrees that suggest a cheaper option and
Abhishek is ready to donate to charities run by explain why. or if the child has
their housing society and willing to pay from his already bought one item, explain
pocket. So, her fears of him being money-minded why another can be purchased only
may not be entirely valid. the following month.
Dr Gokarn says, “Valuing a thing because it is
useful to you, therefore spending more money teach children to share by allowing
on it and less on another is a good thing. It is a them to buy snacks for their friends
good value to learn. But constantly looking for from the canteen. or encourage
cheaper things is eventually a very tiring thing them to share toys and chocolates
to live with as you grow up. Only if parents with their friends.
make children stingy will they grow up to be
stingy.”

www.outlookmoney.com May 2018 Outlook Money 29


Cover Story

Importance of Earning and


Saving
Parents need to lay the foundation of a
value system about money. Helping children
learn the importance of earning money
(through chores given to them), tracking
money earned, and outgoing expenses (for
their wish list items) is a good way to lay
the foundation. Seventeen-year-old Swaraj
Raviraj and his 13-year-old sister Shravyaa
do not get regular pocket money. But they
do get money for going out with friends to
lunch or dinner or to the movies. They also
get some money during Christmas to spend
on gifts either for themselves or for friends.
While they are allowed to go the
restaurant or movie of their choice, they
have to give their mother Mini Raviraj
details of how much they spend and on
what. Raviraj says, “I don’t stop them from
spending money, but they must tell me
where and how much they spend. I also
encourage them to save money by taking the
bus instead of hailing a cab. At times they
have been late for school and I have refused
to call for a cab, instead telling them to go by
bus,” she says.
As a result, if Swaraj takes the cab to
school because he’s running late, he makes it
a point to take the bus back home. Another
saving tip the kids follow is to try out
recipes of food they eat outside with friends.
“Sometimes a restaurant we go to has good
food, but is very expensive. So we try to
AbhiShek bhoSAle (14) make the same food at home. In fact I make
lot of milkshakes at home,” says Swaraj.
Money Lessons: Abhishek gets pocket money “Usually I get `600-700 if I’m going to a small
if he does well at school, and as gift from restaurant and `1000 if it’s a high-end place.
Photos: aPoorva SalKade

grandparents. Money is deducted if he does I try not to exceed this. Since I like going to
badly in studies. He has a bank account and Comic Con, I get `2000-3000 for that. And I
saves money to buy football shoes (within a set bring back a gift for my mother.”
budget). He also donates money to charities Shravyaa loves shopping for clothes and
from his savings and looks for deals and offers accessories, but only goes with her mother.
online while buying shoes. She selects clothes of her choice, but is
careful not to exceed `1000-1500 at one go.
How it Helps: He’s learning to save, spend, and
There have been instances when she has left
keep track of his money, while also learning to
clothing items at the cash counter because
give back to society.
she overshot her budget.
What Needs to be Done: restrict using the Mini Raviraj’s biggest concern about
reward-punishment regime with money for giving money to her kids is that they
things that are normal or standard behaviour as it may misuse it. “I don’t want them to be
might have a negative psychological impact. influenced by their peers and overspend.
That’s why I haven’t given them an ATM

30 Outlook Money May 2018 www.outlookmoney.com


card yet. But next year when Swaraj shifts
to hostel I shall open an account and put a
Our school curricula
limited amount in it for his use,” she says.
Amit Kukreja, Founder, WealthBeing unfortunately do not cover
Advisors, feels that while Raviraj’s fears are any topics on personal
valid, in this case neither party is inculcating finance – earning, saving,
the sense of saving and delaying gratification. spending, investing, inflation,
Ideally, Raviraj should involve the children
rate of interest etc. So the
in household activities to build life skills and
reward them financially for their contribution. onus lies more on parents to
However, he cautions, “They must watch out teach them early based on
for one pattern; that not every activity or task their capacity to understand
given to the kids will earn money, otherwise and follow the advice.
kids will become too focused on money to do
the tasks at home.” AMIT KUKREJA
Too Much Discipline Isn’t Founder, WealthBeing Advisors
Healthy
A disciplined and frugal lifestyle is a good way
to teach children the value of money, but it’s
possible to overdo it. This kind of behaviour
will not help build financial independence. out to once a month. So far Somin has never
Fourteen-year-old Somin Shah loves to play gone to a bank by himself or operated his own
video games, but his mother Poonam Shah bank account. But Shah plans to introduce
permits him to buy only one new game a year him to banking soon and teach him how to use
– that too, costing not more than `1000. He an ATM.
gets money only to go to his tuition classes
or to eat in the school canteen occasionally. Teaching Children to Handle
Other than that he gets no pocket money. The Money
family restricts going to the movies and eating To an extent it’s important to teach kids
about handling money as it imparts a sense
of independence. As children develop their
Tips to teach money lessons: reading, writing, and mathematical skills,
money management tasks can be handed to
Set a goal them to track their expenses, say experts.
Tell your child to set a goal and work “They need not be involved in the
towards it. They can be rewarded for the household financial planning until they are at
actions they take in working towards the least 16. Our school curricula unfortunately
goal as well as when they finally achieve it. do not cover any topics on personal finance –
earning, saving, spending, investing, inflation,
Teach them banking operations rate of interest etc. So the onus lies more on
Take children to the bank and show them parents to teach them early based on their
how to deposit cheques, withdraw money, capacity to understand and follow the advice,”
how cheque books are balanced and so says Kukreja.
on. Show them how an ATM functions and Dr Gokarn says, “What kind of pleasure you
how to do internet banking. seek out of money will depend on how you
have learned to use it; where you will use it
Teach them not to hoard more and where you will use it less – more on
Before buying your child a new toy or movies or clothes for someone who does not
clothes ask them to donate their old have it, and so on. Parents have to introduce
articles to a local orphanage, provided these values gradually.”
they are in usable condition
priya@outlookindia.com

www.outlookmoney.com May 2018 Outlook Money 31


Cover Story

Paving The Way For Your Child’s Future


Education costs are rising rapidly and would be a substantial amount by the time your
kid is 18 years. Planning early is key, says Anagh Pal

Start early
As with any other investment, time
is a key factor. The longer you put off
planning for college (maybe because
of other reasons like investing in a
house, or a car, or a foreign trip) the
more difficult it becomes. “Today,
one needs to start planning for the
educational needs of the child just
after the child is born. Only then
will one be able to build a corpus
sufficient to properly fund their
education,” says Suresh Sadagopan,
Founder, Ladder 7 Financial
Advisories.

Invest in equities

T
With a long investment horizon of
he first day of college they study, which is why parents feel over 10 years, investing mostly in
will be one of the most it is very important that they save for equities is crucial as market vola-
memorable days of your their child’s future,” says Amit Suri, tilities balance out over a period of
child’s life. But as a parent Director and CEO, AUM Wealth time. Investing only in debt products
you will obviously not want to worry Management. Rather than putting will not give the returns required
about how to fund the expense. In a away money with no clear idea of the to create a desired corpus. “Mutual
worst-case scenario, your child may goal in mind, it is crucial that parents funds offer a wide variety of funds to
not be able to take up a course of have a plan in place to meet their choose from – equity, debt, hybrid.
their choice owing to lack of funds. children’s educational expenses. One can invest mostly in equity
Education costs are rising rapidly funds if one is starting early on with
and estimates indicate that at 10 Knowing how much to save investments for the education of the
per cent it is higher than general “A big challenge when planning for an child. If the parents are risk-averse,
inflation. Under these conditions an education corpus is the difficulty of they can tone down the equity expo-
engineering degree that costs `10 arriving at a fixed sum that one would sure somewhat,” says Sadagopan.
lakh today could cost you over `40 need,” says Suri. Since every child is The good news is that educa-
lakh 15 years from now, and a MBA different, so is their desire to study tion loans are available and parents
course that costs `20 lakh today and pursue education of their choice should encourage their children
could cost over `80 lakh. And this later in life. Given these unique indi- to take loans to fund a part of
would be just the course fees. vidual needs, most parents will find it their education. “This inculcates
For parents, their children’s future difficult to calculate how much they responsibility in the child and also
– especially planning their higher need to save. “My advice is to make a takes away some pressure from
education – is a very important start, even if it is with small sums. You the parent. Also, the child can take
financial goal to which a lot of emo- can then add to the investments over advantage of the interest amount of
tion is attached. “Many would put time as your child grows and there’s the education loan and deduct that
their retirement plans behind and some clarity on the field that they and get a tax advantage when they
focus on creating a sizeable corpus may end up choosing,” Suri adds. This start earning,” says Sadagopan. So
for their children. In our country, said, parents can calculate a ballpark plan ahead. Your child’s future is in
one’s future mostly rests on what figure and start investing diligently. your hands.

32 Outlook Money May 2018 www.outlookmoney.com


A Bank Account For Juniors
Banks offer specially designed children’s savings accounts that give them a head start on
the concept of saving and managing money. Anagh Pal takes a look at what’s on offer

Y
ou might have had a instructions. “Our experience has
piggy bank when you shown us that when children have
were little, and so would their own bank account, it gives
your kid. As she grew up them first-hand exposure to money
you would have asked her to save and instils the savings habit in them
some of her pocket money and also early in life,” says Ambuj Chandna,
put any cash she received as gifts Senior Executive Vice President and
into her piggy bank so she could Head – Retail Liabilities, Investment
buy something later. & Payment Products, Kotak
These simple exercises would A children’s bank account works Mahindra Bank.
hopefully have introduced your like any other, but with some unique
child to the concept of money and features. Children over the age of 10 Encouraging Kids to Save
the importance of savings from a are given a personalised debit card, Even small amounts of money
very early age. which they can use to withdraw invested on a regular basis would
money at different ATMs. The debit encourage kids to save. “An early
Kids’ Own Bank Account card and cheque book are issued introduction to the benefits of
When your child turns ten it’s the in the name of the child, which not savings and investment will help kids
right time to open a bank account only gives her a sense of financial in managing their finances better,”
for her. Though savings accounts for responsibility but also teaches her says Chandna.
children can be opened for anyone the basics of banking. Many banks have the option
below 18, banks allow self-operated Parents can transfer the pocket of converting excess funds into
accounts for minors from the early money every month to their child’s a fixed deposit once the balance
age of ten. bank account through standing in an account crosses a certain
amount. Banks will also allow you
to contribute a certain amount
Minimum Monthly Withdrawal Savings
Average Balance Limit Features every month, starting from sums as
small as `1,000, to recurring deposit
` 2,500 a day at Option of automatically accounts or for SIPs in mutual fund
HDFC Kid's
ATMs ,`10,000 a transferring money into a investments.
Advantage `5,000
day at merhant FD when balance reaches a
Fund “The child can watch her pocket
establishments certian amount
money grow and allocate the savings
Option of investing in a re-
Kotak Bank towards achieving different goals.
Withdrawal limit curring deposit / systematic
Junior `5,000 Setting goals teaches kids the value
of `5,000 investment plan with little
Account of money and encourages them to
sums
budget for things they want. This
ICICI Young Money Multiplier faclity by
Choose between gives them a reason to save,” says S
Stars Savings `2,500 linking savings account to
`2,500/ ` 5,000 Sampathkumar, Senior Executive
Account fixed deposit
`5,000 with- Option for setting up Vice President, HDFC Bank.
SBI Pehla What’s more, banks waive
Nil drawal and standing instructions for
Kadam minimum balance requirements
spending limit recurring depoists
IDFC Bank Nil, but stand- Cash withdrawal Option of automatically when savings or investments are
Minior's ing instruction of and daily transferring money into a made through such an account. It’s
Savings `2,000 per month purchase limits FD when balance reaches a time your child learned the basics of
Account mandatory of ` 10,000 certian amount financial planning. This will surely
Any kid between 0-18 years of age is eligible for a kid’s bank account. But a child gets operating rights only after he or she turns 10. help her manage money better in
Source: Bank Websites the future

www.outlookmoney.com May 2018 Outlook Money 33


Cover Story

Mutual Funds: The Way To Go


Mutual fund companies offer specifically designed child plans to meet future financial
requirements for your child. Outlook Money takes a look at what’s on offer

W
hen creating a they work. of large, mid and small-cap stocks while
corpus to fulfil the Investment mix the debt component will be invested in
financial needs These funds would invest in a mix of debt securities and money market in-
of education and equity and fixed returns.. “The ICICI struments.,” says Raghav Iyengar, EVP &
marriage of your child, mutual funds Prudential Child Care fund uses Head - Retail & Institutional Business,
are the best bet. “Mutual funds in-house asset allocation model to ICICI Prudential AMC.
indeed emerge as an excellent choice maintain an effective equity invest-
for the fulfilment of your financial ment level, which would endeavour Lock-in period
goals of education and marriage to be in the range of 65-100 per cent. These funds also come with a lock-in
of kids as they enable you to save The scheme looks to invest in a blend period which ensures that the parents
consistently through Systematic have a discipline in investing in the
Investment Plans (SIPs) and come fund and the child has access to it for
with a potential of higher returns as his or her needs when required. Says
professional fund managers manage Chandresh Nigam, MD & CEO, Axis
the funds,” says Sundeep Sikka, ED Mutual Fund , “The Axis Children’s
and CEO, Reliance Nippon Life Gift Fund has a lock-in such that the
Asset Management Limited. money that is set aside will only be
There are several child plans in available for redemption at the end
the market which are specifically of 3 years or when the minor crosses
designed for investors who want to the age of 18 - whichever is later. This
set aside money to meet the future lock in period will further extend to
needs of their children. Here is how 5 years to align with SEBI guidelines.”
Further being an open ended fund, it
Return (%) is not necessary that the corpus that is
Scheme Name accumulated in this fund be spent only
3 Month 6 Month 1 Year 3 Year 5 Year at age 18 but rather there is a flexibility
that it can be used as per the actual
Axis Children’s Gift - needs at any later date.
-0.16 4.54 13.48 - -
Regular Plan
HDFC Children’s Gift Fund -2.40 5.95 13.57 10.75 18.76 Should you invest
These mutual fund schemes are no
ICICI Prudential Child
-1.50 6.15 5.96 9.14 17.51 different in design than any other
Care Plan - Gift Plan
mutual fund scheme and generic open-
ICICI Prudential Child Care ended mutual funds can be used for
0.39 1.74 6.84 9.25 14.82
Plan - Study Plan
the same purpose too. “Somehow the
LIC MF Children’s Gift Fund -7.02 -2.48 -2.06 4.00 10.43 mere mention to the word ‘child’ in a
SBI Magnum Children’s financial instrument drives people to
-0.32 6.70 16.72 14.63 15.98
Benefit Plan stay disciplined with investments and
Category also check their habit of redemptions
on flimsy grounds. The performance of
Equity: Large Cap -2.62 3.79 11.59 7.72 15.44
some of these funds has also been good
Equity: Mid Cap -5.60 6.11 15.38 12.91 24.98 to suit first-time investors,” says Amit
Equity: Multi Cap -4.34 4.49 13.99 10.59 18.78 Suri, director and CEO, AUM Wealth
Management.
Equity: Small Cap -6.90 10.45 21.45 18.61 31.27
Invest regularly to secure your child’s
Source: Value Research, Returns as on 03rd April 2018
future.

34 Outlook Money May 2018 www.outlookmoney.com


Protect Your Child’s Future
Child-specific plans offered by life insurance companies not only help build a corpus for
children’s future needs, they also come with protection features that will cover parents

L
ife goals such as children’s
education and marriage
will be foremost on every
parent’s mind. There are
several investment avenues to
choose from for this purpose. A
child life insurance plan is one
of them.
“While such a plan ensures a
constant growth in your investment
over a chosen period, it also provides
financial security through life insur-
ance coverage for your children’s
goals, even if you are not around,”
says Kshitij Jain, MD and CEO, Exide
Life Insurance.
These plans also come with a
‘waiver of premium’ feature. “If a
parent is setting aside some money
for the future of the child and has
opted for a child Unit Linked Insur- market potential. They also offer a Opt or Not?
ance Plan (ULIP), product, which choice of fund options ranging from Benefits of a child ULIP can be
usually comes with a waiver of pre- equity to debt, keeping in mind dif- achieved by a term insurance and
mium feature, the insurance com- ferent risk appetites,” says Jain. While investing appropriately in mutual
pany will continue to fund the future some life insurance companies offer funds and other investment op-
premium towards meeting the goal child-specific ULIP plans, many offer tions. “However, if someone wants
in case of death of the parent.” says ULIP plans where the parent can opt an all-in-one product that man-
Subhrajit Mukhopadhyay, Chief & for a specific ‘child’ benefit. ages all these, a child ULIP can be
Appointed Actuary, Edelweiss Tokio considered,” says Suresh Sadagopan,
Life Insurance. Plan Ahead founder, Ladder 7 Financial Advi-
To determine the premium to be sories.
Traditional Plans and ULIPs paid to create an amount required to “One of the advantages is that
Life insurance companies provide fulfil your child’s education goal, you one need not be very financially
both traditional and ULIPs. The for- should have an idea of the amount savvy to navigate his investments.
mer come with guaranteed payouts, required (keeping inflation in mind), In case of unbundling, one has to
where you can either opt for a lump be aware after how many years the ensure that the fund is managed
sum payout at maturity or periodic money is required, and know the exactly the way it should be and
payouts based on a percentage of the expected rate of return. earmarked for each and every goal
sum assured. However, considering “By keeping the above-mentioned and one has to keep on adjusting
the low returns, such a plan may not points in mind and doing a reverse and rebalancing. In case of a ULIP,
be sufficient to build the required calculation, one can determine the one can opt for passive investment
corpus for your child. approximate amount required to be strategy” says Mukhopadhyay.
In case of ULIPs, returns are mar- invested either monthly or annually,” As a parent, it is your duty to
ket-linked. “ULIPs offer an oppor- says Jain. Websites of life insurance invest in and protect your child’s
tunity to build wealth over the long companies will have calculators to future. Proper planning will always
term by benefiting from the growing help you do this. stand you in good stead.

www.outlookmoney.com May 2018 Outlook Money 35


Cover Story

GauRav MaShRuwala
Financial Planner and Author of Yogic Wealth

Gaurav Mashruwala
with wife Pranati and
daughter Sanaa

Photo: soumik kar

Raising Money-Savvy Kids


Ideally we should be telling our bank how much money we have,
instead of the bank informing us of the account balance

W
ealth creation is a habit went to the bank to get the family’s and outflows, such that in case of
and, therefore, it needs to bank passbooks updated from the something going amiss, we would
be inculcated in children time she was 12 years of age. notice it.
from an early age. The faster it is Most of us don’t know how much So, from a very early age, my
ingrained, the easier it is to make it money we have in the bank. It is the daughter has been conscious of her
a way of life. We don’t have to wait bank that tells us how much money priorities and focused on optimum
for kids to become adults to teach we have, in the form of statements utilisation of her resources, which
them money lessons. The later you and text messages. However, in is her pocket money. For example,
do it, the more difficult it will be to reality it is us who should be telling there have been instances when
form good financial habits. the bank how much money we she would go out for coffee with
My daughter Sanaa is 16 now and have. Keeping a parallel track on friends but skip the coffee just
she tracks her expenses and saves debits and credits is of crucial to save money. Last year we had
money for future purchases from importance. Over a longer period planned a trip to England, and
her pocket money. She also handles of time, this will help in knowing she walked in scorching April heat
her own banking. She has started the cashflows throughout the while returning from her tuitions
writing her bank passbook more year. What this would do is to just to save money. She saved
recently but we ensured that she make us more aware of inflows `17,500 over eight months. She

36 Outlook Money May 2018 www.outlookmoney.com


had decided what she wanted to A transparent piggy bank. She learned to deposit the
purchase while abroad and had chocolates in the bank, from which
started dreaming about it.
bank can help your she could eat chocolates twice
The moment we start dreaming child see chocolates a week. Each time a chocolate
about something, we start getting or coins piling up was deposited in the bank she
inner happiness. The longer we do saw the pile build up – and
it the more prolonged will be the reduce in number whenever she
happiness. If we decide to travel very young, we made her sow seeds withdrew. This helped her learn the
to Switzerland after six months, in a pot and she was expected to importance of inflows and outflows.
we start planning for the trip by water the plant regularly. Over a We also gave her two piggy banks.
talking to friends and visiting period of time she saw the seeds In one bank she deposited currency
websites. All this gives us a thrill. sprouting into plants. Firstly, this notes that she received from elders
Even when we sacrifice immediate is a good habit in all aspects. From on auspicious occasions. This
expenses, it doesn’t pinch us at all. the perspective of money training piggy bank was shaped like a bus.
This is because we have a future it will help explain the concept of The logic was that the bus was
materialistic desire fulfilled. It is nurturing wealth. going to the bank. Therefore, all
like giving a bribe to our own self. Other than this, we also gave her currency notes in her piggy bank
Therefore, without spending on a a chocolate bank when she was would eventually go to her bank
trip to Switzerland, we get excited, younger. It was akin to a piggy account. Another piggy bank was a
which is prolonged gratification. transparent glass jar. She deposited
Any kind of saving or investing her coins in it. Next to the jar there
with a financial goal in mind gives was a picture of an object – usually a
prolonged gratification, unlike a TEN COMMANDMENTS toy that she wanted to purchase out
random goal or savings. of her savings. This was to help her
Sanaa’s money training started the Keep track of debits and credits in set financial goals. Since the piggy
day she was given money to spend bank accounts bank was transparent, she could see
in school. When she asked us for the pile of coins increase when she
money that she could spend at the Monitor cashflows regularly deposited money, and see it reduce
school canteen, she was asked to Let the piggy bank be transparent when she took money out of it.
make a note of it. Now, whenever to help monitor accumulation of She was born on December 18th.
the family goes on vacation, she’s money Therefore, every month on the 18th
the official book keeper. Parents she got to purchase a gift of her
today are exposing children to Let children learn the pleasure choice. There was no other buying
the power of spending money but of delayed gratification and throughout the month. This brought
are failing in their responsibility prolonged gratification in discipline. In case she wanted
towards giving a complete picture – Help children set financial goals a larger gift, she had to miss her
which includes earning, saving, and regular gifts for a couple of months.
early like a special gift and let
investing. This taught her the concept of
them save for it delayed gratification.
As an only child, Sanaa has been
told that she can pursue a career Teach children financial discipline All kids wish to imitate their
of her choice. But she will have through personal example parents, so it is of crucial
to learn book-keeping, accounts, importance how adults behave. She
Let children sacrifice smaller
and concepts of capital markets has over the years observed me and
treats for a larger gift my wife write our daily expenses,
if she wants to inherit wealth.
Alternatively, she has been told that Children will imitate parents and she does the same. We must
the basic needs of food, clothing, Important to teach children practise what we preach, or else
and shelter would be taken care conflicting messages are sent out.
power of saving and not just
of and rest of the wealth would be If you’re not financially disciplined,
spending don’t expect your children to be
returned back to society from where
it has come. Teach children to tend to plants money-savvy. Therefore if you do
There are a few things we have everyday. It will teach them to not write the family budget or stay
been practising with our daughter take care of wealth too disciplined with savings, your child
from an early age. When she was will not develop the habit.

www.outlookmoney.com May 2018 Outlook Money 37


Cover Story

DEEpali SEn
Founder, Srujan Financial Advisers LLP
Author of Why Greed is Great

Teaching Kids how to Spend


and Save Effectively
Kids must learn to strike a balance regarding money and
reach an understanding between its use and conservation

F
or me, the following three acquisition and use of money from to be earned.
quotes sum up the essence the day they are born. We work and x Contingency funds – We need to

of making kids money- get paid; spend the money for our keep money aside for a rainy day.
conscious. needs (goods and services); invest x Budgeting pocket money – Money

for tomorrow (generate money from comes in like a tortoise and goes away
“Within the child lies the fate of money); take loans; and help others like a hare.
our future.” financially as and when needed.
–Maria Montessori Then, isn’t educating kids about Kids above 10
“What we instil in our children will money just a case of joining the dots? x Role of banks.
be the foundation upon which they Decoding the dynamics of money, x How money fuels growth and
build their future.” its sources, and its uses provide kids development.
–Steve Maraboli with a perspective on the cycle of x Importance of loans and charity,

“If a person gets his attitude to- karma early in life. It helps them and the difference between the two.
wards money straight, it will help understand that money is not an x How inflation erodes our wealth

straighten out almost every other entitlement; it’s something one gets and, therefore, time value of money.
area in his life.” in lieu of giving something in return. x Why savings are needed, and how

–Billy Graham Ideally, we should create our they are different from investments.
Money is a powerful tool. It’s own informal curriculum for x The need to have money for today

power in its most raw form — one kids of various age groups. The as well as tomorrow.
that needs to be understood and, objective should be to emphasise x The importance of investing right;

eventually, used effectively for self on the intuitive part when they of striking the right balance between
and society. are really young, and move to the risk and returns. No pain, no gain.
The respect for money, its value mathematical, ethical, and practical The RBI recently allowed 10-year-
in our lives, and the right attitude parts as they grow older. olds to open and operate bank
towards it has to be inculcated accounts on their own. This has helped
in kids sooner rather than later. Kids under five provide an institutional framework for
While we may not want our kids x How do we earn money? The fact the popular practice of pocket money.
to become bean counters, money- that when we give something we get It’s equally important for kids to
minded, or overcautious, we would something in return. understand the spiritual aspects of
definitely want them to be aware x Dignity of labour – While various money. Why do we have both wealth
of the cons of spending – or saving jobs may pay differently, each has and poverty? Or the fact that wealth
– too much. It’s vital that they an equally important role to play lies in ideas, and that we can attract it
learn to strike a balance regarding and we need to respect people from through our thoughts. We become in
money and reach an understanding all strata of society. life what we see ourselves as. Have-
between its use and conservation, Kids will imbibe all this better if nots may never become haves if they
and this would call for appropriate narrated in the form of stories. stay preconditioned to their current
nurturing. reality, and keep lacking the belief,
The good news is that kids are far Kids aged 6-10 the gumption, the aspiration, and the
more perceptive and intelligent x Uses of money – What can it buy? execution skills needed to make
than we may want to give them x Money can’t buy everything – it work.
credit for. They witness the Love, respect, and trust need olmdesk@outlookindia.com

38 Outlook Money May 2018 www.outlookmoney.com


Cover Story

laTa DyaRaM, PhD


Associate Professor, Department of Management Studies, IIT Chennai

Shaping the Right attitude


Towards Money
We can’t ignore the fact that we are a product of our parents’
approach towards money, in either embracing or rejecting it

A
ll of us would love to teach save them from discontentment in for family and friends. However, there
our kids the value of money the long run. Children learn a great are many who expend monetarily
and ways to save and invest, deal on how to handle money by to express their love. Soon, this may
but how many of us hold money watching their parents. make kids equate money with love.
as a topic of conversation with our Conversely, there are cases where
kids? As we all have to deal with Starting early we do not spend money but choose
money throughout our lives, par- Regardless of a family’s economic to spend quality time in making
ents must give their children a head situation, it’s important that some things from scratch for kids and
start in money lessons. children understand the value of forego opportunities to bond. These
In the times we live in, where money from an early age. While often send confusing messages to
kids have more ways of spending it is fine to incentivise children’s children. To the extent that it acts as
money than saving it, it may be achievements (good grades, an exchange for what we need today
necessary for parents, schools, and doing chores, etc.), pocket money and tomorrow, money becomes
banks to step into a more proactive must be offered with necessary valuable. Once this is learnt, it
role. Here, we shall highlight some guidance and their expenses must becomes easy to invest in/exchange
perspectives keeping the role of be monitored. It is also important what we truly need today and figure
parents as the focal point. to allow them to waste a little; as out ways to meet our future needs.
such mistakes will help them to
an emotional approach learn budgeting. Treating money Exposure to reality
Most money matters are attitudinal as a commodity will help combat Wealthy parents can expose their
and emotional than financial. If indulgence. Make them aware that, children to the have-nots and the
we start pondering on where our just like food, money doesn’t have harsh realities of life in some form
attitudes come from, we can learn to be consumed all at once – they or the other to nurture the value
to deal logically with money than should use some and save some. of giving, sharing, and a sense of
emotionally. While some can’t cling It’s also crucial to understand responsibility. Involving kids in the
on to money and trap themselves money from a temporal angle process of giving will work well. They
in deep debt, others compulsively to stay relevant in these modern will not only learn the importance of
wrestle over every rupee they need times. While our parents might giving, but also understand how to
to spend. We can’t ignore the fact have hung on to every rupee, it’s do some due diligence before giving
that we are a product of our parents’ important to realise that not all money away. As children get older,
approach towards money, in either spending is irresponsible in these gradually involving them more in
embracing or rejecting it. days of instant gratification. For financial decisions will prepare them
Most parents knowingly or example, at one end, gifting is a for their lives ahead. This signals to
unknowingly pass on their known expression of love and care them what can be achieved through
functional or dysfunctional money a combination of investing, earning,
habits to their children. Most and saving.
hesitate to talk to their kids about Children learn a No matter how much we are taught
money simply because they do not great deal on how as kids, there is much about money
want their kids to worry about it. and its handling that we have to
However, being realistic about the to handle money by understand on our own.
financial situation will only help watching parents olmdesk@outlookindia.com

40 Outlook Money May 2018 www.outlookmoney.com


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Stocks

Mid-cap Stocks To Watch Out For In 2018


Catch them young and watch them grow is an adage that best
describes small and mid-cap stocks. Deepika Asthana puts some of
them under the scanner

S
mall and midcaps When investors begin their
remind one of Sri investment journey, they naturally
Lankan cricketer Marvan gravitate towards large-cap
Atapattu. Now considered Midcaps offer non- stocks. These are stocks of well-
a stylish batsman, he had a really linear wealth creation established companies that provide
poor start. He scored only one run our portfolios with the necessary
in his first six test innings. Nobody
opportunities and are a stability. However, since these stocks
predicted during that tumultuous good option for investors are mostly on top of their game, they
time that the same batsman would with a longer term provide little or no opportunity for
go on to score 16 test centuries and investment horizon. aggressive growth.
amass 5000+ runs in test cricket. This is where mid-cap stocks
Most mid-cap stocks have a Nitin Bhasin come in. These are stocks of up-
similar journey. They tend to start and-coming companies that are
Head of Research, Ambit Capital
out in anonymity and then grow to likely to experience aggressive
become giants. growth – and thus provide a

42 Outlook Money May 2018 www.outlookmoney.com


greater return potential, although goals and risk appetite. Investing
with relatively higher risk. Says through the systematic route and
Nitin Bhasin, Head of Research diversifying across asset classes is
at Ambit Capital, “Midcaps, over Midcaps are the best way to deal with market
longer periods in the past, have volatility and benefit from it,” says
characterised by a higher
outperformed largecaps and created Rengaraju.
a lot of wealth for investors. They degree of volatility The market has been in a buoyant
offer non-linear wealth creation in their operating phase over the last few years. The
opportunities and are hence a good performance, which Nifty Free Float Midcap 100 in CY17
investment option for investors with leads to commensurate outperformed large-cap Nifty 50 by
a longer-term investment horizon. about 19 per cent. In the current
volatility in their asset
These companies are creating new calendar year (2018) the market has
businesses, consumption brands, prices as well. been subdued, with the Nifty index
and service models, capitalising down 5.06 per cent whereas the
on developing India and providing Janakiraman Rengaraju Nifty Free Float Midcap 100 is down
investors with a wider spectrum of Vice President and Portfolio by 12.58 per cent. Nonetheless,
investment choices.” Manager-Equities, investors with a longer-term horizon
According to Janakiraman and the requisite risk appetite can
Franklin Templeton Inevstments
Rengaraju, Vice President and choose to invest in quality mid-cap
Portfolio Manager - Equities, stocks. This sentiment is echoed
Franklin Templeton Investments, by Harshad Patwardhan, CIO
there are some potent reasons return. A disciplined and consistent Equities at Edelweiss Mutual Fund,
for investors to consider mid- investment philosophy helps in “We believe that a high-quality
cap stocks. For starters, midcap better exploiting this combination of mid-cap portfolio will continue to
companies offer better growth better growth, higher volatility and a outperform a high quality large-cap
opportunities. Smaller size is a key more heterogeneous mix. Investors portfolio over the medium- to long-
reason for this advantage. In the in a mid-cap fund should be well term,” he says
current cycle, the relatively larger aware of this interplay between As macroeconomic parameters
exposure to domestic demand has returns, volatility, and required align and the various government
also helped growth. A drawback is timeframes. “Our advice would be initiatives fructify, opportunities are
that midcaps are characterised by to invest in line with one’s financial likely to emerge in various sectors of
a higher degree of volatility in their the economy. Quality mid-cap stocks
operating performance, which leads are well positioned to capitalise on
to commensurate volatility in their emerging opportunities. “Elements
Stock Selection
asset prices as well. of over-valuation are definitely
Methodology
Secondly, relative to largecaps, there amongst the midcaps. While
the mid-cap universe has a higher ROE >20 % some midcap companies are more
degree of variation in the quality ROA >12.5 % expensive than largecap companies,
of the business. This leads to a there are select companies that have
higher risk in stock selection. A EPS CAGR >20 %* a sustainable or unique business
long-term investment horizon helps *An exception has been made for IGL as proposition. In such cases, the
you absorb this higher volatility the company enjoys a monopoly in its relatively higher valuation may be
key market.
and reap the potentially higher justifiable as these companies are
in a strong competitive position to
allocate capital and grow profitably,”
observes Bhasin.
After applying some key filters,
some interesting stocks have come
up from a returns-and-valuation
perspective. While selecting the
stocks, returns on assets and returns
on equity have been factored in, as
has the compounded annual growth
rate (CAGR) of earnings.

www.outlookmoney.com May 2018 Outlook Money 43


Stocks

Century Ply Indraprastha Gas


Indraprastha Gas
Century Plyboards Nifty Free Float Midcap 100
Nifty Free Float Midcap 100 400 313.12
250 191.96 350
300
200
250
150 200
150
100 100 146.41
146.41 50
50 1 Jan 2015 23 Mar 2018
1 Jan 2015 23 Mar 2018

C entury Plyboards (India) Ltd. sells and exports


plywood and veneers. The company offers Indraprastha Gas Ltd (IGL) is a leading natural gas
distribution company in India. It primarily operates in
the National Capital Region and as of December 2017
products under the brand name Century Ply and
exports its range of products to over 20 countries. supplied piped natural gas to over 9,00,000 homes,
2000 commercial establishments, and 1150 industrial
Investment Argument outfits in the region.
Medium density fibre (MDF) penetration in India
is very low. However, with growing preference for Investment Argument
readymade furniture, MDF is now gaining acceptance. IGL is well-positioned to gain from an ongoing drive
Import substitution coupled with the opportunity to against polluting fuels such as petcoke/furnace oil
replace low-end plywood (which has a similar price in and around Delhi. Also, its foray into new markets
point) should lead to faster domestic growth. Century in Haryana is likely to boost volumes. Higher crude
recently set up a plant in Punjab, and production price may take the discount of PNG/CNG to competing
commenced in 3QFY18. The company also plans to fuels (diesel/petrol/LPG) even higher. A widening
focus on setting up regional plants to mitigate high discount will not only encourage users to shift and
logistics costs. boost volumes but will also give the company pricing
power and a cushion on margins.
Investment Risks
1) Raw material accessibility and a sharp rise in raw Investment Risks
material costs; Change in government stance on taxes on competing
2) A continuing housing-led slowdown in demand. fuels or interference to control CNG/PNG prices could
prove to be a downer.

Jubilant FoodWorks Jubilant FoodWorks


Nifty Free Float Midcap 100
200 166.83

J FL is one of the largest QSR companies in India and


is also one of the fastest growing multinational
fast-food chains. The company commands 72 per 150
cent market share in the organised Indian pizza
market (as per Euromonitor). The master franchise 100
agreement with Dominos is valid till 2024 and is 146.41
renewable for another ten years. The company also 50
has exclusive rights for developing and operating 1 Jan 2015 23 Mar 2018
Dunkin’ Donuts restaurants in India.
more than tripled. Urban recovery and increasing
Investment Argument incomes are likely to create a stronger food service
In Q3FY18, Jubilant Foods trumped expectations to opportunity.
achieve same-store-sales growth (SSG) of 17.8 per
cent year-on-year. This gave a fillip to margins, which Investment Risks
rose to a multi-quarter high. The sharp increase in SSG 1) Subdued urban consumer sentiment impacting SSG
also allowed the power of operating leverage to play growth;
out. EBITDA more than doubled while net earnings 2) Increasing input costs due to inflation.

44 Outlook Money May 2018 www.outlookmoney.com


Astral Poly Technik Crompton Greaves Consumer
Astral Poly Technik
223.18
Electrical
Nifty Free Float Midcap 100
250 Crompton
Nifty Free Float Midcap 100
200 250 181.84
150 200

100 150
146.41
50 100 140.69
1 Jan 2015 23 Mar 2018
50
13 May 2016 23 Mar 2018

T he company is a leading manufacturer of CPVC


plumbing systems for both residential and
industrial applications, and also of ASTM solvent weld
lead free PVC plumbing system. It is equipped with In October 2015, the electrical and lighting business
of Crompton Greaves was demerged into Crompton
Greaves Consumer Electricals. The company has four
production facilities Gujarat and Tamil Nadu.
business segments – fans, lightings, pumps, and
Investment Argument electrical appliances. It is a market leader in the fans
The company has expanded its pipe manufacturing and residential pumps segments, with over 25 per cent
capacity around threefold over FY09-16, mainly to market share in each.
serve the increasing demand from the housing and
agriculture sectors. It plans to increase its piping Investment Argument
capacity to 1.7 lakh tonnes by FY19E and also double Higher share of premium offerings and new launches
the capacity of its adhesive segment. With demand are likely to spur profitability. Crompton’s products are
intact, these expansions should boost revenues for positioned in the premium segment, which coupled
the firm. The launch of new products like silicon tape with a robust distribution network allows the company
in the domestic market should result in a gradual to maintain margins and profitability. It can leverage
improvement in profitability. The government’s on its strong brand to improve its value market share in
focus on its social housing programme, together lighting and agri-pumps. The company has been able
with increasing housing affordability, is expected to rejuvenate its brands, address product gaps, and
to provide multi-year demand growth visibility for achieve significant operating efficiency. It is expected to
building material companies. generate large free cash flows over the next three years
and become debt-free by FY20CL.
Investment Risks
1) Slowing ramp-up in the adhesives business Investment Risks
coupled with poor demand for new launches; 1) Waning demand growth environment and a
2) Increasing competitive intensity in the pipes slowdown in housing construction;
segment; 2) Increasing competitive intensity impacting negatively
3) Any sharp fall in crude prices leading to margin on margins.
pressure;
4) Sustained slowdown in the housing market. Deepika asthana, CFA - Strategic Consultant in Financial Markets

ReStart now
make sure you are on track with

www.outlookmoney.com May 2018 Outlook Money 45


Stocks

A Survival Kit for Market Volatility


Dire predictions notwithstanding, there’s hope for the markets if one
looks at long-term prospects – plus there’s a silver lining in the form
of earnings growth, finds Suyash Desai

A Word of Caution
Says Rajesh Palviya, Head -
Technical & Derivatives Analyst
at Axis Securities, “The Nifty will
not go much higher and be around
10,500-10,600 points. If we take
the retracement theory, 50 per
cent retracement of the recent fall
is coming around 10,560, which is
likely to act as stiff hurdle.”
Retracement is based on the
idea that the markets will retrace
a predictable portion of a move,
after which they will continue to
go in the original direction. Palviya
adds that the derivative data is not
looking encouraging and lot of

International events
coupled with domestic
developments have
got investors worried

M
arkets have
corrected over call writing is happening at 10,500
10 per cent from strike price, indicating that upside
their high over is capped. “On the lower side, Nifty
the past few weeks, and experts forms a bottom around 10,000,
feel equities may remain volatile which is a psychological level. The
for some more time. While recent bounce in April does not
no big crash is imminent yet, look strong enough to take it past
international events such as a the abovementioned levels,” he says.
rise in oil prices, concern over
Rajesh Palaviya Similarly, Aneesh Srivastava,
Head - Technical & Derivatives
emerging trade wars, and an Analyst at Axis Securities CIO of IDBI Federal Life Insurance
expected hike from the US Federal cautions investors to moderate
“Nifty will not go much
Reserve System have got investors their expectations compared to the
worried – especially when
higher than 10,500-10,600 points. previous year. “Since the markets
coupled with developments closer On the lower side, Nifty have had a long bull run in the last
home, such as uncertainty over could form a bottom around year, it doesn’t mean they will give
domestic elections, deteriorating 10,000, which is a the same amount of returns this
macroeconomic data, and the psychological level.” year. The smart investor should
scams plaguing the banking sector. play it correctly by choosing the

46 Outlook Money May 2018 www.outlookmoney.com


valuations offer enough bottom-up
stock-picking opportunities.”
Surana recommends a mix of
about 70:30 allocation between
multi-caps and midcaps from
the 3-5 year viewpoint. “While
the volatility might continue for
small and midcap segments for
some more time, we haven’t seen
Neelesh Surana any change in the underlying EA Sundaram
CIO - Equities, Mirae Asset AMC fundamentals – in fact, there are Executive Director and CIO -
“While the volatility might early signs of macro-indicators and Equities at DHFL Pramerica Asset
Management
continue for small and midcap earnings picking up,” he adds.
“The capital market products are
segments for some more time, we
Invest for Longer Duration still much smaller as compared to
haven’t seen any change in the Though volatility in the markets bank fixed deposits in India, and
underlying fundamentals – in fact, have investors worried, EA this is where the potential is. Let
there are early signs of macro- Sundaram, Executive Director and
us not worry about the shorter-
indicators and earnings CIO - Equities at DHFL Pramerica
term dips and instead focus on
picking up.” Asset Management believes that
investing for the long term is the long-term trends, which have much
solution. “The two-month period brighter prospects for the future.”
is not a big period in the economic
right amount in investments, history of the country. The big
remain patient, and moderate their picture is that capital market
expectations in the short run,” products are still much smaller as correction that takes place will
he says. compared to bank fixed deposits affect the flow for a temporary
Srivastava believes that the in India, and this is where the period.
markets have a long cycle. So while potential is. Let us not worry about
stocks provide returns over the the shorter-term dips and instead Research Before Investing
long run, during the short term focus on long-term trends, which According to Sundaram, the drop
they may underperform or provide have much brighter prospects for is a cause for concern because
low returns. “Since the year ahead the future,” he says. He adds that people have purchased stocks
is looking volatile, investors should since there has been a sharp rise – and mutual funds without proper
not look to invest 100 per cent especially in midcap and small-cap research. “If proper research is
in equities,” he says adding that shares in the last 2-3 months – the done before investing, a fall in the
investors with smart investments market really doesn’t lead to panic.
have nothing to worry about. If an investor pays a little attention
why they’re investing in the fund
Silver Lining and as long as the purpose is
In spite of uncertainty and fulfilled, volatility shouldn’t matter
volatility over these domestic and much.”
international factors, Neelesh While all four experts looked
Surana, CIO - Equities, Mirae up to consumption with a long-
Asset AMC believes that earnings term potential, caution was
growth could prove to be a silver expressed regarding the IT and
lining. He says, “FY19 will kick- pharma sectors. “Metal can show
start the much delayed corporate
Aneesh Srivastava potential in the short term, while
CIO of IDBI Federal Life Insurance
earnings recovery, which was corrective action is seen in the
muted for the last three years.
“Since the markets have had a banking sector,” says Palviya. Apart
Earnings growth will help stabilise long bull run, it doesn’t mean from these, infrastructure and
the ongoing volatility. After the they will give the same amount of automobiles are some themes that
recent correction in the markets returns this year.” got notable mentions.
and softening of bond yields, the suyash@outlookindia.com

www.outlookmoney.com May 2018 Outlook Money 47


Interview
Arun ThukrAl
MD & CEO of Axis Securities

Opportunities Ahead For Equity Investors


With markets looking volatile at the start of new financial year, Arun Thukral,
MD and CEO of Axis Securities advises investors to look at opportunities. In
an interview with Suyash Desai, he suggests ways to tide over the volatility

What’s in store for the During volatility, people


markets in the new fiscal favour large caps. Large
year? caps are defensive value
This could be a volatile picks because of the high
year [for markets]. Global degree of revenue and
events such as excessive profit certainty. Besides,
liquidity mop-up by the these are safer bets. Small
US, tariff wars, rise in oil and midcaps are volatile
prices and expected hike because they are growth
of interest rates by the US stocks with relatively
Federal Reserve will all high operational risks,
have a say in deciding the which leads to volatility
market direction. On the in earnings. Thus, in this
domestic front, upcoming phase, investors will favour
state elections will fuel large caps but from a long-
volatility in markets. this year. Whenever there best thing is to go for a term view of 5-10 years,
On the other hand, is volatility, we should look systematic investment there are some quality
domestic earnings have at it as an opportunity. plan in Mutual Funds. midcaps to be picked up in
reverted to the positive Investors have a list of the market.
side. In the first quarter stocks that they were How are corporate
of FY18, earnings were unable to buy when prices earnings expected to be Which sectors would
minus four per cent, in the were high. But there is this year? you look at from a long-
second quarter it was 10 an opportunity now. The There have been growth term point of view?
per cent and in the third correction from the top factors that reflected in If an investor is thinking
quarter it grew by 22 per in January 2018 to the good results in the last of the long term, the
cent year-on-year. So, bottom in March 2018 two-three quarters. Also, entry point is important.
earnings for the March was around 10 per cent. there are underperforming People should use
quarter should be better. One should go and buy the sectors. Banking and these corrections as an
The monsoon forecast is bluechips – that’s where telecom sectors are under opportunity. Auto and
normal. Thus, the markets investors make money. pressure and there may ancillary companies,
will be volatile. It will This can help them create not be an upside for FMCG and consumer
consolidate but there a strong portfolio from a these. But automobiles, durable companies,
will be a downward bias long-term point of view. commodities, consumer infrastructure companies
because of these events. If an investor is not able goods, retail and with execution capability
to understand and handle engineering companies and light balance sheets,
What should be this volatility, the next are giving good numbers housing and related
investors’ approach to in the last two or three themes, and niche NBFC
deal with the volatility? quarters. So earnings and private banks with
The market either gives momentum will continue retail focus are some
you returns or it gives you Markets will in these sectors. sectors with opportunities.
opportunities. We got If the global economy
returns last year and we consolidate with a How will large caps fare does well, even textile and
are getting opportunities downward bias over small and midcaps? chemical will perform.

48 Outlook Money May 2018 www.outlookmoney.com


®
Banking

Small Banks, Big Benefits


Small banks offer interest rates higher than their larger pers, but
depositors should also look at the flip side. Preeti Kulkarni and
Suyash Desai tell you more

S
avers looking for higher When small is big as most of the transactions happen
returns on bank deposits From a risk-averse depositor’s point at the customer’s place. Therefore,
can now look at small of view, small banks offer the best of from a customer’s point of view, high
banks as an option. Bank both worlds: a fixed interest rate and interest rates coupled with doorstep
fixed deposit rates have shrunk to the comfort of parking their money banking are key differentiators,” Babu
6-6.75 per cent, depending on the with a bank. Also, small banks now points out.
tenure, leaving a large section of offer interest rates that are higher He adds that there are other
Indian investors – particularly senior by 25-150 basis points (see table). factors too behind the shift in
citizens – distressed. “They have “The customer today is seeking a preference: “In our experience as a
the option of investing in mutual personalised banking experience, bank, over the last one year we have
funds and earning dividends, which and values this as much or even observed that high interest rate isn’t
may make up for the loss of interest more than the monetary transaction the only reason why a customer
on bank deposits. But a majority he does. In fact, ‘take what you get’ banks with us. The convenience,
of them still feel comfortable with is no longer true as customers are a doorstep service, simplicity, and
banks,” says independent financial lot more aware of their needs than transparency we offer are all big
counsellor VN Kulkarni. before,” says R Baskar Babu, co- differentiators.” These banks also rely
While the interest rate cycle founder and CEO, Suryoday Small heavily on technology to service their
now seems to be turning around, Finance Bank. customers.
with some banks such as SBI and “Most small finance banks were
Axis Bank hiking interest rates, erstwhile microfinance institutions, Making the right choice
depositors continue to look for more and their connection with the Clearly, smaller banks offer a more
lucrative fixed return options. customer is on a one-to-one basis remunerative alternative to investors

50 Outlook Money May 2018 www.outlookmoney.com


Small Wonders
Bank Interest Rates (%)
Savings
Fixed Deposit
Account
1 year 3 years 5 years
Suryoday Small Finance Bank 8.5 8.75 7.75 6.25
Equitas Bank 7.25 7.25 7 6
Yes Bank 7 7 7 5
RBL Bank 7.25 7.25 7.15 5.5
Kotak Mahindra Bank 6.8 6.5 6.25 5.5
Federal Bank 6.7 6.5 6.5 3.5
Bandhan Bank 7 7.1 6.4 4
IDFC Bank 7 7.2 7.2 4
Deposit rates are for amounts under `1 crore; Savings account interest rates are for balance

Take The
under `1 lakh; Source: Banks’ websites

seeking a low-risk instrument that `1 lakh,” he advises.

guesswork
offers guaranteed returns. However, Deposits of up to `1 lakh are
consumer rights activist Jehangir Gai insured under Deposit Insurance

ouT of your
has a word of caution: “Even though and Credit Guarantee Corporation
well-established banks can go bust, (DICGC) and thus the amount is

finances
it is necessary to minimise the risk, completely safe. “Apprehension about
especially keeping in mind that the what will happen if the bank collapses
insurance coverage is minimal. So, should not be there at this nascent
opt for well-established and time- stage as all small finance banks are
tested banks, even private sector just a year old, and depositors should
banks with a sound management,” understand that they are offering
he says, pointing out that a higher higher interest rates as a strategy
interest rate also coincides with
higher risk.
to replace high-cost loans, which
they have availed of from financial Ge t i t
Given that smaller banks are
relatively newer entities, depositors
institutions for undertaking activities
as microfinance institutions,” he a n a ly sed
t o achie v e
are bound to be concerned over explains.
the safety of their money. “Small Of course, before switching banks
finance banks are definitely offering to avail of a higher interest rate, one
better rates. What’s a concern for a must evaluate the pros and cons. your
majority of people – senior citizens According to Kulkarni, it is worth
in particular – is whether it’s safe making the move if the rate difference dre a ms
to keep deposits with such banks,” is more than, say, 100/200 basis
says Kulkarni. Nevertheless, he’s points. Before taking the call, refer
in favour of giving these banks a to market reports on the functioning
chance. “It will be wise to look at of the bank. You could also study the
small finance banks. The rates of bank’s balance sheets to understand
interest offered by them matches the the reserves and capital position
rates depositors of bigger banks were vis-à-vis its non-performing assets Write in to us wit h your
getting two or three years ago. To (NPAs). contac t de tail s at
start with they can deposit up to v suyash@outlookindia.com e dito r@outlo o k mo ney.c om
Myths About Filing Income
Tax Returns
who owe no tax to the authorities legal heir of a deceased person and
generally think that no filing is the deceased had a taxable income
needed. But this is not true. In fact, exceeding the basic exemption limit
there are circumstances where, even whereas your own income is below
if you do not have any income, you’re the threshold. For example, let’s
still required to file a tax return. assume the individual passed away
Under Section 139 of the Income on 31 December 2017, and until that
Tax Act, 1961 (‘Act’), you are day, his total income was (say) `10
required to file a return if your total lakh accruing from interest on fixed
income exceeds the basic exemption deposits. If you are the legal heir,
limit of `2.5 lakh a year. For resident any income accruing for the period 1
individuals who are over 60 (senior January 2018 till 31 March 2018 (last
citizens) or over 80 (very senior quarter) will be taxed in your hands
citizens), the limit is `3 lakh and `5 as your income.
KulDIp Kumar
lakh respectively. Generally, total This may trigger a filing obligation
Partner, PricewaterhouseCoopers
income for this purpose includes where your income exceeds the basic

D
your gross income earned/received exemption limit, after including the
o you see tax filing as a after giving effect of all eligible above interest income from the last
moral duty or merely as deductions/exemptions. However, quarter. Although you will have to
a compliance step? The where you are having exempt long- separately file returns as legal heir for
recent data points and term capital gains from listed shares the income of the deceased up to 31
the mass communication from the or equity-oriented mutual funds December 2017, you cannot include
authorities last year through SMS, under Section 10(38) of the Act, the the last quarter interest income in
email, and even advertisements same would need to be considered to the return of deceased to avoid your
seem to indicate that this is mostly determine your total income. filing where your own income is
taken as a compliance obligation. If you ordinarily qualify to be below the basic exemption limit.
According to a recent Press a resident of India and hold any
Information Bureau release, the foreign asset, you’re required to Why do I need to bother to
number of new IT return filers has file an income tax return with ‘nil’ file before the due date?
increased to 99.49 lakh (as on 30 income. A common oversight in such If you have paid all the taxes and
March 2018) during financial year a category is the case of an employee nothing is due, why do you still need
(FY) 2017-18. Many of them could who is working (or has worked) to file a tax return before the due
be wondering if they needed to file outside India and has an overseas date? While the obvious answer
tax returns at all.In this article, the bank account where a spouse is could be “to avoid receiving constant
author offers some practical advice the joint signatory. Although the reminders from the tax authorities”,
related to tax filing which may raise spouse may not be working or/and there are good enough reasons why
an eyebrow or two. may not have any income to report, you need to file your tax return
there is still an obligation for them within the due date.
Do I really need to file an IT to file a return of income wherein This year, if you do not file the
return? the overseas bank account should be return for FY 2017-18 by the due
This is one of the first things people disclosed. date, you will end up paying late fees
ask. Individuals whose taxes have Another typical situation of filing resulting in a financial loss! Section
been deducted at source and obligation could arise if you are the 234F of the Act was introduced last

52 Outlook Money May 2018 www.outlookmoney.com


year, which mandates the levy of I missed claiming Hra/lTa partly let out and partly self-occupied,
fees of `5000 if the return is filed exemption from my em- you’re obligated to pay tax on notional
after the due date but before 31 ployer. Is there a remedy? rent even for the period you stayed in
December 2018, and `10,000 if filed So you’re a salaried employee and your own house. It may sound crazy,
afterwards (fee amount is restricted couldn’t declare details/supports but it’s the law. For example, if you’re
to `1000 if the total income does not of exemption you intended to avail a salaried employee and stayed in
exceed `5 lakh). of in relation to LTA, HRA etc. your own house until 31 December
These are mandatory payments No worries, you can still claim 2017, but were transferred to another
if you miss the deadline. But after these exemptions when you file city and accordingly let out your
having missed the due date if you your returns and can claim refund house from 1 January 2018 onward.
do not file the return by 31 March of excess taxes that the employer Besides the actual rent received
2019, you will never be able to file would have deducted ignoring these for the period 1 January 2018 to 31
the return thereafter as per the exemptions. You should carefully March 2018, you will also be required
amended provisions. Until last year preserve the supporting documents to pay tax on notional rent for the
you used to get one more year to file as the tax authorities may want to period 1 April 2017 to 31 December
your return but this relaxation is not verify the exemption claims later. 2017, while you stayed in your house.
available any longer. Does it make sense to NOT let out
You will not be able to carry What if I have two self- your house for a part of the year?
forward any loss (except loss from occupied properties – one Well, this does merit consideration
house property) if you do not file where I stay and another until the law is changed.
returns within the timeline. If you where my parents live?
claim a refund in your belated If you have two houses – one in What if there’s a mismatch
return, you will lose interest on such which you stay and another where between my TDS and Form
refund for the period you delayed to your parents stay – only one house 26aS?
file the return, starting from April 1 (of your choice) is allowed to be Before you file your tax return, it is
of the assessment year immediately considered as self-occupied where important that you reconcile your
succeeding the financial year of annual value is considered to be nil. taxes paid/TDS with what is reflected
which the return is filed. For the other house you will still in Form 26AS. A mismatch is quite
In extreme cases, tax authorities need to pay tax on a notional basis, possible in certain situations – say, if
can even invoke prosecution as it is deemed to be let out. you have fixed deposits and the bank
provisions under Section 276CC deducted the tax but inadvertently the
of the Act where there’s a default What if I have only one same does not reflect in your Form
in filing the return, subject to house that’s partly let out? 26AS due to wrong quoting of PAN or
conditions contained therein. If you have only one house that’s otherwise. It can be a real challenge
when such deposits are for a period
of more than a year and you have
opted for the ‘interest on maturity’
option. In such cases, you may forget
to account for accrued interest since
you did not receive any credit in your
bank account.
Therefore, it’s prudent to carefully
track your financial transactions and
keep a proper and accurate record. A
little error in reconciling or recalling
your financial transactions may
trigger a notice from the authorities.
Moreover, if your taxable income
exceeds `50 lakh, you will need to
provide the details of your assets and
liabilities, so it pays to be organised.

Disclaimer: The views expressed in


the article are personal

www.outlookmoney.com May 2018 Outlook Money 53


Life Planning

P lanning
for
the Golden
Years
Ret
irem
emeMedical
rgen
ent
cies

Hobb Ho
ies expuesehold Vaca
nses tions

Ins
preumrance
iums

They say 60 is the new 40, and with good


reason. As people live longer thanks to
advances in medical care and technology, their
cost of living rises proportionately. Anagh Pal
takes a look at how some couples are
managing their retirement finances, as they
adapt to the changing reality of building a nest
egg to see them through their golden years

C
eline Mary Dash, 66, and her after retirement as we’ve always been more
husband Hubert Anthony Dash, focused on providing for our daughters. Now
68, stay in Borivali, a tree-lined they’re both settled,” says Celine proudly.
Mumbai suburb full of churches, Virendra Kumar Jain, 67, and his wife
bakeries, and parks. Hubert plays cricket Deepti, 61, are a Delhi-based couple who
every morning and is keenly involved in have benefited from the guidance of a
church activities, while Celine keeps herself financial consultant who advised them
busy cooking, writing, and praying. After to plan for retirement by investing in
working in Dubai for 26 years, the couple mutual funds and shares. Jain also earns
returned to Mumbai in 2007. One of their an income from his role as a mentor in
daughters stays with them, and the other his son’s business, and is also involved in
is based in Argentina. The family’s regular several philanthropic activities through
expenses are met from the interest they earn Rotary International. The Jains are proud
from their savings invested in fixed deposits, grandparents to six grandchildren. “I’m
and rent from a couple of properties they having the best time of my life playing with
own. “We never specifically planned for life my grandchildren,” he says with a smile.

54 Outlook Money May 2018 www.outlookmoney.com


Chandran Nair, 82, lives with his wife owner, LUHEM Comprehensive Financial
Lakshmi Nair, 71, in Mumbai. They had Planner, agrees, “Among earlier generations,
moved to Saudi Arabia in 1995 after his when a person turned 55 they would consider
retirement, where he worked for five years as their professional lives and responsibilities to
a quality control manager. The stint turned be over and switch to a more domesticated
out to be a lucky break for the Nairs. “The life of taking care of their children and
money I earned in Saudi Arabia helped us in grandchildren and helping with household
our retirement years,” says Nair. chores.”
“I used to get the entire salary without any
tax deductions. In India my superannuation Core Principles
and provident fund amounted to only The basics of retirement planning are simple. The idea is that at some
`1 lakh, and it would have been very difficult point you will not be working anymore. “So you need to create cash flows
to manage with that. Getting a job at 60 that are not dependent on you,” says Niraj R Nanal, founder, NR Financial
was a blessing.” He invested in bank FDs, Consultants. “This could mean investing in equities to create wealth,
company FDs, and mutual funds after taking or in real estate to earn rent.” However, this goal of creating a passive
advice from his son’s friend who is a financial income gets complicated because of inflation. If you’re 15 years away
planner. The income from these sources is from retirement and want `50,000 every month for expenses, you would
enough to meet the couple’s expenses. require `1,37,952 to maintain the current level of expenses then. “So if
While the basic principles of retirement you’re still investing in FDs and PPFs, your retirement is going to be in
remain the same, the realities of retirement great danger. Make sure your retirement investments are efficient and able
planning have changed a lot compared to to beat inflation,” he cautions.
what it was in the past. Creating the right amount of corpus after taking inflation into
consideration should therefore be the key component of a retirement plan.
Lifestyle Inflation “Further, one needs to consider one’s lifestyle and medical requirements
Inflation is a key factor in retirement when planning for the same. Taking the right amount of medical
planning. But Nanal says that in the last insurance with critical riders at an early age can be a key component,” says
10-15 years one has to deal with a new aspect Balvir Chawla, Director, Finnovators Solutions.
to it – lifestyle inflation, which is more than A few decades ago, the realities of retirement were different. A lot has
normal inflation and has got to do with our changed since then. So planning for retirement has become more crucial
changing lifestyles. Hina Shah, proprietor and than ever before.

Virendra Kumar Jain (67) and


Deepti Jain (61), New Delhi
Source of Income: Jain draws a salary from a company where
he is a mentor. Additionally, there are returns from investments
in MFs, FDs, and PPF.
How Did They Plan: Jain has been a regular investor. Apart
from MFs, FDs, and PPF, he has also bought endowment policies
and ULIPs, and invested in IPOs.
Current Concern: Falling interest rates and insufficient
incentives for senior citizens in the budget.
CFP Says: The couple should calculate the amount of required
household expenses till 85 years of age and quantify short,
medium, and long-term goals. If the goal is 7-10 years they could
think of diverting more funds from PPF and FD to equity MFs.
They can also invest in balanced MFs and take a systematic
withdrawal plan (SWP) for basic household expenses. Even
after 10 per cent capital gains tax it’s a good idea.
–Hina Shah, proprietor and owner, LUHEM Comprehensive Financial Planner

Photo: Gireesh. GV

www.outlookmoney.com May 2018 Outlook Money 55


Life Planning

Nuclear Families
Earlier, most couples would save some money for retirement and trust their offspring
to take care of a large part of their expenses, as retired couples mostly stayed with their
children. “Gone are the days when children used to take care of their parents,” says Nanal.
“Not that everyone from the new generation will refuse the responsibility, but even if they
are ready to take care of them how many parents of today’s generation would want to be
dependent on their children financially?” Celine is a case in point. “Life’s good,” she says.
“We live within our means and do not spend on things we don’t need. We’re not dependent
on our daughters; we have the ability and the capacity to manage on our own.”

Photo: aPoorVa salkade

Retired couples now want to lead a good


life, travel, spend on gadgets, and pursue their
hobbies. Nair, a member of the Chembur
Gymkhana Club, used to play badminton and
table tennis and go swimming to keep himself
fit. After a blackout his doctor advised him
to stop strenuous activity. He now does yoga
to keep fit, and is also the chairman of his
housing society.

Reduced Employment Benefits and


Falling Interest Rates
Government or private employees can
no longer depend on their employer or
employment benefits to take care of their
expenses after retirement. Defined benefits
for all government employees who joined
after 1 January 2004 have been stopped.
Private employees have also been hit by a
falling public provident fund rate – from
11 per cent in 2000-2001 to 7.9 per cent in
2017-18 – and also a diminishing employee
provident fund rate.

Rising Medical Expenses


Advancements in medical science have led
to longer life expectancies and prolonged
retirement years. “A focus on healthcare will
mean increased longevity, thereby increasing
Chandran Nair (82) and Lakshmi Nair (71) Mumbai the size of the corpus needed,” says Chawla.
Source of Income: Interest earned from bank FDs and company FDs; also “We have medical insurance because we
have some investments in MFs. know it can be a major expense,” says Nair.
How Did They Plan: Invested in bank FDs, company FDs, and MFs “We took a `3 lakh insurance cover as soon
through a son’s friend who is a financial advisor. A five-year stint in Saudi we returned from Saudi Arabia. The amount
Arabia (1995-2000) helped Nair a lot with his finances. we were required to pay for our insurance
Current Concern: They do not have the services of a CA for their tax premium got doubled about six months back
purposes. but we had no option but to pay the higher
CFP Says: A qualified chartered accountant would charge individuals premium.” Jain, on his part, has a medical
a maximum fee of ₹1000-2000 per return. But the couple should make cover of `10 lakh for him and his wife. His
sure they take advice from a qualified CA in person and not from tax wife underwent a major surgery a few years
consultants (who are not CAs). ago, which demanded regular treatment. Most
–Niraj R. Nanal, founder, NR Financial Consultants of it was covered thanks to insurance.

56 Outlook Money May 2018 www.outlookmoney.com


Photo: soumik kar

The realities mentioned above mean that


one needs to approach retirement planning
in a more aggressive manner. Here are some
pointers:

Working post-retirement: “Nowadays,


retirement does not mean the end of your
working years,” says Chawla. “You could
work on a consultancy basis, or maybe spend
time with an NGO, or take up a teaching
assignment. One needs to plan this carefully
as it would keep you busy and also provide
some financial support.”

Starting early: “Keeping in mind all the


above factors, one should start planning
for retired life as early as possible, starting
from your first pay cheque,” says Shah.
“Rising inflation is the biggest factor to be
considered. Also, one can enjoy the biggest
advantage of power of compounding by
investing early.”

Taking professional help: Managing one’s


finances takes a lot of planning and effort. It
is best to seek expert help. “Hire a qualified Hubert Anthony Dash (68) and Celine Dash (66), Mumbai
advisor who can help you plan according to
your requirements and give you unbiased Source of Income: Interest from FDs, rent from two properties
advice,” says Nanal. Jain has always consulted How Did They Plan: Celine had invested in a couple of properties before
a financial consultant before investing in marriage. Both were based in Dubai and they invested surplus income in
FDs. Did not plan for retirement as such but focused on the education of
shares and mutual funds.
their two daughters.
Investing in equity: Falling interest rates Current Concern: They do not have any medical insurance, but daughters
will take care of the same.
mean that living on interest income is no
longer viable. “Some part has to be in assets CFP Says: The daughters can get medical insurance for their parents but
the premiums will be slightly heavy. However, if they are employed they
that can beat inflation. In the falling interest
could check if their employers can add the parents in their health plan –
rate scenario, the only option is equity for this will be more cost-effective and hassle-free than taking a standalone
the long term, either through mutual funds policy for the parents. Also the couple should keep aside a contingency
or direct equity with the proper guidance of fund for medical emergencies.
a qualified financial advisor,” says Shah. Adds –Balvir Chawla, Director, Finnovators Solutions
Chawla, “While planning for retirement, one
should take calculated risks in investments. out the probability of diseases that can strike
Even post-retirement, one should invest in you, and get to know the standard cost of
products that can beat inflation.” treatment. Then, after adjusting for inflation,
you can work out the exact size of the corpus
Building a medical corpus: Medical that needs to be built.”
emergencies can wreak havoc on your The golden years of retirement are a time
retirement finances. Illnesses like cancer or to sit back and enjoy life. Remember those
organ failure can prove to be very expensive feel-good TV ads showing an old couple
to treat. So, in spite of high premiums, one sipping beverages on a sunny beach and
needs to have substantial medical cover. “If playing with their grandchildren? Well, it
the person can afford it, I suggest they also could be you in that pleasant scenario if you
keep aside a medical corpus,” says Shah. plan now and plan well.
“Based on your family history, you can find anaghpal@outlookindia.com

www.outlookmoney.com May 2018 Outlook Money 57


Morningstar Mutual Fund Guide
UTI Dynamic Bond Fund
Investment Strategy Fixed-Income Stats
Fixed Inc Style Box (Long) High Ltd

P ortfolio manager Amandeep


Singh Chopra, has over 22 years
of experience with UTI. He heads the
directional movements. The fund can go
down to about 2 years on the lower side,
resembling a short term fund and up to
Average Eff Duration
Average Eff Maturity
-
4.0
Average Coupon 8.0
fixed income desk at UTI and has been about 20 years at the longer end of the
Average Price -
managing this fund since 2012. curve.
Average Credit Quality AAA
The investment approach is primarily Issuer selection is based on
driven based on a top down macro fundamental analysis of the risk/ Fixed Income Style Box
approach and duration views are return profile. The credit team works High
based on the interest rate directional closely with the in-house equity team
movements. Allocation towards G-Sec’s, to leverage research on aspects like the Med
Corporate bonds and SDL’s on the other company’s strategy and its financial Low
hand are based on their relative spreads. data (balance sheet strength, cash flow Ltd Mod Ext
The manager aims to invest in the most generation, and so on). The internal
Portfolio
liquid corporate bonds and the most credit ratings process is based on the
Top Holdings Weighting
traded G-Sec papers with a view to credit team’s evaluation of an issuer for
(%)
minimize portfolio risks. The fund is run its creditworthiness and ability to meet
6.79% Govt Stock 2027 14.90
with a lot of focus on risk management their debt obligations.
measures. Investors who are looking to take
National Bank For Agriculture 8.97
And Rural Development
The fund’s average maturity can exposure to interest rate views and don’t
7.68% Govt Stock 2023 7.07
tend to fluctuate significantly based on mind some interim volatility can look to
Reliance Utilities And Power 7.07
the manager’s views of the interest rate invest in this fund. Private Limited
Rural Electrification 6.89
Calendar Year Returns 14.9 Corporation Limited
14.7
12.9 Idea Cellular Limited 4.08
Calculation Benchmark: None 11.7
10.0
8.33% Govt Stock 2026 3.63
8.0 7.6 Jorabat Shillong Expressway 3.21
6.9 Limited
6.0 5.5 5.0
4.2 7.17% Govt Stock 2028 3.09
Return

4.0 3.1
2.0 1.7
Jorabat Shillong Expressway 3.00
0.5 Limited
0.0
YTD 2017 2016 2015 2014 2013
UTI Dynamic Bond Gr India Fund Dynamic Bond Fund Snapshot
Morningstar Category India Fund
Trailing Returns Dynamic Bond
Fund Size (`) 14.3 billion
Data Point: Return Calculation Benchmark: None
Inception Date 16/6/2010
YTD 1 Year 3 Years 5 Years 10 Years Annual Report Net Expense Ratio 1.74
Morningstar Rating Overall *****
UTI Dynamic Bond Gr 1.72 4.49 8.30 9.44 — Manager Name Amandeep Chopra
Minimum Investment (`) 10,000
India Fund Dynamic Bond 0.74 3.61 6.13 7.21 7.00
Morningstar Analyst Rating Bronze

Disclaimer
@2017. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. This Report is issued by Morningstar Investment
Adviser India Private Limited (“Morningstar”), which is registered with SEBI (Registration number INA000001357) and provides investment advice
and research. Please visit http://www.outlookindia.com/outlookmoney/invest/picking-the-right-mutual-funds-2542 and read important
statutory disclosures, as mandated by SEBI, regarding the information, data, analyses and opinions given in this report.

58 Outlook Money May 2018 www.outlookmoney.com


Reliance Equity Opportunities Fund
Manager Biography & Fund Strategy

S hailesh Raj Bhan has over 20


years of experience in research
and portfolio management. He joined
integral part of the strategy.
Bhan’s investment strategy is
flexible in nature and encompasses
Equity
Sectors
Portfolio
Date:
31/3/2018
Reliance AMC in 2003 and has been multiple aspects. He plies a growth at a
managed this fund for over 13 years. reasonable price approach to selecting
Bhan adopts a free-flowing and stocks. He is conscious of valuations
multi-pronged approach to stock but does not mind paying more for a
Basic Materials 5.9
selection, which gels well with his company if he believes it has sustainable
skillset. He scouts for issues that exhibit advantages over its peers and good Consumer Cyclical 22.5
strong growth prospects and have growth prospects. Financial Services 23.8
healthy or rising ROEs. He invests in However, the strategy has some Real Estate 0.0
stocks from across market capitalization inherent risks. Investing in emerging/niche Consumer Defensive 0.8
with allocation to large-caps hovering themes, which largely have untested Healthcare 8.7
in the range of 40-60%. Bhan has a business models and value propositions, Utilities 0.7
penchant for emerging/niche themes is a risky affair. Bhan’s large sector/ Communication Services 0.9
and sunshine sectors and invests thematic bets are also not without risks. Energy 1.1
roughly 20% in them as he believes We draw comfort from the fact that the Industrials 28.1
they have significant upside potential. process is robust with research at its core. Technology 7.5
Another 10% is invested in value This fund is suitable for investors who
Total 100.0
propositions to balance the portfolio’s have the ability to take on slightly higher
growth bias with a value tilt. Taking risk in order to generate greater returns Portfolio
big sector/thematic bets also forms an over the long term. Top Holdings Weighting
(%)
State Bank of India 6.02
Calendar Year Returns Indian Hotels Co Ltd 5.09
Calculation Benchmark: S&P BSE 100 India TR INR 59.7 Divi's Laboratories Ltd 5.08
60
HDFC Bank Ltd 4.74
50
40
40.9
37.6
38.9 Infosys Ltd 4.50
30 GE T&D India Ltd 4.26
20 ICICI Bank Ltd 4.08
Return

10
-8.3 -5.5 -6.4
5.2
0.5 0.4
4.6 4.9 Larsen & Toubro Ltd 3.98
0.0
-10
Axis Bank Ltd 3.37
YTD 2017 2016 2015 2014 2013 Bharat Forge Ltd 2.78
Reliance Equity Opportunites Gr S&P BSE 500 India TR INR

Trailing Returns Fund Snapshot


Data Point: Return Calculation Benchmark: S&P BSE Midcap INR Morningstar Category India Fund flexicap
YTD 1 Year 3 Years 5 Years 10 Years Fund Size (`) 96 billion
Inception Date 28/3/2005
Reliance Equity Opportunities Gr -8.30 12.35 5.92 16.85 15.16 Annual Report Net Expense Ratio 2.27
Morningstar Rating Overall ***
S&P BSE 500 India TR INR -5.54 13.21 9.97 16.41 10.19 Manager Name Sailesh Raj Bhan
Minimum Investment (`) 5,000
Average -5.48 10.36 7.53 15.18 9.55
Morningstar Analyst Rating Silver
Data Source: Morningstar India

www.outlookmoney.com May 2018 Outlook Money 59


Morningstar Mutual Fund Guide
Aditya BSL Mid Cap Fund

Manager Biography and Fund Strategy

J ayesh Gandhi has been managing


this fund since January 2015;
however this is not his first stint at
However, the fund’s mandate allows
the manager enough flexibility to play
to his strengths.
Equity Portfolio
managing this fund. He also helmed Although Gandhi is mindful of Date:
the fund during the years 2005-2007. the benchmark, he can tend to take Sectors 31/3/2018
Gandhi is a reasonably tenured significant off-benchmark exposure
manager in the Small/Mid-Cap space as a part of the strategy. His portfolio
and has over 15 years of experience in reflects his long term views and he
investment management. tends to stay invested over 18-36 %
Gandhi plies a growth-oriented months. Having said that, Gandhi can Basic Materials 14.0
strategy that uses a combination of a tend to trim or add positions based on Consumer Cyclical 19.9
top-down and bottom-up approach. valuations. Financial Services 21.1
While top-down views are used to Gandhi runs this fund as a highly Real Estate 0.0
scout for investment themes and take diversified portfolio of around 50-70 Consumer Defensive 2.5
sector bets, a sentiment overlay is also holdings. Individual stocks don’t exceed Healthcare 8.5
incorporated to steer the portfolio 3% of assets and less-liquid stocks Utilities 6.3
across market conditions. Gandhi are capped at lower limits. Though Communication Services 0.0
relies on relative valuation techniques he aims to remain fully invested, cash
Energy 5.1
to pick stocks that he perceives to levels on the fund can tend to fluctuate
Industrials 14.0
be reasonably priced. He prefers based on the manager’s views.
companies that are cheaper than the This fund is suitable for investors Technology 8.5
sector and the broader market, but looking to build long term wealth by Total 100.0
offer sustainable growth prospects. investing into mid caps.

Top Holdings Portfolio


Calendar Year Returns Weighting (%)
Calculation Benchmark: S&P BSE 100 India INR TeamLease Services Ltd 3.10
120.0 TI Financial Holdings Ltd 2.92
100.0 Mahindra CIE Automotive 2.89
80.0 72.6
Ltd
60.0 56.9 L&T Finance Holdings Ltd 2.86
44.8 49.9 Bharat Electronics Ltd 2.86
40.0
Gujarat State Petronet
Return

20.0
5.7 9.3 10.4 8.7 2.72
-10.1 -10.3 -2.0 -4.0 Ltd
00.0
Petronet LNG Ltd 2.71
-20.0
YTD 2017 2016 2015 2014 2013 Yes Bank Ltd 2.67
Aditya BSL Mid Cap Gr S&P BSE Midcap TR INR PNB Housing Finance Ltd 2.65
MRF Ltd 2.60
Trailing Returns Fund Snapshot
Data Point: Return Calculation Benchmark: S&P BSE 100 India INR Morningstar Category India Fund Small /Mid-Cap
YTD 1 Year 3 Years 5 Years 10 Years Fund Size (`) 22 billion
Inception Date 10/3/2002
Aditya BSL Mid Cap Gr -10.14 10.34 12.95 23.16 14.38 Annual Report Net Expense Ratio 2.47
Morningstar Rating Overall ***
S&P BSE Midcap TR INR -10.29 14.31 16.04 22.70 11.08
Manager Name Jayesh Gandhi
Average -5.48 10.36 7.53 15.18 9.55 Minimum Investment (`) 1,000
Morningstar Analyst Rating Bronze
Data Source: Morningstar India

60 Outlook Money May 2018 www.outlookmoney.com


My Plan

Investing for a healthy and financially sound tomorrow


The young CEO of a digital company has his goals spelt out as clearly as the algorithm.
Peeush has a consultant life partner and two young boys with lots of dreams.

H
is financial plan is
focused on quality
education of his two
sons, early financial
independence and giving back to
the society through philanthropy.
The first step for a financial plan
is clear definition of goals and
the Mahajan family has clearly
laid down these goals. They have
made clear buckets and parked
savings in mutual funds, FDs, Life
insurance policies and have a higher
weightage to real estate as well.
The asset allocation is more tilted
towards real estate and debt. The
meticulous planner has also some
short-term plans for vacations with
family and spending time on leisure.
The savings rate of 15 per cent is

Other Assets Value decent to begin with, but has to be


1 Three Real Estate Assets 6,00,00,000 increased gradually for the long term
goals taking into account the inflation
2 Liquid Assets 25,00,000
and need for early retirement. Apart
Total 6,25,00,000 from his healthy take home, the

S No. Investment vehivle Existing Corpus Current SIP Goal Goal time Goal value
1 FMP 40,00,000 0 Son 1 Education 2022 1 crore
2 FMP 35,00,000 0
3 Large Cap Fund 6,58,000 35,000
4 Multicap Fund 40,000 40,000 Son 2 Education 2025 1 crore
5 Multicap Fund 70,000 35,000 Son 1 Marriage 2030 60 lakh
6 Multicap Fund 7,35,600 40,000 Son 2 marriage 2033 60 lakh
7 Large Cap Fund 72,40,000 0 Reitrement 2030
8 Multicap fund 6,33,000 0
9 FDs 1,00,00,000
Total 2,68,76,600 1,50,000
* All values are in `
Disclaimer
Financial Planning of Frank Immanueldino Sterling is based on the “personal opinion and experience” of Fincart, and that it should not be
considered professional financial investment advice. No one should make any investment decision without first consulting his or her own
financial advisor and conducting his or her own research and due diligence.

62 Outlook Money May 2018 www.outlookmoney.com


Nature Of Goal Goal Year Current Add Existing Investment Scheme Name Suggestion
Sip
Bucket 1

Ayush's education 1 cr 2022 `35,000 0 `75,00,000- fmp Large cap keep it same

TOTAl `35,000

Add sip for


Bucket 2

Aarnav's education 1.2 cr 2025 `40,000 `25,000 `7,00,000 Muticap fund `25,000 in
(Multicap fund)

TOTAl `65,000
Bucket 3

Ayush's Marriage 50 lakh 2030 `35,000 0 0 Multi cap keep it same

TOTAl `35,000
Bucket 4

Aarnav's Marriage 60 lakh 2033 `40,000 0 Multi cap keep it same

TOTAl `40,000

1 cr FDs and 14 lakh in Multicap Add sip for


Bucket 5

equity mf (large cap) + -35,000, midcap- `1,00,000


Retirement plan 8 cr 2030 0 `1,00,000
liquidity from existing 30,000. balance in (Value
real estate fund-35,000 strategy)
TOTAl `10,00,000
Bucket 6

Estate plannig Will Immediate

family income is also boosted through through annual bonus or any will carve out the path for financial
consulting income of his better sudden lump sum gains. He has independence. Periodic review of
half, Anjali. `25 lakh FDs maturing in june. An portfolio, fund performance and
ultra-short term/ arbitrage fund moving to safer buckets as he starts
Streamlining the Financial can be considered. approaching the goals is equally
Plan 3. Over exposure in real estate to be important.
As a prudent investor, Peeush has trimmed as the family has multiple
made some lump sum investments residential properties with very Way forward
in Mutual funds through FMP route, low rental yield. 1. We have assumed overall
initiated SIPs in Equity funds and also 4. A nicely drafted will covering all inflation at 6 per cent
has a life and a health cover for any tangible and financial assets to be 2. Return from equity is assumed at
contingencies. made for succession planning and 12 per cent and from hybrid at
asset protection. 10 per cent
My role as a planner is to 5. Proceeds from real estate 3. Goal planning –Peeush has a
streamline the plan through- liquidation to be parked for a good saving rate and is all geared
1. Increasing the monthly SIP retirement fund for meeting up to meet his goals.
contribution from `1.50 lakh to post retirement finances and We wish peeush and family a very
`2.75 lakh. The portfolio needs to philanthropy goals. healthy and prosperous life.
be complimented by adding some A more Balanced asset allocation,
Balanced funds for medium term increase in equity weightage through KSHITIZ MAHAJAN
goals, diversified and mid cap funds SIPs complimenting his direct Co-Founder of
for long term goals. equity exposure and stepping up Complete Circle
2. A contingency fund to be built the monthly contribution to SIPs Consultants Private Ltd

www.outlookmoney.com May 2018 Outlook Money 63


Review Your Investments In The
New Financial Year
the housing market is slowly turning investors to start and/or increase
into a buyer’s market and, hence, their exposure to equities. Couples
couples with the goal to buy a house in this age group can look at equi-
in the next 2-3 years may get lucky ties for their retirement nest-egg
in terms of price and may even and increase exposure to this sector.
get an opportunity to prepone the
big-ticket acquisition. Therefore, Group B:
these couples should not only up Couples with Young Kids
the priority for their home but also and Home Loans
increase the allocation for the same. B.1 Align interest rates to market
A.2 No positive impact on dispos- rates: Home loan interest rates
able income: While the Budget offered by banks/institutions have
ArviNd A rAo announced a standard deduction of been quite dynamic over the last
Founder of Arvind Rao & Associates `40,000 for salaried individuals, the 15-18 months, especially with rates
exemption of transport allowances being pegged to the bank’s MCLR
(`19,200) and medical reimburse- rather than the base rate. Borrowers
ments (`15,000) totalling to `34,200 who have loan tenures of more than

A
new year is considered a stands withdrawn. This implies no 4-5 years should look at opportuni-
good time to make new major change in the monthly post- ties to refinance their existing loans
resolutions, and a new tax salary receivable in hand, and with the same lender or look for
financial year is an espe- salaried individuals should refrain alternative options at cheaper rates.
cially great time to look over one’s from considering a higher dispos- B.2 Focus on reducing loans on
finances and start making some able income on account of this newly second homes: Budget 2017 had
solid resolutions towards better introduced standard deduction. made leveraged second home buy-
financial security. With Budget 2018 A.3 Focus on retirement corpus: outs unfavourable by extending the
presented in the month of February Equity markets have seen significant restriction on deduction for interest
itself, this financial year has given correction post the Budget an- paid on home loans to `2 lakh per
investors additional time to incor- nouncement, and this gives the annum. Couples in this profile
porate the changes in the income perfect opportunity for long-term should plan for accelerating repay-
tax regime into their new financial
plans.
This article focuses on the top three rule-of-thumb asset allocation that can be
financial habits that investors in dif- targeted for FY 2018-19
ferent age groups should prioritise.
risk assets
Age group debt (Equity/ Gold
Group A: Property)
Young Couples with No Kids
A.1 Prioritise savings for own Young couple with no kids 25 70 5
home: The real estate sector has
Couple with kids 30 60 10
not been going through the best
of times, and a host of regulatory Couples approaching retirement 50-60 40-30 10
changes in the last 15-18 months
Senior citizens 80 20 –
has not made things any easier.
All figures in percentage
Many experts in the sector believe

64 Outlook Money May 2018 www.outlookmoney.com


ment of this loan during this new
financial year to cut down on the
interest cost. This strategy assumes
even higher importance if the loan
is towards a property which is under
construction.
B.3 Close unnecessary accounts:
Whether linking of Aadhaar to
bank accounts becomes manda-
tory or not, couples in this profile
should utilise this opportunity to
review the list of bank accounts
and close the ones which are no
longer operative, such as former
salary accounts, old address bank
accounts, etc. It has been observed
that non-maintenance of minimum
monthly/quarterly balance attracts
modestly high charges for account interest earned on banks and post-
holders, which can be avoided if Things to do: office schemes. Senior citizens can
such accounts are closed. accordingly brace for lower tax-cost
refinance home in this financial year and may ac-
Group C: loans, review health cordingly plan their allocation to
Couples Approaching re- insurance coverage, taxable fixed-income investments.
tirement D.2 Review ease of management
C.1 Focus on tracking and trim- increase equity of portfolio: Senior citizens should
ming down investment portfolio: exposure ensure that their investment port-
Couples in this profile should make folio should be simple and easy to
sure they keep track of their various manage in the new financial year.
investment accounts on a periodic C.3 Review nominations: Couples Increasing the folio count of vari-
basis. For this purpose, they can should focus on this mundane ous investments under the guise of
plan on using a personal finance activity at the start of the new finan- diversification is not going to help.
software in the new year. Regular cial year to check if the nomina- Easy management also includes
tracking will enable you to trim tions across various investments ease of review and decision-taking
down non-performing accounts done over the past as well as in the ability with regard to the portfolio.
and consolidate investments from preceding year are not obsolete. In- D.3 Diversify debt portfolio: Yields
time to time. vestment/bank accounts with joint on government securities (and
C.2 Review health insurance holding should also have appro- the resulting interest rates) have
coverage: The last financial year saw priate nominations, and if minors witnessed lot of volatility in the last
renewal health insurance premiums are appointed, a sanity check on 4-5 months and this is expected to
being increased anywhere between their appointed guardians should continue in the near future. These
10 and 35 per cent by the public sec- be done. Reviewing nominations events have had an impact on debt
tor general Insurers. With retirement becomes the first stepping stone to mutual funds in the short term.
not too far away for the couples in getting one’s will made. Senior citizens need to consider a
this profile, they have to review their bit more dynamic management of
medical coverage independent of the Group d: their debt portfolio, and risk-averse
coverage they may be having with Senior retired Couples senior citizens can even look to
their companies. Beyond retirement, D.1 Increased tax benefits due to move away from debt mutual funds
these individuals/couples may find budget: Senior citizens have got and park their money in short-term
it difficult to increase their coverage dual tax benefits under the new bank deposits to keep volatility at
and shield away exclusions. A new Budget. Higher deduction up to bay in the new financial year.
financial year is the perfect time to `50,000 for medical premium paid
relook at this very crucial risk and its and enhancement of deduction Disclaimer: The views expressed in
coverage. limits to `50,000 from `10,000 for the article are personal

www.outlookmoney.com May 2018 Outlook Money 65


Tax Returns

ARChIT GupTA
Founder & CEO, ClearTax

All You Need to Know


About New ITR Forms
Tax Authorities have introduced important changes in ITR
Forms for the filing of returns this year. Here’s how it will
impact tax payers

T
he Income Tax an additional field for entering 115H (a non-resident Indian
department has once the fee has been added to the in any previous year becomes
again been very prompt form. assessable as resident in India in
in releasing Income Tax The Finance Act 2017 also respect of the total income of any
Returns (ITR) forms for Financial introduced TDS on rent paid in subsequent year) has
Year (FY) 2017-18. Here are some excess of `50,000. Therefore, to been added.
of the significant changes that have claim credit for such TDS, a field The depreciation rate has been
been introduced in the ITR forms has been introduced to disclose limited to 40 per cent in all
this year for Assessment Year (AY) this in the return. depreciation-related schedules,
2018-19: follwing the notification by
ITR 2: the CBDT restricting the rate
ITR 1: Since non-residents cannot file of depreciation on plant and
Similar to AY 2017-18, a one-page returns in ITR 1 for AY 2018-19, machinery.
simplified ITR Form 1 (Sahaj) has they will have to file ITR 2 or other
been notified for AY 2018-19, but forms as the case may be. ITR 4 (Sugam):
with certain modifications. This form, for AY 2018-19, would This return is meant for
ITR 1 for AY 2018-19 can be filed be applicable for individuals or presumptive tax payers i.e., those
only by a resident Indian with HUFs for reporting their income who can declare income as a
an income of up to `50 lakh other than income from ‘Profits specific percentage of their gross
(salary and other sources such and Gains from Business or receipts or turnover and pay taxes
as property or interest). Non- Profession’. Therefore, this form accordingly.
residents cannot file this form for does not have a Schedule for For presumptive taxpayers,
reporting income in FY 2017-18. ‘business or profession’. Further, furnishing of GST-related
Details of salary breakup the field for interest held in the details is now mandatory, viz.,
have been called for, which assets of a firm or association of GST Registration number, GST
is easily available in Form 16. person in Schedule AL (Assets Turnover etc.
Such information can be auto- and Liabilities) has been removed In the tab for financial particulars
populated by using platforms as well. Accordingly, partners of the assessee has to declare the
such as ClearTax. Earlier there firms who could file ITR 2 earlier following additional information:
was no requirement to furnish can no longer do so. a) Partner/Member Capital
these details. Further, parts b) Secured Loan
relating to house property have ITR 3: c) Unsecured Loan
been rationalised and call for a This form can be used by d) Advances
little more detail pertaining to individuals and HUFs receiving e) Fixed Assets
income from house property. income under the head ‘Profits
The Finance Act 2017 introduced and Gains from Business or Common to All Forms
the mandatory levy of a fee under Profession” in FY 2017-18. This year there’s no requirement to
Section 234F for a delay in filing In the General Information furnish details of cash deposits for a
IT returns. To accommodate this, tab, an option to select Section specific period as was provided for

66 Outlook Money May 2018 www.outlookmoney.com


Select the right ITR form to file Income Tax return
Income Tax Applicability for Applicability for Other changes introduced for
Form FY 2016-17 FY 2017-18 FY 2017-18
Individuals having income Resident individuals having Breakup of salary income
from salary, one house income from salary, one house Breakup of house property income
ITR 1 property, other sources, property, other sources, and New field for section 234F
(Sahaj) and total income up to total income up to `50 lakh. TDS details as per Form 26QC
`50 lakh.

ITR 2 Individuals and HUFs Individuals and HUFs not having Schedule BP is removed.
not carrying out business income from profits and gains of The field for ‘interest held in the assets of a
or profession under any business or profession. firm or association of person’ in Schedule AL
proprietorship. (Partners of firms cannot file ITR has been removed.
(Earlier partners of firms 2 anymore.)
could file ITR 2)
Individuals and HUFs Individuals and HUFs having In the General Information tab, an option to
ITR 3 having income from a income from profits and gains of select Section 115H has been added.
proprietary business or business or profession. The depreciation rate has been limited
profession. to 40 per cent in all depreciation-related
This form is therefore exclusively Schedules.
meant for income from business
or profession.

ITR 4 For presumptive income For presumptive income from GST number and turnover details to be
(Sugam) from business and business and profession (no provided.
profession. change in applicability here.) Under ‘financial particulars’ the following
additional information is to be provided: a)
Partner/Member Capital b) Secured Loan c)
Unsecured Loan d) Advances e) Fixed Assets

in ITR Form for AY 2017-18. Summing up details from Form 16 into the ITR.
These returns are due by 31 July First and foremost, the applicability There would be a little challenge
2018. Even though there’s time, of the ITR for various taxpayers has for non-residents who cannot file
make sure you file by the due date. been clarified. There’s no more room the simple ITR 1 anymore. They
Unlike in previous FYs, you will be for confusion. Further, most of the will have to necessarily report their
levied a mandatory penalty of `5000 changes in the ITR forms this time income in ITR 2 or other forms as
if you file by 31 December of the AY have been made more in line with applicable. Presumptive taxpayers
or `10,000 if you file it anytime after (and to accommodate) the various – who generally report a percentage
that. A specific field for this has been amendments brought about in of their turnover as income and
provided. Finance Budget 2017. These include get away without maintaining
The method of filing your tax the introduction of a new field for books – have an additional
returns remains the same. You Section 234F for mandatory payment compliance in terms of reporting
must file electronically, with the of fees on late filing of returns, their GST number, turnover etc.
only exceptions being the following restriction of maximum depreciation This has probably been done with
taxpayers filing ITR 1 or ITR 4. to 40 per cent etc. an objective to link the direct and
(i) A taxpayer who is of age 80 and A few more details have been indirect tax numbers.
above at any time during the sought from the salaried class in ITR The revised forms no doubt call
previous year; or 1, which should be readily available for additional reporting but the
(ii) A person or HUF whose annual in their Form 16. Therefore, filling exercise of such revisions has been
income is not more than `5 lakh, up ITR 1 should not pose a big carried out in a bid to check tax
and who has not claimed any challenge. In fact, tax-filing platforms evasion. In our view, the revision
refund in the return of income will come to the rescue inasmuch as has not added to the complexity of
so far. they would auto-populate most of the filing returns.

www.outlookmoney.com May 2018 Outlook Money 67


Fintech Watch

A New Platform
for Borrowers
and Lenders
Peer-to-peer newbie Finzy offers
higher returns to lenders than other
asset classes, while borrowers get
loans within minutes, creating a
win-win for both, says Suyash Desai

L
oans and investments constitute a major
part of an individual’s financial activity. Loan
requirements can vary from a desire for luxury
to an emergency while investments are essential From Left To Right:
Vishwas Dixit, Co-Founder & CMO,
for returns and wealth creation. Borrowing from banks Abhinandan Sangam, Co-Founder & CTO,
and non-banking finance companies (NBFCs) can often
Photos: DeePak g Pawar

Amit More, Founder & CEO,


be a time-intensive process, but now individuals have Apoorv Gawde, CIO & Head of Product
alternative platforms that seek to bring lenders and
borrowers together.
One such platform is Finzy, a peer-to-peer (P2P)
lending platform that seeks to make personal finance
easy. “Finzy is a digital lending platform that connects
qualified borrowers to investors looking to invest in
a new asset class that provides monthly returns,” says How It Works
Abhinandan Sangam, co-founder and CTO of Finzy. Finzy, through its digital platform connects the
Formed in October 2016 under the parent company borrower with the investor (lender). Interest rates begin
Bridge Fintech Solutions, this startup provides at 10.99 per cent and there’s no prepayment charge.
borrowers with hassle-free loans. “On Finzy you can “We at Finzy have developed a specialised proprietary
apply for a loan in four or five minutes. It happens credit algorithm that helps us rate borrowers in three
through a digital platform and, unlike banks, the process categories: A (A1-A6), B (B1-B6), and C (C1-C6). The
is not time-consuming,” he says. level of risk increases as we go from A to C,” explains
Apart from loans, Finzy provides investors with an Amit More, founder and CEO of Finzy. The average rate
optimised investment option that comes with a higher of interest for borrowing from Finzy is 15-16 per cent
rate of return. “The rate of return for investing in Finzy is and the quantum of loan that can be taken using the
15.5 per cent, which is much higher than any other asset platform ranges from `50,000 to `500,000.
class such as equity, mutual funds, bonds, gold, or fixed The lender’s investment is diversified across three
deposits,” Sangam points out. Till date, more than 2000 groups to reduce risk, and the earnings through interest
customers have engaged with Finzy, of which over 1500 are credited back to the creditor’s account or re-invested
were borrowers and the rest lenders. as per their preference. The rate of returns starts from

68 Outlook Money May 2018 www.outlookmoney.com


10.99 per cent, if the investor wishes to give a loan to an receives their EMI, by taking a very small fee of 1 per cent
A1 category (modest risk) borrower and it can go up to of their EMI after completion of the entire transaction,”
27.99 per cent for a C6 category (risky) borrower. “Since says Vishwas Dixit, co-founder and CMO at Finzy.
investments are diversified across multiple borrowers, The convergence of borrowers and investors takes
investors can get returns across this range, based on place via the Finzy mobile application. An investor has
their risk appetite. We recommend that investors focus the option of choosing borrowers, either manually (Finzy
on a moderate portfolio to optimise risks, which will Manual) or automatically (Finzy Pro).
help them earn returns averaging 15.5 per cent to 16.5
per cent per annum,” adds More. Faster than Banks
An investor can invest up to `10 lakh. The minimum On being compared with banks and NBFCs, Dixit says
amount for a first-time investor is `50,000. Subsequently, that Finzy’s USP is quick service – the process of getting
tranches can be reduced to `10,000. “We believe in a loan should not take more than five minutes. “The loan
transparency. An investor can track his or her portfolio application happens on our digital platform, which is a
performance on their Finzy dashboard and also receive responsive website that can even be accessed on your
detailed portfolio performance emails to track their phone. The borrower is asked to upload soft copies of
investments. We only make money when the investor KYC documents, bank statement, salary slip, Aadhaar,

www.outlookmoney.com May 2018 Outlook Money 69


Fintech Watch

previous year’s Income Tax returns, PAN card, and a passport-


size photo. Unlike banks, we do not accept any physical
documents for loan application, thus, maintaining privacy,
avoiding fraud, and improving turnaround times,” he says.
There are no registration, prepayment, or foreclosure fees, and
only a nominal processing fee that’s charged on loan disbursal.
The screening process for selecting appropriate borrowers
is unique and different from what banks and NBFCs follow,
claims Apoorv Gawde, CIO and Head of Product at Finzy.
“Finzy assigns credit ratings to loan applicants based on 130
parameters to ascertain their creditworthiness. This ensures
that we do not gauge applicants on the basis of the company
they work for or their credit score alone. The parameters Name: Uma Maheshwari, 36
assessed by our credit algorithm include capability, intent,
track record, willingness, past payment history, database Occupation: Assistant Manager,
checks, social media activity, saving and investment Vodafone
patterns, and many more, before the loan is disbursed. This
Relationship with Finzy: Borrower
due diligence helps us to select the right kind of risk-free
borrowers, which has thus far resulted in zero EMI defaults
on the platform in 10 months of operations,” says Gawde.
“On sharing my requirements,
In case of investments, the value proposition that Finzy I got a loan of `5 lakh from
claims to give on returns is 15.5 per cent, higher than other Finzy in two working days.
asset classes. “Over last decade, returns on gold is 11.6 I used it for doing up the
percent, government bonds, debt and equity mutual funds
have yielded 7-10 percent, fixed deposit account around
interiors of my flat.”
6.5 percent, which are much lower than possible returns on
Finzy,” says Sangam. Besides, in case of delayed EMIs, Finzy

Graphics: Praveen Kumar .G

4.45% 7.41% 7.46% 8.43%


Savings Account Gold* Fixed Deposit Governmnet Bond

Value 
Proposition: 
Returns
8.92% 10.41% 11.70% 15.38%
Debt MF ^ Equity ** Equity MF ^^ Finzy ***
returns on all asset classes over a period of april 1,2008 to March 31, 2018 on Cagr basis
* Interest income on gold had been assumed at 2.50% per annum
** Dividend yield on actual basis for the period has been considered at 1.32% per annum
^ Debt MF considered here is ICICI Prudential Liquid Plan - growth
^^ equity MF considered here is HDFC Top 200 - growth

70 Outlook Money May 2018 www.outlookmoney.com Source: AMFI, NSE, banks’ websites, www.investing.com, tradingeconomics.com
Name: Nittish Veeraputhirasamy, 28 Name: Cecil Premi, 43

Occupation: Consultant, Thoughtworks Occupation: Director - Strategic


Alliance, Evineon Technologies
Relationship with Finzy: Borrower
Relationship with Finzy:
Lender/investor
“I wanted a loan of `50,000 for
my honeymoon flight tickets. Finzy “I started with an initial
gave me a loan at 10.9 per cent investment of `50,000 in
interest with a flexible repayment Name: Amit Sethi, 41
Finzy and now I have
rate, and the money was credited in Occupation: VP - Customer Service (Motor), almost reached the upper
my account in two working days.” ICICI Lombard General Insurance Co.
ceiling for investing.”
Relationship with Finzy:
Lender/investor

“I got returns of 17-18 per cent in a


one-year time period through Finzy in
the form of regular monthly returns,
and reinvesting it in mutual funds
gave me 30-32 per cent due to the
compounding effect.”

follows up with borrowers and tries to regularise `5 crore. Due to this we don’t have NPAs through our
the delay. platform,” says More.
Uma Maheshwari, an assistant manager at Vodafone, What about investor experience? Amit Sethi, VP -
Bengaluru, had a personal and a car loan, and wanted Customer Service (Motor) at ICICI Lombard General
an additional personal loan of `5 lakh. “The EMI for the Insurance Company, Gurgaon, has this to say: “Though
car loan is paid by my husband. The banks, both private I was comfortable investing in mutual funds, the high
and public, were unwilling to understand this and denied returns claimed by Finzy attracted me. My initial
me a loan. This is when my research led me to Finzy,” she investment was `1 Lakh and the manner in which Finzy
says. On sharing her requirement with Finzy, she got her distributed the risks was reassuring. I got returns of 17-
loan sanctioned in two working days, which she spent on 18 per cent and reinvesting the returns in mutual funds
redoing the interiors of her apartment. gave me 30-32 per cent due to the compounding effect.”
Nittish Veeraputhirasamy, a consultant at Likewise, Cecil Premi, Director - Strategic Alliance
Thoughtworks, Bengaluru, wanted a modest loan of at Evineon Technologies, Bengaluru, recommends Finzy
`50,000 for his honeymoon flight tickets. He was willing for high-end assured returns. “I started by investing
to pay back the next month. Banks and NBFCs were `50,000 and now I have almost reached the upper
offering a loan at not less than 13-14 per cent interest – ceiling,” he says.
and with a prepayment penalty. “Finzy gave me a loan at So far, Finzy has confined its borrowers to eight
10.9 per cent with a flexible repayment rate. The money major cities of India – Mumbai, Delhi, Kolkata,
was credited in my account in two working days,” he says. Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad.
In FY2017-18, the total loan amount disbursed by Investment option, however, is available across the
Finzy (which began operations in June 2017) was country. “We have plans to expand to other cities and we
`5 crore, while the total applications for loans received target to disburse `35 crores for the financial year
in the same period stood at `25 crore. “We have been 2018-19,” says Dixit.
very selective and thus the disbursed amount is only suyash@outlookindia.com

www.outlookmoney.com May 2018 Outlook Money 71


THE PCJ OSM AWARDS
GALA NIGHT

72 Outlook Money May 2018 www.outlookmoney.com


(Clockwise from top left) HI! Shilpa Shetty (standing) greets Athiya
Shetty while Rajkummar Rao looks on. BOTH EYES OPEN Priya Prakash
Varrier poses for a selfie. OUTSPOKEN Rana Ayyub receives her award
from Harsh Mander. HASH BLUE Rina Dhaka presents Sanjay Thumma
with his prize. HUMBLE Danish Sait gets his trophy from OSM project
editor Vaibhav Vishal. MUTUAL ADMIRATION Vinod Dua presents
Rajkummar Rao with his award.

www.outlookmoney.com May 2018 Outlook Money 73


Title Partner Red Carpet Partner

Our Sponsors:

74 Outlook Money May 2018 www.outlookmoney.com


(Clockwise from top left) I SEE An attentive Rajkummar Rao watches events. ROCK,
GOLD & SPLENDOUR (above) Models showcase the latest collection of PC Jewellers at the
OSM awards. TETE-A-TETE Sunil Sethi, president, FDCI, (right) gets comfy for a chat
with Sudhakar Pai, MD, Kurl-On. EARNEST A student from Sathyabhama Institute of
Science and Technology speaks about social media. GADGETS & HUSTLE Rapper Divine
gets his award from Rajiv and Ruchitra Makhni. PROXY Actor Ramesh Aravind receives
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Knowledge Partner Initiative By Radio Partner Hospitality Partner Digital Partner Celebration Partner

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www.outlookmoney.com May 2018 Outlook Money 75


Insurance

Suffering From A Chronic Illness? You


Can Still Get Insurance!
A pre-existing condition such as diabetes or hypertension could impact
the purchase or renewal of a regular health insurance plan. But a specific
health cover can bail you out, explains Priya Nair

M
inakshi Sharma, a Insurance’s Energy Insurance Plan, The policy includes two free
48-year-old housewife a diabetes-specific health policy. health checkups a year. Sharma
from Delhi, has As part of the insurance, she was gets reminders from the insurance
been suffering from initially given an app, which helped company and her results are
diabetes for the past decade. For her monitor her food intake on a monitored too. This helps her
most of that time her sugar levels real-time basis. She used the app for contain the illness and manage
and medications have only increased. few months. Also, Apollo Munich’s it better. She’s also able to get a
But over the last few months wellness portal, myapollomunich. discount on the premiums as her
Sharma’s sugar levels have shown an com, enabled her to manage health blood sugar levels are better now.
encouraging dip, and her doctor has goals with the help of a health coach. “I spend about `2000-3000
reduced the dosage of her medicines. “Using the app, l used to log what per month on my medicines and
All this thanks to the monitoring app I ate during the day and I got to know glucometer strips. If it weren’t for
her health insurer gave her. the nutritional value of each food. It the app and the constant monitoring
When she was first diagnosed also told me the quantity of various of my food intake and exercise, my
with diabetes, Sharma had been food items I should be consuming. sugar levels would not have been
advised by her doctor to follow a For instance, 50 per cent of my diet under control,” she says.
certain diet and exercise plan. But should comprise vegetables, either
try as she might, she was not able to cooked or raw such as salad, about A Tough Call for Diabetics
stick to it. Then two years ago she 25 per cent should be carbohydrates, It is not easy for diabetics to
purchased Apollo Munich Health and so on,” she says. get health insurance. In case of

76 Outlook Money May 2018 www.outlookmoney.com


hospitalisation, diabetics may be
required to spend 10-15 per cent
Policies for chronic illnesses are costlier
Sum Insured – `10 lakh, Age – 45 years
more time in hospital for their
Price-annualised premium inclusive of taxes
treatment than regular patients.
Besides, chances of complications Apollo Munich’s Energy
tend to be higher when diabetes is
Variant With 20% Co-pay Without Co-pay
involved. These are some reasons
why patients find it difficult to get Silver `20,521 `25,623
insurance cover, says Dr Rajiv Kovil, Gold `26,074 `31,176
Medical Director, Dr Kovil Diabetic
Apollo Munich’s Optima Restore Individual
Centre, and consultant with
Nanavati and SL Raheja Hospitals `12,724
Source: Company
in Mumbai.“Today, diabetics just do
not get insurance. Even if they do, The Downside of Data Star Diabetes Safe
the coverage will start only three to Limitation
Variant `
four years after getting insured. So By and large it’s true that relative to
people try to mask their diabetic healthier individuals it is difficult Plan A (offline) `25,565
status while taking insurance. But for diabetics to get insurance cover, Plan B (online plan)* `34,834
this does not help the insurance admits Antony Jacob, CEO, Apollo * offers discounts on services which is not
company or the patient. When the Munich Health Insurance. Other available in offline plan
patient gets admitted to hospital than the perception that diabetics Star Comprehensive Plan
doctors write everything in the are worse off in health than healthy
`13,895
report. And that does not help the individuals – and the associated Source: Company
patient at the time of claims. It is complications that could arise in the
high time insurance companies long run – another reason is data they are a huge population. India
provide cover based on the risk limitation. is the diabetic capital of the world.
factor and charge a higher premium “Companies want to offer But somehow longitudinal data is
based on that,” says Dr Kovil. insurance to diabetics because absent – that is, credible studies on

Pradeep Malhotra, 56 years Minakshi Sharma, 48 years,


Plan-Apollo Energy Health Insurance -Gold Plan-Apollo Energy Health Insurance –Silver
Policy issued-January 2014 Policy-February 2016
Sum assured `10 lakh Sum assured `3 lakh
Annual Premium `47,506.65 Annual Premium `17,318

www.outlookmoney.com May 2018 Outlook Money 77


Insurance

reasonably large populations over a the company to remind us of his


period of 10, 15, or 20 years. So that Features of checkups. We also get discounts on
is a big limitation. If that kind of data
were available it would be possible Diabetes-specific the premium since his BP is under
control. That’s the biggest attraction.
to price the product more accurately, Plans The checkups are free and we have to
which is difficult in India. Pricing pay only if we want a physical copy of
actuarial science operates a lot on Apollo Munich’s Energy Health the report,” she says.
data, so we have some limitation on Insurance Plan
data as well,” Jacob explains. Offers coverage only to those Diabetes-specific Insurance
suffering from Type 2 diabetes Plans
Paying a Higher Premium Medical checkup is mandatory These are specialised insurance plans
According to Dr S Prakash, COO, before purchasing the policy providing coverage for treatments
Star Health and Allied Insurance, Two variants offered – Gold (cost of or expenses for people who suffer
insurance companies will not refuse wellness test included) and Silver from diabetes. These could be
(cost of wellness test excluded),
insurance cover to a diabetic person both available with/without the standalone plans specifically covering
solely for that reason. “Diabetics co-payment option of 20 per cent the disease, or part of a regular
can get insurance but the insurance Offers a Stay Healthy programme, health insurance policy after paying
company may charge an extra which includes online health extra premium. Varistha Mediclaim
premium if it is known that the assessment, customised diet and from National Insurance and Care
individual is a diabetic on a long- exercise plan, discounts on health Freedom from Religare Health
products and services, alerts
term basis and under treatment. The on doctor’s appointments and Insurance are two such plans, but
amount of premium on account of medicine intake they cater only to senior citizens, says
diabetes will vary from company to Offers discounts based on whether Mehta.
company. Uncomplicated diabetes the customer attends regular However, ‘Diabetes Safe’ from Star
will not be refused insurance cover. checkups, is controlling BP, BMI, Health Insurance and ‘Energy’ from
But diabetics with target organ sugar level, etc. Customers earn Apollo Munich Health Insurance
points based on these parameters.
damage may be refused insurance The points can be used for getting are two exclusive diabetes insurance
cover,” he says. discounts on the renewal premium plans that anyone in the eligible age
The higher premium for diabetics or for OPD expenses and at bracket can buy. The advantages of
could be in the range of 10-20 per pharmacies these two plans are that any diabetic
cent. In most cases the cover is Every customer is assigned a health patient aged between 18 and 65
available only for Type 2 diabetes, coach, who is a certified diabetes is eligible and there’s no waiting
educator. The health coach
says Kapil Mehta , co-founder and publishes a calendar with details of period. Coverage for diabetes and
CEO, SecureNow Insurance Broker. diet, exercise, etc to be followed hypertension is offered from day one.
“If you look at the rejection rate
of people who apply for health
Star Health’s Diabetes To Buy or Not To Buy
insurance, the biggest reasons If you already have a health insurance
are diabetes and hypertension.
Safe Insurance policy and have finished the waiting
Unfortunately, most companies do Covers both Type 1 and Type 2 period for pre-existing diseases
diabetes, other than complications
not offer plans for those suffering (which could go up to four years)
of diabetes
from Type 1 diabetes. Such persons you need not buy a diabetes-specific
Two versions available; version
have no option but to take group one requires a medical test where cover. Your existing policy will meet
insurance,” he says. complications arising out of all your needs. But if you are suffering
Pooja Malhotra from Delhi is only diabetes is covered from day one from diabetes and don’t have any
too aware of this. A diabetic herself, The other version involves a health insurance cover, such a plan
she was refused a plan from Apollo. 15-month waiting period could be suitable for you.
But her husband Pradeep Malhotra, Includes coverage for artificial These plans are about 30 per cent
limbs due to amputation, donor
who is 56 and suffering from high more expensive than a regular health
transplant, and expenses for
BP, is a customer of the Apollo diagnostics and consultation plan and often have restrictions such
Energy plan. “My husband has been Compensation for accidental death as the amount of waiting period for
taking medicines for BP for the last of the insured person specific ailments. But at least the
few years. The policy ensured that he Automatic restoration of entire sum person will have a health insurance
continued with his diet and exercise insured policy, says Mehta.
routine. We get regular calls from priya@outlookindia.com

78 Outlook Money May 2018 www.outlookmoney.com


SPEND

Book Hotels By The Hour


Hotel booking platforms are allowing customers to pay only for the number
of hours a room is used. Anagh Pal explains how it works

I
magine you’ve just landed need — which could be as little as a for three hours. Some platforms are
in a city and wish to freshen couple of hours. “We want to bring flexible in other ways — for instance,
up before a meeting or a about a culture among people to if you want to book a hotel for a
conference. Or, maybe, use the hourly check-in-check-out day, and then for three hours the
you’re in transit and wish to relax format, which makes their life easy next day, you may be required to
a bit before catching a connecting and efficient,” says Mohamed Arif pay `3,000 plus the tariff for three
flight. Or, you have wrapped up Nariampully, CEO & co-founder, hours, and not `6,000, as you would
a pilgrimage itinerary and have a Hora Rooms. “We are particularly have paid otherwise. This means
few hours to kill before your train targeting customers, such as, considerable savings and increased
departs. Typically, in such situations, trainers, backpackers, marketing flexibility while planning trips.
you’d be compelled to book into a executives, couples, bikers, and so Hotels find this an attractive
hotel and pay a full day’s tariff, even on,” he says, adding that, the format proposition, too. Says Prateek Singh,
though you wouldn’t be occupying also works well with students founder and CEO, Brevistay: “Recent
the room for more than a few hours. who may be visiting a city to sit for research shows that during the
The alternative — wander around an exam. daytime, hotels have an occupancy
the city or hang out at a mall — can rate of less than 50 per cent, and
be tiresome, if you’ve had a long day. How it works most check-ins happen during
Not anymore. A slew of online Let us assume a hotel’s daily room nights. A majority of check-outs also
hotel booking platforms have now rental is `3,000. When you book happens either in the evenings or
stepped in to give you your money’s this for shorter time slots, you pay early mornings. So we are trying to
(and your time’s) worth. These much less. So you might be charged give hotels extra income by reselling
platforms tie up with hotels and let `1,800, if you use the room for 12 their rooms multiple times in a day.”
you book a room for as long as you hours,`1,000 for six hours, or `600 So a hotel that offers a room with a

www.outlookmoney.com May 2018 Outlook Money 79


SPEND

who might not have booked into


a hotel room otherwise, which
hotels can tap into to increase their
occupancy,” says Sandeep Jaiswal,
co-founder, MiStay. A hotel that
charges `5,000 a day cannot charge
`2,000 a day because it needs to keep
its brand value intact. But it can sell
the room for `2,000 for a certain
time slot, and earn an income from a
commodity that would otherwise be
lying idle.

Pay for what you use


Each booking platform has its own
unique offering. Through Brevistay,
a traveller can book hotels for 3, 6
Photo: gireesh gv
or 12 hours with the flexibility to
BreviSTAy decide their check-in time. MiStay
has divided a day into three slots:
morning (8 am–11 am), day (12
Prateek Singh, CEO and Co-Founder, 24
noon–7 pm) and night (8 pm–7 am).
Location: Delhi NCR, Mumbai, Kolkata, Chennai, Hyderabad, Mysore, Bengaluru, Travellers can book rooms for any
Lucknow, Jaipur, Hardwar and Neemrana slot, or a combination of slots. Hora
Accommodation type: All kinds, though most belong to the budget segment Rooms, which currently operates out
of 14 places in Kerala, offers hotel
Booking options: 3, 6 and 12 hours with the flexibility to decide check-in time bookings based on a per-hour rate
Prices: The 3-hour slot starts from `399, and 25-35 per cent of the daily rate. The and not in terms of time slots. “We
6-hour rate is 45-55 per cent, and the 12-hour rate, 70-80 per cent provide hourly booking facility from
three to 12 hours as required by the
customers,” says Nariampully. “For
daily tariff of `3,000 can split a high occupancy. example, instead of slots or blocks of
day between two or more bookings “The average occupancy rate hours, if a customer requires three
to earn much more than `3,000. of hotels in India is less than 60 hours, four hours or five hours, he or
This works out to be a great deal for per cent. With this model, we are she can avail of that service through
properties that do not have creating a new segment of customers us.” Another platform, Frotels (which
incidentally gets its name from
‘Freshen-up Hotels’), is present in
150 cities and lets customers book a

FroTeLS
Priyanka Kothmire, COO and Co-Founder, 31
Location: Across 50+ cities covering almost
800+ hotels
Accommodation type: Homestays, lodge,
star category
Booking options: 2 hours to 10 hours, 24x7
Prices: `300 for 2 hours and `1,800
for 10 hours

80 Outlook Money May 2018 www.outlookmoney.com


MiStay
Sandeep Jaiswal, Co-Founder, 26
Location: 35 cities, which include all metro
cities and several Tier-2 cities
Accommodation type: Budget, mid-level and
luxury
Booking options: Three slots: morning, day,
night, and a combination of these slots
Prices: Starts at `400 for some budget hotels
and goes over `5,000 for luxury hotels Photo: DeePak g Pawar

room for anything from two hours offers three slots. A three-hour cent,” says Singh. At Frotels, the
to 10 hours, round the clock. slot could cost between 25-35 per hotel owners have the flexibility to
cent of the 24-hour rate of that play around with the percentage
Cost savings hotel. Similarly, a six-hour rate of total tariffs they want to charge
The innovative practice translates varies between 45-55 per cent and for a certain time. “As a reference
directly into savings. “Brevistay a 12-hour rate between 70-80 per point, hotels generally charge
30-40-45 per cent of a full-day
tariff for two hours for two people,
HorA rooMS and every hour afterwards they
might increase it by five per cent
Mohamed Arif Nariampully, CEO and Co-Founder, 44 or so,” says Priyanka Kothmire,
co-founder and CEO, Frotels. So a
Location: Currently covering 14 places in Kerala. Plan to expand in the traveller could end up with savings
south, followed by Mumbai of up to 70 per cent. What’s more,
Accommodation type: Budget, mid-level and luxury these platforms offer a wide choice
of rooms across budget to mid-
Booking options: Hourly booking facility from 3 to 12 hours level to luxury hotels. For budget
Prices: Basic hourly booking starts from a range between `80 /hour and hotels, the amount you pay per
over `200 /hour hour could be as low as `300 for
two hours.

Sheer convenience
Whenever you need a room for less
than a whole day, these platforms
can come in handy. “People looking
for short stays should stick with
the timings they choose. However,
they can ask us for extensions or
late check-ins but that’s subject to
availability,” says Singh. Just as you
do while booking a room through
an online portal, it is advisable to
check hotel ratings and reviews
before you ‘book by the hour’.
anaghpal@outlookindia.com
Photo: akhil aPPukuttan

www.outlookmoney.com May 2018 Outlook Money 81


Smart Money

Treat Money
Like A Guest
M oney tends to evoke very strong feelings in most people because it’s perceived to be a means to
happiness. But comedian and television personality Bharti Singh says she treats money like a
guest in her life. In a heart-to-heart interview with Malini Bhupta, Singh explains: “Like guests
come into our homes for a certain duration, the flow of money too changes with time. Just as we welcome
guests, I welcome money too, but the quantum of money has never altered my life.”
Many women marry money instead of people, she says, but the real wealth is not the amount we have in
our banks but the people we have in our lives. She recalls the birth of her little niece (sister’s daughter) and
how she brought immense joy into the family. “I think she’s Lakshmi as I got my first large cheque when
she was born. Even though my sister’s in-laws didn’t stand by her, my niece is very precious to me.”

First Big Purchase: “After I finished Laughter Challenge, I did not


get work for a few months. Then one day I got a call for a live show
and I was paid `1.5 lakh for it. With the money I bought my mother
a pair of earrings and bangles. She’d had to sell hers when I was
younger due to a financial crisis. I still remember the look on her face
that day because she was so overwhelmed.” But this doesn’t mean
Singh doesn’t indulge at all – last year she gifted herself a Mercedes
Benz GL.

Next Big Purchase: After having bought her mother


jewellery, she wants to gift her a farmhouse in Karjat
or Lonavla.

Money Mistake: Singh has a word of caution for


shopping freaks. She ends up buying too many
clothes when she goes shopping. She says: “I
end up buying more than I use. I have scores of
dresses which have tags on them still.”

Money Mantra: A family friend advises Singh


on all her investments. She invests mostly in
real estate and gold, but claims that she and
her family are adequately insured as a medical
calamity can strike any time. A fan of spreading
money across asset classes, Singh makes sure she
invests in things other than purely physical assets.
While she does park some money in mutual
funds, she’s also invested in a mineral water factory
in Amritsar and her brand – Kelby – is very popular
all over Punjab. She says, “I wanted a source of
income for my family, so I invested in the factory.”
RNI NO. DELENG/2002/08292